Massachusetts Court Voids Sale on Foreclosed Home ("Bank doesn't hold the title").

[chill_wind]

State Court Voids Home Sale Due to Improper Foreclosure
10/19/2011 Krista Franks

A Massachusetts man lost something he never had – his home. The Masachusetts Supreme Judicial Court ruled this week that when Francis Bevilacqua purchased the home from U.S. Bank in 2006, the bank did not actually hold the home’s title.

The court ruled that because U.S. bank did not hold the mortgage note when it foreclosed on the property, it did not obtain the title in the foreclosure. Therefore, Bevilacqua did not purchase a legal title when he made the purchase.

In its ruling in Bevilacqua v. Rodriguez, the court referenced a case tried in the same court last January, U.S. Bank, N.A. v. Ibanez, in which the court ruled that if a bank cannot provide proof it owns the mortgage note, any foreclosure filings it initiates are void.

The Ibanez case, however, simply involved a foreclosure action. Bevilacqua extends that ruling to instances when a new homeowner has already purchased the property.

more (see comments by A.G. Martha Coakley):

http://www.dsnews.com/articles/state-court-voids-home-sale-due-to-improper-foreclosure-2011-10-19

This could start making clouded title matters more interesting.. :-(

MERS. What a monstrous mess!

[badtoworse]

1. Shouldn't that have shown up in a title search?

Wouldn't Bevilacqua have a claim against the title company?

[Xipe Totec]

3. Now watch the title companies fold like cheap umbrellas. nt

[Hassin Bin Sober]

9. I read somewhere the banks are forcing the new buyers to use...

... the bank's title company. An idea one analyst said would be crazy to do. He/she said the title policies would have all sorts of loop holes to protect everyone but the new buyer. One would hope the new mortgage company would see through these tricks but who knows.


BTW, anyone remember the article written about our favorite half term governor, Queen Quiterella, and her purchase of that Arizona property? According to the author, a renowned title expert, she could be in for the same troubles if things worked the way they are supposed to work.

[customerserviceguy]

24. Don't get your hopes up

Arizona lenders use a "deed of trust" as the instrument that secures a lender's interest on real estate, the usual procedure to foreclose does not involve a court case. From what I've read, all the problems with faulty foreclosures are in the states that use mortgages, which must be foreclosed judicially.

[Hassin Bin Sober]

25. Here's the story, FWIW:

http://www.huffingtonpost.com/2011/06/10/sarah-palin-arizona-home-foreclosure-fraud_n_875186.html

The title problems here are very, very significant, and I believe it is going to require that this be litigated to find out who the legal owner of the property is," said Marie McDonnell, who has been reviewing fraudulent foreclosures in a local Massachusetts county and saw a similarity with the home purchased by the Palin company, Safari Investments LLC.

McDonnell said she and John O’Brien, the Massachusetts Register of Deeds for whom she works, decided to go public with the Palin foreclosure mess in order to "educate the public" about what happens when the legal underpinnings of a real estate transaction become compromised.

"If you’re buying a foreclosed property, can you be guaranteed you’re going to get legal title?" she asked. "There are millions of people facing the same problems, and it was a way for us to raise everyone’s awareness of the seriousness of these problems."

[customerserviceguy]

8. If he got an owner's policy of title insurance

usually paid for by the seller (in this case, the bank) he'd have a solid claim. Chances are, any title insurer involved was sending their lawyers into battle on this, and if they lost, then they'll start looking for their checkbooks unless they think they have solid grounds for an appeal.

[Warren Stupidity]

12. the title search looks for liens against the property

it doesn't do much of anything to validate that the foreclosing agency actually has the right to foreclose. There is a legal process for foreclosures and the banks couldn't be bothered - apparently for quite a while before the collapse - to actually a) have the proper documentation in place establishing that they were the entity legally entitled to foreclose, and/or b) that they had gone through the required steps to reach the foreclosure process. Instead the banks - dubiously empowered to manage the process on their own - just rubber stamped paperwork and took people's homes.

[Xipe Totec]

2. Can he now sue the bank for realestate fraud? nt

[Warren Stupidity]

7. yes

[customerserviceguy]

14. Not necessarily

It depends on a number of things. First, if there was an owner's policy of title insurance, he would look to them to pay a claim. Of course, they would look to sue the bank for recovery of sums paid.

Second, if there was no title insurance, it depends on the type of deed he was given by the bank. If it were a full warranty deed, he'd have a valid claim against them. If it were less than that, well, it depends on the language in that deed.

Chances are pretty good that he's got his hiney covered here one way or another. If nothing else, he might have either the bank or the title company start a quiet title suit, that might eliminate the foreclosed owner and/or any mortgage assignees from having any interest in the property. It could be tough for someone who didn't make the payments to prove they shouldn't have been foreclosed on, and it might be too financially burdensome for entities with tiny fractional interests in the mortgage to join the lawsuit to prove that they are entitled to any compensation.

[Manifestor_of_Light]

4. a lot of banks do not have a paper title to the house.

That violates the Statute of Frauds, which says that certain types of contracts must be in writing to be valid.
One example is the sale of real estate.

The banks don't have title. I was shocked when I read that there were millions of mortgages with no paper title.

[begin_within]

11. Then who does legally own the house?

[Warren Stupidity]

13. as of now the foreclosed on owners.

the court ruled that the fraudulent foreclosure sales were not legal and did not transfer title to the new owners.

[begin_within]

18. What a mess.

Two families entangled in a mess created by the bank. Why didn't the bank get the title to the house as part of the loan agreement? I don't understand why the bank didn't take title to the house at the beginning of the loan, as collateral. But because they didn't, the bank had no right to sell the house. They could have maybe gotten a lien put on the house by the court, for the amount still owed to them. Something doesn't add up right here, for me. Unless I'm missing part of the story.

[customerserviceguy]

20. The bank would have taken the property as collateral at the beginning

What they did here was cut some corners in the foreclosure process, and the court called them on it. If they go back and make sure everything is properly put in order, they can restart the foreclosure procedure, and deliver clear title to the innocent third party purchaser for value.

[Warren Stupidity]

29. except it seems that in quite a few cases there is no clear title

it appears that the tsunami of paper passing that was symptomatic of the pre-crash bubble-scam resulted in 'cut corners' all over the place as mortgages were issued, sold, resold, re-resold etc. The foreclosure corner cutting may frequently be because the entity stuck with the non-performing asset has in fact no valid paper work to go with.

[customerserviceguy]

32. The problem is not in the basic title to the property

It's in the chain of assignment of interests in the mortgage. A mess of uncertainty in that chain does not extinguish the mortgage, it just fuzzies up the question of who has the right to foreclose, and who has the right to execute a valid release of the mortgage once it's paid off.

Courts can resolve that question, and the homeowner who has a solid set of proofs of payment of the mortgage payments can obtain a court-ordered release of the mortgage, although it might be expensive. Simply saving the annual reports of interest paid might well be enough to prove payment.

[customerserviceguy]

19. Did the court rule that the mortgage was dissolved?

If not, then it still exists. I haven't read the decision, but the ruling is most likely that the foreclosure process was not valid. All that is needed to correct that is to go back and dot every "I", cross every "T", and it can start over again, if the conditions for foreclosure under the terms of the mortgage still exist.

A lot of folks here seem to think that it's like the exclusionary rules, where if the cops don't follow the rules, the case goes away. Civil law doesn't work that way.

[flvegan]

22. Well, wait a minute...for entertainment's sake

Let's *assume* that the bank still doesn't possess the Note, the basis of the ruling. The lender dismisses the case, vacates the judgment which reinstates the mortgage. What's needed is the Note and a valid assignment. Were I the original foreclosed on owners, I'd immediately file a Quiet Title action a force the lender's lien off my property, clearing my title of the debt IF they couldn't prove up their claim (produce the Note/assignment).

[customerserviceguy]

23. Good point

I'm sure that some lackeys in the loan department have been working overtime on trying to find that note, and all assignments of it. Presuming that a photocopy of it were in the closer's file, and sworn testimony that the photocopy was genuine, I can't imagine it would be impossible for the lender to prove that the original note existed.

In the absence of provable assignments, it would seem that the original lender would still be the owner of a note that was verified in the above fashion. But, as one of my former title managers put it, it's "a dog's breakfast", no matter what happens.

[flvegan]

26. Let me entertain further

Let's say that said photocopy exists (no original Note is found) and a second Count is added to the Complaint in regards to a lost or destroyed Note. Under Discovery, the Plaintiff would still need to prove up their claim.

SO, it suggests that to perfect title the original lender would have to foreclose instead of the purported foreclosing entity. Calls into question at that point of the subsequent purchaser of the debt having received payment of X months/years of mortgage payments where now the original lender might seek to foreclose. I smell unjust enrichment. And a lawsuit that could pay the whole loan off.

[customerserviceguy]

31. Sounds like

not only the dog's breakfast, but his lunch and dinner as well.

I haven't talked with any title people since my last job in the industry six years ago, but I'll bet the last few years have been a really wild ride.

[customerserviceguy]

16. What do you think a paper title is?

Something you find in a "Monopoly" game? It's actually a legal concept, not a thing that you can hold at all. It's like ownership of intellectual property, it means something, yet it is insubstantial in the traditional sense of "owning" something.

[chill_wind]

5. Boston Globe

Were this print media, I would call this "hot off the presses." Another foreclosure title case was decided and here's Attorney Richard D. Vetstein with the summary:

The Massachusetts Supreme Judicial Court ruled today in much anticipated Bevilacqua v. Rodriguez case. (Text of case can be read here.). The final edict is mix of bad and good news for owners of property whose titles have been rendered defective due to improper foreclosures stemming from the landmark U.S. Bank v. Ibanez ruling last January. The Court held that owners cannot bring a court action to clear their titles under the “try title” procedure in the Massachusetts Land Court. Left open, however, was whether owners could attempt to put their chains of title back together (like Humpty-Dumpty) and conduct new foreclosure sales to clear their titles. Unfortunately, the SJC did not provide the real estate community with any further guidance as to how best to resolve these complicated title defects.

(snip)

Door left open? Re-foreclosure in owner’s name

A remedy left open, however, was whether owners could attempt to put their chains of title back together and conduct new foreclosure sales in their name to clear their titles. The legal reasoning behind this remedy is rather complex, but essentially it says that Bevilacqua would be granted the right to foreclosure by virtue of holding an “equitable assignment” of the mortgage foreclosed upon by U.S. Bank. There are some logistical issues with the current owner conducting a new foreclosure sale, but I’ve heard it has been done.

The other remedy, which is always available, is to track down the old owner and obtain a quitclaim deed from him. This eliminates the need for a second foreclosure sale and is often the “cleanest” way to resolve Ibanez titles.

Title insurance companies who have insured Ibanez afflicted titles have been steadily resolving these titles since the original Ibanez decision in 2009. I’m not sure how many titles are out there unfixed. Those without title insurance, of course, have borne the brunt of this mess.

Bevilacqua v. Rodriguez: What Now For Faulty Foreclosure Titles?
Rona Fischman October 19, 2011 01:57 PM

more: http://www.boston.com/realestate/news/blogs/renow/2011/10/bevilacqua_v_ro.html

[Warren Stupidity]

6. Every one of the people affected should turn around and sue the foreclosing agency

- i.e. the banks - for damages.

[chill_wind]

28. I think that's basically what the lower court judge was saying.

See post # 27

http://www.democraticunderground.com/discuss/duboard.php?az=show_mesg&forum=439&topic_id=2150089&mesg_id=2150810

[begin_within]

10. Then who does own the title to the house?

The article doesn't say.

[customerserviceguy]

21. It would be the 'foreclosed' owner

Subject to the mortgage that owner signed when the house was put up as collateral for that loan. All the court could have ruled is that the foreclosure proceedings were not executed in a way that transferred title to the bank.

[flvegan]

15. Did he purchase an owner's title insurance policy when he bought the property?

If not, this might be an unfortunate lesson for him. If he did, he needs to call his policy underwriter.

[chill_wind]

27. It isn't clear, even from numerous other articles, but

all of this is making my head swim on a whole new level. Basically this was - for a rare change- a very pro-consumer judge that was upheld by the SCJ. What happened in this case originally was that a MERS mortage assignment wasn't produced and recorded for more than a year after the auction. (Far more often these cases seem to be about missing or fraudulent (robosigned or falsely notarized) paper trails, where the original documents have never been produced, but apparently not in this instance. But the net effect of the decision would seem to be the same. See below)

So the title company really wouldn't be at fault if the assignment wasn't there. This is more MERS shit, even if it isn't a case of the more widespread fraudulent document milling/robosigning signing stuff. The decision says that he doesn't have standing to sue the previous foreclosed owner, either, who was not responsible for the foreclosing lender's lack of diligence in proving title.

Bloomberg:

Buyer Can’t Sue After Bad Foreclosure Sale

By Thom Weidlich - Oct 18, 2011 4:58 PM ET


A Massachusetts man who bought property in a faulty foreclosure sale isn’t the true owner and so doesn’t have the right to sue over it, the state’s high court ruled.

The Supreme Judicial Court, which in January found that banks can’t foreclose on a house if they don’t own the mortgage, went one step further in a closely watched case and said a sale after that foreclosure doesn’t transfer the property. Therefore, the buyer couldn’t bring his court action against a previous owner, the court ruled.

lots more: http://www.bloomberg.com/news/2011-10-18/buyer-can-t-bring-case-after-bad-foreclosure-sale-court-rules.html


It may all come down to what the judge said in the earlier case?:

“I have great sympathy for Mr. Bevilacqua’s situation — he was not the one who conducted the invalid foreclosure, and presumably purchased from the foreclosing entity in reliance on receiving good title — but if that was the case his proper grievance and proper remedy is against that wrongfully foreclosing entity on which he relied,” Long wrote.

http://www.massrealestatelawblog.com/2011/05/02/ibanez-aftermath-sjc-hears-arguments-in-important-faulty-foreclosure-transfer-case/

(IANAL, but meaning the judge seems to be saying his remedy is against the bank(s)/MERS)



More links at this Massachusetts Reals Estate blog by an attorney who's been following this along:

What Now? Bevilacqua v. Rodriguez Leaves Toxic Foreclosure Titles Unclear

http://www.massrealestatelawblog.com/2011/10/18/what-now-bevilacqua-v-rodriguez-leaves-titles-unclear-after-u-s-bank-v-ibanez/

Older entries:

Breaking News: U.S. Bank v. Ibanez Foreclosure Ruling Upheld: An Indictment Of The Securitized Mortgage System
by Rich Vetstein on January 7, 2011

http://www.massrealestatelawblog.com/2011/01/07/ibanez-foreclosure-ruling-upheld-an-indictment-of-the-securitized-mortgage-system/


Ibanez Update: Massachusetts Land Court Decision Invalidates Foreclosures Based On Post-Sale Assignments

"The net effect of the Ibanez decision is to call into serious question the validity of any foreclosure where the lender did not physically hold the proper paperwork at the time it conducted its auction. This has already caused significant uncertainty in the ownership of many properties that have already been foreclosed and are awaiting foreclosure."

http://www.massrealestatelawblog.com/2009/08/27/ibanez-update-massachusetts-land-court-decision-invalidates-foreclosures-based-on-post-sale-assignments/


Focus On The Foreclosure Mess: Title Insurance, Robo-Signing, & Ibanez
http://www.massrealestatelawblog.com/2010/10/26/focus-on-the-foreclosure-mess-title-insurance-robo-signing-ibanez/

Not part of this case, but good. Another late-filed assignment (by alleged robosigner for LPS):

"That assignment was executed by Liquenda Allotey, one of the hundreds of deputized vice presidents of MERS, and an alleged “robo-signer” for Lender Processing Service (LPS) which has come under fire for document irregularities. The assignment ran to Deutsche Bank, which completed the foreclosure sale on May 24, bid its mortgage debt and purchased the property."

Judge Tells Lenders You Can’t Have Your MERS Cake & Eat It Too
http://www.massrealestatelawblog.com/2011/08/23/breaking-news-mass-bankruptcy-judge-voids-foreclosure-of-mers-mortgage/

[DRoseDARs]

17. So basically the court reaffirmed the illegality of selling and buying stolen property. n/t

[chill_wind]

30. And not to overlook this: He had further developed the property (condominiums)

and invested his own cash on top of the purchase, so now..what would happen to titles of those properties developed and conveyed under him in theory?

Frank Bevilacqua purchased property in Haverhill out of foreclosure from U.S. Bank. Apparently, Bevilacqua invested several hundred thousand dollars into the property, converting it into condominiums. The prior foreclosure, however, was bungled by U.S. Bank and rendered void under the Ibanez case. Mr. Bevilacqua (or presumably his title insurance attorney) brought an action to “try title” in the Land Court to clear up his title, arguing that he is the rightful owner of the property, despite the faulty foreclosure, inasmuch as the prior owner, Rodriguez, was nowhere to be found.

http://www.massrealestatelawblog.com/2011/10/18/what-now-bevilacqua-v-rodriguez-leaves-titles-unclear-after-u-s-bank-v-ibanez/

[Matariki]

33. Proposed Bill Would Offer Visas to Foreign Homebuyers in U.S.

An article linked from the OP:
http://www.dsnews.com/articles/index/proposed-bill-would-offer-visas-to-foreign-homebuyers-in-us-2011-10-20

I find this disturbing, foreclosing on the American middle class and reselling to who? Wealthy foreign interests? We can all become renters from members of the Saudi Royal family or Chinese industrial barons?