From Ibanez to Bevilacqua: Massachusetts SJC Rules that buyer of foreclosed real estate owns nothing
Last week, the Massachusetts Supreme Judicial Court issued its eagerly awaited opinion in the case of Bevilacqua v. Rodriguez. This decision is the follow-up to the landmark case of US Bank v. Ibanez. In Ibanez, in which the SJC ruled that if a foreclosure is conducted by an assignee of the bank that originally took the mortgage, there must be a written assignment before the bank can foreclose. Before the Ibanez decision was issued it was routine practice in Massachusetts–believe it or not–to conduct a foreclosure with no assignment at all. The Bevilacqua case addresses the issue of what will happen with all the foreclosures that were conducted without assignments.
The banks and foreclosure firms that processed the sloppy paperwork were hoping that the SJC would let them off easy and find a loophole to fix for them their failures to assign the mortgages that they foreclosed on. But in a well-reasoned opinion that followed the language of the foreclosure and “try title” statutes, the SJC followed the law, holding that if there hadn’t been a valid assignment before the foreclosure (meaning that the foreclosing bank had no right to foreclose), then the foreclosing bank also has no right to sell the “foreclosed” property.
Massachusetts Attorney General Martha Coakley, who submitted an amicus brief in the Bevilacqua case, praised the ruling, calling it “yet another clear demonstration that the only way we are going to restore a healthy economy is to address the foreclosure crisis and hold the banks accountable for their actions.”
So what happens next? The SJC provided a path for owners of foreclosed properties to clear the title: foreclose again. This process of re-foreclosed will probably take a minimum of seven to nine months per property. In the meantime, if a foreclosed homeowner is able to cure the default on the mortgage (however unlikely), the homeowner would be able to redeem their equity of redemption–in layman’s terms, reinstate the mortgage. The SJC is also expected to make a decision within the next few months on another case in which the issue is whether the bank needs to have the note, as well as the mortgage, in order to foreclose. More to come.
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