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Saturday, October 10, 2009
Courts - More on: In Kansas, the Mortgage Machine Backfires; MERS issue raised in Indiana
Supplementing this ILB entry from Sept. 27th is this story that appeared yesterday in the Boston Globe, reported by Jenifer B. McKim and headed "Foreclosure sales in limbo over title issue." Some quotes from the lengthy story:
A court decision expected as soon as today could negate the validity of sales of thousands of foreclosed homes in Massachusetts, causing havoc for buyers and sellers and further stalling the housing market’s recovery in hard-hit areas.At issue is proof of ownership at the time of a foreclosure sale. During the housing boom, millions of mortgages were bundled into bonds and sold to investors, a process that resulted in lengthy and twisted paper trails that can obscure ownership. Many lenders believed they could complete foreclosure transactions and later produce formal proof they held the mortgage.
That changed in March when Justice Keith C. Long of Massachusetts Land Court found that two foreclosures in Springfield were invalid because ownership of the mortgages was not clear at the time of the foreclosures.
Long’s ruling, which came as a shock to many who deal with distressed properties, called into question the ownership of hundreds if not thousands of foreclosed homes in Massachusetts, prompting some lenders to delay sales out of fear they could later be voided, title companies to balk at insuring them, and nonprofits to steer away from certain foreclosed homes altogether.
“There are thousands and thousands of titles that have gone through foreclosures with these late filed’’ ownership records, said Lawrence Scofield, an attorney with Ablitt Law Offices in Woburn, who represented plaintiffs in three consolidated Springfield cases ruled on by Long. “Judge Long is saying you don’t really own it. That is the real, overwhelming, economic effect.’’
Two of the plaintiffs asked Long to reconsider the ruling, and a decision is imminent. * * *
While title issues can affect any home sale, Long’s ruling addressed procedures required under foreclosure law and therefore only affects properties foreclosed on by a lender. His decision builds on a growing national movement among housing advocates, courts, and some lawmakers to push lenders dealing with foreclosed properties to produce accurate documentation before deals are consummated.
Kathleen Engel, professor of law at Suffolk University, said the federal government should step in to help states deal with “toxic titles’’ that are clogging up the system from California to Florida. She said until recently few people were scrutinizing paperwork of foreclosing lenders, whose actions are causing problems for borrowers, investors, and municipalities. No matter how Long rules, she said, the problem isn’t going away.
Posted by Marcia Oddi on October 10, 2009 02:20 PM
Posted to Courts in general