Massachusetts foreclosures have experienced a “turn-around” since the seminal Land Court decision in the IBANEZ case. Among other things, that case held that if the entity foreclosing had not received all appropriate assignments of the mortgage prior to commencing the foreclosure, the foreclosure was ineffective, and must be started again. The hitherto acceptable process of obtaining the appropriate assignment(s), post petition, would no longer be permissible.
The immediate effect of this decision was to require all foreclosures to “stop in their tracks” and start the process again after all the correct assignments were in hand. That slowed foreclosures and REO sales down considerably, but they are now getting back on track on a case by case basis.
The lurking problem, however, are those foreclosures which took place before IBANEZ where title attorney and title insurance agencies closed using the old rules. The IBANEZ rules apply just as forcefully to these situations, and title examiners and title insurance companies are rightly concerned that some Borrower may come out of the woodwork and claim that his or her foreclosure was not done properly and demand the property back. That all being said, my advice to any and all Buyers of property that have foreclosures in their title is OBTAIN AN OWNER’S POLICY OF TITLE INSURANCE!!!!! Many current REO Owners received an Owner’s Policy when they purchased the REO. Have your attorney arrange to have that title insurance policy re-issued. In the long run, it will cost your customer much less than the expense of an action to quiet title. If no policy of Owner’s Title Insurance is available, seek a price discount!!
Believe me, we have not heard the end of this problem. Do whatever you can at the time of purchase to make sure it does not harm your Buyer more than the cost of the Owner’s Policy of Title Insurance.