Sloppy Bay State Banks Resort To Foreclosure "Do-Overs" As Title Insurers Refuse To Insure Crappy Titles; Opportunities Open Up For Booted Homeowners

In Boston, Massachusetts, The Boston Globe reports:

• Zepheniah Taylor lost his Dorchester three-decker to foreclosure two times in 17 months. Now the 59-year-old grandfather has returned home to stay. The scenario, once implausible, is becoming more common in the crazed and fast-changing world of foreclosures.

• Hundreds — and possibly thousands — of Massachusetts homeowners are facing back-to-back foreclosures as lenders realize there were problems with property titles the first time around. Those lenders, often unable to obtain title insurance, are opting to start from scratch with what is being called a “re-foreclosure.’’

• The prospect of going through a foreclosure all over again may seem nightmarish for homeowners, but in a growing number of cases the do-overs are creating opportunities for them to repossess their homes. Such was the case with Taylor, who decided to fight the second foreclosure. The tactic paid off: He won the right to repurchase the home at current market value.(1)

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• The recent burst in re-foreclosures can be traced to a 2009 Massachusetts Land Court ruling(2) that called into question the validity of a home’s ownership in cases where foreclosure paperwork was incomplete or inaccurate. The finding is now being reviewed by the state Supreme Judicial Court.(3) Its decision could determine whether tens of thousands of homes with foreclosures in their backgrounds have valid titles. [...] Many lenders believed they could still proceed with a foreclosure and later sort out the legal mess by proving they held the mortgage. That premise was rejected by the Land Court.

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• [Elizabeth J. Barton, chairwoman of the Massachusetts Bar Association’s Foreclosure Legislation Task Force,] said lenders are primarily targeting properties for which they have been denied title insurance because the original foreclosure did not comply with the court’s ruling. “Title insurance companies hesitate to extend protection to a loan that violates the ruling,’’ said Barton, title counsel at Connecticut Attorneys Title Insurance Co., which has offices throughout New England. “A lot of lenders have had to re-foreclose.’’

• The problem of cloudy title histories also is providing a boost to an increasing number of homeowners who are going to court to force lenders to prove they have a legal right to seize their properties.

For more, see Legal twist forces foreclosure redos (Creates second chance for former owners).

Thanks to Bill Collins of Frontier Abstract, Rochester, NY for the heads-up on this story.

(1) According to the story, after leaving his home, Mr. Taylor returned several months later upon the urging from community activists at City Life/Vida Urbana in Jamaica Plains. He then challenged the foreclosure in Boston Housing Court with the help of attorneys from the non-profit law firm Greater Boston Legal Services, claiming Wells Fargo made additional errors in the second foreclosure and still could not prove it had clear title to the home, the story states.

(2) There were actually two rulings issued by Massachusetts Land Court Judge Keith C. Long:

• U.S. Bank Nat’l Ass’n v. Ibanez (Ibanez #1), 17 Mass. Land Court Rptr. 202 (Mar. 26, 2009),
• U.S. Bank Nat’l Ass’n v. Ibanez (Ibanez #2), 17 Mass. Land Court Rptr. 679 (Oct. 14, 2009).

(3) For links to the briefs filed with the Massachusetts Supreme Judicial Court, see Massachusetts High Court Hears Arguments In 'Ibanez' Case That Threatens To Open The Door To Voiding Thousands Of State Foreclosures.