Sunday, January 23, 2011

Post-'Ibanez' Fallout Begins; Mass. High Court Takes Case Of Unwitting 3rd Party Buyer Left Holding The Bag w/ Void Title On Improperly F'closed Home

In Boston, Massachusetts, Bloomberg reports:
  • Massachusetts’ highest court will consider whether a home buyer can rightfully own a property if the bank that sold it to him didn’t have the right to foreclose on the original owner.

  • The state’s Supreme Judicial Court, which agreed last month to take the appeal, already ruled Jan. 7 that banks can’t foreclose on a house if they don’t own the mortgage. The lower court decision now under review said the buyer of residential property in Haverhill, Massachusetts, never really owned it because U.S. Bancorp foreclosed before it got the mortgage.

  • “It appears to be the next step in the conversation,” Paul R. Collier III, who represented the borrower in the earlier case, U.S. Bank v. Ibanez, said in a phone interview. Like the Ibanez case, the court’s decision may resonate with other states as they grapple with the rights of new homebuyers who may be hesitant to complete a purchase for fear of uncertain title, and with how such a trend may hobble the broader housing market.

***

  • The latest case, Bevilacqua v. Rodriguez, could affect trusts that bundled mortgages and sold securities to investors. [...] The Ibanez and Bevilacqua cases both originated before Massachusetts Land Court Judge Keith C. Long in Boston.

  • Francis J. Bevilacqua III went to Long’s court to force the original owner to say whether he had a claim on the property in Haverhill, about 36 miles (58 kilometers) north of Boston. A city assessment website lists four condominiums at the location with a total value of $600,300.

  • Bevilacqua asked Long whether he could try to find the original owner through newspaper notices, said his lawyer Jeffrey B. Loeb, of Rich May PC in Boston, in a phone interview. In August, Long ruled that Bevilacqua wasn’t the property’s owner and didn’t have standing to inquire about claims. U.S. Bancorp, which sold Bevilacqua the property in 2006, conducted an invalid foreclosure because it didn’t properly own the mortgage at the time, Long said.

  • The mortgage transfer to U.S. Bancorp, which oversees the mortgage-backed trust containing the loan, happened after the foreclosure, Long said. All Bevilacqua had was a deed from an invalid foreclosure sale, the judge said.(1)

  • “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.

***

  • Both Costello and Collier, the lawyer for Ibanez, said Bevilacqua is the first so-called third-party buyer case to come before the high court since the Ibanez decision.(2) “The third-party buyers obviously have claims against the selling entity, the servicing entity and any title insurer and any attorney that was engaged,” Collier said. The court has tentatively set oral argument for April, according to Susan Mellen, the court clerk.

***

  • The third-party issue has become a major one for title insurers in the state, said Richard D. Vetstein, a real-estate lawyer in Framingham, Massachusetts. “What’s going to happen to all these people?” Vetstein said. “The people who don’t have title insurance are really in big trouble.”

  • The court may have left the issue of third-party buyers unaddressed in Ibanez anticipating a ruling in the Bevilacqua case, said Thomas Adams, a partner at New York law firm Paykin Krieg & Adams LLP. “That’s a big issue to leave outstanding,” said Adams, a former analyst at bond insurer Ambac Financial Group Inc. “If Judge Long’s decision holds, then that’s a big deal.”

For the story, see Faulty Foreclosure Case in Massachusetts High Court May Hurt Home Buyers.

For Massahusetts Land Court Judge Keith C. Long's ruling now under review before the state high court, see Bevilacqua v. Rodriguez, MISC 10-427157 (KCL), 2010 WL 3351481 (Mass. Land Ct. Aug. 26, 2010) (go here for Judge Long's one-sentence judgment).

(1) Judge Long kicked off his ruling now under review with the following Introduction (bold text is my emphasis, not in the original text):

  • Plaintiff Francis Bevilaqua holds no title to the property at 126-128 Summer Street in Haverhill. That title is held by defendant Pablo Rodriguez. What Mr. Bevilaqua has is a quitclaim deed from US Bank, N.A., which conducted an invalid foreclosure sale on the property (it was not the holder of the mortgage at the time the sale was noticed and conducted as required by G.L. c. 244, § 14) [Note 1] and thus acquired nothing from that sale. See US Bank v. Ibanez, 17 LCR 202 (Mar. 26, 2009) & 17 LCR 679 (Oct. 14, 2009) and cases cited therein. US Bank therefore had nothing to convey, and its purported conveyance to Mr. Bevilaqua was a nullity. See Bongaards v. Millen, 440 Mass. 10, 15 (2003).

    Despite this, Mr. Bevilaqua now seeks to create a full, fee simple title in himself — quite literally, something from nothing — through the “try title” procedure of G.L. c. 240, §§1-5. He cannot do so, for the reasons set forth below. Accordingly, his complaint is DISMISSED in its entirety, with prejudice.

(2) See Albice v. Premier Mortgage Services Of Washington, Inc. (if link expires, TRY HERE, or TRY HERE - latter link may require free registration with Findlaw.com), 157 Wn. App. 912; 239 P.3d 1148 (Wn. Ct. of App., Div. II, September 28, 2010) for an example of a case outside of Massachusetts where the Washington State Court of Appeals ruled that a 3rd party foreclosure purchaser was left holding the bag where one of the technicalities of the state foreclosure process was not strictly followed when the sale of real estate owned by a defaulting borrower was conducted.

posted by Home Equity Theft Reporter at 4:06 AM