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Gov. Charlie Baker last week signed into law a bill that clears the title of previously foreclosed-upon properties, curing the so-called Ibanez defects after a period of three years.
The law provides a three-year statute of limitations for borrowers to seek to regain title to their property after a foreclosure. The law also says that the affidavit of sale recorded with the foreclosure deed will be considered conclusive evidence of compliance with foreclosure statutes once it has been on record for three years.
The law does not apply to borrowers currently challenging their foreclosures, nor does it prevent borrowers from raising defects during the three-year period.
The law also does not prevent borrowers from suing lenders over defective foreclosures, even after the title has cleared.
Borrowers who were foreclosed upon three or more years ago will still have a year to pursue claims against their foreclosing lender.
Peter Wittenborg, executive director of the Real Estate Bar Association for Massachusetts, wrote a letter urging the governor to sign the bill into law last week and said his members were thrilled by the news of its passing.
“This long-awaited legislation will help innumerable homeowners whose post-foreclosure residential real estate titles have been clouded by the SJC’s 2011 Ibanez v. U.S. Bank decision,” Wittenborg said.
In that decision, the Massachusetts SJC ruled that U.S. Bank’s foreclosure on Antonio Ibanez’s property was invalid. U.S. Bank had bought the mortgage from another lender and didn’t record it for more than a year after starting the foreclosure process.
The SJC invalidated U.S. Bank’s foreclosure on Ibanez because it hadn’t recorded the mortgage and therefore wasn’t the legal mortgagor when the foreclosure commenced.
Grace Ross, of the Massachusetts Alliance Against Predatory Lending, lobbied against the bill. She said instead of clearing property titles it will “muddy the waters.”
“The bill is the darling of the title insurance industry,” Ross said. “It purports to clear title. We’re still not convinced that it does. It doesn’t comport with any existing laws that clear title going back to the constitution.”
Ross said the focus should be on repairing each individual title defect is repaired, not by simply declaring them repaired after three years. She also said the bill would disproportionately affect communities of people who were the targets of predatory lending in the first place.
“The bill is discriminatory because we’re wiping out the money of communities of color and women heads of households,” Ross said. “This bill disparately denies them their right to justice.”
