A little background.
Several years ago, the Supreme Judicial Court in U.S.
Bank v. Ibanez held that a valid foreclosure required the
foreclosing entity to have record assignment of the mortgage at the time of
foreclosure. Ibanez came
at a time when mortgagees were doing foreclosures by the dozens, and
being very sloppy in their paperwork. Ibanez, in effect,
invalidated thousands of foreclosures and created a nightmare for title
insurance companies and homeowners who purchased these foreclosed properties.
The
Legislature responded to this problem by attempting to
pass "An Act Clearing Titles to Foreclosed Properties," which
would give former homeowners three years from the date of foreclosure to
challenge the foreclosure. Under the law of adverse possession,
a former homeowner would likely be barred if they did nothing
to challenge the foreclosure after twenty years; this bill would
shorten this period to three years. Supporters
of the bill considered it
necessary for salvaging the real estate market while opponents lobbied against it as
a denial of homeowner rights. I have little doubt that
this legislation will come back to the Legislature next year, as the problem of
void foreclosures will not be going away anytime soon.
The fate of this legislation
also highlights the importance of understanding foreclosure by entry. As
I have written before, foreclosure by entry is a "back up"
option for a non-judicial foreclosure and can be successful even
when the non-judicial foreclosure is not. I predicted before that
foreclosure by entry will be an important topic as the foreclosure crisis
continues and with the Governor's veto of this legislation, I expect that to
continue.