Massachusetts Supreme Judicial Court Holds That Bad Foreclosure = Bad Title For Bona Fide Purchaser

The Massachusetts Supreme Judicial Court ruled this week that owners of property whose titles have been rendered defective due to improper foreclosures cannot bring a court action to clear their titles under the “try title” procedure in the Massachusetts Land Court. The Court, which in January found that banks can’t foreclose on a house if they don’t own the mortgage, went one step further in a closely watched case and said a sale after that foreclosure doesn’t transfer the property. Therefore, the buyer couldn’t bring his court action against a previous owner, the Court ruled. Left open, however, was whether owners could attempt to put their chains of title back together and conduct new foreclosure sales to clear their titles. Unfortunately, the Court did not provide the real estate community with any further guidance as to how best to resolve these complicated title defects.

The Court upheld a lower-court decision that said Francis J. Bevilacqua III, the buyer of residential property in Haverhill, Massachusetts (who apparently invested hundreds of thousands of dollars in the property, converting it into condominiums), never owned it because U.S. Bancorp foreclosed before it the mortgage was assigned to it by MERS. The Court also held that Bevilacqua lacked standing as a "bona fide good faith purchaser for value." This ruling could have implications in the foreclosure crisis, in which banks are accused of clouding home titles through sloppy transferring of mortgages.

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