Faulty Foreclosures Can Strip Property Rights From New Owners

The Massachusetts Supreme Judicial Court ruled today that if an original foreclosure was faulty, people who buy foreclosed property might not own what they think they do.

The case, Bevilacqua vs. Rodriguez, involved a Haverhill property which had been owned by Pablo Rodriguez, who took a mortgage on it in 2005 through a lender named Finance America. The mortgage was assigned to the Mortgage Electronic Registration System (MERS), and the note was subsequently sold into a securitized trust.

In 2006, U.S. Bank, acting as trustee, foreclosed on the property. But the mortgage, which had been entered into the land records as assigned to MERS had never been transferred over to U.S. Bank. This transfer occurred only after the foreclosure sale had already been completed.

Last year, the SJC ruled in its influential Ibanez decision that such post-foreclosure transfers were illegal - banks must be assigned the mortgage prior to foreclosure in order to foreclose.

In 2006, U.S. Bank sold the property to Francis J. Bevilacqua, granting him a "quitclaim deed" affirming U.S. Bank no longer had an interest in the property. But, given the court's Ibanez ruling, in 2010 Bevilacqua elected to file a "try title" action in order to clear up any potential problems with the title.

A "try title" action is a legal method of clearing disputes over who owns a piece of property by forcing the parties with a claim on the land to appear in court and present evidence. If a party with such a claim fails to appear and defend it, or loses the case on the evidence, their claim is wiped out, making it easier for the current owner to sell.

Judge Keith Long of the Land Court, however, ruled that Bevilacqua didn't have the right to attempt to "try title." Since U.S. Bank's original foreclosure was illegal, they didn't have the right to sell the property to Bevilacqua in the first place, and he was not its legal owner.

The SJC today affirmed that decision, saying that the fact that U.S. Bank had granted a deed to Bevilacqua wasn't enough to establish his ownership.

"Recording may be necessary to place the world on notice of certain transactions. Recording is not sufficient in and of itself, however, to render an invalid document legally significant," said the court. "In light of its defective title, the intention of U.S. Bank to transfer the property to Bevilacqua is irrelevant and he cannot have become the owner of the property pursuant to the quitclaim deed."

The court does state that it might be possible for property owners in Bevilacqua's position to establish ownership by, in effect, re-foreclosing on the property.

Bevilacqua might argue that the record shows that U.S. Bank intended to transfer its interest in the property to him, and that therefore he is entitled to foreclose on the property under the terms of the original mortgage, just as U.S. Bank would have been.

However, the court says that a try title action isn't the proper legal proceeding in which to attempt such a maneuver. But they explictly leave the door open for Bevilacqua to make another attempt to establish his ownership.

By Coleen Sullivan

North Shore Massachusetts Flood

Dealing with the Aftermath


If you have experienced a flood, you can file your flood insurance claim by following these three steps:

STEP ONE:

After experiencing a flood, contact your agent or insurance company to file a claim. An adjuster should contact you within a few days of filing your claim. If you do not hear from an adjuster, you can contact your insurance agent or company again. Make sure you have the following information handy:

•The name of your insurance company

•Your policy number

•A telephone and/or email address where you can be reached at all times

STEP TWO:

Separate damaged from undamaged property. Your adjuster will need evidence of the damage to your home and possessions to prepare your repair estimate.

•Take photographs of all of the damaged property, including discarded objects, structural damage, and standing floodwater levels.

•Make a list of damaged or lost items and include their date of purchase, value, and receipts, if possible.
•Officials may require disposal of damaged items so, if possible, place flooded items outside of the home.

STEP THREE:

Your adjuster will provide you a Proof of Loss form for your official claim for damages. You'll need to file this claim with your insurance company within 60 days of the flood. This document substantiates the insurance claim and is required before the National Flood Insurance Program (NFIP) or insurance company can make payment.

You'll receive your claim payment after you and the insurer agree on the amount of damages and the insurer has your complete, accurate, and signed Proof of Loss form. If major catastrophic flooding occurs, it may take longer to process claims and make payments because of the sheer number of claims submitted.

Disaster Assistance: (800) 621-FEMA, TTY (800) 462-7585


http://www.floodsmart.gov/floodsmart/