A colleague and good friend of mine is house shopping. She spent last weekend touring a home in Hingham – a popular, picturesque waterfront suburb south of the city where many travel to Boston’s financial district each morning by ferry (the trip across the Harbor shaves 40 minutes off the commute). The listing caught her eye because of the size of the home and the price – a little too big, a little too well-maintained for the asking price. Turns out the home was being offered by a developer that had acquired the property from a foreclosing lender – something commonplace throughout the country as the national housing market desperately seeks to achieve stability. But in post-Ibanez Massachusetts, where home ownership can rest on an (unelected) judge’s determination that mortgage assignment documentation was defective, buying a home that has been subject to foreclosure (at any point) is a risk that perhaps no reasonable purchaser can take.
Last month we discussed the Ibanez opinion – the SJC’s decision upholding the Massachusetts’ Land Court’s refusal to quiet title with respect to two foreclosed homes because the mortgages, in the Court’s eyes, were not properly assigned by written instrument. The fallout of Ibanez is already being felt throughout the Commonwealth, and the SJC has just agreed to affirm – strike that – has just agreed to hear – Bevilacqua v. Rodriguez – a lower court decision extending the mechanic of Ibanez to bona fide purchasers that bought homes from foreclosing lenders. Judge Keith Long (you’ll remember him as the author of the lower-court Ibanez opinion) denied Mr. Bevilacqua’s request to clear title to a house purchased from a securitization trustee that had acquired the property via foreclosure. Judge Long determined that the documentation assigning the mortgage to the trustee was defective and, as a result, the trustee never acquired clear title to the property (and if the trustee didn’t own the home, it could not have passed title to Mr. Bevilacqua).
Let’s make no mistake: the story of these cases extends well past a scholarly interpretation of “title theory”, and the defeasance of Mr. Bevilacqua was deemed by the Court to be acceptable collateral damage. These are populist decisions intended to punish a mortgage industry that has been roundly demonized by politicians and media-types. As Massachusetts’ Attorney General Martha Coakley (you’ll remember her as the heir apparent that lost “Ted Kennedy’s seat” to Scott Brown) wrote in a her press release on the Ibanez decision:
“In their careless and hasty stampede to securitize loans, the banks moved at their own peril. Whether by robo-signing or failing to properly transfer title, these financial institutions created this real estate chaos. They should bear the brunt and the cost of the remedy.”
Not what I would call a measured response, especially in light of the fact that the “chaos” in question amounted to a missing pooling agreement schedule and an incomplete assignment-in-blank (as an aside, Ms. Coakley seems to take a particularly extreme view of scriveners’ errors). But never let the facts (or common sense) get in the way of a good press-op. The SJC’s decision in the Bevilacqua case won’t be handed down for months. In the meantime, banks will double-check their paperwork, title insurers will wring their hands, politicians will expound vitriol, and my friend’s search for a new home will continue.
By Matt Clark and Krystyna Blakeslee