Court to Decide on Foreclosure Buyer’s Ownership Standing

As an almost-inevitable follow-up to its Jan.  7 ruling that invalidated two foreclosures completed by U.S. Bancorp and Wells  Fargo, the Massachusetts Supreme Judicial Court has agreed to hear an appeal  from a buyer who purchased a foreclosed property from U.S. Bancorp in 2006 only  to have a lower court declare that he was not the property’s owner because U.S.  Bancorp did not own the mortgage when it foreclosed.

The case could have far-reaching implications  on the market for foreclosure properties, calling into question the validity of  previous sales of foreclosed (REO) properties, which represent 15 percent of  all real estate sales, according to RealtyTrac. It could also wreak havoc on  the lenders and title insurers who were involved in faulty foreclosure  transactions.

The plaintiff and buyer in the Massachusetts  case, Bevilacqua v. Rodriguez, originally went to the state’s Land Court  to find the foreclosed homeowner via newspaper advertisements so he could force  the defendant to either make an ownership claim or waive ownership rights to the  property, which now consists of four condominiums worth $600,300, according to  Bloomberg News. The court then ruled that the foreclosure sale deed  transferring ownership of the property to Bevilacqua was invalid because it was  from a seller (U.S. Bancorp) that did not own the mortgage when it completed  the foreclosure. The mortgage was transferred to U.S. Bancorp after the  foreclosure sale took place, according to the court’s ruling.

Bevilacqua’s lawyers argued in  the appeal that the Land Court made the ruling based on a law not relevant to  the suit originally brought by Bevilacqua. His lawyers claim Bevilacqua filed  his original suit based on the state’s “try-title” statute, which allows one  party to force another to either assert or waive potential claim to a property.  They said that even if Bevilacqua does not have “legal title” to the property,  he has “record title” that should allow him to make use of the try-title  statute.

Bevilacqua’s lawyers may also be  able to argue that, based on Massachusetts real estate law, he should be able  to keep ownership of the property because he has had possession of it for three  years, according to the Real Estate Bar Association for Massachusetts. Legal  experts quoted in the Bloomberg story also stated third-party foreclosure  buyers like Bevilacqua may have recourse against the seller, servicing entity,  title insurer and any attorney involved with the foreclosure sale.

Experts said this is the first case involving  the rights of third-party foreclosure buyer to come before Massachusetts’  highest court since the Jan. 7 ruling, U.S. Bank v. Ibanez, which found that  the two lenders did not properly prove they owned the mortgages that were  foreclosed on, nullifying the repossession of the properties secured by the mortgages  via foreclosure. That ruling upheld the ruling of Massachusetts Land Court  judge Keith C. Long, the same judge who made the ruling now to be considered by  the higher court.

Oral arguments before the Massachusetts  Supreme Judicial Court are scheduled to begin in April.


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