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.