Agency Operations

An Act Clearing Titles to Foreclosed Properties PDF Print E-mail

                                                                                                                                                                                                 December 2, 2015

There is very good news to report on the legislative front.

On November 25, Governor Charlie Baker signed into law Senate Bill 2015 as Chapter 141 of the Acts of 2015 ("Chapter 141"). Its title is An Act Clearing Titles To Foreclosed Properties, and is also known as the Foreclosure bill or the Ibanez bill.

Chapter 141 should alleviate much of the uncertainty in foreclosure titles which began with the Ibanez decision. A summary of the bill's provisions follows:

1)     Chapter 141 protects "arm's length purchasers for value" against challenges from foreclosed borrowers who no longer occupy the property. It does so by establishing a time limit for them to challenge the admissibility of the foreclosure affidavit which is executed and recorded pursuant to M.G.L.C. 244, §15 ("the foreclosure affidavit").

Under current law, the foreclosure affidavit is admissible as prima facie evidence in the event of a later challenge. However, under Chapter 141 the foreclosure affidavit shall be conclusive evidence in favor of such purchasers unless there is a challenge within 3 years of the date of its recording.

2)     If the foreclosure is challenged, it is necessary to do so in the context of a legal action and a true and correct copy of the complaint or pleading must be recorded in the Registry or filed with the Registry District of the Land Court where the land is located.

     3)     Under Chapter 141, the 3 year time limit does not apply to foreclosed borrowers who continue to occupy the property as their principal residence. These borrowers can challenge the veracity of the affidavit at any time, by commencing their own actions or as a defense or counterclaim, including eviction proceedings. Therefore, it remains critical that you continue to verify that there are no parties claiming by, through or under the borrowers who are in possession of the property being insured.

     4)     The 3 year time limit of Chapter 141 for challenging the foreclosure affidavit dovetails with the 3 year period for opposing a foreclosure by entry. 

     5)     Although the effective date of Chapter 141 is December 31, 2015, it will not immediately cure titles coming through power of sale foreclosures. This is because the "deadline" for challenging the foreclosure is "3 years from the date of recording of the affidavit or 1 year from the effective date of this act, whichever is later." During this 1 year period, the Attorney General's office and Commissioner of Banks will work with "stakeholders" in the foreclosure process to notify borrowers who may be affected by Chapter 141 of its effects.

Since Chapter 141 expressly provides this 1 year window (i.e., the 2016 calendar year) for borrowers to assert their rights, please continue to forward to our office any claims against existing policies in which defective prior foreclosures are alleged.

If you have any questions or comments concerning Chapter 141, you are encouraged to contact our underwriters to discuss further. We believe that Chapter 141 will greatly benefit those purchasing titles through foreclosures, and their lenders and lessees.

Click here for a copy of Chapter 141.

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