Massachusetts High Court Rules on Faulty Foreclosures

The Massachusetts Supreme Judicial Court ruled that the title held by the banks in the improperly foreclosed property was not clear title -- that is, the banks had no legal claim on the property.

On January 7, 2011, the Massachusetts Supreme Judicial Court -- the highest court in that state -- unanimously decided that the foreclosures in a number of cases before it were improper because the notices of foreclosure were recorded and published before the banks bringing the foreclosures actually owned the mortgages. (The Massachusetts Supreme Judicial Court case is called U.S. Bank National Association vs. Ibanez.)

In the Massachusetts cases (which were consolidated for purposes of the decision), foreclosures had already occurred and the homeowners had moved out after the banks bought the properties at foreclosure auction. When the banks initiated the foreclosures, they had no proof of the chain of title showing that they now were the mortgage owners. After the banks decided to clean up their act (after the foreclosures), they recorded what they alleged was proof of ownership with the local land records office.

The Massachusetts Supreme Judicial Court ruled that the title held by the banks in the improperly foreclosed property was not clear title -- that is, the banks had no legal claim on the property.

The potential implications of this decision are staggering. It means, in essence, that an unknown number of homes that have been improperly foreclosed on by the nation's mortgage lenders have title problems that may be difficult or impossible to clear up. The case will likely affect foreclosures nationwide.

To learn more about this case and its possible implications, read Massachusetts Highest Court Invalidates Clear Title in Faulty Foreclosures -- Ruling May Affect Foreclosures Nationwide in Nolo's Bankruptcy & Foreclosure Blog.