Many people sent links regarding a bombshell ruling in Massachusetts by the Daily Bail that allegedly 'made foreclosure sales in the commonwealth over the last five years wholly void.'

On Oct. 18th, 2011 the Massachusetts Supreme Judicial Court handed down their decision in the FRANCIS J. BEVILACQUA, THIRD vs. PABLO RODRIGUEZ - and in a moment, essentially made foreclosure sales in the commonwealth over the last five years wholly void. However, some of the more polite headlines, undoubtedly in the interest of not causing wide spread panic simply put it 'SJC puts foreclosure sales in doubt' or 'Buyer Can't Sue After Bad Foreclosure Sale.'

In essence, the ruling upheld that those who had purchased foreclosure properties that had been illegally foreclosed upon (which is virtually all foreclosure sales in the last five years), did not in fact have title to those properties. Given the fact that more than two-thirds of all real estate transactions in the last five years have also been foreclosed properties, this creates a small problem.

The Massachusetts SJC is one of the most respected high courts in the country, other supreme courts look to these decisions for guidance, and would find it difficult to rule any other way in their own states. It is a precedent. It's an important precedent.

Clueless Hype

Let's first dispose of the nonsense that the 'Massachusetts SJC is one of the most respected high courts in the country, other supreme courts look to these decisions for guidance, and would find it difficult to rule any other way in their own states.'

The more important issue is the way sites trump up these cases with preposterous statements such as 'In essence, the ruling upheld that those who had purchased foreclosure properties that had been illegally foreclosed upon (which is virtually all foreclosure sales in the last five years) ...'

The essence of the matter is the Daily Bail preaching clueless hype.

I asked Patrick Pulatie at LFI Analytics to chime in on the significance of the case. Pulatie writes ...

US Bank foreclosed upon the property, but no assignment to US Bank occurred until after the foreclosure. B then bought the property.

The court ruled that the foreclosure was unlawful, like in Ibanez. Therefore, B could not own the property. That said, the court ruled that if the Chain of Title could be corrected, then the foreclosure can be redone.

The author completely misrepresents the ruling like so many do. They claim that gold exists, where there is only lead. Unfortunately, this will only give homeowners more false hope.

What tells you how little the authors know is their claim the MA court is so well respected that other states will use the ruling as guidance.

That is laughable hogwash.

Third Opinion

We have heard from the Daily Bail and from Pulatie. Let's find a neutral party for a third opinion. I just happen to have one.

The Massachusetts Real Estate Law Blog asks What Now? Bevilacqua v. Rodriguez Leaves Toxic Foreclosure Titles Unclear

The Massachusetts Supreme Judicial Court issued its opinion today in the much anticipated Bevilacqua v. Rodriguez case considering property owners' rights when they are saddled with defective titles ...

Contrary to some sensationalist headlines [linking to the Daily Bail], the sky is not falling down as the majority of foreclosures performed in the last several years were legal and conveyed good title. Bevilacqua affects those small percentage of foreclosures where mortgage assignments were not recorded in a timely fashion and were otherwise conducted unlawfully. Bevilacqua does not address the robo-signing controversy.

The Bad News

First the bad news. The Court held that owners cannot bring a court action to clear their titles under the "try title" procedure in the Massachusetts Land Court. This is the headline that the major news outlets have been running with, but it was not a surprise to anyone who has been following the case. Sorry Daily Kos, but the court did not take away a property from a foreclosure sale buyer. The buyer never owned it in the first place. If you don't own a piece of property (say the Brooklyn Bridge), you cannot come into court and ask a judge to proclaim you the owner of that property, even if the true owner doesn't show up to defend himself. It's Property Law 101.

The Good News

Next the good news. The court left open whether owners could attempt to put their chains of title back together (like Humpty-Dumpty) and conduct new foreclosure sales to clear their titles. Unfortunately, the SJC did not provide the real estate community with any further guidance as to how best to resolve these complicated title defects.

It should be pretty clear now as to what is hype and what is not.

As far as precedent setting cases from respected courts, please consider 9th Circuit Court Ruling Legitimizes MERS.

As a followup post including an analysis of Assignment of the Deed of Trust in the California case Calvo v HSBC, please consider More on the Coming Wave of Foreclosures.