Bulletin: MA2015001

Dear Associates:

On November 25, 2015, the Governor enacted Chapter 141 of the Acts of 2015, Senate Bill 2015, An Act Clearing Title to Foreclosed Properties (the “Act”). In 2011, the decision ofU.S. Bank National Association v. Ibanez et. al. 458 Mass. 637 (2011) essentially halted the sale and refinance of foreclosed properties across the Commonwealth where the foreclosing mortgagee did not hold the Mortgage by Assignment at the time of the foreclosure. This Act clarifies that the Foreclosure Affidavit recorded pursuant to M.G.L. ch. 244, §15, when on record for 3 years, without challenge, shall be conclusive evidence in favor of an arm’s length third party purchaser for value at or subsequent to the foreclosure sale that the power of sale under the Mortgage was duly executed and that the sale complied with Chapter 244 and M.G.L. ch. 183, §21. The Act goes into effect on December 31, 2015.  

The Act defines “deadline” as 3 years from the recording of the Affidavit or 1 year from the effective date of the Act, whichever is later. In practice what this means is that the earliest effective date that an Ibanez foreclosure can be treated as valid would be December 31, 2016.

It is imperative to note that Section 2(d) of the Act provides for an exception for the filing of a challenge to the validity of the foreclosure action asserted by a party who continues to occupy the mortgaged premises as that party’s principal place of residence, regardless of whether that challenge was raised prior to the deadline.  

Accordingly, we take this opportunity to remind you of the necessity of avoiding insuring properties where the mortgagor subject to the foreclosure or any related parties remain in possession of the property (see also updated Underwriting Rules for Reviewing Foreclosures in Massachusetts attached). In those rare instances where policies are issued, the following exception must be taken in issuing any Commitments or Policies for such parties in possession when the mortgagor subject to the foreclosure remains in possession of the property when insuring title out of a foreclosure sale:  

"Any rights, claims or interest of (the mortgagor) in the land or any claim that the foreclosure by (lender) is invalid."

You may rely on any credible evidence such as a lender or broker confirmation and should retain written confirmation of the same for your file. 

If you have any questions relating to this or other bulletins, please contact a Stewart Title Guaranty Company underwriter.

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