SJC to review foreclosure ruling

2009 decision left sales of hundreds of houses in question

By Jenifer B. McKim, Globe Staff  |  March 24, 2010

The state Supreme Judicial Court will consider a contentious 2009 Land Court decision that has called into question the validity of hundreds, if not thousands, of foreclosure sales in Massachusetts.
The seven-member court said Monday it will take on the so-called Ibanez case through a process that allows it to bypass the Appeals Court. The SJC will review a 2009 ruling by Massachusetts Land Court Justice Keith C. Long that found two foreclosures in Springfield were invalid because ownership of the mortgages was not clear at the time the properties were sold. Until Long’s decision, it was not unusual for the final paperwork on a foreclosure sale to be filed after the deal was completed.
The ruling — which came as a shock to many who deal with the sale of distressed homes — set off a chain reaction in the real estate industry. Many lenders delayed closing deals out of fear that they could be voided, title companies began balking at insuring such properties, and people who already owned foreclosures worried they might face legal complications.
“This is an important enough issue, not just in the state but nationally, that it made sense for the Supreme Judicial Court to start weighing in,’’ said Cambridge lawyer Paul Collier, who represented one of the homeowners in the Springfield case. “A definitive answer is important for borrowers, lenders, and people facing foreclosure.’’
The case addresses issues created during the housing boom as millions of mortgages nationwide were bundled into bonds and sold to investors, often resulting in a twisted paper trail that obscured ownership.
In the Springfield case, the lenders — US Bank National Association and Wells Fargo Bank — did not record that they owned the mortgages until 14 months after the properties were sold, court documents show.
Lawrence Scofield, a Woburn lawyer who represented the lenders in two consolidated cases ruled on by Long, said he hopes the state’s highest court at least will clarify that the 2009 Land Court decision is not retroactive, meaning that sales finalized before then are not in question.
“It needs to be toned down. It has cast a cloud on titles that have gone through foreclosure over the past 20 years,’’ said Scofield. “All those foreclosures are done, and there are new families in those homes. What good does it do to cause their titles to be questionable now?’’
The court is expected to rule within a year, officials said.