A new law went into effect on December 31, 2015 that automatically clears titles on certain foreclosed properties. December 31, 2016 marked an important deadline, helping many homeowners who may have received questionable title to a property and were therefore prevented from selling or refinancing that property. This MA law clears title to foreclosed properties prior to December 31, 2013 and offers a deadline to subsequent foreclosures. Below are some additional details.
An Overview of the Issue
With some past foreclosures, the order in which documents were filed into public record created an opportunity for people to dispute the validity of those foreclosures. For example, a mortgage may have changed hands multiple times, but paperwork wasn’t properly filed on those changes until the the last lender started a foreclosure process. After the foreclosure, the home may have even changed owners multiple times, with each owner being unaware of the issue. After recent court cases, it was determined that the homeowner who was foreclosed upon could come back and sue, claiming that the foreclosure was illegitimate and they therefore still had ownership rights. For the current owners of that property, this became a liability.
Automatic Clearing Process and New Deadlines
Under the new law, anyone challenging the validity of a past foreclosure must file a lawsuit within 3 years. The lawsuit must also be filed at the local Registry of Deeds by the three-year deadline. The deadline starts from when the lender files a foreclosure affidavit at that same Registry of Deeds.
The law had applied retroactively. However, it became clear that some foreclosures would have already passed the 3 year deadline, therefore the law provided a one-year deadline for foreclosures that took place before December 31, 2013. That one-year timeframe just completed. Therefore, the title issue is automatically cleared on all properties with foreclosures before December 31, 2013 where a past owner did not file a lawsuit before the one year deadline of December 31, 2016. More recent foreclosures that took place during 2014 and 2016 still have time before the 3 year deadline is reached.
Properties That Qualify
This MA law clears title to foreclosed properties owned by individuals and not by lenders or loan servicers. Therefore, properties currently owned by entities such as Fannie Mae and Freddie Mac will not benefit. The law was intended to assist private homeowners who may have purchased a property without knowing about the previous title issues.