You’d have to be out of your mind to by a home after a foreclosure sale. Courts can ignore issues like standing and capacity and fraud and abuse of homeowners, but at the end of the line if the process is so corrupted and fatally flawed that the market will not purchase the properties, what’s the point of continuing with all this slop?
Well, for any brave investor or soul that thinks they might want to jump into the toxic stew that is fraudclosure and make their killing buying REO property, read the cautionary tale that is Bevilacqua. The question before the Supreme Court was this:
Whether a person who holds title to property by
virtue of a recorded deed, but whose title is clouded
by a possihle adverse claim due to deficiencies in a
prior foreclosure in his chain of title, has standing
to bring a petition to invalidate the claims of prior owners?
In English:
If a foreclosure mill or bank committed fraud or otherwise engaged in improper conduct (like robosigning) to get a foreclosure and I purchase the home, am I safe from claims by the prior owner?
The answer is…..NO. If you buy a home and anyone played games or cut corners along the way, you’re out of luck. Or as the headline from Bloomberg Screams:
Buyers Can’t Sue After Bad Foreclosure Sale!
A Massachusetts man who bought property in a faulty foreclosure sale isn’t the true owner and so doesn’t have the right to sue over it, the state’s high court ruled.
The Supreme Judicial Court, which in January found that banks can’t foreclose on a house if they don’t own the mortgage, went one step further in a closely watched case and said a sale after that foreclosure doesn’t transfer the property. Therefore, the buyer couldn’t bring his court action against a previous owner, the court ruled. (Full Bloomberg Article Here)
I knew the Mass Supremes would uphold Judge Long again. His decisions are spot on so there is simply nothing to reverse on.
We’ll see how this changes the landscape.
This important case also highlights yet another example of favoritism to the financial oligopoly – one that is not often discussed. The “banks” long ago had pocketed politicians carve them out special statutory protections against liability to parties like Bevilacqua – he likely cannot sue US Bank, the party that, with the state’s assistance, “sold” him the property it did not “own” thru a wrongful foreclosure.
In the real world, if A buys unknowingly buys a stolen auto from B, when the auto is really owned by C, A typically has recourse against B, the party that took his money. Not so in fraudclosure world.
THIS quote by Bevilacqua’s attorney (attempting to put some positive spin on the loss) is hilarious: ” It reaffirms the concept that a defective foreclosure deed operates as an assignment of the mortgage and if you can trace the ownership of the mortgage, that person would have the right to re-foreclose,” said Loeb, of Rich May PC in Boston.
“If you can trace the ownership???!!!???” – HA! Get over it! Admit that the mortgage has been incurably separated from the note. I guess that will probably be the next juicy issue to be heard by this most thoughtful Court.
BTW, I imagine a foreclosure “buyer” would have to litigate to re-establish the efficacy of the claimed “mortgage” prior to any attempt to “re-foreclose.”
So, the real effect of this is to put foreclosure buyers on notice that what they are really potentially bidding on is perhaps not real property, but in actuality only “unsecured debt.”
HA! BUT WAIT – IT GETS EVEN BETTER!
What if the “innocent purchaser” in the “wrongful foreclosure” is only found to have bought an “assignment of the mortgage” WITHOUT a valid purchase of the underlying note?!?!?
THEN would the “innocent purchaser” would have no property and in fact have LESS THAN NOTHING – a “mortgage” that stands alone and secures no valid obligation?!?!?!?!
Oh, what a tangled web they wove…