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A ruling by the state supreme court has possibly put thousands of Massachusetts foreclosure sales in jeopardy.
In Bevilacqua v. Rodriguez, the court ruled that a bank must own a mortgage before it can foreclosure on a piece of property. Otherwise, when the bank later sells the property, it does not transfer title.
This is a big problem for those who took advantage of cheap prices at the height of the housing crisis. Foreclosure buyers may now face claims brought by original owners.
Having clear title to property can prevent such claims. But what does it mean to have clear title?
Clear title means that the titleholder owns the property free and clear of any encumbrances (mortgages, liens). It also means that the title has been fully and properly transferred from one owner to the next.
This latter situation is what did not occur in Bevilacqua.
When a lender forecloses on a home, it obtains title to the property. It can then legally transfer title to a purchaser. The lender is the entity that owns the mortgage.
In Bevilacqua, U.S. Bank did not actually own the mortgage when it foreclosed on the property. It officially acquired the mortgage five months later. The bank therefore never held title to the property, and thus could not transfer it to the buyer.
The buyer, therefore, does not have clear title. He must now re-foreclose on the original owners.
Whether or not you took part in a Massachusetts foreclosure sale, you can learn from the above. Before you purchase a home, ensure that you will obtain clear title. Hire a title search company, or an attorney. Purchase title insurance. Protect yourself and your investment.
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