Bulletin: MA2015001

Date:
December 23, 2015
To:
All Massachusetts Issuing Offices
RE:
UNDERWRITING - Senate Bill 2015 – An Act Clearing Title To Foreclosed Properties

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. 

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THIS BULLETIN IS FURNISHED TO INFORM YOU OF CURRENT DEVELOPMENTS. AS A REMINDER, YOU ARE CHARGED WITH KNOWLEDGE OF THE CONTENT ON VIRTUAL UNDERWRITER  AS IT EXISTS FROM TIME TO TIME AS IT APPLIES TO YOU, AS WELL AS ANY OTHER INSTRUCTIONS. OUR UNDERWRITING AGREEMENTS DO NOT AUTHORIZE OUR ISSUING AGENTS TO ENGAGE IN SETTLEMENTS OR CLOSINGS ON BEHALF OF STEWART TITLE GUARANTY COMPANY. THIS BULLETIN IS NOT INTENDED TO DIRECT YOUR ESCROW OR SETTLEMENT PRACTICES OR TO CHANGE PROVISIONS OF APPLICABLE UNDERWRITING AGREEMENTS. CONFIDENTIAL, PROPRIETARY, OR NONPUBLIC PERSONAL INFORMATION SHOULD NEVER BE SHARED OR DISSEMINATED EXCEPT AS ALLOWED BY LAW. IF APPLICABLE STATE LAW OR REGULATION IMPOSES ADDITIONAL REQUIREMENTS, YOU SHOULD CONTINUE TO COMPLY WITH THOSE REQUIREMENTS.