Real estate lawyers and supporters of the bill (S 1987) in the Legislature say it would give a remedy to homebuyers who purchase a foreclosed property only to learn the title is in dispute, and who are therefore blocked from selling or refinancing their mortgage…
Anti-foreclosure advocates say the bill would substantially reduce legal avenues for people to regain homes after illegal foreclosures and prevent predominantly people of color from returning to their homes.
Last week, one of my friends found himself in the unenviable position of reading an advertisement announcing the auctioning of his house. The announcement came as a surprise. He has been working with an attorney since he filed for bankruptcy and couldn’t pay his mortgage. He had been making good money until he was laid off from work. He has since found temporary employment, but a few years ago, he and his wife had accepted a 15-year mortgage at 9% interest. That’s right a short mortgage for three or four percent more than the going rate at the time. The lender, by the way, had encouraged them to take the 15-year mortgage. The monthly payment eventually became $2200 a month, hardly manageable for a couple making about $80,000 a year. When he was laid off, he did everything he was supposed to do. He called his lender and tried to make arrangements until he could get another job. To put it mildly, the lender was less than helpful. The lender agreed to an adjustment to the mortgage, if my friend could make a down payment of $185,000. The house, according to Zillow, is worth $237,000. My friend ended up defaulting and declaring bankruptcy. He’s working with an attorney who successfully prevented last week’s auction.
If you haven’t already figured it out, my friend was a victim of predatory lending. He didn’t really know what he was getting into, his payments ballooned, and his mortgage was eventually sold to an even less accomodating lender, Beneficial, a subsidiary of HSBC, the British bank that has been sued across the United States, you guessed it, for predatory lending. You might have heard HSBC in the news recently for another reason: it was forced to pay nearly $2 billion in penalties and invest millions in increasing its compliance because it was found to be laundering money for Mexican drug cartels. Beneficial has done everything it can to foreclose on my friend. It claims to have not received paperwork it received, screws around with timelines, and illegally puts my friend’s house up for auction. My friend could afford a regular 30-year mortgage. He has been able to make payments for a while, though not the $2200. Beneficial/HSBC will accept nothing but the full amount.
My friend’s experience isn’t uncommon. I have another friend this happened to, and it continues across the country. But there is also a story here involving the Commonwealth and Massachusetts government. This story involves activists, the legislature, the governor, and Senate Bill 1987, which would increase the time a homeowner has to appeal a wrongful foreclosure from one to three years. It’s the right direction, not far enough, according to activists, just far enough according to real estate lawyers.
IAccording to this real estate lawyer, “the bill would have cleared title of homes affected by defective foreclosures with a one year waiting period from enactment of the bill while giving homeowners three years to challenge wrongful foreclosures.” According to him, this is “truly devastating news for the thousands of innocent homeowners who are stuck with bad title due to botched foreclosures.” The Real Estate Bar Association (REBA) also supported the bill.
There may be non-pecuniary reasons for real estate attorneys to clear up title problems. Two years ago, I worked on a campaign for Register of Deeds, and I know that having clear title to property has been a procedural issue. The subprime mortgage crisis, caused in part by predatory lending, and the securitization of mortgages have played havoc with the ownership to properties. As it stands, if your house is wrongfully foreclosed on, you have a year to challenge it. The house and senate would have increased that time period to 3 years. Governor Patrick effectively vetoed the bill by sending back an amendment that would increase that time period to 10 years. Governor Patrick judiciously smacked the bill down.
A family improperly removed from its home deserves greater protection, and a meaningful opportunity to claim the right to the land that it still holds. The right need not be indefinite, but it should extend for longer than three years. Certainty of title is a good thing — it helps the real estate market function more smoothly, which ultimately can help us all. But this certainty should not come at the expense of wrongly displaced homeowners or, at least, not until we have put this period further behind us.
Claiming victory, The Mass. Alliance Against Predatory Lending (MAAPL), a coalition of approximately 70 housing counseling agencies, legal services groups, social service agencies, and community-based social action groups, held a celebratory rally this week. “The Industry,” according to their flyer, “tried to pass a law to slash homeowners’ window to sue from 20 years to 1 year! WE STOPPED’EM!” The bill passed easily enough through the legislature, but Governor Patrick thankfully realized that expediency is not necessarily justice. Like him, I’m willing to grant that real estate lawyers may have more than a monetary interest in the smooth transfer of property titles, but because of my friend’s experience, I side with homeowners. HSBC has an army of attorneys doing their best to delay, obfuscate, and confuse. the process. I’m sure that many of those who fell prey to unscrupulous lenders don’t know enough to hire lawyers and defend themselves. Dealing with an international conglomerate like HSBC is not something most individuals can handle. My friend has a single attorney he can’t afford not to afford.
Tomorrow, I’ll see our Register of Deeds and, if I’m lucky, some real estate attorneys. I’ll broach the topic of Senate 1987 and my friend’s predicament. I’m sure I’ll hear different, though not necessarily conflicting, point of views If I do, I’ll add what they have to say in the comments.But today? Bully for Patrick!
I have to say I don’t understand this. Three years is a pretty long time–it’s the statute of limitations that already exists for any tort claim, for example. Ten years is an extraordinarily long time, and I see no reason why title to all foreclosed real property should be clouded for so long. Bottom line, can someone explain why, if a borrower who lost a home can’t sue in three years, giving more time will make any difference?
That it’s unclear what the status quo actually is. The article suggests it’s one year, but the blurb from the non-profit group suggests it’s twenty years. Obviously, this makes a difference.
who practices law would know more. I followed up with Mary Olberding, Register of Deeds for Hampshire County. She said she wasn’t sure this bill would have helped my friend.
I remember from working on Mary’s campaign that robo-signing was an issue. Robo-signing is signing “foreclosure documents without reviewing them. Rather than actually reviewing the individual details of each case, robo-signers assume the paperwork to be correct and sign it automatically, like robots.” Investopedia goes on to explain,
The activists wanted to kill the bill. I think the 10-year statute of limitations effectively killed it. Patrick may just want to negotiate the time or being doing his constituents a favor. MAAPL says on their website,
reasons for favoring a 10-year period to challenge a foreclosure.
It sounds reasonable to me. I couldn’t find anything useful from REBA, but Massachusetts pre-eminent real estate blogger was less than persuasive.
shows the mortgage securitization industry at work in Massachusetts shortly before the national financial meltdown of 2008. The industry kept EXTREMELY sloppy paperwork — check out Justice Cordy rapping their knuckles in his concurring opinion). I can see that 10 years is fairer than 3 in order to undo all their mischief.
http://masscases.com/cases/sjc/458/458mass637.html