Last week the Massachusetts’ highest court handed down a ruling confirming a lower court decision to basically rescind foreclosure sales because of technicalities in paperwork. During the boom years of the housing market, investors voracious appetites for mortgage backed securities could not be satisfied, so lenders were pooling together mortgages as quickly as possible and selling complex investments backed by these mortgages to investors. In the midst of the madness, the lenders did not properly fill out some paperwork. The mismanagement of the paperwork was discovered when lawyers representing two sets of homeowners who were foreclosed on, Antonio Ibanez and Mark and Tammy LaRace from Springfield, MA, argued to a MA court that the foreclosure sales should be rescinded because certain paperwork was not filled out properly. The court ruled in favor of the foreclosed homeowners. Massachusetts’ highest court upheld the decision of the lower court. This could single handily have a major impact on the housing market recovery because many foreclosed homeowners will now hire lawyers to do forensic analyses of the paper trail that ultimately ended at foreclosure sales. If the lawyers find technicalities, then they will have a strong case to rescind the foreclosure sales. So, not only are people who bought foreclosed properties probably quaking in their boots because the whole sale could be rescinded and they could possibly have to give back the property (with appropriate compensation), but investors buying foreclosed properties, helping to clear the market, could be much more skeptical about buying the properties now than before and title insurance companies are going to be reluctant to issue title insurance on foreclosed properties. So, this could cause a massive delay in clearing the foreclosure market which is a major segment of the market that is preventing the conventional market from getting back to health. Fortunately, for the Nantucket real estate market, this probably will not have a major effect because of the lack of foreclosures. That being said, still a bit scary…<\/p>\n","protected":false},"excerpt":{"rendered":"
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