Reporter Steven Altieri of the real estate trade journal Banker & Tradesman recently published an article on the Ibanez foreclosure case, Impending SJC Ibanez, Title Ruling May Invalidate Thousands Of Foreclosures, Why Real Estate Attorneys Expect The Worst, And What It Means To The Industry.
Since we’ve written about the case extensively here, Steve asked for my views about the impact of the case and recent matters I’ve handled with Ibanez title defects:
Framingham real estate attorney Richard Vetstein recently represented a family who had bought a house out of foreclosure about a year ago, then invested in excess of $100,000 in improvements to the property with the intention of selling it to their daughter. But before they could complete the sale, a title issue came up and put the transaction on hold.
In Vetstein’s client’s case, when the original owner was foreclosed upon, the mortgage company did not have a properly recorded assignment. To clear the title, Vetstein had to track down the original owner in Alabama, and persuade him to sign over the deed to the property.
“They can close now that the title issue is solved, but in a lot of cases that [is] not going to be able to be solved,” said Vetstein. “We were lucky, that’s what it came down to.”
Steve asked me how I would handicap the appeal of the case:
Vetstein, who has blogged on the Ibanez case at length, thinks the court might uphold the Ibanez decision.
“Given the current constitution of the court and their tendencies of recent years to be kind of moving towards some pro-consumer decisions, I wouldn’t be surprised if they upheld the land court probably by a slim margin,” Vetstein said. “And so for people who are stuck with an Ibanez issue, that is in essence the worst-case scenario.”
Indeed, it’s unlikely that a “pro-consumer” verdict upholding the Ibanez decision would actually help consumers on the whole. Home buyers or investors who thought they had gotten a good deal and a clean title on a foreclosed property will instead be saddled with hefty legal bills and an inability to sell their property.
Lastly, Steve asked if the Ibanez ruling has created an business development opportunties for real estate attorneys:
“I don’t know of any real estate attorney using Ibanez as a business development opportunity, mainly because solving these title defects, if at all, is incredibly difficult and in some cases impossible,” Vetstein said. “It’s a ‘lose-lose’ in many situations.”
One aspect of the case could potentially provide plenty of work for attorneys. Should the SJC uphold the Ibanez decision, Vetstein reasons that there will be many claims against the foreclosing lenders and the foreclosure attorney, for failing to convey good title.
“There will also be claims for rescission of these transactions,” he added. “There is a class action against lenders and foreclosing attorneys which could encompass many millions in potential damages.”