Buying a Massachusetts Foreclosure: More Changes to the Law

“It’s an investor’s worst nightmare. You’ve gone through months of research, paid legal fees and jumped through never-ending hoops when you’re relieved to finally close; then you get the bad news – the homeowner  is suing the bank to keep the property.  It might be months or years before you can buy that fixer-upper that you once thought was a great deal.  If only you knew the headache that buying a foreclosure can cause, you may never have considered it in the first place! Scenarios like these are becoming more common and shows how critical hiring an attorney can be.

“It’s more difficult than ever to foreclose on residential properties in Massachusetts,” said Michelle Oliveira, with PK Boston, a Massachusetts law firm which specializes in foreclosure matters. “Since the law is constantly evolving, banks need to be made aware of new developments in the law.  If they are not apprised of these changes, it could wreak havoc later on.”

BACKGROUND

Over the years, homeowners have won several key cases against lenders seeking to foreclose.  In the 2015 case of Pinti v. Emigrant Mortgage Co., Inc., 472 Mass. 226 (July 17, 2015), the court held that strict compliance with the default notice requirements in paragraph 22 was required prior to foreclosure.  Since that time, many banks have altered their procedures to ensure any default letters are strictly compliant pursuant to Pinti.

Last month, the Massachusetts Supreme Judicial Court extended their ruling in Pinti to any case pending in housing court, trial court, or appeals court.  In Federal National Mortgage Association v. Marroquin, 477 Mass. 82, the foreclosed homeowner, Marroquin, alleged in her eviction case that Federal National Mortgage Association (Fannie Mae) had failed to strictly comply with the default letter requirements under paragraph 22.  The lower court granted summary judgment in favor of Fannie Mae, stating that Pinti was prospective in nature and only applied to cases pending after July 17, 2015 (the date of the Pinti decision).  However, on appeal to the Supreme Court, the Supreme Court held that Marroquin had timely raised the issue in June 2012, prior to Pinti and that Pinti should be extended to any case which was pending in trial court or on appeal before July 17, 2015.

WHAT DOES THIS MEAN FOR INVESTORS INTERESTED IN PURCHASING FORECLOSED HOMES?

With foreclosure rates at an all time low, there are fewer properties available for those wishing to invest in real estate.  After Marroquin, it will likely be harder than ever to purchase foreclosed properties, as many foreclosures will need to be re-done.  Any properties that have been foreclosed and are on the secondary market will likely be heavily scrutinized by title insurance companies.

Therefore, it is important before purchasing a foreclosed property that you have all foreclosure documentation and title reviewed by an attorney.