The Massachusetts Supreme Judicial Court has thrown into doubt the ownership of some foreclosed homes, when it decided that buyers of a house that was improperly foreclosed are not the legal owners of the property.
The Boston Globe reports:
The decision leaves in limbo hundreds, if not thousands, of people who bought homes seized by lenders under questionable circumstances. They are left with no easy recourse; among their options are to sue the lender behind the botched foreclosure or "reforeclose" on the prior owner.
"It leaves us nowhere," said Edward M. Bloom, president of the Real Estate Bar Association for Massachusetts. "The residential housing market is never going to stabilize and grow until all of these properties that are in foreclosure are organized and cleaned out."
This all stems from the robo-signing scandal that has plagued mortgage companies across the country. In short, what has happened is that in the rush of the housing crisis, there was rampant abuse by banks in foreclosure proceedings. As the Globe reports, last winter, this same court "challenged how banks had traditionally seized properties without having all the necessary paperwork."
The Wall Street Journal adds:
Massachusetts Attorney General Martha Coakley had argued that the lower court's ruling should be upheld. "This case is just one example of a much larger problem," Ms. Coakley said in a statement.
She said that banks had been reckless in originating mortgages and hasty in foreclosing on them, creating "a domino effect that has harmed Massachusetts homeowners as well as third-party purchasers who purchased properties after foreclosure."
The decision also comes as federal officials, state attorneys general and the largest U.S. banks try to agree on the terms of a $20 billion settlement to resolve banks' foreclosure and loan-processing abuses.