Creating Thriving Communities Through Land Use And Real Estate Law

Foreclosure Bill Passes Senate, Moves to House

By a 31-7 vote, the Massachusetts Senate passed a bill last week that attempts solve a portion of the ongoing foreclosure crisis by giving assurances to those who purchase property after foreclosure.

The proposed legislation would implement a three-year period of time from the foreclosure in which the prior homeowner could challenge the legality of the foreclosure.  For foreclosures that have already occurred, a one-year statute of limitations would apply.  An affidavit as to the validity of the foreclosure would, after three years, constitute “conclusive evidence” that the foreclosure was proper and that an arm’s length third party sale occurred at or after the foreclosure auction.  The proposed legislation also limits the liability of arm’s length third party purchasers (i.e. not the foreclosing entity) if a foreclosure is found to have been invalid, and allows for damages from the foreclosing entity for misrepresentations in the required affidavit.

This proposed legislation follows the passage of a similar bill last year, which effectively died when then-Governor Patrick amended the length of time to challenge a foreclosure to 10 years.

This proposed legislation, if passed, would provide security for those who have purchased properties at foreclosure.  After the three-year period, the new owners would not need to worry about a challenge to the validity of the foreclosure, and the concurrent risk of losing their new property.  This security should also encourage banks to lend to those who have purchased foreclosed properties, and hopefully lead to fewer homes sitting vacant for lengthy periods of time.

Objections to the bill have been raised by those that feel that it does not sufficiently protect those that have been subject to improper foreclosures, with a disparate impact felt by minorities.

The language of the current bill can be found here.