Wow.

The Massachusetts Supreme Judicial Court, in the much-anticipated Bevilacqua v. Rodriguez case,  ruled that buyers of some foreclosed homes may not be the legal owners of those properties, even though they purchased the homes through a foreclosure proceeding and even in cases where they attempted a “try-title” (mostly equivalent to a state quiet title action) to resolve the title issues on the property. 

The decision was hailed by consumer advocates such as Max Weinstein, an attorney and instructor on predatory lending issues at Harvard Law School’s WilmerHale Legal Services Center, and Massachusetts Attorney General Martha Coakley, who each filed an amicus brief on behalf of the man whose foreclosed home was bought by Bevilacqua. 

Representatives for the Real Estate Bar Association for Massachusetts were not so upbeat.  “It leaves us nowhere,” said Edward M. Bloom, president of the association.

The SJC decision did, however, give a remedial course for the BFP (Bevilacqua) involved in this action.  He can sue the lender who botched the underlying foreclosure or “reforeclose” on the prior owner. 

There has been no immediate comment from the title insurance industry on this case.  A title insurance claim stemming from these faulty foreclosures could be deemed a matter “created, suffered or assumed” by the insured under Condition and Stipulation 3(a) of the lender’s title insurance policy.  If so, there would be no claim for damages against the title insurance agency or insurer for the lender who “botched” the foreclosure.  It remains to be seen whether the industry will begin instituting those types of defenses to coverage in the event the foreclosing lenders start facing a wave of Bevilacqua-related lawsuits — at least in Massachusetts.  Check with your underwriters for more information.

For more information on the case, click here.

We recommend visiting the Source of Title webpage for more information on the background of the case.  If you do not already subscribe to SOT, you should.  It is the best source for straightforward title insurance news in the industry.