The Supreme Judicial Court in Massachusetts said yesterday that it will hear the Ibanez foreclosure case, which has caused turmoil in the banking and mortgage lending business.
In 2009, the Land Court issued the original Ibanez ruling which required that the true mortgage holders be properly identified before foreclosure proceedings could continue.
The pace of foreclosures in Massachusetts ground to a halt, as lawyers questioned exactly what paperwork was necessary to complete a valid foreclosure in the state. With foreclosures in doubt, legal title to the properties were also in doubt, and many lenders became cautious, and avoided foreclosing.
The ultimate source of the problem is the tangled web of financial relationships that ruled the mortgage banking world for much of the 2000’s. Identifying who held a mortgage on a property, which used to be a simple process, instead became a nightmare, with mergers, failures, bundled sales of mortgage notes, and more obscuring who really holds the rights to what property throughout the state.
If the SJC gives the green light to foreclosures again when they issue their ruling, Massachusetts could see a wave of new bankruptcy cases. People who have been living essentially “payment-free” while the Ibenez case festered will need to discharge months of overdue payments through Chapter 7. Homeowners who are not too far behind, and who want to try to keep their homes, will opt for Chapter 13 repayment plans in order to stay in their property as long as possible.
By Doug Beaton