By Liz Scavnicky-Yaekle
One more significant sign that perhaps the deepest wound of the 2007-2009 financial crisis has finally healed was revealed on July 20th.
Total foreclosure filings, including default notices, scheduled auctions or bank repossessions declined 20% during the first six months of this year compared to the same time period in 2016. This update is according to the recently released ATTOM Data Solutions Midyear 2017 U.S. Foreclosure Market Report™. “With a few local market exceptions, foreclosures have become the unicorns of the housing market: hard to find but highly sought after,” ATTOM Data Solutions Senior Vice President Daren Blomquist stated in a release. “More than 38% of properties sold at foreclosure auction in the first half of this year went to third-party buyers rather than back to the bank — the highest share we’ve ever seen going back as far as 2000.”
Some foreclosures can wreak havoc on a property’s title. A clouded property title indicates that there are issues with the property’s past ownership, often referred to as a “break” in the chain-of-title. The root causes are usually in the form of liens, errors in reporting or in the case that legal issues occurred between previous owners. A clouded title prevents legal title transfer to the new owner as demonstrated through its two potential important impacts:
- Uncertainty of Ownership. Clouded titles have negatively impacted many property owners as was the case of hundreds of Massachusetts homeowners. A 2011 court case rendered the purchases of their foreclosed properties—many of which were bought during the financial crisis, invalid. For a period of over four years, the owners were unable to do anything regarding the transfer of their properties. This means that they could not sell their properties nor be approved for home equity lines of credit during that timeframe. It wasn’t until Dec. 31, 2015, when the governor signed a law which cleared the titles of all the properties in question, that the homeowners were officially granted status as legal owners.
- Lawsuits. Clouded titles can also cause mortgage companies to challenge the homeowners’ legal status, arguing that a past foreclosure on the property was illegal. This was the case of Texan homeowners who received notice that JB Mortgage Co. was suing them in late 2015. A local school district had foreclosed on the government-owned land in 1990, but because the government had not consented to the sale, the property purchases were being challenged. Although the homeowners purchased their properties in the 1990’s, since JB Mortgage holds the government’s $5.2 million loan, the company was trying to recap the amount from the current homeowners, claiming that past foreclosures on the property rendered the purchases illegal.
These examples demonstrate that any issues with a property’s title can haunt homeowners at any point in time, so it’s wise to choose an experienced, reputable title company with legal staff on-site to resolve all issues and avoid delaying the property’s closing.