In the bad old days, a scarlet “A” marked those sinners who had been rejected by their community. These days, it’s an “I” on your title – signifying a title tainted by Ibanez – that can put a homeowner beyond the pale.

Thousands of previously foreclosed properties were left with clouded titles after last year’s Ibanez ruling by the Supreme Judicial Court permanently changed the way foreclosures were handled in the Bay State.

But a new bill in the Massachusetts Senate, Bill S.830, hopes to absolve all those properties of their past sins – and take a big weight off the mind of title insurers.

“[The bill] would sort out a lot,” said Christopher Pitt, president of the Real Estate Bar Association.

Prior to the Ibanez case, lenders often neglected to get their ducks in a row at the local Registry of Deeds before initiating the foreclosure process. It led to cases in which Bank B might have been the current owner or servicer of the debt and the entity pursuing the foreclosure, but Bank A was still be on record as the holder of the mortgage. At some point, Bank B would simply register what was called a “confirmatory assignment,” swearing that the foreclosed property had been on their books throughout the foreclosure process, a practice endorsed by the commonwealth’s real estate bar.

But the Supreme Judicial Court ruled in the Ibanez case that the use of “confirmatory assignments” wasn’t quite kosher – banks should get an assignment of the mortgage on the record before they initiated the foreclosure.

Since the ruling, lenders have followed that practice. But that still left tens of thousands of previously foreclosed properties, many of them long since sold to new owners, whose foreclosure had been illegal. Some legal experts have warned it might be possible for a former owner to attempt to regain their property – and current law seems to provide no clear way to remedy the situation.

Time Crunch

The new bill, sponsored by State Sen. Michael Moore, D-Worcester, aims to solve these problems, imposing a 90-day time limit after any such “confirmatory assignment” has been filed for a homeowner to raise a stink about the wrong bank having initiated the foreclosure. Once that period has passed, any person who purchases such a property would be able to rely on that assignment to prove their ownership.

The law would cover prior assignments as well as current ones – meaning, since the Ibanez case first upended legal practices more than a year ago, thousands of clouded titles would be cleared at a stroke.

The language of the bill does limit its impact to subsequent buyers of the foreclosed properties – if a bank has hung on to the property, it would still be open to challenge by the former homeowner.

But many homeowner advocates say that’s not good enough, that 90 days is simply too short of a time for homeowners to discover a problem and make a case.

“It’s a very dangerous bill, from our perspective,” said David Grossman, director of the Harvard Legal Aid Bureau, which has been active in helping homeowners defend themselves from improper foreclosure practices. “Defective foreclosures are rampant – and because we don’t have judicial foreclosure here, most of them never get in front of a judge,” until the foreclosure has already happened and eviction proceedings start.

Grossman said that means groups like his who work with homeowners don’t often have a chance to review their case until that point, “and we’re not usually even seeing people until more than 90 days after this affidavit is recorded.”

Grossman explained that other, analogous laws give individuals far more time to file suit over fraudulent or illegal practices – parties have up to three years to file a fraud case, or up to six under the state’s consumer protection laws.

A Cloudy Future

But opposition to the bill is by no means universal among housing advocates. The Citizen’s Housing and Planning Association, an affordable housing advocacy organization, recently testified that while it thought 90 days might be too short of a time, some legislative fix was definitely needed.

In many distressed areas, the group said, “the real estate market is simply too fragile for the private sector to take on the risk purchasing a property with a checkered title.”

While the bill has attracted broad industry support, even its passage may not resolve all the foreclosure-related legal problems the industry currently faces. The still-pending decision in another Supreme Judicial Court case, Eaton v. Fannie Mae, could change its chances of passing.

The Eaton case examines another aspect of the foreclosure process – whether the foreclosing entity should have to prove it owns the note, or debt, in order to start a foreclosure – and a decision in the homeowner’s favor could do even more to shake up the industry than the Ibanez case.

Until the SJC reveals its reasoning precisely, it’s unknown whether bill 830 would also address any potential problems raised by that case.