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Court rules banks screwed up, have no right to two properties they foreclosed on
By adamg on Fri, 01/07/2011 - 11:01am
The Supreme Judicial Court ruled today that two banks can't claim ownership of two foreclosed Springfield homes because of their shoddy paperwork.
The ruling is a possible blow against banks seeking to foreclose on mortgages that were sold and resold or bundled as "securitized" investments in the years leading up to the near collapse of the financial industry, at least if they failed to dot all their i's as they would normally expect their customers to do. In its ruling, the court said:
Recognizing the substantial power that the statutory scheme affords to a mortgage holder to foreclose without immediate judicial oversight, we adhere to the familiar rule that "one who sells under a power [of sale] must follow strictly its terms. If he fails to do so there is no valid execution of the power, and the sale is wholly void."
Two of the justices went even further in expressing their disgust:
[We] concur fully in the opinion of the court, and write separately only to underscore that what is surprising about these cases is not the statement of principles articulated by the court regarding title law and the law of foreclosure in Massachusetts, but rather the utter carelessness with which the plaintiff banks documented the titles to their assets.
In one of the Springfield cases, the court said U.S. Bank was unable to provide proof the property was actually included in a bundle of securitized mortgages. In another, the current mortgage holder was unable to offer proof the morgage was actually transferred from the initial lender to Bank of America.
The court also noted the banks' alleged attempt to comply with a legal requirement to place foreclosure notices in a newspaper "of general circulation" by putting ads in the Boston Globe for the properties in Springfield.
In one case, the court noted:
According to U.S. Bank, the assignment of the Ibanez mortgage to U.S. Bank occurred pursuant to a December 1, 2006, trust agreement, which is not in the record.
In the other case:
Wells Fargo did not provide the judge with a copy of the flow sale and servicing agreement, so there is no document in the record reflecting an assignment of the LaRace mortgage by Option One to Bank of America.
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Comments
Not to resort to old mem,
Not to resort to old mem, but...BANKS: Y U NO TRACK PAPERWORK?
This will be appealed, of course, but man oh man, a lot of banks have to be sweating. There might be a lot of loss-eating depending on how this goes.
This IS an appeal!
This is a ruling of the Mass Supreme Judicial Court, which was reached on appeal of a lower court's ruling.
It is unlikely to be appealed any further, since the only possible avenue would be the U.S. Supreme Court, which usually defers to the state courts on issues of state law -- which is what titles, real estate, etc., fall under.
All-
-kinds of excellent. "The revolution WILL be televised-in the courts."
This would be great, if it really meant anything. Republicans will just render this ruling obsolete by issuing another Cheney-mandated fatwa on 'activist judges' who don't comply with their voter-given 'mandate' to protect the bankers.
Look up who wrote the harsher concurring opinion
Cordy was chief legal counsel to one Republican governor and was appointed to the court by another. Granted, it was Weld and Cellucci, who don't exactly fit the Tea Party vision of the Republican Party, but still ...
I think you are misreading the opinion
Althought it affirmed the lower court ruling in this case, the SJC actually held that assignments of mortgage can be confirmatory, that is, so long as the lender can show that the loan was assigned to the trustee of the securitized loan trust, the actual record assigment can be executed even after the foreclosure. This is actually a bank-friendly opinion.
Can we both be right?
You're right - the justices did say a mortgage can be securitized.
But they also said the banks have to do the paperwork correctly. And in these two cases, the court said, that didn't happen. Shoddy mortage-related paperwork has been a major issue in other parts of the country. We haven't seen a lot of it here (although we're not completely immune), so I thought it was a particular interesting ruling.
OK, I did rewrite the second paragraph
Because, yes, the way I wrote it made it sound like the ruling was a blow against securitization, when it's really just a blow against pisspoor documentation.
That in of itself is a pretty
That in of itself is a pretty big problem, though. Apparently for all the money they were making, no money was spent on actually FILING anything.
As rhetoric, it is very
As rhetoric, it is very strong against the banks but as legal precedent, it actually helps banks defend cases in which a borrower claims the assignment of mortgage was signed after the sale. Under Judge Long's opinion, at least as it was understood, the assignment of mortgage needed to be executed in recordable form prior to the sending of the foreclosure notices. The SJC says that the assignment can be executed even after the sale, so long as the bank can show, through the securitization and sale documents that the mortgage involved was actually assigned earlier. Assuming the bank has the original executed sale and securitization documents, showing the individual loan that is being foreclosed, this is easy for the banks to establish.
Ah! Thanks for the clarification
So it's an issue for home buyers and their lawyers to consider.
But it all still comes down to filling out the paperwork correctly. Was Massachusetts immune from the sloppy work done in the rest of the country over the past decade? I guess we're going to find out now.
Ibanez decision destroying neighborhoods
I'm no fan of the banks, but the original decision caused many foreclosed homes to sit idle, unable to be sold since title was in dispute. As a result, decent homes wound up with broken windows, broken pipes, unmowed lawns, unshoveled walks and even the unwanted phone book problem. Nice neighborhoods with a few Ibanez affected foreclosures on the street turned ugly fast. Is the SJC decision a path to resolving all those or just adding to the stagnation?
With regards to title, its actually worse than Long's opinion
Because of a bright line rule as to when a foreclosure is valid or invalid, it essentially creates a case-by-case standard by which, in the absence of an assignment of mortgage dated before the notices are sent, could be different, depending on the lender and the jurisdiction.
Really?
I don't know from Springfield, but based on all the criminal charges and convictions coming out of places like Dorchester, it sure seems like greedy brokers and investors have at least as much to do with problem properties as people who bought more than they could afford.