A judge's ruling in Massachusetts might invalidate thousand of foreclosures going back to 1989.
Long ruled that banks can't foreclose on homes unless they have complete paperwork covering every time a specific loan changed hands.
The judge found that fixing documents after the fact, as Wells Fargo and U.S. Bank did in the Springfield cases, isn't enough. He ruled that flaws not resolved earlier can depress bids at foreclosure auctions, reducing how much consumers who face home losses get for their places.
"The issues in this case are not merely . . . a matter of dotting i's and crossing t's. Instead, they lie at the heart of the protections given to homeowners and borrowers," Long wrote yesterday.
Experts say the ruling paves the way for thousands of people who've lost houses to foreclosure to challenge their homes' seizures
I enjoyed reading the complete ruling. The banks were arguing that that's the way they've always been doing it so it shouldn't be a big deal. I was glad to see the judge stick to the law.
If they believe a change is warranted to reflect "industry standards and practice," they must seek that change from the legislature. I note, however, that if those "standards and practice" have brought us to the present situation (see, e.g., Chairman Ben Bernanke, Financial Innovation and Consumer Protection, speech at the Federal Reserve System's Sixth Biennial Community Affairs Research Conference (Apr. 17, 2009); R. Posner, A Failure of Capitalism: The Crisis of '08 and the Descent Into Depression (Harvard University Press 2009)), "we should learn something from that experience." Korematsu v. United States, 323 U.S. 214, 242 (1944)
A good read on the topic was posted by Karl Denninger. Some interesting discussionon his Market Ticker Forum. Denninger did a post last month explaining the problem in more detail
I'm not a lawyer so I thought before writing my own post, I would see if any resident expert on ActiveRain wrote about the topic. I saw Richard Vetstein's post and thought it would be best to reblog it since he's actually an attorney who seems to be pretty knowledgeable.
Via
Richard Vetstein (Vetstein Law Group, P.C.):
Originally posted on The Massachusetts Real Estate Law Blog
Today, Massachusetts Land Court Judge Keith Long reaffirmed his controversial ruling made back in March 2009 that invalidated foreclosure proceedings involving two Springfield homes because the lenders did not hold clear titles to the properties at the time of sale. A copy of the decision can be found here.
As I outlined in my prior post on this case, the problem the Land Court dealt with in this case is what happens when modern securitized mortgage lending practices meets outdated foreclosure laws. When mortgages are packaged to Wall Street investors, the ownership of a mortgage loan may be divided and freely transferred numerous times on the lenders’ books. But the mortgage loan documentation actually on file at the Registry of Deeds often lags far behind.
The Ruling
Judge Long ruled that foreclosures were invalid when the lender failed to bring the ownership documentation (known as an assignment) up-to-date until after the foreclosure sale had already taken place. An assignment is a legal document confirming that a mortgage loan has been transferred from one lender to another. Assignments must be recorded with a registry of deeds so anyone researching a property’s title can track the loan’s origin and ownership. Oftentimes, as in the Ibanez case, lenders will sell bundles of loan and record backdated assignments with an effective date before the first foreclosure notice. Judge Long effectively prohibited this practice.
Despite the lender’s attempt to convince him otherwise, Judge Long came out (again) in favor of consumers:
The issues in this case are not merely problems with paperwork or a matter of dotting i’s and crossing t’s. Instead, they lie at the heart of the protections given to homeowners and borrowers by the Massachusetts legislature. To accept the plaintiffs’ arguments is to allow them to take someone’s home without any demonstrable right to do so, based upon the assumption that they ultimately will be able to show that they have that right and the further assumption that potential bidders will be undeterred by the lack of a demonstrable legal foundation for the sale and will nonetheless bid full value in the expectation that that foundation will ultimately be produced, even if it takes a year or more. The law recognizes the troubling nature of these assumptions, the harm caused if those assumptions prove erroneous, and commands otherwise.
Judge Long also had some choice words for lenders:
[T]he problem the [lenders] face (the present title defect) is entirely of their own making as a result of their failure to comply with the statute and the directives in their own securitization documents… What the plaintiffs truly seek is a change in the foreclosure sale statute (G.L. c. 244, § 14), which can only come from the legislature.
What Now?
That’s a good question and one not readily answerable. To be sure, the current state of flux and confusion surrounding foreclosure titles affected by an Ibanez issue will remain intact until an appellate court considers the case or some action by the Legislature (which may be unlikely). Given the importance of the decision, I predict that the Massachusetts Supreme Judicial Court will take the unusual step of taking the case directly from the Land Court.
As for what happens in the year or so the case may be in appellate limbo, I asked an in house counsel for a leading title insurance company, and his response was essentially that it’s going to take a fair amount of time and research to figure this one out. If there’s an existing title insurance policy on the property, some but not all of the title companies may be willing to insure over the problem. If there’s no title policy in place, affected parties are going to have to ride this one out for awhile.
Once title insurance companies offer some further guidance, I will post it here.
Hi folks. Let's talk a little bit about professional courtesy. I hear this term quite a bit on AR and in my business. Usually, it goes something like this:
