In a closely watched foreclosure fraud case, the Masschusetts high court has voided the foreclosure of two homes by Wells Fargo and US Bancorp. The banks were unable to show that they held the mortgages on these homes when they foreclosed.
In the ruling, Justice Ralph D. Gants wrote for a unanimous court that Wells Fargo and US Bancorp lacked authority to foreclose after having “failed to make the required showing that they were the holders of the mortgages at the time of foreclosure.” Massachusetts is one of 27 states that do not require court approval to foreclose.
Wells Fargo was not immediately available for comment. A US Bancorp spokesman, Steve Dale, said the ruling had no financial impact on the bank, which had “no responsibility for the terms of the underlying mortgage or the procedure by which they were transferred” into a mortgage trust.
Right, the bank which fraudulently seized someone's house had no responsibility for doing us at all. It's a complex case in which the mortgates on the two properties were sold multiple times and pooled with other loans and packaged into a subprime Residential Mortgage-Backed Security (RMBS). David Dayen has much more, on the cases, summing it up:
The point here is that the mortgage assignment and the securitization process was improper. US Bank and Wells Fargo did not have possession of the mortgage note, and thus did not have the standing to foreclose. In addition, they put the endorsement in blank, without naming the entity to which they were assigning the mortgage. This violated Massachusetts law, according to the original judge in the case, and now the MA Supreme Court agreed.
And as we know, this is more the norm than otherwise. But this is one of the first major cases, decided by a state Supreme Court, that affirms that a lack of securitization standards means that the bank who thinks they have the power to foreclose on a delinquent borrower actually does not.
If this ruling gets applied far and wide, you’re basically going to have a situation where most securitized mortgages in the country cannot be foreclosed upon. It depends on state law and the associated rulings, but you can see the Ibanez case being used as precedent.
If this case becomes precedent will very much depend on the real estate laws in other states. Attorneys general in all 50 states are investigating foreclosure fraud, and it's quite possible that this decision could have a major ripple effect. It's the brightest glimmer of hope yet in the whole mess.
Don't miss bobswern's diary for more information and discussion.
