Now even the media is catching onto the implications of the Massachusetts Supreme Court decision. This one isn’t going to be ignored, folks.
Massachusetts Court Decision with Potential To Turn Back the Foreclosure Tsunami
The decision in the court in Massachusetts threatens to unravel the illegal way in which many homeowners have been forced from their homes while federal and state agencies have stood by and turned a blind eye. This case has sparked fear in the holders of those mortgage backed securities and those investment banks that perpetrated those Ponzi Schemes. Here in N.J. a similar case is also pending with the lawyers for Wells Fargo and others trying to scramble to stop it. Here is the latest update:
Massachusetts’ highest court has issued a decision in a case we reported yesterday, slamming the Wall Street banks’ mortgage securitization/foreclosure scam, which goes back to the 1990s and caused a devastating real estate blowout and 8 million home foreclosures in recent years. Of the Massachusetts Supreme Judicial Court ruling today, Georgetown Law expert Prof. Adam Levitin said, “The case is enough to put a serious cloud on [mortgage] title through the whole system, and that’s a problem, challenging the way mortgages were bundled and sold worldwide.” By serving as a precedent for other state supreme courts, the ruling could create a serious barrier against the massive waves of foreclosures by which the big banks and Wall Street investment firms have been enriching themselves.
As LPAC reported Jan. 6, “the Supreme Judicial Court in Boston will issue a ruling as to whether foreclosures in the state should be completely undone because securitization “industry” practices violate real estate law governing how mortgages may be transferred. This case could have global ramifications.” The case involved just two foreclosures — one by Wells Fargo, the other by US Bancorp — but potentially may apply to millions nationwide.
Today the Court found, in a decision by Justice Ralph D. Gants, “We agree with the [lower court] judge that the plaintiffs, who were not the original mortgagees, failed to make the required showing that they were the holders of the mortgages at the time of foreclosure…. There must be proof that the assignment was made by a party that itself held the mortgage.” The decision ruled illegal, the foreclosure documentation practices which “securitization” has made into standard mass practice in Massachusetts and other states — transferring title to the foreclosing bank after it forecloses; transferring mortgage titles into a trust pool en blanc, or without any new owner being named; and skipping the county recordation of the transfer. “These blank mortgage assignments were never recorded and they were not legally recordable,” the Court found.
Moreover, the court did not limit its ruling to prospective effect; it also allowed it to be applied retroactively. So, many thousands of already completed foreclosures by these banks are voided, and can be challenged; title insurers may also have to pay up. The Cambridge attorney of one of the homeowners, Paul Collier, said the ruling reverts ownership of thousands of homes back to those who lost them, at least temporarily.
Elsewhere, the New York Supreme Court has given 30 banks until Jan. 19 to submit briefs and evidence as to why their foreclosures in that state “should not be found illegal.” The Kansas Supreme Court has found the banks’ Mortgage Electronic Registration System (MERS) to be “akin to a straw man”; and California and New Jersey have lower court decisions against the banks being appealed to higher courts.
But the possibility is also rumored, that Republicans in Congress will try to end-run the courts by a legislative act attempting to make MERS legal, retroactively. The Obama White House, reportedly, would back it.
Mass. High Court Ruling Means Foreclosure Mess Just Got Much Worse
Foreclosure-gate is back.
The Massachusetts Supreme Court has ruled against U.S. Bancorp and Wells Fargo in a case that could have serious implications for the already depressed U.S. housing market.
The high court found that the banks wrongfully sold two foreclosed homes by failing to show the proper paperwork at the time of the sale indicating they actually owned those homes and had the right to a) foreclose on those properties and b) sell the homes to new owners.
If this decision is echoed in other states, the foreclosure mess is going to get a whole lot messier.
There is already a huge backlog of potential home foreclosures sitting on banks’ books as a result of last year’s “robo-signing” scandal, which forced banks to undergo a self-imposed moratorium on foreclosure proceedings. It was expected that early this year these foreclosures would eventually go through and the problem would work itself out. (See: RealtyTrac: Foreclosures Drop in November But Will Come Roaring Back in 2011)
Now, the likelihood of that happening is much less.
In the wake of the court’s ruling, there may be increased scrutiny of deals already done. In addition, people may be less inclined to purchase a foreclosure property for fear that it might end in a repossession of the home.
Another freeze on foreclosures may be good for home prices in the short-term, but the long-term outlook seems more grim as RealtyTrac’s Rick Sharga told Tech Ticker last fall. About one-third of all sales are foreclosures sales, and a freezing up of related activity can’t help but create a “chilling effect” on the market.
It looks like housing market has a long way to go before it flushes this mess for good. For a more rosy take on the situation, see: Upside Surprise! Whitney Tilson Sees Silver Lining in Foreslosure-Gate