Friday, January 7, 2011

The Tide is REALLY Turning: Ibanez Ruling in Mass. in Favor of Borrowers

Top Court in Massachusetts Voids Foreclosures by 2 Banks

In a ruling that may affect foreclosures nationwide, the Massachusetts high court has voided the seizure of two homes by Wells Fargo & Company and US Bancorp after the banks failed to show that they held the mortgages at the time of the foreclosures.
Friday’s decision by the Supreme Judicial Court of Massachusetts, which upheld a lower court ruling, is among the earliest to address the validity of foreclosures conducted without full documentation.
That issue prompted an uproar last year that led lenders like Bank of America, JPMorgan Chase and Ally Financial to temporarily stop seizing homes.
Courts in other states are considering similar cases, and all 50 state attorneys general are examining whether lenders are forcing people out of their homes improperly.
Friday’s decision may also threaten banks’ ability to package mortgages into securities and raises the possibility that loans that were transferred improperly might need to be bought back.
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.
In the Massachusetts case, US Bancorp and Wells Fargo had said they controlled through different trusts the respective mortgages of Antonio Ibanez as well as Mark and Tammy LaRace, who lost their homes to foreclosure in 2007.
The banks bought the homes in foreclosure, and sought court orders confirming they had title. A lower court judge ruled against them, and Friday’s decision upheld the ruling.
In a concurring opinion, Justice Robert Cordy lambasted “the utter carelessness” that Wells Fargo and US Bancorp demonstrated in documenting their right to own the properties.
Justice Gants did suggest in his opinion how banks might properly transfer mortgages via securitization trusts.
“The executed agreement that assigns the pool of mortgages, with a schedule of the pooled mortgage loans that clearly and specifically identifies the mortgage at issue as among those assigned, may suffice to establish the trustee as the mortgage holder,” he wrote. “However, there must be proof that the assignment was made by a party that itself held the mortgage.”

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