Tuesday, January 11, 2011
Mass Supreme Court Ruling On Foreclosures May Have National Implications
We now have more evidence that many bank foreclosures are fraudulent and often made on homes that banks don't even own.
Last week, the Massachusetts Supreme Judicial Court affirmed a 2009 ruling that invalidated foreclosure proceedings involving two houses in which the lenders did not hold clear titles to the properties.
“We agree with the judge that the plaintiffs . . . failed to make the required showing that they were the holders of the mortgages at the time of foreclosure,’’ Justice Ralph Gants wrote in the decision.
This ruling is a major development and it will likely have national implications. Case law is all about precedent, and that precedent has now been set.
In Massachusetts — at least — lenders will now have to prove they own mortgages before beginning foreclosure proceedings.
Imagine that. A reasonable person would have suspected that this was mandatory all along.
The ruling puts in question the ownership of hundreds, possibly thousands, of foreclosed properties in Massachusetts. Lawyers say previously foreclosed homes will revert back to the homeowners who lost them, at least temporarily.
If banks cannot show clear title, and that the foreclosure process was done according to the law, it means that a property was improperly taken. In those cases, banks would have to return homes to former owners.
The already clogged foreclosure pipeline could be overwhelmed as foreclosure proceedings are painstakingly reconstructed and reattempted.
Because of the way that millions of home loans were sliced and diced—before being bundled into bonds that were sold to investors during the housing boom—there are often lengthy and wildly confusing paper trails that obscure ownership.
There is no way to overstate the implications this will have on the foreclosure industry and the banks/lenders behind it. For the banks, this ruling is an utter disaster.
The additional problem for the banks is that the ruling will likely unleash a wave of lawsuits from the buyers of bank-owned properties. Those folks will want evidence of clear title, which will be hard to come by in numerous cases.
What's more, there will also be lawsuits from the holders of mortgage-backed securities who have already taken huge losses that are soon to become even worse. Many of them are huge, institutional investors with deep pockets and teams of lawyers.
The securities in question were fraudulently constituted. The banks didn't even own the mortgages in many of the securities they sold.
What is particularly stunning is that it was the banks, not the homeowners, who filed this case in the first place. This decision is certainly not the one that the banks were expecting.
The court said that its ruling applies to all foreclosures in Massachusetts — no matter when they took place — because laws governing proper foreclosure procedures have remained constant over time.
“All that has changed is the plaintiffs’ apparent failure to abide by those principles and requirements in the rush to sell mortgage-backed securities,’’ Justice Gants wrote in the decision.
The reverberations from this decision have only just begun. They will be felt far and wide, and they will be historic.
However, since the banks are the masters of those in Congress and the White House, there is always the possibility that all of this will somehow be smoothed over by our lapdog government.
After all, America has long since become an oligarchy.