The highest court of Massachusetts ruled against U.S. Bancorp and Wells Fargo & Co. Friday in a case of foreclosure mortgage pivot that could cause unrest and uncertainty in the housing market already mired in depression.
A Supreme Court confirmed lower judge's ruling invalidating two mortgage foreclosure sales because banks, as their mortgage-backed securities, trustees have not proven that that they had indeed the mortgage at the time of the seizure.
Decision, which highlights the failure of financial companies to adhere to the rules governing mortgage-backed securities, is likely to cause more borrowers continue the Bank staff and trustees for unjustified seizures. It is unclear what the decision to the individuals who were forced from their homes after their default loans or for those who have purchased homes from foreclosure sales.
"There's now thousands of these houses which were purchased by seizures treated very similarly, where titles are defective," says Ward P. Graham, an attorney for title of Massachusetts who has co-authored a friend-of-the-court brief in the case on behalf of the Association du Barreau Real Estate for Massachusetts, Inc..
Last fall, foreclosure machine banking industry came under scrutiny of revelations that employees at low altitude called "robo signatories" powered by hundreds of foreclosure affidavits a day without checking a single sentence. At the time, analysts warned that allegedly fraudulent document procedures banks could jeopardize their ability to prove that they held mortgages. The decision of Massachusetts stokes these concerns.
"This decision will raise serious problems in hundreds of thousands of cases of foreclosure," said owner-defence attorney Thomas Cox, a Prosecutor in Maine, which was one of the first to develop the signature scandal robo national honor. It has the potential to require that the seizures do, and I think it will be murky important nationally. There is substantial uncertainty. »
In the case of Massachusetts, a Supreme Court concluded that the banks were not the originals of the hypothecary creditors, have not shown that they owned the mortgage at the time of the seizure. Accordingly, the Court concluded, banks do not demonstrate that foreclosure sales were valid.
Banks argued as securitization, documents that they submitted sufficient to prove that they owned mortgages before the publication of the notices of sale and foreclosure sales. Wells Fargo said Friday that the trustee of a pool of securitization of loans expected those serving loans to comply with all laws applicable state, including those governing foreclosure sales. The Bank of San Francisco was a trustee of the trust securitized in question. American Home Mortgage servicing Inc, was the agent.
In a separate statement U.S. Bancorp said that the judgment has no financial impact on the company. "The issues addressed by the Court focused on the process of loan on behalf of the securitization trust conducted here by the agent, American Home mortgage," the Bank, which is based in Minneapolis, said. Later issued another statement saying that, as trustee of the securitization trust has no responsibility for the terms of the underlying mortgage process of foreclosure, the conduct of Constable, the process by which the mortgage is transferred to the trust or the sufficiency of the documentation of the mortgage. »
American Home mortgage servicing, which is based in Coppell, Texas, said in a statement that the "decision is of limited application because it is based on the right is unique and specific to Massachusetts." The decision does not extend to seizures in other States. »
Paul Collier III, attorney representing Antonio Ibanez, one of the owners in the case, said the decision affects thousands of mortgages in Massachusetts and could have an impact on the banking industry of the nation.
"Building owners and seizures in General, this means that any mortgage foreclosure which was launched by a securitised trust, in an era where the trust did not obtain a mortgage assignment which gave him the legal right to do so is void." "These owners, like Mr. Ibanez, still have the property", said the necklace.
He has until regulators to take steps to eliminate the uncertainty on the mortgages raised by decision, said Massachusetts Secretary of State William Galvin. Without legislation, the tribunal's decision will have a "chilling effect" on the real estate market, he said.
The broader implications of the case sent Bank lower stocks, with a stock of Wells Fargo dropped the 65 cents, or 2 percent, close to the $31.50. He traded soon as low as $30.64.
U.S. Bancorp stock slid 20 cents to close at $26.09, having lost over 2.4 per cent after the judgment.
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