The Massachusetts Supreme Court issued a ruling voiding the seizure of two homes by Wells Fargo and U.S. Bank after they failed to show they actually held the mortgage to the homes at the time of foreclosure. The mortgages of the two homes at issue had been sold and assigned numerous times until they ultimately were placed in a type of trust that was sliced up and sold to investors in the form of mortgage bonds or mortgage-backed securities. Wells Fargo and US Bank were the entities that supposedly held the title to these houses on behalf of this “holding trust” at the time of the foreclosure sale. Each bank then bought the home that it foreclosed on, at a price well below market value.
In its ruling, the Massachusetts court ruled that the chain of title of the mortgage from the original lender (the originator) to these holding trusts was not clear. Therefore, these trusts did not have the right or ability to sell the property, and the purchaser of the foreclosed-upon property did not actually own it.
What will be the fallout from this Massachutes foreclosure ruling?
This is a rapidly developing area of law, but one of the most likely immediate results will be that judges who have been hesisitant to block foreclosure sales may take a second look at the banks’ documentation. These legal actions to stop foreclosures are being given added legitimacy as more and more of the banks’ practices are coming to light. If fact, the Massachusetts foreclosure ruling included a scathing rebuke of the lenders, calling their documentation “utter carelessness” and instructing mortgage holders “to take care to ensure that [their] legal paperwork is in order.”
I have personally stopped foreclosure sales and evictions in Texas, and I can tell you from first hand experience that these developments are creating a new legal landscape in which home owners fight to keep their homes. Judges traditionally have looked at foreclosure-related lawsuits as last ditch attempts to stall a trustee sale. Now, they are starting to develop a skeptical eye toward the banks.