Friday, January 7, 2011

Massachusetts Supreme Court rules against US Bank and Wells Fargo in foreclosure case

Via John Cole at Balloon Juice and Atrios at Eschaton, David Dayen reports at Firedoglake that the Massachusetts Supreme Court ruled today that US Bank and Wells Fargo do not have standing to foreclose on Antonio Ibanez due to improper mortgage assignment.
The notice requirements are a bit of a sideshow. The point here is that the mortgage assignment and the securitization process was improper. US Bank and Wells Fargo did not have possession of the mortgage note, and thus did not have the standing to foreclose. In addition, they put the endorsement in blank, without naming the entity to which they were assigning the mortgage. This violated Massachusetts law, according to the original judge in the case, and now the MA Supreme Court agreed.
And as we know, this is more the norm than otherwise. But this is one of the first major cases, decided by a state Supreme Court, that affirms that a lack of securitization standards means that the bank who thinks they have the power to foreclose on a delinquent borrower actually does not.
If this ruling gets applied far and wide, you’re basically going to have a situation where most securitized mortgages in the country cannot be foreclosed upon. It depends on state law and the associated rulings, but you can see the Ibanez case being used as precedent.
I hope it is used as precedent.  There will definitely be those who think that Ibanez deserves to be foreclosed upon anyway for failing to keep up with his payments.  While that may be the case, I don't think that these banks, which were bailed out by taxpayers to the tune of billions of dollars each, deserve to foreclose on him.

These subprime Residential Mortgage-Backed Securities were a major factor of the housing bubble which was a major factor in the economic collapse.  So we bailed out the banks only to have them foreclose on people without proper documentation when that lack of proper documentation is the result of practices which made it necessary to bail them out in the first place?  Why should the rules apply only to individual homeowners and not on huge corporations?

We need courts to issue rulings like this just to show these banks that they can't get away with anything, and that they need to change their practices.  I don't know that the Dodd-Frank financial reform bill, which Republicans would like to repeal along with health care reform, is going to cut it.

I'm with Atrios when he says that a better way to handle the bank bailouts would have been to lend the money to homeowners contingent on them using it to pay their mortgages.  That way the banks still would have received their payments, and then perhaps they wouldn't be currently foreclosing on so many people using these shady tactics.

As it stands, I have far more sympathy for the homeowners who are being foreclosed upon than the banks doing the foreclosing seeing as how so many of them are having trouble staying current on their payments due to the shitty economy, the collapse of which was precipitated by these banks.

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