Banks lose important ruling on foreclosures

[SD Transplant]

http://www.msnbc.msn.com/id/40965934/ns/business-real_estate

NEW YORK — In a decision that may affect foreclosures nationwide, Massachusetts’ highest court voided the seizure of two homes by Wells Fargo & Co and US Bancorp after the banks failed to show they held the mortgages at the time they foreclosed.

Bank shares fell, dragging down the broader U.S. stock market, after the Supreme Judicial Court of Massachusetts on Friday issued its decision, which upheld a lower court ruling.

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The unanimous decision is among the earliest to address the validity of foreclosures done without proper documentation. That issue last year prompted an uproar that led lenders such as Bank of America Corp, JPMorgan Chase & Co and Ally Financial Inc to temporarily stop seizing homes.

“A ruling like this will slow down the foreclosure process” for banks, said Marty Mosby, an analyst at Guggenheim Securities. “They’re going to have to be really precise and get everything in order. It doesn’t leave a lot of wiggle room.”

Wells Fargo and U.S. 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,” Justice Ralph Gants wrote for the Massachusetts court.

In a concurring opinion, Justice Robert Cordy lambasted “the utter carelessness” that the banks demonstrated in documenting their right to own the properties.

In a concurring opinion, Justice Robert Cordy lambasted “the utter carelessness” that the banks demonstrated in documenting their right to own the properties.

Courts in other U.S. states are considering similar cases, and all 50 state attorneys general are examining whether lenders are forcing people out of their homes improperly.

Advertise | AdChoicesAdvertise | AdChoicesAdvertise | AdChoicesFriday’s ruling “will be certainly cited as persuasive authority by anybody in a similar scenario who’s trying to hold onto his home,” said Robert Nislick, a real estate lawyer at Marcus, Errico, Emmer & Brooks PC in Braintree, Massachusetts.

Analysts said the decision may also threaten banks’ ability to package mortgages into securities, and may raise the specter that loans transferred improperly will need to be bought back.

“What they were doing was peddling these mortgages and leaving the paperwork behind,” said Michael Pill, a partner at Green, Miles, Lipton & Fitz-Gibbon LLP in Northampton, Massachusetts, who represents homeowners and is not involved in the case.

A spokeswoman for San Francisco-based Wells Fargo, Teri Schrettenbrunner, had no immediate comment on the decision.

U.S. Bancorp spokesman Steve Dale said the decision has no financial impact on the Minneapolis-based bank, which has “no responsibility” for the terms or means of transfer of mortgages used in the securitization trusts it oversees as trustee.

In the Massachusetts case, U.S. Bancorp and Wells Fargo had said they controlled through different trusts the respective mortgages of Antonio Ibanez and the married couple Mark and Tammy LaRace, who lost their homes to foreclosure in 2007.

The banks bought the Springfield, Massachusetts, homes in foreclosure, and sought court orders confirming they had title. A lower court judge ruled against them in March 2009, and Friday’s decision upheld this ruling.

Massachusetts is one of 27 U.S. states that do not require court approval to foreclose.

“It is the first time the supreme court of a state has looked straight at securitization practices and told the industry, you are not immune from state statutes and homeowner protections,” Paul Collier, a lawyer for Ibanez, said in an interview.

The Supreme Judicial Court also rejected the banks’ request that the ruling apply only in the future, leaving homeowners who had already been foreclosed upon without a remedy.

“I’m ecstatic,” Glenn Russell, a lawyer for the LaRaces, said in an interview. “The fact the decision applies retroactively could mean thousands of homeowners can seek recovery for homes wrongfully foreclosed upon.”

[SK in CV]

This is one little piece in a great big mine field for the mortgage loan industry. It follows a good dozen rulings against them across the country, on more than half a dozen different fronts. Off the top of my head we have:

1. MERS standing.
2. Improper endorsements.
3. Failure to transmit original documents.
4. Attesting to the accuracy of claims made based on personal knowledge of attestee.
5. Violation of NY trust laws which apply to almost all REMICs.
6. Violations of trust specific documents, which, in conjunction with 5 above could invalidate the securitization process, putting tax treatment in jeopardy.
7. Failure to record ownership transfers as required in some jurisdictions.
8. I know there’s at least 3 more that aren’t immediately coming to mind.

This one ruling actually touches on a few of them. Many of them only apply in some states. Some of them can be cured. But it’s a mess. And will almost undoubtedly be something the lenders and loan servicers could have avoided. They deserve all bad things that come to them.

[SK in CV]

This is one little piece in a great big mine field for the mortgage loan industry. It follows a good dozen rulings against them across the country, on more than half a dozen different fronts. Off the top of my head we have:

1. MERS standing.
2. Improper endorsements.
3. Failure to transmit original documents.
4. Attesting to the accuracy of claims made based on personal knowledge of attestee.
5. Violation of NY trust laws which apply to almost all REMICs.
6. Violations of trust specific documents, which, in conjunction with 5 above could invalidate the securitization process, putting tax treatment in jeopardy.
7. Failure to record ownership transfers as required in some jurisdictions.
8. I know there’s at least 3 more that aren’t immediately coming to mind.

This one ruling actually touches on a few of them. Many of them only apply in some states. Some of them can be cured. But it’s a mess. And will almost undoubtedly be something the lenders and loan servicers could have avoided. They deserve all bad things that come to them.

[SK in CV]

This is one little piece in a great big mine field for the mortgage loan industry. It follows a good dozen rulings against them across the country, on more than half a dozen different fronts. Off the top of my head we have:

1. MERS standing.
2. Improper endorsements.
3. Failure to transmit original documents.
4. Attesting to the accuracy of claims made based on personal knowledge of attestee.
5. Violation of NY trust laws which apply to almost all REMICs.
6. Violations of trust specific documents, which, in conjunction with 5 above could invalidate the securitization process, putting tax treatment in jeopardy.
7. Failure to record ownership transfers as required in some jurisdictions.
8. I know there’s at least 3 more that aren’t immediately coming to mind.

This one ruling actually touches on a few of them. Many of them only apply in some states. Some of them can be cured. But it’s a mess. And will almost undoubtedly be something the lenders and loan servicers could have avoided. They deserve all bad things that come to them.

[SK in CV]

This is one little piece in a great big mine field for the mortgage loan industry. It follows a good dozen rulings against them across the country, on more than half a dozen different fronts. Off the top of my head we have:

1. MERS standing.
2. Improper endorsements.
3. Failure to transmit original documents.
4. Attesting to the accuracy of claims made based on personal knowledge of attestee.
5. Violation of NY trust laws which apply to almost all REMICs.
6. Violations of trust specific documents, which, in conjunction with 5 above could invalidate the securitization process, putting tax treatment in jeopardy.
7. Failure to record ownership transfers as required in some jurisdictions.
8. I know there’s at least 3 more that aren’t immediately coming to mind.

This one ruling actually touches on a few of them. Many of them only apply in some states. Some of them can be cured. But it’s a mess. And will almost undoubtedly be something the lenders and loan servicers could have avoided. They deserve all bad things that come to them.

[SK in CV]

This is one little piece in a great big mine field for the mortgage loan industry. It follows a good dozen rulings against them across the country, on more than half a dozen different fronts. Off the top of my head we have:

1. MERS standing.
2. Improper endorsements.
3. Failure to transmit original documents.
4. Attesting to the accuracy of claims made based on personal knowledge of attestee.
5. Violation of NY trust laws which apply to almost all REMICs.
6. Violations of trust specific documents, which, in conjunction with 5 above could invalidate the securitization process, putting tax treatment in jeopardy.
7. Failure to record ownership transfers as required in some jurisdictions.
8. I know there’s at least 3 more that aren’t immediately coming to mind.

This one ruling actually touches on a few of them. Many of them only apply in some states. Some of them can be cured. But it’s a mess. And will almost undoubtedly be something the lenders and loan servicers could have avoided. They deserve all bad things that come to them.

[SD Realtor]

SK we don’t agree on alot of things but I do agree with what you wrote.

What I fear is… do the banks care… the ruling is good because these guys need to follow the rules. On the flip side, to me this just will clog the inventory pipe even more, slowing down the time to market, and holding homes off the market. What was going to take a long time to happen will take longer but necessarily so.

[SD Realtor]

SK we don’t agree on alot of things but I do agree with what you wrote.

What I fear is… do the banks care… the ruling is good because these guys need to follow the rules. On the flip side, to me this just will clog the inventory pipe even more, slowing down the time to market, and holding homes off the market. What was going to take a long time to happen will take longer but necessarily so.

[SD Realtor]

SK we don’t agree on alot of things but I do agree with what you wrote.

What I fear is… do the banks care… the ruling is good because these guys need to follow the rules. On the flip side, to me this just will clog the inventory pipe even more, slowing down the time to market, and holding homes off the market. What was going to take a long time to happen will take longer but necessarily so.

[SD Realtor]

SK we don’t agree on alot of things but I do agree with what you wrote.

What I fear is… do the banks care… the ruling is good because these guys need to follow the rules. On the flip side, to me this just will clog the inventory pipe even more, slowing down the time to market, and holding homes off the market. What was going to take a long time to happen will take longer but necessarily so.

[SD Realtor]

SK we don’t agree on alot of things but I do agree with what you wrote.

What I fear is… do the banks care… the ruling is good because these guys need to follow the rules. On the flip side, to me this just will clog the inventory pipe even more, slowing down the time to market, and holding homes off the market. What was going to take a long time to happen will take longer but necessarily so.

[SK in CV]

[quote=SD Realtor]
What I fear is… do the banks care… the ruling is good because these guys need to follow the rules. On the flip side, to me this just will clog the inventory pipe even more, slowing down the time to market, and holding homes off the market. What was going to take a long time to happen will take longer but necessarily so.[/quote]

I think the banks do care. But their inability to deal with what is potentially catastrophic losses is a function of their arrogance and rigidity. They don’t think the bad shit will happen, and even if they did, they don’t know how to fix it. They’ve never been any good at dealing with distressed assets. Not now. Not 20 years ago. Not 30 years ago. (I haven’t seen it from the inside this time around, but I sure did 20 and 30 years ago.)

And just to make it clear, the primary loser will be the note holders, the banks are only in a position of loan servers in most cases. They make more money foreclosing than they do working out a loan, either through a short sale or a loan mod. So their motives are at odds with their clients, the note holders who would be much better off with loan mods or short sales.

BofA just made a little settlement with the GSE’s on put-backs and the markets cheered. I think it’s maybe far from over.

The GSE’s and private REMICs own most of the loans. But if all those things I listed turn out badly for the note holders, it will start a stampede. We’re potentially talking about gagillions of dollars of secured debt turning into unsecured debt, essentially worthless.

The investors take the losses. They sue the promoters of the securities (mostly wall street banks) for fraud. The promoters sue the loan origninators (the banks again) for fraud. And we’re back to BofA as successor in interest to Countrywide.

Will it happen? I don’t know. The Fed wants to sweep it under the rug. The tough talking 50 AG’s seem to have lost their balls. The FDIC seems to be standing pretty tough. I have very low expectations that the DOJ will get involved other than to help it go away, despite that fact that there are so many RICO charges in this mess that no US Attorney would need viagra for years.

So we’re left with agressive plaintiff attorneys and a concientious judiciary. Maybe an AG here or there. (I assure you the banks would be taking it all much more seriously if Eliot Spitzer was still the AG in NY.)

Edited and added:

Another party that may have some interesting input is the office of the US Trustee, as they did in this case. I spent a lot of time working in the bankruptcy system in the early 90’s, and their aggressiveness varies dramatically from district to district. But there will be cases where they have standing. And it wouldn’t surprise me if they’re the ones that get the snow ball rolling. Bankruptcy judges tend to give them more respect than either debtors or creditors. And there is nothing more dangerous than a pissed off bankruptcy judge.

[SK in CV]

[quote=SD Realtor]
What I fear is… do the banks care… the ruling is good because these guys need to follow the rules. On the flip side, to me this just will clog the inventory pipe even more, slowing down the time to market, and holding homes off the market. What was going to take a long time to happen will take longer but necessarily so.[/quote]

I think the banks do care. But their inability to deal with what is potentially catastrophic losses is a function of their arrogance and rigidity. They don’t think the bad shit will happen, and even if they did, they don’t know how to fix it. They’ve never been any good at dealing with distressed assets. Not now. Not 20 years ago. Not 30 years ago. (I haven’t seen it from the inside this time around, but I sure did 20 and 30 years ago.)

And just to make it clear, the primary loser will be the note holders, the banks are only in a position of loan servers in most cases. They make more money foreclosing than they do working out a loan, either through a short sale or a loan mod. So their motives are at odds with their clients, the note holders who would be much better off with loan mods or short sales.

BofA just made a little settlement with the GSE’s on put-backs and the markets cheered. I think it’s maybe far from over.

The GSE’s and private REMICs own most of the loans. But if all those things I listed turn out badly for the note holders, it will start a stampede. We’re potentially talking about gagillions of dollars of secured debt turning into unsecured debt, essentially worthless.

The investors take the losses. They sue the promoters of the securities (mostly wall street banks) for fraud. The promoters sue the loan origninators (the banks again) for fraud. And we’re back to BofA as successor in interest to Countrywide.

Will it happen? I don’t know. The Fed wants to sweep it under the rug. The tough talking 50 AG’s seem to have lost their balls. The FDIC seems to be standing pretty tough. I have very low expectations that the DOJ will get involved other than to help it go away, despite that fact that there are so many RICO charges in this mess that no US Attorney would need viagra for years.

So we’re left with agressive plaintiff attorneys and a concientious judiciary. Maybe an AG here or there. (I assure you the banks would be taking it all much more seriously if Eliot Spitzer was still the AG in NY.)

Edited and added:

Another party that may have some interesting input is the office of the US Trustee, as they did in this case. I spent a lot of time working in the bankruptcy system in the early 90’s, and their aggressiveness varies dramatically from district to district. But there will be cases where they have standing. And it wouldn’t surprise me if they’re the ones that get the snow ball rolling. Bankruptcy judges tend to give them more respect than either debtors or creditors. And there is nothing more dangerous than a pissed off bankruptcy judge.

[SK in CV]

[quote=SD Realtor]
What I fear is… do the banks care… the ruling is good because these guys need to follow the rules. On the flip side, to me this just will clog the inventory pipe even more, slowing down the time to market, and holding homes off the market. What was going to take a long time to happen will take longer but necessarily so.[/quote]

I think the banks do care. But their inability to deal with what is potentially catastrophic losses is a function of their arrogance and rigidity. They don’t think the bad shit will happen, and even if they did, they don’t know how to fix it. They’ve never been any good at dealing with distressed assets. Not now. Not 20 years ago. Not 30 years ago. (I haven’t seen it from the inside this time around, but I sure did 20 and 30 years ago.)

And just to make it clear, the primary loser will be the note holders, the banks are only in a position of loan servers in most cases. They make more money foreclosing than they do working out a loan, either through a short sale or a loan mod. So their motives are at odds with their clients, the note holders who would be much better off with loan mods or short sales.

BofA just made a little settlement with the GSE’s on put-backs and the markets cheered. I think it’s maybe far from over.

The GSE’s and private REMICs own most of the loans. But if all those things I listed turn out badly for the note holders, it will start a stampede. We’re potentially talking about gagillions of dollars of secured debt turning into unsecured debt, essentially worthless.

The investors take the losses. They sue the promoters of the securities (mostly wall street banks) for fraud. The promoters sue the loan origninators (the banks again) for fraud. And we’re back to BofA as successor in interest to Countrywide.

Will it happen? I don’t know. The Fed wants to sweep it under the rug. The tough talking 50 AG’s seem to have lost their balls. The FDIC seems to be standing pretty tough. I have very low expectations that the DOJ will get involved other than to help it go away, despite that fact that there are so many RICO charges in this mess that no US Attorney would need viagra for years.

So we’re left with agressive plaintiff attorneys and a concientious judiciary. Maybe an AG here or there. (I assure you the banks would be taking it all much more seriously if Eliot Spitzer was still the AG in NY.)

Edited and added:

Another party that may have some interesting input is the office of the US Trustee, as they did in this case. I spent a lot of time working in the bankruptcy system in the early 90’s, and their aggressiveness varies dramatically from district to district. But there will be cases where they have standing. And it wouldn’t surprise me if they’re the ones that get the snow ball rolling. Bankruptcy judges tend to give them more respect than either debtors or creditors. And there is nothing more dangerous than a pissed off bankruptcy judge.

[SK in CV]

[quote=SD Realtor]
What I fear is… do the banks care… the ruling is good because these guys need to follow the rules. On the flip side, to me this just will clog the inventory pipe even more, slowing down the time to market, and holding homes off the market. What was going to take a long time to happen will take longer but necessarily so.[/quote]

I think the banks do care. But their inability to deal with what is potentially catastrophic losses is a function of their arrogance and rigidity. They don’t think the bad shit will happen, and even if they did, they don’t know how to fix it. They’ve never been any good at dealing with distressed assets. Not now. Not 20 years ago. Not 30 years ago. (I haven’t seen it from the inside this time around, but I sure did 20 and 30 years ago.)

And just to make it clear, the primary loser will be the note holders, the banks are only in a position of loan servers in most cases. They make more money foreclosing than they do working out a loan, either through a short sale or a loan mod. So their motives are at odds with their clients, the note holders who would be much better off with loan mods or short sales.

BofA just made a little settlement with the GSE’s on put-backs and the markets cheered. I think it’s maybe far from over.

The GSE’s and private REMICs own most of the loans. But if all those things I listed turn out badly for the note holders, it will start a stampede. We’re potentially talking about gagillions of dollars of secured debt turning into unsecured debt, essentially worthless.

The investors take the losses. They sue the promoters of the securities (mostly wall street banks) for fraud. The promoters sue the loan origninators (the banks again) for fraud. And we’re back to BofA as successor in interest to Countrywide.

Will it happen? I don’t know. The Fed wants to sweep it under the rug. The tough talking 50 AG’s seem to have lost their balls. The FDIC seems to be standing pretty tough. I have very low expectations that the DOJ will get involved other than to help it go away, despite that fact that there are so many RICO charges in this mess that no US Attorney would need viagra for years.

So we’re left with agressive plaintiff attorneys and a concientious judiciary. Maybe an AG here or there. (I assure you the banks would be taking it all much more seriously if Eliot Spitzer was still the AG in NY.)

Edited and added:

Another party that may have some interesting input is the office of the US Trustee, as they did in this case. I spent a lot of time working in the bankruptcy system in the early 90’s, and their aggressiveness varies dramatically from district to district. But there will be cases where they have standing. And it wouldn’t surprise me if they’re the ones that get the snow ball rolling. Bankruptcy judges tend to give them more respect than either debtors or creditors. And there is nothing more dangerous than a pissed off bankruptcy judge.

[Author]

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