This is starting to get interesting, although it is far from conclusive.
Massachusetts Land Court judge Keith Long reaffirmed a 2009 ruling (Ibanez) that invalidated foreclosures on two properties because the lenders did not hold clear title to them at the time of the foreclosure sale. Now this decision is still subject to appeal, and Richard Vetstein of the Massachusetts Law Blog (hat tip reader Barbara W) thinks the Massachusetts Supreme Judicial Court might hear the case directly, given the potential significance of the ruling.
I am still gobsmacked that this issue is even in dispute. Who has ownership is the foundation of commercial as well as property law, and it permeates our life in ways most people do not recognize. The reason you get a receipt at the grocery store is that it is evidence that the title of the goods transferred from the store to you. The idea that banks were too lazy to do a decent job of keeping on top of title instruments, when that was the SOLE basis for their ownership interest in the collateral underlying their loans, is equally stunning. I have seen all sorts of deals in other areas founder (water rights is a biggie) because investors were unable to “perfect” certain rights they sought. This is a well established area of law, but the banks couldn’t be bothered to spend the money and time to do things correctly. And now they think they can simply assert, “Yeah, we really do own this stuff” and get away with it it is brazen. If you lost a $1000 bill or a bearer bond, no one would take “yeah I really do own this stuff” claims seriously either.
From Ralph Vetstein:
When mortgages are packaged to Wall Street investors, the ownership of a mortgage loan may be divided and freely transferred numerous times on the lenders’ books. But the documentation (i.e., the assignments) actually on file at the Registry of Deeds often lags far behind….
Despite the lender’s attempt to convince him otherwise, Judge Long came out (again) in favor of consumers:
The issues in this case are not merely problems with paperwork or a matter of dotting i’s and crossing t’s. Instead, they lie at the heart of the protections given to homeowners and borrowers by the Massachusetts legislature. To accept the plaintiffs’ arguments is to allow them to take someone’s home without any demonstrable right to do so, based upon the assumption that they ultimately will be able to show that they have that right and the further assumption that potential bidders will be undeterred by the lack of a demonstrable legal foundation for the sale and will nonetheless bid full value in the expectation that that foundation will ultimately be produced, even if it takes a year or more. The law recognizes the troubling nature of these assumptions, the harm caused if those assumptions prove erroneous, and commands otherwise.
Judge Long also had some choice words for lenders:
[T]he problem the [lenders] face (the present title defect) is entirely of their own making as a result of their failure to comply with the statute and the directives in their own securitization documents… What the plaintiffs truly seek is a change in the foreclosure sale statute (G.L. c. 244, § 14), which can only come from the legislature.
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Judge Long’s first name is actually Keith not Kenneth.
For that matter, it’s the Supreme Judicial Court
When it’s over 400 years old, you should call it what it wishes to be called :)
Or over 300. One of those. My math skills decline rapidly once I get home from work.
Sorry, should never post while on a conference call. I am particularly prone to typos involving names.
Another example why an independent judiciary is the bastion of our liberty. Judge Long and Judge Rakoff (who refused the SEC’s sweetheart deal w. BOA) are heros.
Interesting to note Joe Nocera’s piece in the NY Times debunking the myth that it was all those sleazy mortgage brokers who are to blame for the subprime mess and that the banks had clean hands. http://executivesuite.blogs.nytimes.com/2009/10/14/subprime-and-the-banks-guilty-as-charged/
James Galbraith has advocated that the government inspect the “tapes” (bank records) of the mortgage transactions to determine just how clean the lenders were. So why hasn’t this been mandated by Congress?
And, by the way, where are the “new Pecora hearings” we were promised by Speaker Pelosi. Interesting how Barney Frank (and other Dumbublicans) have become the banksters best buddies. It would be cynical to think that Wall Street’s big investment in Democratic campaign coffers has anything to do with this.
Bank of America just requested that I send them a copy of my home insurance policy wherein they are to be listed as mortgagees. The original mortgage was through Summit Bank which was acquired by Fleet Bank and then BoA. If BoA securitized the my mortgage, I wonder if I should ask them to prove they still hold the mortgage before I list them as mortgagees?
why not? but then I’m not a lawyer.
“Massachusetts Land Court judge Keith Long reaffirmed a 2009 ruling (Ibanez) that invalidated foreclosures on two properties because the lenders did not hold clear title to them at the time of the foreclosure sale. Now this decision is still subject to appeal, and Richard Vetstein of the Massachusetts Law Blog (hat tip reader Barbara W) thinks the Massachusetts Supreme Judicial Court might hear the case directly, given the potential significance of the ruling.
I am still gobsmacked that this issue is even in dispute. Who has ownership is the foundation of commercial law….”
Property law not commercial law, two related but different animals governed by different legal principles. But I nitpick.
So, does this ruling effect MERS, as the Kansas ruling did?
“If BoA securitized the my mortgage, I wonder if I should ask them to prove they still hold the mortgage before I list them as mortgagees?”
Makes sense to me. If they got sloppy, why in the world should you act against your own economic interest and bail them out? I’d contact a lawyer and confirm that you are within your rights to tell them to go suck an egg.
But as a matter of principle, I’m really sick and tired of these so-called tough guys on Wall Street who claim to “live by the sword,” but who actually benefit enormously from the actions of normal human beings who overwhelmingly honor the spirit of fair play rather than looking for a loophole to screw the other guy.
They’ve had this one-sided game long enough. Game theory tells us that the winning strategy is tit-for-tat. Time for us to start.