The Massachusetts’ Supreme Court ruled that the bank could not foreclose on two properties because the bank could not produce the appropriate paperwork to demonstrate who actually owned the loan.
This is a powerful ruling, and it may be a harbinger of things to come. If you are facing foreclosure, the time may be now to contact our office. Many homeowners who stand up for their rights are often able to find an alternative to foreclosure. Plus, the growing list of scandals facing the banks only highlight the need to assess your rights. Those growing scandals include the robo-signing scandal, as well as issues surrounding service of process.
What makes the Massachusetts case interesting, however, is the fact that the State’s highest court found that the bank could not prove who owned the mortgage at issue. It turns out that it appears as though the system created by the banks to help streamline, and document, their own mortgage system, MERS, is likely what failed them in this case.
That is the case because mortgage loans are like real property and can only be transferred by physically signing over the paperwork — like someone endorsing a check or the title to a car — and delivering it to the next holder. Without that, the holder of record doesn’t change.
As you can imagine, the amount of paperwork required to maintain all those files during the “go go” days of the real estate boom would have been overwhelming. Consequently, systems and procedures were created to help alleviate the banks’ requirement to keep those records. Those systems are known as MERS.
MERS also enabled Wall Street to trade mortgage backed securities with greater ease. Under mortgage securitization, loans got transferred many times after origination before landing in pools of mortgages that are sold to investors. But often times, the banks simply didn’t endorse the paperwork between steps.
And that was apparently the problem in the Massachusetts case. The loan at issue went through five different owners before winding up in a pool of mortgages that U.S. Bank was the trustee for. During that trip down the chain, however, the parties failed to legally assign the mortgage.
The bank produced documents that showed that the loan was one of the mortgages put into a pool, but that failed to satisfy the court, which cited “the utter carelessness with which the plaintiff banks documented the titles to their assets.”
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