Massachusetts Highest Court Rules Against Banks in Pivotal Mortgage Case

Wells Fargo Bank and US Bancorp were dealt a serious blow by the Massachusetts Supreme Judicial Court in a ruling that could affect thousands of foreclosures in the Commonwealth and even across the country. The SJC affirmed a lower court ruling that invalidated two foreclosure sales because the banks could not prove they actually owned the mortgages at the time of the foreclosure.  

"We agree with the judge that the plaintiffs (Wells Fargo and US BanCorp) did not demonstrate that they were the holders of the...mortgages at the time that they foreclosed these properties, and therefore failed to demonstrate that they acquired fee simple title to these properties by purchasing them at the foreclosure sale," Justice Ralph Gants wrote for the Court. 

According to the Fall River Herald News, Attorney Paul Collier, III, who represented one of the homeowners said the ruling could affect thousands of mortgages in Massachusetts and could have far-reaching impact on the nation's foreclosure industry. "For homeowners...it means that any mortgage foreclosure that was initiated by a securitized trust at a time when the trust had not obtained a mortgage assignment which gave it the lawful right to do so is void," Collier said.

"Securitization" involves the pooling of hundreds or thousands of mortgage loans to create a security that can be traded like a stock.

In a concurring opinion, Justice Robert Cordy took the banks to task for not having their documents in order before commencing the foreclosure. "There is no dispute that the [homeowners]...had defaulted on their obligations... Before commencing such an action, however, the holder of an assigned mortgage needs to take care to ensure that his legal paperwork is in order," Cordy wrote.
 
Attorney Andrew Garcia, a wrongful foreclosure lockout attorney with Phillips & Garcia, said that, "the SJC's ruling should give some hope to homeowners struggling to stem the rising foreclosure tide. In the wake of the "robo-signing" foreclosure scandal that shed light on some of the banking industry's fast and loose foreclosure practices, the SJC's reasoning could be used by other courts nationwide to force banks to correct their document deficiencies."