Massachusetts Court Rules Against Banks


Inquiring minds are reading where the highest court in Massachusetts ruled Friday that U.S. Bancorp and Wells Fargo erred when they seized two troubled borrowers’ properties in 2007, thus putting the nation’s banks on notice that foreclosures cannot be based on improper or incomplete paperwork.

To see the original SurvivingCalifornia.com post on this topic here:

State Court to Rule on Forclosure Practices

The Massachusetts Supreme Judicial Court voided the foreclosures by concluding that neither institution had proved it had the right to evict the borrowers. This opens the door to other foreclosure do-overs in the state and returning ownership of the properties to the borrowers.

So does it also make it easier for other state’s courts to rule similarly?

Legal experts said that while this ruling did not set a precedent for other states, the outcome will be closely watched across the country because it is the first such ruling from a state’s highest court. Investors viewed the ruling as negative for banks; an index of financial company shares fell almost 1 percent on the day.

“The broad implication is you’ve got to dot your i’s and cross your t’s,” said Kathleen G. Cully, an expert in bankruptcy and lender regulatory law in New York. “You need a proper chain of title, and in both of these cases there was a gap in the chain.”

Amazing, isn’t it? Banks and their servicers being held to a basic business standard? Considering real property is supposed to be so important as to require ownership to be recorded and all offers and contracts must be in writing that this needs to be adjudicated:

“The broad implication is you’ve got to dot your i’s and cross your t’s,” said Kathleen G. Cully, an expert in bankruptcy and lender regulatory law in New York. “You need a proper chain of title, and in both of these cases there was a gap in the chain.”

The case dates to 2007, when Wells Fargo and U.S. Bancorp began foreclosure proceedings against delinquent borrowers on two separate properties. Neither borrower fought the proceedings — the courts in Massachusetts are not obligated to oversee foreclosures — and both banks quickly seized the properties.

The banks’ problems began in the fall of 2008, when Wells Fargo and U.S. Bancorp sought judgments from the Massachusetts Land Court that would have given them clear title to the properties. In 2009, the court rejected the banks’ arguments, ruling that the banks had not been assigned the mortgages before they foreclosed, as is required. Instead, the banks had acquired the mortgages after they had begun foreclosure proceedings.

The ruling by the Massachusetts court upheld a simple legal point…foreclosures can only occur when lenders can prove they own the note underlying the property.

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One Response

  1. […] the second state which has decided against the banks. Remember this SurvivingCalifornia.com post on Massachuetts Supreme Court’s similar decision last […]

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