BLOOMBERG| Foreclosures May Be Undone by State Ruling on Mortgage Transfer

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BLOOMBERG| Foreclosures May Be Undone by State Ruling on Mortgage Transfer

BLOOMBERG| Foreclosures May Be Undone by State Ruling on Mortgage Transfer

Massachusetts’s highest court is poised to rule on whether foreclosures in the state should be undone because securitization-industry practices violate real- estate law governing how mortgages may be transferred.

The fight between homeowners and banks before the Supreme Judicial Court in Boston turns on whether a mortgage can be transferred without naming the recipient, a common securitization practice. Also at issue is whether the right to a mortgage follows the promissory note it secures when the note is sold, as the industry argues.

A victory for the homeowners may invalidate some foreclosures and force loan originators to buy back mortgages wrongly transferred into loan pools. Such a ruling may also be cited in other state courts handling litigation related to the foreclosure crisis.

“This is the first time the securitization paradigm is squarely before a high court,” said Marie McDonnell, a mortgage-fraud analyst in Orleans, Massachusetts, who wrote a friend-of-the-court brief in favor of borrowers. The state court, under its practices, is likely to rule by next month.

Claims of wrongdoing by banks and loan servicers triggered a 50-state investigation last year into whether hundreds of thousands of foreclosures were properly documented as the housing market collapsed. The probe came after JPMorgan Chase & Co. and Ally Financial Inc. said they would stop repossessions in 23 states where courts supervise home seizures and Bank of America Corp. froze U.S. foreclosures. Massachusetts is one of 27 states where court supervision of foreclosures generally isn’t required.


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4 Responses to “BLOOMBERG| Foreclosures May Be Undone by State Ruling on Mortgage Transfer”

  1. MikeM says:

    Good article. Judge Long and AG Coakley are right on the mark. They are individuals that renew faith in our system.

    Contrary to the securitization industry’s position, it seems clear that an agreement between buyers and sellers to transfer notes and mortgages into a pool, or wherever, is simply that; an agreement between buyer and seller to do something. The intentions spelled out in the security instruments do not replace the requirement of having to complete an actual, bona fide, legal transfer of rights in the notes or mortgages, including transferral of the right to foreclose.

    By securitization industry definitions, it appears now we can all drive a new car off the lot simply by agreeing to purchase it. No more waiting for silly ole title transfers. Please notify all of the auto dealers. Hold on … this could be great! If the Imperical Wizards of Securitization Finance are right, we can now set up a family trust where you can enjoy all the benefits simply by agreeing to set one up. No longer will we have to bother with such mundane tasks as having to actually fund the trust with real live transfers of title. What a great idea! Someone call the IRS and tell them the new rules please. And, oh boy, I can’t wait to buy my next house. Actually, I’d jsut have to agree to buy my next house. No closing required! I won’t even have to get a mortgage! I’ll just agree to buy the house and agree to get a mortgage and then kick the seller out of MY new house!

    Seriously, I’d expect a better founded argument from an eight year old. AG Coakley is correct. The problems the industry is having were wholly self-generated. They should be the ones to pay for their reckless actions.

  2. Geanette says:

    I can see how the banks would want to foreclose on homes The PMI insurance paid by those who have HPD backed mortagages pays the balance of the mortgage amount, not the current market value. So, even if one’s home is underwater, the insurance will pay what’s left of the mortgage. That needs to be changed and changed now. Profit must be taken out of this foreclose practice (as well as outsourcing of jobs, unrelated to this statement)Thus, greedy bankers would rather make the American citizen homeless as opposed to granting a loan modification.

    We as a country, must really do something about the banks and how they conduct business!!

  3. Geanette says:

    What happened aren’t banks like chartered to operate only in their state or selected areas? That is what I learned, many moons ago in economics…now it seems that certain banks have offices all over the United States….there was reasons for regulations and now we are feeling the negative results of deregulation.

    Wall Street and banks cannot operate under the radar and doing whatever they want to fill their own personal coffers at the expense and destruction of our economic system!

    Put the regulations back as humankind left to our own accord will not do the right thing! We are all tempted by greed and corruption..the temptation of gaining unimaginable riches from fraud and market manipulation is much too great!

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