|Foreclosure chaos in US after court voids banks' seizure of homes because of lax mortgage paperwork
Daily Mail | January 8, 2011
Foreclosures in the U.S. have been plunged into doubt after a court voided the seizure of two homes in what could prove a key ruling.
Bank shares fell, dragging down markets, after the decision by the Supreme Judicial Court of Massachusett against Wells Fargo & Co and US Bancorp.
Judges decided their seizure of two homes was void because they had failed to show they held the mortgages at the time of foreclosure.
The court case is among the earliest to address the validity of foreclosures conducted without full documentation.
The issue prompted an uproar last year and led to lenders including Bank of American and JP Morgan temporarily stopping seizing homes.
Courts in other U.S. states are considering similar cases, and all 50 state attorneys general are examining whether lenders are forcing people out of their homes improperly.
The decision may also threaten banks' ability to package mortgages into securities, including whether loans that were transferred improperly might need to be bought back.
Wells Fargo and U.S. Bancorp lacked authority to foreclose after having 'failed to make the required showing that they were the holders of the mortgages at the time of foreclosure,' Justice Ralph Gants wrote for a unanimous court.
U.S. Bancorp spokesman Steve Dale said the ruling has no financial impact on the bank, which has 'no responsibility for the terms of the underlying mortgage or the procedure by which they were transferred' into a mortgage trust.
'What they were doing was peddling these mortgages and leaving the paperwork behind,' said lawyer Michael Pill, who was not involved in the case.
U.S. Bancorp and Wells Fargo had said they controlled through different trusts the respective mortgages of Antonio Ibanez as well as Mark and Tammy LaRace, who lost their homes to foreclosure in 2007.
The banks bought the homes in foreclosure, and sought court orders confirming they had title. A lower court judge ruled against them, and Friday's decision upheld this ruling.
Justice Robert Cordy agreed and lambasted 'the utter carelessness' that
Wells Fargo and US Bancorp demonstrated in documenting their right to own
'The executed agreement that assigns the pool of mortgages, with a schedule of the pooled mortgage loans that clearly and specifically identifies the mortgage at issue as among those assigned, may suffice to establish the trustee as the mortgage holder,' he wrote.
'However, there must be proof that the assignment was made by a party that itself held the mortgage.'
Wells Fargo shares were down nearly 4 percent at $30.92 yesterday afternoon,
while U.S. Bancorp was down 1.4 percent at $25.93.