When the Massachusetts Supreme Judicial Court ruled that Wells Fargo and US Bancorp did not adequately show ownership of two properties that they repossessed and then sold over two years ago, real estate analysts, experts and investors knew the fallout would be huge. After all, pointed out one Georgetown professor, the ruling literally throws a “cloud” on every foreclosure title out there. Over the weekend, some of the effects of the decision became more apparent as the dust cleared:
1. The attorney general plans to use the ruling to stall or stop foreclosures.
“There are thousands of people in our state who have lost their homes,” said AG Marsha Coakley in a statement, adding that the ruling affirmed her already-established belief that “the onus should be on the banks and other holders of notes to follow proper procedure before initiating foreclosure on any Massachusetts homeowner[1]. While this is an entirely reasonable perspective on the surface, because the ruling changes “proper procedure” and renders many of the mortgages and notes that lenders purchased in bundles from other lenders essentially ownerless. This will likely render the foreclosure process on properties with ownerless notes difficult or even impossible. At the least, experts are predicting that the foreclosure process in Massachusetts, which already lasts about 11 months, will slow down much further.
2. People in Massachusetts – and elsewhere – are questioning their evictions.
“Certainly there are going to be people questioning whether the foreclosure they’re involved in now or the foreclosure that took a home from them months or years ago…was legitimately done,” said Tim Warren, CEO of New England real estate data firm The Warren Group. It is likely that a large volume of litigation will result from this decision.
3. Past foreclosure purchases could be up for grabs.
Many investors and analysts, including Edward Bloom, president of the Real Estate Bar Association for Massachusetts, hoped that the court would apply the ruling only to future mortgages since many foreclosed homes in the state have been bought in good faith at foreclosure auctions in the past. However, the Supreme Judicial Court opted to apply the ruling to past mortgages as well. This means, said Bloom, that the ruling will actually “have the largest effect on homeowners that purchased an already foreclosed home at auction.” Former owners of those homes may opt to sue the banks and even try to reverse the foreclosures.
One of the biggest issues up for debate now seems to be just what to do with people who are not making payments on their homes but who feel that they do not deserve foreclosure. Many advocacy groups are viewing this ruling as a huge victory because it will “hold lenders more accountable and encourage them to negotiate more fair and sustainable mortgages with families,” explained Lisa Vinikoor, director of a local program that helps fight foreclosures and evictions. However, lenders argue that if payments are not being made on the terms that were set and signed and the initiation of a mortgage, they should not be compelled to accept lower payments, fewer payments or take a loss on the loan if they believe that foreclosure is a better option.
In an interview with the Eagle Tribune, Warren compared the ruling to “a person committing a crime but not going to jail because of police not following proper procedures like reading Miranda rights.” Even in cases where there is no question that a foreclosure was appropriate because payments had not been made on the property, foreclosure may no longer be an option if the note has not progressed through the system correctly. “If you don’t follow the procedures, you end up putting the whole thing in jeopardy,” said Warren. However, unfortunately for lenders, standard procedure has been retroactively revoked. Do you think this was a good decision?
Thank you for reading! Your comments and questions are welcomed below.
[1] http://www.eagletribune.com/local/x1733409657/State-court-ruling-shakes-up-real-estate-market
It’s about time the courts stepped in and put the rights of citizens ahead of the rights of corporations. If you miss a payment, corporations get to report it and it affects your credit score. If they screw up, the only recourse is reporting it to the Better Business Bureau. Do you really think they care about that at all?
The scales of justice have been out of balance for far too long in favor of corporations. This ruling helps to bring that injustice back into balance, and forces corporations to do what they should have done in the first place. If corporations don’t like this kind of justice, we could always re-visit France’s revolution and bring back the guillotines. I’m just curious which sort of justice they would really prefer?
Your post seems premised on the idea that the Court somehow changed the required procedures. You are mistaken. They simply enforced the long standing procedures that the securitizers have chosen to unilaterally igonore over the last ten years. Perhaps you should read the opinion. Here is what the court ACTUALY said:
“Finally, we reject the plaintiffs’ request that our ruling be prospective in its application. A prospective ruling is only appropriate, in limited circumstances, when we make a significant change in the common law. See Papadopoulos v.Target Corp.,457 Mass. 368, 384 (2010) (noting “normal rule of retroactivity”);Payton v. Abbott Labs,386 Mass. 540, 565(1982). THE LEGAL PRINCIPLES AND REQUIREMENTS WE SET FORTH ARE WELL ESTABLISHED IN OUR CASE LAW AND OUR STATUTES. ALL THAT HAS CHANGED IS THE PLAINTIFFS’ APPARENT FAILURE TO ABIDE BY THOSE PRINCIPLES AND REQUIREMENTS IN THE RUSH TO SELL MORTGAGE-BACKED SECURITIES.”
No, the premise you’re assuming doesn’t exist in this article. — Bryan Ellis
With all due respect Mr. Ellis, I don’t know how else to interpret the closing sentence of the article articulating the writer’s interpretation of what transpired in the ruling:
“However, unfortunately for lenders, standard procedure has been retroactively revoked. Do you think this was a good decision?”