Since the Massachusetts Supreme Judicial Court ruled last week that Wells Fargo and US Bancorp unjustly foreclosed on two properties the mortgages to which they did not actually hold verifiable title, the entire real estate investing industry – along with banking and legal eagles – has been in an uproar. The decision which invalidated two foreclosures that had already been sold at auction was unprecedented, and when the leading judge declared that the decision would be retroactive and apply to any foreclosures that had been mishandled in a similar manner, class action lawyers leapt into action and homeowners involved in and recovering from foreclosures over the past few years felt a spark of hope that maybe their foreclosure could be “unwound” or they might be able to claim damages as well. While very few people dispute that if banks cannot show that they have the right to take homes away from people and sell them to other people then probably those banks should do a better job of record keeping, many investors and traditional homeowners who bought homes in good faith at auctions found themselves on the edge of their seats, wondering if they really even owned the properties that they had paid for.
In the wake of the decision, there have been many responses from all sectors of markets related to the industry. Some experts are not worried at all, while others are just waiting for the sky to fall. Lots of people simply say that the “wealthy investors” and “fattened banks” deserve what they get as long as the people who were thrown out of their homes get justice, while others worry that with this new twist, the housing market might literally never recover. In an effort to determine exactly how widespread the records problem is, a reporter for the Boston Globe took a random sample of 30 foreclosure deeds from Chelsea, Massachusetts[1]. Chelsea has been “hit hardest by foreclosures since the beginning of 2006.” What he found indicated that the damage is pretty far reaching: a solid third of the sample had paperwork issues including no mortgage on file at all, no assignment papers for the mortgage to the foreclosing lender, and failures on the part of mortgage lenders to sign off to allow mortgage servicers to service the mortgages or to allow the mortgages to be placed into pools. In short, based on the recent ruling, 10 of the 30 had solid grounds for invalidation. And all 30 of the properties in the sample had been foreclosed and resold.
Although this is a small sample, the ramifications are huge. At least in Massachusetts, this ruling is going to have a dramatic and far-reaching impact on the entire banking industry and the real estate market. How do you think lenders, homeowners and former homeowners should be dealing with and solving this problem?
Thank you for reading! Your comments and questions are welcomed below.
[1]http://www.boston.com/bostonglobe/editorial_opinion/oped/articles/2011/01/14/a_new_act_in_foreclosure_circus/
One of the judges in the Ibanez decision commented that he was amazed at how careless the banks were in securing the titles to their assetts.That judge is so good, and so innocent, that he does not understand that what he perceives as carelessness is in actuality arrogance.The major banks really believe that they are above the law, therefore they do not have to fiddle with the bothersome little details like properly perfecting the title to their assetts.If there is a missing assignment they will just manufacture one and make it retroactive, don’t have the note? they’ll make one, all that is too much trouble? they’ll just submit a fraudulent lying affidavit to the court and swear its all ok.If you think this is overstated you have not been paying attention.
There is an easy and just solution to the problem of foreclosures that have been bought by innocent parties. The bank that conducted a wrongful foreclosure, and subsequently fraudulently conveyed that property to a new buyer, should be liable to that buyer for the full return of the purchase price plus any other expenses incurred as a result of owning the property. The banks should be fully responsible and not attempt to lay any of the costs off on the title insurers.In my opinion, the banks acted with criminal intent, and it is past time that they be treated that way.
The irony here is that state laws with regard to real estate transfers are precisely in place to prevent things like this. That is what they’re FOR.
Banks will get no sympathy. The have deliberately violated the law in every single jurisdiction in which they operate by failing to record their transfers, forgery and perjury. If there are fewer foreclosures, that is better for the communities that are being hammered. In the meantime, I would say that any bank that has evicted (or frightened) the homeowner out of the house be required to IMMEDIATELY begin cleaning, repairing and maintaining the property – including landscaping – and continue to do so until the property is sold. The buyer must be equally responsible to maintain and vacant property.
All that said, I wonder about the use of quiet title actions to clear up the mess? Would it be possible for banks to re-trace and re-create each stop on the mortgages’ journeys and somehow get statements from the last human being to touch the notes? Get signed, notarized statements for everybody to present to a judge? Is it possible and would it remove this cloud on so many titles? (One at a time, of course).
How this issue should be dealt with is a point destined to the courts and sadly federal regulators, so in the decades it will take to be resolved, we will just drag on, always in some question of when will the next shoe or shoes, drop!
The more important issue going forward is simply how will this impact the real estate lending market?
Want a loan, better have an extremely high FICO score. Want to sell, better be able to cover the losses on your mortagage.
Housing recovery, not likely! If you have high unemployment, low FICO scores, lower average wages, more people living together, where is the demand going to come from? If you have doubts by the lenders about what is going to happen next week, year, decade to their loans, why would they want to loan?
The entire real estate market is turning into a fool’s errand, not because it needs to or should, but because of the constant cry “It needs to be made right!”. Nothing needs to be made right, it needs to be allowed to go on its way!! Everyone became greedy, everyone is going to pay for the greediness. It is not one group or industry, it was all involved, the buyers, sellers and lenders, and all of the middle men! Maybe more the middle men than any other group, because they knew what was happening and just took their cut and kept it going, instead of speaking out about what was happening.
So Massachusett’s Ruling is just one more wrench in the work, helping no one, expect some lawyers and politicians. The masses once more are being screwed, all in the name of “making it right”. What crap!
Why is it the banks responsibility to pay back the people who did not live up to their part of their bargain. In most cases, it was not the banks who sought out the people to make them loans. In none of the writeups do I see any mention that the Borrowers sought out the banks and made an agreement to pay back a loan. As it turned out, if they were not able to afford to make the payments, the banks only option was to take back the property. While this does suck for the homeowner who lost his home, at what point does it become the banks responsibility to keep the homeowner in the property if they arent paying. Everyone seems to be upset at the banks, but they didnt force the borrower to make a loan, and they are getting less for it because of the borrowers inability to pay. Now it seems that they will have to double pay for something that they did not initiate or really do anything wrong. The fact that judges are making retroactive changes based on technicalities is a woefully socialistic strategy which will cost in higher taxes or interest rates.
where haveing that promblem now with are house they lye so much its all the banks there the robers
I’ve telling people for a year that the Wall street firms where handing the bad loans back to the banks & telling them to go foreclose to get some money. Nobody wanted to believe me.
What many people do not realize – even some attorneys – is that on the the fine print
contract of purchase, there is a list of rights of the creditor. One such right I have
read is they can foreclose thru court proceedings! What is wrong with that? Nothing
except for the BIG FAT FACT that this means it is legally improper to foreclose
without going thru the courts in nonjudical foreclosure states! Believe me, as
an attorney, I have seen this happen. Don’t believe that this is not a common practice
in the twenty-six nonjudicial foreclosure states!
My question on the forclosure is how would a person in the state of Washington go about finding out if this problem happened on the house i lost to forclosure in April of 2008? Is there a starting point that you could point out for me to look into this. Thank You Fran Austin
I think every Bank or Lender that pulled this off should be shut down RIGHT NOW…
I think every one should be given Documentation, and the Documents be verified before any action is started. Record Keeping is the main thing about any Business, are they doing there job or are they Liars.
If the Bank can verify ORIGINAL DOCUMENTS with a chain of events up to Foreclosure, then they should be allowed to proceed.
To the homeowners that were part of the ones that invalidated foreclosures and lost, I think they receive an amount equal to a Family’s life is worth times 7 because if it happened to you what is your life worth and how much would it take to rebuild. (3 million each) that would open up the eyes of those who think we are not looking.
Question: I understand that there are recording issues with many homes in foreclosure. Still, there must be payment problems on the part of the debtors, thus creating the foreclosure problem. So we have a recording problem on part of the creditor, and a payment problem on the part of the debtor. How does the industry see this being resolved?
Bryon, I cannot thank you enough for providing the pertinent information that you do. You provide enough information to make people think and do their own research thereafter. The banks are having a field day foreclosing during “loan modifications”. These banks should have taken better care of their responsibilities when it came to recording. My gosh, with all their money it was total arrogance to forgo and bypass the legal aspects of the business.
Looking back 11 months ago brings me to finally tell my story. I too was victim by the Banks with foreclosure. They had illegal services done at my home stating I received documents which i never received or signed. At the time my son who still suffers from mental illness got sick, my home was being foreclosure on and I have and still high blood pressure and diabetic. Lost my job and could not function to handle such a lost of events. I was force out of my home in August 2010 and it was auction of for $210K and I lost over 258K I never received any paper work of the sale. The bank would not work with me and took my home right from us. I still do not have a place of my own and my son is still in the hospital. We need someone to help us got our home back. The banks illegal sold my home at auction and I can prove it. I need to know what steps to take with the process.
Im a Realtor, It’s all about legalized criminal activity the banksters have been given the green light to illegally forclose and throw home owners out on the street, I have seen these banks and servicing companies lie to home owners and say they would place them on a trial mod long enough to place them so far behind that they deny them and foreclose,when they dam good and well did qualified, but this away they can collect 80% of the loan amount on the underwater home by collecting off the insurence that the gov gave them of your tax money with no stipulations on how to spend it, if the bankster’s where to modify or shortsale they lose all that money, Bank of America said to me one day its not a good business move to help these home owners when we can make so much more and then turn around and sell the security again. yet we freaking bailed the sob’s out wake up america do you relly think your so called leadership is that stupid not to stipulate these types of rules and regulations when handing out tax payers monies, As a Realtor if i did that or anyone else we would be behind bars. I personly cant waite for wikileaks to expose the hell out of the sob”s….
DOES ANYONE KNOW WHEN THE NATIONAL DON’T PAY YOUR MORTGAGE MONTH IS ?
You guys are so right. People acted stupidly getting loans beyond their means. They acually believed that poop mortgage agents were selling. Sign here, if you can’t pay later, sell the house & a profit will magicly fall into your lap. Now this mess goes both ways. The borrowers can’t pay and the lenders & their lawyers lie their lips off taking short cuts. The fun part is the’re being found out.