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Massachusetts High Court Invalidates Foreclosures When Lender Can't Prove Ownership

January 14, 2011

Yet another state has taken action stopping foreclosures when lenders cannot prove they actually have the right to foreclose. Yahoo! Finance reported Jan. 7 that the Massachusetts Supreme Judicial Court has upheld rulings invalidating two foreclosures in which the lenders could not prove ownership of the loans at the time of foreclosure. That ruling closely follows judicial decisions in New Jersey, New York and Ohio requiring lenders to produce original paperwork or otherwise prove ownership before allowing foreclosures to go through. The decisions are at least partly a response to the "robo-signing" scandal that our Yucaipa foreclosure defense lawyers have followed since last fall, which exposed shoddy and sometimes illegal paperwork processing by lenders. The decisions are expected to slow foreclosures and may increase foreclosure lawsuits.

The Massachusetts cases involved mortgages that had been bundled into investments and sold. The banks seeking to foreclose were not the original lenders, but were trustees for the securities containing the mortgages. This gave them standing to foreclose, they argued. The Massachusetts courts disagreed. Under state law, they said, any lender seeking to foreclose must have a document assigning the mortgage to it. The lenders in these cases -- Wells Fargo and US Bancorp -- didn't have those documents; they had only documents showing they controlled mortgage-backed securities, which did not specifically name the loans in question. Thus the trial court ruled the foreclosures couldn't take place, and the state's high court agreed Jan. 7.

In a concurrence, Justices Cordy and Botsford wrote, "[W]hat is surprising about these cases is not the statement of principles articulated by the court regarding title law and the law of foreclosure in Massachusetts, but rather the utter carelessness with which the plaintiff banks documented the titles to their assets.... Although there was no apparent actual unfairness here to the mortgagors, that is not the point."

The concurrence makes the court's reasoning extra clear: foreclosing lenders must get their paperwork in order or risk losing their chance to foreclose, even when it's not disputed that the borrower failed to pay. As Brea foreclosure defense attorneys, we're glad the court made this decision, because foreclosure is too financially devastating to be allowed without solid proof that it is legitimate. Even though some borrowers who truly belonged in foreclosure may benefit, the court's action will also protect people who are in foreclosure due to bank errors -- which can and does happen. In a non-judicial foreclosure state like Massachusetts or California, scrutinizing the paperwork is literally the only way to ensure that the foreclosure is legitimate. Lenders are not forbidden from foreclosing -- they are merely required to follow the law, as they always were.

Howard Law PC represents Californians of all backgrounds and incomes who are fighting unfair or unnecessary foreclosures. In our experience as Huntington Beach foreclosure defense lawyers, the sloppiness with paperwork that's now emerging from lenders is mirrored by their sloppiness in dealing with customers before foreclosure. Our clients regularly bring us horror stories about lenders who drop phone calls, lose paperwork, change their requirements or deny loan modifications for no reason at all. We believe lenders can and should do better when people's homes and financial security are at stake, so we help clients hold lenders responsible for their actions. We prefer to negotiate loan workouts out of court, but when necessary to stop a foreclosure or protect clients from predatory lending, we can and will sue.

If you're tired of spending hours on hold at your loan servicer and getting nowhere, call Howard Law instead for a free consultation on your rights. To set up a meeting or tell us your story, call us today at 1-800-872-5925 or send us an email.