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SHOCKWAVES THROUGHOUT THE MORTGAGE INDUSTRY

January 8, 2011, Bloomberg Business Week reported that the Massachusetts state Supreme Judicial Court unanimously upheld a decision to invalidate two foreclosures, because the banks–U.S. Bancorp, and Wells Fargo & Co.–did not prove ownership of the mortgages. The original mortgage lenders had split the loans into two mortgage-backed trusts, bought by the banks; but it did not specify the recipients on the transfer paperwork. The high court voided the foreclosures.


With mortgage-backed trusts or securities, the original mortgage lender sells the mortgage in parcels as securities to investors. Investors receive regular payments from the interest on the mortgage loans, collected by the lender. During the housing market crash, when so many homeowners defaulted on their loans, local courts, and eventually a national investigation, revealed widespread failure on the part of lenders, to insure complete and proper documentation.

Matthew Weidner, a Florida lawyer who represents homeowners, predicts that the case will influence more than the Massachusetts’ homeowners.

This is a very detailed, very specific indictment of an entire industrys practices and procedures, and its an indictment that is going to send shockwaves throughout the entire mortgage, foreclosure, real-estate servicing industry, said Weidner, as quoted in Bloomberg Business Week.

The nationwide investigation into mortgage lending practices last year revealed procedural errors throughout the industry, including assigning mortgages without naming assignees. The investigation began after JPMorgan Chase & Co. and Ally Financial Inc. announced they would stop foreclosures in 23 states where courts supervise home repossessions, and Bank of America Corp. froze U.S. foreclosures.

Bloomberg Business Week quoted Joshua Rosner, an analyst with the research firm Graham Fisher & Co., saying of the Massachusetts Supreme Court case: This is likely to open the floodgates to more suits in Massachusetts, and strengthens cases in other states.

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