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MA Supreme Court Deals Banks a Major Blow on Foreclosure Fraud, in the Ibanez Case
By: David Dayen Friday January 7, 2011 8:08 am
In a major ruling in the Massachusetts Supreme Court today, US Bank and Wells Fargo lost the “Ibanez case,” meaning that they don’t have standing to foreclose due to improper mortgage assignment. The ruling is likely to send shock waves through the entire judicial system, and seriously raise the stakes on foreclosure fraud. Bank stocks are plummeting at this hour.
Tracy Alloway of the Financial Times has a very good explainer of the case.
The notice requirements are a bit of a sideshow. The point here is that the mortgage assignment and the securitization process was improper. US Bank and Wells Fargo did not have possession of the mortgage note, and thus did not have the standing to foreclose. In addition, they put the endorsement in blank, without naming the entity to which they were assigning the mortgage. This violated Massachusetts law, according to the original judge in the case, and now the MA Supreme Court agreed.
And as we know, this is more the norm than otherwise. But this is one of the first major cases, decided by a state Supreme Court, that affirms that a lack of securitization standards means that the bank who thinks they have the power to foreclose on a delinquent borrower actually does not.
If this ruling gets applied far and wide, you’re basically going to have a situation where most securitized mortgages in the country cannot be foreclosed upon. It depends on state law and the associated rulings, but you can see the Ibanez case being used as precedent.
UPDATE: This is from the concurring opinion from the state Supreme Court:
The banks are screwed if this precedent holds.
