Court voids foreclosures when lenders, banks fail to prove ownership of mortgage

California homeowners facing foreclosure, or who may already have been foreclosed upon have been given a big dose of hope this week, thanks to the Massachusetts Supreme Judicial Court (“Foreclosure Case Deals Big Blow To Banks, Lenders”)

In a hearing of two consolidated cases, i.e., the U.S. Bank vs. Ibanez and Wells Fargo vs. LaRace, that state’s highest court invalidated the seizure of two homes after Wells Fargo & Co and US Bancorp failed to show they held the mortgages on these homes at the time they foreclosed.

The banks that made the loans to homeowners subsequently sold them, as part of a pool or bundle comprised of thousands of other mortgages, to other entities as part of the securitization process. However, in order to perfect ownership for the buyers of these pools, the notes and mortgages had to comply with strict and timely procedures. This court held that because those procedures weren’t followed, the buyers (investors) in those mortgages had no right to foreclose.  It is widely believed that those defective procedures in the securitization process are more pervasive than the banking industry would care to admit.

The ruling sent shock waves throughout the banking industry, as it may affect foreclosures nationwide, including those in California, where our attorney general along with AGs from all other states, is examining whether lenders are forcing people out of their homes without proper documentation.  There is a growing trend for courts to more closely examine claims of ownership and proper documentation by the banks, refusing to take the claims of mortgage lenders and servicers at face value.

I have no doubt that this case ruling will reverberate in all the other states, including California. Although this ruling is binding only in MA, the legal basis and reasoning is fundamentally sound and correct. In fact, my firm, REYES LAW GROUP, APLC, is handling more than a hundred cases using similar litigation strategies, and raising the same legal issues with respect to securitization, as those used in Massachusetts. I am looking forward to the day when the judiciary in California catches up to Massachusetts and the rest of the country.

In the meantime, here are the documents you will need to bring to your legal representative to see whether or not your bank is the actual holder of your mortgage:

1. A copy of your original Note
2. A copy of your Deed of Trust
3. A copy of any Substitution of Trustee relating to your property, if any.
4. A copy of any Assignments of Deed of Trust, if any.
5. A copy of any Notice of Default, if any, with any attachments.
6. A copy of any Notice of Trustee’s Sale, if any.
7. A copy of any Trustee’s Deed Upon Sale, if any.
8. Any letter or correspondence you have received from your bank or mortgage servicer relating to previous attempts at loan modification.