Fighting Foreclosures

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Poor documentation has plagued foreclosures in Massachusetts. Now, more and more homeowners facing foreclosure are starting to fight for their rights in the courtroom as some have already successfully overturned foreclosure decisions. The U.S. Bank and Wells Fargo have had their foreclosures invalidated due to insufficient or missing paperwork for the securitization of mortgage loans and their sale to investors.

State’s courts ruled that the two banks on separate occasions failed to prove that they had the right to take action on the foreclosures in Massachusetts that they were going after. The homeowners were able to prove that the banks did not have the legal standing to carry out the foreclosure as they were not the originator of the loan, but rather only the trustees for the mortgage-backed loans.

Where the Documentation Failed

The two banks failed to obtain a mortgage assignment in the long chain of title transfers due to a practice called mortgage-in-blank. Lenders are in the practice of assigning mortgages-in-blank during the securitization process, thus not making clear mortgage assignments to the banks, which will finally undertake the foreclosure proceeding. What banks would normally do is to obtain confirmatory assignments, which only work if there is a previous valid assignment that can be confirmed. The two banks embroiled in the scandal were unable to present documents to this effect, thus the state Supreme Court ruling.

Pundits have come out with the view that this jurisdiction cannot apply to all foreclosure cases filed across the country. This ruling, after all, only affects foreclosures in Massachusetts. But even then, supporters of the ruling believe it can be used as a precedent to foreclosure cases in states, although the rulings may be different.

Homeowners may be in for a long drawn out court battle when trying to hold on to their property. But what these rulings in Massachusetts prove is that the banks attempting to foreclose on properties with poorly documented securitization will have a really tough time proving their legal standing in courts. This is an advantage that homeowners facing foreclosure have over their lenders who are trying to take away their property without the required paperwork.

Source by Joseph B. Smith

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