The Massachusetts Supreme Court issued a major decision against the banks on the issue of foreclosure fraud on January 7, 2011.
In US Trust vs. Ibanez, (which we analyzed earlier) the court ruled that the banks in the case did not have standing to foreclose when they failed to have the mortgage assigned to them prior to foreclosure. Not having standing, means you don’t have the right to bring the lawsuit.
This is a significant case, as many foreclosures may be declared invalid in Massachusetts, and the ruling could influence other state courts. The decision has caused bank stocks to fall in the Stock Market.
The Massachusetts Supreme Court identified a fundamental problem with the mortgage securitization and foreclosure process. The fact that the plaintiffs (the banks) couldn’t or wouldn’t prove that they owned the notes and the mortgages when they filed suit is crucial. They couldn’t even show they owned the notes and Mortgages when they used the judgement they got to buy the properties at the foreclosure sale.
This is just another brick in the wall for Wall Street bankers and their friends in Washington who will now have a harder time trying to stamp out this foreclosure fraud firestorm.
Last October, when foreclosure fraud started capturing national headlines, the Obama administration joined the banks’ PR offensive and helped spin illegal foreclosure as a minor clerical issue.
When the foreclosure fraud scandal hits the front pages again, and threatens to hurt powerful financial institutions — rather than just the foreclosed, unemployed, and powerless it will be interesting to see who the administration sides with. My guess is that they will be with the Banks.
More to come …