What happened in Massachusetts?

On January 7, 2011 a major event occurred in Massachusetts in the Foreclosure Arena.

The Massachusetts Supreme Judicial Court rendered an Opinion possibly invalidating thousands of Mortgage Foreclosures in that State.

Here are the bare bones of what the case was about, and why it’s important to you.

Homeowner takes out a Mortgage with Loan Company 1 in 2005.  Loan company 1 assigns the Note and Mortgage “in blank” to Loan Company 2.  Someone then filled in the blank space on the Assignment and records the assignment in the Public Records in June of 2006.

But here comes the first fly in the works.  According to Trustee Company 6, here’s how they claim they own the note.

In January of 2006, about 6 months before the first Assignment, Loan Company 2 assigns the Mortgage “in blank” again to Investment Company 3 (Lehman Brothers Bank, FSB).  Investment Company 3 sells it to its subsidiary, Investment Company 4 (Lehman Brothers Holdings Inc.).  Investment Company 4 sells it to a Pooling and Servicing Company 5 (Structured Asset Securities Corporation) who then assigns it to its Trustee Company 6 (U.S. Bank National Association).

In the assignment from 5 to 6, this mortgage, was pooled with approximately 1,220 other mortgage loans, to U.S. Bank, as trustee for the Structured Asset Securities Corporation Mortgage Pass-Through Certificates, Series 2006-Z. With this last assignment, the Ibanez and other loans were pooled into a trust and converted into mortgage-backed securities that can be bought and sold by investors–a process known as securitization.

Trustee Company 6, U.S. Bank National Association, files for foreclosure on the homeowners in April of 2007. U.S. Bank National Association buys the property at the Foreclosure Sale in July of 2007.  So what’s the problem?

The second fly in the ointment comes in here.  U.S. Bank National Association, didn’t own the Note, until September of 2008, over a year after the Foreclosure Case was over.  Even then, one could question their “ownership” of the note, since they say they obtained ownership of the Note from American Home Mortgage Servicing, Inc., “as successor-in-interest” to Loan Company 2.

Now, let’s add a third problem for the Trustee Company 6.  They couldn’t, or wouldn’t, produce one document that listed the homeowner’s note as one of the notes that was supposedly bundled with the other 1,119.

So how did this case get into court in the first place?  If the Trustee Company 6 got its property in July of 2007, they won right?  Someone raised a red flag, and the Trustee Company 6 filed a lawsuit to quiet title.  They asked the Court to declare them the sole owners of the property, based on the foreclosure sales some time before.

The court disagreed with the Trustee Company 6, and ruled that they did not own the properties, because they could not prove that they owned the note at the time of the foreclosure sale.  Apparently, post-foreclosure Assignments were common in Massachusetts at this time.  Not any more.

This State Supreme Court ruling could have widespread effects throughout not only Massachusetts, but the rest of the country.  Suits like this are picking up steam, and more and more judges and appellate courts are getting bolder about enforcing the laws that have been on the books for hundreds of years.

For the record, there were other issues, parties, and mortgages involved in this case, but this best shows the importance of being able to prove that you own the note if you are going to foreclose a mortgage, and take someone’s  home away from them.

More to come……

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Homeowner Wins Foreclosure Case