Bank stocks fall after the Massachusetts Supreme Court rules two foreclosures invalid because...


Bank stocks fall after the Massachusetts Supreme Court rules two foreclosures invalid because Wells Fargo (WFC -3.01%) and US Bancorp (USB -1.22%) could not prove they owned the mortgages. BAC -2.11%. JPM -2.9%.

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Comments (28)
  • Richard Mackenzie
    , contributor
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    Well. In that case I guess they can't show that any further mortgage payments are owed to them either. Now, if only the occupants can show that they have a right to be living there...
    7 Jan 2011, 12:19 PM Reply Like
  • wyostocks
    , contributor
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    Richard, interesting point. If the banks can't show they own the mortgage and the occupants can't show they own the property, what happens. I would guess that if the property taxes aren't paid then the city will untimately foreclose but then what do they do with it?
    Wonder what other ststes will rule.
    7 Jan 2011, 12:24 PM Reply Like
  • Richard Mackenzie
    , contributor
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    Who will the city/county foreclose on?
    7 Jan 2011, 12:29 PM Reply Like
  • wyostocks
    , contributor
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    Beats me but the government, be it city, county, state or fed, always gets it money. I am sure the banks will eventually unearth the necessary paperwork on most mortgages but it'll cost a lot of money and time. Lets call this the Lifetime Employment Act For Lawyers.
    7 Jan 2011, 12:33 PM Reply Like
  • lower98th
    , contributor
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    Title company
    7 Jan 2011, 01:00 PM Reply Like
  • Duude
    , contributor
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    Yes, this smells of a court ordered jobs program for attorneys.
    7 Jan 2011, 01:33 PM Reply Like
  • Steve Soden
    , contributor
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    Something I've mulled over recently is the thought that many of these mortgages may have been sold several times when packages were put together.
    I've witnessed Foreclosures taking over a year and The Bank knew no payments would be made for the duration of the loan. The Bank has postponed The Trust sale twice for unknown reasons.
    I think this decision in Mass. is just the tip of a Huge Iceberg that will show many banks looking to Foreclose on one property.
    This could be the undoing of our Financial System!
    I hope not, I'm enjoying living in the Twilight Years of our Society.
    9 Jan 2011, 06:00 AM Reply Like
  • Tony Petroski
    , contributor
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    And the housing woes continue. Several more years and thousands of contingency fees and maybe then the market will clear.
    7 Jan 2011, 12:20 PM Reply Like
  • bbro
    , contributor
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    Someone owns the mortgage....
    7 Jan 2011, 12:21 PM Reply Like
  • lower98th
    , contributor
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    BBro: Maybe not. The right to the debt instrument can be transferred separately from the right to the collateral. There have been several articles written that if the right to seize the collateral isn't properly transferred according to state law, it expires. MA is a recourse state, so the homeowners still owe the amount of the loan. But the banks were found to not have standing to seize the collateral through foreclosure. Guess the banks will have to make restitution for the value of the siezed property in excess of the amount of the note, and/or sue the homeowner for the balance...seeking to claim other assets.
    7 Jan 2011, 12:33 PM Reply Like
  • wyostocks
    , contributor
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    Man, this is like a twisting plot in a crime novel.
    7 Jan 2011, 12:36 PM Reply Like
  • If U Say So
    , contributor
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    This is a rather ironic occurrence in a country where the President can't even prove his birth place.
    7 Jan 2011, 01:42 PM Reply Like
  • 7footMoose
    , contributor
    Comments (2229) | Send Message
     
    I know that many will rejoice in the apparent victory by the homeowners but I expect that this will ultimately result in further retrenchment in the mortgage financing arena. If there has been a violation of law then the banks should and apparently will pay but so will the rest of us. Mortgage loans will become more difficult to obtain and more costly. The already wounded residential real estate industry will suffer further set backs and those who already own homes will lose additional value. Jobs will be lost and new layoffs will occur. This is good news for a few and bad news for many.
    7 Jan 2011, 02:03 PM Reply Like
  • If U Say So
    , contributor
    Comments (348) | Send Message
     
    I concur, and I expect the administration will as well. I fully expect government will get involved not to save the banks but the housing market. The last thing this country needs is ill-gotten gain which will only make qualifying for a new mortgage next to impossible for the vast majority of Americans. We all pay for this, and local government gets hit again when property tax valuations go into another death spiral.
    7 Jan 2011, 02:12 PM Reply Like
  • Hubert Biagi
    , contributor
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    Yes, because the government was by far the largest proponent of MBSs thru Fannie and Freddie.
    7 Jan 2011, 02:17 PM Reply Like
  • wyostocks
    , contributor
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    Kind of agree but property tax valuations are meaningless. The local governments aren't cutting the spending so they'll just offset the lower valuation with a higher rate thereby collecting the same tax per house.
    7 Jan 2011, 02:18 PM Reply Like
  • Duude
    , contributor
    Comments (3413) | Send Message
     
    Sadly, that's too often true for states with no foresight. But for others that recognize higher property taxes lead to slower property value growth and more taxpayers bailing for less expensive havens in other states, it spells opportunity a-knockin'.
    7 Jan 2011, 04:01 PM Reply Like
  • FrankLive
    , contributor
    Comments (124) | Send Message
     
    After the TBTF banks led the way by years. They had no choice but to join the dance. Now they have been forced to eat the TBTF banks problems. Sounds like the Obama Administration following on the heals of the Bush Administration. Remember, it was Wall Street that got us into this mess as enabled by the Bush Administration. Flashback 2004: FBI reports rampant fraud in the mortgage industry. What was done about it? The FBI was sent chasing terrorists elsewhere while the terrorists were on Wall Street. No memory, no history, no learning. It is easy to blame homeowners for this mess. But twenty years ago, with two full time incomes, we couldn't get a small loan to buy a used car from a bank. What changed where banks just gave out massive loans to anyone? If I went to a bank and said I want to buy a Formula One race car because I want it, would they stamp approved without seeing if I was a good risk and whether it made sense for me to own one on their dime? I don't think they would. But that is what they were doing. It was not up to people who wanted to buy a house to determine if they could get a loan. It has never worked that way. It is the banks that have the responsibility to determine whether to give a loan. If I give money to a "deadbeat", I don't expect to get the money back. That's what the banks were doing. Why did they do that? Because as reported by the FBI there was rampant fraud in the mortgage industry!
    7 Jan 2011, 04:23 PM Reply Like
  • wyostocks
    , contributor
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    Please point out for me a "state with foresight".
    7 Jan 2011, 04:34 PM Reply Like
  • alienation
    , contributor
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    Why does this decision make mortgages more difficult to obtain?

     

    Wasn't the problem that they were too easy to obtain?
    7 Jan 2011, 05:58 PM Reply Like
  • wyostocks
    , contributor
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    Would you lend money to someone whereby the contract under which they and you signed could be arbitrarily thrown out by a court who said screw you you can't have your money back? I don't think so.
    7 Jan 2011, 06:58 PM Reply Like
  • lower98th
    , contributor
    Comments (1411) | Send Message
     
    The decision did not say the lender couldn't pursue the debt. It said, if you don't have a legal transfer of the collateral instrument before you file for foreclosure, you don't have the right to foreclose and seize the collateral. Banks said "screw you" to the state laws on chain of lien ownership. MA said, get your paperwork in order first.
    7 Jan 2011, 07:06 PM Reply Like
  • Jim Nelson
    , contributor
    Comments (78) | Send Message
     
    Nice comments! Glad to read that most persons writing comments are finally seeing through the farce of some lawyers and homeowners to sue, sue, sue, to prevent foreclosures of homes. We all pay for this. Some homeowners have lived in a home free for years without ever making a payment. Then when the bank forcloses, some liberal court allows these same homeowners to live free for more years while taxpayers foot the bill. In the end the borrower walks away free, no penalties etc. due to their legal manipulation.
    7 Jan 2011, 03:31 PM Reply Like
  • helplessobserver
    , contributor
    Comments (575) | Send Message
     
    Common law on real estate is pretty simple. When you get a loan you sign a promissory note saying you will pay back the loan with interest. While the borrower gets title to the property he also signs a property lien document that secures the loan with the property. All is legally OK as long as the lender owns and has both documents in his hands. In case of default the lien allows sale of the property and the note directs the proceeds of the sale to the note holder. Separate the two and the lender is in trouble. No lien, no right to force a foreclosure sale, no note no right for money payment from the sale. At best the MBS bond holders may only be unsecured creditors.
    7 Jan 2011, 03:50 PM Reply Like
  • KtgGroup
    , contributor
    Comments (147) | Send Message
     
    This will turn out well for the lawyers...no doubt. It will be like all those class action lawsuits filed on behalf of the consumers where the settlement pays millions in legal fees and the offended consumer gets a nickel.
    7 Jan 2011, 04:28 PM Reply Like
  • TeresaE
    , contributor
    Comments (3041) | Send Message
     
    I smell a future bailout (yes even with the Republicans voicing how they've "seen the light") for the title insurers.

     

    And, of course, banks again. I'm sure the banks will somehow get a bonus for all the "extra" work/costs they will incur. Ben and his buddies from BOTH sides of the aisle will never let the bank work more without more pay.

     

    Once again, the middle who did the right thing, will be called upon to pay for the greedy, the deadbeat, Wall St, lawyers on all sides, City Clerks and Washington lobbyists. For the greater good, of course.

     

    Wonder what/whom these geniuses are going to find to fund their insanity once the middle class is bled out? I hope we never have to find out but everyday, I doubt that more.
    7 Jan 2011, 05:25 PM Reply Like
  • wyostocks
    , contributor
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    TereseE:
    Right on. I am really a huge optimist both about the nation and the economy. Always have been.
    That said, I am with you and everyday doubt my optimism more. I just can't foresee a "good" outcome for all this. My grandkids will never enjoy the good times and opportunities that I did. And, I might add, I was raised in a very middle class inner city family.
    7 Jan 2011, 05:36 PM Reply Like
  • lower98th
    , contributor
    Comments (1411) | Send Message
     
    It is not clear that the lapses in the lien transfers were accidental, rather part of a strategy to substitute paper (CDO) for physical collateral.

     

    In the process of developing securitizations and the credit derivative instruments that insured them, there were some who thought financial engineering would make foreclosure a quaint, unnecessary holdover. Sell the MBS, along with a CDO to insure it, and everyone would be made whole in any circumstance. In the case of defaults, tiny by historic percentage, the foreclosure rights were no longer needed to collateralize the instrument (now done by the derivative product), and banks could avoid having to deal with the problems of physical collateral....REO's are so much more messy than paper.

     

    CDOs paid off quite handsomely to the MBS owners (thank you, taxpayer). They have been paid in full already, regardless of whether the physical property is foreclosed and sold. Money from foreclosure sales is not necessarily needed to repay the lender. He got his when he sold the loan. The owners of the mortgage security got theirs from the CDO (when AIG couldn't pay, the taxpayer did).
    8 Jan 2011, 08:29 AM Reply Like
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