The Massachusetts Supreme Court has ruled that U.S. Bancorp and Wells Fargo wrongfully sold foreclosed homes. The court found that these mortgage companies failed to prove that they actually owned the mortgages and had the right to sell the homes in a foreclosure proceeding.
This follows recent revelations that the banking industry has employed low-level employees as “robo-signers” who signed hundreds of foreclosure affidavits a day without verifying a single sentence. It is clear that this country’s foreclosure mess is going to get a whole lot messier.
This is caused in part by the securitization of mortgages – that is – mortgages that are bundled together and sold as a group to investors. The company who issued the mortgage rarely maintained and serviced that mortgage; it was securitized and sold.
Our country’s property laws require that a valid mortgage must have a signed promissory note and a security instrument such as a deed of trust. These must be kept together and any transfer of lien rights must be recorded at a public office, such as the county auditor.
The note must be endorsed each time the mortgage is sold, which could be several times or more. If a foreclosure is started, the mortgage holder must be able to demonstrate a clear chain of title by signed transfer and endorsement documents.
With the explosion of mortgage backed securities came the Mortgage Electronic Registration System, or MERS. This is an electronic clearing house with 67 million mortgages on file that tracks more than 60 percent of the country’s residential mortgages, but employs only 45 people in one office building located in Virginia.
MERS intended to provide an electronic registry of all mortgage transfers but may have failed, in numerous instances, to comply with long established legal requirements in our country’s property laws as an electronic record does not satisfy legal requirements to prove a chain of title.
Several state courts have rejected attempts by MERS to act on behalf of banks seeking to foreclose on delinquent mortgages and thousands of foreclosures are being challenged across the country.
Homeowners should obtain qualified legal advice to protect their legal rights before surrendering their residence in a foreclosure proceeding.
As the Massachusetts Supreme Court decided, the banks that are claiming ownership of a mortgage may not have the legal right to foreclose on the secured property.