In Landmark Case, Court Voids Two Foreclosures
Earlier today, the Massachusetts Supreme Judicial Court sent down a news-making ruling voiding the foreclosures of two local homes. According to the court, the complicated mortgage paper trail obscured the actual ownership of the homes and made it so the mortgage lenders did not hold clear titles to the properties when they instituted the foreclosures. Although this is a Massachusetts state ruling, its effect is expected to be felt in Georgia and throughout the country as homeowners fight back against alleged improper foreclosure practices.
The ruling upholds an earlier decision of a state land court which stated that the mortgage lenders at issue did not hold clear titles to the two foreclosed properties, and therefore that the foreclosures were improper and illegal. This is likely to be a common ruling based on the history of the mortgage process. A standard practice during the housing market boom was to package mortgages into bonds and sell those bonds to investors. This led to long, complicated paper trails, which lenders found themselves needing to unravel when they wanted to foreclose on a home. Wanting to move fast on foreclosures, they began that process, leaving the proof that they actually owned the mortgage for later.
According to the Massachusetts ruling, this sort of behavior will no longer be permitted in the state. “We agree with the [land court] judge that the plaintiffs who were not the original mortgagees failed to make the required showing that they were the holders of the mortgages at the time of foreclosure,” the court ruling said.
Real estate experts and mortgage lenders are likely frustrated with this outcome, as it will likely postpone the recovery of a housing market that badly needs it. However, according to attorney Paul Collier, who represented one of the homeowners, that does not mean that justice should not be done. “The banks and the investors are going to have to deal with the those homeowners as to what happens to those properties,” he said.
Source: Boston Globe, “SJC ruling may void thousands of foreclosures”, 7 January 2011