The Massachusetts Supreme Court recently issued what is considered to be a Landmark decision, which can effect all homeowners throughout the country who have foreclosure or mortgage issues. This ruling is widely referred to as “Ibanez.” Before we delve into the particulars, which are important for you to read and understand, remember – with our book and this blog – our intent is to give homeowners: information, confidence, courage, and, tools in order to:
Repudiate Fraud-based Loan Documents and Illegal Foreclosures.
This recent unanimous decision came from the case of US Bank National Association v. Ibanez, which also included the case of Wells Fargo Bank v. LaRace. You can read the relatively short (16 page) Court’s opinion here.
The significance is broadly and nationally based because the Massachusetts Supreme Court is regarded by many as being one of the very top state Supreme Court’s in the United States. Consequently, a ruling from such a high authority will be looked on favorably in state courts throughout the nation. This effects all U.S. Mortgage Backed Securities (MBS) that were created, Securitized, and sold, which according to some, the number of MBS, may be 80 – 90%of all home loan originations and re-fi’s since 2000.
This decision affirms a prior decision from the Massachusetts Land Court that foreclosure sale of property inhabited by borrowers, Antonio Ibanez, and separately, Mark and Tammy LaRace, were invalid because the Trustees attempting to foreclose were not the holders of the mortgages at the time they initiated foreclosure proceedings.
In specificity, what is now denied to the entire lending industry, is that the common industry practice of assigning a mortgage “in blank” (not stating to whom the mortgage would be assigned until after the fact – is not a proper ((nor legal)) assignment). The crux of the matter was that assignments were generally not made until after the initiation of foreclosure proceedings, and trustees can not rely on assignments after the fact to cure this deficiency. In a nutshell the foreclosures were not legal. The Court also held that merely holding the promissory note, and not the mortgage, was not grounds to foreclose.
In general, Americans, who are paying attention, are aware that the Banksters who created the now exploded housing bubble committed a stunning array of financial crimes. Recent SEC settlements have indicated the existence of widespread criminal conflicts of interest, including predatory, illegal and deceptive lending. Including brokerage fraud, accounting fraud, securities fraud, insider trading, criminal conflict of interest, let alone deception of shareholders and investors.
Under the names of Foreclosure Gate and Robo Signing, which is a result of Investment Banking “financial engineering,” our nation has been reduced to oncoming Third World status.
We are now able to see that false attorneys, false documents, robo signing, false appraisals, false notaries, and simple theft of perhaps millions of dollars of illegal fees and penalties by loan servicers, have become the “new normal.” A standard fraud-based, method of doing the housing business.
At issue in the Ibanez matter is that the Banksters failed to legally transfer promissory notes and mortgages/deeds-of-trust through the system. They failed to follow their own rules as set forth in Pooling and Servicing agreements made part and parcel of the sale of Mortgage Backed Securities to investors, who relied on such contracts. We add gratuitously, the investors were also sandbagged by the various rating agencies who stamped the various Security packages as “AAA” – attesting that the loans placed into the various Securities were properly underwritten, that it was very likely the homeowners in fact could and would pay and would not default.
We learned how far from the truth that was over the last three years. Witness, the “subprime debacle,” which the clownish Fed Chairman Ben Bernanke stated in front of Congress, was “contained” when the scandal broke out. Contained? We are angry in that such “containment,” was ultimately “contagion.” It brought down our and Global economies.
The bottom line for homeowners is that hundreds of thousand, if not millions of homeowners were illegally foreclosed on using falsified documents by a bank or servicer, or trustee who was not in fact the true holder of the mortgage/Deed-of-Trust or the Promissory note, and had no right to foreclose. Show us the Note has additional teeth.
Justice has not yet been meted out to those Banksters who created this fraudulent system. No one has gone to jail, whereas during the Savings and Loan Debacle over 1,000 top officers of Savings and Loan institutions were indicted, prosecuted and served time in jail.
Let’s get a little technical. Both Wells Fargo and US Bank, acting as Trustees for the securitizations, which claimed to hold the mortgages, both maintained that had they been recipients as “assignees” through “assignments in blank,” and, that the pooling and servicing agreements also, and in addition, assigned them the mortgages in question. The Court disagreed.
The Court stated, “We have long held that a conveyance of real property, such as a mortgage, that does not name the assignee conveys nothing and is void; we do not regard an assignment of land in blank as giving legal title in land to the bearer of the assignment.” (Order p. 11). The Court also held that the Banks had not included any schedules as exhibits and therefore poolwide assignments of “all right, title and interest” in the mortgages were defective. [Emphasis Added.]
In fact, the court held the alleged assigning parties, the Trusts, entities that allegedly assigned the mortgages to Wells and US Bank, ever held the mortgages to be assigned. A shell game with no peas. In other words because there was not proper original assignment to the Trusts, meaning for investors in these securities, that they may be holding “unsecured debt instruments.”
In other words, no mortgages actually back the Mortgage Backed Securities. Which are now demonsratably not secure.
This very likely enables investors to be successful in broader actions going forward against the Securitizers and loan originators, perhaps allowing the investors to actually “put back” the mortgages and be made whole. More good news, is that homeowners can utilize the same law and attach various Causes of Action, from investor lawsuits into their actions against local loan servicers and loan originators.
Larger, and this effects homeowners, the Court rejected the Trustees’ (bank’s) request that this ruling be only “prospective,” not retroactive (see Order p. 12). Because the Court did not change settled case law, borrowers previously foreclosed-upon can apply to courts and challenge their foreclosure as being invalid. This opens the door for those previously foreclosed-on to seek their home back, or, be compensated in monetary damages for the illegal foreclosure. [Emphasis Added.]
What this means practically is that Mark and Tammy LaRace get to keep their home, even though they were foreclosed on in 2007. Antonio Ibanez will get the title to his home back. Meaning he can take repossession of the home, or be fairly compensated for his deed and title.
Do the families of LaRace and Ibanez get free homes? Probably likely not. Arguments can be made that because Massachusetts is a recourse state (bank might pursue an action personally against them), but, if they are genuinely distressed financially, there is no point in pursuing them, and if the debt is held to be unsecured, it could be discharged in bankruptcy court. [Emphasis Added.] We are not attorneys, and certainly not judges, but, occasionally, even in the world of law – logic and common sense prevails.
What this points to is – if the chain-of-title has been broken – it can’t be put back together by the offending banks. Like Humpty Dumpty, the shell is irrevocably broken, in spite of all the King’s men.
Further, those that have recently purchased homes out of foreclosure might not have legal or proper title, which might cause folks to lose such homes if the original owner successfully follows precedent here. Meaning, if you’ve purchased a home that was foreclosed on, you’d better check up on your title insurance, and, could, if you need to sell, have a problem if you assert you do have good and legal title, particularly if you have the slightest doubt. In other words it would be wise to have your attorney with you when you call on your title company.
This means that every homeowner, with the clue offered here, who is being foreclosed upon will likely challenge the banks to prove that they do in fact own the mortgage. If the bank can’t show conclusively that they do legally own the mortgage/Deed-of-Trust through legal assignment, the foreclosure action will likely be dismissed, if, you’re properly lawyered-up.
At the same time those in need of a “fair” short sale who discover title defects, can bring the bank to acceptance of a “fair” short sale. And, further, in the case of those underwater who can pay, yet are considering a strategic “walk-away” default (never never do that), you may have the legal leverage to force a loan mod with principal reduction.
Consequently, foreclosure actions will be pushed back even further than they now are, while banks ensure that the paper work is corrected if – in fact – it can be. If this sound like an impenetrable maze, you are not alone. No one can state how this will play out over time.
Even in some cases where the original mortgage is “lost,” banks, even if the mortgage appropriately existed originally, can’t cure mistakes based on illegal transfers.
Because there are allegedly no grounds for the US Supreme Court to take up this matter, the Banksters are not likely to obtain their “Justice” – from their friends in higher places. “Justice” for them has been an affront and a grave injustice for the American People.
In the other approximately 30 non-recourse, non-judicial foreclosure states, if one is underwater, and discovers through a Security audit, that the chain of title is broken, they could simply stop paying, take a credit rating hit, and then deal with the “alleged” parties to the mortgage in order to achieve a significant principal reduction to current market price and agree to a new fixed mortgage and loan at 5% for 30 years. Believe us, the investors in such mortgage would be wise and happy to agree with the borrowers, against the Investment Banks, originators and current servicers, in order to put the mortgage, the note, the loan on a paying basis, cause it to be a “performing loan” and avoid as much litigation as possible.
What you might realize is that now is not the time to buy a house because the enormity of this issue as it unfolds in various courts over the next couple of years – will only, can only – continue to force the value of homes down throughout the country.
Who knows, perhaps, our largest, our fraudulent Too Big Too Fail Banks, and their Investment Bank Leaders who “do God’s work” (claimed by Blankfein of Goldman Sachs), will be forced into federal receivership; top executives from both groups indicted and/or forced to disgorge their bonuses of the last several years to the Treasury in exchange for forgiven or lenient jail sentences. Hey! Life is a negotiation.
If you don’t know if you’d really have a solid unbroken chain of title title to a home you’re contemplating buying – why would you do it? You wouldn’t. Also, you wouldn’t buy it, if you had any doubts that you couldn’t legally sell it. Clearly, if you think it through, you’ll realize that home prices have no where to go but down. It would be nice if home prices returned to historical Debt to Income ratios. Since there is little on the horizon to offer an increase in jobs anytime soon, it seems to us, further proof that home prices will go down. Actually, there is a name for it.
“Reversion to the Mean” is a term in economics, meaning generally in this regard, that home prices will revert to pre-bubble levels. That is already happening. Yet, this new Massachusetts Supreme Court Decision gives impetus to that happening sooner than later.
Even before this Landmark decision in Massachusetts, the climate in courts throughout the land had been improving for homeowners who have been (most without knowing it) victims of Predatory Lending. Now new on the horizon, we are seeing a great number of very serious litigations by investors in Mortgage Backed Securities, and entities that issued default insurance.
The investors are attempting to use the law and courts to “push-back” mortgage loans to loan originators and Securitizers (Investment Banks who formed “Trusts” in which they placed loans before selling them as Securities – bonds) based on what is finally becoming knowledge-certain of wide-spread fraud in the origination and subsequent illegal transfers of these documents. This goes well beyond fraudulent robo signing – is the crux of Foreclosure Gate – and not trivial “paperwork errors” as claimed by the Banksters.
All praise for the Massachusetts Supreme Court, who have firmly established strong doctrine and precedent, perhaps to be the new “law of the land.”
In conclusion, we thank writers: Mary Bottari, Isaac Gradman, Esq., David S. Hilzenrath, Felix Salmon, Jonathon Stempel and the formidable Yves Smith, for writing early with wisdom and expertise on this issue.Print This Post