After reading about the truly depressing tale of the Foreclosure Express Courtroom (the Rocket Docket) in Florida, here’s some good news provided you aren’t a bank or a bank shareholder. Thanks to Burbed guest editor DreamT for passing this news item along.
By ROBBIE WHELAN, ALAN ZIBEL and VICTORIA MCGRANE, The Wall Street Journal
The highest court in Massachusetts ruled against Wells Fargo & Co. and U.S. Bancorp in two foreclosure cases that cast doubt over whether some home loans were properly handled when packaged into securitizations.
Justices in the state’s Supreme Judicial Court upheld a lower court’s decision to void foreclosure sales of two homes in Springfield, because owners of the loans couldn’t prove that the mortgages had been assigned to them. Both loans were assembled into mortgage-backed securities sold to investors.
Photo, above right: A Wells Fargo branch in San Francisco. Shares of the bank fell 2% on the ruling, and other banks saw share-price losses as well. — Getty Images
Bank stocks fell on worries that Friday’s ruling could make it harder for financial firms to foreclose on mortgages that wound up in securities. The defeat also might provide ammunition to mortgage-bond investors who have accused and even sued servicers for what the investors claim is systematically shoddy loan documentation.
The Massachusetts case is a closely watched example of what some mortgage experts describe as “show-me-the-paper” cases over widely used procedures for transferring loans after they are made. Individual loans often are sold to an investor, with the new owner’s name left blank in loan documents to minimize paperwork hassles as the loan subsequently changes hands before being combined with other loans into mortgage-backed securities.
These cases only apply to Massachusetts, though. Banks in California and nonrelevant parts of the country can continue to foreclose on homeowners without proving they actually own the mortgages in question.