Lenders' right to foreclose is challenged

A pair of out-of-state mortgage firms lacks the legal authority to press forward with home foreclosures in Massachusetts because they haven't obtained required documents verifying that they hold the mortgages, a lawsuit lodged yesterday alleged.

The suit was filed in Suffolk Superior Court on behalf of Darlene Manson of Stoneham and Regine Michel of Hyde Park. Manson's home, where she's lived for 35 years, was foreclosed on last March and she is scheduled to be evicted next week. The suit said Michel's home, where she lives with two daughters, is scheduled for a foreclosure sale next month.

Gary Klein, attorney for both women, said the defendants, GMAC Mortgage LLC of Fort Washington, Pa., and Deutsche Bank National Trust Co. of Santa Ana, Calif., bought the mortgages on the secondary market but haven't completed paperwork proving the mortgages are assigned to them, as required by state law. Lawyers for GMAC Mortgage are reviewing the lawsuit, said GMAC spokeswoman Toni Simonetti. She said GMAC had no immediate comment. Deutsche Bank representatives didn't return a phone call.

The case underscores the increasingly disorganized process of financial firms buying, packaging, and selling mortgages to third parties, a process that is often invisible to homeowners and the public.

By turning the paperwork over to private parties rather than going through registries of deeds, and moving forward with foreclosures before they have the necessary documents, "the lending community is turning the Massachusetts foreclosure process into the Wild West," said Klein, a partner at the Boston law firm Roddy, Klein & Ryan.

Klein said he will seek class-action status on behalf of what he estimated were thousands of other borrowers in similar situations. One of the goals is to buy time for homeowners to stay in their properties until they can be offered assistance by a federal rescue plan.

"Massachusetts' foreclosure process has become an undisciplined and lawless rush to seize homes," the suit alleged. "Many thousands of foreclosures are plainly void under statute and settled Massachusetts case law."

Robert Weisman can be reached at weisman@globe.com.