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Turning the tables on the bankers

Posted by Scott Van Voorhis  October 12, 2009 09:00 AM

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Struggling homeowners seeking relief from banks and other lenders on their mortgages have too often been plunged into a bureaucratic nightmare.

Particularly mind boggling are mortgage servicers who plunge ahead with foreclosure filings, and then, when called on it my activist groups, say they have no power to stop the proceedings since they don’t own the real estate!

Now it appears the legal system may slam the brakes on this runaway corporate train wreck.

A pending decision in Massachusetts Land Court could invalidate the sales of hundreds, if not thousands, of foreclosed homes in Massachusetts, the Globe reports.

The cases in question, from Springfield, deal with a practice that apparently has been common by some lenders – pushing ahead with foreclosure proceedings and lining up formal proof of ownership later.

Of course, this comes in the context of the financial practices common during the housing bubble, in which mortgages were bundled together, securitized and sold off to investors. When the boom went bust and the foreclosure epidemic erupted, untangling who the actual owners are has in many cases required some intensive financial plumbing.

Justice Keith Long is reportedly ready to issue a decision on the issue, one that may call into question thousands of foreclosures in with “late filed’’ ownership records.

That’s probably not good news for the recovering housing market, potentially throwing a monkey wrench into the sales and pending sales of foreclosed properties across the state.

But it does give lenders, especially those who have used all sorts of bureaucratic mumbo jumbo to stymie homeowners fighting foreclosure, a taste of their own medicine.

This blog is not written or edited by or the Boston Globe.
The author is solely responsible for the content.

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9 comments so far...
  1. Particularly mind boggling are mortgage servicers who plunge ahead with foreclosure filings, and then, when called on it my activist groups, say they have no power to stop the proceedings since they don’t own the real estate!

    You don't seem to remotely understand the story you are reporting. Ibanez has nothing to do with the discretion that servicers may or may not have to modify a mortgage. At all.

    Posted by Marcus October 11, 09 10:34 PM
  1. This is a technical nonsense issue . This will not invalidate foreclosures ,and even if it did most homeowners would not have the money to fight the legal battles or pay the past due payments ..
    Hopefully Justice Long will have the foresight to rule appropriately on this issue . The only possible winners in this action would be lawyers.

    Posted by REmaven October 12, 09 08:47 AM
  1. Lenders, courts and legislators should be working to make the foreclosure process faster and more efficient, not the other way around. A fair, quick and efficient foreclosure process is an essential mechanism by which creditors reduce risk. Lenders are willing to loan 90% or more against the value of real estate because they operate under the assumption that if the borrower stops paying they can recover the collateral and sell it. If the courts impede this process, lenders will tighten access to credit and charge higher rates. The net result for consumers is loans will become more expensive and tougher to get.

    Beware unintended consequences.

    Posted by Lance Stapleton October 12, 09 10:53 AM
  1. Particularly mind boggling are potential buyers who plunge ahead with purchasing real estate, and then, when called on to actually pay for it, say they have no money to pay the mortgage since they didn't bother to do a serious study of their finances prior to making the purchase.


    Posted by Michael M October 12, 09 11:45 AM
  1. Gee, didn't I comment on this a few weeks ago??????

    "A landmark ruling in a recent Kansas Supreme Court case may have given millions of distressed homeowners the legal wedge they need to avoid foreclosure. In Landmark National Bank v. Kesler, 2009 Kan. LEXIS 834, the Kansas Supreme Court held that a nominee company called MERS has no right or standing to bring an action for foreclosure. MERS is an acronym for Mortgage Electronic Registration Systems, a private company that registers mortgages electronically and tracks changes in ownership. The significance of the holding is that if MERS has no standing to foreclose, then nobody has standing to foreclose -- on 60 million mortgages. That is the number of American mortgages currently reported to be held by MERS. Over half of all new U.S. residential mortgage loans are registered with MERS and recorded in its name. Holdings of the Kansas Supreme Court are not binding on the rest of the country, but they are dicta of which other courts take note; and the reasoning behind the decision is sound."

    Posted by Steve October 12, 09 12:28 PM
  1. Do you really think we, the American taxpayer can really turn the tables on the bankers? The whole system is rigged to benefit the bankers. I highly suggest EVERYONE read The Creature from Jekyll Island by G. Edward Griffin. This eye opening book has never been more timely.

    Posted by Dave October 12, 09 02:48 PM
  1. The net result for consumers of loans that become more expensive and tougher to get is that real estate prices will drop, so they have to pay less for housing, whether renting or buying.

    Banks are in a better position to do a serious study of the borrower's finances prior to making the loan.

    Posted by Dwight October 13, 09 10:28 PM
  1. Do you want to bet that the banks recorded every single mortgage correctly? During a time when bank employees were being penalized for not giving out enough credit? I think it's an open question whether or not a significant portion of the documents in question can be found. I'd suspect some banks of shirking the (expensive) record keeping.

    During the bubble years, loans were too easy to get, and too cheap. Making the process more expensive and tougher to get is a good thing.

    Posted by Not Moving October 14, 09 09:47 AM
  1. I think a lot of this is really the negative aspect to all the securitizations and the creation of MERS. This has or had a positive influence at least until the end of the bubble years and made it much easier to assign and securitize loans but the flip side is that when these problems commenced there is often no or very little accesible paper trail at the Registries of Deeds to back the servicers up.
    I personally think that in short order MERS et al will end up filling these assignments at the registries so as to avoid the problems that have arisen in Kansas.

    Posted by sarah October 15, 09 04:36 PM
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Scott Van Voorhis is a freelance writer who specializes in real estate and business issues.

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