Ibanez case recap
The justices had many questions about the Wells Fargo/Option One mortgage pooling and servicing agreement, private placement memo, and other mortgage securitization documents. If you’ve read the great book, The Big Short by Michael Lewis,you know how complex these agreements are. Some of the justices clearly weren’t following the complex securitization process and agreements. Justice Ganz characterized the securitization documents as “extraordinarily sloppy.” • Chief Justice Marshall asked the attorney for the foreclosed homeowner whether “the sky will fall if the Land Court’s ruling is upheld”? (Answer was no). Likewise, Justice Ganz asked what are we to do about the seemingly innocent folks who bought these foreclosed homes unaware that the titles were defective. Justice Ganz and Marshall agreed that these purchasers could be “bona fide good faith purchasers” which under the law means they could be immune from claims challenging their title. That’s an encouraging line of reasoning for many people who bought foreclosed homes and are waiting on the outcome of this case.I watched the oral argument webcast in the U.S. Bank v. Ibanez controversial foreclosure case before the Massachusetts Supreme Judicial Court. Here’s a recap of what caught my eye:
• There was also a discussion about changing the current common law which does not require recording of mortgage assignments, to require it. Justice Marshall asked how many states required recording of mortgage assignments, giving a hint of where’s she thinking on this.
• Lastly, Justice Cordy, the former big firm attorney, was clearly on the side of the lenders, even going so far as to ask whether Mr. Ibanez waived his challenge to the foreclosure by not challenging it in lower court.
As with any appeal, the Court takes several months to decide the case and render a formal written opinion. Here’s how I think this could play out. The majority of justices were deeply troubled by the “extraordinarily sloppy” paperwork surrounding the securitized mortgage documents and assignments. My guess is they probably think Land Court Judge Long is right about the lender’s compliance with the foreclosure laws. They also likely think that in the current foreclosure mess, the chain of ownership of these loans should be more transparent to the consumer and those searching titles. However, the justices don’t want to hurt thousands of innocent homeowners who bought properties out of foreclosure and fixed them up, etc. Chief Justice Marshal and Justice Ganz were clearly concerned about this. So, to play this down the middle, the court could uphold Judge Long’s ruling, holding that all mortgage assignments must be recorded from now on, but decline to make the ruling retroactive, so the majority innocent homeowners won’t be saddled with defective titles. There are many folks waiting out this important decision, including several of my clients. I hope the SJC will strike the right balance.
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