Friday, January 7, 2011

Massachusetts (Non-Judicial State) Supreme Court Rules Against Foreclosing Banks Due to Faulty Securitization

Or I should say fraudulent securitization, where mortgage-backed securities were issued without any mortgage in the trust to back the securities. Naked shorting, in a sense.

Bank shares (Bank of America, Wells Fargo, US Bank, J.P.Morgan Chase, etc.) promptly headed south as soon as the news broke this morning, though they recovered much of the loss by the market close.

Reuters (among many others) reports:

NEW YORK (Reuters) - In a ruling that may affect foreclosures nationwide, Massachusetts' highest court voided the seizure of two homes by Wells Fargo & Co and US Bancorp after the banks failed to show they held the mortgages at the time they foreclosed.
And from Karl Denninger [emphasis is his]:
The banks tried to get constructive assignment (e.g. assignment by contract, even though the PSAs said otherwise - that actual assignment and delivery had to take place) recognized by the judge, and failed to produce evidence of actual assignment (because there wasn't any - the notes were originally endorsed in blank and there was no evidence of actual physical delivery to the trustee.) The Judge said no. That's what I was talking about earlier in this case - this has been the pattern and practice in these securitized loans, and the ASF and others in the industry have argued that despite language in the PSAs that required physical delivery they didn't have actually perform in that fashion to have a factually and legally-good transfer.
Yup. And the judge said no. Good for the judge.

I'm curious to see if PIMCO has any insight into the matter. PIMCO, as some of you may know, is loaded with MBS which it seems to have bought just so that it can stick them to the issuing banks. Only two days ago, PIMCO's Rod Dubitsky (Executive Vice President, Global Structured Finance Specialist) wrote a piece in yet another attempt by the big players and financial MSM to cast the whole foreclosuregate/fraudclosure as only moderate "flaws" that are easily fixable.

Calling a fraud a flaw doesn't make it a flaw.

But in many states, particularly the non-judicial states, foreclosures go on uncontested (no easy way for the homeowners to contest anyway), banks getting the homes that they probably don't have title to. Judges are asleep, attorneys either don't know or don't care.


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