BOSTON — The highest court in Massachusetts has ruled against U.S. Bancorp and Wells Fargo & Co. on Friday in a widely watched mortgage-foreclosure case that could have serious implications for the nation’s largest banks.
The Supreme Judicial Court affirmed a lower-court judge’s ruling invalidating two mortgage-foreclosure sales because the banks did not prove that they actually owned the mortgages at the time of foreclosure.
Last fall, the banking industry’s foreclosure machine came under intense scrutiny with the revelations that low-level employees called “robo signers” powered through hundreds of foreclosure affidavits a day without verifying a single sentence. At the time, analysts warned that the banks’ allegedly fraudulent document procedures could imperil their ability to prove that they owned the mortgages.
The Supreme Judicial Court found that the banks, who were not the original mortgagees, did not make a required showing that they held the mortgages at the time of foreclosure. As a result, the banks did not demonstrate that the foreclosure sales were valid to convey title to the properties.
“We agree with the judge that the plaintiffs did not demonstrate that they were the holders of the . . . mortgages at the time that they foreclosed these properties, and therefore failed to demonstrate that they acquired fee simple title to these properties by purchasing them at the foreclosure sale,” Justice Ralph Gants wrote for the court in the unanimous 6-0 ruling.
Attorney Paul Collier III, who represents Antonio Ibanez, one of the home owners in the case, said the ruling affects thousands of mortgages in Massachusetts and could have a far-reaching impact on the nation’s banking industry.
“For homeowners and foreclosures in general, it means that any mortgage foreclosure which was initiated by a securitized trust at a time when the trust had not obtained a mortgage assignment which gave it the lawful right to do so is void. Those homeowners, like Mr. Ibanez, still own the property,” Collier said.
The banks argued that their securitization documents were sufficient to prove they owned the mortgages before the publication of the notices of sale and the foreclosure sales. Wells Fargo said in a statement that as trustee of a securitized pool of loans, it expected those servicing the loans to abide by all applicable state laws, including those governing foreclosure sales.
