by Marian Wang
ProPublica, Jan. 20, 2011
When Massachusetts’ highest court ruled against U.S. Bank and Wells Fargo earlier this month and invalidated two foreclosures, the decision was hailed by some as an important precedent for courts seeking to resolve foreclosure disputes.
While the decision’s impact isn’t entirely clear, even Wall Street analysts who downplayed its applicability acknowledged its troubling implications for banks trying to foreclose with missing or insufficient documentation for the mortgage loans securitized and sold to investors.
The Massachusetts court, in its decision against the banks [PDF], ruled that in two very similar foreclosure cases, neither bank had been able to prove that it had the right to foreclose on the homeowner due to an incomplete chain of title. In other words, the banks couldn’t prove they had legal standing to foreclose because the transfers of ownership weren’t properly documented each time the mortgage changed hands—or was assigned to a new party—during the securitization process.
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