Friday, January 7, 2011

More on Massachusetts Ruling on Foreclosure: Foreclosing Banks Sought Quiet Title

It's getting curiouser and curiouser.

It turns out that the two foreclosures that the court voided were just normal foreclosures in a non-judicial state. There was no involvement of the court, and the homeowners didn't even contest the foreclosures. That was 2007. Then, in 2008, the banks - US Bank and Wells Fargo, each acting as the trustee of a REMIC (Real Estate Mortgage Investment Conduit) who supposedly owned the mortgages - sought a quiet title judgment.

Now why would a bank want to do that, if the foreclosure was just as normal as any other?

And what is a quiet title?

An action to quiet title is a lawsuit filed to establish ownership of real property (land and buildings affixed to land). The plaintiff in a quiet title action seeks a court order that prevents the respondent from making any subsequent claim to the property. Quiet title actions are necessary because real estate may change hands often, and it is not always easy to determine who has title to the property.

A quiet title suit is also called a suit to remove a cloud. A cloud is any claim or potential claim to ownership of the property. The cloud can be a claim of full ownership of the property or a claim of partial ownership, such as a lien in an amount that does not exceed the value of the property. A title to real property is clouded if the plaintiff, as the buyer or recipient of real estate, might have to defend her full ownership of the property in court against some party in the future.

New York Times reports:

... The case dates to 2007, when Wells Fargo and U.S. Bancorp began foreclosure proceedings against delinquent borrowers on two separate properties. Neither borrower fought the proceedings — the courts in Massachusetts are not obligated to oversee foreclosures — and both banks quickly seized the properties.

The banks’ problems began in the fall of 2008, when Wells Fargo and U.S. Bancorp sought judgments from the Massachusetts Land Court that would have given them clear title to the properties. In 2009, the court rejected the banks’ arguments, ruling that the banks had not been assigned the mortgages before they foreclosed, as is required. Instead, the banks had acquired the mortgages after they had begun foreclosure proceedings.

According to the article, quoting the lawyer who represented one of the two homeowners, "U.S. Bancorp, as trustee, will either have to pay Mr. Ibanez to buy a deed from him, Mr. Collier said, or walk away from the property, leaving it to Mr. Ibanez."

Thus the question again: Why did US Bancorp and Wells Fargo seek a quiet title when no one was contesting the foreclosure? Their act of seeking a quiet title ended up opening a can of worms for them and they are going to lose the house or have to buy a deed from the homeowners. Who advised them to do so, particularly when the two banks now say they are not responsible for the proper transfer of the mortgages to the trusts for which they serve as the trustee and blame everything on the servicers?

One potentially funny thing is that those servicers could also well be themselves. Wells Fargo trustee service people blaming the Wells Fargo loan servicing people. (Oh wait, Wells Fargo has already done that, between the 1st mortgage people and the HELOC people.)

They should also know damn well that they are very much responsible; the Pooling and Servicing Agreements (PSAs) normally requires the trustee to make sure all the documents are in order, properly endorsed and properly, physically transferred to the trust.

Following the well-established protocol among MSMs reporting foreclosuregate/fraudclosure, NYT has to imply, by quoting "experts", that it is still a matter of "dot[ting] your i’s and cross your t’s" when it is really a matter of outright fraud to issue MBS without any M to back S.

The Massachusetts Supreme Judicial Court also rejected the banks' request to "make its ruling prospective, meaning that it would affect only new foreclosures. The court declined to do so, allowing foreclosure cases that have been completed to be reopened and brought under scrutiny."

Many, many mortgages that were securitized - subprime, Alt-A, prime, whatever the grade - were not transferred properly at the time of securitization. Many of them (I suspect almost all of them, actually) get transferred to the trust AFTER they are delinquent, and after the foreclosure proceedings have started. Good luck believing it is a matter of dotting the i's and crossing t's, and that it is only in Massachusetts.

Be sure to check out my vid, "Foreclosuregate Explained". (In the tiny screen in the right-hand column, or at Youtube.)


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