Mortgage Servicing Fraud
occurs post loan origination when mortgage servicers use false statements and book-keeping entries, fabricated assignments, forged signatures and utter counterfeit intangible Notes to take a homeowner's property and equity.
Articles |The FORUM |Law Library |Videos | Fraudsters & Co. |File Complaints |How they STEAL |Search MSFraud |Contact Us

The New York Times
  • Reprints
  • This copy is for your personal, noncommercial use only. You can order presentation-ready copies for distribution to your colleagues, clients or customers here or use the "Reprints" tool that appears next to any article. Visit for samples and additional information. Order a reprint of this article now.


    January 7, 2011

    Top Court in Massachusetts Voids Foreclosures by 2 Banks

    The highest court in Massachusetts ruled Friday that U.S. Bancorp and Wells Fargo erred when they seized two troubled borrowers’ properties in 2007, putting the nation’s banks on notice that foreclosures cannot be based on improper or incomplete paperwork.

    Concluding that neither institution had proved it had the right to evict the borrowers, the Supreme Judicial Court voided the foreclosures, returning ownership of the properties to the borrowers and opening the door to other foreclosure do-overs in the state.

    Legal experts said that while this ruling did not set a precedent for other states, the outcome will be closely watched across the country because it is the first such ruling from a state’s highest court. Investors viewed the ruling as negative for banks; an index of financial company shares fell almost 1 percent on the day.

    “The broad implication is you’ve got to dot your i’s and cross your t’s,” said Kathleen G. Cully, an expert in bankruptcy and lender regulatory law in New York. “You need a proper chain of title, and in both of these cases there was a gap in the chain.”

    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.

    The ruling on Friday upheld that decision.

    Foreclosures are supposed to occur only when lenders can prove they own the note underlying the property.

    While it is common now for borrowers to question whether banks moving to seize their properties have the right to do so, in 2007, most borrowers assumed that the institutions foreclosing on them were acting properly.

    Since then, lenders’ foreclosure practices have come under intense scrutiny. Borrowers’ advocates have argued that lenders flouted private property rights in their rush to foreclose on troubled borrowers. As lenders and Wall Street firms bundled thousands of mortgage loans into securities, banks often failed to record each link in the chain of documents demonstrating ownership of a note and a property.

    Attorneys general in all 50 states are investigating foreclosure improprieties, which include forged signatures on legal documents and other dubious practices meant to patch up holes in loan documentation.

    Both mortgages in the Massachusetts case had been bundled into securities and sold to investors. The banks that foreclosed on the borrowers were acting as trustees, bringing the actions on behalf of investors in the trusts, which held the properties at the time of the ruling.

    In a statement, Steve Dale, a U.S. Bancorp spokesman, said: “Our role in this case is solely as trustee concerning a mortgage owned by a securitization trust. This judgment has no financial impact on U.S. Bancorp. The issues addressed by the court revolved around the process of the servicing of the loan on behalf of the securitization trust, which was preformed in this case by the servicer, American Home Mortgage Servicing.”

    Vickee J. Adams, a Wells Fargo spokeswoman, said: “The loans at issue in the court’s ruling were not originated, owned, serviced or foreclosed upon by Wells Fargo. As trustee of a securitized pool of loans, Wells Fargo expects the entities who service these loans to abide by all applicable state laws, including those laws that govern foreclosure sales.”

    Paul R. Collier III, a lawyer in Cambridge, Mass., represented Antonio Ibanez, one borrower in the case. “It’s been pretty clear and becoming ever more clear that the securitization industry has behaved as though it were immune from consumer protection laws, state homeowner protection laws and real estate regulations in its underwriting, securitization and foreclosure practices,” Mr. Collier said. “I am quite confident that this is merely the first petal off the rose with regard to predatory foreclosure practices.”

    A special education teacher in Brookline, Mr. Ibanez and his wife moved out of the house and are now living in a rental condominium, his lawyer said. 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.

    The loss on the property will be taken by investors in the trust that had claimed ownership of the mortgage.

    The other borrowers whose foreclosure was overturned — Mark and Tammy LaRace — are still living in the home. They could not be reached.

    The banks involved in the matter had asked the Massachusetts court 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.

    Mr. Collier said he had a dozen similar cases. In a legal brief presented to the Massachusetts court, representatives of the real estate industry said there were thousands of foreclosure cases in the state with facts like those in the Ibanez matter.

    More in Business Day (8 of 22 articles)

    To the Editor, in an Inmate’s Hand

    Read More »

    Quote 0 0
    Can somebody please explain how this ruling might effect other states ruling. Because this ruling is against the long standing argument the the mortgage follows the note. Can this change long standing presedent in ny state?
    Quote 0 0
    William A. Roper, Jr.
    Angelo said:
    Can somebody please explain how this ruling might effect other states ruling. Because this ruling is against the long standing argument the the mortgage follows the note.   Can this change long standing presedent in ny state?

    The distinction in Massachusetts law that the mortgage does NOT automatically follow the note, but that it, at best, vests in the holder a right to an assignment of the mortgage is unique to Massachusetts.  I seriously doubt that other states are going to unilaterally embrace this finding absent some legislative enactments.

    There are several other aspects of the ruling that are far more likely to prove to be instructive to other states, including the holding that an assignment in blank is a VOID incomplete instrument and the holding that an assignment which purports to antedate the effective date of the assignment is ineffective absent some rather compelling evidence that the assignment is merely confirming of another earlier valid, but defective assignment.

    Bear in mind that while other states might look to the Massachusetts decision for insight and reasoning, the decision is actually binding and authoritative only in Massachusetts.  I do believe that the Ibanez decision will be influential in other decisions elsewhere to come.
    Quote 0 0

    While other jurisdictions may only look to this decision for insight I think this is what we all really need.  One by one decisions that attack the fraudulent transfers of notes and mortgages.  Cases like Landmark and Ibanez keep tightening the noose on these entities using fraud to foreclose. 

    Quote 0 0
    Write a reply...