Massachusetts' highest court retracted the seizure of two homes by Wells Fargo & Co and U.S. Bancorp after the banks failed to prove that they held the mortgages at the time they foreclosed on the homes. Furthermore, this decision could affect foreclosures nationwide.
The unanimous decision from the Massachusetts court is one of the earliest to address the validity of foreclosures done without proper documentation. This is the issue that became apparent last year which prompted a huge uproar that led lenders such as JPMorgan Chase & Co, Bank of America Corp, and Ally Financial Inc to temporarily stop foreclosing on homes.
Marty Mosby, an analyst at Guggenheim Securities said, "A ruling like this will slow down the foreclosure process. They're going to have to be really precise and get everything in order. It doesn't leave a lot of wiggle room."
Justice Ralph Gants wrote for the Massachusetts court that, “Wells Fargo and U.S. Bancorp didn’t have the authority to foreclose after having "failed to make the required showing that they were the holders of the mortgages at the time of foreclosure."
Massachusetts Secretary of State William Galvin said, "It's up to lawmakers to take action to remove the uncertainty over mortgages raised by the decision. Without legislative action, the court's ruling will have a "chilling effect" on the real estate market. The effect is that it throws a monkey wrench into foreclosures. This is an urgent situation."
All 50 state attorneys general are examining whether lenders are forcing people out of their homes improperly and courts in other U.S. states are considering similar cases.
Homeowner-defense attorney Thomas Cox, a Maine attorney who was one of the first to bring this issue out in the open said, "This decision is going to raise serious problems in hundreds of thousands of foreclosure cases. It has the potential to require that foreclosures be done over, and I think there's going to be significant turmoil nationally. There's going to be major uncertainty."
Massachusetts is one of 27 U.S. states that do not require court approval to foreclose.
Paul Collier, a lawyer representing one of the two Massachusetts homeowners that were improperly foreclosed on, said in an interview, "It is the first time the supreme court of a state has looked straight at securitization practices and told the industry, you are not immune from state statutes and homeowner protections."
The Supreme Judicial Court further rejected the banks' request that the ruling apply only in the future, leaving homeowners who had already been foreclosed upon without a remedy.
Glenn Russell, the other attorney who represents the second homeowners that were improperly foreclosed upon, said in an interview, "I'm ecstatic. The fact the decision applies retroactively could mean thousands of homeowners can seek recovery for homes wrongfully foreclosed upon."