Foreclosure Fix: Why a Massachusetts Court Decision Could Rock Banks
This is a must read article for anyone interested in the Article by Alain Sherter, Jan. 7, 2011 – The CBS Interactive Business Network. http://markets.financialcontent.com/synacor/action/linkout?URL=http%3A%2F%2Fwww.bnet.com%2Fblog%2Ffinancial-business%2Fforeclosure-fix-why-a-massachusetts-court-decision-could-rock-banks%2F9551&Title=Foreclosure+Fix%3A+Why+a+Massachusetts+Court+Decision+Could+Rock+Banks
Housing Market – Foreclosures -Mortgage – MBS Fiasco.
From my understanding of the Massachusetts Supreme Judicial Court decision, it is basically a decision on property laws and what should be common sense and generally accepted practices by all lenders. It is something that the Bankers and principals of the MBS operations have known and which they desire to dismiss in hopes that the public does not rise up against them. The mainstream media does not appear to be up to following this major disclosure and further unraveling of the reasons behind these bankers actions over the past years regarding these MBS.
Had it not been that the particular two major banks not proceeded with those two foreclosures – which prompted the suit action by the home owners; the banks would have probably NOT shown up to defend their actions of possible instituting those foreclosures proceedings.
The banks would not want to promulgate the situation in which they knowingly where in violation and creating more wrath than already building in the country with more and more information being disclosed of the workings behind these particular MBS operations.
No proof of the documents assigning the mortgage/deed of trust being held by the initial mortgage broker. No filings, if such were available, had been filed properly by the banks regarding the underlying ownership of those deeds of trust/mortgages. Although I have recently read additional news releases from another state official’s report that discloses that at least one or some of the banks involved in their investigation, actually do have the original notes, according to testimony from personnel.
I have also heard of earlier reports on the failure or inability of banks to provide the names of the mortgage or deed of trust owners, to the delinquent borrower/owner so that they could attempt to work out an alternative solution or modified loan payment in order to avoid foreclosure proceedings by those banks. It is my understanding that those owners then had no further proceedings or contacts from the lender?
Although I do not live in a major adverse foreclosure area such as many areas throughout the country, I have noticed two recent situations of interest involved in vacated homes being held in what I would describe as “Never-land”. Both of these homes were vacated according to the owners of record due to foreclosure procedures pending by their banks regarding their inability to make their payments. Although, both of the homes have been vacated by the owners for over one year due to inability to pay and were involved in initial foreclosure proceedings well over a year ago; neither have been foreclosed upon by the lenders as of this date. Although the threat was initiated by each of the banks, they failed to proceed with going to a foreclosure sale of the property.
One of the homes remained on a real estate listing under short sale provisions during this entire time of vacating the home over a year ago. The lender is pressing the borrower to cooperate with the listing procedure as a short sale versus proceeding with a foreclosure and then probably listing the home with as an REO. Incredibly the bank, some nine months later, proceeded without notice to the owner or other departments of the same bank, instructed the Trustee to proceed with the announcement of the sale of the property by foreclosure. Prior to the property going to the sale date at the courthouse steps, the Trustee was advised by their bank contact to stop proceedings and remove the property from the sale. Although the Trustees are not allowed to divulge the Banks contact persons or the reasons for the withdrawal, it is most probably due to the timing of at least two banks that they were halting all of their foreclosures until they had a chance to review their files and procedures. Again, neither the property owners of record nor the real estate listing agent nor the bank department that was in contact with them to try to proceed with a listing under short sale provisions had any knowledge from the bank or trustee during any period of this procedure.
The other home is still sitting and vacant and with no real estate listing. The owner is dismayed, that they have not proceeded to foreclosure proceedings as initially indicated to him well over a year and a half ago. The property titles still remain as is with the delinquent borrowers. The homes continue to deteriorate. Needless to say, none of the lenders are able to provide any information or contacts regarding the properties when contacted locally. It is though a vast quagmire was created to divert everyone from any contact including their own personnel from answering or discussing items regarding their transactions or procedures. This in itself leads to many questions of those banks in regard to their actions, or inactions of these banks, both legal and accounting issues as a minimum.
If a lender has a legal mortgage or deed of trust instrument and does not proceed with foreclosure proceedings on default of the installment note, I would think that they would be subject to legal action for breach of their fiduciary capacity to the note holders. A declining market, allowing deterioration of the real property improvement by allowing extended periods of vacancy, with no action in behalf of owners of the notes. Regardless, if the MBS notes do not have properly perfected mortgage or deed of trust filings attached to their promissory notes issued, then do the lenders not have a responsibility to reduce those defaults into judgment and initiate a sale of the property by the local courts for their distribution in accordance with the current law.
This of course leads to more questions about the dubious practices that were ongoing throughout the MBS operations. Hopefully more will be divulged and proper actions will take place against those involved; however, I would not count on that happening. The banks are already flooding capitol hill with lobbyist to get them a free pass on their MBS operations and their lack of even basic due diligence in business practices. How? The lobbyist will be “recommending” to our politicians that they can take care of all of this with some creative legislation. They will get their pass with our politicians providing validation of their operations and past misdeeds, retroactively.
In my opinion, the banks are left with two alternatives.
One alternative might be to reduce the unpaid debt of the promissory note (if indeed they have proper titles of ownership) to judgment and lien status and then proceed to court action to have the property sold with the proceeds distributed to all lien holders of record in order of their preference of filing and payment under current commercial laws. This of course does not provide the banks with what they want us to assume that they have perfected as a mortgage attachment, but a “promissory note” for which they only hold title. So they may have to do what any other business would have to do when they have violated these common business laws which have been established over centuries. If they knowingly act as though they have those rights and do not, they are in violation of a great deal more than mere errors and omissions on a random basis. They would also be subject to further suit action regarding promotion and selling of their MBS notes as having been backed by valid mortgages or deeds of trust as collateral against those notes and falsely indicating that transfers were properly filed per current laws and regulations. Any shortfall in the difference in the collection of that debt could be a potential liability with the MBS holders. If fraud was proved, then it is possible that a great deal more is at stakes with these lenders.
Another alternative which is already being implemented is to plow enough money towards influencing our politicians with the assistance of their lobbyist and friends to divert and suppress their actions and deeds or misdeeds, until they figure a way out for themselves. Namely, to obtain the politicians agreement to legislate a retroactive law, allowing for their actions to be considered legal.
This would seem to be an insane option to contemplate, except for the fact that we are probably talking about the same people that created this fiasco to begin with and skipped down from Wall Street to Constitution Avenue to collect their pot of gold. To them, this is probably just a glitch to fix with some spare change.