Banks lose key foreclosure ruling in top Massachusetts court (foreclosures, mortgage)

[baystater]

Banks lose key foreclosure ruling in top Massachusetts court - Yahoo! News (http://news.yahoo.com/s/nm/20110107/bs_nm/us_usa_foreclosures_ruling - broken link)

In a decision that may slow foreclosures nationwide, Massachusetts' highest court voided the seizure of two homes by Wells Fargo & Co and US Bancorp after the banks failed to show they held the mortgages at the time they foreclosed.

Bank shares fell, weighing on broader stock indexes, on fears the decision could threaten lenders' ability to work through hundreds of thousands of pending foreclosures.

The Supreme Judicial Court of Massachusetts' unanimous decision on Friday upheld a lower court ruling. It is among the earliest cases to address the validity of foreclosures done without proper documentation.

That issue, including the use of "robo-signers" who approved foreclosure documents without reviewing them, last year prompted an uproar that led lenders such as Bank of America Corp, JPMorgan Chase & Co and Ally Financial Inc to temporarily stop seizing homes.

Just looking for opinions on this issue. And ask the question of how this decision will help or hurt the housing market in the short term and in longer term.

[mdovell]

Well it will will be good and bad. In a nutshell when things are sold off and collaterialized often times you don't get the full picture. I used to work in collections and when debt isn't collected it's sold to another agency..again..and again..and again. This can go on for years.

With houses there was a lawsuit of the Ohio state government against Deutche Bank. Basically they said that if you do NOT have the deed then you cannot foreclose. The idea that you can without this doesn't work.

This will slow down foreclosures at least until

1) they can find the notes

2) that they actually have them

The bad part about this is it means that there are people that have bough foreclosed homes that might legally have to switch back. Now I don't know if they'll attempt clawback with this because ex post facto they might not be able to.

This brings up even more questions because we're in terra incognito here.

Ok so if someone didn't buy the house should they get their mortgage payments back?

What if the real owner has died? Houses could be in probate for years

What if the real owner has moved away? How much of an attempt can there be made for people far off? What time frame? If it has been over three or so years what if they can't move back? Should houses be abandoned rather than have a paying tenant? This might take months to sort though, hopefully by the end of the summer.

The real long term issue is that banks will be much less likely to sell off foreclosures to other organisations. Which means they'll be forced to deal with them.

This could also cause a ripple due to the shadow inventory. Basically banks have held onto tons of houses as they don't want to put them on the market. It's a game theory thing here. Who shoots first knowing that it will cause a ripple? If these banks suddenly go back to those on them and they still cannot afford they, they could try to sell them. We could see a dramatic rise in the volume of homes in the market.