Mass. Court’s Ruling Could Be a Harbinger of More Foreclosure Hold Ups

January 7, 2011 by Brian Summerfield

By Brian Summerfield, Online Editor, REALTOR® Magazine

A decision this afternoon from the Massachusetts Supreme Court could have huge implications for future foreclosures. In a unanimous decision, the jurists rejected Wells Fargo and US Bancorp’s attempted seizure of two homes due to a lack of proper documentation.

Justice Robert Cordy said the “utter carelessness” in producing paperwork that would prove the banks owned the properties prompted the court’s ruling. Although the verdict only affects foreclosures in that state, it could influence the decisions of courts in several other states as they review similar cases. Additionally, attorneys general in all 50 states have previously expressed that they would look into whether financial institutions are erroneously foreclosing on home owners.

This ruling comes amid a recent spate of embarrassing, wrongful foreclosures and concerns about title complications caused by the Mortgage Electronic Registration Systems (MERS). We will bring you the latest developments in this story as they come in. Stay tuned!

In response to recent queries about banks temporarily halting foreclosures to investigate improper procedures, NAR will be issuing the following item in Monday’s Washington Report.

Please keep in mind that banks are unilaterally doing this nationwide. There is no federal policy involved. Washington Report, Monday, October 11 In September and October 2010, several lenders suspended foreclosures in two dozen states due to questions about whether foreclosures were being processed consistent with applicable state law requirements. Concerns are being raised by state and federal elected officials, as well as consumer and fair housing groups, about the validity of ownership of mortgages that have been securitized and resold.

At the center of the controversy is Mortgage Electronic Registration Systems (MERS). This firm is responsible for electronically tracking the transfer of assignment of mortgages. Class-action suits are being brought against MERS alleging that the use of the system circumvents state laws. On October 1, 2010, Fannie Mae and Freddie Mac released statements regarding servicer compliance with foreclosure processing of Fannie and Freddie loans. In the releases, both organizations reiterated that servicers must comply with applicable state laws governing foreclosures.

Although nearly all of the foreclosures in question are expected to be fixed eventually, the current situation is creating difficulties and a new hurdle to the recovery of the housing and mortgage markets. NAR members are reporting that upcoming sales have been delayed indefinitely or cancelled, to the detriment of all involved. Additionally, homes on the market without clear title will make sales much more difficult. While banking executives focus their attention on this problem, it is possible that servicers may be somewhat more receptive to approving loan modifications and short sales, since they avoid the foreclosure procedural problems altogether. NAR has also developed the following talking points that can be used when responding to queries:

There’s no way of knowing what percentage of foreclosures that were improperly processed were, in fact, inappropriate or wrongly taken. The assumption is that for most of them, this may be only a technicality and that the property ultimately would have been repossessed.

For owners who believe their home was wrongly foreclosed, they may wish to contact a real estate attorney to investigate the possibility of a property claim. However, that could prove costly and time consuming – regulations vary by state.

For banks, it may make sense to modify loans or agree to short sales to expedite disposal of inventory.

For buyers, the assumption is that listed foreclosures come with clear property title but they should discuss any necessary contract contingency with their attorney. Foreclosures in limbo are likely to be withdrawn from the market.

It’s too early to tell if there’s an impact on the market but we will be monitoring the situation.

I've been pondering humans and our natures. If you had asked me a few days ago if I was a civilized human being or not, I would have told you, "Yes, most of the time." I've had moments in my life where I was not the least bit well-mannered, but I usually do OK in the civilization department.

But then something happened.

My just-turned-5 granddaughter Turtle and I went for a walk. We were moseying along, discussing the weighty question of whether or not a troll could beat a dragon if they got into a fight. We had pretty much decided that the troll would win, but only if he had captured some fairy dust and harnessed its power. I had to bow to Turtle's expertise in this subject and blindly agreed with her reasoning and conclusions.

Suddenly, four big dogs boiled out of a hole in a fence and came at us, snarling and barking and growling and snapping.

Instinct is incredible. Before I even had the thought process that my granddaughter and I were in danger from these dogs, I had hoisted Turtle up onto my back. She was holding on with her legs around my waist and her arms around my neck. I suddenly had a stick in one hand and a big rock in the other, and I'm still not sure where those came from. These dogs were going to have to come through me to get to Turtle. I roared "BAD DOGS! NO!" in my biggest alpha-female voice.

The dogs screeched to a halt, surprised to see Turtle and I in the middle of their rumpus - they were playing and hadn't even noticed us. Instead of a pack of carnivorous predators bent on tearing us limb from limb, they were just a bunch of goofy slobbering Black Labs.

Some things are interesting about all this.

• I didn't think about any of my actions. My body knew what to do to protect the child that was with me, with no help or interference from my brain.
  
• I had no conscious thought about the stick and the rock. I guess that as we make our way through our lives our lizard brains note every possible weapon available in each area.
  
• Turtle also had instinct working. That she was on my back so quickly amuses me. (She doesn't normally do anything without at least 15 minutes of discussion first.) Her body knew what to do and did it.

• I had absolutely no thought for my own safety - I only thought about Turtle. Those dogs would have had to go through me to get to her. That instinct was fascinating. I've had my children - survival of the species mandated that I was going to sacrifice me to save the young female. I would have, too.
  

So why am I talking you about this on a real estate blog? Well, first of all, we left strict real estate behind months ago on this space - it was boring. Besides, what taps more closely into human nature than shelter, and home?


The only difference between the Neanderthal that I might have been thousands of years ago and the woman on Mingus View Drive last Saturday is the quality of our clothes.


Once I stopped shaking I noticed how many of Turtle's and my actions during that 5 or 10 seconds were pure instinct and reflex. I did what I did, and Turtle scurried up my back like a spider instead of stopping to explain that she can talk to the dogs, or that she's Wonder Woman or that she should just fly away.

When we got home to family dinner I paid attention to how much of our interactions follow old prehistoric paths. Pecking orders are strong, yet fluid. (Jess, my youngest son, stepped aside to let his older brother to fill his plate first. But then when a child screeched we all stepped aside so that Jess, the medic, could get down the hallway. Like that.)

The next day I showed property. The Buyers and I talked about leverage and investments, but the driving force was shelter and roots. This couple wanted safety and their own territory and their own place to be, inviolate from the rest of the world. We all want that - a safe, warm cave.


I showed them a bank-owned repo, and we saw some more primal human fallout. The previous owner had not only taken everything of value from the property, but he had fouled this nest to the point that nobody else would ever want to live there. This previous owner had literally marked the corners of his territory.

So the next time somebody brags about how civilized they are I'll remember what happened with those dogs. I'll remember that my "civilization" is just a thin veneer over a cavewoman that would have taken those dogs on with her teeth, if necessary to protect a dearly beloved child. I'll remember that we all operate from truths and patterns that are identical to the truths and patterns of our ancestors, with very few alterations.



I realize that I am not a fully evolved, civilized human being - I am a cavewoman who wears Reeboks.