Foreclosure Lawsuit Upset: Court Rules Against Wells Fargo And US Bancorp
In a pivotal foreclosure lawsuit upset, the Massachusetts Supreme Court ruled against US Bancorp and Wells Fargo & Co. today in a case that could affect lower courts in that state and have serious financial consequences for some of the nation's largest banks.
The state Supreme Judicial Court upheld a previous judge's decision that two foreclosures made by the companies were invalid because the banks could not prove they actually owned the mortgages.
In the previous case, held in March 2009, Judge Keitch C. Long said the foreclosures were improperly transferred into two mortgage-backed trusts and voided them. The following October ,the banks requested he reverse the ruling, but he did not.
Today, Justice Ralph D. Gants, upheld the decision saying, "We agree with the judge that the plaintiffs, who were not the original mortgagees, failed to make the required showing that they were the holders of the mortgages at the time of foreclosure."
Wells Fargo issued the following statement in response:
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.This decision comes on the heels of controversy over robo-signing that exploded this fall followed by a national freeze on foreclosures.
Wells Fargo believes the court's ruling does not prevent foreclosures on loans in securitizations. The court simply set forth a standard legal process that mortgage servicers must follow in Massachusetts.
According to the Associate Press, during the robo-signing controversy, analysts warned that the banks' allegedly fraudulent document procedures could imperil their ability to prove that they owned the mortgages.
The fear on Wall Street is how this decision will impact the banks.
According to Bloomberg, the ruling drove down stock prices for the respective banks involved:
- Wells Fargo, the fourth-largest U.S. lender by assets, dropped $1.10, or 3.4 percent, to $31.05 at 11:41 a.m. in New York Stock Exchange composite trading.
- US Bancorp declined 28 cents, or 1.1 percent, to $26.01.
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Ilyce R. Glink is the author of several books, including 100 Questions Every First-Time Home Buyer Should Ask and Buy, Close, Move In!. She blogs about money and real estate at ThinkGlink.com and The Equifax Personal Finance Blog, and is Chief Content Strategist at RealtyJoin.com, a community for real estate investors.
