Landmark Foreclosure Decision

Hi Paddy, nice post and I agree totally. I realize a lot of people may believe that the recent decision from the Massachusetts highest court could impact courts across the country and could also lead to a flood of overturned foreclosures (exacerbating the mortgage mess) wreaking even further havoc on the mortgage and housing industry. However, I don't think there should be a widespread panic over this decision, especially for buyers who have already bought a foreclosed property as an REO.

Keep in mind, even though this decision could potentially invalidate countless numbers of foreclosed properties, it would be up to the foreclosed homeowner to file a post-foreclosure law suit against their lender in an attempt to void the completed foreclosure and recover damages. Many homeowners in foreclosure have already vacated their properties and have moved on with their lives. The likelihood of a foreclosed homeowner obtaining such knowledge or having the ability to pursue such a lawsuit is minimal at best. Trust me, lenders also know this fact. That is why they are not overly concerned and continue to foreclose on homeowners with no legal standing to do so. Unfortunately, in non-judicial states (like Massachusetts) it is up to the homeowner being foreclosed on to file a law suite against the foreclosing party in order to challenge their lender's actions. Regrettably, many homeowners (who are not aware of their rights or this recent court decision) will lose their homes to a fraudulent foreclosure unless they stand up for themselves and challenge such an action!

Whether or not a homeowner owes the money is not what is in question here. We all know they owe the money to "someone". However, the homeowner has every right to definitively know who that "someone" is. A large majority of homeowners are facing legitimate hardships and are not looking for a free ride. They have reached out to their lender (usually once the hardship occurred) and have asked for assistance only to be ignored or given continual run-a-rounds. This is more than likely due to the fact that their loan was part of an asset backed security package that was sold on Wall Street and potentially belongs to multiple people and/or entities that technically requires each party to agree to modify any of the terms that could affect their bottom line. These people/ entities (usually big time investors and speculators from all over the world) have no clue as to what investments they own and don't own (leaving the banks and servicing companies wondering the same thing). Trust me, it's a BIG mess.

If a court allows a lender (with no proven legal standing) to foreclose on a homeowner, it could enable the wrongful investor to fallaciously acquire a family's home, enabling the unlawful investor to grossly profit from their actions with intentions of seeking surplus reimbursements by a variety of potential means (such as seeking government bail out money, filing a mortgage insurance claim, pursuing a deficiency judgment, requiring a promissory note and potentially stripping homeowners from any equity remaining in their home).

More and more courts across the country are now beginning to understand and realize that this issue is not merely a "technicality" and should not be satisfied with anything less than full proof of this issue. During the past few years, some courts believed lender's stories of original promissory notes being "lost or destroyed" and have moved to finalize foreclosure sales simply by taking the lender's word (only to have other people or entities later turn up with the original note (proving that they were the proper holder of the note) and not the person or entity who foreclosed on the property originally, leaving the original borrower still liable). More judges are now realizing and appreciate the fact that if they should agree that an original note has been legitimately lost (and allows a foreclosure to proceed) it is the borrower who is still at risk.

All the Best!

Rick Misitano

Paddy:  Very interesting, I know this 'Theory', has been floating around for quite some time but it's good to see it as something that is actually a "Landmark Decision".  I think every State is aiming for this...Do you know how it stands in California, specifically?

Paddy: Thank you for inviting me to your new group.  I invited everyone who commented on the blog post that you commented on earlier today....If you want to you can edit your posts to be included in that group also.

This was very good input Paddy.  An excellent post to re-read.