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The ruling made by Land Court Judge Keith C. Long regarding the validity of two bank foreclosures in Springfield, MA was upheld by the Massachusetts Supreme Judicial Court. Judge Long’s ruling states that since the mortgages were not recorded officially as being owned by banks, US Bancorp and Wells Fargo, the foreclosures were therefore not valid.
The ruling of the Massachusetts Supreme Judicial Court brought a swift reaction from Wall Street. A few hours after the decision was announced, the shares of Wells Fargo dipped almost 4% at $30.92. U.S. Bancorp shares, on the other hand, went down 1.4% at $25.93.
Other banks with shares that went down include Bank of America, whose share price dived $2.4, JPMorgan down 3.7%, and the KBW Bank Index, which includes the 4 aforementioned lenders, went down 2.3%.
The foreclosure debacle stemmed from the loose securitized mortgage lending practices, where the ownership of a particular mortgage could potentially be divided and transferred multiple times by lending institutions.
Oftentimes, the documentation for the transfers, such as the assignments at the Registry of Deeds, lags far behind. The delay may last for a couple of months and at times, even years, after the foreclosure has been implemented. This results in the difficulty or impossibility of determining who owned what and when.
Glen Russell, an attorney who represented one of the Springfield homeowners, said, “In most cases banks foreclose without any detailed examination of the securitization process of the loan. After all, the homeowner has not paid or has missed payments and the foreclosure goes through without anyone really questioning the legality or legitimacy of the foreclosure.”
For his part, mortgage fraud investigator Steve Dibert, said, “Seventy percent of the loans we investigate are flawed due to recordation, PSA violations, etc.”