Mass. Supreme Court rules against US Bancorp, Wells Fargo in foreclosure case

Written by Biloxi

A case in Massachusetts could put a wrench into many major banks' arguments in court with homeowners to whether the banks are the actual mortgage holders. Massachusetts Supreme Court judge ruled that U.S. Bancorp and Wells Fargo were not the mortgage holders when they foreclosed on two separate homes in the Antonio Ibanez and Mark and Tammy LaRace case. According to Judge Ralph Gant's opinion on page 18:

"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..." "As a result, they did not demonstrate that the foreclosure sales were valid to convey title to the subject properties, and their requests for a declaration of clear title were properly denied."

According to the court opinion, U.S. Bank foreclosed on Antonio Ibanez and purchased his home in a foreclosure sale on July 5, 2007. On that same day, Wells Fargo foreclosed on Mark and Tammy LaRace and sequentially purchased their home at a sale. Both banks filed in the lower court in 2008 to affirm the right, title, and interest of the mortgagor of the property.

U.S. Bancorp claims that it has no ownership interest in the underlying mortgages and the bank's role in this case is solely as the trustee. And here is Wells Fargo's comment on the Massachusetts Superior Court ruling:

“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.
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.”

It is interesting that Wells Fargo claims the loan at issue in the court ruling wasn't owned or foreclosed by Wells Fargo. If Wells Fargo didn’t foreclose on the defendants, then who did? And who put Wells Fargo's name on it? And notice that both Wells Fargo and U.S. Bancorp claim that they are just the trustees. Keep in mind that only the lender or mortgage holder can foreclose on a property and not a trustee or investor. Remember of the chain of title? It requires the note (the borrower IOU) to be endorsed (like signed by one party over to the next), showing the full chain of title. The chain of title looks like this:

A (originator) =& B (sponsor) =& C (depositor) =& D (trust).

All eyes will focus on whether New Jersey Superior Court will adopt the Massachusetts case. Wells Fargo should be afraid. Six mortgage lenders, including Wells Fargo, in New Jersey had been ordered by the State Supreme Court to appear on January 19th to demonstrate why the state should not suspend their foreclosure actions. The lenders have filed in New Jersey court requesting them not to halt foreclosures.