Sunday, January 9, 2011

Mama Weer All Crazee Now!—Mortgage Mess Edition

A key decision came down on the whole Mortgage Mess this past Friday, which will have huge, huge, HUGE implications—according to Bloomberg:
The [Massachusetts] state Supreme Judicial Court yesterday [Friday] upheld a judge’s decision saying two foreclosures were invalid because the banks didn’t prove they owned the mortgages, which he said were transferred into two mortgage-backed trusts without the recipients’ being named.
There is no dispute that in the two cases, the borrowers were delinquent on their mortgage payments. But because of this decision—which will have nationwide implications—the two delinquent borrowers essentially get to keep their homes free and clear.

That’s right: Bad paperwork = Free house = Totally insane.

(For those who don’t know squat about the Mortgage Mess, here’s a semi-coherent explanation of the whole sordid mess. And if you want to find out more, check out these posts, and then check out Yves Smith, who’s gone medieval on this subject over the past five months.)

Barry Ritholtz said a while back that, though the mortgage signing and foreclosure process might have been flawed, sloppy or even crooked, judges weren’t going to render absurd judgments whereby a clearly delinquent borrower could essentially tell the banks to stuff it, insofar as their loans are concerned.

Now, I agree that it’s absurd that a delinquent borrower can tell the bank to stuff it, and get to keep a house because of sloppy or careless administrivia. However, it was the mortgage holders’ responsibility to do the paperwork properly—and the consequences of their sloppiness was clearly delineated in the law. 

So bottom line, what does the Massachusetts Supreme Judicial Court decision mean? It means that the court has opened the door for precisely those “absurd” outcomes throughout Massachusetts—and invited other civil courts across the United States to do as they are doing, and stick it to the banksters.

In other words, it means that, Mama: Weer All Crazee Now.

Here’s Slade, to remind you:


  1. I haven't read the Massachusetts decision yet but do you think that the result be similar to the AZ court ruling in Weisband Chapter 13 Case No. 4:09-bk-05175-EWH where the court ruled against GMAC but they made it clear that Barry Weisband still owed money to someone?

    "In other words, the fact that the funds for a borrower’s loan are supplied by someone other than the loan originator, does not invalidate the loan or restrict enforcement of the loan contract to the parties who funded the loan."

    "The Note is still valid and can be enforced by the party who has the right to enforce it under applicable Arizona law."

  2. If the choice is between letting a delinquent borrower keeping a house he doesn't have a right to, or the banks keeping a house they have no right to, then I will sleep marginally better when the borrower gets to keep it for free. Yes, some borrowers will have wilfully placed themselves in this situations. But banks have ALL placed themselves in this situation willingly.

    Neither one deserves the house, IMO. But at least the money saved by the borrower will flow back into the economy at large, and not to banks in obscure island states.


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