Skip to comments.Court: Busted Securitization Prevents Foreclosure
Posted on 04/18/2011 3:40:01 AM PDT by Neidermeyer
On March 30, an Alabama judge issued a short, conclusory order that stopped foreclosure on the home of a beleaguered family, and also prevents the same bank in the case from trying to foreclose against that couple, ever again. This may not seem like big news -- but upon review of the underlying documents, the extraordinarily important nature of the decision and the case becomes obvious.
No Securitization, No Foreclosure
The couple involved, the Horaces, took out a predatory mortgage with Encore Credit Corp in November, 2005. Apparently Encore sold their loan to EMC Mortgage Corp, who then tried to securitize it in a Bear Stearns deal. If the securitization had been done properly, in February 2006 the trust created to hold the loans would have acquired the Horace loan. Once the Horaces defaulted, as they did in 2007, the trustee would have been able to foreclose on the Horaces.
And that's why this case is so big: the judge found the securitization of the Horace loan wasn't done properly, so the trustee -- LaSalle National Bank Association, now part of Bank of America (BAC) -- couldn't foreclose. In making that decision, the judge is the first to really address the issue, head-on: If a screwed-up securitization process meant a loan never got securitized, can a bank foreclose under the state versions of the Uniform Commercial Code anyway? This judge says no, finding that since the securitization was busted, the trust didn't have the right to foreclose, period.
EDITORIAL COMMENT: The fact that this case came from Alabama makes it all the more important to be watched and noted. Despite the reluctance of many Judges to give a free house to homeowners, this Judge picked up on the fact that the homeowner wasnt getting a free house and that if he allowed the foreclosure it would have been the pretender lender getting the free house.
When it comes down to it, this really is simple: the trustee never got the loan. The asset-backed pool didnt have it despite their claim to the contrary. Saying it doesnt make so.
WOW! The courts are finally applying black letter law !!! If you’re not REALLY SHORT on BAC , WF and the rest DO IT NOW!!! It’s too late to short DJSP ..
It is nice to see that judges are expecting banks to obey the law as well.
I’ve paid off my house and now I’m debt free. Now It’s time to buy a second house. The catch is I’ll be buying it for someone else to live in. Boy do I feel like a sucker.
The banks took the investors money and never gave them the correct paperwork transferring the note to the investors trust/pool ,,, it’s the wall street banks that have been getting the free houses for the last 4 years or so ,, houses that they never put up even a single dollar for ,, it’s time for the wall street banks to pay off the investors for their failure to comply with the contracts they had and to which the homeowner was never a part.
No, the lender will appeal and the people sill owe on the note. In the end the judge will be reversed.
You’ve been paying off wall streets malfeasance through the 4 trillion in debt we’ve piled on and through your taxes which are due today ,, this family did nothing wrong. Are you a sucker ,, you betcha , we all are thanks to OBOZO and Bush#2 . You want to get mad? get mad at Paulsen , Geitner , Bernanke and the rest of the scum that have sunk the USA... notably those that got rid of all oversight on banking over the last 15 years or so.
WRONG , The homeowner still owes on the note (although it is unenforceable) , that is not in dispute ,,, the lender wasn’t even a part of the trial , just the bank that was pretending to be the lender .. THIS WILL STAND!
This family did nothing wrong. Bullcrap. They took out a loan and didn’t pay it.
I’m going to sell my house, invest the cash, take out a new loan and then default.
This is complete horsebleep. Endorsed in blank ? No standing ? Ipso facto predatory ?
Whoever the mortgage broker was - he got paid to replenish his warehouse line for this loan. Then the bank got paid by EMC. And then EMC got paid by Bear. Is the Alabama couple going to sue now to get the payments they made, if any, back now too ? A fictitious tax SPV is to be relied upon to prove no standing ? Something the govt. can annul willy nilly or retroactively?
The only sane remedy here gives the couple 6 more free months in the home while the SPV does some paperwork. The rest of the world has had to catch up to the internet and electronic documentation. Real property law must now do the same. At bottom this is no different than the ATM adding a zero and giving you 2000 instead of 200. No one says that hey - I get to keep the extra 1800. Keep real property because of an endorsement in blank ? The world is turned upside down.
“It is nice to see that judges are expecting banks to obey the law as well.”
Expect to see “something bad” happen to them in the near future.
Im going to sell my house, invest the cash, take out a new loan and then default.
Sorry , you’re too late , Wall Street is actually following the NY State Trust Laws now.
NEGATIVE , You can’t “FIX” outright fraud with NEW FRAUDULENT POSTDATED DOCUMENTS!!! and go against the contract (the PSA) that created and governs the trust ,, this is a complete FUBAR created by Wall Street and it is NOT FIXABLE ...
The culpability is not primarily from the last fifteen years.
This was able to happen because real estate appraisals ceased to factor in the population density, median income, and housing supply.
That change (which allowed a value to be detirmined strictly indexing recent home sales) happened under Carter.
Nobody gets to live anywhere "forever". As far as "without payment", they're still responsible for the property taxes.
It appears that all these properties will end up belonging to the government, at some level. At the rate it's going, I expect to see some kind of mechanism set up that lets the federal government take ownership so it can be made immune to local property taxes, and then handed out to Acorn (or whatever they call themselves today) political operatives.
Do they pay the property taxes? The tax bill usually goes to the mortgage holder, so if the occupants are in default and not paying the mortgage, they likely aren’t paying the property taxes either.
Real estate changes hands slowly enough that current law works just fine. The problem we have with mortgages is that properties are treated like commodities, not individual unique entities.
With the backlog they now have, I could live for free for at least 10 years before they actually managed to foreclose. If ever.