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Earlier this month, the Supreme Judicial Court of Massachusetts made a unanimous ruling that two home foreclosures in Massachusetts were invalid. Both foreclosures took place in 2007 when the homes were seized by Wells Fargo & Co. and US Bancorp. According to the high court’s decision this month, the lenders had failed to provide legal documentation proving that each lender held the title to the home that was foreclosed upon.

Toward the end of 2010, dozens of lenders were required to put foreclosureson hold as attorneys general began to question the validity of lenders’ legal processes for proceeding with foreclosures. Hundreds of cases were turning up with improperly filed documents and complaints from consumers. Many states are reviewing similar cases, which could affect the foreclosure process in Florida and across the U.S.

In the two foreclosure cases presented to the Massachusetts high court, the banks failed to provide documentation that proved the homeowners’ mortgages were held with Wells Fargo and US Bancorp. When an individual takes out a mortgage, the mortgage is often sold to other lenders over the course of the loan. Both mortgages of the homes in Massachusetts were sold and transferred to other lenders, ultimately landing in the hands of Wells Fargo and U.S. Bancorp. However, the title work for the mortgages were never properly updated and filed throughout the string of transactions, and the current lenders’ names were not on the properties’ titles. Because the lenders did not legally document their ownership of the mortgages, the court ruled that the foreclosures were invalid.

Many analysts believe that the Massachusetts ruling could affect foreclosure proceedings throughout 2011. Many argue that similar cases may come forth in other state courts. One real estate attorney explained that the ruling in Massachusetts “will be certainly cited as persuasive authority by anybody in a similar scenario who’s trying to hold onto his home.” The foreclosure process could slow down considerably nationwide if banks can’t prove that they own mortgages they are foreclosing on, and homeowners may have a second chance at getting their homes back.

Sources

Westlaw News & Insight: “Top Mass. Court says banks can’t foreclose without proper title,” Jonathan Stempel, Dena Aubin, Joe Rauch, Dan Wilchins, and Jeff Roberts, 7 Jan. 2011

Westlaw News & Insight: “Analysts predict foreclosure ruling will have limited effect,” Adam Tempkin and Jeff Roberts, 11 Jan. 2011