Mortgage Assignments Fraud
Massachusetts rules against bank in Mortgage Assignment Fraud On January 7, 2011, the Massachusetts Supreme Judicial Court issued an important ruling regarding foreclosures in U.S. Bank National Association vs. Antonio Ibanez. To understand the verdict, it is first necessary to understand what mortgage assignment fraud is and how it’s relevant to the foreclosure process.
Mortgage Assignment Fraud | The background
When banks were creating mortgages left and right to anyone who asked so they could sell them on the open market (like a stock), they were shoddy in their paperwork. Since the banks weren’t keeping the notes, they weren’t concerned with qualifications, and they studied the details of the paperwork like Christina Aguilera studies the words to the National Anthem before a Super Bowl. Needless to say, once homes began foreclosing, it became apparent that things were forgotten. Little things, like the assignment of a mortgage (which proves ownership to a bank) were missing. Ownership in a mortgage becomes necessary when the Lenders are taking back property.
To cure this dilemma, many banks hired other firms to recreate the missing assignment documents, but these new assignments were dated after the homes were sold, and in many cases, after the foreclosure proceeding started. Creating a new ‘special’ assignment for the purpose of foreclosing is considered mortgage assignment fraud. Would this mortgage assignment fraud affect the banks ability to foreclose on a property?
Mortgage Assignment Fraud | The verdict
The court ruled that the failure to document mortgage assignments is mortgage assignment fraud and will void the entire foreclosure. This ruling is of great concern to banks that have lost paperwork or cannot cure gaps in their assignments. At a minimum, this ruling is expected to cause longer foreclosure timelines, with higher legal costs for foreclosures. Homeowners now have more weight in negotiations with the banks and may be able to receive an adjustment in their principal and interest rates in order to avoid going to court. Investors may be weary about purchasing foreclosed property without extensive title search prior to bidding. Of course, this court ruling wouldn’t have been an issue had banks acted properly and not had to engage in mortgage assignment fraud in order to foreclose.
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