House of Cards: Bank Accountability and Foreclosure Fraud


A landmark ruling was issued by the Massachusetts Supreme Court on January 7, 2011, in US Bank v Ibanez.

At the heart of the decision is this question: does a bank have standing to foreclose if it does not have a proper mortgage assignment?

In a case that is likely to act as precedent in other jurisdictions, the highest court in Massachusetts answered: No!

The concurring opinion in this case underscores that "what is surprising about these cases is not the statement of principles articulated by the court regarding title law and the law of foreclosure in Massachusetts, but rather the utter carelessness with which the plaintiff banks documented the titles to their assets."

In this article I unpack the litigation and offer a brief outline of the ruling and its implications.

U. S. Bank National Association, trustee vs. Antonio Ibanez (USB v Ibanez) is certainly one of the first major cases, decided by a state Supreme Court, affirming that a lack of securitization standards means that a bank which believes it has the power to foreclose on a delinquent borrower actually may not be able to do so.

And if this ruling gets applied in other jurisdictions, it is conceivable that many securitized mortgages in the country cannot be foreclosed upon. Of course, the outcome will depend on applicable state law and the results of future litigation, but it's entirely reasonable to view USB v Ibanez as a case that will set precedent. I do not think there are grounds to appeal this case to the US Supreme Court.

The underlying process that the court found unsatisfactory to prove ownership in foreclosure was purportedly a fairly normal procedure in Massachusetts; that is, most banks endorsed in blank, passing along several assignments of the mortgage. Until this ruling! State laws differ on the determinative features of this decision, so the Massachusetts's decision cannot be applied to another state. In a non-recourse state, a ruling similar to USB v Ibanez could have considerable adverse financial consequences for banks.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Jonathan Foxx, Lenders Compliance Group | Attorney Advertising

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