In another Massachusetts case currently pending before its high court, US Bank, NA faces the consequences of another faulty foreclosure, where it attempted to sell an interest that it did not have. Here’s the Credit Slips post on it, and the link to the amicus brief by Professor Adam Levitin, Professor Katie Porter and others. Bob Lawless states:
A typical fact pattern might play out like this. Bank forecloses on Peter. At the foreclosure sale, Paul buys the property. Bank cannot prove it owned the mortgage and note at the time of the foreclosure sale, meaning it had as much right to foreclose as any other stranger to the property. That is to say, it had no right to foreclose.
At this point, Bank either owes Peter or Paul. It owes Peter for fraudulently obtaining a judgment of foreclosure against him and dispossessing him of his home. Or, if we overturn the foreclosure sale, it owes Paul for conveying an invalid title (more accurately, it would owe the sheriff who should have to return Paul’s money). If I had to choose between owing a homeowner for dispossessing the person of her home or owing a disappointed investor for conveying an invalid title at a foreclosure sale, I would rather owe the disappointed investor. It is going to be cheaper.
The issues I have outlined are in play in a Massachusetts case called Bevilacqua v. Rodriguez, currently pending before that state’s highest court. Previously, in a case called Ibanez, the court rejected claims that Wall Street’s nontransfer of mortgages and notes through the securitization process was sufficient to establish standing to conduct a foreclosure sale. Bevilacqua deals with the fallout from Ibanez as the purchaser at a foreclosure sale tries to bring a “try title” action to establish his prior claim to the property despite the fact that the foreclosure sale appears to be invalid under the reasoning of Ibanez. Credit Slips blogger Adam Levitin led an effort by other Credit Slips bloggers (Katie Porter, Chris Peterson, and John Pottow) to file an extraordinarily well-written amicus brief supporting the homeowner’s position. The Mortgage Bankers Association (MBA) has filed an amicus brief supporting the purchaser at the foreclosure sale.