Memo to Tom Miller-Keep It Simple, Part Two.

We became aware of a Massachusetts Supreme Judicial Court decision released this morning that fleshes out the direction this subject is going and makes some important points

In U.S. Bank National Ass'n v. Ibanez, no. SJC-10694 (Mass. Jan. 7, 2011) the bank and Wells Fargo (hereinafter the banks) foreclosed on and purchased two properties as trustees for asset backed securities-for which read sliced and diced securitized mortgage pools.

The plaintiffs asked the Land Court to declare that they held title in fee simple, but the court opined that the banks had not made the required showing that they were the holders of the mortgages. The Supreme Judicial Court, on review, agreed.

In both cases the homeowners did not answer the complaints (I suspect that this is pretty typical) and the plaintiffs moved for default. The Land Court, Judge Keith Long presiding, entered judgment against the plaintiffs, ruling that the foreclosure sales were invalid because the sales named the banks as mortgage holders when they were not, in fact, the assignees of the mortgages at the time.

The banks moved to vacate the court's judgment, but this was denied.

There's an interesting trail here.

The Ibanez mortgage originated in December 2005. Rose Mortgage executed a blank assignment to Option One, which assigned it to Lehman Brothers, which assigned it to Structured Asset Securities Corp., which pooled the mortgage with 1,220 other mortgages and assigned the whole package to U.S. Bank as trustee.

U.S. Bank was unable at the time to show that the mortgage had been assigned to them, and this did not happen until nearly two years after the foreclosure sale. They argued that the securitization documents established the assignment prior to the foreclosure and sale. The court did not agree.

In their concurrence, Justices Cordy and Botsford remarked that what was surprising about the cases was not the principles set forth by the court, but "...the utter carelessness with which the plaintiff banks documented title to their assets. There is no dispute that the mortgagors had defaulted on their obligations and that the mortgaged properties were subject to foreclosure. Before commencing such an action, however, the holder of an assigned mortgage needs to take care that his legal paperwork is in order."

The principle's simple. If you cannot show that you owned it or were the legitimate assignee at the time of the foreclosure, you can't have it and ratify it later on.