Barry Ritholtz comments on a Massachusetts Supreme court case, where several homeowners have sued to void their foreclosures “because securitization-industry practices violate real-estate law governing how mortgages may be transferred.” He says:
here are several issues in the case: The technical one is whether a mortgage can be transferred without naming the recipient, as is commonly done in securitizations. But the more important issue applies to mortgage rights — do they “detach” from the promissory note when that note is sold? Asked more plainly, must someone asserting the right to foreclose actually own that Note?
This is more than a technical issue; at risk is whether we, as a nation, are going to allow corporate entities to violate existing law, or even worse, attempt to create their own, extra-legal, non democratic policies.
I usually find sweeping statements like that more irritating than inspiring, but Ritholtz is too educated to ignore. And the consequences are pretty straightforward: Wells Fargo foreclosed on Mr. and Mrs. Larace’s house 10 months before the bank owned the mortgage. There are more sketchy details in the original Bloomberg story, but this case is pretty binary, like Ritholtz says; either banks get to break the law and take your stuff, or they don’t.