Last week, the top court in Massachusetts handed down a ruling chastising banks for their “carelessness” during the securitization of Massachusetts mortgages. That carelessness has clouded the title of thousands of already-foreclosed properties and creates major problems for future foreclosures.
Not surprisingly, the interests on the banks’ side have put out messages trying to minimize the significance of the decision, messages that Adam Levitin, associate professor of law at Georgetown University, dismantles in the blog Credit Slips. More recently, the law firm K&L Gates, a major, sophisticated firm that did securitization deals, sent out a reassuring newsletter that clients should look at skeptically.
K&L’s basic pro-bank spin is this:
- Completed Massachusetts foreclosures aren’t a big problem because they’re not “automatically” invalidated.
- A complete set of securitization documents successfully transfers mortgages, and perhaps blank assignments can just be filled in, so there’s no fundamental problem foreclosing in the future.
Those claims are misleading and wrong.
The “In Blank” Problem Isn’t Easy to Fix
In order to foreclose…
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