Posted by Jonathan J. Miller -Thursday, October 27, 2011, 7:54 AM
It seems logical to me that a bank can’t foreclose on a mortgage if they can’t prove ownership. You can’t re-take what you don’t own. That’s what last year’s “robo-signer” scandal was all about.
You can appreciate (no pun intended) how much foreclosure volume actually fell after the “robo-signer” scandal last fall in this chart on the Long Island housing market.
Source: Long Island Real Estate Reports
One step further…
According to Bloomberg, The Massachusetts Supreme Judicial Court made recent ruling in that:
banks can’t foreclose on a house if they don’t own the mortgage, went one step further in a closely watched case and said a sale after that foreclosure doesn’t transfer the property. Therefore, the buyer couldn’t bring his court action against a previous owner, the court ruled.
So logically it follows that if this home was resold by the bank even though the bank did not have valid ownership, the chain of title has been broken and the re-sale is not valid until ownership in each step has been proven.
If this is universally adopted (can’t see why it wouldn’t), it will scare investors, keep foreclosure sales activity artificially low, keep credit tight and prevent the housing market from clearing excess supply anytime soon. Of course, it isn’t unreasonable to prove you actually own a property when selling it.
That’s why this housing crisis reflects a systemic breakdown – there was a lack of respect for the rule of law (and no criminal penalties to those who did break it) so we keep uncovering problems that have to be resolved before we can start at square one.
What a mess.