Foreclosures Stopped by Courts
One of the NCREI Investors sent an article to me yesterday referencing an interesting turn of events.
Court rulings may make it tougher for holders of mortgage-backed securities to take back the keys…
The problem stems from a shortcut that many players in the fast-moving securitization business have used in recent years. Normally, when a loan is sold, a simple document is prepared showing that the debt and any collateral attached to it has been transferred to the purchaser. That piece of paper is called an assignment. But in buying up thousands of mortgages at a time, Wall Street commonly skips this step, which requires separate paperwork for each loan. Instead, the industry customarily relies on a lengthy contract, known as a pooling-and-servicing agreement (PSA) to spell out arrangements for all of the loans in a pool. But, as some recent court rulings indicate, a PSA may not be good enough when it comes time to foreclose.[googmonify]4494413162:right:250:250[/googmonify]
Now it is quite common to talk about mortgages and trust deeds interchangeably, but in fact they are different legally, and have a different foreclosure process. Ohio is a mortage state and California is a trust deed state and it is unclear to me if that issue applies exclusively to mortgages or if potentially trust deeds would also be included. If anybody has knowledge or expertise that can clarify this matter - please share it with the group.