Banks must Prove Ownership to Foreclose - Image: Nick Bastian Tempe, AZ (Flickr.com CC-BY-ND 2.0)
Big banks all over the US were dealt a tremendous blow this morning when a federal court ruled that they could not go forward with certain foreclosures because they cannot prove that they are the owners of record when the foreclosure started. This all has to do with the idea of mortgage companies using securities to back and sell off the mortgage notes and then filing for foreclosure against the home owner.
The high court ruled that the banks must present the title to the courts in order to carry out the foreclosure practice. This is a blow because in order for the banks to receive the title they have to buy the mortgages from the security companies that are currently holding the note, foreclose and then resell the mortgage note as well as the home.
This has become a problem for many banks that have been trying to push their foreclosures ahead of new rules that have just taken effect in the US. The new rules have severely limited the chances that the banks will be able to foreclose on most properties that have fallen into default over the past several years.
However, industry experts have said that the new rules are a good thing overall. The rulings are meant to help consumers stay in their homes and still maintain a presence in the market as opposed to losing their home within months of falling behind on the payments.
The banks involved in the suit said that they would appeal the ruling.
