Fascinating March 30 legal decision out of Alabama, in the case of Phyllis Horace vs. LaSalle Bank National Association et. el.
The judge issued a summary judgment ruling (original motion is here), tossing out the foreclosure action due to lack of trustee standing:
“The ruling prevents defendant LaSalle Bank – as the trustee holding the plaintiff’s securitized mortgage – from proceeding with a foreclosure because the trust failed to follow its own pooling and servicing agreement, and did not follow applicable New York law when trying to “obtain assignment of Horace’s note and mortgage,” according to the court order.
Without proof the mortgage had been assigned to the trust, in this case a Bear Stearns-related mortgage trust, the trustee lacked standing to foreclose, the court found.”
In other words, if you screw up the process of securitizing mortgages by failing to assign the loan note (and/or physically keep track of it), you lose the right to subsequently foreclose in the event of a default.
Note who the participants to this debacle are:
Bear Stearns Asset Backed Securities I LLC, asset-backed certificates series 2006-EC2.
Mortgage Electronic Registration Systems (MERS),
Encore Credit Corp.,
EMC Mortgage Co.
Bank of America
Alabama judge denies securitization trustee standing to foreclose
Housing Wire, April 1, 2011
Court: Busted Securitization Prevents Foreclosure
Daily Finance 04/01/11
Yves has the original court filing here . . .