US Banks Lose Foreclosure Ruling

By Robert Davis
Jan 8 2011

US banks are on the losing end after yesterday’s ruling in an US federal court regarding ownership proof for home foreclosures.

The ruling stems from a lawsuit filed in federal court challenging the right of banks who no longer hold the title to a property to foreclose. Under the terms of the new federal mortgage guidelines, the banks that have sold off the property notes are no longer eligible to file foreclosure cases.

The banks challenged the law in federal court stating that they would lose all rights to foreclosure if the rules were allowed to stand. However, the judge in the case upheld the federal guidelines which virtually ended thousands of foreclosure cases all over the US.

The issue at hand deals with banks that secure their mortgages by selling the notes to securities companies all over the US. When they do this the note is then passed to the securities company and the bank no longer has legal ownership of the property. However, in the past such banks were still legally allowed to file foreclosure on such notes.

Now all US banks will be required to show proof of ownership before they are allowed to carry out a foreclosure on a specific property. According to reps for the banks this new rule will cost them millions each year when they must buy back the mortgage notes so that they can file the foreclosure and recoup the money that was lost. They have said that they will likely appeal the ruling from Friday.