The Massachusetts Supreme Court on Friday upheld a lower court ruling voiding two foreclosures because the banks failed to show the proper paperwork to prove they owned the loans-a decision that challenges the way mortgages were bundled and sold around the world.
Shares of Wells Fargo and U.S. Bancorp–the banks involved in the case–as well as those of other banks fell following the announcement of the decision. Wells Fargo was down 3.4 percent and US Bancorp 1.1 percent at midday.
The Massachusetts court is the highest to ruled on this issue and the decision has the potential to invalidate thousands of foreclosures across the state. It also provides more ammunition to borrowers in other states who could push the case to the U.S. Supreme Court. If the nation’s highest court rules that these transfers are not legal, the multi-trillion-dollar mortgage-backed securitization industry could face massive liability.
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