Recent Massachusetts High Court Ruling Triggers Resumption Of Statewide Class Action Alleging Faulty Foreclosures, 'Fair Debt' Violations

In Boston, Massachusetts, Bloomberg reports:

• A statewide class action in which Massachusetts homeowners accuse U.S. Bancorp and Ally Financial Inc. of faulty foreclosures will resume now that the state’s high court ruled in a similar case last week.(1),

• The litigation was on hold while the Supreme Judicial Court decided whether state law required foreclosures to be conducted by the mortgage owner. The high court ruled Jan. 7 in U.S. Bank v. Ibanez that an industry practice allowing post-foreclosure assignments violated state law. “This is a statewide class action and it’s going to bring relief to all of the people who are dispossessed homeowners in many instances,” Kevin Costello, a lawyer for the borrowers, said in a telephone interview today. Costello [] filed a motion to restart evidence gathering in the case. [...] In July, U.S. District Judge Richard G. Stearns in Boston granted the defendants’ request to halt the class action until the high court ruled in Ibanez.

• Banks and law firms had been conducting foreclosures in the state before mortgages were transferred to them under a 1995 “title standard” by the Real Estate Bar Association for Massachusetts, a group of closing attorneys, that condoned the practice.

• “It was basically created by the real-estate bar without adequate foundation,” said Costello of Roddy Klein & Ryan in Boston. “It became an enabler for people who wanted to do business the way they wanted to do business.”

• The homeowners in the class-action, or group, lawsuit said their foreclosures were also brought by the wrong party, often because of the process of securitization -- bundling mortgages into trusts that issue bonds. The Ibanez ruling “pretty clearly establishes that our theory of the case is correct,” Costello said. “The securitization machinery didn’t allow for individualized treatment of these kinds of loans and so the sort of standard industry practice was foreclose first and assign later.”

• The case has two classes of borrowers, he said: those whose foreclosures were started though not completed and those with completed foreclosures. The homeowners sued Ally unit GMAC Mortgage and U.S. Bancorp unit U.S. Bank. Other defendants include EMC Mortgage, now owned by JPMorgan Chase & Co., and two foreclosure law firms, Harmon Law Offices PC in Newton and Ablitt Scofield PC in Woburn.

For the story, see Massachusetts Foreclosure Class Action to Resume.

For the Massachusetts class action lawsuit, see Manson v. GMAC Mortgage LLC.

(1) According to the Amended Consolidated Complaint (paragraphs 6-7), the Plaintiffs seek relief for the Defendants’ wrongful foreclosure practices. Plaintiffs seek declaratory and injunctive relief concerning the validity of foreclosures conducted by entities who do not hold a power of sale at the time of the sale, injunction of eviction actions pending procedures to verify the validity of the underlying sales, injunction of upcoming sales where there is no proof of assignment, cancellation of fees and costs for invalid sale processes, and damages.

In addition , the lawsuit also seeks recovery for alleged violations of the Fair Debt Collection Practices Act, 15 U.S.C. § 1692, et seq. and Massachusetts General Law c. 93A., the state's consumer protection statute.