Bad Securitization Stops Foreclosure

Sometimes a short, simple statement thunders more loudly than a rousing speech. So it was earlier this week, when an Alabama judge issued a brief order declaring that because of faulty securitization, the trust created to hold the defendants’ loan (and others) couldn’t foreclose on the loan.  Abigail Field at Daily Finance analyzes the case in more detail in Court: Busted Securitization Prevents Foreclosure.

And that’s why this case is so big: the judge found the securitization of the Horace loan wasn’t done properly, so the trustee — LaSalle National Bank Association, now part of Bank of America (BAC) — couldn’t foreclose. In making that decision, the judge is the first to really address the issue, head-on: If a screwed-up securitization process meant a loan never got securitized, can a bank foreclose under the state versions of the Uniform Commercial Code anyway? This judge says no, finding that since the securitization was busted, the trust didn’t have the right to foreclose, period.
Kudos to Boot Camper Nick Wooten for this significant victory.