Bank Foreclosures "Invalid"

Remarkable news on bank lending practices from CNN:

The Massachusetts high court ruled on Friday that two foreclosures are invalid because the banks could not prove they had the proper paperwork to foreclose...

This could be a harbinger of things to come because it is the first ruling by a state high court on the issue of whether banks can foreclose on homeowners if can't prove they hold the mortgages.

Numerous instances of this emerged last fall, as evidence appeared that banks were robo-signing foreclosure documents without actually reading them. As a result, there are dozens of similar cases in lower courts across the country, all waiting for the Massachusetts Supreme Court ruling...Mortgage loans are like real property and can only be transferred by physically signing over the paperwork -- like someone endorsing a check or the title to a car -- and delivering it to the next holder. Without that, the holder of record doesn't change.

Under mortgage securitization, loans get transferred many times after origination before landing in pools of mortgages that are sold to investors. But often times, the banks simply didn't endorse the paperwork between steps...