In the euphoria of the housing boom, there was a lot of slipshod paperwork done- and in some instances, it’s playing havoc with the foreclosure process:  [Hat tip Freedom's Phoenix]

In a stunning victory for borrowers, a New Jersey court has dismissed a foreclosure action filed against the borrowers by Deutsche Bank Trust Company America as alleged trustee for a securitized mortgage loan trust after Deutsche Bank willfully, and despite the entry of three (3) separate court orders, refused to produce documents demanded by the borrowers which included documents setting forth the identity of the true owner and holder of the Note and mortgage, the complete chain of title to ownership of the note and mortgage, payment application histories, and documents as to the securitized mortgage loan trust. The Court had given Deutsche Bank multiple opportunities and extensions of time to produce the documents, but Deutsche Bank continually refused to produce any of the documents requested, resulting in the dismissal of Deutsche Bank’s foreclosure action. The Court also ruled that Deutsche Bank is not permitted to re-file any foreclosure action until it is prepared to produce ALL of the subject discovery.

Morgan at Blown Mortgage talked about this problem in March

, as did

Tanta

before him.  Morgan quoted this New York Times piece:

 

WE are all learning, to our deep distress, how the perpetual pursuit of profits drove so many of the bad decisions that financial institutions made during the mortgage mania.

But while investors tally the losses that were generated by loose lending so far, the impact of another lax practice is only beginning to be seen. That is the big banks’ minimalist approach to meeting legal requirements — bookkeeping matters, really — when pooling thousands of loans into securitization trusts.

Stated simply, the notes that underlie mortgages placed in securitization trusts must be assigned to those trusts soon after the firms create them. And any transfers of these notes must also be recorded.

But this seems not to have been a priority with many big banks. The result is that bankruptcy judges are finding that institutions claiming to hold the notes that back specific mortgages often cannot prove it.

Morgan stated:

Lenders need to document the ownership of the note clearly and homeowners have a right to ensure that their rights as a homeowner are not infringed by lenders who are no longer party to the ownership of the home; but this will cause headaches on both sides moving forward as banks try to foreclose and homeowners try to modify mortgages with questionable ownership.

Maybe it’s time to invest in aspirin companies- we’re looking at a lot more headaches going forward.