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PENNSYLVANIA SUPERIOR COURT REQUIRES BANKS TO PROVE THEY OWN THE MORTGAGES ON WHICH THEY ARE FORECLOSING

The explosion of sub-prime lending in the early 2000’s has been followed by collapse in the housing market and an epidemic of home foreclosures. Most of these mortgages were transferred from the original lender, packaged with other mortgages and sold to investors. Unfortunately, when a bank seeks to foreclose on a mortgage loan in default, the bank can have difficulty proving it is the owner of the mortgage. The banks also have difficulty finding payment records, copies of monthly billing statements, and reconciliations of escrow accounts.

In a recent case, Wells Fargo Bank v. Lupori, the Pennsylvania Superior Court has put mortgage holders on notice that they must be able to prove they actually own the mortgage and have the right to foreclose. In this case, Wells Fargo alleged that the mortgage loan had originally been issued by First Franklin, a division of National City Bank and had been transferred to First Franklin Financial Corporation. Wells Fargo then alleged that it was the owner of the mortgage. Wells Fargo did not explain how it acquired the right to foreclose on the mortgage.

The Pennsylvania Superior Court found this to be insufficient. The court was not satisfied with Wells Fargo’s bare assertion that it was now the owner of the mortgage. Instead, the Superior Court ruled that a bank seeking to foreclose must allege a complete chain of title from the original issuer of the mortgage loan to the bank seeking to foreclose.

Kozloff Stoudt’s banking and commercial litigation departments assist mortgage lenders seeking to navigate the mortgage foreclosure process throughout southeastern Pennsylvania.

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