Wall Street investment houses were eager to generate mortgage-securitized trusts – financial instruments created by bundling thousands of mortgages and selling shares to investors who expected to profit from the combined monthly mortgage payments. To deal with the paperwork involved with securitized trusts, many banks set up a process that came to be called robo-signing – high-volume approval of mortgage transfer documents by employees who didn’t review details and missed troubled mortgages. Hughes argued that when Wells Fargo retroactively attached the Wolfs’ mortgage to a securitized trust that was closed and sold to investors three years earlier, the bank violated a Texas law that prohibits fraudulent real estate filings. The jury agreed, although State District Judge Mike Engelhart hasn’t formally entered the verdict, and the bank and mortgage company haven’t said whether they’ll appeal. Ownership of a deed is created when the promissory note is transferred to a trustee, not when change of ownership is recorded at the county clerk’s office, Wells Fargo’s lawyers argued in court filings. Wells Fargo also argued the Wolfs do not have legal standing to contest whether their note and deed of trust were handled correctly under the trusts’ pooling and servicing agreements. […] homeowners are typically in the background and aren’t involved in buying or selling mortgages, transferring documents into trust agreements or creating mortgage-backed securities. […] this time, the Wolfs could stop the foreclosure – and potentially receive millions of dollars in damages if the jury verdict stands – because of the Texas law that prevents fraudulent filing of documents involving real estate. Dana Karni, a consumer rights lawyer in Houston, said that lenders, as well as companies that buy debt at a discount. then try to collect it, may view occasional legal judgments as a business expense unless juries award millions of dollars or more. A representative from Carrington told them that with the job loss and mounting bills, they would be good candidates for a federal program to help struggling homeowners.

Source: Jury awards $5.4 million to couple after finding fraud in foreclosure case – Houston Chronicle