Another Ohio Judge Halts Foreclosures

By Alan White

A state court judge in Cincinnati has dismissed a foreclosure action because the securitization trust filing the suit was not the holder of the mortgage at the time it sued the homeowner. The judge then took the unusual step of ordering the law firm filing the foreclosure to file proof of mortgage ownership before filing any new foreclosure actions for any clients. The mortgage at issue was a teaser rate ARM, and the couple involved say they had made a payment agreement with the servicer before the foreclosure was filed.

The Ohio Attorney General Marc Dann has already filed motions in several Ohio counties to stop foreclosures until their legal ownership is properly established.

In many cases, the securitization trust that owns the loan will be able to obtain the necessary mortgage assignment and a properly endorsed Note, but careful compliance with court rules will put off foreclosure for 30 to 60 days. In other cases, however, especially when the original lender has gone bankrupt or otherwise imploded, it may be difficult or impossible to get the necessary signatures, and the necessary documents, to complete a legal transfer of the mortgage that was not completed before the foreclosure. There is no reliable way to estimate the percentage of cases where ownership paperwork will be unavailable, but it will be significant. Hopefully, while the servicers search frantically for the missing paperwork, they can focus more time and attention on making reasonable modifications of loan principal and interest to allow homeowners to stay in their homes, and mitigate losses to investors. The significance of these cases may also go beyond the "real party in interest" issue, as state and federal court judges may decide to flex their muscles and become less and less inclined to rubber stamp the rising flood of foreclosure filings.

A note to law professors: the Cincinnati Enquirer story cites the study of mortgage servicer errors by Katie Porter, the same study that was also cited by one of the Ohio federal court judges. Good scholarship makes a difference.

Comments

[Bobby Korey]

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