A white knight has come to the rescue of homeowners about to lose their homes to foreclosure. A federal district court in Ohio dismissed 14 foreclosure cases brought by Deutsche Bank (NYSE: DB) on behalf of mortgage investors because they couldn't produce proof that they owned the properties they were trying to seize, the New York Times reports today. These complicated mortgage securities, totaling $6.5 trillion of securitized mortgage debt as of the end of 2006, make it easy for investors to trade the securities, but harder for them to prove actual ownership in the courts.
Until this ruling, the courts have been letting them get away with it. They've also gotten away with the lax legal standards of proof because most people facing foreclosure don't have the money to fight lenders in court. Judge Christopher Boyko asked Deutsche Bank on Oct. 10 to file copies of loan assignments showing that the lender was indeed the owner of the note and mortgage on each property when the foreclosure was filed. But the bank couldn't do that. It could only show that there was an intent to convey the rights in the mortgages rather than proof of ownership. That's because to make things easier for the banks to buy and sell these securities the actual mortgage notes are not shipped around the world.
In fact sometimes an underlying mortgage can be put into more than one securitized debt package. Josh Rosner, a specialist in mortgage securities, told the Times, "I have heard instances where the same loan is in two or three pools." Katherine Porter, whose mortgage study was released last week, found that 40% of creditors foreclosing on borrowers did not show proof of ownership.
Judge Boyko decided to put an end to these lax legal practices and said in his ruling, "The institutions seem to adopt the attitude that since they have been doing this for so long, unchallenged, this practice equates with legal compliance. Finally put to the test, their weak legal arguments compel this court to stop them at the gate," according to the Times story. Hopefully other judges will follow in his footsteps around the country and finally force mortgage services to try to work with people in trouble rather than move swiftly to foreclosure.
If you are facing foreclosure, don't just accept it. Seek help from legal aid lawyers. One consumer lawyer in Florida told the Times, "We see a trend toward judges having enough of this trampling of the rules and procedures and care and reverence with which lawyers and litigants and participants in the judicial process should comply. Hopefully this will convince everybody that the time to work out these home loans is now."
Lita Epstein has written more than 20 books including "The 250 Questions You Should Ask to Avoid Foreclosure" and the "Complete Idiot's Guide to Improving Your Credit Score" due out next month.
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Reader Comments (Page 1 of 1)
11-15-2007 @ 10:47AM
Steven Danis said...
I think as the national lending crisis continues that we will be seeing a lot more of the kinds of lawsuits as in this example in Ohio. Years ago when a bank made a mortage, it held on to the mortgage until it was paid off. Nowadays mortgages have become freely traded financial instruments that are passed on through many hands. Eventually the connection between a specific property that the mortgage covers and the holder of that mortgage has been lost. Which I think will not only help to forestall foreclosures where the mortgage holder is not the original lender, but also increase the losses to the unhappy holders of those mortgages. Yet more collatoral damage from the harebrained schemes hatched on Wall Street during the real estate bubble.
11-15-2007 @ 6:55PM
Jose valle said...
There it is folks...like it or not THIS RULING is the first domino
in a long line
That will lead to a full DEPRESSION in 2007 in our country.
MARK MY WORDS.
11-18-2007 @ 2:20PM
JOhn Reed said...
You know, a depression is only feared by those living above a certain line of income. Once you've lost your house, you fall below that level. Your Credit is ruined for years (and in my own case, illegally through Credit Rating manipulation!), your ability to find good employment is hindered by your negative Credit rating. I know because I'm already there. Those in the Lending Industry who've enjoyed record profits over the last few years have only been able to enjoy those same profits because of the hard work of mostly honest people who were sucked into these illegal/immoral loan schemes. I don't fear a Depression. I've already have been forced to live a lousy lifestyle for several years because of Illegal and immoral financial Institution practices. Practices I was forced to accept because of my own lack of financial ability to fight in the Courts against well backed Institutions. So, if a Depression is the necessary to bring back Justice, fair play and equality between th Corporate World and the Individual, then I say.... Bring it on! Your way ruined me, and now you want me to feel sorry for you? I have been steeled by Loss and ruin imposed by Corporate Greed, there's nothing left to take. Welcome to the Machine. BTW, you know me. I'm that guy who personally did rehabs on 7 properties and was patted on the back by numerouss neighborhood redevelopment Committees for leading the way in revitalizing their neighborhoods, by the Local Politicians wanting re-election and by the Banks wanting to refinance my properties. You know, that Guy who went to all those Attorney's Offices trying to get representation when the Bank's decided to quit refinancing my new rehabs..... without even giving me a reason because all the previous payments were made and on time because you were making to much money doing those legal things that only require 1 piece of paper you could overcharge some poor schmuck out of $500 just to file for them (like an answer to a Summary Judgment which will forestall a foreclosure in Ohio by another 9 months, allowing for more time for the Homeowner to get there shit back together). Only wanting the "easy money" work. Remember me? I'm that Guy who paid thousand's to Mortgage Co.s, thousands to Insurance CO.'s thousands to Property Tax's & thousand's to the Courts for Evictions. I'm that Guy you lived off of for many years and when I had nothing left, had to move to the woods and become a dumpster diver to survive. And now you want me to worry about YOUR Depression? LMAOROTF!!!