Posted on 11/15/2007 7:10:13 PM PST by givemELL
Judge Christopher A. Boyko of Federal District Court in Cleveland dismissed 14 foreclosure cases brought on behalf of mortgage investors, ruling that they had failed to prove that they owned the properties they were trying to seize.
(Excerpt) Read more at nytimes.com ...
The law does not say you show me some paper saying I have an agreement to transfer the note that you are the note holder.
You don’t produce the physical docs, you got squat.
Judge absolutely nailed this one 100% correctly.
You can’t produce the physical mortgage and prove you are the holder of it you have ZERO right to file foreclosure.
You would think so, but I’ve worked on these deals, and I sympathize with the judge’s difficulty of figuring out who actually “owns” the mortgage. There are generally several financial institutions involved in these deals, and different places in the papers give each of them certain rights. My point is that it really is not necessary to figure out which one of them “owns” the mortgage. All of those institutions are acting on behalf of the bondholders, who own the debt, and the mortgage by law follows the debt. Thus, unless there is some confusion as to who the bondholders are, there should be no issue for the judge to decide in that regard. The identity of the bondholders is usually not in dispute, although they are also generally not parties to the foreclosure anyway. The bank appears as the plaintiff in its capacity as agent.
To me, it seems like a case of the judge unable to see the forest for the trees.
I think they produced the note and mortgage. What they did not produce is a document clearly assigning the mortgage to them.
“I used to receive mailings touting how I could borrow up to 120% of the value of my real estate (it was mortgage free). I never took advantage of this but if I had how would you apportion the blame?”
If you lost your home, I would blame you 100%. If the lender lost money I would blame them 100%.
They had the contract. What they did not have is a piece of paper signed by the original mortgagee, clearly assigning it to the plaintiff. So basically, the court was saying that the original mortgagee should be suing, not DB. I don’t think that really gives him grounds to invalidate the debt though.
Where does it say in the article that they did not produce the original note and mortgage? Maybe I missed it, but from what I read, the judge was complaining only that there was not assignment of the mortgage to DB.
BTW, there are statutes that specifically allow a party to sue on a lost note and mortgage. The judge might be able to require the plaintiff to post a bond to protect the mortgagor if it turns out later that another party actually has possession of them, but you don’t always have to produce the originals.
>>If your mortgage is now percentably apportioned and owned by several different investment groups, and not 100% by the bank you bought it from, whom do you make partial payments too?<<
That’s the scary part - and not to you, but to our whole system. Based on what I see in this story, if I was in trouble on my mortgage I would not pay a dime to anyone until they could PROVE they are the one to which I owe the money. It is possible that the bank you are making the payment to is not the one to which you legally owe the money - which means you will have to pay it AGAIN to whoever DOES legally deserve the payment.
The key is in this line from the article: “There is no industry repository for mortgage loans. I have heard of instances where the same loan is in two or three pools.”
This article could hold the kernel of the scariest part of this housing bubble. This could be what brings down the entire western civilizations economic house of cards!
Probably not, but the implications of this ruling are truly frightening - especially if you think the judge was correct.
I do.
“The big issue in all these cases, whether we are dealing with a bankruptcy court, a state court or a federal court, is who really owns the mortgage note, and that is allegedly what they securitized, said O. Max Gardner III, a lawyer who represents borrowers in foreclosure in Shelby, N.C. “A collateral question is, has that mortgage note really been transferred and assigned to the securitization trust? If not, then they really don’t have standing. It’s Law School 101.”
And if you are paying them, it could really cost you later, when the one who REALLY deserves payment steps up to the plate.
>>BTW, there are statutes that specifically allow a party to sue on a lost note and mortgage. The judge might be able to require the plaintiff to post a bond to protect the mortgagor if it turns out later that another party actually has possession of them, but you don’t always have to produce the originals.<<
In the meantime, the borrower enjoys a nice home, rent free, while the system spends a few years trying to figure out who really holds the paper.
He shoud be able to buy his next home with cash...
>>I’m not an expert in the mortgage bond business, but I believe there are reasons why this type of arrangement works well for certain types of investors.<<
It looks like, going forward, you may mean “USED TO work well”.
Especially in light of these comments by the judge: “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 the court to stop them at the gate.”
>>If so I would imagine that lawyers are buzzing about this.<<
And bankers will soon be jumping out of windows over it. ;)
>>This is a clerical matter and not some matter of law. Its like showing up with a lawsuit in which nobody signed the last page attesting that it was written by them. Just sloppiness.<<
I tend to agree with your whole post.
That is, unless this is actually true: “There is no industry repository for mortgage loans. I have heard of instances where the same loan is in two or three pools.”
In that case, the “sloppiness” at all levels could be far more costly than just a well publicised case. The ramifications actually boggle the mind.
>>These are not isolated incidents and Greed played a role in more than a few of them.<<
And if this becomes common knowledge and this decision is just the beginning of a tsunami of like decisions - what does this portend for the future?
This has happened a few times over the years. This case is just being publicized now because it works well with the MSM Doom and Gloom Real Estate Fiasco.
Not saying it’s not a problem, but it has happened before.
Whoever services the loan and sends you a bill is who YOU have to pay. The problem is on the other end. One bank can “service” the loan but others can own it.
>>The borrower has not really gained anything but perhaps some time. <<
If the ultimate outcome is sure to be foreclosure, then time is money - right in the pocket of the borrower - every month he enjoys free houseing. And if this thing gets big, we could see some borrowers enjoying their homes in this fashion for years.
I think I would buy gold with it myself...
>>I would put this simply as ... The judge stated “NO TICKEE ; NO LAUNDRY!”<<
Precicely!
Bad news is that if this uncovers a cesspool of banks “loosing their tickee” or rampant outright fraud, this could be very, very bad.
Then I may be over-reacting? Yeah, that is possible.
It just hit me as I was typing that last line that this may be more of a problem this time simply becuase we never had this sort of real estate financing climate before. This means new stresses, the results of which are unpredictable.
But yeah, it will probably be fairly isolated.
It is no one’s interest to engage in massive foreclosures and resultant evictions as the property being repossessed will be vacant and subject to immediate disrepair upon abandonment.
Whole city blocks could fall to “the broken window syndrome” as this happens in multiple housing neighborhoods and would look a bit like the Dresden bombings of war years past.
Just a personal opinion.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.