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 ...
Happy reading..eom
ping
Somebody has the paper.
A lot of lenders made loans they should not have made on terms they should not have agreed on. The homeowners who overreached are not solely to blame.
“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.”
I don’t agree with the judge. If they did not own it, then the true owner can sue to foreclose. If they did own it, then they can sue to foreclose. Someone can sue to foreclose. To me, it looks like the judge was looking for a way to let the borrower off the hook. Not good for the economy for judges to simply let people who owe money off the hook.
In my view, it’s not really funny. The whole system will go to hell if judges won’t enforce mortgages.
True!
If you could rephrase that in a way that makes sense I'd be forever indebted.
This is NOT something which has some broad and important consequences. Deutsche Bank didn’t have handy the assignment contracts - ie, sloppy paperwork. It’s not as if there are not actual assignments in existence. Its not as though the local loan broker still holds the mortgage even though they get cashed out by DB a month after the note was recorded.
And this whole idea that these homeowners are somehow victims is retarded. In order to get foreclosed upon, you have to NOT BE MAKING YOUR MORTGAGE PAYMENTS!!! Its not like DB just rolled up to some old lady and said “Get Out!”. They don’t want to foreclose on these houses in a market like Ohio. They desparately want these people to start making payments of any kind and keep this paper out there.
There aren’t any victims in this situation. This is just bad representation by the law firm that showed up for DB. They should have had their ducks in a row like any reasonably competent counsel would have. And if they found that DB actually didn’t have notarized assignments to all these mortgages, then they would be slapping people in the head until they got the executed copies in their hands. End of story. Its not like a couple hundred thousand dollar note is just going to slip through the freaking cracks here. SOMEBODY owns the note. SOMEBODY is going to foreclose. The borrowers have guaranteed that by not paying their mortgage (probably for six months or more by the time of this hearing).
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.
All they need to do is show the judge they own the mortgages and he will enforce them.
>> If they did not own it, then the true owner can sue to foreclose.
I wonder if maybe a whole bunch of mortgages were pooled as collateral for some complex investment vehicle that in turn is owned by a whole bunch of investors. Thus, there’s a many-to-many relationship between investors and borrowers.
So, each investor kinda sorta owns a little piece of each mortgage — but no particular investor can prove complete ownership of any particular mortgage.
If so — what a mess!!!
The Tragedy of the Commons...
“The homeowners who overreached are not solely to blame.”
Ok not solely...maybe 95% to blame.
Before we had personal computers (!) I worked in the mortgage department of a bank. I had to coordinate the loan sales and make sure the manually typed assignment documents got recorded, etc. It was a nightmare of details and rushed deadlines. It looks like things have gotten worse instead of better, LOL.
Is this a tactic that the average debtor facing foreclosure can use? If so I would imagine that lawyers are buzzing about this.
The mortgage servicer, who may (and probably is) a totally different party.
Not unless it stops the meter and converts the loan to subprime for life. Looks like a delay of the inevitable to me.
This isn't all that uncommon. This kind of innovative approach to creating securitized mortgage pools goes back to the early days of the mortgage bond industry -- when big institutions like Salomon Brothers would create these odd securities called IO/PO bonds. These terms mean "interest only" and "principal only" -- and they referred to unusual collateralized bonds in which the principal payments from one set of loans were bundled together with the interest payments from another group of loans. So a homeowner's mortgage payments -- unbeknownst to him -- may be going to two separate investors who purchased his mortgage from the bank that originally lent him the money.
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 may have something to do with the inherent "cash-out" risk associated with any mortgage because of the homeowner's right to pre-pay the mortgage at any time without a penalty.
Problem is....they can’t prove they own it. This needs to be sorted out somewhere. It just happens to come at a bad time for some of these paper holders.
So far, really thoughtful, considered responses...thank you all.
It may end up as a bunch of class-action suits....
Interesting post. You could end up with more than one company forclosing on you. I can see why the judge ruled this way.
No matter how complex mortgage-backed securities get, if you want to foreclose, you'll still need to prove that you, in particular, have the right to foreclose. The judge is just telling the bank that their documents don't meet the requirements.
A humorous, and very informational site on this topic is:
http://elainemeinelsupkis.typepad.com/money_matters/2007/11/foreclosed-hous.html
There is no free ride, if the court overstepped anything on the lower level, the higher court will reverse the prior ruling.
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Not if the judge throws it out...
The question of who technically “owns” the mortgage is somewhat academic, though, because the “owner” is merely a representative of certain easily identifiable bondholders who are entitled to be paid. Clearly the bondholders have a right to be paid from the properties. They can appoint anyone they want, and who they appoint is between them and the appointee, having nothing to do with the obligations of the mortgagor.
Ok not solely...maybe 95% to blame.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
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?
your little payment book, but alway make sure you keep your canceled checks forever
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
I don’t have a mortgage to worry about but my bank stopped sending out canceled checks years ago. What do you do then?
The shore area of our state (NJ) has been having their home owners insurance dropped. People are in danger of losing their mortgages. The claim is storm related areas and they no longer cover the area.
The shore area had experienced a boom in home purchases during the ARMs frenzy and now the homes are going to end up in foreclosures due to mortgages not being honored without homeowners insurance.
Well, that is not entirely true. The article states that the mortage note is physically held by a company that warehouses such documents.
The borrower has not really gained anything but perhaps some time. The forcloser is being forced to produce in the forclosure court the actual mortgge note rather than a document attesting to its existance and actual location.
The forclosed borrower is likely out the legal fees for the first battle and will still lose the war and additional legal fees in the next battle when the actual note is produced.
Probably in this case the “trustee” appears to be Deutsche Bank or some entity controlled by Deutsche, which has not kept its paperwork in order.
As others above have said, the remedy is to get the actual ownership in the mortgage paper transferred and then Deutsche can sue.
Only problem I can see: what if the originator of the loan has gone out of business, or even if it is still in business but can’t find the file with the original mortgage in it?
If Deutsche can’t get the paperwork, they can’t ever enforce the mortgage. And they will probably be liable to the owners of the mortgage-backed securities. Ouch big-time.
As someone said above, the job isn’t done until the paperwork is finished.
My mortgage was purchased in 2002 and yes, I have an ARM which I had hoped to get out of. Closing was set - and I was laid off so no closing. I’m making my payment within the month it is due (but always late). Not so good for my credit. Asked Wilshire if they would agree to a skipped payment and put it on the end of the loan. They said no - that they do not have the power/authority to change the terms of my original note. Does this make sense?
In my view, it’s not really funny. The whole system will go to hell if judges won’t enforce mortgages.
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Thats the point ,, they have been lax for 30+ years in enforcing the banks side ,, their paperwork has been deficient in the past and it was overlooked... The judge has decided that both sides have to comply...
I would put this simply as ... The judge stated “NO TICKEE ; NO LAUNDRY!”
It’s not an issue that involves the mortgagor, though. It’s only an issue between the security holders and the bank. It’s a question of who the security holders want to act on their behalf. To let the mortgagor off because the judge can’t figure out the answer to that tangential question is nonsense. If the judge is confused about it, then fine... require the money and/or foreclosed property to be put in trust until he has a clear answer to that question. There should not be any real doubt about it though. The money ultimately goes to the security holders, not the bank, and who owns the securities is not really in doubt.
actually this is not unheard of. It comes from slopping mortgage closings and incomplete papers.
This will be resolved as the lawyers now have to go back an find the defect and how they will be able to plead correctly.
Possessing rights to payment does not imply right to the property itself. Without the note, DB can’t take possession of the property. This is not a systemic problem, it’s institutional laziness, and it seems the judge is telling everyone to get their sh*t in order before challenging the integrity of the court to look the other way.
My point is that it’s not DB’s rights anyway. DB is acting on behelf of the people who have a right to payment. They are merely an agent.
It’s sort of like if you hired a lawyer to handle a case for you, and he sent one of his associates to go with you to the hearing, and the judge refused to hear the associate because he can’t prove that he works for your lawyer. Who cares? You and he are there, and you’re telling the judge that he represents you. The judge doesn’t need to see the associate’s employment contract in order to decide the case.
No, they have a right to an income stream from a pool of bundled securities, such as BS361-350-121-0a31. That security receives the income from the underlying mortgage payments.
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