By Moe Bedard & Aaron Krowne
“It is troubling that the plaintiff has filed this case before it had any interest in it,” Hamilton County Common Pleas Judge
Steven E. Martin said in a letter to Wells Fargo’s lawyer.
The judge said the foreclosure lawsuit was filed before Wells Fargo owned the mortgage - thus,
the suit was premature.
Martin then ordered the Wells Fargo law firm,
The Law Offices of John D. Clunk, that the law firm must file proof that its clients actually own the mortgages before filing any new foreclosure actions in Hamilton County. That firm is based in Hudson, Ohio and is the third largest filers of foreclosure actions in Hamilton County, with 48 properties scheduled for the foreclosure auction block in the next six weeks.
The foreclosure warfare has begun and this ruling is the first of its kind by a state court judge in Ohio since the foreclosure debacle started. Ohio has one of the highest foreclosure rates in the country and just recently Ohio Governor Ted Strickland
created the “Ohio Foreclosure Prevention Task Force” to combat the foreclosure crisis.
In Ohio, the worst state in the nation by foreclosures, 3.7% of all loans were in foreclosure by the end of the third quarter, up from 3.6% in the second quarter, according to a Mortgage Bankers Association survey. The number of new foreclosures in Ohio rose by about 20% in the same period.
Judge Martin’s ruling could have severe implications on how foreclosures are handled in Ohio and in particular how servicers file future cases. This comes after several recent local rulings from three federal court judges that we had reported on last month. The judges in the earlier rulings came from Cleveland, Dayton and Columbus. All had issued similar opinions in foreclosure cases in the last month that caused a media feeding frenzy.
“This court is well aware that entities who hold valid notes are entitled to receive timely payments in accordance with the notes. And, if they do not receive timely payments, the entities have the right to seek foreclosure on the accompanying mortgages.
However, with regard the enforcement of standing and other jurisdictional requirements pertaining to foreclosure actions, this court is in full agreement with Judge Christopher A Boyko for the Northern District of Ohio who recently stressed, ‘That the judicial integrity of the United States District Court is ‘Priceless.’”
- 32 more foreclosures were dismissed on November 14th by Ohio Federal judget Kathleen O’Malley, citing the reasoning of the Boyko decision. Our investigations of this ruling uncovered the fact that the plaintiff was Household Realty Corporation, showing that this issue was not just a “Deutsche Bank problem”.
- In one opinion, a federal judge in Cleveland sought to reverse what he called “a quasi-monopolistic system where financial institutions have traditionally controlled, and still control, the foreclosure process.”
Attorney General Marc Dann has
seized the opportunity to flex his legal muscles and is using that decision in an effort to slow foreclosure filings throughout the state by filing motions last week in seven Hamilton County cases and several more in Butler, Montgomery, Franklin and Delaware counties.
Dann is insisting that judges scrutinize each foreclosure case.
The Wall Street Journal
reported today;
In Ohio, 31 motions have been filed in cases in five Ohio counties since last month, and more will be filed soon, a spokeswoman for Attorney General Marc Dann said. The motions argue that the plaintiffs, often banks that act as trustees for investors of securities backed by mortgages in the cases, don’t actually hold the promissory note and mortgage, and so don’t have a right to foreclose. The situation occurs in part because mortgage documents and the contracts between borrowers and lenders may change hands multiple times and may not be assigned to the plaintiffs at the time the suits are filed.
Lately, some Ohio state judges have ruled against banks for filing suits without showing proof that they hold the mortgage. Mr. Dann’s motions urge judges to review foreclosure filings in their courts and, as warranted, dismiss actions on the same grounds. Short of that, he encourages judges to order mediation so that “parties can negotiate a workout agreement, thereby resolving their dispute without resort to foreclosure.”
The issue is known as the
“real party in interest“ rule, which says that a plaintiff must prove that it has a stake in a lawsuit in order to file it;
“Every action shall be prosecuted in the name of the real party in interest. A personal representative, guardian, bailee, trustee of an express trust, a party with whom or in whose name a contract has been made for the benefit of another, or a party authorized by statute may sue in that person’s own name without joining the party for whose benefit the action is brought; and when a statute of the state of Ohio so provides, an action for the use or benefit of another shall be brought in the name of the state of Ohio. No action shall be dismissed on the ground that it is not prosecuted in the name of the real party in interest until a reasonable time has been allowed after objection for ratification of commencement of the action by, or joinder or substitution of, the real party in interest; and such ratification, joinder, or substitution shall have the same effect as if the action had been commenced in the name of the real party in interest.”
From Cincinnati
The Enquirer;
Many lawyers and experts are unclear how far-reaching the effect of the recent landmark orders will be. But a recent analysis by University of Iowa law professor Katherine M. Porter found that 40 percent of the 1,733 foreclosures she studied did not contain proof that the plaintiff owned the mortgage.
Kevin R. Flynn, a lawyer who teaches real estate law at the University of Cincinnati College of Law, said, “If I were a defendant in a foreclosure action, that’s the first thing I’d raise.”
Though the banks might be guilty of taking shortcuts, in most cases, it’s not hard to prove that they own the mortgage, he said.
The Ohio Attorney General has now put this same issue before a number of other judges.
“We’re hoping that judges will stop and take a closer look at these pleadings,” said Nadine Ballard, the chief of the attorney general’s Consumer Protection Section.
The issue is more than just a technicality, she said. Some of the same financial institutions rushing to the courthouse to seize mortgaged property are also claiming that they don’t own those abandoned buildings when served with a tax bill or building-code violations.
“They can’t have it both ways here,” Ballard said.
We couldn’t have said it better ourselves.
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FORECLOSURE Premature:Bank DID NOTOWN MORTGAGE! 
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