Federal Court Dismisses 14 Foreclosure Cases; Deutsche Bank Fails To Provide Proof Of Mortgage Note Ownership

(original post 11-16-07)
In Cleveland, Ohio, The New York Times reports:

• A federal judge in Ohio has ruled against a longstanding foreclosure practice, potentially creating an obstacle for lenders trying to reclaim properties from troubled borrowers and raising questions about the legal standing of investors in mortgage securities pools. 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.

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• [T]he Ohio ruling indicates that the intricacies of the mortgage pools are starting to create problems for lenders as well. Lawyers for troubled homeowners are expected to seize upon the district judge’s opinion as a way to impede foreclosures across the country or force investors to settle with homeowners.

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• Saying that Deutsche Bank’s arguments of legal standing fell woefully short, the judge wrote: “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.”

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• Because most foreclosures proceed without challenges from borrowers, few judges have forced trustees like Deutsche Bank and Bank of New York to prove ownership by producing a mortgage note in each case. Borrower advocates cheered Judge Boyko’s ruling.

• The plaintiff’s argument that “‘Judge, you just don’t understand how things work,’” the judge wrote, “reveals a condescending mindset and quasi-monopolistic system where financial institutions have traditionally controlled, and still control, the foreclosure process.” The cases could be filed again in state court, however.

The court made clear that Deutsch Bank can refile these foreclosure cases with the appropriate documentation establishing proof of ownership of the mortgages and mortgage notes they are attempting to foreclose (assuming, of course, that they can actually find the physical paperwork - ie. the actual mortgage notes, assignments, affidavits, etc.; no photocopies).

For more, see Foreclosures Hit a Snag for Lenders (may need subscription; if no subscription, try here).

See also, Court Challenges Trust on Foreclosures (Federal Judge Tells Trust to Show Clear Mortgage Documentation in Foreclosures) (if link expires, try Federal judge tells trust to show clear mortgage documentation in foreclosures - same story, different headline).

Go here to view the Federal Court ruling.

For other posts that reference the failure of some mortgage lenders and their attorneys to file the required loan documents when starting foreclosures, Go Here, Go Here, Go Here and Go Here. missing mortgage foreclosure docs alpha