Loan Servicer Causes Home To Be Sold In Foreclosure Sale Despite Fully Paid Off Loan & Recorded Satisfaction Of Mortgage

The Indiana Court of Appeals recently reversed a lower court ruling, and remanded the matter back to it for trial in a case where loan servicer Ocwen Bank allegedly foreclosed on a home despite the fact that:

• the loan holder's (JPMorgan Chase) records show the loan was paid in full,
• the homeowner/couple had proof that the mortgage was paid off - namely a recorded satisfaction of mortgage - received from JPMorgan Chase, and
• there was evidence that they never received notification of the initiation of the foreclosure action against them and may have been improperly served with the lawsuit (ie. "sewer service").

The Indiana appeals court begins its ruling with the following brief summary of this fiasco:

• The Kafkaesque character of this litigation is difficult to deny. Having failed to receive a summons that may have been improperly served upon them, Marilyn and Michael Elliott learned that a default judgment had been entered against them, foreclosing on their home because of a mortgage that was allegedly in default. The home was sold in a sheriff's sale to the lending bank.

• Feeling confused and suspicious, they turned to the Indiana Attorney General, who directed them to file a complaint with the Comptroller of the Currency. The Comptroller's investigation revealed that Chase Bank, the ostensible plaintiff herein, is entirely unaware of the foreclosure proceeding. Moreover, Chase's records show that the mortgage was paid in full in 2001. Chase, therefore, executed and recorded a satisfaction of mortgage.

• Notwithstanding the satisfaction of mortgage, Chase's loan servicer—Ocwen Bank—continued to prosecute this action in Chase's name, attempting to force the Elliotts out of their home even though there has never been a trial and the lending bank has declared that the mortgage was paid in full. Finding this situation untenable, we reverse and remand for trial.

For the facts of the case and the rest of the ruling, see Elliott v. JPMorgan Chase Bank, No. 30A01-0907-CV-356, (Ind. Ct of App., February 3, 2010) (case also available here).