On 11/28/07, michael perelman said:
> A database would be very useful. An Ohio
> judge just ruled that foreclosures were illegal
> because the forcloser[s] could not prove that
> they owned the property.
This isn't quite what he ruled in what anyway is an at once obvious and
trivial ruling.
Although that decision did suggest (in the context of that case: basically
as an aside) that, possibly, in some states which have recording
requirements for the enforcement of mortgages that have been assigned by
the original lender, the ways in/by which holders of mortgages by
assignment typically acquire them but without complying with law required
recording might provide a partial defense to at least some borrowers being
sued, the arguably only significant two aspects of that case were, first,
that the defendants were fortunate enough to be represented by a lawyer who
read the documents on which the plaintiff purported to rely and, second,
that the court ruled that a plaintiff who alleges a right to sue must then
actually prove what it alleges if challenged to do so (re. which "Duh!"
fairly summarizes the applicable technical/legal principle).
Copies of the loan/mortgage documents purportedly sued upon in that case
showed that a different financial institution than the plaintiff owned
those notes and mortgages and so belied the complaint's conclusory
allegation that the plaintiff was the party injured by defendants' alleged
defaults in paying; and although the judge then gave plaintiff's lawyers
ample opportunity to do so, they did not supply a copy of any assignment to
plaintiff of the mortgages sued upon to it before it sued thus making this
(like a few comparable others since) a simple lack-of-standing-to-sue case
(which, at that, the court dismissed "without prejudice" so as to allow the
filing of a new lawsuit if plaintiff obtains the documentation it would
need to do so).
Most residential mortgage foreclosure lawsuits are brought in state courts
against defendants probably not financially able to be represented by
counsel and many such courts also might be expected to invoke This or That
rule of evidence or other principle of law that will be less punctilious
and more accommodating to plaintiffs than the federal judge referred to
above. Further, even in cases in which courts do require foreclosing
lenders or assignees of lenders to provide documentation of the sort
required in that case, so doing more likely than not will have the effect
of adding to costs/expenses defendants will have to bear in light of the
fact that nearly all mortgages these days include provisions to the effect
that borrowers in default shall reimburse the owner of the mortgage for
expenses including attorneys fees incurred to redress uncured defaults.
The decision is notable, however, because of a perhaps
culturally/politically interesting footnote - interesting because, on the
one hand, arguably not necessary for the decision and, on the other hand,
hardly typical for a federal judge to acknowledge (let alone so openly to
emphasize) -- namely, that, chastising plaintiff and its lawyers for their
sloppiness aggravated by what he perceived as a demand for relief despite
their peremptory disregard for basic requirements of law, the judge said:
"Plaintiff's, 'Judge, you just don't understand how things work,'
argument reveals a condescending mindset and quasi-monopolistic system
where financial institutions have traditionally controlled, and still
control, the foreclosure process. Typically, the homeowner who finds
himself/herself in financial straits, fails to make the required mortgage
payments and faces a foreclosure suit, is not interested in testing state
or federal jurisdictional requirements, either pro se or through
counsel. Their focus is either, 'how do I save my home,' or 'if I have to
give it up, I'll simply leave and find somewhere else to live.'
"In the meantime, the financial institutions or successors/assignees
rush to foreclose, obtain a default judgment and then sit on the deed,
avoiding responsibility for maintaining the property while reaping the
financial benefits of interest running on a judgment. The financial
institutions know the law charges the one with title (still the homeowner)
with maintaining the property.
"There is no doubt every decision made by a financial institution in
the foreclosure process is driven by money. And the legal work which flows
from winning the financial institution's favor is highly lucrative. There
is nothing improper or wrong with financial institutions or law firms
making a profit - to the contrary, they should be rewarded for sound
business and legal practices. However, unchallenged by underfinanced
opponents, the institutions worry less about jurisdictional requirements
and more about maximizing returns.
"Unlike the focus of financial institutions, the federal courts must
act as gatekeepers, assuring that only those who meet diversity and
standing requirements are allowed to pass through."
"Counsel for the institutions are not without legal argument to
support their position, but their arguments fall woefully short of
justifying their premature filings, and utterly fail to satisfy their
standing and jurisdictional burdens. 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.
"The Court will illustrate in simple terms its decision: 'Fluidity of
the market' - 'X' dollars, 'contractual arrangements between institutions
and counsel' - 'X' dollars, 'purchasing mortgages in bulk and securitizing'
- 'X' dollars, 'rush to file, slow to record after judgment' - 'X' dollars,
'the jurisdictional integrity of United States District Court' -
'Priceless.'"
