Wednesday, December 12, 2007

Ohio State Court Judge Halts Foreclosure; Lender Fails To Prove Ownership Of Mortgage Loan

In Hamilton County, Ohio, The Enquirer (Cincinnati) reports:

  • [A] Hamilton County Common Pleas Court judge ruled that Wells Fargo Bank couldn't foreclose on [ a couple's] North College Hill home because its lawyers didn't prove that Wells Fargo was the legal owner of the mortgage.

  • The judge said the foreclosure lawsuit was filed before Wells Fargo owned the mortgage - thus, the suit was premature. The ruling - the first of its kind by a state court judge in Ohio since the subprime mortgage crisis erupted this year - could have profound implications on how foreclosures are handled in Ohio, which leads the nation in the percentage of mortgages in foreclosure. The local ruling comes as three federal court judges - in Cleveland, Dayton and Columbus - have issued similar opinions in foreclosure cases in the last month.


  • The [legal] issue [involved] 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. As millions of subprime mortgages are sold and resold on Wall Street, the real "party in interest" isn't always obvious. Often, the holder of the mortgage note - the legal document that gives a lender the right to take someone's home for not making loan payments - is different from the servicing company, or the bank that takes the mortgage payments.


  • "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. Martin then took the unusual step of ordering that the bank's law firm must file proof that its clients actually own the mortgages before filing any new foreclosure actions in Hamilton County. That firm, The Law Offices of John D. Clunk, based in Hudson, Ohio - is the third-largest filer of foreclosure actions in Hamilton County, with 48 properties scheduled for foreclosure sales in the next six weeks.

For more, see Judge halts foreclosures (Says banks must prove they hold mortgages) (if link expires, try here).

For other posts on this issue, either go here, or see:


Qustion for Attorneys:

Assume that there have already been foreclosure sales that have taken place (in which homeowners have already lost their homes) where the party initiating the foreclosure was not the "real party in interest" and the judge didn't catch the error.

  • Wouldn't the fact that the wrong party brought the foreclosure action make the final judgment in the case "void?"

  • If the judgment is void, doesn't that make everything that happened in the case after the judgment (including the actual foreclosure sale) void as well?

  • If the foreclosure sale in a situation like this is void, doesn't that mean that the purchaser at the foreclosure sale (and any subsequent purchaser - even a so-called "bona fide purchaser for value") acquired no title whatsoever, and that title to the home is technically still with the financially strapped homeowner (even though he or she may not realize it - yet),

  • If the answer to all of the above is "Yes," isn't there a significant problem with the real estate titles involving all these foreclosed homes in which the wrong party (one other than the "real party in interest") brought the foreclosure action?

If any attorney wants to substantively chime in on these questions (especially consumer and real estate attorneys, as well as attorneys with or representing title insurance companies), please feel free to drop me a line at I would love to hear the observations.