Lender Not Entitled To Foreclosure Judgment Due To Failure To Prove Promissory Note Ownership, Says Ohio Appeals Court

In Ohio, the Akron Beacon Journal reports:

• The state attorney general's office is looking for new ways to slow foreclosures in court, hoping a recent Ohio appellate court decision will help in those efforts. [... Ohio Attorney General's Office representative Tom] Winters said the office was encouraged by a March 20 decision by the 10th District Court of Appeals in Columbus and is looking for similar cases.

• "That ruling was the first time that a court in Ohio has held that a mortgage company must prove that it still holds the mortgage to the home before it can proceed with a foreclosure," Winters said. "That's consistent with what the federal courts have done, and that's encouraging."

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• "If we can slow the filings down and educate the homeowners on how they can negotiate to stay in their homes, then you have a better chance of resolving this stuff," Winters said. "It's not going to work for everybody, but right now nothing's been working for anybody, and that's the problem."

For more, see Ohio looking for new ways to slow foreclosures in court.

For the decision of of Ohio Court of Appeals, see Everhome Mtge. Co. v. Rowland, 2008-Ohio-1282; (Case #07AP-615; 3-20-08).

Editorial Note:

A quick reading of this case reveals that the Ohio trial judge originally hearing the foreclosure case ruled against the homeowner and held that the foreclosing lender didn't need to prove ownership or show how it came to be the holder of the mortgage. The homeowner subsequently filed an appeal of this ruling. Upon considering the appeal, the Ohio appeals court ruled that the trial judge's decision was in error and, accordingly, reversed the original ruling. Among other things, this case:

1. illustrates the fact that trial judges will make incorrect decisions from time to time, and
2. reflects the importance of being represented by an attorney who is ready, willing and able to file an appeal to seek a reversal of an incorrect decision. Had the attorney not known enough to file an appeal, the homeowner would have been stuck having to follow an incorrect ruling (and probably wouldn't have realized that the judge's ruling was wrong).

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The following excerpts from the Ohio appeals court reflects its position on this issue:

• {¶11} "Every action shall be prosecuted in the name of the real party in interest." Civ.R. 17(A). A real party in interest is one who is directly benefited or injured by the outcome of the case. Shealy v. Campbell (1985), 20 Ohio St.3d 23, 24. The purpose behind the real-party-in-interest requirement is " 'to enable the defendant to avail himself of evidence and defenses that the defendant has against the real party in interest, and to assure him finality of the judgment, and that he will be protected against another suit brought by the real party at interest on the same matter.' " Id. at 24-25, quoting In re Highland Holiday Subdivision (1971), 27 Ohio App.2d 237, 240.

• {¶12} In foreclosure actions, the real party in interest is the current holder of the note and mortgage. Chase Manhattan Mtge. Corp. v. Smith, Hamilton App. No. C-061069, 2007-Ohio-5874, at ¶18; Kramer v. Millott (Sept. 23, 1994, Erie App. No. E-94-5 (because the plaintiff did not prove that she was the holder of the note and mortgage, she did not establish herself as a real party in interest). A party who fails to establish itself as the current holder is not entitled to judgment as a matter of law. First Union Natl. Bank v. Hufford (2001), 146 Ohio App.3d 673, 677, 679-680. Thus, in Hufford, the Third District Court of Appeals reversed a grant of summary judgment where a purported mortgagee failed to produce sufficient evidence explaining or demonstrating its right to the note and mortgage at issue. In that case, the record contained only "inferences and bald assertions" and no "clear statement or documentation" proving that the original holder of the note and mortgage transferred its interest to the appellee. Id. at 678. The failure to prove who was the real party in interest created a genuine issue of material fact that precluded summary judgment. Id. at 679-680.

• {¶13} Similarly, in Washington Mut. Bank, F.A. v. Green (2004), 156 Ohio App.3d 461, the Seventh District Court of Appeals reversed the trial court's finding of summary judgment where the plaintiff failed to prove that it was the holder of the note and mortgage. There, the defendant executed a note and mortgage in favor of Check 'n Go Mortgage Services, not Washington Mutual Bank, F.A. Although Washington Mutual Bank, F.A. submitted an affidavit alleging an interest in the note and mortgage, it did not state how or when it acquired that interest. Id. at 467. The court concluded that this lack of evidence defeated the purpose of Civ.R. 17(A) by exposing the defendant to the danger that multiple "holders" would seek foreclosure based upon the same note and mortgage. Id.

• {¶14} In the case at bar, the note and mortgage identify TrustCorp—not Everhome—as the lender. Therefore, Everhome needed to present the trial court with other evidence to prove its status as the current holder of the note and mortgage. To accomplish this, Everhome relied upon the affidavit testimony of Becky North, an Everhome officer. In her affidavit, North stated that "the copies of the Promissory Note and Mortgage Deed attached to Plaintiff's Complaint are true and accurate copies of the original instruments held by Plaintiff." (Emphasis in the original.) Beyond this tangential reference, North's affidavit contains no further averments regarding Everhome's interest in the note and mortgage.

• {¶15} We conclude that North's testimony is insufficient to establish that Everhome is the current holder of the note. First, Everhome failed to attach the note to its complaint. Thus, North's statement does not prove anything with regard to the note, much less that Everhome currently holds the note. Second, North does not specify how or when Everhome became the holder of the note and mortgage. Without evidence demonstrating the circumstances under which it received an interest in the note and mortgage, Everhome cannot establish itself as the holder.

• {¶16} Lacking the necessary evidence in the trial court record, Everhome attempts to introduce that evidence on appeal. In its brief, Everhome alleges that TrustCorp assigned to it TrustCorp's interest in the note and mortgage on April 19, 2007. Although evidence of an assignment would establish Everhome's status as the current holder of the note and mortgage, we cannot consider Everhome's belated allegation that an assignment occurred. See State v. Ishmail (1978), 54 Ohio St.2d 402, paragraph one of the syllabus ("A reviewing court cannot add matter to the record before it, which was not a part of the trial court's proceedings, and then decide the appeal on the basis of the new matter.").

Representing the homeowner in this case was Adam R. Todd of Dinsmore & Shohl, LLP.

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For other posts that reference the failure some mortgage lenders and their attorneys of filing madatory loan documents when starting foreclosures, Go Here , Go Here and Go Here.

For a consumer video devoted to the subject of making mortgage lenders produce the mandatory paperwork when filing a foreclosure action, see Fight Foreclosure: Make ‘Em Produce The Note!. missing mortgage foreclosure docs beta

Bankruptcy Judge Gives Green Light To U.S. Trustee On Countrywide Inquiry

In Pittsburgh, Pennsylvania, The Associated Press reports:

• A federal judge ruled the Justice Department can subpoena documents and question Countrywide Financial Corp. executives under oath to determine whether the lender abused borrowers and the bankruptcy-court process. U.S. Bankruptcy Judge Thomas Agresti said "it certainly has not been proven that Countrywide did anything wrong," but noted a bankruptcy trustee "has made a showing of a common thread of potential wrongdoing" in several cases. The cases are a representative sample of nearly 300 Pennsylvania bankruptcy cases involving Countrywide borrowers. The potential wrongdoing warrants further inquiry by a bankruptcy trustee on behalf of the Justice Department, Agresti said.

***

• The company has acknowledged errors in handling some debts, but has denied any systematic effort to thwart bankruptcy protections to collect money. Some bankrupt borrowers, however, have accused the company of threatening them with foreclosure even after they made payments under court-approved bankruptcy plans that were meant to shield them from Countrywide's subsequent efforts to collect the debts. Agresti's 50-page ruling was issued late Tuesday in Pittsburgh. [...] Agresti is overseeing 293 cases filed in Pittsburgh that include allegations that Countrywide sought improper fees or payments from bankrupt homeowners and otherwise violated bankruptcy court orders and regulations.

For more, see Judge OKs fed subpoenas of Countrywide.

See also, Reuters: Judge OKs probe into Countrywide practices.

Go here for Judge Agresti's ruling.

Go here for more on recent Countrywide problems with consumers.

Big Profits By Assembly Line "Foreclosure Mill" Law Firms Attract Interest From Private Equity Investment Firms

In Tampa, Florida, The Tampa Tribune reports:

• Their work can be so repetitive that some are known, disparagingly or not, as "foreclosure mills." But the niche field of foreclosure law is profiting enormously from the boom in Florida home foreclosures and is on a hiring spree. [...] Because many law firms file foreclosures across Florida, the biggest firms' monthly foreclosure caseload can grow to a thousand or more, with each case carrying a potential attorney fee of up to $1,200 - although it's not clear what the firms' profit margin is.

***

• The foreclosure business is so strong that it has caught the eye of private equity investment firms, which buy companies using equity and debt financing. Private equity firms have begun buying the back-office foreclosure-processing operations from big law firms and are offering law firms outsourced foreclosure help. These outsourcing companies are keen on moving into Florida.

For more, see Law Firms Cash In On Foreclosures (A surge in foreclosure filings has Florida law firms scrambling for more staff).

Countrywide, Counsel Getting Slammed Around The Country

A story was run recently in The Atlanta Journal Constitution on a fight Countrywide Home Loans faces with the U.S. Trustee in a Georgia Federal bankruptcy court for alleged mistakes and/or misconduct during the course of one particular consumer bankruptcy case. The story also describes the wrath directed towards Countrywide by judges around the country as a result of its "missteps" committed both in the servicing of home loans and in its conduct in the courts:

• A Texas judge, Jeff Bohm, rebuked Countrywide, Atlanta-based McCalla Raymer and a Texas law firm in a 72-page ruling [Judge Bohm's two-part ruling - Part I and Part II]. He found fault with each of the three parties' handling of a case in which Countrywide sought permission to foreclose on a homeowner who was up to date on payments. The Texas law firm hired by McCalla Raymer was singled out by the judge. "Above all else, what kind of culture condones its lawyers lying to the court and then retreating to the office hoping that the Court will forget about the whole matter?" Bohm wrote.

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• In Ohio and Florida, the U.S. Trustee's office has filed complaints in the past month seeking sanctions against Countrywide. In Ohio, Countrywide sought payments in bankruptcy court from a homeowner who had already paid off Countrywide. In Florida, Countrywide tried three times to foreclose on a homeowner who no longer owed Countrywide any money on the property.

• Countrywide has already been sanctioned in other cases. A judge in Pennsylvania sanctioned the lender for trying to foreclose on a couple in that state who had made required payments "like clockwork," according to the judge.

• Countrywide's Texas law firm was hit with a $75,000 sanction for its behavior in a case that included court filings that were "erroneous" and "clearly legal nonsense."

• A judge in North Carolina sanctioned Countrywide for twice changing the locks on a house that it had sought to repossess, even though the foreclosure had been stopped by a bankruptcy filing. Countrywide's agents disposed of the family's Christmas ornaments, family pictures and a christening dress when it improperly seized the home. "It is difficult to imagine more deliberate, unwarranted and egregious conduct," Judge Catharine R. Carruthers wrote when sanctioning Countrywide.

For the article, see Couple lose home in Countrywide dispute, but may yet win (Feds seek sanctions, say lender abused bankruptcy laws).

For an article examining mortgage companies frequent non-compliance with law in consumer bankruptcy cases, see Misbehavior and Mistake in Bankruptcy Mortgage Claims, by Katherine M. Porter University of Iowa - College of Law.

Go here for more on recent Countrywide problems with consumers.

Ohio Attorneys Organizing In Defense Of Homeowners Facing Foreclosure

In Ohio, The Columbus Dispatch reports:

• Low-income Ohioans facing foreclosure now have access to free legal help. Gov. Ted Strickland and the Ohio Bar Association have mobilized 1,100 lawyers statewide to offer free legal services to those Ohioans who earn $54,000 or less to help them keep their homes. [...] In addition to free legal help, the campaign also offers homeowners a new foreclosure hot line, 1-888-404-4674, to call for help. Consumers can also access information on the Web site www.savethedream.ohio.gov.

For more, see Low-income Ohioans facing foreclosure offered free legal aid.

See also State adds free legal aid to foreclosure prevention effort:

• Gov. Ted Strickland, Ohio Supreme Court Chief Justice Thomas J. Moyer and several other state officials gathered Tuesday to announce it has added the legal component to its Save the Dream initiative [... . S]tate officials last month sent letters to more than 34,000 registered Ohio attorneys requesting they help provide free legal aid. As of Tuesday, more than 1,100 attorneys have registered. About 350 of those attorneys have received foreclosure training from the Ohio State Bar Association, while more training sessions are scheduled, officials said.

More Attorneys Coming Forward To Represent Homeowners In Predatory Lending Cases

In New York City, the Staten Island Advance reports:

• [T]he legal landscape is changing and more local lawyers are willing to represent homeowners against banks that made high-interest, problematic subprime loans. "Their ranks have been growing. Over the last two weeks, we've gotten several more private attorneys calling to say they can handle cases," said Margaret Becker, director of the Homeowner Defense Project at Staten Island Legal Services in St. George.

***

• A Harvard Law School graduate who said she was once misled on the interest rate she received on a home equity line of credit, Ms. Becker recently conducted a course on foreclosure defense for members of the Richmond County Bar Association.

• She makes a point of telling attorneys that they can win back their fees and expenses from banks if they are successful in their claims against those lenders. That's important because most people in default don't have the money to pay for lawyers, and proving mortgage fraud can be a complex and costly process.

• One legal recruit is Robert Brown, an Annadale resident and retired New York City police captain who graduated from St. John University's Law School in 2000. Brown is carving out a niche bringing violation of truth-in-lending claims on behalf of the clients he represents, [...].

For more, see New legal arsenal to battle bad loans.

For a story involving a Staten Island couple who recently obtained a favorable court decision against a mortgage lender for violating a New York State anti-predatory lending statute, see:

• Staten Island Advance: Stuck with a bad loan, a Staten Island family fights back (if link expires, try here),
• For the court decision itself: LaSalle Bank, N.A. v Shearon, Supreme Court, Richmond County, 2008 NY Slip Op 28032 (January 28, 2008),
• Kelley Drye & Warren LLP newsletter: LaSalle Bank v. Shearon: A Harbinger of Things to Come (New York Supreme Court Rules in Favor of Borrower on Defensive Claims Under State’s Anti-Predatory Lending Law).

For other posts on homeowners using Federal & state consumer protection statutes to try and undo bad mortgage loans, Go Here and Go Here.

Editorial Note:

The significance of attorney "fee shifting" statutes, which are commonly a part of Federal and state consumer protection statutes, anti-unfair labor statutes, civil rights cases, etc. and allow for attorneys to win back their legal fees and expenses from the losing party in a successful case, can't be emphasized enough. For an example of one case where the lawyers representing aggrieved parties were allowed to win back their legal fees as a result of such a "fee shifting" statute, see NY BigLaw Leader Scores $1 Million Fee in Pro Bono Case (or go here for the actual court decision itself).

Gerogia Attempts To Address Confusion From Home Foreclosures By Companies Without Legal Standing

In Georgia, an opinion article in the Atlanta Journal Constitution addresses the confusion taking place with home foreclosures in the state where the company bringing the foreclosure action doesn't own the promissory note being enforced:

• The General Assembly is attempting to reduce the confusion by requiring clear proof of mortgage ownership before a foreclosure can proceed. But its efforts have been stymied by banks reluctant to come clean on ownership, and there are suggestions the Legislature may put off definitive action until next year.

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• "We want to be able to be certain that our clients are being foreclosed on by the legal entity that has standing," says William Brennan, director of Atlanta Legal Aid's Home Defense Program. "And we want to know who to talk to about the foreclosure. Now, we often don't know who holds the note."

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• Even if 5,000 investors own a piece of a mortgage, the mortgage owner is considered to be the trustee bank that manages the pool. But rather than have to deal with desperate homeowners, those banks prefer to let contractual servicers —- companies that collect the monthly payments or record the deeds —- become the public face of foreclosure while they lurk in the shadows. Those servicing agencies have no incentive to negotiate with borrowers. Lawyers have complained to the Legislature that they can't even get a live person on the phone to talk about a pending foreclosure, leaving homeowners stranded.

For more, see Owning up to a crisis (Georgians faced with foreclosure have a right to know who exactly holds their mortgage) (if link expires, try here).

For other posts that reference the sloppiness and carelessness of some mortgage lenders and their attorneys in connection with their mortgage loan documents, Go Here , Go Here , Go Here , Go Here, and Go Here. missing mortgage foreclosure docs beta