Deutsche Bank tried to foreclose on 14 properties in Ohio, but the federal court judge determined that the bank couldn’t sufficiently prove that it actually owned the mortgage notes, and dismissed the case. [IamFacingForeclosure]

Comments

Edit Your Comment

  1. Rusted says:

    I read the article. My question is, did the bank in question file the foreclosure suit BEFORE purchasing the mortgages? Or is it. they never owned the mortgaged but claimed they did?

  2. TPK says:

    This is really confusing. If the current holder of the loan doesn’t actually own it, then who owns the property? Surely the defaulting homeowner cannot realize a sudden windfall based on this one court’s say that some rules were not properly followed?

  3. tadowguy says:

    Deutsche bags.

  4. sodium11 says:

    The owner of the property is the person whose name is on the deed of the property recorded on the property – i.e. the individual homeowner.

    The holder of the loan, i.e. the mortgage company, has a claim on the property if the loan payments are not made, but it is their responsibility to find out what legal measures are needed to secure that claim, and then take those steps.

    If they fail to do that, they lose their legal claim on the property. Nothing confusing about it.

    The law presumes that the mortgage lender – a large corporation with lots of assets and access to lawyers – should be held to a high standard when it attempts to kick somebody out of their house. It also presumes that somebody who is buying some kind of securitized mortgage investment package instrument will do the due diligence required to determine whether that investment is sound or not.

  5. mac-phisto says:

    yes, it is confusing, but i would venture a guess that the originator/servicer of the loan is one of the companies that shuttered its doors within the past couple years. otherwise, i would imagine that they would file foreclosure – not the bank that held the securities.

    it seems the sticky point is that no documents exist to prove that the notes were transferred (“…Deutsche bank submitted several affidavits that claim that Deutsche was in fact the owner of the mortgage note, but none of these affidavits mention assignment or trust or successor interest”). if that’s the case, it’s quite possible that the bank has no recourse to recover their money (assuming the original servicer of the loan is defunct).

    that’s the thing about shell games…sometimes the thimblerigger is the one to get scammed.

  6. jnews says:

    The dispute appears to be about the rights of a funder after an origination/servicing company goes kaput.

    If I’m a mortgage originating company, I will service my own accounts, but I will aggregate them and sell securities that are backed by the mortgages to funding companies. This gives me more capital to originate more mortgages. We all know that drill. Now, if I go out of business, what rights, if any, does the funding companies have over my mortgages?

    In this case, the funding companies are going directly for foreclosure, on an equitable basis (it was their money). But they were never sold the note, just the profits from it. The judge in this case ruled the funding company doesn’t hold the note and never did, and so it can’t be the one to foreclose.

  7. EagleTheta says:

    @jnews: If that’s the case, and the mortgage company goes bankrupt, then likely those “notes” will be auctioned off – which mean you could buy your own mortgage at pennies on the dollar.

    Now, if Deutche Bank can be found to own the notes (or otherwise buys the notes), would that still give them the right to foreclose as long as you still keep making contracted payments? I wouldn’t think so.

  8. JustAGuy2 says:

    @EagleTheta:

    You could buy the mortgages, in theory, but you’d still owe the cash flow from those mortgages to Deutsche, et al.

    Doesn’t matter who owns the notes, so long as the borrower is making the required payments, the lender can’t just foreclose (well, he can try, but he won’t get anywhere).

  9. maxmax says:

    Before jumping to conclusions, I would read this post over on Calculated Risk:

    Deutsche Bank FC Problems and Revenge of the Nerd

    Tanta is a mortgage expert who has been posting on the subprime meltdown for over a year now. She says, this is all much ado about nothing.

  10. csdiego says:

    Deutsche Bank should have just shown its receipt!

    Nice to know it can happen to the big guys too, not just the little guys.

  11. maxmax says:

    Tanta’s followup after reading the judges actual order:

    In Re Foreclosure Cases

    Very entertaining.

  12. mac-phisto says:

    @maxmax: thanks for that link – it was quite entertaining. i’m with tanta: judge boyko for president!

  13. Nytmare says:

    When did the mortgage industry become such a deep rabbit-hole of trading and repackaging? Or has it always been this complex.

  14. Bryan Price says:

    What I find “fascinating” is that Deutsche Bank was the leading foreclosure for Cleveland a month or two agao. Deutsche Bank does not even have a corporate presence in Ohio, let alone Cleveland.

    And if this teaches that derivatives like this have considerable downsides that people hadn’t thought of before, I say Good!

  15. mac-phisto says:

    @nytmare: mortgage securitization has been around since 1970 (actually, 1968, when fannie mae’s charter was amended). it has grown exponentially more complicated since 1970, when the only two companies doing it (fannie mae & freddie mac) were GSEs. the garn-st germain depository institutions act of 1982 played a big part in allowing banks to package & sell securities on their own (as well as setting the stage for the s&l crisis).