Another judge in Ohio has stopped a foreclosure because lawyers could not legally prove that Wells Fargo owned 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 Consumer Law & Policy blog notes that this decision could cause trouble for banks who are foreclosing on properties where the original lender has gone bankrupt.
In other cases, however, especially when the original lender has gone bankrupt or otherwise imploded, it may be difficult or impossible to get the necessary signatures, and the necessary documents, to complete a legal transfer of the mortgage that was not completed before the foreclosure. There is no reliable way to estimate the percentage of cases where ownership paperwork will be unavailable, but it will be significant. Hopefully, while the servicers search frantically for the missing paperwork, they can focus more time and attention on making reasonable modifications of loan principal and interest to allow homeowners to stay in their homes, and mitigate losses to investors.