Another Ohio Judge Halts A Foreclosure
Another judge in Ohio has stopped a foreclosure because lawyers could not legally prove that Wells Fargo owned the mortgage.
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.
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.
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.
Judge halts foreclosures [Enquirer via CL&P]
(Photo:Getty)
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I don't know why this is all so amazing. Meltdown or not, if you don't have your feces together in the courtroom, you'll have to put off your day in court. Is this supposed to be some type of victory to the creep that can't pay his legal obligations?
@BALTHISAR: I think the point was that some number of people WERE actually paying their mortgage bills but got caught in red tape and lost their house. Forcing the mortgage companies to prove ownership of the loan can only be good for everyone, now and into the future.
@FishingCrue: Oh, and if you RTFA, the problem isn't that the name on the documents is wrong (indicating that they could file an amended complaint) but that they can't get the necessary signatures to prove that the mortgage is theirs because the previous lender closed down before the paperwork was finished (amended complaint won't help there).
Am I being crazy when I say that: shouldn't the lenders be trying to work with the homeowners to eke out some sort of a deal where the original principle + interest gets paid in full as agreed, but on a slightly modified schedule instead of every lender trampling over each other to rush to foreclose? True, that won't work on people who weren't paying off their mortgages to begin with, but for those who have been doing so, I think that would be the best way to recoup the original investment that the lenders made.
Okay, people, for the last time: It's mortgage "principal," NOT "principle!" If you don't understand the difference, shut the hell up.
I can't believe that after losing billions already, mortgage lenders haven't figured out that right now, it makes a whole world more sense to rewrite the loan and keep the people in the house.
@zentec: In many cases it doesn't though. Let's say I bought a house worth, at the time, $300,000, with a loan for the full amount. Monthly payments were $400 for the first 2 years, and are now $900. I can't pay. If they negotiated down to $450, I would pay, but they can foreclose and get at least $200,000 for the house. 200,000:300,000 > 450:900, therefore they foreclose.
HUADPE: Less the $30,000 to $60,000 it cost them to foreclose, and the 8 months of missed payments (in CA, assuming 4 months to NOD, then 120 days to the sale). And the 6 months it'll take before an investor finally offers them $125,000 for the place to take it off their hands.
@Me: I'm not saying it's all cases, and a 33% drop in price is rather steep. Simply put, there are cases where the amount that could be renegotiated and have the debtor pay is sometimes less than the foreclosure value. Renegotiation of loans would also be illegal in many places where payments less than interest aren't legal. If the loan needs $500 a month to cover interest, you can't legally have a min payment under $501 per month in many places. And even if you could, is it fair to have people in a loan where the amount they owe INCREASES over time?
Frankly, there are alot of people who vastly overpaid for houses and are now living in houses they can't afford, and alot of banks and investors who didn't do their due diligence in assessing risk. I'd say the fault is about 80% investors and 20% borrowers.
HAUDPE: I was just pointing out that the sale price isn't the only factor, Foreclosure is expensive for lenders. If I were a lender, I'd do whatever I had to within reason to convert that loan from non-performing to performing.
Uh oh, it's another activist judge (ie. he puts the law and constitution ahead of corporations)! Any bets that he loses his job over this?
@Kjones: It's Ohio. They get elected.
The first time this happened, it appeared that it wouldn't be hard to fix the problem and refile.
This time sounds like it's not going to be that easy to fix the problem. Which was the assumption I had already made on the first time.
So.. what happens if it can't be proved that anyone owns your mortgage? Do you suddenly own your house without having to pay anybody?
@NightSteel: Good question. It would seem that when the mortgage company, who "owns" the house, goes under, their creditors could make a claim on it, but I'll bet there are laws against taking a family's only house in this type of deal.
It does seem pretty silly that you would buy a huge block of mortgages without all the legal proof you would need to enforce them in court.
IANAOL -- But in reality, they move to file an amended complaint, wait ~20 days and then move for summary judgment. It's not like it was dismissed with prejudice, it only delays the inevitable.