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WHY DID THE LOAN SERVICER CLEAR THE LOAN OBLIGATION DOWN TO ZERO?
| Monday, August 29, 2011 Who owns the loan? The Ohio Supreme Court is taking up the question of what a bank needs to prove to force someone from his home. Story by Mhari Saito |
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The Ohio Supreme Court is getting ready to take on what some are calling the biggest issue in state foreclosure law in a century. The question before the justices is what paperwork does a lender need to force an owner out of his home? For Ohio Public Radio, WCPN’s Mhari Saito reports that what the state’s justices decide could have huge implications for the financial services industry. |
| Antoine Duvall and his wife and young son waited until after Christmas to move into their freshly renovated two-story house in Cleveland’s Collinwood neighborhood. It was 2006 and Duvall, a salesperson for a legal document services company, had just happily signed a mortgage and a promissory note to get his loan from Wells Fargo. But soon, he started to get letters about his loan.
Antoine Duvall: We started to receive a lot of different information in the mail, not coming from Wells Fargo, saying that the process had changed a little bit and had been transferred or sold to a different entity. So it was kind of a little confusing. Confusing, perhaps, but definitely the norm. Like many mortgages during the real estate boom, Duvall’s loan was bundled into a bond and sold on Wall Street to a new owner. And like so many loans, that transfer was never recorded in the county recorders office. Antoine Duvall’s attorney Gary Cook: Gary Cook: The issue we’ve encountered is, as in Mr. Duvall’s case, that once the note is transferred there is a major difficulty in identifying who the actual owner of the note is. And that becomes an issue when the owner of that note and mortgage wants to take back the house. US Bank, as the trustee of the bond that held Duvall’s mortgage, sued to foreclose when he fell behind on his mortgage payments. But at that time, court records showed Wells Fargo – not US Bank – owned his loan. Legal Aid of Cleveland’s Howard Strain says lenders filing for foreclosure need to prove they should be paid on the debt. Howard Strain: So it’s like if I went into a bank with a check payable to you, Mhari, a photocopy of that check, and I said please cash it for me, I think we all know that the bank wouldn’t cash it. The security guard would escort me out. Cuyahoga County and the 8th District Appellate courts dismissed the case against Duvall because the US Bank trust didn’t prove it owned his loan before it filed for foreclosure. But other courts around the state have ruled differently on similar cases, so the Ohio Supreme Court has taken Duvall’s case to settle the question. Peter Swire is a former housing official with the Obama administration who now teaches law at Ohio State University. He says the judges will have to deal with tough arguments from both sides. Peter Swire: The homeowner says show us the note, you don’t have a right to this house, you can’t kick me out of this house. On the other side, the bank’s view is there’s a homeowner who stopped paying their mortgage. They knew they had a mortgage, they knew it when they bought the house and they get to laugh and stay in the house while the bank has to come up with paperwork they don’t have. US Bank doesn’t comment on pending litigation. But In a friend of the court brief, attorneys for government-owned mortgage giants Fannie Mae and Freddie Mac sided with them, warning a ruling against the banks would create a “jurisprudential quagmire” that would slow Ohio’s mortgage markets. Foreclosure is the most common type of case in Ohio’s courts. About 80,000 suits are filed a year. Again, law professor Peter Swire. Peter Swire: If the homeowners win, the banks will have to work harder to prove they have the paperwork. The banks might have to pay some settlement to get the family out of the house. But our system of property will not collapse. The Duvall case seemed like a good one for the state Supreme Court to rule on to settle the issue but it has taken an unusual twist. You might even call it another bank snafu. The homeowner, Duvall, now owes nothing on his mortgage because – in an action unrelated to the Supreme Court case – the loan servicer cleared his debt completely in June. Duvall doesn’t know why it happened and neither his loan servicer nor US Bank’s attorneys are commenting. It’s not clear what the state Supreme Court will do, but attorneys for both sides say the legal question is not going away. The court could still take up the Duvall case or it could address several other cases on the same issue, waiting in the wings. |
What is truly amusing about the banks’ position is that in every other type of case, they would be arguing the same position the homeowners are arguing against them. The issue is when can a party go to court for relief. When a consumer files a claim, corporate America first asks, “Does this person have the right to sue us now?” If they think not, they ask the Court to dismiss the case for lack of standing (or another, related, concept). Now that they are the plaintiff, banks are claiming that they don’t need to own the note or mortgage before asking a court enforce those contacts.
The issue is far more complicated than either the reporter or the posters here know. Yes, MERS is a major player (BTW – that stands for Mortgage Electronic Registration System), but so are the thousands of investments trusts (they are trusts, not bonds) called Real Estate Mortgage Investment Conduits (“REMICS”). It is interesting that few people mention the other major player who made this all possible. That would be Uncle Sam. Fannie and Freddie, and the federal government’s push for expanded housing lending, created an environment in which the people making the loans stopped being bankers (and I mean that in the good, old, down-on-the-corner banker who based his lending decision on what he knew about the borrower and the collateral) because they knew they would not have to live with the lending decisions they made. Why worry about collateral value if you are going to sell the loan tomorrow to some large, faceless investment creation of Wall Street? The way people were being paid changed from being based on the quality of the loan over its 30-year life, to the quantity of the loans sold in this quarter.
Why was the Duvall mortgage mysteriously paid off? I think it was because something in the facts of Duvall worries the banking industry. That something is, no doubt, the paperwork showing that the REMIC at issue had some interest in the note and mortgage. The devil’s in the details, and in Duvall, those details were spread over hundreds of pages complex investment documents.
Posted by: Ohio Lawyer on August 30, 2011 10:08AM
It’s simple, the bank/servicer got wind of a homeowner fighting back with no hope of winning (and possible threat of Supreme Court) and decided it was cheaper to give the homeowner his house than face the consequences.
It’s always about the money.
Now they can argue that there are no longer any damages – presto/chango – no basis for the lawsuit.
Posted by: Tomc (United States) on August 30, 2011 1:08AM
www.ohiofraudclosure.blogspot.com
Posted by: OHIO FRAUDclosure (OHIO) on August 30, 2011 1:08AM
Posted by: OHIO FRAUDclosure (OHIO) on August 30, 2011 1:08AM
Open letter to the New Jersey Supreme Court re foreclosure.
www.HurtingHomeOwner.com
www.Twitter.com/HurtinHomeOwner
Posted by: HurtingHomeOwner (USA) on August 29, 2011 11:08AM
Posted by: gregory (sj) on August 29, 2011 11:08AM
Absolutely correct! Sloppy reporting, though, may be better than no reporting. NOT!
To get to the bottom of this Ponzi scheme and to determine the names of the culprits who designed and managed it, strong, objective, investigative reporting is needed… by every media resource who desires to claim themselves as “journalists.”
Otherwise, the issues will remain as clouded as are the titles of every home purchased and/or refinanced during the last 15 years wherein the ghostly “specter of MERS” (Mortgage Electronic Records Service) appeared in the paper work of real estate closings.
This “legal ghost.” MERS, continues to haunt the land registries and courts of our nation. It creates fear in the hearts of “regulators” and spineless prosecutors who are called upon to shine the light of day into the crypts where the dreaded “notes” are hidden.
No owner of property in the US, and no local, state, or federal court will be relieved of the “moanings and groanings” of MERS until it is completely exorcised from the “chain of title” by a massive quiet titling of all affected properties.
The only way to do so is to “punish the MERS stakeholders” who have been “protected” by evil friends in the environs of the SEC, the Halls of Congress, the towers of academia, and the Statehouses of every state (perhaps with the exception of New York.)
Pray that brave souls…. like the Knights in Shining Armor of old will step forth and challenge the Leviathan that has is the “Banksters” who have “Securitized the World.”
Every evil participant in this pervasive and contagious plague must be “burned at the state” or confined forever in the “towers” of our land. A “new prince” of a “new kingdom” must be installed!
Posted by: DanJS on August 29, 2011 10:08AM
Posted by: In the industry (cleveland, ohio) on August 29, 2011 3:08AM
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