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Economy and Business


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.

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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. 

Listener Comments:

Yes, a listing of attorneys for people to contact would be very helpful. Looking for one with experience in Wisconsin specifically. We have been in dance with Citi since July of 2009 -


Posted by: CarrieM (Wisconsin) on September 6, 2011 3:09AM
I'd suggest to publish a list of recognition to lawyers who are winning fraudclosure cases to those in need have a guide in any state.
I for example, do not know who to turn around in the whole state of Texas.

Thank-you

Carlos Dehesa


Posted by: Carlos Dehesa (San Antonio, TX) on September 5, 2011 6:09AM
I believe the reason why they removed the debt is because all the mortgages we have are all already paid for...long time ago...

and also insurance claims (unknown to us) by the banks and servicers and investors upon the insurance companies who paid, I understand, triple damages in many cases the we the homeowner have not heard about...

So, the plot thickens...if we did indeed create a negotiable item for the banksters by signing our names to a note...then we deserve to be compensated for it...many of us have experienced severe emotional trauma and anxiety and unnecessary stress esp those of us who were making regular on time payments...to have some opportunist servicer/bankster take advantage of the foreclosure tsunami to try to steal our homes....
Many homes have been broken up, children homeless, lives lost because of this fraudclosure climate....

God did promise that in the last days all will be expose to the light...America that put their trust in God and then turn its back on Him needs to return to the God of this great nation and have Him fight this out for us...He does seem to be doing an awesome job in exposing all these ugly facts we are now learning of...

As a tax payer,I believe that our government jumped the gun by bailing out the banks instead of us who actually pay taxes...now we are experiencing a 9-11 from the banks that were saved with our tax dollars...just like the terrorists used our own to destroy us....


Posted by: TO Tell The Truth on August 31, 2011 11:08AM
As we are all learning; the banks sold (i.e. securitized) the majority of their home mortgages to mortgage trusts (i.e. MBS investors) while retaining themselves only as the "servicers" for the mortgages (collecting payments, issuing late notices, etc). As "servicers", the banks alone do not have clear standing for mortgage actions such as foreclosure. In such actions, the banks ("servicers") need to show the courts that the represent the trust and the trust holds clear title and note for the mortgage that the bank services. Therein, lies the problem... The banks forgot to properly transfer (assign) many mortgages to the trusts that bought them. This clouds the title and the party of standing. To resolve this "defect" unforeseen until the housing crisis, the banks ("servicers") prepared assignments, many robo-signed and/or late-dated, which courts and attorneys are increasingly challenging. The banks put themselves in big trouble. Many trusts (MBS investors) want their money back. Including Fannie/Freddie, now owned by U.S. taxpayers. Many homeowners want their foreclosure dismissed. In time, even good-paying homeowners may also challenge their bank's ("servicers") authority over their mortgage.

In the end, the Government (Fed or State AGs) will likely accept a settlement from the banks in exchange for a release of claims by all parties against the banks. In other words, the banks will likely buy a get-out-of-jail-free card; reminding us that laws apply only to the poor. No one jailed nor admiting guilt.

How far we've strayed from the days when a bank's purpose was to pool deposits and support corresponding loans. How far, that now banks collect deposits to support investments in the "hope" those earnings far outstrip profits from old-world, mundane, pitiful lending. Why would anyone lend at 5% if you could invest and risk earning more, and know, the Government will backstop any huge loss.


Posted by: John B (Sarasota, FL) on August 31, 2011 9:08AM
Question: 1. Why would a 'Judge' 'sit on top of 'fraudclosure case' for months, then vacate 'motion for summary judgement


Posted by: A Guice (Toledo) on August 31, 2011 5:08AM
Maybe the reporting is somewhat imprecise, but the problem is actually very confusing until you live with it for awhile. Let my contribution to understanding be the following point:

Its not simply that the "bank" cannot find the paperwork (principally, the "Note"). What makes the homeowner's position so strong is that *the bank* already sold the right to collect the money -- but it is very hard to know who now has it. The original lender has long since been paid off -- as have a bunch of other entities in subsequent resales of the obligation (the loan, the mortgage, the security etc -- all of which become hopelessly conflated after awhile). If the original borrower gives money to the loan servicer, there is no way to know whether they will give it to an entity morally entitled get that money! Worse, it could turn out that money paid by the homeowner/borrower does not pay off somebody who one day can claim a lien on the property because they never got all or any of what they expected and now claim an equitable interest in the property -- the title is hopelessly clouded by breaks in the recorded chain of title. None of this is the borrower's fault!


Posted by: Diogenes (Santa Fe, NM) on August 31, 2011 4:08AM
All the TILA/RESPA 'show the note' arguments got me 'nowhere' in California Courts. Here: If they rule for the Borrower, it BK's the country. [as banks are re-paid by taxpayers for losses] If they rule for the 'banks', it makes many taxpayers homeless.
NO Win for either....it shows that each H/O is 'on their own'. I used an 'expert witness' He was a loan re-seller during the bubble and knew what was 'really' happening. he wrote up an argument, gave it to the "banksters" (ie: bank attorneys). It took a few back


Posted by: Chris in Cali (CA) on August 30, 2011 11:08AM
Yes, there are several little errors in the story, but none of them are material.

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
ohio is a state with great judges that stand up aginst fraud by banks against the people. nj judges that are handing homes to bankers despite
no evidence that they even own the loans shuld learn not to be ignorate and stand up and protect
nj people. gone are the days the nj judges rubber stamp forclosure fraud for the banks its time to give nj falks due process of law.do your job or go home nj people demand justice


Posted by: dani (nj) on August 30, 2011 4:08AM
So the bank/servicer "cleared his debt" without explanation. Remember, it's all about the money.

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
The story is excellent as the reporter (Saito) interviews the Homeowner (Duvall) the Attorney (Cook) and legal aid (Strain) on the real question in front of Ohio's highest court ...To have STANDING, as a plaintiff, in a mortgage foreclosure action, must a party show that it owned the NOTE and the MORTGAGE when the complaint was filed? The bank (US Bank) attempted to claim ownership in order to foreclose. But when forced to prove they owned either…they could not. and instead they had the loan servicer and Wells Fargo“pay-off” and “satisfy” the mortgage, to COVER-UP the FRAUDulent transfer of the note and mortgage. Great Work by attorneys Cook and Aten
www.ohiofraudclosure.blogspot.com


Posted by: OHIO FRAUDclosure (OHIO) on August 30, 2011 1:08AM
For the whole story and background go to ohiofraudclosure (dot) blogspot (dot) com


Posted by: OHIO FRAUDclosure (OHIO) on August 30, 2011 1:08AM
WELLS FARGO IS ON BLAST !

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
jurisprudential quagmire what a bunch of B.S. from fannie and freddie what it means is they will actually have to produce paperwork that was never kept,filed or recorded. Fannie and freddie should be closed and people should get their homes free and clear.....


Posted by: gregory (sj) on August 29, 2011 11:08AM
>The question is NOT "who owns the deed", it's who owns the note. With ALL due respect, that's sloppy reporting and/or editing.<

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
The question is NOT "who owns the deed", it's who owns the note. With ALL due respect, that's sloppy reporting and/or editing.


Posted by: In the industry (cleveland, ohio) on August 29, 2011 3:08AM
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