by Brian Mahany
Every now and then courts get it right. The victory is even sweeter when the court that issued the ruling happens to be a state supreme court. On Halloween, the Ohio Supreme Court ruled that a lender must have standing at the time it files for foreclosure. Sorting out the paperwork at a later date is no longer sufficient in Ohio.
In this case, the party seeking to foreclose was a guaranty agency, Freddie Mac. As often happens, Freddie Mac filed for foreclosure before it had an assignment of the underlying note. It produced an assignment by the time the case was complete and that was good enough for a lower court. But not the Ohio Supreme Court which reversed the lower case and dismissed the case.
Lenders need standing in order to file a foreclosure complaint. According to the Ohio Supreme Court, getting an assignment of the note and mortgage after filing the complaint doesn’t cure the defect which attaches when the complaint is filed. A unanimous court ruled that, “invoking the jurisdiction of the court ‘depends on the state of things at the time of the action brought.'” Because Freddie Mac did hold the note when the foreclosure was filed, it couldn’t later correct the defect.
The homeowners in this case were caught between Wells Fargo and Freddie Mac. The homeowner, Duane Schwartzwald, lost his job and began to fall behind on mortgage payments. Trying to stay afloat and preserve their credit, the Schwartzwalds arranged a short sale. Wells Fargo agreed to the short sale but never told the couple that it was turning the loan over to Freddie Mac. When Freddie Mac commenced foreclosure, Wells Fargo apparently told the couple not to answer because they were going to approve the short sale. Obviously, that never happened.
Often we see cases like this from big lenders. Talk to 10 people at Wells Fargo or Bank of America and you are likely to get 10 different answers (if you get someone to speak with you.) We aren’t sure whether the miscommunications and bad advice factored into the court’s decision but it certainly didn’t hurt.
The ruling doesn’t end foreclosures in Ohio but it forces the lender to have its paperwork in order before filing. Anyone going through the foreclosure process knows this often no easy task for big lenders.
The foreclosure defense lawyers at Mahany & Ertl have helped many homeowners. We are not a traditional defense firm – if you are facing an imminent foreclosure we probably can’t help. Our lawyers sue banks and loan servicers for improper denial of HAMP mortgage modifications, predatory lending and foreclosure practices and fraud.
Banks usually have the upper hand in foreclosure cases. The cases typically aren’t heard by juries and they have deep pockets to pay for lawyers. By suing the lenders, however, the banks may have to face a jury and could be forced to pay large damage awards for their misdeeds.
Mahany & Ertl – Giving Homeowners A Voice (and an edge). Offices in Milwaukee, Wisconsin; Detroit, Michigan; Portland, Maine; and Minneapolis, Minnesota. Services available in many jurisdictions.