Foreclosures in Ohio

My sources tell me that the foreclosure mediation program has actually gotten underway in Clermont County. If you are interested in pro bono representation of foreclosure Defendants during the mediation phase in Clermont County, contact Ginny Whitman at Legal Aid in Hamilton County. Legal Aid is coordinating this for Judge Ringland.

I took the time to look at the lambasting that the AG received from Magistrate Bachman. At first blush, my advice to the AG is, geesh, pick your cases a little more carefully if you are going to grandstand. It seems the AG entered the fray well after the property was sold. Just look at these dates: Complaint filed on June 25, 2007, State added as a Defendant on August 17, 2007 with service on the 22nd, Motion for Default granted September 27, State files answer on October 9 (a little tardy don't you think), Amended judgment entered on October 25, property sold at Sheriff's sale on November 29, 2007. AG files a Motion to Dismiss on December 7, 2007 AND delivers it to Judge's courtroom thereby pissing off the Magistrate before even getting out of the gate. The Magistrate took the opportunity to give the AG a few ethical lessons and a big whack on hand saying "... this court must conclude that the Attorney General was using this court to advance a political agenda rather than seek a legal remedy in a court of law." (Opinion at 4).

The only thing I want to say about this "legal remedy" statement is that "forcelosure" is an equitable action. For example, do you see any similarities here:

In closing, we note that, if ever there were a situation that cried out for a court to use its equitable powers, this was the case. Here, an employee, who was in legal and financial difficulties, asked his employer for help. He made an agreement whereby his home was held as collateral for the repayment of his debts. The employer, seemingly intent on keeping the employee's property, went to extreme lengths to keep the employee from repaying his debt, first, by adding new debts not encompassed by the original agreement and, later, by attempting to evict the employee from his home. Here, the trial court used its equitable powers to term the agreement a mortgage. By doing so, it prevented Kaeser from retaining ownership in a $ 40,000 home in exchange for lending Gross roughly $6,000, some of which Gross had already repaid. Such a result would have been fundamentally unfair. Consequently, we affirm the judgment of the trial court. Kaeser v. Gross, 2002 Ohio 4050 (Ohio App. Ct., 1st Dist., 2002)

I am, however, much more interested in the logic underpinning Magistrate Bachman's decision about the real party in interest. I continue to be mystified as to how a person or entity not the proven owner of the debt can enforce the terms of the original mortgage and note. But let's look at the decision. It seems that the State argues, as best as I can get from the opinion, that the current owner of the debt is required to record this fact and attach a copy of the recorded document to the Complaint. By failing to do so, the State argues, the Plaintiff has no standing and cannot show that it has "suffered an injury in fact, defined as an invasion of of a legally protected interest that is concrete and particularised" (Opinion at 5, citing Bourke v. Carnahan, (October 13, 2005) 163 Ohio App. 3d 818 (App. 10 Dist.)). We all know that to invoke the Court's jurisidiction, you must show that you have suffered an injury. However, with notice pleading it is sufficient to allege such a fact. The allegation must be made in good faith -- after all, equity requires clean hands. I believe that in addition to picking the wrong case, the AG went about this wrong way. I think I would have attacked the default by alleging that the plaintiff had never proved, but for the presumption (see below), that it had the legal right to enforce the debt. Nonetheless, here is what the Magistrate says:

“… parties to a Note, subsequent holders of the Note, nonholders in possession of the Note who have the rights of holders and persons not in possession of the Note who are entitled to enforce the Note pursuant to other statutory requirements, may enforce the Note as to each other. Parties falling within these legal categories (my emphasis) may enforce the terms of the note even if the Note is lost, stolen or destroyed.” (Opinion at 6).

“Attaching a copy of the note to the complaint creates a rebuttable presumption that the Plaintiff is the holder of the note and the real party in interest." (Opinion at 7)

“Whether a party to the action is a party to the note or mortgage is a question of fact to be determined at trial or other proceeding where the plaintiff seeks judgment.” Id.

What? The plaintiff? The Magistrate just gave the Plaintiff a rebuttable presumption that it is real the party in interest and the holder of the note. Why would the plaintiff do anything unless its status was questioned. It seems to me it would have been better, rather than grandstanding with a motion to dismiss, to attack by putting the plaintiff to its proof that it has the legal right to enforce the debt – that it is in fact, a party “falling within these legal categories.” I cannot discern that the Plaintiff was ever asked to demonstrate to the Court that it was legally entitled to collect this debt or that it ever presented to the Court the documentation, beyond the rebuttable presumption, that it was within the legal categories of persons who may enforce the Note.

Here is my problem. The Magistrate opines "The original note and mortgage executed by the Defendant were attached to the complaint. It is upon these documents that the plaintiff seeks relief in the instant action." (Opinion at 9) This whole debate arises from the fact that the plaintiff was not a party on the original note and mortgage. But see this from the Minnesota Federal Court So, I am apparently wrong. But I can't figure out how this can be. Putting the Plaintiff to the proof of its legal right to enforce the debt does not seem to matter to the the Minnestoa Court or to Magistrate Bachman.

Such proof should be the absolute minimum that the court should require before putting someone out of their home. My point is this. How can a person or entity who has not proven that it has the legal right to enforce the terms of the mortgage and note force the sale of someone's home? This is just wrong. And inequitable!

I can only conclude that sloppy pleading led the AG to this result, either that or the Magistrate wanted a good grandstand of his own. BTW the AG was again pasted by the Magistrate in Residential Funding v. Anthony Muhammad. I did find this with some more factual information about the case.

Monday’s decision comes in a case filed by Deutsche Bank National Trust Co. against Telisa Barnes. She bought a $128,000 home in Northside a year ago with the help of a mortgage from Equifirst Corp. Five months later, Deutsche Bank filed to foreclose, saying she owed $127,892 – plus interest. The state of Ohio had an interest in the property because Barnes put the house up as part of a $20,000 bond in an aggravated menacing case against another defendant. Dann argued that Deutsche Bank was not a “real party in interest” because it didn’t own the mortgage paper when it filed its foreclosure case. The magistrate ruled federal precedents don’t apply because federal courts have limited jurisdiction in foreclosure cases, while state courts are required to take them.
The Home Equity Theft Reporter: Ohio State Judge Rejects AG's "Real Party In Interest" Argument; Allows Foreclosure To Continue

I think the Cleveland Federal Court was on the right track:

A Cleveland federal court ruling that has the potential to block foreclosures across the country looks as if it is already doing that in the court where the decision was written. And the bandwagon may be just starting to roll. The
federal court averaged 100 new cases a month before judges recently started insisting that banks provide up front a document giving them authority to collect loans made by other lenders and held by investors. As of Friday, the number of new filings in December was two. Foreclosures are rare in federal courts but zoomed in Cleveland's in the last two years as banks seized a quicker alternative to a clogged Cuyahoga County system. Foreclosures are mounting nationwide, and filing could get tougher throughout the country if state courts adopt the federal ruling.

The Home Equity Theft Reporter: Ohio Court Rulings Frighten Away Federal Court Foreclosure Filings

Now look at this case In re Cook: Rogan v. Bank One, 457 F.3d 561 (6th Cir. 2006) and these Comments:

Recordation of the mortgage in the land records is not of critical significance to a debtor. As a practical matter, what a debtor really needs to know is the identity of the servicer. Notice of changes in servicers are required by federal law. In the modern world of mortgage securitization, the mortgage note may change hands many times on its way to a mortgage pool, and the benefits of securitization for borrowers would not be realized if all mortgage assignments had to be recorded. In fact, a striking fact of this record is that the note actually transferred with each assignment until it reached the pool held by the trustee. This is good practice, but doesn’t always happen. Note that perfection of the mortgage against subsequent takers of the mortgagor’s property is a different question from perfection of the assignment against competing assignees for security. This can be accomplished either by possession of the note or by recording a “realty paper” filing as a UCC filing.


I remain Always Annoyed and still puzzled.