Deutsche Bank Foreclosures Tossed Out of Ohio Federal Court – “They Own Nothing!”

by Moe Bedard and Aaron Krowne

Judge Christopher A. Boyko of the Eastern Ohio United States District Court, on October 31, 2007 dismissed 14 Deutsche Bank-filed foreclosures in a ruling based on lack of standing for not owning/holding the mortgage loan at the time the lawsuits were filed.

Judge Boyko issued an order requiring the Plaintiffs in a number of pending foreclosure cases to file a copy of the executed Assignment demonstrating Plaintiff (Deutsche Bank) was the holder and owner of the Note and Mortgage as of the date the Complaint was filed, or the court would enter a dismissal.

The Court’s amended General Order No. 2006-16 requires Plaintiff (Deutsche Bank) to submit an affidavit along with the complaint, which identifies Plaintiff as the original mortgage holder, or as an assignee, trustee or successor-interest.

Apparently Deutsche bank submitted several affidavits that claim that Deutsche was in fact the owner of the mortgage note, but none of these affidavits mention assignment or trust or successor interest.

Thus, the Judge ruled that in every instance, these submissions create a “conflict” and they “do not satisfy” the burden of demonstrating at the time of filing the complaint, that Deutsche Bank was in fact the “legal” note holder.

While the decision is great for homeowners in distress (due to providing a new escape hatch out of foreclosure), it is a big blow to the cause of sorting out the high-finance side of the mortgage mess.

Jacksonville Area Legal Aid Attorney, April Charney, broke this news to us via email and made these comments in regards to the Ohio Federal Court ruling (emphasis ours):

This court order is what I have been saying in my cases. This is rampant fraud on every court in America or nonjudicial foreclosure fraud where the securitized trusts are filing foreclosures when they never own/hold the mortgage loan at the commencement of the foreclosure.

That means that the loans are clearly in default at the time of any eventual transfer of the ownership of the mortgage loans to the trusts. This means that the loans are being held by the originating lenders after the alleged “sale” to the trust despite what it says per the pooling and servicing agreements and despite what the securities laws require.

This also means that many securitized trusts don’t really, legally own these bad loans.

In my cases, many of the trusts try to argue equitable assignment that predates the filing of the foreclosure, but a securitized trust cannot take an equitable assignment of a mortgage loan. It also means that the securitized trusts own nothing.

So with this decision, it appears confirmed that investors in the mortgage debacle may in fact own nothing—not even the bad loans they funded! It seems their right to the cash flow from the underlying properties does not extend to ownership of the properties themselves; thus clouding the recovery picture considerably.

Charney further remarked to us:

This opinion, once circulated and adopted by state and Federal courts across the country, will stop the progress of foreclosures, at first in judicial foreclosure states, across America, dead in their tracks.

We agree with additional remarks Charney made pointing out that this decision has major adverse implications for the prospects of an amicable financial workout for the various investor contingents in mortgage-backed securities (MBSes). Doubt is cast on where the full write-downs will eventually land, and this uncertainty can only be expected to further harm the market value of MBS and MBS-based synthetic securities, already in shambles purely due to rising underlying delinquencies. Investors in these securities might have assumed—wrongly, it turns out—that they actually owned some “real estate” in these deals.

To paraphrase Jim Cramer, “They own nothing!”

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There Are 12 Responses So Far. »

  1. [...] decision piggy backs and enforces Judge Boyko’s Deutsche Bank ruling that we reported on Tuesday and is another HUGE victory for consumer advocate attorneys and [...]

  2. [...] story we broke this past Tuesday in regards to the Ohio Federal Court Deutsche Bank ruling has been getting a tremendous amount of [...]

  3. [...] may have started with this post from I am Facing Foreclosure.com, but it was the New York Times story by Gretchen Morgensen which increased the level of interest [...]

  4. [...] appears to have started with a post on the I am facing foreclosure blog. You can read it here. While the presented interpretation sounds pretty dramatic, Calculated Risk had a totally different [...]

  5. Deutsche Bank screwed up. The article makes it sound like banks always loose the paperwork. They don’t. 99.9999% of the time they CAN prove in court that they own it.

  6. slypspeed:

    A major problem with that simplistic dismissal of our post (aside from the fact that Deutsche hasn’t proven it has assignments pre-dating the foreclosure filing) is that a further 40 or 50 foreclosures have since been thrown out and at least some of these are claimed/held by other investors.

  7. [...] The bloggers who first broke the story sensationalized the rulings as an “escape hatch out of foreclosure” for troubled borrowers. The New York Times’ Gretchen Morgenson then lifted the story (without credit, bad form for a journalist), saying that Boyko’s ruling generated “questions about the legal standing of investors in mortgage securities pools.” And Tanta over at Calculated Risk was forced to weigh in with some heady analysis, too, noting in the end that the issue was merely “the true cost of doing business … belatedly showing up.” [...]

  8. [...] Deutsche Bank Foreclosures Tossed Out of Ohio Federal Court – “They Own Nothing!” - Judge Christopher A. Boyko of the Eastern Ohio United States District Court, on October 31, 2007 dismissed 14 Deutsche Bank-filed foreclosures in a ruling based on lack of standing for not owning/holding the mortgage loan at the time the lawsuits were filed. [...]

  9. [...] about the honorable Judge Boyko; Apparently Deutsche bank submitted several affidavits that claim that Deutsche was in fact the [...]

  10. i have same situation in ma. with HSBC there name is not on martgage there was no transfer and mortgage holder of record is out of business a reversal or delay would be welcome.more time to move

  11. [...] note to Deutsch Bank. Negative news and forums abound about both, Deutsch Bank Credit Rating Cut Deutsh Bank Foreclosures Tossed Out of Ohio Federal Court Deutsch Bank Breach of Trust Downey Savings shares fall Downey Savings carrying risky loans Ailing [...]

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    excellent, your http://www.alljewishlinks.com website layout style is actually nice, I’m looking for any new layout style for my own blog, I like yours, now I am going to go lookup the identical design!…

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