Federal judge: Lenders Hijack Foreclosure System for Profits

[OzarkDem]

Judge Christopher Boyko, who recently ruled that lenders are unable to prove they own properties in foreclosure, follows up with comments about how mortgage lenders work the foreclosure system for profit. Companies selling mortgage backed securities through Wall Street investment firms leave little or no paperwork making it difficult to determine who owns the notes.

Sounds like they've really perfected a system...

"A federal judge in Cleveland has accused the mortgage industry and its lawyers of hijacking the foreclosure system in the interest of profits and at the expense of homeowners and municipalities.

In a written opinion, Judge Christopher Boyko accused lenders of creating confusion about who holds the mortgages of houses in foreclosure so they can collect interest on default judgments while avoiding the cost of maintaining empty houses.

...

The lenders, he said, rush to foreclose on delinquent buyers. But when taking back the properties, they delay recording the deeds, leaving cities to board up empty houses and mow lawns.

http://www.cleveland.com/news/plaindealer/index.ssf?/base/cuyahoga/1195292055294310.xml&coll=2&thispage=1

[havocmom]

1. The judge is correct. And should make sure he has good security.

Those empty, untended homes also lower value of neighborhood properties. Ends up making other homes worth less than the owners have to pay on them.

If pools are involved,the abandoned homes create health hazards when stagnant water provides habitat for mosquitoes. Then there is the risk of rodent infestation and all the disease that can invite into a neighborhood.

Empty houses sometimes end up being used for drug use/sale. All sorts of 'there goes the neighborhood' shit. Also ends up being a boon for private security firms when neighborhood associations have to hire guards to keep that from getting bad. Increases the fear and makes people more inclined to put up with all sorts of private rights abuse in hopes of getting some 'secruity' back in their neighborhoods.

It is very business friendly, all these questionable loans which go bad. Not neighborhood friendly and not property tax payer friendly.

But it's great for the shit-heads who made bad loans their company policies.

[Sen. Walter Sobchak]

2. while I am the first to believe ill about the financial industry

don't attribute to wiliness what can otherwise be attributed to incompetance,

[sam sarrha]

3. THIS WAS PLANED..ReThugs are in on it they ended bankruptcy at way too convenient a time this's a

RICO ripoff..

[happyslug]

4. Duplicate

N/T

[happyslug]

5. Sounds like he did this sua sponte i.e. on his own

No input from any Defense Counsel or the Defendant, on the Judges motion alone. Rare but legal.

Federal District Court for Northern Ohio, Eastern Division Web Site:
http://www.ohnd.uscourts.gov/

The Actual Order (PDF file):
http://www.ohnd.uscourts.gov/Clerk_s_Office/Notable_Cases/re_forclosure.pdf

Please note the dismissal is "without Prejudice" which means the plaintiff can re-file them provided they attach to the new complaint evidence that the Plaintiff actually own the Mortgage (Which is required ONLY by the Federal Rules of Civil Procedures).

Another decision from a different Judge (Kathleen O'Malley), same results:
http://www.ohnd.uscourts.gov/Clerk_s_Office/Notable_Cases/Foreclosure_Dismissals.pdf

Please note these are decisions from Federal District Judges. While technically all are appointed by the President, in reality all are picked by the Senators from the state the Judge sits in. This is done by the Senators suppling a list of members of the President's own party to the President. The President then picks one, and it is approved by the Senate. If the President tries to appoint someone else, the appointment never gets out committee, and none have since the time of Washington. Thus Democrats Glenn and Metzenbaum for all practical purposes (Through technically not legally) appointed O'Malley in 1994 and Republicans DeWine and Voinovich did the same for Boyko in 2004.

[OzarkDem]

10. Cleveland's had major problems w/ these foreclosures

not necessarily related to the economy, but more because of predatory lending practices and the refusal of the GOP controlled General Assembly and governor at the time who thwarted their attempts to crack down on predators.

This article was posted here earlier this week

http://money.cnn.com/2007/11/12/real_estate/Cleveland_foreclosure_factors/?postversion=2007111315

So the judges, who have been dealing with this growing problem for the last several years, are very sensitive to the issue and not sympathetic to the lenders.

There are entire streets and neighborhoods that have been victims of mass foreclosures. The city has been left with the cost and mess to board up or destroy these homes.

[TahitiNut]

6. Capitalism's version of "a plague of locusts."

:puke:

[flvegan]

7. That's not even remotely true.

At least not in Florida.

Points:
1. "leave little or no paperwork making it difficult to determine who owns the notes." The mortgage follows the Note. Public records should have assignments creating a chain. If they don't, counsel has to prove the Note was lost or destroyed AND obtain the proper chain of assignments. Oftentimes, the note is traced through MERS (Mortgage Electronic Registration Systems, Inc) and is on the face of the mortgage as the nominee.

2. Profit off a default judgment? Interest? The Final Summary Judgment takes the place of the mortgage as the existing lien. The property goes to sale. A Certificate of Title is issued. Title vests in the successful bidder, most often the Plaintiff/lender. There's no interest unless the Plaintiff goes after a Deficiency Judgment, which is exceedingly rare. If the lender is using Freddie/Fannie money, they're still making interest payments to the govt. Have been since the day of default. They lose money every month. That Certificate of Title, btw, IS the new deed, and the Court records it, not the bidder. They can't delay recording it.

3. Municipality losses? No. If the city/county has to go out and mow or board a place up, they place a lien on the property. Someone has to pay that. Can't be wiped out in the f/c. The lawyer has to be forward about gaining the info and making sure that the place is taken care of. If not, they file the lien. The successful bidder now owns the debt from that lien, and they can't sell it with that big cloud on the title. No lender will lend over it, and no title company will insure over it without Exception.

[happyslug]

8. In Pennsylvania foreclosure EXTINGUISH such liens.

Pennsylvania follows the rule that the Mortgage company is a "Owner" of the property. This is called a legal fiction. The key to this when a real property is foreclosed on, the mortgage company gets a clean title for having purchased the property AT THE TIME THE MORTGAGE WAS ENTERED INTO. Under this "legal fiction" any subsequent lien is from the home owner, whose right to own the property was extinguished by the foreclosure, ends with the Foreclosure. An exceptions is made for Tax liens, but not judgment liens. I have had mortgage companies refuse to accept a deed in lieu of Foreclosure on the grounds they wanted any subsequent liens on the property extinguished and that can only happen at a Sheriff Sale of the Property.

As I said this is under the "Legal Fiction" that the Mortgage holder is the legal owner of the property from the time the mortgage was entered into by the homeowner ONCE THE HOUSE IS SOLD AT EXECUTION SALE. This rule varies from State to State.

[flvegan]

9. In PA, do the judgment creditors

have to be named in the suit? Sounds like such liens attach to the person but NOT to the property. Interesting.

[happyslug]

13. A judgment is a lien on all the property of the defendant.

And that includes his or her real property. The Courts rule is simple, when the property is foreclosed on, the Judgment lien stays on the property of the Defendant, but the Defendant is ruled NEVER TO HAVE OWNED THE PROPERTY FORECLOSED ON. Thus any Judgment stays as a lien on any other property of the Defendant, but not on the Foreclosed property for the courts view the property as NEVER BEING THE PROPERTY OF THE DEFENDANT.

Please note in the above paragraph I am using the Term "Defendant" to indicate the person who has a Judgment against him independent of the Foreclosure (In which he is also a Defendant"). Technically in Pennsylvania, a Foreclosure action is "In rem" only i.e against the property NOT the person. If the property is sold for less then the Mortgage a separate action has to be brought (almost never is, most banks have better things to do with their money then force someone into bankruptcy).

As to naming anyone else in the Suit, the answer is no. They do NOT even have to named subsequent Mortgage holders (i.e. the First mortgage holder can file a foreclose action and NOT tell the Second or Third Mortgage holders). Now to put the property up for Sheriff sale, the judgment must be filed with the Sheriff who will post the property. The filing MUST be done prior to the Sheriff sale PRIOR to the sale the real property is to be sold at. In my county that is every Three months, in Allegheny County (County seat is the City of Pittsburgh) they sheriff sale property every month. The Sheriff must post the property for sale, and publish the sale in the local newspaper and Bar Journal. If subsequent lien holders don't read these documents, they have no knowledge of the Execution sale (Through most find out, if they really want to know).

Now, the mortgage holder MUST inform the owner of their intention to foreclose at least 30 days before the actual filing. In that notice the bank MUST inform the owner of their right to request "Mortgage assistance" from the state. "Mortgage assistance" is a program run by the state, where after checking out the property (and the liens on the property) and determining someone fell behind do to no fault of their own AND have a good prospect of starting payment within two years, the State will pay the amount in arrears and put a second lien on the property (For the owner to pay back, if the house is sold OR the first mortgage is paid off). This program has existed since the Steel collapse of the early 1980s and has been a very good program. It also can extend the foreclosure procedure to almost none months.

No one really wants to take over people's home, they want paid. Thus the above programs and delay in foreclosure in Pennsylvania.

[OzarkDem]

11. Its true in Ohio

When the GOP was in charge of all state government, they blocked efforts by the cities and counties to tighten restrictions on predatory lenders and foreclosures.

It had triple benefits for the GOP - they got lots of campaign donations from lenders and it allowed them to damage neighborhoods,the economy and elected officials in a Democratic stronghold of the state.

[Richard Steele]

12. Tell it to the judge. nm