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Wednesday, November 14, 2007

Cleveland Federal Judge: Dismisses 32 Foreclosures For Lack Of Proof

CLEVELAND (TDB) -- A federal judge in Cleveland tossed out 32 foreclosure cases in a mass dismissal today because banks and other lenders failed to file a complete set of documents showing their claims were legitimate. U.S. District Judge Kathleen M. O'Malley said the cases could be refiled if the proper paperwork was included with each lawsuit. Her ruling means the courts are going to give foreclosures increased scrutiny.

[UPDATE: 7:22 AM. 11/15/07 -- Here are the plaintiffs, along with the number of foreclosures that were tossed out of court. Deutsche Bank National Trust, 24; Wells Fargo Bank NA, 3; KMO Liquidation Properties Inc. , 2; LaSalle Bank Nat'l Assn, 1; HSBC Mortgage Services, 1, Speciality Mortages LLC, 1. ]

[UPDATE 2: The New York Times has a story this morning about U.S. District Judge Chris Boyko of Cleveland dismissing several mortgage foreclosures filed by Deutsche Bank last week.Bill Callahan at Callahan's Cleveland Diary is closely following the foreclosure crisis and has links to all the latest legal developments, including the Times report and the Bellwether. Callahan notes that the Ohio press has been slow out of the gate and has so far failed to cover the rulings.]

The decision -- which has yet to be discovered by the Old Media -- comes at a time when lenders are scrambling to pick up the pieces from bad loans, and borrowers are struggling to pay off debts that soared during the years of easy credit and possibly predatory lending practices. Cleveland and Ohio have some of the highest foreclosure rates in the United States, and the courts are swamped with thousands of legal actions against homeowners in default.

O'Malley said she was enforcing a specific requirement of the federal court rules that demand detailed information about the identities of lenders -- and the history of a loan -- involved in foreclosure actions. She said a review of cases pending before her showed that some of the plaintiffs seeking foreclosure have not been directly named in the loan documents that are at the heart of the cases filed in Cleveland. O'Malley said she wanted to see the complete history of a loan.

"A foreclosure plaintiff, therefore, especially one who is not identified on the note and/or mortgage at issue, must attach to its complaint documentation demonstrating that it is the owner and holder of the note and mortgage upon which suit was filed. In other words, a foreclosure plaintiff must provide documentation that it is the owner and holder of the note and mortgage as of the date the foreclosure action is filed."

O'Malley said the court recognizes that mortgages are often transferred, sold or end up with others than the originating lender. But she said the federal courts want the entire chain of a mortgage's history, from its start to where it was when it went into default.

"To the extent a note and mortgage are no longer held by the originating lender, a plaintiff must appropriately document the chain of ownership to demonstrate its legal status vis-a-vis the items at the time it files suit on those items. Appropriate 'documentation' includes, but is not limited to, trust and/or assignment documents before the action was commenced, or both as circumstances may require."

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