Boyko foreclosure decision snowballs… avalanche on the way?

From the beginning of 2007 through last Thursday, December 6, Deutsche Bank was the plaintiff in 1,625 foreclosure cases in Cuyahoga County Common Pleas Court , according to the Court’s online database.

Wells Fargo was the plaintiff in 1,429 foreclosures cases in the same period; US Bank in 1,069; JP Morgan Chase in 1,049.

In most of these cases — as well as the 676 filed by the Bank of New York, the 609 filed by HSBC Bank, and thousands more — the bank named as plaintiff was not the actual lender or mortgage holder. As in this Deutsche Bank case, the named plaintiff was usually the “trustee” for a “securitized investment pool” of thousands of mortgages, with ownership interests in the pool held by unnamed shareholders.

All of which makes this story in Saturday’s Cincinnati Enquirer really interesting:

Last week, a Hamilton County Common Pleas Court judge ruled that Wells Fargo Bank couldn’t foreclose on the Byrds’ North College Hill home because its lawyers didn’t prove that Wells Fargo was the legal owner of the mortgage.

The judge said the foreclosure lawsuit was filed before Wells Fargo owned the mortgage – thus, the suit was premature.

The ruling – the first of its kind by a state court judge in Ohio since the subprime mortgage crisis erupted this year – could have profound implications on how foreclosures are handled in Ohio, which leads the nation in the percentage of mortgages in foreclosure. The local ruling comes as three federal court judges – in Cleveland, Dayton and Columbus – have issued similar opinions in foreclosure cases in the last month…

Ohio Attorney General Marc Dann has already seized on that decision in an effort to slow foreclosure filings throughout the state.

He filed motions Friday in seven Hamilton County cases – and several more in Butler, Montgomery, Franklin and Delaware counties – asking judges to scrutinize each foreclosure case.

The issue is known as the “real party in interest” rule, which says that a plaintiff must prove that it has a stake in a lawsuit in order to file it.

As millions of subprime mortgages are sold and resold on Wall Street, the real “party in interest” isn’t always obvious. Often, the holder of the mortgage note – the legal document that gives a lender the right to take someone’s home for not making loan payments – is different from the servicing company, or the bank that takes the mortgage payments.

It’s unclear how far-reaching the effect of the orders will be. But a recent analysis by University of Iowa law professor Katherine M. Porter found that 40 percent of the 1,733 foreclosures she studied did not contain proof that the plaintiff owned the mortgage.

I’d already heard rumors that several Cuyahoga County Common Pleas judges are considering similar actions in the wake of U.S. District Court Judge Boyko’s now-famous ruling three weeks ago.

Now it looks like AG Dann may be trying to turn this snowball effect into an avalanche.

What happens if Common Pleas judges start throwing out foreclosure cases en masse where trustees haven’t fully documented their “real party in interest” standing? Literally thousands of Cuyahoga County foreclosures may have to be re-filed by Deutsche Bank, Wells Fargo, et al. Assuming they can come up with the documents in most cases, this process still could throw a big, costly wrench into the Unstoppable Foreclosure Machine.

You can be sure that defendants’ attorneys and advocates are looking feverishly for ways to take advantage of this unexpected holiday gift.

(c/p CCD)

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