Cleveland sues securitizers for damages under Ohio public nuisance law

January 11, 2008

(c/p CCD)

Exactly friggin’ right:

But Cleveland’s suit is even more unique because the city has based its complaints on a state law that relates to public nuisances. The suit also is far more wide-reaching than Baltimore’s in that it targets the investment banking side of the industry, which feeds off the mortgage market.

Investment bankers at these companies buy subprime mortgages from lenders, then sell mortgage-backed securities to investors. It is a legal practice, known as securitization, that became increasingly popular during the housing boom earlier this decade.

Jackson and city Law Director Robert Triozzi said Cleveland should have been excluded from the frenzy. They pointed to housing prices that remained relatively flat as real estate values jumped elsewhere, as well as a manufacturing downturn and widespread poverty.

The suit claims that even though these issues were well documented, investment bankers continued to feed loans to hungry investors at the expense of borrowers buried in interest.

“Ultimately, they’re responsible,” Triozzi said of the investment banks. “They knew the economic conditions in which they were operating here. They decided that didn’t matter.”

Now I remember why I voted for Frank Jackson.

P.S. You can download the City’s actual filing here (pdf). Recommended reading!

Read the rest of this entry »

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Foreclosure deeds recorded last week

December 19, 2007

(c/p CCD

206 sheriff’s deeds were filed with the Cuyahoga County Recorder’s Office last week (December 10 through December 14).

Here’s who filed five or more of them:

Department of HUD (28)
Deutsche Bank (25)
Federal National Mortgage Assn (24)
US Bank (15)
Wells Fargo (14)
Bank of New York (10)
HSBC Bank (7)
Lasalle Bank (6)
Federal Home Loan Mortgage Corp (5)
Household Realty (5)

(Previous week.)


Boyko foreclosure decision snowballs… avalanche on the way?

December 10, 2007

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)


Who’s foreclosing Cleveland?

October 30, 2007

Search terms that produce 400 or more case numbers when querying the Cuyahoga County Common Pleas online database for the term (e.g. “Deutsche Bank”) as a plaintiff in civil cases filed so far in 2007:

  • “Deutsche Bank” — 1,400 hits
  • “Wells Fargo” — 1,257
  • “US Bank” — 1,065
  • “JP Morgan” and “Chase” combined — 687
  • “Citi” — 638
  • “Bank of New York” — 594
  • “HSBC” — 544
  • “Homecomings” — 443
  • “Sky Bank” — 421
  • “Countrywide” — 414

Remember that the foreclosing lender isn’t often the same institution that originated the mortgage in the first place. Deutsche Bank files foreclosures almost exclusively as the trustee or servicing agent for other lenders and/or mortgage-backed investment pools. Wells Fargo and US Bank (and others) are often in the same role, even though they also originate a lot of subprime loans themselves.

Some of the the county’s biggest subprime lenders, like Argent Mortgage, file very few foreclosures themselves, even though hundreds of their mortgages are in foreclosure at any given moment.

Also remember that a single foreclosure case often has multiple plaintiffs.


Map: Wells Fargo properties in Cleveland

October 30, 2007

The second most active forecloser, and second biggest holder of foreclosed properties in the city of Cleveland, is Wells Fargo & Co., headquartered in San Francisco. Unlike Deutsche Bank, Wells Fargo is a major subprime lender in the Cleveland market; it originated almost 2,000 Cuyahoga County mortgages in 2006 and nearly 900 in the first half of this year. But from January through June 2007, Wells Fargo started foreclosures on almost as many mortgages as it originated, and filed a completed sheriff’s deed for every two new mortages.

As of yesterday (October 29), according to the County Auditor, Wells Fargo held title to 443 properties in the city — up from 419 six weeks earlier.

Click on the graphic for a Google map of these properties (not including a few vacant lots without addresses).

(Map created with GPS Visualizer.)