Ohio Supreme Court sides with homeowners in the neverending foreclosure mess

Reposted with permission by Marc Dann, Esq.

Yesterday, the Ohio Supreme court issued an important decision affecting Ohio Homeowners who are now or who have recently been in foreclosure. In Federal Home Mortgage Corporation v. Schwartzwald the Court unanimously agreed with the position that our firm has been strongly advocating for the past 4 years that only someone who actually holds a homeowner’s note and mortgage may use the courts of Ohio to foreclose on their homes.

This seems obvious. But apparently not to the loan servicers and their foreclosure mill co-conspirators who gleefully sued thousands of Ohioans on behalf of entities that had no right the use the courts of Ohio.

The Court correctly held that Article IV of the Ohio Constitution limits the use of the Common Pleas Court to parties who actually have a dispute with one and other. One doesn’t need to be a lawyer to understand that A can’t sue B for a debt that B owes to C. Apparently that logic wasn’t so obvious to the lenders and loan servicers who originated millions mortgages (often predatory ones) between 2001 and 2008 and sold and resold them to each other and unsuspecting bond holders on Wall Street. For any one remembers playing musical chairs as a child, think of the notes and mortgages originated last decade as the chairs and the originators, special purpose entities, investment banks and Bond Trusts as the players.When the music stopped in 2008 when the Market for mortgage backed securities crashed, we have learned that it is surprisingly unclear who was holding notes and mortgages of Ohio Homeowners.

That is why all of the major lenders and loan servicers in Ohio simply ignored the legal requirements of owning someone’s note and mortgage and just filed for foreclosure in he name of whatever entity they “thought” was the last to buy the note. Believe it or not, thousands of lawsuits for foreclosure in Ohio were filed by entities that simply don’t have any dispute with the homeowner they were suing. In the Schwartwald Decision, the Ohio Supreme Court has said definitively that courts that granted Judgments in such circumstances were without jurisdiction to do so, and that courts that our currently deciding cases must dismiss those where the lender did not possess the note and mortgage prior to filing their foreclosure complaint.

What does this mean for Ohio Homeowners:
First, it is important to understand that courts do not have an obligation to independently review cases to determine whether or not the party suing has standing to do so. Someone who is sued by a lender or servicer that does not hold the note and mortgage must put the information about the lender’s lack of standing before the court. The Schwartzwald Decision makes it more important than ever that homeowners being sued for foreclosure in Ohio retain a lawyer to represent them. While this can conceivably be done by some one without a lawyer, it is a rather sophisticated and complicated argument and can best be put forward by a lawyer who is experienced in defending foreclosures. Our firm and others offer payment arrangements that make retaining counsel affordable to homeowners who are in foreclosure. For those who qualify, local legal aid offices have some of the best staff and volunteer foreclosure defense lawyers in Ohio.

Second, if you have been sued foreclosure over the past several years, even if the matter has been resolved by way of a loan modification or a cash for keys settlement, you should consult a lawyer about whether or not you have claims against the companies involved in suing you. Under the Federal Fair Debt Collection Practices Act and Ohio’s Consumer Sales Practices Act you may have claims for damages and attorneys fees, but they both have short statutes of limitations, therefore time is of the essence. Our firm and others will bring some of these claims on a contingent fee basis, meaning that you would not owe a fee unless we recover damages on your behalf
Most importantly, it may be possible to seek an order vacating a judgment of foreclosure particularly if the real estate has not yet been sold at Sherriff’s sale.

The critical lesson from this important decision is how important it is for homeowners who are facing foreclosure to fight back by challenging every claim that is made. Believe it our not, in thousands of cases throughout Ohio and the Country the largest banks in America and their foreclosure mill lawyers cheerfully sued thousands of Ohioans for debts that weren’t owed to them. The courage of the Schwartzwalds and the brilliant work of their superb lawyer Andy Engel has cleared the path for thousands of Ohioans to seek justice.