Monday, April 16, 2012

Ohio & the National Mortgage/ Foreclosure Settlement

In what was being described as the largest joint federal-state settlement ever obtained, US District Court Judge Rosemary Collyer for the District of Columbia two weeks approved the $25 billion settlement agreement between US Attorney General Eric Holder, along with Department of Housing and Urban Development Secretary Shaun Donovan and 49 state attorneys general, and the nation's five largest mortgage servicers -- Bank of America Corporation, JPMorgan Chase & Co., Wells Fargo & Company, Citigroup Inc. and Ally Financial Inc. (formerly GMAC) -- addressing mortgage loan servicing and foreclosure abuses. That investigation began in October 2010, the University of Pittsburgh's Jurist PaperChase summarized last week, with the forming of a bipartisan group called the Mortgage Foreclosure Multistate Group (MFMG), culminating with the agreement's being reached in February, but requiring court approval to proceed . [The National Conference of State Legislatures has a settlement summary here ]

Jurist referenced that, back in 2009, the US Senate rejected that portion of the Helping Families Save Their Homes Act (Pub.L. 111-22) that would have allowed bankruptcy judges to modify mortgages on primary residences prior to that bill's being signed into law. A USAToday article last week now related federal government's plans to proposing new rules giving homeowners more ways to avoid foreclosure and get accurate accountings of their monthly mortgage payments via the Consumer Financial Protection Bureau, created three years ago via the Dodd-Frank Wall Street Reform & Consumer Protection Act (Pub.L. 111-203). That article says "mortgage servicers would now be required to give all borrowers standardized monthly statements and warn them about interest rate or insurance changes, and make 'good-faith efforts' to contact borrowers at risk of foreclosure, giving them options to avoid losing their homes. There are also stipulations for improving record-keeping and providing foreclosure counseling to those who need it. Those rules will formally be proposed this summer and finalized by January 2013.

A second USAToday article last week, however, related that a report just released from the Office of the Special Inspector General for the Troubled Asset Relief Program said "the program, available in 18 states and the District of Columbia, suffered a 'significant delay' given lack of planning by the U.S. Treasury Department and slow uptake by mortgage loan servicers and mortgage giants Freddie Mac and Fannie Mae, and unless changes are made, not all of the funds may be spent by the program's end in December 2017… Treasury officials say the report 'misses the mark,' and that the program, geared toward helping the unemployed or underemployed in states hard hit by recession or home price declines, has 'kept tens of thousands of families in their homes.'"

USA’s article notes that "Treasury allowed states to tailor their programs to their needs, with itsapproval. While an innovative approach, that also created problems because mortgage servicers, who manage home loans, had to deal with dozens of different programs and were often slow to do so…. State programs to reduce the amount of principal owed on mortgage loans also struggled -- One reason: Freddie Mac and Fannie Mae, which own or guarantee 60% of home loans, doesn't allow principal reduction, and Treasury didn't do enough early on to get big servicers and Freddie and Fannie on board, according to the report. Now that states have set up programs and systems, funds are flowing more rapidly. The amount spent as of Dec. 31 was almost double that of three months prior…"

In the midst of the national fevor, Ohio's supreme court, on April 4th, heard a certified conflict case to determine whether a bank or mortgage company can file a foreclosure lawsuit in Ohio without having proof at the time that it actually holds the mortgage or note. Ohio's supreme court is involved because its appellate courts have issued conflicting decisions on whether a bank needs all the paperwork in order initially or can "catch up" by filing it before the judge rules, according to a Columbus Dispatch’s article. That decision, according to the paper, could have implications not only throughout the state, but also the rest of the country.

The Dispatch article's background on the case said a couple, back in 2006, had bought a house for $335,000, securing a loan for $251,250, after which the husband had lost his job and they moved to Indiana in search of work and putting their home on the market. When they couldn't keep up their mortgage payments in early 2009 they contacted Wells Fargo about a loan modification or short sale, and had a short-sale buyer with the closing set for June 2009. Freddie Mac, however, filed a foreclosure suit in April, saying it was the "holder" of the promissory note but not attaching a copy of that note. It also said it had obtained an assignment of the mortgage but did not attach documentation of the assignment. Neither document was filed until later that year., with Freddie Mac attorney Scott King saying to have the legal right to sue, all a plaintiff needs is to allege facts giving the court jurisdiction to rule, and down the line the bank can back up its suit with the necessary documents.

Proceeding through the courts, Greene County's Second District Court of Appeals issued its decision and entry in the case on July 27, 2011, certifying "In a mortgage foreclosure action, the lack of standing or a real party in interest defect can be cured by assignment of the mortgage prior to judgment" as the question spurring conflict in the state. (See Notice of Certified Conflict )

1 comment:

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