Foreclosing Lenders
Lenders in Ohio, displeased by the one-to-two-year backlog of foreclosures at the state court level, have increasingly turned to federal district courts located in that state to foreclose on delinquent residential mortgage loans when they believe that diversity jurisdiction requirements can be met. As reported in last Thursday's The New York Times, foreclosures in federal district courts in Ohio by servicers of residential loans that have been securitized recently hit a snag when federal district court judges balked at the failure of servicers to produce documentation that demonstrated that they were the owner and holder of the note and mortgage as of the date the foreclosure complaint was filed.
The court's rules require "an affidavit documenting that the named plaintiff is the owner and holder of the note and mortgage," and the courts have interpreted that requirement to mean more than an affidavit, standing alone. They're requiring that the plaintiff produce an assignment of the note and mortgage dated prior to the date of the foreclosure complaint.
It's a matter of establishing diversity jurisdiction. If you can't show that you are a party that suffered some actual injury, you don't satisfy the requirements of Article III of the U.S. Constitution in this respect. This is all set out fairly concisely and dispassionately in an opinion by Judge Kathleen O'Malley. She observes that the plaintiff either hasn't produced an assignment, or has produced an assignment dated after the date of commencement of the foreclosure action. Therefore, she dismissed the foreclosures without prejudice, which permits the refiling of those actions where an assignment to the plaintiff can be obtained.
The opinion that's received most of the press, however, is that of fellow judge Christopher A. Boyko. Judge Boyko appears to believe that the plaintiff's counsel talked down to him, because one of his footnotes is about as scathing as any I've seen since former federal district court judge Joe Kendall dismissed a government counterclaim against a former client of mine more than a decade ago with the pronouncement "A deal's a deal!"
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