On October 10, 2007, Judge Christopher A. Boyko of the United States District Court, Northern District of Ohio, Eastern Division, dismissed 13 foreclosures, all of which were filed by attorney Manley Deas Kochalski representing Deutsche Bank, in a ruling based on lack of standing, because the Plaintiff (Deutsche Bank As Trustee) did not provide proof that the Plaintiff was the owner and holder of the mortgage loans at the time the lawsuits were filed.

The case numbers are: 1:07CV0357, 1204, 1240, 1272, 1356, 1547, 1803, 1880, 1903, 2033, 2228, 2322, 2516. Here is Boyko's Opinion and Order (Document #17).

On October 31, 2007, Judge Boyko dismissed 14 more Deutsche Bank-filed foreclosures for the same reason. The case numbers are: 1:07CV2282, 2532, 2560, 2602, 2631, 2638, 2681, 1695, 2920, 2930, 2949, 2950, 3000, 3029. Here is
Boyko's Second Set of Dismissals.

Judge Boyko issued an order requiring the Plaintiffs in a number of pending foreclosure cases to file a copy of the executed Assignment demonstrating Plaintiff was the holder and owner of the Note and Mortgage as of the date the Complaint was filed, or the court would enter a dismissal...

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On November 14, 2007, Judge O’Malley of the United States District Court, Northern District of Ohio, Eastern Division, dismissed 32 cases for the same reason.

The case numbers are: 1:07cv1007, 1059, 1060, 1122, 1252, 1367, 1515, 1827, 1872, 1936, 1981, 1985, 1992, 2010, 2257, 2636, 2643, 2660, 2677, 2776, 2789, 2797, 2826, 2951, 2961, 2963, 2993, 3022, 3039, 3143, 3259, 3306.

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On November 15, 2007, Judge Thomas M. Rose of the United States District Court, Southern District of Ohio, Western Division at Dayton, gave the plaintiffs of 20 cases thirty days to prove standing and jurisdiction, for the same reason. Judge Rose noted that: "One of the twenty-six (26) foreclosure actions was filed in compliance with General Order 07-03. The remainder were not."

The case numbers are: 3:07cv043, 049, 085, 138, 237, 240, 246, 248, 257, 286, 304, 312, 317, 343, 360, 386, 389, 390, 390, 433.

Judge Rose quoted a recently released study by University of Iowa Associate Professor Katherine Porter, titled Misbehavior and Mistake in Bankruptcy Mortgage Claims, which covered 1700 Chapter 13 bankruptcy cases filed in April 2006 across 24 states, as follows: "[H]ome mortgage lenders often disobey the law and overreach in calculating the mortgage obligations of consumers…. Many of the overcharges and unreliable calculations… raise the spector of poor recordkeeping, failure to comply with consumer protection laws, and massive, consistent overcharging.” Rose Ruling = = =

District Judge Kathleen M. O'Malley said the cases could be refiled if the proper paperwork was included with each lawsuit. = = =
Q: What's this all about?

A: The Boyko dismissals were based on Deutsche Bank's failure to follow a local rule of the Northern District of Ohio, namely General Order 2006-16 (which, of course, doesn't apply outside that district). This order requires the plaintiff to prove standing at the time of filing the case -- which is not normally required. This order has been amended, so far, six times:

General Order 2006-16 (Sixth Amended)

The requirements are:

  1. . Title report
  2. . A written payment history, verified by plaintiff's affidavit, that the amount in controversy exceeds $75,000 (this qualifies it for federal court)
  3. . A copy of the promissory note and any loan modifications -- or an affidavit of lost note
  4. . A recorded copy of the mortgage
  5. . An affidavit that the plaintiff is owner and holder of the note and mortgage

By the way, just because they can come up with a copy (made at some time in the past) of the promissory note, doesn't mean they are the current holder -- thus the affidavit is necessary.

Q: Why is it a Federal case, when foreclosure comes under State law?

A: Deutsche Bank is out-of-state, so the Federal court has jurisdiction under the "diverse parties" clause, 28 U.S.C. § 1331. Deutsche Bank's attorney, Manley Deas Kochalski, had the choice of filing in State or Federal court, and chose Federal, perhaps because each county has different local court rules. = = =

In the Ohio cases, rather than dig up the original assignments, they got somebody to claim to have power of attorney from Argent, and that somebody created whole new assignments from Argent to Deutsche Bank -- after the lawsuits were filed. That was what the attorney offered, late, in an attempt to comply with that General Order. The judge said they needed proof that an assignment occurred before the filing date. So they re-filed and offered the same affidavits again -- the only difference being that the new lawsuit is filed after the date of the new assignment. Still waiting for a ruling on that. = = =
NY Times, November 17, 2007: Judge Demands Documentation in Foreclosures = = =
Chairman Bair testified before the U.S. House Committee on Financial Services in April, 2007. Her testimony included two charts.

The first chart depicts the traditional mortgage transaction:

Here’s Chairman Bair’s second chart, “Borrowing Under a Securitization Structure”, depicting the typical mortgage transaction in 2007 (click to enlarge):

As Chairman Bair explained to the Committee:

Securitization takes the role of the lender and breaks it into separate components. Unlike the more traditional relationship between a borrower and a lender, securitization involves the sale of the loan by the lender to a new owner–the issuer–who then sells securities to investors. The investors are buying “bonds” that entitle them to a share of the cash paid by the borrowers on their mortgages. Once the lender has sold the mortgage to the issuer, the lender no longer has the power to restructure the loan or make other accommodations for its borrower. That becomes the responsibility of a servicer, who collects the mortgage payments, distributes them to the issuer for payment to investors, and, if the borrower cannot pay, takes action to recover cash for the investors.

And she listed some of the roles in this modern mortgage transaction:

"Bankruptcy-remote special purpose entity" is a separate corporation set up for the purpose of owning the loans. If the parent company (here, Deutsche Bank) goes bankrupt, this entity and its property remain unaffected.

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CLEVELAND (TDB) -- A federal judge in Cleveland tossed out 32 foreclosure cases in a mass dismissal today because banks and other lenders failed to file a complete set of documents showing their claims were legitimate. U.S. District Judge Kathleen M. O'Malley said the cases could be refiled if the proper paperwork was included with each lawsuit. Her ruling means the courts are going to give foreclosures increased scrutiny.

[UPDATE: 7:22 AM. 11/15/07 -- Here are the plaintiffs, along with the number of foreclosures that were tossed out of court. Deutsche Bank National Trust, 24; Wells Fargo Bank NA, 3; KMO Liquidation Properties Inc. , 2; LaSalle Bank Nat'l Assn, 1; HSBC Mortgage Services, 1, Speciality Mortages LLC, 1. ]

[UPDATE 2: The New York Times has a story this morning about U.S. District Judge Chris Boyko of Cleveland dismissing several mortgage foreclosures filed by Deutsche Bank last week.Bill Callahan at Callahan's Cleveland Diary is closely following the foreclosure crisis and has links to all the latest legal developments, including the Times report and the Bellwether. Callahan notes that the Ohio press has been slow out of the gate and has so far failed to cover the rulings.]

The decision -- which has yet to be discovered by the Old Media -- comes at a time when lenders are scrambling to pick up the pieces from bad loans, and borrowers are struggling to pay off debts that soared during the years of easy credit and possibly predatory lending practices. Cleveland and Ohio have some of the highest foreclosure rates in the United States, and the courts are swamped with thousands of legal actions against homeowners in default.

O'Malley said she was enforcing a specific requirement of the federal court rules that demand detailed information about the identities of lenders -- and the history of a loan -- involved in foreclosure actions. She said a review of cases pending before her showed that some of the plaintiffs seeking foreclosure have not been directly named in the loan documents that are at the heart of the cases filed in Cleveland. O'Malley said she wanted to see the complete history of a loan.

"A foreclosure plaintiff, therefore, especially one who is not identified on the note and/or mortgage at issue, must attach to its complaint documentation demonstrating that it is the owner and holder of the note and mortgage upon which suit was filed. In other words, a foreclosure plaintiff must provide documentation that it is the owner and holder of the note and mortgage as of the date the foreclosure action is filed."

O'Malley said the court recognizes that mortgages are often transferred, sold or end up with others than the originating lender. But she said the federal courts want the entire chain of a mortgage's history, from its start to where it was when it went into default.

"To the extent a note and mortgage are no longer held by the originating lender, a plaintiff must appropriately document the chain of ownership to demonstrate its legal status vis-a-vis the items at the time it files suit on those items. Appropriate 'documentation' includes, but is not limited to, trust and/or assignment documents before the action was commenced, or both as circumstances may require." = = =

A recent study of 1,733 foreclosures by Katherine M. Porter, an associate professor of law at the University of Iowa, found that 40 percent of the creditors foreclosing on borrowers did not show proof of ownership. = = =
Q: Can I see the paperwork for one of these cases?

A: Sure. Here is a sample. The case number is 1:07-cv-357.

The plaintiff is Deutsche Bank National Trust Company, as trustee of Argent Mortgage Securities, Inc. Asset Backed Pass Through Certificates, Series 2006-W3 under the Pooling and Servicing Agreement Dated as of March 1, 2006, Without Recourse, c/o AMC Mortgage Services, 505 City Parkway, West Orange, California 92868.

The defendant is Clayborne Moore, Jr. 3478, West 45th Street, Cleveland, OH 44102:

#1-1 Complaint
#2-1 Corporate Disclosure Statement
#3-1 Affidavit
#3-2 Exhibit A - Payment History
#5-1 Notice of Filing of Assignment of Mortgage
#5-2 Recorded Assignment
#18 Motion for reconsideration of Dismissal
#17 Order of Case Dismissal

Q: Is that the end of the story?

A: No. On November 9, Deutsche Bank refiled, as case 1:07-cv-3504, Deutsche Bank National Trust Company v. Moore.