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CLIENT ADVISORY - November 16, 2007

"Judge, You Don't Understand How Things Work"

by: Larry R. Rothenberg, Esq.

Cleveland Federal Court Judge Christopher Boyko has drawn the attention of the national media based on his dismissal of a number of foreclosure cases and his written opinion reacting to a comment made by one of the lenders' attorneys (not from WWR) during the oral argument on a motion for reconsideration.  The attorney retorted, "Judge, you don’t understand how things work."

The issue raised by Judge Boyko was whether a foreclosure is properly filed if there has not yet been an executed assignment of the mortgage to the plaintiff.  The plaintiffs in these cases were investors in mortgage securities pools.  It is well known in the industry that when mortgage loans are sold in the secondary mortgage market, the execution of the assignments of the mortgages is not instantaneous.

The common understanding is that the ownership of a loan is transferred upon its sale, and the assignment memorializes the previously completed transfer.   The longstanding and virtually universally accepted practice in Ohio courts has been that the foreclosure may be properly commenced in the name of the purchaser of the loan even though the assignment of the mortgage has not yet been executed.  The only requirement has been that the assignment of the mortgage to the plaintiff must be recorded prior to the entry of the foreclosure judgment.

Even though none of the defendants had raised any issue regarding the plaintiff's standing as the owner of the loan, Judge Boyko unilaterally and without prior notice, dismissed the cases.  Some of the plaintiffs filed motions for reconsideration, and in his decision denying the motions, Judge Boyko wrote that the attorney's comment, "'Judge, you don’t understand how things work' reveals a condescending mindset and quasi-monopolistic system where financial institutions have traditionally controlled, and still control, the foreclosure process."

Following Judge Boyko's action, other judges in the Cleveland Federal Court dismissed without prior notice, uncontested cases for the same reason.  They dismissed still other cases based on another requirement that had not previously been explicitly expressed.  The Judges dismissed those cases for the reason that the affidavit of debt filed in the cases did not have a copy of the assignment of mortgage attached as an exhibit.

In the current "anti-lender" atmosphere, we can expect that other courts and borrowers' attorneys will seize upon Judge Boyko's opinion as a way to force delays or otherwise impede foreclosures.  Other than in Federal Court, WWR will continue to file foreclosures even if the assignment of the mortgage has not yet been executed.  Please advise us, however, if you would prefer that we delay filing a foreclosure until after the assignment is executed in order to avoid the potential risk of having the issue arise later.

If you have any questions on this information, please contact Mr. Larry R. Rothenberg, Esq.

Larry Rothenberg is a Partner managing the Foreclosure/Evictions department of the Cleveland office of Weltman, Weinberg & Reis Co., L.P.A. He is the author of the Ohio Jurisdictional Section contained in the treatise, "Dunaway, The Law of Distressed Real Estate". The firm handles foreclosures and related litigation throughout Ohio, Kentucky, Indiana, Illinois, Pennsylvania and Michigan.  Larry can be reached at (216) 685-1135 or via e-mail at lrothenberg@weltman.com.

Client Advisory is published by Weltman, Weinberg & Reis Co., L.P.A., an organization providing comprehensive creditor representation.  The information contained in this advisory is a summary of legal information and is not intended to constitute legal advice on specific matters or create an attorney-client relationship.  Contact any of our offices or visit our website at www.weltman.com for more information, company facts and attorney profiles. (c)2007