Vincent Howard and our San Bernardino County foreclosure defense lawyers have written a lot about documentation problems affecting foreclosures. This has become a very widespread problem because of sloppy record-keeping and the extensive buying and selling of loans during the housing bubble of the last decade. Lenders have a system of swapping loans using MERS (a private company that maintains a database showing who owns what property), so they don't bother recording assignments properly, which can lead to confusion over who owns the property or incorrect foreclosure attempts. In Federal Home Loan Mortgage Corp. v. Schwartzwald, it led to a successful challenge to a foreclosure by the homeowner. The Ohio Supreme Court ruled that FHL had no standing to sue for foreclosure when it brought the suit, and thus dismissed the case.
Duane and Julie Schwartzwald bought their Xenia, Ohio home in 2006. In 2008, Duane Schwartzwald lost his job and found a new job in Indiana; they were unable to sell their house before they went into default. Though they were able to arrange a short sale, FHL started a foreclosure action on April 15, 2009. Wells Fargo, the lender of record that had authorized the short sale, advised the couple not to worry about it. On May 15, Wells Fargo assigned the note and mortgage to FHL; FHL filed these with the court on June 17 and moved for summary judgment, but the court declined, saying FHL had not established a chain of title. Meanwhile, the short sale fell through. In December, FHL filed the missing documents showing chain of title, but the Schwartzwalds also argued that FHL had no standing to foreclose. The court eventually granted FHL summary judgment. On appeal, Ohio's Second District Court of Appeal upheld that ruling, finding that while FHL had no standing originally, the problem was cured by the assignment of the mortgage and note transfer before the case was closed.
The Schwartzwalds appealed, arguing that standing to foreclose is determined when the action is brought and cannot be cured by subsequent actions. The Ohio Supreme Court ultimately agreed. Citing many of its own past decisions as well as federal cases, it said standing must be determined as of the start of the suit in order to invoke the jurisdiction of the court; any change after the start of the case does not create standing. It noted that this comports with cases from many other states as well. It was not disputed that FHL was not the injured lender when it started the suit, the court noted; thus, it had no standing when it sued. Furthermore, the high court said, FHL cannot cure the defect by substituting the proper party as real party in interest. Substantial caselaw also shows that this practice is disallowed because it permits parties to end-run around statutes of limitations. Thus, the high court reversed the finding and dismissed the complaint, though it noted dismissal was without prejudice.
Vincent Howard and our Costa Mesa foreclosure defense attorneys are pleased to see this ruling, even though it may not help the Schwartzwalds. Although the court found that the foreclosure should not have been permitted to go through, the couple had already been through a foreclosure and auction and lost their short sale, so the damage to their credit and the loss of a better solution have already taken place. That's why it's absolutely vital to talk to an attorney as soon as you believe your lender may be violating your rights. In this case, Wells Fargo blatantly gave the homeowners incorrect information, due to (at best) failure to keep track of activities elsewhere in the company. Never trust assertions from a lender that seem to contract the facts without talking to the Rancho Cucamonga foreclosure defense lawyers at Howard Law, P.C.
If you're facing default or foreclosure and you don't believe your lender or loan servicer has dealt with you honestly, Howard Law may be able to help. For a consultation, send us an email or call today at 1-800-872-5925.