Judge Cancels Homeowner's $460,000 Mortgage Debt

[Tx4obama]

.... surprising smackdown occurred on Oct. 9 in federal bankruptcy court in the Southern District of New York. Ruling that a lender, PHH Mortgage, hadn’t proved its claim to a delinquent borrower’s home in White Plains, Judge Robert D. Drain wiped out a $461,263 mortgage debt on the property. That’s right: the mortgage debt disappeared, via a court order.

So the ruling may put a new dynamic in play in the foreclosure mess: If the lender can’t come forward with proof of ownership, and judges don’t look kindly on that, then borrowers may have a stronger hand to play in court and, apparently, may even be able to stay in their homes mortgage-free.

The reason that notes have gone missing is the huge mass of mortgage securitizations that occurred during the housing boom. Securitizations allowed for large pools of bank loans to be bundled and sold to legions of investors, but some of the nuts and bolts of the mortgage game — notes, for example — were never adequately tracked or recorded during the boom. In some cases, that means nobody truly knows who owns what.

Read full article at: http://www.nytimes.com/2009/10/25/business/economy/25gret.html?partner=rss&emc=rss

[warrior1]

1. Good for the home owner of that property

but, will that mean that the tax payer will be on the hook for the losses from the banks?

[GreenPartyVoter]

3. Maybe the bank should be on the hook for being clueless about their paperwork.

[BrklynLiberal]

4. After all these predatory mortagers have done...they better not come with hat in hand

[BrklynLiberal]

2. Fantastic!! Hope this will discourage that bundling and selling of mortgages that was so rampant.

[RB TexLa]

13. That is how mortgages are funded. Do you also want to see rates go to what, 18%?

MBS help to spread the risk and keeps rates low.

[robinlynne]

5. smile.

[Solly Mack]

6. K&R

[flvegan]

7. Lucky, though he won't be able to sell it nor mortgage it any time soon.

The title is unmarketable.

[rug]

15. It will be after an action to quiet title is filed.

[flvegan]

18. In Florida, you're still waiting 4 years. Great many states have the same rules.

And that's IF the quiet title action is successful. Whole new judge.

[rug]

20. New York doesn't have that backlog.

The bankruptcy discharge of the mortgage should simply the action.

[flvegan]

24. It's not backlog.

It's a combination of time and underwriting rules. As an underwriter, I wouldn't touch this one simply based on the need for good service of process. Not remotely worth the pittance of a premium we'd get for taking on that risk.

[Trillo]

8. It's a start at debt forgiveness.

Maybe it will spread surgically, here and there.

[laughingliberal]

9. Yay! nt

[SoCalDem]

10. The way they played fast and loose, who knows where those actual "notes" are

for all we know, they may have sliced it up into segments..like

yr 1-5 of a 30 yr
or yr 5-10 of an ARM

those "notes" no longer even exist...do they?

and when company A "sells" a $300K mortgage for 100K, haven't they already "discharged" $200K of "worth"?

and the Company B sells that $100K for $50K..

why should the person living in the house still be on the hook for $300k?

[Cleita]

11. I heard this somewhere else. That these mortgages have been sold and

resold so many times that many institutions don't know where the original paper work is. I hope more home owners stick it to these parasites by refusing to turn their homes over to the banks until they can prove ownership.

[malaise]

12. Bravo Judge

Hope other judges follow Judge Drain.

[JNelson6563]

14. Oh I like this!

Wonderful! :toast:

[CoffeeCat]

16. Wow...is that JUSTICE I'm seeing...

...from our justice system? BEAUTIFUL!

The mortgage companies and banks are the ones that sold and sold and sold these high-risk, creatively finances
loans--and then packaged them up and sold them to secondary markets. The banks and mortgage companies made
truckloads of cash doing this. These loan bundles were sold again and again--with money being made at
each step.

The reason it was so easy to get a mortgage, was because the banks were making so much money, as were the secondary
markets and other financial institutions. They all profited handsomely.

It's a crime that we are left without homes--and they get to keep the profits--PLUS THE BAILOUT FUNDS!

Damn straight, that mortgage was wiped out! If the banks want to play that way--then they damn well better be
able to "produce the note". The banks engineered this mess, and it's about damn time someone sided with the homeowners.

Maybe now the banks will start negotiating--or thinking twice before foreclosing on a loan when they don't
even know where the loan is!

Sweet justice!

[elifino]

17. This brings up another question, who pays property tax?

[flvegan]

19. Fee simple owner does.

Even if there was an escrow arrangement, the owner would be wise to pay those.

[Taitertots]

21. I'm going to get my dad to sue his lenders

He is not going to get foreclosed on, but I want to get in on this action. Call it a preventative suit, demanding that they produce the proof of ownership.

I'd do it but I rent.

[peacetalksforall]

22. There will be a hiring rush to sort and match, if it's possible to straighten it out.

[barbtries]

23. i'm happy to read this

and hope it happens more often in the future.

[Phoebe Loosinhouse]

25. There are cases of homeowners who have had more than one foreclosure filed against them on the same

property by 2 different entitites claiming to be the noteholder. That is why this not just some BS scam that the homeowner lucked out on. It is CRITICAL that the entity filing foreclosure has the status to file and is the legitimate noteholder.

If they are so careless that they cannot provide documentation and an unbroken chain of title, then I stay tough nuggies.

Too busy paying those gigantic executive salaries to pay people to properly process and document their purchases and sales. Just more reason for stockholders to sue them for incompetence and failure to fulfill their fiduciary responsibilities to shareholders.

[FarCenter]

26. PHH is a mortgage servicer, not a lender

It's unclear whether PHH would eat the loss. Most likely they would not. They are not a bank. They are just gophers for the actual lenders.

http://www.phhmortgagesolutions.com/