Mortgage Ownership Disputed 

Some homeowners have begun to contest their foreclosures and have actually had some lawsuits thrown out of court until the bank can prove it actually is the holder of the mortgage.

You may have read about two of the cases. The homeowners challenged the ownership of the mortgage paperwork and the lender having standing to sue for foreclosure, and the underlying fraud of the loan contract invalidating the entire agreement.

Homeowners asking for proof that the foreclosing bank has the ability to sue, has been a stunning blow to the banks. The subprime mortgage market was something of a Ponzi Scheme.  Loans were created so that loan originators could sell those mortgages to financial institutions. 

Then those banks and institutions could sell the rights to the monthly mortgage payment income to investors.  The final step was to transfer the responsibility to collect the monthly mortgage payments to specialized mortgage servicing companies.

Sliced Mortgages

The problem with this approach is that it has resulted in the slicing up of the mortgage contract, with no party really having ownership of the original paperwork. When homeowners fall behind, the servicer or trustee tries to initiate lawsuit proceedings to sell the house at a foreclosure auction, but judges are beginning to realize that neither of these parties originated the mortgage and can not prove that they own the loan.

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In order for a second bank or financial institution to have standing to bring a foreclosure lawsuit into court, they must have been assigned the mortgage.

Because this was not done in many cases where mortgages were originated and quickly sold off in large loan packages, banks do not have signed assignment paperwork; and with the collapse of the housing market, many of the subprime lenders have gone out of business, making it impossible to contact the originating mortgage company.

This puts these mortgage loans into a kind of limbo, where the homeowners are not making their payments but the banks can not prove they have any rights to those payments anyway. Homeowners who argue this case have met with some level of success so far, with the banks being forced to stop foreclosure proceedings on the house until they can prove they were assigned the loan from the originating company.

Without Prejudice

The only drawback to this victory for the homeowners is that these foreclosure cases are being dismissed without prejudice, meaning that the bank can begin the lawsuit again if they can prove ownership of the mortgage. The judges are not ruling on the merits of the case (whether the owners are behind and their home must be auctioned to satisfy the debt), but only on the lack of standing to sue -- if the bank can get an original assignment, they can begin to foreclose again.

But in a mortgage environment where so many homeowners were given bad loans that they did not deserve and banks are being bailed out by the public for bad loans they never should have made, it is only fitting that the owners should score a handful of victories in the courts.

Banks Won't Own Loans to Foreclose

In the future, there is a good possibility that judges will argue that banks do not need to own loans to foreclose on houses, thereby erasing the legal standing defense of people against corporations; but for now, homeowners have one more defense they can use to stop foreclosure.

The ForeclosureFish website has been created to provide homeowners in danger of losing their houses with relevant and important foreclosure information, news, and resources. The site details numerous options that may be used to save a home, such as bankruptcy to stop foreclosure, mortgage modification, short sales, loss mitigation, and more.
 

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Visit the site to read more articles about how foreclosure works and how the process may be avoided before it is too late: http://www.foreclosurefish.com/