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Student Scholarship: Unintended Effects and Inadequate Consumer Benefit: Analyzing Federal Home Loan Mortgage Corp. v. Schwartzwald. — 2 Comments

  1. “However, it became an industry-wide practice in Ohio for The Enterprises and other large-scale banks to bring a foreclosure action before actually acquiring the official endorsement of the mortgage or promissory note. These practices lead to increased foreclosure litigation featuring the show-me-the-note defense.”

    As one being accused by several as the father of the show-me-the-note defense, let me share with your readership the logic behind the effort.

    As a business person who worked with accounts receivable for years when I was personally hit with a foreclosure action in 1996. The Plaintiff, Nationsbanc Mortgage Corp. (nka Bank of America (BAC)) sued me as “owner and holder” of my mortgage. From my long time experience in business accounts receivable, I simply knew that that the owner of the debt had to be in court in order to collect. Long story short, BAC fraudulently invoked the jurisdiction of the Cuyahoga County Court of Common Pleas by claiming to be the owner and holder.

    Years later Eighth District Court of Appeals judge Sean Gallagher said in court “we know Davet has been far ahead of us (Eighth District) on this foreclosure thing, however, what do we do with this thing?”

    I bring this up as a result of this post which may mislead some as to the fundamental reasoning gone askew in the foreclosure debacle. MA Judge Keith Long of Ibanez, Bevelaqua cases lamented as to the loss of the foreclosure tool as a result of the financial institutions misuse in recent years.

    People should be aware that the mortgage industry was hijacked some 20 odd years preceding the crisis with the privatization and roll out of the GSE Business Model. I was told a long time ago by a lawyer friend of mine that lawyers have little business sense due to inexperience in the area. Business logic told me that the jet fuel inserted into the GSE Business Model was the government guarantee that propelled the Model into the stratosphere. Without the “guarantee” the entire Model would have gone nowhere.

    Every creditable scholar on the subject calls the GSE Business Model “fatally flawed” and “simply does not work”. The fact that the GSE Business Model funds the vast majority of mortgages is indeed the elephant in the room.

    I for one would like to see Ms. Dollard’s Casenote to be amended to include the fact that the “GSE Business Model was/is “fatally flawed” with its shortcomings all wrought by financial institutions partnering in that Model that included the fact that only in the case of an implosion would the taxpayers need to be tapped.

    We have very good laws. We do not need legislation to support what all agree to be a “fatally flawed” Model. To do so would be to support the wrongdoing…..indeed a slippery slope.

  2. Going through a financial hardship does not give a bank the right to walk all over you. Missing a payment because you lost a job, your spouse died, or you suffered some debilitating injury does not mean you forfeit your right to hold the foreclosing bank to its standard of proof. Our judicial system is not about “the ends justifying the means,” or looking to concerns about title issues years later to justify the glazing over of a bank’s obligation to bring a lawsuit based on an actual obligation that it has rights to enforce. If the bank can’t prove it has rights at filing, then that is the bank’s fault – not that of the consumer.

    Too frequently people forget that the judicial system is about a process where one side presents evidence and the other side tests it. In this case, if a bank cannot prove its standing at filing, then it has only itself to blame. Consumers facing foreclosure have too much to worry about in their lives to lay at their feet the future title issues banks face due to their own negligence.

    My comment belies the significant hardships and devastation that people going through foreclosure experience, and how little the banks have helped those who are doing everything they can to get back on track. Any suggestion that it is just “too bad” for the little guy who missed a payment demonstrates a lack of understanding and empathy for those facing this kind of hardship, as well as the concept that the rules should apply to everyone – even the big banks.

    Respectfully,

    Troy Doucet, Esq.