Ohio judges are putting the brakes on foreclosure actions. Foreclosures in two counties have been placed on hold as judges have issued stays until counterclaims and third party complaints alleging predatory lending and violations of RESPA and various state laws are resolved.
Servicers involved are LaSalle Bank National Association and Argent Mortgage Company LLC, which was acquired by Citigroup last summer.
In LaSalle Bank's foreclosure case, defendants John P. and Tabitha N. Kelly of Wadsworth, Ohio, about 25 miles south of Cleveland, allege in their counterclaim and third party complaint that, in violation of state laws and/or RESPA, their mortgages were improperly secured and that omissions and discrepancies in 1033 forms negatively impacted their credit and the loans.
Medina County Common Pleas Court Judge James L. Kimbler not only granted the Kelly defendants leave to plead their counterclaim and third party complaint, placing LaSalle Bank's foreclosure on hold, but denied the bank's motion to strike the Kellys' jury demand.
That complaint alleges that LaSalle Bank and third party defendants First Franklin Financial Corp., Republic Mortgage Banc LLC, Majestic Title Agency LLC, C&N Services Inc. and others "acted fraudulently and in a civil conspiracy with each other by and through their actions, inaction, omissions" and also acted "negligently and in breach of contracts and fiduciary duties."
Specific complaints include an inflated appraisal, excessive fees and failure to timely notify the Kellys of the sale of their loan in violation of RESPA, all of which placed the Kellys in predatory loans. Further, their complaint charges that the foreclosure action against them was improperly filed. They seek costs, attorney fees and compensatory damages.
Asked for comment, LaSalle Bank spokesman Robert Darmanin told Mortgage Daily.com, "We don't talk about active litigation."
In Ashtabula County, some 40 miles east of Cleveland, Common Pleas Court Judge Alfred W. Mackey is expected to rule soon on a counterclaim and third party complaint by Michael and Cynthia Dibell alleging predatory lending against Argent, Citi, two brokers, an appraiser and a title agent. Judge Mackey had granted a stay of the foreclosure action against the Dibells, even though the foreclosure action had closed, and gave them leave to proceed with their counterclaim and complaint.
Citi officials did not return a call seeking comment.
The Dibells' attorney, Kenneth D. Myers, of Cleveland, told MortgageDaily.com that the Dibells' mortgage, because of an inflated appraisal, was for more than their house was worth, causing them to lose what equity they had under a land contract. The $5,000 in fees they paid at closing also was more than originally stated, he explained.
Both Dibells had become ill shortly after obtaining their mortgage and missed payments, according to Myers. Rather than agree to a workout, Argent filed foreclosure papers three months after the first missed payment and the house was sold back to Argent at a sheriff's sale, he said.
"This is the direction Ohio courts are going," commented Robert Ruckstuhl, who is licensed as a loan officer, appraiser, title agent and notary in Ohio and has testified on predatory lending before the U.S. Congress and the Ohio house and senate.
Last October, U.S. District Court Judge Christopher Boyko in Cleveland dismissed 14 foreclosure cases brought by Deutsche Bank National Trust Co. on the grounds that they had failed to establish ownership of the mortgages and in November another U.S. District Court judge in Cleveland, Kathleen M. O'Malley, dismissed 32 foreclosure cases filed by Deutsche Bank, Wells Fargo and others, similarly ruling that the paperwork filed with the court did not establish the history of the mortgages' ownership.
In December, Ohio Supreme Court Justice Thomas J. Moyer called on Ohio attorneys to offer their services pro bono to assist in addressing the increasing number of foreclosure cases in the Buckeye state.
Last year, more than 42,000 Ohio borrowers lost their homes to foreclosure, and there currently are some 140,615 REOs in the state, according to ForeclosureS.com.
Last month, LaSalle Bank was blocked by New York's Supreme Court from foreclosing on a borrower who committed mortgage fraud because of violations to the state's predatory lending laws by the originating mortgage broker.
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