COMMONWEALTH OF KENTUCKY FRANKLIN CIRCUIT COURT DIVISION I CIVIL ACTION NO. 13-CI-00060
COMMONWEALTH OF KENTUCKY ex. rel. JACK CONWAY, Attorney General,
v.
MERSCORP HOLDINGS, INC. a Delaware Corporation 1818 Library Street, Suite 300 Reston, Virginia 20190
and
MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC. a wholly owned subsidiary of MERSCORP Holdings, Inc. a Delaware Corporation 1818 Library Street, Suite 300 Reston, Virginia 20190
General Electric Co (GE.N) has agreed to settle a federal agency’s lawsuit accusing it of misleading Freddie Mac into buying $549 million of mortgage-backed securities, the Federal Housing Finance Agency said on Wednesday.
The settlement is the first to result from a series of lawsuits the FHFA filed against Wall Street banks in 2011 in its role as conservator for Fannie Mae and Freddie Mac.
While many families over the last several years fought for their homes and lost, a Julington Creek family gets to stay in their home after a foreclosure fight with Wells Fargo.
In late 2009, Jason and Jennifer Westbrook had fallen behind on their mortgage.
“We were struggling with mortgage payments,” Jennifer Westbrook said. “We knew the amount we were paying at the time was a little too high.”
Conway said in an interview that MERS “perpetuated” the housing bubble by allowing Wall Street to slice up risky subprime mortgages into securities and sell them to investors:
“Does a mortgage exist so that banks can revalue it, trade it amongst themselves in secret, not tell the people of community who actually holds the mortgage, revalue it, put it in a trust, divvy it up and have Wall Street gorge itself on mortgage-backed securities, which it did?”
The Courier-Journal-
Kentucky Attorney General Jack Conway is set to announce “a major development in his investigation of mortgage foreclosure issues” today at 1:30 p.m. in Frankfort, according to his office.
New Yorkers Paul and Angelica Kashman, declared in default on their mortgage in July 2010 and foreclosed on by Wells Fargo & Co. (WFC) in February 2011, say they aren’t deadbeats.
“We always knew that when we get into a court of law and show that we have all the information and backup, the truth will come out,” said Paul Kashman, 37, a manager in the hospitality industry. The couple, stuck in limbo by legal bureaucracy, says they were mistakenly pushed into foreclosure, and are eager now to save their home, using court mediation.
Their case is among 72,000 pending in the New York system, accounting for a quarter of the civil caseload, and highlighting the strength and weakness of the state foreclosure process. While borrowers have protections unavailable in many other states, it takes more than 1,000 days for banks to repossess a home, stalling a housing recovery by keeping pressure on values for years to come as a constant drip of distressed properties enter the sales market.
This is a subject that is gaining some traction lately.
Bankruptcy Law Network-
Whoa! What? What the heck is a Zombie Deed? We have heard about Zombie Debt, but we have never discussed Zombie Deeds!
A Zombie Deed is a piece of real estate that you thought was gone, foreclosed, lost forever and no longer yours, but to your dismay, you find that you still own the property long after you thought it was gone.
For example, you know you have missed mortgage payments and you know that your mortgage lender would not give you the mortgage modification that you thought would help you save your home. Foreclosure has started and you have moved form the home to beat the court marshals from forcibly moving you out. You may have also filed bankruptcy to discharge the obligation of the mortgage debt and avoid the possibility of any deficiency judgment making you responsible for the difference between the value of the home and the debt.
The Justice Department’s initial response to the financial crisis did not take long to materialize. In June 2008, three months before the Lehman Brothers collapse, the department brought its first criminal case, charging two former Bear Stearns executives with securities fraud for their alleged roles inflating the housing bubble.
A little more than a year later, a jury found the executives not guilty, dealing the DOJ an early setback. Since then, government investigations into the crisis have almost exclusively centered on civil charges, which requires prosecutors establish guilt beyond a preponderance of the evidence. The bar is higher in criminal cases, requiring they prove guilt beyond a reasonable doubt.
Here are 10 of the most prominent of those cases to date. In nearly all, the government won multi-million dollar settlements, but the companies and officials involved were not required to admit wrongdoing.
More than four years since the financial crisis, not one senior Wall Street executive has faced criminal prosecution for fraud. Are Wall Street executives “too big to jail”?
In The Untouchables, premiering Jan. 22, 2013, at 10 P.M. on PBS (check local listings), FRONTLINE producer and correspondent Martin Smith investigates why the U.S. Department of Justice (DOJ) has failed to act on credible evidence that Wall Street knowingly packaged and sold toxic mortgage loans to investors, loans that brought the U.S. and world economies to the brink of collapse.
Through interviews with top prosecutors, government officials and industry whistleblowers, FRONTLINE reports allegations that Wall Street bankers ignored pervasive fraud when buying pools of mortgage loans. Tom Leonard, a supervisor who examined the quality of loans for major investment banks like Bear Stearns, said bankers instructed him to disregard clear evidence of fraud. “Fraud was the F-word, or the F-bomb. You didn’t use that word,” says Leonard. “By your terms and my terms, yes, it was fraud. By the [industry’s] terms, it was something else.”
To hear some on Wall Street tell it, no one saw the financial crisis coming. As Jamie Dimon, the chairman and CEO of JPMorgan Chase, explained to the Financial Crisis Inquiry Commission, “In mortgage underwriting, somehow we just missed … that home prices don’t go up forever.”
Others were less confident. In fact, well before the housing bubble burst, alarm bells were starting to sound among key players in the mortgage industry: due diligence underwriters.
Due diligence underwriters are paid by banks to assess the risk of buying mortgage portfolios. In the run-up to the crisis, they were among the first to suspect that loosening loan standards could pose a potentially catastrophic threat to the economy.
Federal bank regulators and the mortgage companies claim the recent foreclosure abuse settlement is good news for homeowners who had applied to the review program it replaces.
Banks can now quickly channel $3.5 billion to homeowners, with nearly everyone who received a foreclosure notice in 2009 or 2010 getting a cut, they have said. But as we reported last week, the reviewers who were reviewing home loans until they were abruptly laid off at the beginning of the year say that the original goal of the reviews as described by regulators — to distribute “appropriate compensation to borrowers who suffered financial harm” — is now impossible to meet.
Last month I wrote a piece about SB-94 in California and how the State Bar out there is running a bit fast loose with its interpretation of how it applies to attorneys.
In fact, what I wrote was:
In an unprecedented move that can only be described as stunning ignorance, the California State Bar recently released a legal opinion that will effectively deny legal representation to millions of homeowners faced with foreclosure. The controversy is around SB-94, a law put into effect in 2009 that was meant to protect homeowners from predatory loan modification companies.
A bit harsh? Perhaps, but despite some of the comments and emails I’ve received I stand by it, because the other possible theory is that the California Bar is evil, paid off, and being bribed. As much as I’d like to write an extensive article about that, there’s no real evidence to support that theory.
In the executive summary to this series, we provided an overview of OCC/Federal Reserve foreclosure reviews which were abruptly settled at the beginning of January. Critics anticipated that the flawed design, of having supposedly “independent” review firms hired by the banks themselves, meant the reviews were highly unlikely to find much if any damage to homeowners. Leaks during the course of the reviews confirmed these concerns, revealing that the review process at many of the major servicers was chaotic and the reviews were designed and scored so as to make a finding of harm virtually impossible.
As bad as that sounds, the reality is even worse. We obtained extensive review documentation from whistleblowers at Bank of America and debriefed them at length. They provided compelling evidence that the foreclosure reviews were plagued by persistent, widespread efforts by Bank of America to avoid any finding of borrower harm. These efforts were supported and enabled by its “independent” review firm, Promontory Financial Group.
The whistleblowers, all of whom told their role would be to act as investigators and help borrower get compensation they deserved, described the review process as seriously flawed. Yet even with those obstacles, they saw abundant evidence of serious damage to borrowers. The whistleblowers reviewed 1600 borrower files in a “live” environment, and saw hundreds more in the attenuated start-up period. Reviewer estimates of harm varied widely primarily because they worked on different tests and thus focused on different documents and issues (see Appendix II to the Executive Summary for a description of tests). Whistleblowers were asked to estimate the percentage of harm and serious harm in the files they reviewed. The lowest estimate of harm was 30% and the highest estimate of serious harm was 80% of files reviewed.
On January 7, ten servicers entered into an $8.5 billion settlement with the Office of the Comptroller of the Currency and the Federal Reserve, terminating a foreclosure review process which was set forth in consent orders issued in April 2010. Borrowers who had had foreclosures that were pending or had completed foreclosure sales in 2009 and 2010 could request an investigation by independent reviewers, selected and paid for by the servicers but subject to approval by the OCC.
Some experts argued that the 2009 and 2010 time range was too narrow and excluded many borrowers who had been treated improperly. These professionals also questioned whether the investigators would operate independently and fairly. Nevertheless, the reviews were touted as delivering a measure of justice to abused homeowners, since any found to be have suffered wrongful foreclosures were to receive sizable monetary awards, and smaller payments would be made to those who experienced other forms of abuse. As HUD Secretary Shuan Donovan proclaimed:
For families who suffered much deeper harm — who may have been improperly foreclosed on and lost their homes and could therefore be owed hundreds of thousands of dollars in damages — the settlement preserves their ability to get justice in two key ways.
First, it recognizes that the federal banking regulators have established a process through which these families can receive help by requesting a review of their file. If a borrower can document that they were improperly foreclosed on, they can receive every cent of the compensation they are entitled to through that process.
Second, the agreement preserves the right of homeowners to take their servicer to court. Indeed, if banks or other financial institutions broke the law or treated the families they served unfairly, they should pay the price — and with this settlement they will.
Yet the foreclosure investigation was halted abruptly, with the OCC and the Fed failing to identify any methodology for how the portion of the settlement allotted to cash awards, $3.3 billion, would be distributed to homeowners who might have been harmed in 2009 to 2010, an astonishing lapse that will almost certainly result in small payments being made to large numbers of borrowers, irrespective of whether they deserved vasty more or nothing at all.*
An Act clearing titles to foreclosed properties. By Mr. Moore, a petition (accompanied by bill, Senate, No. 830) of Michael O. Moore for legislation to clear titles to foreclosed properties. The Judiciary.
IN THE COURT OF APPEALS OF OHIO SIXTH APPELLATE DISTRICT SANDUSKY COUNTY
U.S. Bank, N.A., as Trustee Appellee
v.
Ronald W. McGinn, et al. Appellants
Decided: January 4, 2013
* * * * * David A. Wallace and Joel E. Sechler, for appellee. Daniel L. McGookey, Kathryn M. Eyster and Lauren McGookey, for appellants.
* * * * *
YARBROUGH, J.
I. Introduction
{¶ 1} This is an appeal from the judgment of the Sandusky County Court of Common Pleas, granting summary judgment in favor of appellee, U.S. Bank, N.A. (“U.S. Bank”). Because appellants demonstrated the existence of a genuine issue of material fact, we reverse.
A. Facts and Procedural Background
{¶ 2} On June 22, 2005, appellants, Ronald and Tina McGinn, purchased a home in Clyde, Ohio. In order to do so, appellants received a loan from Intervale Mortgage Corporation. The note evidencing the loan was executed solely by Ronald, but the mortgage securing the debt was executed by both Ronald and Tina.
{¶ 3} In March 2007, Tina lost her job. Consequently, appellants were unable to make the required monthly payments in April, May, and June 2007. Instead, appellants attempted to secure a loan modification through Homecoming Financial, the servicer of the loan. In addition, Ronald applied for, and was awarded, a loan through his retirement plan in the amount of $5,251.02, which he paid to Homecoming Financial on July 2, 2007. Assuming the payment would bring the loan current through September, appellants did not make another monthly payment until October 2007.
{¶ 4} In December 2007, appellants began a trial loan modification. The trial loan modification required appellants to make monthly payments of $1,063.10 on December 20, 2007, January 20, 2008, and February 20, 2008. Although appellants ultimately made the required payments, they were late in making those payments each month.
{¶ 5} Despite the payments made pursuant to the trial loan modification, appellants received a notice of foreclosure sometime in March or April 2008. In addition, appellants were notified that their loan modification was denied.
{¶ 6} U.S. Bank filed its complaint in foreclosure on May 30, 2008. In its complaint, U.S. Bank alleges that it is the holder and owner of the note and mortgage. Copies of the note and mortgage are attached to the complaint. The copy of the note that is attached to the complaint contains two endorsements. The first endorsement is from Intervale to Decision One Mortgage Company. The second endorsement is a blank endorsement from Decision One.
{¶ 7} The copy of the mortgage that is attached to the complaint names Intervale as the mortgagee. U.S. Bank did not attach an assignment of the mortgage to the complaint.
{¶ 8} On December 6, 2011, U.S. Bank filed its motion for summary judgment. U.S. Bank attached a copy of the note to the motion, in which the blank endorsement was signed over to Residential Funding Corporation, who then executed a third endorsement, endorsing the note over to U.S. Bank. In addition, U.S. Bank attached an assignment of the mortgage to its motion for summary judgment. The attached assignment was executed on June 12, 2008, twelve days after the complaint was filed.
{¶ 9} On January 5, 2012, the trial court granted U.S. Bank’s motion for summary judgment, concluding that U.S. Bank’s evidence in the form of affidavits, deposition testimony, and exhibits, demonstrated that no genuine issues of material fact existed. It is from this judgment that appellants timely appeal.
B. Assignment of Error
{¶ 10} Appellants assign the following error for our review: The trial court erred in granting U.S. Bank’s Motion for Summary Judgment and in holding U.S. Bank has standing and is entitled to enforce the Note and Mortgage.
II. Standard of Review
{¶ 11} We review summary judgment rulings de novo, applying the same standard as the trial court. Lorain Natl. Bank v. Saratoga Apts., 61 Ohio App.3d 127, 129, 572 N.E.2d 198 (9th Dist.1989); Grafton v. Ohio Edison Co., 77 Ohio St.3d 102, 105, 671 N.E.2d 241 (1996). Under Civ.R. 56(C), summary judgment is appropriate where (1) no genuine issue as to any material fact exists; (2) the moving party is entitled to judgment as a matter of law; and (3) reasonable minds can come to but one conclusion, and viewing the evidence most strongly in favor of the nonmoving party, that conclusion is adverse to the nonmoving party. Harless v. Willis Day Warehousing Co., 54 Ohio St.2d 64, 66, 375 N.E.2d 46 (1978).
{¶ 12} On a motion for summary judgment, the moving party has the burden of demonstrating that no genuine issue of material fact exists. Dresher v. Burt, 75 Ohio St.3d 280, 292, 662 N.E.2d 264 (1996). The moving party must point to some evidence in the record of the type listed in Civ.R. 56(C). Id. at 292-293. Pursuant to Civ.R. 56(C), the evidence to be considered is limited to the “pleadings, depositions, answers to interrogatories, written admissions, affidavits, transcripts of evidence, and written stipulations of fact, if any, timely filed in the action * * *.” Nevertheless, the trial court may consider a type of document not expressly mentioned in Civ.R. 56(C) if such document is accompanied by a personal certification that it is genuine or is incorporated by reference in a properly framed affidavit pursuant to Civ.R. 56(E). See Bowmer v. Dettelbach, 109 Ohio App.3d 680, 684, 672 N.E.2d 1081 (6th Dist.1996). The burden then shifts to the nonmoving party to provide evidence showing that a genuine issue of material fact does exist. Dresher at 293; Civ.R. 56(E).
{¶ 13} To properly support a motion for summary judgment in a foreclosure action, a plaintiff must present evidentiary-quality materials showing: (1) The movant is the holder of the note and mortgage, or is a party entitled to enforce the instrument; (2) if the mover is not the original mortgagee, the chain of assignments and transfers; (3) the mortgager is in default; (4) all conditions precedent have been met; and (5) the amount of principal and interest due. Wachovia Bank v. Jackson, 5th Dist. No. 2010-CA-00291, 2011-Ohio-3202, ¶ 40-45.
III. Analysis
{¶ 14} In their sole assignment of error, appellants argue that the trial court erred in granting summary judgment since U.S. Bank lacked standing. Specifically, appellants argue that U.S. Bank “was not and is not the owner of the Note and Mortgage and did not establish that it was entitled to act on behalf of the owner.” Further, appellants assert that U.S. Bank failed to demonstrate that it was the holder of the note at the time the complaint was filed.
{¶ 15} Ohio’s version of the Uniform Commercial Code (“U.C.C.”) governs who may enforce a note. R.C. 1301.01 et seq. Article 3 of the U.C.C. governs the creation, transfer and enforceability of negotiable instruments, including promissory notes secured by mortgages on real estate. Fed. Land Bank of Louisville v. Taggart, 31 Ohio St.3d 8, 10, 508 N.E.2d 152 (1987).
{¶ 16} The threshold requirement of standing depends upon whether the plaintiff has a real interest in the subject matter of the action. State ex rel. Dallman v. Court of Common Pleas, Franklin Cty., 35 Ohio St.2d 176, 298 N.E.2d 515 (1973), syllabus. In a foreclosure action, the holder of the note and mortgage is the real party in interest. Deutsche Bank Natl. Trust Co. v. Greene, 6th Dist. No. E-10-006, 2011-Ohio-1976, ¶ 13. See also R.C. 1303.31 (the holder of an instrument is a “person entitled to enforce” the instrument).
{¶ 17} A holder of the note and mortgage “[is] not additionally required to plead that it [is] the ‘owner’ of the note and mortgage in its complaint.” U.S. Bank, N.A. v. Coffey, 6th Dist. No. E-11-026, 2012-Ohio-721, ¶ 18. Therefore, the standing issue centers on whether the plaintiff was the holder of the note and mortgage on the date the complaint was filed.
{¶ 18} R.C. 1301.201(a) defines a holder of a negotiable instrument as “[t]he person in possession of a negotiable instrument that is payable either to bearer or to an identified person that is the person in possession.”
{¶ 19} In U.S. Bank’s memorandum in support of its motion for summary judgment, U.S. Bank stated that it was the holder of the note and mortgage on the date the complaint was filed. To support this statement, U.S. Bank attached an affidavit of Peter Knapp, a senior litigation analyst for GMAC Mortgage, LLC, the servicer of appellants’ loan. In his affidavit, Knapp stated that he had reviewed the note and the mortgage. Further, he stated that the note and mortgage attached to the motion for summary judgment are true and accurate copies of the original note and mortgage. In addition, Knapp stated that “[t]he original Note and Mortgage * * * were in the possession of U.S. Bank * * * at the time the foreclosure complaint in this case was filed.”
{¶ 20} Nonetheless, appellants argue that a genuine issue of material fact exists regarding U.S. Bank’s standing. First, appellants argue that “[t]he assignment of the mortgage does not support U.S. Bank’s contention that it is the holder.” Pursuant to the Ohio Supreme Court’s recent holding in Fed. Home Loan Mtge. Corp. v. Schwartzwald, — N.E.2d —-, 2012-Ohio-5017, whether a party has standing is a question that must be resolved by looking at the circumstances as of the date the complaint was filed. Id. at ¶ 24-25. Obtaining an interest in the note and mortgage after the commencement of the action cannot cure a lack of standing. Id. at ¶ 26. Here, the assignment of the mortgage was not executed until after the complaint was filed. Accordingly, it cannot form the basis for U.S. Bank’s standing.
{¶ 21} While it is true that the assignment of the mortgage lends no support to U.S. Bank’s standing argument, the fact that the mortgage was assigned after the filing of the complaint is not necessarily fatal to U.S. Bank’s foreclosure action. In Aurora Loan Services, LLC v. Louis, 6th Dist. No. L-10-1289, 2012-Ohio-384, we stated that “a transfer of an obligation secured by a mortgage also acts as an equitable assignment of the mortgage.” Id. at ¶ 34, citing Kuck v. Sommers, 59 Ohio Law Abs. 400, 100 N.E.2d 68, 75 (3d Dist.1950). Therefore, U.S. Bank need not prove that the mortgage was assigned prior to its filing of the complaint. Rather, U.S. Bank can establish its standing by demonstrating that the note was transferred prior to the date the complaint was filed.
{¶ 22} In the alternative, appellants make another argument, which draws our attention to the inconsistency between the copy of the note that was attached to the complaint and the copy of the note that was attached to U.S. Bank’s motion for summary judgment. Appellants argued in the trial court, as they do here, that the inconsistency creates a genuine issue of material fact. Specifically, appellants contend that the additional special endorsement on the second copy of the note calls into question whether U.S. Bank was in possession of the note at the time the complaint was filed, since the copy it attached to the complaint did not include the additional special endorsement.
{¶ 23} In response, U.S. Bank points to a second affidavit made by Knapp, which U.S. Bank attached to its reply brief. In Knapp’s second affidavit, he explains the reason for the difference between the two copies of the note, and states: Based on the circumstances of this case and my personal knowledge of how foreclosure counsel obtain copies of notes, earlier versions of the notes, not identical to the actual original Note held in the custodial vault, are in GMACM’s computer system and are sometime[s] printed out and inadvertently attached to foreclosure complaints. I believe that is what happened with the copy of the Note which was attached to the Complaint in this case, and is the reason the Note attached to the Complaint was not a copy of the actual original Note.
{¶ 24} U.S. Bank argues that Knapp’s second affidavit resolves any issue concerning the difference in the original note and the copy that was attached to the complaint. However, the language of that affidavit is indecisive. Rather than providing a definitive explanation for the additional endorsements on the original note, Knapp states that he believes that the wrong copy of the complaint was inadvertently attached to the foreclosure complaint. However, Civ.R. 56(E) requires personal knowledge. Indeed, believing something to be true is different that knowing something is true.
{¶ 25} While it may be true that U.S. Bank met its initial burden of demonstrating that no genuine issue of material fact existed, appellants responded by showing that a genuine issue of material fact did exist by pointing to the inconsistency in the two notes. The difference in the two notes calls into question whether U.S. Bank actually possessed the original note prior to filing the complaint. If U.S. Bank did not, it was not a holder and, thus, lacked standing to bring the foreclosure action in the first place. Construing the evidence in a light most favorable to appellants, we conclude that the trial court erred when it granted U.S. Bank’s motion for summary judgment. Accordingly, appellants’ assignment of error is well-taken.
IV. Conclusion
{¶ 26} Having found appellants’ assignment of error well-taken, we hereby reverse the judgment of the Sandusky County Court of Common Pleas, and remand this matter for further proceedings consistent with this decision. Costs are assessed to U.S. Bank in accordance with App.R. 24.
Judgment reversed.
A certified copy of this entry shall constitute the mandate pursuant to App.R. 27. See also 6th Dist.Loc.App.R. 4.
Robert O. Brunner and Harriett L. Brunner, et al.,
Appellants.
C.A. No. L-11-1319.
Court of Appeals of Ohio, Sixth District, Lucas County.
Decided: January 18, 2013.
Elizabeth S. Fuller, for appellee. George R. Royer, for appellants.
——————————————————————————–
DECISION AND JUDGMENT
HANDWORK, J.
{¶ 1} This is yet another appeal from a decision in an action to foreclose on residential property. In this appeal, the borrowers challenge the propriety of the affidavit used by the bank to obtain summary judgment. Finding that the bank’s affidavit fails to satisfy the requirements of Civ.R.56(E), we reverse the judgment of the Lucas County Court of Common Pleas.
{¶ 2} On October 27, 2010, CitiMortgage, Inc. (“CitiMortgage”) filed a complaint in foreclosure against appellants, Robert O. Brunner, Harriett L. Brunner, Michael B. Brunner, and Anne M. Brunner. In its complaint, CitiMortgage alleged that it was the holder of a note and modification agreement upon which Robert Brunner and Harriett Brunner (“the Brunners”) had defaulted, that the loan was accelerated, that all conditions precedent were met, and that the balance due and owing on the note was $94,998.20 together with interest at the rate of 2 percent per year from June 1, 2010. It also alleged that Anne Brunner and Michael Brunner had potential claims of interest in the secured property as titleholders.
{¶ 3} On March 14, 2011, CitiMortgage filed a motion to substitute appellee Federal National Mortgage Association (“FNMA”) as plaintiff in the action. The motion was based on a note allonge and mortgage assignment that were executed by CitiMortgage subsequent to the commencement of the action. The trial court granted the motion on March 17, 2011, ordering that FNMA be substituted as party plaintiff in place of CitiMortgage. On May 9, 2011, after obtaining leave to respond out of rule, the Brunners filed separate answers, each raising five affirmative defenses.
{¶ 4} On June 20, 2011, FNMA filed a motion for summary judgment, which included an affidavit signed by Enan Del Rio. In his affidavit, Del Rio averred that he had personal knowledge of the facts and was competent to testify as to the matters contained therein. Del Rio stated that IBM Lender Business Process Services, Inc. (“BPS”) is the loan servicer for FNMA, that his “position” gives him “access to” business records maintained by BPS, and that he personally reviewed the Brunners’ loan account. Del Rio then substantiated the default-related allegations made in the complaint, asserted that FNMA is the present holder of the Brunners’ note and mortgage, and authenticated the attached exhibits as true and accurate copies of the note, mortgage, modification agreement, and chain of endorsements and assignments.1
{¶ 5} On August 1, 2011, appellants filed a motion to strike and a memorandum in opposition to FNMA’s motion for summary judgment. Appellants argued that Del Rio’s affidavit did not satisfy the personal knowledge and competency requirements of Civ.R. 56(E). Appellants also submitted their own affidavits asserting that they never received notice of default or acceleration as required under the terms of the note. The trial court denied appellants’ motion to strike on November 16, 2011, and granted FNMA’s motion for summary judgment on November 29, 2011. This appeal followed.
{¶ 6} Appellants assert two assignments of error:
(1) The court should not have granted summary judgment motion in this case. (2) The court erred in that it did not grant defendants’ motion to strike plaintiff’s affidavit (as sole support of such summary judgment motion).
{¶ 7} Since these assignments of error present a common and dispositive issue with respect to the sufficiency of Del Rio’s affidavit, we will consider them together. Essentially, appellants contend that the trial court improperly considered Del Rio’s affidavit in rendering summary judgment, since the affidavit failed to comply with the requirements of Civ.R. 56. Specifically, appellants argue that the mere “assertion of competence and personal knowledge” is insufficient under Civ.R. 56(E) where the affidavit does not “set forth a basis of personal knowledge.” To the extent that Del Rio’s affidavit is devoid of any information concerning the nature of his relationship to BPS and its account-holder records, we are compelled to agree with appellants.
{¶ 8} Since this case was decided by summary judgment, our review is de novo, in accordance with the standard set forth in Civ.R. 56. Hudson v. Petrosurance, Inc., 127 Ohio St.3d 54, 2010-Ohio-4505, 936 N.E.2d 481, ¶ 29. “Thus, we review the trial court’s judgment independently and without deference to its determination.” Ameriquest Mtge. v. Wilson, 11th Dist. No. 2006-A-0032, 2007-Ohio-2576, ¶ 24. In other words, in considering the propriety of summary judgment, we “stand in the shoes of the trial court.” Johansen v. Ohio Dept. of Mental Health, 10th Dist. No. 12AP-39, 2012-Ohio-4834, ¶ 10.
{¶ 9} Pursuant to Civ.R. 56(C), summary judgment is proper when (1) there is no genuine issue as to any material fact, (2) the moving party is entitled to judgment as a matter of law, and (3) reasonable minds, after construing the evidence most strongly in favor of the nonmoving party, can only conclude adversely to that party. Zivich v. Mentor Soccer Club, Inc., 82 Ohio St.3d 367, 369-370, 696 N.E.2d 201 (1998). The moving party carries the initial burden of affirmatively demonstrating that no genuine issue of material fact remains to be litigated. Mitseff v. Wheeler, 38 Ohio St.3d 112, 115, 526 N.E.2d 798 (1988). “To accomplish this, the movant must be able to point to evidentiary materials of the type listed in Civ.R. 56(C) that a court is to consider in rendering summary judgment.” Dresher v. Burt, 75 Ohio St.3d 280, 292-293, 662 N.E.2d 264 (1996). A plaintiff or claimant moving for summary judgment meets its initial burden by presenting or identifying appropriate evidentiary materials in support of the essential elements of its own claim. See Todd Dev. Co., Inc. v. Morgan, 116 Ohio St.3d 461, 2008-Ohio-87, 880 N.E.2d 88, ¶ 13, 18; Raymond Builders Supply, Inc. v. Slapnicker, 11th Dist. No. 2003-A-0040, 2004-Ohio-1437, ¶ 5; Day, Ketterer, Raley, Wright & Rybolt, Ltd. v. Burns, 5th Dist. No. 1996CA00132, 1996 WL 490694, *1 (Aug. 26, 1996).
{¶ 10} In order to properly support a motion for summary judgment in a foreclosure action, the bank must produce or identify in the record evidentiary-quality materials demonstrating: (1) that it is the holder of the note, which is secured by a mortgage, or that it is otherwise entitled to enforce the instrument; (2) that the mortgagor is in default; (3) that all conditions precedent have been met; and (4) the amount of the principal and interest due. See U.S. Bank Natl. Assn. v. Mitchell, 6th Dist. No. S-10-043, 2012-Ohio-3732, ¶ 10; U.S. Bank, N.A. v. Coffey, 6th Dist. No. E-11-026, 2012-Ohio-721, ¶ 26.
{¶ 11} Civ.R. 56(E) requires that “affidavits shall be made on personal knowledge, shall set forth such facts as would be admissible in evidence, and shall show affirmatively that the affiant is competent to testify to the matters stated in the affidavit.” For obvious reasons, the personal knowledge requirement in Civ.R. 56(E) tracks the personal knowledge standard of Evid.R. 602 covering lay witness testimony at trial. Bonacorsi v. Wheeling & Lake Erie Ry. Co., 95 Ohio St.3d 314, 2002-Ohio-2220, 767 N.E.2d 707, ¶ 26. Under both provisions, a witness may not testify to a matter unless evidence is introduced to support a finding that the witness has personal knowledge of the matter. State ex rel. Cassels v. Dayton City School Dist. Bd. of Edn., 69 Ohio St.3d 217, 223, 631 N.E.2d 150 (1994).
{¶ 12} The foundation for personal knowledge may be furnished by the witness’s own testimony. Evid.R. 602. “A mere assertion of personal knowledge satisfies Civ.R. 56(E) if the nature of the facts in the affidavit combined with the identity of the affiant creates a reasonable inference that the affiant has personal knowledge of the facts in the affidavit.” Residential Funding Co., LLC v. Thorne, 6th Dist. No. L-09-1324, 2010-Ohio-4271, ¶ 70. See also Home S. & L. Co. v. Eichenberger, 10th Dist. No. 12AP-1, 2012-Ohio-5662, ¶ 18.
{¶ 13} Similarly, in order to properly authenticate business records under Evid.R. 803(6), “the testifying witness must possess a working knowledge of the specific record-keeping system that produced the document * * * [and] `be able to vouch from personal knowledge of the record-keeping system that such records were kept in the regular course of business.'” State v. Davis, 62 Ohio St.3d 326, 343, 581 N.E.2d 1362 (1991), quoting Del Publishing Co., Inc. v. Whedon, 577 F.Supp. 1559, 1464 (S.D.N.Y.1982), fn. 5.
{¶ 14} In RBS Citizens NA v. Vernyi, 9th Dist. No. 26046, 2012-Ohio-2178, ¶ 11, the Ninth Appellate District found:
In the Bank’s motion for summary judgment, it argued that it was entitled to foreclosure, pointing to Grace Smith’s February 23, 2010 affidavit, in which she averred that she was a foreclosure specialist and had reviewed Mr. Vernyi’s loan file. According to Ms. Smith, Mr. Vernyi owed $125,375.54. Ms. Smith’s affidavit consisted of nine paragraphs and did not contain any indication as [to] what connection Ms. Smith had to the Bank; thus, it is unclear whether she had personal knowledge.
See also Maxum Idemn. Co. v. Selective Ins. Co. of South Carolina, 2012-Ohio-2115, 971 N.E.2d 372, ¶ 22 (9th Dist.) (affidavit held insufficient to satisfy personal knowledge requirement in part because it “does not disclose the position [affiant] holds or the scope of his job responsibilities”); Bank of New York Mellon Trust. Co. Natl. v. Mihalca, 9th Dist. No. 25747, 2012-Ohio-567, ¶ 17 (affidavit insufficient in part because affiant “failed to state how her position at Barclay’s [the bank’s attorney in fact] made her familiar with [the borrowers’] account records”); Wachovia Bank of Delaware, N.A. v. Jackson, 5th Dist. No. 2010-CA-00291, 2011-Ohio-3202, ¶ 28 (“Colston’s affidavit asserts she has personal knowledge of all the facts contained in her affidavit, but she merely alleges that she is an assistant secretary of Barclay’s, without elaborating on how her position with the company relates to or makes her familiar with the appellant’s account records”); TPI Asset Mgt., L.L.C. v. Conrad-Eiford, 193 Ohio App.3d 38, 2011-Ohio-1405, 950 N.E.2d 1018, ¶ 20-24 (2d Dist.) (affidavits must provide a basis for concluding that affiant’s position with the bank made him familiar with account records).
{¶ 15} In this case, Del Rio’s affidavit does not identify his connection to FNMA or its account-holder records. In fact, the affidavit seems to take grammatical pains to avoid the subject, which suggests that Del Rio’s assertions of personal knowledge may be problematic. Thus, the affidavit begins, “IBM Lender Business Process Services, Inc., as servicer for Fannie Mae (`Federal National Mortgage Association’), substitute Plaintiff herein, and in that capacity I am authorized to execute this Affidavit.” Del Rio then asserts:
The averments provided in this affidavit are within the scope of my duties. In my position, I have access to business records, including loan documents and loan account records maintained by [BPS], and I have personal knowledge of the operation of and the circumstances surrounding the maintenance and retrieval of records in [BPS’s] record keeping systems.
{¶ 16} Nowhere in the affidavit, however, not even on the signature line, is there any indication as to the nature of Del Rio’s “capacity,” “duties,” or “position.” Nothing in the affidavit suggests that Del Rio is employed by BPS, or that he was ever employed by BPS. The affidavit does not explain how or in what manner Del Rio’s undisclosed “position” gives him “access to” the accounts maintained by BPS or provides him with a working knowledge of its record-keeping system. Indeed, the affidavit does not even reveal what Del Rio does for a living.
{¶ 17} FNMA cites a number of cases for the proposition that affidavits similar to Del Rio’s affidavit “are used regularly by plaintiffs in foreclosure cases, and their compliance with evidentiary rules has been continually upheld by Ohio courts.” However, all of the affidavits in the cases cited by FNMA clearly identified the nature of the affiant’s relationship to the plaintiffs in those cases. For example, in Countrywide Home Loans, Inc. v. Rodriguez, 9th Dist. Nos. 03CA008345, 03CA008417, 2004-Ohio-4723, ¶ 15-16, the court explained:
[T]his Court has previously held that an affiant’s mere assertion that he has personal knowledge of the facts asserted in an affidavit can satisfy the personal knowledge requirement of Civ.R. 56(E) * * * if the nature of the facts in the affidavit combined with the identity of the affiant creates a reasonable inference that the affiant has personal knowledge of the facts in the affidavit.
In the instant matter, the affiant, Olchak, stated that she was an officer of Countrywide and a supervisor of Rodriguez’ account. * * * We find that the identity of Olchak as the affiant, combined with the nature of the facts asserted in her affidavit created a reasonable inference that Olchak did in fact have personal knowledge of the amount of money that was due and owing on Rodriguez’ account. As such, Olchak’s affidavit satisfied the personal knowledge requirement of Civ.R. 56(E).
{¶ 18} In fact, our research discloses that Ohio appellate courts have invariably considered evidence of the affiant’s position, title, or other working relationship with the bank or its servicing agent as a sine qua non of compliance with the personal knowledge requirement of Civ.R. 56(E). See, e.g., U.S. Bank N.A. v. Wilkens, 8th Dist. No. 96617, 2012-Ohio-1038, ¶ 44-45 (averment of personal knowledge sufficient where affiant identified her position with bank’s loan servicer); Bass-Fineberg Leasing, Inc. v. Keller, 8th Dist. No. 96107, 2011-Ohio-3989, ¶ 17 (averment of personal knowledge sufficient where affiant identified her position with lender’s business manager); CitiMortgage, Inc. v. Stevens, 9th Dist. No. 25644, 2011-Ohio-3944, ¶ 16 (on cross-claim in forfeiture action, court found affidavit of condominium association sufficient because affiant averred personal knowledge of the facts, as well as her title with the association); Central Mtge. Co. v. Elia, 9th Dist. No. 25505, 2011-Ohio-3188, ¶ 9 (affiant’s “assertion of personal knowledge after a review of the loan documents, coupled with her position at Central Mortgage and role as records custodian, satisfies Rule 56(E)”); Beneficial Ohio, Inc. v. Hadbavny, 11th Dist. No. 2010-G-2944, 2010-Ohio-6062, ¶ 20 (“The identity of [affiant] as a Senior Foreclosure Specialist employed by appellee, combined with the nature of the facts set forth in the affidavit, permits the reasonable inference that [she] did possess personal knowledge”).
{¶ 19} FNMA also contends that Del Rio’s affidavit is “quite similar to” the affidavit considered by this court in Natl. City Bank v. TAB Holdings, Ltd., 6th Dist. No. E-10-060, 2011-Ohio-3715. However, in finding that the affidavit in Natl. City comported with Civ.R. 56(E), we specifically pointed to the affiant’s averment that “he is the vice president of [the bank’s] Asset Resolution Team.” Id. at ¶ 14. Clearly, the identity of affiant’s employment position was critical to our decision, since we explained:
In determining the propriety of summary judgment in foreclosure actions, courts have consistently held that an averment of outstanding indebtedness made in the affidavit of a bank loan officer with personal knowledge of the debtor’s account is sufficient to establish the amount due and owing on the note, unless the debtor refutes the averred indebtedness with evidence that a different amount is owed. (Emphasis added.) Id. at ¶ 12.
{¶ 20} We find, therefore, that Del Rio’s affidavit did not comport with Civ.R. 56(E). Further, because Del Rio’s affidavit was the only evidence to which FNMA pointed in support of its motion for summary judgment, we must conclude that FNMA did not satisfy its initial burden as movant under Civ.R. 56. Thus, the trial court erred by overruling appellants’ motion to strike and awarding summary judgment in favor of FNMA.
{¶ 21} Given our disposition of the matter, it is unnecessary for this court to address the procedural propriety of appellants’ post-pleading defense that they never received notice of default or acceleration. That issue will have to be evaluated by the trial court in light of further proceedings. However, in the interest of judicial economy, we do find error in the trial court’s conclusion that notice is not a condition precedent to accelerating the loan under the terms of the note.
{¶ 22} The acceleration clause in the note provides, “If I am in default, the Note Holder may send me a written notice [of acceleration].” It then states that the date for payment of the accelerated amount “must be at least 30 days after the date on which the notice is mailed to me or delivered by other means.” Contrary to the trial court, we find it rather obvious that the permissive term “may” in this provision relates to the right of acceleration, not to the giving of notice. In other words, the provision gives the note holder a choice between accelerating the loan with notice or not accelerating the loan. It does not give the note holder the option of either accelerating the loan with notice or accelerating the loan without notice. If that were the case, the clause could easily have stated that the loan my be accelerated upon default without notice to the borrowers. Accordingly, appellants’ assignments of error are well-taken.
{¶ 23} The judgment of the Lucas County Court of Common Pleas is reversed. This cause is remanded to said court for further proceedings consistent with this decision. Costs of this appeal are assessed against appellee pursuant to App.R. 24(A).
Judgment reversed.
A certified copy of this entry shall constitute the mandate pursuant to App.R. 27. See also 6th Dist.Loc.App.R. 4.
Peter M. Handwork, J., Arlene Singer, P.J. and Thomas J. Osowik, J., Concur.
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Footnotes
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1. According to the documents attached to Del Rio’s affidavit, the Brunners originally executed a promissory note in the amount of $80,000 payable to Midwest Mortgage Investments, Ltd. (“Midwest”) on September 27, 2004. The note was secured by a mortgage on the Brunners’ residence in favor of Mortgage Electronic Registration Systems, Inc. (“MERS”), as nominee for Midwest. The mortgage was assigned to CitiMortgage on March 13, 2008. The note contains two undated specific endorsements, one from Midwest to Flagstar Bank, FSB (“Flagstar”), which appears on the face of the note, and the other from Flagstar to CitiMortgage, which appears on a separate page appended to the note. It is unclear, however, whether the latter endorsement to CitiMortgage occurred before or after the complaint was filed, since it was not appended to or included with the copy of the note that was attached to the complaint. Nevertheless, on January 14, 2010, the Brunners entered into a loan modification agreement with MERS and CitiMortgage for the principal balance of $95,388.49 payable to CitiMortgage. CitiMortgage then executed a note allonge on January 25, 2011, and a mortgage assignment on February 16, 2011, transferring its interest in the original note and mortgage to FNMA.
BOSTON CONSULTING GROUP Shubh Saumya Laurent Desmangles Roland Kastoun Lara Kostakidis-Lianos
This report was commissioned by The Pew Charitable Trusts.
This report is intended for educational and informational purposes. References to specific policy makers or companies have been included solely to advance these purposes and do not constitute an endorsement, sponsorship or recommendation by The Pew Charitable Trusts.
Executive Summary
The housing crisis that started six years ago has yet to run its full course. While U.S. home prices are showing encouraging signs of stabilizing—with all 20 cities measured in a major housing index showing price gains in May and June of 20121—this stabilization is not occurring across the board and, as of September 2012, prices were still down nearly 27 percent from their peak in 2006.2 Government and industry have made progress in minimizing losses for homeowners, and mortgage delinquency rates have improved significantly to around 7 percent from a high of almost 11 percent in January 2010.3 Still, experts suggest that we can expect a depressed market for at least three more years. Given the importance of housing to the broader economy, a depressed market is likely to be a continuing drag on economic recovery until the core problems in the housing market are addressed.
This raises a key question for policy makers and industry: What can be done now to address these problems in a way that quickens the pace of recovery and promotes the long-term health of the housing market and the broader economy?
The housing market is showing some signs of improvement in 2013, but there are still challenges that stand in way of recovery.
Pew senior advisor Sheila Bair discusses a new paper that outlines the major challenges and potential solutions to improve the market. Some of the key recommendations include streamlining the home foreclosure process, particularly for vacant properties, and creating consistent standards for the mortgage servicing industry. Learn more at www.pewstates.org/housing.
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