The Ohio Supreme Court recently addressed the following
Can a lack of standing at the commencement
of a foreclosure action be cured by obtaining an assignment of a note and
mortgage sufficient to establish standing prior to the entry of judgment?
On October 31st, the court answered:
[S]tanding is required to invoke
the jurisdiction of the common pleas court, and therefore it is determined as
of the filing of the complaint. Thus,
receiving an assignment of a promissory note and mortgage from the real party
in interest subsequent to the filing of
an action but prior to the entry of judgment does not cure a lack of
standing to file a foreclosure action.
Fed. Home Loan Mortg.
Corp. v. Schwartzwald, 2012 Ohio 5017 (Ohio Oct. 31, 2012) [enhanced version available to lexis.com subscribers].
The Court of Appeals had held that the Federal Home Loan
Mortgage Corporation had established its right to enforce a promissory note as
a non-holder in possession because a post-complaint assignment of the mortgage
effected a transfer of the note it secured. The court explained that standing
is not a jurisdictional prerequisite and that a lack of standing could be cured
by substituting the real party in interest for an original party. Thus, while
Federal Home Loan lacked standing at the time it commenced the foreclosure
action, it cured that defect by assignment of the mortgage and transfer of the
note prior to entry of judgment.
The appellate decision conflicted with Wells Fargo Bank, N.A. v. Byrd, 178 Ohio App. 3d 285 (Ohio Ct.
App., Hamilton County 2008) [enhanced version available to lexis.com subscribers],
Wells Fargo Bank, N.A. v. Jordan, 2009
Ohio 1092 (Ohio Ct. App., Cuyahoga
County Mar. 12, 2009) [enhanced version available to lexis.com subscribers],
and Bank of N.Y. v. Gindele, 2010
Ohio 542 (Ohio Ct. App., Hamilton County Feb. 19, 2010) [enhanced version available to lexis.com subscribers],
which held that a lack of standing could not be cured by substituting the real
party in interest for an original party.
In reversing the appellate court, the court held that:
As reported by the Dayton Daily News, Ohio, as well as other states, has typically
allowed foreclosure lawsuits even when the proper paperwork is non-existent.
This has been described as a first file, paperwork later approach, which is unheard
of in other civil actions. The article goes on to speculate on the Schwartzwald decision's broader
implications; in particular, how it might affect the multitude of closed foreclosure
cases in Ohio.
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