Homeowners Lack Standing to Challenge Validity of Assignment of a Note and Mortgage

A recently decided case in Ohio’s 10th District Court of Appeals reinforces the rule that a debtor is not a party to the assignment of a note and mortgage, and therefore lacks standing to challenge their validity. Following the now famous “robo signing” saga which plagued the mortgage lending industry, it became commonplace for debtors to use the widely reported instances of robo signing to attack the plaintiff’s right to foreclose.  However, a recent trend in Ohio case law has given lenders ammunition to withstand these allegations and should help lenders overcome these collateral attack defense tactics in future foreclosure cases.

In the case of Deutsche Bank Natl. Trust Co. v. Whiteman, 2013-Ohio-1636, the lender filed a foreclosure action on February 23, 2011.  Attached to the complaint were two assignments of mortgage, the first dated February 11, 2009 and the second dated May 14, 2009.  The debtor failed to answer the complaint, and a default judgment and a Decree of Foreclosure were issued by the court in favor of the lender.   Following the issuance of the judgment, the debtor filed a Motion for Relief from Judgment attacking the lender’s right to bring the foreclosure.  As noted above, the assignments attached to the lender’s complaint were executed prior to the filing of the foreclosure which established a prima facie case in favor of the plaintiff.  Thus, the debtor collaterally attacked the assignments and argued instead that the assignments themselves were invalid because they were executed by notorious "robo-signers", and because they violated the lender’s Pooling and Servicing Agreement.

In a decision favorable to the lender, the trial court denied the debtor’s Motion for Relief.  The debtor appeal the trial court’s decision, but the Court of Appeals affirmed the decision reinforcing the rule that a debtor is not a party to the assignment of a note and mortgage, and therefore, lacks standing to challenge their validity. The Court of Appeals followed the trend of other recent decisions made in similar cases decided across the state in favor of the lenders.  See recently decided cases of LSF6 Mercury REO Invests. Trust Series 2008-1 c/o Vericrest Fin., Inc. v. Locke, 10th Dist. No. 11AP-757, 2012-Ohio-4499 Bank of New York Mellon Trust Co. v. Unger, 8thDist. No. 97315, 2012-Ohio-1950, and Bridge v. Aames Capital Corp., Case No. 1:09 CV 2947 (N.D.Ohio 2010).

These courts have determined that the validity of the assignments of the note and mortgage are legally immaterial to the homeowner's contractual obligations to repay the loan. When there is no dispute that the loan is in default because the debtor had ceased making payments, then the debtor has no standing to collaterally attack the foreclosure by challenging the validity of the plaintiff’s assignment of the note and mortgage.

Prior to filing a foreclosure, the lender must always ensure that the proper assignments are in order.  Once the lender has presented the proper assignments, the lender should now be in a position to complete the foreclosure without the burden of challenges that may be brought by the debtor questioning the validity of the assignments.