Let's hear it for Cleveland, Ohio.
Okay, let's at least hear it for Judge C.A. Boyko of the Federal District Court in Cleveland and for Cleveland blogger Bill Callahan.
Before the current sub-prime mortgage meltdown, Cleveland had the highest foreclosure rate in the country. I don't know if it's hung on to this dubious honor, but the foreclosure overhang is getting worse all over the US, as the adjustable rates on sub-prime mortgages soar and the economy threatens to tip into recession.
Which brings us to Boyko. In a recent case in Cleveland, Deutsche Bank National Trust Company was moving to evict 14 families and seize their homes. Boyko asked a simple question: Okay, where are the mortgages?
The Judge asked DB to show documents proving legal title to the 14 homes. DB could not. All DB attorneys could show was a document showing only an “intent to convey the rights in the mortgages.” They could not produce the actual mortgage, the heart of Western property rights since the Magna Charta if not longer.DB's panicky lawyers argued that no one had ever made them do this in all the foreclosures they have pushed through in recent years. Boyko was, to say the least, unimpressed:
Again why could Deutsche Bank not show the 14 mortgages on the 14 homes? Because they live in the exotic new world of “global securitization”, where banks like DB or Citigroup buy tens of thousands of mortgages from small local lending banks, “bundle” them into Jumbo new securities which then are rated by Moody’s or Standard & Poors or Fitch, and sell them as bonds to pension funds or other banks or private investors who naively believed they were buying bonds rated AAA, the highest, and never realized that their “bundle” of say 1,000 different home mortgages, contained maybe 20% or 200 mortgages rated “sub-prime,” i.e. of dubious credit quality.
The Judge then declared that the banks “seem to adopt the attitude that since they have been doing this for so long, unchallenged, this practice equates with legal compliance. Finally put to the test,” the Judge concluded, “their weak legal arguments compel the court to stop them at the gate.” Deutsche Bank has refused comment.Now these documents are someplace, and eventually either the banks will bring pressure to bear to overturn Boyko's decision in a higher court, or Deutsche Bank's US subsidiary will lay hands on 'em and proceed with turfing out the poor folk who went for the okey-doke when the mortgage brokers came knocking.
In the meantime, though, this precedent will be raised not only in Cleveland, but in foreclosure cases in Federal District Courts around the country. If upheld, it will slow both the flow of broke folk out of their homes and the shedding of bad paper by banks which are desperate to put the whole mess behind them and reverse their cratering stock prices.
Even if Boyko's decision is overturned, it has already intensified the spotlight being shone on the criminal greed of the big banks whose massive, and still incalculable, losses have made a joke of their every effort to bury their role in this mess. The mechanisms of this massive scam have been explained in detail in the press of late, but the one of the clearest I've seen is by Bill Callahan in his blog Callahan's Cleveland Diary. In an article titled "What’s this Boyko / Deutsche Bank thing all about, anyway?", he takes a case study, this house, four blocks from his, and shows what has happened to it since the couple who owned it made the mistake of refinancing in 2003. Read it and weep.
[In a future FotM post, I hope to dig into the question of what this sub-prime meltdown means for the Black community and other communities of color in this country and tie it in to the "sundown town" posts that appeared here earlier this year.] Read more!