The New York Times reported that an Ohio federal judge blocked attempts by Deutsche Bank National Trust Company to foreclose on borrowers behind in their mortgage payments because the bank failed to produce evidence that it held the mortgages.

The court’s decision involved 14 foreclosure actions brought on behalf of mortgage investors. The bank was acting as trustee for several mortgage-backed investment securities, also known as securitization pools, into which most mortgages go these days. The mortgage securitization industry is huge. At the end of 2006 investors held more than $6.5 trillion of outstanding securitized mortgage debt.

The actual ownership of the mortgage should be transferred when the mortgage is placed in one of these investment vehicles. To cut costs and save time, the investments overseen by Deutsche Bank had transferred only the data for the mortgages, leaving the bank unable to prove it owned the mortgages it was suing to “reclaim.”

Attorneys for the bank provided Judge Christopher A. Boyko with evidential documents that showed it had intended to convey mortgage rights, but no actual proof that it had done so which would have given it legal standing to foreclose.

Consumer advocates, who point out that data transfers can make it next to impossible for distressed borrowers to determine the right institution and person to contact regarding their mortgage defaults, hailed Judge Boyko’s ruling as a victory for their side.

The ruling will undoubtedly strengthen the positions of attorneys who represent borrowers in default by allowing them to demand that plaintiffs in foreclosure actions present legal and compelling evidence of mortgage ownership.

Tags: Deutsche Bank, foreclosures, mortgage backed securities, securitization pools

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