Ohio Attorney General Marc Dann -- yes, the same one that sued Freddie Mac in late January for participating "in one of the largest housing investment deceptions in modern U.S. economic times" -- apparently decided that for his next trick, he'd try taking a stunt that's worked reasonably well as of late in federal courts down to the state level. The results clearly weren't what he'd bargained for, reported Cincinnati's local Enquirer:
Ohio Attorney General Marc Dann suffered his first setback Monday in a novel effort to slow foreclosure filings in the state – and in doing so had his ethics questioned by a Hamilton County magistrate. Dann argues that lenders can't foreclose unless they can prove they own the mortgage they say is in default ... Monday, however, Common Pleas Court Magistrate Michael Bachman rejected Dann's argument. He further said Dann was acting against the interests of his clients – the taxpayers of Ohio – by moving to dismiss foreclosure cases in which the state has liens against the properties.
Turns out that Bachman did much more than reject Dann's motion; he obliterated it. It also turns out that Dann himself thought to argue the motion personally in front of the magistrate, just for effect. Kevin Funnell at Bank Lawyer's Blog has some questions:
Now, what, you might rightly ask, is the Attorney General doing intervening in a private civil action on behalf of borrowers to, at best, delay the day of reckoning? You'd be right to ask the question, as you would to ask a similar question: What's this got to do with his job as Attorney General of the State of Ohio? The answer to the last question is "nothing" and the answer to the first is "to get himself some more press, so he can advance his political career." Unfortunately for Dann, Deutsche Bank, the trustee handling the foreclosure, didn't back down, and fought Dann. Worse, Dann ran into a state court magistrate who not only kicked his fat tukus off the bandwagon, but also took his name.
The rest of Funnell's commentary on this is worth reading, as well. But I want to get to the actual decision by the magistrate -- the full court doc is available by clicking here -- because it isn't every day that any state's AG gets drilled like this:
...the court has significant concerns regarding the ethical implications of the Attorney General moving to dismiss an action wherein he claims an interest in collecting a debt owed to the State of Ohio by the defendant. ... In foreclosure actions such as the instant case, the State is named as a defendant because the State has, or may have, obtained a judgment against one of the defendants in the action. The State seeks to collect upon the judgment through the proceeds of the judicial sale. Thus, on its face, the Attorney General's motion seeking to dismiss the foreclosure action conflicts with his duty to the taxpayers and citizens of the State of Ohio to collect on judgments rendered in the State's favor. When asked about this obvious conflict in interest, the Attorney General informed the court that no conflict exists because, as a matter of public policy, the Attorney General concluded that the State is more likely to collect the money owed to the State if the homeowners keep their homes. The court finds the Attorney General's argument utterly baseless and demonstrably meritless. First, the State merely seeks to have the instant complaint dismissed without prejudice, meaning that the plaintiff need only wait to record the mortgage assignment and re-file a new foreclosure action under a new case number. Rather than allowing the homeowner to keep the real property, the State's prayer serves only to delay the eventual awarding of judgment against the homeowner. Because the interest due the plaintiff would continue to accrue during the Attorney General-ordained period of delay, less potential excess funds would be available after the judicial sale to satisfy the State's judgment lien. ...this court must conclude that the Attorney General was using this court to advance a political agenda rather than seek a legal remedy in a court of law.
That's gotta sting. Dann's office, for the record, has said it will appeal. While we're at it, can we also please lay to rest the ridiculous notion that says any motion denied on the ground of recording mortgage assignments -- a la Boyko -- is somehow a big issue for the industry?