Appeals court reverses Edgerton foreclosure
MADISON — A state appeals court reversed an Edgerton couple’s foreclosure Thursday, finding the mortgagor couldn’t prove at trial it held the note on the couple’s residence.
In reversing Rock County Judge James Welker, the District 4 Court of Appeals concluded that Aurora Loan Services had not submitted “admissible evidence” that it was the holder of the note.
Aurora Loan Services based in Littleton, Colo., had sought foreclosure against David and Linda Carlsen after the loan on their home at 502 Newville St. went into default in 2006. Because Aurora wasn’t the original lender, the Carlsens’ attorney, Reed Peterson of Madison, had asked that Aurora prove it was the current holder of the $159,000 mortgage.
“It used to be if a lender found you in default, you either paid up or you lost your house,” Peterson said in a phone interview. “Now, attorneys are asking lenders what’s their proof, do they have enough documentation to get a foreclosure?”
Although Aurora claimed it had bought the Carlsens' mortgage, the firm had no one who could testify before Welker that he or she had seen the document assigning the Carlsens' mortgage to Aurora.
Even so, Welker granted Aurora the foreclosure.
The Carlsens appealed.
The appeals court found that the rules of evidence apply to foreclosures and a trial judge can’t rely only on the arguments of a lender’s attorney.
While Aurora had its business records of Carlsens' mortgage, it lacked certification from the Rock County Register of Deeds Office that it had been assigned the note.
To save the filing fee at the register of deeds office, mortgage brokers often use mortgage electronic registration systems to document the transfer of mortgages from one lender to another. Peterson said that creates a problem when they try to prove in court that they hold the mortgage.
“Documents recorded with a register of deeds come with their certification—MERS doesn’t have a system in place that the rules of evidence recognizes as being trustworthy. When lenders come to court, they have a problem with proving they now have the mortgage,” he said.
Calls to Aurora and its attorney for comment on the opinion weren’t returned before deadline.
Peterson said the lack of authenticated records in foreclosures has created a “real mess that needs to be cleaned up.”
A bankruptcy court in New York has declared mortgage electronic registration systems to be “an illegal entity,” Peterson said.
The Carlsens have a mortgage on their property recorded with the register of deeds, but who actually owns the mortgage remains unclear, Peterson said.
Peterson said the Carlsens remain in their home.
Apr 24, 2011 at 7:50 p.m.
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There is no praise to be given except to the appeals court judge for making the correct decision. If a house goes into foreclosure but no bank can prove that they own the mortgage, then the people occupying the house have every right to stay in that house regardless of their payment history. Yes, 916WI, it is like they should get a free home because of some screwed up paperwork. Those are the breaks sometimes. Banks should realize that a court's not going to consider a click of the mouse to be a legal binding document. That's the bank's fault, and the house is in the possession of the proper owners.
Mar 28, 2011 at 10:59 a.m.
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Praising people for not paying their mortgage is wrong. The question is, how is this going to affect the rest of us mortgage payors. How will this affect everything relating to real estate, if people look for loop holes to get out of paying their debt. I think these people are pathetic! Maybe you can find a loop hole, but you still owe it, so man up and pay it, or lose it!
Mar 26, 2011 at 4:33 p.m.
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Westorbust......That's the stupidest thing I've heard all day. Yeah, it's a big scam that people who stop making payments that they agreed to make should have to return the asset they stopped making payments on--what you think everyone who agreed to buy a house or a car should get to keep the asset for free when they stop making the payments? It sounds like the bank has all the files electronically, they just need to get their interest registered with the county, then they can move forward with the foreclosure process.....
Mar 26, 2011 at 11:38 a.m.
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I knew you'd get bank and corporate apologists in the first few comments of this article. Not surprising these are the same people that are cheering on Walker. If a bank can't show legal ownership of the note, then there is no note. Banking and real estate are a massive scam and it's good to see people fight back.
Mar 25, 2011 at 11:16 p.m.
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Good for them...great to see someone winning.
Mar 25, 2011 at 8:01 p.m.
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916....I get that they do not OWN the house until it's fully paid for.The original paper is long gone.The first bank no longer has it or a copy of it.When banks sell mortgages that do it in lots,that is why there's no original paperwork.I for one believe banks need to held accountable.Who's fault is it that they no longer have the paperwork? By the way I do have mine from the day I signed the loan papers.Sure most people do also.
Mar 25, 2011 at 7:38 p.m.
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1234......It's not really "their" home, it's the bank's home until the mortgage is satisfied. They'll only get to keep it if they are able to stay current. I would think that right after the ruling the bank it getting it's paperwork in order so it can proceed accordingly. Like I said, it's difficult to know the situation--whether or not these people are deadbeats--it's not like they should get a free home because of screwed up paperwork.......
Mar 25, 2011 at 7:11 p.m.
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916....If you have a mortgage ?? Read your fine print,it will say your payment is due on X-day of the month.Even if you have a grace period of 15 days(usually late fee)your mortgage is in default the day after X-day.This is what has happened to a lot of the military families that are serving their country.Because the banks foreclosed on them illegally the banks are giving their homes back to them.If their house has been sold,the bank is offering them one of equal value of their choice.Some banks have jumped the gun with foreclosures and they are being held accountable.With mortgage companies/banks selling mortgages 1,2,3,6 times details get lost in the shuffle.Happy to hear this family has won and will be able to keep their home.There's no place like home !!
Mar 25, 2011 at 6:47 p.m.
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916WI, you may have a point - but this is a win only because it enforces the rules and laws that are already on the books. Sadly, these rules of mortgage documentation and ultimately foreclosure have been trounced upon by greedy banks that tried to move as many MBS as fast as possible - lost the paper trail of ownership, deciding instead that following the rules cost too much money.
But now the banks cry fowl when their decisions come back to bite them in the ... courts. :)
Mar 25, 2011 at 5:40 p.m.
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I would love to see the payment history on the Carlsen's loan before praising this decision. Have they attempted to stay current, or are they just deadbeats that gave up paying all together?
Mar 25, 2011 at 5:19 p.m.
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Yea for the little guy!
Prove it! Booyah!
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