Several months ago, an Ohio appellate court slammed PNC down for it’s less than astute practice in asking a trial court to grant it a foreclosure order denying the homeowner’s right to a hearing to defend himself at trial. In that case, the court focused on the fact that PNC didn’t attach certified copies of the documents it filed with the Ohio Secretary of State’s Office, showing had the right to enforce (sue on) all of the former National City Bank’s mortgages. In a more recent case in our Office, it seems that PNC’s failure to abide by what would be considered prudent business practices could come back to haunt it; and for that matter, government-controlled entities Fannie Mae and Freddie Mac, in an even much bigger way. That case involves the Morris'.
In the Morris’ case, we came across an apparent material defect in the way PNC folded up the former National City Bank (“NCB”) operation and merged it into its own. The error seems innocent enough on the surface, but could have long-term serious consequences for PNC, and Fannie Mae and Freddie Mac as well, if it becomes fully exposed to the right-positioned Ohio homeowners. The error we are referring to actually started several years before the merger was completed in 2009, when NCB began consolidating operations. A careful inspection of the filings at the Ohio Secretary of State’s Office as to how NCB and all of its subsidiaries were transferred into PNC’s operation reveals that there may be an Achilles heel to PNC’s position that it has the right to foreclose on former NCB mortgages.
But why do we say that this could lead to big trouble for Fannie and Freddie, as well as PNC? That’s because a large number of the NCB (now PNC) mortgages were sold to those government entities. With that, PNC’s problem essentially becomes the government’s problem. Thus for Ohio homeowners with PNC mortgages, PNC’s, Fannie’s and Freddie’s problems could present a huge opportunity in the fight to save their homes. Fannie and Freddie are every bit as eager to foreclose as any bank or loan servicer. Now could be payback time for thousands of Ohio homeowners, including the Morris’. As irony would have it, it just may turn out that PNC itself may have handed Ohio homeowners an excellent means to put pressure on PNC/Fannie/Freddie to treat them fairly.
Considering that PNC, Fannie and Freddie are foreclosure-driven institutions, having leverage is huge. It is indeed a very sad state of affairs in this Country when Americans, still clinging to the Dream of homeownership, have to engage in a battle with their “banks” (actually loan servicers), just to get a break on their mortgage; a break which would allow them to pay off their mortgages and keep their families in their homes. But such is life in modern day America, a place where loans are bundled into pools and sold as stock certificates, making it profitable for banks (and Fannie and Freddie) to foreclose.
In the Morris’ case, our latest discovery presents an opening to reverse the trial court’s grant of judgment against them. Like the case reversed against PNC mentioned above, with that opening comes a significant opportunity to expose the practices of PNC, and through it, Fannie and Freddie. If there is one common denominator we’ve seen in the past five and one-half years of doing securitized mortgage loan defense, these institutions do not want their practices exposed to the light of day. Will PNC be willing to risk the spotlight being focused on it in the Morris’ case? We don’t think so. And with that will come the fair and just result that not only the Morris’ deserve. Hopefully, the other hundreds of thousands of PNC mortgage customers, who like the Morris’ have been victimized, will take heart and hope from that victory.
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Kate Eyster and Lauren McGookey contributed to this article.
Copyright 2014 Daniel L. McGookey