Bank Must Have Standing to File Foreclosure!

A recent case, Deutche Bank National Trust v. Gilbert, 2012 IL App (2d) 120164 (September 25, 2012), highlights how important it is for a bank to have standing — in this case, the bank must actually own the loan — when filing a foreclosure suit.

In 2005, the defendant homeowner entered into a mortgage with Mortgage Electronic Registration Systems (MERS).  At some point, he defaulted.  In March 2008 the plaintiff, Deutsche Bank, filed a foreclosure action against the defendant.  In August 2008, MERS assigned the mortgage to Deutsche Bank.  The next month, Deutsche Bank amended its complaint and attached the assignment from MERS.

The defendant claimed that Deutsche Bank did not have standing because it did not own the mortgage when the foreclosure was filed.  While the trial judge initally agreed with the defendant, upon motion for reconsideration, he sided with Deutsche Bank.

The home was foreclosed, and the defendant appealed.  The appellate court found that Deutsche Bank did not have standing when the suit was filed, and therefore the foreclosure action was inherently defective.  The appellate court reversed the judgment of foreclosure.

If you are a bank filing foreclosure, you must make sure that the mortgage has been properly assigned to you before filing suit.  If you are a homeowner facing foreclosure, this little loophole could buy you more time!