Foreclosure lawsuit settled

Erie Co. woman's case led to 'robo-signing' challenges

As a lead plaintiff, Andrea Schwarzentraub of Erie County would get $8,000 and, unlike others, her debt will be expunged.

A class-action lawsuit filed three years ago that provided the legal foundation for challenges to the financial industry's use of so-called "robo-signers" in foreclosure filings has been settled, with most of those who had been sued by one of the nation's largest debt-collection firms getting checks of $17.38.

Meanwhile, a state case filed in 2010 against several large mortgage companies is still being fought in federal court in Toledo, where it is waiting for the Ohio Supreme Court to settle a question of state law.

In the class-action case, U.S. District Judge David Katz has granted approval of a $5.2 million settlement in the case of Midland Funding vs. Brent, a landmark case from 2008 in which an Erie County woman challenged the debt-collection industry's practice of using false affidavits to obtain judgments against debtors across the country. The affidavits, which were usually filed in lower courts, claimed that the signer had "personal knowledge" of the debt being collected upon, when in fact the documents had been signed by clerks who had no such personal knowledge.

In an opinion filed Friday, Judge Katz said the settlement would pay $17.38 each to approximately 133,000 people nationwide who had been sued by Midland Funding LLC or one of its subsidiaries and who had agreed to be part of the class action. The lead plaintiffs, including Andrea Schwarzentraub, of Erie County's Perkins Township, would get $8,000, and unlike the others in the class, their debts would be expunged.

In the settlement, Ms. Schwarzentraub is to have a $4,500 debt she allegedly owed -- which was the heart of her case -- expunged. Her attorneys, the Sandusky firm of Murray & Murray, received fees of $1.5 million as part of the case, which they took on a contingency fee basis.

Ms. Schwarzentraub could not be reached for comment Monday.

Her attorney, Dennis Murray, Sr., said the conclusion of the landmark case left a mark on the nation's legal landscape.

"There were other courts around the United States that were faced with these 'robo-signing' questions for years. The only time a judge ever picked it up and called a spade a spade was Judge Katz," Mr. Murray said.

The Midland case marked the first time a federal court had ruled on what has come to be called "robo-signing," which had become a standard practice among giant debt collection agencies and later within the financial industry.

As the nation's foreclosure crisis exploded in 2009 and 2010, then-Ohio Attorney General Richard Cordray filed suit against Ally Financial, GMAC Mortgage, and other mortgage companies in Lucas County for allegedly engaging in the same practices that Judge Katz had found objectionable in the Midland case.

Last November, Mr. Cor- dray's case was moved into U.S. District Court in Toledo, where Judge Jack Zouhary has refused several motions to dismiss and is awaiting a decision by the Ohio Supreme Court on a question of state law before proceeding further with the case against the mortgage companies, according to federal court documents.

Contact Larry P. Vellequette at: lvellequette@theblade.com or 419-724-6091.