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U.S. District Judge Dee Benson left open a legal window Wednesday for two South Jordan residents facing the loss of their house, one of the first cracks in federal court for Utahns trying to save homes from the wave of foreclosures swamping the state.

Benson declined to grant a motion to dismiss the lawsuit brought by Michael and Dana Geddes to halt the foreclosure on their home while they try to negotiate a loan modification. That means the couple and their attorney can proceed with gathering testimony and documents to try to prove their contention that the foreclosure process to which they're being subjected does not comply with Utah and federal laws.

By one estimate, Utah could be facing 40,000 foreclosures this year, the blowback from the financial crisis that was created by an out-of-control mortgage process where many loans were granted with greatly fluctuating interest rates or to people who normally would not qualify.

The practices created a real estate bubble of rapidly inflating home prices that began to burst in late 2007, dragging down the U.S. financial system.

Federal judges in Utah have generally been hostile to lawsuits by homeowners who say that, in the process where mortgages were packaged and resold to groups of investors, traditional property recording practices and laws were bypassed and that, as a result, foreclosures were proceeding illegally.

Benson conducted a 90-minute hearing in the Geddes lawsuit in which he intently grilled both sides over various legal questions. But what seemed to sway him was the admission by attorneys for the foreclosing entities that they were not sure who actually owned the couple's mortgage note.

Homeowner attorneys have argued that because entities such as Bank of America do not own the actual notes, which are in the hands of investors, they cannot legally institute foreclosure proceedings. Benson said the Geddeses made a sufficient case to allow them to demand evidence of who owned the note on their home.

"I think it went into a securitization pool," he said. "But we don't know."

Attorney Abraham Bates, who represented the couple at the hearing, said they both had been diagnosed with cancer and started treatments when they sought a loan modification. But after spending hours on the phone trying to negotiate a modification, ReconTrust Co., the foreclosure arm of Bank of America, began to foreclose.

Benson disputed Bates' characterization that federal courts in Utah were automatically dismissing such cases, saying he was making decisions on a case-by-case basis.

But his decision to not grant dismissal does create a split among local federal judges, others of whom have routinely dismissed many of the dozens of foreclosure suits they've heard.

Chief Judge Tena Campell has granted orders temporarily halting foreclosures and Judge Clark Waddoups also has granted a temporary restraining order, though he has ruled several times in favor of the entities bringing most of the foreclosure actions in Utah, the Mortgage Electronic Registration Systems and ReconTrust.

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