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Mortgage Lawsuits News | Mortgage Litigation Index
Mortgage industry lawsuit news and mortgage litigation coverage. Stories about legal settlements, judgments and mortgage class actions.

Foreclosure Litigation Elevated on East Coast, Midwest

Recent activity in foreclosure litigation

Sept. 17, 2012

By SAM GARCIA Mortgage Daily

portrait of Sam Garcia

East Coast mortgage servicers are battling borrowers who are taking advantage of legal maneuvers. It's the same in a slew of midwest states. But some servicers have seen success navigating their way through the U.S. legal system.

On the East Coast, a motion by Credit Suisse Financial Corp. confirming the referee's report to compute and for a judgment of foreclosure and sale was denied on Aug. 4 by the Supreme Court, Kings County, N.Y.

The borrower in the transaction is Jean Lisvonsce.

"None of the documents submitted on this motion, including the documents submitted to the referee, is executed by an officer or employee of plaintiff," the decision states. "Nowhere does plaintiff make any showing that Select Portfolio Servicing, Inc. is authorized to act for plaintiff pursuant to the limited power of attorney given by DLJ Mortgage Capital Corp., or otherwise. Indeed, plaintiff did not reply to defendant/mortgagor Lisvonsce's opposition, which asserted the deficiency."

BAC Home Loans Servicing LP commenced a foreclosure against Israel I. Musa in September 2009. But no further action was taken for 22 months. The borrower's motion for leave to serve and file a late answer filed in November 2011 was dismissed. As of January 2012, BofA hadn't done anything to move the case forward, and a status conference was scheduled for March. By July, the Supreme Court, Dutchess County, N.Y., dismissed BofA's complaint as abandoned.

In New Jersey, a foreclosure action by Bank of America, N.A., against Melissa Limato was dismissed by a chancery judge who concluded that the bank failed to comply with the notice provision of the Fair Foreclosure Act and lacked standing to foreclose because it could not demonstrate its status as the holder of the note, a non-holder with possession of the note or that the original note was lost as required New Jersey's Uniform Commercial Code. BofA's appeal fell on deaf ears, and the Superior Court of New Jersey, Appellate Division, affirmed the chancery judge's decision.

"Plaintiff's failure to notify the mortgagor of its status as the lender is a deficiency, which when coupled with the insufficient proofs regarding its claimed status as holder, warranted dismissal of the foreclosure complaint without prejudice," the decision stated. "Judge Doyne's reasoned exercise of discretion in this regard will not be disturbed."

MERS agreed to a settlement with the state of Delaware that includes reforms and regular reports on the accuracy of its records, the Delaware attorney general announced in July. The agreement resolves a 2011 lawsuit filed by the state after receiving complaints from homeowners who were unable to have meaningful conversations about avoiding foreclosure and were unable to find out who owned their mortgage.

"MERS' inaccurate and unreliable records raised serious questions about who owns what in America," Delaware Attorney General Beau Biden said in a statement. "The steps MERS will now take will help answer those questions."

There was some good news, however, for east coast servicers.

The Maryland Court of Appeals held that a borrower is barred from raising purported irregularities in the lender's ownership of the mortgage debt by way of post-sale exceptions, according to a client newsletter from Ballard Spahr LLP. The court determined that allegations concerning the lender's ownership of the promissory note must be raised prior to the foreclosure sale. The court ruled that post-sale exceptions to sale are generally limited to irregularities in the conduct of the sale itself and are not the proper vehicle to challenge the validity of the lender's title.

"The decision is good news for mortgage lenders and servicers in that it limits the procedural avenues for borrowers to challenge a lender's ownership of a mortgage," the Washington, D.C.-based law firm wrote.

An "incoherent" complaint filed by Vivian Carter against Mortgage Electronic Registration Systems Inc. was dismissed by the U.S. District Court for the District of Columbia, MERS announced on Aug. 7. Carter alleged 20 violations of law.

"Plaintiff's 59-page complaint, unfortunately, is an incoherent narrative containing numerous allegations that generalize and conclude as opposed to specify and support," U.S. District Judge Richard L. Leon reportedly wrote. "Indeed, the complaint reads like a poorly written assortment of generalized grievances about the banking industry that is more closely tied to newspaper articles and investigative reports than the plaintiff's own situation."

Ernest J. Cotton financed a Chicago five-unit apartment building in 2003 with a $183,207 mortgage from Irwin Mortgage Corp. The loan was transferred to CitiMortgage Inc., which filed a foreclosure in July 2009. But two process servers were unable to serve Cotton after 19 total attempts, and each executed an affidavit to that effect. The trial court granted Citi's motion for service by publication, and Ernest was served by publication in the Chicago Daily Law Bulletin.

At the March 2010 foreclosure sale, second lienholder Marquette Bank purchased the main residence. Cotton quickly filed a motion to vacate the judgment of foreclosure and judicial sale and to quash service by publication. The trial court denied the motion in August 2010, and Cotton filed an appeal with the Appellate Court of Illinois, First District, Second Division. The judgment was reversed by the appeals court on Tuesday, and the case was remanded.

Deutsche Bank National Trust Co. was permitted by the trial court to serve process by publication on Denise Brower, and when she failed to respond -- a default judgment was entered against her and the sale of her home was ordered. Deutsche acquired the property. When Brower moved to quash the service of process by publication, her motion was denied. She filed an appeal with the Appellate Court of Illinois, which reversed the trial court's judgment and remanded the case for further proceedings.

"Deutsche Bank did not present to the court any affidavits in which the affiants swore they made due inquiry to find and serve process on Brewer," the decision stated. "Therefore, the manifest weight of the evidence contradicts the trial court's finding that Deutsche Bank proved due inquiry in strict compliance with Rule 7.3, and the trial court erred when it denied Brewer's motion to quash service of the summons by publication."

An order granting German American Bancorp's motion to sell commercial real estate was reversed by the Court of Appeals of Indiana and remanded. Appellants Mark Van Eaton and Cynthia Van Eaton Vallimont raised a single issue on appeal: whether the trial court abused its discretion by granting GAB's motion to sell real estate.

Patrick McEntee took out a $73,000 mortgage from USB Home Lending in August 2003. In January 2009, when McEntee presented a post-dated check, Wells Fargo had taken over the servicing. But Wells Fargo deposited the check too early, resulting in an overdraft of $113. McEntee sought compensation from Wells Fargo, and the dispute soon spiraled out of control --with McEntee deducting expense amounts from his monthly mortgage payments.

Wells Fargo filed a foreclosure complaint in May 2010. Within a year, a summary judgment was issued in favor of Wells Fargo. McEntee filed a motion to reconsider, which was denied. On appeal, the Court of Appeals of Indiana reversed the decision noting that Wells Fargo failed to establish that there was no genuine issue of material fact as to the allegation that McEntee had defaulted on the note.

In Michigan, Countrywide Mortgage financed a $98,000 balloon-payment loan for James P. Holton in August 2003. Bank of America, which acquired Countrywide, notified Holton in April 2010 about his looming August 2010 balloon payment, and Holton allegedly advised BofA that he wanted the 30-year option. BofA was supposed to send the necessary paperwork -- but Holton claims he never received the documents. After the balloon matured, BofA continued to withdraw monthly mortgage payments from Holton's account until early last year -- at which point it stopped accepting monthly payments and advised the borrower that the full balloon payment was due. A foreclosure notices was received by the borrower in April 2011.

Fed up with BofA's alleged inability to provide the necessary refinance documents, Holton filed a lawsuit in Genesee County Circuit Court, Mich. BofA filed a motion to dismiss the case which was denied with respect to the plaintiff's claim that BofA breached the written option agreement contained in the balloon rider to his mortgage contract but granted in all other respects.

A three-judge panel of the U.S. Court of Appeals for the Sixth Circuit affirmed a June 2011 dismissal from U.S. District Court for the Eastern District of Michigan of a legal challenge to Wells Fargo's authority to foreclose by advertisement under Michigan law, MERSCORP Holdings Inc. announced on July 13. Plaintiffs' claimed that as an assignee of MERS, Wells Fargo was not entitled to foreclose because it did not own an interest in the indebtedness. In addition, the plaintiffs tried to prove that the mortgage assignment by MERS to Wells Fargo was invalid because the mortgage could not be assigned without a corresponding assignment of the underlying debt.

MERS wrote that the "court held that the plaintiffs' argument 'is now foreclosed,' citing an intervening Michigan Supreme Court decision, Residential Funding Co., LLC v. Saurman, which rejected the validity of this argument." The sixth circuit -- which includes Kentucky, Ohio, Michigan and Tennessee -- held that MERS, as record holder of the mortgage, "owned an 'interest in the indebtedness' [that] authorized MERS to foreclose by advertisement under MCL 600.3204(1)(d)' despite not owning the underlying debt."

A foreclosure by Bank of America, N.A., against Horace Allen was vacated by the Court of Appeals of Minnesota and the bank was ordered to return possession of the property to Allen for the remainder of the statutory six-month redemption period, according to an unpublished opinion. BofA began the process of reducing the redemption period in August 2011 on the basis of an abandoned property. The appeals court agreed with Allen's contention that the district court's order must be vacated because the evidence doesn't support the abandonment findings.

The Court of Appeals Minnesota also overturned on Sept. 10 a foreclosure summary judgment in favor of Equity Bank against James J. Shorter. Shorter's claim for damages and equitable relief for Equity Bank's failure to comply with the notice requirements of Minn. Stat. § 500.245 (2010), was rejected by the trial court and reversed on appeal. The decision was due to material fact questions that remain about whether the bank failed to comply with the statute, and, if so, what remedy is appropriate.

But the recent news out of Minnesota wasn't all bad for mortgage servicers.

Attorney William B. Butler of the Butler Liberty Law LLC was "severely sanctioned" for continuing to file and litigate frivolous, meritless "show-me-the-note" lawsuits designed to thwart foreclosure proceedings in Minnesota, MERCORP Holdings Inc. announced on July 12. He was ordered by U.S. District Court Judge for the District of Minnesota Ann D. Montgomery to pay $75,000 plus an additional undetermined reimbursement of legal costs incurred by counsel for MERS and its co-defendants. The sanction was incurred in connection with Blaylock v Wells Fargo Bank, N.A.

The Court of Appeals of Tennessee at Jackson was asked to rule on a voluntary dismissal of a case filed by Rosheay and Theresa Ragland who seeks an injunction against Oakland Deposit Bank. But the appeals court found that the trial court hadn't ruled on post-trial motion regarding legal possession of the property. The trial court's decision was found to be not final, and the appeals court said it lacks subject mater jurisdiction over the appeal.

Further west, a one-tenth fractional interest in a Sedona, Ariz., condominium was the security on a $321,750 loan from Independent Mortgage Co. to Dennis Alaburda and Amy Warner. After the borrowers defaulted in December 2008, Independent Mortgage held a trustee's sale and purchased the property for $285,000. It then sued to recover a $57,884 deficiency balance, but the borrowers successfully had the case dismissed.

Independent Mortgage then filed an appeal with the Court of Appeals of Arizona, Division One, but the trial court judgment was affirmed.

The National Bank of Arizona was successful when it filed a deficiency action against Richard and Sigrid Schwartz after it purchased the property for $675,000 at a foreclosure sale leaving a $764,680 deficiency balance. But the bank wasn't so lucky when the Schwartzes appealed the decision to the Court of Appeals of Arizona, Division One. The court noted that arbitration is required in the note and reversed the decision, remanded the case and entered a stay of proceedings.

Case No. 7476/09, decided June 18, 2012 (Supreme Court, Dutchess County).

Case No. 25368/07, decided Aug. 14, 2012 (Supreme Court, Kings County).

BANK OF AMERICA, N.A., Plaintiff-Appellant, v. MELISSA LIMATO, Defendant-Respondent.
Case No. A-4880-10T3, decided July 2, 2012 (Superior Court of New Jersey, Appellate Division).

Vivian McCarter Plaintiff, v. Bank of New York et al. Defendants.
Case No. 1:11-cv-02078-RJL, motion signed July 9, 2012 (U.S. District Court for the District of Columbia).

Thomas v. Nadel.
(Maryland Court of Appeals).

CITIMORTGAGE, INC., Assignee of Mortgage Electric Registration Systems, Inc., as Nominee for Irwin Mortgage Corporation, Plaintiff-Appellee, v. ERNEST J. COTTON, Defendant-Appellant, (Marquette Bank, Under Mortgage Recorded as Document Number 0527147167; Solar Service, Inc., Under Mechanics Lien Recorded as Document Number 0620650042, and Under Memorandum of Judgment Recorded as Document Number 0732503162, Mildred Barnett and Berton N. Ring, P.C., Under Memorandum of Judgment Recorded as Document Number 0627622047, Lester L. Barclay, Under Memorandum of Judgment Recorded as Document Number 0834345071, Nonrecord Claimants, Unknown Tenants and Unknown Owners, Defendants).
Case No. 1-10-2438, decided Aug. 28, 2012 (Appellate Court of Illinois, First District, Second Division).

DEUTSCHE BANK NATIONAL TRUST COMPANY, Plaintiff-Appellee, v. DENISE BREWER, Defendant-Appellant.
Case No. 1-11-1213, opinion modified on July 18, 2012 (Appellate Court of Illinois, First District, Third Division).

Case No. 42A01-1111-MF-535, decision filed on Aug. 17, 2012 (Court of Appeals of Indiana).

ALAN PATRICK MCENTEE, Appellant-Defendant, v. WELLS FARGO BANK, N.A., Appellee-Plaintiff.
Case No. 75A03-1106-MF-277, decision on June 19, 2012 (Court of Appeals of Indiana).

JAMES P. HOLTON, Plaintiff, v. BANK OF AMERICA, NA, Defendant.
Case No. 11-14198, decided Aug. 22, 2012 (U.S. District Court, E.D. Michigan, Southern Division).

Mary K. Hargrow; M.L. Hargrow, Jr., Plaintiffs-Appellants, v. Wells Fargo Bank, N.A.; Federal National Mortgage Association, Defendants-Appellees.
Case No. 11-1806, decision filed July 3, 2012 (U.S. Court of Appeals for the Sixth Circuit).

Bank of America, N. A., successor by Merger to Merrill Lynch Credit Corporation, Respondent, v. Horace D. Allen, Appellant.
Case No. A11-1969, decision filed June 25, 2012 (Court of Appeals of Minnesota).

James J. Shorter, Appellant, Doretta M. Shorter, Appellant, v. Equity Bank, Respondent, James I. Vermilya, et al., Respondents.
Case No. A11-2056, filed Sept. 10, 2012 (Court of Appeals of Minnesota).

Pamela Blaylock f/k/a Pamela Urman, and Ervin Blaylock; Jeffrey A. Anderson and Patricia Anderson; John B. Nelson and Jody Nelson; Douglas Eugene Halver; Mary Kay L. Ervin-Talbot; Kang Xiong, Plaintiffs, v. Wells Fargo Bank, N.A.; Mortgage Electronic Registration Systems, Inc.; MERSCORP, Inc.; HSBC Bank USA, N.A.; HSBC Mortgage Services, Inc.; and Federal National Mortgage Association, Defendants.
Civil No. 12-693 ADM/LIB (U.S. District Court for the District of Minnesota)

Case No. W2011-02303-COA-R3-CV, decision filed July 12, 2012 (Court of Appeals of Tennessee at Jackson).

INDEPENDENT MORTGAGE COMPANY, Plaintiff/Appellant, v. DENNIS A. ALABURDA and AMY L. WARNER, husband and wife, Defendants/Appellees.
Case No. 1 CA-CV 11-0301, filed July 17, 2012, (Court of Appeals of Arizona, Division One, Department D).

NATIONAL BANK OF ARIZONA, a national banking association, Plaintiff/Appellee, v. RICHARD A. SCHWARTZ and SIGRID E. SCHWARTZ, husband and wife, Defendants/Appellants.
Case No. 1 CA-CV 10-0772, decided June 26, 2012 (Court of Appeals of Arizona, Division One, Department D).

Sam Garcia founded Mortgage Daily in 1998 and became its full-time publisher in 2000. Prior to his news career he worked in mortgage lending for two decades.

[email protected]

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