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Borrowers Successfully Stave Off Foreclosure

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Borrowers in more than a dozen foreclosure actions in 10 states have recently received favorable rulings from the courts. Several of the cases either involve the Federal National Mortgage Association or the Mortgage Electronic Registration Systems Inc. Foreclosure processing services were named as defendants in lawsuits filed by the states of Illinois and Nevada.

Nevada
A lawsuit was filed on Dec. 15 by Nevada Attorney General Catherine Cortex Masto against Lender Processing Services Inc. and subsidiaries including DOCX LLC and LPS Default Solutions. The company is accused of using deceptive practices in the foreclosure process.

Masto said the action followed an investigation into LPS’ residential default servicing. LPS allegedly required employees to execute, and sometimes notarize, up to 4,000 foreclosure-related documents each day. Fraudulent notarizations, forged documents and misrepresented kickback fees are alleged. The state also claims that LPS obstructed communication between foreclosure attorneys and their clients.

On Tuesday, LPS said it filed a motion to dismiss the case.

“The attorney general’s complaint contains significant legal defects which require the court to dismiss the complaint with prejudice,” the Jacksonville, Fla.-based firm said. “Perhaps most significantly, LPS points out that the attorney general’s complaint fails to allege that any document executed by subsidiaries of LPS was incorrect, contained errors, or caused any borrower financial harm.”

Two Nevada Supreme Court rulings on Jan. 20 that require servicers to produce all required foreclosure documents prior to foreclosing don’t establish a new legal standard, according to statements by officials reported by the Associated Press. The decisions relied on state high court opinions issued in July 2011.

Florida
A foreclosure judgment in favor of U.S. Bank, N.A., as trustee against Julia Feltus was overturned by the District Court of Appeal of Florida, Second District, last Friday. U.S. Bank had sought to re-establish a lost promissory note, and the court said that trial court erred because “U.S. Bank failed to show conclusively the absence of a genuine issue of material fact and that it was entitled to foreclosure as a matter of law.”

Barbara Kimmick claims that even though she made six modified payments to BAC Home Loans Servicing, her loan was still foreclosed. U.S. Bank, N.A., the trustee on the loan, claimed she could only cure her loan by paying the full past-due amount and that she hadn’t actually made the payments — even though she presented evidence to the contrary.

So Kimmick took her case to the District Court of Appeal of Florida, Fourth District, and argued that her loan shouldn’t have been foreclosed. The appeals court agreed with her and reversed the summary judgment.

Deutsche Bank National Trust Co., as trustee for a securitization, filed a foreclosure lawsuit in 2008 on a $247,200 loan to Tony Lippi that was originated by Fremont Investment and Loan in 2006. But the borrower successfully had the case dismissed because Deutsche was found to lack standing on the loan involving MERS.

However, the District Court of Appeal of Florida, Fifth District, disagreed with the trial court, reversed the decision and remanded the case.

“Upon review of the record and the Kozel factors, it was error for the lower court to dismiss Deutsche Bank’s foreclosure action with prejudice as a sanction,” the decision stated. “Dismissal with prejudice is unwarranted in this case and the lower court should have considered less severe sanctions if it wished to punish Deutsche Bank.”

Alabama
Reginald A. and Diane V. Patterson closed on a first mortgage with Option One Mortgage Corp. in January 2006. GMAC Mortgage LLC, which subsequently acquired the loan, initiated foreclosure proceedings in May 2007 and foreclosed on Aug. 7, 2007. However, GMAC didn’t execute the assignment until Aug. 6, 2007.

The Pattersons appealed to the Alabama Court of Civil Appeals, and the judgment was vacated.

“Because GMAC Mortgage did not own any interest in the house, it lacked standing to bring its ejectment action against the Pattersons,” the decision stated. “Because GMAC Mortgage lacked standing to bring the ejectment action, the trial court never acquired subject-matter jurisdiction over the ejectment action.”

A $144,433 mortgage taken out by James M. Perry in August 2003 to purchase an Alabama property was subsequently transferred to EverHome Mortgage Co. and foreclosed on by EverHome. The note had been executed in favor of MERS. The foreclosure sale took place in August 2009.

But when Fannie Mae filed a complaint in the Shelby Circuit Court to eject Perry from the property, he answered and denied that Fannie had the right to eject him from the property because the foreclosure sale and the foreclosure deed were void as a consequence of what he claimed had been a “defective notice and a defective sale.” Still, the trial court entered a summary judgment on Aug. 24, 2010, in favor of Fannie.

On appeal, the Court of Civil Appeals of Alabama found that Fannie failed to establish by admissible evidence that EverHome was the holder of the note that would have enabled EverHome to initiate foreclosure proceedings. The decision was reversed, and the case was remanded.

Massachusetts

The Massachusetts Supreme Judicial Court recently issued an order requesting the counsel for both parties in Eaton v. Federal National Mortgage Association to present briefings on what impact a ruling requiring a servicer to possess both a promissory note and mortgage in order to foreclose will have, attorney Richard D. Vetstein wrote. The court also wants briefs on whether such a requirement should be retroactive.

“In my opinion, an adverse ruling against lenders in Eaton could be the apocalyptic scenario, rendering open to challenge any title with a previous foreclosure in it and inserting a fatal wedge into the current securitized mortgage system,” Vetstein wrote.

Illinois
In a lawsuit filed Thursday against Nationwide Title Clearing, Illinois Attorney General Lisa Madigan alleged that the default documentation preparation firm violated the Illinois Consumer Fraud and Deceptive Practices Act and the Uniform Deceptive Trade Practices Act. The Florida-based company is accused of illegally creating and recording documents for its clients — which reportedly include eight of the 10 biggest lenders and servicers in the country.

“The practices that Nationwide Title Clearing used were a key contributor to the mortgage crisis by undermining the integrity and accuracy of the mortgage servicing and foreclosure process,” Madigan said.

Ohio
A summary foreclosure judgment in favor of PHH Mortgage Corp. against John Galvin was reversed on Dec. 30 by the Court of Appeals of Ohio, Ninth District, Summit County. The appeals court agreed with Galvin’s argument that the trial court erred in considering and granting PHH’s motion for summary judgment before he had an opportunity to submit his response in conformity with a trial court order.

Maryland
The U.S. District Court for the District of Maryland ruled that claims by borrowers related to alleged robo-signing in mortgage foreclosures must be raised in the original foreclosure action and not in a subsequent lawsuit for damages, according to a newsletter from Ballard Spahr LLP. The plaintiffs in the case made their claims in a class action.

“The court dismissed the case in its entirety, ruling that plaintiffs could have raised their claims in the state-court foreclosure proceedings,” the Washington, D.C.-based law firm said. “Because those proceedings were litigated to final judgments, the court ruled that res judicata barred the plaintiffs from bringing a new lawsuit for damages allegedly incurred in the foreclosure case.”

Colorado
MERS received a favorable ruling in December from a three-judge panel of the U.S. Tenth Circuit Court of Appeals in Denver, Colo. The case, Commonwealth Property Advocates v. MERS, was consolidated with two others that were on appeal involving MERS deeds of trust.

“The 10th Circuit has ruled unequivocally that as beneficiary on deeds of trust, MERS has the authority to foreclose and sell the property on behalf of the note owner,” MERSCORP spokeswoman Janis L. Smith said in a statement. “Similar to the 9th Circuit in Cervantes v. Countrywide, the 4th Circuit in Horvath v. Bank of New York and the 1st Circuit in Kiah v. Aurora, another federal appellate court has upheld MERS’ ability to hold mortgages and deeds of trust.”

Mississippi
Deutsche filed an appeal with the Court of Appeals of Mississippi challenging the chancellor’s denial of its motion for a default judgment in a lawsuit against Wilburn L. Brechtel Jr. and Barbara Brechtel. The mortgage on their property, which was originated by Ameriquest Mortgage Co. in 2004, didn’t include a reference to a manufactured home on the property.

After foreclosing on the property in July 2008, Deutsche filed a complaint in June 2010 seeking to declare that the manufactured home was included in the foreclosure sale. The motion was denied despite that the Brechtels had the manufactured home certified as real estate by the Harrison County Tax Assessor.

But the appeals court dismissed the appeal because it lacked jurisdiction.

Oregon
MERS announced that the U.S. District Court for the District of Oregon dismissed the borrower’s wrongful foreclosure action and upheld the validity of the deed of trust assignment from MERS to SunTrust. The case was Crowden v. Fannie Mae.

In another MERS case, Fannie Mae v. Goodrich, Judge Daniel Harris of the Oregon Circuit Court for Jackson County dismissed Fannie’s eviction action against the defendant on Dec. 7. The judge agreed with the defendant’s assertion that the foreclosure was invalid because MERS is not the beneficiary of the defendant’s trust deed, and that there are assignments of the trust deed that were unrecorded before the non-judicial foreclosure commenced.

Fannie is appealing the decision with the Oregon Court of Appeals.

The Mortgage Law Group reported Tuesday that it has defended more than a thousand delinquent borrowers in foreclosure cases during the past year. The Chicago-based company, which claims to be “one of the nation’s largest foreclosure defense firms,” said it delays the foreclosure process for as long as possible after exhausting other foreclosure alternatives.

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