The Foreclosure Lawsuit Journal

written by
MORTGAGE EXPERT
6 · 18 · 12

From New York to California, mortgage servicers are battling foreclosure litigation with varying degrees of success. In many cases, the lawsuits drag on for years.

Andinaria and Tarrance Nelson defaulted in 2008 on their mortgage with Flagstar Bank, FSB, and were sent default notices three times through May of that year. They were notified that a foreclosure sale was scheduled for that October, and newspaper notices were published three times. But Flagstar agreed to a forbearance and cut their interest rate by 2.5 percent.

Still, the Nelsons defaulted again in March 2009. The cycle repeated itself, and a foreclosure finally completed through MERS in January 2010. But when Fannie tried to eject the Nelsons, they objected — contending that MERS had no interest in the property because it was not named in the original assignment, because Flagstar didn’t comply with its loss mitigation program and because of faulty affidavits. The trial court awarded a summary judgment to Fannie, and the Nelsons appealed. The Court of Civil Appeals of Alabama vacated the judgment.

Mary McGurk named New Century Mortgage Corp. in a quiet title action then dismissed the action when the former lender filed for bankruptcy protection, and she pursued her action in bankruptcy court — obtaining a judgment to quiet title. But the loan had already been assigned to Deutsche Bank National Trust Co., though the assignment was not recorded until after the judgment. On appeal, the Court of Appeals of California, Second District, Division Three, found that Deutsche was not bound by McGurk’s judgment, reversed the trial court’s judgment in favor of McGurk and remanded the case for an actual determination of the validity of the assigned trust deed interest.

Carlos Gonzales and Ernestina Valladarez obtained a preliminary injunction enjoining Countrywide Home Loans Inc., Bank of America, Recontrust Company, N.A., and Mortgage Electronic Registration Systems Inc. from proceeding with a trustee’s sale of their home. But as a condition of the injunction, the court required the borrower to make monthly payments of $1,284 to BofA during the pendency of the action. Gonzales and Valladarez appealed the condition, but the Court of Appeals of California, Fifth District, affirmed the decision. A request by Countrywide for a sanction against the plaintiffs for filing a frivolous appeal was denied.

Pedro Camacho tried to delay a foreclosure filed by Freddie Mac by removing the case from California Superior Court, County of Orange, to U.S. District Court for the Central District of California. But the federal court denied his request, noting, “the court reminds defendant that ‘[s]peedy adjudication is desirable [in unlawful detainer actions] to prevent subjecting the landlord to undeserved economic loss and the tenant to unmerited harassment and dispossession when his lease or rental agreement gives him the right to peaceful and undisturbed possession of the property.'” The decision said that the $10,000 in alleged damages fell well below the required $75,000 for a federal case, while no federal question exists.

When Joycelyn Adams fell behind on her mortgage with Countrywide Home Loans Inc. in 2006, she agreed to make higher payments for a year to make up the delinquency, which she did. Then, Bank of America Corp. required to continue making the higher payments for an additional two years and subsequently raised the payment amount to $1,900. But despite her meeting the higher payment requirements, foreclosure was commenced and a foreclosure sale was completed in November 2011. So she sued, and the bank requested a dismissal — which has been denied. A motion for leave to amend complaint filed by Adams was granted.

Deutsche Bank National Trust Co. was permitted to serve process by publication on Denise Brewer, who did not respond. A default judgment was entered, and a judicial sale of her home was ordered. When Brewer moved to quash the service of process by publication, her motion was denied.

She appealed, and the Appellate Court of Illinois, First District, found that Deutsche Bank did not meet the requirements for service by publication because it presented no affidavits in which the affiant swore that he personally took the steps necessary for attempting to serve process on Brewer and for due inquiry into her whereabouts. The judgment was reversed and the case remanded for further proceedings.

The U.S. Court of Appeals for the Eighth Circuit ruled in Brisbin v. Aurora Loan Services LLC that a lender’s oral promise to postpone a foreclosure sale is not enforceable under the Minnesota Credit Agreement Statute, Ballard Spahr LLP wrote in a client newsletter. The court also disagreed with the borrower and found that a notice of postponement didn’t need to be published since the borrower requested the postponement and a foreclosure sale was not postponed.

The Appellate Division of the Supreme Court of New York reversed a lower court decision to dismiss Deutsche Bank Trust Co.’s foreclosure complaint against Dominic Codio. The decision indicated that the allonge to note was a sufficient showing to warrant denial of the motion that was based on lack of standing.

After defaulting on his $493,220 mortgage, commercial mortgage broker John Lucido participated in 18 “fruitless” settlement conferences with Bank of America, N.A. Delaying the process was the serious illness and death of Lucido’s wife; the discharge of BofA’s counsel, Steven J. Baum P.C.; and BofA’s representation by an executive who was not authorized to settle.

Lucido, who didn’t provide his financials to the bank, had passed up an offer from BofA for a trial modification because BofA refused to provide any terms of the modification except the payment amount, Lucido was looking to have his principal reduced to $250,000 — the value determined in an appraisal obtained by Lucido (BofA didn’t produce a competing appraisal). BofA claimed that it was bound by a pooling and servicing agreement that prohibited principal reduction — though it repeatedly failed to provide a copy of the full agreement as ordered by the court. By July 2011, accumulated interest and advances had pushed the balance to $672.959.

The Supreme Court, Suffolk County, ruled that BofA could not attempt to collect anything but the principal balance as of the default date from Lucido. In addition, Lucido was awarded $200,000 in exemplary damages — which was applied to the principal balance.

While the trial judge in CitiFinancial Mortgage Co. Inc.’s foreclosure action against Ricky and Rhonda Carey orally granted a summary judgment in favor of Citi, it wasn’t memorialized before retiring. So when the successor judge granted a summary judgment based on the oral order, the Careys appealed and the judgment was reversed and remanded by Court of Civil Appeals of Oklahoma.

When Bruce R. Nelson’s son died in 2009, his mortgage with Option One Mortgage Inc. was in default. Nelson responded to a notice of default with a lawsuit seeking a dismissal of the notice and served a copy of the complaint to a firm he thought was the registered agent for Option One and the subsequent servicer, American Home Mortgage Servicing Inc. When the defendants failed to respond to the complaint, the trial court granted a motion declaring the trust deed void, and Nelson deeded the property to himself and took out a mortgages.

The trustee on the Option One loan still conducted a non-judicial foreclosure sale, but the court ordered the trustee’s deed to be void in June 2010. So the next month, American Home filed a motion setting Nelson’s judgment aside, contending that it hadn’t been served. While Nelson provided no evidence supporting that the served party was an agent for the defendants, the court denied American Home’s motion. So American Home appealed, and Court of Appeals of Oregon reversed and remanded the decision.

A lawsuit filed by Jack Grant to enjoin First Horizon Home Loans from foreclosing on his beachfront property was dismissed. But he appealed, and the Court of Appeals of Washington, Division One, affirmed the dismissal of his claims except for claims related to the authority of First Horizon to commence foreclosure proceedings under the deeds of trust act, chapter 61.24 RCW, which requires that the trustee “have proof that the beneficiary is the owner of any promissory note or other obligation secured by the deed of trust” before issuing a notice of trustee’s sale. However, the case was reverse and remanded.

Christa Albice and Karen Tecca took out a $115,500 mortgage with Option One Mortgage Corp. in 2003 and defaulted in 2006. In July of that year, a forbearance agreement was reached, but the payments were made late every month. Option One accepted late payments until February 2007, at which point it rejected the late payment. The $950,000 property was sold at foreclosure sale in February 2007.

The borrowers sued the buyer, Option One and Premier Mortgage Services of Washington — an Option One-related company that served as the trustee — but the two firms were dismissed from the lawsuit. An appeals court reversed the foreclosure trial court’s decision, concluding that the trustee sale was invalid, and remanded the case — a decision upheld by the Supreme Court of Washington.

Lisa Hedrick sued CitiMortgage Inc. because it charged and collected appraisal fees, debt collection fees, bankruptcy fees and foreclosure fees in violation West Virginia Code § 46A-2-115(a), 127(g), and 128(c) because it never foreclosed. Citi removed the case to U.S. District Court for the Southern District of West Virginia, but Hedrick successfully requested that the case be remanded to the Circuit Court of Kanawha County.

Diane M. Pauk claims that when Deutsche Bank National Trust Co. failed to provide her with a payoff statement on her delinquent loan on a timely basis, she was unable to close on the sale of her property — a claims that the circuit court agreed with. The bank was ordered to release her from the mortgage, and Pauk was ordered to transfer the property title to the bank. The Court of Appeals of Wisconsin affirmed most of the circuit court’s decision except that it found the circuit court exceeded its authority by ordering relief, including transfer of title, apparently based on the Deutsche’s foreclosure claim, without entering a foreclosure judgment that complied. That part of the decision was reversed and the case was remanded.

Fremont Investment & Loan was unsuccessful in its motion for reconsideration in a lawsuit filed by Jay and Julie Kentera. The Arizona couple had entered a forbearance agreement with HomeEq, but when Ocwen took over the servicing — it raised the payment by a penny and failed to inform the borrowers. Ocwen then declared the agreement in default and proceeded with foreclosure. Since the foreclosure had initiated two years earlier, no additional notice was sent to the borrowers — who learned of the foreclosure a day after the foreclosure was completed.

The Arizona Supreme Court ruled in Hogan v. Washington Mutual Bank, N.A., et. al that non-judicial foreclosure statutes do not require the beneficiary to prove its authority or ‘show me the note’ before a trustee may commence a non-judicial foreclosure, Ballard Spahr LLP wrote in a client letter. Both the trial court and the Arizona Court of Appeals rejected the plaintiff’s claims, holding that Arizona’s non-judicial foreclosure statute does not required presentation of the original note before commencing foreclosure proceedings. The court also rejected the plaintiff’s theory of liability under Arizona’s Uniform Commercial Code.

Raphael and Yaffa Aharonoff filed an appeal with the Court of Appeals of California, Second District, looking to overturn the dismissal of their claim seeking to cancel a trustee’s deed delivered upon a trustee’s sale in a non-judicial foreclosure. The servicer is American Home Mortgage Servicing Inc. The appeals court reversed the judgment and remanded the case to the trial court with directions to grant leave to file a second amended complaint.

Mortgage Expert

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