Sea of Foreclosure Litigation

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The news for mortgage servicers in New Jersey was good, but not in Hawaii. Across the rest of the nation, plenty of decisions are being made in favor of delinquent borrowers — with note ownership at issue in several cases.

Fannie Mae issued Announcement SVC-2011-15 on Sept. 1 indicating that until further notice, all foreclosures on properties in Hawaii referred to an attorney on or after May 5 must be commenced as judicial foreclosures. Any non-judicial foreclosures in the state that have not been through a sale need to be dismissed and converted to a judicial foreclosure.

“Due to potential title insurance issues, Fannie Mae may be required to eliminate certain recent acquisitions that resulted from non-judicial foreclosures,” the notice said. “Upon being notified of any eliminations, servicers must immediately restart the matters as judicial foreclosures.”

The maximum allowable foreclosure fee for Hawaii is $2,200. The fee was raised to $1,150 for judicial foreclosures in Delaware and as much as $2,200 in some counties in New York.

In New Jersey, five separate but substantively identical orders authorized foreclosures to resume after the judge’s prior decision to halt a total six cases, according to Patton Boggs LLP. The five lenders who can resume include Wells Fargo, Citibank, OneWest, JPMorgan Chase and Bank of America.

American Banker reported that the New Jersey Supreme Court lifted a foreclosure ban on the sixth case involving Ally Financial Inc. on Monday.

The Court of Appeals of Ohio, Eight District, Cuyahoga County, affirmed a lower court’s decision to deny First Horizon Home Loans’ request for relief from the dismissal of its foreclosure after a forbearance agreement was enacted and the borrower defaulted. The trial court “deems cases settled and dismissed when the parties in interest enter a new contract which is separate and distinct from the original and requires new consideration or has new terms.”

U.S. Bank, N.A., filed a complaint for foreclosure and to re-establish lost note in Florida during February 2009 against Rosa Paiz and Rigoberto Paiz. The action was voluntarily dismissed by the bank to re-establish a lost note. The property was eventually sold at foreclosure sale in August 2010.

On Feb. 1 of this year, Paiz filed an unsworn Florida Rule of Civil Procedure 1.540(b) motion to vacate the final judgment based solely on the assertion by Paiz’s counsel that SASCO 2007-WF-2, the trust for which U.S. Bank was trustee, did not exist. Ultimately, a lower court post-foreclosure judgment and foreclosure sale order staying execution of a writ of possession was reversed by the District Court of Appeal of Florida, Third District, and the case was remanded with instructions to allow the writ of possession to take effect.

The District Court of Appeal of Florida, Fourth District overturned a default and final judgment of foreclosure in favor of LaSalle Bank against Catherine Paige Parker. After an unsuccessful attempt to serve Parker, LaSalle filed an affidavit of constructive service with an affidavit of diligent search and inquiry from a process server showing that personal service could not be made despite a diligent search and inquiry to determine the whereabouts of Parker.

Parker filed an emergency motion to quash service of process three weeks after the foreclosure sale was scheduled, and the trial court denied the motion. But the appeals court determined that LaSalle didn’t conduct a sufficient diligent search and inquiry to support constructive service of process, reversed the trial court’s decision and remanded the case.

Jacqueline Bethea claims she was a victim of a buy-lease-back mortgage-rescue scam. After her loan wound up in foreclosure, Deutsche Bank National Trust Co., the trustee for the securitization that owned her loan, Long Beach Mortgage Loan Trust, won a judgment against her. But Bethea appealed the case because Deutsche allegedly filed the foreclosure a day before it actually had title to the note.

The Superior Court of New Jersey, Appellate Division, vacated the sheriff’s sale, the final judgment and the order granting summary judgment on Bethea’s property and remanded to the trial court for further proceedings.

BofA agreed to a loan modification for Vera Johnson after she elicited more than 16,000 online signatures, according to a press release from Johnson claims that the bank unnecessarily delayed her modification request and handled the process poorly.

The consumer-advocacy group issued another announcement last month trying to spotlight Chase Bank’s decision to foreclose on a U.S. soldier’s father.

During August, BofA reportedly stopped filing foreclosure default notices in Salt Lake County, Utah, though it claims it can still do so, The Salt Lake Tribune reported. BofA attorney William Boland said at a hearing in federal court that a proposed class action lawsuit against ReconTrust and BofA should be dismissed because federal bank laws empower ReconTrust to preempt a state law requiring Utah attorneys and title companies to carry out foreclosure filings and sales.

Sharon and James Bullington’s early payment on the loan due in January 2011 triggered a series of events that would have their loan modification canceled and a foreclosure initiated, the St. Petersburg Times reported. But last month, BofA reportedly relented and reactivated the loan modification.

A foreclosure action was started in Florida by Wells Fargo Bank, N.A., against Joan B. Paul in July 2009. The elderly woman suffered from multiple physical and mental ailments and didn’t respond to the complaint. A summary judgment was issued in favor of Wells Fargo in February 2010, and a foreclosure sale was set for three months later. The property rights were assigned to Freddie Mac.

William Chiste, the nephew of Paul who held a durable power of attorney on her behalf, didn’t learn of the foreclosure lawsuit until March 2010. His request to hold up the sale wasn’t accepted. But an appeals court decided in Chiste’s favor.

“We conclude that the trial court did not base its orders on the exercise of discretion,” the decision declared. “Rather, it mistakenly concluded that it had no discretion to grant relief (1) after the sale and/or (2) based on Mrs. Paul’s mental condition.”

Wells Fargo filed an unverified complaint in Florida during May 2008 alleging that Eric P. Gick and Marilyn J. Gick defaulted on their mortgage when they missed the Nov. 1, 2007, payment. Wells Fargo moved to enter a final summary judgment, and the judge complied. In the process, the Gicks’ request for dismissal was denied.

In their appeal to the District Court of Appeal of Florida, Fifth District, the Gicks argued that they could have argued several potential defenses, though the court only addressed a supporting affidavit executed by Wells Fargo Assistant Vice President David Perez which failed to reference “the alleged non-payment in November 2007, and indeed, did not include any averment that the Gicks had defaulted on the mortgage.”

The appeals court reversed and remanded the case.

In August 2010, Fifth Third Mortgage Co. filed a foreclosure action in Ohio against multiple defendants. One of the defendants, Rebecca Orebaugh, answered Fifth Third’s complaint one day out of time, and five days later Fifth Third moved for a default judgment and subsequently moved for a summary judgment while acknowledging the late answer by Orebaugh.

Orebaugh appealed the decision, and the trial court’s judgment was reversed by the Court of Appeals of Ohio, Twelfth District, Butler County. The case was remanded.

“The judgment is reversed because the grant of summary judgment was void as it was predicated on another void action when the trial court set aside a previously-granted default judgment while the case was on appeal,” the judge wrote.

Wekesa Madzimoyo filed an emergency petition in July 2009 to halt foreclosure proceedings by JP Morgan Chase Bank and Bank of New York Trust Co. because, he claimed, none of the defendants was the original lender and there was no evidence that the original lender had transferred its rights to any defendant. Because Madzimoyo alleged violations of the Fair Debt Collection Practice Act and the Truth-in-Lending Act’s Regulation Z, the defendants were able to remove the petition to U.S. District Court for the Northern District of Georgia.

As recommended by a magistrate judge, the district court granted a judgment on the pleadings. Madzimoyo appealed, and the U.S. Court of Appeals, 11th Circuit, vacated the judgment and remanded the case back to state court.

“Upon review of the record, we conclude that the district court should not have exercised federal-question jurisdiction upon the removal of this case,” the decision stated. “Although Madzimoyo’s petition referenced federal laws in passing, none of his causes of action relied on even the interpretation of federal law. Rather, Madzimoyo merely asserted that he requested his loan information from the mortgage companies in accordance with federal law to show that he had acted diligently and merited state relief.”

The Ninth Circuit Court of Appeals in San Francisco on Wednesday upheld a district court’s decision to deny plaintiffs leave to add a claim for “wrongful foreclosure” to their proposed second amended complaint, Patton Boggs reported. Bank of America Corp. and JPMorgan Chase & Co. were named along with Mortgage Electronic Registration Systems Inc. as defendants.

The borrowers challenged MERS’ ability to foreclose because their notes and trust deeds were “irreparably split” under the MERS system, Patton Boggs wrote. After noting that the lenders would still have a right to foreclose even if such a split had occurred, the court concluded that no split occurred because both MERS and the securitization trustee, as nominal holders of the trust deeds, are recognized as agents of the lenders.

The rejection of a putative class action by a district was affirmed by the Ninth Circuit Court of Appeals, according to Patton Boggs. That lawsuit alleged a fraudulent conspiracy among MERS, a number of its members, and Fannie Mae and Freddie Mac.

Source Media reported that a federal judge in Oregon ruled on Aug. 1 that MERS is a proper beneficiary of the trust deed and authorized to assign it out of the name of MERS and into the name of the servicer. The same legal grounds were used in an Aug. 8 decision by the same judge who struck down a borrower’s similar claim and granted a motion for summary judgment to dismiss the borrower’s lawsuit.

Massachusetts Bankruptcy Court Judge Melvin Hoffman last month issued a ruling voiding a MERS-held mortgage with sloppy paperwork, JD Supra reported. The case is potentially troubling for the foreclosure of any MERS-held mortgage in default.

CSMC 2007-C1 South Rosemary LLC filed a foreclosure action against CityPlace Retail LLC, which defaulted on a $150 million mortgage on Feb. 22, according to a Bloomberg story.

A recent Associated Press story indicated that the use of questionable foreclosure documents goes back to the late 1990s. Citing “legal experts,” AP wrote that robo-signing could ultimately invalidate tens of thousands of home ownership documents.

First Horizon Home Loans, A Division of First Tennessee Bank, N.A., Plaintiff-Appellant, v. Mohsen Fanous, et al., Defendants-Appellees.
Case No. 95924
RELEASED AND JOURNALIZED: Aug. 25, 2011 (Court of Appeals of Ohio, Eighth District, Cuyahoga County).

U.S. Bank National Association, etc., Appellant, v. Rosa Paiz, et al., Appellees.
Case No. 3D11-891, Opinion filed Aug. 17, 2011 (
District Court of Appeal of Florida, Third District).

Case No. 4D10-482, Aug. 10, 2011 decision date
(District Court of Appeal of Florida, Fourth District).

Case No. A-4925-09T3, decided Aug. 9, 2011 (
Superior Court of New Jersey, Appellate Division).

JOAN B. PAUL, Appellant, v. WELLS FARGO BANK, N.A., Appellee.
Case No. 2D10-3889, Opinion filed Sept. 2, 2011 (District Court of Appeal of Florida, Second District).

Fifth Third Mortgage Co., Plaintiff-Appellee, v. Rebecca Orebaugh, et al., Defendants-Appellants.

Case No. CA2011-03-039, 2011 Ohio 4472, Decision on Sept. 6, 2011 (Court of Appeals of Ohio, Twelfth District, Butler County).

Cervantes, et al. v. Countrywide Home Loans, et al.

Case No. 09-17364 (U.S. Court of Appeals for the Ninth Circuit, San Francisco).

CSMC 2007-C1 South Rosemary LLC v. CityPlace Retail LLC.

Case No. 11-013227 (Palm Beach County Court, Florida,West Palm Beach).

Beyer v. Bank of America et al.

Decision on Aug. 1, 2011 (U.S. District Court, Oregon).

Neilson v. Wells Fargo Bank, NA, et al.

Aug. 8, 2011, decision.

In Re. Schwartz.

(U.S. Bankruptcy Court in Massachusetts).

Mortgage Expert

Mortgage Daily Staff