Foreclosure Litigation Battles

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MORTGAGE EXPERT
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Servicers are fighting accusations of “robo-signing” in court rooms throughout the county. Bank of America is urging a federal court to disregard defects in a case where the borrower would have lost the house anyway. The representative of one company missed a foreclosure sale by 10 minutes, and the property was sold to the defaulting borrower’s brother at a fraction of the value.

Bank of America and two subsidiaries, LaSalle Bank and BAC Home Loans Servicing, are facing a potential class action lawsuit in federal court in New Jersey over allegations of “an undisciplined rush to seize homes” through a “willful disregard of knowledge, facts and statutes.”

Relying upon a recent admission by a Bank of America official in a Massachusetts foreclosure case that she signed thousands of foreclosure complaints without reviewing them, the plaintiffs in Beals v. Bank of America, also claim that a 10-day moratorium on foreclosures imposed by the bank in October so as to review procedures constitutes an admission that the bank went after homeowners with little regard as to whether they had met their legal burden to bring the cases.

Bank of America is also facing a legal fight with foreclosed homeowners in a potential class action lawsuit in federal court in Indiana.

Bank of America Corp. last month urged a federal judge to throw out a racketeering lawsuit over its alleged use of “robo-signers” in foreclosures. The largest U.S. bank said the Indiana plaintiffs — Dwayne and Melisa Davis — who lost their home to foreclosure in 2009, failed to show they were harmed by its alleged practice of submitting defective affidavits as they would they have lost their home anyway.

According to the court clerk’s office, the court has not yet ruled on that motion.

Citigroup Inc. is also grappling with homeowner charges of “robo-signing.”

Citigroup and its mortgage unit, CitiMortgage Inc., face charges of using improper paperwork to file “accelerated foreclosures” in a lawsuit filed in federal court in New York. Borrower Brian Costigan said in his complaint seeking class-action status that employees of the New York-based bank submitted fraudulent affidavits that proved Citi’s control of a mortgage and “outsourced tasks” to outsiders without adequate oversight.

Costigan said the bank used “robo signers” who didn’t verify amounts borrowed or determine which institutions had the right to foreclose.

In Sanchez v. LaSalle Bank N.A., a state appellate court reversed a trial court’s decision to throw out a borrower’s defenses to the foreclosure of his house. The trial court said the defenses raised by Washington L. Sanchez lacked specificity and support. The appellate court disagreed and sent the case back to the lower court for further legal proceedings. According to the court clerk’s office, this case was closed on October 8. The law firm handling the case did not return calls by press time.

Deutsche Bank National Trust Company, Trustee, v. Paul Bialobrzeski deals with the question of standing — a question showing up more and more in foreclosure litigation.

Paul Bialobrzeski argued on appeal that Deutsche Bank did not have the right to sue because the mortgage was not assigned to it until sometime after the action was commenced. But the case doesn’t provide much of an answer as the court simply found that the trial court failed to make a determination as to when the bank came into possession of the note and sent it back for further legal proceedings.

A Michigan homeowner will get another chance to file his complaint in his quest to save his house. In Flint v. JPMorgan Chase Bank, a federal district court said that, even though Chase said it determined that the property was abandoned and sent notices to the property owner, the mere fact that the property owner claimed that he did not receive the notices was enough to allow him to file an amended complaint and to defeat the lender’s motion to dismiss the lawsuit.

The Mortgage Electronic Registration Systems is seeing its share of litigation.

In Mtge. Electronic Registration Sys., Inc. v. Vascik, an Ohio appeals court reversed a judgment of the Lucas County Court of C. in a foreclosure. The appellate court sent the case back to the trial court for further legal proceedings on the issue of whether Toledo, Ohio, Sherry Vascik homeowner received notice of the default and an opportunity to cure it.

Vascik had questioned MERS transfer and assignment of the mortgage to Household during the foreclosure. The appellate court, relying in part on the intent of the participants, concluded — despite a lack of evidence that MERS physically delivered and indorsed the note to Household — that Household acquired the rights of a holder in due course of the note and, therefore, was a proper plaintiff. The assignment, however, was signed by the vice president of MERS, notarized and recorded with the county recorder.

MERS is fending off lawsuits in several states which claim lenders are wrongly foreclosing through MERS because it doesn’t own the loans. However, Minnesota has a law upholding MERS’ right to bring foreclosure actions while in Arizona, a state judge this year dismissed a class action by homeowners, ruling that the MERS system was not fraudulent.

Finally, Fannie Mae changed its policy in May, ruling that MERS should not be named as a plaintiff in any foreclosure action on a mortgage loan owned or securitized by Fannie. The loan’s servicer should foreclose, Fannie Mae said.

An appellate court recently set aside a foreclosure, finding that the situation was simply unfair to the borrowers. While, in another lawsuit, the lender is crying foul.

In Albice, et al. v. Premier Mortgage Services Of Washington Inc., Christa Albice and Karen and Bart Tecca appealed the trial court’s refusal to set aside a non-judicial deed of trust foreclosure sale of a 10-acre Washington state property they inherited from their parents.

The Teccas had borrowed $115,500 against the property. The loan was serviced through Option One Mortgage Corp.

The couple entered into a forbearance agreement after becoming delinquent on the loan. Although often late, the Teccas made every payment. However, according to the court’s opinion, Option One refused the last payment. The property was then purchased by an experienced foreclosure real estate investor for a fraction of its appraised value.

However, while the trial court refused to void the sale, the appellate court disagreed. Declaring that the sale price was inadequate and that several “unfair circumstances” existed in the situation, the appellate court said it had no hesitation, under legal precedent, to find that the circumstances more than warranted setting aside the foreclosure.

But, in an instance of “you snooze, you lose,” a bank has asked an appeals court to set aside a foreclosure as unfair. The curious case came about after the defaulting homeowner’s brother brought the property for a song because of the bank representative’s late arrival to the foreclosure auction.

In Simmons First National Bank v. Middleton, the only person to show up for the foreclosure sale of Brandon and Stephanie Middleton’s house and its accompanying 32.5 acres was Mrs. Middleton’s brother, who purchased the property for $27,500. The house was appraised at $145,000.

Simmons Bank filed a motion to set aside the sale. The bank said its representative was scheduled to attend the sale but was detained with a customer and arrived ten minutes late — after the property had already been sold. The bank said the price paid for the property was unfair.

The trial court confirmed the sale and so did the appellate court.

A Philadelphia, Pa. firm last month announced the formation of a new foreclosure defense legal support initiative to help delinquent borrowers escape foreclosure. Legal Vetting says it looks for inaccuracies within the lending and securitization process, according to a written statement provided by Blair Wright, the founder and CEO of the firm.

Legal Vetting claims that it tries to identify lender fraud and to find documents that support the borrower’s counterclaims. It reports that it has already investigated over $600 million in foreclosure cases this year.


Case Citations:

Beals v. Bank of America, et al N.A., United States District Court of New Jersey, Newark, Case No. 10-cv-05427, filed Oct. 19, 2010.

Dwayne R. and Melisa Davis v. Countrywide Home Loans Inc et al, U.S. District Court, Southern District of Indiana, No. 10-01303, filed October 19.

Brian Costigan v. Citigroup Inc. et al, United States District Court for the Southern District of New York, Case No. 1:2010cv08776, filed Nov. 19.

Washington L. Sanchez v. LaSalle Bank National Association, etc. District Court of Appeal of Florida, Third District, No. 3D09-2095. Opinion filed September 22, 2010.

Deutsche Bank National Trust Company, Trustee, v. Paul Bialobrzeski (AC 29884), Appellate Court of Connecticut, argued January 13, 2010, officially released September 21, 2010.

Flint v. JPMorgan Chase Bank, Case No. 10-12532, United States District Court, E.D. Michigan, Southern Division, filed Oct. 18, 2010.

Mtge. Electronic Registration Sys., Inc. v. Vascik, Court of Appeals of Ohio, Sixth District, No. L-09-1129, Decided: September 30, 2010.

Christa L. Albice, a married woman, and Bart A. Tecca and Karen L. Tecca, husband and wife v. Premier Mortgage Services Of Washington, Inc. et al, Court of Appeals of Washington, Division Two, No. 39265-8-II, , Filed: September 28, 2010.

Simmons First National Bank v. Middleton, Court of Appeals of Arkansas, Division II, 2010 Ark. App. 639, Opinion Delivered September 29, 2010.

Information on Beals, Sanchez and Vascik provided by Leagle Inc.

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