Robo-Signing Allegations Must Be Timely Raised in Foreclosure Case or They’re Waived

Robo-signingLast summer, in GMAC v. Coleff, the Eight District Court of Appeals decided another case involving robo-signing claims made by the borrower. Apart from providing a well written summary of the necessary elements of a Rule 60(B) motion, the decision reaffirms the proposition that claims suggesting that a lender relied on fabricated evidence to establish standing must be raised as a defense to the underlying foreclosure, and not in a Rule 60(B)(3) motion. Continue reading

Case Update: Foreclosure Plaintiff Failed to Satisfy Conditions Precedent to Acceleration

Foreclosure NoticeThe Sixth District of the Ohio Court of Appeals held that although the mortgagee in a foreclosure action had established that it was the holder of the note, it failed to offer any evidence from which the court could find that it had satisfied all conditions precedent to acceleration of the balance due, and thus, summary judgment was erroneously entered. Judgment reversed.

The Sixth District did, however, accept the legal proposition that “possession of [the] original note by [the] servicing agent, not plaintiff-bank, did not deprive the bank of status as holder.”

U.S. Bank, N.A. v. Zokle, 2014-Ohio-636 (6th Dist. Ct. App.)

 

Pre-assignment foreclosure filing may violate the Fair Debt Collection Practices Act

The Sixth Circuit Court of Appeals, in Wallace v. Washington Mutual, recently announced that filing a foreclosure complaint, before the note and mortgage have been transferred and assigned to the Plaintiff, may violate the Fair Debt Collection Practices Act. (the “FDCPA”). More importantly, the court noted that the FDCPA may be violated even if state law permits the Plaintiff to cure a real-party in interest defect after the complaint is filed. Finally, although the defendant in this case was the law firm that represented the foreclosure plaintiff, depending on the circumstances, a servicer may be liable under the same theory that was announced by this court.Sometime in 1999, Betty Wallace purchased a home that she financed with a mortgage loan from Norwest Mortgage. Norwest later merged with Wells Fargo who, in March or April of 2008, sent Ms. Wallace notice of default.On July 22, 2008, Washington Mutual (“WAMU”) filed a complaint against Ms. Wallace. The complaint claimed that she was in default under the Norwest Note and Mortgage and that WAMU was the “holder of the note and the mortgage.” However, for the purposes of Ms. Wallace’s appeal, at the time the complaint was filed, WAMU was not the holder of the note or the mortgage. Ultimately, Ms. Wallaces home was foreclosed.

In July 2009, Ms. Wallace sued WAMU, Wells Fargo, and the foreclosure firm, for violations of the FDCPA. Specifically, Ms. Wallace alleged that the foreclosure firm made false and deceptive representations in connection with the collection of a debt because at the time the foreclosure complaint was filed WAMU was not the holder of the note or the mortgage. The district court dismissed Ms. Wallace’s complaint because it concluded that “failure to record an assignment of mortgage before filing a foreclosure action is not a deceptive practice under the [FDCPA]. Ms. Wallace appealed.

The Sixth Circuit Court of Appeals reversed the judgment of the district court. The Sixth Circuit found that a law firm makes a “false, deceptive and misleading representation” when it files a complaint that falsely alleges that the plaintiff is the owner and holder of the note and mortgage. The court, however, did not stop there.

The court determined that a violation can occur even if, as a matter of state procedural law, a lender can cure a real-party in interest defect by making the necessary transfers and assignments at any time before judgment. Stated another way, if the complaint contains factually inaccurate statements that tend to “mislead or confuse,” for the purposes of the FDCPA the lender’s ability to fix the problem after the fact is immaterial. In essence, this decision has the potential to render the “can I file before the paperwork is in order” debate that is raging before the Ohio Supreme Court moot and irrelevant.

Finally, it is noteworthy to point out that while this case involved a suit brought against the law firm, the prohibition against false and misleading representations applies to anyone that is considered to be a “debt collector” under the FDCPA. In turn, the definition of a “debt collector” includes a servicer or assignee if the loan was in default at the time of the transfer. Accordingly if the plaintiff, or the servicer, are considered to be “debt collectors” they may be vicariously liable for any false or misleading statements in the complaint.

Banks Lose Pivotal Massachusetts Foreclosure Case

( Thom Weidlich – Bloomberg.com) — U.S. Bancorp and Wells Fargo & Co., in a ruling that drove down bank stocks, lost a foreclosure case before Massachusetts’s highest court that will guide lower courts in that state and may influence others in bank disputes involving state real-estate law.

The state Supreme Judicial Court yesterday upheld a judge’s decision saying two foreclosures were invalid because the banks didn’t prove they owned the mortgages, which he said were transferred into two mortgage-backed trusts without the recipients’ being named.

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MERS, The Foreclosure Documentation Mess and The Elephant in the Room!

(Peter Giardini – Biggerpockets.com) — Unless you are Rip Van Winkle, it’s hard to not know about the latest foreclosure mess hovering over the housing market.  This mess has to do with the manner in which lenders handled and processed the paperwork needed to proceed through various courts to obtain a foreclosure. 

As you know, most lenders were taking drastic short cuts in the review process and they got caught!  And in typical fashion they all scrambled to fix the issue, review the paperwork and declare they won’t let this happen again.

So… I guess we can all move along as there is nothing more to see regarding this latest mess.  Right?

Well… perhaps this mess is fixed… if you are willing to overlook the ELEPHANT in the room.

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Ohio GMAC Foreclosure Case May Set Anti-Wall Street Precedent

(Bloomberg.com) — When James Renfro had to stop making payments on his two-story fixer-upper in Parma, Ohio, a suburb of Cleveland, he triggered events that were supposed to result in the forced sale of his home.

That Nov. 15 auction has been canceled because of defects in documents submitted by his loan servicer, Ally Financial Inc.’s GMAC Mortgage unit. Two affidavits about Renfro’s home were signed by Jeffrey Stephan, a GMAC employee who said in sworn depositions in Florida and Maine that he hadn’t read thousands of affidavits he’d signed.

Renfro’s case has created a showdown between GMAC and Ohio’s Attorney General Richard Cordray. Cordray has asked Cuyahoga County Court of Common Pleas Judge Nancy Russo not to let GMAC simply submit new documents to cure defects without consequences. He’s taken the same stand against Wells Fargo & Co., which has said it found defects in 55,000 foreclosures.

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After Foreclosure, a Focus on Title Insurance

(New York Times) — When home buyers and people refinancing their mortgages first see the itemized estimate for all the closing costs and fees, the largest number is often for title insurance.

This moment is often profoundly irritating, mysterious and rushed — just like so much of the home-buying process. Lenders require buyers to have title insurance, but buyers are often not sure who picked the insurance company. And the buyers are so exhausted by the gantlet they’ve already run that they’re not interested in spending any time learning more about the policies and shopping around for a better one.

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Niche Lawyers Spawn Foreclosure Fracas

(Wall Street Journal) — The paperwork mess muddying home foreclosures erupted last month. But the legal strategy behind it traces to a lawyer’s gambit in 2006 that has helped keep one couple in their home six years beyond their last mortgage payment.  Lillian and Robert Jackson stopped paying on their home in Jacksonville, Fla., in 2004 when business dropped off at their cleaning company. Eviction might have seemed inevitable when they faced a foreclosure hearing two years later.

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