——–THE FOLLOWING ARTICLE IS NOT A LEGAL OPINION UPON WHICH YOU CAN RELY IN ANY INDIVIDUAL CASE. HIRE A LAWYER——–
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By William Hudson
Tonight Attorney James Randy Ackley returns to the Neil Garfield Show and will continue the conversation about adhesion contracts he touched on during the April 29, 2016. broadcast. During the show, Ackley discussed raising issues of unconscionability in regards to defending against foreclosure.
Unconscionable or oppressive loans are all too common. Take for example, a borrower with limited income who refinances his $1.5 million dollar loan, only to default after five monthly payments. A Notice of Default is subsequently recorded, followed by a Notice of Trustee’s Sale and finally a Trustee’s Deed Upon Sale is recorded just shy of one year after the foreclosure began.
In this example, the borrower (Plaintiff) could sue the bank to set aside the foreclosure due to allegations of “predatory lending” or “unconcionability”. The Plaintiff would argue that the loan was invalid because the mortgage broke ignored not only the fact that plaintiff’s income was inadequate to repay the loan, but also that the Plaintiff had limited English speaking abilities.
After extensive litigation and motion, followed by compelled discovery, the court (predictably) grants the Defendants’ Motion for Summary Judgment and finds that no triable issue of material fact exists.
The Plaintiff appeals and shockingly prevails. The Court of Appeals remands the case back to the trial court stating that there were triable issues of fact involving the unconscionability of the underlying predatory loan and there may be cause to set aside the trustee’s sale. Furthermore, the Court may rule that the failure to tender is not fatal to the Plaintiff’s request to set aside the trustee’s sale.
Cases based on unconscionability in adhesion contracts are not new, but are being raised more frequently to combat the bank’s tactics to engineer loan defaults. Loan modifications are also adhesion contracts and may be filed where the terms or actions of the bank are unconscionable and result in default (dual-tracking, large balloon payments at loan’s end, etc).
The Loan documents homeowner’s sign at closing are considered to be ‘contracts of adhesion’:
A standard contract drafted by one party (usually a business with stronger bargaining power) and signed by the weaker party (usually a consumer in need of goods or services), must adhere to the contract and therefore does not have the power to negotiate or modify the terms of the contract. Adhesion contracts are commonly used for matters involving insurance, leases, deeds, mortgages and other forms of consumer credit.
Nationwide, the Courts are beginning to scrutinize adhesion contracts and may void certain provisions because of the possibility of unequal bargaining power, unfairness, and unconscionability of the contract. Factoring into such decisions include:
- the nature of the assent
- the possibility of unfair surprise
- lack of notice
- unequal bargaining power
- substantive unfairness
Courts refer to the concept of the “doctrine of reasonable expectations” as a justification to invalidate parts or all of an adhesion contract, so the weaker party will not be held to adhere to contract terms that are beyond what the weaker party would have reasonably expected from the contract; even if what he or she reasonably expected was outside the strict letter of agreement.
Historically on issues of unconscionability, the Court can refuse to enforce a contract or a portion of a contract that is unconscionable as a matter of law. To determine if a loan contract may or may not be found to be unconscionable comes down to a two part test. (1) Is the loan contract one of adhesion? If yes, then, (2) is the contract unduly oppressive? Only when both of these factors are present, can a court find that a contract is unconscionable and, therefore, unenforceable.
Raising issues of unconscionability must be well supported and this claim doesn’t allow every borrower with a possible foreclosure problem to claim their loans are unenforceable because they were unconscionable. Rather, a claim for unconscionability requires that a homeowner follow a strict framework that includes multiple defensives that may include securitization fails, dual-tracking, fraud or some other defense.
Interestingly, investors in the empty trust are also making claims of unconscionability because the trusts do not contain the notes that were allegedly transferred and delivered. The investors who purchased the Mortgage-backed securities and derivatives are exploited by the unenforceability of the PSAs that were deliberately poorly written and therefore were contracts of adhesion that are unconscionable.
A contract can’t be enforced if it is grossly unfair- but aren’t mortgages where the borrower is not allowed to know who their lender is- unconscionable? Isn’t dual-tracking, or modifying a loan with unreasonable payments or an outrageous balloon payment at loan’s end unconscionable? Is it not unconscionable when a servicer, who has not paid a dime for the Note, is allowed to “pretend” to own the asset through deception not unconscionable? Is fabricating documents and forging signatures unconscionable? It may be time to expand the definition of what is unconscionable in contracts of adhesion.
Listen in Tonight at 6pm EST to learn more!
___About Attorney James Randy Ackley_______________________________
Over the past 25 years Randy has devoted his life to disaster relief and humanitarian aid having been employed at the American Red Cross and in charge of Presbyterian Global Disaster Assistance. Randy has been on the ground when Hurricanes like Andrew and Katrina struck, responded to tornados and floods, faced armed conflict in Kosovo, economic collapse in Bulgaria, the Indian Ocean tsunami in South Asia and earthquakes in Haiti and Japan- all while keeping his membership active in the Florida BAR.
When Randy says he can help save your home- he means just that. Randy has helped save homes that are in the paths of Tsunamis, volcanos, hurricanes and wars- and even in more mundane venues- but equally dangerous areas- like court rooms.
Randy has stated that home losses are the consequence of bad actions by banks that caused families to lose their homes. Randy Ackley believes that if the laws on the books are enforced, families can fight back and avoid losing their homes altogether. While many people may still perceive foreclosure as similar to that of our grandparents’ day, Randy points out that many people now realize that contemporary foreclosure is often the result of failings, or outright fraudulent behavior, of the lenders and the industry, and that these are very different circumstances from the foreclosures of the past.
If you are in Florida and are looking for help with your foreclosure, especially your foreclosure trial, call James “Randy” Ackley at 561-594-5671 for a FREE CONSULTATION.
Filed under: foreclosure