The false pronouncements that the mortgage crisis is over have led many attorneys and homeowners to give up on winning cases.
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For years the banks having been gradually ramping up a PR campaign that carries the message: the foreclosure crisis is over. “Institutions” like Black Knight (formerly known as the infamous Lender Processing Services —LPS) have been issuing statements that foreclosures are essentially over. The newest round of these false pronouncements is that foreclosures have sunk to a 9 year low.
The truth is more nuanced and “counter-intuitive” as Reynaldo Reyes, VP of Deutsch Bank “asset management” said many years ago. What the banks have done (using LPS/Black Knight) is play Wackamo with the states and counties. They ramp up foreclosures to an all time high and then switch to another county. Then the report is that the county with the all time high is now declining — because the banks have moved on to another county or state.
After the decline, they come back again and ramp it back up, sometimes stopping short of another all time high.
The facts are that there have been some 9 million foreclosures since the mortgage crisis began and there will be at least another 6 million foreclosures under cover of what is being reported as a crisis that is over. There are hundreds of thousands of foreclosures that were put on hold in cases where the homeowner put up a fight. Some of them are over ten years old — and courts, rather than dismissing them for lack of prosecution or adequate prosecution have (a) let them continue and (b) blamed the homeowner for the delays. Those cases are also coming to a head now and the banks are starting to show losses in court that were never reported before because they were only pursuing cases that were uncontested.
The truth is that the banks were playing the odds. The number of homeowners who put up a fight is only around 4-6%. By putting the contested foreclosures on hold, the banks were able to get millions of fraudulent foreclosures completed at a rate of 100%. Out of the contested ones, they still have the advantage much there record of success is much lower and getting lower every day as courts wake up to the fact that the banks are not being truthful in court nor with borrowers.
The soft underbelly is that the banks were not truthful with investors, from whom they essentially stole the money that was advanced for the purchase of mortgage backed securities that were issued by empty trusts.
PRACTICE HINT: There are three basic classifications of foreclosures into which every foreclosure falls.
- Foreclosures without “issues.”
- Foreclosures with factual issues
- Foreclosures with procedural issues.
The first two can be won and should be won 100% of the time (speaking of loans in which multiple “transfers” and claims of securitization were made). The third one can be more challenging because either the pro se litigant or an attorney made admissions or already missed deadlines or otherwise failed to raise and press appropriate defenses.
The result of winning is an involuntary or voluntary dismissal when you win, but then you have the statute of limitations to deal with when they come back and sue again on more fraudulent paperwork. Attorney fees are generally awarded as long as you included the demand in the filings for the homeowner.
By foreclosures without issues I mean an apparent “default:” that the homeowner did stop making payments before the delinquency or default letter. These cases can only be won by good trial practice: timely proper objections, watching what evidence comes in and well-planned cross examination (which means good trial preparation). If you do the work your chances of winning at trial level or appeal, if necessary are very good.
By foreclosures with factual issues I mean situations in which the “servicer” created the illusion of a default by negligently or intentionally posting payments to the wrong ledger. This includes lump sum payments for reinstatement, insurance and other matters. The “borrower” never defaulted even if the note and mortgage were valid and even if the assignments were valid. The result is dismissal usually without prejudice. But if you also show that they were lying about the transfer to the trust or other foreclosing party, the case could be dismissed with prejudice and even with sanctions.
By foreclosures with procedural issues I mean situations in which procedural errors are present that require leniency of the court to correct them in order to properly defend. This usually occurs when pro se (aka pro per) litigants attempt to represent themselves because they think they have found some magic bullet. 95% of such cases are lost thus skewing the overall percentage of wins and losses for homeowners who put up a fight.
No case falls 100% into any specific category but each case can be generally categorized using the above analysis.
In all cases the homeowners’ attorney should make every effort to destroy the case asserted by the foreclosing party through vigorous and timely objections and brutal cross examination. Depending upon the rulings on objections and motions to strike testimony or documentary evidence, the defense should rest if there are no factual issues to present. This is especially true in cases without issues. If you don’t have the defense of payment or that the demand for reinstatement was inaccurate, there is nothing to present by the homeowner except for attempts at prejudicial comments about the lawyers and the servicers etc.
In a recent (August, 2016) case I had “without issues”, Patrick Giunta and I surprised the opposition by resting at the conclusion of the bank’s case. In nonjudicial states this is not so easy to do procedurally although it is possible in isolated instances. By resting at the conclusion of the bank’s case in a judicial foreclosure, the judge is forced to consider whether the evidence on the record supports a judgment for the plaintiff. Some judges will rule for the bank by the seat of their pants.
But by using objections vigorously, we had preserved multiple issues on appeal — namely we had excluded many pieces of evidence that were vital to the Plaintiff’s case. We were fortunate to have a judge that was serious about his job of being a judge. Like a jury would do, the judge took the case, the filings and the evidence into Chambers and read every page. He concluded that there were fatally defective elements and missing elements in the Plaintiff’s case and announced judgment for the homeowner.
In the final analysis the issue is always tacitly or explicitly legal and procedural standing. And one thing to keep in mind is that trial judges are not entirely persuaded by legal argument. But they ARE persuaded by facts admitted into evidence and facts excluded from evidence.
On a final note, I want remind practitioners that the admission of an objectionable document into evidence does two things: (1) it raises an issue for appeal and (2) it opens the door to challenge the probity of the evidence admitted. Once a document is admitted into evidence, it is in — in its entirety and for all purposes and for all parties.
For example when the PSA is admitted into evidence, make sure you have examined it and raise issues on cross examination as to whether it was signed, whether the exhibits were complete etc. Of course the main exhibit is the Mortgage Loan Schedule (MLS) which never contained real loans even where the PSA was complete and in many cases has no actual MLS exhibit, thus defeating the assertion that the Trust ever acquired any loan much less the loan of your client.