by Brian Mahany
Some people reading this post are thinking we have gone to the dark side. Don’t worry – nothing could be farther from the truth. As lawyers, we fight hard for our foreclosure clients but have to be realistic. Anyone reading mortgage blogs and some of the Occupy Homes materials would think that the banks lose every case. They don’t.
While its true that homeowners are beginning to win more battles against Wall Street and big banks, the banks still win many cases. Sometimes it is because homeowners are too scared or too broke to fight. Other times, courts simply side with the lender. Like the California Court of Appeals.
A California appellate panel recently dismissed a suit with prejudice brought by a borrower against Deutsche Bank. “With prejudice” means the homeowner can’t sue again.
The court ruled that a beneficiary under a deed of trust need not produce the original note and a borrower can’t avoid foreclosure based on a mere technicality absent showing of actual prejudice. Both points are very important.
First, many banks are unable to locate the original note. Some courts have dismissed foreclosures based on a missing note while many have not. Only recently have these cases made it to the appellate level. That is significant because a decision of an appeals court is generally binding on trial courts within the state. That a California appeals court decided a case in favor of a lender on a missing note theory is not good news for homeowners.
The facts of every case are different and laws vary greatly from state to state. One appellate loss is certainly not a reason to give up hope. Often, foreclosure cases are filled with multiple bank errors. It is possible to lose on one issue but still have the foreclosure tossed on other grounds.
The second issue is more problematic. Instead of relying on specific state statutes, the court said that as a general rule, borrowers must show actual prejudice – harm – in order to toss a foreclosure on technical grounds. We have seen numerous courts struggle with this very issue.
On one hand, there is a lender with a missing note, forged paperwork, deficient assignment or improperly notarized documents (and sometimes, all of the above). While that might sound like a “slam dunk” case, judges are often troubled by the fact that the homeowner has made no payments. In most judicial foreclosure states, foreclosure is an equitable remedy. That means no jury. The judge is charged with trying to do what is fair. For many judges, giving someone a “free house” isn’t fair.
While that sounds like much uncertainty for the homeowner, banks are scared too. Appellate court rulings carry much weight which is why lenders are often willing to settle IF the homeowner is represented by competent counsel. Banks don’t want to risk losing a major case.
The cases that are settled almost always carry a confidentiality provision. Why? Because the banks don’t want others to know that they have given in to homeowners that stand their ground.
Although we do not typically take foreclosure defense cases, we do sue banks. That is certainly another way to bring the bank to the bargaining table. Unlike foreclosures, damage claims against banks typically can go before a jury and in this current economic climate, banks have reason to be afraid of juries.
Ultimately, we believe there is so much uncertainty in the marketplace that Congress or the U.S. Supreme Court will ultimately step in and bail out the banks. For now, however, it is still possible to fight Wall Street and win.
If you have suffered at the hands of an unscrupulous lender and were mistreated, suffered from an improper foreclosure or were denied a mortgage modification, give us a call. Our law firm sues lenders large and small (we currently have the largest federal false claims act case against a lender – the $2.4 billion case against Allied Home Mortgage.)
Mahany & Ertl – Giving Homeowners A Voice. Offices in Milwaukee, Wisconsin; Detroit, Michigan; Portland, Maine & Minneapolis, Minnesota. Services available in many jurisdictions.