WE’RE HEARING about foreclosure-related court decisions that coincidentally point out it may depend on where you live as to the legal outcome you may end up with. Both cases came down within the last three weeks. One out of Kings County (Brooklyn), N.Y., and one out of the Supreme Court of the great state of Georgia. Both cases involved large national associations.
Both cases involved consumers who were in default of their mortgage loan agreement. The New York case was another classic example of how long a judicial foreclosure can drag through the system in addition to its interesting holding. The Georgia case had been in Federal Court and was sent to the Supreme Court of Georgia to interpret its law on nonjudicial foreclosures.
The Georgia case was a creative attempt to compensate someone who had their home foreclosed on by a lender who held the mortgage but not the promissory note. The case was also a nonjudicial foreclosure which we all know moves relatively quickly through the system. The lender ended up on the winning side in this case. Meaning the Georgia Supreme Court held that current law did not require a party seeking to exercise a power of sale in a deed to secure a debt to also hold the promissory note evidencing the underlying debt.
New York cases have held the opposite of this. Namely if you want to foreclose the mortgage you need to also own the note. Illinois has recently changed its court rules so that in addition to alleging you own the note you also need to include a copy of the note in your pleadings. I wonder if the former homeowners in Georgia will now get sued by the entity that holds the note for nonpayment of the debt?
Meanwhile back in New York a lender got beat up by a consumer in a foreclosure case. In Wells Fargo Bank NA v. Ruggiero, the trial court imposed a number of unpleasant financial results on the lender. This foreclosure case started in the system in 2007. It involved a default on a residential refi ARM loan of $440,000 that had an initial interest rate as of 2006 of 8.9%.
This decision is very lengthy as to the facts relating to an attempt to settle the case and defendant’s request that the lender approve a HAMP modification of the loan. Payments were made and not made, documents were submitted to the lender for review. More documents were requested by the lender which may or may not have been submitted, etc., etc. There were at least 14 settlement conferences where it looks like not a lot got settled.
The homeowners alleged that the lender was not acting in good faith and the court agreed. The court used the words to address the lender’s conduct as “wanton and flagrant.” When these words are used by the court and they are directed at you the next words you hear will not be pleasant. Ultimately the court assessed the lender “costs” in the action.
These costs include forfeiting all of the lender’s attorney’s fees incurred so far in the action, the forfeiting of all interest accrued on the loan since Nov. 12, 2009 through May 29, 2013 and the pleasure of paying for the borrower’s attorney’s fees. The parties get to go back to court for its review of the computation of these sums. Also the borrowers will get to submit another application to have their loan modified. This time, however, any missing documents need to be asked for in 10 days and a final review of the loan modification must be made by the lender within 30 days. My guess is the loan modification will be approved this time.
Based in Chelsea, Mich., John McDermott is a real estate and elder care attorney who represents both consumers and businesses. He can be emailed at email@example.com.