June 19, 2014

We have two separate cases involving Branch Banking & Trust (BB&T) in two separate states (Tennessee and Delaware) where matters which have occurred demonstrate that BB&T cannot be trusted. Jeff Barnes, Esq. represents the borrowers in both actions, assisted by local counsel Andrew Farmer, Esq. in the Tennessee case, and local counsel Stephen Brauerman, Esq. in the Delaware case.

In the Tennessee case, the borrowers had a series of construction loans which had been originated by a lender which was thereafter bought by BB&T. The series of loans involved several parcels of real estate being developed as part of a planned resort community. For a period of three years (from 2006 through 2009), BB&T continually amended the time for performance of payments under the loans on request of the borrowers without ever threatening default or foreclosure. The requests for extensions of time to make payments were the result of numerous factors incident to construction issues.

At some time in 2009, BB&T notified the borrowers that there was an error in the loan documents which had been prepared by the bank, and that as a result, BB&T did not have perfected lien rights against the properties. BB&T requested that the borrowers jointly participate in legal proceedings to reform the loan documents to correct the errors. The borrowers agreed to do so on the condition that the relationship between them and BB&T as to extending the time for performance (payment) on the loans, which BB&T had been doing with the borrowers for the prior 3 years, did not change. BB&T agreed to this.

The proceeding to reform the documents to correct the bank errors consummated. However, shortly thereafter, BB&T refused to grant any modifications to the time for the borrowers to make payments under the loans, and thereafter declared the borrowers in default and initiated foreclosure proceedings. It is thus more than evident that BB&T lied to the borrowers so that BB&T could (a) correct bank errors in the loan documents which errors resulted in BB&T having no lien rights so that (b) BB&T could then set up the borrowers for foreclosure. The borrowers have sued for fraud in the inducement/misrepresentation, breach of contract, unjust enrichment, and injunctive relief to enjoin any foreclosure activity.

The original foreclosure Complaint in the Delaware case had been filed by MERS. The homeowner challenged the Complaint on the grounds that MERS was not one of the specific parties identified in the applicable Delaware statute governing who is entitled to institute a foreclosure. That action was dismissed.

BB&T filed a subsequent action and prevailed on summary judgment, which the homeowner appealed. However, the form of the Memorandum Opinion did not conform to the proper form of a final order which Delaware law permits to be appealed. The homeowner’s counsel, Mr. Brauerman, and BB&T’s counsel thus negotiated a stipulation dismissing the appeal without prejudice to permit the trial court to enter the proper form of Order so that the summary judgment ruling could be appealed.

However, BB&T’s counsel did not include the homeowner’s counsel (Mr. Brauerman) on the form of Order submitted to the Court, only listing, as the borrower’s counsel, an attorney who had previously represented the borrower but who had left the law Firm representing the borrower long before. That attorney had not been involved in the negotiation of the stipulation and his name was not on the stipulation. At all times, BB&T’s attorney only dealt with Mr. Brauerman as to the agreement to dismiss the appeal without prejudice, which BB&T’s counsel knew was being done so that the trial court could enter an appealable form of Order, and was thus on notice that Mr. Brauerman fully intended to appeal the summary judgment decision (as he had already done as to the Memorandum decision which granted BB&T’s Motion for Summary Judgment).

As a result of BB&T’s counsel placing the name of an attorney who did not represent the borrower on the Order and not including Mr. Brauerman’s name on the Order, no notice of the proposed Order nor the Order itself were provided to Mr. Brauerman. The homeowner only learned of the existence of the (erroneous) Order when the property was posted for sale, which was after the appeal period had already expired.

The homeowner filed a Rule 60 Motion to vacate the Order. Incredibly, BB&T’s counsel took the position that the time for appeal had expired and thus the homeowner could not appeal, period. The court apparently saw through the unethical and prejudicial actions of BB&T’s counsel and granted the homeowner’s Rule 60 Motion, vacating the infirm Order.

BB&T’s conduct in these two cases is reprehensible and beyond atrocious: lying to homeowners in Tennessee so BB&T could try to steal valuable resort property, and trying to take advantage of a BB&T-manufactured misleading court filing situation in Delaware. The moral: Beware BB&T!

Jeff Barnes, Esq.,


June 6, 2014

We have been dealing lately with a flood of “substitution” related claims: where the foreclosing party is suddenly requesting that another party be “substituted” as the “new” foreclosing party which new party has allegedly inherited the interest in a mortgage loan through nothing more then an unverified, undocumented assertion of the attorney for the party seeking to foreclose. Such “substitutions” beget numerous issues which affect defenses, discovery, readiness for trial, and the progress of a foreclosure. Three recent cases from three different states demonstrate the numerous problems with these claimed “substitutions.”

As those of you who follow this website are aware, Colorado foreclosures begin with a “Rule 120” proceeding where the party seeking to foreclose files a Motion for an Order Authorizing Sale (“OAS”). The standard for this probable cause proceeding is low, but there is case law from the Colorado Supreme Court which permits the assertion of “real party in interest” defenses at a 120 proceeding. The Judge presiding over the 120 proceeding must take these defenses into account if timely and properly raised.

Recently, a situation came up where in a case where the foreclosing party sought to “substitute” the 120 movant (U.S. Bank National Association as trustee for a securitized mortgage loan trust) with Citibank, N.A. based on a claimed “transfer” of the Note and Deed of Trust (DOT) to Citibank. However, no Affidavit was filed to support the claimed transfer; no documentation was filed evidencing what was transferred, when the alleged transfer occurred, or by what means it took place; and no attorney consenting to the transfer on behalf of Citibank filed any papers in the case. The homeowner, who is represented by Mr. Barnes, challenged the transfer.

Colorado case law requires that any challenged transfer be the subject of an evidentiary hearing, and that the court must make detailed findings of fact and conclusions of law as to the alleged transfer sufficient to permit review by a court of appeals. The Judge in the case granted with substitution without an evidentiary hearing despite being presented with the binding law at the hearing, and thus the matter is now on appeal.

In Florida, JPMorgan Chase has recently sought to substitute a private trust, through “MCM Capital Partners LLC, its trustee”, as the foreclosing Plaintiff in two separate cases where the homeowner is represented by Mr. Barnes. As with the Colorado case, no Affidavit was filed evidencing the alleged transfer; no documentation was filed demonstrating what was transferred, when the alleged transfer occurred, and by what means it occurred; and no evidence of any kind has been presented to prove the alleged transfer. However, the case is set for trial, which presents several problems.

First, the homeowner is now being forced to trial with a last-minute change of the party seeking foreclosure through an undocumented transfer. Due process requires that the homeowner be permitted to amend his pleadings to include defenses as to this alleged and undocumented transfer, and to conduct discovery on the alleged transfer as to what was transferred, when it allegedly occurred, how it occurred, the source of authority for the transfer, and what documents evidence the transfer. Was it a bogus MERS Assignment? Was it an impermissible transfer to a securitization trust? Was the transfer in violation of law?. The homeowner has filed a Motion to amend his defenses.

Second, the case is also no longer in a posture to be tried, as the foreclosing party is amending its pleading as to who is seeking to foreclose and by a different theory [that being now a multiple transfer of interests in the Note and Mortgage to yet another downline party]. Forcing the case to trial would result in an illegal “trial by surprise” and a denial of basic fundamental rights.

In Tennessee, a homeowner represented by Mr. Barnes and local Tennessee counsel John Higgins, Esq. filed an action for Declaratory Relief to determine the rights in a Note and DOT which was originated by one party but sought to be enforced by another. In Tennessee (as in all states), one must name, in a Declaratory Relief action, all parties who may claim an interest in the matters sought to be declared, or who may have an interest in the Declaratory Judgment being sought, or who may be affected thereby.

The originating bank filed a Motion to Dismiss claiming, again in unsworn fashion and without any documentation being filed, that it no longer had any interest in either the Note or the DOT as it had transferred same. The Tennessee Court, at a hearing today, denied the originating bank’s Motion to Dismiss because (a) the Complaint stated a cause of action for declaratory relief, and (b) there was no admissible evidence of the claimed transfer which may have otherwise entitled the originating bank to be dismissed from the action.

The bottom line of all of this is that requests to substitute the foreclosing party should never be taken lightly, and strict proof, by admissible evidence, must be demanded as to any claimed transfer. Never take as gospel or otherwise a naked assertion by a foreclosing party’s attorney that the claimed substitution is “simple”.

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Jeff Barnes, Esq.,


June 4, 2014

FDN has today added its 45th law Firm to its network. Shikha Parikh, Esq. Managing Attorney of Paradigm Law, P.L.C. in Fairfax, Virginia has joined the network for foreclosure defense cases in Maryland and Virginia. She is licensed in both Virginia and Maryland state and Federal courts. We welcome Ms. Parikh to the team.

In addition, existing network attorney Elizabeth Lemoine, Esq. of Makler, Lemoine & Goldberg, P.C. of Portland, Oregon and Jeff Barnes, Esq. are litigating issues related to reverse mortgages, which are governed by the HECM statute (12 USC sec. 1715z-20) and the implementing regulations (24 CFR part 206). Reverse mortgage lenders are taking the position that “non-borrowing” spouses of reverse mortgage borrowers can be foreclosed upon after the death of the “borrowing” spouse, thus literally kicking the surviving spouse into the street. The litigation centers around the regulations which provide that the term “homeowner” under the Statute includes the spouse of the homeowner, and that the loan is not due and payable until the death of both the borrower and the spouse, the same of the home, or the occurrence of other events specified in the regulations.

The foreclosing party, Reverse Mortgage Solutions, Inc., has taken the position that it can foreclose on the widow of the homeowner borrower notwithstanding the regulations and a Federal court’s finding that the Senate Report of the Committee on Banking, Housing, and Urban affairs stated that the Statute intended to defer any repayment obligation until the death of the homeowner and the homeowner’s spouse.

The law is unsettled on the remedy for statutory violations. AARP Foundation Litigation Group has filed an action in Federal Court in the District of Columbia against HUD on behalf of several “non-borrowing” surviving spouses, and the work which Mrs. Lemoine and Mr. Barnes are doing may, like their prior work in the MERS area which wound up establishing the law as to MERS in Oregon, shape the law for homeowners and spouses who have a reverse mortgage.

Jeff Barnes, Esq.,