August 30, 2011

At least two states have apparently realized that the nonjudicial foreclosure process is so infected with fraud, illegal documents, and abuse that they are now leaning toward eliminating nonjudicial foreclosures altogether.

In Hawai’i, Act 48 has all but halted nonjudicial foreclosures, which have come under serious challenges involving lack of standing, lack of chain of title, lack of the real party in interest foreclosing, and irregularities in nonjudicial foreclosure documents. Although the Act does not affect nonjudicial foreclosures which were initiated prior to the Act’s effective date, all foreclosures after that date must be brought judicially.

Hawai’i previously permitted a foreclosing party to elect to proceed in either a judicial or nonjudicial manner. With that choice having been eliminated, homeowners may now get a fair opportunity to challenge a foreclosure in court without being put to the tremendous expense and risk of having to file an action to first seek a Temporary Restraining Order and thereafter a Temporary Injunction or be forced to post a crippling bond just to defend their rights and stop their home from being taken by a party which may not have the legal right to do so in the first place.

In Oregon, a press release today revealed that “hundreds of [nonjudicial foreclosure] files are being reviewed”, and that “thousands” of these foreclosures could ultimately wind up before a Judge. This is the result of various Judges blocking nonjudicial foreclosures, ruling that the foreclosing parties had failed to follow legal requirements for instituting a nonjudicial foreclosure.

This is the right path. The entire nonjudicial foreclosure process reeks of denial of due process and operates on a “guilty until proven innocent” mantra: that once the homeowner is claimed to be “in default” that the foreclosing party gets to take the house without having to prove that (a) the claimed debt is valid and (b) that the foreclosing party has the legal right to foreclose, and may do so unless the homeowner files a lawsuit challenging the alleged default and right to foreclose. Notices are simply filed in the public records (which may and oftentimes are not even complete or accurate), and are allegedly sent to the homeowner by mail without any proof of receipt. The abuses from this practice are more than obvious.

Foreclosure is a drastic remedy. It seeks to take a person’s home. In order to do that, the homeowner must be provided with due process: proof of formal notice (which is by service of process in a judicial foreclosure, which has to be proven in court), and the opportunity to defend without having to post a bond to stop a sale of the home pending the result of the litigation. The foreclosing party must prove, by admissible evidence in court, that they have the legal right to foreclose; there is no “presumption” based on documents being filed in the public records.

Judicial foreclosures also do not have a “bond” requirement to stop a sale of the home pending the termination of the litigation, and rightfully so. The entire “bond” process in nonjudicial foreclosures rewards the foreclosing party, who may not have the legal authority to foreclose, and punishes the homeowner who is forced to put up a monetary bond where the claim is disputed. The foreclosing party should only be entitled to money or property in any form if they prove their case, which is properly done in court with the burden being on the foreclosing party which is seeking the money and the property.   

Bravo to Hawai’i and Oregon. We can only hope that the remaining 22 states which currently have nonjudicial foreclosure will soon follow suit.

Jeff Barnes, Esq., www.ForeclosureDefenseNationwide.com