January 31, 2013

As most of you know, approximately 52 servicers and lenders, including GMAC Mortgage LLC, filed for Bankruptcy in mid-May of last year. As you may not know, however, GMAC obtained stay relief to pursue foreclosures, and recently, Warren Buffett’s Berkshire Hathaway bought the loans from the BK trustee lock, stock, and barrel “free and clear of liens” from the sellers. What that means is that, for all practical purposes, anyone with a foreclosure involving GMAC or any other the other 51 entities who sold their assets to Berkshire may find that Berkshire is the new foreclosure mill.

Not so fast, however. We have been advised that someone has been offered a significant principal reduction in connection with an unsolicited loan mod offer from MERS “for GMAC”. MERS in fact signed the proffered loan mod. Figure that: MERS, which does not extend credit, loan money, or collect money and is not a lender, is offering a loan mod on behalf of a bankrupt entity.

Separately, we are seeing more and more instances where courts are faced with a situation where there is no law on a given foreclosure issue out of that state’s appellate courts, leaving the trial courts with no guidance from law of that state. As anyone who has studied law knows, the law is dynamic and not static, and has to change and adapt with the times. In the world we live in, that means that there has to be someone willing to take an issue to the state appellate court which has no law on an issue in order to establish it, as we did in Oregon on the MERS issue, which we are also taking to the Montana Supreme Court this spring.

One of the facilitating vehicles in the law, which is common in each state, for making new law is case law which permits a state with no law on an issue to look to what is called the “law of other jurisdictions” for guidance: that is, for example, State A, which has no law on a given issue, can look to case law from States B, C, D, etc. which have case law on the issue to see how it has been analyzed. Ohio did this with New York decisions on foreclosure issues as early as 2008, and the trend has been followed ever since.

Attorneys for the banks like to take the position, when there is no state law on an issue in a state where a case is pending, that “Judge, there is no law on this in our state, so the homeowner’s request must be denied.” In reality, this is the perfect situation for showing the court that other states HAVE dealt with the issue, which can provide the Judge with guidance and so that he or she does not have to “re-invent the wheel.”

The problem, of course, is when the banks misinterpret or misconstrue what a case really says, like they have been doing nationally with the Livonia Properties case out of the U.S. District Court for the Eastern District of Michigan. Banks like to take the postion that the case stands for the proposition that a borrower cannot challenge an assignment. What the case actually says is that a borrower CAN challenge irregularities in the foreclosure process under Michigan’s non-judicial foreclosure statute including irregularities in the assignment process.

Per our prior posts, 2013 looks to be a year of “making law” in the foreclosure arena with the numerous appeals pending, and with more on the way. We will continue to advise of these decisions.

Jeff Barnes, Esq., www.ForeclosureDefenseNationwide.com