September 19, 2013

The following is essentially an “op-ed” piece, the matters being a product of what I have seen occurring around this country in the past 5+ years since I became a full-time foreclosure defense litigator. To my knowledge, no one has sought to advance this position in court yet, but it may be that no one else has seen it as I do.

Foreclosures are “civil” actions, meaning, in court parlance, that they are not in the criminal, family, or probate divisions of the court. In the old days (pre-MERS, pre-securitization, pre-robo-signers, etc.), all foreclosure cases came into the civil court (including what are called, in some states, “Chancery” divisions) and were governed by the same Rules of Civil Procedure and pretrial procedures as other civil cases. This applied whether the case was filed as a judicial action by the foreclosing party in a judicial state, or whether filed by a homeowner challenging a foreclosure in a non-judicial state. Parties involved in foreclosure cases were treated the same and given the same rights as any other “civil” litigant involved in non-foreclosure litigation and provided with the same litigation tools, including discovery and full hearings.

What has happened in several jurisdictions is that homeowners involved in foreclosure cases have become relegated to “special” foreclosure divisions, “special” rules of procedure, and “special” pretrial procedures which (a) rob the homeowner of the protections afforded to other civil litigants; (b) railroad a foreclosure case through the system at an accelerated rate of speed; (c) force early trials which hamstring discovery rights and permit the “banks” and servicers to avoid their discovery obligations; and (d) subject homeowner litigants in foreclosure cases to procedures which have been designed for no other purpose than to “clear the court dockets”.  What is without dispute is that the dockets are crowded solely as a result of the disaster created by the investment banks and servicers from the getgo.

The United States Constitution guarantees something called “equal protection”, and precludes something called “disparate treatment” being applied to a “suspect class”. This body of law arose primarily out of the civil rights movement, and there is a wealth of case law on these issues from the Federal courts. However, all of these infirmities are present in certain jurisdictions which have chosen drastic (and, I assert, unconstitutional) measures to cram and jam foreclosure actions through the system.

Homeowners involved in foreclosure litigation are within the general class of civil litigants. All civil litigants are guaranteed certain rights, including the right to have their case governed by the Rules of Civil Procedure and pretrial and trial procedures applicable to all other civil litigants. However, a “suspect class” has been created within the general class of civil litigants (those being homeowners in foreclosure cases), whose members are being subject to “disparate treatment”, meaning that they are being treated differently than other members of the general class of civil litigants with the results being unconstitutional as applied, notwithstanding that the “special” foreclosure procedures may not be unconstitutional on their face. The difference is well-established in the case law: a rule of law may pass muster as being “facially” constitutional, but is unconstitutional when it is applied. That is what is happening in several states with the “special” foreclosure procedures.

In order to stop this wrongful torrent, someone has to be willing to file an action challenging the constitutionality of the “special” foreclosure procedures as applied, using the equal protection principles recognized in the law. The “bank lobby” has had its effect on certain state governments, which have caused the enactment of the “special” procedures for the sole purpose of making it easier for the “banks” and servicers to line their pockets with money and real property by causing the courts to deny homeowners the same rights as other civil litigants, which is illegal as is “robo-signing”, backdating Assignments, forging notary information, and creating fabricated promissory notes through “photoshop”, etc.

A government will get away with something illegal until someone calls them to the carpet on it. A perfect example of this occurred several years ago in Florida, where a new school was under construction and where the DOT had already, before the school was completed, placed the “School Zone” signs outside of the incomplete school which reduced the speed limit to 15 mph during certain hours of the day. Although the school was incomplete and unoccupied, the police wrote hundreds of tickets for “speeding through a school zone” until about 100 people showed up in court on the same day from tickets written by the same police officers and advised the Court of the facts. The Judge threw out all of the tickets at the same time and admonished the officers. Needless to say, the ticket writing stopped that day.

Jeff Barnes, Esq., www.ForeclosureDefenseNationwide.com

September 16, 2013

In what is believed to be the first claim of its kind, an Okaloosa County, Florida Circuit Court has granted a homeowner’s Motion to file a Third-Party Complaint against the County in a foreclosure action brought by Citimortgage, Inc. The homeowner was current on his mortgage until the County breached a long-term written contract with the homeowner’s company which contract provided the primary source of income for the homeowner to pay his mortgage. The default on the mortgage was occasioned solely as a result of the County’s breach of the contract, which to date has resulted in a loss of over $400,000.00 in damages to the homeowner. Citimortgage opposed the Motion on the grounds of “delay”, etc.

However, Florida law interpreting Florida Rules of Civil Procedure’s third-party practice rule expressly provides that a defendant (here, the homeowner) is not to be “locked in” by the Plaintiff’s (here, Citimortgage’s) theory of liability, and the defendant is permitted to assert his own version of the facts demonstrating that he is only passively liable to the plaintiff due to the wrongful actions of the third-party defendant. There is no restriction in Florida case law on the type of case in which such a claim can be brought, and no case law or rule which precludes such an action in a foreclosure proceeding. However, there must be active wrongdoing on the part of the third-party defendant. Thus, a situation involving a corporate layoff or reduction in force or elimination of a job position would probably not support this type of claim.

The homeowner is represented by Jeff Barnes, Esq., who filed and argued the Motion in open court in Okaloosa County last Friday, September 13, 2013.

Jeff Barnes, Esq., www.ForeclosureDefenseNationwide.com

September 11, 2013

We have been waiting on several rulings from recent hearings around the US, many of which appear to have been delayed by the Labor Day holiday and the end of the summer season. Now that these events have passed, the rulings are coming in.

A Washington County, Pennsylvania Judge has denied a Motion for Summary Judgment filed by USBank as the claimed “trustee” of a Bear Stearns securitization. The case involves a claimed MERS assignment to USBank. The homeowner is represented by Jeff Barnes, Esq. and local Washington County, PA counsel Stephen Taczak, Esq. Mr. Barnes provided the legal arguments to oppose the motion for summary judgment.

An audit obtained by the homeowner was performed by a former Director of Loan Administration for Encore Credit Corporation and New Century Mortgage. The auditor conducted an exhaustive investigation and concluded that the MERS assignment was “a valueless and faulty attempt by MERS to assign the mortgage to USBank as Trustee” in part because the claimed assignment was in excess of four years after the Closing Date of the Trust.

This conclusion is bolstered by the recent Glaski case from the California Fifth Appellate District. Pennsylvania does not currently have any appellate law on the alleged authority of MERS to assign a Note to which it was not a party to a securitized mortgage loan trust, or any authority of MERS to assign a loan which is in default to a trust. As such, the Pennsylvania court may, as in most states, look to the law of other jurisdictions which have dealt with the issues for guidance.

Summary Judgment was also denied by the Circuit Court for Santa Rosa County, Florida in a case filed by Wells Fargo Bank as the claimed “trustee” of a 2007 securitization where the original lender, New Century, had been bankrupt years before the case was filed. Wells Fargo presented no evidence of any authority from the Bankruptcy Court that MERS, as the claimed “nominee” of the bankrupt New Century, had authority to assign anything mid-July of 2010 given the Bankruptcy of New Century in 2007. The homeowner is represented by Jeff Barnes, Esq. who briefed the opposition to the summary judgment motion and personally argued the matter in the Santa Rosa County Circuit Court.

This ruling is consistent with other cases where Mr. Barnes represents the homeowner and in which there is an alleged MERS assignment years after the New Century Bankruptcy, including a case in Hawaii where Mr. Barnes caused summary judgment to be denied on the very issues in the Santa Rosa County, Florida case.

Jeff Barnes, Esq., www.ForeclosureDefenseNationwide.com

A Walterboro (Colleton County) South Carolina Judge has ordered the production of numerous documents requested by the homeowner to which the foreclosing plaintiff (SunTrust) objected. The homeowner is represented by Jeff Barnes, Esq. and local South Carolina counsel William H. Sloan, Esq. Mr. Barnes argued the matter in Walterboro in connection with the homeowner’s Motion to Compel documentary discovery to which SunTrust objected.

The Court issued a narrative Order which compels the production of all documents as to the chain of title and money transfer between the original lender and SunTrust as to and for the life of the loan; documents showing the servicing relationship between Freddie Mac and SunTrust; documents showing the authority of MERS to act on behalf of Freddie Mac and SunTrust; documents regarding SunTrust’s application of funds from TARP or any other program regarding payments made towards and in connection with the claimed default on the loan; and documents demonstrating the authority of SunTrust to modify the loan or otherwise complete foreclosure intervention as required by South Carolina Administrative Order.

The Order explained its reasoning for compelling the particular documents. The Court found that the MERS documents were relevant as “MERS signed the assignment of Mortgage that is the basis of Plaintiff’s claimed standing to sue and bring this foreclosure action.”

The Court found that the TARP documents were relevant “as the Plaintiff [SunTrust] may have been forced to accept funds from the U.S. Government and some of these funds may have been applied as an offset to this loan by Plaintiff, Freddie Mac, or a predecessor in interest to the loan”, and, significantly, that the homeowner “may also be allowed to use TARP funds received by the Plaintiff related to this loan in connection with any loan modification or intervention required by the applicable statute.”

This is the first Court Order which we know of which compels documents related to the application and receipt of funds by a foreclosing party from TARP or other programs, and also the first Court Order we are aware of which permits the homeowner to apply received third party funds (TARP or otherwise) as a setoff to the loan or in connection with a loan mod.

A full copy of the Order is available upon e-mail request to us.

Jeff Barnes, Esq., www.ForeclosureDefenseNationwide.com

August 15, 2013

The Supreme Court of Montana has granted and ordered oral argument on an appeal by an homeowner concerning whether MERS is a “beneficiary” under Montana’s non-judicial foreclosure statute. Jeff Barnes, Esq. represents the homeowner. He is assisted by local Montana counsel Eric Hummel, Esq. Mr. Barnes wrote the briefs and will be arguing the case before the full 7 justice panel on September 25, 2013.

We have been advised that by setting the case for oral argument, the Supreme Court of Montana considers the case to be of statewide importance, and that oral argument is very rarely set, with the Court only setting approximately twenty (20) cases per year to be argued orally. Most appeals to the Court are decided on the papers alone.

The Montana statute is almost identical to the Oregon non-judicial foreclosure statute which defines “beneficiary”, which matter was argued by Mr. Barnes before the Supreme Court of Oregon. As those who follow this website know, the homeowner prevailed in that appeal, with the Oregon Supreme Court holding that MERS is not a beneficiary under the Oregon Trust Deed Act.

MERS has take the position, in its briefs in the Montana appeal, that Montana should follow decisions in Nevada and Utah, which hold that MERS is a beneficiary. There is currently no appellate case law in Montana on the issue, so the decision will set the law for the entire state of Montana.

Jeff Barnes, Esq., www.ForeclosureDefenseNationwide.com

August 8, 2013

The Glaski case, discussed in our post below, was published today by the California appellate court, which found that the decision met all requirements for publication under the applicable rule.

Jeff Barnes, Esq., www.ForeclosureDefenseNationwide.com

August 8, 2013

A California appellate court has held that Chase’s attempt to condition approval of a short sale on the homeowner’s agreement to be liable for a deficiency is illegal and will not be enforced. The decision in Coker v. JPMorgan Chase Bank, N.A., California 4th Appellate District (Division One), No. D061720, has been certified for publication. The opinion also states that it answers a question of first impression in California.

Chase had threatened a non-judicial foreclosure. The borrower approached Chase about a short sale, which Chase approved, but as part of the short sale contract, Chase required the borrower to agree to be liable for any deficiency after the short sale. The sale went through, a collection agency for Chase demanded a payment of almost $117,000.00 from the borrower for the claimed deficiency, and the borrower sued, claiming that California’s anti-deficiency statutes precluded the collection effort on the deficiency.

The trial court had dismissed the borrower’s action (termed “sustaining a demurrer” in CA), but the appeals court reversed, finding that the condition imposed by Chase (that the borrower agree to be liable for any deficiency) violated the public policy and purpose behind CA’s anti-deficiency statutes, which were enacted in the time of the Great Depression to prevent an already bad situation from becoming worse.

The clear message here is that the “banks” can no longer, in CA, insert illegal provisions in short-sale contracts such as requiring a borrower to waive statutory anti-deficiency protections. The subtle message, which is derived from the public policy reasoning which begins on page 10 of the opinion, is that the “banks” will not be permitted to take advantage of a situation which they themselves created by over-valuing real estate in the first instance and then attempting to capitalize on it, at the expense of the homeowner, when the inflated market crashes.

Andrew Stilwell, Esq. represented the homeowner. We will forward a copy of the full opinion via e-mail to anyone who requests it from us.

Jeff Barnes, Esq., www.ForeclosureDefenseNationwide.com

August 1, 2013

The California Court of Appeal for the Fifth Appellate District has issued a 29-page opinion which reversed the trial court’s grant of Bank of America’s demurrer (Motion to Dismiss) as to certain claims made by the homeowner, including his claims for Wrongful Foreclosure, Quiet Title, Declaratory Relief, Cancellation of Instruments, and Unfair Business Practices under CA’s Business and Professions Code sec. 17200. The decision was issued yesterday (July 31, 2013), and is styled Glaski v. Bank of America et al, No. F064556.

The decision has been stamped “Not to be Published”. However, we have been advised that papers are being filed to cause the Opinion to become a published decision, and the Opinion relies on numerous published decisions in reaching its result. The law office of Richard Antognini and the law office of Catarina M. Benitez represented the homeowner.

The Complaint alleged that the mortgage loan had not been properly transferred to the WaMu securitized trust, which closed in December of 2005. The alleged transfer (by assignment) was not until June 15, 2009. The homeowner alleged that the non-judicial foreclosure was wrongful because it was initiated by a nonholder of the DOT which failed to comply with the trust documents as to when the loan had to be transferred to the trust, and thus the purported transfer by JPMorgan Chase to the WaMu securitized trust in 2009 was void, resulting in the foreclosure being void as well. The Court rejected decisions from other states which do not permit a borrower to challenge an assignment because the borrower is not a party thereto or is not a third-party beneficiary thereof.

The Court noted that the Trust was governed by NY trust law, and joined courts that have read the NY statute as to conveyances to a trust “literally”. The Court cited the recent NY decision of Wells Fargo Bank, N.A. v. Erbobo, 39 Misc.3d 120A, 2013 WL 1831799, which held that acceptance of the note and mortgage by the (securitization) trustee after the date the trust closed would be void, as any transfer to the trust in contravention of the trust documents is void. The Court further noted that a Texas Bankruptcy Court, relying on Erbobo, held that assignment of the homeowner’s note after the “start up day” (of the trust) is void ab initio, and thus none of the homeowners’ claims were dismissed. (In Re Saldivar, Bankr.S.D.Tex. June 5, 2013, No. 11-10689).

This reasoning was adopted by the United States Congress back in November of 2010 in its Congressional Oversight Report on Foreclosures, which cited NY trust law and similarly found that any purported transfer of a mortgage loan into the trust after the trust closing date in violation of the trust documents was void, resulting in no such transfer ever having occurred.

The Court concluded that the homeowner’s “factual allegations regarding post-closing date attempts to transfer his deed of trust into the WaMu Securitized Trust are sufficient to state a basis for concluding the attempted transfers were void. As a result, Glaski has stated a cognizable claim for wrongful foreclosure under the theory that the entity invoking the power of sale (i.e. Bank of America in its capacity as trustee for the WaMu Securitized Trust) was not the holder of the Glaski deed of trust.”

The Court also distinguished the Gomes decision, which the trial court relied upon in sustaining BOA’s demurrer, distinguishing Gomes through its citation to Naranjo v. SBMC Mortgage (S.D. Cal. Jul. 24, 2012, No. 11-CV-2229-L(WVG) 2012 l 3030370). The Court further held that the “tender” requirement is not applicable where the foreclosure is void, which is what the homeowner alleged.

The Court thus held, in reversing the trial court, that the homeowner stated claims for wrongful foreclosure, quiet title, declaratory relief, cancellation of instruments, and unfair business practices.

This is a monumental decision which clarifies many of the misconceptions that courts in other states are under, in addition to setting the record straight, as NY case law already has, that noncompliance with the PSA results in a void foreclosure. As our readers know, we have been arguing this for years, and now the Courts are finally listening and are apparently no longer distracted by the otherwise incorrect and inapplicable arguments being made by foreclosing attorneys.

We thank one of our clients for bringing this decision to our attention. We will e-mail a copy of the full decision to anyone who requests it.

Jeff Barnes, Esq., www.ForeclosureDefenseNationwide.com

July 29, 2013

Yet another New Jersey Chancery Court Judge has dismissed a foreclosure case due to the Plaintiff’s failure to comply with the homeowner’s discovery. Jeff Barnes, Esq. represents the homeowner together with local New Jersey counsel Kenneth A. Marano, Esq. in what was the Hudson County case.

The Plaintiff was US Bank National Association as the claimed “trustee” of a Bank of America securitization. Mr. Barnes prepared the Contesting Answer and Separate Defenses and the discovery, which were filed and served by Mr. Marano. The Court entered an Order commanding that answers to discovery were to be served within 30 days of the discovery being served. The Plaintiff requested additional time to respond to the discovery to April 8, 2013, yet never served any responses to the discovery.

Even though the Plaintiff was afforded yet another month, no responses were made. Thus, on May 7, 2013, Mr. Marano filed a Motion to Dismiss, which was granted by the Court on June 7, 2013, dismissing the case without prejudice at this point as it was the first request for dismissal, and as New Jersey law and procedure provide that the offending party has 60 days to cure the discovery delinquency in that case.

The Order of Dismissal provides that a  Motion to Dismiss With Prejudice is a “two-step process”, with the first such motion being filed pursuant to R. 4:23-5(a)(1) for a dismissal without prejudice. The Order then states that if the delinquent party fails to provide the discovery, the aggrieved party may move for a dismissal with prejudice pursuant to R. 4:23-5(a)(2). The New Jersey rules also provide that if the defect is not cured within the allotted time that the case has to be re-filed as a new case. However, in connection with prior dismissals which we have obtained in New Jersey in other cases, the presiding Judge has cautioned the “bank” that re-filing will not cure the problem, as the discovery will be propounded in any “new” case and will likewise have to be responded to in any “new” case.

In all of the New Jersey cases which we have had dismissed since 2008, none of the offending parties have ever complied with the New Jersey Court’s Orders as to the discovery.

Jeff Barnes, Esq., www.ForeclosureDefenseNationwide.com

July 19, 2013

A Key West (Monroe County), Florida Circuit Judge yesterday dismissed what was a second foreclosure attempt by Bank of New York as the claimed “trustee” of a securitized mortgage loan trust. The original filing had been dismissed because BONY failed to comply with discovery and failed to comply with the Court’s Pretrial Order. Jeff Barnes, Esq. represents the homeowner and argued the matter in Key West yesterday.

The prior dismissal Order, which was entered in 2010, conditioned any refiling of the case on “complete” compliance with the homeowner’s discovery and the prior Court Orders. Three years later, in April of 2013, BONY refiled the case through a different law Firm, which failed to satisfy the prior dismissal order as to the discovery; failed to produce documents which it claimed, in its filed “Response” to the discovery, that it produced; and asserted objections to the discovery, which were not permitted by the prior dismissal order. The  Court found, on the record, that the conduct of BONY was “outrageous”, and that although the case may be refiled, BONY must produce every document which it has responsive to the homeowner’s discovery, without objection.

Separately, and in what is believed to be a first in the nation, an Oregon jury has found in favor of the homeowner and against JPMorgan Chase in a suit for damages arising out of the “you have to go into default to be considered for a loan mod” scam which we have previously discussed on this website. When the homeowner applied for a loan modification, JPM told the homeowner that he had to stop making payments first and go into default, which he did. He made seven payments, with JPM thereafter asserting that he did not qualify for a loan mod and foreclosed. The jury awarded damages to the homeowner, who is represented by Oregon counsel Terry Scannell, Esq.

JPM claimed that there was “nothing in writing” and that “nothing was promised”. Apparently the jury was not fooled.

This result needs to be published throughout the country. Finally, a jury has seen through the shameless and illegal conduct of JPMorgan Chase in conning homeowners across the nation into placing themselves into default as an alleged precondition of being considered for a loan mod, and then foreclosing anyway. High time this scam has finally (a) made it way to a jury, and (b) that the jury was not fooled by the scam.

The matter is available online at www.oregonlive.com/business/index.ssf/2013/07/jury finds against JPMorgan ch.html.

Thanks to Becca Niday, our Oregon client for whom we recently won the “MERS is not the beneficiary” issue in the Supreme Court of Oregon, for bringing this monumental result to our attention.

Jeff Barnes, Esq., www.ForeclosureDefenseNationwide.com