Most foreclosure cases we see present multiple defenses to the bank’s claims. With these defenses often comes the ability to turn the bank’s desire to foreclose (because it is profitable to do so), into a willingness to come to the table and work with us. The end result in those cases is a great loan modification.
Although we are still a ways from resolution of Lora’s case within the past week, I believe we moved a big step closer.
What occurred was the discovery deposition of the bank’s representative. A discovery deposition is the process permitted by court rules which allows both sides to a lawsuit to put a witness under oath for the purpose of having him or her testify about the relevant issues of the case. Thus, as the term implies, it gives a party the chance to “discover” potentially important facts in the prosecution or defense of a lawsuit. In foreclosure cases, we divide the defenses into two major categories: 1) Standing, or the bank’s legal right to be seeking foreclosure, and 2) Equitable, which essentially raises the question as to whether foreclosure is the proper remedy. Most cases contain both these defenses to varying degrees.
Lora’s case presented both strong standing and equitable defenses. As to standing, the promissory note attached to the original foreclosure complaint was materially different than the one later produced in that it did not contain any endorsement in favor of the bank foreclosing. In addition, the bank could present virtually no proof whatsoever that the document it claimed to be the original note was in fact the original. As to the equitable defense, it appears that the bank actually manufactured the default by incorrectly applying Lora’s payments, and also by telling her that if she made a double payment (which she did) she was caught up.
Finally, Lora’s loan being FHA-insured, it was a necessary precondition to foreclosure that the bank send her a letter giving her the opportunity to come into the bank and meet face-to-face to discuss a resolution to her mortgage issues. With the background of Lora’s case, the bank’s failure to make such an offer is particularly important since the entire matter may very well have been resolved at that meeting, and foreclosure avoided altogether. The failure to offer such a meeting could lead to a dismissal of the foreclosure case, and a complete do-over for her bank if it continues to act unreasonably in coming to terms with Lora.
The lesson in Lora’s story is that depending upon the facts, sometimes in foreclosure cases, it is necessary to turn over stones which may be hiding important defenses. By doing so, the homeowner’s hand may be strengthened, which in turn could be incentive it takes to bring the bank to the table with a great loan modification offer. That modification could very well make the difference between the homeowner and his or her family losing their home or staying safely in it for years to come.
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Kate Eyster and Lauren McGookey contributed to this article.
Copyright 2013 Daniel L. McGookey