Four years ago, when the housing market bubble burst, and I became involved in securitized mortgage loan defense (not simply foreclosure defense), I learned our judicial system was like a sleeping giant – it was going to take courts time to wake up and understand the brand-new world of loan securitization, and how that world fit within long-standing principles of law. That waking-up process has seemed painfully slow at times. However, the story of Daniel presents clear evidence that judges are heading down the right path in enforcing rules of law when it comes to foreclosure cases.
As has happened to hundreds of thousands, if not millions, of homeowners defending their homes against foreclosure, Daniel suffered an adverse judgment based upon a vague and generic affidavit which was executed by an employee of the loan servicer, rather than the loan owner or holder. Of course, being prepared by a lawyer, the affidavit contained all the appropriate catch phrases meant to mislead the judge into believing everything was in order, and there was no reason to continue to waste everyone’s time by requiring a trial. Those phrases included statements identifying the affiant as an officer of the loan servicer; that as such, he had access to the “business records,” and that those records “were kept in the course of a regularly-conducted business.”
Generally in the past, courts would simply take a cursory look at these self-serving statements and find that they were sufficient to justify foreclosure judgment. After all, the only real questions needing to be answered were whether the homeowner signed the loan and whether he or she missed any payments, or so they reasoned. The answer to both these questions was always “yes”, and the foreclosure gavel would thus slam down. This highly simplistic approach demonstrated an alarming ignorance of how securitized lending works, no doubt resulting in many, many homeowners being denied their day in court. And, because there is fraud involved in every securitized loan, the bank never wants to go to trial. In other words, banks were used to pushing their foreclosure cases through the courts without anyone really looking at the pleadings to make sure things were in order.
But maybe no more! Fortunately for Daniel, the court of appeals reversed the trial court’s award of foreclosure judgment prior to trial. In a decision which will speak loud and clear to trial courts in many foreclosure cases to come, the appellate court rejected the court’s extremely lax approach to the protection of Daniel’s rights. On several critical fronts, it raised the bar of proof substantially higher than it was previously set. First, the court determined that a mere assertion by the affiant of personal knowledge does not necessarily end the inquiry. An examination of how that person has knowledge must be conducted to ensure that he or she in fact has it.
Further, when it comes to business records, the court questioned what those records were, and whether the affiant could testify as to the accuracy of the maintenance and retrieval processes in place. Again, the court found the affidavit defective. In conclusion, the appellate court reversed the trial court’s judgment and restored Daniel’s right to his day in court. That fact will make all the difference in Daniel’s fight to save his home. The lesson in Daniel’s story is that every pleading filed by banks in support of a foreclosure, especially affidavits, must be put to careful scrutiny. As a homeowner facing foreclosure, you must be prepared to point out with particularity defects in the pleadings so that the court will call a time out before rushing to judgment.
Note from the author: If you have questions or comments regarding this or any Foreclosure Story article, please visit www.mcgookeylaw.com.
Next week: The story of the Bermans, whose approval for Restoring Stability funds should allow them to save their home.
Copyright 2012 Daniel L. McGookey