All too often, courts have acted too precipitously in granting judgment to banks seeking to foreclose on people’s homes, assuming that the banks have the paperwork in order. As I know from my own personal experience in reviewing nearly a thousand cases involving securitized loans over the past four and a half years, such is a rarely the case. In other words, courts have been routinely duped by the banks and, as a result hundreds of thousands, if not millions of people have lost their homes. I am extremely pleased to report that the tide finally seems to be turning, and that the courts are taking a much closer look at the banks’ paperwork before slamming the foreclosure gavel down.
Within the past several months, we have had two cases where a court of appeals reversed the lower courts’ ruling granting foreclosure before trial, reasoning that the courts mistakenly found that the banks established their case. The most recent is the case of the McFarleys. The McFarleys had been struggling with their bank to gain mortgage relief since 2007 after Trudy McFarley lost her job. Quickly falling behind on their payments, Rob McFarley borrowed over $5,000 from his retirement plan to catch up on their mortgage payments. They thought they were finally going to get the relief they sought for months in December, 2007, when their loan servicer put them in a “trial plan modification”.
Despite making the required payments on that modification, the bank went back on its word and never offered the McFarleys a permanent loan modification, instead filing foreclosure against them in May, 2008. They continued on their quest to get mortgage relief while defending the foreclosure for the next several years. Thus, when they came to us in September, 2010, the process was well-along. Finally, as happens in nearly every contested foreclosure case, the bank filed a motion for summary judgment in December, 2011. “Summary judgment” is a procedural device allowing a party to gain a judgment in its favor before trial if it is shown to the court that there are no genuine issues of fact requiring trial. Historically, nearly all contested foreclosure cases end up in summary judgment in the banks favor because the banks were able to successfully pull the wool over the courts’ eyes and make them believe that all the banks’ paperwork is in order.
And so it was with the McFarleys when they suffered such a judgment against them in January, 2012. Fortunately the court of appeals made things right. Just three weeks ago we received its’ ruling saying that the bank had not established its case to the point where the McFarleys could be denied their day in court by trial. Importantly, the court said that the bank, acting through its loan servicer, had not adequately demonstrated that the servicer had the requisite personal knowledge to authenticate the documents. This is extremely important since in every case I’ve seen, the bank acts through the servicer, never seemingly wanting to put up one of its own employees to testify. Why that is so remains somewhat a mystery, but I suspect that the reason for this is that often the necessary papers have been destroyed, and the bank wants to hide behind the servicer. In the past, the banks have gotten away with their misconduct. Hopefully, the McFarleys’ case represents the dawning of a new day where the courts hold the banks’ feet to the fire and treats them the same as you and I.
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Next week: Loan modification results in a $60,000 of debt forgiveness.
Copyright 2013 Daniel L. McGookey