The Canfields came into our office several years ago after being sued for foreclosure for the second time. The background facts of their case presented the quintessential “equitable defense” argument. By that what I am referring to is that under Ohio law, every foreclosure case is an equitable action, meaning that the foreclosing party (the bank) must prove that it treated the homeowner legally and fairly before it can achieve foreclosure. In this day and age when 95 percent of the home mortgages in this country are securitized (bundled in a loose pool and sold as a stock certificate), making it profitable for the bank to foreclose, the equitable defense is typically very useful.
In the Canfield’s case the equitable defense was stronger than most. That was because their bank dismissed the first foreclosure based upon a loan modification agreement reached with the Canfields. Based on that agreement, the Canfields paid thousands of dollars to save their home. However, as the Canfields found out to their dismay, the bank’s promise was false, and its intention was to wring every dollar out of the Canfields before foreclosing.
In the end, the turmoil their bank caused to the Canfields was offset by the fantastic result they finally achieved. After years of battle (without making payments on their mortgage), the Canfields loan balance escalated to over $300,000. Forced with the prospect of an upcoming trial, however, the bank decided to accept a short payoff of $110,000, one-third the amount it claimed to be owed! This is even a more impressive result when considering that the Canfields home is presently valued at over $200,000.
Why did the bank decide to essentially throw in the towel and walk away from its long-standing effort to take the Canfields home away? I can only guess. However, its action is consistent with what seems to be a growing trend in the cases I’ve seen. When pressed to the limit, a bank will generally give up rather than risk losing at trial. For the Canfields, I am happy to report this phenomena lead to mission accomplished!
Note from the author: If you have questions or comments regarding this or any Foreclosure Story article, please visit www.mcgookeylaw.com.s
Copyright 2013 Daniel L. McGookey