Foreclosure Litigation Journal

A letter was sent by Deutsche Bank National Trust Co. on Dec. 9, 2008, to borrowers Pedro F. Laurencio and Esteves Pedro advising them that their loan had been accelerated and that $200,715 was immediately due and payable. A foreclosure complaint was filed two days later.

Problem was that the letter said that the borrowers would have 30 days to cure the default before a lawsuit would be filed. At an April 2010 summary judgment hearing, the borrowers’ attorney sought leave of court to file an amended answer and affirmative defenses. But the trial court denied the motion and granted summary judgment of foreclosure in favor of Deutsche.

On appeal, the District Court of Appeal of Florida, Second District, agreed with the borrowers and reversed the lower court’s decision, noting that “the trial court should have granted Laurencio leave to file an amended answer and affirmative defenses.”

A summary judgment in favor of Kondaur Capital Corp. against Martha Hankins was handed down from a district court. Hankins appealed the foreclosure judgment by arguing that Kondaur shouldn’t have been substituted as plaintiff since the original plaintiff didn’t have standing to bring the action. She also claimed that the summary judgment was entered in error because the record does not establish the essential elements of a foreclosure action without dispute as to several material facts.

Despite no payments having been made on the $206,238 loan since September 2007, the Supreme Judicial Court of Maine agreed with Hankins. The foreclosure judgment was vacated while the case was remanded for further proceedings.

M&I Bank filed a foreclosure complaint in January 2009 against Moshe Mazine and Jaacov Bouskila in January 2009. An amended complaint was subsequently filed, and Mazine moved to dismiss the complaint because the lender on the note was “M & I Marshall & Ilsley Bank” while the plaintiff listed on the complaint was listed as “M & I Bank.”

At trial, an affidavit of indebtedness was presented by M&I as the only proof of the amount owed and admitted by the court, despite opposition from the defendants’ attorney. But the District Court of Appeal of Florida, First District, agreed with the borrowers and reversed the lower court’s decision.

“Because no foundation was laid, the admission of the affidavit was erroneous,” the decision stated. “Furthermore, the trial court erred in denying appellants’ motion for a directed verdict given the lack of proof that the named plaintiff and appellee, M & I Bank, holds the mortgage and note”

On June 29, a U.S. Bankruptcy Court judge ruled in favor of HSBC Bank USA in deciding that the assignment from Mortgage Electronic Registration Systems Inc. conveyed legal title in the mortgage to HSBC, Massachusetts Lawyers Weekly reported.

A Florida trial court granted a motion by Shedrick Arbonnetta Bucknor to set aside and vacate a final judgment of foreclosure in favor of Novastar Mortgage Inc. and to void the foreclosure sale, the certificate of sale and the certificate of title. Bucknor had offered to bring the property out of foreclosure by using proceeds from an insurance check for sinkhole-related damages and claimed that a Novastar representative told her that the summary judgment would be canceled. But the hearing was not canceled, and the foreclosure completed before the insurance claim was finished.

So Novastar appealed and won the appeal.

“Although Bucknor’s allegations against Novastar may support the granting of a rule 1.540(b)(3) motion, the trial court erred in basing such a determination on the conflicting affidavits of the parties instead of holding an evidentiary hearing on the motion,” the District Court of Appeal of Florida, Second District, wrote in its July 22 opinion.

In Ohio, PHH Mortgage Corp. commenced a foreclosure against Michael S. Prater in April 2008. A default judgment was granted by the Clermont County Court of Common Pleas to PHH the following September.

After withdrawing an order of sale three times, a fourth order of sale was scheduled by the court. But instead of notifying PHH by mail of the fourth sale date scheduled for April 2010, as had been done the previous three times, the sheriff’s office — which had instituted a new notice policy in January 2010 — only made notifications through its Web site. The sheriff’s office claimed it had notified all attorneys involved in pending foreclosure actions about the new policy between October and December 2009.

PHH wasn’t present for the April 6, 2010, sale, and the property sold for significantly less than the loan balance. So it filed a motion to set aside the sale on the grounds that it did not receive notice of the sale and didn’t get a chance to make a substantially higher bid. However, PHH’s motion was denied, and the Court of Appeals of Ohio, Twelfth District, Clermont County, affirmed the denial.

Ohio residents Edward and Ethyl Seeley closed on a $98,500 home-equity line of credit in January 1998 with Star Bank, N.A. In October 1999, the property was sold to Mac and Doris Roberts. By that time the loan had been sold to Firstar Bank, which provided a payoff statement for $71,129. The title company sent the payoff check after the closing, but Firstar didn’t release the mortgage or close the HELOC. The Seeley’s were allowed to continue taking advances against the line.

By the time the property was sold again, U.S. Bank owned the loan. It attempted to foreclose on the property in May 2009, and moved for a summary judgment four months later. The Seeley’s also sought a summary judgment and presented an affidavit from the original title company that the October 1999 payoff should have caused the release of the mortgage.

The trial court granted the Seeley’s summary judgment, and the Court of Appeals of Indiana affirmed the decision.

Trustee U.S. Bank, N.A., appealed a summary judgment in favor of Christine Kimball and lost. A foreclosure was filed in January 2009 against the borrower, who originally obtained a $185,520 loan on her Vermont property from Accredited Home Lenders Inc.

The borrower claimed that U.S. Bank failed to present sufficient evidence that it held the note and corresponding mortgage and that it lacked standing because MERS, as nominee for Accredited, lacked authority to assign the mortgage. Complicating matters was that the borrower received a letter in July 2009 that the note had been assigned to GMAC Mortgage LLC, and not U.S. Bank.

In a client newsletter, Patton Boggs LLP wrote the Utah’s Court of Appeals upheld a judgment in favor of CitiMortgage Inc. and MERS. After defaulting, the borrower quitclaimed the prope in apparent response to an increase in litigation implicating MERS’ role in foreclosures and whether it has the authority to forecloserty to her accountant who then filed a lawsuit.

“In affirming the lower court’s grant of summary judgment for MERS and Citi, the appeals court gave full effect to MERS’ authority to hold and transfer the security interest under the deed of trust,” Patton Boggs wrote. “The court held that the express terms of the deed of trust ‘unassailably provide that MERS has the right to foreclose upon the Property, even if [Lender] sold the note.'”

MERS announced a change to its Rules of Membership on July 21 in an apparent response to growing litigation implicating the service provider’s role in foreclosures and challenges to its authority to foreclose, according to Patton Boggs. Servicers are now prohibited from filing foreclosures and legal proceedings in its name. Patton Boggs noted that Massachusetts and Delaware state attorneys general recently launched investigations into MERS’ practices.

ProPublica wrote in an article last month that GMAC Mortgage “continues to rely on false documents to foreclose on American’s homes.” The basis for the story was a purported GMAC document showing a single incident where “GMAC employees were still discussing the possibility of fabricating evidence needed to facilitate a foreclosure.”

ProPublica, a constant critic of mortgage servicers, is a consumer-advocate publication originally funded by Herb and Marion Sandler after they cashed out of option-ARM giant World Savings. Under the weight of the World Savings acquisition, Wachovia Corp. nearly failed and was ultimately saved through an acquisition by Wells Fargo & Co. ProPublica regularly attacks Wells Fargo for not doing more modifications on the very loans that it was indirectly funded through.

Commonwealth Property Advocates, LLC v. Mortgage Electronic Registration System, Inc. and CitiMortgage, Inc.
Case No. 20100888-CA (Utah Ct. App. July 14, 2011) (Utah Court of Appeals).