Mortgage Firm Loses Texas Lawsuit

Mike Grant, a former president of the Crystal Knoll Terrace homeowners association, said he was relieved by the ruling. He said residents didn’t know if they could sell their homes while the lawsuit, which was filed two years ago, was pending.

“We always had that cloud hanging over the neighborhood,” he said. “It’s nice to have the cloud go away.”

The mortgage company sued the homeowners in the Crystal Knoll Terrace neighborhood near Georgetown in 2015, claiming the Georgetown school district had illegally foreclosed on the land in 1990 for unpaid taxes before it was developed.

The foreclosure violated a federal statute because the federally run Resolution Trust Corp. — which owned the land at the time after the original owners defaulted on a loan — didn’t agree to it, the lawsuit contended.

The government sold the loan that the owners had defaulted on to a private company in 1996, which then passed it on to other companies before it was sold in 2009 to JB Mortgage, according to the suit.

JB Mortgage claimed in the lawsuit that Crystal Terrace homeowners were liable for the $5.2 million loan plus the 10 percent interest that had compounded on it since 1990, making the total amount more than $60 million.

The ruling that Judge Lee Yeakel issued Tuesday said there was no lien on the titles because the Resolution Trust Corp. agreed to the foreclosure, making it legal. The corporation knew about the foreclosure because it showed up at the trial for it, the ruling said.

“The RTC had complete knowledge of the judgment and chose not to appeal or challenge the judgment or the resulting sheriff’s sale and has never asserted that it did not consent to the foreclosure,” the ruling said.

The attorneys for JB Mortgage had contended that since the Federal Deposit Insurance Corp., which succeeded the Resolution Trust Corp., could not find documents related to the tax foreclosure lawsuit, that meant the Resolution Trust Corp. did not formally consent to the foreclosure.

Yeakel said in his ruling the fact that the FDIC could not find the documents “over two decades after the event in question” was not evidence they didn’t exist.

Fred Jones, whose law firm represented 120 of the homeowners who were sued, said some had been worried when it was filed that “they had to start packing and get out.”

“They didn’t deserve the heartache and anxiety it caused.” Jones said.

He said the lawsuit was unusual and also was “an attempted shakedown of the title insurance companies, and (the judge) didn’t buy it.”

“It’s unusual to request an absurd result based on some perceived loophole over something that happened 20 years ago,” Jones said.

One of the lawyers who represented JB Mortgage, Bruce Thomas, said Friday that attorneys for the company hadn’t decided whether to appeal the ruling to the 5th U.S. Circuit Court of Appeals.

“We are still analyzing the judge’s decision,” he said.

Two other lawyers for JB Mortgage did not reply to a request for comment. One of them, Marc Pollard, told the American-Statesman in 2015 that the investment company was not trying to throw people out of their homes.

He said in 2015 that if the court determined the lien was valid, the title insurance companies for the homeowners would be required to pay it off.

JB Mortgage first sued six of the homeowners in Crystal Knoll Terrace in 2013. The lawsuit was dismissed in March 2014 because a six-year statute of limitations had expired.

The 5th Circuit, however, ruled in favor of JB Mortgage in July 2015, saying if the Georgetown school district had sold the land in violation of a federal statute, then the statute of limitations would not apply.

The appeals court then sent the case back to the District Court to decide if the federal government gave its consent to the school district to foreclose on the land.