The attorneys at Doucet & Associates Co LPA help homeowners in Ohio dealing with foreclosure lawsuits in a variety of ways. We can assist homeowners during the loan modification process, identify mortgage errors, and help file an answer when being served with a complaint in a foreclosure lawsuit...
CitiMortgage and CitiFinancial Servicing have been fined $28.8 million by the Consumer Financial Protection Bureau for failing to help homeowners avoid foreclosure by using bad loss mitigation practices...
Are You Getting Your New Home Inspected?
A home inspection is a crucial step in the home buying. After an offer is accepted in the home buying process, the contract usually details how much time a new homeowner has to get an inspection and negotiate repairs.
What to do before an inspection?
It is important for new homeowners to inspect inside and outside parts of the house for damage before the professional inspection. The landscape, drains, grading and possible retaining walls should also be examined. This will prepare a new homeowner to ask the inspector questions while attending the inspection. Inspections can last a few hours so do not feel bad about asking too many questions.
What should a new homeowner expect to learn in an inspection?
An inspection can inform new homeowners of electrical malfunctions, appliance life expectancy, plumbing issues, future repairs, and structural problems with the walls, roof, basement, ceilings, and the foundation. Inspectors can also offer advise on how to maintain a home and its unique features and machinery.
How to choose a home inspector?
Homeowners want inspectors that are experienced and detailed oriented. It is also important to ensure they have a bond or professional errors and omissions insurance. A Real estate agent can suggest an inspector, but homeowners should still do their own research. Ohio does not have a law that requires home inspectors to have a license. There are however certified programs and classes inspectors may take. Asking relatives and friends who own homes for recommendations, checking websites, and reading reviews can help make a homeowner feel confident about choosing an inspector. Researching early on in the home buying process can help a homeowner secure a preferred inspector.
How much does an inspection cost?
An inspection may cost anywhere from a few hundred to a thousand dollars. It is important to verify with the inspector everything that is included in an inspection package and ask for a sample report. The more detailed the report the higher the cost. The larger landscape, drains, grading and retaining walls could raise the cost of the inspection. Home inspectors are usually not licensed to give advice regarding pest control, chemicals or gases, so hiring a professional in a more specific area may be needed.
The lawyers at Doucet & Associates Co., L.P.A. can help homeowners in a consumer litigation lawsuit if a home inspector failed to provide promised information. Contact us at (614)944-5219 today or send us a message on our website by clicking here.
Credit Reports are Improving Since the Housing Crisis
Homeowners that suffered from foreclosure during the housing crisis and Great Recession are starting to get their foreclosure histories taken off their credit reports. Removing foreclosure from a credit report can make it easier for a consumer to increase their credit score. Doucet & Associates Co., L.P.A. helps consumers’ correct errors on their credit reports and assists homeowners fight foreclosure.
The Great Recession refers to the economic decline during the financial crisis and the housing crisis that happened between 2007 and 2009. The rise of unemployment during the financial crisis caused many homeowners to fall into foreclosure, which negatively impacted their credit reports. Foreclosure stays on a consumer credit report for seven years.
There are many reasons that simultaneously caused the recession. The rise in foreclosures and drop in number of people buying homes at that time led to the United States housing bubble collapsing. The prices of homes were dropping, current homeowners were struggling to pay back mortgages, and people were frantically looking for jobs after being laid off. The recession left many Americans with long-lasting consequences.
If your foreclosure history is not being removed from your credit report, the Fair Credit Reporting Act (FCRA) grants consumers the right to write a letter asking the credit reporting agency investigate the error. The removal of foreclosure from a credit report is going to influence consumers getting approved for lower interest rates. If the credit reporting agency is denying your request to have foreclosure cleared from your credit report after seven years the lawyers at Doucet & Associates Co., L.P.A. can provide legal assistance. Contact us today at (614)-944-5219.
A Mortgage Servicer Must Show Compliance with Housing and Urban Development Regulations Prior to Initiating Foreclosure Action
In Wells Fargo, N.A., vs. Awadallah, 41 N.E.3d 481 (2015), the Ninth District held that where a note and mortgage requires compliance with HUD regulations, such compliance is a condition precedent to bringing a foreclosure action. A condition precedent is something that must occur before something else will or can occur. Ms. Awadallah’s promissory note and mortgage were prepared on Federal Housing Administration forms and required that the bank, as a condition of receiving federal money, meet all HUD requirements prior to filing a foreclosure action. Under HUD, Wells Fargo was required to have a face-to-face interview with Ms. Awadallah, or make a reasonable effort to arrange such. At minimum, Wells Fargo was required to send a certified letter to Ms. Awadallah and make at least one trip to see her at the mortgaged property. It failed to do so.
Wells Fargo failed to present evidence to the Ninth District regarding their reasonable effort to make a visit to Ms. Awadallah’s home, which is expressly required under her note and mortgage and federal regulation. Wells Fargo argued that they didn’t need to meet that requirement because after the foreclosure action was filed, the parties attempted to settle the case in mediation. Wells Fargo argued that the purpose of the in-person meeting, as required under HUD, is to consider loss mitigation and that court-sponsored mediation serves the same purpose. The Ninth District disagreed, stating that mediation after the foreclosure action has been initiated does not show compliance with the federal regulation. Wells Fargo failed to strictly comply with standard regulations set forth to protect consumers. Thus, Wells Fargo did not satisfy the conditions precedent to filing a foreclosure action against Ms. Awadallah. Therefore, Wells Fargo was not entitled to succeed on its motion for summary judgment. The Ninth District reversed the judgment and sent the case back for further proceedings.
Banks Must be Cautious with Conditions Precedent: the Alliterative Way to Defend against Foreclosure
Put simply, foreclosure is a contractual remedy to a breach (i.e. default) on a note that is secured by a home. Thus, in order for the bank to succeed in a foreclosure action, it must prove the elements for a breach of contract. In Ohio, to prevail on a breach of contract claim, the plaintiff must prove:
- The existence of a valid contract;
- That the plaintiff performed their obligations under the contract;
- That the defendant did not perform their obligations; and
- Injury resulting from the defendant’s breach.
Conditions precedent stem from the second prong. Many notes or mortgages will require notice of a default and/or acceleration. If a note or mortgage has such a notice clause, the lender must comply with the notice terms or the complaint may be dismissed. Further, certain federal regulations issued by the Secretary of Housing and Urban Development (HUD) may impose additional requirements on the party seeking a foreclosure.
In BAC Home Loan Servicing, LP. v. Taylor, the Ohio Ninth District Court of Appeals held that the bank’s failure to comply with HUD’s regulations could be successfully used as a defense against a foreclosure action. The Taylors’ note and mortgage were subject to the HUD regulations for default and acceleration, and on appeal, they submitted affidavits that no attempt had been made for the required face-to-face meeting, while conversely BAC offered no contradictory evidence. Thus, the court reversed the trial court and found a genuine issue of material fact as to whether BAC had performed all conditions precedent in order to continue with foreclosure.
This ruling is in line with many other Ohio appellate courts and stands for the notion that the foreclosing party must comply with all of the conditions of the note and mortgage contract, or the homeowner may successfully defend against the foreclosure action.
Jarupan v. Hanna, 173 Ohio App.3d 284, 2007-Ohio-5081.
 Fifth Third Mtge. Co. v. Bell, 2013-Ohio-3678.
 See 24 C.F.R. §203.604, which requires a face-to-face meeting or a reasonable attempt for a face-to-face meeting prior to foreclosure.
 BAC Home Loan Servicing. LP v. Taylor, 2013-Ohio-355.
 Id. at ¶ 21.
 See Wells Fargo v. Phillabaum, 192 Ohio App.3d 712, 2011-Ohio-1311, ¶ 11 (4th Dist.); Wells Fargo Bank, N.A. v. Isaacs, 1st Dist. No.C-100111, 2010-Ohio-5811, ¶ 10; U.S. Bank, N.A. v. Detweiler, 191 Ohio App.3d 464, 2010- Ohio-6408, ¶ 53 (5th Dist.); Washington Mut. Bank v. Mahaffey, 154 Ohio App.3d 44, 2003- Ohio-4422, ¶ 22 (2d Dist.)
National City Mortgage Company v. Richards: A case study in condition precedent as a foreclosure defense
National City Mortgage Company v. Richards: A case study in condition precedent as a foreclosure defense
Before your mortgage company can initiate foreclosure proceedings and accelerate your debt they must meet any condition precedents required in the original agreement. Most often these condition precedents come in the form of required prior notice of default and/or acceleration outlined by a provision in your note or mortgage instrument. So what does this mean for you? Basically it means that your mortgage company cannot take action against you without properly informing you of their intent to do so. National City Mortgage Company v. Richards illustrates the scenario well. In that case, Richards argued that she never received notice of her default through first class mail as was required in her original agreement with the mortgage company. Because of this oversight on the part of the mortgage company, Richards never had a reasonable opportunity to cure the problem. The Tenth District sided with Richards and the Mortgage Company’s cause was dismissed. If you believe you might have an issue with condition precedent or any other mortgage issue please do not hesitate to contact Doucet & Associates.
 By: Justin Potter, Of Counsel, Doucet & Associates Co., L.P.A.
 Nat’l City Mortgage Co. v. Richards, 2009-Ohio-2556, ¶ 1, 182 Ohio App. 3d 534
Brunner Dissent in Hazel May Add Foreclosure Defense for FHA Homeowners
Homeowners facing foreclosure would do well to read Judge Jennifer Brunner’s thorough dissent in Wells Fargo Bank, N.A. v. Hazel . Hazel defended an action in foreclosure in Franklin County by herself (pro se) and, though ultimately unsuccessful, might have marked a path to defending certain foreclosures for future defendants.
Hazel’s home loan was a Federal Housing Administration (FHA) loan. These loans are governed by the Department of Housing and Urban Development (HUD), and require lenders to follow very specific steps in order to properly foreclose on a home. The loan contract, also known as a promissory note, contained a vague reference to the HUD regulations:
If Borrower defaults by failing to pay in full any monthly payment, then Lender may, except as limited by regulations of the Secretary in the case of payment defaults, require immediate payment in full of the principal balance remaining due and all accrued interest * * * In many circumstances regulations issued by the Secretary will limit Lender’s rights to require immediate payment in full in the case of payment defaults. This Note does not authorize acceleration when not permitted by HUD regulations. As used in this Note, “Secretary” means the Secretary of Housing and Urban Development or his or her designee.
It is settled Law in Ohio that following HUD regulations prior to initiating foreclosure on FHA loan houses constitute “conditions precedent” under Ohio Civ.R. 9(C). However, Judge Brunner would rule that this vague reference to the HUD regulations actually requires lenders to attach the regulations to a Complaint for foreclosure to be in compliance with the pleading requirements of Ohio Civ.R 10(D). She writes:
Even if Wells Fargo were to assert that the conditions precedent were incorporated by reference to HUD regulations, in order to take advantage of Civ.R. 9(C), Wells Fargo would have needed first to comply with Civ.R. 10(D) and attach the documents that are the basis of its claim-including terms set down elsewhere that are incorporated by reference. In other words, Wells Fargo having made a “claim,” was required by Civ.R. 10(D)(1) to “attach to the pleading” a copy of the operative document.
Brunner’s analysis, and Hazel’s efforts, may have created another avenue to challenge the complaint by forcing lenders to attach the regulations to the complaint itself or be subject to dismissal. If nothing else, Homeowners who have FHA loans should be aware of HUD regulation 24 C.F.R. 201.50, know where to find it, and hold the lenders to it.
 Wells Fargo Bank, N.A. v. Hazel, 2016-Ohio-305, cause dismissed, 2016-Ohio-915, 145 Ohio St. 3d 1412, 46 N.E.3d 705, (10th Dist. 2016) (J. Brunner, dissenting).
 Id., at ¶14, emphasis added.
 See for example: BAC Home Loans Servicing, LP v. Taylor, 9th Dist. No. 26423, 2013-Ohio-355, 986 N.E.2d 1028, U.S. Bank, N.A. v. Detweiler, 5th Dist. No. 2010CA00064, 191 Ohio App.3d 464, 2010-Ohio-6408, 946 N.E.2d 777.
 Wells Fargo Bank, N.A. v. Hazel, at ¶36.
How to Avoid and Fix Contract Disputes With a General Contractor
Many homeowners need a checklist on hiring a contractor to ensure the work gets done correctly. At some point, most homeowners will need to hire a general contractor for a home improvement project or addition to the property, but many do not know where to begin when searching, or what to look out for in order to avoid a contract dispute. The homeowner is the first and last line of defense when it comes to choosing the right general contractor, and deciding on the right one starts with proper research.
The internet offers myriad resources for reviewing and researching general contractors. Sites such as Google and Angie’s List offer ratings and reviews that can be helpful in deciding on which general contractors are trustworthy and capable. Additionally, the Ohio Attorney General’s Office and Better Business Bureau register complaints made against businesses and general contractors. Homeowners can check to see if potential general contractors have any formal complaints, and avoid any potential contract disputes.
The State of Ohio does not require general contractors to be licensed, but most cities in the state do, such as Columbus. Homeowners can check with city websites to see if a potential general contractor is licensed and bonded. A bonded general contractor has some sort of financial policy in place to pay damages against them in the event of a lawsuit or contract dispute. While a general contractor does not need to be bonded to work, it is typically a sign that the general contractor is responsible, diligent, and most importantly, doing what they can to avoid a contract dispute. You should only hire a contractor who has an insurance policy in place, and any such contractor should be happy to provide you a copy.
Homeowners would be wise to have an idea of what permits or licenses will be required for their specific job. A good general contractor will know and include such expenses in a written estimate, but homeowners would be wise to take the time to research costs. An attorney can offer advice on which permits and licenses would be required for a specific job and how to avoid illegal behavior in completing a project.
General contractors will be able to offer items that help potential clients decide for themselves whether or not they are capable of handling a job. Many keep portfolios of projects they are proud of and regularly share with potential clients. A good general contractor will be proud of their work and will make available several satisfied past clients as references. Portfolios and references are excellent resources to help determine how general contractors interact with their clients, and whether or not they can complete the job in a way that is satisfying to the client.
Cost is always at the front of everyone’s mind in a home improvement project, and general contractors are aware of this. They will be able to provide written estimates of the job, including itemized lists of materials, labor estimates, and any miscellaneous costs that may incur, such as permits. Homeowners will want to get at least three estimates from three separate general contractors to get an idea of how much the job will cost.
After settling on a general contractor, homeowners can ensure the contract they sign is fair for all parties. A general contractor should not get more than 20% of the total cost of the job up front, and will should earn a ask for a 10-20% profit over the costs. All guarantees, warranties, and promises should be written in the contract. It is perfectly normal for general contractors to be paid in stages of completion with final payment contingent upon inspection from a third party. Homeowners can also prearrange to pay for materials with an agreed upon supplier and have them delivered to the site, removing the general contractor from the process entirely.
No advice can hold true for every situation, and homeowners should always consult with a professional if they are concerned that a general contractor may be taking advantage of them. Call Doucet & Associates at (614) 944-5219 if you are concerned that a contract may be unfair, or if you need assistance unraveling a bad transaction or settling a contract dispute.
Loss Mitigation Options for Families Facing Foreclosure
Federal law requires mortgage companies to offer loss mitigation options to homeowners who are facing foreclosure. Loss mitigation options include:
- Loan Modification – The lender and borrower agree to extend the life of the loan for a reduction in interest.
- Deed in Lieu – The borrower offers collateral in exchange for a release from the mortgage.
- Pre-foreclosure Sale – The borrower sells the property and uses the money to pay off the mortgage.
- Short Sale – The lender accepts a payoff less than the mortgage is worth. This only applies if the mortgage is more than the value of the property.
- Cash for Keys Deal – The lender pays the family to leave in order to avoid the cost of eviction.
- Forbearance – The lender accepts reduced or no payments for a short time in exchange for a later repayment.
- Partial Claim – The lender advances the fees necessary to bring the mortgage current to the borrower under the condition that they are paid back at a later date.
Which options are available depend on the mortgage servicer and the circumstances surrounding the loss mitigation application. The mortgage servicer will be able to present you with information regarding loss mitigation and what is required to file an application. After submitting an application for loss mitigation:
- Your servicer must respond to loss mitigation application in five business days with the application status:
- Either complete or incomplete.
- If incomplete, the servicer must state what is required to complete the application.
- Your servicer must provide you with an evaluation or complete list of options within thirty business days of receiving the application.
- If you are denied, you must be provided with an opportunity to appeal.
Once you submit a loss mitigation application, before responding to your request the mortgage servicer cannot:
- File a foreclosure lawsuit.
- Move forward with the sale of a property.
This is known as dual tracking and it is illegal. Doucet & Associates deals with banks and mortgage servicers on a regular basis. If you are having trouble getting a loan modification processed, or if you would like assistance in filing one calls us at (614)-944-5219.
Doucet & Associates Files Class Action Lawsuit Against Nationstar Mortgage
FOR IMMEDIATE RELEASE July 13, 2015
Contact: Troy Doucet, (614) 944-5219
(Columbus) – The law firm Doucet & Associates recently filed a class action lawsuit against Nationstar Mortgage, LLC. Their client, Terry Forson alleges that the mortgage company has been engaging in a deliberate and systematic practice of coercing debtors into paying additional fees on their mortgages after bankruptcy. The lawsuit also claims that Nationstar has unfairly damaged the consumer’s credit score by failing to comply with court orders that deem the mortgages “current.”
Mr. Forson filed for chapter 13 bankruptcy in 2008 and repaid his debts over a five year period. After completing the payment plan, the court ordered that his mortgage be updated to “current,” and all arrearages that existed prior to the filing be discharged. Mr. Forson also alleges that he made repeated requests to Nationstar to provide update statements, but that the company failed to do so for months after his bankruptcy ended.
He also maintains that despite a consistent pattern of timely payments that were accepted by Nationstar, he was still being charged for unauthorized fees. Additionally, Nationstar refused to update his mortgage status, which could be a clear violation of the court order. Ultimately, despite timely payments, Nationstar threatened Mr. Forson with foreclosure and required him to pay $8,109.41 in order to prevent his house from being foreclosed on.
Mr. Forson took money out of his wife’s 401k to pay the demand. This was in spite of the fact that he had made regular monthly payments that he alleges were both satisfactory to the terms of the mortgage and accepted by Nationstar. At this point, over a year after exiting bankruptcy, Nationstar still had made no meaningful attempt to clarify the nature of the charges.
Doucet & Associates believes that Nationstar’s practices affects thousands of individuals similarly situated. They have filed a class action lawsuit to recover the erroneously charged fees to Mr. Forson and others. If you would like to join the lawsuit, and you live in Ohio or have been discharged from Chapter 13 bankruptcy, please contact Doucet & Associates today at (614) 944-5219.
Short Sale Risks – Be Careful!
If you are in financial trouble, beware agreeing to a short sale with your lender if that means you will be contractually obligated on any deficiency between the loan and the sale price. That is, if the property sells for $80,000 and you owe $100,000, be cautious about agreeing to the sale if it means you will still need to pay the bank $20,000 (versus having it forgiven). Why?
In Ohio, if the property goes into foreclosure and is sold at auction for a $20,000 loss, the bank has two years to recoup that money from you. That is because Ohio has a two year statute of limitations on deficiency judgments. However, if you sign an agreement with the bank to pay back $20,000, the statute of limitations for contracts is 8-20 years. That means the bank will have turned a two year collection period into a much longer year one! Be careful and talk to knowledgeable counsel before entering into a short sale.
If you live in Ohio and are concerned about going forward with a short sale, call our law firm for help. Here are other things you want to do to protect yourself from longer-term liability from a short sale:
1. Make sure the contract with your selling real estate agent indicates that paying the agent a commission is not only contingent upon the short sale’s approval, but also contingent upon an approval with a “waiver of deficiency.” A waiver will enable you to avoid paying the bank back the $20,000 after the short sale is complete. Without a contingency in your agent’s agreement, you may be liable for their fees if you walk from the short sale because a waiver isn’t accepted.
2. Constantly remind your bank that going through with the short sale is contingent upon a waiver of deficiency. This will decrease the possibility that your lender will “forget” to add in a waiver when they send over the final paperwork. (However, if you think foreclosure is likely, talk to counsel about this, as insisting on a waiver may eliminate your ability to use mitigation of damages as a defense).
3. Don’t expect the short sale process to be over soon, and if you are managing it yourself, it may be wise to contact the bank every other day while you wait for your approval. In today’s short sale and banking world, the squeaky wheel gets the grease.
4. Have an attorney review the final closing documents before the short sale closing, to ensure you are protected from long-term liability. Paying an attorney $600 is a lot cheaper than being on the hook for $20,000 or more.
Firm Sues Law Firm Kaman & Cusimano
Doucet & Associates, a small firm dedicated to protecting the rights of the consumer, has filed a lawsuit against Kaman & Cusimano, LLC, for violating the Fair Debt Collections Practices Act (FDCPA) by selling Doucet’s client’s home without giving her the opportunity to pay back the amounts owed.
Kaman & Cusimano, LLC, represent the Coventry Manor Condominium Association. According to the lawsuit, in April of 2010, Coventry Manor filed a complaint in the Franklin County Court of Common Pleas to foreclosure condominium lien against Doucet’s client for past due condo fees. Coventry Manor was granted a default judgment and a decree of foreclosure.
Coventry Manor did little with the decree of foreclosure for two years until the fall of 2012, when Coventry Manor requested a legal document ordering the sale of the condo. According to the lawsuit, the condo was appraised and put in a sheriff’s auction, all without Doucet’s client’s knowledge. The condo did not sell until a year later, and for less than half of what the homeowner had originally paid for it.
A month later the homeowner learned about the sale. She retained foreclosure counsel and contacted Kaman & Cusimano to find out the payoff amount in order to redeem her home by paying the Association in full. Kama allegedly sent her a letter stating her right to redeem her home had expired three days after the sale was made — a claim the lawsuit alleges is untrue. They neglected to include a payoff quote, and the sale of the home was then confirmed by the court before the homeowner was given that final opportunity to pay off the Association dues.
Doucet’s client claims Kaman & Cusimano violated the FDCPA by falsely stating she had forfeited her right to redeem her home, as well as obstructing her rights by not including a payoff quote. She is suing for actual, emotional, statutory and other damages in addition to attorney fees and the cost of moving from her condo.
Doucet & Associates is dedicated to fighting for the rights of consumers, protecting their interests and offering legal assistance to those who would otherwise be unable to afford it. If you feel that a company is taking advantage of you, the law firm welcomes your call at (614) 944-5219.
Doucet Sues Caliber for Harassing Homeowners for Amounts Not Due
Doucet & Associate has filed a lawsuit against Caliber Home Loans, Inc. and the Bank of New York Mellon Trust on counts for RESPA, breach of contract, negligence, intentional infliction of emotional distress, defamation and invasion of privacy.
The homeowners that Doucet represents took out a mortgage with Caliber Home Loans in 2005. In 2009, they were forced to file Chapter 13 bankruptcy and entered into a payment plan to repay Caliber and the Bank every penny owed.
The homeowners paid back what they owed and the bankruptcy Trustee filed a motion with Caliber Home Loans that the homeowner’s loan be deemed current. Caliber Home Loans did not object. During this time, Doucet’s client alleges that a bank representative assured the homeowners the loan would be made current once the bankruptcy was discharged a month later. The bank issued a statement in bankruptcy court claiming the homeowners were not behind on their loan.
The Bankruptcy Court deemed the homeowners’ mortgage current. Yet, the lawsuit alleges Caliber Home Loans refused to acknowledge the court’s decision. Instead, the lawsuit alleges that the bank continually refused to update its records and harassed the homeowners with letters and phone calls multiple times a day.
The lawsuit alleges that the inaccurate reporting to the credit agencies have made it impossible for the homeowners to refinance their home or seek new employment. Most upsetting, however, is the severe emotional damage the bank’s harassments have caused the homeowners, which resulted in a tragic miscarriage of the homeowner’s baby.
The homeowners are seeking actual, punitive, and statutory damages, declaratory and/or injunctive relief, attorney fees and costs and any other relief the court deems appropriate.
Doucet & Associates is dedicated to fighting for the rights of consumers, protecting their interests and offering legal assistance to those who would otherwise be unable to afford it. If you need help with a company that is trying to take advantage of you or a loved one, call the firm today at (614) 944-5219.
Wells Fargo Admits to Wrongful Conduct in Mortgage
Wells Fargo, a multinational banking and financial services holding company, admitted wrongdoing by proffering judgment in a federal lawsuit filed by Doucet & Associates on behalf of its client, a Westerville homeowner. Wells Fargo confessed to the lawsuit’s allegations and paid the homeowner money for the wrongful conduct.
In 2009, the homeowner accepted a promissory note and a mortgage in order to create a security interest in his home. During this time Landstar Title, LLC, APR Mortgage Corporation, Century Mortgage Company of Kentucky, and Prominent Title Agency, LLC, allegedly improperly set up an affiliate relationship (sharing profits from the real estate settlement). The homeowner alleged they did not properly inform the homeowner of this profit sharing, meaning he alleged all monies that changed hands were illegal kickbacks.
Later in 2012, the homeowner informed Wells Fargo that he wished to cancel his mortgage loan transaction under the Truth in Lending Act (TILA) on the basis of the non-disclosure of payments between the title company and mortgage company. Wells Fargo failed to honor this request, and in doing so violated the Truth in Lending Act.
The homeowner sought the cancellation of his mortgage loan be honored and that the security interest on his property be terminated. He also sought actual, statutory, and punitive damages in addition to injunctive relief to ensure these actions would not happen again, and wished to ensure these dealings did not affect his credit score.
Wells Fargo, in response, admitted wrongdoing and offered the homeowner cash in damages, which he accepted.
Doucet & Associates is dedicated to fighting for the rights of consumers, protecting their interests and offering legal assistance to those who would otherwise be unable to afford it. If you feel that a company is taking advantage of you, the law firm welcomes your call at (614) 944-5219.
Best Foreclosure Defense Available to Consumers
TILA rescission is one of the best statutory consumer foreclosure defense because it enables homeowners to unwind their entire mortgage transaction and get a refund of nearly all money paid to the lender, including monthly interest and closing costs. A subset of TILA, called HOEPA, offers even greater benefits that can generate substantial damages for the homeowner.
To qualify, the loan must have been used for your primary residence and not be older than 3 years old (HOEPA loans can be longer). Most importantly, the loan must have been used to refinance the home. That is, the loan must be a refinance under three years old. If those things apply, you should have your loan evaluated for TILA rescission based on faulty disclosures.
Behind the Ibanez Case
In ruling that U.S. Bank and Wells Fargo had to own mortgages before foreclosing on them, one judge put an end to a two-year saga that left two families without their homes. While the banks tried to convince Massachusetts Land Court Judge Keith Long that the foreclosure sales the banks held in 2007 were valid, Antonio Ibanez and Mark and Tammy Larace’s homes sat empty and deteriorating pending the lawsuits outcome. Over two years later, the Ibanez and Larace’s homes are back in their possession, but with an uncertain future ahead, despite the favorable ruling by Massachusetts Supreme Court.
When the economy worsened, Antonio Ibanez and Mark and Tammy Larace stopped being able to afford their mortgage, and knew it was only a matter of time before their home would be lost to foreclosure. After trying to prevent the inevitable, they received notice that their banks would sell their homes on July 5, 2007. Because Massachusetts permits foreclosure by notice, the banks did not need to receive court permission to foreclose, nor did they seek it. Instead, the banks were able to provide notice in the local newspaper of the foreclosure three weeks before the sale, and then sell the property at auction.
Without means to stop the foreclosure sales, the banks sold each property on schedule in 2007. No one bided on the homes except U.S. Bank and Wells Fargo. U.S. Bank bought Ibanez’s home for $16,437 (15%) less than the appraised value; Wells Fargo bought Larace’s home for $24,602 (17%) less than the appraised value.
Most mortgage loans are no longer lent and held by a local bank, determining who has ownership rights to the any particular loan at any given time becomes difficult and confusing. Banks buy and sell pools of loans regularly, sometimes bundling them with thousands of others to be sold off in chunks by Wall Street. Here, that is what happened to Ibanez and Larace’s loans. Their loans were bundled and sold as part of a security, meaning ownership had transferred multiple times and ended up in a trust. Unfortunately for the banks, however, they did not update their paperwork to show the proper transfers before the foreclosure. Without the proper paperwork, U.S. Bank or Wells Fargo could not prove they had the legal right to order the foreclosure sale. Because the banks did not have the proper paperwork, they could not prove they were the actual mortgage owners, so neither could establish its right to conduct the sale. This means neither bank could obtain title insurance through a title company.
Picture the banks’ problem this way. If you lent John money, and then he stopped paying you, you would have the right to sue him. However, you are the only person with the right to sue him. Your cousin Sally would not be able to take John to court to collect on your loan, nor could she collect on your loan and keep the money for herself. In order for Sally to have that legal ability to sue for you (called having “standing”), you would have to give Sally some legal right. You could either ask Sally to act on your behalf, or sell the loan to Sally so she could sue in her own name. Only when the loan belongs to Sally (or she has your permission) can Sally sue.
The same concept is at work here. U.S. Bank and Wells Fargo were not the original lenders on the Ibanez and Larace’s loans. Instead, other banks owned the mortgages, and never properly sold (assigned) their interest to U.S. Bank and Wells Fargo before those banks foreclosed on the property. Thus, U.S. Bank and Wells Fargo, like Sally, could not show they were the rightful owners of the mortgages and the banks with the power to foreclose. This caused a serious problem for U.S. Bank and Wells Fargo because without standing, they could not legally foreclose or sell the properties.
Without the legal right to foreclose on the properties, the banks did not have the legal right to sell the properties at auction. Without that legal right, the rights of any purchaser of the property would also be tarnished. Think of it in terms of buying a stereo system you know was stolen. Because the thief stole the stereo (he did not have the right to sell it), your ownership is also void – even though you paid the thief money for it. Just because you pay for the stereo does not mean you have ownership rights to it, if the seller never had legal authority to sell it to you. Similarly, if the banks take and sell homes without the legal right to do so, the buyer’s ownership rights will also be tarnished.
Here, the banks were both the seller and the buyer of the tarnished homes, raising serious questions about the legitimacy of the foreclosures and sales. The ownership problem was so big for the banks that title insurance companies would not issue policies on the Ibanez and Larace properties. Title companies issue insurance that covers property owners from losses associated with faulty property ownership chains. If the title company is not comfortable that the foreclosure was proper, and refuses to issue title insurance, then the value of that property drops significantly. After all, no one wants to buy a house from someone that cannot establish they actually own it.
Faced with the prospect of having two nearly worthless properties, U.S Bank and Wells Fargo sue for a court order blessing their foreclosure procedures. The banks could have gathered their paperwork establishing their rights to foreclose, which would mean obtaining “assignments” of the mortgage that showed an unbroken chain of ownership from the original lender to them. However, instead of gathering that paperwork so they could correctly foreclose on the properties, the banks filed a lawsuit asking the court to rubber stamp their shoddy procedures. With such an approval, the banks could then continue to take people’s homes without gathering the necessary paperwork first. Needless to say, the court told the banks to pound sand. The judge did not buy the banks’ arguments in his March 2009 decision, finding that without proper proof of ownership before the foreclosure sale, the banks could not meet the minimal legal requirements necessary to take and sell the homes. The judge noted that beyond Massachusetts’s minimal requirements that require the bank show ownership before the sale, a production of corrected documents after the sale do not fix the problem.
Neither bank was happy with the judge’s decision, and filed documents asking him to change his mind. The banks produced extra documents that they claimed demonstrated their actions were legitimate, including complex securitization documents. After reviewing those documents, the judge again denied their request, finding that “lawsuits are a serious matter and are not a place for ‘do-overs.’” He also found that the additional documents actually offered more proof the banks’ actions were illegal and that his original ruling was correct.
The judge’s order invalidated U.S. Bank and Wells Fargo’s foreclosures against the Ibanez and Larace properties. Both families are back in possession of their homes after two years of sitting empty, and the Massachusetts Supreme Court may have just paved the way for them to stay there. However, despite the favorable Supreme Court ruling, final resolution of these foreclosures is uncertain. While the court’s decision paves the way for each family to sue their bank for wrongful foreclosure, there is still a lingering question about which bank actually owns the mortgage and whether some other lender can appear with the correct documents to foreclose.
What has happened since then is the question?