Turning the Screws on Borrowers

Posted by kevin on May 24, 2013 under Foreclosure Blog | Comments are off for this article

Over the last two weeks, there have been two unpublished appellate division opinions which tighten the screws on the borrowers in default judgment situations. One case, Walsh, involved Aurora Loan Services, which was the servicing arm of Lehman Brothers. Right off the bat, you know that Aurora probably did not lend the money to the borrower but why quibble over details. Interestingly enough, the panel consisted of only two judges. I guess they knew there would not be a tie. The borrower was pro se but did raise some interesting issues which the undermanned panel swatted away like a mosquito on an August evening. Basically, default judgment was entered and the sheriff sale was put off 11 times. Walsh argued lack of standing. The court said that standing was not jurisdictional and that failure to prove standing does not equal a void judgment under Rule 4:50.

Oddly enough, the second case, Cole, also involved a two judge panel, a default judgment with 11 adjourned sheriff’s sales and a standing argument. (Note that both opinions seem to infer that the mediation was protracted to the detriment of the lender when anyone who has been through the mediation process knows that it is the lender who drags out the process.) In this case, we had a Fremont loan (another notorious predatory lender examined and sanctioned by the feds). The MERS assignment of mortgage (which Judge Todd in Raftogianis said is at best a distraction and does not transfer the mortgage loan) was executed after the complaint was filed. No problem says the panel because no answer was filed, and the process was delayed to the detriment of the lender.

Two points: First, most of the recent default judgment cases have said that standing is not jurisdictional. None of the cases, however, mention two NJ Supreme Court cases (Baby T and Watkins) which both state that if the plaintiff does not prove standing, the court does not have the right to decide the substantive issues of the case. Sure sounds like the NJ Supremes are saying that standing is jurisdictional, or something close to it. I argued this in Polanco and was ignored by that panel. My client did not want to take this issue up to the Supreme Court because of the expense. I could not afford to work pro bono on that appeal so the case died on the appellate level. Why are the courts avoiding the clear language in two Supreme Court cases which appear to say the opposite of what is now a commonplace holding in foreclosure cases? I have my theories, but…

The second point is the more practical point; that is, the standard to vacate a default judgment in a foreclosure case in NJ is now almost insurmountable. I did it in Bagley with a very favorable set of facts. But there have not been many decisions like Bagley that have come down the line in the last couple of years. And those more recent cases have a chilling effect on defense counsel. For an attorney, the days of financially rolling dice on these cases are over. Borrowers are going to have to subsidize this type of litigation. Or better yet, avoid the issue in its entirely by hiring counsel when you get a Notice of Intent.

Appellate Argument- appears good result

Posted by kevin on February 3, 2012 under Foreclosure Blog | Comments are off for this article

Appeal dealt with whether trial judge improperly refused to set aside default judgment.  Clients were older, African American couple- hard working, nice people who got taken for ride.  ARM with max interest of over 14%.  Had predatory lending, consumer fraud, HOEPA, common law fraud issues in addition to standing.  Trial judge did not see it our way, so filed an appeal.

On our website, we say that we are not a modification company- we fight foreclosures in court.  Why? Because we believe that our clients are going to get a better shot in front of a judge or judges (appellate level) than they are going to get with a servicer on a HAMP modification.  Yes, it is more work and more money, but we believe that ultimately, the borrower who fights gets a better result.

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Seek Help Early

Posted by kevin on December 14, 2011 under Foreclosure Blog | Comments are off for this article

Last week, I argued before the Appellate Division to set aside a default judgment.  My client had good arguments that the loan was predatory, that the plaintiff lacked standing and that the Fair Foreclosure Act may have been violated.  However, the judges focused on the fact that my client never hired a lawyer until more than a year after default judgment had been entered.  I made creative arguments to get around this “bad fact”- arguments that are a little too detailed and, perhaps, too boring to be presented here.

Without going into detail, there is a lesson to be learned irrespective of how the Appellate Division rules.  When you get served with a Notice of Intent to Foreclose or a Complaint, hire an attorney to file an answer.  I know that at the same time these papers are coming in, the servicer is bombarding the borrower with letters about modifications containing statements that the lender wants to work with you to save your house.  That is usually a lot of hot air especially when you look at the dismal percentages on permanent modifications being granted even at this late date.

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