Halt Foreclosure Proceedings By Challenging Your Bank's Claim To Your House

Banks don’t always own the homes they’re trying to repossess, a crucial oversight that residents facing foreclosure can exploit to stay in their homes—though not without effort. Mamie Ruth Palmer successfully sued the Bank of New York after the bank tried to foreclose her home without possessing the note securing the property. After six years in court, the bank agreed to slash her outstanding mortgage in half and waive $12,000 in foreclosure fees so she could keep her home.

The problems associated with banks that begin foreclosure proceedings when they do not have proper legal standing are now looming larger in the mortgage meltdown. Loans were heaped into trusts with little documentation of ownership or proper loan assignments — it was all about volume and the fees that came with it — and now that sloppiness is hurting both lenders and borrowers.

Mr. Rothbloom said he had another case in which the lender’s representative has been unable to prove ownership for two and a half years.

Meanwhile, consumer lawyers fear that borrowers are being pushed out of their homes by companies that have no right to do so. Such a prospect is particularly worrisome for residents in states that allow lenders to foreclose without court supervision, known as nonjudicial foreclosure states.

Losing a home is devastating for any family. Such monumental and consequential proceedings should adhere to letter of the law, and if they don’t, families shouldn’t hesitate to ask a court to defend their rights.

How One Borrower Beat the Foreclosure Machine [The New York Times]
(Photo: Getty)

Comments

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  1. Irashtar says:

    They cut the loan in half because they couldn’t prove they owned the house? What gave them the right to the other half of the loan?

  2. Jean-Baptiste Emanuel Zorg says:

    A handy chart listing foreclosure types, timeframes, deficiency judgments, and redemption periods for every state:

    [www.all-foreclosure.com]

  3. flidget says:

    Who can afford to pay for a six year legal battle, but not their mortgage?

  4. laserjobs says:

    Is there any easy way to check to see if the servicer has the note in their possession?

  5. dragonvpm says:

    @Irashtar: They did/do own the note that corresponded to her mortgage, but they didn’t have their paperwork in order. Getting all the t’s crossed and i’s dotted in real estate can be tricky. This is why it can take a while just to buy a house and close on it (when I bought my house it took a week longer than expected to get ALL the paperwork in order and ready to be signed by both parties).

    IMO it’s an interesting side story in the wild and crazy sub prime mortgage situation. It’s easy to blame folks who end up in trouble with their mortgages for being greedy etc…, but the fact that the entities actually buying and selling these mortgages didn’t fill out all the legal paperwork that they were supposed to should tell you something about how they were doing business (i.e. aside from this, how often do we ever hear about banks and other financial institutions not protecting their interests via legal documents?). If these companies weren’t taking the basic legal steps they were supposed to in order to protect their investments, what makes you think they weren’t taking illegal steps to secure more mortgages and talk people into signing up for things they couldn’t afford just so they could make more money?

    @flidget: If you’d read the article you’d see that she kept making her mortgage payments to the bankruptcy court while her case worked it’s way through the system. Her lawyer is now going to be paid his $10,000 fee out of that pool of money.

  6. Someone should have told this to Miss “I’m gonna re-decorate the house before they sell it at the foreclosure sale….with my brains” from the other day.

  7. humphrmi says:

    @flidget: Click the link at the bottom of the story. It takes you to the corresponding news article.

    Roughly $10,000 in legal fees billed over five years by Ms. Palmer’s lawyer, Howard D. Rothbloom, will be covered by payments she has made toward her mortgage while she was battling foreclosure.

  8. dragonvpm says:
  9. renegadebarista says:

    @Git Em SteveDave is a poor substitute for LindsayJoy:
    Wow, you really have no class. Making fun of someone who feels so trapped that they take their own life, is funny to you? Someone lost a wife and mother and you mock her. Nice.

  10. jefino says:

    @laserjobs: Call them and ask them for a copy.

  11. Counterpoint says:

    Good for her. While this site’s article makes it sound like a way for people to not pay their mortgages and still keep the house by stalling out their bankers, the actual article details the improper actions of the bank after her bankruptcy.

  12. nebcorp says:

    I love consumerist.com , it has given me a lot of great info about products I buy. However for mortgage information, Calculated Risk is largely regarded as source of high quality and non nonsense information. This post better details the loan situation and Ms. Palmer is not a winner in the situation.

    [calculatedrisk.blogspot.com]

    No contributor(reporter?) on consumerist.com says we should get rid of banks and loans – just be smart about their use. If this massive failure took out banks, would we really be better off?

  13. tedyc03 says:

    I’m all for banks properly seizing assets that they rightfully are owed in a forclosure. You don’t pay the mortgage, you lose your house.

    BUT…

    I’m also glad to know that the legal system still works *and* that she was able to keep her house and get her lender to negotiate with her. I’m sure that she wanted to keep the house and was happy to pay her mortgage but could not for whatever reason…and I’m glad to see that she had the guts to stand up to them and make them prove it.

  14. Scuba Steve says:

    @flidget: A lawyer, of course.

  15. keleka says:

    So when the real holder of the note comes along and demands payment, then what?

  16. humphrmi says:

    @keleka: The bank is probably the holder of the note. They just can’t prove it. The problem is, they probably invested in this house (along with thousands of others) and either the company they bought the mortgage from went under, didn’t send them the paperwork, sent them the wrong paperwork, or any number of other mistakes. From 2002 to 2007, everyone was in such a hurry to move this paper that some of it got lost. Also as the mortgage brokers started going under, they shredded their documents to avoid litigation.

  17. Brontide says:

    Um, the article is incorrect as has been pointed out on calculated risk.

    [calculatedrisk.blogspot.com]

    1) There was never any dispute that she owed BoA, the question was if the mortgage service company had grounds to peruse action.

    2) She Can’t afford the taxes let alone the fees and other things that will happen down the road.

    3) She is further in debt because of all of this.

    In the end her home will be seized by someone else and this time she will probably not be lucky enough to drum up a PR campaign.

  18. humphrmi says:

    @snowmoon: She’s further in debt, but she’s converted her debt into a reverse mortgage, which for a lady her age is probably a good idea. She’ll get to stay in the home (as long as she maintains it and pays the taxes and insurance) until she dies without having to make any mortgate payments, then her estate will either sell the house (if it’s worth more than the reverse mortgage) and keep the difference, or surrender the property to the reverse mortgage company and they will sell it. If she’s still upside down on the reverse when she dies, IndyMac will eat the difference. Hopefully by then, the taxpayers will be off the hook for IndyMac’s bad loans and it’ll just hit their (the new company’s) bottom line.

  19. MikeWas says:

    Tricky points here: banks *never* own the home they foreclose on, otherwise there would be no foreclosure possible. And foreclosure is not repossession. It is a compulsory sale of the home to satisfy the loan.

    Part of the problem many homeowners face is the fact that they can’t figure out who the real party in interest is, and many of the servicing companies – “pretender lenders” – refuse to negotiate in good faith or deliberately mislead the borrower about their intent to negotiate until the day the foreclosure is filed.

    @laserjobs: No. Even if you “call and ask for a copy” as one previous poster suggested, possession of a copy does not prove possession of the original. The only way you’ll ever know if if they foreclose and then present the note.

  20. mythago says:

    Or, companies split up the various aspects of the mortgage and bundled those, so “who has the right to foreclose?” isn’t immediately obvious.

    Whether the right lender may or may not eventually foreclose is beside the point. The courts are supposed to make sure that the person bringing a lawsuit has grounds to do so. Could I go ahead and foreclose on your house? Hey, I have the note–trust me!

  21. sam-i-am says:

    That’s right everyone – try finding new and interesting ways of getting out of paying your mortgage and staying in your home even though you can’t afford it. It’s not like banks can fail…

  22. god_forbids says:

    @sam-i-am: Your comment, sir, is not very Consumerist. Don’t we have the right to battle banks into bankruptcy over customer service issues, and then laugh at then when the FDIC is locking their doors? Nobody who graduated with a degree in finance deserve jobs or housing for their families, anyway.

    /sarcasm(?)

  23. ram0029 says:

    “Such monumental and consequential proceedings should adhere to letter of the law, and if they don’t, families shouldn’t hesitate to ask a court to defend their rights.”

    So its called defending your rights these days? Wow, I always called it not paying your bills. I have had wrong. Guess I need to default so I can defend my rights and stick it to the bank over a paperwork snafu. Hey they would stick it to me right?

  24. ShanghaiLil says:

    @ram0029: Guess I need to default so I can defend my rights and stick it to the bank over a paperwork snafu. Hey they would stick it to me right?

    Do you think for a moment that they wouldn’t? Do you think for a moment that a bank wouldn’t insist on enforcing clauses written in convoluted legalese, in teeny, tiny print, and sent to the consumer as a change in policy, enclosed in a mailing containing pages of bills and lots of flyers advertising other services in order to minimize the chances that said consumer would read the document? Of course they would. And they’d insist that every i be dotted and every t be crossed. On those occasions when the law is on the consumer’s side, why shouldn’t s/he make the most of that? Perhaps that extra time gained allowed the mortgagee to get back on her feet financially.

    @god_forbids: Nobody who graduated with a degree in finance deserve jobs or housing for their families, anyway. /sarcasm(?)

    I’ll start believing that consumers should worry about the security of bank finance people just as soon as I’m convinced that those bank finance people are worrying about where that woman whose house they’re about to foreclose on is going to live. Until then, I’m just going to assume that they’ve tucked away somewhere some of those insane charges that they hit me with when they started changing the due dates on my credit card payments without notice.

  25. mythago says:

    How terrible that the courts are actually requiring foreclosures to be done in accordance with the law, instead of simply saying “Well, they’re deadbeats, screw them.”

  26. Corbin123 says:

    good article about judges upholding the letter of the law over at the wsj law blog:
    [blogs.wsj.com]

  27. Leohat says:

    Isn’t this same info that Randi Rhodes got in trouble for giving out some weeks ago?

  28. modenastradale says:

    @Git Em SteveDave is a poor substitute for LindsayJoy:

    What a disgusting comment. What the hell is wrong with you?