November 2012

A couple that lost their home to a PHIFA foreclosure rescue scam has been awarded $700,000 in damages against the fraudsters. Kudos to my friend Phil Robinson, at Public Justice, for shooting these fish in their barrel. The real issue in these cases is not proving the cause of action, it is getting paid.

But for the title professional, the key element of this Baltimore Sun article is its description of the 2007 lawsuit, where the homeowners regained title to their house, and an "new" mortgage in their name. This is describing the "bona fide" lender that retained a lien on the real property to the extent it paid off the homeowner's existing loan secured by the property.

Now, Phil, go get paid!

Jay Hancock, of the Baltimore Sun, takes note of a disturbing trend that title insurance claim counsel has seen over the last two years: it takes too long to evict. Add a title claim, and the borrower is living large for two to three years as the case drags.

The Baltimore Sun, and its real estate blog, seeks "foreclosure avoidance success stories." Two days after the posting, not a single post.....As a lawyer, the only success stories I have experienced were the product of one thing--litigation!

Baltimore City auctioned over 12,000 property liens, this week, in order to recoup about $203 Million in delinquent taxes and other charges against real property owners. If you're not from these parts, pay attention: The lien purchaser pays the amount of accrued and delinquent taxes or water charges to the municipality. In return the purchaser gets a lien certificate, which states an 18% interest rate. The lien purchaser can then file a petition to extinguish the equities of redemption in the real property. When I last checked, the petition could be filed up to two years later. And so, between the time of sale and the filing of a petition, the only evidence of this unrecorded equity is a notation on the City Lien Sheet, if at all. Also, when a petition is filed, it will often list a dozen or more properties and defendants, making traditional title searching difficutl since there is such a great chance of mis-indexing. But once that petition is filed, title is clouded, even if service is not completed.

Beware the City lien process! Check those settlement files for current lien sheets, and double check every case docket!

I spent over five hours in a mediation session scheduled by the Court of Special Appeals. This is a relatively new program, and I was told that my case was approximately the twentieth case to make use of the program. I am optimistic that this will resolve many cases that could not be resolved at the trial level.

To start, the nine parties and lawyers were introduced to a semi-retired Circuit judge and the head mediator. Unlike mediations held at the trial court level, often conducted before all the facts are developed, and certainly before any legal theories have been tested before a finder of fact, this mediation involved lawyers who knew all the ins-and-outs of the case. This made for a much higher level of discussion, and a more realistic view of each parties "best case" and "worst case" positions. My case did not readily settle, but we have a framework that may bear fruit before the first brief comes due!

Some of our lender/servicer clients buck when we request "proof" of assignments into the current lender or owner of the note and beneficial interest in a trust. But a quick read of this ABA Journal article informs of the importance of this simple inquiry.

In the posted story, well known institutions were found to have misrepresented the authenticity of assignments into the named plaintiff. The court found that the plaintiff did not own the mortgage it was suing upon, at the time the complaint was filed.

The Florida court went on to suggest that the law firm employees involved should be deposed to examine their possible complicity.

Due diligence is everything.

The Gov. signed SB373, which alters the notice and timing provisions of tax sale foreclosure actions against the right of redemption WHEN the tax sale certificate is held by Baltimore City AND the action is against a vacant lot or improved property that is cited as "vacant and unfit for habitation" by formal violation notice. The complaint to foreclose the equity of redemption can now be filed at "any time after the date of sale," and certain notices are excused.

This will modify, slightly, how we review tax sale files in connection with claims for intervening liens and interest. The City has less Due Process to adhere to when foreclosing equities of redemption than a private citizen.

On Saturday, our Legislature continued to rearrange the Titanic's deck chairs, tinkering with a Bill that would permit borrowers to demand mediation with their lender while in the midst of a foreclosure. The lender would be compelled to pay $300 toward the mediation, and the borrower would pay $50. Sen. Frosh says "anything the parties want to negotiate, they can negotiate." And most of the time, that will be nothing!

(and if you are interested in reading the Bill, it is HB 472, not HB475, as cited in the Daily Record article)

I hate to sound jaded, but borrowers who couldn't afford the home in the first instance, and can't afford it during the foreclosure process, bring little to the table. Add to that the mess of relationships that define the "loan-servicer-clearinghouse-mortgage trust-investor" holding the note and beneficial interest in the deed of trust, and you have a process that is poised to do absolutely nothing. Now, the Bill would require disclosure of the entity authorized to modify the loan when the notice for foreclose is filed, but I wouldn't expect the notifications to be complete and accurate, merely pro forma.

Even when you represent a "lender," it can take weeks or even months to get a clear answer on exactly who the "client" is in a particular case.

The Bill does add a whole new layer of litigation to the foreclosure process. If the borrower demands mediation, the lender may petition the court to dismiss the petition, alleging various listed factors. The Bill is not clear whether the borrower and/or the lender will be entitled to any pre-hearing discovery on the issues.

I can't wait to play in the sandbox with this new toy!