Tag: “wrongful foreclosure”

  • California Cracks Open the Court Doors for Foreclosed Homeowners

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    Katie Porter

    As California Monitor, my staff and I fielded tens of thousands, probably hundreds of thousands, questions from homeowners. The hardest conversations were the easiest from a legal perspective. If someone's home was foreclosed in California, we advised there was little, if any, likely recourse. The California Homeowner Bill of Rights created a new remedy for consumers, but for homeowners before its January 2013 effective date, the options were nearly nil.

    The California Supreme Court, in a decision that surprised many, staked out a clear right for homeowners to contest in court whether the foreclosing party had proper rights in the mortgage to allow it to foreclose. In Yvanova v. New Century Mortgage Corp, the court reversed the Court of Appeals and remanded to allow the plaintiff to present her action alleging wrongful foreclosure. The court was careful to stay away from the merits, making no ruling on whether the plaintiff could prove the assignment was void. But, I this the court engaged in a bit of chicanery in declaring that its "ruling in this case is a narrow one." Yvanova is a big change from the developing body of lower court cases in California denying a borrower standing to file a claim based on violations of the the terms of a pooling and servicing agreement. 

    The LA Times story identifies a number of open questions that must be answered to know if any homeowners will actually win damages in wrongful foreclosure cases based on pre-Homeowner Bill of Rights' actions. For one thing, the statute of limitations for wrongful foreclosure is uncertain in California–partly because the state has had so few cases. While I think the court is correct on the law in Yvanova, the wheels of justice may have turned too slowly to help people. As a case study, the opinion may best be used as evidence of the importance of faster, legislative remedies for consumers such as the Homeowner Bill of Rights over developing the common law. The opinion is well-done, however, and merits a read, particularly for its quotation from the Miller opinion: "Banks are neither private attorneys general nor bounty hunters, armed with a roving commission to seek out defaulting homeowners and take away their homes in satisfaction of some other bank's deed of trust."

  • What do bankruptcy mortgage servicing and ebola have in common?

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    Katie Porter

    A long long time ago in this same galaxy, I wrote what may be Credit Slips' most popular post: What do bankruptcy mortgage servicing and phone sex in common? Today, I bring you a new comparison: bankruptcy mortgage servicing and ebola. At the outset, let me be very clear that ebola is a tragic health care crisis. I do not mean to minimize those deaths and illnesses with a comparison to mortgage servicing–although to be sure, poor mortgage servicing has tragic financial consequences.

    Here is the basic analogy. Ebola has a high kill rate. Similarly, screwed up mortgage servicing can be the death knell for homeownership. Ebola is currently epidemic in West Africa, just as the foreclosure crisis made mortgage servicing a top-line policy problem. And despite the publicity, both ebola and foreclosure–as epidemiological matters–are rare. This is one of the reasons that investment and research on both problems has lagged behind more common occurrences such as, respectively, malaria and mobile banking. We have known about the risks of ebola for years, yet the global community is still struggling to find fixes. Again, in parallel, it has been twelve years since Hank Hildebrand wrote "The Sad State of Mortgage Service Providers," and six years after Tara Twomey's and my research on mortgage servicing errors in bankruptcy hit the front pages of newspapers. While improved, bankruptcy mortgage servicing is still a threat to a healthy bankruptcy system.

    Screen Shot 2014-09-24 at 10.27.33 AMMy favorite recent case in point:  In re Williams, in which a couple filed a second bankruptcy solely to save their home–the exact reason for their first bankruptcy. (At least you can only get ebola once!) The Williams alleged that Ocwen had not properly serviced their mortgage during their first bankruptcy. Ocwen pursued a foreclosure after the debtors had completed their chapter 13 plan and refused to accept debtors' payments. Its proof of claim alleged 28 missed payments and an arrearage of $43,388.82.  U.S. Bankruptcy Judge Brendan Shannon (Bankr. Del.) ultimately found the debtors owed only $16,164.24 (12 payments) and ordered Ocwen to pay the costs and fees of the debtors' second bankruptcy filing and litigation with Ocwen. In describing the situation, Judge Shannon, said that the bankruptcy servicing created an "ensuing mess [that] is "dispiritingly predictable." The system was bogged down with a second case, the debtors threatened and stressed by a second foreclosure, and Ocwen spent its resources on a second round of litigation (instead of helping homeowners get loan modifications.)

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