After all the problems the country had with the dishonest banking system causing the mortgage crisis and recession, and the criticism of the Courts for their failure to require adequate monetary settlements from the banks, it would seem that the Courts would have learned that the public expected them to act with integrity when facing dishonest actions from financial institutions. Unfortunately this is not true.
The integrity of judicial system continues to fail the public as the Courts refuse to stop fraudulent foreclosure sales in violation of the law and without giving reasons.
The foreclosure crisis is not over. It continues today with false foreclosures, by the same Financial Institutions and some new players. As before, defrauded homeowners cannot rely on the Courts to stop fraudulent foreclosure sales.
Government prosecution has never been an option as government prosecution can never stop an unlawful foreclosure sale and can only result in retribution payments if any, after conviction.
After the Bailout, litigation ensued over fraudulent practices by the banks. This resulted in settlements long after the foreclosure sales occurred and homeowners lost their homes. The federal government and state governments received large payments while the homeowners received pennies on the dollar of the lost value of their home. Despite the bankers’ criminal acts, no senior banker went to jail.
After the mortgage meltdown, many loans guaranteed by U.S. government agencies or purchased from banks and other institutions by U.S. government agencies were sold back to the same banks who caused the meltdown, other banks or sold to private investment groups. These banks or private investment groups either securitized the loans into Real Estate Mortgage Investment Trusts [REMITs] and sold the securities to others or carried the loans and subsequently assigned the loan to others who did the same thing.
Federal and state laws were enacted to require the “lenders” to discuss modifications, and postpone foreclosures pending such discussions. Federal programs such as HARP, HAMP and federally supported programs operated by states such as Save Your Home California were instituted to help homeowners. However the success of such programs has been questionable primarily due to the lack of cooperation of the Financial Institutions and private investment groups.
These Financial Institutions, private investment groups, REMITs or assignees then foreclosed on nonperforming loans as quickly as possible creating a new foreclosure crisis.
The result was foreclosures continued at a heightened pace. The Financial Institutions, private investment groups, REMITS and assignees continued to commit fraudulent practices. Effective government enforcement of fraudulent foreclosure acts literally ceased.
Enforcement of fraudulent foreclosure acts is presently left to the homeowner.
The homeowner is forced to bring a private lawsuit to stop the foreclosure sale in federal or state court even when the Financial Institution, REMIT or assignee admits it does not own the mortgage, Promissory Note or Deed of Trust.
States such as California, prohibit an action to stop a foreclosure sale even when the foreclosure and foreclosure sale is a fraud.
At present, no law directly enjoins a fraudulent foreclosure sale. Laws exist to postpone a foreclosure sale due to technical errors, allowing for the correction of such errors.
The Fair Debt Collection Practices Act [FDCPA] and its state counterparts can stop a Financial Institution, private investment group, REMIT, assignee of a mortgage or Deed of Trust from foreclosing, by enjoining it from acting until it “verifies the debt”, the same as any other “debt collector.”
However, even the FDCPA has an exemption for “Financial Institutions” and their “Servicers” who acquire a mortgage or Deed of Trust, which was not in default at the time of acquisition and only later defaulted. This “exemption” places the homeowner at an immediate disadvantage related to a fraudulent Financial Institution or “servicer” because the court does not take such “fraud” into consideration.
The homeowner must show the Financial Institution or its Servicer is a “debt collector” under the FDCPA, despite the fact that the Financial Institution or “servicer” admitted it did not own the loan, mortgage, Promissory Note or Deed of Trust.
A “debt collector” under the FDCPA is “any person.. in any business of which the principal purpose of which is to collect debts” or any person “who regularly collects or attempts to collect … debts owed …. another.” [15 U.S.C. Section 1692a(6)]
The homeowner shows this by a statement on correspondence from the Financial Institution, private investment group, REMIT or assignee stating:
“The Financial Institution, private investment group, REMIT or assignee is attempting to collect a debt. Any information obtained may be used for that purpose.”; or
“The Financial Institution, private investment group, REMIT, assignee is a debt collector under the FDCPA [15 U.S.C. Section 1692a(6)].”
However, irrespective of this proof, no opposition by the defendants to the injunction, and an admission by the Financial Institution assignee it did not own the Promissory Note and the Deed of Trust, recently the U.S. District Court for the Central District of California [Judge R. Gary Klausner] dismissed the homeowners’ case “with prejudice” and refused to stop the foreclosure sale.
This action violated the U.S. Supreme Court and 9th Circuit precedent prohibiting dismissing the case with prejudice. The action also violated Local Rule 7-18 (c) “a manifest showing of failure to consider material facts presented to the court before such decision.”
Judge Klausner refused to consider the document admitting the defendant “servicer” was a “debt collector” and the documents admitting the Financial Institution did not own the Promissory Note and Deed of Trust.
Upon appeal, the 9th Circuit Court of Appeals [Justices Kozinski and Paez, Circuit Judges] denied an emergency motion for injunctive relief stopping the foreclosure sale and staying all proceedings pending appeal, in violation of the same U.S. Supreme Court and 9th Circuit precedents and assumedly refused to consider the same documents as they did not give any reason for their denial.
By denying the emergency motion, the 9th Circuit allowed the foreclosure sale to proceed thereby eviscerating any victory in the appeal.
By winning the appeal which will occur due to the violation of U.S. Supreme Court and 9th Circuit precedents, the defendant Financial Institution and Servicer will be required to “verify the debt” which the Financial Institution cannot do as it already admitted it did not own the Promissory Note and Deed of Trust.
The result will be that it is “enjoined from enforcing the “debt””. However, the injunction will be useless as the property will already be sold due to the refusal of the District Court [Judge Klausner] and the 9th Circuit [Justices Kozinsky and Paez] to enjoin the foreclosure sale.
Justice Delayed is Justice Denied!
The next step for the homeowner is to file an action to “clear title” after the foreclosure sale removing any title from the buyer while continuing to pursue the appeal in the 9th Circuit. California does not allow such suit to be filed prior to the foreclosure sale.
Richard I. Fine, Ph.D., Strategic Consultant and Mediator; Chmn., Campaign for Judicial Integrity; Co-Chmn., Judicial Reform Comm., DivorceCorp.
*Disclosure: The above article relates to an experience of Dr. Fine.