About Those Attorney Fees Awards to Bank Attorneys: Double Dipping+?

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When I was litigating 24/7 I used to say that all the best ideas I ever had for the Courtroom came from my clients. I think the reason is fairly simple: they had to live with the result I didn’t. No matter how passionate I was about their cause, nobody cared more about their case than they did. And that’s a good thing because, as any lawyer who has represented himself knows, getting too close removes your objectivity and tactical advantages. You are more likely to think through the consequences of adopting one strategy over another if you have the longer view.

But sometimes you we miss the simple questions as we speed toward our desired victory. It’s when you lose that you start realizing some things that maybe you should have brought up before. One highly educated pro se litigant asked me a simple question relating to a current case and it stopped me dead in my tracks.

The litigant had brought all the usual claims for quiet title, lack of standing and fabricated documents and, as is the tendency still, especially in Arizona, judges tend not to believe that these claims and defense are anything more than a gimmick to defeat an otherwise valid debt. So the homeowner lost and is now on appeal. The homeowner also lost the eviction (FED) action and now that is up on appeal but not before they were actually evicted. There was an issue about supersedeas bond and the timing of when it could be posted.

Supersedeas bond is meant to provide some measure of protection to the the winning side in the event the appeal fails. So for example if the rental value fo the property is $1,000 per month, the court might estimate the length of the appeal and set supersedeas at the rental value so the other side wouldn’t be prejudiced by a frivolous or losing appeal. The banks have been using supersedeas as a weapon against homeowners knowing that they have limited resources and they have sought to raise the bar on supersedeas as high as it can go.

In their effort to increase the supersedeas bond and thus further demoralize the homeowner they have gone one step too far, I think. But I missed the point until the litigant himself asked me about it. His question was essentially this: “if the mortgage and note state that in the event it becomes necessary to sell the property to satisfy the borrower’s obligation, the proceeds shall be first applied to attorneys fees and costs of foreclosure. Why then does supersedeas include attorneys fees and costs (with some judges)?

His question got my brain moving. The property already has been sold, at least according to pretender lender bank doctrine, and the trustee deed has been issued. The bid is whatever is stated on the Trustee deed, and in some cases, the property is even sold a third party. So the if the bid was $100,000 and the fee award was $50,000, isn’t that already covered? Isn’t that attorney fee award improper as applied against the homeowner — especially in a non-deficiency state like Arizona? In most cases, the “lender” can’t pursue the homeowner for a deficiency judgment if they elect non-judicial procedure. Why are attorneys fees an exception to this rule?

The answer appears to be that attorneys fees and court costs are not an exception to the rule regarding the prohibition against the banks against pursuing a non-deficiency judgment, but hey are doing it anyway through these attorney fees awards. And then they are bootstrapping it into a demand for supersedeas bond that includes attorney fees and costs. This is improper.

In a declining market, such as we have, where the rental values are dubious at best and where the marketability of title and property is dead in the water, supersedeas should be nominal — a few hundred dollars. But lawyers are making the mistake of not raising this issue at the hearing on supersedeas and of course pro se litigants are making all kinds of mistakes because they didn’t go through 3 years of law school and decades worth of practice in the courtroom.

The moral of the story is that when opposing counsel comes in asking for a fee award against the homeowner, the homeowner or counsel should object based upon the the prohibition against pursuing deficiency judgments. That legal bill is for the bank to pay and not for the homeowner to pay. Even if the Judge were somehow inclined to enter an order setting the amount of fees, it would still be for the bank to pay and not the homeowner. And frankly even if it was the homeowner’s bill, the amount would ordinarily be covered by whatever the value is of the property, low though it might be.

So these awards are actually double dipping — because the investors are not getting complete reports. The award is first used against the homeowner illegally and then used against the investor pool so that the house goes to the servicing bank, which was the their goal all along. The reason these pretenders are fighting for homes that were not financed by these pretenders and where the obligation was never purchased by these non-lenders is that they know that the investors have abandoned the claim against the homeowners as hopeless and they are instead demanding that the investment bank pay them back 100 cents on the dollar because of the fraudulent sale of mortgage bonds.

The abandonment by the investors has caused a vacuum which has spawned “moral hazard” as they say on Wall Street and “theft” as they say on Main Street. People and entities who had nothing to do with the loan transaction and who might, in certain cases have served as conduits for a small part of the money that flowed from the borrower, have stepped in with immunity from any liability because the investors who have the claim don’t want any part of the claim.

Why? Because the amount the investors advanced was (a) far less than the amount that was loaned which was (b) far less than the value of the loan which was (c) depreciated further by the appraisal fraud at origination of the loan which was (d) even further depreciated by the fall in property values caused by millions of homes being dumped on the market. Add counterclaims by homeowners for predatory and deceptive lending and you have essentially a negative value for going after homeowners — unless of course you have nothing to lose because you invested nothing, like the pretender lenders.

And if anyone questions my assertion that investors have abandoned their rightful claims against homeowners, just ask them.

Tags: ARIZONA, ATTORNEY FEES, bankruptcy, borrower, countrywide, deficiency, disclosure, foreclosure, foreclosure defense, foreclosure offense, foreclosures, fraud, LOAN MODIFICATION, modification, quiet title, rescission, RESPA, securitization, supersedeas, TILA audit, trustee, WEISBAND
Posted in bubble, Corruption, Eviction, securities fraud |