ARIZONA LAW MEMO — ATTACKING THE SALE

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SEE Arizona Law Memorandum

ATTACKING AND THE CREDIT BID AND SALE

AFTER REVIEWING THE STATUTES, OUR LEGAL SCHOLARS HAVE COME UP WITH AN Arizona Law Memorandum THAT WILL BE INSTRUCTIVE AND HELPFUL TO LAWYERS PREPARING TO ATTACK THE SALE, NOTICE OF SALE, NOTICE OF DEFAULT, AND OF COURSE THE CREDIT BID BY THE NON-CREDITOR. HERE ARE SOME OF THE HIGHLIGHTS, BUT READ THE WHOLE THING. THIS IS NOT A SUBSTITUTE FOR HIRING A LICENSED ATTORNEY IN THE JURISDICTION IN WHICH YOUR PROPERTY IS LOCATED. BUT IT APPEARS THAT MOST LAWYERS AGREE THAT IT IS APPLICABLE IN MOST STATES.

1. TITLE COMPANIES: Issue a trustee’s sale guarantee for non-judicial foreclosures. This is the supposedly the practice. When you conduct discovery, asking for the guarantee and the work-papers that back it up should be revealing.
2. BRING-DOWN REPORT: While the normal practice was to do a title review before initiating foreclosure, LPS and others have initiated a practice of doing a credit report, which is less expensive. In conducting discovery, you might ask for the bring-down report, why they don’t have one, and how they knew, as a title company, or Trustee, who the appropriate parties were — along with the all memoranda, correspondence and instructions received from third parties. A second bring-down report is supposed to be run right before the actual sale.
3. DEADLINE FOR REINSTATED DEBT: According to Arizona law, reinstatement of debt can take place as late as 5PM of the day before the sale date. This implies that the amount of the debt might be an issue that could be brought in court, leading to the more general inquiries of standing and real party in interest. Who decides if the debt is reinstated? If the sale is non-judicial, there has been no accounting or judicial determination as to the amount of the debt.
4. TRUSTEE’S RESPONSIBILITY FOR AN ACCOUNTING: You can request it in writing while the debt is subject to reinstatement. The Trustee Must respond with (a) unpaid principal, (b) name and address of the record owner of the property and (c) a list of all liens and encumbrances — which means that if the Trustee does not certify the lien or encumbrance of the party initiating the non-judicial sale, there can be no sale.
5. BROWN V NOWLIN: Unintentional acceptance of late payments prior to acceleration was held to cure the default. By contesting the right of the party to accelerate, and then sneaking a payment in, the default is cured. If the amount of the payment required to cure the default is contested, that is an issue of fact for a court to decide. Thus by bringing an action to reinstate or cure, you have a back door for allegations and discovery that will enable you to challenge standing, real party in interest and status as creditor  (capable of making a credit bid that is valid and not fraudulent).
   
6. CINUARELLI V ZIMMERMAN: Strict performance under the terms of the documents may be required in order to enforce acceleration clauses, absent fraud or bad faith by the lender. This case is often cited by lenders, so if you can get to use it, you enhance your strategic position. By alleging fraud and/or bad faith or that the lender is not present, or that the lender is acting in bad faith because it refuses to reveal itself or provide the proper accounting, you again have a back door to provide a general attack.
7. MILLER V EHRICK: Az Court of Appeals held that notice of default is required where late payments were accepted. If the “lender” could have complained but didn’t, the burden shifts back to the lender to re-start the process. Again, this is a back door to standing, real party in interest, creditor, lender, etc.
8. INACCURATE ACCOUNTING: Plenty of law and case law on this. It is universally accepted that lenders must maintain payment records and be able to verify them. This means you have a right to test the accounting and the verification process which can lead you to third party payments — including asking the question of to whom payments are or were being sent by the servicer.
9. SETOFF: NOGALES V ATLANTIC RICHFIELD: Set off is not NOT allowed if it is unliquidated which means that it your claim for damages for appraisal fraud, slander of title, identity theft, fraudulent foreclosure etc., is not a compulsory counterclaim. It might be a smart idea for some people to wait until the process is over and the “lender” has stopped moving the shells around to draw a bead on the defendants who were responsible for the fraud, including predatory lending. This would not supersede the rescission defense, however, which is not set-off. If you have rescinded, then there is no mortgage to foreclose.
10. WAHL V SOUTHWEST SAVINGS: BROKEN PRIORITY CLAIMS ARE ISSUES OF FACT: They must be resolved prior to going forward in a foreclosure sale — whether it is commercial or residential. This is a back-door entrance to the issue of who are these people and what are they doing in court, much less attempting to sell your property.  The issue of broken priority is normally easily resolved either by corrective instruments, or by a court order. The reason why LPS exists and we have all these robo-signed, fabricated and forged documents is that a corrective instrument signed by the proper party is impossible — for one thing it would require the signature of the borrower, and the only way you could force the borrower to into a corrective instrument is by proving up the parole evidence of the actual transaction — something that the pretenders are loathe to do because the loan originator never touched the money, nor did MERS, the Trustee, etc.

Tags: bankruptcy, borrower, disclosure, foreclosure defense, foreclosure offense, fraud, Lender Liability, predatory lending, rescission, securitization
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