BKR Courts Buying time with "Haphazard" Modifications: What to Do

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The following is my own opinion and reactions to things I observed in court. This is for general information purposes and not legal advice which can ONLY come from an experienced licensed attorney in the area in which your property is located.

REFLECTIONS ON AN AFTERNOON IN COURT:

Listening to the docket one afternoon, virtually every one of the Motions to Lift Stay were subject to court-imposed restrictions that the parties seek modifications. The Judge noted that he could not detect any rationale for when the modifications were granted or denied and used the word “haphazard” to describe the results. The Judge noted the current news stories and congressional hearings regarding the foreclosure proceedings. It seemed quite obvious to me that the Judge was biding his time waiting for things to sort out a little bit more before taking a stand on whether the issue of ownership of the mortgage would be treated seriously.

The particular Judge I heard made the comment from the bench that “someone” must be entitled to foreclose if the borrower had missed payments. This echoes hundreds of similar reports I have heard. The answer to that, I think, is that “someone” lent the money and has a claim, but it is by no means a matter of evidence in the record that the loan was properly documented, recorded or the lien perfected. Nor is there any evidence in the record that any of the parties seeking to lift the stay or go forward with the foreclosure or sale is entitled to actually collect anything or bid on the property as anything other than a bona fide  purchaser for value — i.e., with money. Specifically a credit bid from anyone, must be accompanied by proof that they are in fact the creditor to whom the money is owed.

The Judge should be encouraged, if he or she is inclined to grant the lift stay motion, to add something to the order that this is not a finding that this movant is in fact a creditor from whom the auctioneer may accept a credit bid. It is only a finding that the bare essentials for lifting the stay appear to be present and does not address any other findings of law or fact. The pretender lenders are using these orders lifting stay as evidence that they are the creditor when no such finding was made.

It was also obvious that the stories were all the same. Lack of call backs, improper procedures, sometimes multiple banks seeking foreclosure on the same property, and ridiculous explanations for why modification was denied, which most of the time was the case. On the other hand it was also obvious that there is still forward momentum on these cases and while they have been slowed down, the foreclosures have not been stopped.

From my perspective it looked like an adversary proceeding was required to be filed by the borrower if they wanted to stop the foreclosure. It also occurred to me that a notice letter should probably be sent to the Trustee in non-judicial states, and to the Court Clerk in judicial states that objects to a credit bid being accepted from anyone other than the creditor. If the Trustee or Clerk proceeds, there is a possible cause of action for injunction and mandamus regarding the use of the credit bid to get around the issue of standing that was fudged in the prior actions or proceedings.

PROOF OF CLAIM AND OBJECTION TO CLAIM: This is nit-picky stuff but it could have far-reaching consequences. Check the rules and statute for the requirements of a proof of claim to be filed. If there is anything wrong with it the proof of claim is defective. You can also file an objection to proof of claim, which probably ought to be done in virtually all foreclosure cases involving securitized loans. Your objection, could be that the party claiming to be a creditor is not a party to whom any money is owed by the debtor. Attached to your objection is the original mortgage and note which presumably names someone other than the the party filing the proof of claim and the motion for relief from stay.

All of this goes back to my original promise that attorneys might be committing an error that they and their client will regret if they list anyone other than the parties of record as creditors. That would be limited to solely the payee on the note. It would seem that naming MERS or any other pretender lender would be used against you as an admission against interest. The current software used by bankruptcy attorneys pretty much picks up all possible names, including the servicer, to whom no debt is owed. In my opinion, lawyers should think before they add a party to the creditors list whom they may later want to challenge as not having the standing of a creditor.

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