LAWYERS AND BANKS SANCTIONED FOR FILING WRONGFUL FORECLOSURES

From: April Charney [mailto:April.Charney@jaxlegalaid.org]

Foreclosure Mess: Two Different Plaintiffs Claim to Own Same Mortgage
Posted By Amir Efrati On November 14, 2008 @ 1:38 pm In Global | No Comments
It’s been a while since we revisited the foreclosure crisis, which has obviously gotten worse. Foreclosure numbers are skyrocketing, while numerous states, the federal government and financial institutions are tackling the issue in various ways.
For the legal beagles at so-called foreclosure “mills,” which do assembly-line lawyering for lenders and other mortgage owners, the crisis has meant lots of work but also woes, including sanctions and stern lectures from judges (examples here, here and here). Why are judges so frustrated? The increased volume is leading to mistakes and irregularities, which we’ve chronicled before.
Now comes the foreclosure case of Joanne Fredenburg, a widowed homeowner in Lehigh Acres, Fla., where real estate prices have plummeted. Last month Ms. Fredenburg was served with not one but two foreclosure lawsuits from two different plaintiffs that both claimed to own her promissory note and mortgage and said she owed them each more than $276,000. That, of course, is impossible. (Click here and here for the two complaints.)
One lawsuit seems to make sense. The plaintiff is a unit of Deutsche Bank that acts as a guardian or “trustee” for investors of mortgage-backed securities. Those investors collectively own loans such as Fredenburg’s. But the other lawsuit was filed by a mortgage-servicing company that collects borrower payments on behalf of investors. Surely that is a mistake, as servicers don’t typically own loans.
Indeed, following an inquiry by the Law Blog, we’re told that the servicer, American Home Mortgage Servicing, will withdraw its lawsuit, which was filed by Miami-based Adorno and Yoss LLP. (We’ve put out calls to both and will let you know if we hear back.)
But Ms. Fredenburg’s lawyer is none too happy. Even after American Home withdraws its suit, J. Rex Powell of Cape Coral says he will ask for discovery to find out what payments his client made, whether they were paid to the right entity and whether she was given the proper credit. Given that most people don’t defend against foreclosure lawsuits and the plaintiffs are awarded default judgments, Powell says the case raises an interesting question: Are entities wrongly filing foreclosure suits and collecting on notes they don’t own?
Perhaps Florida Circuit Judges Jay Rosman or Michael McHugh, whose dockets include the Fredenburg foreclosure suits, will be able to shed some light.

November 30, 2007, 9:10 am
Law Blog Lexpionage: “Foreclosure Mills”
Posted by Peter Lattman
Are you hip to the Web site Word Spy? It’s a fun one for all you language lovers out there. Its founder describes its mission as “lexpionage” — sleuthing out new words and phrases. Recent entries include “stroller envy,” feelings of envy directed at high-end baby strollers owned by other parents; and “tattoo regret,” feelings of embarassment or remorse caused by having one or more tattoos.
What fun! Well we hope that Word Spy reads the WSJ because it might want to introduce its readers to “foreclosure mills,” or law firms that are handling thousands of foreclosure cases on behalf of mortgage lenders and servicers. The firms are often paid based on volume — in Ohio, for example, they get around $1,000 a case.
Some of these “foreclosure mills” are drawing criticism from judges for aggressive tactics and cutting corners. Here’s the WSJ story from the Law Blog’s very own Amir Efrati.
This month a state judge in Cincinnati dismissed a foreclosure suit brought by Wells Fargo because it filed the suit before it acquired the mortgage. The judge sent a warning letter to the bank’s law firm, John D. Clunk Co. LPA, in Hudson, Ohio. Judge Steven Martin — we hear he’s a wild and crazy judge — wrote it was “troubling” that the plaintiff “and its counsel filed the lawsuit with no basis whatsoever” and that firm must not do so again. (The law firm didn’t respond to requests for comment. Wells Fargo declined to comment.)
Judges are also fining firms for filing shoddy motions in bankruptcy court on behalf of creditors. In Houston, three judges have sanctioned or considered sanctions against Barrett Burke, a Texas size foreclosure firm. In June, Judge Wesley Steen imposed a $75,000 fine on Barrett Burke for filing computer-generated pleadings that were “grossly erroneous” and “gibberish.” The judge wrote that the firm has “become over reliant” on the software and its attorneys are “allowing their signatures to become affixed to pleadings that they have not adequately reviewed.” Said partner Michael Barrett: “We have taken many steps to eliminate the problems that we had in the past.”
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Gotta love Clunk’s website — scroll down a bit and marvel at “OUR COMMITMENT TO EXCELLANCE” [sic].
Comment by Eddie – November 30, 2007 at 9:38 am
These businesses are just enforcing their rights against deadbeats and criminals. Lets not get carried away with the technicalities of actual ownership of the debt or the burden of proof of indebtedness. We all know that when you miss payments the company can sue you for the debt. Why all the whining about technicalities. This is just another liberal trial lawyer crying point. Woe to the poor people who can’t pay their bills!!! Screw them!! They made a promise to pay and if they can’t keep it then the rights of the lender will be enforced by the state via the sherriff!!
Comment by Tort Reform – November 30, 2007 at 9:51 am
“These businesses are just enforcing their rights”
These rights are provided for by law. Therefore it seems only natural that when you ask the state, via the court, to enforce the law, you should follow said law yourself when making that request. It’s really not that hard. If a company has been wronged by the consumer not paying their debt, it doesn’t mean that company doesn’t have to follow the law anymore.

Tags: foreclosure defense
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