(Culik Law has a similar case pending in front of Judge Saylor. I expect his decision on our case to be the same, and to allow our client to continue with his claims against his mortgage company.)

Copy of decision here: Bosque v. Wells Fargo

Wells Fargo hemmed and hawed, claiming that the loan-modification agreements it has sent to thousands of homeowners here in Massachusetts were not real contracts, trying to evade responsibility for its widespread non-compliance with the federal Home Affordable Modification Program (HAMP), a loan modification program intended to help up to four million homeowners.

The army of corporate attorneys Wells Fargo hired at the law firm K&L Gates argued the agreements “were never intended to be guarantees that the borrowers would receive permanent modifications.”

Dismissing Wells Fargo’s argument, Judge Saylor looked to the agreements that the homeowners had signed: “Here, it is plain that the [trial loan modifications] were offers, and that plaintiffs’ signatures and subsequent monthly payments under the terms of the TPP constituted acceptance of those offers.”

Another Massachusetts federal judge recently came to the same decision in another case. (Available here: Durmic v. JP Morgan Chase.) Massachusetts is fast becoming the leading jurisdiction to establish homeowners’ rights under the HAMP program.

What does this mean? First, it means that if you are a Massachusetts resident who entered into a trial loan modification and made all your payments, but your bank canceled your loan modification, there is a good chance that you can go after your bank for breach of contract. Second, it means that homeowners may be able to sue their banks for other violations of the HAMP program (such as not timely responding to their requests for evaluation within 30 days, which is one of the violations that almost everyone has had, but is rarely discussed).

If you have had a similar experience with your bank, have been given the run-around, and denied for a loan modification or had the foreclosure process started against you, protect your rights and contact an attorney to determine whether you may have a case you can bring to save your home. You can contact Culik Law at www.culiklaw.com/contact.

• Ibanez Decision (January 7, 2010)
• Video of Oral Argument in the Ibanez Case at Supreme Judicial Court
• Briefs in the SJC Ibanez Case

In Ibanez, the SJC reviewed a lower court’s decision issued by Land Court Judge Keith C. Long, in which he invalidated two foreclosures because the banks did not hold valid assignments of the mortgages at the time they foreclosed.

• Profile of Land Court Judge Keith C. Long
• Original Ibanez decision
• Boston Globe Article on the original Ibanez Decision

The issue decided was whether a bank can foreclose without a valid assignment of a mortgage. The answer was a resounding “No.”

The banks, along with the bank-friendly Real Estate Bar of Massachusetts, have for years used the practice of “foreclose first, assign later.” The guidelines they have recommended stated that it is an acceptable practice to foreclose without having a valid assignment of a mortgage, so long as the mortgage is assigned sometime later. That is, a bank could foreclose on someone’s home even if they didn’t hold the mortgage.

Rejecting the banks’ argument that none of the bad foreclosures prior to this decision should be affected, the SJC wrote “The legal principles and requirements we set forth are well established in our case law and our statutes. All that has changed is the [banks’] apparent failure to abide by those principles and requirements in the rush to sell mortgage-backed securities.” In a separate statement, one judge wrote that “[w]hat is surprising about these cases is … the utter carelessness with which the [banks] documented title to their assets.” The SJC emphasized that not only is this the rule going forward, any previous foreclosures that did not comply with the foreclosure procedure are now invalid.

For better understanding, it is important to know that there are actually two documents involved in a mortgage, the promissory note and the mortgage. The promissory note is only for the loan of money that a homeowner took in order to purchase or refinance the house. (In fact, a bank could sue a delinquent homeowner on the note for money damages, but this almost never happens.) The mortgage is like a back-up in case the homeowner stops making payments on the note. Since the homeowner probably has no way of making up the payments, it would be pointless to sue them for the money owed. Instead, the mortgage says that if the note is in default, the bank has permission to sell the house to satisfy the monetary obligation.

The Ibanez decision also clarifies that banks must strictly comply with the foreclosure requirements set out by the Massachusetts Legislature in the foreclosure statute, M.G.L. c. 244, § 14. In Massachusetts, foreclosures do not need to be authorized by a judge because the state allows non-judicial foreclosures pursuant to another statute, M.G.L. c. 183, § 21. You can read a detailed explanation of Massachusetts foreclosure law and procedure.

What happened, however, because of the rampant securitization of mortgages in the 1990s and 2000s, is that the note became separated from the mortgage, leaving no one with the right to foreclose. In many states, the bank only needs to have possession of the promissory note to be able to foreclose. This is why many attorneys and homeowners are using the strategy of what many call “show me the note,” requesting that the bank provide the original note.

But in Massachusetts, the Ibanez decision clarifies that there are additional hurdles a bank must overcome in order to foreclose. Not only must it have the original note, it must also have an assignment of the homeowner’s mortgage. Although the assignment does not actually need to be recorded with the county registry of deeds, there still must be a written assignment that is dated prior to the time the bank started foreclosing. (To clarify, however, the foreclosing bank does not need to have an assignment of the promissory note; it only needs possession of it pursuant to the Uniform Commercial Code.)

What does this all mean? First, it means that the banks’ practice of back-dating mortgage assignments is officially ended. (After the original Ibanez decision, most banks stopped doing it anyway.)

It also means that homeowners in Massachusetts have another tool in their arsenal to stop a foreclosure. Not only does the bank need to show that it has the original note, it also has to show that it was assigned the mortgage before it initiated foreclosure proceedings.

Lastly, it reinforces the long-standing principle in Massachusetts that foreclosure is a strict process and that all the legal requirements must be complied with exactly. The foreclosing bank must “act in good faith and use reasonable diligence to protect the interests of the [homeowner].”

Foreclosure is an equitable proceeding, requiring fairness to homeowners at all stages of the process. Banks should not be permitted to disregard the law simply because it is their habit to do so (as the banks argued in the Ibanez case). There is an obligation to treat homeowners with respect and to protect their legal rights, no matter whether they are behind on their mortgages or current. This is merely an extension of the principle our country was founded on, equality before the law.

* * *

If you are facing foreclosure, there are a number of ways to fight them if you engage a Massachusetts foreclosure lawyer, such as using the principles from the Ibanez decision, challenging predatory lending practices, non-compliance with the HAMP program, and numerous other methods. The worst thing you can do is nothing.

The Nevada lawsuit claims that Bank of America misled vulnerable homeowners in numerous ways, including instructing them to not make mortgage payments, when in fact they were not required to be delinquent to apply for loan modifications under HAMP, nd falsely promising that homeowners would not be foreclosed on while their mortgages were under review for loan modifications, and denying loan modifications for false, unfair, and deceptive reasons. “They waited anxiously, month after month, calling Bank of America and submitting their paperwork again and again, not knowing whether or when they would lose their homes,” states the attorney general.

In the Arizona lawsuit, the allegations are substantially similar, but also relate to a previous consent judgment under which Bank of America promised to evaluate certain former Countrywide loans for modification prior to foreclosing. Bank of America allegedly did not comply with the consent judgment.

In my own experience litigating against Bank of America in both state and federal court here in Massachusetts, I have seen these same things over and over. Homeowners’ documents are lost, mishandled, and neglected. Homeowners are foreclosed on wrongfully while they are under the belief that they are under consider for loan modifications. Culik Law has multiple cases against mortgage servicers, including Bank of America, for these same issues. These are widespread throughout the mortgage industry, and include not just Bank of America, but all the major mortgage servicers such as Wells Fargo, Chase, Citi, and countless others.

Most egregiously, the lawsuits note something that I also see regularly in my practice in MA: the banks lying to people about the status of their modification applications. People who are in the process of being foreclosed on are falsely told that their applications are under review, when in fact no one has been reviewing the package of financial and personal documentation that the homeowner has meticulously collected and provided at the bank’s request. In one case, Bank of America told homeowners that they had postponed a foreclosure when the foreclosure had already been conducted. I have seem similar false statements. Unless mortgage servicers such as Bank of America are held accountable for their promises (for which they were made billions of our taxpayer dollars) to evaluate homeowners for loan modifications, the foreclosure crisis is going to continue at full throttle.

Related documents:

• New York Times Article
• Arizona Attorney General’s press release on Bank of America loan mod lawsuit
• Full text of Arizona loan mod lawsuit against Bank of America
• Nevada Attorney General’s press release on Bank of America loan mod lawsuit
• Nevada FAQs about Bank of America Lawsuit

Data released Wednesday by the Mortgage Bankers Association showed the mortgage delinquency rate rose in the first quarter to 9.38 percent of all loans outstanding, from 8.22 percent in same period last year, David Streitfeld reports in The New York Times.

When adjusted for seasonal variations, the default rate rose over 10 percent for the first time.

Seasonal adjustments are used to smooth out data in ordinary times, but in these extraordinary times the bankers’ group said it was not sure how much they could be trusted. In the first quarter the seasonal adjustments showed the delinquency rate worsened considerably. The raw data, on the other hand, indicated a marked improvement.” READ FULL ARTICLE HERE

These foreclosed homeowners are not the families making headlines for taking on mortgages they could ill afford. Families ensnared in the tax sale sometimes are unable to overcome relatively small debts owed to local tax collectors.”

FULL ARTICLE HERE

Foreclosure petitions, the first step in seizing a home, rose 21 percent to 2,431 last month, according to the Warren Group. While the number of petitions in April slipped 6 percent from March, the total number of petitions through April is 9,008, a 4 percent hike compared to the same period last year.”

CHECK OUT THE FULL ARTICLE HERE