BIG win in National Foreclosure Settlement

Chalk one up for the little guy…finally! If you haven’t heard, Lynn Szymoniak (she’s the woman who decided she was tired of being pushed around by her bank and filed suit) finally got some positive results…VERY positive. She sued on behalf of the federal government for the fraud she claimed was being committed by banks (including hers) in the way they were foreclosing on homes, not following the law when it came to notice, transfers, documentation, etc. and then turning around and collecting from the federal government (that’s our tax dollars, thank you very much) for any deficiency. The banks reached a settlement on a part of her suit and her cut of the settlement was $18 million. The Feds got the rest of the $95 million settlement to reimburse for the financial impact of the fraud. There’s still more of the case to decide so the settlements could go even higher but it’s a clear win for Lynn. I’m sure the banks did not want an actual judicial decision because that would have established legal precedent and opened them up to even more liability. but at least there’s some understanding that property rights have to be respected.

If you’re thinking of doing what Lynn did, you should know that suing your bank is not easy, nor is there any guarantee that you’ll win. But it is becoming increasingly clear that there are many instances where the banks have been very sloppy in attending to the documentation on loans. When it comes time to foreclose, they then want to ignore the details and jump to the sale, followed by the bailout from the government. Just this week I ran across a set of paperwork that clearly showed that the lender on a mortgage was not the party claiming the right to foreclose and there was absolutely no paperwork in between to give them that right. Fortunately, we live in a country where the King (or the affluent, or the financial barons, or anyone for that matter) can’t just take your property unless they follow the law. Yet, it’s apparent that we’ve allowed banks to do just that.

I’ve heard some be critical of the expectation that banks should have to follow a legal process before they can foreclose, pointing out that the reason a foreclosure is being considered at all is that the borrower hasn’t paid their debt (and that the borrower is living in the property rent free, etc.). But I’m not sure that matters. If the borrower is not paying their debt, there is a legal process the party who’s entitled to collect the mortgage can follow to get relief which includes foreclosure. But the process has to be followed. In a case I ran across this week, the bank that’s claiming the right to foreclose is not listed on any paperwork anywhere. Before they proceed, I think it’s reasonable to expect that they demonstrate that they have the right to take someone’s home.

And cases like Ms. Szymoniak’s highlight that this is not an isolated situation – it involves hundreds of thousands of mortgages – some estimate that it could involve as many as 85% of all mortgages. It’s probably going to take a while for the mortgage mess to wash through our economy and as far as I’m concerned, the sooner the better. But not at the expense of following the law. it’s here to protect both the borrower and the bank. If you’re in the cross-hairs of a bank foreclosure mess, you’re in a difficult spot. But don’t forget that you do have rights and you don’t just have to hand over the keys and move out. And sometimes you’ll be amazed at the results. Just ask Lynn.

By: Evan A. Nielsen, Esq.
Licensed in California