Wednesday, December 2, 2009

HAPPY THANKSGIVING

Last week, a judge in New York may have made a significant ruling regarding a home foreclosure. At issue was whether the home would go into foreclosure, the ruling: gave the home free of all liens and loans to the homeowner.

Judge Jeffery Skinner claimed Indy Mac's actions "since February 24, 2009 (and perhaps earlier) has been inequitable, unconscionable, vexatious and opprobrious."

Nice.

In personal dealings with financial institutions it has been my experience that there is no effort on the part of the institutions to help troubled homeowners. There is no sense of responsibility with the lenders for the financial mess they have created. Instead they are more interested in window dressings and not being negatively portrayed in the media and will do only what is necessary to avoid bad press.

Even worse, if the institutions suddenly did gain a sense of altruistic values, their loss mitigation infrastructure is so confused and lacking in resources, they wouldn't be able to do anything if they wanted.

In this situation, the Horoski's purchased a 3,400 sq ft home 15 years ago at $200,000. In 2004, they refinanced. As a result of good faith efforts by the homeowners to restructure their loan in an equitable fashion and the bank's inability to even find a consistent loan value amount...

"The Court is constrained, solely as a result of Plaintiff's affirmative acts, to conclude that Plaintiff's conduct is wholly unsupportable at law or in equity, greatly egregious and so completely devoid of good faith that equity cannot be permitted to intervene on its behalf. Indeed, Plaintiff's actions toward Defendant in this matter have been harsh, repugnant, shocking and repulsive to the extent that it must be appropriately sanctioned so as to deter it from imposing further mortifying abuse against Defendant. The Court cannot be assured that Plaintiff will not repeat this course of conduct if this action is merely dismissed and hence, dismissal standing alone is not a reasonable option."

You can bet there will be an appeal, but in the meantime a sign of hope in a
crisis that continues to hit families and homeowners across the nation.

14 comments:

Michael W. Huseman said...

Ooohh!!! This post is begging for a counter-argument from some of the foreclosure lawyers who read this blog.

This could get interesting.

Anonymous said...

James:

Can I borrow some money from you?

Carmel R. Huseman said...

Newsflash: Banks are in the business to make money---and not to give it away. The Court has no authority to even compel banks to work out any loss mitigation with the debtors. What the Court did in this situation is “wholly unsupportable at law or in equity.” Some judges think they can just rule however they want, arguing that their Court is a Court of Equity…what they fail to realize is that Equity follows the Law…

Michael W. Huseman said...

Oooohhh!!! This is getting good!!!

D.J. Evans said...

While I do believe that the court's decision is open for criticism and could potentially be overturned, I also believe it at least does address the responsibility that banks must have regarding the housing crisis.

I agree that banks are in business to make money. However, I do not believe that banks should be surprised when people cannot afford the house that they bought when they knew full well that the buyer could not afford it when they gave said buyer the loan. Such practices as overlooking a buyer's credit history and/or financial ability to pay for a home have played a substantial role in the crisis.

The cash for clunkers situation reminds me of this. They are giving out loans to people with clunkers. Why do most people have clunkers? Because they cannot afford to upgrade. What kind of credit history and/or ability to pay do these people have?

I have no problem with banks being in business to make money. Likewise, I have no problem with banks taking a financial hit when some of their lending practices come back to haunt them.

Zealous Advocate said...

What about financial responsibility? Can I now have my credit card debt wiped out simply because they gave me a credit limit I can't afford?

D.J. Evans said...

Once again, if you read my comment...I said it works both ways. There are no innocent people in this crisis. Although I would point out that in the case James' cited to, the people had numerous medical issues and make a good faith attempt to work the debt out with the bank. Please read the case before you post a comment.

James Fleckles said...

If it were a simple situation of a lender lending money and a borrower needing to give it back, a lot of the criticism here could be warranted.

Instead we have a situation where the financial institutions were no longer concerned about the loans themselves....they were interested in what the loans represented. What they represented was paper...paper that could be resold in the securities market for billions in revenue. To that end, we have lenders who never did credit checks. Who encouraged outrageous appraisals, who allowed for 10s of thousands of dollars in unearned fees per loan.

I'm sorry but the lending institution's hands are bloody as hell over this one.

Michael D. Wong said...

While Carmel is correct that the Court does not have any right to force settlement upon a Bank or Plaintiff, it appears from the ruling that the Plaintiff went a set further in conflicting and false testimony to the Court.
Based upon Plaintiff's actions and statements in Court it appears that sanctions against Plaintiff, which I believe are at the discretion of the Court, were warranted.
The question is whether the sanctions imposed were reasonable. That is where this issue becomes very gray. Do I believe that the loan and interest should have been cleared in total, no. While I believe this is bad precedent, I also think that such an action was a response to problems with banks and financial institutions response to the current economy. I think it will definitely raise inquiry and discussions as to whether the Courts should be allowed to modify terms of loans without agreement of the parties, as well as Banks and Financial institutions to become more flexible in response to such situations, which they are in part responsible for.

Another Advocate said...

Some banks have already taken a hit and are no longer in business. Note that when the real estate market was booming, everyone rushed to buy properties to make money...but somehow they don't want to take a hit on those "investment" properties.

D.J. Evans said...
This comment has been removed by the author.
D.J. Evans said...

You make the mistake of lumping everyone that is hurting as people who bought houses as merely an "investment property" rather than a place to live. What about those folks who were told by their lender that they should do an interest-only ARM because the housing market would continue to grow. When it did not and their rate adjusted, what did their lender do? Most of them are not trying to help these people out. Rather, they are simply foreclosing on them.

Honest and hard-working people are hurting during this mess. We must not forget that. Yes, there are bad apples in the bunch, but you cannot create a blanket and throw it over all of these people. That would be very narrow-minded.

Carmel R. Huseman said...

Although I sympathize with debtors who are in foreclosure due to job loss or medical reasons, the basis for the Court’s decision cannot be ignored as it can potentially set a bad precedent, as Mr. Wong correctly points out. While it may appear that the Court has sanctioned plaintiff for its conflicting testimony in Court with respect to the amount owed, I believe that the Court also took into consideration the debtors’ financial and medical condition in ruling in such manner. More importantly, I think it was the Court’s way of trying to “send a message” to the ALL the Lenders. The determination of whether to impose sanctions generally rests within the sound discretion of the trial court and will not be disturbed on review absent an abuse of discretion. The standard is that of reasonableness under the circumstances. In this case, it cannot be said that the Court’s action was reasonable. The Court has authority to approve, strike, or require plaintiff to prove up their damages. If the Court finds that some of the charges and fees were unwarranted or simply do not add up in accordance with the terms of the mortgage, the amount prayed for by Plaintiff could be reduced. Dismissal of the action and ordering plaintiff to release the mortgage seem to be an abuse of the Court’s discretion.

James Fleckles said...

The lender was unable to determine the true amount of the loan value. The range offered up in the opinion was in the mid 200's up to over 500k. That fact, coupled with their "egregious" behavior, led the court to believe that they were unable to perform under the terms of the contract. Voided the contract, and awarded the defendants the property.

Is it a bit much, perhaps. The "message" that is being sent is that some of these attorney generals need to get a move on and begin prosecuting where appropriate.