Federal Cases Citing the HAMP and an Illinois Judge's Power to Stay Foreclosure Proceedings

*** As an introductory note, the information below was drafted by me for work. I have removed all identifying information to maintain confidentiality. The memo below covers the effect of legislation passed in Illinois in July 2010 that closes the loop hole that the HAMP created. Please note that no Illinois cases dealing with the HAMP were cited because at the time this was drafted, I could not find any. Enjoy!

Federal Cases Citing the HAMP and an Illinois Judge’s Power to Stay Foreclosure Proceedings

You have asked me to find federal cases that specifically cite the Home Affordable Modification Program (HAMP) and to determine whether a judge has the power to stay foreclosure proceedings while a mortgagor is in the process of loan modification. I have reviewed case law in California and Florida, and have consulted the Illinois Compiled Statutes.


In the case of Phu Van Nguyen v. Bac Home Loan Servs., L.P., 2010 U.S. Dist. Lexis 105704 (N.D. Cal., Oct. 1, 2010), the judge cited the HAMP and laid out what qualifies an individual for the program in detail. Id. at 6. The plaintiff in Phu Van Nguyen alleged that the mortgagee had breached its implied covenant of good faith by not notifying the plaintiff of the plaintiff’s HAMP eligibilities or HAMP guidelines. Id. at 11-12. The court went on to say that, “…numerous courts have considered claims…and concluded that mortgage loan borrowers do not have standing as ‘intended beneficiaries’ of HAMP [Servicer Participation Agreement, or] SPAs.” Id. at 13, citing Escobedo v. Countrywide, 2009 WL 4981618 (S.D. Cal. Dec. 15, 2009) at 3. The Escobedo court went on to say that, "…a qualified borrower would not be reasonable in relying on the [HAMP] Agreement as manifesting an intention to confer a right on him or her because the [HAMP] Agreement does not [mandate] that a [loan servicer] modify eligible loans." Escobedo, 2009 WL at 3. What this means for the client is that he has no guaranteed protection under the HAMP and is not guaranteed a loan modification under HAMP, so the bank can proceed with the foreclosure if it wishes.


Florida federal courts have ruled similarly. For example, in Zoher v. Chase Home Fin., 2010 U.S. Dist. Lexis 109936 (S.D. Flo., Oct. 15, 2010), where the court found that, “[t]he purpose of the program is to delay or avoid foreclosures by offering incentives to servicers to modify home loans…” and that,” [f]inding an implied private right of action for mortgagors would discourage servicers from participating in the program because they would be exposed to significant litigation expenses.” Id, at 9 -10. Under Florida precedent, the client has no redress available to him under federal law if Countrywide does not approve his loan modification.


Turning to Illinois law, a client may have relief under 735 ILCS 5/15-1508(d-5), effective as of July 23, 2010, which provides in pertinent part that, “ …the court that entered the judgment shall set aside a sale … upon motion of the mortgagor at any time prior to the confirmation of the sale, if the mortgagor proves by a preponderance of the evidence that (i) the mortgagor has applied for assistance under the Making Home Affordable Program … and (ii) the mortgaged real estate was sold in material violation of the program's requirements for proceeding to a judicial sale.” What this means for the client is that if the bank does go through with the foreclosure proceeding to where the judge orders a judicial sale, the client can go back to court and stop the sale from going through.


While a judge does not specifically have the power to stay a foreclosure proceeding, the client may file a Motion to Stay Judicial Sale, but he must be in the process of refinancing his home with a loan modification that will cover the existing mortgage and costs and be able to provide sufficient proof when the judge orders a judicial sale. In the end, the client will most likely have to continue with the foreclosure proceeding before he can take action to prevent the sale of his home.

Warm Holiday Wishes*

*The wishes provided herein represent the sentiment of the sender as of the date written and may not reflect the sender’s sentiments on the date this is first received or anytime hereafter. The sender reserves the right to deny the sender ever wished the recipient wishes, whether warm, cold or any temperature whatsoever. Also, the wishes are not dependent on the warmth and may be just wishes, with all the privileges accorded to the state of wishing, including grandiosity but not excluding practicality. The wish, whether warm, neutral or cold, is under no obligation to come true, but does not exclude the possibility that it may come true.

Plainfield Passes New Business Registration Ordinance.

In October, Plainfield, IL adopted a new business registration ordinance. Here is the complete text of the ordinance.  The ordinance amends the Village Code in several ways. The most significant new section outlines a process by which a business owner can challenge the suspension or revocation of his business license.

Section 4-431 provides that a business license can be revoked or suspended for a number of different reasons. For instance:

(1) Fraud, misrepresentation or an incorrect statement contained in the initial or renewal application.
(2) Conviction of any misdemeanor or felony.
(3) Conducting the business as to constitute a breach of the peace, or a menace to the health, safety or welfare of the public or a disturbance of the peace or comfort of residents of the village.
(4) Expiration or cancellation of any required bond or insurance.
(5) Actions unauthorized or beyond the scope of the license granted.
(6) Violation of any provisions of the village’s Building Code, Zoning Ordinance, Fire Protection Code or any other provision of the village’s Code or local Fire Protection Codes.
(8) Refusal of the owner to cooperate with Village inspections.

Once the village learns that a business owner has violated any of the provisions outlined above, the village president shall immediately suspend the owner's license. Notice of the suspension must be served personally or by certified mail.

The notice shall contain a statement of facts upon which the village president has acted in suspending the license. Upon service of the notice of suspension the licensee shall cease all business related activity at the location that is the subject of the license. The licensee shall have the right to make demand upon the village clerk for a hearing to be held within five (5) business days of the village’s receipt of the licensee’s demand for hearing.

Upon the filing of such a demand with the village clerk, the village president shall set a date and time for the hearing. All such hearings shall be held at the village’s principal place of business, or at such other public location designated by the village president. At the hearing the licensee, and any other interested person, shall have the right to present evidence as to the facts upon which the village president based the suspension of the license, and any other facts which may aid the village president in determining whether this article has been violated.

If after such hearing the village president finds this article has been violated, he shall within three (3) business days after the hearing file with the village clerk for public inspection and serve upon the licensee and all interested persons participating in the hearing, a written statement of the facts upon which he bases such findings and shall affirm or vacate the suspension and/or issue an order of revocation of the license. If after such hearing the village president finds this article has not been violated, he shall immediately reinstate the license.

A small claims fiasco

Although small claims cases may seem easy to manage, attorney's would be wise not to underestimate the challenges that can arise in such cases. So many things can go wrong with a small claims case. First, the fact that a low dollar amount is at stake sometimes tends to give one a false sense of ease. When you have lawsuits with high dollar potentials sitting on your desk and screaming for you attention, you tend to put small claims on the back burner. Second, in many cases you are not even getting paid or getting paid very little. Some of the small claims cases that I handled were on a pro bono basis for friends. Basically, I felt bad charging for cases where the dollar amount was merely in the hundreds. But, as my friend Steve always says, "you get what you pay for." Third, a pro se party is often involved, and judges tend to be sympathetic. And, if the pro se party happens to be the Plaintiff, you may not even know by examining the complaint or even after the party presents its case in court what exactly the suit is all about. And, if you don't know what the party is suing for, you don't know how to defend it. Fourth, judges have discretion per Supreme Court Rule 286b to conduct an informal hearing. And, just how they conduct this informal hearing is anyone's guess. Every small claims judge I have been in front of, handled the situation differently.

Recently, I had a case where a pro se Plaintiff handed my client cash to bail her son out of jail. My client got a receipt and put his name on the slip for the check to be returned to his address. The check didn't come back to his house for three months. In the meantime the individual who was bailed out of jail borrowed substantial sums of money from my client. My client apparently lent the individual all this money because he was promised he could keep the check that was coming back from the bail money. The Plaintiff, of course, insisted the money was hers and that her son had no authority to use this money to secure loans from friends.

My initial impression of the case was that we were gonna lose big time. Every small claims hearing that I had attended was conducted very informally with Rule 286b being invoked by the judge himself. And, every time this happened the judge focused less on procedure and rules and more on getting to the truth of the matter. This meant as 286b says "At the informal hearing all relevant evidence shall be admissible and the court may relax the rules of procedure and the rules of evidence." Furthermore, the Plaintiff had a cancelled check from an account that was clearly hers made out to cash in the bail amount and that was dated from the day that bail was posted. Also, my client was going to have to stipulate that she handed him the money. I assumed this because I believe the judge was going to ask him this question regardless of whether the Plaintiff knew how to cross-ex him or not. This was how my other experiences had been.

So, with all that in mind, I took the approach that I was going to have to invoke Rule 286b if the judge didn't do so himself and try to get hearsay evidence in to demonstrate that representations were made to my client by the individual who was bailed out of jail. To my surprise the judge did not invoke the rule. This was the first time this happened to me in small claims with a pro se defendant. I was worried that the Plaintiff could win her case because I didn't think she had to prove that much to prevail and I figured that the judge would still go easy on her. My thought was that the only way I could win was if I could raise doubt over the source of the money that was handed to my client. And, the only way I could adequately do that was to bring in hearsay evidence. So, I invoked the Rule. The judge looked surprised and asked "Counsel, are you sure you want to do that?" I said I was sure. Looking back, that was probably a mistake but I couldn't have known that at the time. As things turned out, the judge was pretty hard on her. He limited her testimony significantly. She did manage to get the bail receipt and cancelled check in to evidence. I didn't object for reasons explained above. And, I stipulated that my client received cash from her.

When I cross examined her, I tried to raise doubt about the source of the funds handed to my client and I tried to ask questions that would make it look like my client could have legitimately believed that the money belonged to the individual bailed out jail and not the Plaintiff. Finally, I questioned my client about hearsay statements made by the individual bailed out jail. The judge stopped me instantly. "Mr. Krause, what is the relevance of all this." I tried to explain the probative value of my questions. "Mr. Krause, I don't want to get into these hearsay conversations that your client participated in." I responed, "your honor, I invoked Rule 286b?" The judge said, "I said I would relax the rules of evidence, not throw them out." So, it became clear to me that hearsay wasn't neccesarily welcome even in 286b situations. I thought "all relevant evidence" was allowed. That is not neccessarily the case. In fact, I am still not sure what the law on this matter is but I know I can't take it for granted in the future. After that, I thought I was going to lose. To my surprise, the judge found in favor of my client. He said the Plaintiff didn't meet her burden of proof. I actually still don't know what kind of case it was. Was it a conversion or trover case? The judge didn't mention what elements she had to meet or that she failed to meet. Whatever it was, I completely failed to spot the issue but still managed to prevail. In any event, I know small claims is nothing to take lightly.

ABA Journal Top 100 Blogs

Once again, the Northern Law Blog did not make the Top 100 legal blogs in America as chosen by the ABA Journal. I didn't know that blogs had to submit themselves for consideration, which we have now done.

We are now recognized by the ABA Blog Directory:

http://www.abajournal.com/blawg/Northern_Law_Blog

Let's start a year-long push for inclusion in next year’s Top 100 rankings. I don't know exactly what that should entail, but I believe that it all starts with quality content. We need to increase the number of contributing writers and increase the number of submissions from each contributor.  Next, I believe that we need to increase our subscription base.

If anyone else has any suggestions, please let me know. Also, if you have not already subscribed to receive new posts via email, please do so now. And, tell your friends. Thanks!

The Plainfield Village Code Specifically Authorizes Texting While Driving.

I live in Plainfield, IL. I just read in the winter newsletter that the Village Board passed a negligent driving ordinance last month. The ordinance amends the Village Code to make it unlawful for any person to "negligently operate" a motor vehicle upon any roadway or public way--certainly an honorable intention. But I pulled it up online to check it out and I believe it specifically authorizes me to text while driving.

Negligently is defined as, among other things, engaging in inattentive actions. Inattentive actions include, among other things, the use of an electronic communication device. Electronic communications devices include, among other things, cell phones and PDAs capable of being used for the purpose of composing, reading or sending an electronic message. Here is the full text of the ordinance.

Then the ordinance declares that "This section is not intended to prohibit the use of an electronic communication device during the safe operation of a motor vehicle."

Cool. So, when I am driving through downtown Plainfield, as long as I am safely operating my car, I can text, watch youtube videos, tweet, and compete in online poker tournaments.

The argument is that you could never operate your car safely while doing any of those things. But keep in mind that police can pull you over if they see you texting, even if you have not made any other traffic infractions. If that happened, I believe you could at least argue this defense to the village prosecutor with a straight face. Of course, I can argue anything with a straight face, as you can tell from the preceding paragraphs. ;)

Illinois Civil Union Law

On Wednesday, December 1, 2010, the Illinois Senate passed the Illinois Religious Freedom Protection and Civil Union Act, which, when signed by the Governor, will become effective June 1, 2011. The law allows both homosexual and heterosexual couples ages 18 and older to enter into a "Civil Union."

I have been following this law for some time and it, in a nutshell, gives a "Party to a civil union" (I would have used "domestic partner") all of the legal rights of a spouse in Illinois. A non-exclusive list of the big changes:

A "Party to a civil union" gains legal rights to:

• Make medical decisions without a Healthcare POA;
• Have hospital visitation when visitation is limited to family;
• Share nursing home rooms;
• Spousal coverage under employer based health insurance plans;
• Share in state pensions;
• Receive inheritance without estate planning documents;
• File suit over a wrongful death;
• Invoke privilege to not have to testify against a partner.

What the law does not and cannot allow (because of the federal Defense of Marriage Act):

• receiving a Social Security survivor's benefit;
• filing joint federal tax returns;
• receiving any other federal benefits reserved for a spouse.

Keep in mind that the value of partner benefits is treated as income and taxed by the federal government for income tax purposes. Further, a partner would not automatically have an interest in the other partner's 401(k), so a beneficiary designation form would have to be updated to pass the assets to the surviving partner. Last, any religious body, Indian Nation or Tribe or Native group is free to decide whether or not to solemnize or officiate a civil union.

A full text version of the act can be found here. Next year should be a stellar year for wedding planners, photographers, caterers, and anyone else in the wedding industry!

Target the Dog - Part II

I wrote a post about Target the dog a couple of weeks ago. You will recall that Target the dog was living the good life as a national hero until she was mistakenly euthanized by a county animal control officer.

A commenter suggested that the attorney who filed suit on behalf of Target's owners would run into tort immunity problems. Governmental tort immunity would certainly be raised as a defense in that case, but I think the plaintiff would ultimately prevail. Keep in mind that complete text books have been written on this subject and I am certainly no expert, so I would welcome any feedback in the comments section. Even though Target was killed in Arizona, I will analyze the situation by applying Illinois law.

At issue would be the Local Government and Governmental Employees Tort Immunity Act. 745 ILCS 10/1 et seq. The Act provides different immunities for public entities and public employees. If I had more time, I could probably come up with a theory why the public entity should not enjoy immunity, but the easier case is the one against the employee who killed the wrong dog. Once liability is proven against the employee, I believe that the employer/entity would be obligated to indemnify the employee. Section 2-303 of the Act specifically says that nothing in the Act shall relieve a local public entity of its duty to indemnify its employees.

With respect to employees, immunity is granted to those who serve in a position involving the determination of policy or the exercise of discretion. See Section 2-201. Immunity is not granted to employees for ministerial acts. A governmental employee acts judicially or exercises discretion when he selects and adopts a plan in his official capacity, but as soon as he begins to carry out that plan, he acts ministerially and is bound to see that the work is done in a reasonably safe manner. See Greene v. City of Chicago, 73 Ill.2d 100 (1978).

Without a doubt, the Animal Control office had a policy in place dictating which dogs would be put down, how it would be done, how long they would be kept before it happened, etc. They don't automatically kill every dog that comes through the door. The original article even referenced a procedure whereby the County tried to reach the dogs' owners by posting pictures of stray dogs on their website and giving owners time to claim their dogs.

It is my position that the employee, and possibly the County, owed a duty to follow the procedures in place. If protocol would have been followed, Target would not have been killed. Because the employee was acting ministerially and was not exercising discretion, I believe he or she is liable for negligence.

Again, there are probably exceptions to the exceptions with regard to the Tort Immunity Act, so please let me know if my analysis is faulty.