A foreclosure defense theory: attacking the MERS signatory.

22 February 2013

Businesses that sell “mortgage securitization audits” or “mortgage audits” or “forensic mortgage audits” promote many arguments to consumers that are attempting to defend against foreclosure.  One of the arguments presented by these companies is that the assignment of the mortgage and/or note did not properly transfer title.  Specifically, the person that executed an assignment for MERS was really an employee for the mortgage company or mortgage servicer.  (It is presented as if a great hidden wrong was uncovered.)  The argument continues, therefore, the assignment was somehow fraudulent or wrongful in some sense and did not properly transfer title/ownership of the mortgage and/or note.  The claim goes on that there is a break in the chain of title of the mortgage and/or note, and now the entity that is foreclosing is not the proper party to do so.

One problem with the argument is that it is misleading.  It is presented as if there was outright fraud at hand when there was not.  Specifically, it does not inform that the person signing the assignment actually is also an authorized signatory for MERS.  And further, that this is quite common, if not the norm. 

 

The other more significant problem with this argument is that it simply is not viable.  For example, just days ago the United States Court of Appeals for the First Circuit decided this issue in Culhane v. Aurora Loan Services of Nebraska.  No. 12-1285 (decided Feb. 15, 2013).  The court described the argument as “unedifying.” It stated the argument that the duality of the person (acting for the servicer and MERS at the same time) would somehow invalidate the assignment was a “little more than wishful thinking.”

The point here is that there are entities willing to dispense poor advice, with good intentions or not, in the foreclosure defense area and one must be careful.  One seeking to defend against a foreclosure typically needs help traversing the legal landscape and must avoid latching on to a blind guide.  There may be legitimate grounds for defending against foreclosure.  But it just is not with this argument, so do not give up hope. 

In the event that you seek to retain your home and desire to obtain quality legal advice, please feel free to give this office a call.

How do I defend against a credit card collection case in Massachusetts?

17 February 2013

The plaintiffs/creditors win the large majority of their suits to collect credit card balances by obtaining a default judgment.  It means that they win because the defendant does not defend against the action.  It is similar to winning by forfeit.  However, there are times when a person decides to defend a collection action.  In that case, the person is typically a consumer with little or no legal background or experience in litigation or the court room.  The debt collectors are used to this and gear their litigation strategy on speed and capitalizing on their opponent’s lack of experience.  If you are such a consumer, this post will provide a bit of what you need to know to defend against the suit.

The first task is to avoid default in the early stages of the case.  For whatever reason, people without experience with litigation seem to think that every date that appears on legal- type documents indicates the date they have to appear in court.  The truth is that the date may be the date you have to appear or it may be a deadline for something else, like the deadline to file a responsive pleading.  It depends on what court you are being sued in, and almost always, the very document you receive tells you the answer, so read it.  You must either show up, if applicable, or file what you need to, if applicable, to avoid default.  If you are unsure after carefully reading the law suit, to learn the answer, you either must consult a competent attorney or visit your local law library and do some research.

 

Even if you have a good argument to defend against the collection case substantively, you can still lose by default, so to speak, by not knowing how to present the substance that you have.  If you do have to show up, you can fail by not preparing a good argument.  A good argument will need some preparation and/or support.  If you appear and make statements that you could have supported but did not, you will probably not prevail.  The other problem is failing to present an argument that is on point and articulated well.  For this, you will likely need to solicit others to listen to your argument and obtain honest feedback.  The argument may sound good to you, but it may be off point, or there may be something to it, but it is being presented so poorly that the decision maker cannot parse through the presentation to find the real substance.  Understand that it is YOU that must decide and present what facts and/or legal arguments really matter; do not expect that you can just tell your story and the clerk or judge is going to take it from there.  From experience in much court watching, this author can tell you that many arguments that are raised by consumers are simply off-point and are not considered or are presented so poorly that the decision maker has trouble discerning what the argument really is. 

If you did not have to appear but had to file a responsive pleading, the next stage of the litigation process is called Discovery.  Here, you must take the same steps you took before; either obtain advice from a competent attorney or make another trip to the local law library.  This step is typically more complicated because Discovery is a broad topic.  You will likely have to respond to Interrogatories, a Request for the Production of Documents, and Requests for Admission.  In a collection case, it is not just important to know how to respond, but how to use the Discovery process to set up the case for your win.  To really use the Discovery process to your best advantage, now you need to dig even deeper into specifically how to defend against a collection action.

Eventually, the case will be decided.  How you conducted yourself prior to the decision could make the difference between winning and losing.  In the event that you want to engage an attorney to defend against a law suit, including defending a credit card collection case or the like, feel free to give this office a call.

My landlord was foreclosed upon, is there a federal law that can protect me from eviction?

1 January 2013

Yes, the law is The Protecting Tenants at Foreclosure Act of 2009.  It is aimed to provide some limited eviction protection to certain tenants living in residential property that was foreclosed upon, or for tenants affected by the foreclosure on a “federally related mortgage loan.”

And the law IS currently in force.  There appeared to be some confusion as to when the law was set to expire.  A review of various sources by the author of this post, including blogs, implied the law would expire soon, at the end of 2012, or at least were not clear on the point.  The facts are that the law was originally scheduled to expire on December 31, 2012. However, the Dodd-Frank Wall Street Reform and Consumer Protection Act amended and extended the expiration date to December 31, 2014.  So, it still can provide some protection to tenants of foreclosed residential properties.

There are certain qualifications, such as a tenant cannot be one of the mortgage holders, which are simply common sense that should be reviewed to ensure the law applies.  There also may be state laws that can apply to the situation which could provide even greater protection.

A brief summary of the protections are that all tenants are entitled to a 90 day notice before eviction can occur.  Tenants with a lease have the right to possession until the end of their lease, unless the purchaser intends to occupy the property as their primary residence, then the 90 day notice applies.

If you are renting property that has or is expected to be foreclosed upon, or you are a landlord that is facing foreclosure, feel free to give this office a call.

Do I need to include my social security (retirement) income in the calculation of my plan payment in chapter 13 bankruptcy?

22 December 2012

It depends.  It is a legal question that is playing out in the courts right now.  If you live in the fifth or tenth federal circuit (Massachusetts is in the first circuit), and arguably in the sixth or eighth circuit, then the answer is yes.  Generally anywhere else it depends on the individual judge.  And this will likely change in the future.  A good local bankruptcy attorney in your area might know the status in your area.

This specific question is whether excluding social security benefits when calculating what your plan payment should be is legally considered “bad faith.”   In bankruptcy, there are two important places that your social security income could be included, one is on Form 22C that determines the length of your plan and possibly the amount that should be paid to unsecured creditors (for above-median income debtors), and another is on the Schedule I, which is used to help determine your plan payment.  There is little dispute that social security income is not considered in the former (Form 22C), but there is a dispute whether it should be included in the latter (Schedule I).  (This does not mean the income does not need to appear on the forms, just if the income is counted in the calculations.)  Those that argue it is bad faith to not include social security income in the calculation point to the “totality of the circumstances” and that the debtors could pay more to their creditors.  Those that argue it is excluded point to a portion of the bankruptcy code they say excludes it completely from income calculations in bankruptcy. 

The two definitive federal circuit decisions on the issue that were rendered in the fifth and tenth circuits may be considered persuasive authority for other courts.  The firth circuit decision can be found here.  The tenth circuit decision can be found here.

If you are planning on filing bankruptcy, there are many issues like the one described here that should be addressed.   If you want to discuss your options, feel free to give us a call.

I want to file bankruptcy but was told that the amount of my income is too high and I will not satisfy the mean test, what is the means test and what can I do?

21 December 2012

The means test in bankruptcy was one of the most important changes to the bankruptcy code made in 2005 under Bankruptcy Abuse Prevention and Consumer Protection Act, known as “BAPCPA.”  The means test is trying to make sure that people who have the “means” to repay their debts, in fact due, conceivably through a chapter 13 (repayment plan in bankruptcy), and are not allowed to simply discharge their debts completely in a chapter 7 (liquidation in bankruptcy).  The way it works is that there are certain levels of income that if you make more than, another test is triggered, which if you do not satisfy, you cannot file a chapter 7.

An initial consideration is that if you were told you didn’t satisfy the means test on a phone conference with a bankruptcy attorney, it is best to have a more thorough investigation, probably involving an in-person meeting.  It may require a great deal of number crunching before you have a good idea.  

There may be a way to avoid the means test altogether.  The issue to look at is whether your debt is primarily consumer debt or business debt.  If your debts are primarily business debt, then you will not need to satisfy the means test.  Please understand that these terms “consumer debt” and “business debt” are terms of art.  Do not rely on a common sense definition, at least exclusively.  For instance, contrary to common sense, one item in favor of potential debtors is that income tax debt is generally considered business debt, even if the income tax debt is owed by you in your personal capacity. 

However, even if the means test does not apply, you are not necessarily home free.  There is still the threat someone can accuse your case of still being filed in bad faith under § 707(b)(1) of the bankruptcy code.  To determine this, like all of these questions, a qualified bankruptcy attorney is typically needed.

In the event you are considering filing bankruptcy and want to know whether you can qualify for chapter 7 or chapter 13, feel free to give us a call.

I am deciding between bankruptcy attorneys, one that costs less and will perform the bare minimum, and another that costs more and provides more, which one should I hire?

8 December 2012

Answer: Probably the one that plans to do more for you.  Here is one example of why hiring the best lawyer you can afford to file a bankruptcy for you, one who is more likely to stay current on the law, may be worth it.  It is In re Belforte, Case No. 10-22742-JNF, (decided Oct. 1, 2012) a recent decision issued by the Massachusetts Bankruptcy Court.

In In re Belforte the debtor filed a chapter 7 bankruptcy.  One of the debtor’s debts was a personal line of credit issued by the local credit union.  The debtor indicated to the credit union on a handwritten note when applying for an extension of the credit line that it was sought to pay for “tuition [and] books” for the debtor’s children’s education.  After the bankruptcy petition was filed, the credit union objected to the line of credit being discharged.  It produced the handwritten note as evidence (likely not provided previously by the debtor to her attorney).  The credit union argued that the debt should be deemed a student loan that is not dischargeable in bankruptcy.  Despite the fact that the loan was not associated with the student loan program the credit union offered and the credit union imposed no control over how the funds were to be spent, the court found it should be deemed a student loan under § 523(a)(8)(A)(ii) of the bankruptcy code.  The practical effect was likely that the debtor thought the debt would be discharged, but it was not.

Now, before thinking the debtor’s attorney in this case was negligent, we must speculate some and add some reality to the mix.  It is assumed the debtor did not indicate the debt could be a student loan to the attorney or provide the hand written note.  And further, even if she did, it is arguably unreasonable to expect an attorney to probe the debtor’s characterization of every single loan they have, such as checking the purpose stated on every loan application (let alone a hand written note).  And for these reasons, this situation is likely to happen again. 

 

However, the more general point is that a lawyer that takes care and stays current on the law is more likely to catch this issue, and the plethora of other possible issues that can complicate and change the benefit of a bankruptcy.  Such a lawyer is more likely to become aware of potential issues and advise his client of matters the client would want to know.  And, such a lawyer typically is not the least expensive one.

 

We hope you consider what this post has to say prior to engaging a bankruptcy or any kind of attorney.  In the event that you are considering filing bankruptcy or taking another type of legal action, feel free to give us a call.