Wells Fargo Bad Faith a Good Defense To Mortgage Foreclosure, Judge Says
A homeowner fighting foreclosure can raise the defense that Wells Fargo Bank did not act in good faith in handling her mortgage-modification request.
Given the bank's "apparent unreasonable actions, ... equity demands that she be able to proceed ... with her defenses against foreclosure," Bergen County Assignment Judge Peter Doyne wrote in an opinion released Monday.
Though homeowner Vicki Schultz might not have a right to receive a modification, "she does have the equitable right to be treated with fairness," Doyne wrote in Wells Fargo Bank v. Schultz, BER-F-17720-12.
Instead, she was met with "months of frustrating and conflicting responses, or lack thereof" from Wells Fargo, including "form letters, duplicative requests for documentation, misleading information, and what appears, at least at first blush, generally unfair treatment regarding the available loan modifications," he said.
Doyne added that "even though it is not evident at this point whether [Wells Fargo] is guilty of unclean hands, its behavior toward Vicki is at the least highly suspect."
In 2004, Schultz borrowed $506,250 from World Savings Bank, which later became Wachovia Mortgage and is now a division of Wells Fargo. The loan was secured by a mortgage on her Oakland home. Her husband, J. Stuart Schultz, did not sign the note but his signature appeared on the mortgage.
In June 2010, Stuart lost his job as CEO of Longview Financial Group Inc. when the company folded, leaving both spouses unemployed. They defaulted on Dec. 6, 2010.
After being accepted to Wachovia's "Unemployment Program," Vicki was put on a modification plan that required six monthly payments of $1,508 starting in February 2011 and came with the promise that as long as she complied, her home would not be foreclosed.
In May 2011, the bank asked for proof of unemployment benefits by June 6, 2011, so the plan could be extended past October.
Vicki certified she faxed the documents on May 26 and spoke with a bank representative who confirmed receipt.
But on June 9, 2011, she got a "Final Decision" letter denying the extension for failure to send the information.
Vicki called the bank on June 22 and was told she needed to dispute the termination in writing and did so that same day.
Advised by the bank to also enroll in the federal Home Affordable Modification Program (HAMP), she applied by telephone, sent in documents and twice re-sent them and additional ones at the bank's behest.
In August 2011, the bank again refused to extend the original plan because the July payment was late, which Vicki claimed was the result of being denied the extension.
The bank also refused a HAMP modification, saying she failed to provide requested documents.
A series of telephone messages she left with her contact at the bank allegedly met with no answer, and the next month she got a letter advising her that the person she called was no longer handling her account.
But not long after that and shortly after Vicki received a notice of intent to foreclose — "almost cruelly," said Doyne, noting it was the second such letter — that same employee sent her a letter saying the bank was committed to helping her retain her home.
Vicki reapplied for HAMP, faxed the asked-for information and, after being told she hadn't, did so again.
After several more rounds of calls, letters and faxed documents, Vicki says she was told on March 22, 2012, that her file was complete. But a week later, the bank denied the modification and said it could not proceed with her request.
For six more months, Vicki went back and forth with bank employees by telephone, fax and mail, but she asserts that she never heard back after the last batch of documents submitted, in September 2012.
"Incredibly, after almost a year of submitting documents and generally "getting the runaround" ... , Vicki finally was informed she had submitted all the necessary documents, only to be informed that the loan modification she applied for was 'not available at this time,'" wrote Doyne. "Again, while Vicki may not have a legal right to the HAMP modification, she does have the equitable right to be treated with fairness" and the bank "has apparently failed in this regard."
In Monday's ruling, Doyne blocked some defenses, granting the bank's motion to enforce a 2010 national class action settlement against Wells Fargo over its "Pick-A-Payment" adjustable rate mortgages.
Under the settlement in Mandrigues v. World Savings, Inc., N.D. Cal. Case No. 07-cv-4497, Wells Fargo was supposed to provide $67 million in loan modifications. Vicki received $178.
Thus, any defenses or claims based on the origination of the loan were precluded, although her husband could raise them because he was not a party to the settlement, Doyne found.
Wells Fargo lawyer Elizabeth Kim of Reed Smith in Princeton did not respond to a request for comment. The Schultzes' lawyer, David Schrader of Schrader & Schoenberg in South Orange, was out of the office and could not be reached.
Schultz is the second recent opinion by Doyne addressing good faith in the context of mortgage modification.
On Feb. 5, he held in Hudson City Savings Bank v. Colyer, BER-F-1214-12, that following its own procedures in denying a mortgage modification does not necessarily establish the lender's good faith.
Link to Article by New Jersey Law Journal
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The Department of Justice's U.S. Trustee Program is proposing controversial new guidelines to rein in what some see as out-of-control attorneys' fees in large corporate restructurings. The guidelines, aired at a hearing on Monday in Washington, D.C., would affect any lawyer whose fees are paid by the bankruptcy estate — whether representing the debtor, creditors' committee or any other court-appointed committee — in Chapter 11 cases with combined assets and liabilities of $50 million or more. The guidelines, which would revise those in place since 1996, are meant to increase transparency in bankruptcy billing, subject legal fees to "the same client-driven market forces, scrutiny and accountability that apply in non-bankruptcy engagements" and keep the burden on lawyers to show fees are reasonable even if no one objects.
STRICTER OVERSIGHT OF LEGAL FEES PROPOSED FOR LARGE CHAPTER 11’S
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Monthly payments from a reverse mortgage are fair game for execution to satisfy a civil judgment, a state appeals court says. Though the mortgagor is indebted to the lender, the lender, too, owes debts to the mortgagor, thus making the payments assets. the Appellate Division ruled in Cameron v. Ewing, A-3628-10. "Although the payments are not earned income, they are a regular and recurring obligation" of the bank, the court said. The ruling is good news for a bicyclist injured in a crash with a homeowner's vehicle, who sought to execute on the reverse mortgage proceeds.
REVERSE-MORTGAGE PAYMENTS DEEMED ASSETS ELIGIBLE FOR GARNISHMENT
15-2-5489 Cameron v. Ewing, App. Div. (Ostrer, J.S.C., temporarily assigned) (18 pp.) In this appeal, we address the novel issue whether the stream of payments due a homeowner under a home equity conversion mortgage, also known as a reverse mortgage, is subject to execution and garnishment for the benefit of judgment creditors of the homeowner. We conclude the mortgagee's obligation to make monthly payments to defendant, the judgment debtor, is properly construed to be a "debt" against which plaintiffs, the judgment creditors, may obtain an order directing execution and garnishment under N.J.S.A. 2A:17-50 and -63 and Rule 4:59-1(c). We also find the reverse mortgage payments are "rights and credits" subject to an order for installment payments by the judgment debtor. N.J.S.A. 2A:17-64. We remand for the court to determine the percentage of the reverse mortgage payments properly subject to execution. N.J.S.A. 2A:17-56.
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River East Plaza, LLC v. LNV Corp.
Court: U.S. 7th Circuit Court of Appeals
Docket: 11-3263Opinion Date: January 19, 2012
Areas of Law: Bankruptcy, Real Estate & Property Law
The debtor's single asset is a commercial building. The lender promptly started foreclosure proceedings in state court, prevailed, and a foreclosure sale of the property was scheduled, but was stayed when the debtor filed for bankruptcy, 11 U.S.C. 362(a)(4). The lender became a participant in the bankruptcy The bankruptcy court rejected the debtor's plan to exchange the mortgage for an "indubitable equivalent," lifted the stay, and dismissed the bankruptcy. The Seventh Circuit affirmed, noting that the lender has waited years to enforce its lien and that the court was not required to further stretch the wait. The lien on Treasury bonds proposed by the debtor would not be equivalent to the lender retaining its lien on the building.
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