Lender's Lack Of Standing, Murkiness Surrounding Promissory Note Ownership Means Favorable Settlement For Elderly Atlanta Homeowner In Foreclosure

The New York Times reports:

• [I]n some mortgage circles, Ms. [Mamie Ruth] Palmer, a 74-year-old former housekeeper, has earned her moment of fame. After enduring six years in foreclosure hell, almost losing her home twice, Ms. Palmer has escaped intact.

• Last month she received a settlement from the Bank of New York, the trustee for a vast pool of mortgages that included hers. Under the terms of the deal, the bank reduced Ms. Palmer’s loan balance to $59,000 from about $100,000 and has agreed to accept the proceeds of a reverse mortgage in full satisfaction of her obligation.(1)

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• Ms. Palmer’s case is hardly unique. It’s just one of a swelling number that revolve around the thorny issue of who owns the note on a home when it’s forced into foreclosure proceedings.

• In the seemingly long-ago era when banks held on to the mortgage loans they made, this was a straightforward matter. But today, amid the freewheeling packaging of mortgage loans into securities that are sold off to investors, it’s much less clear who controls the note — all of which promises to cause banks enormous legal and financial headaches as foreclosures mount. The added twist is that some judges are taking the borrowers’ side in foreclosure disputes, precisely because of murkiness surrounding notes.

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• Loans were heaped into trusts with little documentation of ownership or proper loan assignments — it was all about volume and the fees that came with it — and now that sloppiness is hurting both lenders and borrowers.

Among the notables receiving mention in the story with regard to the problems some foreclosing lenders are facing because their loan documentation is all screwed up:

• Howard D. Rothbloom, a Marietta, Georgia consumer bankruptcy attorney who represented the homeowner in this story,
• April Charney, a consumer lawyer at Jacksonville Legal Aid Society in Florida,
• William J. Brennan Jr., director of the Home Defense Program of the Atlanta Legal Aid Society,
• The Honorable Arthur M. Schack, a justice on New York State Supreme Court in Brooklyn, who has been hammering foreclosing lenders appearing before him for sloppy paperwork for some time,(2) and on occasion, has excoriated lenders' attorneys for wasting the court's time for filing foreclosure actions on behalf of clients that lacked legal standing to do so.(3)

For more, see Fair Game: How One Borrower Beat the Foreclosure Machine.

For other posts that reference the failure of some mortgage lenders and their attorneys to file the required loan documents when starting foreclosures, Go Here, Go Here, Go Here, and Go Here.

(1) According to the story, the settlement also eliminated about $12,000 in foreclosure fees added to her debt and called for the installation of central air-conditioning in Ms. Palmer’s home; and roughly $10,000 in legal fees billed over five years by Ms. Palmer’s lawyer, Howard D. Rothbloom, will be covered by payments she has made toward her mortgage while she was battling foreclosure.
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(2) Go here for list of links to over thirty of Justice Schack's decisions denying foreclosure.
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(3) In a 2007 decision in which he dismissed a foreclosure action with prejudice, Justice Schack makes this observation on the conduct of the law firm filing the suit on behalf of Aurora Loan Services in which legal standing was lacking:

• "[T]he Court is troubled that Aurora's counsel, Druckman & Sinel, LLP, and Robert S. Aronin, Esq., of counsel to Druckman & Sinel, appears to be wasting judicial resources in an action that could be construed as frivolous conduct. Druckman & Sinel, at the home page of their website, www.callthebestlawyer.com, has a headline, "Lawyering is a Difficult Business." It certainly is, if your client lacks standing and your firm engages in wasting of judicial resources". (emphasis added) Aurora Loan Servs., LLC v Sattar, 10/09/2007, 17 Misc 3d 1109(A), 2007 NYSlipOp 51895(U); (2nd paragraph).