Foreclosure Dismissal

When the securitizing banks acting as trustees for the investors are unable to present written proof of ownership at a time that would entitle them to foreclose, they typically file what’s called a lost-note affidavit. April Charney is a Florida legal aid attorney well versed in these issues, having gotten foreclosure proceedings dismissed or postponed for 300 clients in the past year. In a February 2008 Bloomberg article, she was quoted as saying that about 80 percent of these cases involved lost-note affidavits. “Lost-note affidavits are pattern and practice in the industry,” she said. “They are not exceptions. They are the rule.”

In the past, judges have let these foreclosures proceed; but in October 2007, an intrepid federal judge in Cleveland put a halt to the practice. U.S. District Court Judge Christopher Boyko ruled that Deutsche Bank had not filed the proper paperwork to establish its right to foreclose on fourteen homes it was suing to repossess.4 That started the ball rolling, and by February 2008, judges in at least five states had followed suit. In Los Angeles in January, U.S. Bankruptcy Judge Samuel L. Bufford issued a notice warning plaintiffs in foreclosure cases to bring the mortgage notes to court and not submit copies. In Ohio, where foreclosures were up by a reported 88 percent in 2007, Attorney General Marc Dann was reported to be challenging ownership of mortgage notes in forty foreclosure cases.5

Few defendants, however, are lucky enough to have advocates like Charney and Dann in their corner, and most defaulting debtors just let their homes go. A simple challenge can be filed to the complaint even without an attorney, and some subprime borrowers have successfully defended their own foreclosure actions; but retaining an attorney is strongly recommended. People representing themselves are often not taken seriously, and they are likely to miss local rule requirements. With that warning, here is some general information on challenging standing to foreclose:

Some states are judicial foreclosure states and some are non-judicial foreclosure states. In a judicial foreclosure state (meaning the matter is heard before a judge), if a promissory note or recorded assignment naming the plaintiff is not attached to the complaint, the defendant can file a response stating the plaintiff has failed to state a claim. This can be followed with a motion called a demurrer to the complaint. Different forms of demurrers can be found in legal form books in most law libraries. In essence the demurrer states that even if everything in the complaint were true, the complaint would lack substance because it fails to set out a copy of the note, and it should therefore be dismissed. Ordinarily there is no need to cite much in the way of statutes or case law other than the authority reciting the necessity of showing the note proving the plaintiff is entitled to relief.

In a non-judicial foreclosure state such as California, foreclosure is done by a trustee without a court hearing, so the procedure is a bit trickier; but standing to foreclose can still be challenged. If the homeowner has filed for bankruptcy, the proceedings are automatically stayed, requiring the lender to bring a motion for relief from stay before going forward. The debtor can then challenge the lender’s right to the security (the house) by demanding proof of a legal or equitable interest in it.6 A homeowner facing foreclosure can also get the matter before a court without filing for bankruptcy by filing a complaint and preliminary injunction staying the proceedings pending proof of standing to foreclose. A judge would then have to rule on the merits. A complaint for declaratory relief might also be brought against the trustee, seeking to have its rights declared invalid.

· National Foreclosure Information

· Promissory Note Discovery

· Rescind Your Mortgage

· Truth In Lending Act - PDF

· Mortgage Forgiveness Debt Relief

· Foreclosure Dismissal

· RESPA ACT - Loan Regulations

· Free Credit Repair Information

· Foreclosure Workshops