Archives for December 2013

Class Action against Bank of America

In 2010 Homeowners in a Class Action sued Bank of America (no surprise here). The homeowners stated BOA reneged on promises to help them modify their mortgage loans so they could avoid foreclosure.

The court in September 2013 refused for the class action to certify the class stating that the claims were too different to justify allowing a single nationwide lawsuit.  Thousands of homeowners now have no recourse through the court system. Very few people can afford to litigate these issues on their own. The class action lawsuit was the only hope.

This case became well known when in June 2013 when ex-employees of Bank of America claimed that the bank instructed them to stall mortgage-modification applications, lie to customers, and falsify documents. Claims of bonuses and gift cards to employees for placing homeowners in foreclosure where also made by these ex-employees.

Judge Zobel even stated “Plaintiffs have plausibly alleged that Bank of America utterly failed to administer its HAMP modifications in a timely and efficient way; that in many cases it lost documents, or pretended it had not received them, or arbitrarily denied permanent modifications.”

Despite all of this Judge Zobel still refused to assist these homeowners.

For more information look up In Re Bank of America Home Affordable Modification Program (HAMP) Contract Litigation, 10-md-02193, U.S. District Court, District of Massachusetts.

Is there a new defense against Missouri Foreclosures?

Is Dodd-Frank Act the new weapon against Missouri foreclosures?   The section being used is where “no residential mortgage loan… may include terms which require arbitration or any other nonjudicial procedure as the method of resolving any controversy or settling any claims arising out of the transaction”.  The argument is that the Dodd-Frank Act outlaws Missouri foreclosures and preempts the state law that allows such foreclosures.  It is a stretch to think the Act applies to non judicial Missouri foreclosures.  This section in the Act applies to other types of consumer-related disputes between borrowers and lenders such as TILA claims or escrow disputes.  Congress did not intend to dismantle the Missouri non judicial foreclosure process which would wreak chaos as 99% of Missouri foreclosures are processed in this manner. Yet, attorneys across the country are ignoring the intent of Congress and attempting to slow the process down by forcing a judicial foreclosure process on non judicial states such as Missouri.

SHOULD MISSOURI FORECLOSURE LAW CHANGE TO A FAIR MARKET VALUE DETERMINATION?

Should Missouri foreclosure law change so the sale price is based on the fair market value?  Missouri foreclosure law states that the sale price is based on the amount bid at the foreclosure sale. This may cause the sale price to be far below the fair market value.

Missouri Supreme Court in 2012 addressed a deficiency calculation after a foreclosure in First Bank v. Fischer & Frichtel, Inc.   A balance due or deficiency was determined by the sale price minus the debt balance.  This format has been in place for over 100 years in Missouri.  The court stated that the century old practice “of using the foreclosure sale price have no application to a sophisticated debtor such as Fischer & Frichtel”.

Should the rule be different for an unsophisticated homeowner by allowing the homeowner to pay the difference between the debt and the fair market value of the property at the time of the foreclosure?

These days the lender is often the sole bidder who buys the foreclosed property for far less than market value and then sells the property at a profit.   The lender then collects a deficiency from the homeowner based on the below-market value it paid for the property. Windfall!

Missouri’s foreclosure law rule for calculating damages in a deficiency proceeding is inconsistent with the underlying purpose of awarding damages. The purpose of a damage award is to make the injured party whole without creating a windfall. In nearly every context dealing with damage to or the loss of a property or business interest, Missouri law measures damages by reference to fair market value. Yet Missouri foreclosure law ignores the fair market value of the foreclosed property and, instead, measures the lender’s damages with reference to the foreclosure sale price.

Missouri foreclosure law has recognized that a foreclosure sale is not conducive to achieving a price that reflects the fair market value of property.  A foreclosure sale contains conditions for purchase that are subject to time and financing constraints not present in a sale on the open market.   For these reasons, property sold at a forced sale does not bring its full value.

Keeping a 100 year old Missouri foreclosure rule is inconsistent with the goal of fully compensating the injured party and avoiding a windfall for the injured party.

 

 

 

ST. LOUIS CITY TO PROTECT HOUSES AND NEIGHBORHOODS

ST. LOUIS CITY TO PROTECT HOUSES AND NEIGHBORHOODS

Crack houses, run down houses, vacant houses, all are problems.  The City of St. Louis wants to arm neighborhoods, homeowners, and their associations, to protect houses, by providing for money damages if a nuisance exists that affects the property values of a neighborhood because a property owner allowed his property to be in a deteriorated condition due to neglect or failure to maintain.   We all know of a resident who allows clutter on the property such as abandoned cars and appliances.

The City of St. Louis wants to allow a neighborhood association to seek injunctive relief in court if a house with local code violations does not get fixed.  To get results you will first need to give 60 days’ notice to the tenant or property owner of the problem and allow for the nuisance to be corrected.  If not, then the association can ask the court to step in.

Reach out to your congressman and tell your senator or House member that you support an amendment to Section 82.1025 and Section 82.1029.