Archive for December 10th, 2010

Loan Modification Fraud – Fighting Back!

I’m pleased to read this decision from Florida’s First District Court of Appeal.  The ruling says, essentially, that when banks mislead homowners into believing their foreclosure lawsuit will be “on hold” while their loan modification is being reviewed, then obtain a Final Judgment of Foreclosure anyway, the foreclosure should not stand.  That seems fair – why should a bank be able to lie and say a foreclosure is “on hold” and get a foreclosure anyway?  I see two lessons to be learned here:  (1) if the bank tells you your foreclosure case is “on hold” while your modification is being reviewed, don’t believe it; and (2) banks cannot obtain a foreclosure judgment if they’ve misled you in this way, so if this happened to you – fight back! 

Although the court’s ruling is largely good, I’m still a bit disappointed.  This sounds technical, but you may notice how the Court reversed the foreclosure but “remanded” for an evidentiary hearing on the motion to vacate the foreclosure.  This means that the appellate court directed the trial court to conduct an evidentiary hearing, i.e. a hearing with live testimony, to evaluate the merits of the motion.  Unfortunately, this leaves open the possibility (as crazy as it sounds) that the lower court could deny the motion even after this appellate ruling, keeping the foreclosure judgment in place. 

Respectfully, this aspect of the decision is just plain wrong.  The court’s decision reveals that the bank presented no evidence in opposition to the motion.  In other words, it was undisputed that the bank deceived the homeowner into believing the foreclosure would be “on hold” while the modification was being reviewed – the homeowner presented an affidavit establishing that fact and the bank presented nothing in opposition. 

With respect to the judges who wrote this decision, the purpose of an evidentiary hearing is for courts to resolve disputes in the facts.  Where only one side presents affidavits, there are no disputes in the facts, so there is no need for an evidentiary hearing.  In other words, the homeowner’s affidavit was undisputed, so thoat affidavit should have carried the day, and the motion should have been granted, without the need for an evidentiary hearing (and without any possibility that the motion could be denied).  

There are legions of cases about this.  I’ve seen many lawyers, even judges, misunderstand this rule of law, but it’s not that complicated.  When the bank and a homeowner present affidavits with conflicting facts, the judge must conduct an evidentiary hearing, i.e. a hearing with live testimony, and decide who he believes.  If only one side presents an affidavit, however, that side’s affidavit controls and there is no reason for live testimony. 

For example, if the homeowner signs an affidavit that the traffic light was red, and the bank signs an affidavit saying the traffic light was green, the judges must conduct an evidentiary hearing.  But if the homeowner signs an affidavit that the traffic light was red, and the bank does not present an affidavit, the judge has to conclude the traffic light was red. 

It works the same way with loan modifications.  If the homeowner presents an affidavit that the bank deceived them into believing the foreclosure lawsuit was “on hold,” and the bank presents no affidavit, the judge must conclude that the bank deceived the homeowner.

Mark Stopa

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