Can any bank foreclose on your house? You would think the answer would be a resounding “no!” A reasonable person would assume that only the bank that lent you the money to buy your house or bought your loan through a legitimate sale would be able to foreclose on your home. Well, until a recent decision in the California Appellate Court, that wasn’t necessarily the case.
In a May ruling from the California Court of Appeal, it was finally and clearly declared that “only the person or institution entitled to payment may enforce the debt by foreclosing on the security.” That is to say that a bank must prove a clear chain of title on any loan on which it intends to foreclose. In this specific case, there was a void assignment of a Monica Sciarratta’s note to US Bank. US Bank then claimed the right to foreclose. Sciaratta then sued for wrongful foreclosure and won in this decisive ruling from the Court of Appeals.
The court also included in the Sciarratta ruling a clear indictment of the attitude many judges take that says that a borrower who defaults deserves to have their home foreclosed upon, no matter who does the foreclosing. The Court stated that “The borrower owes money not to the world at large but to a particular person or institution” and that person or institution is the only one allowed to foreclose in the case of a default on that debt.
This is an especially important ruling to have at this moment in time. Across the country, thousands of rescission lawsuits are making their way through the courts, and unfortunately a lot of judges are ignoring the law. The law states that a rescission is effective as a matter of law the moment it is mailed. If the “lender” can prove within 20 days that it is the right and true owner of the debt, the rescission will be reversed. What is happening now is that the courts are taking the bank’s word for it. This is a gross miscarriage of justice and a violation of the concept of equal protection under the law. The Sciarratta case is another big win for borrowers.
Hopefully before long, all courts across the country will require proof of standing from foreclosing entities before allowing the process to begin, or before siding with the entity claiming to have standing in a TILA rescission.
Fortunately, in cases all across the country, more and more courts are demanding that banks prove their standing and that there is a clear paper trail behind each loan. As a result, homeowners across the country are finally receiving justice for wrongful foreclosures and unfair lending practices.
This is a great time to be a real estate investor working with distressed homeowners. Despite what certain courts are continuing to do, what we’ve seen around the country is that the law is finally catching up to the banks. Along with District and Appellate Courts all over the country, the Supreme Court has ruled as clearly as possible in the homeowners’ favor. With their ruling in the Jesinoski case, the Supreme Court has clarified that TILA rescission is a powerful tool to stop foreclosure and help homeowners stay in their houses longer. It also creates an opportunity for investors to do some pretty amazing deals. The tides have turned and the banks are being forced to negotiate on our terms. No more begging the banks to accept our short sale and REO offers only to have them demand ridiculously high prices. We can now get the banks to the table and demand that they prove they have the right to enforce a loan.
This makes it more important than ever that homeowners and real estate investors act NOW. This is a massive opportunity for real estate investors. If you know of anyone with a defaulted or underwater note, you need to get in contact with my office immediately at (706)-485-0162. I have spent the last two years building up a team of experienced attorneys and fraud examiners/forensic auditors who specialize in exposing fraud committed in the mortgage process and using that fraud as leverage to negotiate the sale of notes. This opportunity is not going to be available forever; we need to strike while the iron is hot!
We have a huge opportunity to help homeowners and do some great deals with multiple exit strategies. For more information, call me at 706-485-0162.