Why the foreclosure crisis never really ends.

 

Photo by Sam Balye on Unsplash

 

Isaac Asimov once said that there are no happy endings in history, only crisis points that pass. In the case of residential mortgage foreclosures, the crisis point—which started around 2008—has still not passed.

There are many reasons for this, starting with the utter incompetence of the banks holding mortgage backed securities at the beginning of the crisis. They, and the substandard law firms they hired to prosecute foreclosure cases, made so many missteps that at first it was hardly a challenge to find ways to attack their deficient complaint allegations and feigned affidavits of service.

The bank eventually figured out that their attorneys were causing them prejudice through rookie mistakes like failing to appear at foreclosure settlement conferences and losing the notes underlying the mortgages being foreclosed (this happened so many times between 2010–2014 that it still boggles my mind). So they brought out their big guns, which are the law firms we in the legal profession call Big Law.

That’s when we foreclosure defense attorneys got creative by, for example, lifting a doctrine from insurance law cases that set forth the standard for proving a notice has been mailed. At first the banks’ lawyers were submitting affidavits with bare statements like “we mailed the RPAPL §1304 notice on January 1, 2014 so of course the defendant got it.” Such a statement has never been enough to prove mailing of an insurance notice. It is now also not enough in foreclosure cases.

Through the years of the crisis we kept up our attempts to move the law in ways that help homeowner defendants. We had some successes, and some failures. As time wore on, it became more difficult because the appeal judges are weary of foreclosure cases (which at one time made up more than half of the docket at the New York Second Department Appellate Division) and the banks’ lawyers have gotten more savvy.

The crisis never stopped, but seemed to be winding down. Some people continued to fight battle after battle to stay in their homes. And we lawyers continued to help them (for the last several years my work has been limited to foreclosure defense appeals and drafting substantive motions and oppositions for foreclosure defense attorneys).

Then COVID-19 hit, and everything paused with a moratorium on commencing or continuing foreclosures. Today, the federal moratorium is long expired, and the New York moratorium has also expired. Foreclosure cases are moving again and it looks like we are headed for another spike in decisions and appeals.

But the last foreclosure crisis never really ended. The banks and homeowners are still fighting it out.

And the banks are getting crafty. Take this case from the Second Department rendered at the end of 2020: Citimortgage, Inc. v Ramirez, 192 A.D.3d 70 (2nd Dept 2020). Citimortgage filed a foreclosure action against Ramirez back in 2010 and it was dismissed in 2013 for failure to prosecute. The statute of limitations expired in 2016 because the loan was accelerated when the foreclosure started. In 2017, Citimortgage filed a complaint for a money judgment against Ramirez, who moved to dismiss based on the statute of limitations. The motion court granted Ramirez’s motion; Citimortgage appealed arguing the statute of limitations was tolled during the time the first foreclosure action was pending so the statute of limitations expired in 2019, not 2016. The Second Department bought Citimortgage’s argument and reinstated its claim for a money judgment against Ramirez.

As you see, winning some battles does not win the war. I’m sure Ramirez was thrilled to have the mortgage barred by the statute of limitations after the first foreclosure was dismissed. But now he has to fight enforcement of the note for a money judgment, which involves other analyses.

Get ready for the wave of cases and appeals that are coming on the issue of enforcing notes for a money judgment as well as the lingering issues in foreclosures.

I am ready to help. I have been analyzing and writing arguments in foreclosure defense law since 2010. I can handle your appeal as attorney of record if you are an individual or entity. If you are a lawyer, I can analyze the facts, spot issues, and draft the papers you need to move to dismiss, oppose summary judgment, or take or defend an appeal.

Or, sign up for my quarterly newsletter to keep my information close to the top of your inbox.