Foreclosure Defense: Opposing Motion for Relief from Stay in Bankruptcy



See also Foreclosure Defense: Cash for Keys Offer and TILA Defenses

May 9, 2008

This is where the shell game played by lenders starts being used in your favor.

Nail them with their own behavior.

More and more Federal, Bankruptcy, and state courts are adopting this view for both legal reasons and practical reasons — the system can’t absorb this number of foreclosures and bankruptcies, and the communities can’t afford to enforce use restrictions where houses are abandoned.

  • As to pursuing the foreclosure defense and counterclaim market, it demonstrates the confusion created by the scheme of the lenders, the intentional obfuscation of the real parties and the very real possibility that they simply don’t have or won’t be able to find the paperwork to back up their claims as to who is in fact the real party in interest. 
  • The volume was so huge that it is doubtful that these predators all crossed their t’s. This leads to the very real possibility that is arising in courts across the land (Federal and State) that their failure to come up with the real holder of the note and mortgage, once the litigation has commenced, might lead a dismissal with prejudice or a dismissal without prejudice. 
  • In either case, it is a finding that the party to whom the borrower was directing their payments is not the proper party.
  • This leads to the possibility that the borrower could, with or without filing a lawsuit, either stop paying mortgage payments altogether (but not stop insurance or tax payments) or can put the money in some interest bearing escrow account, waiting an appropriate period of time for the lender to either show up or not. 
  • And the amount put in escrow can be in accordance with the allegations of the borrower:
  1.  that they were defrauded and 
  2. that the mortgage, note, payments should be reduced to reflect 
  • a reduction in the total mortgage obligation due to the artificially and fraudulently inflated appearance of fair market value (benefit of the bargain), 
  • the down payment and points and closing fees and interest paid to date, 
  • costs of closing, and 
  • money invested in a house that is not worth what the borrower thought who relied upon his fiduciaries — the lender, the underwriter, the auditor for the lender, the appraiser, the title agent, the mortgage broker, etc. 

The Real Party in Interest and Motions for Relief From the Automatic Stay

A recent bench decision by Maryland Bankruptcy Court Judge Thomas J. Catliota was an important ruling regarding the real party in interest requirement of FRBP 7017.

Americredit Financial Services, Inc., an auto loan servicer, filed a MLS in its own name. Its name appears on the car title as the sole lienholder, it represented that it “has a validly perfected, first priority purchase money security interest in the Collateral…” and it was listed as a secured creditor in both the Schedules and the Chapter 13 Plan.

A response was filed to the MLS arguing that the car loan had been sold to a securitized trust, and that Americredit was therefore not the real party in interest. Americredit responded by agreeing that the note had been transferred to the securitized trust, but argued that the debtor’s failure to object to the POC waived this issue, and that its servicing agreement with the trust allowed it to file the MLS in its own name.

Judge Catliota ruled that since the loan was not owned by Americredit, it needed to file the MLS in the name of the actual noteholder, and denied the MLS (but allowed Americredit to amend to reflect the true owner of the loan).

With the vast majority of loans (home, car, computer, etc.) being securitized, this is an important defense to MLSs, particularly since in a number of these cases, the securitized trust is simply unable to produce the original note or demonstrate that the title records appropriately reflect that it is the proper secured party.

6 Responses

  1. Please Help!

    My mortgage story

    I first requested a forbearance back in March 2009, when I realized I was going to need it. The representative told me to wait for someone to call me after I completed the application online. I waited for about two weeks, and then I decided to call at least twice a week. Each time I was told that someone will contact me.

    When completing the online application, it asked how much can you pay right now? I inserted $200.00. So, I sent $200.00, because I believed this is what they were expecting. My $200.00 was returned! I didn’t think there was going to be a problem with Suntrust since my second mortgage modified my loan within two weeks.

    After about 2 months, I was finally told that my loan was sold to Wells Fargo and Wells Fargo will not allow forbearances. WELLS FARGO! Why couldn’t they have told me this every week I called. I was then told to complete a modification package. I completed the modification package twice. Even though they said I would be contacted after the second completion, I was told they never received it even though I have proof of sending it at least five times. I asked if I could pay something before I received the foreclosure papers, I was told NO! “Just wait to hear from them”. They NEVER EVER CONTACTED ME. I did all of the calling.

    I never received a notice informing me that Wells Fargo owned my loan. The law states that each time a mortgage changes hands, the sellers are required to sign over the mortgage notes to the buyers. However, in the rush to originate more loans during the U.S. mortgage boom, from 2003 to 2006, that assignment of ownership wasn’t always properly completed.

    U.S. Bankruptcy Judge Samuel L. Bufford in Los Angeles issued a notice last month warning plaintiffs in foreclosure cases to bring the mortgage notes to court and not submit copies.
    “This requirement will apply because developments in the secondary market for mortgages and other security interests cause the court to lack confidence that presenting a copy of a promissory note is sufficient to show that movant has a right to enforce the note or that it qualifies as a real party in interest”.

    Does anyone have any suggestions on how to put together a good response for a MOTION OF RELIEF? Your assistance is appreciated.

  2. What is the legal issue if the loan Number is written wrong on promissory note and all closing documents

  3. Mewnika: There are two ways that have been reported to me as working, but there is no assurance because not all Judge’s are “up to speed” on the true facts of this feeding frenzy. The first thing to keep in mind is that despite the “disclosures” on the closing documents, there were only two parties involved in your transaction — you and the investor who put up the money. Everyone else is a middleman who was paid exorbitant fees and doesn’t have any skin in this game. If they get the house and sell it, they will keep the money and not forward a dime to the investors who are the only ones who lost money. The first way is to amend your petitions so that you list your house as an asset of undetermined value because there are claims from third parties. Then you you amend your schedules to list every party — the originating lender, the servicer, the trustee and whoever else you know as having made a claim for collection against the note you signed. You list them under unsecured creditors and list their claims as contested and unliquidated. This way the automatic stay cannot be lifted so easily because they are listed as secured creditors. The other way is simply to challenge them as not being the real parties in interest, that you don’t owe them a dime, and that if you owe anyone, it was the REAL lender which was not disclosed to you at closing contrary to Federal Law.

  4. Is there anyway that I can stop a motion of relief? I had filed bankruptcy and ran into some financial problems, but I really want to keep my house. right now I am doing all that I can to get anhother job, as well as, trying to get my unemployment going. I really need some help. I’ve tried to contact my bankruptcy lawyers for advice, but have been unsuccessful in getting a call back. can you please help. 810-836-6570

  5. […] d wrote an interesting post today onHere’s a quick excerptAmericredit Financial Services, Inc., an auto loan servicer, filed a MLS in its own name. Its name appears on the car title as the sole lienholder, it represented that it “has a validly perfected, first priority purchase money security … […]

  6. […] Wonderful World wrote an interesting post today onHere’s a quick excerptBy Brett Weiss, Maryland Bankruptcy Attorney on Apr 20, 2008 in Lawyer to Lawyer, Chapter 12 Bankruptcy, Chapter 11 Bankruptcy, Maryland, Foreclosure Issues, Chapter 13 Bankruptcy,Automatic Stay, Bankruptcy Cases of Interest, … […]

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