Solving the Puzzle: Settlements with Homeowners Are Rising

Hat tip Michael Bazemore

It’s not easy to see but if you look at the court docket after a ruling against the parties designated as “foreclosing parties” you can see that these cases are often dismissed with reference to an agreement or settlement between the parties.

The typical pleading asking the court to dismiss the case will read as follows:

IT IS HEREBY STIPULATED by and between Plaintiff X and Defendant Y that pursuant to [Federal][State] Rule of Civil Procedure (41(a)(2) [Federal] this action and all causes of action contained therein shall be dismissed with prejudice.

It is further Stipulated by and between Plaintiff and Defendant that each party shall bear their own costs and attorney fees associated with this action.

The parties are submitting a proposed order of dismissal concurrently with this Stipulation.

I took that wording from a case involving a homeowner asserting rights, among other things, that focussed on TILA Rescission. We all know that the consensus is that no court will rule in favor of homeowners. But here you have a settlement that the bank considered too risky to bet on — a case that could have served as precedent for the proposition that there is no note, there is no mortgage and the debt that could have been pursued under 15 USC §1635 (TILA Rescission) is now barred by Statute of Limitations (often stated as “SOT).

I am seeing more of these of late indicating that homeowners who fight aggressively are winning their case and forcing the banks to settle.

PRACTICE NOTE: I think it is error to predicate your thinking about settlement value on the value of the case as it is conventionally determined. The banks are not evaluating cases for settlement based upon what a particular homeowner might gain from a particular verdict. They are evaluating the case based upon potential exposure of the entire fraudulent scheme of foreclosure and the liability associated with false claims of securitization, dubbed “securitization fail” by Adam Levitin.

The threshold question of whether they will settle at all is answered by their evaluation of exposure. The amount of money damages paid is based upon the likely verdict in the case. But it remains to be seen as to whether those with an appetite for risk might bargain based upon the exposure in all cases rather than the risk of a negative verdict in this one particular case.

The index for such valuation could be based upon the amount of gain realized by the investment bank who posed as underwriter and perhaps Master Servicer of a nonexistent trust. Through sales and trading of derivatives based upon the signature of the borrower the investment bank collects as much as 40 times the principal due on the note without any allocation to the benefit of the investors or the borrowers. My opinion is that both investors and borrowers should share in the bounty of $10 million taken in on a $250,000 loan. My opinion has always been that the notion of a default or even a loss should be off the table. The question should not be one of foreclosure but of disgorgement of ill-gotten gains.

Litigating foreclosure defense in this context requires the mindset of a solving a puzzle. Like any word puzzle or video game you need to stare at it for a while. At first you see nothing there. It’s like a painting that upon longer viewing reveals a face. After awhile of looking at the names of parties or their purported roles your mind will kick in and you will see the gaps in their asserted roles.

Let us help you plan for trial and draft your foreclosure defense strategy, discovery requests and defense narrative: 202-838-6345. Ask for a Consult or check us out on Order a PDR BASIC to have us review and comment on your notice of TILA Rescission or similar document.
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16 Responses

  1. Reblogged this on Deadly Clear and commented:
    With this government shutdown, the least Congress could do is call a moratorium on foreclosures and evictions. Maybe President Trump should make an executive order since Congress isn’t doing their job??

  2. Paying not Pauling. Although Dr Linus Pauling discovered vitamin C as a cure for the common cold. Maybe Pauling was paying.

  3. Javagold- I’ve wondered about who is Pauling the property taxes on all these mortgages also.
    I believe that it is Corelogic. Can’t remember where I read that some years ago, but if I didn’t trust the source, I would have dismissed it.
    I remember that my services, SPS, received $980 million as per of the bank bailouts. This was listed on the Pew Mortgage Institute website, although this portion of it has been taken down, or I can’t find it. I flagged it, but that was 3 computers and 2 email addresses ago. But it’s on the hard drive if I ever need it.
    I’ve always wondered how a mortgage serviced, being paid .251 % 0f the outstanding balance of each mortgage as per the PSA, can possibly pay all these items.

  4. I think it’s time we figure out who and why they are paying these property taxes Quarter after Quarter after Quarter. I think that could expose a lot of information !!!!!!

  5. Hinrichsen and Hoang are at the tip
    of the spear in the 9th Circuit. They are
    the equivalent of the frag grenade
    being thrown in after the door (Jensinoski v. Countywide) was breached.

    There is also the Sundquist case
    in the 9th that bears noting. Be careful
    to note Judge Klein’s rulings and reason in Sundquist which is publicly
    known to have damages awarded
    to the Sundquists in the tens of millions range.

    Judge Sabraw opines favorably
    on how the TILA Rescission statuatory scheme should be recognized from a
    legal context in Hinrichsen.

    The relevant PDF case file is
    posted somewhere on Neil’s LL site.

  6. Let’s hope that any of these settlements did NOT include modification.

  7. Federal court here ordered Bank of America to go to mediation with me next month after they voluntarily cancelled foreclosure for the third time in 9 years and are clearly past the SOL and past the TILA year to challenge rescission.

  8. Bob G.
    Patience Grasshopper.

    PS. Best I can tell. Those homeowners should have told you to shove your $1000 and rented the house themselves.

  9. @Neidermyer…great. but how to you prove all that with admissible evidence?

  10. @BobG ,

    I believe Neils numbers , at least in a sizable number of these MBS deals ,, Neil has gone over the math many times in the past and it works out… in my case the “trust” failed immediately and triggered an ins. settlement at 100% of face and the underwriter sold the trust assets for 23% of face to another entity (collector/servicer) that was in on the scam … considering the underwriter was using OPM that’s an infinite return on investment…

    The takeaway from this post isn’t MATH ,, it’s that homeowners are finally getting respect as DANGEROUS entities when they fight through to a ending where the banks have to produce actual docs and fight.

  11. Hope my puzzle will be figured out & solved. Thank you Mr. Garfield for hard work! Hope u become president of USA

  12. JAVA…the house was upside down, the owners had filed for BK so they had no personal liability on the note, divorced, and had already moved out. A thousand bucks was a thousand more than they would have seen otherwise. Very simple process, actually.

  13. Bob G.
    Makes about as much sense as you buying a $400K house for $1,000.

  14. Scrivener’s error: 40 guys buying the note, not 50 guys. my apologies.

  15. This is the most absurd, ridiculous article that I’ve ever seen posted here. There is nothing in that settlement language which says anything about 1635 rescission. further, banks don’t usually settle until their motion for sum judg is denied, and they are likely to face a jury trial.

    “The banks are not evaluating cases for settlement based upon what a particular homeowner might gain from a particular verdict. They are evaluating the case based upon potential exposure of the entire fraudulent scheme of foreclosure and the liability associated with false claims of securitization.” Not true in my experience. They don’t give a damn about any of that stuff…they just don’t. Case in point: I bought a $400K house for $1K. Put about $4K into it. Rented it out for $2350/mo. That’s both gross and net. Bankster paid about $170K for the note. Court directed settlement…I offer them $50K for a lien release, or they pay me $150K cash for keys. They counter with $9K cash for keys. They lost their motion for sum judg and I lost my cross mtn for sum judgment, and now we’re scheduled for a nonjury trial, with a different, yet still pro bankster judge. They don’t want to pay me $150K on top of their $170K note purchase price, for a house only worth $400K. So we have a mexican standoff at this point.

    As for the statement that the banksters turned $250K notes into $10MM in resale revenues, that is absolutely preposterous. You would need 50 guys to buy that note. Who’s gonna buy a $250K note with no interest payments, but only the possibility of a foreclosure sale? 50 guys gonna do that? 50 guys gonna buy the note, and only one gets P&I every month? The other 49 try to foreclose? I don’t think so. And since about $5 trillion worth of notes were securitized, using NG’s $250K per note number, that would be 20 million notes. Selling each one 50 times, you would need 800 million purchasers.

    Does this make sense to anyone here? C’mon people…use your heads!

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