Archives for August 2014

Understanding How Bank Lawyers Operate in Foreclosure Cases

August 29, 2014 by Elliot S. Schlissel

The law firms which represent financial institutions in foreclosure legal actions sometimes process thousands of foreclosure cases per year. These law firms are designed to operate efficiently to obtain a maximum profit level on the foreclosure cases they handle. They are most profitable and most successful with regard to their foreclosure litigation when they don’t run into a foreclosure defense lawyer who has a detailed understanding of the legal process involved in foreclosures, the defenses which can be plead and the problems financial institutions have in prosecuting foreclosure lawsuits. It is most profitable for the bank lawyers processing foreclosures when they can move forward with their lawsuit without significant opposition from the homeowners and their counsel.

When my office raises twenty or more affirmative defenses and countersues financial institutions involved in foreclosure lawsuits, it creates numerous problems for the financial institutions and their attorneys. To start with, the bank lawyers go from aggressive moving party to defending their clients’ practices, producing documents and explaining to the court whether all aspects of the mortgage transaction were legal, ethical and appropriate. In numerous cases in which our law firm is involved, we take the banks and their attorneys to task. Sometimes these cases get put aside for years by the bank’s attorneys. In some of the cases the banks simply move to dismiss their own lawsuit.

Mortgage Modifications

By submitting an aggressive, well thought out series of affirmative defenses and counterclaims, the banks are put back on their heals. One of the ways they deal with these cases is by entering into negotiations for mortgage modifications. Sometimes the pressure of an aggressively litigated foreclosure defense results in the bank offering very favorable mortgage modifications as a means of ending the lawsuit.

Conclusion

If you are sued in a foreclosure, hire an experienced, dedicated foreclosure attorney to protect your rights and prevent the financial institution from taking advantage of you.

Predatory Lending Explained

August 26, 2014 by Elliot S. Schlissel

There have been numerous newspaper articles, stories on television and internet articles concerning predatory lending issues. There seems to be a lot of confusion as to what constitutes predatory lending.

Predatory lending refers to practices engaged in by banks, mortgage companies, mortgage brokers, real estate agents and title representatives which involve dishonesty. Most consumers do not have an expertise regarding obtaining consumer mortgages for residential property. Predatory lending practices take advantage of the lack of knowledge prospective homeowners have when they seek to obtain mortgages to buy a home or refinance an existing mortgage. Predatory lending schemes can violate both federal and New York State law.

Examples of Various Predatory Lending Practices

Preparing paperwork for homeowners for loans they cannot afford to make the payments on.
Obtaining false inflated appraisals on homes.
Convincing prospective homeowners to lie on their applications with regard to inflating their income.
Engaging in racial profiling and convincing minority individuals to take out sub-prime mortgage loans.
Charging excessive fees and expenses for preparation of the paperwork with regard to a mortgage application.
Quoting one interest rate or set of terms regarding a mortgage and then later charging a higher interest rate or additional fees and charges.

Auditing Loan Documents

One of the methods to determine whether predatory lending was involved in a transaction and/or whether the loan and the closing on the transaction were handled properly is to obtain a loan audit. Loan audits can provide documentation with regard to predatory lending issues, violations of truth in lending laws, violation of New York State banking laws, fraudulent practices and other unethical or illegal aspects of the mortgage transaction.

Loan audits can show a variety of improper and bad practices engaged in by a financial institution and/or other individuals involved in the mortgage loan process. Among other things, the mortgage audit can reveal fraud on behalf of the financial institution and/or its employees or agents, misrepresentation with regard to the terms and circumstances of the loan, breaches by the financial institution of the contractual obligations and a variety of other issues which can be utilized as a defense to a foreclosure lawsuit.

Conclusion

There has been a lot of predatory lending in the past five to ten years by financial institutions. Just simply alleging predatory lending was involved in a transaction is not enough. The facts and circumstances of predatory lending must be proven.

Filed Under: Foreclosure, Foreclosure Defense Tagged With: foreclosure defense attorneys, New York foreclosure defense lawyers, predatory lending

Defense to Foreclosure Lawsuit: Statute of Limitations

August 22, 2014 by Elliot S. Schlissel

There is a statute of limitations in every state of the United States with regard to bringing a foreclosure lawsuit. If the financial institution which holds your mortgage does not initiate the foreclosure lawsuit within the statute of limitations period, a defense can be raised in your answer to the summons and complaint that the lawsuit is barred by the statute of limitations. The statute of limitations in the State of New York to bring a foreclosure lawsuit is six years.

Calculating Time Periods for the Statute of Limitations

The usual start of the running of the six year time period under the statute of limitations, in the State of New York, is from the time the homeowner made their last mortgage payment. For example, if the homeowner’s last mortgage payment was made January 1, 2010, the statute of limitations defense could be utilized by the homeowner if the foreclosure lawsuit was not initiated on or before January 1, 2016.

Statute of Limitations: An Affirmative Defense

Affirmative defenses are specific defenses to lawsuits which need to be plead in the pleadings of a responding party. In a foreclosure lawsuit, the homeowner must plead the statute of limitations and other affirmative defenses in their written answer which is submitted to the court and to opposing counsel. Failure to plead a statute of limitations defense or other affirmative defense in an answer acts as a waiver of that defense. Over the years I have had prospective clients who have come into my office and said to me things such as, the foreclosure lawsuit was illegal because it was initiated more than six years from the time they stopped making their mortgage payments. This is not true. As indicated earlier in this paragraph, the statue of limitations defense must be plead as an affirmative defense in an answer to the summons and complaint or else it is waived. Unfortunately in some of the situations clients have brought this up to me in, they had waived their right to submit the affirmative defense of statute of limitations.

Once the financial institution starts the lawsuit, the issue of the statute of limitations as a defense is no longer applicable. So if the foreclosure lawsuit is started four years after the date of default and it goes on for five years, there is no statute of limitations defense available. Once the lawsuit is started, it does not make any difference however long it takes to be finalized or resolved. The statute of limitations only applies to the first six year period.

Conclusion

If you think you have a statute of limitations defense, it is strongly suggested you contact an experienced foreclosure defense lawyer and discuss this issue with him or her and the best way to present it in your pleadings.

Filed Under: Foreclosure Tagged With: defective foreclosure lawsuits, foreclosure defense, foreclosure proceedings, New York foreclosure defense lawyers

Filing Chapter 7 Bankruptcy and Keeping Your Home – Part II

August 19, 2014 by Elliot S. Schlissel

Property Exemptions in New York

There is a homestead exemption for homes, co-ops, condos, and mobile homes of $150,000 within the Counties of Nassau, Suffolk, Westchester, Rockland, Putnam, Richmond, Kings, Queens, New York, and the Bronx. (If the title to the house were in the name of a husband and wife, each of the parties, if they filed a joint bankruptcy, would have a $150,000 homestead exemption. Therefore $300,000 of equity in the parties’ home could be protected in a bankruptcy proceeding.)

The extent of the New York bankruptcy exemptions and the ability to use these exemptions to save the equity in a home can be further brought out by the following example. In this example a husband and wife own a home worth $600,000. They have a mortgage on the home of $300,000. They are up to date on their mortgage payments. They have credit card debt and other unsecured debt of $100,000. In this case, if the parties qualify for a Chapter 7 bankruptcy, as a result of filing bankruptcy, the parties could eliminate their $100,000 in unsecured debt. Instead of making the payments on credit cards and the other unsecured debts, they can now utilize those funds to pay their mortgage. The fact they had $300,000 of equity in their house would not create a problem because each of the parties could utilize their $150,000 exemption. (Please be advised that this only works in the counties referred to above).

Conclusion

Bankruptcy is not usually the best way to handle being served with a summons and complaint in a foreclosure lawsuit, however, in the right circumstance it is a viable option.

Filed Under: Bankruptcy, Foreclosure Tagged With: bankruptcy, Bankruptcy mortgage modification, Chapter 7, foreclosure attorney, foreclosure defense attorneys, New York foreclosure attorney

Filing Chapter 7 Bankruptcy and Keeping Your Home – Part I

August 15, 2014 by Elliot S. Schlissel

Can you file a Chapter 7 bankruptcy, eliminate all of your debts other than your mortgage obligation, and still keep your home? The answer to this question is, yes! If you are current on your mortgage payments when you file your Chapter 7 bankruptcy, you may be able to protect the equity in your house, if any, by using the New York Bankruptcy Exemptions. You can file a Chapter 7 bankruptcy, eliminate all of your credit card debt, personal obligations, debts to lawyers, doctors, medical debts, money judgments, car repossession deficiencies, and all types of other personal obligations in the Chapter 7 bankruptcy.

After going through the bankruptcy and eliminating all of your debt besides the mortgage, you will be in a better position to make your mortgage payments. You won’t have all the other creditors calling you on the phone and sending letters demanding payments.

Chapter 7 Bankruptcy Trustee

When you file a Chapter 7 bankruptcy, the court appoints a bankruptcy trustee to review your case. The trustee reviews your petition and thereafter asks you questions under oath at a creditor’s meeting at the courthouse. The Chapter 7 bankruptcy trustee is interested in looking into whether you have property which can be sold to benefit your creditors. If the trustee cannot find property which is not protected by bankruptcy exemptions and has marketable equity in it, the trustee will close your case and not go after your property.

Filed Under: Bankruptcy, Foreclosure Tagged With: bankruptcy, Bankruptcy mortgage modification, Chapter 7, foreclosure defense attorneys, foreclosure related bankruptciy, New York foreclosure defense lawyers, second mortgage bankruptcy

Citigroup Pays $7 Billion Regarding Improper Mortgage Practices

August 8, 2014 by Elliot S. Schlissel

Citigroup recently settled with the Justice Department a lawsuit with regard to its being involved with fraudulent practices concerning residential mortgages. As part of the settlement, Citigroup will be expending more than $7 billion.

Citigroup

Citigroup is required under the settlement with the Justice Department to modify mortgages of financially troubled homeowners. However, due to the numerous problems Citigroup has had with regard to financing residential mortgages, they do not have sufficient existing mortgages to satisfy a $7 billion settlement with the federal government. Therefore, in addition to being involved in providing mortgage modifications to its struggling mortgage holders, Citibank has agreed to finance affordable housing to be rented to individuals in “high cost of living areas.”

No Criminal Prosecutions

Commentators with regard to the settlement have found the federal government has not held banks accountable to the level they should regarding the real estate crisis created in the United States by faulty mortgage practices. It should be pointed out no Citibank executives were charged criminally or prosecuted with regard to their fraudulent mortgage activities.

Attorney General Eric Holder however, has indicated the settlement with Citibank does not absolve the bank or its employees of the possibility of facing criminal charges. He went on to state, “the bank’s misconduct was egregious.”

Affordable Housing

Citibank has agreed to provide $108 million for affordable housing as part of this settlement. The rental housing component of the settlement will cause Citibank to provide financing for housing developments may result in financial losses to the bank. Justice Department spokesman Tony West, recently stated regarding the settlement, “we hope this measure will bring relief to families who were pushed into the rental market after losing their homes in the wake of the financial crisis.”

Elliot Schlissel is a foreclosure attorney. He litigates predatory lending issues, bad bank practices, fraudulent mortgage practices, and other issues involving financial institutions. He also helps his clients obtain mortgage modifications. Elliot is the former President of the Commercial Lawyers Conference of New York.

Filed Under: Foreclosure, Foreclosure Defense, Mortgage Modification Tagged With: defective foreclosure lawsuits, foreclosure attorney, foreclosure proceedings, fraudulent foreclosure practices, New York foreclosure defense lawyers

Default Interest Rate in Foreclosure 24%

August 6, 2014 by Elliot S. Schlissel

In a case before Magistrate Judge Lois Bloom in the Eastern District of New York (a Federal Court) a borrower named McLaughlin had borrowed $184,000 and provided a note and mortgage to the financial institution regarding the mortgage. The financial institution brought an application for summary judgment claiming there were no issues of fact.

In the summary judgment motion, the attorneys for the financial institution cited a portion of the promissory note which said “in the event of default of the note specified that a 24% per annum ‘default rate’ should remain in effect until such time as all events regarding default were cured.”

Statutory Interest Rate in New York 9%

McLaughlin argued to the court the bank’s calculation of interest at the rate of 24% was improper. He claimed when judgment was granted on the summary judgment motion to the financial institution, they should have used the default rate of interest under New York statutory law of 9%.

Magistrate Bloom considered McLaughlin’s arguments. However, she found the 24% default rate of interest in the note would apply in this situation. She rejected McLaughlin’s argument the New York rate of interest of 9% on judgments was appropriate. She took this position because the contract clearly stated the interest would accrue at the rate of 24% per annum in the event of default until such time as the entire amount of the note was fully paid. She found even after a judgment was entered in the bank’s favor, they would continue to be entitled to an interest rate of 24%.

Conclusion

I find a 24% interest rate of a mortgage is outrageous. Most people do not carefully read mortgage notes when they enter into them. Often, attorneys who represent clients at closings on real estate transactions don’t go into detailed explanations concerning the potential for an interest rate raising from a reasonable rate to 24%. I disagree with this court’s decision. However, Judge Bloom’s decision is now the law of this case.

Elliot Schlissel is a foreclosure lawyer. His office has represented scores of New Yorkers successfully in bank foreclosure proceedings. Elliot strives to keep his clients in their homes!

Filed Under: Foreclosure, Foreclosure Defense Tagged With: financial crisis, foreclosure, foreclosure defense, New York foreclosure attorney

Archives for August 2014

Understanding How Bank Lawyers Operate in Foreclosure Cases

Predatory Lending Explained

Defense to Foreclosure Lawsuit: Statute of Limitations

Filing Chapter 7 Bankruptcy and Keeping Your Home – Part II

Citigroup Pays $7 Billion Regarding Improper Mortgage Practices

Default Interest Rate in Foreclosure 24%

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