Homeowners Win Mortgage Foreclosure Appeal

The dedicated foreclosure defense attorneys at the Emerson Law Firm recently helped homeowners in the Chicago area to win an appeal concerning the foreclosure of their homes. If you are at risk of foreclosure, it is extremely important to speak with an experienced foreclosure defense lawyer who can provide you with advice for keeping your home. To better understand the significance of the recent Court of Appeals decision in foreclosure actions, we should take a look at the facts of the case and the court’s reasons for finding in favor of the homeowners.

Details of the Appeal

In U.S. Bank v. Kosterman, the homeowners executed a mortgage in 2006 and made payments on their loan for a number of years. In 2011, the bank began foreclosure proceedings by filing a complaint, contending that the homeowners had not made timely payments. The homeowners responded with two affirmative defenses: lack of standing and lack of capacity to sue.

In effect, the trial court treated both defenses as concerning a lack of standing, and it emphasized that lack of standing is not an affirmative defense. As such, the trial court dismissed the homeowners’ affirmative defenses with prejudice. The bank filed a motion for summary judgment, which the trial court granted. When a motion for summary judgment is granted, it simply means that the court will enter a decision without hearing a full trial. Given that the motion for summary judgment was granted in the bank’s favor, the bank received an order of possession and an order of foreclosure, and the homeowners appealed.

The Appellate Court of Illinois disagreed with the trial court and remanded the case. How did it comes to its decision? In short, the Court made clear that “a challenge to standing in a civil case is an affirmative defense,” and this remains true even in a foreclosure action such as this one. The Court then had to determine whether the trial court had improperly granted summary judgment to the bank. Ultimately, the Court determined that summary judgment was granted erroneously. What did the Court’s reasoning look like?

When is Summary Judgment Inappropriate in a Foreclosure Action?

After the Court of Appeals made clear that the trial court should not have dismissed the homeowners’ affirmative defenses with prejudice, it turned to the question of summary judgment. How did the Court come to its conclusion that the bank should not have been granted its motion for summary judgment?

The Court emphasized that summary judgment is “appropriate when the pleadings, depositions, admissions, and affidavits, viewed in a light most favorable to the nonmovant, fail to establish a genuine issue of materials fact, thereby entitling the moving part to judgment as a matter of law.” In other words, a motion for summary judgment should only have been granted in this case if the facts presented by the bank, when viewed in the light most favorable to the homeowners, did not establish a substantial issue with regard to the homeowners such that it would have made sense to move forward with the case.

However, under this standard, the trial court improperly granted the bank’s motion for summary judgment. The Court emphasized that the bank’s motion was supported by an affidavit from a bank official that referred to “various records” concerning the foreclosure action. Yet, as the Court pointed out, “none of the records were attached to her affidavit.” According to the Illinois Supreme Court Rules, “affidavits submitted in support of motions for summary judgment ‘shall have attached thereto sworn or certified copies of all documents upon which the affiant relies.’”

Lack of Access to Records and Other Evidence

Many communications occurred between the homeowners and the bank, but the homeowners did not receive access to all of the records relied upon in the affidavit. The Court determined that the homeowners were denied the records and the ability to depose the bank official who provided the affidavit. As such, the Court concluded that the homeowners “had no meaningful change to challenge [the bank’s] contentions” since all the information they needed to do so was in the “sole possession” of the bank.

Upon retrial, the Court emphasized that the homeowners will be able to seek evidence for their affirmative defense and to replead that defense, as well as to seek access to the evidence surrounding the bank’s affidavit.

If you have questions or concerns about foreclosure defense, it is extremely important to contact an experienced Oak Park foreclosure defense lawyer. An advocate at the Emerson Law Firm can help with your case today.

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Subprime Lending, Home Values, and the Reasons for Foreclosure

Are subprime mortgages really the reason for the foreclosure crisis? While this narrative has become the common one in America over the last five years, a recent study conducted by researchers at the University of Pennsylvania’s Wharton School of Business suggests that home values may be almost solely to blame. Indeed, Forbes Magazine reported on the study and emphasized, “The key variable driving all foreclosures wasn’t the type of loan, the amount of leverage, or the socioeconomic or ethnic status of the borrower, but whether a given house was underwater, or worth less than its mortgage.”

Prime Borrowers Losing Homes to Foreclosure

According to the recent study, in the early years of the housing crisis, “subprime borrowers were more likely to default.” However, in the past several years, “twice as many prime borrowers lost their homes as subprime, with correspondingly higher total dollar impact on the financial markets.” Why is this the case? The researchers emphasize that borrowers whose homes were worth less than the amount they owed on their mortgages were most likely to end up in foreclosure. In other words, being underwater on your loan, regardless of whether you had a subprime mortgage, was more likely to result in a foreclosure on your property.

Does this mean banks weren’t targeting low-income families with subprime loans? Not necessarily. However, it does mean that the reasons for a majority of foreclosures might not be what most of us believe. Fernando Ferreira and Joseph Gyourko, the  researchers who authored the study, “A New Look at the Foreclosure Crisis,” simply don’t believe the facts match up with the subprime premise behind the recent history of foreclosure in our country.

Nearly 50 Million Mortgages Can’t Be Wrong

The data gathered by Ferreira and Gyourko is immense, and it suggests that we should take notice of their findings. According to Forbes Magazine, the authors “pulled together a remarkable set of data to reach these conclusions, following the trajectory of 34 million first mortgages and 14 million second mortgages through the crisis.” They identified each of the borrowers, and they classified them according to the following:

• Race
• Income
• Loan category
• Initial loan-to-value ratio (LTV)

In addition to looking at initial LTVs, Ferreira and Gyourko also “calculated loan-to-value ratios over the period for each home, as well as the economic characteristics of the surrounding neighborhood, in order to isolate the variables that were most predictive of foreclosure.” We know that the study determined subprime loans weren’t the primary cause of foreclosure. But what else did the authors discover?

• Race may not play as significant a factor in foreclosure as some researchers previously believed.
• Timing is everything. Even with a prime loan, paying more for a house than it is currently worth can seriously impact your risk of foreclosure.
• When people’s homes are worth less than what they owe, they are more likely to stop making mortgage payments.

The study suggests that its foreclosure-prevention solutions might be more complicated than most of us would hope. Do you have questions or concerns about foreclosure? Don’t hesitate to contact a dedicated Chicago foreclosure defense lawyer at the Emerson Law Firm. We’re here to help.

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