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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Illegal Mortgage Servicing Results in $1.5 Million Fine

Stubborn Foreclosure Rates in Illinois

Illegal Mortgage Servicing Results in $1.5 Million Fine

The Consumer Financial Protection Bureau (CFPB) has been busy in the last few months. The watchdog agency was created to monitor and enforce laws that protect consumers, and it appears that it is working to do just that. According to a recent article from HousingWire, the CFPB has levied a fine of $1.5 million against Residential Credit Solutions, a mortgage servicer that didn’t abide by the law.

Illegal Mortgage Servicing Allegations Against Residential Credit Solutions

Why did Residential Credit Solutions receive a whopping $1.5 million fine? The company was fined for illegally servicing of thousands of loans it acquired from other servicers. According to the article, the mortgage servicer broke the law in a number of ways, including:

• Failing “to honor modifications for loans transferred from other servicers”;
• Providing false information to consumers about unpaid loan balances, payment due dates, required payment amounts, and delinquency statuses;
• Treating “consumers as if they were in default when they weren’t”;
• Misrepresenting the amount of escrow surplus due to consumers; and
• Forcing consumers “to waive their rights in order to get a repayment plan.”

The mortgage servicer is based out of Fort Worth, Texas, but it has consumers across the country. Residential Credit Solutions is known as a company that “specializes in servicing delinquent or default loans and so-called ‘credit-sensitive’ residential mortgage loans, where the borrower is at high risk for default.” The CFPB estimates that the mortgage servicer has assets totaling about $95 million. And since 2009, around 75,000 homeowners have seen their mortgage loans transferred to the Texas-based company.

Details of Mortgage Servicer’s Violations

One of the biggest problems, according to the CFPB, is the way in which Residential Credit Solutions handled loans that had already undergone modifications from other servicers. A number of its customers are said to have had trial loan modifications with their previous servicers, but when Residential Credit Solutions acquired those mortgages, it failed to honor the modifications.

Instead, the CFPB alleges that the Texas mortgage servicer “insisted that the consumer re-prove that he or she was qualified.” And if the CFPB is correct, then Residential Credit Solutions “effectively set consumers back as though they had not received a trial modification.” The CFPB described the position into which the mortgage servicer placed these consumers as a “trial period purgatory.” In connection to the issues surrounding loan modifications and other violations, the CFPB alleged that the Texas-based mortgage servicer effectively prevented consumers from saving or selling their homes through confusion and misrepresentation.

In addition to the fine, will the CFPB require any additional steps from Residential Credit Solutions? The article emphasizes that the mortgage servicer won’t be able to simply pay the $1.5 million and forget about the accusations against it. Rather, it will have to take some of the following steps to repair the harms it is alleged to have caused:

• Engaging in outreach campaigns to help borrowers save their homes;
• Honoring loss mitigation agreements entered into with prior servicers;
• Ending mortgage servicing violations;
• Creating a rigorous program to ensure accurate information in mortgage transfers; and
• Making loss mitigation applications available to consumers electronically and at no cost.

If you believe you were treated unfairly by a lender or a mortgage servicer, it is important to discuss your case with an Oak Park consumer protection attorney. Contact the Emerson Law Firm today to learn more about how we can assist you with your claim.

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Consumer Financial Protection Bureau Cites Illegal Student Loan Practices

Deceptive Credit Card Collection Practices Come to an End

Stubborn Foreclosure Rates in Illinois

The foreclosure crisis, for all intents and purposes, appears to be over. Homeowners are not as concerned as they used to be about risks of foreclosure, and according to a recent article in USA Today, far fewer homes are “entering the foreclosure process now than before the housing bubble burst.”

However, foreclosure rates in certain states remain particularly “stubborn,” according to the article. By examining data contained in a RealtyTrac report, we can see that Illinois is near the top of the list of states that still have a markedly high rate of foreclosure. What’s going on in Illinois, and how long will it take before the foreclosure crisis truly comes to an end?

Home Loans in Foreclosure Originated Years Ago

By and large, home loans that are currently “in some state of foreclosure were originated between 2004 and 2008.” Many Americans purchased expensive houses with high price tags before the real estate market crashed, and since 2008 they have found themselves with seemingly valueless homes that are underwater.

A home that sold for $500,000 in 2006—for which a Chicago family took out a mortgage of $450,000—that is currently only valued at $200,000 means the owners could not even begin to recoup their investment if they sold the property. For some Chicagoans in this position over the last decade, it did not make sense to stay in the house. Other homebuyers in this situation attempted to make monthly mortgage payments on time, but the difficulties of the recession made this impossible.

Shouldn’t we see strong evidence of improvement by now? The data from RealtyTrac suggests that we are definitely seeing fewer foreclosure starts, but we are witnessing particularly lengthy time periods for completing the average foreclosure. On the one hand, “foreclosure starts (a first notice of loan default or notice that a lawsuit has been filed regarding the ownership of a property) are at a 10-year low.” That is the good news, but on the other hand, “it’s taking forever to get those bad, crisis-era loans through the system.”

RealtyTrac identified a current average of 629 days to complete a foreclosure, which is “the longest the foreclosure process has been since RealtyTrac started tracking the metric in 2007.”

Illinois Remains Hard-Hit By Foreclosures

In RealtyTrac’s calculations, Illinois is the fifth-worst state in the country when it comes to foreclosure issues. As the article points out, some aspects of Illinois’s foreclosure statistics are getting better. For instance, current foreclosure starts are below the level they were at in 2006, before the housing bubble burst. However, our state also had “a city in the top-10 metro areas . . .with the highest foreclosure rates in the first half of the year.” In Rockford, Illinois, one in every eighty-seven homes was reported to be “in some state of foreclosure.”

Other states that made the list with Illinois include, in order from best to worst:

• Tennessee
• South Carolina
• Indiana
• Ohio
• Delaware
• Nevada
• Maryland
• New Jersey
• Florida

To see a visual representation of the continued problem of foreclosure time from start to finish, readers only need to look at a color-coded map provided by RealtyTrac. The states in darkest green are having the hardest time dealing with continuing foreclosure issues, and Illinois remains a dark green spot in the middle of the country. Currently, RealtyTrac estimates that there are more than 51,200 foreclosures in Illinois. When we compare that number with a figure from a state marked in light green, such as Mississippi, we can see the stark difference. In Mississippi, RealtyTrac estimates that only 523 foreclosures are currently on record.

If you have concerns about avoiding foreclosure or have questions about modifying your mortgage payments, you should contact an experienced Oak Park foreclosure defense attorney as soon as possible. An advocate at the Emerson Law Firm can help.

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Update on Zombie Foreclosures in Chicago

Subprime Lending, Home Values, and the Reasons for Foreclosure

Update on Zombie Foreclosures in Chicago

Are Chicago neighborhoods continuing to grapple with boarded up homes due to foreclosure? According to a recent article in the Chicago Tribune, there are fewer “zombie” foreclosures, as they have come to be known. They have “plummeted from a year ago.” However, as the article emphasizes, “there are still more than 7,000 of the empty homes working their way through the foreclosure process.”

Foreclosures Remain, Numbers Decline

As a quick reminder, “zombie” foreclosures are those, according to RealtyTrac, where you have “a vacant home that is actively in the foreclosure process.” Other experts define these properties further as those in which the lender is not following through on the foreclosure, and thus the house is left in an empty, eerie state of limbo. In general, Illinois residents are seeing fewer “zombie” foreclosures than before. All of the counties in the greater Chicago area “recorded double-digit percentage decreases” in foreclosures when compared with the second quarter in 2014, based on data from RealtyTrac.

At the same time, however, decreases in the numbers do not necessary mean that foreclosed homes are not still a problem in many communities. Thousands of homes remain in foreclosure. As of March 31st of this year, the following counties still recorded foreclosures in the hundreds and even thousands:

• Cook County had about 3,600 properties in foreclosure
• DuPage County had 488 foreclosures
• More than 150 foreclosures in Kendall County
• 434 properties in foreclosure in Kane County
• 680 foreclosures in Lake County
• More than 600 properties in foreclosure in Will County

If there are still thousands of foreclosures in the Chicago area, should we really be emphasizing improvement?

Public Policy Measures Combat Zombie Foreclosures

In short, those foreclosure numbers reveal a salient improvement in the number of “zombie” foreclosures affecting Illinoisans. Indeed, according to Daren Blomquist, the vice president at RealtyTrac, he sees significant improvement in foreclosure activity in the Chicago area that is likely the result of considerable measures aimed at combating the problem.

As Blomquist explained, “A growing number of states and cities have enacted public policy measures to combat the problem of zombie foreclosures, and we are seeing the results of those efforts in the overall decrease nationwide as well as in several hard-hit markets such as Chicago.”

On the whole, “zombie” foreclosures have declined across the country. RealtyTrac’s data suggests that about 127,000 of these properties still exist throughout the country, but that number represents a 10 percent decrease from the same time last year. However, Chicago is one of a handful of metropolitan areas in which the rate of “zombie” foreclosures has decreased. While policies in our state have resulted in a decline in the number of abandoned properties in the Chicago area, cities such as Boston, Houston, Los Angeles, New York, and Philadelphia have actually presented an “uptick” in the number of “zombie properties” in existence.

For now, it is important to take action to prevent foreclosure if possible. Foreclosure remains a significant problem for homeowners throughout the Chicago area. If you have questions about avoiding foreclosure, don’t hesitate to discuss your case with an experienced Oak Park foreclosure defense attorney. An advocate at the Emerson Law Firm can discuss your situation with you 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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