Those of you who remember the hard-fought battles of the era of predatory foreclosures will recall the name of Maine attorney Tom Cox. Over 9 million families lost their homes, many of whom could have been salvaged through loan modifications which would have been better for investors too.
Cox broke open the fact that servicers, on a mass basis, weren’t taking the steps required for them to foreclose. And as soon became evident, what were depicted as mere paperwork deficiencies actually reflects a vastly more serious legal problem: that mortgage notes (the borrower promise to pay) often if not routinely hadn’t been transferred properly to the securitization trust. A related problem was that the lien against the property hadn’t been recorded in the local courthouse but in a mortgage registry called MERS, and the procedures for changing the MERS record when the note and the mortgage lien changed hands were legally bogus for a set of reasons that it would take too much space to recount here.
Here are the key sections from the New York Times account of the case that put Cox on the national map:
It should have been a routine foreclosure, with Mrs.[Nicolle] Bradbury joining the anonymous millions quietly dispossessed since the recession began…
Her file was pulled, more or less at random, by Thomas A. Cox, a retired lawyer who volunteers at Pine Tree [a nonprofit group]. He happened to know something about foreclosures because when he worked for a bank he did them all the time. Twenty years later, he had switched sides and, he says, was trying to make amends.
Suddenly, there is a frenzy over foreclosures. Every attorney general in the country is participating in an investigation into the flawed paperwork and questionable methods behind many of them. A Senate hearing is scheduled, and federal inquiries have begun. The housing market, which runs on foreclosure sales, is in turmoil. Bank stocks fell on Thursday as analysts tried to gauge the impact on lenders’ bottom lines.
All of this is largely because Mr. Cox realized almost immediately that Mrs. Bradbury’s foreclosure file did not look right. The documents from the lender, GMAC Mortgage, were approved by an employee whose title was “limited signing officer,” an indication to the lawyer that his knowledge of the case was effectively nonexistent.
Mr. Cox eventually won the right to depose the employee, who casually acknowledged that he had prepared 400 foreclosures a day for GMAC and that contrary to his sworn statements, they had not been reviewed by him or anyone else.
GMAC, the country’s fourth-largest mortgage lender, called this omission a technicality but was forced last month to halt foreclosures in the 23 states, including Maine, where they must be approved by a court. Bank of America, JPMorgan Chase and other lenders that used robo-signers — the term caught on instantly — have enacted their own freezes.
In 2012, Cox was one of five winners of the Public Purpose prize, which as the Portland Press-Herald described it,”recognizes people older than 60 who work toward the public good and rewards them with $100,000.”
Cox has continued to win many precedent-setting foreclosure defense cases in Maine. I’ve embedded his most recent victory, which makes an argument I hadn’t seen before: that the foreclosing servicer had violated evidentiary requirements by including records from former servicers where the personnel from the current servicer who appeared in court could not attest as to their validity. I’ve embedded the short and readable ruling from the Maine Supreme Court at the end of the post.
As Cox said via e-mail:
Yves, seven years ago you published an article that I wrote entitled “Two Cords of Wood” describing how KeyBank used the foreclosure process to force a Maine homeowner out of her small Maine home for absolutely foolish reasons—KeyBank actually lost money in doing so. Well, today, we found some retribution for KeyBank’s bad acts in a decision from the Maine Supreme Court. Here is the story.
Is justice done when a homeowner wins a foreclosure case?
I’ve often been asked this question, and have been asked it yet again today by a news reporter as a result of a decision today from the Maine Supreme Court in KeyBank National Association v. Quint, 2017 ME 237, __A.3d__. We won on behalf of the homeowner at the foreclosure trial and won again in the Maine Supreme Court today. Under the current state of Maine law, res judicatawill operate to bar any future foreclosure action against Ms. Kilton, and will allow us to obtain a court order removing the mortgage as a lien upon her property. At trial, the homeowner admitted that she had defaulted on her mortgage. So, “why” I am asked “is it fair or just that that homeowner ends up with unencumbered title to her home and the loan owner ends up with no way to be repaid?”
With all of its flaws, I still believe that the United States’ system of justice is one of the best around.
I started my career as a public defender in Boston. I won “not guilty” verdicts for a number of clients who I knew were guilty, even one who was accused of rape. I subscribed then, and still do, to the theory that it is better that a guilty defendant should go free than any innocent person being punished. This is the only thing that will keep prosecutors honest. Now that I am defending homeowners in judicial foreclosure cases, I translate that same theory into foreclosure cases: it is better that some mortgage owners should lose their rights to recovery than it would be for any homeowner to lose a home due to dishonest, mistaken or even fraudulent evidence being used by a mortgage owner to take that house away. This is the only incentive that we have to keep the mortgage servicers honest in their court cases.
My client here, Victoria Kilton, is an elderly, disabled, sick and marginally literate woman who joined with her mother to purchase their mobile home 9 years ago. They could only afford the monthly mortgage payments by pooling their Social Security checks. When Kilton’s mother died, there suddenly was insufficient money to continue to make the mortgage payments, and thus Kilton found herself in this foreclosure action. As Maine law has developed in the last three months in the Deschaine and Pushard decisions, we now have the right to obtain an order of declaratory judgment removing Keybank’s mortgage lien from Kilton’s real estate.
Under Maine statutory law, as we got it amended in 2011, I now have the right to seek an award of my legal fees from KeyBank for defending Ms. Kilton in the bank’s failed foreclosure action.
Is this fair or just? Damn right it is! Keybank lost this case at trial because it hired an inept and/or indifferent lawyer (one who I had previously beaten on the exact same issue, and who therefor knew better) who thought he could blow inadmissible evidence by a busy Maine trial judge with no homeowner lawyer present to expose the bank’s utterly and fundamentally deficient evidence. KeyBank’s failure to hold its mortgage servicers and their lawyers accountable for their sloppy and sometimes even dishonest evidence is what causes these banks to suffer these losses.
Obviously, KeyBank has the financial resources to enforce the honesty and competency of its mortgage servicers and foreclosure lawyers, but it has made the financial calculation that there are not enough foreclosure defense lawyers, and that losing a few cases like this one is a small enough price to be in order to be able to continue to do foreclosure cases on the cheap. It is only when the banks and servicers repeatedly realize truly severe consequences of total losses in foreclosure cases and having to pay legal fees to homeowners’ counsel that they will start coming to court with honest and competent evidence in all of their cases and not just then ones where they know in advance that foreclosure defense counsel will be present.
This afternoon, I had the pleasure and satisfaction of calling Ms. Kilton and telling her, just 4 days before Christmas, that she will get to keep her home.