Archive for May, 2011
Recently I wrote about the very controversial HB 274 that has made its way partially through the Texas legislature. It had cleared the Texas House of Representatives and was sent to the Texas Senate for consideration. It is widely believed that if the bill makes it through the legislature, it is a given that Texas governor Rick Perry will sign it.
Fortunately, the Texas Senate has put the brakes on HB 274. In committee, the Senate took public comment on the proposed bill, which included considerable opposition from both plaintiff and defense attorneys. It is likely that the Texas state senate will put out its own version of the bill–commonly referred to as “loser payers”–that address some of the many concerns over the fairness of HB 274. We’ll have to wait and see what that version looks like, but you can be sure to read about the latest developments here.
I probably sound like a broken record, but I can’t stress one point enough: you must take control of your own housing situation and don’t rely on what anyone else tells you.
The Dallas Morning News has reported that at least 25 Dallas, Texas constables are suspected of of falsifying official documents by lying about their attempts to serve residents with notices of eviction and other civil court actions taken against them. County officials found the discrepancies by comparing data from GPS units in all constable vehicles with official documents filled out by the deputies.
County Judge Clay Jenkins said it’s possible some people were evicted from their homes without receiving official notice. “If you had a situation where someone never went to your house … you might have been evicted before you had the opportunity to get the money together to stay in your house,” Jenkins said. “I find that to be particularly despicable.”
I also find it despicable. Sadly, we’ve come to expect corner-cutting out of the big banks, but you would at least expect your public officials to do their job. I guess that’s just not always the case–at least in Dallas, Texas. Homeowners and renters are legally entitled to notice before they can be evicted. In many cases, this notice period gives people the chance to round up the money they need to stay in their home, or at least make alternate arrangements so their belongings aren’t literally placed on the curb.
Getting evicted with no notice is nothing short of kicking folks while they’re already down. It’s also illegal. If you think you have been wrongfully evicted or foreclosed upon, I highly recommend you speak with an attorney about your rights.
CNBC’s RealtyCheck Blog, which covers national real estate news, recently published an article titled “Foreclosure Delays Plague Housing Recovery,” which discussed the delays banks are facing in foreclosing on homes. The article basically talks about the backlog of foreclosed houses the banks are accumulating and how this is hurting the recovery of the housing market. But the author also discussed how long it takes banks to foreclose on homes. For example, in New York and New Jersey, it takes more than 900 days to get through the foreclosure process from start to finish, in Florida 619 days, and in California 330 days, according to RealtyTrac.
I’m a Texas foreclosure defense lawyer, not New York or New Jersey, but I’m certainly not seeing a 900 day delays out of banks foreclosing on properties in Texas. To the contrary, I’m seeing banks move swiftly, whether it is a judicial foreclosure (most common for HELOC loans) or non-judicial foreclosure. And I’m seeing continued sloppiness out of lenders in their foreclosure proceedings. In many instances, they are completely ignoring clear statutory requirements.
However, if this article is correct that foreclosures are moving slower than ever, I consider that to be a very good thing.
Why? Because foreclosures are bad for homeowners, communities, and banks. Nobody wins when the bank takes a home.
Delays in foreclosures, for whatever reason, are a good thing when they give the parties a chance to step back and try to work out an arrangement that keeps the homeowner in their home. This keeps a family from being displaced and, from the bank’s perspective, it keeps up a stream of payments (after all, they’re in the lending business, not the real estate business). The process works best when the bank works in good faith with the homeowner to come up with a modification that the homeowner can afford.
Unfortunately, I’ve seen too many examples of banks not working in good faith. In one very troubling example, a bank told a homeowner to complete a modification application within 30 days. These homeowners then got a notice of foreclosure sale in less than 30 days. Had they taken the bank at its word, their home would have been sold on the courthouse steps despite being in the modification process.
Delays in foreclosures may or may not be good for the macroeconomics of the housing industry. I’m not an economist, and my focus isn’t on the big picture. I’m a foreclosure defense lawyer, and my focus is on my clients’ situations, and getting a fair deal for them. But this much I do know–delays in foreclosures usually help the system to run more justly. Delays prevent lenders from quickly running over homeowners with no regard to their rights. Delays prevent banks from blindly relying on robosigned documents. And delays can sometimes be the difference between having a family put out on the street by a constable (literally) or having an orderly winding down of a loan.
Dallas attorney Walker M. Duke of Duke Law Office, P.C. recently scored another victory for homeowners by stopping a Fort Worth-area foreclosure just 24 hours before the bank was going to sell the house. Duke, a foreclosure defense attorney, obtained a temporary restraining order that prevented the foreclosure sale. He also filed a lawsuit seeking a determination of the rights of the bank that tried to foreclose.
Attorney Walker Duke stated that there are “legitimate concerns about whether the bank even holds this homeowner’s mortgage.” More importantly, he said, “the bank did not comply with the clear requirements set out under Texas law. This homeowner did not even receive a notice of the foreclosure until four days before the sale was to take place. That’s a blatant violation of even the most basic foreclosure statutes.”
The accompanying lawsuit seeks declaratory judgment that the foreclosing bank has no right to conduct a sale and money damages for fraud.
Texans should be afraid. Very afraid. The Texas Legislature, which is currently in session, is considering HB 274, a bill that would drastically limit Texans’ access to the judicial system, or at least raise the stakes exponentially. As things currently exist, Texans may have their good faith disputes heard in court. With just a few exceptions, there is generally no penalty on a plaintiff if they do not prevail. The reasoning behind this setup–which is unique to the American justice system–is to avoid barriers to the court system. If a party has a good faith dispute, but is fearful of having to pay the other side’s attorney’s fees if a jury doesn’t see things their way, then they will naturally be hesitant to bring their claim.
The notion that the loser in litigation pays the other side’s expenses, including attorney’s fees, is generally known as the “British Rule” because that is how the British courts are set up. The United States, however, has a long history of rejecting the idea of loser pays because it essentially limits access to the courts to large corporations who can afford to pay the other side’s legal fees or extremely poor individuals who are considered “judgment-proof.” For most middle-class Americans and small- to medium-sized businesses, the prospect of having to pay tens of thousands of dollars for the other side’s expenses could be devastating.
Texas HB 274, which is currently pending in the Texas legislature, proposes the creation of a loser-pay system. In other words, if HB 274 becomes law, if you bring a claim and lose you may be responsible for paying the other side’s legal fees and expenses. I believe this has the real potential to discourage legitimate claimants from seeking justice in court–particularly in developing areas of law.
Once upon a time, product manufacturers faced almost no liability for putting out dangerous products. We’ve all heard about Ford being sued for exploding Pintos and producers of asbestos-laced products facing legal liability, but that wasn’t always the case. This area of law took time to develop, and the “legal pioneers” lost cases in court in the early days. But those pioneers continued to fight, and the result is our current product liability law which encourages companies to produce safe products and holds them accountable for producing dangerous ones.
If HB 274’s “loser pays” rule had been in effect in the early days of product liability law, Americans would not have the protections we take for granted today (and we’d probably still be breathing asbestos). I believe foreclosure law is in a similar state of development. Securitization of mortgage loans has changed the banking and residential housing industries, and our legal system is just now starting to catch up. A “loser pays” system will wrongly discourage homeowners from taking their good faith disputes to court. We’ve seen what happens when the banking industry was left unchecked–it nearly sank the U.S.’s and the world’s economy completely, it created the deepest and longest lasting recession since the Great Depression, and it created a wave of unemployment that has remained near double-digits for years. Just imagine how it will develop from here on out knowing there is little possibility they will be held responsible in court.
I’m not trying to imply that foreclosure lawyers are some sort of superheros. However, open access to our court system is what keeps our society in order and what holds businesses and individuals responsible for their actions. Anything that limits that access is a threat to our ability to seek justice.