Tuesday, November 6, 2012

Wells Fargo v. McCluskey - A Big Win for Illinois Homeowners in Foreclosure

Second District Appeals Court Declines to Adopt MERS v. Barnes


In what will surely be a landmark decision in Illinois mortgage foreclosure law, the Appellate Court of Illinois for the Second District recently ruled, in Wells Fargo Bank, N.A. v. McCluskey, 2012 IL App (2d) 110961, that homeowners in foreclosure may file motions to vacate (known as 2-1301 motions in Illinois) even after the foreclosure sale has been conducted. 

This is a HUGE victory for homeowners facing foreclosure in the Second District (Jo Daviess, Stephenson, Winnebago, Boone, McHenry, Lake, Carroll, Ogle, Lee, De Kalb, Kane, Kendall and DuPage counties).  The Second District Court departed from a decision in the First District, See Mortgage Electronic Registration Systems Inc. v. Barnes, 406 Ill.App.3d 1 (2010).  The Second District court found:
"...[W]e disagree with the Barnes court's reasoning that permitting a defendant to file a section 2-1301(e) motion following a judicial sale would threaten to 'evicerate' section 15-1508 of the Foreclosure Law."  McCluskey at 6.
This decision has created a split of authority among the districts in Illinois.  In Cook County (the First District), Barnes tells us that we cannot file 1301 motions after the sale has been conducted.  In the Second District, McCluskey says that Defendants may continue to file these motions under the standards and rules that apply to any 1301 motion (meritorious defense, due diligence, timeliness, discretion of the court etc.)

The lesson for homeowners here remains the same.  If you are facing foreclosure, it is important that you seek the advice of a competent attorney in your area.  Timelines and paperwork are very important in a foreclosure case (and indeed any lawsuit).  You should always make every effort to adhere to the rules set by the court.  For most non-attorneys, this means you should seek to hire an attorney or at least consult with one.



Mark A. Laws is a consumer protection and foreclosure defense attorney based in Chicago Illinois.  He was the lead attorney for the Appellant in Wells Fargo v. McCluskey.


Please email comments to mark@lawsatlaw.com

Wednesday, August 15, 2012

The Illinois Mortgage Foreclosure Process

Most people know very little about the process behind foreclosing on a mortgage.  Sure, many have heard the term "foreclosure" and they know that it means the bank is coming to take the house, but what does that mean to the homeowner?

Foreclosure is different from state to state.  Some states use what is called a "judicial foreclosure" (this is what we have in Illinois), while others use what is known as "non-judicial foreclosure" or "statutory foreclosure".  For purposes of this article, I will be focusing on the Illinois mortgage foreclosure process.

As an attorney practicing in Chicago, Illinois, I regularly deal with the judicial foreclosure process in Illinois - particularly in Cook County and the collar counties surrounding Chicago.  In Illinois, we have a law called the Illinois Morgage Foreclosure Law ("IMFL") which governs the manner in which a mortgage lender (a/k/a lien holder, mortgagee, bank) is able to foreclose on a mortgage.  I won't bore you with the intricate details about the law - leave that to the lawyers.  As a homeowner who might be facing foreclosure, this is what you need to know.

TIMELINE FOR A FORECLOSURE IN ILLINOIS

  • The process begins when you fall behind on your mortgage payments (or in some cases, where the mortgage company makes an accounting mistake).
  • You will start to receive phone calls and letters from your bank or third party companies that work for the bank (mortgage servicing companies/debt collection agencies - people in call centers).
  • GRACE NOTICE: After falling behind 30-90 days, you will receive a letter from your mortgage company, this letter is required under Illinois Law.  It will inform you that you have 30 days to come current on your loan or the mortgage company will file a foreclosure lawsuit against you.
    • Note: that this letter will come regular U.S. mail and looks relatively innocuous.  THEY MUST SEND IT BEFORE THEY FILE A FORECLOSURE SUIT AGAINST YOU
  • LAWSUIT: At this point, you are probably about 90 days delinquent on your loan payments.  The case has been referred to local attorneys who will handle filing the lawsuit against you.
  • You will soon be served with a summons to appear in court.  If you have not already sought local counsel, this is the time to get on the phone.
    • Note: Illinois recently passed a law specifically regarding defendant-homeowners in mortgage foreclosure law suits.  (see the next lines).
    • If you appear in court even once you may waive defenses to your foreclosure case.
    • If you file one paper in court, you may waive defenses to your foreclosure case.
    • Please call an experienced foreclosure attorney before you go to court.
  • We have come to a fork in the road.  You can choose to fight your foreclosure (either on your own, or with the help of legal counsel), or you can choose to ignore this lawsuit.
  • OPTION 1: DO NOTHING
    • If you do nothing, the attorneys for the bank will obtain a judgment of foreclosure against you.  
    • This will happen about 2-4 months after you were served with the summons and complaint.  
      • Note: This could be longer or shorter depending on which county your property is in.
    • Typically about 3 months after judgment, the bank (through its attorneys) will put the property up for sale at auction.  
    • 30-45 days after sale, the bank will come back into court and ask the judge to confirm the sale of the property.
    • You (as the former owner) have 30 days from the confirmation date to vacate the premises.  The new owner has a legal right to occupancy.
    • TOTAL TIME FROM COMPLAINT TO CLOSE: 6-9 MONTHS.
  • OPTION 2: FIGHT THE FORECLOSURE SUIT
    • The first thing you should do when you get served with a lawsuit is call an attorney.  If you don't know an attorney, call your local bar association.
    • Your attorney will file documents on your behalf with the court to defend the foreclosure lawsuit.
    • On average, the effect of raising appropriate defenses and filing the correct documents with court, will extend a foreclosure case by 12-18 months (in addition to the 6-7 months it normally takes).
    • Additionally, many counties are now offering mediation programs for homeowners facing foreclosure.  These programs can be great tools if you know how to navigate them.
    • TOTAL TIME FROM COMPLAINT TO CLOSE: 24-30 MONTHS.

THE BOTTOM LINE

Most people will only ever face foreclosure one time.  They are not familiar with the process because it is long, complicated and unfamiliar.  In most cases, the cost of consulting an attorney is far less than the cost of going through a foreclosure alone.  Beyond the monetary value of hiring an attorney, there is additional value that the homeowner can receive.

By hiring a professional, a homeowner gains the following:
  • Knowledge about the process through each step of the case.
  • Well-informed opinion about options for the homeowner.
    • Loss Mitigation (i.e. Loan modifications, short sales, deeds-in-lieu)
    • Is mediation right for you?
    • Where will you go next, what is the timeline for MY case?
  • A stringent legal defense, ensuring the bank respects your rights as a consumer.
  • Protection from harassing calls from mortgage company debt collectors.
  • Peace-of-mind knowing that a professional is representing your interests.

Wednesday, May 23, 2012

Consumer Bankruptcy Part 2: Chapter 13

This is the second part of my three part breakdown of consumer bankruptcy cases.  These pieces are meant as informational tools for consumers who are considering bankruptcy or are looking to find out more information about what bankruptcy is.  I will remind the readers that in order to determine the best options for any given person, it is very important to consult with a local professional bankruptcy attorney.  There is no substitute for learned local counsel.

Chapter 13

The sometimes less popularized version of a consumer bankruptcy is Chapter 13.  As opposed to liquidation (See Chapter 7), a Chapter 13 is a reorganization or repayment plan.  Chapter 13 provides a way that people can keep property and pay back creditors over the course of the plan (over a term of 36-60 months).  This type of bankruptcy is also very helpful to people who experienced a temporary loss of income and who now have regular income and can make regular monthly payments.  Chapter 13 can:

  • Help a homeowner to prevent or stop a mortgage foreclosure
  • Help a driver reinstate their license through repayment on parking tickets
  • Allow a consumer debtor to pay back some of their debts over time
  • Grant a debtor a discharge of debts upon completion of a plan (3-5 years)

REQUIREMENTS

The requirements for filing chapter 13 are few.  A person need only have "regular income" and less than $336,900 in unsecured debt.  Unsecured debts are typically things such as credit cards, medical bills and other regular loans and lines of credit that are not backed up with collateral.  There is also a requirement of less than $1,010,650 in total secured debt.  Please note that these debt limits are subject to change on a regular basis as determined by Congress and as permitted by law.  It is important that you consult with a local bankruptcy lawyer before making any determinations.

FILING THE CASE

Filing the chapter 13 case is very similar to a Chapter 7.  A few forms are required to start the case and the debtor must have also completed the required credit counseling course previous to filing the petition.  The main difference in filing a chapter 13 case is with the repayment plan which is proposed by the debtor.

THE PLAN

The Chapter 13 Plan is the document which is created by the debtor which is proposed to the court in the Bankruptcy case.  This Plan is the document which set forth the manner in which debts will be repaid over the next 3-5 years.  The Debtor is generally given great leeway in constructing this plan, but there are certain requirements and restrictions, some of which are:
  • All priority claims must be paid in full (i.e. taxes, child support payments, and other special debts)
  • The present value payments must equal at least what the creditors would receive through a chapter 7. This means that you cannot propose to pay less in a chapter 13 than you would in a 7.
  • Secured creditors must accept the plan. (your mortgage company)
    • additionally, you are required to continue to pay your regular payments (i.e. mortgage) as well as make payments on the arrearages.
  • Usually, the debtor must pay ALL of their available disposable income each month toward the plan (through the U.S. Trustee).
These restrictions are sometimes more complicated and there are exceptions to these rules.

CONFIRMATION

Assuming that you have followed all the rules and filed all the proper forms, you will be all set to go in front of a bankruptcy judge for confirmation of your plan.  Hopefully, you or your attorney has done all of the legwork required to create a successful and feasible plan for you.  by this point you should have already made a payment or two to the Trustee based on the proposed plan.  Barring any objections from the creditors or the Trustee, the court should confirm your plan, Congratulations!

CONVERSION/AMENDMENTS

3-5 years can be a long time.  Over that period of time, it is common for circumstances to change.  If they do, the debtor may experience a change in income or financial status.  This might mean that the original plan needs to be amended.  Don't worry, this is allowed and common.  It is important that you make sure to keep making payments to the trustee or else your case can be dismissed or converted to a chapter 7.  In order to avoid this, you should consult with your attorney or the trustee's office to make payment arrangements.  If you fail to make timely payments each and every month in the plan, your case will be dismissed and you be back to square one.  DONT MISS YOUR PAYMENTS!!!

DISCHARGE

Assuming that you made it through 3-5 years of monthly payments, the final step in the case is discharge.  The discharge is the order from the bankruptcy court which releases the debtor from any further obligations under debts which were properly included in the bankruptcy petition and plan.  A Chapter 13 discharge is often broader than a discharge in chapter 7 (some additional types of debts are included) but it is also more difficult to obtain.  Some of these additional types of debts are:
  • debts arising from injury to property
  • marital property settlements
  • certain fines or penalties
There are, of course, exceptions to a discharge in a chapter 13 as there are in a chapter 7.  Please consult with a local bankruptcy attorney to find out if a Chapter 13 is right for you.

For more information about Chapter 7, please see my separate article Here

My next article will discuss how to decide if bankruptcy is right for you and if so, what chapter you should file.

Wednesday, May 9, 2012

Consumer Bankruptcy: Part 1 - Chapter 7

As a consumber bankruptcy firm, one of the most common questions asked by clients is about the different kinds of bankruptcy (called chapters).  The most common types of cases filed by individual consumer debtors are chapters 7 and 13.  Choosing the right type of case to file is a decision that is based on your financial situation, your goals, the types of debts you owe and your intentions relating to your property.  This decision can be very important and for many people, very difficult.  It is important that you seek professional advice from an experience bankruptcy attorney regarding which may be right for you.  I will provide a general idea of what each chapter involves and who typically qualifies to file.  Remember, this is a general information article.  Each person has a specific set of circumstances that alter the following criteria.  Furthermore, bankruptcy rules (even though through a federal court) are very different from state to state and district to district. Please consult with a local attorney in-person or on the phone in order to properly assess your personal situtation.

Chapter 7

Most people, when thinking of bankruptcy, think of a chapter 7 (also called a liquidation).  During the years of 2008-2012, more than 1 million consumer debtors file for Chapter 7 bankruptcy protection per year. US Courts BK Stats.  Any person residing in or having property in the US (including a business) may file for Ch. 7 bankruptcy protection (11 USC sec. 109).  Before filing, the person muct have received a credit counseling briefing from an approved non-profit agency.  US Trustee Approved Credit Counseling Agencies

FILING

There are a number of forms that consumer debtors must fill out in order to complete a chapter 7 filing but in order to start the case, a person only needs to fill out a 3 page petition with an attached proof of credit counseling along with a court assessed filing fee of $306 (current as of May 2012).  The proper place ("venue") to file a petition in bankruptcy is the "domicile, residence, principal place of business or where the principal assets are located" for 180 days prior to petition.  This means that if you have recently moved, the proper place to file and more importantly, the proper rules and exemptions that apply to you might not be where you actually are.  Again, you should consult with a local bankruptcy expert in order to assess your case.

POST-FILING

Upon filing the petition, the debtor is automatically granted immediate protection from creditors.  This includes garnishments, levies, seizures and attachments.  Additionally, the assets and property of the debtor are generally frozen (there are always exceptions to any rule).  Within a few weeks of filing, the court will notify all creditors of a meeting to be held with the trustee (an attorney who represents creditors in bankruptcy court).  This meeting is sometimes called the "meeting of creditors" or the "341 meeting"  This notice also sets certain deadlines with the court and the important filing dates with the court.

341 MEETING

The 341 meeting is often the only hearing that a consumer debtor has to appear for in a straight chapter 7 case.  At this meeting, debtors and their attorneys meet with the bankruptcy trustee to verify information that was filed with the petition.  The trustee is tasked with administering the bankruptcy estate of debtors and if appropriate, she will distribute assets to creditors that are owed money by the debtor's estate.  Typically, trustees will ask debtors about property they own, law suits that are pending, tax returns for a few years prior to filing, pay stubs (or other proof of income) and questions relating to monthly expenses.  Debtors are required to appear in person with a photo ID and proof of social security number.  Despite being called the "meeting of the creditors", creditors rarely actually appear a the 341 meetings, instead the trustee acts on behalf of the creditors.

EXEMPTIONS

What many people don't know is that you can keep much of your personal property even after filing for Ch. 7 protection.  Each state provides that debtors are allowed to protect or "exempt" certain property from creditors.  This means that people who file for bankruptcy can still keep things such as:
  • A primary home up to a certain amount of equity
  • A vehicle up to a certain value
  • Government benefits such as social security or unemployment
  • Retirement funds
  • Clothes
  • Tools used for a trade profession
The bottom line here is that, if you file for Ch. 7, the creditors will not literally take the clothes off of your back.  Bankruptcy protection exists so that people can get a fresh start and unburden themselves from a mountain of debts that seem unsurmountable.

For more information about what you can protect in bankruptcy, you should consult with a local bankruptcy attorney.  For an easy and quick look at Illinois Exemptions follow this Link to Illinois Exemptions.

DISCHARGE

The final step in the Chapter 7 process is the discharge.  This is the final order from the federal court which grants the debtor relief from any pre-petition debts that were included ("scheduled") in the bankruptcy petition.  Generally, the discharge applies to all debts EXCEPT:

  • Tax Debts and other debts owed to governmental units
  • Debts for domestic support obligations (alimony and child support)
  • Student Loans
  • Debts involving fraud
  • Debts involving personal injury
  • Other debts ruled to be non-dischargeable in a bankruptcy proceeding


Mark A. Laws is a consumer attorney and bankruptcy practitioner in Chicago, Illinois.  For more information visit lawsatlaw.com.






Tuesday, May 1, 2012

HUD Protections in Foreclosure

Courts around the country have been dismissing foreclosure action due to the bad acts of mortgage servicing companies (e.g. PHH Mortgage Corporation).  More specifically, the failure to comply with federal regulations that specifically regulate mortgages that are insured buy the US Department of Housing and Urban Development ("HUD").  Most recently, the Virginia Supreme Court (the highest court in the state) remanded a mortgage foreclosure case due to the mortgage servicer's (PHH) failure to comply with HUD regulations.

More Information on HUD Servicing Guidelines

HUD has an interest in protecting the mortgages that it ensures, therefore the US government has granted authority for HUD to create extra protections to homeowners who have a loan insured by HUD.  One of these protections requires that:

the lender to "have a face-to-face interview" with the borrower, "or make a reasonable effort to arrange such a meeting." 24 C.F.R. § 203.604(b). However, it also states that "[a] face-to-face meeting is not required if . . . [t]he mortgaged property is not within 200 miles of the mortgagee, its servicer, or a branch office of either." 24 C.F.R. § 203.604(c).

This means that before a lender can foreclosure, they need to meet with the homeowner to discuss loss mitigation options (loan modification, refinance, deed-in-lieu of foreclosure, sales etc.)  Lenders (and their servicers) have attempted to skirt this rule by claiming an exemption under the "200-mile rule"  this exemption allows a servicer to escape the face-to-face meeting requirement if they do not have an office located within 200 miles of the subject property (the home).

In case you are unaware, many mortgage servicing companies have only a few actual "mortgage servicing offices".  These are large facilities filled with personnel who are trained in how to service a mortgage loan (See: Collect Debts).  While you might see a Wells Fargo Mortgage storefront on every corner in your county, these are largely just sales offices where mortgage loans originate.  The mortgage companies argue that these offices do not count as "branch offices" as contemplated by HUD and under its regulations.  Many consumer attorneys such as myself disagree with this attempt to end run around the law.

In a great decision for American homeowners, the Virginia Supreme Court has sided with the homeowner!  Quoting from Mathews v. PHH Mortgage Co (April 2012):

 "The Mathewses argue the term "branch office" is unambiguous and that the plain language of the Regulation supersedes HUD's response in the FAQ. They assert that the common and popular meaning of a "branch office" is "a place for the regular transaction of business or performance of a particular service located at a different location from the business's main office or headquarters." Moreover, HUD expressly acknowledged in the FAQ that the term "branch office" encompasses not only a "servicing office" but a loan origination office as well. We agree."


The Virginia Supreme Court went out to explicitly reject PHH's argument that  because it did not have a "servicing office" within 200 miles it should be exempt from this regulation.

For the complete case follow this link to google scholar Mathews v. PHH (Virginia 2012)

Way to go Virginia!

Monday, April 30, 2012

Fair Credit Reporting: Accuracy Obligations of the CRBs

The Fair Credit Reporting Act ("FCRA") is a federal law that sets rules and guidelines that Credit Reporting Bureaus ("CRBs") a/k/a Consumer Reporting Agencies ("CRAs") must follow when reporting on the credit of a consumer.  Some well known CRBs are Equifax, Transunion and Experian.  Not only does the FCRA impose liability (see: fault) on CRAs for reporting faulty information, it further requires that CRAs utilize reasonable procedures to ensure maximum possible accuracy of the information in a report.

All of this legalese means that you, the consumer, have a right to an accurate and correct credit report.  If you suspect that there is a false information on your credit report, this is what you should do:
  1. Obtain a copy of your credit report.  This can be done for free once per year from each of the three major bureaus.  Annual Credit Report Again, this is free.
  2. Determine which bureau is reporting the false information - it could be one or all three.
  3. Send a dispute letter in writing to the appropriate CRB.
    • Send the letter certified - keep a copy of the proof of service.
    • Do not email this letter.
    • Identify as much information as you can about the false information within the letter (i.e. your name, address, account numbers, etc.)
    • Enclose a copy of your report with the bad information on it.
    • Allow 30 days for a response from the CRB.
    • Send the letter certified - keep a copy of the proof of service!!!

If the CRB fails to properly conduct an investigation into the bogus item on your report, they might be liable for damages to you.

Remember that the FCRA is a federal statute which provides protection for consumers from inaccurate information.  This means that the information must be false.  Accurate reports of delinquent payment history - no matter how frustrating - do not create liability.

The source, cause and or reason for a mistake in a consumer credit report can be very difficult to determine.   You should never assume that a faulty piece of information creates liability on the part of the CRB.  Furthermore, a large factor in assessing a claim brought under the FCRA is the amount of damages (financial, emotional and other types of harm) caused to the affected consumer. 

If you have been significantly harmed by false information contained within your credit report, it is in your best interests to consult with an attorney experienced with the FCRA and consumer protection laws.  For more information please visit the following websites:

Federal Trade Commission

National Association of Consumer Advocates

Attorney Mark A. Laws

Wednesday, February 15, 2012

New Consumer Rights Under Dodd-Frank

About 18 months ago, President Obama signed the Dodd-Frank Wall Street Reform and Consumer Protection Act ("Dodd-Frank" for short) into law.  As a consumer attorney, I am very pleased and excited with this 2000 page piece of legislation.  As a consumer, especially home owners, you should be ecstatic.

Dodd-Frank strengthens some of the United States' most consumer friendly federal laws.  Included in this category are the Truth in Lending Act ("TILA"), Real Estate Settlement and Procedures Act ("RESPA"), Fair Debt Collection Practices Act ("FDCPA") and the Fair Credit Reporting Act ("FCRA").  In addition to revising the above mentioned statutes, Dodd-Frank also created the Bureau of Consumer Financial Protection ("Bureau"), a new federal agency to oversee the banks and other financial institutions.

More than a year after the passage of Dodd-Frank, many of us in the legal community are still unclear as to how far reaching the new regulations will be, the Bureau has the authority to make many of the new rules that will go into place.  We do know a few things.

1.  Consumer Protection is increased substantially, especially relating to mortgage lending and servicing.
2.  Statutory damages (civil penalties that can be imposed against banks) have increased.
3.  The ability of consumers to fight banks and obtain awards (including court costs and attorney's fees) has increased.
4.  More regulations and rules are on the horizon.

The long and the short of it is that you, the homeowner, have significant rights under federal law when it comes to your mortgage, your credit report and the way that the banks communicate with you.  If you are facing difficulties with your mortgage or your credit report, or if you suspect errors or fraudulent conduct has been committed by the bank, you need to seek the advice of a consumer protection attorney in your area with experience in this field.

Tuesday, January 10, 2012

Launch

Welcome to my first blog post.  By way of introduction, I am a solo practicing attorney located in downtown Chicago.  About 60% of my practice revolves around mortgages, mortgage foreclosures and homeowner protection.  The rest is made up of some bankruptcy, consumer fraud/protection, real estate and a bit of small business creation.  The landscape for foreclosure work has changed drastically since 2008 and it continues to do so.  It is my goal to stay abreast of current cases as well as share war stories with other consumer attorneys and consumer clients.  I hope that this blog will aid in that goal.

In the coming weeks and months you can expect this feed to populate with various stories and sources relating to consumer law and consumer protection.  I hope to share my knowledge and experiences from the "field" (Cook, Lake, DuPage, Will county Circuit Court) with all of you.  I am always open to feedback via email and would love to hear from other attorneys or consumers about their experiences (win, lose or draw) with similar matters.


All the best in 2012 to all of you!

Sunday, January 8, 2012

Welcome!

This is the first post on the blog of The Law Office of Mark A. Laws!