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How to Fight a Wrongful Foreclosure

By Jane Bryant Quinn | Jan 21, 2011 |

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How much does it cost to get justice, when a bank forecloses on your house illegally? Thousands of
ex-homeowners don’t pursue their rights to a financial settlement because they assume they couldn’t pay the
legal fees.

In fact, it costs less than you fear. Consumer lawyers take a few cases at no charge. More likely, you’ll pay fees —
upfront or on a monthly plan — tied to the lawyer’s estimate of the time it will take and your ability to pay. If
they win your case, they’ll collect from the financial institution, too.

Before readers attack the “greedy lawyers” for defending “deadbeat” clients who couldn’t repay their mortgage
loans, let me quote from a groundbreaking decision reached earlier this month by the Massachusetts Supreme
Court. The court reversed two foreclosures because the banks — Wells Fargo and U.S. Bancorp, acting as
trustees for investors — couldn’t prove that they actually owned the mortgages. Judge Robert J. Cordy
excoriated them for their “utter carelessness.” The fact that the borrowers owed the money was “not the point,”
he wrote. The right to deprive people of their property is a powerful one and banks have to prove they have the
legal standing to do so.

American law cannot allow property seizures based on backdated, incomplete, or fraudulent documentation, no
matter what the circumstances are. Otherwise, no one’s home is safe. Courts enforce private property rights
through the cases brought before them. In other words, lawyers.

The Massachusetts case began not with consumers, but with the banks themselves. They asked the courts to
affirm that the foreclosures were valid so they could get title insurance. That pulled the borrowers — Antonio
Ibanez and Mark and Tammy LaRace — into the fray. When the horrified courts looked at how the foreclosures
had gone down, they said, “no way,” and gave the former owners their property back.

Ibanez, a special ed teacher, bought the home for investment in 2005 and defaulted in 2007 on a $103,500 loan,
according to the court papers. Even since, the house has been boarded up. Ibanez filed a Chapter 7 bankruptcy,
so he now has title to the home and no obligation on the debt. The mortgage investors will take the loss. But
litigation isn’t over, Ibanez’ attorney, Paul Collier, says. He expects the bank to appeal to the U.S. Supreme
Court.

The LaRaces borrowed $103,200 to buy their home in 2005 and also defaulted in 2007. They had an offer on
their home, but the servicer foreclosed anyway. (During the trial, the foreclosing law firm admitted that
servicers are graded on how quickly they can liquidate a mortgage.)

The LaRaces have moved back into their long-unattended home, but first they had to clean up mold, fix

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plumbing, and make other repairs. They would gladly resume payments on the mortgage, their lawyer Glenn
Russell says. But the trustee bank doesn’t own the loan. The investors don’t own it because the mortgage was
never transferred properly. The original lender, Option One, no longer exists. So whom do they pay?

This important case opens the door to thousands of foreclosure do-overs in Massachusetts and might influence
courts in other states. But there hasn’t been a rush by lawyers to get involved, probably because the field is
complex and not especially remunerative. No class actions have been certified, so the cases proceed one by one.
The financial trail can be hard to track (the Massachusetts documents were unwound by mortgage-fraud
specialist Marie McDonnell). The lawyer — often, a sole practitioner — is up against the awesome resources of
major financial institutions.

Neither Ibanez nor the LaRaces were charged for their lawyer’s services. Collier will file a claim for wrongful
foreclosure and be paid from any settlement. Russell will do the same. Russell also thinks the LaRaces are owed
something for the cost of repairing their home.

Very few cases start as pro bono, however. Lawyers who defend consumers have bills to pay, just as the banks’
corporate attorneys do. If you want to fight an unfair foreclosure, you might be offered one of several
arrangements:

An upfront fee. “Many of my clients were formerly very successful individuals,” Russell says. On
average, the value of the homes of the people who contact him is “somewhat north of $500,000.” He
suggests a fee based on their means.
Monthly payments. If you’re not making monthly mortgage payments, some portion of that money
could be applied to legal expenses. Collier says he puts the payments into escrow and retains them if he
gets the house back (he says he always does, in predatory lending cases).
Bankruptcy payment plans. The clients of North Carolina bankruptcy attorney Max Gardner are
usually in a Chapter 13 monthly repayment plan. Each state sets the maximum attorney’s fee, payable as
part of the plan.

Mostly, the attorneys get paid by suing the financial institutions, who settle claims or suffer court judgements
due to their own illegal activity. People who beat up on consumer lawyers scream that they bring frivolous cases
just for the fees. But consumer lawyers only get paid if their case is good, so they’re pretty rigorous about whom
they choose to represent. “I was called crazy for practicing in this area of law, as in ‘I would be broke’ by not
getting enough fees,” Russell says. “Three years later, I am still here and still living my motto of helping people
first.”

If you think you have a case, your toughest challenge isn’t fees, it’s finding a lawyer with the expertise to press
your claim successfully, Gardner says. If you don’t have a personal reference for a qualified lawyer, the best
place to look is the website of the National Association of Consumer Advocates. Next best: the National
Association of Consumer Bankruptcy Attorneys. In either case, ask if the lawyer has won other securitization,
mortgage servicing, and foreclosure cases. “They have to know what documents to ask for,” Gardner says. That’s
what wins.

More on MoneyWatch:

Report Shows 2010 Was Record Year for Foreclosures

Ally Withdraws Active Foreclosures in Maryland
You Could Be at Risk of Default Even if You Pay on Time
Are You in Loan Modification Hell? Join the Club

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Read Jane’s latest book

Making the Most of Your Money Now
by Jane Bryant Quinn
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Jane Bryant Quinn

Jane Bryant Quinn is a leading commentator on personal finance, with books and columns read and trusted by
millions. During her long career, she's established herself as America's most reliable voice for people trying to
manage their money well. Her policy columns address matters of top concern to citizens, including investor
protection, health insurance, Social Security, and the sufficiency of retirement plans. Her personal finance
columns demystify money to help families make better decisions about their financial future. Jane's best-selling
book, Making the Most of Your Money, is a comprehensive guide to personal finance, named by Consumers
Union as the best personal finance book on the market. The first edition, published in 1991, has been in print
and popular, ever since. The third edition -- Making the Most of Your Money NOW -- was published in January,
2010. She also writes for her own Web site, JaneBryantQuinn.com. Jane has worked extensively in television.
She co-hosted an investment series, "Beyond Wall Street," which ran on the Public Broadcasting System. PBS
also ran her own program, a personal-finance series called "Take Charge!" She worked ten years for CBS News,
first on the CBS Morning News, appearing twice weekly, then on The Evening News with Dan Rather. She has
also been a regular on ABC's The Home Show as well as a guest on Good Morning America, Nightline, The News
Hour with Jim Lehrer and many other programs. Jane has many awards to her credit, including the Emmy
Award for outstanding coverage of news on television and the Gerald Loeb award for distinguished lifetime
achievement in business and financial journalism. She has also received many honorary degrees. She currently
serves on the board of Bloomberg LP, the financial services company. She has also served on the board of the
Harvard School of Public Health, the Jerome Levy Economics Institute of Bard College, and her alma mater,
Middlebury College. She's a member of the Council on Foreign Relations. Jane is the editorial director of
MainStreetConnect.com, a company she founded with her husband to bring high-quality local news to
communities online.

Jane Bryant Quinn

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