New York Bankruptcy Court Wipes Out Mortgage

On October 9, 2009, a federal bankruptcy court in the Southern District of New York ruled that a servicer, PHH Mortgage, could not prove its claim to the debt owed on a home in White Plains, New York. Instead, Judge Robert D. Drain wiped out the entire $461,263 mortgage debt on the property.

We all know the story too well. A homeowner falls behind in her mortgage payments. The bank sues to foreclose. And without an attorney, the bank wins and the homeowner has to move out.

Not this time. Initially the homeowner hired a bankruptcy lawyer in an attempt to modify her loan with PHH. After months of getting nowhere fast with that, her lawyer asked for proof from PHH that they had the right to sue his client. PHH wrote a letter in response saying that it was the servicer of the loan, but that the holder of the note was U.S. Bank. So her lawyer asked for proof that U.S. Bank was the actual holder. He got an affidavit from the vice president for PHH, saying that PHH was the servicer for the note held by US Bank. This same vice president also signed the assignment of this mortgage to the Mortgage Electronic Registration System, better known as M.E.R.S. This document also showed that the note was assigned to M.E.R.S. was signed well past the filing of the action. That means PHH sued on behalf of U.S. Bank before it had any claim to the property by the assignment.

PHH's attorney even admitted at the hearing that, “In the secondary market, there are many cases where assignment of mortgages, assignment of notes, don’t happen at the time they should. It was standard operating procedure for many years.” In rejecting the argument, Judge Drain responded, saying “I think that I have a more than 50 percent doubt that if the debtor paid this claim, it would be paying the wrong person. That’s the problem. And that’s because the claimant has not shown an assignment of a mortgage.”

These are the arguments the Ticktin Law Group has been making against the banks, lenders, and servicers. While this ruling may be in New York, and not in Florida, the banks and their servicers employ these same tactics here in Florida in many foreclosure cases, and left unchallenged, they get away with it. The Ticktin Law Group is proudly taking action to put a stop to this.

For more on the above story, check out:
http://fedupusa.org/2009/10/25/if-lenders-say-%e2%80%98the-dog-ate-your-mortgage%e2%80%99/