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:
17me237Yves, 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.
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That is genuinely moving.
Bad news is always round the corner, good news has to walk.
Merry xmas to all at NC.
It is the only thing I won’t give up this year apart from my generally.phenomenal faith in others
There is good in this world and it’s worth fighting for. Great post. Merry Christmas NC.
Yes, good news is always nice to read since these days it often seems so scarce.
A Merry Christmas and Happy New Year to All.
A fine start to the morning. thank you. and thank Mr. Cox.
Man, this is all bringing back memories. It was the MERS story that led me to this site as I could not see it or the mortgage story being explained elsewhere as it was here.
I’m thinking of all of us whose homes weren’t saved. Too much fraud all around. It’s amazing to me that courts in Maine are still following the rule of law, when mostly across the country that’s been suspended regarding mortgages.
Institutional decay.
Laws perverted.
USA is rotten. Why is this allowed to happen? It is a feature, not a bug
The bottom line is that the consumer admits to having borrowed the money, the consumer admits to having not paid it back and not intending to pay it back, and the lawyer finds a way for the consumer to keep the proceeds of the loan without having to pay the money back.
America is a great nation. Everybody go out and buy a house, then find a lawyer who can make it so the house is yours for free.
From Mr. Cox’s email:
” 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.”
Right, flora! And this: “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.” It took decades and massive liability suits for the tobacco industry to own up to its dirty tricks. The same needs to happen to a few other industries. This is a welcome, and all to rare victory. Congratulations to Mr. Cox and the Maine Supreme Court. A real Christmas miracle.
Well Bill H, apparently you would not care if you had a mortgage that was current and not in default and the bank was allowed to lie and claim otherwise and take your house away. Or you would not care if you were wrongfully charged with robbing a bank when you were five counties away and the prosecutors convicted you by the use of false evidence. America is a great nation when we prevent those things from happening, and that is why the court ruled as it did in this case–the bank has to know that if it comes to court with inadmissible evidence it will lose. In my bank lawyer days, I used to do foreclosures. They are easy to do right. I never lost one.
Tom,
The banks could easily EASILY show they have the right to foreclose. Yet, they can’t in most instances. I’m actually shocked that the Maine court continues to uphold the rule of law, as in many states it’s been suspended regarding mortgages.
Good win.
Some banks were convinced that they could foreclose on a ham sandwich. They didn’t see the need to stop at a mere indictment.
;p
Bill, did you miss the part where the Bank’s representative failed to meet the evidentiary standard that the court had set for foreclosure? In a legal action it is their responsibility to do that. If a bank is maintaining their records properly, this would not even take much more than the time it would take to package the files and arrange for transport to the lawyer. And if the lawyer was.doing their job they would make sure they had that.
But, as we learned over the last years, banks haven’t bothered to keep adequate records and often haven’t demanded them when purchasing mortgages from other servicers. So they roll.the dice knowing they can not meet their burden of proof, since most poor slubs including those who shouldn’t be facing foreclosure will not know how to demand that proof.
Now who do you think is abusing the system more often the home owner with one mortgage in default or the banks filing multiple foreclosures without adequate paperwork? Who has the most means to correct this? Who has the experience to know better?
Your failure of the system is merely the bank not meeting the burden of proof which would be automatically demanded of any individual bringing suit.
Bill H – that argument sounds like it would fit all the banks and financial firms in 2007/2008 that were ‘bailed out’ by taxpayers via the magic of the federal reserve. Most should not exist right now, but they do.
IMHO, that was far more morally wrong than allowing some poor woman on SS to have a house trailer that is most likely not a trailer you or I would ever want to live in.
Merry Christmas.
Banks make loans with the expectation that some will go bad. That’s called being a lender. Their loan pricing reflects that. This is about business, it’s not ethics. This woman is willing to pay but now there is only one income, not two.
When loans get in trouble, until securitizations, it would always be more attractive to the lender to work out a deal rather than foreclose. Foreclosing costs money and foreclosed properties tend to sell at distressed prices.
The reason the servicer to foreclose is that he has bad incentives. This is all about his profit to the disadvantage of the actual lenders (the investors). So you advocate a servicer ripping off investors and tossing homeowners out on the street when they can’t even be bothered to do what they should do in terms of their duties to investors (having paperwork in a row isn’t merely for foreclosures…)
You have a warped idea of ethics.
Gee whiz, if their case was so solid, you would think they wouldn’t try to argue that the purchaser of the mobile home showing up with counsel constitued “unfair surprise”.
If the bankers don’t follow the laws (by say, making up their own property recordation system), that’s just dandy, but if the poor borrowers don’t live up to their end, even if it’s because their mother died, it’s a grave injustice…have I got that right?
Not an ethical comment mate. I have been unable to pay loans due to shit happens. And, have had no sleepless nights just saying no, can’t pay. These are corporations that have no social responsibility beyond making a profit. They cheat, lie, steal etc.
No one here in this place can defend corporations, they are a disease and every time someone like Thomas Cox calls them out on their unethical ways of doing ‘business’, well me and many here are going to cheer them on.
What a family blogging tale, tears even
Lawyers and bankers are so unable to make moral arguments. So the good Mr. Cox advises banks who wish to foreclose on old, sick, semi-literate poor people to make sure all the bank’s ducks are in a row before they go to court–after all, the banks can afford to hire armies of competent people. Then things will be OK and the old, sick, semi-literate poor people will be duly made homeless and the bank will seize their real estate everyone will agree that “justice” has been done.
Even this weak-kneed and morally-questionable advice to the banks will, of course, be ignored, since, as Cox himself points out, the banks make more money doing exactly what they’re doing now. Banks do rely on the fact that the poor usually can’t afford, and thus mostly forego, lawyers, and are therefore easy targets. Wealthy foreclosure defendants often take their case to bankruptcy court to fight the banks.
Why not just step back and ask where that newspaper gets the idea that “justice” is done only if a debt is repaid? Wealthy people–and I don’t need to name names–laugh at this crazy notion. Why is “debt default” a moral category? Why is default an instance of injustice? (From the email, Mr. Cox seems to share this opinion.)
Wouldn’t “justice” look more like “not foreclosing” on people who, owing to their conditions, are unable to repay a monetary debt? Or equally, not foreclosing on people whose conditions were ruined by the financial collapse caused by the banks themselves? Or, to take it further, isn’t it obvious that the economic order itself causes poverty?
This reply relies upon a distorted and aggressively uncharitable reading of Cox’s comments.
As a lawyer, Cox tries to anticipate what adversaries might do or say. It is entirely natural for Cox to note that he would not have won his cases if the banks had crossed their i‘s and dotted their t‘s, and to explain why it was in the banks’ interest not to bother. To frame this as “Cox is advising banks on better strategy for foreclosing on defenseless homeowners” is baffling.
Similarly, Cox realizes that some people in the larger public are troubled at the fact that most homeowners are required to pay their mortgages, but some of his clients end up owning homes outright due to bank errors. He therefore acknowledges this objection and responds to it. If he were to respond to it as you seem to advocate, namely by proclaiming that debt default simply doesn’t matter, it would become unclear whether he was proposing a cessation of all contractual relationships.
It’s possible for some people to work at imagining what a society without foreclosures might look like, and for other people to work within the current legal framework to try to help people to resist foreclosures. Are you suggesting that it’s only moral to do the latter if one also proclaims one’s advocacy of the former?
Yes.
Let’s see if I understand: If someone does nothing for defenseless people, but at least doesn’t pretend that they’re a good person, then according to you they’re no worse, and are possibly better, than someone who does help defenseless people, but who doesn’t publicly espouse every aspect of your maximalist program?
Are you a troll sent to destroy the Left?
Woo boy…
Complaining about the “unfairness” of the woman you’re trying to kick out of her mobile home showing up to court prepared is, shall we say, not a good look. Like a bully complaining that it’s unfair that the kid he picks on all the time started taking karate lessons. Yowzahs….
It makes the power imbalance they’re relying on rather starkly obvious, doesn’t it?
I have acquaintances out in Reno who got out of an underwater mortgage on a truly splendid house in the west foothills. In ~2010. Without fanfare. Because they were local, upper middle class social insiders in a city that is still run by a cozy, old style local elite. They appear to have negotiated a multi-hundred thousand dollar cram down. They purchased another equivalent home in the same neighborhood 2 years later, when prices had become more reasonable.
No one will ever whine about their ‘shrewd business dealings’ on the web. First, because they will never be public. And second because they will never be seen as semi-indigents living on the public dole. Of course they made out like small time bandits and some ill-defined, larger group of people lost some small sum for them to have done so (stockholders, employees who didn’t make bonus that quarter, what have you).
But, they are so fit and clean looking. Very white. Well-dressed. Not yet on social security, and unlikely to be held in contempt when they are. They have a stucco McMansion and a BMW; they can’t be disrespected.
Gee, NC. I posted a long-ish reply about the ethical context of this article. That was several hours ago.
Was wondering where it went. . .?
Thanks for filling me in.
https://www.nakedcapitalism.com/policies
OK. Thank you for your explanations. (Comment still hasn’t appeared, has perhaps joined Santa for that sleigh ride. . . ?)
Wow, if I post another comment (i.e., this one), then my original comment from yesterday magically appears, headed by the words “awaiting moderation.” But if I leave the site and then return, yesterday’s comment doesn’t appear!
Elves, maybe?
It’s not an “explanation.” It’s a quotation from site policy, which you have failed to read, while at the same time assigning us work by insisting that your comment be approved with greater dispatch. As you say, “wow.”
Shovel?
No, an idiotic and entitled commentor. You have no right to comment here and you whinge as if you do.
I need a lawyer in Massachusetts who has the skill and leanings of Tom Cox in Maine. I had to relieve my counsel in a similar case in Mass in November because he was clearly setting my case up for dismissal. More recently I met another foreclosed homeowner who was similarly set up with a predatory loan by Wells Fargo, in my same town, who was f**ked by the same attorney.
We need a thousand more Tom Coxes, in all fifty states.
“We need a thousand more Tom Coxes, in all fifty states.”
That is precisely why Mr. Cox noted that – bolds mine – “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.
That is truly heartwarming. Thank you for your service Mr. Cox!
“Unfair surprise” that they’d have to face opposing counsel, and actually comply with the rules of evidence? They should be sanctioned for presenting a frivolous argument.
Frivolous lawsuit-civil sanction + legal fees.
Fraud, perjury, subornation of perjury, filing false documents, conspiracy–criminal against the lawyer, the employee of the servicers, and the servicer itself.
Illegitimi non carborundum!
Mock Latin, but will suffice for so many occasions.
Don’t let the bastards grind you down!
This comment is “late to the party,” but on the chance others are as late as I am here I’ll post anyway.
Mr. Cox made reference to, without identifying, the “formulation, or “ratio,” of English jurist William Blackstone, included in his “Commentaries on the Laws of England.” Blackstone stated “It is better that ten guilty persons escape than that one innocent suffer.” The commentaries were written a decade, plus, before the American Revolution. Law/jurisprudence in the US both before, and after, the revolution has deep basis on English law.
Prior to the revolution John Adams represented British soldiers involved in the Boston Massacre. In his defense he expanded on Blackstone’s Formula, stating, “It is more important that innocence should be protected, than it is, that guilt be punished; for guilt and crimes are so frequent in this world, that all of them cannot be punished…. when innocence itself, is brought to the bar and condemned, especially to die, the subject will exclaim, ‘it is immaterial to me whether I behave well or ill, for virtue itself is no security.’ And if such a sentiment as this were to take hold in the mind of the subject that would be the end of all security whatsoever.”
Blackstone’s Formulation applies most directly in a criminal context.
In a civil context I have strong views that adherence to the rules of evidence, and procedure, provides the best road map to just and proper results. Failure to adhere to same usually results in something that has little, or no, resemblance to justice.
The rules are not merely suggestions subject to whimsical neglect by attorneys and courts, but rather reflect Constitutional procedural due process imperatives, as well as professional imperatives and standards. Perilous precedents are set when/if practitioners are permitted to ignore procedural rules.
A couple of gems I’m fond of:
“Substantive rights, even of constitutional magnitude, do not transcend procedural rules, because without such rules those rights would smother in chaos and could not survive. There is a simple and easy procedural avenue for the enforcement and protection of every right and principle of substantive law at an appropriate time and point during the course of any litigation, civil or criminal. That is not to say that form may be exalted over substance, because procedural requirements generally do not exist for the mere sake of form and style. They are lights and buoys to mark the channels of safe passage and assure an expeditious voyage to the right destination. Their importance simply cannot be disdained or denigrated. Without them every trial would end in a shipwreck.” Brown v Commonwealth, 551 S.W.2d 557 (Ky. 1977).
“However hurried a court may be in its efforts to reach the merits of a controversy, the integrity of procedural rules is dependent upon consistent enforcement because the only fair and reasonable alternative thereto is complete abandonment.” Miller v. Lint, 62 Ohio St. 2d 209 (1980).
In this case both the District Court, and the Maine Supreme Judicial Court, adhered to the rules of evidence relating to foundation for admissibility, and hearsay exceptions for business records, and made the proper determination based on that adherence.
Good work Mr. Cox.
Value added, thank you.
Even later to the party with this, but it seems relevant.
In days of old,
When knights were bold …
Um, no, no, that’s not it. In days of old business records were made, and maintained, in paper form. That is no longer always the case. Even if a record is created in paper form it may be converted to a digital form. Some records are originally made in digital form. Once a computer becomes involved the records are likened to being scientific evidence, and an additional eleven step foundation should be laid:
“1. The business uses a computer. 2. The computer is reliable. 3. The business has developed a
procedure for inserting data into the computer. 4. The procedure has built-in safeguards to ensure
accuracy and identify errors. 5. The business keeps the computer in a good state of repair. 6. The
witness had the computer readout certain data. 7. The witness used the proper procedures to
obtain the readout. 8. The computer was in working order at the time the witness obtained the
readout. 9. The witness recognizes the exhibit as the readout. 10. The witness explains how he or
she recognizes the readout. 11. If the readout contains strange symbols or terms, the witness
explains the meaning of the symbols or terms for the trier of fact.”
The above comes from In re Vee Vinhnee, 336 B.R. 437, 446 (9th Cir.BAP (Cal.) 2005), and could be thought of as the “Imwinkelreid foundation.” The entire opinion is worth a read.
This use to be the thought, and the feeling, behind at least part of our justice system. It seems to have died and rotted away. Perhaps this is a reason for our security state. Civil asset forfeitures, police brutality and murders, the TSA, and NSA, are not about protecting the innocent, but about punishing the possibly guilty, and if the innocent have to suffer, perhaps even more than the guilty, them’s the breaks.