11.17.08
Assignment Tangles
Getting foreclosed? Don’t be so sure that your out-of-town or fly-by-night lender has their ducks in the row. You might have a great defense if you’ve mortgaged with the shadier side of lending in order to save that extra 1/4 of 1%. From the Wall Street Journal Law Blog:
Now comes the foreclosure case of Joanne Fredenburg, a widowed homeowner in Lehigh Acres, Fla., where real estate prices have plummeted. Last month Ms. Fredenburg was served with not one but two foreclosure lawsuits from two different plaintiffs that both claimed to own her promissory note and mortgage and said she owed them each more than $276,000. That, of course, is impossible. (Click here and here for the two complaints.)
One lawsuit seems to make sense. The plaintiff is a unit of Deutsche Bank that acts as a guardian or “trustee” for investors of mortgage-backed securities. Those investors collectively own loans such as Fredenburg’s. But the other lawsuit was filed by a mortgage-servicing company that collects borrower payments on behalf of investors. Surely that is a mistake, as servicers don’t typically own loans.
Indeed, following an inquiry by the Law Blog, we’re told that the servicer, American Home Mortgage Servicing, will withdraw its lawsuit, which was filed by Miami-based Adorno and Yoss LLP.
But Ms. Fredenburg’s lawyer is none too happy. Even after American Home withdraws its suit, J. Rex Powell of Cape Coral says he will ask for discovery to find out what payments his client made, whether they were paid to the right entity and whether she was given the proper credit. Given that most people don’t defend against foreclosure lawsuits and the plaintiffs are awarded default judgments, Powell says the case raises an interesting question: Are entities wrongly filing foreclosure suits and collecting on notes they don’t own?
