Appeals Court Enforces Modification Deal

We rarely write about residential foreclosure cases. Although we don’t typically handle cases for individual homeowners, we follow them closely. The same deceitful tricks banks use against helpless homeowners often find their way into commercial cases. Banks have deep pockets and know that financially troubled borrowers frequently can’t afford quality legal counsel. Unfortunately, many lawyers that advertise “foreclosure defense” are nothing more than bankruptcy lawyers.

Combine poor quality lawyers with overwhelmed foreclosure dockets and the court decisions issued in these cases are often bad. Simply put, there is a tremendous amount of bad case law coming from residential banking misconduct cases. Every now and then, however, the good guys win.

Earlier this year three Florida homeowners won an important victory in Florida. Because they won in the Florida Court of Appeal, their victory has a more far reaching effect. At issue was enforcement of a settlement accepted by the bank but later ignored when the homeowners actually came up with the money to fund the settlement.

Gene and Maria Lentz and Gladys Marcos jointly owned a home in Monroe County, Florida. They found themselves facing foreclosure in 2010 after missing a payment to Community Bank of Florida. Once in default, the homeowners could only cure the default by paying the entire $337,000 balance of the loan plus interest and legal fees.

Like many states, Florida offers homeowners facing foreclosure a mediation process. Our lucky trio opted for mediation and reached a settlement with Community Bank. The bank agreed to drop the interest on their mortgage from 7.5% to 6% and base payments on a 40 year amortization schedule. The entire sum would be due with a balloon payment in 60 months but that would give them 5 years to find new financing or sell the home. If the settlement ended there, it wouldn’t be too bad. Unfortunately, the bank wanted more.

An additional condition of the settlement meant increasing the loan’s principal balance by a staggering $45,000 to insure the bank would collect its supposed legal fees and expenses attributable to the foreclosure.

The homeowners also had just 72 hours to make a $52,000 payment. If the homeowners actually paid, the bank agreed to hold the $52,000 in escrow and return the funds if the loan didn’t close.

Surprise, surprise… the three homeowners scraped together the require $52,000! The bank never closed the new loan, however. The homeowners blamed the bank and claimed they didn’t even prepare the new loan documents. When new documents finally were prepared, the bank had tried to slip in a provision requiring the homeowners to pay an additional $20,000.

For its part, the bank blamed the homeowners for the failure to close.

When the loan didn’t close, the bank never returned their $52,000 escrow and simply kept the money. They then proceeded to foreclose.

Normally the story would end. Few homeowners have the money to appeal. The Lentz – Marcos family was both angry and resourceful. Once more they scraped together money and this time found a good residential foreclosure lawyer.

On appeal, a three judge panel reversed the foreclosure and ordered the trial judge to enforce the settlement.

Obviously, the settlement isn’t exactly fair or spectacular. It does give the homeowners five years of breathing room, however, provided they can make the reduced payments.

The takeaway from this case is simple. Many banks behave like bullies and can’t be trusted. We believe that no one at Community Bank of Florida ever imagined the homeowners would scrape together $52,000.00 in just 72 hours. They did.

Once that happened, the bank still had no intention on closing the loan. They participated in the mediation process because they were ordered to so but had no intention of letting the homeowners reclaim their home. We believe, the bank simply decided to instead see how much cash they could extract from the homeowners before taking their home.

We see the same tactics in commercial loan cases. Banks or servicers declare a loan to be in default and then engage in months of predatory foreclosure practices designed to force the borrower to pledge more assets and pay exorbitant fees. In the end, the bank has more cash, more collateral and still proceeds to foreclose.

If you believe that you are the victim of predatory banking procedures, call us. Unlike most lender liability lawyers that defend banks, we sue them. Few law firms in the country have our experience when it comes to suing banks. Unlike many of our colleagues who work for big firms and charge $600 to $1000 per hour, we fight for businesses hurt by the banks. Because we are two national boutique law firms that work together, our reach is nationwide and our rates reasonable. More importantly, because we routinely handle these cases, the total number of hours we charge is usually much less than larger firms.

For more information, contact attorney Chris Katers at [hidden email] or by telephone at (414) 777-0778. The author of this post, attorney Brian Mahany, can be reached at [hidden email] or by direct dial at (414) 704-6731.

MahanyLaw and Judge, Lang & Katers – America’s Lender Liability Lawyers -  We Sue Banks 

*We have a minimum $10 million threshold for our cases (amount of money at stake) but talk to us if close or if your case is unique. Unfortunately, we only handle residential foreclosure cases if part of a larger class action.