My last post, The High Cost of Mediation and Failure of the Maryland Courts, presented a hypothetical couple who were facing foreclosure. They were waiting for mediation and also hoping to get a modification to save their home. They had exhausted their saving. Their home was under water so selling it was not an option. The most frustrating thing was that they were both working and could easily keep their property if the note was modified.
Mediation is a method whereby all parties to a dispute meet and attempt to settle a dispute. Maryland basically requires mediation, when requested, in all foreclosures. However, in order to mediate all parties must proceed in good faith, and each party must have a financial benefit that would result if the case were settled. The Maryland Judiciary is generally providing that financial benefit to the lenders through litigation and therefore removing that incentive to mediate in good faith. Here is how it works.
The term "robo signers" is a term familiar to most homeowners going through litigation. In Maryland robo signing also applied to foreclosing attorneys. These attorneys would have someone sign their name to an affidavit, usually the notary, and then swear that the attorney stood before them and gave oath. The affidavits were bogus. On a national level, lenders would hire people who had only one attribute - the ability to sign their name. The lenders would give them a fancy title like "Vice-President of Loan Documentation." These robo signers would sign their name to thousands of documents each week. These documents would be passed on to the courts for use in foreclosures.
In addition to robo signed documents, much of the paperwork used by the lenders was improperly executed. Simply put, the foreclosing lender did not have the legal power to foreclose.
Laws flow from two sources, statutes and appellate decisions. Appellate courts decide issues arising from statues (and common law). Published opinions from these courts are binding on lower courts. The problem is that a significant number of the trial courts in Maryland ignore appellate law. The result is that foreclosing lenders who have lied, cheated and stolen their way into court are given a pass by the trial courts while the homeowners whose only mistake was to be a victim of a recession, in large part caused by these lenders, lose their homes and get put onto the street.
As I proceed in this series of articles, I want to set the stage for the next article in this series. First, most homeowners want to keep their homes and want to pay for their homes. Second, we as a society should help these people, if not for compassion for our neighbors, then for a very selfish reason. Every foreclosed property brings down values in neighborhoods. If you think that this does not apply to you, look again.
I hear a lot of attorneys banking on the philosophy that a judge will not give somebody a free house. My question is, why not? Let that thought sink in for a minute. If a lender has so mishandled paperwork, cheated by presenting forged and bogus documents, and as a result, cannot prove his case in court, then why is a court so loath to say to a lender, you lose. Failure to pay a mortgage does not give these lenders a free license to cheat their way into the courthouse and succeed in a lawsuit that, if presented in any other context, would lose.
So long as these lenders know that the courts will pave their way to success they have very little incentive to mediate in good faith.