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The 8th Circuit Court of Appeals has ruled that a homeowner has a private right of action to sue their mortgage lender when the bank fails to properly process the application. Topchain v JPMorgan Chase, No. 13-2128 (8th Cir. 2014). This is a significant case because the HAMP laws do not specifically state whether a homeowner may sue their mortgage company when the bank wrongfully refuses to offer a permanent loan modification. Sure, HAMP laws require the banks to modify certain mortgage loans, but what do you do when they refuse to follow the law? According to the 8th Circuit, you may sue them for breach of contract.
Under the Home Affordable Modification Program (“HAMP”), an eligible homeowner receives a Trial Period Plan (TPP) that typically requires the homeowner to make 3 modified payments. If the TPP payments are made on time, the homeowner then receives a permanent loan modification agreement.
In an amazing display of arrogance and bad faith, Chase argued that no contract was ever formed because it did not sign the agreement.
After submitting a HAMP application and making his trial payments, Chase sent Topchain a modification agreement. Topchain signed the agreement and returned it to Chase, but Chase never signed the agreement. In an amazing display of arrogance and bad faith, Chase argued that no contract was ever formed because it did not sign the agreement and thus Topchain could not sue them for breach of contract. The 8th Circuit balked at this defense. First, the court ruled that Chase probably waived the requirement of signing the agreement when they verbally told Topchain that the agreement was accepted. Second, the court ruled that Chase most likely waived the signature requirement by accepting payments provided under the agreement for ten months. Consequently, the case was sent back down to the trial court for litigation on the breach of contact claim.
Homeowners can sue their mortgage lender for not complying with HAMP regulations. A private right of action exists for homeowners. This is a significant victory for homeowners.
Regardless of the outcome in Topchain’s case, the take away is that homeowners can sue their mortgage lender for not complying with HAMP regulations. A private right of action exists for homeowners. This is a significant victory for homeowners.
Other courts have also ruled that HAMP gives homeowners contractual rights to sue their bank when they fail to establish permanent loan modifications for eligible borrowers. See Wigod v Wells Fargo Bank, N.A. 673 F.3d 547 (7th Cir. 2012), Corvello v. Wells Fargo Bank, N.A., 728 F.3d 878 (9th Cir. 2013), Young v. Wells Fargo Bank N.A., 717 F.3d 224 (1st Cir 2013).
Homeowners who are unable to pay their mortgage generally lack the financial resources to sue their mortgage company when their HAMP application has been unfairly denied or delayed. However, Chapter 13 bankruptcy cases offer a forum to litigate HAMP issues with the added benefit of granting protection from foreclosure while that litigation takes place.
Many questions will have to be resolved by the bankruptcy courts now that it is clear that homeowners have contractual rights to obtain HAMP modifications. May a pre-bankruptcy mortgage arrearage be cured through a Chapter 13 Plan calling on the bank to modify the loan? Is the wrongful denial of a loan modification a basis to defend a Motion for Relief from the automatic bankruptcy stay when the homeowner defaults on post-petition payments? May the debtor file an adversary proceeding against the mortgage company when a loan modification is wrongfully denied? This could get interesting.
Image courtesy of Flickr and David Shankbone.
The 8th Circuit Court of Appeals has ruled that a homeowner has a private right of action to sue their mortgage lender when the bank fails to properly process the application. Topchain v JPMorgan Chase, No. 13-2128 (8th Cir. 2014). This is a significant case because the HAMP laws do not specifically state whether a homeowner may sue their mortgage company when the bank wrongfully refuses to offer a permanent loan modification. Sure, HAMP laws require the banks to modify certain mortgage loans, but what do you do when they refuse to follow the law? According to the 8th Circuit, you may sue them for breach of contract.
Under the Home Affordable Modification Program (“HAMP”), an eligible homeowner receives a Trial Period Plan (TPP) that typically requires the homeowner to make 3 modified payments. If the TPP payments are made on time, the homeowner then receives a permanent loan modification agreement.
In an amazing display of arrogance and bad faith, Chase argued that no contract was ever formed because it did not sign the agreement.
After submitting a HAMP application and making his trial payments, Chase sent Topchain a modification agreement. Topchain signed the agreement and returned it to Chase, but Chase never signed the agreement. In an amazing display of arrogance and bad faith, Chase argued that no contract was ever formed because it did not sign the agreement and thus Topchain could not sue them for breach of contract. The 8th Circuit balked at this defense. First, the court ruled that Chase probably waived the requirement of signing the agreement when they verbally told Topchain that the agreement was accepted. Second, the court ruled that Chase most likely waived the signature requirement by accepting payments provided under the agreement for ten months. Consequently, the case was sent back down to the trial court for litigation on the breach of contact claim.
Homeowners can sue their mortgage lender for not complying with HAMP regulations. A private right of action exists for homeowners. This is a significant victory for homeowners.
Regardless of the outcome in Topchain’s case, the take away is that homeowners can sue their mortgage lender for not complying with HAMP regulations. A private right of action exists for homeowners. This is a significant victory for homeowners.
Other courts have also ruled that HAMP gives homeowners contractual rights to sue their bank when they fail to establish permanent loan modifications for eligible borrowers. See Wigod v Wells Fargo Bank, N.A. 673 F.3d 547 (7th Cir. 2012), Corvello v. Wells Fargo Bank, N.A., 728 F.3d 878 (9th Cir. 2013), Young v. Wells Fargo Bank N.A., 717 F.3d 224 (1st Cir 2013).
Homeowners who are unable to pay their mortgage generally lack the financial resources to sue their mortgage company when their HAMP application has been unfairly denied or delayed. However, Chapter 13 bankruptcy cases offer a forum to litigate HAMP issues with the added benefit of granting protection from foreclosure while that litigation takes place.
Many questions will have to be resolved by the bankruptcy courts now that it is clear that homeowners have contractual rights to obtain HAMP modifications. May a pre-bankruptcy mortgage arrearage be cured through a Chapter 13 Plan calling on the bank to modify the loan? Is the wrongful denial of a loan modification a basis to defend a Motion for Relief from the automatic bankruptcy stay when the homeowner defaults on post-petition payments? May the debtor file an adversary proceeding against the mortgage company when a loan modification is wrongfully denied? This could get interesting.
Image courtesy of Flickr and David Shankbone.
Case Set-Up This is the bankruptcy case study for Darius from Chicago, Illinois who was in my office to determine whether or not chapter 7 or chapter 13 will help him. He currently resides in Chicago and he has a spouse who will not be filing with him. He has filed a chapter 13 bankruptcy+ Read More
The post Bankruptcy Case Study For Darius From Chicago appeared first on David M. Siegel.
You always have the ability to switch bankruptcy attorneys if you are not satisfied with your current attorney. Depending upon which type of bankruptcy case you have filed will determine whether or not it makes good sense to make the switch. For example, if you have already filed a chapter 7, fresh start bankruptcy, then+ Read More
The post Can I Switch Bankruptcy Attorneys After My Case Is Filed? appeared first on David M. Siegel.
Two days, two chapter 7 section 506 decisions by the the 11th Circuit Court of Appeals. On September 29, 2014, the Court issued its decision in In re Phillip, 2014 WL 4802758 (11th Cir. Sept. 29, 2014)(not selected for publication). On September 30, 2014, the Court issued its decision in In re Vaner Iest, 2014 WL 4825253 (11th Cir. Sept. 30, 2014)(not selected for publication). The mortgage lender in both cases was Bank of America, N.A.
In both cases, the second mortgage on the chapter 7 debtor's home was underwater. In both cases, the Court noted its prior decision in McNeal v. GMAC Mortgage, LLC, 735 F.3d 1263 (11th Cir. 2012) in which the Court held that it was bound by the "prior panel precedent" rule to apply its prior decision in Folendore v. Small Business Administration, 862 F.2d 1537, 1540 (11th Cir. 1989). The Court in Folendore held that section 506 (d) of the Bankruptcy Code permits a chapter 7 debtor to avoid ("strip off") a wholly "underwater" second mortgage.
Dewsnup Ironically, the Court in Phillips stated that the Supreme Court in Dewsnup v. Timm, 502 U.S. 410 (1992) "rejected the reasoning of Folendore." In Dewsnup, the Supreme Court held that lien partially underwater could not be stripped down to value of its equity.
Prior Panel Precedent Rule - "Clear Contrary Opinion" Required
In McNeal, the Court held that it was bound by the Court's "prior panel precedent" rule to apply Folendore and allow the strip down of wholly underwater liens in a chapter 7 case despite the Supreme Court's decision in Dewsnup. The 11th Circuit previously explained in the case of United States v. Steele, 147 F. 3d 1316 (11th Cir. 1998)(en banc) that under its prior precedent rule, "a panel cannot overrule a prior one's holding even though convinced it was wrong."
The Court's ruling in Phillips appears to reflect frustration in being required to follow its prior decision in Folendore and that that if Bank of America sought "to petition this Court for en banc consideration of the issue it raises here, this Court should seriously consider the petition."
This article explains that the 11th Circuit in the case of Main Drug, Inc. v. Aetna U.S. Healthcare, Inc., 475 F.3d 1228 (11th Cir. 207), held that “‘[w]ithout a clearly contrary opinion of the Supreme Court or of this court sitting en banc, we cannot overrule a decision of a prior panel of this court.’”
Next
Folendore's days may be numbered. It would make sense that Bank of America will move for an en banc hearing.
Jordan E. Bublick is a Miami Bankruptcy Lawyer
Lien Stripping in Chapter 7 Last week, the 11th Circuit issued two back-to-back ("not for publication") decisions in In re Phillip, 2014 WL 4802758 (11th Cir. Sept. 29, 2014) and In re Vaner Iest, 2014 WL 4825253 (11th Cir. Sept. 30, 2014). The mortgage lender in both cases was Bank of America, N.A.
In both Phillips and Vaner Iest, the second mortgage on the chapter 7 debtor's home was wholly "underwater" and had been "lien stripped" by the Bankruptcy Court. In both cases, the 11th Circuit help that it was bound by its "prior panel precedent" rule and upheld the Bankruptcy Court's lien avoidance in the same manner it did previously in McNeal v. GMAC Mortgage, LLC, 735 F.3d 1263 (11th Cir. 2012)("not for publication"). In McNeal the Court ruled that it was bound by its 1989 decision in Folendore v. Small Business Administration, 862 F.2d 1537 (11th Cir. 1989), which held that section 506 (d) of the Bankruptcy Code permits a chapter 7 debtor to avoid ("strip off") a wholly "underwater" second mortgage.
Bank of America, N.A. is a taking tremendous efforts to prohibit the ability of chapter 7 debtors to avoid wholly underwater second mortgages. A motion filed in one such case indicates that there were 21 appeals pending before the 11th Circuit on this issue and that Bank of America was trying to consolidate them for appeal. But it is not clear how quickly this issue will obtain an en banc review as it was denied recently on an attempt in June, 2014 in the case of the In Re Trina Renee Banks, No. 13-13867 as "no Judge in regular active service on the Court having requested that the Court be polled."
DewsnupThe problem the decisions of the 11th Circuit have on this issue is that Folendore pre-dates the U.S. Supreme Court's decision in the landmark case of Dewsnup v. Timm, 502 U.S. 410 (1992). The Court's ruling in McNeal indicated that if it were not bound by the "prior panel precedent" rule it would not apply Folendore as Dewsnup appears to reject the reasoning of Folendore. This article indicates that the 7th Circuit in Ryan v. United States (reviewed here) and 10th Circuit in In re Woolsey, 696 F.3d 1266 (2012) have already held that Dewsnup prohibits the avoidance of "underwater" junior liens in chapter 7. Dewsnup is reviewed here and here.
Prior Panel Precedent Rule - "Clear Contrary Opinion" RequiredIn McNeal, the Court held that it was bound by the Court's "prior panel precedent" rule to apply Folendore and allow the strip down of wholly underwater liens in a chapter 7 case despite the Supreme Court's decision in Dewsnup. Timm, 502 U.S. 410 (1992). Under the prior precedent rule, "a panel cannot overrule a prior one's holding even though convinced it was wrong." United States v. Steele, 147 F. 3d 1316 (11th Cir. 1998)(en banc). This article explains that the 11th Circuit in the case of Main Drug, Inc. v. Aetna U.S. Healthcare, Inc., 475 F.3d 1228 (11th Cir. 207), held that “‘[w]ithout a clearly contrary opinion of the Supreme Court or of this court sitting en banc, we cannot overrule a decision of a prior panel of this court.’”
"
Apparrently, the Judges in Phillips were not very happy to be bound by the "prior precedent rule" as they wrote that the Supreme Court in Dewsnup "rejected the reasoning of Folendore" and that if Bank of America sought "to petition this Court for en banc consideration of the issue it raises here, this Court should seriously consider the petition."
Motion for "Summary Affirmance" against ItselfThe Court's docket in Phillips, indicates that Bank of America got to the 11th Circuit after it moved for and was granted "summary affirmance" against itself by the District Court of the Bankruptcy Court against itself. Bank of America, N.A. did so so as to permit it to seek "en banc review and/or petition the Supreme Court for a writ of certiorari regarding the continued viability of Folendore."
Sinkfield in the 11th CircuitIn another case which reached the 11th Circuit after "summary affirmance" in the District Court (Sinkfield), took the following course:
- 11th Circuit granted summary affirmance to permit Bank of America to seek en banc review and/or petition the Supreme Court for a writ of certiorari regarding the continued viability of Folendore
- Bank of American's petition for rehearing en banc was construed as a motion for reconsideration of the summary affirmance order and referred to the panel
- Panel denied the motion without explanation
- Writ of Certiorari to the Supreme Court was denied on March 31, 2014 - "presumably to permit the en banc Eleventh Circuit to resolve the issue"
Jordan E. Bublick - Miami Bankruptcy Lawyer - Kendall & Aventura Offices - (305) 891-4055 - www.bublicklaw.com
Here at Shenwick & Associates, many of our clients are understandably concerned about how to protect their assets from creditors––especially their home. While there are limits on how much asset protection we can provide clients when presented with an immediate crisis (i.e. a foreclosure sale), with advance planning, there are several strategies debtors can use to protect their most valuable asset. Let's look at a few of these asset protection techniques and devices:
1. The homestead exemption. Most, but not all states provide a homestead exemption (for example, New Jersey has no state law homestead exemption, forcing debtors to use federal bankruptcy exemptions, which are currently $22,975 per debtor, to retain any equity in their home). On the other end of the protections spectrum are states like Texas and Florida, which place no limit on home equity that can be protected from creditors. In New York State, the homestead exemption varies by region of the state, but for downstate counties, the homestead exemption is $150,000 per debtor. While that's a significant amount, given the value of real estate in the New York metropolitan area, many homeowners have much more equity in their homes than can be protected under the homestead exemption.
2. Ownership of your house as tenants by the entirety. There are several ways that two or more persons can own property–as joint tenants, as tenants in common or as tenants by the entirety. While any people can own any property in a tenancy in common or a joint tenancy, ownership as tenants by the entirety is limited to:
a. The state you live in must recognize this form of property ownership (New York and New Jersey do, but Connecticut does not).
b. You must be married to your co–tenant; this type of ownership is strictly limited to married couples.
c. The property must be must be your personal residence.
d. The tenants by the entirety must take title to the property at the same time and with the same deed.
In a tenancy by the entirety, neither spouse may voluntarily, or involuntarily, convey their interest in the home without the consent of the other. This rule places the home out of the reach of the creditors of one of the spouses. However, there are some circumstances in which the protections of tenancy by the entirety won't protect debtors:
a. Joint and several debts of the spouses;
b. Divorce; and
c. Death
3. Limited liability companies (LLCs) and family limited partnerships (FLPs). These two types of entities can be useful to hold real estate in. However, there are some potential drawbacks of owning a primary residence via a LLC or a FLP. For example, loss of tax benefits–when a property is owned by natural persons, mortgage interest is deductible, and when the home is sold, $250,000 of capital gains per person (or $500,000 for a couple) is exempt from capital gains taxes. Unless only one of the spouses owns all of the interests in a LLC or FLP, those tax benefits will be lost–and in a recent case, a court set aside the protections of a LLC even when only one spouse owned all of the membership interests in the LLC. Therefore, this may not be optimal for protecting a primary residence.
4. A qualified personal residence trust (QPRT). This is a special type of irrevocable trust that is designed to hold and own your primary or secondary residence. However, while having your residence owned by a QPRT has both asset protection and estate planning benefits, there are also some drawbacks. For example, you don't own your home anymore, and after the term of thrust ends, you will have to pay fair market rent to the beneficiaries of the QPRT.
5. More complex asset protection strategies. These may include getting a loan and/or a mortgage (or additional mortgages) to reduce the value of the equity in your home as much as possible (a so called "debt shield") and using a domestic asset protection trust or asset protected investments (such as annuities and whole or universal life insurance policies) to repay the lender.
As you see, asset protection strategies can get quite complex, and using entities such as LLCs, FLPs and trusts takes time to implement, which is why you should start planning right away to protect your assets, and not wait for a crisis like a judgment or foreclosure to strike. To protect your most precious assets for yourself and the ones you love, please contact Jim Shenwick.
According to Joliet Bankruptcy Lawyer, David Siegel, Joliet has always been a tough, blue-collar, hard-working town in Will County, Illinois. When times are tough in the state of Illinois, they are especially tough in Joliet. And times have been really tough lately. The housing market has not recovered in this area. The job market+ Read More
The post Joliet Bankruptcy Lawyer States “You Need Not Struggle Anymore” appeared first on David M. Siegel.
People often wonder what percentage creditors are going to be paid back in a chapter 13 bankruptcy. As a bankruptcy attorney in Chicago, I can only estimate what the approximate amount may be. The reason why I cannot provide a definitive answer is because I do not know what type and amount of claims are+ Read More
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While serving in the military, individuals have the same rights as regular civilians to file bankruptcy protection in order to save their valuable assets. However, individuals should keep in mind that certain high-ranking positions require security clearances that may not be available to people who have filed for bankruptcy. Nevertheless, there are no legal restrictions... Read more »
The post Can You File Bankruptcy While in the Military? appeared first on Allmand Law Firm PLLC.
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