Debt Collection Attorneys Beware: Debtors are Learning the Law to Fight for Their Rights

Author: Julio Martinez-Clark
As record numbers of homeowners default on their mortgages, questionable practices among lenders are coming to light in courts, leading some legal specialists to contend that companies instigating foreclosures may be taking advantage of imperiled borrowers.

In the last past weeks there have been important events unknown by many homeowners and individuals facing debt collection lawsuits. In a study of foreclosures, Katherine Porter of the University of Iowa found questionable fees on almost half of the loans and discovered that though bankruptcy laws require documentation that a creditor has a claim on the property, 4 out of 10 claims in Ms. Porter’s study did not attach such a promissory note. The second event is a court ruling on October 31, 2007 in which a federal judge in Ohio has ruled against a longstanding foreclosure practice, potentially creating an obstacle for lenders trying to reclaim properties from troubled borrowers and raising questions about the legal standing of investors in mortgage securities pools. The third event is another ruling on November 15, 2007 by a federal judge in Ohio who has given lenders 30 days to prove that they own the promissory notes on the properties they intend to seize from troubled homeowners in 27 other cases. In a fourth event according to the New York Times article dated November 28, 2007 and titled "Foreclosures by Lender Investigated," the federal agency monitoring the bankruptcy courts has subpoenaed Countrywide Financial, the nation’s largest mortgage lender and loan servicer, to determine whether the company’s conduct in two foreclosures in southern Florida represented abuses of the bankruptcy system.

The sighting of a robin does not make a spring, nor do the actions of four judges constitute a trend. Nevertheless, the fact that some courts are taking a harder look at foreclosure practices may foretell a shift in attitudes. In the fourth event involving Countrywide, there is every indication that Countrywide was not alone in the practices at issue. So what makes this story interesting is that it is another example of a subtle shift in power in the judicial system. The plaintiffs have considerably more resources than the mortgage holders (the homeowners), most of whom cannot mount a fight; but judges may be starting to recognize that that power imbalance has led many banks to be sloppy, presumptuous, and at times extortionate, and at least a few jurists are holding their feet to the fire. In this case, the issue was charges Countrywide added to mortgage balance in two bankruptcy filings. When the borrowers objected, Countrywide did not appear at the hearing, leading the judge to remove those costs. Countrywide's failure to respond piqued the interest of the bankruptcy trustee, leading to the investigation. Note the judge ruled against Countrywide's objections to trustee's subpoenas.

The media needs to bring to the public eye that It has long been a common practice for lenders to bring foreclosure proceedings without attaching proof of ownership of the underlying note. Tracking down such documentation may be more challenging because of securitization, the pooling of mortgages into trusts that are subsequently sold to investors.

The proliferation of legal education books and events such as the ones named above are a waking call for the lending and legal industries; thus making the job of a debt collector attorney more difficult after enjoying decades of easy judgments against individuals who don’t know their rights. As Ms Porter’s study suggests, if one were to carefully analyze debt collection cases, one would probably discover that many of them lack legal standing due to insufficient proof of claims. The amount of debt collection void judgments in our courthouses is perhaps so vast, that it’s almost impossible to estimate how many there are. If every void judgment were vacated with damages, the whole financial and legal system would crumble perhaps representing an unprecedented shift in wealth.
Article Tags: Foreclosure, Debt Collection, Consumer Rights, Countrywide
About the Author:

Julio Martinez-Clark has a Bachelor’s degree in Electrical Engineering (B.S.E.E), a Master of Business Administration (M.B.A.) and extensive domestic and international business experience in the telecommunications and real estate industries. He is the author of a book titled “How To Legally Beat Debt Collectors” available at www.Beat-Debt-Collectors.com and soon at major bookstores. Mr. Martinez-Clark also publishes an informative newsletter called "The Truth Report" available at his website www.juliomartinezclark.com in which he exposes the truth about several life topics (money, law, health, etc), news and general information that you likely won't see in the mass media. If it’s in the media, it’s probably not important for you to know it.