Better Options for Underwater Homeowners

While Ohio’s economy has begun its recovery the Realty Trac in January reported that over 25% of Northeast Ohio homeowners remain underwater, owing lenders more than their home is worth. Statewide the percentage is slightly lower but enough to keep Ohio among the top ten states in the U.S. for underwater and delinquent mortgages.

Historically, home mortgage borrowers, especially those who had fallen behind on their home mortgage or who had marginal credit scores had few good options and there was little lawyers could do help clients in such situations. One of the positive outcomes of the aftermath of the great recession is that there now exist a variety of tools to assist mortgage borrowers who are delinquent on their mortgage or who owe much more than the value of their property.

As we enter 2015 developing case law regarding state court foreclosure and federal bankruptcy law coupled with strong new federal regulations that govern mortgage loan servicers gives lawyers representing delinquent or underwater homeowners a variety of useful tools to create positive outcomes for such clients.

All of these legal tools can put such borrowers in position to take advantage of greatly improved workout mechanisms like loan modifications and debtor in possession plans through a Chapter 13 bankruptcy. Mortgage lenders have increasingly realized one important economic fact, that the “net present value” of a loan modification with a payment that is affordable to the homeowner and where the principal balance is reduced to an amount that is more closely reconciled to the value of the collateral home (therefore creating an economic incentive for the homeowner to stay current on payments) is often higher than the net present value of a liquidation through foreclosure and sheriff’s sale.

This is particularly true because Ohio is one of 14 States in the country where foreclosures are conducted judicially. This means that Ohio homeowners are fortunate to have the opportunity to avail themselves of the strong due process proceedings of a common pleas court lawsuit before their home or rental property can be taken to satisfy a mortgage delinquency. The time it takes a mortgage loan servicer to file, serve and prosecute a well defended case can often provide a homeowner facing foreclosure with enough breathing room to reorganize their finances or to take advantage of federally subsidized and proprietary loan modification solutions that have, since 2008 become much more available to homeowners.

Fellow litigators who have not defended homeowners in foreclosure are often surprised to hear that there are viable defenses to a mortgage foreclosure lawsuit. Such defenses include:

-Defenses to reformation of mortgage claims due to sloppy loan origination practices in the run up to the 2008 mortgage meltdown.

-Issues related to the standing of the plaintiff actually conducting the foreclosure.

-Failure to properly accelerate mortgage notes.

-Failure to comply with HUD or VA regulations governing the acceleration and foreclosure of government insured mortgages.

Successfully arguing such issues will not only potentially slow or stop the foreclosure process, but put additional pressure on the lender to arrive at a negotiated outcome more favorable to the homeowner. While the Ohio Supreme Court has severely limited the ability of homeowners to attack foreclosure judgments after they are entered, there is strong precedent emerging for borrowers who answer and defend within the 28 day answer period.

Another lesson learned from the 2008 financial melt down is that mortgage loan servicers often fail to meet their duties to homeowners causing or exacerbating mortgage delinquency problems. In 2012 the National Mortgage Settlement, negotiated between State Attorneys General, The U.S. Justice Department and most of the major mortgage loan servicers identified the problem and set out standards of conduct for such servicers. In 2014, the Consumer Finance Protection Bureau issued a new scheme of regulations under the Federal Truth in Lending Act (TILA) and the Real Estate Settlement Protection Act (RESPA) that codified conduct standards for such servicers and created a private right of action for borrowers against mortgage loan servicers who fail to meet those standards. Now borrowers in dispute with their mortgage lender can bring an action in Federal Court seeking statutory and actual damages and shifting attorneys fees when a mortgage lender fails to meet those standards.

Many of the actions prohibited by RESPA regulation X involve conduct by lender-plaintiffs in state court foreclosure actions. Borrowers with counsel in the state court proceedings who are knowledgeable about both state court defenses and potential federal claims greatly increase the likelihood of a positive litigated or negotiated outcome.

Finally, the last few years have spurred a great deal of litigation in Federal Bankruptcy Court regarding home mortgage loans. The opportunity to bring a mortgage loan current over a 36 to 60 month chapter 13 plan has always been available, but emerging case law surrounding the ability to cram mortgage loans down to the value of the collateral in certain circumstances offers additional potential leverage for mortgage loan borrowers who seek the protection of Bankruptcy Court.

The bottom line is that in 2015 there are many more options for underwater or delinquent mortgage loan borrowers than ever before. Assisting such homeowners in rationalizing their mortgage obligation to the value of their home is not only good for the client, but the community as a whole because keeping our community’s housing stock in the hands of individual homeowners who have the financial wherewithal to pay their mortgage and taxes and keep their property in good condition leads to strong neighborhoods and the potential for increased property values that will take Ohio out of the ignominious position of being among leading states for underwater and delinquent mortgages.

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Liability Issues of CFPB Regulations


Posted in CFPB, Regulation X, Regulation Z, RESPA, TILA

“Fresh Starts.”

When people ask me what I specialize in, I tell them, suing banks, then after they chuckle, I tell them really our law firm is about “Fresh Starts.”

During the most challenging times in my life, I have found that immersion and engagement in the arts has been not only a source of escape and diversion, but has often been the source of inspiration for overcoming those challenges.

Many of our clients at the Dann Law Firm are facing significant difficulties in their lives.
Some are facing the prospect of losing their home or business. Others have been victimized by lenders, debt collectors or mortgage loan servicers who refuse to follow the law. Still others have suffered financial setbacks that have caused them to have to reorganize through bankruptcy.

Most people come to us at one of the worst moments in their lives.

We are a law firm first and foremost and clients come to us to develop state of the art legal strategies. But to do that we also must help our clients develop a vision and a game plan for a better future for themselves, their businesses and their families. Only then are we able to build a cutting edge legal strategy around that vision.

That is why we are so proud to announce that we are partnering with one of the most exciting arts institutions in Ohio, the Cleveland International Film Festival that opens this week for an 11-day run throughout Northeast Ohio by sponsoring the showing of the movie Christmas, Again. The movie will be shown on Thursday March 19 at 7:20 p.m. at Tower City Cinema and again on Friday March 20 at 2:20 p.m.

Christmas, Again is a movie about an entrepreneur who runs a Christmas tree stand in New York and is forced to start over in his life on many levels. Like many of our clients, the characters face increasing economic injustice and, also like many of our clients, demonstrate determination to overcome the roadblocks placed in front of them.

Like many of the films that have inspired me at the Cleveland Film Festival in past years, I hope that this film will inspire others as well.

Clients and friends of The Dann Law Firm can obtain a $2.00 discount on advance purchase tickets to any Cleveland Film Festival movie by typing DANN as the promo code when checking out from the Film Festival Website. My wife Kathy and I will spend several evenings and most weekends enjoying dozens of films at the festival this year.

I hope many of you will join us.

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Hitting For Singles

When I first began the work of representing homeowners in foreclosure several years ago I truly thought that the battles of protecting consumers would be won or lost by raising issues regarding fraudulent, deceptive or negligent business practices on an industry-wide basis. We spent hours and hours briefing issues related to the securitization of notes and mortgages and challenging the rights of lenders to foreclose on Ohio Homeowners.

We filed class action complaints against foreclosure mill law firms and mortgage loan servicers. These cases brought occasional success, but more often than not ended up slowed or stopped by arcane issues of state or federal civil procedure and pleading. Lenders argued that every loan, every default and every borrower was different and, despite the abhorrent business practices we detailed in our lawsuit, the only way those issues could be raised would be one case at time.

What the loan servicing industry, and their lawyers, didn’t bank on is that we would take them up on their challenge.

So, for the past few years my long-time colleagues, Grace Doberdruk, Dan Solar, the late great Jim Douglass, and I stopped trying to hit for home runs against the banks and mortgage servicers and started to defend each case by hitting for singles.

We have had successes in a few areas recently that I thought would be important to share. In several cases, we have been successful in persuading courts of appeals in Ohio that the evidence the Loan Servicers put in front of the court in support of their motions for summary judgment were simply insufficient to support the judgments that they were being routinely granted. Right before Jim Douglass passed away, several cases he argued regarding the sufficiency of individual affidavits and other summary judgment evidence were reversed by courts of appeals:

In Deutche Bank v. Dvorak the court of appeals held that the witness who signed the affidavit on behalf of Deutche Bank simply lacked sufficient personal knowledge to attest to that which she was testifying to. Similarly, in Bank of America v. Loya and Bank of New York Mellon v. Villalba, our firm persuaded the Court of Appeals for the 9th Appellate District to reverse foreclosure judgments because affidavit evidence offered was insufficient. In Bank of New York Mellon v. Froimson, another of our cases, Jim Douglass persuaded the 8th District Court of Appeals on Reconsideration to reverse a foreclosure judgment because the Plaintiff failed to put forward specific evidence of a merger of one of the holders of the note. These cases forced banks and loan servicers, who chose to avail themselves of Ohio’s courts, to actually prove their case.

It is a simple concept but it has proven effective.

On February 10, we had a similar success when a Butler County Common Pleas Judge granted our motion to dismiss a foreclosure because the Plaintiff failed to record a prior loan modification as required by the Ohio Revised Code. A copy of the decision is here:

McLaughlin 2015 02 10 decision Dismissing Case

Good basic thorough lawyering. Making the Banks and other Lenders prove their case and not backing down.

Its not going to land us in the Wall Street Journal or the New York Times but it creates the leverage to get our clients the results they need and deserve.

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Alternatives For Homeowners Facing Sheriff’s Sales

Too often we receive calls from homeowners who were deceived by their loan servicers into not defending their foreclosure case and who end up with a judgment of foreclosure. While I have written before about how the Ohio Supreme Court has made it more difficult to vacate foreclosure judgments, the Consumer Finance Protection Bureau (“CFPB”) has created an entire new framework that requires loan servicers to work constructively with homeowners as long as the work begins more than 37 days before a scheduled Sheriff’s Sale.

The CFPB Regulations X and Z that took effect a year ago require loan servicers to follow tight timelines and to act in good faith in reviewing borrowers for assistance on loan modifications, applications for deed in lieu of foreclosure or short sales. For anyone who has been through a loan modification application process, perhaps the most appealing new rule requires that loan servicers tell borrowers within 5 business days if any documents are missing from their applications.

The lender must make decisions within 30 business days of submission of a complete loan modification application. Significantly, the submission of a complete loan modification application prohibits the loan servicers from proceeding to Sheriff’s sale as long as the application is submitted more than 37 days before the scheduled sale.

The new regulations also provide homeowners the right to sue if the loan servicer fails to comply with the regulations, provides for statutory penalties, actual damages and the shifting of attorney’s fees.

As with with any federal regulation, the process is complicated. Here is a flow chart that we have developed for training other lawyers about these important new rules:

Loss Mit Flow Chart

As you can see, this is rather complicated stuff. We have established a systematic process in our office to guide our clients who are pre-foreclosure, currently in foreclosure, post-judgment or coming out of Bankruptcy to put together loss mitigation applications thoroughly and professionally and with an important focus on tracking the dates and times of submission to make sure that, if necessary, we are in position to enforce our client’s rights.

So far we have only had to sue 5 loan servicers to enforce our clients’ rights under these new regulations (Chase, Wells Fargo, BSI, Fay Servicing and PHH). Our hope is, as time goes on, the regulations and efforts by the CFPB and firms such as ours to enforce the laws will encourage better, more consumer-friendly conduct by lenders. The results we have obtained for clients without having to sue seem to already support that theory.
We have also expanded our Bankruptcy Practice where there are additional options for homeowners who are facing sheriff’s sale. A Chapter 13 plan can be designed to keep a homeowner in their home. A Chapter 7 can delay a sheriff’s sale and put a homeowner in a better position to apply for a loan modification.

The bottom line is that, while it is better to retain a lawyer as early in the process as possible, there are tools available to help homeowners even weeks before a scheduled Sheriff’s Sale.

Marc Dann


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The Foreclosure Crisis is Not Over

As Martin Andelman points out, reports of the death of the foreclosure crisis have been greatly exaggerated. According to, foreclosure filings in Ohio were up by six percent at the end of 2014. According to Bankrate, 1 out of every 872 houses in Ohio received a foreclosure filing through December of 2014. At the Dann Law Firm we have seen a similar rise in new clients facing foreclosure over the past several months.

Since the decision of the Ohio Supreme Court in Bank of America v. Kuchta, retaining a lawyer early in the foreclosure process is more important than ever in Ohio. In Kuchta, the Ohio Supreme Court severely limited the circumstances under which a homeowner in foreclosure, or a litigant in any lawsuit for that matter, can attempt to challenge a judgment of an Ohio Common Pleas Court after it has been rendered. The Court’s theory is that someone who is sued for foreclosure in a judicial foreclosure state, such as Ohio, should understand that when they receive personal service or certified mail from the Clerk of Courts they have 28 days to answer a complaint for foreclosure as they should have sufficient notice to step up and defend the case or to hire a lawyer experienced in representing homeowners to do it for them.

What the Supreme Court failed to understand is that many homeowners and borrowers think that just because they are in default, that they have no potential defense to a foreclosure filing. For example, in the Kuchta case itself the Court acknowledged that at the time Bank of America sued the Kuchtas they had no right to sue them, but they said that they forfeited the chance to make that argument by not raising it specifically enough before they retained our firm to represent them. The Kuchtas, like many homeowners faced with foreclosure, were focused on trying to work out a modification of their loan with the bank and not focusing on highly technical legal and jurisdictional arguments.

That is why it is critical that someone in Ohio who is in default on their mortgage loan, and particularly anyone who has been served with a lawsuit for foreclosures, pay attention to both the legal issues and defenses they need to raise directly in court and work with their loan servicer to find a smart and reasonable solution to their problems.

New Federal Regulations provide additional protections and avenues for homeowners who fall behind on their mortgage but wish to stay in their homes. At the Dann Law Firm we have now filed 5 lawsuits against mortgage loan servicers who have violated Federal Regulations X and Z which are now just over one year old, and we anticipate filing more in the future. These regulations require quick disclosure of information critical to understanding and defending a foreclosure and, most importantly, set strict timelines and rules of conduct for mortgage loan servicers who undertake to modify an individual’s home loan.

For a family facing foreclosure, it is critical to retain a lawyer who understands both the potential state law defenses to the foreclosure complaint itself and the rights of borrowers under these new federal regulations, because the intersection of these two laws create a much better opportunity for a positive outcome for those homeowners.

Marc Dann


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Failed Termite Treatments Gives Rise to Serious Consumer Fraud Lawsuit

Last night  Fox 19 in Cincinnati reported on a tragic situation involving the home of one of our clients.  Mary Ellen Boutet of Reading Ohio paid to have her home treated to prevent termites and continued to pay for annual treatments and inspections.  After she passed away and her daughter undertook to sell the house it became clear that those treatments were completely ineffective and that Ms. Boutet’s home was so infested with termites that her daughter has been unable to close a sale on the property.

It turns out that some of the chemicals that Terminix, the pest control company Ms. Boutet hired, were ineffective when they were applied and that the company concealed that fact from our client and their other customers for years

We have teamed up with the Campbell Law Firm from Alabama to bring suit in Hamilton County Common Pleas Court. A copy of our complaint is here:Yelkin T 2014 09 16 Complaint.

Marc Dann


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Fox 19 in Cincinnati Exposes Terminix Consumer Fraud Alleged in Dann Law Firm Suit in Hamilton County

Fox News Previews Tonight’s Story that runs at 10:00 p.m.

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Lessons Losing A Supreme Court Case: Retaining a Lawyer is More Critical Than Ever

Its never fun to lose a case.

And it is especially not fun to lose a case in the Ohio Supreme Court.

That is why it has taken me a couple of weeks to write about the Court’s decision in Bank of America v. Kuchta. In part I waited because we have been working on a motion to reconsider. We are filing that motion to reconsider today. Kuchta G 2014 10 17 Motion for Reconsideration with Memorandum. We are, of course hopeful that the Ohio Supreme Court will reconsider some very wide reaching implications of their decision. In a nutshell, we have argued in our motion to reconsider that if a plaintiff in a lawsuit does not have a dispute with the defendant that they sue at the time the suit is filed than the entire suit is void. The Court has ruled that unless the defendant raises that issue during trial or on appeal that the fact there was no real controversy cannot ever be raised.

Those of us who practice in the Foreclosure and Debt Buyer defense arena understand, perhaps better than the Ohio Supreme Court how difficult that it can be for a Defendant, especially one not represented by an attorney to figure out if a Plaintiff in a lawsuit is misrepresenting facts about their standing in the short time frames that courts allow to answer or to respond to a motion for summary judgment. In the Kuchta case, by the time the Defendant’s figured out that Bank of America did not hold either their note or mortgage at the time they filed the foreclosure lawsuit against them and hired us to file a motion to vacate the judgment, the Ohio Supreme Court says they were too late to raise the issue.

We argue in the Motion to Reconsider that that right and duty belongs to the court not the parties and cannot be waived. We certainly hope, in the interest of justice that they give this matter a second look.

But as hard as it is to lose a case it is most important that lawyers and litigants in present and future focus on the important lessons that this case provides to anyone in Ohio who has been sued for any reason. Even for individuals who have been sued over debts where they might have actually defaulted. Those lessons are as follows:

  1. Just because you’ve defaulted on a debt (mortgage debt, credit card or other debt) and have been sued doesn’t mean that the person suing you has the right to bring the claim. (Everyone agreed that if the Kuchta’s had raised the issue earlier the case should and would have been dismissed)
  1. It is critical to file an answer or motion to dismiss within 28 days of being served with a lawsuit by certified mail or process server or you risk losing the right to ever be able to challenge the standing of the party suing you.
  1. Understand that in a surprising number of cases involving the collection of mortgage notes and other debts the entity filing the lawsuit is unable to prove that they have the right to enforce the note. (If Bank of America, one of the largest banks in the world can screw this up anyone can and many debt buyers really don’t know if they have the right to sue you)
  1. If you have been sued you need to consult a lawyer. If you have been sued over a debt, a Dann Law Firm lawyer will consult with you for free. We don’t do that to be nice (although I think we are nice). We have found in the vast majority of debt lawsuits that there may be legal defenses, bankruptcy strategies or even affirmative claims that can be brought against the plaintiff. We may also discover that you have claims for damages under the Fair Credit Reporting Act, The Telephone Consumer Protection Act, the Fair Debt Collection Practices Act, or state consumer protection laws.
  1. If you have an application pending for a loan modification and you have been sued for foreclosure you may not only have defenses to the foreclosure but you may have claims under new Truth In Lending Act and Real Estate Settlement Protection Act Regulations that took effect this year against the loan servicer for damages that may include the costs of defending the foreclosure. We’ve filed two of the first such cases in the country.
  1. We are starting to get traction in Ohio Courts on a variety of issues that allow us to defend foreclosure lawsuits and lawsuits attempting to collect other debts:
  1. Plaintiffs regularly fail to prove that they have standing.
  2. Plaintiffs often fail to properly accelerate the debt.
  3. Homeowners with FHA mortgages have special statutory and regulatory protections.
  4. Affidavits used in foreclosure and debt collection cases are being to be rejected by courts in Ohio.
  5. Plaintiffs regularly sue defendants in the wrong court.

There are many more lessons to be learned but the most important take away is this, it is more critical than ever when faced with foreclosure or a lawsuit by anyone to seek the advice of an attorney experienced in defending such claims who is unafraid to financial institutions and other financial predators.

Marc Dann


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CFPB Brings First Enforcement Action under Regs X and Z

In the first of what should be many The Consumer Finance Protection Bureau entered into a $37.5 Million settlement with Flagstar Mortgage today.

The CFPB outlined conduct that our office has attacked on behalf of our clients since the new Federal Servicing Regulation went into effect on January 10 of this Year.

Flagstar was cited for the following conduct that violates Federal TILA and RESPA laws.

  • Closed borrower applications due to its own excessive delays: Flagstar took excessive time to review loss mitigation applications, often causing application documents to expire. To move its backlog, Flagstar would close applications due to expired documents, even though the documents had expired because of Flagstar’s delay.
  • Delayed approving or denying borrower applications: Under the new CFPB mortgage servicing rules, Flagstar must evaluate a complete loss mitigation application within 30 days, if it receives the complete application more than 37 days before a foreclosure sale. Flagstar also failed to adhere to these timelines.
  • Failed to alert borrowers about incomplete applications: Flagstar is responsible for reviewing borrowers’ initial loss mitigation applications to determine what documents are missing. It must then tell borrowers what documents are missing, usually by sending a “missing document” letter. Flagstar failed to send, or delayed sending, missing document letters to borrowers.
  • Miscalculated incomes: Eligibility for some loss mitigation programs, such as a loan modification, is highly dependent on borrower income. If borrowers have too much or too little income, they do not qualify. Flagstar routinely miscalculated borrower income and wrongfully denied loan modifications.
  • Denied applications for unspecified reasons: Under the CFPB’s new rules, mortgage servicers must provide the specific reason a complete loan modification application is rejected. Flagstar’s policy was to say only “not approved for loss mitigation options by the investor/owner of the loan,” even though Flagstar’s internal systems contained the true reason for the denial.
  • Misinformed borrowers about their appeal rights: Under the CFPB’s new rules, Flagstar must provide certain borrowers the right to appeal the denial of a loan modification. But Flagstar failed to provide this notice, and it wrongly stated that borrowers have an appeal right only if they reside in certain states.
  • Put borrowers in trial period purgatory: Flagstar needlessly prolonged trial periods for loan modifications. This caused some borrowers’ loan amount under the modified note to increase and, in some cases, jeopardized borrowers’ permanent loan modification.

Consumers and Homeowners who encounter such conduct from their own loan servicer have a right under the new CFPB regulations to bring an action in Federal Court for Damages against their mortgage company. The Dann Law Firm has been on the forefront of bringing claims under Regulations X and Z.

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