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Seriously? Judge’s Ruling Based On “I’m Gonna Teach You a Lesson” Precedent?

judge hand with gavel

Recently I read where a judge in Suffolk County, NY judge erased a Long Island couple’s >$500k in mortgage debt admittedly to teach the originator (and/or)servicer, OneWest, a lesson.

As is too common lately, sadly, the couple had fallen behind on their mortgage due to health issues and a change in their interest rate. OneWest refused to refinance.  So, after slamming OneWest for its “harsh, repugnant, shocking and repulsive” acts, he issued the bombshell decision.

The mortgage is hereby cancelled, voided, nullified, set aside and is of no further force and effect.

(Side note: Doesn’t that sound like the Jackie Chiles character on Seinfeld – the parody of Johnnie Cochran?)

In watching the video on the story, it also sounds as though they may have stripped equity through a refi at some point.  For some reason the news doesn’t really go into those details.  But, is using our home as an ATM really our fault?  (Yes, that’s snark-casm) 

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WTH, Your Honor?

What rule of law can he possibly cite?  While I am no legal wiz, I doubt it can possibly be upheld through appeals.  Or, can a judge in NY essentially give away property legally owned by someone else?  Whatever the answer, for the time being he has set a precedent. 

He has also set into motion an action that will require the lender/servicer to accrue massive legal fees in appeal as will others when like lawsuits begin to pop up.

The Backlash?

Will this start a landslide of “my-lender-was-mean-to-me-because-I-couldn’t-pay” lawsuits?  Will we begin to see binding arbitration agreements added to the mounds of mortgage docs, much like employment agreements for new hires intended to mitigate the legal fees associated with any future employment lawsuit(s)?  If so, is the homeowner more or less protected?

For the record, I have very few details on this, and am commenting on what I see in the original news story.  Foreclosure is a heartbreaking reality these days, and it’s not my intent to diminish or marginalize this family’s ordeal. 

Related: If I can get the lenders on my mortgages to be mean to me, can I get the debt erased?  How about on my car lease?  I’m sure they aren’t so nice.

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p.s.  The term Snark-Casm is not copyrighted.  Feel free to use it any time it’s applicable.

Written By

Brandie is an unapologetically candid marketing professional who was recently mentioned on BusinessWeek as a Top Young Female Entrepreneur. She recently co-founded consulting firm MarketingTBD. She's held senior level positions with GE and Fidelity, as well as with entrepreneurial start-ups. Raised by a real estate Broker, Brandie is passionate about real estate and is an avid investor. Follow her on Twitter.

28 Comments

28 Comments

  1. MIssy Caulk

    December 17, 2009 at 9:30 am

    Brandie, I had a closing on Monday and my Title Attorney told me that they had been sued 5 times. Why?
    The consumer saying they didn’t understand what they were doing.
    They sued the Realtors, lenders, and title company. All costing time and money. He also told me all the lawsuits were laid out the same way, same words only plugging in different buyers names.
    Frightening, isn’t it?

    • Brandie Young

      December 17, 2009 at 10:34 am

      Missy, I don’t get it either. Call me old fashioned, but if I don’t understand something, I don’t sign it… Nobody wants to accept responsibility for anything. And we make it too easy to bring suit. I could go on and on.

  2. egoldre

    December 17, 2009 at 9:44 am

    My husband told me about this ruling and I was in shock! I don’t think the ruling will be held up in appeals. This is a case of the judge basing his ruling on emotion and not on the letter of the law. I haven’t been able to find further details on it either so I’m sure there’s more to the story that we’re missing.

    • Brandie Young

      December 17, 2009 at 10:36 am

      EgoldRE – I doubt it could be held up either. How can any judge essentially give away property belonging to someone else (in this case the lein holder). It does set a precedent and opens the door to more of the same, which to Missy’s point, will drive costs up as well as suck valuable time.

  3. Bob

    December 17, 2009 at 10:25 am

    Do you know for sure whether or not they are the originator? OneWest has purchased notes of failed banks from the the FDIC with huge guarantees that allow them to make some huge profits if they ever foreclose. So guess what they do?

    There may be way more to this than has been reported.

    Good for the judge.

    On the same note, why are so many in this industry so quick to pass judgement on homeowners? Unless agents can say that when prices were at the peak they suggested to their buyers that they could lose their ass when the market turned (and they all do) then making judgments seems kind of harsh to me and more than a bit hypocritical.

    • Brandie Young

      December 17, 2009 at 10:53 am

      Hi Bob,
      I don’t know if they originated or are a servicer/default servicer, etc. (why I had and/or servicer when I listed OneWest’s name). No doubt there is much more to the story, and tried to make disclaimer as such.

      I like that you are standing up for homeowners. No doubt there were unscrupulous folks throughout the RE value chain culpable in many of these stories.

      That said, I have yet to hear any borrower say “Yeah, I messed up. I stripped my home of it’s equity.” or “I fudged my income on my app to qualify for the loan.” (Then again that wouldn’t be meaty news). Instead it’s the lenders that gave bad loans? Realtors that oversold? Blame can’t rest squarely on one party’s shoulders. And, unless they had a gun to their head, at the end of the day the homeowner did sign on the dotted line …

      I think it can be argued round or square, with both sides making equally weighted and valid points. And, like fingerprints, every story is unique.

  4. 4closureFraud

    December 17, 2009 at 11:00 am

    “For the record, I have very few details on this, and am commenting on what I see in the original news story.”

    Of course the “news story” portrays the events in a manner that is beneficial for the banks. They own the media. Maybe you should do some research before writing about a topic you “have very few details on” and misleading your readers. I’m talking real research, like reading the case files of this decision along with the many others that are related to what is really going on here. There are more and more each week ruling in favor of the homeowners coming in from all across the country.

    This ruling was the absolutely correct and the Judge handled it like many others should, and will, by following the law.

    Do you really think twenty million homeowners gathered around the kitchen table one night and said let’s take down the entire financial industry, the entire US economy?

    During the housing boom, “lenders” passed around mortgages as if they were whiskey bottles at a frat party. Appraisals were overinflated, notes were lost, destroyed, shredded, sold into multiple pools. Mortgages were not recorded and exorbitant fees were collected by the big firms on Wall Street.

    Now that the bubble has burst, these “lenders” are trying to collect on loans they do not own, in most cases never lent a dime on the transaction, have no right to, or were paid 30 times over in bailouts, insurance, credit default swaps, etc.

    In almost EVERY case these “pretender lenders” do not and did not have any “skin in the game”. Almost all loans during the boom were securitized and it was investors that put up the money, not the banks.

    Now these “pretender lenders”, the “servicers”, along with MERS, Mortgage Electronic Registration Systems, are unrightfully taking peoples homes by filing fraudulent mortgage assignments to process foreclosures.

    In other words, the “lenders” that are making the claim on the homeowners, have lost nothing by the default, have not been damaged, and have no standing or right to be in court.

    It is all a sham, a shell game.

    Do the research. See for yourself…

    It is all in the public records…

    4closurefraud.wordpress.com/

    4closureFraud

    • Brandie Young

      December 21, 2009 at 8:40 pm

      4closureFraud,

      I had all the info I needed to start the discussion. I was asking broad questions, specifically:
      1. Can a judge give away an asset
      2. If this precedent brings about conditions that will in the long run hurt homebuyers by having them sign away their rights to trial/legal action

      I don’t think the story takes the banks side at all. Quite the opposite. But that’s in the eyes of the viewer.

      You make several absolute statements here on broad topics. In my opinion, you have a few things wrong.

  5. Deontos

    December 17, 2009 at 12:31 pm

    Brandie,
    That same OH SO innocent lender LOST
    a case in California recently. Were told
    desist actions against the defendant.
    IGNORED the Court Order and
    re-filed a new action.

    A follow up to the Yano Horoski Case.
    YOU need to inform yourself of the
    FACTS before writing Snarkastic
    articles. Have you READ the
    case file? I HAVE. The Lender’s
    actions were REPREHENSIBLE.

    And guess what? Onewest has
    now sent another collection letter
    to the defendants demanding
    payment. IGNORING the Court’s
    Order!

    If you and other readers here
    want an objective understanding
    of the illegalities occurring in
    foreclosure actions around the
    country go here:

    4closurefraud . wordpress . com

    • Brandie Young

      December 17, 2009 at 10:38 pm

      Deontos

      1. I NEVER called the servicer/lender innocent
      2 I clearly STATED I don’t know all the facts of this particular case
      3. The POINTS I was making were:
      A: What kind of precedent this sets for other lawsuits and how that might change or inhibit homeowners rights in the future.
      B: Does a judge have a legal right to GIVE AWAY an asset

      I have every right to my opinions, just as you do.

      The difference between us is I engage in conversation and don’t make comments in a cowardly manner (read: ones that can’t be tracked back to me).

  6. Deontos

    December 17, 2009 at 1:59 pm

    PT1

    Brandie,
    That same OH SO innocent lender LOST a case in California recently. Was told
    desist actions against the defendant. IGNORED the Court Order and
    re-filed a new action.

    A follow up to the Yano Horoski Case. YOU need to inform yourself of the
    FACTS before writing Snarkastic articles. Have you READ the
    case file? I HAVE. The Lender’s actions were REPREHENSIBLE.

    MORE…..PT2

  7. Mike

    December 17, 2009 at 4:54 pm

    For the record. OneWest did get a great deal from the FDIC. Why? Because they couldn’t get it sold otherwise. There were no interested investors. The FDIC had to offer a great deal, or they would still own it.
    Indymac did have one of the worst reputations for approving loans that they knew were very risky. Buyers still need to take responsibility. If you don’t understand it, don’t sign it. Also, any buyer that listens to a RE Agent when they say that home prices will never depreciate, get what they deserve. Homes have always been a commodity. That said, there are a lot of shady people in this business. It makes it easier for the quality agents to shine.

  8. Cecelia

    December 17, 2009 at 5:03 pm

    There is more to this story… nypost.com/p/news/local/judge_kos_mortgage_to_slap_bank_28ZS1oW8Y58z6gu1AQbWMI

  9. Bob

    December 17, 2009 at 6:57 pm

    I have heard more than my share of homeowners take responsibility for their actions.

    As for the gun at their heads, agents can’t stand there and crow about why their expertise is so valuable when they continued to put people in homes when the market was turning and more so when it was dropping. Many homebuyers put all their trust in the their agents, and I have heard ad museum the huge number of agents who bitch about their clients not listening to them.

    Mike,

    Its easy to make those statements, but do you know for a fact that the FDIC couldnt cut a better deal with others? Selling a note at 70% or less and then guaranteeing losses up to 95% of the original value? That isnt a deal, that is a giveaway. More importantly, its created an incentive for the investor to foreclose.

    I would love to be a fly on the wall when you explain purchase contracts and escrow docs to clients.

    • Brandie Young

      December 17, 2009 at 10:42 pm

      Bob,
      To your point re: homeowners … i was speaking more about the way homeowners are typically featured in the news, which seems to lean toward the victim angle.

      At the end of the day, my opinion is every situation is quite unique. And not a single entity can be held 100% responsible.

  10. Matt Carter

    December 17, 2009 at 7:20 pm

    More details on this unusual case from New York Law Journal:

    law.com/jsp/article.jsp?id=1202435781738&pos=ataglance

  11. Lisa E

    December 18, 2009 at 2:45 am

    Brandie,

    I FULLY AGREE!

    How in the world did we get to a place that those with no legal rights to something have the audacity and nerve to assume the rights of a holder in due course! OUTRAGEOUS!

    OneWest (FKA Indymac) has NO LEGAL RIGHT to that property and should NEVER have even been trying to collect funds or foreclose upon the collateral (aka: basic human need, shelter, aka: a family’s home).

    See, good ole’ OneWest done sold that there note down the line, eventually ending up in some mortgage backed security investor’s portfolio. So, have you been to foreclosure court to observe? What is kind of interesting is the fact that these foreclosing servicers sell the properties and neglect to pass on the proceeds to the investors who are the rightful lenders of the funds!

    Now, these investors are up in arms starting up lawsuits against these “down-line” banks in the multi-level marketing Wall Street game that ends up with a homeless family.

    Happy Holidays!

  12. Mike

    December 18, 2009 at 7:30 am

    bob, I’m way too lazy to google and quote the articels here, but I followed it in the news and the FDIC was not getting any intrest in Indymac. Google Sheila Bear. Only when they agreed to bear much of the risk, did they get it sold. The FDIC was desprerate to dump indymac.
    As far as agents tellling their clients their home will not depreciate, I don’t do it. bob, my investment broker told me that Starbucks would never go below $28, it went to $13. Do I hold him responsible? No. A home is a comodity. Also, I explain the contract quite clearly. Do you wear your shades while writting contracts?
    bob, anyone can be an internet tough guy. It’s weak.

  13. Bob

    December 19, 2009 at 5:14 pm

    Mike, if you post a comment and cant handle a response that challenges your facts, don’t cry about being bullied because you are wrong, just do your homework.

    Your assertion that they were the only ones that showed interest is flat out wrong. It had no prior banking existence prior to the IndyMac failure.

    OneWest was created by Wall Street billionaire equity and hedge fund investors J.C. Flowers, John Paulson and George Soros, for the sole purpose to take over IndyMac’s assets and those of subsequent failed banks. This was not a situation where there were no bidders at an auction. This was a joint creation of an institution by Wall Street and the Feds prior to seizing the bank. While they got a sweetheart deal, they were also supposed to adhere to the loan mod model set up by the FDIC. Their adherence to that agreement has been questioned.

    Brandie, of course there are entities that can be held 100% responsible. You can start with Mozilo.

    • Brandie Young

      December 21, 2009 at 8:45 pm

      Hey Bob,

      Love your passion … yet must respectfully disagree that it can possibly boil down to a single individual or link in the value chain. There’s copability at every link, including homebuyers.

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