For the second time in my memory, a judge has awarded a ‘free house’ to a homeowner, basically tearing up a mortgage. The first time was in Buffalo, New York, before I started this blog. The second time was recently in Riverside California. I have linked to Mandelman and his article about this one.
A Riverside, California homeowner, Denise Saluto, who was in foreclosure filed for quiet title against Deutsche Bank National Trust, as trustee for Long Beach Mortgage, and its successors and/or assigns, and Washington Mutual Bank, successor in interest to Long Beach Mortgage Company… and won by default. (And Washington Mutual, turned into JPMorgan Chase.) Default means that neither Deutsche Bank nor JPMorgan Chase responded to the lawsuit.
The reader should substitute the term clear title or try title for quiet title depending on what state you live in. The three terms are essentially synonymous. If your County Recorder doesn’t recognize one term, try the other two.
The Plaintiff still had to present his or her case, but it’s unopposed so it’s much easier. After considering the evidence presented by the Plaintiff, the court entered judgment in favor of Plaintiff and against the Defendants, thereby voiding her Trustee Sale and the Deed of Trust. So, no more mortgage… as in… it’s a free and clear house! Ms. Saluto may still owe the debt, but the mortgage company is now like Visa or Mastercard, insecure because they’re unsecured. And no one wants to be unsecured, especially in bankruptcy court.
No one knows for sure why the Defendant didn’t respond in court. With the Robo-signing scandal, one could imagine a scenario, however. In fact, when the mortgage servicer lawyer tried using this excuse, the judge was quick to point out that the file had been with the lawyer for NINE MONTHS before any efforts were made to get the default judgment set aside.
When a party loses by default like that, assuming it was an oversight of some kind, they usually appeal the decision as soon as they’re notified of the judgment by coming back into court to ask the judge to set aside the default judgment, claiming they weren’t properly served or whatever. And depending on the reason they defaulted, and almost certainly in the case of a bank and a foreclosure, the judge will set aside the default judgment and let the case start over.
If it’s within six months of the default, and the lawyer takes the blame, the court MUST vacate the default judgment. It’s actually the only time you ever get to see a lawyer willingly accept blame for anything.
So, in this case, as one would think, Deutsche Bank did appeal the decision, but the thing is, they waited almost a year to do so, in legalese… the mortgage servicer, “failed to establish diligence in bringing their motion for relief.”
In July 2009, Saluto filed a request for entry of default judgment, and on December 15, 2009, default judgments were entered.
Then… a year went by and to make a long story short; because JPMorgan Chase Bank said it discovered the default in March 2010 and Deutsche Bank said it discovered the default in early April 2010, but they didn’t file their motion under section 473.5 until December 2010, the appeals court found no evidence that the two banks acted “diligently” in bringing their motion for relief under section 473.5, and therefore the trial court should not have granted the motion that set aside the default judgment.
As far as complying with the procedural requirements of section 1008, mentioned above, the court said the following:
“Because we have found reversible error based on defendants‟ failure to establish diligence in bringing their motion for relief, Saluto’s additional contentions are moot.”
So, that’s that for Denise Saluto… she won, quieted her title and now she has no mortgage on her home. She may still owe the money to some entity, but the debt is unsecured… like credit card debt… whatever she owes it’s no longer tied to her home.
The question arises; did it happen because Deutsche Bank and JPMorgan Chase somehow let this slip through the cracks? Maybe. Or, was it that the banks weren’t prepared to defend the quiet title action… as in, they couldn’t find the note, or the assignment was a forged and fraudulent mess. You did hear about Robosigner, didn’t you?
In the end, it really doesn’t matter how this happened. The point is, the homeowner won, not the mortgage servicer.
Mandelman called around to various lawyers and other experts, asking if the banks could somehow get the decision reversed? The answer: No. The decision by the Court of Appeal is essentially final. The California Supreme Court could overturn a decision by this court, but the upshot is that the chances of that happening are so remote that it’s not worth considering.
So, there are no legal maneuvers that will change what’s happened, but who could believe that the bankers are just going to give up and go home on this. Maybe they will, but maybe they won’t, right? So, what else could happen next to threaten the title to Denise’s home?
Theoretically, a “new owner” of Denise’s note could show up on the scene with paperwork showing they bought it from the prior owner, either Deutsche Bank or JPMorgan Chase, before all this transpired.
Would this be fraud? Sure looks like it.. Would that stop the bankers from doing it? Didn’t stop Robo-signing. And would it work and cause Denise to lose her home?
The lawyers, however, all say the answer is no. None of that would happen… it simply wouldn’t work.
What’s missing here is the REST Report Title Search. With that, any and all questions of other or future actions would be moot.
So, Denise Saluto does now own her home free and clear. However, it seems very likely that she still owes the amount of her mortgage as an unsecured debt. Lawyers have told me that she could potentially have the debt discharged in a Chapter 7 bankruptcy, but it would depend on a few things lining up just right, including the value of her home being less than the homestead exemption.
For information on the REST Property Solutions Report, please click and watch this:
Broken Chain: http://youtu.be/yEfdsQDPr7M
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