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BKMod™ & Zombie 2nds
2022-2023: The Great Recession (2007) and its resolution period (from 2009 to December 31, 2016), left homeowners with millions of Zombie 2nds “unresolved”. 2022 and 2023 have revealed that lenders, buyers or collectors of debt, and some big institutional owners, are actively and aggressively making demands and moving homeowners into foreclosure in 2022 and 2023.
Most homeowners, and most lawyers have no understanding of what and why, or how to stop the barrage. Rich Rydstrom, Esq., former CMIS Chairman, and other insiders are working on a solution for both the homeowner, and the lending and collection industries.
When home values (“FMVs”) are up-side-down, Chapter 13 BK will wipe out the 2nds. Chapter 7 is not used for stripping. But as we know, currently, FMVs are at a high point since the Great Recession. With an economic downturn, and high values, the perfect storm appears again. This storm may presently preclude homeowners from relief in BK court, including stripping because home values are not up-side-down. In most cases, that will wipe out homeownership and hurt this economy badly. Should the industry take advantage of this easy-take? Would that benefit the industry in the longer-term? Is it better to replace individual family ownership with a few institutional or governmentally controlled borrowers or owners? Is there a solution that benefits both the industry and the individual family borrower? Yes, the BKMod™ and or QBSam™ can allow the individual family to stay and pay, and allow appreciation/profits to accrete to the shared mutual benefit.
Risks of Zombie Foreclosures:
Lawyers who understand that liability for the collective “10 year lay in wait period” is present under various state causes of action including but not notwithstanding the facial argument that a TD/lien never dies under most state statutes of limitations (“SOL”).
Of course, but under the hood we can see liability: (1) the 10-year lay in wait period is evidence of fraudulent concealment, malicious laches, unfair trade practices, and breach of its express and implied contractual reciprocal covenants; and (2) the lack of compliance with: periodic detailed loan statements, credit reporting, and truthful and truthfully dated and attested oath disclosures, (phony) transfer/assignment documents and or letters, and the compliant application of its SPA duties with HAMP/2MP, NMS, and various and then applied Decrees. This reveals reckless disregard of the rights of the borrower, the lessening or destruction of borrower rights and contract rights, and the intentional and malicious conduct intended to preclude payment compliance by common plan and foreclosure scheme. Over a 10-year period of non-compliance, countless ‘public policy bad-acts’ are found in the public records, whether recorded or not. In California I have received up to 18x the cash at issue as ‘treble’ damages for fraud and unfair trade practices. It’s based on quantity and quality of the bad-acts including procedural, substantive and public policy violations.
So if a jury finds that the underlying debt is void or voidable, or offsets liability, the fail-safe Trust Deed and its (fraudulent) maintenance, is effectively stripped in civil court, and used to prove a false or sham lien claim. A security lien maintained on a debt that is in violation of law, regulations including Reg X, Z, F, etc., HAMP/2MP, servicing guidelines, Decrees, and procedural, substantive and public policy foreclosure laws, both on a Federal and State analysis, in State Court, are grounds for proving breach, rescission, fraud, concealment, unfair trade practices, and possible crimes including publishing and maintaining recorded false real estate statements (and TDs, liens), rendering it void or voidable. A naked debt requires the application of the shorter SOL, for example, Contract (4 years) and fraud (3 years). This renders the common plan and scheme hoisted by one’s own petard. The cause of actions define the relevant facts to prove or disprove the elements; hence, Plaintiffs are not restricted to the lenders or collectors Trust Deed/Lien analysis. A class action or landmark case may create an ironic reversal or poetic justice for such an unfair, unlawful or fraudulent common plan and scheme.
So if the lender/collector has a substantial portfolio history, then the common plan and scheme evidence is ‘recorded’ or not, in the public records. Both positive and negative facts are direct evidence. Such is evidence to prove or disprove the elements of state causes of action such as fraud, concealment, breach, etc., to satisfy its elements with various and repeated violations of law, regulations, guidelines, Decrees, HAMP/2MP, etc. Various bad-acts lend itself to punitive damages and multiple-treble-liability. (See West v. JP Morgan Chase, Reg X, Z, F, etc., HAMP/2MP, etc.)
The Consumer Financial Protection Bureau (CFPB):
The Consumer Financial Protection Bureau (CFPB) issued an advisory opinion to affirm that the Fair Debt Collection Practices Act (FDCPA) and its implementing Regulation F prohibit a debt collector from suing or threatening to sue to collect a time-barred debt. Accordingly, an FDCPA debt collector who brings or threatens to bring a State court foreclosure action to collect a time-barred mortgage debt may violate the FDCPA and Regulation F. (CONSUMER FINANCIAL PROTECTION BUREAU 12 CFR Part 1006 Fair Debt Collection Practices Act (Regulation F); Time-Barred Debt.) https://files.consumerfinance.gov/f/documents/cfpb_regulation-f-time-barred-debt_advisory-opinion_2023-04.pdf
In California, and in California Superior Court, we can use The Rosenthal Act incorporating the FDCPA, and other state causes of action, such as Unfair Trade Practices (UCL€¯), Breach of Contract, Fraud and Misrepresentation, both negligent and intentional, among others, to find liability and hold the debt collectors liable for acting outside of the law. In California, enforcement of a debt must be lawful and currently valid, otherwise it is unlawful to threaten foreclosure or record pre-foreclosure and foreclosure documents. The California Civil Code of Procedure, section 337, holds that a debt is time-barred from enforcement over 4 years from the date of the breach of contract, which is typically the date of non-payment, or date of the charge-off or extinguishment whether by purchase/sale, insurance claims or assignment.
The Federal government supplies regulations, standards, and guidelines which can be used to satisfy the state causes of action. For example, HAMP/2MP states that if a lender/servicer charges off the debt/lien it is an extinguishment. It also says that an extinguishment prohibits the creditor from collecting on that debt/lien, this would be true even if the defendants cleverly disguise the party transactions by inserting a non-SPA-signatory. The corollary holds that a bank/lender or collector who falsely or misleadingly, represents verbally or in writing to Borrower (or the public record), that the debt was charged-off or canceled by various means including assignment in return for the insurance payment on its official claim will satisfy its unenforceability, or in the least, support the demand for trial by jury on the factual matters including: was the statement misleading to the borrower, or to others similarly situated, or likely to confuse or deceive the reasonable member of the California public, as public policy. There’s great risk for defendants down that road.
Litigation to come. Stay tuned. (C)(TM) Rich Rydstrom, Esq. 1-877-WIN-4-YOU™
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