Foreclosure Litigation Overview I. Check attorney / client status A. Advise the client about the differences between mediation and litigation. B. Litigation retainer. C. Entry of appearance. II. Review the procedural status of the case when it was stayed for mediation, and address any issues. A. You should do the following if the client did not file an Answer or a Leave to Plead prior to mediation. i. Immediately move for leave to file an Answer instanter. Otherwise, Plaintiff may seek default judgment within days after mediation terminates. i If Plaintiff has already moved for a default judgment, file a Brief in Opposition (move for leave to file instanter if necessary) You should also appear at the default hearing and ask the Court to grant your motions and deny the Motion for Default Judgment. Typically the Court will not grant the default judgment if you and the homeowner appear at the hearing. B. If the client filed only a Leave to Plead before mediation was approved, file an Answer instanter as soon as possible after mediation terminates. C. If the client filed a pro se Answer before mediation was approved, you can seek leave to file an Amended Answer and Counter-Claim if applicable. I usually style the motion as one for leave to answer or otherwise respond. D. You should do the following if the plaintiff moved for summary judgment before mediation was approved. i. File a Civ. R. 56(F) motion requesting a continuance so that you can obtain discovery. a) Remember to include an affidavit from the client. b) You may want to serve discovery before or contemporaneously with the 56(F) motion.
E. Caveat for Lorain County. i. Lorain County differs because the magistrates conduct settlement conferences, not mediations. Since you are before the magistrate, you should ask the Magistrate to set a trial schedule that addresses these issues if there is no settlement. F.Some judges and magistrates will set a quick trial schedule. III. Determine and implement litigation strategy A. Joining additional parties (such as servicers, mortgage brokers, appraisers, etc.). i. Need to distinguish between Civ. R. 13(H), Joinder of additional parties; Civ. R. 14(A), When defendant may bring in third party; and filing a separate claim and then moving to consolidate under Civ. R. 42(C). Using the proper procedure to join new parties and claims is critical to obtaining jurisdiction and avoiding dismissal. Feel free to contact Legal Aid with procedure and strategy questions about joinder of new parties and claims. B. Always serve discovery. i. Feel free to contact Legal Aid for sample discovery requests relevant to your case. Interrogatories. a) In addition to substantive interrogatories, ask Plaintiff to identify people with knowledge and any experts it plans to use at trial. b) Plaintiff must automatically supplement its responses under Civ. R. 26(E)(1). i Requests for Production of Documents. a) Ask for electronic records. b) Ask for Fidelity / LPS Software (contains almost all notes) c) Ask for documents from WebEx or other imaging system. Ask for all documents. 2
iv. Requests for Inspection. a) Use this to review the original promissory note and other documents. v. Requests for Admissions. vi. Civ. R. 30(B)(5) Depositions C. Opposing a Motion for Summary Judgment. i. Substantive issues. a) FHA loans: Did lender comply with HUD regulations and satisfy loss mitigation requirements prior to commencing foreclosure? i ii iii iv Argue that compliance is a condition precedent to acceleration or foreclosure. The starting point is 24 C.F.R. 203.500: It is the intent of the Department that no mortgagee shall commence foreclosure or acquire title to a property until the requirements of this subpart have been followed. The term subpart refers to 24 C.F.R. 203.500-203.685. The standard FHA mortgage form contains the following language in Paragraph 9: Regulations of HUD Secretary. In many circumstances regulations issued by the Secretary will limit Lender s rights, in the case of payment defaults, to require immediate payment in full and foreclose if not paid. This Security Instrument does not authorize acceleration or foreclosure if not permitted by regulations of the Secretary. This argument is usually raised because lender did not make a reasonable effort to arrange a face-to-face meeting with the mortgagor. 24 C.F.R. 203.604(d). But the argument can be raised for other violations, including a failure to consider all loss mitigation options. 24 CFR 203.605. b) U.C.C. issues: Article 3 of Ohio s U.C.C. governs most promissory notes. i ii Determine if the note is negotiable. See R.C. 1303.03(A). Determine if the Plaintiff is entitled to enforce the note. See R.C.1303.31. 3
iii Determine if Plaintiff is a holder in due curse. R.C. 1303.32. c) General standing issues: Was plaintiff the owner and holder of the note and mortgage at the time foreclosure action was filed? Are there gaps in the chain of title? d) Standing issues related to securitization: Is plaintiff the trustee of a trust? If so, did the trust timely obtain ownership of the loan, according to the guidelines set forth in the applicable Pooling and Servicing Agreement (a copy of which can often be obtained on the SEC s Edgar website)? e) Loan origination issues: Are there problems related to the loan application, loan closing, or closing paperwork, and do those facts warrant denial of summary judgment with respect to Plaintiff? f) Are there other material fact issues related to other defenses or counterclaims? g) Equity issues: Determine if it would be inequitable under the facts of the case to foreclose. Procedural issues. a) Make sure the Plaintiff disclosed the affiant in response to an interrogatory requesting Plaintiff identify all people with knowledge. b) Argue that the Plaintiff / Movant must satisfy all elements of its case in chief. See Wachovia Bank of Delaware, N.A. v. Jackson (5th Dist. 2011), 2011-Ohio-3202. i Evidentiary issues. a) Determine if affiant satisfied Evid. R. 803(6). b) Determine if Plaintiff properly authenticated the documents. D. What to do if the client receives an adverse decision. i. Magistrates decide most cases. See Civ. R. 53. i Always ask for findings of facts and conclusions of law. Critical, if a Magistrate issues the decision, you must object to the decision as set forth in Civ. R. 53. 4
iv. You waive the right to appeal any finding of fact or conclusion of law if you do not object under Civ. R. 53. (See the caselaw for exceptions). IV. When to return a case to mediation. A. Bases for going back into mediation. i. Household income has increased. i Change in eligibility for Save the Dream funds (formerly known as Restoring Stability funds). Client may be eligible for a new program. For example: a) The Treasury Department lifted the twelve-month restriction on FHA HAMP. b) HAMP Tier II was instituted last year. iv. Client no longer wants to stay in the house, and mediation can be used to negotiate a short sale or deed-in-lieu of foreclosure. v. Litigation merits are not as strong as previously thought, but client has financial resources that make it feasible to save the house. B. Procedure for getting back into mediation. i. You can submit a new Request for Mediation form to the Mediation Department. In the alternative, you can file a motion to refer the case back to mediation. Sometimes the other side will join in that motion. 5