Foreclosure Law with the Gammon Law Office
In May 2013, Patrick Linton was driving while using his cell phone and he struck cyclist Robert Crouch, breaking his back in four places and causing permanent damages. Crouch hired us to help him. The jury awarded him $865k in compensatory damages.
I just finished reading an article shared by Bill Davis, a member of the Central Texas Foreclosure Defense Group. The paper is by Gary Neustadter of Santa Clara University Law School, called “Randomly Distributed Trial Court Justice: A Case Study and Siren from the Consumer Bankruptcy World.”
The article presents an empirical study of a debtor presenting identical claims in multiple courts across the country. The reader is left with a good understanding of just how arbitrary our court system, a/k/a/ the “puzzle palace”, truly is.
By: E. Jason Billick
The Texas Legislature recently passed House Bill 2067, which is effective immediately and will be codified as 16.038 of the Texas Civil Practice & Remedies Code. This bill addresses the statute of limitations for recovery of real property once a borrower’s underlying note becomes due.
The Texas Supreme Court has made it clear that if a series of notes or obligations or a note or obligation payable in installments is secured by a lien on real property, limitations does not begin to run until the maturity date of the last note, obligation, or installment. Limitations may run sooner if the mortgagee exercises its option to accelerate the loan once a borrower has defaulted.
The latter situation is what we’ve become accustomed to seeing with some of our clients’ loans. The “lender”, usually the entity exercising said option, has been able to avoid the limitations issue if it’s able to prove the acceleration has been abandoned either through an agreement of the parties or through some other action of one or both parties.
House Bill 2067 allows the lender to abandon the acceleration through a notice of rescission. This has been an approved form of abandonment in the past, but now the Texas Legislature has made it clear as to how lenders may accomplish said abandonment.
In 2010, Florida-based Ocwen Financial Corporation created the Shared Appreciation Modification, hereinafter (“SAM”). The SAM program was designed to get borrowers back on track with their mortgage payments through reducing delinquent principal owed. In exchange, the program provided an incentive to the owner of the loan (usually a bank) to share in some of the appreciation if the home increased in value by the time the borrower either sold or refinanced.
In practice, the SAM would forgive the balance of the mortgage up to 95 percent of the prevailing market value. The homeowner would then be required to share 25% of the home’s appreciation, if any. Principal reduction is one important advantage SAM has over the Home Affordable Modification Program.
The SAM program continues today and provides distressed home owners with an option for getting back on track.
By Anthony Read
Your homestead has been sold at foreclosure sale. You have received a three day “notice to vacate” that says you have three days to move. How long do you have?
First, not just three days.
An aside about time. In the eviction context, weekends count as regular days. If you are counting five days and Saturday and Sunday are included, they count. The only exception is if the end day is on the weekend or a holiday – then it is moved to the first workday.
When you read the notice carefully, it says if you do not vacate in three days, the new owner will file suit in the Justice of the Peace Court to have you evicted. They can’t file that suit until you have had three days from receipt of notification.
On the fourth day (if they are on top of things), the new owner can file a law suit to have you evicted. You will be served with this suit – called a Forcible Detainer (“FD”). Often, depending on the Justice of the Peace (“JP”) Court, you will have a court date and time included in the citation saying you’ve been sued. The date usually gives you six days before trial.
At trial, the owner (or, most likely, their lawyer) will present a case for your eviction. You have the opportunity to present your case against eviction. As an aside here, having a lawyer is awfully handy in this situation (especially if you hire one before the foreclosure).
If the owner does not present a proper case or you rebut their case, the judge will dismiss the FD. You stay in your house until the new owner refiles and retries and wins.
If the owner wins, they have to wait five days (except as discussed below) before asking for a writ of possession for the constable to evict you. When the constable gets the writ and has time to serve it, you are given a very real 24 hour notice to vacate. If you do not vacate, the constable will direct all possessions and persons be removed from the property.
Another route exists to the process. First, you make sure when you have your trial that you ask the judge to set an appeal bond. The appeal bond allows you to appeal to the County Court at Law (“CCL”). To stop the issuance of the writ of possession, you must post the bond at the JP before the end of the fifth day and file a notice of appeal.
If you cannot pay the bond amount, you can file a “pauper’s affidavit” attesting to the inability to pay the appeal bond within five days of the court’s decision (same as the bond). The owner is notified and has five days to contest your pauper’s affidavit. Should the owner win, you can appeal the decision to the CCL but that is outside the scope of this article.
Assuming you either pay the bond or are successful with your pauper’s affidavit, the JP court will forward the record to the CCL (this can take days or weeks). Once the CCL has the record, you will be sent a letter giving you twenty days to pay the fee (unless you were successful with a pauper’s affidavit). If you didn’t file a written answer to the FD law suit, you have eight days to do so.
Once this is complete, the CCL will set a trial date sometime in the future.
If you win at this level, the owner can appeal to the Third Court of Appeals or completely re-do the process starting with the JP Court. If you lose at this level, you can appeal to the Third Court of Appeals. The Third Court appeal requires bond and is beyond the scope of this article.
If you do lose and do not appeal, you have ten days before a writ of possession can be obtained by the owner. Once the writ is issued, the constable will place the 24 hour notice and you will have 24 hours to vacate.
This article shows that the three days isn’t really three days. Eviction after foreclosure is a complicated process that can take weeks instead of a few days if you follow the proper steps.
By Anthony Read
Texas was the last state to allow home equity loans. That is, a loan that gives you cash taken against the equity in your home. This is distinct from a purchase money loan where you borrow money to buy the house or a refinance where you borrow just enough to pay off the old mortgage.
If your loan is NOT a Home Equity loan, there is a non-judicial process for foreclosure mostly involving notification followed by a sale. Home Equity loans, by contrast, can only be foreclosed with a judicial process – that is a judge has to sign an order allowing the foreclosure.
The first step in the process is to send you a default letter stating you are behind in your payments and that you have (usually) 30 days to bring the loan current. The default letter usually threatens to “accelerate” your loan if you do not bring it current.
Acceleration sometimes takes place after that 30 day period, but it can take longer for the bank’s lawyers to send the letter. Acceleration is a demand that you pay the entire balance of the loan or face foreclosure. A pointer to remember here is that even if the loan has been accelerated you can almost always still pay just the arrears to reinstate the loan.
After acceleration, the bank’s lawyers must file suit to obtain an order to foreclose. The suit must be served by constable or process server on the last address the bank has on file for you. This is usually the property address. The title of the suit will be IN RE: <property address>. DO NOT IGNORE THIS SUIT. This is the easiest point in time to delay foreclosure. This is also a really good time to hire a lawyer to protect your rights.
You have until the first Monday after 38 days have passed to answer the suit. If you do not file an answer, the bank’s lawyer can apply for a default or automatic win. Assuming a default or a loss, the bank’s lawyer, armed with the order, can start the rest of the foreclosure process. All foreclosures happen on the first Tuesday of the month. You have to be given 21 days’ notice before the foreclosure. It is still usually possible, even after notice of sale, to bring your loan current if you have the funds – the acceleration may mislead you into thinking you have to have the entire balance of the loan.
If there is a title dispute or other irregularity in the foreclosure, it is possible to stop the foreclosure right up to the day before. All you have to do is to file a lawsuit challenging the foreclosure or title and notify the bank’s lawyer and the foreclosure is automatically stayed. The filing and notification must take place by 5:00 PM the Monday before the foreclosure.
Unless the sale is stopped, the bank’s lawyer is likely to sell your house to highest bidder (often the bank). Within a few days or weeks, you will receive a notification to vacate in 3 days. This does not mean you have to move in 3 days. It means that if you do not move in 3 days, the buyer can file suit to have a Justice Court evict you. This process can take days or weeks depending on how it is handled.
Again, Texas Home Equity loans provide some extra protections for home owners against foreclosure. It is a longer process and it takes a judge’s approval. The description above is general in nature. You should consult a qualified attorney to determine exactly what your rights are with regard to your homestead and foreclosure.
By: E. Jason Billick
Home loan modifications still present the best avenue for homeowners to get back on track when they’ve fallen behind on their mortgage. It makes sense. The Making Home Affordable program that began in 2009 was designed to modify delinquent loans so payments became affordable and sustainable for financially distressed homeowners. Unfortunately, the program was poorly implemented and resulted in several loopholes ripe for banks to take advantage of.
Bank of America was one of the first lenders under fire for alleged abusive practices under the Home Affordable Modification Program (HAMP):
Articles like the one above illustrate some of the challenges entities like the Consumer Financial Protection Bureau face when determining how to regulate this process. The truth is, there are thousands of homeowners who have experienced the HAMP modification nightmare of submitting financial documentation over and over to their lender only to discover the information was either lost, destroyed or ignored.
Our firm represents homeowners faced with lenders abusing the HAMP process. We’ve seen banks fail to honor modification agreements, deny permanent modifications to those who have successfully completed the Trial Payment Period, purposefully delay the loss mitigation process by losing paperwork, and demanding homeowners to send in payments with no intention of granting promised permanent loan modifications. The list goes on.
For homeowners, one of the first things you can do to help yourself is determine whether you are even eligible for a HAMP loan in the first place. The eligibility criteria list is lengthy, but there are a couple of preliminary questions that can first be answered before you dive into the process.
First, if your current mortgage payment is less than 31 percent of your gross income, you will not be eligible for a loan modification under HAMP;
Second, your loan originated on or before January 1, 2009;
Third, you are currently undergoing financial hardship;
Fourth, your property is not condemned and it’s a one-to-four-unit residential property;
Fifth, an escrow account must be established;
Sixth, there are some loan principal balance limitations that may apply;
Seventh, applications must be submitted no later than December 31, 2015; and
Eighth, check makinghomeaffordable.gov to verify whether your lender participates in HAMP.
Be very cautious of non-lawyers willing to take your money to help you through the HAMP process. Many of these services are scams. It’s highly recommended to seek an attorney if you are facing issues with the HAMP process.
By: E. Jason Billick
If you ask any attorney who handles forcible detainer actions in Texas, chances are they’ve come across the infamous Rice v. Pinney decision. The case has become Plaintiff’s first line of defense when a defendant homeowner cries “title.” When a defendant raises a title issue, the court is then tasked with determining whether a landlord-tenant relationship exists. A landlord-tenant relationship is usually created through a lease, by agreement, or created through the conditional language found within homeowner’s deed of trust (usually paragraph 18 or 22). The existence of a landlord-tenant relationship provides a basis for the court to determine the right to immediate possession without resolving the question of title. See Villalon v. Bank One, 176 S.W.3d 66, 71 (Tex. App.—Houston [1st Dist.] 2004, no pet.).
Plaintiffs, i.e. banks and investors, are quick to cite Rice for the proposition that the court retains jurisdiction regardless of whether a title dispute is pending in district court. See Rice v. Pinney, 51 S.W.3d 705, 711-713 (Tex. App. – Dallas 2001, no pet.) (justice court and county court did not err in exercising jurisdiction over forcible detainer action despite pending title dispute action in district court, because issues of title and possession may be separately resolved).
The parties are quick to direct the court’s attention to the language found within the homeowner’s deed of trust. Rice is often used to convince the judge or jury that the plain language in the homeowner’s deed of trust automatically creates the landlord-tenant relationship. It is precisely this lie that has caused the proverbial train to get off the tracks. Worst yet, the courts buy into it and have done so for over ten years.
“Evidence presented in the county court also established that the original deed of trust contained language establishing a landlord-tenant relationship between the borrower and the purchaser…Because the evidence in the county court showed…there was a landlord tenant-relationship between [homeowner] and [bank] the county court could determine possession without quieting title.” Morris v. Am. Home Mortg. Servicing, Inc., 360 S.W.3d 32, 35 (Tex. App. Houston 1st Dist. 2011) (relying on Rice).
“[Homeowner] contends that a landlord and tenant-at-sufferance relationship is created under the deed of trust only when there is strict and full compliance with the contractual requirements in the deed of trust for conducting the foreclosure. Because the existence of a landlord and tenant-at-sufferance relationship is necessary to establish a forcible detainer, [Homeowner] asserts that the title issue presented in his district court suit is intertwined with the issue of possession in [Bank]’s forcible-detainer suit”
“The deed of trust contained the following landlord-tenant provision: ‘If the Property is sold pursuant to this paragraph 18 [regarding foreclosure procedure], Borrower or any person holding possession of the Property through Borrower shall immediately surrender possession of the Property to the purchaser at that sale. If possession is not surrendered, Borrower or such person shall be a tenant at sufferance and may be removed by writ of possession.”
“This Court has recently rejected this same argument in cases involving deeds of trust containing almost identical landlord-tenant provisions. See Wilder v. Citicorp Trust Bank, F.S.B., No. 03-13-00324-CV, 2014 Tex. App. LEXIS 2941, 2014 WL 1207979, at *2 (Tex. App.—Austin Mar. 18, 2014, no pet. h.) (mem. op.); Jaimes v. Federal Nat’l Mortg. Ass’n, No. 03-13-00290-CV, 2013 Tex. App. LEXIS 14615, at 3-4 (Tex. App.—Austin Dec. 4, 2013, no pet.) Killebrew v. BKE Invs., Inc., 2014 Tex. App. LEXIS 7291 (Tex. App. Austin June 30, 2014).”
It’s important to note that the Wilder and Jaimes decisions cited above relied on the faulty Rice premise that the homeowner’s deed of trust automatically creates the landlord-tenant relationship. For over eleven years there’s been a faulty assumption that the Rices’ deed of trust was either identical or vastly similar to the deeds of trusts that exist in today’s cases. A careful examination of the Rices’ deed of trust reveals just how sui generis the case really is.
The Rice Trust Deed states, in relevant part (emphasis added):
“The maturity of indebtedness secured hereby may, at the option of the holder of same, be accelerated upon the happening of any of the following defaults:
(a) If default be made in the payment of any monthly installment on said note or any part thereof and such default continues for a period of two months; or
(b) If for a period of two months default be made in the repayment to the holder of said note of any sum advanced for on behalf of undersigned which undersigned was obligated hereunder to pay, with interest accruing thereon as hereinabove stipulated; or
(c) If for a period of two months default be made in the performance of any other covenant, agreement or condition in this deed of trust; or
(d) If there should be any loss or damage to the improvements or any part thereof on said property from fire, tornado, or hail, in any amount, whether compensated by insurance or not; or
(e) If the undersigned, or any assignee of the undersigned, sells or conveys all or any party of the mortgage real property without having the purchaser or grantee expressly assume in writing, of record, the payment of the indebtedness secured hereby; and if the said assumption transfer fee is not paid.
Whereupon the entire principal, unpaid interest and attorney’s fees, if any, and all sums then remaining unpaid, with interest, as hereupon specified, shall become immediately due and payable. Trustee, at the request of any holder of the said indebtedness, or any part thereof, after same shall mature, either by its terms or by acceleration on account of any default are hereby expressly authorized to take immediate possession of the premises and, with or without such possession, proceed to sell the mortgaged property or any part thereof at public venue to the highest bidder for cash, at the court-house door in the county where the said mortgaged properties are situated, between the hours of ten o’clock A.M. and four o’clock P.M. on the first Tuesday in any month, after giving notice of the time, place and terms of sale and the property to be sold by posting written notice thereof for three consecutive weeks prior to the date of sale at three public places in said county at which real estate is to be sold, one of which shall be at the court-house door in said county…”
Yup. You read it right. The Rices didn’t even have to be foreclosed upon to lose possession. Or, as Judge David Phillips, apparently the only judge in Texas to have looked at the Rice Trust Deed since 2001, recently said: “They could just send over Black Bart with six-shooters and come in with, You-all get out of this place.”
The Rice decision has played a big role in determining jurisdiction in forcible detainer actions. To date, the decision has been followed in 34 cases and cited in over 160 decisions, most of which find against the homeowner. Today, homeowner’s attorneys have a difficult job ahead of them: debunking the Rice v. Pinney myth.
The trial was 2 days ago. My clients, a couple in their 60’s, were being evicted from their home of 13 years. They’d suffered a foreclosure after he was laid off from work and then missed several mortgage payments. The bank/mortgage company bought their house at the auction and was taking them to court to force them to move out. It’s still a common story these days, more so than you’d imagine.
They had been to court before, lost and filed an appeal. The hearing on their appeal was to have taken place a week before it did, but the court reporter was ill that day and the case got reset. They had been given another week.
The bank’s lawyer, a kind man, gave them my name as he left the courtroom. They called me immediately and I made time to see them. I have a soft spot for people losing their homes.
When they arrived they brought nothing with them except for the notice of the hearing they had just left: no paperwork on the mortgage; nothing on the foreclosure; nothing on the eviction proceeding they faced. Of course they brought no money. They told me the Lord had sent them, that they had faith, and that He would provide. They had no intention to pay anything, including filing fees or court costs, all of which, they explained, were now my responsibility.
Believe it or not, I see this mindset quite a lot. I call it, “I need, and therefore you owe me.” People come in with nothing to offer but a bagful of problems, hand it to you and call it a gift. Perhaps they are right. I do believe we are here to help one another and these folks certainly bring that opportunity in abundance. They are helpless. Their cases, seldom strong initially, suffering from a chronic lack of legal guidance and preparation, are usually hopeless. The legal moves that might have been effective, when timely employed, are often no longer available.
This dire situation, however, does nothing to diminish client anticipation. They will not be disabused of the notion that justice is still available in court and that their lawyer, if competent, will certainly deliver it to them. Lawyers, on the other hand, faced with such insurmountable difficulties, see a no-lose situation. There is nothing they can do to screw up such a case and anything they achieve will be miraculous, worthy of at least an ode, even if not lots of money. Such divergent viewpoints commonly result in unfulfilled expectations on both sides, regardless of the outcome in court. Because of the nature of my law practice I have represented many penurious people and taken up more than my share of hopeless causes. In the process I have dealt with no small amount of ingratitude. I have, in fact, come to expect it. I could tell right away that this case would be no different.
Still, I did not agree to represent these messengers from the almighty. Something I could not identify bothered me at a deep level: a sense of self-preservation that made me wary of entanglement with them. So I told them to get their paperwork together and make another appointment. I also told them I would not see them until they had written down exactly what it was they expected of me and why.
The email came later that same day: an explanation of the reasons they were entitled not only to free, legal representation at their upcoming eviction trial, but payment by me of all their related expenses. In their view they were presenting me with the rare opportunity to file a lawsuit against a bank and extract justice. I was to perform these services immediately and also recover millions of dollars in damages to which they were entitled for their stress and the disruption in their lives.
It was an offer I found difficult to refuse; yet somehow I managed.
When we spoke on the phone afterwards I reluctantly told him I would not be able to meet their needs. I wished them well and bade him goodbye. He called back. I did not respond. He persisted. I worked on productive tasks for other clients.
The day before the trial he showed up unannounced at my office carrying a box of unsorted documents. The paralegal who brought the news added, “I think he’s drunk.”
When I reached the reception area it was reeking of alcohol. I was not amused.
“Don’t you ever come back here when you have been drinking,” I told him. “You are stinking up my office. This is disrespectful of me and of yourself, too.” I wondered if the Lord had provided the booze as an additional inducement to take this man’s case. Little did I realize. “You need to leave, now.”
“What about tomorrow?” he asked?
“I will see you at the courthouse,” said a voice that sounded remarkably like mine.
It is truly amazing what comes out of your mouth when you are intoxicated. By the time my head stopped spinning he was gone with his box of papers and I was left with the hangover. Great.
The festivities were set on the afternoon docket. I arrived early with a small file I had prepared the night before. In it I had copies of the clients’ mortgage documents I had downloaded from the Travis County property records and a single, recent case on point from the 3rd court of appeals. When the judge called the case the bank’s lawyer offered his evidence that showed his client was entitled to possession of my client’s house: there had been a foreclosure (he introduced the foreclosure deed); the bank had sent demands to vacate the home (established by a business records affidavit); and there was a landlord-tenant relationship between his client and the former homeowners, my clients (established by a clause on page 8 of the deed of trust my client signed in favor of the bank). Those three documents and the fact that my clients were refusing to vacate was all he needed to win.
Except for one problem.
When I read the clients’ deed of trust the night before I noted that it was a nine-page document, the first page numbered “page 1 of 9.” Curiously, the signature page was labeled “page 10 of 9.”
I looked closer.
The signature page said: “By signing below, I agree to all the terms on pages 1 through 6 of the foregoing document.”
Apparently, whoever at the bank drafted the signature page used a form from another, 6-page document, adding the page numbering at the bottom to show that it was page 10 (of 9). It turned out my client had only agreed to be bound by the clauses on the first six pages of the deed of trust. The part that allowed the foreclosure and eviction was on pages 7, 8 and 9.
When I pointed this out to the judge he remarked that in his nearly 40 years on the bench he had held many a man’s feet to the fire on contract clauses they claimed not to have read. He had no difficulty finding that the bank, which prepared the document, had limited the deal to the first 6 pages.
Judgment for my clients.
The bank’s lawyer took it in stride. He even laughed at himself for referring the clients to me. “Bill, I never saw that. The bank never saw that. All the lawyers who have handled this file and no one ever noticed that. Congratulations on a good win.”
I knew it was blind, dumb luck and the influence of second-hand alcohol but accepted his compliment graciously. We shook hands and I left with the clients.
On the way down the stairs she asked me “Now what?”
“Nothing,” I told her. “You won. You stay in the house.”
“There has to be something else,” she said. “There is always something else.”
“Life goes on,” I offered in consolation.
When I started for my car he stopped me. “Wait a minute!” There was a definite edge to the voice.
I turned toward him.
“What about my damages,” he asked? His face was beginning to contort with anger. “I have had to live with this for two years. I moved out of my house when they foreclosed and then moved back in to it when the bank left it vacant. (He really said that.) I need to get paid for all this.”
Fortunately, this time I had prepared for this bullshit. Before stepping into the courtroom I gave him a contract to sign stating that I was representing him for free but only for the purpose of this one hearing and nothing else. If he didn’t want to sign it I would walk away before the hearing. If he did sign it, I would walk away after the hearing. Either way I was free of this miscreant claiming divine sponsorship.
“Your damages,” I told him, “do not exist.” I moved closer, confident he had not had time to start drinking since the verdict a few minutes before. “In case you weren’t paying attention in court, the judge just said that you were only bound to the first six pages of the deed of trust. You moved out for nothing. If you had taken the time to read what you signed you would have seen that.”
I grinned at him, but my eyes were hard. “Have a nice life,” I concluded.
I could feel him staring at me as I walked away. I give it a month before I get the grievance.
Ah, gratitude. It’s so overrated.