The Pipes, The Pipes Are . . . Frozen! (Or, Who Is Liable For Property Damage While Home Buyer And Home Seller Wait For The Final Check To Clear?)

by: Peter J. Gallagher (@pjsgallagher) (LinkedIn)

Frozen pipe (pd)Although the temperature today is supposed to reach 90 degrees, this post is about frozen pipes. More specifically, pipes in a house that is under contract for sale that freeze and cause property damage after the scheduled, but not completed, closing, but before the buyer takes possession of the home. In a case like that, who is liable for the damage?

In Bianchi v. Ladjen, plaintiff was under contract to buy a home. It was an all cash sale, no mortgage was involved. The closing was scheduled for New Year's Eve. Plaintiff performed a walk through on the morning of the closing and reported no damage to, or issues with, the home. The closing could not be completed as scheduled, however, because plaintiff did not wire the balance of the purchase price to the title company prior to the closing as he had been instructed to do. Instead, plaintiff brought a certified check to the closing. As a result, the parties entered into an escrow agreement, which provided that the title company would hold  "all closing proceeds" and the "Deed & Keys" in escrow until the check cleared.

This is where it gets tricky.  

Continue reading “The Pipes, The Pipes Are . . . Frozen! (Or, Who Is Liable For Property Damage While Home Buyer And Home Seller Wait For The Final Check To Clear?)”

Supreme Court: Party That Buys Defaulted Debt Not A “Debt Collector” Under The Fair Debt Collection Practices Act

by:  Peter J. Gallagher (@pjsgallagher) (LinkedIn)

Debt collection (pd)In Henson v. Santander Consumer USA Inc., Justice Gorsuch delivered his first opinion for the Supreme Court, and in doing so, provided an interesting opinion on a relatively boring issue, and subconsciously (I assume) invoked the movie Repo Man, a classic (?) mid-1980's movie starring Emilio Estevez and Harry Dean Stanton, which the website, imdb.com, summarized as follows: "Young punk Otto [Estevez] becomes a repo man after helping to steal a car, and stumbles into a world of wackiness as a result."

Neither the facts nor the law in Henson were wacky. Plaintiffs took out loans from CitiFinancial Auto to buy cars, but later defaulted on those loans. Defendant purchased the defaulted loans and sought to collect the debt from plaintiffs in ways that plaintiffs claimed violated the Fair Debt Collection Practices Act. The Act, which was designed to curtail "[d]isruptive dinnertime calls, downright deceit and more besides" authorizes private lawsuits and "weighty fines" for anyone who engages in "wayward collection practices." But, it only applies to "debt collectors," a term that is defined to include anyone who "regularly collects or attempts to collect . . . debts owed or due . . . another." The question in Henson was whether a party who purchases debts originated by someone else and then seeks to collect those debts for its own account qualifies as a debt collector." Justice Gorsuch framed the issue as follows:

Everyone agrees that the term ["debt collector"] embraces the repo man – someone hired by a creditor to collect an outstanding debt. What if you purchase a debt and then try to collect it for yourself – does that make you a "debt collector" too? That 's the nub of the dispute now before us.  

The district court and the U.S. Court of Appeals for the Fourth Circuit sided with defendant, holding that a party that buys defaulted debt and collects it for its own account is not a "debt collector." In doing so, however, the Fourth Circuit acknowledged that other circuit courts had come to the opposite conclusion. The U.S. Supreme Court took the case to clear up this split. 

Continue reading “Supreme Court: Party That Buys Defaulted Debt Not A “Debt Collector” Under The Fair Debt Collection Practices Act”

You Got A Better Idea?!? Government Opens Suggestion Box For Ideas On How To Rent Out Foreclosed Properties

by:  Peter J. Gallagher

  The New York Times is reporting that the government is soliciting ideas for turning its glut of vacant, foreclosed houses into rental units that could be managed by private parties or sold in bulk  ("U.S. Seeks Ideas On Renting Out Foreclosed Property").  The goal of the program would be to "stabilize neighborhoods where large supplies of empty, foreclosed properties have hurt property values" and "clear the nation’s balance sheet of real estate holdings that, because they have been difficult to sell individually, have hung over the housing market and stunted sales of existing homes and new construction."  The request for ideas comes from the Federal Housing Finance Agency, the Department of Housing and Urban Development, and the Treasury Department, and you can click here to submit your ideas.

As the article notes, the percentage of homes owned by the government that are currently in foreclosure is somewhat staggering:

Of the 248,000 homes owned by Fannie Mae, Freddie Mac and the F.H.A. at the end of June, 70,000 were listed for sale, said Corinne Russell, a housing finance agency spokeswoman. The remainder were not yet on the market or the agencies had already received an offer from a prospective buyer.

But it is possible that hundreds of thousands of more homes that are now in the foreclosure process could come into the possession of the federal government in the next few years, housing experts say.

The government is now looking for a few good men ideas for how to deal with this crisis.  Among those already proposed are "rent-to-own programs, in which previous homeowners or current renters could lease properties as a path to ownership, and ways in which the properties can be used to support affordable housing."

If you have any thoughts, be sure to let us know when you let the government know.

Chickens Continue Coming Home To Roost For Lenders And Mortgage Companies Involved In Foreclosure Crisis

by:  Peter J. Gallagher and Steven P. Gouin

Our regular followers know that many of our pieces focus on the foreclosure industry, and with good reason, as over 2 million American homes are currently in foreclosure.  Add to this troubling statistic the recent allegations of shoddy paperwork at many of the nation's largest mortgage companies and the law firms representing them, and you have the makings of a compelling story of a giant foreclosure-induced catastrophe.  While homeowners have been feeling the pain from this crisis for years now, the catastrophe struck close to home recently for many of the banks and mortgage companies at the heart of the foreclosure crisis. 

In an article entitled “Confidential Federal Audits Accuse Five Biggest Mortgage Firms Of Defrauding Taxpayers,” the Huffington Post is reporting that a recent federal audit conducted by the Department of Housing and Urban Development (HUD) revealed that five of the nation's largest foreclosure firms, including industry giants like CitiBank and Bank of America, are guilty of fraud under the Federal False Claims Act.  Specifically, the audit concluded that the banks “filed for federal reimbursement on foreclosed homes that sold for less than the outstanding loan balance using defective and faulty documents.”  According to the article, federal prosecutors are debating whether to use the audits as the basis for criminal and civil sanctions against the mortgage companies. 

At the same time, the New York Times is reporting that New York Attorney General Eric Schneiderman has requested information and documents from three major banks – Goldman Sachs, Bank of America, and Morgan Stanley – about their mortgage-backed securities operations (“NY State Investigates Banks’ Role In Financial Crisis”).  This suggests that Mr. Schneiderman may be launching an investigation into the banks' practices, which many believe led to billions in mortgage losses.  One of the most interesting aspects of the article is the suggestion that, by requesting this information from the banks, Mr. Schneiderman is “operating independently of peers from other states who are negotiating a broad settlement with large banks over foreclosure practices.”  The article notes that Mr. Schneiderman has been unwilling to join this proposed settlement because the banks are demanding that it include a clause whereby regulators agree not to conduct additional investigations into the banks’ activities during the mortgage crisis.