Foreclosure. The bank alleges a default on a mortgage. A lawsuit is begun, but due process is not followed. All assumptions are in favor of the bank.
Many years of legal theory are destroyed with each foreclosure judgment. Burden of proof--gone. Due process--gone. Equity--gone.
Where the legal system once recognized allegations in a lawsuit as allegations--matters subject to proof, allegations of default in foreclosure actions are taken as immutable truths. Where service of process--the right to notice of a lawsuit and the right to be heard--once was considered sacrosanct, judgments are entered where "special process servers" lie to rush lawsuits through the system. Where equity once abhorred a forfeiture and rewrote contracts to honor the intentions of the parties rather than punish an allegedly-defaulting party, homeowners accused of mortgage default are stripped of all the equity in their home even though they are no more at fault for the downturn in the housing market than the lender.
Macchiavelli pointed out that taking the offensive is a way to keep ahead of the enemy, to control the course of history. Homeowners have, on the average, not read enough Machiavelli. We have let the foreclosure crisis come to us.
Now it is time to take the crisis to those who would foreclose.
Homeowners have two powerful weapons: the Fair Housing Act and the Equal Credit Opportunity Act.
The Fair Housing Act applies to almost any transaction related to housing. Many may believe this has to do with refusing to sell or rent a home, but courts have allowed suits based on the Fair Housing Act to proceed where the alleged wrong was refusing to sell insurance or other services needed to obtain housing. Standing under the Fair Housing Act is broad. Communities and housing organizations can, in some cases, have standing.
The Equal Credit Opportunity Act applies to lending transactions. The Seventh Circuit Court of Appeals has specifically held it applies to loan modification applications.
Both laws prohibit discrimination based on "protected class." Though there is a slight variation in the classes protected--and state and local law may add classes--the classes include race, national origin, disability, religion, gender, and familial status.
The use of the Fair Housing Act--a broadly-construed civil rights statute that has withstood attempts to weaken its reach--is homeowners' best hope for turning the tide of the foreclosure crisis.
Modification decisions can be attacked under the Fair Housing Act and Equal Credit Opportunity Act. Was a denial based on race? Did the lender refuse to consider income because someone had been on maternity leave? Did the lender ask a woman what she was doing about birth control? Did the lender refuse to alter its modification procedures so they could be accessed by a person with a disability? Is the lender assuming homes in majority-minority communities are worth less than those in other neighborhood and denying modifications accordingly?
Foreclosures can be attacked under the Fair Housing Act. Is the lender foreclosing more rapidly on homes in a minority-majority neighborhood? Is the lender taking more shortcuts, such as filing false affidavits, if the homeowner has a "foreign sounding" name (under the assumption the person does not speak English and will not appear in Court to clarify misrepresentations)?
Post-foreclosure servicing may also provide room for litigation under the Fair Housing Act. Is the lender maintaining homes in white neighborhoods and letting those in majority-minority neighborhoods crumble to the ground? Are people from one racial group offered the chance to rent the home back while others are hustled out on a speedy eviction?
Many of the practices above could also give rise to claims under the Fair Debt Collection Practices Act.
By evaluating foreclosure files to see if claims like the ones above are viable, attorneys and homeowners can turn the tables on lenders. We can serve the summons. We can set the court dates. We can rule the negotiating table.
Oh, yes, we will stay in our homes.
The Romans never allowed a trouble spot to remain simply to avoid going to war over it, because they knew that wars don't just go away, they are only postponed to someone else's advantage. Therefore, they made war with Philip and Antiochus in Greece, in order not to have to fight them in Italy... They never went by that saying which you constantly hear from the wiseacres of our day, that time heals all things. They trusted rather their own character and prudence— knowing perfectly well that time contains the seeds of all things, good as well as bad. -- Machiavelli, The Prince, Ch.3
