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Foreclosure Actions

Foreclosure Actions

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Published by: Foreclosure Fraud on Nov 28, 2012
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Electronic copy available at: http://ssrn.com/abstract=2163127
Defending Foreclosure Actions
 Marcia Johnson and Luckett Anthony Johnson
*
Introduction
Markets are cyclical. Since the economic panic of 1797,which was instigated by a burst of the land speculationbubble, there have been more than 20 recessions of varying severity in the United States.
1
These recessions were drivenby a number of things including government policies andcyclical changes in consumption, business, health, real estateand banking.
2
The economic collapse of 2007 was driven by anumber of factors led by the downturn in real estate, basedin part on the sub-prime market.
3
Earlier downturns thatsuered real estate crashes saw increased foreclosures, butnot so great as resulting from the crash of 2007. Between2002 and 2006, annual foreclosures averaged 455,000,representing less than 1% of all loans.
4
However, between2004 and 2006 the average number of all foreclosure starts
*
Marcia Johnson is a professor of law at Thurgood Marshall Schoolof Law, Texas Southern University. Luckett Anthony Johnson is a 2010graduate of the University of Texas School of Law. The authors acknowl-edge our, research assistant, Matthew Cherry, 2L, Thurgood MarshallSchool of Law for his valuable comments, reviews and edits.
1
Davis, Joseph H., An Improved Annual Chronology of U.S. BusinessCycles Since the 1790's (February 2005). NBER Working Paper Series, Vol. w11157, pp. 2005. Available at SSRN: http://ssrn.com/abstract=673244.
2
See generally Nikola Spatafora, International Monetary Fund, TheGlobal Financial Crisis 2009: Preparing for the Future; World EconomicOutlook: Crisis and Recovery, Practising Law Institute, 1753 PLI/Corp 65,PLI Order No. 20457, August 5, 2009, and see Investment Strategy Groupof Sandler O'Neill + Partners, L.P., Dangerous Denials for 2010, Practis-ing Law Institute, 1800 PLI/Corp 55, March 9, 2010, addressing consumerspending and consumption and government, and the nancial system.
3
Todd A. Knoop, Recessions and Depressions: Understanding Business Cycles, ABC CLIO, 2nd ed. 2010, ISBN 978-0-313-38164-5.
4
Lorenzo, Unsafe Loans in a Deregulated U.S. Mortgage Market, 30Pace L. Rev. 154 (2009).
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Electronic copy available at: http://ssrn.com/abstract=2163127
was 950,000.
5
Since the economic housing crash of 2007 upto the second quarter of 2009, foreclosures escalated to morethan 2,152,000 annually,
6
with the largest occurrences being in the states of California, Florida, Nevada, Utah, Arizona,Colorado, Ohio, Georgia, Michigan, Idaho and Pennsylvania.
7
By the fourth quarter 2010, the number of mortgagedelinquencies fell to the lowest level in two years.
8
However,the number of loans in foreclosure remained at its highestlevel since the start of the mortgage crisis.
9
Today, 9,000 Americans are losing their homes to foreclosure daily.
10
With the rising incidences of residential foreclosures, manyhomeowners are overwhelmed by the foreclosure process andanticipated costs and often opt to vacate the premiseswithout oering any defense.
11
The American justice systemrests on the premise that no person will be deprived of theirliberty or property without due process.
12
Procedural dueprocess requires that a person have notice of the chargesagainst them as well as a reasonable opportunity to defend
5
Larry Cordell, Karen Dynan, Andreas Lehnert, Nellie Liang andEileen Mauskopf, Designing Loan Modications to Address the MortgageCrisis and the Making Home Aordable Program, 42 UCC L.J. 1 (2009).
6
Id.
7
See Realty Trac (Anthony's cite).
8
Nick Timiraos, The Wall Street Journal, February 18, 2011, A2.
9
Id.
10
See Olefson and Kaniuk, Florida Foreclosure Defense Strategies: An Immediate Look at the Best Practices for Assisting DistressedHomeowners in Florida, 2009 Aspatpre Special Report 11 (2009) and stat-ing that a total number of homes lost is anticipated to reach as many assix million with another two million Americans ending up underwater andan aggregate $4 million in home equity lost forever.
11
Cox, Foreclosure Reform Amid Mortgage Lending Turmoil: A PublicPurpose Approach, 45 Hous. L. Rev. 683, 709 (2008) and see John Leland,Facing Default, Some Abandon Homes to Banks, N.Y. Times, Feb. 29,2008, at A1 and see Pinkston, In The Weeds: Homeowners Falling Behindon their Mortgages, Lenders Playing the Foreclosure Game, and CitiesLeft Paying the Price, 34 S. Ill. U. L.J. 621 (2010) stating that in certaincircumstances homeowners lack the wherewithal, the nances, the incen-tive, or maybe all three, to ght foreclosure proceedings, and so the“choose” to abandon their property.
12
5th Amendment, United States Constitution, stating in pertinentpart, “No person shall be . . . deprived of life, liberty, or property, withoutdue process of law . . ..”
Defending Foreclosure Actions
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against them.
13
Reasonable opportunity is circumventedwhen the defendant is eectively without the means todefend.
14
This is especially oensive to our notions of justicewhen the defendant has legitimate bases for defense but iseectively denied the opportunity to urge such defensesbecause of nances.
15
This article is written to examine thedefenses available to homeowners facing foreclosure and toprovide a practical approach to defending againstforeclosure.
1613
Id. and Mullane v. Central Hanover Bank & Trust Co., 339 U.S.306, 70 S. Ct. 652, 94 L. Ed. 865 (1950) nding that there can be no doubtthat the due process clause requires that deprivation of life, liberty orproperty by adjudication be preceded by notice and an opportunity forhearing appropriate to the nature of the case and citing their opinion inGrannis v. Ordean, 234 U.S. 385, 394, 34 S. Ct. 779, 783, 58 L. Ed. 1363(1914) stating that the fundamental requisite of due process of law is theopportunity to be heard.
14
See Kerrin Maureen McCormick, The Constitutional Right toPsychiatric Assistance: Cause for Reexamination of AKE, 30 Am. Crim. L.Rev. 1329 (1993) stating that “a state may not adopt procedures that re-strict an indigent defendant's ability to defend himself so that only thosedefendants with greater nancial resources are aorded a ‘meaningful op-portunity’ to defend themselves.” But see Freyermuth, Foreclosure By Arbitration?, 37 Pepp. L. Rev. 459, 465 (2010) stating that the constitu-tional challenge to non-judicial foreclosures on due process grounds asrejected by most courts primarily because it does not involve state actionsubject to due process requirements and see Kenneth Krock, TheConstitutionality of Texas non-Judicial Foreclosure: stating that“traditionally, non judicial foreclosure sale notice procedures avoidedconstitutional scrutiny because they were not considered state action.” And nding that the supreme court has never been faced with a direct dueprocess challenge to a power of sale.
15
See Klevens, Poverty and Equal Access to the Courts: TheConstitutionality of Summary Dispossess in Georgia, 20 Stan. L. Rev. 766,773 (1968) distinguishing the eect of due process in the case where thedefendant fails to defend his case at all from the eect on the litigant who,due to nancial constraints are eectively denied a defense. The essenceof dueprocess is basic fairness in procedure. Jafay v. Board of CountyCom'rs of Boulder County, 848 P.2d 892 (Colo. 1993).Dueprocess is not atechnical concept with xed content unrelated to time, place, andcircumstance; rather it is exible and calls for such procedural protectionsas the particular situation demands. Mathews v. Eldridge, 424 U.S. 319,96 S. Ct. 893, 47 L. Ed. 2d 18 (1976). Whether particular proceduresadopted to review determinations aecting property interests satisfy dueprocess depends on the circumstance of the particular case. Morrissey v.Brewer, 408 U.S. 471, 92 S. Ct. 2593, 33 L. Ed. 2d 484 (1972).
16
The Homeowner should assess the prudence of ghting to keep ahome in certain circumstances, e.g. when they are substantially underwa-ter. For an examination of the value of such assessment, see generally,
Real Estate Law Journal [Vol. 40:4 2012]
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