M.A.S.H. –Maine’s Foreclosure Defense Force: Part 3
[Author’s Note: This is the last of an interminable series on foreclosure defense law. As we observed last time, the world, she’s a turnin’ quick, but the real estate market is still stuck in the muck.]
Before we start on Part 3 of this series, let’s once again get spiritually renewed. Let’s look at more wisdom from the ancient sages:
“Experience is what you get when you do not get what you want.” Anonymous
“Home run hitters strike out a lot” –Jackson, Reggie
“The significant problems we face cannot be solved at the same level of thinking we were at when we created them.” – Albert Einstein
Attorney Andrea Stark of Biddeford spoke about unfair trade practices in foreclosure defense. Here’s a beautiful thought: Predatory lending behavior will likely result in a state UTPA violation.
Examples include inflated appraisals, and the submission and use of inflated income of the borrower (made without their knowledge). Also, look for bait and switch terms different than those disclosed, such as an off the record “promise” to re-finance six months later.
A big advantage of the UTPA is that it has a six-year statute of limitations. One of the governing cases is State v. Weinschenck, 868 A.2d 200, a 2005 case. Another helpful Massachusetts case is Commonwealth v. Freemont Investments, 897 NE.2d 548.
Some loans are presumptively unfair. Examples include loans that mature in less than three years or less; loans where the difference between the intro rate and the actual rate is more than 3%; loans where the loan debt to income ratio exceeds 50%; loans where the loan to value is 100%; loans where there is a prepayment penalty. Sometimes in order to prove damages in these cases, retro appraisals are needed.
There is some debate about whether there is a UTPA exemption for financial institutions.
In Provencher v. T & M Mortgage Solutions, 502 F.3d 29, (1st Cir 2007) the First Circuit held that the financial provider exemption to the UTPA only applies if the lender is “in compliance with federal or state laws.” This exception swallows the rule. The UTPA allows you to bring mortgage lender cases into the newly established State Business Court.
Remember to investigate whether there are RESPA Violations, especially after the consumer laws were amended this year and last. In sum, the UTPA protects homeowners from predatory lending.
2. Other Law.
A. Common law. The doctrine of unconscionability allows the Court to void the underlying contract when there has been fraud or other misconduct. Another theory is fraud in the inducement. See 9-A M.R.S.A. § 9-401 for a statutory definition of misrepresentation in the Uniform Commercial Credit Code. Another theory is negligence. A fourth is negligent misrepresentation. See Binette v. Dyer. A fifth is intentional interference with contract. A Sixth is conspiracy between the real estate agent/broker/lender.
B. Truth in Lending. Truth in lending in Maine is a state remedy, even though there is also a federal statute on point. Earlier courts have held that Maine’s statutory scheme 9-A MRSA-1-102, is as good as, or better than federal law. However, there are sharply limited statutes of limitations for truth in lending violations. Also, rescission, the primary remedy under Truth in Lending, used to be a great option. Now there is a requirement imposed by federal courts to pony up the down payment before requesting rescission.
C. Under RESPA, addressing settlement procedures, there is a one-year statute of limitations. However, under federal law, there is a three year SOL for servicers of loans.
D. Maine Consumer Credit Code. Don’t forget the Consumer Credit Code, 9 MRSA 401 et seq, relating to misrepresentations. Fraudulent inducement is found in 9-402. Attorney’s fees can be awarded if you can prove these violations. Also, the load star multiple will apply for attorney’s fees. Even contingency fees are permitted.
E. Mortgage Broker Regs. Don’t overlook Article 10 relating to mortgage brokers. There are a host of regulations, including the need for written disclosure of services and fees. Brokers seldom do it. They sometimes fail provide what they should under the law.
3. Legislative Update
There are several very important bills that recently passed, which you should download and print: LD1439 and LD1418. The first of the bills requires mandatory mediation and a 35-day notice to cure, from 30. It removes the no harm no foul provision on verifying lender income. If a lender didn’t verify income, the violation is still actionable even if the borrower had the resources to get the loan. The second, LD1418 requires a heightened standard of pleading and other consumer protections.
That was easy, wasn’t it? Now lets go SAVE HOMES!!