I recently read a post regarding the California Act that will prohibit Banks from "dual tracking" foreclosure cases. This term of art that is developing describes the situation in which the Bank continues to work with the Homeowner to modify the mortgage while also proceeding with the foreclosure action. In Ohio, or at least in the cases I have seen, the Courts expect the Banks to continue to contact the Homeowners. The Courts will actually inform the Homeowners to keep in constant contact with the Bank and the law firm representing the Plaintiff in the foreclosure, because the Banks never tell the attorneys anything. Motions for default are denied or at least continued when a homeowner comes to Court the day of the hearing and says (1) I am working with the Bank and have made the final trial payment on my modification, (2) the Bank told me I did not need to appear, but I thought I should. If the Homeowner did not appear default judgment would have probably issued.
Several of my more recent clients have stated that (1) they were told that a modification would resolve the foreclosure, (2) they did not need to appear at Court, (3) they were eventually denied the loan modification only to find out that the Court granted judgment in favor of the Bank. In addition, those clients who have contacted my office as soon as they are served with the complaint, state that they are contacted by the Bank repeatedly until the answer is filed. This could be the Bank ethically deciding not to contact a party who is represented by counsel, but it is starting to feel more like the Bank contacts homeowners trying to lull them to sleep until a default judgment is rendered against the Homeowner.
It would appear that this is simply another step in the well conceived foreclosure process by the banks. Convince the Homeowners and the Public in general that everything is the fault of "irresponsible homeowners". Dual track the process so the embarrassed Homeowner is lead to believe that he/she can quietly fix the problem through a loan modification without going to Court. Obtain default judgment and deny the loan modification. I reecntly suggested on a Mandelman Matters comment that an effort should be made to quantify the number of Homeowners who were convinced that they did not have to file a responsive pleading in the Court based upon their communications with the Bank.
In a number of motions for relief from judgment I have been developing the idea that Ohio Courts already use a balancing test when determining excusable neglect under 60(B)(1), by finding the neglect more excusable based upon the strength of the defense. The standard for relief from judgment should also be lessened when there is eviednce presented that the Homeowner was contacted by the Bank and encouraged to participate in a loan modification instead of defending the foreclosure action.
An additional concern is that Banks are using the delay in bringing a property to Sheriff's Sale to their advantage. Homeowners seem to be given a false sense of security with the knowledge that the Sheriff's Sale may not occur for some time. The Homeowner believes that they have time to modify the loan. However, as the time from the decree of foreclosure goes beyond one year, the Homeowner faces a much more difficult task in obtaining relief from judgment. Several grounds for relief under Civil Rule 60(B) must be raised within one year. Homeowners repeatedly send in their financial papers, wait 6 weeks for a response, and repeat. A year goes by pretty quickly waiting for repeated responses. The loan modification is denied; Sheriff's Sale is approaching rapidly, and the Homeowner has lost several grounds for relief as a result of more than a year passing.
Homeowners need to aggressively defend the Foreclosure Complaint from the beginning. A concentrated effort needs to be made to advise these Homeowners.
The complaint and summons in Ohio now advise Homeowners of resources available from the Ohio Attorney General's Office. However, the Homeowner is not cautioned that these groups are not attorneys, cannot represent the Homeowner in Court, and can only assist with the loan modification process. Dual tracking and the Banks' overall strategy seem to be inadvertently assisted by referring Homeowners to these resources.
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