Can a Bank Steal Your House Even If You Paid Cash?

Picture this… you buy a house in cash that you plan to renovate and sell. Two years later you have renovated the house and you try to take out a line of credit to purchase another property to renovate and sell. You’re excited to move forward until the bank tells you that you don’t own your house anymore because it has been foreclosed and sold to someone else. This is exactly what happened to a Montana couple. The family sued, and during the trial the bank did everything they could to get out of their responsibility for the error. Fortunately the court and the jury saw through the bank’s lies and ordered them to pay $350,000 in lost profitability, $100,000 for emotional distress and $1.6 million in punitive damages. This is part of a larger national trend that shows courts coming down hard on the side of wronged homeowners, creating opportunities for investors across the country.

Florida’s 4^th District Court of Appeals recently made a very subtle change that changes what the banks are allowed to submit as business records to prove a loan was made. The banks have been utilizing the tactic of sending employees with no knowledge of the loan in question to court in order to testify about the general practices of the bank instead of actually addressing the specific loan. The witness uses all the right buzzwords, stating that they are familiar with the books and records used by the bank and that entries were made near the time of the transaction. However, they have no direct knowledge which transactions were done by their employer. Before this ruling, the courts were acting under the presumption that the homeowner did indeed receive a valid loan from someone in the chain that leads to the foreclosing party. Now the presumption is that, though documents might have been executed, a loan was not necessarily made. This now puts a burden on the foreclosing party to prove with actual, valid documentation that a loan was made and that they have the right to enforce the loan. 

In addition to the Florida DCA ruling, the Ohio Court of Appeals recently ruled that homeowners can challenge the transfer of loans and the loan documents used. In the specific case, US Bank used different copies of the note in their complaint and the motion for summary judgment. The Court ruled that ignoring the difference would be “unjust.” The court expanded on this to clarify that “standing broadly exists for persons to challenge the validity of the transfer of a note or assignment of the mortgage.” This is huge. The banks will now have to prove the validity of their transfers and assignments instead of the courts letting them submit whatever they want.

What these decisions show us is that the law is finally catching up to the banks.  Along with District Courts all over the country, the Supreme Court has ruled as clearly as possible in the homeowners’ favor. With their ruling in the Jesinoski case, the Supreme Court has clarified that TILA rescission is a powerful tool to stop foreclosure and help homeowners stay in their houses longer. It also creates an opportunity for investors to do some pretty amazing deals. The tides have turned and the banks are being forced to negotiate on our terms. No more begging the banks to accept our short sale and REO offers only to have them demand ridiculously high prices. We can now get the banks to the table and demand that they prove they have the right to enforce a loan.

This makes it more important than ever that homeowners and real estate investors act NOW. This is a massive opportunity for real estate investors. If you know of anyone with a defaulted or underwater note, you need to get in contact with my office immediately at (706)-485-0162. I have spent the last two years building up a team of experienced attorneys and fraud examiners/forensic auditors who specialize in exposing fraud committed in the mortgage process and using that fraud as leverage to negotiate the sale of notes. This opportunity is not going to be available forever; we need to strike while the iron is hot!

We have a huge opportunity to help homeowners and do some great deals with multiple exit strategies. For more information, call me at 706-485-0162.