Judge Dismissed $292,500 in Debt Due to Shady Lender Practices -- Wall St. Freaks Out

As if the foreclosure crisis wasn't distressing enough, it's come to light that some homeowners have been victim to sloppy and even fraudulent paperwork filed by mortgage companies. Luckily, judges are starting to recognize these instances and rule in favor of the homeowners––a move that has big banks shaking.

Last year, Long Island judge Jeffrey Spinner dismissed a foreclosure case––and $292,500 in debt––because the paperwork was so haphazard, reports the Washington Post. He called the lender's behavior "repugnant" and gave homeowner Diane Yano-Horoski's her house back. The ruling is being appealed by lender OneWest Bank, but if it sets a legal precedent it could have strong implications on the future of foreclosure cases. According to OneWest Bank, "We believe the Yano-Horoski ruling, if allowed to stand, has sweeping and dangerous implications for the entire mortgage lending industry."

The judge and his colleagues estimate they've thrown out as many as half of foreclosure cases in New York based on similar bad paperwork. Brooklyn and Long Island account for some of the state's highest rates of foreclosure, but the rulings could influence lower court judges across the country, as similar cases are dismissed and big bank appeals pile up.  "I think we're going to see more decisions like this,” according to foreclosure defense attorney Craig D. Robins. "Many judges are finding their court calendars clogged with cases that have all these flaws in them that never should have been brought in the first place or should never have been brought without more due diligence."

In the Yano-Horoski ruling, Judge Spinner wrote that OneWest operated with an "opprobrious demeanor and condescending attitude," in addition to acting with "duplicity" in contradictory paperwork, presented past  deadline, that said the Yano-Horoskis owed different amounts. In 2005, the family attempted to modify their loan after Greg Horoski became sick and their income suffered. According to Horoski, "People thought people who didn't pay their mortgages were automatically deadbeats. People are educated now. They are realizing all of a sudden how many hundreds of thousands of these homes that were foreclosed may have been done so with fraudulent documents."

Read more at the Washington Post.

AlterNet / By Julianne Escobedo Shepherd

Posted at November 9, 2010, 6:29am

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