Witness Preparedness

By: Danielle Spradley, Attorney

KK TAKEAWAY:

Individuals who serve as witnesses for mortgagors and servicers should spend a sufficient amount of time to prepare to testify in depositions, trials and other evidentiary hearings. A witness should know the case well and be prepared to answer the questions pertaining to the areas of inquiry as stated in the notice of taking deposition or know the case in general when testifying in a trial.

BACKGROUND:

If you operate in the world of litigation, the odds are great that you will be required to provide testimony at the request of opposing counsel or before a Judge as the main witness to prove the Plaintiff’s case in a foreclosure trial. While attorney such as myself, my ask you commit a few hours of your time to prepare you for your testimony, it will be time well spent.

A deposition is a formal statement that someone who has promised to tell the truth makes a statement that can be used in court. Pursuant to the Florida Rules of Civil Procedure 1.310, “[a] fter the commencement of the action any party may take the testimony of any person, including a party, by deposition upon oral examination.”

This may include the person who verified and executed the complaint, the person who executed the affidavit of indebtedness, or the person designated as the corporate representative, who may testify at trial.

While motions for protective order are tools to be used to limit who may be deposed, the scope of the deposition, how long a deposition can be conducted, or the location where the deposition may take place, the deposition will be permitted if the person’s testimony is deemed to be relevant to the case. This testimony is binding on the corporation, as that individual is speaking on behalf of the corporation, whether the deposition goes well, or not.

A notice of taking deposition or notice of taking deposition duces tecum must disclose the topics for inquiry at the deposition so that the deponent knows how to prepare. These topics will typically include the statements made in the complaint, the allegations stated in the defendant’s affirmative defenses and other statements made under oath. When a deposition includes a duces tecum, the documents to be produced are fair game for inquiry. Therefore, a witness should know the documents better than anyone else. Be sure to understand how to read the payment history. Some payment histories include all sorts of codes and internal lingo, which may require decoding. A witness must be able to explain in layman’s terms what those codes mean; when the payments were made and how much went to principal, interest, late fees, taxes, insurance, etc. A witness needs to know the authority by which the Plaintiff can collect attorney’s fees, or whether the Plaintiff was required to provide notice after the default before initiating the foreclosure action, or whether the subject loan requires approval by the Secretary of the U.S. Department of Housing and Urban Development to initiate an action; whether the servicer was required to attempt to have a face-to-face meeting with the borrower. In litigation, every factual detail is of great importance and these are all details that if stated incorrectly can damage Plaintiff’s case.

While, at the conclusion of the deposition, the witness has the right to read the deposition and confirm whether or not what was recorded was correct and may revise their answers with the explanation, it is a best practice to get it right the first time so that the veracity of your testimony is not under negative scrutiny by the finder of fact, in our cases.

Even though depositions and trials are currently being conducted via Zoom, your testimony should be based on your preparation before the deposition. Under no circumstance should you open/access your working portal to answer any questions.

So, take the time to prepare. Review the necessary documents to maximize preparedness and remember, it’s okay to say, “I don’t know.” Do not answer questions of which you do not know the answer. You are not required to guess the answer and it is better that you don’t. The answers provided are binding, so witness preparedness provides the best opportunity to answer the questions to the best of the witness’s ability with accuracy. This puts the Plaintiff in the best possible position for a successful prosecution.

When Mortgage Statements Become Mortgage Communications

Daniels v. Select Portfolio Servicing, Inc.

By: Jordan E. Shealy, Attorney

KK TAKEAWAY:

The mortgage statements required by the Truth in Lending Act (TILA) may constitute communications for the purpose of collecting a debt if: the letter states “this is an attempt to collect a debt,” if payment is requested by a certain date, if a late fee is identified, and the relationship of the parties would suggest that the statement is made for the purpose of debt collection.

BACKGROUND:

In 2009, Daniels modified her mortgage with her bank. This modification allowed her to make interest-only payments on her mortgage for a 10year period. For over a year, Daniels made these payments on time. Subsequently, the mortgage was assigned to Wells Fargo and the servicer on the loan became Select Portfolio Servicing. Wells Fargo refused to accept the interestonly payments from Daniels and brought a foreclosure action against her. The lawsuit lasted 5 years. The court held that Daniels was entitled to the terms of the modification and Wells Fargo was sanctioned for improperly foreclosing on the property.

In the 5-year period of the suit, there were interest and escrow payments that were unpaid or unaccepted. Select Portfolio Servicing sent Daniels letters alerting her to these interest and escrow payments. TILA requires mortgagees to send their mortgagors periodic letters with the status of the loan payments, while the FDCPA prohibits harassment or abuse, false or misleading representations, and unfair practices. The letters from Select Portfolio Servicing stated, “this is an attempt to collect a debt,” payment was requested by a certain date, and a late fee was identified. These letters incorrectly identified certain amounts on her debt. Daniels filed suit, alleging that Select Portfolio Services was harassing her and using unfair trade practices to collect a debt from her. The FDCPA and the FCCPA both define a “debt” as “any obligation or alleged obligation of a consumer to pay money arising out of a transaction in which the money, property, insurance, or services which are the subject of the transaction are primarily for personal, family, or household purposes, whether or not such obligation has been reduced to judgment.” Additionally, they both define “communication” as “the conveying of information regarding a debt directly or indirectly to any person through any medium.” The court recognized that Daniels’ mortgage was a debt.

The court then held that because the letters from the servicer to Daniels contained the requisite information for a communication of debt collection, and because the relationship between Daniels and Select Portfolio Services would suggest that the statement is made for the purpose of debt collection, the letters constituted communications for the purpose of collecting a debt. While the letters conformed to the requirements of TILA, the letters went beyond the requirements and crossed over into the realm of unfair debt collection practices.

Applicability of the Probate Act to Mortgage Foreclosures in Illinois

By: Travis P. Barry, Attorney

KK TAKEAWAY:

The requirement of the Probate Act whereby creditors must assert a claim against an estate within two years of the decedent’s death does not prevent a mortgagee from filing a complaint to foreclose on a mortgage where the default occurs more than two years after the borrower’s death.

BACKGROUND:

In a case of first impression, In Re: Estate of Thomas F. Topal, 2022 IL App (4th) 210613, the Illinois Appellate Court analyzed the applicability of a two-year limitations period set forth in section 18-12(b) of the Probate Act of 1975, 755 ILCS 5/18-12(b) (West 2016), to an action brought to foreclosure a mortgage given by the deceased borrower.

The scenario presented by Topal is common in cases with a sole remaining mortgagor who passed away – the family members continued making payments on the loan, owned by Associated Bank, and did not initially open a probate estate. As a result, the loan was not in default and the bank had no reason to pursue a foreclosure.

More than two years later, an estate was opened, and it moved to prohibit all of Associated Bank’s claims. In addition, the estate petitioned the court to require the bank to release its mortgage under the theory that the Probate Act prevented any action against it, as the two-year limitations period had lapsed. Under the Act, “all claims which could have been barred under this Section are, in any event, barred 2 years after decedent’s death, whether letters of office are issued upon the estate of the decedent.” 755 ILCS 5/18-12(b).

Ultimately, the trial court sided with the estate and found that Associated Bank did not file its claim against the decedent or estate within two years, and any claim that it had against the property was time-barred under section 18-12(b). The court ordered Associated Bank to execute a release of its lien and deliver it to the estate.

On appeal, however, the Fourth District noted a distinction between an action to pursue estate assets to satisfy the debt owed on a defaulted loan and the bank’s ability to bring a foreclosure action against the property covered by the mortgage. While a mortgagee may be prevented from seeking a judgment against the estate under the Probate Act, the law does not prevent a lender from foreclosing its mortgage. In the event a foreclosure sale does not produce sufficient funds to satisfy the outstanding balance, the bank will simply be unable to collect against the estate. The Court analogized the situation to one where a borrower has had their personal obligation discharged in a bankruptcy proceeding. “[T]he concept of personal liability diverges from the mortgagee’s right to enforce the lien securing its debt.” Topal at ¶ 29.

In summary, a mortgagee may pursue an action to foreclose a mortgage given by a deceased borrower, but it may not seek to collect from the assets of the borrower’s estate if more than two years have passed since the date of the decedent’s death.