In January 2006, 103,540 properties nationwide entered some stage of foreclosure. This was a 27% increase from the month prior and a 45% increase from January 2005. By end-year 2007, over 1% of all homes nationwide will be in foreclosure with 2.5% of foreclosures nationally involving properties valued in excess of $750,000.
In mid-2005, Philadelphia had the second highest foreclosure rates of any metropolis-more then two (2) times the national average and 2.8 times the average within the Commonwealth. In 2000, the Philadelphia Sheriff's Office auctioned approximately 300-400 properties monthly; now, that monthly count has increased to over 1,000.
To date, over 50 sub-prime lenders have folded, filed for bankruptcy, or "closed their doors" by liquidating their inventory (mortgages).
Debtors' counsel propound that despite the clear need for enabling debtors, at the very least, greater access to the courts, the opposite has been the case (thereby depriving those with the least abilities and greatest needs with effective means). Lenders' counsel similarly complain that while their volume has increased so have their profits inversely decreased with the introduction of "out-sourcers" (third-party administrators hired by lenders as foreclosure servicers-paid directly by lenders' counsel), class actions against law firms, uniform all-inclusive low flat foreclosure fees, required cost advances, competition for clients, and increasing disparity between federal and state and county to county Rules (precision requirements contrasting the paralegal driven nature that volume requires) mandating more overhead.
Debtors themselves complain about their inability via foreclosing lender's bureaucratic obstacles to, in fact, "workout" their delinquency, which their lender (as a false pretext) solicits. Lenders counter that foreclosure volume, great procedural disparities (inter and intra-state), and related reduced gross income mandates a monolithic approach overlooking already defaulting debtors' claims to mutual beneficial resolution via work-out as well a uniform litigation approach (to the detriment of jurisdictional specific debtors' legal rights).
In the meantime, parties' qualified counsels' legal abilities are restricted by volume's financial needs compounded by their clients' limited fee payment. Judicial abilities are likewise stretched in the age of mass torts, discovery disputes, and class actions to effective manage let alone adjudicate often emergency filings predicated on narrow, fact intensive, and case specific needs.
As real estate values fall below secured mortgage pay-offs, unemployment rises, and bankruptcy has become essentially non-viable given the new bankruptcy reform act, "something's got to give"-to everyone's detriment.
Other then much discussed but equally much delayed judicial and legislative overhauls during a time when war, white collar crime, and terrorism is at the forefront, the only conceivable solution is through greater collective post-default, foreclosure specific academic knowledge enabling greater efficiency and efficacy.
Herein provides no relief, merely analysis:
Initial Process: State
In a residential foreclosure where the principal balance is $50,000 or less, Notice of Intent to Foreclose (a/k/a "Act 6" notice) must be sent (evidence of receipt irrelevant) by certified mail to the mortgagor (debtor) thirty (30) days prior to initial process. If the delinquency is less the 24 months and $60,000, notice ("Act 91") of debtor's Homeowners Mortgage Assistance Program (HEMAP) rights to seek a hardship loan must likewise be sent. An application to HEMAP stalls the foreclosure for sixty (60) days while pending, after which the mortgagee (lender) may presume denial.
The failure of Act 6/91 strict statutorily complaint notice renders the foreclosure without jurisdiction. Sending of the notice(s) when otherwise not required estops the mortgagee from denying its necessity for strict compliance therewith.
Along with the itemized amount due, description of the land subject, averment of default, and names, address and interest of the defendants, a Foreclosure Complaint must contain: (1) the parties to and date of the mortgage, and assignments; and (2) statement of the place of record of the mortgage and assignments. As many mortgages are assigned multiple times at or before the commencement of the foreclosure or thereafter, there may exist want of record assignment, venue mandated attachments and required party Verification rendering the mortgagee without standing or complaint defective, respectively.
Contemporaneous with default (99% of foreclosures are uncontested) judgment, the Writ of Execution upon which the ultimate Sheriff's foreclosure (as opposed to tax or otherwise) Sale is predicated issues. The aforesaid failings (including proper Verification) should render the default stricken upon petition, as opposed to being opened which is granted upon: (1) promptly filing; (2) providing a meritorious defense; and (3) offering a legitimate excuse for the delay. Most local rules require a proposed Answer to be attached.
Upon filing a Petition to Strike/Open, the mortgagee's foreclosure will not stop until favorable adjudication, and Sale will be scheduled within ninety (90) days regardless. Local Rules' non-compliance risks the petition sitting until, for example, Argument Praecipe or being rejected outright by the Prothonotary (in Philadelphia County, for want of enough return envelopes).
With the parties' financial abilities and need for time consuming though emergent strict procedural compliance becoming inversely related, substantive pleading becomes even more grueling.
In all but unique circumstances, a Counterclaim is prohibited. Therefore, almost all origination, servicing, and fraud contests must, counter-intuitively, be raised in a separate action, especially if the proposed counterclaim seeks in personam relief within the in rem foreclosure (arguably barred even if raised as New Matter). For example, a claim under Truth-In-Lending may be entirely prohibited causing an otherwise rescindable and defective mortgage to transform into an ultimately proper judgment.
Offense: Federal Jurisdiction
Named for two (2) separate cases, the United States Supreme Court created the "Rooker-Feldman" doctrine rendering a federal court without jurisdiction to review an adjudicated state court matter. Superannuated claim/issue preclusion, essentially federal courts may not sit as an appellate body per resolved state court issues.
If counterclaims and affirmative defenses to mortgage foreclosures even on federal rescission grounds are Rule prohibited (and thus not a meritorious defense), federal like offensive actions are arguably jurisdictionally barred, and state offensive causes of action are res judicata or collaterally estopped, then it would appear the only safe haven would be to contemporaneously defend the state foreclosure and prosecute the federal affirmative action at both their inception (and hope the state action, argued by the foreclosing lender as requiring no discovery and on an expedited track, does not beat the complex and fact-intensive federal action to judgment, or the judge does not require Twombly-esque specificity). But see, above economic and (unique to foreclosure litigants) social realities.
Last (commonly, first) Chances: Sheriff's Sale & Ejectment
Similar to service of original process, due process requires mortgagee's service (recorded with Prothonotary, not Sheriff) of notice thirty (30) days prior to the first and every Sale relisting over 120 days thereafter. Prior to the Sheriff's Deed Poll being recorded, a Sale may be set aside for equitable reasons; thereafter, for "want of authority" or fraud. In most counties, the deed will be recorded 30-90 days subsequent to full tender of the Sale purchase price.
If the property is purchased by a third-party (non-mortgagee), that successful bidder may attempt jurisdictionally barred quick Eviction via landlord-tenant municipal court (or via self-help). Likewise, the mortgagee may similarly, impermissibly file for Ejectment prior to its recorded Deed. A procedurally proper uncontested Ejectment takes approximately five (5) months on average following the Sale (a foreclosure takes approximately eight (8) to twelve (12) months).
Wholly uncontested possession taking approximately 1.5 years subsequent to initial default, mortgagees understandably generally do not grant extensions and the filing of an affirmative claim both procedurally and practically will not stop the underlying foreclosure/ejectment. Like a Petition to Strike/Open having no effect on the listing, a Petition to Stay will not, prior to adjudication, effect the Sale date, nor will a Petition to Set Aside delay the ejectment (the Petition to Set Aside also bearing a different docket number then the ejectment, necessitating a separate though contemporaneous contest). In fact, an appeal may not stay either, nor will consolidation likely be granted.
Therefore, it is only proper that foreclosure parties contemporaneously litigate three (3) actions (state foreclosure vis-à-vis sheriff's sale, state ejectment and often federal affirmative action) at those parties' limited fees. Noting recent trial holdings of knowledge mooting jurisdictional failings (i.e., even if service of process has not been effectuated, debtor's constructive knowledge of the fact of process has been held as enough when circumstantially proven), filing early and often is procedurally required.
What to Do: At the Whim of Our Clients Before the Bar of the Court
Being sophisticated (despite the foreclosure, itself, evidencing the contrary), receipt of the statutorily compliant Act 6/91 Notice triggers defendant-mortgagor to pay in full before competent counsel's intervention, instead of seeking HEMAP assistance or lender's contemporaneously forwarded workout invitation (debtor intuitively knowing that neither relief is ever practically granted).
Realistically, defendant-mortgagor, not comprehending or otherwise, sits on pre-foreclosure notices until service of the complaint, at which point seeks family bail-out and then bankruptcy protection only to be told that both are impossible (not only owing to the reform act, but rather the requirement of ongoing separate pre and post-petition payments totaling well in excess of barely affordable ongoing monthly mortgage payments). Then, debtor contacts plaintiff-lender who is instead actually foreclosure servicer, and, after tremendous time and patience despite the panic re gravity of the situation, is forwarded an incomprehensible workout application (therein requesting non-existent documentation), which, even if completed and returned, is denied for no good reason (including the loan having since been sold). All the while, the foreclosure moves forward towards Sale.
Only after judgment is entered and Notice of Sale is received indicating Sale within thirty (30) days does debtor contact prior counsel, who first takes a shot at defense and then refers until competent counsel is found. Once appropriate counsel is contacted, fee payment issues arise. Thereafter, an emergency Petition to Stay is filed which, if successful, precedes a Petition to Open. Only then can debtor re-retain counsel to contemporaneously litigate the foreclosure and, separately, any affirmative causes of action, all for the purpose of entering-initially sought by both parties-workout now with payment of debtors' attorneys fees.
While the Court can, perhaps rightfully so (though practically unavoidable), complain about (both lenders' and debtors') counsels' last-minute and imperfect filings, and counsel, again correctly, can complain of their clients' underlying multiple deficiencies, this does not cure the foreclosure epidemic above discussed exploding to all parties' detriment (nor does this tremendous amount of required litigation do anything to alleviate court congestion). Simply, banks do not want to become homeowners via Sale; homeowners do not want to be in default; and counsel and courts do not want their economies (time and money) strained, but each are beyond each other's grasp.
In lieu of a much discussed judicial overhaul of our non-uniform rules, a Commonwealth-wide electronically accessible foreclosure division of our courts, and congressional intervention, the only clear solution is to in practice affirm all litigants' constitutionally guaranteed rights to adjudication on the merits without foreclosing lenders and homeowner-defendants becoming trapped in the self-defeating mire of forms over substance, procedures over due process.