The Law Offices of Schneider & Stone Reduces BOA Mortgage to Unsecured Claim in Chapter 13


The Law Offices of Schneider & Stone Reduces Mortgage to Unsecured Claim in Chapter 13

The Law Offices of Schneider & Stone, a bankruptcy and business law firm based in Skokie, has successfully removed a Bank of America mortgage from their clients’ home. In an incredible turn of events, the homeowners’ Chapter 13 plan will treat the entire mortgage as unsecured – no different than a common credit card – and the clients will own their home free and clear after successfully completing their case.

The firm’s clients refinanced their property with Bank of America several years ago. The clients signed a standard mortgage giving Bank of America a lien on their house. Bank of America failed to record the mortgage with the Recorder of Deeds. The homeowners fell behind on their mortgage payments and filed Chapter 13 bankruptcy to save their home. Chapter 13 does not discharge a mortgage from a debtor’s home; it rolls late payments into the bankruptcy plan and lets the client start making regular payments until the loan is paid off. In this case, Bank of America’s failure to record the mortgage negated their rights.

The bankruptcy filing caused the bank to review the account, at which point it determined that the mortgage had never been recorded. The bank filed a Motion for Relief from the Automatic Stay in an effort to record the mortgage. The Law Offices of Schneider & Stone objected to the Motion and the court denied relief. The court demanded briefs, and on November 28, 2012, after hearing both parties, the court entered an order deeming the bank’s claim as wholly unsecured.

“An unrecorded mortgage does not create a valid secured claim, period,” said bankruptcy attorney and firm partner Ben Schneider. “The fact that the bank tried to record its mortgage post-petition is incredible to me, and based on the facts of this case, the court absolutely made the right decision.”

Since this matter has been resolved, the homeowners’ Chapter 13 plan will now be able to move forward with confirmation. With the mortgage treated as an unsecured claim, successful completion of the plan will mean the homeowners will leave the bankruptcy with a mortgage-free home. The bankruptcy judge has set a status hearing on the matter, scheduled for January 18, 2013.

(Case Number: 12-11838)




8 Responses to “The Law Offices of Schneider & Stone Reduces BOA Mortgage to Unsecured Claim in Chapter 13”
  1. al says:

    I don’t disagree at all with your position vis a vis BOA’s commission of fraud upon it’s mortgage customers facing foreclosure.
    However, I would like to alert you and your readers to the OPPOSITE situation whereby they FAIL to protect the integrity of neighborhoods by REFUSING TO TAKE OTHERWISE LEGITIMATE FORECLOSURE ACTION THEREBY PROTECTING NEIGHBORING PROPERTY OWNERS AND THEIR OWN SHAREHOLDERS!
    The following is the essence of any email (names/locale removed) sent to BOA “customer relations” folks identified in this wiki post:
    “The reason for this email is to express the consummate frustration that we have been experiencing for one year now as a result of your bank’s consistent refusal to proceed with an entirely warranted and justified foreclosure of a home. We just completed a call to the law firm representing your bank after noticing that this property suddenly disappeared from their list of properties to be auctioned.

    Noticing that these debtors had returned to this property in July 2012, after leaving it a year earlier, we called both the local police, searched county records, and obtained whatever information available regarding this property’s status.

    It is clear that the buyers of this home fell delinquent in their mortgage payments sometime in 2010 and, in 2011, left the home completely. Having owned our home for 12 years as a part-time resident who visits often, we noted the increasingly poor condition of this home and its unkempt yard. Clearly, these are residents who cannot, or will not, respect either their legal/financial obligations or the integrity of the neighboring properties.

    These residents returned in the heat of the summer of 2012 without ensuring that the premises had running water or air conditioning. If not for our efforts with local and state officials where we advocated that they cite this home as uninhabitable, the returning residents would not have paid an outstanding water bill and provided running water to the home. They were using pool water, which had not been filtered/treated for at least a year, to flush their toilets. Because of a serious mosquito problem in the area, the Town had to treat the community with pesticides. We were concerned that the untreated pool was a potential health hazard for West Nile virus and alerted the county accordingly.

    We became aware that BOA secured the winterization of this home in 2011 after the default of these property owners on their mortgage. This action must have been taken to protect what the BOA viewed as their legal ownership of these premises. Why then, after the property was vacated by the property owners of record, does BOA continue to treat the occupants as the legal owners?
    We are also aware of BOA’s forgiveness of the second, or subordinate, loan that it made to this property owner in the amount of approximately $100,000. As the total amount loaned to these delinquent debtors totaled roughly the sales price, we estimate that at least $500,000.00 remains due BOA. Considering the interest that has accumulated in the ensuing three years, we imagine that a good deal more is left owing.

    Due to the significant fall in home values, and especially in light of the deplorable condition in which this home now finds itself, its market value would approximate one half of the outstanding loan amount.

    It is clear to us, now more familiar with the “main breadwinners” work record that he appears to have great difficulty finding work and lost his job with the BOA shortly after purchasing this home. His attempts to support a family of five on whatever limited employment is available to him in this remote, seasonal area seem inadequate.

    BOA’s hopes of ever securing any responsible payment of the amounts owed it are slim, if they exist at all; and this latest report we received of an attempt to “work out” the loan is ludicrous, if not exceptionally and personally damaging to us as neighbors in this unfortunate situation.

    Additionally, the eldest daughter in this family is in frequent trouble with local law enforcement and is, in fact, in court today answering two drug-related charges.

    It is clearly false economy for the BOA to believe that the correct remedy for this problem is to wait for an epiphany that will turn these debtors into responsible borrowers or good neighbors. A better approach would be to conduct the auction of this property as scheduled and allow a competent borrower to purchase and rehabilitate the same. We certainly feel that BOA stockholders would appreciate this latter approach as well.
    It is perplexing, too, why some hard-working individuals trying to care for and support their homes in this and other communities and who truly suffered hardships for which they were not responsible, were displaced from their homes by BOA in short periods of time and without the same opportunities granted these homeowners. We’re sure these BOA customers would appreciate an explanation for the disparate treatment evidenced here.”

  2. Kaye Wolf says:

    In my case, Judge Kwan ruled that Bank of America lacked standing right before leaving the bench and denied their motion. They quickly assigned the mortgage to U.S. Bank (a violation of the stay) and Judge Catherine Bauer — former Head of Bank of America Corporate Bankruptcy’s Department — ruled that U.S. Bank had standing to request relief. She stated on the record that she had not read my opposition and would not even consider my opposition! Appeal set in the 9th Ckt. Oral arguments soon.

  3. stripes says:

    Demand clear title, compensatory damages & other equitable for INTENT TO DO PERMANENT HARM by these imposters for even bringing their fraudulent fc complaint. INTENT TO DECEIVE IS CRIMINAL…THESE FRAUDULENT COMPLAINTS ARE LOADED WITH FELONIES….

  4. Sue Em says:

    Exact same happened to us….Refinanced with BoA, it never got filed. Now they denying having our loan. Mers doesn’t track our loan anymore, BoA had the assignment but they don’t have it. Nobody has it. Nobody has the mortgage or note. No-one has filed a lost note affidavit. It is unbelievable. Think we are lucky? Think twice – we still make our payments but how can we ever sell this house with a clouded title?

    • DanJS says:

      After 3 years of “negotiations” with two mortgage servicers, Saxon and Ocwen, and 6 “standowns” at the courthouse steps, I finally acknowledged the need to file for Chapter 7 bankruptcy and did so as a Pro Se. Later I employed a very astute para-legal professional to assist me.

      When the foreclosing attorney “automatically” filed for a lift of the stay, he discovered he should have attended the creditors meeting. At that meeting, I presented the Trustee with a well prepared objection to any request for an “lift of the stay.” The “document” was filed before the hearing with the court and a courtesy copy was hand-delivered to the judge’s secretary.

      When I was called to “the table” by the Trustee, it was immediately noted by her that my “response to the creditors named” included documents alleging fraudulent filings signed by both “Robo-signers” and notaries within the confines of no less than 4 recorded assignments. We also presented the court with a copy of a deposition by one of my “robo-signers” who testified that she had never worked as a “vice president” for the company for which she had signed legal documents attesting “personal knowledge” of the financial documents pertaining to the “Deed to Secure Debt” that was being foreclosed on in a “non-judicial state.”

      The Trustee requested I meet her at her office to review the file rather than to have the other “borrowers” in the room wait. At that later meeting, after reviewing the “courtesy copy” I gave her at the “creditors meeting,” she asked me a few related questions about the events surrounding the initial closing of my re-financing. Thereafter, she pushed her chair back from her desk and said “the judge doesn’t like this kind of stuff.” “I know the foreclosing attorney” she continued, ” I will contact him about this and get back in touch with you.”

      Knowing when to keep my mouth firmly shut, I thanked her for her time and left her office. Within 24 hours, I received an e-mail from the Trustee telling me that the “hearing for the lift of stay” was “indefinitely postponed.” That email was followed by another from the foreclosing attorney (to whom I had mailed a courtesy copy of my “document” contesting the stay. His email was almost identical to the Trustee’s.

      [ It might be noted here that when I filed the Chapter 7 BK, I did three things I consider important:

      1. I listed the Deed to Secure Debt as an “unsecured debt” along with less than $3,000 of other personal loans, and

      2. I named everyone who had ever been associated with my property in any way other than myself, my insurance company, and my county tax commissioner, as “unsecured creditors” on the “creditors matrix.” That legal list of “creditors” included every attorney who had ever written a letter to me as well as the “closing attorney;” the mortgage broker (who bankrupted 6 years ago; the “pretender lender, Fremont Investment,” (who had also bankrupted;) every party named on every recorded legal document including the “Trustees” and the TBTF banks who employed them; the two “mortgage servicers” who had over 10 separate addresses the court would later serve notice of the BK to; the appraiser; and every “foreclosing attorney and office” I had ever received a foreclosure document from.

      3. I discovered that one of the “mortgage servicers” had notified that both my taxes and insurance were “escrowed” and that they would be responsible for paying these “loan associated expenses.”

      I immediately contacted my insurance agent and made a written instruction to name me as Payee to my homeowner’s insurance policy, with instructions to never again “accept a letter of instruction” from any other party other than myself relative to the policy which I pay for personally

      I found out that the “servicer” sends annually a “letter of instruction” to the county tax collection office indicating that .they are to be the “payor” of “escrowed taxes” for thousands of my fellow citizens. I immediately instructed them to make a notation in their “taxpayer database” that any instructions from any party (other than a court) to pay my own taxes (not written and certified that it was sent by me personally) were to be ignored. Only me (the taxpayer) would be entitled to pay my taxes.

      I made sure there would never be a lapse in proof of my possession of my property would be used to “justify” a claim on my property by an attestation of “adverse possession.”

      (This was a result of my discovering that a “mortgage servicer” acting under the “color of authority” of their “letter of instruction to the county” had actually paid a portion of my taxes the year previously as I was fighting/:negotiating” with them about their attempts to foreclose. A “non-payment” or “partial payment” of escrowed taxes or insurance can “trigger” foreclosure in a “non-judicial state.”)

      Back to the Chapter 7…. I asked my para-legal “What does it mean that the ‘hearing requesting a lift of stay’ is now ‘indefinitely postponed?” He told me that the “BK clock was running” and that eventually, unless the foreclosing attorney filed some kind of response, the judge would eventually decide to dismiss my request for C7 BK or the “non-secured liens” of my BK estate would be discharged.

      After several months of waiting for “something to happen,” the BK judge discharged all of those “unsecured debts” I had listed in the “Creditors Matrix,” and sent me a letter that informed me and the “creditors” (by name… all of them!) of the BK discharge.

      Next step… I secured a certified copy of the discharge letter from the BK clerk and took it directly to the Clerk of Superior Court in my county and recorded it (directly behind all of the “robo-signed” assignments.) Hopefully any future party hoping to foreclose on my home will view the county records and “think better” of “re-opening” what they could be considered a “can of snakes.” (I’m considering incurring the cost of securing a certified copy of my “BK document,” complete with the certified affidavit of “my robo-signer” and recording that at the county….. I better not — that may be “overkill” — might be better to just wait to see if it’s needed later… meanwhile the BK court will keep “my document” safe and secure.

      The “upshot of all this”? I’m paying my taxes and insurance faithfully, living in and maintaining my property, and waiting for an “ugly head” to arise before calling my para-legal again, His advice is to wait for 5 years and a day from when I last paid any money to my last “servicer,” then we will file to “Quiet Title” my property and request that a judge expunge all of the assignments containing signatures of the robo-signers and “questionable notaries” who signed documents attesting to their presence during the signing of legal documents concerning my property.

      • Sue Em says:

        Good luck to you – that sounds rather clever. When I read this the first thought was bankruptcy. Quiet title is just too costly. Thank you for sharing this!!!

  5. Caren says:

    I am in the process of almost the same strategy and yert the Trustee will not let me do this Pro se – its a fixed game they play /

  6. Sarah says:

    That’s the way to do it. By the way, all debt should be treated the same, but Wall Street/DC won’t allow it, especially for people’s biggest and frequently most important investment of their lives. Don’t call that capitalism, call it tyranny.

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