Triad Law Group takes on case of inappropriate bank accounting; gets client settlement

Triad Law Group takes on case of inappropriate bank accounting, getting client settlement

The lead:

  • Banks are notoriously poor communicators – some would contend Banks do this purposefully;

  • During the course of the loan period, it is critical that Bank and borrower are on the same page at all times and that loan statements and other documents are verified for accuracy;

  • These principals are particularly true when there are special proceedings e.g. Bankruptcy;

  • Borrowers should develop an awareness of loan accountings/communications, otherwise if disparities exist, they will grow each month making resolution less likely as time marches on.

In the lawsuit between Client T[1] and First Horizon Bank (“Bank,”) one of the primary issues was the adequacy of communications occurring between Client T and the lender Bank. After suit was filed, this case was ultimately removed by the Bank to Federal Court – Eastern District of Washington. The case was resolved in mediation before that court.

 The borrower – “Client T”– experienced financial issues and fell behind on his mortgage payments. The bank initiated the foreclosure process which forced Client T to enter into Chapter 13 Bankruptcy proceedings (this allowed him to retain his home.)

 Later, during the actual bankruptcy process, a number of issues were caused by Client T’s having made late payments; however, by the time of the closeout of his bankruptcy Client T had paid all amounts that were owed – such that when the bankruptcy was completed, both Client T and the Bankruptcy Trustee believed that he was “up to snuff” regarding his payments to the Bank.

 At the conclusion of the Bankruptcy, the Bank failed to disclose to Client T and the Bankruptcy Trustee that it considered the borrower to be behind. (The Trustee stated that the borrower – upon his making one last payment – would be completely current.) Even more amazingly, for a time, the Bank was unwilling to accept the borrower’s payments.[2]

 Immediately (and ridiculously) the Bank – because it believed from that Client T was behind – started the default/Trustee’s Sale process.

 Notices of default, letters issued to Client T telling him that he was behind and that payments were overdue – all happening even while Client T was faithfully sending his payments in.

 Subsequent to his bankruptcy discharge, Client T was continuing to consistently make his payments and he was pointedly inquiring with the bank as far as getting an accounting of his loan from the bank (because he wasn’t getting an accounting – he was afraid that he wasn’t getting appropriate credit.)

 This process continued for more than a year.

 Having become exasperated and getting no relief from the bank after this lengthy period, Client T finally filed a lawsuit.

 Before trial, a Summary Judgment was noted by the Bank (it is very difficult why the Bank would believe that it was entitled to Summary Judgment) and was heard by the Court. Here is what the court found:

 In its briefing, Defendant (“Bank”) maintains that (Client T) was in default by May, 2009. A reasonable jury could conclude, however, that to the extent Client T was in default, it was [only] because the Bank refused to accept payment from the Bankruptcy Trustee. Under that scenario, a reasonable jury could infer it would have been pointless for Client T to pay the May, 2009 payment until the April, 2009 [final payment] payment was resolved. The facts bear this out. Shortly after Bank accepted the Trustee payment, Client T made the May and June, 2009 payments. Notably, however, it does not appear that Bank properly credited the payments.

 The record supports a conclusion that Bank was proceeding with foreclosure at the same time it was rejecting payments from the Bankruptcy Trustee, even after the Trustee notified it at least three times that the bankruptcy had been reinstated. Moreover, as a creditor and participant in the bankruptcy proceedings, the Court is confident the Bank received notice from the Bankruptcy Court that the dismissal was vacated; it would have been put on notice to accept the payments, regardless of whether the Trustee notified it that this was the case. There is nothing in the record to suggest why the Bank failed to accept the payments. A reasonable jury may infer that Bank was negligent in handling the Trustee’s and Client T’s payments. Or, it may infer that Bank intentionally refused the payments so it could foreclose on Client T’s home. A reasonable jury may conclude that having a Notice of Default posted on a house, even though the homeowner was making payments toward the mortgage, would cause emotional distress.

 Consequently, a reasonable jury could find as outrageous Bank’s conduct in rejecting payment at the same time it was proceeding with foreclosure. Throughout the bankruptcy, Client T paid over $40,000 to the Bank. Yet, as Client T was on the verge of completing his bankruptcy plan, the Bank refused to accept the payment and instead, proceeded to foreclose on the property, including posting Notices of Default on Client T’s house.

 Moreover, a reasonable jury could find that the Bank may have breached its covenant of good faith and fair dealing when it failed to credit Client T’s mortgage payments and continued to threaten foreclosure, especially in light of the efforts Client T and his bankruptcy attorney took to alert the Bank to the problem. As a mortgage lender, the Bank has a duty of good faith and fair dealing to accurately account for payments made on the mortgage, and not reject the payments in order to proceed with foreclosure. Whether this happen is a question for the jury to decide.

 Finally, it will be up to the jury to determine whether Client T’s severe anxiety, asthma, nervousness, depression, fear, and extreme emotional distress were caused by the Bank’s actions.

 The moral of the story is this: it always pays to determine exactly what the Bank is doing with and how it is accounting for your money – and despite the fact that it can be difficult to do so – one must make sure that they get periodic home loan accountings showing credit for one’s home loan payments.

 It took quite some time and a great deal of effort, but what we did was question the bank at length and we were finally able to determine that there was a disconnect between what the bank was saying and what the trustee/borrower was saying and what was paid.

 By establishing this disconnect we were able to demonstrate that our client’s position made complete sense and that it was the Bank that made a mess of this situation. Hence the judge’s ruling above.

This is what led to successful settlement of this case.

[1] (Our client’s name has been removed to protect his privacy.)

[2] Later, the Bank’s Trustee was sending Client T’s payments to the wrong address.