The NJ Superior Court Appellate Division recently handed down an interesting ruling in the case of DEUTSCHE BANK NATIONAL TRUST COMPANY v. MITCHELL.
The Court believes it is important for a bank or other lending corporation to actually hold the lien or note on a property before foreclosing on it. Seems like a simple enough point but with the crazy world of mortgage resale and assignment it is a point which has slipped through the crack more than once over the past few years. It is interesting that at the trial level it seems the Court was fine with allowing the foreclosure to proceed based on the fact the lender was assigned the note after they filed for foreclosure but before the property went to Sheriff’s Sale.
It is an interesting case but there is another part of the case that caught my eye, one the Court was not called to rule upon but it is essential for every distressed homeowner to read and understand.
Bethea in this story is the homeowner who after her mother died had trouble paying her mortgage and looked for someone to help her navigate her pre-foreclosure options.
Bethea met Steve French, president and CEO of Elite Financial Services (Elite), when seeking options to prevent foreclosure of the Property. She certified that French promised her that he could save her home and convinced her to dismiss her then-pending bankruptcy petition. Bethea certified that French proposed a buyout of the Property, which would allow her to save her home, pay off her debts, improve her credit score and allow her to remain in her home.
On February 17, 2006, French facilitated Bethea’s sale of the Property to a straw-person, Constance Lawrence Mitchell, for $355,000. Mitchell obtained a mortgage in the amount of $319,500 from Long Beach Mortgage Company (Long Beach) to purchase the Property. Bethea also gave Mitchell a $35,500 mortgage on the Property.
French drove Bethea to the closing at an attorney’s office. Bethea was not represented by her own lawyer at the closing. She acknowledges that she signed several papers at the closing, but claims she did not understand their significance. Bethea entered into a “Consulting Agreement” (Agreement) with Elite and French at the closing. The Agreement provided for a sale of the Property to a third party (Mitchell), but allowed Bethea to rent the home for two years with the opportunity to repurchase it within that period.
The Agreement provided that Bethea would create a reserve account by setting aside $37,187 from the closing proceeds. If Bethea failed to make a rental payment, the Agreement authorized counsel to pay the rent from the reserve account. The Agreement also provided that Bethea would pay Elite a $25,000 “consulting fee.” Mitchell received $10,000 from the “consulting fee.”
Wow. Look I know there are unscrupulous people out there and if you live a long life you will likely end up on the wrong end of a transaction with a few of them. I had a car one time that I bought from a man in my church that broke down between the sales lot and the Department of Motor Vehicle where I was driving to get my plates and registration. What made matters worse is I was the man’s pastor at the time of the transaction!
Everyone makes mistakes. Do not buy a too good to be true story about saving your home. If you cannot pay for it, you cannot viably plan to stay in that house and need to come up with a plan. Just be careful who you turn to for help. There are a lot of desperate people out there looking to save their financial ship by sinking yours.
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