The unjust enrichment of delinquent mortgage squatters
Tens of thousands of delinquent mortgage squatters may be awarded free housing if attorneys prevail with their statutory claims.
“In law, unjust enrichment is where one person is unjustly or by chance enriched at the expense of another, and an obligation to make restitution arises, regardless of liability for wrongdoing,” according to Wikipedia. In terms of delinquent mortgage squatters, they are clearly being enriched at the expense of the lender who provided a loan in good faith on the assumption the loan would be repaid with interest.
Our real estate finance system functions because lenders believe they will get their money back either through repayment or foreclosure if the borrower becomes delinquent. If lenders didn’t have this assurance, they simply wouldn’t loan the money. Would you?
At common law, a claim based on unjust enrichment can be submitted to five stages of analysis. These can be summarized in the form of the following questions:
- Was the defendant enriched?
If delinquent mortgage squatters get free housing by not making payments, and perhaps a free house by never repaying the loan, then they are certainly enriched.
- Was the enrichment at the expense of the claimant?
The lender clearly expected to be repaid in accordance with the Promissory Note, and they believed they had a right to call an auction in accordance with the Mortgage agreement. The lender losses to the same degree a borrower benefits.
- Was the enrichment unjust?
Despite the plethora of rationalizations for squatting (lost paperwork, unclear loan terms, evil banks, and so on), there is no equitable justification for enriching borrowers at the expense of lenders.
- Does the defendant have a defense?
None that withstood any reasonable challenge in court.
- What remedies are available to the claimant?
Foreclosure and deficiency judgment, unless they are barred by the courts, which is what some delinquent mortgage squatters and their attorneys argue today.
By MICHAEL CORKERYMARCH 29, 2015
MIAMI — In September, Susan Rodolfi celebrated an unusual anniversary: five years of missed mortgage payments.
She is like a ghost of the housing market’s painful past, one of thousands of Americans who have skipped years of mortgage payments and are still living in their homes.
What are we coming to when we begin celebrating deadbeats?
Now a legal quirk could bring a surreal ending to her foreclosure case and many others around the country: They may get to keep their homes without ever having to pay another dime.
The reason, lawyers for homeowners argue, is that the cases have dragged on too long.
There are tens of thousands of homeowners who have missed more than five years of mortgage payments, …
Just the group of people we want to reward with free houses, right?
People respond to incentives. If judges start rewarding delinquent mortgage squatters with free houses, what is everyone encouraged to do?
“No one gets a free house,” Judge Michael B. Kaplan of the United States Bankruptcy Court in Trenton wrote in an opinion late last year, reflecting what he characterized as a longstanding “admonition” he and others made during the foreclosure crisis. But after effectively ending a New Jersey homeowner’s foreclosure case in November because the state’s six-year statute of limitations had expired, he wrote in his opinion, “With a proper measure of disquiet and chagrin, the court now must retreat from this position.” …
Bank of America, for example, has initiated the foreclosure process on roughly 20,000 mortgages that have not been paid in at least five years. The bank estimates that 90 percent of those homes are still occupied.
How many of you got free housing over the last five years? How do you feel about the benefit these deadbeats enjoyed while you continued to make payments?
Lawyers for homeowners in Florida contend that lenders have five years to file for foreclosure after a homeowner defaults, normally after several months of missed payments, and the mortgage is “accelerated,” meaning that the bank says that the debt is due all at once. …
The issue is now before the Florida Supreme Court.
The lenders’ lawyers have warned in court papers that if the state’s high court sides with the homeowners, “it would spawn a public policy hazard” and dissuade banks from extending mortgages in Florida in the future.
In New Jersey, where the statute of limitations on foreclosures is six years, the issue has just started being argued in the courts. In November, a bankruptcy judge in Trenton grudgingly allowed a Madison, N.J., man to walk away from a $520,000 mortgage that had been in default since 2007.
In concluding his opinion, Judge Kaplan wrote, “the court will proceed to gargle in an effort to remove the lingering bad taste.”
The lender has appealed.
It’s difficult to imagine the specifics of the case that prompted the judge to make such a bad decision. We can only hope the appeals court removes the bad taste from everyone’s mouth.
“People who are paying their mortgage might see this as a windfall for the homeowner,” said one of her lawyers, Martin G. McCarthy. “But the lenders are more than partly to blame, and in Susan’s case, I wouldn’t feel bad for them.”
Truly one of the lamest justifications for unjust enrichment I’ve ever read.
And for the record, just how upstanding a citizen was the defendant here?
For her part, Ms. Rodolfi, 47, said, “If they had just agreed to modify my loan, I would be paying my mortgage, and we wouldn’t be at this point.”
It is easy to see why she has been fighting all these years to keep her home, which Nationstar says is worth $272,000.
Her working-class neighborhood is a short drive from Coconut Grove, a wealthy waterfront enclave of Miami. Her bedroom opens up onto a pool, shaded by palm trees. Outside her house, she parks a small motorboat she named Mermaid. The property includes an adjoining house that she rents out.
Good to know she’s kept up her entitlements. She even makes money from the property.
Instead of making her roughly $1,300 monthly mortgage payment, she pays her lawyer $500 a month to represent her in court.
In June 2010, Aurora agreed to modify her loan on a trial basis, she said, but waited months to send her the modification deal. When she received the contract in the mail, she refused to sign it, saying that documents had arrived too late.
So the statement earlier about Aurora not agreeing to modify her loan was a lie. She refused to sign the loan modification. Apparently, the deal wasn’t as lucrative as continued free housing, so she didn’t see the need.
Ms. Rodolfi, who now drives a shuttle boat at a local marina, applied for another modification, but Nationstar denied the request.Again, she applied and was rejected. One reason: “excessive forbearance,” which suggests she was too far behind on her mortgage to ever catch up.
Ms. Rodolfi says she accepts responsibility for falling behind on her mortgage, but she blames her lenders for delaying the modification process. She does not relish the idea of keeping her home through a legal maneuver.
She is still seeking a modification, hoping to rebuild her damaged credit and begin a business.
“I screwed up and they screwed up, so now what?” she said.
Now what? Now she gets out of the home she didn’t pay for. Does she think she deserves to keep this house without paying for it?
Perhaps David J. Stern was one of the good guys. Put him on the case.