A mortgage foreclosure in Pennsylvania is the culmination of a lengthy series of personal and financial events. For each mortgage foreclosure, there is a story of how one person, a couple, or occasionally, a group of people, arrived at this unhappy state. Each time I am called about a mortgage foreclosure, if my caller is a new client, he or she wishes to explain to me how it happened. Naturally I listen, but legally it hardly matters how we got there. So the purpose of this post is to explain some of the mechanics of the process. This post is not a comprehensive discussion of all possible foreclosure defenses. This post is not concerned with the various mechanisms to refinance your loan or obtain emergency mortgage loan assistance, although making application to the Home Owners Emergency Mortgage Assistance Program (HEMAP) or as stimulated by Act 6 or Act 91 Notices can never hurt you and will extend time periods before a mortgage foreclosure starts. Searching the internet using search terms like “Pennsylvania Consumer Law Mortgage Foreclosure” or something similar may bring to your attention the full range of possible defenses. I reference some, but only in passing. The reason is that full-bore legal defense in a mortgage foreclosure is quite expensive itself, unless you have a legal service organization doing it for you for free. Many of the possible legal defenses would entail thousands of dollars of legal fees to present and pursue. If you had that kind of money, you could have just paid your darn mortgage. But these defenses are of great concern to foreclosing lenders, and as I walk through the structure of a typical mortgage foreclosure complaint below, many of the paragraphs and provisions found in the complaint are mortgage lenders’ (and their attorneys’) pro-active legal responses to various type of potential technical legal defenses.
First, when you have been served mortgage foreclosure papers, you are not in immediate danger of being legally evicted or forced from your home. In all circumstances in Pennsylvania, months (and often years) intervene between the time you are served the complain in mortgage foreclosure and the time a foreclosing lender can legally require you to leave. More on that later. At the outset though, what is the paperwork which has just been placed in your hand or delivered by a family member or posted on your door or (rarely) sent to you in the mail?
The very first piece of paper may be something generated by the county, to encourage to take some legal steps to try to save your home. In Montgomery County, recent complaints in mortgage foreclosure have had a top cover sheet which says “Act Now!” The sheet, prepared by the Montgomery County Sheriff’s Department, advises “You may be able to Save Your Home from Foreclosure!” The Sheriff’s Cover Sheet lists resources which may help you: an attorney, the Loss Mitigation or refinance options which your mortgage lender may provide, the Consumer Credit Counseling Agency, the Pennsylvania Housing Finance Agency, HUD (U.S. Department of Housing and Urban Development). These may be helpful to you, and I encourage you to them as much as the Sheriff’s Department of Montgomery County. The problem may be and often is that you are so far behind in your mortgage payments, the value of your home is so depressed, your economic circumstances are so limited, that there is just no real chance to turn this around. In fact, in many cases, the best thing you can do is just live without mortgage payments and rent-free for as long as you can, save your money, and start over. A great deal of grief has been expended by people in this country trying to save homes from foreclosure, when in many cases, saving their nickels and dimes and starting over would have been (and still is) the best bet. Bleeding heart tears are for bleeding hearts. If you want to stop being a victim, you may have to develop a more steely-eyed approach to the problem. Pouring time, money and effort down a drain is a waste. If your home is ‘under water,’ do you need to be? But each person’s circumstances is unique, and this post is no substitute for an individualized assessment of your circumstances. But on to the next piece of paper.
In Pennsylvania, the next cover sheet is the one mandated by the Supreme Court of Pennsylvania, which collect information to be used solely for court administration purposes. This civil cover sheet was intended to take the place of a myriad of different cover sheets used by each of Pennsylvania’s different counties. You don’t have to do anything about this cover sheet, or respond to it in any way. On the sheet you will see the name of the “Lead Plaintiff” which is the foreclosing mortgage lender who has initiated the foreclosure. Your name should appear in the box marked “Lead Defendant” or in some other box indicating you as a defendant. You will note that in the box concerning ‘money damages’ it shows that no money damages are requested. That is because, in Pennsylvania, mortgage foreclosure is only about the bank getting the property back, or auctioning it off in a sheriff’s sale. It is not about assessing a personal money judgment against you as an individual. (More on that later).
Just note that the docket number of your case is sometimes written on the Supreme Court cover sheet. In 2013, in Montgomery County, a docket number might look like this: 13-XXXXX. Stamped on the civil cover sheet may be a date which the complaint was received by the Sheriff’s office for service (‘service’ means handing you the complaint). This date generally isn’t crucial – it does not start a clock measuring the time you have to answer the complaint. The clock for the time you have to answer the complaint is started on the day the complaint is handed to you, or posted. After the sheriff’s deputy completes services, he or she will fill out a ‘return of service’ to be filed in the docket (or record) of your case, which says when he served it, and generally on whom the complaint was served. That date is the important date for measuring your time to answer.
In Montgomery County, there is another Civil Cover Sheet which is required by local (county) rule. It’s also used for court administrative purposes. This sheet may note that the Amount in Controversy is more than $50,000 – this has nothing to do with you. This is the way the foreclosing lender indicates that the case is not suitable for arbitration before three local attorneys who act as arbitrators – mortgage foreclosure is never suitable for arbitration because it involves an order authorizing the sheriff to expose the property to auction at a certain date and time – which is beyond the power of non-judicial arbitrators to order or award.
Following that there is a Notice which does pertain to you. This Notice tells you that you have twenty (20) days to answer this mortgage foreclosure Complaint. That 20 days started on the day you were handed the complaint. However, even if you allow the 20 day period to elapse, you must get another warning, commonly called a ten-day letter. Time periods are measured differently, though. The timing on the 20-day period starts when you were handed the Complaint. The timing on the ten-day letter starts the day the letter was mailed. Big difference, if you are waiting till the last minute to respond. If the mail is slow or you don’t pick it up right away, the ten-day letter may really only give you a few days. Once the ten-day letter time period has expired, then the foreclosing lender can take a default judgment. If you want to stay in your home and stretch out your time periods to look for another place to live, you absolutely want to avoid a foreclosing lender taking a default judgment. That is the fast track for them – you want to put them on the regular track of litigation, and it is your right to do so.
After the last Notice page, then comes the first page of the actual Complaint in Mortgage Foreclosure. You should see a time and date stamp, showing when it was received in the Office of the Prothonotary (civil clerk of the Court of Common Pleas in most counties in Pennsylvania). As noted above, the time and date stamp isn’t particularly crucial to you – it doesn’t start your clock to answer, the way that Sheriff’s service did. The next thing you will see on the first page of the complaint is the name of the law firm and lawyer who filed the complaint. In Southeastern Pennsylvania, there are a handful of law firms, sometimes referred to caustically as ‘foreclosure mills’, which do the great majority of mortgage foreclosures. Although the reputations of these firms may be uneven (depending on who you ask), it is worth noting that generally they are very efficient in terms of the attorney’s fees that they add to the mortgage judgment they seek. Generally, when I see these firms add in their attorneys fees, the amounts are usually under $2500, and sometimes considerably under that figure. Although it is no comfort to you, given the amount of legal work that is entailed in bringing a mortgage foreclosure complaint to a conclusion, there is no good basis to ask the court to reduce a fee like that. Genuinely contested litigation in the Court of Common Pleas typically will run up lawyer’s bills many times that figure.
Usually, the actual lawyer responsible for the complaint is a relatively new, or young, lawyer. It is easy enough to tell because in Pennsylvania, attorney ID numbers are given in sequential order. Recently I saw an attorney ID number on a foreclosure complaint that was over 200,000 – by way of comparison, I was admitted to the Pennsylvania Bar as a mid-life career changer in 1993, and my attorney ID number is 68848. So with a Pennsylvania attorney ID number like that, we are dealing with a relatively new attorney, an associate, not a partner, who probably is grinding through dozens or hundreds of foreclosure complaints in the course of a month. Your case is just one file on a desk stacked up with files, and the attorney in question is probably overworked and (at least to ask him or her) underpaid. The point for you to take is that any type of legal resistance may move you to the bottom of his stack. If you engage an attorney to represent you, and the foreclosing associate attorney sees that, it may really move you to the bottom of the stack. If you have 100 of anything to do in a month (file and conclude mortgage foreclosures, rebuild transmissions, sell insurance policies, whatever), you are likely to make your first efforts at the easiest situations, not the hardest. For the foreclosing attorney, the easiest situations are the ones where he gets to take a default judgment, meaning there was no answer or response was filed.
The caption of the case is listed under the name of the attorney and his law firm. The caption of a foreclosure complaint will list the plaintiff first, on the left hand side of the page, and may look something like this: BANK OF AMERICA, N.A., AS SUCCESSOR BY MERGER TO BAC HOME LOANS SERVICING, LP F/K/A COUNTRYWIDE HOME LOANS SERVICING, LP with an address underneath that may be someplace in Texas. Underneath that will be the “v.” for versus, and then the names of the defendants, you and your spouse or whoever else may own the property with you. A mortgage foreclosure is premised on who is on the deed and mortgage (should be the same people), not necessarily who signed the Note (the IOU to the original lending bank which says you are going to make payments on a monthly basis). A mortgage is a security instrument – it represents the pledge of the property in question as security for repayment of the Note. That is why in Pennsylvania a mortgage foreclosure is considered an action ‘in rem’ (Latin for lawsuits pertaining only to property, not to people). The mortgage foreclosure complaint is an action to get an Order of the Court to expose the property to a sheriff’s sale – if the property does not meet the minimum bidding standards set by the foreclosing plaintiff (the bank), then the bank gets the property back. The reason there are numbers (the debt which is unpaid, including back interest, penalties, the outstanding principal balance, escrow credit or debit, etc.) is that the amount of the foreclosure judgment will determine the foreclosing lender’s ‘credit bid’ at the sheriff’s sale.
On the right hand side of the page the caption will identify the Court (Court of Common Pleas) the county, e.g. Montgomery County, and the number (or No.). The caption number is important and identifies this particular complaint in a unique way, to distinguish it from the thousands of other foreclosure complaints and hundreds of thousands of other civil actions which have been filed in a particular county. Whatever you do with respect to making legal answers or responses, always include the full caption number. Often the year is included first, e.g., 2013-xxxxx, and sometimes the year is shortened to 13-xxxxx, but the last four or five digits of the caption number are unique to this filing.
All defendant’s must be individually served in a mortgage foreclosure complaint. The Pennsylvania rules of service of a complaint are somewhat complicated, but in essence a sheriff’s deputy has to hand a copy of the complaint separately to each defendant, or to the Person in Charge at the home, who must be over 18. So everybody has to get a copy. Often mortgage foreclosure accompanies other difficulties in the family – husbands and wives are going through a separation or divorce, or unmarried couples bought property together but are no longer involved with each other or living together, or there is some unresolved dispute among larger family unit. The net result is often, one defendant is not talking much, or at all, to another defendant. This can lead to a game of defendant’s ‘chicken’ – each defendant is waiting to see what the other defendant(s) will do, because if the other defendant spends money on a lawyer to defend, then the passive defendant(s) get to go along on the ride without spending money for lawyer’s fees.
Bankruptcy filed by any defendant can put a temporary stop to the progress of a foreclosure complaint, but usually bankruptcy (which costs money that defendants may not have) generally only delays the proceedings. To engage in a gross generalization, in Chapter 7 bankruptcies usually the foreclosing lender obtains ‘relief from the automatic stay’ and may resume the progress of the foreclosure action. Chapter 13 bankruptcies feature a debtor’s repayment plan that fails in many cases because the debtor can’t keep making the plan payments, and then the foreclosing lender is permitted to resume the progress of the foreclosure. Bankruptcy law is complex and technical and depends on a close analysis of a debtor’s income, assets and debts, and if you are even remotely considering bankruptcy, you should obtain a consultation with an attorney who practices bankruptcy law. The attorney at our firm who practices bankruptcy is Patrick McDonnell, and if you are Pennsylvania resident in the Southeastern segment of the state, feel free to call and ask to speak to him.
After the complaint lists the owners/mortgagors of the property, then it will begin a series of numbered paragraphs, which are the allegations of the plaintiff. Although recent mortgage foreclosure complaints I have seen have a somewhat abbreviated format, the basic outline of any foreclosure complaint looks like this.
Paragraph 1 identifies the plaintiff. It’s the same entity whose name appeared in the caption of the complaint. If yo are answering the complaint, you will answer each paragraph by number. You generally have no reason to deny the plaintiff’s self-identification in paragraph 1.
Paragraph 2 identifies the defendants. Whether or not some error in identifying the defendants is critical depends on too many factors to present in a generalized post like this one. By way of example, a mistake about the middle initial of one defendant might not matter, unless that middle initial identified another family member. By way of generalization, the second paragraph ought to correctly name all the defendants. Their adddress may be listed, and often the address of the foreclosing property is used for all defendants, even if some have vacated.
Paragraph 3 generally recites that a mortgage was made by the defendants, and presents the list of assignments of the mortgage and where the mortgage was recorded and when, and under what book and page number in the Recorder of Deeds Office. What level of documentation the foreclosing lender has to provide in this paragraph to justify its assertion that it holds the right to foreclose on the mortgage is the subject of considerable controversy. Recent foreclosure complaints I have seen have made reference to Pa.R.C.P. (Pennsylvania Rule of Civil Procedure) 1019(g), which provides that if documents are of public record (e.g., recorded in the Recorder of Deeds Office), then such documents do not have to be attached to the Complaint. This is the position and interpretation of the foreclosing plaintiff. It assumes that the documents upon which the plaintiff relies actually are properly recorded. Maybe – like much else in the law, it all depends – depends on surrounding facts, depends on recent court rulings, depends on the customary practices of the judges in a particular county. Generally the attorneys at the ‘foreclosure mills’ are closely familiar with what is required in order to proceed, but there have been some notable exceptions and failures, in connection with the mechanics of putting together a foreclosure complaint. Of course, you as a non-attorney can assert anything by way of defense (including that the devil made you do it), but frivolous defenses are not the most effective for buying the time that you may want to prepare for your next move. A technical issue such as whether or not a chain of assignments is adequate to sustain a foreclosure complaint has to be evaluated by an attorney, if this is an area where you are considering a defense. In Montgomery County, there has been a successful legal action filed by the Recorder of Deeds in connection with receiving fees for assignments made by or through the Mortgage Electronic Registrations System (MERS). To my knowledge, this complex litigation, which is really over the fees the Recorder collects, has not yet been of any substantial benefit to someone who is a defendant in a mortgage foreclosure action, but more research is required.
The next paragraph may recite who has possession or right to the Promissory Note. This is the IOU Note previously referenced in this post. This has been an area of controversy and defense in some states, including Pennsylvania. Pennsylvania’s legal rules require that “the real party in interest” bring a lawsuit. Since the Mortgage Electronic Registration Systems, Inc. (MERS) has acted as a nominee (it’s not a bank, it doesn’t lend money), mortgage foreclosure complaints brought in the name of MERS alone have been found defective. Entities whose business is servicing mortgage loans are not the real parties in interest. This allegations of this paragraph (who really holds the Note, who is the real party in interest) may well be fruitful areas of defense. The problem is that if you are only trying to buy time, and you wake up that overworked junior attorney with a substantive attack on the basic right of the bank to conduct a foreclosure, your foreclosure will not be on the bottom of the pile anymore. This is a judgment call – in Pennsylvania, the kind of attack you would make on the issue of who holds the Note or who is the real party in interest or who has standing to sue is done by means of preliminary objections. In Pennsylvania, it is rare for any preliminary objections to result in the ultimate annihilation of the plaintiff’s case – rather, preliminary objections begin a round of legal maneuvers which ultimately end up with the foreclosing plaintiff amending and modifying the complaint, finding new documents to attach to the Complaint, obtaining new verifications, adding allegations and references to other documents of public record, etc., which ultimately result in the court overruling any further preliminary objections and compelling the defendant (you) to answer. If you are an aggressive, well-read, and literate pro se defendant (one unrepresented by an attorney) you can try it. As attorneys, we are accustomed to bring these legal pleadings and objections before the court all the time, but of course, that brings us back to the fundamental issue that started all this, which is money and the circumstances of your life which have made money scarce. From a strategy perspective, when we are retained, just be virtue of being lawyers we represent the potential to bring such defenses to bear, and sometimes that is helpful.
Usually there is a paragraph which references a legal description of the property, which should be attached. The legal description generally came from the mortgage, and you should be able to check that it actually pertains to your property if you have your home purchase papers available, including your deed, mortgage or title commitment. There will be a numbered paragraph which recites that the mortgage is in default. This is an important paragraph and you want to read it carefully. It should say when you stopped making mortgage payments, and that should be accurate. Your mortgage bank does not have to accept partial payments, which is often very frustrating for people who are trying to do the right thing by paying what they can, but that is the status of the law concerning mortgages. Partial payments may be of great interest if you are simultaneously trying to refinance your loan, but that is such a complicated spaghetti-tangle of federal and state regulations, bank software, bank customer service representatives who are never the same person each time you call, missing paperwork, missing files, delay, repetition and repeated application, that I simply pass it by in this post. All of your efforts in the area of negotiating a refinance generally do not stop ore even slow the progress of a mortgage foreclosure. The law firm doing the foreclosure probably isn’t even talking to the department of the bank which is engaged in entertaining applications for refinancing. Mortgage lender refinancing and foreclosure operate on two entirely separate tracks – different timetables, different documents, different people.
At any rate, you should scrutinize the paragraph which alleges the default, and the paragraph which alleges which amounts are due. As a minimum, the complaint should identify a fixed date upon which certain fixed sums were due: the Principal Balance, accumulated Interest (with dates for the beginning and ending date of the calculation), Late Charges, and any Escrow deficiencies or Escrow credits, and a balance. Lawyer’s fees may or may not be included in this paragraph. If there is a discrepancy in these figures you can document, you have a good defense for a considerable time period. Even if you are not sure, this is an area where you can give a qualified ‘legal denial,’ simply because you don’t know. You are not legally compelled to agree with a calculation done by the bank’s software program, although not agreeing with something because you are not sure is quite different, ultimately, than proving it erroneous.
Generally there will be a numbered paragraph in the complaint which asserts that the foreclosing bank, the Plaintiff, is not seeking a judgment of personal liability against you, also called an in personam judgment. Mortgage foreclosure is just about the real estate itself. However, that doesn’t mean that your personal credit scores won’t be affected by a mortgage foreclosure – they probably will, although often, by the time of a mortgage foreclosure, the downward adjustment by the credit rating agencies in your credit score has already taken place. Occasionally this becomes an important issue when someone who has no real interest in the property, e.g., a family member who neither lives in the property nor makes payments, but is named on the deed – is named in the mortgage foreclosure. It is possible to make efforts to try to have that particular type of mortgage foreclosure complaint not affect a person’s credit score, although I have never been entirely convinced those efforts are successful. Credit scoring is deliberately kept a mystery by the credit scoring agencies, though, and one can only try to repair whatever effects there are.
I have seen language in mortgage foreclosure complaints reciting that “plaintiff reserves the right to bring a separate Action” to establish some sort of personal liability. That is boilerplate language when it appears, at least today, in Pennsylvania. I know of no situation where a foreclosing lender has successfully sued for a personal judgment against a residential homeowner in Pennsylvania in recent years. Pennsylvania’s rules concerning an action for a ‘deficiency judgment’ are so imposing and defendant-friendly that no lenders currently even attempt such an action. That is not true in other states, however, such as Florida. More to the point, the complaint recites that if the defendant, you, has filed and received a discharge in bankruptcy, the mortgage foreclosure action does not seek to establish personal liability, but only seeks the right to recover and sell the property. This is standard stuff in bankruptcy, and no changes in Pennsylvania law could affect it, as bankruptcy law is federal law and takes precedence over any state law in the event of a conflict of laws. Bankruptcy filings do tend to delay foreclosure actions, but only for a time. Typically, the lender will make a motion in bankruptcy court to obtain ‘relief from the automatic stay’ – a motion not hard to make, and readily granted by the bankruptcy court. Thereafter, the progress of the mortgage foreclosure will resume.
Usually the foreclosure complaint will recited that the various Notice requirements have been met: Notice of Intention to Foreclose (the Act 6 Notice), and Notice of Homeowner’s Emergency Mortgage Assistance Program (the Act 91 Notice). If you didn’t receive these notices, this is an appropriate paragraph for a response that says “Denied.”
After that, you will see the “WHEREFORE” clause – in which the Plaintiff demands an in rem judgment against the Defendant in a certain sum of money. This is the lender’s credit bid number at sheriff’s sale, although that number is often bumped up by legal paperwork filed later to re-assess the bank’s ‘damages’. The Wherefore clause also includes a demand for interest, costs, fees, charges, attorneys’ fees, and for costs of the foreclosure. Again, these are charges which will not be assessed against you in your personal capacity, but will give the bank the right to an upward adjustment in the final credit bid number at sheriff’s sale.
Beneath the Wherefore clause, you should see the name and signature of the attorney who prepared and filed the Complaint. A law firm in Pennsylvania has been sanctioned for having office personnel, who were not attorneys, use stamps or otherwise sign foreclosure complaints on behalf of an attorney who never actually read the foreclosure complaint. If there is an attorney’s stamp, or anything other than the name and Pennsylvania attorney ID no. signed underneath the complaint, you have a valid basis for an objection. In Pennsylvania, any legal paper presented on behalf of a corporation must be filed and signed by an attorney licensed in Pennsylvania. An attorney’s signature on a legal paper filed with the Court necessarily implies that the legal paper was reviewed by the attorney, even if prepared by non-attorney staff, and is consistent with the ethical and procedural rules which govern civil procedure and attorney practice in this state.
Following all this will be the legal description of the property, and after that, the Verification. The verification is quite important, and ties directly in to who has the right to bring a foreclosure, who holds the Note, who is the real party in interest, etc. Who gets to sign a Verification is something of a technical issue, but the short and general answer is that it has to be the party in interest, or someone authorized by the party in interest who has knowledge of the facts being asserted in the legal paper. This is where the controversy over robo-signing arose, in which it was discovered that hundreds of mortgage documents were being signed (verified) by people who had no idea what they were signing (the ‘robots’). In some cases, it appeared that the necessary chain of title (e.g. assignments of the mortgage) facts were being falsified in the complaint, or had been post-dated; in other cases, there was no demonstration of actual falsehood, but no question that the signing individuals had no idea what they were signing, no idea of the underlying facts, etc. The person signing the Verification in the mortgage foreclosure complaint brought against you should be clearly identified as to name and title and their relationship to the Plaintiff in the case should be clear. Anything else, then this is another area where some defense may be possible, although since the Verification is not one of the numbered paragraphs, the defense has to be by way of preliminary objections, rather than by an Answer.
Despite the various legal controversies, it is worth noting that at the end of the day, ultimately the legal system is going to give lenders back homes to resell where the mortgage is not being paid. Home ownership would not be possible without lenders, and lenders could not lend without adequate means to recover at least some of the value of their mortgage loans. Being a ‘crusader against the system’ is not an approach that I have much interest in. As a lawyer, however, ‘buying time’ for my clients is often of great interest to me, and that effort is conducted on behalf of clients in many circumstances – much of commercial law is all about ‘buying time’ for my clients, while they re-order their finances and commitments. That is the nature of all bankruptcy Chapter 13 practice – there is nothing wrong with it, and no one need feel apologetic about it. They put Donald Trump on television, and he has engaged in ‘buying time’ legal maneuvers in his real estate ventures many times. So if you are going to buy time, get as much as you can – you can never have too much. My legal practice puts me on the other side of the table as well – we institute foreclosure actions when there is no other way to recover an obligation (for example, some people don’t pay their monthly homeowner’s or condo fee assessments, ever) – and the rules work the same in both directions. Whether you are a foreclosing lender or homeowners’ association, or a foreclosed upon homeowner, you deserve the same level of competent, quality legal representation, no more, no less.
Later posts on this topic will address the next steps in the foreclosure process, which usually involve responses to a motion for summary judgment, scheduling of the sheriff’s sale, postponements of the sheriff’s sale, cash for keys, when do you really have to leave the property, etc.
If you have more legal questions on a Pennsylvania mortgage foreclosure, click on this link, or if you have a Pennsylvania personal injury case, click on this link.
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