Our Ontario foreclosure defense attorneys frequently represent clients here in California whose homes were foreclosed on without a chance to discuss alternatives to foreclosure with the lender. This violates a California state law that requires at least a discussion of alternatives before a foreclosure, and we have had success suing lenders under that law. So we were very interested to see a recent decision from the Eighth U.S. Circuit Court of Appeals on a similar law in Minnesota. In Mayer v. Countrywide Home Loans, the law at issue was the Minnesota Farmer-Lender Mediation Act, which requires foreclosing lenders to try mediation before foreclosing. Kathleen Barbara Mayer alleged that Countrywide broke that law when foreclosing on her home, but the federal district court found that the FLMA didn't apply because Mayer's property was not principally used for farming.
Mayer had three parcels of land totaling about 62 acres near Glenwood, Minn, including a 6.21-acre homestead parcel on which she lived. All three were held in a living trust for which she was both owner and trustee. She took out a second mortgage on the homestead parcel in 2006, and the local bank assigned the mortgage to Countrywide. She defaulted on the loan in 2007, and Countrywide later sold the parcel to itself at foreclosure auction. Mayer sued six months later, alleging violation of the FLMA and requesting an injunction against Countrywide's repossession of the property. She later argued in a response that Countrywide procured the mortgage through fraud. The district court granted summary judgment to Countrywide on the grounds that the FLMA did not apply to Mayer and her property. She appealed to the Eighth Circuit.
On appeal, the issue was whether Mayer's mortgage debt was a "mortgage on agricultural property," defined in the law as real property used for producing livestock, milk and milk products, produce or agricultural products. Even in the light most favorable to Mayer, the Eighth said, it could not decide her property was agricultural. Mayer contended that the homestead parcel is a farm homestead necessary for storing tools, equipment and materials for farming. Even if so, said the court, this is just a small part of the overall parcel, most of which is used as a residence. Mayer showed that she farms grains and raises cattle on the other two parcels, the court said, but this does not affect the analysis of the homestead parcel, which is the only one encumbered by the mortgage. The court also rejected Mayer's contention that the Countrywide mortgage was fraudulent, because she failed to plead it with particularity in her original complaint. She was put on notice, the court noted, and still did not amend it before the deadline had passed. Thus, the Eighth upheld summary judgment for Countrywide.
Judge Bye dissented from this opinion, arguing that the majority was wrong to rely on Countrywide's status as a creditor to grant summary judgment. Countrywide never made this argument, nor did Mayer raise it, the judge noted; thus, Mayer never had a chance to address it. Furthermore, the dissent said, the district court made a clear error in interpreting the FLMA because it saw the homestead parcel as standing alone instead of part of the trust. This raises the possibility that Mayer may have been a debtor under the FLMA, and entitled to its protection. Because the judge felt the majority's opinion was inconsistent with the purpose of the FLMA, he dissented.
As Costa Mesa foreclosure defense lawyers, we are also disappointed in this decision. The dissent suggests that important issues were left unaddressed, and those issues could make the difference in this woman's attempt to keep her home. We don't handle a lot of farm foreclosures here in southern California, but that doesn't mean we don't see small businesses or older people using a living trust as an alternative to a will. Those are issues that can complicate a foreclosure (or a bankruptcy) if they affect the property, but ideally, those complications come from courts giving those legal structures the extra attention they need. Our Whittier foreclosure defense attorneys work hard to ensure that when our clients go to court, judges consider the full picture before deciding on important foreclosure issues.
If you're in default or foreclosure and your lender has stymied every attempt you've made to avoid a foreclosure sale, don't wait to call Howard Law PC for help. For a free, confidential case evaluation, send us an email or call 1-800-872-5925.