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DC Circuit Resurrects Lawsuit Alleging Washington Mutual Mishandled Foreclosure - Youkelsone v. FDIC

November 16, 2011

As our Rubidoux foreclosure defense lawyers well know, the financial crisis that triggered so many foreclosures and related problems also brought out some serious problems at major banks. Among these was Washington Mutual, which went into receivership with the FDIC and eventually was purchased by Chase. The crisis also exposed a lot of bad practices at major banks, as their systems for handling foreclosures got far more use than expected or intended. Those two circumstances came together in Youkelsone v. FDIC, a lawsuit by a New York borrower alleging wrongful conduct by Washington Mutual in the aftermath of her foreclosure. Nadia Youkelsone argued pro se that the district court erred in dismissing her case for lack of standing. In its decision, the Court of Appeals for the District of Columbia agreed, remanding her case for further proceedings.

Washington Mutual acquired the note and mortgage to Youkelsone's home in 2001, and later assigned it to Fannie Mae. Some time after -- the opinion does not specify when or in what order -- Youkelsone's loan went into foreclosure and WaMu failed. The FDIC took over as receiver for WaMu, and is the bank's successor in interest for this case. Youkelsone alleges that WaMu engaged in wrongful conduct including delaying providing the closing documents and making active misrepresentations to the bankruptcy court. The FDIC moved to dismiss her 2009 lawsuit for failure to state a claim, but the trial court never reached that issue. Instead, it decided sua sponte to dismiss for lack of standing. Youkelsone appealed.

The DC Circuit started by dismissing the FDIC's claim that the appeal was untimely. Youkelsone requested and was granted a 30-day extension to appeal, which said her last day to appeal was June 10, 2010. Unfortunately for Youkelsone, who was representing herself, the district court was mistaken -- federal rules would have made the last day June 9. After briefing, the DC Circuit found that the federal rule in question is a claim-processing rule, not a jurisdictional bar, and that the FDIC had also forfeited its timeliness objection by not raising it on appeal. Turning to an issue of more substance, the appeals court next found that Youkelsone did not lack standing. The district court said she failed to allege causation and redressability of her claims by WaMu because her claims were affected in part by actions of Fannie Mae. The DC Circuit disagreed. Though other parties were involved in the foreclosure, it said, Youkelsone's claims were based on actions by WaMu. Finally, it declined to reach the FDIC's failure to state a claim argument, saying this issue is better left to the trial court. It reversed and remanded.

Our Westminster foreclosure defense attorneys are particularly interested to see this case because Youkelsone was representing herself. It's unusual for such a plaintiff to succeed against a large, well-funded company or government agency. Even though the courts often extend extra patience and courtesy to such people, they often don't have the legal expertise to navigate confusing federal rules -- never mind defend themselves against professional lawyers. The fact that Youkelsone survived this appeal suggests not only that her case has merit, but that she understands how to present it. As professional Carson foreclosure defense attorneys, we believe most clients are better off with professional representation -- but we applaud people who succeed on their own.

If your home is in foreclosure or you expect it to be there soon, you may already be discovering that the "help" your loan servicer offers is anything but helpful. To talk to an experienced attorney about defending your home, call Howard Law, P.C., today. You can reach us through our website or call 1-800-872-5925.

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