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Sixth Circuit Rules Wife's Interest in Property Makes Her Responsible for Mortgage - In re Rowe

July 8, 2011

Our Rancho Cucamonga foreclosure defense attorneys were interested to see a federal appeals court decision about what is necessary to create an enforceable and valid mortgage. In In re Rowe, the Sixth U.S. Circuit Court of Appeals took up that question in a case involving a debtor who attempted to avoid her mortgage because she was not personally liable, but had made her interest available in the bankruptcy. Linda Lou Rowe and Boyd Wayne Rowe filed for Chapter 7 bankruptcy in 2009, and listed their home in the petition. The promissory note was signed only by Boyd and the mortgage contract names Boyd as the sole mortgagor, but the mortgage contract was signed by both spouses. The couple's bankruptcy trustee sought to avoid the mortgage as to Linda, and the bankruptcy court agreed. Their lender, Fifth Third Bank, appealed.

The trustee argued that he should be able to avoid the mortgage with respect to Linda's interest in the property because she was not identified in the documents as a borrower or mortgagor. Fifth Third argued that Linda is a borrower because she signed a rider to the mortgage that was incorporated into, supplement and amend the mortgage. On both the rider and the mortgage itself, she hand-printed her name, while Boyd's name was already printed on the documents. In addition, Linda was never named in the mortgage itself as a mortgagor. Under Kentucky caselaw, the Sixth noted, mortgages are enforceable only against people whose identities are readily discernable from a review of the entire document.

After some analysis, the court found that Linda Lou Rowe was such a person. Because she signed the rider, and because of a section of the mortgage that details duties of co-signers, her identity was incorporated into the mortgage. The Sixth found that the bankruptcy court erred when it concluded that a mortgagor's identity can't be incorporated from a rider to a mortgage, and thus failed to consider the rider at all. The court conceded that Linda was not named as a borrower in the mortgage itself, but she signed both the mortgage and the rider that was incorporated by reference. Thus, she is sufficiently identified as a mortgagor under Kentucky law and the bankruptcy court should have granted summary judgment on the issue to Fifth Third.

This decision disappoints us, as Costa Mesa foreclosure defense lawyers. By avoiding the mortgage as to Linda, the trustee could have allowed the Rowes to void her part of the mortgage's debt, making more assets available for other parts of their bankruptcy or to help them start over. Lenders have put forth a lot of sloppy paperwork in the past several years, and banks are only now catching on that much of it is unreliable or unacceptable as a basis to foreclose on lenders. It would be interesting to know whether the paperwork in this case was indeed sloppy, or whether Linda Lou Rowe was intentionally left out of the mortgage documents that Fifth Third now finds it convenient to include her in. As San Diego County foreclosure defense attorneys, we don't believe sloppiness and false statements to the court should be rewarded by judges.

Howard Law PC represents people throughout California who are fighting foreclosures they believe they can avoid if the lender is willing to consider other options. That includes battles that take place in bankruptcy court. To talk to us about your situation and your legal rights, send us a message through our website or call toll-free at 1-0800-872-5925.

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