Saturday, December 4, 2010

Should you use an "administrative process" to fight your mortgage lender?

There has been this idea circulating around the internet that you can cancel or rescind your mortgage by private correspondence with your lender through a so-called "administrative process."  The idea is that you ask your lender to prove they have an interest in your loan, and then, when the lender fails to respond, you unilaterally rescind your mortgage, put your lender on notice, and record such actions with respect to the property at your local land records office.

Sounds good in theory, except that in detail, from what I can tell, this "process" is a bunch of pseudo-legal gobblygook.  As far as I can see, there is no solid basis in the law for this "administrative process."  You can throw in together a few legal terms and concepts, but there is not enough real basis that would have a chance to stand up in court.

Also, just because someone shows you recorded documents conveying the property to them free and clear, it doesn't mean that the property is free and clear.  As soon as that person actually stops making payments (did you assume they are not making payments?) and as soon as the bank gets to foreclosing on the property, all it takes is a simple legal challenge to the nonsensical documents recorded by the homeowner, and an order declaring such documents void will be entered along with an injunction prohibiting such recordings in the future.  I am actually describing several real cases that I have seen.

So the question is not whether you can invent some private process and record documents purporting to free your property.  The question is whether any such actions will have any legal validity so as to deprive the bank from collecting on the mortgage and taking the property by foreclosure.  What's worse, I heard one judge say that this administrative process and its recording of bogus documents amount to outright intentional fraud on the part of the homeowner in trying to steal the house without paying off the mortgage.  Moreover, the individuals that promote and advise people as to such a process are engaging, in my opinion, in blatant unauthorized practice of law, and it is only a matter of time before they are caught.

However, if you have already gone through this "administrative process," there is one decent benefit to it, especially if you are in a nonjudicial state.  Unless the bank takes an aggressive stance and just completely ignores your recordings and forecloses on your house (which is hard to do because prospective buyers are not as aggressive), they would have to first remove the homeowner-created cloud on the title.  This forces the bank to file a lawsuit.  The bank becomes a plaintiff in the action, and this re-orients the parties and shifts the burden of proof to the bank.  It forces the bank to prove that they have a claim to the property, while all the homeowner has to do is sit back and poke holes in their pleadings.  It is easier to use "lack of standing" and other technical defenses on a motion to dismiss rather than in a complaint to stop a nonjudicial foreclosure.

The reason I say that the shifting of burden of proof is a "decent" and not a "great" benefit is because, while you gain some strength from reorienting the parties, you lose lots of credibility before the judge as someone who is trying to get a "free house" not by merely challenging a foreclosure, but by also using bogus recordings, not to mention possible fraud charges. Therefore, you should be very careful with this whole situation and be prepared to explain to the judge the basis of your earlier recordings.

Hopefully, the above account will give people a more clear picture of what they are up against when considering or engaging in going through an "administrative process" with respect to their property.


  1. Mortgage Fraud Examiners exposed this scam in a press release: "Beware of the Latest Foreclosure Rescue Scam—“Mortgage Elimination."

    1. Storm: This is the first time I agree with you. That so called Administrative Process in bogus and not supported by any law that I know of. It is truly a rescue scam, probably set up by non attorneys with very little legal knowledge or education. I still believe in homeowner's rights, though, and see these banksters as scum