People ex rel. Madigan v. Wildermuth

The First District Appellate Court has determined in a recent ruling that individuals and companies engaged in predatory loan modification assistance endeavors cannot target protected classes.

The case, People ex rel. Madigan v. Wildermuth, stands for the proposition that predatory loan modification assistance companies can also violate the Illinois Human Rights Act, 775 ILCS 5/3-102(B) when they specifically target minority groups or other protected classes.  People ex rel. Madigan v. Wildermuth, 2016 IL App (1st) 143592.

The Illinois Attorney General has accused Matthew Wildermuth, George Kleanthis, and the Loan Modification Network, LLC, of not only conducting a predatory loan modification assistance program but also specifically targeting African-Americans and Latinos.

The question at issue upon appeal was whether the Illinois Human Rights Act might apply to this specific situation, and the First District answered in the affirmative. The Court did not determine whether the Defendants were actually engaged in predatory loan modification scams or whether they were actually directing the scams at minorities.

It is important to have legal representation when one’s home has fallen into foreclosure, but it is a necessity to vet the attorney or assistance group before engaging their services. Many homeowners in Illinois employ unscrupulous “law firms” based in California or Florida to help them obtain loan modifications. It is best to obtain local counsel that is subject to the Illinois rules related to loan modification assistance. The various bar associations and courts maintain lists of attorneys in good standing that provide assistance in foreclosure defense. When in doubt, check with these organizations.


Deutsche Bank National Trust Company v. Iordanov

The First District Appellate Court once again affirmed its position that if an affirmative defense is not timely filed, it is forfeited.

In the case Deutsche Bank National Trust Company v. Iordanov, 2016 IL App (1st) 152656 (2016), the homeowner, Iordanov, raised the affirmative defense of standing upon the final hearing – a motion to reconsider confirmation of sale. His argument revolved around the issue that the Plaintiff, Deutsche Bank, was assigned the mortgage after the lawsuit was filed. The Appellate Court stated that Mr. Iordanov waived this argument because he did not timely raise it. Affirmative defenses should be raised in the Answer, or shortly thereafter with leave of the Court. Courts generally do not permit leave to file affirmative defenses after summary judgment has been entered.

What makes this case damaging to Defendants is that the Appellate Court, in dicta, goes on to find the following legal conclusions:

  • Mortgage Assignments can be oral. It does not need to physically exist. A written assignment can be prepared after the fact to memorialize the transfer.
  • The Defendant under such a scenario has the burden to show that there was no oral assignment – a nearly impossible task.
  • A Defendant cannot rely solely on the Bank’s filings to raise the affirmative defense of standing. The Defendant must produce something more than the mortgage, note, and assignments to rebut the strong presumption that the Bank is entitled to bring the foreclosure lawsuit.
  • The First District specifically rejects the Second District’s ruling on a similar matter in the case Deutsche Bank National Trust Company v. Gilbert, 2012 IL App (2d) 120164. The Court in Gilbert found that the Defendant could make a prima facie showing that the Bank did not have standing to foreclose at the time of the lawsuit filing, by proffering a late or non-existent assignment. The Iordanov Court says this burden-shifting runs contrary to the Illinois Supreme Court’s position that lack of standing must be plead and proved by the Defendant alone.

With this ruling it is clear that if a Defendant homeowner wants to successfully assert the affirmative defense of standing in the First District, he/she must obtain evidence beyond the mortgage and note documents filed by the foreclosing Bank to have a chance.

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For a more detailed analysis of affirmative defenses to a Complaint, check out NCLC’s Foreclosures Guide.