MPR News received a tip about a complicated story involving an attorney, a judge and the state's foreclosure laws.
U.S. District Judge Patrick J. Schiltz has taken the unusual step of sanctioning Minneapolis attorney William Butler for filing what the judge calls frivolous show-me-the-note actions. That's where a homeowner facing foreclosure argues that because the mortgage and note are held by different entities, the home's mortgage or foreclosure on that mortgage is invalid.
Separating the note from the mortgage contributed to the practice of mortgage securitization, one culprit in the housing bubble and crash.
Some courts in other states have ruled in favor of homeowners in cases like these. But here, Judge Schiltz says it's been established under Minnesota law (he references Jackson v. Mortgage Electronic Registration Systems, Inc.) that the entity that holds the mortgage can foreclose on the mortgage even if that entity does not also hold the note. Showing the note is not necessary under foreclosure by advertisement, which is how most of Minnesota's foreclosures are processed.
Butler, of Butler Liberty Law, LLC, brought nearly 30 of such cases on behalf of several hundred people and apparently never won.
Among other things, Judge Schiltz alleges Butler solicited homeowners facing foreclosure for frivolous cases and then "judge shopped" for sympathetic judges while his cases dragged on for months, allowing him to collect fees from clients and allowing those clients to continue living in their homes rent-free.
As punishment, the court ordered Butler to pay a $50,000 penalty and cover attorneys fees for some of the largest firms representing clients like GMAC Mortgage, Deutsche Bank, The Bank of New York and others. People familiar with the case expect these penalties to rise well into the six figures. Butler also risks losing his license to practice law.