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.
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