Appellate Reversal:
U.S. Bank v. Hernandez

2nd District Appellate Court of Illinois, 10-12-2017
Defendant Attorney: Daniel S. Khwaja, Esq.
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The matter of U.S. Bank v. Hernandez (Reversal):

Illinois Foreclosure Lawyer Daniel S. Khwaja's recent appellate reversal win in U.S. Bank v. Hernandez dealt with two important issues. The first is standing, and the second is 24 C.F.R. 203.604 of the Code of Federal Regulations. The Appellate Court did not rule in Defendants favor as to the first issue, standing. The record reflected that 4 months prior to the filing of the foreclosure complaint by U.S. Bank (January 2, 2014), there was an assignment of mortgage from Bank of America, N.A. executed on August 15, 2013 with language that stated, "together with the notes" that assigned both the mortgage and the note to Secretary of Housing and Urban Development, a non-party to the case. The assignment was signed, notarized, incorporated in Plaintiff's Motion for Summary Judgment, and recorded in the Lake County Recorder of Deeds.

It was Attorney Daniel S. Khwaja's position that this assignment of the Note executed within a few short months prior to the filing of the foreclosure created a genuine issue of material fact as to when U.S. Bank took possession of the Note. The evidence in Attorney Khwaja's view strongly suggested that the Secretary of Housing and Urban Development had possession of the Note when the Complaint was filed.

The Appellate Court ruled against the Defendants because U.S. Bank had a "copy" of the Note attached with a blank endorsement. Generally, under 810 ILCS 5/3-201 a blank endorsement transfers a promissory note on possession alone. But the endorsement that was found on the Note was on behalf of Countrywide Bank, a legal entity which ceased to exist on April 27, 2009. The assignment of the Note was executed on behalf of Bank of America, N.A. (who countrywide merged into) nearly 4 years later. This made clear that in the timeline of events the assignment occurred after the endorsement found on the imaged copy of the Note, and that the assignment reflected the most recent transfer of the Note.

The second issue which the Defendants did win was regarding 24 C.F.R 203.604 which requires that letter be sent by the mortgagee by certified mail through the United States Postal Service offering the mortgagor a face-to-face meeting prior to the filing of the foreclosure, and before no more than three payments are due. It was Attorney Khwaja's position that the use of Federal Express as the method to send the letter was insufficient under the law and did not meet its substantive requirements.

Federal Express in Attorney Khwaja's view is neither through the postal service (as the regulation explicitly requires), and does not otherwise meet the definition of certified mail as defined by case law throughout the country. The Appellate Court in coming to its conclusion determined that the Federal Express label used in this instance did not demonstrate “proof of dispatch” as required under the law. The label was merely one that could be pre-printed off a computer screen, and did not provide any evidence that the purported letter incorporated in this federal express label was actually sent.

Conclusion: A Nice Win for Homeowners

The Second District Appellate Court ultimately vacated the summary judgment, and judgment of foreclosure and sale. The case has been remanded back to the Trial Court for further proceedings on this issue. This was a nice win for homeowners as we continue to deal with notice issues that are condition precedents in mortgage foreclosure actions, that deal with statutes, regulations, and provisions found within mortgage contracts.

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» view Official Appellate Reversal Opinion (PDF)