Yesterday I Was Lying: Creeping Preclusion of Reciprocal Fee Awards in Residential Foreclosure Litigation

Abstract

State actors systemically frame the foreclosure context differently from other types of civil litigation. The consequence of this framing is that judges are emboldened to modify or dispense with traditional civil practice procedures or doctrines, typically to the detriment of financially distressed homeowners facing foreclosing entities with significantly more resources. This Article extends our exploration of systemic framing with respect to consumer foreclosure litigation to yet another area of longstanding jurisprudence facing attack and overhaul in the context of distressed homeowner litigation — namely, the applicability and availability of attorneys’ fees awards to the successful homeowner-litigant.

Most, if not all, mortgage contracts specifically allow for the foreclosing entity to recover their attorneys’ fees in the event of default and foreclosure. Many state statutes contain automatic reciprocity provisions for such one-sided attorneys’ fees provisions regardless of the type of contract. Yet, perhaps unsurprisingly in the wake of our prior research, traditional application of such reciprocity has begun to deteriorate and erode in the face of judicial skepticism towards awarding homeowners’ attorneys’ fees. Accordingly, this Article continues the same narrative, in another context, of state actors viewing and treating distressed homeowners differently than other civil litigants, to the detriment of those homeowners.

Lenders are allowed to plead for recovery under the mortgage, but in those rare instances when they lose for standing or for title reasons, they may then seek to avoid paying attorneys’ fees under the fee recovery statute because of that lack of standing or title. In other words, courts permit lenders to “lie yesterday” about being the proper party to enforce the contract and believe that they are “telling the truth” today about not being a party to the contract, which otherwise would require paying the homeowners’ attorneys’ fees.

Keywords: foreclosure, mortgage, home loan, fee-shifting, attorneys' fees, fee-shifting statutes