Real Cases in Real Estate By Andrea Lee Negroni, Esq. – October 16th, 2012 Update

Real Cases in Real Estate By Andrea Lee Negroni, Esq. – October 16th, 2012 Update

Real Cases in Real Estate is a weekly update on real estate law, with legal principles illustrated and explained by lawsuits from around the country. The topics are wide-ranging for appeal to a broad spectrum of readers including lawyers, homeowners, investors and the general public. Andrea Lee Negroni, a Washington DC attorney and legal writer with 25 years of experience in financial services and mortgage law, contributes the case summaries.

Followers of Real Cases in Real Estate will learn and be entertained by lawsuits involving nuisance, trespass, zoning violations, deed restrictions, title insurance, public utilities, mechanics liens, construction defects, adverse possession, foreclosure and eviction, divorce and marital property rights, tenants' rights, and more. Real Cases in Real Estate uncovers the unpredictable, amusing, and sometimes outrageous disputes between next-door neighbors, contractors and homeowners, condo boards and residents, real estate brokers and homebuyers, and zoning administrators and developers.

Each fully cited case summary highlights the essential law of the case and explains the principal legal theories and concepts relevant to the outcome. Plain language treatment makes Real Cases in Real Estate accessible to lawyers and laymen alike.

Whether you follow real estate law professionally or as a hobby, you'll find something new and useful every week in Real Cases in Real Estate.

Updates for the Week of October 16th, 2012

Homeowners Cannot Avoid Foreclosure by Claiming "Unconscionability" When They Didn't Read or Understand their Mortgage Loan Agreement.

The Walters mortgaged their home in Norwich, Connecticut for a $165,000 loan. The lender declared a default and demanded the entire balance due. The Walters pleaded special defenses and made a counterclaim against the lender for "equity stripping" based on what they claimed was a breach of the lender's duty of good faith and fair dealing in the loan transaction.

The homeowners said the lender's conduct was unconscionable and oppressive, because where they once had virtually debt-free homes, they were now in the position of losing the homes in foreclosure. They argued that the mortgage loans were misleading and they didn't realize the monthly payments would not amortize the principal of the loan. The interest rate was 5%, and the loan was "interest only." The Walters' claimed to be surprised that they needed another loan to pay off the principal at maturity. They characterized themselves as inexperienced with loans. The court considered the issue of unfair surprise, frequently termed as "procedural unconscionability." Unfair surprise is implicated by "overly harsh contract terms." However, the Connecticut court held that procedural unconscionability does not supersede the obligations of a party to read the agreement he signs. Moreover, the Walters did not claim their 5% interest rate or other loan terms were overly harsh.

The Walters were similarly unsuccessful in their second special defense, which was based on the doctrine of unclean hands - they claimed the lender attempted to strip them of their homes by taking advantage of their ignorance and charging significant fees or an arbitrarily high interest rate. However, they did not prove the lender's intentional misconduct or that the lender attempted to gain an improper advantage over them.

In their third special defense, the borrowers said the lender violated the covenant of good faith and fair dealing, which presumes neither party will do anything to injure the others' right to receive the benefit of their agreement. However, the Connecticut Appellate Court has held that violation of the covenant of good faith and fair dealing is not a sufficient special defense to a foreclosure action. In addition, the borrowers did not claim the lender interfered with their rights under the mortgage agreement.  All of the borrowers' special defenses to foreclosure failed.

Dime Bank Loan Servicing Corp. v. Walter, 2012 Conn. Super. LEXIS 2124 (August 22, 2012) [enhanced version available to subscribers].


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