Oathout home in Liberty (Photo by Andy O’Brien(
Oathout home in Liberty (Photo by Andy O’Brien(
Last month, the Maine Supreme Court issued a stunning rebuke to national mortgage companies that have flagrantly committed fraud and abuse against homeowners across the state. In its groundbreaking decision, the state’s highest court ruled in the case Federal National Mortgage Association (Fannie Mae) v. Deschaine that the governmentbacked mortgager Fannie Mae is barred from bringing another foreclosure suit against Patricia and Paul Deschaine of Lincoln after a lower court dismissed its previous foreclosure action “with prejudice” for failing to comply with a court order to file witness and exhibit lists.

That ruling will have a major impact on other pending foreclosure cases, says homeowner defense attorney Tom Cox of the group Maine Attorneys Saving Homes. Cox says he and another attorney intend to use the decision to appeal a dozen foreclosure cases, which will entail filing a “quiet title” action to assert that the proper owners of the properties are the occupants and not the former mortgage holders.

“I’m sitting on 8 to 10 case files right now where there have been either defense judgements for homeowners or they have been dismissals with prejudice,” said Cox, who filed an amicus brief in FNMA v. Deschaine. “Suddenly those are now affected by this decision. Any lawyer who is reasonably astute should be able to take that Deschaine decision and use it to go to court and bring a quiet title action.”

Mortgage Servicers Behaving Badly

Maine law allows borrowers to challenge the legality of foreclosure in court. If the court rules in favor of the lender, then the borrower has a three-month redemption period to stop the action in order to come up with the money. Maine's Foreclosure Diversion Program also provides for mediation between lenders and borrowers in foreclosure, with the goal of working out a repayment plan that works for both parties.  

However, as The Free Press reported in a 2013 investigation (“Have They Learned Their Lesson?,” 4/11/2013), national mortgage servicers operating in Maine have repeatedly missed foreclosure mediation deadlines, acted in bad faith in processing loan modifications and even forced homeowners into default through improper escrow charges because lucrative fees that mortgage servicers charge delinquent homeowners have given servicers more incentive to foreclose than to modify the loans.

As a lawyer representing homeowners in foreclosure cases, Cox says he has collected over 80 discipline sanctions by judges against national loan servicers for such violations. In some of those cases, the behavior of the servicers was so brazen that courts dismissed the case “with prejudice,” which means that the plaintiff is technically barred from bringing another foreclosure action on the same claim. However, up until now, mortgage companies have continued to bring foreclosure suits against homeowners despite having earlier suits dismissed with prejudice.

Cox says the decision could potentially save the home of a family in Liberty, whom The Free Press profiled in 2013, if challenged in court. In that case, homeowners Meghan and Brett Oathout fell behind on their payments on the house they built for three months after Brett’s carpentry work dried up temporarily when the recession hit in 2008. Although Fannie Mae owned the mortgage, it had contracted with Colorado-based Aurora Loan Services to service the payments. Aurora agreed to provide the Oathouts with a higher temporary repayment plan, but in spite of the couple making payments on time, they began receiving default notices without any acknowledgment of their repayment agreement. Soon mysterious charges began showing up on their statements, and after three and a half years of making regular payments, the family was still inexplicably in default and thousands of dollars in arrears.

When Cox was representing the Oathout family in 2012, he uncovered what he believed to be blatantly fraudulent practices and bad accounting. Eventually Belfast District Court Judge Ralph Tucker, who is now a Democratic legislator, dismissed the foreclosure case with prejudice in September 2012 after Aurora’s attorneys repeatedly filed documents late and defied a court order by failing to provide adequate answers concerning the status of the Oathout’s account. In the meantime, Aurora went out of business and other mortgage servicers took over the loan. But without a resolution in court as to who owned the mortgage, the Oathouts continued to receive bills from servicers for all of the same mysterious fees the couple had disputed in court in the first place.

Still in Default Four Years Later

These days, the cube-shaped house that Brett Oathout built sits vacant and boarded up. Reached by phone last week, Brett Oathout said the family eventually abandoned the house in 2014 after receiving repeated threats of foreclosures and visits from property inspectors employed by mortgage servicers. Oathout said he used to visit the home, but the companies changed the locks several times and the family now lives in Montville.

Last year, Fannie Mae unloaded the Oathout’s mortgage along with thousands of other delinquent loans to Goldman Sachs subsidiary MTGLQ Investors. The Wall Street giant has been buying up defaulted mortgages as a way to meet the terms of a $5 billion settlement with the US Department of Justice for fraudulently misleading investors by claiming that securities it sold were backed by sound mortgages when they were actually toxic. The bank can receive up to $1.8 billion in credit to meet its settlement obligation by providing debt relief to distressed homeowners in the form of repayment plans, loan modifications, settlements, short sales or transferring the deed to the company in lieu of a foreclosure. But the Oathouts haven’t seen much relief since MTGLQ took over.

For several months, the MTGLQ’s servicer Shellpoint has been sending the Oathouts the full $73,000 bill, which the couple has long given up on paying. Oathout said his credit is wrecked as a result of the ordeal.

“We’re still struggling because we took on a lot more than we could to get ourselves out of a bad situation,” said Oathout. “We did what any good American would do — we put ourselves further in debt in the hopes that we’ll see the light of day someday. My wife and I have been married for 10 years and we can’t own anything together. Everything is in her name because I can’t be subject to a lien or that foreclosure actually coming through and everything getting taken from me.”

Earlier this year, the research firm RealtyTrac reported that MTGLQ made about $121 million selling foreclosed homes it had taken possession of in 2016.

Cox no longer represents the family, but he says the family could benefit from the Deschaine ruling regardless of who owns the mortgage now.

“It doesn’t matter that the loan has been transferred multiple times,” said Cox. “The bottom line is that there was an adjudication on the merits in a prior owner’s hands and that barred future actions. Just because they keep selling or reselling a loan doesn’t give the new buyers any greater rights than the outfit had when they lost the case the first time.”

However, without money for a lawyer, Oathout says it’s unlikely he’ll be able to go back to court.

“If you actually think about the burden that it has put on my family and me, not only financially, but emotionally for my kids and my wife,” he said. “I pull it together because that’s what we do as people, but inside every day is a fight. It’s like we’re behind on this, we’re behind on that, we lose our health insurance, how can we afford that? We’re already maxed out on our bills. Never mind hiring an attorney to resolve that issue. That’s why I just feel like letting it go.”

While it may be too late to help the Oathouts, the Deschaine decision will certainly help other victims of foreclosure abuse. Cox says he doesn’t have nearly as many judicial sanctions against mortgage servicers for misbehavior as he used to. And that’s likely due to the persistence of homeowner attorneys like Cox, who exposed the so-called “robosigning” scandal, a form of systematic perjury, that led to national servicers paying out a $25 billion settlement.

“The sanctions have tapered way off,” he said. “They’ve shaped up and they’ve learned how to do it right, which is good. I’m delighted, and that’s been our objective since day one.”