Foreclosure Defense: Will Matrix Throw Sand in the Foreclosure Machine?



Written by Greenwood Bankruptcy Lawyer, Dee Compton

In the Sci-Fi classic The Matrix, Man is enslaved by a vast machine, which uses human beings as the energy source supporting its survival.  Before Man could overcome the machines, their power had to be overthrown by a new force.  So “Neo,” as Techno-Messiah, fought the machines and saved mankind.

The current foreclosure crisis has government, banking and Wall Street interests feeding on people, too.  Families have been encased in cocoons of “bad paper,” created by bad (or no) government rules, and greed.  Lenders have ignored the law, or paid it only lip service, and gotten away with it in the name of expedience.  But a new way of looking at old rules in South Carolina will help consumers fight back.

A recent South Carolina case, Matrix Financial Services Corporation v. Frazer provides common sense help.  Matrix says, in effect, if lenders don’t follow South Carolina law when closing mortgage loans, they may not be able to foreclose their mortgage when the borrower defaults.

The South Carolina Supreme Court explained the problem lenders may face as follows:

[I]n this case Matrix comes to the court with unclean hands, and is thus barred from seeking equitable relief.  Matrix hired LandAmerica OneStop to perform the title search, prepare the documents, and close the refinance loan–all admittedly without the supervision of a licensed attorney.   Thus, Matrix has committed the unauthorized practice of law in closing the refinance mortgage, clearly violating South Carolina law.  The dissent’s protestations aside, a party cannot violate the law and expect not to bear the consequences of its actions. This Court will not grant a discretionary, equitable remedy to a party who refused to follow the laws of this state.  Therefore, even if Matrix were able to satisfy the requirements for equitable subrogation, Matrix would not be entitled to that equitable remedy because it has unclean hands.

For years, South Carolina courts have been telling lenders to follow the consumer protection rules in mortgage lending.  The Matrix case is a new weapon to fight the foreclosure machine and help save homes.

Welcome to the real world.

Postscript: For more information on this issue, see “Was Your Mortgage Loan Closed by An Attorney?” posted in the Charleston Foreclosure Defense Blog.  The post discusses South Carolina case law requirements regarding real estate closings and the Matrix case.

John DeVore “Dee” Compton, III is an attorney practicing Consumer Bankruptcy Law in Greenwood South Carolina. A product of the Greenwood public school system, Dee graduated Greenwood High in 1981. He also graduated from Lander College with a B.S. in Political Science (1986) and Mercer University Law School (1989). In 1990 Dee founded the Compton Law Firm, PA, and practiced solo until his wife, Alecia, joined him in practice in 1994. As a solo practitioner, Dee handled all kinds of legal work, from arguing appeals before the South Carolina Supreme Court and Court of Appeals, to DUI defense, to preparing Wills, to closing Real Estate transactions, to litigating a variety of Civil Cases. Dee began filing Bankruptcy cases in 1993. In 1994, Dee and Alecia decided to make Bankruptcy the focus of their practices, and have devoted 90% of their efforts to Bankruptcy ever since. Dee also devotes much of his energies in practice to litigating Consumer issues in bankruptcy court. Notable among some of his cases in South Carolina, Dee successfully brought the first Extended Right of Rescission Tender through a Chapter 13 plan, and its accompanying rescission case under the Truth in Lending Act; removal of State Court Foreclosure actions to Bankruptcy Court to assert consumer claims; Litigation to declare Car Title Lending unconscionable; Litigation against Lawyers for aiding and abetting the Unauthorized Practice of Law; Litigation against creditors and law enforcement agents for stay violations; and Litigation attacking Creditor Claims for various Federal and State consumer violations, and a successful Student Loan discharge, among other cases. Because the financial deck is stacked against debtors, Dee believes that the effective practice of bankruptcy requires attorneys to do more than run a “forms” practice. A bankruptcy attorney should litigate matters whenever there is a reasonable probability of adding value the bankrupt’s estate, or when unscrupulous creditors violate bankruptcy or consumer laws, and cause damage to a debtor. In addition to practicing law, Dee is a member of the Greenwood Lions Club, and has a long record of community service having served on many boards and committees. Dee is a past chairman of the S.C. Bar Consumer Law Section, and has spoken at CLEs on Consumer and Bankruptcy issues. He is the author “Legal Briefs”: a series of articles on general legal topics, and has published Op-Eds on matters of interest in the Greenville News, The State, the Index Journal and other newspapers. Dee has also appeared many times on local talk radio to discuss matters of legal and political interest. Dee has engaged in public service having served on Greenwood City Council, and as Vice-Chairman of Greenwood County Council. Dee handles consumer and business bankruptcy cases under Chapter 7 and 13 of the Bankruptcy Code. He is admitted to practice in all courts in South Carolina and Georgia, The 4th and 11th Circuit Courts of Appeal, and the United States Supreme Court. Dee and Alecia are the parents of three daughters.

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