Judiciary Taking a Tough Stand Regarding Foreclosure Suits

April 6th, 2009 | Tags: Foreclosure

The judiciary is taking a tough stand regarding foreclosure suits and not allowing the lenders to get away easily. In Ohio the rights of Deutsch Bank to foreclose came to be challenged. Now it is the turn of a North Carolina judge to dismiss Wachovia’s lawsuit.

Superior Court Judge Richard W. Stone stopped Wachovia from foreclosing on a property held by Granite Development by imposing a preliminary injunction. This injunction will remain in force until completion of a trial charging Wachovia with termination a derivative interest rate “swap”. Wachovia has asked for $5.48 as terminating fees. Granite Development had filed the suit in February alleging that Wachovia had indulged in coercion, deception, and unjust and misleading practices. Granite Development wants the swap agreement to be rescinded or changed and the “contrived and unwarranted” termination of the fee to be stopped.

Judge Stone observed that there are “serious issues” relating to the right of Wachovia to go ahead with the foreclosure against Granite Development. It would cause irreparable harm to the shopping centre that has been targeted. Wachovia has also been ordered by the judge to stop collection rent from the tenants of the centre.

The idea behind the swap was to give protection to Granite form increase in interest rate beyond the stipulated 5.82%. The chaos in the economy has led the swap to be used in exactly the opposite direction. Moreover the termination fee would in effect weigh down Granite with 10.9% increase in interest. It would tantamount to double the promised rate of the swap agreement. As per the latter understanding any interest increase was to be borne by Wachovia and not by Granite.

Alexander T. Arapoglou of University of North Carolina has testified that the swap agreement suggested by Wachovia was “never an appropriate vehicle” to be a bolster against potential increase of interest rates. He also described that the so-called termination fee would amount to “an unconscionable windfall” for Wachovia.

The amended complaint states, “Far from protecting (the Granite affiliate) from the risk of rising permanent mortgage interest rates, the swap agreement has compounded (the Granite affiliate\’s) risk. Not only must (the Granite affiliate) now pay higher market rates than the fixed rate specified in the swap agreement, but Wachovia actually contends that (the Granite affiliate) owes Wachovia money on the termination of the swap agreement, rather than other way around.”