At times, when a lender gives a loan secured by a mortgage on real estate, something happens in the loan origination or closing processes (whether through mistake, inadvertence, or even fraud), which results in the mortgage being defective, and therefore not a lien on the real estate. Items such as missing signatories to the mortgage and incorrect legal descriptions of the mortgaged property are typical.

The means of resolving such issues is usually the filing of a mortgage reformation action, asking the court to judicially “reform” the mortgage to make right what went wrong. Reformation actions are usually uncontested, and defenses, when proffered, tend to be limited.

However, in a recent reformation case I litigated, US Bank as Trustee v. Finkel, et al. (Court of Common Pleas, Northampton County, #C-48-CV-2011-5023), the defendants raised rarely-seen defenses, specifically, defenses under the federal Fair Debt Collection Practices Act, the Pennsylvania Unfair Trade Practices and Consumer Protection Law, the Pennsylvania Fair Credit Extension Uniformity Act, and the federal Equal Credit Opportunity Act. All of these defenses, in one way or another, alleged that the plaintiff was engaging in debt collection through the reformation action and/or had caused the defendants harm thereby. Although I have litigated numerous reformation cases in Pennsylvania, this was the first and only one I know of to raise these defenses.

The Court granted summary judgment against the defendants, holding, in what seems to be a case of first impression in Pennsylvania, that the subject reformation action (as well as an alternative count requesting an equitable lien on the property at issue), did not involve debt collection, nor caused the harm complained of by the defendants.

Lenders faced with the task of reforming mortgages in Pennsylvania can therefore count on Stark & Stark to effectively analyze and respond to uncommon challenges to such reformation efforts.