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PJC files brief: Church Denied Opportunity to Address Debt through Foreclosure Process

October 22, 2010: In some cases, going through the foreclosure process is the better option.

Now before you conclude that the PJC has lost its mind and mission, read this story about a church that lost its property to a lender. When C. Phillip Johnson Full Gospel Ministries, Inc., took out a mortgage a few years back, the lender required the church to sign a deed in lieu of foreclosure. This meant that when the church eventually missed two loan payments, the lender could immediately record title to the property and take ownership without going through the foreclosure process. Avoiding that process might seem like a relief, until you realize that it would have provided time for the church to make up those payments and a framework for working out at least partial compensation for the property.

The church sued in Montgomery County Circuit Court, but the judge ruled in favor of the lender. The church appealed, and the Maryland Court of Appeals decided to review the case, C. Phillip Johnson Full Gospel Ministries, Inc. v. Investors Financial Services, LLC.

Upon invitation from the Court, the Public Justice Center filed a friend-of-the-court brief on October 22, 2010, addressing implications for residential mortgages. Murnaghan Appellate Advocacy Fellow Jessica Weber argued in the brief that a deed in lieu of foreclosure, executed at the time of the original mortgage transaction and prior to default on a loan, is invalid because it clogs the borrower’s right of redemption. This right provides a time period for people with mortgages to pay off their debts and prevent the loss of their home. In light of the current economic downturn, the foreclosure crisis, and the high rates of mortgage default nationwide, the courts must vigilantly guard the right of redemption, particularly in the face of predatory loan terms.

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