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Apr
08

ACLU Charges High-Speed Florida Foreclosure Courts Deprive Homeowners of Chance to Defend Homes

By | Court Cases, Featured, Foreclosure Defense Research, Founding Principles, Housing & Economic Research, Right of Due Process

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The American Civil Liberties Union (ACLU) filed its case yesterday in the 2nd District Court of Appeals in the case of Georgi Merrigan. I personally worked closely with the attorneys at the ACLU on this issue of Lee County courts as I have been an advocate for  homeowner rights for years and was the co-chair of the Lee County Foreclosure Task Force from 2008 to 2009. My affidavit was also filed as part of the Appendix to the ACLU’s filing and was referenced directly in the Petition for a Writ of Certiorari and Writ of Prohibition.

The full Petition can be downloaded HERE.
My Affidavit can be downloaded HERE.
The full Appendix to the Petition can be downloaded HERE.

Below is the full press release from the ACLU’s website.

ACLU Charges High-Speed Florida Foreclosure Courts Deprive Homeowners of Chance to Defend Homes

PETITION FILED IN STATE APPELLATE COURT SAYS ‘MASS FORECLOSURE DOCKET’ IN LEE COUNTY CIRCUIT COURT IGNORES PROCEDURAL SAFEGUARDS IN RUSH TO CLEAR CASES

FOR IMMEDIATE RELEASE: April 7, 2011

CONTACT:
Derek Newton, ACLU of Florida, (786) 363-2737; media@aclufl.org
Will Matthews, ACLU national, (212) 549-2582 or 2666; media@aclu.org

CAPE CORAL, FL – The American Civil Liberties Union today filed a petition in a Florida appellate court charging that the foreclosure court system in Lee County systematically denies homeowners a fair opportunity to defend their homes against foreclosure.

The special “mass foreclosure docket” established in December 2008 operates under rules that differ substantially from those that govern the rest of Lee County’s civil cases and was designed to speed through as many foreclosure cases as possible without providing homeowners facing foreclosure a meaningful opportunity to develop their cases or present defenses, according to the petition.

“Operating against the backdrop of well-documented disarray and fraud in mortgage documentation, the shortcuts taken in Lee County courts mean that homeowners may never have a meaningful opportunity to refute faulty evidence supposedly supporting foreclosure,” said Larry Schwartztol, staff attorney with the ACLU Racial Justice Program. “By elevating speed over accuracy, Lee County subjects homeowners to foreclosure proceedings that violate the due process rights guaranteed by the Constitution.”

The petitioner in the ACLU’s case, Georgi Merrigan of Cape Coral, FL, is facing foreclosure after leaving her job as a flight and ground paramedic to care full time for her husband, who suffered massive injuries in a catastrophic car accident. Merrigan has every intention of vigorously contesting her foreclosure case. But because Merrigan’s case is assigned to the “mass foreclosure docket,” the ACLU charges that she cannot get a fair shot at defending her home. The ACLU’s petition asks that Merrigan’s case be re-assigned to the general civil division so that she will be afforded due process under the Florida and U.S. Constitutions.

“No one should ever have to go to court with the deck already stacked against them,” said Howard Simon, Executive Director of the ACLU of Florida. “Nowhere does it say someone is entitled only to the justice we have time for. We can’t allow the basic protections of due process to be the victim of judicial shortcuts.”

The ACLU’s petition is the culmination of a months-long investigation into foreclosure court systems throughout the state of Florida, where media reports have long suggested that the constitutionally-protected due process rights of homeowners have been ignored in a rush to push foreclosure cases through the courts. With one in every 288 housing units in foreclosure, Lee County has the highest percentage of foreclosures in the state of Florida, arguably the epicenter of the nation’s foreclosure crisis.

According to the ACLU’s petition, officials in Lee County seek to clear the foreclosure court docket as quickly as possible, at the expense of complying with basic procedural rules. Despite explicit instructions from the chief justice of the state supreme court that reducing the backlog of foreclosure cases should not “interfere with a judge’s ability to adjudicate each case fairly on its merits,” judges move through cases at lightning speed, sometimes seeing as many as 200 cases a day, according to the petition.

“Despite the extremely high stakes for homeowners, procedural violations in the ‘mass foreclosure docket’ are rampant,” said Rachel Goodman, an attorney with the ACLU Racial Justice Program. “Homeowners face systemic handicaps, and banks get a pass in proving their cases because the courts have effectively suspended the rules that give homeowners a chance to review the evidence against them.”

About 25 percent of Lee County’s population is black or Latino, and government data show that the foreclosure crisis across the country has disproportionately impacted communities of color. According to a recent report by the Center for Responsible Lending, nearly 8 percent of both African Americans and Latinos have lost their homes to foreclosures, as compared to 4.5 percent of whites. Additionally, the indirect losses in wealth that result from foreclosures as a result of depreciation to nearby properties will also disproportionately impact communities of color. The Center for Responsible Lending report estimates that by the end of 2012, the African American and Latino communities will be drained of $194 and $177 billion, respectively, in these indirect “spillover” losses alone.

# # #

A copy of the ACLU’s petition is available online at: http://www.aclufl.org/pdfs/2011-04-MerriganPetition.pdf

Georgi Merrigan, Howard Simon and ACLU of Florida Associate Legal Director Maria Kayanan will be available today in front of the Merrigan home at:

Thursday, April 7, 2011
1:30pm
2723 SW 17 PL
Cape Coral, FL 33914

Apr
08

5th DCA Win for Homeowner – Khan, Appellant, v. Bank of America NA

By | Court Cases, Featured, Homeowner Resources

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This just out from Florida’s 5th District Court of Appeals! Big win for homeowner and defense bar in Florida. The essence of this decision was that Bank of America alleged to be owner and holder of the Note and Mortgage but, like a HUGE number of these cases, the documents that they attached to their Complaint directly conflicted with those allegations (as in the Note was payable to a different entity)!

The lower court granted summary judgment anyway, presumably because the Judge felt that well-established case law in Florida didn’t matter that the exhibits attached to a complaint are controlling when the allegations conflict. Just one more example… well, you know that already!

Here you go…

36 Fla. L. Weekly D738a

Mortgage foreclosure — Standing — Error to enter final summary judgment of foreclosure in favor of plaintiff where, although unverified amended complaint alleged plaintiff was holder of note and mortgage, this allegation was contradicted by copy of note attached to amended complaint — When exhibits are attached to complaint, contents of exhibits control over allegations of complaint

SHAKIL KHAN AND DINA KHAN, Appellant, v. BANK OF AMERICA, N.A., Appellee. 5th District. Case No. 5D10-3288. Opinion filed April 8, 2011. Non-Final Appeal from the Circuit Court for Orange County, Emerson R. Thompson, Jr., Senior Judge. Counsel: Craig R. Lynd, Matthew D. Valdes and Jonathon C. Blevins, of Kaufman, Englett & Lynd, PLLC, Orlando, for Appellant. No Appearance for Appellee.

(ORFINGER, J.) Shakil and Dina Khan appeal a final summary judgment of foreclosure entered in favor of Bank of America, N.A. We reverse.

In its amended complaint to foreclose a mortgage on the Khans’ home, Bank of America alleged that it was the owner and holder of the note and mortgage. However, the copy of the note attached to the amended complaint bears an endorsement from Bank of America to Wells Fargo Bank, N.A. as trustee for the holders of Banc of America Mortgage Securities, Inc. Mortgage Pass-Through Certificates, Series 2006-B. The Khans correctly raised the issue of Bank of America’s standing to prosecute the foreclosure based on the assignment of the note to Wells Fargo Bank.

The proper party with standing to foreclose a note and mortgage is the holder of the note and mortgage or the holder’s representative. See Taylor v. Deutsche Bank Nat. Trust. Co., 44 So. 3d 618, 622 (Fla. 5th DCA 2010); BAC Funding Consortium Inc. ISAOA/ATIMA v. Jean-Jacques, 28 So. 3d 936, 938 (Fla. 2d DCA 2010). While Bank of America alleged in its unverified complaint that it was the holder of the note and mortgage, the copy of the note attached to the amended complaint contradicts that allegation. When exhibits are attached to a complaint, the contents of the exhibits control over the allegations of the complaint. See Hunt Ridge at Tall Pines, Inc. v. Hall, 766 So. 2d 399, 401 (Fla. 2d DCA 2000). Because the exhibit to Bank of America’s amended complaint conflicts with its allegations concerning standing, Bank of America did not establish that it had standing to foreclose the mortgage as a matter of law. As a result, the trial court acted prematurely in entering the final summary judgment of foreclosure in favor of Bank of America. We, therefore, reverse the final summary judgment of foreclosure and remand for further proceedings.

REVERSED and REMANDED for further proceedings. (PALMER and EVANDER, JJ., concur.)

Nov
19

ALERT! 2nd DCA Overturns Foreclosure Judgment Decision out of Lee County, Florida – Homeowner’s Case Valid

By | Court Cases, Housing & Economic Research

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This was an expected decision. I think it’s safe to say that the original decision entered by Judge McHugh was either tainted with some sort of bias or can just be explained as a decision regardless of, no, in spite of, the Florida Rules of Civil Procedure and well established case law. Need anything more be said? Sure, I could write a book. But if Lee County Judges and others like them don’t start applying the RULES to ALL cases on their dockets and across the board, then it is likley that a good case will be made that Constitutional Rights of Homeowners are being violated en masse through a systemic failure of justice, decency, ethics and leadership.

That is essentially what meetings with the ACLU have directly focused on. Yes, First and Fourteenth Amendment Rights Violations. Not just by one judge but by a SYSTEM OF JUDGES, well, Florida Judges.

It is refreshing to see that there are some judges that actually hold values dear like integrity, honor, equity. You know, old, outdated, traditional values. Maybe better said: Founding Values.

I want to honor Pasco County Judge Susan Gardner and Sarasota County Judge Anthony Rondolino. Two people who care about the integrity of their profession and the system. They are doing good, honest work striving to maintain order and an ethical practice of law in this state. At the very bottom of this post I am inserting a recent story on Judge Gardner’s growing anger at bank and plaintiff’s bar attorney lawlessness… CLICK HERE to read full story on Tampa Tribune.

Imagine what our lives would be like today, as Americans, if our financial system and judicial system actually still had integrity. No, greed has consumed and greed is overcoming. Power Greed. Money Greed. It’s a deep perversion undermining America’s Greatness. But greed is rooted in the person, not the system. The system has simply become polluted with AwfulPeople. Not completely so as to lose hope. Not yet but the crossroads are here America. What path shall we take? What path will you take? Who will you elect? What will you tolerate around you?

Some in this foreclosure fight are fighting for a free home. That I believe to be wrong. We are all stakeholders in this thing we call America. The financial system is corrupt but the foundations of it are what makes us a great country that can be great again. I wouldn’t expect a home for free, that just doesn’t feel right in my gut. If I signed a Note, a promise to pay, then I need to live up to that. If my ability to pay has changed due to a loss of income, a rising payment or whatever, well, so be it. I might try to work things out, many have. The banks are not playing fair. They created such a convoluted mess I call “Subsidiary City.” I know that fraud is wrong. I know that overcharging people is wrong. I know that getting paid back 2-10 times as much as what was originally funded – and then trying to take a US Citizen’s home on top of it – feels wrong.

So I say that if we as a country are to pull through this and pull out of this with our country, our freedoms and Constitutional Rights intact – we ALL better figure out how to compromise. Greed will not let that happen. But we can overcome it and work together, Banks and Homeowners. Judges and Attorneys. Right and Left, Conservative and Liberal. We can agree to disagree about the little things. It’s the BIG things we need to be steely resolved to agreeing on. We have to go back to solid principles and values or we will destroy ourselves.

Well, anyway, heres’ the DCA Summary.

35 Fla. L. Weekly D2519a

Mortgage foreclosure — Trial court erred in entering summary judgment of foreclosure on basis of equitable subrogation in favor of plaintiff which had allegedly paid off two prior mortgages on homestead property — Summary judgment was improper because there were factual issues as to whether the prior notes and mortgages were satisfied after closing, and factual issue as to whether husband’s signature on earlier loan documents had been forged

PAMELA ANN BROTHERIDGE and JASON BROTHERIDGE, Appellants, v. OPTION ONE MORTGAGE CORPORATION and GRP LOAN, LLC, Appellees. 2nd District. Case No. 2D09-4893. Opinion filed November 17, 2010. Appeal from the Circuit Court for Lee County; Michael T. McHugh, Judge. Counsel: Daniel S. Cruz, Barbara Goolsby, and Michael Stirrup of Florida Rural Legal Services, Inc., Fort Myers, for Appellants. J. Matthew Belcastro and Suzanne M. Boy of Henderson, Franklin, Starnes & Holt, Fort Myers, for Appellees.

(ALTENBERND, Judge.) Pamela Ann and Jason Brotheridge appeal a judgment of foreclosure entered as a result of a motion for summary judgment. We conclude the record did not demonstrate that GRP Loan, LLC, was entitled to foreclose on the property under a theory of equitable subrogation when the trial court granted its motion for summary judgment. There were significant irregularities in the closing of the loan at issue, as well as in the execution of the loan documents, and the evidence before the trial court failed to demonstrate the nonexistence of a genuine issue of material fact. Therefore, the entry of summary judgment was improper and we reverse.

The Brotheridges are married and own a home in Cape Coral, Florida. In 1995, the home was encumbered by at least two notes and mortgages. The larger note with Centex Mortgage allegedly had an outstanding indebtedness of approximately $208,000. The smaller note, obtained to repair hurricane damage to the home, was a U.S. Small Business Administration loan for $70,000, allegedly with an interest rate of only 3.3 percent. Mrs. Brotheridge operated a pet store that was struggling and needed capital to keep the business open. She hoped to obtain that capital by refinancing the couple’s home.

Pablo Samsing, a mortgage broker with Prime Time Mortgage, contacted Mrs. Brotheridge over the telephone. He led her to believe that she could refinance the home at an interest rate of 8.9 percent and obtain approximately $50,000 to use in her business. Prime Time Mortgage apparently applied for the financing with Option One Mortgage Corporation. Various documents that were part of that application contain what, at this point in the litigation, must be assumed to be the forged signatures of Mr. Brotheridge.

On the day of the closing, a notary public, Maureen Calderone, came to the Brotheridges’ home. At that time, Mrs. Brotheridge first learned that the note would bear an interest rate of 12.45 percent. It is undisputed that Mrs. Brotheridge signed the note and mortgage at that time, borrowing approximately $325,000.

The note and mortgage also contain the purported signature of Mr. Brotheridge, allegedly witnessed by Mrs. Calderone’s husband, Kevin J. Calderone. Mrs. Calderone, as a notary, signed the documents, claiming that she identified Mr. Brotheridge from his Florida driver’s license. It is undisputed that he has a Canadian driver’s license. Mrs. Brotheridge denies that Mr. Brotheridge or Mr. Calderone were present at the closing. Expert testimony currently establishes that the signature of Mr. Brotheridge on these documents is a forgery. Thus, at summary judgment, the trial court was required to assume that Mr. Brotheridge had not signed the documents or otherwise been involved in this loan transaction.

Mrs. Brotheridge has never paid anything on this obligation and, with the assistance of counsel, has tried to rescind the loan. In all probability, the obligation is now far larger than the value of the home. The fact that she has lived in the home for several years without making any arrangements to pay this obligation clearly troubled the trial court.

At some point Option One assigned its rights to GRP Loan, LLC. It then moved for summary judgment in this case, maintaining that it was at least entitled to recover the amount of $278,728.47 that allegedly was applied to pay off the two prior mortgages. Significantly, it relied exclusively on dollar amounts described in the settlement statement at the closing to establish its right to foreclose. The trial court granted that summary judgment, reserving the Brotheridges’ right to proceed on their counterclaims. Thereafter, without resolving the counterclaims, it entered the final judgment of foreclosure that is now pending on appeal.

There admittedly is some authority for the theory that a lender can obtain an equitable lien by virtue of equitable subrogation, not on its own loan documents but based on earlier loans that were paid off in refinancing. See Palm Beach Sav. & Loan Ass’n, F.S.A. v. Fishbein, 619 So. 2d 267 (Fla. 1993); Suntrust Bank v. Riverside Nat’l Bank of Fla., 792 So. 2d 1222 (Fla. 4th DCA 2001). We note, however, that in Fishbein, the earlier notes and mortgages had been executed by both the husband and wife and that it was the husband who had forged his wife’s signature on the documents for the new loan. 619 So. 2d at 268. Suntrust Bank involved a situation in which a bank lost its priority inadvertently. 792 So. 2d at 1223. Thus, these cases are not factually similar to this case. This case may involve misconduct by a mortgage broker and a notary. From the record, it is not clear whether their possible misconduct can or should be attributed to Option One and GRP Loan, LLC.

Given the major irregularities at the closing, however, we are unwilling to assume that the settlement statement at that closing is dispositive of this foreclosure. GRP Loan, LLC, did not place any notes or mortgages from Centex Mortgage or the U.S. Small Business Administration in the record. There is no proof that those notes and mortgages were satisfied after the closing. In fact, the only indication that they may have been satisfied by this transaction is a reference to them in the settlement statement. We conclude that the trial court erred in accepting the reference in the settlement statement as proof of what the lender actually did with the proceeds of this loan after closing with Mrs. Brotheridge. There is also nothing to indicate that Mr. Brotheridge ever executed those earlier loan documents; thus, he is suffering a foreclosure of his homestead with no proof that he signed or agreed to the loan. We agree with the Brotheridges that factual issues as to the foreclosure and their counterclaims exist that should be resolved before their home goes to a forced sale.

Even assuming that the earlier notes and mortgages were properly executed by the husband and wife and were satisfied by virtue of this new loan, we question whether an equitable lien under a theory of equitable subrogation should give GRP Loan, LLC, the right to immediate foreclosure under these circumstances. GRP Loan, LLC, had no rights under those earlier documents until the trial court gave it equitable rights. At that point, GRP Loan, LLC, may have received the equitable right to obtain future payments from the Brotheridges under the terms of those earlier loans, which were more favorable to the Brotheridges. However, nothing in this record suggests the Brotheridges were ever extended the opportunity to make payments on those notes to GRP Loan, LLC. Without proof of any default on those earlier notes and being, at worst, in default on forged notes, we are not entirely convinced that this record at summary judgment entitled GRP Loan, LLC, to receive an immediate equitable right to foreclose on this property and, in particular, on Mr. Brotheridge’s homestead.

Reversed and remanded. (DAVIS, J., and WILLIAMS, CHARLES E., ASSOCIATE JUDGE, Concur.)

* * *

Sep
22

HOT OFF THE PRESS! Florida’s 3rd DCA overturns Summary Judgment against Homeowner

By | Court Cases, Featured, Homeowner Resources

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Here you go folks! One more case where the Florida District Court of Appeals is sending a strong message to the lower courts around Florida that they cannot just simply ignore well-established law and the Florida Rules of Civil Procedure just because it’s a “Foreclosure Case” and the judges are overwhelmed with them. They simply cannot continue to ignore the basic elements of due process and rules of civil procedure. The very fact that the majority of foreclosure cases end in a summary judgment should draw the ire and attention of every Florida legislator, politician, and the Florida Supreme Court. In no other area of law do the cases end in Summary Judgment with this type of frequency or percentage.

To put it simply: The vast majority of Florida Judges are applying completely different rules of evidence, procedure and ethics to Foreclosure Cases as opposed to any and all other types of cases. Combined with the obvious facts that systemic fraud is running amok in the system and the fact that the Florida Attorney General’s office and the FBI are investigating the firms that handle the large majority of foreclosure cases statewide, there should be an immediate reversal in what is clearly an unspoken mandate by the Administrative Judges in every FL Judicial Circuit – which, obviously, is to cram these foreclosure cases through as fast as their rubber stamp and gavel can be applied.

I suggest they start paying attention to the bullhorn in their ears… enjoy the case below (if you’re a homeowner or advocate thereof).

35 Fla. L. Weekly D2106b

Mortgage foreclosure — Affirmative defenses — Trial court erred in striking mortgagor’s affirmative defenses on ground that they were not specific or supported

WASHINGTON L. SANCHEZ, Appellant, vs. LASALLE BANK NATIONAL ASSOCIATION, ETC., Appellee. 3rd District. Case No. 3D09-2095. L.T. Case No. 09-4074. Opinion filed September 22, 2010. An Appeal from the Circuit Court for Miami-Dade County, Mark King Leban, Judge. Counsel: John H. Ruiz and Hector A. PeÑa, for appellant. Butler & Hosch, Beth A. Norrow, and Thomasina Moore, for appellee.

(Before GERSTEN, SHEPHERD, and LAGOA, JJ.)

(PER CURIAM.) Washington Sanchez (“Sanchez”) appeals from a summary final judgment for foreclosure in favor of LaSalle Bank National Association, as Trustee for Merrill Lynch First Franklin Mortgage Loan Trust (“LaSalle”). We reverse.

Sanchez defaulted under the terms of his mortgage, and LaSalle filed suit for mortgage foreclosure. In response, Sanchez filed an answer and affirmative defenses. Among other things, Sanchez alleged that LaSalle did not comply with the federal Truth-in-Lending Act (“TILA”), 15 U.S.C. § 1601 et seq.

Thereafter, LaSalle responded to the affirmative defenses, and moved for summary judgment. Shortly before the hearing on the motion for summary judgment, Sanchez moved to add additional affirmative defenses. The trial court granted Sanchez’ motion, but then sua sponte struck all of Sanchez’ affirmative defenses. The trial court also granted LaSalle’s motion for summary judgment.

On appeal, Sanchez asserts that the trial court erred in striking his affirmative defenses and entering summary judgment. LaSalle contends the trial court properly struck the affirmative defenses because they were not specific or supported. We agree with Sanchez.

Generally, the striking of pleadings is not favored. See, e.g., Menke v. Southland Specialties Corp., 637 So. 2d 285 (Fla. 2d DCA 1994); Costa Bell Dev. Corp. v. Costa Dev. Corp., 445 So. 2d 1090 (Fla. 3d DCA 1984). Florida Rules of Civil Procedure authorize a trial court sua sponte to strike a pleading which is “redundant, immaterial, impertinent or scandalous,” and, upon a party’s motion, a pleading which is sham. Fla. R. Civ. P. 1.140(f), 1.150. A trial court, however, should not strike a pleading sua sponte on the ground that it is legally insufficient, or because the party subsequently may not be able to prove his or her allegations. Bay Colony Office Bldg. Joint Venture v. Wachovia Mortgage Co., 342 So. 2d 1005 (Fla. 4th DCA 1977).

Here, the trial court, on its own motion, struck Sanchez’ affirmative defenses without finding them redundant, immaterial, impertinent, scandalous or a sham. Apparently, the trial court deemed the defenses to be lacking in specificity and support. Neither of these grounds warrants the sua sponte dismissal of Sanchez’ affirmative defenses.

Accordingly, we reverse the final summary judgment, and remand the cause for further proceedings.

Reversed and remanded.

Sep
13

Chase Sued in NY for denying modifications

By | Corporate Greed & Corruption, Court Cases, General, HAMP, Housing & Economic Research

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 See full story below… this is going to start happening more and more. The  bottom line in this bank charade is that the big banks/servicers are NOT modifiying people’s loans according to the Making Home Affordable (HAMP) provisions and in accordance to their Servicer Participation Agreements with the US Dept. of Treasury, Fannie Mae and Freddie Mac. Why? Becasue they don’t make as much money when they modify… they’d rather keep a homeowner in default and ultimately foreclose. It all boils down to massive greed.

You know, what really galls me about all of this is that these banks took taxpayer funded bailouts which were given to them AGAINST the will of the people but they took the bailout money and now they are givin the US taxpayer the finger when it comes to modifying millions of homeowners into a federal program which would seriously stabilize the entire economy if it were truly implemented. The worst part of this situation is that the banks/servicers who received the bailout money and who are denying loan modifications really don’t have anything to lose really; they sold these mortgage loans they now service so they have already been paid on them. You know who really owns these loans? You and I do basically… city pension funds, state pension funds, mutual funds. Oh yeah… these fraudsters sold the toxic assets to the American people, insured themselves against the default of the toxic assets, came crying to the government to bail out their insurance companies when the claims exceeded the ability to pay out, took bailout money to “stabilize” the bank when they started to fail and now they treat defaulting American homeowners like complete *!$@ when they call the bank to ask for help to save their home and offer to keep paying a payment that they can afford because the whole damn economy has been imploded by their reckless and greedy behavior.

I for one will NEVER put my worthless money in any of the big banks ever again. A safe at home is safer than depositing any money in a bank. Use a small community bank or local state bank. Credit unions are just as bad if not worse. Seriously, we should all collectively bring the big banks to their knees by simply exercising our right of choice. Take your money out of their bank and go open a new account with a small community bank.

If you continue to do business with the likes of Chase, Bank of America, Wells Fargo, Wachovia, US Bank, Citibank, et al. good luck… you’ll probably be forced to sue them one day just to make sure they abide by their agreements because they really don’t care about you at all.

Chase sued in NYC for denying foreclosure relief

Three Queens homeowners allege the bank illegally delayed and denied their applications under the Home Affordable Modification Program; suit seen as first in NYC.
By Amanda Fung

Published: May 4, 2010 – 12:28 pm

Three Queens homeowners filed a lawsuit against J.P. Morgan Chase Bank N.A. and two of its subsidiaries, Chase Home Finance and Washington Mutual Bank, claiming that the groups illegally delayed and denied their applications for permanent foreclosure relief under the federal Home Affordable Modification Program. The lawsuit is seen as one of the first cases involving the modification program in New York City.

The lawsuit, which was filed in the Eastern District Federal Court in Brooklyn, claims that the bank violated the federal program that requires banks to provide permanent modifications to eligible homeowners who complete three months of trial payments and verify their income. Similar lawsuits have been filed against a number of other banks, such as Bank of America and Wells Fargo, in other states over the past year. Last month, a California couple reportedly sued Chase because it told them to stop making mortgage payments so they could qualify for loan modification. Chase then foreclosed on their home.

Chase declined to comment.

“Chase breached their contract,” said Carmela Huang, an attorney at the Urban Justice Center, which is representing the Queens homeowners in the case. “As far as we know, this is the first case in New York.”

Homeowners from three Queens neighborhoods—Queens Village, Fresh Meadows and Jamaica—are suing to force Chase to modify their loans and end foreclosure proceedings.

Despite making timely trial modification payments two of the homeowners were denied permanent loan modifications and their homes were foreclosed, according to the lawsuit. Chase claimed that their incomes were inadequate for the permanent loan modification, but refused to specify income qualifications, said Ms. Huang.

Similar to the California case, the third plaintiff in this lawsuit is a homeowner in Fresh Meadows who claims that the bank instructed him last month to deliberately miss payments so he would be eligible for a loan modification. The homeowner had refinanced in 2005. As a result of missing two monthly payments, the homeowner now faces foreclosure. While the homeowner was placed on trial modification last year, he was denied permanent status based on the value of his house. But the bank has not disclosed the value. The Home Affordable Modification Program requires banks to offer trial modifications as long as the value of modifying the loan is more than the value of foreclosing.

“Our clients’ situation is not unique. We have been inundated by people in foreclosure,” said Ms. Huang, adding that homeowners don’t have enough resources to sue banks. In this particular case, Urban Justice is providing its legal service for free. “The law is clearly on our side. We hope Chase will settle quickly.”

Loan modifications under the federal program reduce homeowners’ mortgage payments to 31% of the homeowners’ income by reducing the interest rate, extending the term of the loan or adjusting monthly payments. According to Chase, since the start of 2009 the bank has offered 750,000 homeowners loan modifications nationwide, 25% of those were permanent. The bank does not break down regional information.

Feb
27

LPS Alerts SEC that trouble is brewing – Fraudulent Assignments Class Action

By | Corporate Greed & Corruption, Court Cases, Featured

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Lender Processing Services (LPS), a spinoff company from FIS (Fidelity National Information Services), who also happens to traffic in creating mortgage assignments out of thin air for the largest financial institutions and foreclosure fraud mills, has just put the SEC on alert in it latest 10K Filing that they cannot accurately assess the economic impact of a class action lawsuit it has been named as a Defendant in. The class action was filed last week in federal court in the Southern District of Florida. Click Here to read the complaint.

The radar screen of foreclosure fraud is starting to really light up with bogies… otherwise known as “bogus” mortgage assignments and un-authenticated affidavits. I think the bottom line is that Americans are just plain fed up with the fraud and trickery being perpetrated upon our communities, our country and its citizens by corporate America, as well as the executive and judicial branches of this country. Enough is enough is what I hear every day and I predict a meltdown of the corporate foreclosure machine very soon lest a total revolution breaks out in this country by the “astroturf” tea baggers and the like.

Click here to read the actual LPS 10K Filing but here’s the interesting excerpt…

Item 3 – Legal Proceedings

Litigation
 
In the ordinary course of business, we are involved in various pending and threatened litigation matters related to our operations, some of which include claims for punitive or exemplary damages. Often, these matters do not include a specific statement as to the dollar amount of damages demanded. Instead, they include a demand in an amount to be proved at trial. For these reasons, it is often not possible to make a meaningful estimate of the amount or range of loss that could result from these matters. Accordingly, we review matters on an ongoing basis and follow the provisions of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 450, Contingencies, when making accrual and disclosure decisions. When assessing reasonably possible and probable outcomes, we base our decision on our assessment of the ultimate outcome following all appeals. We intend to vigorously defend all litigation matters that are brought against us, and we do not believe that the ultimate disposition of any of these lawsuits will have a material adverse impact on our financial position or results of operations. Finally, we believe that no actions, other than the matter listed below, depart from customary litigation incidental to our business.
 
Schneider, Kenneth, et al. vs. Lender Processing Services, Inc., et al.
 
On February 17, 2010 this putative class action complaint was filed in the United States District Court for the Southern District of Florida. In a single count complaint, the plaintiffs seek to recover unspecified damages for alleged violations of the Fair Debt Collection Practices Act relating to the preparation and use of assignments of mortgage in foreclosure actions. The defendants include two large banks, as well as LPS and our document solutions subsidiary. The complaint essentially alleges that the industry practice of creating assignments of mortgages after the actual date on which a loan was transferred from one beneficial owner to another is unlawful. The complaint also challenges the authority of individuals employed by our document solutions subsidiary to execute such assignments as officers of various banks and mortgage companies. Although we do not believe that our conduct falls under the provisions of the Fair Debt Collection Practices Act, at this early stage we are unable to accurately predict the outcome of this matter.
 
Regulatory Matters
 
Due to the heavily regulated nature of the mortgage industry, from time to time we receive inquiries and requests for information from various state and federal regulatory agencies, including state insurance departments, attorneys general and other agencies, about various matters relating to our business. These inquiries take various forms, including informal or formal requests, reviews, investigations and subpoenas. We attempt to cooperate with all such inquiries. Recently, during an internal review of the business processes used by our document solutions subsidiary, we identified a business process that caused an error in the notarization of certain documents, some of which were used in foreclosure proceedings in various jurisdictions around the country. The services performed by this subsidiary were offered to a limited number of customers, were unrelated to our core default management services and were immaterial to our financial results. We immediately corrected the business process and began to take remedial actions necessary to cure the defect in an effort to minimize the impact of the error. We subsequently received an inquiry relating to this matter from the Clerk of Court of Fulton County, Georgia, which is the regulatory body responsible for licensing the notaries used by our document solutions subsidiary. In response, we met with the Clerk of Court, along with members of her staff, and reported on our identification of the error and the status of the corrective actions that were underway. We have since completed our remediation efforts with respect to the affected documents. Most recently, we have learned that the U.S. Attorney’s office for the Middle District of Florida is reviewing the business processes of this subsidiary. We have expressed our willingness to fully cooperate with the U.S. Attorney. We continue to believe that we have taken necessary remedial action with respect to this matter.

Game on folks… keep putting the pressure on every pressure point you can find in this corrupt system. Sooner or later, the knees of this system will buckle.

Feb
12

Let the In-Fighting Begin… HUGE case for Florida Homeowners

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Fresh off the press of the 2nd District Court of Appeals, today the Fla. 2nd DCA issued a stunning shot across the bow of US financial institutions by reversing a trial court’s decision to grant summary judgment in favor of US Bank, NA.

CLICK HERE for a copy of the Final Order issued today, February 12, 2010.

What is absolutely hilarious about this case is that the homeowners were NOT involved in the case. Rather, BAC Funding Consortium Inc., who was the 2nd mortgagee in the case, appealed the trial courts decision and alleged that US Bank, NA did not have standing to foreclose. Oh the irony… we knew this would happen but it is certainly fun to watch it start to happen. Banks suing Lenders; Lenders suing Trustees; Investors suing Servicers. Much more to come… that’s a promise.

The essence of BAC’s argument? Summary judgment for the plaintiff in mortgage foreclosure action was premature where plaintiff had failed to establish standing to foreclose — Plaintiff moving for summary judgment before an answer is filed must establish that defendant could not raise any genuine issues of material fact if defendant were permitted to answer complaint — Because exhibit to plaintiff’s complaint conflicts with allegations concerning standing and exhibit does not show that plaintiff has standing to foreclose mortgage, plaintiff did not establish entitlement to foreclose mortgage — Incomplete, unsigned, and unauthenticated assignment attached as exhibit to plaintiff’s response to defendant’s motion to dismiss did not constitute admissible evidence establishing standing to foreclose note and mortgage.

The appellate court agreed and said,
“Despite the lack of any admissible evidence that U.S. Bank validly held the note and mortgage, the trial court granted summary judgment of foreclosure in favor of U.S. Bank. BAC now appeals, contending that the summary judgment was improper because U.S. Bank never established its standing to foreclose.

The summary judgment standard is well-established. “A movant is entitled to summary judgment ‘if the pleadings, depositions, answers to interrogatories, admissions, affidavits, and other materials as would be admissible in evidence on file show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.’ ” Estate of Githens ex rel. Seaman v. Bon Secours-Maria Manor Nursing Care Ctr., Inc., 928 So. 2d 1272, 1274 (Fla. 2d DCA 2006) (quoting Fla. R. Civ. P. 1.510(c)). When a plaintiff moves for summary judgment before the defendant has filed an answer, “the burden is upon the plaintiff to make it appear to a certainty that no answer which the defendant might properly serve could present a genuine issue of fact.” Settecasi v. Bd. of Pub. Instruction of Pinellas County, 156 So. 2d 652, 654 (Fla. 2d DCA 1963); see also W. Fla. Cmty. Builders, Inc. v. Mitchell, 528 So. 2d 979, 980 (Fla. 2d DCA 1988) (holding that when plaintiffs move for summary judgment before the defendant files an answer, “it [is] incumbent upon them to establish that no answer that [the defendant] could properly serve or affirmative defense it might raise” could present an issue of material fact); E.J. Assocs., Inc. v. John E. & Aliese Price Found., Inc., 515 So. 2d 763, 764 (Fla. 2d DCA 1987) (holding that when a plaintiff moves for summary judgment before the defendant files an answer, “the plaintiff must conclusively show that the defendant cannot plead a genuine issue of material fact”). As these cases show, a plaintiff moving for summary judgment before an answer is filed must not only establish that no genuine issue of material fact is present in the record as it stands, but also that the defendant could not raise any genuine issues of material fact if the defendant were permitted to answer the complaint.

In this case, U.S. Bank failed to meet this burden because the record before the trial court reflected a genuine issue of material fact as to U.S. Bank’s standing to foreclose the mortgage at issue. The proper party with standing to foreclose a note and/or mortgage is the holder of the note and mortgage or the holder’s representative. See Mortgage Elec. Registration Sys., Inc. v. Azize, 965 So. 2d 151, 153 (Fla. 2d DCA 2007); Troupe v. Redner, 652 So. 2d 394, 395-96 (Fla. 2d DCA 1995); see also Philogene v. ABN Amro Mortgage Group, Inc., 948 So. 2d 45, 46 (Fla. 4th DCA 2006) (“[W]e conclude that ABN had standing to bring and maintain a mortgage foreclosure action since it demonstrated that it held the note and mortgage in question.”). While U.S. Bank alleged in its unverified complaint that it was the holder of the note and mortgage, the copy of the mortgage attached to the complaint lists “Fremont Investment & Loan” as the “lender” and “MERS” as the “mortgagee.” When exhibits are attached to a complaint, the contents of the exhibits control over the allegations of the complaint. See, e.g., Hunt Ridge at Tall Pines, Inc. v. Hall, 766 So. 2d 399, 401 (Fla. 2d DCA 2000) (“Where complaint allegations are contradicted by exhibits attached to the complaint, the plain meaning of the exhibits control[s] and may be the basis for a motion to dismiss.”); Blue Supply Corp. v. Novos Electro Mech., Inc., 990 So. 2d 1157, 1159 (Fla. 3d DCA 2008); Harry Pepper & Assocs., Inc. v. Lasseter, 247 So. 2d 736, 736-37 (Fla. 3d DCA 1971) (holding that when there is an inconsistency between the allegations of material fact in a complaint and attachments to the complaint, the differing allegations “have the effect of neutralizing each allegation as against the other, thus rendering the pleading objectionable”). Because the exhibit to U.S. Bank’s complaint conflicts with its allegations concerning standing and the exhibit does not show that U.S. Bank has standing to foreclose the mortgage, U.S. Bank did not establish its entitlement to foreclose the mortgage as a matter of law.

Moreover, while U.S. Bank subsequently filed the original note, the note did not identify U.S. Bank as the lender or holder. U.S. Bank also did not attach an assignment or any other evidence to establish that it had purchased the note and mortgage. Further, it did not file any supporting affidavits or deposition testimony to establish that it owns and holds the note and mortgage. Accordingly, the documents before the trial court at the summary judgment hearing did not establish U.S. Bank’s standing to foreclose the note and mortgage, and thus, at this point, U.S. Bank was not entitled to summary judgment in its favor.”
[END]

The part that I underlined is especially important to note… US Bank actually filed the original note in the record but the Note apparently lacked any endorsement in favor of US Bank, and, presumably did not have a blank endorsement either. The appellate court also did NOT accept the bogus assignment that US Bank filed – and we have certainly seen ALOT of highly questionable assignments flying off the desks of document production factories like LPS (Lender Processing Services), the Law Office of David J. Stern PA and FIS Foreclosure Solutions.

 

This is a fantastic case for attorneys and homeowners in Florida. There is a tremendous amount of legal ammunition in this case if you read the decision carefully and parse it out paragraph by paragraph.

UPDATE:

CLICK HERE to view the Class Action Lawsuit filed against Deutsche Bank, US Bank, LPS and DocX on Feb. 17, 2010 for committing fraud in foreclosure cases for creating unauthenticated mortgage assignments.

Feb
01

Important Florida Case – one way to get a foreclosure dismissed

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There is a recent decision out of the Sixth Judicial Circuit in FL (Pinellas County) that I believe warrants focus and analysis for homeowners and their attorneys. In Wachovia Mortgage v. Matacchiero, the Defendant filed a Motion to Dismiss (MTD) the case through her attorney. The basic premise of the MTD was that the Plaintiff lacked the “capacity to sue” the Defendant for foreclosure under Fla. Civ. Pro., Rule 1.120(a).

Most foreclosure attorneys are used to hearing (and arguing) the legal issue of “standing” and while standing is a very valid issue that should be questioned in every foreclosure case, the “capacity to sue”  is different. ‘Capacity to sue’ is an absence or legal disability which would deprive a party of the right to come into court.” Judge Rondolino, the presiding judge who signed the order granting the Defendant’s MTD, made the distinction right in his order.

In this case, the Plaintiff was, “Wachovia Mortgage FSB, F/K/A World Savings Bank.” The argument was simply that the Plaintiff failed to properly identify itself in the pleadings (complaint) and therefore the Defendant was deprived of knowing exactly who to answer or frame her responsive pleading to.

The Defendant’s argument: “Because the Plaintiff failed to “plead or specify in what capacity the Plaintiff brings suit and by failing to define or identify in any way the nature of its legal entity the Plaintiff has not plead that it has the capacity to maintain suit before this court.”

Notice point 4 of the Judge’s order where he specifically compares capacity to standing and note the differences.

The attorney in this case did a great job really analyzing the Defendant’s case and he obviously has a firm grasp on and working knowledge of the rules of civil procedure. He successfully attacked the legal deficiencies in this case and won on the merits of his well plead argument.

The majority of foreclosure cases are fraught with legal deficiencies. The problem I see is that few are truly analyzing the complaint, pleadings and allegations made by these institutional fraudsters to find these deficiencies and use them against the Plaintiffs. You know the old saying, “the devil is in the details.”

Hopefully, you’ll read the judge’s order and dive into the rules of civil procedure in your state and really learn something as to how “we should think” about foreclosure cases. The lesson here is to learn how to “frame” our thinking regarding foreclosure cases and to learn to look at the details. Look at what these Plaintiffs are truly alleging. The words they are using are not accidental and often we will find conflicting statements, inconsistencies and the like.

Use the rules of civil procedure as the guide and attack the missteps of these institutions. The rules define how the game is played. If a party fails to follow the rules they have a problem and if you have a rogue judge who doesn’t care about ensuring the rules are followed, these things need to be identifed, recorded and quantified so that you can set a case up for an appeal. The Appellate courts are in a position where they have to hold the parties (and judges) to following the well-established rules of civil procedure.

Now, what you are waiting for? If you need legal representation in a foreclosure matter (or even think you might), call Houk Law today to speak with us about all the reasons why you should consider retaining us to represent you… and why it makes complete economic sense as well!

We can be reached at 1-877-508-4848 ext. 0

Nov
09

Finally, a Judge Willing to Hold Lenders/Servicers Accountable!

By | Court Cases, Featured, Foreclosure Defense Research, Foreclosure Rights

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I have to say that reading the below order from Judge Arthur Schack is refreshing. It’s also disappointing because there are so few judges out there today willing to do what he is doing. The majority of Florida judges are cowboys who don’t really care about legal standards and rules of civil procedure. They routinely grant motions for Summary Judgment even when there are clear issues of material fact in the case or even when there is still outstanding disovery that the Plaintiff servicer/trustee hasn’t complied with. They routinely hear a Motion to Dismiss AND a Motion for Summary Judgment on the same day/time! It’s ridiculous and despicable all at the same time.

The bottom line is that most judges in Florida and other states trample on the civil rights of homeowners and deny them due process because of their “personal views” on the issues of foreclosure. I highly encourage homeowners to organize in their communities and march on the steps of their local courthouse and protest what their elected judges are doing and not doing to uphold the law as Judge Schack is doing in this case.

Judge Schack also provides some great points that attorneys and pro se litigants should focus on in their case(s). Read carefully and learn the elements that he is stipulating because there are fine points of law that he his holding the plaintiff in this case to. Enjoy…

 

HSBC Bank USA, N.A. v. Valentin N.Y.Sup.,2008. NOTE: THIS OPINION WILL NOT BE PUBLISHED IN A PRINTED VOLUME. THE DISPOSITION WILL APPEAR IN A REPORTER TABLE. Supreme Court, Kings County, New York.
HSBC BANK USA, N.A., as Indenture Trustee for the Registered Noteholders of Renaissance Home Equity Loan Trust 2005-3, Renaissance Home Equity Loan Asset-Backed Notes, Series 2005-3,, Plaintiff, v. Candida VALENTIN, Candide Ruiz, et. al., Defendants. No. 15968/07. Jan. 30, 2008. Vincent P. Surico, Esq., De Rose & Surico, Bayside, for Plaintiff. No Opposition submitted by defendants to plaintiff’s Judgment of Foreclosure and Sale. ARTHUR M. SCHACK, J. *
1 Plaintiff’s application, upon the default of all defendants, for an order of reference, for the premises located at 572 Riverdale Avenue, Brooklyn, New York (Block 3838, Lot 39, County of Kings) is denied without prejudice. The “affidavit of merit” submitted in support of this application for a default judgment is not by an officer of the plaintiff or someone with a power of attorney from the plaintiff.
Leave is granted to plaintiff, HSBC BANK USA, N.A., AS INDENTURE TRUSTEE FOR THE REGISTERED NOTEHOLDERS OF RENAISSANCE HOME EQUITY LOAN TRUST 2005-3, RENAISSANCE HOME EQUITY LOAN ASSET-BACKED NOTES, SERIES 2005-3 (HSBC), to renew its application for an order of reference upon presentation to the Court of compliance with the statutory requirements of CPLR § 3215(f), with “an affidavit of facts” executed by someone who is an officer of HSBC or has a valid power of attorney from HSBC.
Further, the Court, upon renewal of the application for an order of reference requires a satisfactory explanation to questions with respect to: the assignment of the instant nonperforming mortgage loan from the original lender, Delta Funding Corporation to HSBC Bank; the employment history of one Scott Anderson, who assigned the instant mortgage to HSBC, yet in a case I decided last month, HSBC Bank, N .A. v. Cherry, 18 Misc.3d 1102(A), swore in an affidavit to be HSBC’s servicing agent; and the relationship between HSBC, Ocwen Federal Bank, FSB (OCWEN), Deutsche Bank and Goldman Sachs, who all seem to share office space at 1661 Worthington Road, Suite 100, West Palm Beach, Florida 33409 (Suite 100). Background Defendants, Candida Valentin and Candide Ruiz, borrowed $340,000 from Delta Funding Corporation, on June 23, 2005.
The note and mortgage were recorded in the Office of the City Register, New York City Department of Finance on July 14, 2005, at City Register File Number (CRFN) 2005000395517. Delta Funding Corporation, by Mortgage Electronic Registration Systems, Inc. (MERS), its nominee for the purpose of recording the mortgage, assigned the note and mortgage to plaintiff HSBC, on May 1, 2007, with the assignment recorded on June 13, 2007 at CRFN 2007000306260.
Plaintiff’s moving papers for an order of reference fails to present an “affidavit made by the party,” pursuant to CPLR § 3215(f). The application contains an April 23, 2007-affidavit by Jessica Dybas, who states that she is “a Foreclosure Facilitator of OCWEN LOAN SERVICING, LLC, servicing agent and attorney in fact to the holder of the bond and mortgage sought to be foreclosed herein.”On that date, the note and mortgage were still held by MERS, as nominee of Delta Funding Corporation. For reasons unknown to the Court, MERS, as nominee of Delta Funding Corporation, or plaintiff HSBC failed to provide any power of attorney authorizing OCWEN to go forward with the instant foreclosure action.
Further, even if HSBC authorized OCWEN to be its attorney in fact, Ms. Dybas is not an officer of OCWEN. She is a “Foreclosure Facilitator,” a job title unknown to this Court. Therefore, the proposed order of reference must be denied without prejudice. Leave is granted to plaintiff HSBC to comply with CPLR § 3215(f) by providing an “affidavit made by the party,” whether by an officer of HSBC or someone with a valid power of attorney from HSBC. *2 Further, according to plaintiff’s application, the default of defendants Valentin and Ruiz began with the nonpayment of principal and interest due on January 1, 2007. Yet, four months later, plaintiff HSBC was willing to take an assignment of the instant nonperforming loan. The Court wonders why HSBC would purchase a nonperforming loan, four months in arrears?
Additionally, plaintiff HSBC must address a third matter if it renews its application for an order of reference. In the instant action, as noted above, Scott Anderson, as Vice President of MERS, assigned the instant mortgage to HSBC on May 1, 2007. Doris Chapman, the Notary Public, stated that on May 1, 2007, “personally appeared Scott Anderson, of 1661 Worthington Road, Suite 100, West Palm Beach, Florida 33409.”In HSBC Bank, N.A. v. Cherry, at 3, I observed that: Scott Anderson, in his affidavit, executed on June 15, 2007, states he is Vice President of OCWEN. Yet, the June 13, 2007 assignment from MERS to HSBC is signed by the same Scott Anderson as Vice President of MERS. Did Mr. Anderson change his employer between June 13, 2007 and June 15, 2007. The Court is concerned that there may be fraud on the part of HSBC, or at least malfeasance. Before granting an application for an order of reference, the Court requires an affidavit from Mr. Anderson describing his employment history for the past three years. Lastly, the court notes that Scott Anderson, in the MERS to HSBC assignment gave his address as Suite 100. This is also the address listed for HSBC in the assignment. In a foreclosure action that I decided on May 11, 2007 (Deutsche Bank Nat. Trust Company v. Castellanos, 15 Misc.3d 1134[A] ), Deutsche Bank assigned the mortgage to MTGLQ Investors, L.P. I noted, at 4-5, that MTGLQ Investors, L.P.: According to Exhibit 21.1 of the November 25, 2006 Goldman Sachs 10-K filing with the Securities and Exchange Commission … is a “significant subsidiary” of Goldman Sachs…. [T]he January 19, 2007 assignment has the same address for both the assignor Deutsche Bank and the assignee MTGLQ Investors, L.P., at 1661 Worthington Road, Suite 100, West Palm Beach, Florida 33409.
The Court will not speculate about why two major financial behemoths, Deutsche Bank and Goldman Sachs share space in a West Palm Beach, Florida office suite In the instant action, with HSBC, OCWEN and MERS, joining with Deutsche Bank and Goldman Sachs at Suite 100, the Court is now concerned as to why so many financial goliaths are in the same space. The Court ponders if Suite 100 is the size of Madison Square Garden to house all of these financial behemoths or if there is a more nefarious reason for this corporate togetherness.
If HSBC seeks to renew its application for an order to reference, the Court needs to know, in the form of an affidavit, why Suite 100 is such a popular venue for these corporations. Discussion Real Property Actions and Proceedings Law (RPAPL) § 1321 allows the Court in a foreclosure action, upon the default of the defendant or defendant’s admission of mortgage payment arrears, to appoint a referee “to compute the amount due to the plaintiff.” In the instant action, plaintiff’s application for an order of reference is a preliminary step to obtaining a default judgment of foreclosure and sale. (Home Sav. Of Am., F.A. v. Gkanios, 230 A.D.2d 770 [2d Dept 1996] ). *3 Plaintiff has failed to meet the requirements of CPLR § 3215(f) for a default judgment. On any application for judgment by default, the applicant shall file proof of service of the summons and the complaint, or a summons and notice served pursuant to subdivision (b) of rule 305 or subdivision (a) of rule 316 of this chapter, and proof of the facts constituting the claim, the default and the amount due by affidavit made by the party… Where a verified complaint has been served, it may be used as the affidavit of the facts constituting the claim and the amount due; in such case, an affidavit as to the default shall be made by the party or the party’s attorney. [Emphasis added]. Plaintiff has failed to submit “proof of the facts” in “an affidavit made by the party.”The affidavit is submitted by Jessica Dybas, “a Foreclosure Facilitator of OCWEN LOAN SERVICING, LLC, servicing agent and attorney in fact to the holder of the bond and mortgage sought to be foreclosed herein.” There must be an affidavit by an officer of HSBC or a servicing agent, possessing a valid power of attorney from HSBC for that express purpose. Additionally, if a power of attorney is presented to this Court and it refers to pooling and servicing agreements, the Court needs a properly offered copy of the pooling and servicing agreements, to determine if the servicing agent may proceed on behalf of plaintiff. (EMC Mortg. Corp. v. Batista, 15 Misc.3d 1143(A) [Sup Ct, Kings County 2007]; Deutsche Bank Nat. Trust Co. v. Lewis, 14 Misc.3d 1201(A) [Sup Ct, Suffolk County 2006] ).
Also, the instant application upon defendants’ default must be denied because even though it contains a verified complaint, the attorney’s verification is insufficient to meet the requirements of CPLR § 3215(f). The Court, in Mullins v. Di Lorenzo, 199 A.D.2d 218 [1st Dept 1993], instructed that “a complaint verified by counsel amounts to no more than an attorney’s affidavit and is therefore insufficient to support entry of judgment pursuant to CPLR 3215.”Citing Mullins v. Di Lorenzo, the Court, in Feffer v. Malpeso, 210 A.D.2d 60, 61 [1st Dept 1994], held that a complaint with not more than an attorney’s affidavit, for purposes of entering a default judgment “was erroneous and must be deemed a nullity.” Professor David Siegel, in his Practice Commentaries (McKinney’s Cons Laws of NY, Book 7B, CPLR C3215: 16) explains that Mullins v. Di Lorenzo is in point here. Perhaps the verified complaint can do service as an affidavit for various purposes within the litigation while the contest is on … but it will not suffice to put an end to the contest with as drastic a step as a default at the outset.  It must be kept in mind that even an outright “affidavit” by the plaintiff’s attorney on the merits of the case-except in the relatively rare circumstances in which the attorney happens to have first-hand knowledge of the facts – lacks probative force and is usually deemed inadequate by the courts to establish the merits. A fortiori, a verified pleading tendered as proof of the merits would also lack probative force when the verification is the attorney’s. [Emphasis added ] *4 In Blam v. Netcher, 17 AD3d 495, 496 [2d Dept 2005], the Court reversed a default judgment granted in Supreme Court, Nassau County, holding that: In support of her motion for leave to enter judgment against the defendant upon her default in answering, the plaintiff failed to proffer either an affidavit of the facts or a complaint verified by a party with personal knowledge of the facts (seeCPLR 3215(f): Goodman v. New York City Health & Hosps. Corp. 2 AD3d 581 [2d Dept 2003]; Drake v. Drake, 296 A.D.2d 566 [2d Dept 2002]; Parratta v. McAllister, 283 A.D.2d 625 [2d Dept 2001] ). Accordingly, the plaintiff’s motion should have been denied, with leave to renew on proper papers (see Henriquez v. Purins, 245 A.D.2d 337, 338 [2d Dept 1997] ). (See Hazim v. Winter, 234 A.D.2d 422 [2d Dept 1996]; Finnegan v. Sheahan, 269 A.D.2d 491 [2d Dept 2000]; De Vivo v. Spargo, 287 A.D.2d 535 [2d Dept 2001]; Peniston v. Epstein, 10 AD3d 450 [2d Dept 2004]; Taebong Choi v. JKS Dry Cleaning Eqip. Corp., 15 AD3d 566 [2d Dept 2005]; Matone v. Sycamore Realty Corp., 31 AD3d 721 [2d Dept 2006]; Crimmins v. Sagona Landscaping, Ltd., 33 AD3d 580 [2d Dept 2006] ). Therefore, the instant application for an order of reference is denied without prejudice, with leave to renew.
The Court will grant plaintiff HSBC an order of reference when it presents: an affidavit by either an officer of HSBC or someone with a valid power of attorney from HSBC, possessing personal knowledge of the facts; an affidavit from Scott Anderson clarifying his employment history for the past three years and what corporation he serves as an officer; and, an affidavit by an officer of HSBC explaining why HSBC would purchase a nonperforming loan from Delta Funding Corporation, and why HSBC, OCWEN, MERS, Deutsche Bank and Goldman Sachs all share office space in Suite 100.
Conclusion Accordingly, it is ORDERED, that the application of plaintiff, HSBC BANK N.A., AS INDENTURE TRUSTEE FOR THE REGISTERED NOTEHOLDERS OF RENAISSANCE HOME EQUITY LOAN TRUST 2005-3, RENAISSANCE HOME EQUITY LOAN ASSET-BACKED NOTES, SERIES 2005-3, for an order of reference for the premises located at 572 Riverdale Avenue, Brooklyn, New York (Block 3838, Lot 29, County of Kings), is denied without prejudice; and it is further ORDERED, that leave is granted to plaintiff, HSBC BANK N.A., AS INDENTURE TRUSTEE FOR THE REGISTERED NOTEHOLDERS OF RENAISSANCE HOME EQUITY LOAN TRUST 2005-3, RENAISSANCE HOME EQUITY LOAN ASSET-BACKED NOTES, SERIES 2005-3, to renew its application for an order of reference for the premises located at 572 Riverdale Avenue, Brooklyn, New York (Block 3838, Lot 39, County of Kings), upon presentation to the Court, within forty-five (45) days of this decision and order, of: an affidavit of facts either by an officer of HSBC or someone with a valid power of attorney from HSBC, possessing personal knowledge of the facts; an affidavit from Scott Anderson, describing his employment history for the past three years; an affidavit from an officer of plaintiff HSBC BANK N.A., AS INDENTURE TRUSTEE FOR THE REGISTERED NOTEHOLDERS OF RENAISSANCE HOME EQUITY LOAN TRUST 2005-3, RENAISSANCE HOME EQUITY LOAN ASSET-BACKED NOTES, SERIES 2005-3, explaining why plaintiff would purchase a nonperforming loan from Delta Funding Corporation and why plaintiff *5 HSBC BANK N.A., shares office space at Suite 100, 1661 Worthington Road, West Palm Beach, Florida 33409, with Ocwen Federal Bank FSB, MortgageElectronicRegistrationSystems, Inc., Deutsche Bank and Goldman Sachs. This constitutes the Decision and Order of the Court. N.Y.Sup.,2008. HSBC Bank USA, N.A. v. Valentin Slip Copy, 18 Misc.3d 1123(A), 2008 WL 239932 (N.Y.Sup.), 2008 N.Y. Slip Op. 50164(U) END OF DOCUMENT

Aug
20

Bank of America loses in Federal Ruling – Judge says investors own the loans

By | Court Cases, Featured, Foreclosure Defense Research, Foreclosure Rights

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The report of the ruling below by this Federal Judge has several implications:

  1. Mortgage modifications may come to a halt again
  2. Attorney’s and anyone supposedly “helping” with modifications should be very, very wary
  3. The federal court in Manhattan is recognizing a couple very important issues:
    1. Servicers are NOT the owners of the loans (in the case of a securitized loan)
    2. Investors own the loans
    3. Servicers MAY be liable to buy back modified loans (subject to the terms of the PSA)

This ruling could ultimately end up being the demise of ALL foreclosure actions involving securitized loans. One thing is clear in that the federal court identifies the investors as the owners of the loan and is so doing the court also recognizes that the servicer/intermediaries/pretender lender have no authority to do ANYTHING in the way of enforcement, modification, collection through legal means such as a  foreclosure action because they simply have no standing (the alleged debt is not owed to anyone other than the investors).

Just because a secret deal between Wall Street, servicers, banks and MERS occurred to obscure the ownership and the transfers of mortgages doesn’t mean their deal will hold up under the careful eye of diligent judge who understands AND cares about the law being upheld.


Source: Reuters
BofA’s Countrywide loses court ruling on mortgages

Thu Aug 20, 2009 7:37am EDT

* Federal judge lacks jurisdiction, moves case to states

* Loan modifications can hurt mortgage investors

NEW YORK, Aug 20 (Reuters) – A federal judge has ruled that Bank of America Corp (BAC.N: Quote, Profile, Research, Stock Buzz) cannot have a lawsuit by investors seeking to force it to buy back mortgages heard in federal court, saying he lacks jurisdiction to decide the case.

Tuesday’s ruling by Judge Richard Holwell of the U.S. District Court in Manhattan means the case will move to state court. Holwell did not decide the merits of the case.

“Congress passed two statutes within a year of each other to address the mortgage crisis,” the judge wrote. “In neither of these statutes did Congress federalize the case.”

The ruling is a win for investors, to the extent that Holwell rejected a claim by the bank’s Countrywide Financial Corp unit that new federal laws to encourage loan modifications to help struggling borrowers stay in their homes govern this case.

Countrywide had argued that the laws negated obligations it might have had to buy back modified loans. In 2008, Countrywide agreed with some 11 state attorneys general to modify $8.4 billion of loans made to roughly 400,000 borrowers.

Investors who own mortgage securities typically receive interest and principal payments. If servicers modified the underlying loans to reduce borrower obligations, investors would be harmed because they would receive lower payments.

Holwell did rule that investors bear the burden of showing that pooling and servicing agreements for their loans, taken “as a whole,” require Countrywide to buy back the loans.

Bank of America could not immediately be reached for comment. A published report said a spokeswoman agreed that the court did not rule on the merits of the plaintiffs’ claims.

The current case was brought by two investment funds holding Countrywide mortgages, Greenwich Financial Services Distressed Mortgage Fund 3 LLC and QED LLC.

These investors complained they would be harmed if Countrywide shifted the burdens of loan modifications to 374 trusts into which loans had been repackaged and securitized.

These investors would rather Countrywide repurchase modified loans for the full unpaid amounts.

Countrywide had been the largest U.S. mortgage lender before Bank of America acquired it last July for $2.5 billion.

The case is Greenwich Financial Services Distressed Mortgage Fund 3 LLC and QED LLC v. Countrywide Financial Corp, U.S. District Court, Southern District of New York (Manhattan), No. 08-11343. (Reporting by Jonathan Stempel, with additional reporting by John Tilak in Bangalore)

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Jul
24

N.Y. AG Files Lawsuit Against Collectors of Debt – “They used fraud to Collect”

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 July 24, 2009

This is just the tip of the iceberg. Really. Lenders and Creditors violate the law with near impunity in their lending and collection activities. I’m sure there are some honest banks or lenders out there but they’re no dime a dozen. There is massive fraud being perpetrated in the collection of mortgage debt – which is essentially what foreclosure is. The lender/creditor/servicer is using foreclosure as their means of collecting on a debt they claim is due and which default on the contract (the Note) has happened.

Here in Lee County, Florida, I am seeing an enormous amount of fraud being used to illegally seize homes. So the New York case below is a great step to help other states attorney generals and other elected officials realize that this is just a common industry practice to defraud citizens who generally speaking don’t have the means or the knowledge to protect themselves. I know that no elected official could possibly believe that these practices were completely confined to New York citizens. The only question really is do Lee County, FL officials and Florida state officials have the backbone to do something as well. How about Texas officials? How about Nobama?

N.Y. Claims Collectors of Debt Used Fraud

By JONATHAN D. GLATER - story from the NY Times

Tens of thousands of New York consumers had money seized by creditors using court orders that had been obtained by fraud, the state’s attorney general said Wednesday — and the money should be returned.

According to a lawsuit filed on Tuesday in New York Supreme Court in Buffalo, lawyers and debt collectors obtained more than 101,000 court orders that were improperly issued, allowing them to seize, on average, $5,474 from each consumer.

The lawsuit asserts that consumers were never properly notified and were not given a chance to defend themselves in court; creditors won default judgments. The total amount of money seized exceeded $500 million, according to the attorney general’s office.

“Our legal system is defined by due process and the guarantee that every New Yorker will get the chance to defend him or herself in court,” Andrew M. Cuomo, the attorney general, said in a statement. Not providing notice of legal proceedings, “undermined the foundation of this system.”

The two collections agencies and 35 lawyers and law firms named in the lawsuit, which lawyers for Mr. Cuomo’s office filed on behalf of the state’s chief administrative judge, Ann Pfau, all used one company, American Legal Process, of Lynbrook, N.Y., to notify consumers of debt collection proceedings.

But American Legal Process did not give people proper notice and instead “repeatedly and persistently falsified” statements that it had, according to the attorney general. In thousands of cases, a lawyer for Mr. Cuomo’s office stated in a court filing, individual American Legal Process employees claimed to have delivered notices of collections proceedings to different people in different locations at the same time.

When consumers did not appear in court, lawyers for creditors obtained court orders allowing them to take consumers’ money directly from bank accounts or to garnish wages.

A lawyer for American Legal Process, Corey Winograd, did not immediately return calls.

The attorney general brought criminal charges against American Legal Process and its chief executive, William Singler, in April. Those proceedings are continuing, according to Mr. Cuomo’s office.

Mar
26

Tranche Warfare: MBS Investor Sues American Home Over REO Sales

By | Court Cases, Featured

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By TERI BUHL

 A Greenwich-based hedge fund manager is in a desperate fight to keep his subprime MBS investment strategy alive. HousingWire peeled back the layers to uncover what’s really going on behind the scenes in what has become a vicious battle between the hedge fund and legendary investor Wilbur Ross’ mortgage servicing company, Irving, Tex.-based American Home Mortgage Servicing, Inc.

The lawsuit underscores just how complicated servicing non-agency securitized loans can really be, amid a push by legislators and regulators to put a common set of standards into place to help manage a housing crisis that as of yet shows little signs of slowing down.

Bruce Rose, who runs hedge fund Carrington Investment Partners LP – and who purchased a mortgage servicing platform of his own last year when former subprime high-flier New Century Mortgage went bankrupt – filed a lawsuit last month claiming that American Home Mortgage Servicing, the nation’s largest independent mortgage servicer, had been selling the REO homes it manages at ‘fire sale prices,’ because it needed cash to pay off its warehouse credit facility.

The REO sales push was hurting Rose’s hedge fund, because the loans on the homes are tied to mortgage-backed securities Rose had invested in. According to Carrington investors and sources familiar with Rose’s investment strategy, the hedge fund owns the junior tranches of the deals in question.

Carrington, which leaked a copy of the lawsuit to the Wall Street Journal before the suit had been served to American Home Mortgage and filed in court, alleges in its complaint that AHMSI saw its core credit facilities shrunk, forcing the REO sales. But sources familiar with Irving-based servicer say they’ve never worried about being able to tap the credit market – and say that selling the REOs had nothing to do with paying down an existing credit facility.

Instead, AHMSI’s decision to sell the homes was driven out of a desire to serve the best interests of the trust that represents all investors, sources say – to get the most money they could for the trust, because holding on to properties while home prices remain in a negative freefall costs most bondholders more money than simply getting the properties off the books. Most servicers have a fiduciary duty to a trust to maximize net present value of cash flows to investors, per most traditional pooling and servicing agreements that bind servicer’s activities.

David Friedman, CEO of American Home Mortgage, told HousingWire today, “The financial health of our company is strong. We paid off the original credit facility and replaced it with an AAA-rated facility. In fact, if needed, we can expand our credit limit and others can now invest in our high quality debt.”

So-called ‘tranche warfare’ is something that most investors and servicers have become accustomed to, but the Carrington/AMHSI dispute is unique because of the structure of the specific deals Carrington invested in. According to the complaint, Carrington acquired a 100 percent interest in a unique class of subordinate certificates in various MBS deals during 2005 and 2006, totaling $128.1 million in principal amount.

These subordinate certificates allegedly give Carrington the right to direct the servicer over the management and sale of all REO properties tied to the trust, a right that Carrington asserts in the pleading it had bargained specifically for in structuring the deals – three of the four MBS deals in question were issued directly by Carrington. All four deals were serviced by Option One Mortgage Company until Ross’ AHMSI unit acquired the Option One platform last year from tax giant H&R Block (HRB: 17.42 +2.17%).

Carrington argues in the complaint that its interests as a junior bondholder are in line with those of the senior bondholders, as well as trustees including Deutsche Bank (DB: 44.46 +4.07%) and Wells Fargo & Co. (WFC: 15.95 -2.86%) – allegations that are being hotly contested by sources that spoke with HousingWire.

Holding REO hostage?

Rose is currently battling an investor-led lawsuit, filed early last year, for alleged securities fraud and breach of his duties as the manager of the hedge fund; his fund booked a negative 9.75 percent return for 2008, according to an investor letter reviewed by HousingWire. That return is actually amazingly good given the upheaval among most funds investing in private-party MBS – but according to the investors in the lawsuit, Rose is improperly marking the assets in the fund to his own model.

Carrington was also one of the first hedge funds to get investors to vote on an amendment halting redemptions in late 2007; according to the securities lawsuit against the fund, Rose said if he had to sell the subprime-backed mortgage securities he would only get 10 cents on the dollar and would have to shut down the fund. The attorney representing Carrington investors told HousingWire that they anticipate moving for summary judgment shortly after Rose finally answers the original complaint, which is due later this month; such a judgment could invalidate the redemption amendment, and leave Carrington’s fund open to significant redemptions.

Sean O’Shea, an attorney representing Carrington, said that Rose was acting to protect investors by preventing redemptions. “By putting up the gate, Rose acted in the interest of all his investors and upheld his duty to all,” he told HousingWire. O’Shea also stressed that the investors’ claims are baseless. Nonetheless, a Connecticut federal judge ruled last month that the Carrington investors’ complaint had strong enough evidence to move forward with the securities fraud claim.

Rose allegedly told a fellow top hedge fund manager in 2007 that his strategy was to “isolate and hold the credit risk on subprime deals,” a strategy borne out by the unique class of securities Carrington now holds on the AMHSI-serviced loans. A hedge fund manager who knows Rose and spoke on the condition of anonymity told HousingWire, “I’d be amazed if there was actually any money left in the fund.”

How much money is left remains to be seen; but the special rights allegedly given to Carrington as a junior bondholder in the disputed loans have apparently led to some strange behavior, including allegedly attempting to direct AHMSI not to sell its REO properties, or to list them above market value to ensure they do not sell. When a loan in the pool does default, as long as the servicer still holds on to the property as a bank owned asset and marks it at the level of the original loan investment, the junior bond continues to pay out, sources told HousingWire.

In contrast, if the REO property is sold and actual market prices are recognized, the junior tranche would effectively be wiped out while the senior tranches divide up the recovered principal. So by dictating how a servicer can manage the loan, Carrington could control the value of its investment while setting up senior bondholders for a fall they may or may not have expected. Sources familiar with the situation told HousingWire that Rose has been asking AHMSI to book the REO in its deals at a mark-to-model method he prefers, rather than using independent appraisals or other common methods of property valuation.

Sources familiar with the situation also suggested that Rose originally attempted to get the trustees on the deals – Deutsche and Wells Fargo – to fire AHMSI as servicer of record, a move that led the trustees to suggest they poll all other investor classes first. When it became clear that other investors were unwilling to support the move, Rose attempted to purchase the relevant servicing rights himself to have the servicing moved over to his own shop; allegedly, Rose could not secure enough financing to manage such a purchase, and filed suit shortly thereafter.

O’Shea, Carrington’s attorney, says financing wasn’t the issue, and contends that AHMSI didn’t offer terms that were acceptable to Carrington to purchase the servicing. He also says that the hedge fund has ample room in its own credit facility to buy the servicing rights, if it wanted to.

Carrington’s complaint did not peg an alleged monetary damage suffered by the hedge fund, nor did the fund attempt to file an injunction to stop AHMSI from selling further REO properties tied to the contested securities. O’Shea told HousingWire his client has lost $128 million thus far on forced REO sales – all of the original principal amount invested. Of course, whether Carrington would have such broad rights as a junior bondholder to direct both the pricing and disposition methods of REO properties is a matter yet to be sorted out by the courts.

Both sides say they expect a long fight.

O’Shea told HousingWire that he believes according to the pooling and servicing agreement, AHMSI was required to uphold Carrington’s ‘special rights,’ as a responsibility to all investors. “They did it for the first few months, why aren’t they doing it now?” he said.

AHMSI’s Friedman told HousingWire that the servicer plans a fight of its own. “We plan to vigorously defend Carrington’s baseless claims in a court of law,” he said. “The servicer stands by the fact their real responsibility is to not violate its contractual obligations of the trust, and do right by all investors, not just the ones conveniently holding the ‘special rights.’”

Jan
16

UPDATED! – TILA Rescission Case – Bankruptcy Judge Finds in Favor of Borrower

By | Court Cases, Truth in Lending

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Below is my original post from January 2009.

This case was just upheld in July 2009 so this is good case law for federal bankruptcy courts. Obviously there may be some judges in different districts who won’t like it or may not adhere to it because it’s not their district. This case should be good if you have to appeal if that’s the route the judge takes but this is great news for homeowners who have rescinded, tendered correctly and the lender/assignee did not respond as per the statute.

At the very least, a trail has been blazed and there is now a federal case which really follows the statute as it is truly written – which is in favor of the consumer.

CLICK HERE to read the case.

By Lane A. Houk
January 16, 2009

The Little Guy (David) vs. the Big Guy (Goliath). These classic battles are being waged in the “War on the Home Front” every single day. The subject of this post is a case that goes to the win column for the Little Guy. We are fighting for our freedom, our country, democracy… we are fighting against corporate and political corruption. I hope you are fighting too. This is a war for our rights and our homes and our American way of life. It’s all under siege folks. Don’t be fooled into complacency.

This is one of the most powerful cases I have read in a long time. CLICK HERE to read the actual case order from the Judge in the Adversary Proceeding. The borrower in this case rescinded the loan transaction because an audit of their closing documents revealed a “material disclosure” violation as is defined in 15 U.S.C. §§ 1601 et seq. (“TILA”) and its implementing regulations at 12 C.F.R. § 226 et seq. (“Reg. Z”).

Once the Consumer rescinds, the security interest arising by operation of law becomes void automatically. The promissory note is also voided since it is part of the same “transaction.”

The borrower in this case had foreclosure filed against them. After retaining an attorney for the foreclosure, the attorney advised them to have an audit of their loan closing file which revealed a material disclosure violation. It is important to note that a loan can ONLY be rescinded when:

  1. The loan is a refinance transaction;
  2. Funded in the last three years
  3. On the borrower’s primary residence;
  4. When a “material disclosure violation” is found

The term “material disclosure violation” is a very important component. Many people (including self-proclaimed experts in loan auditing) think that “any” violation of the Truth in Lending Act gives someone the right to rescind.  That is patently wrong. The four conditions above must be true in order for the borrower to have the possible “extended right to rescind” the loan transaction. There are only 4 potential “material disclosure violations.”

The borrower in this case was given an insufficient amount of the Notice of Right to Cancel. A borrower should receive two (2) copies of the Notice.

If a married couple is identifiable on a Universal Residential Application, then each consumer is entitled to rescind and must be given a copy of the TILA Disclosure Statement with all material information accurately and correctly disclosed, 15 U.S.C. § 1602(u); Reg. Z § 226.23(a)(3) n.48, and two (2) copies each of the rescission notice, 15 U.S.C. § 1635(a); Reg. Z § 226.23(b), irrespective of whether both are obligated on the note (or either, for that matter).

 

In this case, the borrowers were married and received only 2 copies total. Material disclosure violation. Thus they rescinded. The lender Option One obviously contested the matter.

 

Once the Consumer rescinds, the security interest arising by operation of law becomes void automatically.  The promissory note is also voided since it is part of the same “transaction,” see i.e., 15 U.S.C. § 1635(b) and Reg. Z § 226.23(d)(1).]

 

This is powerful folks. This is a complete remedy to foreclosure. The mortgage is the security interest and it is the mortgage (and the mortgage only) that gives the lender the right to foreclose. In a rescission, the lender must void the mortgage within 20 days. If it does not, it is another violation of TILA.

 

After rescinding the loan the borrowers also filed a Chapter 13 bankruptcy. The lender refused to rescind the loan. The borrowers filed an Adversary Proceeding in the Bankruptcy Court. Bottom line: The judge heard all arguments from both Plaintiff (borrower) and the Defendant (Option One). The judge found in favor of the borrower/plaintiff and determined that they had the right to rescind. Victory number one.

 

But a BIG ruling in this case was that since they had rescinded the loan, the loan became an “unsecured” debt since the mortgage was automatically voided as per TILA. Since the debt became “unsecured” it was able to be discharged through bankruptcy like any other type of unsecured debt such as a credit card debt.

 

The moral of the story: TILA Rescission is the most powerful remedy to foreclosure if/when the borrower has this remedy afforded to them. The key is to obtain a loan audit by a real expert. Call/email me if this is something you want to do. I encourage you to read the Adversary Proceeding Case. It is highly enlightening.

 

 © Lane A. Houk – 2009– All Rights Reserved

Jan
10

Loan Rescission and TILA Violations

By | Court Cases, Foreclosure Defense Research, General, Homeowner Resources, Truth in Lending

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I recently started a blog post about TILA Violations and what these violations can mean for the financial institutions. This is a BIG can of worms for them because a large percentage of home loans were funded in violation of the federal TILA statute and its implementing regulations found in Regulation Z.

In short, if a TILA violation is found within 3 years of closing on a refinance transaction of the borrower’s primary residence, the debtor/borrower can “rescind the loan.” By serving notice to the lender of the debtor’s action to rescind the loan, the lender has “20 days to return all finance charges, downpayment monies, etc.” to the borrower and must also “remove all security interests on the property” in 20 days.

If the lender fails to do so, it is in violation of TILA requirements, mainly 15 USC §1635 and, according to paragraph “b” of this section, there are some huge implications for both debtor and creditor if the creditor does not comply with these requirements.

Here’s a sample case that you can read as evidence of how powerful this remedy can be: Belini v. WAMU

Call or email me if you want help pursuing a TILA violation against you. These are cases for attorneys to take up and we have an extensive network of attorneys that we can help you get in touch with.