REMINDER: THE CONTENTS OF THIS BLOG DO NOT MAKE AN ATTORNEY-CLIENT OR OTHER PROFESSIONAL RELATIONSHIP. ALWAYS CONSULT THE CASES AND LAWS OF EACH PARTICULAR JURISDICTION AND AN ATTORNEY IN AND FAMILIAR WITH THE PARTICULAR JURISDICTION AND ITS LAWS, WHENEVER YOU TRY TO ADDRESS OR RESOLVE ANY LEGAL QUESTION.
The information provided on this site is informational, only. We cannot represent, guarantee or warrant that the information contained in this site is appropriate for the usage of any particular reader. We are independent of cross links and do not warrant their accuracy or applicability.
We are located in Florida and comply with all ethical rules of the Florida Bar. Some States may require the wording "This is an advertisement" or other words or information of this nature.
Reading email or Comments, or replying to email or Comments, or accepting telephone calls or returning telephone calls shall not be considered legal advice.
We require that all agreements for professional services be in writing and signed by Mr. Wall, the Firm and the client, whether for Legal Services, Consulting Services, or Expert Witness.
Sign Asking For Help Turning Covid ICU Patient (Marcus Yarn/Los Angeles Times)
Case law from Florida's Fifth District Court of Appeal shows a simple way to protect renters, homeowners and landlords from evictions and foreclosures, respectively, because of Covid.
Here it is. First the way, then the case law. Congress should enable federal agencies to issue regulations conditioning evictions and foreclosures on the Coronavirus Pandemic. Even more precisely, authorized federal agencies should issue regulations governing mortgage servicing for the duration of the Pandemic, including many possible provisions from outright bans on foreclosure to specified conditions precedent designed to protect renters and owners including if the owners are landlords who have mortgages on the properties they rent.
This assumes that Congress has not already authorized federal administrative agencies to issue regulations regulating, restricting, defining and otherwise conditioning mortgage servicing activities specifically because of Covid. Congress may have already done so. Let the authorized regulations begin.
In 2017 in the case of DeLong v. Lakeview Loan Servicing, LLC, 222 So. 3d 662 (Fla. 5th DCA 2017), Florida's Fifth District Court of Appeal showed the way to protect renters and owners from Covid evictions and foreclosures today.
Robert DeLong executed a promissory note and mortgage which recited that Mr. DeLong's loan was "guaranteed and insured" by Veterans Affairs.
The documents "specifically incorporate into their terms certain federal regulations issued" under federal law. In particular, they apparently incorporated regulations governing "Service procedures for holders." DeLong, 222 So. 3d at 662-63.
By the time that Lakeview foreclosed on Mr. DeLong, it was the holder of his note and mortgage and so it was bound by the regulations incorporated by reference in the note and mortgage.
Lakeview lost the appeal because it did not comply with the Federal servicing regulations when it tried to foreclose on Robert DeLong. Robert DeLong was protected from foreclosure in that case.
In a similar way, evictions and foreclosures can be regulated, restricted and even prevented for a period of time or for the duration of the Coronavirus Pandemic, if regulations are simply authorized, issued, and incorporated by reference in the notes and mortgages documenting loans for buying land in America during the Pandemic.
There is the way, and there is the case law. To say again, let the authorized regulations begin.
Homeowners are already in a bind. The bind is tightening, both on homeowners and on lenders. The current lockdown has stopped income because it has stopped all paid work except employment that is deemed essential. While Congress continues to refuse to provide income supports for regular people, its monetary support of corporations will be useless to homeowners although in some cases it might help parties holding residential mortgages.
Parenthetically, landlords renting both residential and commercial properties report "that companies with offices or retail spaces" have skipped their rent payments in greater numbers than individual renters. The landlords report that over 66% of all commercial tenants did not pay their rent either in April or in May. That compares with less than 25% of residential tenants who skipped rent in April and in May. The CEO of one major real estate company said this about the rent-skipping 'office and retail tenants with healthy finances': "They think of this as some sort of field day. I'm shocked, candidly." SeeMatthew Haag, Commercial Rent Revenue is Sliding, and Landlords Predict a Catastrophe, NEW YORK TIMES, Friday, May 22, 2020, at A12.
The Census Bureau itself has confirmed that homeowners have stopped paying their mortgages in record numbers because they simply do not have the money. The Census Bureau released a report on the 2020 mortgage crisis last Wednesday, May 19, 2020. 47% of adults across the nation told the Census Bureau when asked that they or another adult in their household had lost income since March 13. Loss of income has hit the poorest and low-income wage earners the hardest. 56% of the respondents who had not earned a high school diploma, and 51% who hold a high school diploma but did not go on to college, have lost work and so have lost income. Only 38% of respondents with a college degree or higher, reported that they have lost income in the same period.
So when the tales of fraud come tripping in, as they will, the lived experience of landlords and lenders is that wealthy business tenants have stopped paying rent by more than 2.5 times the rate of residential tenants. And for their part, homeowners in large numbers have stopped paying their monthly mortgage payments for a good reason that has nothing to do with maximizing profit: Homeowners just don't have the money.
Nonetheless the stories of fraud will come. They will be broadcast across the land. What is true, however, is that evictions will rise, unauthorized add-ons such as insurance premiums placed by force will increase, and foreclosures will climb. We have been here before. We have seen this movie, as they say. Here's hoping that this time it will be all right in the end, or it won't be the end.
Find out more about the Causes and Claims behind Lender Force-Placed Insurance Practices. See the Introduction by Dennis Wall to what's in the Loan Documents you sign when you or your clients buy a house, Section 2:1 in LENDER FORCE-PLACED INSURANCE PRACTICES published by American Bar Association Publishing, accessible at no charge to you and your clients at https://www.dennisjwall.com.
Homeowners Who Can't Make Mortgage Payments Get a New Deferral Option, by Andrew Khouri, LOS ANGELES TIMES (online link not available at time of this post); Business / Newsletter: If You Can't Pay Your Mortgage, You Have Options, by Rachel Schnalzer, LOS ANGELES TIMES (online link also not available at time of this post).
If you can't make your homeowner's insurance, you have add-on mortgage risks including servicing fees, surveys, etc. adding to foreclosure risk.
Selling houses without making them habitable looks, sounds, and smells like Bad Faith. Even when they are sold at "instant buying" prices over the internet. See Ben Casselman and Conor Dougherty, Looking For a Fast Sale? Silicon Valley is Buying, New York Times, Wednesday, May 8, 2019, p. B1.
Haven't we seen this movie as they say? Maybe it was so good -- for some -- that they had to do it again.
What title shall we put on this, say, "Great Recession II"?
In Shawnee Tabernacle Church v. Guideone Ins., No. 16-5728, 2019 WL 1779829, at *1 (E.D. Pa. April 23, 2019), the Court was confronted with a water loss and claims of breach of contract and insurer bad faith. The questions addressed in this particular decision were two: (1) Are damages for foreclosure recoverable here, and (2) What is the proper measure of those damages?
The Court's answers in this case were, first, that damages resulting from foreclosure are a form of consequential damages and are recoverable in such a case.
Second, the proper measure of damages here is the diminution in fair market value of the property as a result of the foreclosure.
To rephrase Mr. William Faulkner's famous phrase about the past, 'Foreclosure isn't dead. It isn't even past.'
Photograph Courtesy of New York Public Library Collection.
The secretary of the treasury has forced a fraction of the Internal Revenue Service employees, who had been laid off, to return to work and process papers for the mortgage industry.
So as not to actually break the law in plain sight, the Federal Government is paying these people with so-called "user fees," i.e., donations paid by the mortgage industry to do the work.
This was arranged by the Mortgage Bankers Association. The MBA worked with the treasury department by asking the current Federal Government to recall the Federal employees to process the papers which the MBA needed to process mortgage money, er, mortgage applications.
This is no surprise. The current occupier of the title of Secretary of the Treasury made much of his money from mortgages and foreclosures before entering the current Administration.
Reportedly, some observers of these arrangements question how it is legal to use Federal employees to benefit not the American public but one discrete group of private businesses. Other observers despair that no-one who has standing to object, will object and therefore they see no remedy to the situation.
Well, let's take a look at that.
The situation as you might call it is bad faith. A few people are forced to give up their labor, because through no fault of their own they are employed by the Federal Government during the current Administration, which calls them back to work in order to help a few businesses continue to make money (and prolong the shutdown because the shutdown will not feel so bad, obviously). These IRS employees are being instructed to serve the interests of a few in the name of public service.
This is happening while other people are told not to come back to work and in some cases they will not be paid. Ever.
Is a mandatory injunction available? Would their unions have standing to represent thousands of what we are told is the current laid off Federal workforce of 800,000 people? (A figure that will soon grow even higher.) The idea of a mandatory injunction might be that the rest of the hundreds of thousands of Federal workers who are not getting paid and who have also been told not to report for work, should also be brought back to work and paid.
If arrangements are made by the Federal Government that benefit some furloughed Federal workers but not others who are in the same boat, shouldn't the Federal Government lawfully be required to also arrange for these other people to be recalled back to work by the same Federal Government that told them not to come to work in the first place? And arrange topay them also?
That brings in another idea. The Federal Government of all people is supposed to provide equal protection of the laws. Equal protection clearly demands that people be treated equally. Federal workers are people and as such, they too deserve to be treated equally.
Regardless of whether their work does or does not make money for private interests.
A mortgage broker's errors and omissions (E&O) policy did not provide coverage as interpreted under Arizona law in 11333 Incorporated v. Certain Underwriters at Lloyd's, London, ___ F. Supp. 3d ___, No. CV–14–02001–PHX–NVW, 2017 WL 2556755 (D. Ariz. June 13, 2017), appeal docketed, No. 17-16331 (9th Cir. June 28, 2017).
The coverage claim in this case was based on a bank's losses from a defaulted mortgage. The mortgage broker was the policyholder of the E&O Policy. The broker claimed that its E&O policy covered it for the alleged losses of its client, the lender. The lender's losses in particular were allegedly caused by the broker's failure to secure fire or flood insurance coverage for property that a borrower put up as collateral for the mortgage loan when the borrower defaulted and the lender foreclosed. Parenthetically, the amount of the mortgage loan was $18 Million and the borrower was a subdivision land developer.
In that case, the broker was not merely wearing the hat of a mortgage broker, but it also put on the hat of a mortgage servicing agent for the loan and it put on the additional hat of a legal fiduciary as manager of the same lender's assets generally. There was apparently a strong relationship between this particular mortgage lender and this particular mortgage broker-servicer-fiduciary.
However, the Insuring Agreement of the insurance policy in question provided coverage only for “[l]oss to the Insured's Mortgagee interest or Owner interest, including when acting as a mortgage servicing agent or in a legal fiduciary capacity, in real property[.]” Although there was certainly a "loss" in the sense that the borrower had previously defaulted on the mortgage and the lender had previously foreclosed on the collateralized property, the mortgage broker was the "Insured" under this policy and the mortgage broker did not have a mortgagee or ownership interest in property so that the "loss" was not a covered loss under this policy language.
Moreover, the mortgage broker's client, the lender who suffered the alleged loss, was not named as an additional insured in the E&O policy. In this case, the Court pointed out, only the lender had a mortgagee's interest while the mortgage was in place and only the lender (through a subsidiary it invented) had an ownership interest when it foreclosed. At no time did the broker have either a "mortgagee interest or an owner interest."
Judgment against the mortgage broker: No E&O coverage under this policy.
Dennis Wall is at work on a book about concealed evidence and secret settlements that take our money, foreclose on our homes, and change our lives.
In Auto-Owners Ins. Co. v. Bolden, as Personal Representative, etc., and Reverse Mortgage Solutions, Inc., d/b/a Vertical Lend ISAOA/ATIMA, No. 9:16-cv-2961-DCN, 2017 WL 3923356 (D.S.C. September 7, 2017), the Court addressed several issues.
Chief among the important facts for our purposes was that, among other things, a homeowner died in a fire at her home while her home was being foreclosed. The homeowner's estate made a claim for coverage. The homeowners carrier did not pay the policy proceeds to the policyholder's estate.
Instead, the homeowners carrier paid part of the claim to the estate, and then proffered a check for the balance of the claim naming both the estate and the mortgagee as joint payees. The estate refused the second check basically on the ground that the policyholder owned the property at the time of the fire loss and so her estate should be the sole payee now.
The homeowners carrier then filed a lawsuit claiming the right to an interpleader. The Estate filed counterclaims in the carrier's lawsuit, for breach of contract and bad faith. The homeowners carrier requested that the Estate's claims be dismissed partly because it, the carrier, had filed a motion for interpleader and also because, the carrier argued, the bad faith claims in essence died with the homeowner.
In this procedural posture, the Court allowed the Estate to pursue the homeowner's contract and bad faith claims, denied the carrier's motion to dismiss those claims, and refused interpleader in this case.
... WHEN A FALSE DESCRIPTION IS THE TRUMP, AND BAD FAITH IS NOT EVEN IN THE PICTURE.
A couple that filed for bankruptcy owned two properties. Their mortgage on a home equity loan gave the street address for one property as the collateral, but the "metes and bounds" legal description for their other property as the collateral. Not only did the two properties have different legal descriptions, of course, but they are miles apart.
The mortgage was recorded but apparently no-one caught the false identification of the collateral for a loan of several hundreds of thousands of dollars.
The lender contended in Bankruptcy Court that the property description in the mortgage should be "reformed" to reflect what it said was the true collateral for the home equity loan. Of course, at that point, it seems like the lender could have picked either property to be the collateral, if it had wanted, since both properties were partially described as collateral in the mortgage.
The Bankruptcy Court applied precedent and held that this mortgage could not be reformed and, rather, that this mortgage is a part of the bankruptcy estate. In re Benton (Eastern Bank v. Benton), Case No. 16–11385–JNF, Adv. P. No. 16–11012017, 2017 WL 53581, at *9-*10 (Bankr. D. Mass. January 4, 2017).
When a lender is writing up a mortgage, a miss is as good as a mile sometimes.
Image Copyright Dennis J. Wall. All rights reserved.
A lender-mortgagee foreclosed on property and sold it at a foreclosure sale. The buyer on foreclosure was Andromeda Real Estate Partners, LLC. Andromeda was sued immediately by a prior owner of the property who alleged claims in four (4) counts. At bottom, in each count the underlying plaintiff alleged that Andromeda's deed was invalid.
Andromeda held a title insurance policy issued by Commonwealth Land Title Insurance Co. Andromeda submitted the claim to Commonwealth and demanded a defense of all four counts against it in the underlying case. Commonwealth offered to defend only one count. Commonwealth contended that it had no coverage whatsoever for the other three counts in the underlying complaint against Andromeda.
Andromeda sued Commonwealth in Federal court for coverage.
The Court applied the simple rule that when there is a duty to defend one count in an underlying complaint against a policyholder, there is a duty to defend all counts in the underlying complaint against the policyholder.
"The Court finds that the entire complaint relates to an alleged defective foreclosure sale and a defect in the deed. All four counts are intimately intertwined with whether Andromeda received good title, a covered occurrence under the policy." Andromeda Real Estate Partners, LLC v. Commonwealth Land Title Ins. Co., C.A. No. 15-224-M-LDA, 2016 WL 715777, at *2 (D.R.I. February 19, 2016).
Next, after holding that Commonwealth wrongly denied a defense to Andromeda, the Court held that as a consequence of its wrongful denial Commonwealth will have to pay the attorney's fees of counsel which Andromeda, not Commonwealth, retained to defend Andromeda in the underlying case.
The Court announced the essential basis for its decision at the beginning of its opinion. The Court held the way it did "[b]ecause this Court finds that the allegations in the underlying lawsuit taken as a whole are a covered risk under the title insurance policy, and that the insured landowner was entitled to conflict-free representation …." Andromeda Real Estate Partners, LLC v. Commonwealth Land Title Ins. Co., C.A. No. 15-224-M-LDA, 2016 WL 715777, at *1 (D.R.I. February 19, 2016).
The article's main point is that debt buyers clearly seem to follow an established business model (disputed by debt buyers), in which they buy the debts of people, meaning that they can then file collection suits to recover the alleged debts, and more. Debt buyers file robo-signed affidavits in large numbers with exhibits as "evidence" of the debt which in many cases is not owed by the people being sued.
Although they should not ignore these complaints, people often do ignore them, whether because the collection suits are filed in small claims courts (which they often are) and the consequences of not responding to them correspondingly seem small, or because the people who allegedly defaulted on a debt never asked for the loan, or the people do not recognize the name of the plaintiff suing them because they have never heard of it.
For whatever reason, people do not respond when they are sued in such matters -- something which the debt buyers allegedly count on as a part of their business model. When the people do respond with a lawyer, either the debt buyers dismiss their lawsuits right away (frequently) or the people represented by lawyers win on the merits (also fairly frequent when people are represented by counsel in these lawsuits, according to the ABA Journal article). According to statistics presented in the article, fewer than 2% of the people sued in these cases are represented by a lawyer, however.
When as happens in the vast majority of these cases the people do not respond, the debt-buying-plaintiffs request that the clerks enter default judgments, all without a judge ever seeing the complaint or the "affidavit" or its exhibits. Statistics in the article reflect that over 99% of judgments in such cases were entered without a trial.
"A clerk simply processed the creditor's claim based on a document stating little more than this person owes us this much, and the fact that she was served with the suit, then entering judgment after it went unchallenged." Terry Carter, ABA Journal, supra.
At this stage of the business process, the people who are sued really are debtors now: Judgment debtors. The next step in the process is that the judgment creditors -- the debt buyers -- execute upon the judgments and seize and sell the judgment debtors' assets to satisfy the judgments.
The article describes this business model as "unprecedented":
The debt-buying industry has understandably taken advantage of this and put an unprecedented burden on the nation's courts--state venues, usually small claims or others of nonrecord jurisdiction.
There is precedent for the burden placed on the nation's courts by a business model involving the calculated use of "robo-signed affidavits," however: The foreclosure crisis. In Florida, for example, the Courts were nearly overwhelmed with foreclosure suits. One way in which the Florida Supreme Court dealt with the explosion of foreclosure suits was to institute special Mediation Foreclosure procedures. The new mediation requirements in foreclosure cases have played a part in lowering the numbers of foreclosure filings, but foreclosure litigation is still a burden on the Florida Courts. Nationally, predatory lending practices of mortgage lenders and their servicers included lender force-placed insurance practices and foreclosure lawsuits based on robosigned affidavits.
By definition, such affidavits are signed robotically and are not made on personal knowledge. Robosigned affidavits accordingly contain the testimony of witnesses who do not have a clue about the truth or falsity of what they are swearing and affirming to be true. These and other similar business practices brought about a so-called National Mortgage Settlement. Neither the national settlement nor the settlements in individual cases have stopped the lenders' alleged predatory practices. See "SETTLEMENTS HAVE NOT STOPPED LENDER FORCE-PLACED INSURANCE PRACTICES OR LAWSUITS," posted on Insurance Claims and Issues Blog on Monday, December 14, 2015.
Obviously, that includes robosigning.
A solution in some States, such as in California, has been to enact legislation to address the debt-buyers' business model and litigation practices. Other States, such as New York, have enacted new Rules of Court to deal with the same issues. However, as is noted in the ABA Journal article, clerks of Courts are still so overwhelmed that no-one can confirm compliance with the new laws or with the new rules, as the case may be.
Until the clerks get their heads above water and their desks above paper filings, something can be done to further justice and slow the cause of injustice in the interim. Clerks can refuse to enter defaults; they can refer the cases to judges. Judges for their part can and must refuse to enter judgments which are not based on admissible evidence. Anything less and the clerks and the Courts will continue to complain about being overwhelmed, and as in the case of their cousins the mortgage lenders and mortgage servicers filing foreclosure lawsuits, the plaintiffs who file debt collection cases will demand that the judicial system now take steps to "streamline" dockets and reduce obstacles such as evidence, in order to accommodate the massive and overwhelming numbers of collection lawsuits which these debt-buying-plaintiffs file.
Or else they will overwhelm the system, they will say.
Foreclosure trends are headed back up. So says RealtyTrac in its report released on November 12, 2015, "U.S. Foreclosure Starts Increase 12 Percent in October" (subscription may be required). The top five foreclosure states reported by RealtyTrac are Maryland, New Jersey, Florida, Nevada, and Illinois, and RealtyTrac swiftly summarizes its written report in a YouTube video podcast, here.
A lender force-placed insurance ("LFPI") case went to trial. And the evidence introduced at trial has just been reported, a lot of it. There have been many LFPI cases, but until recently most have ended in secret settlements and none has been found which ended in a trial.
Based on the evidence in this "wrongful foreclosure" action that did go to trial, a State Court Trial Judge entered judgment for the mortgagor's estate and assessed punitive damages. On appeal, the State Court of Appeals affirmed in part and reversed in part. When it affirmed, the appellate court affirmed multiple grounds for the trial court's holdings of liability and assessment of punitive damages. Dollens v. Wells Fargo Bank, N.A., 356 P.3d 531, 2015-NMCA-096 (N.M. Ct. App. 2015).
Lender force-placed insurance practices are ordinarily challenged in Federal Court actions. Not one of those challenges has ended with a trial. The Dollens case may very well present a viable way not only to publicly air out practices which affect the public, but also to provide incentive for attorneys to litigate cases in which the prospect of success does not always mean settlement. Instead, the prospects of success in LFPI cases now can mean awards of general damages and assessments of punitive damages in favor of homeowners-mortgagors who have proven lender misconduct and resulting damages.
In Dollens, the parties stipulated that general damages amounted to $4,221.73. Dollens v. Wells Fargo Bank, N.A., 356 P.3d 531, 535 n.2, 2015-NMCA-096 (N.M. Ct. App. 2015). This amount apparently reflects the amount due on the decedent's mortgage which the evidence shows was misapplied by the defendant mortgage servicer. In basic terms, the evidence also displayed that the actions of the mortgage servicer dealing with the money were the predicate cause of the decedent's mortgage loan going into default. Upon default, the mortgage servicer foreclosed on the decedent's property. Here is what the evidence shows according to the appellate court in Dollens.
The evidence shows that the mortgage servicer had two (2) opportunities to bring the mortgage due, and that it declined the opportunity on both occasions because it paid itself before it applied the payments according to the priorities set forth in the mortgage. The first occasion was when Minnesota Life Insurance Company paid the mortgage servicer the proceeds of a mortgage accidental death (or "MADD") insurance policy in the amount of $133,559.15. The mortgage servicer acted as the insurance company's "agent" to sell the MADD policy to the decedent. The servicer pocketed the "agent fees" paid by the insurance company. Parenthetically, in the parlance of LFPI cases, "fees" of this kind are alleged "kickbacks."
Further, in Dollens, instead of applying the insurance proceeds to reduce the principal balance as the mortgage required it to do, the mortgage servicer paid itself late fees, inspection charges, and bills for charges supposedly incurred for preservation of the property.
Parenthetically, the evidence clearly shows that before Minnesota Life paid the MADD proceeds to the mortgage servicer, Minnesota Life -- in a communication from the principal to its agent -- begged the mortgage servicer not to foreclose.
The evidence also clearly shows that the servicer filed for foreclosure six days after Minnesota Life asked it to hold off on filing foreclosure proceedings.
Inexplicably, in the eyes of the appellate court, the evidence does not reflect any other response by the agent to its principal, i.e., by the mortgage servicer to the insurance company.
The second time was just like the first, which came about when the decedent's estate brought the loan current four-and-one-half months later. Again, the mortgage servicer paid itself late fees and property inspection fees, and left more due on the loan than would have been the case if the payment had been applied following the priorities established in the mortgage for the mortgage servicer to follow, and which, the evidence showed, for a second time it did not follow. Dollens v. Wells Fargo Bank, N.A., 356 P.3d 531, 535, 2015-NMCA-096 (N.M. Ct. App. 2015).
The appellate court affirmed the trial court's assessment of punitive damages on at least two grounds, in part here pertinent. The first ground related to the evidence admitted at trial concerning what the appellate court called "unreasonable property inspection and preservation fees":
The Estate presented evidence at trial that Wells Fargo made excessive “drive-by” visits to the property, charging the mortgage account for each visit, and also charging for dubious preservation work orders, including orders for “winterization” in July, and multiple orders for “grass cuts” where photographic evidence presented at trial demonstrated that there was no grass.
Dollens v. Wells Fargo Bank, N.A., 356 P.3d 531, 543 ¶ 32, 2015-NMCA-096 (N.M. Ct. App. 2015). [Emphasis added.]
The appellate court also affirmed the trial court's assessment of punitive damages on account of what the appellate court termed, "misapplication of funds." Affirmance on this claim (or group of claims) was reached "[f]or several reasons," the appellate court's conclusion in part being that "there was substantial evidence that Wells Fargo misapplied the insurance proceeds in bad faith." Dollens v. Wells Fargo Bank, N.A., 356 P.3d 531, 544 ¶ 37, 2015-NMCA-096 (N.M. Ct. App. 2015). [Emphasis added.]
There was more evidence to come, however:
Against this backdrop, the district court heard testimony from a Wells Fargo employee that the account was handled in a “customary” manner. Thus, it was reasonable to conclude that these were not isolated errors but that Wells Fargo consistently and systematically acted in order “to increase its profits without regard for ... Decedent or his family.”
Dollens v. Wells Fargo Bank, N.A., 356 P.3d 531, 545 ¶ 40, 2015-NMCA-096 (N.M. Ct. App. 2015).
There is more to the Dollens opinion on appeal, and readers will profit from reading it in its entirety. What has been shown here is enough to show the benefits of evidence and a record in lender force-placed insurance cases.
“We are constantly seeing problems with the way servicers are treating homeowners and not following the rules. I don’t understand why there hasn’t been a stronger policing from Treasury on servicers.”
To keep money flowing through as great a number of hands as possible, and to keep homeowners in their homes, loan modifications – “deals that reduce the costs of mortgages” -- became a popular potential solution to a large part of the Great Recession, which was caused in large part by practices involved in mortgage lending. Loan modifications thus became central to the Obama Administration’s Home Affordable Modification Program or “HAMP,” which was supposed to affect Four Million homeowners and the lenders and servicers that deal with their mortgages.
In an investigative report issued last week, the Office of the Special Inspector General of the Troubled Asset Relief Program (“SIGTARP”) found that banks participating in HAMP rejected 72% of the applications for loan modifications. After some 6 years, the banks have agreed to loan modifications for 887,001 mortgagors-borrowers, not 4,000,000.
SIGTARP reported two big reasons for these results: HAMP is entirely voluntary for banks, and the banks which do participate are “on their own,” without any supervision or accountability.
Lawyers who represent borrowers who have alleged that their loan modification applications were wrongly denied, add a third reason, at least equally significant to the two reasons reported by the Special Inspector General:
Delaying a borrower’s loan modification request can be profitable for a bank; extra time for the bank means more interest and fees can be charged to the borrower, increasing the amount owed on the mortgage.
Instead of affordable modifications, banks are delivering more predatory practices, enabled instead of policed by the Federal Government. The business model of robbing the poor to give to the rich is very much alive.
SO GOES MOST OF THE NATION ON DEFENSES TO WRONGFUL FORECLOSURE.
In a case called Yvanova, the Supreme Court of California granted review in a case involving standing to raise the issue of a defective assignment of a note and deed of trust as a defense in a wrongful foreclosure action. Depending on how the California Court answers that question, the wrong plaintiff may be pursuing that foreclosure action.
The Supreme Court granted review in Yvanova almost a year ago. It seems like that was very long ago to some people, so long that they have apparently forgotten what the California high Court’s review is about. To some degree, it may be the California Supreme Court’s own fault, letting the case lie untouched to human eyes for nearly a year, but that happens in law and not just in the California Supreme Court.
At any rate, several commentators have recently observed that the California Supreme Court was considering a homeowner’s standing to raise the issue of wrongful foreclosure – period.
Nah. That is not what they were doing when they granted review. Here is what the California Supreme Court said they are going to review in that case:
Briefing and argument is limited to the following issue (see Cal. Rules of Court, rule 8.516(a)(1)): In an action for wrongful foreclosure on a deed of trust securing a home loan, does the borrower have standing to challenge an assignment of the note and deed of trust on the basis of defects allegedly rendering the assignment void?
Yvanova v. New Century Mort. Corp., 331 P.3d 1275, 176 Cal. Rptr. 3d 266, 266 (Cal. August 27, 2014).
The issue accepted for review by the Supreme Court is an important one. The Supreme Court’s answer will affect the resolution of many wrongful foreclosure actions, and not just actions in California as the Courts of other States and jurisdictions follow or even distinguish and reject the Californians’ lead.
But it is totally not the same issue as whether a homeowner has standing to raise the issue of, i.e., file a claim for, wrongful foreclosure – period.
Lender force-placed insurance practices apparently became a defense to foreclosure in the case of Bank of Am., N.A. v. Pate, ___ So. 3d ___, 2015 WL 1135923 (Fla. 1st DCA March 16, 2015)(Thomas, J., Specially Concurring provided all the facts in this Per Curiam decision).
The Pate case was a civil foreclosure involving a “residential home.” The Trial Court found that the bank acted with “unclean hands in this equity action”.
The bank’s hands were found to be unclean partly on account of the bank’s alleged (and apparently proven) failure to pay the homeowners’ insurance fees from escrow, following which the bank force-placed insurance and thereby “quadrupled” the homeowners’ monthly mortgage payment.
In addition to losing its foreclosure action, the bank in this case was also a counterdefendant against counterclaims filed by the homeowners “for breach of contract and fraud” which resulted in the assessment of $250,000.00 in punitive damages together with an award of $60,433.29 in compensatory damages.
We owe a debt of gratitude to Judge Thomas for making the facts public knowledge in his Specially Concurring opinion in this Per Curiam case.
Homeowners May Pay Bankers’ Future Bonuses, Courtesy of a New Regulation Proposed by the Consumer Financial Protection Bureau.
Under a proposal made by the U.S. Government, banks and other mortgage servicers would be empowered to decide whether homeowner’s insurance on mortgaged homes is “insufficient”. These same banks reportedly earn money by declaring that a homeowner’s insurance is “insufficient” and requires lender force-placed insurance. Further, the banks earn more money if the homeowner cannot afford the exorbitant higher premiums of lender force-placed insurance, and so the banks foreclose on the homeowner’s mortgage.
Under the pending proposal, written by the Consumer Financial Protection Bureau, the banks and other mortgage servicers would be immunized if they are wrong. Whether the homeowner had “sufficient” insurance coverage is at the heart of most lawsuits over lender force-placed insurance practices; if the banks are immunized for being wrong about that, they may be exposed to significantly less scrutiny by juries and judges in LFPI lawsuits. Certainly, that is what the banks at least will argue.
The official period for comments expires on Monday, March 16, 2015. As these words are written, there is time to register your own observations on the CFPB proposal. On Friday, March 13, 2015, the author filed his own comments and for your convenience, they are repeated here including the information necessary for the Government to process your comments including the CFPB Docket Number and the Regulatory Information Number (“RIN”) . Please take advantage of this unique opportunity, whether or not you agree with the following comments of this writer.
These Comments concern certain amendments or changes to regulations and related forms proposed by the CFPB. The Bureau’s proposed amendments are not authorized by Congress.
The Consumer Financial Protection Bureau can act only with authority delegated by Congress. Here, the Bureau’s cited Legal Authority does not authorize the CFPB to issue a regulation that in turn authorizes a mortgage servicer to demand “evidence that the borrower has hazard insurance that provides sufficient coverage”.
These Comments address in particular the Bureau’s proposed changes to 12 C.F.R. § 1024.37(c)(2)(v)(A) and (B). The CFPB’s proposed changes to the regulation also implicate changes proposed by the CFPB to Forms in Appendix MS-3 including (A) and (B).
The CFPB’s cited “Legal Authority” for these changes references certain sections of the Real Estate Settlement Procedures Act (RESPA):
These proposed amendments and clarifications to § 1024.37 implement sections 6(k)(1)(A), 6(k)(2), 6(l), and 6(m) of RESPA.
The proposed amendments addressed here do not implement the cited sections of RESPA. (The sections relied on by the CFPB are codified in 12 U.S.C. § 2605.)
Section 6(m), or subsection 2605(m), does not authorize anything like requiring evidence that the borrower has hazard insurance that provides “sufficient” coverage.
Sections 6(k)(1)(A) and (2), or subsections 2605(k)(1)(A) and (2), refer to “the loan contract’s requirements to maintainpropertyinsurance” [emphasis added]. In that way, these two subsections of the enabling statute, taken together, allow mortgage servicers to obtain force-placed hazard insurance only when there is a reasonable basis to believe that the borrower has failed to comply with the loan contract’s requirements to maintain property or other hazard insurance. There has been no change to the provisions of the enabling statute. There is no resulting authority for changing the regulation written to implement the statute’s provisions. The proposed amendment to Section 1024.37, referencing authority conferred upon mortgage servicers to require and accept evidence of “sufficient” property or other hazard coverage, is without authority. Unless and until determined to the contrary by a Court of competent jurisdiction, the proposed amendment would as a result be void at inception because it would be issued without the required authority which has not been extended by Congress to the Bureau.
There is no arguable basis for the proposed amendment to the regulation, under Section 6(l) or subsection 2605(l), either. This provision of the statute does not authorize a change to the regulation, it has not been changed itself, and issuing such a regulation as that proposed by the Bureau would not, in this instance, implement the statute in any conceivable way.
To the contrary, paragraph 6(l)(2) which is codified as paragraph (2) of subsection 2605(l), prohibits the proposed regulatory change by implication. It provides:
(2) Sufficiency of demonstration
A servicer of a federally related mortgage shall accept any reasonable form of written confirmation from a borrower of existing insurance coverage, which shall include the existing insurance policy number along with the identity of, and contact information for, the insurance company or agent, or as otherwise required by the Bureau of Consumer Financial Protection.
There is nothing in the statute about who makes the determination of what is or is not “sufficient” coverage. There is nothing in the statute about what qualifies as “sufficient” coverage. The statute simply does not address the concept of “sufficient” coverage at all.
The statutory scheme selected by Congress is reasonably clear: A servicer is required to accept all reasonable forms of evidence of “existing insurance coverage.” Thereafter, the borrower and the servicer can each determine for themselves whether a Court of competent jurisdiction would hold that the evidence provided of “existing” coverage is evidence of “sufficient” coverage required by the mortgage loan contract.
Otherwise, the mortgage servicer’s demand under the proposed amended regulation for evidence of “sufficient” coverage may be immunized under the Interpretations promulgated by the CFPB concerning compliance with all CFPB regulations. See 12 C.F.R. 1024, Supp. I, unnumbered “Introductory Paragraph.”
The genesis of the proposed amended regulation may lie in the Bureau’s regulation which addresses the sufficiency of Flood Insurance policy limits. See Dennis J. Wall, “Lender Force-Placed Insurance Practices,” a book forthcoming later this March, in which the Bureau’s regulatory activity in the arena of Flood Insurance is discussed along with many other issues arising from lender force-placed insurance practices.
However, the source of authority for the Flood Insurance regulation is the National Flood Insurance Act, as amended. RESPA does not convey any similar authority upon the Bureau.
CONCLUSION
The proposed regulatory changes which are the subject of these Comments are the Consumer Financial Protection Bureau’s proposed amendments to12 C.F.R. § 1024.37(c)(2)(v)(A) and (B). The CFPB’s proposed changes to the regulation also implicate changes proposed by the CFPB to Forms in Appendix MS-3 including (A) and (B).
In proposing the amendments addressed in these Comments, the Consumer Financial Protection Bureau relies on sections 6(k)(1)(A), 6(k)(2), 6(l), and 6(m) of RESPA [codified as 12 U.S.C. § 2605(k)(1)(A), (2), (l), and (m)]. The Bureau’s cited Legal Authority does not authorize the CFPB to make the subject changes which the Bureau proposes to make to the regulation. In particular, the enabling statute – RESPA – does not authorize the Bureau to issue regulations that in turn authorize a mortgage servicer to determine what may constitute “sufficient” insurance coverage and receive immunity for its decision, including immunity for a servicer’s demand for “evidence that the borrower has hazard insurance that provides sufficient coverage”.
FAILING TO OBEY EVEN COURT RULES WOULD NOT RESULT IN SANCTIONS IMPOSED BY COURT.
The United States Department of Justice has a history of settling claims against large financial institutions rather than trying them. Moreover, it is apparent that the DOJ also has a policy not to accuse individuals at large financial institutions of wrongdoing.
These strains of policy came together in a matter involving the U.S. Trustee Program and the Bankruptcy Courts of the United States. The inappropriate result in this case is the central focus of this article.
The Trustee Program took certain "actions ... in districts around the country concerning [J.P. Morgan] Chase's improper practices in bankruptcy cases, including robo-signing." This is the DOJ's description in a press release announcing that the DOJ has settled the U.S. Trustee Program's "actions." Press Release, Department of Justice Office of Public Affairs, Tuesday, March 3, 2015. These actions and the announced "robo-signing" deserve a little closer look.
First, the announced offense. Statutes and Court Rules require that affidavits and declarations under oath shall be submitted to Judges based on the declarant's personal knowledge, if they are supposed to be considered by the Courts as evidence. "Robosigning" means that the persons testifying to their personal knowledge actually did not have personal knowledge. It means that these same persons had no idea what was in the documents that they swore they knew all about.
"Robosigning" never involves what might be called schoolyard bragging. The robosigned affidavits and declarations -- so-called because they are signed so fast that the declarants swear and sign them like robots -- are always submitted as evidence. Otherwise there is no purpose to them.
Chase "acknowledged," i.e., admitted , according to the DOJ's press release, "that it filed in bankruptcy courts around the country more than 50,000 payment change notices that were improperly signed, under penalty of perjury, by persons who had not reviewed the accuracy of the notices." [Emphasis added.] Chase even outsourced some of the 'signings' to "individuals employed by a third party vender on matters unrelated to checking the accuracy of the filings."
So, the United States Department of Justice was presented with a case in which 50,000 persons allegedly committed perjury. These 50,000 people signed false or incomplete papers which falsely declared that persons in bankruptcy should be subjected to payments for mortgage debts, so-called "payment change notices."
Not one of the 50,000 people involved in this practice faces any sanctions, or at least the DOJ does not mention any in its press release. The only thing achieved in this perjury settlement is that Chase will pay some money.
That is not enough.
That is not sufficient to maintain the integrity of the Courts including the Bankruptcy Courts of the United States. No-one should ever be permitted to declare the truth of something under oath which they know not to be true. Declarants committing perjury should still suffer the consequences of their perjury for the sake of preserving the integrity of the judicial system -- and for preserving the willing obedience of every member of society to the rules and rulings of the Courts. This settlement does not even come close to serving that purpose.
The DOJ's settlement on behalf of the U.S. Trustee Program has reportedly been submitted for approval to the United States Bankruptcy Court in the U.S. District Court, Eastern District of Michigan. The DOJ press release does not provide the case number. An Internet Search by the author does not reveal it either, although the author's search did turn up many places in which the terms of the DOJ's press release are either repeated or summarized.
Here is the contact information for the National Association of Bankruptcy Trustees. These people should be able to provide that missing case number so that the Court Files can be accessed and objections can be filed:
The readers of this column are invited to register their comments in accordance with the rules of the Court.
PRAYER FOR RELIEF. The Court in that case is respectfully requested to impose sanctions and require more than the payment of money in this settlement, which is all that the Department of Justice was content to require, if this settlement proceeds at all.
The American Bankers Association has requested “clarification” of mortgage servicing and consumer financial protection rules from the Consumer Financial Protection Bureau (“CFPB”). The Association has written to the Bureau to advise that “legal and regulatory uncertainty” should not be “additional factors that encourage banks to scale back their mortgage servicing activities.” Letter to Ms. Kelly Cochran, Assistant Director for Regulations at the CFPB, from Mr. Robert R. Davis, Executive Vice President for Mortgage Markets, Financial Management & Public Policy at the American Bankers Association, dated October 24, 2014. (This letter is referenced by the CFPB in its call for Comments to Amended 2013 Mortgage Rules Under RESPA, the Real Estate Settlement Procedures Act, and Under the Truth in Lending Act, which you can access here and leave your own comments in response to the Bureau’s invitation. The CFPB's citation of the Association's October 24, 2014 can be found in nn. 70, 299, and 316. The Association’s October 24, 2014 letter is accessible here: Download American Bankers Association Letter Rolling Delinquencies.102414.)
What the American Bankers Association’s letter does not mention is that banks are “scaling back their mortgage servicing activities” because that business is no longer as profitable as it once was.
Ms. Gloria Hoegh sued Florida State Court Judges for alleged constitutional improprieties during her foreclosure proceeding. She argued that the Florida Judges violated the Florida Constitution in a foreclosure action filed against her by one Credit-Based Asset Servicing and Securitization, LLC.
On January 5, 2015 a panel of the Eleventh Circuit Court of Appeals affirmed the District Court's dismissal of Hoegh's complaint in a "DO NOT PUBLISH" opinion. The Eleventh Circuit held that it was obvious to them, as it was to the District Judge, that the Federal Courts lacked subject-matter jurisdiction here. Hoegh v. Thompson (11th Cir. Case No. 13-12501 January 5, 2015)(stated "DO NOT PUBLISH") Download Hoegh v Thompson (11th Cir. 01.05.15 DO NOT PUBLISH OPINION).
There may be ways to address irregularities in foreclosure actions whether or not the cases are filed in Florida or elsewhere. A clear lesson from the Eleventh Circuit's unpublished opinion in this case is that the way that was followed here is apparently not one of the ways to do that.
Please Read The Disclaimer. Copyright 2015 by Dennis J. Wall. All rights reserved. No claim to Original U.S. Government Works.
Class action settlements provide many issues separate and apart from the substance of the cases. There is no better example at hand than lender force-placed insurance (“LFPI”) cases.
In Keller v. Wells Fargo Bank, N.A., 2014 WL 6684895 (W.D. Wash. November 25, 2014), the issue was whether a class action settlement in Florida barred lender force-placed insurance claims in Washington State.
The claimants in Washington State are Scott and Marnie Keller, on behalf of themselves and others similarly situated, i.e., an alleged class in that case. The Kellers alleged “claims for breach of contract, unjust enrichment, breach of the implied covenant of good faith and fair dealing, breach of fiduciary duty, and violation of the [Washington State] Consumer Protection Act.” Keller v. Wells Fargo Bank, N.A., 2014 WL 6684895 *2 (W.D. Wash. November 25, 2014). [Emphasis added.] These alleged claims were based on insurance that was placed by force by Wells Fargo. It appears from the brief opinion that the Kellers alleged that Wells controlled their mortgage escrow; in all likelihood, the two Wells Fargo defendants sued by the Kellers were the mortgage lender or mortgage servicer, or the agent of either of these [hereinafter collectively referred to as “Wells Fargo” or “Wells”].
The Kellers alleged that they continuously maintained “hazard insurance” on their home from the day they purchased it on October 27, 2004. The Kellers’ annual premium for this insurance was $1,331.00.
Wells Fargo paid the premiums for the Kellers’ insurance from the Kellers’ escrow account, for awhile. Apparently, on or about October 29, 2010, a policy of insurance force-placed by Wells Fargo took effect on the Kellers’ home. The Kellers alleged that there was a balance of $1,662.00 in their escrow account at the time which, they alleged, was more than sufficient to pay the annual premium of the insurance on their home.
Allegedly Wells Fargo notified the Kellers for the first time in January, 2011 of the insurance which was force-placed effective October 29, 2010. In January, 2011, Wells Fargo allegedly also notified the Kellers – for the first time – not only that Wells had force-placed insurance but that it had done so at a cost charged to the Kellers of $3,492.00.
The Kellers refused to pay the increase in their monthly mortgage payments. They continued to pay their monthly mortgage amount of $1,149.59 during this entire period, until Wells allegedly did not accept their mortgage payments any longer. “On May 1, 2013, Wells Fargo refused the Kellers’ mortgage payment” and on “August 5, 2013, the Kellers received a notice of default stating that they were” in arrears. “The Kellers have approximately $100,000 of equity in their home.” Keller v. Wells Fargo Bank, N.A., 2014 WL 6684895 *1 (W.D. Wash. November 25, 2014).
The Kellers filed a motion for a preliminary injunction enjoining the foreclosure sale of their home. Keller v. Wells Fargo Bank, N.A., 2014 WL 6684895 *1 (W.D. Wash. November 25, 2014). Wells defended against the motion by alleging in turn that the claims of the Kellers had been settled in an LFPI class action settlement in Florida.
Specifically, Wells alleged that the Kellers had not timely “opted out” of the LFPI class action settlement in Florida, and that as a result their claims were no longer valid.
The Federal Judge in Washington State included Wells’ arguments in granting the Kellers’ request for a preliminary injunction, applying four (4) tests enunciated by the U.S. Supreme Court for evaluating claims for preliminary injunctive relief:
“Likelihood of Success on the Merits.” Under the allegations summarized above, the Court held that the Kellers satisfied this element – for the time being. “Accordingly, as set forth below, the court will grant limited injunctive relief to allow plaintiffs an opportunity to come forward with evidence or argument that demonstrates that they opted out of the [Florida] settlement or that their claims are somehow not covered by the settlement.”
“Irreparable harm.” “The court finds that the loss of plaintiffs’ home, which has more than $100,000 in equity, would result in irreparable harm.”
“Balance of the Equities.” Balancing the money damages which Wells might incur because of a delay in the foreclosure sale against the plaintiffs’ loss of their home, the Court concluded that this element, too, is satisfied in this LFPI case.
“Public Interest.” The Court held that the public interest is satisfied by a preliminary injunction of the defendant’s foreclosure sale of the plaintiffs’ home in this case. “Plaintiffs have consistently made their mortgage payments on time and raised serious questions as to whether defendant caused the deficiency at issue here.”
Keller v. Wells Fargo Bank, N.A., 2014 WL 6684895 *2-*3 (W.D. Wash. November 25, 2014).
A check of the PACER files (Public Access to Court Electronic Records) on the day this article is written shows no significant activity since this decision was issued. It is interesting to note that in applying the four standard factors for any preliminary injunction in this lender force-placed insurance case:
The Court did not hold that the bank would be irreparably harmed by temporarily enjoining a foreclosure sale based on refusal to pay – i.e., based on nonpayment – of lender force-placed insurance premiums.
The Court similarly did not hold that the equities favored the lender in securing the collateral – the Kellers’ house -- for its mortgage loan.
And the Court likewise did not hold that the public interest would somehow be served by allowing the foreclosure sale to proceed despite the claims alleged by the homeowners concerning the lender’s forced placement of insurance in this case.
Sometimes what a Court did not hold can be as illuminating as what a Court did hold.
This is a theme that also bears watching in our next post. In it, we will examine a decision by Judge Posner concerning Federal Court approval of settlements in class action cases. His opinion for a unanimous panel of the Seventh Circuit did not just break ground in reviewing class action settlements. Judge Posner’s opinion sets off rockets.
To be continued ….
The author is at work on a book on “Lender Force-Placed Insurance” which the American Bar Association is scheduling for publication in the Spring of 2015.
Please Read The Disclaimer. Copyright 2014 by Dennis J. Wall. All rights reserved. No claim to Original U.S. Government Works.
Condominium prices are rising and pressure is increasing on the Federal Housing Administration. The FHA is being pressured by realtors and mortgagees to guarantee or backstop with taxpayer money, what amount to subprime mortgages. It is said that the FHA guarantee will enable people to buy condominiums who cannot afford them now. See Kenneth R. Harney, "FHA Squeezing Loans for Condos Despite Surging Demand" (Los Angeles Times Online, posted Sunday, November 9, 2014).
But is it really a good thing for the borrowers whose condominium units will be foreclosed when they can no longer pay the mortgage? And is it the kind of public policy we really want to put in place, to guarantee and likely pay for those mortgages with your tax money?
The realtors and mortgagees think so. For example, a former head of the FHA changed his mind apparently since he left his post as Commissioner of the FHA. Now he is the head of the Mortgage Bankers Association and his views have changed. There is no reason for restrictions now, it seems, that the foreclosure crisis "has abated, as at present." (To be fair, these are apparently not the Mortgage Banker's words, at least not a direct quote, but words written by the reporter on the story to finish what the Mortgage Banker was saying about disappearing foreclosure problems.)
Who told you that "the crisis has abated, as at present"? Probably not someone in foreclosure, at present.
There is a second set of mortgages that realtors and mortgagees and other investors want to insure with money from the Federal Treasury. The article mentions that the COO of "ReadySetLoan" is among those who want the FHA to guarantee the purchase of reverse mortgages by seniors, also.
Why do you think it would be a good idea to put your mom or dad, or someone else's mom or dad, or any of your clients or customers, into a reverse mortgage, and then backstop default with money provided by the Federal Government, so that investors and others can be paid?
It seems that we have seen this movie, as they say. Perhaps most recently in about 2008? There may and undoubtedly are better ways to spend the guarantees that amount to Federal Housing Insurance paid for by you and by me.
Dennis Wall is writing a book on the topic of residential mortgage contracts and lender force-placed insurance. It is scheduled for publication by the American Bar Association in the Spring of 2015.
Please Read The Disclaimer. Copyright 2014 by Dennis J. Wall. All rights reserved.
In the case of JPMorgan Chase Bank, N.A. v. Skoda, 2014 WL 1320141 (N.D. April 3, 2014), the North Dakota Supreme Court affirmed a summary judgment of foreclosure. This case was discussed in an article posted here on Tuesday, April 8, 2014.
Now it might be interesting to take a second look at the same case but from a different angle. The mortgagor-borrower, Mr. Frederick Skoda, paid all his taxes.
He just did not pay the property taxes on his house out of escrow.
In his mortgage contract with JPMorgan Chase Bank, Mr. Skoda agreed to pay his property taxes, out of escrow.
So JPMorgan Chase foreclosed on Mr. Skoda's mortgage.
Because he paid his taxes, but not out of escrow.
And JPMorgan Chase Bank won its foreclosure case without a trial.
Think that the Bank did something unique when it filed its foreclosure lawsuit against Mr. Skoda? It did exactly what many banks, JPMorgan Chase among them, do. Their purpose is not to encourage people to pay their taxes.
The banks' purpose is to enforce their contracts.
It remains to be seen whether JPMorgan Chase Bank will file a motion for Mr. Skoda to pay its costs and fees, if it has not filed its motion already.
In the case of JPMorgan Chase Bank, N.A. v. Skoda, 2014 WL 1320141 (N.D. April 3, 2014), the North Dakota Supreme Court affirmed a summary judgment of foreclosure.
The Trial Court entered summary judgment in favor of JPMorgan Chase Bank because its mortgagor-borrower, Mr. Frederick Skoda, paid his property taxes, just not out of escrow. Because the did not pay his property taxes out of escrow as his mortgage called for, the Bank foreclosed and won, without a trial.
Think that this result is somehow unique to the Courts of North Dakota? It is not. It is the view of many Judges in many Courts across the United States.
Mortgage reductions will mean taxable income to homeowners because their debt has been reduced. In turn, because 'banks' which reduce mortgage debt have forgiven debt, they will get a tax deduction or a tax exemption. Congress would have to enact a law to change this tax situation. See Shaila Dewan, "Welcome Relief, Then Tax Bill" p. B1, col. 2 (New York Times Nat'l ed., "Business Day" Section, Wednesday, February 5, 2014). If you don't like the color blue, don't hold your breath waiting for the U.S. House of Representatives to do anything like enacting a law.
This adds insult to obvious injury. Mortgage reductions are generally given to those homeowners who are "under water" on their mortgages, meaning that their homes are worth less than the unpaid balance on their home mortgages.
Taking the insult a step away from the direction of bad faith, banks and underwater homeowners are not the only parties on the scene with incentives in the situation. Mortgage insurance companies have an interest in not paying out on their policies. In other words, mortgage insurance companies have an interest in homeowners paying their mortgages. If homeowners stop paying on their mortgages, banks may claim that they are owed the full policy limit of the original mortgage policy which was issued for the full unpaid balance due of the mortgage involved. It is in the interest of mortgage insurance companies to see that homeowners keep paying on their mortgages.
I have not seen any reports or studies on the purchase of property insurance by the investors that purchase these properties.
Moreover, since these investors do not carry mortgages, they do have no need to buy mortgage insurance.
Further, the number of homeowners is necessarily declining since fewer homes are being sold and purchased in 2013. It seems that as a consequence the number of homeowner's insurance policies must also decline. That will have clear results in falling homeowner's insurance sales and premiums. What effects will it have on the handling of homeowner's insurance claims in a tightening market?
There is potentially good news on the other hand for sellers of tenants and renters insurance policies. Investors are buying the foreclosed homes in order to rent them.
Simple math. That is one reason, at the least, why home ownership is in decline. There are fewer homeowners because there are fewer homes bought and sold; instead, homes in 2013 are increasingly bought and rented.
The Federal Housing Administration insures or guarantees the repayment of some loans secured by certain classes of mortgages. When the mortgage is not being paid, the loan is "nonperforming". The lender forecloses because the loan is nonperforming and then the lender makes a claim on the FHA guarantee.
However, there are certain exclusions in the FHA guarantee just as there are exclusions in most other insurance. The FHA will not pay claims if the lender making the claim violated underwriting or servicing standards or engaged in other specified forms of excluded conduct.
Rather than being adjudicated as violating underwriting and servicing standards in the issuance and servicing of FHA-guaranteed mortgages, it is reported that many lenders are holding off on making any such claims right now.
There appears to be an affirmative benefit from not making the claims, including the good that the lenders derive from avoiding the adjudication that the lenders' claims are excluded from the FHA insurance. Lenders reportedly do not have to post reserves to cover any loans which are "performing" -- and if the lenders have not foreclosed, then the mortgages and the loans they secure must by that fact be "performing" and so the lenders do not have to post reserves on account of them.
Further, the Federal Department of Housing and Urban Development, which oversees the FHA, has responded to some claims by four (4) banks in the past year that in making those claims, the lenders have violated the False Claims Act.
All these issues are interesting, particularly the insurance-related questions. They deserve attention. I wanted to bring them to your attention now. I will address them further in more extensive articles in the future, after I have had the opportunity to research them further.
There may be an issue under Florida law, whether a settlement of Bad Faith Claims can be made confidential by the parties in their settlement agreement, even with a Court's approval. A Florida Statute provides:
Any portion of an agreement or contract which has the purpose or effect of concealing a public hazard, any information concerning a public hazard, or any information which may be useful to members of the public in protecting themselves from injury which may result from the public hazard, is void, contrary to public policy, and may not be enforced.
Fla. Stat. § 69.081(4). The statutory definition of a “public hazard” includes any “person” or “procedure” “that has caused and is likely to cause injury.” Fla. Stat. § 69.081(2). That is a pretty broad definition, which can apply to a wide array of conduct. It was probably meant to.
No Court shall enter an order or judgment in a case subject to this Florida Statute, “[e]xcept pursuant to this section,” which has, among other things, “the purpose or effect of concealing a public hazard” or “of concealing any information which may be useful to members of the public in protecting themselves from injury which may result from the public hazard.” Fla. Stat. § 69.081(3).
Similarly there may be issues of Bad Faith in secret settlements under the laws of other jurisdictions besides Florida.. Cf. Kreuger Int'l, Inc. v. Federal Ins. Co., 2008 WL 5264021 (E.D. Wis. Dec. 16, 2008).
As many attorneys do in many kinds of cases, the attorneys for the parties in a recent Federal Declaratory Relief action stipulated that certain Insurance Coverage information would be produced under seal. In fact, the attorneys apparently stipulated to a Protective Order saying so. Thereafter, they filed some of those materials in the Federal Court File.
The Federal Judge said that although the secrecy stipulation arguably facilitated discovery, the parties could not stipulate that everything they filed in the Court records was confidential and so they could not keep those materials by that expedient forever from the public eye.
*A small child confronted one of the ballplayers who threw the World Series. The player had pretended to do his best. That is what he told people before he was brought up on charges of throwing the World Series. The little kid said, "Say it Ain't So, Joe!" The young child's comment has inspired the title of this post article. Thank you.
This is really a follow up on the Mortgage Fraud Settlement in which four large Mortgage Servicers settled national claims against them for fraud. The claims were apparently never written in a Complaint filed in any Federal Court, nor filed in any State Court, nor filed with any Agency, State or Federal. However, the national settlement was produced in writing after several weeks following the announcement of the settlement in which its provisions were not known to the public.
It appears that Mortgage Servicers may have had the tools all along to modify Mortgages including to forgive principal. See Statement of Hon. Sheila C. Bair, Chair of the Federal Deposit Insurance Corporation, reported by Martin Crustinger in an Associated Press copyrighted story, "Fed Urges Loan Companies to Help Prevent Mortgage Defaults," p. A5, col. 3 (Times-News, Twin Falls, Idaho, Wed., September 5, 2007) available on page 5 of this pdf posted online through twinfallspubliclibrary.org).
If that is so, then there was never any need for the Mortgage Servicing Fraud Settlement earlier this year -- except that the investment banks who were also the Mortgage Servicers, or who acquired the Mortgage Servicers, wanted immunity.
One further note of, frankly, what is either fantasy or more stuff for Mr. Donovan to confess the next time he unburdens himself in the Confessional. He says that the settlement agreement "also provides an additional $334 million in state aid" that Pamela Bondi, Florida Attorney General, will use "to help homeowners through proven tools like housing counseling."... And if you believe that, Mr. Donovan and Ms. Bondi have some swamp land to sell you in South Florida as they say.
It is only now being widely reported that the Florida Legislature has other plans for that money, regardless of what Ms. Bondi says.