Claims and Bad Faith Law Blog

SHAME ON YOU, SHAUN. THAT'LL BE TEN HAIL MARYS, ...

... One Our Father, and One Glory Be.  Now say a Good Act of Contrition.

      Opposing the facts in yesterday's post, here, with false opinions, SHAUN DONOVAN, the Secretary of HUD, has had an opinion piece published under his name at Shaun Donovan, "Mortgage Pact Helps Floridians See Light at End of the Tunnel" p. A19, col. 1 (Orlando Sentinel, Friday, July 27, 2012).

     In his piece, Mr. Donovan points out that the entire settlement agreement between the Banks and the State and D.C. Attorneys General is said to total "$25 Billion," and that "$8 Billion" will in some unexplained way "forc[e] lenders to reduce the size of unaffordable loans and to refinance loans for underwater homeowners."  Id.  If that were happening, it might be a good deal.  But that is not what is happening.  See again yesterday's post and the authorities discussed in it.

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."  Id.  And if you believe that, Mr. Donovan and Ms. Bondi have some swamp land to sell you in South Florida as they say.

Please Read The Disclaimer.

BAD FAITH SETTLEMENT AGREEMENT: MORTGAGE SERVICERS, ATTORNEYS GENERAL, AND OBAMA ADMINISTRATION.

     Newspaper columnists are pointing out the failures of the Obama Administration since 2007-2008 to provide relief to Homeowners in Foreclosure.  Rightfully so.  E.g., Beth Kassab, "Like Many Homeowners, Hope Adrift" p. A3, col. 1 (Orlando Sentinel Tuesday, July 24, 2012); Gretchen Morgenson, "Fair Game / Into the Bailout Buzz Saw" p. 1, col. 1 (New York Times Nat'l ed., "SundayBusiness" Section, Sunday, July 22, 2012).

     However, it is easy to point a finger at Government miscues and inaction.  Perhaps too easy.  Let's take a look at a contract, a settlement agreement, made by the Banks in exchange for immunity from Government criminal and civil prosecution over their Mortgage lending practices.

The Banks made a deal to pay $2.5 Billion to the States which would include loan modifications.  (Their deal included other money and other provisions as well.  They announced the deal weeks before they posted their agreement online.  See the posts here and links in them on January 31, 2012 and on February 2, 2012.)  The deal was supposed to include debt forgiveness to be included in that amount.  There is no deal, it appears, and there is no $2.5 Billion for loan modifications.

     By way of background, in January of 2012 a global settlement agreement was announced.  The agreement involved 5 major Mortgage Servicers but, since all 5 happened to also be Banks which lent money to Homeowners, the deal was expanded to include their practices as Banks and not just as Mortgage Servicers.  Of course, once the deal was expanded to address the questionable practices of Banks lending Mortgage money to Homeowners, the Bank practices were arguably expanded to the Mortgage practices of all Banks.

     On the other side of the deal were the State and District of Columbia Attorneys General.  They were reportedly holding out for far more money and concessions if they were going to expand their deal to confer immunity on Banks for anything more than the so-called "robo-signing" practices which triggered their joint investigation in the first place.  Under pressure from the Obama Administration through Sean Donovan, Secretary of Housing and Urban Development, they caved and took a deal that included the fictional 'loan modifications' and '$2.5 Billion' in question.  Furthermore, they gave credit to the Banks for all the money spent by the Banks toward that $2.5 Billion figure that not even the Banks' lawyers probably thought they would get in 2.5 billion years.  Pretty soon, there was little or nothing left of the $2.5 Billion and the loan modifications that were supposedly part of the deal.

     If there ever were any enforceable provisions with respect to loan modifications included in that deal -- and that is a big "if" -- then they were not only negotiated in Bad Faith but they are seemingly being performed in Bad Faith.  It does not help that many observers have been aware since the deal was announced in January, 2012 that this was coming.  Homeowners asking for loan modifications under the deal are finding that out now, in July, 2012.

Please Read The Disclaimer. 

 

Foreclosers in Florida Follow Foreclosure "Mistakes Are Made" Business Model.

    The problems dumped on Florida's Judicial system by Foreclosure Fraud -- and on the Courts in other jurisdictions as well -- have been the subject of many posts here.  See, for example, the series on "Immunizing Foreclosure Frauds is Not an Option," posted on 09.29.11, 10.06.11, and 10.13.11.

    Solutions have been proposed to these problems.  For example, a  set of several solutions was posted here almost a year ago, on June 8, 2011, "Foreclosure Lawsuits Problems Attmept Overcoming Court:  No. 1, With Solutions."  The State of Missouri has followed one of its own solutions:  Missouri is criminally prosecuting Forgery initiated by Florida Foreclosure Facilitators, and the Missouri prosecution was posted here on February 9, 2012.

    Now another issue has arisen and is pending right now in front of the Florida Supreme Court:

    The issue is whether Florida banks should be able to escape punishment if they drop a foreclosure case because they realize they have fraudulent documents.  They are allowed to do so and then refile the case with proper documentation.

Kathleen Haughney, "Florida Justices Weigh 'Robo-Signing' Sanctions" p.A3, col. 1 (Orlando Sentinel, Wednesday, May 9, 2012).

    The Florida Supreme Court has scheduled Oral Arguments on the issue for today, Thursday, May 10, 2012.

    Reportedly, groups of bankers have filed briefs in which they take the position that they should be allowed to continue their foreclosure 'mistakes are made' business model.  See id.

    If mistakes were the only issue, then perhaps.

    But mistakes are not the only issue.  See all the posts and links, above.  No, the business model is the issue.  It is not compatible with the Justice system in Florida -- or anywhere else.

Please Read The Disclaimer.

Is This a Mortgage Fraud "Settlement"? Or Just a Fraud?

    Criticism of the supposed Mortgage Fraud Settlement is being reported from many points of the compass.  A chief criticism of the arrangement between the Federal and State Attorneys General, on the one side, and five huge Mortgage Servicers which are also investment Banks on the other side, is that the Gang of Five are credited in their agreement with things they would do anyway.  See Shaila Dewan and Jessica Silver-Greenberg, "Foreclosure Deal Credits Banks for Routine Efforts (New York Times Online, posted March 27, 2012).

    So how, you understandably are asking, is this a negotiated settlement?  Good question.  A lot has to do with the nature of this arrangement.  It is likely that the settlement documents are not complete.  It is a certainty that the settlement documents that do exist, were written first,  before a Complaint was written -- which as most lawyers and every Banker knows is the opposite of the way things are handled in a negotiated settlement.   See March 18, 2012 post here, "After the Settlement ... They Wrote the Complaint".

    More to come, no doubt.

    Please Read The Disclaimer.

FANNIE MAE AND FREDDIE MAC REFUSE TO WRITE DOWN PRINCIPAL ...

... AND WHY THEIR REFUSAL MAY BE IN GOOD FAITH.

 

Sometimes it takes a little learning.

          The Federal Housing Finance Agency is the current, and hand-picked, regulator for both Fannie Mae and Freddie Mac.  The acting director of FHFA says that he takes his duties seriously.  His duties are above all to safeguard the risks imposed on the Taxpayer and the money the Taxpayer will have to pay.

 

          Fannie Mae and Freddie Mac were both put into conservatorship as a result of the Mortgage Fiasco, of course.   Neither had the money to pay the bills, i.e., the Mortgages they assumed, once the bills came due.

 

          There have been calls for Fannie and Freddie to write down the principal amount of the first Mortgages which they assumed.  The publicly stated theory behind such calls is that Homeowners-Mortgagors will find it easier to pay reduced first Mortgages.

 

          This ignores a fact that the FHFA acting director cannot ignore, however.  Writing down the principal on first Mortgages held by Fannie and Freddie without a corresponding write-down of the principal on second Mortgages would increase the likelihood that the second Mortgages would remain completely in effect and would be paid, or the Homeowners would suffer the consequences of Foreclosure once the first Mortgages, now held by Fannie and Freddie, no longer exist once a reduced write-down amount is paid.

 

          There is a victim, if you will, if Fannie or Freddie write down the principal amount due on first Mortgages even as the Homeowners would be given apparent relief on the face of it:  Federal Taxpayers are the people due the principal amount which is being written down.  If the principal is in fact written down, the Taxpayers recover less whenever any Mortgage now held by Fannie or Freddie is reduced.

 

          Further, the second Mortgagors are investment Banks.  They already got their bailout, as we all know.

 

          Reducing the amount owed on first Mortgages held by Fannie Mae and Freddie Mac, without a corresponding write-down of the principal on second Mortgages held by the Banks, would mean nothing less than a second bailout of the Banks.

 

          Much of this is laid out in an easy-to-understand article by Gretchen Morgenson, "Fair Game / A Bailout by Another Name" p.1 col. 6 (New York Times Nat'l ed., "SundayBusiness" Section, Sunday, March 25, 2012).  As Ms. Morgenson wrote at the conclusion of her article:

 

So the next time you hear someone advocating vast principal reductions on Fannie and Freddie loans, remind them that it would be another stealth bank bailout, courtesy of taxpayers.  Banks' unwillingness to share the pain has been a central feature of this crisis.  It's time to put an end to this dysfunctional dynamic.

 

Please Read The Disclaimer. 

AFTER THE SETTLEMENT ...

   ... They Wrote the Complaint.

    Settlement between five Mortgage Servicers/Banks, on the one hand, and the United States, and all but one of the Attorneys General of the States and the District of Columbia on the other hand, was announced in early February, 2012.  They settled unalleged differences over unknown things.

    Their Settlement Agreement was not made available until it was posted this past week online, at www.nationalmortgagesettlement.com.  

    The only people who could look at it in the meantime, are the ones who wrote it.  See February 26, 2012 post here:  "Is There a Mortgage Foreclosure Fraud Settlement? 

    In an unusual development, the Complaint was not written until after the settlement was announced.  Also this past week, a Complaint was posted for the first time.

    It is not dated.  A date would, well, date it.

    It does not show a Case Number, nor does it bear any Clerk's "Filed" stamp.  Presumably, it looks the same as the original filed in Court.

    Without a case number, the parties listed in the style are too generic to yield any PACER search results.  PACER is of course the online electronic docket of the Federal Courts.  I have tried PACER searches for the lawsuit, without success, yet.  I plan to continue.  If you want to try a search yourself, on PACER or otherwise, the parties' names on the Complaint are United States of America, et al. v. Bank of America Corporation, et al. 

    Here is a copy of the only Complaint made available in the interim from the www.nationalmortgagesettlement.com website:  Download Undated, Unfiled Complaint.  It is 99 pages long.  I have not finished reading it, at this time.  I plan to comment further regarding it, in a later post.

    There are as many Settlement Agreements posted on the website as there are Mortgage Servicers:  Five.  A look at the Settlement Agreement reached with the first-named "Defendant" in the Complaint, Bank of America Corporation, shows that it is a potentially intimidating 317  pages long.

    To summarize where we are to this point:  There was a settlement, after which a 99-page complaint was written, and thousands of pages of settlement documents were also written, and all of which reading material was released for public review a month after the press notices were released announcing a settlement of unknown, unidentified allegations.

    And now, a Federal Judge is going to be asked to approve it all.  Judge, correct me if I am wrong, but this smells.  Perhaps it is just the way it was cooked.

    The prevailing applicable rule of law followed by Federal Judges in reviewing actions of administrative agencies, is one of "deference".  In the 21st Century, this standard of review rule or at least the way it is being argued in recent similar cases, has frankly outlived any basis in reality it once had.  The Governments' argument is essentially that Federal Judges are duty-bound to rubber stamp whatever settlements the Governments make.

    That is the binding rule of law at this time, at least according to one Second Circuit panel.  See Edward Wyatt, "Ruling Gives Edge to U.S. in its Appeal of Citi Case" p. B1, col. 6 (New York Times Nat'l Ed., "Business Day" Section, Friday, March 16, 2012).

    Perhaps there will be one United States District Judge honest enough to say that the evidence submitted in support of the bare allegations in the "Complaint" is not enough, but prevailing law requires approval of this settlement anyway simply because an administrative agency of the Federal Government made it.

Please Read The Disclaimer. 

    

 

    

Is There a Mortgage Foreclosure Fraud Settlement?

And if there Is a Mortgage Foreclosure Fraud Settlement Agreement, why can't we see it?  If it displays Good Faith, Would It not be displayed?  You would think.

   There is no Settlement Agreement on the website set up for the Foreclosure Fraud Settlement.

    The reports of an Agreement may be premature.

    There is an Executive Summary, and something called a fact sheet.  There are no dates in them. 

    The Mortgage Foreclosure Fraud Settlement was announced 3 weeks ago, as this post is written.

    I am interested in how the reported 'settlement' affects Banks' and Mortgage Servicers' liability for past practices that allegedly committed fraud upon the Courts.  Things like submitting Affidavits as proof without personal knowledge despite the signers' oath that they had personal knowledge of what was in the Affidavits they executed.  Things like at least some Foreclosure Plaintiffs' allegations that Notes and Mortgages were lost and could not be found, although allegedly the Notes and Mortgages are in the files of the Foreclosure Plaintiffs who made such allegations.  I have been looking for any information and in researching the entire Internet on this subject, I have found one source of information.

    We owe it to one source among the many weighing in on this reported 'settlement,' who describes what if any provisions are made in it concerning the liability of Banks and Mortgage Servicers for past practices which allegedly perpetrated fraud upon the Courts.  An Assistant Attorney General in Wisconsin writes on the website of the Wisconsin Bar that in the settlement, the participating Banks/Servicers are completely released from all such claims which might be pursued by the Federal Government and the participating State Attorneys General, based on alleged fraud upon the Courts of the States and of the United States.  See Holly Pomraning, Esquire, Assistant Attorney General, Wisconsin Department of Justice, "Wisconsin Joins $25 Billion Mortgage Settlement" posted on February 13, 2012 on State Bar of Wisconsin website.

    If Attorneys General will not ensure that fraud is not committed upon the Courts, who will?

   We would likely be better off if the reported settlement was never born, as they say.  See "Mortgage Foreclosure Fraud Settlement:  This Settlement is a Fraud," posted on February 16, 2012 on Insurance Claims and Bad Faith Law Blog.

Please Read The Disclaimer.   

Mortgage Foreclosure Fraud Settlement: This Settlement is a Fraud.

   This is getting to be a bit much.

   Last week, the Obama Administration announced a settlement of all claims by any agency of the Federal Government or by any State Attorney General, of Mortgage Fraud committed by or on behalf of five huge Mortgage Servicers which are also Banks and which issued Mortgages as well.  Many features of the settlement have been written up in Press Releases and published in many newspapers.

   However, the actual Settlement Agreement is not posted online yet as of this writing.

   As noted, this is getting to be too much.  It seems pretty clear that the participants are not posting their Settlement Agreement because they just do not want other people to look at it.  They would rather have their Press Releases published instead.

   An "executive summary" without the actual provisions has just been released.  Download Philip A Lehman Asst A G N C Executive Summary of Multistate Federal Settlement of Foreclosure Misconduct Claims (undated c 02 15 12)  It is four pages long.

   Three paragraphs address the Release given by the Federal Government and by the State Attorneys General. 

   The "executive summary" of their Release is that they have released all claims that they might file on account of the Foreclosure Frauds allegedly committed upon Homeowners who are losing their homes in these Foreclosures.  The alleged Fraudulent activities are not mentioned, but past allegations of their Fraud include the submission of Affidavits which are not based on personal knowledge, or which are allegedly false and misleading, and including also the filing of Foreclosure lawsuits and the pursuit of nonjudicial Foreclosures where permitted, which are allegedly brought by persons or corporations which do not hold the Note behind the Mortgage in question, and who swear or affirm that they cannot account for its whereabouts, even as they pursue their Foreclosure claims based upon those same Notes and Mortgages.

   Individuals and their lawyers are not bound by this settlement, and they can still pursue claims and defenses based upon these Frauds, the executive summary helpfully summarizes for us.

   What the executive summary leaves out, however, is that most of these Foreclosure Defendants do not have a lawyer.

   There is often no-one involved in their Foreclosures who knows enough to look for evidence of  the Foreclosure Plaintiffs' Mortgage Fraud if any.  That leaves the United States Department of Justice, all the Federal agencies involved, and the 50 State Attorneys General to raise the issues -- only they have just settled out.

   Mortgage Fraud Settlement:  This Settlement is itself a Fraud.  Just in time for the upcoming 2012 elections.

Please Read The Disclaimer. 

MISSOURI INDICTS FLORIDA FORECLOSURE FACILITATORS FOR FORGERY.

   "Robosigning" is the act of signing someone else's name, or yours, to papers that will be used to evict people from their homes whether they deserve it or not. 

   Forgery is a felony in most jurisdictions.  It is certainly a crime in Missouri, where a Grand Jury handed up indictments of "DocX" and its founding former president on "136 counts of forgery in the preparation of documents used to evict financially strained borrowers from their homes."  Gretchen Morgenson, "Company Faces Forgery Charges in Foreclosures in Missouri" p. B1, col. 2 (New York Times Nat'l ed., "Business Day" Section, Tuesday, February 7, 2012).

   DocX reportedly employed people for the purpose of signing other people's names and notarizing the signatures on "millions of mortgage documents for big banks and loan servicers".  Id.  Doc X was a part of Lender Processing Services located in Jacksonville, Florida, until DocX was "closed" a year-and-a-half ago.

   You and your clients might be wondering if forgery is a crime in other States besides Missouri?  Of course it is.

   You might also be wondering in what other States has forgery been prosecuted as a crime?  One.  Nevada, where some individuals have been charged with "notary fraud".  Id.

   You might wonder why not?  Why have there not been criminal prosecutions for forgery and Fraud?

   Except in Missouri and Nevada?

   Mortgage Insurance Companies and Title Insurance Companies faced with more and higher payouts on their Policies would like to know the answer to that question, too.

   So would the rest of us.

Please Read The Disclaimer.

Residential Mortgage-Backed Securities Group: The Final Installment.

Unidentified "people close to the talks" say that State Attorneys General have until tomorrow to decide whether to settle with Mortgage Servicers which are also Banks, on undisclosed terms which may involve a Release of "civil state and federal lawsuits about servicing misconduct and faulty foreclosures, and state lawsuits about how they made some of the loans."  Aruna Viswanatha and Rick Rothacker, in a copyrighted Reuters news story as it appears on OrlandoSentinel.com on Thursday, Feb. 2, 2012, entitled "States to Decide This Week on Mortgage Deal".

This ends a series begun on Monday, Jan. 30,2012 on Insurance Claims and Issues Weblog.  Part 2 was posted on Tuesday, Jan. 31, 2012 on Insurance Claims and Bad Faith Law Blog, and Part 3 was posted yesterday on Insurance Claims and Issues Weblog.  

   When we ended Part 3 of this series, we made note of the fact that none of the websites of any of the three State Attorneys General who have expressed reservations about, or withdrawn from, the Mortgage Servicers-Banks Mortgage Fraud settlement talks, even posted a press release or any other news about the Federal Residential Mortgage-Backed Securities Working Group.

   The three State Attorneys General in question have each already launched their own prosecutions, civil or criminal, and the Obama Administration seems to be applying all the pressure that it can bring to bear on them to settle.  The three State Attorneys General involved, are the Attorneys General of:

1. California;
2. Massachusetts; and
3. Nevada.

   By way of further information identifying the lawsuits and reservations of these Attorneys General about the 'talks,' the California Attorney General withdrew from the talks and is pursuing California's own prosecution of Mortgage Fraud.  October 4 and October 27, 2011 posts on Insurance Claims and Bad Faith Law Blog; see November 1, 2011 post on Insurance Claims and Bad Faith Law Blog.

   As if there was not already enough pressure being applied to the California Attorney General to agree to return to the 'talks' and agree to sign the Release demanded by the Banks of all their potential liabilities in the Mortgage Fraud Fiasco, known and unknown, there is this news:  Reportedly if those 'talks' result in a settlement, the Banks will pay more money if California signs on to the Release.  Aruna Viswantatha and Rick Rothacker, Reuters news report, supra.

   The Attorney General of Massachusetts has also filed suit on behalf of her State over Mortgage Fraud.  December 4 and December 6, 2011 posts on Insurance Claims and Bad Faith Law Blog.

   The Nevada Attorney General has similarly filed suit on behalf of Nevada citizens who have allegedly been damaged by Bank misconduct during the Mortgage Fraud Fiasco.  See January 9, 2012 post on Insurance Claims and Issues Weblog, and the links to other reports in it.

   No suit appears to be pending against the Banks over their alleged involvement in the Mortgage Fraud Fiasco, which was filed by the Federal Government.

   There is however tremendous pressure, as we have seen, which is being applied to State Attorneys General to settle, sight unseen, with the Banks over the Banks' involvement if any in the Mortgage Fraud.  We have seen in particular that extreme pressure is being applied by the Administration to three strong women Attorneys General who have rejected the idea of settling, sight unseen.

   Given the activities of recent days which result in as much pressure as can be brought to bear by the current Federal Government, it will not be at all surprising if the positions of one or more of the State Attorneys General  change.

   Time will tell.  In the meantime, Mortgage Insurance Companies and Title Insurance Companies will continue to bear the cost of the Mortgage Fraud Fiasco, more or less alone.

Please Read The Disclaimer.

HEALTH INSURANCE: MORE ON "FORCE PLACED INSURANCE" ...

... Herein of its profitable performance as a financial planning tool for lenders, its lack of deductibles, and its effects on Fiduciary Relations.  This updates the post here on January 15, 2012.

    In addition to the many features of "force placed" or "forced place" Insurance that were addressed in a post here last week, force placed Insurance also has these prominent features as well:

1. At this time, it generates $6 Billion annually, or $6,000,000,000.00 a year.  It has grown 6 times in recent years, largely at the expense of Homeowners.
2. "[L]ender-placed insurance" is strictly for the benefit of Lenders.  Homeowners are not protected by it and there is ordinarily no Deductible.
3. Lenders of course are the ones who require Borrowers-Homeowners to agree that Lenders can force the placement of Insurance to protect the Lenders' interests.  A Lender's Mortgage Servicer may be, and often is, connected or affiliated with the Insurance Company which issues the force placed Policy.  The Mortgage Servicer may not disclose the conflict of interest in that situation and, if there is a loss, the Mortgage Servicer may be reluctant to submit a Claim to its affiliate, the Insurance Carrier which issued the force placed Insurance.  In the meantime, the Homeowner of course is charged for the high Premium and, if the Homeowner cannot pay that Premium, the Lender frequently forecloses -- paying the Lender's Mortgage Servicer to bring the Foreclosure proceedings.

See  Gretchen Morgenson, "Fair Game / Hazard Insurance With Its Own Perils" p. 1, col. 1 (New York Times Nat'l ed., "SundayBusiness" Section, Sunday, January 22, 2012).   "Mind you, force-placed policies do not protect homeowners from loss.  Only lenders are covered.  But homeowners must pray the freight."  Id.

 Please Read The Disclaimer.

Admissible Admission of Mortgage Servicing Practices in Massachusetts?

   A new lawsuit filed by Massachusetts against certain investment banks over their Mortgage Servicing activities, was described in a post here on December 4, 2011.  See "Is The S.E.C. Too Big to Fail?", posted December 4, 2011.

   On Friday, December 2, 2011, newspapers reported that Massachusetts had filed a Complaint the day before against major investment banks over their alleged Mortgage Lender/Servicer unfair and deceptive business practices.  See, e.g., Gretchen Morgenson, "Massachusetts Sues 5 Major Banks Over Foreclosure Practices" p. B1, col. 2 (New York Times Nat'l ed., "Business Day" Section, Friday, December 2, 2011).  The investment bank defendants in that case include Bank of America, JPMorgan Chase, Wells Fargo, Citigroup, and GMAC Mortgage.  MERS, or Mortgage Electronic Registration System, Inc., a corporation set up and funded by investment banks as their alternative to public recordkeeping of Mortgages, is also a defendant as is its 'parent corporation'.

   As noted, one of the defendants is GMAC Mortgage.  It immediately decided to stop all of its Mortgage Servicing activities in Massachusetts that resulted in the claims alleged in the lawsuit.  Reportedly, however, GMAC Mortgage will continue Mortgage operations in Massachusetts in which it does not provide Mortgage Servicing, i.e., it will continue to make loans to mortgagors directly rather than servicing the mortgages held by others.  See "GMAC Ends Most Massachusetts Mortgage Lending After Suit" (Associated Press Copyrighted Story published on Friday evening, December 2, 2011 in the Los Angeles Times Online).

   Possibly a good business move.  Possibly too late?  Will GMAC Mortgage's move affect the outcome of the Massachusetts lawsuit?

   Time will tell.

Please Read The Disclaimer.

Is the S.E.C. Too Big to Fail?

   Massachusetts sues, S.E.C. settles.

   On Friday, December 2, 2011, newspapers reported that Massachusetts had filed a Complaint the day before against major investment banks over their alleged Mortgage Lender/Servicer unfair and deceptive business practices.  See, e.g., Gretchen Morgenson, "Massachusetts Sues 5 Major Banks Over Foreclosure Practices" p. B1, col. 2 (New York Times Nat'l ed., "Business Day" Section, Friday, December 2, 2011).

   On Saturday, December 3, 2011, newspapers continued to report on many reasons why the Federal Government's S.E.C. cannot sue major investment banks over their practices, including that the S.E.C. lacks the resources, cannot make a case, and the horrible things that could happen if the S.E.C. sued and failed.  See, e.g., James B. Stewart, "Few Avenues for Justice in the Case Against Citi" p. B1, col. 1 (New York Times Nat'l ed., "Business Day" Section, Saturday, December 3, 2011).  See generally Hank Stern, "Cavalcade of Risk #145:  Insurance Fest edition" (posted on Insureblog.blogspot.com on Wednesday, November 30, 2011); Van Mayhall, "Cavalcade of Risk, No. 145 -- Insurance Fest" (posted on insuranceregulatorylaw.com on Wednesday, November 30, 2011).

     How can Massachusetts find the resources and the will to sue where the Federal Government can only settle?

     Is the S.E.C. too big to fail?

   

Please Read The Disclaimer.

UPDATE on Good Faith: Homeowners Betrayed, Banks Unreal: California Investigates, Refuses Pre-Immunity.

 This is an Update of posts which appeared here on October 4 and 27, 2011.

    The settlement talks between the Iowa Attorney General and other representatives of all the State Attorneys General, with the five largest Mortgage Servicers (each of which are also "banks") in the United States, may be nearing a settlement proposal each side will agree to sell to its constituents.  See Gretchen Morgenson, "Fair Game / A Deal That Wouldn't Sting" p. 1, col. 1 (New York Times, "SundayBusiness" Section, Sunday, October 30, 2011).

   Here is a reported tentative breakdown of the sums which would be paid by the Mortgage Servicers, and distributed by the Iowa and other State Attorneys General represented at the talks:

• $                         1,500.00 "to any borrower who lost his or her home to foreclosure since September 2008."
• $                 90,000,000.00 or $ 90 Million to State bank regulators.
• $              750,000,000.00 or $750 Million to the Federal Government.
• $           2,700,000,000.00 or $2.7 Billion more to "participating states".

   In addition, the Mortgage Servicers would get an estimated $20,000,000.00 or $20 Billion in "credits" if they "agree to reduce a predetermined amount of principal owed on mortgages that they own or service for private investors."

   Their cash outlay, apparently akin to the cash component of a structured settlement, is of course estimated at a much lower figure, in this case, between $3.5 Billion and $5 Billion.  Id.

   The linked report provides information only on the amounts of money that the Banks-Mortgage Servicers participating in this settlement might pay.  It does not contain any information on what Release they would require, or mention the fact that they are insisting on a Release that goes way beyond the original conditions when the parties entered into settlement talks over "robosigning" Fraud and other alleged Bad Faith, Unfair Trade practices.

   Why should there be a settlement then which would include all claims based on anything other than the original conditions of the talks?

   What reason do the Attorneys General have for even considering a Release of All Claims including claims not yet made and which they have not yet investigated -- but which clearly concern the Banks more than the "robosigning" and other Claims that have been made?

   And one thing more, at least:  Especially when the money figures they are proposing are about the same as what the Banks would have proposed to pay, even if the Attorneys General had not shown up?

   Please Read The Disclaimer.

 

IMMUNIZING FORECLOSURE FRAUDS IS NOT AN OPTION: Part 2: ...

 

... Herein of the Responses in Florida and in Other States to Foreclosure Fraud Business Practices, continuing analysis begun here on September 29, 2011 and on October 6, 2011.  See in addition the post here on October 4, 2011.

    A central fact in Foreclosure Fraud business practices is that Homeowner Defendants do not have legal representation for the most part.  To put it another way, Foreclosure Defendants do not usually have lawyers.  That fact must be kept firmly in mind or nothing understandable can come of this story.

   Florida's judicial responses include establishing a so-called "Rocket Docket" in which Foreclosure Lawsuits are the only thing on the Court docket and they are disposed of quickly, or they were disposed of quickly until the Plaintiffs' Fraud Business Model began to come to light.

   Retired Judges have been brought back in many Circuits in Florida to handle these specially treated cases.  No other class of cases enjoys this attention in Florida.

   Finally, the Supreme Court of Florida has established a State-wide Residential Mortgage Foreclosure Mediation Program, again especially for the express purpose of mediating Foreclosures in lawsuits involving homes.

   It is an unsettled question in Florida whether Clerks of Courts will continue to accept fraudulent and falsely sworn Affidavits for filing.  There is presently an argument over whether Florida Clerks of Court have the power to reject anything submitted for filing on a ground related to its content, as distinct from any other ground, such as a missing notarization or the wrong-sized paper perhaps.  See Gary Blankenship, "Who Owns the Note?  Paperwork Problems Still Plague Foreclosure Actions" p. 1, col. 4 (Florida Bar News, September 15, 2011).

   In other States, for example a Register of Deeds in Massachusetts, officials have found the authority to reject fraud and false swearing in Court filings that other States including Florida only argue about.  John O'Brien is the Register of Deeds for South Essex County in Massachusetts who has found the authority.  He calls his office "a 'crime scene'" because of the fraudulent paperwork:

   O'Brien had a forensic audit performed on 2,000 documents filed in 565 mortgage assignments on 473 "unique" mortgage cases by J.P. Morgan Chase, Wells Fargo, and Bank of America.  Among the findings were that owners could be determined on only 60 percent of the properties, and particularly problematic were those that had MERS [Mortgage Electronic Registration System] paperwork or were owned by federal government-sponsored entities, such as Fannie Mae or Freddie Mac.

   Of all the assignments examined, only 16 percent were valid, and another 8.7 percent were questionable.  Seventy-five percent were invalid.  The audit found 27 percent of the invalid assignments were fraudulent, 35 percent had been processed by robosigners, and 10 percent violated the Massachusetts Mortgage Fraud Statute.

Id.  

   The MERS mentioned in this quoted piece as being "particularly problematic" in its paperwork, given its corporate birth by the real estate financing industry, "has handled about 35 million mortgages, or about half of the residential market in the U.S."  Id.

   Some of the techniques explored by the South Essex County Register of Deeds in Massachusetts seem easily transferable to other Counties in other States and Commonwealths, and are plainly easy to duplicate.  For example, his Office has made a list of clearly identified false and fraud swearers.  He has ordered his Office to require an additional Affidavit from the Plaintiff when the Plaintiff's paperwork in a given Mortgage Foreclosure Case is prepared by business organizations on this list.  The additional Affidavit simply requires that the Plaintiff affirm or swear that the original papers filed on its behalf in the Mortgage Foreclosure Action were correct. 

   There have been no takers:

   O'Brien has taken the unusual step of publishing a list of known robosigners and refusing to accept any paperwork with their signatures.  Instead, he returns it to the lender, along with an additional affidavit for the lender to certify [that] there is nothing wrong with the paperwork.  None of the affidavits have been signed and returned, he said; rather, the lenders have executed new paperwork with other people signing the affidavits and related paperwork.  O'Brien said he forwards those redone filings to the state Attorney General's Office for investigation of possible fraud.

Id.  [Emphasis added.]

 

End of Part 2 of 3 parts.

 The 22nd Annual Bad Faith Litigation Conference of the American Conference Institute is being held in 2011 in Orlando, Florida.  The author will be speaking on emerging issues of Bad Faith, such as the issues frequently featured in Foreclosures.  Here is a link to the American Conference Institute Website Page which features this Conference including registration. If you or someone you know would like to attend, the ACI is offering a discount to the readers of this weblog.  If you would like to explore the ACI discount offer, contact:

Marc Gerstein
Delegate Coordinator
Office: 1-212-352-3220  x5432

[email protected]

 

Please Read The Disclaimer.

IMMUNIZING FORECLOSURE FRAUDS IS NOT AN OPTION: Part 1 Continued ...

 ... Herein of the Recent Encounters of the Florida Courts With the Foreclosure Fraud and False Swearing Madness:  Rulings "Follow the Law, Not Just The Money".

    This post continues Part 1 of "Immunizing Foreclosure Frauds Is Not An Option".  In particular, this post will illustrate the issues of Fraud and False Swearing presented in Affidavits, and Proof, in recent Florida Foreclosure cases.  It is worth noting that none of the recent Florida decisions cites to any of the others.  The Florida Courts are nonetheless reaching similar results on similar facts in Foreclosure cases filed across the State.

    In Florida, as in most other "judicial" Foreclosure jurisdictions where Foreclosures must take place in actions in open Court:

    The party seeking foreclosure must present evidence that it owns and holds the note and mortgage to establish standing to proceed with a foreclosure action.  [Citations omitted.]  Because a promissory note is a negotiable instrument and because a mortgage provides the security for the repayment of the note, the person having standing to foreclose a note secured by a mortgage may be either the holder of the note or a nonholder in possession of the note who has the rights of a holder. [Citations omitted.]  An allegation of default in a complaint must be proven by competent evidence.

 Mazine v. M & I Bank, 67 So. 3d 1129 (Fla. 1st DCA 2011)(page numbers not available via Westlaw at the time of this post).  In the Mazine case, there was only one witness at the Foreclosure Trial, one Taxdal, a "regional security officer" for M & I Marshal and Ilsley Bank (which, Mr. Taxdal testified, is a different entity from the Foreclosure Plaintiff, M & I Bank).  The Foreclosure Plaintiff attempted to admit an Affidavit as a "business record" from another Witness who did not appear at the Trial.  The Affidavit in question, executed by one (absent) Koontz, was offered "as to amounts due and owing."  Taxdal  "did not testify, and, indeed, could not testify," that the Koontz Affidavit was "actually kept in the regular course of business."  There was no legally sufficient foundation for admission of the Koontz Affidavit as a business record, and so the First District held that the Trial Court erroneously admitted it, and its admission was prejudicial error requiring reversal of a Foreclosure Judgment entered by the Trial Court after a bench trial.

   In addition, in Florida as in other "judicial" Foreclosure jurisdictions, "[t]o have standing to foreclose, it must be demonstrated that the plaintiff holds the note and mortgage in question."  This was not demonstrated by M & I Bank, i.e., M & I Bank "had not demonstrated it possessed the standing to proceed in the foreclosure action, [and so] we must reverse on this issue as well."

   All of the following even more recent Florida decisions discussed below, are revealed as not being final according to Keycite on Thursday morning, October 6, 2011, which is the date of this post.

   In Parker v. LaSalle Bank Nat'l Ass'n, 2011 WL 3476668 (Fla. 4th DCA August 10, 2011), the Foreclosure Plaintiff filed an Affidavit from a process server.  The Affidavit was intended to establish what is ordinarily a formality in Florida litigation when constructive service of process is the only kind of service of process that the Plaintiff claims to have been able to make on the Defendants.  In this case, however, the Fourth District Court of Appeal observed that the process server's Affidavit proved that there had not been the required reasonable diligence for constructive instead of personal service of process.  "However, the affidavit shows the search for [Catherine Paige] Parker was less than diligent."  Id. at *2.  The Fourth District reversed a Default Judgment of Foreclosure, and remanded for further proceedings in this case.

   In U.S. Bank Nat'l Ass'n v. Paiz, 2011 WL 3586132 (Fla. 3d DCA August 17, 2011), a Foreclosure Lawsuit proceeded all the way through the Plaintiff's Motion for Summary Judgment, the entry of a Foreclosure Judgment, followed by a forced sale, and the issuance of a writ of possession taking the property away from the Defendants-Mortgagors.  The Defendants at this point filed an "unsworn" motion to vacate the Foreclosure Judgment, or a Motion for Relief From Judgment under Fla. R. Civ. P. 1.540 (located on pages 71-72 of attached link).  They obtained a stay of the writ of possession.  The only ground assigned in the motion for setting aside the Foreclosure Judgment was that the Plaintiff Trust did not actually exist.  Id. at *1.  "The motion did not allege with specificity any facts showing fraud occurred in this case."  Id. at *2.  At Hearing on that Motion, the Defendants questioned for the first time the Affidavits filed by the Plaintiff and talked generally but apparently not specifically about "fraud".

   Since Fla. R. Civ. P. 1.540 requires "fraud or misrepresentation, not an arguable miscalculation" in a Foreclosure case as here, and since it also requires "that fraud be specified with particularity and, if it exists, how it would entitle the defendants to have the judgment set aside," the Third District reversed the Trial Court's stay of the writ of possession in this case.

   In Gick v. Wells Fargo Bank, N.A., 2011 WL 3861525 (Fla. 5th DCA September 2, 2011), Florida's Summary Judgment Motion Rule, Fla. R. Civ. P. 1.510 (located on pages 69-70 of attached link), was the basis for the Florida Court's decision.  Like most if not all other jurisdictions, Florida requires that Affidavits be in evidentiary form in order for the Affidavits to support a Motion for Summary Judgment.  In the Gick case, an Affidavit of one Perez provided the Foreclosure Plaintiff's only attempt to place evidence in the record to support its Motion for Summary Judgment of Foreclosure, and because of the "deficiencies" in Mr. Perez' Affidavit, the Fifth District held that "the record was insufficient to negate an answer alleging that the Gicks had made their payments."  Id. at *1.

   The Perez Affidavit "did not reference the alleged non-payment" of the Mortgage Note by the Defendants.  "[I]ndeed," said the Florida Appellate Court in this case, the subject Affidavit "did not include any averment that the Gicks had defaulted on the mortgage."  Id.

    To say again:  "An allegation of default in a complaint must be proven by competent evidence."  Mazine v. M & I Bank (Fla. 1st DCA 2011),, quoted above.

   That brings us in this post to the Glarum decision referenced in the earlier post on this issue.  Download Glarum v. Lasalle Bank Nat'l Ass'n (Fla. 4th DCA Case No. 4D10-1372, Opinion Filed September 7, 2011).  In that case, Florida's Fourth District also based its decision on Florida's Summary Judgment Rule, Fla. R. Civ. P. 1.510(c), although on a different subsection of the same Rule.  As in the Fifth District's decision in Gick, the Fourth District never addressed the Florida Rule of Civil Procedure governing the form of Affidavits.  Instead, as in Gick, the Florida Appellate Court reversed a Foreclosure Summary Judgment because the Affidavit filed by the Plaintiff in support of its Motion for Summary Judgment was based on what the Court saw clearly as "inadmissible hearsay and, as such, could not support LaSalle's motion for summary judgment."  Slipsheet Opinion at 2.  As a result of its evidentiary deficiencies, "the affidavit of indebtedness constituted inadmissible hearsay."  Id. at 2-3.

        End of Part 1.  To be continued in Part 2 including the massive harm inflicted on Mortgage Insurance Companies and on Title Insurance Companies by the Foreclosure Fraud and False Swearing.

 Please Read The Disclaimer.

Good Faith: Homeowners Betrayed, Banks Unreal: California Investigates, Refuses Pre-Immunity.

    The California Attorney General has pulled out of national settlement talks with the Banks over unlawful mortgage servicing and foreclosure practices.  Download California AG 093011 Mortgage Letter.  In her letter, she mentioned "Good Faith," or lack of it, three times.

   The New York Attorney General has raised concerns during the talks.  He was immediately removed from the negotiations.  

   These developments have not gone unnoticed in the popular press or in blog posts.  See, e.g., Louise Story, "California Quits States' Talks With Banks on Mortgages" p. B1, col. (New York Times Nat'l ed., "Business Day" Section, Saturday, October 1, 2011); Alejandro Lazo and Nathaniel Popper, Post on "Money & Company" Blog on Los Angeles Times Online, Friday, September 30, 2011:  "California Breaks From 50-State Probe Into Mortgage Lenders [Updated]"; Ruth Simon and Nick Timiraos, "California Pulls Out of Foreclosure Talks" (Wall Street Journal Online, Saturday, October 1, 2011); Rick Daysog, Post on "CapitolAlert" Blog on Sacramento Bee Online, on Friday, September 30, 2011:  "California Pulls Out of Nationwide Wrongful Foreclosure Settlement".

   However, not many of these reports put these developments in the context in which they occurred.  That is the intent behind this post.  It may be a long post, unless you are interested in the reasons these things happened and then the time it takes to understand the background will, I think, be well spent.

Putting it all in perspective:  The context.

   50+ State Attorneys General (counting the chief legal officers of the District and of the U.S. territorial possessions) have been in national settlement talks with the "Banks".  The subjects of their negotiations have been unlawful foreclosure practices and mortgage servicing.

   The Banks have apparently already agreed to change foreclosure practices that they pursue or that "mortgage servicers" pursue in their names.  "Good progress has been made, particularly with respect to identifying common-sense reforms to mortgage servicing and foreclosure practices."  California Attorney General 09.30.11 Letter, supra, at 1.

   But the Banks want more.

   The Banks have expanded their own demands beyond unlawful mortgage servicing and foreclosure practices.  They want immunity from mortgage securitizations.

   The Banks want the State AG's to agree to confer immunity upon the Banks if the Federal Government, any departments of State Governments, or individuals sue the Banks for damages allegedly caused by the Banks' mortgage securitizations.  See the newspaper reports and blog posts linked above.

  Some Attorneys General want these negotiations to include loan modifications to restore a flow of money and stimulate the economy.  Loan modifications by or on behalf of the Banks are apparently not on the negotiating table.  See California A.G. 09.30.11 Letter at 2:  "In return for this broad release of claims, the relief contemplated would allow far too few California homeowners to stay in their homes."

   The Banks' demand for immunity from their mortgage securitizations in contrast is on the negotiating table.  The Obama Administration position is to take the Banks' money in exchange for the Banks' immunity.  This exchange is intended to help restore the economy.

   The Obama Administration has been incessant in putting pressure on State AGs who refuse or are reluctant to talk about mortgage securitization immunity for the Banks.  The New York Attorney General as one example has been an object of attention from officials in the Obama Administration and in the Federal Reserve System in this regard.  E.g., Alan Feuer, "Top Prosecutor Stands Out by Pushing Back" p. 22, col. 1 (New York Times Nat'l ed., Sunday, October 2, 2011);  Gretchen Morgenson, "Attorney General of N.Y. is Said to Face Pressure on Bank Foreclosure Deal" (New York Times Online, August 21, 2011).

The experience of settlement negotiations.

   Experienced negotiators know that your negotiating counterparties have just told you where they perceive themselves to be most vulnerable when they make such a demand.

   That appears to be one of two good reasons why the California AG is exclusively directing the time and resources of her office to investigating things like the role of mortgage securitizations in the mortgage foreclosure crisis.  She and other State Attorneys General -- in contrast to the current Federal Department of Justice -- have already been investigating that issue.  Two good reasons for removing the constraints of the current national settlement discussions therefore include, first, that investigating this area is where the Banks on the other side of the table do not want you to go, and second, this decision tends to push the Obama officials back.

   In actual context, it is clear why the California AG wrote a letter saying that the proposed settlement is "inadequate":

   However, despite your diligence and our good-faith effort to reach reasonable terms with the banking industry, there now exists a proposed settlement that is inadequate for California homeowners....

... California was being asked for a broader release of claims than we can accept and to excuse conduct that has not been adequately investigated.  In return for this broad release of claims, the relief contemplated would allow too few California homeowners to stay in their homes.

California AG 09.30.11 Letter at 1-2.  Many newspaper reporters took this to mean that the contemplated "damages" were inadequate.  See the many newspaper reports and blog posts linked above.  Damages were never mentioned in this letter.  The inadequate relief contemplated in this arrangement was instead mentioned over and over.  It is not about the money.  It is about Good Faith, or lack of Good Faith, in settlement negotiations.

Once, twice, three times "Good Faith".

      I mentioned that the California AG's letter mentioned "Good Faith," or lack of it, three times.  The first time was when the AG identified a good faith effort -- by the AGs -- to reach reasonable terms with the Banks.

   The second time was to describe the fact that the AGs were negotiating in good faith with the Banks when "recently, at the same time" the Banks' foreclosure actions in California "surged again."

   Third and finally, the reforms identified in the talks apparently included enhancing "transparency" and eliminating "incentives to disregard borrowers' rights in foreclosure.  Many of these reforms have been identified in the multistate talks, and I hope that in good faith the banks will adopt those reforms immediately."  California AG 09.30.11 Letter at 1-2.

And in the end, the love you take is not equal to the deals you make.

   The Obama Administration's pressure on State AGs to confer immunity in exchange for an amount of money without investigation, has already been described above. 

   Good Faith in negotiations contemplates an exchange.  It does not mean acceptance without investigation of the counterparty's position.  It includes obtaining something of equal value in return for what the other side demands.  If the other side of a negotiation is not willing to negotiate in Good Faith, then there really are no negotiations that deserve the name.

Please Read The Disclaimer. 

IMMUNIZING FORECLOSURE FRAUDS IS NOT AN OPTION: Part 1 ...

... Herein of When The Fraud and False Swearing was first Unleashed.   

   Events in Florida do not always make the news outside of our State's borders.  The Florida Bankers Association has proposed that the Florida Legislature remove judicial oversight of Florida Foreclosures.  The Governor and people in key positions in the Florida Legislature reportedly agree, at least in principle.  There is no concrete proposal at this time for the next sitting of the Florida Legislature.  See Editorial, St. Petersburg Times, Monday, September 26, 2011:  "Effort to Cut Courts Out of Foreclosure Process Could be Costly to All Floridians".  (In contrast, the Florida Bankers Association unsuccessfully proposed legislation in 2010 which would neuter Florida's Judicial oversight of Foreclosures, proposed legislation which apparently was so specific that it ran over some 56 pages.  The proposed legislation was named by a George Orwell character or a moral equivalent.  Try this link to view a copy of it:  Download The-Florida-Consumer-Protection-and-Homeowner-Credit-Rehabilitation-Act proposed in 2010.)

   Here is the scope of the Foreclosure problem.  Florida mirrors the United States in these features:

• Affidavits:  Affidavits are submitted reportedly based on fraud and false swearing.  The subjects reportedly include the basics of any Foreclosure lawsuit:

1. Indebtedness of the Homeowners-Defendants.  Frequently, the affidavits are just plain wrong.  The Defendants either owe nothing, or they owe far less than the amount attested in the Affidavit.  See Glarum v. Lasalle Bank Nat'l Ass'n (Fla. 4th DCA September 7, 2011; STATED NOT FINAL):  Download Glarum v. Lasalle Bank Nat'l Ass'n (Fla. 4th DCA Case No. 4D10-1372, Opinion Filed September 7, 2011).
2. An allegation that the Plaintiff has possession of the note, a crucial element of an ordinary Foreclosure action, is often simply wrong.  Reportedly, the Plaintiffs do not have possession, and they do not know who does.
3. The original or some other evidentiary substitute of the Mortgage Note cannot be accounted for so that the Plaintiff should not be required to produce it although the Plaintiff would be the proper party to pursue the Foreclosure if the note were available:  This particular allegation, which is often accepted by Florida Courts as a legal substitute for possession of the note, is also reportedly often simply untrue.
4. Personal knowledge vs. "robosigning":  All Affidavits including those filed by Plaintiffs in Foreclosure Actions are required to be made on personal knowledge of the contents by the person signing the Affidavit.  In many Foreclosure Cases, the personal knowledge requirement has reportedly been replaced by "robosigning," a practice in which lots of Affidavits are executed by the same person who apparently has little or no time to read any of them -- or even to try.  Yet they sign their own names to the Affidavits anyway and swear or affirm the truth of the Affidavits under oath.

• Homeowners-Defendants are without legal representation for the most part. 
• Proof of the Mortgage note is required, of course, in any action to Foreclose on the Mortgage.  Which brings us back to the matter of "Affidavits," discussed above.
• Motions for Summary Judgment are the Foreclosure Plaintiffs' preferred method of disposing of the case.  Until recently, granting those motions was seemingly also the preferred method of the Florida Foreclosure Courts in rapidly disposing of Foreclosure cases, too.  The motions and the resulting Summary Judgments are based on the Affidavits in the Court File.  When Affidavits are submitted based on nothing more than fraud and false swearing, and there is no adversary in the adversarial process to point that out to the Court, Summary Judgments are entered when in actual fact there are at bottom genuine issues of material fact -- including the right of the Plaintiff to bring the Foreclosure action in the first place, i.e., it is often at best a fact issue whether the Foreclosure Plaintiff in a given Foreclosure case even has standing to sue in the first place.

  Part 1 Continues ... So Does the Fraud and the False Swearing.

Please Read The Disclaimer.

  

Nevada Sues to Set Aside Settlement Bank of America Allegedly Dishonored.

   In a Complaint reportedly filed by the Attorney General of Nevada on August 30, 2011, Nevada has filed suit to set aside a Mortgage Foreclosure Fraud Settlement allegedly dishonored by Bank of America.  I have searched PACER.  Nevada's Complaint, filed in the United States District Court for the District of Nevada, is not available Online as yet.  I will keep searching every so often.  When I find the Complaint, I intend to post it here.  In the meantime, Ms. Gretchen Morgenson has reported on it and her reporting is reliable.  See Gretchen Morgenson, "Nevada Sees Violations of Mortgage Agreement" p. B1, col. 6 (New York Times Nat'l ed., "Business Day" Section, Wed., August 31, 2011).

   Ms. Morgenson reports eight (8) ways in which BOA allegedly dishonored its Settlement Agreement with the State of Nevada, among other parties, and why Nevada wants out of that agreement:

1. BOA told Credit Reporting Agencies that people had defaulted on their Mortgage payments, when they had not defaulted;
2. BOA employees allegedly misrepresented to Borrowers the reasons why Borrowers' Mortgages were not modified despite the Borrowers' requests;
3. BOA told the Borrowers that "the actual owners of the loans had refused to allow changes" to the Mortgages when that was not true;
4. BOA claimed that Borrowers had not made payments on "trial loan modifications," although they had made payments;
5. BOA offered loan modifications, at first with one package of provisions "only to come back with a substantially different deal";
6. "Several" of BOA's employees claimed that BOA set a maximum time limit of 7 to 10 minutes to spend with each Borrower, otherwise the employees would be reprimanded if they took a longer time to discuss a Borrower's status or capacities or wishes;
7. BOA (in its prior incarnation as Countrywide before it acquired Countrywide and  Countrywide's Mortgage Foreclosure liabilities) sold "mortgage securities" to Investors without delivering "necessary loan documentation," i.e., it failed to "endorse the mortgage note and deliver it to the trustee overseeing the pool"; and
8. "These paperwork failures should have barred the bank from foreclosing on borrowers, the Nevada complaint says, but it went ahead nonetheless."

Id.

   Whew.  So do you think, based on these allegations, that this Bank can be trusted in future Settlement Agreements it makes concerning the Mortgage Foreclosure Fraud debacle?  Many of these allegations concern conduct allegedly indulged in by Bank of America after it entered into the Court-approved Settlement Agreement with the State of Nevada, among other parties.

   Apparently the remaining Attorneys General of the 50 States, all of whom are currently negotiating yet another "Settlement Agreement" with Banks and other participants in the Mortgage Foreclosure Fraud model, are paying attention to this development.  See id.  Watch for the Administration and several of the State Attorneys General to try to put pressure on the Nevada Attorney General to dismiss the lawsuit and accept yet another "Settlement Agreement". 

   Asking the Federal Court to set aside the previous so-called "Settlement Agreement" is not the only relief requested in Nevada's Complaint this week.  "Ms. Masto's [the Nevada Attorney General's]  complaint asks that the court impose civil penalties on Bank of America and order it to cover the costs of caring for foreclosed properties borne by municipalities."  Id.

Please Read The Disclaimer.

More Reasons to Pray: Mortgage, Title Insurance Claims to Pay.

 Risks caused by self-Inflicted Moral Hazards spread to Mortgage Insurance Companies and Title Insurance Companies paying Claims.

      The effects of an overwhelming number of Foreclosures on Mortgage Insurance Companies and Title Insurance Companies are well-documented.  Mortgage Insurance Companies are overwhelmed with Insurance Claims by Banks and other Foreclosure Plaintiffs.  Title Insurance Companies are similarly overwhelmed as a result of the actions by Banks and other Lenders.  E.g., Dennis J. Wall, "Litigation and Prevention of Insurer Bad Faith" § 3:111, "Mortgage Insurance" (West 3d Edition 2011); see, e.g., "HUD Program Offers Hope of Relief ... to Mortgage, Title Insurers," April 5, 2011 post on Insurance Claims and Issues Web Log ; "Mortgage Insurance Absolutely No Antidote for Radioactive Investments," March 29, 2011 post on Insurance Claims and Issues Web Log;;  "'Fraud Upon the Courts?' Insurance Crisis Result of False Swearing," November 3, 2010 post on Insurance Claims and Issues Web Log.

      Florida's Attorney General since January, 2011, Ms. Pamela Bondi, sees a Moral Hazard in Residential Mortgage Foreclosures.  She does not see a Moral Hazard in lending practices, as can be seen from her own actions since January.  She instead sees a Moral Hazard in principal reductions, in even considering reductions of the Mortgage principal owed by Florida Homeowners to non-Florida Banks.  Principal reduction is not a suitable negotiating chip in discussions between the 50 State Attorneys General and the Banks over the Foreclosure Fraud Fiasco, she has announced.  General Bondi's announced views run counter to negotiation best practices from the beginning of these negotiations, see, e.g., Alejandro Lazo, "Banks Are Foreclosing While Homeowners Pursue Loan Modifications" (Los Angeles Times Online, April 14, 2011); "POSTSCRIPT:  Prayers for Bondi, Mortgage Finance 'Unfair, Deceptive and Unconscionable' Actions," posted here on July 29, 2011, down through today.  See  Michael Hiltzik, "Foreclosure Reforms May Be Coming To a Head" (Los Angeles Times Online, Sunday, August 14, 2011).

    These views also run counter to a view that fairness has a role to play in the process.  "We have to bring a greater sense of equitable treatment.  When we do that Americans will say, 'Yes, we are all in this together.'"  Thomas M. Hoenig, President of the Federal Reserve Bank of Kansas City, quoted by Gretchen Morgenson, "Fair Game / Conventional Fed Wisdom, Defied" p. 1, col. 1 (New York Times Nat'l ed., "SundayBusiness" Section, Sunday, August 14, 2011).

    Two Assistant Attorneys General received great respect from lawyers across the nation for their successful efforts in investigating Fraud by Mortgage Foreclosure Plaintiffs.  The same two Assistant Attorneys General received high performance reviews of their work in the Florida Attorney General's Office after General Bondi assumed that Office.  General Bondi forced them both to resign, claiming they instead performed poorly, a claim which has yet to be supported by a single page of documentation.  See "POSTSCRIPT:  Prayers Over Bondi, Mortgage Finance 'Unfair, Deceptive and Unconscionable' Actions," posted here on July 29, 2011.

      Now, the Office run by General Bondi has provided more troublesome, potential Moral Hazards.  Another Assistant Attorney General has resigned, this time after the Assistant A.G. investigated the number of cases in which former employees of the Florida Department of Legal Affairs (A.G.'s Office) have landed jobs with targets of the Residential Mortgage Foreclosure Fraud investigation.  The Assistant A.G. concluded that, among other things, where there's smoke, there's fire.  To paraphrase his own departing remarks as quoted in newspaper reports, the Assistant A.G. in question concluded that Florida Taxpayers deserve an Attorney General's Office which does not have its own self-inflicted Moral Hazards.  He immediately resigned.  The Florida A.G.'s Office charged that they were about to dismiss the Assistant A.G. in question on a claim that the Assistant A.G. had a business relationship with a target of the Mortgage Fraud investigation.  See Aaron Deslatte and Kathleen Haughney, "Sentinel Watchdog / Bondi's Office Rocked by Accusations of Impropriety" p. A1, col. 1 (Orlando Sentinel, Saturday, August 13, 2011).

      If we had any doubts before, you and I, we should not have any doubts now, that on this and every day we should pray unceasingly that we will have Justice in Florida, and in our country.

 Please Read The Disclaimer.

 

Mortgage Insurance Rescission Remedy ...

   ... for Mortgage Fee-Taking Fiasco.  

   The financial world continues to offer headlines about fees taken from issuing mortgages to people who could not afford them.  Unfortunately the news behind the headlines does not offer much hope of a remedy.  See, e.g., Barry Ritholtz, "Why Didn't Prosecutors Go After Wall Street?" (July 14, 2011 post on "The Big Picture" Blog); Barry Ritholtz, "Will the AGs Turn the US Into a Banktocracy?" (July 11, 2011 post on "The Big Picture" Blog)

   Banks and other lenders are making claims on Mortgage Insurance Companies as a result.  Defaults by mortgagors translate into fewer fees collected.  Mortgage Insurance Companies may have found a remedy for these claims in Rescission.  The remedy is based on the simple concept that the Banks and associated persons provided nothing short of material representations in their applications for Mortgage Insurance that the Mortgagors were just not able to pay their Mortgages from the outset.  See, e.g, Download JPMorgan Chase Bank, N.A. v. Republic Mortgage Insurance Co. (D.N.J. Case No. 10.06141, Opinion Filed May 4, 2011) PUBLIC RECORDS ACCESS, also published as 2011 WL 1750439 (D.N.J. May 4, 2011)(authorized password required to access Westlaw) and sources cited in this seminal case.

   Will Rescission become a way of doing business in the Great Recession caused by the applicants who caused the Mortgage Fee-Taking Fiasco?  Time will tell.

Please Read The Disclaimer.

POSTSCRIPT: Prayers Over Bondi, Mortgage Finance "Unfair, Deceptive and Unconscionable" Actions.

   Reductions of Principal "'are still on the table'" says a spokesperson for the State Attorney General actually in charge of negotiations with the Banks and other Finance Companies, the Iowa Attorney General.  See Beth Kassab, "Bondi Eases Stand on Reduced Principals" p. B5, col. 1 (Orlando Sentinel, "Business" Section, Friday, July 29, 2011).

   Even General Bondi of Florida is coming around to the idea.  She issued a press release stating that in "'appropriate'" cases principal reduction might be considered.  She did not have an example of an appropriate case in which principal reduction might be considered.  See id.

   At the same time, General Bondi responded to reactions overwhelming her Office to her firing of two Assistant Attorneys General whose work was lauded as "instrumental" in successful Foreclosure investigations and remedies.  She responded that the Assistant Attorneys General performed "'poorly,'" but again, she could not say how.  See id.; Janet Zink, "Bondi Faces Call For Inquiry Into Forced Resignations of Two State Lawyers" (St. Petersburg Times Online, Wed., July 27, 2011).

Link here for easier access to earlier posts to which this is a postscript.

Please Read The Disclaimer.

"The Banks Still Want a Waiver" ... No, They Also Want Immunity: ...

This is an update to numerous posts in this space, most recently on July 19, 2011 entitled, "Prayers Over Bondi, Mortgage Finance "Unfair, Deceptive and Unconscionable" Actions

... Foreclosure Fraud by Foreclosure Plaintiffs, Continued.

   "MERS" stands for "Mortgage Electronic Registry Systems".  This company has nothing to do with the Clerks of Court in the States.  It is a corporation made by Banks and other Lenders to save them the time and expense not only of recording all the Mortgages they take back to secure their Loans in the first place, but also to file Foreclosure Lawsuits against defaulting Homeowners-Mortgagors.  Unfortunately, MERS did not make the loans and, in addition, MERS does not have the original note or a lawful excuse why not, in many cases.

   There is a split among the Courts over whether MERS has standing to sue for Foreclosure under these circumstances.  The percentage breakdown among the Courts is unclear.  The judicial view that MERS has no standing to sue in such Foreclosure Cases is well-articulated by Federal Judge Robert E. Grossman, quoted by Gretchen Morgenson, "Fair Game / The Banks Still Want A Waiver" p. 1, col. 1 (New York Times Nat'l ed., "SundayBusiness" Section, July 24, 2011):

This court does not accept the argument that because MERS may be involved with 50 percent of all residential mortgages in the country, that is reason enough for this court to turn a blind eye to the fact that this process does not comply with the law.

   The contrary view is expressed, for example, in a case involving the substantive law of Arizona, which is a Nonjudicial Foreclosure State meaning that the only involvement Courts in Arizona have with Foreclosures is when someone files a lawsuit to halt or to enforce one.  See, e.g., Download Schayes v. BAC Home Loans Servicing, LLP (D. Ariz. Case Nos. CV.10.1893, CV.11.1074, Order Filed July 15, 2011) PUBLIC ACCESS also published as 2011 WL 2746322 *2 (D. Ariz. July 15, 2011)(only Defendant was "the current servicer" of a residential loan secured by a deed of trust; holding in case at bar in pertinent part both that the Plaintiffs had not adequately pled sufficient facts in their Complaint to withstand dismissal of their Claims, and had stated legally insufficient Claims, that the mortgage servicer "is incapable of foreclosing absent actual possession of the note," that the trust deed is invalid, or that the mortgage servicer lacks standing "to conduct a non-judicial foreclosure.")(authorized password required to access Westlaw).

   Banks that own MERS are seeking releases of liability against claims that have not been made yet, it is reported by Gretchen Morgenson, "The Banks Still Want A Waiver," supra.  The Banks are making this demand in their current negotiations with the 50 State Attorneys General.  "Lawyers who have examined this issue say it would be unprecedented to grant a broad release from liability ... from claims that have not been investigated."  Id.

   Demanding a release from Unknown Claims is not exactly unprecedented on Wall Street, however.  The U.S. Government, specifically the Federal Reserve Bank of New York and the Treasury Department, forced AIG to release in advance what a release demanded by AIG's counterparties on Credit Default Swaps specifically labeled as "Unknown Claims".  See "AIG's Secret 'Unknown Claims' Release Worthless Paper?" posted here on July 6, 2010; and see "Who Fleeced the Fiduciaries?  AIG's 'Unknown Claims' Release ... Could Be Worthless Paper" posted on Insurance Claims and Issues Blawg, also on July 6, 2010

   The story about the hidden release of AIG's "Unknown Claims" was broken by New York Times Reporters Louise Story and Gretchen Morgenson.  One of the few good things in this situation is that the newspaper and these fine reporters are still focused on this very important and unfortunately recurring story.

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Prayers Over Bondi, Mortgage Finance "Unfair, Deceptive and Unconscionable" Actions.

   This is an Update to posts about Prayers for Florida's New Attorney General, Ms. Pamela Bondi, on May 26, 2011 and on June 19, 2011.  This post also Updates previous posts concerning Mortgage Foreclosure Issues seemingly designed as a Business Model to Overwhelm the Court System, on June 6, 2011, on June 8, 2011 and on July 19, 2011.

   Prayers issue daily that Florida's Attorney General since January, Ms. Pamela Bondi, will represent the People of Florida in negotiations between all of the 50 State Attorneys General, and  Banks and Mortgage Servicers, over alleged Foreclosure misdeeds.

   The previous Florida Attorney General -- before Ms. Bondi assumed office in January, 2011 -- started an investigation by the Economic Crimes Section.  The 98-page Report which resulted is entitled, "Unfair, Deceptive and Unconscionable Acts in Foreclosure Cases".

   The Report was written by then-Assistant Attorneys General Theresa Edwards and June Clarkson.  It is clearly important to the Attorney Generals' negotiations.  As their Supervisor noted in evaluating job performance, their Report was used in what he believed to be the first settlement of charges against a Law Firm as a "foreclosure mill" engaged in tactics such as the signing and filing of Affidavits without the affiant necessarily being personally familiar with the contents, or even having read the Affidavits before signing them.  See Brady Dennis, "Florida Foreclosure Investigators Say They Were Forced to Resign" (Washington Post Online, Thursday, July 14, 2011).

   Ms. Edwards' and Ms. Clarkson's Supervisor wrote, in that same complimentary employee review, that the Report was "instrumental in triggering a nationwide review of such practices."  See, e.g., Scott Maxwell, "Taking Names / Foreclosure-Fraud Watchdogs' Ouster Troubling" p. B1, col. 1 (Orlando Sentinel, Wednesday, July 20, 2011); Brady Dennis, "Florida Foreclosure Investigators Say They Were Forced to Resign" (Washington Post Online, Thursday, July 14, 2011).

   Their Report is also "instrumental" in a Foreclosure lawsuit in New York State won by a Homeowner in which the New York Court dismissed the case with prejudice.  The Judge "also demanded HSBC Bank officials appear in court to explain why they should not be sanctioned."  Kimberly Miller, "Florida Fraud Report Key to New York Foreclosure Case" (Palm Beach Post Online, Saturday, July 16, 2011).

   As a result of their Report, Assistant Attorneys General Edwards and Clarkson were given the bum's rush by Attorney General Bondi.  They were reportedly not allowed to review their files before they were told to leave.  They were not allowed to brief other attorneys who would be taking over their cases.  In their own words, "[w]e were just locked out."  They were given an option, however:  Resign or be fired that day.  They chose to resign.

   The unconscionable and deceptive practices highlighted by Ms. Edwards and Ms. Clarkson in their Report, are still going on.  See Michelle Conlin & Pallavi Gogoi, AP Business Writers, "Report:  Mortgage 'Robo-signing Goes On'" (Associated Press Report, posted Online on Wisconsin Law Journal at http://wislawjournal.com, Tuesday, July 19, 2011).  In the linked report, the authors point to evidence from County Officials and others about continuing practices -- and investigations by State Attorneys General -- in California, Illinois, Massachusetts, Michigan, and North Carolina as examples.  Further, reportedly the Register of Deeds in Guilford County, North Carolina has stopped filing documents that appear to be signed by "robo-signers" without further Affidavits certifying the signatures and assuming responsibility if legal title was questioned in the future as a result of the original Affidavits.  See id.

   It is also worth noting that the Florida Attorney General's Office also reportedly issued a statement that despite asking the most "instrumental" investigators in the country to leave the investigation, the Office is aggressively  pursuing an investigation, too.

   The costs incurred by Mortgage Insurance Companies and by Title Insurance Companies, as a result of the unconscionable and deceptive practices documented by Ms. Edwards and Ms. Clarkson, have previously been posted here many times.  That bystanders are incurring costs as a result of such practices is unconscionable.

   Florida Governor Rick Scott's suggestion to simply eliminate the Judicial Foreclosure Process in Florida and replace it with nonjudicial foreclosure is examined from several angles with many links in a thought-provoking post by Adam Levitin, "Switching Foreclosure Rules in the Middle of the Game" (Credit Slips / A Discussion on Credit, Finance and Bankruptcy Blog, posted on June 25, 2011).

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Foreclosure Lawsuits Problems Attempt Overwhelming Courts: No. 2, With Solutions.

This is another in a continuing occasional series.  This post follows the June 8, 2011 post here, "Foreclosure Lawsuits Problems Attempt Overcoming Courts:  No. 1, With Solutions," and the post on June 6, 2011 on Insurance Claims and Issues Web Log, "Frivolous Foreclosure Fraud Attempt to Overcome Courts".  This post also adds to the many previous posts in the Category of "Foreclosures" on both Blogs.

   In Download Brooks v. Flagstar Bank, FSB (E.D. La. Case No. 11.67, Order and Reasons Filed July 12, 2011) PUBLIC ACCESS, also published as 2011 WL 2710026 (E.D. La. July 12, 2011)(authorized password required to access Westlaw), the Federal Court applied "the Rooker-Feldman doctrine" to measure whether it would exercise jurisdiction over eleven (11) asserted Claims.  That doctrine relates to collateral attacks on final State Court Judgments, in this case, a Judgment of Foreclosure.

   In basic and simple terms, under the Rooker-Feldman doctrine a Federal Court will refuse to exercise jurisdiction to hear what is essentially an appeal of a State Court Judgment.  Brooks v. Flagstar Bank, FSB, 2011 WL 2710026 at *2 - *3.

   The occasion for applying the Rooker-Feldman doctrine was in the context of a Motion to Dismiss for lack of subject-matter jurisdiction under Fed. R. Civ. P. 12(b)(1).  That Motion was filed by the Defendant Bank's law firm and by one Candace A. Coutreau.  The Federal Court applied the doctrine to dismiss two of the eleven Claims alleged against those parties:  Claims based on (1) an alleged abuse of executory process and on (2) an alleged abuse of executory process in bad faith.  Id. at *4.

   That left nine (9) Claims remaining, which the Court held were not barred by the Rooker-Feldman doctrine.  Although all remaining Claims were dismissed as against the Bank's law firm and Ms. Coutreau for failure to state a Claim under Fed. R. Civ. P. 12(b)(6), they are at least potentially available in an appropriate set of facts as against the Bank itself.  The nine such Claims alleged in this case were alleged (1) Fair Debt Collection Practices Act violations; (2) Federal Unfair Trade Practices; (3) Deceit; (4) Breach of Duty of Good Faith and Fair Dealing; (5) Justifiable Reliance; (6) Louisiana Unfair Trade Practices; (7) Negligence; (8) Fraud, and (9) Conspiracy.  See id. at *1, *4 - *10.  (According to PACER, the Online Docket of the Federal Courts, the Bank's Answer or other responsive pleading is not yet due.)

   In addition to these further possible solutions to the problems of Foreclosure Lawsuits filed in an apparent attempt to overwhelm Courts, there is also the reported potential of a Class Action Lawsuit based on alleged violations of (1) the Federal Truth-in-Lending Act and (2) State Consumer Protection Statutes.  See Kenneth R. Harney, "Litigation Gauges Banks' Ability to Cut Home-Equity Credit Lines / A Possible Giant Class-Action Lawsuit is Considered a Bellwether Test of Homeowner Rights under the Truth in Lending Act and State Consumer Protection Statutes" (Los Angeles Times Online, Sunday, July 17, 2011).

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Prayers for Pamela.

     This is an UPDATE on my post here on May 26, 2011, "Praying for Florida's New Attorney General".

 "We prayed for her, that her eyes would be opened and her heart softened to the reality of what is happening in our state.  Ordinary Floridians are relying on her to stand for them and not Wall Street."  Rev. Errol Thompson, Baptist Pastor in Orlando, Florida and Chair, PICO United Florida,  "Guest Columnist / Troubled Homeowners Need Bondi's Support," p. A21, col. 1 (Orlando Sentinel, Friday, June 17, 2011).

 

   When money lenders started talking about moral hazard, they opened the door for higher authorities to speak.  Ministers are now speaking out about moral hazard. 

   Ministers see a moral hazard peril in the love of money.  Money lenders have not been heard to refute that or to attack the Ministers, yet.  For now, money lenders seem content to have their positions advanced  by "public officials".

     Pamela Bondi, Florida's Attorney General, has for example championed their position in settlement negotiations between the 50 State Attorneys General and Mortgage Servicers and Banks as a result of 'defects' in Foreclosure proceedings.  Florida's Attorney General has publicly renounced taking any position in the negotiations with the Mortgage Servicers and Banks that the mortgage lenders even consider reducing the debts owed by homeowners in Florida.  Ms. Bondi is of the view that it would unleash the whirlwind of a moral hazard.

   The response of a group led by Ministers is to pray for her.  Unceasingly and often.  See Rev. Errol Thompson, "Guest Columnist / Troubled Homeowners Need Bondi's Support" p. A21, col. 1 (Orlando Sentinel, Friday, June 17, 2011).

   Today is a good day to pray.

    Please Read The Disclaimer.

Foreclosure Lawsuits Problems Attempt Overcoming Courts: No. 1, With Solutions.

This is the second in an occasional series.

   One problem with the attempt to overwhelm the Court System with Foreclosure Lawsuits, thus laying the groundwork for "reform" by making Foreclosures easier for Foreclosure Plaintiffs to sue, lies with the presentation of Affidavits and Testimony and other unsupported Evidence.  See the previous posts for several years in those categories as applicable, and in the Category of "Foreclosures".

   In presenting unsupported Affidavits, Testimony and other Evidence, Foreclosure Plaintiffs often present Affidavits or Testimony which does not rest on personal knowledge.  Further, some Witnesses or Exhibits purport to offer "summaries" of other people's calculations or work.   Unless the Homeowners are represented by counsel when they are sued as Defendants, there is no-one to object under the most-followed, current Court System model.

   This system is well known to Foreclosure Plaintiffs.  The response of Courts and Legislatures to the overwhelming number of filed Foreclosure Lawsuits has often been to engage in "reforms" suggested by Foreclosure Plaintiffs which will "speed up" the process of their Foreclosures.

   A major problem with these "reforms" is when they require the acceptance in a Court proceeding, a lawsuit, of testimony and evidence which has not previously been found acceptable.  I.e., Affidavits and Testimony and other unsupported Evidence.

   Here are three possible solutions to the problems.  These possibilities are offered here in the context of possible changes to Court and Bar Rules.  Perhaps the involvement of Legislatures and statutes may be required in some jurisdictions.  Further, the language in these proposals addresses the only problem before the Courts in Foreclosure Lawsuits at this time, which is the presentation by Plaintiffs of unsupported Evidence in those cases.  If other problems arise, the language can be changed to address additional problems which may develop in the future.

   As noted, thes following proposals address a problem currently posed by Foreclosure Lawsuits, which is the presentation of unsupported Evidence by or on behalf of Plaintiffs particularly against Defendants who have no Legal Counsel. 

   1.  Summary Judgment Rule and/or Rules regarding Affidavits filed in Court proceedings.  Proposal to add to existing Rule(s):

        This provision is applicable to any Foreclosure Lawsuit in which the Plaintiff offers an Affidavit(s) in support of a motion for summary judgment of Foreclosure:

        (a)  In which the Defendant in a Foreclosure Lawsuit is not represented by Counsel, the Court is empowered and authorized to hold Hearings and take Testimony including in person from the signer of any Affidavit(s) submitted by the Plaintiff, for the purpose of determining compliance with these Rules, including but not limited to the purpose of a finding on the issue of whether the Affidavit was made on personal knowledge.

        (b)  In any Foreclosure Lawsuit in which the Court shall determine that the Affidavit(s) have not been made or filed in accordance with these Rules, the Court shall strike the Affidavit(s) from the Court File.  In addition, the Court in any such case upon such a finding may in its discretion also:

          (1)  Strike the pleadings of the Plaintiff.

          (2)  Dismiss the lawsuit.

2.  Appellate Rule.  Proposal:

        In any Appeal from a Judgment of Foreclosure on the ground that the Judgment of Foreclosure is not supported by the Evidence, or is against the manifest weight of the Evidence, review of the Judgment with regard to such ground or grounds shall be de novo [brand new by the reviewing Court on appeal].

 

3.  Pro Bono Bar Rule.  Proposed additions:

  (1)  Include representation of Foreclosure Lawsuit Defendants who do not qualify for Legal Aid.

  (2)  Include representation of Foreclosure Lawsuit Defendants who have qualified for Legal Aid and upon referral and certification by Legal Aid that Legal Aid is unable to handle the representation without the referral.

 

Do you have other solutions?  If so, or if you want to comment upon these proposed Rule changes, please leave a Comment with your thoughts.  Thank you.

Please Read The Disclaimer.

 

       

Frivolous Foreclosure Fraud Lawsuits Threaten to Overcome Court System.

   I plan a series of occasional posts on the Foreclosure Lawsuit Fraud problem which confronts our Court system.  The first in the series appears on Insurance Claims and Issues Web Log today.

   Taking an unusual step, I also plan to alternate the occasional posts on this series between the Insurance Claims and Issues Weblog, and this one.  The effects on Mortgage Insurance are pronounced and trigger the insight offered on Insurance Claims and Issues Weblog in particular.  The business model which requires the filing of an overwhelming number of Foreclosure Lawsuits which will likely increase the Plaintiffs' prospects of prevailing in Foreclosure is a particularly appropriate subject for this Insurance Claims and  Bad Faith Law Blog.

   I intend to summarize how we got to where we are today, take a picture and publish it in words about where we are today, exactly, and what can be done to safeguard the Judicial System of which I have been a part throughout my professional career, and in which I continue my professional life.

Please Read The Disclaimer.

Nonjudicial Foreclosure Failure Regardless of Bad Faith; Securitization at Bottom.

   In an action filed by servicing companies or banks on behalf of securitized trusts ("foreclosers"), it has been held that the Plaintiffs were not entitled to a declaration of perfection.  The Plaintiffs in that case requested a judicial declaration that their real estate titles were perfected.  Instead, the Courts unanimously held that the foreclosers failed to obey the Law which allows nonjudicial foreclosures.  U.S. Bank National Association v. Ibanez (Mass., Opinion Filed January 7, 2011).  Try this link for the Public Access Official Opinion:  http://weblinks.westlaw.com/result/default.aspx?action=Search&cnt=DOS&db=MA=ORS, or do an internet search for "Massachusetts Supreme Judicial Court" and click on decisions or opinions. 

   The Plaintiffs were not denied their relief in this case because they acted in Bad Faith.  In Massachusetts, as in other nonjudicial foreclosure jurisdictions, "a mortgage holder must not only act in strict compliance with its power of sale but must also 'act in good faith and  ... use reasonable diligence to protect the interests of the mortgagor,' and this responsibility is 'more exacting' where the mortgage holder becomes the buyer at the foreclosure sale, as occurred here."  Id. n. 16.  The issue of the Plaintiffs' Bad Faith was not adjudicated here.  The Plaintiffs were not even accused of Bad Faith in this case, apparently.

   The issue was whether the foreclosers followed the Law.

   This was not a lawsuit filed by Homeowners (Mortgagors) who stopped paying their mortgages.  In fact, the Homeowners-Mortgagors admitted that they stopped paying their mortgages.  For a long time, they did not even contest the case for any reason.

   The issue was whether the foreclosers obeyed the Law.

   The Courts of Massachusetts held that the foreclosers did not obey the Law.

   Massachusetts is a nonjudicial foreclosure jurisdiction.  In taking that position, it stands with the majority of jurisdictions in the United States which do not require a Court to approve a Foreclosure or even a forced sale of the distressed property at issue.  This means that foreclosers like the Plaintiffs who filed this lawsuit, do not need a Court proceeding in order to foreclose when as here defaulting Mortgagors have stopped paying their mortgages.  Id.   However, to perfect their title, i.e., to eliminate a cloud on their title after foreclosure, foreclosers like the Plaintiffs in this case need a judicial declaration.  Id.   That is why the foreclosers filed suit here, to request a judicial declaration that they did it right.

   The Courts of Massachusetts, as noted, held that the foreclosers in this case did not obey the Law.  As a normal and ordinary part of securitization, the foreclosers recorded the final assignment of the Mortgages at issue after they foreclosed.  This was the first time in the record that during the course of securitization, the Plaintiffs-foreclosers recorded any assignment of the Mortgages on which they foreclosed.  They attempted to backdate their assignment.  Backdating was held a nullity, void and of no effect.

   The decision is based entirely on the Law of Massachusetts.  This Law is followed throughout many if not all nonjudicial foreclosure jurisdictions.  There does not appear to be any recognized basis for a majority of the U.S. Supreme Court to seize jurisdiction and reverse the result, even assuming that a majority could be assembled to seek that result.  The decision of the Massachusetts State Courts appears final.

   The facts which led to the decision do not appear to have involved any mistakes, so much as a procedure mandated by the foreclosing Plaintiffs' business model.  It would have cost a lot of money to record all the assignments involved in their securitization.  It also appears to be plain that securitization has set up a deadly contest.  Either the Law or securitization must give way to the other.   The two cannot exist side-by-side without one radically changing or dying in order to accommodate the other in its present form.

   Time will tell.

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More On Foreclosure Fraud, Modification Madness Lawsuits.

   In the same week as the Nevada Attorney General (and the Arizona Attorney General) filed suit over Foreclosure Fraud and Modification Madness, posted here on Sunday, December 19, 2010, a Jury in U.S. District Court in Nevada awarded $79,000.00 in Compensatory Damages and assessed $5,100,000.00 ($5.1 Million) in Punitive Damages in a Foreclosure and Modification Fraud case.  The Nevada Jury award is reported by Gretchen Morgenson, "Fair Game/Opening the Bag of Mortgage Tricks" p. 1, col. 1 (New York Times Nat'l ed., "SundayBusiness" Section, Sunday, December 19, 2010).

   The Jury reportedly returned a Verdict on all Counts.  The Complaint contained causes of actions or Claims for Conspiracy, Breach of Contract, Breach of Fiduciary Duty, and Breach of Good Faith and Fair Dealing.  Id.

   The suit was filed against loan servicers by a group of 50 Plaintiff investors in commercial loans.  "Loan servicers act as intermediaries between borrowers and their lenders, collecting monthly payments and real estate taxes and forwarding them to the appropriate parties."  Id.  In that case, the Defendant loan servicers allegedly:

1.  Took money rightfully owed to the Plaintiff investors holding the loans, by "improperly charging" various items, including:

   a.  "default interest,"

   b.  "late fees and"

   c.  "loan origination fees".

 2.  Constructed obstacles to loan repayments and hid them from the Plaintiffs when Borrowers "tried to pay off or otherwise resolve disputed loans," including:

   a.  They refused to negotiate, or

   b.  They counseled Borrowers to seek loan modifications for which the Defendant loan servicers allegedly "reaped undisclosed fees".

Id.

   More and other investors are expected to grow the list of lawsuits over Foreclosure Fraud and Modification Madness.  Id.  The results of the past week are certainly no inhibition to that happening.

The harmful effects of Foreclosure Fraud and Modification Madness on Mortgage Insurance Claims are explored by Dennis J. Wall, "Litigation and Prevention of Insurer Bad Faith" § 3:106, "Mortgage Insurance" (West Publishing Co. 2010 Supplement).

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Remember the Neediest!