Claims and Bad Faith Law Blog

FRAUD CAN DECEIVE A PERSON. BUT NOT EVERYONE, NOT ALWAYS.

In Discovery Land Co., LLC v. Berkley Ins. Co., NO. CV-20-01541-PHX-ROS, 2023 WL 2503634 (D. Ariz. March 14, 2023), the insureds bought a castle in Scotland, claimed that they were defrauded by their lawyers, added insureds to their policies after a known loss, and then apparently made claims to coverage.

    The two insurance carriers in the case "both filed counterclaims seeking rescission of the change endorsements, arguing Plaintiffs fraudulently added entities as joint insureds after they discovered the losses."  Discovery Land Co., 2023 WL 2503634, at *5.

    The Court entered a summary judgment of no coverage for both carriers.

Please read the disclaimer.  This blog article ©2023 Dennis J. Wall.  All rights reserved.  Fraud allegations in the context of first-party cases such as Discovery Land Company are discussed in 2 DENNIS J. WALL, LITIGATION AND PREVENTION OF INSURER BAD FAITH § 11:12 (3d Edition West Publishing Co., 2023 Supplements in process).

POSTSCRIPT TO DURHAM DISCLOSURES.

Apparently, John Durham's office practices in front of federal judges who are not like any of the federal judges you and I may have practiced in front of.  Faced with a Motion to Strike allegations from his main pleading, Mr. Durham's Office did not respond.

Instead, they filed a Response all right, but they said they would respond in the future, just not right now:  "Indeed, the Government intends to file motions in limine in which it will further discuss these and other pertinent facts to explain why they constitute relevant and admissible evidence at trial."  USA v. Sussman, Government's Response to the Defendant's Cross-Motion to Strike, Doc. 40 at p. 2, filed Feb. 17, 2022 (D.C.D.C. Criminal Case No. 21-582 (CRC)).  Download USA v. Sussman USA's Response to Defendant's Cross-Motion to Strike Doc. 40 filed Feb. 17 2022 (D.C.D.C. Criminal Case No. 21-582 (CRC)).

It never occurred to me to tell a federal judge that she or he just has to wait for my Response, that's all there is to it.   Did it ever occur to you that you could get away with that?

It occurred to Mr. John Durham.  Or at least to someone in his office.  The pleading was signed by one Brittain Shaw, a relatively new player on the pleadings docket on PACER in this case.

Stay tuned.  More to come....

Please read the disclaimer.  ©2022 Dennis J. Wall.  All rights reserved.

NATIONAL CONSUMER LAW CENTER DECEMBER WEBINARS FOR THE AGES.

The issue of confidentiality was on the table for discussion in an outstanding December Webinar put on for the National Consumer Law Center by Steve Koval, Esquire and Ahmad Keshavarz, Esquire, Don't Mess Up The Settlement Agreement!

          John Rao, Esquire of NCLC moderated another outstanding Webinar, this one presented by Phillip Robinson, Esquire and Yongmoon Kim, Esquire, Using Violations of Mortgage Servicing Rules Without Private Rights of Action as Predicates for FDCPA [Fair Debt Collection Practices Act] and UDAP [Unfair and Deceptive Acts and Practices, by whatever name] Claims.

          Alpha Taylor, Esquire of NCLC and Marissa Ditkowsky, Esquire jointly presented still another informative Webinar, The Intersection of Disability and Consumer Law.

          These Webinars were presented less than two months ago, but they are timeless.  If you have access to these NCLC Webinars, give thanks for the opportunity.  Watch, listen and learn.

          And one more that is more than worth your while ....

Please read the disclaimer.  ©2022 Dennis J. Wall.  All rights reserved.

The Coming Wave of Underwater Homeowners and Distressed Lenders.

Homeowners are already in a bind.  The bind is tightening, both on homeowners and on lenders.  The current lockdown has stopped income because it has stopped all paid work except employment that is deemed essential.  While Congress continues to refuse to provide income supports for regular people, its monetary support of corporations will be useless to homeowners although in some cases it might help parties holding residential mortgages.

    Homeowners have not stopped paying mortgages in record numbers because they have suddenly been infected with fraud.  Homeowners have stopped paying mortgages in record numbers because they don't have the money.  See Kathy Orton, Homeowners Stopped Paying Mortgages in Record Numbers in April, WASHINGTON POST  online Friday, May 22, 2020.

    Parenthetically, landlords renting both residential and commercial properties report "that companies with offices or retail spaces" have skipped their rent payments in greater numbers than individual renters.  The landlords report that over 66% of all commercial tenants did not pay their rent either in April or in May.  That compares with less than 25% of residential tenants who skipped rent in April and in May.  The CEO of one major real estate company said this about the rent-skipping 'office and retail tenants with healthy finances':  "They think of this as some sort of field day.  I'm shocked, candidly."  See Matthew Haag, Commercial Rent Revenue is Sliding, and Landlords Predict a Catastrophe, NEW YORK TIMES, Friday, May 22, 2020, at A12.

    The Census Bureau itself has confirmed that homeowners have stopped paying their mortgages in record numbers because they simply do not have the money.  The Census Bureau released a report on the 2020 mortgage crisis last Wednesday, May 19, 2020.  47% of adults across the nation told the Census Bureau when asked that they or another adult in their household had lost income since March 13.  Loss of income has hit the poorest and low-income wage earners the hardest.  56% of the respondents who had not earned a high school diploma, and 51% who hold a high school diploma but did not go on to college, have lost work and so have lost income.  Only 38% of respondents with a college degree or higher, reported that they have lost income in the same period.

    The income forecast for the rest of the year is abysmal.  Most businesses responding to the Census Bureau's survey expect it will take at least 6 months to resume operations.  More than 20% of adult individuals who responded to the survey have little or no confidence in their ability to pay rent or mortgage that come due next month.  See Sarah D. Wire, One-Fifth of Americans Fear They Can't Pay June Rent or Mortgage, Federal Survey Finds, LOS ANGELES TIMES online Wednesday, May 20, 2020.

    Foreclosures have already begun in many cases, particularly for homeowners struggling to pay on so-called distressed mortgages, and  despite widespread publicity of possible forbearance options at this time.  See Matthew Goldstein, Goldman Forecloses on More Than 10,000 Homes, NEW YORK TIMES, Friday, May 22, 2020, at B6.  

    So when the tales of fraud come tripping in, as they will, the lived experience of landlords and lenders is that wealthy business tenants have stopped paying rent by more than 2.5 times the rate of residential tenants.   And for their part, homeowners in large numbers have stopped paying their monthly mortgage payments for a good reason that has nothing to do with maximizing profit:  Homeowners just don't have the money.

    Nonetheless the stories of fraud will  come.  They will be broadcast across the land.  What is true, however, is that evictions will rise, unauthorized add-ons such as insurance premiums placed by force will increase, and foreclosures will climb.  We have been here before.  We have seen this movie, as they say.  Here's hoping that this time it will be all right in the end, or it won't be the end.

Find out more about the Causes and Claims behind Lender Force-Placed Insurance Practices. See the Introduction by Dennis Wall to what's in the Loan Documents you sign when you or your clients buy a house, Section 2:1 in LENDER FORCE-PLACED INSURANCE PRACTICES published by American Bar Association Publishing, accessible at no charge to you and your clients at https://www.dennisjwall.com.

Please read the disclaimer. ©2020 Dennis J. Wall. All rights reserved.

 

CONSUMER PROTECTION CLAIMS FOR INSURER BAD FAITH.

Consumers have a right of action under Washington's Consumer Protection Act against their insurance carriers for breach of the duty of good faith and fair dealing, i.e., for insurer bad faith.  This rule has been applied recently against a health insurance carrier accused of failing to deliver the insurance services for which it charged insurance premiums approved by the Washington State Office of the Insurance Commissioner.

In particular, the plaintiff-policyholder alleged that the defendants' "unfair or deceptive acts or practices in conducting its insurance business" consisted in pertinent part of failing to have in-network providers as represented, and failing to provide coverage represented by the defendants to be within the plan.  Harvey v. Centene Mgt., Co. LLC, ___ F. Supp. 3d ___, No. 2:18-CV-00012-SMJ, 2018 U.S. Dist. LEXIS 198773, at *13-*14, 2018 WL 6112407, at *4 (E.D. Wash. Nov. 21, 2018).

Interested in current events?  Take another look: READ BARR'S LETTER LIKE A  LAWYER LIKE BARR from our sister blog, Claims and Issues.

Please Read The Disclaimer.  ©2019 Dennis J. Wall.  All Rights Reserved.

 

SHOUTS FAKE "FRAUD!" EXCEPT WHEN HE WINS THE ELECTION.

Rick Scott is one of many politicians who spent millions of their own dollars to get elected only to claim "fraud" when maybe they did not win the election.

And if they do win the election, it's not "fraud" any more if you pay attention to them.

Real "fraud" is when a company defrauds veterans and seniors of their Medicaid and Medicare money and pleads guilty to doing it.   Amy Sherman, PolitiFact: Did Rick Scott Invoke the Fifth Amendment 75 Times? (Tampa Bay Times Online June 22, 2014), at http://www.tampabay.com/news/politics/national/politifact-did-rick-scott-invoke-the-fifth-amendment-75-times/2185493.

How long can this nonsense go on?  Not long.

  (Handout Photo / Sun Sentinel)

Please Read The Disclaimer.  ©2018 Dennis J. Wall.  All Rights Reserved.

 

IF BUNDLED FLORIDA AMENDMENTS WERE GOOD, YOU COULD VOTE ON EACH. YOU CAN'T.

Election Day here in Florida is the same as in the rest of the country of course, November 6, 2018.

          Unlike the rest of the country we in Florida have been given a scam, 19 proposed "amendments" to the Florida Constitution packaged together and numbered 6 through 12 (8 was thrown out by the Florida Supreme Court; it was too deceptive even for them).  Count 'em as they say.  That's 19 bundled, bungled amendments in the clothes of 6 packages of so-called "amendments."

          They were intended to be confusing of course.  That includes "Amendment 6," the so-called "Victim's Rights Amendment" which really is 3 amendments disguised as 1.

          They are explained in understandable terms in a brief PowerPoint I made and converted into a YouTube video for 11 minutes and 11 seconds, The Florida Constitution:  A Presentation of the Bundled Amendments on the Florida Ballot (October 2018), at https://youtu.be/Ma4Div0yXos. 

          Read all about these bungled amendments.  Then make your mind up if you vote in Florida whether you want to vote for any one of them, or against all of them.  Remember that if the 2017-2018 Constitution Revision Commission gets away with this bundling business, they will do it again next time.

          And remember this also:  If a single amendment is really good, they will come back with it next time.  You can count on that.

Please Read The Disclaimer.  ©2018 Dennis J. Wall.  All Rights Reserved. 

NO "HEIGHTENED FRAUD PLEADING" FOR ILLINOIS BAD FAITH CLAIMS: …

NOT FOR CONTRACT CLAIM OR UNREASONABLE AND VEXATIOUS CONDUCT CLAIM UNDER ILLINOIS INSURANCE CODE.

A breach of a homeowner's insurance contract claim, even though the claim includes allegations of bad faith, is not subject to a "heightened fraud pleading requirement" under Federal Rule of Civil Procedure 9(b), the District Court held in Wheeler v. Assurant Specialty Prop., 125 F. Supp. 3d 834, 840 (N.D. Ill. 2015).  There the breach of contract claim "exists independent of any allegations of fraud or deception contained in the complaint."

Further, a claim of unreasonable and vexatious insurer conduct is actionable under the Illinois Insurance Code, the same Court further held.  Wheeler v. Assurant Specialty Prop., 125 F. Supp. 3d 834, 840-41 (N.D. Ill. 2015).  The Court refused to "apply Rule 9(b)'s pleading requirements to conduct that does not necessarily sound in fraud" even if the alleged conduct sounds in bad faith.  Wheeler v. Assurant Specialty Prop., 125 F. Supp. 3d 834, 841 (N.D. Ill. 2015). 

Please Read The Disclaimer.  ©2016 by Dennis J. Wall, author of Litigation and Prevention of Insurer Bad Faith (3d ed. Thomson Reuters West in 2 Volumes, with  Supplements).  All rights reserved.

FLORIDA DECEPTIVE AND UNFAIR TRADE PRACTICES ACT PREEMPTED.

 

"By its express terms," said the Court, the Florida Deceptive and Unfair Trade Practices Act "'does not apply to ... [b]anks and loan associations regulated by federal agencies.'"  Wilson v. Everbank, N.A., 77 F. Supp. 3d 1202, (S.D. Fla. 2015), quoting Fla. Stat. Section 501.212(4)(c).  The Court accordingly granted a federally regulated savings and loan association's motion to dismiss a FDUTPA claim with prejudice in that lender force-placed insurance practices case.

However, the Court entertained a cornucopia of claims allegedly arising under Florida, New York, or Illinois law, some of which it left standing, including claims based on the Truth-in-Lending Act, and alleged breaches of contract and of the implied covenant of good faith and fair dealing.

Please Read The Disclaimer.  Copyright 2015 by Dennis J. Wall, author of "Lender Force-Placed Insurance Practices" (American Bar Association 2015).  Listen to the author's most recent Thomson Reuters Legal Current podcast.  All Rights Reserved.

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'INSURANCE COVERAGE BY ESTOPPEL IS NOT A BAD FAITH CLAIM.'

  In Bishop v. Progressive Express Ins. Co., ___ So. 3d ___, 2015 WL 63648 (Fla. 1st DCA January 6, 2015), a Florida appellate court was faced with an appeal from a summary judgment.  The trial court entered the summary judgment, in part, on a claim of "insurance coverage by estoppel" against an insurance company.  The complaint detailed the insurer's alleged conduct.

    On appeal, Florida's First District Court of Appeal reversed the summary judgment on this claim.  The appellate court was careful from the start to outline the limitations on any such claim:

     Undertaking communication, conduct, and steps in defense of an underlying action, heavily dependent upon the circumstances, may rise to a coverage by estoppel claim. This appeal involves an allegation an insurer made statements and undertook actions which led a business owner to believe she had insurance coverage for the underlying action; all this despite the insurer's knowledge of facts which would have permitted it to deny coverage.

Bishop v. Progressive Express Ins. Co., ___ So. 3d ___, 2015 WL 63648, *1 (Fla. 1st DCA January 6, 2015).  "This “coverage by estoppel” claim requires a representation of material fact, reasonable reliance, and a detrimental change in position (i.e., prejudice) as a result of the reliance."  Bishop v. Progressive Express Ins. Co., ___ So. 3d ___, 2015 WL 63648, *1 (Fla. 1st DCA January 6, 2015).

    The appellate court reversed the trial court's summary judgment in favor of the insurance company on the "coverage by estoppel" claim in this case.  However, the appellate court was careful to point out that its reversal was as a matter of law and did not weigh the facts, which is the job of the trier of fact and not the task of the Court:

Here, we do not pass on the strength of the business owner's claims regarding the insurer's conduct and actions or what the business owner believed afterwards. That is for the trier of fact to determine. We write only to confirm the cause of action exists, such a claim does not sound in bad faith, and here it was for the trier of fact to determine the ultimate weight to give the insurer's conduct versus the reasonableness of the business owner's reliance.  We REVERSE the court's grant of summary judgment in favor of the insurer as to this count and REMAND for further proceedings.

 

Bishop v. Progressive Express Ins. Co., ___ So. 3d ___, 2015 WL 63648, *1 (Fla. 1st DCA January 6, 2015).

    Whether and to what future fact patterns this holding will be applied remains to be developed.  However, this holding fits with a rule of law which is rarely invoked with success in Florida.  The rule is what the appellate court meant in its condensed version of the rule in the first quotation from the appellate court in this case, above.

    You would  not necessarily know from that statement of Florida law that so far the rule of "coverage by estoppel" in cases involving liability insurance has been limited to situations involving a liability insurance company with a duty to defend undertaking the defense of its insured without a reservation of rights, and then only where the lack of a reservation misled the insured to its prejudice when the insured reasonably relied on the insurance company's undertaking of the insured's defense without reseravation.

    The appellate court's statement of this rule is repeated here for the reader's ease of comparison:

     Undertaking communication, conduct, and steps in defense of an underlying action, heavily dependent upon the circumstances, may rise to a coverage by estoppel claim. This appeal involves an allegation an insurer made statements and undertook actions which led a business owner to believe she had insurance coverage for the underlying action; all this despite the insurer's knowledge of facts which would have permitted it to deny coverage.

 

Please Read The Disclaimer.  Copyright 2015 by Dennis J. Wall.  All rights reserved.  No claim to original U.S. Government Works.

 

THE BIG BAD FAITH NATIONAL MORTGAGE SETTLEMENT FOR MORTGAGE SERVICERS.

         You may be wondering at the increasing number of reports about specialty mortgage servicers.  The reports have it that this current brand of mortgage servicers, who bought their contract rights to service mortgages from the 5 largest mortgage servicers, are doing all the misdeeds that the "big 5" mortgage servicers agreed not to do in their big National Mortgage Settlement with the United States Attorney General and the Secretary of Housing and Urban Development, and with most of the States Attorneys General.  In that big settlement, the big 5 mortgage servicers agreed to stop doing such things as robosigning, lender force-placed insurance unfair practices, and the like.

         How can the specialty mortgage servicers now be doing all these things post-settlement, if the companies which sold them the mortgage servicing rights agreed in the National Mortgage Settlement not to do these things?

         It turns out that the specialty mortgage servicers argue that they are not bound by the settlement their principals made.

         The settlement documents must have been written by the mortgage servicers.  The "settling 5" agreed with the Department of Justice, HUD, and the majority of State Attorneys General:

References to Servicer shall mean [fill in the name of one of the five bank mortgage servicers] and shall include all Servicer's successors and assignees in the event of a sale of all the assets of Servicer or of Servicer's division(s) or major business unit(s) that are engaged as a primary business in customer-facing servicing of residential mortgages on owner-occupied properties.

         It does not take a transaction lawyer from a white-shoed Wall Street law firm to know that the 5 Servicer's "successors and assigns" have an argument that they are not included where the sale is NOT "of all or substantially all" of the Servicer's "assets".  In addition to the contract rights to service mortgages, the Gang of 5 for example could have sold furniture and fixings and other assets which they and their assigns valued much higher than the contract rights to service mortgages.  In that event alone, the assigns could and undoubtedly would argue that the sale of servicing rights was NOT "a sale of all or substantially all" of the 5 Servicer's assets.

         Cunning?  Perhaps.  Another one of those hard decisions they tell us they had to make?  Not hardly.  But whatever it is, you cannot call it a Good Faith Settlement, because it isn't.

 © 2014 by Dennis J. Wall.  All rights reserved.  No claim to original U.S. Government works.

 Please Read The Disclaimer.

BANK EMPLOYEE INDICTED IN MORTGAGE FRAUD CONSPIRACY!

          In a Grand Jury indictment written by the United States Attorney's Office for the Southern District of Florida, filed on January 7, 2014, one of the seven (7) indicted defendants was indicted as "a loan officer for Sun Trust Mortgage."  (Paragraph 32, p. 6, in Download US Atty SD FLA Indictment Bank fraud and wire fraud (M Fraud N.,C.) F'd 01.07.14.)  This individual is one of the few bank employees/officials to be criminally indicted as a result of allegedly criminal activities during the great financial crisis, if he is not the first of his kind.

          The alleged conspiracy in which the former bank officer allegedly participated, included the signing and processing of false affidavits and declarations, and other things which were arguably released in the national mortgage fraud settlement as to five mortgage servicers.  Two of the mortgage servicers released by the Federal Government and by the State Attorneys General who participated in that national settlement, are also two of the Banks which were allegedly the object of the conspirators in the recently filed criminal indictment:  Bank of America and Wachovia n/k/a Wells Fargo.

          This means that at least as to the extent of the conduct released in the course of the national mortgage fraud settlement, the parties released including B of A and Wells Fargo would claim that they are immune from suit now, assuming that a civil release would bar a criminal prosecution in this case.

          Two other Banks are also identified in the current indictment as objects of the conspirators' mortgage fraud:  Regions Bank and the indicted individual loan officer's employer, Sun Trust.  They are neither of them named in the releases in the national mortgage fraud settlement.  It is difficult to see how either Regions or Sun Trust could have standing to raise the national mortgage fraud settlement releases as a defense to their criminal prosecution.

          Which raises questions here.

 Why is an individual loan officer of Sun Trust indicted because of his alleged fraudulent, conspiratorial mortgage-related conduct (see ¶ 37 p. 6; Count I ¶ 2 pp. 7-8 and ¶¶ 8-19 pp. 10-14; and Count II ¶ 2 pp. 15-16 and ¶ 5 pp. 17-22), but not his bosses or any of his co-workers at Sun Trust?

Particularly when at one point, the indictment lists fifteen (15) specific instances of alleged criminal mortgage fraud conduct (specifically, alleged bank fraud) including "[s]ubmission of fraudulent mortgage loan application, closing, and related documents" for the purpose of obtaining loans to purchase land and for the purpose of obtaining loans to begin construction on that land -- and 9 out of the 15 specific instances involved fraudulent submissions accepted by Sun Trust?  Is it credible that one and only one loan officer had the power to totally review every document in every single one of these (and certainly other) loan submissions -- and that no-one else at the bank, not his superiors, not his coworkers, no-one -- reviewed either a single one of these documents or this one loan officer's job performance?

 These are only some of the questions raised here.  Let's start with asking these questions and we'll work our way through others.

The national mortgage fraud settlement is examined in a four-part series here and on Insurance Claims and Issues Weblog.  The series began 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 on February 1, 2012 on Insurance Claims and Issues Weblog.  The final leg of the series, Part 4, was posted here on Insurance Claims and Bad Faith Law Blog on February 2, 2012. 

© 2014 by Dennis J. Wall.  All rights reserved.  No claim to original U.S. Government works.

TITLE AGENT E&O RESCISSION FOR MORTGAGE FRAUD.

          The case of Zurich American Insurance Co. v. Diamond Title was a "declaratory relief action seeking rescission of a title agent's errors and omissions policy".  Zurich American Insurance Co. v. Diamond Title, 2013 WL 6283684 *1 (M.D. Fla. December 4, 2013).

          The title insurer alleged that the applicant for title agent's errors and omissions coverage, Diamond Title, "misrepresented material facts in its application for insurance" by incorrectly answering Question 21, reproduced below.  Question 21 is apparently a standard question, with that number, in many title insurance applications in use across the nation.

          Question 21 of the title insurance agent E&O application asked:

 

Does the Applicant or any prospective insured know of any circumstances, acts, errors or omissions that could result in a professional liability claim against the Applicant?

 

Zurich American Insurance Co. v. Diamond Title, 2013 WL 6283684 *2 (M.D. Fla. December 4, 2013).

          One Rotolo "was the owner, operator, and President of Diamond Title at that time".  She answered Question 21 with a "No" in 2007.  In 2009, she admitted that between 2002 and 2008 she had conspired "to make materially false statements to FDIC-insured banks for the purpose of influencing those banks in connection with mortgage loans and to committing wire fraud".  The purpose of the fraud "was to obtain loans secured by mortgages from FDIC-Insured banks and mortgage lending business."  Among the "false statements" were statements about the buyers and sellers; the family relationships among them; "the properties' actual purchase prices; the borrowers' intended use of the properties; the amount and source of the equity contributed to the purchase of the property by the borrowers," among other things.  Zurich American Insurance Co. v. Diamond Title, 2013 WL 6283684 *1 (M.D. Fla. December 4, 2013).

          The Court in this case had no trouble declaring this conduct was among the things that a title insurance agent does and for which a title insurance agent obtains E&O coverage.  "These false statements are within the Policy's definition of professional services because they are the duties of a closing agent and escrow agent."  Zurich American Insurance Co. v. Diamond Title, 2013 WL 6283684 *3 (M.D. Fla. December 4, 2013).  On that ground alone, rescission was in order in the eyes of this Court.

          But there was a further ground for rescission.  "The Policy makes clear that it does not cover liability for criminal acts ....  Rotolo was not relieved of her duty in the application to report acts that could result in a professional liability claim simply because the Policy many not have covered those acts."  Zurich American Insurance Co. v. Diamond Title, 2013 WL 6283684 *3 (M.D. Fla. December 4, 2013).  [Italics in original; boldface added.]

          The Court in that case granted the insurance company's motion for summary judgment and directed the Clerk to enter judgment in favor of the plaintiff insurance company.

 

 

© 2013 by Dennis J. Wall.  All rights reserved.  No claim to original U.S. Government works.

 

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HOMEOWNER'S INSURANCE FRAUD MADE POSSIBLE ... AND IMMUNIZED, TOO.

          The Bureau of Consumer Financial Protection has issued regulations and a "Supplement to Part 1024--Official Bureau Interpretations".  Popularly known as the Consumer Financial Protection Bureau or "CFPB," it has made homeowner's insurance fraud possible, and immunized it, too.

          The CFPB Official Interpretations make substitute or force-placed "hazard insurance" synonymous with substitute "homeowners' insurance" or substitute "property insurance".  Of course, force-placed insurance is not homeowner's insurance.  Force-placed insurance provides coverage only against a small number of risks or "hazards" such as fire, and in almost every case it only protects lenders, not homeowners.

           The truth is that force-placed insurance is collateral protection insurance.  That is not the Bureau of Consumer Financial Protection's interpretation, however.

          Congress enacted the Real Estate Settlement Procedures Act in part to require lenders and their agents, known as mortgage servicers, to send notices to homeowners-mortgagors with specific language before insurance can be placed by force upon the homeowner.  The language these congressionally required notices are supposed to contain is codified in 12 U.S.C.A. § 2605(l)(1)(A), (B) and (C).  The CFPB previously issued proposed forms mirroring the identical language in Appendix MS-3-Mortgage Servicing Model Forms and Clauses.

          The statute and the Mortgage Servicing Model Forms and Clauses which are supposed to implement the statute, all refer specifically to forced placement of substitute "hazard" insurance.  That is actually what is being placed by force, namely, substitute "hazard" insurance to protect lenders against damage to or loss of collateral protection.

          Now, the CFPB interprets the notices which are required to be sent to borrowers to refer to substitute "homeowner's" insurance.   To say again, the insurance that is thereby placed by force is substitute collateral protection insurance.

         Worse than that, the same Official CFPB Interpretation would immunize "good faith compliance" with its "Interpretation" from liability.  It is scheduled to take effect on January 10, 2014.  The Comment period has expired.  If the Bureau does not withdraw this "interpretation," it will apparently be up to Congress to nullify it.

          The official cite for the Official CFPB Interpretations is 12 C.F.R. 1024, Supp. I, and the official site is somewhere on http://www.consumerfinance.gov/regulatons.  When there, check out the "2013 Real Estate Settlement Procedures Act (Regulation X) and Truth in Lending Act (Regulation Z) Mortgage Servicing Final Rules".

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NEW YORK COURT REQUIRES LENDER, SERVICER TO ANSWER FPI COMPLAINT.

   In Casey v. Citibank, N.A., 915 F. Supp. 2d 255 (N.D.N.Y. 2013) the Court was confronted with motions to dismiss by all defendants.  The case was based on claims alleging force-placed insurance.  Specifically, the plaintiffs complained that the defendants committed a variety of wrongs by forcing the plaintiffs to pay premiums for flood insurance policy limits that went way beyond their remaining loan balances.

   The Federal Court agreed.  The claims were upheld at the pleading stage with respect to all defendants except defendant Citigroup, Inc.  The claims against that defendant were dismissed but without prejudice.  The remaining motions to dismiss were all denied and the claims upheld as against all the remaining defendants:  Citibank, N.A.; Citimortgage, Inc.; MidFirst Bank, N.A.; and FirstInsure, Inc.

   The Court summarized its holdings as follows:

   The parties dispute whether the mortgage agreements give defendants the discretion to set and change the amount of flood insurance required. Making all reasonable inferences in plaintiffs' favor at this early stage of the litigation, their interpretation of the contract language is plausible. Plaintiffs thus state plausible causes of action for breach of contract, conversion, and breach of the implied covenant of good faith and fair dealing.

   Similarly, plaintiffs sufficiently allege that defendants' receipt of commissions and/or kickbacks related to the force-placed flood insurance was neither disclosed in the mortgage agreements nor permitted by federal law. They also adequately allege that defendants mismanaged their escrow funds. Therefore, plaintiffs state plausible causes of action for unjust enrichment and breach of fiduciary duty.

   Finally, the amended complaint contains clear allegations that defendants misrepresented the amount of flood insurance required under the mortgage agreements, initially accepted a lesser amount of coverage, and failed to provide proper notice and disclosure before force-placing unauthorized and excessive flood insurance on plaintiffs' properties. Plaintiffs thus state plausible claims for violations of the NYDPA [New York Deceptive Practices Act] and TILA [the Federal Truth in Lending Act].

Casey v. Citibank, N.A., 915 F. Supp. 2d 255, 267 (N.D.N.Y. 2013).

 

Please Read The Disclaimer.  Copyright © 2013 Dennis J. Wall.  No claim to original U.S. Government works.

The Appraisal and The Expert.

          The case of Biscayne Cove Condo. Ass'n v. QBE Insurance Corp., 2013 WL 2646828 (S.D. Fla. June 12, 2013), presented U.S. Magistrate Judge O'Sullivan with unique opportunities for ruling.  It is a declaratory judgment action filed by a condominium association requesting a declaration that it has a right to appraisal of its Hurricane Wilma damage claim.  The condominium association bases this claim on the appraisal provision of its property insurance policy issued by the defendant.  The defendant insurance company did not dispute coverage under the policy, only the value of the damaged property.  Biscayne Cove Condo. Ass'n v. QBE Insurance Corp., 2013 WL 2646828 *3 (S.D. Fla. June 12, 2013).

          One of the opportunities to rule was presented by the condominium association's motion in limine to prevent the insurance company from putting on expert testimony in the declaratory judgment action concerning valuation.  The insurance company raised an affirmative defense of fraud in that case, and contended that it should be allowed to put on expert testimony on the fraud issue.

          The Court agreed with both positions in ruling that expert testimony was admissible on the fraud issue, but not concerning valuation, in the declaratory judgment action as distinct from the appraisal proceeding if any:

             In the instant case, the defendant will be allowed to present evidence on causation and valuation as it relates to the affirmative defense of fraud. Evidence regarding valuation and causation is necessary to determine if the plaintiff made purposeful misrepresentations to QBE. Evidence regarding causation and valuation, however, is not relevant to the other issues of this action for declaratory judgment.

Biscayne Cove Condo. Ass'n v. QBE Insurance Corp., 2013 WL 2646828 *5 (S.D. Fla. June 12, 2013).

Please Read The Disclaimer.

 

SECRET SETTLEMENTS: THE BAD FAITH ISSUES.

          Apparently the New York Fed is making secret settlements again.  AIG found out about one of them recently after it filed a lawsuit against Bank of America.  AIG sought to recover on some of its losses on Residential Backed Mortgage Securities allegedly caused by BofA.  It learned that the New York Fed previously "released" BofA from liability for those losses, or tried to.  See Gretchen Morgenson, "Fair Game / Don't Blink, or You'll Miss Another Bailout" p.1, col. 1 (New York Times Nat'l ed., "SundayBusiness" Section, Sunday, February 17, 2013).  This certainly brings back memories of secret settlements that the Treasury Department and the New York Fed made with investment banks allegedly responsible for causing the Great Recession. See, for example, "Residential Mortgage-Backed Securities Group:  The Final Installment" article posted here on February 2, 2012.

        There may be an issue under Florida law, whether a settlement of Bad Faith Claims can be made confidential by the parties in their settlement agreement, even with a Court's approval. A Florida Statute provides: 

 

Any portion of an agreement or contract which has the purpose or effect of concealing a public hazard, any information concerning a public hazard, or any information which may be useful to members of the public in protecting themselves from injury which may result from the public hazard, is void, contrary to public policy, and may not be enforced.

Fla. Stat. § 69.081(4).  The statutory definition of a “public hazard” includes any “person” or “procedure” “that has caused and is likely to cause injury.”  Fla. Stat. § 69.081(2).  That is a pretty broad definition, which can apply to a wide array of conduct.  It was probably meant to.

        No Court shall enter an order or judgment in a case subject to this Florida Statute, “[e]xcept pursuant to this section,” which has, among other things, “the purpose or effect of concealing a public hazard” or “of concealing any information which may be useful to members of the public in protecting themselves from injury which may result from the public hazard.” Fla. Stat. § 69.081(3).

        Similarly there may be issues of Bad Faith in secret settlements under the laws of other jurisdictions besides Florida..  Cf. Kreuger Int'l, Inc. v. Federal Ins. Co., 2008 WL 5264021 (E.D. Wis. Dec. 16, 2008).

        As many attorneys do in many kinds of cases, the attorneys for the parties in a recent Federal Declaratory Relief action stipulated that certain Insurance Coverage information would be produced under seal.  In fact, the attorneys apparently stipulated to a Protective Order saying so.  Thereafter, they filed some of those materials in the Federal Court File.

        The Federal Judge said that although the secrecy stipulation arguably facilitated discovery, the parties could not stipulate that everything they filed in the Court records was confidential and so they could not keep those materials by that expedient forever from the public eye. 

To be continued .....

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"Say it Ain't a Scam, Pam!"*

*A small child confronted one of the ballplayers who threw the World Series.  The player had pretended to do his best.  That is what he told people before he was brought up on charges of throwing the World Series.  The little kid said, "Say it Ain't So, Joe!"  The young child's comment has inspired the title of this post article.  Thank you.

                 This is really a follow up on the Mortgage Fraud Settlement in which four large Mortgage Servicers settled national claims against them for fraud.  The claims were apparently  never written in a Complaint filed in any Federal Court, nor filed in any State Court, nor filed with any Agency, State or Federal.  However, the national settlement was produced in writing after several weeks following the announcement of the settlement in which its provisions were not known to the public.

                Florida Attorney General Pamela Bondi firmly announced that she alone negotiated $300 Million on behalf of Florida residents who were defrauded by the Mortgage Servicers.  See "Mortgage Servicers, Mortgage Settlement:  Dealing Fairly in Financial Good Faith," published here on October 25, 2012.  The monies were to include mortgage loan reductions, financial counseling, and many other good things, Ms. Bondi's office announced to us.

                It is now reported that Ms. Bondi has negotiated another deal for the $300 Million and Ms. Bondi's office again tells us that this is a good thing for us.   With her agreement, the Florida Legislature has taken a cut of about 25% of that $300 Million which Ms. Bondi, alone, previously negotiated.  See Toluse Olorunnipa, "Pam Bondi Reaches Deal on Florida's $300 Million Foreclosure Settlement" (Tampa Bay Times Online, Friday, November 2, 2012).  She negotiated this deal also.  25% to the Florida Legislature.

                And counting.

                Say it ain't so, Pam.

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"Lies, Lies, And Da*n Lies": RMBS Born From "Systemic Fraud".

    A new complaint was filed on Monday, October 1, 2012 arising out of residential mortgage-backed securities ("RMBS"), an investment vehicle at the bottom (with other vehicles) of the current Great Recession.  The complaint is by the State of New York against JPMorgan Securities, JPMorgan Chase, and EMC Mortgage.

      Basically the complaint is based on two sets of alleged manifestations of fraud, deception, and misrepresentation:  First, in promoting and selling RMBS, and second, "systemic fraud" in failing and refusing to correct "defects" after due diligence and quality control procedures revealed that RMBS presented serious problems to the finances of investors and Homeowners.  Here is a copy of the complaint:  Download Complaint.New York v. JP Morgan Securities LLC etc. et al (Filed in N.Y. Supreme Court on Monday, Octo ber 1, 2012). 

    This is reportedly the first time that the claim of systemic fraud has been collectively alleged against the promoters and servicers of residential mortgage-backed securities as a class, as it were.  Gretchen Morgenson, "JPMorgan Unit is Sued Over Mortgage Securities Pools" (New York Times Online, posted October 1, 2012).  The reason is a New York law, General Business Law  352, et seq., known as the Martin Act, which allows for broad claims of fraud against groups of financial actors allegedly committing fraud.  See Michael J. de la Merced, "In JPMorgan Case, the Martin Act Rides Again" (Dealbook Blog on New York Times Online, posted October 2, 2012).  More about New York's Martin Act later.

    Another commentator who reads the complaint like it is a newspaper, finds that the complaint does not contain any news and is not newsworthy.  Peter J. Henning, "In JPMorgan Suit, a Lack of New News" (Dealblook Blog on New York Times Online, posted October 2, 2012).

    Perhaps the new complaint presents issues of Good Faith and Fair Dealing that are worth a little more attention.  Those issues will be explored here.

    More to come.

    Please Read The Disclaimer. 

QUESTIONS OF GOOD FAITH AND FAIR DEALING BY BANKS AS MORTGAGEES.

            Some important questions implicating Good Faith and Fair Dealing by Banks as Mortgagees are asked by Gretchen Morgenson, "Fair Game / How to Erase a Debt That Isn't There" p. 1, col. 2 (New York Times Nat'l ed., "SundayBusiness" Section, Sunday September 30, 2012).

            It is reported that Mortgagee-Banks including Bank of America and JP Morgan Chase have sent letters to Homeowners forgiving Mortgages that were discharged in Bankruptcy years ago.

           The letters also reportedly advise the Homeowners that the Banks' forgiveness of these debts which do not exist, will be reported to the IRS.  Id.

            Some questions arise, the answers to which do not appear to be entirely clear.  See id.   Will the Mortgagees-Banks claim that they are entitled to a credit for forgiving debts that do not exist, against their $25 Billion worth of obligations which include forgiveness of Mortgage debts?  They voluntarily assumed those obligations earlier this year when they agreed to their Mortgage Fraud Settlement with some States and the Federal Government.    See, for example, the post and links in it here on July 26, 2012, "BAD FAITH SETTLEMENT AGREEMENT: MORTGAGE SERVICERS, ATTORNEYS GENERAL, AND OBAMA ADMINISTRATION."

             If the Banks report their forgiveness of debts to the Internal Revenue Service, the burden will shift to the Homeowners to explain to the IRS why the Banks made a mistake in reporting this forgiveness of nonexistent debts.  Will the Banks seriously report forgiveness of these debts which do not exist, to the IRS?

            Readers of this blog are invited to EMail and write these questions to the Mortgagees-Banks.  Please take a moment to look up their addresses online and send them these simple questions.  They should have the answers. 

Please Read The Disclaimer.

Fair Dealing: The Law Already Got There. More is Needed.

    Much has been written about Municipal Bond Insurance.  That includes posts here and especially under the category of Bond Insurance which address the need for enforcement of duties of Good Faith and Fair Dealing in this arena.

    Now comes news that "fair-dealing rules" have been in place "for decades" in the municipal bond market.  "Rules requiring fairness in this market state that participants must not be deceptive, dishonest or unfair in their practices.  The regulations apply to the sale of municipal bonds to investors and to underwriters' interactions with issuers; fraud need not be alleged in a fair-dealing case."  Gretchen Morgenson, "Fair Game / Police Protection, Please, for Municipal Bonds" p. 1, col. 1 (New York Times Nat'l ed., "SundayBusiness" Section, Sunday, August 5, 2012).

    From recent news coverage it is clear that at least certain firms and individuals who make their money from Wall Street, have taken advantage of relatively less financially sophisticated school board members or water management district board members, for example.  Even so, the Securities and Exchange Commission seems to be overloaded with George W. Bush-era political appointees who still see their mission as doing nothing so that others can accuse the Federal Government of not acting.  The SEC has recently asked for more power to enforce regulations in the municipal bond market while ignoring the regulations that have existed for almost as long as the SEC itself.  This is perhaps an exaggeration, but only a slight one.

    This is an area deserving of research.  "So far, the commission's reticence to act on behalf of municipal issuers has left those issuers to take on Wall Street alone.  Few have done so."  Gretchen Morgenson, "Fair Game / Police Protection, Please, for Municipal Bonds" p. 1, col. 1 (New York Times Nat'l ed., "SundayBusiness" Section, Sunday, August 5, 2012).

    There does not seem to be a similar impediment to lawsuits involving allegedly failed advice to munis when they are investors rather than issuers.  The City of St. Petersburg is one example.  The City successfully sued for over $10 Million in a case involving alleged failure or unfair dealing in financial advice to the City on an investment.  See "Bad Faith Financial Services:  No Comparative Negligence in Lawsuit," posted on April 5, 2012.

    This area is worth taking time to research the law so that the law may be applied.

    It is worth your time, too.

 Please Read The Disclaimer.

    

    

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.

Bad Faith Financial Services: No Comparative Negligence in Lawsuit.

    The Verdict is in:  Federal Jury awards every penny St. Petersburg put on the board in Closing.

    Many cities claim that they lost money by relying on bad advice or, in some cases, allegedly relying on no advice, from the cities' financial advisers before the Great Collapse.  One of those cities among many is the City of St. Petersburg, Florida.

    The City sued because it allegedly lost money buying Lehman Brothers bonds after Lehman's financial condition began a death march.  The Defendants in the City's Federal lawsuit is the City's financial adviser:  Wachovia Global Securities, now owned by Wells Fargo.  According to the City's claims, the Defendant did not tell St. Petersburg that Lehman's financial condition  had begun rapidly deteriorating.  

    The Defendant defended on a reported contention that the City of St. Petersburg knew or should have known that Lehman bonds were a bad investment at the time.

    Regardless of what the Defendant told the City, or did not tell the City, their client.

    All of these contentions were previously posted here on March 27, 2012, "City Sues For Alleged Bad Faith Financial Services, $16 Million Damages".  (The amount of money reflected in the title of that post comes from a newspaper article which is linked in the post.  That amount is apparently the amount lost by the City as of the time the City filed ts lawsuit.)

    Now, the Verdict is in.  A Federal Jury awarded the City of St. Petersburg every penny it asked for: $10,387,500.00.  This represents the difference between what the City paid for the Lehman bonds, and what the Lehman bonds are worth now.  See Michael Van Slicker, "City of St. Petersburg Wins $10.4 Million Verdict Against Big Bank" (Tampa Bay Times Online, Tuesday, April 3, 2012).

    Two of the Jurors who were interviewed for the linked newspaper report, revealed that they were not happy with the conduct of the City's chief financial-investment official, who reportedly went ahead with the investments despite apparent knowledge at least that Lehman was in bad straits financially.  However, according to the Jurors, the Jury in this case concentrated on the conduct of the Defendants, which reportedly impressed them even more.

    As the Jurors saw it, the City's financial advisers breached their duties to advise the City about these and other risky financial investments.  "'But the evidence showed that Wachovia didn't do its fiduciary duty.'" Id., quoting the man whom the Jury elected as its Foreman.

    The City sued its financial advisers for alleged breach of contract, breach of alleged Fiduciary Duties, and negligence.  As a matter of law, a matter perhaps unknown to financial advisers at least before this Verdict, 'comparative negligence' is not a defense to claims other than negligence when, as the Jury found in this case, financial advisers breach the duties they assume when their offer to be paid in exchange for their financial advice are accepted.  When that happens, they owe duties to their new-found clients.  In this case, a Federal Jury found one more thing:  These Defendants breached their duties to the tune of every penny their client lost as a result, which the Jury awarded.

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.

City Sues for Alleged Bad Faith Financial Services, $16 Million Damages

    The Trial began on Monday in a Florida municipality's Federal lawsuit against its financial services "bank"/financial adviser.  The City of St. Petersburg has sued Wachovia Global Securities for failing to disclose the condition of Lehman Brothers to the City even as Wachovia allegedly advised St. Petersburg to invest in Lehman bonds and Lehman was going bankrupt.

    The bank reportedly counters that the City of St. Petersburg was fully aware of Lehman's condition, which Wachovia itself of course knew.  Wachovia Financial Services has since been acquired by Wells Fargo.

    As the result of a pretrial ruling in the case, the City of St. Petersburg will be allowed to put on evidence of similar circumstances resulting in losses to other cities.  For example, the City of Sarasota reportedly lost $40 Million in a similar investment in Lehman bonds apparently at or about the same time.

    The common thread in cities' litigation against their former financial advisers is known as "securities lending".  In essence, the cities leased bonds they held, or the right to receive income from them in the future, in exchange for cash payments now.  "The risk comes when the city makes an investment that loses money, which would then have to be repaid."  Michael Van Slicker, "St. Petersburg Seeks to Recover $15.8 Million in Lost Investments in Trial Monday" (Tampa Bay Times Online, Saturday, March 24, 2012).

    Who bears the risk of nondisclosure, on the one hand, or of the equivalent of assumption of the risk, on the other hand, is at issue in such lawsuits.

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.