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Crooked Neil Garfield Warns Consumers about Crooked Lawyers

Crooked attorney Neil Garfield, ever concerned about public exposure to crooked or incompetent attorneys, writes to readers of his Living Lies blog:

Warning: Conduct your Due Diligence on ANY Attorney you Hire

by Neil Garfield

Before you hire ANY attorney for a phone consultation, to conduct an analysis of your case, or retain them to represent you, please conduct your due diligence first.   A simple google search with their name will usually suffice.

In fact, before you hire Neil Garfield for a consultation, case analysis, or other legal matter I suggest you conduct your due-diligence like you would when hiring any professional.

Always use caution if the Bar has publicly reprimanded an attorney.

If you believe you have been a victim of an unethical Florida foreclosure attorney, please report your experience to the Florida Bar at: https://www.floridabar.org/public/acap/assistance/

Contact me at:

Neil Garfield | March 27, 2018 at 2:54 pm

In the same spirit of consumer advocacy, I decided to help crooked Neil Garfield spread the word about crooked lawyers, in this case Neil himself.  Here’s a little information on Neil:

http://www.jaxdailyrecord.com/showstory.php?Story_id=548048

JAX DAILY RECORD  MONDAY, AUG. 1, 2016 12:00 PM EST

Supreme Court disciplines 32 attorneys

The Florida Supreme Court disciplined 32 attorneys — disbarring six, revoking the licenses of two, suspending 16 and publicly reprimanding eight.

Two attorneys were also placed on probation and another was ordered to pay restitution.

The attorneys are: […]

  • Neil Franklin Garfield, Parkland, to be publicly reprimanded. (Admitted to practice: 1977) In at least four instances, Garfield accepted money to represent clients and failed to follow through. In one case, Garfield did not perform the work and, when asked for a refund, denied knowing the client. In other cases, he failed to communicate, charged excessive fees, failed to return refunds upon request and failed to timely respond to Bar inquiries.

 

Neil Garfield’s frivolous filings and bogus legal theories have already cost at least one client, Zdislaw Maslanka, a wad of attorney fees in an utterly frivolous action to get his house free even though he remained current in his mortgage payments.  As the docket entries below show, the Florida 4th District appellate panel affirmed the 17th Circuit’s dismissal of the case and ordered Maslanka to pay the attorney fees of the two mortgage creditors that he sued.

  • 4D14-3015-Zdzislaw E. Maslanka v. Wells Fargo Home Mortgage and Embrace Home Loans
05/12/2016 Affirmed ­ Per Curiam Affirmed  
05/12/2016 Order Granting Attorney Fees­Unconditionally ORDERED that the appellee Embrace Home Loans Inc.’s September 2, 2015 motion for attorney’s fees is granted. On remand, the trial court shall set the amount of the attorney’s fees to be awarded for this appellate case. If a motion for rehearing is filed in this court, then services rendered in connection with the filing of the motion, including, but not limited to, preparation of a responsive pleading, shall be taken into account in computing the amount of the fee
05/12/2016 Order Granting Attorney Fees­Unconditionally ORDERED that the appellee Wells Fargo Home Mortgage’s September 3, 2015 motion for attorneys’ fees is granted. On remand, the trial court shall set the amount of the attorneys’ fees to be awarded for this appellate case. If a motion for rehearing is filed in this court, then services rendered in connection with the filing of the motion, including, but not limited to, preparation of a responsive pleading, shall be taken into account in computing the amount of the fee.

Last but not least, here is the text of an 8-page report that Neil Garfield charged Vincent Newman THOUSANDS of dollars for, advising a foreclosure defense and TILA rescission strategy.  Newman obtained a pick-a-pay loan in 2010 to purchase a home, then defaulted.  Garfield idiotically suggested mailing a notice of TILA rescission in 2016, and then suing to enforce it, without regard to the fact that the TILA statute of repose of 3 years for conditional rescission had already tolled, and the creditor had not violated TILA.  Garfield thereby illustrated his delusional misunderstanding of conditional TILA rescission which the law allows only for non-purchase-money loans like refinances and HELOCS in which the creditor failed to give the borrower required disclosures of the right to cancel and the cost of the loan not more than $35 understated. No such TILA violation occurred in Newman’s case.  Thus, Neil Garfield’s incompetent advice, had Newman heeded it, would have caused Newman expense and  embarrassment through a frivolous, failing TILA rescission effort.

———————-  Garfield’s Expensive Report to Newman —————–

This is a review and report and not a definitive statement of opinion on the entire case strategy.
Since the property is located in Florida and Mr. Garfield is licensed in Florida, he is qualified to
give both expert opinions and legal opinions.

MEMORANDUM
TO: File
FROM:

RE: Vincent Newman and his Wife
Phone No.: 954-554-6487
Email Address: vnewmansr@yahoo.com

JUDGMENT ENTERED 2011,
SALE DATE CANCELED MULTIPLE TIMES
RESCISSION SUGGESTED
FEDERAL ACTION TO ENJOIN USE OF NOTE AND MORTGAGE SUGGESTED

1. The address of the property in question is 6401 Garfield Street, Hollywood, Florida, 33024 in Broward County.

2. The property is in foreclosure. As of December 29, 2015 Mr. Newman reports that he hired an attorney, started modification and is not current on payments.

3. He has requested a review and commentary in connection with his property and his loan.

4. He has already filed a petition for relief in bankruptcy court under Chapter 7 and apparently converted to Chapter 13. Motion to lift stay was filed and presumably granted. The name of his attorney in the State Court action, Case No. CACE10041220 is Evan Plotka, in the 17 th Judicial Circuit for Broward County [Florida].

5. Mr. Newman reports that in 2010 they were 3 months behind in their payments. Acting through a HUD counselor there was apparently an agreement that was reached in September 2010 where they would catch up on the three payments. According to Mr. Newman Wells Fargo broke the agreement, refused to discuss the matter any further and Mr. Newman and his wife apparently were served with a summons and compliant that October 2010. If they have correspondence proving the existence of the deal, then this would be a point to raise in defense as a possible violation of either estoppel 1 or dual tracking, which was not passed until after the agreement.

1 If the agreement can be proven (they will most likely deny it), then even without the Dodd-Frank prohibition against dual tracking, the homeowners reasonably relied upon the existence of the agreement and made payments that were accepted. Wells Fargo has a history of accepting payments under oral modifications and then abandoning the agreement without accounting for the payments — which often makes the default letter wrong as to the missing payments.

6. Disclosures as to the true funding of the origination of the loan, the acquisition of the debt (as opposed to the acquisition of the paper) and the true party in interest who could be plaintiff are all absent, which is the same thing that I have seen as an expert witness and as an attorney many times with Wells Fargo. Many entities, like World Savings and Wachovia boasted they were funding their own loans. This was nearly never true. The loan papers may have been originated back in 2010 but the disclosure of the money trail has never been made.

7. Mr. Newman answered the summons and complaint without the help of legal counsel and served interrogatories on the plaintiff that he says were never answered.

8. He has apparently been through several attorneys that were merely kicking the can down the road to buy more time without making mortgage payments but of course having Mr. Newman make monthly payments to the attorney.

9. According to the registration statement submitted by Mr. Newman the original loan was with World Savings Mortgage which merged into Wachovia and then Wells Fargo. I think what he meant was World Savings Bank which was acquired by Wachovia Bank which in turn was acquired by Wells Fargo Bank. The case was filed as Wells Fargo Bank as plaintiff. From prior experience we know that this is probably a ruse intended to cover up the fact that they don’t know who the creditor is and they are hoping that a judge will simply take their word for it.

10. Mr. Newman has provided a docket from the Clerk of the Circuit Court which indicates that the property has been set for sale several times. This would indicate in turn that a final judgment of foreclosure was entered. However I do not see on the docket the description of an order granting summary judgment or a final judgment of foreclosure entered in favor of Wells Fargo. I presume that such a judgment exists or the sale would never have been scheduled.

11. As of December 30, 2015 Wells Fargo is showing a balance due of $93,979.25, with an unpaid principle balance of $200,338.10, an escrow balance of $31,855.05, carrying an interest rate of 6.5 percent with a maturity date in July 2049.

12. Based upon my knowledge of the parties involved, and specifically in this case Loan No. 0483028569 2 , I believe that the loan is in fact claimed by a trust which in fact does not own it. The loan was in my opinion most likely never funded by World Savings Bank, Wachovia or Wells Fargo. It is my opinion that none of those entities paid for either the origination or the acquisition of the loan and that any documents to the contrary are fabricated and most likely forged. The system at Wells Fargo if this case actually goes to trial at some point will show that probably Fanny Mae or Freddie Mac was the “investor” from the start. However, since the government sponsored entities generally function in only two areas 3 , it seems unlikely, to say the least, that the investor would be correctly identified in the Wells Fargo system that they would use at trial unless they have changed their method of fabricating business records.

2 Client advises that the loan number changed recently. The reasons for this change should be investigated.

3 The statutory authority of the GSE’s (Fannie and Freddie) allow for them to operate as guarantors and/or Master Trustees of REMIC Trusts who were intended to own the debt, note and mortgage. The “hidden” REMIC Trusts operate the same as private label and publicly registered REMIC Trusts. And they suffer from the same defects — the money from investors never made it into any account owned by the Trust or the Trustee, which means that the Trust could not possibly have paid for loans. The Trust would be an inactive trust devoid of any business, operations, assets, liabilities, income or expenses.

13. For reasons that I will discuss below, it is my opinion that the homeowners in this case should send a notice of rescission and we will discuss whether that notice should be recorded. In addition there should be consideration of a federal lawsuit seeking to enforce the rescission and seeking an injunction to prevent Wells Fargo from using the note and mortgage against the Newmans. I would further add that in my opinion from my review of the documents that were provided by the client there is a strong likelihood of success using standard foreclosure defense strategies.

14. In the court file is a notice of action which states that Vincent Newman and Imelda Newman both stated as avoiding service at the address of 6401 Garfield Street, Hollywood, Florida, 33024. This indicates to me that the service in 2010 was a “drive by” service in which no real effort was made to find or serve Mr. or Mrs. Newman.

15. This in turn leads me to believe that this was typical foreclosure mill actions and that Wells Fargo still has not fulfilled its obligation to review the business records to determine the ownership or balance of the loan. Or to put it differently, they probably did know about the problems with ownership and balance of the loan and wanted the foreclosure sale anyway. Based upon my preliminary review it would appear that Wells Fargo Bank made payments to the certificate holders of a trust under a category known mainly in the industry as “servicer advances.”

16. Based upon their statement I would say that their servicer advances totaled more than $90,000.00. The longer the case goes the higher is the value of their claim to recover their “servicer advances.” However, those advances, while made, came from a comingled account consisting entirely of investor money. Therefore there is no actual action for recovery of the servicer advances.
 
17. The case was apparently filed in January 2011. Or if the case was not filed at that time then additional paperwork was added to the file at that point. Since the case number refers to the year 2010 I am presuming that they filed a skeleton case in order to have the case filed before the end of the year.

18. The complaint is interesting in that, as usual, Wells Fargo does not allege that it is the owner of the debt. It alleges that it is the owner and holder of the note and mortgage. And of course it alleges that a default exists but it does not state the party to whom the money is owed nor the statement of ultimate facts upon which the court could arrive at the conclusion that the actual creditor has suffered a default or loss as a result of the payments being stopped.

19. The alleged loan, which in my opinion was never funded by World Savings Bank, was a reverse amortization (pick a payment) loan. This loan was probably sold in one form or another 20 or 30 times. The capital from the sale of the loans probably funded many other loans.

20. There is a request filed in January 2011 for the original promissory note, and the contact information for the current holder of the note, which was never answered. This might have some relevancy to a claim contesting jurisdiction of the court.

21. While the docket that was sent to me by Mr. Newman did not appear to contain the final judgment for the plaintiff, the documents that he sent and which were uploaded contain a final judgment for plaintiff. The final judgment apparently was a summary judgment in favor of the plaintiff on November 17, 2011 at 1:30 p.m.

22. As expected, the documents in the possession of Mr. Newman contain a mortgage servicing transfer disclosure. Hence we have evidence of the transfer of servicing rights but not transfer of ownership of the debt. 4 In my opinion this corroborates my conclusion that the loan was subject to claims of securitization starting at a time before consummation could have ever occurred. In my opinion the loan was table funded, which means that the actual source of funds for the loan was another party to whom the documents would be “assigned” immediately after, or even before the apparent “closing.”

4 This is especially relevant to the issue of whether the alleged loan is subject to claims (probably false claims) of securitization. Each of the alleged entities in the “Chain” had robust servicing capacities. The transfers of servicing duties makes no sense and explains nothing except that the usual pattern of musical chairs was being employed to confuse the issues surrounding “holder” of the note etc. The presumptions that are ordinarily used for a holder of a note should not be allowed, in my opinion, because of the history of flagrant violations by Wells Fargo and its predecessors. Producing evidence of a pattern of conduct of fabrication, forgery, robo-signing etc should enable the attorney to argue that the presumptions should not apply, thus requiring Wells Fargo to prove the money trial and ownership of the debt, which they will never do.

23. In my opinion the mortgage document was improper in that it failed to disclose a hidden balloon payment. By having negative amortization or reverse amortization, the balance that is owed as principal continues to increase. Under the terms of the mortgage when it reaches 115 percent of the original loan principal, the loan automatically reverts to standard amortization which is what caused so many people, including the Newmans, to default. Borrowers were seduced into taking these highly complex loan products under the supposition that they would later be able to refinance again, taking “equity” out of the home and providing them with the resources to make the payments. The effect of these loans is to cause a balloon payment at the end of a short period of time. Thus the balloon was not disclosed and the term of the loan was not disclosed because the full amortization of the loan was beyond the financial capacity of the “borrower.”

24. In my opinion the assertion by Wells Fargo that it is the investor, the creditor, the lender, or the successor lender is and always has been false. It appears that no sale of the property has taken place and that none is scheduled based upon information I received from Mr. Newman on December 29, 2015 in a telephone consultation. Even though a judgment has been entered, it is my opinion that the rights and obligations of the parties are still defined by the alleged note and the alleged mortgage. Hence the sending of a notice of rescission and the recording of a notice of interest in real property under Florida Statute 712.05 would be appropriate as a strategy. I also think that an action filed in federal court to enjoin Wells Fargo from the use of the note and mortgage would be appropriate. The basis for the action would be, after notice of rescission had been sent, and presumably after the 20 days from receipt of the notice of rescission had expired, the loan contract was cancelled, the note and mortgage became void as of the date of mailing of the notice of rescission.

25. There is also another strategy of alleging a fraud upon the court, but I don’t think that would get much traction.

26. What I think can get some traction is a lawsuit against Wells Fargo for having presented the false evidence to the court. The difference is that you are not accusing the court of wrongdoing, you are accusing Wells Fargo of wrongdoing and taking advantages. I believe that considering the history that the Newmans report in their narrative that substantial compensatory damages might be awarded, but that punitive damages do not appear to be likely at this time. That is not to say that punitive damages will not be awarded. As time goes on, more and more courts are becoming aware of the fact that the type of foreclosure system has been a sham. Each time another judgment for settlement is reached it becomes apparent that the banks are continuing to engage in the same behavior and simply paying fines for it as a cost of doing business.

27. As Mr. Newman knows, I do not accept many engagements to directly represent homeowners in these actions. I think that in this case I would be willing to accept the engagement, along with co-counsel, Patrick Giunta. I would have to review this file with him to confirm, but the likelihood is that the initial retainer would be in excess of $5,000.00 and that the monthly payment of our fee would be at least $2,000.00. There would also be court costs and other expenses amounting to over $1,000.00.

28. Another option is to seek out another attorney who is willing to take on the case and use my services as litigation support. The hourly rate I charge for all matters, whether as attorney or expert witness is $650.00. The hourly rate of most other attorneys is significantly below that. The actual amount of work required from me if I am in the position of litigation support would be vastly reduced and thus the expense of having me work on the Newman file would be significantly reduced, enabling the Newmans to hire counsel who is receptive to me providing litigation support.

29. In all engagements, in which I am the attorney, or providing litigation support, there is also a contingency fee that varies from 20 percent to 35 percent of any amount paid in hand to the homeowner. Specifically this means that if the case is settled or resolved in a manner in which title to the property becomes unencumbered, the contingency fee would not apply to the house itself, but only to other damages that were paid in connection with the settlement or collection of a judgment.

SpeakWrite
www.speakwrite.com
Job Number: 16039-001
Custom Filename: Newman
Date: 02/08/2016
Billed Words: 2069

WordPress.com

Proof that YOU can AFFORD a Mortgage Exam

Scammers of every stripe seem to crawl the nation looking for gullible home loan borrowers facing foreclosure, in order to sell them a worthless mortgage rescue service for gargantuan fees.

And when those borrowers finally learn about Mortgage Attack, they have the gall to whine that they don’t have the money to pay for the comprehensive mortgage examination they should have bought at the beginning of their trouble.

Why should borrowers invest in a mortgage exam?

Borrowers need the mortgage exam to prove injury and launch a Mortgage Attack against those who hurt them.   Injurious parties can include the lender, servicer, appraiser, mortgage broker, realtor, closer, title company, lawyer, and any others connected to your loan transaction.  Borrowers need the mortgage exam service because they lack the knowledge, experience, and skill to do it themselves.

And they need the exam because Mortgage Attack constitutes the ONLY demonstrably RELIABLE METHOD borrowers can use to collect monetary damages, set-offs from their debt, a loan balance reduction at favorable terms, or even the house free and clear.

You had the money to pay the scammers selling securitization audits, loan audits, and other useless services like the scams in the below press releases.  So DON’T tell me you don’t have the money for a proper mortgage exam that provides you with the proof that will convince a court to order a damages award to you for injuries you suffered.

Otherwise, without the mortgage exam integral to  the Mortgage Attack method, YOU WILL LOSE THE HOUSE, as you should, for breaching your note and failing to challenge the validity of the loan.

Here’s the proof that YOU have the money for the comprehensive mortgage examination that the Mortgage Attack  Maven recommends.  AND, here’s the proof that people like you have the money to pay upward of $10,000 or more to SCAMMERS.

Remember that a DOZEN such scammers get away with their crimes for every scammer the government catches and prosecutes.  And people like you emptied their wallets for them.

So, DON’T TELL me that you can’t afford a mortgage exam.  Go GET the money and order your mortgage examination today.

PROOF 1:  scammer imprisoned for bilking 400 mortgage victims out of $15,000 each.

Department of Justice
U.S. Attorney’s Office
Central District of California

FOR IMMEDIATE RELEASE
Monday, October 5, 2015

Whittier Woman Sentenced to Nearly 6 Years in Prison for Having Duped 400 Victim Homeowners – Many Spanish Speakers – of Nearly $4 Million with False Promises of Eliminating Their Mortgages

LOS ANGELES—A Whittier woman was sentenced today to nearly 6 years in prison for her lead role in a scheme that falsely promised to eliminate mortgage debts for approximately 400 distressed homeowners who each paid a $15,000 fee, totaling nearly $4 million in victim payments. Instead of working on behalf of the homeowners, the woman simply sent worthless “Sovereign Citizen” paperwork to lenders—paperwork that did nothing to affect the mortgage of a single homeowner.

Maria Marcela Gonzalez, 45, was sentenced by Judge Stephen V. Wilson in United States District Court in Los Angeles, for two counts of making a false bankruptcy declaration.  In rejecting her request for a probationary sentence and imposing the 70-month sentence, Judge Wilson said that the defendant’s actions were “callous and in gross disregard of the law.”

Gonzalez, who pled guilty in July of this year, started the Crown Point Education Inc. scheme in early 2010 and operated from offices in Montebello.  She admitted in her plea agreement that she spoke at seminars to recruit distressed homeowners and salespersons in the Crown Point program and ran the day-to-day operations of the scheme. Many of the victims were primarily or exclusively Spanish speakers.

In her plea agreement, Gonzalez admitted that she and others promised distressed homeowners at these seminars that, in exchange for fees that were generally $15,000 per property, Crown Point would eliminate the homeowners’ mortgages within six to eight months through a secret process that involved sending packets of documents to lenders. Even though she told victims that she could eliminate their mortgage woes, Gonzalez admitted in her plea agreement that the process had never been successful. Gonzalez failed to tell distressed homeowners that earlier Crown Point clients had lost their houses to foreclosure and been evicted from their houses.

In the plea agreement, Gonzalez admitted that she worked with co-schemer Jude Lopez, who was also convicted and sentenced to a probationary term, and Ernesto Diaz, who was charged but failed to appear and is currently a fugitive.  Lopez admitted in his plea agreement that he filed bankruptcy documents in the names of Crown Point clients to delay foreclosure and eviction. Diaz admitted in his plea agreement that Crown Point filed many bankruptcy documents without the knowledge of the company’s clients and that signatures of debtors and notaries were forged on many documents filed with the bankruptcy court.

The claims made to distressed homeowners were based on discredited Sovereign Citizen claims that mortgages are invalid because the banks did not actually lend the money used to fund mortgages, and the notes were securitized.

The case against Gonzalez, Diaz, and Lopez was conducted by the Federal Bureau of Investigation.

PROOF 2:  Scammer indicted for bilking 13 mortgage victims out of up to $8000 each for mortgage amelioration service.

PRESS RELEASE

Internal Revenue Service – Criminal Investigation
Cincinnati Field Office
Special Agent in Charge Kathy A. Enstrom

Date: Wednesday, September 30, 2015
Contact: Craig Casserly
IRS – Criminal Investigation
401 N. Front Street
Columbus, Ohio 43215
(614) 744-3130
Craig.casserly@ci.irs.gov
CI Release #: CINFO-2015-35

COLUMBUS BUSINESSMAN INDICTED IN “MORTGAGE AMELIORATION” INVESTMENT FRAUD SCHEME

COLUMBUS, OHIO — A federal grand jury here has indicted Gary Jones, 52, of Columbus, Ohio, charging him with thirteen counts of mail fraud, eight counts of money laundering, and four counts of willfully failing to file a federal income tax return with the Internal Revenue Service (IRS).

Carter M. Stewart, United States Attorney for the Southern District of Ohio, and Kathy A. Enstrom, Special Agent in Charge, Internal Revenue Service Criminal Investigation, Cincinnati Field Office, announced the indictment returned today.

According to the indictment, between January 2010 and March 2012, Jones was the managing member of 3ARCK Capital Group, LLC, also d/b/a Three Arck Capital Group, LLC (hereinafter “3Arck”). Jones is alleged to have been the sole authorized signatory on several bank accounts for the benefit of 3Arck, which had a banking relationship with Fifth Third Bank, PNC Bank, and J.P. Morgan Chase Bank. In addition, Jones allegedly partnered with an individual in an investment company known as North American Realty Services Corporation, LLC (hereinafter “NARSCOR”).

It has been alleged that between May 2009 and September 2012, Jones, by himself, through his position at 3Arck, and through his partnership with NARSCOR, raised funds under false pretenses through a process called “mortgage amelioration.” Through “mortgage amelioration,” Jones represented that he could eliminate or modify mortgages held by banks, based on theories that the mortgages were invalid or illegal because the banks had no right to foreclose on the loans. Jones represented that, after a long process, the banks would acknowledge that the mortgages and/or foreclosures were not legitimate.

Jones allegedly represented that he could present claims to the banks and the courts on behalf of property owners, and that he could either force the banks to return properties that had already been repossessed through foreclosures, or that he could get restitution for property owners upon whom the foreclosures had occurred. Jones allegedly represented that the property owners could then either have their mortgages completely eliminated, or at the very least, modified with lower payments and a better term. In addition, Jones allegedly represented that those who had already lost their homes would be rewarded with monetary compensation or the return of bank-owned properties.

It has further been alleged that the property owners or investors could place a property into the “mortgage amelioration” program by paying an application fee of between $3,995 and $7,995. The fee was to be held in an escrow account and was represented to be 100% refundable, whether the process was successful or unsuccessful.

Allegedly, Jones represented that the only expenditures out of the escrow account were to be for incidentals necessary for filings with the courts and for the creation of a trust. Even if expenditures were made from funds in the escrow account, the fee was to be returned in full to the investor at the end of the process. Once the trust was created, Jones represented that he would “ameliorate” the mortgages on the properties through communications with the banks and the courts. After the mortgage had been “ameliorated,” the property owner, allegedly, could either buy the property back from the trust or walk away from the property.

It has been alleged that the property owners or investors either mailed or e-mailed their application and other documentation. The application fees were paid by mailing checks or by wire transfer to Jones, 3Arck, Jones’s partner at NARSCOR, or to NARSCOR. Jones represented to victims that he had completed numerous “mortgage amelioration” deals and had a 100% success rate; however, it has been alleged that no mortgages were ever successfully eliminated or reduced through the program. Also, despite representations that the refundable application fees would be kept in escrow accounts, it has been alleged that the money was deposited into bank accounts controlled by Jones and no application fees were ever refunded; rather, Jones used the homeowners’ and investors’ funds for personal use.

It has been alleged that Jones failed to file a federal income tax return with the IRS for the 2009-2012 income tax years, despite earning gross income in the amount of $280,340 in 2009; $1,090,304.54 in 2010; $880,791.12 in 2011; and $146,554.50 in 2012.

Mail fraud carries a maximum penalty of 20 years in prison and a fine of up to $250,000. Money laundering carries a maximum penalty of 10 years in prison and a fine of up to $250,000. Failing to file an income tax return with the IRS carries a maximum penalty of 1 year in prison and a fine of up to $100,000.

“Mr. Jones’s actions not only caused negative ramifications to those financially connected to him, but also the honest taxpayer when he committed significant tax fraud violations as detailed in the indictment,” said Kathy A. Enstrom, Special Agent in Charges, IRS Criminal Investigation, Cincinnati Field Office. “Honest and law abiding citizens are fed up with the likes of those who use deceit and fraud to line their pockets with other people’s money as well as skirt their tax obligations.”

This case is being prosecuted by Assistant United States Attorney Jessica H. Kim and was investigated by special agents of IRS-Criminal Investigation.

An indictment merely contains allegations, and the defendant is presumed innocent unless proven guilty in a court of law.

# # #

PROOF 3:  USDC fines and sentences perps for $7 million Loan Mod Scam

Department of Justice
U.S. Attorney’s Office
Central District of California

FOR IMMEDIATE RELEASE
Monday, December 7, 2015

Operator of Inland Empire Loan Modification Scam that Targeted Distressed Homeowners Sentenced to 18 Years in Federal Prison

RIVERSIDE, California – The founder and co-owner of a Rancho Cucamonga business was sentenced today to 18 years in federal prison for orchestrating a scheme that offered bogus loan modification programs to thousands of financially distressed homeowners who lost more than $7 million when they paid for services that were never provided.

Andrea Ramirez, 47, of Rancho Cucamonga, was sentenced today by United States District Judge Virginia A. Phillips, who also ordered the defendant to pay $6,764,743 in restitution.

Ramirez was the organizer of a telemarketing operation known under a series of names – including 21st Century Legal Services, Inc. – that bilked more than 4,000 homeowners across the nation, many of whom lost their homes to foreclosure. Ramirez was sentenced today after pleading guilty to one count of conspiracy to commit mail fraud and wire fraud.

“This fraudulent company purposely targeted homeowners who were extremely vulnerable because they were facing foreclosure,” said United States Attorney Eileen M. Decker. “Ramirez and her co-defendants made false promises to desperate homeowners, often took the last of their money and then abandoned them. Her contempt for her victims will put her in federal prison for nearly two decades.”

Previously in this case, the other co-owner of 21st Century – Christopher Paul George, 45, of Rancho Cucamonga, was sentenced by Judge Phillips to 20 years in federal prison.

A total of 11 defendants linked to 21st Century have been convicted of federal fraud charges as a result of an investigation conducted by the Federal Bureau of Investigation; IRS – Criminal Investigation; the United States Postal Inspection Service; the Office of the Special Inspector General for the Troubled Asset Relief Program (SIGTARP); and the Federal Housing Finance Agency, Office of Inspector General.

“As the ringleader in a scheme to dupe thousands of distressed homeowners out of their last dollar at the height of the financial crisis, Andrea Ramirez earned the next 18 years in federal prison, which she should use to reflect on her victims,” said Christy Goldsmith Romero, Special Inspector General for the Troubled Asset Relief Program (SIGTARP).

During a 15-month period that began in the middle of 2008, Ramirez operated 21st Century, which defrauded financially distressed homeowners by making false promises and guarantees regarding 21stCentury’s ability to negotiate loan modifications for homeowners. Employees of 21st Century made numerous misrepresentations to victims during the course of the scheme, including falsely telling victims that 21st Century was operating a loan modification program sponsored by the United States government. Victims were generally instructed to stop communicating with their mortgage lenders and to cease making their mortgage payments.

21st Century employees contacted distressed homeowners through cold calls, newspaper ads and mailings. The company also controlled websites that advertised loan modification services. Once they contacted the distressed homeowners, 21st Century employees often falsely told clients that the company was operating through a federal government program, that they would be able to obtain new mortgages with specific interest rates and reduced payments, and that attorneys would negotiate loan modifications with their lenders. 21st Century employees regularly instructed financially distressed homeowners to cease making mortgage payments to their lenders and to cut off all contact with their lenders because they were being represented by 21st Century. On some occasions, 21stCentury employees told homeowners that 21st Century was using the fees paid by the homeowner to make mortgage payments, when Ramirez, George and their co-defendants simply were pocketing the homeowners’ money.

After federal authorities executed a search warrant at 21st Century, Ramirez relocated 21st Century’s offices, renamed the company and made it appear it was operating out of Las Vegas, Nevada.

“Fraudulent mortgage fraud schemes affect consumers at the most basic level, jeopardizing their ability to retain ownership of their homes,” said Robert Wemyss, Inspector in Charge of the U.S. Postal Inspection Service – Los Angeles Division. “The U.S. Postal Inspection Service will continue to investigate these crimes to protect consumers and our nation’s mail system from being used for illegal or dangerous purposes.”

Special Agent in Charge Erick Martinez of IRS-Criminal Investigation of the Los Angeles Field Office stated: “Ms. Ramirez took advantage of unsuspecting homeowners hoping to keep a roof over their heads.  Hopefully she will now understand that her irresponsible actions have real consequences.”

In addition to Ramirez and George, nine other defendants have been convicted for their roles in the 21st Century scam. They are:

•           Crystal Taiwana Buck, 40, of Long Beach, who persuaded numerous victims to pay fees to 21stCentury, was sentenced to five years in prison;

•           Albert DiRoberto, 62, of Fullerton, who handled both sales and marketing – which included making a commercial for 21st Century – was sentenced to five years in prison;

•           Yadira Garcia Padilla, 38, of Rancho Cucamonga – who, among other things, posted bogus positive reviews about 21st Century on the Internet – was sentenced to four years in prison;

•           Michael Bruce Bates, of Moreno Valley, was sentenced to one year and one day in prison;

•           Michael Lewis Parker, of Pomona, was sentenced to six years in prison;

•           Catalina Deleon, of Glendora, is scheduled to be sentenced on December 14;

•           Hamid Reza Shalviri, of Montebello, is scheduled to be sentenced on Thursday, December 10;

•           Mindy Sue Holt, of San Bernardino, was sentenced to 18 months in prison; and

•           Iris Melissa Pelayo, of Upland, was sentenced to four years in prison.

15-144
USAO – California, Central
Updated December 7, 2015
# # #

PROOF 4:  Scammers Bilk 54 Mortgage Rescue victims out of $220,000

Department of Justice
U.S. Attorney’s Office
Northern District of Illinois

FOR IMMEDIATE RELEASE
Tuesday, December 17, 2013

Three Defendants Indicted For Allegedly Swindling 54 Victims Of $220,000 In Fees In Mortgage “Rescue” Fraud Scheme

CHICAGO ― Three defendants who operated Washington National Trust, which was not licensed in Illinois as either a trust or a mortgage company, are facing federal fraud charges for allegedly swindling approximately $220,000 from at least 54 homeowners after falsely promising to save their homes from foreclosure and lower their monthly mortgage payments. The alleged mortgage “rescue” fraud scheme primarily preyed upon Hispanic victims in and around Aurora since late 2011.

One defendant, CARLOS RAYAS, 39, of Aurora, whose loan originator license was revoked by state regulators, was arrested today. He pleaded not guilty before U.S. Magistrate Judge Sheila Finnegan and was released on his own recognizance. A status hearing was set for Jan. 10 in U.S. District Court.

Arrest warrants were issued for MELVIN T. BELL, 37, also known as “Alex Crown,” “Minister Bey,” “Sovereign King Bey,” “King Bey,” and “S.K. Bey,” and MONICA HERNANDEZ, 43, Rayas’ cousin and a former licensed real estate broker. Both Bell and Hernandez were last known to reside in Oswego.

Bell and Hernandez were each charged with four counts of mail fraud, and Rayas was charged with two counts of mail fraud, in an indictment that was returned last week by a federal grand jury and unsealed today. The indictment also seeks forfeiture of approximately $220,000.

According to the indictment, the defendants marketed the official-sounding Washington National Trust as a business providing a financial assistance program for homeowners that was operated and controlled by wealthy Native Americans and was exempt from state and federal laws. In exchange for fees ranging between $5,000 and $10,000 per property, the defendants claimed that Washington National Trust would lower the homeowners’ existing mortgage payments by half and defeat any foreclosure. All three defendants knew, however, that Washington National Trust was not licensed to conduct loan originations and modifications in Illinois and could not lower mortgage payments or defeat foreclosure.

Bell, Hernandez, and Rayas allegedly falsely promised that Washington National Trust would pay off and acquire homeowners’ mortgages, and once that happened, the homeowners would owe only half the original mortgage to Washington National Trust, due over five years and free of any interest and property taxes. To effect this so-called “mortgage rescue,” the defendants had homeowners sign documents and deeds purportedly appointing Washington National Trust as trustee and transferring title of their homes to the business, the indictment alleges. As part of the scheme, the defendants recorded fraudulent documents and deeds in Kane, Kendall and other counties to delay foreclosure and to make it appear that their business was the homeowners’ trustee, the charges add.

The indictment also alleges that the defendants falsely promised that the fees paid by homeowners would go toward reducing their principal balance after Washington National Trust acquired the loan from the lender. Instead, Bell and Hernandez used the fees to pay for marketing and operating the business, including making payments to Rayas and others who referred homeowners to them, as well as for various personal expenses, including meals, travel, and merchandise.

All three defendants allegedly concealed from homeowners that the Kane County Circuit Court had issued orders in September and October 2012 barring Washington National Trust from further filing and recording deeds. They also allegedly concealed that the Illinois Department of Financial and Professional Regulation had issued orders in December 2012 and February 2013, first, to Washington National Trust to stop using the word “trust” and, later, to all three defendants to stop engaging in unlawful residential mortgage activity.

The charges were announced by Zachary T. Fardon, United States Attorney for the Northern District of Illinois, and Tony Gómez, Inspector-in-Charge of the U.S. Postal Inspection Service in Chicago. The Illinois State Police also participated in the investigation.

The government is being represented by Assistant U.S. Attorney Jessica Romero.

Each count of mail fraud carries a maximum penalty of 20 years in prison and a $250,000 fine, or an alternative fine totaling twice the gross gain or twice the loss, whichever is greater, and restitution is mandatory. If convicted, the Court must impose a reasonable sentence under federal sentencing statutes and the advisory United States Sentencing Guidelines.

An indictment contains only charges and is not evidence of guilt. The defendants are presumed innocent and are entitled to a fair trial at which the government has the burden of proving guilt beyond a reasonable doubt.

Indictment

USAO – Illinois, Northern
Updated July 27, 2015
# # #

PROOF 5:  Mortgage Rescue scammers give up $400,000 in compensation for cheating borrowers

A.G. Schneiderman Reaches $400,000 Settlement With Alleged Participants In Mortgage Rescue Scam That Stole Deeds From Long Island Homeowners

Sale-Leaseback Fraud, Perpetrated At Height of Housing Crash on Long Island, Cheated 14 Families Out Of Their Homes’ Deeds and Equity

Settlements Will Return $400,000 To Families Cheated By Scam; Office of the Attorney General Also Working To Return Stolen Deeds To Homeowners

Schneiderman: This Shameful Scam Re-Victimized Families Already Suffering From The Collapse Of The Housing Market

NEW YORK – Attorney General Eric T. Schneiderman today announced that he had reached settlement agreements with a disbarred attorney, an attorney, and a mortgage broker, who along with others allegedly operated a mortgage foreclosure rescue scam on Long Island that robbed 14 Long Island homeowners out of their homes’ deeds and equity. The mortgage foreclosure rescue scam involved multiple alleged partners: Empire Property Solutions and its principals, John Rutigliano and Kenneth Kiefer, located in Medford and Bethpage, NY; Zornberg & Hirsch law firm and its married principals, disbarred attorney Barry Zornberg and Nanci Hirsch, located in Hauppauge, NY; H&Z Abstract, a title company owned by Hirsch, located in Hauppauge, NY; Cory Covert, an attorney licensed to practice in New York, located in Hauppauge, NY; and mortgage broker Leonie Neufville (d/b/a Neufville Mortgage, located in Baldwin, NY).

Under the settlements, Barry Zornberg agreed to pay $340,000; Cory Covert agreed to pay $67,500.00; and Leonie Neufville agreed to pay $10,000.00 and accept a five-year ban on acting as a broker. The Attorney General has received a default judgment against Rutigliano and Kiefer, which will be converted into a money judgment. All of these funds will be used to compensate victims of the “sale-leaseback” fraud, which was perpetrated at the height of the housing crash on Long Island.

“This shameful scam re-victimized families already suffering from the collapse of the housing market,” said Attorney General Schneiderman. “My office has the resources to connect families in danger of foreclosure with qualified housing counselors and lawyers. We’ve already helped more than 50,000 families across the state, but our work will not end until we’ve guaranteed that every family in need can get the help they deserve.”

Under this mortgage rescue scam, Empire Property Solutions advertised in local papers, offering services to help families save their homes from foreclosure by refinancing their mortgages and repairing their credit scores. The company’s principals, Rutigliano and Kiefer, encouraged homeowners to turn over the titles to them through “sale-leaseback” agreements. Homeowners were told they could stay in the properties, pay rent, build up their credit, and then, after a year, that title in the home would revert back to them. But the Attorney General’s investigation found that Rutigliano and Kiefer failed to make good on their promises to use the homeowners’ payments to pay down their mortgages. In the end, the homeowners faced foreclosure and eviction.

The attorneys represented buyers, sellers, and banks at various closings of these sale-leaseback transactions, which took place at the office of Zornberg & Hirsch. But the attorneys allegedly failed to represent the interests of the homeowners, and were instead integral to inducing them to enter into the fraudulent transactions with Empire Property Solutions. As alleged, the scam also relied on the participation of a mortgage broker, Leonie Neufville, who prepared loan applications that were integral to the effort to fraudulently obtain new mortgages.

After filing a civil complaint, Attorney General Schneiderman reached multiple settlements that will return money to the victims of this fraudulent mortgage rescue scheme.

The settlement with Zornberg, Nanci Hirsch, H&Z Abstact, and Zornberg & Hirsch law firm requires Zornberg to pay a total of $340,000. The settlement with the other attorney, Cory Covert, requires him to pay $67,500. The settlement with the mortgage broker, Leonie Neufville, bars her from practicing in the real estate industry for five years and requires her to pay $10,000.

Attorney General Schneiderman has also received a default judgment against Rutigliano and Kiefer, the principals of Empire Principal Solutions. Since Rutigliano has passed away, his estate is in probate, and the Attorney General is working to convert the default judgment against Rutigliano and Kiefer into a money judgment.

The Office of the Attorney General (OAG) is working with several of the victims to return their deeds to their rightful ownership. OAG is also actively helping another family purchase a new home with the restitution they will receive from the settlements.

One of the homeowners who will get her deed back is Rosalie Thomas, a licensed nurse practitioner from Elmont, NY. After receiving a foreclosure notice in 2006, Thomas called Empire Property Solutions for help. Empire Property Solutions claimed Thomas could avoid foreclosure by signing onto their payment plan, but she still received a foreclosure notice a year later after spending tens of thousands of dollars.

“This whole ordeal has been very scary and stressful,” said Rosalie Thomas. “My youngest son was born in the house that Empire Property Solutions tried to take away from me. It’s the only home he’s ever known. I’m looking forward to finally getting the deed back and finally putting this behind me.”

Ronald Lambre and Marie DiManche, Haitian immigrants who live in Medford, NY, are working with OAG to purchase a new home with money from the settlements. After seeing an ad in the newspaper, Ms. Dimanche, a certified nursing assistant, called Empire Property Solutions and set up a payment plan that was initially half of what she and her husband were paying on their mortgage. After a year, Empire Property Solutions tripled the monthly payments and threatened to evict Lambre and DiManche if they did not pay. Their family, which includes six children, left the home and has since moved three times. OAG came across their case after opening an investigation.

“There is no way to describe how you feel when your home is stolen,” said Marie DiManche. “I’m from Haiti, and it was my dream to own a house. How do you tell your kids you can’t get back what you lost? Thanks to these settlements, my family will finally have a chance to start over again.”

The federal government also brought a criminal investigation against the partners of this sale-leaseback fraud. The United States Attorney’s Office (USAO) indicted Rutigliano and Kiefer on charges of conspiracy to commit wire fraud. USAO also indicted Zornberg for lying to federal investigators about his role in the scam.

The indictment has been dismissed against Rutigliano due to his death. Kiefer pleaded guilty and is awaiting sentencing. Zornberg pleaded guilty to perjury as part of a plea deal and has agreed to pay approximately $1.3 million in compensation to the victims of the fraud. Zornberg is awaiting final sentencing in federal criminal court.

This case is being handled by Assistant Attorney General Richard Yorke, Senior Investigator Paul Matthews, and Assistant Attorney General in Charge of the Nassau Regional Office, Valerie Singleton, under the supervision of Executive Deputy Attorney General for Regional Offices, Marty Mack.  The case was previously handled by former Assistant Attorney General Victoria Safran.

In December 2014, Attorney General Schneiderman launched AGScamHelp.com, a web-based app that helps homeowners determine whether a mortgage assistance company has been vetted by a government agency.

OAG launched AGScamHelp.com in direct response to an observed increase in mortgage rescue scams in New York and across the country. According to a December 2014 report by the Center for NYC Neighborhoods and the Lawyers Committee for Civil Rights Under Law, more than 42,000 homeowners have been conned out of $100 million nationwide.

New Yorkers have been hit particularly hard. From March 2010 to September 2014, New York homeowners submitted more than 2,700 foreclosure rescue scam complaints to the Lawyer Committee for Civil Rights, documenting at least $8.25 million in losses. Since AGScamHelp.com launched in December, more than 26,000 New Yorkers have visited the website.

AGScamHelp.com has several informational features:

  • Search Government-Vetted Companies: AGScamHelp.com allows consumers to search the name of an individual or company to determine if that entity is a “government-vetted” agency (that is, either a member of the Attorney General’s HOPP network or a HUD-certified counseling agency). If the company searched is not a government-vetted agency, the consumer will be told to proceed with caution and advised with several tips on how to identify signs of a foreclosure rescue scam.
  • Locate Nearby Counseling Partners: The web-based app also features an interactive map that allows consumers to find the nearest Homeowner Protection Program (HOPP) grantee. The Attorney General has dedicated $100 million to fund HOPP, a network of more than 85 housing counseling and legal services agencies across the state that are dedicated to providing free assistance to New Yorkers.
  • Report Scams: Consumers who have already been contacted by, or are in the process of working with a company suspected of operating a foreclosure rescue scam, will also have the option to file a complaint with the Attorney General’s Office. They will be directed to a separate page where they can complete a complaint form online. All complaints will be directed to the Attorney General’s Bureau of Consumer Frauds and Protection, and will be mediated by the Attorney General’s Office.
  • Get Tips: AGScamHelp.com offers details on how to recognize signs of a foreclosure rescue scam, including samples of scam letters and other materials utilized by fraudsters to target homeowners, and provides information about recent foreclosure scams that have been the subject of enforcement actions brought by the Attorney General’s Office and other law enforcement agencies.

Homeowners at risk of foreclosure should reach out to OAG, which can connect them with a free, qualified housing counseling agency within the Attorney General’s Homeowner Protection Program (HOPP).

# # #

 

Tyschkevich loses “Loan wasn’t Consummated” Argument

TYSHKEVICH v. WELLS FARGO BANK, NA, No. 2: 15-cv-2010 JAM AC (PS) (E.D. Cal. Nov. 13, 2015).

Klingon photo
Garfield Clingon

Svetlana Tyschkevich sued for TRO (Temporary Restraining Order) to stop the foreclosure sale of her house on which she took out a $1.36 million dollar loan on which she had not made a payment for 7 years.

She claimed that she had rescinded under TILA (Truth in Lending Act) validly, though 6 years after the loan date, because she had never consummated the loan because the loan docs didn’t identify the real parties, a favorite failing legal theory of Neil Garfield’s “Clingon” minions.

She also claimed the foreclosure was a debt collection activity that violated the FDCPA (Fair Debt Collection Practices Act) because of her rescission.

The magistrate pointed to the loan docs she had signed and the formal status of her lender, and to the TILA statute of repose that limited her right to rescind to 3 years, and to the fact that a foreclosure is not a debt collecting activity subject to the FDCPA.  TRO denied.

Another Garfield Klingon bites the dust.

To make matters worse, the foolish woman never bothered hiring a competent professional to examine her loan-related documents.  Had she done that, she probably would have learned of numerous legitimate causes of action against those who injured her, such as appraisal fraud and mortgage fraud, for which she might have won huge punitive damages.

If you find yourself in a situation like Svetlana’s, contact me for more info on a path to salvation. 727 669 5511.

Bob Hurt photo
Bob Hurt, Writer

SCOTUS: Borrower Lacks Standing to Challenge PSA Violations

By Bob Hurt, 4 November 2015

Introduction

The 2 November 2015 US Supreme Court denial of certiorari in Tran v Bank of New York settled once-and-for-all the spurious assertion that borrowers can challenge putative violations of the Pooling and Servicing Agreement (PSA) creating a securitization trust. Borrowers, encouraged by Glaski v BOA, a California appellate win for the borrower, have claimed that because New York Law voids assignment of a note into a trust after its closing date in the PSA, the assignee has no authority to enforce the note in a foreclosure effort.

This argument boils down to nothing more than a borrower’s effort to use quirks in the law to get a “free house” by preventing foreclosure because the borrower did not make timely payments. Bottom line the courts will not allow a borrower to get a free house unless the lender team injured the borrower sufficiently to justify it.

Numerous California courts have deprecated the Glaski opinion, as have other courts across the land.   Now the US Supreme Court has flicked its chin at it, and in doing so has buried it for good.

The US 2nd Circuit supported the NY Southern District in its reliance upon the 2nd Circuit’s Rajamin v Deutsche Bank opinion that borrowers lack standing to challenge the PSA or any assignment of the note because they

  1. Never became a party to the PSA or assignment
  2. Did not get injured by the PSA violation or assignment, and
  3. Receive no 3rd party benefits from the PSA or assignment.

Now, the SCOTUS has put the KIBOSH forever on the frivolous argument that the borrower can cite irregularities in obeying the PSA and assigning the note as a basis for stymieing a foreclosure. I have presented full opinions of the relevant cases. READ THEM.

If you want to know how to prove the lender team injured the borrower, and how the borrower can use that proof to win millions in compensatory and punitive damages, visit http://MortgageAttack.com.

Court Opinion Links:

  1. Tran v. Bank of New York, Supreme Court of the United States 2 Nov 2015
    http://www.supremecourt.gov/search.aspx?filename=/docketfiles/15-260.htm
  2. Tran v. Bank of New York, Court of Appeals, 2nd Circuit 2015
    https://scholar.google.com/scholar_case?case=13250751688791686592
  3. Tran v. Bank of New York, Dist. Court, SD New York 2014
    https://scholar.google.com/scholar_case?case=8421089202998856475
  4. RAJAMIN v. DEUTSCHE BANK NATIONAL TRUST COMPANY, Court of Appeals, 2nd Circuit 2014
    https://scholar.google.com/scholar_case?case=13230459673637581146
  5. Glaski v. Bank of America, 218 Cal. App. 4th 1079 – Cal: Court of Appeal, 5th Appellate Dist. 2013
    https://scholar.google.com/scholar_case?case=8535344425094007526

 Download this article with the above opinions embedded.  Distribute broadly.

Bob Hurt Photo
Bob Hurt, Writer

Mayer-Brown Whines about Brown v Quicken Loans Punitive Damage Award

Whining about Puni DamagesIn this article the author, from a law firm that specializes in beating up state courts for what the author considers excessive punitive damages awards, ATTACKED the West Virginia Supreme Court of Appeals for using procedural tricks to prevent the US Supreme Court from reviewing the award of $2.17 Million in punitive damages and $600K in attorney fees in the Brown v Quicken Loans case.  The author considered the award excessive and violative of Quicken’s due process rights.

West Virginia Supreme Court Of Appeals’ Refusal To Review Punitive Award For Excessiveness Under Due Process Clause Warrants Summary Reversal, Says Chamber Of Commerce In Mayer Brown-Authored Amicus Brief

Bob Hurt responds with the following comments:

West Virginia Trial Court and Supreme Court of Appeals handling of the Brown v Quicken Loans and Quicken Loans v Brown cases do indeed raise the hackles of lenders who have cheated the holy hell out of borrowers. I feel inclined to render the following opinion about the huge punitive damages award the trial court (without a jury) made to Brown.

The courts duly haggled over the award through three trials and two appeals, and Quicken lawyers still don’t feel satisfied. They want to cheat borrowers with relative impunity.

I believe the Supreme Court has the final say on the meaning of the Constitution’s clauses like “Due Process” but not to the extent of undermining juries and judges who must act to punish the wicked to the extent they deem necessary to teach the wicked a lesson, and even, if necessary, to run them out of business altogether. The US Supreme Court sits altogether too remote from the little people and their abusers in the American hinterland to make appropriate rulings on whether a punishment abused due process rights of the abuser. Punishments by their very nature always abuse the perpetrator, and the perpetrator’s rights, as they should.

So I fully support the West Virginia Supreme Court of Appeals effort to keep the US Supreme Court out of such cases, by whatever clever means they must.

Quicken Loans has probably abused THOUSANDS of borrowers as badly as or worse than it abused Lourie Jefferson (Brown) in Wheeling WV, starting with encouraging the appraiser to value her $46,000 house at $144,000. She settled out of court with the appraiser and his insurer, but that did not punish Quicken for its underwriting of that horrific appraisal. BOTH the appraiser and Quicken’s loan officers and executives overseeing them belong in Federal Prison for that crime of bank fraud. And that is just the tip of the iceberg of crookedness in this case.

Laurie Jefferson was sick and broke and could not afford an attorney when Quicken foreclosed on her. Luckily, Jim Bordas, who knew her family, took her case on contingency, for 40%. He fought rabidly on their joint behalf. And he won. Now Quicken wants the US Supreme Court to undermine that win by reducing the damage award. In my opinion, the damage award should have gone much higher.

To get the proper perspective on my opinion, read the court opinions detailing the tale of horror of how Quicken’s agents and employees cheated Lourie Jefferson in every way they could, apparently. I archived them together here along with my overview:

https://archive.org/details/BrownVQuickenLoansOverviewAndCaseFiles

I consider the Brown v Quicken case the POSTER CHILD for the methodology to which I refer as “Mortgage Attack.”  See the details of the method at http://mortgageattack.com.   The method contains these elements:

1.  Find the injuries and related evidence

2.  Hire a competent attorney

3.  Artfully ATTACK the injurious.

Most foreclosure “victims” took loans they should not have.  But they suffered some hardship that led to their breaching the note through non-payment.  That injured the creditor who hired a lawyer and attacked the borrower through foreclosure.  Typical foreclosure victims cannot afford competent counsel to find out how the lender team members (e.g., appraiser, broker, closer, lender) injured them and then attack the lender team members for those injuries.

In most loans, the injuries do not become immediately obvious as they did in the Brown case.  And because it costs so much time and effort and talent to examine the loan related documents to find those injuries, most foreclosure victims cannot afford the cost.  So they hire Pretense Defense attorneys to “keep them in the house as long as possible,” a scam in and of itself.

RARELY, therefore, can a plaintiff like Lourie Jefferson find competent counsel to help attack the lender team.  Most attorneys cannot and will not take a case like Brown’s on contingency.  As a consequence, most simply plod along to foreclosure and lose the house, enriching a foreclosure pretense defense attorney $15,000 to $30,000 in the process.

On behalf of all those tens of thousands or hundreds of thousands of foreclosure victims who suffered monstrous cheating of the kind Quicken Loans perpetrated on Lourie Jefferson (Brown), the Trial Court in Wheeling WV delivered an effective blow in ensuring that Lourie and Monique Brown received a little over $4 million (if I calculated correctly) for their injuries, with 40% going to Bordas and Bordas law firm for the diligent work they did in bringing Quicken Loans to well-deserved justice.

So, let us keep that perspective while pondering just how much the US Supreme Court should have to say in the matter of punitive damages which should have numbered in the tens of millions of dollars in order really to punish Quicken Loans enough to keep them from cheating other hapless borrowers like the desperate, ill Lourie Jefferson.

The Vapor Money Theory

Courts across the land have trashed the Vapor Money Theory – the idea that the borrower’s note funded the loan, or there’s no real money and so the lender never actually gave money in the form of a loan.  I provide some court opinions, and a host of related citations.

http://www.leagle.com/decision/In%20FDCO%2020100615B54/BARNES%20v.%20CITIGROUP%20INC.

MICHAEL J. BARNES, Plaintiff(s), v. CITIGROUP INC., et al., Defendant(s).

United States District Court, E.D. Missouri, Eastern Division.
June 15, 2010.


In the typical vapor money claim, “Plaintiff alleges that the promissory note he executed is the equivalent of `money’ that he gave to the bank. He contends that [the lender] took his `money,’ i.e., the promissory note, deposited it into its own account without his permission, listed it as an `asset’ on its ledger entries, and then essentially lent his own money back to him….He further argues that because [the lender] was never at risk, and provided no consideration, the promissory note is void ab initio, and Defendants’ attempts to foreclose on the mortgage are therefore unlawful.” Demmler v. Bank One NA, No. 2:05-CV-322, 2006 WL 640499 at *3 (S.D. Ohio Mar. 9, 2006). While the vapor money theory has not been addressed by any court within the 8th Circuit, it and “similar arguments have been rejected by federal courts across the country.”McLehan v. Mortgage Electronic Registration Sys., No. 08-12565, 2009 WL 1542929 at *2 (E.D. Mich. June 2, 2009) (citations omitted). See, e.g., Thomas v. Countrywide Home Loans, No. 2:09-CV-00082-RWS, 2010 WL 1328644 (N.D. Ga. Mar. 29, 2010); Andrews v. Select Portfolio Servicing, Inc., No. RDB-09-2437, 2010 WL 1176667 (D. Md. Mar. 24, 2010); Barber v. Countrywide Home Loans, Inc., No. 2:09-CV-40-GCM, 2010 WL 398915 (W.D.N.C. Jan. 25, 2010); Kuder v. Washington Mut. Bank, No. CIV S-08-3087 LKK DAD PS, 2009 WL 2868730 (E.D. Cal. Sept. 2, 2009); Rodriguez v. Summit Lending Solutions, Inc., No. 09cv773 BTM(NLS), 2009 WL 1936795 (S.D. Cal. July 7, 2009); Johnson v. Deutsche Bank Nat’l Trust Co., No. 09-21246-CIV, 2009 WL 2575703 (S.D. Fla. July 1, 2009); Gentsch v. Ownit Mortgage Solutions Inc. No. CV F 09-0649 LJO GSA, 2009 WL 1390843 (E.D. Cal. May 14, 2009). Thus, the vapor money theory is not a valid route to recovery, and Plaintiff’s claims based upon it must be dismissed.

http://www.gpo.gov/fdsys/pkg/USCOURTS-mdd-1_10-cv-01130/pdf/USCOURTS-mdd-1_10-cv-01130-0.pdf

YVONNE MOSELY-SUTTON v.  KENNETH MACFADYEN, USDC Maryland, 17 June 2011


Plaintiff appears to make a vapor money claim by alleging that, “Lawful money no longer is available for payment of debt in our economic system.” Compl. at 7. Plaintiff seems to assert that the loan at issue is unenforceable because “no such required cash was tendered,” presumably at the closing of the loan. Compl. at 5, ¶ 14. To the extent Plaintiff asserts a vapor money claim, this Court has previously noted that this “theory has been consistently rejected by federal courts as frivolous and insufficient to withstand a motion to dismiss.” Andrews v. Select Portfolio Servicing, Inc., 2010 WL 1176667, at *3 (D. Md. March 24, 2010). Accordingly, all claims based upon any variation of the vapor money theory must be dismissed.

Why Foreclosure Courts Want Proof that the Lender Injured the Borrower

DEUTSCHE BANK NATIONAL TRUST COMPANY v. Gardner, 2015 PA Super 219 – Pa: Superior Court 2015

https://scholar.google.com/scholar_case?case=5819170402171567967

In this TILA rescission appeal the court explained exactly why the borrower must tender in order to complete the rescission, and why the court has the power to rearrange the process, including the tender and lien removal sequence and mechanism. The court also explained the difference between old money and new money tender. And, most importantly the court explained that it can relieve the borrower of the obligation to tender ONLY in the case of creditor cheating or deceit.

“However, those cases relieving the borrower of his or her tender obligation, resulting in a forfeiture by the lender, are limited to “situations where creditors have tried to deceive or cheat the consumer.”/In re Williams,/291 B.R. 636, 655 (Bankr. E.D. Pa. 2003) (quoting/Michel v. Beneficial Consumer Discount Co.,/140 B.R. 92, 101 (Bankr. E.D. Pa. 1992)) (declining to hold that the borrower “should be relieved of her `tender obligation’” under TILA even though it adopted the minority view that termination of the lender’s security interest could not be conditioned upon tender).”

“We hold that, with this absence of any proof of an intent by Deutsche Bank or any of its predecessors to deceive or cheat Gardner, the trial court abused its discretion in ruling that rescission was appropriate, and in ordering the termination of Deutsche Bank’s security interest obtained in the 2005 refinance transaction, without also requiring Gardner to fulfill his tender obligation.”

I rightly point out that the borrower’s failure to find and lodge cheating/deceit causes of action against the lender team, such as appraisal or loan application fraud, constituted a COLOSSAL error that COST the borrower a LOT OF MONEY.

This of course vindicates my OFTEN REPEATED assertion that all home loan borrowers should purchase a COMPREHENSIVE MORTGAGE EXAMINATION from a COMPETENT PROFESSIONAL… BEFORE seeking a rescission or defending against a foreclosure attack.

People interested in much more info can call me at 727 669 5511, because I know Neil Garfield cannot or will not give it to them.

Mort Gezzam photo
Mort Gezzam

Mutual Tender under Rescission

Rescission means making a contract null. It requires unwinding of the deal so as to restore the parties to “status quo ante,” or “pre-contract condition.”  The unwinding requires the creditor to remove any lien and both creditor and borrower to tender (offer or present for acceptance) payment back to each other of what they received from each other.  See the below definitions, court opinions, and law references.

Definitions

RESCIND.  To abrogate, annul, avoid, or cancel a contract; particularly, nullifying a contract by the act of a party.  See Powell v Lince Co., 29 Misc. Rep. 419, 60 N. Y. Supp 1044; Hurst v. Trow Printing Co., 2 Misc. Rep. 361, 22 N. Y. Supp. 371.

Black’s Law Dictionary
2nd Edition (1910)

rescind (ri-sind), vb. (17c) 1. To abrogate or cancel (a contract) unilaterally or by agreement. [Cases: Contracts C=c249.] 2. To make void; to repeal or annul <rescind the legislation>. 3. Parliamentary law. To void, repeal, or nullify a main motion adopted earlier.
Also termed annul; repeal. rescindable, adj. rescind and expunge. See EXPUNGE (2).

rescission (ri-sizh-an), n. (17c) 1. A party’s unilateral unmaking of a contract for a legally sufficient reason, such as the other party’s material breach, or a judgment rescinding the contract; VOIDAKCE.• Rescission is generally available as a remedy or defense for a nondefaulting party and is accompanied by restitution of any partial performance, thus restoring the parties to their precontractual positions. Also termed avoidance. [Cases: Contracts G=’249.] 2. An agreement by contracting parties to discharge all remaining duties of performance and terminate the contract. – Also spelled recision; recission. – Also termed (in sense 2) agreement of rescission; mutual rescission; abandonment.

Cf. REJECTION (2); REPUDIATION (2); REVOCATION (1). [Cases: Contracts G=252.] – rescissory (ri-sis-<lree or ri-siz-), adj.
“The [UCC] takes cognizance of the fact that the term ‘rescission’ is often used by lawyers, courts and businessmen in many different senses; for example, termination of a contract by virtue of an option to terminate in the agreement, cancellation for breach and avoidance on the grounds of infancy or fraud. In the interests of clarity of thought – as the consequences of each of these forms of discharge may vary the Commercial Code carefully distinguishes three circumstances. ‘Rescission’ is utilized as a term of art to refer to a mutual agreement to discharge contractual duties. ‘Termination’ refers to the discharge of duties by the exercise of a power granted by the agreement. ‘Cancellation’ refers to the putting an end to the contract by reason of a breach by the other party. Section 2-720, however, takes into account that the parties do not necessarily use these terms in this way.” John D. Calamari & Joseph M. Perillo, The Law of Contracts § 21-2. at 864-65 (3d ed. 1987).

equitable rescission. (1889) Rescission that is decreed by a court of equity. [Cases: Cancellation of Instruments (;::; 1.]

legal rescission. (1849) 1. Rescission that is effected by the agreement of the parties. [Cases: Contracts C=> 251.] 2. Rescission that is decreed by a court of law, as
opposed to a court of equity.
“The modern tendency is to treat rescission as equitable, but rescission was often available at law. If plaintiff had paid money, or had delivered goods. he could rescind by tendering whatever he had received from defendant and suing at law to recover his money or replevy his goods. But if he had delivered a promissory note or securities, or conveyed real estate, rescission required the court to cancel the instruments or compel defendant to reconvey. This relief was available only in equity. Many modern courts ignore the distinction …. But versions of the distinction are codified in some states:’ Douglas Laycock, Modern American Remedies 627-28 (3d ed. 2002).

Black’s Law Dictionary 9th Edition (2009)

Court Opinions

“There is no reason why a court that may alter the sequence of procedures after deciding that rescission is warranted, may not do so before deciding that rescission is warranted when it finds that, assuming grounds for rescission exist, rescission still could not be enforced because the borrower cannot comply with the borrower’s rescission obligations no matter what. Such a decision lies within the court’s equitable discretion, taking into consideration all the circumstances including the nature of the violations and the borrower’s ability to repay the proceeds. If … it is clear from the evidence that the borrower lacks capacity to pay back what she has received (less interest, finance charges, etc.), the court does not lack discretion to do before trial what it could do after. Determinations regarding rescission procedures shall be made on a “case-by-case basis, in light of the record adduced.”
Yamamoto v. Bank of New York, 329 F.3d 1167 (9th Cir. 2003)

Courts have equitable discretion to allow borrowers to tender via monthly payments.  In re Stuart, 367 B.R. 541, 552 (Bankr.E.D.Pa.2007); Shepeard v. Quality Sliding & Window Factory, Inc., 730 F.Supp. 1295 (D.Del.1990) (allowing borrower to satisfy tender obligation by making monthly payments); Mayfield v. Vanguard Sav. & Loan Ass’n, 710 F.Supp. 143, 149 (E.D.Pa.1989) (allowing borrower to satisfy tender obligation by making monthly payment).

Law

15 U.S.C. §1635. Right of rescission as to certain transactions

http://www.gpo.gov/fdsys/pkg/USCODE-2010-title15/html/USCODE-2010-title15-chap41-subchapI-partB-sec1635.htm

(a) Disclosure of obligor’s right to rescind

Except as otherwise provided in this section, in the case of any consumer credit transaction (including opening or increasing the credit limit for an open end credit plan) in which a security interest, including any such interest arising by operation of law, is or will be retained or acquired in any property which is used as the principal dwelling of the person to whom credit is extended, the obligor shall have the right to rescind the transaction until midnight of the third business day following the consummation of the transaction or the delivery of the information and rescission forms required under this section together with a statement containing the material disclosures required under this subchapter, whichever is later, by notifying the creditor, in accordance with regulations of the Board, of his intention to do so. The creditor shall clearly and conspicuously disclose, in accordance with regulations of the Board, to any obligor in a transaction subject to this section the rights of the obligor under this section. The creditor shall also provide, in accordance with regulations of the Board, appropriate forms for the obligor to exercise his right to rescind any transaction subject to this section.

(b) Return of money or property following rescission

When an obligor exercises his right to rescind under subsection (a) of this section, he is not liable for any finance or other charge, and any security interest given by the obligor, including any such interest arising by operation of law, becomes void upon such a rescission. Within 20 days after receipt of a notice of rescission, the creditor shall return to the boligor any money or property given as earnest money, downpayment, or otherwise, and shall take any action necessary or appropriate to reflect the termination of any security interest created under the transaction. If the creditor has delivered any property to the obligor, the obligor may retain possession of it. Upon the performance of the creditor’s obligations under this section, the obligor shall tender the property to the creditor, except that if return of the property in kind would be impracticable or inequitable, the obligor shall tender its reasonable value. Tender shall be made at the location of the property or at the residence of the obligor, at the option of the obligor. If the creditor does not take possession of the property within 20 days after tender by the obligor, ownership of the property vests in the obligor without obligation on his part to pay for it. The procedures prescribed by this subsection shall apply except when otherwise ordered by a court.

(c) Rebuttable presumption of delivery of required disclosures

Notwithstanding any rule of evidence, written acknowledgment of receipt of any disclosures required under this subchapter by a person to whom information, forms, and a statement is required to be given pursuant to this section does no more than create a rebuttable presumption of delivery thereof.

(d) Modification and waiver of rights

The Board may, if it finds that such action is necessary in order to permit homeowners to meet bona fide personal financial emergencies, prescribe regulations authorizing the modification or waiver of any rights created under this section to the extent and under the circumstances set forth in those regulations.

(e) Exempted transactions; reapplication of provisions

This section does not apply to—

(1) a residential mortgage transaction as defined in section 1602(w) of this title;

(2) a transaction which constitutes a refinancing or consolidation (with no new advances) of the principal balance then due and any accrued and unpaid finance charges of an existing extension of credit by the same creditor secured by an interest in the same property;

(3) a transaction in which an agency of a State is the creditor; or

(4) advances under a preexisting open end credit plan if a security interest has already been retained or acquired and such advances are in accordance with a previously established credit limit for such plan.

(f) Time limit for exercise of right

An obligor’s right of rescission shall expire three years after the date of consummation of the transaction or upon the sale of the property, whichever occurs first, notwithstanding the fact that the information and forms required under this section or any other disclosures required under this part have not been delivered to the obligor, except that if (1) any agency empowered to enforce the provisions of this subchapter institutes a proceeding to enforce the provisions of this section within three years after the date of consummation of the transaction, (2) such agency finds a violation of this section, and (3) the obligor’s right to rescind is based in whole or in part on any matter involved in such proceeding, then the obligor’s right of rescission shall expire three years after the date of consummation of the transaction or upon the earlier sale of the property, or upon the expiration of one year following the conclusion of the proceeding, or any judicial review or period for judicial review thereof, whichever is later.

(g) Additional relief

In any action in which it is determined that a creditor has violated this section, in addition to rescission the court may award relief under section 1640 of this title for violations of this subchapter not relating to the right to rescind.

(h) Limitation on rescission

An obligor shall have no rescission rights arising solely from the form of written notice used by the creditor to inform the obligor of the rights of the obligor under this section, if the creditor provided the obligor the appropriate form of written notice published and adopted by the Board, or a comparable written notice of the rights of the obligor, that was properly completed by the creditor, and otherwise complied with all other requirements of this section regarding notice.

(i) Rescission rights in foreclosure

(1) In general

Notwithstanding section 1649 of this title, and subject to the time period provided in subsection (f) of this section, in addition to any other right of rescission available under this section for a transaction, after the initiation of any judicial or nonjudicial foreclosure process on the primary dwelling of an obligor securing an extension of credit, the obligor shall have a right to rescind the transaction equivalent to other rescission rights provided by this section, if—

(A) a mortgage broker fee is not included in the finance charge in accordance with the laws and regulations in effect at the time the consumer credit transaction was consummated; or

(B) the form of notice of rescission for the transaction is not the appropriate form of written notice published and adopted by the Board or a comparable written notice, and otherwise complied with all the requirements of this section regarding notice.

(2) Tolerance for disclosures

Notwithstanding section 1605(f) of this title, and subject to the time period provided in subsection (f) of this section, for the purposes of exercising any rescission rights after the initiation of any judicial or nonjudicial foreclosure process on the principal dwelling of the obligor securing an extension of credit, the disclosure of the finance charge and other disclosures affected by any finance charge shall be treated as being accurate for purposes of this section if the amount disclosed as the finance charge does not vary from the actual finance charge by more than $35 or is greater than the amount required to be disclosed under this subchapter.

(3) Right of recoupment under State law

Nothing in this subsection affects a consumer’s right of rescission in recoupment under State law.

(4) Applicability

This subsection shall apply to all consumer credit transactions in existence or consummated on or after September 30, 1995

 

TILA Regulation Z 12 C.F.R.§ 1026

Stay Up To Date here:
http://www.consumerfinance.gov/eregulations/1026

12 C.F.R. § 1026.23 Rescission under Regulation Z

http://www.gpo.gov/fdsys/pkg/CFR-2015-title12-vol9/pdf/CFR-2015-title12-vol9-sec1026-23.pdf

Appendix I.  Interpretation of Regulation Z by Consumer Financial Protection Burea (CFPB)

http://www.gpo.gov/fdsys/pkg/CFR-2015-title12-vol9/pdf/CFR-2015-title12-vol9-part1026-appI-id89.pdf

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Mort Gezzam

Bradford Shows the Basics of Mortgage Attack in his own case

NORMAN BRADFORD SHOWS THAT THE COURTS LIKE RESCISSION and OTHER FORMS OF MORTGAGE ATTACK, etc, IF THE BORROWER ARTFULLY MANAGES THE ATTACK.

If you want to see a case where the court denied rescission pre-Jesinoski, but the court awarded damages and attorney fees to the plaintiff, and where the MORTGAGE ATTACK lawsuit shows you how to set up a win, read up on Bradford v HSBC.  Get the PACER docket report for this case:

1:09-cv-01226-TSE-JFA Bradford v. HSBC Mortgage Corporation et al

If you use the RECAP THE LAW extension in Firefox or Chrome browser, you can get an abbreviated docket report and some case docs FREE. Get the Docket Report I just ran HERE:

http://ia700409.us.archive.org/19/items/gov.uscourts.vaed.247729/gov.uscourts.vaed.247729.docket.html

You can get the case opinions at Google Scholar here.

22 July 2011 – Bradford v. HSBC Mortg. Corp., 799 F. Supp. 2d 625 – Dist. Court, ED Virginia 2011
https://scholar.google.com/scholar_case?case=10469497073493990651

8 Dec 2011 – Bradford v. HSBC Mortg. Corp., 829 F. Supp. 2d 340 – Dist. Court, ED Virginia 2011
https://scholar.google.com/scholar_case?case=16422283053088070918

5 March 2012-  Bradford v. HSBC Mortg. Corp., 838 F. Supp. 2d 424 – Dist. Court, ED Virginia 2012
https://scholar.google.com/scholar_case?case=15611931269908753326

26 April 2012- Bradford v. HSBC Mortg. Corp., 859 F. Supp. 2d 783 – Dist. Court, ED Virginia 2012
https://scholar.google.com/scholar_case?case=11349799512745292008

This case has not ended yet, partly because the creditor filed for bankruptcy and has not come out yet.

As the above opinions show, Bradford took out a refi loan in 2006, and paid on it for two years even thought the loan broker had lied, bait and switched him, then Bradford send the lender a justified notice of rescission in 2008.  He sued for TILA rescission, for related damages including credit reputation damage for failure of the creditor to remove the lien and to tender after he offered to tender, for FDCPA violations for trying to collect a rescinded debt, for RESPA violations because the servicer refused to tell him the identity of the creditor (for which Bradford won costs, $4K damage, and over $25K legal fees), and for wrongful foreclosure.  He filed the lawsuit 1 year and 16 days after sending notice of rescission.

Document 56 shows that a competent plaintiff like Bradford can craft a multi-count complaint so that it sails past a motion to dismiss with flying colors.  The judge analyzes the complaint carefully and seems to love it.

The court ended up dismissing the rescission complaint because the 4th Circuit had opined that the borrower must sue within 3 years after closing, and Bradford sued a little over 4 years after closing.  Thereafter, the 4th Circuit changed its view about the timing of rescission lawsuit, incidentally aligning with the Jesinoski opinion.

After the creditor comes out of bankruptcy, Bradford will have the ability to challenge the rescission dismissal in light of later Circuit position on suing for rescission, and in light of Jesinoski.  The court would, of course, reverse the dismissal and order the unwinding of the loan.  However, Bradford will have a considerable amount of setoffs, and the creditor knows it.

So, instead of challenging the dismissal right off, he can demand a settlement from the creditor (“Give me the house free and clear and call us even”).  He will point out how badly he has beat up his adversaries already, and how much more he will beat them up with the rescission and setoffs and enormous legal fees, etc.  They might make him a suitable counter offer.  Or he might have to take them back to court.  Time will tell.

Regardless, Bradford has not made a house payment since late 2008, he does not have to make payments because of the justified rescission, and interest stopped accruing on his debt in 2008, giving him free use of that money in the form of his house

In summary, Norman Bradford has, though his case, conducted a Mortgage Attack seminar for anyone wanting to know how to beat up the bank and its team members.  The pleadings sit there on PACER for you to study.

 

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Mort Gezzam

Florida 1st District Affirms $250K Punitive Damage Award in Pate v BOA

All of you who simply cannot believe that borrowers can beat the bank by proving the bank and its agents and allies injured the borrower, TAKE HEART.  Here I present a crystal clear example of the MORTGAGE ATTACK methodology:

Bank of America, NA v. Pate, 159 So. 3d 383 – Fla: Dist. Court of Appeals, 1st Dist. 2015

https://scholar.google.com/scholar_case?case=9278967945135979893

Don’t waste your time whining about the banking industry, fractional reserve lending, the Federal Reserve, the money system, securitization, and such irrelevancies.  Get a mortgage examination if necessary to find the causes of action, and use them to HAMMER the lender, creditor, servicer, appraiser, loan broker, closer, title company, etc (whoever hurt you) IN COURT.

As you can see, the Florida appeals court upheld the BENCH TRIAL (not jury) award of $250,000 in PUNITIVE DAMAGES and over $60,000 in compensatory damages for the INJURIES the BANK did to the BORROWER.  The Pates could probably have won much more in a jury trial.

If you want to deploy the MORTGAGE ATTACK strategy in your own mortgage dispute, visit http://MortgageAttack.com to learn what works and what does not.

159 So.3d 383 (2015)

BANK OF AMERICA, N.A., and Third-Party Defendant, Homefocus Services, LLC, Appellants,
v.
Phillip V. PATE and Barbara Pate, Robert L. Pohlman and Marcia L. Croom, Appellees.

No. 1D14-251.
District Court of Appeal of Florida, First District.

March 16, 2015.
J. Randolph Liebler and Tricia J. Duthiers of Liebler, Gonzalez & Portuondo, Miami, for Appellants.

384*384 Jonna L. Bowman of Law Office of Jonna Bowman, Blountstown, for Appellees.

PER CURIAM.

AFFIRMED.

ROWE and OSTERHAUS, JJ., concur; THOMAS, J., CONCURS SPECIALLY WITH OPINION.

THOMAS, J., Specially Concurring.

In this civil foreclosure case, the trial court found that Appellant Bank of America (the Bank) engaged in egregious and intentional misconduct in Appellee Pates’ (Pate) purchase of a residential home. Thus, based on the trial court’s finding that the Bank had unclean hands in this equity action, it did not reversibly err in denying the foreclosure action and granting a deed in lieu of foreclosure. In addition, the trial court did not err in ruling in favor of the Pates in their counterclaims for breach of contract and fraud, and awarding them $250,000 in punitive damages and $60,443.29 in compensatory damages, against the Bank and its affiliate, Homefocus Services, LLC, which provided the flawed appraisal discussed below. Finally, the trial court did not reversibly err in granting injunctive relief and thereby ordering the Bank to take the necessary measures to correct the Pates’ credit histories.

In the bench trial below, the trial court found that the Bank assured the Pates, based on the appraisal showing the home’s value far exceeded the $50,000 mortgage loan, that it would issue a home equity loan in addition to the mortgage loan. This was a precondition to the Pates’ agreement to purchase the home, which was in very poor condition but had historical appeal for the Pates. The Pates intended to restore the home, but needed the home equity loan to facilitate restoration.

Before the closing on the property, the Bank informed the Pates that it would close on the home equity loan “later,” after the mortgage loan was issued. The Bank later refused to issue the home equity loan, in part on the ground that the appraisal issued by Homefocus was flawed. The Pates were forced to invest all of their savings and much of their own labor in extensive repairs. Thus, the trial court found that the Pates detrimentally relied on the representations of the Bank that it would issue the home equity loan. The record supports the trial court’s conclusion that the Bank acted with reckless disregard constituting intentional misconduct by the Bank. See generally,Lance v. Wade, 457 So.2d 1008, 1011 (Fla.1984) (“[E]lements for actionable fraud are (1) a false statement concerning a material fact; (2) knowledge by the person … that the representation is false; (3) the intent … [to] induce another to act on it; and (4) reliance on the representation to the injury of the other party. In summary, there must be an intentional material misrepresentation upon which the other party relies to his detriment.”).

The trial court further found that the Pates complied with the Bank’s demand to obtain an insurance binder to provide premiums for annual coverage, and that the Bank agreed to place these funds in escrow, utilizing the binder to pay the first year of coverage and calculate future charges to the Pates. Although the Pates fulfilled this contractual obligation, the Bank failed to correctly utilize the escrow funds. Consequently, the Pates’ insurance policy was ultimately cancelled due to nonpayment. The Pates attempted to obtain additional coverage but were unsuccessful due to the home’s structural condition. The Bank then obtained a force-placed policy with $334,800 in coverage and an annual premium of $7,382.98, which was 385*385 included on the mortgage loan, quadrupling the Pate’s mortgage payment.

The Pates offered to pay the original $496.34 monthly mortgage payment, but the Bank refused, demanding a revised mortgage payment of $2,128.74. The trial court found it “disturbing that Bank of America could financially profit due to [the Bank’s] failure to pay the home insurance…. [T]he profits for one or more months of forced place insurance would have been substantial.”

The trial court further found that during the four years of litigation following the Pates’ default, the Bank’s agents entered the Pate’s home several times while the Pates resided there, attempted to remove furniture, and placed locks on the exterior doors. Following the Bank’s action, the Pates had to have the locks changed so their family could enter the residence. During two of the intrusions, the Pates were required to enlist the aid of the sheriff to force the Bank’s agent to leave their home. The trial court found as fact that, due to the Bank’s multiple intrusions into their home, the Pates were forced to obtain alternative housing for 28 months, at a cost of thousands of dollars.

The Bank’s actions supported the trial court’s finding that punitive damages were awardable. In Estate of Despain v. Avante Group, Inc., 900 So.2d 637, 640 (Fla. 5th DCA 2005), the court held that “[p]unishment of the wrongdoer and deterrence of similar wrongful conduct in the future, rather than compensation of the injured victim, are the primary policy objectives of punitive damage awards.” See also Owens-Corning Fiberglas Corp. v. Ballard, 749 So.2d 483 (Fla.1999); W.R. Grace & Co.-Conn. v. Waters, 638 So.2d 502 (Fla.1994).

In Estate of Despain, the court held that “[t]o merit an award of punitive damages, the defendant’s conduct must transcend the level of ordinary negligence and enter the realm of willful and wanton misconduct….” 900 So.2d at 640. Florida courts have defined such conduct as including an “entire want of care which would raise the presumption of a conscious indifference to consequences, or which shows… reckless indifference to the rights of others which is equivalent to an intentional violation of them.” Id. (quoting White Constr. Co. v. Dupont, 455 So.2d 1026, 1029 (Fla.1984)). Here, the Bank’s intent to defraud was shown by its reckless disregard for its actions. The facts showing the Bank’s “conscious indifference to consequences” and “reckless indifference” to the rights of the Pates is the same as an intentional act violating their rights. See White Constr. Co., 455 So.2d at 1029. The record evidence provides ample support for the trial court’s ruling in favor of the Pates’ claim for punitive damages against the Bank.

The learned trial judge found that the Bank’s actions demonstrated its unclean hands; therefore, the Bank was not entitled to a foreclosure judgment in equity. Unclean hands is an equitable defense, akin to fraud, to discourage unlawful activity. SeeCongress Park Office Condos II, LLC v. First-Citizens Bank & Trust Co., 105 So.3d 602, 609 (Fla. 4th DCA 2013) (“It is a self-imposed ordinance that closes the doors of a court of equity to one tainted with inequitableness or bad faith relative to the matter in which he seeks relief[.]”) (quoting Precision Instrument Mfg. Co. v. Auto. Maint. Mach. Co., 324 U.S. 806, 814 (1945)). The totality of the circumstances established the Bank’s unclean hands, precluding it from benefitting by its actions in a court of equity. Thus, the trial court did not err by denying the foreclosure action.

CA court affirms $250K for dual tracking in Bergman v JPMCB

 

Read the opinion here (also appended below):

http://www.courts.ca.gov/opinions/nonpub/E060148.PDF

This California 4th District appellate opinion contains a treasure trove of virtual advice for borrowers whom the lender scammed with a fake loan mod while foreclosing on him at the same time (“dual tracking.”

The panel fully supported the opinion of the trial court which awarded Bergman $250,000 in damages plus legal fees.  The court would have awarded him much more had Bergman’s attorney hired Law Partner On Call (http://lawpartneroncall.com) to manage the litigation, write the pleadings, and write the jury instructions.

Bergman got his payday for breach of contract by his creditor, but he made a bunch of mistakes.

For example, he did not include an attorney fees provision in his loan security instrument (that standard form only says the creditor can recover legal fees and costs) in the event the court finds that the creditor or servicer or other agent engaged in wrongdoing that injured the borrower.  The court awarded Bergman fees anyway, but against great opposition by the creditor.  Most borrowers make the same mistake.

And, Bergman failed to add to the security instrument that a special penalty attaches to dual tracking, a scam that virtually every lender has run on desperate borrowers who want a loan mod.

Furthermore, Bergman made the same mistake many do in loan mod negotiations – he failed to record the name and ID# of everyone he talked to at the bank, and he failed to get a signed writing saying he had to miss payments in order to qualify for the loan mod, and that if he missed them, then made proper trial payments, the lender would grant the loan mod.  Everything was oral leading up to the actual mod.  And oral agreements have no more value than the paper on which the parties wrote them.  The lender’s attorney blustered about it, but the court ruled that the parties had indeed make that agreement, then failed to give Bergman a loan mod.  I believe many courts, faced with similar facts, have ruled that no agreement existed.

Bergman’s most monumental mistake:  he failed to hire a competent professional to examine his loan documents for evidence of torts, contract and regulatory breaches, and legal errors.  Had he done that, and lodge those as claims in his complaint, he could have won gargantuan damages award because, almost certainly, fraud underlay his loan.

Bergman while in the right, found uncommon good luck in this litigation.  Many borrowers have lost using his paper-thin arguments.

READ THE OPINION thoroughly, especially if you have a mortgage and consider a loan mod.

But if you really want to win, call me right now at 727 669 5511 and schedule a mortgage examination, whether or not you face foreclosure.  Read all about what wins and what does not win at http://mortgageattack.com.

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Filed 9/30/15 Bergman v. JP Morgan Chase Bank, N.A. CA4/2

NOT TO BE PUBLISHED IN OFFICIAL REPORTS

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA FOURTH APPELLATE DISTRICT

DIVISION TWO

E060148

(Super.Ct.No. RIC10014015) OPINION

APPEAL from the Superior Court of Riverside County. Ronald L. Taylor, Judge. (Retired judge of the Riverside Super. Ct. assigned by the Chief Justice pursuant to art. VI, § 6 of the Cal. Const.) Affirmed.

AlvaradoSmith, John M. Sorich, S. Christopher Yoo, Jacob M. Clark; Parker Ibrahim & Berg, John M. Sorich and Mariel Gerlt-Ferraro for Defendant and Appellant.

Burkelegal and Gregory Burke for Plaintiff and Appellant.

I INTRODUCTION

Plaintiff and respondent Jeffrey A. Bergman (Bergman) sued defendant and appellant JPMorgan Chase Bank, N.A. (Chase) on claims involving a residential loan modification. A jury found in favor of Bergman on his causes of action for intentional misrepresentation and breach of the implied covenant of good faith and fair dealing.

Chase appeals from a $250,000 judgment in favor of Bergman, and the posttrial orders denying Chase’s motion for judgment notwithstanding the verdict (JNOV) and granting attorney’s fees to Bergman.

Chase argues the verdict is not supported by substantial evidence because no evidence shows Chase made misrepresentations to Bergman. Additionally, Chase argues the trial court erred in evidentiary rulings and jury instructions. Finally, Chase contends the judgment’s award of damages was duplicative, and the attorney’s fees provision under the subject deed of trust and promissory note did not include recovery of fees.

Bergman has filed a cross-appeal, raising issues of instructional and evidentiary error, and additional claims by Bergman for breach of contract and attorney’s fees.

We presume the judgment is correct if it is supported by substantial evidence. (Ermoian v. Desert Hospital (2007) 152 Cal.App.4th 475, 494; Denham v. Superior

Court (1970) 2 Cal.3d 557, 564; San Diego Metropolitan Transit Development Bd. v. Handlery Hotel, Inc. (1999) 73 Cal.App.4th 517, 528.) To warrant reversal, an error in jury instructions must result in a miscarriage of justice. (Mize-Kurzman v. Marin

Community College Dist. (2010) 202 Cal.App.4th 832, 862; Soule v. General Motors

Corp. (1994) 8 Cal.4th 548, 580.) Evidentiary error must also be “arbitrary, capricious, or patently absurd . . . resulting in a manifest miscarriage of justice.” (Boeken v. Philip Morris, Inc. (2005) 127 Cal.App.4th 1640, 1685.) On a motion for judgment notwithstanding the verdict, an appellate court must decide whether any substantial evidence supports the verdict unless the verdict raises purely legal questions. (Trujilllo v. North County Transit Dist. (1998) 63 Cal.App.4th 280, 284; Wolf v. Walt Disney Pictures

& Television (2008) 162 Cal.App.4th 1107, 1138.) An award of attorney’s fees is

reviewed de novo. (Conservatorship of Whitley (2010) 50 Cal.4th 1206, 1212.) Based on the various appropriate standards of review, we affirm the judgment:

“The ultimate determination is whether a reasonable trier of fact could have found for the respondent based on the whole record.” (Kuhn v. Department of General Services (1994) 22 Cal.App.4th 1627, 1633.)

II

FACTUAL AND PROCEDURAL BACKGROUND

In 2005, Bergman purchased the subject residential real property located at 22330 Foxhall Drive in Corona, making a down payment of $250,000. Bergman proceeded to make improvements to the property costing about $291,000.

In 2007, Bergman refinanced the property with an adjustable rate mortgage of

$937,500, based on a value of $1.25 million. Bergman testified he thought the loan was a conventional loan. Instead, the monthly payments in the fixed amount of $5,273.44 were interest-only for the first 10 years until 2017.

Bergman made the monthly payments from January until October 2008. Chase acquired the beneficial interest in the loan in September 2008. In December 2008, Bergman asked for a loan modification with a lower interest rate. He paid the loan modification fee of $1,582. The bank agreed to reduce the interest rate to 3 percent and the monthly payment to $4,112.74, while increasing the loan balance by an additional

$9,000. In the third year, the monthly payment would increase to $5,417.64, applied to both principal and interest.

When Bergman realized how much the monthly payment would increase in the third year, he immediately contacted Chase about another modification. He testified Chase offered proposed terms for a new loan modification with a 40-year term, a fixed interest rate at 3 percent, and a $3,000 monthly payment. Bergman had the ability to pay

$3,000 a month.

Bergman testified he did not make a payment on the first loan modification in January 2009 or later because the Chase bank staff1 told him that to qualify for another loan modification he would need to be in default. Bergman did not remember making a payment that was reversed and returned in February 2009, for nonsufficient funds, or “NSF.”

A notice of default (NOD) was recorded in April 2009. Although Bergman contacted Chase about the NOD, Bergman did not realize in July 2009 that the

  • Bergman could not name most of the bank staff to whom he Almost none of the correspondence he received from Chase included individual names.

foreclosure was proceeding. A notice of trustee’s sale was mailed to Bergman, posted on the property, and recorded on August 3, 2009.

In the meantime, in August 2009, Bergman consulted with a real estate broker about a short sale. Bergman also finally received information about a HAMP2 loan modification from Chase. Bergman submitted a HAMP hardship affidavit and financial information to Chase on August 20, 2009. Bergman had suffered financial difficulties from a divorce, a downturn in his limousine business, and two surgeries. He stated the property was worth $578,000 and the outstanding loan was $946,000. However, Bergman could not qualify for a HAMP loan because of the limit of $729,750 on loan modifications.

Bergman identified one Chase employee, Hifa Boolori, whose name appears on correspondence dated August 28, 2009, approving a trial plan agreement. A trial plan agreement was not a HAMP loan but a Chase internal loan modification program.

Bergman agreed to the plan and made three trial plan payments of $2,775 in September, October, and November 2009. He provided additional information, anticipating he would receive a second loan modification.

Bergman testified he did not know the foreclosure was proceeding at the same time the second loan modification was being evaluated. He was told the foreclosure

would be “frozen.” In his fifth amended complaint, he alleged he was informed on November 17, 2009, that he had been denied a loan modification and a sale was

  • Home Affordable Modification

scheduled for January 5, 2010. At trial, he testified he did not know the trustee’s sale was scheduled for December 2, 2009, but had been rescheduled for January 15, 2010.

On December 17, 2009, Bergman signed a listing agreement for a short sale. He drafted a letter on December 22, 2009, asking Chase to let him sell the property in a short sale.

On the same date, December 22, 2009, Chase wrote Bergman a letter asking him to provide two recent paystubs to support his loan modification request. After receiving that letter, Bergman called Chase—because he had already been told his loan modification was denied—but Chase told him the loan was still under review. Bergman provided copies of his bank statements for October and November 2009.

On January 12, 2010, Chase again wrote Bergman, stating his loan modification was being reviewed. On February 11, 2010, Bergman wrote Chase, asking to cancel the loan modifications and to proceed with a short sale. Bergman continued to receive conflicting information about his loan from Chase until July 2010.

The property was sold at a trustee’s sale in July 2010 to defendant Mark Mraz, a friend of Bergman’s. One appraised fair market value was $595,000. The unpaid principal balance was $1,022.265.92. Bergman continued to receive notices about loan modification after the sale.

After the property was sold, Bergman was sued for unlawful detainer. Bergman posted a cash bond of $30,000 with money borrowed from his parents. Bergman incurred additional attorney’s fees defending the unlawful detainer action.

The jury completed the special verdict forms on all seven causes of action and punitive damages. The jury awarded Bergman damages of $125,000 on the cause of action for breach of the implied covenant of good faith and fair dealing and $125,000 on the cause of action for intentional misrepresentation.

III

PROPERTY IMPROVEMENTS

At trial Chase objected to Bergman’s testimony about the $291,000 he spent on property improvements on the grounds that information had not been disclosed during discovery. Chase argues the trial court abused its discretion by allowing Bergman to testify. (Evid. Code, § 352.) Chase contends it was prejudiced by “surprise at the trial” because Chase could not adequately challenge Bergman’s testimony regarding the property upgrades. (Chronicle Pub. Co. v. Superior Court (1960) 54 Cal.2d 548, 561.)

Chase’s pretrial motion in limine sought to exclude any documentary evidence and witnesses not previously disclosed. Bergman was not an undisclosed witness and he did not submit documentary evidence about the property upgrades at trial. Furthermore, we have reviewed Chase’s record citations to its discovery requests and those requests do not support Chase’s contention that it “specifically requested all documents in support of Bergman’s claims.” Chase’s requests for admission, form and special interrogatories, and document requests do not ask generally or particularly for any documents in support of Bergman’s claim for damages based on the cost of the property improvements.

Therefore, the predicate for Chase’s argument—that Bergman did not comply with

discovery requests—is not supported by the record. The trial court did not abuse its

discretion in allowing Bergman’s testimony, which did not involve undisclosed documents or witnesses. (Boeken v. Phillip Morris, Inc., supra, 127 Cal.App.4th at p. 1685.)

IV

JURY INSTRUCTION ON CORPORATE FRAUD

The trial court gave the jury a standard instruction based on CACI No. 1900, concerning intentional misrepresentation: “Jeffrey Bergman claims that [Chase] made a false representation that harmed him.” Chase contends the court erred by not giving its proposed Special Instruction No. 11: “To assert a fraud action against a corporation, a plaintiff must also allege [the] names of the person or persons who allegedly made the

fraudulent representation, their authority to speak, to whom they spoke, what they said or

wrote, and when it was said or written.”

The special instruction requested by Chase is based on heightened pleading requirements for corporate fraud, requiring a plaintiff to allege specifically the name of the person who made the alleged misrepresentations, his authority to speak, and what he said or wrote, and when it was said or written. (Lazar v. Superior Court (1996) 12 Cal.4th 631, 645; Tarmann v. State Farm Mut. Auto. Ins. Co. (1991) 2 Cal.App.4th 153,

157; Cansino v. Bank of America (2014) 224 Cal.App.4th 1462, 1469.) However, “[l]ess specificity in pleading fraud is required ‘when “it appears from the nature of the allegations that the defendant must necessarily possess full information concerning the facts of the controversy . . . .”’ (Committee on Children’s Television, Inc. v. General

Foods Corp. (1983) 35 Cal.3d 197, 217.)” (Cansino, at p. 1469.)

In the present case, Bergman specifically alleged and testified that he knew the name of one Chase employee in particular, Hifa Boloori, who made representations to him, although he spoke to many Chase employees during many phone calls between 2008 and 2010. Additionally, Chase had extensive records of contacts and conversations with Bergman which included information about which Chase employees contacted him, including the period between October 2008 and February 2009. Under the category of “USR,” the Chase delinquency notes identified the Chase employee by his or her initials, allowing Chase to determine who contacted Bergman far more easily than Bergman could do so. Even if Chase’s records do not expressly document an oral promise for a

40-year loan at 3 percent interest with $3,000 monthly payments, the records still include information about the employees who talked to Bergman.

Under these circumstances, it was not error or prejudicial for the trial court to instruct the jury according to the standard jury instruction and not to use Chase’s

proposed special instruction. The instruction to the jury was not required to be as specific as the pleading. Nevertheless, Bergman identified one person by name and Chase had to know its own employees based on its own records. (West v. JPMorgan Chase Bank, N.A. (2013) 214 Cal.App.4th 780, 793.) There was no error causing a miscarriage of justice and no prejudice in refusing Chase’s special instruction. (Mize-Kurzman v. Mann Community College Dist., supra, 202 Cal.App.4th at p. 862, citing Soule v. General Motors Corp., supra, 8 Cal.4th at p. 580.)

V SUBSTANTIAL EVIDENCE

Chase argues there is not substantial evidence to support the jury’s verdict on the causes of action for fraud by intentional misrepresentation and breach of the covenant of good faith and fair dealing. In our review, we are guided by well-established principles: “It is for the trier of fact to determine the weight of the evidence and the credibility of the witnesses and resolve all conflicts. Where disputed facts are presented to and resolved by the trial judge, unless clearly erroneous his findings will not be disturbed by the reviewing court; it is not the province of this court to substitute its judgment for that of                   the trier of fact. On appeal the evidence and all reasonable inferences to be drawn therefrom must be viewed in a light most favorable to the findings and judgment. [Citations.] ‘Such a judgment, when attacked on evidentiary grounds, must be affirmed when there is any evidence, direct or circumstantial, to support the findings of the trial court. Stated negatively, such a judgment cannot be reversed unless there is no evidence, direct or circumstantial, to support the findings. These rules are elementary.’

[Citations.]” (Ach v. Finkelstein (1968) 264 Cal.App.2d 667, 674.)

  1. Intentional Misrepresentation

 Chase contends there is not substantial evidence of the elements of intentional misrepresentation: 1) a false representation of a material fact; 2) knowledge of the falsity; 3) intent to induce another to rely on the misrepresentation; 4) reliance on the misrepresentation; and 5) resulting damage. (Ach v. Finkelstein, supra, 264 Cal.App.2d

at p. 674; Mirkin v. Wasserman (1993) 5 Cal.4th 1082, 1111.) Chase argues substantial

evidence does not show that Chase made any misrepresentation to Bergman or that Bergman was induced to default on a loan as a result of a misrepresentation by Chase.

Bergman asserts that Chase was liable for two separate misrepresentations: 1) that, if his loan was in default, he could obtain a loan modification; and 2) if Bergman made three trial plan payments he could obtain a loan modification. The jury found the former was true and the latter was not.

“‘In its broad, general sense the concept of fraud embraces anything which is intended to deceive, including all statements, acts, concealments and omissions involving a breach of legal or equitable duty, trust or confidence which results in injury to one who justifiably relies thereon. . . . There is no absolute or fixed rule for determining what  facts will constitute fraud; whether or not it is found depends upon the particular facts of the case under inquiry. Fraud may be proved by direct evidence or it may be inferred from all of the circumstances in the case. [Citation.] “Actual fraud is always a question of fact.” (Civ. Code, § 1574.)’ [Citations.]” (Ach v. Finkelstein, supra, 264 Cal.App.2d at p. 675.)

Chase’s argument is primarily that Bergman is inconsistent in his testimony about exactly what he was told and when. However, Bergman’s testimony and other evidence certainly supports his contention that Chase informed him that in order to qualify for a second loan modification, he would have to be in default. Based on the evidence, the jury could have reasonably found that, beginning in December 2008 and continuing through 2010, Bergman had many conversations with Chase about modifying his loan.

Although Chase wants to pin Bergman down to precise dates and times, the general tenor

of the evidence was consistent. Because Bergman hoped to obtain a second loan modification, he defaulted on payments under the first modification. His default continued as he waited to complete the second modification, including making the additional three trial payments in late 2009, and investigating a short sale as an alternative if the second loan modification was not completed. We conclude substantial evidence supported the jury verdict that Chase made intentional misrepresentations to Bergman. (Ach v. Finkelstein, supra, 264 Cal.App.2d at pp. 673-676.)

  1. Breach of Covenant of Good Faith and Fair Dealing

 Chase also argues there was not substantial evidence of breach of the covenant of good faith and fair dealing and the special jury verdicts were inconsistent. We disagree.

The court gave the jury the following instructions on breach of contract: 1) Bergman claims that he and Chase “entered into an oral contract for a loan modification  at fixed payments under $3,000.00”; 2) Chase “breached this contract by not providing him a permanent loan modification after he made the three trial plan payments”; and 3) to prove breach of contract, Bergman must prove Chase “failed to do something that the

contract required it to do.” The court gave the jury additional instructions on the breach of the covenant of good faith and fair dealing: 4) Bergman must prove the parties entered into a valid contract; and 5) Chase “interfered with” Bergman’s “right to receive the benefits of the contract.”

The instructions are confusing but the jury apparently reconciled any conflicts by finding that Bergman and Chase had a binding oral contract for a loan modification with

$3,000 payments. However, the jury did not find the oral contract was conditioned on

defendant making three trial plan payments. Therefore, the jury found Chase did not “fail to do something that the oral contract required it to do,” namely provide a loan modification after Bergman made the three payments. Nevertheless, the jury also found Chase interfered with “Bergman’s right to receive benefits of the contract,” i.e. the promise of a loan modification.

In other words, the jury did not find Chase was required to give Bergman a loan modification if he made the three trial plan payments; Chase did not breach the contract for that reason. But Chase did interfere with Bergman’s benefits under the contract by not giving him the promised loan modification. Therefore, as already discussed, sufficient evidence showed that there was a contract for a loan with $3,000 payments and that Chase interfered with the contractual benefit to Bergman.

VI DUPLICATIVE DAMAGES

Bergman testified that his damages included his original down payment of

$250,000 and the property improvements of $291,000. Chase argues the damages award was duplicative and the intent of the jury was not to award $250,000 but to award a total of only $125,000 for both causes of action found in his favor.

The court gave the jury multiple, somewhat contradictory, instructions on damages. Ultimately, the jury awarded damages of $125,000 for breach of the implied covenant and $125,000 for intentional misrepresentation. The trial court entered a judgment of $250,000. The trial court reasoned:

“It’s the Court’s opinion that the jury did intend to award separate damages to the plaintiff for the improvements that the plaintiff testified that he made to his home . . . and the down payment which he made for the home. [¶] So my interpretation of the jury verdict was they intended to award damages for both of those injuries incurred by the plaintiff and not just one sum of the $125,000. So, in other words, I agree . . . as to how the jury reached its verdict on these two separate causes of action, which were based upon different losses incurred by the plaintiff.”

There is no evidence in the record of the “intent” of the jury. Instead, the record shows the jury was given special verdict forms for each of the seven causes of action and the claim for punitive damages. The jury was instructed to award separate damages for each cause of action. It was not instructed to award damages collectively. The amount of damages claimed by Bergman was at least $541,000, the combined amount of his down payment and the property improvements. The jury’s verdict awarding him damages of

$125,000 each on two causes of action is within the realm of damages.

Chase’s argument that the jury meant to award only $125,000 is speculative and the cases relied upon by Chase are distinguishable. Shell v. Schmidt (1954) 126 Cal.App.2d 279, 291, involved a single cause of action, not two causes of action as here. In DuBarry Internat., Inc. v. Southwest Forest Industries, Inc. (1991) 231 Cal.App.3d 552, 564, the court acknowledged a plaintiff could be entitled to recover separate damages on two causes of action: “They do involve, after all, alleged invasions of different rights.” Tavaglione v. Billings (1993) 4 Cal.4th 1150, 1158, held that a party “is

not entitled to more than a single recovery for each distinct item of compensable damage

supported by the evidence.” However, “[i]n contrast where separate items of compensable damage are shown by distinct and independent evidence, the plaintiff is entitled to recover the entire amount of his damages, whether that amount is expressed by the jury in a single verdict or multiple verdicts referring to different claims or legal theories.” (Id. at p. 1159.)

The present case involves two separate causes of action, different theories, and two distinct items of compensable damages. Under these circumstances, no duplicative damages were awarded by the jury.

VII

CHASE’S MOTION FOR JUDGMENT NOTWITHSTANDING THE VERDICT

Chase contends the trial court should have granted its motion for JNOV for two reasons. Chase repeats the argument that Bergman did not identify the employee who made the misrepresentation—an argument we have already rejected.

Second, Chase argues Bergman was not damaged because the proper measure of damages for the wrongful foreclosure of real property is the value of the equity in the property at the time of the foreclosure. (Munger v. Moore (1970) 11 Cal.App.3d 1, 11; Civ. Code, § 3333.) At the time of the foreclosure sale in July 2010, the unpaid principal balance, along with costs, totaled $1,022,256.92, leaving no equity.

Chase’s argument about wrongful foreclosure is not pertinent, however, because the jury rejected the wrongful foreclosure claim and did not award damages on that cause of action. Instead, the jury awarded damages for intentional misrepresentation and

breach of the covenant of good faith and fair dealing. The jury was instructed Bergman

could prove damages for breach of contract based on what would reasonably compensate for the breach. (CACI No. 350.) The jury was also instructed it could award Bergman reasonable compensation for harm. (CACI No. 1923.) The instructions to the jury, as reasonably construed did not prohibit the jury from awarding damages for the original down payment or for the property improvements, even if the losses for those items of damage were not sustained until after Chase committed its breach or made its misrepresentations. The damages awarded were not for wrongful foreclosure and the measure of such damages is not relevant.

VIII ATTORNEY’S FEES

The trial court awarded Bergman attorney’s fees—reduced from $454,772.23 to

$188,100—finding that he could recover fees under both contract and tort based on the attorney’s fees provision in the original note and trust deed under which the foreclosure was conducted. The same result occurred in Smith v. Home Loan Funding, Inc. (2011) 192 Cal.App.4th 1331, 1337-1338. (Civ. Code, § 1717; Code Civ. Proc., § 1021.)

The subject note provides: “. . . the Note Holder will have the right to be paid back by me for all of its costs and expenses in enforcing this Note [including] reasonable attorneys’ fees.” The subject trust deed provides: “Lender shall be entitled to collect all expenses incurred in pursuing the remedies provided . . . including, but not limited to,

reasonable attorneys’ fees . . . .”

The Smith court construed the very same language and found that that “breach of the implied covenant can sometimes support an award of fees under section 1717.”

(Smith v. Home Loan Funding, Inc., supra, 192 Cal.App.4th at p. 1337.) Smith distinguished Sawyer v. Bank of America (1978) 83 Cal.App.3d 135, 140, 145, and held that, where one party had a fiduciary obligation and made an express oral promise, it was justifiable to treat the oral agreement and the loan documents as a single agreement because they were all part of the same transaction. (Smith, at pp. 1337-1338, citing Civ.

Code, § 1642 [“Several contracts relating to the same matters, between the same parties, . . . are to be taken together”].)

The oral contract between Bergen and Chase was part of a single agreement, including the note and deed of trust; the trial court found the oral contract was intended to effect a modification of the original obligation. Therefore, the trial court’s award of attorney’s fees was proper, allowing the prevailing party to recoup attorney’s fees under the intertwined tort and contract claims. (Xuereb v. Marcus & Millichap, Inc. (1992) 3 Cal.App.4th 1338, 1341-1343.)

IX

BERGMAN’S CROSS-APPEAL

  1. Special Verdict on Wrong Foreclosure

 The special verdict on the cause of action for wrongful foreclosure asked: Did Chase “violate any law or regulation governing foreclosure?” Bergman contends the special verdict should have read: Did Chase Bank “cause an illegal, fraudulent or oppressive sale of the real property located at 22330 Foxhall Drive, Corona, CA 92883?” Bergman argues his claim is not for wrongful foreclosure based on a statutory violation

but “Chase’s fraudulent practice of inducing borrowers into default with the promise of a

loan modification.” The basis for this instruction is thus exactly the same as Bergman’s causes of action for intentional misrepresentation and breach of the covenant of good faith and fair dealing, for which he recovered damages. Under these circumstances, there was no miscarriage of justice in refusing Bergman’s alternative instruction. (Mize- Kurzman v. Marin Community College Dist., supra, 202 Cal.App.4th at p. 862, citing Soule v. General Motors Corp., supra, 8 Cal.4th at p. 580.)

  1. Special Verdict on Punitive Damages

 Bergman claims the jury should have been instructed that Chase could be directly liable for fraud and punitive damages. A corporate employer may only be liable for punitive damages as a result of its employees’ acts where it somehow ratified the behavior. (Civ. Code, § 3294, subd. (b); Weeks v. Baker & McKenzie (1978) 63 Cal.App.4th 1128, 1153.) The special verdict on punitive damages was based on CACI No.VF-3904: “Did an agent or employee of [Chase] engage in the conduct of malice, oppression, or fraud against Plaintiff?” The jury was also given an instruction based on CACI No. 3936 about liability for punitive damages for a corporate entity based on the acts of its agents. Chase could not be found directly liable for punitive damages for its own conduct. (Davis v. Kiewit Pacific Co. (2013) 220 Cal.App.4th 358, 365.) The jury was properly instructed on punitive damages.

  1. Motion to Amend

At the end of trial, the court denied Bergman’s request for leave to amend to add a claim for breach of a written contract under HAMP or the Chase trial payment plan. An appeal from a trial court’s decision in granting or denying a request to amend the

pleadings is reviewed for a clear showing of an abuse of discretion. (Garcia v. Roberts (2009) 173 Cal.App.4th 900, 909.) The guiding principles are: “(1) whether facts or  legal theories are being changed and (2) whether the opposing party will be prejudiced by the proposed amendment.” (City of Stanton v. Cox (1989) 207 Cal.App.3d 1557, 1563.)

Throughout the trial, Bergman had relied on a theory of an oral promise, not a written contract. The trial court properly denied Bergman’s oral motion to amend, and subsequent motion for JNOV, because the introduction of new facts and theories would cause prejudice to Chase. There was no reason for Bergman to wait years to amend his claims. We reject Bergman’s contentions on this issue.

  1. Attorney’s Fees

 Bergman argues he should have been allowed to offer evidence of the attorney’s fees he incurred in the unlawful detainer action and he was entitled to recover those fees under the note and trust deed. We conduct a de novo review on whether there is a legal basis for a fee award. (Conservatorship of Whitley, supra, 50 Cal.4th at p. 1212.)

After Chase objected to the submission of evidence on attorney’s fees for the unlawful detainer action, Bergman’s counsel stated he would raise it later. Bergman’s counsel did not raise the issue again. The record shows Bergman waived this issue. (Estate of Odian (2006) 145 Cal.App.4th 152, 168.) Furthermore, Bergman’s claim was for attorney’s fees sustained in a separate unlawful detainer action by Mraz, the third party who purchased the property at trustee’s sale. Bergman cites no authority for the recovery of attorney’s fees under these circumstances. In fact, he concedes there is no

authority but asks this court to resolve the issue in a published opinion. We decline to do so.

X DISPOSITION

We reject both appeals and affirm the judgment. In the interests of justice, we order the parties to bear their own costs on appeal.

NOT TO BE PUBLISHED IN OFFICIAL REPORTS

CODRINGTON                     

J.

We concur:

 

RAMIREZ                             

  1. J.

HOLLENHORST                  

J.

In Re Brown Denies TILA Rescission post-Jesinoski

The US Supreme Court opinion in Jesinoski has confused many foreclosure defense pundits, like Neil Garfield, into thinking that the loan suddenly becomes void upon filing of a notice of TILA rescission.  Such people don’t have a clue about rescission.

As the court for In Re Brown, below, explains, TILA rescission doesn’t happen UNLESS a TILA violation occurred, and it always requires an unwinding of the loan including a tender of payment by both creditor and borrower.

Furthermore, the court all but called Brown scammers for trying to use Bankruptcy to stave off foreclosure.

 

 

In re: BARBARA MURPHY BROWN, Chapter 13, Debtor.

Case No. 15-12027-RGM.
United States Bankruptcy Court, E.D. Virginia, Alexandria Division.

September 21, 2015.

MEMORANDUM OPINION

ROBERT G. MAYER, Bankruptcy Judge.

This case was before the court on September 3, 2015, on the chapter 13 trustee’s motion to dismiss this case because the debtor was not eligible to be in chapter 13. The trustee argued that she was over the debt limit of $1,149,525 for secured debts. 11 U.S.C. §109(e).

The debtor attempted to show that the outstanding balance of the loan was less than the §109(e) eligibility limit. She testified that she and her non-filing husband borrowed $1,265,000 on June 27, 2008. They made payments until March 2010 when they sought to rescind the loan. The debtor presented two documents showing, she said, an outstanding loan balance of $1,143,404.28 as of September 1, 2013, and — notwithstanding that neither she nor her husband had made any payments on the loan — $1,078,513.03 as of September 1, 2015.[1] The documents show, in addition to the principal balances the debtor relies on, that the loan is a variable interest rate loan; that the interest rate changes annually as of August 1; that the payment changes annually as of September 1; and that the interest rate is the 1 Year LIBOR published daily in the Wall Street Journal plus a margin of 2.25%. In fact, the two documents are the 2013 and 2015 annual notices from the lender showing the calculation of the new monthly payment and giving the debtor notice of the amount of the new monthly payment.

A change in the monthly payment of an adjustable rate mortgage is calculated in advance of the payment change date based on the contractually due principal balance as of the payment change date.[2] This is, in fact, what the June 24, 2013, letter shows. It states:

  Projected Principal Balance as of the Payment Change Date:         $1,143,404.28

  Remaining Loan Term as of the Payment Change Date:                 300 months

There were, contractually, 300 payments due from September 1, 2013, to the end of the loan. Five years had elapsed on the 30-year loan made on June 27, 2008, and on which the first payment was due on September 1, 2008. Put another way, 60 months had elapsed out of a total of 360 months.

The second payment change letter was dated June 19, 2015. It states:

Your new payment is based on the 1 YEAR LIBOR, your margin, your loan balance of $1,078,513.03, and your remaining loan term of 276.

There were, contractually, 276 payments due from September 1, 2015, to the end of the loan. Twenty-four months elapsed from the effective date of the June 24, 2013 payment change letter to the effective date of the June 19, 2015 payment change letter.

This is the proper manner in which to calculate the new payment. The contractually due principal balance as of the change date is the appropriate number rather than the principal balance actually due as of the change date. The actual outstanding principal balance cannot be known when the new payment is calculated about six weeks before the payment change date. Payments could be missed or late. (In this case, no payments were made after March 2010.) If the payment change were calculated on the actual principal balance, the monthly payment would necessarily be higher than if it were calculated on the contractually due principal balance. If the debtor and her husband made all of the missed payments after receiving the payment change notification and continued with the higher monthly payments calculated on the actual outstanding principal balance, the monthly payments would payoff the loan in less than 30 years, depriving the debtor and her husband of the benefit of the longer loan term. By using the contractually due principal balance, if the debtor and her husband reinstated the loan and continued with the monthly payments, the loan would payoff at the end of the 30-year term as agreed by the parties. The principal balances shown on the payment change letters reflect what the principal balance would have been had the debtor made all contractually due mortgage payments. She admittedly stopped making payments after March 2010, and the principal balances shown on the two payment change letters understate the actual principal balances as of the date of the letters.

The court can estimate the principal balance as of March 2010 from the information presented by the debtor. The original loan amount was $1,265,000. It was a 30-year note. The interest rate was a variable rate which was prime plus a margin of 2.25%. The lowest interest rate possible is 2.25%, which assumes that the prime rate was zero, which it was not. Using a loan rate of 2.25% from June 27, 2008 through March 2010, the principal balance due as of April 1, 2010, can be computed. It was $1,217,394.45. This is simply a mathematical calculation. It makes assumptions in the light most favorable to the debtor. The resulting principal balance is above the §109(e) eligibility limit. In fact, the loan payoff is higher that this calculated principal balance because the 1 Year LIBOR was not zero during this period. In addition, interest accrued on the loan from March 1, 2010 through the petition date of June 11, 2015. Interest at the minimal rate of 2.25% per annum as of the petition date would be about $141,500. The interest rate and the interest due when the petition was filed were higher. There are also late charges and other fees and costs. But, the principal balance calculation is sufficient to put the debtor over the §109(e) eligibility limit.

Debtor’s counsel argues that the debtor and her husband rescinded the loan in March 2010. It is not entirely clear what counsel was arguing. If she was arguing that rescission ipso facto changed the secured loan to an unsecured loan, the debtor is significantly over the unsecured limit. If her argument is that rescission eliminates that loan, she overlooks the debtor’s rescission obligation to put the lender in the same position, less certain fees and costs, as the lender was in before the transaction. It appears that debtor’s counsel relies on Jesinoski v. Countrywide Home Loans, Inc., 574 U.S. ___, 135 S.Ct. 790 (2015). She appears to focus on that portion of the opinion discussing the elements of the common law right of rescission. Reliance is misplaced. The sole issue in that case was whether the borrowers timely rescinded the loan, not the effect of the rescission notice on the borrowers’ obligations when they rescinded the transaction. They gave their rescission notice within the three-year period but did not file suit until after the three-year period. The lender argued that they were time-barred and that the transaction was, therefore, not rescinded. The lender argued that the common law doctrine of rescission applied and required that the borrower tender the loan amount at the time of rescission for there to be a valid rescission. The borrowers gave notice of the rescission but did not tender the rescission payment. The Supreme Court acknowledged the elements of the common law rescission but held that Congress created a new right of rescission that superceded common law rescission and that notice of the rescission was all that the statute required. Debtor’s counsel appears to be arguing that because the common law element of rescission — making a tender of the rescission amount — is not required, the loan is rescinded on notice and the debtor has no further obligation. In fact, the debtor has a further obligation upon giving notice of rescission and that is to make the appropriate rescission payment. This obligation is a claim in bankruptcy. 11 U.S.C. §101(5). Nor does it matter in this case whether the claim is a secured claim or an unsecured claim. Either way, the amount of the claim exceeds the applicable limit.

Debtor’s counsel also appeared to argue that the deed of trust was invalid. There was no evidence that the deed of trust was defective or void.[3] Again, if it were, the debtor would be substantially over the unsecured debt limit of §109(e).

To the extent that debtor’s counsel was arguing that the lender forfeited its loan, its right to repayment or its rescission payment, there was simply no evidence to support the argument.

Having determined that the debtor exceeds the eligibility limits in §109(e), the question is whether the case should be dismissed or the debtor be given time to consider conversion to chapter 11. The case will be dismissed because conversion would be futile — the debtor cannot formulate an effective chapter 11 plan — and because this case was filed in bad faith.

Gilbert v. Residential Funding LLC, 678 F.3d 271 (4th Cir. 2012) makes plain that there is a difference between giving notice of rescission and determining whether the loan is properly rescinded. Anticipating Jesinoski v. Countrywide Home Loans, the Court of Appeals held that notice of rescission was required to be given within three years of the closing but suit to enforce the rescission was not required to be filed within the three-year period. Id. at 277. Giving notice of rescission does not, however, mean that the transaction must be unwound. The Court of Appeals stated:

We must not conflate the issue of whether a borrower has exercised her right to rescind with the issue of whether the rescission has, in fact, been completed and the contract voided. . . . At this stage of the litigation, we are not concerned with whether the contract has been effectively voided. A court must make a determination on the merits as to whether that should occur.

Id.

The law of the Fourth Circuit is that after the borrower gives notice of rescission, the borrower must have the ability to tender the rescission amount within a reasonable time. The Court of Appeals stated that “[t]he equitable goal of rescission under [the Truth in Lending Act] is to restore the parties to the `status quo ante.'” Am. Mortg. Network, Inc. v. Shelton, 486 F.3d 815, 820 (4th Cir. 2007). To achieve this, the borrower seeking rescission must be able to tender the borrowed funds back to the lender. Rescission is effected in a 3-step process under 15 U.S.C. §1635(b). First, the security interest in the home is voided and the borrower is not liable for any further payments. Second, the creditor has 20 days to refund any payments made in connection with the loan. Third, the borrower must tender the proceeds of the loan. Rescission should not be granted where it is clear that the borrower cannot or will not tender the borrowed funds to the creditor. 15 U.S.C. §1635(b); Shelton, 486 F.3d at 819-20. To do so would simply convert the secured lender to an unsecured lender with a claim against the borrower. That result would be inequitable and does not achieve the purpose of the statute which is to put the parties back into the position they were in prior to the loan.

If the borrower cannot tender the rescission payment within a reasonable time, the loan will not be unwound. In Haas v. Falmouth Financial, LLC, 783 F.Supp.2d 801 (E.D.Va. 2011), the District Court stated:

Because rescission entails restoring the parties to the status quo ante, rescission cannot be granted where, as here, the borrower fails to demonstrate that he has the ability to meet his tender obligation. If plaintiff were allowed to achieve rescission without meeting his tender obligation, the lender would be reduced to an unsecured creditor. Such a result is not only inequitable, but it is inconsistent with the intent of Congress in drafting TILA.

Id. at 808.

Giving notice of rescission does not void the loan or cause the lender to ipso factoforfeit its loan. It only requires that the loan be unwound. The debtor must have the ability to tender the rescission amount within a reasonable time. This obligation is a claim in bankruptcy and, absent any other applicable factor, is a secured claim.[4] It is a claim that must be addressed in a chapter 11 plan. In this case, the debtor would not be able to tender a rescission payment or address it in a chapter 11 plan.

The debtor testified that neither she nor her husband had the ability to tender a rescission amount within 60 days. This testimony — and the fair inference from their circumstances that if they would ever be able to tender the rescission amount, it would be far in the future — is corroborated by the debtor’s testimony, schedules and statement of affairs. The debtor’s husband is a dentist. He suffered a back injury that prevents him from practicing dentistry because of the necessity to stand for long periods. He is receiving significant disability payments. She works in his dental practice in a non-medical capacity. They have no savings. The house is underwater — the debtor valued it at $900,000 on her schedules.

A chapter 11 plan based on a March 2010 rescission of the transaction will not work. They cannot pay the rescission amount from savings because they have none. They cannot sell the property and pay the rescission amount from the proceeds of sale because the house is worth less than the payoff of the loan. They cannot reasonably be expected to qualify for a loan to refinance the lender in their present circumstances because they do not have enough income to support the required mortgage payment and because there is no equity in the property to support a refinance loan.

Nor does the debtor have the ability to cure the present mortgage arrearage in a chapter 11 plan. The debtor, even with the assistance of her co-debtor husband, does not have sufficient income to make the current mortgage payment and an arrearage payment.[5] Conversion to chapter 11 would be futile.

The case was filed in bad faith. There is only one creditor. The plan proposed monthly payments to the chapter 13 trustee of $3,000; however, he was to hold the payments until the debtor concluded her litigation with the lender. The current mortgage payment was not to be made. At the end of the plan, the arrearage might be cured, but there would be a new post-petition arrearage. The plan cannot be confirmed. See n.5.

The plan is illusory. The debtor has the right to dismiss her chapter 13 case at any time. 11 U.S.C. §1307(b). Upon dismissal, all funds that the trustee holds are repaid to the debtor. Harris v. Viegelahn, ___ U.S. ___; 135 S.Ct. 1829 (2015). The debtor does not have the ability, even with her husband’s assistance, to propose a traditional 60-month plan to repay the arrearage and make current mortgage payments. Nor does she have the ability to propose a plan providing that the lender would be paid from the sale of her property. In reality, the debtor simply seeks to obtain the benefit of the automatic stay while she litigates or negotiates with the lender.[6] In light of the debtor’s bad faith and futility of conversion to chapter 11, the court is not required to convert the case to chapter 11 if the debtor requested conversion under §1307.[7] See Marrama vs. Citizen Bank of Massachusetts, 549 U.S. 365, 127 S.Ct. 1105, 166, L.Ed. 2d 956 (2007) (a chapter 7 debtor acting in bad faith does not have an absolute right to convert to chapter 13); In re Mitrano, 472 B.R. 706 (E.D.Va. 2012) (a chapter 13 debtor acting in bad faith does not have an absolute right to dismissal of his case).

The debtor’s case will be dismissed because she is not eligible to be a chapter 13 debtor and because the case was filed in bad faith.

[1] Debtor’s counsel argued that the reduction of the principal loan balance from September 1, 2013 to September 1, 2015, resulted from the debtor and her husband paying the real estate taxes and insurance which, she argued, were in that same approximate — although not precise — amount. That argument is frivolous. A principal balance is reduced by payment to the lender, not by payment to third parties of real estate taxes and insurance.

[2] Interest is paid in arrears. This means that the September payment includes interest that accrued during August. In this case, the loan was made on June 27, 2008. Interest due from June 27, 2008 through June 30, 2008 was paid at closing. The first monthly mortgage payment was due on September 1, 2008 at which included the interest that accrued in August 2008.

[3] Debtor’s counsel raised this argument in her closing statement, but there were no facts in the record to support it.

[4] Another applicable factor could be that the deed of trust was defective in some manner or, perhaps, not recorded. In these instances, the lender would not have a secured claim, but it would have an unsecured claim.

[5] The proposed chapter 13 plan proposes to pay $3,000 a month as the cure payment but no regular monthly payment. The debtor’s budget show that she and her husband have sufficient income to pay the proposed $3,000 chapter 13 plan payment, but, there is no payment to the lender on the mortgage in the budget. The debtor proposes to pay real estate taxes and insurance, $1,340 and $500, respectively, but not the note payment. The combined payment as proposed by the debtor — $3,000, $1,340 and $500 for a total of $4,840 — is significantly smaller than that new payment amount shown on the June 19, 2015 change payment letter. The new monthly payment is $7,514.40. The budget does not have sufficient net disposable income to make the monthly mortgage payment and the arrearage payment. The debtor and her husband would need an additional $5,674 in monthly income to make the mortgage payment and the arrearage payment.

[6] The debtor’s husband unsuccessfully sued the lender in the District Court. The details of the suit were not presented.

[7] Although the practice is to grant a debtor’s motion to convert a chapter 13 cases to chapter 11, especially if there is a §109(e) problem, §1307(a) does not give a debtor the right to convert from chapter 13 to chapter 11. It only gives a debtor the right to convert to chapter 7.

 

Nationstar v Brown – Statute of Limitations No Defense Against Foreclosure

Statute of Limitations Applies to Whole Payment Stream

By Bob Hurt, 18 September 2015

Florida’s 1st District Appellate Court gave Germaine and Andrea Brown a rude awakening by telling them the Florida foreclosure 5-year statute of limitations does not apply a 30-year stream of mortgage payments even after the creditor accelerates the loan, making the entire balance immediately due and payable.  The panel cited the Florida Supreme Court opinion in Singleton v Greymar (2004) as the controlling authority (“the unique nature of the mortgage obligation and the continuing obligations of the parties in that relationship.”).  The panel held that “the subsequent and separate alleged default created a new and independent right in the mortgagee to accelerate payment on the note in a subsequent foreclosure action.”  In other words, every default of a scheduled payment provides a new right to sue, throughout the original term of the loan.

The panel admitted that Florida’s 3rd District had reached a contrary conclusion in Deutsche Bank v Beauvais (2014).  But the panel harked to the USDC adverse opinion in Stern v BOA (2015) which claimed that Beauvis opinion went against ”overwhelming weight of authority.”  Now the Beauvais court plans to review its decision.

This should make it abundantly clear that the foreclosure statute of limitations in Florida does not constitute a valid defense against foreclosure, except on payments more than 5 years overdue on which the creditor has failed to take action.

Why should this matter to mortgage victims facing foreclosure?  Because you cannot depend on Foreclosure Defense to defeat foreclosure.  The court/trustee will NOT give you a free house.

ONLY ONE methodology  gives home loan borrowers a reliable chance beat the appraiser, mortgage broker, title company, servicer, and creditor in a mortgage dispute:  MORTGAGE ATTACK.  Borrowers must ATTACK THE VALIDITY OF THE LOAN, and to do that, they must get a comprehensive mortgage examination.

If you have a mortgage dispute, contact Mortgage Attack NOW for a full explanation of the ONLY WINNING METHODOLOGY.

Mortgage Attack Logo

 


 

NATIONSTAR MORTGAGE, LLC v. Brown, Fla: Dist. Court of Appeals, 1st Dist. 2015

https://scholar.google.com/scholar_case?case=9222404951266369639

NATIONSTAR MORTGAGE, LLC, Appellant,
v.
GERMAINE R. BROWN a/k/a GERMAINE R. BROWN; ANDREA E. BROWN, Appellees.

Case No. 1D14-4381.

District Court of Appeal of Florida, First District.

Opinion filed August 24, 2015.

Nancy M. Wallace of Akerman LLP, Tallahassee; William P. Heller of Akerman LLP, Fort Lauderdale; Celia C. Falzone of Akerman LLP, Jacksonville, for Appellant.

Jared D. Comstock of John F. Hayter, Attorney at Law, P.A., Gainesville, for Appellees.

KELSEY, J.

Appellant challenges a final summary judgment holding that the statute of limitations bars appellant’s action to foreclose the subject mortgage. We agree with appellant that the statute of limitations did not bar the action. Thus, we reverse.

It is undisputed that appellees have failed to make any mortgage payments since February 2007, the first month in which they defaulted. In April 2007, appellant’s predecessor in interest gave notice of its intent to accelerate the note based on the February 2007 breach, and filed a foreclosure action. However, the trial court dismissed that action without prejudice in October 2007, after counsel for the lender failed to attend a case management conference.

The next relevant event occurred in November 2010, when appellant sent appellees a new notice of intent to accelerate, based on appellees’ breach in March 2007 and subsequent breaches. Appellees took no action to cure the default, and appellant filed a new foreclosure action in November 2012. Appellees asserted the statute of limitations as an affirmative defense, arguing that the new action and any future foreclosure actions were barred because they were not filed within five years after the original 2007 acceleration of the note. § 95.11(2)(c), Fla. Stat. (2012) (establishing five year statute of limitations on action to foreclose a mortgage).

The principles set forth in Singleton v. Greymar Associates, 882 So. 2d 1004 (Fla. 2004), apply in this case. In Singleton, the Florida Supreme Court recognized “the unique nature of the mortgage obligation and the continuing obligations of the parties in that relationship.” 882 So. 2d at 1007 (emphasis added). The court sought to avoidboth unjust enrichment of a defaulting mortgagor, and inequitable obstacles “prevent[ing] mortgagees from being able to challenge multiple defaults on a mortgage.” Id. at 1007-08. Giving effect to those principles in light of the continuing obligations of a mortgage, the court held that “the subsequent and separate alleged default created a new and independent right in the mortgagee to accelerate payment on the note in a subsequent foreclosure action.” Id. at 1008. The court found it irrelevant whether acceleration had been sought in earlier foreclosure actions. Id. The court’s analysis in Singleton recognizes that a note securing a mortgage creates liability for a total amount of principal and interest, and that the lender’s acceptance of payments in installments does not eliminate the borrower’s ongoing liability for the entire amount of the indebtedness.

The present case illustrates good grounds for the Singleton court’s concern with avoiding both unjust enrichment of borrowers and inequitable infringement on lenders’ remedies. Judgments such as that under review run afoul of Singleton because they release defaulting borrowers from their entire indebtedness and preclude mortgagees from collecting the total debt evidenced by the notes securing the mortgages they hold, even though the sum of the installment payments not made during the limitations period represents only a fraction of the total debt. See GMAC Mortg., LLC v. Whiddon, 164 So. 3d 97, 100 (Fla. 1st DCA 2015) (dismissal of earlier foreclosure action “did not absolve the Whiddons of their responsibility to make mortgage payments for the remaining twenty-five years of their mortgage agreement”). We further observe that both the note and the mortgage at issue here contain typical provisions reflecting the parties’ agreement that the mortgagee’s forbearance or inaction do not constitute waivers or release appellees from their obligation to pay the note in full. These binding contractual terms refute appellees’ arguments and are inconsistent with the judgment under review.

We have held previously that not even a dismissal with prejudice of a foreclosure action precludes a mortgagee “from instituting a new foreclosure action based on a different act or a new date of default not alleged in the dismissed action.” PNC Bank, N.A. v. Neal, 147 So. 3d 32, 32 (Fla. 1st DCA 2013); see also U.S. Bank Nat. Ass’n v. Bartram, 140 So. 3d 1007, 1014 (Fla. 5th DCA), review granted, 160 So. 3d 892 (Fla. 2014) (Case No. SC14-1305) (dismissal of earlier foreclosure action, whether with or without prejudice, did not bar subsequent foreclosure action based on a new default);Evergrene Partners, Inc. v. Citibank, N.A., 143 So. 3d 954, 955 (Fla. 4th DCA 2014)(foreclosure and acceleration based on an earlier default “does not bar subsequent actions and acceleration based upon different events of default”). The dismissal in this case was without prejudice, so much the more preserving appellant’s right to file a new foreclosure action based on appellees’ breaches subsequent to the February 2007 breach asserted as the procedural trigger of the earlier foreclosure action. We find that appellant’s assertion of the right to accelerate was not irrevocably “exercised” within the meaning of cases defining accrual for foreclosure actions, when the right was merely asserted and then dismissed without prejudice. See Olympia Mortg. Corp. v. Pugh, 774 So. 2d 863, 866-67 (Fla. 4th DCA 2000) (“By voluntarily dismissing the suit, [the mortgagee] in effect decided not to accelerate payment on the note and mortgage at that time.”); see also Slottow v. Hull Inv. Co., 129 So. 577, 582 (Fla. 1930) (a mortgagee could waive an acceleration election in certain circumstances). After the dismissal without prejudice, the parties returned to the status quo that existed prior to the filing of the dismissed complaint. As a matter of law, appellant’s 2012 foreclosure action, based on breaches that occurred after the breach that triggered the first complaint, was not barred by the statute of limitations. Evergrene, 143 So. 3d at 955 (“[T]he statute of limitations has not run on all of the payments due pursuant to the note, and the mortgage is still enforceable based upon subsequent acts of default.”).

We are aware that the Third District has reached a contrary conclusion in Deutsche Bank Trust Co. Americas v. Beauvais, 40 Fla. L. Weekly D1, 2014 WL 7156961 (Fla. 3d DCA Dec. 17, 2014) (Case No. 3D14-575). A federal district court has refused to follow Beauvais, noting that it is “contrary to the overwhelming weight of authority.” Stern v. Bank of America Corp., 2015 WL 3991058 at *2-3 (M.D. Fla. June 30, 2015) (No. 2:15-cv-153-FtM-29CM). The court in Beauvais acknowledges that its conclusion is contrary to the weight of authority on the questions presented. 2014 WL 7156961, at *8-9. That court’s docket shows that the court has set the case for rehearing en banc; it remains to be seen whether the merits disposition will change.

Accordingly, we reverse and remand for further proceedings on appellant’s foreclosure action.

THOMAS and MARSTILLER, JJ., CONCUR.

NOT FINAL UNTIL TIME EXPIRES TO FILE MOTION FOR REHEARING AND DISPOSITION THEREOF IF FILED.

 

IF the servicer’s home preservation company steals your stuff…

This US 8th Circuit Appellate opinion should give you heart, IF you can get a damages award from an arbitrator or trial court for theft of your stuff by a home preservation company’s felonious employees.

In this case, the arbitrator awarded the Starks $6 million to punish the servicer, note holder, and home preservation company for breaking into the home during a foreclosure dispute after the Starks had moved into an apartment across the street (still in possession, did not abandon).  The 8th Circuit upheld the award.  Appellants appealed to the SCOTUS which denied certiorari.

https://law.resource.org/pub/us/case/reporter/F3/381/381.F3d.793.03-2366.html

381 F.3d 793

Stanley William STARK; Patricia Garnet Stark, Plaintiffs-Appellants,
v.
SANDBERG, PHOENIX & VON GONTARD, P.C.; Scott Greenberg; EMC Mortgage Corporation; SpvG Trustee, Defendants-Appellees.

No. 03-2366.

United States Court of Appeals, Eighth Circuit.

Submitted: January 15, 2004.

Filed: August 26, 2004.

Appeal from the United States District Court for the Western District of Missouri, Ortrie D. Smith, J. COPYRIGHT MATERIAL OMITTED COPYRIGHT MATERIAL OMITTED Roy B. True, argued, Kansas City, Missouri, for appellant.

Mark G. Arnold, argued, St. Louis, Missouri (Robert B. Best, Jr. and Leonard L. Wagner on the brief), for appellant.

Before BYE, HEANEY and SMITH, Circuit Judges.

BYE, Circuit Judge.

1

Stanley and Patricia Stark appeal the district court’s order vacating in part an arbitration award granting them punitive damages. We reverse.

2

* Stanley and Patricia are husband and wife and live near Kansas City, Missouri. In 1999, in hopes of shoring up a failing business, the Starks borrowed $56,900 against their home and secured the loan with a mortgage. Despite the infusion of funds, the business failed and in April 2000 the Starks petitioned for bankruptcy protection. At about the same time, the Starks’ lender sold the note, which was in default, to EMC Mortgage Corporation making EMC a debt collector under the provisions of the Fair Debt Collection Practices Act (FDCPA), 15 U.S.C. §§ 1692-1692o. In anticipation of foreclosure, the Starks vacated the home and moved into an apartment across the street. The Starks, however, remained in possession of legal title and did not abandon the home. In June 2000, EMC’s motion to lift the automatic stay was granted and it proceeded with foreclosure.

3

The Starks were represented throughout the foreclosure and bankruptcy proceedings by attorney Roy True who notified EMC’s attorney, Scott Greenberg of Sandberg, Phoenix & von Gontard, P.C., that his representation of the Starks extended beyond the bankruptcy proceedings. Between October 2000 and March 2001, despite letters from True advising EMC he represented the Starks and not to contact them directly, EMC tried several times to deal directly with the Starks. In April 2001, the Starks filed suit against EMC and its attorneys alleging violations of the FDCPA.

4

EMC moved to compel arbitration as required by the parties’ loan agreement, and the district court ordered the dispute submitted to arbitration. The order compelling arbitration is not at issue in this appeal. During the pendency of the arbitration, EMC’s agent, without the Starks’ consent, forcibly entered the home and posted a sign in the front window indicating the “Property has been secured and winterized. Not for sale or rent. In case of emergency call 1st American (732) 363-3626.” The agent then contacted Mrs. Stark at her apartment, and EMC contacted Mr. Stark at work regarding the matter. Further, on November 5, 2001 and January 27, 2002, EMC wrote to the Starks directly regarding insurance coverage on the home. In total, the Starks testified EMC contacted them by mail, telephone or in person at least ten times after being advised they were represented by counsel.

5

After these incidents, the Starks moved to amend their complaint to include claims alleging intentional torts against EMC and seeking punitive damages. EMC opposed the motion arguing the arbitration agreement expressly precluded an award of punitive damages. The Starks contended the limitation on punitive damages was unconscionable and unenforceable. After extensive briefing, the arbitrator concluded the limitation was ambiguous and construed the language against EMC. The arbitrator noted the agreement purported to grant him “all powers provided by law” and then purported to deny the power to award “punitive … damages … as to which borrower and lender expressly waive any right to claim to the fullest extent permitted by law.” The arbitrator concluded,

6

In at least three places the Stark’s [sic] are promised that they can seek all damages allowed by law, and then that promise is taken away. This is the keystone of an ambiguous contract, and the Agreement is to be interpreted in their favor. As a matter of law they are not prohibited from seeking punitive damages from EMC.

7

Appellee’s app. at 22.

8

The arbitrator found EMC violated the FDCPA and awarded the Starks $1000 each in statutory damages, $1000 each in actual damages, $22,780 in attorneys fees, and $9300 for the cost of the arbitration. The arbitrator found EMC’s forcible entry into the premises “reprehensible and outrageous and in total disregard of plaintiff’s [sic] legal rights” and awarded $6,000,000 in punitive damages against EMC. Id. app. at 17.1

9

The Starks moved to confirm the award, and EMC moved to vacate the punitive damages award arguing the arbitration agreement expressly prohibited punitive damages. No other aspect of the award was challenged. The district court vacated the award of punitive damages, holding the agreement was unambiguous and not susceptible to the arbitrator’s interpretation.

10

On appeal, the Starks contend the arbitrator acted within his authority in construing the contract and his finding of an ambiguity was not irrational. EMC argues the district court’s order vacating the award of punitive damages should be affirmed.

II

11

When reviewing a district court’s order confirming or vacating an arbitral award, the court’s findings of fact are reviewed for clear error and questions of law are reviewed de novo. First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 947-48, 115 S.Ct. 1920, 131 L.Ed.2d 985 (1995); Titan Wheel Corp. of Iowa v. Local 2048, Int’l Ass’n of Machinists & Aerospace Workers, 253 F.3d 1118, 1119 (8th Cir. 2001).

12

When reviewing an arbitral award, courts accord “an extraordinary level of deference” to the underlying award itself, Keebler Co. v. Milk Drivers & Dairy Employees Union, Local No. 471, 80 F.3d 284, 287 (8th Cir.1996), because federal courts are not authorized to reconsider the merits of an arbitral award “even though the parties may allege that the award rests on errors of fact or on misinterpretation of the contract.” Bureau of Engraving, Inc. v. Graphic Communication Int’l Union, Local 1B, 284 F.3d 821, 824 (8th Cir.2002) (quotingUnited Paperworkers Int’l Union v. Misco, Inc., 484 U.S. 29, 36, 108 S.Ct. 364, 98 L.Ed.2d 286 (1987)). Indeed, an award must be confirmed even if a court is convinced the arbitrator committed a serious error, so “long as the arbitrator is even arguably construing or applying the contract and acting within the scope of his authority.” Bureau of Engraving, 284 F.3d at 824 (quoting Misco, 484 U.S. at 38).

13

The Federal Arbitration Act (FAA), 9 U.S.C. §§ 1-16, established “a liberal federal policy favoring arbitration agreements.” Moses H. Cone Mem. Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983). Thus, the FAA only allows a district court to vacate an arbitration award

14

(1) Where the award was procured by corruption, fraud, or undue means.

15

(2) Where there was evident partiality or corruption in the arbitrators, or either of them.

16

(3) Where the arbitrators were guilty of misconduct in refusing to postpone the hearing, upon sufficient cause shown, or in refusing to hear evidence pertinent and material to the controversy; or of any other misbehavior by which the rights of any party have been prejudiced.

17

(4) Where the arbitrators exceeded their powers, or so imperfectly executed them that a mutual, final, and definite award upon the subject matter submitted was not made.

18

9 U.S.C. § 10(a).

19

Similarly, under 9 U.S.C. § 11 a reviewing court may only modify the arbitrator’s award

20

(a) Where there was an evident material miscalculation of figures or an evident material mistake in the description of any person, thing, or property referred to in the award.

21

(b) Where the arbitrators have awarded upon a matter not submitted to them, unless it is a matter not affecting the merits of the decision upon the matter submitted.

22

(c) Where the award is imperfect in matter of form not affecting the merits of the controversy.

23

9 U.S.C. § 11.

24

A “district court must take the award as it finds it and either vacate the entire award using section 10 or modify the award using section 11.” Legion Ins. Co. v. VCW, Inc., 198 F.3d 718, 721 (8th Cir.1999). The deference owed to arbitration awards, however, “is not the equivalent of a grant of limitless power,” Leed Architectural Prods., Inc. v. United Steelworkers of Am., Local 6674, 916 F.2d 63, 65 (2d Cir.1990), and “courts are neither entitled nor encouraged simply to `rubber stamp’ the interpretations and decisions of arbitrators.”Matteson v. Ryder Sys. Inc., 99 F.3d 108, 113 (3d Cir.1996). Thus, courts may also vacate arbitral awards which are “completely irrational” or “evidence[] a manifest disregard for the law.” Hoffman v. Cargill Inc., 236 F.3d 458, 461 (8th Cir.2001) (internal quotations and citations omitted).

25

An award is “irrational where it fails to draw its essence from the agreement” or it “manifests disregard for the law where the arbitrators clearly identify the applicable, governing law and then proceed to ignore it.” Id. at 461-62. “An arbitrator’s award draws its essence from the [parties’ agreement] as long as it is derived from the agreement, viewed in light of its language, its context, and any other indicia of the parties’ intention.” Johnson Controls, Inc., Sys. & Servs. Div. v. United Ass’n of Journeymen, 39 F.3d 821, 825 (7th Cir.1994) (internal quotations omitted).

26

Faced with these limitations on a court’s ability to review arbitration awards, EMC argues the arbitrator’s award of punitive damages was properly vacated under § 10 because the arbitrator exceeded his powers by modifying the unambiguous agreement, and properly modified under § 11 because in considering the issue of punitive damages the arbitrator made a decision on a matter not submitted to him.2 EMC also argues the arbitrator’s finding of an ambiguity was irrational and without foundation in reason or fact because the clear language of the agreement precludes an award of punitive damages. Finally, EMC argues the award of punitive damages was excessive and made in manifest disregard of the law. Because we conclude the arbitration agreement unambiguously permitted the award of punitive damages, we hold the award of punitive damages was proper and reverse the district court.

III

27

The plain language of the arbitration agreement states the “borrower and lender expressly waive any right to claim [punitive damages] to the fullest extent permitted by law.” Appellee’s app. at 19 (emphasis added). Thus, the agreement only effected a limited waiver of punitive damages, that is, punitive damages were waived only if the governing law permitted such a waiver. Conversely, if the law did not permit the waiver of punitive damages, the arbitration agreement unambiguously preserved the right to claim them.

28

Under Missouri law “there is no question that one may never exonerate oneself from future liability for intentional torts or for gross negligence, or for activities involving the public interest.” Alack v. Vic Tanny Int’l of Mo., Inc., 923 S.W.2d 330, 337 (Mo.1996) (citingLiberty Fin. Mgmt. Corp. v. Beneficial Data Processing Corp., 670 S.W.2d 40, 48 (Mo.App.1984)) (in turn citing 6A Corbin on Contracts, § 1472 (1962)). An attempt to procure a waiver of punitive damages is an attempt to exonerate oneself from future liability for intentional torts or gross negligence, because the remedy of punitive damages would otherwise be available for such acts. Thus, Missouri law did not permit EMC to exonerate itself from liability for the intentional torts committed against the Starks by procuring the punitive damages waiver, and the arbitrator did not exceed his authority in awarding punitive damages.

29

We recognize the FAA allows parties to incorporate terms into arbitration agreements that are contrary to state law. See UHC Mgmt. Co. v. Computer Sciences, Corp., 148 F.3d 992, 997 (8th Cir.1998) (holding “[p]arties may choose to be governed by whatever rules they wish regarding how an arbitration itself will be conducted.”) (citation omitted). Thus, had the parties to this agreement intended its interpretation to be governed solely by the FAA, the punitive damages waiver might have barred any such award. The plain language of the agreement, however, makes it clear Missouri law applies to this issue.

30

The agreement’s arbitration clause provides,

31

Arbitration. To the extent allowed by applicable law, any Claim … shall be resolved by binding arbitration in accordance with (1) the Federal Arbitration Act, . . . (2) the Expedited Procedures of the Commercial Arbitration Rules of the American Arbitration Association … and (3) this Agreement.

32

Appellee’s app. at 19 (emphasis added).

33

The agreement then defines applicable law as “the laws of the state in which the property which secures the Transaction is located.” Id.(emphasis added). In other words, the agreement makes clear the parties intent to apply Missouri state substantive law while operating within the framework of the FAA, American Arbitration Association rules and the agreement. As previously noted, the punitive damages waiver expressly states the parties intended to waive punitive damages only to the extent permitted by Missouri law. Because Missouri law would not permit a waiver under the facts of this case, we hold the arbitrator’s award of punitive damages was proper.

IV

34

Alternatively, while we believe the plain meaning of the agreement supports the award of punitive damages, we also conclude the arbitrator’s finding of an ambiguity was not irrational.

35

The arbitration clause states any claims will be resolved in accordance with the FAA, which permits a waiver of punitive damages. The choice of laws provision, however, states claims must be resolved in accordance with “applicable [Missouri] law,” which does not permit the waiver of punitive damages argued for by EMC in this case. Thus, an arbitrator could reasonably conclude this agreement is ambiguous.

36

In Mastrobuono v. Shearson Lehman Hutton, Inc., 514 U.S. 52, 62, 115 S.Ct. 1212, 131 L.Ed.2d 76 (1995), the Supreme Court considered the juxtaposition of a choice of laws provision prohibiting punitive damages with an arbitration clause permitting an award of punitive damages. The Court concluded “[a]t most, the choice-of-law clause introduces an ambiguity into an arbitration agreement that would otherwise allow punitive damages awards.” Id. (Emphasis added). As in Mastrobuono, an arbitrator interpreting this agreement could reasonably conclude the apparent conflict between the arbitration clause and the choice of laws provision introduced an ambiguity into the agreement. Accordingly, the Supreme Court’s recognition that an ambiguity is created when an agreement purports to be governed by conflicting state and federal law is instructive, and supports the arbitrator’s finding of an ambiguity.

37

Additionally, we cannot ignore well-settled precedent from this court holding state contract law governs whether an arbitration agreement is ambiguous. See Lyster v. Ryan’s Family Steak Houses, Inc., 239 F.3d 943, 946 (8th Cir.2001). Under Missouri law, “[t]he primary rule in the interpretation of a contract is to ascertain the intention of the parties and to give effect to that intention.” Speedie Food Mart, Inc. v. Taylor, 809 S.W.2d 126, 129 (Mo.Ct.App.1991). The test for determining if an ambiguity exists in a written contract is “whether the disputed language, in the context of the entire agreement, is reasonably susceptible of more than one construction giving the words their plain meaning as understood by a reasonable average person.” Speedie Food Mart, 809 S.W.2d at 129.

38

In this case, EMC argues the exclusionary language is clear and unambiguous and shields it from liability for any award of punitive damages. When viewed in the context of Missouri law governing exculpatory clauses, however, this clause could easily be viewed as ambiguous. “A `latent ambiguity’ arises where a writing on its face appears clear and unambiguous, but some collateral matter makes the meaning uncertain.” Royal Banks of Missouri v. Fridkin, 819 S.W.2d 359, 362 (Mo. 1991) (en banc) (citation omitted). Here, the ambiguity arises because the clause attempts to effect a prospective waiver of rights which Missouri law holds may not be waived. Under Missouri law “there is no question that one may never exonerate oneself from future liability for intentional torts or for gross negligence, or for activities involving the public interest.” Alack, 923 S.W.2d at 337 (citations omitted). Words purporting to waive claims which cannot be waived “demonstrate the ambiguity of the contractual language.” Id.

39

Finally, EMC “cannot overcome the common-law rule of contract interpretation that a court should construe ambiguous language against the interest of the party that drafted it.” Mastrobuono, 514 U.S. at 62, 115 S.Ct. 1212 (citations omitted). EMC “cannot now claim the benefit of the doubt. The reason for this rule is to protect the party who did not choose the language from an unintended or unfair result.” Id. at 63, 115 S.Ct. 1212.

40

Accordingly, we conclude the arbitrator’s finding that the contract was ambiguous was not irrational.

V

41

EMC next argues the award of punitive damages was properly vacated because it is excessive and exhibits a manifest disregard of the law. We disagree.

42

“Beyond the grounds for vacation provided in the FAA, an award will only be set aside where it is completely irrational or evidences a manifest disregard for the law.” Hoffman, 236 F.3d at 461 (internal citations and quotations omitted) (emphasis added). “These extra-statutory standards are extremely narrow: … [A]n arbitration decision only manifests disregard for the law where the arbitrators clearly identify the applicable, governing law and then proceed to ignore it.” Id. at 461-62 (citing Stroh Container Co. v. Delphi Indus., 783 F.2d 743, 749-50 (8th Cir.1986)) (emphasis added).

43

“A party seeking vacatur [based on manifest disregard of the law] bears the burden of proving that the arbitrators were fully aware of the existence of a clearly defined governing legal principle, but refused to apply it, in effect, ignoring it.” Duferco Int’l Steel Trading v. T. Klaveness Shipping A/S, 333 F.3d 383, 389 (2d Cir.2003). Because “[a]rbitrators are not required to elaborate their reasoning supporting an award,” El Dorado Sch. Dist. # 15 v. Continental Cas. Co., 247 F.3d 843, 847 (8th Cir.2001) (internal quotations omitted), “[i]f they choose not to do so, it is all but impossible to determine whether they acted with manifest disregard for the law.” W. Dawahare v. Spencer,210 F.3d 666, 669 (6th Cir.2000) (citing Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Jaros, 70 F.3d 418, 421 (6th Cir. 1995)).

44

Manifest disregard of the law “is more than a simple error in law or a failure by the arbitrators to understand or apply it; and, it is more than an erroneous interpretation of the law.” Duferco Int’l, 333 F.3d at 389 (citations omitted). “Our disagreement with an arbitrator’s interpretation of the law or determination of the facts is an insufficient basis for setting aside his award.” El Dorado Sch. Dist., 247 F.3d at 847 (citing Hoffman, 236 F.3d at 462).

45

In support of its claim, EMC argues the arbitrator disregarded the Supreme Court’s pronouncements in BMW of N. Am., Inc. v. Gore,517 U.S. 559, 572-74, 116 S.Ct. 1589, 134 L.Ed.2d 809 (1996) (describing a 500:1 ratio of punitive to compensatory damages as “breathtaking” and suspicious), and State Farm Mut. Auto. Ins. Co. v. Campbell, 538 U.S. 408, 426, 123 S.Ct. 1513, 155 L.Ed.2d 585 (2003) (finding a 145:1 ratio of punitive to compensatory damages presumptively excessive). In so arguing, however, EMC has failed to present any evidence that the arbitrator “clearly identif[ied] the applicable, governing law and then proceed[ed] to ignore it.” Hoffman,236 F.3d at 461-62 (citing Stroh Container, 783 F.2d at 749-50). None of the cases relied upon by EMC are cited in the arbitrator’s decision,3 and there is nothing in the record to demonstrate “one of the parties clearly stated the law and the arbitrator[ ] expressly chose not to follow it.” W. Dawahare, 210 F.3d at 670; see also Duferco Int’l, 333 F.3d at 390 (“In determining an arbitrator’s awareness of the law, we impute only knowledge of governing law identified by the parties to the arbitration.”) (citation omitted).

46

Indeed, to the extent the arbitrator’s decision sets forth the basis for the punitive damages award, it is apparent the arbitrator did not disregard governing law. The arbitrator’s award was intended to punish EMC and to deter others from similar conduct. In arriving at the appropriate amount, the arbitrator specifically found the $6,000,000 award (amounting to one-tenth of one percent of shareholder equity) was “not great punishment but it should act as a deterence [sic].” Appellee’s app. at 18; see also Barnett v. La Societe Anonyme Turbomeca France, 963 S.W.2d 639, 655 (Mo.App.1998) (holding under Missouri law the net worth of a defendant is relevant when determining the extent of punitive damages necessary to punish and deter the defendant). Accordingly, we reject EMC’s claim of manifest disregard.

47

“Although this result may seem draconian, the rules of law limiting judicial review and the judicial process in the arbitration context are well established and the parties … can be presumed to have been well versed in the consequences of their decision to resolve their disputes in this manner.” Stroh Container, 783 F.2d at 751. Moreover, “[a]rbitration is not a perfect system of justice, nor it is [sic] designed to be.”Hoffman, 236 F.3d at 462 (citation omitted). Rather, it “is designed primarily to avoid the complex, time-consuming and costly alternative of litigation.” Id.

48

In the arbitration setting we have almost none of the protections that fundamental fairness and due process require for the imposition of this form of punishment. Discovery is abbreviated if available at all. The rules of evidence are employed, if at all, in a very relaxed manner. The factfinders (here the panel) operate with almost none of the controls and safeguards [present in traditional litigation.]

49

Lee v. Chica, 983 F.2d 883, 889 (8th Cir. 1993) (Beam, J. concurring in part and dissenting in part).

50

Here, EMC chose to resolve this “dispute quickly and efficiently through arbitration.” Schoch v. InfoUSA, Inc., 341 F.3d 785, 791 (8th Cir.2003), cert. denied, ___ U.S. ___, 124 S.Ct. 1414, 158 L.Ed.2d 81 (2004). Indeed, it was EMC that insisted on removing the matter to arbitration. In so doing, EMC “got exactly what it bargained for.” Id. “Having entered such a contract, [EMC] must subsequently abide by the rules to which it agreed.” Hoffman, 236 F.3d at 463 (citation omitted).

VI

51

We reverse the district court’s order vacating the award of punitive damages and remand with instructions to confirm the arbitrator’s award in its entirety.

Notes:

1The arbitrator indicated the award of punitive damages was calculated as one percent of EMC’s shareholder equity. One percent of equity, however, would have resulted in an award of $60,000,000. The arbitrator later clarified this mistake indicating it was his intent to award $6,000,000. Thus, the award was actually calculated as one-tenth of one percent of shareholder equity

2EMC’s § 11 argument is clearly without merit. The issue of punitive damages was submitted to the arbitrator. If the award was improper because it exceeded the scope of the agreement, § 10 is the proper avenue to redress the arbitrator’s error

3The arbitrator’s decision predatesState Farm making it impossible for the arbitrator to have identified the decision as controlling.

Mort Gezzam photo
Mort Gezzam

Does the Creditor Owe the Borrower a Loan Mod?

Many people have suffered when servicers lied to them about the need to miss payments in order to qualify for a loan modification.  But lenders owe borrowers no duty to give them loan modifications.

Lueras, 221 Cal. App. 4th at 68 (defendants “did not have a common law duty of care to offer, consider, or approve a loan modification, or to offer [plaintiff] alternatives to foreclosure,” nor “a duty of care to handle [plaintiff]’s loan `in such a way to prevent foreclosure and forfeiture of his property;'” however, “a lender does owe a duty to a borrower to not make material misrepresentations about the status of an application for a loan modification.”)

Borrowers should get all loan mod offers in writing, particularly claims that the borrower must miss payments to qualify.

Remember:  An oral agreement isn’t worth the paper it’s written on!

Mort Gezzam photo
Mort Gezzam

Foreclosure Statute of Limitations Leaves Bad Taste in Judge’s Mouth

Foreclosure Statute of Limitations Leaves Bad Taste in Judge’s Mouth – In Re:  Washington 

https://scholar.google.com/scholar_case?case=1086839727325893797

“…with figurative hand holding the nose, the Court, for the reasons
set forth below, will grant Debtor’s motion for summary judgment.”

“The Court will proceed to gargle in an effort to remove the lingering bad taste.”

In the case I linked above, the New Jersey US Bankruptcy court denied foreclosure of an unpaid mortgage because the claimant securitization trust FAILED to sue within 6 years after it had accelerated the note because of non-payment. The New Jersey 6 year foreclosure statute of limitations, enacted in 2009 as an adjunct to the 1995 Fair Foreclosure Act, forbids foreclosure later than 6 years after accelerating the note.

I see the banks’ moaning about this decision as an effort to have their cake and eat it too. The bank accelerates the note, making the whole balance due immediately, but still wants the statute of limitations to expire AFTER the originally scheduled maturity date of the note(typically 20 or 30 years.)

A similar dispute has arisen in Florida, and the courts simply cannot face the reality that creditors who fail properly to litigate
foreclosure deserve to lose their claim against the borrower. The Florida Supreme Court has failed to weigh in on the matter so far, but has granted certiorari to determine whether the Statute of Limitations applies to accelerated notes. See Bartram v. U.S. Bank, Nat’l Ass’n, 140 So. 3d 1007 (Fla. 5th DCA 2014), cert granted, (Fla. Sept. 11, 2014)(No. SC14-1265).

The Third District has opined that a dismissal with prejudice
de-accelerates the note as a matter of law. I disagree, but anyway see Deutsche Bank Trust Company Americas v. Beauvais, 3D14-575, 2014 WL 7156961 (Fla. 3d DCA 2014). The Third DCA also held that a threat to accelerate does not constitute an acceleration. See Snow v. Wells Fargo Bank, N.A., 2015 WL 160326 (Fla. 3d DCA Jan. 14, 2015).
In my opinion, a threat to accelerate does not constitute an
acceleration, but NO dismissal, with or without prejudice, stops the
statute of limitation clock from ticking or restarts it. The clock
starts ticking on the payment stream at the instant the first breach
occurs or on the entire amount of the note with accrued interest and
collection costs the instant the creditor accelerates the note.

The big rub in all this lies with the concept of acceleration. The borrower must make payments in a stream of payments, and every payment has an associated statute of limitations. But if,  because of a breach, the creditor accelerates the note, making the entire balance due and payable forthwith, the statute of limitations clock starts ticking at the acceleration because the payment stream obligation no longer exists, by operation of the law of the contract.

Let us back off from all this to see it in crystal clear context. What difference does a foreclosure or related statute of limitations make when the lender or others injured the borrower at the inception of the loan through such heinous acts as these:

  • appraisal fraud
  • loan application fraud
  • bait and switch tactics
  • excessive origination fees
  • excessive interest

?

A borrower who attacks the injurious parties over these can end up with millions of dollars in compensatory and punitive damages, or the house free and clear, without the gruelling terror of a foreclosure battle.

If you want to know how to find such injuries as those I listed above,
plus dozens more, visit this web site:

http://mortgageattack.com

Then, give me a call

Bob Hurt
727 669 5511

Why a Mortgage Note is Not a Security

You might believe that a mortgage note or a deed of trust is a security,  but here is your proof to the contrary:
 
The 1934 Act says that the term “security” includes “any note . . . [excepting one] which has a maturity at the time of issuance of not exceeding nine months,” and the 1933 Act says that the term means “any note” save for the registration exemption in § 3(a)(3). These are the plain terms of both acts, to be applied “unless the context otherwise requires.” A party asserting that a note of more than nine months maturity is not within the 1934 Act (or that a note with a maturity of nine months or less is within it) or that any note is not within the antifraud provisions of the 1933 Act[18] has the 1138*1138 burden of showing that “the context otherwise requires.” (Emphasis supplied.) One can readily think of many cases where it does—the note delivered in consumer financing, the note secured by a mortgage on a home, the short-term note secured by a lien on a small business or some of its assets, the note evidencing a “character” loan to a bank customer, short-term notes secured by an assignment of accounts receivable, or a note which simply formalizes an open-account debt incurred in the ordinary course of business (particularly if, as in the case of the customer of a broker, it is collateralized). When a note does not bear a strong family resemblance to these examples and has a maturity exceeding nine months, § 10(b) of the 1934 Act should generally be held to apply.[19]
“See Exchange Nat. Bank, supra, at 1138 (types of notes that are not “securities” include “the note delivered in consumer financing, the note secured by a mortgage on a home, the short-term note secured by a lien on a small business or some of its assets, the note evidencing a `character’ loan to a bank customer, short-term notes secured by an assignment of accounts receivable, or a note which simply formalizes an open-account debt incurred in the ordinary course of business (particularly if, as in the case of the customer of a broker, it is collateralized)”);Chemical Bank, supra, at 939 (adding to list “notes evidencing loans by commercial banks for current operations”).”
For an explanation, read this first part of the Reves opinion.  The law does not always mean what it says.
494 U.S. 56 (1990)

REVES ET AL.
v.
ERNST & YOUNG

No. 88-1480.
Supreme Court of United States.

Argued November 27, 1989
Decided February 21, 1990
CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE EIGHTH CIRCUIT58*58 John R. McCambridge argued the cause for petitioners. With him on the briefs wereGary M. Elden, Jay R. Hoffman, and Robert R. Cloar.

Michael R. Lazerwitz argued the cause for the Securities and Exchange Commission asamicus curiae urging reversal. With him on the brief were Solicitor General Starr, Deputy Solicitor General Merrill, Daniel L. Goelzer, Paul Gonson, Jacob H. Stillman, Martha H. McNeely, Randall W. Quinn, and Eva Marie Carney.

John Matson argued the cause for respondent. With him on the brief were Carl D. Liggio, Kathryn A. Oberly, and Fred Lovitch.[*]

JUSTICE MARSHALL delivered the opinion of the Court.

This case presents the question whether certain demand notes issued by the Farmers Cooperative of Arkansas and Oklahoma (Co-Op) are “securities” within the meaning of § 3(a)(10) of the Securities Exchange Act of 1934. We conclude that they are.

I

The Co-Op is an agricultural cooperative that, at the time relevant here, had approximately 23,000 members. In order to raise money to support its general business operations, the Co-Op sold promissory notes payable on demand by the holder. Although the notes were uncollateralized and uninsured, they paid a variable rate of interest that was adjusted 59*59 monthly to keep it higher than the rate paid by local financial institutions. The Co-Op offered the notes to both members and nonmembers, marketing the scheme as an “Investment Program.” Advertisements for the notes, which appeared in each Co-Op newsletter, read in part: “YOUR CO-OP has more than $11,000,000 in assets to stand behind your investments. The Investment is not Federal[sic] insured but it is. . . Safe . . . Secure . . . and available when you need it.” App. 5 (ellipses in original). Despite these assurances, the Co-Op filed for bankruptcy in 1984. At the time of the filing, over 1,600 people held notes worth a total of $10 million.

After the Co-Op filed for bankruptcy, petitioners, a class of holders of the notes, filed suit against Arthur Young & Co., the firm that had audited the Co-Op’s financial statements (and the predecessor to respondent Ernst & Young). Petitioners alleged, inter alia, that Arthur Young had intentionally failed to follow generally accepted accounting principles in its audit, specifically with respect to the valuation of one of the Co-Op’s major assets, a gasohol plant. Petitioners claimed that Arthur Young violated these principles in an effort to inflate the assets and net worth of the Co-Op. Petitioners maintained that, had Arthur Young properly treated the plant in its audits, they would not have purchased demand notes because the Co-Op’s insolvency would have been apparent. On the basis of these allegations, petitioners claimed that Arthur Young had violated the antifraud provisions of the 1934 Act as well as Arkansas’ securities laws.

Petitioners prevailed at trial on both their federal and state claims, receiving a $6.1 million judgment. Arthur Young appealed, claiming that the demand notes were not “securities” under either the 1934 Act or Arkansas law, and that the statutes’ antifraud provisions therefore did not apply. A panel of the Eighth Circuit, agreeing with Arthur Young on both the state and federal issues, reversed. Arthur Young & Co. v. Reves, 856 F. 2d 52 (1988). We granted certiorari to address 60*60 the federal issue, 490 U. S. 1105 (1989), and now reverse the judgment of the Court of Appeals.

II

A

This case requires us to decide whether the note issued by the Co-Op is a “security” within the meaning of the 1934 Act. Section 3(a)(10) of that Act is our starting point:

“The term `security’ means any note, stock, treasury stock, bond, debenture, certificate of interest or participation in any profit-sharing agreement or in any oil, gas, or other mineral royalty or lease, any collateral-trust certificate, preorganization certificate or subscription, transferable share, investment contract, voting-trust certificate, certificate of deposit, for a security, any put, call, straddle, option, or privilege on any security, certificate of deposit, or group or index of securities (including any interest therein or based on the value thereof), or any put, call, straddle, option, or privilege entered into on a national securities exchange relating to foreign currency, or in general, any instrument commonly known as a `security’; or any certificate of interest or participation in, temporary or interim certificate for, receipt for, or warrant or right to subscribe to or purchase, any of the foregoing; but shall not include currency or any note, draft, bill of exchange, or banker’s acceptance which has a maturity at the time of issuance of not exceeding nine months, exclusive of days of grace, or any renewal thereof the maturity of which is like-wise limited.” 48 Stat. 884, as amended, 15 U. S. C. § 78c(a)(10).

The fundamental purpose undergirding the Securities Acts is “to eliminate serious abuses in a largely unregulated securities market.” United Housing Foundation, Inc. v.Forman, 421 U. S. 837, 849 (1975). In defining the scope of the market that it wished to regulate, Congress painted with a broad brush. It recognized the virtually limitless scope of 61*61 human ingenuity, especially in the creation of “countless and variable schemes devised by those who seek the use of the money of others on the promise of profits,”SEC v. W. J. Howey Co., 328 U. S. 293, 299 (1946), and determined that the best way to achieve its goal of protecting investors was “to define `the term “security” in sufficiently broad and general terms so as to include within that definition the many types of instruments that in our commercial world fall within the ordinary concept of a security.’ ” Forman, supra, at 847-848 (quoting H. R. Rep. No. 85, 73d Cong., 1st Sess., 11 (1933)). Congress therefore did not attempt precisely to cabin the scope of the Securities Acts.[1] Rather, it enacted a definition of “security” sufficiently broad to encompass virtually any instrument that might be sold as an investment.

Congress did not, however, “intend to provide a broad federal remedy for all fraud.”Marine Bank v. Weaver, 455 U. S. 551, 556 (1982). Accordingly, “[t]he task has fallen to the Securities and Exchange Commission (SEC), the body charged with administering the Securities Acts, and ultimately to the federal courts to decide which of the myriad financial transactions in our society come within the coverage of these statutes.”Forman, supra, at 848. In discharging our duty, we are not bound by legal formalisms, but instead take account of the economics of the transaction under investigation. See, e. g., Tcherepnin v. Knight, 389 U. S. 332, 336 (1967) (in interpreting the term “security,” “form should be disregarded for substance and the emphasis should be on economic reality”). Congress’ purpose in enacting the securities laws was to regulate investments,in whatever form they are made and by whatever name they are called.

62*62 A commitment to an examination of the economic realities of a transaction does not necessarily entail a case-by-case analysis of every instrument, however. Some instruments are obviously within the class Congress intended to regulate because they are by their nature investments. In Landreth Timber Co. v. Landreth, 471 U. S. 681 (1985), we held that an instrument bearing the name “stock” that, among other things, is negotiable, offers the possibility of capital appreciation, and carries the right to dividends contingent on the profits of a business enterprise is plainly within the class of instruments Congress intended the securities laws to cover. Landreth Timber does not signify a lack of concern with economic reality; rather, it signals a recognition that stock is, as a practical matter, always an investment if it has the economic characteristics traditionally associated with stock. Even if sparse exceptions to this generalization can be found, the public perception of common stock as the paradigm of a security suggests that stock, in whatever context it is sold, should be treated as within the ambit of the Acts. Id., at 687, 693.

We made clear in Landreth Timber that stock was a special case, explicitly limiting our holding to that sort of instrument. Id., at 694. Although we refused finally to rule out a similar per se rule for notes, we intimated that such a rule would be unjustified. Unlike “stock,” we said, ” `note’ may now be viewed as a relatively broad term that encompasses instruments with widely varying characteristics, depending on whether issued in a consumer context, as commercial paper, or in some other investment context.” Ibid. (citing Securities Industry Assn. v. Board of Governors of Federal Reserve System, 468 U. S. 137, 149-153 (1984)). While common stock is the quintessence of a security, Landreth Timber, supra, at 693, and investors therefore justifiably assume that a sale of stock is covered by the Securities Acts, the same simply cannot be said of notes, which are used in a variety of settings, not all of which involve investments. Thus,63*63 the phrase “any note” should not be interpreted to mean literally “any note,” but must be understood against the backdrop of what Congress was attempting to accomplish in enacting the Securities Acts.[2]

Because the Landreth Timber formula cannot sensibly be applied to notes, some other principle must be developed to define the term “note.” A majority of the Courts of Appeals that have considered the issue have adopted, in varying forms, “investment versus commercial” approaches that distinguish, on the basis of all of the circumstances surrounding the transactions, notes issued in an investment context (which are “securities”) from notes issued in a commercial or consumer context (which are not). See, e. g., Futura Development Corp. v. Centex Corp., 761 F. 2d 33, 40-41 (CA1 1985);McClure v. First Nat. Bank of Lubbock, Texas, 497 F. 2d 490, 492-494 (CA5 1974);Hunssinger v. Rockford Business Credits, Inc., 745 F. 2d 484, 488 (CA7 1984);Holloway v. Peat, Marwick, Mitchell & Co., 879 F. 2d 772, 778-779 (CA10 1989), cert. pending No. 89-532.

The Second Circuit’s “family resemblance” approach begins with a presumption that anynote with a term of more than nine months is a “security.” See, e. g., Exchange Nat. Bank of Chicago v. Touche Ross & Co., 544 F. 2d 1126, 1137 (CA2 1976). Recognizing that not all notes are securities, however, the Second Circuit has also devised a list of notes that it has decided are obviously not securities. Accordingly, 64*64 the “family resemblance” test permits an issuer to rebut the presumption that a note is a security if it can show that the note in question “bear[s] a strong family resemblance” to an item on the judicially crafted list of exceptions, id., at 1137-1138, or convinces the court to add a new instrument to the list, see, e. g., Chemical Bank v. Arthur Anderson & Co., 726 F. 2d 930, 939 (CA2 1984).

In contrast, the Eighth and District of Columbia Circuits apply the test we created in SECv. W. J. Howey Co., 328 U. S. 293 (1946), to determine whether an instrument is an “investment contract” to the determination whether an instrument is a “note.” Under this test, a note is a security only if it evidences “(1) an investment; (2) in a common enterprise; (3) with a reasonable expection of profits; (4) to be derived from the entrepreneurial or managerial efforts of others.” 856 F. 2d, at 54 (case below). Accord,Baurer v. Planning Group, Inc., 215 U. S. App. D. C. 384, 391-393, 669 F. 2d 770, 777-779 (1981). See also Underhill v. Royal, 769 F. 2d 1426, 1431 (CA9 1985) (setting forth what it terms a “risk capital” approach that is virtually identical to the Howey test).

We reject the approaches of those courts that have applied the Howey test to notes;Howey provides a mechanism for determining whether an instrument is an “investment contract.” The demand notes here may well not be “investment contracts,” but that does not mean they are not “notes.” To hold that a “note” is not a “security” unless it meets a test designed for an entirely different variety of instrument “would make the Acts’ enumeration of many types of instruments superfluous,” Landreth Timber, 471 U. S., at 692, and would be inconsistent with Congress’ intent to regulate the entire body of instruments sold as investments, see supra, at 60-62.

The other two contenders — the “family resemblance” and “investment versus commercial” tests — are really two ways of formulating the same general approach. Because we 65*65 think the “family resemblance” test provides a more promising framework for analysis, however, we adopt it. The test begins with the language of the statute; because the Securities Acts define “security” to include “any note,” we begin with a presumption that every note is a security.[3] We nonetheless recognize that this presumption cannot be irrebutable. As we have said, supra, at 61, Congress was concerned with regulating the investment market, not with creating a general federal cause of action for fraud. In an attempt to give more content to that dividing line, the Second Circuit has identified a list of instruments commonly denominated “notes” that nonetheless fall without the “security” category. See Exchange Nat. Bank, supra, at 1138 (types of notes that are not “securities” include “the note delivered in consumer financing, the note secured by a mortgage on a home, the short-term note secured by a lien on a small business or some of its assets, the note evidencing a `character’ loan to a bank customer, short-term notes secured by an assignment of accounts receivable, or a note which simply formalizes an open-account debt incurred in the ordinary course of business (particularly if, as in the case of the customer of a broker, it is collateralized)”);Chemical Bank, supra, at 939 (adding to list “notes evidencing loans by commercial banks for current operations”).

We agree that the items identified by the Second Circuit are not properly viewed as “securities.” More guidance, though, is needed. It is impossible to make any meaningful inquiry into whether an instrument bears a “resemblance” to 66*66 one of the instruments identified by the Second Circuit without specifying what it is about those instruments that makes them non-“securities.” Moreover, as the Second Circuit itself has noted, its list is “not graven in stone,” 726 F. 2d, at 939, and is therefore capable of expansion. Thus, some standards must be developed for determining when an item should be added to the list.

An examination of the list itself makes clear what those standards should be. In creating its list, the Second Circuit was applying the same factors that this Court has held apply in deciding whether a transaction involves a “security.” First, we examine the transaction to assess the motivations that would prompt a reasonable seller and buyer to enter into it. If the seller’s purpose is to raise money for the general use of a business enterprise or to finance substantial investments and the buyer is interested primarily in the profit the note is expected to generate, the instrument is likely to be a “security.” If the note is exchanged to facilitate the purchase and sale of a minor asset or consumer good, to correct for the seller’s cash-flow difficulties, or to advance some other commercial or consumer purpose, on the other hand, the note is less sensibly described as a “security.” See, e. g., Forman, 421 U. S., at 851 (share of “stock” carrying a right to subsidized housing not a security because “the inducement to purchase was solely to acquire subsidized low-cost living space; it was not to invest for profit”). Second, we examine the “plan of distribution” of the instrument, SEC v. C. M. Joiner Leasing Corp.,320 U. S. 344, 353 (1943), to determine whether it is an instrument in which there is “common trading for speculation or investment,” id., at 351. Third, we examine the reasonable expectations of the investing public: The Court will consider instruments to be “securities” on the basis of such public expectations, even where an economic analysis of the circumstances of the particular transaction might suggest that the instruments are not “securities” as used in that transaction. Compare Landreth Timber,471 67*67 U. S., at 687, 693 (relying on public expectations in holding that common stock is always a security), with id., at 697-700 (STEVENS, J., dissenting) (arguing that sale of business to single informed purchaser through stock is not within the purview of the Acts under the economic reality test). See also Forman, supra, at 851. Finally, we examine whether some factor such as the existence of another regulatory scheme significantly reduces the risk of the instrument, thereby rendering application of the Securities Acts unnecessary. See, e. g., Marine Bank, 455 U. S., at 557-559, and n. 7.

We conclude, then, that in determining whether an instrument denominated a “note” is a “security,” courts are to apply the version of the “family resemblance” test that we have articulated here: A note is presumed to be a “security,” and that presumption may be rebutted only by a showing that the note bears a strong resemblance (in terms of the four factors we have identified) to one of the enumerated categories of instrument. If an instrument is not sufficiently similar to an item on the list, the decision whether another category should be added is to be made by examining the same factors.

Bob Hurt, Concerned Bob Hurt         Blog 1 2 3   f  t  
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Erobobo, Rajamin – Why Borrowers Cannot Enforce the PSA

In the Rajamin opinion, the US 2nd Circuit made it clear that a only a party to, a person injured by, or a third party beneficiary of the Pooling and Servicing Agreement (PSA) has standing to enforce or dispute it.  Thus, the  effort to challenge standing to sue because of a violation of the PSA will ultimately fail and waste a lot of resources, as Rajamin discovered the hard way.

Rajamin v. Deutsche Bank Nat. Trust Co., 757 F. 3d 79 – Court of Appeals, 2nd Circuit

How Courts have cited Rajamin

You will find the most recent serious citation to Rajamin in this Erobobo slip opinion:

WELLS FARGO BANK, NA v. EROBOBO, 2015 NY Slip Op 3522 – NY: Appellate Div., 2nd Dept. 2

In any event, Erobobo, as a mortgagor whose loan is owned by a trust, does not have standing to challenge the plaintiff’s possession or status as assignee of the note and mortgage based on purported noncompliance with certain provisions of the PSA (see Bank of N.Y. Mellon v Gales, 116 AD3d 723, 725; Rajamin v Deutsche Bank Natl. Trust Co., 757 F3d 79, 86-87 [2d Cir]).

—the Appellate Division of the New York Supreme Court (“Appellate Division”) ruled that mortgagors lack standing to assert such breaches, citing as authority the opinion of the district court in this very case: While holding that the plaintiff bank was not entitled to summary judgment in its action to foreclose the defendants’ mortgage, the Appellate Division affirmed the lower …
– in Rajamin v. Deutsche Bank Nat. Trust Co., 2014 and 3 similar citations
Under New York law, “only an intended beneficiary of a contract may assert a claim as a third-party beneficiary.”
– in Colton v. US National Bank, 2013 and one similar citation
“The weight of caselaw throughout the country holds that a non-party to a PSA lacks standing to assert non-compliance with the PSA as a claim or defense unless the non-party is an intended (not merely incidental) third party beneficiary of the PSA.”
– in IN RE DALY, 2015 and one similar citation
Plaintiffs have not alleged any facts that would support plausibly a claim that they are intended third-party beneficiaries of the PSAs. Thus, Plaintiffs lack standing to challenge Defendants’ alleged ownership of the Notes and [Deeds of Trust] or authority to foreclose based on non-compliance with the PSAs
– in Tran v. Bank of New York, 2014 and one similar citation
In an opinion filed on March 28, 2013, the district court granted the motion to dismiss the Complaint for failure to state a claim on which relief can be granted, finding that plaintiffs lacked standing to challenge defendants’ ownership of the notes and mortgages based on alleged noncompliance with the terms of the PSAs.
However, Erobobo has been criticized and multiple federal courts, including in this District, have held that under New York law, an assignment of a mortgage into a trust in violation of the terms of the PSA is voidable, not void
– in HALACY v. WELLS FARGO BANK, NA, 2013 and one similar citation
These cases have further held that for a party to be considered a third-party beneficiary to a PSA, the intent to render a non-party a third-party beneficiary must be clear from the face of the PSA.
– in Tran v. Bank of New York, 2014 and one similar citation
In so holding, the Court in Rajamin stated that it was joining “the weight of the case law around the country.”
But even if he would benefit from some of its provisions, he is at most an “incidental” beneficiary.
Because plaintiffs have failed to satisfy both the constitutional and prudential requirements of standing, they may not assert a quiet title claim.[11
– in ZUTEL v. WELLS FARGO BANK, NA, 2014 and 2 similar citations
“The `prudential standing rule… normally bars litigants from asserting the rights or legal interests of others in order to obtain relief from injury to themselves.'”
– in Gache v. HILL REALTY ASSOCIATES, LLC, 2014 and 2 similar citations
The Second Circuit affirmed, holding “as unauthorized acts of the Trustee may be ratified by the trust’s beneficiaries such acts are not void but voidable; and that under New York Law such acts are voidable only at the insistence of a trust beneficiary or a person acting on his behalf.”
—disagreeing with Glaski’s interpretation of New York law; finding improper transfer into investment trust is voidable, not void
– in Kan v. Guild Mortgage Co., 2014 and 2 similar citations
Thus, although a post-closing-date loan assignment violates the terms of the PSA, these courts conclude that such an assignment is not void,[4] but is merely voidable, because the trustee has the option of accepting the loan assignment despite its untimeliness.
– in Wood v. Germann, 2014 and one similar citation
In addition to these “constitutional limitations” on federal court jurisdiction, the standing inquiry also “involves… prudential limitations on its exercise.”
– in ZUTEL v. WELLS FARGO BANK, NA, 2014 and one similar citation
These courts have recognized that a PSA is a contract between the originating lender and the subsequent purchaser/trustee and that, under traditional principles of contract law, a contracting party is capable of ratifying conduct that is done in violation of the contract.
– in Wood v. Germann, 2014 and one similar citation
—borrowers sought a judgment declaring that the defendant trusts did not own the borrowers’ loans and mortgages because the parties to the trusts breached the terms of the securitization agreements.
– in IN RE LAKE CHARLES RETAIL DEVELOPMENT LLC, 2014 and one similar citation
As defendant was not an intended third party beneficiary of the Pooling and Servicing Agreement, he may not assert noncompliance
– in US BANK NA v. Duthie, 2014 and one similar citation
In fact, plaintiffs'”impl [ication] that the loans are owned by some other entity or entities [] is highly implausible, for that would mean that since 200 [5], there was no billing or other collection effort by” the loan’s true owner.
– in ZUTEL v. WELLS FARGO BANK, NA, 2014 and one similar citation

How to Hammer Out Cash for Mortgage Victims

 

hammer photo
You need a bigger hammer when dealing with the bank

Proof of Methodology

Check out this proof (linked below) of how hugely mortgage victims can win a wad of cash if you will only learn how (and commit) to attack the validity of the loan.  NO OTHER methodology wins compensation for mortgagors.

Hammer v Residential (2015)

Hammer v Residential Credit Solutions – 2015-USDC-ILND-1_13-cv-06397-0

Click the above link to download the pdf containing the trial opinion, amended complaint, and damages award.

An Illinois jury returned a money verdict in favor of Alena Hammer against Residential Credit Solutions, Inc. (RCS), a national mortgage loan servicer headquartered in Fort Worth, Texas, for its breach of contract, violations of the Real Estate Settlement Procedures Act (RESPA), and violations of the unfairness and deception provisions of the Illinois Consumer Fraud and Deceptive Business Practices Act. All of Hammer’s claims dealt with RCS’s misconduct in handling and servicing the mortgage loan on Hammer’s home in DuPage County, Illinois, where Hammer has resided for the last 27 years.

The court awarded Alena Hammer $500,000 in compensatory damages and $1,500,000 in punitive damages.

Revisit Current and Old Cases?

Do you think this additional revelation about the workability of “Mortgage Attack” methodology would justify your revisiting some of your client’s cases and actually doing the work it takes to find the injuries they have suffered at the inception of the loan?

I know a mortgage examiner who can guide you through the process.  Why not call me so we can chat about it?

727 669 5511

Mort Gezzam photo
Mort Gezzam

How to Get the Benefits of a Securitization Audit FREE

Securitization Audits Decline Dramatically… Find Out Why

Securitization Audits Chart
Why the Shocking Decline in Securitization Audits?

 

How to Get the Benefits of a Securitization Audit FREE

Benefits?  WHAT Benefits? Learn below why the audit is a complete waste of resources.

Copyright © 1 April 2014 by Bob Hurt.  All rights reserved.  http://MortgageAttack.com

TECHNICAL ALERT:  I, the author, am not an attorney or practitioner, and I do not seek in this article to solve any specific problem for any specific person.   I provide this information for academic and discussion purposes.  Consultant a COMPETENT attorney on all questions of law.  To ensure competence, demand and verify a winning record in similar cases before you trust his battle scheme.

Background:  Why I Write this Article

Securitization audits have suffered a SHOCKING decline recently as foreclosure victims learned the hard way that the audits give no value to the foreclosure process, and foreclosure victims cannot use them to avert foreclosure.

Hundreds of people have called me personally or written to me about their mortgage problems since 2009.  I would say thousands, but I have lost count. That year I started giving people FREE information about what works and what does not win mortgage disputes against creditors and their agents and associates.

The majority of those callers had already blown hundreds to thousands of dollars on a “Securitization Audit” or flimsy “Loan Audit” which did not have the worth of the powder to blow them to hell.  Many mortgagors had also blown thousands to pay a foreclosure “pretense defense” attorney for the privilege of dragging out the foreclosure.  Most of those foreclosure victims eventually lost their homes to foreclosure auction.  Many who did loan mods went into foreclosure again and either lost the home or soon will.

Every one of those people bought a service from a clueless “Kool-Aid Drinker” or an out-and-out scammer (charlatan, cheat, con artist).  Even those attorneys who promised “We’ll keep you in the house as long as we can” committed legal malpractice if they failed to examine the mortgage transaction comprehensively for evidence of fraud and other torts, contract breaches, regulation breaches, and legal errors, and as a result failed to lodge the causes of action and affirmative defenses that would have averted foreclosure.

I write this commentary not just to give all those snakes-in-the-grass the literary black eye that they deserve, but also to give the reader something FREE that bozo scammers charge hundreds or thousands for.

I shall tell you, in short order, how to find out who owns your note and why the chain of ownership of the note has no relevance to foreclosure courts.

Securitization audit scammers tell their desperate, clueless foreclosure victim prospects that they will research the “chain of title” and find out who owns the note and what shenanigans happened during transfers of note ownership.   They will suggest that the chain of title to the note really matters in a foreclosure dispute.

In reality, as demonstrated by myriad foreclosure sales, it does not matter at all to the foreclosure judge or trustee.  Those scammers will talk about their certification, credentials, and the crookedness of securitization, putting the note into the trust after the closing date specified in the pooling and servicing agreement (PSA), REMIC violations, Bloomberg terminals for researching Securities and Exchange Commission information, etc.  And they will show you a wad of useless affidavits, and claim to have functioned as expert witnesses.  They will not tell you their affidavits and testimony have no notable effect on foreclosure decisions.

Judges and Lawyers Declare the Securitization Audit CROOKED

I shall prove to you right now that those securitization audit scammers and the charlatan attorneys who con you into paying for such audits are liars and con artists for suggesting such audits have an iota of value.

See, Demilio v. Citizens Home Loans, Inc. (M.D. Ga., 2013) (“Frankly, the Court is astonished by…Plaintiff’s attempt to incorporate such an ‘audit,’ which is more than likely the product of “charlatans who prey upon people in economically dire situation.”)

In other words, after reading this, you show yourself a fool if you ever fall for their suggestions that you need the audit to terminate a foreclosure permanently.

You do not have to take my word for it.  Look at what two attorneys say about securitization audits:

  • “… Most ‘securitization audits’ that I have reviewed are inadmissible in a court of law; they contain a mere opinion of a layman without personal knowledge (direct experience) as to what happened with a particular mortgage note after closing. Why pay a securitization auditor when you can have your grandmother provide an opinion as to what happened with the note and have her sign an ‘audit report’? In reality, in about 95% of all cases, the information supplied by a ‘securitization audit’ is either already publically available, or it is unavailable to either the homeowner or the auditor. Thus, where a homeowner genuinely lacks this information, an outsider’s opinion (in contrast to the bank’s admission) is unlikely to help.”

Gregory Bryl, Foreclosure Defense Attorney, Virginia and Florida.

http://www.veteranstoday.com/2012/03/27/beware-of-the-latest-foreclosure-rescue-scam-securitization-audits/

  • “Mortgage Loan Securitization Audits ARE A CRIME! … THAT INFORMATION IS USELESS IF IT IS NOT ADMISSABLE IN COURT! … So I issue the challenge once again….WILL ANY SO CALLED SECURITIZATION EXPERT PLEASE STAND UP?   PLEASE, SHARE WITH ME ADMISSABLE EVIDENCE OF SUCCESS IN ANY FORECLOSURE OR BANKRUPTCY CASE!” 

Matthew Weidner, Foreclosure Defense Attorney, Florida.

http://mattweidnerlaw.com/mortgage-securitization-audits-they-are-a-crime/

Why A Borrower Defaulting a Valid Loan Cannot Beat Foreclosure

Before I tell you how to get the benefit of a securitization audit FREE, and how to get the name of the note owner, let us examine some essential facts.  To get to those facts, please answer these questions, assuming you have become a mortgagor (borrower):

  1. Did you borrow money to purchase, refinance, or get a line of credit on a home?
  2. Did you sign a note in which you agreed that you had received a loan?
  3. Did you sign a security instrument (Deed of Trust – DOT, or Mortgage) in which you asserted having seisin (possession) and having transferred the estate to the lender for purpose of a mortgage or deed of trust?
  4. Did the lender assign a servicer to service your account (take payments manage, escrow, distribute proceeds, answer your questions regarding servicing the loan)?
  5. Did you make any timely payments to the servicer?

Foreclosure Deals with Breach of Contract

If you answered yes to those questions, then you know you have a contractual relationship with the lender, in which various other entities played a role (realtor, appraiser, mortgage broker, Title Company, attorney, etc.).

Moreover, you know that if either you or the others breach the contract, then that entitles you or the lender to take legal action.  You know that in a judicial foreclosure state the lender may sue you and take the house in a foreclosure sale if you breached the contract.  You know that in non-judicial foreclosure state, the lender may get the trustee to foreclose.

The lender needs to fulfill certain conditions, listed in § 22 of your loan security instrument, prior to such action, such as notify you that you breached the note, accelerate the note to make the balance due and payable now, and then take the matter to the trustee or sue you to get that money or the house.

You Lose the House if You Breached the Note

You SHOULD know that if the lender or his agents or associates engaged in some crooked behavior that invalidated the note or the loan transaction, that will give you reason to sue.

If the lender sues you for a breach and wins, the lender gets your house, or money from its sale, because the lender has a security instrument.

Unlike the lender, you do not have a security instrument that lets you go to the court or trustee to order the lender or his agent or associate to give up his house in some kind of foreclosure sale.  So how do you deal with injuries you suffered in the loan process? And how do you find out who owns the note?

Why Not Ask the Servicer and Complain to the CFPB?

You should know that if you want to learn who owns the note, you do not need a securitization audit because you can just ask the servicer. And that remains true if you want some error in your loan corrected.

You might know, though many do not, that the US Government has established the Consumer Financial Protection Bureau (CFPB) to resolve disputes between borrowers and lenders and their servicers. You can file a complaint at the following web site:

Why You Have No Standing in PSA or Note Assignment Disputes

But wait a minute. Surely you must wonder whether robo-signing, notary falsification of note assignments, assignment to a securitization trust after the closing date specified in the Pooling and Servicing Agreement (PSA), violations of Real Estate Mortgage Investment Conduit (REMIC) rules, and other securitization and assignment issues have any bearing on foreclosure, and whether you can use related arguments to beat foreclosure.  You might actually believe a securitization audit can shine some light on these concerns.

Let us answer another set of questions to get to the truth:

  1. Did you become a party to, become injured by, or become a third party beneficiary of:
    1. The PSA for a trust that owns your note?
    2. Any assignment of your note to another creditor (owner of beneficial interest in the note)?

If you answered NO to both a and b above, then you know that neither the assignment nor the PSA have any effect on you whatsoever.  Surely you know they do not affect whether or not you have breached your note or owe a mortgage loan debt.  So, therefore, you know (do you not?) that you have no standing to dispute or enforce the PSA or any assignment of the note in court.  That means robo-signing of the note (one of those ridiculous things securitization auditors tell you they will find for you) has become irrelevant to you and to any court.

See, Javaheri v. JPMorgan Chase Bank N.A., 2012 WL 3426278 at *6 (C.D. Cal. Aug. 13, 2012). (“Plaintiffs here do not dispute that they defaulted on the loan payments, and the robo-signing allegations are without effect on the validity of the foreclosure process.”)

About Blank Indorsements of the Note

Furthermore, according to the Uniform Commercial Code (UCC), if a creditor indorses the note in blank instead of naming an assignee, the note becomes bearer paper. See, UCC §3-205 https://www.law.cornell.edu/ucc/3/3-205.

  • 3-205. SPECIAL INDORSEMENT; BLANK INDORSEMENT; ANOMALOUS INDORSEMENT.

(a) If an indorsement is made by the holder of an instrument, whether payable to an identified person or payable to bearer, and the indorsement identifies a person to whom it makes the instrument payable, it is a “special indorsement.” When specially indorsed, an instrument becomes payable to the identified person and may be negotiated only by the indorsement of that person. The principles stated in Section 3-110 apply to special indorsements.

(b) If an indorsement is made by the holder of an instrument and it is not a special indorsement, it is a “blank indorsement.” When indorsed in blank, an instrument becomes payable to bearer and may be negotiated by transfer of possession alone until specially indorsed.

(c) The holder may convert a blank indorsement that consists only of a signature into a special indorsement by writing, above the signature of the indorser, words identifying the person to whom the instrument is made payable.

(d) “Anomalous indorsement” means an indorsement made by a person who is not the holder of the instrument. An anomalous indorsement does not affect the manner in which the instrument may be negotiated.

 

An enormous number of notes bear blank indorsements.  That makes it easy to hand them off without cumbersome paper trails. Thus, whoever holds the note can enforce it, whether or not the holder owns beneficial interest in it. So, try answering this question:

  1. If the most recent indorser of your note indorsed your note in blank, why would you care who owns it?

I suppose you realize that you should not care because the note holder, regardless of identity, will foreclose and take the house if you breach the note.

Who May Enforce the Note, Even if Lost, Stolen, or Destroyed

The UCC defines the “PETE”  – Person Entitled to Enforce the note.  See, UCC §3-301 https://www.law.cornell.edu/ucc/3/3-301.

  • 3-301. PERSON ENTITLED TO ENFORCE INSTRUMENT.

Person entitled to enforce” an instrument means (i) the holder of the instrument, (ii) a nonholder in possession of the instrument who has the rights of a holder, or (iii) a person not in possession of the instrument who is entitled to enforce the instrument pursuant to Section 3-309 or 3-418(d). A person may be a person entitled to enforce the instrument even though the person is not the owner of the instrument or is in wrongful possession of the instrument.

In the event the note becomes lost, destroyed, or stolen, the PETE can enforce the note anyway. See, UCC §3-309 https://www.law.cornell.edu/ucc/3/3-309.

  • 3-309. ENFORCEMENT OF LOST, DESTROYED, OR STOLEN INSTRUMENT.

(a) A person not in possession of an instrument is entitled to enforce the instrument if:

(1) the person seeking to enforce the instrument

(A) was entitled to enforce it the instrument when loss of possession occurred, or

(B) has directly or indirectly acquired ownership of the instrument from a person who was entitled to enforce the instrument when loss of possession occurred;

(2) the loss of possession was not the result of a transfer by the person or a lawful seizure; and

(3) the person cannot reasonably obtain possession of the instrument because the instrument was destroyed, its whereabouts cannot be determined, or it is in the wrongful possession of an unknown person or a person that cannot be found or is not amenable to service of process.

(b) A person seeking enforcement of an instrument under subsection (a) must prove the terms of the instrument and the person’s right to enforce the instrument. If that proof is made, Section 3-308applies to the case as if the person seeking enforcement had produced the instrument. The court may not enter judgment in favor of the person seeking enforcement unless it finds that the person required to pay the instrument is adequately protected against loss that might occur by reason of a claim by another person to enforce the instrument. Adequate protection may be provided by any reasonable means.

In view of these laws, the Trustees and Courts do not require the PETE to present the original note in order to foreclose. Some states, like Florida, which require the original and will not admit into evidence a copy of a negotiable instrument, provide a law allowing a creditor to reestablish a lost, stolen, or destroyed instrument, and thereby effectively to create a new, legal “original.” See Florida Statutes, Chapter 71, http://goo.gl/hrB9bY.

So, answer these questions:

  1. Can a creditor foreclose a lost, stolen, or destroyed note on which you defaulted?
  2. Can a PETE who does not have creditor status foreclose a note in default?

I hope you answered YES to those two questions.  If so, you have by now begun to realize that only two questions have salient importance in your mortgage:

  1. Did you breach the note?
  2. Does the note lack validity?

If you answer yes to the first question, then you know that the PETE can enforce the note by foreclosing and forcing a sale of the collateral property – your house.

The ONLY Reliable Basis for Battling the Creditor and Associates

If you answered yes to the second question, then you might have an opportunity to undo the foreclosure and wind up with the house free and clear, or with a loan modified to your advantage, or setoffs from your debt, or compensatory and punitive damages awards.  You may sue for injuries that made the note invalid, whether or not you face foreclosure.

You may NOT sue until you have complied with § 20 of your loan security instrument, which provides the following delightful text:

Neither Borrower nor Lender may commence, join, or be joined to any judicial action (as either an individual litigant or the member of a class) that arises from the other party’s actions pursuant to this Security Instrument or that alleges that the other party has breached any provision of, or any duty owed by reason of, this Security Instrument, until such Borrower or Lender has notified the other party (with such notice given in compliance with the requirements of Section 15) of such alleged breach and afforded the other party hereto a reasonable period after the giving of such notice to take corrective action.  If Applicable Law provides a time period which must elapse before certain action can be taken, that time period will be deemed to be reasonable for purposes of this paragraph.  The notice of acceleration and opportunity to cure given to Borrower pursuant to Section 22 and the notice of acceleration given to Borrower pursuant to Section 18 shall be deemed to satisfy the notice and opportunity to take corrective action provisions of this Section 20.

You can find applicable law (RESPA – Real Estate Settlement Procedures Act – 12 U.S.C. 2601 et seq.) and Regulations (Regulation X – 12 C.F.R. 1024 et seq.) at the below web sites, but take note that I have provided links to the latest at this point in time, and you might need to refer to earlier years based on your situation:

Take note of (carefully read) 12 U.S.C. 2605 and 12 C.F.R. 1024.35 at the above links, for these tell you the duties of the servicer to notify you of changes of the servicer, and explain what questions the servicer must answer for you, what questions the servicer may ignore, and what corrective actions the servicer must take.

So, you see, if you know the note lacks validity in some respect because the lender, servicer, title company, mortgage broker, appraiser, realtor, or some attorney or other third party injured you at the inception of the loan, you can ask for a settlement from, or sue the injurious party.  You start by bringing the injuries to the attention of the servicer.

Now you face a gnawing question that you absolutely must answer:

  1. How do you find out whether the note lacks validity?

Why Mortgage Borrowers Need a Professional Mortgage Examination

Obviously, YOU should examine all the documents related to your loan transaction for evidence of fraud, regulatory breaches, contract breaches, legal errors, and flim-flams. You might find all kinds of causes of action (reasons to sue) that entitle you to challenge the validity of the loan in court and get the court to compensate you for your injuries.

To examine your loan transaction and related issues comprehensively and comprehensively, you will need a good working knowledge of tort law, contract law, mortgage finance law, real estate law, criminal law, bankruptcy law, foreclosure law, consumer credit law, and federal and state regulations law dealing with mortgages, lending, disclosures, credit reporting, debt collection, equal opportunity, etc.

That brings us to the toughest question of all:

  1. Do you have the requisite knowledge and skill to perform a comprehensive, professional examination of your loan transaction and any related court actions?

Frankly, I guess most home loan borrowers do not have a clue how to do that. So naturally, you will want an answer to this question:

  1. Who has such competence and experience to perform a comprehensive mortgage loan transaction examination?

This article focuses on an entirely different issue.  It deals with why you do not need a securitization audit and how to get the putative benefits of such an audit FREE.  So, I shall address the answer to the above question briefly at the end of the article.

But, I do guarantee you right now that NO securitization auditor or so-called forensic loan auditor, and only the rarest of attorneys, has the remotest capability of doing such an examination correctly without wasting your money.

How to Discover Who Owns Your Mortgage Note:  Ask the Servicer

So let us get on with this final question:

  1. How do I find out who owns the note?

How to Avoid Paying the Wrong Party

Most people worry about who owns the note because they do not want to pay the wrong person and then face an accusation of breaching the note through non-payment.  Some simply want to mount a challenge against foreclosure, thinking that if the wrong person forecloses, that will justify asking the court to dismiss the case or stop the foreclosure.

Suppose you do not know who owns the note and you fear that the wrong person will receive your mortgage payments. That could open you to an accusation by the real creditor that you breached the note through non-payment.  The courts provide a means for ensuring that your payment goes to the right party:  the Interpleader Action.

Your loan security instrument identifies whom to pay. If you ever doubt whom to pay, you can file the interpleader action to remove doubt and comply with the terms of your loan.  The court will assign someone to take your money and pay it to the correct party.

Federal Law Helps You Find the Owner of the Note

As to how to find out who owns the note, federal law requires the creditor and servicer to notify you of any change in creditor or servicer timely so you do not pay the wrong party.  Read the law for yourself, here:

See, 15 U.S.C. 1641(f)

(f) Treatment of servicer

(1) In general

A servicer of a consumer obligation arising from a consumer credit transaction shall not be treated as an assignee of such obligation for purposes of this section unless the servicer is or was the owner of the obligation.

(2) Servicer not treated as owner on basis of assignment for administrative convenience

A servicer of a consumer obligation arising from a consumer credit transaction shall not be treated as the owner of the obligation for purposes of this section on the basis of an assignment of the obligation from the creditor or another assignee to the servicer solely for the administrative convenience of the servicer in servicing the obligation. Upon written request by the obligor, the servicer shall provide the obligor, to the best knowledge of the servicer, with the name, address, and telephone number of the owner of the obligation or the master servicer of the obligation.

 

Federal law also requires the servicer and creditor to notify the borrower of any change in the servicer or creditor.

See, 15 U.S.C. 1641(g)

(g) Notice of new creditor

(1) In general

In addition to other disclosures required by this subchapter, not later than 30 days after the date on which a mortgage loan is sold or otherwise transferred or assigned to a third party, the creditor that is the new owner or assignee of the debt shall notify the borrower in writing of such transfer, including—

(A) the identity, address, telephone number of the new creditor;

(B) the date of transfer;

(C) how to reach an agent or party having authority to act on behalf of the new creditor;

(D) the location of the place where transfer of ownership of the debt is recorded; and

(E) any other relevant information regarding the new creditor.

(2) Definition

As used in this subsection, the term “mortgage loan” means any consumer credit transaction that is secured by the principal dwelling of a consumer.

 

Thus, the borrower should always have timely notice in order to pay the right party and to know whether the right party has made any effort to foreclose a defaulted loan.

If in doubt the borrower need only call or write to ask the servicer.  The servicer must give the borrower the identity and contact information for the creditor, and the details regarding escrow for insurance and property tax, and other information regarding servicing the loan.

Get Help from the Consumer Financial Protection Bureau

If the servicer plays dumb or either the servicer or creditor fail to inform the borrower, then the borrower may seek enforcement assistance from the CFPB.  As I mentioned above, you can file a complaint via the web site:

Sue the Creditor and/or Servicer

As to punishing servicer recalcitrance, federal law provides borrowers with a private right of action against the creditor and/or servicer as appropriate. The court can order the defendants to pay the borrower up to $4000, plus any actual damage, plus legal fees and costs of the action.  The court can force the defendants to give the proper information to the borrower.

See, 15 U.S.C. 1640(a)

§1640. Civil liability

(a) Individual or class action for damages; amount of award; factors determining amount of award

Except as otherwise provided in this section, any creditor who fails to comply with any requirement imposed under this part, including any requirement under section 1635 of this title, subsection (f) or (g) of section 1641 of this title, or part D or E of this subchapter with respect to any person is liable to such person in an amount equal to the sum of—

(1) any actual damage sustained by such person as a result of the failure;

(2)(A)(i) in the case of an individual action twice the amount of any finance charge in connection with the transaction, (ii) in the case of an individual action relating to a consumer lease under part E of this subchapter, 25 per centum of the total amount of monthly payments under the lease, except that the liability under this subparagraph shall not be less than $200 nor greater than $2,000, (iii) in the case of an individual action relating to an open end consumer credit plan that is not secured by real property or a dwelling, twice the amount of any finance charge in connection with the transaction, with a minimum of $500 and a maximum of $5,000, or such higher amount as may be appropriate in the case of an established pattern or practice of such failures; 1 or (iv) in the case of an individual action relating to a credit transaction not under an open end credit plan that is secured by real property or a dwelling, not less than $400 or greater than $4,000; or

(B) in the case of a class action, such amount as the court may allow, except that as to each member of the class no minimum recovery shall be applicable, and the total recovery under this subparagraph in any class action or series of class actions arising out of the same failure to comply by the same creditor shall not be more than the lesser of $1,000,000 or 1 per centum of the net worth of the creditor;

(3) in the case of any successful action to enforce the foregoing liability or in any action in which a person is determined to have a right of rescission under section 1635 or 1638(e)(7) of this title, the costs of the action, together with a reasonable attorney’s fee as determined by the court; and

(4) in the case of a failure to comply with any requirement under section 1639 of this title, paragraph (1) or (2) of section 1639b(c) of this title, or section 1639c(a) of this title, an amount equal to the sum of all finance charges and fees paid by the consumer, unless the creditor demonstrates that the failure to comply is not material…

 

Please read the full Civil Liability law at the below link.  I have only provided the part important to this discussion.

The SEC Web Site

You can satisfy your curiosity about the PSA and other documents related to your loan, such as the bank’s 424(b)(5) prospectus form filing.  You need only dig around in Edgar at the Securities and Exchange Commission’s web site here:

You can find the regulations requiring such filings in 17 C.F.R. 230.424

Thus, You Need NO Securitization Audit to Receive its Alleged Benefits

As you can see, I have just saved you the cost of a securitization audit.  I have given you the main benefit of it, knowledge of how to discover the identity of the creditor, the person who owns beneficial interest in the note, and I have shown your entitlement to get the court to award damages to you for a failure to give that information.  And I gave you all that ABSOLUTELY FREE.

Now you know also that you do not need to pay some scalawag huckster of a securitization auditor to find out who owns your note. Most of the time the so-called auditor gives clients a bunch of useless information like a copy of the PSA, but fails to tell you who owns the note.  Why? Because creditors indorsed most securitized notes in blank and most notes have become securitized.

If in doubt, check the Fannie Mae or Freddie Mac web site and enter your loan number, for they own many if not most of the mortgage notes.

If still in doubt, pick up the phone.  Call the servicer, and ask, “Who owns my note?”  If you get the bum’s rush, try it in writing, then contact the CFPB, and complain. If that does not work, SUE.

But under NO CIRCUMSTANCES should you bother with a securitization audit.  It will only waste your money and your time, and give you zero benefit.

Yes, I know I titled the article to make it seem like securitization audits provide benefits you can get free.  Well I gave you FREE those benefits that a securitization auditor fools victims into thinking they will get for a big fat fee, but which the victims do not get at all.

If you already made the ill-informed mistake of paying a securitization auditor for that useless audit, I suggest that you demand a full refund and report that scalawag to the State Attorney General.  Why?  Because those crooked “auditors” know they sell useless junk.

Save Your Money for a Professional Mortgage Examination

Besides, you will need all that money to pay a competent, professional mortgage transaction examiner to examine your transaction documents.  That will reveal injuries you have suffered.  And when you show the injuries to the servicer, the injurious parties, the CFPB, and the court, you thereby give yourself the ONLY opportunity of pressing your adversary into a settlement or of obtaining a damage award judgment from the court.

Yes, I know the ONLY such examination firm in the USA, the only one I can confidently recommend.

If you have a mortgage and you want help with it, familiarize yourself with the articles and concepts at the Mortgage Attack web site here:

Then write me using the contact form at the site, or pick up the phone and call me at

  • 1 (727) 669-5511

Bob Hurt