Perhaps the regulators should pay close attention to this case and see if there is anything they might have intentionally missed?

Gretchen Morgenson-

“TAKING on corporate Goliaths for their wrongdoing should not be so daunting.”

That’s the view of Michael Winston, a former executive at Countrywide Financial, the subprime lending machine that was swallowed up by Bank of America in 2008. Mr. Winston won a wrongful-dismissal and retaliation case against the company in February 2011, but is still waiting to receive his $3.8 million award. Bank of America is fighting back and has appealed the jury verdict twice.

After hearing a month of testimony from a parade of top Countrywide officials, including the company’s founder, Angelo Mozilo, a California state jury sided with Mr. Winston. An executive with decades of expertise in management strategy, he contended that he was pushed out for, among other things, refusing to follow questionable orders from his superiors.

But for the last year and a quarter, Mr. Winston, 61, has been in legal limbo. Bank of America lost one appeal in the court that heard the case and has filed another that is pending in state appellate court.

[NEW YORK TIMES]

Things don’t seem to get any better. Remember Fannie selling foreclosures for $200 A POP? Well now it seems they’re selling what we call it in the Commercial RE world as “REO Tapes” of homes to V.I.P Buyers.

Mark Stopa-

For reasons that should quickly become apparent, this is the most important blog I’ve ever written.  Ever.  I’m so angry that it’s difficult to write coherently, but I’ll do my best. …

I’ve often expressed my disgust at how Fannie Mae and Freddie Mac frequently pay banks 100% of their judgment amounts in foreclosure cases.  It’s an appalling dynamic in foreclosure-world, one where banks often have no incentive to modify mortgages because “our” government will pay the banks in full once the foreclosure is over (and all the banks have to do is convey title to Fannie and Freddie).  Incredibly, just when I thought I couldn’t be any more appalled, somehow, my disgust with this dynamic … with “our” government … reached a new level today.

I have it on good information (directly from someone personally involved) that Fannie and Freddie are selling foreclosed homes in bulk to third-party investors.…

[STAY IN MY HOME]

HuffPO-

A huge mistake is weighing on Bank of America.

The bank’s acquisition of mortgage lender Countrywide in 2008 has cost BofA more than $40 billion, the Wall Street Journal reports. The merger turned BofA into a big player in the mortgage market right before the housing bubble burst and since the bank has suffered massive real estate losses and paid out huge sums in legal fees and settlements with state and federal agencies.

To put the sum in perspective, JPMorgan Chase’s infamous trading loss could amount to $9 billion — less than one-fourth of the Countrywide losses.

“It is the worst deal in the history of American finance,” Tony Plath, a banking and finance professor at the University of North Carolina at Charlotte told the WSJ. “Hands down.”

[HUFFINGTON POST]

I was beginning to believe this is the closest anyone was getting to be held accountable with a MERS connection, circumstances unrelated of course.

AP_

The Justice Department has declared that Attorney General Eric Holder’s decision to withhold information about a bungled gun-tracking operation from Congress does not constitute a crime and he won’t be prosecuted for contempt of Congress.

In a letter to House Speaker John Boehner, the department says that it will not bring the congressional contempt citation against Holder to a federal grand jury and that it will take no other action to prosecute the attorney general.

[AP]

Decided on June 20, 2012

20236/2011

For the Plaintiff: McCabe Weisberg & Conway, P.C., by Richard P. O’Brien, Esq., 145 Huguenot Street, New Rochelle, New York 10801

For Defendant Mohammad Haque: Lawrence Spivak, Esq., 169-26 Hillside Ave., Jamaica, New York 11432

Charles J. Markey, J.

Notice of Motion – Affidavits – Exhibits ………………………………………………………..1-3

Answering Affidavits – Exhibits …………………………………………………………………..4-5

Reply Affidavits …………………………………………………………………………………………6-7

Plaintiff Deutsche Bank National Trust Company, as trustee of the Home Equity Mortgage Loan Asset-Backed Trust Series INABS 2005-B, Home Equity Mortgage Loan Asset-Backed Certificates, Series INABS 2005-B, under the Pooling and Servicing Agreement dated June 1, 2005 (“Deutsche Bank”) seeks to foreclose on a mortgage on the subject real property known as 90-05 215th Street, Queens Village, in Queens County, New York given by defendant Haque. The mortgage was given to secure repayment of a promissory note, evidencing a loan in the original principal amount of $279,200.00, plus interest. Plaintiff Deutsche Bank alleges in its complaint that it is the holder of the mortgage and underlying note pursuant to an assignment dated August 11, 2011. Plaintiff Deutsche Bank also alleges that defendant Haque defaulted under the terms of the mortgage and note by failing to make the monthly installment payment of interest due on April 1, 2010, and, it elected to accelerate the entire mortgage debt. [*2]

In lieu of serving an answer, defendant Haque moves, pursuant to CPLR 3211(a)(3), to dismiss the complaint asserted against him based upon lack of standing. Defendant Haque asserts that the plaintiff Deutsche Bank did not own the note and mortgage at the time it commenced the foreclosure action, and cannot rely upon the August 11, 2011 assignment to establish standing.

The Appellate Division, Second JudiciaI Department, in U.S. Bank, N.A. v Collymore, 68 AD3d 752 [2009], in pertinent part, stated:

. . . . In a mortgage foreclosure action, a plaintiff has standing where it is both the holder or assignee of the subject mortgage and the holder or assignee of the underlying note at the time the action is commenced (see Mortgage Elec. Registration Sys., Inc. v Coakley, 41 AD3d 674 [2007]; Federal Natl. Mtge. Assn. v Youkelsone, 303 AD2d 546, 546-547 [2003]; First Trust Natl. Assn. v Meisels, 234 AD2d 414 [1996]). Where a mortgage is represented by a bond or other instrument, an assignment of the mortgage without assignment of the underlying note or bond is a nullity (see Merritt v Bartholick, 36 NY 44, 45 [1867]; Kluge v Fugazy, 145 AD2d 537, 538 [1988]). Either a written assignment of the underlying note or the physical delivery of the note prior to the commencement of the foreclosure action is sufficient to transfer the obligation, and the mortgage passes with the debt as an inseparable incident (see Weaver Hardware Co. v Solomovitz, 235 NY 321 [1923]; Payne v Wilson, 74 NY 348, 354-355 [1878]; LaSalle Bank Natl. Assn. v Ahearn, 59 AD3d 911, 912 [2009]; Mortgage Elec. Registration Sys., Inc. v Coakley, 41 AD3d at 674; Flyer v Sullivan, 284 App Div 697, 699 [1954]).

U.S. Bank, N.A. v Collymore, 68 AD3d at 753-754.

The mortgage names IndyMac Bank, F.S.B. (IndyMac) as the lender and Mortgage Electronic Registration Systems, Inc. (MERS) as the nominee for the lender and the lender’s successors and assigns, and as the mortgagee of record for the purpose of recording the mortgage. The note is executed by defendant Haque in favor of IndyMac and bears an undated blank endorsement, without recourse, by Vincent Dombrowski, as “Vice President” of IndyMac.

To the extent plaintiff Deutsche Bank asserts the August 11, 2011 assignment effectuated the assignment of the note and mortgage, the mortgage does not specifically give MERS the right to assign the underlying note (see, Bank of New York v Silverberg, 86 AD3d 274 [2nd Dept. 2007]).

In addition, to the extent plaintiff Deutsche Bank asserts the note was transferred to “the trust,” pursuant to a “pooling and servicing” agreement between IndyMac ABS, Inc. as depositor, IndyMac BankSM, as seller and “master servicer” and Home Equity Mortgage Loan Asset-Backed Trust, Series INABS 2005-B, issuer, such agreement does not establish that IndyMac assigned the note to plaintiff Deutsche Bank. Plaintiff Deutsche Bank does not otherwise allege a basis for a valid assignment of the note (see, U.S. Bank, N.A. v Collymore, 68 AD3d at 753-754, supra). [*3]

Nevertheless, to the extent it is alleged that the note was transferred to plaintiff Deutsche Bank, plaintiff Deutsche Bank would have standing in order to be entitled to relief if Deutsche Bank had physical possession of the note on August 28, 2011, the date of commencement of this action (see, Mortgage Elec. Registration Sys., Inc. v Coakley, 41 AD3d 674 [2nd Dept. 2011]; cf. U.S. Bank Nat. Assn. v Dellarmo,AD3d, 2012 WL 1109173, 2012 NY Slip Op. 02481, 2012 NY App Div LEXIS 2437 [[2nd Dept. 2012]). Since a foreclosure plaintiff must prove its standing in order to be entitled to relief (see, U.S. Bank, N.A. v Collymore, 68 AD3d at 753, supra; Wells Fargo Bank Minn., N.A. v Mastropaolo, 42 AD3d 239, 242 [2nd Dept. 2007]), defendant Haque may assert lack of standing as an affirmative defense in his answer (see, e.g., HSBC Bank USA v Hernandez, 92 AD3d 843 [2nd Dept. 2012]; US Bank N.A. v Madero, 80 AD3d 751 [2nd Dept. 2011]).

The motion is denied, and defendant Haque is directed to serve an answer to the complaint within 20 days after service of a copy of this order with notice of entry.

The foregoing constitutes the decision, order, and opinion of the Court.

______________________________Hon. Charles J. Markey

Justice, Supreme Court, Queens County

Dated: Long Island City, New York

June 20, 2012

DUH! When is the media and especially FHA going to learn…..??

Shocked they’re still in business!

American Banker-

FHA remains said in a statement that it remains confident in the accuracy of the data it reported in April,” FHA said in a statement, but warned that “the very large increase reported by LPS for the month of April was not accurate.” 

Michelle Kersch, an LPS spokeswoman, admits there was an error.

[AMERICAN BANKER]

12 news now-

Jefferson County 58th district court Judge Bob Wortham sanctioned Bank of America to pay 47-year-old Fannett resident Trudie Crutchfield $300,000 after a lawsuit has gone unsettled for 5 years.

Crutchfield says the “nightmare” of three court cases against big banks started after Hurricane Ike in 2005. Her then mortgage company, Countrywide Home Loans sent her a letter saying she didn’t have to pay her mortgage for three months so she could get back on her feet after the hurricane damaged her home, meaning no late fees, no penalties, and no reports to credit bureaus.

[12 NEWS NOW]

I have to agree with Abigail when I read this the other day. I said what’s this BS… I did not post this because it was a bit odd coming from Reuters and did not make sense.

Abigail Field-

Normally I’m a fan of Reuters, it has backed some terrific reporting on the banks’ fraudulent foreclosure documents and I respect many of its reporters. But this piece: “Insight: Evidence Surfaces Anti-Foreclosure Laws May Backfire” is pure banking industry and Federal Reserve propaganda. The goal of the propaganda campaign reflected the piece (and one in HousingWire I debunked six weeks ago) is to eliminate barriers to the banks’ use of fraudulent documents to seize houses. That is, going after judicial foreclosures and efforts to defend private property rights and the rule of law.

The Housing Crisis Is NOT Caused By Helping Homeowners 

The Reuters piece aggressively misrepresents the idea that huge “shadow inventory” and the problems it causes for the housing market as proof that Due Process and efforts to stop banker fraud are hurting the housing market. That’s total B.S.

The first part is true–having huge shadow inventory and having lots of underwater homeowners is horrible for the housing market and the broader economy. But the second part–the assertion that judicial process, Due Process, and efforts to stop banker fraud are what’s causing the delays, is completely false.

Bankers Are Responsible For the Housing Crisis …

[REALITY CHECK]

image: billhicksisdead.blogspot.com

What GAO Found

Data GAO obtained from Fannie Mae and Freddie Mac (the enterprises) and five of the largest mortgage lenders indicate that appraisals—which provide an estimate of market value at a point in time—are the most commonly used valuation method for first-lien residential mortgage originations. Other methods, such as broker price opinions and automated valuation models, are quicker and less costly but are viewed as less reliable. As a result, they generally are not used for most purchase and refinance mortgage originations. Although the enterprises and lenders GAO spoke with did not capture data on the prevalence of approaches used to perform appraisals, the sales comparison approach—in which the value is based on recent sales of similar properties—is required by the enterprises and the Federal Housing Administration. This approach is reportedly used in nearly all appraisals.

Conflict-of-interest policies have changed appraiser selection processes and the appraisal industry more broadly, raising concerns about the oversight of appraisal management companies (AMC), which often manage appraisals for lenders. Recent policies, including provisions in the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act), reinforce prior requirements and guidance that restrict who can select appraisers and prohibit coercion. In response to market changes and these requirements, some lenders have turned to AMCs. Greater use of AMCs has raised questions about oversight of these firms and their impact on appraisal quality. Federal regulators and the enterprises said they hold lenders responsible for ensuring that AMCs’ policies and practices meet their requirements but that they generally do not directly examine AMCs’ operations. Some industry participants voiced concerns that some AMCs may prioritize low costs and speed over quality and competence. The Dodd-Frank Act requires state appraiser licensing boards to supervise AMCs and requires the federal banking regulators, the Federal Housing Finance Agency, and the Bureau of Consumer Financial Protection to establish minimum standards for states to apply in registering them. Setting minimum standards that address key functions AMCs perform on behalf of lenders could provide greater assurance of the quality of the appraisals that AMCs provide. As of June 2012, federal regulators had not completed rulemaking to set state standards.

The Appraisal Subcommittee (ASC) has been performing its monitoring role under Title XI of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA), but several weaknesses have potentially limited its effectiveness. For example, ASC has not clearly defined the criteria it uses to assess states’ overall compliance with Title XI. In addition, Title XI charges ASC with monitoring the appraisal requirements of the federal banking regulators, but ASC has not defined the scope of this function—for example, by developing policies and procedures—and its monitoring activities have been limited. ASC also lacks specific policies for determining whether activities of the Appraisal Foundation (a private nonprofit organization that sets criteria for appraisals and appraisers) that are funded by ASC grants are Title XI-related. Not having appropriate policies and procedures is inconsistent with federal internal control standards that are designed to promote the effectiveness and efficiency of federal activities.

NJ-

Despite its standing as one of the most affluent areas in the country, Bergen County did not dodge the foreclosure crisis, Bergen County Clerk John Hogan said at a talk with Bergen County Grassroots today.

The good government group invited Hogan and mortgage consultant Jacqueline Wisner to speak about the county’s mortgage recording system.

The number of troubled mortgages increased drastically in Bergen County as the foreclosure crisis took hold.

In 2009, Bergen County recorded 4,594 liz pendens filings, which lenders use to indicate the possibility of a foreclosure on a property. That is more than double the number recorded in 2007.

[NJ.COM]

Funny. I spoke with a senior citizen just today who is on a reverse and he asked me what’s the deal with all these mailings coming in at once. What is HARP? etc..

Don’t get scammed and if you’re not sure please seek professional help or call the Consumer Financial Protection Bureau.

Ben Hallman-

Reverse mortgages, a lifeline for seniors struggling to pay bills in allowing them to turn home equity into cash, are entering into foreclosure at an “alarming” rate, Consumer Financial Protection Bureau Director Richard Cordray said Wednesday.

One out of every 10 seniors with a reverse mortgage is in default or foreclosure, Cordray said in a conference call with reporters on Wednesday timed to coincide with the release of a reverse mortgages report prepared for Congress.

The agency also found that seniors often don’t really understand the terms of the loan, a problem exacerbated by deceptive mailings and other advertisements, Cordray said.

“We will work with our partners at the federal, state and local level to root out these kinds of scams,” Cordray said. He described one flier that portrayed a reverse mortgage as a “government benefit,” which is wrong, and that contained “blatantly false information about loan repayment options.” He did not go into further detail about who sends out these notices but said that the agency has authority to ensure that the reverse mortgage market works well for consumers.

[HUFFINGTON POST]

[ipaper docId=98609397 access_key=key-2dwkxfkqau0rj076q394 height=600 width=600 /]

Richard Zombeck-

For quite some time Wells Fargo managed to stay below the media’s radar and let the other guys like Bank of America and JPMorgan Chase, for example, bear the brunt of consumer and activist outrage. Lately, it seems, they’ve had to prove that they’re equally nasty and contemptible as the others. Foreclosing on priests and temples; closing bank accounts without apparent reason; promoting and profiting from private prisons; and ripping off towns, states and counties with bid rigging that skimmed money slated for schools, hospitals, and nursing homes.

Wells Fargo can’t seem to get enough bad press these days. While working with the “any press is good press” theory may work for loud mouths like Rush Limbaugh and Glenn Beck, it’s not a strategy normally employed by most consumer based businesses.

In a piece I wrote a couple of weeks ago I speculated that Wells Fargo had closed the bank accounts of ML-Implode’s Aaron Krowne out of retribution for Martin Andelman’s articles about Wells Fargo’s egregious and reprehensible track record in respect to homeowners and foreclosures….

[HUFFINGTON POST]

The House of Representatives has voted to hold Attorney General Eric Holder in contempt of Congress.

Politico-

The House has voted to hold Attorney General Eric Holder in contempt of Congress over his failure to turn over documents related to the Fast and Furious scandal, the first time Congress has taken such a dramatic move against a sitting Cabinet official.

The vote was 255-67, with 17 Democrats voting in support of a criminal contempt resolution, which authorizes Republicans leaders to seek criminal charges against Holder. This Democratic support came despite a round of behind-the-scenes lobbying by senior White House and Justice officials – as well as pressure from party leaders – to support Holder.

[POLITICO]

Times Union- By Eric Schneiderman

The foreclosure numbers for May are out, and the picture for New York is grim. Foreclosure filings are up almost 50 percent compared to May of 2011.

The economic cost of foreclosures is staggering. On average, each foreclosure carries around $245,000 in direct and indirect costs.

But it’s not just a matter of numbers. People are uprooted, children are pulled out of school, jobs are lost and lives are destroyed.

The causes of the crisis are complex, but the big picture is clear. Years of reckless deregulation set the stage for irresponsible and sometimes illegal behavior, in the mortgage market and on Wall Street. Shoddy lending practices, and opaque financial engineering to resell shaky mortgage debt to investors, drove housing prices upward during the bubble years, far past the point when the market should have started to cool. When the bubble burst, millions of jobs disappeared, more than $7 trillion in home equity evaporated, and the U.S. economy sank in to the longest and deepest recession in 70 years.

[TIMES UNION]

COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS

Hearing on “Empowering and Protecting Servicemembers, Veterans and their Families in the Consumer Financial Marketplace: A Status Update.” The witnesses will be The Honorable Joseph R. “Beau” Biden III, Attorney General, State of Delaware; Colonel Paul Kantwill, Director of Legal Policy, Office of the Undersecretary for Personnel and Readiness, U.S. Department of Defense; and Ms. Hollister K. Petraeus, Assistant Director for Servicemember Affairs, Consumer Financial Protection Bureau. Additional witnesses may be announced at a later date.

Witnesses

Panel 1

• The Honorable Joseph R. “Beau” Biden, III [view testimony]
  Attorney General
  State of Delaware
• Colonel Paul Kantwill [view testimony]
  Director of Legal Policy
  Office of the Undersecretary for Personnel and Readiness
• Ms. Hollister K. Petraeus [view testimony]
  Assistant Director, Office of Servicemember Affairs
  Consumer Financial Protection Bureau

[view archive webcast]

source: http://banking.senate.gov

Deal Book-

Losses on JPMorgan Chase’s bungled trade could total as much as $9 billion, far exceeding earlier public estimates, according to people who have been briefed on the situation.

When Jamie Dimon, the bank’s chief executive, announced in May that the bank had lost $2 billion in a bet on credit derivatives, he estimated that losses could double within the next few quarters. But the red ink has been mounting in recent weeks, as the bank has been unwinding its positions, according to interviews with current and former traders and executives at the bank who asked not to be named because of investigations into the bank.

The bank’s exit from its money-losing trade is happening faster than many expected. JPMorgan previously said it hoped to clear its position by early next year; now it is already out of more than half of the trade and may be completely free this year.

[DEAL BOOK]

CONTACT JASON MILLER
PUBLIC INFORMATION OFFICER
PHONE (302) 577-8949
CELL (302) 893-8939
Jason.Miller@state.de.us

Media Release
June 26, 2012

Biden Brings Fight for Servicemember Financial Protections to Washington

Testimony to U.S. Senate Banking Committee highlights progress & continuing challenges

Washington D.C. – At a hearing on consumer financial protections for servicemembers, veterans, and
their families held today by the U.S. Senate Committee on Banking, Housing, and Urban Affairs,
Attorney General Beau Biden offered his perspective as both his state’s chief law enforcement officer
and consumer protector and also as a member of the Delaware National Guard’s Judge Advocate
General’s Corps. Biden’s testimony detailed enhanced protections for servicemembers secured earlier
this year as part of the $25 billion national mortgage foreclosure settlement between 49 state attorneys
general, the country’s five largest servicing banks and the federal government. He also noted areas
where more work is needed.

“The U.S. housing crisis has hit every community in this nation, and it has hit military families
especially hard,” said Biden. “They are often backed into financial corners by the realities of military
life and a decade of constant deployment. Because so many of the financial obstacles faced by military
families cross state lines, we must work collaboratively on state and federal levels to be most effective.

I was grateful for the opportunity to participate in today’s hearing and look forward to the continued
progress we can make together.”

Biden testified how changes made to the Servicemembers Civil Relief Act (SCRA) under the
multistate settlement cover several areas of concern to military families, including complications
associated with Permanent Change of Station (PCS) orders, mortgages taken out after beginning
military service, and ways to mitigate losses often incurred as a result of the demands of military life.
Specifically, he noted that the settlement:

• Establishes that PCS orders must now be considered when banks and servicers are making
hardship determinations about short sales, deeds in lieu, and loan modifications. Additional protections
guard against inaccurate reporting of servicemembers to credit reporting agencies for using loss
mitigation options in these circumstances.
• Increases servicemember access to loss mitigation options, including mandating that information
and contact with SCRA-trained employees is readily available, and that servicers go beyond the
requirements of the SCRA to ensure that more borrowers who are entitled to assistance before
foreclosure receive it.
• States that homes of active duty servicemembers deployed in combat areas cannot be foreclosed
on in most instances, even if the debt was incurred after they entered military service. This was a
significant expansion beyond the terms of the SCRA, which only provides this protection for debt
incurred before entering the armed forces.

Biden also detailed additional settlement provisions negotiated by the USDOJ Civil Rights Division
that direct payments to servicemembers who experienced wrongful foreclosures and interest charged in
excess of the six percent allowed by the SCRA. These payments will come from funds secured on top
of the $25 billion settlement amount.

Biden’s testimony covered other consumer financial challenges facing servicemembers, veterans and
their families, as well, and noted the need for ongoing coordinated efforts to address them. Biden
discussed for-profit schools and their often “aggressive marketing” toward servicemembers in order to
exploit veterans’ educational benefit funding via loopholes in the country’s Higher Education Act. To
remedy this, Biden was one of 22 attorneys general who called on Congress last month to require that
GI Bill and Veteran’s Assistance educational benefits be subject to the 90/10 rule, which prohibits forprofit
colleges from receiving more than 90 percent of their revenue from public Department of
Education (Title IV) funding sources.

Also testifying at today’s hearing were Colonel Paul Kantwill, Director of Legal Policy in the Office of
the U.S. Department of Defense Undersecretary for Personnel and Readiness, and Mrs. Holly Petraeus,
Assistant Director for Servicemember Affairs at the U.S. Consumer Financial Protection Bureau.
Attorney General Biden, Col. Kantwill, and Mrs. Petraeus all offered testimony regarding the need to
vigilantly monitor the activities of banks and servicers, as well as the responsibility of all who assist
servicemembers to do a better job of educating military families about making good consumer
financial choices, and about the resources available to help them do so.

# # #

[ipaper docId=98556132 access_key=key-1q2keo61h0bfudati39h height=600 width=600 /]

H/T Reuters Alison Frankel

NATIONAL FEDERATION OF INDEPENDENT BUSINESS et al.

v.

SEBELIUS, SECRETARY OF HEALTH AND HUMAN SERVICES, et al.

Nos. 11–393, 11–398 and 11–400
United States Supreme Court.
Argued March 26, 27, 28, 2012
Decided June 28, 2012FN1

SyllabusFN*

FN*The syllabus constitutes no part of the opinion of the Court but has been prepared by the Reporter of Decisions for the conveni-ence of the reader. See United States v. De-troit Timber & Lumber Co., 200 U. S. 321, 337.

In 2010, Congress enacted the Patient Protection and Affordable Care Act in order to increase the number of Americans covered by health insurance and decrease the cost of health care. One key provision is the individual mandate, which requires most Ameri-cans to maintain ?minimum essential? health insur-ance coverage. 26 U. S. C. §5000A. For individuals who are not exempt, and who do not receive health insurance through an employer or government pro-gram, the means of satisfying the requirement is to purchase insurance from a private company. Begin-ning in 2014, those who do not comply with the mandate must make a ?[s]hared responsibility pay-ment? to the Federal Government. §5000A(b)(1). The Act provides that this ?penalty? will be paid to the Internal Revenue Service with an individual‘s taxes, and ?shall be assessed and collected in the same manner? as tax penalties. §§5000A(c), (g)(1).

Another key provision of the Act is the Medicaid expansion. The current Medicaid program offers fed-eral funding to States to assist pregnant women, children, needy families, the blind, the elderly, and the disabled in obtaining medical care. 42 U. S. C. §1396d(a). The Affordable Care Act expands the scope of the Medicaid program and increases the number of individuals the States must cover. For example, the Act requires state programs to provide Medicaid coverage by 2014 to adults with incomes up to 133 percent of the federal poverty level, whereas many States now cover adults with children only if their income is considerably lower, and do not cover childless adults at all. §1396a(a)(10)(A)(i)(VIII). The Act increases federal funding to cover the States‘ costs in expanding Medicaid coverage. §1396d(y)(1). But if a State does not comply with the Act‘s new coverage requirements, it may lose not only the federal funding for those requirements, but all of its federal Medicaid funds. §1396c.

Twenty-six States, several individuals, and the National Federation of Independent Business brought suit in Federal District Court, challenging the consti-tutionality of the individual mandate and the Medicaid expansion. The Court of Appeals for the Eleventh Circuit upheld the Medicaid expansion as a valid exercise of Congress‘s spending power, but concluded that Congress lacked authority to enact the individual mandate. Finding the mandate severable from the Act‘s other provisions, the Eleventh Circuit left the rest of the Act intact.

Held: The judgment is affirmed in part and re-versed in part.
648 F. 3d 1235, affirmed in part and reversed in part.

[…]

[ipaper docId=98543933 access_key=key-2b21o92tq2khyk466j7b height=600 width=600 /]

The foreclosure processor sued by Nevada Attorney General Catherine Cortez Masto in last year’s robosigning cases has now retaliated, suing Masto and alleging due process violations.

VEGAS INC.-

In December, Masto’s office sued Lender Processing Services Inc. (LPS) of Jacksonville, Fla., claiming it was involved in widespread fraud involving mass document-signing procedures in which foreclosure documents were fraudulently notarized by the thousands. That suit remains active in Clark County District Court.

The investigation that led to her suit also resulted in criminal charges against several notaries and two LPS officers.

On Wednesday, attorneys for LPS sued Masto…

[VEGAS INC.]

A federal judge has heard arguments in a lawsuit by six banks seeking to overturn two anti-foreclosure ordinances in Springfield.

CBS 3-

U.S. District Judge Michael Ponsor did not immediately rule Wednesday after hearing arguments from lawyers representing the banks and the city of Springfield.

The banks sued after the Springfield City Council passed the ordinances last summer. One would require mortgage lenders to engage in mediation with homeowners facing foreclosure or face a $300 per day fine. The other would require lenders to put up a $10,000 bond to secure and maintain their foreclosed and vacant properties.

[CBS 3]

From the Desk of:
R. Kymn Harp

Sometimes, some things just have to be said. And I, being on the front line of distressed commercial real estate loan workouts, find myself compelled to say it.

There is trouble afoot. A fundamental miscalculation is being made, sending bankers, senior officers, directors, troubled asset advisors, special asset
committees, and their respective attorneys, down the wrong path.

Blame it on Wall Street. Blame it on the FDIC. Blame it on regulators generally.
Lord knows we have been blaming it on evil real estate developers, investors and
borrowers for this entire economic down cycle.

We are bankers. The pure at heart. Protectors of the American dream. Providers of
the fuel that runs our economy. [Never mind that the fuel tank exploded a few
years ago.] We are the righteous. We are the strong.

Troubled assets [we like to call them “Special”]: The shopping centers, office
buildings, industrial properties, senior housing projects, multifamily and
condominium projects, and other real property that serves as collateral for our
loans.

The borrower said the asset was worth $20 million. Today it is worth barely $10
million, if even that. We must have been defrauded!

Our guarantors gave personal financial statements reflecting a net worth of $15
million when they obtained their loan. Today, they claim to be broke. They are
evil thieves who must be hiding their treasures off shore, or in their back yards.
[Oh wait. We foreclosed on their back yards – it must be in their mattresses!]
Where else could it have gone?!!! Never mind that it was comprised of equity
interests in commercial real estate developments, with revenue from fully
occupied centers, whose values have plummeted, or been lost in foreclosure to
others.

They promised to pay us off by selling-out their condominium project in 36 months. That was
six years ago. Liars. . . Liars! Their pants must surely be on fire!

So now, here we are. We have a huge number of defaulted loans. We are on the Troubled Bank
List. [Shouldn’t it be called the “Special” Bank List?] We are one of the FDIC’s problem banks.
Or, perhaps, we are a “fortunate” successor bank – with a loss sharing arrangement with the
FDIC.

We have a boat load of “Special Assets”. What do we do now?

One choice would be to make the best of a bad situation. Recognize the virtual certainty, in
many cases, that the loan is going to result in a loss. Detach from the blame game. Use prudent
commercial business sense and sophisticated business acumen to analyze the situation and take
steps to recover as much as we reasonably can from these troubled loans. Behave as prudent
bankers. Pursue the loan workout objective pronounced by our banking supervisors in their joint
Policy Statement on Prudent Commercial Real Estate Loan Workouts issued October 30, 2009
(available on the FDIC website): “Loan workout arrangements need to be designed to help
ensure that the institution maximizes its recovery potential.”

There’s a novel idea. Take steps designed to MAXIMIZE RECOVERY POTENTIAL. What do
you suppose that means?

Do you suppose that means putting blinders on, declaring every default, and mindlessly
enforcing each and every remedy provided in our loan documents? Pushing real estate collateral
to a trustee’s foreclosure sale or sheriff’s sale, even when other potential purchasers have
expressed concrete interest in purchasing the property in an “ordinary course of business”
purchase transaction for significantly more than we can reasonably expect to realized at a forced
sale? Pursuing guarantors, without compromise, to the point of effectively forcing them into
bankruptcy (which may often be a “no-asset” liquidation from which we will recover nothing)
instead of negotiating with a guarantor for a release of guaranty in return for cooperation in
getting the highest possible price for the collateral – or for even a moderate payment from funds
the guarantor may be able to borrow from friends or family to avoid bankruptcy—and which we
will never receive if the guarantor must file bankruptcy?

For many years I represented banks, bank shareholders (holding company shareholders), senior
officers and directors. In this down cycle, my focus has been primarily representing distressed
borrowers and guarantors, but I get it. I have been on each side. These aren’t just bad loans. For
more than a few, these are bad loans threatening to take down the bank. With that, is the risk
that the FDIC will subsequently sue senior officers and directors, and in some case their
attorneys and advisors, seeking to impose personal liability for imprudent loans or failure to
properly manage loan risks or failure to take adequate steps to maximize recovery.

In other cases, the bank has already failed, and the focus is on enforcing loans in a way that
complies with our duty to the FDIC to mitigate loss to the FDIC insurance fund, and enable us to
gain the benefit of loss sharing arrangements with the FDIC.

In either case, decision making is often shaded by fear of FDIC criticism. Perhaps counterintuitively,
this can lead to commercially indefensible decisions based upon simpleminded or
misguided notions of what the FDIC is concerned about. More and more frequently, I am
experiencing bankers, senior officers, directors, troubled asset advisors, special asset
committees, and their respective attorneys, making asset recovery decision exactly contrary to
the FDIC directive to MAXIMIZE RECOVERY for financial institutions.

I have recently had bank attorneys tell me (as I have proposed loan workouts/settlements for
borrowers and guarantors) that:

(i) It would be better for the bank to sell the collateral through a trustee’s foreclosure
sale and realize even only $5 million to $6 million instead of $9.5 million offered by an
interested independent buyer seeking an “ordinary course of business” sale – for fear of
the bank being “criticized by the FDIC” for selling the collateral pursuant to a “private
sale” instead of public sale. [The bank acquired the loan pursuant to a reported 90/10 loss
sharing arrangement with the FDIC—Question: Is this the approach the bank would be
using to maximize its recovery if the bank stood to suffer 100% of the loss? Is this a little
bit of gambling with other people’s [the FDIC’s] money?].

(ii) It would be better for the bank to actively litigate a foreclosure and guaranty
action [against a virtually insolvent guarantor], with two sets of lawyers, in two states,
[seriously increasing the bank’s costs and depleting available borrower/guarantor
resources] even though the borrower was willing to fully cooperate with the bank in
devising a cooperative marketing plan to sell the property at the best possible price, or
give a deed in lieu of foreclosure, or agree to a consent foreclosure, [the choice being the
bank’s] in return for a release of guaranty.

(iii) It would be better for the bank to pursue the guarantor and receive nothing
following the guarantor’s personal bankruptcy, than it would be for the bank to accept a
payment of funds the guarantor would be able to gather by borrowing from friends and
family, because a bankruptcy with no recovery from the guarantor would be “cleaner”,
reasoning the FDIC could not criticize the bank for not pursuing the guarantors.

Objectively, the obvious question that needs to be asked is – how are any of these courses of
action designed to maximize recovery for the financial institution?

The truth is, they are not. There is no objective commercial analysis that can justify any of these
positions – at least not in the particular cases to which I am referring, and for which I have
personal knowledge. These decisions can only be explained, objectively, as smoke and mirror
efforts to create a plausible defense to criticism from the FDIC.

And what criticism is trying to be avoided? Criticism against doing exactly what these banks,
bankers and their attorneys are, in fact, doing. Pursuing recovery strategies that are NOT
designed to maximize recovery for the financial institution (and avoid loss to the FDIC insurance
fund).

On a very simplistic level, I get it. The FDIC, as Receiver for various failed banks, has taken to
suing senior officers and directors, and in some cases their attorneys and professional advisors,
seeking to impose personal liability for mismanagement resulting in loss. Often there are
questionable loans to friends or cronies of bank insiders that have resulted in millions of dollars
of loss to the financial institution, and ultimately to the FDIC insurance fund. [None of the loans
referred to above were to borrowers/guarantors who had any relation to any bank insider.] A
recurring allegation, in support of the FDIC’s claim that these senior officers, directors, attorneys
and advisors should be personally liable for the loss is that they breached fiduciary duties owed
to the institution by failing to take adequate steps to protect the bank from loss, and in many
instances “made no effort to pursue the guarantors.”

Taking an overly simplistic view of this allegation, a growing number of senior officers,
directors, attorneys and advisors appear to have developed a strategy that is essentially this: “If
the FDIC is going to assert as a basis for personal liability that “no effort was made to pursue the
guarantors,” then we will just simply NEVER release a guarantor, and will always pursue the
guarantor, come Hell or high water, even if we could improve and maximize recovery for the
bank by working out a compromise that includes a release of the guarantor from personal
liability.”

The underlying justification seems to be: “If I have to choose between the bank [or the FDIC]
losing more money, or me being potentially personally liable for not pursuing a guarantor, I am
going to protect myself every time. Damn the guarantor – and damn the bank’s balance sheet
[and damn the FDIC insurance fund]. I am going to pursue the guarantor to the ends of the earth
so the FDIC can never allege in a complaint that I “made no effort to pursue the guarantor.”

To the non-critical eye, this approach may appear to make some sense. Recognize, however, that
the legal theory underlying the FDIC allegation of personal liability for failure to pursue the
guarantor is that the FDIC’s litigation targets breached their fiduciary duty to the financial
institution by failing to take adequate steps to mitigate loss and maximize recovery. It is the
purest form of breach of fiduciary duty to sacrifice the best interests of the bank – by declining a
workout plan that maximizes recovery – just so you can be in a position to say to the FDIC: “But
I pursued the guarantor!”

In the three circumstances I described above – and there are many, many more of the same ilk –
how difficult is it going to be for the FDIC to recast the allegation in support of personal liability
of senior officers, directors, attorneys and advisors, that they breached their fiduciary duties to
mitigate loss and maximize recovery by declining viable loan workout plans that did just that?

This truly has become the “March of the Mindless”.

The legitimate way to avoid criticism from FDIC regulators, and to avoid exposure to personal
liability for breach of your fiduciary duties to your financial institution (and, under loss sharing
arrangements, for breach of your duty to mitigate loss to the FDIC insurance fund) is to
genuinely act in a prudent manner to maximize recovery, and thereby mitigate loss.

There is no mechanical formula. Each loan, and each workout scenario, must be evaluated
based upon its particular circumstances. The objective, always, must be to maximize recovery
for the financial institution. Actually maximize recovery. You may not avoid all losses, but you
can mitigate loss by pursuing a workout plan that, in fact, is objectively designed to maximize
recovery.

My approach on behalf of distressed borrowers and guarantors in loan workouts for seriously
distressed loans is, and always has been, to help you maximize your recovery, in return for you
releasing the borrower and/or guarantor from further liability so bankruptcy and financial ruin
can be avoided. It is not a pretty circumstance for either party – but prudent cooperation all
around will give the best possible result for all concerned. This is not a zero sum game.
Maximizing loss for the guarantor is not the same thing as maximizing recovery for the bank.
The first rule of successful negotiations is to focus on the benefit you receive, not the benefit
the other party receives. Why would it be bad for the bank that the guarantor avoids complete
financial annihilation? Just do what is right for the bank. Comply with your duty to maximize
recovery; by genuinely maximizing your recovery – and move on to the next troubled loan. I’m
sure you have plenty.

Thanks for listening,
Kymn
www.rsplaw.com

© 2012, R. Kymn Harp

published with permission

[ipaper docId=98485930 access_key=key-c76sdq0eb7460dnptkq height=600 width=600 /]

image: I-Robot

Fire Dog lake-

Earlier this month, I had the pleasure of appearing on a panel at Netroots Nation with, among others, Lynn Szymoniak, the lawyer and forensics expert who during her own foreclosure case recognized the massive fraud in documentation being perpetrated by banks. Lynn devoted the next several years to rooting out this fraud and telling anyone who will listen about what the banks were doing with mortgage assignments. She ended up taking home $18 million in a whistleblower case that was folded into the foreclosure fraud settlement. And now, the 60 Minutes piece that gave her national notoriety won a Loeb Award, the most prestigious award in business journalism.

The story, “The Next Housing Shock,” picked up the prize for explanatory reporting. Other winners last night included the LA Times’ three-part series on used car lots, the Allentown Morning Call’s excellent series on Amazon.com warehouses, and Felix Salmon’s financial blog.

[FDL]