The evidence shows that two law firms handled all or substantially all of the bankruptcy cases in this district from 1996-2008 for Wells Fargo — the Brice Vander Linden firm and the McCalla Raymer firm. The Brice Vander Linden firm has admitted it filed “presigned” affidavits and has provided a list of many of them. Those affidavits are included in plaintiff’s list of 631 affidavits. The affidavits it handled also included affidavits that exhibited most if not all of the other infirmities listed. The McCalla Raymer firm does not admit to filing any presigned affidavits. However, all of the other infirmities appeared in its affidavits.
[…]
The McCalla Raymer law firm did a substantial amount of Wells Fargo’s work in the Southern District of Alabama over the period 2004-2008. There is no evidence that McCalla Raymer used presigned affidavits. However, the McCalla Raymer affidavits had many of the same defects as the Brice firm affidavits. Many had undated affiant or notary signatures. Many had wrong affiant names or job titles.
In addition, McCalla Raymer affidavits had three other defects. Some McCalla affidavits had attachments added to affidavits after they were signed. This is clear because some affidavits stated that a note was attached, but a lost note affidavit was attached instead. Most troubling was the fact that there were numerous affidavits which stated that payments were in default for periods of time in the future, i.e., an affidavit dated August 25, 2004 stated that the September 2004 payment was in default.
HW-
Default servicing law firm McCalla Raymer agreed to acquire some of the non-legal functions and assets of Prommis Holdings as it heads into Chapter 11 bankruptcy.
Prior to Prommis announcing plans to file for bankruptcy protection in Delaware, the firm provided support default services in Georgia for McCalla Raymer.
Laws are like cobwebs, which may catch small flies,but let wasps and hornets break through.
Jonathan Swift- A Tritical Essay upon the Faculties of the Mind
Introduction
A few years back, the denizens of Wall Street seized upon the idea that there was a lot of money to be made by taking thousands of mortgage loans, mixing them together, and baking them, so to speak, into a large pie, the many small pieces of which could then be sold on the secondary market as mortgage-back securities.
Clearly no sensible investor would relish the possibility of her investment being clawed back into someone’s bankruptcy estate, and so one of the first orders of business was to safely distance each mortgage loan from whatever economic misfortune and subsequent liability might befall the originating lender. The solution, simple in theory, was to transfer ownership of every mortgage loan slated for the pie to a company with no assets and no liabilities, thus making them bankruptcy remote. The key word here is transfer—that is to say, a true sale of the mortgage by the originating lender.
In practice, however, it soon evolved into a process of mind-boggling complexity involving multiple parties governed by multiple documents, many of which are typically hundreds of pages in length. And it was a process that involved not simply one, but multiple transfers of ownership—a point to bear in mind during the present discussion. This meant that there would be more tracking to do, more assignments to draft, and more feet on the ground at the local land office ill-equipped as it was to handle the spike in volume. The trouble and expense would be prohibitive.
The industry response was to design, as an alternative, what turned out to be a private and in many respects secretive registry that would, among other things, not only track mortgage loans electronically and far more efficiently but also eliminate the need to produce—and, for safety’s sake, record—a written assignment every time a mortgage loan changed hands. Thus from this union of concerns there was born in the final years of the Twentieth Century a lovechild: MERS, the Mortgage Electronic Registration Systems, Inc. Its first objective proved fairly straightforward; the second, which is the subject of the present discussion, would be problematic—not because the concept itself was wrongheaded, but because of the way in which it would be carried out.
Simply put, there are flaws in the MERS model—flaws that may well call into question not only the legality of a potentially staggering number of foreclosures but also the integrity of an equally staggering number of titles to real property in cases where there has been no foreclosure. But even beyond this, the opacity of the MERS model has come to be seen by unscrupulous players within the industry as an ideal medium in which to launder material defects in the chain of title and conceal further violations of state and federal law. This is of course proving itself to be a risky business: that same opacity, once understood and thus removed, is a point of entry to a trail at the end of which stands the real person to whom such mischief ultimately owes itself—the person who gave the order and might bear the risk of prosecution for having given it.
As we delve into the specifics, it would be useful to bear in mind that the present discussion is based upon Massachusetts law. Massachusetts is a non-judicial foreclosure state in which a foreclosure may be carried out privately by power of sale—though it is absolutely clear that the power of sale may only be exercised by the person who actually owns the mortgage or stands in the owner’s shoes.2 Massachusetts is also a title-theory state in which an assignment of mortgage is considered to be the transfer of an interest in land subject to the statute of frauds, and in which the mortgage doesn’t necessarily follow the note but may be held by a different person.3 In such a case, the mortgagee is deemed to hold the mortgage in something akin to a resulting trust for the holder of the note.4
Therefore, in order to establish ownership of the mortgage and the right to foreclose, the number of assignments must equal the number of transfers that have taken place in any particular case. The point has been clearly made by the Supreme Judicial Court:
(T)here must be proof that the assignment was made by a party that itself held the mortgage. See In re Samuels, 415 B.R. 8, 20 (Bankr. D. Mass. 2009). A foreclosing entity may provide a complete chain of assignments linking it to the record holder of the mortgage, or a single assignment from the record holder of the mortgage. See In re Parrish, 326 B.R. 708, 720 (Bankr. N.D. Ohio 2005) (“If the claimant acquired the note and mortgage from the original lender or from another party who acquired it from the original lender, the claimant can meet its burden through evidence that traces the loan from the original lender to the claimant”). The key in either case is that the foreclosing entity must hold the mortgage at the time of the notice and sale in order accurately to identify itself as the present holder in the notice and in order to have the authority to foreclose under the power of sale (or the foreclosing entity must be one of the parties authorized to foreclose under G. L. c. 183, § 21, and G. L. c. 244, § 14) 5
In short, we are long past a time in Massachusetts when ownership of a mortgage could be soundly determined merely by trotting out the original mortgage contract, a lone assignment to the person exercising the power of sale, and perhaps a foreclosure deed spawned by that assignment. Securitization, with its system of multiple transfers, has changed the entire dynamic of foreclosure law, and to accept these three documents alone as prima facie proof of ownership is to force the jurisprudential foot into a shoe that has seen its day and simply no longer fits; it is atavistic and simply wrong.
[…]
Rockwell P. Ludden, MA., JD., is an attorney with firm of Ludden Kramer Law, P.C. in Yarmouth, Massachusetts.
HSBC BANK USA, N.A. AS TRUSTEE FOR THE REGISTERED HOLDERS OF THE REN- AISSANCE HOME EQUITY LOAN ASSETBACKED CERTIFICATES, SERIES 2004-4,
Plaintiff,
-against-
MARIA CARCHI, ET AL.,
Defendants.
The following papers numbered 1 to 10 read on this motion by defendants Maria Carchi and Jose Dutan for an order granting partial summary judgment in favor of the defendants on all of the plaintiff’s claims; cancelling the notice of pendency; declaring that plaintiff cannot foreclose on the mortgage and has no legal right to the promissory note and related indebtedness; directing that the mortgage and assignment of mortgage be expunged from the Queens County records; severing defendants’ counterclaims while retaining jurisdiction over said counterclaims; and imposing sanctions, costs and attorney’s fees.
Upon the foregoing papers the motion is determined as follows:
Plaintiff HSBC Bank USA N.A., as Trustee for the Registered Holders of the Renaissance Home Equity Loan Asset-Backed Certificates, Series 2004-4 commenced this mortgage foreclosure action on July 18, 2011, and filed a notice of pendency on the same date. On August 3, 2011, defendants Maria Carchi and Jose Dutan served an answer and interposed 14 affirmative defenses and 11 counterclaims. Plaintiff has served a reply to the counterclaims. On August 3, 2011, defendants served plaintiff with combined demands and a notice of discovery and inspection, and plaintiff served its responses on October 4, 2011. On December 20, 2011 defendants’ counsel served a Notice to Admit on plaintiff on plaintiff’s counsel by ordinary mail. Plaintiff’s counsel served a response to the notice to admit, by ordinary mail, on January 17, 2012.
A response to a notice to admit must be served within 20 days of service of the notice to admit, in the form of a sworn statement by the party to whom the request is directed “either denying specifically the matters of which an admission is requested or setting forth in detail the reasons why he cannot truthfully either admit or deny those matters” (CPLR 3123[a]). A notice to admit is to be used only for disposing of uncontroverted questions of fact or those that are easily provable. (Meadowbrook-Richman, Inc. v Cicchiello, 273 AD2d 6 [ 2000].) A failure to respond to a notice to admit has been found to constitute admission of the noticed facts ( Hernandez v City of New York, 95 AD3d 793[2012]; Watson v City of New York, 178 AD2d 126 [1991]) and a person acts at his/her peril in failing to respond to clear cut matters of fact. ( Marine Midland Bank v Custer, 97 AD2d 974 [1983].) A party cannot be compelled to accept an unsworn response to a notice to admit. (see Rosenfeld v Vorsanger, 5 AD3d 462, 463 [ 2004]; Matter of Johnson v Town of Haverstraw, 102 Misc 2d 923 [1980].)
CPLR 3123 does not grant an attorney permission to make the statement on behalf of a party. (see ELRAC, Inc. v McDonald, 186 Misc. 2d 830, 832-834 [2001]; Barnes v Shul Private Car Serv., 59 Misc 2d 967 [1969].) An attorney may be permitted to answer a notice to admit, but only where the attorney has personal knowledge of the facts or if the answers are based on documentary evidence (ELRAC, Inc. v McDonald, supra).
Here, the response to the notice to admit was timely served within 20 days. As the notice to admit was served by regular mail, plaintiff’s time to respond was extended by five days, and as the 20 day fell on a Saturday, and the next business day was Martin th Luther King Jr. Day, a holiday, service was properly made on January 17, 2012. (CPLR 3123, 2103[b][3]; General Construction Law § 24.) However, said response was executed only by plaintiff’s counsel, and was not verified. Counsel, in her opposing affirmation, states that the responses were made based upon documentary evidence in her office’s possession. However, no explanation is offered as to why she failed to serve a sworn response.
In addition, plaintiff’s counsel’s response improperly raised objections to items 15, 16, 19, 23 and 24 of the notice to admit. Unlike requests for written interrogatories where a party is permitted to object in lieu of responding (CPLR 3133[a]), such a procedure is not authorized with a notice to admit. ( see Webb v Tire and Brake Distributor, Inc., 13 AD3d 835 [2004]; see also Prime Psychological Servs. P.C. v Auto One Insurance Co., 14 Misc 3d 1122[A] [2008].) If there is a request for an improper admission, the correct procedure is to seek a protective order, pursuant CPLR 3103. (see Sagiv v Gamache, 26 AD3d 368 [2006].) Plaintiff, however, did not seek a protective order.
Contrary to plaintiff’s counsel’s assertions, defendants did not waive their objections to the response to the notice to admit. A notice to admit is a discovery device, and may be used by a party on a motion for summary judgment, or at trial. (see Kowalski v Knox, 293 AD2d 892 [2002]; Beneficial Fin. Co. of New York, Inc. v Youngman, 57 AD2d 727[1977]; Patrick M. Connors, Practice Commentaries, McKinneys’ Cons Laws of NY, Book7B, CPLR C3123:4.) CPLR 3123 does not require a party to reject, object to, or return an improper response to a notice to admit. Furthermore, the fact that the parties engaged in settlement negotiations on two occasions in late January 2012, without discussing the response to the notice to admit, does not constitute a waiver of said response. In view of the fact that plaintiff’s counsel served an unsworn response to the notice to admit, which contained several improper objections, said response is a nullity. Plaintiff, therefore, is deemed to have admitted to the genuineness of the documents covered by requests 1, 2 and 3, the original note, the original mortgage, and the assignment of the mortgage executed on June 3, 2011.
Defendants assert that based upon the notice to admit and the documents attached to said notice plaintiff lacks standing to bring this action, because MERS lacked authority to assign the mortgage to plaintiff, and plaintiff cannot establish that it is the holder or assignee of the underlying note. It is noted that lack of standing was asserted as an affirmative defense in the answer.
Plaintiff commenced the within action on July 18, 2011, seeking to foreclose the subject mortgage. In its complaint, plaintiff alleges that it is the owner and holder of the mortgage, subject to the assignment, and that it is in possession of the original note with a proper endorsement and/or allonge.
A plaintiff has standing in a foreclosure action 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 Bank of N.Y. v Silverberg, 86 AD3d 274, 279 [2011]; see Countrywide Home Loans, Inc. v Gress, 68 AD3d 709.) Furthermore, the Appellate Division, Second Department has warned:
“while assignment of a promissory note also effectuates assignment of the mortgage (see Bank of N.Y. v. Silverberg, 86 AD3d [274, 280] [2011]; U.S. Bank, N.A. v Collymore, 68 A.D.3d [752, 753–754] [2009]; Mortgage Elec. Registration Sys., Inc. v Coakley, 41 A.D.3d 674 [2007]), the converse is not true: since a mortgage is merely security for a debt, it cannot exist independently of the debt, and thus, a transfer or assignment of only the mortgage without the debt is a nullity and no interest is acquired by it (see Deutsche Bank Natl. Trust Co. v Barnett, 88 A.D.3d 636 [2011]; Bank of N.Y. v Silverberg, 86 A.D.3d at 280)” (U.S. Bank Nat. Assn. v Dellarmo, 94 A.D.3d 746 [2012]).
The documentary evidence establishes that on October 29, 2004, defendant Maria Carchi executed a note, and in return for a loan she received, promised to pay the lender, Delta Funding Corporation, the sum of $450,000.00, plus interest. The loan was secured by a mortgage on the subject real property known as 111-47 44 Avenue, Corona, New York, dated October 29, 2004. The th original note, now deemed to be admitted, is made payable to the lender, Delta Funding Corporation.
The mortgage was executed by Maria Carchi and Jose Dutan, and stated, among other things, that MERS was the nominee for the lender and that for the purposes of recording the mortgage, MERS was the mortgagee of record. The assignment of the mortgage states on its face that the mortgage was assigned by MERS to plaintiff, together with “all of its rights, title and interest in and to a certain mortgage” on December 23, 2004, and that said assignment was executed on July 3, 2011. Said assignment was recorded on July 15, 2011. It is noted that plaintiff, in the notice of pendency filed in this action, states that the subject mortgage was assigned “by an assignment of mortgage which is dated March 24, 2011.”
Plaintiff, in opposition to the within motion, has submitted an affidavit from Youa Vang, an account manager employed by Wells Fargo Bank, National Association, who states that Wells Fargo is the document custodian for the plaintiff and that Wells Fargo’s records show that it was in physical possession of the original note and original mortgage relative to the subject property on July 18, 2011.
Plaintiff’s counsel states in her opposing affirmation that “the original note and mortgage may be produced on the hearing date of the Defendants’ subject motion for inspection by the Court”. However, she offers no explanation as to why she cannot produce a copy of the original note at this time, and has not established that said note was endorsed to plaintiff in blank, without recourse, or that there is an allonge securely affixed thereto. The production of the original note is clearly not a matter for in camera review, as defendants have raised the issue of standing and plaintiff is now required to establish that it has standing to commence this action.
Neither Ms. Vang, nor plaintiff’s counsel, states that the note was endorsed over to plaintiff or in blank at the time the plaintiff came into physical possession of the note (see Mortgage Electronic Registration Systems, Inc. v Coakley, 41 AD3d 674 [2007], supra; cf., First Trust Nat. Assn . v Meisels, 234 AD2d 414 [1996]; see generally Slutsky v Blooming Grove Inn. Inc., 147 AD2d 208[1989]), and plaintiff has failed to present any other evidence that it was a holder of the note at time the action was commenced (see UCC 1- 201[21], 3-203[a], 3-301).
Defendants, therefore, have established their prima facie entitled to partial summary judgment as a matter of law. It is
ORDERED, that the branch of defendants motion which seeks partial summary judgment dismissing the plaintiff’s complaint is granted; and it is further,
ORDERED, that the Clerk of Queens County is directed, upon payment of the proper fees, if any, to cancel and discharge a certain notice of pendency filed in this action on November 19, 2008, for the premises located at 111-47 44 Avenue, Corona , NY th 11368, Block 2016 and Lot 70, and said Clerk is hereby directed to enter upon the margin of the record of same a notice of cancellation referring to this order; and it is further
ORDERED that defendants’ request for summary judgment on its first counterclaim for declaratory judgment is denied as they have not established their right to such relief at this time; that plaintiff’s request to expunge the mortgage and assignment of the mortgage from the Queens County records is denied; and that plaintiff’s requests for the imposition of sanctions, attorney’s fees and costs, is denied; and it is further
ORDERED that defendants’ counterclaims are hereby severed.
Bankruptcy Law Network-
by Chip Parker, Jacksonville Bankruptcy Attorney
I had two foreclosure trials scheduled earlier this week, and in both cases, the bank lawyers dismally failed to comply with very specific, important pretrial rules which should have resulted in sanctions against the banks. Specifically, in both cases, the banks refused to disclose the name of their testi-liar . . . er . . . robo-witness until hours before trial. In one case, I literally learned the name of their corporate representative when the bailiff called the case to start.
You must be thinking, “Boy, that judge must have read them the riot act!” I mean, even a layperson would understand the importance of disclosing a witness before trial. Well, in both cases, the senior judge just rescheduled the trial to a later date, allowing derelict bank lawyers yet another chance to ignore the rules. Typical.
I think we have seen this before…oh yeah and then there was a $25 Billion Dollar Settlement!
Miami Herald-
Scavenging the remnants of South Florida’s housing crisis, a partnership called Presscott Rosche appeared to gobble up almost three dozen foreclosed homes in Miami-Dade County last year. The company is currently listed as the owner of 12 homes worth about $3.5 million, according to the Miami-Dade property appraiser.
But this seemingly thriving business is, in many ways, an illusion. The name of the company’s agent listed in state records is fake. So are many of the deeds the company has filed in Miami-Dade Circuit Court to stake its claim to more than 30 houses and condos, a Miami Herald investigation has found.
The company has gained control of these homes — renting them out to unsuspecting tenants, in some cases — by filing dubious deeds and documents filled with legal-sounding jargon and shoddy punctuation. The author of many of these documents calls himself an “attorney in fact,” though he is not, in fact, a licensed attorney in Florida.
District Court of Appeal of Florida, Fourth District.
.
THE LAW OFFICES OF DAVID J. STERN, P.A.,
and
DAVID J. STERN
Appellant
v.
RORY HEWITT
Appellee
No. 4D11-3524
[January 9, 2013]
PER CURIAM
Jeffrey Tew and James Malphurs of Tew Cardenas LLP, Miami, for appellants.
Philip M. Burlington and Nichole J. Segal of Burlington & Rockenbach, P.A., West Palm Beach, Louis M. Silber of Silber & Davis, LLC, West Palm Beach, and Kirk Friedland, West Palm Beach, for appellee.
We affirm the class certification order in this case on the authority of Law Offices of David J. Stern, P.A. v. Banner,50 So.3d 1221 (Fla. 4th DCA 2010), which we find to be indistinguishable from this case in all relevant respects. We reject appellants’ argument that the class representative’s claim was atypical because he did not pay any of the reinstatement charges. Id. at 1222 (declining to distinguish between those class members who paid reinstatement charges and those who did not).
We note, however, that our jurisdiction in this non-final appeal is limited to review of the propriety of the class certification. The trial court’s denial of appellants’ motion for partial summary judgment on appellee’s claim for a violation of FDUTPA is not before us at this point. See Pinellas Cnty. Sch. Bd. v. Crowley,911 So.2d 881, 882 (Fla. 2d DCA 2005) (“The School Board’s argument . . . actually addresses the issue of whether the class representatives’ complaint stated a cause of action. This issue is not properly before us, and we express no opinion on it. Our jurisdiction in this nonfinal appeal is limited to the review of the propriety of the order of class certification.”).
We therefore cannot express an opinion on whether appellee’s complaint stated a cause of action for a FDUTPA claim. However, we note our decision in State, Office of Attorney General v. Shapiro & Fishman, LLP,59 So.3d 353 (Fla. 4th DCA 2011), in which we upheld a trial court order quashing a subpoena seeking production of documents related to a law firm’s representation of lending institutions in foreclosure cases, and ruled that “the alleged conduct of the law firm … d[id] not fall within the rubric of `trade or commerce’ as required for civil investigative subpoenas under FDUTPA.” Id. at 356. Further, any future determination on whether the FDUTPA claim is viable would not affect the trial court’s determination as to class certification of the FCCPA claim. We thus hold that the class certification order here was not an abuse of discretion.
Affirmed.
TAYLOR, CIKLIN and LEVINE, JJ., concur.
Not final until disposition of timely filed motion for rehearing.
IN THE UNITED STATES COURT OF APPEALS FOR THE ELEVENTH CIRCUIT ________________________ No. 11-14618 ________________________ D.C. Docket No. 3:10 – cv-0222-MCR
DZ BANK AG DEUTSCHE ZENTRAL GENOSSENSCHAFTSBANK, FRANKFURT AM MAIN, NEW YORK BRANCH, Plaintiff -Counter Defendant -Appellee,
versus
MICHAEL MCCRANIE, a.k.a. Michael J. McCranie, Defendant -Counter Claimant -Appellant.
Claiming to be the holder in due course of a commercial loan on which Appellant Michael McCranie had defaulted, Appellee DZ Bank brought an enforcement suit in federal district court. McCranie defended the suit on the grounds that DZ Bank was not in fact a holder of the loan because of a problem in the chain of title, and that even if it was, it had obtained the loan subject to certain valid defenses that prevented enforcement. The District Court granted summary judgment to DZ Bank. Because we find that the facts surrounding the loan’s chain of title were in material dispute, we reverse and remand for further proceedings.
[…]
As to the evidence, DZ Bank’s showing regarding the chain of title is anything but overwhelming. Again, its only direct evidence of the assignment from Brooke Credit to Brooke Funding is one sentence in an affidavit from a DZ Bank executive who has not explained how he could have personal knowledgeregarding such a transaction. See Dkt. No. 54 – 1 at 2. Nor do the agreements identified by DZ Bank do much, if anything, to bolster this showing. Those agreements merely confirm that Brooke Funding assigned whatever interest it had to DZ Bank; they do not show that Brooke Funding received a valid assignment of the loan from Brooke Credit in the first place. 1 Moreover, McCranie has produced an agreement in which Brooke Credit purported to sell almost its entire interest in the loan to an entirely different bank. Especially in light of the allegations of malfeasance and poor accountingsurrounding the Brooke companies at the relevant times, these inconsistencies raise real questions about whether a valid assignment ever existed.A rational trier of fact could well conclude that DZ Bank has not demonstrated a chain of title that leads back to Brooke Credit.
Abstract We analyze whether mid-level managers in securitized finance were aware of the housing bubble and a looming crisis in 2004-2006 using their personal home transaction data. To the extent that the practice of securitization may have led to lax screening of subprime borrowers, we find that the average person in our sample did not expect it to lead to problems in the wider housing market. Certain groups of securitization agents were particularly aggressive in increasing their exposure to housing during this period, suggesting the need to expand the incentives-based view of the crisis to incorporate a role for beliefs.
This week, Sheila Bair, the longtime Republican who served as chair of the Federal Deposit Insurance Corporation (FDIC) during the fiscal meltdown five years ago, joins Bill to talk about American banks’ continuing risky and manipulative practices, their seeming immunity from prosecution, and growing anger from Congress and the public.
IN a perfect world, policy makers, legislators and concerned Americans would have spent the last few years conducting an honest dialogue about two important issues: how to resolve Fannie Mae and Freddie Mac, the government-owned mortgage finance giants, and how to create a housing finance system that would serve borrowers without imperiling taxpayers.
But ours is an imperfect world, and discussions about these questions have taken place mostly behind closed doors in Washington. The rest of us Americans, who guarantee the mortgage market, have not been given much of a say.
House Bill 87 and Senate Bill 1666 — which backers say will clear the backlog of foreclosure cases in Florida actually will create more problems by putting speed ahead of justice.
The backlog is blamed on homeowners allegedly dragging their feet. In reality, banks have been the cause because of federal directives to pursue loss-mitigation alternatives or by voluntarily slowing down the process to explore settlement options in the interests of both parties and the market.
However long it takes to conclude a foreclosure in Florida, given the unprecedented magnitude of the fraud, forgery and abuses to which banks have admitted, we should exempt this category of civil court cases from “time to complete” requirements.
We should not make public policy decisions based on unverified, incorrect and misleading information, particularly when the data are provided by the same industry that admitted wrongdoing.
The next problem behind any push for foreclosure reform is that the real-estate market is improving. Prices have rebounded in Florida because, in part, inventories of foreclosed homes are being managed by the banks and homeowners.
Since most politicians’ campaigns are largely funded by wealthy companies and individuals, it would give voters a better sense of who the candidate they are voting for is actually representing if the company’s logo, or individual’s name, was prominently displayed upon the candidate’s clothing at all public appearances and campaign events. Once elected, the candidate would be required to continue to wear those “sponsor’s” names during all official duties and visits to constituents. The size of a logo or name would vary with the size of a donation. For example, a $1 million dollar contribution would warrant a patch of about 4″ by 8″ on the chest, while a free meal from a lobbyist would be represented by a quarter-sized button. Individual donations under $1000 are exempt.
Our unmatched practice area experience includes best-in-class innovations in class action settlement, mass tort, public, and business project administration.
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March 22 (Bloomberg) — Bloomberg’s Ryan Chilcote updates the Cyprus bank crisis. He speaks on Bloomberg Television’s “Market Makers.” (Source: Bloomberg)
Banks Ignore Homeowner Complaints; New IG Report Faults FHFA Leadership
Cummings Calls for Hearing with Banks And FHFA’s DeMarco
Washington, D.C. (March 21, 2013) — Today, Congressman Elijah E. Cummings, Ranking Member of the House Committee on Oversight and Government Reform, released a new report issued by the Inspector General of the Federal Housing Finance Agency (FHFA) warning that mortgage companies that service loans backed by Freddie Mac “have largely failed to implement” requirements to resolve “escalated cases” of serious homeowner complaints alleging abuses such as improper foreclosures and fraudulent servicing practices.
“Today’s report reveals the latest in a sorry string of failures by FHFA leadership to protect American homeowners,” said Cummings. “After so many reports documenting the abuses homeowners have suffered at the hands of mortgage servicers, it is unconscionable that FHFA has failed to require mortgage servicers to properly handle tens of thousands of homeowner complaints.”
The Inspector General concluded that between October 1, 2011, and November 30, 2012, more than 34,000 escalated cases were filed by homeowners with Freddie Mac and its eight largest mortgage servicers. Although current FHFA guidelines require these complaints to be resolved within 30 days of receipt, more than 20% were not resolved within that timeframe.
Current FHFA guidelines also require mortgage servicers to report the escalated cases they receive to Freddie Mac on a monthly basis. The Inspector General found that four of Freddie Mac’s largest mortgage servicers—including Bank of America, CitiMortgage, Provident, and Wells Fargo—“did not report any escalated cases to Freddie Mac despite handling more than 20,000 such cases.”
The Inspector General also found that no penalties have been imposed on servicers for their failure to handle escalated cases in a manner compliant with current FHFA guidelines.
Ranking Member Cummings also sent a letter to Chairman Darrell Issa requesting that the Committee hold a hearing with Edward DeMarco, the Acting FHFA Director, and Steve A. Linick, the Inspector General of FHFA. Cummings requested that the Committee also invite representatives from Bank of America, CitiMortgage, Provident, and Wells Fargo – the mortgage servicers singled out by the Inspector General’s report as completely disregarding FHFA’s requirements to report monthly on the escalated cases they receive.
Cummings has called for new leadership at FHFA and encouraged President Obama to nominate a permanent, Senate-confirmed candidate to replace DeMarco.
I could use some help. As a Notary Public, most everyone that knows me, know I have filed numerous complaints regarding notaries and their fraudulent practices. Most of us know about Lorraine Brown, and others at LPS. The National Notary Association has a speaker (at least second year, although I caught last years speaker list after the event) and this speaker works for, LSI, a division of LPS. I find this offensive to say the least, as I believe in integrity and law abiding practices, and this is not a company that I would view as having any integrity or law abiding practices. See Ryan Flaherty on this list, http://www.nationalnotary.org/conference/speaker_bios.html and can you all help sign this petition, email, call, fax, whatever to get their attention that this is not a speaker that should be speaking on any stance of authority, integrity, or any other stance for that matter!
Phone: 1-800-US NOTARY email: conference@nationalnotary.org Mail: National Notary Association P.O. Box 541032 Los Angeles, CA 90054-1032
IN THE COURT OF APPEALS ELEVENTH APPELLATE DISTRICT ASHTABULA COUNTY, OHIO
SELF HELP VENTURES FUND, Plaintiff-Appellee,
– vs –
LOIS J. JONES, et al., Defendant-Appellant.
Civil Appeal from the Ashtabula County Court of Common Pleas, Case No. 2010 CV 00521.
Judgment: Reversed and remanded.
Nicholas D. Donnermeyer and Kimberlee S. Rohr, Lerner, Sampson & Rothfuss, 120 East Fourth Street, Suite 800, Cincinnati, OH 45201-5480 (For Plaintiff-Appellee).
Anne M. Reese, Legal Aid Society of Cleveland, 121 East Walnut Street, Jefferson, OH 44047, and Philip D. Althouse, Legal Aid Society of Cleveland, 1530 West River Road, Suite 301, Elyria, OH 44035 (For Defendant-Appellant).
CYNTHIA WESTCOTT RICE, J.
{¶1} Appellant, Lois J. Jones, appeals the summary judgment of foreclosure entered in favor of Appellee, Self Help Ventures Fund (“Self Help”), by the Ashtabula County Court of Common Pleas. At issue is whether Self Help’s lack of standing when it filed this mortgage foreclosure action could be cured by the assignment of the mortgage and promissory note to it prior to the entry of final judgment. For the reasons that follow, the trial court’s judgment is reversed, and this matter is remanded for the trial court to dismiss the complaint without prejudice.
{¶2} On June 26, 2007, appellant purchased a home in Conneaut, Ohio. Appellant applied for and received a residential home loan from Sky Bank in the amount of $61,100. In return for the loan, appellant executed a promissory note in that amount in favor of Sky Bank. In order to secure the loan, appellant executed a mortgage in favor of Sky Bank. Later in 2007, Sky Bank merged into Huntington National Bank.
{¶3} Subsequently, appellant defaulted on the note, and the amount owed was accelerated. On May 10, 2010, Self Help filed this action against appellant. Self Help alleged it was the holder of the note on which appellant defaulted. Self Help attached copies of the note and mortgage to the complaint; however, both instruments showed Sky Bank, rather than Self Help, as the creditor.
{¶4} Some two months later, on June 30, 2010, Huntington National Bank, as “successor by merger to Sky Bank,” assigned the note and mortgage to Self Help.
{¶5} On August 9, 2010, appellant filed an answer denying the material allegations of the complaint and asserting various affirmative defenses, including Self Help’s alleged lack of standing.
{¶6} On December 29, 2010, Self Help filed a motion for summary judgment against appellant. In support of said motion, Self Help filed the June 30, 2010 assignment of the note and mortgage from Huntington to Self Help.
{¶7} In further support of its summary-judgment motion, Self Help filed the affidavit of Dawn Adams, an officer of Self Help’s servicing agent. Ms. Adams stated that Self Help is the holder of the instant promissory note and mortgage as a result of the foregoing assignment from Huntington to Self Help. She stated that appellant is in default on the note and mortgage and that the amount owed on the account had been accelerated, making the entire balance of $59,653.80 due. Ms. Adams authenticated the note and mortgage.
{¶8} In further support of its motion for summary judgment, Self Help filed the Sky Bank/Huntington merger documents demonstrating that in 2007 Sky Bank merged into Huntington National Bank.
{¶9} Appellant filed a brief in opposition to Self Help’s motion for summary judgment and a cross motion for summary judgment, arguing that Self Help lacked standing. However, appellant did not dispute she defaulted on the note.
{¶10} On March 7, 2012, the trial court entered summary judgment and a decree in foreclosure against appellant, implicitly finding that Self Help had standing.
{¶11} A sheriff’s sale was scheduled for July 18, 2012. On June 27, 2012, appellant filed a motion to stay execution of the order of sale pending appeal, which the trial court granted.
{¶12} Appellant now appeals, asserting two assignments of error. For her first assigned error, appellant alleges:
{¶13} “The trial court erred as a matter of law by granting Summary Judgment to the Appellee where the Appellee had no ownership interest in the note or the mortgage on the date the Complaint was filed, which is a fatal standing defect that cannot be cured by subsequent assignment of the note and mortgage.”
{¶14} “Subject matter jurisdiction is a court’s power to hear and decide a case on the merits * * *.” Morrison v. Steiner, 32 Ohio St.2d 86 (1972), paragraph one of the syllabus. “Because subject-matter jurisdiction goes to the power of the court to adjudicate the merits of a case, it can never be waived and may be challenged at any time.” Pratts v. Hurley, 102 Ohio St.3d 81, 2004-Ohio-1980, ¶11. When the trial court lacks subject-matter jurisdiction, its final judgment is void. Id. at ¶12.
{¶15} In Ohio, courts of common pleas have subject-matter jurisdiction over justiciable matters. Ohio Constitution, Article IV, Section 4(B).
{¶16} “Standing to sue is part of the common sense understanding of what it takes to make a justiciable case.” Steel Co. v. Citizens for a Better Environment, 523 U.S. 83, 102 (1998). Standing involves a determination of whether a party has alleged a personal stake in the outcome of the controversy to ensure the dispute will be presented in an adversarial context. Mortgage Elec. Registration Sys. v. Petry, 11th Dist. No. 2008-P-0016, 2008-Ohio-5323, ¶18. A personal stake requires an injury to the plaintiff. Id. The Supreme Court of Ohio has held that standing is jurisdictional in nature. State ex rel. Dallman v. Franklin Cty. Court of Common Pleas, 35 Ohio St.2d 176, 179 (1973).
{¶17} In the context of a mortgage foreclosure action, the mortgage holder must establish an interest in the mortgage or promissory note in order to have standing to invoke the jurisdiction of the common pleas court. Fed. Home Loan Mortg. Corp. v. Schwartzwald, 134 Ohio St.3d 13, 2012-Ohio-5017, ¶28.
{¶18} Whether standing exists is a matter of law that is reviewed de novo. Cuyahoga Cty. Bd. of Commrs. v. State, 112 Ohio St.3d 59, 2006-Ohio-6499, ¶23.
{¶19} Standing is similar to the requirement in Civ.R. 17(A) that every action “shall be prosecuted in the name of the real party in interest.” The real party in interest is one who has a real interest in the subject matter of the litigation and not merely an interest in the action itself, i.e., “‘one who is directly benefitted or injured by the outcome of the case.’” Midwest Business Capital v. RFS Pyramid Management, LLC, 11th Dist. No. 2011-T-0030, 2011-Ohio-6214, ¶19, quoting Shealy v. Campbell, 20 Ohio St.3d 23, 24 (1985). Where the action has not been initiated by the real party in interest, Civ.R. 17(A) provides that no action shall be dismissed on the ground that it is not prosecuted in the name of the real party in interest until a reasonable time has been allowed after objection for joinder or substitution of the real party in interest. Civ.R. 17 allows a representative of the real party in interest to file an action and to later be substituted by the real party in interest as long as the representative plaintiff also had standing in his own right to file the action. Schwarzwald, supra, at ¶37-44. The real-party-in-interest rule concerns only proper party joinder, not standing. Id. at ¶33.
{¶20} In contrast to standing, which is jurisdictional, Civ.R. 17(A) is considered procedural and is waived if not specifically pled. Travelers Indemn. Co. v. R.L. Smith Co., 11th Dist. No. 2000-L-014, 2001 Ohio App. LEXIS 1750, *8 (Apr. 13, 2001).
{¶21} Under her first assigned error, appellant argues that because Self Help did not hold the note or mortgage when it filed the complaint, it lacked standing, and this defect could not be cured after the complaint was filed. She thus argues that standing is jurisdictional and could not be acquired after the complaint was filed.
{¶22} In contrast, Self Help argues that, although it did not hold the note or mortgage when it filed its complaint, it acquired standing when it became the holder of these instruments after the complaint was filed. It therefore argues that standing is not jurisdictional and could be acquired before the entry of final judgment.
{¶23} Thus, the issue before us is whether Self Help was required to have standing at the time it filed this action or whether its lack of standing was cured by the assignment of the mortgage and note to it after the action was filed but before final judgment was entered.
{¶24} The Supreme Court of Ohio recently addressed the identical issue before us in Schwartzwald, supra. In Schwartzwald, the Supreme Court held that standing is required to present a justiciable controversy and is a jurisdictional requirement. Id. at ¶21-22. The Court held that, because standing is required to invoke the trial court’s jurisdiction, standing is determined as of the filing of the complaint. Id. at ¶24. Further, the Court held that a mortgage holder cannot rely on events occurring after the complaint is filed to establish standing. Id. at ¶26. Thus, the plaintiff cannot rely on Civ.R. 17(A) to cure its lack of standing by obtaining an interest in the subject of the litigation after the action is filed and substituting itself as the real party in interest. Id. at ¶36. Finally, the Court held that when the evidence demonstrates the mortgage lender lacked standing when the foreclosure action was filed, the action must be dismissed without prejudice. Id. at ¶40.
{¶25} This court followed the Supreme Court’s holding in Schwartzwald, supra, in Federal Home Loan Mortgage Corp. v. Rufo, 11th Dist. No. 2012-A-0011, 2012-Ohio- 5930, ¶44, and overruled this court’s prior holding in, inter alia, Everhome Mortg. Co. v. Behrens, 11th Dist. No. 2011-L-128, 2012-Ohio-1454, ¶12, 16, that standing is not jurisdictional.
{¶26} Thus, pursuant to Schwartzwald, standing is jurisdictional. As a result, Self Help was required to establish an interest in the note or mortgage when it filed this action in order to have standing to invoke the jurisdiction of the trial court.
{¶27} We therefore hold that, pursuant to Schwartzwald, supra, and Rufo, supra, because Self Help did not hold the note or mortgage when it filed the complaint, it did not have standing to bring this foreclosure action against appellant. As a result, the trial court erred in granting summary judgment in favor of Self Help because it was not entitled to judgment as a matter of law. We sustain appellant’s first assignment of error, reverse the court’s summary judgment in favor of Self Help, and order the trial court to dismiss the complaint without prejudice.
{¶28} For her second assignment of error, appellant alleges:
{¶29} “The trial court erred to the prejudice of the Appellant by granting Summary Judgment where the Appellee failed to sustain its burden to prove that it had standing to sue by providing evidence that it had both (1) possession of an indorsed note and (2) ownership of the mortgage on the date the Complaint was filed.” {¶30} Having sustained appellant’s first assignment of error, we find her second assigned error to be moot. However, a court may rule on an otherwise moot case “where the issues raised are ‘capable of repetition, yet evading review.’” State ex rel. Beacon Journal Publishing Co. v. Donaldson, 63 Ohio St.3d 173, 175 (1992), quoting State ex rel. Plain Dealer Publishing Co. v. Barnes, 38 Ohio St.3d 165 (1988), paragraph one of the syllabus. Because the issues raised by appellant’s second assignment of error are likely to be reasserted on the re-filing of this action, we shall address them.
{¶31} First, appellant argues that in order to have standing to sue on the note in this case, Self Help was required to prove it was the holder of the note by negotiation, pursuant to R.C. 1303.31. Without citing any authority in support, she argues a note cannot be transferred by assignment, as it was in this case. We do not agree.
{¶32} R.C. 1303.31(A) identifies three classes of persons who are “entitled to enforce” an instrument, such as a note. As pertinent here, they include: (1) the “holder” of the note, and (2) a “nonholder” in possession of the note who has the rights of a holder.
{¶33} A “holder” is a person in possession of a note that is payable either to bearer or to an identified person. R.C. 1301.01(T)(1), renumbered June 29, 2011 as R.C. 1301.201(B)(21).
{¶34} “An instrument is transferred when it is delivered * * * for the purpose of giving to the person receiving delivery the right to enforce the instrument.” R.C. 1303.22(A). The transfer of an instrument vests in the transferee any right of the transferor to enforce the instrument. R.C. 1303.22(B).
{¶35} “Negotiation” is a particular type of transfer. “Negotiation” means “a * * * transfer of possession of an instrument * * * to a person who by the transfer becomes the holder of the instrument.” R.C. 1303.21(A). “[I]f an instrument is payable to an identified person, negotiation requires transfer of possession of the instrument and its indorsement by the holder. If an instrument is payable to bearer, it may be negotiated by transfer of possession alone.” R.C. 1303.21(B). Thus, in order for a person to become a “holder” of a note, it must have been transferred to him by negotiation.
{¶36} Further, “[t]ransfer of an instrument, whether or not the transfer is a negotiation, vests in the transferee any right of the transferor to enforce the instrument.” (Emphasis added.) R.C. 1303.22(B). Thus, contrary to appellant’s argument, a note can be transferred by a method other than negotiation.
{¶37} A “nonholder” is one in possession of the instrument who acquired it by some method of transfer other than negotiation. Official Comment 2 to R.C. 1303.22. A nonholder is entitled to enforce the instrument if the transferor was a holder at the time of transfer. Id. Although the transferee is not a “holder,” he has the rights of the transferor as holder pursuant to R.C. 1303.22(B). Id.
{¶38} In this case, the note attached to the complaint is payable to an identified entity, Sky Bank. Thus, only Sky Bank could have negotiated the subject note by transferring the note and endorsing it to a specific person or to “bearer.”
{¶39} However, Huntington, which acquired the note and mortgage from Sky Bank by way of merger, transferred both instruments by assignment to Self Help. Ohio Appellate Districts have repeatedly held that a note can be transferred by assignment. For example, in Bank of New York v. Dobbs, 5th Dist. No. 2009-CA-000002, 2009-Ohio- 4742, the Fifth District held that the assignment of a mortgage, without an express transfer of the note, is sufficient to transfer both the mortgage and the note, if the record indicates that the parties intended to transfer both. Id. at ¶31. This court cited Dobbs with approval and followed its holding in Rufo, supra, at ¶44.
{¶40} Further, in Deutsche Bank Nat’l Trust Co. v. Gardner, 8th Dist. No. 92916, 2010-Ohio-663, the Eighth District held that, while the unendorsed note was insufficient to show that the transferee was a “holder” of the note, the assignment of the note and mortgage to the transferee demonstrated that the transferor transferred and assigned to the transferee all of its rights to the note. Id. at ¶22. The Eighth District further held that in these circumstances, the trial court could find that the transferee had the rights of a holder of the note with the right to enforce payment thereon. Id. Additionally, in United States Bank, N.A. v. Higgins, 2d Dist. No. 24963, 2012-Ohio-4086, the Second District held that the assignment of the mortgage, in circumstances indicating the transferor intended to transfer the note with the mortgage, was sufficient to demonstrate that the transferee had the rights of a holder of the note. Id. at ¶22.
{¶41} In light of the foregoing authority, we conclude that the assignment at issue here was effective to transfer the note from Huntington to Self Help and that Self Help has the rights of a holder with the right to enforce the note.
{¶42} Second, appellant argues that the Huntington/Sky Bank merger documents could not be considered on summary judgment because they were not authenticated as required by Civ.R 56(C). The merger documents are pertinent to the issue of whether Huntington, as successor by merger to Sky Bank, acquired the mortgage from Sky Bank and was authorized to assign it to Self Help. Self Help conceded below that the merger documents were not authenticated, and simply argued it was not required to authenticate them on summary judgment. However, pursuant to Civ.R. 56(C), Self Help is incorrect. Because the merger documents were not authenticated, they could not be considered on summary judgment.
{¶43} For the reasons stated in this opinion, it is the judgment and order of this court that the judgment of the Ashtabula County Court of Common Pleas is reversed, and this matter is remanded for the trial court to dismiss this action without prejudice.
Residential Capital LLC should try to negotiate a new foreclosure-review process with federal regulators before seeking a bankruptcy court order to halt the $300 million program, a judge said.
U.S. Bankruptcy Judge Martin Glenn in Manhattan told ResCap today he wouldn’t rule immediately on the company’s request to suspend its obligation to find any damages suffered by borrowers who went through foreclosure. ResCap, through its GMAC Mortgage unit, agreed to the review under a settlement with U.S. regulators before filing for bankruptcy last year.
The review, which may cost about $300 million, is a waste of money because a new federal policy allows a lump-sum payment to be split among borrowers, a lawyer for ResCap said today. That would be cheaper than paying PricewaterhouseCoopers LLP to conduct the review, the company said.
“You have to negotiate with the Fed and then come back to me,” Glenn said, referring to the U.S. Federal Reserve, which is requiring the review. “I’m not ruling today, I’m making that crystal clear.”
Cuomo Administration Settlement with Assurant Includes Restitution for Homeowners, a $14 Million Penalty, and Industry-leading Reforms
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Cuomo Administration Says Other Force-placed Insurers, Including QBE, Need to “Step Up to the Plate Now” and Put in Place These Reforms
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NEW YORK, NY – Governor Andrew M. Cuomo today announced that a New York State Department of Financial Services (DFS) investigation has produced a major settlement with the country’s largest “force-placed” insurer, Assurant, Inc., which will help lead a nationwide reform effort for this industry. The settlement includes restitution for homeowners who were harmed, a $14 million penalty paid to the State of New York, and industry-leading reforms that will save homeowners, taxpayers, and investors millions of dollars going forward through lower rates.
“The force placed insurance industry has for too long been plagued by an intricate web of relationships between insurers and banks that pushed distressed families over the foreclosure cliff,” said Governor Andrew M. Cuomo. “Today’s agreement starts us on the road to reform, which will clean up this industry and truly protect working people.”
Benjamin M. Lawsky, Superintendent of Financial Services said: “Our investigation found that insurers and banks built a network of troubling relationships and payoffs that helped drive premiums sky high. Those improper practices created significant conflicts of interest and saddled homeowners, taxpayers, and investors with millions of dollars in unfair and unnecessary costs. This settlement includes major reforms that will put a stop to those practices at Assurant, provide restitution to homeowners who were harmed, and save millions of dollars for homeowners, taxpayers, and investors going forward through lower rates.”
The Findings of DFS’s Investigation of Assurant
In October 2011, DFS launched an investigation into the force-placed insurance industry, including Assurant and its subsidiaries. Force-placed insurance is insurance taken out by a bank, lender, or mortgage servicer when a borrower does not maintain the insurance required by the terms of the mortgage. This can occur if the homeowner allows their policy to lapse (often due to financial hardship), if the bank or mortgage servicer determines that the borrower does not have a sufficient amount of coverage, or if the homeowner is force-placed erroneously.
The DFS investigation revealed that the premiums charged to homeowners for force-placed insurance can be two to ten times higher than premiums for voluntary insurance — despite the fact that force-placed insurance provides far less protection for homeowners than voluntary insurance.
Indeed, even though banks and servicers are the ones who choose which force-placed insurance policy to purchase, the high premiums are ultimately charged to homeowners, and, in the event of foreclosure, the costs are passed onto investors. And when the mortgage is owned or backed by a government-sponsored enterprise, such as Fannie Mae or Freddie Mac, those costs are ultimately borne by taxpayers.
DFS’s investigation found that Assurant competed for business from the banks and mortgage servicers through what is known as “reverse competition.” That is, rather than competing by offering lower prices, the insurers competed by offering what is effectively a share in the profits. This profit sharing pushed up the price of force-placed insurance by creating incentives for banks and mortgage servicers to buy force-placed insurance with high premiums. That’s because the higher the premiums, the more that the insurers paid to the banks. This was done by:
Paying commissions to insurance agents and brokers affiliated with the banks even though the agents and brokers did not perform the customary tasks that would justify a commission.
Paying banks’ “expenses” related to force-placed insurance. These expenses were typically a percentage of premium and were paid to banks that did not have agents or brokers that would collect a premium.
Paying lump sum amounts, such as one bank’s $1 million termination fee for switching its business to Assurant from another insurer.
Allowing a reinsurance company owned by a bank to take as much as 75 percent of the premium and therefore 75 percent of the profit. A reinsurance company provides insurance to insurance companies by sharing risk. But since there was little risk in force-placed insurance relative to the high premiums, this was effectively a way to transfer profits. Thus, the bank put itself on both sides of the transaction, paying an inflated premium that hurt the homeowner and then reaping 75 percent of those gains back from Assurant through a reinsurance agreement. For example, JPMorgan Chase has made approximately $600 million since 2006 by taking 75 percent of the profits from the force-placed business it gave Assurant.
One measure of how profitable force-placed insurance has been for Assurant is how little it has paid in claims—what is known as the loss ratio. In its 1994 rate filing with DFS, one of Assurant’s subsidiaries based its rate on the expectation that it would pay 58 percent of premium on claims. In fact, from 2006 through 2011, that subsidiary actually paid only 24.7 percent, 19.4 percent, 17.3 percent, 22.8 percent, 24.3 percent, and 24.7 percent, respectively. Despite years when it paid out claims less than half of what it projected, Assurant did not file for lower rates. For voluntary homeowners insurance the loss ratio has historically been around 63 percent nationally.
Key Terms of the Settlement
The settlement that Assurant and the New York State Department of Financial Services signed today includes restitution for homeowners who were harmed, a $14 million penalty, and a set of major reforms for force-placed insurance at Assurant.
Superintendent Lawsky said: “By agreeing to implement these critical reforms, Assurant is serving as an industry leader. These reforms will make Assurant a stronger and better company focused on its customers. Other force-placed insurers, including QBE, need to step up to the plate now and put in place these reforms. Our work on this issue is far from done and we expect that this settlement will help lead a nationwide reform effort for this industry.”
The key terms of the settlement include:
To lower the cost of force-placed insurance going forward for all non-flood business:
Assurant shall file with DFS a premium rate with a permissible loss ratio of 62 percent, supported by the required data and actuarial analysis that is acceptable both professionally and to DFS. This will substantially reduce homeowners’ premiums.
Every three years, Assurant will be required to re-file its rates with DFS for review.
If Assurant’s actual rates in any year result in an actual loss ratio of less than 40 percent for the immediately preceding calendar year, Assurant will be required to re-file its rates for the next year for DFS review in order to bring the loss ratio back up.
Assurant must report annually to DFS on its actual loss ratio, earned premiums, itemized expenses, losses, and reserves.
To put a stop to the improper practices found in DFS’s investigation, many of which helped Assurant support inflated premiums:
Assurant shall not issue force-placed insurance on mortgaged property serviced by a bank or servicer affiliated with Assurant.
Assurant shall not pay commissions to a bank or servicer or a person or entity affiliated with a bank or servicer on force-placed insurance policies obtained by the servicer.
Assurant shall not reinsure force-placed insurance policies with a person or entity affiliated with the banks or servicer that obtained the policies.
Assurant shall not pay contingent commissions based on underwriting profitability or loss ratios.
Assurant shall not provide free or below-cost, outsourced to banks orservices to servicers or their affiliates.
Assurant shall not make any payments, including but not limited to the payment of expenses, to servicers, lenders, or their affiliates in connection with securing business.
To provide restitution to those who were harmed by Assurant’s practices:
Refunds will be provided to consumers through a claims process and a third-party administrator selected by DFS and paid for by Assurant for homeowners who have been force-placed at any time after January 1, 2008 and meet the eligibility criteria for one of the following three categories of claimants:
Homeowners who defaulted on their mortgage or were foreclosed because of force placement.
Homeowners who were charged for force placement at a coverage limit higher than permitted by their mortgage.
Homeowner’s who were erroneously charged for force-placed insurance: either because they had voluntary insurance in effect, or they were charged commercial rates for a residence.
Additionally, under the terms of the settlement, Assurant will pay a civil penalty of $14 million to the State of New York; provide improved disclosures and notices to homeowners; improve its email retention policy; and ensure that the amount of coverage force placed on any homeowner shall not exceed the last known amount of coverage, provided that if the last known amount of coverage did not comply with the mortgage, then the amount of coverage shall not exceed the replacement cost of improvements on the property.
To read a full copy of the Department of Financial Services’ settlement with Assurant, please visit, link.
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