Note: See below that MERS is named as a defendant AND I bet MERS was involved in assigning these mortgages. See any conflicts?

SUPREME COURT – STATE OF NEW YORK
I.A.S. PART 7 – SUFFOLK COUNTY

PNC Bank National Association,
Plaintiff,

-against-

Michael Sam Giovanni dk/a Michael Sangiovanni,
Karla Manzueta, HSBC Mortgage Corporation
(USA), Mortgage Electronic Registration Systems,
Inc.,
Defendants.

‘This is an action to foreclose a mortgage on premises known as 14 Gregory Lane, Central
Islip. New York. On July 26, 2005, defendants Sangiovanni and Karla Marizueta (Manzueta)
executed a fixed rate note in favor of Nationpoint a Division of Nat. City Bank of IN (Nationpoint)
agreeing to pay 9;220,000.00 at the yearly rate of 5.9990 percent. The note presented to the court
contains neither an indorsement nor an allonge. On July 27, 2005, defendants Sangiovanni and
Manzueta executed a first mortgage in the principal sum of $220,000.00 on their home, the subject
property. The mortgage was recorded on August 1 1. 2005 in the Suffolk County Clerk’s Office.
Thereafter, it is alleged that the mortgage was transferred by assignment of mortgage dated
December 2, 2005 from Nationpoint a Division of National City Bank of IN to First Franklin
Financial Corporation and recorded with the Suffolk County Clerk’s Office on March 8,2006’. On
May 26, 2011, the mortgage was transferred by assignment of mortgage from First Franklin
Financial Corporation to PNC Bank, National Association. SPS Select Portfolio Servicing, Inc.,
attorney-in-fact for plaintiff, sent a notice of default dated January 3 1,201 1 to defendants stating that
Sangiovanni and Manzueta had defaulted on their mortgage loan and that the amount past due was
$1 1.386.93.

As a result of defendants’ continuing default, plaintiff commenced this foreclosure action
on June IO, 201 I!. In its complaint, plaintiff alleges in pertinent part that defendants breached their
obligations under the terms of the note and mortgage by failing to make monthly payments
commencing on September 1,20 10, and each subsequent month thereafter, and that it is the current
holder of the note and mortgage. Defendant Sangiovanni answered by entering a denial and asserting
five affirmative defenses.

The Court’s computerized records indicate that a foreclosure settlement conference was held
on March 28, 2012 at which time this matter was referred as an IAS case since a resolution or
settlement had not been achieved. Thus, there has been compliance with CPLR 3408 and no further
settlement conference is required.

Plaintiff now moves for summary judgment on its complaint contending that defendants
Sangiovanni and Manzueta failed to comply with the terms of the loan agreement and mortgage, that
the answer of defendant Sangiovanni raised no issues of fact for trial and, that no valid affirmative
defenses were raised by the defendant. In support of its motion, plaintiff submits among other
things: the sworn affidavits of David Coleman, document control officer for Select Portfolio
Servicing, Inc.; the affirmation of Ted Eric May, Esq.; the summons and verified complaint;
defendant’s verified answer; the note, mortgage and assignment of mortgage dated May 26,20 1 1 ;
a notice of default; notices pursuant to RPAPL §§ 1320, 1303 and 1304; the affirmation of Ted Eric
May, Esq. pursuant to the Administrative Order of the Chief Administrative Judge of the Courts
(A0143 1/11); affidavits of service for the summons and complaint; an affidavit of service of the
instant summary judgment motion upon the defendants; and a proposed order appointing a referee
to compute.

Defendant, in opposition to the summary judgment motion contends, inter alia, that PNC
Bank lacks standing to foreclose on defendant’s mortgage.

“[In an action to foreclose a mortgage, a plaintiff establishes its case as a matter of law
through the production of the mortgage, the unpaid note, and evidence of default” (see Republic
Natl. Bank of N. Y. v O’Karze, 308 AD2d 482,482,764 NYS2d 635 [2d Dept 2OQ31; Village Bank
t’ Wild Onks Ho,lding, 196 AD2d 8 12,60 1 NYS2d 940 [2d Dept 19931; see also Argent Mtge. Co.,
LLC VMentesann, 79 AD3d 1079,915 NYS2d 591 [2d Dept 20101). Once a plaintiff has made this
showing. the burden then shifts to defendant to produce evidentiary proof in admissible form
sufficient to require a trial of their defenses (see Aames Funding Corp. v Houston, 44 AD3d 692,
843 NYS2d 660 [2d Dept 20071; Household Fin. Realty Corp. of New York v Winn, 19 AD3d 545,
796 NYS2d 533 [2d Dept 20051; see also Washington Natl. Bank v Valencia, 92 AD3d 774,939
NYS2d 73 [2d Dept 20121). However, “foreclosure of a mortgage may not be brought by one who
has no title to it” (see US Bank, Nat Ass’n v Slzarif, 89 AD3d 723,933 NYS2d 293 [2d Dept 201 I];
Kluge v Fugazy, 145 AD2d 537,536 NYS2d 92 [2d Dept 19881).

Where, as here, standing is put into issue by the defendant, the plaintiff is required to prove
it has standing in order to be entitled to the relief requested (see Deutsclze Bank Natl. Trust Co. v
€faller, 100 AD3d 680,954 NYS2d 55 1 [2d Dept 201 11; USBank, NA v Collyntore, 68 AD3d 752,
890 NYS2d 578 [2d Dept 20091; Wells Fargo Bank Minn., NA vMastropaolo. 42 AD3d 239,837
NYS2d 247 [2d Dept 20071). In a mortgage foreclosure action “[a] plaintiff has standing where it
is the holder or assignee of both the subject mortgage and of the underlying note at the time the
action is commenced” (HSBC Bank USA v Hernandez, 92 AD3d 843,939 NYS2d 120 [2d Dept
20121; US Bank, NA v Collymore, 68 AD3d at 753; Countrywide Home Loans, Inc. v Gress, 68
AD3d 709, 888 NYS2d 914 [2d Dept 20091). “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” (HSBC Bank USA v Hernandez, 92 AD3d 843).

In the matter at hand, plaintiff has failed to establish, prima facie, that it had standing to
commence this action. The evidence submitted by the plaintiff in support of its motion did not
demonstrate that the note was physically delivered or assigned to it prior to the commencement of
the action. The affidavit from David Coleman, document control officer for Select Portfolio
Servicing, Inc,, did not give any factual details based on personal knowledge of a physical delivery
or assignment of the note and thus, failed to establish possession of the note prior to commencing
this action (HSBC Bank USA v Hernandez, 92 AD3d 843; Citimortgage, Inc. v Stosel, 89 AD3d
887, 934 NYS2d 182 [2d Dept 201 I]). Conclusory boiler plate statements such as “[plaintiff is the
holder and owner of the subject note” will not suffice when standing is raised as a defense (see
Deutsche Bank Natl. Trust Co. v Barnett, 88 AD3d 636,93 1 NYS2d 630 [2d Dept 201 11; Aurora
Loan Services, LLC v Weisblunz, 85 AD3d 95, 923 NYS2d 609 [2d Dept 201 11). Furthermore,
plaintiff has failed to establish through demonstrable evidence a chain of title to the note and related
mortgage that plaintiff seeks to foreclose on. As such, plaintiff has no foundation in law or fact to
foreclose on the mortgage.

Based upon the foregoing, the motion for summary judgment against defendant
Sangiovanni, to strike his answer, granting a default judgment in favor of plaintiff and for an order
of reference is denied without prejudice as set forth above.

The Court grants plaintiffs request to amend the caption by striking from it the names of
defendants “JOHN DOE #1 ” through “JOHN DOE #12”.

Plaintiff is directed to serve a copy of this order amending the caption of this action upon the
Calendar Clerk of this Court.

HON. WILLIAM B. REBOLINI, J.S.C.

footnote:

’ Plaintiff has failed to submit evidence of the December 2, 2005 assignment of mortgage
and proof of filing with the Suffolk County Clerk’s Office in its motion before the Court.

HuffPO-

Outside in the world, Safeguard Properties was supposed to be protecting millions of homes that had slid into foreclosure, shoring up and repairing abandoned properties for the banks that were responsible for tending to all this real estate gone bad.

But inside the offices of Safeguard’s complaint department, Kevin Kubovcik says he gained a starkly different perspective on his company’s pursuits as allegations of incompetence, malevolence and larceny rolled in day after day.

People with legal title to their property called to complain that Safeguard contractors had broken into their homes and carted off family heirlooms, valuable artwork and weapons, he recalled. People living next door to foreclosed properties complained that Safeguard mixed up the addresses and locked them out of their own homes.

Complaints came in seemingly without end. “I’d pick up the phone, put it down, and then it would ring again,” Kubovcik said.

[HUFFINGTON POST]

via: Our Financial Security

What Does HR 992 Do?

HR 992 modifies Section 716 of the Dodd – Frank Act to add numerous additional exemptions to the section’s ban on Federal government bailouts of large derivatives dealers.

What Does Section 716 Do?

The key effect of Section 716 as currently written is that it would force many types of swaps dealing activities to be removed from insured depository institutions and placed into a separately capitalized subsidiary. This is because Section 716 prohibits public (taxpayer) support for derivatives dealing, and insured depository institutions are automatically eligible for substantial public support. This support includes access to the Federal Reserve discount window as well as FDIC deposit insurance.

Section 716 already contains exemptions to the broad ban on public support that permit dealing in interest rate swaps and foreign exchange swaps to remain within the depository institution. Any derivatives needed to hedge actual banking activities may also remain within the depository institution. However, dealing in more exotic swaps – including equity swaps, many commodity swaps, and all customized credit default swaps — would have to be conducted in a separate subsidiary completely supported by private capital and not eligible for the public support given to depository institutions.

How Exactly Does HR 992 Modify Section 716?

The exemptions added by HR 992 would allow almost all of the forms of swaps dealing ‘pushed out’ of the depository institution by Section 716 to instead remain in the depository institution. These swaps dealing activities would once again be supported by the public safety net, including Federal Reserve and deposit insurance support. This reverses most of the effect of Section 716.

What Banks Are Affected By Section 716 And HR 992?

The activity of swaps dealing is dominated by a few large Wall Street banks. Swaps dealing is the activity of ‘making a market’ in swaps, or selling derivatives to all sides in the entire market of users. Swaps dealers generally maintain large derivatives books and are dominant players in the relevant market. Community banks are not swaps dealers.
Some of the major Wall Street swaps dealers (such as Goldman Sachs) already do not conduct their swaps dealing activities from a U.S. insured depository institution. Thus they would not be affected by Section 716 or benefited by HR 992. The major banks that would likely be benefited by HR 992 are Citibank, JP Morgan, and Bank of America.

How Would These Banks Be Benefited By HR 992?

When banks can put their swaps dealing activities in a depository institution, they can engage in these activities more cheaply due to implicit public support. The business benefits from the cheap funding provided by insured deposits, and counterparties are confident that an insured depository institution will not default on swaps obligation. When swaps dealing is conducted from an independent subsidiary, counterparties demand more capital and collateral to be confident in the safety of the transaction. The costs of the activity more accurately reflect the true market risks of derivatives dealing.

Doesn’t HR 992 Actually Maintain The Ban on Public Bailouts in Section 716?

HR 992 does not remove the explicit ban on public bailouts of swaps entities in Section 716(a). However, by greatly expanding the list of exemptions to that ban in Section 716(d) the legislation would take away most of the practical impact of the ban. Placing exotic swaps back into the depository subsidiary effectively restores the public subsidy to dealing in these swaps.

If Swaps Dealing Is Removed From The Depository Bank, Will It Go Unregulated?

No. All swaps dealers, including all non-bank dealers, are regulated directly by either the SEC or the CFTC. In addition, if a swap dealer is a non-depository subsidiary of a bank holding company it will be subject to Federal Reserve consolidated supervision. Finally, swaps dealers who are outside of a depository institution are subject to more effective market discipline and oversight. Counterparties will demand higher levels of capital and other protections when the dealer is not an insured depository.

Won’t The Volcker Rule Protect Banks From Derivatives Risks?

Once implemented the Volcker Rule should protect banks from risks involved in proprietary trading. However, the Volcker Rule specifically allows market making or dealing in derivatives – the exact area addressed by Section 716. A justification for allowing market making under the Volcker Rule was that a properly managed dealer should hedge all of their derivatives dealing risks. However, many of the types of exotic swaps ‘pushed out’ by Section 716 are the most challenging types of derivatives to risk manage. In fact, one of the major challenges in implementing the Volcker Rule is determining the difference between proprietary trading and market making in the area of customized and exotic swaps. Section 716 will improve protections in this area.

Will ‘Pushing Out’ Swaps Into a Separate Subsidiary Increase Costs To End Users?

Once the public subsidy to derivatives dealers is removed, the costs of that activity to banks will better reflect its true market risks. Derivatives markets are currently dominated by a few large banks who earn very high profits margins from the activity. Removing the public subsidy will indeed increase costs to the banks. Given the margins earned in this business, there is plenty of room for these costs to be absorbed by dealers themselves. It is also notable that there are many major derivatives dealers that already conduct their swaps activities from separate non-depository subsidiaries, and they are able to compete for business, demonstrating that it is possible to service end users effectively using this model.

[ipaper docId=138808924 access_key=key-yba5oz8yuqrdy4bnunk height=600 width=600 /]

This is from an emailed tip:

1.  We expect to be completed with a document execution review in the second quarter…don’t know that everything will be completed by year-end…it’s the same process we’ve been in for a while…it’ll just continue to drag maybe early 2014.

2.  It’s…an issue of…places where we’ve…stepped away from contracts…our margin and risk tolerance level.

3.  [W]e did not settle with the State of Nevada….And our suits with the FDIC also remain…And [indiscernible]

4.  Questions about sales of servicing rights and the potential for more; any negative impact on LPS and opportunity with the special servicers like Nationstar is answered by Hugh Harris, CEO, President AND director (hmmmm….) – with Nationstar…a great relationship… installed our desktop,…(and) our LendingSpace platform.

5.   Bank of America has led (the sales of mortgage servicing rights)…they’re not on our platform.

6.  So…opportunity for (LPS) to pick up servicing…because of who is buying the servicing.

7.  Obviously, if Ocwen buys it, we don’t have a shot at that right now.

8.  But all the other buyers we’re pretty much working with, in one way or another.

9.  Wells Fargo…planning on just selling the servicing rights and maintaining a sub-servicing arrangement… which will continue to be good for us.

10.  Origination Services revenue… roughly half of our volume is coming from HARP…(both) consumer-driven (and) the banks alerting the consumer…

11.  The (main driver behind the) seasonal uptick in default in Q2 (is due to) springtime…when we have a lot of grass cuts on property maintenance…a rather sizable impact in the second quarter that we did expect.

JaxDailyRecord-

After more than three years of investigations by federal and state authorities into foreclosure processes, the legal issues that have saddled Lender Processing Services Inc. and its mortgage banking clients are winding down.

For Jacksonville-based LPS, which provides technology services to mortgage lenders, the focus now is on increasing business as financial institutions adjust to new industry standards.

“As lenders move beyond legacy issues, including the recent settlement of many bank consent orders, we are seeing an even greater focus on deploying technology to re-engineer processes and to address the cost structure of originating and servicing loans,” LPS Chief Executive Officer Hugh Harris said in the company’s quarterly conference call last week.

[JAXDAILYRECORD]

No. SCWC-11-0000444, Thursday, May 16, 2013, 11 a.m.

MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC., solely as nominee, Respondent/Plaintiff-Appellee,

vs.

SHARON KEHAULANI WISE and BLOSSOM ILIMA NIHIPALI, Petitioners/Defendants-Appellants, and EWA BY GENTRY COMMUNITY ASSOCIATION, Respondent/Defendant-Appellee.

The above-captioned case has been set for argument on the merits at:

Supreme Court Courtroom
Ali`iolani Hale, 2nd Floor
417 South King Street
Honolulu, HI 96813

Attorneys for Petitioners:

Gary Victor Dubin, Frederick J. Arensmeyer, and Zeina Jafar of Dubin Law Offices

Attorney for Respondent Mortgage Electronic Registration Systems:

David B. Rosen

NOTE: Certificate of recusal, by Chief Justice Mark E. Recktenwald, filed 03/13/13.

NOTE: Order assigning Circuit Court Judge Rhonda A. Nishimura, in place of CJ Recktenwald, recused, filed 03/18/13.

NOTE: Order accepting Application for Writ of Certiorari, filed 04/10/13.

COURT: PAN, Acting CJ; SRA, SSM, & RWP, JJ; Circuit Court Judge Nishimura, in place of CJ Recktenwald, recused.

Brief Description:

Petitioners Sharon Wise and Blossom Nihipali signed a mortgage and promissory note secured by real property in favor of Flexpoint Funding Corporation. Respondent Mortgage Electronic Registration Systems (MERS) was listed on the mortgage as “nominee.” Subsequently, the mortgage and promissory note were transferred to the JP Morgan Chase Bank. Thereafter, MERS initiated a judicial foreclosure action in the first circuit court alleging that Petitioners had defaulted on their mortgage.

Subsequently, MERS secured entry of default against Petitioners, and on May 12, 2010 the court entered final judgment against Petitioners and appointed a commissioner to sell Petitioners’ property. Petitioners then moved to set aside the defaults. On April 29, 2011, the court issued an order confirming the sale of Petitioners’ residence, and on May 10, 2011, the court denied Petitioners’ motion to set aside the defaults. Petitioners appealed to the Intermediate Court of Appeals (ICA), arguing that MERS lacked standing to bring the foreclosure action.

The ICA affirmed the court’s orders, holding that ratification by Chase pursuant to Hawai`i Rules of Civil Procedure Rule 17 cured any defect in Respondent’s standing. In their Application, Petitioners ask whether the ICA erred in holding Chase could ratify Respondent’s standing when Chase did not demonstrate that it held the mortgage and promissory note when MERS brought the foreclosure action, and thus, was the real party in interest.

by Justin Elliott ProPublica, April 30, 2013, 9:55 a.m.

In January, Rep. Jeb Hensarling, R-Texas, ascended to the powerful chairmanship of the House Financial Services Committee. Six weeks later, campaign finance filings and interviews show, Hensarling was joined by representatives of the banking industry for a ski vacation fundraiser at a posh Park City, Utah, resort.

The congressman’s political action committee held the fundraiser at the St. Regis Deer Valley, the “Ritz-Carlton of ski resorts” known for its “white-glove service” and for its restaurant by superstar chef Jean-Georges Vongerichten.

There’s no evidence the fundraiser broke any campaign finance rules. But a ski getaway with Hensarling, whose committee oversees both Wall Street and its regulators, is an invaluable opportunity for industry lobbyists.

Among those attending the weekend getaway was an official from the American Securitization Forum, a Wall Street industry group, a spokesman confirmed. It gave $2,500 in February to Hensarling’s political action committee, the Jobs, Economy, and Budget (JEB) Fund.

Len Wolfson, a lobbyist for the Mortgage Bankers Association, which gave the JEB Fund $5,000 that month, posted a picture on Instagram from the weekend of the fundraiser of the funicular at the St. Regis. (It was labeled, “Putting the #fun in #funicular. #stregis #deervalley #utah.”) Wolfson did not respond to requests for comment. (UPDATE 1 p.m. Wolfson has now set his account to private.)

Visa, which gave the JEB Fund $5,000, also sent an official. A Visa spokesman told ProPublica that in attendance were not just finance companies, but also big retailers and others.

Hensarling, a protégé of former Texas senator and famed deregulator Phil Gramm, has a mixed record regarding Wall Street. While he has been critical of “too big to fail” banks and voted against the 2008 bailout, Hensarling recently said he opposed downsizing big banks, according to Bloomberg. That stance matters now more than ever as a bipartisan duo in the Senate, David Vitter, R-La., and Sherrod Brown, D-Ohio, introduced a bill last week seeking to constrain the too-big-to-fail institutions. While the bill is considered a longshot, it has provoked intense opposition from the industry.

Meanwhile, Hensarling recently barred the head of the new Consumer Financial Protection Bureau from appearing before the House Financial Services Committee, citing a legal cloud over recess appointments made by President Obama.

Whatever his stance on the industry, Hensarling has been more than happy to court Wall Street’s money.

Donors working in various financial industries are Hensarling’s biggest supporters, giving him over $1 million dollars in the last election cycle, according to the Center for Responsive Politics. The congressman’s office did not respond to requests for comment.

Others donating to Hensarling’s JEB Fund around the time of the Utah ski weekend: Capital One; Credit Suisse; PricewaterhouseCoopers; MasterCard; UBS; US Bank; the National Association of Federal Credit Unions; Koch Industries, which is involved in sundry financial trading; the National Pawnbrokers Association; and payday lenders Cash America International and CheckSmart Financial. All either declined to comment or did not respond to requests.

A spokeswoman for one large bank that donated $5,000, Alabama-based Regions Financial, told ProPublica the company doesn’t discuss events employees attend for “a number of reasons, including security.”

Also donating $5,000 to Hensarling’s political committee around the time of the ski weekend was Steve Clark, a lobbyist for JP Morgan and the industry group the Financial Services Roundtable. (In 2011, a memo written by Clark and his partners for the American Bankers Association proposed an $850,000 public-relations strategy to undermine Occupy Wall Street. It leaked to MSNBC; the plan had apparently never been executed.)

Clark didn’t respond to requests for comment.

The ski weekend was a large, apparently family-friendly affair. A Utah entertainment booker told ProPublica she had hired two caricature artists for a Feb. 23 event at the St. Regis for a group of 100, including 20 children. Hensarling’s JEB Fund, paid the bill. The fund also reported spending about $1,000 on “gifts and mementos” at Deer Valley as well as charges at the upscale restaurant Talisker on Main.

Campaigns and political action committees of a few other GOP congressmen also show charges totaling more than $50,000 at the St. Regis around that time: House Rules Committee Chairman Pete Sessions of Texas; House Ways and Means Committee Chairman Dave Camp of Michigan; and National Republican Congressional Committee Chairman Greg Walden of Oregon. None responded to requests for comment.

This is at least the second consecutive year that Hensarling has attended a fundraiser at Deer Valley. During the same February congressional recess last year, the National Republican Congressional Committee hosted a “Park City Ski Weekend” for Hensarling along with Sessions and Walden. Hensarling’s JEB Fund also reported about $60,000 paid to the St. Regis Deer Valley in the last election cycle. (The NRCC said it did not sponsor this year’s event.)

The Texan congressman has long had a taste for mixing skiing and politics. On the same February weekend in 2009, for example, Hensarling’s political action committee invited donors “to the second annual 2018JEB Fund Takes Jackson'” ski weekend for a minimum contribution of $2,500. The setting was the Snake River Lodge and Spa in Jackson, Wyoming, which boasted “wintertime activities fun for the entire family” including dog sledding tours and sleigh rides, according to the invitation.

Reporting contributed by Al Shaw.

Reuters-

Bond insurer MBIA Inc may pursue its case against Bank of America Corp over toxic mortgage-backed securities packaged by Countrywide Financial Corp.

In decisions made public Monday, New York State Supreme Court Justice Eileen Bransten denied Bank of America’s motion for a pre-trial ruling that it should not be held liable for claims against Countrywide.

Bransten also rejected MBIA’s summary judgment motion that Bank of America should assume Countrywide’s liabilities. Bank of America, the second-largest U.S. bank, acquired Countrywide in 2008.

Bank of America had argued MBIA was seeking a “windfall” by holding it liable for Countrywide’s alleged misrepresentations. Bank of America said the claims were barred because the bank paid “fair value” for Countrywide’s assets in 2008.

Branstein didn’t buy the bank’s “fair value” argument.

“Whether fair value is paid for the assets acquired has no bearing,” Bransten wrote in her ruling.

[REUTERS]

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF HAWAII

Jerry Agbannaoag, Merlita Agbannaoag, Severino Agbannaoag,
Conchita Agbannaoag, and Cosmedin Tasani,
and Ke Kailani Development LLC and Michael J. Fuchs,
all on behalf of themselves, and on behalf of all others
similarly situated, requesting non-monetary relief,

Plaintiffs,

vs.

(1) THE HONORABLE JUDGES OF THE CIRCUIT
COURT OF THE FIRST CIRCUIT OF THE STATE
OF HAWAII, AS INDIVIDUALS ACTING IN
THEIR OFFICIAL CAPACITIES:

KAREN S.S. AHN; STEVENS s. ALM;
BERT I. AYABE; PATRICK W.
BORDER; JEANNETTE
CASTAGNETTI; DERRICK H.M.
CHAN; GARY W.B. CHANG;
VIRIGINIA L. CRADALL; DEXTER
D. DEL ROSARIO; COLETTE Y.
GARBIBALDI; GLENN J. KIM;
EDWARD H. KUBO JR; RANDAL
K.O. LEE; EDWIN C. NACINO;
KAREN T. NAKASONE; RHONDA A. NISHIMURA; DEAN E. OCHIAI;
RICHARDK. PERKINS; KARL K.
SAAMOTO; FA’AUUGA L.
TO’OTO’O; RAM A. TRADER;
MICHAEL D. WILSON,

(2) THE HONORABLE JUDGES OF THE CIRCUIT COURT OF THE SECOND CIRCUIT OF THE STATE OF HAWAII, AS INDIVIDUALS ACTING IN THEIR OFFICIAL CAPACITIES:

RICHARD T. BISSEN JR.; PETER T.
CAHILL; JOSEPH E. CARDOZA;
RHONDA I.L. LOO,

(3) THE HONORABLE JUDGES OF THE CIRCUIT COURT OF THE THIRD CIRCUIT OF THE STATE OF HAWAII, AS INDIVIDUALS ACTING IN THEIR OFFICIAL CAPACITIES:

GLENN S. HARA; RONALD
IBARAA; GREG K. NAKAMURA;
ELIZABETH A. STRANCE,

(4) THE HONORABLE JUDGES OF THE CIRCUIT COURT OF THE FIFTH CIRCUIT OF THE STATE OF HAWAII, AS INDIVIDUALS ACTING IN THEIR OFFICIAL CAPACITIES:

RANDAL G.B. VALENCIANO;
KATHLENN N.A. WATANABE,

Judicial Defendants.

[ipaper docId=138682475 access_key=key-13qr5w0j2s5wyh7xhkks height=600 width=600 /]

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION

KEVIN WHEELER and
JULIEANNE WHEELER,
on behalf of plaintiffs and a class,
Plaintiff,

vs.

CODILIS AND ASSOCIATES, P.C.,
Defendant.

COMPLAINT – CLASS ACTION
INTRODUCTION

1. Plaintiffs Kevin Wheeler and Julieanne Wheeler bring this action to secure
redress from unlawful credit and collection practices engaged in by defendant Codilis and
Associates, P.C. (“defendant”). Plaintiffs allege violation of the Fair Debt Collection Practices
Act, 15 U.S.C. §1692 et seq. (“FDCPA”).

[ipaper docId=138618082 access_key=key-kkh585z1qynu17te49y height=600 width=600 /]

© 2010-19 FORECLOSURE FRAUD | by DinSFLA. All rights reserved.

Two new court cases may help California homeowners avoid foreclosure, but banks are trying to stop it. If you have completed a trial modification and the bank has refused to modify your loan permanently, read on. If you were in the middle of a loan modification, and the bank gave you the run-around, read on.

The first case says that banks must offer permanent loan modifications to homeowners who have completed a trial modification plan. The case is  Genevieve West v. JPMorgan Chase Bank, N.A., No. G046516, Court of Appeal of the State of California (4th Dist.  Div. 3, March 18, 2013). The second case says that banks can have an obligation to take care when handling a loan modification. The case is Scott Call Jolley v. Chase Home Finance, LLC, No. A134019, Court of Appeal of the State of California (1st Dist., Div. 2, February 11, 2013).

In West, the homeowner, Ms West, had completed a trial plan, and made all her trial plan payments on time. The financial information she had provided to her bank was still correct. Nonetheless, the bank, Chase, decided to go back on its word and deny her a permanent loan modification. It’s a familiar story. One would think that when a person had made an agreement with their bank, and met the terms, that a bank would have to meet its obligations. However, in the past, Chase and others have argued that the trial modification plans are not contracts, and that therefore, they don’t have to honor the trial plans. Unfortunately, in the past, courts have agreed with the banks, and decided that homeowners have no right to bring a lawsuit.

The West case is noteworthy because the court has sided with the homeowner and compelled the bank to do something very simple– to live up to the terms of a contract it entered into with a homeowner. It is sad that it has taken this long for the appellate court to make a ruling like the one in West, because many people have successfully completed trial plans only to have the rug pulled out from under them at the last minute, and only to face courts that deny them all redress. The West decision, then, is a step in the right direction. West means that when a person has completed a trial plan successfully, the bank has to offer a permanent modification. This is good news.

In the Jolley decision, the court ruled that a “duty of care” applies in a loan modification transaction. In plain English, it means that banks have an obligation to try to do the loan modification correctly, and if they fail, the homeowner/borrower can sue.  In the past, that wasn’t the case. The facts in Jolley are as familiar as they are infuriating. Mr. Jolley took out a construction loan with Chase. After he ran into some difficulties, Chase promised him that it would work out a modification. Based on those promises, Jolley borrowed additional money from friends and relatives to finish construction. While Jolley was negotiating with Chase for the modification, Chase foreclosed on the property. Chase had “dual tracked” him, a common practice wherein a bank claims to be working on a modification, while simultaneously foreclosing on the borrower.

Jolley is an especially interesting case for homeowners, because two of the factors the court looked at were the “moral blame” associated with Chase’s conduct, as well as the “policy of preventing future harm.” The court found that Chase had moral blame for essentially leading Mr. Jolley on while simultaneously foreclosing on him.  The court also identified “a rising trend to require lenders to deal reasonably with borrowers in default to try to effectuate a workable loan modification.” The Jolley case is important because too many homeowners have suffered from the modification maze of false promises, “lost” documents and sudden foreclosure. The ruling in Jolley makes it possible for homeowners to strike back against abusive and “incompetent” loan modification practices that lead to unnecessary foreclosures.

Despite the finance sector’s public relations shills, it is evident that the foreclosure crisis is ongoing. The legislature and courts have started to realize that as the public outcry has become deafening. It is about time that the legislature and courts respond to the public outcry, if indeed they want to retain the consent of the governed. What we are facing as citizens is a financial sector that seeks nothing less than total control. In that light, the banks’ response to the Jolley and West decisions is not surprising. The rumor is that they are trying to get the courts to publish decisions that would nullify Jolley and West.

Thus, it is important for people to do two things: 1) spread the word about the favorable decisions and 2) file legitimate suits based on the two new cases. Spreading the word makes it harder for the courts to overturn the decisions, especially when it would look like a gimme to the banks. Filing legitimate suits also makes it harder to overturn the decisions.

In summary, California homeowners now have some strong support for holding the banks accountable for bad behavior in loan modifications. People should move quickly to protect their rights under the new decisions.

Miami Herald-

The Florida House has passed a bill aimed at speeding up the state’s mortgage foreclosure system.

Rep. Kathleen Passidomo said Monday her bill would move along the foreclosure process to get homes “back into the stream of commerce.” Supporters say Florida’s economy would benefit.

Opponents say the bill is tilted against homeowners struggling to keep their homes.

[MIAMI HERALD]

H/T Living Lies

 IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF HAWAII

This is a very complex article with some excellent research behind it but here is some more info to share.

Update:

via Maine Attorney Tom Cox-

This article is fundamentally wrong. UETA applies to electronic notes, not to mortgages. Under UETA, no paper note can be converted to an electronic note by scanning, photocopying or otherwise. An electronic note exists as such only if it is created at such by the issuer’s electronic signature. The MERS eRegistry is only for electronic notes. Notes originally created in paper form are not, and never can be, registered on or transfered on the MERS eRegistry system.

The MERS eRegistry for electronic notes, and the MERS System for allegedly tracking the transfers or assignments of ownership of paper notes, are entirely separate systems performing similar but entirely separate functions. This article blurs the distinction and following its direction will not yield useful results.

I am a a foreclosure defense attorney and despise MERS, but I cannot stand by when misinformation is put out into the world.

Deadly Clear-

W

hile fishing for bank-related patents this gem surfaced and jumped into the net. At first it wasn’t apparent it was a keeper because the UETA issue has not been in the forefront of foreclosure defense. However, taking the time to dissect the document it became apparent that, as some of us have suspected, there is a mandatory methodology from the origination of the mortgage loan on a trip to the securitized trust that includes the EXPLICIT CONSENT of the obligor (homeowner).

Yup… The road to securitization needs an electronic record that the “issuer” aka the “obligor” has explicitly consented to at the time of origination. Yeah, ya think maybe that was the real intention of MERS aka Mortgage Electronic Registration Systems, Inc.? But it looks like it didn’t have all its ducks in a row. This is a lot to digest – but you need to know and understand this information in order to plead your case correctly before the courts.

As the third Mortgage Electronic Registration Systems, Inc. and the Trustees for the alleged REMIC trusts began filing foreclosure proceedings, fraudulent assignment of mortgages and other fabricated robo-signed documents began to surface. As a result, discussion and dissection of securitization and MERS dominated the court process.

[DEADLY CLEAR]

Naked Cap-

It appears that the Office of the Comptroller of the Currency and the Fed dropped the ball yet again on vetting firms involved in the Orwellianly-named Independent Foreclosure Review (IFR) for conflicts of interest. Michael Olenick’s expose on Allonhill, one of the “independent consultants” hired by Wells Fargo, led to Allonhill’s role being curtailed considerably.

But there’s no way to curtail the role of Rust Consulting, a firm that has been central in the Independent Foreclosure Reviews virtually from their onset. Rust was the firm that servicers engaged to handle the initial mailings to borrowers eligible for a review. The assumption of the authorities appears to have been that Rust was merely doing such low level stuff that it didn’t need to be checked; when I called the OCC to ask if the firm had been screened for conflicts of interest, the PR staffer who returned my call reacted as if the question was off-base (he said he’d get back to me with an answer the following day and never did).

But as both unhappy Congressmen and even more unhappy homeowners have found, Rust is playing a substantive review in the IFR, and one that has not stood up well to close scrutiny. Now it is bad enough that its independence is already subject to question, in that, like the “independent” consultants, it was hired by and paid for by the servicers. But it is even more troubling that its owners have deep ties and involvement in the residential real estate business, and Rust’s parent is being sold to the venture capital arm of Citigroup, which is also subject to the IFR.

[NAKED CAPITALISM]

The Gaurdian-

News reports yesterday indicated that Bradley Manning, widely known to be gay, had been selected to be one of the Grand Marshals of the annual San Francisco gay pride parade, named by the LGBT Pride Celebration Committee. When the predictable backlash instantly ensued, the president of the Board of SF Pride, Lisa L Williams, quickly capitulated, issuing a cowardly, imperious statement that has to be read to be believed.

Williams proclaimed that “Manning will not be a grand marshal in this year’s San Francisco Pride celebration” and termed his selection “a mistake”. She blamed it all on a “staff person” who prematurely made the announcement based on a preliminary vote, and she assures us all that the culprit “has been disciplined”: disciplined. She then accuses Manning of “actions which placed in harms way [sic] the lives of our men and women in uniform”: a substance-free falsehood originally spread by top US military officials which has since been decisively and extensively debunked, even by some government officials (indeed, it’s the US government itself, not Manning, that is guilty of “actions which placed in harms way the lives of our men and women in uniform”). And then, in my favorite part of her statement, Williams decreed to all organization members that “even the hint of support” for Manning’s actions – even the hint – “will not be tolerated by the leadership of San Francisco Pride”. Will not be tolerated.

[THE GAURDIAN]

© 2010-19 FORECLOSURE FRAUD | by DinSFLA. All rights reserved.

The more you support the evils the greater they shall become.

Thank the government for doing their job and for protecting the new mob!

LA Times-

Michele and Russell Poland’s credit was shot, but they managed to buy their suburban dream home anyway.

After a business bankruptcy and a home foreclosure, they turned to a rare option in this era of tightfisted banking — a subprime loan.

The Polands paid nearly $10,000 in upfront fees for the privilege of securing a mortgage at 10.9% interest. And they had to raid their retirement account for a 35% down payment.

Most borrowers would balk at such stiff terms. But with prices rising, the Polands wanted to snag a four-bedroom home in Temecula near top-rated schools for their 5-year-old son. By later this year, they figure, they’ll be able to refinance into a standard loan.

“The mortgage is a bridge loan,” said Russ Poland, now working as an insurance investigator. “It was expensive, but we think it’s worth it.”

[LA TIMES]

United States Court of Appeals, Sixth Circuit.

~

Harold C. WALLACE, Plaintiff–Appellant,

v.

MIDWEST FINANCIAL & MORTGAGE SERVICES, INC.; Mortgageit, Inc.; David Schlueter; Bryan Bates; First Financial Home Lending, Inc., Defendants–Appellees, Shane Soard, et al., Defendants.

No. 12–5208.

Argued: Jan. 17, 2013. — April 23, 2013

Before COLE and DONALD, Circuit Judges; RUSSELL, District Judge.*

ARGUED:William H. Blessing, Cincinnati, Ohio, for Appellant. Michael T. Sutton, Sutton Rankin Law, PLC, Edgewood, Kentucky, for Midwest Financial Appellees. Matthew W. Breetz, Stites & Harbison, PLLC, Louisville, Kentucky, for MortgageIT Appellee. ON BRIEF:William H. Blessing, Cincinnati, Ohio, for Appellant. Michael T. Sutton, Sutton Rankin Law, PLC, Edgewood, Kentucky, for Midwest Financial Appellees. Matthew W. Breetz, Richard A. Vance, Stites & Harbison, PLLC, Louisville, Kentucky, for MortgageIT Appellee.

OPINION

This is a subprime mortgage case brought by the borrower, Harold Wallace, against the lender, MortgageIT, Inc. (“MortgageIT”), the mortgage broker, Midwest Financial & Mortgage Services, Inc. (“Midwest Financial”), the broker’s two principals, David Schlueter and Bryan Bates, and several other now-dismissed parties. Wallace alleges that the defendants fraudulently inflated an appraisal of his home as part of a scheme to push him into a high-cost, adjustable-rate mortgage from which he now seeks relief. He made several claims below, only three of which are relevant here—two claims arising under the federal Racketeer Influenced and Corrupt Organizations Act (“RICO”) and one arising under Kentucky conspiracy law. The district court granted summary judgment in favor of the defendants on each of these claims. On appeal, Wallace argues that the district court erred in concluding he did not sufficiently demonstrate that the allegedly fraudulent appraisal proximately caused his financial injuries. We agree. Accordingly, we reverse the district court’s grant summary of judgment in favor of the defendants based on a lack of proximate causation, affirm its grant of summary judgment in favor of MortgageIT on the state law claim on other grounds, and remand for further proceedings.

I.

Because this appeal arises from a motion for summary judgment, we accept as true Wallace’s version of the facts. Grawey v. Drury, 567 F.3d 302, 310 (6th Cir.2009). The relevant ones reach back to October 2004, when Wallace purchased a newly built home in Florence, Kentucky. He financed the home with an adjustable-rate mortgage in the amount of $272,316—though not the one at issue here. Wallace later took out a second mortgage on the home in the amount of $164,500 to complete certain improvements and to pay down credit card debt. He made regular payments on both loans without incident.

In June 2006, Wallace hatched the ill-fated idea of building out his basement. The estimated cost of the project came in at $42,500, which Wallace intended to cover using the proceeds of a cash-out refinancing of both of his existing loans. By this point, Wallace had reduced the aggregate balance to slightly less than $380,000, meaning he was in the market for a refinance loan in the amount of approximately $422,500. Enter Shane Soard, a loan officer at Midwest Financial. Soard arranged to meet with Wallace to discuss his options for borrowing. Wallace claims Soard expressed familiarity with home values in the immediate neighborhood and “talked very positively about the increased value of [Wallace’s] home.” Wallace also claims Soard expressed confidence that he could secure a favorable refinance loan at a lower interest rate than Wallace paid on his existing loans. Their meeting left Wallace with the impression that he was on track to get a new fully amortizing mortgage with equal monthly payments.

After Wallace turned over some financial information and signed a few forms, Soard informed him that a home appraisal would be needed. For this, Midwest Financial turned to Accupraise, as it had for many of its other appraisals. Accupraise is a now-defunct company that performed real estate appraisals in parts of Ohio and Kentucky under the direction of a de-licensed appraiser named Andrew Brock, an erstwhile party to this litigation. A former employee of Accupraise explained that Midwest Financial would routinely “sen[d] a fax to Accupraise with certain information, including the ? requested appraisal value,” and Brock would send back a tailor-made appraisal. Brock often did so without setting foot on the property he purported to appraise. Instead, he made a habit of forging the signature of a licensed appraiser to make his appraisals appear legitimate. In this instance, Accupraise and Brock provided Midwest Financial with a Uniform Appraisal Report valuing Wallace’s home at $500,000. Soard called Wallace with the news that his home had been appraised at nearly twice the amount he had paid just two years prior. Based on the value of the appraisal, Soard told Wallace he was eligible for a $500,000 loan. Wallace declined and reiterated his desire only to borrow enough to build out his basement. The next day Soard responded by offering Wallace a $425,000 loan. They agreed on the terms of the loan during the course of the same telephone conversation—though Wallace maintains that Soard continued to misrepresent the nature of the payment schedule—and set a time to close.

Midwest Financial then submitted Wallace’s completed loan application to MortgageIT for approval. MortgageIT reviewed the application to determine the level of risk involved in lending to Wallace. The appraisal factored significantly into this process: it substantiated the value of the asset used to secure the loan and produced a favorable loan-to-value ratio of eighty-five percent. The appearance of remarkable appreciation notwithstanding, the appraisal raised no red flags among the underwriters at MortgageIT. Wallace’s loan application was ultimately approved. Closing went ahead as scheduled, at which point Wallace signed several documents disclosing the final terms of his cash-out refinance loan.

Unbeknownst to Wallace, those terms were consistent with a type of financial product called an option adjustable-rate mortgage (“option ARM”). The hallmark of an option ARM is its flexibility. In general, it gives the “borrower[ ] the option of skipping the principal payment and some of the interest payment for an introductory period of several years. The unpaid balance[ ] [is then] added to the body of the loan.” David Streitfeld, Big Banks Easing Terms on Loans Deemed as Risks, N.Y. Times, July 3, 2011, at A1. An option ARM thus allows for the possibility of negative amortization. Once the introductory period ends or the maximum limit on negative amortization is reached, the amortization schedule resets and the borrower is left with potentially unaffordable minimum payments that reflect the capitalization of unpaid interest, as well as a principal balance that potentially exceeds the value of the real estate used as security. Here, Wallace was offered a teaser rate of two percent that quickly multiplied into something much higher under the terms of his loan. For securing a high long-term interest rate, Midwest Financial received a yield spread premium from MortgageIT in excess of $14,000. See generally Lee v. Countrywide Home Loans, Inc., 692 F.3d 442, 445–46 (6th Cir.2012) (explaining that a yield spread premium is the amount paid to a broker for securing a loan with a higher interest rate).

The refinance loan has since created insurmountable financial problems for Wallace in the form of fees, interest costs, and other expenses related to his inability to meet its terms. Wallace has also learned that the true value of his home at the time of the appraisal was approximately $375,000—or $125,000 less than he was led to believe during the course of negotiations with Midwest Financial. With no equity left in his home, Wallace could not sell it for enough to repay the loan. Wallace’s financial problems recently forced him to declare bankruptcy and ultimately surrender the home.

In May 2007, Wallace filed this suit alleging that he was the victim of a fraudulent scheme between the defendants “to generate higher dollar loans to borrowers and thereby capture more fees.” The nub of this scheme was the appraisal. Wallace says that Midwest Financial acted in concert with Accupraise to manufacture misleadingly optimistic real estate valuations that induced him and borrowers like him to enter into larger loans with higher interest rates than they could reasonably afford. In return, Midwest Financial received a better yield spread premium—or “kickback” in Wallace’s words—from MortgageIT, who bundled his loan with others as part of a mortgage-backed security and sold it off to investors, turning a profit while avoiding most of the risk of default.

Wallace brought federal law claims under RICO, the Truth in Lending Act (“TILA”), and the Real Estate Settlement Procedures Act (“RESPA”), in addition to state law claims for breach of contract, fraud, breach of fiduciary duty, and conspiracy. The parties conducted extensive discovery, after which Midwest Financial and MortgageIT both moved for summary judgment. The district court granted their motions as to Wallace’s civil RICO claim, civil RICO conspiracy claim, TILA claim, and state law civil conspiracy claim. The court denied their motions as to the rest. The court also ordered the parties to enter mediation, which eventually produced a settlement agreement. Under the agreement, Wallace prevailed on his RESPA claim while all of his other claims that survived summary judgment were dismissed with prejudice, including the claims against Soard, Brock, and Accupraise.

On appeal, Wallace challenges only the district court’s grant of summary judgment in favor of the defendants on the three remaining claims: (1) his civil RICO claim under 18 U.S.C. § 1962(c) alleging Midwest Financial as the enterprise, Schlueter and Bates as individual defendants, and violations of the federal mail and wire fraud statutes while procuring and paying for inflated appraisals as predicate acts; (2) his civil RICO conspiracy claim under 18 U.S.C. § 1962(d) alleging that Midwest Financial, Schlueter, Bates, and MortgageIT conspired to violate § 1962(c) by engaging in mail and wire fraud while procuring and paying for inflated appraisals; and (3) his civil conspiracy claim under Kentucky law alleging essentially the same wrongful conduct. We address each claim in turn.

II.

Wallace first appeals from the district court’s grant of summary judgment for the defendants on his two civil RICO claims. We review this decision de novo. Colvin v. Caruso, 605 F.3d 282, 288 (6th Cir.2010). In so doing, we construe the evidence in the light most favorable to Wallace and draw all reasonable inferences in his favor. Dye v. Office of the Racing Comm’n, 702 F.3d 286, 294 (6th Cir .2012). Summary judgment is warranted only when the evidence shows that there is no genuine issue of material fact and that the moving party is entitled to judgment as a matter of law. See Fed.R.Civ.P. 56(c). As such, our primary inquiry is “whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law.” In re Calumet Farm, Inc., 398 F.3d 555, 558–59 (6th Cir.2005) (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 251–52, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986)).

RICO provides a private cause of action for “[a]ny person injured in his business or property by reason of a violation of” one of the statute’s four criminal provisions. 18 U.S.C. § 1964(c). Two provisions are relevant here. The first is § 1962(c), which generally makes it illegal for an enterprise to engage in “racketeering activity,” as defined by predicate acts including mail and wire fraud. The second is § 1962(d), which makes it illegal “for any person to conspire to violate any” of the other criminal provisions. The Supreme Court has held in no uncertain terms that under each provision a plaintiff must show that the predicate acts alleged “not only [were] a ‘but for’ cause of his injury, but [were] the proximate cause as well.” Holmes v. Sec. Investor Prot. Corp., 503 U.S. 258, 268, 112 S.Ct. 1311, 117 L.Ed.2d 532 (1992) (emphasis added). This requirement is the primary issue on appeal. Specifically, Wallace challenges the district court’s finding that his injuries were “unrelated to the inflated appraisal,” the procurement of which constitutes the predicate act of mail or wire fraud, but flowed instead from “the high interest rate and unfavorable terms of his adjustable rate mortgage?” The district court made no finding as to the remaining elements of his claims. Thus, the question before us is whether Wallace has sufficiently demonstrated that the allegedly fraudulent appraisal proximately caused his injuries. We answer in the affirmative and remand to the district court for further consideration.

A.

It is well-settled that proximate cause is an essential ingredient of any civil RICO claim. The language of the statute limits the scope of liability to those injuries suffered “by reason of” an alleged violation of one of the criminal provisions. See 18 U.S.C. § 1964(c). In Holmes, the Supreme Court explained that this language requires plaintiffs to plead and prove proximate causation. 503 U.S. at 265–68. The Court employed the term “ ‘proximate cause’ to label generically the judicial tools used to limit a person’s responsibility for the consequences of that person’s own acts.” Id. at 268. Accordingly, the Court read RICO as incorporating the many traditional proximate-cause considerations found at common law. Id.; see Perry v. Am. Tobacco Co., Inc., 324 F.3d 845, 848 (6th Cir.2003). One such consideration is directness—whether there exists “some direct relation between the injury asserted and the injurious conduct alleged.” Holmes, 503 U.S. at 268; see also Hemi Grp., LLC v. City of New York, 559 U.S. 1, 130 S.Ct. 983, 989, 175 L.Ed.2d 943 (2010) (noting that any “link that is ‘too remote,’ ‘purely contingent,’ or ‘indirec[t]’ is insufficient” (quoting Holmes, 503 U.S. at 271, 274)). Another such consideration is foreseeability—whether the plaintiff’s injury was a foreseeable consequence of the conduct alleged. See Perry, 324 F.3d at 850–51; see also Desiano v. Warner–Lambert Co. ., 326 F.3d 339, 346, 348 (2d Cir.2003). We have in some cases also considered whether the causal connection between the injury and the conduct is logical and not speculative. See Trollinger v. Tyson Foods, Inc., 370 F.3d 602, 614–15 (6th Cir.2004). At bottom, these considerations are all consistent with the foundational notion that proximate cause is a “flexible concept” and must be assessed on a case-by-case basis. See Bridge v. Phx. Bond & Indem. Co., 553 U.S. 639, 654, 128 S.Ct. 2131, 170 L.Ed.2d 1012 (2008).

Despite its flexibility, the proximate-cause requirement tends to invite confusion in cases involving mail and wire fraud as the predicate acts. Mail fraud occurs when an individual devises a plot to defraud and subsequently uses the mail in furtherance of it. See 18 U.S.C. § 1341. Strict application of traditional proximate-cause considerations might be seen as mandating first-person reliance on the mailing itself. However, the Supreme Court recently held that a plaintiff need not show that she relied on any allegedly fraudulent misrepresentations to state a claim. See Bridge, 553 U.S. at 653–59. For RICO purposes, reliance and proximate cause remain distinct—if frequently overlapping—concepts. While reliance is “often used to prove ? the element of causation,” that does not mean it is the only way to do so, nor does that “transform reliance itself into an element of the cause of action.” Id. at 659 (quoting Anza v. Ideal Steel Supply Corp., 547 U.S. 451, 478, 126 S.Ct. 1991, 164 L.Ed.2d 720 (2006) (Thomas, J., concurring in part and dissenting in part)). A plaintiff need only show use of the mail in furtherance of a scheme to defraud and an injury proximately caused by that scheme. See id. at 649–50. Thus, the appropriate inquiry in this case is not whether Wallace actually relied on the allegedly inflated appraisal, but whether the fraudulent scheme furthered by that appraisal proximately caused his financial injuries.

We turn now to Wallace’s causal theory. He contends that Midwest Financial and Accupraise committed fraud by producing and sending through the mail a false appraisal of his home that inflated its value by more than $100,000 as part of a larger scheme to secure high-interest loans. This appraisal gave rise to the illusion of substantial equity against which Wallace intended to borrow to fund his build-out project. Based on that illusion, Soard was able to convince Wallace to enter into a large option ARM, the unfavorable terms of which were never made clear to Wallace. The accruing interest outpaced Wallace’s ability to pay and negative amortization occurred. Wallace was never able to catch up, and with no real equity in his home, he could not sell it for enough to repay the loan. He was thus injured in the amount of the fees, interest costs, and other expenses tied to the option ARM.

Wallace’s theory is sufficient to raise a question of fact regarding causation under the directness standard. See Holmes, 503 U.S. at 268. Once we accept that Wallace was an intended target of the defendants’ alleged scheme to induce borrowers to agree to loans with high interest rates and other unfavorable terms—as we must at this stage in the litigation—the link between the scheme and the type of injury Wallace suffered is plain to see. Wallace’s confidence in his ability to afford a larger mortgage and confusion regarding the underlying terms might well have “led directly” to his decision to enter into the option ARM at issue. See Anza, 547 U.S. at 461. This remains true even if the relevant RICO violation is drawn more narrowly than the scheme as a whole. Looking closely at the evidence in the record, it is clear enough that the inflated appraisal itself played a significant role in the negotiations between Soard and Wallace. Indeed, one of Wallace’s first priorities was “seeing if [he] had enough equity in [his] home” to finance the build-out project. Midwest Financial subsequently asked for and received an appraisal from Accupraise overstating the value of Wallace’s home, thereby giving rise to the illusion of equity. A good-faith appraisal would have revealed at best that Wallace had no equity in his home and at worst that he was already upside-down on his existing mortgages. Without any corresponding evidence showing that Wallace intended to pursue the build-out project at all costs, it is certainly possible that the illusion of equity made the difference here. In other words, we are able to trace a straight line between the alleged fraud and the asserted injury. See Hemi, 130 S.Ct. at 990.

Wallace’s theory looks even better under the other proximate-cause standards. First, his injuries were foreseeable. See Perry, 324 F.3d at 848; see also Anza, 547 U.S. at 469–70 (Thomas, J., concurring in part and dissenting in part). The defendants’ alleged scheme to cultivate the illusion of equity by way of an inflated appraisal created more than a bare possibility that Wallace would enter into a large loan. As Wallace tells it, the scheme was calibrated to practically guarantee such a result. Why else intentionally overstate the value of his home and run the risk of an undersecured mortgagee? Wallace’s eventual injuries in the form of escalating interest payments and an unmanageable principal balance were hardly unforeseeable or uncertain consequences of such a scheme. That much is true regardless of the directness of those injuries. Cf. Anza, 547 U.S. at 469–70 & n. 6 (Thomas, J., concurring in part and dissenting in part) (citing Prosser & Keeton on the Law of Torts § 42, at 273, 293–97 (5th ed.1984)).

Second, Wallace’s theory is neither illogical nor speculative. See Trollinger, 370 F.3d at 614–15. He was led to believe that he had substantial equity in his home; leveraging this knowledge, Soard pushed him into a large option ARM; since then, negative amortization has prevented him from paying down the principal. This theory is not contingent on intervening causes: Wallace and Soard did not engage in detailed or protracted negotiations regarding the terms of the mortgage after Soard called with news of the appraisal and a corresponding offer. The record shows no more than two days passed from the time of the call to an oral agreement. As such, the connection between the scheme to create an illusion of equity and the ultimate decision to obtain the option ARM is strong enough to raise a genuine issue of material fact regarding causation.

In arriving at the opposite conclusion, the district court noted that the inflated appraisal only “influenced the size of Wallace’s loan” and amounted to no more than a “ ‘but for’ cause of his obtaining a high-cost mortgage.” The court identified “the high interest rate and unfavorable terms” of Wallace’s loan as the true sources of his injuries. But this betrays an unnecessarily rigid understanding of the case. The high interest rate and unfavorable terms are more properly viewed as components of the alleged injuries rather than the proximate cause of such. After all, it is the overwhelming amortization payments and capitalization of significant unpaid interest from which Wallace seeks relief.

In addition, an appraisal is a more fundamental part of the lending calculus than the district court lets on. Wallace himself averred that he only intended to proceed with his build-out project if he “had enough equity in [his] home” to finance it. Given that most homeowners borrow by leveraging their equity, it is not difficult to see how a scheme geared toward creating the illusion of it encourages borrowers to act in the first place. While the illusion alone did not compel Wallace to borrow as he did here, it certainly increased the likelihood that he would. Put another way, the inflated appraisal appears to be “a substantial factor in the sequence of responsible causation” according to Wallace’s version of the facts. See Cox v. Admin. U.S. Steel & Carnegie, 17 F.3d 1386, 1399 (11th Cir.1994) (quoting Hecht v. Commerce Clearing House, Inc., 897 F.2d 21, 23–24 (2d Cir.1990)). That is sufficient at this stage in the litigation. See Dye, 702 F.3d at 294.

The district court also noted that “a falsely inflated appraisal harms only the lender” in refinancing transactions because the lender is the one left “with an asset that is worth less than the amount loaned to the borrower” in the event of a default. But this observation misses the mark as well. For one thing, a borrower has much to lose from entering into a too-big loan, especially when that loan is an option ARM. A larger initial balance creates a larger gap between the minimum payment and the interest charged over that same period, which in turn leads to skyrocketing payments when the unpaid interest is tacked onto the balance and the payment schedule resets—as happened here. While Wallace managed to make regular payments on an earlier option ARM with a smaller principal, he was unable to pay enough to avoid negative amortization on the larger one. This created an apparent self-feeding spiral that eventually tipped Wallace into bankruptcy.

For another thing, the subprime mortgage crisis taught us that lenders like MortgageIT acted as cavalierly as they did because the quick securitization and sale of mortgages to investors diffused the risk of default. If MortgageIT had truly been concerned about “ensur[ing] that any loan transaction entered into [was] adequately collateralized” to minimize its risk, one would think an appraisal showing nearly one-hundred percent appreciation in two years would raise red flags. Apparently it did not. The point is that the context in which this loan transaction occurred—refinancing rather than a new home purchase—does not alter the causal analysis.

In the end, we must bear in mind that a “proximate cause is not ? the same thing as a sole cause.” Cox, 17 F.3d at 1399. Though the decision to obtain a mortgage is no doubt complicated, the appraisal of the home used to secure it is a fundamental part of the calculus. That holds true in this case. As such, it is no surprise that the application of traditional proximate-cause considerations supports a minimal finding that Wallace has raised a genuine issue of material fact regarding causation. The connection between the scheme to manufacture inflated appraisals and Wallace’s financial injuries is not so indirect, unforeseeable, or illogical that the defendants must prevail as a matter of law. See In re Calumet, 398 F.3d at 558–59. The district court erred in concluding otherwise.

B.

Finding as it did on the element of causation, the district court declined to consider whether Wallace had raised a sufficient question of fact as to the remaining elements of his two civil RICO claims. Under § 1962(c), those elements are the “(1) conduct (2) of an enterprise (3) through a pattern (4) of racketeering activity.” Sedima, S.P.R.L. v. Imrex Co., Inc., 473 U.S. 479, 496 (1985) (footnote omitted); see Heinrich v. Waiting Angels Adoption Servs., Inc., 668 F.3d 393, 404 (6th Cir.2012). Section 1962(d) adds as an additional element “the existence of an illicit agreement to violate” one of RICO’s criminal provisions, including § 1962(c). Heinrich, 668 F.3d at 411 (quoting United States v. Sinito, 723 F.2d 1250, 1260 (6th Cir.1983)). Rather than decide for ourselves whether Wallace has proved what he needs to prove to survive the defendants’ motions for summary judgment, we leave it to the district court to decide in the first instance.

III.

Wallace also appeals from the district court’s grant of summary judgment in favor of the defendants on his state law civil conspiracy claim. We review this decision de novo as well. Colvin, 605 F.3d at 288.

Under Kentucky law, a plaintiff must prove “an unlawful/corrupt combination or agreement between the alleged conspirators to do by some concerted action an unlawful act.” James v. Wilson, 95 S.W.3d 875, 897 (Ky.Ct.App.2002) (citing Montgomery v. Milam, 910 S.W.2d 237, 239 (Ky.1995)). The “gist of the civil action for conspiracy is the act or acts committed in pursuance of the conspiracy, not the actual conspiracy”—meaning a plaintiff must also prove that the act or acts caused her injuries. Id. In this sense, it is substantively similar to RICO § 1962(d).

Accordingly, Wallace’s state law claim parrots his civil RICO conspiracy claim. He alleges that Midwest Financial, Schlueter, Bates, Soard, Accupraise, Brock, and MortgageIT conspired to manufacture fraudulent appraisals designed to dupe consumers into obtaining unaffordable option ARMs for which MortgageIT paid generous yield spread premiums. As the district court recognized, this alleged conspiracy seems to consist of two distinct subparts that bind the defendants together—though Wallace does not directly say so in his complaint. The first subpart involves the alleged agreement between Midwest Financial, Schlueter, Bates, Soard, and Brock to manufacture the fraudulent appraisals. The second subpart involves the alleged agreement between Midwest Financial, Schlueter, Bates, and MortgageIT providing for “unlawful kickbacks” in the form of yield spread premiums. We address each in turn.

Regarding the first subpart, the district court held that Wallace’s claim failed because he could not show that the fraudulent appraisal—the relevant unlawful act—caused his injuries. The court relied on its prior determination to the same effect. For the reasons set forth above, we disagree. Viewing the facts in the light most favorable to Wallace, we find that he has raised a sufficient question of fact as to causation. However, it is yet to be determined whether he has also raised a sufficient question of fact as to the remaining elements of his claim under Kentucky conspiracy law. See id. at 896 (“[T]he burden is on the party alleging that a conspiracy exists to establish each and every element of the claim in order to prevail.”). We once again allow the district court to make this determination in the first instance.

Regarding the second subpart, the district court held that Wallace “presented no evidence which establishes that Defendants [Midwest Financial and MortgageIT] entered into an agreement to commit an unlawful act.” With this we agree. The court did not rely on its faulty proximate-cause analysis to reach this conclusion. Instead, the court correctly noted that “yield spread premiums are not illegal per se under” federal law, and found nothing in the record that suggested MortgageIT conspired to provide a specifically illegal yield spread premium in this case. More generally, MortgageIT had no obvious relationship or communications with Midwest Financial outside of the formal application process and payment of such premiums—certainly nothing on the order of an illicit agreement. At most, it might be said that MortgageIT knew of the appraisal-based scheme given its review of the application materials and then agreed to the overarching objective by paying yield spread premiums. Cf. Heinrich, 668 F.3d at 411 (applying such a standard to a civil RICO conspiracy claim). But this theory is simply too attenuated to raise a sufficient question of fact. Because the record offers essentially no support for Wallace’s contention that MortgageIT manifested an agreement to commit an unlawful act, we affirm the district court’s decision in this respect.

IV.

For these reasons, we reverse the district court’s grant summary of judgment in favor of the defendants based on a lack of proximate causation, affirm its grant of summary judgment in favor of MortgageIT on the state law claim on other grounds, and remand for further proceedings.

COLE, Circuit Judge.

* Department of Justice alerts judge to favorable ruling

* Ruling endorses key weapon in mortgage fraud cases

* U.S. using FIRREA in pending cases against BofA, Wells Fargo

Reuters-

The U.S. Justice Department has promptly capitalized on a court victory to bolster a case before another federal judge, citing a ruling on Wednesday that endorsed the agency’s use of a little known financial fraud law to prosecute bank actions during the financial crisis.

In a letter made public on Thursday, the agency told U.S. District Judge Jesse Furman on Wednesday that the ruling is one reason why its mortgage-fraud case against Wells Fargo & Co should not be dismissed.

U.S. District Judge Lewis Kaplan made that ruling in a lawsuit against Bank of New York Mellon, which the Justice Department accuses of overcharging clients for trading currencies.

[REUTERS]

Funds Distributed From National Settlement With Lender Processing Services for Faulty Practices Against Homeowners in Foreclosure

Chicago — Attorney General Lisa Madigan today announced the distribution of $3.3 million to Illinois county recorders from the national settlement with Lender Processing Services Inc. (LPS) that resolved allegations that the Jacksonville, Fla.-based firm engaged in pervasive “robo-signing” of mortgage documents and other faulty practices while servicing loans of struggling homeowners at risk of foreclosure.

Madigan and 45 other attorneys general reached the settlement in January following an extensive investigation into LPS and its subsidiaries – LPS Default Solutions and DocX – all of which primarily provide support to banks and mortgage loan servicers. The attorneys general alleged LPS and its subsidiaries engaged in widespread “robo-signing” of mortgage documents, many of which were filed in county recorders offices. The states’ investigation revealed a practice by DocX of so-called “surrogate signing,” or the signing of documents by an unauthorized person in the name of another and notarizing those documents as if they had been signed by the proper person. The settlement requires that LPS reform its business practices, including prohibiting LPS from signing off on mortgage documents with signatures of unauthorized people or people without firsthand knowledge of facts attested to in the documents.

As part of the settlement, LPS paid $3,364,326 to Illinois for cy pres distribution. Madigan said all of the money will be distributed to Illinois’ 102 county recorder offices.

“LPS and its subsidiaries demonstrated an utter disregard for accuracy and fairness in verifying key mortgage documents,” Madigan said. “The settlement holds LPS accountable for its unlawful actions and will provide added resources to Illinois’ county recorders to enhance their efforts in maintaining accurate public records.”

The LPS settlement and subsequent funding distribution is part of Attorney General Madigan’s ongoing effort to address the misconduct that contributed to the financial crisis by holding lenders and other financial institutions accountable for their unlawful practices, while providing relief and assistance to Illinois families struggling to save their homes as a result of the foreclosure crisis.

Madigan took a lead role in the February 2012 national foreclosure settlement, in conjunction with other states and the U.S. Department of Justice and the U.S. Department of Housing and Urban Development, with five of the nation’s largest banks – Bank of America, JPMorgan Chase, Wells Fargo, Citibank and GMAC/Ally – to address allegations of widespread “robo-signing” of foreclosure documents and other fraudulent practices while servicing loans of struggling homeowners. As part of that $25 billion national settlement, Illinois borrowers already have received more than $1.4 billion in direct relief.

-30-

Center for Investigative Reporting –

Joji Thomas was desperate to save his home. The San Francisco mechanical engineer sold his car, tapped into his wife’s savings and begged friends for money. In July, to stave off foreclosure, he bought a $27,777.85 cashier’s check and mailed it to Bank of America.

A bank representative acknowledged receiving the check two days later, Thomas said. But the payment went missing later that week and was not applied to his mortgage. Bank of America foreclosed on his home and sold it at auction. He moved out April 13.

“I was forced into this,” he said as he cleared the furniture from his home. “I had no other choice.” 

Thomas is one of thousands of Bay Area homeowners fighting in court to save their homes from a foreclosure system rife with mistakes, mismanagement and even fraud, a joint investigation by the Center for Investigative Reporting and NBC Bay Area has found.

[Center for Investigative Reporting]

Foreclosure Defense San Francisco Bay Area

This includes the government! No doubt!

Rollingstone-

The Illuminati were amateurs. The second huge financial scandal of the year reveals the real international conspiracy: There’s no price the big banks can’t fix

Conspiracy theorists of the world, believers in the hidden hands of the Rothschilds and the Masons and the Illuminati, we skeptics owe you an apology. You were right. The players may be a little different, but your basic premise is correct: The world is a rigged game. We found this out in recent months, when a series of related corruption stories spilled out of the financial sector, suggesting the world’s largest banks may be fixing the prices of, well, just about everything.

You may have heard of the Libor scandal, in which at least three – and perhaps as many as 16 – of the name-brand too-big-to-fail banks have been manipulating global interest rates, in the process messing around with the prices of upward of $500 trillion (that’s trillion, with a “t”) worth of financial instruments. When that sprawling con burst into public view last year, it was easily the biggest financial scandal in history – MIT professor Andrew Lo even said it “dwarfs by orders of magnitude any financial scam in the history of markets.”

 [ROLLINGSTONE]

Washington, D.C. (Apr. 25, 2013)—Today, Rep. Elijah E. Cummings, Ranking Member of the House Committee on Oversight and Government Reform, announced the introduction of H.R. 1706, The Mortgage Settlement Monitoring Act of 2013, to create an Independent Monitor to oversee the distribution of funds paid by mortgage servicers for illegal foreclosures and other abuses against homeowners under their settlement agreement with federal regulators.

Original co-sponsors of the legislation include Ranking Members Maxine Waters, George Miller, John Conyers, and Henry Waxman, as well as Representatives John F. Tierney, Zoe Lofgren, and Jan Schakowsky.

The bill has been endorsed by the Center for Responsible Lending, the National Consumer Law Center, the National Fair Housing Alliance, the National Association of Consumer Advocates, Americans for Financial Reform, National People’s Action, the Connecticut Fair Housing Center, and Consumer Action.

“Mortgage servicers have now admitted that they broke the law by illegally foreclosing on American families and committing numerous other abuses, but regulators refuse to provide even the most basic information about the extent of the abuses that were uncovered,” said Cummings.  “Since federal regulators now plan to rely on these same banks to determine payouts and deliver settlement funds to borrowers, we need an Independent Monitor to bring transparency and accountability to this process.”

On February 28, 2013, the Board of Governors of the Federal Reserve System and the Office of the Comptroller of the Currency (OCC) entered into amended consent orders requiring 11 mortgage servicers that originally entered consent orders in 2011 to provide cash payments and other assistance to borrowers, including more than $3 billion in payments to borrowers who were in foreclosure in 2009 and 2010.  This settlement prematurely ended the Independent Foreclosure Review that banks were ordered to conduct to identify harms suffered by individual borrowers.

The Mortgage Settlement Monitoring Act of 2013 would create an Independent Monitor appointed by the President to review the compliance of all parties to the settlement—including both the mortgage servicers and the Federal Reserve and the OCC—and issue quarterly reports to Congress and the public.  These reports must include:

• A description of the criteria and methodology used to determine eligibility for direct and indirect relief, as well as a description of due process protections for recipients;

• Information on borrowers who receive relief, broken down by mortgage servicer and including demographic information, the level of direct compensation for similarly situated borrowers, and the number and amounts of principal reduction loan modifications and other types of borrower assistance;

• Information on the credit given to mortgage servicers for direct and indirect compensation provided to borrowers; and

• A list of instances in which mortgage servicers or regulators fail to comply with the terms of the settlement, and a list of actions taken by the Federal Reserve or the OCC to compel compliance.

On January 31, 2013, Cummings and Senator Elizabeth Warren launched a joint investigation of the settlement and requested that the Federal Reserve and the OCC provide documents relating to illegal actions by mortgage servicers identified during the Independent Foreclosure Review.  The Federal Reserve and OCC refused to provide these documents, arguing that they are the “trade secrets” of mortgage servicers.

On April 4, 2013, the Government Accountability Office issued a report examining the Independent Foreclosure Review, finding:  “Complexity of the reviews, overly broad guidance, and limited monitoring for consistency impeded the ability of the Office of the Comptroller of the Currency (OCC) and the Board of Governors of the Federal Reserve System (Federal Reserve) to achieve the goals of the foreclosure review.”  The report concluded that “limited communication with borrowers and the public adversely impacted transparency and public confidence” and recommended that regulators “apply lessons from the foreclosure review process, such as enhancing planning and monitoring activities to achieve goals, as they develop and implement the activities under the amended consent orders.”

Last week, the New York Times editorialized about the need for an independent monitor to oversee, analyze, and publicly report on the implementation of the settlement after some borrowers were unable to cash the checks they received as part of the deal.

source: democrats.oversight.house.gov