January 2014 Geoffry Walsh National Consumer Law Center®
I. INTRODUCTION The ongoing foreclosure crisis has involved more homes going through state foreclosureprocedures than at any other time in United States history. Since 2008, over four million homeshave been foreclosed. Before the crisis is over, millions more are likely to follow. Theunprecedented volume of cases has produced delays in the foreclosures process in certain areas,primarily in states that require court approval of foreclosure sales. Delays of two years or moreare common in some judicial foreclosure states. Not surprisingly, these delays have produceddemands from the mortgage lending industry for ways to speed up foreclosures. Much of theindustry’s attention has focused on laws to create short cuts through judicial foreclosuresystems.
In response to these concerns, new state “fast track” foreclosure laws have begun to appear. At least seven state legislatures have enacted such laws since 2009. In most instances, these laws tie a right to fast track foreclosure to a mortgage holder’s claim that a property is “abandoned.” Proponents of the new laws focus upon the futility of delaying foreclosure while a property remains empty and becomes an increasingly grave threat to its community. There is clearly no benefit to delaying foreclosure in these circumstances, and no one would claim otherwise.
This report examines seven recently enacted fast track foreclosure statutes: those in Michigan, Oklahoma, Kentucky, Indiana, New Jersey, Nevada, and Illinois. The report also considers a draft fast track foreclosure law prepared by the National Conference of Commissioners of Uniform State Law (NCCUSL). The report concludes that several of these laws contain provisions that work effectively to achieve the twin goals of prompt completion of foreclosures of properties that are truly unoccupied and abandoned. Other statutes, however, have been drafted broadly and are clearly over-inclusive in their reach. Several laws expressly apply to occupied properties and others are vague in defining when they apply. Nearly all set up new and burdensome procedural requirements for homeowners. The overwhelming majority of homeowners facing foreclosure today lack access to legal assistance. Under certain fast track laws, homeowners face loss of substantial rights under state property laws if they do not meet new procedural deadlines, submit paperwork promptly, appear for hearings, and rebut evidentiary presumptions. Finally, beyond speeding up foreclosure sales in selected cases chosen by mortgage servicers, these laws generally fail to coordinate a response to the problem of deteriorated and abandoned properties in foreclosure.
There are ways to deal with the problems of abandoned properties in foreclosures that protect communities, preserve existing property rights of borrowers, and allow lenders to minimize losses. After reviewing fast track foreclosure laws now in effect and proposed by the NCCUSL, this report makes nine recommendations for improvement of fast track foreclosure laws.
KATRINA PERKINS STEINBERGER, as Executor of the Estate of Charles A. Perkins, deceased, and individually, Petitioner,
v.
THE HONORABLE MICHAEL R. MCVEY, Judge of the SUPERIOR COURT OF THE STATE OF ARIZONA, in and for the County of Maricopa, Respondent Judge,
INDYMAC MORTGAGE SERVICES, a division of ONEWEST BANK, F.S.B., a Federally Chartered Savings Bank; DEUTSCHE BANK NATIONAL TRUST COMPANY, as Trustee of the INDYMAC INDX MORTGAGE LOAN TRUST 2005-AR14; MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC., a Delaware Corporation; QUALITY LOAN SERVICE CORPORATION, a California Corporation, Real Parties in Interest
No. 1 CA-SA 12-0087
Petition for Special Action from the Superior Court in Maricopa County
No. CV2010-054539
The Honorable Michael R. McVey, Judge (Retired)
JURISDICTION ACCEPTED; RELIEF GRANTED IN PART AND DENIED IN PART
G O U L D, Judge:
¶1 Petitioner Katrina Perkins Steinberger (“Steinberger”) seeks special action relief from the trial court’s judgment granting a motion to dismiss filed by OneWest Bank, FSB (“OneWest”), Deutsche Bank National Trust Company (“DBNTC”) and Mortgage Electronic Registration Systems, Inc. (“MERS”) (collectively, “Respondents”). For the following reasons, we accept jurisdiction; grant relief in part, deny relief in part; and remand this case to the trial court for further proceedings consistent with this opinion.
¶2 This case involves an all-too familiar scenario taking place in Arizona and across America today; a homeowner defaults on her home loan, and the lender seeks to foreclose on the property. Here, Steinberger filed a complaint challenging Respondents’ authority to foreclose on her home. Steinberger also seeks damages for Respondents’ alleged misconduct in relation to the foreclosure proceeding.
¶3 At its core, this case presents three basic legal questions. First, are there any circumstances under which a person who is facing foreclosure may challenge the authority of the party seeking foreclosure? The second question is related to the first; if there are such circumstances, what are the requirements, if any, for the party seeking foreclosure to establish its authority? Third, if the lender or its agent offers to modify (lower) the payments to assist the homeowner, is the lender/agent required to act reasonably in processing the loan modification?
¶4 In considering these issues, we emphasize that this opinion is limited to the legal sufficiency of Steinberger’s complaint. The strength of the evidence supporting Steinberger’s case is not before us in this special action.
Factual and Procedural History1
¶5 In May 2005, Steinberger’s father, Charles Perkins, took out a loan from IndyMac Bank, FSB (“IndyMac”) to purchase a home. The original promissory note was signed on May 25, 2005, and identified the lender as IndyMac and the borrower as Charles Perkins. Contemporaneously with the note, Perkins also executed a deed of trust.
¶6 When Perkins passed away in December 2007, Steinberger inherited the property. Under the terms of the note, the monthly loan payments had nearly doubled by July 2008, and Steinberger was struggling to make her payments. In an effort to avoid defaulting on the loan, Steinberger contacted a representative at IndyMac to obtain a loan modification and lower the monthly payments. The representative told Steinberger that a loan modification was not available unless she was in default on the loan. Based on this phone call and subsequent conversations with IndyMac, Steinberger defaulted on her loan payments and applied for a loan modification.
¶7 By December 2008, Steinberger had completed the paperwork necessary for a loan modification and returned it to IndyMac Federal FSB (“IndyMac Federal”).2 Thereafter, Steinberger had a series of confusing communications with the various entities servicing her loan. During a telephone conversation in late December, an IndyMac Federal representative led Steinberger to believe that her loan would be modified. However, in February 2009, IndyMac Federal told Steinberger that because she was in default on the loan, a trustee’s sale of the property was scheduled for May 2009.
¶8 Throughout the winter and spring of 2009, Steinberger repeatedly contacted representatives of IndyMac Federal, and later IndyMac Mortgage Services (“IndyMac Mortgage”),3 in an effort to vacate the trustee’s sale and obtain a loan modification. The trustee’s sale was rescheduled to August 2009, and Steinberger continued to discuss obtaining a loan modification with representatives of Quality Loan Service Corporation (“QLS”), an entity assisting IndyMac Mortgage in servicing Steinberger’s loan.
¶9 During the summer of 2009, the status of Steinberger’s loan remained unresolved. Then, in late July, Steinberger was advised by a representative from IndyMac Mortgage that she had been granted a “loan forbearance” agreement. Under this agreement, Steinberger was allowed to make lower monthly payments until she qualified for a loan modification. The loan forbearance agreement was later extended to March 2010.
¶10 On January 11, 2010, a representative from IndyMac Mortgage advised Steinberger that it had received her loan modification paperwork and her monthly payment for the loan forbearance agreement. However, a few days later Steinberger was advised by a different representative from IndyMac Mortgage that a trustee’s sale was set for January 21 because Steinberger had failed to send her modification paperwork and her loan forbearance payment. Confident that she had sent the paperwork and the payment, Steinberger contacted several representatives at IndyMac Mortgage in an effort to vacate the trustee’s sale; however, she was advised by one representative that there would be no loan modification, and that it was “over.” Steinberger then redoubled her efforts, and was eventually able to persuade the lender to cancel the sale. In addition, the loan forbearance agreement remained in place while her loan modification application was being processed.
¶11 In March 2010, IndyMac Mortgage advised Steinberger that her loan modification application had been approved for a ninety-day trial period. Steinberger sent her March payment to IndyMac Mortgage, which accepted the payment. However, in April, IndyMac Mortgage rejected Steinberger’s payment on the ground she had failed to submit the proper paperwork. Thereafter, throughout the spring and summer of 2010, Steinberger continued to submit payments to IndyMac Mortgage, only to be told her payments could not be accepted because she had not submitted the proper paperwork. Then, in August, IndyMac Mortgage told Steinberger she had breached the ninety-day trial agreement because she had failed to submit her payments.
¶12 In late August and early September of 2010, Steinberger tried to maintain the ninety-day trial agreement, but by mid-September she was told the agreement was no longer valid because her loan modification request had been denied. A trustee’s sale was set for November, only to be continued again on the grounds a loan modification was “in the system” and still being processed. However, the loan modification agreement never came to fruition, and a trustee’s sale was eventually set for January 10, 2011.
¶13 Steinberger sought to prevent the trustee’s sale by filing a complaint in superior court in November 2010, and an amended complaint in December 2010. Steinberger’s amended complaint alleged eleven causes of action: (1) a claim to vacate/set aside the substitution of trustee, the assignments of the deed of trust, and notice of the trustee’s sale; (2) a temporary restraining order, preliminary injunction, and permanent injunction prohibiting the trustee’s sale from going forward; (3) quiet title; (4) breach of contract; (5) negligent performance of an undertaking (“Good Samaritan Doctrine”); (6) fraudulent concealment; (7) common law fraud; (8) consumer fraud; (9) negligence per se; (10) unconscionable contract; and (11) discharge/payment of a debt.
¶14 The main remedy Steinberger sought in her complaint is a declaratory judgment that Respondents lack the authority to foreclose on her home, and that the notice of trustee’s sale is null and void. Steinberger also sought payment of her attorneys’ fees and punitive damages.
¶15 Steinberger obtained a temporary restraining order (“TRO”) on January 6, 20114 prohibiting Respondents from going forward with the trustee’s sale. The TRO required her to post a $7,000 bond with the court.
¶16 Respondents moved to dismiss Steinberger’s complaint, and the trial court granted their motion “for the reasons set forth in the moving Defendants’ [Respondents’] Motion to Dismiss and Reply.” Steinberger then filed this special action, and after hearing oral argument, we accepted jurisdiction and ordered the TRO to remain in place during the pendency of this special action.
A Nevada judge has ordered the state’s attorney general to pay legal and discovery costs to Lender Processing Services after the state failed to come up with evidence supporting a lawsuit accusing the firm of defrauding homeowners, an attorney for LPS said.
The order represents an extremely rare case of a judge finding the state’s highest legal officer acted improperly, said Mitchell Berger with Berger Singerman, a Florida lawyer perhaps most famous for representing Al Gore in his post-election disputes in 2000.
“I have been practing law for 34 years,” Berger said. “I’ve been around the block. And I’ve never seen an attorney general sanctioned.”
On August 21, 2013, the California Court of Appeal issued a negative ruling against homeowners in an area homeowners thought they were winning.
The story begins in February 2013, when the California Court of Appeals (the First District), issued a groundbreaking decision in Jolley v. Chase, which found that mortgage servicers could be held liable for negligence if they mishandled the loan modification process and caused foreseeable harm to affected homeowners. This ruling was a significant win for homeowners who had long sought to hold mortgage servicing companies accountable for fraudulent, unfair, and deceptive conduct when reviewing people for and negotiating loan modifications. The ruling was also a watershed moment for homeowners since most of the case law prior to this ruling found that banks could never be held liable for negligence in the loan modification context—no matter how egregious their conduct.
After hundreds of lawsuits and thousands of complaints, banks are finally pushing for reform in one of the darkest corners of the housing market. Under new guidelines expected to be adopted this year by most of the industry, the workers that watch over millions of homes in default or foreclosure will be subject to heightened levels of background checks.
The measures are meant to screen out people convicted of a criminal offense, such as theft or fraud. They follow widespread allegations, first reported by The Huffington Post, that the handymen and home inspectors that banks hire to look after vacant properties are breaking into still-occupied homes, and looting them of valuables. Some of these people, who work indirectly for the banks through a web of contracting companies, have lengthy criminal records.
“The intent is to give communities a high level of confidence that the people walking around in homes are not going to cause problems,” said Eric Miller, the executive director of the National Association of Mortgage Field Services, the trade association that helped design the new standards.
You know if Matt’s writing about this, it’s going to be great!
Rollingstone-
If you make a big show of punishing someone, and when you’re done they still don’t think they have a behavior problem, you probably picked the wrong punishment. Every parent on earth knows this implicitly – but does the Obama White House finally get it, too, now, after Jamie Dimon’s raise?
When the board of JP Morgan Chase gave its blowdried, tirelessly self-regarding CEO a whopping 74 percent raise – after a year in which the Justice Department blasted the bank with $20 billion in sanctions – it was one of those rare instances where Main Street and Wall Street were mostly in agreement.
Everyone from the Financial Times to Forbes.com to the Huffington Post decried the move. The Wall Street pundits mostly thought it was a dumb play by the Chase board from a self-interest perspective, one guaranteed to inspire further investigations by the government. Meanwhile, the non-financial press generally denounced the raise as a moral obscenity, yet another example of the serial coddling of Wall Street’s habitually overcompensated executive class.
The U.S. government has asked a judge to order Bank of America Corp (BAC.N) to pay $2.1 billion, increasing its request for penalties stemming from a jury’s finding that the bank was liable for fraud over defective mortgages sold by its Countrywide unit.
The request in a court filing late Wednesday followed a December hearing where a judge asked the bank and the U.S. Justice Department to brief him on how he might base the penalties on Countrywide’s gains rather than losses resulting from the mortgage sales.
The Justice Department had previously asked for only $863.6 million based on gross losses it said government-sponsored mortgage finance companies Fannie Mae (FNMA.OB) and Freddie Mac (FMCC.OB) incurred on loans purchased from Countrywide in 2007 and 2008.
U.S. BANK NATIONAL ASSOCIATION, AS TRUSTEE FOR THE HOLDER OF BEAR STEARNS ASSET-BACKED SECURITIES 1 TRUST 2006 Im1 3476 Stateview Boulevard Ft. Mill, SC 29715, Plaintiff,
v.
VICTOR DE LOS RIOS a/k/a VICTOR M. DE LOS RIOS, MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC., AS NOMINEE FOR IMPAC FUNDING CORPORATION D/B/A IMPAC LENDING GROUP,
JOHN DOE (Said name being fictitious, it being the intention of Plaintiff to designate any and all occupants of premises being foreclosed herein, and any parties, corporations or entities, if any, having or claiming an interest or lien upon the mortgaged premises), Defendants.
HOGAN LOVELLS US LLP Attorney for Plaintiff 875 Third Avenue New York, New York 10022.
CABANILLAS & ASSOCIATES, P.C. Attorney for Defendant De Los Rios 245 Main Street, Suite 120 White Plains, New York 10601.
W. GERARD ASHER, Judge.
It is.
ORDERED that this motion by plaintiff for an order fixing the defaults of the non-appearing defendants, granting summary judgment on its complaint, striking the affirmative defenses and counterclaims in the answer of defendant Victor De Los Rios, an order of reference appointing a referee to compute is granted to the extent of severing and dismissing all of the affirmative defenses and counterclaims except for the third affirmative defense alleging lack of standing. The motion is otherwise denied and the remainder of the action shall continue.
On December 23, 2005, defendant Victor De Los Rios (“De Los Rios”) borrowed $368,000 from non-party Impac Funding Corporation d/b/a Impac Lending Group (“Impac”), executing a note secured by a mortgage on the property known as 1147 Reilly Street in Bay Shore, New York (the “Property”). The mortgage names Mortgage Electronic Registration Systems, Inc. (“MERS”) as Impac’s nominee and the mortgagee of record for purposes of recording, and confers upon it the right to take any action required of Impac. The mortgage was recorded by MERS on January 10, 2006 in the Suffolk County Clerk’s Office. MERS assigned the mortgage to the plaintiff by an assignment of mortgage dated December 31, 2008 (the “Assignment”).
De Los Rios defaulted on the note by failing to make the monthly installments due November 1, 2008 and thereafter. The plaintiff commenced this action in September 2009 to, inter alia, foreclose the mortgage on the Property. All of the defendants were timely served with the summons and complaint. De Los Rios interposed an answer raising affirmative defenses, including lack of standing, and asserted several counterclaims. The remaining defendants have failed to answer or otherwise appear in the action and remain in default.
The plaintiff now moves for summary judgment on its complaint, to strike the answer of De Los Rios, and for an order of reference pursuant to RPAPL 1321 fixing the defaults of the non-answering defendants and for the appointment of a referee to compute. In support of its motion, the plaintiff relies upon the affidavit of Angela Frye (“Frye”), a vice president for Wells Fargo Bank, N.A., successor by merger with Wells Fargo Home Mortgage, Inc. d/b/a America’s Servicing Company (“Wells/ASC”), the servicer and custodian of records for plaintiff. Frye asserts that she reviewed the books and records maintained by Wells/ASC in its regular course of business as servicer and custodian of the subject loan, the sources from which she derived her knowledge of the facts. Frye asserts that based on the records, De Los Rios received and signed a Truth-In-Lending Disclosure Statement (“TILA”) and the HUD-1 Form. Frye asserts that the Wells/ASC business records reflect that after De Los Rios failed to make the November 1, 2008 payment, ASC sent a notice of default on or about February 15, 2009 which indicated the amount past due and provided him with the opportunity to cure the default. Frye asserts that also on February 17, 2008, ASC sent De Los Rio a 90-day notice. Frye states that as of the date the complaint was filed, De Los Rios had not cured his default.
The opposition submitted by De Los Rios challenges whether personal jurisdiction has been obtained over him (first affirmative defense) as well as the plaintiff’s standing to prosecute this action (third affirmative defense). De Los Rios did not move to dismiss the complaint based on lack of personal jurisdiction within 60 days of service of his answer, and thus has waived this defense (see CPLR 3211[e]; JP Morgan Chase Bank v Munoz, 85 AD3d 1124, 927 NYS2d 364 [2d Dept 2011]).
With respect to the third affirmative defense, De Los Rios maintains that the copy of the note previously produced by the plaintiff did not contain an indorsement, and no proof has been submitted to demonstrate that Impac delivered the note to plaintiff. De Los Rios also argues that the purported Assignment is insufficient to confer standing as there is no evidence that MERS as the assignor, ever had possession of the note.
In response, and in further support of its motion, plaintiff has submitted a memorandum of law without a sworn statement. In the memorandum, plaintiff does not address the lack of an indorsement but stands by the attestations made by Frye in her affidavit in support that the note containing a special indorsement by Impac to plaintiff was delivered to Wells/ASC on or about August 24, 2006.
Where a note is payable to order, it is negotiated by delivery with any necessary indorsement (McKinney’s Cons Laws of NY, Book 62 ½, UCC § 3-202[1]). The indorsement must be written on the note “or on a paper so firmly affixed thereto as to become a part thereof” (id. at § 3-202[2]). As explained in the Official Comment following UCC § 3-202, when the indorsement is affixed to an instrument, it is called an allonge (id. at 102). “[A] purported indorsement on a mortgage or other separate paper pinned or clipped to an instrument is not sufficient for negotiation” (id.).
Contrary to the plaintiff’s argument in its memorandum of law, Frye’s affidavit in support of the motion does not establish when the note was physically delivered to Wells/ASC. Although in the memorandum of law it is claimed that delivery of the note was made on August 24, 2006, there is no statement to that effect in Frye’s affidavit. Frye asserts at paragraph 5 of her affidavit that Impac endorsed the note to the plaintiff and that it and the mortgage “were subsequently transferred and physically delivered to Wells/ASC, as custodian under the Pooling and Servicing Agreement dated as of August 24, 2006 (the “PSA”) for the Trust prior to commencement of this action in 2009.”
The date of the PSA does not effectuate a transfer of the note or satisfy the requirement of a proper indorsement and physical delivery of the note. Morever, the explicit language of the PSA demonstrates that delivery of the note is anticipated, but was not yet accomplished. Indeed, Frye points out that “[t]he PSA identifies Wells/ASC as the custodian and section 2.01 of the PSA provides that the loan documents for each mortgage loan in the Trust will be delivered to the custodian for the benefit of the Trust, which is the plaintiff here.” Section 2.01 is not attached to the plaintiff’s papers, however, section 2.02 of the PSA, which has been provided, reads:
On the Closing Date[1], the Trustee or the Custodian on its behalf will deliver to the Sponsor and the Trustee an Initial Certification. . . confirming whether or not it has received the Mortgage File for each Mortgage Loan, but without review of such Mortgage File, except to the extent necessary to confirm whether such Mortgage File contains the original Mortgage Note or a lost note affidavit and indemnity in lieu thereof. No later than 90 days after the Closing Date, the Trustee or the Custodian on its behalf shall, for the benefit of the Certificateholders, review each Mortgage File delivered to it and execute and deliver to the Sponsor and the Trustee and, if reviewed by the Custodian or the Trustee, an Interim Certifications [sic]. . . . In conducting such review, the Trustee or the Custodian on its behalf will ascertain whether all required documents have been executed and received and whether those documents relate, determined on the basis of the Mortgagor name, original principal balance and loan number, to the Mortgage Loans identified in Exhibit B to this Agreement. . . .
This anticipatory language confirms that delivery of the mortgage note had not occurred as of the date the PSA was executed. Moreover, the language indicates that the trustee or custodian, upon such delivery, was to ascertain whether the notes relating to the mortgages identified in Exhibit B to the PSA had actually been received. No one with knowledge of these facts has stated that the note and mortgage which are the subject of the instant action were actually received and listed in Exhibit B. Notably, Exhibit B to the PSA is not included in the papers submitted herein.
Further, the alleged indorsement is on a separate page from the note. There is no explanation as to why the indorsement was not placed on the actual note. The plaintiff does not indicate that a copy of the purported indorsement was actually affixed to the subject note so as to become an allonge. Moreover, the allonge does not contain any identifying information to relate it to the subject note as it simply contains a stamp on an otherwise blank sheet of paper that reads:
Pay To The Order Of: Without Recourse Impact Funding Corporation d/b/a Impact Lending Group A California Corp. By: _____________________________________ Dellela Madonado, Authorized Signatory[2]
Next to this information is stamped the plaintiff’s name. The indorsement is undated and the papers before the court do not contain any proof as to when the note was negotiated. Additionally, “[t]he affidavit from the plaintiff’s servicing agent did not give any factual details of a physical delivery of the note” (HSBC Bank USA v Hernandez,supra at 844). Furthermore, the plaintiff has not provided an explanation as to why a different version of the note without the allonge was produced by it. Moreover, although the Assignment indicates that MERS assigned the mortgage together with the note to the plaintiff, there is nothing in the papers before the court to indicate that the note was transferred to MERS or that MERS ever had possession of the note. Thus, the Assignment even if valid, standing alone is insufficient to establish that plaintiff had standing to commence this action (seeBank of New York v Silverberg,supra). Hence, De Los Rios has raised questions of fact as to whether a valid transfer of the note was made to the plaintiff by an indorsement with physical possession thereof effectuated prior to commencement of this action (seeDeutsche Bank Nat. Trust Co. v Haller, 100 AD3d 680, 954 NYS2d 551 [2d Dept 2012]); HSBC Bank USA v Hernandez,supra;Deutsche Bank Nat. Trust Co. v Barnett, 88 AD3d 636, 931 NYS2d 630 [2d Dept 2011]).
The remainder of the plaintiff’s motion is decided as follows. It is noted that other than the personal jurisdiction issue (first affirmative defense) and the standing issue (third affirmative defense), De Los Rios has not submitted any opposition to the plaintiff’s argument to dismiss the remaining affirmative defenses and the counterclaims. Instead, De Los Rios, in essence, argues that summary judgment should be denied in order for him to conduct discovery (CPLR 3212[f]).
Addressing De Los Rios’ discovery argument, pursuant to CPLR 3212(f), if it appears from affidavits submitted in opposition to the motion for summary judgment “that facts essential to justify opposition may exist but cannot be stated, the court may deny the motion or may order a continuance to permit affidavits to be obtained or disclosure to be had and may make such other order as may be just.” However, “[a] determination of summary judgment cannot be avoided by a claimed need for discovery unless some evidentiary basis is offered to suggest that discovery may lead to relevant evidence” (Wyllie v District Attorney of Count of Kings, 2 AD3d 714, 770 NYS2d 110 [2d Dept 2003]). Mere hope based on speculation and surmise that discovery will reveal the existence of triable issues of fact is insufficient to forestall the grant of summary judgment in a defendant’s favor (see id.). Here, De Los Rios has failed to offer any evidentiary basis to suggest that discovery may lead to relevant evidence to support his affirmative defenses and counterclaims. Consequently, there is no need to delay the determination of the remainder of the plaintiff’s motion by virtue of CPLR 3212(f) (seeFreiman v JM Motor Holdings NR 125-139, LLC, 82 AD3d 1154, 920 NYS2d 189 [2d Dept 2011]).
The Court’s computerized records indicate that several foreclosure settlement conferences were held, thus, there has been compliance with CPLR 3408. There has also been compliance with the Administrative Order of the Chief Administrative Judge of the Courts (AO/431/11), as before the court is the affirmation of Nicole E. Schiavo, Esq. Additionally, the summonses served upon De Los Rios contain the language required by RPAPL § 1320, and the affidavits of service proffered indicate that he was served with the notice pursuant to RPAPL § 1303. The papers before the court also include the 90-day foreclosure notice required by RPAPL § 1304. Thus, the foreclosure notice requirements have been satisfied. Plaintiff’s request for a settlement conference and the second affirmative defense alleging non-compliance with RPAPL § 1303 are, therefore, without merit and hereby severed and summarily dismissed.
The TILA executed by De Los Rios is annexed to the plaintiff’s moving papers. Therefore, the fourth affirmative defense alleging that the plaintiff failed to deliver the TILA disclosure is baseless, and hereby severed and summarily dismissed.
The fifth affirmative defense for violation of the Deceptive Practices Act, General Business Law (“GBL”) § 349 is also severed and dismissed. To establish a cause of action under GBL § 349, De Los Rios was required to allege a deceptive consumer-oriented act or practice which is misleading in a material respect, and injury resulting from such act (seeStutman v Chemical Bank, 95 NY2d 24, 709 NYS2d 892 [2000]; Andre Strishak & Assoc., P.C. v Hewlett Packard Co., 300 AD2d 608, 752 NYS2d 400 [2nd Dept 2002]). De Los Rios alleges that the plaintiff extended him credit with the knowledge that he could not afford to make the payments, and that upon information and belief, the plaintiff routinely made unaffordable loans to borrowers. De Los Rios has not submitted any evidence to support these allegations. Additionally, he has failed to allege specific misrepresentations that caused him to be misled and suffer damages (seeGale v IBM Corp., 9 AD3d 446, 781 NYS2d 45 [2nd Dept 2004]).
In the sixth affirmative defense and first counterclaim De Los Rios seeks rescission of the mortgage for alleged predatory lending in violation of the Home Ownership and Equity Protection Act (“HOEPA”), 15 USC § 1639, an amendment to the Truth in Lending Act (15 USC § 1601 et seq.). De Los Rios, however, has failed to offer any proof that the subject mortgage loan is governed by HOEPA. The subject mortgage may be considered a “consumer credit transaction” (see 15 USC § 1602[h]) with a “creditor” (see 15 USC § 1602 [f]), secured by the “consumer’s principal dwelling” (see 15 USC § 1602 [v]). Nevertheless, De Los Rios has failed to demonstrate the annual percentage rate of interest (the “APR”) at consummation for the loan transaction exceeded the statutory threshold level (see 15 USC § 1602[aa][1][A]) or that “the total points and fees” he paid at or before closing exceeded 8 percent of the total loan amount (see 15 USC § 1602[aa][1][B]). On the other hand, the plaintiff has established that the APR and the point and fees did not exceed the threshold levels. Thus, the sixth affirmative defense and first counterclaim are dismissed.
The plaintiff has also established its entitlement to summary judgment dismissing the seventh affirmative defense and second counterclaim for fraudulent inducement. Critical to a fraud claim is that basic facts are alleged to establish the elements of the cause of action. CPLR 3016(b) requires that the circumstances constituting the alleged wrong be stated in detail (seeLanzi v Brooks, 54 AD2d 1057, 388 NYS2d 946 [1976],affd43 NY2d 778, 402 NYS2d 384 [1977]). Here, De Los Rios has failed to specifically plead the acts or conduct allegedly engaged in to support this defense. The allegation of an oral promise to never exercise the right to foreclose fails to meet the “threshold of believability” (Chemical Bank v Broadway 55-56th Street Associates, 220 AD2d 308, 309, 632 NYS2d 553 [1st Dept 1995]), and any such promise would have to be in writing as required by the mortgage and the statute of frauds (North Bright Capital, LLC v 705 Flatbush Realty, LLC, 66 AD3d 977, 889 NYS2d596 [2d Dept 2009]). Furthermore, “although it is well settled that an assignee of a mortgage takes it subject to the equities attending the original transaction (internal quotation marks and citation omitted), [the plaintiff] cannot be required to answer in damages for alleged misrepresentations committed by [Impac] in connection with the making of the [original] mortgage loan” (US Bank National Assn v McPhearson, 33 Misc 3d 1219[A], 2012 NY Slip Op 50742[U], 2012 WL 1521862 [Sup Ct Queens County]). The tenth affirmative defense and fifth counterclaim alleging breach of contract based upon the plaintiff’s failure to fulfill the oral promise made by its mortgage broker to refinance the loan are, thus, also dismissed.
The remaining affirmative defenses and counterclaims alleging overcharges, statutory damages, and negligence have been reviewed and deemed to be without merit.
[1] The cover page of the PSA before the court indicates that it an “Amended and Restated Pooling and Servicing Agreement Dated as of August 24, 2006.” However the portion of the PSA proffered by the plaintiff defines the Closing Date as April 25, 2006.
APPELLATE DIVISION : SECOND JUDICIAL DEPARTMENT MARK C. DILLON, J.P. JOHN M. LEVENTHAL CHERYL E. CHAMBERS ROBERT J. MILLER, JJ. 2012-00756 (Index No. 10439/08)
[*1]Washington Mutual Bank, respondent,
v
Oscar Holt III, appellant, et al., defendants.
Oscar Holt III, Westbury, N.Y., appellant pro se. Stagg, Terenzi, Confusione & Wabnik, LLP, Garden City, N.Y. (Jacqueline M. Della Chiesa and Owen A. Kloter of counsel), for respondent.
DECISION & ORDER
In an action to foreclose a mortgage, the defendant Oscar Holt III appeals from an order of the Supreme Court, Queens County (Cullen, J.), entered December 8, 2011, which, after a hearing to determine the validity of service of process, denied those branches of his motion which were pursuant to CPLR 5015(a), inter alia, to vacate a judgment of foreclosure and sale entered against him upon his failure to appear or answer, and pursuant to CPLR 3211(a)(8) to dismiss the complaint insofar as asserted against him for lack of personal jurisdiction.
ORDERED that the order is reversed, on the facts, with costs, and those branches of the motion of the defendant Oscar Holt III which were pursuant to CPLR 5015(a) to vacate the judgment of foreclosure and sale and pursuant to CPLR 3211(a)(8) to dismiss the complaint insofar as asserted against him for lack of personal jurisdiction are granted.
The plaintiff commenced this action against Oscar Holt III, among others, to foreclose a mortgage secured by a multiple dwelling (hereinafter the premises) owned by Holt and situated in Corona, Queens. To assure that those tenants who were in possession of residential units at the premises would be bound by any subsequent entry of a judgment of foreclosure against Holt (see Nationwide Assoc. v Brunne, 216 AD2d 547, 547), the plaintiff allegedly attempted to join those tenants as defendants in this action. The plaintiff’s process server testified at a hearing that he attempted to serve process upon several tenants residing in apartments at the premises. The process server further testified that he served copies of the summons and complaint upon Holt at Holt’s residence in Westbury by employing the “affix and mail” method (see CPLR 308[4]), after unsuccessfully attempting personal delivery and service pursuant to CPLR 308(2) on four prior dates.
This Court possesses authority to review a determination rendered after a hearing that is as broad as that of the hearing court, and may render the determination it finds warranted by the facts, taking into account that, in a close case, the hearing court had the advantage of seeing the witnesses (see Northern Westchester Professional Park Assoc. v Town of Bedford, 60 NY2d 492, 499; Lopez v DePietro, 82 AD3d 715, 716; American Home Mtge. v Villaflor, 80 AD3d 637).
Although, as a general matter, we do not lightly disturb findings that are based upon conflicting evidence and implicate the credibility of witnesses, the evidence adduced at the hearing [*2]warrants a reversal of the Supreme Court’s determination that process was properly effected upon Holt (see Matter of Chemical Bank v Davis, 133 AD2d 756; Aronauer v Ohl, 80 AD2d 592). Here, there was evidence that, of the five people whom the process server had allegedly contacted on various dates at the premises owned by Holt, one had moved out of the premises prior to the time in question, three had been earlier evicted, and one established through documentary evidence that he was physically in Atlanta, Georgia, on business when the process server claimed the witness was in Queens. Where a witness has given testimony that is demonstrably false, we may, in accordance with the maxim falsus in uno falsus in omnibus, choose to discredit or disbelieve other testimony given by that witness (see DiPalma v State of New York, 90 AD3d 1659, 1660; Accardi v City of New York, 121 AD2d 489, 490-491; see generally People v Becker, 215 NY 126, 144). Under the circumstances presented here, we conclude that the process server’s testimony with respect to the affix-and-mail service allegedly effected upon Holt in Westbury should not be credited or believed.
Viewing the evidence in its totality, the plaintiff failed to meet its burden of proving by a preponderance of the evidence that jurisdiction over Holt was obtained by proper service of process (see Bankers Trust Co. of Cal. v Tsoukas, 303 AD2d 343). Accordingly, the Supreme Court should have granted those branches of Holt’s motion which were pursuant to CPLR 5015(a) to vacate the judgment of foreclosure and sale entered against him and pursuant to CPLR 3211(a)(8) to dismiss the complaint insofar as asserted against him for lack of personal jurisdiction
The appellant’s remaining contentions have been rendered academic. DILLON, J.P., LEVENTHAL, CHAMBERS and MILLER, JJ., concur.
WASHINGTON, D.C. — Today, the Consumer Financial Protection Bureau (CFPB) initiated an administrative proceeding against PHH Corporation and its affiliates (PHH), alleging PHH harmed consumers through a mortgage insurance kickback scheme that started as early as 1995. The CFPB is seeking a civil fine, a permanent injunction to prevent future violations, and victim restitution.
The filing is against New Jersey-based PHH Corporation and its residential mortgage origination subsidiaries, PHH Mortgage Corporation and PHH Home Loans LLC, and PHH’s wholly-owned subsidiaries, Atrium Insurance Corporation and Atrium Reinsurance Corporation.
Mortgage insurance is typically required on loans when homeowners borrow more than 80 percent of the value of their home. It protects the lender against the risk of default. Generally, the lender, not the borrower, selects the mortgage insurer. The borrower pays the insurance premium every month in addition to the mortgage payment. While mortgage insurance can help borrowers get a loan when they cannot make a 20 percent down payment, it also adds to the cost of monthly payments for borrowers who have little equity in their homes.
Mortgage insurance can be harmful when illegal kickbacks inflate its cost. Increasing the burden on borrowers who already have little equity increases the risk that they will default on their mortgages. The Real Estate Settlements Procedures Act (RESPA) protects consumers by banning kickbacks that tend to unnecessarily increase the cost of mortgage settlement services. RESPA also helps promote a level playing field by ensuring companies compete for business on fair and transparent terms.
A CFPB investigation showed that when PHH originated mortgages, it referred consumers to mortgage insurers with which it partnered. In exchange for this referral, these insurers purchased “reinsurance” from PHH’s subsidiaries. Reinsurance is supposed to transfer risk to help mortgage insurers cover their own risk of unexpectedly high losses. According to today’s Notice of Charges, PHH took the reinsurance fees as kickbacks, in violation of RESPA. The CFPB alleges that because of PHH’s scheme, consumers ended up paying more in mortgage insurance premiums.
Enforcement Action Today’s Notice alleges that PHH used mortgage reinsurance arrangements to solicit and collect illegal kickback payments and unearned fees – through its affiliates Atrium Insurance Corporation and Atrium Reinsurance Corporation – in exchange for the referral of private mortgage insurance business. The Bureau believes that from the start of the arrangements, and continuing into at least 2009, PHH manipulated its allocation of mortgage insurance business to maximize kickback reinsurance payments for itself. PHH Corporation and its affiliates are specifically accused of:
Kickbacks: Over the approximately 15-year scheme, the CFPB alleges that PHH set up a system whereby it received as much as 40 percent of the premiums that consumers paid to mortgage insurers, collecting hundreds of millions of dollars in kickbacks;
Overcharging Loans: In some cases, PHH charged more money for loans to consumers who did not buy mortgage insurance from one of its kickback partners. In general, they charged these consumers additional percentage points on their loans; and
Creating Higher-Priced Insurance: PHH pressured mortgage insurers to “purchase” its reinsurance with the understanding or agreement that the insurers would then receive borrower referrals from PHH. PHH continued to steer business to its mortgage insurance partners even when it knew the prices its partners charged were higher than competitors’ prices.
A Notice of Charges initiates proceedings in an administrative forum, and is similar to a complaint filed in federal court. This case will be tried by an Administrative Law Judge from the Bureau’s Office of Administrative Adjudication, an independent adjudicatory office within the Bureau. The Administrative Law Judge will hold hearings and make a recommended decision regarding the charges, which may be appealed to the Director of the CFPB for a final decision.
The Bureau’s administrative proceedings are similar to the administrative proceedings of other federal regulators, including the Securities and Exchange Commission, the Federal Trade Commission, and prudential regulators like the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation.
The Office of Inspector General at the Department of Housing and Urban Development (HUD) initiated the investigation of PHH’s reinsurance practices, and in July 2011, HUD’s authority over the investigation transferred to the CFPB. Since then, HUD has given the Bureau valuable assistance in this matter.
This administrative proceeding follows the Bureau’s settlements in 2013 with five mortgage insurers who participated in similar schemes.
The Notice of Charges is not a finding or ruling that the defendants have actually violated the law. The Bureau’s Rules of Practice for Adjudication Proceedings provide that the CFPB may publish the actual Notice of Charges ten days after the company is served. If allowed by the hearing officer, the charges will be available on the CFPB website after Feb. 12, 2014.
###
The Consumer Financial Protection Bureau is a 21st century agency that helps consumer finance markets work by making rules more effective, by consistently and fairly enforcing those rules, and by empowering consumers to take more control over their economic lives. For more information, visit consumerfinance.gov.
The thing is, if the banks had acted honorably in regard to actually modifying people, whether it be HAMP, HARP or “in house” rather than incentivizing foreclosures and short sales with Bed Bath & Beyond gift cards, we would have all been helped, a bit more satisfied, had less motive and drive to delve into the bottomless fraud and gotten on with our lives.
Delving deeper into the catastrophic calamity that is the Homeowner Hunger Games, may never have even occurred to us had we been properly settled with regard to the programs set in place to “help” homeowners in these unprecedentedtimes. The economy would be flowing, our bills wouldn’t be so burdensome, we’d be better equipped to handle some of these losses – like jobs, healthcare, bankster bailouts, hope for our futures and faith in our justice system.
There’s obviously more going on here than just greed and gluttony. Besides the “dark money” in banking and politics, the Wall Street roulette, the secret government behind the dysfunctional bad theatrics by which we’re held hostage andthe lack of accountability, let alone justice.
Hypothetical idea; If the banks had modified the mortgages from, say 2000 or 2001 to 2% fixed for 30 years or however long each loan had remaining – just modified across the board at 2% for the remaining terms of the loans, cut someprincipal, etc… we would have all gotten on with our lives, some of us even willing to accept the fraud, just to not be dealing with this for so many years and so many horrific revelations. But the banks not only set this up, took down the middle class and the entire world economy, rigged it to happen along with Libor, playing Bernie Madoff reindeer games with our investments, homes, retirement funds and lives. They continue to get away with the abuse, the fees, the insurance, fraud, collusion, massive amounts of foreclosures, short sales, etc…..It’s perverse and disgusting. It’s being done to us on every level in broad daylight while simultaneously doubling the sociopathic CEO paychecks and bonuses. http://www.dailyfinance.com/2012/07/11/the-libor-scandal-explained-in-one-simple-infographic/
At this point, would we all rather be unemployed in Iceland? Seriously.
Thousands of homeowners in my social media groups and networks share thesame exact patterns of abuse, the same delays and perpetual attempts to get help to no avail regardless of the servicing bank, be it Wells Fargo, Bank ofAmerica, Ocwen, Nationstar, Chase etc….. The same exact patterns of abuse, obstacles, bogus excuses, total disconnects.
“What we have here is a failure to communicate”, (to quote Cool Hand Luke). What we need is a new conversation. A conversation that would make it impossiblefor miscommunication. We need clear decisive actions and ideas to clearly communicate what we need from these banks and our political officials.
We need clear and simple time frames of dealing with the robot banks. We need rate and principle reductions. We need simple packets of forms, easy to understand, easy to calculate andsimple to return within a quick turnaround. We need designated departments that are educated and informed on giving us clear concise legitimate answers within 30 days or less. We need clear reform and servicing standards that are accountable and punishableby the law, the fees, the courts significant penalties. We need to have one on one accountability based on the above, and consequences to these banks that they will feel when they don’t comply. We need banking to go back to what it was by restoring The Glass Steagall Act: http://legal-dictionary.thefreedictionary.com/Glass-Steagall+Act
We need criminal bankers to go to jail. We need to press our local and national media affiliates, online sources, and socialmedia to be bombarded by the ongoing abuses being dealt to homeownersby these bully banks. We need to show up for each other and be heard. We need accountability to modify our standing, our contracts, our humanity. How do you modify fraud? You delegate, regulate and retaliate. You negotiate and you compensate. Often you need to litigate.
Join the conversation. Stand up. Let’s modify these banking crimes before theyobliterate what little we have left. Now is the time for a new conversation. We have nothing to lose, (one more quote from Cool Hand Luke),“Some times nothin? can be a real cool hand.”
Lainey Hashorva is a Social Media Activist, Advocate for homeowners fighting foreclosure, Investigative Journalist, Artist and Solopreneur of The Magic Bean Company since 1994. Her line of handcrafted one of a kind items and vintage collectibles can be found via Etsy.com – Laineybean. https://www.etsy.com/shop/Laineybean?ref=si_shop
Something is very wrong with this picture…very wrong. Other CEO’s would have been ousted.
It pays to be VERY close to the gov!
Bloomberg-
JPMorgan Chase & Co. (JPM) Chief Executive Officer Jamie Dimon, who got a 74 percent raise for his work in 2013, stands to reap a separate and bigger payday within months.
The bank’s board of directors, having delayed a decision for more than a year, has yet to say whether Dimon, 57, can collect 2 million stock options originally granted in 2008 and now worth about $34 million. Last week, the board increased his annual pay to $20 million from $11.5 million a year ago, when he was penalized for faulty oversight of botched derivatives bets.
After Dimon’s incentive package was created six years ago, JPMorgan grew to become the nation’s largest bank with shares outperforming the industry, and then snapped a three-year run of record profits as costs from government probes surged. The board’s decision to boost Dimon’s annual pay despite mounting legal settlements shows he probably will get the full options award, said Alan Johnson, founder of compensation-consulting firm Johnson Associates Inc.
NOT FOR PUBLICATION UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT
STEPHANIE TASHIRO-TOWNLEY; SCOTT C. TOWNLEY, Plaintiffs – Appellants,
v.
BANK OF NEW YORK MELLON, as Trustee for the Certificateholders CWL, Inc. Asset Backed Certificates, Series 2005-10, FKA Bank of New York; et al., Defendants – Appellees.
EXCERPT:
However, Washington law provides an exception to the waiver doctrine for claims for damages alleging violations of the Washington Consumer Protection Act (“CPA”). See Wash. Rev. Code § 61.24.127(1)(b). After the district court dismissed plaintiffs’ CPA claim, the Washington Supreme Court decided Bain v. Metropolitan Mortgage Group, Inc., 285 P.3d 34, 51 (Wash. 2012), which held that a plaintiff may meet the public interest element of a CPA claim by alleging that Mortgage Electronic Registration System Inc. was unfairly or deceptively characterized as the beneficiary of a deed of trust. See id. at 49 (elements of a CPA claim). Because the district court did not have the benefit of Bain when it issued its order of dismissal, we remand to allow the court to reconsider plaintiffs’ CPA claim.
Before the Court are the parties’ cross motions for partial summary judgment. (Dkt. Nos. 38 & 41.) The dispute centers on whether the notice of rescission given by the defendant lender to the plaintiff borrowers was “clear and conspicuous” as required by 12 C.F.R. § 226.23(b)(1). Under the circumstances, the Court finds the reference in the notice of rescission to “3 business days” was not clear and conspicuous. Accordingly, summary judgment on plaintiffs’ fourth cause of action is proper.
BACKGROUND The Simmonses closed on a home mortgage loan for $328,606, on Wednesday, April 2, 2008. During the closing plaintiffs were given standard form 38-43 which informed them that, among other things, they had “3 business days” from the latest of 3 events in which to rescind the transaction, as follows:
You are entering into a financial transaction that will result in a mortgage/deed of trust/lien on your home. You have a legal right under federal law to cancel this transaction, without cost, within three business days from whichever of the following events occurs last: (1) the date of the transaction, which is April 1 2008 or; (2) the date you received your Truth in Lending disclosures; or (3) the date you received this notice of your right to cancel.
(Dkt. No. 47, Defs.’ Mem. In Opp’n at 6.)
It is undisputed that the applicable date from which the “3 business days” period began was the date of closing, that is, Wednesday, April 2, 2008. Accordingly, because the closing was on a Wednesday, the final date to rescind would either be Saturday, April 5, 2008, if Saturday was considered a “business day,” or Monday, April 7, 2008, if Saturday was not counted as a business day.
According to Mr. Simmons, he was unhappy with the interest rate, and therefore attempted to rescind the loan transaction by going to the bank on Monday, April 7, 2008. His effort was rejected by the bank on the ground that the final date for rescission had been the previous Saturday.
Mr. Simmons claims he didn’t think or know that Saturday qualified as a business day. As it turns out, Mr. Simmons was wrong, at least according to Regulation Z, 12 C.F.R. § 226.1 et seq., which specifically includes Saturdays as business days, as follows:
Business day means a day on which the creditor’s offices are open to the public for carrying on substantially all of its business functions. However, for purposes of rescission under §§ 226.15 and 226.23, and for purposes of §§ 226.19(a)(1)(ii), 226.19(a)(2), 226.31, and 226.46(d)(4), the term means all calendar days except Sundays and the legal public holidays specified in 5 U.S.C. 6103(a), such as New Year’s Day, the Birth of Martin Luther King, Jr., Washington’s Birthday, Memorial Day, Independence Day, Labor Day, Columbus Day, Veterans Day, Thanksgiving Day and Christmas Day. 12 C.F.R. § 226.2(a)(6).
THE LAW The Truth in Lending Act, 15 U.S.C. § 1601, et seq., requires the borrower to be “clearly and conspicuously” informed of the date the rescission period expires. The pertinent regulation, 12 C.F.R. § 226.23(b)(1), reads:
(b)(1) Notice of right to rescind. In a transaction subject to rescission, a creditor shall deliver two copies of the notice of the right to rescind to each consumer entitled to rescind (one copy to each if the notice is delivered in electronic form in accordance with the consumer consent and other applicable provisions of the ESign Act). The notice shall be on a separate document that identifies the transaction and shall clearly and conspicuously disclose the following: . . .
(v) The date the rescission period ends. Id. (emphasis added).
The principal issue presented by the parties’ motions is whether this legal standard requiring the notice to “clearly and conspicuously disclose” the “date the rescission period expires” was complied with under the facts of this case. The plaintiffs assert the standard has not been met because the notice they received “is subject to more than one sensible reading.” They cite several cases in support, including: Williamson 414 v. Lafferty, 698 F.2d 767, 768-69 (5th Cir. 1983); Barnes v. Chase Home Finance, LLC, 825 F. Supp. 2d 1057, 1067 (D. Or. 2011); Aubin v. Residential Funding Co., LLC, 565 F. Supp. 2d 392 (D. Conn. 2008); New Maine National Bank v. Gendron, 780 F. Supp. 52, 55 (D. Me. 1991); Mayfield v. Vanguard S&L Ass’n, 710 F. Supp. 143, 146 (E.D. Pa. 1989); and Aquino v. Public Finance Consumer Discount Co., 606 F. Supp. 504, 507 (E.D. Pa. 1985).
The plaintiffs also cite the United States Court of Appeals for the Tenth Circuit’s pronouncement that TILA is to be read liberally in favor of consumers. Rosenfield v. HSBC Bank, 681 F.3d 1172, 1179 (10th Cir. 2012) (“As a remedial statute, TILA must be construed liberally in favor of the consumer.”)
The defendants claim the notice was clear and conspicuous and in any event they cannot be held liable because they used an official form which gives them a presumption of compliance. See 15 U.S.C. § 1635(h). They cite in support an unpublished case from the United States Court of Appeals for the Fifth Circuit, Kelly v. Performance Credit Corp., 2009 WL 3308030 (D. Mass. April 14, 2009).
ANALYSIS The Court agrees with plaintiffs’ position. The Court finds the case of Aubin v. Residential Funding Company, LLC, 565 F. Supp. 2d 392 (D. Conn. 2008), to be especially apt, with facts and legal questions virtually identical in most respects to the instant case. Both cases involved Wednesday closings, and in both cases the lender employed Model Form H-8 to inform the borrower of the deadline for rescinding. The court in Aubin found the rescission notice to be less than “clear and conspicuous” and rejected the defendant’s argument that it should be shielded from liability because it used rescission Model Form H-8, explaining its reasoning as follows:
[W]hile the Rescission Notice refers to “business day,” it never defines “business day” or tells the consumer when to begin counting business days or how to count them. Indeed, it would likely surprise the average person (it certainly surprised this judge) to learn that “Saturday” is included within TILA’s definition of a “business day.” . . . . It seems apparent to this Court that the average consumer would believe that “business days” are confined to “Monday through Friday.” See Wikipedia, http://en.wikipedia.org/wiki/Business_day (“In the Western world, Saturdays and Sundays are not counted as business/working days.”); see also Black’s Law Dictionary 402 (7th ed. 1999) (defining “business day” as “A day that most institutions are open for business. A day on which banks and major stock exchanges are open, excluding Saturdays and Sundays.”) That would not necessarily be fatal to Defendants’ defense of the Rescission Notice except for the fact that in this particular case the third business day was in fact a Saturday. The Aubins singed the Rescission Notice on March 1, 2006, a Wednesday, which meant that if they stared counting on the next day (as TILA requires) their rescission period expired three business days later, on March 4, 2006, a Saturday.
However, the Court believes that the average consumer calculating three business days following the closing would have arrived at an expiration date of March 6, 2006, a Monday, not March 4, a Saturday. At a bare minimum, it is certainly not clear to the average consumer when precisely three business days following the closing expired. Accordingly, the Rescission Notice did not “clearly and conspicuously” disclose [to the Aubins] the date the rescission period expire[d].” 12 C.F.R. § 226.23(b)(1)(v). Cf. Handy, 464 F.3d at 764 (“Where more than one reading of a rescission form is ‘plausible,’ the form does not provide the borrower ‘with a clear notice of what her right to rescind entails’” (quoting In re Porter, 961 F.2d at 1077 (alteration mark omitted))); Williams v. Empire Funding Corp., 109 F. Supp.2d 352, 358-61 (E.D. Pa. 2000). These same factors compel the Court to conclude that even if, as Defendants argue, a presumption of TILA compliance was created by their use of the H-8 – Rescission Model Form, the Aubins have successfully overcome that presumption on the particular facts of this case. Id.
The notice given to the Simmonses was subject to more than one sensible reading. At the very least, ascertaining the precise meaning of “business day” would require further inquiry. Under these circumstances, the language cannot qualify as clear and conspicuous. There can be no question that any person, no matter how sophisticated, after reading the notice would need to do something to ascertain whether Saturday does or does not qualify as a “business day.” This inquiry could involve an effort to know whether the lender was open for business on Saturdays (although this would not definitively end the inquiry) and also whether Saturdays are “business days” within the meaning of the law. But regardless what steps would need be taken to understand what the notice means, it is clear something must be done to get a “clear” understanding of when the rescission deadline expires. The mere fact that something must be done is sufficient to disqualify the notice from being “clear and conspicuous.”
CONCLUSION
Plaintiffs’ motion for partial summary judgment is granted as to cause of action number 4, finding that plaintiffs are entitled to a three-year rescission period. Whether the plaintiffs have otherwise met their rescission obligations cannot be determined on summary judgment on the present state of the record. The parties are invited to further address this issue with supplemental briefing.
DATED this 3rd day of January, 2014. _________________________________ Dee Benson United States District Judge
More than 1,000 Florida borrowers will share in a $831,110 class action award for being billed unlawful foreclosure-related fees by the Law Offices of David J. Stern.
The judgment, which is believed to be the first successful class action lawsuit against the former foreclosure titan, was finalized last week by Palm Beach County Circuit Judge Lucy Chernow Brown.
Loxahatchee homeowner Rory Hewitt represented the class.
I guess Sheila Bair’s proposed lifetime ban on regulators working for regulatees’ industry doesn’t apply to her.
But don’t judge too quickly as we need those who can make excellent watchdog unlike others who are in it for the money!
NYTimes-
Sheila C. Bair, a former head of the Federal Deposit Insurance Corporation who once argued that former regulators should be barred from joining the banks they oversaw, is joining the board of Banco Santander, the Spanish bank said on Monday.
Ms. Bair, who ran the F.D.I.C. during the turmoil of the financial crisis, has been appointed a director of Santander, subject to ratification by shareholders, the bank said. She will fill a vacancy left by Terence Burns, a former British official who served for more than a decade on the board.
Though Santander is based in Madrid, it has extensive operations in the United States, with $50 billion in deposits and 705 branches. That division is supervised by the F.D.I.C. in a back-up capacity. The company also owns a bank in Puerto Rico that is regulated by the F.D.I.C. and local authorities.
They don’t give a shit because no one is going to go to jail. Simply pay whatever fine and move onto the next scam. I think we’ve learned by now it’s all about the revolving door for regulators not doing their job and allowing fraud to continue.
Reuters-
The U.S. Department of Justice and the Commodity Futures Trading Commission have both held investigations into whether Bank of America (BAC.N) engaged in improper trading by doing its own futures trades ahead of executing large orders for clients, according to a regulatory filing.
The June 2013 disclosure, which Reuters recently reviewed on a website run by the securities industry regulator FINRA, sheds light on the basis for a warning by the Federal Bureau of Investigation on January 8.
The warning, in the form of an intelligence bulletin to regulators and security officers at financial services firms, said that the FBI suspected swaps traders at an unnamed U.S. bank and an unnamed Canadian bank may have been involved in market manipulation and front running of orders from U.S. government-owned mortgage giants Fannie Mae (FNMA.OB) and Freddie Mac (FMCC.OB).
What a coincidence on how the foreclosure fraud crisis was handled by the following states… this is pretty dead on! Although IOWA should have been next to Florida since they lead the 50 states AG settlement.
WaPO-
Former Virginia Gov. Bob McDonnell’s indictment on charges that he accepted illegal gifts, vacations and loans from a major campaign contributor who sought special treatment is so shocking, in part, because McDonnell is the first governor in the history of the Commonwealth to face criminal charges. Unlike plenty of other states, Virginia doesn’t have a long history of scandals and ethics abuses.
Which states are more used to corruption? Well, depending on how you define corruption, it could be Florida, or Louisiana, or Tennessee, or New York, or Georgia. And then there’s the District of Columbia.
Maybe we’ll get to see him playing some dodge-ball action in his kitchen for this accomplishment?
AP-
JPMorgan Chase almost doubled Chairman and CEO Jamie Dimon’s pay for 2013, rewarding the executive for settling probes against the bank.
Dimon will receive total compensation of $20 million in 2013, consisting of $18.5 million in stock options and a base salary of $1.5 million, the bank said in a statement Friday.
That compares with total compensation of $11.5 million a year earlier, down from $23 million in each of the previous two years.
Always great to see my site linked in a story about cartels 🙂
Reuters-
The great 19th century English jurist, Sir James Fitzjames Stephens, once wrote that murderers were hung not for reasons of revenge or deterrence — but to underscore what a serious breach of the social compact had been committed.
Federal District Judge Jed S. Rakoff was making a similar point when he recently called attention to the lack of criminal prosecutions in the wake of the 2008 financial crisis. Consider the 1980s Savings and Loan crisis. The losses were minuscule compared to this recent paroxysm, but they still led to hundreds of criminal convictions.
That looks highly unlikely here. The federal statute of limitations for fraud, generally five years, is rapidly running down. There are reportedly a few cases in process. But the odds are that if there are any indictments, they will be in the pattern of the indictment of Goldman Sachs banker Fabrice Tourre, who has been left holding the bag for a complex scheme to load up clients with worthless securities. Email trails leave little doubt that far more senior figures were aware of the purpose of the deal. The firm also executed other similar deals that haven’t been prosecuted.
US Bank National Association, AS TRUSTEE FOR CERTIFICATE HOLDERS OF BANC OF AMERICA FUNDING CORPORATION 2009-FT1 TRUST, MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 2009-FT1, Plaintiff,
against
Neil R. Gioia, LAUREN N. GIOIA, BANK OF AMERICA, N.A., DISCOVER BANK, and “JOHN DOE No.1” to “JOHN DOE No.10,” the last 10 names being fictitious and unknown to plaintiff, the persons or parties intended being the persons or parties, if any, having or claiming an interest in or lien upon the mortgaged premises described in the verified complaint, Defendants.
25441/2011
Robert J. McDonald, J.
The following papers numbered 1 to 9 were read on this motion by plaintiff, US BANK NATIONAL ASSOCIATION, for an order pursuant to CPLR 3217(b) and 6514(d) discontinuing the instant action without prejudice and canceling the lis pendens; and the cross-motion of defendants NEIL R. GIOIA and LAUREN N. GIOIA for an order compelling the plaintiff to toll the interest accruing on the loan since the commencement of the action and enjoining the plaintiff from collecting attorney’s fees incurred after the commencement of the action:
Papers[*2]Numbered
Notice of Motion-Affirmation-Affidavits-Exhibits ….1 – 3
Cross-Motion-Affirmation in Opposition-Affidavits-Exhibits………………………………………4 – 7
Affirmation in Opposition to Cross-Motion/Reply……8 – 9
Upon the foregoing papers it is ordered that this motion is determined as follows:
This is a motion made by plaintiff, US BANK NATIONAL ASSOCIATION, seeking to discontinue the mortgage foreclosure action for the property located at 39-26 50th Street, Woodside, New York. The property consists of a two-family house in which defendants, NEIL R. GIOIA and LAUREN N. GIOIA, a father and daughter, reside with their spouses in separate residences.
Based upon the record before this court, on July 11, 2003, the defendants, NEIL R. GIOIA and LAUREN N. GIOIA, entered into a note and mortgage in favor of Fleet National Bank to secure payment of the principal sum of $250,000. The note and mortgage were subsequently assigned to the plaintiff. The defendants are alleged to have defaulted in payment of the mortgage commencing on September 17, 2010 at which time the plaintiff accelerated the mortgage and elected to have the entire principal sum and all amounts still owing under the Note be due and payable in full immediately.
Plaintiff subsequently brought an action to foreclose its mortgage by filing a summons, complaint and lis pendens on November 9, 2011. Issue was joined by service of defendants’ timely answer dated November 21, 2011.
Plaintiff now moves for an order discontinuing the action without prejudice and canceling the lis pendens filed against the premises. In support of the motion counsel states that it is in the best interests of all parties and in the interests of judicial economy to discontinue the action without prejudice.
Defendants oppose the motion to discontinue and cross-move for an order compelling plaintiff to toll the interest accruing on the loan as of the commencement of the action and not permitting additional interest to accrue on the loan until plaintiff completes an accurate review of defendants’ eligibility for a permanent loan modification and for an order enjoining plaintiff from collecting attorney’s fees incurred after the commencement of the action.
In support of the cross-motion, defendants’ counsel, Aisha [*3]A. Baruni, Esq., states that the instant action was commenced by plaintiffs in November 2011. The defendants filed a timely answer. Subsequently the plaintiff did not take any action to prosecute the case and did not file an RJI which would have triggered the scheduling of a settlement conference pursuant to CPLR 3408 and did not file an affirmation pursuant to AO 431/11 affirming that a representative of the Bank confirmed the factual allegations of the pleadings. As a result of the plaintiff taking no action to prosecute the action, the case remained on the “shadow docket” of this Court until a conference was ordered by the court. On April 15, 2013, the defendants attended a conference at which time the matter was referred for a settlement conference in the Residential Foreclosure Settlement Part for June 28, 2013. According to the affirmation of defendants’ counsel, the Bank informed the defendants at the conference that they intended to discontinue the action and sought a stipulation of discontinuance. However, the defendants requested that the plaintiff not discontinue the action because the defendants wanted to participate in settlement negotiations in the Settlement Conference Part and sought a response to their outstanding application for a loan modification. Counsel states that she informed the plaintiff’s attorney that the Gioias had a pending loan modification application, however, plaintiff’s counsel did not know the status. The Court Referee ordered the plaintiff to make a determination as to loan modification by August 5, 2013. On July 1, 2013 the defendants filed an RJI and requested a further settlement conference. A settlement conference was then scheduled for September 23, 2013.
When no response from plaintiff was forthcoming, counsel Baruni submitted an updated loan modification application on August 6, 2013. On September 23, 2013 the Referee set another deadline of October 15, 2013 for plaintiff to make a decision on defendant’s application and set a new conference date for January 15, 2014. However, the plaintiff did not respond to the loan modification application and instead, by motion dated August 8, 2013, the plaintiff moved to discontinue the instant action.
In opposition to the motion, defendant Neil R. Gioia submits an affidavit stating that defendants have still not received a response to their request for a loan modification. Mr. Gioia states that he objects to the plaintiff discontinuing the action until such time as they have gotten a response to their application and have had a chance to negotiate a loan modification in the Court supervised Settlement Conference Part. He states that if the action is discontinued he will have to wait for the plaintiff to commence a new action before he will have the opportunity to attempt to settle the matter in court. [*4]Defendant also objects to the discontinuance stating that as the arrears on the mortgage continue to accrue, the amount of interest and other costs is also increasing such that their chances of obtaining a loan modification will be decreased due to the greater amount owed to the bank and the concomitant reduction in equity of the home.
Defendants’ counsel argues in opposition to the motion that to permit the plaintiff to discontinue the action at this time would prejudice the defendants and deprive them of the benefit of the Residential Foreclosure Settlement Conference Part and thereby subvert the purpose of CPLR 3408 which is to attempt a reasonable settlement and avoid a homeowner from losing their home. CPLR 3408(f) requires both sides to “negotiate in good faith to reach a mutually agreeable resolution, including a loan modification if possible.” It is argued that moving to discontinue while the case is still in the Residential Mortgage Settlement Part also violates the intent of the statute whose goal is the preservation of the mortgagees home through early resolution of the foreclosure case (citing GMAC Mtge., LLC v Bisceglie, 2013 NY Slip Op 5878 [2d Dept. 2013]; Matter of Sheena B. v Rory F., 83 AD3d 1056 [2d Dept. 2011]).
Counsel also contends that discontinuance of the case will additionally prejudice the defendants as every month of delay causes additional interest to accrue increasing the overall balance owed and making it more difficult to resolve the action through loan modification and will decrease the dedendant’ equity should they have to ultimately sell the home to satisfy the mortgage debt. Therefore, counsel requests that the court utilize its equitable powers to toll the accrual of interest on the note until plaintiff reviews the defendants for a permanent loan modification based upon their over two year delay in negotiating with the defendants in good faith in violation of CPLR 3408.
In reply, the plaintiff’s counsel Mark Russell, Esq., states that defendants have failed to make mortgage payments on their loan since September 17, 2010 and pursuant to the mortgage contract, interest would have accrued on the action whether an action to foreclose was brought or not. Counsel indicates that at the foreclosure conference held on September 23, 2013, the plaintiff indicated that the defendants’ modification application was under review and that a decision would be forthcoming. Counsel also argues that the fact that the plaintiff wishes to discontinue the action for procedural reasons does not mean that the modification review will be terminated prematurely. Counsel claims that the plaintiff is prepared to participate in discussions with the defendant regarding a modification of the defendants’ obligation even after the matter is discontinued. [*5]
Upon review and consideration of the plaintiff’s motion for a discontinuance of the action, the defendant’s cross-motion and affirmation in opposition and the plaintiff’s reply thereto, this court finds that the motion for an order permitting the plaintiffs leave to discontinue the action is denied.
This court agrees with the defendants that they will be prejudiced should the plaintiff be permitted to discontinue the action while it is still pending in the foreclosure settlement part where the defendants have been attempting to negotiate in good faith. The purpose of CPLR 3408 is to help homeowners avoid foreclosure through loan modifications early in the process. Here, however, the plaintiff failed to file an RJI and did not enter into settlement negotiations until called in by the court a year and a half after the action was commenced. The Referee has given the plaintiffs several deadlines for completing the negotiations which have not been adhered to by the plaintiff. At the present time the case is still pending in the foreclosure settlement part with a new date of January 15, 2014. Because the interest has been accruing against the defendants while this action has been pending, this court finds that the defendants will be prejudiced if plaintiff is permitted to discontinue the action at this time. The Bank has failed to provide a reason for discontinuance other than stating it would be in the interests of all parties.
The courts have held that “a motion for leave to discontinue an action without prejudice should be granted unless there are reasons which would justify its denial (see GMAC Mtge., LLC v Bisceglie, 2013 NY Slip Op 5878 [2d Dept. 2013]; Wells Fargo Bank v Fisch, 103 AD3d 622 [2d Dept. 2013][the general rule is that plaintiff should be permitted to discontinue the action without prejudice, unless defendant would be prejudiced thereby]; Matter of Sheena B. v Rory F., 83 AD3d 1056 [2d Dept. 2011][ordinarily a party cannot be compelled to litigate and, absent special circumstances, discontinuance should be granted. Particular prejudice or other improper consequences flowing from discontinuance may however make denial of discontinuance permissible]; Kane v Kane, 163 AD2d 568 [2d Dept. 1990] [neither CPLR 104 nor CPLR 3217 (b) supports the grant of a discontinuance by the court if unfair prejudice results to the adversary]; St. James Plaza v Notey, 166 AD2d 439 [2d Dept. 1990][if the party opposing the motion can demonstrate prejudice if the discontinuance is granted, discontinuance must be denied]).
This court find that the defendants are entitled to a conclusion of the settlement negotiations before this action is discontinued. CPLR 3408 requires both the plaintiff and defendant to negotiate in good faith to reach a mutually agreeable [*6]resolution, including a loan modification, if possible. Here, the plaintiff commenced the action but did not file an RJI, did not commence the settlement process and still has not made any offer to the plaintiff for a loan modification or provided a reason why they did diligently prosecute the case for the past two years. Further, the plaintiff has not provided a reason for failing to respond to the defendants’ applications for a loan modification. The defendants have submitted multiple loan applications which have not been reviewed by the plaintiff in a timely manner despite deadlines being placed by the Referee.
It was not until the defendants themselves filed an RJI that a settlement conference was scheduled and at that point, rather than negotiate with the defendants, the Bank served the instant motion to discontinue the foreclosure action. Under the circumstances of this case, this Court finds that in moving to discontinue at the same time the Gioias are trying to apply for a loan modification and before the settlement conference process has been completed the plaintiff has violated the good faith negotiation requirement set forth in CPLR 3408. This court finds that it would be inequitable to permit the plaintiff to discontinue the action prior to the conclusion of the settlement process. The plaintiff’s failure to timely prosecute the action after filing the summons and complaint placed the defendants in a situation where they had no means to negotiate under the auspices of the Court Attorney-Referee while interest and fees on the mortgage continued to accrue damaging the defendants’ ability to obtain a loan modification. Although the defendants can still negotiate with the Bank after the action is discontinued, applying for a loan modification outside of the court supervised settlement process is not a substitute for the mandatory settlement conference process set forth in CPLR 3408 which, as stated above, creates an affirmative obligation for both parties to negotiate in good faith and provides court oversight to enforce this mandate. Should the action be discontinued and then refiled by the Bank, the parties would be back in the settlement part where the parties would be required to start over again and the defendants would have accrued additional interest increasing their debt and making settlement harder to achieve.
Therefore, the defendants’ cross-motion for an order tolling the accrual of interest is granted nunc pro tunc commencing from the time of the commencement of the action until such time that a determination made by the Referee either settling the case or releasing it from the settlement part (see CPLR 5001 [a]; Norwest Bank Minn., NA v E.M.V. Realty Corp., 94 AD3d 835[2d Dept. 2012] [where action is equitable in nature, the recovery of interest is within the court’s discretion]; Deutsche Bank Trust [*7]Co., Ams. v Stathakis, 90 AD3d 983 [2d Dept. 2011]). The Courts have held that he exercise of discretion will be governed by the particular facts in each case, including any wrongful conduct by either party (see Danielowich v PBL Dev., 292 AD2d 414 [2d Dept. 2002]).
Here, this court finds it would not be fair to charge the defendants interest and penalties during the period of the Bank’s unreasonable and unexcused delay (see Dayan v York, 51 AD3d 964 [2d Dept. 2004]; U.S. Bank, N.A. v Shinaba, 40 Misc 3d 1239(A)[Sup. Ct. Bronx Co. 2013]; BAC Home Loans Servicing v Westervelt, 29 Misc 3d 1224[A] [Sup Ct. Dutchess Co. 2000]).
Accordingly, for all of the above-stated reasons, it is hereby,
ORDERED, that the plaintiff’s motion for an order granting plaintiff leave to discontinue the action is denied without prejudice to renew following a final determination by the Referee, and it is further,
ORDERED, that the defendants’ cross-motion for an order compelling the plaintiff to toll the interest from accruing on the defendants’ loan from the date of commencement of the action and not permitting additional interest to accrue on the loan pending the final determination of the Referee is granted.
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