Archive | May, 2014

Homeowners Super PAC — For release Sunday 6/1/14 on The Foreclosure Hour

Homeowners Super PAC — For release Sunday 6/1/14 on The Foreclosure Hour

Don’t miss this Sunday’s Foreclosure Hour, featuring former Hawaii Governor John Waihee.

John and Gary Dubin are launching the HOMEOWNERS SUPER PAC on Sunday Jun 1, 2014 — a national political action committee providing financial muscle for what heretofore has been a sleeping giant.

This is the final solution, giving homeowners for the first time a seat at the nationwide decision making table.

Forget the overwhelmingly unfriendly federal and state courts and the phony federal and state agencies.

That has largely been a colossal and deceptive waste of time and energies.

HOMEOWNERS SUPER PAC is instead going after major state reform legislation, organizing homeowners State by State with financial power, the only language the system understands or will every understand.

There are 5 major so-called banks and approximately 100 million of us homeowners.

The numbers speak for themselves.

John Waihee, with his extensive legislative, executive, and fund-raising leadership experience, has agreed to head the Homeowners Super PAC. (click here for his background)

Starting this Sunday, This SUPER PAC will begin its effort to organize in every State.

The Super PAC will be promoting a unique Homeowners Bill of Rights and Wrongs that has been previewed on Gary Dubin’s The Foreclosure Hour radio show:

1. a new simplified and flexible, mandatory, five-page maximum, borrower-friendly form of mortgage, abolishing foreclosures in favor of conversion options protecting possession and equity;

2. A new mandatory state recording system, requiring proof of ownership of mortgage loans, or otherwise their escheat to the state to do with them as the people of each state decide;

3. The mandatory recording of copies of all promissory notes to end the rampant fraud in the present system and the threat to valid titles, and all of the usual phony chain of title disputes; and

4. The formation of a specialized mortgage court in each recorder’s jurisdiction staffed by knowledgeable judges to decide mortgage loan challenges.
And much more.

So tune in this Sunday June 1, 2014 (Click below for more information & the time in your area)

Contact information:
Homeowners Super PAC
Suite 3100
55 Merchant Street
Honolulu, Hawaii 96813
Office: 808-585-8880
Fax:  808-585-8881
Reserved — under construction:

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Breaking News: Newark, NJ Approves Use of Eminent Domain to Fight Foreclosures – The First Domino Falls

Breaking News: Newark, NJ Approves Use of Eminent Domain to Fight Foreclosures – The First Domino Falls

Cross Posted Via Mandelman Matters

Newark, New Jersey has become the first city in the country to officially approve a controversial plan that uses eminent domain to fight foreclosures and neighborhood blight.

Newark’s new mayor, Ras Baraka, introduced the resolution and the Newark Municipal Council, which passed it unanimously, according to a press release issued today by New Jersey Communities United (, which describes itself as a progressive grassroots community organization committed to building power for low and moderate income people, predominantly in Newark.

According to the release…

“Newark Council Unanimously Approves Resolution Supporting Local Principal Reduction Program for Families Facing Foreclosure?Mayor-Elect Ras Baraka Leading Fight Against Foreclosure Crisis in Newark”

The program would allow homeowners trapped in certain type of mortgage, known as a Private Label Security or PLS Loans, to voluntarily participate in a program where the City purchases these mortgages from investors and repackages them at terms homeowners can afford. For most of the estimated 1,200 homeowners with these types of loans in Newark, the policy would save them from losing their homes to foreclosure.
Mayor-Elect Ras Baraka…

“Newark families have been absolutely devastated by the foreclosure crisis. Unless we take decisive action now, the situation will only get worse. As Mayor of Newark, I will aggressively move forward to implement the resolution passed by the Council. It will send a clear message that we will no longer accept the predatory lending and questionable foreclosure practices by banks. More importantly this policy will keep families in their homes and begin to reverse the blight created by vacant and abandoned houses that have already been lost to bank foreclosures.”
Trina Scordo, executive director of NJ Communities United, said…

“Newark voters elected the right candidate to lead the City in a new direction. Mayor Baraka’s vision for a better Newark begins with putting the people’s needs above the interests of Wall Street. His leadership on this issue and his ability to work with Council leaders to move innovative policies like this bode well for the future of Newark.”

The release also points out that according to a recent report published by the Haas Institute at the University of California, Berkeley titled: “Underwater America: How the So-Called Housing Recovery is Bypassing Many Communities,” New Jersey is at or near the top of the list of states hardest hit by the foreclosure crisis.

The study found that New Jersey cities, Newark, Elizabeth and Paterson are ranked second, third and fourth in the country for the percentage of homes with “underwater mortgages,” the term used when homeowners owe more than the value of their properties.

Underwater mortgages lead to foreclosure because when homeowners are hit with a life event, such as divorce, illness, injury or job loss, they can’t sell their homes or borrow against them to get through the rough patch. If that happens and the bank won’t modify, it’s a foreclosure. New Jersey’s high percentage of underwater mortgages means, “there are thousands of homes at the brink of foreclosure,” the release explains.

Lenders and servicers have resisted approving principal reductions as a preventive measure or in any broad based way, the argument being that as long as borrowers are making their payments there’s no need to provide any assistance. As I recently wrote, it’s clear to me that from the beginning of the foreclosure crisis, it’s been a matter of not wanting to leave any money on the table, and a sort of baseless optimism that says: “Hey, maybe property values will come back and we won’t have as great a loss.”

Let’s face it… that sort of thinking has resulted in almost 8 million homes lost to foreclosure since 2008, and cities in New Jersey like Newark, and in California like Richmond, are clearly tired of waiting for some imagined turnaround in the housing market that has failed to materialize for six years while they’ve watched their communities continue to pay the price of inaction by the holders of these mortgages.

So today, I would have to say that Newark is to be commended for having the courage to draw the line and take control of their city’s destiny by becoming the first American city to say yes to the use of eminent domain as a way to deal with underwater loans and urban blight caused by the ongoing foreclosure crisis. But in addition, since there are reportedly some 26 other cities across the country that have been considering the plan, I would also have to imagine that Newark only represents the first domino to fall, in what could potentially become a long line of dominoes.

And I suppose that’s really why the banking industry lobbyists have tried so hard to scare cities away from the use of eminent domain… they simply don’t want to cede control… I understand.

But, at this point cities like Newark have endured six years of a housing market’s collapse, and they still have thousands of homes underwater by 50 percent and more. What would you do if you were mayor of such a city… if you pledged an oath to protect that city… what else could you do.

ONE MORE THING: The opposition will no doubt say that investors will lose money as a result of using eminent domain in this instance, but that’s just not true. Investors must receive “fair market value” for the properties being seized by the city, which is more than they’d be able to get were they to foreclose. In fact, in New Jersey, where it takes something like 1,000 days to foreclose, the investors would be lucky to net half the home’s fair market value by foreclosing.
A Lesson From the 1930s…

During the 1930s, we lost 50 percent of the homes in the country to foreclosure, and by the middle of that decade, states started passing moratoria that banned foreclosures for five years. Of course, that’s the worst possible answer to the problem, because it encourages more to default, and it only puts off the problem.

So, investors… look at it that way… would you rather see eminent domain used and receive fair market value, or see a five-year prohibition on all foreclosures? Because that’s your real choice… the city of Newark is saying that the status quo is simply not an option.

Stand by, lots more to come. You might even think of this as being the shot heard round the world.

Mandelman out.



If you haven’t yet listened to the series of Mandelman Matters Podcasts with Professor Robert Hockett, the author of The Municipal Plan, which is the plan Newark has approved and the others are considering, here they are, and they are worth hearing.

Breaking the Securitization Suicide Pact Killing Our Recovery.  

Eminent Domain to Solve the Housing Crisis, PART 2

Part 3 with Professor Hockett

Is Eminent Domain ton Write Down Loans Unconstitutional?

Is the Eminent Domain Plan Good for Homeowners?

AND FROM THE OPPOSITION… Tom Deutsch of the American Securitization Forum.


For questions about the “Underwater America” report published by the Haas Institute at the University of California at Berkeley, contact Rachelle Galloway-Popotas at


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U.S. probes possible overcharging by banks on foreclosure fees

U.S. probes possible overcharging by banks on foreclosure fees

Where ever these bankstas have their hands, you better bet there is a scam involved!


The U.S. Attorney’s office in Manhattan is investigating at least five banks over whether they overcharged the government for expenses incurred during foreclosures on federally backed home loans, filings and interviews show.

PNC Financial Services Group Inc, PHH Corp, MetLife Inc, Santander Holdings USA Inc and Citizens Financial Group Inc, the U.S. unit of Royal Bank of Scotland, have all disclosed in filings with the Securities and Exchange Commission that they’ve received subpoenas. U.S. Attorney Preet Bharara’s office is seeking information on claims on foreclosed loans insured by the Federal Housing Administration or guaranteed by Fannie Mae and Freddie Mac, according to records reviewed by Reuters.

The subpoenas, coming years after the height of the foreclosure crisis, seek information about banks’ foreclosure-related expenses, which generally include court filings and posting or mailing legal notices.

“You’ve got a lot of people trying to clean up the servicing industry, but the truth is we are seeing the same servicing problems over and over,” said Ira Rheingold, director of the National Association of Consumer Advocates in Washington. “It was built into the model to charge as many fees as they could.”


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


HABERL v. 21st MORTGAGE CORPORATION, Fla 5DCA | affidavit in support of 21st Mortgage’s motion for summary judgment does not comply with the pre-acceleration notice requirements set forth in paragraph 22 of the mortgage

HABERL v. 21st MORTGAGE CORPORATION, Fla 5DCA | affidavit in support of 21st Mortgage’s motion for summary judgment does not comply with the pre-acceleration notice requirements set forth in paragraph 22 of the mortgage


JOANN HABERL, Appellant,

Case No. 5D12-4839.
District Court of Appeal of Florida, Fifth District.
Opinion filed May 23, 2014.
Carl J. Hognefelt and Barry M. Elkin, of Elkin & Hognefelt, Tampa, for Appellant.

Thomas A. Valdez, of Quintairos, Prieto, Wood & Boyer, P.A., Tampa, and Sonya Daws, of Quintairos, Prieto, Wood & Boyer, P.A., Tallahassee, for Appellee.


Joann Haberl appeals a summary final judgment of foreclosure entered in favor of 21st Mortgage Corporation. Because the notice of default attached to the affidavit in support of 21st Mortgage’s motion for summary judgment does not comply with the pre-acceleration notice requirements set forth in paragraph 22 of the mortgage,[1] we reverse the summary final judgment of foreclosure and remand for further proceedings. See Samaroo v. Wells Fargo Bank, 39 Fla. L. Weekly D670 (Fla. 5th DCA Mar. 28, 2014) (summary final judgment of foreclosure reversed where default letter that mortgagee sent to mortgagors failed to satisfy the pre-acceleration notice requirement of the mortgage as a condition precedent to foreclosure).


TORPY, C.J., EVANDER and BERGER, JJ., concur.


[1] The notice of default failed to inform Haberl of the right to reinstate after acceleration and the right to assert in the foreclosure proceeding the non-existence of a default or other defense of borrower to acceleration and foreclosure.

Down Load PDF of This Case

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IN RE TRAVERSE, Court of Appeals, 1st Circuit 2014 | This case requires us to explore the contours of a bankruptcy trustee’s lien avoidance and preservation powers under 11 U.S.C. §§ 544 and 551 when a debtor’s state-law homestead exemption has been invoked.

IN RE TRAVERSE, Court of Appeals, 1st Circuit 2014 | This case requires us to explore the contours of a bankruptcy trustee’s lien avoidance and preservation powers under 11 U.S.C. §§ 544 and 551 when a debtor’s state-law homestead exemption has been invoked.


MARK G. DEGIACOMO, Chapter 7 Trustee for the Estate of Virginia A. Traverse, Appellee,

No. 13-9002.
United States Court of Appeals, First Circuit.
May 23, 2014.
David G. Baker for appellant.

Tara Twomey, National Consumer Bankruptcy Rights Center, and Ray DiGuiseppe on brief for the National Association of Consumer Bankruptcy Attorneys, Amicus Curiae.

Mark G. DeGiacomo, with whom Keri L. Wintle and Murtha Cullina LLP were on brief, for appellee.

Before Torruella, Howard, and Kayatta, Circuit Judges.

HOWARD, Circuit Judge.

This case requires us to explore the contours of a bankruptcy trustee’s lien avoidance and preservation powers under 11 U.S.C. §§ 544 and 551 when a debtor’s state-law homestead exemption has been invoked.

In 2005, six years before filing a petition for Chapter 7 bankruptcy, Virginia Traverse secured a loan with a mortgage on her home. In the years before her bankruptcy and continuing since filing her petition, Traverse has remained current on all mortgage payments on the property. Because Traverse’s home is subject to a homestead exemption under Massachusetts law, in these circumstances the Bankruptcy Code would ordinarily allow Traverse to pass through bankruptcy in possession of her home. Yet because Traverse’s bank failed to record the mortgage with the appropriate registry, the bankruptcy trustee contends that his power to avoid and preserve the mortgage justifies him in selling Traverse’s home as property of the bankruptcy estate. The bankruptcy judge and Bankruptcy Appellate Panel accepted the trustee’s view. We reverse.

I. Facts and Background.

Virginia A. Traverse resides in a home in Lynn, Massachusetts. She has been the title owner of the property since April 30, 1999, when she recorded her ownership with the Essex County South District Registry of Deeds. On July 11, 2005, Traverse executed a mortgage on the home in favor of Washington Mutual Bank to secure a loan of $200,000. On September 25, 2008, JP Morgan Chase acquired this mortgage as part of its blanket acquisition of Washington Mutual’s assets. At no point did either mortgagee record the mortgage on Traverse’s home with the Registry of Deeds. Meanwhile, in March of 2007, Traverse executed a second mortgage in favor of Citibank to secure a loan of $31,000, which Citibank recorded in due course. Traverse has kept current on her mortgage payments to both JP Morgan and Citibank.

On August 14, 2011, Traverse filed a voluntary bankruptcy petition under Chapter 7 of the Bankruptcy Code. On her bankruptcy schedules, Traverse valued her home at $223,500.[1] She listed the remaining claim secured by JP Morgan’s mortgage as $185,777.30 and the claim secured by Citibank’s mortgage as $29,431.04. Finally, pursuant to the Massachusetts Homestead Act, Traverse claimed a homestead exemption in the property in the amount of $500,000. Traverse’s homestead exemption, which Traverse had formally recorded in a Declaration of Homestead in January 2009, went unchallenged by any interested party.

On December 15, 2011, Mark D. DeGiacomo, acting as the Chapter 7 trustee of Traverse’s bankruptcy estate, filed a complaint to avoid JP Morgan’s unrecorded mortgage and to preserve it for the benefit of the estate. In response, Traverse filed a counterclaim seeking a declaratory judgment that, even if he preserved the mortgage, DeGiacomo could sell only the mortgage itself and not her underlying property. Traverse argued that because the trustee’s preservation of JP Morgan’s mortgage gave the estate only the rights of the original mortgagee, it created no right to sell her home until she defaulted on her payments and triggered the right of foreclosure. After DeGiacomo moved for summary judgment, the bankruptcy court granted summary judgment in his favor on all counts and the Bankruptcy Appellate Panel (BAP) affirmed. Both tribunals concluded that, having preserved JP Morgan’s interest in Traverse’s home for the bankruptcy estate, the trustee was entitled to sell the home in order to liquidate that interest. While not disputing that Traverse’s current mortgage payments prevented DeGiacomo from foreclosing on her home in his capacity as mortgagee, the bankruptcy court and the BAP concluded that DeGiacomo could nevertheless sell the home pursuant to his core powers as a trustee administering a debtor’s property under the Bankruptcy Code.

Traverse now challenges that conclusion as a matter of law.

II. Standard of Review.

On appeal from the BAP, we train our analysis on the underlying bankruptcy court decision, reviewing factual findings for clear error and conclusions of law de novo. In re Canning, 706 F.3d 64, 68-69 (1st Cir. 2013). Under the de novo standard, we do not defer to the bankruptcy court’s ruling, but consider the matter anew as though no decision were rendered below. Id. at 69. Neither do we cede any deference to the conclusions of the BAP. In re Hill, 562 F.3d 29, 32 (1st Cir. 2009).

III. Discussion.

Under § 541 of the Bankruptcy Code, all of the debtor’s legal and equitable interests in property at the time of her bankruptcy petition automatically become the property of the bankruptcy estate. 11 U.S.C. § 541(a)(1); In re Barroso-Herrans, 524 F.3d 341, 344 (1st Cir. 2008) (“When an individual files for bankruptcy, all of his property . . . becomes property of the estate.”). Nevertheless, § 522 of the Code allows a debtor to exempt certain property, based either on an enumerated list of federal exemptions or on any alternate exemptions provided by her state. See 11 U.S.C. § 522(b); In re Cunningham, 513 F.3d 318, 323 (1st Cir. 2008); In re Hildebrandt, 320 B.R. 40, 43 (B.A.P. 1st Cir. 2005). Among the state exemptions incorporated by § 522 is the Massachusetts Homestead Act, which allows a debtor to claim an interest of up to $500,000 in a home being used by the debtor as her principal residence. In re Peirce, 483 B.R. 368, 376 (Bankr. D. Mass. 2012); see also Mass. Gen. Laws ch. 188, § 1. The debtor’s declared homestead exemption is insulated from conveyance, sale, or levy to help satisfy the debtor’s debts in bankruptcy, with the exception of (as relevant here) a debt secured by a lien on the property, such as a mortgage. Mass. Gen. Laws ch. 188, § 3(b); In re Swift, 458 B.R. 8, 15 (Bankr. D. Mass. 2011) (“[A] debtor’s homestead exemption is not effective against a mortgagee where the mortgage in question was executed before the debtor recorded a declaration of homestead.”). The final working of the scheme is that, when a debtor declares a property as her homestead, proceeds realized from the sale of that property must be used first to pay off any secured claims and subsequently to satisfy the debtor’s claimed exemption before, at last, being turned over to her bankruptcy estate.

A core power of a bankruptcy trustee under § 363(b) of the Code is the right to sell “property of the estate” for the benefit of a debtor’s creditors. 11 U.S.C. § 363(b)(1) (“The trustee, after notice and a hearing, may use, sell, or lease, other than in the ordinary course of business, property of the estate . . . .”). Because a debtor’s exempted property interests are effectively removed from the estate, however, see Owen v. Owen, 500 U.S. 305, 308 (1991), § 363 does not empower the trustee to sell exempted interests. In re Carmichael, 439 B.R. 884, 890 (Bankr. D. Kan. 2010) (“[W]here the debtor’s interest is exempted, the estate no longer has an interest that it may sell.” (quoting Collier on Bankruptcy ¶ 363.08[3] (16th ed. 2012))); see also In re Parker, 142 B.R. 327, 330 (Bankr. W.D. Ark. 1992) (“The trustee abandons property of the estate in a chapter 7 case usually because there is no equity in the property or the property is exempt.”). Nor does a bankruptcy trustee ordinarily sell property solely for the benefit of secured creditors. See In re Scimeca Found., Inc., 497 B.R. 753, 781 (Bankr. E.D. Pa. 2013) (“[A] bankruptcy trustee should not liquidate fully encumbered assets, for such action yields no benefit to unsecured creditors.”); Collier on Bankruptcy ¶ 725.01 (“It is not the proper function of the trustee to liquidate property solely for the benefit of secured creditors.”).[2] Consequently, where a debtor claims a homestead exemption in her home, a trustee will typically sell the home only where its value exceeds both the mortgage liens on the property and the debtor’s homestead exemption. In re Ellerstein, 105 B.R. 214, 216 (Bankr. W.D.N.Y. 1989) (“[Where] [t]he debtors’ interest is subject to a mortgage . . . and the debtors’ equity is significantly more than the amount of the homestead exemption . . . the trustee would sell the property . . . .”); In re Early, Bankr. No. 05-01354, 2008 WL 2569408, at *3 (Bankr. D.D.C. June 23, 2008) (“[I]f the amount of the debtor’s exemption was less than the value of the property, . . . a trustee is free to sell the property,” so long as she “distribute[s] the proceeds first to the debtor in payment of the debtor’s claimed exemption . . . .”). This excess benefit for the unsecured creditors, calculated as the value of the estate minus any secured claims and exemptions, represents the bankruptcy estate’s remaining “equity” in the property. In re Hyman, 123 B.R. 342, 344 (B.A.P. 9th Cir. 1991), aff’d, 967 F.2d 1316 (9th Cir. 1992) (“[T]he equity available for the estate would be any amount exceeding . . . encumbrances . . . plus the homestead exemption . . . .”); In re McKeever, 132 B.R. 996, 999 (Bankr. N.D. Ill. 1991) (defining the estate’s “equity” as that “which would be left for unsecured creditors after payment of secured claims and the debtors’ homestead exemption”).

Where, on the other hand, a property fails to yield any remaining equity for the estate beyond the value of its secured encumbrances and the debtor’s homestead exemption, a trustee generally should not sell the home, but should leave the secured creditors to their own legal means of recovering their claims. See Scimeca Found., 497 B.R. at 781 (“[I]t is appropriate for a chapter 7 bankruptcy trustee to . . . allow the secured creditors to exercise their right to recover possession of their collateral.”). This is because, by definition, “[a] secured creditor can protect its own interests in the collateral subject to the security interest.” U.S. Department of Justice, Executive Office for United States Trustees, Handbook for Chapter 7 Trustees at 8-20 (2002). If a debtor defaults on her mortgage payments, the secured creditor’s options include its contractual right to foreclose on the debtor’s home. If, however, a debtor continues to satisfy her contractual obligations to the benefit of the creditor, the mortgagee has no grounds to foreclose and the debtor may retain her home through the bankruptcy proceedings. See Ellerstein, 105 B.R. at 216 (“[If] [t]he debtors’ home is subject to a mortgage which is not in default and the debtors’ equity is less than the properly claimed homestead exemption . . . the trustee would abandon the interest and the debtors would retain the home.”).

Traverse’s homestead exemption leaves no residual equity for her unsecured creditors, and her lack of default on her monthly payments precludes both Citibank and JP Morgan from foreclosing on her property. There is consequently no dispute that, if Traverse’s mortgages remained with their respective banks, the foregoing analysis would dispose of the case: the bankruptcy trustee would have no claim to sell Traverse’s property and Traverse would retain possession of her home. Indeed, this appears to be the trustee’s precise position with regard to Citibank’s second mortgage. In the case of JP Morgan, however, the trustee notes a further wrinkle: neither Washington Mutual nor JP Morgan perfected the first mortgage on Traverse’s home by recording the lien with the Registry of Deeds.

Where a creditor has an unperfected lien on a debtor’s property, the Bankruptcy Code empowers a trustee to avoid and preserve the lien for the benefit of the estate. The trustee exercises this power through two strong-arm provisions. First, the trustee’s right of avoidance under 11 U.S.C. § 544 “vests the trustee with the powers of a bona fide purchaser of real property for value, and allows the trustee to invalidate unperfected security interests.” In re Sullivan, 387 B.R. 353, 357 (B.A.P. 1st Cir. 2008). Second, his right of preservation under 11 U.S.C. § 551 automatically preserves the benefit of the avoided interest for the estate by “put[ting] the estate in the shoes of the creditor whose lien is avoided.” In re Carvell, 222 B.R. 178, 180 (B.A.P. 1st Cir. 1998). Together, these provisions benefit the unsecured creditors by allowing the trustee to eliminate unperfected liens on a debtor’s property and subsequently to apply the value represented by those liens to the general estate, bypassing any junior lienholders. See In re French, 440 F.3d 145, 154 (4th Cir. 2006) (“[T]he Code’s avoidance provisions protect creditors by preserving the bankruptcy estate against illegitimate depletions.”); In re Nistad, Bankr. No. 10-17453-WCH, 2012 WL 272750, at *5 (Bankr. D. Mass. Jan. 30, 2012) (“The purpose of 11 U.S.C. § 551 is to allow a trustee to preserve the avoided interest for the estate so that junior interest holders do not benefit from the avoidance to the detriment of the estate and its creditors.”). In this case, the trustee exercised his strong-arm powers to avoid and preserve JP Morgan’s mortgage on Traverse’s home.[3] He now argues that, by preserving the mortgage lien, he may sell the property that is subject to the lien in order to realize the value of the mortgage for the bankruptcy estate.

Before addressing the trustee’s argument, it is important to clarify what the trustee does not argue. First, he does not suggest that his preservation of JP Morgan’s mortgage empowers him to sell Traverse’s home in his position as mortgagee. Nor could he, since Traverse correctly notes that her current payments on her mortgage insulate her property from foreclosure.[4] Rather, the trustee suggests that, even in the absence of default, his preservation of the mortgage has given the bankruptcy estate an equity interest in the home that triggers his core power of sale as bankruptcy trustee.

Second, the trustee does not argue that the preserved mortgage freed up equity in Traverse’s home for the bankruptcy estate by eliminating a secured debt to be satisfied before the home’s value can begin accruing to unsecured creditors. Nor, again, could he do so, because Traverse’s unchallenged exemption of $500,000 swallows the full $223,500 value of her home regardless of whether the sale’s proceeds are first used to satisfy the $185,777.30 mortgage claim. Rather, the trustee insists that the preserved mortgage itself, as a senior lien on the home, has created equity in the home for the estate. He suggests, in short, that the preserved mortgage has turned some corresponding share of the home’s value into the “property of the estate” to be liquidated through sale.

The trouble with the trustee’s argument is that his preservation of an undefaulted mortgage on Traverse’s home for the benefit of the bankruptcy estate is not co-extensive with an ownership right over the underlying property. Under § 551, the trustee preserves any liens or transfers avoided under § 544 by Traverse’s property based on his position as mortgagee we find no reason to challenge her reaffirmation in this case. claiming those liens for the benefit of the estate, but he preserves the benefit of only that which has been avoided—in this case, the mortgage. “When the Trustee avoided the lien granted by Debtor . . ., the avoided lien and only the avoided lien became property of the estate under § 541(a)(4).” Carmichael, 439 B.R. at 890; cf. In re Haberman, 516 F.3d 1207, 1208 (2008) (“[A] bankruptcy trustee who successfully avoids a lien pursuant to 11 U.S.C. §§ 544 and 551 preserves for the bankruptcy estate the value of the avoided lien . . . .”). Preservation gives the bankruptcy estate an exclusive interest in the avoided lien, but it does not give the estate any current ownership interest in the underlying asset. See Early, 2008 WL 2569408, at *3 (“[T]he only interest recovered via avoidance is the avoided lien, not an ownership interest in the property.”). As far as the trustee’s § 363 powers are concerned, avoidance and preservation thus empower the trustee to sell the newly avoided mortgage as property of the estate. But if the underlying property has been exempted and withdrawn from the “property of the estate” for the purposes of § 363, the preservation of a mortgage does not resurrect the trustee’s § 363 powers over that property itself. See Carmichael, 439 B.R. at 890 (“The only property interest which the Trustee may sell under § 363(b) is the estate’s one-half interest in the unperfected lien . . . .”); In re Early, Bankr. No. 05-01354, 2008 WL 2073917, at *4 (Bankr. D.D.C. May 12, 2008), order amended and supplemented, 2008 WL 2569408, at *4 (“[T]he avoided lien here does not give the trustee a right to sell the debtor’s interest in the Property itself.”).[5]

The trustee makes much of the Supreme Court’s holding in Schwab v. Reilly, in which the Court held that exemptions claimed under the Code remove only a monetary “interest” in a debtor’s asset, rather than the asset itself, from the property of the bankruptcy estate. 560 U.S. 770, 782 (2010). Various courts have applied this same principle to state-created homestead exemptions, including that in Massachusetts. See Peirce, 483 B.R. at 376 (Mass. Gen. Laws ch. 188 only protects the owner’s interest in the home to the extent of the monetary exemption.”); In re Gebhart, 621 F.3d 1206, 1210 (9th Cir. 2010) (“The homestead exemptions available to the debtors . . . do not permit the exemption of entire properties, but rather specific dollar amounts.”). The trustee reasons that, if Traverse’s home remains part of the bankruptcy estate despite Traverse’s homestead exemption, he may dispose of it like any other property so long as he repays Traverse the value of her exemption from the proceeds.

As a preliminary matter, we note that the rule articulated in Schwab does not apply directly to this case. In each of the cases above, the debtor’s exemption could not prevent the trustee from selling the underlying asset because that asset’s value surpassed the exemption amount, creating additional equity for the bankruptcy estate. Schwab, 560 U.S. at 776; Peirce, 483 B.R. at 376; Gebhart, 621 F.3d at 1210. By contrast, where a debtor’s homestead exemption equals or surpasses the total value of her property, the bankruptcy court has construed the Massachusetts homestead exemption to protect the debtor’s physical ownership of as well as her financial rights in her home. Peirce, 483 B.R. at 376 (“[S]o long as the available monetary exemption is greater than or equal to the value of that property, the owner’s possessory and pecuniary interests are both fully protected.”). This reading accords with the established policy behind the Massachusetts homestead exemption, which “favors preservation of the family home regardless of the householder’s financial condition” and inclines courts to construe the exemption “liberally in favor of debtors.” Shamban v. Masidlover, 705 N.E.2d 1136, 1138 (Mass. 1999); see also Hildebrandt, 320 B.R. at 44 (“Homestead laws are designed to benefit the homestead declarant and his or her family by protecting the family residence from the claims of creditors.” (internal quotation marks omitted)). We decline to depart from that practice today.

More to the point, neither Schwab nor its progeny address the precise legal question before us. The issue raised by this case is not whether Traverse’s homestead exemption withdrew her home or merely the right to its proceeds from the property of the estate. The issue is whether a trustee’s powers of sale under § 363 justify selling a debtor’s asset where no equity remains for the estate beyond the senior claims of secured creditors and the debtor’s own exempt interest. The distinction may best be illustrated by the fact that the issue facing us today could arise even if there were no homestead exemption involved. Imagine, for example, a case in which a debtor fails to claim any homestead exemption, but the full value of her home falls short of her undefaulted mortgages on the property. In this scenario, even absent any debates about whether the debtor had withdrawn her home or merely an “interest” in her home from the bankruptcy estate, the trustee’s § 363 powers would not justify selling the asset, because there would be no residual equity in the property for unsecured creditors. The trustee himself admits as much, as he acknowledges that he would not sell Traverse’s home if both her mortgages remained with their banks—even though, under his own reading of Schwab, the home is technically “property” of the estate.

The trustee suggests that his preservation of Traverse’s first mortgage for the bankruptcy estate makes this case different. He insists that the preserved mortgage empowers him to sell Traverse’s home because, with the bankruptcy estate now standing in the shoes of the secured lienholder, the sale would directly benefit the unsecured creditors. Just because the preserved mortgage entitles the estate to benefit from the sale of Traverse’s property, however, does not mean that the trustee is by that fact empowered to sell the property so as to immediately realize that benefit. In itself, a mortgage carries neither a right of immediate ownership of Traverse’s property, nor a right of immediate payment of the secured loan’s outstanding value, but only a right to foreclose on Traverse’s property in the event that she defaults on her loan or to receive payment in full when the home is sold through other means. And that is the extent of the rights gained by the estate by through the trustee’s preservation. See Haberman, 516 F.3d at 1210 (“[T]he trustee, on behalf of the entire bankruptcy estate, in some sense steps into the shoes of the former lienholder, with the same rights in the collateralized property that the original lienholder enjoyed.”); Carvell, 222 B.R. at 180 (“Preservation is just that. It simply puts the estate in the shoes of the creditor whose lien is avoided.”). We make this observation not to revive the red herring argument that the trustee would need to exercise a mortgagee’s power of foreclosure in order to sell Traverse’s home; of course he could accomplish such a sale, when appropriate, simply in the exercise of his powers under § 363. We make the observation simply to clarify that, as far as the trustee’s § 363 powers are concerned, the trustee may only sell “property of the estate,” and the preserved mortgage in this case carries no immediate ownership rights that might be seen to turn Traverse’s home into the property of the estate.

To put it another way, contrary to the trustee’s assertions, just because the preserved mortgage promises the bankruptcy estate a benefit from the sale of Traverse’s home does not mean that the preserved mortgage creates “equity” for the estate. Bankruptcy courts have defined the equity that justifies a sale of property, consistently and explicitly, in one way: the value remaining for unsecured creditors above any secured claims and the debtor’s exemption. See, e.g., Hyman, 123 B.R. at 344; In re White, 409 B.R. 491, 495 (2009); McKeever, 132 B.R. at 999. It is this equity for unsecured creditors that authorizes a trustee to liquidate the property in the first place, as the trustee should not exercise his § 363 powers for the benefit of secured creditors alone. See Scimeca Found., 497 B.R. at 781; U.S. Department of Justice, Executive Office for United States Trustees, Handbook for Chapter 7 Trustees at 8-20 (2002); Collier on Bankruptcy ¶ 725.01. Here, having avoided and preserved JP Morgan’s mortgage for the benefit of the bankruptcy estate, the trustee has inherited the standing of the secured creditor. Haberman, 516 F.3d at 1210; In re Kors, Inc., 819 F.2d 19, 23 (2d Cir. 1987); Carvell, 222 B.R. at 180. But he has not changed the status of the lien as a secured lien, to be subtracted from the value of the asset before any remaining equity may be calculated. In this sense, for the very reason that the preserved mortgage entitles the bankruptcy estate to any proceeds from Traverse’s property, as a senior secured claim overriding Traverse’s claimed homestead exemption, it cannot double as the unsecured equity triggering the trustee’s sale powers under § 363.

The trustee, in essence, would have the preserved mortgage function as both the senior secured interest that entitles the bankruptcy estate to derive value from Traverse’s property ahead of junior lienholders and the unsecured equity interest that excuses him from leaving the secured creditors to satisfy their claims contractually.[6] Yet precisely because of their contractual means of protecting their interests, the bankruptcy scheme typically entrusts secured creditors such as mortgagees to vindicate their claims based on their privately negotiated terms. That in some cases a mortgagee will have no immediate means for claiming the value of its collateral—for example, when the mortgagor remains current on her mortgage payments pursuant to the contractual agreement—is not a flaw in the system, but rather reflects Congress’s intent not to augment the mortgagee’s rights over a compliant mortgagor simply because the mortgagor enters the world of bankruptcy. Cf. Dewsnup v. Timm, 502 U.S. 410, 418 (1992) (noting the rule, valid since the Bankruptcy Act of 1898, that “a lien on real property passe[s] through bankruptcy unaffected”).[7]

Our holding today comports not only with the most coherent reading we can make of the trustee’s powers under the Bankruptcy Code, but also with any sense of fairness on these facts. As noted above, there is no dispute that if Traverse’s first mortgage remained with JP Morgan she would retain her home in these exact same circumstances. We see no reason why the trustee’s preservation of the mortgage under § 551 should alter that result. The objective behind the trustee’s powers of avoidance and preservation is to change the priority of creditors’ claims to property falling under a debtor’s estate, boosting the standing of unsecured creditors against both illegitimate secured claims and junior secured creditors. See French, 440 F.3d at 154; Connelly v. Marine Midland Bank, N.A., 61 B.R. 748, 750 (W.D.N.Y. 1986). It remains a mystery to us why a provision clearly aimed at regulating the distribution of a debtor’s estate among her creditors should exacerbate the debtor’s substantive obligations and vulnerabilities in bankruptcy. That is especially the case here, where the trustee’s ability to preserve JP Morgan’s mortgage derives exclusively from the failure of two banking corporations to perform due diligence and record their mortgage on Traverse’s home. To sanction the sale of the debtor’s home in this case would be to punish an individual consumer for the administrative oversights of the banks.[8]

We affirm today the principle that the preservation of a lien entitles a bankruptcy estate to the full value of the preserved lien—no more and no less. Where this lien is an undefaulted mortgage on otherwise exempted property, the trustee may for the benefit of the estate enjoy the liquid market value of that mortgage, claim the first proceeds from a voluntary sale, or wait to exercise the rights of a mortgagee in the event of a default.[9] But the trustee may not repurpose the mortgage to transform otherwise exempted assets, to which neither the estate nor the original mortgagee boasted any ownership rights, into the property of the bankruptcy estate.

IV. Conclusion.

In the end, we see the matter differently than did the lower courts. Accordingly, we reverse the decision of the BAP and remand to that tribunal with directions to vacate the bankruptcy court’s judgment and to remand the matter to the bankruptcy court for further proceedings consistent with this opinion.

[1] As of March 2012, the City of Lynn assessed Traverse’s home as having a fair market value of $236,200. Because the approximate $13,000 dollar difference between these estimates does not change the legal analysis, the remainder of this opinion relies on Traverse’s schedules.

[2] The U.S. Department of Justice instructs that, “[g]enerally, a trustee should not sell property subject to a security interest unless the sale generates funds for the benefit of unsecured creditors.” U.S. Department of Justice, Executive Office for United States Trustees, Handbook for Chapter 7 Trustees at 8-20 (2002).

[3] In addition to objecting to the sale, Traverse also challenges the bankruptcy court’s jurisdiction to enter a final order approving the trustee’s avoidance and preservation in light of the Supreme Court’s decision in Stern v. Marshall, 131 S. Ct. 2594 (2011). Traverse suggests that Stern strips the bankruptcy court of jurisdiction because the trustee’s complaint seeks to augment the bankruptcy estate and depends on Massachusetts state law.

Under Stern, a bankruptcy court’s jurisdiction to enter final judgments is limited by Article III to issues in bankruptcy that “stem[] from the bankruptcy itself or would necessarily be resolved in the claims allowance process.” Id. at 2618. Both the trustee’s complaint in this case, arising out of his § 554 and § 551 powers, and Traverse’s counterclaim, disputing the bankruptcy estate’s rights to her real property, stem directly from Traverse’s bankruptcy filing. The bankruptcy court correctly exercised jurisdiction in entering a final order on all claims.

[4] Under 11 U.S.C. § 524(c), a debtor who remains current on her loan payments must also enter into a valid reaffirmation agreement in order to prevent a mortgagee from foreclosing on its security interest after she has filed for bankruptcy. Id.; see also In re Golladay, 391 B.R. 417, 421 (Bankr. C.D. Ill. 2008). Although the record does not reveal whether Traverse properly reaffirmed her mortgage, because the trustee makes no claims to

[5] Although the bankruptcy court in Early ultimately concluded that the issue of the trustee’s power of sale was not ripe before it, withdrawing without repudiating its observations on the matter, see 2008 WL 2569408, at *3, we believe that the court’s reasoning is precisely on point.

[6] The secured creditors’ contractual remedies would, of course, be subject to any lien enforcement procedures set by statute.

[7] Our analysis here is limited to a trustee’s attempts to benefit unsecured creditors by avoiding a security interest on fully exempt property, selling that property, and then capturing the proceeds of the sale for the estate up to the amount of the security interest. We do not decide whether a trustee may sell fully-secured property to benefit the estate in other scenarios, for example, when selling secured property as part of a package with unsecured property would increase the value of the unsecured property itself. See Handbook for Chapter 7 Trustees at 8-20.

[8] We note that, in general, our interpretation enhances predictability and lower transaction costs. Under the trustee’s view, without first paying to confirm the perfection of the mortgage, no homeowner contemplating bankruptcy could predict whether the family will lose its residence merely because of a quirk in the bank’s practices that no one could view as adverse to the debtor.

We also note that, to be sure, a bankruptcy trustee’s avoidance powers extend to far less blameless and sympathetic scenarios, such as avoidance of fraudulent transfers under 11 U.S.C. § 548 or post-petition transfers under 11 U.S.C. § 549. None of these other circumstances is implicated by our opinion, however, in that none of them overrides a debtor’s homestead exemption under § 522. Furthermore, to the extent that an avoided fraudulent or post-petition transfer of a debtor’s home allows a trustee to sell the underlying property, it does so precisely by permitting the trustee to include in the estate the putatively transferred asset: the home.

[9] The parties in this case have presented to us no issue regarding who is entitled to Traverse’s post-petition payments. Absent a separate agreement to the contrary, avoidance and preservation of a security interest do not entitle the trustee to payments on the underlying debt. In re Rubia, 257 B.R. 324, 327 (B.A.P. 10th Cir. 2001), aff’d, 23 F. App’x 968 (10th Cir. 2001); In re Trible, 290 B.R. 838, 845 (Bankr. D. Kan. 2003).

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Financial Agencies: Caught in the Web…Who Can Do What To Whom

Financial Agencies: Caught in the Web…Who Can Do What To Whom

Courtesy of JPMorgan Chase

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Letter | Elizabeth Warren and Jeff Merkley tell Obama to nominate Fed people who will care about bank oversight

Letter | Elizabeth Warren and Jeff Merkley tell Obama to nominate Fed people who will care about bank oversight


The White House has been getting an earful in the past year from members of the Senate Banking Committee, who haven’t been shy about suggesting criteria for nominees at the Federal Reserve.

On Wednesday, Sens. Jeff Merkley (D., Ore.) and Elizabeth Warren (D., Mass.) continued with such unsolicited advice, sending a letter to President Barack Obama urging him to fill two vacant seats on the Fed’s seven-member board with nominees possessing an interest in financial regulation and a desire to address the problems revealed by the 2008 financial crisis.

“With [the Fed’s] responsibilities for oversight of the financial system, it is critical that the two remaining nominees for the Board be leaders who possess expertise in financial regulation and have demonstrated a strong commitment to financial reform,” the senators wrote in the letter.


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Debt Collection & Debt Buying — The State of Lending in America & its Impact on U.S. Households | Center for Responsible Lending

Debt Collection & Debt Buying — The State of Lending in America & its Impact on U.S. Households | Center for Responsible Lending

Once a consumer obtains a loan, an entirely different set of actors and rules comes into play in collecting the loan should it go into default. For many consumers, defaulting on a loan is inevitable when unemployment, medical emergencies, or some other financial crisis leaves them unable to cover the payments.

The Great Recession only made this outcome more likely for more U.S. households. Currently, more than one in seven adults is being pursued by debt collectors in the U.S., for amounts averaging about $1,500 (Federal Reserve Bank of New York, 2014).

If a borrower is unable to make payments on a loan for a certain period of time, the lender will
typically deem the obligation to be in default and attempt to collect on the debt. The lender can
do so by pursuing the borrower itself using an internal collections department or by outsourcing
collection activities to a third-party debt collector or law firm. The lender generally will also report
the debt to the major credit reporting agencies (CRAs).

The third-party debt collection industry has grown tremendously over the past few decades, with
2010 revenue more than 6.5 times that of 1972, after controlling for inflation (Hunt, 2013). The
industry’s participants make more than one billion consumer contacts annually for hospitals, govern
-ment entities, banks and credit card companies, student lenders, telecommunications companies, and
utility providers (Hunt, 2013).

The federal Fair Debt Collection Practices Act (FDCPA) prohibits unfair, deceptive, and abusive
debt-collection practices, such as threatening consumers, misrepresenting consumers’ rights, and
making harassing phone calls. However, the FDCPA only applies to third-party debt collectors and
thus does not apply to creditors—such as many banks and hospitals—that collect their own debts.
The Consumer Financial Protection Bureau (CFPB) has the authority to write and enforce rules
related to this statute and can also examine “larger participant” debt collectors for compliance. In
many states, debt collectors must be licensed in order to collect debts in the state and thus are also
subject to state oversight.

Although debt collection plays an important role in the functioning of the U.S. credit market, it
may also expose American households to unnecessary abuses, harassment, and other illegal conduct.
The Federal Trade Commission (FTC) received over 200,000 complaints about debt collection in
2013—second only to complaints regarding identity theft (FTC, 2014a).



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A.G. Schneiderman Launches Statewide Effort To Combat Zombie Properties

A.G. Schneiderman Launches Statewide Effort To Combat Zombie Properties

City Council Resolutions In New York, Albany, Poughkeepsie, Elmira, Beacon, Jamestown And Hornell To Call For Passage Of Zombie Property Bill Sponsored By Senate Co-Leader Klein And Assemblymember Weinstein

Schneiderman: Zombie Properties Threaten Neighborhoods Across New York State

NEW YORK – Attorney General Eric T. Schneiderman today launched a statewide effort to encourage the State legislature to pass the Abandoned Property Neighborhood Relief Act he proposed earlier this year.  As part of the effort, New York City Councilmember Ritchie Torres announced that he will introduce a council resolution encouraging the legislature to pass the bill.  Attorney General Schneiderman also announced that the city councils of Albany, Poughkeepsie, Elmira, Beacon, Jamestown and Hornell are scheduled to pass resolutions on Monday urging passage of the bill. The city councils of Newburgh, Binghamton and Schenectady passed similar resolutions already.

Introduced in the Senate by Co-Leader Jeff Klein and in the Assembly byAssemblymember Helene Weinstein, the Attorney General’s Abandoned Property Neighborhood Relief Act would provide critical support to communities that have been plagued with vacant properties. Among other measures, the bill would make lenders responsible for delinquent properties soon after they are abandoned – not at the end of a lengthy foreclosure process – and pay for their upkeep.

“Zombie properties threaten neighborhoods across New York State, from big cities to small towns,” said Attorney General Schneiderman. “Abandoned homes become magnets for crime, drag down property values and drain municipal coffers. Our bill will keep communities safer and lessen the burden of municipalities still struggling to recover from the housing crisis.” 

“The ripple effect of abandoned properties due to foreclosure are clear – property values plummet and neighborhoods become hotbeds for criminal activity,” said Senate Co-Leader Jeffrey D. Klein. “One foreclosure can threaten the safety, well-being and quality of life for an entire community. In 2009, I was happy to work with Assemblywoman Weinstein and then State Senator Schneiderman to pass legislation requiring the maintenance of properties upon foreclosure. Attorney General Schneiderman’s legislation is the next common sense step in holding banks responsible at the outset andcurtail a neighborhood crisis before it’s begun. This bill will ensure we not only keep our communities safe, but our neighborhoods beautiful and strong.”

“In too many neighborhoods all across New York State, lending institutions have permitted vacant and abandoned residential properties that are delinquent in payments to fall into disrepair,” said Assemblymember Helene E. Weinstein, Assembly Judiciary Committee Chair. “Such properties are a blight on neighborhoods and bring down the property values in communities. I commend New York State Attorney General Eric Schneiderman for proposing this bill that I am proud to sponsor. It is a balanced measure that will help protect our neighborhoods by identifying and ensuring maintenance of properties early on.”

“Abandoned and distressed homes are an eyesore for the community, and have real safety and financial implications for neighboring residents,” said Bronx Council Member Ritchie Torres. “I commend Attorney General Schneiderman and Senator Klein for advancing legislation that places responsibility for these properties where it belongs- with the banks and lenders that put them into foreclosure.”

“As we begin to address New York City’s housing crisis, it is important to make sure abandoned residential properties are taken care of,” said Council Member Jumaane D. Williams (D-Brooklyn), Deputy Leader and chair of the Council’s Housing and Buildings Committee. “Too often buildings will fall in disrepair once a homeowner has moved out because of a foreclosure notice, making it more susceptible to crime and vandalism. During that foreclosure process, lending institutions need to be held responsible for the upkeep of these buildings, not only to ensure the safety the neighborhood, but to guarantee our city and state’s housing inventory does not fall short because of neglect.”

“Abandoned properties are blighting influences on the health and safety of our neighborhoods. They also are a costly burden on the municipalities who step in to seal and secure them to protect the public safety,” said Vicki Been, Commissioner of the Department of Housing Preservation and Development. “This bill will hold lenders accountable for maintaining derelict properties and allow our city to allocate resources to other critical code enforcement activities. I thank the Attorney General for his partnership and commitment to protecting our communities.”

The Attorney General’s Abandoned Property Neighborhood Relief Act will hold banks accountable for so-called zombie properties. Too often, when a homeowner falls behind on mortgage payments and receives a notice of arrears or a foreclosure notice, the homeowner abandons the property. Many families are not aware that they have the right to remain in their home until a judge declares the foreclosure complete, which can take years. At the same time, there is evidence that lenders are actually slowing down the foreclosure process, and in some cases, seeking court orders to cancel foreclosure actions in the middle of the process. 

With no one maintaining these derelict properties, they become vulnerable to crime, decay, vandalism and arson. Furthermore, these zombie homes decrease the property value of neighboring homes and become an enormous burden for local code enforcement and emergency service providers. 

An epidemic of zombie homes has impacted communities statewide. RealtyTrac estimates more than 15,000 properties to be zombie foreclosures. 

The Abandoned Property Neighborhood Relief Act seeks to close the current loophole, changing state law to make lenders responsible for delinquent properties soon after they are abandoned – not at the end of a lengthy foreclosure process – and to pay for their upkeep. Banks or their servicers would be required to notify delinquent homeowners of their right to stay in their homes until the foreclosure process has been completed. 

The bill would also create a statewide registry for zombie properties that would be electronically accessible by, and serve as a resource for, localities facing abandoned property issues. Banks that fail to register an abandoned property will be subject to civil penalties and/or court actions. 

Richard Conti, President Pro Tempore of the Albany Common Council, said, “Albany uses a lot of valuable resources trying to track down owners of derelict buildings. The Attorney General’s legislation gives cities additional tools to fight urban blight and revitalize neighborhoods.  That’s why the Albany Common Council unanimously adopted a resolution supporting its enactment into law.”  

Elmira City Councilmember Dan Royle said, “There are several of these properties in my district that have been. festering problems for years. Resolving code concerns and other problems related to vacant properties has been very challenging. Just this past year I have had to contact bank officials as far away as India to deal with property management concerns and code issues. I sincerely appreciate the attorney generals effort on our behalf and all cities in New York that are struggling with this issue.” 

Schenectady Mayor Gary McCarthy said, “Vacant and abandoned properties drain needed taxpayer resources and are detrimental to the quality of life in our neighborhoods.  Attorney General Schneiderman’s proposal is a much needed step toward combating this significant issue in a comprehensive way.” 

Christopher D. Petsas, Majority Leader of the City of Poughkeepsie Common Council, said, “I commend Attorney General Schneiderman for showing leadership and the political will to push for a much needed solution to a problem that increasingly harms neighborhoods like those in Poughkeepsie. Vacant properties are a blight on neighborhoods and significantly diminish the quality of life for residents of any community. The Attorney General’s legislative proposal will both protect the rights of homeowners and require the banks that conduct business in our neighborhoods to act as good neighbors.”

Jamestown Mayor Sam Teresi said, “The proposed zombie property legislation crafted by Attorney General Schneiderman and his office has my full support as the Mayor of Jamestown.  The registry that will be created for vacant and abandoned homes will give our code enforcement and public safety officers an important tool for our continued neighborhood revitalization efforts.  I encourage the New York State Senate and Assembly to pass this legislation, and the Governor to sign it to help protect our neighborhoods which are the heart and soul of our communities. We cannot have robust economic development if our neighborhoods are in trouble with vacant and abandoned properties that have to endure a long and protracted foreclosure process leaving the city taxpayers to take care of these properties.”

“Today, the Attorney General has brought attention to an issue that those of us who work in foreclosure prevention are, unfortunately, all too familiar with,” said Christie Peale, Executive Director of the Center for NYC Neighborhoods. “Following the financial crisis, vacant and abandoned properties have been a blight on neighborhoods across the state. We commend the Attorney General for championing this legislation and we look forward to continuing to work together to make our communities safer and stronger.”

Meghan Faux, Acting Project Direction of South Brooklyn Legal Services, said, “Vacant and abandoned properties have a destabilizing effect on communities exacerbating the housing crisis and depressing economic recovery. Thanks to Attorney General Schneiderman’s legislation we will be able track vacant and abandoned properties, and implement mechanisms to ensure these properties are maintained preventing neighborhood blight, stabilizing home values and preserving affordable housing.

Homeowners who are in need of assistance are encouraged to call the Attorney General’s statewide foreclosure hotline at 855-HOME-456 and visit to connect with organizations and agencies in their area that can provide foreclosure prevention services.


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RH CICCONE PROPERTIES, INC. v. JP Morgan Chase Bank, NA, MERS | Fla 4dca – For two reasons, we agree with the buyer that the litigation privilege did not bar the quiet title action.

RH CICCONE PROPERTIES, INC. v. JP Morgan Chase Bank, NA, MERS | Fla 4dca – For two reasons, we agree with the buyer that the litigation privilege did not bar the quiet title action.



No. 4D12-4254.
District Court of Appeal of Florida, Fourth District.
May 21, 2014.
Robert Saylor, West Palm Beach, for appellant.

Thomas H. Loffredo and Ronald J. Tomassi, Jr. of GrayRobinson, P.A., Fort Lauderdale, for appellees JP Morgan Chase Bank, N.A., and Mortgage Electronic Registration Systems, Inc.


The buyer of a property appeals the circuit court’s final order dismissing with prejudice its quiet title action against JP Morgan Chase Bank, N.A. and Mortgage Electronic Registration Systems, Inc. (collectively, “the bank”) following the bank’s voluntary dismissal of a foreclosure action against the property’s prior owner. The buyer argues the circuit court erred in finding that the litigation privilege barred the quiet title action. We agree with the buyer’s argument. Therefore, we reverse for reinstatement of the quiet title action.

We will explain briefly the litigation privilege before explaining the reasoning for our decision.

The litigation privilege is an affirmative defense which affords absolute immunity “to any act occurring during the course of a judicial proceeding. . . so long as the act has some relation to the proceeding.” Levin, Middlebrooks, Mabie, Thomas, Mayes & Mitchell, P.A. v. U.S. Fire Ins. Co., 639 So. 2d 606, 608 (Fla. 1994). The rationale behind the litigation privilege is to “free [participants in litigation] to use their best judgment in prosecuting or defending a lawsuit without fear of having to defend their actions in a subsequent civil action for misconduct.” Id.

The bank’s motion to dismiss argued that because the buyer’s allegations in the quiet title action were based on the bank’s allegations in the voluntarily-dismissed foreclosure action, the litigation privilege barred the quiet title action. In response, the buyer argued that the litigation privilege would not bar a quiet title action. According to the buyer:

[T]he general rule is that an assertion in a judicial proceeding of an adverse claim, even though such a proceeding may have been terminated without a decree on the merits, will constitute a cloud on title which may be removed or confirmed in an equitable proceeding brought for that purpose.

Stark v. Frayer, 67 So. 2d 237, 239 (Fla. 1953).

The circuit court agreed with the bank’s argument. In its order dismissing with prejudice the buyer’s quiet title action, the court reasoned that the litigation privilege barred the quiet title action because it was based entirely on actions and statements which occurred during the foreclosure action.

This appeal followed. The buyer argues that the circuit court erred in finding that the litigation privilege barred the quiet title action. Our review is de novo. See Edwards v. Landsman, 51 So. 3d 1208, 1213 (Fla. 4th DCA 2011) (“A trial court’s order granting a motion to dismiss is reviewed de novo.”); DelMonico v. Traynor, 116 So. 3d 1205, 1211 (Fla. 2013) (the issue whether the litigation privilege applies “is a pure question of law, subject to de novo review”).

For two reasons, we agree with the buyer that the litigation privilege did not bar the quiet title action.

First, Florida case law currently applies the litigation privilege to bar actions arising from “misconduct [which] constitutes a common-law tort or a statutory violation.” Echevarria, McCalla, Raymer, Barrett & Frappier v. Cole, 950 So. 2d 380, 384 (Fla. 2007). No Florida case has applied the litigation privilege to bar a quiet title action. Although the bank cites Echevarria for the proposition that the litigation privilege “applies across the board to actions in Florida,” id., a closer reading of Echevarria reveals that our supreme court simply was extending the litigation privilege to include not just common law torts, but also misconduct constituting statutory violations. See id. (“[There is] no reason why . . . [the] rationale [behind the litigation privilege] would be limited by whether the misconduct constitutes a common-law tort or a statutory violation.”).

Second, the litigation privilege would not serve its intended purpose by barring the owner’s quiet title action. The purpose of the litigation privilege is to “free [participants in litigation] to use their best judgment in prosecuting or defending a lawsuit without fear of having to defend their actions in a subsequent civil action for misconduct.” Id. (quoting Levin, 639 So. 2d at 608). In the owner’s quiet title action, however, the bank would not have to defend its actions in the prior foreclosure action. The bank would have to defend only the validity of the mortgage upon which it based its foreclosure action, if it even chooses to do so given its voluntary dismissal of its foreclosure action. See Fla. R. Civ. P. 1.420(f) (2012) (“If a notice of lis pendens has been filed in connection with a claim for affirmative relief that is dismissed under this rule, the notice of lis pendens connected with the dismissed claim is automatically dissolved at the same time.”).

Based on the foregoing, we reverse the circuit court’s dismissal with prejudice of the buyer’s quiet title action, and remand for further proceedings as to that action. We take no position on the merits of the buyer’s quiet title action, other than recognizing, as the bank argues, that some of the buyer’s allegations within the action may be irrelevant and superfluous to stating a quiet title action. We affirm the dismissal with prejudice of the buyer’s actions against the bank for nuisance and slander of title without further discussion.

Affirmed in part, reversed in part, and remanded for further proceedings.

STEVENSON and MAY, JJ., concur.

Not final until disposition of timely filed motion for rehearing.

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Veteran Gets Mortgage Free House

Veteran Gets Mortgage Free House

Wish we had the address…I’m betting this doesn’t have a clean title …with all the fraud BofA was part of. Sorry to be a downer, but just stating the facts regardless of this outcome.


Memorial Day is a time to reflect on the sacrifice of the men and women who protect our country. One Veteran was given a special “thank you” for his service. News Channel Six’s Dee Griffin is here to tell us about he was honored.

For two years, Bank of America has joined various organizations to give more than a thousand mortgage free houses across the country.

They have given 75 in Georgia alone. The newest recipient was awarded his keys today in Thomson. For him, Operation Homefront was the best mission he has ever accomplished.


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Adam J. Levitin | The Politics of Financial Regulation and the Regulation of Financial Politics

Adam J. Levitin | The Politics of Financial Regulation and the Regulation of Financial Politics

The Politics of Financial Regulation and the Regulation of Financial Politics

Adam J. Levitin

Georgetown University Law Center
March 21, 2014

Harvard Law Review, Vol. 127, 2014


This review essay considers six recent books on the financial crisis (Bernanke, Blinder, Bair, Barofsky, Connaughton, and Admati & Hellwig). The essay discerns two basic narratives of the crisis in these books and in the regulatory response to the crisis: the perfect storm narrative and the regulatory capture narrative. The perfect storm narrative is a story of dynamic financial markets outpacing static regulation, which was then overwhelmed by a perfect storm. In this narrative, no one was at fault for 2008, and financial regulators were the heroes who saved the economy. The regulatory capture narrative, in contrast, is a story of a completely preventable crisis that was enabled by feckless regulators who deserve faint praise for putting out the fire they started.

Most of the policy response to the crisis responds to the problems perceived by the perfect storm narrative. Yet, it is hard not to credit the regulatory capture narrative to at least some degree, and most of the books reviewed acknowledge a capture problem. Some post-crisis reforms are in fact responsive to perceived capture problems: the elimination of the Office of Thrift Supervision, the change in federal preemption standards, the creation of the Consumer Financial Protection Bureau, and the Durbin Interchange Amendment. These responses, however, represent very different approaches to capture. The CFPB is a doubling down on agency independence, while the Durbin Interchange Amendment represents an embrace of political contestation of policy that carries on the Glass-Steagal Act’s tradition of divide-and-conquer on industrial organization lines.

The essay argues that the lesson from the books reviewed is that we are simply having the wrong debate about financial regulation. The real issue in financial regulation is politics, not technical regulatory questions. A focus on the technical details of regulation without addressing the politics of financial regulation will result in unsustainable regulatory reforms. Only by reforming the politics of financial regulation will we achieve lasting financial regulation that achieves the socially optimal balance of stability and growth.

To this end, the essay explores the range of approaches to dealing with financial politics illustrated in the Dodd-Frank Act and suggests that rather than doubling down on agency independence, we might do better by trying to harnessing rent-seeking impulses through industrial organization in order to neutralize political influence on the regulatory process.

Down Load PDF of This Case

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


Ocwen Exec: “We do not require gag clauses for modifications”

Ocwen Exec: “We do not require gag clauses for modifications”

Who ya gonna believe? “for modifications” but what about the rest??


After being accused of forcing borrowers to promise not to insult them publicly, nonbank mortgage servicer Ocwen Financial Corp. (OCN) issued a rebuttal saying it does not require “gag clauses” for ordinary loan modifications.

A Reuters article posted that nonbank mortgage payment collectors at companies are agreeing to ease the terms of borrowers’ underwater mortgages, but are increasingly demanding that homeowners promise not to insult them publicly. And in some cases, they are demanding that homeowners’ lawyers agree to the same terms, in addition to possibly requiring them to agree not to sue them again.

But there’s just one catch — it’s not true.


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


Wells Fargo Agrees to Settlement for Alleged ‘Robo-Signing’ Practices

Wells Fargo Agrees to Settlement for Alleged ‘Robo-Signing’ Practices

Lender to Spend $67 Million on Homeowner Assistance, Counseling and Record Consolidation


Wells Fargo & Co. said Friday it has agreed to spend at least $67 million on homeowner assistance and other initiatives as part of a settlement around the lender’s alleged so-called robo-signing practices.

Settlement is tied to a suit filed on behalf of shareholders in 2011 that alleged Wells Fargo employees approved legal documents related to home-foreclosure proceedings without proper review.


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


Aurora Loan Servs. LLC v Scheller | NYSC – Neither Aurora Loan Services LLC, Nationstar Mortgage LLC nor the REMIC have any interest whatsoever in the mortgage sought to be foreclosed

Aurora Loan Servs. LLC v Scheller | NYSC – Neither Aurora Loan Services LLC, Nationstar Mortgage LLC nor the REMIC have any interest whatsoever in the mortgage sought to be foreclosed

Good to see Judge Spinner back!

Decided on May 22, 2014

Supreme Court, Suffolk County


Auroa Loan Services LLC, Plaintiff,


Manfred Scheller, CHERYL MENDENHALL, et. al., , Defendants.


Shawn Spielberg Esq.
Frenkel Lambert Weiss Weisman & Gordon LLP
Attorneys for Plaintiff
53 Gibson Street
Bay Shore, New York 11706

Charles Wallshein Esq.
Macco & Stern LLP
Attorneys for Defendants SCHELLER and MENDENHALL
135 Pinelawn
Melville, New York 11747

Jeffrey Arlen Spinner, J.

Before the Court is a written application by Defendants MANFRED SCHELLER and CHERYL MENDENHALL wherein they seek an Order, pursuant to CPLR § 602(a), consolidating the within matter with that filed under Suffolk County Index Number 2013-61765, on the basis that both actions claim foreclosure of the same mortgage lien, albeit by different named plaintiffs. Defendants also seek an Order of this Court, pursuant to CPLR § 3025(b) compelling Plaintiff to accept service of their Second [*2]Amended Answer. For the reasons which follow, the relief sought by Defendants must be granted and Plaintiff’s cross-motion must be denied.

In the present action, Plaintiff claims foreclosure of first mortgage in the original principal amount of $ 999,000.00 dated April 28, 2006 and recorded with the Clerk of Suffolk County, New York in Liber 21298 of Mortgages, Page 40. Said mortgage was given to secure an Adjustable Rate Note of the same date and it encumbers real property known as 12 Bay Colony Court, East Hampton, New York. This action was filed with the Clerk of Suffolk County on June 11, 2009 by Plaintiff’s predecessor counsel. Defendants seasonably appeared through predecessor counsel and the matter appeared on the foreclosure settlement conference calendar on not less than eleven occasions.

The second action, entitled “Nationstar Mortgage LLC vs. Manfred Scheller, Cheryl Mendenhall et. al.” was filed under Suffolk County Index Number 2013-61675 on July 11, 2013. In that action, Plaintiff claims foreclosure of the same mortgage lien upon the same real property. Defendants have appeared and interposed an Answer. Plaintiff’s successor counsel has cross-moved to discontinue the first action without prejudice, which is vehemently opposed by Defendants.

In order for joinder to properly lie, there must be common questions of law and fact in both actions, such that it would be fair and equitable to address the matters in a single proceeding. Part and parcel of such consideration includes both the avoidance of unnecessary expense as well as the delay that might be engendered by reason of separate proceedings and trials. The court must also determine whether or not the actions are at dissimilar stages as well as whether or not substantial prejudice would be sustained by the adverse party were the application granted. That having been said, where the Court is faced with a joinder application, the burden is placed upon the party opposing such a motion to demonstrate the likelihood of substantial prejudice that would ensue if the relief were granted, Vigo S.S. Corp. v. Marship Corp. 26 NY2d 157 (1970). Where the actions sought to be joined are at disparate or dissimilar stages of the litigation, joinder is improper, Shelly v. Sachem Central School District 309 AD2d 917 (2nd Dept. 2003). The provisions of CPLR § 602 are not mandatory but instead vest the trial court with a fair degree of discretion in determining whether or not such a motion should be granted, Woods v. County of Westchester 112 AD2d 1037 (2nd Dept. 1985). It is only where the party opposing such an application demonstrates the likelihood of substantial prejudice that joinder will be denied, Johnson v. Berger 171 AD2d 728 (2nd Dept. 1991).

In the matter that is sub judice, counsel for Defendants correctly and adeptly points out that while the two actions were commenced more than four years apart, they share identical (rather than similar) questions [*3]of both law and fact and that they are at not at different stages of the legal process. The failure to join these actions together, it is asserted, would engender substantial prejudice to the detriment of Defendants. Inasmuch as the issues of law fact herein have not been resolved, it is hard to imagine that any prejudice at all would befall Plaintiff. It is clear beyond cavil that these matters should be properly joined and adjudicated as one.

Defendants further seek leave to interpose a Second Amended Answer, based in part, upon substantial questions of fact, not the least of which are who the real party in interest is respecting the mortgage and which party, if any, is vested with the legal right to enforce the note and mortgage. Defendants’ counsel has raised genuine and substantial issues as to just who the real party Plaintiff might be (and it may well not be either of the named Plaintiffs in these two actions). Defendants have raised serious and substantial questions as to the identity of the party that is entitled to enforce the note and mortgage.

The Court is constrained to note, from an examination of all of the papers filed herein, that the plain and express language of the instrument dated June 28, 2012 which purports to assign the mortgage at issue from Aurora Loan Services LLC to Nationstar Mortgage LLC transfers only the mortgage but does not convey the underlying obligation. Moreover, a plaintiff, in order to establish standing, must come forward with proof sufficient to demonstrate that it was actually in possession of both the mortgage and the underlying obligation that it secures at the time of the commencement of the suit, HSBC Bank USA v. Hernandez 92 AD3d 843 (2nd Dept. 2012). In New York, it has long been settled law that the assignment of a mortgage without a concomitant transfer of the underlying obligation that it secures is a nullity, Merritt v. Bartholick 36 NY 44 (1867); hence, this assignment is absolutely void on its face. This is particularly so where, as here, Plaintiff has failed to adduce any proof that the mortgage and note were delivered to it prior to the commencement of this action.

In addition to the foregoing, Defendants’ proposed Second Amended Answer asserts that, contrary to the allegations contained within the complaints in both actions, that the loan at issue herein was actually owned by a common law trust known as a Real Estate Mortgage Investment Conduit or REMIC, prior to its purported transfer to Plaintiff Aurora Loan Services LLC. Defendants further assert that the entity that possesses the loan herein has been structured in a manner calculated to ensure that the assets that comprise the pool be wholly insulated from creditors who may seek to reclaim or “claw back” REMIC assets that may have been obtained from transferors who were insolvent as well as to legally avoid taxation at the level of the investor therein. The proposed Second Amended Answer also contains counterclaims demanding, in essence, annulment of the Assignments together with a declaratory judgment pursuant to RPAPL § 1501 et. seq. quieting title to the property in Defendants. These claims are based [*4]upon the premise that the acts of the Trustee of the REMIC were ultra vires pursuant to the provisions of EPTL § 7-2.4 and hence were void.

It has not been determined as to whether or not Defendants’ loan is or was held by a trust, by Aurora Loan Services LLC, by Nationstar Mortgage LLC, by a combination of them or by none of them. This is clearly a triable issue of fact which cannot be disposed of summarily but instead requires further searching examination. As a consequence, the Court must, at this juncture, necessarily limit its inquiry to the sufficiency of the allegations in the proposed Second Amended Answer, particularly when the same is juxtaposed with the complaints that have been filed in both matters.

Plaintiff counters Defendants’ claims by asserting that the proposed Second Amended Answer is palpably insufficient. This Court strongly disagrees with that posture. Defendants allege, inter alia, that the acceptance of the asset, viz. the note and mortgage at issue, by the Trustee was actually accomplished in a manner other than that either prescribed or permitted by the Pooling & Servicing Agreement or PSA, which is the controlling instrument for the REMIC. If the allegations of the foregoing counterclaim by Defendants is borne out by the facts, then it inexorably follows that the acts taken by the Trustee were clearly ultra vires and therefore would necessarily be void ab initio. For well over one hundred years, it has been the law in New York that where the transfer of a mortgage to a third party is effectuated in a manner that contravenes the express terms of a governing trust, the transfer is ultra vires and is void, Kirsch v. Tozier 143 NY 390 (1894). Indeed, it follows logically that where the Trustee’s acts are ultra vires, all successors and subsequent assignees are charged with constructive knowledge of the express terms of the trust and hence cannot claim to be bona fide purchasers thereafter inasmuch as they would either know or would have reason to know that any interest transferred would be subject to the operative terms of the trust, Smith v. Kidd 68 NY 130 (1877), McPherson v. Rollins 107 NY 316 (1887).

Plaintiff further claims that Defendants have no standing to challenge or otherwise attack the assignment. This argument, while superficially correct, is likewise untenable. While it is true that third parties do not, under ordinary circumstances, enjoy standing to challenge the assignment of an indebtedness from one obligee to another, Bank of New York Mellon v. Gales 116 AD3d 723 (2nd Dept. 2014), in the present matter that assertion is decidedly misplaced. A fair reading of Defendants’ proposed Second Amended Answer discloses that Defendants are attempting to challenge the validity of the initial assignment which, it is claimed, has caused them to incur damages respecting the marketability of title to the property herein. Defendants mount their challenge only to the particular transactions respecting the mortgage for which foreclosure is claimed, asserting that the REMIC is a common law trust and that it falls within the narrow purview of EPTL § 7-2.4.

If Defendants’ allegations are proven to be factually correct, it is entirely within the realm of reasonable probability that neither Aurora Loan Services LLC, Nationstar Mortgage LLC nor the REMIC have any interest whatsoever in the mortgage sought to be foreclosed. At this juncture, it is the opinion of this Court that based upon all of the foregoing, the true identity of the party in interest with the power to enforce the terms of the mortgage and note is clearly unknown. This level of uncertainty creates a situation where the marketability of Defendants’ title is likely to be adversely impacted. Even assuming arguendo that fee title to Defendants’ property is insurable, any cloud on title would serve to effectively diminish the value of the fee simple absolute interest. Standards for marketable title and insurable title are markedly different, with marketable title being title that is “…reasonably free from any doubt which would interfere with its market value.” Voorheesville Rod & Gun Club Inc. v. E. W. Tompkins Co. 82 NY2d 564 (1993). For title to be insurable, it need only be that which a title insurer would insure, a far lower standard and one which seems elusive at best. It logically follows then that if the REMIC, as real party in interest, did not take title to the note and mortgage in accordance with the express terms and conditions of the trust, then the party Plaintiffs in these actions, as purported successors in interest thereto would be without any authority to enforce the same, their assertions to the contrary notwithstanding. This, in turn, leads inexorably to invocation of the ancient maxim of “Nemo dat quod non habet” (“You cannot give what you do not have”). The question, to be directed to both Plaintiffs, “What do they have?” cannot be answered to the satisfaction of the Court at this point in time.

It has long been the public policy of New York that matters be resolved on their merits rather than by default wherever it is possible. That having been said, it is the custom and practice of the courts that leave to be amend be freely given, provided that it does not impose either surprise or prejudice upon the adverse party, Balport Construction Co. v. New York Telephone Co. 134 AD2d 309 (2nd Dept. 1987), Ozen v. Yilmaz 181 AD2d 666 (2nd Dept. 1992). No actual prejudice or surprise has been advanced by either Plaintiff which could be said to be of sufficient magnitude to warrant preclusion of the relief sought by Defendants. Moreover, since an action to foreclose a mortgage is a suit in equity, Jamaica Savings Bank v. M.S. Investment Co. 274 NY 215 (1937), equity mandates that the Court do that which is right and fair, that which ought to be done.

It is, therefore,

ORDERED that Defendants’ Application (seq. 002), made pursuant to CPLR § 602(a) and CPLR § 3025(b) shall be and the same is hereby granted in its entirety; and it is further

ORDERED that Plaintiff’s application (seq. 003) seeking dismissal of this action shall be and the same is hereby denied in its entirety; and it is further

ORDERED that Defendants shall serve and file their Second Amended Answer within twenty one (21) days from the date of this Order; and it is further

ORDERED that this action and the one pending under Suffolk County Index No. 2013-61675 shall be joined and consolidated, for all purposes, under Suffolk County Index No. 2009-22839; and it is further

ORDERED that the caption of this action shall read as follows:




AURORA LOAN SERVICES LLC andIndex No. 2009-22839





MENDENHALL, et. al.,



and it is further

ORDERED that any relief not expressly granted herein shall be and the same is hereby denied; and it is further

ORDERED that counsel for Defendants shall serve a copy of this Order with Notice of Entry upon all parties as well as Plaintiff in the second action within twenty one days from the date hereof.

Dated: May 22, 2014

Riverhead, New York


HON. Jeffrey Arlen Spinner


_X__Non Final Disposition


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


Underwater America: Will President Obama, Mel Watt and Wall Street Finally Do the Right Thing for Troubled Homeowners?

Underwater America: Will President Obama, Mel Watt and Wall Street Finally Do the Right Thing for Troubled Homeowners?

It is impossible to fix the monstrosity of fraud that the banks have done. I don’t see anyone performing any miracles to get this country back into shape.



The release of former Treasury Secretary Tim Geithner’s new book, Stress Test — his self-serving account of the Obama administration’s effort to address the nation’s economic crisis and mortgage meltdown — has triggered a great deal of controversy and debate. Was the Obama economic team too cozy with, or too sympathetic, to Wall Street? Was the stimulus package large enough? Did Geithner, Larry Summers and Ben Bernanke stifle the views of dissidents within the administration — especially Council of Economic Advisors chair Christina Romer and FDIC chair Sheila Bair (perhaps not surprisingly, both women) — who urged bolder approaches?

But on at least one issue, there is a growing consensus: The Obama administration did too little, too late, to help troubled homeowners, who faced plummeting home prices and the risk of foreclosure.

Obama’s closest advisors wrongly assumed that as the economy improved, Americans would be better able to buy homes and pay the mortgage on existing homes. But the economy recovery was slower than expected, many unemployed people who did find jobs had to settle for less pay than before, and many homeowners found themselves with ballooning mortgage payments or with mortgages worth less than the value of their homes. Between 2006 and 2011, Americans lost about $7 trillion in home equity due to plunging housing prices — the largest overall loss of wealth than at any time since the Depression.


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


Moody’s issues ratings for $1B Invitation Homes rental securitization

Moody’s issues ratings for $1B Invitation Homes rental securitization

…And there go the neighborhoods


Moody’s Investors Service has issued its provisional ratings for the $1 billion single-family rental securitization from Invitation Homes. Moody’s becomes the third ratings agency to issue $483.3 million in AAA ratings to the largest tranche of the deal.

Previously, Morningstar and Kroll Bond Ratings issued AAA ratings for the same segment of the deal. The summary of Morningstar’s ratings can be seen here. The summary of Krool’s ratings can be seen here.

The offering, referred to as Invitation Homes 2014-SFR1, is backed by one floating rate loan secured by mortgages on 6,537 single-family rental properties.


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


Women in Foreclosure: How We Got Here

Women in Foreclosure: How We Got Here

Woman’s Media Center-

In the first of a two-part series, the author describes the origins of the mortgage crisis and its impact on women. This feature is based on her March article in the University of Chicago’s journal Social Service Review.

The housing crisis is not over. The largest U.S. mortgage securities firm projects that by the end of 2014, one in every five homeowners will be in default. The AARP reports that one out every 30 Americans over 80 are currently experiencing foreclosure, and 3.5 million Americans over 50 owe more on their homes than their properties are worth. Embedded in this ongoing crisis are the lives of single women, who are more likely than anyone in the U.S. to have risky loans that are highly likely to default. Even when controlling for credit score, income, and wealth, women are 30 percent more likely than their male peers to own a risky mortgage, and single black women are 259 times more likely than white men with the same financial characteristics to have a risky subprime loan. Although research shows that women take fewer financial risks than men, their ability to remain financially stable is evaporating under the weight of subprime lending. If women are more cautious than men, why do they bear the burden of risk in the current economy?

In 1986 Eve, a black homeowner from Philadelphia, purchased a small row house with her new husband. They were, she said, “the first of our people to own property. Being a black family and buying your own house—other than my kids it was the greatest thing I’ve ever done. We didn’t get to go to college, but we still put together that down payment.” Like most home buyers at the time, they signed what is commonly known as a traditional, prime mortgage, meaning the interest was fixed. The new couple had full confidence that the terms and costs of their home loan would not rise and fall over time. Unbeknownst to Eve and the rest of the public, the stable mortgage market this couple shopped in would soon be a relic of the past. Gaps in protective housing laws, deregulation, and financial innovations like securitization were creating a toxic combination that left a generation of women at risk.


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


Major banks under investigation for ties to Mexican drug cartels

Major banks under investigation for ties to Mexican drug cartels

When are we going to learn? These banks are the fucking cartels! Keep them in business and the more damage they will continue to do. Plain and simple.

Got that corrupted officiales?


Federal regulators in the United States are reportedly investigation no fewer than two major American banks with regards to their relationships with clients believed to be tied to Mexican drug cartels.

Reuters reported exclusively on Wednesday this week that the US Securities and Exchange Commission is probing both Charles Schwab Corp. and Bank of America’s Merrill Lynch brokerage firm because clients of those entities were linked to Mexican drug cartels.

The SEC, Reuters reported, “is looking into whether the brokerages missed red flags that could indicate attempts to move money illicitly or to feed proceeds from drug trafficking and other crimes into the financial system by failing to know their customers well enough,” according to the newswire’s sources.


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


The Daily Show | Timothy Geithner Extended Interview

The Daily Show | Timothy Geithner Extended Interview

Cannot embed the video but click image below for link–

Former Secretary of Treasury Timothy Geithner discusses his book “Stress Test,” and suggests that the bailout was necessary to avoid a depression. (42:20)



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


U.S. mortgage collectors gag homeowners in loan deals

U.S. mortgage collectors gag homeowners in loan deals

Nothing new…


Joseph and Neidin Henard thought they had finally fixed the mortgage that was crushing them.

In January, the couple reached a settlement with every company that had a stake in the mortgage on their house in Santa Cruz, California, a deal that would have slashed their monthly payment by almost 40 percent to $3,337. It was the end of a process that started with their defaulting in 2009.

But when they saw the final paperwork for their settlement, they found that Ocwen Financial Corp, the company that collected and processed their mortgage payments, had added an extra clause: they could not say or print or post anything negative about Ocwen, ever.


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


Excerpts from Superintendent Lawsky’s remarks on non-bank mortgage servicing – as well as their affiliates, which provide ancillary services

Excerpts from Superintendent Lawsky’s remarks on non-bank mortgage servicing – as well as their affiliates, which provide ancillary services

Press Release

May 20, 2014

Contact: Matt Anderson, 212-709-1691



Benjamin M. Lawsky, Superintendent of Financial Services for the State of New York, is delivering remarks today at the Mortgage Bankers Association 2014 National Secondary Market Conference  in New York City.

The following are excerpts from Superintendent Lawsky’s remarks on non-bank mortgage servicing as prepared for delivery.


Excerpts from Superintendent Lawsky’s Remarks at the Mortgage Bankers
Association 2014 National Secondary Market Conference
New York, NY
May 20, 2014

As Prepared for Delivery

Let’s start with the issue of non-bank mortgage servicers. Specifically, the parallel growth of non-bank servicers – as well as their affiliates, which provide ancillary services.

First, some context on how a loan and the servicing of that loan become separate assets.  This background will be familiar to many of you, but it’s not well known among the wider public.


In a typical scenario, mortgage loans are originated or purchased by a bank or other large financial institution, which then pools them together into a security.  A pooling and servicing agreement (PSA) governs the rights and obligations of the parties, including the rights of certain investors to collect mortgage payments, and the compensation to be paid to a servicer to collect borrower payments and transmit them to investors. 

A trustee is appointed as a fiduciary to represent the collective rights of mortgage investors, but as a functional matter the trustee does very little. And the bank often retained for itself the right to service the mortgages and to collect the servicer compensation designated by the PSA.

Recently, however, there has been an evolution in the mortgage servicing industry. Regulators are – appropriately, in the wake of the financial crisis – putting in place stronger capital requirements for big banks.  In particular, they are giving those banks less credit for the – often distressed – mortgage-servicing rights (MSRs) on their balance sheets. 

Rather than building up stronger capital buffers in response, many large banks are instead offloading those MSRs to non-bank mortgage servicers – which are often more lightly regulated.

There are, of course, likely other factors at play beyond capital requirements. But the recent trend toward explosive growth in non-bank mortgage servicing itself is undeniable – regardless of its cause. 

Now, one of the things we’re concerned about as a regulator is whether these MSR sales trigger a race to the bottom that puts homeowners at risk.  Remember, in most cases, the compensation to be paid for servicing is fixed by the PSA; it cannot be diminished. So the cheaper a servicer can service those mortgages, the more profit it expects to earn from the fixed servicing fees, and the more it can offer the banks to buy these MSRs.

The result is high prices paid for MSRs, together with incentives for cut-rate servicing by non-banks. Indeed, one large non-bank servicer touted that it can service distressed loans at a more than 70 percent discount – in part due to expanded use of information technology.

Regulators have a responsibility to ask whether the purported “efficiencies” at non-bank mortgage servicers are too good to be true.

The servicers advertise themselves as having scalable and efficient technology to deal with this influx of loans, and I’m as big a proponent of technology as anyone. But technology alone does not keep a family in its home.

People lead complicated lives, and helping them work through their issues often requires creative solutions. It is human capital – people – that help families keep their homes. Human beings are not as readily scalable as the technology that supposedly supports them.

And the explosive growth of non-bank servicers only compounds these problems as the companies try (often unsuccessfully) to keep up with a rapidly increasing portfolio of loans.

So, what are the consequences of this potential race to the bottom?  Well, it should be no surprise that borrowers tend to be the losers here. When we at DFS take a closer look at some of these non-bank servicers, we find corners being cut, to the disadvantage of homeowners.

Mortgage investors also lose out.  After all, they are the ones paying rack rates for bargain basement services.

Borrowers and investors both suffer when a servicer does not know how to pull together its loan files strewn around the globe. Or when a servicer is unable to extract information from its many incompatible computer systems at the right time and for the right purpose. Or when a borrower cannot get a straight answer from a servicer on a loan modification that could both save a family’s home and reduce an investor’s losses.

Moreover, while some defend the non-bank mortgage servicing industry as providing better service than the large banks – that’s cold comfort for most borrowers and investors given the bank’s track record in this area (even if it were true). It also wouldn’t justify regulators turning a blind eye to a rapidly growing non-bank sector in which the homes of millions of families are at stake.

As Comptroller of the Currency Thomas Curry recently noted, it’s vital that state regulators stay vigilant about risks moving outside the traditional banking system and into the shadows at non-banks.

Furthermore, it’s also important to remember who would benefit from light-touch regulation in this space. It’s not the borrowers or the mortgage investors. It’s the banks that are receiving top dollar for their MSRs, and the non-bank servicers that are paying these sums because they often believe they can still profit through cut-rate service.

What’s more, our review of non-bank servicers has also turned up another enormous profit center associated with these MSRs that could put homeowners and mortgage investors at risk: the provision of what we call ancillary services.

Under a business model employed by several large non-bank mortgage servicers, the servicer or an affiliate provides fee-based services for every single step in the real estate process.

Need to inspect a property to determine whether it’s vacant?  We have an affiliate that can do it. 

Need to market your short-sale property to a wider audience?  We have an online auction site that can do it. 

Need to sell a property in a foreclosure sale?  We can handle it. 

Need to sell your real-estate-owned property following foreclosure?  We have an affiliated real estate brokerage. 

Need to collect on a debt that’s no longer secured by the property?  Use our affiliated debt collector. 

Need to get a non-performing loan off your books?  We even have an affiliate that will buy loans from investors, pursue foreclosure, and turn those idle properties into profitable rentals. 

The list of services available goes on and on and on.

Now, in most circumstances, there’s nothing inherently wrong with companies and their affiliates providing a range of ancillary services. 

However, these are not ordinary circumstances where a customer has the opportunity to choose from a range of options and selects the option that meets the customer’s requirements at the lowest price.

Rather, this is the extraordinary circumstance where there effectively is no customer to select its vendor for ancillary services. Non-bank servicers have a captive (and often confused) consumer in the homeowner.

Yes, the borrower interacts most with the servicer, but has little or no power in this relationship and is typically at the mercy of the servicer. Yes, the mortgage investors pay the servicers’ bills, but those investors constitute a large and diverse group that does not speak with a single voice.  Yes, the trustee nominally represents the investors, but it lacks the authority to select the servicer and lacks either the capacity or will to demand that the servicer do a good job. 

So who makes the decision about where to procure these ancillary services, and how much of the investor’s or the borrower’s money to pay for them?  It’s usually the servicer, seemingly with no oversight whatsoever.  The very same servicer that benefits – either directly or indirectly – from the profitability of the affiliated companies that provide these services.

The potential for conflicts of interest and self-dealing here are perfectly clear.  Servicers have every incentive to use these affiliated companies exclusively for their ancillary services, and they often do.  The affiliated companies have every incentive to provide low-quality services for high fees, and they appear in some cases to be doing so.


Indeed, so long as the volume of MSRs remains high, servicers and their affiliates make a profit.  A performing loan keeps churning servicing fees. A delinquent loan merits monitoring of the property, for a fee.  An underwater mortgage is solicited for a short sale, for auction fees, technology fees, broker fees, referral fees, and servicing fees.  A foreclosed property involves a foreclosure sale, for a fee.  A property that doesn’t sell in foreclosure becomes real estate owned and then sold, for many more fees.

In the context of the non-bank mortgage servicing market, homeowners and investors are at risk of becoming fee factories.

It’s the regulator’s role to monitor these fees in the mortgage industry imposed through potentially conflicted arrangements. And when these ancillary services are being provided either at a sub-standard quality or at inflated prices – or both – that deserves strong scrutiny.

We’ve publicly highlighted our concerns about ancillary services with one particular non-bank servicer, but they are not the only industry player doing this. So you should expect us to expand our investigation into ancillary services in the coming weeks and months.


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


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