National Mortgage News-

Here is a cautionary tale of how a seemingly minor error can end up costing a financial services company big if left unaddressed.

A jury last month awarded $16.2 million in damages to a California homeowner who waged a three-year battle to block a foreclosure by the private-label mortgage servicer PHH Corp. The verdict is among the largest ever awarded in a mortgage case and $6 million more than PHH’s mortgage servicing business earned in the second quarter.

And, according to the plaintiff’s attorneys, it all started with a $616 shortfall in an escrow account.

[NATIONAL MORTGAGE NEWS]

CASE CAN BE OBTAINED VIA SCRIBD (I could not get this to embed)
http://www.scribd.com/doc/236663425/PHH-16M-jury-verdict-case-Linza-v-PHH

Lexology-

A New Jersey trial court issued an interesting opinion last week, allowing a lender to foreclose but imposing significant limitations on the lender because the court concluded that the lender had violated the Consumer Fraud Act.

In Freedom Mortgage Corporation v. Mamie E. Major, borrower wanted to refinance the mortgage on her home to lower the 5 5/8 interest rate and take out additional money to help pay for her grandson’s college tuition. Defendant was 70 years old, earned approximately $30,000 per year and owed $341,500 on her existing mortgage. At the time of the refinance her home had a market value of $365,000, but she eventually abandoned her plan to obtain more equity from the home and instead refinanced just to lower the interest rate.

Her existing home loan was an FHA-insured loan and was current, so Freedom Mortgage Company treated the refinance as an FHA “Streamline loan,” which required little or no new or extra documentation and did not require a new appraisal. According to Freedom, FHA guidelines allowed it to rely on the underwriting performed by the prior lender. Nonetheless, before approving the refinance, Freedom used a “net benefit” test to determine whether it was justified, and concluded that it was because both the interest rate and the monthly payment would be lower under the new loan.

[LEXOLOGY]

NOT FOR PUBLICATION WITHOUT
THE APPROVAL OF THE COMMITTEE ON OPINIONS

FREEDOM MORTGAGE CORPORATION
Plaintiff,

-v.-

MAMIE E. MAJOR, et al.,
Defendants.

ESCALA, J.S.C.:
This is an action for foreclosure. On motion of plaintiff to strike defendant’s pleadings, the Court found that plaintiff had established the right to foreclose (see order of May 15, 2014), but that there was a factual issue to be tried on violation of the Consumer Fraud Act.

Having heard the testimony of defendant and of a representative of plaintiff, having reviewed the evidence, and having heard and considered the argument of counsel, I make the following findings of fact and conclusions of law.

In 2009, Mamie E. Major lived at 136 William Street, Englewood, in the family home she had acquired in 1980 for $43,000. She mortgaged the property over the years and had a mortgage with Wells Fargo whose balance was then about $341,500. Ms. Major, then 70 years old, worked at Englewood Hospital and earned somewhat over $30,000 a year. She wanted to refinance the mortgage to take additional money out of the house’s equity to help pay for her grandson’s college and to lower the interest rate of 5 5/8%. She was put in contact with Freedom Mortgage Corporation (hereinafter “Freedom”). It appears that most information relative to a refinance was obtained over the telephone and that all papers—including the loan application and related documents—were signed at the closing on her front porch on March 23, 2009. She told the interviewer that she made $30,000. The notion of her obtaining any more equity from the house on the refinance appears to have disappeared in the process, and the refinance was directed at reducing the interest rate, from 5 5/8% to 5%.

The Wells Fargo loan then in existence was already an FHA-insured loan and was current. The new loan would lower the interest rate. Therefore, according to Sheila Harkness, a senior vice-president of Freedom, this refinance could be treated as an FHA “streamline loan,” which would require little or no new or extra documentation, nor would an appraisal be needed. Under the FHA criteria, Freedom was free to depend on the prior mortgage’s underwriting, she testified, in order to refinance to lower the interest rate. See Streamline Your FHA Mortgage (P-4ev).

There was no new appraisal. Cited in the loan application signed by defendant at the loan closing (D-1ev) were the essentials: her name and address, the interest rate, data about the house (address, when built, market value of $365,000), amount owed on the current mortgage ($341,572.71) and current monthly payment on principal and interest ($1,963.22), and proposed new p & i ($1,900.38) and escrows ($271.89 for hazard insurance, $461.44 for property taxes, and $150.75 for mortgage insurance), showing a proposed monthly payment of $2,792.49. The completed form had no entries for other assets or other liabilities (other than the property and the mortgage-loan balance) and was blank as to her income. Ms. Major was required to sign a form 4506-T (D-4ev) that would authorize Freedom to obtain her tax records for 2005, 2006, 2007, and 2008. But no tax returns were obtained by Freedom. The loan application showed a proposed new-loan amount of $354,005.

Also brought to the closing by Freedom’s representative was a notice to the applicant as to credit-score information disclosure (D-2ev). This form in its preprinted portion indicated that there were ranges for possible scores of the three credit-bureau providers of about 300 to 850. The entry on the form for defendant’s score is 99. She signed the form. At the hearing Ms. Harkness disclosed that this number was not a credit score but rather a code which indicated that there was no credit report ordered. That is not apparent from the document itself. Thus, Ms. Major was required to sign a paper that set forth inaccurate information.

At the closing she signed a form HUD-1A Settlement Statement (P-9ev), which showed the transaction data: the new loan was for $354,005; the Wells Fargo Loan being paid off was $341,572.72; open second-quarter taxes paid was $1,382.07; and the open first-quarter tax balance of $220.43. The settlement charges of $11,479.65 included a loan-discount (1 point) to Freedom of $3,540.05; commitment fee to Freedom of $795; application fee to Freedom of $596; courier fee to Freedom of $55; mortgage-insurance premium to FHA of $5,231.61; title work to the lawyer of $840; title insurance of $1,277; and recording fees.

Supposedly, the “net-benefit test” used by Freedom to support the justification of the refinance was that the interest rate and the monthly payment were both lowered, according to the testimony of Ms. Harkness. However, a mathematical overview of this refinance shows that for a reduction of the interest rate from 5 5/8% to 5%, the borrower paid almost $11,500 in fees, which were added to her Wells Fargo loan balance of $341,572.72 and thus increased her mortgage loan to $354,005. By lowering her interest rate by five-eighths of a percent, she would pay $2,134.83 less a year in interest, but by her having to pay some $11,479 in fees to accomplish that reduction in interest, it would take her 5 plus years to break even. Her monthly payment was lowered by less than $63 a month. She made six payments and defaulted.

Analysis
Under the New Jersey Consumer Fraud Act (CFA), a consumer who can prove (1) unlawful conduct by the alleged violator of the CFA; (2) an ascertainable loss on the part of the claimant; and (3) a causal relationship between the unlawful conduct and the ascertainable loss is entitled to relief. D’Agostino v. Maldonado, 216 N.J. 168, 184 (2013).

The Act defines an unlawful practice as “[t]he act, use or employment by any person of any unconscionable commercial practice, deception, fraud, false pretense, false promise, misrepresentation, or the knowing, concealment, suppression, or omission of any material fact with intent that others rely upon such concealment, suppression or omission, in connection with the sale or advertisement of any merchandise or real estate, or with the subsequent performance of such person as aforesaid, whether or not any person has in fact been misled, deceived or damaged thereby . . .” N.J.S.A. § 56:8-2. The broad language of the Consumer Fraud Act encompasses the offering, sale, or provision of consumer credit. Gonzalez v. Wilshire Credit Corp., 207 N.J. 557, 577 (2011) (internal citation omitted).

In 1971, the legislature expanded the Act to include “unconscionable commercial practice” within the unlawful practices prohibited by the Act. Cox v. Sears Roebuck & Co., 138 N.J. 2, 15 (1994) (internal citation omitted). Unconscionability is “‘an amorphous concept obviously designed to establish a broad business ethic.’” Id. at 18 (quoting Kugler v. Romain, 58 N.J. 522, 543 (1971)). An “unconscionable commercial practice” is an activity which materially departs from standards of “‘good faith, honesty in fact and fair dealing.’” Associates Home Equity Services, Inc. v. Troup, 343 N.J. Super. 254, 278 (App. Div. 2001) (quoting Kugler, 58 N.J. at 544). “[T]he need for application of that standard ‘is most acute when the professional seller is seeking the trade of those most subject to exploitation–the uneducated, the inexperienced and the people of low incomes.’” Troup, 343 N.J. Super. at 278 (quoting Kugler, 58 N.J. at 544).

Courts have traditionally recognized that Consumer Fraud Act violations “can be divided, for analytical purposes, into three categories[:]” 1) affirmative acts, 2) knowing omissions, and 3) regulatory violations. Bosland v. Warnock Dodge, Inc., 197 N.J. 543, 556 (2009) (citing Cox, 138 N.J. at 17). A lack of intent to deceive will not preclude liability for an affirmative act. Id. In order to find a violation of the CFA for an omission or concealment, the claimant “‘must show that the defendant acted with knowledge, and intent is an essential element of the fraud.’” Bosland, 197 N.J. at 556 (citing Cox, 138 N.J. at 18)). In all types of consumer fraud, the “capacity to mislead is the prime ingredient.” Cox, 138 N.J. at 17 (citing Fenwick v. Kay Am. Jeep, Inc., 72 N.J. 372, 378 (1977)).

“Because the fertility of the human mind to invent new schemes of fraud is so great, the CFA does not attempt to enumerate every prohibited practice, for to do so would severely retard its broad remedial power to root out fraud in its myriad, nefarious manifestations.” Gonzalez, 207 N.J. at 576 (internal citations omitted). Guided by the language of the Consumer Fraud Act, “a trial court adjudicating a CFA claim conducts a case-specific analysis of a defendant’s conduct and the harm alleged to have resulted from that conduct.” D’Agostino, 216 N.J. at 186. See also Kugler, 58 N.J. at 543. The Act, like most remedial legislation, is to be “construed in favor of consumers.” Cox, 138 N.J. at 15.

Under the CFA, a person who suffers “any ascertainable loss of moneys or property, real or personal,” as a result of the use of an unconscionable commercial practice may bring a lawsuit seeking legal and/or equitable relief, treble damages, and reasonable attorneys’ fees. N.J.S.A. 56:8-19. One purpose of the remedies available against violators of the CFA is “‘not only to make whole the victim’s loss, but also to punish the wrongdoer and to deter others from engaging in similar fraudulent practices.’” Gonzalez, 207 N.J. at 585 (quoting Furst v. Einstein Moomjy, Inc., 182 N.J. 1, 12 (2004)).

Applying the “net-benefit test” to this transaction –the reduction of the interest rate from 5 5/8% to 5% resulting in a savings of interest that would take more than 5 years to amortize and reduction of the monthly payment from $1963.22 to $1900.38 demonstrates that the financial benefit to Freedom in fees for arranging this refinance far exceeded the nominal benefit of savings to the defendant.

In deciding whether there was a violation of the Consumer Fraud Act, the price charged the consumer is one element to be considered. Kugler, 58 N.J. at 530 (holding that the price for a “book package was unconscionable in relation to defendant’s cost and the value to the consumers” and finding there to be a fraud within the contemplation of the CFA). The price paid by the consumer takes on even more serious characteristics of imposition “[i]f the price is grossly excessive in relation to the seller’s costs, and if in addition the goods sold have little to no value to the consumer for the purpose for which he was persuaded to buy them and which the seller pretended they would serve.” Id.

In D’Ercole Sales, Inc. v. Fruehauf Corp., the Appellate Division stated that “[a]n insight into the nature of the consumer transaction contemplated by the New Jersey Consumer Fraud Act . . . can be gleaned from an analysis of the Uniform Consumer Sales Practice Act, (UCSPA).” 206 N.J. Super. 11, 29 (App. Div. 1985). There, the Appellate Division examined the USCPA and the criteria it set forth to assist the court in determining unconscionability under the CFA. Id. at 29. These criteria, set forth in the USCPA, included “‘circumstances such as the following which the supplier knew or had reason to know:

(3) that when the consumer transaction was entered into the consumer was unable to receive a substantial benefit from the subject of the transaction;
…
(5) that the transaction he induced the consumer to enter into was excessively one-sided in favor of the supplier;” Id. at 29-30 (citing UCSPA, 7A U.L.A. 231 et seq).

Here, the plaintiff lender was able to take advantage of the then lax requirements of the FHA that permitted use of prior documents that accompanied (or didn’t accompany) an existing FHA-insured loan. This the lender undertook regardless of the then age of the borrower (70) in the context of her employment and future income prospects. Had the lender simply checked the annual income of the borrower from its telephone interview notes, it would have seen the obvious – that her annual income did not support the monthly mortgage payment itself. Apparently, not only did the plaintiff proceed to process the loan using the underwriting data of the existing loan, it never examined those documents. It never made diligent inquiry into her then ability to make the loan payments going forward. As demonstrated here, defendant defaulted within a few months. Such default so soon after the making of the loan suggests her then financial frailty.

These facts then leads to the conclusion that the loan was granted in order to engender fees for the lender and not for the benefit of the borrower. The reduction in her interest rate would take five plus years to amortize via reduced interest payments set off against the additional fees she incurred and that increased her principal balance. The transaction has been demonstrated to be effectively one-sided, for the benefit of the lender. The token reduction in the monthly payment for the borrower while substantially increasing her debt shows only token benefit to her.

Conclusion
While the plaintiff has demonstrated its right to foreclose, its participation in this transaction under what the court has determined to be consumer fraud will result in the following limitations on its proceeding to judgment of foreclosure:
1. The fees charged by Freedom in this transaction ($11,479.65) will be forfeited.
2. The principal for which judgment will be entered will be limited to $341,572.72, the amount paid off and refinanced.
3. Interest attributable to this amount since the date of default will be forfeited.
4. Advances paid by Freedom shall be added to the amount due.
5. The damages sustained by defendant are the fees ($11,479.65) she was charged for this transaction, which amount will be trebled to $34,438.95; after giving credit for the forfeiture of fees in paragraph 1 above, the net credit which shall be deducted from the amount to be sought in the judgment of foreclosure shall be $22,959.30.
6. Plaintiff is to delay for one year from the date of this order before applying to the Office of Foreclosure for entry of judgment, in order to allow plaintiff time to obtain a buyer for the property or to refinance from other sources.
7. Plaintiff shall pay to defendant’s counsel the sum of $26,165 for counsel fees and costs.
With these limitations imposed, the matter will be referred to the Office of Foreclosure for further proceedings.

Gerald C. Escala, J.S.C

NYTIMES-

Rises in housing prices have been profitable to private equity firms and institutional investors that bought foreclosed homes to flip them or to rent them out. Now the recovery in housing is fueling a niche market for newly minted bonds that are backed by the most troubled mortgages of them all: those on homes on the verge of foreclosure.

And it is not just vulture hedge funds swooping in to try to profit from the last remnants of the housing crisis. The investors making money off these obscure bonds — none are rated by a major credit rating agency — include American mutual funds. And one of the biggest sellers of severely delinquent mortgages to investors is a United States government housing agency.

The demand for securitizations of nonperforming loans illustrates Wall Street’s never-ending hunt for higher-yielding investment opportunities. The market also reflects in part an effort by regulators to close a chapter on the housing mess.

[NEW YORK TIMES]

WAYNE, Pa., Aug. 14, 2014 /PRNewswire/ —  Ryan & Maniskas, LLP announces that a securities fraud class action lawsuit in the United States District Court for the Southern District of Florida against Ocwen Financial Corporation (“Ocwen” or the “Company”) /quotes/zigman/1496154/delayed OCN +2.93% on behalf of investors who purchased or otherwise acquired the common stock of the Company during the period from May 2, 2013 through August 11, 2014 (the “Class Period”).

Ocwen shareholders may, no later than October 14, 2014, move the Court for appointment as a lead plaintiff of the Class.  If you purchased shares of Ocwen and would like to learn more about these claims or if you wish to discuss these matters and have any questions concerning this announcement or your rights, contact Richard A. Maniskas, Esquire toll-free at (877) 316-3218 or to sign up online, visit: www.rmclasslaw.com/cases/ocn .  You may also email Mr. Maniskas at rmaniskas@rmclasslaw.com .

Ocwen, through its subsidiaries, is engaged in the servicing and origination of mortgage loans in the United States and internationally. The Company’s Servicing segment provides residential and commercial mortgage loan servicing, special servicing, and asset management services to owners of mortgage loans and foreclosed real estate.

The Complaint brings forth claims for violations of the Securities Exchange Act of 1934. The Complaint alleges that throughout the Class Period, Defendants made false and/or misleading statements, as well as failed to disclose material adverse facts about the Company’s business, operations, and prospects.

Specifically, Defendants made false and/or misleading statements and/or failed to disclose a myriad of material information regarding the Company’s improper business and operational practices including, among other things, the fact that Ocwen’s mortgage servicing practices violated applicable regulations and laws; that the Company’s executives allowed related company Altisource Portfolio Solutions, S.A. (“Altisource”) — a company of which Defendant William C. Erbey, Ocwen’s Chairman of the Board, owns approximately 27% of its shares outstanding — to impose wholly unreasonable rates for services provided to Ocwen; and that Defendant William C. Erbey, along with other directors and officers, were directly involved in approving Ocwen’s conflicted transactions with Altisource. In addition, the Company’s financial results were artificially inflated during the Class Period, resulting in a restatement of the Company’s financial results.

Accordingly, Defendants issued materially false and misleading statements and omitted material information from Ocwen’s public disclosures, which failed to disclose, among other things, that: (i) Altisource was charging exorbitant fees to Ocwen to enable Defendants to funnel as much as $65 million in questionable fees; (ii) despite public representations to the contrary, Defendant Erbey was personally involved in approving conflicted transactions with Altisource and other related entities which he controlled; (iii) the Company failed to comply with applicable laws and regulations, including lending regulations designed to protect homeowners; (iv) the Company’s financial statements during the Class Period were artificially inflated and did not provide a fair presentation of the Company’s finances and operations; (v) the Company lacked adequate internal and financial controls; and (vi) as a result of the above, the Company’s financial statements were materially false and misleading at all relevant times.

If you are a member of the class, you may, no later than October 14, 2014, request that the Court appoint you as lead plaintiff of the class.  A lead plaintiff is a representative party that acts on behalf of other class members in directing the litigation.  In order to be appointed lead plaintiff, the Court must determine that the class member’s claim is typical of the claims of other class members, and that the class member will adequately represent the class.  Under certain circumstances, one or more class members may together serve as “lead plaintiff.”  Your ability to share in any recovery is not, however, affected by the decision whether or not to serve as a lead plaintiff.  You may retain Ryan & Maniskas, LLP or other counsel of your choice, to serve as your counsel in this action.

Ryan & Maniskas, LLP is a national shareholder litigation firm.  Ryan & Maniskas, LLP is devoted to protecting the interests of individual and institutional investors in shareholder actions in state and federal courts nationwide.

CONTACT:	Ryan & Maniskas, LLP
	Richard A. Maniskas, Esquire
	995 Old Eagle School Rd., Suite 311
	Wayne, PA 19087
	877-316-3218
	rmaniskas@rmclasslaw.com
	www.rmclasslaw.com/cases/ocn

Logo – http://photos.prnewswire.com/prnh/20121112/MM11729LOGO

SOURCE Ryan & Maniskas, LLP

Copyright (C) 2014 PR Newswire. All rights reserved

Huthsing v Dyck-O’Neal and Consuegra COMPLAINT

Dyck-O’Neal Power of Attorney

Happy to see jaxlawcenter.com representing the class!

UPDATE:

IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF FLORIDA
TAMPA DIVISION

DANELL A. HUTHSING., on behalf of
himself and all others similarly situated,
Plaintiff,
v.

LAW OFFICES OF DANIEL C. CONSUEGRA,
P.L., a Florida Professional Limited
Liability Company, and DYCK-O’NEAL, INC.,
a Texas Corporation.
Defendants.

CLASS ACTION COMPLAINT
Plaintiff, DANELL A. HUTHSING (hereinafter “Plaintiff”), by and through her
undersigned counsel, brings this suit against Defendants, LAW OFFICES OF DANIEL C.
CONSUEGRA, P.L., a Florida Professional Limited Liability Company, and DYCK-O’NEAL,
INC., a Texas Corporation, and alleges:

I. INTRODUCTION

1. This is a class action brought under the Fair Debt Collection Practices Act, 15
U.S.C. § 1692 et seq. (“FDCPA”).

2. This action arises out of Defendants’ systematic violations of the FDCPA’s venue
provision, and more specifically, by filing suit against Plaintiff and members the putative class in
venues other than where they reside, in  contravention of § 1692i(a).

[…]

Decided on August 12, 2014

2009-04422

Larry T. Powell, Esq.

Davidson Fink LLP

Attorneys for Plaintiff

28 East Main Street

Rochester, New York 14614

John Batanchiev, Esq.

Ian S. Wilder, Esq.

Long Island Housing Services Inc.

Attorneys for Defendant BRIAN DONO

640 Johnson Avenue

Bohemia, New York 11716
Jeffrey Arlen Spinner, J.

Plaintiff, through predecessor counsel Steven J. Baum P.C., commenced this action pursuant to Real [*2]Property Actions and Proceedings Law Article 13, claiming the foreclosure of a first mortgage which encumbers residential real property located at 77 Winchester Drive, Lindenhurst, Town of Babylon, Suffolk County, New York. In its Verified Complaint, the Plaintiff alleges that it is the owner and holder of an Adjustable Rate Note in the principal amount of $ 420,000.00 which is secured by a Mortgage, recorded with the Suffolk County Clerk. Plaintiff demands foreclosure of the Mortgage together with recovery of interest, costs, disbursements, attorney’s fees and a deficiency judgment. Defendant does not deny the default, instead freely admitting that the course of events which brings these parties before the Court occurred as a direct result of his incarceration. The Court recalls that prior to Defendant’s discharge from custody, his wife appeared at the settlement conferences in the exercise of a vain but honest attempt to reach an amicable disposition herein.

In compliance with the provisions of CPLR § 3408, a series of mandatory settlement conferences were held, upon which there were no less than 24 appearances before the Court. Indeed, as early as March 16, 2009, the Court’s records reflect that Defendant requested provision of the appropriate settlement conference package, apparently evincing his intention to attempt to reach an amicable resolution herein.

Defendant, through counsel, now moves this Court for an Order tolling interest and other costs on the mortgage debt, asserting that Plaintiff has failed to negotiate in good faith, as mandated by CPLR § 3408. Not surprisingly, Plaintiff vociferously opposes Defendant’s application, insisting that it has acted in good faith throughout the process and that there exists no basis for Defendant’s application.

In support of its application, Defendant submits the Affirmations of John Batanchiev Esq. and Ian S. Wilder Esq. together with the Affidavit of Brian Dono, supported by a number of exhibits as well as a Reply Memorandum of Law. Plaintiff has submitted the Affirmation of Larry T. Powell Esq. together with a Sur-Reply Affirmation but has not seen fit to provided proof from a party with actual knowledge. The Court is constrained to note that in the particular matter that is sub judice, Plaintiff has failed to appear through a representative during the mandatory settlement conference process, despite having been ordered to do so by the undersigned.

In essence, Defendant asserts, without any factual or admissible contravention by Plaintiff, that since at least October 1, 2010, he has fully complied with each and every document request received from Plaintiff’s various loan servicers, each of whom, it is claimed, have acted in bad faith. Defendant claims, again without contraversion by Plaintiff, that the real property that secures the loan has an approximate fair market value of $ 317,265.00 juxtaposed against a claimed balance due of $ 676,361.45. Defendant further states, once again without opposition, that Plaintiff has unreasonably and wrongfully delayed these proceedings by interposing multiple and duplicitous document demands, that Plaintiff and its servicers have willfully failed to comply with the applicable HAMP guidelines, to which its initial servicer was subject, by offering a “modified” payment equal to 70% of his gross monthly income while knowing that the “cap” was set at 31% within those guidelines, that Plaintiff surreptitiously conveyed the loan to a different, non-HAMP servicer so as to avoid being subject to the HAMP guidelines and which also caused the process to start anew, that Plaintiff failed and neglected to provide HAMP-compliant denials, that Plaintiff refused to consider Defendant’s reasonable counter-offer which fell well within HAMP guidelines and finally, that Plaintiff has refused to negotiate, instead propounding a “take it or leave it” modification which contained unconscionable terms including a waiver of defenses, counterclaims and setoff together with a reverter clause in the nature of a penalty. While Defendant’s sworn averments are supported by efficacious documentation together with Affirmations from two respected attorneys who possess actual and personal knowledge of this particular matter (both attorneys have appeared before the undersigned on multiple occasions with respect to this matter), Plaintiff has failed to submit any evidence whatsoever in opposition, instead relying upon counsel’s cavalier Affirmation.

Plaintiff’s opposition, distilled to its essence, consists solely of counsel’s stentorian albeit factually unsupported assertions that inasmuch as a mortgage is a contract, the Court may neither interfere with nor modify its terms; that since this proceeding is one sounding in equity this Court is bound to comply with the rules of equity (and hence must rule in Plaintiff’s favor), citing IndyMac Bank F.S.B. v. Yano-Horoski 78 AD3d 895 (2nd Dept. 2010) and Bank of America v. Lucido 114 AD3d 714 (2nd Dept. 2014), among others; that the Court may not force a settlement upon the parties; and finally, counsel refers this Court to the decision of a court of co-ordinate jurisdiction in such a manner as to strongly suggest that said opinion is controlling herein. Counsel urges this Court to summarily deny the relief sought by Defendant, stating that Plaintiff has asked for nothing more than that the note and mortgage be strictly enforced according to their terms and further, that it is Defendant who has acted in bad faith. None of these meretricious assertions are supported by so much as a scintilla of evidence and indeed, they are both factuallly inaccurate and decidedly fallacious. Counsel fails and neglects to substantively address any of Defendant’s efficacious claims, instead stridently admonishing this Court that it may not act in a manner that is based upon sympathy, citing Graf v. Hope Building Corp. 254 NY 1 (1930) and further strongly admonishing this Court that in view of the clear language of the note and mortgage, that this Court is “…not at liberty to revise while professing to construe” citing Sun Printing & Publishing Ass’n v. Remington Paper & Power Co. 235 NY 338 (1923).

Interestingly, the Affirmation of Plaintiff’s counsel does not state the basis upon which his bald and unsupported statements are based, other than his position as an associate with Plaintiff’s successor counsel. Again, the opposition submitted is quite conspicuous for its complete absence of any Affidavit of a party with actual knowledge herein and as counsel surely must be aware, an Affirmation of counsel, absent proof of actual first-hand knowledge, is wholly devoid of probative value, Barnet v. Horwitz 278 AD 700 (2nd Dept. 1951).

The decision in this matter is necessarily based upon and is controlled by the provisions of CPLR § 3408, which was promulgated by the Legislature in response to the mortgage foreclosure crisis that was (and is) facing New York homeowners. The statute, remedial in nature, was passed in 2008 and was substantially amended late in 2009.

The relevant portions for purposes of this decision are CPLR § 3408(a) & (f), which read, in pertinent part, as follows:

“(a) In any residential foreclosure action involving a home loan…in which the defendant is a resident

of the property subject to foreclosure, the court shall hold a mandatory conference…for the purpose

of holding settlement discussions pertaining to the relative rights and obligations of the parties under

the mortgage loan documents, including, but not limited to determining whether the parties can reach

a mutually agreeable resolution to help the defendant avoid losing his or her home, and evaluating

the potential for a resolution in which payment schedules or amounts may be modified or other

workout options may be agreed to, and for whatever other purposes the court deems appropriate.

“(f) Both the plaintiff and defendant shall negotiate in good faith to reach a mutually agreeable

resolution, including a loan modification, if possible.” CPLR 3408(a), (f)

While the express language of CPLR § 3408 appears clear on its face, the term “good faith” is nowhere defined in the statute. Too, the legislative history fails to reveal any clue at all as to the definition of this term. Instead, working within a statutory vacuum, various trial courts have assiduously attempted to give real meaning to this concept in the absence of any definition or other guidance. Both Defendant and Plaintiff have cited a plethora of case law in their respective papers, none of which is controlling, in view of a new decision from our Appellate Division, which was released subsequent to the submission of the instant [*3]application.

Instead, this Court finds itself inexorably guided by the decision in the matter of US Bank N.A. v. Jose Sarmiento

2014 NY Slip Op 05533, 2014 NY App Div LEXIS 5457 (2nd Dept., July 30, 2014). In a searching and thoughtful opinion by Justice Leventhal, the Appellate Division painstakingly explored and expounded upon the provisions and guidelines of HAMP, CPLR § 3408 and, most important, the concept of good faith as applied to the mandatory settlement conference process. For purposes of the matter at bar, this Court is only concerned with the issue of good faith. Indeed, the Appellate Division, in that opinion, has expressly and unequivocally stated that “…the issue of whether a party failed to negotiate in good faith’ within the meaning of CPLR 3408(f) should be determined by considering whether the totality of the circumstances demonstrates that the party’s conduct did not constitute a meaningful effort at reaching a resolution.”Therefore, this express language constitutes the yardstick by which this Court must measure the conduct of Plaintiff and Defendant in order to determine which party, if either, failed to act in good faith.

In accord with the ruling of the Appellate Division in US Bank N.A. v. Sarmiento, supra, close and careful examination and consideration of the totality of the circumstances reveals that Defendant has fully complied with Plaintiff’s various document demands on multiple occasions, that Defendant and/or his counsel have appeared on at least 24 occasions before the undersigned with respect to mandatory settlement conferences, that Plaintiff has failed to comply with the HAMP guidelines by offering a “modification” which was facially and obviously not affordable and which exceeded the applicable housing expense ceiling by 39%, that Plaintiff failed and refused to negotiate at all with Defendant, that Plaintiff failed and refused to produce a representative in court despite a Court order to do so, that Plaintiff conveyed the loan to a different servicer which engendered further delay in that the process had to begin anew, all of which has inured to the detriment of Defendant. Since October 1, 2010, interest has continued to accrue at an adjustable rate of not less (and possibly greater) than 8.2% together with the accrual of added costs, disbursements and, presumably, a claim for reasonable counsel fees.

Based upon the totality of circumstances, this Court is constrained to find that Plaintiff, and the servicers acting upon its behalf, have acted in bad faith throughout the mandatory settlement conference process, as “bad faith” has been defined in US Ban k N.A. v. Sarmiento, supra, thus inexorably warranting the granting of Defendant’s application.

It is, therefore,

ORDERED that Defendant’s application shall be and is hereby granted in its entirety; and it is further

ORDERED that all interest, disbursements, costs and attorneys fees which have accrued upon the loan at issue since October 1, 2010 shall be and the same are hereby permanently abated, shall not be a charge on account of or to the detriment of Defendant and that Plaintiff and any assignee is forever barred, prohibited and foreclosed from recovering the same from Defendant; and it is further

ORDERED that such abatement shall continue in futuro and that no further interest, disbursements, costs or attorney’s fees shall accrue or be chargeable to Defendant absent further Order of this Court; and it is further

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

ORDERED that Defendant’s counsel shall, within twenty one days after entry hereof, serve a copy of this Order with Notice of Entry upon all parties in this action as well as all counsel who have appeared in [*4]this action.

Dated: August 12, 2014

Riverhead, New York

E N T E R:

______________________________________

JEFFREY ARLEN SPINNER, J.S.C.

In the
Supreme Court of the United States

ALBERTO C. TIMOSAN, SIMPLICIA C. TIMOSAN,
ARIEL TIMOSAN, ARCHANGEL TIMOSAN
and AILYN T. OUNYOUNG,
Petitioners,

vs.

THE BANK OF NEW YORK MELLON TRUST
COMPANY, NATIONAL ASSOCIATION, FKA THE
BANK OF NEW YORK TRUST COMPANY, N.A. AS
SUCCESSOR TO JPMORGAN CHASE N.A. AS
TRUSTEE FOR RAMP 2OO5RS9,
Respondent.

On Petition For Writ Of Centiorari
To The Supreme Court Of The State Of Hawaii

PETITION FOR WRIT OF CERTIORARI

GARY VICTOR DUBIN
FREDERICK J. ARENSMEYER
Counsel of Record for Petitioners
DUBIN Law Offices
55 Merchant Street, Suite 3100
Honolulu, Hawaii 96813
Telephone: (808) 537-2300
Facsimile: (808) 523-7733
E -Mail: gdubin@dubinlaw.net
E-Mail: farensmeyer@dubinlaw. net

QUESTION PRESENTED
Is it a violation of the Due Process Clauses of the
Fifth and Fourteenth Amendments to the United
States Constitution for a federal or state court
through state action to deprive property owners of
title to and possession and enjoyment of real
property by enforcing a nonjudicial or judicial
foreclosure against their economic interests based
solely on recorded mortgages and recorded mortgage
assignments without first also requiring proof by a
foreclosing mortgagee of the location, ownership and
validity of their underlying promissory note?

Contacts

Kahn Swick & Foti, LLC
Lewis Kahn, 1-877-515-1850
Managing Partner
lewis.kahn@ksfcounsel.com
or
Melinda Nicholson, 1-877-515-1850
Partner
melinda.nicholson@ksfcounsel.com

Accuser in scandal involving Shurtleff and Swallow says conspiracy harmed thousands of Utah homeowners in foreclosure dispute.

The Salt Lake Tribune-

A key player in the scandal surrounding Mark Shurtleff and John Swallow is suing the former attorneys general, alleging they conspired with Bank of America to derail a major foreclosure lawsuit, harming thousands of Utahns who could have benefited from the case.

Darl McBride — who had previously been in the news because of a recorded meeting in which Shurtleff offered to get him $2 million if he would stop his online criticism of a developer — and his wife, Andrea, filed the lawsuit last week in 3rd District Court.

The McBrides’ suit, drawing on criminal charges leveled last month against Shurtleff and Swallow, alleges Shurtleff dismissed a lawsuit challenging Bank of America’s foreclosure practices in exchange for a job with a Washington, D.C., lobbying firm that had represented the financial giant.

[THE SALT LAKE TRIBUNE]

image: utahpoliticalcapitol.com

Published on Aug 12, 2014

Aug. 12 (Bloomberg) — Actor Robin Williams died Tuesday at age 63 of suspected suicide. This is a clip of Charlie Rose’s interview with Williams from 2009 when the comic was getting back into stand-up for HBO’s “Weapons of Self Destruction.” “Charlie Rose” airs weeknights on Bloomberg Television at 8p & 10p ET.

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Andrew M. Cuomo
Governor

Benjamin M. Lawsky
Superintendent

August 4, 2014

Timothy Hayes
General Counsel
Ocwen Financial Corporation
1661 Worthington Road, Suite 100
West Palm Beach, FL 33409

Dear Mr. Hayes:
As part of the Department’s ongoing examination of Ocwen’s mortgage servicing practices, we are reviewing a troubling transaction involving Ocwen’s related company, Altisource Portfolio Solutions, S.A. (“Altisource”), and the provision of force-placed insurance. Indeed, this complex arrangement appears designed to funnel as much as $65 million in fees annually from already-distressed homeowners to Altisource for minimal work. Additionally, the role that Ocwen’s Executive Chairman William C. Erbey played in approving this arrangement appears to be inconsistent with public statements Ocwen has made, as well as representations in company SEC filings. As discussed below, we require certain information about this force-placed insurance arrangement and about Mr. Erbey’s role in approving the arrangement.

Background
As you know, the Department has previously expressed concerns about Ocwen’s use of related companies to provide fee-based services such as property inspections, online auction sites, foreclosure sales, real estate brokers, debt collection, and many others. Because mortgage servicing presents the extraordinary circumstance where there is effectively no customer to select a vendor for ancillary services, Ocwen’s use of related companies to provide such services raises concerns about whether such transactions are priced fairly and conducted at arms-length.

The Department now seeks additional information about Ocwen’s provision of force-placed insurance through related companies. As you are aware, the Department’s recent investigation into force-placed insurance revealed that mortgage servicers were setting up affiliated insurance agencies to collect commissions on force-placed insurance, and funneling all of their borrowers’ force-placed business through their own agencies, in violation of New York Insurance Law section 2324’s anti-inducement provisions.

The Department discovered that servicers’ own insurance agencies had an incentive to purchase force-placed insurance with high premiums because the higher the premiums, the higher the commissions kicked back by insurers to the servicers or their affiliates. The extra expense of higher premiums, in turn, can push already struggling families over the foreclosure cliff. In light of this investigation, the Department last year imposed further prohibitions on these kickbacks to servicers or their affiliates.

However, as part of our broader review of ancillary services provided by non-bank mortgage
servicers, we are concerned that certain non-bank mortgage servicers are seeking to side-step
those borrower protections through complex arrangements with subsidiaries and affiliated
companies. Indeed, in recent weeks, we halted one such arrangement at another non-bank
mortgage servicing company.

Agreements with SWBC and Altisource
Based on its investigation and through the Monitor’s work, the Department understands that
Ocwen’s force-placed arrangement with Altisource features the use of an unaffiliated insurance
agent, Southwest Business Corporation (“SWBC”), apparently as a pass-through so that Ocwen
and Altisource are not directly contracting with each other, but Altisource can still receive
insurance commissions and certain fees seemingly for doing very little work.

These are the facts established by documents Ocwen provided to the Monitor: In August 2013,
Ocwen appointed an Altisource subsidiary called Beltline Road Insurance Agency, Inc.
(“Beltline”) as its exclusive insurance representative, purportedly to negotiate and place a new
force-placed insurance program for Ocwen. Ocwen’s existing force-placed arrangement with the
insurer Assurant was set to expire in March 2014, and Beltline’s stated task was to find an
alternative arrangement. In January 2014, Altisource provided a memo to the Credit Committee
of Ocwen Mortgage Servicing, Inc., recommending, among other things, replacing Assurant with
SWBC as Ocwen’s managing general agent. SWBC would then be charged with managing
Ocwen’s force-placed insurance program, including negotiating premiums with insurers. As part
of this arrangement, Altisource recommended itself to provide fee-based services to SWBC.

In emails dated January 15 and 16, 2014, the transaction was approved by the three members of
the Credit Committee: William Erbey, Duo Zhang, and Richard Cooperstein. The Credit
Committee did not meet to discuss this proposal, no minutes were taken of the Credit
Committee’s consideration of this proposed transaction, and the proposed transaction apparently
was not presented for review or approval to any member of the Ocwen Board of Directors except
Mr. Erbey, as Mr. Zhang and Mr. Cooperstein are not members of the Ocwen Board of
Directors.

Just one month after this Credit Committee approval, on February 26, 2014, the company
received the Department’s letter raising concerns about potential conflicts of interest between
Ocwen and its related public companies. In that letter, we identified facts that “cast serious
doubts on recent public statements made by the company that Ocwen has a ‘strictly arms-length
business relationship’ with those companies,” and we specifically referenced the multiple roles
played by Mr. Erbey as an area of concern.

Disregarding the concerns raised in our letter, Ocwen proceeded to execute contracts formalizing
this new force-placed arrangement, apparently without further consideration by any Board
member other than Mr. Erbey. Those contracts, dated as of June 1, 2014, indicate that Altisource
will generate significant revenue from Ocwen’s new force-placed arrangement while apparently
doing very little work. Indeed, a careful review of these and other documents suggests that
Ocwen hired Altisource to design Ocwen’s new force-placed program with the expectation and
intent that Altisource would use this opportunity to steer profits to itself.

First, Altisource will reap enormous insurance commissions for having recommended that Ocwen hire SWBC. Under the contracts, Ocwen promises to give its force-placed insurance business to SWBC. SWBC does the work of negotiating premiums, preparing policies, and handling renewals and cancellations. For these services, SWBC receives commissions from insurers. SWBC then passes on a portion of those commissions, constituting 15% of net written premium on the policies, to Altisource subsidiary Beltline, for “insurance placement services.” Documents indicate that Ocwen expects to force-place policies on its borrowers in excess of $400 million net written premium per year; a 15% commission on $400 million would be $60 million per year. It is unclear what insurance placement services, if any, Altisource is providing to justify these commissions.

Second, Altisource will be paid a substantial annual fee for providing technology support that it appears to be already obligated to provide. This fee relates to monitoring services, whereby Ocwen pays a company to monitor whether its borrowers’ insurance remains in effect. Such monitoring is necessary to establish which borrowers have lapsed on their payments and need to have insurance force-placed upon them. Prior to 2014, Ocwen was paying ten cents per loan per month to Assurant for monitoring. In this new arrangement, however, Ocwen agrees to pay double the prior amount – twenty cents per loan per month now paid to SWBC, for each of the approximately 2.8 million borrowers serviced by Ocwen. SWBC, in turn, agrees to pass on fifteen out of that twenty cents to Altisource, or an estimated $5 million per year. Altisource provides only one service in exchange for this fee: granting SWBC access to Ocwen’s loan files. Altisource, of course, only has access to Ocwen’s loan files through its own separate services agreements with Ocwen, which appear to contractually obligate Altisource to provide this access to business users designated by Ocwen to receive such access.

Third, the contracts require SWBC to use Altisource to provide loss draft management services for Ocwen borrowers; to pay Altisource $75 per loss draft for these services; and to pay Altisource an additional $10,000 per month for certain other services.
In an effort to better understand this arrangement, the Department requests that Ocwen provide the following information and documents:

1. Is Altisource already obligated to provide access to Ocwen’s loan files to SWBC pursuant to separate agreements with Ocwen? If your answer is no, please specifically explain how the Technology Products Letter between Ocwen and Altisource, produced to the Department beginning at OFC00002496, does not impose this obligation.
2. What services, if any, does Altisource or its subsidiary provide to SWBC in exchange for SWBC paying the Altisource subsidiary a commission of 15% of insurance premiums? In addition, it appears that payment of this commission excludes premium generated by policies issued on properties in New York State. Please describe the negotiations that resulted in this exclusion, and identify any alternate compensation to be paid to Altisource or any affiliate to make up for the excluded commissions on New York properties.
3. What services, if any, does Altisource provide to SWBC in exchange for SWBC paying Altisource fifteen cents per loan per month?
4. What services, if any, does Altisource provide to SWBC in exchange for an additional $10,000 per month?
5. Under what circumstances do Ocwen policies and procedures permit approval of transactions solely through the Credit Committee? Did this force-placed insurance arrangement meet those requirements? Do Ocwen policies and procedures require any additional review or approvals for transactions involving related companies? If so, did Ocwen engage in that review or obtain those approvals for this arrangement?
6. Were any options presented to the Credit Committee other than the proposed SWBC transaction? If so, did all such options feature the retention of Altisource to provide fee-based services? Or were options presented that did not involve payments to Altisource?
7. Throughout this process, did members of the Credit Committee or any Ocwen personnel give any consideration to the impact that Altisource fees and commissions would have in increasing insurance premiums to be paid by struggling families?
8. After the Credit Committee approved Altisource’s January 2014 proposal for Ocwen’s new forced-placed insurance program, it appears that certain changes were made to the proposal, including an expansion of SWBC’s and Altisource’s roles in the program and their associated compensation. Please describe those changes and the negotiations that led to those changes, and identify all personnel involved in negotiating and approving those changes.
9. What process resulted in the August 2013 appointment of Altisource’s subsidiary as Ocwen’s exclusive insurance representative? Was this process competitive? What Ocwen Board members or personnel were involved in this appointment? Which Board members, if any, authorized this appointment? Did those Ocwen Board members or personnel know or anticipate that Altisource would return with a plan that would appear to be highly profitable for itself?
10. What amount of revenue has Altisource or its affiliates realized, and what amount of revenue is it projected to realize, from the services it is providing pursuant to this force-placed insurance arrangement? What are its costs for providing those services? How many employees at Altisource or its subsidiaries work on providing those services, and how much of their time is dedicated to this work?
11. Altisource’s presentation to the Credit Committee stated that “Altisource will establish its own managing general underwriter during 2014 to provide LPI underwriting services starting in 2015.” Please explain Altisource’s intention to establish a managing general underwriter, state whether Ocwen supports Altisource’s plan, and explain how this development will affect Ocwen’s force-placed program, Altisource’s revenue, and the fees to be charged to Ocwen borrowers or mortgage investors.

Ocwen’s Public Statements Concerning Transactions with Related Companies

In addition to the issues raised above, the Department has serious concerns about the apparently conflicted role played by Ocwen Executive Chairman William Erbey and potentially other Ocwen officers and directors in directing profits to Altisource, which is “related” to Ocwen but is formally a separate, publicly-traded company. As you know, Mr. Erbey is Ocwen’s largest shareholder and is also the Chairman of and largest shareholder in Altisource. In fact, Mr. Erbey’s stake in Altisource is nearly double his stake in Ocwen: 29 percent versus 15 percent. Thus, for every dollar Ocwen makes, Mr. Erbey’s share is 15 cents, but for every dollar Altisource makes, his share is 29 cents.
The Department and its Monitor have uncovered a growing body of evidence that Mr. Erbey has approved a number of transactions with the related companies, despite Ocwen’s and Altisource’s public claims – including in SEC filings1 – that he recuses himself from decisions involving related companies. Mr. Erbey’s approval of this force-placed insurance arrangement as described above appears to be a gross violation of this supposed recusal policy.

12. Please explain how and why Mr. Erbey approved the arrangement between Ocwen, SWBC, and Altisource.
13. Please provide every instance where Mr. Erbey has approved a transaction involving a related company notwithstanding Ocwen’s statements to the contrary.
Finally, Ocwen and Altisource state in their public filings that rates charged under agreements with related companies are market rate,2 but Ocwen has not been able to provide the Monitor with any analysis to support this assertion.
14. Please advise whether Ocwen has performed any independent analysis to determine whether the rates charged in the SWBC arrangement are market rate.
15. Please address whether Ocwen has performed any independent analysis to support the assertion that the rates charged under other related party agreements are market rate.

We intend to fully review all of the issues raised above. Please also provide documents that support your responses. We ask and expect that Ocwen will preserve all documents concerning the matters discussed in this letter.
Sincerely,
Benjamin M. Lawsky Superintendent of Financial Services
cc: William C. Erbey, Executive Chairman, Ocwen Board of Directors
Ronald M. Faris, Ocwen Board of Directors
Ronald J. Korn, Ocwen Board of Directors
William H. Lacy, Ocwen Board of Directors
Wilbur L. Ross, Jr., Ocwen Board of Directors
Robert A. Salcetti, Ocwen Board of Directors
Barry N. Wish, Ocwen Board of Directors
Mitra Hormozi, Zuckerman Spaeder LLP
James Sottile, Zuckerman Spaeder LLP

The Future of the Private Label Securities Market

David J. Reiss, Brooklyn Law School

Abstract

The PLS market, like all markets, cycles from greed to fear, from boom to bust. The mortgage market is still in the fear part of the cycle and recent government interventions in it have, undoubtedly, added to that fear. In recent days, there has been a lot of industry pushback against the government’s approach, including threats to pull out of various sectors. But the government should not chart its course based on today’s news reports. Rather, it should identify fundamentals and stick to them. In particular, its regulatory approach should reflect an attempt to align incentives of market actors with government policies regarding appropriate underwriting and sustainable access to credit. The market will adapt to these constraints. These constraints should then help the market remain healthy throughout the entire business cycle.

Palm Beach Post-

Not mentioned in today’s story about Fannie Mae going after former homeowners who still owe unpaid mortgage balances is the law firm handling the cases.

The Tampa-based Law Offices of Daniel C. Consuegra was hired to file the deficiency judgments in court for the company Dyck O’Neal, which is acting on the behalf of Fannie Mae.

Consuegra is one of multiple so-called “foreclosure mills” that became a target in 2010-2011 as it came to light that lenders were not properly documenting foreclosure paperwork and used “robo-signers” to attest to the veracity of documents that they had not read.

[PALM BEACH POST]

Palm Beach Post-

The fight for their home ended long ago with the fall of a foreclosure court gavel — or so they thought.

This summer, hundreds of South Florida residents are facing new foreclosure ramifications as banks pursue the unpaid mortgage debt for homes that were sold at the auction block up to five years before.

In a month-long period beginning June 1, about 110 lawsuits were filed in Palm Beach County against former homeowners by a Texas-based debt collection company named Dyck O’Neal. The same firm filed more than 300 cases in Broward County and nearly 200 in Miami-Dade County.

[PALM BEACH POST]

For those of you who don’t know.  Jessica Ticktin, daughter of Peter Tickin, the well known FD attorney, is running to unseat Judge Lewis in WPB.

Link to Jessica’s website: http://ticktinforjudge.com/

Jessica TICKTIN
For Circuit Court Judge

Jessica Ticktin is a longtime resident of Florida and has been a practicing lawyer in Palm Beach County for the past 10 years.

Jessica knows that almost all of our circuit court judges are superb, and do an excellent job managing their caseloads while maintaining control of the courtroom with a high level of dignity and respect.

Jessica also knows we need a strong, efficient, and respectful judge in the Group 14 seat. That is why Jessica filed to be our next Circuit Court Judge. Jessica will be a fair and impartial judge who will treat both lawyers and litigants with the respect they deserve.

As the Managing Partner of a successful mid-size law firm with 24 attorneys, Jessica has handled a wide variety of cases including family law, contract law, and other types of general civil litigation.

Jessica will use that experience to be a fair and impartial judge who will listen to the facts and evidence before her, consider the applicable laws, and make fair decisions that are grounded in the law and tempered with common sense. 

Jessica has the qualifications, experience, temperament, and wisdom that it takes to make a great Circuit Court Judge.

Please join us and vote for Jessica Ticktin for Circuit Court Judge, Group 14.

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HuffPO-

Eleven of the nation’s largest banks have failed to convince federal regulators they could safely be wound down if they neared failure, government authorities said Tuesday, reinforcing the idea that they are too big to fail.

The Federal Deposit Insurance Corp. said October blueprints submitted by banks, including JPMorgan Chase, Goldman Sachs and Bank of America, detailing how they think they’d be resolved in bankruptcy if they neared collapse were “not credible.” The Federal Reserve, another bank regulator, said the so-called living wills need significant improvement by July 2015 or the government may force them to shrink.

“Each plan being discussed today is deficient and fails to convincingly demonstrate how, in failure, any one of these firms could overcome obstacles to entering bankruptcy without precipitating a financial crisis,” Thomas Hoenig, FDIC vice chairman, said in a statement. “Despite the thousands of pages of material these firms submitted, the plans provide no credible or clear path through bankruptcy that doesn’t require unrealistic assumptions and direct or indirect public support.”

[HUFFINGTONPOST]

image: www.pocketinfo.net

After the millions that lost their homes…here’s what I have to say. YAWN! Don’t hold your breath.

WAPO-

Some struggling homeowners may soon have a shot at securing a type of mortgage relief that’s been off limits to them for years.

The mortgage finance giant Freddie Mac has agreed to sell a chunk of its most troubled loans to an unnamed investor. That investor can now turn around and reduce the size of the borrowers’ mortgages if it chooses –- an option that would not have been possible had the loans stayed with Freddie.

Freddie, its larger rival Fannie Mae, and their regulator have steadfastly refused to allow such “principal reductions,” fearing in part that the arrangements would entice homeowners to intentionally default on their mortgages so they can get better deals.

[WASHINGTON POST]

More straw-men…companies.

WaPO-

Companies overseeing millions of mortgage loans appear to be skirting new federal regulations and legal settlements intended to stop them profiteering at the expense of troubled homeowners.

They are selling or have sold nearly nonexistent insurance agencies — in some cases with no offices, no websites and only a single registered agent — in multi-million dollar deals, as new rules prohibit them from collecting commissions on insurance they force homeowners to buy.

The deals illustrate how regulators are still wrestling with messy banking practices more than six years after the housing market’s collapse. They also mean that newly sold insurance agencies have an incentive to compel struggling homeowners to buy costly policies, to justify the high sales prices commanded when the insurance agencies were sold.

[WASHINGTON POST]

Whether the Truth in Lending Act entitles homeowners to rescind their mortgage commitment by notifying the lender in writing within the period specified by the statute, or whether the homeowner must file a lawsuit to make the rescission effective.

The Truth in Lending Act was designed to protect homeowners by allowing them to rescind their mortgage commitment by written notice to the lender so long as they do so within the statutorily specified period.  Nothing in the language of the statute or implementing regulations that have been in force for four decades supports the lender’s argument in this case that a lawsuit is necessary in order to rescind. Joining with other advocacy groups, the ACLU’s amicus brief points out, in addition, that further restricting a homeowner’s opportunity to rescind will increase foreclosures and have a particularly devastating effect on communities of color.

Legal Docs

Case is here:US BANK NATIONAL ASSOCIATION v SARMIENTO | NY Appellate Div, 2nd Dept. – we hold that the Supreme Court properly concluded that the plaintiff failed to negotiate in good faith and that the Supreme Court had the authority to sanction the plaintiff for that failure

NYPOST –

In a decision that will have enormous ripple effects through local foreclosure cases, a powerful New York court hit Wells Fargo for failing to negotiate in good faith with Brooklyn borrower José Sarmiento.

The smackdown came as the court affirmed an earlier ruling on the issue, and upheld sanctions preventing Wells from collecting interest and fees on the loan since December 2009 and legal fees in this action — a total of roughly $300,000, according to estimates by Sarmiento’s attorney, David Fuster.

Sarmiento endured 18 rounds of settlement negotiations with Wells, which “delayed and prevented resolution of the action,” according to the decision.

[NEW YORK POST]

Supreme Court of the State of New York
Appellate Division: Second Judicial Department

D39377
W/hu
AD3d Argued – June 6, 2013
REINALDO E. RIVERA, J.P.
PETER B. SKELOS
JOHN M. LEVENTHAL
PLUMMER E. LOTT, JJ.

2012-03513 OPINION & ORDE

Hogan Lovells US LLP, New York, N.Y. (David Dunn and Nathaniel E. Marmon of counsel), for appellant.

Fuster Law, P.C., Long Island City, N.Y. (J. A. Sanchez-Dorta of counsel), for respondent.

Before: Reinaldo E. Rivera, J.P. Peter B. Skelos John M. Leventhal Plummer E. Lott, JJ.

APPEAL by the plaintiff, in an action to foreclose a mortgage, from so much of an order of the Supreme Court (Leon Ruchelsman, J.), dated December 19, 2011, and entered in Kings County, as, upon a finding that the plaintiff failed to negotiate in good faith during settlement conferences conducted pursuant to CPLR 3408, granted the motion of the defendant Jose Sarmiento to bar the plaintiff from collecting interest or fees that accrued on the subject loan since December 1, 2009, to bar the plaintiff from recovering from him any costs or attorneys’ fees it incurred in this action, and to direct the plaintiff to review the issue of whether the subject loan may be eligible for a loan modification pursuant to the Home Affordable Modification Program by employing correct information and without regard to interest or fees that have accrued on the subject loan since December 1, 2009.

LEVENTHAL, J.

OPINION & ORDER

On appeal in this mortgage foreclosure action, the plaintiff contends that the Supreme Court erred in determining that it failed to negotiate in good faith during mandatory settlement conferences conducted pursuant to CPLR 3408, and that, in any event, the Supreme Court lacked the authority to impose any sanctions against it on the ground that it violated the “good faith” requirement of CPLR 3408(f). In addressing these contentions, we set forth the proper standard for determining whether a party acted in good faith pursuant to CPLR 3408(f). Further, we hold that the Supreme Court properly concluded that the plaintiff failed to negotiate in good faith and that the Supreme Court had the authority to sanction the plaintiff for that failure.

In May 2009, the plaintiff, as successor trustee to Bank of America, National Association (Successor by Merger to LaSalle Bank National Association), as trustee for Morgan Stanley Mortgage Loan Trust, 2007-2AX, commenced this action in the Supreme Court, Kings County, to foreclose a mortgage secured by residential property located in Brooklyn. In the complaint, the plaintiff alleged that the defendant homeowner, Jose Sarmiento, defaulted on the subject mortgage by failing to make the monthly payment due on October 1, 2008. The plaintiff elected to call due the entire amount secured by the mortgage, in the principal sum of $578,388.75, plus interest at an annual rate of 8.25%, accruing from September 1, 2008. Issue was joined by Sarmiento’s service of a pro se verified answer dated July 17, 2009, which was accompanied by a notice to produce documents.

In an affidavit, Sarmiento averred that, in May 2008, he lost much of his monthly income and that, as a consequence, he was unable to make his monthly mortgage payment due on October 1, 2008, and the payments due thereafter. In September 2008, Sarmiento contacted America’s Servicing Company (hereinafter ASC), the mortgage servicing agent of the lender, and a wholly owned subsidiary of Wells Fargo Bank, N.A. (hereinafter together ASC/Wells), in order to discuss a loan modification. Sarmiento was told that he did not qualify for a loan modification because he had insufficient income. In February 2009, Sarmiento found an additional tenant for the subject property, and began receiving monthly rental income in the sum of $4,652. According to Sarmiento, notwithstanding his augmented income, ASC/Wells repeatedly refused to modify his loan.

In September 2009, this matter was referred to a Court Attorney Referee for a mandatory settlement conference pursuant to CPLR 3408. Sarmiento initially appeared pro se at the settlement discussions, and later obtained pro bono counsel. ACS/Wells, through their counsel,^[1] appeared at the settlement discussions on behalf of the plaintiff. From September 14, 2009, to January 14, 2011, 18 settlement conferences were held. What transpired during the settlement conferences is detailed in the report of the Court Attorney Referee, dated April 20, 2011.

The Court Attorney Referee’s Report

The report of the Court Attorney Referee set forth the following facts. On October 29, 2009, Sarmiento submitted to ACS/Wells a Home Affordable Mortgage Program (hereinafter HAMP) application^[2]. On November 18, 2009, upon the request of ASC/Wells, Sarmiento submitted updated financial documents. According to the Court Attorney Referee, Sarmiento met the basic criteria for HAMP eligibility since: (1) the subject property was a one-to-four-family residence; (2) Sarmiento’s monthly mortgage payment of principal, interest, property tax, and insurance exceeded 31% of his gross monthly income; and (3) the principal balance of the loan was equal to or less than $729,750.

At a settlement conference held on November 30, 2009, ASC/Wells confirmed that it had received Sarmiento’s HAMP application and his updated financial documents, and represented that it would make a decision on the application within one week, even though it had 30 days to make that decision. Upon her review of Sarmiento’s income, the Court Attorney Referee directed him to set aside the sum of $2,000 per month beginning December 1, 2009, to demonstrate his good faith and his ability to make modified mortgage payments and, if necessary, to use as a down payment on a non-HAMP, traditional loan modification.

First HAMP Denial

By letter dated January 12, 2010, ASC/Wells denied Sarmiento’s HAMP application on the ground that he did not reside at the subject property as his primary residence. After Sarmiento asserted that there was no factual basis for ASC/Wells to have concluded that the property was not his primary residence, ASC/Wells conceded that Sarmiento resided at the property.

At a settlement conference conducted on February 2, 2010, ASC/Wells reported that Sarmiento’s HAMP application was complete and still under review. ASC/Wells asserted, however, that it required a broker’s price opinion (hereinafter BPO) to determine the value of the property, which was necessary before a Net Present Value (hereinafter NPV) test could be conducted under HAMP. The NPV test would determine whether a loan modification or a foreclosure sale was more lucrative to the mortgage lender/investor.

Second HAMP Denial

By letter dated April 2, 2010, ASC/Wells advised Sarmiento that his HAMP application was again denied, this time on the ground that an affordable monthly payment amount—equal to or less than 31% of gross monthly income—could not be reached. In an email message from ASC/Wells’s counsel to Sarmiento’s counsel, ASC/Wells stated that Sarmiento’s HAMP application was denied because of a monthly income deficit of $1,100. According to the Court Attorney Referee, “Servicer ASC/Wells was evaluating . . . Sarmiento for a [HAMP] modification using the wrong income figures, although the defense thoroughly documented the employment and rental income that . . . Sarmiento and his wife earned each month.” By letter dated April 7, 2010, Sarmiento’s counsel informed ASC/Wells of this error, and referred ASC/Wells to Sarmiento’s previously submitted pay stubs, bank statements, and rental agreements, which reflected a gross monthly income of $6,303. Sarmiento’s counsel further requested a denial notice with greater specificity than set forth in the denial letter of April 2, 2010. Pursuant to Sarmiento’s rights under HAMP, his counsel requested that ASC/Wells produce the inputs and data that ASC/Wells used in performing the NPV test.

In an email message dated April 9, 2010, ASC/Wells advised Sarmiento’s counsel that it had never conducted an NPV test on Sarmiento’s HAMP application because the file had not reached the NPV calculation phase, and that the denial was “due to [an inability to] reach an affordable payment.” By letter dated April 12, 2010, Sarmiento’s counsel reiterated his objections to the HAMP denials, and requested “that ASC/Wells comply with HAMP guidelines and complete its modification review.”

At a settlement conference held on April 13, 2010, and by letter dated April 22, 2010, Sarmiento requested a proper review of his HAMP application. According to the Court Attorney Referee, ASC/Wells replied that it “had misplaced income documentation” and that some other documentation had become “stale.” As a consequence of its characterization of the status of the documentation, ASC/Wells requested that Sarmiento submit a new HAMP application. The Court Attorney Referee instructed Sarmiento’s counsel to resubmit and update the HAMP application, and directed “ASC/Wells to escalate and expedite the HAMP review.” Sarmiento submitted an updated HAMP application to ASC/Wells on April 26, 2010.

Third HAMP Denial

At a settlement conference held on May 11, 2010, ASC/Wells reported that it had “escalated” review of Sarmiento’s HAMP application, and that such review was still incomplete. Two days later, however, ASC/Wells informed Sarmiento’s counsel, in an email message, that it was again denying his HAMP application “due to not being able to reach affordability.” The email message further stated the “this property is not affordable,” and requested Sarmiento’s counsel to “refer the borrower to our liquidations department for further foreclosure prevention options.” According to the Court Attorney Referee, the email message dated May 13, 2010, “failed and refused to demonstrate that Sarmiento was ineligible for a HAMP modification.”

By letter dated May 28, 2010, Sarmiento’s counsel requested more specific information about the denial, and again demanded the inputs and data that ASC/Wells used to conduct the NPV test in connection with Sarmiento’s HAMP application. ASC/Wells did not provide the requested information. The Court Attorney Referee observed that, “[a]lthough HAMP guidelines require production of the NPV inputs upon request so that borrowers can review the propriety of a denial and challenge the accuracy of the NPV inputs, Services ASC/Wells ignored[] the written requests [from Sarmiento’s counsel] for the data, and failed to produce the NPV values. Indeed, ASC/Wells failed to demonstrate that an NPV test had, in fact, been run.”

As set forth in the report of the Court Attorney Referee, on June 2, 2010, Sarmiento filed a formal complaint against ASC/Wells with the HAMP support center on the ground that ASC/Wells refused to properly assess his HAMP application. On June 8, 2010, the HAMP support center advised Sarmiento that ASC/Wells had denied his HAMP application because he had $25,000 in liquid assets, which exceeded the maximum limit. The report of the Court Attorney Referee noted, however, that the $25,000 reflected funds which she had previously directed Sarmiento to set aside.

Nevertheless, at a settlement conference held on July 1, 2010, ASC/Wells reported that Sarmiento’s HAMP application was “still under review,” and that this review would be completed no later than two weeks after that date. ASC/Wells added that the funds that Sarmiento set aside at the direction of the Court Attorney Referee would not affect his HAMP application. Sarmiento’s counsel made a third request for the inputs and data that ASC/Wells used in the NPV test; ASC/Wells replied that it “did not have the NPV inputs because the latest denial related to a non-HAMP modification.” The Court Attorney Referee adjourned the settlement conference until July 19, 2010, to await the results of ASC/Wells’s review of Sarmiento’s HAMP application.

At the settlement conference held on July 19, 2010, ASC/Wells reported that it had not completed its HAMP review. Moreover, consistent with the statement of the HAMP support center dated June 8, 2010, counsel for ASC/Wells reported that ASC/Wells had previously denied Sarmiento’s HAMP application because of “excess resources.” The Court Attorney Referee stated that, “[i]n light of the repeated delays, the baseless denials, and obvious mishandling of the loan file by both ASC/Wells and [counsel for ASC/Wells] before a HAMP review was even done, I directed an ASC/Wells representative with personal knowledge and settlement authority to appear in person at the next settlement conference.”

At the next settlement conference, which was held on September 14, 2010, Eliza Melendez of ASC/Wells appeared, and explained that “Sarmiento’s HAMP application was still under review and that a new BPO was required to value the [property] for the NPV test.” The Court Attorney Referee described Melendez as having limited knowledge of Sarmiento’s file, and no settlement authority. Sarmiento’s counsel asserted that ASC/Wells should waive at least nine months of accrued interest because of the “inexplicable delays” in ASC/Wells’s HAMP review. The Court Attorney Referee directed the vice president of ASC/Wells to personally appear at the next settlement conference.

The next settlement conference was held on September 28, 2010. At that time, Tracy Brooks, a Loan Administration Manager in the Home Preservation Department of ASC/Wells, personally appeared, and she reported that the HAMP review was incomplete because Sarmiento had not submitted certain documents. However, when Brooks accessed Sarmiento’s loan file on her personal laptop computer, she confirmed that the file was complete. Upon Brooks’s request, she was allowed to review the file overnight. The next day, Brooks reported that ASC/Wells needed a property tax bill and a copy of Sarmiento’s property insurance declaration page, and that she was expediting the HAMP review.

At the next settlement conference, which was held on October 5, 2010, ASC/Wells offered a traditional, non-HAMP loan modification, in which the annual percentage rate (hereinafter APR) was lowered from 8.25% to 4%. ASC/Wells explained that it “had not made a HAMP offer because it was still trying to figure out what to do’ about the informal escrow account that . . . Sarmiento had set aside at [the Court Attorney Referee’s] direction.”

Fourth HAMP Denial

Meanwhile, according to the Court Attorney Referee, “ASC/Wells sent . . . Sarmiento a denial letter [dated October 6, 2010], erroneously and preposterously stating that he was denied a HAMP modification because he was current on his mortgage loan and not at risk of default.“

At a settlement conference held on October 12, 2010, ASC/Wells “reported for the first time that an NPV test had been run and that [Sarmiento] had failed,” meaning that a HAMP modification would not be more favorable to the plaintiff than a foreclosure sale. ASC/Wells provided none of the data or inputs it had used to conduct the NPV test, and reiterated its offer of a traditional, non-HAMP loan modification. Sarmiento rejected the non-HAMP loan modification as unaffordable.

A few weeks later, in an email message dated November 2, 2010, ASC/Wells provided some of the data and inputs it had used to conduct the NPV test. According to the Court Attorney Referee, this data showed that ASC/Wells conducted the NPV test in November 2010, which was 25 months after Sarmiento defaulted, and one year after ASC/Wells had initially denied Sarmiento’s HAMP application. The Court Attorney Referee calculated that, as a result of ASC/Wells’s delay, more than $40,000 in arrears accrued on the loan.

On November 5, 2010, ASC/Wells offered Sarmiento a second traditional, non-HAMP modification, in which the APR was initially dropped to 2%, but then increased to 4%. Sarmiento rejected that offer.

At a settlement conference held on January 14, 2011, ASC/Wells stated that it would make no further modification offers. ASC/Wells then retained Hogan Lovells, LLP (hereinafter Hogan) as cocounsel to Steven J. Baum, P.C., in anticipation of a hearing pursuant to CPLR 3408 before the Supreme Court to determine whether it had failed to negotiate in good faith. According to the Court Attorney Referee, at that conference, Hogan acknowledged that ASC/Wells had handled Sarmiento’s loan “poorly,” but stated that ASC/Wells could not “do anything for . . . Sarmiento because of excessive forbearance.”

No progress on a settlement was made in three subsequent settlement conferences. With the parties at an impasse, the Court Attorney Referee directed them to submit position statements for use in the preparation of the report. In her report, the Court Attorney Referee determined that the plaintiff and ACS/Wells had failed to negotiate a loan modification in good faith, and had not complied with HAMP guidelines. Thus, the Court Attorney Referee recommended, inter alia, that the Supreme Court conduct a hearing to determine whether sanctions should be imposed against the plaintiff and ASC/Wells and its counsel.

Sarmiento’s Motion for an Award of Sanctions

By notice of motion dated June 17, 2011, Sarmiento moved to bar the plaintiff from collecting interest or fees accrued on the subject loan from December 1, 2009, “to date,” to bar the plaintiff from collecting from him any attorney’s fee or costs incurred “to date” in this action, and to direct the plaintiff to review the subject loan for a HAMP modification using an unpaid principal balance that excluded interest, fees, and costs that had accrued from December 1, 2009, “to date.” In support of his motion, Sarmiento submitted, inter alia, his counsel’s affirmation, to which were appended, as exhibits, an affidavit from Sarmiento, excerpts from a handbook entitled “Making Home Affordable Handbook for Servicers of Non-GSE Mortgages,” letters and copies of email messages between ASC/Wells and Sarmiento that were sent during 2010, and a proposed order. In an affirmation, Sarmiento’s counsel argued that the conduct of ASC/Wells demonstrated an “egregious refusal to negotiate in good faith, including its repeated delays and baseless denials of Mr. Sarmiento’s request for a modification in violation of HAMP guidelines.”

The Plaintiff’s Opposition

In opposition to Sarmiento’s motion, the plaintiff submitted, inter alia, an affidavit from Kyle N. Campbell, Vice President of Loan Documentation for ASC/Wells.

Campbell averred as follows: on February 18, 2010, the plaintiff received all documents necessary to review Sarmiento’s HAMP application. By letter dated April 2, 2010, the application was denied because Sarmiento’s debt-to-income ratio exceeded HAMP limits, inasmuch as his monthly expenses were $7,823.64 and his monthly income was only $4,728.94. After receiving additional financial documents in late April 2010, the plaintiff again reviewed the loan file but, by letter dated May 13, 2010, Sarmiento’s HAMP application was again denied, as was the possibility of a traditional, non-HAMP loan modification, because his debt-to-income ratio remained excessive, specifically, he had monthly income of $3,839.91, and monthly expenses of $7,253.22.

In September 2010, the plaintiff offered Sarmiento a non-HAMP loan modification, lowering the APR of the loan from 8.25% to 4%. Sarmiento rejected that offer, as it was not made pursuant to HAMP. In response, the plaintiff made a second non-HAMP loan modification offer, in which the APR of the loan would be initially lowered to 2% and gradually increased to 4%. Sarmiento also rejected that offer. Campbell asserted that the plaintiff could not offer any further modifications because of Sarmiento’s “limited income and his delinquency in making any payments under the loan for more than two years.”

On August 2, 2011, the parties stipulated, among other things, that Sarmiento’s motion seeking, inter alia, to bar the plaintiff from collecting interest or fees that accrued on the subject loan since December 1, 2009, would be decided without an evidentiary hearing.

The Order Appealed From

Based upon the papers submitted, the Supreme Court, in the order appealed from, inter alia, granted Sarmiento’s motion to bar the plaintiff from collecting interest or fees that accrued on the subject loan since December 1, 2009, to bar the plaintiff from recovering any costs or attorneys’ fees it incurred in this action, and to direct the plaintiff to review the subject loan for a HAMP loan modification using correct information and without regard to interest or fees that have accrued on the subject loan since December 1, 2009. The Supreme Court determined that, while the plaintiff had failed to negotiate in good faith as required by CPLR 3408(f), Sarmiento had acted in good faith. The court determined that, while Sarmiento and his counsel acted quickly and had been in contact with the plaintiff and ASC/Wells, the plaintiff and ASC/Wells has failed to respond to Sarmiento’s “requests for very basic information” related to his HAMP application, and their counsel’s communications with Sarmiento had sown confusion, distress, and doubt by including, among other things, confusing and vague rejection notices and requests for duplicative documents. The court stated:

“To describe the Plaintiff’s attitude succinctly: it was happy to do equity when it brought the underlying action for foreclosure, but stubbornly refused to do equity when as a result of statute (CPLR 3408), it was forced to sit down at the negotiating table with the homeowner and attempt to work out a deal. Put otherwise, the only delay’ that is legal in a foreclosure action is the delay imposed by CPLR 3408, and good faith means participating honestly, cleanly, and mutually in that delay’ process. Otherwise, this Court may exercise its equitable powers to restrict any remedy otherwise available.”

The plaintiff appeals.

HAMP

The federal response to the mortgage foreclosure crisis included the creation of HAMP, which arose as part of the Emergency Economic Stabilization Act of 2008 (12 USC §§ 5201 et seq.) and the Helping Families Save Their Homes Act of 2009 (Pub L 111-22, § 1[a], 123 Stat 1632, 1632 [111th Cong, 1st Sess, May 20, 2009]) (see JP Morgan Chase Bank, N.A. v Ilardo, 36 Misc 3d 359, 366 [Sup Ct, Suffolk County]). HAMP is administered by the Federal National Mortgage Association (hereinafter Fannie Mae), as an agent of the United States Treasury Department (see id. at 366). The purpose of HAMP “is to provide relief to borrowers who have defaulted on their mortgage payments or who are likely to default by reducing mortgage payments to sustainable reduced levels, without discharging any of the underlying debt” (id.).

Fannie Mae entered into agreements with numerous home loan servicers, including Wells Fargo, pursuant to which the servicers “agreed to identify homeowners who were in default or would likely soon be in default on their mortgage payments, and to modify the loans of those eligible under the program” (Wigod v Wells Fargo Bank, N.A., 673 F3d 547, 556 [7th Cir]). HAMP provides lenders and loan servicers an incentive “to offer loan modifications to eligible homeowners” (Young v Wells Fargo Bank, N.A., 717 F3d 224, 228 [1st Cir]; see Edwards v Aurora Loan Servs., LLC, 791 F Supp 2d 144, 148 [D DC] [explaining that, under HAMP, the United States Treasury Department “pay(s) financial incentives to servicers and loan owners/investors that are sufficient to make a HAMP modification a better financial outcome than foreclosure for the servicer and investor”]).

When a borrower applies for a HAMP loan modification, the first step is to determine HAMP eligibility, which includes, among other things, consideration of whether the subject loan originated prior to January 1, 2009, the subject property is improved by a one-to-four-family house, the borrower resides in the house, and, prior to modification, the borrower’s monthly mortgage payment exceeded 31% of the borrower’s verified gross monthly income (see Making Home Affordable Handbook for Servicers of Non-GSE Mortgages vers 3.2, ch 2, § 1.1 [HAMP Eligibility Criteria]). If the initial HAMP eligibility criteria are met, upon the borrower’s submission to the servicer of the required financial information, the servicer must apply a “waterfall,” i.e., a multiple-step process that is to be applied in a particular sequence, one step at a time, which here involves a five-step review of the terms of the loan to determine whether modification of one or more of those terms might reduce the monthly mortgage payment to no more than 31% of the borrower’s gross monthly income. The five steps of the standard waterfall, in the order in which they are to be applied, are capitalization modification, interest rate reduction, term extension, principal forbearance, and principal forgiveness (see Making Home Affordable Handbook for Servicers of Non-GSE Mortgages vers 3.2, ch 2, § 6.3 [Standard Modification Waterfall]; see also Edwards v Aurora Loan Servs., LLC, 791 F Supp 2d at 149). Deviations from the standard waterfall are not precluded and, under certain circumstances, servicers may offer borrowers modifications more favorable than those required under HAMP (see Making Home Affordable Handbook for Servicers of Non-GSE Mortgages vers 3.2, ch 2, § 6.3.6 [Variation from Standard Modification Waterfall]).

Moreover, “[a]ll loans that meet HAMP eligibility criteria and are either deemed to be in imminent default or delinquent as to two or more payments must be evaluated using a standardized NPV test that compares the NPV result for a modification to the NPV result for no modification” (Making Home Affordable Handbook for Servicers of Non-GSE Mortgages vers 3.2, ch 2, § 7]; see Edwards v Aurora Loan Servs., LLC, 791 F Supp 2d at 149 [citations omitted]). Using the standard modification waterfall, if the NPV test result under the modification scenario is greater than the NPV test result without modification, the result is deemed “positive” and the servicer “must offer the [HAMP] modification” (Making Home Affordable Handbook for Servicers of Non-GSE Mortgages vers 3.2, ch 2, § 7]). If the opposite occurs, the result is deemed “negative,” and the servicer, with the express permission of the investor, has the discretion to offer the HAMP modification (id.). If, after a negative result, the servicer opts not to offer the borrower a modification, it “must send a Non-Approval Notice and consider the borrower for other foreclosure prevention options” (id.).

CPLR 3408(f) and Good Faith

We now turn from the federal response to the financial crisis, and address New York’s response to the 2008 mortgage crisis. New York’s response included the enactment of CPLR 3408, a remedial statute which required that, “in residential foreclosure actions involving the type of loans within the ambit of that section, in which the defendant was a resident of the subject property, the court would hold a mandatory conference for settlement discussions” (Wells Fargo Bank, N.A. v Meyers, 108 AD3d 9, 17; see L 2008, ch 472; CPLR 3408).

In 2009, CPLR 3408 was amended by, among other things, requiring mandatory settlement conferences in mortgage foreclosure actions involving any home loan in which the defendant is a resident of the subject property—regardless of when the home loan was made—and requiring both the plaintiff and defendant to negotiate in “good faith” to reach a resolution of the action, including, if possible, a loan modification (L 2009, ch 507, § 9, amending CPLR 3408[a] and adding CPLR 3408[f]). The Chief Administrator of the Courts thereafter promulgated 22 NYCRR 202.12-a, a regulation setting forth the rules and procedures governing CPLR 3408 settlement conferences (see 22 NYCRR 202.12-a [directing the court to “ensure that each party fulfills its obligation to negotiate in good faith”]). “The purpose of the good faith requirement [in CPLR 3408] is to ensure that both plaintiff and defendant are prepared to participate in a meaningful effort at the settlement conference to reach resolution” (2009 Mem of Governor’s Program Bill, Bill Jacket, L 2009, ch 507, at 11). While the aspirational goal of negotiations pursuant to CPLR 3408 is that the parties “reach a mutually agreeable resolution to help the defendant avoid losing his or her home” (CPLR 3408[a]), the statute requires only that the parties enter into and conduct negotiations in good faith (see Wells Fargo Bank, N.A. v Van Dyke, 101 AD3d 638). In its present form, CPLR 3408 provides, in pertinent part, as follows:

“(a) In any residential foreclosure action involving a home loan . . . in which the defendant is a resident of the property subject to foreclosure, the court shall hold a mandatory conference . . . for the purpose of holding settlement discussions pertaining to the relative rights and obligations of the parties under the mortgage loan documents, including, but not limited to determining whether the parties can reach a mutually agreeable resolution to help the defendant avoid losing his or her home, and evaluating the potential for a resolution in which payment schedules or amounts may be modified or other workout options may be agreed to, and for whatever other purposes the court deems appropriate.

“(f) Both the plaintiff and defendant shall negotiate in good faith to reach a mutually agreeable resolution, including a loan modification, if possible” (CPLR 3408[a], [f] [emphasis added]).

A review of the legislative history does not reveal any discussion of the “good faith” standard envisioned by the Legislature (see L 2009, ch 507).

On this appeal, the plaintiff essentially argues that a party to a mortgage foreclosure action can only be found to have violated the good-faith requirement of CPLR 3408(f) when that party has engaged in egregious conduct such as would be necessary to support a finding of “bad faith” under the common-law. The plaintiff maintains that it did not engage in any egregious conduct such as gross negligence or intentional misconduct and, therefore, it satisfied the good-faith requirement of CPLR 3408(f).

In the absence of a statutory definition of “good faith,” we must first determine whether a lack of good faith should be measured by the common-law standard of bad faith or by a plaintiff’s failure to comply with HAMP guidelines. No published decision appears to specifically define “good faith,” as that term is employed in CPLR 3408(f). In Wells Fargo Bank, N.A. v Van Dyke (101 AD3d at 638-639), the Appellate Division, First Department, rejected a plaintiff mortgagee’s argument that compliance with the good faith requirement of CPLR 3408 is established “merely by proving the absence of fraud or malice on the part of the lender,” and briefly addressed the issue of what constitutes “good faith” by noting that “[a]ny determination of good faith must be based on the totality of the circumstances” taking into account that CPLR 3408 is a remedial statute. However, the standard to apply in determining what constitutes a lack of good faith pursuant to CPLR 3408(f) is a matter of first impression in this Court (cf. IndyMac Bank, F.S.B. v Yano-Horoski, 78 AD3d 895, 896 [the plaintiff did not challenge “bad faith” determination on appeal, but only contested the sanction of cancellation of the debt]).

A review of various trial-level court decisions shows that courts have not required a showing of intentional misconduct, malice, or gross negligence when determining whether a party has failed to negotiate in good faith as required by CPLR 3408(f). For example, one court observed that good faith is a subjective concept, generally meaning honest, fair, and open dealings, and a “state of mind motivated by proper motive” (HSBC Bank USA v McKenna, 37 Misc 3d 885, 905 [Sup Ct, Kings County] [internal quotation marks omitted]). Unreasonable, arbitrary, or unconscionable conduct is inconsistent with the statutory purpose of good faith negotiations aimed at achieving a resolution (see id. at 908). Several trial-level courts have found that, where a plaintiff lost financial documents, sent confusing and contradictory communications, inexcusably delayed a modification decision, or denied requests for HAMP loan modifications without setting forth grounds, such conduct constituted a lack of good faith within the meaning of CPLR 3408(f) (see e.g. Wells Fargo Bank, N.A. v Ruggiero, 39 Misc 3d 1233[A], 2013 NY Slip Op 50871[U] [Sup Ct, Kings County] [finding it appropriate to sanction the plaintiff for its failure to act in good faith where the plaintiff, inter alia, provided conflicting information, refused to honor agreements, engaged in unexcused delay, imposed unexplained charges, made misrepresentations, and failed to deal honestly, fairly, and openly]; HSBC Bank USA v McKenna, 37 Misc 3d at 888, 898-899, 910 [accepting a referee’s recommendation that the plaintiff be found to have failed to act in good faith where the plaintiff rejected a proposed short sale at a sum the plaintiff had previously stated was its minimum sale amount and, in dicta, advising that, in determining whether the plaintiff failed to act in good faith in rejecting a short sale proposal, the factors to be considered included the outstanding debt, the likely market movement, and whether a short sale would result in a greater yield than a public foreclosure auction]; cf. Wells Fargo Bank, N.A. v Van Dyke, 101 AD3d 638 [the defendants did not establish lack of good faith by the plaintiff where the defendants did not submit evidence supporting their claimed rental income]; but see JP Morgan Chase Bank, N.A. v Ilardo, 36 Misc 3d at 366, 378-380 [the plaintiff’s conduct did not constitute a lack of good faith because an interim modification plan applied on a trial basis did not contractually obligate the plaintiff to provide a permanent HAMP loan modification to the defendants]). In addition, while we were not expressly called upon to decide the proper standard to apply in Wells Fargo Bank, N.A. v Myers (108 AD3d 9), in that case we determined that the record supported the Supreme Court’s finding that the mortgagee had failed to satisfy its obligation to negotiate in good faith without applying the common-law standard of bad faith.

The plaintiff nevertheless urges this Court to adopt the common-law standard of bad faith and hold that in determining whether a party failed to act in good faith during mandatory settlement negotiations pursuant to CPLR 3408, a court should consider only whether the party acted deliberately or recklessly in a manner that evinced gross disregard of, or conscious or knowing indifference to, another’s rights. This standard for bad faith conduct has been articulated in various contexts to determine issues such as whether an insurance carrier may be held liable for the alleged bad-faith failure to accept a settlement offer (see Pavia v State Farm Mut. Auto. Ins. Co., 82 NY2d 445, 453-454 [to establish a prima facie case of bad faith, the plaintiff must establish that the insurer’s conduct constituted a “gross disregard of the insured’s interests—that is, a deliberate or reckless failure to place on equal footing the interests of its insureds with its own interests when considering a settlement offer”]); whether a “no-damage-for delay” clause in a contract may be enforced for delays allegedly actuated by bad faith (see Kalisch-Jarcho, Inc. v City of New York, 58 NY2d 377, 384-385 [“no-damage-for delay” clause will not exempt a party from liability for willful or gross negligence, intentional wrongdoing, fraudulent or malicious conduct]); and whether allegedly stolen bonds were taken in bad faith (see Manufacturers & Traders Trust Co. v Sapowitch, 296 NY 226, 229 [bad faith is “nothing less than guilty knowledge or willful ignorance”]).

Were this Court to adopt the plaintiff’s proposed standard for determining whether a party failed to act in good faith, we would undermine the remedial purpose of CPLR 3408. The purpose of the statute is “to address the problem of mortgage foreclosures” by “help[ing] struggling homeowners without harming all consumers by inadvertently driving up the cost of credit or limiting the availability of legitimate credit” (Letter of Sen Farley, Bill Jacket, L 2008, ch 472, at 5), and “providing additional protections and foreclosure prevention opportunities for homeowners at risk of losing their homes” (Senate Introducer’s Mem in Support, Bill Jacket, L 2008, ch 472, at 7). To reiterate, “[t]he purpose of the good faith requirement [in CPLR 3408] is to ensure that both plaintiff and defendant are prepared to participate in a meaningful effort at the settlement conference to reach resolution” (2009 Mem of Governor’s Program Bill, Bill Jacket, L 2009, ch 507, at 11).

Therefore, we hold that the issue of whether a party failed to negotiate in “good faith” within the meaning of CPLR 3408(f) should be determined by considering whether the totality of the circumstances demonstrates that the party’s conduct did not constitute a meaningful effort at reaching a resolution. We reject the plaintiff’s contention that, in order to establish a party’s lack of good faith pursuant to CPLR 3408(f), there must be a showing of gross disregard of, or conscious or knowing indifference to, another’s rights. Such a determination would permit a party to obfuscate, delay, and prevent CPLR 3408 settlement negotiations by acting negligently, but just short of deliberately, e.g., by carelessly providing misinformation and contradictory responses to inquiries, and by losing documentation. Our determination is consistent with the purpose of the statute, which provides that parties must negotiate in “good faith” in an effort to resolve the action, and that such resolution could include, “if possible,” a loan modification (CPLR 3408[f]; see Wells Fargo Bank, N.A. v Meyers, 108 AD3d at 11, 18, 20, 23; Wells Fargo Bank, N.A. v Van Dyke, 101 AD3d 638 [the defendants did not demonstrate that the plaintiff failed to act in good faith because nothing in CPLR 3408 requires a plaintiff to make the exact settlement offer desired by the defendants]; HSBC Bank USA v McKenna, 37 Misc 3d 885 [Sup Ct, Kings County] [the plaintiff failed to act in good faith based upon, inter alia, a referee’s finding that the plaintiff rejected an all-cash short sale offer]).

Where a plaintiff fails to expeditiously review submitted financial information, sends inconsistent and contradictory communications, and denies requests for a loan modification without adequate grounds, or, conversely, where a defendant fails to provide requested financial information or provides incomplete or misleading financial information, such conduct could constitute the failure to negotiate in good faith to reach a mutually agreeable resolution.

In this case, the totality of the circumstances supports the Supreme Court’s determination that the plaintiff failed to act in good faith, as the plaintiff thwarted any reasonable opportunities to settle the action, thus contravening the purpose and intent of CPLR 3408. Sarmiento submitted his initial HAMP application on October 29, 2009, and provided updated financial documentation on November 18, 2009. Beginning on December 1, 2009, at the direction of the Court Attorney Referee, Sarmiento began placing $2,000 per month in an escrow fund, in part to demonstrate his ability to make modified monthly payments. On January 2, 2010, six weeks after receiving Sarmiento’s complete HAMP application, the plaintiff denied the application on the erroneous ground that the property was not Sarmiento’s primary residence.

Another month passed without a proper HAMP determination. On February 2, 2010, the plaintiff indicated that it needed a BPO to conduct an NPV test, a representation which suggested that Sarmiento’s HAMP application had satisfied the five-step waterfall test. Nevertheless, two months later, on April 2, 2010, the plaintiff again denied Sarmiento’s HAMP application, apparently for failing to satisfy the waterfall test since the plaintiff claimed that modification could not result in a monthly payment equal to or less than 31% of Sarmiento’s gross monthly income. However, the plaintiff apparently reached this conclusion using incorrect income data.

At the request of the Court Attorney Referee, Sarmiento submitted a second HAMP application on April 26, 2010. On May 13, 2010, the plaintiff denied the application, this time on the ground that the property was “not affordable.” The plaintiff ignored Sarmiento’s ensuing request for a more specific reason for denial and for the data that the plaintiff had used in conducting the NPV test.

On June 8, 2010, after Sarmiento sought the assistance of the HAMP support center, he was told that his HAMP application had been denied because of the escrow fund he had created at the direction of the Court Attorney Referee. This rationale, presumably relayed to the HAMP support center by the plaintiff, was a new ground for denial, and was inexplicable since the plaintiff was aware that the escrow fund existed at the direction of the Court Attorney Referee.

Nevertheless, despite the apparent denial of May 13, 2010, the plaintiff indicated, on July 1, 2010, that it was still reviewing Sarmiento’s HAMP application. Despite having indicated in February 2010 that it would soon conduct an NPV test, the plaintiff stated that no NPV test had yet been conducted. On July 19, 2010, the plaintiff indicated that the defendant’s HAMP application had been denied because of the creation and existence of the escrow fund.

Two months later, the plaintiff indicated that it again needed a BPO so that it could conduct an NPV test. Notably, the plaintiff had made an identical representation eight months earlier, and did not explain why it had not conducted the NPV test in February 2010. On October 5, 2010, the plaintiff offered Sarmiento a non-HAMP loan modification, while simultaneously indicating that his HAMP application was still under review. On the following day, the plaintiff again denied Sarmiento’s HAMP application, this time on the ground that he was current on his mortgage. The record demonstrates that it was not until October 12, 2010, nearly one year after Sarmiento made his initial HAMP application, that the plaintiff finally conducted an NPV test, which was negative.

Any one of the plaintiff’s various delays and miscommunications, considered in isolation, does not rise to the level of a lack of good faith. Viewing the plaintiff’s conduct in totality, however, we conclude that its conduct evinces a disregard for the settlement negotiation process that delayed and prevented any possible resolution of the action and, among other consequences, substantially increased the balance owed by Sarmiento on the subject loan. Although the plaintiff may ultimately be correct that Sarmiento is not entitled to a HAMP modification, the plaintiff’s conduct during the settlement negotiation process makes it impossible to discern such a fact, as the plaintiff created an atmosphere of disorder and confusion that rendered it impossible for Sarmiento or the Supreme Court to rely upon the veracity of the grounds for the plaintiff’s repeated denials of Sarmiento’s HAMP application.

Therefore, the totality of the circumstances supports the Supreme Court’s determination that the plaintiff failed to negotiate in good faith, in violation of CPLR 3408(f) (see Wells Fargo Bank, N.A. v Meyers, 108 AD3d at 17).

Sanction

The plaintiff further argues that, even if it failed to act in good faith, the Supreme Court lacked the authority to sanction it absent express statutory or regulatory authority. In the plaintiff’s view, CPLR 3408(f) and 22 NYCRR 202.12-a(c)(4) require the parties to negotiate in good faith, but provide no mechanism to enforce that requirement. In order to address this particular contention, we must first look to our recent holding in Wells Fargo Bank, N.A. v Meyers (108 AD3d 9).

In Meyers, the plaintiff in a foreclosure action had, among other things, commenced the action even though its loan modification proposal was pending, denied a permanent loan modification based on the defendants’ purported debt-to-income ratio without submitting evidence of its calculations, and provided conflicting information regarding its denials of requests for a loan modification. This Court observed that, upon finding that foreclosing plaintiffs failed to negotiate in good faith pursuant to CPLR 3408(f), the trial-level courts have imposed a variety of sanctions, including barring them from collecting interest, legal fees, and expenses, imposing exemplary damages against them, staying the proceedings, imposing a monetary sanction pursuant to 22 NYCRR part 130, and vacating the judgment of foreclosure and sale and cancelling the note and mortgage (see Wells Fargo Bank, N.A. v Meyers, 108 AD3d at 20-21). We noted that, save for our determination in IndyMac Bank, F.S.B. v Yano-Haroski (78 AD3d 895), in which we reversed the severe sanction of cancellation of the note and mortgage, based on the plaintiff’s failure to negotiate in good faith as required by CPLR 3408(f), this Court had not otherwise reviewed the propriety of other means of enforcing the good-faith negotiation requirement of CPLR 3408(f).

In Meyers, this Court determined that there was no basis to disturb the Supreme Court’s finding, made after a hearing, that the plaintiff failed to negotiate in good faith, in violation of CPLR 3408(f). While acknowledging that CPLR 3408(f) does not set forth a specific remedy for a party’s failure to negotiate in good faith (see Wells Fargo Bank, N.A. v Meyers, 108 AD3d at 19; Hon. Mark C. Dillon, The Newly-Enacted CPLR 3408 for Easing the Mortgage Foreclosure Crisis: Very Good Steps, but not Legislatively Perfect, 30 Pace L Rev 855, 875 [Spring 2010]), this Court found that the particular remedy imposed by the Supreme Court—compelling the plaintiff to permanently abide by the terms of a HAMP trial loan modification—was “unauthorized and inappropriate” (Wells Fargo Bank, N.A. v Meyers, 108 AD3d at 21). This Court did not rule on the possibility of other remedies for a violation of the good-faith negotiation requirement set forth in CPLR 3408(f) and cautioned that the courts may not rewrite the loan agreements into which the parties freely entered merely upon finding that one party failed to satisfy its obligation to negotiate in good faith pursuant to CPLR 3408(f) (see id.).

Contrary to the plaintiff’s contention, the Supreme Court did not lack authority to impose a sanction for the plaintiff’s failure to negotiate in good faith pursuant to CPLR 3408(f). This Court has specifically held that the Supreme Court has “authority to impose a sanction or remedy in the event it determined . . . that [a] plaintiff had failed to negotiate in good faith in the mandatory foreclosure settlement conferences” (Bank of Am. v Lucido, 114 AD3d 714, 715, citing Wells Fargo Bank, N.A. v Meyers, 108 AD3d at 11). Although CPLR 3408 is silent as to the sanctions or remedies that may be employed for violation of the good faith negotiation requirement, “[i]n the absence of a specifically authorized sanction or remedy in the statutory scheme, the courts must employ appropriate, permissible, and authorized remedies, tailored to the circumstances of each given case” (Wells Fargo Bank, N.A. v Meyers, 108 AD3d at 23).

Notably, unlike the borrower in Meyers (108 AD3d 9), Sarmiento specifically moved to impose the sanctions ultimately imposed by the Supreme Court, based upon the court’s finding that the plaintiff violated the good faith requirement of CPLR 3408(f). Therefore, the plaintiff was on notice that the Supreme Court would entertain such a remedy.

We also note that in contrast to Meyers, the plaintiff does not argue that the sanctions actually imposed in the instant case were excessive or improvident. Therefore, the propriety of the particular sanctions imposed herein is not before us. To the extent that the arguments raised in the plaintiff’s reply brief may be viewed as a challenge to the propriety of the sanction imposed by the Supreme Court in this case, these arguments are not properly before us since they are raised for the first time in a reply brief, to which Sarmiento had no opportunity to respond (see Monadnock Constr., Inc. v DiFama Concrete, Inc., 70 AD3d 906; Congel v Malfitano, 61 AD3d 809; Borbeck v Hercules Constr. Corp., 48 AD3d 498).

We are cognizant that, in a foreclosure action, “[t]he court’s role is limited to interpretation and enforcement of the terms agreed to by the parties, and the court may not rewrite the contract or impose additional terms which the parties failed to insert” (131 Heartland Blvd. Corp. v C.J. Jon Corp., 82 AD3d 1188, 1189; see Wells Fargo Bank, N.A. v Meyers, 108 AD3d 9; Maser Consulting, P.A. v Viola Park Realty, LLC, 91 AD3d 836, 837). Thus, in fashioning a remedy for a violation of the good-faith negotiation requirement set forth in CPLR 3408(f), courts should be mindful not to rewrite the contract at issue or impose contractual terms which were not agreed to by the parties. As the nature of the sanction in this case is unchallenged, our determination herein should not be construed as a deviation from the above-stated principle.

Accordingly, the order is affirmed insofar as appealed from.

RIVERA, J.P., SKELOS and LOTT, JJ., concur.

ORDERED that the order is affirmed insofar as appealed from, with costs.

[1] ACS/Wells was represented by the law firm of Steven J. Baum, P.C.

[2] HAMP is a federal program that is intended to help homeowners avoid foreclosure “by modifying loans to a level that is affordable for borrowers now and sustainable over the long term” (https://www.hmpadmin.com/portal/programs/hamp.jsp, last accessed July 16, 2014).

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