Simply Unbelievable.

NYT-

White-collar crime cases can take years to develop, so today’s headlines often reflect what happened well in the past. And as we approach the end of 2014, there is a sense, to steal a line from Yogi Berra, that it’s like déjà vu all over again.

We will, of course, see continued fallout from the practices that helped fuel the financial crisis. This past year, the Justice Department reached multibillion-dollar settlements with Bank of America and JPMorgan Chase for selling shoddy mortgage-backed securities before the financial crisis hit in 2008. Most of the loans packaged for investors were made by companies acquired by the banks as the real estate market spiraled downward in 2008, so they paid for the sins of others.

The settlements with big banks hardly close out cases from the financial crisis as names from the past keep popping to the surface. DealBook reported that the Justice Department was considering a civil fraud case against Angelo R. Mozilo, former chief executive of Countrywide Financial, which was at the center of the subprime mortgage market. Prosecutors in Los Angeles closed a criminal investigation a few months after Mr. Mozilo reached a settlement with the Securities and Exchange Commission in 2010 over securities fraud charges. But he may be back in the news again if a new round of civil fraud charges is filed.

The S.E.C. sued the former chief executives of mortgage giants Fannie Mae and Freddie Mac, along with other officers of the companies, for securities fraud in 2011 for not adequately disclosing the companies’ exposure to the subprime mortgages that led to a government bailout. Those cases are just winding up the discovery phase, so it is unlikely there will be a trial in 2015 as the two sides continue to fight over whether the case should proceed.

[NEW YORK TIMES]

Chicago Tribune-

The end of the year occasions awards season in all industries, and the world of personal finance is no exception, which brings us to the 2014 edition of the Piggy Bank Awards for Dubious Achievements in Consumer Finance or, for short, “The Piggies.”

And what a year of very dubious achievements it was. Loan servicers continued to stick it to mortgage clients, except when the servicers turned out to be sticking it to student loan borrowers. The big mortgage banks that caused the Great Recession continued to buy their way out of trouble. Top law enforcement officials continued to collect hundreds of thousands of (mostly tax-deductible) dollars in fines for criminal activity by banks, while remaining unable to find even one actual banker who committed all those criminal acts.

Naturally, bank customers will end up paying those fines in the end, thanks to ever-higher bank fees on customer accounts.

[CHICAGO TRIBUNE]

ADIEL GOREL AND FLCA TROPICAL HOLDINGS, LLC, Appellants,
v.
THE BANK OF NEW YORK MELLON, ETC., Appellee.

Elizabeth T. Frau and Jeffrey M. Gano, of Ronald R. Wolfe & Associates, PL, Tampa, for Appellee.

PER CURIAM.

Adiel Gorel and FLCA Tropical Holdings, LLC appeal the Final Summary Judgment of Mortgage Foreclosure in favor of The Bank of New York Mellon (Bank). Gorel and FLCA contend that Bank failed to establish that it was entitled to summary judgment because it failed to properly refute their affirmative defense alleging Bank’s failure to provide them with pre-acceleration notice as required by the terms of the mortgage. We agree, reverse the summary judgment under review, and remand this case for further proceedings. See Pavolini v. Williams, 915 So. 2d 251, 253 (Fla. 5th DCA 2005) (“`[T]he plaintiff must either disprove those defenses by evidence or establish their legal insufficiency. Thus, summary judgment is appropriate only where each affirmative defense has been conclusively refuted on the record.'” (citation omitted) (quoting The Race, Inc. v. Lake & River Recreational Props., Inc., 573 So. 2d 409, 410 (Fla. 1st DCA 1991))); see also Haven Fed. Sav. & Loan Ass’n v. Kirian, 579 So. 2d 730, 733 (Fla. 1991) (“A court cannot grant summary judgment where a defendant asserts legally sufficient affirmative defenses that have not been rebutted.”); Gray v. Union Planters Nat’l Bank, 654 So. 2d 1288, 1288 (Fla. 3d DCA 1995) (“`[W]here a defendant pleads an affirmative defense and the plaintiff does not by affidavit contradict or deny that defense, the plaintiff is not entitled to a summary judgment.'” (quoting Johnson & Kirby, Inc. v. Citizens Nat’l Bank of Ft. Lauderdale, 338 So. 2d 905, 906 (Fla. 3d DCA 1976))).

REVERSED and REMANDED.

SAWAYA, PALMER, and LAMBERT, JJ., concur.

NOT FINAL UNTIL TIME EXPIRES TO FILE MOTION FOR REHEARING AND DISPOSITION THEREOF IF FILED.

Credit Slips

Apparently some mortgage lenders feel they can make this change unilaterally. Big changes are afoot in the process of granting a home mortgage, which could have a significant impact on a homeowner’s ability to fight foreclosure. In many states in the Unites States (including but not limited to Connecticut, Delaware, Florida, Hawaii, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, New Jersey, New Mexico, New York, North Dakota, Ohio, Oklahoma, Pennsylvania, South Carolina, South Dakota, Vermont and Wisconsin), a lender must go to court and give the borrower a certain amount of notice before foreclosing on his or her home. Now the mortgage industry is quickly and quietly trying to change this, hoping no one will notice. The goal seems to be to avoid those annoying court processes and go right for the home without foreclosure procedures. This change is being attempted by some lenders simply by asking borrowers to sign deeds of trust rather than mortgages from now on.

Not long ago, Karen Myers, the head of the Consumer Protection Division of the New Mexico Attorney General’s Office, started noticing that some consumers were being given deeds of trust to sign rather than mortgages when obtaining a home loan. She wondered why this was being done and also how this change would affect consumers’ rights in foreclosure. When she asked lenders how this change in the instrument being signed would affect a consumer’s legal rights, she was told that the practice of having consumers sign deeds of trust rather than mortgages would not affect consumers’ rights in foreclosure at all. Being skeptical, she and others in her division dug further into this newfound practice to see if it was widespread or just a rare occurrence in the world of mortgage lending. Sure enough, mortgages had all but disappeared, being replaced with a deed of trust.

[CREDIT SLIPS]

BusinessWeek-

Credit Suisse Group AG (CSGN) was ordered to face a $10 billion lawsuit by New York’s attorney general accusing the Swiss bank of fraud in the sales of mortgage-backed securities before the 2008 financial crisis.

A New York State Supreme Court justice rejected the bank’s request to dismiss the case, a move that gives leverage to Attorney General Eric Schneiderman to demand internal bank documents and force a settlement. New York demonstrated the bank may have engaged in misconduct, Justice Marcy Friedman said in a Dec. 24 decision, allowing the suit to head toward trial.

In addition to forcing Zurich-based Credit Suisse to defend itself or settle, the ruling may strengthen Schneiderman’s hand in punishing other banks for bad behavior tied to the recession.

[BUSINESS WEEK]

image: BusinessWeek

These are admissions coming direct from an insider who knows both the government and the bankers play by play and why we continue to be left out in the streets without any help or support!

Thank you to The Foreclosure Hour for their podcasts.

[CLICK IMAGE BELOW]

The defendant was represented by Jordan T. Schiller, Esq. of Schiller P.C., 55 Broad Street, Suite 18B, NY, NY

GENINE D. EDWARDS, J.

This foreclosure action was referred to this Court for a bad faith and standing hearing after twenty-five foreclosure settlement conferences, over the course of more than three years, from January 2010 to April 2013, were held before Special Referee Deborah L. Goldstein. From June 2013 to August 2014, this Court held several additional settlement conferences to reach a mutually agreeable resolution. After repeated attempts to reach an agreement failed, this Court conducted the hearing on October 27, 2014.

CPLR § 3408 mandates “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….” CPLR § 3408(a). Plaintiff is to appear in person or by counsel fully authorized to dispose of the action and is to bring, among other documents, the mortgage and note. CPLR § 3408(c); CPLR § 3408(e). “If the plaintiff is not the owner of the mortgage and note, the plaintiff [is to] provide the name, address and telephone number of the legal owner of the mortgage and note.” CPLR § 3408(e). The statute requires all parties to “negotiate in good faith to reach a mutually agreeable resolution, including a loan modification….” CPLR §3408(f). Flagstar Bank v. Walker, 112 AD3d 885, 977 N.Y.S.2d 359 (2d Dept. 2013). Failure to act reasonably and cooperatively leads to a finding of bad faith. US Bank, N.A. v. Williams, 121 AD3d 1098, ___ N.Y.S.2d ___ (2d Dept. 2014); US Bank. N.A. v. Sarmiento, 121 AD3d 187, 991 N.Y.S.2d 68 (2d Dept. 2014) (“[T]he issue of whether a party failed to negotiate in good faith’ within the meaning of CPLR 3408 (f) is 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.”); Wells Fargo Bank v. Meyers, 108 AD3d 9, 966 N.Y.S.2d 108 (2d Dept. 2013).

The referee’s report indicated the following: defendant Amadou Diakite qualified for a HAMP modification trial and made three monthly payments of $2,637.00 on December 1, 2009, January 1, 2010, and February 1, 2010. Referee’s Report, dated April 9, 2013. Additional payments were rejected and returned to him. Id. Plaintiff Aurora Loan Services LLC (“Aurora”) kept the three trial payments, rejected the final modification, and insisted that defendant Diakite re-start the process because Aurora claimed to have not received the signed modification agreement from defendant Diakite, who denied receiving same.^[1] Id. Thereafter, defendant Diakite submitted multiple complete packages, but plaintiff repeatedly requested documents that defendant Diakite had already submitted, and appeared at settlement conferences by various attorneys, including per diem counsel, who lacked personal knowledge of defendant Diakite’s loan history.^[2] Id. In a letter, dated July 15, 2012, Nationstar Mortgage LLC (“Nationstar”) informed defendant Diakite that the servicing of his loan was being assigned, sold or transferred from plaintiff to Nationstar. Id. In another letter, with the same date, July 15, 2012, Nationstar informed defendant Diakite that the debt is owed to Wilmington Trust Company, Trustee, SASCO Series 2005-4XS, but is being serviced by Nationstar. Id. Subsequently, Nationstar denied defendant Diakite’s HAMP application on October 16, 2012 because Defendant Diakite did not provide Nationstar with the documents it requested. In another denial letter, dated November 16, 2012, Nationstar simply stated “[w]e are unable to create an affordable payment equal to 31% of your reported monthly gross income without changing the terms of your loan beyond the requirements of the program.” Id. The parties appeared at further settlement conferences but no agreement was reached. On April 9, 2013, the referee issued a directive and report that referred the action this Court. Neither party moved to confirm or reject all or part of the referee’s report.

Upon referral, at the initial Court appearance on July 3, 2013, the Court ordered the parties to appear for a bad faith and standing^[3] hearing to be held on October 11, 2013. That hearing was deferred as the parties were still interested in pursuing a mutually agreeable resolution. As of December 13, 2013, plaintiff indicated that the HAMP application was fully submitted and under review. It later requested additional documentation. Then, as of May 23, 2014, the HAMP application was once again in underwriting and awaiting a decision. The application was denied on or about May 30, 2014 and plaintiff was ordered to provide defendant Diakite with the HAMP inputs for review. On August 1, 2014, the Court ordered the parties to appear for a bad faith hearing on October 27, 2014. In a letter, dated September 4, 2014, plaintiff’s counsel advised defense counsel that defendant Diakite had been denied for HAMP Tier 1, HAMP Tier 2, and a Standard Modification. The letter listed the figures the plaintiff used to issue the May 30, 2014 denial.

In preparation for the hearing, this Court directed plaintiff to produce the mortgage and note with any assignments and proof of ownership of both instruments. Plaintiff failed to produce any documents.

At the hearing, defendant Diakite testified that he submitted modification packages over and over to the plaintiff. At the end of 2009, he was offered a trial modification, and he timely made the three trial payments. Defendant Diakite testified that he thought his mortgage would be modified, but he never heard from the plaintiff after the last payment. Sometime later he was required to continuously submit further documents to his counsel in an effort to modify his mortgage payments, all to no avail. He admitted that at some point he began receiving mail and document requests from a new bank, Nationstar, but denied receiving a denial letter dated May 30, 2014.

Milly Rhodes, a Nationstar default case specialist since March 2014, testified on behalf of the plaintiff. Ms. Rhodes had no knowledge of the history of this loan or why a permanent modification was not offered to defendant Diakite. In 2014, three modification reviews, HAMP Tier 1, HAMP Tier 2, and the in-house were performed, but modification was denied because defendant Diakite lacked sufficient income. Ms. Rhodes did not have the documents to substantiate what was actually done. She did not produce the note, mortgage, assignments, or any documents at all.

After due deliberation and consideration, this Court finds that the record supports the referee’s findings that the plaintiff failed to negotiate in good faith pursuant to CPLR § 3408. The referee’s report is confirmed. Accordingly, all interest, costs, and attorneys’ fees are stayed from March 1, 2010 to October 27, 2014.

This constitutes the decision and order of this Court.

[1] The referee directed plaintiff to appear with proof that a final HAMP agreement was mailed to Defendant Diakite via certified mail but no proof was provided. Referee’s Report, dated April 9, 2013; Referee’s Directive, dated December 10, 2012.

[2] Originally, Steven J. Baum P.C. represented plaintiff. Thereafter, plaintiff was represented by Fein, Such and Crane, LLP.

[3] An answer was not filed in this action. Neither was a pre-answer motion to dismiss.

Palm Beach Post-

The Legal Aid Society of Palm Beach County is getting a $115,000 budget boost from an unusual source — leftovers from a successful class action lawsuit against former Florida foreclosure king David J. Stern.

Palm Beach County Circuit Judge Lucy Chernow Brown said in a Dec. 8 order that money remaining from a $831,110 judgment against Stern can go to the fiscally strapped agency that offers legal counsel to those who can’t afford it.

[PALM BEACH POST]

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

Credit Slips-

A lot of the mortgage servicing litigation over the past seven years has faltered on standing issues. Does the borrower have standing to sue the servicer? This has been a problem for RESPA and HAMP suits, where there are questions about whether there is a private right of action, as well as for plain old breach of contract actions. The point I make in this post is that borrowers almost always have standing to sue the servicer for a breach of contract action arising out of the mortgage loan contract itself because the servicer is an assignee of part of the mortgage note. This was an issue that lurked in the background of a case I recently testified in, and I think it’s worth highlighting for the Slips readers.

A lot of courts have misunderstood the nature of the servicing relationship vis-a-vis the borrower and assumed that because the servicer is not expressly a party to the note and security agreement that there is no privity between the borrower and servicer and hence the borrower cannot maintain a breach of contract suit. That’s wrong. The servicer is not on the note or the security agreement, but the servicer is an assignee of the note, just like the securitization trust, and that provides all the privity needed for a breach of contract suit.

Legal scholarship has long understood that property can be conceptualized as a bundle of separate rights. Thus, if I sell you Blackacre in fee simple, absolute, I am conveying to you the right to use Blackacre currently, the right to use it in the future, the right to the products and profits from the land, the right to reconvey it, etc. These rights could be split up: I could sell you the right to use Blackacre for a year, with the property reverting to me thereafter. That’s just a lease. Likewise, the mineral rights and the air rights to Blackacre could be sold separately from the surface rights. The same can be done with a mortgage note.

[CREDIT SLIPS]

Reuters-

Colorado’s Attorney General John Suthers has sued two more law firms in the state for fraud, accusing them of inflating foreclosure costs charged to homeowners, his office said.

As part of an ongoing investigation, Suthers has filed eight civil law enforcement actions against Colorado foreclosure law firms in 2014, five of which resulted in settlements totaling nearly $12 million.

The firms targeted earlier this year included the state’s two largest, which were accused of defrauding homeowners, investors and taxpayers by grossly hiking costs and padding bills with unauthorized expenses.

[REUTERS]

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

David J. Reiss, Brooklyn Law School
K. Sabeel Rahman, Brooklyn Law School
Jeffrey Lederman, Brooklyn Law School

Abstract

This is a comment on the Consumer Financial Protection Bureau’s (the “Bureau”) proposed Policy on No-Action Letters (the “Policy”). The Policy is a step in the right direction, but a more robust Policy could better help the Bureau achieve its statutory purposes.

The Bureau recognizes that there are situations in which consumer financial service businesses (“Businesses”) are uncertain as to the applicability of laws and rules related to new financial products (“Products”); how regulatory provisions might be applied to their Products; and what potential enforcement actions could be brought against them by regulatory agencies for noncompliance. Businesses could therefore benefit from the issuance of a No-Action Letter to reduce that uncertainty.

There is very little scholarly literature on the use of No-Action Letters by administrative agencies. In the absence of comprehensive studies, it is hard to precisely determine how to allocate agency resources to informal guidance as opposed to other types of regulatory action. Notwithstanding this, an agency should attempt to determine the optimal amount of its resources that should be devoted to informal guidance as opposed to the alternatives and then refine that initial estimate as experience dictates.

A rapidly changing field like consumer finance can benefit from the availability of quick and informal feedback for Businesses so long as the process is properly designed. Because the Policy would use a relatively small amount of Bureau resources compared to other types of regulatory action, a well-designed No-Action Letter Policy would be a win-win-win for Businesses, for the Bureau and for consumers.

DANIEL and NANCY KIEFERT, Appellants,
v.
NATIONSTAR MORTGAGE, LLC, Appellee.

Nancy M. Wallace, Kristen M. Fiore, and Michael J. Larson of Akerman LLP, Tallahassee, and William P. Heller of Akerman, LLP, Fort Lauderdale, for Appellee.

BENTON, J.

Daniel and Nancy Kiefert appeal the final judgment of foreclosure entered against them following a non-jury trial, on grounds that Nationstar Mortgage, LLC (Nationstar) did not prove standing. The Kieferts first raised lack of standing in two motions to dismiss, then pleaded it as a defense in their answer. We reverse because Nationstar failed to establish that the original plaintiff, Aurora Loan Services, LLC (Aurora), had standing to foreclose at the time Aurora filed the original foreclosure complaint.

As Aurora’s successor, Nationstar proceeded on the theory that it was the holder of the note and mortgage at issue.^[1] Under this theory, a plaintiff must show that it is the holder both of the mortgage^[2] and of the note the mortgage secures in order to have standing to foreclose the mortgage. See Lindsey v. Wells Fargo Bank, N.A., 139 So. 3d 903, 906 (Fla. 1st DCA 2013) (citing Mazine v. M & I Bank, 67 So. 3d 1129, 1132 (Fla. 1st DCA 2011)). A plaintiff alleging standing as a holder must prove it is a holder of the note and mortgage both as of the time of trial and also that the (original) plaintiff had standing as of the time the foreclosure complaint was filed.^[3] See id. (citing Rigby v. Wells Fargo Bank, N.A., 84 So. 3d 1195, 1196 (Fla. 4th DCA 2012)); see also Ryan v. Wells Fargo Bank, N.A., 142 So. 3d 974, 974-75 (Fla. 4th DCA 2014) (holding the plaintiff failed to establish standing when, among other things, it “did not demonstrate that the endorsement occurred prior to the filing of the initial complaint”).

Such a plaintiff must prove not only physical possession of the original note but also, if the plaintiff is not the named payee, possession of the original note endorsed in favor of the plaintiff or in blank (which makes it bearer paper). See Focht v. Wells Fargo Bank, N.A., 124 So. 3d 308, 310-11 (Fla. 2d DCA 2013) (citing Green v. JPMorgan Chase Bank, N.A., 109 So. 3d 1285, 1288 (Fla. 5th DCA 2013)); Lindsey, 139 So. 3d at 906 (citing Gee v. U.S. Bank Nat’l Ass’n, 72 So. 3d 211, 213 (Fla. 5th DCA 2011)). If the foreclosure plaintiff is not the original, named payee, the plaintiff must establish that the note was endorsed (either in favor of the original plaintiff or in blank) before the filing of the complaint in order to prove standing as a holder. See Ryan, 142 So. 3d at 975; Focht, 124 So. 3d at 310-11; McLean v. JP Morgan Chase Bank Nat’l Ass’n, 79 So. 3d 170, 174 (Fla. 4th DCA 2012).

In the present case, Aurora filed the foreclosure action, attaching to the original complaint an unendorsed copy of the note payable, not to Aurora, but to Lehman Brothers Bank, FSB. A year later, Aurora sought leave to file an amended complaint to which it attached a different copy of the note, now bearing endorsements making it bearer paper. The trial court granted Aurora’s motion and allowed the amended complaint to supersede the original complaint. Separately, a year after the amended complaint was filed, the trial court substituted Nationstar for Aurora.^[4] See Olivera v. Bank of Am., N.A., 141 So. 3d 770, 771-774 (Fla. 2d DCA 2014) (reversing a final summary judgment of foreclosure because the original plaintiff lacked standing, despite the substituted plaintiff’s possession of a duly endorsed note, which had been filed with the court nearly a year before the substitution).

At trial, the original of the note attached to the amended complaint came into evidence. That note bears two endorsements: the first, an endorsement from Lehman Brothers Bank, FSB to Lehman Brothers Holdings, Inc., and the second, an endorsement in blank by Lehman Brothers Holdings, Inc. Both endorsements were undated; neither answered the question whether the endorsement in blank antedated the filing of the original complaint. The only evidence Nationstar presented on this question was the testimony of one witness, Mr. Hyne, an employee of Nationstar. On cross-examination, the Kieferts’ counsel pressed Mr. Hyne concerning his knowledge, if any, of when the note had been endorsed. But Mr. Hyne’s testimony established only that Aurora was in possession of the note at the time the complaint was filed, not that the note had been endorsed at the time the complaint was filed.^[5] In short, Nationstar failed to establish that Aurora had standing to foreclose at the time Aurora filed the original complaint.

Nationstar’s subsequent acquisition of the note endorsed in blank cannot cure Aurora’s lack of standing at the inception of the case. See Focht, 124 So. 3d at 311-12 (stating the general principle that lack of standing in foreclosure actions is not a defect that can be cured after the case is filed) (citations omitted); Rigby, 84 So. 3d at 1196; see also Olivera, 141 So. 3d at 771-74. We therefore reverse the final judgment of foreclosure. See Ryan, 142 So. 3d at 975; Hunter v. Aurora Loan Servs., LLC, 137 So. 3d 570, 574 (Fla. 1st DCA 2014).

Reversed.

LEWIS, C.J. and RAY, J., CONCUR.

NOT FINAL UNTIL TIME EXPIRES TO FILE MOTION FOR REHEARING AND DISPOSITION THEREOF IF FILED.

[1] Under certain circumstances, nonholders may also enforce notes and foreclose mortgages securing them. See § 673.3011(2)-(3), Fla. Stat. (2010); Mazine v. M & I Bank, 67 So. 3d 1129, 1131 (Fla. 1st DCA 2011).

[2] The cases teach that ownership of a mortgage follows the note it secures. See Johns v. Gillian, 184 So. 140, 143 (Fla. 1938); Lindsey v. Wells Fargo Bank, N.A., 139 So. 3d 903, 907 (Fla. 1st DCA 2013); Vives v. Wells Fargo Bank, 128 So. 3d 9, 17 (Fla. 3d DCA 2012) (concurring opinion); Deutsche Bank Nat’l Trust Co. v. Lippi, 78 So. 3d 81, 85 (Fla. 5th DCA 2012); Taylor v. Bayview Loan Servicing, LLC, 74 So. 3d 1115, 1118 (Fla. 2d DCA 2011); WM Specialty Mortg., LLC v. Salomon, 874 So. 2d 680, 682 (Fla. 4th DCA 2004).

[3] Even when the original plaintiff produces a duly endorsed note (after the inception of the case but) before another party is substituted as plaintiff, the complaint is subject to dismissal for lack of standing. See Olivera v. Bank of Am., N.A., 141 So. 3d 770, 771-774 (Fla. 2d DCA 2014) (reversing where original plaintiff filed a copy of the note with two, undated endorsements eighteen months after initially filing a complaint with an unendorsed copy of the note, not payable to the original plaintiff and, one year after the endorsed note was produced, another bank was substituted as plaintiff (stating that the substituted plaintiff failed to establish that the original plaintiff had possession of the endorsed note “before the commencement of the underlying action”)).

[4] Pursuant to Florida Rule of Civil Procedure 1.260, a substituted plaintiff acquires the standing of the original plaintiff. See Brandenburg v. Residential Credit Solutions, Inc., 137 So. 3d 604, 605-06 (Fla. 4th DCA 2014) (affirming a final summary judgment of foreclosure because the substituted plaintiff showed that the original plaintiff had standing to foreclose).

[5] [Kieferts’ counsel]: [C]an you continue on and locate the amended complaint attached.

[Mr. Hyne]: Yes.

[Kieferts’ counsel]: Does that note have endorsements?

[Mr. Hyne]: Yes.

[Kieferts’ counsel]: When were those endorsements put on that note?

[Mr. Hyne]: I don’t know.

[Kieferts’ counsel]: Was your — who was the holder of the note at the time you filed the lawsuit?

[Mr. Hyne]: Aurora Loan Services.

[Kieferts’ counsel]: Do you know what a holder is?

. . . .

[Mr. Hyne]: Yes.

[Kieferts’ counsel]: What is a holder?

[Mr. Hyne]: It’s the entity that has possession of the document and has the ability to take the actions. [Kieferts’ counsel]: Do you know if the person has to have the endorsement in their favor or an endorsement in blank to be a holder?

. . . .

[Mr. Hyne]: I don’t know.

[Kieferts’ counsel]: Do you have any — or have you reviewed any records that indicate that there was an endorsement on the note at the time of filing the lawsuit?

[Mr. Hyne]: No.

December 22, 2014

Contact: Matt Anderson, 212-709-1691

NYDFS ANNOUNCES OCWEN CHAIRMAN TO RESIGN FROM FIRM AND RELATED COMPANIES; OCWEN TO PROVIDE DIRECT HOMEOWNER RELIEF AND UNDERTAKE SIGNIFICANT OPERATIONAL REFORMS

$150 Million in ‘Hard-dollar’ Assistance to New Yorkers

NYDFS Will Have Independent Monitor at Ocwen for up to Additional Three Years

Benjamin M. Lawsky, Superintendent of Financial Services, announced today that — to address serious conflict of interest issues uncovered during a New York State Department of Financial Services (NYDFS) investigation — William C. Erbey will step down from his position as Executive Chairman of Ocwen Financial Corporation (OCN) and from his positions as Chairman of the Board of Directors of each of four related companies: Altisource Portfolio Solutions S.A. (ASPS), Altisource Residential Corporation (RESI), Altisource Asset Management Corporation (AAMC), and Home Loan Servicing Solutions, Ltd. (HLSS). As of these resignations, Mr. Erbey will have no directorial, management, oversight, consulting, or any other role at Ocwen or any related party, or at any of Ocwen’s or the related parties’ affiliates or subsidiaries.

Additionally, Ocwen — the fourth-largest mortgage servicer in the country and largest subprime mortgage servicer in the United States — will undertake significant operational reforms to address serious servicing misconduct and conflict of interest issues at the company; have an NYDFS-selected, independent monitor on site for up to an additional three years; and provide “hard-dollar” assistance to New Yorkers totaling $150 million.

Superintendent Lawsky said: “Today’s agreement will deliver significant assistance to Ocwen homeowners in New York and provide a new path for the company to clean up its operations. We will continue to closely monitor Ocwen to ensure that it lives up to its obligations under this agreement, and treats struggling homeowners with the respect and dignity they deserve.”

That $150 million in hard-dollar assistance Ocwen will pay includes:

• $50 million in direct, hard-dollar restitution payments to former and current Ocwen homeowners in New York. Ocwen homeowners in New York who lost their homes to foreclosure will receive a payment of $10,000 each. After the payments are made to foreclosed homeowners, the balance of the funds will be distributed equally to current and former Ocwen homeowners (up to $1,000 each) who have had foreclosure proceedings initiated against them but have not yet lost their homes to foreclosure, and those current Ocwen homeowners will also have the opportunity to be reviewed for a mortgage modification or other alternative to foreclosure.
• $100 million for housing, foreclosure relief, and community redevelopment programs supporting New York’s housing recovery.

Ocwen may not use so-called “soft-dollar” mortgage modifications of loans it does not own to satisfy any of this $150 million penalty. As a servicer, Ocwen is already under a legal obligation to make such modifications if they are in the best interest of homeowners and investors. As such, soft dollar settlements do not represent either a punitive penalty to Ocwen for its misconduct or provide significant additional relief to consumers. Moreover, Ocwen shall not seek or accept, directly or indirectly, reimbursement or indemnification with regard to any or all of the amounts payable under today’s agreement; nor will it claim a U.S. tax deduction or tax credit for those payments.

Ocwen will continue to not be permitted to acquire additional mortgage servicing rights (MSRs). Ocwen may not begin to acquire additional MSRs until and unless it receives prior approval from NYDFS, and meets benchmarks developed by the independent monitor concerning the adequacy of Ocwen’s onboarding process for newly acquired MSRs and its ability to adequately service both those newly acquired MSRs and its existing loan portfolio.

NYDFS’ Investigation of Ocwen’s Misconduct

Ocwen is currently the fourth largest mortgage loan servicer and the largest servicer of subprime loans in the United States, servicing an unpaid principal balance (“UPB”) of approximately $430 billion.

Ocwen has grown more than ten-fold in the last several years. Beginning in 2009, Ocwen significantly expanded its servicing operations through the acquisition of several major servicers of home loans, as well as the acquisition of mortgage servicing rights (MSRs) for hundreds of billions of dollars in UPB.

In 2010 and 2011, NYDFS participated in a multistate examination of Ocwen, as well as entities ultimately acquired by Ocwen. The examination of Ocwen identified, among other things, deficiencies in Ocwen’s servicing platform and loss mitigation infrastructure, including (a) robo-signing, (b) inaccurate affidavits and failure to properly validate document execution processes, (c) missing documentation, (d) wrongful foreclosure, (e) failure to properly maintain books and records, and (f) initiation of foreclosure actions without proper legal standing.

Accordingly, Ocwen and NYDFS entered into an Agreement on Mortgage Servicing Practices on September 1, 2011. In June 2012, the Department conducted a surprise examination of Ocwen to assess its compliance with the 2011 Agreement, and uncovered significant violations. Consequently, on December 5, 2012, Ocwen entered into a Consent Order with NYDFS, which required Ocwen to retain an independent compliance monitor for two years.

During the course of the Monitor’s review, it identified numerous and significant additional violations of the 2011 Agreement, as well as New York State laws and regulations. For example, a limited review by the Monitor of 478 New York loans that Ocwen had foreclosed upon revealed 1,358 violations of Ocwen’s legal obligations, or about three violations per foreclosed loan. These violations included:

• failing to confirm that it had the right to foreclose before initiating foreclosure proceedings;
• failing to ensure that its statements to the court in foreclosure proceedings were correct;
• pursuing foreclosure even while modification applications were pending (“dual tracking”);
• failing to maintain records confirming that it is not pursuing foreclosure of servicemembers on active duty; and failing to assign a designated customer care representative.

The Department and the Monitor also identified, among other issues, (a) inadequate and ineffective information technology systems and personnel, and (b) widespread conflicts of interest with related parties.

In the course of its review, the Monitor determined that Ocwen’s information technology systems are a patchwork of legacy systems and systems inherited from acquired companies, many of which are incompatible. A frequent occurrence is that a fix to one system creates unintended consequences in other systems. As a result, Ocwen regularly gives borrowers incorrect or outdated information, sends borrowers backdated letters, unreliably tracks data for investors, and maintains inaccurate records.

Ocwen’s core servicing functions rely on its inadequate systems.  Specifically, Ocwen uses comment codes entered either manually or automatically to service its portfolio; each code initiates a process, such as sending a delinquency letter to a borrower, or referring a loan to foreclosure counsel.  With Ocwen’s rapid growth and acquisitions of other servicers, the number of Ocwen’s comment codes has ballooned to more than 8,400 such codes.  Often, due to insufficient integration following acquisitions of other servicers, there are duplicate codes that perform the same function.

Despite these issues, Ocwen continues to rely on those systems to service its portfolio of distressed loans. Ocwen’s reliance on technology has led it to employ fewer trained personnel than its competitors. For example, Ocwen’s Chief Financial Officer recently acknowledged, in reference to its offshore customer care personnel, that Ocwen is simply “training people to read the scripts and the dialogue engines with feeling.”  Ocwen’s policy is to require customer support staff to follow the scripts closely, and Ocwen penalizes and has terminated customer support staff who fail to follow the scripts that appear on their computer screens. In some cases, this policy has frustrated struggling borrowers who have complex issues that exceed the bounds of a script and have issues speaking with representatives at Ocwen capable of addressing their concerns.  Moreover, Ocwen’s customer care representatives in many cases provide conflicting responses to a borrower’s question.  Representatives have also failed in many cases to record in Ocwen’s servicing system the nature of the concerns that a borrower has expressed, leading to inaccurate records of the issues raised by the borrower.

The Department’s review of Ocwen’s mortgage servicing practices also uncovered a number of conflicts of interest between Ocwen and four other public companies (the aforementioned “related companies”), all of which are chaired by Mr. Erbey, who is also the largest individual shareholder of each and the Executive Chairman of Ocwen.

Despite Mr. Erbey’s holdings in these companies, Mr. Erbey has not in fact recused himself from approvals of several transactions with the related parties.  Mr. Erbey, who owns approximately 15 percent of Ocwen’s stock, and nearly double that percentage of the stock of Altisource Portfolio, has participated in the approval of a number of transactions between the two companies or from which Altisource received some benefit, including the renewal of Ocwen’s forced placed insurance program in early 2014.

Ocwen’s close business relationship with related companies is particularly evident in its relationship with Altisource Portfolio, which has dozens of subsidiaries that perform fee-based services for Ocwen.  In one example, Altisource Portfolio subsidiary Hubzu, an online auction site, hosts nearly all Ocwen auctions.  In certain circumstances, Hubzu has charged more for its services to Ocwen than to other customers — charges which are then passed on to borrowers and investors.  Moreover, Ocwen engages Altisource Portfolio subsidiary REALHome Services and Solutions, Inc. as its default real estate agency for short sales and investor-owned properties, even though this agency principally employs out-of-state agents who do not perform the onsite work that local agents perform, at the same cost to borrowers and investors.

Conflicts of interest are also evident at other levels of the Ocwen organization.  For example, during its review, the Monitor discovered that ?Ocwen’s Chief Risk Officer concurrently served as the Chief Risk Officer of Altisource Portfolio. The Chief Risk Officer reported directly to Mr. Erbey in both capacities.  This individual seemed not to appreciate the potential conflicts of interest posed by this dual role, which was of particular concern given his role as Chief Risk Officer.

Homeowner Relief

In addition to the direct payments to Ocwen homeowners in New York, the company will also provide the following relief:

• Ocwen will provide upon request by a New York borrower that borrower’s complete loan file, which includes all information from all systems, including comment codes, at no cost to the borrower, regardless of whether such borrower’s loan is still serviced by Ocwen.
• Ocwen will provide every New York borrower who is denied a modification, short sale, or deed-in-lieu of foreclosure, a detailed explanation of the reasons for denial.
• For all New York borrowers who have been reported negatively by Ocwen to credit agencies since January 1, 2010, Ocwen will provide upon request at no cost a copy of such borrower’s credit report (including credit scores), regardless of whether such borrower’s loan is still serviced by Ocwen.
• Nothing in today’s agreement shall excuse Ocwen from paying additional required restitution to any borrowers harmed by its improper or illegal conduct, including the backdating of letters to borrowers.

Additional Board Members, Monitor, and Significant Operational Reforms

Under today’s agreement, to help address conflict of interest issues, Ocwen will expand its Board of Directors by two independent board members in consultation with the Monitor. These additional directors will not own equity in any related party company. Moreover, Ocwen’s Board will contain no more than two executive directors at any time.

The Monitor will also review the adequacy and effectiveness of Ocwen’s operations, and assess Ocwen’s progress in complying with recommended corrective measures.  Such an assessment will include but is not limited to the following areas:

• Information technology systems and personnel, including with respect to record keeping and borrower communications;
• Number of personnel and the training and expertise of its personnel in all servicing operations;
• Onboarding process for newly acquired mortgage servicing rights, including Ocwen’s ability to onboard newly acquired MSRs without interruption to servicing newly acquired loans or its existing loan portfolio;
• Controls in identifying and correcting errors made by Ocwen’s personnel or systems;
• Risk management functions;
• Contracts or proposed contracts with third parties, including but not limited to related parties;
• Fees charged by Ocwen to borrowers or mortgage investors; and
• The Ocwen borrower experience.

The Monitor will review and assess Ocwen’s current committees of the Board of Directors.  The Ocwen Board will consult with the Monitor concerning, among other things, the structure, composition, and reporting lines of such committees, and whether certain committees should be either disbanded or created. The Board will consult with the Monitor to determine which decisions should be committed to the specific oversight of the Board’s independent directors, or a committee comprised of such independent directors, including, but not limited to:

• Approval of transactions with related parties;
• Approval of transactions to acquire mortgage servicing rights, sub-servicing rights, or otherwise to increase the number of loans serviced by Ocwen;
• Approval of new relationships with third-party vendors;
• Determinations as to whether Ocwen’s servicing, compliance, and information technology functions are adequately staffed;
• Determinations as to whether Ocwen’s servicing, compliance, and information technology personnel are adequately trained;
• Determinations as to whether Ocwen’s information technology infrastructure and ongoing investment in information technology systems are adequate;
• Determinations as to whether Ocwen is adequately addressing the issues identified by the Operations Monitor and the Compliance Monitor; and
• Determinations as to whether Ocwen is treating borrowers fairly and is communicating with borrowers appropriately.

The Monitor will semi-annually review and approve Ocwen’s benchmark pricing and performance studies with respect to all fees or expenses charged to New York borrowers by any related party.

The Board will also consult with the Monitor to determine whether any additional members of senior management should be terminated or whether additional officers should be retained to achieve the goals of complying with today’s agreement — and all other applicable laws, regulations, and agreements — as well as creating a corporate culture of ethics, integrity, compliance, and responsiveness to borrowers.

To view a copy of today’s consent order between NYDFS and Ocwen, please visit, link.

Consumer Compliance (CC)
Office of the
Comptroller of the Currency
Washington, DC 20219

Comptroller’s Handbook CC-TILA

Truth in Lending Act

December 2014

Introduction
The Office of the Comptroller of the Currency’s (OCC) Comptroller’s Handbook booklet,
“Truth in Lending Act,” is prepared for use by OCC examiners in connection with their
examination and supervision of national banks and federal savings associations (collectively,
banks).1 Each bank is different and may present specific issues. Accordingly, examiners
should apply the guidance in this booklet consistent with each bank’s individual
circumstances.

The booklet provides background information and optional expanded examination
procedures for the Truth in Lending Act (TILA) and Regulation Z, which implements TILA.
Examiners decide which of these procedures are necessary, if any, after completing a
compliance core assessment as outlined in the “Community Bank Supervision,” “Large Bank
Supervision,” and “Federal Branches and Agencies Supervision” booklets of the
Comptroller’s Handbook. Complaint information received by the Office of the Ombudsman
and the Customer Assistance Group may also be useful in completing the assessment.
Background and Summary
TILA (15 USC 1601 et seq.) was enacted on May 29, 1968, as title I of the Consumer Credit
Protection Act (Pub. L. No. 90-321). TILA, implemented by Regulation Z (12 CFR 1026),
became effective on July 1, 1969.

TILA was first amended in 1970 to prohibit unsolicited credit cards. Additional major
amendments to TILA and Regulation Z were made by the Fair Credit Billing Act of 1974,
the Consumer Leasing Act of 1976, the Truth in Lending Simplification and Reform Act of
1980, the Fair Credit and Charge Card Disclosure Act of 1988, and the Home Equity Loan
Consumer Protection Act of 1988.

Regulation Z also was amended to implement section 1204 of the Competitive Equality
Banking Act of 1987 and, in 1988, to include adjustable rate mortgage (ARM) loan
disclosure requirements. All consumer leasing provisions were deleted from Regulation Z in
1981 and transferred to Regulation M (12 CFR 1013).

The Home Ownership and Equity Protection Act of 1994 (HOEPA) also amended TILA. The
law imposed new disclosure requirements and substantive limitations on certain closed-end
mortgage loans bearing rates or fees above a certain percentage or amount. The law also
included new disclosure requirements to assist consumers in comparing the costs and other
material considerations involved in a reverse mortgage transaction and authorized the Board
of Governors of the Federal Reserve System (FRB) to prohibit specific acts and practices in
connection with mortgage transactions.

The TILA amendments of 1995 dealt primarily with tolerances for real estate secured credit.
Regulation Z was amended on September 14, 1996, to incorporate changes to TILA.
Specifically, the revisions limit lenders’ liability for disclosure errors in real estate secured
loans consummated after September 30, 1995. The Economic Growth and Regulatory
Paperwork Reduction Act of 1996 further amended TILA. The amendments were made to
simplify and improve disclosures related to credit transactions.

The Electronic Signatures in Global and National Commerce Act (E-Sign Act), 15 USC 7001
et seq., was enacted in 2000 and did not require implementing regulations. On
November 9, 2007, amendments to Regulation Z and the official commentary were issued to
simplify the regulation and provide guidance on the electronic delivery of disclosures
consistent with the E-Sign Act.

In July 2008, Regulation Z was amended to protect consumers in the mortgage market from
unfair, abusive, or deceptive lending and servicing practices. Specifically, the change applied
protections to a newly defined category of “higher-priced mortgage loans” that includes
virtually all closed-end subprime loans secured by a consumer’s principal dwelling. The
revisions also applied new protections to mortgage loans secured by a dwelling regardless of
loan price and required the delivery of early disclosures for more types of transactions. The
revisions also banned several advertising practices deemed deceptive or misleading.
The Mortgage Disclosure Improvement Act of 2008 (MDIA) broadened and added to the
requirements of the FRB’s July 2008 final rule by requiring early truth-in-lending disclosures
for more types of transactions and by adding a waiting period between the time when
disclosures are given and consummation of the transaction. In 2009, Regulation Z was
amended to address those provisions. The MDIA also requires disclosure of payment
examples if the loan’s interest rate or payments can change, as well as disclosure of a
statement that there is no guarantee the consumer will be able to refinance in the future. In
2010, Regulation Z was amended to address these provisions, which became effective on
January 30, 2011.

In December 2008, the FRB adopted two final rules pertaining to open-end (not homesecured)
credit. The first rule involved Regulation Z revisions and made comprehensive
changes applicable to several disclosures required for applications and solicitations, new
accounts, periodic statements, change in terms notifications, and advertisements. The second
was a rule published under the Federal Trade Commission (FTC) Act and issued jointly with
the Office of Thrift Supervision (OTS)2 and the National Credit Union Administration
(NCUA). It sought to protect consumers from unfair acts or practices with respect to
consumer credit card accounts. Before these rules became effective, however, the Credit
Card Accountability Responsibility and Disclosure Act of 2009 (Credit CARD Act) amended
TILA and established a number of new requirements for open-end consumer credit plans.

Several provisions of the Credit CARD Act are similar to provisions in the FRB’s December
2008 TILA revisions and the joint FTC Act rule, but other portions of the Credit CARD Act
address practices or mandate disclosures that were not addressed in these rules. In light of the
Credit CARD Act, the FRB, the NCUA, and the OTS withdrew the substantive requirements
of the joint FTC Act rule. On July 1, 2010, creditors were required to comply with the
provisions of the FRB’s rule that were not affected by the Credit CARD Act.

The Credit CARD Act provisions became effective in three stages. The provisions effective
first, on August 20, 2009, required creditors to increase the amount of notice consumers
receive before the rate on a credit card account is increased or a significant change is made to
the account’s terms. These amendments also allowed consumers to reject such increases and
changes by informing the creditor before the increase or change goes into effect. The
provisions effective next, on February 22, 2010, involved rules regarding interest rate
increases, over-the-limit transactions, and student cards. Finally, the provisions effective last,
on August 22, 2010, addressed the reasonableness and proportionality of penalty fees and
charges and reevaluation of rate increases.

In 2009, Regulation Z was amended following the passage of the Higher Education
Opportunity Act by adding disclosure and timing requirements that apply to lenders making
private education loans.

In 2009, the Helping Families Save Their Homes Act amended TILA to establish a new
requirement for notifying consumers of the sale or transfer of their mortgage loans. The
purchaser or assignee that acquires the loan must provide the required disclosures no later
than 30 days after the date on which it acquired the loan.

In 2010, the FRB further amended Regulation Z to prohibit payment to a loan originator that
is based on the terms or conditions of the loan, other than the amount of credit extended. The
amendment applies to mortgage brokers and the companies that employ them, as well as to
mortgage loan officers employed by depository institutions and other lenders. In addition, the
amendment prohibits a loan originator from directing or “steering” a consumer to a loan that
is not in the consumer’s interest, to increase the loan originator’s compensation.

Dodd–Frank amended TILA to include several provisions that protect the integrity of the
appraisal process when a consumer’s home is securing the loan. The statute also requires that
appraisers receive customary and reasonable payments for their services. The appraiser and
loan originator compensation requirements had a mandatory compliance date of April 6,
2011.

Dodd–Frank granted rulemaking authority under TILA to the Consumer Financial Protection
Bureau (CFPB). Title XIV of Dodd–Frank included a number of amendments to TILA, and
in 2013, the CFPB issued rules to implement them. Prohibitions on mandatory arbitration and
waivers of consumer rights, as well as requirements that lengthen the time creditors must
maintain an escrow account for higher-priced mortgage loans, were generally effective
June 1, 2013. The remaining amendments to Regulation Z were effective in January 2014.3
These amendments include ability-to-repay requirements for mortgage loans, appraisal
requirements for higher-priced mortgage loans, and a revised and expanded test for high-cost
mortgages, as well as additional restrictions on those loans, expanded requirements for
servicers of mortgage loans, refined loan originator compensation rules and loan origination
qualification standards, and a prohibition on financing credit insurance for mortgage loans.

The amendments also established new record retention requirements for certain provisions of
TILA.

In 2013, the CFPB issued a final rule revising the general limitation on the total amount of
account fees that a credit card issuer may require a consumer to pay. Effective March 28,
2013, the limit is 25 percent of the credit limit in effect when the account is opened. The
limitation applies only during the first year after account opening.

In 2013, the CFPB also issued a final rule to remove the requirement that card issuers
consider the consumer’s independent ability to pay for applicants who are 21 or older and to
permit issuers to consider income and assets to which such consumers have a reasonable
expectation of access. This change was effective May 3, 2013, with a mandatory compliance
date of November 4, 2013.

[…]

IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF NEW YORK

NATIONAL CREDIT UNION
ADMINISTRATION BOARD,
as Liquidating Agent of U.S. Central Federal
Credit Union, Western Corporate Federal Credit
Union, Members United Corporate Federal
Credit Union, Southwest Corporate Federal
Credit Union, and Constitution Corporate
Federal Credit Union,

Plaintiffs,

v.

U.S. BANK NATIONAL ASSOCIATION, and
BANK OF AMERICA, NATIONAL
ASSOCIATION,
Defendants.

COMPLAINT

The National Credit Union Administration Board (“NCUA Board”), acting in its capacity as liquidating agent for each of U.S. Central Federal Credit Union (“U.S. Central”), Western Corporate Federal Credit Union (“WesCorp”), Members United Corporate Federal Credit Union (“Members United”), Southwest Corporate Federal Credit Union (“Southwest”), and Constitution Corporate Federal Credit Union (“Constitution”), (collectively, the “CCUs” and the NCUA Board as liquidating agent for each, the “Plaintiffs”), by and through their attorneys, for this action against U.S. Bank National Association (“U.S. Bank”) and Bank of America, National Association (“Bank of America,” and collectively with U.S. Bank, “Defendants”), alleges as follows:

I. NATURE OF THE ACTION
1. Plaintiffs bring this action against Defendants for violating the Trust Indenture Act of 1939 (the “TIA”), 15 U.S.C. § 77aaa et seq., and, regarding the New York trusts, for violating New York Real Property Law § 124 et seq. (the “Streit Act”) to recover the damages they have suffered because of Defendants’ violations of their statutory and contractual obligations.
2. This action arises out of Defendants’ roles as trustees for 99 trusts identified on Exhibit A that issued residential mortgage-backed securities (“RMBS”).1 Each trust consists of hundreds of individual residential mortgage loans that were pooled together and securitized for sale to investors. Investors purchased certificates issued by the RMBS trust that entitled the investors (or “certificateholders”) to fixed principal and interest payments from the income stream generated as borrowers made monthly payments on the mortgage loans in the trusts.
3. The CCUs purchased the certificates in the trusts identified on Exhibit A at an original face value of approximately $5.8 billion.
4. The certificates’ value was dependent on the quality and performance of the mortgage loans in the trusts and swift correction of any problems with the loans. But, because of the structure of the securitization, certificateholders do not have access to the mortgage loan files or the power to remedy or replace any defective loans. Instead, certificateholders must rely on the trustees to protect their interests.
5. Defendants, as the trustees for the trusts, had contractual and statutory duties to address and correct problems with the mortgage loans and to protect the trusts’ and the certificateholders’ interests. The trustee for each trust has three primary duties. First, the trustee must take possession and acknowledge receipt of the mortgage files, review the documents in the mortgage files, identify any mortgage files that lack a complete chain of title or that have missing documents, and then certify that the mortgage files are complete and accurate. If the trustee identifies defects in the mortgage files, it must notify the appropriate parties and take steps to enforce the responsible party’s obligation to cure, substitute, or repurchase any mortgage loans with defective mortgage files.
6. Second, if the trustee discovers a breach of the representations and warranties concerning the mortgage loans, including but not limited to representations concerning the characteristics of the mortgage borrowers, the collateral for the mortgage loans, and assurances that the mortgage loans were originated in accordance with applicable underwriting criteria, the trustee must notify the appropriate parties and take steps to enforce the responsible party’s obligation to cure, substitute, or repurchase the defective mortgage loans. If the trustee fails to exercise this duty, then the trusts and the certificateholders will suffer losses properly borne by the party responsible for the defective loans.
7. Third, the trustee must act to protect the interests of the trust and the certificateholders when it becomes aware of defaults concerning the trust. Thus, when the trustee discovers a default, or is notified by other parties, such as servicers, of defaults like breaches of representations and warranties with respect to the underlying mortgage loans, the trustee must act prudently to investigate those defaults, notify certificateholders of the defaults, and take appropriate action to address the defaults.
8. Here, Defendants even failed to perform the threshold duties of taking full possession of the original notes and mortgages and properly reviewing the mortgage loan files for irregularities. If they had fulfilled their obligations, a significant percentage of the mortgage loans in the trusts would have been repurchased or substituted.
9. Moreover, an overwhelming number of events alerted Defendants to the fact that the trusts suffered from numerous problems, yet they did nothing. First, the trusts suffered identifies defects in the mortgage files, it must notify the appropriate parties and take steps to enforce the responsible party’s obligation to cure, substitute, or repurchase any mortgage loans with defective mortgage files.
6. Second, if the trustee discovers a breach of the representations and warranties concerning the mortgage loans, including but not limited to representations concerning the characteristics of the mortgage borrowers, the collateral for the mortgage loans, and assurances that the mortgage loans were originated in accordance with applicable underwriting criteria, the trustee must notify the appropriate parties and take steps to enforce the responsible party’s obligation to cure, substitute, or repurchase the defective mortgage loans. If the trustee fails to exercise this duty, then the trusts and the certificateholders will suffer losses properly borne by the party responsible for the defective loans.
7. Third, the trustee must act to protect the interests of the trust and the certificateholders when it becomes aware of defaults concerning the trust. Thus, when the trustee discovers a default, or is notified by other parties, such as servicers, of defaults like breaches of representations and warranties with respect to the underlying mortgage loans, the trustee must act prudently to investigate those defaults, notify certificateholders of the defaults, and take appropriate action to address the defaults.
8. Here, Defendants even failed to perform the threshold duties of taking full possession of the original notes and mortgages and properly reviewing the mortgage loan files for irregularities. If they had fulfilled their obligations, a significant percentage of the mortgage loans in the trusts would have been repurchased or substituted.
9. Moreover, an overwhelming number of events alerted Defendants to the fact that the trusts suffered from numerous problems, yet they did nothing. First, the trusts suffered enormous losses due to the high number of mortgage defaults, delinquencies, and foreclosures caused by defective loan origination and underwriting. Second, highly publicized government investigations and enforcement actions, public and private litigation, and media reports highlighted the mortgage originators’ systematic abandonment and disregard of underwriting guidelines and the deal sponsors’ poor securitization standards in the years leading up to the financial crisis. As summarized below, these actions and reports detail the incredible volume of defective loans and notorious activities of the originators, sponsors, and other players in the RMBS industry. Yet Defendants failed to take steps to preserve their rights or hold the responsible parties accountable for the repurchase or substitution of defective mortgage loans in direct contravention of their obligations as trustees.
10. Finally, Defendants failed to address servicer and/or master servicer defaults and events of default. Defendants knew that the master servicers and servicers were ignoring their duty to notify other parties, including Defendants as trustees, upon the master servicers’ and servicers’ discovery of breaches of the mortgage loan representations and warranties. Despite Defendants’ knowledge of these ongoing defaults and events of default, Defendants failed to act prudently to protect the interests of the trusts and the certificateholders.
11. Defendants’ failures resulted in the trusts and certificateholders suffering losses rightfully borne by other parties. Had Defendants adequately performed their contractual and statutory obligations, breaching loans would have been removed from the loan pools underlying the certificates and returned to the responsible party. Defendants’ improper conduct directly caused losses to certificateholders like the Plaintiffs.
12. Even after ample evidence came to light that the trusts were riddled with defective loans, Defendants shut their eyes to such problems and failed to take the steps necessary to protect the trusts and certificateholders. Defendants failed to act in part because protecting the best interests of the trusts and the certificateholders would have conflicted with Defendants’ interests. As participants in many roles in the securitization process, Defendants were economically intertwined with the parties they were supposed to police.
13. Because of the widespread misconduct in the securitization process, Defendants had incentives to ignore other parties’ misconduct in order to avoid drawing attention to their own misconduct. Thus, Defendants failed and unreasonably refused to take action to protect the trusts and certificateholders against responsible party breaches.
14. Indeed, it is precisely this type of trustee complicity and inaction that led Congress to enact the TIA to “meet the problems and eliminate the practices” that plagued Depression-era trustee arrangements and provide investors with a remedy for trustees that utterly neglect their obligations. See, e.g., 15 U.S.C. § 77bbb(b) (explaining purposes of the TIA in light of problems identified in 15 U.S.C. § 77bbb(a)).
15. To that end, several sections of the TIA impose duties on trustees. First, TIA Section 315(a) provides that, prior to default (as that term is defined in the governing documents), the trustee is liable for any duties specifically set out in the governing documents. 15 U.S.C. § 77ooo(a)(1). Second, TIA Section 315(b) provides that the trustee must give holders of covered securities “notice of all defaults known to the trustee, within ninety days after the occurrence thereof.” 15 U.S.C. § 77ooo(b). Third, Section 315(c) requires a trustee to act prudently in the event of a default (as that term is defined in the governing documents). 15 U.S.C. § 77ooo(c). Finally, the TIA states that “[n]otwithstanding any other provision of the indenture to be qualified, the right of any holder of any indenture security to receive payment of the principal of and interest on such indenture security, on or after the respective due dates expressed in such indenture security . . . shall not be impaired or affected without the consent of such holder.” 15 U.S.C. § 77ppp(b).
16. In addition, Section 124 of the Streit Act imposes a duty upon the trustee to discharge its duties under the applicable indenture with due care to ensure the orderly administration of the trust and to protect the trust beneficiaries’ rights. N.Y. Real Prop. Law § 124. Like the TIA, following an event of default, the Streit Act provides that the trustee must exercise the same degree of skill and care in the performance of its duties as would a prudent person under the same circumstances. N.Y. Real Prop. Law § 126(1).
17. Finally, upon awareness of the various failures discussed in this complaint, the governing agreements require Defendants to exercise their rights and powers using the same degree of care and skill as a prudent person would exercise or use under the circumstances in the conduct of such person’s own affairs.
18. Defendants’ failure to perform their duties under the TIA, the Streit Act, and the governing agreements has caused Plaintiffs to suffer enormous damages.

[…]

Of course!

REUTERS-

The U.S. credit union regulator said on Wednesday it filed a lawsuit against U.S. Bank and Bank of America over mortgage securities sold in the years leading up to the financial crisis.

The National Credit Union Administration (NCUA) said the banks broke state and federal laws by failing their duties as trustees for 99 residential mortgage-backed securities trusts.

The banks sold $5.8 billion in securities to five corporate credit unions that later failed after the products lost value. The regulator accused U.S. Bank and Bank of America of knowing about defects in the mortgage loans but not providing required notices to the investors.

[REUTERS]

H/T Dave Krieger

Third District Court of Appeal
State of Florida

Opinion filed December 17, 2014.
Not final until disposition of timely filed motion for rehearing.
________________
No. 3D14-575
Lower Tribunal No. 12-49315
________________

Deutsche Bank Trust Company Americas, etc.,
Appellant,

vs.

Harry Beauvais, et al.,
Appellees.

An Appeal from the Circuit Court for Miami-Dade County, Peter R. Lopez,
Judge.

K & L Gates LLP, William P. McCaughan, Steven R. Weinstein and
Stephanie N. Moot, for appellant.

Sigfried, Rivera, Hyman, De La Torre, Mass & Sobel, Steven M. Siegfried
and Nicholas Sigfried; The Wallen Law Firm and Todd L. Wallen, for appellees.
Before SHEPHERD, C.J., and EMAS and SCALES, JJ.
EMAS, J.

I. INTRODUCTION
Deutsche Bank Trust Company Americas, as Indenture Trustee for
American Home Mortgage Investment Trust 2006-2 (“Deutsche Bank”), appeals
from the trial court’s order of final summary judgment in favor of Aqua Master
Association, Inc. (“the Association”). Deutsche Bank asserts the trial court erred
in concluding that the expiration of the statute of limitations barred the cause of
action and rendered the lien of mortgage on the property null and void. The
following issue is squarely raised in this case:

Where a lender files a foreclosure action upon a borrower’s default,
and expressly exercises its contractual right to accelerate all payments,
does an involuntary dismissal of that action without prejudice in and
of itself negate, invalidate or otherwise “decelerate” the lender’s
acceleration of the payments, thereby permitting a new cause of action
to be filed based upon a new and subsequent default?

We answer that question in the negative, and hold that the involuntary
dismissal without prejudice of the foreclosure action did not by itself negate,
invalidate or otherwise decelerate the lender’s acceleration of the debt in the initial
action. The lender’s acceleration of the debt triggered the commencement of the
statute of limitations, and because the installment nature of the loan payments was
never reinstated following the acceleration, there were no “new” payments due and
thus there could be no “new” default following the dismissal without prejudice of
the initial action. The filing of the subsequent action, after expiration of the statute
of limitations, was therefore barred. We reverse, however, that portion of the order
which canceled the note and mortgage and quieted title in favor of the Association.

[…]

Executive Summary

The following summary is an overview of the fourth set of compliance reports that I have filed with the United States District Court for the District of Columbia (the Court) as Monitor of the National Mortgage Settlement. The summary includes:

• An overview of the process through which my colleagues and I have reviewed the servicers’ performance on the Settlement’s servicing reforms
• An update on the servicers’ plans to correct issues outlined in this and prior reports
• Summaries of each servicer’s compliance for the first and second calendar quarters of 2014, including compliance with the four new additional metrics I issued in October 2013
• An analysis of complaints received from distressed borrowers and the professionals who represent them

I reported a total of three potential violations in the first two quarters of this year, the relevant test periods for this report. In the first quarter of 2014, Bank of America failed Metrics 7 and 19 and Citi failed Metric 20. There were no reported fails in the second quarter of 2014.

In May of 2014, I reported that Green Tree failed eight metrics in the fourth quarter of 2013 and had much work to do. I have since reviewed the corrective action plans Green Tree proposed to address the root causes of these fails and summarized them in this report. Green Tree reported, and I confirmed, that the servicer passed Metrics 10 and 12 in the second quarter of 2014, two of the metrics it previously failed. The six other previously failed metrics will be tested in subsequent test periods.

I filed with the Court an interim report on Ocwen’s progress for the relevant test periods. In May 2014, an Ocwen employee contacted a member of the Monitoring Committee and alleged serious deficiencies in the internal review group (IRG) process, which called into question the IRG’s independence and the integrity of the IRG’s operations. Based on these allegations, I launched an investigation into the claims. After my team and I reviewed numerous documents and interviewed several Ocwen personnel, I concluded that I could not rely on the work of Ocwen’s IRG for the first half of 2014. Therefore, I exercised my authority under the Settlement and tasked McGladrey, an independent accounting firm, to retest Ocwen’s performance on a number of metrics.

Additionally, after reviewing a letter issued by the New York Superintendent of Financial Services, which indicated that the date on certain correspondence from Ocwen to its consumers was incorrect, I directed Ocwen to scope, correct and remediate this letter dating problem. Again, I engaged McGladrey to perform additional work to confirm that Ocwen is complying with the Settlement. McGladrey’s work on both issues is ongoing, and I will report to the Court when it has been completed.

[jasmithmonitoring]

For immediate release:
December 16, 2014

Contact:
Hannah Harrill
919-508-7821

Monitor: Banks Fail Three Tests, Issues Discovered at Ocwen Joseph Smith reports on NMS compliance, Ocwen consumer relief, and Chase RMBS Settlement

RALEIGH, N.C. – Joseph A. Smith, Jr., Monitor of the National Mortgage Settlement (NMS), the Ocwen National Servicing Settlement, and JP Morgan Chase Residential Mortgage-Backed Securities Settlement (Chase RMBS Settlement), today released updates on six mortgage servicers’ compliance with the NMS servicing standards, Ocwen’s self-reported progress toward fulfilling its consumer relief requirement under the Ocwen National Servicing Settlement, and JP Morgan Chase’s progress toward fulfilling the consumer relief requirements of the Chase RMBS Settlement.

NMS Compliance
Smith’s Continued Oversight report is a summary of six compliance reports he filed with the United States District Court for the District of Columbia as part of his duties monitoring the NMS. This summary details the results of his tests to determine compliance by Bank of America, Chase, Citi, Green Tree, Ocwen and Wells Fargo with the NMS servicing rules from Jan. 1, 2014 to June 30, 2014.

This is the first report with results for Smith’s four additional metrics created to supplement the original 29 NMS metrics. “The new metrics addressed concerns related to issues involving the loan modification process, single points of contact and billing statement accuracy,” said Smith. “I found that all the servicers tested on these new metrics passed them.”

There were three fails of other metrics.

Ocwen Compliance
“In May, an Ocwen employee contacted me through the Monitoring Committee and identified serious deficiencies in Ocwen’s internal review group process,” said Smith. “The Monitoring Committee and I took the claims seriously, and I launched an investigation, during which my team and I reviewed thousands of documents and interviewed nine Ocwen executives and employees. As a result, I retained an independent auditing firm to review and retest the Ocwen internal review group (IRG)’s work. This work is ongoing, and I will report on Ocwen’s performance for the period covered in these reports when it is complete. I appreciate this whistle-blower’s integrity.

“I have since further strengthened my review process of all servicers’ IRGs. Among other enhancements, I added interviews with multiple employees at various levels, additional reviews at various steps in the testing process, and the establishment of an Ethics Hotline so that any concerned IRG employee can reach my team quickly and anonymously if he or she has any concerns.

“The Monitoring Committee has been active and constructive in the monitoring process since the beginning of the NMS and I consulted with it during the course of my investigation into Ocwen’s practices.” The Monitoring Committee is composed of representatives from 15 states, the U.S. Department of Housing and Urban Development and the U.S. Department of Justice.

Smith also engaged Ocwen about the New York State Superintendent of Financial Services’ concerns about incorrect dates on some of Ocwen’s correspondence with customers, as this letter dating issue impacts the NMS.

“Many NMS standards and metrics have timeline requirements, so it was important to me to investigate Ocwen’s work in this area,” said Smith. “Ocwen has agreed to five remedial actions to date, which I include in this report. I also charged the same independent firm with determining the scope of the issue, assessing the reliability of Ocwen’s systems, and retesting relevant metrics.

“Ocwen has cooperated throughout the IRG and letter dating investigations and the ongoing work.”

Ocwen Consumer Relief under the Ocwen National Servicing Settlement
Smith also released an update on Ocwen’s $2 billion in first lien principal reduction obligation. Ocwen self-reported that it has completed $1.5 billion to borrowers through September 30, 2014. This is the first update on Ocwen’s consumer relief progress, and the Monitor has not yet credited these numbers. The Ocwen consumer relief data can be found here.

Chase RMBS Consumer Relief
In addition, Smith released a report on Chase’s progress toward providing $4 billion in consumer relief as part of the Chase RMBS Settlement. Chase’s review group asserted to the Monitor that it provided almost $1.4 billion in credited relief in the third quarter of 2014 and more than $2.2 billion in credited relief to date. Chase reports that it has provided $13.8 billion dollars in gross modifications and lending to 111,924 borrowers as of September 30, 2014. The Monitor has credited more than $868 million and is reviewing the additional work Chase and its internal review group (HRG) asserted. He will report the results of his testing in his report to the public next quarter.

About the Office of Mortgage Settlement Oversight More information about the National Mortgage Settlement and the Ocwen National Servicing Settlement is available at www.nationalmortgagesettlement.com. Further information about Joseph Smith and the Office of Mortgage Settlement Oversight is available at www.mortgageoversight.com.

About the Chase RMBS Settlement
More information about the Chase RMBS Settlement is available at https://www.jasmithmonitoring.com/chase. Further information about Joseph A. Smith, Jr. is available a https://www.jasmithmonitoring.com.

REPORT:

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They will never get their shit in order no matter how much fraud they find and no matter how many settlements are agreed to.

National Mortgage News-

Ocwen Financial came under fire Tuesday from Joseph A. Smith, the monitor of the national mortgage settlement, after concerns of conflicts of interest were raised by an unnamed whistleblower.

Smith said in a report that he could not rely on Ocwen’s internal review process and had hired independent accounting firm McGladrey to test Ocwen’s work to ensure compliance with the national mortgage settlement.

The whistleblower alleged that an internal review group created to test Ocwen’s compliance with mortgage servicing standards was not independent. The whistleblower said the group was not properly selecting random samplings of loan files to be tested, Smith said.

[NATIONAL MORTGAGE NEWS]

Something tells me he obviously knew what was about to go on with robo-signing! So let the storm calm down and reacquire it…simple.

Jacksonville-

Nearly a year after reacquiring Lender Processing Services Inc., Fidelity National Financial Inc. Chairman Bill Foley wonders why the company ever got rid of LPS in the first place.

“Why we did that and how we let LPS get away from FNF, because that’s why we moved here to start with, we still are kind of mystified by that,” Foley said at an “Investor Day” presentation at the company’s Jacksonville headquarters Dec. 4.

Fidelity, which is mainly a title insurance company, bought the company that became LPS from Alltel Corp. in 2003 and then moved its headquarters from California to LPS’ offices in Jacksonville.

[JACKSONVILLE]

image: Jacksonville