The Indiana Attorney General says financially stressed Northwest Indiana families need all the protection they can get from mortgage companies racing to foreclose on them.
“I fought long and hard against these mortgage bankers who want to go back to business as usual,” Greg Zoeller said last week.
He said he is lobbying against legislation that would terminate an earlier law that formalized the Mortgage Foreclosure Trial Court Assistance program, a homeowner protection program created during the mortgage crisis since 2010 and still helping thousands of Hoosiers this year.
“There were 1,900 distressed borrowers in Lake County who got a settlement conference, and there were 839 people who got to stay in their homes,” Zoeller said.
What a better way to preface the upcoming Quiet Title Workshop in Las Vegas (April 16th-18th; see the Clouded Titles website for details) than to relate some of the more serious title issues that could certainly affect the standing of the property owner (or alleged property owner) to be able to file a quiet title action.
I start by first discussing what many attorneys I’ve spoken with refer to as a “deed to nowhere”. There are other terms that have been bandied about in the legal community, but I think this term is the most succinct as it relates to the lack of property ownership ab initio. For those of you who aren’t keen on your Latin, the foregoing term means “from the beginning”. In this case, it refers to what DIDN’T happen at closing (or shortly thereafter). I have made note of a few cases to back up what I’m about to discuss here.
I have to slam the behaviors of the title companies, trustees, escrow officers and mortgage document preparers who DON’T first review their work before they hit “PRINT” or “SEND”, only to be relied upon by someone else who is less learned in real property issues than they are. I nitpick at these folks because these people are (in my humble opinion) the MOST responsible for the errors committed here which I am about to discuss in various scenarios.
Benjamin Lawsky, New York state’s financial services regulator, has added himself to the regulators investigating Deutsche Bank AG for manipulation of the Libor benchmark borrowing rate, the Financial Times reported on Sunday, citing unnamed sources.
The New York Department of Financial Services’ probe of the German bank marks the first Libor investigation for the regulator. Deutsche Bank is currently negotiating a settlement with the U.S. Justice Department, the newspaper said.
Lawsky’s department regulates banks with charters in New York as well as foreign banks with branches in the state. He is not investigation other banks, which have already settled with the government, the Financial Times said.
IN THE DISTRICT COURT OF APPEAL FIRST DISTRICT, STATE OF FLORIDA
IN THE DISTRICT COURT OF APPEAL FIRST DISTRICT, STATE OF FLORIDA NOT FINAL UNTIL TIME EXPIRES TO FILE MOTION FOR REHEARING AND DISPOSITION THEREOF IF FILED CASE NO. 1D14-251
BANK OF AMERICA, N.A., AND THIRD-PARTY DEFENDANT, HOMEFOCUS SERVICES, LLC, Appellants,
v.
PHILLIP V. PATE AND BARBARA PATE, ROBERT L. POHLMAN AND MARCIA L. CROOM, Appellees.
_____________________________/
Opinion filed March 16, 2015.
An appeal from the Circuit Court for Calhoun County. Kevin Grover, Judge.
J. Randolph Liebler and Tricia J. Duthiers of Liebler, Gonzalez & Portuondo, Miami, for Appellants.
Jonna L. Bowman of Law Office of Jonna Bowman, Blountstown, for Appellees.
PER CURIAM.
AFFIRMED.
ROWE and OSTERHAUS, JJ., CONCUR; THOMAS, J., CONCURS SPECIALLY WITH OPINION. THOMAS, J., Specially Concurring.
In this civil foreclosure case, the trial court found that Appellant Bank of America (the Bank) engaged in egregious and intentional misconduct in Appellee Pates’ (Pate) purchase of a residential home. Thus, based on the trial court’s finding that the Bank had unclean hands in this equity action, it did not reversibly err in denying the foreclosure action and granting a deed in lieu of foreclosure. In addition, the trial court did not err in ruling in favor of the Pates in their counterclaims for breach of contract and fraud, and awarding them $250,000 in punitive damages and $60,443.29 in compensatory damages, against the Bank and its affiliate, Homefocus Services, LLC, which provided the flawed appraisal discussed below. Finally, the trial court did not reversibly err in granting injunctive relief and thereby ordering the Bank to take the necessary measures to correct the Pates’ credit histories.
In the bench trial below, the trial court found that the Bank assured the Pates, based on the appraisal showing the home’s value far exceeded the $50,000 mortgage loan, that it would issue a home equity loan in addition to the mortgage loan. This was a precondition to the Pates’ agreement to purchase the home, which was in very poor condition but had historical appeal for the Pates. The Pates intended to restore the home, but needed the home equity loan to facilitate restoration.
Before the closing on the property, the Bank informed the Pates that it would close on the home equity loan “later,” after the mortgage loan was issued. The Bank later refused to issue the home equity loan, in part on the ground that the appraisal issued by Homefocus was flawed. The Pates were forced to invest all of their savings and much of their own labor in extensive repairs. Thus, the trial court found that the Pates detrimentally relied on the representations of the Bank that it would issue the home equity loan. The record supports the trial court’s conclusion that the Bank acted with reckless disregard constituting intentional misconduct by the Bank. See generally, Lance v. Wade, 457 So. 2d 1008, 1011 (Fla. 1984) (“[E]lements for actionable fraud are (1) a false statement concerning a material fact; (2) knowledge by the person . . . that the representation is false; (3) the intent . . . [to] induce another to act on it; and (4) reliance on the representation to the injury of the other party. In summary, there must be an intentional material misrepresentation upon which the other party relies to his detriment.”).
The trial court further found that the Pates complied with the Bank’s demand to obtain an insurance binder to provide premiums for annual coverage, and that the Bank agreed to place these funds in escrow, utilizing the binder to pay the first year of coverage and calculate future charges to the Pates. Although the Pates fulfilled this contractual obligation, the Bank failed to correctly utilize the escrow funds. Consequently, the Pates’ insurance policy was ultimately cancelled due to nonpayment. The Pates attempted to obtain additional coverage but were unsuccessful due to the home’s structural condition. The Bank then obtained a force-placed policy with $334,800 in coverage and an annual premium of $7,382.98, which was included on the mortgage loan, quadrupling the Pate’s mortgage payment.
The Pates offered to pay the original $496.34 monthly mortgage payment, but the Bank refused, demanding a revised mortgage payment of $2,128.74. The trial court found it “disturbing that Bank of America could financially profit due to [the Bank’s] failure to pay the home insurance. . . . [T]he profits for one or more months of forced place insurance would have been substantial.”
The trial court further found that during the four years of litigation following the Pates’ default, the Bank’s agents entered the Pate’s home several times while the Pates resided there, attempted to remove furniture, and placed locks on the exterior doors. Following the Bank’s action, the Pates had to have the locks changed so their family could enter the residence. During two of the intrusions, the Pates were required to enlist the aid of the sheriff to force the Bank’s agent to leave their home. The trial court found as fact that, due to the Bank’s multiple intrusions into their home, the Pates were forced to obtain alternative housing for 28 months, at a cost of thousands of dollars. The Bank’s actions supported the trial court’s finding that punitive damages were awardable. In Estate of Despain v. Avante Group, Inc., 900 So. 2d 637, 640 (Fla. 5th DCA 2005), the court held that “[p]unishment of the wrongdoer and 4 deterrence of similar wrongful conduct in the future, rather than compensation of the injured victim, are the primary policy objectives of punitive damage awards.” See also Owens-Corning Fiberglas Corp. v. Ballard, 749 So. 2d 483 (Fla. 1999); W.R. Grace & Co.-Conn. v. Waters, 638 So. 2d 502 (Fla. 1994).
In Estate of Despain, the court held that “[t]o merit an award of punitive damages, the defendant’s conduct must transcend the level of ordinary negligence and enter the realm of willful and wanton misconduct . . . .” 900 So. 2d at 640. Florida courts have defined such conduct as including an “entire want of care which would raise the presumption of a conscious indifference to consequences, or which shows . . . reckless indifference to the rights of others which is equivalent to an intentional violation of them.” Id. (quoting White Constr. Co. v. Dupont, 455 So. 2d 1026, 1029 (Fla. 1984)). Here, the Bank’s intent to defraud was shown by its reckless disregard for its actions. The facts showing the Bank’s “conscious indifference to consequences” and “reckless indifference” to the rights of the Pates is the same as an intentional act violating their rights. See White Constr. Co., 455 So. 2d at 1029. The record evidence provides ample support for the trial court’s ruling in favor of the Pates’ claim for punitive damages against the Bank.
The learned trial judge found that the Bank’s actions demonstrated its unclean hands; therefore, the Bank was not entitled to a foreclosure judgment in equity. Unclean hands is an equitable defense, akin to fraud, to discourage unlawful activity. See Congress Park Office Condos II, LLC v. First-Citizens Bank & Trust Co., 105 So. 3d 602, 609 (Fla. 4th DCA 2013) (“It is a self-imposed ordinance that closes the doors of a court of equity to one tainted with inequitableness or bad faith relative to the matter in which he seeks relief[.]”) (quoting Precision Instrument Mfg. Co. v. Auto. Maint. Mach. Co., 324 U.S. 806, 814 (1945))). The totality of the circumstances established the Bank’s unclean hands, precluding it from benefitting by its actions in a court of equity. Thus, the trial court did not err by denying the foreclosure action.
JPMorgan Chase & Co.’s $13 billion fraud settlement with the U.S. can’t be blocked by a watchdog group because it couldn’t prove it was harmed by the deal.
Better Markets Inc.’s lawsuit challenging the U.S Justice Department’s agreement with the bank was dismissed by a federal judge. The group, founded by a hedge fund manager, “failed to meet its burden to show it has suffered an injury in fact, and consequently it cannot demonstrate standing,” U.S. District Judge Beryl Howell in Washington ruled.
The government’s agreement with JPMorgan, announced in November 2013, settled allegations that the biggest U.S. lender by assets misled investors and the public when it sold bonds backed by faulty residential mortgages.
Citigroup Inc.’s failure to pay 24,000 people owed money as part of a settlement with the government over foreclosure abuses has prompted a U.S. lawmaker to call for an investigation into whether banks missed other borrowers.
Maxine Waters, the senior Democrat on the House Financial Services Committee, sent a letter Friday to the inspectors general of the Federal Reserve and the Treasury Department seeking an examination. Her request pertains to a 2013 accord in which lenders agreed to pay $10 billion to resolve allegations that they improperly initiated hundreds of thousands of foreclosures following the housing bust.
Waters is seeking a probe after Bloomberg News reported earlier this month that thousands of borrowers who were entitled to compensation from Citigroup never got checks. The bank took action after one borrower’s complaint caused regulators to reexamine the settlement.
“Thankfully, this error was discovered,” Waters of California wrote in the letter to Mark Bialek at the Fed and Eric M. Thorson at Treasury. The situation “has raised questions as to whether there are other borrowers who have not been properly compensated by other servicers,” she added.
Ocwen Loan Servicing has agreed in principle to settle a nationwide class action accusing it of causing homeowners to lose valuable tax breaks by misreporting mortgage interest to U.S. tax authorities, according to a court filing on Wednesday.”
If the deal goes through, it will be very good for the class,” plaintiffs’ lawyer David Vendler at Morris Polich & Purdy said in an emailed message. Ocwen is represented by lawyers at Greenberg Traurig. A spokesman for Ocwen declined comment.
Hoping to deliver relief to Americans pounded by the financial crisis, the government has poured billions of dollars into a sort of Red Cross for homeowners.
NeighborWorks America, a nonprofit chartered by Congress, distributes much of that money to counseling groups that dispense mortgage advice and sometimes financial aid.
A close look at the group reveals a house in disorder — with sweetheart contracts, document fudging and unexplained departures of top officials.
The trial of the century—a long-awaited determination of the damage perpetrated by Wall Street institutions in the financial crisis—began Monday in New York. But it’s only happening because one bank—unlike Goldman Sachs, JP Morgan, Citigroup, and Bank of America—refused to settle out of court. The Japanese firm Nomura stands accused of lying to mortgage giants Fannie Mae and Freddie Mac about the quality of mortgages pooled into securities during the housing bubble. The case will finally reveal hard data on just how much money Nomura, and the rest of the industry, made through fraud.
The Federal Housing Finance Agency (FHFA), conservator of Fannie Mae and Freddie Mac, sued 18 of the biggest banks in the world in 2011. As an investor, Fannie and Freddie purchased $196 billion in mortgage-backed securities from 2005 to 2007, filled with loans that did not meet specific underwriting guidelines. Sixteen of the 18 banks settled with FHFA, netting the agency $18.2 billion. One suit with the Royal Bank of Scotland remains in limbo. Only Nomura pushed FHFA into trial.1
The Securities and Exchange Commission denied Bank of America’s request to exclude a shareholder proposal from this year’s proxy that asks the Charlotte bank to examine ways to break itself up.
The agency’s decision means Bank of America shareholders will get a chance to vote this spring on the proposal, although such measures typically face an uphill battle in winning stockholder support.
The shareholder behind the proposal said it is the first time the SEC has allowed a measure to go forward that pushes for splitting up a major bank.
U.S. housing finance companies Fannie Mae and Freddie Mac could require more bailouts from U.S. taxpayers as risks are rising due to shrinking reserves, an internal watchdog for the firms’ regulator said on Wednesday.
Washington bailed out the two firms in 2008 at the height of the financial crisis and has since seized all their quarterly profits while demanding the firms reduce their capital buffers.
“Future profitability is far from assured,” Federal Housing Finance Agency Office of Inspector General said in a report, pointing out that the firms could again chalk up losses on their derivatives portfolios, similar to those they reported in the fourth quarter.”
(This) increases the likelihood of additional Treasury investment,” the report stated.
Ocwen Financial Corp (OCN.N) said it was selling residential mortgage servicing rights worth $9.6 billion to a subsidiary of Walter Investment Management Corp (WAC.N).
The deal is the latest in a series of steps by Ocwen to slim down its operations amid regulatory scrutiny over its business practices.
Ocwen, which delayed filing its full-year results, also said it was reviewing the ability of its affiliate, Home Loan Servicing Solutions Ltd (HLSS.O), to meet obligations to fund new servicing advances.
A Chapter 7 trustee objected to the proof of claim filed by a downstream assignee of a lost mortgage note. The trustee sought both to reject the claim and to avoid the mortgage (so that he could preserve the mortgage lien for the benefit of the estate). The bankruptcy court held for the trustee with respect to the note and for the mortgagee with respect to the right to enforce the mortgage. Both parties appealed.
The debtor acquired property for a purchase price of $1.00 plus assumption of all encumbrances, including a mortgage given by seller to the trustee of a real estate trust (Hansbury). The debtor did not incur any direct liability to Hansbury.
Hansbury subsequently assigned the note and mortgage to another party (CPIC). Hansbury had lost the note, so he gave CPIC (1) an assignment of the mortgage, (2) a lost note affidavit with a copy of the note, and (3) an allonge transferring rights into the note. The lost note affidavit had typical representations that a full and complete copy of the note was attached, Hansbury was the holder of the note (which had been lost but had not been transferred or discharged), the outstanding balance, and the consideration paid by Hansbury for the note and mortgage. CPIC in turn assigned its rights under the Murphy note and mortgage to another trustee of a trust (Green) as security for a loan.
Yesterday, an agency of the Federal government, the U.S. Treasury’s Office of Financial Research (OFR), released a study warning that by three separate measures the U.S. stock market is approaching dangerous “two-sigma thresholds” which can lead to “quicksilver markets.” Translation: we could be heading for a big crash.
A two-sigma threshold is when market valuation metrics move at least two standard deviations above the historical mean. The study notes that “valuations approached or surpassed two-sigma in each major stock market bubble of the past century.” Think 1929, 2000 and 2007. A quicksilver market, as defined by the study, is when stable markets turn on a dime and “change rapidly and unpredictably.”
EDIT: A tip came in with the following to this case:
A key part of this decision concerns an agency’s interpretive powers. Generally, courts give Chevron deference to an agency’s interpretations of its rules if the interpretations are adopted through the Administrative Procedure Act’s notice-and-comment rulemaking procedures. Otherwise, courts generally give a lower standard of deference to an agency’s interpretations. In Jesinoski, the defendants argued that CFPB should be accorded no deference or at most Auer-Skidmore deference. In Fridman, the court touches upon this but does not really explore this topic. However, the dissent asks the question, “Why should an agency that parrots a statute in a regulation, as the Bureau did, get to make binding rules through “official commentary” that did not go through notice-and-comment rulemaking?” The answer is Perez v. Mortgage Bankers Association.
Fridman was decided two days after the U.S. Supreme Court’s decision in Perez v. Mortgage Bankers Association so it is possible that the Seventh Circuit was unaware of this decision. In Perez, the Court unanimously ruled that a federal agency is not required to use the notice-and-comment rulemaking procedures when changing an interpretation of its regulations. The Perez decision applies to interpretative rules issued by any federal agency including the Consumer Finance Protection Bureau. However, the decision leaves untouched the well-established rule that an agency must acknowledge and provide an explanation for its departure from established precedent. The Perez court goes into a lengthy discussion of the Seminole Rock-Auer deference.
Suffice to say, IMHO, the CFPB’s interpretations should accorded Chevron deference. “First, always, is the question whether Congress has directly spoken to the precise question at issue. If the intent of Congress is clear, that is the end of the matter; for the court, as well as the agency, must give effect to the unambiguously expressed intent of Congress. If, however, the court determines Congress has not directly addressed the precise question at issue, the court does not simply impose its own construction on the statute . . . Rather, if the statute is silent or ambiguous with respect to the specific issue, the question for the court is whether the agency’s answer is based on a permissible construction of the statute.” Chevron U.S.A. v. NRDC, 467 U.S. 837 (1984).
Before WOOD, Chief Judge, and EASTERBROOK and HAMILTON, Circuit Judges.
WOOD, Chief Judge.
Like many consumers today, Elena Fridman paid her mortgage electronically, using the online payment system on the website of her mortgage servicer, NYCB Mortgage Company, LLC. By furnishing the required information and clicking on the required spot, she authorized NYCB to collect funds from her Bank of America account. The question before us concerns the time when NYCB received one of her payments. Although Fridman filled out the form within the grace period allowed by her note, NYCB did not credit her payment for two business days. This delay caused Fridman to incur a late fee. Believing that her payment should not have been treated as late, Fridman brought this suit in the district court on behalf of herself and a putative class. She alleged that NYCB’s practice of not crediting online payments on the day that the consumer authorizes them violates the Truth in Lending Act (TILA), 15 U.S.C. § 1601 et seq. The district court read the law differently and granted NYCB’s motion for summary judgment. Fridman appealed, and we now reverse the district court’s order and remand for further proceedings.
I
Like a great many financial institutions, NYCB accepts mortgage payments through its website, http://www. mynycb.com, as well as through mail, telephone, and wire transfer. A consumer whose personal bank account is not with NYCB makes an online payment by signing on to her NYCB loan account and providing the routing and account numbers for her external bank account. Next, the consumer electronically authorizes NYCB to debit her bank account by clicking a “submit payment” button. NYCB withdraws funds from the consumer’s account through the Electronic Payments Network (EPN), which is an Automated Clearing House (ACH). Each business day, NYCB compiles electronic authorizations into an ACH file. The next day, it uses that file to request the transfer of funds from its consumers’ banks through the EPN. Consumer electronic authorizations submitted before 8:00 p.m. Eastern Time on a business day are included in that day’s ACH file, while authorizations submitted after that time are placed in the next business day’s file. NYCB credits payments made through its website two business days after an electronic payment is submitted. (The company notifies its consumers of this lag time on the electronic-authorization webpage.) NYCB’s rationale for the delay is that two business days represents “the earliest NYCB can receive the electronic funds transfer through the ACH network from its consumers’ banks.” It does not, however, make consumers wait longer than two days for a payment to be credited, even if a problem with the ACH processing system causes a delay in NYCB’s actual receipt of the funds.
NYCB services Fridman’s mortgage. The mortgage requires payment on the first day of each month, with a 15-day grace period before she must pay a late fee. In December 2012, Fridman used NYCB’s website to authorize NYCB to transfer funds electronically from her Bank of America checking account. Fridman completed the electronic authorization on either the evening of Thursday, December 13, 2012 (after the 8:00 p.m. cutoff time), or the morning of Friday, December 14, 2012. In keeping with its policy, NYCB did not credit Fridman’s mortgage account until Tuesday, December 18, 2012, two business days later, and three days after the expiration of the grace period. (This was also the day that Fridman’s Bank of America account was debited.) NYCB charged Fridman a late fee of $88.54.
Fridman brought this lawsuit under TILA’s civil liability provision, 15 U.S.C. § 1640. She asserted that TILA requires mortgage servicers to credit electronic payments on the day of the authorization. NYCB persuaded the district court that the relevant time under the statute for crediting such a payment is when the mortgage servicer receives the funds from the consumer’s external bank account. Whether that is correct is the sole issue on appeal. As nothing but questions of law are presented, our review is de novo. Taylor-Novotny v. Health Alliance Med. Plans, Inc., 772 F.3d 478, 488 (7th Cir. 2014).
II
TILA generally requires mortgage servicers to credit payments to consumer accounts “as of the date of receipt” of payment, unless delayed crediting has no effect on either late fees or consumers’ credit reports. 15 U.S.C. § 1639f(a). This provision’s implementing regulation, known as Regulation Z, essentially repeats this requirement. See 12 C.F.R. § 1026.36(c)(1)(i) (“No servicer shall fail to credit a periodic payment to the consumer’s loan account as of the date of receipt….”). But what is the date of receipt? That question, on which the result in this case turns, is more complicated than one might think. The Consumer Financial Protection Bureau’s (CFPB) Official Interpretations of Regulation Z (“Official Interpretations”) define the term “date of receipt” as follows:
1. Crediting of payments. Under § 1026.36(c)(1)(i), a mortgage servicer must credit a payment to a consumer’s loan account as of the date of receipt.
…
3. Date of receipt. The “date of receipt” is the date that the payment instrument or other means of payment reaches the mortgage servicer. For example, payment by check is received when the mortgage servicer receives it, not when the funds are collected. If the consumer elects to have payment made by a third-party payor such as a financial institution, through a preauthorized payment or telephone bill-payment arrangement, payment is received when the mortgage servicer receives the third-party payor’s check or other transfer medium, such as an electronic fund transfer.
Official Interpretations, 12 C.F.R. pt. 1026, Supp. I, pt. 3, at § 1026.36(c)(1)(i).
That is what the CFPB thinks, but the first question we must address is what weight we should give to its views. The Official Interpretations for Regulation Z were adopted in wholesale form, minus a few technical changes, from the Federal Reserve Board (FRB) Staff Commentary (also known as the “Official Staff Interpretations”) on Regulation Z. See Truth in Lending (Regulation Z), 76 Fed. Reg. 79,768-01 (Dec. 22, 2011). (Before the CFPB assumed responsibility for Regulation Z, the Federal Reserve Board was charged with this task.) Courts gave deference to the FRB Staff Commentary on Regulation Z unless the opinion was “demonstrably irrational.” See Hamm v. Ameriquest Mortgage Co., 506 F.3d 525, 528 (7th Cir. 2007) (quoting Ford Motor Credit Co. v. Milhollin, 444 U.S. 555, 565 (1980)). The Federal Reserve, however, did not use the formal notice-and-comment procedure before issuing its interpretations, while the CFPB has that authority. We acknowledge that future CFPB Official Interpretations adopted pursuant to notice-and-comment rulemaking may merit deference under the framework set forth in Chevron, U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984). The CFPB itself seems to contemplate that its Official Interpretations are a more authoritative source than the FRB Staff Commentary that preceded them. Compare 12 C.F.R. pt. 1026, Supp. I, pt. 1, at Introduction (“This commentary is the vehicle by which the Bureau of Consumer Financial Protection issues official interpretations of Regulation Z.”) (emphasis added), with 12 C.F.R. pt. 226, Supp. I, at Introduction (“This commentary is the vehicle by which the staff of the Division of Consumer and Community Affairs of the Federal Reserve Board issues official staff interpretations of Regulation Z.”) (emphasis added). Nevertheless, for present purposes it is enough to say that the CFPB’s Official Interpretation of section 1026.36(c)(1)(i) of Regulation Z, which was transferred from the FRB’s Staff Commentary on that section, is not “demonstrably irrational.” TILA expressly requires servicers to “credit a payment … as of the date of receipt,” and the Official Interpretations define the “date of receipt” as when the “payment instrument or other means of payment reaches the mortgage servicer.” (Emphasis added.) This definition is far from irrational. While the CFPB (and the FRB before it) could have determined that “payment” means the receipt of funds by the servicer, the conclusion that “payment” refers to the consumer’s act of making a payment is equally sensible.
The definition is not limited to one type of payment instrument versus another type. It instead covers all instruments used to effect payment, and then it specifies that no matter what the means of payment, the relevant date of receipt is the day when the payment mechanism reaches the mortgage servicer, not any later potentially relevant time. With this much established, we are left with the question how electronic authorizations fit into the statutory and regulatory system. Fridman argues that an electronic authorization of payment, such as the authorization she gave when she filled out NYCB’s online form, qualifies as a “payment instrument or other means of payment.” In NYCB’s view, the electronic authorization was not a means of payment at all; NYCB contends that it was only the consumer’s initiation of a process in which NYCB would ask her external bank to make a payment. NYCB then reasons that the transfer of funds from the external bank to itself is the relevant “payment instrument,” and the “date of receipt” is thus the date that the funds reach it (the servicer).
In order to decide whose interpretation is more true to Regulation Z, we must turn to its language and that of the Official Interpretations. Neither one defines the term “payment instrument or other means of payment,” but the addition of the “other means” language tells us that it is broad. Electronic authorizations, which are an increasingly common way to pay not only mortgage payments but also a wide variety of other bills, easily fit within it. Moreover, several other statutes define the phrase “payment instrument” in a way that indicates that electronic authorizations are included. The Dodd-Frank Wall Street Reform and Consumer Protection Act explains that a “payment instrument” is “a check, draft, warrant, money order, traveler’s check, electronic instrument, or other instrument, payment of funds, or monetary value (other than currency).” 12 U.S.C. § 5481(18) (emphasis added).
Several states have similar definitions for the phrase. See, e.g., KAN. STAT. ANN. § 9-508(j) (“any electronic or written check, draft, money order, travelers check or other electronic or written instrument or order for the transmission or payment of money, sold or issued to one or more persons, whether or not such instrument is negotiable”) (emphasis added); MICH. COMP. LAWS ANN. § 487.1003(e) (“any electronic or written check, draft, money order, travelers check, or other wire, electronic, or written instrument or order for the transmission or payment of money, sold or issued to 1 or more persons, whether or not the instrument is negotiable”) (emphasis added). While these provisions are not dispositive, they nevertheless are helpful as an indicator of the common understanding of an undefined term. See Sanders v. Jackson, 209 F.3d 998, 1000 (7th Cir. 2000) (“Another guide to interpretation is found in the construction of similar terms in other statutes.”). And the phrase in the Official Interpretations (“payment instrument or other means of payment“) is even more expansive than the wording of these statutes (which define merely “payment instrument”), lending further support to the conclusion that electronic authorizations are encompassed within the term. The Uniform Commercial Code gives us no reason to think otherwise: it does not contain a definition of either “payment instrument” or “means of payment.” While Article 4A of the Code—which governs funds transfers—discusses “payment orders,” it does not clearly specify whether electronic authorizations such as Fridman’s would be classified as such an order, nor does it hint at whether we should view a “payment order” as analogous to a “payment instrument or other means of payment.” See U.C.C. § 4A-103-104.
NYCB calls our attention to certain differences between electronic authorizations and checks: for example, paper checks, unlike electronic authorizations, contain words of negotiability and the signature of the drawer. That would be a telling point if the definition we are considering were limited to negotiable instruments or it required a physical signature. But it does not. And checks are only an example of devices that qualify as a “payment instrument or other means of payment,” an open-ended set. NYCB also argues that electronic authorizations are merely the first step of an electronic fund transfer (EFT). It urges that the EFT is not complete— and the payment does not “reach” NYCB as required by the Official Interpretations—until the requested funds are transferred from the consumer’s external bank account to the mortgage servicer. This means, in NYCB’s view, that the EFT, not the electronic authorization, is the “payment instrument or other means of payment.”
The problem with that reasoning is that the same is true of a paper check, which the Official Interpretations specifically include in the definition of “payment instrument or other means of payment.” Paper checks must be credited when received by the mortgage servicer, not when the servicer acquires the funds. Just like an electronic authorization, a check is in a sense “incomplete” when the mortgage servicer receives it. It is nothing more or less than the consumer’s written permission to the payee to take another step— that is, to draw funds from the consumer’s account—just like the electronic submission Fridman tendered. The servicer does not instantaneously have the funds promised by a paper check. It must use the banking system to have the funds transferred to it—a process that takes at least one or two days. If a check must be credited on the date of physical receipt, even though the recipient does not receive the funds that day and must take further steps to acquire them, then there is no reason why a mortgage servicer should not face a comparable process when it receives an electronic “check” or authorization to draw funds from the consumer’s bank account.
NYCB’s last argument, which may be its most serious one, focuses on the final line of Official Interpretations: “If the consumer elects to have payment made by a third-party payor such as a financial institution, through a preauthorized payment or telephone bill-payment arrangement, payment is received when the mortgage servicer receives the third-party payor’s check or other transfer medium, such as an electronic fund transfer.” § 1026.36(c)(1)(i) (emphasis added). NYCB urges that the word “preauthorized” should be read to refer to the authorization that the consumer gives to her mortgage servicer so that the servicer can remove funds from her external bank account. Following that logic, NYCB argues, Fridman “preauthorized” NYCB to extract money from her Bank of America account at the moment she filled out NYCB’s online form. If that was indeed the preauthorization to which the Official Interpretations refer, then the consumer would have elected to have payment made by a third-party payor pursuant to that authorization, and NYCB would be entitled to take the position that payment is received only when it receives the third-party’s check or other transfer medium. In short, if NYCB’s interpretation is correct, it was within its rights to refuse to credit Fridman’s payment until it received the EFT (or a check) from Bank of America.
Fridman counters that NYCB’s reading of the Official Interpretations is a strained one, not least because it drives a wedge between paper checks and electronic checks. She argues that the phrase “through a preauthorized payment or telephone bill-payment arrangement” refers to an arrangement with a third party, not with NYCB itself. (For one thing, to refer to her authorization of NYCB to conduct one particular transaction as “pre”-authorization is somewhat odd.) Many financial institutions now offer automatic bill payment systems. Under those systems, the consumer arranges with her bank or other financial institution (the third-party payor) to authorize that institution in advance to pay the creditor (here, the mortgage servicer) at regularly occurring intervals. Services that allow consumers to authorize the bank to pay regularly occurring bills every month, unless and until the consumer cancels that arrangement, are wide-spread. Many banks provide automatic bill payment services, which permit the consumer to list bills to be paid, furnish addresses of creditors, specify how much will be paid, and so on. Consumers can also use third-party services, through which consumers grant access to their bank or credit card accounts so that the services can automatically pay their recurring bills.
We think that the more natural reading of the Official Interpretations is the one under which the reference to “preauthorized payments” addresses advance authorization with third parties, not authorizations for the mortgage servicer itself to collect the specific payment being made. If a consumer arranges with either her bank or a bill payment service to provide regular monthly payments to the mortgage servicer, then the servicer is entitled to credit the consumer’s account only when it receives the check or EFT from that third-party payor. In such a situation, the servicer has no control over the time when the consumer instructs the thirdparty payor to initiate the payment process, and so it is entirely reasonable to allow the servicer to wait for the arrival of the check or EFT.
The interpretation we adopt promotes an important purpose of TILA: to protect consumers against unwarranted delay by mortgage servicers. When a consumer interacts directly with a mortgage servicer (such as by delivering a check, personally paying by telephone, or filling out an electronic authorization form on a servicer’s website), it is the servicer that decides how quickly to collect that payment through the banking system. Nothing dictates when the servicer must deposit the check, use the payment information given over the phone to receive payment, or place the electronic authorization information in an ACH file and collect the funds through the EPN. The servicer is in control of the timing, and without the directive to credit the payment instrument when it reaches the servicer, the servicer could decide to collect payment through a slower method in order to rack up late fees. In contrast, when a consumer interacts directly with a third-party payor to deliver payment at a set time in the future (such as through automatic bill payment services or third-party bill payment companies), the speed of the delivery of those payments is up to the third-party payor. There is no opportunity for the servicer to delay, and thus no potential strategic behavior to address. The servicer simply credits the third-party payor’s payment when the servicer receives it, as directed by the last sentence of Official Interpretations § 1026.36(c)(1)(i).
The opportunity (and perhaps even incentive) to delay the crediting of accounts explains TILA’s “date of receipt” requirement. Reading TILA to require mortgage servicers to credit electronic authorizations when they are received protects consumers from this unwarranted—and possibly limitless—delay. At oral argument, NYCB recognized this risk, but it argued that consumers are already adequately protected against it. It represented that it is required to batch electronic authorizations into an ACH file and request funds each business day. Moreover, it asserted that it is not allowed to charge late fees if a crash in the electronic payment network system causes a delay in the receipt of funds from consumers’ bank accounts. But it is far from clear that NYCB or any other mortgage servicer is required by law to take these actions; NYCB pointed to no statute or regulation that unambiguously imposes this burden on servicers. Only TILA’s requirement that servicers credit electronic authorizations when they are received provides legal assurance that consumers are not injured by delays that are out of their hands.
III
We conclude, therefore, that an electronic authorization for a mortgage payment entered on the mortgage servicer’s website is a “payment instrument or other means of payment.” TILA requires mortgage services to credit these authorizations when they “reach[] the mortgage servicer.” Because NYCB did not credit Fridman’s account when her authorization reached it, it was not entitled to summary judgment. We therefore REVERSE the judgment of the district court and REMAND the case for further proceedings consistent with this opinion.
EASTERBROOK, Circuit Judge, dissenting.
Elena Fridman had a mortgage loan from NYCB. Payments were due by the first of each month. On December 14, 2014, or 14 days late, Fridman used NYCB’s web site to request payment from her checking account at Bank of America through Electronic Payment Network, an automated clearing house (ACH). That process usually takes two business days. NYCB told Fridman that her payment would be credited on December 18, two business days hence. (December 14 was a Friday.) Fridman acknowledged this timing, and her payment was posted on December 18. NYCB added a late fee, and in this litigation Fridman maintains that the fee violates 15 U.S.C. §1639f(a).
Section 1639f(a) provides: “In connection with a consumer credit transaction secured by a consumer’s principal dwelling, no servicer shall fail to credit a payment to the consumer’s loan account as of the date of receipt, except when a delay in crediting does not result in any charge to the consumer or in the reporting of negative information to a consumer reporting agency”. (A “servicer” is the entity responsible for collecting the debt. NYCB handles its own collections and is a “servicer” under the statute.)
NYCB did not receive a “payment” by the end of its 15-day grace period. What happened on December 14 was not “payment” but an electronic instruction directing NYCB to request a transfer from Bank of America (and authorizing Bank of America to remit). Money did not reach NYCB until December 18. On this all agree. Nonetheless, Fridman maintains, the instruction of December 14 should be treated as equivalent to a payment—and, although no statute requires lenders to have grace periods, Fridman wants to combine NYCB’s 15-day forbearance with the statutory requirement that “payment” be credited immediately to produce a conclusion that the late fee is impermissible.
The statute does not define “payment.” A regulation, 12 C.F.R. §1026.36(c)(1)(i), tracks the statutory language without adding a definition. My colleagues turn to commentary provided by the staff of the Consumer Financial Protection Bureau. Yet it, too, fails to define “payment.” It does say, however, the “date of receipt” (a term in both the statute and the regulation) is “the date that the payment instrument or other means of payment reaches the mortgage servicer.” 12 C.F.R. Part 1026, Supp. I, pt. 3 §1026.36(c)(1)(i) ¶3.
It is not clear to me that we owe this commentary any deference, as opposed to the careful consideration all agencies’ views receive. The Bureau receives leeway when explaining its regulations, see Ford Motor Credit Co. v. Milhollin, 444 U.S. 555 (1980) (discussing the status of commentary by the Federal Reserve, which formerly administered the Truth in Lending Act), but “date of receipt” is a phrase in the statute. Why should an agency that parrots a statute in a regulation, as the Bureau did, get to make binding rules through “official commentary” that did not go through notice-and-comment rulemaking? See Gonzales v. Oregon, 546 U.S. 243, 257 (2006) (“the near equivalence of the statute and regulation belies the Government’s argument for … deference”). Especially when the statute is implemented through litigation rather than administrative adjudication? See Adams Fruit Co. v. Barrett, 494 U.S. 638 (1990). Cf. Perez v. Mortgage Bankers Association, No. 13-1041 (U.S. Mar. 9, 2015), slip op. 10-11 n.4 and concurring opinions. But NYCB has not relied on Gonzales or Adams Fruit, and this court is not the right forum to resolve any dispute about the status of Bowles v. Seminole Rock & Sand Co., 325 U.S. 410 (1945), and its successors (including Ford Motor), so I let this pass. The question remains how a payment instruction should be treated.
An instruction is not a “payment”; NYCB was not paid until December 18. Was it a “payment instrument” such as a check? No; it was not an “instrument” of any kind. The statute, regulation, and commentary all leave “instrument” undefined, and if we turn to the payments articles of the Uniform Commercial Code we do not find any definition equating a payment instruction routed through a clearing house the same as a payment instrument such as a check. Article 4A of the UCC, which covers electronic transfers, speaks of the transaction that Fridman initiated on December 14 as a “payment order” for a “funds transfer” and never as an “instrument” (a word used in the Article on checks). Similarly, an instruction to start the process of obtaining funds from a depositary bank does not sound like a “means of payment”; if this procedure has a “means,” it is the entirety of the ACH’s operation, which did not produce a payment until NYCB received its credit on December 18.
The majority’s tour, slip op. 7-8, through state statutes and federal opinions shows the power of electronic databases. It is linguistically possible to use “instrument” as one statute in each of Kansas and Michigan does, but this doesn’t show that such a usage is normal (what of the other 48 states and the UCC?; what of all the other statutes in Kansas and Michigan?) or appropriate for this particular federal regulatory system. And if you look closely at the language quoted from the Kansas and Michigan statutes, you see that they contrast “orders” for the payment of money with “instruments”; these are different ideas.
Because “payment,” “instrument,” and “means of payment” are not defined, my colleagues turn to another sentence of the staff’s commentary:
If the consumer elects to have payment made by a third-party payor such as a financial institution, through a preauthorized payment or telephone bill-payment arrangement, payment is received when the mortgage servicer receives the third-party payor’s check or other transfer medium, such as an electronic fund transfer.
This ought to clinch the case for NYCB, because it says that “payment is received when the mortgage servicer receives the third-party payor’s check or other transfer medium, such as an electronic fund transfer.” It shows that the staff thinks “electronic fund transfer” different from an “instrument” and that the lender must credit the payment when it “receives the third-party payor’s … transfer medium”—when the process is finished, not when it is initiated—which in this case means December 18. This is why the district court granted summary judgment in NYCB’s favor.
But my colleagues do not read the sentence this way. Instead they say that a third-party transfer is credited on the date of receipt only when the payment instruction was issued by the borrower directly to the third party (here, to Bank of America). If the payment instruction is routed through the lender or servicer, my colleagues conclude, then this sentence of the staff commentary is irrelevant.
I don’t follow this. The staff’s language does not specify a difference according to who receives the payment instruction. The sentence asks when the third party’s payment reaches the lender. How the transaction begins is neither here nor there. The phrase “preauthorized payments,” on which my colleagues rely (slip op. 11-12), does not do the trick. Whether the process starts with the lender or the borrower’s bank, the payment is “preauthorized” in the sense that the authorization precedes the credit. A customer could authorize a payment two days, a month, or a year in advance, but all are “preauthorized.”
Now let us suppose that everything I have said is wrong, and that the staff commentary not only trumps the statute but also treats a payment order as an “instrument” or “means of payment.” The best analogy for that point of view would be to equate a payment instruction with the use of a debit card, which might be called a “means of payment” (though the debit card also produces an immediate transfer, unlike the delay built into the ACH system). Is a lender required to accept a debit card, or for that matter a payment order, on a par with cash? The statute does not say—but the regulation does.
Section 1026.36(c)(1)(iii) says that a servicer may require customers to pay using a menu of ways that it specifies. Thus NYCB is entitled to reject debit and credit cards. In the absence of a written policy specifying acceptable ways to pay, a servicer can reject anything other than cash, money orders, or negotiable instruments (of which checks are examples). Staff commentary on §1026.36(c)(1)(iii) at ¶3. So NYCB need not accept as statutory (and regulatory) “payment” orders that leave it with the burden of using an ACH to obtain funds from the customer’s bank. The regulation recognizes, however, that a servicer may permit a method not on its authorized list (or the staff’s default list). If it does that, it may defer giving credit for as long as five days. 12 C.F.R. §1026.36(c)(1)(iii).
As far as I can see, NYCB has not put transfer via ACH on a list of approved payments. In other words, it accepts a payment order as a means of producing a payment, but not as a payment. Before being allowed to enter the payment instruction on NYCB’s web site, Fridman had to check a box acknowledging that a funds transfer through an ACH would not qualify as immediate payment. This brought it within the scope of §1026.36(c)(1)(iii) and allowed NYCB to wait as long as five days before giving credit. NYCB credited Fridman’s account in two business days—indeed, promised credit in two business days even if the ACH took longer. Fridman therefore cannot complain about the late charge.
My colleagues express concern that, if a lender need not treat an ACH order as a statutory “payment” until it receives the funds from the depositary bank, it may be tempted to delay the start of the collection process in order to run up late fees. Slip op. 12-13. That’s not a risk for NYCB, which promises credit in two business days no matter how long the ACH process takes. And I do not think it likely for any other servicer. Playing games would put its reputation at risk. Users of the Internet proclaim their grievances loudly, and many sites rate merchants based on users’ observations.
The majority’s understanding can lead to bad consequences too—worse, and more likely, than the possibility that concerns my colleagues. One thing a lender may do in response to today’s decision is refuse to accept payment orders. Then a borrower such as Fridman would either have to write a paper check, taking all risk of delay in the mails, or go to her own bank’s web site to cause it to make a funds transfer (something that, the majority acknowledges, would allow the lender to defer credit until the money arrives).
A second thing a lender could do would be to reduce or eliminate grace periods. NYCB now gives its customers 15 days past the deadline to make payments without incurring charges. Under NYCB’s procedures, a borrower who wants to use an ACH collection must act within the first 13 of those days to avoid a late fee. If as my colleagues hold a lender must give the borrower credit the same day a payment order is received, that turns 15 grace days to 17 (or 19 with weekends). The lender can cut the time back to 15 by reducing the grace period to 13 or 11 days. But that’s hard to remember. A reduction to 10, 7, or zero would be more likely. Customers would lose.
Consequences, good or bad, are the province of Congress and the Bureau. Our job is to interpret the statutory and regulatory language. Instead of stretching that language in a way that may induce lenders to reduce or eliminate grace periods, or stop facilitating ACH transfers, we should read the statute and regulation to mean what they say: lenders must give credit when they receive payment. NYCB gave Fridman credit the day it received payment. It has complied with the statute.
Commonwealth of Virginia Office of the Attorney General
Mark Herring
Attorney General
900 East Main Street
Richmond, Virginia 23219
For media inquiries only, contact: Michael Kelly, Director of Communications Phone: (804)786-5874 Email:mkelly@oag.state.va.us
MAILINGS GOING TO SUNTRUST BORROWERS WHO MAY BE ELIGIBLE FOR PAYMENT
~More than 3,000 Virginia borrowers may be eligible for payment from $40 million national fund~
RICHMOND (March 16, 2015) — Attorney General Mark R. Herring announced that claim forms are going out today to approximately 3,050 SunTrust borrowers in Virginia who lost their homes to foreclosure between January 1, 2008 and December 31, 2013 and who may be eligible for payment under the $550 million SunTrust national mortgage foreclosure settlement. Qualified borrowers will receive a bilingual English/Spanish packet containing a letter from Attorney General Herring, instructions, answers to frequently asked questions, and a claim form that must be returned by June 4, 2015.
“This payment is intended as partial compensation for the mortgage servicers’ illegal conduct and servicing abuse, and further terms of the settlement ensure that SunTrust will abide by more rigorous standards when servicing mortgages or attempting to foreclose,” Herring said. “We will continue to work each and every day to defend the rights of Virginia consumers and to hold businesses accountable when they violate consumers’ rights.”
SunTrust agreed to a $550 million national settlement with the federal government, the Commonwealth of Virginia, 48 other states and the District of Columbia following investigations which alleged numerous violations in its servicing of mortgages and its foreclosure practices. The settlement, which was filed in June 2014 and took effect in September 2014, earmarked $40 million in payments for approximately 45,250 borrowers nationwide who lost their homes to foreclosure during that period and had their loan serviced by SunTrust. The exact payment will depend upon the total number of borrowers who decide to participate.
Broad reform of the mortgage servicing process resulted from the settlement, as well as financial relief for borrowers still in their homes through direct loan modification relief, including principal reduction and refinancing underwater mortgages.
By participating, borrowers do not give up any legal rights. They many participate in this settlement and also pursue other legal remedies such as filing a lawsuit or participating in a class action, if they so choose.
Eligible Virginia borrowers should complete their claim forms and return them as soon as possible in the envelope provided, or file them online at: www.NationalMortgageSettlementSunTrustClaim.com
The deadline for all claims is June 4, 2015. Payment checks are expected to be mailed in the fall of 2015.
Free claim form assistance available
The one-page claim forms are simple to complete. However, borrowers who have questions or need help filing their claim can contact the settlement administrator, toll-free, at 1-866-590-8532, or send questions by email to:
Herring said eligible borrowers do not need to prove financial harm to receive a payment, nor do they give up their rights to pursue a lawsuit against their mortgage servicer.
Eligible borrowers may get a payment from this settlement even if they participate in another foreclosure claims process. However, any payment received may reduce payments that borrowers may be eligible to receive in any other foreclosure claim process or legal proceeding.
Eligible borrowers not notified should contact settlement administrator
Borrowers who believe they may qualify for a payment, but who do not receive a notice because they have moved, should contact the settlement administrator directly to provide that information:
Call toll-free: 1-866-590-8532. The line is staffed Monday through Friday from 7 a.m. to 7 p.m. Central Time.
Borrowers should not need to pay anyone to file their claim. Herring warns all homeowners to be aware of settlement-related scams. Do not provide personal information or pay money to anyone who calls or emails you claiming that they are providing settlement-related assistance. If you believe someone is conducting a settlement-related scam, call Attorney General Herring’s Consumer Protection Hotline at (800) 552-9963 if calling from Virginia, or (804) 786-2042 if calling from the Richmond area or from outside Virginia.
Settlement background
The national settlement followed state and federal investigations, which alleged that SunTrust routinely signed foreclosure-related documents outside the presence of a notary public and without personal knowledge that the facts contained in the documents were correct. This civil law enforcement action also alleged that SunTrust committed widespread errors and abuses in its foreclosure processes.
For more information about eligibility and filing a claim:
WASHINGTON—Sen. Richard Blumenthal (D-CT) and Rep. Keith Ellison (D-MN) introduced the Permanently Protecting Tenants at Foreclosure Act of 2015 (H.R. 1354)today. The bill ensures expired federal protections for renters living in foreclosed properties are renewed.
“Families who pay their rent and play by the rules should not be evicted simply because their landlord fails to pay his mortgage,” Sen. Blumenthal said. “This measure is necessary to protect tenants from eviction when their landlord defaults. The Act that protected them previously expired in 2014, so tenants may now be evicted, inexplicably and inexcusably when the building owner faces foreclosure. As a matter of common sense and basic fairness, families should be spared life on the street when landlords shirk their obligations.”
“When a building owner falls into foreclosure, people who live in the property may be forced out—even if they’ve paid their rent in full and on time,” Ellison said. “It’s wrong that families face homelessness because the owner of the property where they live failed to make payments on time. The Permanently Protecting Tenants in Foreclosure Act ensures families have the time they need to find new housing.”
“The PTFA provides critical protection to innocent renter families whose homes have been foreclosed. PTFA is an important tool, especially now, given the significant national shortage of rental housing,” said National Housing Law Project Executive Director Marcia Rosen.
“Without federal protections in place, many renters in foreclosed properties are vulnerable to summary eviction and homelessness. In nearly half the states, these renters can be evicted with five days’ notice or less, through no fault of their own,” said National Law Center on Homelessness and Poverty Executive Director Maria Foscarinis.
“We are grateful to Senator Blumenthal and Representative Ellison for introducing this crtical legislation to protect renters when their landlords’ properties go into foreclosure. We hope Congress acts swiftly to enact these protections,” said Sheila Crowley, President and CEO for National Low Income Housing Coalition.
While much of the response to the foreclosure crisis has focused on homeowners, 27% of properties and 40% of the units in foreclosure are estimated to be renter-occupied. These renters often have no idea that their landlord has fallen behind on mortgage payments, and usually have continued to pay their rent even as their landlord has failed to pay the mortgage. Prior to the passage of the Protecting Tenants at Foreclosure Act (PTFA) in May 2009, tenants were often required to move with as little as a few days-notice. The law ensured that most tenants can stay in their home for the remainder of their lease or for at least 90 days post-foreclosure.
But Congress did not extend the PTFA and it expired on December 31, 2014. The Permanently Protecting Tenants at Foreclosure Act of 2015 makes the law permanent.
The Permanently Protecting Tenants at Foreclosure Act of 2015 is co-sponsored by: Reps.G.K. Butterfield, Michael Capuano, Katherine Clark, Elijah Cummings, Al Green, Raul Grijalva, Hank Johnson, Alcee L. Hastings, Rubén Hinojosa, Marci Kaptur, Jim Langevin, Barbara Lee, John Lewis, Stephen Lynch, Carolyn B. Maloney, James P. McGovern, Gregory Meeks, Gwen Moore, Eleanor Holmes Norton, Mark Pocan, Louise Slaughter, Adam Smith, Mark Takano and Maxine Waters.
An Appeal from an order of the Circuit Court for Miami-Dade County, Jennifer D. Bailey, Judge.
Krinzman, Huss, Lubetsky, and Cary A. Lubetsky and Aniella Gonzalez, for appellant.
Albertelli Law (Tampa),1 for appellee.
1 Albertelli Law represented Bank of America in the proceedings below, and Bymel served Albertelli Law with his notice of appeal. This Court issued an order directing Bank of America to file an answer brief within ten days from the date of the order or be precluded from filing a brief and/or presenting an oral argument. Bank of America failed to file an answer brief as directed by this Court. Thereafter, this Court issued an order precluding Bank of America from filing an Before SHEPHERD, C.J., and SUAREZ and ROTHENBERG, JJ.
ROTHENBERG, J.
William J. Bymel (“Bymel”) appeals from an order denying his motion to
intervene in the foreclosure action filed by Bank of America, N.A. against Paul
Everett and Carmell S. Johnson-Everett (collectively, “the Everetts”).2 We find
that the trial court abused its discretion by denying the motion to intervene, and
therefore, we reverse and remand for further proceedings.
After Bank of America filed its foreclosure action against the Everetts and
recorded its lis pendens in 2012, Bank of America approved a short sale of the
Everetts’ property to Bymel in May 2013. Prior to the closing of the short sale,
Bank of America approved the settlement statement that was prepared by the
settlement agent. Then, in June 2013, the short sale transaction closed; the
Everetts executed a warranty deed naming Bymel as the purchaser of the real
property, which deed was later recorded; and the settlement agent initiated a wire
transfer to Bank of America of the short sale proceeds. The wire transfer was not
answer brief or presenting an oral argument unless otherwise ordered, but allowed Bank of America to file a memorandum of points and authorities in support of its position. As of this date, Bank of America has not filed anything in this appeal. 2 Bymel also appealed the denial of his motion to continue the non-jury trial
scheduled for December 10, 2013. The non-jury trial did not take place due to Bymel’s filing of the instant appeal, and therefore, the denial of the motion to continue is no longer at issue.
2 accepted by Bank of America,3 and thereafter, the settlement agent attempted to
resolve the matter with Bank of America. In October 2013, Bank of America sent
a second letter to the Everetts stating that it was approving the short sale to Bymel.
As requested by Bank of America, the Everetts executed this letter although the
short sale had previously closed and the Everetts had already transferred the
property to Bymel in June 2013. On December 5, 2013, Bank of America
contacted the settlement agent acknowledging that it had received certain
documents but indicated that there had not been a final approval. Bank of America
informed the settlement agent that one of its settlement associates would be in
contact within five days.4
Based on these proceedings, Bymel moved on December 6, 2013, to
continue the non-jury foreclosure trial scheduled for December 10, 2013, and also
moved to intervene in the foreclosure action pursuant to Florida Rule of Civil
Procedure 1.230. Bymel asserted that he has a superior interest in the real property
because he is the present owner of the real property as a result of the short sale
approved by Bank of America. Bymel further asserted that he reasonably
3 At this point, it is unclear why Bank of America refused to accept the short sale funds after approving the settlement statement and allowing the short sale to proceed to closing. We note, however, that the short sale approval letter provides that Bank of America will cancel the approval of the short sale offer and continue with the foreclosure action if the terms and conditions of the short sale approval are not met. We offer no opinion as to whether the terms and conditions of the short sale were met. 4 The short sale proceeds are currently in the settlement agent’s trust account.
3 anticipated that Bank of America would dismiss the foreclosure action, discharge
the notice of lis pendens, and record a satisfaction of mortgage shortly after the
closing of the short sale, thereby clearing title to the real property. The trial court
denied Bymel’s motion to continue the trial and motion to intervene. Bymel’s
appeal followed.
Bymel contends that the trial court abused its discretion by denying his
motion to intervene. See Racing Props., L.P. v. Baldwin.
885 So. 2d 881
, 883 (Fla.
2004) (holding that a trial court’s ruling on a motion to intervene is reviewed for
an abuse of discretion). Under the facts of this case, we agree.
Rule 1.230 provides: “Anyone claiming an interest in pending litigation
may at any time be permitted to assert a right by intervention, but the intervention
shall be in subordination to, and in recognition of, the propriety of the main
proceeding, unless otherwise ordered by the court in its discretion.” As stated
earlier, Bymel claims that he has an interest in the pending litigation because he is
the current owner of the real property that is the subject of Bank of America’s
foreclosure action.
We recognize that in Andresix Corp. v. Peoples Downtown National Bank,
419 So. 2d 1107
(Fla. 3d DCA 1982), this Court affirmed the denial of Andresix’s
motion to intervene in a pending foreclosure action, holding that “Andresix, as a
purchaser of property which was then the subject of a mortgage foreclosure action
4 and accompanying lis pendens by Peoples Downtown National Bank, was not
entitled to intervene in such action.” Id. at 1107; see SADCO, Inc. v. Countrywide
Funding, Inc.,
680 So. 2d 1072
, 1072 (Fla. 3d DCA 1996) (affirming denial of
motion to intervene in a residential foreclosure action citing to Andresix for the
proposition that a “purchaser of property that was subject of lis pendens arising
from bank’s foreclosure action was not entitled to intervene in that action”); see
also Timucuan Props., Inc. v. Bank of New York Mellon,
135 So. 3d 524
, 524
(Fla. 5th DCA 2014) (per curiam affirmance citing to SADCO and Andresix). The
rule in Andresix is based on the “concern that to allow purchasers pendente lite to
intervene would unnecessarily protract litigation.” Harrod v. Union Fin. Co.,
420 So. 2d 108
, 108 (Fla. 3d DCA 1982). Thus, when property is purchased during a
pending foreclosure action in which a lis pendens has been filed, the purchaser
generally is not entitled to intervene in the pending foreclosure action. Indeed, if
such a buyer purchases the property, he does so at his own risk because he is on
notice that the property is subject to the foreclosure action. See Centerstate Bank
Cent. Fla., N.A. v. Krause,
87 So. 3d 25
, 28 (Fla. 5th DCA 2012) (“[T]he purpose
of a notice of lis pendens is to notify third parties of pending litigation and protect
its proponents from intervening liens that could impair or extinguish claimed
property rights.”). Allowing such a purchaser to intervene would unnecessarily
prolong the foreclosure action.
5 The instant case, however, is factually and materially distinguishable from
Andresix, Harrod, SADCO, and this general rule. Unlike the purchasers in
Andresix, Harrod, SADCO, and most situations where the buyer purchases
property during a pending foreclosure action, Bymel was not a stranger to Bank of
America. Rather, Bank of America was actively involved in Bymel’s purchase of
the real property because it had approved both the short sale of the real property to
Bymel and the settlement statement prepared by the settlement agent prior to the
short sale closing. Therefore, this is not a situation where Bymel believed that he
was purchasing the property subject to the pending foreclosure action and the lis
pendens. Instead, Bymel reasonably believed that following the short sale, Bank
of America would dismiss its foreclosure action against the Everetts, discharge its
notice of lis pendens, and record a satisfaction of its mortgage, thereby clearing
title to the real property.
Based on the facts of this case, we conclude that the trial court abused its
discretion by denying Bymel’s motion to intervene. Accordingly, we reverse the
denial of Bymel’s motion to intervene and remand with instructions to enter an
order allowing Bymel to intervene in the foreclosure action.
A federal judge has ruled that a class action can go forward accusing Ocwen Loan Servicing and Litton Loan Servicing of consumer fraud for allegedly violating agreements to help homeowners avoid foreclosures during the housing crisis.
Judge Edgardo Ramos in U.S. District Court in Manhattan ruled Wednesday that Ocwen must face breach of contract claims and both servicers must face claims they violated the New Jersey Consumer Fraud Act.
A U.S. housing regulator is set to take two of the world’s biggest banks to trial on Monday to try and recoup more than $1 billion in damages over mortgage bonds sold to government-run mortgage finance companies ahead of the 2008 economic crisis.
Lawyers for the regulator will face off with attorneys of Nomura Holdings Inc (8604.T) and Royal Bank of Scotland Group Plc (RBS.L) in a non-jury trial in Manhattan federal court, one of the few cases spilling out of the financial crisis by the U.S. government to reach trial.
Barring a last-minute settlement, the trial would be the first to result from 18 lawsuits filed in 2011 by the Federal Housing Finance Agency (FHFA) to recover losses on some $200 billion in mortgage-backed securities that various banks sold Fannie Mae (FNMA.OB) and Freddie Mac (FMCC.OB).
While most of those living in non-judicial foreclosure states never see these individuals, states where the lender has to file a lawsuit and serve notice on the Borrower in order to complete a mortgage foreclosure brings to the forefront what I have been trying to advocate in my educational materials I disseminate in my enhanced Chain of Title Assessment (COTA) Workshops. There is a COTA Workshop coming to Chicago, June 4-6, 2015. One of more attorneys will be attending this workshop and will be answering questions about my procedures and how they are utilized in defending foreclosures, whether you are in a judicial or non-judicial foreclosure state. Look for details to be posted soon on the Clouded Titles website.
On Monday, March 9, 2015, I was in court observing the goings-on in multiple foreclosure cases in two separate courtrooms in Palm Beach County. I thought I would share a few items of interest for the readers of this blog site:
1. There are still very few homeowners that actually show up at trial. This allows bank witness testimony to go unchallenged and thus, uncontroverted. It is sad to see bank witnesses (I will refer to them as robo-witnesses here because that is exactly HOW they were behaving) complicit in helping the alleged bank get away with this sort of “legalized theft”.
2. The afternoon court session, which began shortly after 1:30 p.m. in Courtroom 4A, was littered with these robo-liars. Several of them were accompanied by foreclosure mill attorneys (who were probably out of law school no more than a few years), who basically got up before the judge, who allowed each attorney to tag team these witnesses in tandem to all of their foreclosure cases (at least a dozen that I could count), where the attorney read from a list of questions AFTER the judge swore the witness in. The Q&A was 90-mile-an-hour case specific. The robo-witness was clearly “coached” to read figures from a list provided directly to them by counsel to quote from, which no objection from the absentee homeowner. The judge even joked at one point that maybe he could get an attorney who wouldn’t talk so fast.
3. Our specific case was reserved for the very end, so there were very few people in the courtroom (the judge, two clerks and a woman bailiff) besides the litigants. The trial, which included a robo-witness (Cynthia Stevens, who had testified at numerous events earlier that day, unchallenged), lasted nearly 3-1/2 hours (2:40-6 p.m.). The judge took the whole matter under advisement.
4. During the trial, I took notes (so I could compare them to the nearly 200-page trial transcript), counting 46 multiple objections by Palm Beach County foreclosure defense attorney Lorelei Fiala (who herself used to work for a foreclosure mill but was fired for refusing to alter sworn documents within verified complaints being used in foreclosure cases). Most of these objections came at the expense of the robo-witness on issues involving hearsay, lack of foundation and lack of capacity. The witness was clearly flustered during some points of her testimony, especially when Fiala forced her to give a “NO” answer to Steven’s lack of actual knowledge of certain statements she was making at the behest of U. S. Bank’s attorney. The judge actually had to force Stevens on more than one occasion to answer YES or NO. In this author’s opinion, Fiala certainly came into the fight with a lot of her “A Game”, which is something you don’t see a lot of.
5. During the morning session, I observed a very well-dressed foreclosure defense attorney toss out a few objections to witness testimony, but failed to cross-examine the witness when given the opportunity to do so. You might as well have thrown your hard-earned money away on an attorney who won’t go the mile like Fiala did during the afternoon session.
6. During the nearly 3-1/2 hour trial, the judge overruled BOTH sides and denied the bank’s renewed motion to correct a scrivener’s error involving additional information that its counsel wanted added to the Plaintiff’s name. In sum and substance, for 5 years, Trust A was the Plaintiff. Then right before trial, Trust B comes in and wants to be substituted into the case, which was granted. Trust B’s counsel however, had a difficult time proving HOW it got the note and mortgage and the defense certainly wasn’t going to give them an easy victory, which in the end, was highly doubtful.
7. During closing arguments, defense counsel proffered the following flow chart, which the defendant homeowner (one of my learned students, myself and Fiala) worked on into the wee hours of that morning before trial. I offer that to you for your perusal and consideration Flow Chart – PAUL v.4 FINAL in .pdf format.
8. It is interesting to note also in this trial that the Pooling and Servicing Agreements (PSAs) of BOTH Trust A and Trust B were offered and accepted into evidence by the Court. This allowed both sides to argue its contents. The Plaintiff bank of course offered Trust B’s PSA into evidence. Defense counsel offered Trust A’s PSA into evidence to countermove the Closing Dates on BOTH trusts, which were BOTH in 2005. The bank’s attorney maintained her poker face during almost the entire event. Virtually all of her objections were overruled during the presentation of the defense attorney’s case.
9. Bank’s counsel tried to avoid the Assignments of Mortgage which were done in 2009 and 2013. Defense counsel got both of them admitted as exhibits and in the end, it was the homeowner who took the stand and impeached the bank’s counsel with testimony that BOTH Assignments of Mortgage never made the Closing Date … and neither did their Allonges, which appeared to be “conveniently manufactured”, to give U. S. Bank standing to be an alleged Plaintiff. The judge also examined the alleged photocopied “Allonges” to the Note, which were NOT attached in the original complaint five years earlier. This really added to the bank’s demise as to credible testimony.
10. In the end, I did not see the bank proving what it needed to elementally prove its case. The Flow Chart came in handy for defense counsel because it clearly showed the judge where (in simple terms), we were coming from. This is a case-maker, because we framed our entire case for appeal, as it is highly likely in most cases that go down in Florida courts, that a judge will give a house to a homeowner. I found it also interesting the way Fiala postured her closing remarks about, “We’re not asking for a free house, Your Honor … we want this case dismissed so they can re-file and present their case properly, not like they have here today!” We already had read the judge’s mind and “headed that common concept off at the pass” (as it were).
11. MOST IMPORTANTLY, the bank’s attorney admitted:
(a.) That it knew the title to the property was screwed up! AND
(b.) That the Servicer created the documents that were being used at trial!
Both of those admissions made defense counsel’s jaw drop (as did the rest of us)! It is significant to note that this is what I have been teaching in my COTA Workshops … “If I can’t convey, neither can they!” This goes to the fact that the bank, through its document manufacturing mills, littered the chain of title with so much crap that there’s no way they could legitimately SELL this property at a foreclosure sale without clearing title. Good luck with that, if you don’t have standing.
Had the homeowner NOT taken the COTA Workshop, the level of presentation would have been less obvious in the flow chart. The flow chart however, is simple, and says it all in one page. JPMorgan Chase can’t have two “bites at the same apple” when transferring a note.
I can’t wait to see the trial transcript. It will be even more interesting when we finally get a ruling to see WHAT the judge perceived as being the real triable issues of fact here. I found this case to be significant for Florida for the following reasons:
(a.) It incorporated the pooling and servicing agreements from two separately-registered SEC trusts.
(b.) Both trusts’ Closing Dates came into play (like Glaski), citing the recent 4th DCA-released Murray v. HSBC Bank USA N.A. and McLean v. JPMorgan Chase Bank, N.A. cases.
(c.) There are very few cases in which the PSAs are even allowed to be discussed at trial because banks’ attorneys always object to the homeowner having the right to challenge them. We used the PSA to assert that the Note, as well as the supporting documentation, never made either trust pools’ Closing Date.
(d.) We also used the PSA to defeat the robo-witnesses’ testimony that she reviewed the PSA to see if the note was in it, yet later backpedaled when challenged, that she wasn’t an attorney and couldn’t interpret the PSA and refused to answer further questions about her actual knowledge of the PSA. This doesn’t look good for robo-witnesses.
(e.) There are very few cases in Florida that ever get close to arguing internal issues within a PSA. Defense counsel presented (and got entered into evidence) a copy of the Loan Remittance Report for January of 2015, obtained publicly from Wells Fargo Bank, N.A. (as Master Servicer of the trust)’s website, wherein the homeowner’s loan COULD NOT BE FOUND! That doesn’t say much for note ownership, does it?
More significantly, an appeal will follow if the judge grants the bank Summary Judgment of Foreclosure. Countersuits are also likely. That’s why you use a court reporter! Again, I can safely attest that the COTA Workshop paid off here, even if you don’t end up becoming a COTA Preparer.
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