March, 2018 | FORECLOSURE FRAUD | by DinSFLA

Archive | March, 2018

TFH 4/1/2018 | 20 Winning Ways To Defeat Promissory Notes in Foreclosure Proceedings: Understanding the Differences Between Paper Notes, Securitized Notes, and Cyber Notes (Rebroadcast from February 22, 2015)

TFH 4/1/2018 | 20 Winning Ways To Defeat Promissory Notes in Foreclosure Proceedings: Understanding the Differences Between Paper Notes, Securitized Notes, and Cyber Notes (Rebroadcast from February 22, 2015)

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Sunday – April 1, 2018

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20 Winning Ways To Defeat Promissory Notes in Foreclosure Proceedings: Understanding the Differences Between Paper Notes, Securitized Notes, and Cyber Notes (Rebroadcast from February 22, 2015)

 

 

 

 

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We will shortly be starting our eighth year on KHVH-AM News Radio, having examined virtually every aspect of the Mortgage Crisis in the United States.

If there is any lesson to be learned, it is the fact that our legal system — judges, legislators, and foreclosure defense attorneys alike — have failed to understand the changing nature of a residential real property promissory note, transitioning from Paper Notes to Securitized Notes to Cyber Notes.

Yet that rare evolutionary insight remains the key to understanding what has become the largest nationwide financial fraud in American history and what should be done about it.

Paper Notes: Our traditional mortgage law developed in England centuries ago based upon there being a contract between a landowner-borrower and a mortgage lender, with the note a negotiable unconditional promise to pay and a mortgage (or deed of trust) as a security instrument tied to a promissory note, the two being considered inseparable and the mortgage logically said to follow the note as security for repayment of the underlying debt.

If a note was sold by assignment, it therefore followed in the traditional legal understanding that the mortgage or deed of trust was transferred by assignment with it whether so stated or not.

The note and the mortgage on paper were nevertheless logically separate, since the former was a negotiable instrument whose original on paper was required therefore to be safeguarded in the custody of the lender as holder often to be converted into a bearer note, whereas the original of the latter was to be registered at the State recording office so as to establish priorities among competing mortgage, tax, and other liens on the underlying property.

On that basis, mortgages in lien theory States or deeds of trust in title theory States were enshrined in legislation providing for the separate treatment of a note as ownership of the debt and a mortgage or deed of trust as ownership of the right to foreclosure in the event of a payment default.

All of that was well understood, as expressed in the traditional view that the note and mortgage were separate physically but inseparable as a matter of law, with the mortgage traditionally said to logically follow the note.

Securitized Notes: Several decades ago however Wall Street altered the character of our major banks in order to unleash otherwise seem as trapped equity in real property in the United States through their securing of Congressional legislation changing their character into investment banks, who quickly transformed residential mortgages into securities by bundling them and slicing and dicing portions of the resulting tranches into stock certificates which they sold to institutional and private investors.

In doing so, the major banks chose to bypass State recording offices by keeping track of securitized trust owned sliced and diced mortgages and trust deeds on their own through creation in part of the Mortgage Electronic Registration Systems (MERS) in its many forms, since what was traded was not the mortgages or deeds of trust but the investment stock certificates in various tranches.

Securitized trust trading in turn has been and continues to be moreover largely hidden and unregulated, and when the Mortgage Crisis of 2008 occurred due to widespread use of fraudulent appraisals, fraudulent loan applications, fraudulent underwriting, and fraudulent loan documentation, the major banks serving as securitized trustees had to artificially recreate mortgages and mortgage assignments because State foreclosure laws were written to allow nonjudicial and judicial foreclosure on mortgages and deeds of trust only.

That required as we know enlisting an army of minimum wage robo-signing robots, each creating up to 600 false mortgage assignments falsely notarized per day and even eventually the photoshopped recreation of promissory notes and allonges, the originals of which the securitized trust industry had often lost or destroyed, otherwise seen as insignificant for their trading purposes, until it came time to foreclose.

The securitized note lost its traditional character as a negotiable instrument, but the legal system to this day has been ignorant and unprepared to apply securities laws to the creation and trading of promissory notes and related security instruments from the borrower’s perspective when it comes to foreclosure.

In securitized trading, the note follows the mortgage. That is because the mortgage or deed of trust is separately sliced and diced and placed in separate tranches of different trading values as the collateral to support the trust’s debt to its certificate investors to whom it owes an income stream.

The note follows the mortgage because once the mortgage is used as collateral to support the securitized trust’s new promise to pay its certificate investors, the certificate investors collectively have an equitable right to require the securitized trust to foreclosure for their benefit.

What often happens however is that the debt to the certificate holders is fully paid off by the income stream from each tranche, some of its included mortgages over performing and some underperforming or even foreclosed on.

It remains a mystery however where the monies from a foreclosure sale or resale or from collections on deficiency judgments or the proceeds from default insurance or monies from government guaranties actually go. To understand what is actually going on, the courts need to follow the money.

The American legal system has failed to understand the difference between paper notes and securitized notes, and that the application of traditional mortgage laws are largely inapplicable in foreclosure situations.

That is because the functions of the participants in real property securitization are misunderstood. The borrower is really unwittingly a stock issuer, the property and the borrower’s income stream are what are really being collateralized to support the stock sale, loan brokers are really securities salespersons, the securitized trusts and the master loan servicers are really securities dealers, and the certificate purchasers are the stock investors.

Ironically, the courts have no difficulty applying securities laws to protect the certificate investors, but provide no such fraud protection for borrowers, even though, for instance, it was never disclosed to borrowers that their property and their income stream were being intentionally converted into stock shares or that nonrecourse insurance was paying off partially or in full their debt.

Cyber Notes: The difference between securitized notes and cyber notes is that through the absence of regulation and the absence of transparency, promissory notes in cyber space have taken on a life of their own, the ultimate bit coins, and for instance even after the underlying property is foreclosed on, certificate investors in the majority of cases are still being paid either by the master servicer or through insurance proceeds, and their sliced and diced mortgages are still being actively traded as if no foreclosure had ever occurred, still living in the cyberspace of an alternative universe.

The legal system to protect homeowners needs to abandon applying traditional mortgage foreclosure concepts to securitized notes and to cyber notes, and instead to force to the surface the hidden operations of the securitized and cyber banking casinos, and by following the money stop unjust enrichment to the detriment of America’s duped homeowners, sucked into such risky shadow banking without their consent only to become victims of ultimately planned foreclosures when more money can be made by securitized trusts and especially their loan servicers by foreclosing on borrowers than by modifying their loans.

With this background in mind, we proudly rebroadcast our February 22, 2015 show that highlighted how to use this new understanding of the difference between paper notes, securitized notes, and cyber notes to defeat promissory notes, which was the first time anywhere that that distinction was first recognized and discussed in closing commentary by myself, Virginia Parsons, and Wendy Nora.

Gary Dubin

Please go to our website, www.foreclosurehour.com, and join your fellow homeowners in the Homeowners SuperPac today.

A Membership Application is posted there waiting for your support.

 

 

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Barclays Agrees to Pay $2 Billion in Civil Penalties to Resolve Claims for Fraud in the Sale of Residential Mortgage-Backed Securities

Barclays Agrees to Pay $2 Billion in Civil Penalties to Resolve Claims for Fraud in the Sale of Residential Mortgage-Backed Securities

FOR IMMEDIATE RELEASE
Thursday, March 29, 2018

Barclays Agrees to Pay $2 Billion in Civil Penalties to Resolve Claims for Fraud in the Sale of Residential Mortgage-Backed Securities

Two Former Barclays Executives Agree to Pay $2 Million to Resolve Claims Brought Against Them Individually

The United States has reached agreement with Barclays Capital, Inc. and several of its affiliates (together, Barclays) to settle a civil action filed in December 2016 in which the United States sought civil penalties for alleged conduct related to Barclays’ underwriting and issuance of residential mortgage-backed securities (RMBS) between 2005 and 2007.  Barclays will pay the United States two billion dollars ($2,000,000,000) in civil penalties in exchange for dismissal of the Amended Complaint.

 

Following a three-year investigation, the complaint in the action, United States v. Barclays Capital, Inc., alleged that Barclays caused billions of dollars in losses to investors by engaging in a fraudulent scheme to sell 36 RMBS deals, and that it misled investors about the quality of the mortgage loans backing those deals.  It alleged violations of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA), based on mail fraud, wire fraud, bank fraud, and other misconduct.

 

Agreement has also been reached with the two former Barclays executives who were named as defendants in the suit:  Paul K. Menefee, of Austin, Texas, who served as Barclays’ head banker on its subprime RMBS securitizations, and John T. Carroll, of Port Washington, New York, who served as Barclays’ head trader for subprime loan acquisitions.  In exchange for dismissal of the claims against them, Menefee and Carroll agree to pay the United States the combined sum of two million dollars ($2,000,000) in civil penalties.

 

The settlement was announced by Richard P. Donoghue, United States Attorney for the Eastern District of New York, and Laura S. Wertheimer, Inspector General, of the Federal Housing Finance Agency Office of the Inspector General (FHFA-OIG).

 

“This settlement reflects the ongoing commitment of the Department of Justice, and this Office, to hold banks and other entities and individuals accountable for their fraudulent conduct,” stated United States Attorney Donoghue. “The substantial penalty Barclays and its executives have agreed to pay is an important step in recognizing the harm that was caused to the national economy and to investors in RMBS.”

 

“The actions of Barclays and the two individual defendants resulted in enormous losses to the investors who purchased the Residential Mortgage-Backed Securities backed by defective loans,” stated FHFA-OIG Inspector General Wertheimer.  “Today’s settlement holds accountable those who waste, steal or abuse funds in connection with FHFA or any of the entities it regulates.  We are proud to have partnered with the U.S. Department of Justice and the U.S Attorney’s Office for the Eastern District of New York on this matter.”

 

The scheme alleged in the complaint involved 36 RMBS deals in which over $31 billion worth of subprime and Alt-A mortgage loans were securitized, more than half of which loans defaulted.  The complaint alleged that in publicly filed offering documents and in direct communications with investors and rating agencies, Barclays systematically and intentionally misrepresented key characteristics of the loans it included in these RMBS deals.  In general, the borrowers whose loans backed these deals were significantly less creditworthy than Barclays represented, and these loans defaulted at exceptionally high rates early in the life of the deals.  In addition, as alleged in the complaint, the mortgaged properties were systematically worth less than what Barclays represented to investors.  These are allegations only, which the Defendants dispute, and there has been no trial or adjudication or judicial finding of any issue of fact or law.

 

The government’s case has been handled by this Office’s Civil Division.  Senior Counsel F. Franklin Amanat, and Assistant United States Attorneys Matthew R. Belz, Charles S. Kleinberg, Evan P. Lestelle, Matthew J. Modafferi, Josephine M. Vella and Alex S. Weinberg have been in charge of the litigation.  Mr. Donoghue thanks the FHFA-OIG for its assistance in conducting the investigation in this matter.

 

E.D.N.Y. Docket No. 16-CV-7057 (KAM/JO)

 

The press release from the Eastern District of New York orignially announcing the filing of the suit can be found here.

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Tracey v. WELLS FARGO BANK, NA | FL 2DCA – the breach of the modification agreements became an integral part of the basis of Wells Fargo’s theory of recovery as well as the final judgment the circuit court ultimately entered… and so we must reverse the court’s final judgment.

Tracey v. WELLS FARGO BANK, NA | FL 2DCA – the breach of the modification agreements became an integral part of the basis of Wells Fargo’s theory of recovery as well as the final judgment the circuit court ultimately entered… and so we must reverse the court’s final judgment.

 

MARLYN TRACEY, Appellant,
v.
WELLS FARGO BANK, N.A., as Trustee for the Certificateholders of Banc of America Mortgage Securities, Inc. 2007-2 Trust, Mortgage Pass-Through Certificates, Series 2007-2, Appellee.

Case No. 2D16-5091.
District Court of Appeal of Florida, Second District.
Opinion filed March 23, 2018.
Appeal from the Circuit Court for Pinellas County; Karl B. Grube, Senior Judge.

Mark P. Stopa of Stopa Law Firm, Tampa, for Appellant.

Nancy M. Wallace of Akerman LLP, Tallahassee; William P. Heller of Akerman LLP, Fort Lauderdale; Celia C. Falzone of Akerman LLP, Jacksonville, and David A. Karp of Akerman LLP, Tampa, for Appellee.

LUCAS, Judge.

Marlyn Tracey appeals a final judgment foreclosing Wells Fargo Bank, N.A.’s (Wells Fargo) mortgage on her home. Ms. Tracey raises two issues on appeal. Finding merit in her first argument, we need not consider the second. The circuit court reversibly erred when it permitted Wells Fargo to amend its complaint during trial to conform to the evidence it presented of two unpled modification agreements.

The underlying litigation began on June 9, 2011, when Wells Fargo filed a complaint seeking to foreclose upon a mortgage on Ms. Tracey’s property. The original complaint included as exhibits Ms. Tracey’s promissory note, mortgage, and two loan modification agreements, dated May 8, 2009, and July 17, 2009, respectively. As originally filed, Wells Fargo’s complaint specifically alleged that Ms. Tracey’s breach of the modification agreements predicated its claim for relief.

Following an involuntary dismissal of that pleading, Wells Fargo changed tack with respect to its theory of recovery. On September 5, 2012, it filed an amended complaint, what would become the operative pleading for the remainder of this case, in which no mention was made of the previously asserted and attached modification agreements. For her part, Ms. Tracey’s answer and affirmative defenses to the amended complaint did not raise either of these modification agreements as an avoidance to any part of Wells Fargo’s claim. So, seemingly, whatever importance these modification agreements may have had—either as a basis for Wells Fargo’s recovery or as an avoidance to it—was abandoned as an issue for adjudication. The case then progressed in a not unordinary course for a residential mortgage foreclosure proceeding.

When the case went to trial four years later, Wells Fargo changed course yet one more time, reverting back to the modification agreements as a basis for its cause of action. Over objection, Wells Fargo admitted both modification agreements into evidence and called two witnesses who explained the succession of the note, Ms. Tracey’s payment history, and that the balance was due and owing based upon the note and modification agreements. Wells Fargo’s counsel argued that the omission of the modification agreements from the amended complaint was a “mistake or inadvertence” but that, in all events, their inclusion as part of its claim for relief visited no prejudice on Ms. Tracey because she signed the agreements and they were attached to a pleading—albeit the original, abandoned complaint. Ms. Tracey maintained that she was prejudiced by the change in Wells Fargo’s theory of the case because she was unable to prepare her defense for an issue she had thought was abandoned four years earlier. Indeed, she testified that she was under the impression that the loan modification agreements Wells Fargo introduced had never progressed beyond proposals: she received blank envelopes from Wells Fargo regarding the agreements, and when she attempted to inquire about their status by telephone was directed to a call center in Bangladesh. Nevertheless, the circuit court granted Wells Fargo’s motion and, following the conclusion of the trial, entered the final judgment of foreclosure—premised on the mortgage, promissory note, and both loan modification agreements—that we now have before us.

A circuit court’s decision to amend the pleadings to conform to the evidence under Florida Rule of Civil Procedure 1.190(b) is one we review for abuse of discretion. Turna v. Advanced Med-Servs., Inc., 842 So. 2d 1075, 1076 (Fla. 2d DCA 2003). Our review here requires us to examine a particular aspect of rule 1.190(b):

Amendments to Conform with the Evidence. When issues not raised by the pleadings are tried by express or implied consent of the parties, they shall be treated in all respects as if they had been raised in the pleadings. Such amendment of the pleadings as may be necessary to cause them to conform to the evidence and to raise these issues may be made upon motion of any party at any time, even after judgment, but failure so to amend shall not affect the result of the trial of these issues. If the evidence is objected to at the trial on the ground that it is not within the issues made by the pleadings, the court may allow the pleadings to be amended to conform with the evidence and shall do so freely when the merits of the cause are more effectually presented thereby and the objecting party fails to satisfy the court that the admission of such evidence will prejudice the objecting party in maintaining an action or defense upon the merits.

(Emphasis added.)

Without question, Ms. Tracey objected to Wells Fargo’s reassertion of the loan modification agreements as a basis for its recovery at trial. She did not try Wells Fargo’s claim on two modification agreements by express or implied consent. The question before us, then, is whether the circuit court’s finding that she was not prejudiced by the late amendment amounted to an abuse of discretion. Under these facts, we hold that it was.

Few courts have attempted to lay hold of the precise measure of “prejudice” that rule 1.190(b) contemplates when a party objects to a motion to amend a pleading to conform to the evidence.[1] Cf. Smith v. Mogelvang, 432 So. 2d 119, 123 (Fla. 2d DCA 1983) (“There is a limit, which cannot be precisely delineated . . . beyond which parties may not depart from their pleadings.”). But a few guiding principles can be discerned. First and foremost, a court must be mindful of the larger purpose that pretrial pleadings fulfill in civil litigation—pleadings function as a safeguard of due process by ensuring that the parties will have prior, meaningful notice of the claims, defenses, rights, and obligations that will be at issue when they come before a court. See Pro-Art Dental Lab, Inc. v. V-Strategic Grp., LLC, 986 So. 2d 1244, 1252 (Fla. 2008) (“`Florida law clearly holds that a trial court lacks jurisdiction to hear and to determine matters which are not the subject of proper pleading and notice,’ and `[t]o allow a court to rule on a matter without proper pleadings and notice is violative of a party’s due process rights.'” (alteration in original) (emphasis omitted) (quoting Carroll & Assocs., P.A. v. Galindo, 864 So. 2d 24, 28-29 (Fla. 3d DCA 2003))); Hart Props., Inc. v. Slack, 159 So. 2d 236, 239 (Fla. 1963) (“[I]ssues in a cause are made solely by the pleadings . . . . [The purpose of pleadings] is to present, define and narrow the issues, and to form the foundation of, and to limit, the proof to be submitted on the trial.”); Land Dev. Servs., Inc. v. Gulf View Townhomes, LLC, 75 So. 3d 865, 871 (Fla. 2d DCA 2011)(“Due process protections prevent a trial court from deciding matters not noticed for hearing and not the subject of appropriate pleadings.” (quoting Mizrahi v. Mizrahi, 867 So. 2d 1211, 1213 (Fla. 3d DCA 2004))); Rankin v. Rankin, 258 So. 2d 489, 491 (Fla. 2d DCA 1972) (“We simply say that the pleadings must be such as to afford both parties due process.”). It must also be remembered that rule 1.190(b), like all the rules of civil procedure, aims “to prevent the use of surprise, trickery, bluff and legal gymnastics.” Surf Drugs, Inc. v. Vermette, 236 So. 2d 108, 111 (Fla. 1970); see also Massey-Ferguson, Inc. v. Santa Rosa Tractor Co., 366 So. 2d 90, 93 (Fla. 1st DCA 1979) (“The trial judge aptly stated: `The purpose of pleadings is to make issues. The purpose of issues is for people to know what they’ve got to meet and get ready to meet it.'”).[2]

Prejudice, then, under rule 1.190(b), appears to turn on whether a litigant’s right to notice of what to prepare for at trial has been infringed. See, e.g., GGB Profit Sharing P’ship v. Goldberg, 166 So. 3d 847, 849 (Fla. 2d DCA 2015) (holding it was error to allow amendment to complaint to conform to the evidence so that plaintiff could change his theory of recovery from restitution to one based on his status as a beneficiary of a trust; “[b]ecause paragraph 6 [of the complaint] was not adequate to put GGB on notice of Goldberg’s alternative theory, it was error for the trial court to consider it”); Bachman v. McLinn, 65 So. 3d 71, 74 (Fla. 2d DCA 2011) (concluding that the trial court erred in allowing the father to amend pleadings to conform to evidence at trial over the mother’s objections because it “deprived the [m]other of the opportunity to prepare for the case that [the father] actually presented rather than for the one he pleaded, which was what she was expecting to defend”); Buday v. Ayer, 754 So. 2d 771, 772 (Fla. 2d DCA 2000)(reversing amendment of counterclaim to conform to the evidence where the original counterclaim sought specific performance and declaratory relief in a real property dispute but the counterclaimant pursued a claim for money damages at trial; “[n]othing in this case indicates that Ms. Buday was on notice that Mr. Ayer sought monetary damages; she had no reason to anticipate such a claim before the trial’s commencement”); Dean Co. v. U.S. Home Corp., Inc., 485 So. 2d 438, 439 (Fla. 2d DCA 1986) (concluding that it was “obvious[] . . . error” for the trial court to permit a third-party plaintiff to amend its complaint for indemnification to include a claim for contribution at the conclusion of trial because the third-party defendant “Dean entered the trial of the third[-]party claim knowing . . . that Dean had only to defend against U.S. Home’s attempt to thrust upon it the entire responsibility for the roof’s failure. . . . Dean’s counsel had no reason to develop evidence during the trial of the third[-]party action that would have shed light on the percentage, if any, of the damages sustained by the Association to be borne by Dean”); Fed. Home Loan Mortg. Corp. v. Beekman, 174 So. 3d 472, 476 (Fla. 4th DCA 2015) (reversing entry of order granting a loan modification where note holder “was denied an opportunity to defend against the issue of loan modification and could have offered additional evidence had the issue been pled”); Kind v. Gittman, 889 So. 2d 87, 91 (Fla. 4th DCA 2004) (affirming trial court’s refusal to permit a “[midtrial] amendment to introduce a new and different cause of action for breach of contract . . . [that] would have required additional discovery and possibly additional witnesses”).

Viewed in the light of these holdings, Ms. Tracey clearly suffered prejudice when the circuit court permitted the amendment of Wells Fargo’s complaint to conform to the evidence over her objection. Two contracts that she believed had never been formed (and that Wells Fargo had abandoned as a basis of recovery when it filed its amended complaint) became a featured point of Wells Fargo’s foreclosure cause of action against her. Cf. Rattigan v. Cent. Mortg. Co., 199 So. 3d 966, 967 (Fla. 4th DCA 2016) (reversing a final foreclosure judgment when “[t]he Bank was clearly proceeding under the modified note, i.e., a different note”). Ms. Tracey would have had no reason to prepare any kind of defense to these unpled modification agreements and, in fact, would have reasonably assumed that they would not be a feature in the trial at all. See Raymond, James & Assocs. v. Zumstorchen Inv., Ltd., 488 So. 2d 843, 844 (Fla. 2d DCA 1986) (“[I]n filing [an amended] complaint, the pleader causes the new complaint to become a substitute for the prior pleading.”); Eigen v. Fed. Deposit Ins. Corp., 492 So. 2d 826, 827 (Fla. 2d DCA 1986) (“Normally, an original pleading is superseded where an amended pleading does not express an intention to save any portion of it.”). Yet, the breach of the modification agreements became an integral part of the basis of Wells Fargo’s theory of recovery as well as the final judgment the circuit court ultimately entered. Under these facts, allowing Wells Fargo to amend its complaint at trial was an abuse of discretion, and so we must reverse the court’s final judgment.

Having reversed the judgment of foreclosure, the question arises as to what is the appropriate scope of remand. Compare Beekman, 174 So. 3d at 477 (reversing judgment of foreclosure premised on an unpled modification agreement and remanding for new trial), and Brumlik v. Palmer, 407 So. 2d 1058, 1059 (Fla. 5th DCA 1981) (“Because neither the pleadings, amendments nor proof support the relief granted, we reverse and remand for repleading and retrial.”), with Buday, 754 So. 2d at 773 (reversing final judgment on counterclaim that was improperly amended at trial to pursue additional damages and remanding to strike that portion of the award from the judgment), and Dean, 485 So. 2d at 440 (reversing judgment premised on motion to amend to conform to the evidence and directing trial court to enter judgment in favor of third-party defendant). On the facts before us, we are of the opinion that it would be proper to remand this case for further proceedings and a new trial so that the parties may have an opportunity, if the circuit court deems it appropriate, to reframe their pleadings on their respective claims and defenses. See Ohio Cas. Ins. Co. v. MRK Const., Inc., 602 So. 2d 976, 978 (Fla. 2d DCA 1992). We do not presume to set forth a comprehensive rule about the scope of remand today; we hold only that the facts and equities of this case warrant the one we are ordering.[3]

Reversed and remanded for further proceedings.

KHOUZAM and SLEET, JJ., Concur.

NOT FINAL UNTIL TIME EXPIRES TO FILE REHEARING MOTION AND, IF FILED, DETERMINED.

[1] At the same time, several courts have observed that the issue of prejudice is “the crucial consideration” on a motion to amend to conform to the evidence. See Horacio O. Ferrea N. Am. Div., Inc. v. Moroso Performance Prods., Inc., 553 So. 2d 336, 337 (Fla. 4th DCA 1989) (first citing New River Yachting Ctr. v. Bacchiocchi, 407 So. 2d 607, 609 (Fla. 4th DCA 1981); then citing Lasar Manufacturing Co. v. Bachanov, 436 So.2d 236 (Fla. 3d DCA 1983); and then citing Fla. R. Civ. P. 1.190(b)).

[2] With those principles in mind, some of the prior pronouncements from our court concerning motions to amend to conform to the evidence (which seem almost categorical in their tenor) become all the more clarion. See, e.g., Palm v. Taylor, 929 So. 2d 566, 568 (Fla. 2d DCA 2006) (“Amending a complaint during trial to assert a new cause of action generally should not be permitted over objection.”); Freshwater v. Vetter, 511 So. 2d 1114, 1115 (Fla. 2d DCA 1987) (“[A]mending [to conform to the evidence] to state a new cause of action should not be allowed over objection.” (first citing Triax, Inc. v. City of Treasure Island, 208 So. 2d 669 (Fla. 2d DCA 1968) and then citing Tucker v. Daugherty, 122 So. 2d 230 (Fla. 2d DCA 1960))); see also Simon, Pipes & Ross, Inc. v. Cuartas, 834 So. 2d 870, 872 (Fla. 3d DCA 2002) (“Where an objection is raised by the defendant, it is reversible error to permit a plaintiff to amend at the close of evidence to allege a new theory of recovery.” (citing Designers Tile Int’l Corp. v. Capitol C Corp., 499 So. 2d 4 (Fla. 3d DCA 1986))).

[3] Beyond pictorial proscriptions against biting apples more than once or affording “extra innings,” see, e.g., Morton’s of Chicago, Inc. v. Lira, 48 So. 3d 76, 80 (Fla. 1st DCA 2010)—metaphors that, even on their own terms, have become increasingly riddled with exceptions, see, e.g., Paeth v. U.S. Bank Nat’l Ass’n for C-Bass Mortg. Loan Asset Backed Certificates, 220 So. 3d 1273, 1275 (Fla. 2d DCA 2017)(holding that because “the Bank offered some evidence, albeit insufficient, to prove the amount of indebtedness . . . the Bank is entitled to further proceedings on remand to determine the amount of the indebtedness”)—it does not appear that Florida law has developed a comprehensive theory or jurisprudential philosophy to guide appellate courts when fashioning remand instructions for lower tribunals in civil controversies. We have a generally stated rule (that parties in civil controversies are not ordinarily entitled to retry their case when a judgment is reversed due to their legal error) that is subject to “exceptional circumstances,” Morton’s, 48 So. 3d at 80, but no principled basis to discern which circumstances are exceptional or by what authority (be it equitable or legal) we brook their consideration.

 

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Posted in STOP FORECLOSURE FRAUD0 Comments

U.S. Bank v Joseph | American Veteran’s 12 year battle with bank ends with Appellate Court reversing the lower court and dismissing foreclosure as barred by the statute of limitations

U.S. Bank v Joseph | American Veteran’s 12 year battle with bank ends with Appellate Court reversing the lower court and dismissing foreclosure as barred by the statute of limitations

Congratulations to the younglawgroup.org

U.S. Bank N.a. v Joseph (2018 NY Slip Op 02155)- 2d Dept SOL_Bankruptcy_CPLR 204(a)_toll_stay_TRO_OSC by DinSFLA on Scribd

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Posted in STOP FORECLOSURE FRAUD1 Comment

Manhattan U.S. Attorney Announces Lawsuit Against Foreclosure Law Firm Rosicki, Rosicki & Associates For Systematically Overbilling Fannie Mae For Foreclosure Expenses

Manhattan U.S. Attorney Announces Lawsuit Against Foreclosure Law Firm Rosicki, Rosicki & Associates For Systematically Overbilling Fannie Mae For Foreclosure Expenses

FOR IMMEDIATE RELEASE
Wednesday, March 28, 2018

Manhattan U.S. Attorney Announces Lawsuit Against Foreclosure Law Firm For Systematically Overbilling Fannie Mae For Foreclosure Expenses

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, and Rene Febles, Deputy Inspector General for Investigations for the Federal Housing Finance Agency (“FHFA-OIG”), announced today that the United States has filed a complaint-in-intervention against Rosicki, Rosicki & Associates, P.C. (“ROSICKI”), a foreclosure law firm in New York, and its wholly owned affiliates, Enterprise Process Service, Inc. (“ENTERPRISE”) and Paramount Land, Inc. (“PARAMOUNT”), for engaging in a scheme to generate false and inflated bills for foreclosure-related expenses and causing those expenses to be submitted to and paid for by the Federal National Mortgage Association, known colloquially as Fannie Mae.  The case is assigned to U.S. District Judge Jed S. Rakoff.

Manhattan U.S. Attorney Geoffrey S. Berman said:  “As alleged in the complaint, for years the Rosicki law firm exploited its relationship with Fannie Mae, a Government-sponsored entity, for its own financial gain by knowingly causing Fannie Mae to pay artificially inflated costs for foreclosure-related services.  This lawsuit demonstrates this Office’s continued commitment to root out fraud in all of its forms.”

FHFA Deputy Inspector General for Investigations Rene Febles said:  “FHFA-OIG recognizes that the best deterrent against fraud is a proactive and visible law enforcement effort.  We are vigilant and remain committed to conducting vigorous investigations and working closely with prosecutors to hold those organizations and persons accountable who waste, steal, or abuse funds in connection with FHFA or any of the entities that it regulates.”

As alleged in the complaint:

From May 2009 through the present (“Covered Period”), ROSICKI, a law firm based in Plainview, New York, that specializes in mortgage foreclosures, acted as counsel to various mortgage servicing companies, and in that capacity effectuated mortgage foreclosures on Fannie Mae-owned loans.  ENTERPRISE was a service-of-process company wholly owned and controlled by the two founding partners of ROSICKI, and PARAMOUNT was a title search company also wholly owned and controlled by the same ROSICKI partners.

Throughout the Covered Period, ROSICKI, ENTERPRISE, and PARAMOUNT perpetrated a scheme whereby ROSICKI exclusively engaged ENTERPRISE and PARAMOUNT purportedly to serve process and perform title searches that were required to complete mortgage foreclosures on Fannie Mae-owned loans.  In reality, however, ENTERPRISE and PARAMOUNT engaged third-party vendors to perform the majority of the work, and then applied exponential markups, as much as 750%, to those vendors’ bills for foreclosure-related services, while adding little if any value to the services that the vendors had performed.  ENTERPRISE and PARAMOUNT submitted their marked-up expenses, which significantly exceeded market rates, to ROSICKI.  ROSICKI in turn billed the mortgage servicers for those inflated expenses, which ROSICKI represented were the actual expenses incurred for the foreclosure-related services, with knowledge that the mortgage servicers would submit claims to Fannie Mae for full reimbursement of the expenses.  Defendants’ submission of these fraudulently inflated expenses caused Fannie Mae to pay millions of dollars for falsely inflated foreclosure expenses.

This matter was initiated by a relator pursuant to the qui tam provisions of the False Claims Act, 31 U.S.C. § 3729 et seq.

*                *                *

Mr. Berman thanked the FHFA-OIG for its efforts and ongoing support and assistance with the case.

The case is being handled by the Office’s Civil Frauds Unit.  Assistant U.S. Attorneys Cristy Irvin Phillips, Andrew E. Krause, and Lauren A. Lively are in charge of the case.

Topic(s):
Financial Fraud
Press Release Number:
18-093
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Posted in STOP FORECLOSURE FRAUD1 Comment

New York foreclosure firm accused of cheating Fannie Mae out of millions

New York foreclosure firm accused of cheating Fannie Mae out of millions

Housing Wire-

A New York foreclosure law firm allegedly used its affiliated companies to “systemically” overcharge for foreclosure-related services and defraud Fannie Mae out of “millions of dollars,” the Department of Justice said in court this week.

According to the U.S. Attorney’s Office for the Southern District of New York, Rosicki, Rosicki & Associates engaged in a scheme with its wholly owned affiliates, Enterprise Process Service and Paramount Land, to markup foreclosure services by as much as 750% knowing that Fannie Mae would pay the bills.

In a complaint, the DOJ alleges that the Rosicki firm specializes in foreclosures, acting as counsel to mortgage servicers that use the firm to execute foreclosures in New York, a judicial foreclosure state.

[HOUSINGWIRE]

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Posted in STOP FORECLOSURE FRAUD0 Comments

Florida Passes Bill to Stop Bankruptcy Debtors From “Having Their Cake and Eating It Too”

Florida Passes Bill to Stop Bankruptcy Debtors From “Having Their Cake and Eating It Too”

Lexology-

On March 20, Florida Governor Rick Scott signed Senate Bill 220 into law. The bill is designed to limit the ability of defendants in foreclosure proceedings to keep contesting the foreclosure after agreeing, in bankruptcy, to surrender the property to their lenders.

By way of background, when an individual debtor files for bankruptcy, whether under Chapter 7 (liquidation) or Chapter 13 (reorganization), the debtor is required to make a statement under penalty of perjury as to how the debtor proposes to handle property that secures a debt, such as a home or a car. Broadly speaking, the debtor can choose to surrender the property, to redeem the property (by paying off the debt), or to retain the property and make payments on the debt going forward.

Oftentimes, debtors choose to surrender the property to their lenders, which typically results in the debtor receiving a discharge of the associated debt. Once a debtor agrees to surrender it, a creditor can commence or continue foreclosure or other proceedings to recover and sell the property to attempt to satisfy the creditor’s claim. In recent years, a number of Florida debtors attempted to “have their cake and eat it too” by agreeing to surrender their homes in bankruptcy, thereby obtaining a discharge of the mortgage debt – but then fighting later foreclosure proceedings in state court in an attempt to delay or prevent foreclosure. The result was troubling, as it would allow debtors to live essentially “rent free” in homes while the foreclosure wound slowly through the state judicial system.

[LEXOLOGY]

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Posted in STOP FORECLOSURE FRAUD1 Comment

Brooks v. BANK OF GENEVA, Ind: Court of Appeals | Because the mortgage is released, the Bank cannot foreclose on it, and its own partial summary judgment motion should have been denied. The Brookses’ claim for abuse of process remains pending.

Brooks v. BANK OF GENEVA, Ind: Court of Appeals | Because the mortgage is released, the Bank cannot foreclose on it, and its own partial summary judgment motion should have been denied. The Brookses’ claim for abuse of process remains pending.

 

R. Kinsey Brooks, Susan K. Brooks, Appellants-Defendants,
v.
Bank of Geneva, Appellee-Plaintiff.

No. 01A05-1709-MF-2174.
Court of Appeals of Indiana.
March 21, 2018.
Appeal from the Adams Circuit Court, Trial Court Cause No. 01C01-1605-MF-16, The Honorable Chad E. Kukelhan, Judge.

Andrew L. Teel, Fort Wayne, Indiana, Attorney for Appellant.

James R. Williams, Christopher L. Bills, Matthew L. Kelsey, DEFUR VORAN, LLP, Muncie, Indiana, Attorneys for Appellee.

BARNES, Judge.

Case Summary

R. Kinsey and Susan Brooks appeal the trial court’s grant of summary judgment in favor of Bank of Geneva (“the Bank”) and the denial of their motion for summary judgment. We reverse and remand.

Issue

The Brookses raise three issues. We need address only one dispositive issue: whether the Brookses were released from a mortgage obligation to the Bank when the terms of the third-party debt the mortgage secured were altered.

Facts

On August 15, 2013, dairy farmers Matthew and Ginger Summersett executed a promissory note to borrow $398,000.00 from the Bank. Ginger is the Brookses’ daughter, and Matthew is their son-in-law. On the same date, the Brookses executed a mortgage in favor of the Bank for farmland they owned in Berne, in order to partially secure the Summersetts’ debt to the Bank. The Summersetts also secured the debt with a mortgage on four parcels of their own property. The Brookses’ mortgage specified that they were not personally liable for the Summersetts’ debt.

Also on August 15, 2013, the Bank issued two other loans to the Summersetts: one for $994,500.00 and one for $307,500.00. On October 31, 2013, the Bank loaned another $50,000.00 to the Summersetts; it was secured by a mortgage on one of the four pieces of property the Summersetts mortgaged for the $398,000.00 loan. On October 31, 2014, the Bank loaned the Summersetts another $48,976.22; again, it was secured by a mortgage on one of the properties mortgaged for the $398,000.00 loan. The Brookses were not aware of these additional loans to the Summersetts.

On October 8, 2015, the Bank agreed to change the terms of the $398,000.00 promissory note to provide for semi-annual payments rather than monthly payments by the Summersetts. The monthly payment amount had been $2,173.80, while the new semi-annual payment was to be $13,102.28. The first modified payment was due on March 15, 2016. However, the Summersetts never made that payment or any subsequent payment on the loan. The Brookses were not notified of this modification to the promissory note. According to the Bank, this modification was made “in order to address and accommodate the Summersetts [sic] cash flow issues regarding their ceasing of dairy operations. . . .” App. Vol. III p. 98.

In late 2015 and early 2016, the Summersetts began selling off the real estate they had mortgaged, as well as items of farm equipment and cattle. The total of these sales greatly exceeded $398,000.00. However, the proceeds of the sales were applied only to the other four loans the Bank had made to the Summersetts, all of which were eventually deemed paid in full.

On May 19, 2016, the Bank filed a complaint against the Summersetts and Brookses for breach of note and foreclosure of mortgage with respect to the $398,000.00 loan; the complaint was amended on June 21, 2016. It alleged a current balance due on the note of $407,932.18. The complaint only sought foreclosure of the Brookses’ mortgage, however.[1] In fact, on June 3, 2016, the Bank executed and duly filed with the Adams County Recorder the following “SATISFACTION OF MORTGAGE”:

This Certifies that a mortgage, executed by Matthew K. Summersett and Ginger A. Summersett, to Bank of Geneva, Geneva, Adams County, an Indiana Corporation on the 15th day of August, 2013, calling for $398,000.00, and recorded in Instrument #XXXXXXXXXX, Adams County, State of Indiana, has been paid in full and is hereby released.

Id. at 96. A Bank officer later stated that this mortgage was released “to facilitate the sale of the mortgaged land that served as collateral to secure multiple obligations to the Bank of Geneva and to allow the Summersetts to satisfy loans other than” the $398,000.00 note. Id. at 98. However, the officer also stated that the document filed with the Adams County Recorder had “inadvertently” said that the $398,000.00 loan was paid in full. Id. at 99. The Brookses’ answer to the complaint included a counterclaim for abuse of process against the Bank.

On October 24, 2016, the Bank filed a motion for partial summary judgment, seeking an in rem decree of foreclosure on the property the Brookses mortgaged. On January 11, 2017, the Brookses filed a response and cross-motion for partial summary judgment, asserting in part that their mortgage had been released by the actions of the Bank and the Summersetts. On September 5, 2017, the trial court denied the Brookses’ motion for partial summary judgment and granted the Bank’s motion, finding the Bank was then owed $462,772.89 and ordering sale of the Brookses’ property if the judgment was not paid.

The Brookses initiated an appeal. The Bank thereafter filed with the trial court a motion to set an appeal bond, requesting an amount no less than $500,000.00. After a hearing in which an expert appraised the Brookses’ property at approximately $250,000.00,[2] the trial court set an appeal bond of $285,000.00 and stayed execution of the judgment. On February 1, 2018, upon the Brookses’ motion, this court reduced the appeal bond to $25,000.

Analysis

I. Appeal Bond

Before turning to the merits of the case, we will explain our decision to substantially reduce the appeal bond in this case, for purposes of future guidance to trial courts. Indiana Appellate Rule 18 states in part:

No appeal bond shall be necessary to prosecute an appeal from any Final Judgment or appealable interlocutory order. Enforcement of a Final Judgment or appealable interlocutory order from a money judgment shall be stayed during appeal upon the giving of a bond, an irrevocable letter of credit, or other form of security approved by a trial court or Administrative Agency. The trial court or Administrative Agency shall have jurisdiction to fix and approve the bond, irrevocable letter of credit, or other form of security, and order a stay prior to or pending an appeal. After the trial court or Administrative Agency decides the issue of a stay, the Court on Appeal may reconsider the issue at any time upon a showing, by certified copies, of the trial court’s action. The Court on Appeal may grant or deny the stay and set or modify the bond, letter of credit, or other form of security. . . .

Additionally, Indiana Trial Rule 62(D)(2) provides the following guidelines for determining the amount of an appeal bond:

When the judgment is for the recovery of money not otherwise secured, the amount of the bond or letter of credit shall be fixed at such sum as will cover the whole amount of the judgment remaining unsatisfied, costs on the appeal, interest, and damages for delay, unless the court after notice and hearing and for good cause shown fixes a different amount or orders security other than a bond or letter of credit. When the judgment determines the disposition of the property in controversy as in real action, replevin, and actions to foreclose liensor when such property is in the custody of the sheriff or when the proceeds of such property or a bond or letter of credit for its value is in the custody or control of the court, the amount of the appeal bond or letter of credit shall be fixed at such sum only as will secure the amount recovered for the use and detention of the property, the costs of the action, costs on appeal, interest, and damages for delay.

(Emphases added).

“The determination of the amount of an appeal bond lies within the discretion of the trial court, and will not be disturbed absent an abuse of discretion.” Kocher v. Getz, 824 N.E.2d 671, 675 (Ind. 2005). A trial court abuses its discretion in ruling on a matter when its decision is clearly against the logic and effect of the facts and circumstances before the court, or if the court has misinterpreted the law. Kosarko v. Padula, 979 N.E.2d 144, 146 (Ind. 2012).

We reduced the appeal bond in this case because the trial court misinterpreted the law in setting the bond at $285,000.00. The trial court apparently reached that amount based upon a $250,000.00 valuation of the real property, plus appellate attorney fees the Bank had already incurred of approximately $15,000.00, plus interest at 8% per annum on $250,000.00 and based on an assumed delay in resolution of this case by this court lasting approximately one year. But, Trial Rule 62(D) expressly limits an appeal bond in a foreclosure case such as this only to an amount that “will secure the amount recovered for the use and detention of the property, the costs of the action, costs on appeal, interest, and damages for delay.” It also is important to emphasize that this was purely an in rem judgment against the Brookses’ property. There was no attempt to recover the judgment against the Brookses personally; the Brookses’ mortgage expressly stated, “the Non-Obligated Mortgagor is not personally liable for the Secured Debts.” App. Vol. II p. 29.

An appeal bond in a foreclosure case can include an amount reflecting “use” of the property during the appeal. “Ordinarily, the proper measure of damages for loss of use of property is the fair rental value of the property during the time that the injury existed.” Williams v. Hittle, 629 N.E.2d 944, 951 (Ind. Ct. App. 1994), trans. denied. The Bank does not claim it presented any evidence regarding the rental value of the Brookses’ land; the Brookses assert that the farmland could not generate any rental income anyway during the winter and not until the spring planting season begins in April or May at the earliest. Additionally, as for “damages for delay,” that phrase might encompass things such as waste or depreciation of the property while the appeal is pending. See Opp v. Ten Eyck, 99 Ind. 345, 347 (1884)Scott v. Marchant, 88 Ind. 349, 353 (1882). There is a lack of indication that either depreciation or waste will be a problem for this land.

The Bank does assert there is the possibility the Brookses could sell the land to a third party during the appeal, and “the Bank could easily be out the value of the land.” Appellee’s Verified Motion to Remand and Response to Appellant’s Verified Motion to Modify Appeal Bond, p. 7. We do not see how that could possibly happen. The land is mortgaged to the Bank and is embroiled in litigation. Even if a third party did for some reason buy the land, it would still be subject to the mortgage. See Dorothy Edwards Realtors, Inc. v. McAdams, 525 N.E.2d 1248, 1256 (Ind. Ct. App. 1988).

Thus, in reducing the appeal bond here to $25,000.00, we considered that the Bank has incurred approximately $15,000.00 in appellate attorney fees, and the Brookses’ mortgage contains an attorney fee provision that would allow the Bank to recover these fees from the Brookses if they lost this appeal. To this we added $10,000.00 in potential interest at 8% per annum on $250,000.00, confident in our ability to decide this case in much less time than the trial court or the Bank thought we would.

II. Release of Mortgage

We now turn to the merits of granting summary judgment in the Bank’s favor and denying the Brookses’ partial summary judgment motion. We review a grant of summary judgment de novo. Hughley v. State, 15 N.E.3d 1000, 1003 (Ind. 2014). “Drawing all reasonable inferences in favor of . . . the non-moving parties, summary judgment is appropriate `if the designated evidentiary matter shows that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law.'” Williams v. Tharp, 914 N.E.2d 756, 761 (Ind. 2009) (quoting T.R. 56(C)). “A fact is `material’ if its resolution would affect the outcome of the case, and an issue is `genuine’ if a trier of fact is required to resolve the parties’ differing accounts of the truth, or if the undisputed material facts support conflicting reasonable inferences.” Id. “The fact that the parties filed cross-motions for summary judgment does not affect our standard of review. In such case we consider each motion separately to determine whether the moving party is entitled to judgment as a matter of law.” Alexander v. Marion Cty. Sheriff,891 N.E.2d 87, 92 (Ind. Ct. App. 2008) (citation omitted), trans. denied.

We will focus solely upon whether the trial court properly denied the Brookses’ motion for partial summary judgment on the question of whether their mortgage was released. If it was released, there was nothing for the Bank to foreclose on and no basis for granting it summary judgment.

One who mortgages his or her land to secure the debt of another stands in the position of surety to the debtor. First Fed. Bank of Midwest v. Greenwalt, 42 N.E.3d 89, 94 (Ind. Ct. App. 2015). It is axiomatic that a surety is a favorite of the law and must be dealt with in the utmost good faith. Id. (quoting Kruse v. Nat’l Bank of Indianapolis, 815 N.E.2d 137, 147 (Ind. Ct. App. 2004) (in turn quoting Ind. Telco Fed. Credit Union v. Young, 156 Ind. App. 483, 485, 297 N.E.2d 434, 435 (1973)). Longstanding precedent also dictates,

One who, with the knowledge of the creditor, furnishes collateral to secure the loan of another stands in the relation of surety to the debtor and such collateral is released by any action of the creditor which would release a surety, such as the extension of the time of payment of the debt, the acceptance of a renewal note, or the release of other security.

Owen Cty. State Bank v. Guard, 217 Ind. 75, 84-85, 26 N.E.2d 395, 398-99 (1940).

If a debtor and creditor make a material alteration in the underlying obligation without the consent of the guarantor, the guarantor is discharged from further liability. Yin v. Society Nat’l Bank Indiana, 665 N.E.2d 58, 64 (Ind. Ct. App. 1996),trans. denied. A “material” alteration is one that changes the legal identity of the debtor’s contract, substantially increases the risk of loss to the guarantor, or places the guarantor in a different position. Id. It is irrelevant whether an alteration was intended for the surety’s benefit, so long as the alteration entails either a change in the physical document or a change in the terms of the contract between the debtor and creditor that creates a different duty of performance on the part of the debtor. Greenwalt, 42 N.E.3d at 95.

The Bank materially altered the promissory note with the Summersetts in at least two respects, thus releasing the Brookses’ mortgage. First, the Bank changed the payment terms from monthly to semi-annually. The Bank contends this was not a material alteration because it did not change the amount of money the Summersetts owed or anything of that nature, and the semi-annual payment amount was roughly equal to six monthly payments.

Clear precedent dictates that the Bank is incorrect. In Telco, we held that a surety was discharged from liability where the creditor agreed to accept lower payments from the debtor toward a promissory note, going from $75 every two weeks to $138 per month, without the surety’s knowledge or consent. Telco, 165 Ind. App. at 486-87, 297 N.E.2d at 436. There, as here, the change in payment terms apparently was due to the debtor’s financial hardship—or “cash flow issues” as the Bank here described it. App. Vol. III p. 98. Even if the change in the Summersetts’ payment terms was intended to make it more likely that they would be able to pay the loan back, the Brookses were entitled to know about this change. This would have alerted the Brookses to the fact that the Summersetts were having difficulty paying back the loan on its original terms and allowed them to protect themselves and their collateral if possible. The change in the Summersetts’ payment terms was a material alteration to the original contract between them and the Bank. Because the Brookses did not consent to that change, they were discharged from liability as sureties and their mortgage should have been released.

It also is clear that the Brookses were discharged as sureties and their mortgage should have been released when the Bank released the Summersetts’ own mortgage. By this action, the Brookses were placed in a much more perilous position than they were when the Summersetts’ land also secured the $398,000.00 loan. And, the record indicates that the Summersetts’ land was worth far more than $398,000.00, or the value of the Brookses’ own land. The Brookses’ property went from one of five parcels of real estate securing the promissory note to the only parcel. The Brookses did not agree to put their land at such peril. Our supreme court has explained:

“It is a well settled principle of equity, that a creditor, who has the personal contract of his debtor, with a surety, and has also, or afterwards takes property from the principal, as a pledge or security for the debt, is to hold the property fairly and impartially, for the benefit of the surety as well as himself; and if he parts with it, without the knowledge or against the will of the surety, he shall lose his claim against the surety to the amount of the property so surrendered.”

Farmers Loan & Tr. Co. v. Letsinger, 652 N.E.2d 63, 66 (Ind. 1995) (quoting Stewart v. Davis’ Executor, 18 Ind. 74, 75-76 (1862)).

The facts are undisputed with respect to the question of release.[3] The Brookses did not know or consent to the change in payment terms for the promissory note or the Bank’s release of the Summersetts’ collateral for the loan. As a matter of law, the mortgage on the Brookses’ property should have been released upon either act.

Conclusion

The trial court should have granted partial summary judgment to the Brookses on the release issue. We reverse and remand with instructions that the mortgage on the Brookses’ property be released. Because the mortgage is released, the Bank cannot foreclose on it, and its own partial summary judgment motion should have been denied. The Brookses’ claim for abuse of process remains pending.

Reversed and remanded.

Najam, J., and Mathias, J., concur.

[1] The complaint also made fraud allegations against the Summersetts.

[2] We do not have a transcript of this hearing, but the parties agree that this testimony was given.

[3] The Brookses assert there is a question of fact as to whether the Summersetts actually paid the $398,000.00 debt to the Bank in full and also challenge the admissibility of an affidavit the Bank prepared in which it claimed the debt was not in fact paid in full, despite language to the contrary in its release filing with the Adams County Recorder. We need not address the admissibility of that affidavit or whether the debt was paid in full. We also need not address the Brookses’ arguments that the Bank’s subsequent issuance of additional loans to the Summersetts released the Brookses as sureties, or that the Bank acted improperly in applying the proceeds of the sales of the Summersetts’ properties to loans other than the $398,000.00 loan.

 

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Vieira v. PENNYMAC CORP. | FL 4DCA – PennyMac failed to prove that prior to suit, Chase Bank had indorsed the note over to JP Morgan. Thus, we conclude that PennyMac failed to prove that JP Morgan had standing at the inception of the suit.

Vieira v. PENNYMAC CORP. | FL 4DCA – PennyMac failed to prove that prior to suit, Chase Bank had indorsed the note over to JP Morgan. Thus, we conclude that PennyMac failed to prove that JP Morgan had standing at the inception of the suit.

 

ROBERTO D. VIEIRA a/k/a ROBERTO VIEIRA and SHAWN D. VIEIRA a/k/a SHAWN VIEIRA, Appellants,
v.
PENNYMAC CORP. and THE TIMBERS OF BOCA HOMEOWNERS ASSOCIATION, INC., Appellees.

No. 4D16-3430.
District Court of Appeal of Florida, Fourth District.
March 21, 2018.
Appeal from the Circuit Court for the Fifteenth Judicial Circuit, Palm Beach County; Susan R. Lubitz, Senior Judge; L.T. Case No. 50-2015-CA-001150 AW.

Kendrick Almaguer, Thomas Eross, Jr., and Kyle M. Costello of The Ticktin Law Group, PLLC, Deerfield Beach, for appellants.

Nancy W. Wallace of Akerman LLP, Tallahassee, and William P. Heller and Henry H. Bolz of Akerman LLP, Fort Lauderdale, for appellee PennyMac Corp.

CONNER, J.

Roberto D. Vieira and Shawn D. Vieira (“the Borrowers”) appeal the final judgment of foreclosure in favor of PennyMac Corp (“PennyMac”) asserting the trial court erred by (1) determining PennyMac had standing to enforce a lost note, and (2) rejecting their attempt to amend pleadings to conform to the evidence. Because we agree with the Borrowers’ first contention, we do not address the second contention. We agree that PennyMac failed to prove at trial that the initial plaintiff had standing to enforce the note. We reverse the final judgment and remand for the trial court to enter judgment in favor of the Borrowers.

Background

In January 2015, JP Morgan Chase Bank, National Association (“JP Morgan”) filed the initial complaint in this case, seeking to foreclose on a note and mortgage given by the Borrowers to Chase Bank USA, N.A. (“Chase Bank”), the original lender. The complaint also sought to re-establish the lost note secured by the mortgage. JP Morgan asserted that although the note was lost, it was entitled to enforce the instrument pursuant to section 673.3091, Florida Statutes (2017). Attached to the complaint was a copy of the note and mortgage. The complaint alleged in part that “Plaintiff will establish the terms and conditions of the subject note in addition to its right to enforce. A lost note affidavit is attached hereto as Exhibit `A.'” The body of the three-page complaint made no reference to Chase Bank.

The lost note affidavit attached to the complaint stated, in part:

A copy of the original note and, if applicable, allonge(s) is/are attached hereto as Exhibit A.

The copy does not display endorsements.

(emphasis added). Exhibit A attached to the lost note affidavit included a copy of the note, but no copy of an allonge was attached.

The Borrowers eventually filed an answer, asserting that JPMorgan lacked standing and failed to fulfill conditions precedent. Subsequently, JP Morgan moved to substitute PennyMac as plaintiff and to change the case style, alleging that JP Morgan assigned the mortgage to PennyMac after the suit was filed, attaching a copy of the recorded assignment. The assignment only transferred the mortgage and not the note. An order was entered substituting PennyMac as the plaintiff.

At trial, PennyMac called two witnesses; one a JP Morgan employee and the other a PennyMac employee. We summarize the testimony that is most pertinent to disposition of this appeal.

The JP Morgan witness testified that Chase Bank was the first loan servicer, JP Morgan was the second servicer, and PennyMac was the current servicer. She testified that the Borrowers were given a notice of assignment, sale and transfer of servicing rights from Chase Bank to JPMorgan. She further testified about the process JP Morgan followed regarding a search for a lost note. According to the witness, JPMorgan was in possession of the note because there was an imaged copy that was uploaded during JP Morgan’s servicing of the loan, though she did not recall the specific date of the upload, believing it to be around 2010. Additionally she testified that after reviewing JP Morgan’s records and Chase Bank’s records, nothing led her to believe that the note could be reasonably located. She admitted that she did not know the exact date the note was lost.

Through the JP Morgan witness, PennyMac introduced into evidence the original lost note affidavit, a copy of which was attached to the complaint. According to the witness, the affidavit was executed in September 2014 (four months before the complaint was filed). Unlike the copy of the affidavit attached to the complaint, the original affidavit had an original allonge attached to it, stating:

This Allonge is being prepared to evidence the transfer and assignment of ownership of that certain Mortgage Note described above, which was executed in favor of CHASE BANK USA, NA, to the below-named Purchaser. The original of the Mortgage Note has been lost or misplaced by the below-named seller. A copy of the fully-executed Mortgage Note is attached to that certain Lost Note affidavit dated SEPTEMBER 18, 2014 executed by the Seller.

The allonge was undated and contained a signature by a JP Morgan representative, but no signature by a Chase Bank representative. The JP Morgan witness could not say when the allonge was executed or when it was imaged into any system.

Through the JP Morgan witness, PennyMac also introduced into evidence the assignment of mortgage from JP Morgan to PennyMac.

PennyMac’s witness testified that when PennyMac acquired servicing rights, the prior servicer, JP Morgan, sent all loan records. She further testified that the Borrowers’ loan was part of a Purchase of Servicing Agreement (“PSA”), which governed how PennyMac serviced the loan. The PSA indicated that the Borrowers’ loan was part of a pool of loans for which PennyMac purchased the servicing rights from JP Morgan in January 2015.

At the conclusion of the evidence, the trial court denied the Borrowers’ motion for involuntary dismissal on the issue of standing. A final judgment was entered against the Borrowers, after which the Borrowers gave notice of appeal.

Analysis

The standard of review of whether the trial court’s factual findings are legally sufficient to establish standing is a question of law subject to de novo review. Elman v. U.S. Bank, N.A., 204 So. 3d 452, 454 (Fla. 4th DCA 2016). A trial court’s factual findings are reviewed for competent substantial evidence. Id. at 455; Jasser v. Saadeh, 91 So. 3d 883, 884 (Fla. 4th DCA 2012) (quoting Acoustic Innovations, Inc. v. Schafer, 976 So. 2d 1139, 1143 (Fla. 4th DCA 2008)) (reciting that judgment entered after a nonjury trial is reviewed for competent, substantial evidence). “When reviewing a judgment rendered after a nonjury trial, the trial court’s findings of fact come to the appellate court with a presumption of correctness and will not be disturbed unless they are clearly erroneous.” State Tr. Realty, LLC v. Deutsche Bank Nat’l Tr. Co. Ams., 207 So. 3d 923, 925 (Fla. 4th DCA 2016) (quoting Stone v. BankUnited, 115 So. 3d 411, 412 (Fla. 2d DCA 2013)).

Because it was substituted as plaintiff after suit was filed, PennyMac had to prove at trial that JP Morgan had standing when the initial complaint was filed, as well as its own standing when the final judgment was entered. Lamb v. Nationstar Mortg., LLC, 174 So. 3d 1039, 1040 (Fla. 4th DCA 2015). Throughout the proceedings below, the note was lost. Thus, PennyMac had to prove standing and the right to enforce the note, using section 673.3091, Fla. Stat. (2017). Section 673.3091(1)(a), requires in part that “[t]he person seeking to enforce the instrument was entitled to enforce the instrument when loss of possession occurred, or has directly or indirectly acquired ownership of the instrument from a person who was entitled to enforce the instrument when loss of possession occurred.” (emphasis added).

Standing may be established by possession of the note specially indorsed to the plaintiff or indorsed in blank. Peoples v. Sami II Tr. 2006-AR6, 178 So. 3d 67, 69 (Fla. 4th DCA 2015); § 673.2031(1), Fla. Stat. (2017) (“An instrument is transferred when it is delivered by a person other than its issuer for the purpose of giving to the person receiving delivery the right to enforce the instrument.”); § 673.2031(2), Fla. Stat. (“Transfer of an instrument, whether or not the transfer is a negotiation, vests in the transferee any right of the transferor to enforce the instrument, including any right as a holder in due course . . . .”). A plaintiff may also prove standing “through evidence of a valid assignment, proof of purchase of the debt, or evidence of an effective transfer.” Stone, 115 So. 3d at 413 (quoting BAC Funding Consortium Inc. ISAOA/ATIMA v. Jean-Jacques, 28 So. 3d 936, 939 (Fla. 2d DCA 2010)). That is because “if an instrument is transferred for value and the transferee does not become a holder because of lack of indorsement by the transferor, the transferee has a specifically enforceable right to the unqualified indorsement of the transferor . . . .” § 673.2031(3), Fla. Stat.

In this case, the original lender and payee of the note was Chase Bank. Although the parties make various arguments and counter-arguments regarding standing, we perceive the critical issue to be whether sufficient proof was presented at trial to show that Chase Bank transferred the note to JP Morgan, the original plaintiff, prior to suit being filed.

The Borrowers contend on appeal that PennyMac failed to prove that JP Morgan had standing to foreclose when it filed suit. More specifically, the Borrowers argue that PennyMac did not produce substantial competent evidence that JP Morgan was in possession of the allonge at the inception of the case. They point out that the allonge was not attached to the complaint when it was filed; instead, the allonge appeared at trial with no dates of creation on its face. Moreover, PennyMac’s witness could not offer evidence that the allonge was created or executed prior to the filing of the complaint.

Additionally, the Borrowers argue there was no proof of transfer of the note from Chase Bank to JP Morgan. The allonge did not contain an indorsement from Chase Bank, and it was not signed by a representative of Chase Bank. The assignment of mortgage entered into evidence only transferred the mortgage and not the note. The Borrowers also assert that the notice of transfer or sale of servicing rights was not an effective transfer of the note.

Addressing the issue of standing at the inception of the suit, PennyMac contends on appeal that it presented sufficient evidence to prove that JP Morgan’s authority to enforce the note derived from its status as a non-holder in possession of the note with the rights of a holder at the time of the loss. PennyMac acknowledges that its contention is based on “multi-tiered evidence” of transfer of the note by Chase Bank. It begins the analysis with the assertion that the evidence showed that Chase Bank and JP Morgan are “related entities.” PennyMac argues that the allonge memorialized the transfer of the note from Chase Bank to JP Morgan. It further asserts that to agree with the Borrowers’ position would require the absurd inference that JP Morgan made a six-figure sale of the note to PennyMac without authority from Chase Bank, a related entity that used the same address in the public records.

Additionally, PennyMac argues that despite case law to the contrary, the assignment of the mortgage alone, without the inclusion of the note, bolsters the proof that JP Morgan had standing at the inception of the suit. For this argument, PennyMac relies on section 701.01, Florida Statutes (2017). Finally, PennyMac argues that the evidence of escrow advances corroborate JP Morgan’s standing.

However, there are problems with PennyMac’s “multi-tiered evidence” arguments. First, it is unclear in what way Chase Bank and JP Morgan are “related entities.” No evidence was presented that JP Morgan and Chase Bank merged or that Chase Bank was completely bought out by JP Morgan. As we have made clear in the past, separate corporate entities, even parent and subsidiary entities, are legally distinct entities. See Wright v. JPMorgan Chase Bank, N.A., 169 So. 3d 251, 251-52 (Fla. 4th DCA 2015) (noting a parent corporation and its wholly-owned subsidiary are separate and distinct legal entities and a parent corporation cannot exercise the rights of the subsidiary corporation); see also Houk v. PennyMac Corp., 210 So. 3d 726, 734 (Fla. 2d DCA 2017) (noting a conflict of allegations between affidavits and the complaint where the affidavits alleged PennyMac Loan Services, LLC was the servicer and the complaint alleged PennyMac Corp. was the servicer). There was no explicit testimony or other evidence that Chase Bank sold or equitably transferred the note to JP Morgan.

Additionally, PennyMac cites no case law in support of its argument that the assignment of mortgage (without an assignment of the note) bolsters the proof that JP Morgan had standing at the inception of the suit. Instead, PennyMac cites to section 701.01, which provides:

Any mortgagee may assign and transfer any mortgage made to her or him, and the person to whom any mortgage may be assigned or transferred may also assign and transfer it, and that person or her or his assigns or subsequent assignees may lawfully have, take and pursue the same means and remedies which the mortgagee may lawfully have, take or pursue for the foreclosure of a mortgage and for the recovery of the money secured thereby.

(emphases added). However, although the statute makes clear that an assignee has the “same means and remedies the mortgagee may lawfully have,” we have previously held that “[t]he mortgage follows the assignment of the promissory note, but an assignment of the mortgage without an assignment of the debt creates no right in the assignee.” Tilus v. AS Michai LLC, 161 So. 3d 1284, 1286 (Fla. 4th DCA 2015) (citing Bristol v. Wells Fargo Bank, Nat’l Ass’n, 137 So. 3d 1130, 1133 (Fla. 4th DCA 2014)); see also Lamb, 174 So. 3d at 1041 (“A bank does not have standing to foreclose where it relies on an assignment of the mortgage only.”). Therefore, we disagree with PennyMac’s assertion that the assignment of mortgage alone, without a transfer of the note, establishes that JP Morgan had standing at the inception of the suit.

PennyMac’s argument that the allonge memorialized the transfer of the note from Chase Bank to JP Morgan reveals the biggest flaw in PennyMac’s contention that JP Morgan had standing at the inception of the suit. The major stumbling block is that the allonge was signed by a representative of JP Morgan, and there is no signature on the document by Chase Bank. Section 673.2041, Florida Statutes (2017), clearly requires a signature by the current note holder to constitute an indorsement and transfer of the note to another payee or bearer. § 673.2041, Fla. Stat. (“The term `indorsement’ means a signature . . . for the purpose of negotiating the instrument [or] restricting payment of the instrument.”). We have previously said, “[t]o transfer a note, there must be an indorsement, which itself must be `on [the] instrument’ or on `a paper affixed to the instrument.'” Jelic v. BAC Home Loans Servicing, LP, 178 So. 3d 523, 525 (Fla. 4th DCA 2015)(second alteration in original)(emphasis added)(quoting § 673.2041(1), Fla. Stat.).

Next, in support of its argument that evidence of escrow advances corroborates JP Morgan’s standing, PennyMac cites Peuguero v. Bank of America, N.A., 169 So. 3d 1198 (Fla. 4th DCA 2015), where we said that a foreclosure plaintiff paying taxes and fees associated with the mortgaged property prior to suit is “a noteworthy factor in determining standing, as financial institutions are not known to incur expenses on behalf of properties for which they do not hold an interest.” Id.at 1202. However, our statement was in the context of facts where the lender originating the loan signed an indorsement to Countrywide Bank, the entity which filed the foreclosure suit. Id. at 1200. After suit was filed, Bank of America was substituted as plaintiff on the contention that Countrywide Bank merged into Bank of America. Id. In other words, we viewed the evidence of advanced fees as corroboration of more direct evidence of transfer of the note. Id. at 1202. We never held that such evidence, standing alone, would be sufficient to establish standing. In this case, there is no other more direct evidence of a transfer of the note for the evidence of the escrow advances to corroborate.

Finally, the remaining testimonial and documentary “multi-tiered evidence” discussed in PennyMac’s brief does not demonstrate that JP Morgan had standing at the inception of the suit. As discussed above, neither of PennyMac’s witnesses directly testified about the transfer of the note from Chase Bank to JP Morgan. Instead, the witness testimony referred a few times to Chase Bank and JP Morgan as “Chase entities.” Likewise, the notice of sale and transfer of servicing rights, loan acquisition screenshots, and lost note affidavit do not constitute direct or circumstantial evidence of the transfer of the note from Chase Bank to JP Morgan.

Although we agree with PennyMac that the evidence proved that JP Morgan had possession of the note when the note was lost and prior to suit being filed, PennyMac failed to prove that prior to suit, Chase Bank had indorsed the note over to JP Morgan. Thus, we conclude that PennyMac failed to prove that JP Morgan had standing at the inception of the suit. Therefore, we reverse the final judgment in favor of PennyMac and direct the trial court to enter a judgment in favor of the Borrowers.

Reversed and remanded.

WARNER and FORST, JJ., concur.

Not final until disposition of timely filed motion for rehearing.

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After Being AWOL on Wells Fargo’s Decade-Long Illegal Conduct, Promoting the President of the San Francisco Fed to Lead the New York Fed Rewards Failure and Confirms the Fed is Broken

After Being AWOL on Wells Fargo’s Decade-Long Illegal Conduct, Promoting the President of the San Francisco Fed to Lead the New York Fed Rewards Failure and Confirms the Fed is Broken

Better Markets-

FOR IMMEDIATE RELEASE

Monday, March 26, 2018

Contact: Nick Jacobs, 202-618-6430 or njacobs@bettermarkets.com

 

 

Washington, D.C. – Dennis Kelleher, President and CEO of Better Markets, issued this statement following reports that the President of the San Francisco Fed has been selected to be the next President of the New York Fed:

“After being AWOL and failing to stop Wells Fargo’s decade-long illegal conduct, the President of the San Francisco Fed should not be promoted to be President of the most important regional office in the entire Federal Reserve System, the New York Fed.  That would reward failure and send the wrong message to the biggest banks in the country that the Fed really does not take bank supervision seriously or understand its mandate to protect bank customers from illegal and predatory conduct.  Given that the New York Fed already has a well-earned reputation for being more of cheerleader than a supervisor of the nation’s biggest banks, this promotion is doubly bad.

“Adding insult to injury, such a promotion also confirms again that the Federal Reserve System is dangerously insular, out-of-touch and unaccountable.  The Fed continues to be a black box, keeping the public in the dark about what it does and why.  It is shredding what credibility it has left and threatening its own independence.  This is just the latest example proving that the Fed must be made more transparent and accountable.

“The San Francisco Fed was and remains the primary regulator for Wells Fargo, the biggest and most important bank under its supervision.  It has hundreds of staff assigned to supervising Wells Fargo daily.  It is indisputable that the San Francisco Fed failed for years to identify or stop Wells’ illegal and predatory actions creating millions of fake accounts, terminating thousands of employees including whistleblowers, and victimizing untold numbers of customers systemically for more than a decade.  The San Francisco Fed either did not know this was happening under its nose or knew but did nothing to stop it.  Either way, it was a gross dereliction of duty that should be punished not rewarded.

“That alone should be a disqualification for any promotion, but it is compounded by the fact that there has been no accountability for anyone at the San Francisco Fed or public disclosure of how such an egregious failure of supervision and regulation could happen or last for so long.  To reward the President of the San Francisco Fed with a promotion to one of the most important positions in the entire Federal Reserve System confirms yet again that the Fed is dangerously out of touch and needs systemic reform to make it more accountable and transparent.  That must start with a full, detailed public disclosure of all the facts and circumstances surrounding the years-long failures at the San Francisco Fed of its supervision of Wells Fargo, including specifically the role of its President.  That searching examination must be followed by a full public airing of the secretive and flawed process at the New York Fed that resulted in the recommendation to reward such failure.”

 

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Better Markets is a non-profit, non-partisan, and independent organization founded in the wake of the 2008 financial crisis to promote the public interest in the financial markets, support the financial reform of Wall Street and make our financial system work for all Americans again. Better Markets works with allies – including many in finance – to promote pro-market, pro-business and pro-growth policies that help build a stronger, safer financial system that protects and promotes Americans’ jobs, savings, retirements and more. To learn more, visit www.bettermarkets.com.

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Saticoy Bay LLC Series 9641 Christine View v. FANNIE MAE | 9th Cir. – HOA Super-Priority Lien Law Preempted by Federal Statute

Saticoy Bay LLC Series 9641 Christine View v. FANNIE MAE | 9th Cir. – HOA Super-Priority Lien Law Preempted by Federal Statute

Lexology-

Given the significant role Fannie Mae and Freddie Mac have in the national housing market, it is unsurprising that both have become embroiled in the Nevada HOA super-priority lien litigation. Since July 2008 – well before the Nevada Supreme Court held that an HOA’s foreclosure on its super-priority lien could extinguish a first deed of trust – Fannie Mae and Freddie Mac have been in the conservatorship of the Federal Housing Finance Agency (FHFA). The Housing and Economic Recovery Act of 2008 (Federal Foreclosure Bar), which created FHFA, includes a provision commonly referred to as the Federal Foreclosure Bar, which provides that FHFA’s property shall not be subject to foreclosure without FHFA’s consent. Fannie Mae and Freddie Mac, as well as loan servicers acting on their behalf, have long argued that the Federal Foreclosure Bar preempts the Nevada HOA super-priority lien statute and prevents HOA foreclosure sales from extinguishing the interests of Fannie Mae and Freddie Mac. While the Ninth Circuit already held that the Federal Foreclosure Bar preempts Nevada’s HOA super-priority lien statute, the Nevada Supreme Court had not weighed in until now. On March 21, 2018, the Nevada Supreme Court released a unanimous, en banc opinion in Saticoy Bay LLC Series 9641 Christine View v. Federal National Mortgage Association, siding with the Ninth Circuit on federal preemption.

[LEXOLOGY]

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A.G. Schneiderman Announces Record $42 Million Settlement With Bank Of America Merrill Lynch Over Fraudulent “Masking” Scheme In Electronic Trading Division

A.G. Schneiderman Announces Record $42 Million Settlement With Bank Of America Merrill Lynch Over Fraudulent “Masking” Scheme In Electronic Trading Division

Bank of America Merrill Lynch Admits To Systematically Misleading Clients About How Stock Orders Were Handled; Admits to Violating New York’s Martin Act

$42 Million Penalty Is Largest Ever State Recovery In Connection With An Electronic Trading Investigation

NEW YORK – Attorney General Eric Schneiderman announced today that Bank of America Merrill Lynch (“BofAML”) will pay a record $42 million penalty to the State of New York to settle an investigation into fraudulent practices in connection with BofAML’s electronic trading services. As part of the settlement, BofAML admits that, pursuant to undisclosed agreements with so-called electronic liquidity providers (“ELPs”) such as Citadel Securities, Knight Capital, D.E. Shaw, Two Sigma Securities, and Madoff Securities, BofAML systematically concealed from its clients over a five-year period that it was secretly routing its clients’ orders for equity securities to such firms for execution. Attorney General Schneiderman’s investigation uncovered that BofAML made other misleading statements to its clients regarding several aspects of its electronic trading services—statements that made BofAML’s electronic trading services appear safer and more sophisticated than they really were. In addition to paying a penalty to New York State, BofAML admitted that it violated the Martin Act, New York’s securities law, and New York Executive Law § 63(12).

“Bank of America Merrill Lynch went to astonishing lengths to defraud its own institutional clients about who was seeing and filling their orders, who was trading in its dark pool, and the capabilities of its electronic trading services,” Attorney General Schneiderman said. “As Wall Street firms offer increasingly complex electronic trading services, they cannot use new technology to exploit their clients in service of their business relationships with large industry players, like Bank of America Merrill Lynch did here.”

The Attorney General’s investigation revealed, and BofAML admits, that BofAML engaged in a multi-year fraud in connection with the operation of its electronic trading division. Beginning in 2008, BofAML intentionally and methodically concealed from its clients that it was routing millions of their orders for equity securities to ELPs like Citadel, Two Sigma, Knight, and others. Instead, BofAML told its clients that those orders were executing in-house at BofAML. The company  accomplished its fraud by re-programming its electronic trading systems to automatically doctor the trade confirmation messaging sent back to its clients after executions by these firms, in a process that BofAML employees referred to internally as “masking.” “Masking” involved replacing the identity of the ELP to whom the order was routed with a code indicating that the trade occurred in-house at BofAML. BofAML applied its “masking” strategy to over 16 million client orders between 2008 and 2013, representing over 4 billion traded shares.

In order to avoid detection, BofAML also altered post-trade reports called “transaction cost analysis” reports, which are meant to help clients understand where and how their orders are executed. BofAML generated reports that reflected that BofAML was the venue where clients’ trades had executed, even though the trades had actually been executed by ELPs. BofAML also altered client invoices and other written documentation that would ordinarily reveal to clients where their trades had executed.

As set forth fully in the Settlement Agreement, the Attorney General’s investigation also uncovered that BofAML made other inaccurate representations to investors about BofAML’s electronic trading services, in an effort to make the firm’s electronic trading services look more sophisticated and safer than they really were:

  • BofAML inflated its claims about the amount of retail orders routed to and executed in its dark pool, called “Instinct X.” Over several years, BofAML claimed that 20% or even 30% of the orders in its dark pool came from retail traders. OAG’s investigation determined that, in reality, BofAML’s retail client orders typically accounted for no more than 5% of the orders in Instinct X. BofAML also significantly overstated the number of retail orders that were in fact executed in Instinct X once routed there.
  • BofAML touted a “Venue Analysis” that it purportedly used to find the best trading venue for its clients’ orders, and to avoid low-liquidity or otherwise “toxic” trading venues. Over several years, BofAML distributed marketing materials that purported to represent how BofAML’s trading algorithms made  “strategic” and “tactical” decisions about how and where to route client orders on an “order by order” basis. In fact, BofAML did not use that analysis to route client trades, and BofAML’s algorithms and order router did not access the analysis, or the data underlying it, to make trading decisions for clients. In addition, although the underlying data reflecting the performance of various venues changed over time, BofAML did not update the analysis it distributed to its clients.

A copy of the settlement agreement can be found here.

Today’s settlement is the latest in a series of actions arising from the Attorney General’s Investor Protection Bureau’s initiative related to electronic and high frequency trading. In connection with those efforts, the Attorney General filed an action against Barclays in 2014, after uncovering evidence that Barclays made knowing and systematic misrepresentations to investors about how, and for whose benefit, Barclays operated its dark pool, and that Barclays exposed its clients to the predatory traders from whom it promised to protect them. As a result of its fraud, Barclays grew its dark pool to be the second largest in the United States.  In January 2016, Barclays settled with the NYAG for $35 million, admitted that it violated securities laws, and agreed to install an independent monitor to ensure the proper operation of its electronic trading division.

Also in January 2016, the Attorney General resolved an investigation of Credit Suisse’s practices relating to the operation of its dark pool, then the largest in the United States. The Attorney General found that Credit Suisse had made numerous misrepresentations regarding the operation of its dark pool, leading Credit Suisse clients to believe that they had the ability to avoid trading with high-frequency trading firms whose order flow Credit Suisse itself considered “opportunistic” and detrimental to institutional investors. Credit Suisse settled with the NYAG for $30 million.

In December 2016, the Attorney General announced the resolution of its investigation of Deutsche Bank, which revealed that it too had engaged in fraud in connection with its electronic trading services, in particular in its order routing practices. Deutsche Bank settled with the NYAG for $18.5 million and admitted that it violated New York State securities laws.

Barclays, Credit Suisse, and Deutsche Bank also settled parallel investigations into these matters with the SEC.

As a result of Attorney General Schneiderman’s investigations regarding electronic trading at major Wall Street financial institutions, four firms have now agreed to pay $125.5 million in penalties to the State of New York for their wrongful conduct.

“I urge all members of the financial community to evaluate and if necessary reform your practices around electronic trading services, to ensure that you treat each and every client, big and small, ethically and loyally. For those financial institutions that refuse to do so, we will hold you accountable,” said Attorney General Schneiderman.

The Bank of America Merrill Lynch matter was handled by Assistant Attorney General John Castiglione, Volunteer Attorney Rita Burghardt McDonough, Investor Protection Enforcement Section Chief Cynthia Hanawalt, and Investor Protection Bureau Chief Katherine C. Milgram. The Investor Protection Bureau is part of the Economic Justice Division, which is led by Executive Deputy Attorney General Manisha M. Sheth.

© 2010-18 FORECLOSURE FRAUD | by DinSFLA. All rights reserved.



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BofA defrauded clients as it secretly routed trades to Bernie Madoff

BofA defrauded clients as it secretly routed trades to Bernie Madoff

NY POST-

Bank of America secretly routed trades in order to enrich clients like Bernie Madoff while misleading other customers through “masked” messages for five years through 2013, according to the $45 million settlement with New York Attorney General Eric Schneiderman on Friday.

BofA, which is led by CEO Brian Moynihan, sold stock at discounted prices to ultra-fast electronic trading companies, even though they told clients that they were being routed to public markets at fair prices by the bank’s in-house brokers, according to the settlement.

“Bank of America Merrill Lynch went to astonishing lengths to defraud its own institutional clients about who was seeing and filling their orders, who was trading in its dark pool, and the capabilities of its electronic trading services,” Schneiderman said in a statement.

[NY POST]

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TFH 3/25 | 10 Ways Courts Could Easily Reduce Otherwise Increasing Residential Foreclosure Case Backlogs by More Than 95% While Protecting Homeowners at the Same Time — Are Any Judge’s Listening? (Rebroadcast from 7/2/17)

TFH 3/25 | 10 Ways Courts Could Easily Reduce Otherwise Increasing Residential Foreclosure Case Backlogs by More Than 95% While Protecting Homeowners at the Same Time — Are Any Judge’s Listening? (Rebroadcast from 7/2/17)

COMING TO YOU LIVE DIRECTLY FROM THE DUBIN LAW OFFICES AT HARBOR COURT, DOWNTOWN HONOLULU, HAWAII

LISTEN TO KHVH-AM (830 ON THE AM RADIO DIAL)

ALSO AVAILABLE ON KHVH-AM ON THE iHEART APP ON THE INTERNET

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 ———————
10 Ways Courts Could Easily Reduce Otherwise Increasing Residential Foreclosure Case Backlogs by More Than 95% While Protecting Homeowners at the Same Time — Are Any Judge’s Listening? (Rebroadcast from 7/2/17)

 

 

 

 

SPECIAL NOTE:  DAYLIGHT SAVINGS TIME, ONCE AGAIN STARTING  AND THE FORECLOSURE HOUR WILL BE HEARD AT 6:00 PM PACIFIC TIME AND 9:00 PM EASTERN TIME ON THE IHEART INTERNET RADIO APP, ALSO REPEATED THE FOLLOWING HOUR ON IHEART RADIO.
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We have learned that several foreclosure judges nationwide are now listening to The Foreclosure Hour. As a result, we decided to rebroadcast our July 2, 2017 show in advance symbolically of Easter 2018.

Many of our listeners have concluded that foreclosure judges are either politically corrupt protecting their private pensions or just plain stupid.

The Foreclosure Hour believes otherwise, that most foreclosure judges are historically simply misinformed or perceive themselves bound by archaic case precedent, while equally or more so understandably concerned about enormous foreclosure case backlogs.

For, not only has mortgage and trust deed law become enormously complicated with the advent of securitized trusts, but the size of judicial residential foreclosure case backlogs has sharply gyrated up and down in recent decades in virtually all state and federal courts.

Starting approximately between 1990 and 2000, for instance, and escalating after the 2008 Mortgage Crisis, in many state and federal jurisdictions the number of judicial foreclose filings rapidly increased, annoyingly becoming the majority of all cases in many courts, with dramatically mushrooming case backlogs, which forced many courts irrationally to adopt in arguably wrongly perceived self-defense either openly or in effect the “rocket docket” processing of many residential foreclosure cases.

Federal courts, moreover, adopted in response what they openly called a “triage” approach, instructing Magistrates frankly to force foreclosure settlements, Magistrates frequently threatening homeowners that otherwise their assigned federal district judge would rule against them, which is what usually happened — anything to cut their foreclosure backlogs which in truth were restricting the time available for all other cases often deemed more important by federal judges.

And when Fannie Mae and Freddie Mac, in order to save money and speed up foreclosures, instructed foreclosure attorneys in many states by 2000 to elect nonjudicial foreclosures instead, many courts expressed a sigh of relief as if a tsunami had turned away, and matter-of-factly closed their collective eyes to abuses in the unsupervised nonjudicial foreclosure process.

Today in many state court jurisdictions there is emerging an increased awareness of the unacceptable abuses in nonjudicial foreclosure sales as well as within securitized trust judicial foreclosure litigation, with increased appellate restrictions being announced almost daily upon judicial and nonjudicial foreclosing plaintiffs alike, raising the specter once again of increasing foreclosure case backlogs, surely soon to threaten a possibly new self-defensive retreat by state courts away from protecting homeowner rights.

To hopefully counter this reverse trend which we are already seeing, with many lower courts outright ignoring homeowner friendly appellate court decisions in their own jurisdiction, The Foreclosure Hour presents again its 10 ways in which courts could easily cut their foreclosure case backlogs by more than 95% while increasing, not decreasing, protections for homeowners.

Yes, it is possible. Listen and learn how. Tune in to this Sunday’s rebroadcast, or listen in when the show’s audio is immediately posted on the “past broadcasts” section of our Website, www.foreclosurehour.com.

And while on our Website, join H-PAC (The Homeowners SuperPAC) to support this and other needed reforms.

Judges especially listening this Sunday and Legislators also will be pleasantly surprised, for problems are often not our problem, but the way we relate to problems is often our real problem.

Gary Dubin

Please go to our website, www.foreclosurehour.com, and join your fellow homeowners in the Homeowners SuperPac today.

A Membership Application is posted there waiting for your support.

 

 

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Host: Gary Dubin Co-Host: John Waihee

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CALL IN AT (808) 521-8383 OR TOLL FREE (888) 565-8383

Have your questions answered on the air.

Submit questions to info@foreclosurehour.com

The Foreclosure Hour is a public service of the Dubin Law Offices

Past Broadcasts

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3:00 PM HAWAII 
6:00 PM PACIFIC
9:00 PM EASTERN
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The Foreclosure Hour 12

 

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Liu v. US Bank National Association, DC: Court of Appeals 2018 | when Sonata enforced its super-priority lien to collect six months of unpaid assessments at the foreclosure sale, the Bank’s first deed of trust for the condominium was effectively extinguished and Ms. Liu purchased the condominium free and clear of the Bank’s deed of trust.

Liu v. US Bank National Association, DC: Court of Appeals 2018 | when Sonata enforced its super-priority lien to collect six months of unpaid assessments at the foreclosure sale, the Bank’s first deed of trust for the condominium was effectively extinguished and Ms. Liu purchased the condominium free and clear of the Bank’s deed of trust.

 

ANDREA LIU, Appellant,
v.
U.S. BANK NATIONAL ASSOCIATION, Appellee.

No. 16-CV-262.
District of Columbia Court of Appeals.
Argued January 31, 2017.
Decided March 1, 2018.
Appeal from the Superior Court of the District of Columbia, CAR-6539-14, Hon. Ronna L. Beck, Motions Judge.

Robert C. Gill for appellant.

S. Mohsin Reza for appellee.

Before BLACKBURNE-RIGSBY, Chief Judge,[*] and GLICKMAN and THOMPSON, Associate Judges.

This opinion is subject to formal revision before publication in the Atlantic and Maryland Reporters. Users are requested to notify the Clerk of the Court of any formal errors so that corrections may be made before the bound volumes go to press.

BLACKBURNE-RIGSBY, Chief Judge.

In the District of Columbia, condominium associations are granted a “super-priority lien” over first mortgage lienholders, which permits an association to collect up to six months of unpaid assessments upon foreclosure on a condominium unit.[1] In Chase Plaza Condominium Ass’n v. JPMorgan Chase Bank, N.A., 98 A.3d 166, 172 (D.C. 2014), this court was asked to determine whether a condominium association’s foreclosure on its super-priority lien could extinguish an otherwise first-priority deed of trust or mortgage when the proceeds of the foreclosure sale were insufficient to satisfy the deed of trust or mortgage. We held in the affirmative— that “a condominium association is permitted to foreclose on [its] six-month [super-priority] lien and [to] distribute the proceeds from the foreclosure sale first to satisfy [its super-priority] lien and then to satisfy any remaining liens in order of lien priority.” Id. We clarified that in such circumstances “[a]ny liens [including a first mortgage or first deed of trust] that are unsatisfied by the foreclosure-sale proceeds are extinguished, and the foreclosure-sale purchaser acquires free and clear title.” Id.

The present case requires this court to determine a similar issue. We must decide whether, prior to the 2017 amendment to D.C. Code § 42-1903.13,[2] a condominium association could choose to sell the condominium unit “subject to the first mortgage or first deed of trust” on the property, while at the same time enforcing its super-priority lien. We conclude that a condominium association could not foreclose on its super-priority lien while leaving the property subject to the unsatisfied balance of the first mortgage or first deed of trust—to find otherwise would contravene our holding in Chase Plaza. Accordingly, we reverse the trial court’s order granting summary judgment to U.S. Bank, which concluded that a condominium could foreclose on its super-priority lien while leaving the underlying mortgage lien intact, and remand for further proceedings consistent with this opinion.

I. Factual Background

On March 9, 2007, Jon Michael Lucas obtained a mortgage loan in the amount of $589,750 to finance his purchase of condominium unit 1003, located at 301 Massachusetts Avenue, N.W., in the Sonata Condominium complex. Mr. Lucas also executed a deed of trust and promissory note, which secured the loan on the condominium. Mr. Lucas’s mortgage loan was originally from Vanguard Mortgage and Title, Inc. (“VMT”) and the deed of trust and note were executed in VMT’s favor. The deed of trust was recorded in the land records of the District of Columbia. Mr. Lucas’s mortgage loan was later assigned to U.S. Bank (“Bank”), which also took possession of the note.

In 2009, Mr. Lucas stopped paying both his monthly mortgage payments and his condominium assessments, the latter of which prompted the Sonata Condominium Unit Owners Association (“Sonata”) to seek foreclosure on the condominium, pursuant to D.C. Code § 42-1903.13 (a)(2), which entitles condominium associations to a super-priority lien for the most recent six months of unpaid condominium assessments. Between 2011 and 2014, Sonata scheduled several foreclosure sales for the condominium, but the sales were all cancelled after the Bank paid Mr. Lucas’s unpaid assessments. The Bank paid the assessments on Mr. Lucas’s behalf in order to preserve its lien on the condominium. These payments were secured under Mr. Lucas’s loan by the deed of trust.[3]

On May 1, 2014, Mr. Lucas was in default for unpaid condominium assessments, prompting Sonata to file a “Notice of Foreclosure Sale of the Condominium Unit for Assessments Due” with the District’s Recorder of Deeds. The notice stated that Mr. Lucas was in arrears to Sonata for $11,503.67.[4] Sonata sent the notice of the foreclosure sale to Mr. Lucas and all other interested parties, including the Bank; the notice stated that the foreclosure sale would not be held until thirty-one days past the date on which the notice was mailed, and that if the past due amounts were not paid in full by that time, the condominium would be sold at a public auction on June 4, 2014. On May 23, Sonata also sent the Bank a letter stating the amount that needed to be paid in order to stop the scheduled foreclosure sale.

Sonata publicly advertised the sale of the condominium in the Washington Post on May 23, May 28, and June 3, 2014. The advertisement stated that the condominium would be sold pursuant to D.C. Code § 42-1903.13, and that it would be “[s]old subject to a deed of trust for approximately $589,750.00 (as of 03/09/2007)[,]” referencing the Bank’s deed of trust for Mr. Lucas’s mortgage loan.

On June 4, Sonata held a public auction for the foreclosure sale and the condominium was sold to appellant Liu, the highest bidder at the auction, for $17,000. An accounting of the foreclosure sale, included in the record, demonstrates that, of the $17,000 purchase price for the condominium, Sonata deducted almost six months of unpaid condominium assessments, totaling $5,195.28, as well as interest on the assessments, attorney’s fees, and other expenses from the foreclosure sale.[5]

The Bank attempted to pay the assessments owed to Sonata in order to stop the foreclosure sale. Sonata, however, did not receive the check from the Bank until June 5, 2014, the day after the foreclosure sale. Accordingly, the Bank’s check was returned with a letter indicating that the condominium had already been sold to a third-party purchaser. Ms. Liu recorded the deed of trust, dated July 1, 2014, which included a provision inserted by Sonata, stating: “The hereinafter described property is sold subject to a deed of trust recorded in the Office of the Recorder of Deeds at Instrument Number XXXXXXXXXX.”

On October 16, 2014, the Bank filed a claim for judicial foreclosure against Mr. Lucas, as the mortgagor in default under the note, and later joined Ms. Liu, the new record owner of the condominium, as a defendant in the action. In its claim, the Bank asserted its rights as the beneficiary of the deed of trust, and also notified the court that Mr. Lucas’s loan had been accelerated, and that he owed $799,034.23 under the note.[6] In her defense, Ms. Liu maintained that she purchased the condominium at the foreclosure sale, free and clear of the Bank’s mortgage lien, pursuant to both D.C. Code § 42-1903.13 (a)(2) and this court’s decision in Chase Plaza.[7] Both Ms. Liu and the Bank moved for summary judgment before the trial court.

On February 3, 2016, the trial court granted the Bank’s motion for summary judgment and denied Ms. Liu’s motion for summary judgment. The trial court acknowledged that, at the time of Sonata’s foreclosure sale, the law was unclear regarding the effect of a condominium association’s foreclosure sale, pursuant to its super-priority lien, on a bank’s first-priority mortgage lien.

Despite this lack of clarity in the law at the time of Ms. Liu’s purchase, the trial court emphasized that the advertisements, the memorandum of sale to Ms. Liu, and the deed of trust all specified that the property was sold to Ms. Liu subject to the Bank’s mortgage lien. Thus, it was “abundantly clear” that Ms. Liu was purchasing the property subject to the Bank’s lien. Furthermore, the court noted that Ms. Liu had testified at a deposition that the property was worth between $700,000 and $750,000, and that the District of Columbia Office of Tax and Revenue assessed the condominium at a value of $719,930. The court stated that the $17,000 purchase price “obviously reflected the understanding that the Property was subject to [the Bank’s] lien.” Accordingly, the trial court concluded that “[i]t would be an inequitable windfall and contrary to the parties’ expectations to permit Ms. Liu to disavow [the Bank’s] mortgage . . . and would impose an enormous foreclosure deficiency on [] [Mr.] Lucas if Ms. Liu’s purchase is not subject to [the Bank’s] lien, as was contemplated at the foreclosure sale.” This appeal followed.

II. Discussion

We review a trial court’s order granting summary judgment de novo. Chase Plaza, supra, 98 A.3d at 172. In determining whether summary judgment was appropriate, we view the evidence in the light most favorable to the non-prevailing party and we draw all reasonable inferences in that party’s favor. See Woodland v. Dist. Council 20, 777 A.2d 795, 798 (D.C. 2001). “Summary judgment is only appropriate where there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law.” Chase Plaza, supra, 98 A.3d at 172(citation and internal quotation marks omitted).

A. Chase Plaza

In Chase Plaza, this court was asked to, for the first time, address the proper interpretation of a condominium association’s super-priority lien for unpaid assessments under D.C. Code § 42-1903.13 (a)(2), and the impact of an association’s foreclosure, pursuant to a super-priority lien, on a bank’s first deed of trust or first mortgage. We explained that, under the District of Columbia Condominium Act, condominium association liens for unpaid assessments are “split[] . . . into two liens of differing priority[.]” Chase Plaza, supra, 98 A.3d at 173. First, the condominium association is granted a lien for the most recent six months of unpaid condominium assessments, which is “higher in priority than the first mortgage or first deed of trust[,]” and commonly referred to as a “super-priority lien.” Id.see also D.C. Code § 42-1903.13 (a)(2) (stating that a condominium association’s lien “shall [] be prior to a mortgage or deed of trust . . . to the extent of the common expense assessments . . . which would have become due in the absence of acceleration during the [six] months immediately preceding institution of an action to enforce the lien . . .”). Second, the Act grants the condominium association a lien for any remaining unpaid assessments beyond the most recent six-month period. See D.C. Code § 42-1903.13 (a). However, this second lien is “lower in priority than the first mortgage or first deed of trust.” Chase Plaza, supra,98 A.3d at 173.

Thus, under the circumstances presented here, where a condominium unit owner defaults on both his mortgage payments and his condominium assessments, the condominium association’s super-priority lien for the most recent six months of assessments, is higher in priority than the first mortgage or first deed of trust on the condominium unit. See D.C. Code § 42-1903.13 (a)(2); Chase Plaza, supra, 98 A.3d at 173. Importantly, the Act also expressly prohibits “variation by agreement,” which prevents parties from contracting around the statute: “Except as expressly provided by this chapter, a provision of this chapter may not be varied by agreement and any right conferred by this chapter may not be waived.” D.C. Code § 42-1901.07.

Chase Plaza involved facts similar to those presented in this case and therefore, is central to our consideration. In Chase Plaza, Chase Plaza Condominium Association, Inc. instituted foreclosure proceedings against a condominium unit owner to collect six months of unpaid assessments, pursuant to its super-priority lien under D.C. Code § 42-1903.13 (a)(2). Chase Plaza, supra, 98 A.3d at 168. Chase Plaza’s notice of the foreclosure sale “specified that the foreclosure sale would not be subject to the first deed of trust” and thus, the bank’s first deed of trust, as a lien lower in priority than the condominium association’s super-priority lien, would not be protected by the foreclosure sale. Id. After the condominium was sold to the highest bidder at the sale, JPMorgan Bank, as holder of the note for the first deed of trust, filed a complaint against Chase Plaza and the new record owner, requesting that the trial court set aside the foreclosure sale and declare that JPMorgan Bank held title to the unit. Id. at 169. The trial court granted summary judgment to JPMorgan Bank on the basis that “Chase Plaza could not lawfully extinguish [JPMorgan Bank’s] first deed of trust[.]” Id. Accordingly, the trial court voided Chase Plaza’s foreclosure sale “because the unit had not been sold subject to the first deed of trust.” Id.

We reversed the trial court’s decision, recognizing the general and well settled principle of foreclosure law that “liens with lower priority are extinguished if a valid foreclosure sale yields proceeds insufficient to satisfy a higher-priority lien[.]” Id. at 173. We observed further that the plain language of the super-priority lien provision, under D.C. Code § 42-1903.13 (a)(2), did not suggest that the Council of the District of Columbia intended to deviate from this general principle. Id. at 174. Upon a review of the legislative history of the super-priority lien provision, we noted that the Council intended for the super-priority lien to give condominium associations “maximum flexibility in collecting unpaid condominium assessments.” Id. (citing D.C. Council, Report on Bill 8-65, at 3 (Nov. 13, 1990)). We also noted that our super-priority lien provision had been modeled after similar provisions from the Uniform Common Interest Ownership Act (“UCIOA”) and the Uniform Condominium Act (“UCA”), and that the drafters’ official comments under those Acts indicated that they understood that a condominium association’s foreclosure on its super-priority lien would extinguish a first mortgage or first deed of trust. Id.However, the drafters “expected that mortgage lenders would take the necessary steps to prevent that result, either by requiring payment of assessments into an escrow account or by paying assessments themselves to prevent foreclosure.” Chase Plaza, supra, 98 A.3d at 174-75see also UCIOA § 3-116, cmt. 2; UCA § 3-116, cmt. 2. For these reasons, we concluded that the condominium association’s foreclosure pursuant to its super-priority lien effectively extinguished JPMorgan Bank’s first deed of trust. Chase Plaza, supra, 98 A.3d at 175, 178.

B. Analysis of Super-Priority Lien Provision

On appeal, neither party disputes this court’s holding in Chase Plaza. Ms. Liu argues that the decision supports a conclusion that she purchased the condominium at Sonata’s foreclosure sale, free and clear of the Bank’s mortgage lien. She contends that the anti-waiver provision of the Condominium Act precludes a condominium association from enforcing its super-priority lien at a foreclosure sale, subject to a first mortgage or deed of trust.[8]

Conversely, the Bank argues that the trial court properly granted its motion for summary judgment on equitable grounds because “the sale’s advertisement, the auctioneer’s statements [] at the sale, the Memorandum of Purchase signed by Ms. Liu, and the Trustee’s Deed [] recorded by Ms. Liu” all demonstrate that the condominium was sold to Ms. Liu, subject to the deed of trust. The Bank argues that Chase Plaza is not applicable to this case because Sonata did not enforce its super-priority lien at its foreclosure sale, but instead elected to sell the condominium subject to its deed of trust. The Bank also challenges Ms. Liu’s purchase at Sonata’s foreclosure sale on other grounds, which we address later in this opinion.

To begin, we agree with Ms. Liu that the anti-waiver provision of the Condominium Act, D.C. Code § 42-1901.07, precludes a condominium association from exercising its super-priority lien while also preserving the full amount of the Bank’s unpaid lien. D.C. Code § 42-1901.07 states “[e]xcept as expressly provided by this chapter, a provision of this chapter may not be varied by agreement and any right conferred by this chapter may not be waived.” (emphasis added). As we stated in Chase Plaza, none of the provisions of the chapter expressly indicate that a super-priority lien may be contracted away by the parties or waived by the condominium association.

Furthermore, permitting a condominium association to exercise its super-priority lien while also preserving the full amount of the Bank’s unpaid lien, defeats the Council’s purpose in enacting the super-priority lien. The super-priority lien provision effectively shields condominium associations from pressure by lenders to require foreclosure-sale purchasers to agree that the property is subject to the first mortgage, a term that could reduce the number of interested bidders and impair the condominium association’s ability to recover unpaid assessments.

Here, the record demonstrates that Sonata enforced its lien for Mr. Lucas’s most recent six months of unpaid assessments, when it sold the condominium to Ms. Liu at the foreclosure sale. The foreclosure notice to Mr. Lucas and Sonata’s letter to the Bank indicated that Sonata was seeking to collect $11,503.67 in unpaid assessments and related costs, and that if the amount was not paid, Sonata would institute foreclosure proceedings on the unit.

The Bank argues, however, that because the terms of the sale indicated that the unit would be sold subject to its first deed of trust, Sonata did not actually enforce its super-priority lien. The Bank also maintains that a condominium association may agree to subordinate its super-priority lien to a first deed of trust during a foreclosure sale. We disagree. Such a reordering of lien priorities would effectively constitute a waiver by the condominium association of its super-priority lien, which is not permitted under D.C. Code § 42-1901.07. That section expressly states that any right conferred under the Condominium Act may not be waived. “[W]hen the language of a statute is plain and unambiguous, we are bound by the plain meaning of that language.” See Hudson Trail Outfitters v. District of Columbia Dep’t of Emp’t Servs., 801 A.2d 987, 990 (D.C. 2002) (citation and internal quotation marks omitted). Thus, any attempt by a condominium association or a holder of a first mortgage or deed of trust to have a condominium association’s super-priority lien waived or varied by contract is invalid, as a matter of law.

To be clear, we are not stating that a foreclosing condominium association is required to foreclose pursuant to its super-priority lien.[9] However, here, where Sonata collected on only the most recent six months of unpaid assessments, we are satisfied that Sonata enforced its super-priority lien at the sale.[10] Under these circumstances, if the proceeds of the sale are insufficient to cover the first deed of trust, then the first deed of trust must be considered effectively extinguished. SeeChase Plaza, supra, 98 A.3d at 176 (stating “the general rule that foreclosure on a lien with greater priority extinguishes liens with lower priority”). The plain language of D.C. Code § 42-1903.13 (a)(2), the super-priority lien provision, does not indicate an intent to deviate from this general principle. Id. at 175.

C. Equitable Estoppel

The Bank contends that the trial court properly concluded that Ms. Liu was equitably estopped from claiming that its mortgage interest was extinguished at the sale. We have recognized that “[a] party raising equitable estoppel must show that he changed his position prejudicially in reasonable reliance on a false representation or concealment of material fact which the party to be estopped made with knowledge of the true facts and intent to induce the other to act.” Nolan v. Nolan, 568 A.2d 479, 484 (D.C. 1990) (citation and internal quotation marks omitted). In response, Ms. Liu asserts that the provisions in the advertisement, on her memorandum of sale, and in the deed of trust, which indicated that the property was sold subject to the deed of trust, were only included because of the trial court’s erroneous ruling in Chase Plaza, which was later reversed by this court.

Here, the record does not support the trial court’s application of the equitable estoppel doctrine to preclude Ms. Liu from maintaining that her purchase of the condominium was not subject to the Bank’s deed of trust. To begin, the Bank has not demonstrated that it reasonably relied on the advertised terms of sale to protect its mortgage interest. To the contrary, the Bank attempted to pay the six months of condominium assessments in order to stop the foreclosure sale, but failed to make the payment on time. Moreover, although the Bank contends that it “reasonably relied upon Ms. Liu’s actions in accepting the terms of the sale by not moving to vacate the sale after it occurred[,]” this argument lacks merit—the Bank was aware through its loan servicer that the state of the law on super-priority liens was in flux at the time, and that the Bank’s interest could be subordinate to Sonata’s interest in the event of a foreclosure sale.

Furthermore, the legislative history of the super-priority lien provisions and public policy concerns related to ensuring a condominium association’s collection of unpaid assessments, also support a conclusion that equitable estoppel is not appropriate in this case. See Sears v. Sears, 293 F.2d 884, 887 (D.C. Cir. 1961) (“[A] court of equity, in determining whether to interpose the bar of equitable estoppel, must consider all the factors of the particular case at bar, the parties involved, the effect of the ultimate decision on third parties who are not before the court, the nature of the rights sought to be vindicated and, as well, public policy as expressed by pertinent statutes and prior judicial declarations.”). For example, in 2013, the Joint Editorial Board for Uniform Real Property Acts (“JEB”)—a board established by the Uniform Law Commission (“ULC”)—created a report, to in part, address the appropriate interpretation of the six-month limited priority lien provision.[11] See JEB Report, supra note 11, at 6. In its report, the JEB discussed how the depressed real estate market has led to incentives for banks to intentionally delay foreclosure proceedings, at the expense of condominium associations, which are forced to forgo timely payments of assessments, and at the expense of condominium association residents who “bear the consequences of default by a [condominium unit owner] [on] assessment obligations.” Id. at 4. In this case, Mr. Lucas was in default on both his mortgage payments and his condominium assessments for a lengthy period, from 2009 to 2014, yet the Bank waited five years to institute foreclosure proceedings on the unit. In addition, the condominium association had to file several notices of foreclosure in an effort to obtain payments to cover Mr. Lucas’s defaults on the assessments. It is this prejudice to condominium associations from extended delays by a bank to institute foreclosure on a condominium unit, which the super-priority lien was intended to prevent.

Finally, and most importantly, we note that equitable relief is not available when granting such relief would contravene the express provision of a statute. The judicial system is charged with enforcing public policy as embodied by legislative statute. “It is a basic maxim that equity is ancillary, not antagonistic, to the law. Equitable relief is not available when the grant thereof would violate the express provision of a statute.” Dep’t of Transp. v. Am. Ins. Co., 491 S.E.2d 328, 331 (Ga. 1997) (citation and internal quotation marks omitted); see also T.F. v. B.L., 813 N.E.2d 1244, 1253-54 (Mass. 2004) (citation and internal quotation marks omitted) (stating that “[e]quity is not an all-purpose judicial tool by which the right thing to do can be fashioned into a legal obligation possessing the legitimacy of legislative enactment”). Although it may seem like Ms. Liu was able to procure the property for a relatively low amount of money through the foreclosure process, any concerns about this process are properly addressed through the legislative process. Moreover, the Bank still retains a claim against Mr. Lucas, the borrower under the Bank’s mortgage loan, from whom the Bank can seek to recover the remaining balance owed on Mr. Lucas’s mortgage.

D. The Bank’s Additional Claims

The Bank makes a few additional challenges to Sonata’s foreclosure sale, which warrant brief discussion. First, the Bank argues that Sonata was permitted to conduct the foreclosure sale subject to the Bank’s first deed of trust, because a secured party bank and a condominium association may agree to subordinate a condominium association’s super-priority lien to a bank’s mortgage lien under the JEB Report. However, this is a mischaracterization of the JEB Report. Example One of the JEB Report addresses an instance in which a unit owner is in default on both its mortgage with the bank and its common expense assessments, and the bank institutes foreclosure proceedings on the unit. JEB Report, supra note 11, at 7-8. Example One clarifies that a bank’s foreclosure on the unit will not extinguish the association’s super-priority lien because that lien is senior to the bank’s lien. Id. at 7. Instead, the association’s super-priority lien will transfer to the proceeds of the sale, and the buyer at the foreclosure sale will take title to the unit, subject to the association’s six-month super-priority lien. Id. at 7-8. In this example, the JEB Report mentions that as an alternative, the bank and the association may agree that the foreclosure sale will deliver clear title to the buyer, with the proceeds of the sale being distributed first to the association to cover its six months’ worth of unpaid assessments prior to being applied to the bank’s unpaid mortgage balance. Id. at 8. This alternative, however, does not suggest that the association may subordinate its senior lien status; to the contrary, it reinforces the principle that an association’s six-month priority lien has “true priority” over the bank’s subordinate lien. See id.

Next, the Bank argues that Sonata could only impose its six-month super-priority lien through a judicial foreclosure, and maintains that because the association conducted a non-judicial foreclosure in this case, the sale could not operate to extinguish the Bank’s mortgage lien. We disagree. The Bank cites to the version of D.C. Code § 42-1903.13 (a)(2) in effect on the date of the foreclosure sale, which states that:

[t]he lien shall also be prior to a mortgage or deed of trust . . . to the extent of the common expense assessments based on the periodic budget adopted by the unit owners’ association which would have become due in the absence of acceleration during the 6 months immediately preceding institution of an action to enforce the lien.

However, the statute also contemplates non-judicial enforcement of liens, as occurred in Chase Plaza—D.C. Code § 42-1903.13 (c)(1) expressly states that “[t]he unit owners’ association shall have the power of sale to enforce a lien for assessments against a condominium unit . . . unless the power of sale procedures are specifically and expressly prohibited by the condominium instruments.” (emphasis added). Here, the condominium by-laws explicitly authorize a non-judicial foreclosure, stating that “[t]he lien for assessments may be foreclosed in the manner provided by the laws of the District of Columbia either, at the option of the Board of Directors, by a sale in a non-judicial proceeding or by suit brought in the name of the Board of Directors, acting on behalf of the Association.” Moreover, effective June 21, 2014, D.C. Code § 42-1903.13 (a)(2) was amended to include language referring to “institution of an action to enforce the lien or recordation of a memorandum of lien against the title to the unit by the unit owners’ association.” “While the action of a later Council usually does not provide definitive evidence of the intent underlying the action of a former Council,” see Coleman v. Cumis Ins. Soc’y, 558 A.2d 1169, 1172-1173 (D.C. 1989), the fact that the 2014 “clarif[ication]” is consistent with the official comments of the UCIOA and the UCA, discussed below, “lends some support for our view that . . . the [earlier] Council intended to” provide for foreclosure of a super-priority lien through a condominium association’s power of sale. Id.

The official comments of the UCIOA and the UCA for the super-priority lien provisions state that an association’s super-priority lien may be foreclosed in the same manner in which a mortgage on real estate is foreclosed. See UCIOA § 3-116 (k)(1); UCA § 3-116 (a); see also JEB Report, supra note 11, at 9 n.8 (“[A]n association may foreclose its lien by non-judicial proceedings if the state permits non-judicial foreclosure.”). In this jurisdiction, a mortgage lender may foreclose on a unit through judicial foreclosure or non-judicial foreclosure, and accordingly, Sonata had the option of pursuing either type of foreclosure in this case. See D.C. Code §§ 42-815, -816 (2012 Repl.). Thus, Sonata was not precluded from pursuing non-judicial enforcement of its super-priority lien.

Lastly, the Bank argues that Sonata’s foreclosure sale could not have been conducted pursuant to its super-priority lien because Sonata had already previously attempted to foreclose on the unit. The Bank, relying on Example Three in the JEB Report, is correct that the super-priority lien provision “does not . . . authorize an association to file successive lien enforcement actions every six months as a means to extend the association’s limited lien priority.” JEB Report, supra note 11, at 12. Example Three in the JEB Report, however, is based on a case in which a foreclosure action is already pending at the time the association attempts to file an additional foreclosure action; as a foreclosure action had already been initiated, the additional action was not necessary to enforce the association’s lien and represented an attempt to extend the association’s lien priority beyond the six months entitled to super-priority status. Although this precludes an association from obtaining super-priority status on an amount in excess of six months while a foreclosure action is pending, it does not preclude an association from enforcing another super-priority lien if there is no action pending.

In JPMorgan Chase Bank, N.A. v. SFR Investments Pool 1, LLC, the United States District Court for the District of Nevada stated that it could not find “any authority stating that an [association] is precluded from bringing multiple enforcement actions to enforce entirely separate liens (with super[-]priority portions) for unpaid assessments against the same parcel of property.” 200 F. Supp. 3d 1141, 1167 (D. Nev. 2016). The court recognized that the JEB Report barred multiple attempts to “enforce the super[-]priority portion of its lien multiple times during the pendency of the same bank foreclosure action” but that no such bar existed for a subsequent enforcement action to enforce a separate lien when no other foreclosure action was pending. Id. at 1168. Similarly, in this case, although Sonata had previously collected on a separate super-priority lien, they were not barred from filing a successive foreclosure action when no such action was pending.

III. Conclusion

In sum, we conclude that a condominium association, acting on its six-month super-priority lien for unpaid condominium assessments, pursuant to D.C. Code § 42-1903.13 (a)(2), may not conduct its foreclosure sale subject to the first deed of trust. Although Sonata’s foreclosure sale in this case was purportedly subject to the Bank’s deed of trust, the anti-waiver provision of D.C. Code § 42-1901.07, precludes a condominium association from waiving the priority of its super-priority lien or exercising its super-priority lien while also preserving the full amount of the Bank’s unpaid lien. Thus, when Sonata enforced its super-priority lien to collect six months of unpaid assessments at the foreclosure sale, the Bank’s first deed of trust for the condominium was effectively extinguished and Ms. Liu purchased the condominium free and clear of the Bank’s deed of trust. Accordingly, we reverse the trial court’s order granting summary judgment to the Bank and remand for further proceedings.

So ordered.

[*] Chief Judge Blackburne-Rigsby was an Associate Judge at the time this case was argued. Her status changed to Chief Judge on March 18, 2017.

[1] D.C. Code § 42-1903.13 (a)(2) (2012 Repl.).

[2] Effective April 7, 2017, D.C. Code § 42-1903.13 was amended to add a provision requiring that the foreclosure sale notice expressly state whether the foreclosure sale is for the six-month priority lien and not subject to the first deed of trust, or for more than the six-month priority lien and subject to the first deed of trust. D.C. Code § 42-1903.13 (c)(4)(B)(ii).

[3] The “Condominium Rider,” which was signed by Mr. Lucas on March 9, 2007, and which supplemented the deed of trust, states that Mr. Lucas and his Lender agreed that “[i]f [Mr. Lucas] does not pay condominium dues and assessments when due, then [the] Lender may pay them. Any amounts disbursed by [the] Lender . . . shall become additional debt of [Mr. Lucas] secured by the [deed of trust].”

[4] The amount Mr. Lucas owed was accelerated through 2014. According to the attorney conducting the foreclosure sale, Elizabeth Menist, if a unit is sold to a third-party, an adjustment is made so that the foreclosed unit owner is not charged for future assessments given that he or she no longer owns the unit. The third-party purchaser is then responsible for the monthly assessments as they become due.

[5] Ultimately, there was a surplus of $7,512.92 after Sonata collected the assessments ($5,192.28), interest ($216.45), attorney’s fees and reimbursable costs ($2,788.93), advertising costs ($885.08), the auctioneer’s commission ($425), and the lienholder’s portion of interest on unpaid balance from buyer ($30.04).

[6] In May 2014, the Bank sent Mr. Lucas a demand letter, and attached a “Payoff Quote” at the back of the letter. According to the Bank’s quote, Mr. Lucas owes $589,749.85 for the principal balance on the note, $10,487.96 for an escrow advance, $62,873.59 for a corporate advance, $135,855.25 in interest, and $67.58 in late charges. These charges equate to $799,034.23, the total amount the Bank is currently seeking under the note.

[7] On August 28, 2014, a few months after Ms. Liu’s purchase of the condominium at the foreclosure sale, we issued our decision in Chase Plaza. Relying on the plain language and legislative history of the super-priority lien provision, as well as general principles of foreclosure law, we held that “a condominium association can extinguish a first deed of trust by foreclosing on its six-month super-priority lien under D.C. Code § 42-1903.13 (a)(2).” Chase Plaza, supra, 98 A.3d at 178.

[8] Ms. Liu further asserts that the provisions in the advertisement, on her memorandum of sale, and in the deed of trust, which indicated that the property was sold subject to the deed of trust, were only included because of the trial court’s erroneous ruling in Chase Plaza, which was later reversed by this court. Notably, Ms. Liu mentions the attorney who conducted the foreclosure sale of the property at issue in this case was the same attorney who conducted the foreclosure sale in Chase Plaza.

[9] We do not address the question of whether a lien covering a period in excess of six months prior to the 2017 amendment to D.C. Code § 42-1903.13 is properly conceptualized as a split-lien, which includes a six-month portion entitled to super-priority status, or as one lien, all of which is considered to be lower in priority to the first mortgage or deed of trust.

We also refrain from addressing the issue of whether the foreclosure sale should be set aside, given that the sole count in the complaint was one for judicial foreclosure, and in light of the Bank’s statement that it “does not seek to set aside the June 4, 2014 sale in this action.”

[10] The attorney conducting the foreclosure sale, Elizabeth Menist, also conducted the foreclosure sale in Chase Plaza. In this case, Ms. Menist testified that her intention was for Sonata to foreclose on a lien for January through December, 2014. However, given that the sale occurred on June 4, 2014, Sonata foreclosed on a lien covering slightly less than the six months entitled to super-priority status. As discussed in note 4, supra, an adjustment is made so that the foreclosed unit owner is not charged for future assessments.

[11] The JEB monitors all uniform real property acts and “provides guidance to the [ULC] and others regarding potential subjects for uniform laws relating to real estate[.]” Report of the Joint Editorial Bd. for Unif. Real Prop. Acts, The Six-Month “Limited Priority Lien” for Association Fees Under the Uniform Common Interest Ownership Act (June 1, 2013) (“JEB Report”). The Board is made up of representatives from the ULC, the American Bar Association’s Real Property, Trust and Law Section, and the American College of Real Estate Lawyers, and liaisons from the American College of Mortgage Attorneys, the American Land Title Association, and the Community Associations Institute.

 

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Is a Foreclosure Crisis Looming in Our Nation’s Capital?

Is a Foreclosure Crisis Looming in Our Nation’s Capital?

Lexology-

The District of Columbia Court of Appeals recently sent a new set of shockwaves through the mortgage industry in the nation’s capital when it released its decision in Andrea Liu v. U.S. Bank National Association. Having held over three years ago that condominium associations have “super-priority” liens for unpaid assessments and can wipe out first mortgages by foreclosing on those liens, the Liu decision went an unexpected step farther: An association’s foreclosure would wipe out the first mortgage even if the association expressly stated that it intended for the foreclosure to be held subject to that mortgage.Secured lenders who thought they might have dodged the bullet now find themselves fighting for the validity of their security interests.

In 2014, the D.C. Court of Appeals issued its decision in Chase Plaza Condominium Ass’n v. JPMorgan Chase Bank, N.A., which addressed the effect of a condominium association’s foreclosure sale in the District of Columbia. The Chase Plaza court explained that D.C. Code § 42-1903.13 entitled a condominium association to foreclose and then apply the sale proceeds first to the six months of assessments considered a “super-priority” lien under D.C. law. Moreover, the court reasoned that because the super-priority lien had seniority over a lender’s first mortgage on the same property, the association’s foreclosure would wipe out that mortgage. If the sales proceeds were insufficient to pay the outstanding balance of the mortgage, then the secured lender would be left with a potentially hefty unsecured debt.

[LEXOLOGY]

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Mortgage company threatens foreclosure for ‘missed’ payments

Mortgage company threatens foreclosure for ‘missed’ payments

AZ Family-

“It’s actually been amazing to look up and see my work on the wall,” said Edwin Valrey-Jung.

Valrey-Jung loves photography. So, when he bought his Tempe home last summer, he decorated it with his own artwork.

“This is the first time I’ve ever hung any pictures up on the wall and I’m a photographer so how much doI love this house? I love this house a lot so when it comes to my mortgage, I make sure I make my mortgage payments,” he said.

[AZ FAMILY]

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U.S. SEC awards Merrill Lynch whistleblowers a record $83 million

U.S. SEC awards Merrill Lynch whistleblowers a record $83 million

Reuters-

The U.S. Securities and Exchange Commission has awarded a record $83 million to three whistleblowers tied to a 2016 settlement with Bank of America Corp’s Merrill Lynch brokerage unit, the whistleblowers’ attorney said on Monday.

The SEC announced the size of the awards on Monday but did not say which case led it to pay two whistleblowers $50 million and a third $33 million. A law firm representing the whistleblowers said their clients tipped off the agency to the misuse of customer funds by the brokerage.

“Our clients represent the very best of Wall Street and feel vindicated by the SEC’s determination,” Jordan Thomas, a partner at Labaton Sucharow, said in a statement. “By coming forward, these courageous executives protected millions of Merrill Lynch’s customers.”

[REUTERS]

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Once an S.E.C. Regulator, Now Thriving as a Lawyer for Whistle-Blowers

Once an S.E.C. Regulator, Now Thriving as a Lawyer for Whistle-Blowers

NYT-

When Jordan A. Thomas left the Securities and Exchange Commission in 2011, he could have landed a job at a top law firm, likely earning $500,000 or more a year to defend corporations and Wall Street firms in government investigations.

But Mr. Thomas had another plan: He wanted to build a law practice representing whistle-blowers seeking to expose corporate wrongdoing.

“People thought I was crazy not to go into a big corporate defense practice where I could make a lot of money,” Mr. Thomas said.

Seven years later, his bet is paying off. He has built one of the top legal practices in the country representing corporate whistle-blowers. And because of a program that Mr. Thomas helped create at the S.E.C., in which whistle-blowers can receive a cut of penalties the agency imposes as a result of information they provide, the money is starting to pour into Mr. Thomas’s firm.

[NYT]

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DEBISH v. WELLS FARGO BANK, NA |  FL 4DCA – because the trial court reestablished the lost note without finding that the borrowers were adequately protected against loss that might occur due to a claim by another person to enforce the lost note, we reverse and remand

DEBISH v. WELLS FARGO BANK, NA | FL 4DCA – because the trial court reestablished the lost note without finding that the borrowers were adequately protected against loss that might occur due to a claim by another person to enforce the lost note, we reverse and remand

THOMAS and MICHELLE DEBISH, Appellants,
v.
WELLS FARGO BANK, N.A., AS TRUSTEE, ON BEHALF OF REGISTERED HOLDERS OF FIRST FRANKLIN MORTGAGE LOAN TRUST, MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 2004-FF6, Appellee.

No. 4D17-469.
District Court of Appeal of Florida, Fourth District.

March 14, 2018.
Appeal from the Circuit Court for the Nineteenth Judicial Circuit, St. Lucie County; Robert E. Belanger, Judge; L.T. Case No. 2014CA002540.

W. Trent Steele of Steele Law, Hobe Sound, for appellants.

Nicholas Agnello and Erica Gomer of Burr & Forman LLP, Fort Lauderdale, for appellee.

PER CURIAM.

The borrowers, Thomas and Michelle Debish, appeal an Amended Final Judgment of Foreclosure. We affirm without discussion as to the borrowers’ argument that the plaintiff failed to prove its standing to enforce the lost note. However, because the trial court reestablished the lost note without finding that the borrowers were adequately protected against loss that might occur due to a claim by another person to enforce the lost note, we reverse and remand with directions for the trial court to amend the judgment so as to provide adequate protection to the borrowers. See Blitch v. Freedom Mortg. Corp., 185 So. 3d 645, 646-47 (Fla. 2d DCA 2016); § 673.3091(2), Fla. Stat. (2017).

“Because the court’s consideration of the issue of adequate protection is a condition of entering a judgment that reestablishes a lost note, its failure to provide adequate protection, or to make a finding that none is needed under the circumstances, requires reversal and remand for the court to consider the issue.” Blitch, 185 So. 3d at 646. As noted in Blitch, the requirement of adequate protection is generally satisfied “through a written indemnification agreement in the final judgment, the posting of a surety bond, a letter of credit, a deposit of cash collateral with the court, or `[s]uch other security as the court may deem appropriate under the circumstances.'” Id. (quoting § 702.11(1)(e), Fla. Stat. (2014)).

Affirmed in part, Reversed in part, and Remanded for further proceedings.

TAYLOR, MAY and DAMOORGIAN, JJ., concur.

Not final until disposition of timely filed motion for rehearing.

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Kushner Cos. filed false paperwork with New York housing authorities for years: AP

Kushner Cos. filed false paperwork with New York housing authorities for years: AP

Market Watch-

The real-estate firm controlled by the family of President Donald Trump’s son-in-law and senior adviser, Jared Kushner, routinely filed false paperwork with New York City, declaring it had no rent-regulated tenants in buildings it owned, when it actually had hundreds, the Associated Press reported.

That allowed the company to move in and conduct extensive construction and renovation that tenants claimed was targeted harassment aimed at driving them out to clear the way for higher-paying renters, said the AP.

In one instance, the Kushner Cos. purchased three buildings in Queens in 2015, in which most of the tenants had some protection that barred developers from evicting them or raising their rents in an effort to turn a quick profit.

[MARKET WATCH]

image: Carolyn Kaster/AP

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WSJ: Fed investigation into Wells Fargo broadens

WSJ: Fed investigation into Wells Fargo broadens

NY Daily News-

A federal investigation into Wells Fargo has broadened to include its wealth-management division, according to a Wall Street Journal report Friday.

Wells Fargo is wrestling with the aftermath of a scandal in its retail banking unit in which, among other things, employees opened up millions of fake accounts without customer authorization.

The Justice Department is now investigating whether Wells Fargo made inappropriate recommendations or referrals, or failed to inform customers about potential conflicts of interest, the Journal reported, citing unnamed people familiar with the matter.

[NY DAILY NEWS]

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