We have a good one for our lender and servicer friends out there.
In Bauer v. Roundpoint Mortg. Servicing Corp., No. 18 C 3634, 2018 U.S. Dist. LEXIS 184328 (N.D. Ill. Oct. 29, 2018), the Court held that despite a court order dismissing the mortgage foreclosure with prejudice, plaintiff’s mortgage servicer could report the plaintiff’s default to the credit reporting agencies.
The plaintiff, Bauer, defaulted on his mortgage. Then-mortgagee, JP Morgan Chase (“Chase”), filed a judicial foreclosure (“First Foreclosure”) against Bauer which was voluntarily dismissed in 2013. Chase then filed a second judicial foreclosure action (“Second Foreclosure”) against Bauer. The Second Foreclosure was voluntarily dismissed in 2015. In March 2016, then-mortgagee, U.S. Bank, filed a third foreclosure action (“Third Foreclosure”) against Bauer.
Bauer moved to dismiss the Third Foreclosure based on Illinois’s “single filing rule.” Under the rule, after a voluntary dismissal, a plaintiff may only commence a new action on the same cause of action within one year or within the remaining period of limitation, whichever greater. The court agreed that the rule applied and dismissed the Third Foreclosure with prejudice. In relevant part, the dismissal order (“Order”) said, “… Plaintiff’s complaint is dismissed with prejudice based on the single re-filing rule.”
The bank that foreclosed on the home of Cesar Sayoc, the suspect in the pipe bomb mailings, was formerly owned by Treasury Secretary Steven Mnuchin.
Sayoc lost his home in 2009 when IndyMac moved to foreclose on his south Florida home, according to Florida property and court records. IndyMac was a California-based bank that failed during the recession and was later purchased by a group of investors that included Mnuchin. IndyMac was renamed OneWest Bank.
Further, there are signs that Sayoc may have been a victim of a controversial industry practice during the recession.
The lawyer who signed Sayoc’s foreclosure paperwork was Erica Johnson-Seck, a lawyer for OneWest. Johnson-Seck was an official at the center of OneWest’s so-called “robo-signing” scandal. Robo-signing is where banks signed off on thousands of legal documents automatically without checking their accuracy, causing thousands of people to lose their homes without proper procedures.
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Sunday – October 28, 2018
Summarizing and Understanding the Thirty-Five Year Transformation of Foreclosure Defense in Hawaii from 1983 to 2018, What Remains Ahead, and What the Hawaii Experience Can Mean for Listeners in Other States
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On past shows John and I, in addition to discussing foreclosure defense issues nationally, have highlighted a number of advances in judicial protections for Hawaii homeowners, in which our law firm has played a part, that have also caught the attention of numerous commentators nationwide.
Several of our listeners have requested that we summarize the history of those changes, how they occurred, and what additional advances in Hawaii can be anticipated in the future, of interest not only to our Hawaii listeners, but listeners in other States, including judges and legislators, who would like to replicate those changes in their jurisdiction.
On today’s show, therefore, John and I will discuss the Hawaii experience, concentrating on ten of the most important Hawaii appellate decisions that collectively have reshaped foreclosure defense in our State, challenging our listeners to achieve the same and more in their jurisdiction, including:
1. Hawai’i Community Federal Credit Union v. Keka, 94 Haw. 213, 11 P.3d 1 (2000);
2. GE Capital Hawaii v. Yonenaka, 96 Haw. App. LEXIS 113 (2001);
3. Beneficial Hawaii, Inc. v. Kida, 96 Haw. 289, 30 P.3d 895 (2001);
4. U.S. Bank v. Salvacion, 2011 Haw. App. LEXIS 387 (2011);
5. Kondaur Capital Corp. v. Matsuyoshi, 136 Haw. 227, 361 P.3d 454 (2015);
6. Santiago v. Tanaka, 137 Haw. 137, 366 P.3d 612 (2015);
7. Bank of America v. Reyes-Toledo, 139 Haw. 361, 390 P.3d 1248 (2017); Bank of America v. Reyes-Toledo 2, 2018 Haw. LEXIS 214, 2018 WL 4870719 (2018);
8. U.S. Bank v. Mattos, 140 Haw. 26, 398 P.3d 615 (2017);
9. Wells Fargo Bank v. Behrendt, 142 Haw. 37, 414 P.3d 89 (2018);
In a published decision issued on October 4, 2018, the New Jersey Appellate Division issued a controversial ruling that allows a homeowner to pursue a claim against Bank of America under the New Jersey Truth-in-Consumer Contract, Warranty and Notice Act (TCCWNA) due to the defendants’ failure to identify the lender’s name and address in several pre-action foreclosure notices served on the homeowner, even though the bank ultimately did not file a foreclosure suit. Wright v. Bank of America, et al., Docket No. A-2358-15T-3 (App. Div. NJ, October 4, 2018).
In this particular case, the homeowner filed a complaint against Bank of America and its loan servicer BAC Home Loans Servicing, LP (BAC), alleging that five notices of intention to foreclose served on him by BAC violated the FFA because the notices neglected to include Bank of America’s name and address. The homeowner did not dispute having defaulted on his mortgage or claim that the notices were false and misleading.
The trial court dismissed the homeowner’s complaint against Bank of America and its loan servicer BAC, finding that a violation of the FFA cannot support a TCCWNA claim. The homeowner appealed.
The U.S. Court of Appeals for the Seventh Circuit held that the plaintiffs failed to prove a violation of the federal Equal Credit Opportunity Act (ECOA) under a disparate treatment theory where their only evidence was a vague statement from one of the defendant’s employees.
Accordingly, the Seventh Circuit affirmed the ruling of the trial court granting summary judgment in favor of the defendant.
A copy of the opinion in Mario Sims v. New Penn Financial LLC is available at: Link to Opinion.
The plaintiffs, an African-American couple, purchased a home from the seller in October 2008 for $185,000. The plaintiffs made a down payment of $12,000, and monthly payments of $1,400 to the seller for about one year.
The State of California recently reinstated and amended its Homeowner Bill of Rights, which previously expired on January 1, 2018. The Homeowner Bill of Rights contains various foreclosure protections for borrowers pursuing loan modifications or similar foreclosure prevention alternatives. The law becomes effective on January 1, 2019.
The Homeowner Bill of Rights provides for a variety of requirements and prohibitions in connection with foreclosures. These provisions generally apply to first lien loans secured by owner-occupied homes. Among other things, entities that foreclosed on more than 175 homes during the prior reporting year are prohibited, following submission of a complete loan modification application, from recording a notice of default or notice of sale, or conducting a trustee’s sale (if an application is submitted at least 5 business days prior to a scheduled sale) until the borrower: (i) is provided a written denial of an application (including the reasons for denial and foreclosure prevention alternatives) and the 30-day period to appeal the denial expires; (ii) does not accept a written offer to participate in a modification within 14 days; or (iii) defaults under an accepted modification. Further, prior to recording any notice of default: (i) the borrower must be given written notice of protections that may be available under the federal SCRA and the right to request copies of the evidence of indebtedness and security instrument, any assignment, and payment history since the borrower was last less than 60 days past due; and (ii) 30 days must pass after contacting the borrower or after making diligent effort to do so. In addition, a notice of default also may not be recorded if the borrower is approved in writing for a foreclosure prevention alternative, and certain other specified conditions are met.
If a foreclosure prevention alternative is offered, a servicer must generally send written communication providing specified information about the alternative within 5 days after recording a notice of default. If an alternative is approved, a servicer is prohibited from recording a notice of sale or conducting a trustee’s sale if specified conditions are met. A notice of default must be rescinded, and a pending trustee’s sale canceled, upon execution of a permanent foreclosure alternative. The law prohibits fees from being charged in connection with a modification or foreclosure prevention alternative, and requires that modifications and prevention alternatives previously approved must be honored following transfer or sale to another servicer. The law also requires that a notice of default must include a specified declaration regarding contact with the borrower, and provides that a mortgage servicer satisfies specified telephone contact requirements in this regard if the borrower makes a written request to cease communications. Certain technical changes have also been made to provisions requiring a servicer to establish a single point of contact for a borrower requesting a foreclosure prevention alternative. The law also defines what it means for a loan modification application to be “complete.”
Violations of the above provisions may result in liability to borrowers, as well as awards of the greater of treble damages or statutory damages of $50,000 for intentional or reckless violations. Violations of certain provisions by CFL, CRMLA, and REL licensees may be deemed violations of those respective licensing laws. Mortgage servicers engaging in multiple and repeated filings of unsubstantiated foreclosure documents may be subject to a civil penalty of up to $7,500 per lien and further administrative enforcement.
Additionally, the law provides that any amendment, addition, or repeal of a section of the Homeowner Bill of Rights does not release, extinguish, or change any liability under a previous section that was in effect at the time of an action. The law also generally subjects entities that foreclosed on fewer than 175 properties during the prior reporting year to similar, but in some cases less stringent, requirements and restrictions.
A copy of the reinstated California Homeowner Bill of Rights, as amended, is available here.
The Wells Fargo & Co. fake-accounts scandal is one of the highest-profile cases of banking villainy since the financial crisis, but it is an odd kind of villainy. If you were a cartoon-villain banker, this is pretty much the last thing you would do. Wells Fargo’s retail bankers were under a lot of pressure to open accounts, so they responded by opening fake accounts. This angered customers and the public, but it’s not like it did Wells Fargo any favors. Wells Fargo’s goal in pressuring its employees to open lots of accounts for customers was to open lots of real accounts, to get customers to make deposits and take out loans and do transactions and generate revenue for Wells Fargo. The thing about fake accounts is that they mostly don’t bring in any money: At least 95 percent of Wells Fargo’s fake accounts brought in zero dollars, while the rest seem to have brought in about $2.4 million in fees, a rounding error for a bank with $88 billion of net revenue last year, and orders of magnitude less than the fines Wells has had to pay. The fake-accounts scandal is not a story about a clever greedy bank exploiting customers for money; it is a story about a dumb greedy bank with poorly designed incentives and inadequate supervision harming customers without making any money.
A.G. Underwood Announces $65 Million Settlement With Wells Fargo For Misleading Investors Regarding Cross-Sell Scandal
Wells Fargo Failed to Disclose to Investors that Success of Cross-Sell Efforts was Built on Misconduct – Such as Opening Millions of Fake Deposit and Credit Card Accounts; NY Investors Lost Millions when Misconduct was Disclosed
Settlement Marks Latest Martin Act Enforcement Action to Protect NY Investors and Integrity of Financial Marketplace
NEW YORK – Attorney General Barbara D. Underwood announced today that Wells Fargo & Company will pay a $65 million penalty following the Attorney General’s investigation into the bank’s fraudulent statements to investors in connection with its “cross-sell” business model, related sales practices, and the bank’s publicly reported cross-sell metrics.
“The misconduct at Wells Fargo was widespread across the bank and at every level of management – impacting both customers and investors who were misled,” said Attorney General Underwood. “State securities laws are vital to protecting the hard-earned savings of working families and Main Street investors from financial fraud, and my office will continue to do what’s necessary to protect the public and the integrity of our markets.”
“Cross-sell” refers to the process of selling new financial products and/or services to an existing customer.?Wells Fargo represented to investors its ability to increase revenues and better serve customers by pursuing its purportedly superior cross-sell strategy; it also regularly reported cross-sell metrics that supposedly reflected the success of that strategy.
However, Wells Fargo failed to disclose to investors that the success of its cross-sell efforts was built on sales practice misconduct at the bank. Driven by strict and unrealistic sales goals, employees in Wells Fargo’s Community Bank division engaged in fraudulent sales practices, including the opening of millions of fake deposit and credit card accounts without customers’ knowledge. Through a significant incentive compensation program, employees who met these targets were eligible for promotions and bonuses, while employees who did not meet the sales targets faced relentless pressure and even termination.
Today’s settlement notes that Wells Fargo made numerous misrepresentations to investors over many years, and failed to disclose its knowledge of systemic problems pervading the bank’s sales practices. In one email from June 2011, a member of the incentive compensation team acknowledged this misconduct by Wells Fargo employees, stating that “I’ve asked bankers… why people cheat… it’s because their manager tells them they’ll be fired if they don’t hit their minimums.”
Beginning as early as 2011, Wells Fargo’s Board of Directors received reports that described increasing numbers of allegations of this sales practice misconduct by its employees. In Congressional testimony, Wells Fargo’s former CEO stated that he personally became aware of widespread fraud by Wells Fargo employees in 2013. Yet Wells Fargo failed to disclose to investors the misconduct at the heart of the bank’s vaunted cross-sell business model. When the truth was publicly disclosed, New York investors lost millions of dollars.
The Attorney General, through the office’s Investor Protection Bureau, is charged with enforcing the New York State securities law (commonly known as the Martin Act), to protect New York investors and the integrity of the marketplace through investigations of suspected fraud in the offer, sale, or purchase of securities.
The Attorney General’s office is also continuing its investigation of Wells Fargo in connection with its illegal business practices of opening millions of unauthorized accounts and enrolling consumers in services without their knowledge or consent. Today’s settlement has no impact on that ongoing investigation and other pending investigations of Wells Fargo.
This matter was handled by Senior Enforcement Counsel Hannah K. Flamenbaum and Assistant Attorneys General Melissa Gable and Amita Singh, all of the Investor Protection Bureau, under the supervision of Investor Protection Bureau Chief Cynthia Hanawalt. Data Scientist Katie Rosman and Director Jonathan Werberg of the Research and Analytics Department and Chief Economist Peter Malaspina also assisted in this matter. The Investor Protection Bureau is part of the Economic Justice Division, which is led by Executive Deputy Attorney General for Economic Justice Manisha M. Sheth.
A bankruptcy judge has ordered a temporary halt to all state and appellate court proceedings in which suspended foreclosure defense attorney Mark Stopa and his former law firm are counsel of record.
The emergency order, effective until Nov. 6, could give dozens of Florida homeowners a temporary respite from the threat of foreclosure. But many have been surprised and dismayed to find that the trustee overseeing the law firm’s bankruptcy case has been cashing post-dated checks they wrote to the firm.
“It’s a hot mess,” Tonya McKendree, a former client of Stopa, said Wednesday. She said trustee Stephen Meininger cashed four checks totaling $1,250, causing her account to be overdrawn by about $400 and costing her more than $100 in overdraft fees.
A federal grand jury convicted Nathan E. Hardwick IV of twenty-one counts of wire fraud, one count of conspiracy to commit wire fraud, and one count of making false statements to a federally insured financial institution on October 12, 2018.
“Hardwick was motivated by unadulterated deceit and greed when he blatantly violated the trust placed in him by embezzling millions of dollars from his clients and partners,” said U.S. Attorney Byung J. “BJay” Pak. “The extravagant lifestyle that Hardwick enjoyed at the expense of others will now be traded for time in prison.”
“This case is especially troubling given the illegal actions were orchestrated by a lawyer who swore an oath to uphold the law and represent his clients with integrity,” said Chris Hacker, Special Agent in Charge of FBI Atlanta. “The magnitude of theft Hardwick is convicted of merits a lengthy sentence, one that will hopefully send a message that the FBI and U.S. Attorney’s Office will not tolerate this type of white-collar crime.”
According to U.S. Attorney Pak, the charges and other information presented in court: Hardwick and Asha Maurya engaged in a scheme to defraud MHSLAW, Inc. and its subsidiaries, Morris Hardwick Schneider, LLC and LandCastle Title, LLC, (collectively referred to as “MHS”). MHS owned and operated a law firm that specialized in residential real estate closings and foreclosures, and it ran a title business. MHS employed approximately 800 people in 16 states. Hardwick was the managing partner of the law firm and the CEO of the title business. He also ran the law firm’s closing division, which was based in Atlanta. Maurya managed MHS’s accounting operations under Hardwick’s supervision and control.
Miami attorney Bruce Jacobs, representing a couple in a foreclosure case, had sought to get his allegations against Bank of America heard in court.
The bank argued his claims were baseless.
Judge Bronwyn Miller dismissed the attorney’s claims over the bank’s purge of 1.8 billion of bank records.
CNBC-
A Miami-Dade County judge on Tuesday turned down requests by a real estate attorney to punish Bank of Americaover claims of withholding and destroying records.
Judge Bronwyn Miller also dismissed the attorney’s claims over the bank’s purge of 1.8 billion of bank records. The ruling, handed down after a hearing on Monday, did not explain the legal reason for her decision.
Miami attorney Bruce Jacobs, representing a couple in a foreclosure case, had sought to get his allegations against Bank of America heard in court. The bank argued his claims were baseless.
(GLOBE NEWSWIRE) — Freddie Mac(OTCQB: FMCC) today reminded Servicers of its disaster relief policies for borrowers who have been affected by Hurricane Michael. Freddie Mac’s disaster relief options are available to borrowers whose homes or places of employment are located in presidentially-declared Major Disaster Areas where federal individual assistance programs are made available to affected individuals and households.
In areas where the Federal Emergency Management Agency (FEMA) has not yet made individual assistance available, mortgage servicers may immediately leverage Freddie Mac’s short-term forbearance programs to provide mortgage relief to their borrowers that have been affected by the hurricane.
“Safety is our top priority for those in the Florida panhandle and nearby states as Hurricane Michael approaches,” said Yvette Gilmore, Freddie Mac’s Vice President of Single-Family Servicer Performance Management. “Once safe from this dangerous storm, we strongly encourage homeowners whose homes or places of employment have been impacted by Hurricane Michael to call their mortgage Servicer—the company to which borrowers send their monthly mortgage payments—to learn about available relief options. We stand ready to ensure that mortgage relief is made available.”
News Facts:
Freddie Mac disaster relief policies authorize mortgage servicers to help affected borrowers in eligible disaster areas: those federally-declared Major Disaster Areas where federal individual assistance programs have been extended. A list of these areas can be found on the FEMA’s website.
Freddie Mac mortgage relief options for affected borrowers in eligible disaster areas include:
Suspending foreclosures by providing forbearance for up to 12 months;
Waiving assessments of penalties or late fees against borrowers with disaster-damaged homes; and
Not reporting forbearance or delinquencies caused by the disaster to the nation’s credit bureaus.
Freddie Mac is reminding servicers to consider borrowers who are impacted by the storm, but who live and work outside of an eligible disaster area, for Freddie Mac’s standard relief policies, which include forbearance and mortgage modifications.
Affected borrowers should immediately contact their mortgage servicer—the company to which they send their monthly mortgage payment.
Freddie Mac makes home possible for millions of families and individuals by providing mortgage capital to lenders. Since our creation by Congress in 1970, we’ve made housing more accessible and affordable for homebuyers and renters in communities nationwide. We are building a better housing finance system for homebuyers, renters, lenders, investors and taxpayers. Learn more at FreddieMac.com, @FreddieMac and Freddie Mac’s blog.
MEDIA CONTACT: Chad Wandler 703-903-2446 Chad_Wandler@FreddieMac.com
WASHINGTON, DC – Fannie Mae (FNMA/OTC) is reminding those impacted by Hurricane Michael of the options available for mortgage assistance. Under Fannie Mae’s guidelines for single-family mortgages:
Homeowners impacted by Hurricane Michael are eligible to stop making mortgage payments for up to 12 months, during which time they:
will not incur late fees during this temporary payment break
will not have delinquencies reported to the credit bureaus
Servicers are authorized to suspend or reduce a homeowner’s mortgage payments immediately for up to 90 days without any contact with the homeowner if the servicer believes the homeowner has been affected by a disaster. Payment forbearance of up to 12 months is available in many circumstances.
Servicers must suspend foreclosure and other legal proceedings if the servicer believes the homeowner has been impacted by a disaster.
“It is important for those in the path of the storm to focus on their safety as they deal with the potential impact of Hurricane Michael,” said Carlos Perez, Senior Vice President and Chief Credit Officer at Fannie Mae. “Fannie Mae and our lending and servicing partners are focused on ensuring assistance is offered to individuals and families in need. We also are focused on working with our Multifamily DUS® lenders and borrowers to determine appropriate actions to assist renters impacted by the storm. We urge everyone in the area to be safe, and we encourage homeowners affected by the storm to contact their mortgage servicer for assistance as soon as possible.”
Homeowners can reach out to Fannie Mae directly by calling 1-800-2FANNIE (1-800-232-6643). For more information, please visit www.knowyouroptions.com/relief.
Fannie Mae helps make the 30-year fixed-rate mortgage and affordable rental housing possible for millions of Americans. We partner with lenders to create housing opportunities for families across the country. We are driving positive changes in housing finance to make the home buying process easier, while reducing costs and risk. To learn more, visit fanniemae.com and follow us on twitter.com/fanniemae.
See the attached filing below with deposition transcript, setting out Nationstar Mortgage, LLC’s position that Aurora Bank, FSB policies include forging indorsements to give the appearance the promissory notes are indorsed to blank. Edward Hyne, Nationsatr’s Rule 30(b)(6) witness refers to the practice as “preparing indorsement pages”.
EXCEPTS:
BY MR. RILEY: Q What is your testimony about the Note, Mr. Hyne?
A The Note itself is accurate, but as to the page where the endorsements are, um,
there is, actually, um — the original Note has the endorsements on the backside of the
signature page, and this was an alternate second endorsement sheet that had been
prepared by Aurora Bank, it’s my understanding. That’s why there was a discrepancy
raised relating to the endorsements.
MR. OLIVER: Prepared by?
THE WITNESS: Aurora, the prior servicer.
MR. RILEY: Would you, please, read back his answer, if you would.
BY MR. RILEY: Q Why would there be an alternate endorsement sheet prepared by
Aurora?
A Um, well, I don’t have personal knowledge. I didn’t work for Aurora. It’s my
understanding that the, um — Aurora had an image of the Note that, um, apparently,
when imaging their system, they didn’t have the back page with the endorsements on
it, and someone at Aurora had gone in and created a separate endorsement sheet, um,
for the purposes of having a complete version of the Note with an endorsement, not
knowing that the back of the original Note, um, contained the, um, original
endorsements.
Q So it’s your testimony they prepared an allonge, if you’re familiar with the term
“allonge”?
THE WITNESS: I don’t know if you would call it an allonge, um, but they prepared,
um, a sheet that had new endorsements so that it could be imaged, um, with, um, an
image of the Note that was, um, different from the original Note that already had the
endorsements on the backside of the signature page.
Q Let’s go back to the document you’re referring to and that you’re looking at in front
of you. What is that?
A This page, um, is a page that has three endorsements on it.
Q So is it your testimony this was the endorsement that was prepared by Aurora that
was attached to Claim 1?
THE WITNESS: Yes.
BY MR. RILEY: Q Okay. And how do you have knowledge of how this happened?
A We have — in our imaging system when the loan came across from Aurora to
Nationstar to service. We had images with this Note with this endorsement page, and
a separate image of the Note as it, actually, appears with the other endorsements. Um,
I’ve had discussions with Simon Ward-Brown, who —
Q I’m sorry, who?
A Simon Ward-Brown. He’s an employee of Nationstar now, but was previously
employed by Aurora when this loan — before the loan transferred to Nationstar.
Q And he’s the one that informed you how these signatures came to be on the claim?
THE WITNESS: We discussed as to how there might be two different, um,
endorsement pages.
BY MR. RILEY:Q When would you have had that conversation?
A I think it was last year, late last year
Q Why was an amended Proof of Claim not filed, if that wasn’t the accurate Note?
A I’m not sure why there wasn’t an amended Proof of Claim filed. Certainly
Nationstar wasn’t aware of the issue until, I believe, it was raised later on in the
litigation.
BY MR. OLIVAR: Q Now, I think you testified you spoke with Mr. Ward-Brown about an
alternate second set of — alternate second endorsement sheet. Do I have that right?
A Yes.
Q And the alternate second endorsement sheet, you believe, was prepared by Aurora
Bank?
A Yes.
Q Did he know how that was prepared or why that was prepared when you spoke
with him?
A We had discussed what he believed to have happened, um, to provide an
explanation why there is a second endorsement page.
Q When you say you discussed what he believed to have happened, were the two of
you just speculating as to possibilities, or did anybody know what had happened?
A He didn’t say that he was there when it happened physically at the time that it was
occurring, um, so he was trying — he believed that that is what happened based upon
his, um, knowledge of the servicing policies and processes at Aurora.
Q So based on his knowledge of the general policies at Aurora, he posited some
options as to what might have happened, or was it just one option?
A No. I believe that was the one option.
Q So based on his knowledge of Aurora’s general policy, he said he believed that’s
what had happened?
A Aurora has an imaging system where they image their own documents. An
employee of Aurora had looked at the images of the Note and saw that there was not
an endorsement page image with the Note as part of the Note document. Even
though the original, um, Note has the endorsements on the back page of the signature
page, um, it was Simon’s understanding or belief that, um, an employee of Aurora
then prepared, um, a separate endorsement page, um, for the purposes of completing
the chain of endorsements for the image of the Note that they had in their system.
Q What was the name of the employee at Aurora who saw there was no endorsement
page?
A Um, he didn’t have a name of a person. He believed that’s what would have
triggered an employee looking at the imaging system.
Q When did that unnamed Aurora employee create that second page?
A It’s not dated, so I’m not sure if he could tell but, um, there’s certainly nothing on
the document that would indicate when it occurred.
Q How did the Aurora employee create a second endorsement page?
A I don’t know.
Q Do you know whether the page was photo shopped?
A I don’t know.
Q Do you know whether the page was physically xeroxed with a cut-and-paste
technique?
At the heart of the dispute is the purge of 1.88 billion records. Bank of America, in a court filing, insists the records were copied, returned to the bank and still exist in its system.
Miami attorney Bruce Jacobs, a former prosecutor, says the bank got rid of loan records that he claims may have contained evidence of fraud.
Bank of America said he has it all wrong.
CNBC-
The nation’s second-largest bank is squaring off in a contentious court battle against a Miami real estate attorney who is accusing it of purging 1.88 billion records to conceal alleged fraud.
Bank of America, in a court filing, insists the records were copied, returned to the bank and still exist in its system.
But Bruce Jacobs, a former Miami-Dade County prosecutor, says the bank got rid of loan records he was seeking that he says may be evidence of fraud because the original records may have been altered by the bank.
“Bank of America thinks they’re untouchable,” Jacobs told CNBC. “They think they have so many zeroes in their bank accounts that they’re above the law.”
RESCHEDULED FROM LAST WEEK 10/14 DUE TO LOSS OF POWER AT KHVH-AM WHICH BROADCASTS OUR LIVE SHOW
________________________________
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
.
Sunday – October 14, 2018
Foreclosure Workshop #70: Bank of America v. Reyes-Toledo (October 9, 2018) (Reyes-Toledo 2) — Hawaii Supreme Court Frees Hawaii Homeowners from Decades of Wrongful Federal Judicial Interference with Their State Court Foreclosure Defense Rights, Which New Published Opinion Should Become a Model for Every State Judiciary
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I have mentioned on numerous shows that the federal courts are generally a virtual graveyard for homeowners being foreclosed on, and I meant that as no exaggeration.
For I have been an eye-witness advocate to decades of the mindless arrogant slaughter of homeowners’ rights in federal courts, generally ignoring Truth-in-Lending rescissions, ignoring loan modification abuses, ignoring the lack of good faith and fair dealing in nonjudicial auctions, ignoring the adequacy of notice pleading, and ignoring the many fraudulent and undisclosed low visibility practices within MERS and REMIC securitized trust paper hocus pocus mumbo jumbo.
And those errant federal decisions moreover have corrupted the foreclosure defense jurisprudence of most state court foreclosure defense adjudications as well, including in Hawaii Courts, kowtowing and genuflecting to federal court decisions in the foreclosure field — until now.
The Hawaii Supreme Court in its first, 2017 Reyes-Toledo decision, after earlier handing down numerous welcome published opinions clobbering nonjudicial foreclosure abuses, began an effort to control abuses in an otherwise hidden and unregulated securitized banking system by requiring judicially foreclosing plaintiffs to prove ownership and possession of the promissory note and right to foreclosure at the exact time it filed its foreclosure complaint, which created the equivalent of a “10” on the Richter Scale, sending foreclosure attorneys in Hawaii scampering for proof of note ownership while frequently merely filing to dismiss existing deficient foreclosure complaints.
And now, in its most recent, 2018 Reyes-Toledo decision, it calls Reyes-Toledo 2, the case returning to it on certiorari following its earlier remand to the Hawaii Intermediate Court of Appeals, the Hawaii Supreme Court has now taken the gloves off, as it were, squarely rejecting the federal court “plausibility” dismissal standard as well as allowing wrongful foreclosure counterclaims to be filed in every foreclosure case without a homeowner having to wait until being foreclosed on before suing for wrongful foreclosure.
This 2018 common sense approach, preventing contrary federal court pleading standards in foreclosure cases in Hawaii State Courts from similarly shutting courthouse doors to homeowners in foreclosure in State Court is another example of combatting what our listeners know as The Rule Ritual.
Even more importantly, Reyes-Toledo 2 now creates, at least in Hawaii, a split in case outcome, applying different dismissal standards in the Federal District Court and the State Courts in Hawaii, in Honolulu ironically located across the street from one another.
On today’s show we will highlight the absolutely unfair, discriminatory, and lacking in due process differing result triggered not on the merits but based on which pleading standard of review is used, by exploring a recent Federal District Court dismissal in the Dairy Road Partners case now on appeal to the Ninth Circuit Court of Appeals, our challenging the “plausibility” dismissal standard there, anticipating our asking the United States Supreme Court to accept certiorari and to reconsider that standard of review.
For, if a pleading standard is dispositive of a case, why should not the state dismissal standard be required instead, at least where a state claim based on diversity of citizenship is pled?
Listen this Sunday while John Waihee and I discuss today’s landmark Hawaii Supreme Court Case, Reyes-Toledo 2, a copy of which will be posted on our website, www.foreclosurehour.com, in our “past broadcast” section shortly after the show.
No homeowner or foreclosure defense counsel can afford to miss today’s broadcast introducing the remarkable Reyes-Toledo 2 which has clearly placed Hawaii Courts at the forefront of foreclosure reform.
HSBC Agrees To Pay $765 Million In Connection With Its Sale Of Residential Mortgage-Backed Securities
DENVER – U.S. Attorney Bob Troyer announced today that HSBC will pay $765 million to settle claims related to its packaging, securitization, issuance, marketing and sale of residential mortgage-backed securities (RMBS) between 2005 and 2007. During this period, federally-insured financial institutions and others suffered major losses from investing in RMBS issued and underwritten by HSBC. Under the settlement, HSBC will pay the $765 million as a civil penalty pursuant to the Financial Institutions Reform, Recovery and Enforcement Act (FIRREA).
“HSBC made choices that hurt people and abused their trust,” said Bob Troyer, United States Attorney for the District of Colorado. “HSBC chose to use a due diligence process it knew from the start didn’t work. It chose to put lots of defective mortgages into its deals. When HSBC saw problems, it chose to rush those deals out the door. When deals went south, investors who trusted HSBC suffered. And when the mortgages failed, communities across the country were blighted by foreclosure. If you make choices like this, beware. You will pay.”
“The actions of HSBC resulted in significant losses to investors, which purchased the HSBC Residential Mortgage-Backed Securities backed by defective loans,” said Associate Inspector General Jennifer Byrne of the Federal Housing Finance Agency-Office of Inspector General (FHFA-OIG). “We are proud to have partnered with the U.S Attorney’s Office for the District of Colorado on this matter.”
FIRREA authorizes the federal government to seek civil penalties against financial institutions that violate various predicate offenses, including wire and mail fraud. The United States alleged that HSBC violated FIRREA by misrepresenting to investors the quality of its RMBS and the due diligence procedures it claimed it would use to ensure that quality. The United States’ allegations are described in the settlement agreement at paragraph 3.
The United States alleged that HSBC had a due diligence process for reviewing the loans HSBC planned to securitize as RMBS, but as early as 2005, an HSBC credit risk manager expressed concerns with HSBC’s due diligence process. HSBC nevertheless touted its due diligence process to potential investors. It told investors that when it purchased pools of subprime loans, HSBC would review at least 25% of the loans in the pool for credit and compliance. It told investors that it selected 20% of the loan pool as an “adverse sample” based on “a proprietary model, which will risk-rank the mortgage loans in the pool.” But on some loan pools, HSBC’s RMBS trading desk influenced how the risk management group selected loans for the adverse portion of the sample, and as a result, the sample was not based on its model. HSBC also told investors that it selected another 5% of the loan pool as a “random sample.” But in some instances, HSBC used a random sample that was less than 5% of the pool, or used a sample that was not random at all.
To review the loans HSBC did select for review, HSBC used due diligence vendors, and HSBC saw the results of the vendors’ reviews of the loans before the deals were issued. Over a one-and-a-half year period, between January 2006 and June 2007, HSBC’s primary due diligence vendor flagged over 7,400 loans as having low grades—more than one out of every four loans the vendor reviewed for HSBC during that time. When HSBC employees saw loans with low grades, they sometimes “waived” those loans through or recategorized the grades to make the due diligence “percentages look better.” They also expressed views about the deals they were issuing. For example, in 2007, an HSBC trader said, in reference to an RMBS that HSBC was about to issue, “it will suck.”
For a loan pool HSBC purchased in 2006, HSBC learned of what employees referred to as an “abnormally large” and “alarmingly” high number of payment defaults. HSBC had purchased the loan pool but had not securitized it yet. Early payment defaults (EPDs)—when a borrower fails to make one of the first few payments on a mortgage—could be, in the words of HSBC’s co-head of RMBS, “an indicator of higher expected loss on the pool.” In an internal email, HSBC’s head of risk management for RMBS wrote that the high EPD rate could be a sign of systemic problems with the pool. Others within HSBC’s risk management group expressed concern that the pool “may be contaminated” and asked whether “they should hold back on the securitization launch until there is further clarity on all the issues….” The next day, the head of HSBC’s whole loan trading risk management group stated that he was “comfortable that we need not make any further disclosures to investors….” HSBC issued the securitization a few days later. A later post-close quality control review indicated that loans that “appear to have fraud or misrep” went into the securitization. HSBC went on to buy and securitize more loans from the same originator, even after the head of HSBC’s due diligence team concluded that the originator had offered “bad collateral.”
After purchasing certain loan pools, HSBC ordered a quality control review but did not wait for the final results before issuing the securitization. On two pools, HSBC received preliminary quality control results before the issuance of the securitization that, according to the quality control vendor, showed indications of fraud in the origination of particular loans, but included those loans in the RMBS anyway. On a loan pool in 2007, HSBC performed post-close due diligence on a sample of loans from that pool. HSBC’s due diligence vendor graded approximately 30% of the loans in the post-close due diligence sample as having the lowest grade. HSBC went on to securitize loans from that same pool without any further credit or compliance review before securitization.
These are allegations only, which HSBC disputes and does not admit.
Assistant U.S. Attorneys Kevin Traskos, Jasand Mock, Ian J. Kellogg, Hetal J. Doshi, and Lila M. Bateman of the District of Colorado investigated this matter, with the support of the Federal Housing Finance Agency’s Office of the Inspector General (FHFA-OIG).
UPDATE: This release was updated to reflect an amended complaint, filed on Oct. 9, 2018, which no longer names The Collection Group as a defendant. The amended complaint is available here.
Companies are still garnishing wages, seizing bank account funds and threatening to foreclose on homes based on thousands of unlawful judgments
OLYMPIA — Attorney General Bob Ferguson today filed a lawsuit against Wenatchee-based collection agencies and their owner for buying millions of dollars of old debt and suing to collect on the debt without being licensed as collection agencies with the state.
The companies bought the debt for pennies on the dollar and collected on it for up to nine years before obtaining licenses. To this day, they continue to collect on the debt based on unlawfully obtained judgments. Their collection efforts include garnishing wages, seizing bank account funds and threatening to foreclose on homes.
“These debt buyers continue to go after consumers’ homes, wages and bank accounts without legal authorization,” Ferguson said. “Washington law requires debt buyers to be licensed for a reason: to protect consumers.”
The lawsuit, filed in King County Superior Court, asserts the companies solicited and arranged to buy portfolios of old debts of Washington consumers without a license, in violation of the state Collection Agency Act. The companies, owned by Brian Fair, then sued to collect the full face amount of the debts, despite not being licensed as collection agencies as required by law. These violations of the Collection Agency Act also violate the state Consumer Protection Act.
Fair owned two debt-collecting companies: EGP Investments, formed in 2009, and JPRD Investments, formed in 2007, neither of which obtained a collection agency license until 2013. Before they were licensed, the companies bought thousands of debt accounts and unlawfully sued and obtained judgments on the debts of at least 2,800 consumers. The companies are still collecting on unlawfully obtained debts.
Companies like Fair’s are known as debt buyers. Unlike a traditional collection agency, which collects debt on behalf of a creditor who owns the debt, debt buyers purchase debts outright from a creditor for a small fraction of the debt owed.
When debt buyers solicit and purchase old debt accounts, as these companies did, they are required under Washington’s Collection Agency Act to be licensed as collection agencies. Buying debt without a license is legal unless the buyer acts as a collection agency, as these defendants did.
Typically, debt buyers pay less than five cents on the dollar, depending on how old the debt is. For example, if a debt buyer paid four cents on the dollar, they paid just $80 for the right to sue on a $2,000 debt. Because they own the debt, they can collect and keep the full face amount of the debt.
The Washington State Legislature passed the Collection Agency Act in 1971. The purpose of the act is to ensure collection agencies deal fairly and honestly with debtors.
As consumer debt has increased, more debt buyers are collecting debt from Washingtonians. The debt accounts are often sold repeatedly from debt buyer to debt buyer, sometimes with little original documentation or evidence of the debt.
After purchasing old debts for a tiny fraction of the face value, Fair’s companies sued consumers to obtain court judgments requiring consumers to pay the debts. These judgments give the companies leverage to seize a consumer’s assets, such as homes, wages and bank account funds. Because Fair’s debt buyer companies were not licensed collection agencies, these collection judgments were unlawful.
Fair’s companies are currently still collecting on the judgments they obtained without licenses, in violation of the Collection Agency Act and Consumer Protection Act. When garnishing consumers’ wages, Fair’s companies seized and continue to seize up to 25 percent of each paycheck.
In addition to garnishing wages, seizing money from bank accounts and other aggressive collection tactics, the companies have threatened to foreclose on consumers’ homes using the judgments. In King County alone, the companies have recorded more than 390 judgments and have used the judgments to foreclose on consumers’ homes.
Across the state, Fair and his companies have used the unlawful judgments to foreclose on consumers’ homes. For example, Fair and EGP Investments wrote to a homeowner in Lynnwood earlier this year and told her they would foreclose on her home unless she immediately contacted them to pay off the judgment, even though they obtained the judgment illegally in the first place.
She responded to the company with a handwritten note, explaining that her only source of income was a monthly Social Security payment. Fair responded that interest continued to accrue on her debt account and advised her to begin the process of applying for a “reverse mortgage” to pay off the debt.
In addition to failing to acquire a license, at least one of Fair’s companies, JPRD, violated the Collection Agency Act by failing to properly notify consumers about the interest that had accrued on their debts.
Ferguson’s lawsuit asks the court to order that Fair and his companies stop collecting on these illegally obtained judgments and update consumers’ credit reports to remedy the harms.
The lawsuit seeks restitution for consumers harmed by Fair’s actions, in addition to civil penalties and reimbursement of legal costs and fees. The state Consumer Protection Act allows for a civil penalty of up to $2,000 per individual violation.
Assistant Attorneys General Matthew Geyman and Amy Teng are handling the case for the Attorney General’s Office.
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The Office of the Attorney General is the chief legal office for the state of Washington with attorneys and staff in 27 divisions across the state providing legal services to roughly 200 state agencies, boards and commissions. Visit www.atg.wa.gov to learn more.
Contacts:
Dan Jackson, Acting Communications Director, (360) 753-2716; DanJ1@atg.wa.gov
A recent case involving basketball star Caldwell Jones demonstrates the danger in having only one spouse’s name on a reverse mortgage. A federal appeals court has ruled that an insurance company may foreclose on a reverse mortgage after the death of the borrower, Mr. Jones, even though Mr. Jones’ widow is still living in the house. While there are protections in place for non-borrowing spouses, many spouses are still facing foreclosure and eviction.
A reverse mortgage allows homeowners to use the equity in their home to take out a loan, but borrowers must be 62 years or older to qualify for this type of mortgage. If one spouse is under age 62, the younger spouse has to be left off the loan in order for the couple to qualify for a reverse mortgage. Some lenders have actually encouraged couples to put only the older spouse on the mortgage because the couple could borrow more money that way. But couples often did this without realizing the potentially catastrophic implications. If only one spouse’s name was on the mortgage and that spouse died, the surviving spouse would be required to either repay the loan in full or face eviction.
IN THE SUPREME COURT OF THE STATE OF HAWAI?I
—oOo—
________________________________
BANK OF AMERICA, N.A., SUCCESSOR BY MERGER TO BAC HOME LOANS
SERVICING, LP FKA COUNTRYWIDE HOME LOANS SERVICING LP,
Respondent/Plaintiff-Appellee,
vs.
GRISEL REYES-TOLEDO, Petitioner/Defendant-Appellant,
and
WAI KALOI AT MAKAKILO COMMUNITY ASSOCIATION;
MAKAKILO COMMUNITY ASSOCIATION; and
PALEHUA COMMUNITY ASSOCIATION,
Respondents/Defendants-Appellees.
California enacts a first-of-its-kind legislation imposing disclosure requirements on commercial purpose loans similar to those that the federal Truth in Lending Act (“TILA”) and Regulation Z impose on consumer purpose loans. And it extends those provisions to factoring, merchant cash advances and other types of arrangements that involve assignments of accounts and receivables.
On September 30, 2018, California Governor Jerry Brown signed S.B. 1235 into law, which will amend the California Financing Law (“CFL”) to require certain providers of “commercial financing” to disclose information to a recipient at the time of extending a commercial financing offer that is $500,000 or less and to obtain the recipient’s signature on the disclosure before consummating the commercial financing transaction. S.B. 1235 does not create new licensing obligations. Rather, it imposes new disclosure requirements on those who fall within S.B. 1235’s coverage, including both those who are licensed under the CFL and those who are not required to obtain a CFL license.
This change will impact a broad range of non-bank fintech companies offering smaller balance commercial loans. In fact, one purpose of the bill was to require disclosures in so-called bank partnership arrangements, when a commercial finance provider works through an online platform.
The U.S. Court of Appeals for the Eleventh Circuit held that 12 U.S.C. § 1715z-20(j) did not alter or limit the lender’s right to foreclose under the terms of the valid reverse mortgage contract where the non-borrower spouse was still living in the home.
Accordingly, the Eleventh Circuit affirmed the trial court’s dismissal of the plaintiff’s petition for injunctive relief to prevent the foreclosure sale.
A copy of the opinion in The Estate of Caldwell Jones, Jr. v. Live Well Financial, Inc. is available at: Link to Opinion.
A borrower obtained a reverse mortgage that was subsequently assigned to the defendant lender. The mortgage was secured by the house the borrower shared with his wife and their minor daughter, and was insured by the Department of Housing and Urban Development (HUD).
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