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BANK OF NEW YORK MELLON v. Lopes, NM: Court of Appeals 2014 | Another Bad Day for MERS–This Time in New Mexico (MERS cannot assign the note and thus create standing in RMBS Trust)

BANK OF NEW YORK MELLON v. Lopes, NM: Court of Appeals 2014 | Another Bad Day for MERS–This Time in New Mexico (MERS cannot assign the note and thus create standing in RMBS Trust)

THE BANK OF NEW YORK MELLON f/k/a THE BANK OF NEW YORK, NOT IN ITS INDIVIDUAL CAPACITY BUT SOLELY AS TRUSTEE FOR THE BENEFIT OF THE CERTIFICATE HOLDERS OF THE CWABS INC., ASSET-BACKED CERTIFICATES, SERIES 2006-16, Plaintiff-Appellee,
v.
SUZANNE LOPES, Defendant-Appellant, and
MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC. (SOLELY AS NOMINEE FOR LENDER AND LENDER’S SUCCESSOR AND ASSIGNS) and OSCAR D. FREITES, Defendants.

Docket No. 32,310.
Court of Appeals of New Mexico.

July 22, 2014.
The Castle Law Group, LLC, Peggy A. Whitmore, Elizabeth Mason, Albuquerque, NM, for Appellee.

Suzanne Lopes, Albuquerque, NM, Pro Se Appellant.

OPINION

VIGIL, Judge.

{1} Defendant, Suzanne Lopes (Homeowner), appeals from the district court order granting summary judgment in favor of Plaintiff, The Bank of New York Mellon (the Bank). Homeowner contends, among other things, that the Bank failed to show that it had standing to bring its foreclosure claim. We agree with Homeowner and reverse.

I. BACKGROUND

{2} Homeowner executed a promissory note to Countrywide Home Loans, Inc. (Countrywide), in the amount of $140,000 for the purchase of a home. Homeowner also signed a mortgage contract with Mortgage Electronic Registration Systems (MERS), as nominee for Countrywide, as security for the loan. On July 6, 2011, MERS assigned Homeowner’s mortgage to the Bank. On August 4, 2011, the Bank filed a complaint for foreclosure, asserting that the loan was in default. The complaint asserted that “[the Bank] is the owner of the [m]ortgage and the holder in due course of the [n]ote.” The Bank attached to the complaint copies of the mortgage and the mortgage assignment. Representing herself, Homeowner answered, asserting that to bring the action, the Bank was required to own both the mortgage and the promissory note. Because there was no evidence that the Bank owned the note, Homeowner contended that the Bank had no standing.

{3} On September 22, 2011, as an exhibit to the Bank’s response to a motion filed by Homeowner to disqualify counsel, the Bank attached a copy of a promissory note from Homeowner to Countrywide. The note was indorsed in blank by Michelle Sjolander, Executive Vice President of Countrywide. The indorsement was undated and appears to be signed by stamp rather than by hand. No evidence was presented to show when or how the Bank came into possession of the note. In any case, the Bank asserted that the assignment of the mortgage by MERS “effectively assign[ed] the [n]ote as well because . . . the [n]ote is secured by the [m]ortgage.” The Bank then filed a motion for summary judgment, which the district court granted, and it filed a decree of foreclosure on the home in favor of the Bank.

{4} Homeowner appeals, arguing that the Bank has no right to foreclose, which we construe to mean it has no standing to bring the action. In its amended answer brief, the Bank asserts that a copy of the mortgage and assignment of mortgage were attached to the original complaint and that substantial evidence supports the finding by the district court that it was a holder under the New Mexico Uniform Commercial Code (UCC) of Homeowner’s note.

II. DISCUSSION

{5} On appeal, Homeowner raises several issues in addition to standing. Because our disposition of the standing issue is dispositive, we do not reach the merits of the other issues.

A. Standard of Review

{6} “Summary judgment is appropriate where there are no genuine issues of material fact and the movant is entitled to judgment as a matter of law.” Self v. United Parcel Serv., Inc., 1998-NMSC-046, ¶ 6, 126 N.M. 396, 970 P.2d 582. We review issues of law de novo. Id. “The movant need only make a prima facie showing that he is entitled to summary judgment. Upon the movant making a prima facie showing, the burden shifts to the party opposing the motion to demonstrate the existence of specific evidentiary facts which would require trial on the merits.” Roth v. Thompson, 1992-NMSC-011, ¶ 17, 113 N.M. 331, 825 P.2d 1241. Because we hold that there are material issues of fact and matters of law that preclude summary judgment, we reverse the order granting summary judgment to the Bank.

B. The Bank Lacks Standing

{7} Our Supreme Court “clarified that standing is a jurisdictional prerequisite.” Deutsche Bank Nat’l Trust Co. v. Beneficial N.M. Inc., 2014-NMCA-___, ___ P.3d ___, ¶ 8 (No. 31,503, May 1, 2014); see also Bank of N.Y. v. Romero, 2014-NMSC-007, ¶ 15, 320 P.3d 1 (“[L]ack of standing is a potential jurisdictional defect.” (alteration, internal quotation marks, and citation omitted)). Therefore, standing must be established as of the commencement of a suit. Bank of N.Y., 2014-NMSC-007, ¶ 17 (“[S]tanding is to be determined as of the commencement of suit.” (alteration in original) (internal quotation marks and citation omitted)); Deutsche Bank, 2014-NMCA-___, ¶ 8 (“[S]tanding . . . must be established at the time the complaint is filed.”); Lujan v. Defenders of Wildlife, 504 U.S. 555, 570 n.5 (1992) (“[S]tanding is to be determined as of the commencement of suit[.]“).

{8} In order for the Bank to establish standing to bring a suit for foreclosure against Homeowner, it was required to demonstrate the right to enforce both the promissory note and the mortgage lien on the property at the time it filed its complaint. See Bank of N.Y., 2014-NMSC-007, ¶ 17 (stating that the bank had the burden of establishing ownership of the note and the mortgage under the UCC at the time it filed suit); see also Deutsche Bank, 2014-NMCA-___, ¶ 8 (stating that in order to demonstrate standing in a foreclosure case, a lender must establish at the time of the complaint: “(1) a right to enforce the note, which represents the debt, and (2) ownership of the mortgage lien upon the debtor’s property”). The standing issue in this case pivots on whether the Bank demonstrated that it was entitled to enforce the note.

{9} The right to enforce negotiable instruments, which include notes for home loans like that of Homeowner, is governed by the UCC. See Bank of N.Y., 2014-NMSC-007, ¶ 19 (stating that notes for home loans are negotiable instruments and that the UCC governs enforcement of negotiable instruments). To establish the right to enforce Homeowner’s note under the UCC, the Bank was required to prove that at the time suit was filed, it was: “(i) the holder of the instrument, (ii) a nonholder in possession of the instrument who has the rights of a holder, or (iii) a person not in possession of the instrument who is entitled to enforce the instrument.” NMSA 1978, § 55-3-301 (1992). Because the Bank asserted in its complaint that it was a “holder in due course[,]” and on appeal argues that it was a holder,[1] we consider only whether the Bank had standing to bring suit as a holder, the first of the three ways to establish the right to enforce a negotiable instrument under the UCC.

{10} “Holder” is a term of art within the UCC. While it is necessary to possess a negotiable instrument to qualify as a holder, possession of a negotiable instrument is not of itself necessarily sufficient. See Bank of N.Y., 2014-NMSC-007, ¶ 21 (“The first requirement of being a holder is possession of the instrument. However, possession is not necessarily sufficient to make one a holder.” (internal quotation marks and citation omitted)). Because Homeowner’s note was originally made payable to Countrywide, not the Bank, this case concerns a non-payee to a note asserting the right to enforce as a holder. The UCC provides two paths by which a third party to a note can establish the right to enforce as a holder: (1) possession of the note properly indorsed specifically to the third party; or (2) possession of the note properly indorsed in blank—that is, properly indorsed but not to an identified person or entity. See NMSA 1978 § 55-1-201(b)(21) (2005) (stating that a holder is a person in possession of a negotiable instrument payable: (1) to bearer, or (2) to an identified person and who is that person); see § 55-1-201(b)(5) (identifying bearer paper as a negotiable instrument that has an indorsement in blank).

{11} The Bank argues that because it attached the assignment of mortgage made to the Bank by MERS that the Bank was entitled to enforce the note. This is not consistent with Bank of N.Y., which was decided by our Supreme Court while this case was pending. In Bank of N.Y., our Supreme Court concluded that MERS “is merely a nominee for [the lender] in the underlying [m]ortgage” and, as such, “lacked any authority to assign [the homeowners'] note.” 2014-NMSC-007, ¶ 35 (internal quotation marks omitted). The Court observed that a note and a mortgage serve distinct contractual functions—the note is the debt while the mortgage is a pledged security for the debt. Id. ¶ 17. Accordingly, the MERS assignment of mortgage to the Bank was ineffective to establish the Bank’s right to enforce the note.

{12} Neither the Bank’s attachment of a copy of Homeowner’s note, indorsed in blank, to its September 22, 2011 pleading nor its production of that note at the summary judgment hearing on July 17, 2012 established the Bank’s standing to bring the suit for foreclosure against Homeowner on July 6, 2011. Under the UCC, possession of a note properly indorsed in blank establishes the right to enforce that note. See id. ¶ 24 (stating a blank indorsement makes the negotiable instrument bearer paper and therefore payable to the person who is in possession). But again, in order to establish standing to bring a suit for foreclosure, the right to enforce the note must be established at the time the complaint is filed. See id. ¶ 17 (“Standing is to be determined as of the commencement of the suit . . . . the [bank] had the burden of establishing timely ownership of the note and the mortgage to support its entitlement to pursue a foreclosure action.” (alteration, internal quotation marks, and citation omitted)). In Deutsche Bank, we concluded that a note with an undated indorsement in blank, which was not produced at the time the complaint was filed, but only at trial, was insufficient to establish a bank’s standing to foreclose. 2014-NMCA-___, ¶ 13. As in Deutsche Bank, the Bank’s failure to establish that it had the right to enforce Homeowner’s note as of the date the complaint for foreclosure was filed constitutes a failure to establish the Bank’s standing to bring the suit and a jurisdictional defect.

{13} Because the Bank failed to establish that it had the right to enforce Homeowner’s note as of the time of the complaint, the Bank lacked standing to file a suit for foreclosure against Homeowner.

CONCLUSION

{14} The district court order is reversed, and this case is remanded for further proceedings consistent with this Opinion.

{15} IT IS SO ORDERED.

JAMES J. WECHSLER, Judge and TIMOTHY L. GARCIA, Judge, concurs.

[1] Holders in due course under the UCC are a subset of holders who “took the instrument (i) for value, (ii) in good faith, [and] (iii) without notice that the instrument is overdue or has been dishonored[,]” among other requirements. NMSA 1978, Section 55-3-302(a)(2) (1992). Holders in due course are immunized from certain “personal defenses” generally available to the maker of a note. See Cadle Co., Inc. v. Wallach Concrete, Inc., 1995-NMSC-039, ¶ 8, 120 N.M. 56, 897 P.2d 1104. We do not consider the Bank’s assertion of holder in due course status because the parties ignore it and because disposition of the case does not require our consideration thereof.

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CITI Group to Buy OneWest for $3.4 Billion

CITI Group to Buy OneWest for $3.4 Billion

NYT-

The CIT Group, a lender to small and midsize businesses run by John A. Thain, said on Tuesday that it had agreed to acquire the parent company of OneWest Bank for $3.4 billion in cash and stock.

The deal will bolster CIT’s lending abilities by more than doubling its deposit base. OneWest currently manages $15 billion in deposits, as well as $23 billion in assets, including commercial and home mortgages.

It will merge with CIT’s own bank, creating a commercial bank with $28 billion in deposits and $67 billion in assets — putting it above the $50 billion threshold for increased regulatory oversight of banks deemed systemically important.

[NEW YORK TIMES]

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Housing Ponzi Scheme Losses: American Homeowners Battling Wall Street

Housing Ponzi Scheme Losses: American Homeowners Battling Wall Street

Relief for Homeowners?

Will the BlackRock/PIMCO suit help homeowners? Not directly. But it will get some big guns on the scene, with the ability to do all sorts of discovery, and the staff to deal with the results.

Fraud is grounds for rescission, restitution and punitive damages. The homeowners may not have been parties to the pooling and servicing agreements governing the investor trusts, but if the whole business model is proven to be fraudulent, they could still make a case for damages.


Global Research-

For years, homeowners have been battling Wall Street in an attempt to recover some portion of their massive losses from the housing Ponzi scheme. But progress has been slow, as they have been outgunned and out-spent by the banking titans.

In June, however, the banks may have met their match, as some equally powerful titans strode onto the stage. Investors led by BlackRock, the world’s largest asset manager, and PIMCO, the world’s largest bond-fund manager, have sued some of the world’s largest banks for breach of fiduciary duty as trustees of their investment funds. The investors are seeking damages for losses surpassing $250 billion. That is the equivalent of one million homeowners with $250,000 in damages suing at one time.

The defendants are the so-called trust banks that oversee payments and enforce terms on more than $2 trillion in residential mortgage securities. They include units of Deutsche Bank AG, U.S. Bank, Wells Fargo, Citigroup, HSBC Holdings PLC, and Bank of New York Mellon Corp. Six nearly identical complaints charge the trust banks with breach of their duty to force lenders and sponsors of the mortgage-backed securities to repurchase defective loans.

[GLOBAL RESEARCH]

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Merritt v. Countrywide Financial Corp. || “….district courts may evaluate RESPA claims case-by-case; and, therefore, in this case, the court vacated the dismissal of plaintiffs’ Section 8 of RESPA claims on limitations grounds and remanded for reconsideration. ….”

Merritt v. Countrywide Financial Corp. || “….district courts may evaluate RESPA claims case-by-case; and, therefore, in this case, the court vacated the dismissal of plaintiffs’ Section 8 of RESPA claims on limitations grounds and remanded for reconsideration. ….”

 

DAVID MERRITT; SALMA MERRITT, Plaintiffs-Appellants,
v.
COUNTRYWIDE FINANCIAL CORPORATION, a Delaware corporation; COUNTRYWIDE HOME LOANS, INC., a New York corporation; ANGELO MOZILO, an individual; MICHAEL COLYER, an individual; DAVID SAMBOL, an individual; BANK OF AMERICA, NA; KEN LEWIS, an individual; JOHN BENSON, Defendants-Appellees.

No. 09-17678.
United States Court of Appeals, Ninth Circuit.
Argued and Submitted November 9, 2012—San Francisco, California.
Filed July 16, 2014.
Jacob N. Foster (argued), Kasowitz, Benson, Torres & Friedman LLP, San Francisco, California, for Plaintiffs-Appellants.

James Goldberg (argued) and Stephanie A. Blazewicz, Bryan Cave LLP, San Francisco, California; Douglas E. Winter and Angela Buenaventura, Bryan Cave LLP, Washington D.C., for Defendants-Appellees Countrywide Home Loans, Inc., Countrywide Financial Corporation, Bank of America Corporation, Michael Coyler, David Sambol, and Kenneth Lewis.

Charles Elder and Caleb Bartel, Irell & Manella LLP, Los Angeles, California, for Defendant-Appellee Angelo Mozilo.

Susan H. Handelman, Ropers, Majeski, Kohn & Bently, Redwood City, California, for Defendant-Appellee John Benson.

Before: Andrew J. Kleinfeld and Marsha S. Berzon, Circuit Judges, and William E. Smith, District Judge.[*]

Opinion by Judge Berzon, Dissent by Judge Kleinfeld

OPINION

BERZON, Circuit Judge.

Once again, we address issues arising from Countrywide Financial Corporation’s residential lending business during the period shortly before novel practices by lenders resulted in widespread distress in the housing markets. See, e.g., Balderas v. Countrywide Bank, N.A., 664 F.3d 787 (9th Cir. 2011); Cervantes v. Countrywide Home Loans, Inc., 656 F.3d 1034 (9th Cir. 2011). David Merritt and Salma Merritt (“the Merritts”) sued Countrywide Financial Corporation and various other defendants (collectively “Countrywide” or “CHL”) involved in their residential mortgage, alleging violations of numerous federal statutes. The district court dismissed the claims pleaded, with prejudice.[1] This appeal followed.

We consider in this opinion two issues raised by that dismissal: (1) whether the district court properly dismissed the Merritts’ Truth in Lending Act (“TILA”) rescission claim because they did not tender the rescindable value of their loan prior to filing suit or allege ability to tender its value in their complaint; and (2) whether the Merritts’ claims under Section 8 of the Real Estate Settlement Practices Act (“RESPA”) may proceed, including whether the RESPA limitations period, 12 U.S.C. § 2614, may be equitably tolled.[2]

Factual & Procedural Background

In March 2006, the Merritts took out both an adjustablerate mortgage[3] and a home equity line of credit (“HELOC”) with Countrywide on a home they purchased in Sunnyvale, California.[4] Initially, the Merritts’ Countrywide agent had told them, “I can pretty much guaranty you that we can get you in your new home for $1800 per month and possibly even as low as $1,500.” Three days before closing, however, the agent told the Merritts that he had completed their loan package and that their monthly payments would be $4,400 a month for the first five years: $3,200 for the mortgage, plus $1,200 for the HELOC. When the Merritts balked, the agent replied that “the market had shifted” since his initial estimates. He told the Merritts that the $4,400 monthly payment was “the lowest that you’ll find anywhere,” and if they did not close right away, they would lose their goodfaith deposit. He did not disclose that the $4,400/month figure was based on a temporary, “teaser” interest rate rather than a fixed rate, and that the Merritts’ monthly payments would be much higher once the teaser rate expired. The Merritts would not have accepted the loan if they had understood the terms.

The home’s owner falsely represented himself throughout the process as the selling agent. As the sale approached, he spoke with the Merritts’ Countrywide agent about getting the home appraised. The seller stated that he had found an appraiser who would provide an inflated appraisal of $739,000, above the home’s actual value of about $690,000, so as to justify a higher sale price. The Countrywide agent responded that he preferred to select the appraiser himself, but that since Countrywide had used the seller’s recommended appraiser before, he would agree to using him for this sale. The Countrywide agent, the seller, and the appraiser spoke over the phone, and the appraiser agreed to provide a $739,000 appraisal before having reviewed the property. The Merritts allege that Countrywide maintained a company practice of encouraging agents to select appraisers who would provide inflated appraisals, so as to increase the total amounts financed and thereby maximize Countrywide’s profits.

On the date of closing, a Countrywide representative arrived at the Merritts’ home with loan documents and said, “I will not have time to wait for you to read any of the documents, but just need you to sign these and if you have any questions or concerns afterwards, you can contact your loan agent.” The Merritts signed the documents, but between the small print and “confusing language,” did not understand the documents provided. The Countrywide representative did not give the Merritts copies of the signed documents to keep, only form notices of their right to rescind. The spaces where the lender would ordinarily fill in the relevant dates and deadlines on the form notices were left blank. The Merritts similarly were given a form for TILA disclosures, but with the spaces left blank for the annual percentage rate, finance charge, amount financed, total of payments, schedule of payments, and variable interest rate.

The day after the closing, the Merritts called their Countrywide agent and asked him to clarify the terms of their mortgage. The agent assured them that he would send them further documentation but never did. He also promised that they could refinance their mortgage at a lower interest rate after a year of on-time payments.

Over the next three years, the Merritts repeatedly requested from Countrywide the completed disclosures, to no avail. Meanwhile, Countrywide continued to send the Merritts monthly billing statements that did not disclose that the “minimum payment due” would only be applied to interest, and that they should pay more if they wanted to begin paying down the principal.

In 2009, Countrywide sent the Merritts the loan documents that they had been requesting for three years. By then, the Merritts had made about $200,000 in payments to Countrywide. The Merritts consulted with lawyers, who told them that they had been victims of “predatory lending.” They had their loan materials audited by an underwriter, who told them that he had identified numerous violations of state and federal law, including TILA, in the documentation provided by Countrywide.

Meanwhile, in August 2008, the Merritts suffered a loss of income that made them unable to afford their monthly payments. They repeatedly asked Countrywide to refinance or modify their mortgage into a conventional loan, but Countrywide refused.

In February 2009, the Merritts notified Countrywide that they wished to rescind their loan. Countrywide did not respond to the rescission request, instead offering to modify the loan. The modified loan offered was one the Merritts still could not afford.[5]

The Merritts filed this case pro se on March 18, 2009 and shortly thereafter amended the complaint.[6] Countrywide moved to dismiss the complaint in its entirety. The district court granted the motion, with prejudice. As relevant to the issues in this opinion, the district court dismissed the Merritts’ claim for rescission under TILA because the Merritts did not tender the value of their HELOC to Countrywide before filing suit, and dismissed their claims under Section 8 of RESPA as time-barred.

This appeal followed. We appointed pro bono counsel to represent the Merritts before this court.

Discussion

A. TILA rescission

TILA provides two remedies for loan disclosure violations — rescission and civil damages, each governed by separate statutory procedures.[7] Under TILA, an obligor has the “right to rescind . . . until midnight of the third business day following the consummation of the transaction or the delivery of the information and rescission forms required under this section . . . whichever is later.” 15 U.S.C. § 1635(a). Regardless of whether the required information and forms have been delivered, “[the] obligor’s right of rescission shall expire three years after the date of consummation of the transaction or upon the sale of the property.” Id. § 1635(f).

The TILA rescission provisions set out the following sequence of events for pursuing rescission: First, the obligor must notify the creditor of his intention to rescind, id. § 1635(a); then, within 20 days after receipt of notice of rescission, the creditor must return to the obligor any security interest, id. § 1635(b); and lastly, “[u]pon the performance of the creditor’s obligations under this section [i.e., upon return of the security interest], the obligor shall tender the property to the creditor.” Id. These procedures “shall apply except when otherwise ordered by a court.” Id.

Notably, “[t]he sequence of rescission and tender set forth in § 1635(b) is a reordering of the common law rules governing rescission.” Williams v. Homestake Mortg. Co., 968 F.2d 1137, 1140 (11th Cir. 1992) (citing 17A Am. Jur. 2d Contracts § 590, at 600-01 (1991)). Specifically, “[a]lthough tender of consideration received is an equitable prerequisite to rescission, the requirement was abolished by the Truth in Lending Act.” Palmer v. Wilson, 502 F.2d 860, 861 (9th Cir. 1974) “Under § 1635(b),” consequently,

all that the consumer need do is notify the creditor of his intent to rescind. The agreement is then automatically rescinded and the creditor must, ordinarily, tender first. Thus, rescission under § 1635 places the consumer in a much stronger bargaining position than he enjoys under the traditional rules of rescission.

Williams, 968 F.2d at 1140 (internal quotation marks and alteration omitted). By reversing the traditional sequence for common law rescission claims, TILA “shift[s] significant leverage to consumers,” consistent with the statute’s general consumer-protective goals. Lea Krivinskas Shepard, It’s All About the Principal: Preserving Consumers’ Right of Rescission under the Truth in Lending Act, 89 N. C. L. Rev. 171, 188 (2010).

At the same time, consumer protection is not the only goal of statutory rescission under TILA; “another goal of § 1635(b) is to return the parties most nearly to the position they held prior to entering into the transaction.” Williams, 968 F.2d at 1140. Balancing the two goals, the case law construing TILA has long recognized courts’ equitable power to modify the statutory rescission process. See id. at 1140; Palmer, 502 F.2d at 862. Congress confirmed this equitable role for courts overseeing TILA rescission proceedings when it amended TILA in 1980 to clarify that the § 1635(b) sequence of procedures “shall apply except when otherwise ordered by a court.” See Truth in Lending Simplification and Reform Act, Pub. L. No. 96-221, § 612(a)(4), 94 Stat. 175 (1980), codified at 15 U.S.C. § 1635(b).

Invoking this permission, the district court dismissed the Merritts’ TILA rescission claim because their complaint did not “allege that they tendered the Home Equity Line of Credit or its reasonable value to CHL or Bank of America when they sought rescission.” In so ruling at the pleading stage, the district court erred.

In accordance with the statutory provision that courts may order an alteration of the sequence of events otherwise prescribed by the TILA rescission provision, see id., we have held that district courts may, if warranted by the circumstances of the particular case, require the obligor to provide evidence of ability to tender as a condition for denial of a summary judgment motion advanced by the creditor. See Yamamoto v. Bank of New York, 329 F.3d 1167, 1171-73 (9th Cir. 2003). Yamamoto concluded that where “it is clear from the evidence that the borrower lacks capacity to pay back what she has received (less interest, finance charges, etc.), the court does not lack discretion to do before trial what it could do after,” i.e., refuse to enforce rescission. Id. at 1173. In so ruling, Yamamoto relied on earlier cases which had permitted judges after a resolution of the TILA claim on the merits to condition rescission on tender. Palmer, one of those earlier cases, had instructed courts considering such a condition to take into account “the equities present in a particular case, as well as consideration of the legislative policy of full disclosure that underlies [TILA] and the remedial-penal nature of the private enforcement provisions of the Act.” Id. at 1171 (quoting Palmer, 502 F.2d at 862); see also LaGrone v. Johnson, 534 F.2d 1360, 1362 (9th Cir. 1976) (holding that court should condition rescission on tender where TILA violations “were not egregious and the equities heavily favor the creditors”).

Like some other district courts in this circuit, the district court in this case extended Yamamoto to require that plaintiffs plead ability to tender in their complaint. See Botelho v. U.S. Bank, N.A., 692 F. Supp. 2d 1174, 1180 (N.D. Cal. 2010) (collecting cases). We reject this extension.

As Botelho noted, Yamamoto “was decided in the procedural context of summary judgment, when the district court was in a position to consider a full range of evidence in deciding whether to condition rescission on tender.” Id. at 1180. Without such evidentiary development, a district court is in no position to evaluate equitable considerations of the sort identified in Yamamoto and its predecessors. The equities to be considered, Yamamoto noted, might include the nature of the TILA violations (such as whether they were or were not egregious); whether the obligor had gone into bankruptcy; and the borrower’s ability to repay the proceeds (including, perhaps, whether that ability to repay was itself dependent upon a rescission order because without such an order, the obligor could not refinance or sell the property). 329 F.3d at 1171, 1173. “Whether the call is correct must be determined on a case-by-case basis, in light of the record adduced.” Id. at 1173. In making the call, the court may consider evidence such as affidavits and deposition testimony or may hold an evidentiary hearing. See Palmer, 502 F.2d at 862. To prescribe the pleading of ability to tender in every TILA rescission case would be inconsistent with this evidencegrounded, case-by-case approach.[8]

Further, our approach better comports with the TILA statutory text, which prescribes an enforcement sequence except when “otherwise ordered by a court.” 15 U.S.C. § 1635(b). If all obligors had to allege ability to tender payment when seeking rescission and so allege in a complaint for enforcement of the rescission obligation, then (1) the requirement of doing so would no longer be an exception, and (2) the requirement would not be “otherwise ordered by a court,” as a complaint initiates suit before any court order issues.

Moreover, Yamamoto recognized that if a creditor acquiesces at the outset in the notice of rescission, “then the transaction [is] rescinded automatically, thereby causing the security interests to become void and triggering the sequence of events laid out in subsections (d)(2) and (d)(3) [of Regulation Z, 12 C.F.R. § 226.23, which implements 15 U.S.C. § 1635(b)].” 329 F.3d at 1172. Yamamoto‘s holding allowing district courts to vary that sequence was targeted at situations in which the creditor “produce[s] evidence sufficient to create a triable issue of fact about compliance with TILA’s disclosure requirements.” Id. Where no such evidence (or viable legal argument) is produced, then the situation is legally indistinguishable for judicial remedy purposes from one in which the creditor initially acquiesced in the rescission; that is what should have happened in the absence of a tenable defense. Automatically to require tender in the pleadings before any colorable defense has been presented would encourage creditors to refuse to honor indisputably valid rescission requests, because doing so would allow the security interest to remain in place absent tender. The result would be to allow creditors to vary the statutory sequence simply through intransigence.

In addition, in many cases, it will be impossible for the parties or the court to know at the outset whether a borrower asserting her TILA rescission rights will ultimately be able to return the loan proceeds as required by the statute. That ability may depend upon the merits of her TILA rescission claim or on other claims related to the same loan transaction. See, e.g., Prince v. U.S. Bank Nat’l Ass’n, 2009 WL 2998141, at *5 (S.D. Ala. Sept. 14, 2009) (denying creditor’s motion to dismiss as based on “mere speculation” that plaintiffs would be unable to tender, and indicating that court would address the proper sequences for implementing the rescission, if necessary, only after resolving the rescission claim on the merits). For instance, if a TILA rescission claim is meritorious and the creditor relinquishes its security interest in the property upon notice of rescission as required by the default § 1635(b) sequence, the obligor may then be able to refinance or sell the property and thereby repay the original lender. Cf. Burrows v. Orchid Island TRS, LLC, 2008 WL 744735, at *6 (C.D. Cal. Mar. 18, 2008) (declining to require pleading of tender where the court inferred that borrower would be able to tender by selling or refinancing the property if rescission was found to be appropriate); Williams v. Saxon Mortg. Co., 2008 WL 45739, at *6 n.10 (S.D. Ala. Jan. 2, 2008) (declining to condition rescission on tender as was done in Yamamoto, because it was not clear that borrower would not be able to refinance the loan). Or her complaint may allege damages claims arising from the same loan transaction, the proceeds of which, if successful, could then be used to satisfy her TILA tender obligation. See Shepard, supra, at 205 & n.200, 210.

For all these reasons, any requirement that all TILA rescission plaintiffs allege ability to tender cannot be reconciled with the statute, Yamamoto‘s holdings, and Yamamoto‘s underpinnings. Any suggestion that such a pleading requirement may apply in some cases but not others fares no better, for two reasons:

First, requiring a subset of TILA rescission plaintiffs to plead tender would effectively impose a special pleading requirement upon those plaintiffs, without any advance notice as to who those plaintiffs are. After Ashcroft v. Iqbal, 556 U.S. 662 (2009), as before, “Rule 8(a)’s simplified pleading standard applies to all civil actions, with [only] limited exceptions.” Swierkiewicz v. Sorema N.A., 534 U.S. 506, 513 (2002) (emphasis added); see Starr v. Baca, 652 F.3d 1202, 1215-16 (9th Cir. 2011) (discussing how to reconcile Iqbal and Swierkiewicz). Under this standard, a plaintiff need only plead “sufficient allegations of underlying facts to give fair notice and to enable the opposing party to defend itself effectively,” and “the factual allegations that are taken as true must plausibly suggest an entitlement to relief.” Starr, 652 F.3d at 1216. There is no authority for altering the pleading requirements for a given statutory claim for some plaintiffs making that claim and not for others.

Second, there would be no principled way to determine which plaintiffs should be required to plead tender in the complaint. Yamamoto and its predecessors indicate that major factors as to whether to require tender in advance of rescission are the strength of any defense to rescission and the egregiousness of any TILA violation. Neither of these considerations can be evaluated before the creditor advances its defense, factually and legally. Nor do we see how the other “case-by-case” considerations pertinent under Yamamoto can be set out in such a way as to notify TILA plaintiffs in advance of any special, heightened pleading requirements applicable to them in particular.

For all these reasons, we hold that plaintiffs can state a claim for rescission under TILA without pleading that they have tendered, or that they have the ability to tender, the value of their loan. Only at the summary judgment stage may a court order the statutory sequence altered and require tender before rescission — and then only on a “case-by-case basis,” Yamamoto, 329 F.3d at 1173, once the creditor has established a potentially viable defense.

In light of this holding, we reverse the district court’s Rule 12(b)(6) dismissal of the Merritts’ TILA rescission claim and remand for further proceedings on that claim.

B. The RESPA Section 8 claims

Congress enacted RESPA in 1974 in response to abusive practices that inflate the cost of real estate transactions. 12 U.S.C. § 2601(a); see Sosa v. Chase Manhattan Mortg. Corp., 348 F.3d 979, 981 (11th Cir. 2003). Section 8 of RESPA prohibits kickbacks and unearned fees and may be enforced criminally or civilly. 12 U.S.C. § 2607. Civil actions under this section must be brought within one year of the alleged violation. Id. § 2614. The district court dismissed the Merritts’ claims under Section 8 of RESPA as “barred by the one-year statute of limitations because Plaintiffs filed suit nearly three years after closing on their loan.” The district court held that “the [RESPA] limitations period begins to run as of the date of the closing,” and did not address whether the statute might have been equitably tolled to the date in 2009 when the Merritts allege that they actually received their loan documents.

There is no direct precedent in this court on the RESPA equitable tolling issue, although we have held that the closely similar TILA limitations period provision may be equitably tolled. See King v. California, 784 F.2d 910, 914-15 (9th Cir. 1986). Before proceeding to the question whether we should reach the same conclusion as to tolling under RESPA as we did under TILA, we first consider whether we should pretermit that issue by affirming on a separate ground.

1. Plaintiffs’ RESPA Section 8 claims

We may affirm a dismissal on any properly preserved ground supported in the record. Johnson v. Riverside Healthcare Sys., LP, 534 F.3d 1116, 1121 (9th Cir. 2008); Papa v. United States, 281 F.3d 1004, 1009 (9th Cir. 2002). However, we are not required to do so, “and as a prudential matter can properly remand to the district court” rather than “decide ab initio issues that the district court has not had an opportunity to consider and that present questions of first impression in our circuit.” Badea v. Cox, 931 F.2d 573, 575 n.2 (9th Cir. 1991) (internal quotation marks omitted).

After considering the two RESPA Section 8 claims briefly, we have determined, as we shall explain shortly, that each raises fairly complex legal questions of first impression in this circuit neither decided by the district court nor fully briefed before this court. We therefore conclude that prudence counsels against addressing those claims on the merits in advance of any district court decision on them.

Plaintiffs alleged two theories of liability under Section 8 of RESPA, which we address in turn.

a. Section 8(b)

RESPA Section 8(b) prohibits the “giv[ing] . . . [of] any portion, split, or percentage of any charge made or received for the rendering of a real estate settlement service . . . other than for services actually performed.” 12 U.S.C. § 2607(b). The Merritts allege that defendants violated Section 8(b) by “charg[ing] [them] . . . cost[s] for copying, insurance and other costs associated with the loan, which cost Defendants significantly less,” thereby “pass[ing] on charges which falls within the definition of `markups’ and were charges not actually earned for any service.”

A case closely similar, but not identical, to this one as to the RESPA Section 8 “markup” issue, Martinez v. Wells Fargo Home Mortg., Inc., 598 F.3d 549, 553 (9th Cir. 2010), held that RESPA Section 8(b) “prohibits only the practice of giving or accepting money where no service whatsoever is performed in exchange for that money” (emphasis added). “By negative implication, Section 8(b) cannot be read to prohibit charging fees, excessive or otherwise, when those fees are for services that were actually performed.” Id. at 553-54.

The plaintiffs in Martinez did not press a third-party “markup” theory on appeal — that is, a theory that depended on the provision of services by a party other than by the defendant who charged the fee and collected it from the consumer. See id. at 552 n.2. The Merritts, therefore, urge us to distinguish Martinez and follow the Second Circuit’s decision in Kruse v. Wells Fargo Home Mortg., Inc., 383 F.3d 49 (2d Cir. 2004). Kruse held that while straight overcharges are not actionable under Section 8(b), markups for services provided by a third party are actionable. Id. at 58-62.

The circuits are divided on the third-party markup issue under RESPA. In holding that third-party markups were actionable under Section 8(b), Kruse held that the statute itself was ambiguous and therefore deferred to a HUD policy statement interpreting the provision to prohibit markups. See Kruse, 383 F.3d at 57. Santiago v. GMAC Mortg. Corp., Inc., 417 F.3d 384, 388-89 (3d Cir. 2005), like Kruse, held that markups are actionable under Section 8(b), although it relied on the statutory language as unambiguous, rather than on an agency interpretation of an ambiguous statute. In contrast, several circuits have held or strongly implied that third-party markups are not actionable under RESPA Section 8(b). See Freeman v. Quicken Loans, Inc., 626 F.3d 799, 804 (5th Cir. 2010) (“RESPA is an anti-kickback statute, not an anti-price gouging statute”); Haug v. Bank of Am., N.A., 317 F.3d 832, 836 (8th Cir. 2003) (holding that charging plaintiffs more for third-party services than defendant paid for them, “standing alone, does not violate Section 8(b) of RESPA”); Boulware v. Crossland Mortg. Corp., 291 F.3d 261, 266, 268 (4th Cir. 2002) (“§ 8(b) requires fee-splitting or a kickback”; “Congress chose to leave markups . . . to the free market”); Krzalic v. Republic Title Co., 314 F.3d 875, 881 (7th Cir. 2002) (holding that markups are not actionable under RESPA, which “is not a price-control statute”).[9]

This question, which raises complicated issues of statutory interpretation and administrative law of first impression in this circuit, was not addressed by the district court and only minimally briefed before this court. We therefore decline to decide the question in the first instance on appeal.

b. Section 8(a)

Section 8(a) prohibits the “giv[ing] . . . [of] any fee, kickback, or thing of value pursuant to any agreement or understanding, oral or otherwise, that business incident to or a part of a real estate settlement service involving a federally related mortgage loan shall be referred to any person.” 12 U.S.C. § 2607(a). Plaintiffs’ theory of Section 8(a) liability is that Countrywide referred appraisal business to the appraiser, Benson, in exchange for a “thing of value,” namely, an inflated appraisal.

At oral argument, defendants disputed the facts underlying the Section 8(a) claim. Specifically, defendants argued that the Merritts have admitted that the appraisal referral was made “before [they] first contacted Countrywide.” These factual claims rely on documents that were not before the district court, and in any event, are unavailing in light of this court’s duty to accept the plaintiffs’ allegations as true at the pleading stage of the litigation. Contrary to defendants’ representation at oral argument, the operative complaint alleges that the Merritts were in contact with their Countrywide agent as early as February 2006, and that the agent and the appraiser were in contact in early March. To the extent that there are possible inconsistencies in the timeline alleged in the complaint, the district court as well as this court must construe the complaint in the light most favorable to the plaintiffs and grant leave to amend if any defects could be cured. See Lucas v. Dep’t of Corr., 66 F.3d 245, 248 (9th Cir. 1995) (per curiam) (pro se complaints should be dismissed without leave to amend only if it is clear that deficiencies could not be cured by amendment).

Countrywide also argued in its brief that the Merritts’ Section 8(a) claim cannot survive dismissal because the statute only provides for liability “to the person or persons charged for the settlement service involved in the violation,” 12 U.S.C. § 2607(d)(2), and the Merritts did not allege that they were charged for the appraisal. However, this failing could be cured if the Merritts were granted leave to amend the complaint to allege that, as they contend in their reply brief, they paid the appraiser directly.

A more complicated question is whether an inflated appraisal would qualify as a “thing of value” as that term is defined for RESPA purposes. The answer is not self-evident, the parties briefed this question only in passing, and the district court did not decide it. Moreover, the determination of this question may depend on factual development as to the precise structure of the agreement and the sequence of events. We therefore do not decide this question in the first instance either. We conclude only that we are not prepared to affirm at this juncture on the ground that the inflated appraisal was not a “thing of value” for RESPA purposes, and so must reach the limitations issue.

2. Equitable tolling

The district court dismissed the Merritts’ claims under Section 8 of RESPA as “barred by the one-year statute of limitations because Plaintiffs filed suit nearly three years after closing on their loan,” and, although the issue was raised, did not consider whether the statute might have been equitably tolled to the date in 2009 when the Merritts allege that they actually received their loan documents. Only at that time, the Merritts allege, did they learn about the markups charged, as well as key information about their loan that could help to tip them off to the appraisal kickback scheme, including that the individual they thought had been the home’s selling agent was actually also its owner.

The pertinent RESPA limitations provision states:

Jurisdiction of courts; limitations. Any action pursuant to the provisions . . . of this title may be brought in the United States district court or in any other court of competent jurisdiction, for the district in which the property involved is located, or where the violation is alleged to have occurred, within . . . 1 year in the case of a violation of section 2607 . . . of this title from the date of the occurrence of the violation

. . . .

12 U.S.C. § 2614.

We have not previously decided whether the RESPA statutory limitations period may be equitably tolled. King did, however, address a closely similar question concerning the TILA limitations period. King, 784 F.2d 910. King held that the TILA limitations period was subject to equitable tolling. Id. at 195. We reach the same conclusion here with regard to the RESPA limitations period.

There has, however, been considerable development since King in the general principles governing the availability of equitable tolling of statutory limitations periods. Consequently, we conduct a somewhat more extensive analysis of the pertinent considerations than did King, albeit with the same result.

Our departure point under post-King case law is the proposition that “[t]ime requirements in lawsuits between private litigants are customarily subject to `equitable tolling.’” Irwin v. Dep’t of Veterans Affairs, 498 U.S. 89, 95 (1990) (citing Hallstrom v. Tillamook Cnty., 493 U.S. 20, 27 (1989)). To determine whether the RESPA limitations period falls within that customary rule, we must first determine whether it is jurisdictional; courts “[have] no authority to create equitable exceptions to jurisdictional requirements.” Bowles v. Russell, 551 U.S. 205, 214 (2007). If the RESPA limitations period is non-jurisdictional, we must assess whether Congress has clearly precluded equitable tolling. See United States v. Brockamp, 519 U.S. 347, 350 (1997).

a. The RESPA limitations period is not jurisdictional

In a series of recent cases, the Supreme Court has “pressed a strict[] distinction between truly jurisdictional rules, which govern `a court’s adjudicatory authority,’ and nonjurisdictional `claim-processing rules,’ which do not.” Gonzalez v. Thaler, 132 S. Ct. 641, 648 (2012) (quoting Kontrick v. Ryan, 540 U.S. 443, 454-55 (2004)). In doing so, the Court has clarified that “the term `jurisdictional’ properly applies only to prescriptions delineating the classes of cases (subject-matter jurisdiction) and the persons (personal jurisdiction) implicating [the court's adjudicatory] authority.” Reed Elsevier, Inc. v. Muchnick, 559 U.S. 154, 160-61 (2010) (emphasis added) (internal quotation marks omitted). Moreover, a rule is “jurisdictional” only if “Congress has `clearly state[d]‘ that the rule is jurisdictional.” Sebelius v. Auburn Reg’l Med. Ctr., 133 S. Ct. 817, 824 (2013) (quoting Arbaugh v. Y & H Corp., 546 U.S. 500, 515-516 (2006) (alteration in original)). To determine whether Congress clearly intended a statutory restriction to be jurisdictional, courts review factors such as the statute’s language, “context, and relevant historical treatment.” Reed Elsevier, 559 U.S. at 166. Applying this test, the Court has repeatedly held that “filing deadlines ordinarily are not jurisdictional; indeed, [the Court has] described them as `quintessential claim-processing rules.’” Sebelius, 133 S. Ct. at 825 (quoting Henderson ex rel. Henderson v. Shinseki, 131 S. Ct. 1197, 1203 (2011)). With these precepts in mind, we proceed to examine the relevant factors.

i. Language

By its terms, § 2614 provides that any RESPA Section 8 action “may be brought . . . within 1 year . . . from the date of the occurrence of the violation.” 12 U.S.C. § 2614 (emphasis added). This non-mandatory language is far more permissive than several limitations provisions that have been held amenable to equitable tolling. For example, the limitations provision held to be non-jurisdictional and tollable in Henderson, 131 S. Ct. at 1204, stated that a claimant “shall file . . . within 120 days” (emphasis added). If not all “mandatory prescriptions, however emphatic, are . . . properly typed jurisdictional,” Henderson, 131 S. Ct. at 1205 (emphasis added) (internal quotation marks omitted), then the use of permissive, non-mandatory language such as RESPA’s “may file” language weighs considerably against a finding that the limitations period is jurisdictional.

ii. Statutory placement

In examining whether or not a rule is jurisdictional, a few of the Supreme Court’s recent cases have assigned some significance to whether the rule is “located in a jurisdictiongranting provision.” Reed Elsevier, 559 U.S. at 166; see also Henderson, 131 S. Ct. 1205; Payne v. Peninsula Sch. Dist., 653 F.3d 863, 870-71 (9th Cir. 2011) (en banc), overruled in part on other grounds by Albino v. Baca, 747 F.3d 1162 (9th Cir. 2014). Countrywide primarily relied upon this factor to support its argument against equitable tolling, citing the D.C. Circuit’s holding that “the [RESPA] time limitation is a jurisdictional prerequisite to suit and as such not subject to equitable tolling.” Hardin v. City Title & Escrow Co., 797 F.2d 1037, 1038 (D.C. Cir. 1986). To reach its conclusion, Hardin relied upon the placement of the RESPA time limitation in “the same sentence” that, in Hardin‘s characterization, “creates federal and state court jurisdiction” under RESPA, and upon the subtitle of the section, “Jurisdiction of Courts.” See id. at 1039.

In light of Supreme Court cases decided since Hardin, we cannot agree with the D.C. Circuit that the RESPA time limitation is placed in a sentence that “creates federal and state court jurisdiction.” It is true that the provision appears under the heading “Jurisdiction of courts; limitations.” But, as the Supreme Court has noted in recent years, “jurisdiction” has “many, too many meanings.” Arbaugh, 546 U.S. at 510. In particular, use of the word “jurisdiction” does not make a provision “jurisdiction-granting.Reed Elsevier so indicated, rejecting the argument that the “presence of the word `jurisdiction’” in a provision renders the entire provision jurisdictional. 559 U.S. at 163. Moreover, “[a] requirement we would otherwise classify as nonjurisdictional . . . does not become jurisdictional simply because it is placed in a section of a statute that also contains jurisdictional provisions.” Sebelius, 133 S. Ct. at 825 (citing Gonzalez, 132 S. Ct. at 651-52). “Mere proximity will not turn a rule that speaks in nonjurisdictional terms into a jurisdictional hurdle.” Gonzalez, 132 S. Ct. 651.

Here, although the RESPA limitations period appears in a provision that references the court’s “jurisdiction,” the section, read as a whole, is not a “jurisdiction-granting provision.” Reed Elsevier, 559 U.S. at 166 (emphasis added). The provision’s reference to “United States district court[s]. . . [and] other court[s] of competent jurisdiction” implies, instead, that the source of the referenced courts’ “competent jurisdiction” lies elsewhere. And that is in fact the case with regard to federal district courts, which have jurisdiction to hear claims “arising under” RESPA because it is a “law[]. . . of the United States.” See 28 U.S.C. § 1331. Other than providing for a limitations period, then, the RESPA provision at 12 U.S.C. § 2614 simply clarifies that, when determining in which court of competent jurisdiction they will file their claim, RESPA litigants have a choice of venue: either “the district in which the property involved is located,” or, if it differs, “where the violation is alleged to have occurred.” 12 U.S.C. § 2614.

iii. Historical treatment

In some statutory contexts, there is a venerable, consistent line of Supreme Court cases construing whether a particular limitations provision is jurisdictional. See, e.g., Bowles, 551 U.S. at 210-13; John R. Sand & Gravel Co. v. United States, 552 U.S. 130, 137-39 (2008). Here we have no such historical guidance, as the Supreme Court has not addressed whether RESPA’s limitations period is jurisdictional, nor has our court. In the absence of Supreme Court precedents the case for deference to historical guidance is much weaker here than in cases such as Bowles, 551 U.S. 205.

We do, however, have pertinent established law in this circuit, namely King, 784 F.2d 910; see also Ramadan v. Chase Manhattan Corp., 156 F.3d 499, 501-05 (3d Cir. 1998) (following King‘s holding as to TILA). King is precedent in this circuit, and is persuasive authority in this case.

King construed TILA’s similarly worded limitations period, and held it amenable to equitable tolling. The TILA limitations provision is as follows:

(e) Jurisdiction of courts; limitations on actions; State attorney general enforcement

Except as provided in the subsequent sentence, any action under this section may be brought in any United States district court, or in any other court of competent jurisdiction, within one year from the date of the occurrence of the violation. . . .

15 U.S.C. § 1640(e). Like the RESPA limitations period, then, the parallel TILA provision appears in the same sentence as a reference to “jurisdiction” and under the heading “Jurisdiction of courts; limitations on actions.”[10]

King was decided without the benefit of the Supreme Court’s recent admonitions against “profligate use” of the term “jurisdiction[al].” Payne, 653 F.3d at 868 (internal quotation marks omitted); see Arbaugh, 546 U.S. at 510. But King necessarily relied upon an understanding that the TILA limitations period was non-jurisdictional; otherwise, King could not have held the limitations period contained in the subsection subject to equitable tolling. Reflecting that understanding of King, the Seventh Circuit, in Lawyers Title Insurance Corp. v. Dearborn Title Corp., 118 F.3d 1157 (7th Cir. 1997), relied in part upon King‘s reasoning when it expressly declined to follow the D.C. Circuit’s contrary holding in Hardin. Lawyers Title held, instead, that the RESPA limitations period is not jurisdictional and may be equitably tolled. See Lawyers Title, 118 F.3d at 1166-67.[11]

Countrywide argues that Judge Posner’s opinion for the court in Lawyers Title is not persuasive, because it relies upon the premise that federal limitations periods “are universally. . . nonjurisdictional” unless they involve “actions against the United States.” Id. at 1166 (quoting Cent. States, Se. & Sw. Areas Pension Fund v. Navco, 3 F.3d 167, 173 (7th Cir. 1993)). The Supreme Court’s more recent equitable tolling jurisprudence indicates that the line is not quite so bright. For example, in Bowles, the Court held that “time limits for filing a notice of appeal are jurisdictional in nature.” 551 U.S. at 206.

But Irwin, decided before Lawyers Title, began from a similar premise — that “time requirements in lawsuits between private litigants are customarily subject to `equitable tolling.’” Irwin, 498 U.S. at 95. The difference between the “universally” adverb in Lawyers Title, 118 F.3d at 1166, and the “customarily” adverb in Irwin, 489 U.S. at 95, appears to reflect hyperbole in the former, but not a difference in fundamental concept. In contrast, Hardin applied the sort of rigidly formalistic jurisdictional analysis that the Supreme Court’s recent cases have eschewed.

All of these factors point towards a conclusion that the RESPA limitations period does not “implicat[e] [the district court's adjudicatory] authority,” Reed Elsevier, 559 U.S. at 161, but, instead, is an ordinary “filing deadline,” a “quintessential claim-processing rule[].” See Sebelius, 133 S. Ct. at 825. We so conclude.

b. The presumption of equitable tolling applies

As the RESPA limitations period is not jurisdictional, RESPA claims are presumptively amenable to equitable tolling, see Irwin, 489 U.S. at 95, unless Congress has clearly indicated otherwise. There is no such indication in the statute.

Many of the considerations on which we relied as to the jurisdictional issue, particularly the permissive language used in the limitations provision, also help to negate any clear barrier to equitable tolling. In addition, we are guided by the analysis in King, 784 F.2d 910, which applied an approach with respect to equitable tolling generally consistent with the recent cases. King‘s logic with regard to the TILA limitation period applies equally to the parallel RESPA provision.

King began by asking “whether tolling the statute in certain situations [would] effectuate the congressional purpose” of the statute, always “our basic inquiry” when determining whether a limitations period may be equitably tolled. Id. at 914-15. Because TILA is a broadly remedial consumer-protection statute, King reasoned, “an inflexible rule that bars suit one year after consummation [of the loan]” would be “inconsistent with legislative intent.” Id. at 914. King also recognized, however, that Congress did not intend to expose lenders “to a prolonged and unforeseeable liability.” Id. King therefore struck the balance between consumer protection and predictable liability by holding that the TILA limitations period could, “in the appropriate circumstances,” be equitably tolled, but only “until the borrower discovers or had reasonable opportunity to discover the fraud or nondisclosures that form the basis of the TILA action.” Id. at 915.

As we have recently recognized, RESPA is, like TILA, “intended . . . to serve consumer-protection purposes.” Medrano v. Flagstar Bank, FSB, 704 F.3d 661, 665 (9th Cir. 2012). Consistent with those purposes, we have concluded that “RESPA’s provisions relating to loan servicing procedures should be construed liberally to serve the statute’s remedial purpose.” Id. at 665-66 (internal quotation marks omitted). By the same token, “tolling the statute [of limitations] in certain situations [would] effectuate the congressional purpose” of protecting consumers. King, 784 F.2d at 915. There may be situations in which a consumer is unable to file suit within the statutory limitations period precisely because of a real estate service provider’s obfuscation or failure to disclose.

We hold, therefore, that although the limitations period in 12 U.S.C. § 2614 ordinarily runs from the date of the alleged RESPA violation, “the doctrine of equitable tolling may, in the appropriate circumstances, suspend the limitations period until the borrower discovers or had reasonable opportunity to discover” the violation. King, 784 F.2d at 915. Just as for TILA claims, district courts may evaluate RESPA claims case-by-case “to determine if the general rule would be unjust or frustrate the purpose of the Act and adjust the limitations period accordingly.” Id.

* * *

The district court dismissed plaintiffs’ RESPA Section 8 claims as time-barred, holding that “the [RESPA] limitations period begins to run as of the date of closing,” and thereby assuming that the period could not be equitably tolled. Rather than “decide ab initio issues that the district court has not had an opportunity to consider and that present questions of first impression in our circuit,” Badea, 931 F.2d at 575 n.2, we decline, for the reasons explained, to affirm the dismissal of the Merritts’ Section 8 claims on alternate grounds. Instead, we reach the issue that was the basis for dismissal, failure to comply with the statutory limitations period. In light of our holding today regarding equitable tolling, we vacate the dismissal of the Section 8 claims on limitations grounds and remand for reconsideration. On remand, the district court may consider such evidence as it deems appropriate to determine on what date the Merritts discovered or had reasonable opportunity to discover the alleged Section 8 violations and whether they filed their complaint within a year of that date. If the district court determines that the plaintiffs’ RESPA Section 8 claims are not time-barred, it should permit substantive amendment of the claims upon an appropriate request and continue with further proceedings consistent with this opinion. See Lucas, 66 F.3d at 248 (“Unless it is absolutely clear that no amendment can cure the defect . . . a pro se litigant is entitled to notice of the complaint’s deficiencies and an opportunity to amend.”).

Conclusion

We reverse the district court’s dismissal of plaintiffs’ TILA rescission claim and remand for further proceedings on that claim. As to plaintiffs’ RESPA Section 8 claims, we vacate the dismissal and remand to the district court for further consideration in accordance with this opinion.

REVERSED IN PART, VACATED IN PART, AND REMANDED FOR FURTHER PROCEEDINGS.

KLEINFELD, Senior Circuit Judge, dissenting:

I respectfully dissent.

We review a 12(b)(6) dismissal de novo,[1] and can affirm on any ground, regardless of whether the district court relied on it.[2]

This complaint violated Federal Rule of Civil Procedure 8(a)(2). The Rule requires a “short and plain statement of the claim showing that the pleader is entitled to relief.”[3] We are indulgent with pro se complaints, but even for them, there are limits.

The Merritt complaint is neither “short” nor “plain.” It is 68 pages long, 398 paragraphs. Nor were they deprived of opportunities to clarify what their claims were. Though they call the complaint their “Second Amended Complaint,” the truth is that it is their fifth version. They got leave to file this version of their complaint by filing a motion explaining that the amendments would be “clarifications,” along with a “stipulation” to which Countrywide did not stipulate. The leave to amend they thus obtained mooted out Countrywide’s pending motion to dismiss, so it was not adjudicated. The plaintiffs then filed their amended complaint which was materially different from the one submitted to the district court with their motion for leave to amend. Far from “clarifying” their previous complaints, this new complaint added an additional 69 paragraphs, 16 pages, and yet another cause of action.

We have articulated five factors for evaluating whether a plaintiff should be given leave to amend: “(1) bad faith, (2) undue delay, (3) prejudice to the opposing party, (4) futility of amendment; and (5) whether plaintiff has previously amended his complaint.[4] We have held that the “district court’s discretion to deny leave to amend is particularly broad where plaintiff has previously amended the complaint.”[5] Here, the Merritts have submitted five different complaints to the district court. Further amendment would unduly prejudice the defendants. The defendants have responded to two of the Merritts’ five prolix, incomprehensible complaints, doubtless at great expense for their own lawyers. Defendants have filed numerous motions addressing those complaints, for violation of Rule 8, misrepresentations, failure to state claims upon which relief may be granted, and lack of appropriate service. That is a lot of wasted money. Plaintiffs imposed this unfair prejudice on defendants by their vague prolixity and multiple filings.

The Merritts’ most recent amendments made their complaint even more prolix, and less “short and plain.” Countrywide’s combined motion to strike and dismiss placed the Merritts on notice that their complaint failed to comply with Rule 8, but they made no attempt to bring their complaint into compliance with the rules. Because of this history, dismissal with prejudice was justified. Although dismissal with prejudice for failure to comply with the rules requires consideration of less drastic alternatives,[6] here there were none, as it did not appear that plaintiffs were prepared, even after five tries, to make a short and plain statement of claims for which they were entitled to relief. Their misleading stipulation had already burdened Countrywide with the need to brief a second motion to dismiss. Allowing the Merritts a sixth attempt to plainly state their claims would be too prejudicial to the defendants to be a fair alternative under these circumstances.

The majority opinion does a heroic job of stating claims clearly on behalf of the Merritts. But plaintiffs did not state them. It is not fair to defendants to perform these legal services for plaintiffs, even pro se plaintiffs, where the plaintiffs do not evidently have good claims. “Prolix, confusing complaints such as the ones plaintiffs filed in this case impose unfair burdens on litigants and judges. As a practical matter, the judge and opposing counsel, in order to perform their responsibilities, cannot use a complaint such as the one plaintiffs filed, and must prepare outlines to determine who is being sued for what. Defendants are then put at risk that their outline differs from the judge’s, that plaintiffs will surprise them with something new at trial which they reasonably did not understand to be in the case at all, and that res judicata effects of settlement or judgment will be different from what they reasonably expected. [T]he rights of the defendants to be free from costly and harassing litigation must be considered.”[7]

If plaintiffs had what looked like a strong claim that ought to be adjudicated on the merits, judicial creation of a complaint for them might not be so unfairly prejudicial.[8] But they do not. What they appear to be saying in their 398-paragraph complaint is that they bought a $729,000 house, and borrowed $739,000 for it, because the seller lowballed them into thinking they were going to get the house for $719,000. They seem to be saying that Countrywide’s agent persuaded them to lie, which they did, in their loan application, such as by saying that Mrs. Merritt was employed when she was actually receiving disability payments (later terminated). And they seem to be saying that because they were minorities they were offered a more ample adjustable rate mortgage instead of a less ample fixed rate mortgage loan than they would otherwise be entitled to.

Were we limited to 12(b)(6) dismissal, we would have to assume for purposes of decision that the plausible factual statements (but not the legal conclusions and editorializing rhetoric) in the complaint were true.[9] We are not so limited under Rule 8 analysis, which I suggest ought to be applied. Under Rule 12 analysis, some of the claims are plausible at least in part. Obviously, if Countrywide did not properly provide the loan papers to the Merritts, a claim if timely could be made. Tender of the full amount received is not in all circumstances a sine qua non for a pleading claiming rescission, though some sort of equitable judgment requiring tender must be made if rescission is granted, to assure that the plaintiff does not get to keep what it bought and also get all the money back.[10]

It is hard to say whether plaintiffs even seek a rescission remedy that could be allowed. The prayer in their complaint seeks a return of all the money they have “invested in their property,” plus compensatory damages, plus $2,000,000 in punitive damages, plus a “prime loan at current market rates” (far lower than the housing bubble interest rates that prevailed when they bought their $729,000 house), or for them to be able to walk away with the reimbursements and damages. Their appellate brief is more modest, but was not before the district court.

Their pleading seems to say that they have been living in a $729,000 house for what is now almost six years without paying anything toward the price. If they got past their Rule 8 problems, and their Rule 12 problems, their equities appear to be weak. The Merritts have had five chances to state this claim. Prejudice and futility counsel against giving them a sixth try. We ought to let the dismissal with prejudice stand.

[*] The Honorable William E. Smith, District Judge for the U.S. District Court the District of Rhode Island, sitting by designation.

[1] The district court dismissed the claims not on Rule 8 grounds but on the merits for failure to state a claim upon which relief may be granted, pursuant to Rule 12(b)(6). The dissent suggests we affirm on the basis of Rule 8(a)(2). The enforcement of Rule 8 rests within the district court’s discretion, and defendants do not raise any Rule 8(a)(2) questions before us. Under these circumstances, it would be improper for us to affirm on Rule 8 grounds. See Gillibeau v. City of Richmond, 417 F.2d 426, 431 (9th Cir. 1969).

[2] We address the Merritts’ other claims, and the parties’ motions for judicial notice, in a memorandum disposition issued concurrently with his opinion.

[3] As is generally true in California, the legal instrument for the Merritts’ home loan was a deed of trust and not, technically speaking, a mortgage. See Siegel v. Am. Savings & Loan Ass’n, 258 Cal. Rptr. 746, 747 (Cal. Ct. App. 1989) (defining a deed of trust); 27 Cal. Jur. 3d Deeds of Trust § 1 (2011) (same); Cal. Civ. Code § 2920(b) (distinguishing mortgage from deed of trust for certain purposes under California state law). We refer to the Merritts’ home loan throughout this opinion as a mortgage, because that is how the parties have referred to it in their pleadings and briefs, and the precise financing instrument is not legally material to the issues addressed in this opinion.

[4] Because we are evaluating a district court’s dismissal pursuant to Rule 12(b)(6), we take the facts from the Merritts’ complaint and assume that they are true. See Cervantes v. United States, 330 F.3d 1186, 1187 (9th Cir. 2003).

[5] Countrywide had, in the meantime, been acquired by Bank of America. The Merritts’ loan was eventually sold to Wells Fargo.

[6] We refer to the amended complaint throughout simply as “the complaint.”

[7] Plaintiffs’ TILA claims relate solely to their home-equity line of credit, or “HELOC.” TILA does not apply to residential mortgages used to finance the initial acquisition or construction of a dwelling. See 15 U.S.C. §§ 1635(e)(1) & 1602(x). Countrywide presents for the first time on appeal the argument that plaintiffs’ HELOC falls within this residential mortgage exception. Because this argument was not previously raised in the district court, we do not address it here.

[8] Indeed, even in a common-law equitable rescission action where the plaintiff is required to tender first, the plaintiff need not necessarily plead ability to tender in the complaint. See 1 Dan B. Dobbs, Law of Remedies: Damages—Equity—Restitution § 4.8, at 463 (2d ed. 1993).

[9] The Eleventh Circuit has reserved whether a third-party markup theory might be viable under RESPA Section 8(b). See Sosa, 348 F.3d at 982-84.

[10] There is one distinction. The TILA limitations provision, as passed by Congress, appeared as one subsection in a section headed “Civil liability.” See Consumer Credit Protection Act, Pub. L. 90-321, § 130(e), 82 Stat. 146, 157 (1968). The subheading “Jurisdiction of courts” was added in the codification process. In contrast, the RESPA limitations provision, as passed by Congress, appeared under the heading “Jurisdiction of Courts.” See Real Estate Settlement Procedures Act of 1974, Pub. L. 93-534, § 16, 88 Stat. 1724, 1731 (1974). We do not ascribe significance to this distinction for present purposes. Whatever its origin, the heading just identifies a subject matter; it does not identify the subsection as jurisdiction-creating.

[11] Two other circuits have reserved the question of whether RESPA’s limitations period may be equitably tolled. See Egerer v. Woodland Realty, Inc., 556 F.3d 415, 424 n.18 (6th Cir. 2009); Snow v. First Am. Title Ins. Co., 332 F.3d 356, 361 n.7 (5th Cir. 2003).

[1] Edwards v. Marin Park, Inc., 356 F.3d 1058, 1061 (9th Cir. 2004).

[2] Janicki Logging Co. v. Mateer, 42 F.3d 561, 564 (9th Cir. 1994). The majority cites dicta in Gillibeau v. City of Richmond, 417 F.2d 426, 431 (9th Cir. 1969), a 1969 case, for the proposition that we should not, in the first instance, affirm a dismissal on Rule 8 grounds where the district court did not act upon the Rule 8 motions. On the other hand, we said, possibly in dicta, but possibly in holding, in a 1988 case, Sparling v. Hoffman Construction Co., 864 F.2d 635, 640 (9th Cir. 1988), that even if the pleading did state a claim upon which relief could be granted, “the complaint would be deficient under Rule 8(a) of the Federal Rules of Civil Procedure which requires `a short and plain statement of the claim showing that the pleader is entitled to relief.’” In the case before us, the court noted that the Merritts’ second amended complaint was “mostly unintelligible.” The district court further noted that the Merritts’ allegations and claims purported to be “made, at least in part, `hypothetically.’” It took note of the defendant’s motion to dismiss under Rule 8, but treated it as moot, because of the dismissal for failure to state a claim under Rule 12. I think we should affirm on Rule 8 grounds, and may, under Sparling.

[3] Fed. R. Civ. P. 8(a)(2).

[4] Allen v. City of Beverly Hills, 911 F.2d 367, 373 (9th Cir. 1990) (emphasis added).

[5] Id. (quoting Ascon Properties, Inc. v. Mobil Oil Co., 866 F.2d 1149, 1160 (9th Cir. 1989)).

[6] See, e.g., Nevijel v. N. Coast Life Ins. Co., 651 F.2d 671, 674 (9th Cir. 1981).

[7] McHenry v. Renne, 84 F.3d 1172, 1179-80 (9th Cir. 1996) (internal quotation marks omitted) (alteration in original).

[8] See, e.g., Von Poppenheim v. Portland Boxing & Wrestling Comm’n, 442 F.2d 1047, 1052 n.4 (9th Cir. 1971) (“Since harshness is a key consideration in the district judge’s exercise of discretion, it is appropriate that he consider the strength of a plaintiff’s case if such information is available to him before determining whether dismissal with prejudice is appropriate.”).

[9] Chavez v. United States, 683 F.3d 1102, 1108 (9th Cir. 2012).

[10] See Yamamoto v. Bank of New York, 329 F.3d 1167, 1171, 1173 (9th Cir. 2003).

Merritt v. Countrywide Financial Corp.

Docket: 09-17678 Opinion Date: July 16, 2014
Judge: Berzon
Areas of Law: Banking, Real Estate & Property Law

Plaintiffs filed suit against Countrywide and others involved in their residential mortgage, alleging violations of numerous federal statutes. The district court dismissed the claims with prejudice and plaintiffs appealed. The court held that plaintiffs can state a claim for rescission under the Truth in Lending Act (TILA), 15 U.S.C. 1601 et seq., without pleading that they have tendered, or that they have the ability to tender, the value of their loan; only at the summary judgment stage may a court order the statutory sequence altered and require tender before rescission – and then only on a case-by-case basis; and, therefore, the court reversed the district court’s dismissal of plaintiffs’ rescission claim and remanded for further proceedings. The court held that, although the limitations period in the Real Estate Settlement Practices Act (RESPA), 12 U.S.C. 2614, ordinarily runs from the date of the alleged RESPA violation, the doctrine of equitable tolling may, in the appropriate circumstances, suspend the limitations period until the borrower discovers or had reasonable opportunity to discover the violation; just as for TILA claims, district courts may evaluate RESPA claims case-by-case; and, therefore, in this case, the court vacated the dismissal of plaintiffs’ Section 8 of RESPA claims on limitations grounds and remanded for reconsideration.

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Courthouse News-

A California couple did not have to show that they could pay back a home-equity loan before legally challenging an allegedly predatory Countrywide mortgage, the 9th Circuit ruled Wednesday.
     After the lender refused to let them rescind a more-than $700,000 home loan and home equity line of credit, David and Salma Merritt sued Countrywide Financial Corp under the Truth in Lending Act (TILA) in 2009
     The Merritts claimed that their Countrywide agent had lied to them in 2006 about the details of their loan, promising a relatively low monthly payment but then jacking it up nearly threefold days before closing. They said that the agent also had failed to inform them that the final $4,400 monthly mortgage payment for their Sunnyvale home was based on “teaser rate,” and that their payments would rise even higher in the coming years.
     Countrywide’s agent, the home’s seller and an appraiser also all faced allegations of having conspired to inflate the value of the home in violation of the Real Estate Settlement Practices Act (RESPA). The couple further argued that the agent had failed to provide proper loan documentation, and that the home’s owner had lied about being the “selling agent.”

[COURTHOUSE NEWS]

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JPMorgan pulls back from mortgage lending on foreclosure worries

JPMorgan pulls back from mortgage lending on foreclosure worries

Pulling away from sub-prime lending…the same lending that got these idiots into trouble in the first place and our asses rescuing them every-time. Folks, this is a good thing!


REUTERS-

JPMorgan Chase & Co, the second-largest U.S. mortgage lender, is backing away from making home loans to less creditworthy borrowers after losing faith in its ability to recover much money from foreclosing on homes, even with government guarantees.

The shift reflects a change in the way JPMorgan runs its mortgage business: while it used to regard collateral and U.S. government lending programs as key backstops to most of its loans, it now pays closer attention to the credit quality of borrowers. The bank wants to reduce the chances of having to foreclose on a loan, because it’s bad business.

“The cost to take a customer through the foreclosure process is just astronomical now,” Kevin Watters, chief executive of JPMorgan Chase’s residential mortgage banking business in New York, told Reuters in an interview.

[REUTERS]

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BofA pays AIG $650 million to settle mortgage disputes

BofA pays AIG $650 million to settle mortgage disputes

REUTERS-

Bank of America (BAC.N) agreed to pay American International Group Inc (AIG.N) $650 million to settle long-running legal disputes over defective mortgage-backed securities sold in the run-up to the financial crisis.

The deal, which the parties announced early Wednesday, ends securities fraud litigation that the insurer brought against Bank of America. It also removes the biggest obstacle to the bank’s $8.5 billion settlement with investors in mortgage securities issued by Countrywide Financial, the subprime lender Bank of America acquired in 2008.

AIG will file notices dismissing its litigation accusing the bank of causing billions of dollars in losses by selling it shoddy mortgage securities. The litigation is pending in New York and California.

[REUTERS]

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Justice Department, Federal and State Partners Secure Record $7 Billion Global Settlement with Citigroup for Misleading Investors About Securities Containing Toxic Mortgages

Justice Department, Federal and State Partners Secure Record $7 Billion Global Settlement with Citigroup for Misleading Investors About Securities Containing Toxic Mortgages

Department of Justice

Office of Public Affairs
FOR IMMEDIATE RELEASE
Monday, July 14, 2014
Justice Department, Federal and State Partners Secure Record $7 Billion Global Settlement with Citigroup for Misleading Investors About Securities Containing Toxic Mortgages
Citigroup to Pay the Largest Penalty of Its Kind – $4 Billion

The Justice Department, along with federal and state partners, today announced a $7 billion settlement with Citigroup Inc. to resolve federal and state civil claims related to Citigroup’s conduct in the packaging, securitization, marketing, sale and issuance of residential mortgage-backed securities (RMBS) prior to Jan. 1, 2009.  The resolution includes a $4 billion civil penalty – the largest penalty to date under the Financial Institutions Reform, Recovery and Enforcement Act (FIRREA).  As part of the settlement, Citigroup acknowledged it made serious misrepresentations to the public – including the investing public – about the mortgage loans it securitized in RMBS.  The resolution also requires Citigroup to provide relief to underwater homeowners, distressed borrowers and affected communities through a variety of means including financing affordable rental housing developments for low-income families in high-cost areas.  The settlement does not absolve Citigroup or its employees from facing any possible criminal charges.

 

This settlement is part of the ongoing efforts of President Obama’s Financial Fraud Enforcement Task Force’s RMBS Working Group, which has recovered $20 billion to date for American consumers and investors.

 

“This historic penalty is appropriate given the strength of the evidence of the wrongdoing committed by Citi,” said Attorney General Eric Holder.  “The bank’s activities contributed mightily to the financial crisis that devastated our economy in 2008.  Taken together, we believe the size and scope of this resolution goes beyond what could be considered the mere cost of doing business.  Citi is not the first financial institution to be held accountable by this Justice Department, and it will certainly not be the last.”

 

The settlement includes an agreed upon statement of facts that describes how Citigroup made representations to RMBS investors about the quality of the mortgage loans it securitized and sold to investors.  Contrary to those representations, Citigroup securitized and sold RMBS with underlying mortgage loans that it knew had material defects.  As the statement of facts explains, on a number of occasions, Citigroup employees learned that significant percentages of the mortgage loans reviewed in due diligence had material defects.  In one instance, a Citigroup trader stated in an internal email that he “went through the Diligence Reports and think[s] [they] should start praying . . . [he] would not be surprised if half of these loans went down. . . It’s amazing that some of these loans were closed at all.”  Citigroup nevertheless securitized the loan pools containing defective loans and sold the resulting RMBS to investors for billions of dollars.  This conduct, along with similar conduct by other banks that bundled defective and toxic loans into securities and misled investors who purchased those securities, contributed to the financial crisis.

“Today, we hold Citi accountable for its contributing role in creating the financial crisis, not only by demanding the largest civil penalty in history, but also by requiring innovative consumer relief that will help rectify the harm caused by Citi’s conduct,” said Associate Attorney General Tony West.  “In addition to the principal reductions and loan modifications we’ve built into previous resolutions, this consumer relief menu includes new measures such as $200 million in typically hard-to-obtain financing that will facilitate the construction of affordable rental housing, bringing relief to families pushed into the rental market in the wake of the financial crisis.”

 

Of the $7 billion resolution, $4.5 billion will be paid to settle federal and state civil claims by various entities related to RMBS: Citigroup will pay $4 billion as a civil penalty to settle the Justice Department claims under FIRREA, $208.25 million to settle federal and state securities claims by the Federal Deposit Insurance Corporation (FDIC), $102.7 million to settle claims by the state of California, $92 million to settle claims by the state of New York, $44 million to settle claims by the state of Illinois, $45.7  million to settle claims by the Commonwealth of Massachusetts, and $7.35 to settle claims by the state of Delaware.

 

Citigroup will pay out the remaining $2.5 billion in the form of relief to aid consumers harmed by the unlawful conduct of Citigroup.  That relief will take various forms, including loan modification for underwater homeowners, refinancing for distressed borrowers, down payment and closing cost assistance to homebuyers, donations to organizations assisting communities in redevelopment and affordable rental housing for low-income families in high-cost areas.  An independent monitor will be appointed to determine whether Citigroup is satisfying its obligations.  If Citigroup fails to live up to its agreement by the end of 2018,  it must pay liquidated damages in the amount of the shortfall to NeighborWorks America, a non-profit organization and leader in providing affordable housing and facilitating community development.

 

The U.S. Attorney’s Offices for the Eastern District of New York and the District of Colorado conducted investigations into Citigroup’s practices related to the sale and issuance of RMBS between 2006 and 2007.

 

“The strength of our financial markets depends on the truth of the representations that banks provide to investors and the public every day,” said U.S. Attorney John Walsh for the District of Colorado, Co-Chair of the RMBS Working Group.  “Today’s $7 billion settlement is a major step toward restoring public confidence in those markets.  Due to the tireless work by the Department of Justice, Citigroup is being forced to take responsibility for its home mortgage securitization misconduct in the years leading up to the financial crisis.  As important a step as this settlement is, however, the work of the RMBS working group is far from done, we will continue to pursue our investigations and cases vigorously because many other banks have not yet taken responsibility for their misconduct in packaging and selling RMBS securities.”

 

“After nearly 50 subpoenas to Citigroup, Trustees, Servicers, Due Diligence providers and their employees, and after collecting nearly 25 million documents relating to every residential mortgage backed security issued or underwritten by Citigroup in 2006 and 2007, our teams found that the misconduct in Citigroup’s deals devastated the nation and the world’s economies, touching everyone,” said U.S. Attorney of the Eastern District of New York Loretta Lynch.  “The investors in Citigroup RMBS included federally-insured financial institutions, as well as a host of states, cities, public and union pension and benefit funds, universities, religious charities, and hospitals, among others.  These are our neighbors in Colorado, New York and around the country, hard-working people who saved and put away for retirement, only to see their savings decimated.”

 

This settlement resolves civil claims against Citigroup arising out of certain securities packaged, securitized, structured, marketed, and sold by Citigroup.  The agreement does not release individuals from civil charges, nor does it release Citigroup or any individuals from potential criminal prosecution. In addition, as part of the settlement, Citigroup has pledged to fully cooperate in investigations related to the conduct covered by the agreement.

 

Michael Stephens, Acting Inspector General for the Federal Housing Finance Agency said, “Citigroup securitized billions of dollars of defective mortgages, after which investors suffered enormous losses by purchasing RMBS from Citi not knowing about those defects. Today’s settlement is another significant step by FHFA-OIG and its law enforcement partners to hold accountable those who committed acts of fraud and deceit in the lead up to the financial crisis, and is a necessary step toward reviving a sound RMBS market that is crucial to the housing industry and the American economy.  We are proud to have worked with the Department of Justice, the U.S. Attorneys’ Offices in the Eastern District of New York and the District of Colorado. They have been great partners and we look forward to our continued work together.”

 

The underlying investigation was led by Assistant U.S. Attorneys Richard K. Hayes, Kevin Traskos, Lila Bateman, John Vagelatos, J. Chris Larson and Edward K. Newman, with the support of agents from the Office of the Inspector General for the Federal Housing Finance Agency, in conjunction with the President’s Financial Fraud Enforcement Task Force’s RMBS Working Group.

 

The RMBS Working Group is a federal and state law enforcement effort focused on investigating fraud and abuse in the RMBS market that helped lead to the 2008 financial crisis.  The RMBS Working Group brings together more than 200 attorneys, investigators, analysts and staff from dozens of state and federal agencies including the Department of Justice, 10 U.S. Attorneys’ Offices, the FBI, the Securities and Exchange Commission (SEC), the Department of Housing and Urban Development (HUD), HUD’s Office of Inspector General, the FHFA-OIG, the Office of the Special Inspector General for the Troubled Asset Relief Program, the Federal Reserve Board’s Office of Inspector General, the Recovery Accountability and Transparency Board, the Financial Crimes Enforcement Network, and more than 10 state Attorneys General offices around the country.

 

The RMBS Working Group is led by its Director Geoffrey Graber and its five co-chairs: Assistant Attorney General for the Civil Division Stuart Delery, Assistant Attorney General for the Criminal Division Leslie Caldwell, Director of the SEC’s Division of Enforcement Andrew Ceresney, U.S. Attorney for the District of Colorado John Walsh and New York Attorney General Eric Schneiderman.

 

Learn more about the RMBS Working Group and the Financial Fraud Enforcement Task Force at: www.stopfraud.gov .

14-733
Attorney General

Source: DOJ

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Citigroup Is Said to Be Close to Settling Inquiry Into Mortgage Securities

Citigroup Is Said to Be Close to Settling Inquiry Into Mortgage Securities

NYT-

Citigroup and the Justice Department are nearing a deal that could cost the bank roughly $7 billion to settle a civil investigation into the sale of mortgage investments, people briefed on the matter said on Tuesday.

The settlement, which is expected to be announced within the next week, caps months of negotiations that grew so tense in June that the Justice Department threatened to sue if the bank did not agree to the government’s proposed penalty. The deal, which would be made up of a monetary penalty and relief for homeowners, would remove a huge legal obstacle that has been weighing on the bank’s share price and casting a shadow over its future.

At one point in the talks, the government demanded that Citigroup pay $10 billion. While the settlement will fall short of that demand, the bank will still pay more than once expected.

[NEW YORK TIMES]

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HSBC settles US claims over foreclosure-related charges

HSBC settles US claims over foreclosure-related charges

Just breaking and more info to follow…

 

Reuters-

HSBC Holdings PLC : * Settlement of civil fraud claims against HSBC Bank to be announced — New York federal court official * Reaches $10 million settlement with U.S. government to resolve false claims act case — court official * Case relates to bank’s alleged failure to oversee reasonableness of foreclosure-related charges submitted to U.S. department of housing and urban development — court official * Settlement of HSBC case expected to be formally announced later Tuesday.

[REUTERS]

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N.Y. Agency Taps TARP Ex-Watchdog Barofsky to Monitor Credit Suisse

N.Y. Agency Taps TARP Ex-Watchdog Barofsky to Monitor Credit Suisse

.

Credit Suisse Agreed to Pay $2.6B, Including $715M to New York, in Tax-Evasion Case


WSJ-

Neil Barofsky, the former watchdog of the U.S. government’s bank-bailout program, has been selected by New York’s banking agency to oversee Credit Suisse Group AG’s compliance with a tax-evasion settlement the firm reached with federal and state authorities last month, according to people familiar with the matter.

A five-member committee within the New York Department of Financial Services recently chose Mr. Barofsky from a pool of about 15 candidates who applied to be the monitor for the settlement, according to one of…

 [WALL STREET JOURNAL]

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BlackRock v. U.S. Bank | DERIVATIVE COMPLAINT AGAINST U.S. BANK NA FOR BREACH OF CONTRACT; VIOLATION OF THE TRUST INDENTURE ACT OF 1939; BREACH OF FIDUCIARY DUTY; BREACH OF DUTY OF INDEPENDENCE; AND NEGLIGENCE

BlackRock v. U.S. Bank | DERIVATIVE COMPLAINT AGAINST U.S. BANK NA FOR BREACH OF CONTRACT; VIOLATION OF THE TRUST INDENTURE ACT OF 1939; BREACH OF FIDUCIARY DUTY; BREACH OF DUTY OF INDEPENDENCE; AND NEGLIGENCE

SUPREME COURT OF THE STATE OF NEW YORK
COUNTY OF NEW YORK

BLACKROCK ALLOCATION TARGET SHARES: SERIES S PORTFOLIO; BLACKROCK BALANCED CAPITAL PORTFOLIO (FI); BLACKROCK CORE ACTIVE BOND FUND B; BLACKROCK CORE ACTIVE LIBOR FUND B; BLACKROCK CORE BOND PORTFOLIO; BLACKROCK CORE BOND TRUST; BLACKROCK COREALPHA BOND FUND E; BLACKROCK COREALPHA BOND MASTER PORTFOLIO; BLACKROCK COREPLUS BOND FUND B; BLACKROCK ENHANCED GOVERNMENT FUND, INC.; BLACKROCK FIXED INCOME GLOBALALPHA MASTER FUND LTD.; BLACKROCK FIXED INCOME VALUE OPPORTUNITIES; BLACKROCK FUNDS II, INFLATION PROTECTED BOND PORTFOLIO; BLACKROCK INCOME OPPORTUNITY TRUST; BLACKROCK INCOME TRUST, INC.; BLACKROCK LIMITED DURATION INCOME TRUST; BLACKROCK LOW DURATION BOND PORTFOLIO; BLACKROCK MANAGED VOLATILITY V.I. FUND (FI); BLACKROCK MULTI-ASSET INCOME – NON-AGENCY MBS PORTFOLIO; BLACKROCK MULTI-SECTOR INCOME TRUST; BLACKROCK SECURED CREDIT PORTFOLIO; BLACKROCK STRATEGIC INCOME OPPORTUNITIES PORTFOLIO; BLACKROCK TOTAL RETURN PORTFOLIO (INS – SERIES); BLACKROCK TOTAL RETURN V.I. PORTFOLIO (INS – VAR SER); BLACKROCK US MORTGAGE;
BLACKROCK WORLD INCOME FUND, INC.; FIXED INCOME SHARES (SERIES R); FIXED INCOME SHARES: SERIES C; FIXED INCOME SHARES: SERIES LD; FIXED INCOME SHARES: SERIES M; LVS I LLC; LVS I SPE XIV LLC; LVS II LLC; PARS ASPIRE FUND; PCM FUND, INC.; PIMCO ABSOLUTE RETURN STRATEGY 3D OFFSHORE FUND LTD.; PIMCO ABSOLUTE RETURN STRATEGY II MASTER FUND LDC; PIMCO ABSOLUTE RETURN STRATEGY III MASTER FUND LDC; PIMCO ABSOLUTE RETURN STRATEGY III OVERLAY MASTER FUND LTD.; PIMCO ABSOLUTE RETURN STRATEGY IV IDF LLC; PIMCO ABSOLUTE RETURN STRATEGY IV MASTER FUND LDC; PIMCO ABSOLUTE RETURN STRATEGY V MASTER FUND LDC; PIMCO CANADA CANADIAN COREPLUS BOND TRUST; PIMCO CANADA CANADIAN COREPLUS LONG BOND TRUST; PIMCO CANADA CANADIAN TACTICAL BOND TRUST; PIMCO CANADIAN TOTAL RETURN BOND FUND; PIMCO COMBINED ALPHA STRATEGIES MASTER FUND LDC; PIMCO CORPORATE & INCOME OPPORTUNITY FUND; PIMCO CORPORATE & INCOME STRATEGY FUND; PIMCO DISTRESSED SENIOR CREDIT OPPORTUNITIES FUND II, L.P.; PIMCO DYNAMIC CREDIT INCOME FUND; PIMCO DYNAMIC INCOME FUND; PIMCO EQUITY SERIES: PIMCO BALANCED INCOME FUND; PIMCO ETF TRUST: PIMCO LOW DURATION EXCHANGE-TRADED FUND; PIMCO ETF TRUST: PIMCO TOTAL RETURN EXCHANGE-TRADED FUND; PIMCO FUNDS: PIMCO EM FUNDAMENTAL INDEXPLUS® AR STRATEGY FUND; PIMCO FUNDS: PIMCO INTERNATIONAL FUNDAMENTAL INDEXPLUS® AR STRATEGY FUND; PIMCO FUNDS: PIMCO SMALL COMPANY FUNDAMENTAL INDEXPLUS® AR STRATEGY FUND; PIMCO FUNDS: PIMCO COMMODITIESPLUS® STRATEGY FUND; PIMCO FUNDS: PIMCO COMMODITY REAL RETURN STRATEGY FUND®; PIMCO FUNDS: PIMCO CREDIT ABSOLUTE RETURN FUND; PIMCO FUNDS: PIMCO DIVERSIFIED INCOME FUND; PIMCO FUNDS: PIMCO EMERGING LOCAL BOND FUND; PIMCO FUNDS: PIMCO EMERGING MARKETS BOND FUND; PIMCO FUNDS: PIMCO EMERGING MARKETS CURRENCY FUND; PIMCO FUNDS: PIMCO EMG INTL LOW VOLATILITY RAFI®-PLUS AR FUND; PIMCO FUNDS: PIMCO EXTENDED DURATION FUND; PIMCO FUNDS: PIMCO FLOATING INCOME FUND; PIMCO FUNDS: PIMCO FOREIGN BOND FUND (U.S. DOLLAR-HEDGED); PIMCO FUNDS: PIMCO FOREIGN BOND FUND (UNHEDGED); PIMCO FUNDS: PIMCO FUNDAMENTAL ADVANTAGE ABSOLUTE RETURN STRATEGY FUND; PIMCO FUNDS: PIMCO FUNDAMENTAL INDEXPLUS® AR FUND; PIMCO FUNDS: PIMCO GLOBAL ADVANTAGE® STRATEGY BOND FUND; PIMCO FUNDS: PIMCO GLOBAL BOND FUND (U.S. DOLLAR-HEDGED); PIMCO FUNDS: PIMCO GLOBAL BOND FUND (UNHEDGED); PIMCO FUNDS: PIMCO GLOBAL MULTI-ASSET FUND; PIMCO FUNDS: PIMCO GNMA FUND; PIMCO FUNDS: PIMCO HIGH YIELD FUND; PIMCO FUNDS: PIMCO INCOME FUND; PIMCO FUNDS: PIMCO INFLATION RESPONSE MULTI-ASSET FUND; PIMCO FUNDS: PIMCO INTERNATIONAL STOCKSPLUS® AR STRATEGY FUND (U.S. DOLLAR-HEDGED); PIMCO FUNDS: PIMCO INTERNATIONAL STOCKSPLUS® AR STRATEGY FUND (UNHEDGED); PIMCO FUNDS: PIMCO INVESTMENT GRADE CORPORATE BOND FUND; PIMCO FUNDS: PIMCO LONG DURATION TOTAL RETURN FUND; PIMCO FUNDS: PIMCO LONG-TERM CREDIT FUND; PIMCO FUNDS: PIMCO LONG-TERM U.S. GOVERNMENT FUND; PIMCO FUNDS: PIMCO LOW DURATION FUND; PIMCO FUNDS: PIMCO LOW DURATION FUND II; PIMCO FUNDS: PIMCO LOW DURATION FUND III; PIMCO FUNDS: PIMCO MODERATE DURATION FUND; PIMCO FUNDS: PIMCO MORTGAGE OPPORTUNITIES FUND; PIMCO FUNDS: PIMCO MORTGAGE-BACKED SECURITIES FUND; PIMCO FUNDS: PIMCO REAL ESTATE REAL RETURN STRATEGY FUND; PIMCO FUNDS: PIMCO REAL RETURN ASSET FUND; PIMCO FUNDS: PIMCO REAL RETURN FUND; PIMCO FUNDS: PIMCO SHORT-TERM FUND; PIMCO FUNDS: PIMCO SMALL CAP STOCKSPLUS® AR STRATEGY FUND; PIMCO FUNDS: PIMCO STOCKSPLUS® ABSOLUTE RETURN FUND; PIMCO FUNDS: PIMCO STOCKSPLUS® AR SHORT STRATEGY FUND; PIMCO FUNDS: PIMCO STOCKSPLUS® FUND; PIMCO FUNDS: PIMCO STOCKSPLUS® LONG DURATION FUND; PIMCO FUNDS: PIMCO TOTAL RETURN FUND; PIMCO FUNDS: PIMCO TOTAL RETURN FUND II; PIMCO FUNDS: PIMCO TOTAL RETURN FUND III; PIMCO FUNDS: PIMCO TOTAL RETURN FUND IV; PIMCO FUNDS: PIMCO UNCONSTRAINED BOND FUND; PIMCO FUNDS: PIMCO UNCONSTRAINED TAX MANAGED BOND FUND; PIMCO FUNDS: PIMCO WORLDWIDE FUNDAMENTAL ADVANTAGE AR STRATEGY FUND; PIMCO FUNDS: PRIVATE ACCOUNT PORTFOLIO SERIES ASSET-BACKED SECURITIES PORTFOLIO; PIMCO FUNDS: PRIVATE ACCOUNT PORTFOLIO SERIES DEVELOPING LOCAL MARKETS PORTFOLIO; PIMCO FUNDS: PRIVATE ACCOUNT PORTFOLIO SERIES EMERGING MARKETS PORTFOLIO; PIMCO FUNDS: PRIVATE ACCOUNT PORTFOLIO SERIES HIGH YIELD PORTFOLIO; PIMCO FUNDS: PRIVATE ACCOUNT PORTFOLIO SERIES INTERNATIONAL PORTFOLIO; PIMCO FUNDS: PRIVATE ACCOUNT PORTFOLIO SERIES LONG DURATION CORPORATE BOND PORTFOLIO; PIMCO FUNDS: PRIVATE ACCOUNT PORTFOLIO SERIES MORTGAGE PORTFOLIO; PIMCO FUNDS: PRIVATE ACCOUNT PORTFOLIO SERIES REAL RETURN PORTFOLIO; PIMCO FUNDS: PRIVATE ACCOUNT PORTFOLIO SERIES SHORT-TERM PORTFOLIO; PIMCO FUNDS: PRIVATE ACCOUNT PORTFOLIO SERIES U.S. GOVERNMENT SECTOR PORTFOLIO; PIMCO GLOBAL ADVANTAGE STRATEGY BOND FUND (CANADA); PIMCO GLOBAL CREDIT OPPORTUNITY MASTER FUND LDC; PIMCO GLOBAL INCOME OPPORTUNITIES FUND; PIMCO GLOBAL STOCKSPLUS & INCOME FUND; PIMCO HIGH INCOME FUND; PIMCO INCOME OPPORTUNITY FUND; PIMCO INCOME STRATEGY FUND; PIMCO INCOME STRATEGY FUND II; PIMCO LARGE CAP STOCKSPLUS ABSOLUTE RETURN FUND; PIMCO MONTHLY INCOME FUND (CANADA); PIMCO OFFSHORE FUNDS – PIMCO ABSOLUTE RETURN STRATEGY IV EFUND; PIMCO OFFSHORE FUNDS: PIMCO OFFSHORE FUNDS – PIMCO ABSOLUTE RETURN STRATEGY V ALPHA FUND; PIMCO STRATEGIC GLOBAL GOVERNMENT FUND, INC.; PIMCO TACTICAL OPPORTUNITIES MASTER FUND LTD.; PIMCO VARIABLE INSURANCE TRUST: PIMCO COMMODITYREALRETURN STRATEGY PORTFOLIO; PIMCO VARIABLE INSURANCE TRUST: PIMCO EMERGING MARKETS BOND PORTFOLIO; PIMCO VARIABLE INSURANCE TRUST: PIMCO FOREIGN BOND PORTFOLIO (U.S. DOLLAR HEDGED); PIMCO VARIABLE INSURANCE TRUST: PIMCO FOREIGN BOND PORTFOLIO (UNHEDGED); PIMCO VARIABLE INSURANCE TRUST: PIMCO GLOBAL ADVANTAGE STRATEGY BOND PORTFOLIO; PIMCO VARIABLE INSURANCE TRUST: PIMCO GLOBAL BOND PORTFOLIO (UNHEDGED); PIMCO VARIABLE INSURANCE TRUST: PIMCO HIGH YIELD PORTFOLIO; PIMCO VARIABLE INSURANCE TRUST: PIMCO LONG TERM U.S. GOVERNMENT PORTFOLIO; PIMCO VARIABLE INSURANCE TRUST: PIMCO LOW DURATION PORTFOLIO; PIMCO VARIABLE INSURANCE TRUST: PIMCO REAL RETURN PORTFOLIO; PIMCO VARIABLE INSURANCE TRUST: PIMCO SHORT-TERM PORTFOLIO; PIMCO VARIABLE INSURANCE TRUST: PIMCO TOTAL RETURN PORTFOLIO; PIMCO VARIABLE INSURANCE TRUST: PIMCO UNCONSTRAINED BOND PORTFOLIO; PIMCO VARIABLE INSURANCE TRUST: PIMCO GLOBAL MULTI-ASSET MANAGED ALLOCATION PORTFOLIO; PIMCO VARIABLE INSURANCE TRUST: PIMCO GLOBAL MULTI-ASSET MANAGED VOLATILITY PORTFOLIO; TERLINGUA FUND 2, LP; CREF BOND MARKET ACCOUNT; CREF SOCIAL CHOICE ACCOUNT; TIAA GLOBAL PUBLIC INVESTMENTS, MBS LLC; TIAA-CREF BOND FUND; TIAA-CREF BOND PLUS FUND; TIAA-CREF LIFE BOND FUND; TIAA-CREF LIFE INSURANCE COMPANY; TIAA-CREF SHORT-TERM BOND FUND; TIAA-CREF SOCIAL CHOICE BOND FUND; PRUDENTIAL BANK & TRUST; PRUDENTIAL RETIREMENT INSURANCE AND ANNUITY COMPANY; PRUDENTIAL TRUST COMPANY; THE GIBRALTAR LIFE INSURANCE COMPANY LTD.; THE PRUDENTIAL INSURANCE COMPANY OF AMERICA; THE PRUDENTIAL INVESTMENT PORTFOLIOS 2; THE PRUDENTIAL INVESTMENT PORTFOLIOS 9; THE PRUDENTIAL INVESTMENT PORTFOLIOS INC.; THE PRUDENTIAL INVESTMENT PORTFOLIOS, INC. 17; THE PRUDENTIAL SERIES FUND; BROOKFIELD HIGH INCOME FUND INC.; BROOKFIELD MORTGAGE OPPORTUNITY INCOME FUND INC.; BROOKFIELD SECURITIZED CREDIT QIF FUND; BROOKFIELD TOTAL RETURN FUND INC.; CRYSTAL RIVER CAPITAL INC.; MILLERTON ABS CDO LTD.; GLOBAL PREFERRED RE LIMITED; LIICA HOLDINGS, LLC; LIICA RE I, INC.; LIICA RE II, INC.; MONUMENTAL LIFE INSURANCE COMPANY; STONEBRIDGE CASUALTY INSURANCE COMPANY; STONEBRIDGE LIFE INSURANCE COMPANY; STONEBRIDGE REINSURANCE COMPANY; TRANSAMERICA ADVISORS LIFE INSURANCE COMPANY; TRANSAMERICA ADVISORS LIFE INSURANCE COMPANY OF NEW YORK; TRANSAMERICA FINANCIAL LIFE INSURANCE COMPANY; TRANSAMERICA INTERNATIONAL RE (BERMUDA) LTD.; TRANSAMERICA LIFE (BERMUDA) LTD.; TRANSAMERICA LIFE INSURANCE COMPANY; TRANSAMERICA LIFE INTERNATIONAL (BERMUDA) LTD.; WESTERN RESERVE LIFE ASSURANCE CO. OF OHIO; KORE ADVISORS LP; SEALINK FUNDING LIMITED; DZ BANK AG, derivatively, on behalf of the Trusts Identified in Exhibit 1
Plaintiffs,

-against-

U.S. BANK NATIONAL ASSOCIATION,
Defendant,

-and-

The Trusts Identified in Exhibit 1,
Nominal Defendants.

I. NATURE AND SUMMARY OF THE ACTION

1. Defendant U.S. Bank is a national banking association and is the Trustee for over a thousand RMBS trusts originally securitized by more than $1.3 trillion of residential mortgage loans. Among them are the Trusts at issue in this action: 841 private-label RMBS Trusts securitized between 2004 and 2008 collateralized with loans worth approximately $771 billion at the time of securitization. U.S. Bank, as Trustee, is the sole gatekeeper for the protection of the Trusts and their beneficial certificateholders (the “Certificateholders”), and must at all times act in the best interests of the Trusts. As alleged herein, U.S. Bank wholly failed to discharge its duties and obligations to protect the Trusts. Instead, to protect its own business interests, U.S. Bank ignored pervasive and systemic deficiencies in the underlying loan pools and the servicing of those loans and unreasonably refused to take any action. This derivative action seeks to recover billions of dollars in damages to the Trusts caused by U.S. Bank’s abdication of responsibility.

2. RMBS trusts are created to facilitate the securitization and sale of residential mortgage loans to investors. The trust’s assets consist entirely of the underlying loans, and the principal and interest (“P&I”) payments on the loans are “passed through” to the certificateholders. Between 2004 and 2008, a handful of large investment banks dominated the RMBS market and controlled the process from beginning to end. These banks act as “sponsors” of the RMBS, acquiring the mortgage loans from originators, who often were affiliates of the sponsors, or beholden to them through warehouse lending or other financial arrangements. Once the loans are originated, acquired and selected for securitization, the sponsor creates a trust where the loans are deposited for the benefit of the Certificateholders. The sponsor also hand-picks the servicer, often an affiliate of the sponsor or originator, to collect payments on the loans. Finally, a select number of these same banks that originate, securitize and service RMBS also act as trustees on other sponsor’s deals.

3. To ensure the quality of the RMBS and the underlying loans, the Trust documents generally include representations and warranties from the loan sellers attesting to the quality and characteristics of the mortgages as well as an agreement to cure, substitute, or repurchase mortgages that do not comply with those representations and warranties. Because the risk of non-payment or default on the loans is “passed through” to investors, other than these representations and warranties, the large investment banks and other players in the mortgage securitization industry have no “skin” in the game once the RMBS are sold to certificateholders. Instead, their profits are principally derived from the spread between the cost to originate or purchase loans, how much they can sell them to investors once packaged as securities, as well as various servicing-related income. Accordingly, volume became the focus, and the quality of the loans was disregarded.

[...]

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IN RE: MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC., MERS | 9th Circuit –  false, and therefore actionable, a document that is “forged, groundless, contains a material misstatement or false claim or is otherwise invalid….Pleaded their robosigning claims with sufficient particularity to satisfy Federal Rule of Civil Procedure 8(a)

IN RE: MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC., MERS | 9th Circuit – false, and therefore actionable, a document that is “forged, groundless, contains a material misstatement or false claim or is otherwise invalid….Pleaded their robosigning claims with sufficient particularity to satisfy Federal Rule of Civil Procedure 8(a)

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT

IN RE: MORTGAGE ELECTRONIC
REGISTRATION SYSTEMS, INC.,

JONATHAN E. ROBINSON; SALLY J.
ROBINSON-BURKE; ROSA A. SILVAS;
JOSEPHA S. LOPEZ; JOSE TRINIDAD
CASAS; MARIA C. CASAS; LYNDON
B. GRAVES; TYRONE EVENSON;
MICHELLINA EVENSON; BRYAN
GRAY, [for complete list of
plaintiff/appellants, see Notice of
Appeal]; PABLO LEON,
Plaintiffs-Appellants,
v.
AMERICAN HOME MORTGAGE
SERVICING, INC.; AMERICA’S
SERVICING COMPANY; AMERICA’S
WHOLESALE LENDER; AURORA
LOAN SERVICES, LLC; AZTEC
FORECLOSURE CORP.; BAC HOME
LOANS SERVICING LP; BANK OF
AMERICA, NA; BANK OF NEW YORK
MELLON; CALIFORNIA
RECONVEYANCE CO.; CENTRAL
MORTGAGE CO.; COOPER CASTLE
LAW FIRM LLP; CR TITLE SERVICES,
INC.; DEUTSCHE BANK; EXECUTIVE
TRUSTEE SERVICES, LLC; FEDERAL
HOME LOAN MORTGAGE
CORPORATION; FEDERAL HOUSING
FINANCE AGENCY; FEDERAL
NATIONAL MORTGAGE
ASSOCIATION; FIDELITY NATIONAL
TITLE INSURANCE CO.; FIRST
AMERICAN LOAN STAR TRUSTEE
SERVICES, LLC; FIRST HORIZON
HOME LOAN CORP.; G.E. MONEY
BANK; GMAC MORTGAGE, LLC;
HOUSEKEY FINANCIAL CORP.; HSBC
MORTGAGE CORPORATION, USA;
HSBC MORTGAGE SERVICES, INC.;
HSBC BANK, U.S.A., N.A.; IB
PROPERTY HOLDINGS; JPMORGAN
CHASE BANK; MORTGAGE
ELECTRONIC REGISTRATION
SYSTEMS, INC.; MERSCORP, INC.;
MORTGAGE IT, INC.; MTC
FINANCIAL, INC., DBA Trustee
Corps.; NATIONAL CITY MORTGAGE;
PNC FINANCIAL SERVICES GROUP,
INC.; NATIONAL DEFAULT
SERVICING CORP.; NDEX WEST
LLC; OLD REPUBLIC NATIONAL
TITLE INSURANCE CO.; QUALITY
LOAN SERVICE CORPORATION;
RECONTRUST COMPANY; SAXON
MORTGAGE, INC.; T.D. SERVICE
COMPANY; UTLS DEFAULT
SERVICES, LLC; WELLS FARGO
BANK, NA; WESTERN PROGRESSIVE
TRUSTEE, LLC; CITYMORTGAGE,
INC.; LIME FINANCIAL SERVICES
LIMITED,
Defendants – Appellees.

Excerpt:

Fourth, the MDL Court held that appellants had not
pleaded their robosigning claims with sufficient particularity
to satisfy Federal Rule of Civil Procedure 8(a). We disagree.
Section 33-420 characterizes as false, and therefore
actionable, a document that is “forged, groundless, contains
a material misstatement or false claim or is otherwise
invalid.” Ariz. Rev. Stat. §§ 33-420(A), (B) (emphasis
added). The CAC alleges that the documents at issue are
invalid because they are “robosigned (forged).” The CAC
specifically identifies numerous allegedly forged documents.
For example, the CAC alleges that notice of the trustee’s sale
of the property of Thomas and Laurie Bilyea was “notarized
in blank prior to being signed on behalf of Michael A. Bosco,
and the party that is represented to have signed the document,
Michael A. Bosco, did not sign the document, and the party
that did sign the document had no personal knowledge of any
of the facts set forth in the notice.” Further, the CAC alleges
that the document substituting a trustee under the deed of
trust for the property of Nicholas DeBaggis “was notarized in
blank prior to being signed on behalf of U.S. Bank National
Association, and the party that is represented to have signed
the document, Mark S. Bosco, did not sign the document.”
Still further, the CAC also alleges that Jim Montes, who
purportedly signed the substitution of trustee for the property
of Milan Stejic had, on the same day, “signed and recorded,
with differing signatures, numerous Substitutions of Trustee
in the Maricopa County Recorder’s Office . . . . Many of the
signatures appear visibly different than one another.” These
and similar allegations in the CAC “plausibly suggest an
entitlement to relief,” Ashcroft v. Iqbal, 556 U.S. 662, 681
(2009), and provide the defendants fair notice as to the nature
of appellants’ claims against them, Starr v. Baca, 652 F.3d
1202, 1216 (9th Cir. 2011).

We therefore reverse the MDL Court’s dismissal of
Count I.

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U.S. Bank Natl. Assn. v McCrory | NYSC – repeatedly violated both the statute and this court’s orders, and failed to provide documentation requested by the court. In short, the court found egregious behavior amounting to lack of good faith.

U.S. Bank Natl. Assn. v McCrory | NYSC – repeatedly violated both the statute and this court’s orders, and failed to provide documentation requested by the court. In short, the court found egregious behavior amounting to lack of good faith.

Decided on April 3, 2014

Supreme Court, Cortland County

 

U.S. Bank National Association AS TRUSTEE FOR RASC 2005-EMX4, Plaintiff,

against

Kristine H. McCrory, MICHAEL P. McCRORY, et al., Defendant.

13-539
Julie A. Campbell, J.

Plaintiff U.S. Bank National Association as Trustee for RASC 2005-EMX4 commenced this action for foreclosure.

In 2010 U.S. National Bank Association commenced a foreclosure action against these same defendants with respect to the same real property. That action was dismissed based on plaintiff’s lack of good faith during the settlement process [see Order and Decision, Index No. 10-001; RJI No. 2010-0060-C, copy attached]. In the dismissal order the court outlined a long succession of missteps by plaintiff taking place over a period of a year. The court found that plaintiff had made misrepresentations to the court and to the defendants; that plaintiff had reneged on modification offers after accepting defendants’ good faith payments; that plaintiff repeatedly violated both the statute and this court’s orders, and failed to provide documentation requested by the court. In short, the court found egregious behavior amounting to lack of good faith.

The order of dismissal contained the following provisions:

ORDERED, that in the event plaintiff commences a new action in [*2]foreclosure with respect to Kristine McCrory and the premises at issue herein, no additional costs or attorney fees will be allowed, absent good cause shown, and it is further

ORDERED, that a copy of the Order and Judgment of Dismissal shall be attached to the original pleadings in any such subsequent action in foreclosure and shall be specifically referenced in the body thereof.

That order was never appealed and remains the law of the case.

On November 12, 2013, plaintiff commenced this foreclosure action against Kristine McCrory, inter alia. The prior order of this Court is not attached to that complaint. The body of the complaint does not make reference to that order. And the complaint seeks relief including additional interest, late charges, attorney’s fees and costs.

On April 3, 2014, this Court held a conference on this action in accordance with CPLR 3408, which requires that plaintiff “appear in person or by counsel, and if appearing by counsel, such counsel shall be fully authorized to dispose of the case.” Plaintiff did not appear in person but sent counsel who advised that he was not authorized to dispose of the case without consulting with plaintiff. Moreover, counsel for plaintiff claimed to by wholly uninformed of this Court’s previous decision and order.

The Uniform Rules for Trial Courts also require that “only attorneys fully familiar with the action and authorized to make binding stipulations, or accompanied by a person empowered to act on behalf of the party represented, will be permitted to appear at a pretrial conference.” [22 NYCRR 202.26 (e)].

In short, plaintiff continues to ignore the laws of this state, to flaunt the orders of this Court and to manipulate the legal system with an absence of good faith toward defendants, the court and, apparently, its own attorney.

As this Court noted in the previous Decision and Order:

A foreclosure action is equitable in nature and triggers the equitable powers of the court [Notey v Darien Constr. Corp, 41 NY2d 1055 (1977)]. Once equity is invoked, the court’s power is as broad as equity and justice require [Mortgage Elec. Registration Sys., Inc. V Horkan, 68 AD3d 948 (Second Dept., 2009)]. “Moreover, as particular to foreclosure actions, this court has the power, and indeed the affirmative obligation under the New York Code of Rules and Regulations, to ensure that the parties are acting in good faith (see 22 NYCRR 212.12-a [c] [4]). In the wake of a national banking crisis resulting from years of wide-spread predatory lending practices … New York enacted sweeping new legislation effective August 2008 in an effort to stave off the alarming surge of mortgage foreclosures upon homeowners.” [BAC Home Loans Servicing v Westervelt, 29 Misc 3d 1224 (A) (Sup Ct, 2010)]. The court’s role is to ensure (1) [*3]that the primary statutory goal of keeping homeowners in their homes is met wherever feasible [see CPLR 3408 (a)]; and (2) to ensure the concomitant obligation of the parties to act in good faith [BAC Home Loans Servicing v Westervelt, supra].

For the reasons stated herein , and pursuant to Uniform Rule 202.26 (e), it is hereby

ORDERED, that the above matter is hereby dismissed, with prejudice.

This constitutes the Order and Judgment of the Court. The mailing of a copy of this Order and Judgment by this court shall not constitute notice of entry.

Dated:April 3, 2014ENTER

___________________________

Hon. Julie A. Campbell

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One West Bank, F.S.B. v Corrar | NYSC — plaintiff failed to move for a default judgment within a year after defendant’s default and, therefore, pursuant to CPLR §3215(c)

One West Bank, F.S.B. v Corrar | NYSC — plaintiff failed to move for a default judgment within a year after defendant’s default and, therefore, pursuant to CPLR §3215(c)

Decided on May 30, 2014
Supreme Court, Kings County

One West Bank, F.S.B., Plaintiff, – against-

against

Daniel Corrar a/k/a DANIEL CARRAZ a/k/a DANIEL COKRAR a/k/a DANIEL E. CORRAR, City of New York Environmental Control Board, Sea Gate Association, Manhattan Beer Distributors, “JOHN DOE”, “RICHARD ROE”, “JANE DOE”, “CORA COE”, “DICK MOE” and “RUBY POE”, the six, defendants last named in quotation marks being intended to designate tenants or occupants in possession of the herein described premises or portions thereof, if any there be, said names being fictitious, their true names being unknown to the plaintiff, Defendants.

19614/09

Attorney for Defendant Daniel Corrar
Baum & Bailey, P.C.
48 Wall Street, 11th Fl
New York, NY 10005

Attorney for Plaintiff
Stein, Weiner & Roth, LLP
One Old Country Road, Suite 113
Carle Place, NY 11514

Attorney for Defendant Sea Gate Association
Alan J. Wohlberg, Esq.
2805 Avenue N
Brooklyn, NY 11210

Attorney for Plaintiff
Ras Boriskin, LLC
900 Merchants Concourse, Suite LL-13
Westbury, NY 11590
Donald Scott Kurtz, J.

Recitation, as required by CPLR §2219(a), of the papers considered in the review of these motions:

PapersNumbered

Notice of Motion/Cross Motion/Attorneys’ affirmations

supplementing the motions……………………………………….1,2

Answering Affidavits/Affirmations……………………………3

Reply Affidavits/Affirmations/Memoranda of Law…….4Referee’s Report……………………………………………………….

Upon the foregoing cited papers, plaintiff’s motion for an Order of Reference and defendant Corrar’s cross-motion to dismiss plaintiff’s complaint pursuant to CPLR §3215(c), is decided as follows:

Plaintiff commenced this foreclosure action by the filing of a Summons and Verified Complaint on August 3, 2009. Defendant Daniel Corrar a/k/a Daniel Carraz a/k/a Daniel Cokrar a/k/a Daniel E. Corrar (hereinafter “defendant”) was allegedly served pursuant to CPLR §308(2) by delivery of the Summons and Verified Complaint to a co-tenant on August 6, 2009 and by the required mailing on August 11, 2009. Defendant failed to answer. A proposed Order of Reference was received by the Court on September 23, 2009. By letter dated October 13, 2010, plaintiff withdrew its proposed Order of Reference. On January 17, 2013, plaintiff filed a motion [*2]for an Order of Reference, noticed for February 6, 2013. On February 6, 2013, both plaintiff and defendant failed to appear and said motion was marked off. On September 27, 2013, plaintiff filed its second motion for an Order of Reference. On the return date, defendant appeared pro-se and the case was adjourned at his request to retain counsel. On January 29, 2014, defendant cross-moved for an order dismissing the complaint pursuant to CPLR §3215(c); cancelling any accrued interest from the date of defendant’s default including all fees and penalties; and, in the alternative, granting him an extension of time to serve an answer.Defendant maintains he never received the Summons and Verified Complaint. He submits an affidavit wherein he states he completed a trial modification in October 2008, prior to the action’s commencement. Thereafter, he was informed that IndyMac was no longer servicing his loan and he was unable to ascertain the identity of the new servicer. He maintains he does not know the co-tenant who was allegedly served with the Summons and Verified Complaint and that the first he learned of this action was when he received plaintiff’s second motion for an Order of Reference on September 24, 2013. Defendant argues that plaintiff failed to move for a default judgment within a year after defendant’s default and, therefore, pursuant to CPLR §3215(c), the action should be dismissed.

In opposition to defendant’s cross-motion, plaintiff argues that it made an application for entry of a default judgment within a year of defendant’s default, despite the application having been withdrawn. Plaintiff maintains that the threshold for satisfying CPLR §3215(c) is very low and merely an application for a default judgment is enough. Moreover, it argues that settlement discussions can constitute a reasonable excuse for plaintiff’s delay in entering a judgment and notes that on May 18, 2010, the case was calendered for a foreclosure pre-settlement conference.

CPLR §3215(c) states, in pertinent part, that if a plaintiff “fails to take proceedings for the entry of judgment within one year after the default, the Court shall…dismiss the complaint as abandoned, without costs, upon its own initiative or on motion, unless sufficient cause is shown why the complaint should not be dismissed.” This section “prevents a plaintiff from taking advantage of a defendant’s default where the plaintiff has also been guilty of inaction.” Myers v. Slutsky, 139 AD2d 709, 710 (2d Dept 1988). The legislative intent underlying CPLR §3215(c) was to “prevent the plaintiffs from unreasonably delaying the determination of an action…” and “to avoid inquests on stale claims (citations omitted).” Id., Giglio v. NTIMP, Inc., 86 AD3d 301, 307 (2d Dept 2011).

The Court does not agree with plaintiff’s contention that it made an application for entry of a default judgment within one year of defendant’s default. In fact, upon review of the papers, it is noted that plaintiff submitted an ex-parte application for an Order of Reference only, which was submitted directly to the court clerk. Therefore, this “application” could not have been a motion for a default judgment pursuant to CPLR §3215. Moreover, even if the Court considered plaintiff’s application to be a motion pursuant to CPLR §3215, said application or motion was withdrawn by plaintiff. “The effect of a withdrawal of a motion is to leave the record as it stood prior to its filing as though it had not been made.” Stoute v. City of New York, 91 AD2d 1043, [*3]app dismissed 59 NY2d 602, lv to app dismissed 59 NY2d 762 (1983). On January 17, 2013, approximately two and a half years after defendant’s alleged default, plaintiff filed its first motion for an Order of Reference. The Notice of Motion did not state plaintiff was seeking a default judgment. The motion was marked off on February 6, 2013. Plaintiff now makes its second motion for an Order of Reference. Again, upon review of the Notice of Motion, it still does not seek a default judgment, even though defendant’s alleged default occurred almost four years ago.

The Court finds plaintiff’s remaining argument that the May 18, 2010 foreclosure pre-settlement conference constitutes a reasonable excuse for plaintiff’s delay in entering a judgment to be without merit. Defendant did not appear and no conference was held. Moreover, the case was in that part only once, and after that one appearance, the case was immediately released to the IAS part for plaintiff to proceed.

In view of the foregoing, plaintiff’s application for an Order of Reference is hereby denied and defendant’s cross-motion to dismiss pursuant to CPLR §3215(c) is hereby granted.The foregoing shall constitute the Decision and Order of the Court.

DONALD SCOTT KURTZ
Justice, Supreme Court

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Underwater America: How the So-Called Housing Recovery is Bypassing Many Communities

Underwater America: How the So-Called Housing Recovery is Bypassing Many Communities

via: http://diversity.berkeley.edu

The Haas Institute has just released a new report entitled Underwater America: How the So-Called Housing Recovery is Bypassing Many CommunitiesDownload the full report here.

The report was launched at a national press conference on May 8 in Richmond, CA, in order to highlight the problem of widespread “underwater mortgages” – homeowners stuck in loans for more than their home is worth- which persists in many communities across the country. The report identifies the nation’s most troubled hot spots: the cities, metro areas and communities where the highest proportion of homeowners still have negative equity, or are “underwater.”  The report’s authors argue that market forces alone will not bring the recovery to these severely impacted communities, and call for local or federal intervention to reduce mortgage principal.

PRESS COVERAGE

NATIONAL

http://www.nytimes.com/2014/05/09/opinion/what-housing-recovery.html

http://www.reuters.com/article/2014/05/08/us-usa-housing-minorities-idUSBREA4713020140508

http://www.americanbanker.com/bankthink/morning-scan-more-fighting-over-fannie-freddie-yellen-on-shadow-banks-1067403-1.html

http://www.huffingtonpost.com/peter-dreier/post_7590_b_5313595.html

http://www.nytimes.com/2014/05/17/opinion/avoiding-foreclosure-a-view-from-the-treasury-dept.html

CALIFORNIA

http://sanfrancisco.cbslocal.com/2014/05/08/uc-berkeley-study-looks-at-underwater-mortgage-problem-supports-richmonds-eminent-domain-plan/

http://www.mercurynews.com/business/ci_25725683/underwater-homes-minorities-still-suffering-from-housing-collapse

http://www.contracostatimes.com/business/ci_25725683/underwater-homes-minorities-still-suffering-from-housing-collapse

http://blogs.kqed.org/newsfix/uc-berkeley-report-calls-for-action-on-underwater-homes

http://www.baycitynews.com/bcn/general/05/newsclip.14.05.09.21.51.00.1.txt

http://www.timesheraldonline.com/news/ci_25728872/vallejo-among-top-u-s-cities-mortgages-underwater

http://richmondstandard.com/2014/05/richmond/

http://www.recordnet.com/apps/pbcs.dll/article?AID=/20140510/A_BIZ/405130302/-1/a_biz

http://www.modbee.com/2014/05/13/3338939/stanislaus-countys-home-affordability.html?sp=/99/1623/

CONNECTICUT

http://www.ctpost.com/news/article/Bridgeport-lands-on-top-10-underwater-mortgage-5472872.php

http://www.courant.com/business/real-estate/hc-hartford-tops-underwater-home-mortgages-story,0,1021185.htmlstory

http://www.courant.com/business/real-estate/hc-underwater-mortgages-in-connecticut-20140508,0,452800.htmlpage

http://www.rep-am.com/business/802799.txt

http://wnpr.org/post/homes-hartford-top-list-underwater-cities

http://connecticut.cbslocal.com/2014/05/09/hartford-hardest-hit-by-underwater-mortgages/

http://www.wfsb.com/story/25471944/report-hartford-top-city-with-underwater-mortgages

http://www.hartfordbusiness.com/article/20140508/NEWS01/140509915

http://www.ctnow.com/business/hc-hartford-underwater-mortgages-20140508,0,332458.story

http://wnpr.org/post/lawmakers-avert-legal-aid-cuts-q-poll-shows-gubernatorial-race-deadlocked

WISCONSIN

http://www.jsonline.com/blogs/purple-wisconsin/258542721.html

http://www.jsonline.com/news/milwaukee/wells-fargo-injects-515-million-into-milwaukee-home-buyer-program-b99265500z1-258493141.html

http://milwaukeecourieronline.com/index.php/2014/05/10/report-shows-housing-crisis-far-from-over-for-milwaukee/
http://milwaukeecourieronline.com/index.php/2014/05/17/state-action-needed-to-solve-milwaukees-foreclosure-crisis/

http://www.wisconsingazette.com/trending-news/tiny-homes-big-solutions.html

NEW JERSEY

www.njspotlight.com/stories/14/05/09/nj-still-drowning-in-underwater-mortgages-new-study-reveals

ST. LOUIS

http://www.stltoday.com/business/local/st-louis-is-hot-spot-for-underwater-mortgages/article_1a9b46b5-38f4-5b93-b4b4-e895f8e0bab5.html

http://www.kansas.com/2014/05/10/3449242/st-louis-area-hotspot-for-underwater.html

http://www.stltoday.com/news/opinion/mailbag/letters-to-the-editor/lots-of-opportunities-to-buy-in-north-county/article_4907c724-5478-5e80-af48-a7d79fede68d.html

DETROIT

http://wdet.org/shows/craig-fahle-show/episode/homes-underwater-detroit/

http://articles.chicagotribune.com/2014-05-13/business/sns-rt-us-usa-detroit-housing-20140513_1_bankrupt-detroit-modifications-housing-market

http://metrotimes.com/news/news-hits/redefining-eminent-domain-1.1684933

MEMPHIS

http://www.bizjournals.com/memphis/news/2014/05/12/report-housing-recovery-is-skipping-memphis.html

ORLANDO

http://articles.orlandosentinel.com/2014-05-07/business/os-orlando-home-cash-buyers-20140507_1_realtytrac-report-metro-orlando-orlando-area

ATLANTA

http://atlantablackstar.com/2014/05/31/homeowners-color-still-underwater/

CHARLESTON, SC

http://www.charlestonchronicle.net/83287/2152/housing-recovery-ignores-black-and-latino-communities

In the first report of its kind, the authors analyze negative equity and foreclosure data together with race and income data, at a zip code level, as well as city and metropolitan area. The report uncovers the depth of the housing problem that persists in these hard hit communities, as well as how the legacy of predatory lending has meant a disproportionate negative impact on African American and Latino communities. One in ten Americans live in the 100 hardest hit cities where the number of underwater homeowners range from 22% to 56%, the report says.

REPORT AUTHORS: Peter Dreier, Professor of Politics and chair of the Urban & Environmental Policy Department at Occidental CollegeSaqib Bhatti, Fellow at the Nathan Cummings FoundationRob Call, graduate student in urban planning at the Massachusetts Institute of TechnologyAlex Schwartz, Professor of Urban Policy at the Milano School of International Affairs, Management, and Urban Policy at The New School; and Gregory Squires, Professor of Sociology and Public Policy & Public Administration and chair of the Department of Sociology at The George Washington University.

RECOMMENDATIONS FROM THE REPORT

1. Loan holders—banks, government sponsored enterprises (i.e., Fannie Mae and Freddie Mac, which are regulated by the Federal Housing Finance Agency, FHFA), and investors—should reduce the principal on underwater mortgages to current market values.

2. If loan holders are unwilling or unable to reduce the principal on underwater mortgages to current market values, they should allow these loans to be purchased by publicly-owned or nonprofit entities that are willing to restructure them with fair and affordable terms.

3. Local municipalities should use all options at their disposal to facilitate the goal of resetting mortgages to current market values, including the use of “reverse eminent domain” (the program proposed in Richmond, California and elsewhere) to acquire mortgages in order to restructure them with fair and affordable terms.

4. Banks, government sponsored enterprises like Fannie Mae and Freddie Mac, and investors that own vacant homes that have already been foreclosed upon should sell them to publicly- owned or nonprofit entities that can convert them to affordable housing units for residents of the community instead of selling them to speculators.

5. Local municipalities should use all options at their disposal to facilitate the goal of turning vacant, foreclosed homes into affordable housing. This includes the use of “reverse eminent domain” to acquire properties in order to convert them to af- fordable housing units for residents of the community and to prevent them from being purchased by speculators.


Fact Sheets on Hardest-Hit Areas

View specific reports on the hardest-hit cities and neighborhoods. 

California Cities

Georgia ZIP Codes

Antioch, CA

Atlanta, GA

Baltimore, MD

Cincinnati, OH

Cleveland, OH

Coachella, CA

Detroit, MI

Hartford, CT

Irvington, NJ

Milwaukee, WI

Minneapolis, MN

New York, NY

Newark, NJ

Richmond, CA

San Pablo, CA

Seattle, WA

Vallejo, CA.pdf

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Burt v. Bank of New York Mellon | California Ruling Supporting Glaski Case Issues and the Homeowners

Burt v. Bank of New York Mellon | California Ruling Supporting Glaski Case Issues and the Homeowners

Tentative Rulings for Department 403

3 Tentative Ruling

Re: Burt v. Bank of New York Mellon
Case No. 14CECG00641

Hearing Date: June 4th, 2014 (Dept. 403)

Motion: Defendants’ Demurrer to Complaint

Tentative Ruling:
To overrule the demurrer to the complaint, in its entirety. (Code Civ. Proc. §
430.10(e).) Defendants shall serve and file their answer within ten days of the date of
service of this order.

Explanation:
Defendants have demurred to the entire complaint on the ground that it fails to
state facts sufficient to constitute a cause of action. Their first argument is that plaintiffs
are required to allege that they are ready, willing and able to tender the entire amount
they owe under the loan in order to state a claim for wrongful foreclosure, or related
causes of action.

In Arnolds Management Corp. v. Eischen (1984) 158 Cal.App.3d 575, the Court of
Appeal stated, “It is settled that an action to set aside a trustee’s sale for irregularities in
sale notice or procedure should be accompanied by an offer to pay the full amount of
the debt for which the property was security.” (Arnolds Management Corp. v. Eischen
(1984) 158 Cal.App.3d 575, 578-579, emphasis added.)

Here, however, plaintiffs are not attempting to set aside a completed trustee’s
sale. They are instead trying to prevent the foreclosure sale from happening at all.
Thus, the rule stated in Arnolds Management does not apply here, because the
trustee’s sale has not yet taken place.

Also, in Glaski v. Bank of America, N.A. (2013) 218 Cal.App.4th 1079, the Fifth
District Court of Appeal held that a plaintiff who challenges a pending foreclosure
proceeding based on alleged defects in the assignment of the note and deed of trust
that render the assignment void does not have to allege tender in order to state a valid
claim for wrongful foreclosure and related claims.

“Tender is not required where the foreclosure sale is void, rather than voidable,
such as when a plaintiff proves that the entity lacked the authority to foreclose on the
property. [¶] Accordingly, we cannot uphold the demurrer to the wrongful foreclosure
claim based on the absence of an allegation that Glaski tendered the amount due
under his loan.” (Id. at 1100, internal citations omitted.)

Here, plaintiffs have alleged that the assignment of the note and deed of trust is
void because it was completed after the closing date of the trust. (Complaint, ¶¶ 21-
26.) Thus, plaintiffs are not required to allege tender of the full amount due under the
loan in order to support their claims. The court declines to sustain the demurrer to the
extent it is based on the tender rule.

Next, defendants argue that plaintiffs have not stated a claim under Civil Code
section 2923.6 because the statute only applies to “owner-occupied residential”
properties (Civil Code § 2924.15(a)), and plaintiffs have admitted that their property is
not residential. Plaintiffs have alleged that the County of Fresno refused to recognize
their property as residential, and County records only show a “mobile home” on the
property. (Complaint, ¶ 29.)

Section 2924.15(a) does not define what “residential” property is, but it does
state that “‘owner-occupied’ means that the property is the principal residence of the
borrower and is security for a loan made for personal, family, or household purposes.”
(Civ. Code, § 2924.15(a).) Here, the plaintiffs have alleged that the property is their
principal residence, and that it was security for the loan made for the personal, family
or household purposes. (Complaint, ¶¶ 28, 62.) While the property may not be
recognized as containing a residence in the County’s records, the plaintiffs have
adequately alleged that they are actually residing on the property, and that the loan
was made to purchase their family home. Therefore, plaintiffs have sufficiently alleged
that the property is “owner-occupied residential real property” for the purpose of
section 2923.6(a).

Defendants also argue that plaintiffs have not alleged any actual violation of
section 2923.6, because section 2923.6 only bars foreclosure proceedings when a loan
modification application is pending, and here the plaintiffs admit that they did not
submit their loan modification application until after the notice of default was issued.

Civil Code section 2923.6(c) states, in part, “If a borrower submits a complete
application for a first lien loan modification offered by, or through, the borrower’s
mortgage servicer, a mortgage servicer, mortgagee, trustee, beneficiary, or authorized
agent shall not record a notice of default or notice of sale, or conduct a trustee’s sale,
while the complete first lien loan modification application is pending. A mortgage
servicer, mortgagee, trustee, beneficiary, or authorized agent shall not record a notice
of default or notice of sale or conduct a trustee’s sale until any of the following occurs:
(1) The mortgage servicer makes a written determination that the borrower is not
eligible for a first lien loan modification, and any appeal period pursuant to subdivision
(d) has expired.”

Here, plaintiffs allege that they were attempting to obtain a loan modification
application in June of 2013, but they did not actually receive the application until July
3rd, 2013. (Complaint, ¶¶ 38, 40.) They completed and submitted the loan modification
application on July 24th, 2013 by Federal Express. (Id. at ¶ 40.) However, the notice of
default was issued on June 21st, 2013, before the loan modification application was
completed or sent out. (Request for Judicial Notice, Exhibit 3. The court intends to take
judicial notice of the notice of default and the other documents attached to the
request for judicial notice as officially recorded documents.) Thus, plaintiffs cannot
show that the notice of default was issued in violation of section 2923.6.

On the other hand, plaintiffs also allege that defendants issued the notice of
trustee’s sale on February 12th, 2014, while the loan modification process was still
pending. (Complaint, ¶¶ 41-55.) The Bank appears to claim that the notice of trustee’s
sale was sent out after the first application for loan modification had been denied, and
before plaintiffs resubmitted a new application. However, the allegations of the
complaint appear to indicate that the first loan modification application was pending
at the time the notice of trustee’s sale was served on plaintiffs. (Complaint, ¶¶ 51, 55.)
Defendants have not shown that there was a written denial of the application before
the notice of trustee’s sale was issued. Therefore, the plaintiffs have sufficiently alleged
that the defendants violated section 2923.6 by issuing the notice of trustee’s sale while
the loan modification application was pending.

With regard to the second cause of action for wrongful foreclosure, defendants
argue that the plaintiffs cannot show that they were injured by the alleged irregularities
in the assignment process, as there was no change in their obligations under the note.
They also contend that plaintiffs have no standing to allege defects in the assignment,
because they were not parties to the assignment. However, the Fifth District Court of
Appeal rejected these arguments in Glaski v. Bank of America, supra, 218 Cal.App.4th
1079.

In Glaski, the Court of Appeal found that the plaintiff had alleged sufficient facts
to support claims for wrongful foreclosure, quiet title, declaratory relief, cancellation of
instruments, and unfair business practices under Business and Professions Code section
17200 based on alleged defects in the assignment of the note and deed of trust.
(Glaski, supra, at 1101.) The Glaski court found that the allegation that the assignment
was made after the closing date of the trust was sufficient to show that the assignment
was void, and thus the lender had no authority to foreclose on the property. (Id. at
1096-1097.) The Glaski court also rejected the argument that the borrower has no
standing to challenge the assignment because the borrower was not a party to the
assignment. (Id. at 1094-1095.)

Here, plaintiffs’ allegations are similar to those in Glaski, since plaintiffs are
alleging that the deed of trust and note were not transferred or assigned properly
before the closing date for the trust. (Complaint, ¶¶ 23-25.) Therefore, under Glaski, the
plaintiffs have stated a valid claim for wrongful foreclosure, because Bank of America
and Bank of New York allegedly have no standing to foreclose on the note.
Conversely, plaintiffs do have standing to assert the improper assignment, because
they are alleging that the assignment is void, and not just voidable. (Glaski, supra, at
1094-1095.) The court in Glaski did not require any showing that the borrower suffered
actual prejudice from the improper assignment, since the improper assignment
rendered the entire assignment void. (Ibid.) Therefore, the court intends to overrule the
demurrer to the second cause of action for wrongful foreclosure.

Likewise, the third cause of action for cancellation of the notice of default,
assignment of the deed of trust, and notice of trustee’s sale is also sufficiently alleged.

In Glaski, the court specifically found that plaintiff could state a claim for, among other
things, cancellation of the allegedly invalid instruments based on the defects in the
assignment. (Glaski, supra, at 1101.) Here, plaintiffs have made allegations that the
assignment was void, so the court will permit plaintiffs to proceed with their cancellation
of instruments cause of action and overrule the demurrer to the third cause of action.
For the same reasons, plaintiffs have adequately alleged their quiet title claim in
the fourth cause of action. Glaski specifically held that plaintiff could allege a quiet title
claim based on the same theory alleged in the present case. (Glaski, supra, at 1101.)
Defendants argue that plaintiffs cannot state a quiet title claim against them because
plaintiffs have not alleged full payment of the note. However, plaintiffs have alleged
that defendants have no authority to collect payments on the note or foreclose on the
property because of the improper assignment. (Complaint, ¶ 84.) Therefore, plaintiffs
do not have to allege that they paid the note in order to allege a quiet title claim
against defendants.

Finally, defendants demur to the plaintiffs’ fifth cause of action for unfair business
practices under Business and Professions Code section 17200, contending that plaintiffs
have not alleged a predicate violation of any statute, or that they have suffered any
loss of money or property as a result of defendants’ actions. However, as discussed
above, plaintiffs have adequately alleged violations of Civil Code section 2923.6 by
proceeding with the foreclosure while the loan modification application was pending,
as well as falsely claiming that they were entitled to collect on the note when allegedly
the assignment of the note and deed of trust was invalid. Thus, plaintiffs have
sufficiently alleged predicate violations of other laws to support their UCL claim. In
addition, plaintiffs have alleged that they are in danger of losing their home due to
defendants’ unfair business practices. Therefore, plaintiffs have sufficiently alleged their
claim under the UCL, and the court intends to overrule the demurrer to the fifth cause
of action.

Pursuant to CRC 3.1312 and CCP §1019.5(a), no further written order is necessary.
The minute order adopting this tentative ruling will serve as the order of the court and
service by the clerk will constitute notice of the order.

Tentative Ruling
Issued By: KCK on 6/3/2014 .
(Judge’s initials) (Date)

Down Load PDF of This Case

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