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Members of The Florida Bar express deep concern with the section’s support of Senate Bill 1666 and House Bill 87

Members of The Florida Bar express deep concern with the section’s support of Senate Bill 1666 and House Bill 87

The Florida Bar News-

We write as members of The Florida Bar and in some cases as members of the Real Property, Probate and Trust Law Section to express our deep concern with the section’s support of Senate Bill 1666 and House Bill 87, which propose to materially change the rules governing foreclosures in Florida.

The proposed amendments are in complete derogation to fundamental tenets of due process and property rights. The passing of this legislation would completely disregard the evidence code, allowing courts to presume liability with only a prima facie showing by the plaintiff, and without opportunity of homeowners to conduct discovery into possible abuses by the banking industry that often result in out-of-court settlements between lenders and homeowners, or a rash of voluntary dismissals by the banks.

This proposed legislation would effectively undo 250 years of American jurisprudence, returning us to a legal dark age. Furthermore, certain proposed amendments would apply retroactively, creating ex post facto provisions which violate both our state and federal constitutions.

The proposed legislation favors banks, retired judges, homeowners’ associations and title insurance companies, and disfavors homeowners and newspapers. While banks support the bills because they provide them with an expedited procedure of foreclosure, many of these procedures will effectively reduce the financial incentive for lenders to participate in short sales and negotiated settlements that are helping restabilize the Florida real estate economy.

SB 1666 proposes to dramatically increase the use of retired senior judges, an issue that has profound constitutional implications. Article V of Florida’s Constitution requires that judges who reach the age of 70 retire and cease to maintain full case loads. The Florida Constitution also requires judges who preside over cases reside in the communities in which they serve and face the will of the voting public through retention votes. The proposed legislation completely ignores these fundamental protections. Foreclosure judgments entered by these senior judges will perpetually be attacked as unconstitutional, which will create unsettled cases for potentially decades, making matters ultimately worse. Overburdening of the district courts of appeal that are already struggling to keep up is not sound policy.

These bills are more interested in protecting the banking and the title insurance industries than protecting the larger interests of the Constitution, the judicial system as a whole, and the rights of homeowners. The “Finality of Foreclosure” provisions in these bills prevent homeowners from ever getting their home back even after a fraudulent foreclosure is overturned; rather, the homeowner would be entitled to economic damages only. No matter how blatant the fraud, no matter how obvious the forgery, no matter what errors are committed, once a judgment is entered, the wronged homeowner could never get that property back again.

We see no reason why there should be a special legislative exemption for an industry that has collected billions from policy premiums paid by homeowners over the years to protect them from defective title. Effectively, the Legislature would be giving the industry a huge subsidy by providing this unnecessary protection.

Should this legislation pass, the negative consequences to homeowners would far outweigh any alleged benefits to lenders, the title insurance industry, and the court system. The quantum of harm to consumers and to our legal system as a whole should shock any attorney. For example, one provision allows the retroactive application of the law to existing cases. As attorneys, even the thought of ex post facto laws should cause grave concern, creating a very dangerous slippery slope in the future in other areas of the law. If passed, these bills will change the standard in the middle of a case and subject the litigants to a new legal standard that did not exist when the case was filed. Next, the bills propose to shift the burden of proof to defendant homeowners. The plaintiff in all suits has the burden of proof to substantiate its allegations. The bills usurp the role of appellate courts by providing safe harbor for lender mortgage fraud by making foreclosure judgments final. The bills also overturn a long-standing law that only requires depositing of payments into a court’s registry where agreed upon, by the parties, in the mortgage to instead now require that any homeowner who is not occupying his or her home pay his or her mortgage in full or immediately lose possession.

Homeowners, who are already fighting an uphill battle in defending foreclosures, would effectively have little chance at defending their rights at a preliminary hearing where the banks need only show a prima facie case to foreclose. Bank fraud and robo-signing, which have primarily been exposed through discovery during the foreclosure process, will likely remain buried should the proposed summary procedures be permitted, and would not have been uncovered in the first place had these laws been in place at the time. These fast and loose procedures build a house of cards that could eventually collapse without the proper procedural and substantive safeguards in place. The more than 30,000 dismissals (in 2012 alone) for incomplete or fraudulent documentation is indicative of the banks’ own acknowledgment of their legal shortfalls.


© 2010-17 FORECLOSURE FRAUD | by DinSFLA. All rights reserved.


Another Passionate Letter To Florida Senators: Vote No On Senate Bill 1666 And House Bill 87…NO! TO FORECLOSURE FRAUD!

Another Passionate Letter To Florida Senators: Vote No On Senate Bill 1666 And House Bill 87…NO! TO FORECLOSURE FRAUD!

Matt Weidner Law-

The passion from real people is so powerful.  And you know that there is no one on the other side of these bills who is reaching out in this way.  Only the monied special interests buying their way into Florida’s law books. How can our elected leaders ignore pleas like this:


Dear Senators,

It’s my understanding that the banks filed forged documents in foreclosures and had to pay a fine to the State of Florida and now the State is going to use that money to speed up the stalled foreclosures and strip the victims of their property, dignity, labor and money investment with HB-87 and SB 1666.

The number of elderly citizens in Florida increases your liability as lawmakers when you make decisions that allow the banks to commit fraud against the elderly, a weak and vulnerable population.  Won’t you be proud when your law puts Florida on the national news for dumping this vulnerable group of victims onto the streets.

[Continue to MATT WEIDNER LAW]

© 2010-17 FORECLOSURE FRAUD | by DinSFLA. All rights reserved.




Fact: The proposed bill shifts the burden of proof to the defendant

Fact: A Judge can ignore evidence that the foreclosure is improper

Fact: Foreclosures are slow for many reasons, but the legal process isn’t one.

Fact: Florida law already has an expedited foreclosure procedure

Fact: The proposed bill encourages fraud

Fact: The Proposed bill is retroactive

Fact: This bill will become law this legislative session if you don’t voice your opposition

© 2010-17 FORECLOSURE FRAUD | by DinSFLA. All rights reserved.


Urgent Action Alert : Stop the legalization of fraudclosure (House bill 87) – Florida lawmakers pushing the bill through

Urgent Action Alert : Stop the legalization of fraudclosure (House bill 87) – Florida lawmakers pushing the bill through

via: Foreclosure Hamlet

The Florida legislature is moving forward quickly on passing a legalization of foreclosure fraud bill.  We must act if we want to stop it.  This is the fourth year we’ve been fighting against this type of proposed legislation which will make foreclosures happen faster, smoother, and easier for banks and make it much harder for Floridians to defend themselves against fraud and abuse.

Please send this email to Florida lawmakers and also pick up the phone and call them yourself and simply leave a message that you are calling to urge the representative to VOTE NO ON HOUSE BILL 87.  They may ask for your name and zip code.  That’s it.  Simple and will make a difference.  The lawmakers’ staff count and report on these calls and emails.

Please do not depend on a few active citizens to stop this bill from passing.  Activists and advocates can not fight this without help.  Please take five minutes to send an email, make some calls, and ask your friends and family to do the same.

Please copy and paste the subject line and text below.  Sign off with your name, your county, and with your zip code.  Send to all the Florida lawmakers whose emails are listed below.

Thank you very much and please stay tuned for more action alerts on this issue.


Office of the Majority Leader
Stephen L “Steve” Precourt, 850 717-5044 

Office of the Majority Whip
Dana D. Young, 488-1993 850 717-5060

Office of the Minority Leader
Perry D. Thurston, Jr., 850 717-5094

Democratic Whip
Alan B. Williams 850 717 5008

Office of the General Counsel
Dan Nordby, 850 717-5500

Civil Justice Subcommittee:
Metz, Larry [R] Chair 850 717-5032 
Hager, Bill [R] Vice Chair 850 717-5089 
Stafford, Cynthia A. [D]
Democratic Ranking Member 850 717-5109 
Boyd, Jim [R] 850 717-5071 
Clelland, Michael Philip “Mike” [D]850 717-5029 
Davis, Daniel [R] 850 717-5015 
Goodson, Tom [R] 850 717-5050
Oliva, Jose R. [R] 850 717-5110 
Passidomo, Kathleen C. [R] 850 717-5106 
Rodríguez, José Javier [D] 850 717-5112 
Spano, Ross [R] 850 717-5059 
Stone, Charlie [R] 850 717-5022
Waldman, James W. “Jim” [D] 850-956-5600


Subject: Please Vote No on House Bill 87


We urge you to vote NO on House Bill 87.  The problem with Florida foreclosures is NOT the  judicial process.  The problem is unethical behavior and criminal fraud by mortgage servicers, certain law firms including David Stern and Marshall Watson, and banks.
Our single most urgent problem is the abandonment by banks of thousands of homes across Florida. These abandoned homes destroy neighborhoods, driving home prices further down, and  create havens for rodents and mold.  We need legislation that holds banks and Fannie Mae accountable for maintaining the thousands of properties they now own. We do not need faster foreclosures – we need to hold the banks and mortgage servicers accountable.
Thank you,

After you’re done head over and read about this more in detail:  Chip Parker: Is this the year Wall Street completes its purchase of Florida’s Court System?

AND sign this petition:

© 2010-17 FORECLOSURE FRAUD | by DinSFLA. All rights reserved.


IN RE WASHINGTON Bankr. Court, D. New Jersey | Morris County homeowner gets a FREE HOUSE

IN RE WASHINGTON Bankr. Court, D. New Jersey | Morris County homeowner gets a FREE HOUSE


In Re: GORDON A. WASHINGTON, Chapter 13, Debtor.
SPECIALIZED LOAN SERVICING, LLC, and THE BANK OF NEW YORK MELLON, as Trustee for the Certificate-holders of the CWABS, Inc., Asset-backed Certificates, Series 2007-5, Defendants.

Case No. 14-14573-TBA, Adv. Pro. No. 14-01319-TBA.
United States Bankruptcy Court, D. New Jersey.
Hearing September 30, 2014.
November 5, 2014.
Walter D. Nealy, Esq., Englewood, NJ, Attorney for Gordon A. Washington.

Charles A. Gruen, Esq., Rosa Amica-Terra, Esq., Law Offices of Charles A. Gruen, Westwood, NJ, Special Counsel for Gordon A. Washington.

David V. Mignardi, Esq., Kenneth J. Flickinger, Esq., Karen B. Olson, Esq., Knuckles, Komosinski & Elliott, LLP, Elmsford, NY, Attorney for Specialized Loan Servicing, LLC, and The Bank of New York Mellon.


MICHAEL B. KAPLAN, Bankruptcy Judge.


“No one gets a free house.” This Court and others have uttered that admonition since the early days of the mortgage crisis, where homeowners have sought relief under a myriad of state and federal consumer protection statutes and the Bankruptcy Code. Yet, with a proper measure of disquiet and chagrin, the Court now must retreat from this position, as Gordon A. Washington (“the Debtor”) has presented a convincing argument for entitlement to such relief. So, with figurative hand holding the nose, the Court, for the reasons set forth below, will grant Debtor’s motion for summary judgment. These matters come before the Court on a motion and two cross motions for summary

judgment in the adversary complaint filed by Debtor to determine the validity, priority and extent of the mortgage lien on his three-family residence in Madison, New Jersey, against Defendant creditors Specialized Loan Servicing, LLC, and The Bank of New York Mellon (as Trustee for the Certificate-holders of the CWABS, Inc., Asset-backed Certificates, Series 2007-5) (“SLS” and “BoNY”) (collectively “the Defendants,” represented by one counsel). The motions are:

(1) the Debtor’s motion for partial summary judgment based on the argument that the 6-year statute of limitations applicable to suit on a negotiable instrument under N.J.S.A. § 12A:3-118(a) has expired, so that Defendants are out of time to sue on their mortgage note on which Debtor defaulted on or about June 1, 2007 (dkt. 7)[1]; and

(2) the Defendants’ cross motion for partial summary judgment based on the argument that the 20-year statute of limitations applicable to foreclosure of a mortgage under N.J.S.A. § 2A:50-56.1(c) has not expired, so that Defendants may still foreclose the mortgage on which Debtor defaulted on or about June 1, 2007 (dkt. 11); and finally

(3) the Debtor’s cross motion for summary judgment on the mortgage based on the arguments:

(a) that the 6-year statute of limitations applicable to foreclosure of a mortgage in which the maturity date has been accelerated under N.J.S.A. § 2A:50-56.1(a) has expired, so that the Defendants are out of time to sue on either the note or the mortgage; and

(b) that Defendants lack standing to enforce the note and mortgage because the Assignment is defective and because the Defendants waived their interest in the loan under a Settlement Agreement (dkt. 19).

` The Defendants filed a reply brief at dkt. 22.[2] The Court heard oral argument on September 30, 2014 and reserved on the narrow issue of whether N.J.S.A. § 2A:50-56.1(a) and 11 U.S.C. §§ 502(b)(1) and 506(d) operate to make the mortgage unenforceable, to disallow the Defendants’ claim, and to void the mortgage lien so that the Defendants have no claim against the Debtor, the property or the estate.


The Court has jurisdiction over these matters under 28 U.S.C. § 1334(b) and the Standing Orders of Reference entered by the United States District Court on July 10, 1984 and amended on October 17, 2013. This is a core proceeding under 28 U.S.C. § 157(b)(2)(A), (B), (K) and (O). Venue is proper in this Court under 28 U.S.C. §§ 1408 and 1409.


The acquisition of the property.

On February 27, 2007, the Debtor purchased a three-family home at 11 Walnut Street, Morris County, New Jersey (“Property”), paying a $130,000 deposit and obtaining a 30-year adjustable rate mortgage and note for $520,000 for the balance with first payment due on April 1, 2007 (dkt. 7-2, Debtor’s Certification in Support of Summary Judgment, ¶ 4, Exhibit A, note). The mortgagee was America’s Wholesale Lender (dkt. 7-2, Debtor, ¶ 5, 9). Debtor’s attorney asserts that Countrywide Home Loans served as the mortgage servicer, an assertion disputed by the Defendants (dkt. 7, Debtor SUMF, ¶ 7). Debtor moved into the third-floor apartment and began to renovate the first and second floor apartments to rent (dkt. 7-2, Debtor ¶ 7). During renovation, the first and second floor apartments suffered water damage and became uninhabitable (dkt. 7-2, ¶ 7). Debtor failed to make the July 1, 2007 mortgage payment, and the loan has been in continuous default since that time (dkt. 7-2, Debtor, ¶8).[4]

The bankruptcy case.

The Debtor filed a voluntary Chapter 7 petition on March 12, 2014, along with a motion to convert the case to one under Chapter 13. The case was converted by Order entered on April 9, 2014. The claims bar date was August 18, 2014. Thereafter, the Debtor filed an original Plan on May 19, 2014 (main dkt. 17) and a first modified Plan on August 5, 2014 (main dkt. 25); a confirmation hearing is scheduled presently for November 20, 2014. Each Plan proposes to sell the above property in a short period. The first Plan proposes payments of 12 months @$492 plus $554,000 in the last month; the second Plan proposes payments of 17 months @$492 plus $554,000 in the last month. The Debtor projected the value of the property at $550,000-$600,000 and scheduled the Defendants’ debt at $519,000. The Defendants filed a proof of claim for $920,469 (claim 7-1) (the $519,000 scheduled by the Debtor represents only the principal due) and filed an objection to the Plan because it indicates a short sale with a payoff of only $554,000 in the 18th month (main dkt. 34, ¶5). The Plan suggests (does not state) that Debtor seeks to cram down the note on this three-family home to the value of the property; but the clear aim of this adversary proceeding is to render the Defendants’ note and mortgage not only undersecured but wholly unenforceable.

Debtor scheduled $137,000 in general unsecured claims. Proofs of claim timely filed include, in addition to the claim of Defendants, $15,000 in priority tax claims; $70,000 in general unsecured claims (including $15,000 due a relative); and an additional $63,000 due on a student loan. The Debtor proposes a pro rata distribution to the general unsecured creditors.

The adversary proceeding.

The Debtor filed this adversary proceeding on March 18, 2014 (dkt. 1). The Defendants answered on May 2, 2014 (dkt. 4), and on May 19, 2014 the parties entered a Joint Scheduling Order which scheduled trial for December 5, 2014 (dkt. 5). The Debtor filed the initial motion for partial summary judgment on June 2, 2014, and the cross motions followed. On September 30, 2014, in addition to hearing oral argument on these motions, the Court, on Defendant’s motion, entered an Order which compelled discovery, modified the Joint Scheduling Order and rescheduled trial to February 20, 2015 at 10:00 a.m. (dkt. 23).

The mortgage documents and related pleadings.

The February 1, 2007 Adjustable Rate Note (“the note”) between America’s Wholesale Lender and Debtor stated a principal of $520,000, periodic payments beginning April 1, 2007 at 8.950% interest, and monthly debt service of $4,165.34 (dkt. 7, Exhibit A). The note defined March 1, 2037 as the Maturity Date and provided that any amounts due would be paid on that date (dkt. 7, Exhibit A, ¶ 3(A), Maturity Date). The note contained the following default provisions and remedy:


. . .

(B) Default

If I do not pay the full amount of each monthly payment on the date it is due, I will be in default.

(C) Notice of Default

If I am in default, the Note Holder may send me a written notice telling me that if I do not pay the overdue amount by a certain date, the Note Holder may require me to pay immediately the full amount of Principal which has not been paid and all the interest that I owe on that amount. The date must be at least 30 days after the date on which the notice is mailed to me or delivered by other means.

(D) No Waiver by Note Holder

Even if, at a time when I am in default, the Note Holder does not require me to pay immediately in full as described above, the Note Holder will still have the right to do so if I am in default at a later time.

(dkt. 7, Exhibit A).

The mortgage, dated February 27, 2007, referenced the note and contained its own default provisions:

NON-UNIFORM COVENANTS. Borrower and Lender further covenant and agree as follows:

22. Acceleration; Remedies. Lender shall give notice to Borrower prior to acceleration following Borrower’s breach of any covenant or agreement in this Security Instrument (but not prior to acceleration under Section 18 [based on borrower’s transfer of the property] unless Applicable Law provides otherwise). The notice shall specify: (a) the default; (b) the action required to cure the default; (c) a date, not less than 30 days from the date the notice is given to Borrower, by which the default must be cured; (d) that failure to cure the default on or before the date specified in the notice may result in acceleration of the sums secured by this Security Instrument, foreclosure by judicial proceedings and sale of the Property; (e) the Borrower’s right to reinstate after acceleration and the right to assert in the foreclosure proceeding the non-existence of a default or any other defense of Borrower to acceleration and foreclosure; and (f) any other disclosure required under the Fair Foreclosure Act, codified at Sections 2A:50-53 et seq. of the New Jersey Statutes, or other Applicable Law. If the default is not cured on or before the date specified in the notice, Lender at its option may require immediate payment in full of all sums secured by this Security Instrument without further demand and may foreclosure this Security Instrument by judicial proceeding. Lender shall be entitled to collect all expenses incurred in pursuing the remedies provided in this Section 22, including, but not limited to, attorneys’ fees and costs of title evidence permitted by Rules of Court.


UNIFORM COVENANTS. Borrower and Lender covenant and agree as follows:

. . .

19. Borrower’s Right to Reinstate After Acceleration. If Borrower meets certain conditions, Borrower shall have the right to have enforcement of this Security Instrument discontinued at any time prior to the earliest of: (a) five days before sale of the Property pursuant to any power of sale contained in this Security Instrument; (b) such other period as Applicable law might specify for the termination of Borrower’s right to reinstate; or (c) entry of a judgment enforcing this Security Instrument. Those conditions are that Borrower: (a) pays Lender all sums which then would be due under this Security Instrument and the Note as if no acceleration had occurred; (b) cures any default of any other covenants or agreements; (c) pays all expenses incurred in enforcing this Security Instrument, including, but not limited to, reasonable attorneys’ fees, property inspection and valuation fees, and other fees incurred for the purpose of protecting lender’s interest in the Property and rights under this security Instrument; and (d) takes such action as Lender may reasonably require to assure that Lender’s interest in the Property and rights under this Security Instrument, and Borrower’s obligation to pay the sums secured by this Security Instrument, shall continue unchanged Lender may require that Borrower pay such reinstatement sums and expenses in one or more of the following forms, as selected by the Lender: (a) cash; (b) money order; (c) certified check, bank check, treasurer’s check or cashier’s check, provided any such check is drawn upon an institution whose deposits are insured by a federal agency, instrumentality or entity; or (d) Electronic Funds Transfer. Upon reinstatement by Borrower, this Security Instrument and obligations secured hereby shall remain fully effective as if no acceleration had occurred. However, this right to reinstate shall not apply in the case of acceleration under Section 18 [Transfer of the Property or a Beneficial Interest in Borrower].

. . .

(dkt. 7, Exhibit B, ¶¶ 22 and 19). Accompanying the mortgage were an Adjustable Rate Rider and a 1-4 Family Rider which included at paragraph H an absolute assignment of rents (dkt. 7 Exhibit B, Mortgage). Both accompanying documents were dated February 27, 2007.

The mortgage was assigned by MERS as Nominee for America’s Wholesale Lender to co-Defendant The Bank of New York [as Trustee] for the Benefit of the Certificate-holders, CWABS Inc. Asset-Backed Certificates Series 2007-5 (“BoNY”) for $1.00 by an Assignment of Mortgage effective November 12, 2007 but recorded on September 9, 2008 (dkt. 7, Exhibit L, “the Assignment”).

The Assignment recites the original amount of the mortgage as $520,000 and states in relevant part:

And the Assignor covenants that there is now due and owning upon the Mortgage and the Bond, Note or other obligation secured thereby, the sum of $519,132.54 Dollars principal with interest thereon to be computed at the rate of 8.950 percent per year from June 1, 2007, along with such other sums as may be collectible, and that there are no set-offs, counterclaims or defenses against the Mortgage or the Bond, Note or other obligation, in law or in equity, nor have there been any modifications or other changes in the original terms thereof, other than as stated in this Assignment.

(dkt. 7, Exhibit L).[5] Debtor relies in part on this language in the Assignment for the proposition that the Defendants accelerated the maturity date of the note and mortgage to June 1, 2007 (dkt. 19-13, Debtor’s response to Defendants’ SUMF, ¶ 5; dkt 19-13, Debtor’s Counterstatement of Undisputed Material Facts, ¶ 5, 13; dkt. 19-1, Debtor’s certification in support of cross motion, ¶¶ 6, 9-10, 13; dkt. 19-14, Debtor’s brief in support of cross motion, pp. 1, 2, 8, 12, 14, 16-17).

On December 14, 2007, the Defendants filed a foreclosure Complaint in Superior Court of New Jersey, Chancery Division, Morris County, Dkt. No. F-34837-07 (dkt. 7, Exhibit E) (“the Complaint”). The Complaint described the loan as “an obligation (note) to secure the sum of $520,000.00 payable on March 1, 2037” (dkt. 7, Exhibit E, ¶ 1). The Complaint continues in relevant part:

8. The Defendants named in Paragraphs 1 and 2 above, or their grantee or grantees, if any has failed to make the installment payment due on June 1, 2007, and all payments becoming due thereafter. Therefore the loan has been in default since July 1, 2007, and said payments have remained unpaid for more than 30 days from the date of the mailing of the Notice of Default to the obligor, and are still unpaid. Plaintiff herein, by reason of said default, elected that the whole unpaid principal sum due on the aforesaid obligation and mortgage referred to in Paragraphs 1 and 2 above, with all interest and advances made, shall be now due (Emphasis added).

. . .

10. Notice of Intention to Foreclose was sent in compliance with the Fair Foreclosure Act more than 31 days prior to filing of the complaint.

(dkt. 7, Exhibit E, ¶¶ 8, 10). Debtor also relies on ¶ 8 in the Complaint for the proposition that the Defendants accelerated the maturity date of the loan to June 1, 2007 (dkt. 7, Debtor’s SUMF, ¶ 11; dkt. 7-2, Debtor’s certification in support of motion, ¶ 12; dkt. 7-22, Debtor’s brief, p. 3). The Debtor filed his Answer on February 8, 2008 and in it neither admitted nor denied the allegations in ¶ 8 but denied the allegations in ¶ 10 (dkt. 7, Exhibit F (Answer), ¶¶ 8, 10).

Defendants concur that the payment default occurred on July 1, 2007 (the interest default having occurred on June 1, 2007) but dispute the acceleration date (dkt. 11-2, July 29, 2014 affidavit of Cynthia Wallace for SLS in support of Defendants’ crossmotion, ¶ 4b; dkt. 11-3, affidavit of Matthew R. Stahlhut for BoA in support of Defendants’ crossmotion, ¶ 7). Defendants “assert that the subject loan . . . was accelerated on December 14, 2007 upon the filing of the 2007 Foreclosure Complaint” (dkt. 11-1, Defendants’ response to Debtor’s SUMF, ¶ 8, also ¶ 11; dkt. 11-1 Defendants’ Counterstatement of Undisputed Material Facts, ¶ 5). As explained below, whether the default and acceleration date is reckoned as June 1, 2007, July 1, 2007 or December 14, 2007, does not affect the outcome of this case.

By Return Notice dated October 28, 2010, the Office of Foreclosure returned the foreclosure judgment package to BoNY with extensive deficiencies noted, including at ¶ 23, “One attorney certified copy of each of the following must be submitted: bond or note, recorded mortgage, assignments(s), if any” (dkt. 7, Exhibit H, “Return Notice” dated October 28, 2010). BoNY filed a Notice of Lis Pendens dated February 5, 2013, recorded on February 7, 2013 (dkt. 7, Exhibit M, “Notice of Lis Pendens”).

On May 31, 2013, the Superior Court Clerk’s Office issued a notice of intent to dismiss the foreclosure case without prejudice for lack of prosecution within 30 days unless the plaintiff produced one of the following documents: amended complaint; request for default or motion to enter default out of time; motion to: strike answer, enter judgment or for summary judgment; proof of bankruptcy filing or other condition that stays the case; affidavit or certification asserting that failure to file or take the next required action is due to exceptional circumstances” (dkt. 7, Exhibit I, “Foreclosure Dismissal Notice”). Counsel for BoNY responded on June 21, 2013 that he intended to file an Order to Show Cause to obtain more time (dkt. 7, Exhibit J, Certification of John Caporale, Esq.). On July 5, 2013, the Superior Court Clerk’s Office issued a Foreclosure Dismissal Order, dismissing the Defendants’ complaint for lack of prosecution without prejudice and with the provision, “Reinstatement of the matter after dismissal may be requested by a motion for good cause” (dkt. 7, Exhibit K) (“Foreclosure Dismissal Order”). BoNY caused a Discharge of Lis Pendens to be recorded on August 21, 2013 (dkt. 7, Exhibit N, “Discharge of Lis Pendens”).

Thus, to date, the Defendants have not obtained a Final Judgment of Foreclosure. Moreover, Defendants admit the dismissal of the foreclosure Complaint without prejudice (dkt. 11-1, response to Debtor’s SUMF, ¶¶ 17, 19).[6] Debtor certifies that Defendants’ failure to produce the original note, mortgage or assignment was the primary basis for the dismissal (dkt. 7-2, Debtor, ¶¶ 14, 17, 20) and contends that BoNY never produced the original note during the foreclosure proceedings (dkt. 7-22, Debtor’s brief, p. 4), citing N.J. R. 4:64-2(a) (which requires production of original documents in support of foreclosure judgment). Following inspection of Defendants’ files on October 7, 2014, the Debtor appears to concede that Defendants have the original note[7], but challenged the absence of an Allonge which Defendants assert does not exist (dkt. 25, Debtor’s October 9, 2014 letter to the Court; dkt. 26, Defendants’ October 10, 2014 responsive letter to the Court). The basis for the dismissal of the foreclosure proceeding and whether Defendants possess an Allonge have little or no bearing on the Court’s decision in this matter.


The Parties’ Positions

The Debtor initially argued that BoNY’s claim for action on the note accrued on June 1, 2007, when BoNY declared the default and accelerated the loan. The Debtor asserted that N.J.S.A. § 12A:3-118(a) serves as the statute of limitations for bringing an action on the note as a negotiable instrument (dkt. 7-22, Debtor’s brief, pp. 12-13).[8] Inasmuch as the statute of limitations under N.J.S.A. § 12A:3-118(a) runs six years after the due date or the accelerated due date, the Debtor posited that BoNY was time-barred from enforcing the note and that the Debtor should be granted summary judgment as a matter of law, declaring the note unenforceable.

In their cross motion, the Defendants conceded that the 6-year statute of limitations for enforcement of the note had run but argued that enforcement of the mortgage is subject to a 20-year statute of limitations recognized as a common law matter in Security Nat’l Partners Ltd. P’ship v. Mahler, 336 N.J. Super. 101, 107, cert den., 169 N.J. 607 (2001) (“Mahler“) and later codified at N.J.S.A. § 2A:50-56.1(c) (“Statute of limitations relative to foreclosure proceedings”) (dkt. 11-14, Defendants’ brief, p. 4). Defendants submit that that they are entitled to foreclose on the property and to apply the sale proceeds to their debt but admit that they are unlikely to be able to enforce any deficiency against the Debtor.[9] In re Pecora, 297 B.R. 1, 3 (Bankr. W.D.N.Y. 2003) (distinguishing debtor liability for the mortgage debt from the persistence of the mortgagee’s lien, citing Dewsnup v. Timm, 502 U.S. 410, 417-18 (1992) and Johnson v. Home State Bank, 501 U.S., 78, 84-85 (1991)). The Defendants contend that the Trust is entitled to summary judgment because there is no genuine issue of material fact and they can enforce the mortgage as a matter of law.

In his cross motion, Debtor argues that Defendants’ declaration of default and acceleration (which both parties acknowledge with respect to the note, supra) advanced the maturity date of the mortgage to June 1, 2007 so that under N.J.S.A. § 2A:50-56.1(a), which requires the mortgagee to file a foreclosure action within 6 years of the maturity date of the mortgage, Defendants cannot pursue foreclosure of the Property (dkt. 19-14, pp. 12-18; dkt. 7, Exhibits L and E). Whether the accelerated maturity of the mortgage is found to be July 1, 2007, or December 14, 2007 (as urged by Defendants), the Defendants are still out of time under Debtor’s interpretation of N.J.S.A. § 2A:50-56.1(a) to file a foreclosure complaint.

In their response, the Defendants press Mahler and make the bare assertion that the lender-accelerated date does not satisfy the requirement in N.J.S.A. § 2A:50-56.1(a) of a “maturity date set forth in the mortgage or the note, bond, or other obligation secured by the mortgage, whether the date is itself set forth or may be calculated from information contained in the mortgage or note, bond, or other obligation.” N.J.S.A. § 2A:50-56.1(a) (emphasis added); (dkt. 22, Defendants’ reply brief, pp. 6-7). The question for the Court is whether acceleration of the note and mortgage advanced the maturity date so that N.J.S.A. § 2A:50-56.1(a) cuts off the Defendants’ cause of action, and whether this statute, effective August 6, 2009, applies to the instant case.

The Fair Foreclosure Act and N.J.S.A. § 2A:50-56.1

N.J.S.A. § 2A:50-53 through-68, “Foreclosure of Residential Mortgages” (“Fair Foreclosure Act,” or “FFA”), was approved on September 5, 1995, effective on December 4, 1995 and applicable “`to foreclosure actions commenced on or after that date.'” N.J.S.A. § 2A:50-53, citing L. 1995, c. 244, § 19 (a note to the Act). The Legislature made part of the body of the statute the finding and declaration that it is “public policy of this State that homeowners should be given every opportunity to pay their home mortgages” and that mortgagees benefit when defaulted loans return to performing status. N.J.S.A. § 2A:50-54. The FFA defines “residential mortgage” as one secured by a property with not more than 4 dwelling units, “one of which shall be, or is planned to be, occupied by the Debtor or a member of the Debtor’s immediate family as the Debtor’s or member’s residence at the time the loan is originated” and therefore applies to the 3-dwelling-unit residence occupied by the Debtor when the loan originated. N.J.S.A. § 2A:50-55 (“Definitions”); (dkt 7-2, Debtor, ¶ 7).

The FFA codifies the mortgagee’s obligation to give borrowers precise notice of the mortgagee’s intention to foreclose and the borrowers’ opportunities to cure defaults. U.S. Bank Nat’l Ass’n. v. Guillaume, 209 N.J. 449, 469-70 (2012). The statute acknowledges acceleration of the maturity date as a consequence of default and de-acceleration as a consequence of curing default:

2A:50-56. Written notice of intent to foreclose; contents

a. Upon failure to perform any obligation of a residential mortgage by the residential mortgage debtor and before any residential mortgage lender may accelerate the maturity of any residential mortgage obligation and commence any foreclosure or other legal action to take possession of the residential property which is the subject of the mortgage, the residential mortgage lender shall give the residential mortgage debtor notice of such intention at least 30 days in advance of such action as provided in this section.

N.J.S.A. § 2A:50-56(a) (West 2000 and Supp. 2014) (emphasis added). N.J.S.A. § 2A:50-57 provides:

2A:50-57. Right to cure default; procedure

a. Notwithstanding the provisions of any other law to the contrary . . . the debtor. . . shall have the right at any time, up to the entry of final judgment or the entry by the office or the court of an order of redemption pursuant to [N.J.S.A. § 2A:50-56], to cure the default, de-accelerate and reinstate the residential mortgage by tendering the amount or performance specified in subsection b. of this section. . . .

d. Cure of a default reinstates the debtor to the same position as if the default had not occurred. It nullifies, as of the date of cure, any acceleration of any obligation under the mortgage, note or bond arising from the default.

N.J.S.A. § 2A:50-57 (West 2000 and Supp. 2014) (emphases added). “Acceleration” and “maturity” are not otherwise defined in the statute. Certain courts view as axiomatic the proposition that acceleration advances the maturity date of the debt. Bank v. Kim, 361 N.J. Super. 331, 344 (App Div. 2003) (“In pursuit of this objective [of encouraging homeowners to cure mortgage defaults], N.J.S.A. 2A:50-56 sets forth in considerable detail the steps required of a lender seeking to accelerate maturity and foreclose a residential mortgage upon the debtor’s failure to perform an obligation under the mortgage”); In re LHD Realty Corp., 726 F.2d 327, 330 (7th Cir. 1984) (determining that a mortgagee loses its right to a prepayment premium when it decides to accelerate a debt “because acceleration, by definition, advances the maturity date of the debt so that payment thereafter is not prepayment but instead is payment made after maturity”); cited in Westmark Comm. Mtge. Fund IV, 362 N.J. Super. 336, 345, 346-47 (App. Div. 2003) (which ultimately decided that prepayment premium was due and payable notwithstanding acceleration because the parties had bargained for it).

Shortly after the Fair Foreclosure Act was enacted, the Appellate Division of the Superior Court of New Jersey in Security Nat’l Partners Ltd. P’shp v. Mahler, 336 N.J. Super. 101, 105 (App. Div. 2000), cert. den., 169 N.J. 607 (2001) addressed the absence of a statute of limitations for foreclosure actions in New Jersey (“this State has never had a statute of limitations expressly referring to mortgage foreclosures”). In Mahler, the parties entered the note and mortgage on June 22, 1988 with final payment due June 22, 2003; the debtors defaulted on March 22, 1989; and the lender filed a foreclosure complaint on August 8, 1990. Id. at 103. After the complaint was filed, the debt was transferred multiple times, and the second-to-last assignee unilaterally dismissed the complaint. On June 26, 1996, the last assignee, the plaintiff-appellant, refiled the complaint which the chancery court dismissed as untimely. Id. at 103. The Appellate Division in Mahler reiterated the distinction between action on the note and action on the mortgage and declared that the lender’s time to sue on the note, governed by the 6-year statute of limitations in N.J.S.A. § 12A:3-118(a), had run. Mahler, 336 N.J. Super. at 105. The court rejected the borrowers’ argument that the same 6-year statute governed suits on the mortgage. Id. at 105.

The Appellate Division in Mahler observed that New Jersey common law had developed a 20-year limitation period for a suit on a mortgage

by borrowing and applying the twenty-year limitation period in certain adverse possession statutes. The concept was that a mortgagor in possession or control of the mortgaged property, who failed to make required payments under the mortgage, was in “adverse possession” of the property since—by his conduct—he was denying the mortgagee’s claim of ownership and right to possession.

Mahler, 336 N.J. Super. at 106.

The Appellate Division in Mahler reiterated that, apart from non-payment throughout the limitations period, the debtor is not required to take any other action to establish adverse possession. Mahler, 336 N.J. Super. at 107. The court in Mahler concluded that a foreclosure action is time-barred if not commenced within 20 years after the debtor’s default; declared that the time had not run in its case; and echoed the request in a well-known treatise that New Jersey adopt a statute of limitations for mortgage foreclosure actions. Mahler, 336 N.J. Super. at 106-107, 108; 30 New Jersey Practice, Law of Mortgages § 298, at 196 (Roger A. Cunningham & Saul Tischler) (1975).

In response to Mahler, the New Jersey Legislature promulgated as part of the Fair Foreclosure Act N.J.S.A. § 2A:50-56.1 (“Statute of limitations relative to foreclosure proceedings”), effective August 6, 2009:

2A:50-56.1 Statute of limitations relative to foreclosure proceedings.

An action to foreclose a residential mortgage shall not be commenced following the earliest of:

a. Six years from the date fixed for the making of the last payment or the maturity date set forth in the mortgage or the note, bond, or other obligation secured by the mortgage, whether the date is itself set forth or may be calculated from information contained in the mortgage or note, bond, or other obligation, except that if the date fixed for the making of the last payment or the maturity date has been extended by a written instrument, the action to foreclose shall not be commenced after six years from the extended date under the terms of the written instrument;

b. Thirty-six years from the date of recording of the mortgage, or, if the mortgage is not recorded, 36 years from the date of execution, so long as the mortgage itself does not provide for a period of repayment in excess of 30 years; or

c. Twenty years from the date on which the debtor defaulted, which default has not been cured, as to any of the obligations or covenants contained in the mortgage or in the note, bond, or other obligation secured by the mortgage, except that if the date to perform any of the obligations or covenants has been extended by a written instrument or payment on account has been made, the action to foreclose shall not be commenced after 20 years from the date on which the default or payment on account thereof occurred under the terms of the written instrument.

N.J.S.A. § 2A:50-56.1 (West 2000 and Supp. 2013) (emphasis added).

As explained in the Assembly Financial Institutions and Insurance Committee Statement, Senate, No. 250-L. 2009, c. 105 (“the Committee Statement”) accompanying the bill which became N.J.S.A. § 2A:50-56.1, the statute “in part, codifies the holding in Security National Partners Limited Partnership v. Mahler, 336 N.J. Super. 101 (App. Div. 2000).” The Committee Statement in an October 6, 2008 report says:

The Assembly Financial Institutions and Insurance Committee reports favorably Senate Bill 250 (1R).

This bill supplements the “Fair Foreclosure Act,” P.L.1995, c.244 (C.2A:50-53 et seq.) by applying a statute of limitations to residential mortgage foreclosure actions. The bill is intended to address some of the problems caused by the presence on the record of residential mortgages which have been paid or which are otherwise unenforceable. These mortgages constitute clouds on title which may render real property titles unmarketable and delay real estate transactions. The bill provides that a foreclosure action must be commenced by the earliest of: (1) six years from the date of maturity on the mortgage or other obligation secured by the mortgage, matching the six-year statute of limitations on actions based on contract law; (2) 36 years from the date of recording or execution of the mortgage, provided the mortgage itself does not provide for a period of repayment in excess of 30 years, again relying upon the six-year statute of limitations for contract law; or (3) 20 years from the date of default by the debtor on the mortgage or other obligation secured by the mortgage, matching the 20-year statute of limitations on adverse possession actions. Thus, the bill allows a determination that certain mortgages are not clouds on title because a party can no longer bring an action to foreclose them beyond the bill’s expressly stated statute of limitations, as borrowed from actions in contract law or adverse possession, as applicable.

The bill, in part, codifies the holding in Security National Partners Limited Partnership v. Mahler, 336 N.J. Super. 101 (App. Div. 2000) which applied a 20-year statute of limitations to a residential mortgage foreclosure action based on a default due to nonpayment. In its decision, the court noted that since there is currently no statute of limitations expressly applicable to mortgage foreclosures in these situations, courts have resorted to drawing analogies to adverse possession statutes which bar rights of entry onto land after 20 years. This bill would resolve the uncertainties surrounding this area of law by providing a specific statute of limitations of 20 years from the date of the default by the debtor.

(cited at N.J.S.A. § 2A:50-56.1 (West 2000 and Supp. 2013)) (emphases added).

While federal courts allow recourse to legislative history to interpret a statute only if the text is “ambiguous or otherwise unclear,” the New Jersey Supreme Court has encouraged the use of “extrinsic aids” to interpretation. Compare U.S. v. Cheeseman, 600 F.3d 270, 285-86 (3d Cir.), cert den., ___ U.S. ___, 131 S. Ct. 636 (2010) (concurring) with Nat’l Waste Recycling, Inc. v. Middlesex Cty. Improvement Auth., 150 N.J. 209, 224 (1997); but see U.S. Bank. Nat’l Ass’n. v. Guillaume, 209 N.J. at 471-72 (the court must construe a statute from its plain language; stop the “`interpretive process'” if there is no ambiguity, and “`not resort to extrinsic interpretive aids when the statute is clear and unambiguous'”) (internal citations omitted). The legislative history accompanying N.J.S.A. § 2A:50-56.1(a) provides a limited measure of guidance as to whether the maturity referenced in the statute includes an accelerated maturity date. The Committee Statement notes that the six-year limitations period “match[es] the six-year statute of limitations on actions based on contract law.” If the foreclosure statute is meant to parallel N.J.S.A. § 2A:14-1, that statute is neutral on acceleration and maturity:

Every action at law . . . for recovery upon a contractual claim or liability, express or implied, not under seal, or upon an account other than one which concerns the trade or merchandise between merchant and merchant, their factors, agents and servants, shall be commenced within 6 years next after the cause of any such action shall have accrued [except for action on breach of sale governed by N.J.S.A. § 12A:2-275].

N.J.S.A. § 2A:14-1 (“Limitation of Actions/Adverse Possession/Various Actions/Six Years”). If the foreclosure statute is meant to parallel N.J.S.A. § 12A:3-118 (“Negotiable Instruments/ General Provisions and Definitions/Statute of Limitations”), there is a stronger argument that an accelerated maturity date applies and starts the running of the statute of limitations:

Except as provided in subsection e. of this section, an action to enforce the obligation of a party to pay a note payable at a definite time must be commenced within six years after the due date or dates stated in the note or, if a due date is accelerated, within six years after the accelerated due date.

N.J.S.A. § 12A:3-118(a) (emphasis added) (As stated earlier Uniform Commercial Code cmt. 2 to this section iterates, “If the note is payable at a definite time, a six-year limitations period starts at the due date of the note, subject to prior acceleration.”)

The Application of N.J.S.A. § 2A:50-56.1 to this Case

N.J.S.A. § 2A:50-56.1 went into effect on August 6, 2009 (West 2000 and Supp. 2014). The statute does not state whether the effective date is measured against the date of the mortgage, the date of the default, or the date on which the foreclosure action is filed. The parent Fair Foreclosure Act became effective on the 90th day after its September 5, 1995 enactment (effective December 4, 1995) and “appl[ied] to foreclosure actions commenced on or after the effective date.” N.J.S.A. § 2A:50-53, citing L. 1995, c. 244, § 19 (a note to the Act) (emphasis added). If the amendment at N.J.S.A. § 2A:50-56.1 is presumed to measure effectiveness in the same manner, then the statute does apply to the instant case in which the Defendants have not yet filed a viable foreclosure complaint.

Defendants contended at the September 30, 2014 hearing that a foreclosure complaint filed now should “relate back” to the complaint filed on December 14, 2007 and dismissed without prejudice on July 5, 2013 (dkt. 7, Exhibits E and K). In the unsolicited letter of October 9, 2014, Debtor argued that a foreclosure action filed now would not “relate back” to the original proceeding because the Defendants discharged the lis pendens and failed to appeal the July 5, 2013 dismissal, with the 45-day appeal period having expired (dkt. 25, October 9, 2014 letter to the court; N.J.R. 4:37-1, cmt. 1.2; N.J.R. 4:37-2(a), cmt. 4; O’Loughlin v. Nat’l Comm. Bank, 338 N.J. Super. 592, 603 (App. Div.), cert. den., 169 N.J. 606 (2001) (“[a] dismissal without prejudice adjudicates nothing and does not constitute a bar to re-institution of the action, subject to the constraint imposed by the statute of limitations”) (affirming the dismissal of a complaint in part because plaintiff failed to refile by the deadline stipulated in a consent order, citing the comment to N.J.R. 4:37-1). In their reply letter, the Defendants did not respond to the Debtor’s challenge to their “relation back” argument (dkt. 26, October 26, 2014 letter to the Court).

To the extent that N.J.S.A. § 2A:50-56.1 applies to this case only if given retroactive application, this statute meets the criteria for retroactive application reiterated in James v. N.J. Mfrs. Ins. Co., 216 N.J. 552, 558, 563 (2014). In New Jersey, statutes are given prospective application (1) unless “`the Legislature intended to give the statute retroactive application'” and (2) provided retroactive application does not “`result in either an unconstitutional interference with vested rights or a manifest injustice.'” James, 216 N.J. at 563, quoting In re D.C., 146 N.J. 31, 50 (1996) and Phillips v. Curiale, 128 N.J. 608, 617 (1992) (other internal citations omitted by James). The court in James, collecting other cases, expanded the first prong to three circumstances:

(1) that the Legislature expressed or implied its intent for retroactivity (necessity for fulfilling a legislative goal; unworkability without retroactive application);

(2) that the amendment is merely curative or clarifying rather than representing a change in existing law; or

(3) that the expectations of the parties warrant retroactivity.

James, 216 N.J. at 563. If any of these circumstances exists, the Court still examines whether retroactive application would result in “manifest injustice,” meaning that “`the parties relied on prior law to their detriment, such that retroactive application would cause a “deleterious and irrevocable” result.'” James, 216 N.J. at 565, quoting Gibbons v. Gibbons, 86 N.J. 515, 523-24 (1981). Myron Weinstein in New Jersey Practice indicated that giving the broadest application to N.J.S.A. § 2A:50-56.1 fulfills legislative purpose:

It is not clear whether the statute is retroactive or whether it only applies to mortgages or defaults after the effective date. If so, its benefits would be greatly reduced, as one of its stated purposes is to remove mortgage constituting “clouds on title which may render real property titles unmarketable and delay real estate transactions.

Myron, Weinstein. Law of Mortgages. 29 New Jersey Practice § 13.16 (“Statute of Limitations”) (emphasis added). By any prospective or retroactive measure of effectiveness, N.J.S.A. § 2A:50-56.1 applies to the instant case.

The Defendants accelerated the maturity date of the loan to the June 1, 2007 default date, as acknowledged in the Assignment (dkt. 7, Exhibit L).[10] Moreover, neither the Debtor nor the Defendants have taken any measures under the note or mortgage, or under the Fair Foreclosure Act, to de-accelerate the debt, and the Defendants have further failed to file a foreclosure complaint within 6 years of the accelerated maturity date as required by N.J.S.A. § 2A:50-56.1(a). Accordingly, the Defendants are now time-barred from filing a foreclosure complaint and from obtaining a final judgment of foreclosure.

The Disallowance of the Defendants’ Proof of Claim and Avoidance of the Underlying Mortgage.

On July 17, 2014, the Defendants timely filed secured proof of claim 7-1 under 11 U.S.C. § 501(a) for $920,469.86 based on their note and mortgage (the claims bar date was August 18, 2014). A claim in bankruptcy is a “right to payment, whether or not such right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured, or unsecured.” 11 U.S.C. § 101(5)(A). Debt is “liability on a claim.” 11 U.S.C. § 101(12). Moreover, pursuant to 11 U.S.C. § 102(2), a claim against the Debtor’s property also constitutes a claim against the Debtor. Thus, while Defendants have only in rem claims, having failed to sue on the note within the six years permitted under the statute, such claims remain claims against the Debtor in this bankruptcy proceeding.

11 U.S.C. § 502(a) controls the claims allowance process: “A claim or interest, proof of which is filed under section 501 of this title, is deemed allowed, unless a party in interest . . . objects.” 11 U.S.C. § 502(a). Debtor’s adversary complaint includes a demand which constitutes an objection to the Defendants’ proof of claim: “Determine that Defendants have no allowed secured claim” (dkt. 1, “Request for Relief, p. 4, ¶ b) and triggers the Court’s review. 11 U.S.C. § 502(b) governs unenforceability of claims and states in relevant part:

(b) Except as provided in subsections (e)(2), (f), (g), (h) and (i) of this section [not relevant here] if such objection to a claim is made, the court, after notice and a hearing, shall determine the amount of such claim in lawful currency of the United States as of the date of the filing of the petition, and shall allow such claim in such amount, except to the extent that—

(1) such claim is unenforceable against the debtor and property of the debtor, under any agreement or applicable law for a reason other than because such claim is contingent or unmatured.

11 U.S.C. § 502(b)(1) (emphasis added). 11 U.S.C. § 506 controls the allowance of secured claims and provides that, if the claim underlying the lien is disallowed, then the lien is void:

(a)(1) An allowed claim of a creditor secured by a lien on property in which the estate has an interest, or that is subject to setoff under section 553 of this title, is a secured claim to the extent of the value of such creditor’s interest in the estate’s interest in such property, or to the extent of the amount subject to setoff, as the case may be, and is an unsecured claim to the extent that the value of such creditor’s interest or the amount so subject to setoff is less than the amount of such allowed claim. Such value shall be determined in light of the purpose of the valuation and of the proposed disposition or use of such property, and in conjunction with any hearing on such disposition or use or on a plan affecting such creditor’s interest.

. . .

(d) To the extent that a lien secures a claim against the debtor that is not an allowed secured claim, such lien is void, unless [conditions not relevant here exist].

11 U.S.C. § 506(a)(1) and (d)(emphasis added).

As explained above, by application of N.J.S.A. § 2A:50-56.1(a) and (c), the Defendants are time-barred under New Jersey state law from enforcing either the note or the accelerated mortgage. As a result, Defendants’ proof of claim 7 must be disallowed under 11 U.S.C. § 502(b)(1) as unenforceable against the Debtor or against Debtor’s property under applicable state law. Having determined that Defendants do not have an allowed secured claim, the underlying lien is deemed void pursuant to 11 U.S.C. §§ 506(a)(1) and (d).[11]


In light of Defendants’ acceleration of the maturity date of the underlying debt as of June 1, 2007, and because neither Debtor nor Defendants took any action under either the mortgage instruments, or the Fair Foreclosure Act, to de-accelerate the maturity date, Defendants’ right to file a foreclosure complaint expired 6 years after the June 1, 2007 acceleration date under N.J.S.A. § 2A:50-56.1(a). Given that Defendants’ putative secured claim is unenforceable under 11 U.S.C. § 502(b)(1), by applicable New Jersey statute, their mortgage lien is void under 11 U.S.C. § 506(d), and the Debtor retains the property, free of any claim of the Defendants. Debtor is to submit a form of judgment. The Court will proceed to gargle in an effort to remove the lingering bad taste.

[1] Docket references are to adv. pro. no. 14-1319 unless stated otherwise. Debtor provided a signed Rule 56.1 Statement of Undisputed Material Facts (“Debtor SUMF”) at dkt. 8 to replace the unsigned copy at dkt. 7, but this opinion refers to the Debtor’s SUMF at dkt. 7 for consistency with the other elements of Debtor’s motion.

[2] At dkt. 22, p. 1, n.1, the Defendants note the procedural impropriety of the Debtor having filed a cross motion to a cross motion. The Court considers the Debtor’s cross motion at dkt. 19 as opposition to the Defendants’ cross motion, and the Defendants’ reply memorandum at dkt. 22 as a response thereto. For consistency with the docket entries, however, this opinion cites to Debtor’s dkt. 19 as to the `cross motion.’

[3] The facts recited herein are undisputed by any of the parties.

[4] Debtor believes that a friend made the July 1, 2007 payment but has not pressed or proven that point (dkt. 7-2, Debtor, ¶ 8). The unassailable fact that Debtor went into default within 90 days of the loan closing makes this decision even less palatable. 4

[5] The Defendants also provided a copy of this recorded Assignment at dkt. 11, Exhibit C. Debtor questions the authenticity and effectiveness of the Assignment generally, because a different version of it, unrecorded and bearing different officer signatures, was attached to the foreclosure complaint, infra (dkt. 19, Exhibit 3, “Unrecorded Assignment”). Both the recorded and the Unrecorded Assignment contain the clause accelerating the debt to June 1, 2007.

Matthew R. Stahlhut, officer at Bank of America (“BoA”), asserts that BoA serviced the loan from its inception through transfer of servicing rights on November 16, 2013 to defendant-servicer SLS (dkt. 11-3, Stahlhut cert., ¶5). Defendants provide an Amended Assignment of Mortgage signed on December 31, 2013, recorded on January 8, 2014, purportedly to correct the name of BoNY (dkt. 11, Exhibit D, “Amended Assignment”). The Amended Assignment is different in format from the original Assignment and does not contain the acceleration clause.

[6] In response to Debtor’s SUMF, ¶ 16, that the Defendants “never obtained a judgment against the Homeowner in the 2007 Foreclosure Complaint,” Defendants assert without documentary evidence or certified response that they obtained “summary judgment,” but that judgment (not provided) appears simply to have stricken the Debtor’s answer (dkt. 11-1, Defendant’s response to Debtor’s SUMF, ¶ 16).

[7] Cynthia Wallace, an officer of SLS, certifies that CWABS, Inc., Asset-Backed Certificates, Series 2007-5 (“the Trust”) “maintain[s] . . . through its custodian” the note, mortgage, assignment, and corrective assignment signed December 31, 2013 and recorded on January 8, 2014 (dkt. 11-2, Wallace cert. ¶¶ 1, 3 and dkt. 11, Exhibits A, B, C, D).

[8] N.J.S.A. § 12A:3-118(a) provides: “Except as provided in subsection e. of this section, an action to enforce the obligation of a party to pay a note payable at a definite time must be commenced within six years after the due date or dates stated in the note or, if a due date is accelerated, within six years after the accelerated due date.” N.J.S.A. § 12A:3-118(a) (emphasis added). Uniform Commercial Code cmt. 2 to this section iterates, “If the note is payable at a definite time, a six-year limitations period starts at the due date of the note, subject to prior acceleration.”

[9] Defendants state that the 6-year statute of limitations would obviate any deficiency claim, but Debtor’s eventual discharge in Chapter 13 or Chapter 7 would also relieve him of personal liability for the debt. N.J.S.A. § 2A:50-52 (“No deficiency judgment”) also prohibits deficiency judgments on foreclosures under this statute.

[10] Whether the default were measured from July 1, 2007 or from the December 14, 2007 filing date of the foreclosure complaint, the statute of limitations under N.J.S.A. § 2A:50-56.1 has still run.

[11] In as much as the Court finds that the Defendants are time-barred from enforcing the note or the mortgage, it is not necessary to address Debtor’s arguments that Defendants lack standing to enforce the note and mortgage based on alleged defects in the Assignment or the alleged impact of a Settlement Agreement.

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H/T Richard Zombeck

Massachusetts Alliance Against Predatory Lending


Senate Bill 1987

Massachusetts’ Supreme Judicial Court has declared thousands of foreclosures void and homeowner rights violated. Massachusetts has a problem going forward with hundreds of thousands of titles to property, 65,000 of which were “foreclosed” homes. S1987’s attempt to deny former owners the right to regain illegally foreclosed property is not the same as clearing titles and is not the solution. It disparately impacts women and communities of color foreclosed on early in the crisis before the SJC recognized the many lender illegalities in foreclosure.

What Does This Bill Do? It does nothing to clear title – it attempts to exclude the party most likely to sue.
The Senate version of the bill shortens the time to overturn an illegal foreclosure after filing a foreclosure deed and accompanying affidavit from the long standing, 20 year statute of limitations to 3 years for future auctions and to only one year for those previously foreclosed. The bill provides no notice to MA homeowners of this curtailing of long-standing, property rights. In passing the bill on July 23rd, 2014, House leadership changed the bill to limit the decrease from 20 years to 10 for both present and future foreclosed homeowners. This change will at least protect homeowners in the present crisis.
The bill offers an exemption only if the former homeowner sues or is sued, knows to ask and can convince a judge to give permission to file a copy of their complaint in the Registry of Deeds. Getting such an allowance can be hard since court rulings on foreclosed homeowners’ claims against lenders’ illegal procedures are still evolving.
While S1987 provides triple, monetary damages if the foreclosing lender is found to have lied on its affidavit, the home in which people raised their children, invested all their incomes and participated in their communities is forever gone. A home is not just a financial investment. S1987 misses that reality: denying our right to fight for and reclaim an illegally foreclosed home and limiting judgment to financial recompense which can never repay what is lost when a home is taken illegally.

Will S1987 protect innocent, new homeowners who purchase post-foreclosure?
The clear majority of new purchasers (58%) are big, cash-only investors – not new owner-occupants or small local investors. Only homeownership and long-term stable rental ensure healthy neighborhoods.
The recording of any legal challenge to title –lis pendens– exists specifically to protect future buyers.
However, only a judge can approve such a filing (G.L. Chapter 184 sect. 15). When legal rulings evolve so quickly, judges are learning like the rest of us. Prior to each recent major SJC ruling in foreclosed homeowners’ favor, most judges ruled against those same legal claims, declaring arguments “frivolous” when homeowners attempted to appeal. Judges have not been able to fully assess what will or will not be determined a “frivolous challenge” in the near future and thus merit recording in the Registry now. If a homeowner is permitted to record the initial claim, they are also laid open to counter-suits that their filing was frivolous.
S1987 does nothing to clear title. The now common problems of broken chains of title to mortgages and missing notes means there may be other parties besides former homeowners who have rights unaffected by S1987. The only sure protection for new or old homeowners will be swift adjudication of or another remedy to the now numerous valid challenges to post-foreclosure titles and broken chains of ownership of mortgages and notes.

Can the foreclosure deed affidavit be considered as “conclusive evidence” of a valid foreclosure?
The foreclosure affidavit filed at the Registry in a foreclosure is a purposefully abbreviated form created by the legislature to memorialize the bare bones of a foreclosure. As has been adjudicated by the Massachusetts Supreme Judicial Court in two decisions in the last two years:
“The statutory form was intended as an alternative to the more lengthy form prescribed by G.L. c. 244, §
15,… The purposes of a statutory form are…: to be recorded with the foreclosure deed and “secure the preservation of evidence that the conditions of the power of sale… have been complied with… Such an
affidavit is not conclusive proof of compliance with G.L. c. 244, § 14.”
The statutory affidavit covers none of the legal challenges that have been the critical breakthrough defenses against illegal foreclosures in the last few years: a mortgage having sub-prime characteristics, a broken chain of title to the mortgage, lacking an enforceable note, proper service on the homeowner of the notice of the auction, strict compliance with the right to cure period, etc. The affidavit S1987 attempts to elevated to a “conclusive evidentiary” status would require creation of a lengthier affidavit to cover the most salient issues. The abbreviated version used for decades cannot be elevated to proof of legal foreclosure. “Evidence” by its very nature must be the subject of scrutiny in court. “Conclusive evidence” without adjudication is a legal impossibility.

Can a curtailed time period to sue be fair when courts broaden the number of winnable offenses monthly?
Can the outcome of a lawsuit best predicted by the date it is brought be fair? If previously foreclosed homeowners had been limited to 1 year in 2008, none of the now common legally successful challenges to foreclosure could win in court then.

What new claims will become winnable in coming months?
S1987 will drown our Civil Court system in legal claims. As the state judiciary has grasped the many problems in the procedures of mortgaging and foreclosure of homes, they have moved to enforce our laws more and more completely. A significant percentage of the 65,000+ households that were foreclosed since 2007 now have valid and potentially winnable legal challenges to regain their title. The Massachusetts courts will be deluged as homeowners and their advocates rush to file suit on now viable claims within one year. A small percentage of such filings (1,300) will mean slightly fewer lawsuits in one year than were filed in the last six!

S1987 unjustly lacks any notification to former or present homeowners of vast cut in right to sue
S1987 provides a one year window for the over 65,000 foreclosed homeowners since 2007 to sue and get a copy of their complaint recorded at the local registry of deeds, rather than the traditional 20, a serious curtailment of traditional rights. The House bill, as amended, improves a still flawed bill by increasing the period to 10 years. Homeowners deserve notification that the state has changed the time period. S1987 includes no provision. Nor would S1987 notify future foreclosed homeowners of their Senate-proposed three year window to sue.
A homeowner will not know when their clock to sue starts. No Massachusetts law requires a deadline for recording a foreclosure deed and subject affidavit. S1987 does not fix this nor require notification to the supposed former homeowner of the filing. Currently deeds are recorded from 1 to 21 months after auction. No ‘foreclosed’ homeowner can be expected to check every week for the date a foreclosure deed is recorded.

Shouldn’t laws reverse the huge economic loss to the state rather than make that impossible?
Conservatively, the 65,000+ Massachusetts foreclosures represent a $20-$40 billion loss in wealth to the state’s households. The vast majority of those foreclosures were done by out of state lenders, who took almost all of those billion out of our state. It is well recognized that the loss of value in a home represents a concomitant loss of spending power representing additional billions of dollars of lost economic activity and spending in the Commonwealth. Studies also show concomitant unemployment and job losses, negative health impacts, much lower school performance by children, the tearing apart of the fabric of our communities, losses in property tax revenue to our municipalities, increase in crime and its concomitant costs. We should support our residents to get their homes back, receive justice they deserve, bring their pillaged wealth back and rebuild our economy.

Our Housing Market is Still Unstable: S1987 does not help
S1987 will not stabilize the housing market. MAAPL, the Mass Bankers Association, and Commissioner of Banks all stated publicly that they do not believe foreclosures are over. Spring 2014 foreclosures spiked again: March, April and May’s petitions to foreclose and June auctions more than doubled. Percentages over the prior year were still far higher than the height of the then believed to be devastating foreclosure crisis of the early 1990s.
While the initial cause of the foreclosures and damage to our housing market appeared to be sub-prime lending policies, evidence now shows that the damage was caused by the huge housing bubble. Now that property prices have dropped down closer to the normal historical curve, those hugely overpriced mortgages are still common place in our state. These continue to destabilize neighborhoods and our housing market as a whole. Surface solutions that allow some properties to be purchased more easily will not address the underlying problems or the continuing accumulation of damages from the foreclosures that have happened already.

S1987 Only Claims to Address a Small Part of the Widespread Ruined Titles in our Registries
In addition to the problems exposed in the Ibanez ruling of “broken chain of title to the mortgage,” numerous additional examples of other chain of title to mortgage problems exist, such as the recent Eaton decision’s on “holding the note” and a dozen others highlighted in seminal, SJC decisions in the last couple years alone. These problems compromise the marketability of title. Their property record contains the same legal violations. What are the homeowners to do who face these problems each and every month over the next 30 to 50 years when they or their heirs go to refinance or sell their home? S1987 is a response to the tip of the Housing Bubble/Housing Crash iceberg. It does not resolve title problems either for those who have been illegally foreclosed or the much larger percentage of homeowners who will face these problems in the decades going forward. Damage to titles can be located. The state should commit to finding them and providing a genuine repair. Legislative Contact: Grace Ross, 617-291-5591

© 2010-17 FORECLOSURE FRAUD | by DinSFLA. All rights reserved.


S.1187: Mortgage Forgiveness Tax Relief Act and Very Big Deal | AFR Sign On Letter Tax Relief Act

S.1187: Mortgage Forgiveness Tax Relief Act and Very Big Deal | AFR Sign On Letter Tax Relief Act

Hi Damian

I’ve attached a pretty powerful letter that was sent to Congress last week by Americans for Financial Reform on behalf of just about everybody in the country, according to the multiple signature pages. It urges quick action by legislators to extend and expand the mortgage debt tax relief provisions that expired at 12/31/2013. I hope you can post it.

Also, in case you think your readers might want to weigh in themselves, here’s a link to a website where they can track bills and quickly send letters of support or opposition directly to their elected representatives.

Surfing this site and reading the personalized letters suggests there was deliberate delay by various lenders in processing all sorts of pipeline deals before year-end (short sales, mods, refis). Therefore it looks like a lot of borrowers got stuck in a very bad tax place for 2014 through no fault of their own.

Just FYI, right now, this mortgage debt relief provision is also included in the more comprehensive “tax extenders” bill, S 1859 (also tabled), with about 50 other tax provisions that expired at 12/31/2013. Those are the provisions that Ron Wyden wants to work on with Orrin Hatch (Senate Finance Committee) this “spring.” But even if they can get the House to go along (Paul Ryan et al), it’s not clear which of the 50+ “extenders” will survive in a version that might become law.

To make those decisions, legislators will be paying close attention to the letters they get from constituents and funders, starting right about now. That’s because everything on the Hill will pretty much grind to a halt mid-summer until after the mid-term elections. After that, what will happen is anyone’s guess.

By the way, there’s been a lot of misinformation about who will get hit with big tax bills if the relief doesn’t get extended for 2014. Folks who truly have nothing will likely NOT be in trouble because they are “insolvent” for both IRS and Chapter 7 Br purposes.

But here’s the danger – Anyone who is still hanging on is probably not destitute. These folks probably have wages and/or assets that are vulnerable at some level to either the IRS or the Bankruptcy Court. So there may be no way out for them unless Congress acts.

For example, older workers who have qualified retirement plan savings (IRAs 401s 457s, etc) could lose them because they are not off-limits to the IRS the same way as they would be for bankruptcy. They might even have to pay big early withdrawal penalties if those savings have to be used to pay the IRS.

The attached letter explains how younger families who took cash-out refis during the boom are also vulnerable.

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Onewest Bank, FSB v Dewer | NYSC – MERS Assignment/Note Fail, Charles Boyle Affidavit Fail, FDIC, as the receiver for IndyMac to OneWest Bill of Sale Fail

Onewest Bank, FSB v Dewer | NYSC – MERS Assignment/Note Fail, Charles Boyle Affidavit Fail, FDIC, as the receiver for IndyMac to OneWest Bill of Sale Fail





Plaintiff commenced this action on September 10, 2010 to reform and foreclose a
mortgage encumbering the real property known as 119-22 Inwood Street, Jamaica, New York
given by defendants Dewer as security for the payment of a note, evidencing an obligation
in the principal amount of $403,750.00 plus interest. The mortgage names IndyMac Bank,
F.S.B. (IndyMac), as the lender and Mortgage Electronic Registration Systems, Inc. (MERS),
as the nominee for the lender and the lender’s successors and assigns, and as the mortgagee
of record for the purpose of recording the mortgage. Plaintiff alleged in its complaint that
it is the holder of the note and subject mortgage, and that defendants Dewer defaulted under
the terms of the mortgage and note, and as a consequence, it elected to accelerate the entire
mortgage debt. It also alleged that, due to a clerical error, the mortgage was recorded without
a legal description included, and the legal description corresponding to the address of the
property should be incorporated into the mortgage nunc pro tunc.

Defendants Dewer served a combined answer, asserting various affirmative defenses,
including lack of standing, and interposing counterclaims. Plaintiff served a reply to the
counterclaims. Plaintiff did not cause defendants “John Doe” and “Jane Doe” to be served
with process because plaintiff determined that they are unnecessary party defendants.
That branch of the motion by plaintiff for leave to amend the caption deleting
reference to defendants “John Doe” and “Jane Doe” is granted.

It is ORDERED that the caption shall read as follows:

ONEWEST BANK, FSB, Index No. 23000 2010



It is well established that the proponent of a summary judgment motion “must make
a prima facie showing of entitlement to judgment as a matter of law, tendering sufficient
evidence to demonstrate the absence of any material issues of fact” (Alvarez v
Prospect Hosp., 68 NY2d 320, 324 [1986]; Zuckerman v City of New York,
49 NY2d 557 [1980]). To establish a prima facie case in an action to foreclose a mortgage,
the plaintiff must produce the mortgage, the unpaid note, bond or obligation and evidence
of default (see Baron Assoc., LLC v Garcia Group Enters., Inc., 96 AD3d 793 [2d Dept
2012]; Citibank, N.A. v Van Brunt Props., LLC, 95 AD3d 1158 [2d Dept 2012]). Where
standing is put into issue by the defendant, the plaintiff must prove its standing in order to
be entitled to relief (see Deutsche Bank Nat. Trust Co. v Haller, 100 AD3d 680 [2d Dept
2012]; U.S. Bank, N.A. v Collymore, 68 AD3d 752, 753 [2d Dept 2009]; Wells Fargo Bank
Minn., N.A. v Mastropaolo, 42 AD3d 239, 242 [2d Dept 2007]). A plaintiff establishes its
standing in a mortgage foreclosure action by demonstrating that it is both the holder or
assignee of the subject mortgage and the holder or assignee of the underlying note at the time
the action is commenced (see Deutsche Bank Natl. Trust Co. v Rivas, 95 AD3d 1061,
1061-1062 [2d Dept 2012]; Bank of N.Y. v Silverberg, 86 AD3d 274, 279 [2d Dept 2011];
see Homecomings Fin., LLC v Guldi, 108 AD3d 506 [2d Dept 2013]; US Bank N.A. v Cange,
96 AD3d 825, 826 [2d Dept 2012]; U.S. Bank, N.A. v Collymore, 68 AD3d at 753-754;
Countrywide Home Loans, Inc. v Gress, 68 AD3d 709 [2d Dept 2009]). “Either a written
assignment of the underlying note or the physical delivery of the note prior to the
commencement of the foreclosure action is sufficient to transfer the obligation, and the
mortgage passes with the debt as an inseparable incident” (U.S. Bank, N.A. v Collymore,
68 AD3d at 754; see HSBC Bank USA v Hernandez, 92 AD3d 843 [2d Dept 2012]; see
Aurora Loan Servs., LLC v Weisblum, 85 AD3d 95, 108 [2d Dept 2011]).

In support of that branch of the motion for summary judgment, plaintiff offers, among
other things, a copy of the pleadings, affidavits of service upon defendants Dewer, an
affirmation of regularity by its counsel, a copy of the subject mortgage, underlying note, an
assignment dated August 26, 2010, and the bill of sale providing for the sale of certain assets
of IndyMac by the Federal Deposit Insurance Company (FDIC), as the receiver for IndyMac
to plaintiff, and an affidavit dated June 21, 2013 of Charles Boyle, an officer of plaintiff. In
his affidavit, Mr. Boyle states plaintiff is the holder and in possession of the original note,
and that plaintiff is the assignee of the “security instrument” for the loan, and defendants
Dewer defaulted in paying the monthly mortgage installment due under the mortgage on
June 1, 2009 and thereafter. The copy of the note presented includes an undated endorsement
in blank, without recourse, by Vincent Dombrowski, as the vice president of IndyMac.

Defendants Dewer oppose the motion, asserting that plaintiff has failed to make a
prima facie showing of standing to commence this action.

To the extent plaintiff contends it is the assignee of the mortgage and note by virtue
of an assignment executed by MERS, plaintiff has failed to show MERS had been the holder
of the note and mortgage, or that MERS had been given an interest in the underlying note by
the lender or specifically authorized to assign the subject note (see Bank of N.Y. v Silverberg,
86 AD3d at 283). In addition, although Mr. Boyle makes reference to the possession of the
note by plaintiff, his affidavit does not give any factual details of a physical delivery of the
note and when the note was endorsed in blank (see Homecomings Fin., LLC v Guldi,
108 AD3d 506 [2d Dept 2013]; HSBC Bank USA v Hernandez, 92 AD3d 843). The
affirmation of plaintiff’s counsel dated July 10, 2013, furthermore, does not indicate it is
based upon personal knowledge and lacks detail as to when the note was endorsed and
physically came into possession by plaintiff. That a copy of the note with the endorsement
was annexed as an exhibit to the complaint filed with the summons does not, without more,
establish that the original note with the endorsement was in physical possession of plaintiff
or its counsel at the time of the institution of the action. To the extent plaintiff additionally
relies upon the bill of sale to demonstrate it had standing to bring this action, the court
declines its invitation to search the internet to verify that the subject mortgage was part of the
assets sold by the FDIC to plaintiff. More importantly, the copy of the bill 1 of sale does not
itself establish that plaintiff was the holder or assignee of the subject mortgage and note or
had physical possession of the note endorsed in blank at the time of the transfer of the assets
by the FDIC to plaintiff or the time of the commencement of this action (cf. JP Morgan
Chase Bank Nat. Assn. v Miodownik, 91 AD3d 546 [1st Dept 2012], lv to appeal dismissed
19 NY3d 1017 [2012]; JP Morgan Chase Bank, N.A. v Shapiro, 104 AD3d 411, 412
[1st Dept 2013]). Under such circumstances, plaintiff has failed to show how or when it
became the lawful holder of the note either by delivery or valid assignment of the note to it
(see Citimortgage, Inc. v Stosel, 89 AD3d 887, 888 [2d Dept 2011]; Bank of N.Y. v
Silverberg, 86 AD3d at 283). As such, that branch of the motion by plaintiff for summary
judgment against defendants Dewer is denied.

With respect to that branch of the motion by plaintiff to strike the affirmative defenses
asserted by defendants Dewer in their answer, plaintiff bears the burden of demonstrating
that the defenses are without merit as a matter of law (see Butler v Catinella, 58 AD3d 145,
157-148 [2d Dept 2008]; Vita v New York Waste Servs., LLC, 34 AD3d 559, 559 [2d Dept

With respect to the first affirmative defense and the first counterclaim asserted by
defendants Dewer in their answer, defendants Dewer assert they are entitled to rescind the
loan agreement pursuant the Federal Truth in Lending Act (15 USC § 1601 et seq.) (TILA),
and the TILA implementing regulations (found in Federal Reserve Board Regulation Z
[Regulation Z] at 12 CFR 226), and seek to recover actual and statutory damages for
violations of TILA, in addition to rescission. Defendants Dewer also seek as a second and
third counterclaim a judgment declaring the subject mortgage to be void. Plaintiff offers
evidence that the subject loan transaction was exempt from the requirements of TILA at the
time of the making of the loan because the non-exempt total points and fees charged in
relation to the loan did not exceed 8% of the entire principal loan amount (see
former 15 USC § 1602 [aa] [1] [B]; see also 15 USC § 1605 [e]; 12 CFR 226.4). In addition,
plaintiff offers evidence that it provided the required material disclosures to defendants
Dewer in compliance with TILA at the closing and, therefore, any right to rescind was not
extended to three years after the date of the consummation of the transaction
(see 15 USC § 1635 [f]). Defendants Dewer have failed to come forward with any proof to
show TILA was applicable to the subject loan at the time of its making, or that any material
written representations or disclosures made to them were in conflict with the terms of the
subject mortgage and note. Under such circumstances, that branch of the motion by plaintiff
to dismiss the first affirmative defense and the counterclaims asserted by defendants Dewer
is granted.

That branch of the motion by plaintiff to dismiss the second affirmative defense
asserted by defendants Dewer in their answer based upon failure to state a cause of action is
granted. On its face, the complaint states causes of action for foreclosure and reformation
of the mortgage.

That branch of the motion by plaintiff to dismiss the third, fourth, fifth, twelfth,
thirteenth, nineteenth, and twentieth affirmative defenses based upon unjust enrichment,
estoppel, “condonation and ratification,” the doctrine of unclean hands, waiver, “consent to
Defendants’ conduct,” and participation in wrongdoing, respectively, is granted. They have
failed to allege or prove any facts supporting these conclusions of law (see Moran
Enterprises, Inc. v Hurst, 96 AD3d 914 [2d Dept 2012]; Glenesk v Guidance Realty Corp.,
36 AD2d 852 [2d Dept 1971], abrogated on other grounds by Butler v Catinella,
58 AD3d 145; MacIver v George Braziller, Inc., 32 Misc 2d 477 [Sup Ct, NY County 1961];
CPLR 3018 [b]).

That branch of the motion by plaintiff to dismiss the seventh, eighth, ninth and
eighteenth affirmative defenses of defendants Dewer based upon negligence and assumption
of risk, culpable conduct of third parties and plaintiff, and lack of proximate cause,
respectively, is granted. The concepts of negligence, assumption of risk, culpable conduct
and proximate cause are related to tort. The claims asserted by plaintiff herein relate to a
default under the mortgage and reformation of the mortgage, as opposed to tortious conduct
and thus, any affirmative defense based upon a notion of culpable or tortious conduct
is unavailable herein (see CPLR 1401; Pilweski v Solymosy, 266 AD2d 83 [1st Dept 1999];
Nastro Contracting Inc. v Agusta, 217 AD2d 874 [3d Dept 1995]; Schmidt’s Wholesale, Inc.
v Miller & Lehman Const., Inc., 173 AD2d 1004 [3d Dept 1991]; Castleton Holding Corp.
v Forde, 15 Misc 3d 1111[A] [Sup Ct, Kings County 2007]).

The branch of the motion by plaintiff to dismiss the sixth, fifteenth, sixteenth and
seventeenth affirmative defenses asserted by defendants Dewer is granted. These defenses
are based upon allegations that plaintiff failed to exercise good business judgment,
unjustifiably relied on representations and misrepresentations, and failed to perform due
diligence and make proper inquiry. Such allegations, without more, do not constitute a
defense to a foreclosure action. The legal relationship between a borrower and a lending
bank is normally one of debtor and creditor (see Trustco Bank, Nat. Assn. v Cannon Bldg.
of Troy Assocs., 246 AD2d 797 [3d Dept 1998]), and defendants Dewer have failed to allege
any facts which would demonstrate that a duty of care was owed to them by the lender in the
origination of the loan.

That branch of the motion by plaintiff to dismiss the tenth and fourteenth affirmative
defenses asserted by defendants Dewer based upon failure to mitigate damages and lack of
damages is granted. Mitigation of damages is not an affirmative defense to an action to
foreclose a mortgage. Any dispute as to the exact amount owed plaintiff pursuant to the
mortgage and note, may be resolved after a reference pursuant to RPAPL § 1321 (see
Crest/Good Mfg. Co, v Baumann, 160 AD2d 831 [2d Dept 1990]).

Defendants Dewer assert as an eleventh affirmative defense that plaintiff is guilty of
laches in bringing this action. Laches is not a defense to a mortgage foreclosure proceeding
where, as here, the action was commenced within the statute of limitations (CPLR 213 [4];
see New York State Mtge. Loan Enforcement & Admin. Corp. v North Town Phase II Houses,
Inc., 191 AD2d 151 [1st Dept 1993]; Schmidt’s Wholesale, Inc. v Miller & Lehman Const.,
Inc., 173 AD2d 1004 [3d Dept 1991]). Even if the defense was available here, defendants
Dewer have not shown that they changed their position, or failed to take some action to their
prejudice as a result of the alleged delay.

The allegation that plaintiff suffered no damage because it was insolvent does not
constitute an affirmative defense to a foreclosure action. That branch of the motion by
plaintiff to dismiss the twenty-first affirmative defense asserted by defendants Dewer is

That branch of the motion by plaintiff to dismiss the twenty-second affirmative
defense asserted by defendants Dewer based upon lack of standing is denied (supra at 3-4).

Accordingly, the branch of plaintiff’s motion for an order amending the caption is
granted, as ordered, supra. The branch of the motion for an order granting plaintiff summary
judgment is denied. Those branches of the motion for an order dismissing the first, second,
third, fourth, fifth, sixth, seventh, eighth, ninth, tenth, eleventh, twelfth, thirteenth,
fourteenth, fifteenth, sixteenth, seventeenth, eighteenth, nineteenth, twentieth, and twentyfirst
affirmative defenses, and all counterclaims are granted.

Dated: February 6, 2014

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Florida governor signs bill HB 87 to speed up state’s foreclosure process

Florida governor signs bill HB 87 to speed up state’s foreclosure process

Watch this video and you’ll see what kind of person he is.

You ignorant people that voted for him!! Sorry but had to vent.

Housing Wire-

Florida’s governor signed a much-discussed foreclosure bill Friday, enacting a series of provisions aimed at speeding up the default process in the state.

While the legislation is considered a response to Florida’s untimely foreclosure timelines, it’s a big shift that has attracted a great deal of attention.

Attorneys working within the foreclosure space note House Bill 87 comes with new legal and procedural requirements.


Image: wmxdesign

© 2010-17 FORECLOSURE FRAUD | by DinSFLA. All rights reserved.


HB 87 | With friends like Ms. Bondi in Tallahassee, banks hardly need another gift

HB 87 | With friends like Ms. Bondi in Tallahassee, banks hardly need another gift

This should be a sequel to: Meet FL AG Pam Bondi, Foreclosure Fraudsters’ BFF


Palm Beach Post-

The Legislature finally has passed a bill to ease Florida’s foreclosure crisis. The problem is, it’s a bad bill that Gov. Scott should veto.

Rep. Kathleen Passidomo, R-Naples, sponsor of House Bill 87, believes that giving banks the right to seek a quicker hearing would get the state’s 350,000 foreclosure cases resolved faster. Her approach might make sense if the banks weren’t causing the backlog by not acting on the cases they file.

Though some homeowners employ attorneys who are responsible for delays, the vast majority are at the mercy of lenders who set the timetable for how quickly cases move, or don’t move. It takes an average of two years to dispose of foreclosure lawsuits in Florida because too often lenders and servicers don’t want to assume the taxes, association dues and expenses to list a house for sale that they incur after taking possession. They also don’t want a glut of foreclosures depressing prices and furthering their losses. So they let cases languish. On Friday, the backlog prompted the Florida Supreme Court to order that trial courts hire magistrates, to move more cases.

HB 87 would let lenders seek a “show cause” hearing, forcing homeowners into court quickly to prove that they shouldn’t be foreclosed on. That would not light a fire under the banks.


© 2010-17 FORECLOSURE FRAUD | by DinSFLA. All rights reserved.


HB 87 | Passidomo’s foreclosure reform proposal passes Legislature

HB 87 | Passidomo’s foreclosure reform proposal passes Legislature

Naples Daily News-

The third time’s the charm for one Southwest Florida representative’s top priority.

The state Senate this morning voted 26-13 to approve a measure that speeds up the foreclosure process. The bill – which has been sponsored by Rep. Kathleen Passidomo, R-Naples, for the past three years – now heads to the governor’s office for his signature.

“I can’t believe it,” said Passidomo, as she walked back to House chambers after being on the Senate floor for the vote. “It’s really terrific.”

The foreclosure bill — House Bill 87 — shortens the time period that banks can collect losses from five years to one; requires banks to produce the note at the time of the foreclosure; and allows lien holders, like a homeowner association, to initiate the foreclosure process.


© 2010-17 FORECLOSURE FRAUD | by DinSFLA. All rights reserved.


House Finance Chair Goes on Ski Vacation with Wall Street

House Finance Chair Goes on Ski Vacation with Wall Street

by Justin Elliott ProPublica, April 30, 2013, 9:55 a.m.

In January, Rep. Jeb Hensarling, R-Texas, ascended to the powerful chairmanship of the House Financial Services Committee. Six weeks later, campaign finance filings and interviews show, Hensarling was joined by representatives of the banking industry for a ski vacation fundraiser at a posh Park City, Utah, resort.

The congressman’s political action committee held the fundraiser at the St. Regis Deer Valley, the “Ritz-Carlton of ski resortsknown for its “white-glove service” and for its restaurant by superstar chef Jean-Georges Vongerichten.

There’s no evidence the fundraiser broke any campaign finance rules. But a ski getaway with Hensarling, whose committee oversees both Wall Street and its regulators, is an invaluable opportunity for industry lobbyists.

Among those attending the weekend getaway was an official from the American Securitization Forum, a Wall Street industry group, a spokesman confirmed. It gave $2,500 in February to Hensarling’s political action committee, the Jobs, Economy, and Budget (JEB) Fund.

Len Wolfson, a lobbyist for the Mortgage Bankers Association, which gave the JEB Fund $5,000 that month, posted a picture on Instagram from the weekend of the fundraiser of the funicular at the St. Regis. (It was labeled, “Putting the #fun in #funicular. #stregis #deervalley #utah.”) Wolfson did not respond to requests for comment. (UPDATE 1 p.m. Wolfson has now set his account to private.)

Visa, which gave the JEB Fund $5,000, also sent an official. A Visa spokesman told ProPublica that in attendance were not just finance companies, but also big retailers and others.

Hensarling, a protégé of former Texas senator and famed deregulator Phil Gramm, has a mixed record regarding Wall Street. While he has been critical of “too big to fail” banks and voted against the 2008 bailout, Hensarling recently said he opposed downsizing big banks, according to Bloomberg. That stance matters now more than ever as a bipartisan duo in the Senate, David Vitter, R-La., and Sherrod Brown, D-Ohio, introduced a bill last week seeking to constrain the too-big-to-fail institutions. While the bill is considered a longshot, it has provoked intense opposition from the industry.

Meanwhile, Hensarling recently barred the head of the new Consumer Financial Protection Bureau from appearing before the House Financial Services Committee, citing a legal cloud over recess appointments made by President Obama.

Whatever his stance on the industry, Hensarling has been more than happy to court Wall Street’s money.

Donors working in various financial industries are Hensarling’s biggest supporters, giving him over $1 million dollars in the last election cycle, according to the Center for Responsive Politics. The congressman’s office did not respond to requests for comment.

Others donating to Hensarling’s JEB Fund around the time of the Utah ski weekend: Capital One; Credit Suisse; PricewaterhouseCoopers; MasterCard; UBS; US Bank; the National Association of Federal Credit Unions; Koch Industries, which is involved in sundry financial trading; the National Pawnbrokers Association; and payday lenders Cash America International and CheckSmart Financial. All either declined to comment or did not respond to requests.

A spokeswoman for one large bank that donated $5,000, Alabama-based Regions Financial, told ProPublica the company doesn’t discuss events employees attend for “a number of reasons, including security.”

Also donating $5,000 to Hensarling’s political committee around the time of the ski weekend was Steve Clark, a lobbyist for JP Morgan and the industry group the Financial Services Roundtable. (In 2011, a memo written by Clark and his partners for the American Bankers Association proposed an $850,000 public-relations strategy to undermine Occupy Wall Street. It leaked to MSNBC; the plan had apparently never been executed.)

Clark didn’t respond to requests for comment.

The ski weekend was a large, apparently family-friendly affair. A Utah entertainment booker told ProPublica she had hired two caricature artists for a Feb. 23 event at the St. Regis for a group of 100, including 20 children. Hensarling’s JEB Fund, paid the bill. The fund also reported spending about $1,000 on “gifts and mementos” at Deer Valley as well as charges at the upscale restaurant Talisker on Main.

Campaigns and political action committees of a few other GOP congressmen also show charges totaling more than $50,000 at the St. Regis around that time: House Rules Committee Chairman Pete Sessions of Texas; House Ways and Means Committee Chairman Dave Camp of Michigan; and National Republican Congressional Committee Chairman Greg Walden of Oregon. None responded to requests for comment.

This is at least the second consecutive year that Hensarling has attended a fundraiser at Deer Valley. During the same February congressional recess last year, the National Republican Congressional Committee hosted a “Park City Ski Weekend” for Hensarling along with Sessions and Walden. Hensarling’s JEB Fund also reported about $60,000 paid to the St. Regis Deer Valley in the last election cycle. (The NRCC said it did not sponsor this year’s event.)

The Texan congressman has long had a taste for mixing skiing and politics. On the same February weekend in 2009, for example, Hensarling’s political action committee invited donors “to the second annual 2018JEB Fund Takes Jackson'” ski weekend for a minimum contribution of $2,500. The setting was the Snake River Lodge and Spa in Jackson, Wyoming, which boasted “wintertime activities fun for the entire family” including dog sledding tours and sleigh rides, according to the invitation.

Reporting contributed by Al Shaw.

© 2010-17 FORECLOSURE FRAUD | by DinSFLA. All rights reserved.


FL Bill HB 87 passes to speed mortgage foreclosure system

FL Bill HB 87 passes to speed mortgage foreclosure system

Miami Herald-

The Florida House has passed a bill aimed at speeding up the state’s mortgage foreclosure system.

Rep. Kathleen Passidomo said Monday her bill would move along the foreclosure process to get homes “back into the stream of commerce.” Supporters say Florida’s economy would benefit.

Opponents say the bill is tilted against homeowners struggling to keep their homes.


© 2010-17 FORECLOSURE FRAUD | by DinSFLA. All rights reserved.


VOMIT | Fla. committee approves mortgage foreclosure bill

VOMIT | Fla. committee approves mortgage foreclosure bill

Bill seeking to speed up Florida’s residential mortgage foreclosure process headed to House



A bill to speed up Florida’s residential mortgage foreclosure process is headed to the state House floor.

The measure (HB 87) won approval from the House Judiciary Committee on a 12-6 vote Thursday in its last committee stop before a looming vote in the full House.

Rep. Kathleen Passidomo, R-Naples, says her bill is aimed at unclogging the foreclosure process in a state that’s been swamped by foreclosures.


© 2010-17 FORECLOSURE FRAUD | by DinSFLA. All rights reserved.


Update on the Florida Foreclosure Bills

Update on the Florida Foreclosure Bills

Here’s the latest update on the Florida Lawmakers’ push to give banks a faster foreclosure process and impinge on Floridians’ constitutional rights.  As you know, there is a bill in the Florida House (HB-87) and now, a newly introduced matching bill in the Florida Senate (SB-1666).  The House bill (H-87) has been through two committee votes.  Unfortunately, the bill passed with flying colors in both House committees; 10-3 and 9-2.

PLEASE TAKE A FEW MINUTES TO CONTACT THE FLORIDA LAWMAKERS WHO ARE NEXT UP TO VOTE ON THE FASTER FORECLOSURE BILL!  We need your help!   This week, please take the time to contact Florida lawmakers who are trying to pass the bills into law, a law that will give banks the green light to violate property rights and the rights of Floridians to have their day in court (due process) to defend themselves. 



1)      Call Representative Baxley (850) 717-5023 at and give your name, county, zip code and leave a message telling the Representative to VOTE NO ON HOUSE BILL 87.


2)      Call Senator Simmons (850) 487-5010 at and give your name, county, zip code and leave a message telling the Senator to VOTE NO ON SENATE BILL 1666.




Don’t forget to include your name, county and zip code!,,,,,,,,,,,,,,,,,,,,,,,




Don’t forget to include your name, county and zip code!,,,,,,,,,,,,,,,,,,

If you have time to make additional phone calls, please click here for the list of phone numbers for all the Florida lawmakers who will be voting next.

Thank you for all your efforts! 


© 2010-17 FORECLOSURE FRAUD | by DinSFLA. All rights reserved.


Speedy foreclosure bill passes House Civil Justice

Speedy foreclosure bill passes House Civil Justice


Orlando Sentinel-

TALLAHASSEE — An attempt to speed up foreclosures in Florida sparked outcry from both consumer advocates and bankers at a meeting in Tallahassee Thursday.

Lawmakers passed a measure that would attempt to speed up the foreclosure process, which now takes 853 days on average, by making a number of changes to the legal procedures governing the law.

The proposal, HB 87, would give lenders only one year – instead of the current five – to pursue a judgment against the homeowner if the sale of the foreclosed home fell short of the amount still owed on the loan. It would also require lenders to have all the required paperwork such as loan notes when they file a foreclosure complaint.

“We start with the complaint,” said state Rep. Kathleen Passidomo, R-Naples, the bill’s sponsor. “It’s got to be done right. We’re telling the lenders, ‘Don’t bother filing the complaint unless you’ve got it right.’ You’ve got all the cards there so the courts can look at it. “


© 2010-17 FORECLOSURE FRAUD | by DinSFLA. All rights reserved.


Billion Dollar Bait & Switch: States Divert Foreclosure Deal Funds – ProPublica

Billion Dollar Bait & Switch: States Divert Foreclosure Deal Funds – ProPublica

by Paul Kiel and Cora Currier
ProPublica, May 22, 2012, 12:26 p.m.

Answers to homeowners’ questions about the Independent Foreclosure Review.The administration’s website for the foreclosure prevention program. Provides an FAQ, homeowner examples, and other tools to see whether you might qualify for the program.A list of HUD-approved housing counseling agencies nationwide.Tips for homeowners from the Federal Trade Commission.These rules lay out how mortgage servicers are supposed to conduct the program.A finance and economics blog that provides news and metrics on the state of the housing market.

States have diverted $974 million from this year’s landmark mortgage settlement to pay down budget deficits or fund programs unrelated to the foreclosure crisis, according to a ProPublica analysis. That’s nearly forty percent of the $2.5 billion in penalties paid to the states under the agreement.

The settlement, between five of the country’s biggest banks and an alliance of almost all states and the federal government, resolved allegations that the banks deceived homeowners and broke laws when pursuing foreclosure. One part of the settlement is the cash coming to states; the deal urged states to use that money on programs related to the crisis, but it didn’t require them to.

ProPublica contacted every state that participated in the agreement (and the District of Columbia) to obtain the most comprehensive breakdown yet of how they’ll be spending the funds. You can see the detailed state-by-state results here, along with an interactive map. Many states told us they’ll be finalizing their plans in the coming weeks. We’ll be updating our breakdown as the results come in.

What stands out is that even states slammed by the foreclosure crisis are diverting much or all of their money to the general fund. In California, among the hardest hit states, the governor has proposed using all the money to plug his state’s huge budget gap. And Arizona, also among the worst hit, has diverted about half of its funds to general use. Four other states where a high rate of homeowners faced foreclosure during the crisis are spending little if any of their settlement funds on homeowner services: Georgia, South Carolina, Wisconsin, and Maine.

Overall, only about $527 million has been earmarked for new homeowner-focused programs, but that number will go up. A number of large states 2014 in particular New York, Nevada, Illinois, and Florida 2014 have indicated they’ll be dedicating substantial amounts of the funds to consumer programs, but haven’t yet produced a final breakdown.

Iowa Attorney General Tom Miller, who led the coalition of attorneys general who negotiated the deal, argued that only a very small portion of the settlement was being diverted and it will “overwhelmingly” benefit homeowners. The centerpiece of the settlement is a requirement that the banks earn $20 billion in “credits” by helping homeowners in various ways 2014 from reducing principal on underwater homes to bulldozing empty ones. Because the system awards only partial credit for certain actions, Miller said the settlement would bring more than $20 billion in benefits to consumers 2014 he estimated $35 billion. Critics contend those sorts of numbers far overstate the benefits to consumers, because the banks can claim credit for some activities that were already routine.

The banks will only pay $5 billion in actual cash penalties under the agreement. The largest chunk, $2.5 billion, goes to the states’ attorneys general, while about $1 billion goes to the federal government. $1.5 billion will be sent to borrowers who lost their homes to foreclosure during the crisis in the form of $2,000 payments.

Compared with the billions going to consumers, Miller contended, $1 billion going to states’ general funds was minimal. It was always expected that the states would divert some of the money to their general expenditures, he said.

But when announcing the deal, state and federal officials said the states’ $2.5 billion would mainly fund housing counselors and legal aid organizations. Studies have shown homeowners stand a better chance of avoiding foreclosure if they get the help of a counselor, and homeowners lack legal representation in the overwhelming majority of foreclosure cases. The money was divvied up among the states according to a formula that took into account how large the states were and how hard they were hit by the crisis.

As you can see from our breakdown, 15 states have so far allocated over half their amounts to consumer-focused efforts. But the uses range widely. In Ohio, $75 million has been set aside to destroy some 100,000 abandoned homes. In Minnesota, the state is setting up a fund to compensate victims of the banks’ foreclosure abuses.

In two of the states most affected by the foreclosure crisis, California and Arizona, the attorneys general had intended to use most of their funds on homeowner-related efforts before the governors intervened.

After California Attorney General Kamala Harris prepared a proposal to spend the money on counselors, lawyers, and other consumer-related efforts, Gov. Jerry Brown released a proposed revised budget last week that used the state’s $411 million for existing housing programs. In other words, the money would just be used to help fill the state’s $16 billion budget deficit. Harris opposes the move, which still must make its way through the state legislature for it to become law.

In Arizona, the attorney general had similar plans. Then state lawmakers and the governor took $50 million of the $98 million coming the state’s way. Although the budget legislation stated that the money should be used to fund departments related to housing and law enforcement, there will be no new spending. Housing advocates are readying a lawsuit to stop the transfer and expect to file in the coming month, said Valerie Iverson, Executive Director of Arizona Housing Alliance.

Several other large states have diverted most or all of the money:

2022 Georgia directed all of its $99 million to programs designed to attract new businesses. A spokesman for the governor said, “He believes that the best way to prevent foreclosures amongst honest homeowners who have experienced hard times is to create jobs here in our state.”

2022 In Missouri, the state legislature used almost all of its $39 million to fund higher education, which had been slated for cuts. The attorney general’s office kept $1 million for hotlines and outreach related to the settlement.

2022 Virginia put the entirety of its $66.5 million into the state’s general fund without restrictions. In March, Democrats proposed a budget amendment that would funnel that money to foreclosure prevention and homeownership programs, but it was voted down.

2022 Wisconsin Governor Scott Walker announced soon after the settlement was finalized that the bulk of it2014roughly $26 million2014would go into the state general fund. Two million went to an economic development fund, including funds for demolition in blighted neighborhoods. Many state Democrats and housing advocates opposed the plan, but failed to block it.

2022 Texas directed its $135 million to the state’s general fund, of which $10 million has been allocated for basic services to low-income Texans. The legislature won’t formally decide what to do with the rest until next January because it meets only once every two years. John Henneberger, co-director of Texas Housers, an affordable housing group, said that in speaking to legislators, advocates had “received no assurances that this money will be used according to the purposes of the settlement.”

ProPublica will continue to track how the funds are being used in the coming months. Check out our breakdown and interactive map for updates.


© 2010-17 FORECLOSURE FRAUD | by DinSFLA. All rights reserved.


Bill SB 5275 in WA Legislature to Eliminate “Produce the Note” Foreclosure Protection

Bill SB 5275 in WA Legislature to Eliminate “Produce the Note” Foreclosure Protection

Updated March 4, 2011

I was contacted by a woman in Washington informing us that we were off the mark with this post. The way we posted fell a bit short and was slightly off the mark. It seems this bill was already voted through. Here’s the update and correction to this piece:

The “declaration” portion of this foreclosure bill trying to pass in the Washington State legislature is already law. This is what we, in Washington, are currently fighting. The bill, SB 5275, is a so-so bill with this “declaration” embedded in it. What the law (with its current language) does is bring the parties to the mediation table. This mediation process gives the homeowner an additional 90 days. What it DOESN’T do, is bring the CORRECT parties to the mediation table, as the banks can still hide behind this “declaration” in claiming ownership of the note, by putting a robo-signed pen-to-paper.

There are people in Washington, who are fighting within the legislature to get an amendment proposed. They are trying to get language similar to Arizona’s SB 1259, allowing only for a “clear chain of title” to prove ownership of the note. What a “clear chain of title” will do, it will bring the CORRECT PARTIES TO THE MEDIATION TABLE.

All you Washingtonians, please write your Senators and your Representatives asking for this amendment bringing a “clear chain of title” to this bill, SB 5275. If we can get this amendment to the floor of the House, we may still have a chance in Washington to bring the banks to their knees, as we all know they are unable to provide a “clear chain of title.”

Also ask your legislator to think about NEXT legislative session to put an end to the RCW 61.24.030 (7)(a), which states that the servicer only need provide a “declaration” to reside with the trustee to prove ownership of the note. The servicers are able to robo-sign these declarations and not have to provide any more proof of ownership of the note. THIS IS WHAT IS REALLY BAD LAW. The legislators need to know that what they did LAST session, has made Washington the worst state in the nation to try to fight these criminal servicers.

Thank you to Richard Zombeck @ for his help on clarifying this update for us. Don’t be silent… share your thoughts and story with ShameThe Banks. Together we can and are making a difference.

Original Post below..

This bill (SB 5275) is scheduled for a hearing today (scroll down for details). It must be stopped. We cannot allow the banks to take what they don’t own. Please call and/or email these senators (AND reps regarding the companion bill HB 1362) to politely but firmly express your opposition to giving the banks a freebie. Remind these people who they work for (US, not the banks). –Scott

Senate Bill Co-sponsors list:;;;;;;;;;;;;;;;;;;;;

Full Senate list:;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;

House List:;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;;

SB 5275 – 2011-12
Addressing homeowner foreclosures.
Revised for 1st Substitute: Protecting and assisting homeowners from unnecessary foreclosures.

The above underlined description of this foreclosure bill recently dropped by stealth in the Washington State legislature is an Orwellian lie; it exists to protect the banks of the New World Order-controlled Federal Reserve System, which our treasonous legislature has shown repeatedly that it serves. Amidst all of this bill’s seemingly warm and fuzzy, even lofty pronouncements on mediation and fairness, the following chilling provision stands out; please read it carefully to grasp the magnitude of its treason against the people of Washington State — and of the United States, if this abusive bill is allowed to pass and set a legislative precedent:
“7 (a) That, for residential real estate property, before the notice of trustee’s sale is recorded, transmitted, or served, the trustee shall have proof that the beneficiary (bank) is the owner of the promissory note or obligation secured by the deed of trust. A declaration by the beneficiary (bank) made under penalty of perjury stating that the beneficiary (bank) is the actual holder of the promissory note or other obligation secured by the deed of trust shall be sufficient proof as required under this subsection.”

Go to documents…
History of Bill
as of Wednesday, February 23, 2011 10:56 PM

Senators Kline, Haugen, Kohl-Welles, Hargrove, Rockefeller, Nelson, Ranker, Keiser, Swecker, White, Conway, Hobbs, Chase, Harper, Kilmer, Prentice, Shin, Murray, Fraser, McAuliffe

Companion Bill:
HB 1362

Jan 19
First reading, referred to Financial Institutions, Housing & Insurance. (View Original Bill)

Jan 26
Public hearing in the Senate Committee on Financial Institutions and Housing & Insurance at 1:30 PM. (Committee Materials)

Feb 16
Executive action taken in the Senate Committee on Financial Institutions and Housing & Insurance at 1:30 PM. (Committee Materials)

Feb 17
FIHI – Majority; 1st substitute bill be substituted, do pass. (View 1st Substitute) (Majority Report)

And refer to Ways & Means.

Feb 24
Scheduled for public hearing in the Senate Committee on Ways & Means at 1:30 PM. (Subject to change) (Committee Materials)

Go to history…
Available Documents
Bill Documents
Bill Digests
Bill Reports
Original Bill
Substitute Bill (FIHI 11)

Bill Digest
Substitute Bill Digest

Senate Bill Report (Orig.)
Senate Bill Report

[ipaper docId=49818854 access_key=key-257fq53w4yivpxsg87z0 height=600 width=600 /]

© 2010-17 FORECLOSURE FRAUD | by DinSFLA. All rights reserved.


GA Foreclosure Fraud Bill Passes Out of House Committee

GA Foreclosure Fraud Bill Passes Out of House Committee

HB 237, introduced by Representative Rich Golick, would prohibit misstatements with the intent to defraud during the foreclosure process. The bill would also give law enforcement, including the Attorney General, sufficient authority to investigate and prosecute violations.

Georgia Seal


Monday, February 28, 2011

Foreclosure Fraud Bill Passes Out of House Committee; Attorney General Unveils Mortgage and Foreclosure Webpage

Attorney General Sam Olens applauded today’s action by the House Judiciary (Non-Civil) Committee to recommend “Do Pass” on HB 237. HB 237, introduced by Representative Rich Golick, would prohibit misstatements with the intent to defraud during the foreclosure process. The bill would also give law enforcement, including the Attorney General, sufficient authority to investigate and prosecute violations. Attorney General Olens, who testified before the Committee last Friday in support of the bill, is dedicated to protecting consumers from fraud during the foreclosure process and is asking the General Assembly to expand the State of Georgia’s current mortgage fraud law to cover fraud during the entire lending process, including foreclosures.

“Georgia’s real estate market has been hit hard during the financial crisis due in part to unscrupulous individuals involved in the process,” said Attorney General Sam Olens. “As the state’s attorney, it is appropriate that my office investigate foreclosure fraud and prosecute individuals who scam the system. I thank Representative Rich Golick and the other sponsors for their leadership on this important issue and encourage the General Assembly to protect Georgia citizens by expeditiously passing HB 237 into law.”

Attorney General Sam Olens also unveiled today the new “Mortgage and Foreclosure Information” page on the Department of Law’s website to assist consumers seeking information about the mortgage and foreclosure processes. The webpage includes frequently asked questions and provides links and contact information to other helpful resources.

“The Department of Law receives numerous calls each day from consumers inquiring about mortgages and foreclosures,” said Attorney General Sam Olens. “We saw a need for an easily accessible consumer resource, and developed the webpage by researching the issues most commonly raised in citizen calls and letters. I remain committed to assisting consumers by making more information available on our website.”

The webpage can be found on the Department of Law website under “Key Issues” or by clicking here.


© 2010-17 FORECLOSURE FRAUD | by DinSFLA. All rights reserved.


Obama Clarifies Pocket Veto Of Controversial Bill Related To Foreclosures

Obama Clarifies Pocket Veto Of Controversial Bill Related To Foreclosures

Arthur Delaney | HuffPost Reporting

The White House issued a statement Friday clarifying President Obama’s “pocket veto” of legislation that consumer advocates worried would have made it more difficult for homeowners to fight fraudulent foreclosures.

Some have been skeptical that a pocket veto, which allows the president to kill legislation simply by not signing it when Congress is not in session, was available because the Senate has, in fact, been holding pro-forma sessions.

So instead of just not signing the bill, Obama is also sending it back to the House, making it a “protective return” veto.

“To leave no doubt that the bill is being vetoed,” said Obama in a statement, “in addition to withholding my signature, I am returning H.R. 3808 to the Clerk of the House of Representatives, along with this Memorandum of Disapproval.”

Continue reading…HUFFINGTON POST


© 2010-17 FORECLOSURE FRAUD | by DinSFLA. All rights reserved.

Posted in assignment of mortgage, foreclosure, foreclosure fraud, foreclosure mills, foreclosures, Notary, notary fraud, STOP FORECLOSURE FRAUD1 Comment

Fannie-Freddie Fix at $160 Billion With $1 Trillion Worst Case

Fannie-Freddie Fix at $160 Billion With $1 Trillion Worst Case

By Lorraine Woellert and John Gittelsohn

June 14 (Bloomberg) — The cost of fixing Fannie Mae and Freddie Mac, the mortgage companies that last year bought or guaranteed three-quarters of all U.S. home loans, will be at least $160 billion and could grow to as much as $1 trillion after the biggest bailout in American history.

Fannie and Freddie, now 80 percent owned by U.S. taxpayers, already have drawn $145 billion from an unlimited line of government credit granted to ensure that home buyers can get loans while the private housing-finance industry is moribund. That surpasses the amount spent on rescues of American International Group Inc., General Motors Co. or Citigroup Inc., which have begun repaying their debts.

“It is the mother of all bailouts,” said Edward Pinto, a former chief credit officer at Fannie Mae, who is now a consultant to the mortgage-finance industry.

Fannie, based in Washington, and Freddie in McLean, Virginia, own or guarantee 53 percent of the nation’s $10.7 trillion in residential mortgages, according to a June 10 Federal Reserve report. Millions of bad loans issued during the housing bubble remain on their books, and delinquencies continue to rise. How deep in the hole Fannie and Freddie go depends on unemployment, interest rates and other drivers of home prices, according to the companies and economists who study them.

‘Worst-Case Scenario’

The Congressional Budget Office calculated in August 2009 that the companies would need $389 billion in federal subsidies through 2019, based on assumptions about delinquency rates of loans in their securities pools. The White House’s Office of Management and Budget estimated in February that aid could total as little as $160 billion if the economy strengthens.

If housing prices drop further, the companies may need more. Barclays Capital Inc. analysts put the price tag as high as $500 billion in a December report on mortgage-backed securities, assuming home prices decline another 20 percent and default rates triple.

Sean Egan, president of Egan-Jones Ratings Co. in Haverford, Pennsylvania, said that a 20 percent loss on the companies’ loans and guarantees, along the lines of other large market players such as Countrywide Financial Corp., now owned by Bank of America Corp., could cause even more damage.

“One trillion dollars is a reasonable worst-case scenario for the companies,” said Egan, whose firm warned customers away from municipal bond insurers in 2002 and downgraded Enron Corp. a month before its 2001 collapse.

Unfinished Business

A 20 percent decline in housing prices is possible, said David Rosenberg, chief economist for Gluskin Sheff & Associates Inc. in Toronto. Rosenberg, whose forecasts are more pessimistic than those of other economists, predicts a 15 percent drop.

“Worst case is probably 25 percent,” he said.

The median price of a home in the U.S. was $173,100 in April, down 25 percent from the July 2006 peak, according to the National Association of Realtors.

Fannie and Freddie are deeply wired into the U.S. and global financial systems. Figuring out how to stanch the losses and turn them into sustainable businesses is the biggest piece of unfinished business as Congress negotiates a Wall Street overhaul that could reach President Barack Obama’s desk by July.

Neither political party wants to risk damaging the mortgage market, said Douglas Holtz-Eakin, a former director of the Congressional Budget Office and White House economic adviser under President George W. Bush.

“Republicans and Democrats love putting Americans in houses, and there’s no getting around that,” Holtz-Eakin said.

‘Safest Place’

With no solution in sight, the companies may need billions of dollars from the Treasury Department each quarter. The alternative — cutting the federal lifeline and letting the companies default on their debts — would produce global economic tremors akin to the U.S. decision to go off the gold standard in the 1930s, said Robert J. Shiller, a professor of economics at Yale University in New Haven, Connecticut, who helped create the S&P/Case-Shiller indexes of property values.

“People all over the world think, ‘Where is the safest place I could possibly put my money?’ and that’s the U.S.,” Shiller said in an interview. “We can’t let Fannie and Freddie go. We have to stand up for them.”

Congress created the Federal National Mortgage Association, known as Fannie Mae, in 1938 to expand home ownership by buying mortgages from banks and other lenders and bundling them into bonds for investors. It set up the Federal Home Loan Mortgage Corp., Freddie Mac, in 1970 to compete with Fannie.

Lower Standards

The companies’ liabilities stem in large part from loans and mortgage-backed securities issued between 2005 and 2007. Directed by Congress to encourage lending to minorities and low- income borrowers at the same time private companies were gaining market share by pushing into subprime loans, Fannie and Freddie lowered their standards to take on high-risk mortgages.

Many of those went to borrowers with poor credit or little equity in their homes, according to company filings. By early 2008, more than $500 billion of loans guaranteed or held by Fannie and Freddie, about 10 percent of the total, were in subprime mortgages, according to Fed reports.

Fannie and Freddie also raised billions of dollars by selling their own corporate debt to investors around the world. The bonds are seen as safe because of an implicit government guarantee against default. Foreign governments, including China’s and Japan’s, hold $908 billion of such bonds, according to Fed data.

‘Debt Trap’

“Do we really want to go to the central bank of China and say, ‘Tough luck, boys’? That’s part of the problem,” said Karen Petrou, managing partner of Federal Financial Analytics Inc., a Washington-based research firm.

The terms of the 2008 Treasury bailout create further complications. Fannie and Freddie are required to pay a 10 percent annual dividend on the shares owned by taxpayers. So far, they owe $14.5 billion, more than the companies reported in income in their most profitable years.

“It’s like a debt trap,” said Qumber Hassan, a mortgage strategist at Credit Suisse Group AG in New York. “The more they draw, the more they have to pay.”

Fannie and Freddie also benefited by selling $1.4 trillion in mortgage-backed securities to the Fed and the Treasury since September 2008, bonds that otherwise would have weighed on their balance sheets. While the government bought only the lowest-risk securities, it could incur additional losses.

‘Hard to Judge’

Treasury Secretary Timothy F. Geithner has vowed to keep Fannie and Freddie operating.

“It’s very hard to judge what the scale of losses is,” Geithner told Congress in March.

One idea being weighed by the Obama administration involves reconstituting Fannie and Freddie into a “good bank” with performing loans and a “bad bank” to absorb the rest. That could cost taxpayers as much as $290 billion because of all the bad loans, according to a May estimate by Credit Suisse analysts.

At the end of March, borrowers were late making payments on $338.4 billion worth of Fannie and Freddie loans, up from $206.1 billion a year earlier, according to the companies’ first- quarter filings at the Securities and Exchange Commission.

The number of loans more than three months past due has risen every quarter for more than a year, hitting 5.5 percent at Fannie as of the end of March and 4.1 percent at Freddie, according to the filings.

Surge in Delinquencies

The composition of the $5.5 trillion of loans guaranteed by Fannie and Freddie suggests that the surge in delinquencies may continue. About $1.98 trillion of the loans were made in states with the nation’s highest foreclosure rates — California, Florida, Nevada and Arizona — and $1.13 trillion were issued in 2006 and 2007, when real estate values peaked. Mortgages on which borrowers owe more than 90 percent of a property’s value total $402 billion.

Fannie and Freddie may suffer additional losses as a result of the Treasury’s effort to prevent foreclosures. Under the program, banks with mortgages owned or guaranteed by the companies must rewrite loan terms to make them easier for borrowers to pay.

The Treasury program is budgeted to cost Fannie and Freddie $20 billion. The companies have already modified about 600,000 delinquent loans and refinanced almost 300,000 more, in some cases for an amount greater than the houses are worth.

The government is using Fannie and Freddie “for a public- policy purpose that may well increase the ultimate cost of the taxpayer rescue,” said Petrou of Federal Financial Analytics. “Treasury is rolling the dice.”

Republican Phase-Out

If the plan works and foreclosures fall, that could help stabilize Fannie’s and Freddie’s balance sheets and ultimately protect taxpayers.

“Avoiding foreclosures can be a route to reducing loss severity,” said Sarah Rosen Wartell, executive vice president of the Center for American Progress, a Washington research group with ties to the Obama administration.

Loans issued since 2008, when the companies raised standards for borrowers, should be profitable and help offset prior losses, Wartell said.

Republicans attempted to include a phase-out of the mortgage companies in the financial reform bill. Democratic lawmakers and the Obama administration opted for further study, and the Treasury began soliciting ideas in April.

Representative Scott Garrett, a New Jersey Republican and co-sponsor of the phase-out amendment, said eliminating Fannie and Freddie would force the government and the housing market to confront the issue.

“It’s somewhat impossible to predict the magnitude of their impact if they continue to be the primary source of lending,” Garrett said in an interview.

Caught in ‘Quandary’

Democrats dismissed the phase-out idea as simplistic.

“We need to have a housing-financing system in place,” Senate Banking Committee Chairman Christopher Dodd said last month. “If you pull that rug out at this particular juncture, I don’t know what the particular result would be. We’re caught in this quandary.”

By delaying action, the Obama administration keeps losses off the government’s books while building a floor under housing prices during a congressional election year.

Keeping Fannie and Freddie functioning could also support an overall economic recovery. Residential real estate — the money spent on rent, mortgage payments, construction, remodeling, utilities and brokers’ fees — accounted for about 17 percent of gross domestic product in 2009, according to the National Association of Home Builders.

‘Already Lost’

Allowing the companies to go under and hoping that private financing will fill the gap isn’t realistic, analysts say. It would require at least two years of rising property values for private companies to return to the mortgage-securitization market, said Robert Van Order, Freddie’s former chief international economist and a professor of finance at George Washington University in Washington.

The price tag of supporting Fannie and Freddie “needs to be evaluated against the cost of not having a mortgage market,” said Phyllis Caldwell, chief of the Treasury’s Homeownership Preservation Office.

Whatever the fix, the money spent will not be recovered, said Alex Pollock, a former president of the Federal Home Loan Bank of Chicago who is now a fellow at the Washington-based American Enterprise Institute.

“It doesn’t matter what you do or don’t do, Fannie and Freddie will cost a lot of money,” Pollock said. “The money is already lost. There’s an attempt to try to avert your eyes.”

To contact the reporter on this story: Lorraine Woellert in Washington at; John Gittelsohn in New York at

Last Updated: June 13, 2010 19:00 EDT

© 2010-17 FORECLOSURE FRAUD | by DinSFLA. All rights reserved.

Posted in fannie mae, foreclosure, foreclosures, Freddie Mac, securitization0 Comments



2010 NY Slip Op 04868


406796/07, 1308.

Appellate Division of the Supreme Court of New York, First Department.

Decided June 8, 2010.

DLA Piper LLP (US), New York (Richard F. Hans, Patrick J. Smith, Kerry Ford Cunningham and Jeffrey D. Rotenberg of counsel), for appellants.

Andrew M. Cuomo, Attorney General, New York (Richard Dearing, Benjamin N. Gutman and Nicole Gueron of counsel), for respondent.

Before: Gonzalez, P.J., Saxe, Catterson, Acosta, JJ.


This appeal calls upon us to determine whether the regulations and guidelines implemented by the Office of Thrift Supervision (OTS) pursuant to the Home Owner’s Lending Act of 1933 (HOLA) (12 USC § 1461 et seq.) and the Financial Institutions Reform, Recovery and Enforcement Act of 1989 (FIRREA) (Pub L 101-73, 103 STAT 183 [codified in scattered sections of 12 USC]), preempt state regulations in the field of real estate appraisal.

The Attorney General claims that defendants engaged in fraudulent, deceptive and illegal business practices by allegedly permitting eAppraiseIT residential real estate appraisers to be influenced by nonparty Washington Mutual, Inc. (WaMu) to increase real estate property values on appraisal reports in order to inflate home prices. We conclude that neither federal statutes, nor the regulations and guidelines implemented by the OTS, preclude the Attorney General of the State of New York from pursuing litigation against defendants First American Corporation and First American eAppraiseIT, LLC. We further conclude that the Attorney General has standing to pursue his claims pursuant to General Business Law § 349.

In a complaint dated November 1, 2007, plaintiff, the People of the State of New York, commenced this action against defendants asserting claims under Executive Law § 63(12) and General Business Law § 349, and for unjust enrichment. The complaint alleges that in Spring 2006, WaMu hired two appraisal management companies, defendant eAppraiseIT and nonparty Lender’s Service, Inc., to oversee the appraisal process and provide a structural buffer against potential conflicts of interest between WaMu and the individual appraisers. The gravamen of the Attorney General’s complaint asserts that defendants misled their customers and the public by stating that eAppraiseIT’s appraisals were independent evaluations of a property’s market value and that these appraisals were conducted in compliance with the Uniform Standards and Professional Appraisal Practice (USPAP), when in fact defendants had implemented a system allowing WaMu’s loan origination staff to select appraisers who would improperly inflate a property’s market value to WaMu’s desired target loan amount.[1]

Defendants moved for dismissal of the complaint pursuant to CPLR 3211, asserting that the Attorney General is prohibited from litigating his claims because HOLA and FIERRA impliedly place the responsibility for oversight of appraisal management companies on the OTS, and asserting a failure to state a cause of action. Supreme Court denied defendants’ motion, finding that HOLA and FIRREA do not occupy the entire field with respect to real estate appraisal regulation and that the enforcement of USPAP standards under General Business Law § 349 neither conflicts with federal law, nor does it impair a bank’s ability to lend and extend credit. We affirm.

The Supremacy Clause of the United States Constitution provides that Federal laws “shall be the supreme Law of the Land; and the Judges in every State shall be bound thereby, any Thing in the Constitution or Laws of any State to the Contrary notwithstanding” (US Const, art VI, cl [2]), and it “vests in Congress the power to supersede not only State statutory or regulatory law but common law as well” (Guice v Charles Schwab & Co., 89 NY2d 31, 39 [1996], cert denied 520 US 1118 [1997]). Indeed, “[u]nder the U.S. Constitution’s Supremacy Clause (US Const, art VI, cl 2), the purpose of our preemption analysis is . . . to ascertain the intent of Congress” (Matter of People v Applied Card Sys., Inc., 11 NY3d 105, 113 [2008], cert denied ___ US ___, 129 S Ct 999 [2009]). Congressional intent to preempt state law may be established “by express provision, by implication, or by a conflict between federal and state law” (Balbuena v IDR Realty LLC, 6 NY3d 338, 356 [2006], quoting New York State Conference of Blue Cross & Blue Shield Plans v Travelers Ins. Co., 514 US 645, 654 [1995]). Express preemption occurs when Congress indicates its “pre-emptive intent through a statute’s express language or through its structure and purpose” (Altria Group, Inc. v Good, 555 US ___, ___, 129 S Ct 538, 543 [2008]). Absent explicit preemptive language, implied preemption occurs when “[t]he scheme of federal regulation [is] so pervasive as to make reasonable the inference that Congress left no room for the States to supplement it . . . [o]r the Act of Congress may touch a field in which the federal interest is so dominant that the federal system will be assumed to preclude enforcement of state laws on the same subject” (Rice v Santa Fe El. Corp., 331 US 218, 230 [1947]). Further, when “[a] conflict occurs either because compliance with both federal and state regulations is a physical impossibility, or because the State law stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress,” the State law is preempted (City of New York v Job-Lot Pushcart, 213 AD2d 210, 210 [1995], affd 88 NY2d 163 [1996], cert denied 519 US 871 [1996] [internal quotation marks and citations omitted]).

Here, defendants do not argue, nor have they directed this Court’s attention to any language within HOLA or FIRREA that establishes, that Congress expressly created these statutes to supersede state law governing the causes of actions asserted in the Attorney General’s complaint. Defendants also have not argued that there exists a conflict between federal and State laws or regulations. Rather, defendants assert that because Congress has legislated so comprehensively, and that federal law so completely occupies the home lending field, the Attorney General is precluded from bringing claims against them under the theory of field preemption. Thus, the necessary starting point is to determine whether HOLA and FIRREA so occupy the field that these two statutes preempt any and all state laws speaking to the manner in which appraisal management companies provide real estate appraisal services.

In 1933, Congress enacted HOLA “to provide emergency relief with respect to home mortgage indebtedness at a time when as many as half of all home loans in the country were in default” (Fidelity Fed. Sav. & Loan Assn. v De la Cuesta, 458 US 141, 159 [1982] [internal quotation marks and citations omitted]). HOLA created a general framework to regulate federally chartered savings associations that left the regulatory details to the Federal Home Loan Bank Board (FHLBB). The FHLBB’s authority to regulate federal savings and loans is virtually unlimited and “[p]ursuant to this authorization, the [FHLBB] has promulgated regulations governing the powers and operations of every Federal savings and loan association from its cradle to its corporate grave” (id. at 145 [internal citations and quotation marks omitted]).

When Congress passed FIRREA in 1989, it restructured the regulation of the savings association industry by abolishing the FHLBB and vested many of its functions into the newly-created OTS (see FIRREA § 301 [12 USCA § 1461 et seq.] [establishing OTS], § 401 [12 USCA § 1437] [abolishing the FHLBB]). According to FIRREA’s legislative history

“[t]he primary purposes of the [FIRREA] are to provide affordable housing mortgage finance and housing opportunities for low- and moderate-income individuals through enhanced management of federal housing credit programs and resources; establish organizations and procedures to obtain and administer the necessary funding to resolve failed thrift cases and to dispose of the assets of these institutions . . . and, enhance the regulatory enforcement powers of the depository institution regulatory agencies to protect against fraud, waste and insider abuse”

(HR Rep 101-54 [I], at 307-308, reprinted in 1989 US Code Cong to Admin News, at 103-104). FIRREA was also designed “to thwart real estate appraisal abuses, [by] establish[ing] a system of uniform national real estate appraisal standards.

It also requires the use of state certified or licensed appraisers for real estate related transactions with the Federal National Mortgage Association (Fannie Mae), the Federal Home Loan Mortgage Corporation (Fannie Mac), the RTC, or certain real estate transaction [sic] regulated by the federal financial institution regulatory agencies” (HR Rep 101-54 (I), at 311, reprinted in 1989 US Code Cong to Admin News, at 107).

Further, 12 USCS § 3331, which was enacted as part of FIRREA, states that the general purpose of this statute, is

“to provide that Federal financial and public policy interests in real estate related transactions will be protected by requiring that real estate appraisals utilized in connection with federally related transactions are performed in writing, in accordance with uniform standards, by individuals whose competency has been demonstrated and whose professional conduct will be subject to effective supervision.”

The uniform standards described in 12 USCS § 3331, are defined in 12 USCS § 3339 which requires that the OTS, as a

“Federal financial institution[] regulatory agency . . . shall prescribe appropriate standards for the performance of real estate appraisals in connection with federally related transactions[2] under the jurisdiction of each such agency or instrumentality. These rules shall require, at a minimum — (1) that real estate appraisals be performed in accordance with generally accepted appraisal standards as evidenced by the appraisal standards promulgated by the Appraisal Standards Board of the Appraisal Foundation; and (2) that such appraisals shall be written appraisals.”

The Appraisal Standards Board (ASB) of the Appraisal Foundation promulgates the appraisal standards mandated by 12 USC § 3339 and are called USPAP. The Appraisal Foundation is a private “not-for-profit organization dedicated to the advancement of professional valuation [and] was established by the appraisal profession in the United States in 1987? (Welcome to The Appraisal Foundation [The Appraisal Foundation], [accessed May 27, 2010]). The ASB is responsible for “develop[ing], interpret[ing] and amend[ing]” USPAP (Welcome to The Appraisal Foundation, DynamicPage.aspx?Site=TAF & WebCode=ASB [accessed May 27, 2010]). However, “[e]ach U.S. State or Territory has a State appraiser regulatory agency, which is responsible for certifying and licensing real estate appraisers and supervising their appraisal-related activities, as required by Federal law” (State Regulatory Information [The Appraisal Foundation], & WebCode=RegulatoryInfo [accessed May 27, 2010]; see also State Appraiser Regulatory Programs > State Contact Information [Appraisal Subcommittee], [accessed May 27, 2010] [listing each State appraiser regulatory agency’s website]). Further, the OTS itself has determined that

“[i]t does not appear that OTS is required by title XI of FIRREA to implement an appraisal regulation that reaches all the activities of savings and loan holding companies, at least to the extent that those activities are unrelated to the safety and soundness of savings associations or their subsidiaries. Neither the language of Title XI nor its legislative history indicate that Congress intended title XI to apply to the wide range of activities engaged in by savings and loan holding companies and their non-saving association subsidiaries” (55 Fed Reg 34532, 34534-34535 [1990], codified at 12 CFR 506, 545, 563, 564 and 571).

Indeed, the OTS encourages financial institutions

“to make referrals directly to state appraiser regulatory authorities when a State licensed or certified appraiser violates USPAP, applicable state law, or engages in other unethical or unprofessional conduct. Examiners finding evidence of unethical or unprofessional conduct by appraisers will forward their findings and recommendations to their supervisory office for appropriate disposition and referral to the state, as necessary” (OTS, Thrift Bulletin, Interagency Appraisal and Evaluation Guidelines at 10 [November 4, 1994], http://files.ots.treas. gov/84042.pdf [accessed May 27, 2010]).

In looking at the legislative history it becomes clear that Congress intended to establish

“a system of uniform real estate appraisal standards and requires the use of State certified and licensed appraisers for federally regulated transactions by July 1, 1991. . . The key . . . lies in the creation of State regulatory agencies and a Federal watchdog to monitor the standards and to oversee State enforcement. . . It is this combination of Federal and State action . . . that . . . assur[es] . . . good standards are properly enforced (135 Cong Rec S3993-01, at S4004 [April 17, 1989], 1989 WL 191505 [remarks of Senator Christopher J. Dodd]).

Thus, we conclude that neither HOLA or FIRREA preempts or precludes the Attorney General from pursuing his claims.

Having rejected defendants’ general arguments for preemption under HOLA and FIRREA, “[t]he Court’s task, then, is to decide which claims fall on the regulatory side of the ledger and which, for want of a better term, fall on the common law side” ( Cedeno v IndyMac Bancorp, Inc., 2008 WL 3992304, *7, 2008 US Dist LEXIS 65337, *22 [SD NY 2008] [internal quotation marks and citation omitted]). Defendants assert that the Attorney General is preempted from pursuing his claims because subsequent to FIRREA’s passage, the OTS issued extensive regulations specifically addressing the composition and construction of appraisal programs undertaken by federal savings and loans.

It is well settled that “[a]gencies delegated rulemaking authority under a statute . . . are afforded generous leeway by the courts in interpreting the statute they are entrusted to administer” (Rapanos v United States, 547 US 715, 758 [2006]). Indeed, the OTS regulations “have no less pre-emptive effect than federal statutes” (Fidelity Fed. Sav. & Loan Assn., 458 US at 153). 12 CFR 545.2, states that regulations promulgated by the OTS are “preemptive of any state law purporting to address the subject of the operations of a Federal saving association.” However, 12 CFR 560.2(a) limits the language of 12 CFR 545.2 by setting parameters to the OTS’ authority to promulgate regulations that

“preempt state laws affecting the operations of federal savings associations when deemed appropriate to facilitate the safe and sound operation of federal savings associations, to enable federal savings associations . . . to conduct their operations in accordance with the best practices of thrift institutions in the United States, or to further other purposes of the HOLA” (12 CFR 560.2[a]).

12 CFR 560.2(b) provides a non-exhaustive list of illustrative examples of the types of state laws preempted by 12 CFR 560.2(a). Further, 12 CFR 560.2(c) states that the following types of State law are not preempted

“to the extent that they only incidentally affect the lending operations of Federal savings associations . . . (1) Contract and commercial law; (2) Real property law; (3) Homestead laws specified in 12 U.S.C. 1462a(f); (4) Tort law; (5) Criminal law; and (6) Any other law that OTS, upon review, finds: (i) Furthers a vital state interest; and (ii) Either has only an incidental effect on lending operations or is not otherwise contrary to the purposes expressed in paragraph (a) of this section.”

The OTS advises that when a court is

“analyzing the status of state laws under § 560.2, the first step will be to determine whether the type of law in question is listed in paragraph (b). If so, the analysis will end there; the law is preempted. If the law is not covered by paragraph (b), the next question is whether the law affects lending. If it does, then, in accordance with paragraph (a), the presumption arises that the law is preempted. This presumption can be reversed only if the law can clearly be shown to fit within the confines of paragraph (c). For these purposes, paragraph (c) is intended to be interpreted narrowly. Any doubt should be resolved in favor of preemption” (61 Fed Reg 50951-01, 50966-50967 [1996]).

Defendants argue that the Attorney General’s challenges to defendants’ business practices are preempted because the conduct falls within 12 CFR 560.2(b)(5), which provides examples of loan-related fees “including without limitation, initial charges, late charges, prepayment penalties, servicing fees, and overlimit fees.” Defendants also assert that their alleged conduct is within 12 CFR 560.2(b)(9), which provides

“[d]isclosure and advertising, including laws requiring specific statements, information, or other content to be included in credit application forms, credit solicitations, billing statements, credit contracts, or other credit-related documents and laws requiring creditors to supply copies of credit reports to borrowers or applicants” (id.).

Lastly, defendants assert that their alleged conduct falls within 12 CFR 560.2(b)(10) which states that “[p]rocessing, origination, servicing, sale or purchase of, or investment or participation in, mortgages” is preempted.

The Attorney General’s complaint asserts that defendants engaged in conduct proscribed by Executive Law § 63(12)[3] and General Business Law § 349[4] . It further alleges that defendants unjustly enriched themselves by repeated use of fraudulent or illegal business practices, in that they allowed WaMu to pressure eAppraiseIT appraisers to compromise their USPAP-required independence and collude with WaMu to inflate residential appraisal values so that the appraisals would match the qualifying loan values WaMu desired.

Under the first prong of the preemption analysis, we find that this action brought pursuant to Executive Law § 63(12), General Business Law § 349(b) and on the theory of unjust enrichment is not preempted by 12 CFR 560.2(b)(5) because it involves no attempt to regulate bank-related fees. We also find, under the first prong of the preemption analysis, that there is no preemption pursuant to 12 CFR 560.2(b)(9) because these claims do not involve a state law seeking to impose or require any specific statements, information or other content to be disclosed. Although at least one case has held that claims similar to those asserted here were preempted (see Spears v Washington Mut., Inc., 2009 WL 605835 [ND Cal 2009]), we find under the first prong of the preemption analysis that 12 CFR 660.2(b)(10) does not preclude the Attorney General’s complaint because prosecution of the alleged conduct will not affect the operations of federal savings associations (FSA) in how they process, originate, service, sell or purchase, or invest or participate in, mortgages.

The question then becomes whether the Attorney General is nevertheless precluded from litigating his claims under the second prong of the preemption analysis. Because enjoining a real estate appraisal management company from abdicating its publicly advertised role of providing unbiased valuations is not within the confines of 12 CFR 560.2(c), we answer it in the negative.

Defendants argue the OTS’s authority under HOLA and FIRREA is not limited to oversight of a FSA and that its authority under these two statues extends over the activity regulated and includes the activities of third party agents of a FSA. Defendants assert that providing real estate appraisal services is a critical component of the processing and origination of mortgages and represents a core component of the controlling federal regime. Defendants cite 12 USC § 1464(d)(7)(D) and State Farm Bank, FSB v Reardon (539 F3d 336 [6th Cir 2008]) for support. 12 USC § 1464(d)(7) states, in pertinent part, that

“if a savings association . . . causes to be performed for itself, by contract or otherwise, any service authorized under [HOLA] such performance shall be subject to regulation and examination by the [OTS] Director to the same extent as if such services were being performed by the savings association on its own premises . . .”

Here, it is alleged eAppraiseIT and Lender’s Service, Inc., were hired by WaMu to provide appraisal services. However, defendants are incorrect in asserting that providing real estate appraisal services is an authorized banking activity under HOLA. In an opinion letter dated October 25, 2004, OTS concluded that it had the authority to regulate agents of an FSA under HOLA because

“[i]nherent in the authority of federal savings associations to exercise their deposit and lending powers and to conduct deposit, lending, and other banking activities is the authority to advertise, market, and solicit customers, and to make the public aware of the banking products and services associations offer. The authority to conduct deposit and lending activities, and to offer banking products and services, is accompanied by the power to advertise, market, and solicit customers for such products and services . . . A state may not put operational restraints on a federal savings association’s ability to offer an authorized product or service by restricting the association’s ability to market its products and services and reach potential customers . . . Thus, OTS has authority under the HOLA to regulate the Agents the Association uses to perform marketing, solicitation, and customer service activities” (2004 OTS Op No. P-2004-7, at 7,, 2004 OTS LEXIS 6, at *15 [accessed May 27, 2010]).

State Farm Bank, FSB v Reardon (539 F3d 336 [6th Cir 2008]) follows this principle. In Reardon, the plaintiff, a FSA chartered by the OTS under HOLA, decided to offer, through its independent contractor agents, first and second mortgages and home equity loans in the State of Ohio. The Sixth Circuit concluded that although the statute at issue

“directly regulates [the plaintiff FSA’s] exclusive agents rather than [the FSA] itself . . . the activity being regulated is the solicitation and origination of mortgages, a power granted to [the FSA] by HOLA and the OTS. This is also a power over which the OTS has indicated that any state attempts to regulate will be met with preemption . . . [T]he practical effect of the [statute] is that [the FSA] must either change its structure or forgo mortgage lending in Ohio. Thus, enforcement of the [statute] against [the FSA’s] exclusive agents would frustrate the purpose of the HOLA and the OTS regulations because it indirectly prohibits [the FSA] from exercising the powers granted to it under the HOLA and the OTS regulations” (Reardon, 539 F3d at 349 [internal quotation marks and citation omitted]).

Since appraisal services are not authorized banking products or services of a FSA, defendants have failed to show that the Attorney General is preempted from pursuing his claims under 12 USC § 1464(d)(7)(D). Consequently, under the second prong of the preemption analysis, the result of the Attorney General litigating his claims against a company that independently administers a FSA’s appraisal program would “only incidentally affect the lending operations of [the FSA]” (12 CFR 560.2[c]). Thus, defendants have failed to show that OTS’s regulations and guidelines preempt or preclude the Attorney General from pursuing his claims.

Defendants assert that Cedeno v IndyMac Bancorp, Inc. (2008 WL 3992304, 2008 US Dist LEXIS 65337 [SD NY 2008]) provides this Court with persuasive authority that the federal government and its regulators alone regulate the mortgage loan origination practices of FSAs including all aspects of the appraisal programs they utilize. In Cedeno, the Southern District found preemption precluded a private individual from maintaining a cause of action against a bank. It was alleged that the bank failed to disclose to the plaintiff that it selected appraisers, appraisal companies and/or appraisal management firms who would inflate the value of residential properties in order to allow the bank to complete more real estate transactions and obtain greater profits. This practice resulted in the plaintiff being misled as to the true equity in her home. The Southern District found that the conduct of the bank was

“directly regulated by the OTS: the processing and origination of mortgages, a loan-related fee, and the accompanying disclosure. The appraisals are a prerequisite to the lending process, and are inextricably bound to it. Because the plaintiff’s claim is not a simple breach of contract claim, but asks the Court to set substantive standards for the Associations’ lending operations and practices, it is preempted” (Cedeno, 2008 WL 3992304, *9, 2008 US Dist LEXIS 65337, at *28 [internal quotation marks and citations omitted]).

Contrary to defendants’ assertions, we find that Cedeno is not applicable here because Cedeno does not reach the question as to whether HOLA, FIRREA or OTS’s regulations and guidelines are intended to regulate the conduct of real estate appraisal companies.

Annexed to the OTS’s October 25, 2004 opinion letter is a document entitled Appendix A — Conditions. In this document, OTS requires FSAs that wish to use agents to perform marketing, solicitation, customer service, or other activities related to the FSA’s authorized banking products or services to enter into written agreements that “(4) expressly set[] forth OTS’s statutory authority to regulate and examine and take an enforcement action against the agent with respect to the activities it performs for the association, and the agent’s acknowledgment of OTS’s authority” (2004 OTS Op No. P-2004-7, at 16, http://files.ots., 2004 OTS LEXIS 6, at *37 [accessed May 27, 2010]). We note that defendants have neither asserted that such written agreements exist nor produced such documents.

Thus, we conclude that the Attorney General may proceed with his claims against defendants because his challenge to defendants’ allegedly fraudulent and deceptive business practices in providing appraisal services is not preempted by federal law and regulations that govern the operations of savings and loan associations and institution-affiliated parties.

Defendants assert that the Attorney General cannot rely upon a substantive violation of a federal law to support a claim under General Business Law § 349 because this is an improper attempt to convert alleged violations of federal law into a violation of New York law. Defendants claim that where a plaintiff seeks to rely upon a substantive violation of a federal law to support a claim under General Business Law § 349, the federal law relied upon must contain a private right of action.

However, the Attorney General is statutorily charged with the duty to “[p]rosecute and defend all actions and proceedings in which the state is interested, and have charge and control of all the legal business of the departments and bureaus of the state, or of any office thereof which requires the services of attorney or counsel, in order to protect the interest of the state” (Executive Law § 63[1]). Indeed, when the Attorney General becomes aware of allegations of persistent fraud or illegality of a business, he

“is authorized by statute to bring an enforcement action seeking an order enjoining the continuance of such business activity or of any fraudulent or illegal acts, [and] directing restitution and damages’ (Executive Law § 63 [12]). He is also authorized, when informed of deceptive acts or practices affecting consumers in New York, to bring an action in the name and on behalf of the people of the state of New York to enjoin such unlawful acts or practices and to obtain restitution of any moneys or property obtained’ thereby (General Business Law § 349 [b])” (People v Coventry First LLC, 13 NY3d 108, 114 [2009]).

It is well settled that “[o]n a motion to dismiss pursuant to CPLR 3211, the court must accept the facts as alleged in the complaint as true, accord plaintiffs the benefit of every possible favorable inference, and determine only whether the facts as alleged fit within any cognizable legal theory’” (Wiesen v New York Univ., 304 AD2d 459, 460 [2003], quoting Leon v Martinez, 84 NY2d 83, 87-88 [1994]). The Attorney General’s complaint alleges that defendants publicly claimed on their eAppraiseIT website that eAppraiseIT provides a firewall between lenders and appraisers so that customers can be assured that USPAP and FIRREA guidelines are followed and that each appraisal is being audited for compliance. The Attorney General charges that defendants deceived borrowers and investors who relied on their proclaimed independence by allowing WaMu’s loan production staff to select the appraiser based upon whether they would provide high values.

We find defendants’ assertions that the Attorney General lacks standing under General Business Law § 349 and that his complaint fails to state a cause of action are without merit.

Indeed, the Attorney General’s complaint references misrepresentations and other deceptive conduct allegedly perpetrated on the consuming public within the State of New York, and “[a]s shown by its language and background, section 349 is directed at wrongs against the consuming public” (Oswego Laborers’ Local 214 Pension Fund v Marine Midland Bank, 85 NY2d 20, 24 [1995]). Therefore, we find that the Attorney General’s complaint articulates a viable cause of action under General Business Law § 349, and that this statute provides him with standing.

Consequently, we conclude that defendants have failed to demonstrate that HOLA, FIRREA or the OTS’s regulations and guidelines preempt or preclude the Attorney General from pursuing the causes of action articulated in his complaint. We additionally find that the Attorney General has standing under General Business Law § 349. We have reviewed defendants’ remaining contentions and we find them without merit.

Accordingly, the order of the Supreme Court, New York County (Charles Edward Ramos, J.), entered April 8, 2009, which, insofar as appealed from as limited by the briefs, denied defendants’ motion to dismiss the complaint on the ground of federal preemption, should be affirmed, without costs.

All concur.


[1] USPAP is incorporated into New York law and it prohibits a State-certified or State licensed appraiser from accepting a fee for an appraisal assignment “that is contingent upon the appraiser reporting a predetermined estimate, analysis, or opinion or is contingent upon the opinion, conclusion or valuation reached, or upon the consequences resulting from the appraisal assignment” (NY Exec Law § 160-y; 19 NYCRR 1106.1).

[2] 12 USC § 3350(4) states that “[t]he term federally related transaction’ means any real estate-related financial transaction which—(A) a federal financial institutions regulatory agency or the Resolution Trust Corporation engages in, contracts for, or regulates; and (B) requires the services of an appraiser.”

[3] Executive Law § 63(12) states, in pertinent part, that “[w]henever any person shall engage in repeated fraudulent or illegal acts or otherwise demonstrate persistent fraud or illegality in the carrying on, conducting or transaction of business, the attorney general may apply, in the name of the people of the state of New York . . . for an order enjoining the continuance of such business activity or of any fraudulent or illegal acts, directing restitution and damages. . .”

[4] General Business Law § 349(b) states, in pertinent part, that “[w]henever the attorney general shall believe from evidence satisfactory to him that any person, firm, corporation or association or agent or employee thereof has engaged in or is about to engage in any of the acts or practices stated to be unlawful he may bring an action in the name and on behalf of the people of the state of New York to enjoin such unlawful acts or practices and to obtain restitution of any moneys or property obtained directly or indirectly by any such unlawful acts or practices.”

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