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GARCIA vs BAC HOME LOANS, ETC., ET. AL.,| FL 5DCA – Rule 1.420(e) does not authorize the dismissal of a complaint; it requires the dismissal of the action.

GARCIA vs BAC HOME LOANS, ETC., ET. AL.,| FL 5DCA – Rule 1.420(e) does not authorize the dismissal of a complaint; it requires the dismissal of the action.

IN THE DISTRICT COURT OF APPEAL OF THE STATE OF FLORIDA
FIFTH DISTRICT

NOT FINAL UNTIL TIME EXPIRES TO
FILE MOTION FOR REHEARING AND
DISPOSITION THEREOF IF FILED

ERIK GARCIA AND IRELA GARCIA,
Appellants,

v.

BAC HOME LOANS, ETC., ET. AL.,
Appellees.
________________________________/
Opinion filed August 22, 2014

Appeal from the Circuit Court
for Marion County,

William T. Swigert, Judge.

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

Miguel A. Gonzalez, John S. Graham and Alice K.
Sum, of Fowler White Burnett, PA, Miami; Jason
Joseph of Gladstone Law Group, P.A., Boca Raton;
Tricia J. Duthiers, J. Randolph Liebler, and Joshua
R. Levine, of Liebler, Gonzalez & Portuondo, Miami
for Appellees.

PER CURIAM.

On May 25, 2007, Appellants gave a note and mortgage in the amount of
$156,000 to Appellees. The mortgage went into default on October 1, 2009, and on
March 5, 2010, foreclosure was filed. Appellees sought to foreclose on the Garcias’
property. For several months, litigation proceeded as normal and then, suddenly, all
activity ceased. Nothing transpired between November 12, 2010, and November 7,
2011, when Appellants filed a notice of intent to dismiss for lack of prosecution, which
was mailed to Appellees on November 4, 2011. Nothing more was filed in the sixty
days following the notice of intent until January 6, 2012, when Appellants filed their
motion to dismiss for lack of prosecution, which was mailed to Appellees on January 4,
2012. On January 17, 2012, Appellees filed a motion to amend their complaint. On
February 13, 2012, the court entered its order dismissing Appellee’s complaint “without
prejudice” and, in the same order, granting Appellee’s motion to amend. On June 7,
2012, the court acknowledged in its order that Appellee’s complaint had been dismissed
for failure to prosecute.

The issue on appeal is whether the court erred in granting the leave to amend.

Florida Rule of Civil Procedure 1.420(e) reads:

In all actions in which it appears on the face of the record
that no activity by filing of pleadings, order of court, or
otherwise has occurred for a period of 10 months, and no
order staying the action has been issued nor stipulation for
stay approved by the court, any interested person, whether a
party to the action or not, the court, or the clerk of the court
may serve notice to all parties that no such activity has
occurred. If no such record activity has occurred within the
10 months immediately preceding the service of such notice,
and no record activity occurs within the 60 days immediately
following the service of such notice, and if no stay was
issued or approved prior to the expiration of such 60-day
period, the action shall be dismissed by the court on its own
motion or on the motion of any interested person, whether a
party to the action or not, after reasonable notice to the
parties, unless a party shows good cause in writing at least 5
days before the hearing on the motion why the action should
remain pending. Mere inaction for a period of less than 1
year shall not be sufficient cause for dismissal for failure to
prosecute.

Clearly, Appellees filed nothing within a ten-month period. After they received
notice from Appellants, they filed nothing within the sixty-day period. The court,
apparently acting on its own, dismissed Appellees’ complaint without prejudice and
granted Appellees’ motion to amend. There was, therefore, no noticed hearing to start
the five-day clock to show cause. Appellees’ only issue is whether the court properly
granted the motion to amend. We hold, however, that during the throes of rule 1.420(e),
when it is time to show cause, rule 1.190(a), authorizing amendment of pleadings, is
inapplicable. In any event, the court misinterpreted the rule. Rule 1.420(e) does not
authorize the dismissal of a complaint; it requires the dismissal of the action. Our only
appropriate action is to reverse and remand with instructions for the court to conduct a
good-cause hearing, and if none can be shown, dismiss the action. Appellees’ remedy
then will be to file a new action for those claims not barred by the statute of limitations.
See Singleton v. Greymar Assocs., 882 So. 2d 1004 (Fla. 2004); U.S. Bank Nat’l Ass’n
v. Bartram, 140 So. 3d 1007 (Fla. 5th DCA 2014).

REVERSED and REMANDED with instructions.
ORFINGER, LAWSON, JJ., and HARRIS, C.M., Senior Judge, concur.

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Some homeowners could get hit with a whopping tax bill if they accept help through Bank of America’s settlement

Some homeowners could get hit with a whopping tax bill if they accept help through Bank of America’s settlement

The never-ending saga…


WAPO-

The $17 billion settlement that Bank of America reached with the Department of Justice on Thursday provides mortgage debt relief for some troubled homeowners. But those that accept the help could get hit with a hefty tax bill later.

As part of the settlement, the bank agreed to spend $7 billion on helping struggling homeowners and communities, including lowering the mortgage balances of certain borrowers who owe more than their homes are worth. The problem is that some of these “underwater” borrowers might have to pay taxes on the debt that’s forgiven.

In 2007, Congress adopted a law that spared homeowners from being taxed on the amount of the loan that was written off. But that tax break expired in December, and now that kind of relief can be counted as income by the IRS, an issue we wrote about in April.

[WASHINGTON POST]

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A.G. Eric Schneiderman Led State & Federal Working Group Announces Record-Breaking $16.65 Billion Settlement With Bank Of America

A.G. Eric Schneiderman Led State & Federal Working Group Announces Record-Breaking $16.65 Billion Settlement With Bank Of America

RMBS Task Force, Co-Chaired By Schneiderman, Secures Settlement That Includes $800 Million For New Yorkers, Including, For The First Time, Relief For Borrowers With FHA-Insured Loans

Settlement Addresses Misconduct That Contributed To The 2008 Financial Crisis

Schneiderman: “Today’s Settlement Is A Major Victory In The Fight To Hold Those Who Caused The Financial Crisis Accountable”

NEW YORK – Attorney General Eric T. Schneiderman today joined members of a state and federal working group he co-chairs to announce a $16.65 billion settlement with Bank of America. The settlement is the largest in U.S. history with a single institution, surpassing the $13 billion settlement with JPMorgan Chase that was secured by the same state and federal working group last November. The settlement includes $800 million – $300 million in cash, and a minimum of $500 million worth of consumer relief – that will be allocated to New York State. As part of today’s settlement, Bank of America acknowledged it made serious misrepresentations to the public – including the investing public – arising out of the packaging, marketing, sale and issuance of residential mortgage-backed securities (RMBS) by Bank of America, as well as by Countrywide Financial and Merrill Lynch, institutions that Bank of America acquired in 2008. The resolution also requires Bank of America to provide relief to underwater homeowners, distressed borrowers, and affected communities through a variety of means, including relief that for the first time will assist certain homeowners with mortgages insured by the Federal Housing Administration (FHA) who were ineligible for relief under previous settlements.

The settlement requires Bank of America to pay $9.65 billion in hard dollars and provide $7 billion in consumer relief. New York State will receive at least $800 million: $300 million in cash and a minimum of $500 million in consumer relief for struggling New Yorkers. The settlement was negotiated through the Residential Mortgage-Backed Securities Working Group, a joint state and federal working group formed in 2012 to share resources and continue investigating wrongdoing in the mortgage-backed securities market prior to the financial crisis. Attorney General Schneiderman co-chairs the RMBS working group.

“Since my first day in office, one of my top priorities has been to pursue accountability for the misconduct that led to the crash of the housing market and the collapse of the American economy,” said Attorney General Schneiderman. “This historic settlement builds upon our work bringing relief to families around the country and across New York who were hurt by the housing crisis, and is exactly what our working group was created to do. The frauds detailed in Bank of America’s statement of facts harmed countless of New York homeowners and investors. Today’s result is a major victory in the fight to hold those who caused the financial crisis accountable.”

The settlement includes an agreed-upon statement of facts that describes how Bank of America, Merrill Lynch and Countrywide made representations to RMBS investors about the quality of the mortgage loans they securitized and sold to investors.  Contrary to those representations, the firms securitized and sold RMBS with underlying mortgage loans that they knew had material defects. Bank of America also made representations to the FHA, an agency within the U.S. Department of Housing and Urban Development, about the quality of FHA-insured loans that Bank of America originated and underwrote. Contrary to those representations, Bank of America originated and underwrote FHA-insured mortgages that were not eligible for FHA insurance. Bank of America and Countrywide also made representations and warranties to Fannie Mae and Freddie Mac about mortgages they originated and sold to those Government Sponsored Entities (GSE’s). Contrary to those representations and warranties, many of those mortgages were defective or otherwise ineligible for sale to GSE’s.

As the statement of facts explains, on a number of occasions, Merrill Lynch employees learned that significant percentages of the mortgage loans reviewed by a third party due diligence firm had material defects. Significant numbers of loans—50% in at least one pool—that were found in due diligence not to have been originated in compliance with applicable laws and regulations, not to be in compliance with applicable underwriting guidelines and lacking sufficient offsetting compensating factors, and loans with files missing one or more key pieces of documentation were nevertheless waived into the purchase pool for securitization and sale to investors. In an internal email that discussed due diligence on one particular pool of loans, a consultant in Merrill Lynch’s due diligence department wrote: “[h]ow much time do you want me to spend looking at these [loans] if [the co-head of Merrill Lynch’s RMBS business] is going to keep them regardless of issues? . . . Makes you wonder why we have due diligence performed other than making sure the loan closed.” A report by one of Merrill Lynch’s due diligence vendors found that from the first quarter of 2006 through the second quarter of 2007, 4,009 loans that were part of loan pool samples reviewed by the vendor were not in compliance with underwriting guidelines or applicable laws and regulations, and were waived in to purchase pools by Merrill Lynch. This conduct, along with similar conduct by other banks that bundled defective and toxic loans into securities and misled investors who purchased those securities, contributed to the financial crisis.

Attorney General Schneiderman was elected in 2010 and took office in 2011, when the five largest mortgage servicing banks, 49 state attorneys general, and the federal government were on the verge of agreeing to a settlement that would have released the banks – including Bank of America – from liability for virtually all misconduct related to the financial crisis. Attorney General Schneiderman refused to agree to such sweeping immunity for the banks. As a result, Attorney General Schneiderman secured a settlement that preserved a wide range of claims for further investigation and prosecution.

In his 2012 State of the Union address, President Obama announced the formation of the RMBS Working Group. The collaboration brought together the Department of Justice (DOJ), other federal entities, and several state law enforcement officials – co-chaired by Attorney General Schneiderman – to investigate those responsible for misconduct contributing to the financial crisis through the pooling and sale of residential mortgage-backed securities. The negotiations for settlement, which were led by Associate Attorney General Tony West of DOJ, were part of the RMBS Working Group.

Under the settlement, Bank of America will be required to provide a minimum of $500 million in creditable consumer relief directly to struggling families and communities across the state. The settlement includes a menu of options for consumer relief to be provided, and different categories of relief are credited at different rates toward the bank’s $500 million obligation. The agreement also requires Bank of America to provide minimum amounts of creditable relief under certain priority categories in New York. The Consumer Relief Credit Menu, available here, details the how each category of relief will be credited and the minimum amounts for each category where applicable.

The most significant priority on the Consumer Relief Credit Menu is a change that will allow first lien principal reductions for certain types of FHA-insured mortgages. Borrowers with these types of loans have previously been excluded from getting the benefits of principal reduction under past settlements, despite the fact that a significant number of distressed loans fall into this category. According to data collected by the Office of the Attorney General, roughly 23% of all distressed loans in New York have FHA insurance, and FHA-insured loans represent the largest portion of Bank of America’s remaining distressed loan portfolio in New York.

Attorney General Schneiderman made it a high priority to extend principal forgiveness to FHA-insured mortgages in negotiations with Bank of America, and their inclusion in this settlement represents a huge step forward in Attorney General Schneiderman’s ongoing commitment to helping families move past the foreclosure crisis.

“Empire Justice Center is very pleased that the settlement with Bank of America provides for principal balance reductions on FHA-insured loans,” said Kirsten Keefe, Senior Attorney at the Empire Justice Center. “This is a critical component that has not been included in prior bank settlements. It has left homeowners with FHA loans at a disadvantage when trying to negotiate with their bank to save their homes. We thank Attorney General Schneiderman for making this a priority in the Bank of America Settlement.”

Bank of America will provide a minimum of $60 million in first lien principal reductions in New York, including the FHA-insured portfolio. Other New York-specific minimum requirements for consumer relief under this settlement include:

  • A minimum value of $20 million in donations, including cash and contributions of vacant and abandoned properties to land banks, units of local government and other nonprofits. Bank of America estimates that this will help address as many as 300 vacant properties—also known as zombie properties—across the state of New York.
  • The bank must also earn at least $35 million in credits for making cash donations to legal service providers, housing counseling agencies, land banks and other community development nonprofits. These relief options are a direct compliment to the investment Attorney General Schneiderman has made to these types of programs over the past three years, including more than $60 million in funding to support a network of housing counseling and legal service provider across the state under the Homeowner Protection Program (HOPP), which has provided free, high-quality services to more than 30,000 homeowners since launching in 2012.
  • Bank of America must also provide $125 million in credits to create and preserve hundreds of units of affordable rental housing across New York State. This initiative is particularly critical in New York, where affordable rental housing is scarce and many families are struggling to find decent and affordable alternatives to homeownership following the economic crisis.

New York City Mayor Bill DeBlasiosaid, “We’re in the midst of an affordability crisis hitting New Yorkers from the very poor to those once solidly middle class. We are deeply grateful to the Attorney General for securing a historic settlement that will make a real difference for families struggling across the city and state. We are pushing hard to build and preserve an unprecedented amount of affordable housing to meet this crisis, and the Attorney General’s continued advocacy is proving vitally important in supporting that effort.”

“We applaud AG Schneiderman’s efforts to hold the too-big-to-fail banks accountable to lower income communities,” said Josh Zinner, Co-Director of New Economy Project. “We are hopeful that this settlement will provide relief to people and communities that have been hardest hit by predatory lending and high rates of foreclosure.”

Compliance with the settlement will be overseen by an independent monitor who will be responsible for ensuring that targets under the settlement are met and that quarterly reporting requirements, which will measure how relief is being allocated at a Census Tract level, are made available to the public.

This matter was led by former Deputy Attorney General for Economic Justice Virginia Chavez Romano, Chief of the Investor Protection Bureau Chad Johnson, Senior Enforcement Counsel for Economic Justice Steven Glassman, and Assistant Attorneys General in the Investor Protection Bureau Hannah Flamenbaum and Melissa Gable.

SOURCE: http://ag.ny.gov

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FONTENO vs WELLS FARGO | CA Appeals Court – Plaintiffs have pled viable causes of action for equitable cancellation of the trustee’s deed…

FONTENO vs WELLS FARGO | CA Appeals Court – Plaintiffs have pled viable causes of action for equitable cancellation of the trustee’s deed…

Filed 8/18/14

CERTIFIED FOR PUBLICATION

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
FIRST APPELLATE DISTRICT
DIVISION TWO

LEROY FONTENO, et al,
Plaintiffs and Appellants,

v.

WELLS FARGO BANK, N.A., et al,
Defendants and Respondents.
In June 2011, defendant Wells Fargo, N.A. (Wells Fargo) foreclosed on the residential mortgage loan of plaintiffs Leroy Fonteno and Jeanette Childs and purchased their home at a trustee sale conducted by defendant First American Trustee Servicing Solutions LLC (First American). Plaintiffs sued, alleging, among other things, that defendants violated both their deed of trust’s incorporation of a pre-foreclosure meeting requirement contained in National Housing Act (NHA) regulations and the Federal Debt Collection Practices Act (FDCPA). The trial court sustained defendants’ demurrers and denied plaintiffs’ request for a preliminary injunction, leading to this appeal. Plaintiffs argue numerous errors in these rulings.

We conclude that plaintiffs have pled viable causes of action for the equitable cancellation of the trustee’s deed obtained by Wells Fargo based on their allegation that Wells Fargo did not comply with the NHA requirements incorporated into the deed of trust. Because compliance is a condition precedent to the accrual of Wells Fargo’s contractual authority to foreclose on the property, if, as plaintiffs allege, the sale was conducted without such authority, it is either void or voidable by a court sitting in equity. Whether void or voidable, plaintiffs were not required to allege tender of the delinquent amount owed under the circumstances alleged in this case. Accordingly, the trial court should not have sustained Wells Fargo’s demurrers to plaintiff’s wrongful trustee sale and quiet title causes of action without leave to amend. That part of the trial court’s order is reversed. However, we affirm the remainder of the trial court’s demurrer rulings.

[...]

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Bank Of America Agrees Record $17bn Settlement

Bank Of America Agrees Record $17bn Settlement

AND …Again…No jail time!

 

Sky News-

Bank of America has agreed to a record $17bn (£10.2bn) settlement over its sale of mortgage-backed securities in the lead up to the 2008 financial crisis.

The bank will pay $10bn in cash and provide consumer relief valued at $7bn, officials familiar with the deal told the AP news agency.

The settlement is the largest arising from the economic meltdown during which millions of Americans lost their homes to foreclosure.

It also marks the largest settlement in the history of corporate America.

[SKY NEWS]

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Countrywide’s Mozilo Said to Face U.S. Suit Over Loans

Countrywide’s Mozilo Said to Face U.S. Suit Over Loans

AND …Again…But aren’t the statute of limitations NOW after them? I’m sure they are! Nice try Holder, Nice try!

Look forward to the complaint coming soon.


Bloomberg-

Countrywide Financial Corp. co-founder Angelo Mozilo hasn’t escaped the wrath of prosecutors for his company’s role in inflating the U.S housing bubble that preceded the financial crisis.

More than 12 months after a deadline passed to file criminal charges, U.S. attorneys in Los Angeles are preparing a civil lawsuit against Mozilo and as many as 10 other former Countrywide employees, according to two people with knowledge of the matter.

The government is making a last ditch-effort to hold him accountable for the excesses of the past decade’s subprime-mortgage boom, using a 25-year-old law that has helped the Justice Department win billions of dollars from Wall Street banks, said the people, who weren’t authorized to discuss the case publicly.

[BLOOMBERG]

image: Jay Mallin/Bloomberg

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Alvarez v. BAC Home Loans Servicing | CA Court of Appeals Finally Finds Servicers Cannot Negligently Handle Your Loan Mod Application

Alvarez v. BAC Home Loans Servicing | CA Court of Appeals Finally Finds Servicers Cannot Negligently Handle Your Loan Mod Application

Bergman & Gutierrez Law Firm-

There has been significant progress in the case law involving mortgage loan servicer negligence in the handling of loan modification applications. Recently, in Alvarez v. BAC Home Loans Servicing, the California Court of Appeal (First Appellate District, Division Three) held — for the first time– that a mortgage loan servicer owes a duty of care to borrowers in reviewing their loan modification application. Although another appellate decision in Jolley v. Chase Home Finance had issued a similar ruling, Jolley involved a construction loan and didn’t specifically discuss whether the holding would apply to a residential mortgage loan.

Prior to this case, there had been divergence in opinion at the trial court level– many finding that a duty of care could be found if a servicer was neligent in reviewing a loan mod application, and others finding that servicers could never be negligent in such circumstances because the servicer was acting in its “conventional role as a lender.” By relying on the1991 case Nymark v. Heart Fed Savings & Loan Association, many trial courts concluded that reviewing a borrower’s loan modification application could be considered part of its role as a conventional role as a lender and therefore could not be negligent in its conduct related to the handling of the loan modification.

In Alvarez, the California Court of Appeal correctly held that the Nymark rule could not be read that broadly and effectively sheild servicers from neglience in every circumstance. Instead, the court noted, “[e]ven when the lender is acting as a conventional lender, the no-duty rule is only a general rule. …Nymark does not support the sweeping conclusion that a lender never owes a duty of care to a borrower. Rather, the Nymark court explained that the question of whether a lender owes such a duty requires “the balancing of the ‘Biakanja factors.’ ”

[BERGMAN & GUTIERREZ]

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Inside the Dark, Lucrative World of Consumer Debt Collection

Inside the Dark, Lucrative World of Consumer Debt Collection

NYT-

One afternoon in October 2009, a former banking executive named Aaron Siegel waited impatiently in the master bedroom of a house in Buffalo that served as his office. As he stared at the room’s old fireplace and then out the window to the quiet street beyond, he tried not to think about his investors and the $14 million they had entrusted to him. Siegel was no stranger to money. He grew up in one of the city’s wealthiest and most prominent families. His father, Herb Siegel, was a legendary playboy and the majority owner of a hugely profitable personal-injury law firm. During his late teenage years, Aaron lived essentially unchaperoned in a sprawling, 100-year-old mansion. His sister, Shana, recalls the parties she hosted — lavish affairs with plenty of Champagne — and how their private-school classmates would often spend the night, as if the place were a clubhouse for the young and privileged.

So how, Siegel wondered, had he gotten into his current predicament? His career started with such promise. He earned his M.B.A. from the highly regarded Simon Business School at the University of Rochester. He took a job at HSBC and completed the bank’s executive training course in London. By all indications, he was well on his way to a very respectable future in the financial world. Siegel was smart, hardworking and ambitious. All he had to do was keep moving up the corporate ladder.

Instead, he decided to take a gamble. Siegel struck out on his own, investing in distressed consumer debt — basically buying up the right to collect unpaid credit-card bills. When debtors stop paying those bills, the banks regard the balances as assets for 180 days. After that, they are of questionable worth. So banks “charge off” the accounts, taking a loss, and other creditors act similarly. These huge, routine sell-offs have created a vast market for unpaid debts — not just credit-card debts but also auto loans, medical loans, gym fees, payday loans, overdue cellphone tabs, old utility bills, delinquent book-club accounts. The scale is breathtaking. From 2006 to 2009, for example, the nation’s top nine debt buyers purchased almost 90 million consumer accounts with more than $140 billion in “face value.” And they bought at a steep discount. On average, they paid just 4.5 cents on the dollar. These debt buyers collect what they can and then sell the remaining accounts to other buyers, and so on. Those who trade in such debt call it “paper.” That was Aaron Siegel’s business.

[NEW YORK TIMES]

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KNECHT vs FIDELITY NATIONAL TITLE INSURANCE COMPANY, et al., | Big Time Loss for MERS and Deutsche Bank National Trust Company as Trustee in Washington State Federal District Court

KNECHT vs FIDELITY NATIONAL TITLE INSURANCE COMPANY, et al., | Big Time Loss for MERS and Deutsche Bank National Trust Company as Trustee in Washington State Federal District Court

UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF WASHINGTON
AT SEATTLE

JOHN KNECHT, et al.,
Plaintiffs,

v.

FIDELITY NATIONAL TITLE INSURANCE COMPANY, et al.,
Defendants.

EXCERPT:

From its inception, Mr. Knecht’s deed of trust ran afoul of the Deed of Trust Act by designating MERS as its beneficiary. The Act declares that the beneficiary of a deed of trust is “the holder of the instrument or document evidencing the obligations secured by the deed of trust . . . .” RCW 61.24.005(2). Banks and other well-heeled financial interests, in an effort to facilitate the easy transfer of mortgage obligations, created MERS in the mid 1990s. Bain, 285 P.3d at 39-40. MERS is, in essence, a database for tracking mortgage rights that permits MERS’s member institutions to transfer mortgage obligations without publicly recording the transfers. Id. In Washington, lenders hoping to take advantage of the MERS system designated MERS as the beneficiary of deeds of trust, just as ABC did in Mr. Knecht’s deed of trust. But it is now clear that Washington law does not permit MERS to act as a beneficiary unless it is also the “holder” of the note secured by the deed of trust. Bain, 285 P.2d at 47.

There is no suggestion that MERS ever held Mr. Knecht’s note, and yet it purported in April 2010 to assign to DB “the Promissory Note secured by [the Knecht] deed of trust and also all rights accrued or to accrue under said Deed of Trust.” The assignment, which is recorded in King County, was executed by “MERS as nominee for [ABC],” but there is no evidence that ABC actually authorized MERS to effect the transfer. See Bavand v. OneWest Bank, FSB, 309 P.3d 636, 649 (Wash. Ct. App. 2013) (noting MERS’s failure to establish its agency relationship with a noteholder).

There is no dispute in this case that MERS lacked the power to transfer anything to DB. DB does not rest its claim to be the beneficiary of Mr. Knecht’s deed of trust on the MERS assignment, or at least it does not do so in these motions. Indeed, DB consistently refuses to acknowledge that MERS purported to assign not only the deed of trust, but Mr. Knecht’s note as well. DB avoids the MERS assignment, it appears, because it prefers that the court not focus on that apparently void transfer of the deed of trust and note. DB prefers that the court conclude that it acquired its interest in the deed of trust and note without MERS’s assistance.

Even assuming that Mr. Knecht bears the burden to prove that DB is not the beneficiary of his deed of trust, an issue the court does not decide,3the evidence he has provided is sufficient to create a genuine issue of material fact that only a trial can resolve. Mr. Knecht has offered two pieces of evidence: his original note and deed of trust, in which DB held no interest; and the MERS assignment, which was a legal nullity. A trier of fact could determine that this evidence makes it more likely than not that DB has no valid interest in Mr. Knecht’s note or deed of trust.

[...]

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GANN vs BAC HOME LOANS SERVICING LP, n/k/a BANK OF AMERICA, N.A. | FL 2DCA – Huge new case: Enforcing a mortgage is collecting a debt for purposes of debt-collection laws in Florida

GANN vs BAC HOME LOANS SERVICING LP, n/k/a BANK OF AMERICA, N.A. | FL 2DCA – Huge new case: Enforcing a mortgage is collecting a debt for purposes of debt-collection laws in Florida

H/T Attorney Michael Alex Wasylik

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

IN THE DISTRICT COURT OF APPEAL
OF FLORIDA
SECOND DISTRICT

MARIAN GANN,
Appellant,

v.

BAC HOME LOANS SERVICING LP,
n/k/a BANK OF AMERICA, N.A.,
Appellee.
___________________________________
Opinion filed August 15, 2014.

Appeal from the Circuit Court for Lee
County; Sherra Winesett, Judge.

Joseph C. LoTempio of The Dellutri Law
Group, P.A., Fort Myers, for Appellant.

Joseph F. Poklemba and K. Denise Haire
of Blank Rome, LLP, Boca Raton, for
Appellee.

SILBERMAN, Judge.
In her action for alleged violations of the Florida Consumer Collection
Practices Act (FCCPA) against BAC Home Loans Servicing LP, n/k/a Bank of America,
N.A. (the Bank), Marian Gann appeals a final order dismissing with prejudice her
complaint for failure to state a cause of action. We reverse the order to the extent that it
dismisses count one and remand for further proceedings.

Gann filed a two-count complaint against the Bank, alleging a violation of
the FCCPA and a violation of the Florida Deceptive and Unfair Trade Practices Act
(FDUTPA). She does not contest the dismissal of count two for alleged violations of the
FDUTPA. In count one, Gann alleged that the Bank entered into a permanent loan
modification in connection with her mortgage loan and that she kept all payments
current pursuant to the terms of the modification. She further alleged that the Bank
subsequently notified her of an alleged default although all payments were timely made
pursuant to the modification. Gann further alleged that the Bank breached its duty to
her and ignored the terms of the modification. She asserted that in its collections
actions and communications to her the Bank violated the FCCPA, including section
559.72(9), Florida Statutes (2011). Attached to Gann’s complaint as an exhibit are the
two letters that she alleges violated the FCCPA. Both parties rely on these two letters in
making their respective arguments.

In the first letter, the first section of the letter states as follows:
IMPORTANT MESSAGE ABOUT YOUR HOME LOAN
We recently received your payment in the amount of
$780.76. This payment was less than the total amount
needed to bring your loan up to date. However, we have
applied the above referenced payment to your loan in
accordance with your loan terms. The total amount due after
we applied your payment is $436.97.
We previously sent you a notice informing you of the amount
needed to reinstate your loan. The expiration date provided
on that notice remains in effect. If the amount due is not
received by the specified due date, foreclosure proceedings
may begin or continue.

(Emphasis added.) The letter also states, “If you are having difficulty making your home
loan payment, we can work with you to determine what options may be available to
assist you.” And the letter provides that the lender has not waived its rights under the
loan documents by accepting less than the amount owed.

In the second letter, the first section of the letter states as follows:
IMPORTANT MESSAGE ABOUT YOUR LOAN
Thank you for your recent payment to Bank of America,
N.A., your home loan servicer.
However, your loan payment for the current month has not
been received. As of September 13, 2011, the total due on
your loan is $414.30, which includes the payment due on
September 01, 2011.

Later in the letter it states that “it is vital that the full amount currently due is paid in
order to avoid other default-related actions, which may include returning payments that
are less than the total amount owed.” (Emphasis added.) The letter then states,
“Please send us the total amount due, $414.30, immediately or contact our office to
discuss a mutually acceptable repayment agreement.” (Emphasis added.)

The Bank filed a motion to dismiss the complaint and, with respect to the
FCCPA claim, argued that the enforcement of a security interest such as a mortgage is
not considered the collection of a consumer debt under the Federal Debt Collection
Practices Act (the Federal Act). The Bank further argued that when applying the
FCCPA due consideration and weight should be given to the interpretation of federal
law. The Bank contended that Gann’s complaint demonstrated that the Bank was
seeking to enforce a security interest and that the Bank’s conduct does not fall within
the scope of the FCCPA.

The only issue before the trial court on the motion to dismiss was whether
the correspondence from the Bank could be construed as an attempt to collect a
consumer debt. After a hearing, the trial court entered an order granting the Bank’s
motion to dismiss with prejudice. The order states, “Because the Letters did not contain
language which could be construed as an attempt to collect on the underlying debt, [the
Bank's] communications therein were merely attempts to enforce its security instrument
and not attempts to collect a consumer debt.”

A ruling on a motion to dismiss concerning a question of law is subject to
de novo review. Fla. Bar v. Greene, 926 So. 2d 1195, 1199 (Fla. 2006). A motion to
dismiss tests the legal sufficiency of the complaint and does not determine factual
issues. Id. The complaint’s allegations “must be taken as true and all reasonable
inferences therefrom construed in favor of the nonmoving party.” Id. The trial court
confines itself to considering the four corners of the complaint when ruling on a motion
to dismiss. Swope Rodante, P.A. v. Harmon, 85 So. 3d 508, 509 (Fla. 2d DCA 2012).

Section 559.72(9) provides as follows:
In collecting consumer debts, no person shall:
. . . .
(9) Claim, attempt, or threaten to enforce a debt when such
person knows that the debt is not legitimate, or assert the
existence of some other legal right when such person knows
that the right does not exist.

With reference to section 559.72(9), the gist of Gann’s claim is that the Bank sought to
enforce a debt that was not legitimate because the parties had entered into a
modification of the loan and that Gann was current on her payments.

In the section allowing for civil remedies against a person violating the
provisions of section 559.72, the FCCPA states that “[i]n applying and construing this
section, due consideration and great weight shall be given to the interpretations of the
Federal Trade Commission and the federal courts relating to the federal Fair Debt
Collection Practices Act.” § 559.77(5); see also Kelliher v. Target Nat’l Bank, 826 F.
Supp. 2d 1324, 1327 (M.D. Fla. 2011). In addition, “[i]n the event of any inconsistency
between any provision of this part and any provision of the federal act, the provision
which is more protective of the consumer or debtor shall prevail.” § 559.552.

The trial court erred in granting the Bank’s motion to dismiss when it
determined that the Bank was only trying to enforce a security interest and not trying to
collect a consumer debt from Gann. The trial court and the Bank relied upon the federal
decision of the Middle District of Florida in Trent v. Mortgage Electronic Registration
Systems, Inc., 618 F. Supp. 2d 1356 (M.D. Fla. 2007), aff’d, 288 F. App’x 571 (11th Cir.
2008). In Trent, the Middle District explained that “the purpose and intent of the
FCCPA, like the [Federal Act], is to eliminate abusive and harassing tactics in the
collection of debts. It is not meant to preclude a creditor or someone otherwise holding
a secured interest from invoking legal process to foreclose.” Id. at 1361. The court
concluded that “filing a foreclosure lawsuit is not a debt collection practice under §
559.72 of the FCCPA.” Id.

The court then went on to consider whether presuit letters or notices
violated section 559.72(9). The court determined that MERS’ conduct did not violate
section 559.72(9) because the debt was legitimate and MERS as mortgagee had the
ability to foreclose. Id. at 1362. The court also determined that MERS did not violate
section 559.72 by referring to itself as a “creditor” in the notice. Id. at 1363-64. But the
court did not state that the presuit notice was not an attempt to collect a consumer debt.

Subsequent to Trent, the Eleventh Circuit considered a claim under the
Federal Act based on a letter and enclosed documents that a law firm representing the
lender sent to the debtors which demanded payment of the debt and threatened to
foreclose on the property if the debtors did not pay. Reese v. Ellis, Painter, Ratterree &
Adams, LLP, 678 F.3d 1211, 1214 (11th Cir. 2012). The law firm moved to dismiss the
complaint for failure to state a claim and argued, among other things, that the letter and
documents attached to the complaint did not constitute debt collection activity but
instead were only an attempt to enforce its client’s security interest. Id. at 1215. The
district court dismissed the claim, and the Eleventh Circuit reversed. Id. at 1218-19.

The Reese case involved both a promissory note and a security interest,
and the promissory note is a debt within the plain language of the Federal Act. Id. at
1217. The letter stated “that the ‘Lender hereby demands full and immediate payment
of all amounts due.’ ” Id. The letter also threatened “that ‘unless you pay all amounts
due and owing under the Note,’ attorney’s fees ‘will be added to the total amount for
which collection is sought.’ ” Id. The other documents also had language indicating that
the law firm was ” ‘ATTEMPTING TO COLLECT A DEBT.’ ” Id.

The Eleventh Circuit rejected the law firm’s argument that the purpose of
the letter and documents was only to enforce a security interest. Id. “That argument
wrongly assumes that a communication cannot have dual purposes.” Id. The court
recognized that if it had adopted the law firm’s argument “[t]he practical result would be
that the [Federal] Act would apply only to efforts to collect unsecured debts. So long as
a debt was secured, a lender (or its law firm) could harass or mislead a debtor without
violating the [Federal Act].” Id. at 1218. Rather, “[a] communication related to debt
collection does not become unrelated to debt collection simply because it also relates to
the enforcement of a security interest. A debt is still a ‘debt’ even if it is secured.” Id.;
see also Birster v. Am. Home Mortg. Servicing, Inc., 481 F. App’x 579, 583 (11th Cir.
2012) (“Reese provides that an entity can both enforce a security interest and collect a
debt.”).

Here, the language in the letters from the Bank to Gann do not explicitly
state that it is attempting to collect a debt as the documents did in Reese. However, the
first letter states that if the Bank does not receive a specific amount due by a specified
date, “foreclosure proceedings may begin or continue.” The second letter states that “it
is vital that the full amount currently due is paid” and asks Gann to send “the total
amount due, $414.30, immediately” or contact the Bank’s office. The letters plainly
seek collection of an alleged debt.

Therefore, the trial court erred in determining that the letters did not
contain language that could be construed as an attempt to collect on the underlying
debt and only were attempts to enforce the Bank’s security instrument. Accordingly, we
reverse the order to the extent it dismisses the FCCPA claim in count one.

We note that the Bank makes an alternative argument on appeal that
Gann’s complaint was subject to dismissal because the Bank is not a debt collector
under the FCCPA. The Bank did not argue this as a ground for dismissal in its motion
or at the hearing. In fact, defense counsel asserted that the only issue at the hearing
was whether debt collection activity had occurred.

Moreover, Florida courts have recognized that the FCCPA applies not only
to debt collectors but also to any “person.” See Schauer v. Gen. Motors Acceptance
Corp., 819 So. 2d 809, 812 (Fla. 4th DCA 2002); see also § 559.72 (providing that “[i]n
collecting consumer debts, no person shall . . . “). This provision “includes all allegedly
unlawful attempts at collecting consumer claims.” Schauer, 819 So. 2d at 812. Thus,
the Fourth District determined that GMAC, the creditor, qualified as a person under the
FCCPA and reversed the dismissal of the count against GMAC. Id. In doing so, the
Schauer court noted that “[t]he Florida Act is different than its federal counterpart
because it is not limited to debt collectors.” Id. at 812 n.1.

Furthermore, in Morgan v. Wilkins, 74 So. 3d 179, 181 (Fla. 1st DCA
2011), the appellees conceded “that the trial court was in error when it ruled that
FCCPA pertains only to debt collectors, as that term is defined in the Act.” The court
stated that “[s]ection 559.72 provides that ‘no person’ shall engage in certain practices
while attempting to collect a consumer debt.” Id.; see also Kelliher, 826 F. Supp. 2d at
1327 (“Although the [Federal Act] does not apply to original creditors, the FCCPA has
been interpreted to apply to original creditors as well as debt collection agencies.”).

Therefore, we reject the Bank’s alternative argument on appeal because
the FCCPA applies to the Bank. Accordingly, we reverse the order to the extent that it
dismisses count one and remand for further proceedings.
Affirmed in part, reversed in part, and remanded.

NORTHCUTT and BLACK, JJ., Concur.

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Zervos v. OCWEN LOAN SERVICING, LLC, Dist. Court, D. Maryland 2012 | NEW SERVICER AFTER DEFAULT *IS* A DEBT COLLECTOR

Zervos v. OCWEN LOAN SERVICING, LLC, Dist. Court, D. Maryland 2012 | NEW SERVICER AFTER DEFAULT *IS* A DEBT COLLECTOR

CHRISTINE ZERVOS, et al., Plaintiffs,
v.
OCWEN LOAN SERVICING, LLC, Defendant.

Civil No. 1:11-cv-03757-JKB.
United States District Court, D. Maryland.

March 30, 2012.

MEMORANDUM

JAMES K. BREDAR, District Judge.

In Re: Defendant’s Motion to Dismiss (ECF No. 10)

Christine and Demetrios Zervos (“Plaintiffs”) brought this suit against Ocwen Loan Servicing, LLC (“Defendant”), alleging violations of the Fair Debt Collection Practices Act (“FDCPA”), 15 U.S.C. § 1692, the Maryland Mortgage Fraud Prevention Act (“MMFPA”), MD. CODE ANN., REAL PROP. § 7-401, et seq., the Maryland Consumer Debt Collection Practices Act (“MCDCPA”), MD. CODE ANN., COMM. LAW § 14-201, et seq., the Maryland Consumer Protection Act (“MCPA”), MD. CODE ANN., COMM. LAW § 13-101, et seq., and “breach of duty of good faith and fair dealing” as set out in MD. CODE REGS. 09.03.06.20. Defendant now moves to dismiss the complaint for failure to state a claim. The issues have been briefed and no oral argument is required. Local Rule 105.6. For the reasons explained below, Defendant’s Motion to Dismiss (ECF No. 10) is GRANTED IN PART (with respect to Count I: ¶ 21(b), (e), and (h), Count II, Count III: ¶ 31(a), and Count V) and DENIED IN PART (with respect to Count I: ¶ 21(a), (c), (d), (f), and (g), Count III: ¶ 31(b), and Count IV).

I. BACKGROUND

Plaintiffs are Baltimore County residents with an outstanding mortgage on property located at 10 Lochwell Court, Baltimore, Maryland 21234 (“The Property”). Defendant began servicing the mortgage on or about September 1, 2011, when it acquired the previous servicing company. At the time of the acquisition, Plaintiffs were in the process of negotiating a modification of their mortgage with the original servicer. They attempted to continue negotiation with Defendant by sending it their loan modification package, but Defendant denied modification and allegedly attempted to foreclose on the The Property. Specifically, Plaintiffs allege that on or about September 20, 2011, Defendant sent them a letter stating that “they would not loose [sic] their home within the next thirty days if they contacted [Defendant],” but that they “could loose [sic] their home immediately after thirty days.” (Compl. ¶ 15, ECF No. 2). Plaintiffs allege that they attempted to contact Defendant by phone but were unable to do so because Defendant’s automated phone system informed them that there were over two hundred callers ahead of them in line to speak with a representative. Next, Plaintiffs claim that on September 20, 2011, one of Defendant’s agents, named Alberto, arrived at their home and attempted to change the locks on the doors, stating that “Plaintiffs’ home `home [sic] was foreclosed upon’.” (Compl. ¶ 16, ECF No. 2). Additionally, Plaintiffs claim that when Alberto arrived “there were four cards [sic] present in the driveway, over four people in the Property, and the lights were on.” Id. Next, Plaintiffs claim that Defendant sent them a second letter on September 22, 2011, stating that “there was a confirmed `foreclosure sale date’ scheduled on their home within the next 60 days.” (Id., ¶ 17). Plaintiffs maintain, however, that contrary to these representations, no foreclosure proceedings had ever occurred and no sale was ever scheduled. (Compl. ¶¶ 17-18). Finally, Plaintiffs claim that on October 5, 2011 Defendant called their counsel’s office and requested to speak with them. When a paralegal informed Defendant that Plaintiffs were represented by counsel, Defendant allegedly insisted on speaking to Plaintiffs on a personal matter, unrelated to the mortgage.

On November 9, 2011, Plaintiffs filed the instant complaint in the Circuit Court for Baltimore City. (Compl., ECF No. 2). Defendant removed the case to this Court on the basis of diversity and federal question jurisdiction. (Notice of Removal, ECF No. 1). Defendant now moves to dismiss the case for failure to state a claim pursuant to FED. R. CIV. P. 12(b)(6). (Motion to Dismiss, ECF No. 10).

II. LEGAL STANDARD

A motion to dismiss under FED. R. CIV. P. 12(b)(6) is a test of the legal sufficiency of a complaint. Edwards v. City of Goldsboro, 178 F.3d 231, 243 (4th Cir. 1999). To pass this test, a complaint need only present enough factual content to render its claims “plausible on [their] face” and enable the court to “draw the reasonable inference that the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949 (2009). The plaintiff may not, however, rely on naked assertions, speculation, or legal conclusions. Bell Atlantic v. Twombly, 550 U.S. 544, 556-57 (2007). In assessing the merits of a motion to dismiss, the court must take all well-pled factual allegations in the complaint as true and construe them in the light most favorable to the Plaintiff. Ibarra v. United States, 120 F.3d 472, 474 (4th Cir. 1997). If after viewing the complaint in this light the court cannot infer more than “the mere possibility of misconduct,” then the motion should be granted and the complaint dismissed. Iqbal, 129 S.Ct. at 1950.

III. ANALYSIS

A. Count I: Fair Debt Collection Practices Act

Count I of the Complaint alleges that Defendant violated the following FDCPA provisions:

15 U.S.C. § 1692d(5):

A debt collector may not engage in any conduct the natural consequence of which is to harass, oppress, or abuse any person in connection with the collection of a debt. Without limiting the general application of the foregoing, the following conduct is a violation of this section:

. . .

(5) Causing a telephone to ring or engaging any person in telephone conversation repeatedly or continuously with intent to annoy, abuse, or harass any person at the called number.

15 U.S.C. § 1692e(2), (5), (10), & (11):

A debt collector may not use any false, deceptive, or misleading representation or means in connection with the collection of any debt. Without limiting the general application of the foregoing, the following conduct is a violation of this section:

. . .

(2) The false representation of—

(A) the character, amount, or legal status of any debt; or

(B) any services rendered or compensation which may be lawfully received by any debt collector for the collection of a debt.

(5) The threat to take any action that cannot legally be taken or that is not intended to be taken.

(10) The use of any false representation or deceptive means to collect or attempt to collect any debt or to obtain information concerning a consumer.

(11) The failure to disclose in the initial written communication with the consumer and, in addition, if the initial communication with the consumer is oral, in that initial oral communication, that the debt collector is attempting to collect a debt and that any information obtained will be used for that purpose, and the failure to disclose in subsequent communications that the communication is from a debt collector, except that this paragraph shall not apply to a formal pleading made in connection with a legal action.

Defendant argues that Plaintiffs cannot state a claim against it under the FDCPA because loan servicers are not considered “debt collectors” under that law. That exemption, however, does not apply where a loan servicer acquires a loan after it has already gone into default. Allen v. Bank of America Corp., Civil No. CCB-11-33, 2011 WL 3654451 at *7 n.9 (D. Md. Aug. 18, 2011) (unpublished) (citing Schlosser v. Fairbanks Capital Corp., 323 F.3d 534, 536-39 (7th Cir. 2003); Shugart v. Ocwen Loan Servicing, LLC, 747 F.Supp.2d 938, 942-43 (S.D. Ohio 2010)). The complaint does not allege that Plaintiffs’ mortgage was in default when Defendant acquired it, but the Court finds that default can be easily inferred from the alleged fact that Defendant sent Plaintiffs letters threatening foreclosure only 20 days after acquiring the mortgage. As this is a motion to dismiss, the Court is obliged to draw this inference in Plaintiffs’ favor. See Ibarra, 120 F.3d at 474.[1]

With respect to Plaintiffs’ specific allegations, the Court finds as follows:

a. Defendant violated 15 U.S.C. §1692d of the FDCPA by engaging in conduct, the natural consequence of which is to harass, oppress, or abuse the Plaintiff in connection with the collection of a debt.

(Compl. ¶ 21(a)). While it is far from obvious that the conduct Plaintiffs allege was inherently harassing, oppressive, or abusive, the Court finds that it is at least plausibly so. Specifically, Defendant’s alleged representations that Plaintiffs’ home had been foreclosed upon and that a sale date had been scheduled, when in fact there was no such foreclosure, could plausibly be construed as abuse. Similarly, Defendant’s alleged attempt to effect foreclosure and eviction of Plaintiffs from their home by changing the locks without allowing Plaintiffs the thirty days response time allegedly promised in the first letter could be construed as abuse and or harassment. These claims will therefore stand.

b. Defendant violated 15 U.S.C. §1692d(5) of the FDCPA by contacting the Plaintiff at home, via letters and personal appearances, repeatedly and continuously with the intent to annoy, abuse and harass the Plaintiff.

(Compl. ¶ 21(b)). Subsection d(5) deals specifically with telephone communications, which Plaintiffs do not allege here. This claim will therefore be dismissed.

c. Defendant violated 15 U.S.C. §1692e(10) of the FDCPA by using deceptive means to attempt to collect a debt.

d. Defendant violated 15 U.S.C. §1692e(10) by using false representations and deceptive practices in connection with collection of an alleged debt from Plaintiff.

(Compl. ¶ 21(b) &(c)). The Court finds these allegations plausible in view of the alleged fact that Defendant falsely represented to Plaintiffs that their home had been foreclosed upon and that a sale date had been scheduled. Such a representation, if made, would certainly be deceptive. These claims will therefore stand.

e. Defendant violated 15 U.S.C. §1692e(11) by failing to notify Plaintiff during each collection contact that the communication was from a debt collector.

(Compl. ¶ 21(e)). Plaintiffs have alleged no facts to support this claim. Indeed, they allege that the letters they received from Defendant were identifiable as communications from their loan servicer, and they imply that Defendant identified itself when it called their lawyer’s office. With respect to the visit from Alberto, Plaintiffs do not state whether or how Alberto identified himself (apart from his name). This claim will therefore be dismissed.

f. Defendant violated 15 U.S.C. §1692e(2) by misrepresenting the imminence of legal action by the debt collector.

(Compl. ¶ 21(f)). Subsection e(2) prohibits misrepresentations regarding “the character, amount, or legal status of any debt.” A misrepresentation that a lender has foreclosed on property used to secure a loan, and has scheduled a date to sell the property, can be plausibly construed as regarding the “legal status” of the debt. This claim will therefore stand.

g. Defendant violated 15 U.S.C. §1692e(5) by threatening legal action that cannot legally be taken or that is not intended to be taken.

(Compl. ¶ 21(g)). Plaintiffs plainly allege in the complaint that Defendant threatened foreclosure and then represented that foreclosure had occurred and that a sale date had been scheduled when in fact this was not the case. Such representations can be plausibly construed as threats of legal action that cannot, or will not, be taken. This claim will therefore stand.

h. Defendant violated 15 U.S.C. §1692e by attempting to contact the Plaintiffs knowing they are represented by counsel.

(Compl. ¶ 21(h)). Plaintiffs allege that when Defendant’s representative called their counsel’s office a paralegal informed him that Plaintiffs were represented by counsel but that the representative stated he wished to speak to them about a “`personal matter’ unrelated to the loan.” (Compl. ¶ 19). Section 1692e does not prohibit this contact. Rather, communications between debt collectors and represented consumers is dealt with in § 1692c(a)(2), which provides that

(a) Communication with the consumer generally

Without the prior consent of the consumer given directly to the debt collector or the express permission of a court of competent jurisdiction, a debt collector may not communicate with a consumer in connection with the collection of any debt—

(2) if the debt collector knows the consumer is represented by an attorney with respect to such debt and has knowledge of, or can readily ascertain, such attorney’s name and address, unless the attorney fails to respond within a reasonable period of time to a communication from the debt collector or unless the attorney consents to direct communication with the consumer.

The facts alleged in the complaint, however, are insufficient to raise an inference that Defendant engaged in this conduct. Importantly, Plaintiffs do not allege that Defendant actually communicated with them after they retained counsel, but only that it attempted to do so. Further, the Court cannot infer that the attempted communication, had it been successful, would have been prohibited. Plaintiffs allege that Defendant’s representative told their counsel’s paralegal that he wished to speak with them regarding a matter other than their mortgage. Plaintiffs clearly imply that this statement was a ruse, but the Court cannot draw that inference, even on a motion to dismiss, without some factual basis. This claim will therefore be dismissed.

In conclusion, Defendant’s motion to dismiss will be granted with respect to ¶ 21(b), (e), & (h) of Count I of the complaint, and denied with respect to ¶ 21(a), (c), (d), (f), & (g).

B. Count II: Maryland Mortgage Fraud Prevention Act

Count II alleges that Defendant committed mortgage fraud when it told them that their home was being foreclosed upon and that a sale had been scheduled when there were, in fact, no foreclosure proceedings pending. Plaintiffs fail to state a claim under the MFPA, however, because they have failed to meet the heightened pleading standards of FED. R. CIV. P. 9(b) with respect to the details of the alleged fraudulent representations and because they have alleged no facts evincing that Defendant had knowledge of the statements’ falsity or intent to defraud. Rule 9(b) requires that plaintiffs plead fraud with particularity, including “the identity of the person making the misrepresentation and what he obtained thereby.” Harrison v. Westinghouse Savannah River Co., 176 F.3d 776, 784 (4th Cir. 1999). Plaintiffs do not allege what Defendant gained or attempted to gain by making the alleged misrepresentations. Additionally, Plaintiffs have alleged no facts from which the Court can infer an intent to defraud. Although FED. R. CIV. P. 9(b) provides that elements of fraud such as knowledge and intent may be “averred generally,” this Court has consistently held that that does not lower the ordinary pleading standard of Rule 8, which requires that allegations have enough factual support to be at least plausible. See Int’l. Fidelity Ins. Co. v. Mahogany, Inc., Civil No. JKB-11-1708, 2011 WL 3678830 at *3 (D. Md. August 22, 2011) (citing U.S. ex rel. Wilson v. Kellogg Brown & Root, Inc., 525 F.3d 370, 379 (4th Cir. 2008)). Plaintiffs have provided no such support. Defendant’s motion to dismiss will therefore be granted with respect to Count II.

C. Count III: Maryland Consumer Debt Collection Practices Act

Count III alleges that Defendant violated the following provisions of the MCDCPA:

In collecting or attempting to collect an alleged debt a collector may not:

(1) Use or threaten force or violence;

(6) Communicate with the debtor or a person related to him with the frequency, at the unusual hours, or in any other manner as reasonably can be expected to abuse or harass the debtor.

MD. CODE ANN., COMM. LAW, §14-202(1) & (6). Specifically, Plaintiffs allege first that Defendant used or threatened force when it sent Alberto to change the locks on their home. The Court cannot agree. Plaintiffs have alleged no facts supporting an inference that they had anything other than a verbal interaction with Alberto, and the only statements Alberto is alleged to have made, that Plaintiffs’ home had been foreclosed upon, cannot be plausibly construed as threats of force. Plaintiffs’ claim under Subsection (1) will therefore be dismissed. With respect to Subsection (6), Plaintiffs merely incorporate the preceding allegations of the complaint. However, since the Court has already concluded that those allegations made out a minimally plausible claim that Defendant’s communications with them regarding their mortgage were abusive or harassing under the FDCPA, this claim, too, will stand for the same reasons.

D. Count IV: Maryland Consumer Protection Act

Plaintiffs allege that if Defendant’s conduct was a violation of the MCDCPA, as they claim, then it was also a per se violation of the MCPA. That is correct. See MD. CODE ANN., COMM. LAW § 13-301(14)(iii). This claim therefore stands.

E. Count V: Breach of Duty

Finally, Plaintiffs allege that Defendant breached duties imposed on it by MD. CODE REGS. 09.03.06.20. Enforcement of this regulation, however, is committed exclusively to the Commissioner of Financial Regulation. See MD. CODE REGS. 09.03.06.16; MD. CODE ANN., FIN. INST. § 11-517. This claim will therefore be dismissed.

IV. CONCLUSION

Accordingly, an ORDER shall issue GRANTING IN PART (with respect to Count I: ¶ 21(b), (e), and (h), Count II, Count III: ¶ 31(a), and Count V) and DENYING IN PART (with respect to Count I: ¶ 21(a), (c), (d), (f), and (g), Count III: ¶ 31(b), and Count IV) Defendant’s Motion to Dismiss (ECF No. 10).

[1] In a footnote in its reply brief, Defendant makes the following argument:

It is expected that Plaintiffs will seek leave to amend the Complaint to allege that Ocwen took over servicing from Litton Loan Servicing, L.P. (“Litton”) when the loan was in default. Such an amendment would afford Plaintiffs no relief. Litton was acquired by Ocwen. Plaintiff would need to explain how the acquisition justifies an exception to the FDCPA.

(Reply at 3 n.1, ECF No. 14). The Court does not understand the thrust of this argument. If Plaintiffs’ mortgage was in default when Defendant acquired Litton, then Defendant acquired the mortgage, and began servicing it, when it was in default.

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How a $600 Servicing Error Snowballed into a $16M Jury Verdict

How a $600 Servicing Error Snowballed into a $16M Jury Verdict

National Mortgage News-

Here is a cautionary tale of how a seemingly minor error can end up costing a financial services company big if left unaddressed.

A jury last month awarded $16.2 million in damages to a California homeowner who waged a three-year battle to block a foreclosure by the private-label mortgage servicer PHH Corp. The verdict is among the largest ever awarded in a mortgage case and $6 million more than PHH’s mortgage servicing business earned in the second quarter.

And, according to the plaintiff’s attorneys, it all started with a $616 shortfall in an escrow account.

[NATIONAL MORTGAGE NEWS]

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Freedom Mortgage Corporation v. Mamie E. Major | New Jersey – Lender allowed to foreclose but punished by court for violating Consumer Fraud Act

Freedom Mortgage Corporation v. Mamie E. Major | New Jersey – Lender allowed to foreclose but punished by court for violating Consumer Fraud Act

Lexology-

A New Jersey trial court issued an interesting opinion last week, allowing a lender to foreclose but imposing significant limitations on the lender because the court concluded that the lender had violated the Consumer Fraud Act.

In Freedom Mortgage Corporation v. Mamie E. Major, borrower wanted to refinance the mortgage on her home to lower the 5 5/8 interest rate and take out additional money to help pay for her grandson’s college tuition. Defendant was 70 years old, earned approximately $30,000 per year and owed $341,500 on her existing mortgage. At the time of the refinance her home had a market value of $365,000, but she eventually abandoned her plan to obtain more equity from the home and instead refinanced just to lower the interest rate.

Her existing home loan was an FHA-insured loan and was current, so Freedom Mortgage Company treated the refinance as an FHA “Streamline loan,” which required little or no new or extra documentation and did not require a new appraisal. According to Freedom, FHA guidelines allowed it to rely on the underwriting performed by the prior lender. Nonetheless, before approving the refinance, Freedom used a “net benefit” test to determine whether it was justified, and concluded that it was because both the interest rate and the monthly payment would be lower under the new loan.

[LEXOLOGY]

NOT FOR PUBLICATION WITHOUT
THE APPROVAL OF THE COMMITTEE ON OPINIONS

FREEDOM MORTGAGE CORPORATION
Plaintiff,

-v.-

MAMIE E. MAJOR, et al.,
Defendants.

ESCALA, J.S.C.:
This is an action for foreclosure. On motion of plaintiff to strike defendant’s pleadings, the Court found that plaintiff had established the right to foreclose (see order of May 15, 2014), but that there was a factual issue to be tried on violation of the Consumer Fraud Act.

Having heard the testimony of defendant and of a representative of plaintiff, having reviewed the evidence, and having heard and considered the argument of counsel, I make the following findings of fact and conclusions of law.

In 2009, Mamie E. Major lived at 136 William Street, Englewood, in the family home she had acquired in 1980 for $43,000. She mortgaged the property over the years and had a mortgage with Wells Fargo whose balance was then about $341,500. Ms. Major, then 70 years old, worked at Englewood Hospital and earned somewhat over $30,000 a year. She wanted to refinance the mortgage to take additional money out of the house’s equity to help pay for her grandson’s college and to lower the interest rate of 5 5/8%. She was put in contact with Freedom Mortgage Corporation (hereinafter “Freedom”). It appears that most information relative to a refinance was obtained over the telephone and that all papers—including the loan application and related documents—were signed at the closing on her front porch on March 23, 2009. She told the interviewer that she made $30,000. The notion of her obtaining any more equity from the house on the refinance appears to have disappeared in the process, and the refinance was directed at reducing the interest rate, from 5 5/8% to 5%.

The Wells Fargo loan then in existence was already an FHA-insured loan and was current. The new loan would lower the interest rate. Therefore, according to Sheila Harkness, a senior vice-president of Freedom, this refinance could be treated as an FHA “streamline loan,” which would require little or no new or extra documentation, nor would an appraisal be needed. Under the FHA criteria, Freedom was free to depend on the prior mortgage’s underwriting, she testified, in order to refinance to lower the interest rate. See Streamline Your FHA Mortgage (P-4ev).

There was no new appraisal. Cited in the loan application signed by defendant at the loan closing (D-1ev) were the essentials: her name and address, the interest rate, data about the house (address, when built, market value of $365,000), amount owed on the current mortgage ($341,572.71) and current monthly payment on principal and interest ($1,963.22), and proposed new p & i ($1,900.38) and escrows ($271.89 for hazard insurance, $461.44 for property taxes, and $150.75 for mortgage insurance), showing a proposed monthly payment of $2,792.49. The completed form had no entries for other assets or other liabilities (other than the property and the mortgage-loan balance) and was blank as to her income. Ms. Major was required to sign a form 4506-T (D-4ev) that would authorize Freedom to obtain her tax records for 2005, 2006, 2007, and 2008. But no tax returns were obtained by Freedom. The loan application showed a proposed new-loan amount of $354,005.

Also brought to the closing by Freedom’s representative was a notice to the applicant as to credit-score information disclosure (D-2ev). This form in its preprinted portion indicated that there were ranges for possible scores of the three credit-bureau providers of about 300 to 850. The entry on the form for defendant’s score is 99. She signed the form. At the hearing Ms. Harkness disclosed that this number was not a credit score but rather a code which indicated that there was no credit report ordered. That is not apparent from the document itself. Thus, Ms. Major was required to sign a paper that set forth inaccurate information.

At the closing she signed a form HUD-1A Settlement Statement (P-9ev), which showed the transaction data: the new loan was for $354,005; the Wells Fargo Loan being paid off was $341,572.72; open second-quarter taxes paid was $1,382.07; and the open first-quarter tax balance of $220.43. The settlement charges of $11,479.65 included a loan-discount (1 point) to Freedom of $3,540.05; commitment fee to Freedom of $795; application fee to Freedom of $596; courier fee to Freedom of $55; mortgage-insurance premium to FHA of $5,231.61; title work to the lawyer of $840; title insurance of $1,277; and recording fees.

Supposedly, the “net-benefit test” used by Freedom to support the justification of the refinance was that the interest rate and the monthly payment were both lowered, according to the testimony of Ms. Harkness. However, a mathematical overview of this refinance shows that for a reduction of the interest rate from 5 5/8% to 5%, the borrower paid almost $11,500 in fees, which were added to her Wells Fargo loan balance of $341,572.72 and thus increased her mortgage loan to $354,005. By lowering her interest rate by five-eighths of a percent, she would pay $2,134.83 less a year in interest, but by her having to pay some $11,479 in fees to accomplish that reduction in interest, it would take her 5 plus years to break even. Her monthly payment was lowered by less than $63 a month. She made six payments and defaulted.

Analysis
Under the New Jersey Consumer Fraud Act (CFA), a consumer who can prove (1) unlawful conduct by the alleged violator of the CFA; (2) an ascertainable loss on the part of the claimant; and (3) a causal relationship between the unlawful conduct and the ascertainable loss is entitled to relief. D’Agostino v. Maldonado, 216 N.J. 168, 184 (2013).

The Act defines an unlawful practice as “[t]he act, use or employment by any person of any unconscionable commercial practice, deception, fraud, false pretense, false promise, misrepresentation, or the knowing, concealment, suppression, or omission of any material fact with intent that others rely upon such concealment, suppression or omission, in connection with the sale or advertisement of any merchandise or real estate, or with the subsequent performance of such person as aforesaid, whether or not any person has in fact been misled, deceived or damaged thereby . . .” N.J.S.A. § 56:8-2. The broad language of the Consumer Fraud Act encompasses the offering, sale, or provision of consumer credit. Gonzalez v. Wilshire Credit Corp., 207 N.J. 557, 577 (2011) (internal citation omitted).

In 1971, the legislature expanded the Act to include “unconscionable commercial practice” within the unlawful practices prohibited by the Act. Cox v. Sears Roebuck & Co., 138 N.J. 2, 15 (1994) (internal citation omitted). Unconscionability is “‘an amorphous concept obviously designed to establish a broad business ethic.’” Id. at 18 (quoting Kugler v. Romain, 58 N.J. 522, 543 (1971)). An “unconscionable commercial practice” is an activity which materially departs from standards of “‘good faith, honesty in fact and fair dealing.’” Associates Home Equity Services, Inc. v. Troup, 343 N.J. Super. 254, 278 (App. Div. 2001) (quoting Kugler, 58 N.J. at 544). “[T]he need for application of that standard ‘is most acute when the professional seller is seeking the trade of those most subject to exploitation–the uneducated, the inexperienced and the people of low incomes.’” Troup, 343 N.J. Super. at 278 (quoting Kugler, 58 N.J. at 544).

Courts have traditionally recognized that Consumer Fraud Act violations “can be divided, for analytical purposes, into three categories[:]” 1) affirmative acts, 2) knowing omissions, and 3) regulatory violations. Bosland v. Warnock Dodge, Inc., 197 N.J. 543, 556 (2009) (citing Cox, 138 N.J. at 17). A lack of intent to deceive will not preclude liability for an affirmative act. Id. In order to find a violation of the CFA for an omission or concealment, the claimant “‘must show that the defendant acted with knowledge, and intent is an essential element of the fraud.’” Bosland, 197 N.J. at 556 (citing Cox, 138 N.J. at 18)). In all types of consumer fraud, the “capacity to mislead is the prime ingredient.” Cox, 138 N.J. at 17 (citing Fenwick v. Kay Am. Jeep, Inc., 72 N.J. 372, 378 (1977)).

“Because the fertility of the human mind to invent new schemes of fraud is so great, the CFA does not attempt to enumerate every prohibited practice, for to do so would severely retard its broad remedial power to root out fraud in its myriad, nefarious manifestations.” Gonzalez, 207 N.J. at 576 (internal citations omitted). Guided by the language of the Consumer Fraud Act, “a trial court adjudicating a CFA claim conducts a case-specific analysis of a defendant’s conduct and the harm alleged to have resulted from that conduct.” D’Agostino, 216 N.J. at 186. See also Kugler, 58 N.J. at 543. The Act, like most remedial legislation, is to be “construed in favor of consumers.” Cox, 138 N.J. at 15.

Under the CFA, a person who suffers “any ascertainable loss of moneys or property, real or personal,” as a result of the use of an unconscionable commercial practice may bring a lawsuit seeking legal and/or equitable relief, treble damages, and reasonable attorneys’ fees. N.J.S.A. 56:8-19. One purpose of the remedies available against violators of the CFA is “‘not only to make whole the victim’s loss, but also to punish the wrongdoer and to deter others from engaging in similar fraudulent practices.’” Gonzalez, 207 N.J. at 585 (quoting Furst v. Einstein Moomjy, Inc., 182 N.J. 1, 12 (2004)).

Applying the “net-benefit test” to this transaction –the reduction of the interest rate from 5 5/8% to 5% resulting in a savings of interest that would take more than 5 years to amortize and reduction of the monthly payment from $1963.22 to $1900.38 demonstrates that the financial benefit to Freedom in fees for arranging this refinance far exceeded the nominal benefit of savings to the defendant.

In deciding whether there was a violation of the Consumer Fraud Act, the price charged the consumer is one element to be considered. Kugler, 58 N.J. at 530 (holding that the price for a “book package was unconscionable in relation to defendant’s cost and the value to the consumers” and finding there to be a fraud within the contemplation of the CFA). The price paid by the consumer takes on even more serious characteristics of imposition “[i]f the price is grossly excessive in relation to the seller’s costs, and if in addition the goods sold have little to no value to the consumer for the purpose for which he was persuaded to buy them and which the seller pretended they would serve.” Id.

In D’Ercole Sales, Inc. v. Fruehauf Corp., the Appellate Division stated that “[a]n insight into the nature of the consumer transaction contemplated by the New Jersey Consumer Fraud Act . . . can be gleaned from an analysis of the Uniform Consumer Sales Practice Act, (UCSPA).” 206 N.J. Super. 11, 29 (App. Div. 1985). There, the Appellate Division examined the USCPA and the criteria it set forth to assist the court in determining unconscionability under the CFA. Id. at 29. These criteria, set forth in the USCPA, included “‘circumstances such as the following which the supplier knew or had reason to know:

(3) that when the consumer transaction was entered into the consumer was unable to receive a substantial benefit from the subject of the transaction;

(5) that the transaction he induced the consumer to enter into was excessively one-sided in favor of the supplier;” Id. at 29-30 (citing UCSPA, 7A U.L.A. 231 et seq).

Here, the plaintiff lender was able to take advantage of the then lax requirements of the FHA that permitted use of prior documents that accompanied (or didn’t accompany) an existing FHA-insured loan. This the lender undertook regardless of the then age of the borrower (70) in the context of her employment and future income prospects. Had the lender simply checked the annual income of the borrower from its telephone interview notes, it would have seen the obvious – that her annual income did not support the monthly mortgage payment itself. Apparently, not only did the plaintiff proceed to process the loan using the underwriting data of the existing loan, it never examined those documents. It never made diligent inquiry into her then ability to make the loan payments going forward. As demonstrated here, defendant defaulted within a few months. Such default so soon after the making of the loan suggests her then financial frailty.

These facts then leads to the conclusion that the loan was granted in order to engender fees for the lender and not for the benefit of the borrower. The reduction in her interest rate would take five plus years to amortize via reduced interest payments set off against the additional fees she incurred and that increased her principal balance. The transaction has been demonstrated to be effectively one-sided, for the benefit of the lender. The token reduction in the monthly payment for the borrower while substantially increasing her debt shows only token benefit to her.

Conclusion
While the plaintiff has demonstrated its right to foreclose, its participation in this transaction under what the court has determined to be consumer fraud will result in the following limitations on its proceeding to judgment of foreclosure:
1. The fees charged by Freedom in this transaction ($11,479.65) will be forfeited.
2. The principal for which judgment will be entered will be limited to $341,572.72, the amount paid off and refinanced.
3. Interest attributable to this amount since the date of default will be forfeited.
4. Advances paid by Freedom shall be added to the amount due.
5. The damages sustained by defendant are the fees ($11,479.65) she was charged for this transaction, which amount will be trebled to $34,438.95; after giving credit for the forfeiture of fees in paragraph 1 above, the net credit which shall be deducted from the amount to be sought in the judgment of foreclosure shall be $22,959.30.
6. Plaintiff is to delay for one year from the date of this order before applying to the Office of Foreclosure for entry of judgment, in order to allow plaintiff time to obtain a buyer for the property or to refinance from other sources.
7. Plaintiff shall pay to defendant’s counsel the sum of $26,165 for counsel fees and costs.
With these limitations imposed, the matter will be referred to the Office of Foreclosure for further proceedings.

Gerald C. Escala, J.S.C

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Investors Profit From Foreclosure Risk on Home Mortgages

Investors Profit From Foreclosure Risk on Home Mortgages

NYTIMES-

Rises in housing prices have been profitable to private equity firms and institutional investors that bought foreclosed homes to flip them or to rent them out. Now the recovery in housing is fueling a niche market for newly minted bonds that are backed by the most troubled mortgages of them all: those on homes on the verge of foreclosure.

And it is not just vulture hedge funds swooping in to try to profit from the last remnants of the housing crisis. The investors making money off these obscure bonds — none are rated by a major credit rating agency — include American mutual funds. And one of the biggest sellers of severely delinquent mortgages to investors is a United States government housing agency.

The demand for securitizations of nonperforming loans illustrates Wall Street’s never-ending hunt for higher-yielding investment opportunities. The market also reflects in part an effort by regulators to close a chapter on the housing mess.

[NEW YORK TIMES]

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Ryan & Maniskas, LLP Announces Class Action Against Ocwen Financial Corp.

Ryan & Maniskas, LLP Announces Class Action Against Ocwen Financial Corp.

WAYNE, Pa., Aug. 14, 2014 /PRNewswire/ –  Ryan & Maniskas, LLP announces that a securities fraud class action lawsuit in the United States District Court for the Southern District of Florida against Ocwen Financial Corporation (“Ocwen” or the “Company”) /quotes/zigman/1496154/delayed OCN +2.93% on behalf of investors who purchased or otherwise acquired the common stock of the Company during the period from May 2, 2013 through August 11, 2014 (the “Class Period”).

Ocwen shareholders may, no later than October 14, 2014, move the Court for appointment as a lead plaintiff of the Class.  If you purchased shares of Ocwen and would like to learn more about these claims or if you wish to discuss these matters and have any questions concerning this announcement or your rights, contact Richard A. Maniskas, Esquire toll-free at (877) 316-3218 or to sign up online, visit: www.rmclasslaw.com/cases/ocn .  You may also email Mr. Maniskas at rmaniskas@rmclasslaw.com .

Ocwen, through its subsidiaries, is engaged in the servicing and origination of mortgage loans in the United States and internationally. The Company’s Servicing segment provides residential and commercial mortgage loan servicing, special servicing, and asset management services to owners of mortgage loans and foreclosed real estate.

The Complaint brings forth claims for violations of the Securities Exchange Act of 1934. The Complaint alleges that throughout the Class Period, Defendants made false and/or misleading statements, as well as failed to disclose material adverse facts about the Company’s business, operations, and prospects.

Specifically, Defendants made false and/or misleading statements and/or failed to disclose a myriad of material information regarding the Company’s improper business and operational practices including, among other things, the fact that Ocwen’s mortgage servicing practices violated applicable regulations and laws; that the Company’s executives allowed related company Altisource Portfolio Solutions, S.A. (“Altisource”) — a company of which Defendant William C. Erbey, Ocwen’s Chairman of the Board, owns approximately 27% of its shares outstanding — to impose wholly unreasonable rates for services provided to Ocwen; and that Defendant William C. Erbey, along with other directors and officers, were directly involved in approving Ocwen’s conflicted transactions with Altisource. In addition, the Company’s financial results were artificially inflated during the Class Period, resulting in a restatement of the Company’s financial results.

Accordingly, Defendants issued materially false and misleading statements and omitted material information from Ocwen’s public disclosures, which failed to disclose, among other things, that: (i) Altisource was charging exorbitant fees to Ocwen to enable Defendants to funnel as much as $65 million in questionable fees; (ii) despite public representations to the contrary, Defendant Erbey was personally involved in approving conflicted transactions with Altisource and other related entities which he controlled; (iii) the Company failed to comply with applicable laws and regulations, including lending regulations designed to protect homeowners; (iv) the Company’s financial statements during the Class Period were artificially inflated and did not provide a fair presentation of the Company’s finances and operations; (v) the Company lacked adequate internal and financial controls; and (vi) as a result of the above, the Company’s financial statements were materially false and misleading at all relevant times.

If you are a member of the class, you may, no later than October 14, 2014, request that the Court appoint you as lead plaintiff of the class.  A lead plaintiff is a representative party that acts on behalf of other class members in directing the litigation.  In order to be appointed lead plaintiff, the Court must determine that the class member’s claim is typical of the claims of other class members, and that the class member will adequately represent the class.  Under certain circumstances, one or more class members may together serve as “lead plaintiff.”  Your ability to share in any recovery is not, however, affected by the decision whether or not to serve as a lead plaintiff.  You may retain Ryan & Maniskas, LLP or other counsel of your choice, to serve as your counsel in this action.

Ryan & Maniskas, LLP is a national shareholder litigation firm.  Ryan & Maniskas, LLP is devoted to protecting the interests of individual and institutional investors in shareholder actions in state and federal courts nationwide.

CONTACT: Ryan & Maniskas, LLP
Richard A. Maniskas, Esquire
995 Old Eagle School Rd., Suite 311
Wayne, PA 19087
877-316-3218
rmaniskas@rmclasslaw.com
www.rmclasslaw.com/cases/ocn

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SOURCE Ryan & Maniskas, LLP

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Who is Dyck-O’Neal, and why are they suing 10,000 Floridians for $1Billion?

Who is Dyck-O’Neal, and why are they suing 10,000 Floridians for $1Billion?

In a nutshell, on July 1, 2013, The Florida Legislature passed the Fair Foreclosure Act (or some other nonsense name) which gutted consumer rights in foreclosure cases, but it actually did one positive thing – it reduced the time period for filing a deficiency lawsuit from 5 years to one year after foreclosure sale.  A deficiency lawsuit seeks a money judgment for the difference between the money owed to the bank in the final judgment minus the fair market value of the collateral (house) at the time of the foreclosure sale.
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Anyway, for judgments entered prior to the enactment of the new law, the deadline for filing a deficiency was July 1, 2014.  
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Well, Dyck-O’Neal, Inc. approached Fannie Mae and bought up tens of thousands of stale foreclosure judgments for cheap since the statute of limitations was about to expire – The source I know estimates $1B worth of Florida deficiencies.  The deal probably took place last summer, just after the Act passed, and the portfolio consists primarily of the oldest possible judgments – late 2009 and early 2010.  
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This year (primarily April through June), D.O. has filed thousands lawsuits throughout Florida seeking enormous money judgments against consumers who thought the foreclosure crisis was in their rear view mirror.  There was an enormous volume just prior to July 1st deadline.  So thousands of these lawsuits are starting their journey through the pipeline.  I’ll bet 90+% of these consumers will be defaulted.
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It gets better.  D.O. is bringing these lawsuits in the county in which the foreclosure occurred.  They are choosing the foreclosure county because (I assume) they surmise the lawsuit is based upon the original mortgage and note which relate to real property in that county.  However, its clear that a deficiency judgment is merely a general unsecured debt, meaning that the only proper place to sue the former homeowner is in the county where they now reside.  THOUSANDS of these defendants reside outside the state of Florida – My source even represents someone who lives in Japan.  Currently, their firm represents dozens of these defendants.
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On Monday, Parker & Dufresne filed the attached class action lawsuit against The Law Offices of Daniel Consuegra and Dyck-O’Neal, Inc. (Copy attached).  Attached to our complaint, you will find a sample Dyck-O’Neal complaint.
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There are a few of angles here:
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1)  D.O. purchased the stalest of debts from Fannie.  Why?  Because (a) those are the people who have had the longest period to recover, and (b) this is when Florida home values were at their lowest, creating the greatest deficiency gap.  Imagine these people who have already taken the credit hit and have moved on, only to be sued 8 years after they walked away from their underwater home.
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2)  D.O. and its lawyers are knowingly violating the Federal Fair Debt Collections Practices Act by suing hundreds of out-of-state consumers on a purely unsecured debt.
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3)  Every one of these lawsuits attach two assignments – One from the original plaintiff to FNMA and another from FNMA to Dyck-O’Neal.  The FNMA to Dyck-O’Neal assignment is executed by an officer of Dyck-O’Neal “as attorney in fact for FNMA.”  See the attached POA which purportedly gave D.O. the power to do this back in October of 2008 pursuant to a separate “Deficiency Pursuit Agreement” from 2008.  I think this agreement raises all sorts of questions.  This is right after it was placed into conservatorship by the U.S. Treasury in September 2008.
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4)  Homeowners are getting it on both ends – Foreclosure courts, run by retired Senior Judges, rammed all of these foreclosures through the system with the justification of getting the collateral back to the banks.  In order to do this, these senior judges routinely rule in favor of the banks with watered-down evidence because the banks have such a hard time proving ownership of the loans.  I believe that these retired judges never thought FNMA would be showing up in court again to get these deficiency judgments. 
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5)  In addition to D.O., Mortgage Guaranty Insurance Corporation – a mortgage protection insurance company who paid out claims to servicers also filed a bunch of suits just under the deadline.  These suits were also filed by the same D.O. lawyers.  Many of these suits also violate the FDCPA by suing out of state defendants on unsecured claims.
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Simpson v Dyck-O’Neal and Consuegra COMPLAINT

Dyck-O’Neal Power of Attorney

Attorney Chip Parker, www.jaxlawcenter.com

 

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