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Powell v. WELLS FARGO BANK, NA |  FL 4DCA – neither party disputes the validity of the special indorsement appearing on the allonge filed with the original complaint, the Bank was required to prove a chain of transfers starting with the indorsee, GreenPoint Mortgage.

Powell v. WELLS FARGO BANK, NA | FL 4DCA – neither party disputes the validity of the special indorsement appearing on the allonge filed with the original complaint, the Bank was required to prove a chain of transfers starting with the indorsee, GreenPoint Mortgage.

 

MARA POWELL and GLENN KENNETH POWELL, Appellants,
v.
WELLS FARGO BANK, N.A., as Trustee for Structured Asset Mortgage Investments II Inc., Greenpoint Mortgage Funding Trust 2006-AR2, Mortgage Pass-Through Certificates Series 2006-AR2, MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC., CITY OF FORT LAUDERDALE, FLORIDA, and CITY OF LAUDERHILL, Appellees.

No. 4D15-3013.
District Court of Appeal of Florida, Fourth District.
April 19, 2017.
Appeal from the Circuit Court for the Seventeenth Judicial Circuit, Broward County; Barry J. Stone, Senior Judge; L.T. Case No. CACE08052451.

Rachel M. Coe of Polaris Legal Group, Lighthouse Point, for appellants.

Elliot B. Kula, W. Aaron Daniel and William D. Mueller of Kula & Associates, P.A., Miami, for appellee Wells Fargo Bank, N.A.

DAMOORGIAN, J.

Mara and Glenn Powell (“Borrowers”) appeal the trial court’s entry of a final judgment of foreclosure in favor of Wells Fargo Bank, N.A. as Trustee for Structured Asset Mortgage Investments II, Inc., GreenPoint Mortgage Funding Trust 2006-AR2, Mortgage Pass-Through Certificates, Series 2006-AR2 (“the Bank”) following a bench trial. Because the Bank failed to establish standing, we reverse the final judgment and remand for entry of an order of involuntary dismissal.

In 2005, Borrowers executed and delivered a note and mortgage to Bankers Mortgage Trust, Inc. (“the original lender”). In 2008, the Bank, in its capacity as trustee, filed a two count complaint against Borrowers after they defaulted on the loan, alleging one count for mortgage foreclosure and one count for reestablishment of a lost note. Therein, the Bank alleged that it was the “legal and/or equitable owner and holder of the Note and Mortgage and ha[d] the right to enforce the loan documents.” The copy of the note attached to the complaint contained no indorsements, however an allonge affixed thereto contained one undated, special indorsement from the original lender to GreenPoint Mortgage Funding, Inc. (“GreenPoint Mortgage”). The Bank later amended the complaint and dropped the lost note count.

In October 2013, nearly five years after the filing of the original complaint, the Bank filed with the trial court the “true and correct” original note. That note reflected the same affixed allonge bearing a special indorsement from the original lender to GreenPoint Mortgage. The back-side of that allonge, however, also reflected an additional undated, special indorsement from GreenPoint Mortgage to the Bank. A second, separate allonge was also filed with the original note and bore an undated, blank indorsement from the Bank.

The matter ultimately proceeded to a bench trial. At trial, the Bank presented its case through the testimony of a single witness, Pamela Bingham (“the witness”). The witness worked as a home lending research officer for JP Morgan Chase Bank, N.A. (“JP Morgan”) which serviced Borrowers’ loan on behalf of the Bank. Through the witness, the Bank introduced the original note and two allonges, including the allonge bearing a special indorsement from GreenPoint Mortgage to the Bank. The witness, however, was unable to testify as to when the special indorsement to the Bank was placed on the back-side of the first allonge, when the blank indorsement from the Bank was placed on the second allonge, or why the back-side of the first allonge and the second allonge altogether were not attached to either the original or amended complaint.

As to how the Bank purportedly became the holder of the note, the witness explained the following series of transactions. On January 17, 2006, an entity named EMC Mortgage Corporation (“EMC Mortgage”) purchased and acquired Borrowers’ loan and began servicing the loan. The witness was unable to specify from whom EMC Mortgage purchased Borrowers’ loan. The witness then testified that on March 1, 2006, Borrowers’ loan was placed in the “Structured Asset Mortgage Investments II, Inc., GreenPoint Mortgage Funding Trust 2006-AR2, Mortgage Pass-Through Certificates, Series 2006-AR2” trust via a pooling and servicing agreement (“PSA”). The PSA, which was thereafter admitted into evidence, listed Structured Asset Mortgage Investments II, Inc. as the Depositor, EMC Mortgage as Servicer, and the Bank as trustee. The PSA did not reference GreenPoint Mortgage or the Borrowers’ loan, nor was a mortgage loan schedule attached thereto. The witness then testified that in May 2008, JP Morgan acquired EMC Mortgage and all of its assets, including Borrowers’ loan. According to the witness, the original note had been in the continuous physical possession of either EMC Mortgage or JP Morgan since January 25, 2007.

At the close of evidence, the Bank candidly acknowledged that it could not establish standing as holder of the note in light of the witness’s testimony. The Bank therefore moved to amend the complaint to conform to the evidence presented at trial and to change its theory of standing from holder in possession to nonholder in possession with the rights of the holder. The court granted the motion and ultimately entered final judgment of foreclosure in favor of the Bank.

On appeal, Borrowers argue that the court erred in finding that the Bank had standing as a nonholder in possession with the rights of the holder because the Bank failed to prove the series of transactions through which it acquired the note from the original lender. The Bank counters that the witness’s testimony that Borrowers’ loan was purchased and placed in the subject trust in 2006, coupled with the PSA which reflects an effective date of March 1, 2006, sufficiently established the Bank’s standing as nonholder in possession. We disagree with the Bank.

“A crucial element in any mortgage foreclosure proceeding is that the party seeking foreclosure must demonstrate that it has standing to foreclose” when the complaint is filed. McLean v. JP Morgan Chase Bank Nat’l Ass’n, 79 So. 3d 170, 173 (Fla. 4th DCA 2012). “If the note does not name the plaintiff as the payee, the note must bear a special [i]ndorsement in favor of the plaintiff or a blank [i]ndorsement.” Id. “When specially indorsed, an instrument becomes payable to the identified person and may be negotiated only by the indorsement of that person.” § 673.2051(1), Fla. Stat. (2015) (emphasis added).

“Where a bank is seeking to enforce a note which is specially indorsed to another, the bank is a nonholder in possession.” Bank of N.Y. Mellon Tr. Co., N.A. v. Conley, 188 So. 3d 884, 885 (Fla. 4th DCA 2016). “A nonholder in possession may prove its right to enforce the note through: (1) evidence of an effective transfer; (2) proof of purchase of the debt; or (3) evidence of a valid assignment.” Id. As this Court has made clear, “[a] nonholder in possession must account for its possession of the instrument by proving the transaction (or series of transactions) through which it acquired the note,” starting with the first holder of the note. Id. (citing Murray v. HSBC Bank USA, 157 So. 3d 355, 358 (Fla. 4th DCA 2015)).

In the present case, and because neither party disputes the validity of the special indorsement appearing on the allonge filed with the original complaint, the Bank was required to prove a chain of transfers starting with the indorsee, GreenPoint Mortgage. Aside from the witness’s testimony that EMC Mortgage purchased and acquired Borrowers’ loan from “someone,” the only evidence admitted at trial purporting to transfer the note was the PSA. The PSA, in turn, did not reference GreenPoint Mortgage or Borrowers’ note. Moreover, absolutely no testimony was adduced at trial which explained how the Depositor, Structured Asset Mortgage Investments II, Inc., acquired mortgage loans to convey in the first place. At most, the evidence at trial established that EMC Mortgage acquired Borrowers’ loan in 2006 and placed the loan in the trust, and that the Bank became the trustee. There was nothing, however, connecting the indorsee of the note, GreenPoint Mortgage, to EMC Mortgage or the Bank. In other words, the Bank failed to prove the series of transactions through which it purportedly acquired the note from the indorsee.

Accordingly, we reverse the final judgment and remand for entry of an order of involuntary dismissal of the foreclosure action.

Reversed and remanded.

MAY and CONNER, JJ., concur.

Not final until disposition of timely filed motion for rehearing.

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



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Held v. US Bank NA | FL 4DCA- court erred in granting the bank’s motion because no record activity occurred during the sixty days after the court issued the notice of lack of prosecution

Held v. US Bank NA | FL 4DCA- court erred in granting the bank’s motion because no record activity occurred during the sixty days after the court issued the notice of lack of prosecution

 

JUDY HELD, Appellant,
v.
U.S. BANK NATIONAL ASSOCIATION, as Trustee for C-BASS 2007-CB7 Trust, Mortgage Loan Asset-Backed Certificates, Series 2006-CB7, UNKNOWN TENANT #1, n/k/a JEAN PIERRE LOUIS, and UNKNOWN TENANT #2, n/k/a ROSE SEIDE, Appellees.

No. 4D15-4499.
District Court of Appeal of Florida, Fourth District.
April 19, 2017.
Appeal from the Circuit Court for the Seventeenth Judicial Circuit, Broward County; Sandra Perlman, Patti Englander Henning, and Cynthia Imperato, Judges, and Barry Stone, Senior Judge; L.T. Case No. CACE09032763(11).

Cristina Duarte of Cristina Duarte, P.A., Miami, for appellant.

Diana B. Matson of Baker, Donelson, Bearman, Caldwell & Berkowitz, PC, Fort Lauderdale, for appellee U.S. Bank National Association.

GERBER, J.

The borrower appeals from the circuit court’s final judgment of foreclosure, which was entered after the court granted the bank’s motion to vacate an earlier final order of dismissal for lack of prosecution. The borrower argues, among other things, that the court erred in granting the bank’s motion because no record activity occurred during the sixty days after the court issued the notice of lack of prosecution, and the bank did not show good cause at least five days before the good cause hearing.

We agree with the borrower’s argument and reverse for reinstatement of the final order of dismissal. This opinion will present the procedural history before the circuit court, and then will provide our analysis.

Procedural History

In 2009, the bank filed the foreclosure action. In 2010, the borrower filed an answer and affirmative defenses. In 2011, the borrower filed a motion for leave to amend the answer and affirmative defenses. For the next two years, no further record activity occurred.

On July 30, 2013, a judge issued a notice of lack of prosecution. The notice advised the bank that no activity had occurred for a ten month period, and if no record activity occurred within sixty days following the notice’s service, the case would be dismissed pursuant to Florida Rule of Civil Procedure 1.420(e), unless the bank showed good cause in writing at least five days before a hearing as to why the court should not dismiss the case for lack of prosecution. No record activity occurred within sixty days following the notice’s service.

On August 30, 2013, the judge issued an order for the bank to show good cause in writing, at least five days before a hearing set for October 15, 2013, as to why the court should not dismiss the case for lack of prosecution.

On October 11, 2013 (four days before the hearing), the bank filed a status report stating the bank had terminated its original counsel’s services on or about August 16, 2013, and had retained new counsel. The bank requested, “[i]n the light of the foregoing . . . the court find good cause to prevent the instant action from being dismissed.”

It is unclear from the record, but somehow two contradictory orders, signed by two different judges, were issued on October 15, 2013. One order, signed by the judge who set the show cause hearing, dismissed the case for lack of prosecution. Another order, signed by a different judge, declined to dismiss the case for lack of prosecution, finding “good cause shown.” No hearing transcript exists in the record to explain either of these two contradictory orders.

In August 2014 (ten months after the contradictory orders were issued), the bank filed a verified motion to vacate the order dismissing the case for lack of prosecution. The bank alleged it appeared at the October 15, 2013 hearing, the court found good cause for the case to remain open, and the court inadvertently issued an order dismissing the case for lack of prosecution. The bank argued that Florida Rule of Civil Procedure 1.540(b) authorized the court to relieve the bank from the inadvertent issuance of the order dismissing the case for lack of prosecution.

A third judge held a hearing on the bank’s motion. The following excerpt encompasses the hearing’s substance:

[BANK’S COUNSEL]: Judge, this is the [bank’s] verified motion to vacate the order of dismissal. Looks like there was a lack of prosecution hearing. [The bank] appeared at the hearing, and the Court found good cause to keep the case pending.

At the same day of the hearing, the Court also inadvertently issued a dismissal for lack of prosecution.

So, our motion is to have that dismissal set aside, due to the Court making that mistake.

We’re moving under Rule 1.540(b), on this matter, it’s a verified motion . . . . The docket in this matter reflects on the date of the hearing, good cause was shown, and, again, we’re just saying it was an inadvertent mistake, and also the attorney who drafted the motion, as an officer of the Court, states that good cause was shown at the hearing, and the Court stated the case would remain pending. It was just a mistake.

[BORROWER’S COUNSEL]: Your Honor, our position is that the dismissal should not be vacated.

The notice of lack of prosecution was executed July 30 of 2013. There was no record activity within 60 days after that, which is what’s required pursuant to Florida Rule of Civil Procedure 1.420. And there was also no motion . . . to show good cause issued. . . .

[BANK’S COUNSEL]: There was nothing 60 days after the lack of prosecution. That’s why the Court issued an order to show cause, and at the order to show hearing, they did find good cause, and the [borrower] is arguing for, basically, for rehearing of the order to show cause. . . .

What’s before the Court is our [1.540] motion in the case, [as to the order] which entered the dismissal, which was entered in error by the Court.

THE COURT: Okay. Got it. Granted.

The third judge, pursuant to its oral ruling, issued a written order granting the bank’s motion to vacate the dismissal.

The borrower then filed a motion to vacate the order vacating the dismissal. The borrower argued, among other things, that pursuant to Florida Rule of Civil Procedure 1.420(e), the court was required to dismiss the case because the bank failed to comply with the requirement to show good cause in writing at least five days before the good cause hearing.

The third judge entered an order denying the borrower’s motion to vacate. A fourth judge then held a non-jury trial on the foreclosure action, and entered a final judgment of foreclosure in the bank’s favor.

This appeal followed. The borrower argues the third judge erred in granting the bank’s motion to vacate dismissal because no record activity occurred during the sixty days after the first judge issued the notice of lack of prosecution, and the bank did not show good cause at least five days before the good cause hearing.

Analysis

Our review is de novo. See Chemrock Corp. v. Tampa Elec. Co., 71 So. 3d 786, 790 (Fla. 2011) (“[W]e apply a de novo standard of review when the construction of a procedural rule is at issue.”)

We agree with the borrower’s argument. Florida Rule of Civil Procedure 1.420(e) (2013) states, in pertinent part:

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 . . . 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 . . . unless a party shows good cause in writing at least 5 days before the hearing on the motion why the action should remain pending.

Fla. R. Civ. P. 1.420(e) (2013) (emphasis added).

Since 2005, our supreme court has held that rule 1.420 should be interpreted according to its plain meaning. See Wilson v. Salamon, 923 So. 2d 363, 369 (Fla. 2005) (“[W]e return to the plain meaning of the rule as specifically set forth in the words of the rule as discussed above.”); Chemrock, 71 So. 3d at 792 (“Our plain meaning interpretation of the rule in Wilson remains applicable to the current rule [as amended in 2006]”).

In the instant case, no record activity occurred within the 10 months immediately preceding the service of such notice, no record activity occurred within the 60 days immediately following the service of such notice, and no stay was issued or approved prior to the expiration of such 60-day period. It was not until four days before the hearing that the bank sought to show good cause in writing why the action should remain pending. Under rule 1.420(e)’s plain meaning, the bank’s good cause showing was untimely. Therefore, the judge who issued the final order of dismissal for lack of prosecution did so properly.

Our reasoning is consistent with our sister court’s reasoning in Turner v. FIA Card Svcs., N.A., 51 So. 3d 1242 (Fla. 3d DCA 2011). Given the opinion’s similarity to this case, we cite the opinion virtually in its entirety:

It is undisputed that there was no record activity for a period of ten months immediately preceding the trial court’s issuance of a Notice of Lack of Prosecution on November 24, 2009. It is also undisputed that no record activity took place during the sixty-day period following the court’s Notice. The court refused to dismiss the action because [the plaintiff] filed on February 1, 2010, a showing of good cause. The hearing on the Notice was set for February 5, 2010. Rule 1.420(e) provides that this showing of good cause must be made “at least 5 days before the hearing.” The trial court stated that the timeliness was “close enough.” We conclude that “close enough” is not “good enough.”

The Florida Supreme Court in Wilson v. Salamon, 923 So. 2d 363, 368 (Fla. 2005), created a bright-line rule that any filing would prevent dismissal pursuant to this rule. Likewise, any filing in the 60-day period following the notice or motion for lack of prosecution would qualify as record activity and would keep the case from being dismissed. The rule likewise specifies a bright line for providing good cause — “at least five days before the hearing.” The rule does not read more or less five days, or around five days. By filing the showing of good cause on February 1, [the plaintiff] did so four days before the hearing. If this is close enough, what about February 2, three days before? We believe that, just as the Florida Supreme Court sought to impose a bright line for keeping a case from being dismissed for lack of prosecution, we should impose a bright line for showing good cause, and if the rule states “5 days,” we can require no less.

Id. at 1242-43 (emphasis added; footnote omitted).

Based on the foregoing, we reverse the final judgment of foreclosure and remand for reinstatement of the final order of dismissal.

Reversed and remanded for reinstatement of final order of dismissal.

TAYLOR and KLINGENSMITH, JJ., concur.

Not final until disposition of timely filed motion for rehearing.

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



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TFH 4/23 |  Foreclosure Workshop #31: Dowers v. Nationstar Mortgage, LLC — The FDCPA, a Newly Improved and Expanded Weapon in Foreclosure Offense

TFH 4/23 | Foreclosure Workshop #31: Dowers v. Nationstar Mortgage, LLC — The FDCPA, a Newly Improved and Expanded Weapon in Foreclosure Offense

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Foreclosure Workshop #31: Dowers v. Nationstar Mortgage, LLC — The FDCPA, a Newly Improved and Expanded Weapon in Foreclosure Offense
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The Foreclosure Hour has discussed in depth for years a broad range of lender, securitized trust, and loan servicer abuses which mostly heretofore have escaped effective judicial scrutiny.

This lack of oversight has been simply because in most instances traditional common law defenses have proven to be largely inadequate remedies as narrowly interpreted by judges acting as “word robots” performing what in past shows we have termed “The Rule Ritual” rather than their applying “The Rules.”

On today’s show we discuss what is becoming the principal weapon of homeowners against mortgage abuse: The Fair Debt Collection Practices Act,” which for many homeowners, their attorneys, and Judges alike, has for too long been neglected as a borrower’s remedy.

The federal FDCPA not only is becoming a powerful weapon against mortgage abuse in a growing number of cases, but gives homeowners the right to an independent action and the right to a jury trial, which the latter we know is the equivalent in the mortgage industry to waiving a Christian Cross at a Vampire.

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



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Shaffer v DEUTSCHE BANK NATIONAL TRUST | FL 2DCA- no other document introduced at trial shows that the Shaffer note and mortgage are included in the Deutsche Bank trust.

Shaffer v DEUTSCHE BANK NATIONAL TRUST | FL 2DCA- no other document introduced at trial shows that the Shaffer note and mortgage are included in the Deutsche Bank trust.

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

IN THE DISTRICT COURT OF APPEAL
OF FLORIDA
SECOND DISTRICT

LINDA L. SHAFFER,
Appellant,

v. …………… Case No. 2D14-4205

DEUTSCHE BANK NATIONAL TRUST,
AS INDENTURE TRUSTEE FOR
AMERICAN HOME MORTGAGE
INVESTMENT TRUST 2006-1,
MORTGAGE BACKED NOTES,
SERIES 2006-1,

Appellee.

Opinion filed April 19, 2017.
Appeal from the Circuit Court for Manatee
County; George K. Brown, Jr., Senior Judge.

Jacqulyn Mack of The Mack Law Firm,
Englewood, for Appellant.

Kimberly S. Mello and Jonathan S.
Tannen of Greenberg Traurig, P.A.,
Tampa, and Patrick G. Broderick of
Greenberg Traurig, P.A., West Palm
Beach, for Appellee.

ROTHSTEIN-YOUAKIM, Judge.

Linda L. Shaffer appeals from a final judgment of foreclosure, arguing,
among other things, that Deutsche Bank National Trust, as Indenture Trustee for
American Home Mortgage Investment Trust 2006-1, Mortgage Backed Notes, Series
2006-1 (the Bank), lacked standing to foreclose. Because we agree that the Bank failed
to prove that it had standing at the inception of the suit, we reverse.1

In September 2009, the Bank filed a complaint against Shaffer for
mortgage foreclosure and to reestablish a lost note. Along with the complaint, the Bank
filed a copy of the May 2009 assignment of the mortgage to the Bank from Mortgage
Electronic Registration Systems, Inc., as nominee for the original lender, American
Home Mortgage Acceptance Inc. (AHMAI). Before trial, however, the Bank filed with
the court the original note and voluntarily dismissed the lost-note count. The note,
which was dated September 21, 2005, identified AHMAI as the payee and bore an
undated indorsement in blank.

At trial, Shannon Fretwell, a loan analyst for Ocwen, the note servicer,
testified regarding Ocwen’s boarding process and the documents that Ocwen had
received from the previous servicer. One of those documents was a limited power of
attorney (LPOA), effective July 2009, between the Bank and prior servicer American
Home Mortgage Servicing, Inc. (AHMSI). The LPOA authorized AHMSI to act on behalf
of the Bank in connection with, among other things, American Home Mortgage
Investment Trust 2006-1, which, according to an exhibit attached to the LPOA, was
dated March 29, 2006.

Based on her review of the LPOA, Fretwell testified that the loan had been
transferred into the trust on March 29, 2006. She subsequently explained that, by
“loan,” she meant “note,” and by “transferred,” she meant that the note had been made
“a party of the trust,” i.e., the trust had “owned” it. We note, however, that nothing in the
LPOA—or in any other document admitted at trial—establishes what American Home
Mortgage Investment Trust 2006-1 comprised, and Fretwell did not indicate the basis for
her testimony that the note itself had been transferred into the trust.2 We also note,
however, that Shaffer did not cross-examine her on that point despite having the
opportunity to do so.

Regardless, even accepting Fretwell’s testimony that the note itself was
transferred into the trust on March 29, 2006, there is no evidence establishing what
interest in the note AHMAI transferred to the Bank as trustee. There is no evidence
establishing when the blank indorsement had been placed on the note, and the Bank
did not properly introduce a copy of the Pooling and Servicing Agreement (PSA)
establishing the duties, rights, and obligations of the parties to the trust.3

“[E]vidence that the note was transferred into the trust prior to the
foreclosure action is insufficient by itself to confer standing because there [is] no
evidence that the indorsee had the intent to transfer any interest to the trustee.” Balch
v. LaSalle Bank N.A., 171 So. 3d 207, 209 (Fla. 4th DCA 2015); see also Jarvis v.
Deutsche Bank Nat’l Tr. Co., 169 So. 3d 194, 196 (Fla. 4th DCA 2015) (“[E]vidence that
the note was physically transferred into a trust prior to Deutsche Bank filing its
foreclosure complaint does not, by itself, establish standing.”). Absent any evidence
establishing the interest that AHMAI conveyed to the Bank when transferring the note
into the trust, we conclude that the Bank failed to establish standing, and we reverse
and remand with instructions for the trial court to enter an involuntary dismissal.

Reversed and remanded.

SILBERMAN, J., Concurs.
VILLANTI, C.J., Concurs specially with opinion.

VILLANTI, Chief Judge, Concurring specially.

I concur in the majority’s decision to reverse the final judgment of
foreclosure. I write separately to note that while I agree that Deutsche Bank’s evidence
was legally insufficient to establish its standing to foreclose, I do not agree with all the
reasons identified by the majority. I also write to express my concerns with several
aspects of current foreclosure practice and to suggest ways to alleviate them.

The record in this case shows that Deutsche Bank filed its unverified
foreclosure complaint on September 29, 2009. Attached to the complaint were a copy
of the Shaffer mortgage in favor of American Home Mortgage Acceptance, Inc.
(AHMAI), and a copy of a May 1, 2009, assignment of the mortgage to Deutsche Bank
from MERS. No copy of the promissory note was attached to the complaint. Several
months later, on February 5, 2010, Deutsche Bank filed the original promissory note,
which was in favor of AHMAI and which was endorsed in blank. Importantly, the
endorsement in blank was undated.

Apparently recognizing that the undated blank endorsement on the note
was insufficient to establish its standing to foreclose, Deutsche Bank offered at trial the
testimony of Shannon Fretwell, a loan analyst for Ocwen Financial Corporation, which
was the current servicer of the Shaffer mortgage. Through Fretwell, Deutsche Bank
offered evidence that Ocwen was the successor by merger to the original loan servicer,
American Home Mortgage Servicing, Inc. (AHMSI). Also through Fretwell, Deutsche
Bank introduced a copy of a limited power of attorney (LPOA) that authorized AHMSI to
act on behalf of Deutsche Bank in, among other matters, foreclosure litigation relating to
notes and mortgages held by Deutsche Bank in its capacity as trustee of a number of
asset and investment trusts. Fretwell testified that the LPOA established that the
Shaffer loan became part of the American Home Mortgage Investment Trust 2006-1,
Mortgage Backed Notes, Series 2006-1 (the trust) on March 29, 2006; however, she
admitted that her testimony was based solely on her review of the LPOA and not any
independent knowledge that she had of the note or the transaction.

Unfortunately for Deutsche Bank, a review of the LPOA does not support
Fretwell’s testimony. The LPOA, which is dated July 21, 2009, includes the trust on
behalf of which Deutsche Bank purports to be acting as trustee in the foreclosure
proceeding against Shaffer. However, nothing in the LPOA identifies any of the notes
or mortgages that make up any of the trusts to which the LPOA applies. And while we
will generally defer to a witness’s trial testimony on factual matters, we need not do so
when that testimony is nothing more than the witness’s interpretation of a document that
is equally available to this court. Cf. Emergency Assocs. of Tampa, P.A. v. Sassano,
664 So. 2d 1000, 1002 (Fla. 2d DCA 1995) (noting that the appellate court is on equal
footing with a trial court when interpreting a written document); Fla. Power Corp. v.
Lynn, 594 So. 2d 789, 791 (Fla. 2d DCA 1992) (noting that the interpretation of a written
document is a question of law, on which an appellate court need not defer to the trial
court). Hence, neither the LPOA nor Fretwell’s testimony establish when or if Deutsche
Bank took ownership of the Shaffer note, and so neither can establish that Deutsche
Bank had standing when the foreclosure complaint was filed.

In addition, no other document introduced at trial shows that the Shaffer
note and mortgage are included in the Deutsche Bank trust. The record shows that
prior to trial, Deutsche Bank filed a request for judicial notice, attached to which was a
partial copy of a Pooling and Service Agreement (PSA) relating to the applicable trust.
However, this PSA—a document personal to one of the parties—was not subject to
judicial notice under any of the provisions of either section 90.201 or section 90.202,
Florida Statutes (2014). Moreover, the unauthenticated PSA was simply attached to a
notice of filing, making it inadmissible at trial without further testimony. See, e.g., BAC
Funding Consortium Inc. ISAOA/ATIMA v. Jean-Jacques, 28 So. 3d 936, 939 (Fla. 2d
DCA 2010) (noting that an unauthenticated document attached as an exhibit to a motion
did not constitute admissible evidence); Ciolli v. City of Palm Bay, 59 So. 3d 295, 297
(Fla. 5th DCA 2011) (noting that an unauthenticated document attached to a
memorandum of law does not constitute competent evidence); Tunnell v. Hicks, 574 So.
2d 264, 266 (Fla. 1st DCA 1991) (noting that an unauthenticated letter attached as an
exhibit to a motion was not admissible and not properly before the court). Because the
PSA was not subject to judicial notice and because Deutsche Bank took no steps to
authenticate it or introduce it into evidence at trial, the PSA was not properly before the
court and cannot constitute evidence of Deutsche Bank’s standing.

In sum, Deutsche Bank offered no evidence to establish that it owned the
note on the date it filed the foreclosure complaint in this case, and it therefore failed to
prove that it had standing. Shaffer’s motion for involuntary dismissal should have been
granted without further ado. For this reason, I agree with the majority’s decision to
reverse the final judgment in this case.4

1Because we conclude that reversal is warranted on this ground, we
decline to address Shaffer’s other challenges to the judgment.

2The LPOA indicated that the trusts covered by its terms could include
mortgages, deeds of trust, retail installment contracts, or promissory notes.
3Before trial, the Bank requested that the trial court take judicial notice of a
partial copy of a PSA relating to the applicable trust. However, this PSA—a document
personal to one of the parties—was not subject to judicial notice under either section
90.201 or section 90.202, Florida Statutes (2014). Moreover, the unauthenticated PSA
was simply attached to a notice of filing and was, therefore, inadmissible at trial without
further testimony. See, e.g., BAC Funding Consortium Inc. ISAOA/ATIMA v. JeanJacques,
28 So. 3d 936, 939 (Fla. 2d DCA 2010) (noting that an unauthenticated
document attached as an exhibit to a motion did not constitute admissible evidence);
Ciolli v. City of Palm Bay, 59 So. 3d 295, 297 (Fla. 5th DCA 2011) (noting that an
unauthenticated document attached to a memorandum of law does not constitute
competent evidence); Tunnell v. Hicks, 574 So. 2d 264, 266 (Fla. 1st DCA 1991) (noting
that an unauthenticated letter attached as an exhibit to a motion was not admissible and
not properly before the court). Because the PSA was not subject to judicial notice and
because the Bank took no steps to authenticate it or introduce it into evidence at trial,
the PSA was not properly before the court and cannot constitute evidence of the Bank’s
standing.

4The majority cites to several cases that pertain to whether there was
evidence that “the indorsee had the intent to transfer any interest to the trustee.” Given
that Deutsche Bank offered no admissible evidence that the Shaffer note and mortgage
were ever transferred into the trust, I find these cases irrelevant to the issue of standing
before this court.

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



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OCWEN | COMMONWEALTH OF MASSACHUSETTS DIVISION OF BANKS — Temporary Order to Cease and Desist and Order

OCWEN | COMMONWEALTH OF MASSACHUSETTS DIVISION OF BANKS — Temporary Order to Cease and Desist and Order

COMMONWEALTH OF MASSACHUSETTS
DIVISION OF BANKS

IN THE MATTER OF:

OCWEN LOAN SERVICING, LLC
Debt Collector License No: DC0861
Mortgage Lender License No: ML1852
NMLS No. 1852
1661 Worthington Rd., Suite 100
West Palm Beach, FL 33409

Docket No. 2017-001


FINDINGS OF FACT AND TEMPORARY ORDER TO CEASE AND DESIST AND
ORDER TO SHOW CAUSE AND NOTICE OF RIGHT TO A HEARING

 

The Division of Banks (“Division”) has determined that Ocwen Loan Servicing, LLC (“Ocwen” or “Company”), with its headquarter office located at 1661 Worthington Rd., Suite 100, West Palm Beach, Florida 33409, has engaged in, or is engaging in, residential mortgage loan servicing practices which violate State and Federal laws and fails to meet the requirements for a Massachusetts residential mortgage lender and debt collector.  Therefore, the Division hereby issues these FINDING OF FACTS AND TEMPORARY ORDER TO CEASE AND DESIST AND ORDER TO SHOW CAUSE AND NOTICE OF RIGHT TO A HEARING (“Order”) pursuant to General Laws chapter 255E section 6, and General Laws chapter 93, sections 24J and 24I.

JURISDICTION

WHEREFORE, the Division has jurisdiction over the licensing and regulation of persons and entities engaged in the business of debt collection and servicing residential mortgage loans in Massachusetts pursuant to General Laws chapter 93, sections 24-28 and implementing regulation 209 CMR 18 et seq.

WHEREFORE, the Division has jurisdiction over the licensing and regulation of persons and entities engaged in the business of residential mortgage lending pursuant to General Laws chapter 255E and implementing regulation 209 CMR 42 et seq.

WHEREFORE, Ocwen, at all relevant times herein was a wholly-owned subsidiary of Ocwen Mortgage Servicing, Inc., which was a wholly-owned subsidiary of Ocwen Financial Corporation, has engaged in the business of servicing residential mortgage loans in Massachusetts. These activities generally include collecting or remitting for any lender, noteowner, noteholder, or itself, payments, interest, principal, and trust items on a residential mortgage loan in accordance with the terms of the residential mortgage loan, as well as the additional servicing activities further described below.  Ocwen has also engaged in the business of residential mortgage lending.

WHEREFORE, the Division has issued to Ocwen a debt collector license, License Number DC0861, for the servicing of loans and collection of debts relating to residential mortgage loans in Massachusetts and a mortgage lender license ML1852.

MMC EXAMINATION AND SUPPLEMENTAL COLLECTION OF INFORMATION

The state mortgage regulators, as coordinated by the Multi-State Mortgage Committee (“MMC”), conducted a limited-scope multi-state examination (“MMC Examination”) of Ocwen in order to determine Ocwen’s compliance with applicable State and Federal laws and regulations. The MMC Examination covered the period of January 1, 2013, to February 28, 2015. The participating States in the MMC Examination consisted of Florida, Maryland, Massachusetts, Mississippi, Montana, and Washington. Florida served as the lead State.

The MMC Examination was conducted pursuant to the participating States’ respective statutory authorities, and in accordance with the protocols established by the Conference of State Bank Supervisors (CSBS)/American Association of Residential Mortgage Regulators (AARMR) Nationwide Cooperative Protocol for Mortgage Supervision as well as the Nationwide Cooperative Agreement for Mortgage Supervision.

Pursuant to the MMC Examination, the participating States identified compliance violations of both State and Federal laws, a deteriorating financial condition, and systemic operational limitations under present management, all of which resulted in substantial harm to consumers and presented grave risk regarding the overall viability of Ocwen as a going concern.

In December 2015, the MMC issued to Ocwen the written Report of Examination.

In January 2016, Ocwen submitted a written Response to the Report of Examination (Examination Response).

Subsequently, the MMC has engaged in the collection of additional information from Ocwen, the status of which is ongoing.  The Division is issuing this Order due to the deficient nature of the Examination Response and level of corrective action.

The following sets forth specific facts as determined by the MMC Examination and supplemental collection of information.

STATEMENT OF FACTS

OVERALL CONDITION:

1.  The MMC Examination found that Ocwen’s overall condition is deficient due to the failure to identify, measure, monitor, and control risk associated with rapid growth. Beginning in late 2012, Ocwen began making large acquisitions of mortgage servicing rights (MSRs).  Over a nine-month period from December 2012 through August 2013, Ocwen acquired the MSRs to over 2.6 million consumer mortgage loans with over $347 billion in unpaid principal balance (UPB). MSR purchases from 2012 through year-end 2014 more than doubled the size of Ocwen’s servicing portfolio from $204 billion to $465 billion. The rapid growth beginning in 2012 doubled Ocwen’s net income from $181 million for 2012 to $282 million for 2013. However, through September 30, 2016, Ocwen lost $819 million as operational deficiencies due to rapid growth and increased operational complexity resulted in increased operating costs.  The MMC Examination found that the effectiveness of Ocwen’s Management Control Systems (MCSs)  failed to keep pace with growth leading to a material increase in operational deficiencies including the failure to timely date borrower correspondence, the failure to timely pay borrower escrow items, the failure to ensure the accuracy of escrow statements, the failure to timely reconcile consumer custodial accounts and the failure to ensure licensure of an affiliate that provides servicing related activities. The MMC Examination review of these operational deficiencies revealed that as Ocwen attempted to assimilate MSR purchases, deficient MCSs caused consumer harm, led to violations of federal and state regulations and resulted in non-compliance with servicing standards required by the 2012 National Mortgage Settlement (NMS).

FINANCIAL CONDITION:

2.  Earnings: Ocwen lost $472 million in 2014, $247 million in 2015 and $200 million in 2016.  Ocwen’s losses stem from declines in loan servicing income as a result of Ocwen’s sale in 2015 of $88 billion of its servicing portfolio and continued high operating costs including the costs of regulatory fines, industry litigation and ongoing monitoring required by regulatory settlements.

3.  Capital: Ocwen has lost $919 million since the beginning of 2014, that when combined with $320 million in stock repurchases during that same period, have reduced capital by $1.2 billion, or 63 percent. Additionally, Ocwen’s stock value has declined from a high of $59.97 on October 25, 2013 to a range of $1.50 to $7 dollars per share in 2016, which impedes Ocwen’s ability to raise additional capital.  Ocwen has failed to put forth realistic plans to address its declining level of capital.

4.  Liquidity: Ocwen’s liquidity is less than satisfactory due to uncertainty surrounding Ocwen’s ability to maintain and refinance borrowing facilities at competitive rates in light of Ocwen’s deteriorated condition. The MMC Examination revealed that Ocwen did not have the current liquidity to fund required servicing advances should it be unsuccessful in renewing borrowing facilities in the future. Although Ocwen did subsequently renew its borrowing facilities, there is no guaranty that the facilities will continue to be renewed in light of Ocwen’s overall deficient financial condition.

5.  Budget: The MMC Examination found that Ocwen’s 2014 budget did not account for increasing levels of uncollectable servicing advances which resulted in an increase of $50 million in reserves for bad debt to a total of $127 million, an increase of nearly 65 percent over 2013’s reserve for bad debt. The increase in uncollectible servicing advances was the result of operating deficiencies related to servicing acquisition integrations.

6.   Sensitivity to Market Risk: The MMC Examination found that Ocwen had not adopted limits on exposure to Interest Rate Risk (IRR). Ocwen reserved $1.6 million during the MMC Examination period against declines in the value of its MSRs due to changes in interest rates. Additional declines in the value of MSRs from exposure to IRR occurred after the MMC Examination and negatively affected earnings.

7. Sale of GSE MSRs: Ocwen sold the MSRs to loans totaling approximately $92 billion in 2015. Although the MSR sales provided significant liquidity that Ocwen primarily used to reduce debt, the MSR sales significantly reduced income and contribute to ongoing losses that have eroded capital.

SYSTEM OF RECORD DEFICIENCIES

8.  REALServicing: The problems with Ocwen’s system of record REALServicing have been extensive.  By way of example, the 2014 Consent Order that Ocwen entered with the New York State Department of Financial Services (NYSDFS) provided the following: “Ocwen’s core servicing functions rely on its inadequate systems. Specifically, Ocwen uses comment codes entered either manually or automatically to service its portfolio; each code initiates a process, such as sending a delinquency letter to a borrower, or referring a loan to foreclosure counsel. With Ocwen’s rapid growth and acquisitions of other servicers, the number of Ocwen’s comment codes has ballooned to more than 8,400 such codes. Often, due to insufficient integration following acquisitions of other servicers, there are duplicate codes that perform the same function. The result is an unnecessarily complex system of comment codes, including, for example, 50 different codes for the single function of assigning a struggling borrower a designated customer care representative.”

9.  Letter dating deficiencies: The dates on Ocwen’s letters to borrowers are automatically inserted onto the letterhead based on events in the system of record REALServicing. Ocwen relies on third party vendors to actually print and mail the letters. Going as far back as 2012, large scale delays occurred between the time of the event that triggered the need for a letter versus the time the letters were actually mailed by the vendors. The dates on many letters were often several days or even weeks before the letters were actually mailed. For example, borrowers received letters providing for 30 days to appeal the denial of a loan modification, but the 30-day appeal period had already lapsed. Disturbingly, when an Ocwen employee first brought the problem to the attention of Ocwen management, Ocwen ignored the problem for another 5 months before even starting corrective measures. In April 2015, Ocwen submitted a Global Corrective Action Plan (CAP) to the Monitor for the NMS to address letter dating deficiencies. The Global CAP encompassed 7 different types of letters that were part of the letter dating problem.  The Monitor has required that the metric testing under the Global CAP be extended for a year beyond the termination date of the NMS to February 2018. An external review of Ocwen’s letter dating deficiencies concluded that Ocwen was aware of the deficiencies from at least 2012. The external review also concluded that, the problems were prevalent in all correspondence platforms, the deficiencies were technology related and Ocwen’s systems and processes did not evolve with growth and Ocwen’s regulatory responsibilities. Ocwen has reserved $15 million for the cost of remediating letter dating deficiencies.

LENDER PLACED INSURANCE

10.  Lender Placed Insurance: The MMC Examination found that Ocwen has engaged in a pattern and practice of unsafe and unsound loan servicing by manipulating the lender-placed force-placed insurance market and artificially inflating the premiums and then passing the improperly inflated amounts onto consumers. Generally, the terms and conditions of the mortgage loan documents require consumers to maintain insurance coverage on the properties securing their loans. If a consumer does not maintain the required insurance, the loan documents permit a lender to obtain insurance to cover its interest in the property and the loan. Permitting a lender to forcibly place insurance on a mortgaged property and charge the borrower for the cost of the premium is commonly referred to as forced-place insurance or lender-placed insurance. Lender-placed insurance (LPI) is a well-established practice in the mortgage industry and is uniformly disclosed in loan documents; however, the MMC Examination revealed that Ocwen has exclusive arrangements with one of the major participants in the LPI market that allowed Ocwen and its affiliates to collect unearned commissions and other benefits that artificially inflate LPI premium rates.

11.  In 2009, Ocwen entered into a five-year agreement with Assurant that required Assurant to pay Ocwen $16.8 million per year for Ocwen supplying 611 Full Time Equivalent resources to perform various services for Assurant including image verification, outbound telemarketing, insurance customer service, and exception processing. A review of LPI practices showed that Ocwen and other third-parties involved in administering LPI for Ocwen had little, if any, financial incentive to explore options that would have resulted in lower LPI premiums for borrowers.

12.  To manipulate the LPI market and reap the benefits of artificially inflated LPI premium rates, Ocwen purchases master or “umbrella” insurance policies that cover its entire portfolio of mortgage loans. In exchange, the insurer is given the exclusive right to force insurance on property securing a loan within the portfolio when the borrower’s insurance lapses or the lender determines the borrower’s existing insurance is inadequate. Once it is determined that the insurance covering the mortgage property has lapsed, the borrower receives a notice that insurance will be “purchased” and force-placed if the voluntary coverage is not continued. If a lapse continues, the insurer notifies the borrower that insurance is being force-placed at the borrower’s expense. When the forced-place coverage is imposed, Ocwen pays the insurer for the premium and then charges the borrower for the payment, which is either deducted from the borrower’s mortgage escrow account or added to the balance of the borrower’s loan.

13.  LPI litigation: Several lawsuits have been filed around the country against Ocwen regarding LPI programs, and Ocwen has set aside $16.7 million in a reserve through June 30, 2015 to pay for claims related to the lawsuit. These suits principally allege that Ocwen and insurers colluded to create a scheme of “kickbacks” in the form of unearned commissions and other benefits that artificially inflate LPI premium rates.  Ocwen settled a Federal, class-action law suit (0:14-cv-60649-JAL) in the Southern District of Florida on December 18, 2014 that alleged Ocwen derived improper financial benefits through LPI policies imposed on borrower properties. The settlement included provisions prohibiting Ocwen, or any Ocwen affiliated vendor, from charging and collecting LPI premiums. These facts illustrate how Ocwen’s policies and practices undermine requirements that loan servicers act in a safe and sound manner.

LOAN TRANSFERS AND BOARDING

14. Transfer Notices: Federal law requires that Ocwen send a Notice to borrowers at least 15 days prior to any transfer. Ocwen transferred a bulk of loans on April 15, 2015.  Ocwen used a third party vendor to process the Notices. However, Ocwen failed to provide the vendor usable data to process the Notices until April 1, 2015, and the vendor took two or more days to complete the generation of the Notices. As a result, the Notices were not actually sent to the borrowers until April 2, 2015, or later. These Notices were sent in less than 15 days before the bulk transfer and were therefore in violation of the federal law.  Moreover, the examiners determined that the face of the Notices were deceptively back-dated to reflect a date of March 27, 2015. This violation occurred on a substantial scale. For example, the Washington Department of Financial Institutions (WA DFI) found the violation in 31% of the loans reviewed.

15.  Boarding loans: Under both state and federal law, Ocwen is required to board new loans into its system of record with accurate servicing data on the loans.  However, the MMC Examination loan review found that for 2 of the 29 loans reviewed by the WA DFI, Ocwen boarded the loans to incorrectly require an escrow account.

BORROWER ESCROW ACCOUNTS

16.  Untimely escrow payments: Federal law requires that Ocwen make disbursements from escrow accounts to the taxing authorities and insurance companies in a timely manner (within 30 days) to avoid the borrowers incurring penalties. The MMC Examination showed that Ocwen failed to make timely disbursements from escrow accounts on at least 56 loans. This violation occurred on a substantial scale, as it was found by 5 out of the 6 participating exam States. Moreover, the borrowers on these loans filed consumer complaints to the respective participating exam States.

17. Inaccurate Escrow Statements: The MMC Examination revealed that Ocwen routinely sent borrowers inaccurate escrow statements as a result of entries made to Ocwen’s escrow accounting system to effectuate an Ocwen proprietary Shared Appreciation Modification (SAM). One escrow statement reviewed listed approximately 60 actual escrow payments when in fact they were non-cash items used to account for the SAM.  Ocwen later identified over 7,200 borrowers who received escrow statements containing SAM accounting entries listed as actual escrow payments. The MMC Examination found that Ocwen’s inability to accurately monitor the Ocwen SAM program caused Ocwen to send confusing and misleading escrow statements to consumers. The MMC Examination findings support the conclusion that Ocwen did not have any procedures in place to detect escrow statements that contained SAM accounting entries.

DEFAULT SERVICING

18.  Loss Mitigation: As prior referenced, the MMC Examination revealed that Ocwen was unaware that it had routinely mailed inaccurate escrow statements to borrowers who had obtained an Ocwen SAM that contained numerous SAM accounting entries that appeared as actual escrow payments, when in fact they were not.

19.  Failure to provide accurate loss mitigation option information to borrowers: During the MMC Examination, examiners evaluated the nature of Ocwen’s operations; the adequacy of its internal controls, and its compliance with laws and regulations to determine whether Ocwen was operating in a safe and sound manner with respect to its third-party loss mitigation policies and procedures.[1] The MMC Examination findings support the conclusion that Ocwen lacked the internal controls necessary to ensure that consumers received accurate loss mitigation information.

20.  Property Inspections: Borrowers were overcharged $6.2 million in 2014 for property inspections carried out by vendor Altisource Portfolio Solutions, S.A. (Altisource) when it mistakenly increased inspection fees to the maximum GSE allowable amount, which in some cases exceeded the amounts that were contractually agreed upon in the statement of work. Ocwen has agreed to refund borrowers the overcharges. Ocwen agreed to pay 30 percent ($1.9 million) of the $6.2 million refund and Altisource will pay the remaining 70 percent ($4.3 million).

LOAN PAY OFFS

21.  The MMC loan review revealed an instance where Ocwen failed to issue a satisfaction of a mortgage loan. As of the MMC Examination date of February 28, 2015, Ocwen had not issued a satisfaction of mortgage on a loan that was paid off on August 25, 2014, or 187 days prior. Ocwen management responded to the MMC Examination finding stating that the vendor that processes mortgage satisfactions could not find a recorded mortgage in the county of record. Ocwen further responded that if the borrower provided a copy of the recorded mortgage, Ocwen would promptly issue a release noting that no further actions were possible or required.  Further review by MMC examiners revealed that the county of record does not provide online information and that formal requests for recording information are required. Ocwen was made aware of this requirement by MMC examiners, after which, Ocwen formally requested and received the required information and issued a satisfaction of mortgage. The MMC Examination revealed that Ocwen’s procedures for issuing satisfactions of mortgage, including vendor oversight, were deficient.

22.  Failure to communicate with successor in interest: Section 1024.38(b)(1)(vi) of the Real Estate Settlement Procedures Act (12 CFR 1024) requires the servicer upon death of a borrower to promptly identify and facilitate communication with the successor in interest of the deceased borrower with respect to the property secured by the deceased borrower’s mortgage loan. The MMC loan review revealed an instance where Ocwen failed to promptly identify and facilitate communication with the successor interest of a deceased borrower after Ocwen obtained credit reports indicating that the borrower was deceased.

NEGATIVE EFFECTS OF RELATED PARTY TRANSACTIONS

23.  Switch to Southwest Business Corporation (SWBC) for LPI policies:  Beginning in 2009, Ocwen entered into a series of vendor agreements with Assurant that provided Ocwen significant income related to LPI. Later in 2009, Ocwen spun off one of its business units, Altisource, in a manner which provided Altisource, not Ocwen, entitlement to the income related to LPI. In 2014, Ocwen switched vendors from Assurant to SWBC. This switch allowed Altisource to receive income related to LPI in amounts beyond the limits set by Fannie Mae December 2013 and effective in June 2014. The matters involving Altisource and SWBC were approved by William Erbey, the former Ocwen Chairman and Altisource’s single largest shareholder. The Altisource-SWBC arrangement was essentially a captive pool of LPI which gave Ocwen little incentive to explore other potentially less costly options for borrowers.  In December 2014, Ocwen settled a federal class action law suit involving allegations that Ocwen derived improper financial benefits through LPI policies. One month later, Altisource announced that it was exiting the LPI business. The MMC Examination found that the 2014 switch from Assurant to SWBC was a root cause of Ocwen’s failure to timely pay escrow amounts for borrower insurance.

24. Hubzu: Ocwen requires certain borrowers[2] that are interested in a short sale to list their property at the Hubzu.com website, an online marketing, sales and auction site for real-estate owned properties and short sales. Hubzu is the registered name of Altisource Online Auction, Inc., a Delaware corporation owned by Altisource, which is a publicly traded company based in Luxembourg. In 2012, Altisource and Ocwen amended their 2009 servicing agreement to include a section covering “Assisted Short Sale Services.”  Under the 2012 amended agreement, Ocwen agreed to retain Altisource to oversee pending borrower requests for short sale approvals. Ocwen maintains that the Hubzu requirement is designed to meet the following objectives:

  1. Increase the pool of interested and relevant buyers of a short sale property,
  2. Increase the likelihood that the borrower and investor receive a market price for the short sale,
  3. Increase the speed at which a successful short sale can be completed, and
  4. Decrease the likelihood of fraud against any stakeholder in the transaction.

25.  As part of the MMC Examination an in-depth investigation of Hubzu was conducted.  Analysis of data for loans that have been listed on Hubzu website supports the conclusion that the Hubzu short sale program increases fees for a once-affiliated company with common ownership ties to the Ocwen parent company and has resulted in diminished benefits for the borrowers or increased the likelihood of harm to borrowers seeking short sale approval from Ocwen.

26.  The service agreement provides that Ocwen agrees to pay Altisource on a fee-for-service basis as set forth on a fee schedule. The buyer’s premium is 3.5% of the purchase price, and the technology fee is $299. The buyer’s premium and technology fee are not charged to the buyer if the offer accepted by Ocwen is the same offer amount by the same buyer as originally brought to Ocwen by the listing agent. If the offer accepted by Ocwen is lower than the original offer, but is made by the original buyer, then the buyer’s premium and technology fee are charged to the original buyer. The buyer’s premium and technology fee are paid to Altisource in all other circumstances, including where the winning offer is from someone other than the original bidder and the sales prices is the same as or lower than the original offer. The buyer’s premium for short sale properties has been increased to 4.5% in an amendment to the service agreement dated June 2015 (amended service agreement).

27.  Review of the Hubzu data showed that listing property on the Hubzu website did not increase the pool of interested buyers (e.g., 33 out of 71 loan files or 47 percent showed that borrowers received zero bids when they listed their properties on Hubzu). The data also showed that properties listed on Hubzu did not increase the amount of the purchase price of the home (e.g. only 5 out of 71 loan files resulted in a consummated short sale with a higher purchase price than the original, pre-Hubzu, offer). Additionally, examiners found that listing property on the Hubzu website did not increase the speed for short sale approvals (e.g. prior to June 2015, Altisource retained the discretion to list the property for an unlimited number of auction cycles up to 30 calendar days prior to a scheduled foreclosure). While the file remained with Altisource, the borrower was precluded from pursuing other loss mitigation options such as a Home Affordable Foreclosure Alternatives short sale or deed in lieu of foreclosure.

28.  The MMC Examination also revealed that there was a lack of transparency regarding program requirements for Ocwen borrowers who were required to utilize Hubzu. For example, the Ocwen website does not inform borrowers that before they will be approved for a short sale, they will be required to list their property at Hubzu., the types of loans that are required to be listed at Hubzu, or the maximum number of auction cycles.

29.  The MMC Examination further revealed that Ocwen’s requirement that borrowers list their short-sale properties on the Hubzu website left consumers at risk for higher deficiency debts after the sale of the property because the Hubzu listing requirement reduced the amount of money paid to mortgage holders and investors. Of the consummated short sales through Hubzu, almost twice as many loans closed with the same or a lower purchase price than the original offer. The deficiency amount was also greater for borrowers that fell out of the Hubzu program and were subsequently offered a traditional short sale.

30.  Thus, one can conclude from the MMC Examination findings that Ocwen’s short sale program using the Hubzu website has contributed to the organizational deficiencies that prevent Ocwen from operating in a safe and sound manner. Like the policies and practices that allowed Ocwen and its affiliates to manipulate the LPI market and reap the benefits of artificially inflated LPI premium rates, the harm to borrowers described above is the by-product of an affiliate relationship between Ocwen and Altisource.

CONSUMER CUSTODIAL ACCOUNTS

31.  Failure to timely reconcile consumer custodial accounts:  Ocwen internal audits identified several high priority findings that revealed significant deficiencies related to the failure to timely reconcile consumer custodial accounts. Similarly, a Fannie Mae review in late 2014 resulted in a CAP to address concerns over Ocwen’s failure to timely reconcile consumer custodial accounts. The MMC Examination identified further instances of Ocwen’s failure to timely reconcile consumer custodial accounts of which management was unaware in spite of Ocwen’s own internal audits and the Fannie Mae review. Ocwen engaged in a pattern and practice of failing to timely reconcile aged consumer custodial account items. The MMC Examination revealed that four of the seven consumer custodial accounts reviewed had not been timely reconciled.  Unreconciled aged items from around the country were 64,139, totaling $83 million at the end of 2014. Further, the MMC Examination revealed that Ocwen was forced to create a special team to handle the high number of unreconciled items, and that it was subject to the mandates of a Fannie Mae action plan to increase reconciliation timeliness. The MMC examiners’ review of consumer custodial account reconciliations showed that an error in REALServicing’s custodial account software had caused the untimely reconciliation of consumer custodial account items. In this instance, Ocwen did not realize that accounts were not being reconciled in a timely manner, and that the accounting software system was not functioning properly until MMC examiners brought the matter to Ocwen’s attention. Thus, the MMC Examination findings support the conclusion that Ocwen’s internal controls are insufficient to meet its loan servicing duties under state and Federal laws; enforcement orders; and consent decrees. Ocwen’s response to these deficiencies is that they are not a material violation of the American Bankers Association Uniform Standard Attestation Program concerning timely reconciliations of consumer custodial accounts because the unreconciled items were less than five percent of all reconciled items; however, the failure to timely reconcile consumer custodial accounts  demonstrates that Ocwen does not have effective policies and procedures in place to ensure that it operates in a safe and sound manner. The MMC Examination findings concerning the failure to timely reconcile consumer custodial accounts and Ocwen’s lack of awareness about the untimeliness of account reconciliations support the conclusion that Ocwen’s practices undermine the safety and soundness of its internal operations.

BOARD OVERSIGHT

32.  Failure to ensure an effective Risk Management Program: The MMC Examination found that Ocwen’s Board of Directors failed in its responsibility to oversee and ensure that Ocwen had an effective Risk Management Program (RMP) with MCSs that kept pace with increased operational complexity that arose from rapid growth. Ocwen was cited for failure to have a comprehensive RMP in place with MCSs capable of effectively identifying, measuring, monitoring, and controlling its growth-related risks. The MMC Examination provided specific examples showing that Ocwen’s lack of an effective RMP resulted in operational deficiencies, including untimely borrower letter dating, untimely payment of escrow items, inaccurate escrow statements, the use of an unlicensed affiliate for servicing related activities, and untimely reconciliation of consumer custodial accounts.

33.  Failure to review and approve key strategic initiatives: The MMC Examination confirmed that it was not Ocwen’s Board of Directors, but former Chairman Erbey and two members of Ocwen’s Credit Committee, who approved a key strategic initiative to switch Ocwen’s LPI vendors. The switch in LPI vendors allowed Altisource, an Ocwen related entity in which Chairman Erbey has a financial interest, to continue to earn LPI premiums beyond the June 2014 general prohibition imposed by Fannie Mae on loan servicers earning LPI related income. Former Chairman Erbey resigned his position at Ocwen and four other Ocwen related entities as part of a settlement with the NYDFS, in part, over allegations of conflicts of interest regarding Ocwen related entities. Former Chairman Erbey’s financial interest in Altisource is a conflict of interest that should have precluded him from voting on the switch in LPI vendors. Additionally, the MMC Examination found that the switch in LPI vendors was a root cause of Ocwen’s failure to timely pay borrower escrow insurance items leading to instances of consumer harm through increased borrower premiums and heightened borrower confusion.

34.  Similarly, the MMC Examination found no evidence that the Board of Directors reviewed and approved Ocwen management’s actions surrounding the lack of state licensure of Ocwen affiliate Ocwen Business Solutions, Inc. (OBS). OBS performs servicing related activities for Ocwen and is located in the Philippines as part of Ocwen’s strategy to reduce servicing costs and minimize taxes. Information was requested during the MMC Examination about Ocwen’s internal deliberations over the need for state licensure of OBS.  Ocwen management indicated that no such information existed. However, the MMC obtained information after the MMC Examination that contradicted management’s assertion that no such information existed. Internal e-mails obtained by the MMC revealed management was fully aware that OBS lacked proper licensure when it began operations, but felt that the risk was “minimal” according to one internal e-mail. The MMC met with the Board of Directors again and presented the e-mails as evidence that management knew that OBS was not properly licensed and that it continued to be non-responsive to requests for information made during the MMC Examination. After the Board of Directors meeting with the MMC, Ocwen produced a large amount of internal deliberations regarding OBS licensure that had not been produced when originally requested. The use of unlicensed affiliate OBS for servicing related activities was cited as a violation of Washington State law in the MMC Examination and resulted in a fine of $900,000.  To date, Ocwen has not confirmed if Massachusetts consumers were serviced by OBS or affected by its operations.

35.  Over-reliance on senior management for Board responsibilities: The failure to review and approve key strategic initiatives suggests that the Board became over-reliant on members of senior management to carry out traditional Board functions such as corporate planning, personnel administration, and the oversight of compliance with applicable laws and regulations.  Senior management did not include the Board in deliberations over the initiative to use OBS for servicing-related activities and did not present the Board important information, such as the need for licensure of OBS.

36.  Turnover and vacancies in senior management: The MMC Examination set forth the Board of Directors’ responsibility to have regulatory compliance personnel with adequate access to information necessary to properly respond to regulator requests for information, including during the MMC Examination, and an effective understanding of the information being supplied. However, the MMC Examination found high levels of turnover and vacancies in Ocwen’s regulatory compliance department. Ocwen’s Chief Compliance Officer, Vice President of Compliance and Senior Manager of Examinations all resigned during the MMC Examination.  Moreover, the positions of Director of Examinations, Licensing and Analytics, Senior Manager of Licensing and Senior Manager of Analytics were all vacant at the outset of the MMC Examination.  Since then, positions have been filled in some areas, but turnover and consistency continue to be issues for the licensee.

MANAGEMENT

37.  Approval of actions with conflict of interest: As prior-referenced, the MMC Examination confirmed instances of senior management, and not the Board, approving key strategic initiatives where potential conflicts of interest should have precluded management from participating in the approval process. The MMC Examination confirmed that it was former Chairman Erbey and two other members of Ocwen’s Credit Committee, and not the Board, who approved Ocwen’s switch in LPI vendors, a transaction in which Mr. Erbey held a financial interest.

38.  Failure to implement an effective RMP: As prior-referenced, the MMC Examination found that Ocwen failed in its responsibility to have an effective RMP with adequate MCSs, which resulted in operational deficiencies. The MMC Examination traced Ocwen’s lack of an effective RMP to instances of consumer harm, violations of federal and state regulations, non-compliance with servicing standards required by the  NMS, and Ocwen’s overall deficient condition.

39.  Deficient internal audit structure: The MMC Examination found that Ocwen’s Internal Audit Department (IAD) had been realigned to report operationally to its Chief Risk Officer, and functionally to its Vice President and General Auditor. The MMC Examination cited concerns that such a reporting structure might hamper the IAD’s ability to provide Ocwen’s Board of Directors with independent and objective assurances that major business risks are being managed appropriately and that Ocwen’s risk management and internal control framework is operating effectively.

40.  Deficient reporting channels: Senior management failed to provide adequate information to the Board regarding the need for licensure of affiliate OBS. Additionally, Ocwen’s IAD revealed Ocwen had inadequate procedures for escalation and tracking of deficiencies to ultimate resolution.

41.  Failure to notify State Regulators of significant events: The MMC Examination revealed that Ocwen failed to report as required by Massachusetts regulation several regulatory actions against Ocwen involving significant events and proposed changes in ownership or personnel, including the 2014 settlement with the NYSDFS.

42.  Timely Filing of Financial Reports: The MMC Examination found that Ocwen failed to file its 2015 annual financial audit within the required timeframes for the States of Florida and Massachusetts. Ocwen delayed filing its 2015 annual financial audit until May 11, 2015 in order to resolve questions surrounding its ability to remain a going concern, which allowed Ocwen to receive an unqualified audit opinion. Concerns remain about Ocwen’s overall deficient financial condition and Ocwen’s ability to continue as a going concern and there is no assurance that Ocwen will receive an unqualified audit opinion in the future.

FAILURE TO COOPERATE WITH EXAMINATION ACTIVITIES

43.  Delay in producing information during the MMC Examination and multiple other State specific examinations: During the MMC Examination, Ocwen management consistently failed to provide MMC examiners with access to books and records requested. Ocwen failed to timely provide MMC examiners with access to books and records and/or failed to provide comprehensive records of all documents requested.

44.  Ocwen’s responses during the MMC Examination to information requests were often slow, and or, non-responsive requiring numerous follow-up requests for additional information. Ocwen paid a fine of $2.5 million as part of a settlement with the CA DBO during the MMC Examination review period that was based, in part, on concerns over responsiveness to regulatory information requests.

45.  Ocwen’s failure to provide the books and records requested severely limited the MMC Examination team from conducting a comprehensive evaluation of the Company’s operations.

46.  On or about February 28, 2015, the MMC Examination team notified Ocwen that it would be conducting a review of the Company’s books and records to ensure compliance with each participating state’s statutes and regulations.

47.  Ocwen was notified that the MMC Examination would commence on or around April 6, 2015. Ocwen was notified through an Initial Information Request sent to Ocwen’s management team on or about March 27, 2015 that the MMC Examination would include at a minimum; a review of Ocwen’s failure to timely pay escrow items.

48.  Although, Ocwen was made aware of the MMC Examination team’s concerns, during the onsite portion of the MMC Examination, Ocwen’s management failed to prepare any responses about the scope and root causes of the Company’s failure to timely pay consumer escrow funds and furthermore, management failed to notify the MMC Examination team what remedial action had been taken to ensure that consumers escrow funds were safeguarded.

49.  During the MMC Examination, several requests for information were made regarding the status of the failure to timely pay escrow items and meetings were held with Ocwen’s management to underscore to the Company’s representatives that a thorough response about Ocwen’s failure to appropriately manage consumer escrow funds would be required.

50.  On August 19, 2015, as a result of Ocwen’s pattern of failure to produce requested books and records, the MMC held a meeting with Ocwen Financial Corporation’s Board of Directors.  During the August 19, 2015 meeting, the Board of Directors committed to resolve deficiencies surrounding MMC Examination requests for information that had been outstanding since the commencement of the MMC Examination. The Board of Directors was receptive to concerns about untimely and inadequate responses to requests for information and made a commitment to the MMC to resolve the identified concerns. However, although Ocwen management appeared to have improved its responsiveness to requests for information after the meeting with the Board of Directors, The MMC Examination team later learned that Ocwen management continued its pattern of withholding requested information as evidenced by its failure to produce information concerning internal deliberations over the need for licensure of Ocwen affiliate OBS when originally requested.

51.  Ocwen’s lack of responsiveness to regulatory requests during the MMC Examination raises significant concerns about the Company’s receptiveness to regulatory oversight.

UNLICENSED SERVICING ACTIVITY

52.  During the MMC Examination, the MMC examiners became aware that Ocwen utilized its affiliate OBS for services related to debt collection, loan modifications, and its servicing related business.

53.  The MMC Examination revealed that OBS was not properly licensed in all jurisdictions in which it has been operating. In addition, the MMC Examination found that Ocwen’s Board of Directors was not involved in approving the use OBS for servicing related activities and that Ocwen’s management team had failed to discuss the need for licensure with the Board of Directors even though Ocwen management knew OBS was not properly licensed.

54.  From discussions with Ocwen management, the MMC Examination team learned that the Philippine location for OBS was originally intended to be a branch location of Ocwen.  However, OBS’s parent company was ultimately formed as an independent, wholly-owned subsidiary of Ocwen’s parent, Ocwen Financial Corporation for tax purposes.

55.  Information received during the MMC Examination indicates that OBS began servicing consumer accounts in late 2012. The MMC Examination team’s review of the Master Agreement for Services (Master Agreement) between Ocwen and OBS revealed that, although the Master Agreement was signed in December of 2014, the effective date is as of January 1, 2014.

56.  A further review of the Company’s books and records revealed that OBS billed Ocwen over $10 million for servicing related activities in 2014 in the absence of both a written agreement and a statement of work.

57.  The MMC Examination revealed that OBS has processed consumer loan payments in excess of $445 million since 2013. Ocwen’s Management also notified the MMC Examination team that there are no written policies and procedures for reviewing any charges imposed by OBS bills for reasonableness.

58.  Additionally, the MMC Examination team was unable to gather comprehensive information regarding OBS’s business activities as Ocwen’s management failed to respond to requests for information in a timely manner.

59.  As of the date of this Order, Ocwen is in the process of applying for the requisite licenses for OBS, but has not applied in Massachusetts.

60.  Unlicensed affiliate Ocwen Financial Solutions Private Limited: During the MMC Examination, the MMC examiners became aware that Ocwen utilized its affiliate Ocwen Financial Solutions Private Limited in Washington State to service consumer loan accounts without obtaining the required license.

61.  During the MMC Examination, the MMC Examination team also became aware that Ocwen had outsourced a large portion of its servicing related business by hiring employees located in both the Philippine’s and India. The MMC Examination revealed that approximately seventy (70) percent of Ocwen’s employees are located offshore.

OTHER REGULATORY ENFORCEMENT ACTIONS (DISCIPLINE)

62. National Mortgage Settlement: On February 9, 2012, the attorneys general of 49 states and the District of Columbia the federal government and five banks and mortgage servicers reached agreement on the NMS that created new servicing standards, provided for relief to distressed homeowners and provided funding for state and federal governments. The NMS was formalized on April 5, 2012, when the United States District Court of the District of Columbia (Court) entered the consent judgments containing the Settlement terms.

63.  The NMS established nationwide reforms to mortgage servicing. These standards required at a minimum: better communication with borrowers; a single point of contact; adequate staffing levels and training; and appropriate standards for executing documents in foreclosure cases.

64.  The servicers’ performance in meeting the standards was required to be tested by a designated Monitor through a series of metrics. The NMS created 29 original metrics, and the designated Monitor established four more in 2013 for a total of 33 metrics.

65.  On February 24, 2014, Ocwen entered into a new consent judgment (Agreement) with the Consumer Financial Protection Bureau (CFPB) and 49 states which required the Company to comply with the NMS servicing standards for its entire loan portfolio. The provisions of Ocwen’s Agreement required the designated Monitor to conduct a quarterly testing of the metrics and issue reports outlining the results of the testing.

66.  The MMC Examination team reviewed the reports filed by the Monitor and Ocwen’s overall compliance with the metrics which revealed that in 2014 Ocwen failed four metrics and seven additional metrics were also deemed failures.

67.  The MMC Examination revealed that Ocwen in addition to entering into the NMS whereby the Company was required to provide approximately 2.1 billion in consumer relief also entered into several subsequent settlement agreements with State Mortgage Regulators which required Ocwen to pay either monetary penalties and/or provide consumer restitution.

68.  New York: The MMC Examination revealed that on December 22, 2014, Ocwen entered into a $150 million settlement with the NYSDFS. The settlement included allegations of: Inadequate and Ineffective Information Technology Systems and Personnel; and Widespread Conflicts of Interest with Related Parties regarding Chairman William Erbey, (and other members of Ocwen Management) arising from their ownership interests in, and positions held at related companies.)

69.  The NYSDFS settlement also placed restrictions on MSR growth in New York and required the election of two additional independent directors to the Board of Ocwen’s parent OFC.

70.  The terms of the NYSDFS settlement required OFC to pay $100 million as a civil monetary penalty and $50 million as borrower restitution.

71.  California: The MMC Examination revealed that on January 23, 2015, Ocwen entered into a settlement with the California Department of Business Oversight (CA DBO). The settlement included allegations that Ocwen repeatedly failed to timely and fully comply with the CA DBO’s requests for information and documentation.

72.  The terms of the settlement prohibited Ocwen from acquiring additional California MSRs until the CA DBO was satisfied that Ocwen could satisfactorily respond to requests for information and documentation made in the course of a regulatory examination.

73.  The CA DBO settlement also required Ocwen to engage a third-party auditor who was required to report directly to the CA DBO for 24 months to assess Ocwen’s compliance with state and federal laws and regulations. The CA DBO settlement required Ocwen to pay a monetary penalty of $2.5 million.

74.  WA DFI: On August 24, 2016, Ocwen entered into a settlement with the WA DFI. The settlement included allegations that Ocwen engaged the services of two unlicensed companies, Ocwen Financial Solutions Private Limited, operating out of a location in India, and Ocwen Business Solutions, operating out of a location in the Philippines, to engage in the servicing business in Washington State.

75.  The WA DFI alleged that Ocwen Financial Solutions Private Limited engaged in unlicensed servicing activities dating back to August 1, 2010 and Ocwen Business Solutions’ unlicensed activity took place between June 2013 and August 2015.

76.  The terms of the settlement prohibited Ocwen from engaging in the servicing business in Washington State from any location and/or by any person that was not appropriately licensed by the State.

77.  The WA DFI settlement further noted that Ocwen would be subject to an examination to evaluate the Company’s compliance with the provisions of the settlement agreement between 12-18 months.

78.  The WA DFI settlement required Ocwen to pay a monetary penalty of $900,000.

79.  It is the Division’s understanding that there are other pending regulatory enforcement and legal matters that are likely to negatively impact Ocwen’s financial condition.

FAILURE TO COMPLY WITH THE MEMORANDUM OF UNDERSTANDING

80.  Based on the findings of the examination and subsequent communications, the state regulators, Ocwen Financial Corporation, Ocwen Mortgage Servicing, and Ocwen entered into a Memorandum of Understanding (MOU) on December 7, 2016.  The MOU outlined various steps that Ocwen and its parent companies would take to help alleviate certain regulatory concerns. As outlined below, Ocwen materially failed to comply with the terms of the MOU.

81.  The MOU required Ocwen to retain an independent auditing firm (Auditor) to perform a comprehensive audit and reconciliation of all consumer escrow accounts, with a report to be furnished by the Auditor to Ocwen and the MMC within five business days thereafter. The audit plan was to be submitted to, and approved by, the MMC no later than January 13, 2017.

82.  Ocwen’s response to the state regulators on January 13, 2017, was that the reconciliation of escrow accounts, which is paramount in ensuring the appropriate management of consumer funds, would cost $1.5 billion and well beyond Ocwen’s financial capacity. Ocwen has suggested instead that a sample of 457 escrow accounts nationwide be reconciled out of 2.5 million active first lien escrow accounts that Ocwen has serviced since January 2013. This proposal is entirely deficient as the sample size is such a small percentage of Ocwen’s total portfolio.

83.  The MOU required Ocwen to provide, among other things, a viable going forward business plan that encompassed an analysis of its financial condition going forward. The purpose of the   plan was to analyze Ocwen’s future financial condition incorporating and encompassing all known or reasonably certain liabilities.  Ocwen’s going forward plan submitted in response to the MOU was deficient because it did not provide a complete assessment of its financial condition because it excluded significant liabilities. The Division has reason to believe that if the going forward plan had accurately accounted for known or anticipated regulatory penalties and other operational costs, including, but not limited to, the expenses of moving to a new servicing platform and complete reconciliation of consumer escrow accounts with restitution to impacted borrowers, it would indicate the company would not continue as a going concern.

CONCLUSIONS OF LAW

 Based upon the aforementioned Statement of Facts, Ocwen has failed to demonstrate the financial responsibility, character, reputation, integrity, and general fitness that would warrant the belief that the business will be operated honestly, fairly, and soundly in the public interest in violation of General Laws chapter 93, sections 24G, 24I, General Laws chapter 255E, section 4, 209 CRM 42.03, and 209 CMR 18.03.

ORDER TO CEASE AND DESIST

After taking into consideration the FINDINGS OF FACT and CONCLUSIONS OF LAW stated herein, it is hereby:

ORDERED that Ocwen and any and all officers, directors, managers, employees, independent contractors or agents operating on behalf of Ocwen, and their successors or assigns, shall initiate a process as set forth below to transfer the entire portfolio of Massachusetts residential mortgage loans for which it provides mortgage servicing and debt collection services as defined under Massachusetts General Laws chapter 93, sections 24-28 to one or more appropriately licensed loan servicer(s) as approved by the Division.

  1. )           Within 30 days of this order, Ocwen shall seek the Division’s approval by submitting in writing the licensed loan servicer(s) to which Ocwen intends to transfer all of its mortgage servicing and debt collection activities.  Ocwen may transfer its mortgage servicing rights or may engage sub-servicer(s).
  2. )           Within 120 days after the Division’s approval of transferee loan servicer(s), Ocwen will effectuate the transfer all of its mortgage servicing and debt collection activities.
  3. )           Until the mortgage servicing and debt collection activities for each loan is transferred, Ocwen will continue to act as servicer.  This includes, but is not limited to accepting, processing and applying payments, as well as making appropriate escrow disbursements.
  4. )           Ocwen will transfer all of its mortgage servicing and debt collection activities in a manner compliant with all federal and state regulations, including but not limited to the Real Estate Settlement Procedures Act (RESPA).
  5. )           Ocwen shall ensure the transfer is made with no harm to any Massachusetts consumers.

As soon as possible, but not later than 48 hours after the effective date of this ORDER, Ocwen shall submit to the Commissioner a list identifying all of the Massachusetts residential mortgage loans which are to be transferred on or after the effective date of this ORDER.  The list shall contain all identifying information for the loan, including but not limited to the following: the property address, the borrower’s name, addresses and telephone numbers; the loan number; and the name of the new loan servicer.  The record should include telephone numbers of contact persons at each new loan servicer who is familiar with the Company’s transferred loans;

IT IS FURTHER ORDERED that Ocwen shall immediately cease soliciting or accepting, either directly or indirectly, any new residential mortgage loan applications from consumers for residential property located in Massachusetts.

IT IS FURTHER ORDERED that Ocwen shall place with one or more qualified or lender(s), with no loss to applicants, the following: (a) Ocwen’s entire portfolio of Massachusetts residential mortgage loans which were closed by Ocwen, and remain unfunded within 15 days after the issuance of this Order; and (b) Ocwen’s entire pending application list of Massachusetts residential mortgage loans.  It being understood that “no loss to the applicant” shall mean that any loan which was closed by Ocwen, as well as any application which was approved by Ocwen, shall be placed to a lender willing to fund, or close, the mortgage loan under the same terms and conditions extended by Ocwen.  In the event that no such placement can be made, Ocwen shall either independently fund the mortgage loan under such terms and conditions or buy down the mortgage loan offered by the lender so that the applicant does not incur a loss as a result of such placement.  Ocwen shall obtain the prior approval of the Commissioner before placing such applications to the qualified lender(s).  Ocwen shall continue to maintain its present pipeline of loan applications until the transfer for each application has been completed.

IT IS FURTHER ORDERED that Ocwen shall immediately place any fees previously collected from Massachusetts consumers relative to any pending mortgage loan applications in a separate escrow account maintained at a federally insured bank.

IT IS FURTHER ORDERED that Ocwen shall submit to the Commissioner a detailed record, prepared as of the date of submission, of all of the Company’s pending residential mortgage loan applications on property located in Massachusetts.  The records to be produced shall include all information on file regarding the Company’s Massachusetts mortgage loan portfolio, including but not necessarily limited to, the following:

  1. )           Within sixteen (16) days of the effective date of this Order, Ocwen shall submit to the Commissioner all information on file as of the date of submission regarding the Company’s portfolio of mortgage loans that were closed by Ocwen prior to the effective date of this Order, but remain as yet unfunded.  Such information shall include, but is not limited to, the following: The names of all individuals from whom Ocwen processed an application and closed the residential mortgage loan, but failed to fund; the applicants’ addresses and telephone numbers; the loan number; the amount of all prepaid loan fees submitted by the customer; the amount of each loan; the loan terms; the current funding status; the actual closing dates; the loan purpose (i.e. purchase or refinance); and identification of the applicable lender with whom each application will be placed.  The record should include telephone numbers of contact persons at each lender who is familiar with the Company’s submitted loans;
  2. )           As soon as possible, but not later than  forty eight hours after the effective date of this Order, Ocwen shall submit to the Commissioner all information on file as of the date of submission regarding the Company’s pipeline of pending mortgage loan applications including but not limited to, the following: The names of all individuals from whom Ocwen has accepted an application for a residential mortgage loan; the applicants’ addresses and telephone numbers; the loan number; the amount of all prepaid loan fees submitted by the customer; rate lock status; the amount of each loan; application status (i.e. filed, submitted to lenders, cleared to close, etc.); loan terms, if approved; scheduled closing dates; the loan purpose (i.e. purchase or refinance); and identification of the applicable lender with whom each application will be placed.  The record should include telephone numbers of contact persons at each lender who is familiar with the Company’s submitted loans;

IT IS FURTHER ORDERED that Ocwen shall immediately secure all pending mortgage loan application files and, to the extent that any original documents must be forwarded to the relevant mortgage lender(s) pursuant to this Order, a copy of such document, correspondence, or paper relating to the mortgage loan shall be retained in Ocwen’s books and records and shall be available to the Commissioner, in their entirety, upon request.

IT IS FURTHER ORDERED that within five (5) days of the effective date of this Order, Ocwen shall submit to the Commissioner Ocwen’s balance sheet and year-to-date income statement, prepared as of the date of submission, and attested by a duly authorized officer of the Company.  The balance sheet shall indicate Ocwen’s cash position at each of its depository banks as well as Ocwen’s bank account numbers.

IT IS FURTHER ORDERED that this Order shall become effective immediately and shall remain in effect unless set aside, limited or suspended by the Commissioner or upon court order after review under Massachusetts General Laws chapter 30A.

ORDER TO SHOW CAUSE 

The Division hereby re-alleges and incorporates by reference FINDINGS OF FACT and CONCLUSIONS OF LAW stated herein as though fully set forth.  WHEREAS, finding it necessary and appropriate and in the public interest, and consistent with the purposes of the laws governing mortgage brokers and loan originators in the Commonwealth;

IT IS HEREBY ORDERED that Ocwen shall show cause why its mortgage lender license, ML1852 should not be revoked pursuant to General Laws chapter 255E, section 6.

IT IS FURTHER ORDERED that Ocwen shall show cause why its debt collector license, DC0861 should not be revoked pursuant to General Laws chapter 93, section 24I.

PRAYER FOR RELIEF

WHEREFORE, the Division, by and through the Commissioner, prays for a final decision as follows:

  1. For a final Agency decision in favor of the Division and against Ocwen for each Charge set forth in this Order;
  2. For a final Agency decision revoking Ocwen’s mortgage lender license, numbers ML1852 to conduct business as a mortgage lender in Massachusetts;
  3. For a final Agency decision revoking Ocwen’s mortgage lender license, numbers DC0861 to conduct business as a debt collector and residential mortgage loan servicer in Massachusetts;
  4. For a final Agency decision ordering Ocwen to cease and desist from transacting business in Massachusetts as a mortgage lender;
  5. For a final Agency decision ordering Ocwen to cease and desist from transacting business in Massachusetts as a debt collector or loan servicer;
  6. For a final Agency decision ordering Ocwen to immediately place any pending residential mortgage loan applications and related files, if it has not already done so in accordance with the provisions of this Order, with qualified mortgage lender(s), with no costs to the applicant;
  7. For a final Agency decision ordering Ocwen to immediately place any residential mortgage loans, if it has not already done so in accordance with the provisions of this Order, with qualified mortgage servicer(s), with no costs to the consumer;
  8. For costs and fees of the Division’s investigation of this matter; and
  9. For such additional equitable relief as the Presiding Officer may deem just and proper.

NOTICE OF RIGHT TO A HEARING

Ocwen is required to file an Answer or otherwise respond to the Charges contained in this Order within twenty-one (21) days of its effective date, pursuant to the Standard Adjudicatory Rules of Practices and Procedures, 801 CMR 1.01(6)(d).  Ocwen may request that a hearing be held within 20 days of the Division’s receiving of Ocwen’s request for a hearing.  If Ocwen fails to respond to this Order within the twenty-one (21) day period, the FINDING OF FACT AND TEMPORARY ORDER TO CEASE AND DESIST AND ORDER TO SHOW CAUSE AND NOTICE OF RIGHT TO A HEARING shall become permanent and final until it is modified or vacated by the Commissioner. Failure to file an Answer may also result in a default judgment against Ocwen in the matter of the revocation of the Company’s mortgage lender and debt collector licenses. The Answer, and any subsequent filings that are made in conjunction with this proceeding, shall be directed to the Division, with a copy to Prosecuting Counsel. All papers filed with the Division shall be addressed to the attention of:
Administrative Hearings Officer
Massachusetts Division of Banks
1000 Washington Street, 10th Floor
Boston, Massachusetts 02118

Prosecuting Counsel for this matter is:

Amanda B. Loring, Esq.
Massachusetts Division of Banks
1000 Washington Street, 10th Floor
Boston, Massachusetts 02118

You are further advised that Ocwen has the right to be represented by counsel or other representative, to call and examine witnesses, to introduce exhibits, to cross-examine witnesses who testify against Ocwen and to present oral arguments. The hearing will be held at a date and time to be determined and will be conducted according to Massachusetts General Laws, chapter 30A, sections 10 and 11, and the Standard Adjudicatory Rules of Practice and Procedure, 801 C.M.R. 1.01 and 1.03.

Ocwen may examine any and all discoverable Division records relative to this case prior to the date of the hearing, during normal business hours, at the office of the Prosecuting Counsel. If you elect to undertake such an examination, please contact the Prosecuting Counsel, Amanda B. Loring, Esq. at 617-956-1500 in advance to schedule a time that is mutually convenient.



[1] The MMC Examination findings also showed that Ocwen violated Federal and various state laws governing loss mitigation procedures by failing to process and address the application as required under 12 CFR 1024.41(b). As a loan servicer of federally related mortgage loans are governed under Federal Regulation X, Ocwen is required to review the loss mitigation application and to notify the borrower within 5 days of the outcome, 12 CFR 1024.41(b); is required to evaluate the plaintiff for all loss mitigation options, 12 CFR 1024.41(c); is prohibited from engaging in “dual tracking” after having received the application for loss mitigation and responding by scheduling the foreclosure sale, 12 CFR 1024.41(g); and is required to comply with various state laws that make it a violation to act contrary to Regulation X requirements.

 

[2] According to Ocwen, loans owned by the following investors are excluded from the requirement to list the property at Hubzu: the Federal National Mortgage Association, the Federal Home Loan Mortgage Corporation, and FHA or VA insured loans.  In addition, E*TRADE has stated to Ocwen that they do not wish to participate in the Hubzu program.

 

 

BY ORDER AND DIRECTION OF THE COMMISSIONER OF BANKS.

Dated at Boston, Massachusetts, this 20th day of April, 2017

Cynthia A. Begin
Chief Risk Officer
Commonwealth of Massachusetts

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North Carolina Slaps Ocwen with a Cease-and-Desist Letter

North Carolina Slaps Ocwen with a Cease-and-Desist Letter

?In completely separate moves, Ocwen came under fire from multiple states across the country. For instance, the state of North Carolina today slapped Ocwen with a cease-and-desist letter that will indefinitely prevent it from acquiring new mortgage servicing rights in the state, as well as originating mortgages that it plans to service.

OcwenOrder17_025 by DinSFLA on Scribd

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



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REBOOT |  CFPB Sues Ocwen for Failing Borrowers Throughout Mortgage Servicing Process

REBOOT | CFPB Sues Ocwen for Failing Borrowers Throughout Mortgage Servicing Process

Mortgage Servicer’s Widespread Errors, Shortcuts, and Runarounds Cost Borrowers Money, Homes

WASHINGTON, D.C. — The Consumer Financial Protection Bureau (CFPB) today sued one of the country’s largest nonbank mortgage loan servicers, Ocwen Financial Corporation, and its subsidiaries for failing borrowers at every stage of the mortgage servicing process. The Bureau alleges that Ocwen’s years of widespread errors, shortcuts, and runarounds cost some borrowers money and others their homes. Ocwen allegedly botched basic functions like sending accurate monthly statements, properly crediting payments, and handling taxes and insurance. Allegedly, Ocwen also illegally foreclosed on struggling borrowers, ignored customer complaints, and sold off the servicing rights to loans without fully disclosing the mistakes it made in borrowers’ records. The Florida Attorney General took a similar action against Ocwen today in a separate lawsuit. Many state financial regulators are also independently issuing cease-and-desist and license revocation orders against Ocwen for escrow management and licensing issues today.

“Ocwen has repeatedly made mistakes and taken shortcuts at every stage of the mortgage servicing process, costing some consumers money and others their homes,” said CFPB Director Richard Cordray. “Borrowers have no say over who services their mortgage, so the Bureau will remain vigilant to ensure they get fair treatment.”

Ocwen, headquartered in West Palm Beach, Fla., is one of the nation’s largest nonbank mortgage servicers. As of Dec. 31, 2016, Ocwen serviced almost 1.4 million loans with an aggregate unpaid principal balance of $209 billion. It services loans for borrowers in all 50 states and the District of Columbia. A mortgage servicer collects payments from the mortgage borrower and forwards those payments to the owner of the loan. It handles customer service, collections, loan modifications, and foreclosures. Ocwen specializes in servicing subprime or delinquent loans.

The CFPB uncovered substantial evidence that Ocwen has engaged in significant and systemic misconduct at nearly every stage of the mortgage servicing process. The CFPB is charged with enforcing the Dodd-Frank Wall Street Reform and Consumer Protection Act, which protects consumers from unfair, deceptive, or abusive acts or practices, and other federal consumer financial laws. In addition, the Bureau adopted common-sense rules for the mortgage servicing market that first took effect in January 2014. The CFPB’s mortgage servicing rules require that servicers promptly credit payments and correct errors on request. The rules also include strong protections for struggling homeowners, including those facing foreclosure. In its lawsuit, the CFPB alleges that Ocwen:

  • Serviced loans using error-riddled information: Ocwen uses a proprietary system called REALServicing to process and apply borrower payments, communicate payment information to borrowers, and maintain loan balance information. Ocwen allegedly loaded inaccurate and incomplete information into its REALServicing system. And even when data was accurate, REALServicing generated errors because of system failures and deficient programming. To manage this risk, Ocwen tried manual workarounds, but they often failed to correct inaccuracies and produced still more errors. Ocwen then used this faulty information to service borrowers’ loans. In 2014, Ocwen’s head of servicing described its system as “ridiculous” and a “train wreck.”
  •  Illegally foreclosed on homeowners: Ocwen has long touted its ability to service and modify loans for troubled borrowers. But allegedly, Ocwen has failed to deliver required foreclosure protections. As a result, the Bureau alleges that Ocwen has wrongfully initiated foreclosure proceedings on at least 1,000 people, and has wrongfully held foreclosure sales. Among other illegal practices, Ocwen has initiated the foreclosure process before completing a review of borrowers’ loss mitigation applications. In other instances, Ocwen has asked borrowers to submit additional information within 30 days, but foreclosed on the borrowers before the deadline. Ocwen has also foreclosed on borrowers who were fulfilling their obligations under a loss mitigation agreement.
  • Failed to credit borrowers’ payments: Ocwen has allegedly failed to appropriately credit payments made by numerous borrowers. Ocwen has also failed to send borrowers accurate periodic statements detailing the amount due, how payments were applied, total payments received, and other information. Ocwen has also failed to correct billing and payment errors.
  • Botched escrow accounts: Ocwen manages escrow accounts for over 75 percent of the loans it services. Ocwen has allegedly botched basic tasks in managing these borrower accounts. Because of system breakdowns and an over-reliance on manually entering information, Ocwen has allegedly failed to conduct escrow analyses and sent some borrowers’ escrow statements late or not at all. Ocwen also allegedly failed to properly account for and apply payments by borrowers to address escrow shortages, such as changes in the account when property taxes go up. One result of this failure has been that some borrowers have paid inaccurate amounts.
  • Mishandled hazard insurance: If a servicer administers an escrow account for a borrower, a servicer must make timely insurance and/or tax payments on behalf of the borrower. Ocwen, however, has allegedly failed to make timely insurance payments to pay for borrowers’ home insurance premiums. Ocwen’s failures led to the lapse of homeowners’ insurance coverage for more than 10,000 borrowers. Some borrowers were pushed into force-placed insurance.
  • Bungled borrowers’ private mortgage insurance: Ocwen allegedly failed to cancel borrowers’ private mortgage insurance, or PMI, in a timely way, causing consumers to overpay. Generally, borrowers must purchase PMI when they obtain a mortgage with a down payment of less than 20 percent, or when they refinance their mortgage with less than 20 percent equity in their property. Servicers must end a borrower’s requirement to pay PMI when the principal balance of the mortgage reaches 78 percent of the property’s original value. Since 2014, Ocwen has failed to end borrowers’ PMI on time after learning information in its REALServicing system was unreliable or missing altogether. Ocwen ultimately overcharged borrowers about $1.2 million for PMI premiums, and refunded this money only after the fact.
  • Deceptively signed up and charged borrowers for add-on products: When servicing borrowers’ mortgage loans, Ocwen allegedly enrolled some consumers in add-on products through deceptive solicitations and without their consent. Ocwen then billed and collected payments from these consumers.
  • Failed to assist heirs seeking foreclosure alternatives: Ocwen allegedly mishandled accounts for successors-in-interest, or heirs, to a deceased borrower. These consumers included widows, children, and other relatives. As a result, Ocwen failed to properly recognize individuals as heirs, and thereby denied assistance to help avoid foreclosure. In some instances, Ocwen foreclosed on individuals who may have been eligible to save these homes through a loan modification or other loss mitigation option.
  •  Failed to adequately investigate and respond to borrower complaints: If an error is made in the servicing of a mortgage loan, a servicer must generally either correct the error identified by the borrower, called a notice of error, or investigate the alleged error. Since 2014, Ocwen has allegedly routinely failed to properly acknowledge and investigate complaints, or make necessary corrections. Ocwen changed its policy in April 2015 to address the difficulty its call center had in recognizing and escalating complaints, but these changes fell short. Under its new policy, borrowers still have to complain at least five times in nine days before Ocwen automatically escalates their complaint to be resolved. Since April 2015, Ocwen has received more than 580,000 notices of error and complaints from more than 300,000 different borrowers.
  •  Failed to provide complete and accurate loan information to new servicers: Ocwen has allegedly failed to include complete and accurate borrower information when it sold its rights to service thousands of loans to new mortgage servicers. This has hampered the new servicers’ efforts to comply with laws and investor guidelines.

The Bureau also alleges that Ocwen has failed to remediate borrowers for the harm it has caused, including the problems it has created for struggling borrowers who were in default on their loans or who had filed for bankruptcy. For these groups of borrowers, Ocwen’s servicing errors have been particularly costly.

Through its complaint, filed in federal district court for the Southern District of Florida, the CFPB seeks a court order requiring Ocwen to follow mortgage servicing law, provide relief for consumers, and pay penalties. The complaint is not a finding or ruling that the defendants have actually violated the law.

The lawsuit is available at:http://files.consumerfinance.gov/f/documents/20170420_cfpb_Ocwen-Complaint.pdf

###

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Acting Manhattan U.S. Attorney Settles Civil Lawsuit Against HSBC Bank USA, N.A., Regarding Failure To Disclose Fraud Or Potential Fraud In Guaranteed Loans

Acting Manhattan U.S. Attorney Settles Civil Lawsuit Against HSBC Bank USA, N.A., Regarding Failure To Disclose Fraud Or Potential Fraud In Guaranteed Loans

Department of Justice
U.S. Attorney’s Office
Southern District of New York

FOR IMMEDIATE RELEASE
Friday, April 14, 2017

Acting Manhattan U.S. Attorney Settles Civil Lawsuit Against HSBC Bank USA, N.A., Regarding Failure To Disclose Fraud Or Potential Fraud In Guaranteed Loans

Defendant HSBC Bank USA, N.A., Admits Submitting Dozens of Loans for Payment on SBA Guarantees Without Disclosing that Loans Had Been Identified as Fraudulent or Potentially Fraudulent

Joon H. Kim, the Acting United States Attorney for the Southern District of New York, and Eric S. Benderson, the Acting General Counsel of the U.S. Small Business Administration (“SBA”), announced today that the United States has settled a civil fraud lawsuit against HSBC BANK USA, N.A. (“HSBC”). The Government’s complaint, filed on April 10, 2017 (the “Complaint”), sought damages and civil penalties under the False Claims Act for misconduct in connection with HSBC’s participation in the SBAExpress loan program, which was designed to help start-ups and existing small businesses. The Complaint alleged that, as part of an internal review designed to identify reasons for defaults on loans to small and medium-size enterprises, HSBC identified dozens of SBAExpress loans as fraudulent or potentially fraudulent, since borrowers appeared to have submitted false information to HSBC to obtain the loans. The Complaint further alleged that after 42 of these loans defaulted, HSBC sought reimbursement from the SBA without revealing the facts suggesting that borrowers submitted false information to HSBC to obtain many of the loans, or the fact that HSBC had included the loans on an internal list of fraudulent or potentially fraudulent loans. In the settlement approved today by U.S. District Judge Lorna G. Schofield, HSBC agreed to pay $2,118,861.36 to resolve the Government’s claims, and admitted, acknowledged, and accepted responsibility for conduct alleged in the Complaint.

 

Manhattan Acting U.S. Attorney Joon H. Kim said: “Lenders must disclose material information for our agency partners like the SBA, who administer federal loan programs. When they fail to do so – as HSBC did here, by submitting loans for repayment on SBA guarantees without disclosing that the loans had been identified as potentially fraudulent – they need to be held to account. This settlement reflects the Office’s continuing commitment to keep lenders who participate in federal lending programs honest.”

 

SBA Acting General Counsel Eric S. Benderson said: “This case is yet another example of the tremendous results achieved through the joint efforts of the SBA and the Department of Justice to uncover and forcefully respond to civil fraud committed by those who participate in SBA’s lending programs. Identifying and aggressively pursuing instances of civil fraud by participants in the Agency’s lending programs is one of SBA’s top priorities.”

 

The Government’s lawsuit alleged as follows:

 

In or around 2006, HSBC conducted an internal review to identify reasons for the default rates on loans it had made to small and medium-size enterprises, including but not limited to loans issued pursuant to SBAExpress. HSBC created a list of known fraud accounts as part of the review. HSBC identified many SBAExpress loans as fraudulent or potentially fraudulent in which borrowers may have submitted false information to HSBC in obtaining their loans, including 42 loans (the “Loans”) referenced in an exhibit attached to the Complaint.

 

After the Loans defaulted, HSBC sought reimbursement from SBA for the guaranteed amount on each of these Loans (up to 50 percent of the principal of the Loans) without telling SBA that many of the Loans were fraudulent or potentially fraudulent. Specifically, HSBC did not inform SBA of all of the facts indicating that borrowers may have submitted false information to HSBC in connection with the origination of many of the Loans, or that HSBC had included these Loans on an internal list of fraudulent or potentially fraudulent loans. HSBC’s failure to disclose that it had determined that many of the Loans were fraudulent or potentially fraudulent rendered HSBC’s reimbursement requests for losses incurred in connection with the Loans false, misleading, and/or fraudulent. The submissions made to SBA in connection with seeking reimbursement on many of these Loans contained half-truths and material omissions by failing to disclose facts about fraud or potential fraud by borrowers when the Loans were originated.

 

The case was initially brought by a whistleblower under the False Claims Act, and the Government intervened in the case.

 

Pursuant to the settlement, HSBC will pay the United States $2,118,861.36. As part of the settlement, the bank admitted, acknowledged, and accepted responsibility for the following conduct:

 

  • In or around 2006, HSBC voluntarily commenced an internal effort to gain an understanding of the reasons for the default rates on loans that it had made to small and medium-size enterprises, including but not limited to loans issued pursuant to the SBAExpress program. HSBC’s efforts included an attempt to identify whether any of the loans involved fraud or potential fraud by borrowers;

     

  • As part of this effort, HSBC identified a number of loans as fraudulent or potentially fraudulent in which borrowers may have submitted false information to HSBC in obtaining their loans, including the Loans;

     

  • HSBC subsequently sought from SBA the guaranteed amounts on each of these Loans (i.e., up to fifty percent of the principal of the Loans) after the loans defaulted;

     

  • In submitting the requests for payment to SBA of the guaranteed amounts of certain Loans, HSBC did not inform SBA of all of the facts indicating that borrowers may have submitted false information to HSBC in connection with the origination of these loans, or that as a result HSBC had identified these loans as fraudulent or potentially fraudulent.

 

* * *

Mr. Kim thanked SBA for its investigative efforts and assistance with the case.

 

This case is being handled by the Office’s Civil Frauds Unit. Assistant U.S. Attorney Lawrence H. Fogelman is in charge of the case.

17-108
Topic:
Financial Fraud
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Feds knew of 700 Wells Fargo whistleblower cases in 2010

Feds knew of 700 Wells Fargo whistleblower cases in 2010

CNN-

America’s chief federal banking regulator admits it failed to act on numerous “red flags” at Wells Fargo that could have stopped the fake account scandal years earlier.

One particularly alarming red flag that went unheeded: In January 2010, the regulator was aware of “700 cases of whistleblower complaints” about Wells Fargo’s sales tactics.

 An internal review published on Wednesday by the Office of the Comptroller of the Currency found that the regulator didn’t live up to its responsibilities. The report found that oversight of Wells Fargo (WFC) was “untimely and ineffective” and federal examiners overseeing the bank “missed” several opportunities to uncover the problems that led to the creation of millions of fake accounts.
[CNN]
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HSBC Challenges Foreclosure Dismissal Amid Claims of ‘Unclean Hands’

HSBC Challenges Foreclosure Dismissal Amid Claims of ‘Unclean Hands’

Daily Business Review-

Things looked grim for HSBC Bank USA N.A. last year when it faced involuntary dismissal of its case after a bench trial and sanctions for prosecuting a foreclosure suit with “unclean hands.”

Back then, the trial judge sided with borrowers accusing the bank of building its case on a forged mortgage assignment and granted their request to force the financial institution to show why it shouldn’t be punished for committing a fraud on the court.

But HSBC seems off to a strong start on appeal—at least in its challenge of one aspect of the lower court’s order—having survived a motion to dismiss its case as premature before a state appellate panel.

[DAILY BUSINESS REVIEW]

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Costa v. Deutsche Bank |  NYSD – granted summary judgment (i) in favor of their RPAPL Article 15 claim seeking the cancellation and discharge of record of the Mortgage, a declaration adjudging the Property to be free from an encumbrance arising from the Mortgage, and a declaration discharging Plaintiffs’ obligations under the Note

Costa v. Deutsche Bank | NYSD – granted summary judgment (i) in favor of their RPAPL Article 15 claim seeking the cancellation and discharge of record of the Mortgage, a declaration adjudging the Property to be free from an encumbrance arising from the Mortgage, and a declaration discharging Plaintiffs’ obligations under the Note

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK

VITO V. COSTA and MARION P. COSTA,
Plaintiffs,

v.

DEUTSCHE BANK NATIONAL TRUST
COMPANY AS TRUSTEE FOR GSR
MORTGAGE LOAN TRUST 2006-OAI,
MORTGAGE PASS-THROUGH
CERTIFICATES, SERIES 2006-OA1, and
SPECIALIZED LOAN SERVICING LLC,
Defendants.

KATHERINE POLK FAILLA, District Judge:

Stripped of its technical jargon, this case is about whether a nearly
decade-old defaulted mortgage loan remains enforceable. Plaintiffs Vito and
Marion Costa argue that the applicable six-year statute of limitations has
expired and that they are therefore entitled to the cancellation and discharge of
their mortgage loan. Defendants, the loan trustee and the servicer, maintain
that the limitations period has not expired because it had not started prior to
this action or, if it had, it was tolled or renewed; thus, foreclosure is warranted.
Even if their foreclosure claim is time-barred, however, Defendants still seek to
recoup their expenses in maintaining the property over the past decade. The
parties filed cross-motions for summary judgment pursuant to Federal Rule of
Civil Procedure 56 following the close of discovery. For the reasons that follow,
Plaintiffs’ motion is granted and Defendants’ motion is denied.

[…]

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CFPB Files Suit Against Law Firm for Misrepresenting Attorney Involvement in Collection of Millions of Debts

CFPB Files Suit Against Law Firm for Misrepresenting Attorney Involvement in Collection of Millions of Debts

WASHINGTON, D.C. – Today, the Consumer Financial Protection Bureau (CFPB) filed a lawsuit in a federal district court against the debt collection law firm Weltman, Weinberg & Reis for falsely representing in millions of collection letters sent to consumers that attorneys were involved in collecting the debt. The law firm made statements on collection calls and sent collection letters creating the false impression that attorneys had meaningfully reviewed the consumer’s file, when no such review has occurred. The CFPB is seeking to stop the unlawful practices and recoup compensation for consumers who have been harmed.

“Debt collectors who misrepresent that a lawyer was involved in reviewing a consumer’s account are implying a level of authority and professional judgement that is just not true,” said CFPB Director Richard Cordray. “Weltman, Weinberg & Reis masked millions of debt collection letters and phone calls with the professional standards associated with attorneys when attorneys were, in fact, not involved. Such illegal behavior will not be allowed in the debt collection market.”

Weltman, Weinberg & Reis, based in Cleveland, Ohio, regularly collects debt related to credit cards, installment loan contracts, mortgage loans, and student loans. It collects on debts nationwide but only files collection lawsuits in seven states: Illinois, Indiana, Kentucky, Michigan, New Jersey, Ohio, and Pennsylvania.

The CFPB alleges that the firm engaged in illegal debt collection practices. In form demand letters and during collection calls to consumers, the firm implied that lawyers had reviewed the veracity of a consumer’s debt. But typically, no attorney had reviewed any aspect of a consumer’s individual debt or accounts. No attorney had assessed any consumer-specific information. And no attorney had made any individual determination that the consumer owed the debt, that a specific letter should be sent to the consumer, that a consumer should receive a call, or that the account was a candidate for litigation.

The CFPB alleges that the company is violating the Fair Debt Collection Practices Act and the Dodd-Frank Wall Street Reform and Consumer Protection Act. Since at least July 21, 2011, the law firm has sent millions of demand letters to consumers. Specifically, the CFPB alleges that the law firm:

  • Sent collection letters falsely implying they were from a lawyer: Weltman, Weinberg & Reis sent letters on formal law firm letterhead with the phrase “Attorneys at Law” at the top of the letter and stated the law firm’s name in the signature line. The letters also included a payment coupon indicating that payment should be sent to the firm. Some demand letters referred to possible “legal action” against consumers who did not make payments. Despite these representations, the vast majority of the time, no attorneys had reviewed consumer accounts or made any determination that the consumer owed the debt, that a specific letter should be sent to the consumer, or that the account was a candidate for litigation before these letters were sent.
  • Called consumers and falsely implied a lawyer was involved: Weltman, Weinberg & Reis’s debt collectors told consumers during collection calls that they were calling from a law firm. Specifically, sometimes they told consumers that it was the “largest collection law firm in the United States,” or that the debt had been placed with “the collections branch of our law firm.” This implied that attorneys participated in the decision to make collection calls, but no attorney had reviewed consumer accounts before debt collectors called consumers.

The Bureau is seeking to stop the alleged unlawful practices of Weltman, Weinberg & Reis. The Bureau has also requested that the court impose penalties on the company for its conduct and require that compensation be paid to consumers who have been harmed.

The Bureau’s complaint is not a finding or ruling that the defendant has actually violated the law.

The full text of the complaint can be found at:http://files.consumerfinance.gov/f/documents/201704_cfpb_Weltman-Weinberg-Reis_Complaint.pdf

###
The Consumer Financial Protection Bureau is a 21st century agency that helps consumer finance markets work by making rules more effective, by consistently and fairly enforcing those rules, and by empowering consumers to take more control over their economic lives. For more information, visit consumerfinance.gov.

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Buyers Beware! Florida’s District Courts of Appeal Confirm that Third Party Purchasers Have Little to No Right to Participate in Foreclosure Proceedings

Buyers Beware! Florida’s District Courts of Appeal Confirm that Third Party Purchasers Have Little to No Right to Participate in Foreclosure Proceedings

Lexology-

Third party purchaser lacks standing to participate in foreclosure proceeding, absent assertion of intention to redeem the property. After the Second District Court of Appeal issued a per curiam affirmance of the entry of final judgment of foreclosure in favor of the bank, Judge Sleet issued a specially concurring opinion in which he concluded that because the appellant was a third party purchaser of the property who was not obligated on the note and mortgage, it was “questionable” whether she had standing to challenge the bank’s foreclosure proceeding in the first place. Pealer v. Wilmington Trust, N.A., as Trustee for the MFRA Trust, 2D15-2822, 2017 WL 104075, at *1 (Fla. 2d DCA March 171, 2017).

In 2011, the appellant (“the Purchaser”) acquired the property at a homeowner’s association foreclosure sale with actual knowledge of the bank’s mortgage on the property, but did not assume the mortgage. Id. In 2013, the bank began its foreclosure proceeding, naming the mortgagors, who did not participate in the foreclosure, and the Purchaser, who participated fully at trial and disputed the admissibility of the bank’s business records and challenged its standing to foreclose. Id. The bank did not object to the Purchaser’s participation at trial, thereby waiving any argument that the Purchaser lacked standing to participate. Id.

However, in his specially concurring opinion, Judge Sleet concluded that, had the bank objected to the Purchaser’s right to participate at trial, that argument would have been meritorious in this case. Id. The concurrence explained that the Purchaser was an indispensable party to the foreclosure proceeding and was properly named as a defendant because she acquired the property before the bank filed a foreclosure complaint or recorded a lis pendens. Id. However, the concurrence explained that the Purchaser’s interest in the foreclosure proceeding was “not a legally cognizable interest” because the Purchaser took title to the property subject to the bank’s superior interest in the property. Id. at *2. Because the Purchaser had only a possessory interest in the property and was never obligated on the note and mortgage, the Purchaser could only participate in the foreclosure proceeding to exercise her statutory right of redemption and prevent the forced sale of the property. Id. In this case, though, the concurrence found that there was no evidence in the record that the Purchaser ever asserted her right to redeem the property, and as a result, the Purchaser’s interest in the foreclosure action was “speculative” and “insufficient to support [her] standing to challenge the bank’s standing or admission of evidence at trial.”

continue reading LEXOLOGY

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Bank of America Protests Judge’s $45 Million Fine In Homeowner Case

Bank of America Protests Judge’s $45 Million Fine In Homeowner Case

Fox News-

Bank of America Corp. asked a bankruptcy judge to reconsider his $45 million fine over its treatment of a California couple who requested lower mortgage payments, calling the amount “unprecedented in its magnitude.”

In court papers, bank officials asked Judge Christopher Klein to amend his 107-page ruling against the bank, arguing that his “excessive” fine amount violates guidance from Supreme Court justices in 2008 meant to prevent outsized awards. The fine, the bank said, stands as the largest punitive damages award for violations of bankruptcy law’s automatic stay rules, which ban lenders from advancing foreclosures and taking other actions.

The ruling, issued March 23, said that bank officials mistreated California couple Renee and Erik Sundquist as they fought to save their home outside Sacramento from foreclosure. The decision, which renewed attention to the mortgage industry’s loan-servicing business, called for the Sundquists to donate most of the $45 million award to five law schools and two legal-aid nonprofits.

[FOX NEWS]

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Mortgage Resolution Servicing, LLC (“MRS”) v JP Morgan Chase |  PLAINTIFFS’ MOTION AND INCORPORATED MEMORANDUM OF LAW CHALLENGING THE DESIGNATION OF THE DEPOSITION TRANSCRIPTS OF THIRD-PARTY WITNESSES BRIAN BLY AND ERIKA LANCE

Mortgage Resolution Servicing, LLC (“MRS”) v JP Morgan Chase | PLAINTIFFS’ MOTION AND INCORPORATED MEMORANDUM OF LAW CHALLENGING THE DESIGNATION OF THE DEPOSITION TRANSCRIPTS OF THIRD-PARTY WITNESSES BRIAN BLY AND ERIKA LANCE

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK

– – – – – – – – – –  – – – – – – – – – – – – – – – – – – – x
MORTGAGE RESOLUTION SERVICES, LLC, 1ST
FIDELITY LOAN SERVICING, LLC, and S & A
CAPITAL PARTNERS, INC.,
Plaintiffs,

-against

JPMORGAN
CHASE BANK, N.A., CHASE HOME
FINANCE LLC, and JPMORGAN CHASE & CO.,
Defendants

PLAINTIFFS’ MOTION AND INCORPORATED MEMORANDUM OF LAW
CHALLENGING THE DESIGNATION OF THE DEPOSITION TRANSCRIPTS OF
THIRD-PARTY WITNESSES BRIAN BLY AND ERIKA LANCE

<SNIP>

On or about February 17, 2017, Plaintiffs served two employees of non-party Nationwide
Title Clearing, Inc. (“NTC”), Bryan Bly and Erika Lance, with subpoenas to appear as witnesses
at their respective depositions to obtain their personal knowledge as to the preparation process and filing of documents by NTC, an entity whose actions have contributed to the injuries suffered by Plaintiffs at issue in this action.

Both depositions were taken on March 21, 2017. Mr. Bly was deposed first, and provided
information regarding his positions at NTC, which included serving as a Title Policy Researcher,
Document Inspector (a quality control position), a notary, as well as an authorized representative
to sign documents on behalf of banks and mortgage companies, including Chase, and other duties
and responsibilities at NTC. He testified that he had signed documents for Chase, such as Lien
Releases, but had no knowledge as to whether Chase actually had a lien on the properties or as to
how mortgage-related documents such as a Lien Release were prepared or whether they were
accurate. At the end of the deposition. Chris Barker, counsel for Mr. Bly, designated under the
Protective Order the entire transcript “For Attorneys’ Eyes Only”, claiming that dissemination of
Mr. Bly’s personal information could cause problems for him and because he didn’t want any
“harassment”.

Plaintiffs then began the deposition of Erika Lance, whose name was disclosed as having
prepared the actual fraudulent documents, such as the lien releases, that had damaged Plaintiffs in their business and property. At first, she testified that she knew the types of work or the types of clients NTC has and that she prepared the lien releases and other mortgage related documents on behalf of Chase contained in Composite Exhibit 1 to her deposition transcript, which pertained to notes and mortgages owned by Plaintiffs, not Defendants. She also testified that she had the personal knowledge as to how NTC’s systems worked to create those documents, the content of the forms, and the systems used to create the documents, but she refused to testify about that information. The witness, however, claimed that she was “not there on behalf of NTC” and then Mr. Barker – who is also representing Ms. Lance – directed her not to answer questions, claiming she was not authorized to testify even based on her personal knowledge. Mr. Barker admitted that his claim that Ms. Lance’s employer, NTC, might take action against her was purely hypothetical.

After an exchange among the lawyers where it became obvious that no progress could be made on
this issue, Plaintiffs were forced to terminate the deposition since Ms. Lance continued to refuse
to provide answers to highly relevant questions within her personal knowledge. As with the
deposition transcript of Mr. Bly, Mr. Barker designated the entire transcript of Ms. Lance’s
deposition “For Attorneys’ Eyes Only” under the Protective Order as well.

Prior to filing this Motion, Plaintiffs wrote further to Mr. Barker to object to the wholesale
designations of these deposition transcripts as “Confidential and Attorneys’ Eyes Only”. This
objection was renewed during a telephonic conference with the Honorable James Francis IV on
April 11, 2017, and the Court instructed Plaintiffs to file a motion challenging the confidentiality designations, outlining the bases for their objections to the designations, by April 14, 2017.

The blanket designation of both transcripts as “ATTORNEYS” EYES ONLY” was improper under the Protective Order because neither the questions asked nor the answers provided revealed highly personal information, non-public financial information, or could otherwise result in substantial competitive, commercial or personal harm to either deponent. The answers provided by both deponents were based solely on publicly available employment background and job responsibilities. No highly personal information such as medical, financial, personnel records, competitive information or trade secrets were contained in the transcripts.

Mr. Barker’s purported justification of his wholesale designations of the deposition testimony of Mr. Bly and Ms. Lance as “ATTORNEYS’ EYES ONLY” was that NTC employees had been subject to harassment in the past based on the contents of prior deposition transcripts.
However, the transcripts at issue in this action provide no non-public information regarding NTC
or these employees, particularly with regard to Ms. Lance’s transcript, wherein she refused to
answer any specific questions.

[…]

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TFH 4/16 | Paragraph 22, The Notice of Default and Right To Cure: How To Use This Most Overlooked Foreclosure Defense To Defeat Summary Judgment and Win at Trial

TFH 4/16 | Paragraph 22, The Notice of Default and Right To Cure: How To Use This Most Overlooked Foreclosure Defense To Defeat Summary Judgment and Win at Trial

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

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

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

.

.

Sunday –  April 16

Paragraph 22, The Notice of Default and Right To Cure: How To Use This Most Overlooked Foreclosure Defense To Defeat Summary Judgment and Win at Trial
———————

This important broadcast, first exclusively airing on The Foreclosure Hour on July 17, 2016, is being repeated this Easter Sunday, because homeowners are still largely under-using this powerful weapon against foreclosure given the sloppiness and dishonesty of loan servicers, although available in every mortgage and deed of trust situation.

Not only will its careful use almost always defeat a foreclosure summary judgment no matter in what jurisdiction a borrower resides, but it can also result in a foreclosure action being dismissed entirely with prejudice.

All a borrower facing foreclosure needs to know about this “bunker buster” foreclosure defense is contained within this one hour rebroadcast.

See, e.g., Edmonds v. US Bank National Association (Florida, Second District Court of Appeal), decided April 5, 2017, featured in “Stop Foreclosure Fraud” this week.

This is moreover just another example of how vulnerable foreclosure rules really are in court, being a product of the legal system’s defective rule reasoning, what we have termed “The Rule Ritual,” mistaking “Rule Statements” for “Rules,” which homeowners with an increased understanding can, turning the tables on lenders as it were, use to their winning benefit.

Please join John Waihee and me for the rebroadcast of our Foreclosure Workshop #16, the knowledge in which could save your home from foreclosure.

~

.
Host: Gary Dubin Co-Host: John Waihee

.

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

Have your questions answered on the air.

Submit questions to info@foreclosurehour.com

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

Past Broadcasts

EVERY SUNDAY
3:00 PM HAWAII
6:00 PM PACIFIC
9:00 PM EASTERN
ON KHVH-AM
(830 ON THE DIAL)
AND ON
iHEART RADIO

The Foreclosure Hour 12

 

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The Man in Charge of Fixing Fannie and Freddie Knows Them All Too Well

The Man in Charge of Fixing Fannie and Freddie Knows Them All Too Well

NYT-

You may not know much about Craig S. Phillips, special counselor to Steven Mnuchin, the United States Treasury secretary. Because Mr. Phillips was not a political appointee, he did not face congressional scrutiny before he began directing our nation’s housing policy, one of his main tasks.

Getting to know Mr. Phillips and his background is a worthwhile exercise, especially because he’s determining the Trump administration’s path forward on Fannie Mae and Freddie Mac, the mortgage finance giants that remain in conservatorship.

Mr. Phillips certainly knows a thing or two about Fannie and Freddie. As the leader of Morgan Stanley’s mortgage desk during the peak mortgage-mania years of 2004 and 2005, he ran the operation that bundled loans and sold them to the two government-sponsored enterprises. When those loans blew up and the government sued Morgan Stanley, Mr. Phillips was a named defendant in the initial case — a case that resulted in the firm paying a $1.25 billion settlement.

Continue reading the main story

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Mnuchin’s OneWest Avoided Force-Placed Insurance Class Actions During Crisis

Mnuchin’s OneWest Avoided Force-Placed Insurance Class Actions During Crisis

Bloomberg-

OneWest Bank, the mortgage servicer previously owned by Treasury Secretary Steven Mnuchin, has been accused by homeowner groups of a type of foreclosure abuse involving lender-placed, or force-placed, insurance.

Mortgage servicers are able to force insurance policies on homeowners during a lapse in coverage, when premiums haven’t been paid or the homeowner has no hazard insurance. Sometimes force-placed policies stem from changes in flood maps or other risks from catastrophic events.

Numerous class actions accused mortgage servicers during the 2010 foreclosure crisis of forcing expensive LPI policies on homeowners, when those policies weren’t necessary.

[BLOOMBERG]

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Edmonds v. US Bank National Association | FL 2DCA – Because the appellees failed to establish that notice of default was given as required by paragraph 22 of the mortgage

Edmonds v. US Bank National Association | FL 2DCA – Because the appellees failed to establish that notice of default was given as required by paragraph 22 of the mortgage

DOUGLAS C. EDMONDS and ARCHONDOULA N. EDMONDS, Appellants,
v.
U.S. BANK NATIONAL ASSOCIATION; JP MORGAN CHASE BANK, NATIONAL ASSOCIATION, Appellees.

Case No. 2D15-2590.
District Court of Appeal of Florida, Second District.

Opinion filed April 5, 2017.
Appeal from the Circuit Court for Lee County; James R. Thompson, Senior Judge.

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

Ira Scot Silverstein of Ira Scot Silverstein, PLLC, Fort Lauderdale, for Appellee U.S. Bank National Association.

No appearance for Appellee JP Morgan Chase Bank, National Association.

SILBERMAN, Judge.

After a nonjury trial, Douglas C. Edmonds and Archondoula N. Edmonds appeal a final judgment of foreclosure entered in favor of JP Morgan Chase Bank, National Association (JP Morgan). Because the appellees failed to establish that notice of default was given as required by paragraph 22 of the mortgage, which was a condition precedent to filing suit, we reverse the final judgment and remand for the trial court to enter an order of involuntary dismissal.

The condition precedent issue is dispositive of this appeal. Thus, we do not address the other issues that the Edmonds raise. However, we note that the record reflects somewhat of a procedural quagmire, which is the reason we have listed both JP Morgan and U.S. Bank National Association (U.S. Bank) as appellees. See Fla. R. App. P. 9.020(g)(2).

By way of background, the original lender was Chase Bank USA, N.A. (Chase). JP Morgan filed the foreclosure complaint and attached a copy of the note indorsed in blank. Prior to trial, JP Morgan filed a motion to substitute U.S. Bank as party plaintiff. At trial, counsel appeared for U.S. Bank, and the trial court asked if an order on the motion to substitute had ever been entered. The parties asserted that an order had been entered, but U.S. Bank’s counsel could not find it in the file. Our record does not contain an order on the motion to substitute, and the trial court docket does not reflect that the trial court ever ruled on the motion. The final judgment identifies JP Morgan as the plaintiff and makes no mention of U.S. Bank. The Edmonds’ notice of appeal identifies U.S. Bank as the plaintiff (now appellee), but their initial brief identifies JP Morgan as the appellee. The style of the answer brief lists JP Morgan as the appellee, but counsel specifies that the brief is filed on behalf of U.S. Bank. For ease of reference, we refer to the appellees as the Plaintiff unless otherwise required by the context.

With this background in mind, we turn to the issue of the notice of default. Paragraph 22 of the mortgage requires, among other things, that the lender give the borrowers notice of default and an opportunity to cure the default prior to acceleration of the debt. Paragraph 15 specifies that notices to the borrowers shall be deemed to have been given when they are mailed by first class mail or when actually delivered to the borrowers’ notice address. In its complaint, JP Morgan alleged that it complied with all conditions precedent. In their answer, the Edmonds denied that JP Morgan gave the required notice of the alleged default and an opportunity to cure.

At trial, Vonterro White testified as a default specialist for Fay Servicing, LLC, the servicer for U.S. Bank. He acknowledged that another company had been the prior servicer for the loan. Among the documents introduced into evidence over the Edmonds’ objection were four default letters dated January of 2014, identifying JP Morgan as the entity giving notice of default. A “welcome letter” was also introduced into evidence, reflecting that Fay Servicing became the servicer in August of 2014, several months after the date of the default letters and after JP Morgan had filed suit. The Plaintiff did not produce any return receipts, a mailing log, or any documentary evidence to show that the default letters were in fact mailed or delivered.

When questioned about one of the default letters White testified, over objection, that he knew the letter was mailed because it was addressed to the borrowers at the property address. He added that it “is the business practice to send letters on loans that are delinquent and these letters are sent every month.” However, he admitted that he had never worked for Chase or JP Morgan. At the conclusion of this testimony the defense again objected, challenging both the testimony and the admission of the default letters into evidence. Defense counsel argued that White’s testimony was as to Fay Servicing’s practices and procedures rather than Chase’s or JP Morgan’s and reiterated that White had not worked for Chase or JP Morgan. The trial court overruled the objection.

At the conclusion of the Plaintiff’s case, the defense moved for an involuntary dismissal. The defense contended, among other things, that the Plaintiff failed to prove the default letters were mailed. The trial court denied the motion and entered a final judgment of foreclosure.

The Edmonds again argue, and we agree, that the Plaintiff failed to prove that it gave the required notice under the mortgage because it did not show that the default letters were mailed or actually delivered; thus, the Plaintiff failed to establish a condition precedent to suit. Although the letters were admitted into evidence, the fact that they were drafted is insufficient by itself to show that they were mailed. See Allen v. Wilmington Trust, N.A., No. 2D15-2976, slip op. at 3 (Fla. 2d DCA Mar. 24, 2017); see also Burt v. Hudson & Keyse, LLC, 138 So. 3d 1193, 1195 (Fla. 5th DCA 2014) (recognizing that the plaintiff had produced a letter but had offered no proof that it was mailed). A company’s routine business practice may give rise to a rebuttable presumption of mailing, but “the witness must have personal knowledge of the company’s general practice in mailing letters.” Allen, slip op. at 4; see also § 90.406, Fla. Stat. (2014); CitiMortgage, Inc. v. Hoskinson, 200 So. 3d 191, 192 (Fla. 5th DCA 2016) (recognizing that the witness had personal knowledge of the plaintiff company’s mailing practices).

White’s testimony reflected no knowledge of JP Morgan’s mailing procedures or practices, and he was never employed by JP Morgan, the entity that drafted the letters. Rather, he only testified as to a “normal course of business” of mailing letters in general. This testimony was insufficient to prove that the letters were mailed. See Allen, slip op. at 4 (determining that testimony was insufficient to establish routine business practice of mailing letters when the witness was never employed by or had personal knowledge of the mailing practices of the predecessor servicer that drafted the letter at issue). Thus, the failure to prove that the default letters were mailed or actually delivered and that the notice under paragraph 22 was given requires that we reverse the final judgment and remand for the trial court to enter an order of involuntary dismissal. See id. at 5; Blum v. Deutsche Bank Trust Co., 159 So. 3d 920, 920 (Fla. 4th DCA 2015).

Reversed and remanded with directions.

SLEET and BADALAMENTI, JJ., Concur.

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

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DiGiovanni v. DEUTSCHE BANK NATIONAL TRUST COMPANY | FL 2DCA – Without any evidence to show that Bankers Trust had been renamed Deutsche Bank, Deutsche Bank failed to show that it had standing to foreclose

DiGiovanni v. DEUTSCHE BANK NATIONAL TRUST COMPANY | FL 2DCA – Without any evidence to show that Bankers Trust had been renamed Deutsche Bank, Deutsche Bank failed to show that it had standing to foreclose

 

LEONARDO N. DiGIOVANNI, Appellant,
v.
DEUTSCHE BANK NATIONAL TRUST COMPANY f/k/a BANKERS TRUST COMPANY OF CALIFORNIA, NATIONAL ASSOCIATION, AS TRUSTEE FOR VENDEE MORTGAGE TRUST 1999-3, UNKNOWN SPOUSE OF LEONARDO N. DIGIOVANNI; CITY OF CAPE CORAL, FLORIDA, A MUNICIPAL CORPORATION; UNKNOWN TENANT #1 n/k/a KIM MITCHELL; UNKNOWN TENANT #2 n/k/a CHARLIE MITCHELL; UNKNOWN TENANT #3; UNKNOWN TENANT #4; AND OTHER UNKNOWN PARTIES, INCLUDING THE UNKNOWN SPOUSE OF ANY TITLE HOLDER IN POSSESSION OF THE PROPERTY; AND, IF A NAMED DEFENDANT(S) IS DECEASED, THE SURVIVING SPOUSE, HEIRS, DEVISEES, GRANTEES, CREDITORS, AND ALL OTHER PARTIES CLAIMING BY, THROUGH, UNDER OR AGAINST THAT DEFENDANT(S); AND THE SEVERAL AND RESPECTIVE UNKNOWN ASSIGNS, SUCCESSORS IN INTEREST, TRUSTEES OR OTHER PERSONS CLAIMING BY, THROUGH, UNDER OR AGAINST ANY CORPORATION OR OTHER LEGAL ENTITY NAMED AS A DEFENDANT(S); and ALL CLAIMANTS, PERSONS OR PARTIES, NATURAL OR CORPORATE, OR WHOSE EXACT LEGAL STATUS IS UNKNOWN, CLAIMING UNDER ANY OF THE ABOVE NAMED OR DESCRIBED DEFENDANT(S), Appellees.

Case No. 2D15-4180.
District Court of Appeal of Florida, Second District.
Opinion filed April 5, 2017.
Appeal from the Circuit Court for Lee County; Hugh E. Starnes, Senior Judge.

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

Mary J. Walter of Liebler, Gonzalez & Portuondo, Miami, for Appellee Deutsche Bank National Trust Company f/k/a Bankers Trust Company of California, National Association, as Trustee for Vendee Mortgage Trust 1999-3.

No appearance for remaining Appellees.

KHOUZAM, Judge.

Leonardo N. DiGiovanni appeals the final judgment of foreclosure entered against him and in favor of Deutsche Bank National Trust Company f/k/a Bankers Trust Company of California, National Association, as Trustee for Vendee Mortgage Trust 1999-3. Because Deutsche Bank failed to show standing to foreclose, we reverse.

On May 3, 2012, Deutsche Bank National Trust Company f/k/a Bankers Trust Company of California, National Association, as Trustee for Vendee Mortgage Trust 1999-3 filed a foreclosure complaint against DiGiovanni seeking to reestablish a lost note. In count one, the complaint alleged that plaintiff or its predecessor was in possession and was entitled to enforce the note when it was lost or destroyed. In count two, the complaint alleged that the note and mortgage had been executed by DiGiovanni on June 21, 1999, and he had failed to make his payments since August 1, 2009. Attached to the complaint were copies of the note and mortgage, showing that the original lender was U.S. Department of Veterans Affairs. Also attached was a copy of an assignment transferring the mortgage from U.S. Department of Veterans Affairs to Bankers Trust Company of California, N.A., as Trustee for Vendee Mortgage Trust 1999-3.

At trial, a mortgage resolution associate from Bank of America, N.A., testified that Bank of America was the servicer of the mortgage. She stated that Bank of America had possession of the note on or about October 29, 1999, when it was transferred to former foreclosure counsel for a previous foreclosure case. The note was lost in transition back to Bank of America. A copy of the note was admitted into evidence. It bore a specific endorsement to Bankers Trust Company of California, N.A., as Trustee for Vendee Mortgage Trust 1999-3 and was dated October 28, 1999. A copy of the assignment transferring the mortgage to Bankers Trust was admitted, though Deutsche Bank noted that it was not relying on the assignment. A breach letter and payment history were also admitted. But none of these documents showed that Deutsche Bank was formerly Bankers Trust or that Deutsche Bank was the current trustee for Vendee Mortgage Trust 1999-3. Indeed, when the mortgage resolution associate from Bank of America was specifically asked if she had any document to illustrate that Deutsche Bank National Trust Company was formerly known as Bankers Trust Company of California, she admitted that she did not. DiGiovanni argued that without such a document, Deutsche Bank could not show standing to foreclose.

After the defense rested, the judge stated that he needed to take a break to consider the standing issue: “I’m going to go up to my office where I can look on my computer and see what I can do.” When the judge returned, he made clear that the evidence as presented was insufficient to establish Deutsche Bank’s standing. However, he explained that during the break he had run a Google search and found Deutsche Bank’s institutional history on the National Information Center’s[1] website showing that Bankers Trust had been renamed Deutsche Bank in 2002:

[W]ell, there’s no documentation, I think I have to rule in favor of the defendant because it’s different entity. . . . [T]he plaintiff normally, of course, has submitted something through the Federal research that actually shows if there’s been a change of name or something, and of course I didn’t know it was merger, there was no evidence, and [defense counsel] made that clear from his calling [the mortgage resolution associate]. And—but I thought, do I need to consider, in the interest of justice, allowing the plaintiff, if there is something that is virtually public record, to ask me to take judicial notice if that’s the only failing. And that’s where I came down to, that’s the only thing that I think failed in the plaintiff’s proof and so I just thought, you know, if it really is that obvious, something like that, or that clear, I’ll Google it. So I Google Bankers Trust Company of California and I printed out what came up, National Information Center, United States Federal Reserve System, and this is what usually comes up. And I’ve taken judicial notice in other cases when somebody’s submitted something like that . . . . See, I put in Bankers Trust Company and this is what came up, institutional history for Deutsche Bank and what it shows. . . Bankers Trust Company of California was renamed Deutsche Bank National Trust Company. . . . I think that’s the type of thing that I should take judicial notice of. Since that’s something new, I’ll give [defense counsel] a shot at anything he wants to say about that, but it’s so obvious that I think I should take notice of it.

DiGiovanni pointed out that Deutsche Bank had the burden of proof, that Deutsche Bank had not presented this document, and that it was improper for the court to do its own investigation. The court then asked Deutsche Bank, “Do you wish to reopen your case to admit this document?” Deutsche Bank did so, and the document was admitted. The judge clarified that he believed that even if the Deutsche Bank had not reopened the case, he could have taken judicial notice sua sponte

because it is so straightforward and black and white that it was a change of name that is in the repository of the government, Federal governmental agency whose task it is to keep track of all that and it is a very technical thing to say, well, they’ve said . . . we were formerly Bankers Trust Company and for their suit to fail because they didn’t present that, I don’t think would really be just.

Judgment was entered in favor of Deutsche Bank. DiGiovanni moved for rehearing, again raising the objection to the court’s independent investigation and arguing that the case should have been dismissed. The court held a hearing but ultimately denied rehearing, concluding that it was appropriate to take judicial notice of the document under subsections 90.202(5) and (12), Florida Statutes (2014).

We conclude that the judge erred in conducting his own independent research, prompting Deutsche Bank to reopen the case, and admitting the document he found into evidence. “Whether intentional or not, the trial judge gave the appearance of partiality by taking sua sponte actions which benefitted” one party over the other—in this case, Deutsche Bank. Lyles v. State, 742 So. 2d 842, 843 (Fla. 2d DCA 1999). “A judge must not independently investigate facts in a case and must consider only the evidence presented.” Fla. Code of Jud. Conduct, Canon 3B(7), cmt. “[W]hen a judge becomes a participant in judicial proceedings, `a shadow is cast upon judicial neutrality,'” particularly when the judge actively seeks the production of evidence that the parties themselves never sought to present. J.F. v. State, 718 So. 2d 251, 252 (Fla. 4th DCA 1998) (quoting Chastine v. Broome, 629 So. 2d 293, 295 (Fla. 4th DCA 1993)). It is also improper for a court to sua sponte reopen a trial after all parties have rested in order to take such additional evidence. See In re T.W., 846 So. 2d 581, 582 (Fla. 2d DCA 2003). A judge should “never suggest or advise counsel how to try his or her case.” Nationstar Mortg., LLC v. Marquez, 180 So. 3d 219, 221 n.2 (Fla. 3d DCA 2015) (citing Shore Mariner Condo. Ass’n v. Antonious, 722 So. 2d 247, 248 (Fla. 2d DCA 1998), for the proposition that “[t]rial judges must studiously avoid the appearance of favoring one party in a lawsuit, and suggesting to counsel or a party how to proceed strategically constitutes a breach of this principle”).

Here, the parties had rested, and Deutsche Bank had not presented any evidence to support its assertion that Bankers Trust had been renamed Deutsche Bank. Deutsche Bank did not present the document in question, did not direct the court’s attention to it, and did not ask the court to take judicial notice of it. The judge independently decided to research the issue, finding the document and providing it to the parties. When DiGiovanni objected, the judge prompted Deutsche Bank to reopen the case to admit the document. The judge made clear that without the document, he would have dismissed the suit. These actions created, at a minimum, the appearance of partiality.

Deutsche Bank argues, and the trial court believed below, that the document could be appropriately admitted pursuant to section 90.202, which delineates matters which may be judicially noticed. But “judicial notice applies to self-evident truths that no reasonable person could question, truisms that approach platitudes or banalities.” Maradie v. Maradie, 680 So. 2d 538, 541 (Fla. 1st DCA 1996) (quoting Hardy v. Johns-Manville Sales Corp., 681 F.2d 334, 347-48 (5th Cir. 1982)). Judicial notice may only be taken pursuant to the procedures set forth in section 90.204. Id. at 540 (reversing in part because the trial court failed to follow the statutory procedure required for judicial notice under section 90.204). And “the practice of taking judicial notice of adjudicative facts should be exercised with great caution” because “the taking of evidence, subject to established safeguards, is the best way to resolve disputes concerning adjudicative facts” and judicially noticed matters are taken as true without being offered by the party who will ultimately benefit. Id. at 541.

Moreover, judicially noticed documents must be otherwise admissible. See Dufour v. State, 69 So. 3d 235, 253 (Fla. 2011) (“[T]he fact that a record may be judicially noticed does not render all that is in the record admissible.”); Stoll v. State, 762 So. 2d 870, 877 (Fla. 2000) (“[W]e find that documents contained in a court file, even if that entire court file is judicially noticed, are still subject to the same rules of evidence to which all evidence must adhere.”). Here, the document was simply printed from the internet. It was never authenticated or shown to fall within an exception to the rule against hearsay. “Web-sites are not self-authenticating.” Nationwide Mut. Fire Ins. Co. v. Darragh, 95 So. 3d 897, 900 (Fla. 5th DCA 2012) (quoting St. Luke’s Cataract & Laser Inst., P.A. v. Sanderson, No. 8:06-CV-223-T-MSS, 2006 WL 1320242 (M.D. Fla. May 12, 2006)). Rather, “[t]o authenticate printouts from a website, the party proffering the evidence must produce `some statement or affidavit from someone with knowledge [of the website].'” Id. (latter alteration in original). Deutsche Bank made no attempt to show that the contents of the printout fell within an exception to the rule against hearsay, such as the business record exception or the public records exception. See § 90.803(6), (8); see also Whitley v. State, 1 So. 3d 414, 415 (Fla. 1st DCA 2009). Accordingly, the internet printout could not be judicially noticed under the circumstances of this case.

Without any evidence to show that Bankers Trust had been renamed Deutsche Bank, Deutsche Bank failed to show that it had standing to foreclose. Deutsche Bank needed to prove that it “was entitled to enforce the instrument when loss of possession occurred, or ha[d] directly or indirectly acquired ownership of the instrument from a person who was entitled to enforce the instrument when loss of possession occurred.” § 673.3091(1)(a), Fla. Stat. (2014). And because Deutsche Bank sought to show standing through the testimony of a mortgage resolution associate from the servicer, Bank of America, Deutsche Bank was also required to show that Bank of America was holding the note on its behalf. See Phan v. Deutsche Bank Nat’l Trust Co., ex rel. First Franklin Mortg. Loan Trust 2006-FF11, 198 So. 3d 744, 749 (Fla. 2d DCA 2016) (“[W]here an agent holds a mortgage note on behalf of its principal, the principal has constructive possession of the note and standing to file a complaint for foreclosure as a holder.”).

But the evidence presented only showed that U.S. Department of Veterans Affairs was the original lender; that the note and mortgage had been transferred from U.S. Department of Veterans Affairs to Bankers Trust Company of California, N.A., as Trustee for Vendee Mortgage Trust 1999-3; and that Bank of America was the servicer at the time the note was lost in October of 1999. Aside from the internet printout, there was no evidence presented to show that Bankers Trust had been renamed Deutsche Bank and that Bank of America was servicing the loan on behalf of Deutsche Bank as opposed to Bankers Trust. Indeed, the circuit court repeatedly acknowledged that without the printout, dismissal was required. Accordingly, we reverse and remand with directions for the trial court to enter an order of involuntary dismissal.

Reversed and remanded.

VILLANTI, C.J., and CASANUEVA, J., Concur.

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

[1] The National Information Center is “a central repository of data about banks and other institutions for which the Federal Reserve has a supervisory, regulatory, or research interest, including both domestic and foreign banking organizations operating in the United States.” Nat’l Info. Ctr., NIC Home, https://www.ffiec.gov/nicpubweb/nicweb/NicHome.aspx (last visited Feb. 28, 2017).

 

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The damning 2004 report that Wells Fargo chose to ignore

The damning 2004 report that Wells Fargo chose to ignore

CNN MONEY-

An internal Wells Fargo report prepared 12 years ago — in August 2004 — eerily foretold the fake account scandal that has recently shaken Wells Fargo to its core.

That investigation, titled “Gaming,” warned that Wells Fargo employees had an “incentive to cheat” that was “based on the fear of losing their jobs.” It said that workers felt they couldn’t meet the bank’s unrealistic sales goals “without gaming the system.”

 The 2004 report was sent to Wells Fargo’s chief auditor, HR personnel and others. The Wells Fargo (WFC) task force even cautioned that the bank faced “reputational risks” with customers and recommended management consider eliminating the sales goals.

Board Report by DinSFLA on Scribd

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DOJ is probing Barclays over whistleblower scandal

DOJ is probing Barclays over whistleblower scandal

NY Post-

The Justice Department is investigating UK banking giant Barclays and the US Postal Service over an alleged attempt to unmask a whistleblower, The Post has learned.

Barclays, at the request of Chief Executive Jes Staley, reached out to postal inspectors after its board received two letters mailed from an anonymous employee complaining about the hiring of a mid-level executive, according to a source familiar with the probe.

Justice Department investigators are trying to determine whether officials at Barclays or USPS inspectors may have violated civil Dodd-Frank whistleblower protections or even criminal law by attempting to unmask the employee, according to the source.

[NY POST]

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