Excerpt:

In all mortgage foreclosure actions pending on May 9,2011, before any merits hearing in the case, or if an order of foreclosure has been entered, before any foreclosure sale, the Mortgagee shall, through its attorney of record, file with the court and serve upon every Mortgagor a notice of the Mortgagots right to foreclosure intervention. All proceedings in the foreclosure action shall be stayed until completion of such foreclosure intervention.

No foreclosure hearing or foreclosure sale may be held in the foreclosure action until the Mortgagee’s attorney certifies the following:

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RONALDO ALPINO and ILMA ALPINO, Plaintiffs,
v.
JPMORGAN CHASE BANK, NATIONAL ASS’N Defendants.

Civil No. 1:10-12040-PBS.United States District Court, D. Massachusetts.

April 21, 2011.

MEMORANDUM AND ORDER

PATTI B. SARIS, District Judge.

I. Introduction

This cases arises after the defendant’s foreclosure of the plaintiffs’ home. The plaintiffs have alleged the following: the defendant breached the duty of good faith and reasonable diligence inherent in every mortgage contract in Massachusetts (Count I); the defendant breached its contract with the United States under the Home Affordable Modification Program (Count II); the defendant violated Mass. Gen. L. c. 244, § 14, regarding the operation of a foreclosure sale (Count III); and the defendant intentionally inflicted emotional distress (Count IV).

On November 24, 2010, the case was removed to federal court on the basis of diversity and federal question jurisdiction, see 28 U.S.C. §§ 1331, 1332, the federal question being the defendant’s alleged breach of the HAMP government contract. The defendant then filed a motion to dismiss. After considering the record, the Court DENIES the motion in part and ALLOWS the motion in part without prejudice to the filing of an amended complaint.

II. Factual Background

A) The Alpinos’ Mortgage:

The Court derives the following facts from the complaint (“Compl.”). For the purposes of this motion to dismiss, the facts are taken to be true. See Ashcroft v. Iqbal, 129 S. Ct. 1937, 1941 (2009).

The Alpinos purchased their home in December of 2002. In early 2004, they refinanced their original mortgage loan with a new loan from Washington Mutual Bank, Federal Association (“Washington Mutual”) in the amount of $366,000, secured by a first mortgage on their property. The loan is a 30 year, adjustable rate mortgage, which annually adjusts to 2.65% above the average of the prior 12 monthly yields of the one year United States Treasury Securities.

Like many Americans, when the economy began failing in 2008, the Alpinos had difficulty keeping up on their mortgage payments. Meanwhile in September 2008, Washington Mutual collapsed, and JPMorgan Chase Bank (“JPMorgan”) became its successor in interest to a number of financial interests, including the Alpinos’ mortgage and refinancing loan. The Alpinos contacted JPMorgan to see about adjusting their payments in order to avoid default. They “diligently provided JPMorgan with all the information requested” and “negotiated in good faith for a forbearance agreement, loan modification, or any other way to save their home from foreclosure.” (Compl. ¶ 15.) JPMorgan refused to modify, and when the Alpinos failed to stay current on their mortgage, the bank scheduled a foreclosure sale.

Besides the failure to consider a mortgage payment modification, this action also concerns events occurring at the scheduled foreclosure sale. The Alpinos allege that they arrived at their property around 4:15 pm on March 2, 2010 — fifteen minutes after the scheduled foreclosure auction was supposed to take place — and found a group of approximately twenty people. Mr. Alpino asked some of the people gathered whether the sale had already occurred. He was told that it had not. At that point he went inside the home to call a lawyer. Ms. Alpino remained outside waiting for the auction. After about ten minutes, all but two of the potential purchasers had left. After several more minutes, these remaining two individuals had left as well. According to Ms. Alpino, at no time during this period did an auctioneer appear to fly an auction flag or hold an auction. Nonetheless, the defendant asserts that it conducted a sale and that it “became the absolute title holder to the [Alpinos’ home].” (Def. Mem. at 3.)

B) The Home Affordable Modification Program (HAMP):

In February 2009 the President announced the Homeowner Affordability and Stability Plan to help millions of Americans restructure their mortgages and stay in their homes in the face of impending default and foreclosure. (See Doc. 7, Ex. A (“Supp. Directive”) at 1.) As part of that plan the government created the Home Affordable Modification Program (HAMP).

Among other things, HAMP creates a cost sharing system, whereby the government helps reduce the impact of mortgage modifications on lenders. In exchange, the program asks servicers to standardize and systemize a process for mortgage modification, including the implementation of the net present value (NPV) test. NPV compares the expected cash flow from a modified loan with the cash flow from the unmodified loan. If the expected cash flow from the modified loan exceeds the amount from the unmodified loan, then the loan servicer must modify the loan. Id. at 4. In considering a loan for modification, servicers must perform a “Standard Modification Waterfall.” Id. at 8. This process requires servicers to apply a series of modification steps that work to reduce loan monthly payments to as close as possible to 31 percent of the homeowners gross monthly income. See generally Morris at 10 n.3.

Servicers opt into HAMP by executing Servicer Participation Agreements (SPAs). These agreements between servicers and Fannie Mae, in its capacity as a financial agent for the United States, require servicers to consider all eligible mortgage loans for modification unless prohibited by the rules of an application pooling and servicing agreement (PSA), which establish private label securitizations of mortgages. See id. at 1. But even in the face of PSAs that prohibit modification, “[p]articipating servicers are required to use reasonable efforts to remove any prohibitions and obtain waivers or approvals from all necessary parties in order to carry out any modification under HAMP.” Id.

Despite these provisions, homeowners have not always seen the benefits HAMP was intended to foster. During the first year of operation, HAMP resulted in the permanent modification of only 230,801 mortgages, well below the target objective of three to four million borrowers. See Jean Braucher, Humpty Dumpty and the Foreclosure Crisis: Lessons from the Lackluster First Year of the Home Affordable Modification Program (HAMP), 52 Ariz. L. Rev. 727, 739 (2010). In June 2010, the Government Accountability Office traced some of this underperformance to servicers’ failure to adequately solicit HAMP eligible borrowers and to promptly respond to borrower inquiries regarding HAMP modifications. See U.S. Gov’t Accountability Office, GAO-10-634, Troubled Asset Relief Program, Further Actions Needed to Fully and Equitably Implement Foreclosure Mitigation Programs i (2010).

The defendant allegedly signed an SPA with the government and is a HAMP participant. (Comp. ¶ 19.)

III. Standard

The plaintiffs’ burden is to plead “sufficient matter, accepted as true, to state a claim for relief that is plausible on its face.” Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949 (2009) (citing Bell Atlantic v. Twombly, 550 U.S. 544, 570 (2007)). “A case has `facial plausibility’ when plaintiff pleads factual content that allows the court to draw a reasonable inference that the defendant is liable for the misconduct alleged.” Id. Where a complaint pleads facts that are “merely consistent with” a defendant’s liability, it “stops short of the line between possibility and plausibility of `entitlement to relief.'” Id. In considering the adequacy of pleadings, a court must take as true the factual allegations in the plaintiff’s pleadings and must make all reasonable inferences in favor of the plaintiff. Rivera v. Rhode Island, 402 F.3d 27, 33 (1st Cir. 2005).

IV. Claims

Because it colors the resolution of the plaintiffs’ state law claims, the Court begins by discussing Count II, the plaintiffs’ claim for breach of the SPA between JPMorgan and the United States.

A) Count II

In order to bring a claim for breach of the SPA between the defendant and the United States Department of Treasury, the Alpinos must demonstrate that they are the third party beneficiaries of this agreement. See Speleos v. BAC Home Loans Servicing, 10-11503, 2010 WL 5174510, * 4 (D. Mass. Dec. 14, 2010)(“Speleos”). Of the number of federal courts to have considered this issue, the majority have held that homeowners are not the intended beneficiaries of these agreements and, thus, do not have a claim for breach of contract arising from lenders or servicers’ failures to abide by the terms of HAMP in considering inquiries related to mortgage modifications. See Speleos at * 3 (collecting cases). Only one court has held to the contrary. See Marques v. Wells Fargo Home Mortgage, Inc., 09-1985-L, 2010 WL 3212131 (S.D. Calif. Aug. 12, 2010) (“Marques”).

In December, this court denied a homeowner third party beneficiary status under HAMP. See Speleos (Gorton, J.). Quoting at length from the HAMP guidelines and Treasury announcements explaining the program, the court held that the borrower could make out a “colorable” claim that HAMP was intended to benefit homeowners. Id. at *5. However, the court ultimately concluded that a finding that homeowners could sue for the breach of an SPA was not consistent with the terms of the contract, which stated that the rights and remedies outlined in the SPA were “for our benefit and that of our successors and assigns.” Id.

The court in Marques arrived at the opposite conclusion after highlighting the numerous requirements HAMP imposes on servicers with regard to their interactions with borrowers. For example, the court noted that the “agreement expressly provides that the `[s]ervicer shall perform the Services for all mortgage loans it services. . . .'” Marques at *5 (quoting SPA at § 2(A)). Thus, the court held: “The Agreement on its face expresses a clear intent to directly benefit the eligible borrowers.'” Marques at *6.

There is compelling evidence that the government intended to benefit homeowners when it implemented the HAMP program, and the contractual language highlighted by the court in Marques requiring servicers to consider all eligible mortgages for HAMP modifications is illustrative of this design. But on its own, this language merely stresses that servicers are required to perform these obligations, not that private parties necessarily have third party beneficiary status to enforce them. As the Supreme Court recently illuminated in reversing the Ninth Circuit’s decision in Cnty. of Santa Clara v. Astra USA, Inc., 588 F.3d 1237 (9th Cir. 2009), rev’d, 131 S.Ct. 1342 (2011), the test for determining whether a plaintiff is a third party beneficiary to a government contract must focus on whether the contract intended to provide the plaintiff with a legal cause of action, not just whether the plaintiff falls within a class of individuals that the contract and its underlying policies seek to benefit. See Astra USA, Inc. v. Santa Clara Cnty., 131 S.Ct. 1342, 1348 (2011)(“The distinction between an intention to benefit a third party and an intention that the third party should have the right to enforce that intention is emphasized where the promisee is a governmental entity.” (quoting 9 J. Murray, Corbin on Contracts §45.6, p. 92 (rev. ed. 2007)(internal quotation marks omitted)).

Guided by this principle, the Court adopts the reasoning in Speleos. Despite HAMP’s general purpose to benefit homeowners, the SPA contains clear language limiting the class of actors who can enforce its terms. It states: “The Agreement shall inure to the benefit of and be binding upon the parties to the Agreement and their permitted successors-in-interest.” (See Pl. Ex. A (“SPA”) at § 11(B).) In the face of this language, and the Supreme Court’s recent holding in Astra, the Alpinos cannot demonstrate that they are the intended beneficiaries of the SPA. For this reason, Count II must be dismissed.

In dismissing Count II, the Court recognizes the difficulty homeowners have had in realizing the benefits of HAMP. HAMP enforcement tends to focus on servicers’ responsibilities after a loan has been modified and seek to protect “the Treasury for overpaying [incentives].” Marques at * 6. There has been little enforcement of the requirement that servicers consider eligible loans for modification. One recent article has noted that part of the problem Treasury has had in encouraging HAMP compliance may lie in the conflict between the incentives of loan servicers and mortgage loan holders. Servicers, who often administer mortgage loans that have been packaged and sold off to third-party holders in complicated securities instruments, will sometimes see greater returns from a foreclosure than a modification, even if the modification increases cash flows to mortgage holders. See, Adam J. Levitin & Tara Twomey, Mortgage Servicing, 28 Yale J. on Reg. 1 (2011).

This does not mean that homeowners like the Alpinos are without a means of redress. Even though the Alpinos cannot bring a claim directly for breach of the SPA agreement, the defendant’s failure to abide by HAMP’s terms may give rise to other causes of action under state law. Specifically, as this Court held in Morris, the Alpinos may have a cause of action under Mass. Gen. L. ch. 93A, the Consumer Protection Act, for the defendant’s failure to consider them for a HAMP modification, as long as they can show that this failure was deceptive or unfair under § 93A. See Morris at 7-8; see also Bosque v. Wells Fargo Bank, N.A., No. 10-10311, 2011 WL 304725, at *7-*8 (D. Mass. Jan. 26, 2011) (denying motion to dismiss Chapter 93A claim arising out of HAMP application). They may also be able to allege that the defendant’s failures amounted to negligence, for HAMP affects the mortgage lender’s legal duties. Speleos at *6 (stating, with regard to HAMP, that a “claim for negligence based on a statutory or regulatory violation can survive even where there is no private cause of action under that statute or regulation.”). In other words, even if the Alpinos do not have a federal cause of action under HAMP, some violations of HAMP may form the basis of state law causes of action. Count II is dismissed without prejudice.

B) Counts I and III

The Alpinos also allege that the defendant breached its “duty of good faith and reasonable diligence.” This claim does not concern HAMP or the SPA; rather, it posits the violation of independent state-law duties inherent in every mortgage contract in Massachusetts. Along with this claim, in Count III, the Alpinos allege that the defendant violated the Massachusetts foreclosure statute by failing to conduct an open public auction under the mortgage’s power of sale. See Mass. Gen. L. c. 244 § 14.

In Massachusetts “the basic rule of law applicable to the foreclosure of real estate mortgages is that `a mortgagee in exercising a power of sale in a mortgage must act in good faith and must use reasonable diligence to protect the interests of the mortgagor.'” Seppala & Aho Const. Co., Inc. v. Petersen, 373 Mass. 316, 367 N.E.2d 613, 616 (Mass 1977)(citations omitted). Technical compliance with the rules governing the foreclosure procedure does not necessarily ensure that a mortgagee has met its obligations under the law. If the mortgagee does not exercise good faith in the execution of a foreclosure, then the foreclosure sale is invalid. See Edry v. Rhode Island Hospital Trust Bank, 201 B.R. 604, 607 (Bankr. D. Mass. 1996) (finding that a mortgagee’s failure to make reasonable efforts to sell the property for the highest value possible invalidated a foreclosure sale). “[T]his responsibility is [even] `more exacting’ where the mortgage holder becomes the buyer at the foreclosure sale. .. .” U.S. Nat. Bank Ass’n v. Ibanez, 458 Mass. 637, 941 N.E.2d 40, 50 n. 16 (citations omitted).

Here, the Alpinos press two different theories of liability under Count I. First, they allege that the defendant breached its duties by failing to consider the Alpinos for a mortgage modification. Second, they argue that the defendant’s alleged failure to hold the auction in a reasonable manner is a violation of the inherent duty of good faith and reasonable diligence.

The Court need not address the first theory of liability, for it finds that the Alpinos have alleged sufficient facts to surpass a motion to dismiss on their second theory. In claims for a breach of the duty of good faith and reasonable diligence, Massachusetts courts have placed emphasis on a mortgagee’s duty to protect the mortgagor’s interests by seeking a reasonable foreclosure price and ensuring that the mortgagor has notice of the sale. For example, in Bon v. Graves, 216 Mass. 440, 130 N.E. 1023 (1914), the Supreme Judicial Court held that the fact that a mortgagee gave notice of a foreclosure sale in publications of limited circulation, along with the mortgagee’s failure to provide the mortgagor with personal notice of the sale, amounted to a breach of its duties under state law. Id. at 1026 (“The duty of one acting under a power of sale in a mortgage is to use that reasonable degree of effort and diligence to secure and protect the interests of the mortgagor, the owner of the equity of redemption and junior lienors, to the observance of which he is bound by the obligation in good faith.”).

Here, the Alpinos have alleged sufficient facts to raise a plausible claim that the defendant failed to make reasonable efforts to protect the Alpinos’ interests by conducting a fair and open foreclosure sale. See Aurea Aspasia Corp. v. Crosby, 331 Mass. 515, 120 N.E.2d 759, 760-61 (Mass. 1954)(finding that the appearance of an auctioneer, who announced the terms of the sale, and flew a red flag was sufficient to conclude that a foreclosure action had occurred). This would implicate the defendant’s duty to protect the plaintiff’s interests by securing the highest possible price in the foreclosure sale and its duty to ensure that the homeowner had adequate notice of the auction, a duty that is heightened in this case because the defendant allegedly purchased the property at issue.

The plaintiffs have also alleged sufficient facts to establish that the defendant may have violated the Massachusetts foreclosure statute. Mass. Gen. L. c. 244, § 14 addresses a mortgagee’s “foreclosure under power of sale.” Id. Among other things, this section assumes the conducting of a public auction. See id. (providing a model form for the “Mortgagee’s Sale of Real Estate,” which includes specific mention of a “Public Auction” and leaves space for the time, date, and location of the auction.). If the defendant indeed failed to hold a public auction at the time and date noticed, then it violated both the letter and the spirit of the provision.

The fact that the foreclosure sale may not have been properly conducted does not necessarily mean that the Alpinos have asserted valid claims for relief. The plaintiffs allege that the defendant’s actions entitle them to, among other things, the issuance of a preliminary injunction preventing their eviction, a preliminary injunction preventing JPMorgan from selling the property, the granting of “unclouded title” in the property, reasonable damages, and a lis pendens. At a hearing before this Court, the plaintiffs stated that they were also seeking rescission of the mortgage contract. The defendant argues that the only cause of action available to the Alpinos is one in equity for redemption of the mortgage and seeks to dismiss Counts I and III because the Alpinos have not explicitly made a claim for redemption.

Massachusetts law recognizes two different types of actions that can be brought by a mortgagor alleging that his property has been transferred in a wrongful foreclosure sale: “[a]n action of tort, and a proceeding to set aside the foreclosure.” Cambridge Sav. Bank v. Cronin, 289 Mass. 379, 194 N.E. 289, 290 (Mass. 1935). The plaintiffs appear not to be pursuing a tort claim, for such a claim would be inconsistent with their stated desire to retain title to their home. See Rogers v. Barnes, 169 Mass. 179, 47 N.E. 602, 604 (Mass. 1897) (explaining that in cases where the plaintiff successfully brings an action in tort for wrongful foreclosure, which is similar to an action for conversion of personal property, the plaintiff surrenders legal title to the property at issue). Instead, the Court understands them to be seeking an invalidation of the foreclosure sale. Historically, this type of claim was styled as a “bill to set aside the foreclosure and redeem.” See Cambridge Savings Bank, 194 N.E. at 290. Nowhere in their complaint do the Alpinos explicitly state their intent to exercise their right of redemption. But, even assuming that this is the only form of relief available, a failure to explicitly seek a right of redemption does not require dismissal of a claim for equitable relief from an allegedly invalid foreclosure sale. Cf. State Realty Co. of Boston v. MacNeil Bros., Co., 334 Mass. 294, 135 N.E.2d 291, 294-95 (Mass. 1956)(finding that there “was no error in overruling the demurrer of” the mortgagee in a suit for redemption where the “bill for redemption [was] somewhat inartifically drawn” but identified the “mortgage and the parties interested in it, allege[d] that the mortgage is upon property of the plaintiff, and offer[ed] redeem.”). A determination that the foreclosure sale was unlawful will void the sale and return the plaintiffs to the position they were in before the sale allegedly occurred. See Ibanez, 941 N.E.2d at 50 (“[O]ne who sells under a power of sale must follow strictly its terms. If he fails to do so there is no valid execution of the power, and the sale is wholly void.” (internal quotation marks and citations omitted)); see also Rogers v. Barnes, 169 Mass. 179, 47 N.E. 602, 603 (Mass. 1897)(noting that a wrongful foreclosure sale gives rise to a “cloud upon the title of the plaintiff to an equity of redemption in the premises, which cannot be removed without some expense to the plaintiff, and the damages might be more than nominal.”).

D) Count IV: Intentional Infliction of Emotional Distress:

As explained by the First Circuit, “[u]nder Massachusetts law, an individual is liable for intentional infliction of emotional distress when he, `by extreme and outrageous conduct and without privilege, causes severe emotional distress to another.'” Limone v. U.S., 579 F.3d 79, 91 (1st Cir. 2009) (quoting Agis v. Howard Johnson Co., 371 Mass. 140, 355 N.E.2d 315, 318 (1976)).

Though the defendant may have engaged in some legally cognizable wrongdoing, and though the Alpinos may have suffered greatly, there is no indication that the defendant’s actions were extreme and outrageous. “The usage of the terms outrageous and extreme have become commonplace in today’s society, however, as used by the Agis Court they mean more than `annoyances, or even threats and petty oppressions.'” Harvard Univ. v. Goldstein, No. 961020, 2000 WL 282537, * 2 (Mass. Super. Ct. Feb. 15, 2000) (quoting Conway v. Smerling, 635 N.E.2d 268, 273 (1994)). The plaintiffs have not alleged that the defendant ever asked for more money than they actually owed on the mortgage, see Beecy v. Pucciarelli, 387 Mass. 589, 441 N.E.2d 1035, 1045 (D. Mass. 1982)(finding that attorney’s negligent actions in bringing a collection action against the wrong defendant did not constitute extreme and outrageous conduct), nor do they claim that they have been removed from their home in the wake of the wrongful foreclosure. At most, the defendant failed to consider the plaintiff for a mortgage modification under HAMP and then failed to operate an open and fair foreclosure sale. The Alpinos claim for intentional infliction of emotional distress is dismissed.

ORDER

The Court ALLOWS the motion to dismiss Count II and Count IV. The Court ALLOWS the request for a lis pendens. The Court DENIES the motion to dismiss the remaining counts.

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via Mandelman Matters-

Preface…

Sit down and relax… you’re going to need a comfortable chair.  But, I promise you… it’ll be worth it.

In the fall of 2008, news stories about “scammers” taking advantage of homeowners at risk of foreclosure started appearing frequently in the media.  I remember watching a prime-time national news magazine type program, I think it was 20/20, that was airing a story that featured a sleazy looking middle-age man in Denver, hurriedly walking from a small, strip mall store front to his car, his hand covering his face, as a reporter tried to ask him questions that he obviously did not plan to answer.

The story involved a company that had charged a handful of homeowners several thousand dollars up front to help them negotiate with their banks to get their mortgages modified.  The core issue being raised by the show’s host was that the homeowners had been victims of a scam because, as a couple of the homeowners interviewed were saying, their loans had not yet been modified.

I remember wondering, to begin with, how in the world such a story had become the subject of a national news magazine television program.  I mean, “Three homeowners get ripped off by small business in Denver,” is not usually the sort of event that makes national headlines.  The implication being made was that this case was emblematic of a more widespread problem, but nothing further was offered in the way of proof… no statistics, no additional facts… just statements about how homeowners should NEVER pay anyone up front to help them negotiate with their bank over a loan modification because they were “scammers.”

MICHAEL G. BRAUTIGAM,

v.

ROBERT E. RUBIN, C. MICHAEL
ARMSTRONG, JOHN M. DEUTCH,
ANNE M. MULCAHY, VIKRAM PANDIT,
ALAIN J.P BELDA, TIMOTHY C. COLLINS,
JERRY A GRUNDHOFR, ROBERT L. JOSS,
ANDREW N. LIVERIS, MICHAEL E. O’NEILL,
RICHARD D. PARSONS, LAWRENCE R.
RICCIARDI, JUDITH RODIN, ROBERT
L. RYAN, ANTHONY M. SANTOMERO,
DIANA L. TAYLOR, WILLIAM S. THOMPSON,
JR., AND ERNESTO ZEDILLO
~
Excerpts:

I. This is a shareholder derivative action brought on behalf and for the benefit of Citigroup against certain of its current and former directors. Citigroup is a global . financial services company, and provides consumers, corporations, governments and institutions with a range of financial products and services. The recipient of some $45 billion of federal government bail-out monies, Citigroup has suffered, and will continue to suffer, serious financial and reputational impacts from the inadequate servicing of its troubled residential mortgage loans.

2. On April 13, 2011, the Office of the Comptroller of the Currency (“OCC”) publicized findings from its fourth quarter 2010 investigation into Citigroup’s mortgage servicing and foreclosure processing practices. As a result of that investigation, the OCC concluded that Citigroup (through its wholly-owned subsidiary, Citibank, N.A.): engaged in improper servicing and foreclosure practices; lacked sufficient resources to ensure proper administration of its foreclosure processes; lacked adequate oversight, internal controls, policies, and procedures, compliance risk management, internal audit, third party management; failed to supervise outside counsel and other third parties handling foreclosure-related services; and engaged in unsafe or unsound banking practices. The above findings were made public in the OCC’s formal enforcement agreement with Citibank as set forth in the Consent Order captioned In the Matter of Citibank, NA. Las Vegas, Nevada AA -EC-II-I3 (the “Consent Order”).

<SNIP>

13. Apar from a dismal track record in complying with its obligations under TARP and HAMP, Citigroup also suffered from the effects of a lack of adequate controls over its foreclosure processes. By third and fourth quarters of 20 10, reports had surfàced alleging that companies (including Citigroup) servicing $6.4 trillion in American mortgages may have bypassed legally required steps to foreclose on a home. For example, a New Jersey state cour administrative order specifically implicated Citi Residential Lending, Inc. (“Citi Residential,” a business of Citigroup) in the so-called “robosigning” scandal. Robo-signers, as the court put it, “are mortgage lender/servicer employees who sign hundreds-in some cases thousands-of affidavits submitted in support of foreclosure claims without any personal  knowledge of the information contained in the affidavits. ‘Robo-signing’ may also refer to improper notarizing practices or document backdating.” The administrative order cited devastating evidence of the inadequacies of Citigroup’s internal controls over its loan documentation and foreclosure processes:

An individual employed by Nationwide Title Clearing, Inc., with signing authority for Citi Residential Lending, Inc., testified in a deposition that when he signed documents for Citi, he did not review them for substantive correctness. He could not even explain what precisely an assignment of a mortgage accomplishes. He had no prior background in the mortgage industry.

Further, a second person with signing authority for Citi Residential Lending, Inc. testified that she never reviewed any books, records, or documents before signing affidavits and that she instead trusted the company’s internal policies and procedures to ensure the accuracy of the information she signed. She signed several documents each day (in many instances without knowledge of what she was signing) and indicated that they were often notarized outside of her presence.

14. The deficiencies in Citigroup’s controls over its loan documentation and foreclosure processes have led to tens of thousands of adverse outcomes for the Company throughout the United States. On November 23, 20 i 0, a Managing Director of Citi- Mortgage, in a written statement to the House Committee on Financial Services, Subcommittee on Housing and Community Opportunity, admitted that: (a) the Company was reviewing approximately 10,000 affidavits executed in pending foreclosures initiated before February 2010; (b) affidavits executed before fàll 2009 would need to be refilled;
(c) that the Company was reviewing another approximately 4,000 pending foreclosure affidavits that may not have been properly executed; and (d) it was transferring approximately 8,500 foreclosure files from its former Florida law firm that engaged in robo-signing.

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http://www.scribd.com/full/53708513?access_key=key-1pzxbltfa7cdhtky3rr8

ELLERY G. PENNINGTON AND
LAURA M. PENNINGTON, on behalf
of themselves and all others similarly
situated,

v.

HSBC BANK USA, NATIONAL
ASSOCIATION and WELLS FARGO
BANK, N.A.,

Excerpt:

Plaintiffs bring this action against Wells Fargo Bank, N.A., its division Wells Fargo Home Mortgage, and HSBC Bank USA (collectively, “Defendants”) on behalf of Texas resident home equity loan borrowers who were offered loan modifications by Defendants after March 3, 2007.

<SNIP>

Defendants then railroaded borrowers into foreclosure by setting up so many roadblocks to modification that borrowers would finally cry uncle in the face of bureaucratic stonewalling, incompetence, misrepresentations, deception, and fraud. Meanwhile, borrowers subjected to Defendants’ misconduct would have interest charges running against them during the pendency of Defendants’ purported “review” of their loans. An already distressed loan situation became all but impossible to escape because of Defendants’ misconduct and deception. Borrowers’ interest arrearages for the months and years they got chewed up in Defendants’ maniacal mortgage meatgrinder made any loan modification prospect remote almost to the point of impossibility.

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Double Crossed

Lenders say ‘dual tracking’ protects their investment if the homeowner is unable to qualify for new loan terms. But regulators seeking to ban the practice say it lulls some borrowers into thinking they won’t have their homes taken away.

Don’t even want to waste any thoughts.

From BLOOMBERG

The House of Representatives voted 252-170 on March 29 to eliminate HAMP, which pays banks and mortgage servicers to modify monthly payments for delinquent borrowers. The program is President Barack Obama’s signature effort to aid struggling homeowners.

Last month Representative Patrick McHenry, a North Carolina Republican, called the plan an “epic failure.”

WE AGREE.

via The Home Equity Theft Reporter a fantastic site!

• The Complaint alleges that CitiMortgage accepted billions in government bailout money under the Troubled Asset Relief Program (“TARP”) earmarked to help struggling homeowners avoid foreclosure. CitiMortgage, like other TARP-funded financial institutions, is contractually obligated to modify mortgage loans it services for homeowners who qualify under HAMP, a federal program designed to abate the foreclosure crisis by providing mortgage loan modifications to eligible homeowners.

• According to the lawsuit, CitiMortgage systematically slows or thwarts homeowners’ requests to modify mortgages, depriving borrowers of federal bailout funds that could save them from foreclosure. The bank ends up reaping the financial benefits provided by TARP-funds and also collects higher fees and interest rates associated with stressed home loans.

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A TARP Special Agent sent an email to anonymous hacker OperationLeakS on Tuesday. In this alleged email the unidentified Special Agent appears to request a face to face meeting to possibly discuss HAMP

“I am interested in learning more about the info you possess relative to B of A. Are you in the New York area?.”

I say fat chance that this meeting will ever happen, although I am sure OperationLeakS wouldn’t mind discussing this with Elizabeth Warren.

See email below:

Looks like someone is taking an interest to the leaked Balboa emails.

By Lorraine Woellert – Mar 10, 2011 12:01 AM ET

The House Financial Services Committee voted to abolish President Barack Obama’s signature anti-foreclosure program, saying it failed to deliver the promised help to homeowners.

The panel voted yesterday along party lines, 32-23, to repeal the Home Affordable Modification Program, or HAMP, which pays lenders to rewrite loan terms to lower borrowers’ payments.

Representative Patrick McHenry, a North Carolina Republican, called the plan an “epic failure.”

Washington Post Staff Writer
Wednesday, March 9, 2011; 8:55 PM

Republican lawmakers on Wednesday accused the Obama administration of trying to make an end run around Congress as it negotiates a large settlement with banks involved in shoddy foreclosure practices.

In a letter to Treasury Secretary Timothy F. Geithner, Republicans criticized the scope of a 27-page draft term sheet that was recently submitted to five of the nation’s largest banks by state attorneys general and a handful of federal agencies, including the Justice Department and the new Consumer Financial Protection Bureau.

“The settlement agreement not only legislates new standards and practices for the servicing industry, it also resuscitates programs and policies that have not worked or that Congress has explicitly rejected,” the letter said. It was signed by nearly half a dozen Republicans, including Rep. Scott Garrett (N.J.), the lead sponsor.

“The settlement agreement not only legislates new standards and practices for the servicing industry, it also resuscitates programs and policies that have not worked or that Congress has explicitly rejected”

Speaking of reviving the FAILED HAMP PROGRAM…

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By David Bauerlein

Edward J. Rukab says it might have been “bailout fever” that convinced him to apply for a mortgage modification.

With banks getting assistance left and right, he figured the federal Home Affordable Modification Program would help struggling homeowners such as himself who were underwater on mortgages.

Today, he bitterly regrets ever applying to Bank of America for a mortgage modification under the federal program, which has faced persistent complaints about changing rules midstream, losing paperwork and taking too long to act on applications.

Continue reading … Jacksonville

Press Releases

Contact: Sean Bartlett (202) 225-2201

Congresswoman Waters Troubled by Reported Foreclosure Fraud Deal

Reiterates Need for Servicing Standards, Raises Concerns about Settlement Figure & OCC Protecting Banks Over Borrowers

Washington, Feb 25 –

Congresswoman Maxine Waters (D-Calif.), a senior member of the Financial Services Committee, issued the following statement today after reports of a deal between the Obama Administration and mortgage servicers to settle systemic fraud issues in the servicing and foreclosure industry:

Reporting from yesterday and today indicates that federal regulators are close to reaching a settlement over what they describe as “shortcomings in foreclosure governance and document preparation processes,” or what I have plainly referred to as “foreclosure fraud.”  The settlement, as described by the Wall Street Journal, Huffington Post, and other media outlets, leaves me deeply concerned about whether homeowners will receive the due process and fair treatment they deserve.

Particularly, I am concerned about the $20 billion settlement figure, spread across 14 servicers, that has been noted in various reports.  Though this figure sounds like a large settlement to those unfamiliar with the scale of the foreclosure crisis, we must remember that over 3 million homes have been lost to foreclosure since 2006, and some analysts expect an additional 11 million foreclosure filings in the near future.  Moreover, the Center for Responsible Lending estimates that foreclosures between 2009 and 2012 will result in $1.86 trillion in lost wealth for families.

We must also contrast this $20 billion settlement figure, shared by 14 servicers, with the $8.6 billion settlement paid by Countrywide Finance Corp. in 2008 as a result of origination fraud.  I have every reason to believe that today’s improper servicing is likely just as pervasive as origination fraud a few years ago.

This settlement is too small, and will likely have one of two results:  either borrowers will receive insignificant principal reductions, or reductions will only be available to a small subset of troubled borrowers.

I am also concerned about the fact that this settlement, as reported, contains no discussion of mortgage servicing standards going forward.  Though I was pleased that the Administration briefly mentioned the need for servicing changes in their Fannie Mae and Freddie Mac reform proposal, we have yet to see the details of their plan for servicing reform.  As I have reiterated for years, meaningful servicing standards are absolutely necessary to protect the millions of borrowers vulnerable to foreclosure.  My bill from the last Congress, The Foreclosure Prevention and Sound Mortgage Servicing Act of 2009 (H.R. 3451), which I plan to reintroduce, contained borrower protections that I believe could have prevented many of the servicing failures we see today.  I urge regulators to insist on meaningful borrower protections that satisfy all of the servicing reforms described below:

• Provide that servicers have a duty to engage in reasonable loss mitigation activities, as outlined in H.R. 3451;
• Adopt servicer compensation structures that result in servicers having an interest as to whether the loan remains current, and separates simple transaction processing from actual loss mitigation activities;
• Require that a formula govern how second lien holders are required to modify second liens in the event of a first lien modification;
• Mandate that servicers establish a single-point-of-contact for each borrower seeking a loan modification, and provide that single-point-of-contact with actual decision making authority;
• Require that an independent master servicer provide oversight and resolve disputes regarding servicers’ actions;
• End the foreclosure “dual track,” which often results in borrowers being foreclosed upon by one division of a servicer while they are simultaneously attempting to negotiate a loan modification with another division of the servicer;
• Require servicers to foreclose in their own names;
• Change payment structures for law firms and other servicer contractors so that compensation is not tied to the speed at which these contractors foreclose; and
• Require servicers to disclose the complete chain of title as well as a full accounting of all fees (both upon request and in the Notice of Default), and the use of lost note affidavits in their foreclosures.

In addition to these borrower protections and servicing industry reforms, I continue to believe that it is essential for Congress to provide bankruptcy judges with the authority to alter mortgage debt on primary residences, an ability that judges already have on vacation homes.  I also believe that the Treasury Department should pursue monetary penalties for servicers’ failure to comply with Home Affordable Modification Program (HAMP) guidelines.  These monetary penalties could be redirected for any number of purposes, including increasing legal services funding so that homeowners can be adequately represented by counsel in foreclosure.  Finally, if the interagency report on foreclosure fraud does not already address this issue, I would urge regulators to conduct a robust investigation into whether parties involved in mortgage securitization may have failed to follow rules regarding the creation of Real Estate Mortgage Investment Conduits (REMICs), and are therefore in violation of tax rules.

More generally, I remain concerned that our regulators didn’t learn the lessons outlined in the Financial Crisis Inquiry Commission report, which starkly laid out how a failure to protect borrowers led to an explosion in exploitive subprime mortgage products.  All the evidence we have points to the fact that history is likely repeating itself.  In fact, in a November hearing of my Subcommittee, regulators made it clear that they learned of foreclosure fraud via newspaper reports, despite having teams of examiners located within the operations of major servicers.

For this reason, I was very skeptical from the outset that this investigation would yield substantive results, given that it was led by the Office of the Comptroller of the Currency (OCC).  As the subprime crisis has taught us, a regulator charged with protecting banks’ safety and soundness cannot also be charged with protecting the due process rights of borrowers.

Through yesterday and today’s reporting, we learned that the OCC’s position is that only a “small number” of borrowers were improperly foreclosed upon.  I am doubtful of this claim, given what I’ve learned about servicer-driven defaults in the years since this crisis began.  For instance, National Consumer Law Center attorney Diane Thompson has noted in testimony that around 50 percent of the borrowers she represents in foreclosure cases were subject to a servicer-driven default.  Academic work from experts like Kurt Eggert at Chapman University School of Law provides additional support for claims of servicer misbehavior.  And just recently, JPMorgan Chase admitted to wrongfully foreclosing on 14 active duty military personnel and overcharging another 4,000 military borrowers on their mortgages, in contravention of the Servicemembers Civil Relief Act.

To date, all we have are these anecdotal reports.  But through both Congressional hearings, and first-hand experience with servicers, I believe that there is substantial evidence indicating that improper fees, wrongful application of borrower payments, the use of unscrupulous foreclosure mills and other practices evidence the fact that improper foreclosures are widespread.

I eagerly await the full results of the interagency foreclosure fraud investigation.  In the meantime, I will continue to advocate for servicing reforms.  I believe that these fundamental changes to mortgage servicing are needed not only for borrowers, but to ensure a fully-functioning mortgage market that protects investors and encourages the return of private capital moving forward.

###

.

WASHINGTON — A top federal regulator told bankers on Friday that a major investigation into Wall Street’s foreclosure system has revealed a “broken” process that takes advantage of homeowners, further intensifying the debate over regulatory remedies to potential foreclosure fraud.

Mortgage companies have been accused of submitting fraudulent paperwork in the foreclosure process, prompting a brief suspension of foreclosures by several major servicers in the fall. This spectacle has undermined public faith in President Barack Obama’s signature foreclosure-relief effort, the Home Affordable Modification Program, which relies on servicers to implement all of its critical components. The National Consumer Law Center estimates that half of the foreclosure cases it takes on are driven by improper actions by mortgage servicers, rather than fundamental problems with a borrower’s ability to pay off a mortgage.

By: David Dayen Wednesday February 9, 2011 8:45 am

I attended a Huffington Post Mortgage Madness Meetup in Los Angeles last night, which suffered from some late planning, the buggy nature of the Meetup tool and the general difficulty of self-organizing. Only a half-dozen people showed, and most of them were either media (a guy from NPR’s Marketplace) or interested observers in the foreclosure mess. In fact, the one homeowner with a story to tell arrived late and almost didn’t make it because he went to the wrong location initially. But oh, what a story he had to tell. And while I’ve heard a lot of these HAMP horror stories in the past year, I’ve never heard anything like this.

Jeremy Fletcher is a swimming pool builder from Northridge, California. His business jumped along with the inflation of the housing bubble, as people bought new homes and made improvements. He made enough money in those years to purchase a $900,000 home for him, his wife and two kids in late 2007. “Ironically, the reason I was doing so well ended up tied to the same thing that got me in this mess,” Fletcher, a surfer and former musician who lived with the Lovin’ Spoonful growing up, told the group.

As the bubble popped, his business tanked. He went from $250,000 in sales in 2007 to $40,000 in 2008. By early 2009, “I was totally broke,” paying for his $4,200 mortgage out of savings and barely hanging on.

He called his servicer, Citi Mortgage, early in 2009, when HAMP was announced, to see if he could get help. “I thought I was being responsible, looking forward before I got into trouble,” he said. The servicer didn’t see it that way. Citi told him they wouldn’t help because he hadn’t missed a payment and showed no sign of default.

In re: JOSE D CRUZ, Chapter 13, Debtor.
JOSE D CRUZ, Plaintiff,
v.
HACIENDA ASSOCIATES, LLC and WELLS FARGO BANK, N.A., Defendants.

Case No. 10-43793-MSH, Adv. Pro. No. 11-04006.

United States Bankruptcy Court, D. Massachusetts, Central Division.

January 26, 2011.

MEMORANDUM OF DECISION ON PLAINTIFF’S EMERGENCY MOTION FOR PRELIMINARY INJUNCTION

MELVIN S. HOFFMAN, Bankruptcy Judge

Before me is the emergency motion of the plaintiff, Jose D. Cruz, for a preliminary injunction barring defendant Wells Fargo Bank, N.A. from foreclosing its mortgage on the plaintiff’s residence at 73 Bolton Street, Marlborough, Massachusetts. After a preliminary hearing on the motion on January 18, 2011, I entered a temporary restraining order enjoining the foreclosure sale, which had been scheduled for that day, but permitted Wells Fargo to postpone the sale by public proclamation to a date after January 25, 2011. On January 25th, I held an evidentiary hearing on the motion. After reviewing the complaint and the evidence submitted by the parties, and for the reasons stated below, I will grant the plaintiff’s motion and enter a preliminary injunction subject to certain conditions.

In accordance with Fed. R. Civ. P. 65, made applicable to this proceeding by Fed. R. Bankr. P. 7065, my decision whether or not to grant a preliminary injunction must be based on the evidence before me, including the verified complaint and affidavits submitted by the parties. I consider the plaintiff’s complaint to be a verified complaint because the plaintiff filed an affidavit dated January 13, 2011 in which he verified the facts alleged in the complaint. The plaintiff also filed the affidavit of Joseph Molina of GIM Services, Inc., who averred that his office submitted a loan modification application to Wells Fargo on behalf of the plaintiff on November 29, 2011. According to Mr. Molina’s affidavit, after several inquiries regarding the status of the loan modification application, his office was informed by telephone on January 19, 2011 (after the complaint had been filed) that the plaintiff’s loan modification application had been denied, and that the reason given for the denial was the approaching foreclosure sale. Mr. Molina also averred that Wells Fargo has not yet communicated this denial to the plaintiff in writing. Lastly, the plaintiff submitted the affidavit of his attorney, Michael Shepsis, who averred that he had contacted Wells Fargo’s foreclosure counsel on several occasions regarding the status of the loan modification and as of January 18, 2011, he had not received any notice that the application had been denied.

In order to obtain a preliminary injunction, the requesting party must demonstrate that (i) there is a likelihood of success on the merits of his claim; (ii) that he will suffer irreparable harm if the injunction is not granted; (iii) that the harm to the requesting party if the injunction is not granted is greater than the harm to the opposing party if it is granted; and (iv) that the public interest would not be adversely affected by the issuance of the injunction. See Sunshine Development, Inc. v. F.D.I.C., 33 F.3d 106, 110-11 (1st Cir. 1994).

On the issue of irreparable harm, the plaintiff seeks in Counts I (breach of contract) and V of his complaint (breach of duty of good faith and reasonable diligence) judgment canceling the pending foreclosure sale of his home. Accordingly, I find that absent an injunction the plaintiff will be irreparably harmed because a foreclosure sale will effectively deprive him of the relief requested in those counts of his complaint.

The question of whether the plaintiff is likely to succeed on the merits of his complaint is really the critical factor to be determined here. See Narragansett Indian Tribe v. Guilbert, 934 F.2d 4, 6 (1st Cir. 1991). The plaintiff argues that Wells Fargo, which is a participant in the federal government’s Home Affordable Modification Program (“HAMP”), breached its obligation under the program by scheduling a foreclosure sale of the plaintiff’s property while the plaintiff’s application for a loan modification was under consideration by it. HAMP arose out of the Emergency Economic Stabilization Act of 2008, and is administered by the Federal National Mortgage Association (“Fannie Mae”) as the agent of the Department of the Treasury. Speleos v. BAC Home Loans Servicing, L.P., 2010 WL 5174510, *1 (D. Mass. 2010). The program requires that all mortgage loans owned or guaranteed by Fannie Mae or the Federal Home Loan Mortgage Corporation (“Freddie Mac” and together with Fannie Mae, the government-sponsored agencies or “GSEs”) that meet certain requirements be evaluated by the loan servicers for loan modifications. If a borrower qualifies, then the servicer is obligated to modify the loan in accordance with a predefined formula that reduces the borrower’s monthly payment to 31% of his gross income for the first five years.[1] In addition, many servicers of mortgage loans not owned by the GSEs have executed so-called Servicer Participation Agreements (“SPAs”) with Fannie Mae, as agent for the Treasury Department, by which they agree to review and modify loans on similar terms. The Treasury Department, through Fannie Mae, has established guidelines that servicers must follow in evaluating and approving loan modification requests by borrowers. These guidelines are binding on each servicer by way of its servicing agreements with the GSEs or the SPA to which it was a party. I take judicial notice of the fact that Wells Fargo has executed an SPA, and is thus obligated to follow the HAMP requirements with respect to evaluating a loan modification application.[2]

The plaintiff points to Supplemental Directive 09-01, the first of the Treasury Department’s HAMP guidelines, to support his allegation that servicers such as Wells Fargo are prohibited from foreclosing on mortgages that are under review for loan modification. This directive also requires servicers to seek alternatives to foreclosure in the event that a loan modification is denied.[3] The plaintiff alleges that Wells Fargo scheduled the foreclosure sale of his property while his loan was being reviewed for a HAMP modification, and that this alleged violation of the HAMP guidelines constituted a breach of contract and of Wells Fargo’s duty to act in good faith and with reasonable diligence, justifying, among other things, cancellation of the foreclosure.

The plaintiff’s breach of contract claim in Count I of the complaint is premised on the proposition that he is a third party beneficiary of the Wells Fargo’s SPA or its servicing agreements with the GSEs. While the HAMP program was intended to benefit homeowners by helping them avoid foreclosure, the majority of courts considering the issue have held that consumers have no private cause of action as third party beneficiaries to enforce HAMP violations by their servicers. See McKensi v. Bank of Am., N.A., 2010 WL 3781841, *5-6 (D. Mass. 2010) (“the existing case law weighs decisively in favor of defendant: numerous district courts have interpreted identical HAMP agreements and have come to the conclusion that a borrower is not a third party beneficiary.”) (quoting Hoffman v. Bank of Am., N.A., 2010 WL 2635773 (N.D. Cal.) and citing additional cases); but see Reyes v. Saxon Mortgage Services, Inc., 2009 WL 3738177, *2 (S.D. Cal.) (plaintiff’s complaint alleging a third party beneficiary status with respect to a HAMP violation was “sufficient to state a plausible claim for breach of contract under a third party beneficiary theory”). Very recently, Judge Gorton of the U.S. District Court in Massachusetts cited the proposition in Restatement (Second) of Contracts § 311(b) that one must look to a contract itself to determine whether the parties intended to give rights to third party beneficiaries. Speleos, 2010 WL 5174510 at *5. He held that although the various SPAs and servicing agreements related to HAMP serve to benefit borrowers, nothing in the contracts themselves indicate an intent to create a private right of action in favor of borrowers. I agree with the majority view that the plaintiff is not a third party beneficiary of Wells Fargo’s SPA or other relevant HAMP servicing agreements and, therefore, I find that the plaintiff is not likely to succeed on Count I of the complaint.

In Count V of his complaint, the plaintiff alleges that Wells Fargo breached its duty to act in good faith and with reasonable diligence by attempting to foreclose its mortgage on the plaintiff’s property. Massachusetts courts have consistently held that in addition to complying with the statutory requirements governing mortgage foreclosure set forth in Mass. Gen. Laws ch. 244, a mortgagee must act in good faith and must use reasonable diligence to protect the interests of the mortgagor. Williams v. Resolution GGF OY, 417 Mass. 377, 382-83 (1994). In Snowden v. Chase Manhattan Mortgage Corp., 2003 WL 22519518 (Mass. Super.), the court held that a lender breached this duty by foreclosing a mortgage the day after receiving notice that the borrower had negotiated an agreement to sell the property at a price beneficial to the lender. The court noted that mortgagees in Massachusetts must act as a “trustee for the benefit of all persons interested.” Id. at *2 (quoting Taylor v. Weingartner, 233 Mass. 243, 247 (1916)).

The plaintiff argues that by scheduling a foreclosure sale while the plaintiff’s loan modification request was pending, Wells Fargo breached its duty to act in good faith and with reasonable diligence to protect the plaintiff’s interests. The plaintiff’s argument finds support in Speleos, which concluded that even though the borrowers had failed to state a claim for relief under third party beneficiary theory, they could state a claim for negligence on the theory that the defendants had a duty under the HAMP guidelines not to proceed with a foreclosure sale while evaluating the borrowers for a loan modification. Speleos, 2010 WL 5174510 at *6. The plaintiff’s allegation in Count V of the complaint that Wells Fargo breached its duty of good faith and reasonable diligence is comparable to the negligence claim in Speleos.

The evidence thus far indicates that Wells Fargo scheduled and intended to conduct a foreclosure sale of the plaintiff’s property while the plaintiff’s request for a loan modification was pending before it. Even if the modification was denied on January 19, 2011, eight days prior to the rescheduled foreclosure sale, the plaintiff was not given written notice of the denial nor was he offered other foreclosure mitigation options as required under HAMP guidelines. I find, therefore, that there is a substantial likelihood that the plaintiff will prevail on Count V of his complaint.

In addition, I find that the plaintiff has satisfied the remaining requirements for injunctive relief. While it is possible that the value of the plaintiff’s property may depreciate as this case proceeds (although Wells Fargo offered no evidence on this point), I find that any potential detriment to Wells Fargo from depreciation is outweighed by the enormity of the harm to the plaintiff from a foreclosure sale. Further, my order that the plaintiff make payments to the Chapter 13 trustee will protect Wells Fargo from depreciation and unpaid real estate taxes in the event it ultimately prevails in this action. Finally, I find that it is in the public interest to ensure that lenders foreclose on properties only when they are entitled to do so. Also, the neighbors surrounding the plaintiff’s property will likely benefit if foreclosure can be avoided.

Under Fed. R. Bankr. P. 7065 the court may require a party who benefits from a preliminary injunction to post security to protect the enjoined party in the event that the injunction turns out to have been wrongly issued. Here, the plaintiff’s first and second amended Chapter 13 plans filed in the main case, dated September 24 and October 11, 2010 respectively, each contained provisions in which the plaintiff agreed to make monthly payments to Wells Fargo while his loan modification application was under review. At the evidentiary hearing on the plaintiff’s motion, the plaintiff’s counsel conceded that these payments have not been made to date. The Chapter 13 trustee noted that the plaintiff’s amended Schedule J accompanying his bankruptcy petition lists a total of $1800 in expenses to be dedicated to home mortgage and real estate tax payments. In his memorandum of law in support of his motion for injunctive relief, the plaintiff indicates that his current monthly income is $5829, plus $1,200 in rental income from a tenant. Based on these amounts, a hypothetical HAMP loan modification would involve an initial monthly payment of $1806.99, equal to 31% of total income, after subtracting 25% of the rental income to account for vacancy risk. Accordingly, the preliminary injunction will be conditioned on the plaintiff’s making monthly payments of $1800 to the Chapter 13 trustee. This payment requirement shall be retroactive to October 1, 2010 (the first month after the plaintiff proposed to make these payments in his September 24, 2010 amended Chapter 13 plan). Payments shall be held by the trustee for the benefit of Wells Fargo and paid to Wells Fargo in the event it prevails in this action.

The plaintiff shall make payments of $1800 per month to the Chapter 13 trustee on the first day of each month beginning on February 1, 2011, with a ten day grace period for late payment. In order to catch up on payments due for October through January, the plaintiff shall make a double payment of $3600 on the first day of March, April, May and June. The failure of the plaintiff to make any payment when due will be grounds for vacating the injunction.

A separate order shall enter.

[1] See, e.g., Making Home Affordable Program Handbook for Servicers of Non-GSE Mortgages, Version 3.0 (hereinafter “HAMP Handbook”) at 65, available at https://www.hmpadmin.com/portal/programs/docs/hamp_servicer/mhahandbook_30.pdf.

[2] See Wells Fargo Servicer Participation Agreement, available at http://www.treasury.gov/initiatives/financial-stability/housing-programs/mha/Documents_Contracts_Agreements/093010wellsfargobanknaSPA(incltransmittal)-r.pdf; see also HAMP Handbook, supra note 1 at 17 (explaining the role of the SPA).

[3] Each of the GSEs has its own version of this directive, but all contain the prohibition against foreclosure while loans are under review for modification.

Opinion Below…

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EXCERPTS:

To address that condition, and with no end to it in sight, we decided to break the log jam by introducing a process “for debtors and lenders to [mediate and to] reach consensual resolution when a debtor’s residential property is at risk of foreclosure” by “opening communications between debtors’ and [the] lenders’ decision-makers.”3 LMP §I Purpose, 1.

[…]

CONCLUSION
The Rhode Island Loss Mitigation Program was conceived as a case management tool designed to encourage the resolution of differences between residential mortgage lenders and their borrowers, and to provide a way for them to access the various federal housing programs available outside of bankruptcy, such as the Home Affordable Modification Program (HAMP). The Loss Mitigation Program is intended to start a dialogue, giving the parties nothing more than the opportunity to discuss their respective positions. The alleged dire consequences of the implementation of such a Program, as predicted by PHH have not materialized, and if any do emerge, they will be judicially
addressed forthwith.

For the reasons discussed above, and based on the arguments of the NCLC and by the Debtors, here and in Lawton, which are adopted and incorporated herein by reference, PHH’s Objection to participating in this Court’s loss mitigation program is OVERRULED.

Dated at Providence, Rhode Island, this 28th day of January, 2011.

Arthur N. Votolato
U.S. Bankruptcy Court
Entered on docket: 1/28/11

Continue to both orders below…

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MERS could be “harnessed by Congress and the industry to improve the mortgage finance system,” R.K. Arnold, its president and CEO, told a House subcommittee in November. Arnold retired this month.

By Prashant Gopal and Lorraine Woellert – Jan 27, 2011 12:01 AM ET

U.S. mortgage servicers face a new era of tighter oversight as regulators seek to cut the number of botched foreclosures and increase loan modifications for struggling borrowers.

The industry, which oversees $10.6 trillion in loans, has been overwhelmed by more than 3 million foreclosures since 2006. The housing-market collapse exposed failures — in the way servicers are paid, track loans and process property seizures — that threaten to stall a fledgling rebound in prices and sales.

“If we fail to act decisively now to deal with the foreclosure crisis, we risk triggering a double-dip in U.S. housing markets,” Sheila Bair, chairman of the Federal Deposit Insurance Corp., said in a Jan. 19 speech to mortgage-industry executives in Washington. “The problem is serious, and the need for action is urgent.”

Changes being studied include a new fee structure for servicers, independent reviews of rejected requests to ease loan terms and a fund to compensate victims of improper foreclosures, according to Bair and other federal and state regulators. Lawmakers have proposed reining in the privately run Merscorp Inc., even as the company says it could serve as a national mortgage registry.

Members of the committee questioned Special Inspector General Barofsky and others about the quarterly report on the Troubled Asset Relief Program (TARP) and Home Affordable Mortgage Program (HAMP) . Chairman Rep. Darrell Issa, (R-CA) Witnesses: Neil Barofsky, special inspector general for the troubled asset relief program Department of the Treasury Tim Massad, Acting Assistant Secretary for Financial Stability and Chief Counsel

House Committee on Oversight & Reform hearing on latest SIGTARP report:

http://www.c-spanvideo.org/program/Bailouts

Barofsky opening statement: http://oversight.house.gov/images/stories/Hearings/Opening_Statements/Testimony.Barofsky.SIGTARP.012611.pdf

Treasury opening statement: http://oversight.house.gov/images/stories/Hearings/Opening_Statements/Massad_Testimony_1.26.11.pdf

Ranking Minority Member Cummings opening statement barred from ‘live’ delivery by Chair Darrell Issa (R-CA): http://democrats.oversight.house.gov/index.php?option=com_content&view=article&id=5164:cummings-opening-statement-for-the-sigtarp-hearing-&catid=3:press-releases&Itemid=49

Documents and video should be posted later:

http://oversight.house.gov/index.php?option=com_content&view=article&id=1085%3Abailouts-and-the-foreclosure-crisis-report-of-the-special-inspector-general-for-the-troubled-asset-relief-program&catid=12&Itemid=20

January 2011 – SIGTARP quarterly report to Congress: http://www.sigtarp.gov/reports/congress/2011/January2011_Quarterly_Report_to_Congress.pdf

PACHECO v. EMC Mortgage Corp & The Bear Stearns Companies LLC [Read Complaint Below]

SEATTLE, January 10, 2011 (GlobeNewswire) – Attorney Advertising. Keller Rohrback L.L.P. (www.krclassaction.com) announces that a class action has been filed in the United States District Court for the Eastern District of Washington on behalf of all mortgagors in the State of Washington whose home mortgage loans are serviced by EMC Mortgage Corporation and who (a) have attempted to obtain modifications of their loan terms from EMC; and (b) have made payments pursuant to a “Repayment Agreement,” a Home Affordable Modification Program (“HAMP”) trial modification plan, or any other temporary modification plan.

The complaint alleges, among other things that the Defendants: engaged in bad faith as to home mortgage loan modification negotiations; led mortgagors to reasonably believe and rely on Defendants’ representations that they would permanently modify their mortgage loans upon successful completion of “Repayment Agreements” or other trial programs; charged unreasonable, unlawful, or excessive fees; failed to properly disclose and/or concealed fees and other charges; failed to provide to mortgagors a proper or comprehensible accounting of fees, payments, credits, arrearages, and amounts owed; improperly or under-applied mortgage payments to accounts; and breached “Repayment Agreements” or other trial modification program contracts or promises. The complaint has been filed pursuant to the Washington Consumer Protection Act and contains additional claims for breach of contract, breach of the duty of good faith and fair dealing, promissory estoppel, and unjust enrichment.

Keller Rohrback is also investigating the following mortgage loan servicers regarding mortgage loan modifications in Washington and elsewhere:

• American Home Mortgage Servicing, Inc.
• Aurora Loan Services, LLC
• Citimortgage, Inc.
• GMAC Mortgage, Inc.
• JPMorgan Chase Bank NA
• Litton Loan Servicing LP
• Nationstar Mortgage LLC
• OneWest Bank
• SunTrust Mortgage, Inc.

If your home mortgage loan is serviced by EMC Mortgage Corporation or any of the above-listed servicers and you have questions regarding these matters, please contact paralegal Nick Wallace or attorneys Gretchen Obrist or Lynn Sarko at 800.776.6044 or via email at info@kellerrohrback.com.

For additional information regarding the litigation, please click here.

Keller Rohrback, with offices in Seattle, Phoenix, Santa Barbara and New York, is committed to helping individuals protect their investments. Keller Rohrback has successfully provided class action representation for over a decade. Its litigators have obtained judgments and settlements on behalf of clients in excess of seven billion dollars.

Attorney Advertising. Prior Results Do Not Guarantee A Similar Outcome.

CONTACT:
Keller Rohrback L.L.P.
Nick Wallace, Paralegal
(800) 776-6044
info@kellerrohrback.com
www.krclassaction.com

Source: Keller Rohrback L.L.P. Keller Rohrback L.L.P. Announces Class Action Complaint Filed Against EMC Mortgage Corp. and The Bear Stearns Companies LLC

Continue Reading the complaint below…

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Via: Mandelman Matters

I have to tell you… I’ve been waiting for this to happen.

Ohio Judge Peter Sikora was looking to take advantage of the lowest mortgage interest rates in decades and refinance his eight-bedroom, lakefront Cleveland home, so he contacted his bank, JPMorgan Chase.  With property values in decline in Cleveland, Chase said no to refinancing but told the judge to apply for a loan modification instead.  The judge followed JPMorgan Chase’s advice to the letter and as a result has fallen a year behind on his nearly $1 million mortgage… hasn’t paid his property taxes… and now has ended up in foreclosure.

So, all I can think of to say is… don’t you just hate these irresponsible sub-prime borrowers who should never have been allowed to buy their homes in the first place and now think they’re entitled to loan modifications?  I know I sure do.  Maybe if the judge had called a scammer and paid an up front fee… he would have gotten his loan modified… no, wait… that’s not right… maybe if he had called a lawyer he would have… wait, no… he is a lawyer, right.  Well, maybe if he… oh wait, I know… MAYBE IF HE HAD NOT BELIEVED THE LIES TOLD BY JPMORGAN CHASE… yeah, that’s sure as shootin’ where he went wrong.

According to a story in the Cleveland Plain Dealer, that I’m betting mysteriously isn’t going to get a lot of national attention…

“The bank advised me that the only way they would consider a loan modification would be if I fell behind on my payments,” said Sikora, 59, a judge since 1989. “I took their advice and put the money aside.”