Jeffrey Stephan | FORECLOSURE FRAUD | by DinSFLA

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The Destruction of a Foreclosure Lawyer’s Faith in the Justice System

The Destruction of a Foreclosure Lawyer’s Faith in the Justice System


If the courts can’t address clear instances of fraud and injustice, how can they protect our citizens?

 New Deal 2.0-

It has been exactly 18 months since I deposed GMAC Mortgage’s prolific document signer, Jeffrey Stephan, in a case where I was defending a Maine homeowner in foreclosure. Stephan admitted to signing 8,000 to 10,000 foreclosure documents a month (that is about one a minute, if you do the arithmetic), including summary judgment affidavits used by courts as the basis for entering forclosure judgments. Stephan’s affidavits were sent by GMAC to courts all over the country. Obviously, and as Stephan admitted, he did not bother to read those affidavits. He also admitted that he had no idea as to whether the foreclosure affidavits that he signed were true. He didn’t even trouble himself to appear before a notary to be sworn, even though his affidavits said that he had done so. While Stephan admitted that he understood that judges were relying upon his affidavits to take away the homes of homeowners all over the country, he seemed serene and untroubled by his dishonesty in signing these false affidavits. (Conduct like this has since been awarded the slang term “robo-signing,” but I never use it because it fails to adequately describe the dishonesty and deception involved.)

[NEW DEAL 2.0]

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Maine Supreme Judicial Court upholds ruling in robo-signing foreclosure

Maine Supreme Judicial Court upholds ruling in robo-signing foreclosure


A Denmark woman whose case touched off a national uproar over foreclosures with faulty paperwork may finally lose her home.

KJOnline-

By a 5-1 decision released this morning, the Maine Supreme Judicial Court upheld a lower court ruling that allowed loan servicer GMAC Mortgage, despite admittedly flawed practices involved in affadavit signing, to foreclose upon a home in Denmark purchased in 2003 by Nicolle M. Bradbury.

[KJONLINE]

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Jeffrey Stephan, the first bank employee outed as a “robo-signer,” still works at GMAC (not as a robo-signer)

Jeffrey Stephan, the first bank employee outed as a “robo-signer,” still works at GMAC (not as a robo-signer)


For some these are documents and for others it represents families.

 

WSJ-

GMAC Mortgage LLC, the mortgage servicer that vaulted “robo-signing” into the headlines, says it has overhauled its foreclosure procedures.

The unit of Ally Financial Inc. has put each employee who works on foreclosures through an additional 40 hours of training, testing them on what they learned. Outside law firms that handle foreclosures for GMAC must answer questions about their own practices and are subject to on-site reviews.

The changes came after GMAC employee Jeffrey Stephan said in a deposition last year that he had signed off on as many as 10,000 foreclosure documents without proper review.

[WALL STREET JOURNAL]

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Maine Appeal pushes for sanctions in foreclosure

Maine Appeal pushes for sanctions in foreclosure


Portland Press Herald-

PORTLAND – The “robo-signing” foreclosure case of a Denmark woman represents such a serious attack on the integrity of the state’s judicial system that an investigation of the mortgage servicer’s practices is warranted, the woman’s lawyer argued before the Maine Supreme Judicial Court on Wednesday.

Nicolle Bradbury’s attorney, Thomas Cox, also said a lower court erred when it failed to find GMAC Mortgage in contempt because one of its employees signed a sworn document in support of foreclosure on her home without reviewing the relevant records. Cox, who discovered the flawed process, argued that it was part of a pattern and that the trial court should have considered remedial or punitive action against GMAC.

Cox said such affidavits affect all of the 1,152 foreclosure actions brought in Maine by GMAC over the past six years. He said GMAC was sanctioned in Florida for the same problems in 2006, but failed to reform its practices.

[PORTLAND PRESS]

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GMAC LLC vs. LAW OFFICES OF DAVID J. STERN Battle it out in Federal Court

GMAC LLC vs. LAW OFFICES OF DAVID J. STERN Battle it out in Federal Court


Mortgage Fraud

GMAC Mortgage, LLC
Law Offices of David J. Stern

Action Date: August 12, 2011
Location: FT. Lauderdale, FL

GMAC Mortgage, LLC filed counterclaims in a federal court lawsuit brought against GMAC by its former lawyers, The Law Offices of David J. Stern, P.A. (“Stern”). The case, No. 11-CV-61526, was filed in federal court in the Southern District of Florida, where Stern’s offices were located.

GMAC accuses Stern of gross legal malpractice, breach of contract, breach of fiduciary duty, violating Florida’s Deceptive and Unfair Trade Practice Act and Misrepresentation/Suppression. GMAC seeks unspecified compensatory and punitive damages.

GMAC alleges that Stern:

1. caused or permitted Stern employees to execute, witness and/or notarize assignments of mortgage that were back-dated;

2. caused or permitted Stern’s employees to witness and/or notarize assignments of mortgages, affidavits of indebtedness and/or other affidavits on a daily basis prior to and without actually witnessing execution of the document by the person whose signature was to be witnessed and/or notarized;

3. caused or permitted Stern’s employees to prepare and execute affidavits of indebtedness for submission to the foreclosure court that failed to follow appropriate professional practices and procedures;

4. caused or permitted Stern’s employees to sign the name of another person on various foreclosure-related documents without any indication of that fact on the documents;

5. charged GMAC substantial fees and costs for legal services that Stern knew or should have known fell below the minimum standard of professional care owed by Stern to GMAC; and

6. committed acts or omissions that have subjected GMAC to claims, losses and liabilities of third-parties.

Essentially, GMAC claims that Stern’s malpractice carrier should be held responsible for all of the allegedly fraudulent acts of Stern’s office manager, Cheryl Samons, and other Stern employees who signed mortgage assignments and affidavits to push through foreclosures at record-breaking speed.

On July 27, 2011, Stern filed its Answer to these GMAC claims including the following:

“ 9. GMACM’s claims are barred, in whole or in part, by the doctrine of unclean hands because of GMACM’s: breach of contract; failure to retain replacement counsel in a timely manner; signing inaccurate affidavits; affidavits that were not properly notarized; not confirming whether loan and mortgage documents were properly endorsed; assigned or in possession of the appropriate party; and other misconduct identified in the Consent Order entered on April 13, 2011 by Order of the Board of Governors of the Federal Reserve System and the FDIC, and because, to the extent DJSPA committed legal malpractice, which is expressly denied, any such malpractice was the result of GMACM’s own actions and/or instructions.”

Homeowners and investors are lost in this battle of the giants. Tens of thousands of Florida homeowners lost their foreclosure cases because of the fraudulent documents produced by GMAC.

These documents most certainly came from Stern, but they also came from GMAC’s own employees, including master-signer Jeffrey Stephan, and employees in many other major foreclosure mills used by GMAC. The Stern defense that “Everybody was doing it” is unfortunately true.

An important question for homeowners and investors is whether GMAC has instructed its new lawyers to advise the Courts and homeowners of these findings.

Malpractice insurance carriers throughout the country could not imagine a more ominous case. Copies of the Counterclaim and Answer are available in the Pleadings section of Fraud Digest.


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Internal Doc Reveals GMAC Filed False Document in Bid to Foreclose

Internal Doc Reveals GMAC Filed False Document in Bid to Foreclose


by Paul Kiel
ProPublica, July 27, 2011, 1:07 p.m.

GMAC, one of the nation’s largest mortgage servicers, faced a quandary last summer. It wanted to foreclose on a New York City homeowner but lacked the crucial paperwork needed to seize the property.

GMAC has a standard solution to such problems, which arise frequently in the post-bubble economy. Its employees secure permission to create and sign documents in the name of companies that made the original loans. But this case was trickier because the lender, a notorious subprime company named Ameriquest, had gone out of business in 2007.

And so GMAC, which was bailed out by taxpayers [1] in 2008, began looking for a way to craft a document that would pass legal muster, internal records obtained by ProPublica [2]show.

“The problem is we do not have signing authority—are there any other options?” Jeffrey Stephan, the head of GMAC’s “Document Execution” team, wrote to another employee and the law firm pursuing the foreclosure action [2]. No solutions were offered.

Three months later, GMAC had an answer. It filed a document with New York City authorities [3] that said the delinquent Ameriquest loan had been assigned to it “effective of” August 2005. The document [3] was dated July 7, 2010, three years after Ameriquest had ceased to exist and was signed by Stephan, who was identified as a “Limited Signing Officer” for Ameriquest Mortgage Company. Soon after, GMAC filed for foreclosure.

An examination by ProPublica suggests this transaction was not unique. A review of court records in New York identified hundreds of similar assignment documents filed in the name of Ameriquest after 2008 by GMAC and other mortgage servicers.

Get ProPublica’s stories delivered to your inbox [4]

The issue has attracted growing scrutiny in recent months as bloggers [5], consumer attorneys and media outlets [6] have identified what appears to be part of a pattern of questionable assignments filed across the country.

GMAC, which is still majority owned by the government, was at the center of what became known as the robo-signing scandal [7]. The uproar began last fall after revelations that mortgage servicing employees had produced flawed documents to speed foreclosures [8]. GMAC and other banks have acknowledged filing false affidavits in which bank officials claimed “personal knowledge” of the facts underlying thousands of mortgages. But GMAC and other servicers say they’ve since tightened their procedures. They insist that their records were largely accurate and the affidavits amounted to errors of form, not substance.

The issues surrounding the Ameriquest loan and others like it appear to be more serious.

“This assignment of mortgage has all of the markings of GMAC finding that it lacked a needed mortgage assignment in order to foreclose and just making it up,” said Thomas Cox, a Maine foreclosure defense attorney.

In New York, it’s a felony to file a public record with “intent to deceive.”

“It’s fraud,” said Linda Tirelli, a consumer bankruptcy attorney. “I want to know who’s going to do a perp walk for recording this.”

No criminal charges have been filed in the robo-signing cases.

Asked by ProPublica about the document, GMAC acknowledged Stephan did not have authority to sign on behalf of Ameriquest. The bank said it is still planning to push ahead with foreclosure on the homeowner, who remains in the property.

Company spokeswoman Gina Proia said an internal review last fall into “suspected documentation execution issues” had flagged the loan as problematic and that GMAC is “determining what needs to be done in order to receive the necessary authorization.”

“We will determine and complete the necessary steps to remediate and proceed with foreclosure,” Proia said.

GMAC also declined a request from ProPublica to interview Stephan.

Another GMAC document obtained by ProPublica shows that in at least one recent incident, GMAC employees were still discussing the possibility of fabricating evidence needed to facilitate a foreclosure.

The company once again lacked a document that would show it had been assigned the mortgage. Since the lender was defunct and no assignment had ever been made, GMAC again seemed to be stuck. But the employee proposed in June of this year that GMAC file a sworn statement that the assignment had once existed but had been lost. It’s unclear if such an affidavit was ultimately provided to a court.

Records also show that GMAC has continued to rely on documents signed by the very employee at the center of the robo-signing scandal—Jeffrey Stephan, the same employee who also signed the Ameriquest document in 2010. Stephan acknowledged in sworn testimony last year that he had been signing 400 documents each day [9], a revelation that helped kick off the scandal. According to a former employee and a consumer attorney, Stephan still works at GMAC, though he has been transferred to a different unit.

GMAC said it is still pursuing foreclosures based on assignments signed by Stephan. As part of a bid to rebrand itself, GMAC renamed its holding company Ally Financial last year.

“There is no reason or requirement to ‘withdraw’ valid assignments of mortgage that happened to have been signed by Mr. Stephan,” said GMAC spokeswoman Proia, because there’s “no requirement that [the assignment] be signed by a person with knowledge of any particular facts.” All that mattered, she said, was that the signer had received the proper authority.

Banks have little reason to worry about their documents being challenged, since homeowners rarely contest foreclosure actions. In a filing with the New Jersey Supreme Court, GMAC said that of the more than 4,000 foreclosures it has handled in the state only about 4 percent of homeowners had contested the action.

When homeowners do challenge banks’ documentation for foreclosures, they can have success. Late last week, the Vermont Supreme Court threw out a foreclosure case handled by GMAC due, in part, to a flawed assignment document signed by Stephan.

“It is neither irrational nor wasteful to expect the foreclosing party be actually in possession of its claimed interest,” the court said [10], “and have the proper supporting documentation in hand when filing suit.”

Since last fall, GMAC has added staff, increased training and added new procedures, said Proia. But some of those new hires have come from firms themselves accused of filing false foreclosure documents.

One manager at GMAC, Kevin Crecco, moved there from a position at the Law Offices of David Stern in Florida after the firm drew scrutiny from the state’s attorney general for allegedly filing forged documents. Stern’s office, once among Florida’s biggest foreclosure law firms and labeled a “foreclosure mill” by critics, ceased operations earlier this year.

An internal organization chart [11] from this spring for GMAC’s foreclosure department lists Crecco as a manager overseeing roughly two dozen employees. GMAC declined to make Crecco available for an interview. He hasn’t been accused of any wrongdoing.

Mortgage servicers like GMAC continue to be set up like assembly lines, with members of its “Document Execution” team responsible for signing documents. The organizational chart shows two “Document Execution” teams of 13 employees each.

The employees are tasked with, among other things, signing affidavits attesting to the accuracy of the basic facts of the loan, such as the mortgage amount, outstanding fees, etc. Affidavits are a necessary step to foreclosure in many states where banks have to go to court to seize a home.

During the robo-signing scandal, GMAC admitted that employees signing affidavits didn’t verify the underlying facts. The bank says it has fixed the problems.

But consumer attorneys said that while GMAC’s processes have improved, they haven’t corrected basic flaws with their process.

Cox, the attorney who questioned Stephan last year as part of a foreclosure case, said employees on the “Document Execution” team still aren’t truly checking the accuracy of the underlying information. Rather than digging for the original documents, employees on the team look at the numbers given by a GMAC database and double-check the math.

If the employee “just looks at a computer screen, that’s not sufficient in my view,” said Cox. He said he would soon be challenging affidavits GMAC recently filed in court.

Consumer attorneys also said the systems that servicers rely on are consistently plagued with inaccuracies, making a more thorough verification of the information necessary. “These days, homeowners are being forced to save every receipt, every letter, every statement, so that one day they can prove that their payment history is accurate and the bank is wrong,” said Jim Kowalski, a consumer attorney in Florida.

GMAC’s Proia said the company’s procedures—which amount to a review of information in the company’s computerized databases—were sufficient to file affidavits.

© 2010-15 FORECLOSURE FRAUD | by DinSFLA. All rights reserved.



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U.S. BANK NA v. KIMBALL | VT Supreme Court Affirms w/Prejudice “AFFIDAVIT FAIL, Jeffrey Stephan, Scott Zeitz, Accredited, Allonge, MERS, RFC, Homecomings, GMAC”

U.S. BANK NA v. KIMBALL | VT Supreme Court Affirms w/Prejudice “AFFIDAVIT FAIL, Jeffrey Stephan, Scott Zeitz, Accredited, Allonge, MERS, RFC, Homecomings, GMAC”


U.S. Bank National Association (2010-169)

2011 VT 81

[Filed 22-Jul-2011]

NOTICE:  This opinion is subject to motions for reargument under V.R.A.P. 40 as well as formal revision before publication in the Vermont Reports.  Readers are requested to notify the Reporter of Decisions, Vermont Supreme Court, 109 State Street, Montpelier, Vermont 05609-0801 of any errors in order that corrections may be made before this opinion goes to press.

2011 VT 81

No. 2010-169

U.S. Bank National Association

Supreme Court




On Appeal from

v.

Grand Isle Superior Court




Christine Kimball

January Term, 2011





Ben W. Joseph, J.

Andre D. Bouffard of Downs Rachlin Martin PLLC, Burlington, for Plaintiff-Appellant.

Grace B. Pazdan, Vermont Legal Aid, Inc., Montpelier, for Defendant-Appellee.

PRESENT:  Reiber, C.J., Dooley, Johnson, Skoglund and Burgess, JJ.

¶ 1. BURGESS, J. Plaintiff US Bank National Association, as trustee for RASC 2005 AHL1, appeals from a trial court order granting summary judgment for defendant homeowner and dismissing with prejudice US Bank’s foreclosure complaint for lack of standing.  On appeal, US Bank argues that it had standing to prosecute the foreclosure claim and the court’s dismissal with prejudice was in error.  Homeowner cross-appeals, arguing that the court erred in not addressing her claim for attorney’s fees.  We affirm the dismissal and remand for consideration of homeowner’s motion for attorney’s fees.

¶ 2. On appeal from a grant of summary judgment, “the nonmoving party receives the benefit of all reasonable doubts and inferences.”  Samplid Enters., Inc. v. First Vt. Bank, 165 Vt. 22, 25, 676 A.2d 774, 776 (1996). We review the decision de novo under the same standard as the trial court.  Id.  Summary judgment is appropriate if there is no genuine issue of material fact and a party is entitled to judgment as a matter of law.  Id.; see V.R.C.P. 56(c)(3).

¶ 3. So viewed, the record reveals the following facts.  Homeowner purchased property on June 16, 2005.  To finance the purchase, she executed an adjustable rate promissory note in favor of Accredited Home Lenders, Inc. (Accredited) in the amount of $185,520.  The note was secured by a mortgage deed to Mortgage Electronic Registration Systems, Inc. (MERS) as nominee for Accredited.

¶ 4. On January 12, 2009, US Bank filed a foreclosure complaint for homeowner’s failure to make required payments.  The complaint alleged that the mortgage and note were assigned to US Bank by MERS, as nominee for Accredited, by an instrument dated January 6, 2009.  Attached to the complaint was a copy of the instrument entitled “Assignment of Mortgage,” signed by Jeffrey Stephan, identified therein as Duly Authorized Agent and Vice President of MERS.  The promissory note was also attached to the complaint, and appended to it was an undated allonge[1] signed by a corporate officer of Accredited, endorsing the note in blank.

¶ 5. Homeowner initially filed a pro se answer.  After procuring counsel, homeowner filed an amended answer, claiming, among other things, that US Bank failed to present sufficient evidence that it held homeowner’s note and corresponding mortgage.  Homeowner also filed a counterclaim alleging consumer fraud.  In March 2005, homeowner filed a motion for summary judgment arguing that US Bank lacked standing to bring the foreclosure complaint because it failed to establish that it held an interest in the debt secured by homeowner’s property.  Homeowner argued that US Bank had not established proper assignment of the mortgage because MERS as nominee for Accredited lacked authority to assign the mortgage.  Homeowner further argued that US Bank failed to demonstrate that it held or had a right to enforce the promissory note.  In July 2009, in support of the motion for summary judgment, homeowner submitted an affidavit, averring that in mid-June 2009 she received a letter from her mortgage servicer, Homecomings Financial, notifying her that the servicing rights to her loan were being assigned not to US Bank, but to GMAC Mortgage, LLC effective July 1, 2009.  She also averred that she received a concurrent letter from GMAC, confirming that it was servicing the loan on behalf of Residential Funding Corporation (RFC).  The letters referred to in the affidavit were attached.

¶ 6. US Bank opposed the request and responded with its own cross-motion for summary judgment on the merits, claiming that whatever deficiencies were present in its original complaint were now resolved because it had produced and sent to homeowner “a copy of the fully endorsed note specifically payable to [US Bank].”  In its statement of undisputed facts, US Bank asserted that it had the original note, and that it was endorsed from Accredited to RFC and then to US Bank.  No dates, however, were provided for these endorsements.  In support, US Bank attached an affidavit attesting to these facts, but still devoid of any dates for the purported assignments.  The affidavit was signed by Jeffrey Stephan, the same man who had signed the assignment attached to original complaint, but this time identifying himself as a “Limited Signing Officer” for GMAC, the mortgage servicer for homeowner’s loan.  In the affidavit, Stephan claims that he has “familiarity with the loan documentation underlying the mortgage loan entered at issue in the present foreclosure case.”  The copy of the note attached had an allonge, appearing to be the same allonge previously submitted as endorsed in blank, but this time with “RFC” stamped in the blank spot and containing a second endorsement from RFC to US Bank.  Neither endorsement was dated.

¶ 7. The court held a hearing on the summary judgment motions.  Following the hearing, the court issued a written order on October 27, 2009.  The court concluded that to enforce a mortgage note, “a plaintiff must show that it was the holder of the note at the time the Complaint was filed,” and here there was “simply no evidence of an assignment to a party in interest.”  Because neither note submitted by US Bank was dated, the court concluded that there was no evidence that the note was endorsed to US Bank before the complaint was filed.  Therefore, the court held that US Bank lacked standing to bring the foreclosure action.  The court granted homeowner’s motion for summary judgment, dismissed the foreclosure action, and set the matter for hearing on homeowner’s counterclaim.

¶ 8. On November 23, 2009, US Bank moved for reconsideration.[2] US Bank acknowledged that it had created “confusion” by attaching to the complaint “an outdated copy of the note prior to its transfer to [US Bank], and a mortgage assignment that purports to assign the note along with the mortgage.”  It claimed, however, that because it now held the original note, it was entitled to enforce it.  Homeowner did not dispute that US Bank possessed what appeared to be the original note, but she insisted US Bank was required to authenticate the endorsements through credible affidavits and to demonstrate that it had possession when the complaint was filed.  As to this timing issue, US Bank contended that homeowner’s mortgage had been endorsed to it in September 2005.  In support, US Bank submitted an affidavit signed by Scott Zeitz, who is identified as a litigation analyst with GMAC.  In the affidavit, ZeitzZeitz avers that homeowner’s mortgage note was endorsed to RFC and then to US Bank in September 2005.  The affidavit does not explain the obvious inconsistencies with the prior affidavits offered by US Bank or with the letter homeowner received from GMAC identifying RFC as the holder of her note in June 2009.  It also does not explain how obtained this knowledge given that GMAC did not begin servicing the loan until July 1, 2009.  In the alternative, US Bank argued that, even if did not hold an interest in the note at the time the complaint was filed, it could cure the deficiency by now substituting itself as the real party in interest under Rule of Civil Procedure 17(a).  US Bank also filed a motion to amend its complaint to properly reflect the manner in which it now alleged that it acquired an interest in homeowner’s note and mortgage.

¶ 9. Homeowner opposed the motions, contending that the numerous inconsistencies in the information offered by US Bank made it unreliable.  In addition, homeowner argued that the Zeitz affidavit was not based on personal knowledge and therefore insufficient to support the motion.  Homeowner moved for reasonable attorney’s fees under Rule 56(g), claiming that US Bank acted in bad faith by filing affidavits lacking a basis in personal knowledge and contradicting undisputed evidence.[3] Homeowner explained that as a result her attorney “spent numerous hours responding to and refuting the validity of the affidavits.”

¶ 10. Following a hearing, the court denied the motions for reconsideration and to amend the complaint.  The court concluded that US Bank had submitted a defective complaint and the deficiencies therein were not mere technicalities, but essential items, without which the case could not proceed.  The court held that US Bank lacked standing when the complaint was filed, and dismissed the complaint “with prejudice.”  US Bank appeals.

¶ 11. On appeal, US Bank argues that the court erred in (1) dismissing the complaint with prejudice; (2) concluding there was no standing when there was evidence demonstrating that US Bank was the holder of the note before the complaint was filed; and (3) denying US Bank’s request to substitute itself as the real party in interest.  Homeowner cross-appeals, arguing that the court failed to address her request for attorney’s fees and requesting a remand.

¶ 12. We begin with the issue of standing.  “[O]ur review of dismissal for lack of standing is the same as that for lack of subject matter jurisdiction.  We review the lower court’s decision de novo, accepting all factual allegations in the complaint as true.”  Brod v. Agency of Natural Res., 2007 VT 87, ¶ 2, 182 Vt. 234, 936 A.2d 1286.  We have the same standing requirement as the federal courts in that our jurisdiction is limited to “actual cases or controversies.”  Parker v. Town of Milton, 169 Vt. 74, 76-77, 726 A.2d 477, 480 (1998). Therefore, to bring a case “[a] plaintiff must, at a minimum, show (1) injury in fact, (2) causation, and (3) redressability.”  Id. at 77, 726 A.2d at 480 (citing Lujan v. Defenders of Wildlife, 504 U.S. 555, 560-61 (1992)).  This means a plaintiff “must have suffered a particular injury that is attributable to the defendant,” id. at 77, 726 A.2d at 480, and a party who is not injured has no standing to bring a suit.  Bischoff v. Bletz, 2008 VT 16, ¶¶ 15-16, 183 Vt. 235, 939 A.2d 420.  And, as the U.S. Supreme Court has explained, “standing is to be determined as of the commencement of suit.”  Lujan, 504 U.S. at 570 n.5.

¶ 13. To foreclose a mortgage, a plaintiff must demonstrate that it has a right to enforce the note, and without such ownership, the plaintiff lacks standing.  Wells Fargo Bank, N.A. v. Ford, 15 A.3d 327, 329 (N.J. Super. Ct. App. Div. 2011).  While a plaintiff in a foreclosure should also have assignment of the mortgage, it is the note that is important because “[w]here a promissory note is secured by a mortgage, the mortgage is an incident to the note.”  Huntington v. McCarty, 174 Vt. 69, 70, 807 A.2d 950, 952 (2002). Because the note is a negotiable instrument, it is subject to the requirements of the UCC.  Thus, US Bank had the burden of demonstrating that it was a “ ‘[p]erson entitled to enforce’ ” the note, by showing it was “(i) the holder of the instrument, (ii) a nonholder in possession of the instrument who has the rights of a holder, or (iii) a person not in possession of the instrument who is entitled to enforce the instrument.”  9A V.S.A. § 3-301.  On appeal, US Bank asserts that it is entitled to enforce the note under the first category—as a holder of the instrument.

¶ 14. A person becomes the holder of an instrument when it is issued or later negotiated to that person.  9A V.S.A. § 3-201(a). Negotiation always requires a transfer of possession of the instrument.  Id. § 3-201 cmt. When the instrument is made payable to bearer, it can be negotiated by transfer alone.  Id. §§ 3-201(b), 3-205(a). If it is payable to order—that is, to an identified person—then negotiation is completed by transfer and endorsement of the instrument.  Id. § 3-201(b). An instrument payable to order can become a bearer instrument if endorsed in blank.  Id. § 3-205(b).See Bank of N.Y. v. Raftogianis, 13 A.3d 435, 439-40 (N.J. Super. Ct. Ch. Div. 2010) (reciting requirements for bank to demonstrate that it was holder of note at time complaint was filed). Therefore, in this case, because the note was not issued to US Bank, to be a holder, US Bank was required to show that at the time the complaint was filed it possessed the original note either made payable to bearer with a blank endorsement or made payable to order with an endorsement specifically to US Bank.

¶ 15. US Bank lacked standing because it has failed to demonstrate either requirement.  Initially, US Bank’s suit was based solely on an assignment of the mortgage by MERS.  The complaint did not allege that US Bank held the original note.  US Bank simply attached a copy of the note with an allonge endorsement in blank.  Homeowner challenged this evidence as insufficient to show that US Bank held an interest in her note.  Because homeowner supported her position with an affidavit and documentary evidence, US Bank was required to “come forward with an opposing affidavit or other evidence that raises a dispute as to the fact or facts in issue.”  Alpstetten Ass’n, Inc. v. Kelly, 137 Vt. 508, 514, 408 A.2d 644, 647 (1979). At this point, US Bank abandoned its claim of assignment of the mortgage and instead asserted that it held the original note.  It submitted the note with an allonge containing two undated specific endorsements, one to US Bank.  The supporting affidavit claimed that the note had been endorsed to US Bank, but provided no information about when and failed to explain why a note with a blank endorsement was the basis for the complaint.

¶ 16. Based on this contradictory and uncertain documentation, the trial court did not err in concluding that there was no evidence to show that US Bank was a holder of the note at the time it filed the complaint.  US Bank failed to allege or demonstrate that it held the original note endorsed in blank when it commenced the foreclosure action.  In fact, US Bank asserted that the note with the blank endorsement was an earlier copy that was mistakenly attached to the complaint.  It also alleged that the blank endorsement was stamped with RFC’s name in 2005.  Therefore, it could not possibly have held the original note with a blank endorsement when the complaint was filed.  Further, there is no evidence to show that US Bank held the original note endorsed to its name before the complaint was filed.  While US Bank eventually produced the original note with an endorsement to it, none of the evidence submitted at summary judgment by US Bank established the timing of the endorsement.  Given US Bank’s failure to show it had standing, the foreclosure complaint was properly dismissed.

¶ 17. US Bank argues that whatever shortcomings were present in its earlier filings were cured by the documents attached to its motion to reconsider, and, therefore, the court erred in denying this motion.  We disagree.  The additional affidavit submitted with the motion to reconsider did nothing to establish the timing of the endorsement to US Bank because it was not based on personal knowledge and contained conclusions rather than facts.  Affidavits must be “made on personal knowledge [and] set forth such facts as would be admissible in evidence, and shall show affirmatively that the affiant is competent to testify to the matters stated therein.”  V.R.C.P. 56(e). The affiant, Zeitz, declared himself to be an employee of GMAC, the servicer of homeowner’s loan.  Zeitz averred that the note was endorsed to US Bank in September 2005 but provided no explanation of how he gained personal knowledge about this endorsement that supposedly took place several years before his company began servicing homeowner’s loan.  Further, the affidavit failed to explain the obvious contradictions with other evidence.  Specifically, Zeitz did not account for the letter from his company, submitted by homeowner, that identifies RFC, the predecessor-in-interest to US Bank, as the holder of the loan in July 2009, months after the complaint was filed.  Having already failed to succeed on its summary judgment motion, reconsideration of the same issues on new evidence was up to the court’s sound discretion.  See Crosby v. Great Atl. & Pac. Tea Co., 143 Vt. 537, 539, 468 A.2d 567, 568 (1983) (per curiam) (affirming court’s denial of plaintiffs’ motion to reconsider summary judgment ruling using an abuse-of-discretion standard).  Fraught with contradictions and evidently lacking information based on personal knowledge, the affidavit was insufficient to establish that US Bank had an interest in the note prior to the time the complaint was filed.  Thus, it was no abuse of discretion for the court to deny the motion to reconsider.

¶ 18. In the alternative, US Bank argues that even if it did not hold the note at the time the complaint was filed, this should be overlooked because it has now produced the original note with a chain of endorsements ending in US Bank.[4] Thus, US Bank contends it can now be substituted as the real party in interest under Rule 17(a).  US Bank argues that this Court allows liberal substitution of parties, citing Korda v. Chicago Insurance Co., 2006 VT 81, 180 Vt. 173, 908 A.2d 1018.  In that case, the trial court dismissed an estate’s claims against a tortfeasor’s employer’s insurance company where the employer did not assign its rights to the estate until three years after the complaint was filed.  This Court reversed, holding that “where, as here, a plaintiff acquires capacity to sue after the suit is filed, and before the action is dismissed for lack of capacity, the acquisition of capacity relates back to the filing of the action for all purposes, including compliance with the statute of limitations.”  Id. ¶ 16. US Bank contends it is similarly situated and is entitled to substitution as the real party in interest now that it has obtained an interest in the note.

¶ 19. The merit of this argument might have been better received by the trial court had it been supported by the necessary documentation and proffered before summary judgment was granted for defendant.  US Bank had notice of the standing deficiency from the start of the litigation and had an opportunity to prove its case.  It was unable to do so.  Having failed to support its position, the court was not required to give US Bank another opportunity to prove its case following the grant of summary judgment, and did not abuse its discretion in denying the request at that late stage in the proceeding.  See V.R.C.P. 17(a) (directing that action not be dismissed for absence of real party in interest “until a reasonable time has been allowed”).

¶ 20. US Bank argues that for reasons of policy it should be permitted to proceed because it would be wasteful to prevent it from being able to “cure” its standing problem.  While we are sympathetic to the desire to avoid wasteful and duplicative litigation, the source of the unnecessary proceedings in this case was not an overly wooden application of the rules, but US Bank’s failure to abide by them.  It is neither irrational nor wasteful to expect a foreclosing party to actually be in possession of its claimed interest in the note, and have the proper supporting documentation in hand when filing suit.[5] Nor is it irrationally demanding to expect the foreclosing party to provide adequate, satisfying proof in response to a motion for summary judgment challenging standing to bring suit.  What should have here been a fairly straightforward, if not a summary, proceeding under the rules, was rendered inefficient by US Bank’s failure to marshal its case before compelling homeowner and the court to waste time and resources, twice, by responding to what could not be proven.  There was nothing inequitable in dismissing this matter.

¶ 21. We turn next to the question of whether the court erred in dismissing the complaint “with prejudice.”  US Bank argues this was in error and homeowner contends that the court’s determination bars US Bank from filing again to foreclose.  At a minimum, the court certainly intended to put an end to US Bank’s instant foreclosure action and dismissal was appropriate because, as another court explained, when a plaintiff is not able to establish that it possessed the note on the date the complaint was filed, the complaint should be subject to dismissal “if only to provide a clear incentive to plaintiffs to see that the issue of standing is properly addressed before any complaint is filed.”  Raftogianis, 13 A.3d at 455.

¶ 22. Nevertheless, and despite the court’s invocation of “with prejudice” in its dismissal order, US Bank cannot be precluded from pursuing foreclosure on the merits should it be prepared to prove the necessary elements.  Although postured as cross-motions for summary judgment, the motion practice addressed only whether the bank had standing for jurisdictional purposes.  The merits of foreclosure were not, and on this record could not have been, litigated.  The court’s dismissal on just jurisdictional grounds was no adjudication on the merits.  See V.R.C.P. 41(b)(3) (providing that any involuntary dismissal, “other than a dismissal for lack of jurisdiction, . . . operates as an adjudication upon the merits” (emphasis added)); see also Wells Fargo Bank, N.A. v. Byrd, 2008-Ohio-4603, ¶¶ 18-20, 897 N.E.2d 722 (Ct. App.) (reversing trial court’s dismissal with prejudice of foreclosure complaint as inappropriate where dismissal was for lack of standing).

¶ 23. Thus, this may be but an ephemeral victory for homeowner.  Absent adjudication on the underlying indebtedness, the dismissal cannot cancel her obligation arising from an authenticated note, or insulate her from foreclosure proceedings based on proven delinquency.  Cf. Indymac Bank, F.S.B. v. Yano-Horoski, 912 N.Y.S.2d 239, 240 (App. Div. 2010) (reversing trial court’s order canceling mortgage and debt).  Homeowner’s arguments supporting a dismissal with prejudice are not convincing.[6] Homeowner relies on Nolen v. State, but that unpublished three-justice decision simply affirmed the trial court’s decision to dismiss with prejudice plaintiff’s constitutional claim for lack of standing without a challenge to or any analysis of the “with prejudice” designation.  No. 08-131, 2009 WL 2411832, at *2 (Vt. May 29, 2009) (unpub. mem.), available at http://www.vermontjudiciary.org/d-upeo/upeo.aspx.New Eng. Educ. Training Serv., Inc. v. Silver St. P’ship, 156 Vt. 604, 613, 595 A.2d 1341, 1345-46 (1991) (affirming dismissal of foreclosure action where recovery on the underlying note would be unconscionable).  While the trial court may have had discretion to exert its equitable powers in this manner, no findings were made to support such a conclusion, and we will not speculate on a matter of such importance. Further, the court’s order does not support plaintiff’s assertion that the court was warranted in dismissing with prejudice on equitable grounds given what homeowner characterizes as inconsistent and “likely fraudulent filings” submitted by US Bank.  See

¶ 24. Finally, we address homeowner’s cross-appeal.  In response to US Bank’s motion to reconsider, homeowner filed a motion for attorney’s fees asserting that US Bank had filed affidavits in bad faith.  We agree that the request for attorney’s fees under Rule 56(g) was timely and properly raised in the trial court, and that the court erred in failing to consider the motion.  Therefore, we remand for consideration of homeowner’s request.

The foreclosure complaint is dismissed and the case is remanded for consideration of defendant’s motion for attorney’s fees.




FOR THE COURT:












Associate Justice




[1] An allonge is “[a] slip of paper sometimes attached to a negotiable instrument for the purpose of receiving further indorsements when the original paper is filled with indorsements.”  Black’s Law Dictionary 83 (8th ed. 2004).  The Uniform Commercial Code (UCC) accepts the use of such endorsements, explaining that “a paper affixed to the instrument is a part of the instrument.”  9A V.S.A. § 3-204(a). Although at one time an allonge could be used only when there was no room on the original document, the official comment to the UCC explains that now an allonge “is valid even though there is sufficient space on the instrument for an indorsement.”  Id. § 3-204 cmt.

[2] Because final judgment had not yet been entered, the motion was filed pursuant to Rule of Civil Procedure 56.  See Kelly v. Town of Barnard, 155 Vt. 296, 307, 583 A.2d 614, 620 (1990) (holding that trial court retains jurisdiction to modify or rescind order prior to entry of final decree and may grant summary judgment motion after denying prior similar motion).

[3] In pertinent part, Rule of Civil Procedure 56(g) states:


Should it appear to the satisfaction of the court at any time that any of the affidavits presented pursuant to this rule are presented in bad faith . . . , the court shall forthwith order the party employing them to pay to the other party the amount of the reasonable expenses which the filing of the affidavits caused the other party to incur, including reasonable attorney’s fees, and any offending party or attorney may be adjudged in contempt.

[4] This argument in and of itself underscores the extent of confusion created by US Bank’s evidence.  While, on the one hand, US Bank wishes us to accept that it has uncontroverted evidence that it has held homeowner’s note since September 2005, on the other hand, it argues that it has acquired an interest in the note recently and can now be substituted as the real party in interest.  It appears that even US Bank is unsure of when the note was endorsed to it.

[5] We note that the foreclosure rule as amended now specifically requires a plaintiff to attach to the complaint “the original note and mortgage deed and proof of ownership thereof, including copies of all original endorsements and assignments of the note and mortgage deed.”  V.R.C.P. 80.1(b)(1) (Cum. Supp. 2010); see 2009, No. 132 (Adj. Sess.) § 1.

[6] We note that two cases cited by homeowner to support dismissal of a foreclosure complaint with prejudice have since been reversed.  U.S. Bank N.A. v. Emmanuel, No.  19271/09, 2010 WL 1856016  (N.Y. Sup. Ct. May 11, 2010), reversed by 921 N.Y.S.2d 320 (App. Div. 2011); IndyMac Bank F.S.B. v. Yano-Horoski, 890 N.Y.S.2d 313 (Sup. Ct. 2009), reversed by 912 N.Y.S.2d 239 (App. Div. 2010).

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GMAC appeal coming to Maine Supreme Court

GMAC appeal coming to Maine Supreme Court


The Morning Sentinel-

A landmark legal case that spotlighted mishandled foreclosures by some of the country’s major lenders is likely to come before Maine’s highest court in September.

The Maine Supreme Judicial Court is expected to hear an appeal of a lower court ruling involving the mortgage servicer GMAC and its foreclosure practices.

Last September, a Maine District Court judge found that a GMAC official had signed a sworn statement supporting the foreclosure of a home owned by Nicolle Bradbury of Denmark, who had lost her job and stopped making mortgage payments. The official, however, hadn’t actually reviewed Bradbury’s foreclosure documents before signing.

Continue reading [THE MORNING SENTINEL]

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In re: GILBERT | NC Appeals Court Reversal “Improper Indorsement, No Evidence of Debt” JEFFREY STEPHAN AFFIDAVIT, DEUTSCHE BANK, GMAC, RESIDENTIAL FUNDING

In re: GILBERT | NC Appeals Court Reversal “Improper Indorsement, No Evidence of Debt” JEFFREY STEPHAN AFFIDAVIT, DEUTSCHE BANK, GMAC, RESIDENTIAL FUNDING


Here’s a snippet and highly recommend reading this in its entirety!

Excerpt:

The record is void of any evidence the Note was assigned and securitized to a trust.

[ipaper docId=54673705 access_key=key-1dch86ck9zy229rl5p87 height=600 width=600 /]

IN THE MATTER OF THE FORECLOSURE BY DAVID A. SIMPSON, P.C., SUBSTITUTE TRUSTEE, OF A DEED OF TRUST EXECUTED BY REX T. GILBERT, JR. AND DANIELA L. GILBERT, HUSBAND AND WIFE, DATED MAY 5, 2006 AND RECORDED ON MAY 10, 2006, IN BOOK 219 AT PAGE 53 OF THE HYDE COUNTY PUBLIC REGISTRY.

No. COA10-361.

Court of Appeals of North Carolina.

Filed May 3, 2011.

Katherine S. Parker-Lowe, for respondent-appellants.

The Law Office of John T. Benjamin, Jr., P.A., by John T. Benjamin, Jr. and James R. White for petitioner-appellee.

HUNTER, JR., Robert N., Judge.

Respondents Rex T. Gilbert, Jr. and his wife Daniela L. Gilbert, appeal from the trial court’s Order authorizing David A. Simpson, P.C., as Substitute Trustee, to proceed with foreclosure under a power of sale in the Deed of Trust recorded in Book 219 at Page 53 in the Hyde County Register of Deeds. We reverse.

I. Factual and Procedural History

On 5 May 2006, Respondent Rex T. Gilbert, Jr. executed an adjustable rate note (“the Note”) to refinance an existing mortgage on his home. According to the terms of the Note, Mr. Gilbert promised to pay a principal amount of $525,000.00 plus interest to First National Bank of Arizona. The Note was secured by a Deed of Trust, executed by Mr. Gilbert and his wife, Daniela L. Gilbert, on real property located at 134 West End Road, Ocracoke, North Carolina. The Deed of Trust identified First National Bank of Arizona as the lender and Matthew J. Ragaller of Casey, Grimsley & Ragaller, PLLC as the trustee.

The record reveals that, during 2008, Respondents ceased making payments on the Note and made an unsuccessful attempt to negotiate a modification of the loan. On 9 March 2009, a Substitution of Trustee was recorded in the Hyde County Register of Deeds, which purports to remove Matthew Ragaller as the trustee of the Deed of Trust and appoint his successor, David A. Simpson, P.C. (“Substitute Trustee”). The Substitution of Trustee identified Deutsche Bank Trust Company Americas as Trustee for Residential Accredit Loans, Inc. Series 2006-QA6 (“Petitioner”) as the holder of the Note and the lien created by the Deed of Trust.

On 12 March 2009, the Substitute Trustee commenced this action by filing a Notice of Hearing on Foreclosure of Deed of Trust with the Hyde County Clerk of Superior Court pursuant to section 45-21.16 of our General Statutes. N.C. Gen. Stat. § 45-21.16 (2009). The Notice of Hearing stated, “the current holder of the foregoing Deed of Trust, and of the debt secured thereby, is: Deutsche Bank Trust Company Americas as Trustee for Residential Accredit Loans, Inc. Series 2006-QA6.”

In a letter dated 5 April 2009, Mr. Gilbert purported to exercise his right to rescind the loan transaction he entered into with the original lender, First National Bank of Arizona, pursuant to the federal Truth in Lending Act, 15 U.S.C. § 1635. As justification for his purported rescission, Gilbert alleged that the Truth in Lending Disclosure Statement provided by First National Bank of Arizona failed to accurately provide all required material disclosures including, inter alia, the correct annual percentage rate and payment schedule. The Substitute Trustee responded with a letter from GMAC ResCap, in which it denied any material disclosure errors were made and refused to rescind the loan transaction.

The foreclosure hearing was held on 2 June 2009 before the Clerk of Superior Court of Hyde County. The Honorable Sharon G. Sadler entered an Order on 17 June 2009, permitting the Substitute Trustee to proceed with the foreclosure. In the Order, the Clerk specifically found, inter alia, that Petitioner was the holder of the Note and Deed of Trust that it sought to foreclose and the Note evidenced a valid debt owed by Mr. Gilbert. Respondents appealed the Order to superior court.

The matter came on for a de novo hearing on 18 August 2009 before the Honorable Marvin K. Blount, III, in Hyde County Superior Court. During the hearing, the trial court admitted into evidence a certified copy of the Note and the Deed of Trust and two affidavits attesting to the validity of Gilbert’s indebtedness pursuant to the Note, and that Deutsche Bank Trust Company Americas as Trustee for Residential Accredit Loans, Inc. Series 2006-QA6 is the current owner and holder of the Note. Additionally, Petitioner introduced the original Note and Allonge for the trial court’s inspection.

Reviewing the record before this Court, the Allonge contains a series of indorsements evidencing the alleged assignments of the Note, as follows:

PAY TO THE ORDER OF: First National Bank of Nevada WITHOUT RECOURSE BY: [Signature] ___________________________ AMY HAWKINS, ASSISTANT VICE PRESIDENT FIRST NATIONAL BANK OF ARIZONA Pay to the order of: RESIDENTIAL FUNDING CORPORATION Without Recourse FIRST NATIONAL BANK OF NEVADA By: [Signature] __________________________ Deutsche Bank National Trust Company, F/K/A Bankers Trust Company of California, N.A. as Custodian as Attorney in Fact [Illegible Name and Title] PAY TO THE ORDER OF Deutsche Bank Trust Company Americas as Trustee WITHOUT RECOURSE Residential Funding Corporation BY [Signature] ________________________ Judy Faber, Vice President

Respondents made two arguments at the hearing. First, Respondents argued that the debt evidenced by the Note no longer existed, as Mr. Gilbert had rescinded the transaction for the loan with First National Bank of Arizona. Petitioner objected to Respondents’ rescission argument as being a defense in equity and, as such, inadmissible in a proceeding held pursuant to N.C. Gen. Stat. § 45-21.16. The trial court agreed and refused to let Respondents’ expert witness testify as to alleged material errors in the Truth in Lending Disclosure Statement, which Mr. Gilbert alleged permitted him the right to rescind the loan. Second, Respondents argued that Petitioner had not produced sufficient evidence to establish that Deutsche Bank Trust Company Americas as Trustee for Residential Accredit Loans, Inc. Series 2006-QA6 was the holder of the Note.

Based on the preceding evidence, the trial court entered an order on 18 August 2009 in which it found, inter alia: Mr. Gilbert executed the Note and, with his wife, executed a Deed of Trust in favor of First National Bank of Arizona, secured by the real property described in the Deed of Trust; a valid debt exists and is owed by Gilbert to Petitioner; Gilbert is in default under the Note and Deed of Trust; proper notice of the foreclosure hearing was given to all parties as required by N.C. Gen. Stat. § 45-21.16; Petitioner was the current holder of the Note and the Deed of Trust. The trial court concluded as a matter of law that the requirements of N.C. Gen. Stat. § 45-21.16 had been satisfied. Based on these findings and conclusion of law, the trial court authorized the Substitute Trustee to proceed with the foreclosure. Respondents timely entered notice of appeal.

II. Analysis

A party seeking permission from the clerk of court to proceed with a foreclosure pursuant to a power of sale contained in a deed of trust must prove the following statutory requirements: (1) the party seeking foreclosure is the holder of a valid debt, (2) default on the debt by the debtor, (3) the deed of trust provides the right to foreclose, (4) proper notice was given to those parties entitled to notice pursuant to section 45-21.16(b). N.C. Gen. Stat. § 45-21.16(d) (2009). The General Assembly added a fifth requirement, which expired 31 October 2010: “that the underlying mortgage debt is not a subprime loan,” or, if it is a subprime loan, “that the pre-foreclosure notice under G.S. 45-102 was provided in all material respects, and that the periods of time established by Article 11 of this Chapter have elapsed[.]” Id. The role of the clerk of court is limited to making a determination on the matters specified by section 45-21.16(d). See Mosler ex rel. Simon v. Druid Hills Land Co., Inc., 199 N.C. App. 293, 295-96, 681 S.E.2d 456, 458 (2009). If the clerk’s order is appealed to superior court, that court’s de novo hearing is limited to making a determination on the same issues as the clerk of court. See id.

The trial court’s order authorizing the foreclosure to proceed was a final judgment of the superior court, therefore, this Court has jurisdiction to hear the instant appeal. N.C. Gen. Stat. § 7A-27(b) (2009). Our standard of review for this appeal, where the trial court sat without a jury, is “`whether competent evidence exists to support the trial court’s findings of fact and whether the conclusions reached were proper in light of the findings.'” In re Adams, __ N.C. App. __, __, 693 S.E.2d 705, 708 (2010) (quoting In re Foreclosure of Azalea Garden Bd. & Care, Inc., 140 N.C. App. 45, 50, 535 S.E.2d 388, 392 (2000)).

We note the trial court classified multiple conclusions of law as “findings of fact.” We have previously recognized “[t]he classification of a determination as either a finding of fact or a conclusion of law is admittedly difficult.” In re Helms, 127 N.C. App. 505, 510, 491 S.E.2d 672, 675 (1997). Generally, “any determination requiring the exercise of judgment or the application of legal principles is more properly classified a conclusion of law.” Id. (citations omitted). Any determination made by “`logical reasoning from the evidentiary facts,'” however, “is more properly classified a finding of fact.” Id. (quoting Quick v. Quick, 305 N.C. 446, 452, 290 S.E.2d 653, 657-58 (1982)). When this Court determines that findings of fact and conclusions of law have been mislabeled by the trial court, we may reclassify them, where necessary, before applying our standard of review. N.C. State Bar v. Key, 189 N.C. App. 80, 88, 658 S.E.2d 493, 499 (2008) (citing In re Helms, 127 N.C. App. at 510, 491 S.E.2d at 675).

Looking to the trial court’s Order, we conclude that the following “findings of fact” are determinations that required the application of legal principles and are more appropriately classified as conclusions of law: a valid debt exists and is owed to Deutsche Bank Trust Company Americas as Trustee for Residential Accredit Loans, Inc. Series 2006-QA6; proper notice was given to and received by all parties as required by N.C. Gen. Stat. § 45-21.16 and the Rules of Civil Procedure; Deutsche Bank Trust Company Americas as Trustee for Residential Accredit Loans, Inc. Series 2006-QA6 is the current owner and holder of the Note and Deed of Trust. See In re Watts, 38 N.C. App. 90, 92, 247 S.E.2d 427, 428 (1978) (noting upon the appeal of a N.C. Gen. Stat. § 45-21.16 special proceeding the trial court’s conclusions of lawsee also Connolly v. Potts, 63 N.C. App. 547, 549, 306 S.E.2d 123, 124 (1983) (same). In light of this reclassification of the trial court’s findings of fact and conclusions of law, we turn to the issues raised on appeal. included the existence of a valid debt, the right to foreclose under the deed of trust, and proper notice to the mortgagors);

1. Rescission of the Loan Transaction

Respondents raise several arguments alleging the trial court erred by refusing to consider their defense to the foreclosure action, that the debt Petitioner sought to foreclose was not a valid debt——a required element under the statute for foreclosure by power of sale. See N.C. Gen. Stat. § 45-21.16(d)(i) (requiring, inter alia, that the clerk of court must determine that a valid debt exists). Respondents contend the debt is not valid because Mr. Gilbert rescinded the transaction by which he obtained the loan from First National Bank of Arizona pursuant to the federal Truth in Lending Act (“TILA”), 15 U.S.C. §§ 1601-1667f, and the Federal Reserve Board’s Regulation Z, 12 C.F.R. § 226.1-.58. We conclude the trial court did not err.

The admissibility of evidence in the trial court is based upon that court’s sound discretion and may be disturbed on appeal only upon a finding that the decision was based on an abuse of discretion. Gibbs v. Mayo, 162 N.C. App. 549, 561, 591 S.E.2d 905, 913 (2004). Here, we conclude the trial court properly refused to consider Respondents’ evidence of rescission. Rescission under the TILA is an equitable remedy. See Am. Mortg. Network, Inc. v. Shelton, 486 F.3d 815, 819 (4th Cir. 2007) (“`[A]lthough the right to rescind [under the TILA] is [statutory], it remains an equitable doctrine subject to equitable considerations.'” (quoting Brown v. Nat’l Permanent Fed. Sav. & Loan Ass’n, 683 F.2d 444, 447 (D.C. Cir. 1982)). While legal defenses to a foreclosure under a power of sale are properly raised in a hearing held pursuant to section 45-21.16, equitable defenses are not. Watts, 38 N.C. App. at 94, 247 S.E.2d at 429. As we have previously stated, a hearing under section 45-21.16 is “not intended to settle all matters in controversy between mortgagor and mortgagee, nor was it designed to provide a second procedure for invoking equitable relief.” Id. A party seeking to raise an equitable defense may do so in a separate civil action brought in superior court under section 45-21.34. Id.; N.C. Gen. Stat. § 45-21.34 (2009) (stating that a party with a legal or equitable interest in the subject property may apply to a superior court judge to enjoin a sale of the property upon legal or equitable grounds). Accordingly, the trial court properly concluded Respondents’ argument that Mr. Gilbert had rescinded the loan transaction, invaliding the debt Petitioner sought to foreclose, was an equitable defense and not properly before the trial court. Respondents’ argument is without merit.[1]

2. Evidence that Petitioner was the Owner and Holder of Mr. Gilbert’s Promissory Note

Respondents also argue the trial court erred in ordering the foreclosure to proceed, as Petitioner did not prove that it was the holder of the Note with the right to foreclose under the instrument as required by section 45-21.16(d)(i) and (iii). We agree.

A “foreclosure under a power of sale is not favored in the law and its exercise will be watched with jealousy.” In re Foreclosure of Goforth Props., Inc., 334 N.C. 369, 375, 432 S.E.2d 855, 859 (1993) (citations and internal quotation marks omitted). That the party seeking to foreclose on a promissory note is the holder of said note is an essential element of the action and the debtor is “entitled to demand strict proof of this element.” Liles v. Myers, 38 N.C. App. 525, 528, 248 S.E.2d 385, 388 (1978).

For the trial court to find sufficient evidence that Petitioner is the holder of a valid debt in accordance with section 45-21.16(d), “this Court has determined that the following two questions must be answered in the affirmative: (1) `is there sufficient competent evidence of a valid debt?'; and (2) `is there sufficient competent evidence that [the party seeking to foreclose is] the holder[ ] of the notes [that evidence that debt]?'” Adams, __ N.C. App. at __, 693 S.E.2d at 709 (quoting In re Cooke, 37 N.C. App. 575, 579, 246 S.E.2d 801, 804—05 (1978)); see N.C. Gen. Stat. § 45-21.16(d) (2009) (in order for the foreclosure to proceed, the clerk of court must find, inter alia, the existence of a “valid debt of which the party seeking to foreclose is the holder,” and a “right to foreclose under the instrument” securing the debt) (emphasis added).

Establishing that a party is the holder of the note is essential to protect the debtor from the threat of multiple judgments on the same note.

If such proof were not required, the plaintiff could negotiate the instrument to a third party who would become a holder in due course, bring a suit upon the note in her own name and obtain a judgment in her favor. . . . Requiring proof that the plaintiff is the holder of the note at the time of her suit reduces the possibility of such an inequitable occurrence.

Liles, 38 N.C. App. at 527, 248 S.E.2d at 387.

We have previously determined that the definition of “holder” under the Uniform Commercial Code (“UCC”), as adopted by North Carolina, controls the meaning of the term as it used in section 45-21.16 of our General Statutes for foreclosure actions under a power of sale. See Connolly, 63 N.C. App. at 550, 306 S.E.2d at 125; Adams, __ N.C. App. at __, 693 S.E.2d at 709. Our General Statutes define the “holder” of an instrument as “[t]he person in possession of a negotiable instrument that is payable either to bearer or to an identified person that is the person in possession.” N.C. Gen. Stat. § 25-1-201(b)(21) (2009); Econo-Travel Motor Hotel Corp. v. Taylor, 301 N.C. 200, 203, 271 S.E.2d 54, 57 (1980). Furthermore, a “`[p]erson’ means an individual, corporation, business trust, estate, trust . . . or any other legal or commercial entity.” N.C. Gen. Stat. § 25-1-201(b)(27) (2009).

As addressed above, we conclude the trial court properly found that a valid debt existed. The remaining issue before this Court is whether there was competent evidence that Petitioner was the holder of the Note that evidences Mr. Gilbert’s debt.

In support of its argument that it provided competent evidence to support the trial court’s findings, Petitioner first points to its production of the original Note with the Allonge at the de novo hearing, as well as its introduction into evidence true and accurate copies of the Note and Allonge. Petitioner asserts this evidence “plainly evidences the transfers” of the Note to Petitioner. We cannot agree.

Under the UCC, as adopted by North Carolina, “[a]n instrument is transferred when it is delivered by a person other than its issuer for the purpose of giving to the person receiving delivery the right to enforce the instrument.” N.C. Gen. Stat. § 25-3-203(a) (2009). Production of an original note at trial does not, in itself, establish that the note was transferred to the party presenting the note with the purpose of giving that party the right to enforce the instrument, as demonstrated in Connolly, 63 N.C. App. at 551, 306 S.E.2d at 125, and Smathers v. Smathers, 34 N.C. App. 724, 726, 239 S.E.2d 637, 638 (1977) (holding that despite evidence of voluntary transfer of promissory notes and the plaintiff’s possession thereof, the plaintiff was not the holder of the note under the UCC as the notes were not drawn, issued, or indorsed to her, to bearer, or in blank. “[T]he plaintiff testified to some of the circumstances under which she obtained possession of the notes, but the trial court made no findings of fact with respect thereto.”)

In Connolly, determining who had possession of the note became the critical question for the foreclosure proceeding. 63 N.C. App. at 551, 306 S.E.2d at 125. Several years prior to the foreclosure proceedings at issue in Connolly, the petitioners obtained a loan from a bank and pledged as collateral a promissory note that was payable to the petitioners by assigning and delivering the note to the bank. Id. at 549, 306 S.E.2d at 124. After obtaining their loan, the petitioners sought to foreclose on the promissory note and deed of trust, which was in the bank’s possession, but were denied at the special proceeding before the clerk of court. Id. at 548, 306 S.E.2d at 124. The petitioners appealed the decision to superior court. Id. During the de novo hearing, the petitioners testified their loan to the bank had been paid, but “they had left the [] note at the bank, for security purposes.” Id. at 551, 306 S.E.2d at 125. The petitioners, however, “introduced the originals of the note and deed of trust” during the hearing. Id. The trial court found the bank was in possession of the note and concluded, as a matter of law, the petitioners were not the holders of the note at the institution of the foreclosure proceedings; the foreclosure was again denied. Connolly, 63 N.C. App. at 550, 306 S.E.2d at 124-25. On appeal, this Court concluded that despite the fact that the party seeking foreclosure introduced the original note at the time of the de novo hearing, the trial court’s findings of fact did not address whether the petitioners were in possession of the note at the time of the trial; the trial court’s judgment was vacated and remanded. Id. at 551, 306 S.E.2d at 125-26.

Similarly, here, the trial court’s findings of fact do not address who had possession of Mr. Gilbert’s note at the time of the de novo hearing. Without a determination of who has physical possession of the Note, the trial court cannot determine, under the UCC, the entity that is the holder of the Note. See N.C. Gen. Stat. § 25-1-201(b)(21) (defining “holder” as “the person in possession of a negotiable instrument that is payable either to bearer or to an identified person that is the person in possession“) (emphasis added); Connolly, 63 N.C. App. at 550, 306 S.E.2d at 125 (“It is the fact of possession which is significant in determining whether a person is a holder, and the absence of possession defeats that status.“) (emphasis added). Accordingly, the trial court’s findings of fact do not support the conclusion of law that Petitioner is the holder of Mr. Gilbert’s note.

Assuming arguendo that production of the Note was evidence of a transfer of the Note pursuant to the UCC and that Petitioner was in possession of the Note, this is not sufficient evidence that Petitioner is the “holder” of the Note. As discussed in detail below, the Note was not indorsed to Petitioner or to bearer, a prerequisite to confer upon Petitioner the status of holder under the UCC. See N.C. Gen. Stat. § 25-1-201(b)(21) (requiring that, to be a holder, a person must be in possession of the note payable to bearer or to the person in possession of the note). “`[M]ere possession’ of a note by a party to whom the note has neither been indorsed nor made payable `does not suffice to prove ownership or holder status.'” Adams, __ N.C. App. at __, 693 S.E.2d at 710 (quoting Econo-Travel Motor Hotel Corp., 301 N.C. at 203, 271 S.E.2d at 57).

Petitioner acknowledges that following the signing of the Note by Mr. Gilbert, the Note was sequentially assigned to several entities, as indicated by the series of indorsements on the Allonge, reprinted above. Respondents argue these indorsements present two problems. First, Respondents state that Petitioner did not provide any evidence to establish that Deutsche Bank National Trust Company had the authority, as the attorney-in-fact for First National Bank of Nevada, to assign the Note to Residential Funding Corporation in the second assignment. Respondents make no argument——and cite no authority to establish——that such evidence is needed. Therefore, we do not address the merits of this alleged error and deem it abandoned. See N.C. R. App. P. 28(6) (2011) (“Issues not presented in a party’s brief, or in support of which no reason or argument is stated, will be taken as abandoned.”)

Second, Respondents argue Petitioner has not offered sufficient evidence that Deutsche Bank Trust Company Americas as Trustee for Residential Accredit Loans, Inc. Series 2006-QA6 was the holder of the Note and, thus, the party entitled to proceed with the foreclosure action. We agree.

Respondents note the third and final assignment on the Allonge was made to “Deutsche Bank Trust Company Americas as Trustee,” which is not the party asserting a security interest in Respondents’ property; this action was brought by Deutsche Bank Trust Company Americas as Trustee for Residential Accredit Loans, Inc. Series 2006-QA6, the entity the trial court found to be the owner and holder of the Note. Section 3-110 of the UCC, as codified in our General Statutes, states in pertinent part:

For the purpose of determining the holder of an instrument, the following rules apply:

. . . .

(2) If an instrument is payable to (i) a trust, an estate, or a person described as trustee or representative of a trust or estate, the instrument is payable to the trustee, the representative, or a successor of either, whether or not the beneficiary or estate is also named . . . .

N.C. Gen. Stat. § 25-3-110(c) (2009) (emphasis added). Additionally, the official comments to this section of the UCC state, in part, “This provision merely determines who can deal with an instrument as a holder. It does not determine ownership of the instrument or its proceeds.” Id. § 25-3-110, Official Comment 3.

In the present case, the Note is clearly indorsed “PAY TO THE ORDER OF Deutsche Bank Trust Company Americas as Trustee.” Thus, pursuant to section 25-3-110(c)(2), the Note is payable to Deutsche Bank Trust Company Americas as Trustee. See Id. Because the indorsement does not identify Petitioner and is not indorsed in blank or to bearer, it cannot be competent evidence that Petitioner is the holder of the Note. See N.C. Gen. Stat. § 25-1-201(b)(21) (defining “holder” as “[t]he person in possession of a negotiable instrument that is payable either to bearer or to an identified person that is the person in possession“); Econo-Travel Motor Hotel Corp., 301 N.C. at 204, 271 S.E.2d at 57 (concluding that where the defendants produced a copy of the note indorsed to an entity other than the plaintiff, the “defendants established that plaintiff was not the owner or holder of the note”).

In addition to the Note and Allonge, Petitioner points to two affidavits provided by two GMAC Mortgage employees as further evidence that the trial court’s findings are based on sufficient competent evidence. Again, we disagree.

The first affidavit is an Affidavit of Indebtedness by Jeffrey Stephan (“Stephan”).[2] In his affidavit, Stephan averred, inter alia, he was a limited signing officer for GMAC Mortgage, the sub-servicer of Mr. Gilbert’s loan, and as such, was “familiar with the books and records of [GMAC Mortgage], specifically payments made pursuant to the Note and Deed of Trust.” Accordingly, Stephan testified as to the principal amount of Mr. Gilbert’s loan and to his history of loan payments. Stephan further testified that after the Note and Deed of Trust were executed they were “delivered” to the original lender, First National Bank of Arizona; the original lender then “assigned and transferred all of its right, title and interest” to First National Bank of Nevada, which, in turn, assigned all its rights, title, and interest in the instruments to Residential Funding Corporation. The final assignment to which Stephan averred is an assignment and securitization of the Note and Deed of Trust from Residential Funding Corporation to “Deutsche Bank Trust Company Americas as Trustee.” Stephan then makes the conclusory statement, “Deutsche Bank Trust Company Americas as Trustee for Residential Accredit Loans, Inc. Series 2006-QA6 is the current owner and holder of the Note and Deed of Trust described herein.”

Whether Deutsche Bank Trust Company Americas as Trustee for Residential Accredit Loans, Inc. Series 2006-QA6 is the owner and holder of the Note and Deed of Trust is a legal conclusion that is to be determined by a court of law on the basis of factual allegations. As such, we disregard Stephan’s conclusion as to the identity of the “owner and holder” of the instruments. See Lemon v. Combs, 164 N.C. App. 615, 622, 596 S.E.2d 344, 349 (2004) (“`Statements in affidavits as to opinion, belief, or conclusions of law are of no effect.'” (quoting 3 Am. Jur. 2d, Affidavits § 13 (2002))); see also Speedway Motorsports Int’l Ltd. v. Bronwen Energy Trading, Ltd., __ N.C. App. __, __ n.2, __ S.E.2d __, __ n.2, slip op. at 12 n.2, No. 09-1451 (Feb. 15, 2011) (rejecting a party’s contention that this Court must accept as true all statements found in the affidavits in the record, stating, “our standard of review does not require that we accept a witness’ characterization of what `the facts’ mean”). While Stephan referred to a Pooling and Servicing Agreement (“PSA”) that allegedly governs the securitization of the Note to Deutsche Bank Trust Company Americas as Trustee, the PSA was not included in the record and will not be considered by this Court. See N.C. R. App. P. 9(a) (2011) (“In appeals from the trial division of the General Court of Justice, review is solely upon the record on appeal, the verbatim transcript of proceedings, if one is designated, and any other items filed pursuant to this Rule 9.”) The record is void of any evidence the Note was assigned and securitized to a trust.

We also note that Stephan alleged no facts as to who possesses Mr. Gilbert’s note, other than his averment that the Note was “delivered” to the original lender, First National Bank of Arizona. Stephan referred to a statement made by counsel for GMAC Mortgage that the original Note “would be brought to the foreclosure hearing,” but he did not provide any facts from which the trial court could determine who has possession of the Note. As demonstrated by Connolly,63 N.C. App. at 551, 306 S.E.2d at 125. Thus, we conclude Stephan’s affidavit is not competent evidence to support the trial court’s conclusion that Deutsche Bank Trust Company Americas as Trustee for Residential Accredit Loans, Inc. Series 2006-QA6 is the owner and holder of Mr. Gilbert’s note. discussed above, production of a note at trial is not conclusive evidence of possession.

Petitioner also provided the affidavit of Scott Zeitz (“Zeitz”), who alleged in his affidavit to be a litigation analyst for GMAC Mortgage. Zeitz’s basis for his affidavit testimony is that he works with “the documents that relate to account histories and account balances of particular loans” and that he is familiar with Mr. Gilbert’s account. Accordingly, Zeitz testified to the details of Mr. Gilbert’s loan and the terms of the Note. Zeitz’s affidavit, substantially similar to the affidavit of Jeffrey Stephan, also averred to the transfer of the Note and Deed of Trust through the series of entities indicated on the Allonge, stating in part:

Residential Funding Corporation sold, assigned and transferred all of its right, title and interest in and to the Note and Deed of Trust to Deutsche Bank Trust Company Americas as Trustee for Residential Accredit Loans, Inc. Series 2006-QA6. This is reflected on the Allonge to the Note, a true and accurate copy of which is attached and incorporated hereto as EXHIBIT 5. (Emphasis added.)

This statement is factually incorrect; the Allonge in the record contains no indorsement to Deutsche Bank Trust Company Americas as Trustee for Residential Accredit Loans, Inc. Series 2006-QA6. Zeitz further stated that “Deutsche Bank Trust Company Americas as Trustee for Residential Accredit Loans, Inc. Series 2006-QA6 is the current owner and holder of the Note and Deed of Trust.” This statement is a legal conclusion postured as an allegation of fact and as such will not be considered by this Court. See Lemon, 164 N.C. App. at 622, 596 S.E.2d at 349.

Unlike Jeffrey Stephan, Zeitz stated that Deutsche Bank Trust Company Americas as Trustee for Residential Accredit Loans, Inc. Series 2006-QA6 “has possession of the original Note and Deed of Trust.” We note, however, that “[w]hen an affiant makes a conclusion of fact, it must appear that the affiant had an opportunity to observe and did observe matters about which he or she testifies.” Lemon, 164 N.C. App. at 622, 596 S.E.2d at 348-49 (quoting 3 Am. Jur. 2d Affidavits § 13) (internal quotation marks omitted). Moreover,

[t]he personal knowledge of facts asserted in an affidavit is not presumed from a mere positive averment of facts but rather the court should be shown how the affiant knew or could have known such facts and if there is no evidence from which an inference of personal knowledge can be drawn, then it is presumed that such does not exist.

Id. at 622-23, 596 S.E.2d at 349 (quoting 3 Am. Jur. 2d Affidavits § 14, cited with approval in Currituck Associates Residential P’ship v. Hollowell, 170 N.C. App. 399, 403-04, 612 S.E.2d 386, 389 (2005)). Thus, while Zeitz concluded as fact that Deutsche Bank Trust Company Americas as Trustee for Residential Accredit Loans, Inc. Series 2006-QA6 has possession of the Note, his affidavit provides no basis upon which we can conclude he had personal knowledge of this alleged fact. Because of these deficiencies, we conclude that neither the affidavit of Jeffrey Stephan nor the affidavit of Scott Zeitz is competent evidence to support the trial court’s finding that Deutsche Bank Trust Company Americas as Trustee for Residential Accredit Loans, Inc. Series 2006-QA6 is the owner and holder of Mr. Gilbert’s note.

III. Conclusion

We conclude the record is lacking of competent evidence sufficient to support that Petitioner is the owner and holder of Mr. Gilbert’s note and deed of trust. The trial court erred in permitting the Substitute Trustee to proceed with foreclosure proceedings and its order is

Reversed.

Judges MCGEE and BEASLEY concur.

[1] During the pendency of this action, the Gilberts filed a separate action against Deutsche Bank Trust Company Americas, Residential Funding, LLC, GMAC Mortgage, LLC, and David A. Simpson, P.C. to litigate, inter alia, their TILA claim in Hyde County Superior Court. The defendants removed the action to federal court. See Gilbert v. Deutsche Bank Trust Co. Americas, slip op. at 1, 4:09-CV-181-D, 2010 WL 2696763 (E.D.N.C. July 7, 2010), reconsideration denied, 2010 WL 4320460 (E.D.N.C. Oct. 19, 2010). Because the Gilberts’ claim was filed more than three years after the loan transaction was completed, the federal trial court dismissed the action for failure to state a claim upon which relief could be granted. Id. at __, slip op. at 5.

[2] This Court finds troubling that GMAC Mortgage, LLC was recently found to have submitted a false affidavit by Signing Officer Jeffrey Stephan in a motion for summary judgment against a mortgagor in the United States District Court of Maine. Judge John H. Rich, III concluded that GMAC Mortgage submitted Stephan’s false affidavit in bad faith and levied sanctions against GMAC Mortgage, stating:

[T]he attestation to the Stephan affidavit was not, in fact, true; that is, Stephan did not know personally that all of the facts stated in the affidavit were true. . . . GMAC [Mortgage] was on notice that the conduct at issue here was unacceptable to the courts, which rely on sworn affidavits as admissible evidence in connection with motions for summary judgment. In 2006, an identical jurat signed under identical circumstances resulted in the imposition of sanctions against GMAC [Mortgage] in Florida. James v. U.S. Bank Nat. Ass’n, 272 F.R.D. 47, 48 (D. Me. 2011).

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PB POST | Lenders compound court errors

PB POST | Lenders compound court errors


While some called the problem a technicality, others called it perjury and a fraud.

By Christine Stapleton and Kimberly Miller
Palm Beach Post Staff Writer
Updated: 8:23 p.m. Saturday, Feb. 5, 2011
Posted: 8:18 p.m. Saturday, Feb. 5, 2011

Scores of Palm Beach County homes were foreclosed on with faulty paperwork that banks are now trying to sidestep with a legal maneuver experts say doesn’t even exist.

A Palm Beach Post review of court documents filed after last fall’s robo-signing scandal found 116 Palm Beach County cases in which attorneys for banks have asked a judge to ratify a final foreclosure judgment even though flawed documents “may” have been used to foreclose on the property.

Nearly half of the homes – 48 percent – have been sold at foreclosure auction. Tampa-based Florida Default Law Group, being investigated by the state attorney general, filed all of those foreclosures. All but three of the homes auctioned were seized based on documents signed by Jeffrey Stephan, a renowned robo-signer.

They were spotted because lawyers filed “motions to ratify” the final foreclosure judgment – an unheard-of request apparently aimed at getting judges to uphold the original case, the amounts owed to the bank, and attorney fees.

A judge’s blessing on the back end could discourage challenges to ownership and title down the road.

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FDL | 10,000 GMAC Foreclosures Stopped in Maryland

FDL | 10,000 GMAC Foreclosures Stopped in Maryland


Posts by David Dayen Sunday January 16, 2011 7:00 am

In a major ruling Friday, a coalition of nonprofit defense lawyers and consumer protection advocates in Maryland successfully got over 10,000 foreclosure cases managed by GMAC Mortgage tossed out, because affidavits in the cases were signed by Jeffrey Stephan, the infamous GMAC “robo-signer” who attested to the authenticity of foreclosure documents without any knowledge about them, as well as signing other false statements.

The University of Maryland Consumer Protection Clinic and Civil Justice, Inc., a nonprofit, filed the class action lawsuit, arguing that any case using Jeffrey Stephan as a signer was illegitimate and must be dismissed. In court Friday, GMAC agreed to dismiss every case in Maryland relying on a Stephan affidavit. They can refile foreclosure actions on the close to 10,000 homes, but only at their own expense, and subject to new Maryland regulations which require mandatory mediation between borrower and lender before moving to foreclosure. Civil Justice and the Consumer Protection Clinic also want any cases with affidavits from Xee Moua of Wells Fargo, who has also admitted to robo-signing, thrown out, but that case has not yet been settled.

This was not the plan of GMAC and other banks caught using robo-signers last year. They hoped to undergo a pause in proceedings, run a quick “double-check” and then issue substitute documents in the same cases. That would have been a much more rapid solution for the banks and would have resulted in many more foreclosures. Now GMAC has to go back and basically file the entire case all over again, meaning they have to give notice of foreclosure to the borrower, engage the borrower in modification options, and basically run through the whole process from the beginning. They cannot use the shortcut solution, thanks to the class action suit filed. GMAC’s dismissal of every foreclosure in Maryland shows their doubts they would have won the class action.

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FL AG Economic Crime Division: UNFAIR, DECEPTIVE AND UNCONSCIONABLE ACTS IN FORECLOSURE CASES

FL AG Economic Crime Division: UNFAIR, DECEPTIVE AND UNCONSCIONABLE ACTS IN FORECLOSURE CASES


OFFICE OF ATTORNEY GENERAL

Economic Crimes Division

UNFAIR, DECEPTIVE AND UNCONSCIONABLE ACTS IN FORECLOSURE CASES

By: June M. Clarkson, Theresa B. Edwards
and Rene D. Harrod


Continue below to the excellent presentation…

[ipaper docId=46258574 access_key=key-2hfi1i8hv2w0765d15l5 height=600 width=600 /]

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Mortgage Fraud…Ally Financial (GMAC), Bank of America, Citibank, JPMorgan, OneWest, Wells Fargo: By Lynn Szymoniak, Esq.

Mortgage Fraud…Ally Financial (GMAC), Bank of America, Citibank, JPMorgan, OneWest, Wells Fargo: By Lynn Szymoniak, Esq.


Mortgage Fraud

Ally Financial/GMAC
Bank of America

Citibank

JP Morgan Chase

OneWest Bank

Wells Fargo Bank

Action Date: December 20, 2010
Location: Mercer County, NJ

New Jersey State Supreme Court Chief Justice Stuart Rabner entered an order To Show Cause “In The Matter of Residential Mortgage Foreclosure Pleadings and Document Irregularities” in Civil Action No. F-059553-10, Superior Court of New Jersey, Chancery Division, General Equity Part, Mercer County on December 20, 2010. Six mortgage servicing companies and their bank-owners were ordered to show cause why the Court should not suspend their rights to foreclose.

First on the list was Ally Financial, formerly known as GMAC. Ally/GMAC is the employer of Jeffrey Stephan who was exposed as one of many “robo-signers” – a phrase indicating that an employee signed thousands of documents used in foreclosure cases with no idea of the truth of the matters asserted in the documents, and more often than not, without even having read what was signed.

Stephan signed thousands of Affidavits, but he signed tens of thousands of Mortgage Assignments – the documents used by mortgage-backed trusts to show that the trusts acquired the mortgages at issue and have the right to foreclose.

Stephan signed these Mortgage Assignments for many different mortgage-backed trusts. Over 50 RALI (Residential Accredit Loans, Inc.) Trusts relied almost exclusively on Mortgage Assignments signed by Stephan. Over 44 RAMP (Residential Asset Mortgage Products) Trusts also used Assignments churned out by Stephan. At least 20 RASC (Residential Asset Securities Corp.) Trusts used Stephan assignments almost exclusively in foreclosures. At least 40 other mortgage-backed trusts, including certain Aames Mortgage Investment Trusts, certain Bear Stearns Trusts and certain Harborview Trusts all relied on Ally/GMAC’s Stephan for proof of their right to foreclose.

These trusts needed the Stephan-made assignments because the trusts’ depositors, sponsors, trustees and document custodians failed to obtain the critical documents, including notes and assignments, at the inception of the trust – despite promises to investors and regulators that these documents had been obtained and were being safeguarded.

In Florida, Stephan’s name appears on thousands of Mortgage Assignments, most often on documents prepared by the Law Offices of David Stern, who is under investigation by the Florida Attorney General. In almost every case, Stephans signed as a Vice President of Mortgage Electronic Registration Systems.

According to the Stephan documents, the trusts almost always acquired these mortgages AFTER they were already in default, and often AFTER foreclosure proceedings had been initiated.

Many different banks, in their capacity as Trustees for mortgage-backed trusts, used Stephan Assignments, but Stephan documents were most often used by Deutsche Bank Trust Company Americas, Bank of NY Mellon and U.S. Bank.

Assuming that each trust has mortgage loans with a face value of one billion dollars – and that over 200 trusts are involved, the amount in controversy is staggering.

Also disturbing is the number of Assignments on Stephan/Stern documents where the assignee trust is unidentified. The Stephan/Stern team repeatedly prepared and filed Assignments where only the Trustees – and not the trusts themselves – were identified as the new owners of the mortgages. “U.S. Bank as Trustee” and “Deutsche Bank Trust Company Americas as Trustee” are the new owners of thousands of mortgages.

Stephan often wrongly stated his own job title, the date the assignment to the trusts took place, and the identity of the trusts. Stephan’s conduct – and the documents he produced – will not stand up to the most superficial examination. Chief Justice Rabner seems determined to dig much deeper.

The other five companies named by Chief Justice Rabner have the very same problems, having produced hundreds of thousands of flawed loan documents for mortgage-backed trusts, signed by individuals with very limited knowledge or authority. Their role was to sign their names without questioning or understanding what they signed.

According to Chief Justice Rabner, the next step may be the Appointment of a Special Master “to inquire into and report to the court on the extent of irregularities concerning affidavits, certifications, assignments and other documents from time to time filed with the court in residential mortgage foreclosure actions…” Past and present business practices would be examined and the Master could also consider whether sanctions should be imposed…and a suggested formula to determine an appropriate sanction.”

By his Order, Chief Justice Rabner gave hope to hundreds of thousands of victims of fraud by securities companies, banks, mortgage companies and mortgage servicing companies.

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[NYSC] STEVEN J BAUM PC UNABLE TO LOCATE WELLS FARGO AUTHORITY TO EXECUTE TRANSFER OF ANY LOAN DOCUMENTS

[NYSC] STEVEN J BAUM PC UNABLE TO LOCATE WELLS FARGO AUTHORITY TO EXECUTE TRANSFER OF ANY LOAN DOCUMENTS


SUPREME COURT – STATE OF NEW YORK
I.A.S. PART XXXVI SUFFOLK COUNTY

Plaintiff, PLAINTIFF’S ATTORNEY:
STEVEN J. BAUM, P.C.

220 Northpointe Parkway, Suite G
Amherst, New York 14228

WELLS FARGO BANK, N.A.,

-against-

SUNNY ENG, SHIRLEY ENG, HTFC
CORPORATION
, JANE ENG,

DEFENDANTS’ ATTORNEY:
LAW OFFICES OF CRAIG D. ROBINS
Woodbury, New York 11797
Defendants. 180 Froehlich Farm Blvd.
……………………………………………………….. X

Excerpts:

The Court notes that the same law firm, Steven J. Baum, P.C., represented both HTFC and Wells Fargo as plaintiffs.

Moreover, Mr. Wider avers that “Jeffrey Stephan,” who purportedly executed the assignment as “Limited Signing Officer” of HTFC Corporation, has never been an employee of HTFC and that such person was never authorized to act as a “Limited Signing Officer” on behalf of HTFC for any purpose.

Wells Fargo does not have standing to maintain and prosecute this action to foreclose defendants’ mortgage. Plaintiffs have failed to come forward with any evidence to substantiate its claims herein or to raise a triable issue of fact. Indeed, the affirmation of plaintiffs attorney, sworn to September 8, 2010, reflects that plaintiff has been unable to locate any documents substantiating plaintiffs “belief’ that “its servicer had the authority to execute any and all documents attendant to the transfer of the loan.”

Continue below to see both the Decision, Assignment in question…

ENG COM

[ipaper docId=44232303 access_key=key-faynnigo46v0go85gbf height=600 width=600 /]

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False Statements: R.K. Arnold, Mortgage Electronic Registration Systems

False Statements: R.K. Arnold, Mortgage Electronic Registration Systems


False Statements

R.K. Arnold
Mortgage Electronic Registration Systems

Action Date: November 18, 2010
Location: WASHINGTON, DC

As the many problems (frauds) are exposed regarding documents used by mortgage-backed trusts in foreclosures, some revelations stand out. Literally millions of foreclosures by mortgage-backed trusts hinge on a Mortgage Assignment signed by an officer of Mortgage Electronic Registration Systems (“MERS”) showing that the mortgage in question was transferred to the trust by MERS. The “MERS officer” who signs the Mortgage Assignment is actually most often an employee of a mortgage servicing company that is paid by the trust.

MERS itself has only 50 employees and they are not involved in signing mortgage assignments to trusts. These servicing company employees sign as officers of MERS “as nominee for” a particular mortgage company or bank. They are not employees of the mortgage companies or employees of the original named lender, but their titles on the Mortgage Assignment belie this and typically read: “Linda Green, Vice President, Mortgage Electronic Registration Systems, Inc., as nominee for American Brokers Conduit.”

MERS president R.K. Arnold testified in Senate testimony earlier this week that there are over 20,000 MERS “certifying officers.” To become a MERS certifying officer, a mortgage servicing company employee need only complete an online form and pay $25.00. Because of the concealment of the actual employer on the Mortgage Assignments, it is easy enough for Courts, and homeowners, to believe that they are examining a document prepared by the lender that sold the mortgage to the trust, when, in fact, the signer was a servicing company clerk paid by the trust itself.

The representative of the GRANTOR is, in truth, a paid employee of the GRANTEE. In hundreds of thousands of cases, the authority is, therefore, misrepresented. It is now also coming to light that in tens of thousands of cases, the individuals signing these forms did not even sign their own names. The documents were made to look official because other mortgage servicing company employees signed as witnesses and then all four “signatures” were notarized by yet another mortgage servicing company employee. The titles were false, the signatures were forged, the “witnessing” was a lie, as was the notarization. Despite all of these false statements, the BIGGEST LIE on these documents is that the trust acquired the mortgage on the date stated plainly on the Mortgage Assignment. In truth, no such transfers ever took place as represented by these MERS certifying officers (or their stand-in forgers). The date chosen almost always corresponds not to an actual transfer, but to the date roughly corresponding to the time the loan went into default. The Mortgage Assignment was prepared only to provide “proof” that the trust owned the mortgage. Until courts require Trusts to come forward with actual proof that they acquired the mortgages in question, specifying whom they paid and how much they paid for each such trust-owned mortgage, the actual owner of these mortgages will never be known.

In response to the exposure of the widespread fraud in the securitization process, the American Bankers Association issued a statement essentially saying that Mortgage Assignments were unnecessary. Investors and regulators were told, however, that the trusts owned the mortgages and notes in each pool of mortgages and that valid Assignments of Mortgages had been obtained. Where the proof of ownership put forth by the trusts is a sworn statement by a MERS “certifying officer” who had no knowledge whatsoever of the transactions involved and did not even review documents related to the transactions, such proof of ownership should be deemed worthless by the Courts. Other litigants are not allowed to manufacture their own evidence and offer it as proof at trial – there should be no exception for mortgage-backed trusts.

In particular, where the “MERS Certifying Officer” is actually an employee of the law firm hired to handle the foreclosure, such documents should be stricken and sanctioned. “MERS Certifying Officers” should be the next group required to testify before Congress. Here are the statistics for one Florida county, Palm Beach County, regarding the number of Mortgage Assignments filed by Mortgage Electronic Registration Systems: January, 2009: 1,164; February, 2009: February, 2009: 1,230; March, 2009: March, 2009: 1,113. An examination of just one day’s (March 31, 2009) filed Mortgage Assignments reveals that the signers of these Assignments are the very same mortgage servicing company employees who signed the “no-actual knowledge” Affidavits that triggered the national scrutiny: Jeffrey Stephan from Ally, Erica Johnson-Seck from IndyMac, Crystal Moore from Nationwide Title Clearing, Liquenda Allotey from Lender Processing Services, Denise Bailey from Litton Loan Services, Noriko Colston, Krystal Hall, and other well-known professional signers from the mortgage servicing industry. The most frequent signers from that particular day were two lawyers, associates in the law firm representing the trusts, who signed as Assistant Secretary for Mortgage Electronic Registration Systems.


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FLORIDA CLASS ACTION: HUBER v. GMAC, ALLY FINANCIAL

FLORIDA CLASS ACTION: HUBER v. GMAC, ALLY FINANCIAL


COUNT I

VIOLATION OF CONSTITUTIONAL RIGHTS UNDER COLOR OF STATE OF LAW42U.S.C.1983

COUNT II
ABUSE OF PROCESS

COUNT III
UNFAIR AND DECEPTIVE TRADE PRACTICES, FLA. STAT. 501.201 et. seq.

COUNT IV
DECLARATORY JUDGMENT- UNCLEAN HANDS 28 U.S.C. 2201-2202

COUNT V
DECLARATORY JUDGMENT- VOID AFFIDAVITS 28 U.S.C. 2201-2202

DEMAND FOR JURY TRIAL

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Ally CEO Says Firm `Screwed Up’ Using Robosigners on Foreclosure Documents

Ally CEO Says Firm `Screwed Up’ Using Robosigners on Foreclosure Documents


Ally Financial Inc., the auto and home lender, said the company was “embarrassed” that it used so-called robosigners to fill out foreclosure documents.

We screwed up,” Chief Executive Officer Michael Carpenter, 63, said today during a conference call on third- quarter earnings for Detroit-based Ally. “We had a robosigner affidavit problem. No question about it. We’re embarrassed about it and we fixed it going forward.

Any errors will be corrected and the company is “confident that we did not foreclose on anybody inappropriately,” Carpenter said. “It’s up to us to prove that.”

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Ohio AG Cordray Files AMICUS CURIAE in Cleveland Foreclosure Case

Ohio AG Cordray Files AMICUS CURIAE in Cleveland Foreclosure Case


Via ForeclosureBlues

Ohio AG Cordray Asks Court to Consider GMAC Fraud in Cleveland Foreclosure Case

“Judges rely upon the accuracy of affidavits to grant judgments and ensure that the integrity of the judicial system can be trusted,” said Attorney General Cordray. “False affidavits throw the entire system into question. Foreclosures should not move forward when the basis of evidence is perjured statements.”

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NY DAILY NEWS: Dubious signatures, missing, inaccurate paperwork halt 4,450 city foreclosures

NY DAILY NEWS: Dubious signatures, missing, inaccurate paperwork halt 4,450 city foreclosures


BY Robert Gearty
DAILY NEWS STAFF WRITER

Sunday, October 24th 2010, 4:00 AM

Thousands of foreclosures across the city are in question because paperwork used to justify the seizure of homes is riddled with flaws, a Daily News probe has found.

Banks have suspended some 4,450 foreclosures in all five boroughs because of paperwork problems like missing and inaccurate documents, dubious signatures and banks trying to foreclose on mortgages they don’t even own.

The city’s not alone. All 50 states are investigating foreclosure paperwork, evicted homeowners are hiring lawyers and buyers of foreclosed homes are fretting over the legality of their purchases.

Last week, New York‘s top judge, Jonathan Lippman, began requiring all bank lawyers to sign a form vouching for the accuracy of their foreclosure paperwork.

That could have been a problem for one Long Island foreclosure that was being brought by GMAC Mortgage last year.

A sworn affidavit dated March 30 was signed by someone identified as Sherry Hall, vice president of a GMAC affiliate called Homecomings Financial Network.

Fifteen days later another sworn affidavit surfaced in another Suffolk County foreclosure, this time signed by a GMAC vice president named Sheri D. Hall.

Despite the difference in the names, the signatures were identical – and were vouched for by the same notary.

Suffolk Supreme Court Justice Peter Mayer refused to approve the foreclosure bearing the name Sherry Hall and ordered her, and the notary, to appear in court Nov. 17. GMAC officials did not return calls.

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Related link:

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CASE EVERYONE SHOULD READ: DEUTSCHE BANK TRUST AMS. AS TRUSTEE v. McCoy, 2010 NY Slip Op 51664 – NY: Supreme Court, Suffolk

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The “MAINE HOUSE” That Halted Foreclosures Nationwide

The “MAINE HOUSE” That Halted Foreclosures Nationwide


From a Maine House, a National Foreclosure Freeze

By DAVID STREITFELD
Published: October 14, 2010

DENMARK, Me. — The house that set off the national furor over faulty foreclosures is blue-gray and weathered. The porch is piled with furniture and knickknacks awaiting the next yard sale. In the driveway is a busted pickup truck. No one who lives there is going anywhere anytime soon.

Nicolle Bradbury bought this house seven years ago for $75,000, a major step up from the trailer she had been living in with her family. But she lost her job and the $474 monthly mortgage payment became difficult, then impossible.

It should have been a routine foreclosure, with Mrs. Bradbury joining the anonymous millions quietly dispossessed since the recession began. But she was savvy enough to contact a nonprofit group, Pine Tree Legal Assistance, where for once in her 38 years, she caught a break.

Her file was pulled, more or less at random, by Thomas A. Cox, a retired lawyer who volunteers at Pine Tree. He happened to know something about foreclosures because when he worked for a bank he did them all the time. Twenty years later, he had switched sides and, he says, was trying to make amends.

Suddenly, there is a frenzy over foreclosures. Every attorney general in the country is participating in an investigation into the flawed paperwork and questionable methods behind many of them. A Senate hearing is scheduled, and federal inquiries have begun. The housing market, which runs on foreclosure sales, is in turmoil. Bank stocks fell on Thursday as analysts tried to gauge the impact on lenders’ bottom lines.

All of this is largely because Mr. Cox realized almost immediately that Mrs. Bradbury’s foreclosure file did not look right. The documents from the lender, GMAC Mortgage, were approved by an employee whose title was “limited signing officer,” an indication to the lawyer that his knowledge of the case was effectively nonexistent.

Mr. Cox eventually won the right to depose the employee, who casually acknowledged that he had prepared 400 foreclosures a day for GMAC and that contrary to his sworn statements, they had not been reviewed by him or anyone else.

Continue reading…NYTIMES

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Posted in foreclosure, foreclosure fraud, foreclosures, GMAC, jeffrey stephanComments (1)

MUST WATCH VIDEO: “FREEZING FORECLOSURES” on GOOD MORNING AMERICA ABC NEWS

MUST WATCH VIDEO: “FREEZING FORECLOSURES” on GOOD MORNING AMERICA ABC NEWS


Congratulations… Tywanna Thomas makes Good Morning America. Tywanna Thomas is/was an employee of Lender Processing Services/ DOCX and these documents were executed in DOCX’s office in Alpharetta, GA.

You may see her many signatures and employers below. “It’s not just her”

“If your going to take my house away from me you better be able to prove you own my house and you have the right to take the house away” -GERRY WILLIS

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Link to the source: ABCNEWS.com
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http://abcnews.go.com/GMA/YourMoney/video/banks-freeze-faulty-foreclosures-11792395


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Posted in assignment of mortgage, CONTROL FRAUD, DOCX, foreclosure, foreclosure fraud, foreclosure mills, foreclosures, forgery, investigation, jeffrey stephan, Lender Processing Services Inc., LPS, MERS, MERSCORP, MORTGAGE ELECTRONIC REGISTRATION SYSTEMS INC., Notary, note, robo signers, Tywanna ThomasComments (4)

MAINE: Jeffrey Stephan “Deposition Transcript” Protective Order DENIED

MAINE: Jeffrey Stephan “Deposition Transcript” Protective Order DENIED


Excerpt:

In addition to renewing it’s Motion for Summary Judgment, Plaintiff has also filed a Motion for Entry of Protective Order pursuant to M.R. Civ. P. 26 (c). This motion is likewise denied.

Rule 26(c) provides that “for good cause shown” a court may enter a protective order “which justice requires to protect a party or person from annoyance, embarrassment, oppression, or undue burden or expense….” M.R.Civ. P. 26(c). Plaintiff seeks a protective order prohibiting the dissemination of discovery materials obtained in this case.” Plaintiff’s Motion for Entry of Protective Order at 7. As grounds for it’s motion, Plaintiff points to the embarrassment GMAC and it’s employees have suffered, and will continue to suffer, from the posting of excerpts from Stephan’s deposition transcript on an Internet blog. The court is not persuaded that the Plaintiff has shown the requisite “ good cause” to justify entry of a protective order in this case. See e.g. Public Citizen v. Liggett Group, Inc., 858 F.2d 775, 789 (1st Cir. 1988) (agreeing with Second Circuit in noting that “the party seeking a protective order has burden of  showing that good cause is not shown, the discovery materials in question should not receive judicial protection and therefore would be open to the public for inspection”) (citation omitted).

Stephan’s deposition was taken in advance a legitimate purpose, and the testimony elicited has directed probative value to dispute. Attorney Cox did not himself take action other that to share the deposition transcript with an attorney in Florida. That the testimony reveals corporate practices that GMAC finds embarrassing in not enough to justify issuance of a protective order. Further, Plaintiff has failed to establish that GMAC has been harmed specifically as a result of the dissemination of the June 7, 2010 deposition transcript, given that similarly embarrassing deposition from December 10, 2009 Florida deposition also appears on the Internet, and will remain even were this Court to grant Plaintiff’s motion. Accordingly, because Plaintiff has failed to satisfy it’s burden of persuasion under Rule 26(c), it’s Motion for Entry of Protective Order is denied.

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Posted in assignment of mortgage, concealment, conspiracy, deed of trust, deposition, foreclosure, foreclosure fraud, foreclosures, GMAC, jeffrey stephan, MORTGAGE ELECTRONIC REGISTRATION SYSTEMS INC., robo signers, servicers, STOP FORECLOSURE FRAUD, trade secretsComments (3)

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