Decided on March 16, 2012

3523/10

Plaintiff Attorney: Dacia C Cocariu, Esq.

Sills Cummis & Gross

Defense Attorney: Kirk P. Tzandies, Esq

Yvonne Lewis, J.

Defendant Van Brunt Properties, LLC (Van Brunt) and defendant Sutter Avenue Management, LLC (Sutter) collectively move for an order, pursuant to [*2]Civil Practice Law and Rules (CPLR) §602(a), to consolidate the foreclosure action of Citibank, N.A. v Sutter Avenue Management, LLC., Midwood Lumber & Mill Work, Inc., et al. (Index No. 354/10), into the foreclosure action of Citibank, N.A. v Van Brunt Properties, LLC, et al. (Index No. 3523/10). Upon consolidation, the defendants seek an order, pursuant to the doctrine of collateral estoppel, declaring that this court’s March 4, 2011 order in the Van Brunt action is equally binding on the Sutter action. The defendants further move for equitable relief in the Sutter action based on their assertion that Citibank acted unconscionably and in bad faith during the protracted period of settlement negotiation. Finally the defendants seek an order terminating the temporary receivership imposed on the Sutter property.

Citibank cross-moves for an order striking all references to conduct and statements made during settlement negotiations, including a pre-negotiation agreement (signed by all three parties), which together form much of the basis of the defendants’ claims for equitable relief, in the Van Brunt action under CPLR § 4547. Citibank also cross-moves, pursuant to CPLR §1018, to substitute Wells Fargo as the plaintiff in the Van Brunt action, and, pursuant to CPLR §3025, to correspondingly amend the case caption. Finally, Citibank cross-moves for an order clarifying the portion of this court’s March 4th order which requires Van Brunt to commence making monthly payments to Citibank.

Background and Procedural History

Sutter is the legal and equitable owner of premises located at 529 Sutter Avenue in Brooklyn. On October 29, 2007, Citibank entered into a mortgage loan in the principal amount of $2,610,000.00 with Sutter. Van Brunt is the legal and equitable owner of premises located at 252-254 Van Brunt Street, also in Brooklyn, which is encumbered by a mortgage in the amount of $950,000.00 financed by Citibank, dated March 21, 2007. Roland Dib is a managing member of both Sutter and Van Brunt. Both the defendants began to have difficulty meeting their mortgage obligations and assert that attempts were made in late 2008 and early 2009 to negotiate with Citibank for a modification of the interest rate so that the requisite payments could be made. The defendants assert that they expended substantial sums to attract new tenants to the properties.

Commencing on July 1, 2009, Van Brunt failed to make its required monthly payments.. Citibank contends that on December 16,2009, it notified Van Brunt that it was in default and advised that if the default was not cured, Citibank reserved its right to exercise all of its rights and remedies. Citibank initiated a foreclosure proceeding against Van Brunt on February 5, 2010.On August 9, 2010, Citibank moved for summary judgment on its foreclosure action against Van Brunt and sought dismissal of Van Brunt’s answer and affirmative defenses and the appointment of a temporary receiver. Van Brunt cross-moved for an order determining that Citibank was not entitled to: any interest on the principal balance of the mortgage loan, late charges, advances, attorneys’ fees, prepayment penalties, commissions and all other costs and expenses. On October 15, 2010, Citibank transferred all interest in the note and mortgage, as well as the other loan documents, to LSREF2 Nova Investments, LLC (“Nova”). On December 10, 2010, all interest in the note and mortgage , together with the other loan documents, were transferred to Wells Fargo. On June 24, 2011, Citibank moved to substitute Wells Fargo into the action as the plaintiff.

In an order dated March 4, 2011, this Court denied that branch of [*3]Citibank’s motion seeking the appointment of a receiver, and denied without prejudice that branch of the motion seeking substitution and for summary judgment. The order granted Van Brunt’s cross motion to the extent of ordering that Citibank is not entitled to any interest from the date of the alleged default to and through March 31, 2011 and found that Citibank is not entitled to any default interest or expenses, including attorneys fees and prepayment penalties. Van Brunt was directed to pay the principal and interest due under the loan commencing on April 1, 2011. In addition, it was directed to pay to Citibank by April 1, 2011, the principal only from the date of default to March 31, 2011, which would be applied to the reduction of the principal.

As regards Sutter, beginning October 2009 it failed to make its required monthly payments under the mortgage. By letter dated December 16, 2009, Citibank maintains that it advised Sutter that it was in default and that failure to cure could result in Citibank exercising its right to accelerate the indebtedness. On February 5, 2010, Citibank filed a separate foreclosure action against the Sutter property. On February 24, 2010, a receiver was appointed to manage the Sutter property.On May 26, 2011, Citibank moved for summary judgment on its foreclosure action and to dismiss Sutter’s answer and affirmative defense. On October 15, 2010, Citibank transferred all interest in the note and mortgage, as well as the other loan documents, to LSREF2 Nova Investments, LLC (“Nova”). On December 10, 2010, all interest in the note and mortgage , together with the other loan documents, were transferred to Wells Fargo. On April 11,2011, Citibank moved to substitute Wells Fargo into the action as the plaintiff.

Consolidation

The defendants move to consolidate the Van Brunt and Sutter actions arguing that both actions involve common questions of law and fact and arise from the same facts and circumstances and assert the identical legal theories and defenses, in accord with the direction of §602(a) of the CPLR. If successful on the issue of consolidation, the defendants then seek an order, pursuant to the doctrine of collateral estoppel, declaring that this court’s March 4, 2011 order in the Van Brunt action is equally binding on the Sutter action. The defendants further move for equitable relief in the Sutter action based on their assertion that Citibank acted unconscionably and in bad faith during the protracted period of settlement negotiation. Finally the defendants seek an order terminating the temporary receivership imposed on the Sutter property.They further contend that the resolution of both cases will involve the same documents and witnesses and thus, such overlap, necessitates consolidation to avoid unnecessary costs, delays and inconsistent judgments. Finally, they contend that there would be no prejudice to Citibank if the actions were consolidated arguing that both actions are in the same pre-discovery stage.

The defendants assert that Citibank treated the two mortgages as a package from the moment of default, noting for example, that Citibank alleges that it notified both properties of default on the same day and that all renegotiation’ efforts were done with both properties and as a package. The defendants note that every transfer of the property – October 15, 2010 to Nova and December 10, 2010 to Wells Fargo – was packaged as well. They argue that both of the defendants’ theory of the case is that foreclosure should be denied due to the bad faith and unconscionable behavior of Citibank throughout the course of said joint negotiations. They allege that they were jointly induced [*4]to make substantial personal investments in the respective properties at issue, based on an implied promise by Citibank that this show of good faith on the defendants’ part would result in a renegotiation of both mortgages, thereby avoiding default. The defendants conclude that the substance and legal theories of both cases are identical, will require the same testimony and evidence to be presented to the court, and should therefore be consolidated to avoid unnecessary costs, delay and inconsistent judgments.In opposition, Citibank argues that Van Brunt and Sutter are foreclosure actions filed separately by Citibank on February 5th, 2010 against two different commercial borrowers, namely Van Brunt Properties LLC, et al. and Sutter Avenue Management, LLC, et. al., each of whom holds a mortgage on a distinct property. They further point out that the circumstances under which each loan was made, the loan documents, and the defaults differ from one another. Moreover, Citibank avers that the receivership status and procedural posture of each case differs. Citibank maintains that consolidation should be denied inasmuch as the two actions do not have the requisite common issues of law and fact. Citibank also argues that it would be prejudiced by consolidation since consolidation would delay the resolution while both actions were aligned with one another. Finally, Citibank claims that the defendants are only seeking consolidation in an attempt to obtain a more favorable outcome, noting that there was no motion for consolidation until, this court’s ruling favorable to Van Brunt in the Van Brunt action.

Discussion

Section 602(a) of the CPLR gives a court discretion to consolidate actions where common questions of law or fact are present. Consolidation is preferred where these commonalities exist, absent proof that consolidation will prejudice a substantial right of the party opposing the motion (Best Price Jewelers.Com, Inc. v Internet Data Stor. & Sys., Inc., 51 AD3d 839 [2008]; Beerman v Morhaim, 17 AD3d 302 [2005]; Progressive Insurance Co. v Vasquez, 10 AD3d 518, 519 [2004]; Zupich v Flushing Hosp. & Med. Ctr., 156 AD2d 677, 677 [1989]). Further, consolidation is appropriate where it will avoid unnecessary duplication of trials, save unnecessary costs and expense, and prevent an injustice which would result from divergent decisions based on the same facts (see Zupich, 156 AD2d at 677). The defendants assert that their respective actions raise identical factual and legal issues, that the two properties have been dealt with as a package since they defaulted, that there will be little delay as the result of consolidation, that there would be no substantial prejudice to the plaintiff and therefore consolidation is required. The plaintiff does not dispute that the two properties were dealt with as a package during the period of renegotiation of their mortgages, but opposes the consolidation of these actions primarily on the ground that substantial prejudice would result from the delay that such a consolidation would cause. It avers that each action has an independent mortgage related to a separate and distinct parcel of land, that consolidation will unduly and additionally delay resolution and that the defendants’ motion is an attempt to forum shop in order to get a more favorable outcome in both actions

Absent a showing of prejudice to a substantial right the existence of common questions of law or fact justifies the grant of a motion for consolidation. (Lamboy v. Inter Fence Co., 196 AD2d 705, 601 N.Y.S.2d 619 (1st Dept.1993).However, a delay which would prevent a trial from taking place for “some time to come” has justified the denial of such a motion, Mulligan v. Farmingdale Union Free School District No. 22, 133 AD2d 617, 519 N.Y.S.2d [*5]725 (2d Dept.1987). In the instant actions, there are, as the plaintiff suggests, different procedural postures but these differences are not likely to cause such a delay as would substantially prejudice the plaintiff. The plaintiff does argue that it will be so prejudiced, but the arguments consist of conclusory self-serving statements that prejudice would occur if consolidation were ordered. The plaintiff suggests that there will be a delay “while the actions [are] brought in line with each other.” The major delay , appears to be caused by the appeals this Court’s March 4, 2011 Order, and the appeal of the instant motion, regardless of the out come. The plaintiff’s counsel says, “[t]rying to bring these actions in line with each other, so that they can proceed together, would only create undue delay and confusion, allowing defendant to prolong the proceedings and avoid judgement to Plaintiff’s severe prejudice.” Counsel does say not how the plaintiff is prejudiced nor what the prejudice is. There is no showing of prejudice to a substantial right of the plaintiff. “[A] and mere delay of the trial is not a sufficient basis upon which to deny a motion for consolidation or a joint trial (see Alsol Enters., Ltd. v. Premier Lincoln—Mercury, Inc., 11 AD3d 494, 783 N.Y.S.2d 620; Zupich, 156 AD2d at 677).” (Whiteman v Parsons Transportation Group of New York, Inc, et al. 72 AD3d 677, 900 N.Y.S.2d 87 ( 2d Dept 2010)

” Although a motion pursuant to CPLR 602 (a) to consolidate two pending actions is addressed to the sound discretion of the trial court, consolidation is favored by the courts in serving the interests of justice and judicial economy (see, Zupich v Flushing Hosp. & Med. Ctr., 156 AD2d 677). As both actions clearly involve similar issues of fact and law, it [would be] an improvident exercise of discretion to deny consolidation….” (Flaherty v RCP Assoc., 208 AD2d 496, 616 N.Y.S.2d 801,[ 1994]). In the case at bar, there are issues, with regard to whether the plaintiff and or its assigns have acted in good faith, which necessarily must be decided prior to a determination of whether the foreclosure of the defendants’ properties should go forward.These actions arise from the same factual events, involve virtually identical legal theories and defenses; they feature nearly the same principal parties. ” Where common questions of law or fact exist, a motion pursuant to CPLR 602(a) to consolidate … should be granted absent a showing of prejudice to a substantial right of the party opposing the motion (see Mas—Edwards v. Ultimate Servs., Inc., 45 AD3d 540, 845 N.Y.S.2d 414; Perini Corp. v. WDF, Inc., 33 AD3d 605, 606, 822 N.Y.S.2d 295; Nationwide Assoc. v. Targee St. Internal Med. Group, P.C. Profit Sharing Trust, 286 AD2d 717, 730 N.Y.S.2d 349).

Collateral Estoppel

The defendants seek an order, pursuant to the doctrine of collateral estoppel, declaring that this Court’s March 4, 2011 order in the Van Brunt action is equally binding on the Sutter action. They urge the utilization of the doctrine of issue preclusion which is part of Collateral Estoppel. In order for a court’s ruling to be dictated by the decision made in a prior action under the doctrine of issue preclusion, “the identical issue necessarily must have been decided in the prior action and be decisive of the present action, and second, the party to be precluded from relitigating the issue must have had a full and fair opportunity to contest the prior determination” (Kaufman v Eli Lily and Co., 65 NY2d 449, 455 [1985]; Allied Chemical v Niagra Mohawk Power, 72 NY2d 271, 276 [1988]. When a court decides whether issue preclusion applies in a given case “the party seeking the benefit of collateral estoppel bears the initial burden of demonstrating that an issue in the present litigation is identical to an issue decided in the prior determination” (Lewis v City of New York, 17 Misc 3d [*6]537, 544 [2007]. The defendants further move for equitable relief in the Sutter action based on their assertion that Citibank acted unconscionably and in bad faith during the protracted period of settlement negotiation and that Citibank treated Van Brunt and Sutter identically during the course of said negotiation. For which reason, the defendants believe that Sutter is entitled to the relief granted to Van Brunt in this Court’s March 4, 2011 order.

Citing Halyalkar v. Board of Regents of the State of NY, 72 NY2d 261,268, the plaintiff, argues in opposition, that collateral estoppel is inapplicable unless the matter has been “actually litigated” The plaintiff’s counsel buttresses Citibank’s argument with a reminder that the actions “involve, among other things, different loan transactions and different parties. Most notably, the Sutter Loan Documents and the circumstances of Sutter’s default have never even been before this Court.” In sum, the argument is that collateral estoppel cannot be applied herein because there has been no actual litigation of the foreclosure in the Sutter action. Halyalkar,defines actually litigated’ as follows: “To satisfy the identicality requirement, the question must have been actually litigated and, therefore, it must have been properly raised by the pleadings or otherwise placed in issue and actually determined in the prior proceeding.” Halyalkar, supra at 261.

This Court’s March 4, 2011order in the Van Brunt action was issued after consideration of the papers and after oral argument on several motions which were before the Court. The motions and cross motion were before the court on March 4th and they were heard together. The plaintiff’s motions sought a temporary receiver, substitution and summary judgement on the foreclosure. The relief requested was denied with express permission to re-file both as to substitution and summary judgement. The motion for a temporary receiver can be made anew at anytime during the course of the proceeding where new facts arise. The defendants cross motion sought equitable relief; the plaintiff responded with opposition and oral argument was heard on the motion. The March 4th Order resulted from a full presentation by the parties on the issues before the court. As relevant to the collateral estoppel, the order addresses the behavior of the parties in that action and the consequences of that behavior with regard to the period following the “default” and renegotiation efforts made by the parties. It is not a permanent determination with regard to the foreclosures of the subject properties, rather it is the imposition of an equity equalizer put in place in recognition of the fact that Citibank and its assigns, as determined on papers and after oral argument, did actively prolong these proceeding with such lack of good faith as to require that they should forfeit any interest that would have otherwise been owning to them under the terms of the agreement they had with the borrowers. All of the renegotiation efforts were made with both Van Brunt and Sutter and at all the same times and places. Citibank had a full and fair opportunity to contest the prior determination; the issues were actually litigated in the Van Brunt action. In as much as the behavior of the lenders in the Van Buren action were identical, both in substance and in time, to the behavior of the lenders in Sutter, this Court cannot see how any different outcome for the Sutter action can fail to be an inconsistent result and a waste of judicial resources.

Finally the defendants seek an order terminating the temporary receivership imposed on the Sutter property. This Court is without sufficient information to make a determination as to wether or not the temporary receiver should be removed. Upon consolidation, and in as much as the papers are already before the Court, defendant Sutter may request a [*7]conference/argument with the plaintiff on the appropriateness/lack of need for the receiver.

Citibank’s Cross Motion.

Citibank cross-moves for an order finding that all conduct and statements over the course of settlement negotiations entered into between Citibank and the defendants, including the pre-negotiation agreement signed by all three parties, be ruled inadmissable in the Van Brunt action, pursuant to CPLR § 4547. Citibank also cross moves for an order seeking to substitute Wells Fargo as the plaintiff in the Van Brunt action and that the case caption be amended accordingly. Finally, Citibank cross-moves for clarification of two rulings contained in this court’s March 4, 2011 order.

In opposition to Citibank’s cross motion, the defendants argue that the cross motion and opposition papers should not be considered as such submissions were untimely and defective. On the issue of timeliness, the court notes that CPLR §2215 pertinently provides that “[a]t least three days prior to the time at which the motion is noticed to be heard, or seven days prior to such time if demand is properly made pursuant to subdivision (b) of rule 2214, a party may serve upon the moving party a notice of cross-motion demanding relief, with or without supporting papers . . .” Here, the defendants motion was served upon the plaintiff on April 6, 2011. The cross motion was not served until June 20, 2011, a full seventy-five days later.

The defendants further argue that the plaintiff’s papers are defective and should not be considered by the court. Specifically, it is argued that the papers are defective because they are submitted in reliance upon an affidavit of Marisa K. McGuaghey, who describes herself as an “authorized representative of Hudson Americas LLC” and bases her authority to submit her affidavit on behalf of Wells Fargo pursuant to an undated, uncertified copy of a Limited Power of Attorney. A power of attorney presented to the Court must be an original or a copy certified by an attorney, pursuant to CPLR §2105. Section 2105 of the CPLR states, inter alia, that “an attorney admitted to practice in the court of the state may certify that it has been compared by him with the original and found to be a true and complete copy” (see Security Pacific Nat. Trust Co. v Cuevas, 176 Misc 2d 846 [1998]). Here, there is nothing in the record indicating that the plaintiff’s attorney has performed this comparison (see Lasalle Bank N.A. v Smith, 26 Misc 3d 1239A [2010]; United States Bank Natl. Assn. v White, 22 Misc 3d 1112A [2009]; U.S. Bank Natl. Assn. v Bernard,18 Misc 3d 1130A [2008]). Additionally, the court notes that the fact that the limited power of attorney is undated is a further defect (see Ameriquest Mortgage Co., v Basevich, 16 Misc 3d 1104A [2007]. Based upon the foregoing, the court finds that the plaintiff’s papers are defective and therefore will not address the merits, or lack thereof, of the plaintiff’s cross motion.

This constitutes the decision and order of the court.

E N T E R,

____________________________

yvonne lewis, JSC

[ipaper docId=86159925 access_key=key-1ewlj4b6bxsj6l27diwk height=600 width=600 /]

The never ending settlement… because those in DC are doing their best to make sure their bankers are A-OK.

Reuters-

Mortgage-backed securities investors who are convinced that banks intend to shift the cost of the $25 billion national mortgage settlement onto their shoulders are “evaluating their legal options,” according to Chris Katopis, executive director of the Association of Mortgage Investors (and a former clerk on the District of Columbia Circuit Court of Appeals). The private investors, as I’ve reported, are outraged at the terms of the settlement, which sets no limit on the percentage of securitized mortgages the settling banks — Bank of America, JPMorgan Chase, Citigroup, Wells Fargo, and Ally Financial — are permitted to modify to reach their $17 billion target for reducing the principal balance owed by struggling borrowers. Mortgage-backed noteholders believe the deal terms encourage banks to write down investor-owned first liens, rather than second lien mortgages in bank-owned portfolios. That incentive, they say, shifts the cost of the deal from the banks to mortgage-backed bondholders.

Their argument is gaining traction. The New York Times editorialized Sunday on the bank-friendly details of …

[REUTERS LEGAL]

Economic Musings-

 The wounds on past and present homeowners are still fresh from the housing crisis.  As Jonathan Laing points out in this weekend’s Barron’s cover story, “five million of the country’s 76million mortgage holders have lost their homes to foreclosure or lender ordered short sales since 2006, and an estimated 14million more own more on their homes than their properties are currently worth.  In all, some $7.4 trillion in homeowners’ equity has been destroyed according to Mark Zandi…”  

 Cries for Accountability

 Details of the $25bil Settlement (in the words of HUD) & Public Lauding

“On February 9, the Department of Justice …

[ECONOMIC MUSINGS]

by USRepMarcyKaptur

www.kaptur.house.gov

Excellent view from this NYT’s editorial piece.

NYT-

Last week was a big one for the banks. On Monday, the foreclosure settlement between the big banks and federal and state officials was filed in federal court, and it is now awaiting a judge’s all-but-certain approval. On Tuesday, the Federal Reserve announced the much-anticipated results of the latest round of bank stress tests.

How did the banks do on both? Pretty well, thank you — and better than homeowners and American taxpayers.

That is not only unfair, given banks’ huge culpability in the mortgage bubble and financial meltdown. It also means that homeowners and the economy still need more relief, and that the banks, without more meaningful punishment, will not be deterred from the next round of misbehavior.

[NEW YORK TIMES]

American Banker-

No sooner did Linda Almonte show up for work on November 30, 2009 than was she escorted out the door by security at JPMorgan Chase’s Credit Card Litigation Support Group in San Antonio. A midlevel Chase executive who oversaw business process execution employees, Almonte says she was fired after just six months on the job for challenging her superiors about the accuracy of the bank’s credit card records.

Colleagues first learned of her dismissal later in the day when operations manager Jason Lazinbat, Almonte’s former boss, gathered bank staff in a conference room and announced she was no longer with the bank. Under no circumstances, Lazinbat warned, were staffers to communicate with Almonte, recalls Carole McGinn, a quality control worker who spent 14 years at Chase. The account was confirmed by second employee, who requested to speak anonymously.

[AMERICAN BANKER]

Abigail Field-

Q: When is a deal not a deal?

A: When the deal documents punt on contentious issues, merely agreeing to agree later. 

Sadly, that’s what this “deal” does. This “deal” is a hybrid contract and term sheet, with all the crucial, operational aspects of compliance unresolved. A smallish to-be-dealt-with-later item is the timing for implementing the servicing standards. The biggie is the Work Plans; those have not been negotiated at all.

Yes, part of compliance has been finalized; the metrics, and the basic enforcement structure. But it’s not enough to have metrics; you also need processes for gathering the metric data and computing the results. Similarly you need more than a structure for enforcement; you need how-to details. The not-yet-existing Work Plan will cover all that. Worse, the negotiations will happen while the clock is ticking on the deal.

Servicing Standards Take Effect On a Date TBD

When the deal is approved…

[REALITY FIELD]

HuffPo-

No Hollywood scriptwriter could plot a more implausible story. Here is the plotline sequencing:

1. Bankers make NINJA loans, securitize them, and sell on to government GSEs
2. Bankers destroy all the loan documents and begin random and fraudulent foreclosures, throwing millions of innocent victims out on the street
3. GSEs sue bankers and force them to take back bad mortgages
4. Bankers sell servicing rights for the same bad mortgages back to GSEs, who overpay
5. GSEs resell servicing rights to companies run by former GSE officials
6. Bankers slapped on wrist with puny foreclosure settlement in return for government promise it will never sue them for past foreclosure fraud
7. Government stress test claims banks are healthy
8. Bankers get sweet deal, counting mortgage mods for best borrowers toward the settlement
9. HUD report released demonstrating massive foreclosure fraud that reached to highest levels of banks
10. Vampire Squid Executive Director fires off resignation letter decrying bankster culture
11. Banksters walk away scott-free as statute of limitations runs out for criminal behavior

This would have to be a fantasy because no one would ever believe it could have been true...

[HUFFINGTON POST]

by bloomberglaw on Mar 15, 2012

🙂 Credit Cards WILL BE the NEXT robo-signing scandal! 🙂

American Banker-

JPMorgan Chase & Co. took procedural shortcuts and used faulty account records in suing tens of thousands of delinquent credit card borrowers for at least two years, current and former employees say.

The process flaws sparked a regulatory probe by the Office of the Comptroller of the Currency and forced the bank to stop suing delinquent borrowers altogether last year.

The bank’s errors could call into question the legitimacy of billions of dollars in outstanding claims against debtors and of legal judgments Chase has already won, current and former Chase employees say.

For the banking industry at large, the situation at Chase highlights the risk that shoddy back-office procedures and flawed legal work extends well beyond mortgage servicing.

“We did not verify a single one” of the affidavits attesting to the amounts Chase was seeking to collect, says Howard Hardin, who oversaw a team handling tens of thousands of Chase debt files in San Antonio. “We were told [by superiors] ‘We’re in a hurry. Go ahead and sign them.'”

[AMERICAN BANKER]

NOTE: Am I the only person that sees MERS named as the Plaintiff and MERS named as a Defendant in this case?

Guess what, this isn’t the only time, there has been several instances like this case where a NY SUPREME COURT JUDGE BASHES ‘MERS’ FOR SUING ITSELF…OWNS NOTHING!

Can MERS even pursue this… since it issued an announcement on 2/2011 to banks to stop foreclosing in its name?

Decided on March 12, 2012

7439/09

Robert J. McDonald, J.

In this foreclosure action commenced on March 25, 2009, plaintiff previously obtained an order dated July 28, 2009, appointing a referee to ascertain and compute the amount due plaintiff and to examine and report whether the mortgaged premises known as 168 Marvin Street, Far Rockaway, New York can be sold in parcels. The Referee appointed pursuant to such order executed his oath and rendered his report dated September 1, 2009, indicating the sum of $486,471.41 was due plaintiff as of August 13, 2009, and that the mortgaged premises should be sold in one parcel.

Plaintiff previously sought to obtain a judgment of foreclosure and sale, but by order dated April 22, 2010, the application was denied with leave to renew following the holding of a conference, or evidence that the mortgagors failed to appear for a conference. The court determined that a settlement conference had yet to be held in the Residential Foreclosure Settlement Part, plaintiff had failed to provide certain documents, and the proposed judgment lacked a certain provision. After defendants Lopez failed to attend the settlement conference held on August 6, 2010, plaintiff renewed its application, but by order dated November 19, 2010, that application also was denied with leave to renew upon proper papers, including an affirmation by plaintiff’s counsel pursuant to the administrative order of the Chief Administrative Judge of the Court dated October 20, 2010 then in effect (see AO/548/10). Plaintiff asserts that by assignment dated April 4, 2011, it, as nominee for Wall Street Mortgage Bankers Ltd., d/b/ Power Express (Wall Street Mortgage), the mortgagee, assigned the subject mortgage to Vanderbilt.

That branch of the motion by plaintiff for leave to amend the caption as proposed is denied (CPLR 1018). Although substitution is appropriate where the mortgage and note have been assigned to a new party after commencement of a foreclosure action (see Saxon Mortg. [*2]Services, Inc. v Coakley, 83 AD3d 1038 [2011], lv to appeal denied 17 NY3d 708 [2011]), plaintiff has failed to establish that Vanderbilt presently holds the note, which was endorsed by Christine Holman, assistant vice-president of Wall Street Mortgage, in blank and without recourse on behalf of Wall Street Mortgage (see Bank of New York v Silverberg, 86 AD3d 274, 280 [2011]). Thus, plaintiff has failed to show that Vanderbilt rightfully may pursue, or be awarded, a judgment of foreclosure and sale (see id.).

With respect to the cross motion,

“[a] defendant who has failed to timely appear or answer the complaint must provide a reasonable excuse for the default and demonstrate a meritorious defense to the action, when opposing a motion for leave to enter judgment upon its failure to appear or answer and moving to extend the time to answer or to compel the acceptance of an untimely answer (see Juseinoski v Board of Educ. of City of NY, 15 AD3d 353, 356 [2005]; Ennis v Lema, 305 AD2d 632, 633 [2003])” (see Lipp v Port Auth. of NY & N.J., 34 AD3d 649 [2006]).

The determination of what constitutes a reasonable excuse for a default in answering lies within the sound discretion of the court (see Adolph H. Schreiber Hebrew Academy of Rockland, Inc. v Needleman, 90 AD3d 791 [2011]; Maspeth Fed. Sav. & Loan Assn. v McGown, 77 AD3d 889 [2010]; Grutman v Southgate At Bar Harbor Home Owners’ Assn., 207 AD2d 526, 527 [1994]).

Defendants Lopez, appearing by Queens Legal Services, assert that they were victims of predatory lending practices committed by the lender regarding the financing of the purchase of their home from Autumn Equities, LLC (Autumn Equities). They claim that a real estate agent employed by Autumn Equities/United Homes induced them to purchase a two-family house, which was then still under construction, for $579,000.00, without a down payment, advising them, in effect, they could live with defendant Christian Lopez, their adult-aged son, in one of the units, and rent out the other unit, to make the house affordable. They also claim that the agent advised them they would need two mortgage loans to finance the entire $579,000.00 purchase price, and that his office could arrange for them to get two fixed-rate mortgages with a combined monthly payment of approximately $3500.00 per month from Wall Street Mortgage. They further claim that the agent failed to tell them they had the right to hire an independent real estate appraiser or home inspector, or shop for financing from a lender of their own choosing. Defendants Lopez additionally claim that at the suggestion of Wall Street Mortgage, they added defendant Christian Lopez as an applicant to the mortgage application to insure approval of the loans. They assert Wall Street Mortgage failed to disclose to them when they applied for the loans that the primary mortgage loan would have an adjustable interest rate, the initial payments would be sufficient only to pay the interest accruing on the loan, and the monthly mortgage payment would increase significantly once the loan became fully amoritizing. Defendants Lopez also claim that they were represented at the closing by an attorney provided to them by Autumn Equities or United Homes, but still no one disclosed to them the actual loan terms. They further claim that the “Truth in Lending” disclosure form provided to them at the closing fails to [*3]disclose, clearly and conspicuously the proper payment schedule reflecting the terms stated in the note. According to defendants Lopez, they never would have entered into the transaction if they knew the truth about the repayment terms of the primary mortgage loan. They assert they struggled to pay their mortgage payments for two years, but because of illness and financial setbacks, they were no longer able to maintain their payments, and the property fell into foreclosure.

Defendants Lopez state that shortly after they received the summons and complaint, they sought help from the Legal Aid Society at a foreclosure prevention clinic held at the Queens Civil Courthouse. Sumani Lanka, a staff attorney with Legal Aid Society, states she informed defendants Lopez that the Society would not be able to represent them in this case because of the Society’s own limited resources. Defendants Lopez assert they were unaware of the availability of any other free or low-cost legal services, and believed that without legal representation, they could not defend themselves in this action. They state the servicing agent for the lender denied their application for a loan modification, and the servicing agent and Vanderbilt denied their requests to consent to proposed short sales. Defendants Lopez also state that Vanderbilt then contacted them asking them to reapply for a loan modification, which they did. They additionally state that on or about August 11, 2011, they attended a foreclosure clinic at the Queens Civil Courthouse, and met with Franklin Romeo, of counsel to Jennifer Ching, Esq., Queens Legal Services, who informed them that in the event his office was not able to represent them, they had the right to represent themselves in the case, but would need to make a motion since their time to respond to the complaint had expired. Defendants Lopez state that prior to this conversation, they did not realize they could have filed an answer to the complaint without the assistance of an attorney. They state that Mr. Romeo informed them a few weeks later that plaintiff had filed the instant motion. Defendants Lopez assert that Vanderbilt then denied their loan modification application by letter dated August 31, 2011.

The copy of the summons on file in the clerk’s records in this action provided notice of commencement of this suit, but also called upon defendants Lopez to answer the complaint and to serve a copy on plaintiff’s attorney. It warned, in bold type, that failure to respond to the summons and complaint by “serving the answer on the plaintiff for the mortgage company who filed this foreclosure proceeding against you and filing the answer with the court, a default judgment may be entered and you can lose your home.” Furthermore, it advised (again in bold type) defendants Lopez to “[s]peak to an attorney or go to the court where your case is pending for further information on how to answer the summons and protect your property.” It, thus, clearly provided notice that if defendants Lopez did not have an attorney or were unable to obtain legal representation, they could proceed to the court and get help in answering the complaint. In addition, it reiterated, in larger, bold type, “[Y]OU MUST RESPOND BY SERVING A COPY OF THE ANSWER ON THE ATTORNEY FOR THE PLAINTIFF (MORTGAGE COMPANY).” Defendants Lopez make no claim that they were not personally served with a copy of the summons and complaint, or the additional notice provided pursuant to CPLR 3215(g)(3) by service of a copy of the summons by first-class mail (see affidavit of Erin E. DiFrancesca dated May 27, 2009 annexed as Plaintiff’s Exhibit B in opposition). Therefore, [*4]defendants Lopez have failed to show that they reasonably believed they could not defend themselves in the case without an attorney. Defendants Lopez, moreover, make no claim that they were lulled into inaction as a consequence of any negotiations with the servicing agent or Vanderbilt. Under such circumstances, defendants Lopez have failed to demonstrate a reasonable excuse for their failure to timely serve an answer. The cross motion by defendants Lopez to vacate their default in answering and for leave to serve a late answer is denied (see C & H Import & Export, Inc. v MNA Global, Inc., 79 AD3d 784 [2010]; 599 Ralph Ave. Dev., LLC v 799 Sterling Inc., 34 AD3d 726 [2006]; Elite Limousine Plus, Inc. v Allcity Ins. Co., 266 AD2d 259 [1999] ).

That branch of the motion by plaintiff for leave to amend the complaint nunc pro tunc to the time of the commencement of the action to reflect that amount of the claimed monthly installment payment was $2389.24 and the date of the claimed default was December 1, 2008 is granted.

That branch of the motion by plaintiff to confirm the Referee’s report of computation is granted.

To the extent defendants Lopez oppose that branch of the motion by plaintiff for leave to enter a judgment of foreclosure and sale on the ground plaintiff failed to serve them with a copy of the notice of the motion for a judgment of foreclosure and sale, they were not entitled to such notice, because they failed to answer the complaint, or appear and demand such personal service (see Polish Nat. Alliance of Brooklyn, U.S.A. v White Eagle Hall Co., 98 AD2d 400, 404 [1983]).

Defendants Lopez also oppose that branch of the motion by plaintiff for leave to enter a judgment of foreclosure and sale on the ground plaintiff has failed to demonstrate it served them with a notice pursuant to RPAPL 1304. Plaintiff’s counsel previously submitted a statement dated September 10, 2009 to the court indicating that the subject mortgage is neither a subprime home loan nor a high-cost home loan, and that the annual percentage rate at consummation did not exceed three percentage points over the yield on treasury securities as of the fifteenth day of the month in which the loan was consummated. In addition, the subject mortgage is not a “non-traditional home loan” as that phrase was defined in the version of RPAPL 1304 in effect at the time of the commencement of this action (see L 2008, c 472, § 2, eff. Sept. 1, 2008). A nontraditional home loan was defined as “a payment option adjustable rate mortgage or an interest only loan consummated between January first, two thousand three and September first, two thousand eight” (see former RPAPL 1304[5][e]). The subject mortgage is not a “payment option adjustable rate mortgage” because it does not grant the mortgagor an option to make a payment of less than the actual payment of interest and principal necessary to amortize the loan. Nor is it an “interest only” loan insofar as the note calls for interest only for the first ten years of the loan, but principal and interest for the next 20 years. Under such circumstances, plaintiff was under no obligation to serve defendants Lopez with a notice pursuant to RPAPL 1304 as a condition precedent to suit (cf. Aurora Loan Services, LLC v Weisblum, 85 AD3d 95 [2011]). [*5]

Plaintiff’s counsel submits her affirmation dated August 11, 2011, pursuant to the administrative order the Chief Administrative Judge of the Court dated March 11, 2011 (AO 431/11), indicating that she communicated with one “Jackie Mash,” “Legal Affairs Representative,” of plaintiff on June 21, 2011. According to the affirmation, Jackie Mash informed plaintiff’s counsel that she “personally reviewed plaintiff’s documents and records relating to this case for factual accuracy; and … confirmed the factual accuracy of the allegations set forth in the Complaint and any supporting affidavits or affirmations filed with the Court, as well the accuracy of the notarizations contained in the supporting documents filed therewith” (emphasis supplied). Such affirmation, however, is at odds with the other affirmation of plaintiff’s counsel dated June 4, 2011 wherein counsel stated the complaint contained errors as to the date of default and the amount of the monthly payment. Thus, the branch of the motion for leave to enter the judgment of foreclosure and sale is denied without prejudice to renewal based upon proper papers, including an affirmation by plaintiff’s counsel, clarifying this issue, and upon proper service, including service upon defendants Lopez (see Home Sav. Bank v Chiola, 203 AD2d 525 [1994]).

Dated: Long Island City, NY

March 12, 2012

______________________________

ROBERT J. MCDONALD

J.S.C.

[ipaper docId=85427226 access_key=key-vrpbx3ffyjwsxxyb0rt height=600 width=600 /]

Naked Capitalism-

I’ve been going over the mortgage settlement documents over the past few days – a lot has been released, with many implications.  There is plenty to criticize.  Subprime Shakeout has a great summary, and David Dayen has done a wonderful job going through the nitty gritty.  Abigail Field has a spectacular review of the problems with the servicing standards.  I’ll make a few criticisms of my own below.  But I think the most interesting parts of the document release were the HUD Inspector General reports on the five banks and the DOJ complaint.  What these prove is what we’ve always known – the law enforcement community knew exactly what these banks were doing.  DOJ simply chose not to prosecute.  There was intent to defraud, fraud, and frankly, according to HUD.

In fact, it’s not clear that the past tense is the correct tense to use.  The Wells Fargo report is particularly interesting on that last point.  Take it away, HUD OIG (italics are mine).

At the time of our review, affidavits continued to be processed by these same signers, who may not have been qualified, and these signers may not have adequately verified certain figures because they accessed a computer screen of data showing a compilation of figures instead of verifying the data against the information through review of the books and records kept in the regular course of business by the institution.

I’m sorry, but WHAT THE $&*@!?!?

[NAKED CAPITALISM]

HW-

The nation’s five biggest banks will pay $25 million to the New York attorney general’s office to settle certain claims related to the use of Mortgage Electronic Registration Systems.

The agreement with New York Attorney General Eric Schneiderman releases Bank of America ($8.84 0.35), Citigroup ($35.21 -1.24), JPMorgan Chase ($43.58 0.19), Wells Fargo ($33.37 0.04) and Ally Financial from certain claims of robo-signing foreclosure documents.

Schneiderman sued Bank of America, JPMorgan and Wells Fargo, as well as MERS, in early February. The AG’s office said in the complaint the banks “created the MERS system as an end-run around the property-recording system.”

MERS is not involved in the agreement, and a company spokeswoman declined to comment.

Continue to read up on DE & MA … [HOUSING WIRE]

HUD OIG Report | Bank of America Corporation Foreclosure and Claims Process Review

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HUD OIG Report | CitiMortgage, Inc. Foreclosure and Claims Process Review

[ipaper docId=85365712 access_key=key-csoceh86p97oisriqb8 height=600 width=600 /]

HUD OIG | JPMorgan Chase Bank N.A. Foreclosure and Claims Process Review

[ipaper docId=85365666 access_key=key-2m8ptqj3wnff14pctchr height=600 width=600 /]

HUD OIG Report | Wells Fargo Bank Foreclosure and Claims Process Review

Thanks to Abigail Field for pointing these out for us.

See PP 6 & 7

[ipaper docId=85365649 access_key=key-14bo0rfvr6w2x133nzra height=600 width=600 /]

HUD OIG Report | Ally (GMAC) Financial, Incorporated Foreclosure and Claims Process Review

[ipaper docId=85368972 access_key=key-1puwleudzt8nhu1xxr11 height=600 width=600 /]

Does anyone know the judge that is going to look over this case? If so, please forward their name or post in the comment section.

Business Week-

An audit of foreclosure practices at the Federal Housing Administration’s five largest mortgage servicers uncovered widespread failures to ensure the banks had proper legal documents.

According to reports released today by the inspector general of the Department of Housing and Urban Development, banks including Bank of America Corp. and Wells Fargo & Co. (WFC) violated the federal False Claims Act when they improperly foreclosed on homes insured by the FHA.

The audits, spurred by revelations in 2010 that mortgage servicers were seizing homes using improper paperwork, were forwarded to the Department of Justice last year. They formed part of the basis for a $25 billion settlement with five banks filed in U.S. court in Washington yesterday.

“I believe the reports we just released will leave the reader asking one question: How could so many people have participated in this conduct?” the inspector general, David Montoya, said in a statement accompanying the reports. “The answer: simple greed.’”

[BUSINESS WEEK]

HuffPO-

Top law enforcement officers from most of the 50 states gathered last week in Washington, D.C., for the annual spring meeting of state attorneys general, where the hot topic was the $25 billion foreclosure settlement finally filed in federal court on Monday.

More than a dozen state and federal officials who crafted the deal, which resolves charges that banks wrongfully foreclosed on homeowners, say it is the most ambitious of its kind ever reached, far outstripping the complexity and political machinations of the decade-old case against the giant tobacco companies.

But instead of high-fives and fist-bumps, officials, who had sniped at each other — and at the deal — for the better part of a year, tried to come to grips with the aftermath. The deal had to overcome disagreements between the banks and government officials, and between liberal Democrats and Tea Party-backed Republicans.

“It was like the Battle of Verdun, every square inch was fought over,” said George Jepsen, the Connecticut attorney general, of the 16 months of negotiations between federal officials, state attorneys general and five major financial institutions — Bank of America, JPMorgan Chase, Wells Fargo, Citigroup and Ally Financial (formerly GMAC) — over the foreclosures and a host of other nasty “servicing” abuses.

[HUFFINGTON POST]

Wall Street Journal-

Five of the nation’s biggest banks have agreed to pay New York a total of $25 million to settle claims brought by New York State Attorney General Eric Schneiderman regarding their use of a private national mortgage electronic system.

The agreement, filed in federal court Tuesday, resolves certain monetary claims by the New York attorney general against Ally Financial Inc., Bank of America Corp., Citigroup Inc., J.P. Morgan Chase & Co. and Wells Fargo & Co.

The agreement preserves the New York attorney general’s right to sue for damages suffered by consumers …

[WALL STREET JOURNAL]

Alison Frankel-

In a conference call on Feb. 14, Secretary Shaun Donovan of the Department of Housing and Urban Development promised about 90 mortgage-backed bondholders that the $25 billion national mortgage settlement would include a 15 percent cap on the number of investor-owned loans that the five settling banks would be permitted to modify, according to the three participants in the call.

Donovan made the promise in response to MBS investor concerns that banks would shift the cost of the settlement onto their shoulders by writing down the principal in securitized mortgages, rather than in the loans banks hold in their own portfolios. He had already said in a press conference that the settlement would provide incentives for the settling banks — Bank of America, JPMorgan Chase, Citigroup, Wells Fargo, and Ally Financial — to reduce the principal in their own portfolio loans, estimating that “a relatively small share, in the range of 15 percent” of the write-downs would be in investor-owned mortgages. In the Feb. 14 call with bondholders, according to the three participants, Donovan went a step farther, assuring MBS investors that the written settlement agreement would limit the percentage of investor-owned loans the banks were permitted to modify.

[REUTERS LEGAL]