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BENEFICIAL CONSUMER DISC. CO. v. VUKMAM | PA Superior Court “Act 91, Failed To Meet Face-to-Face with the mortgagee who sent Deficient Notice”

BENEFICIAL CONSUMER DISC. CO. v. VUKMAM | PA Superior Court “Act 91, Failed To Meet Face-to-Face with the mortgagee who sent Deficient Notice”


courtesy of Leagle

BENEFICIAL CONSUMER DISCOUNT COMPANY D/B/A BENEFICIAL MORTGAGE COMPANY OF PENNSYLVANIA, Appellant,
v.
PAMELA A. VUKMAM, Appellee.

No. 259 WDA 2011.
Superior Court of Pennsylvania.
Filed: January 30, 2012.

BEFORE: MUSMANNO, DONOHUE and COLVILLE*, JJ.
OPINION BY COLVILLE, J.:
This is an appeal from an order that sustained Appellee’s “Motion to Set Aside Judgment and Sheriff’s Sale.” We affirm.
The relevant background underlying this matter can be summarized in the following manner. In October of 2006, Appellant filed a complaint in mortgage foreclosure against Appellee. According to the complaint, Appellee owns a home subject to a mortgage for which Appellant is the mortgagee. Appellant averred that Appellee’s mortgage was in default due to Appellee’s failure to pay her monthly mortgage costs. The parties eventually agreed to settle the matter. In short, the parties agreed to enter a judgment in favor of Appellant for $217,508.81 together with interest. They further agreed that, so long as Appellee made regular payments to Appellant, Appellant would not execute on the judgment. The trial court approved the parties’ settlement on May 7, 2009.
On April 5, 2010, Appellant filed an affidavit of default wherein it alleged that Appellee had defaulted on her payment obligations. The following day, Appellant filed a praecipe for writ of execution. On August 2, 2010, the subject property was sold by sheriff’s sale; Appellant was the successful bidder.
On August 31, 2010, Appellee filed a document which she entitled “Motion to Set Aside Judgment and Sheriff’s Sale.” Appellee contended that the trial court lacked subject matter jurisdiction over the matter because Appellant failed to comply with the notice requirements of the Homeowner’s Emergency Mortgage Act, 35 P.S. §§ 1680.401c et seq. (“Act 91”). More specifically, Appellee maintained that the Act 91 notice she received from Appellant failed to inform her that she had thirty days to have a face-to-face meeting with Appellant. After holding a hearing, the trial court agreed with Appellee that the Act 91 notice was deficient. The court issued an order setting aside the sheriff’s sale and the judgment; the order also dismissed Appellant’s complaint without prejudice. Appellant timely filed an appeal.1
In its brief to this Court, Appellant asks us to consider the following questions:
A. Did Section 403c of Act 91 require [Appellant] to notify [Appellee] of an option to have a face to face meeting with [Appellant] where both the plain language of the statute and the history of such Act evidence a legislative intention to vest in the Agency the discretion to select which of these options should have been offered to homeowners in the Uniform Notice adopted by the Agency for use by all Lenders under the Act?
B. Was not the determination of the Pennsylvania Housing Finance Agency to remove any reference in its model Uniform Act 91 notice to homeowners having a face to face meeting with their lenders reasonable and consistent with the stated purpose and goals of such Act?
C. Should not the court below have deferred to the experience and expertise of the Agency in its administration of the Act, and should not the court below have upheld the validity of the Act 91 Notice sent to [Appellee] herein where such notice was entirely consistent with the model Uniform Notice adopted by the Agency for use by all lenders?
D. Even if the Act 91 notice should have offered [Appellee] the option of having a face to face meeting with her lender, should the court below have dismissed this action for lack of subject matter jurisdiction where [Appellee] had fully exercised her rights under Act 91 and was not in any way prejudiced by such omission?
E. Should not [Appellee] have been estopped from raising any objection to the Act 91 notice provided to her, and should not [Appellee’s] objection to such notice have been barred by laches, where [Appellee] admitted to the validity of such notice in discovery and consented to the entry of judgment, and where [Appellee’s] objection to such notice was made for the first time after a sheriff’s sale had been held almost four (4) years after the commencement of the action?
Appellant’s Brief at 3-4.
As an initial matter, we will consider whether the trial court properly entertained the Act 91 notice issue that Appellee presented in her “Motion to Set Aside Judgment and Sheriff’s Sale.” The trial court determined that, when a mortgagee provides to a mortgagor a deficient Act 91 notice and then files a mortgage foreclosure action, the court lacks subject matter jurisdiction to entertain the action. In its argument to this Court, Appellant raises a number of doctrines, including laches and res judicata, in arguing that Appellee untimely presented her Act 91 notice issue. Appellant’s Brief at 31-33.
We begin our analysis of this threshold issue by noting the following principles of law.
The test for whether a court has subject matter jurisdiction inquires into the competency of the court to determine controversies of the general class to which the case presented for consideration belongs.
In re Administrative Order No. 1-MD-2003, 936 A.2d 1, 5 (Pa. 2007) (citation omitted).
It is the law of this Commonwealth that a judgment may be attacked for lack of jurisdiction at any time, as any such judgment or decree rendered by a court that lacks subject matter or personal jurisdiction is null and void.
Bell v. Kater, 943 A.2d 293, 298 (Pa. Super. 2008) (citation omitted).
Appellee has never questioned the competency of the trial court to entertain mortgage foreclosure actions. Indeed, the Rules of Civil Procedure govern such actions, Pa.R.C.P. 1141 et seq., and save for exceptions that are irrelevant to this matter, the courts of common pleas have unlimited original jurisdiction over all actions and proceedings in this Commonwealth. 42 Pa.C.S.A. § 931(a). Appellee’s complaints regarding the deficiencies in the Act 91 notice sound more in the nature of a jurisdictional challenge based upon procedural matters. Procedurally based jurisdictional challenges can be waived. See, e.g., Hauger v. Hauger, 101 A.2d 632, 633 (Pa. 1954) (“It is the rule that consent or waiver will not confer jurisdiction of the cause of action or subject matter where no jurisdiction exists. However, this rule does not apply to . . . jurisdiction based upon procedural matters, as to which defects can always be waived.”) (citation omitted).
However, Appellee correctly highlights that, in the context of discussing subject matter jurisdiction, this Court has concluded, “[T]he notice requirements pertaining to foreclosure proceedings are jurisdictional, and, where applicable, a failure to comply therewith will deprive a court of jurisdiction to act.” Philadelphia Housing Authority v. Barbour, 592 A.2d 47, 48 (Pa. Super. 1991) (citation omitted), affirmed without opinion, 615 A.2d 339 (Pa. 1992); see also, Marra v. Stocker, 615 A.2d 326 (Pa. 1992) (concluding that, despite the fact that a judgment had been entered in the underlying mortgage foreclosure action, the trial court erred by refusing to set aside a sheriff’s sale where the mortgagee failed to provide to the mortgagor the mortgage foreclosure notice required by 41 P.S. § 403). We are bound by these decisions. See, e.g., Commonwealth v. Hull, 705 A.2d 911, 912 (Pa. Super. 1998) (“It is beyond the power of a panel of the Superior Court to overrule a prior decision of the Superior Court.”). For this reason, we conclude that the trial court properly considered whether the pertinent Act 91 notice was deficient.
Moving forward, we note that the parties agree that, at the time relevant to this appeal, Act 91 provided, in pertinent part, as follows:
Before any mortgagee may accelerate the maturity of any mortgage obligation covered under this article, commence any legal action including mortgage foreclosure to recover under such obligation, or take possession of any security of the mortgage debtor for such mortgage obligation, such mortgagee shall give the mortgagor notice as described in section 403-C. [35 P.S. § 1680.403c.] Such notice shall be given in a form and manner prescribed by the [Pennsylvania Housing Finance Agency (“agency”)]. Further, no mortgagee may enter judgment by confession pursuant to a note accompanying a mortgage, and may not proceed to enforce such obligation pursuant to applicable rules of civil procedure without giving the notice provided for in this subsection and following the procedures provided for under this article.
35 P.S. § 1680.402c (amended July 8, 2008, effective September 8, 2008) (emphasis added).
(a) Any mortgagee who desires to foreclose upon a mortgage shall send to such mortgagor at this or her last known address the notice provided in subsection (b): Provided, however, That such mortgagor shall be at least sixty (60) days contractually delinquent in his mortgage payments or be in violation of any other provision of such mortgage.
(b)(1) The agency shall prepare a notice which shall include all the information required by this subsection and by section 403 of the act of January 30, 1974 (P.L. 13, No. 6), referred to as the Loan Interest and Protection Law. This notice shall be in plain language and specifically state that the recipient of the notice may qualify for financial assistance under the homeowner’s emergency mortgage assistance program. This notice shall contain the telephone number and the address of a local consumer credit counseling agency. This notice shall be in lieu of any other notice required by law. This notice shall also advise the mortgagor of his delinquency or other default under the mortgage and that such mortgagor has thirty (30) days to have a face-to-face meeting with the mortgagee who sent the notice or a consumer credit counseling agency to attempt to resolve the delinquency or default by restructuring the loan payment schedule or otherwise.
(2) The notice under paragraph (1) must be sent by a mortgagee at least thirty (30) days before the mortgagee:
(i) asks for full payment of any mortgage obligation; or
(ii) begins any legal action, including foreclosure, for money due under the mortgage obligation or to take possession of the mortgagor’s security.
(3) The proposed notice under paragraph (1) shall be published by the agency in the Pennsylvania Bulletin within one hundred twenty (120) days of the effective date of this paragraph. The notice actually adopted for use by the agency shall be promulgated as part of the program guidelines required by [35 P.S. § 1680.401c]. . . .
35 P.S. § 1680.403c (amended July 8, 2008, effective September 8, 2008) (emphasis added).
As to the facts of this case, the parties agree that Appellant sent to Appellee an Act 91 notice and that the notice informed Appellee that she had thirty days to have a face-to-face meeting with a consumer credit counseling agency. They further agree that the Act 91 notice did not inform Appellee that she could meet face-to-face with the mortgagee, i.e., Appellant. The trial court interpreted the language highlighted above to mean that the Act 91 notice sent by Appellant to Appellee had to inform Appellee that she had thirty days either to have a face-to-face meeting with Appellant or to have a face-to-face meeting with a consumer credit counseling agency. Because the Act 91 notice Appellant sent to Appellee failed to inform Appellee that she could meet with Appellant, the trial court concluded that the notice was deficient and that the court thus lacked subject matter jurisdiction to entertain the matter, presumably from the time that Appellant filed its complaint. Consequently, the court set aside the sheriff’s sale and the judgment and then dismissed Appellant’s complaint without prejudice.
Appellant begins its argument to this Court by documenting the history of Act 91 and its notice requirements. Appellant next challenges the trial court’s interpretation of the relevant version of the Act 91 notice provision. According to Appellant, the trial court’s interpretation of Section 1680.403c of Act 91 failed to give effect to the word “or.” Appellant maintains that the Legislature intended to vest the agency with the discretion to decide whether the notice sent from a mortgagee to a mortgagor should include the option of the mortgagor meeting face-to-face with the mortgagee or the alternate option of the mortgagor meeting face-to-face with a consumer credit counseling agency. Appellant believes that the agency reasonably chose to include in the notice that it promulgated the option of the mortgagor meeting face-to-face with a consumer credit counseling agency. Appellant argues that the trial court failed to give the agency’s interpretation and prerogative due deference. Jumping forward a bit in Appellant’s brief, Appellant contends that it was entitled to rely on the notice promulgated by the agency. We pause at this point to address these aspects of Appellant’s argument.
While there are multiple layers to Appellant’s argument, a relatively straightforward statutory construction analysis reveals whether the trial court erred in its interpretation of Act 91. All matters requiring statutory interpretation are guided by the provisions of the Statutory Construction Act, 1 Pa.C.S.A. § 1501 et seq.2 Swords v. Harleysville Insurance Companies, 883 A.2d 562, 567 (Pa. 2005) (citations omitted).
Under the Statutory Construction Act, the object of all statutory construction is to ascertain and effectuate the General Assembly’s intention. 1 Pa.C.S.[A.] § 1921(a). When the words of a statute are clear and free from all ambiguity, the letter of the statute is not to be disregarded under the pretext of pursuing its spirit. 1 Pa.C.S.[A.] § 1921(b).
Id.
At the time relevant to this matter, Section 1680.402c of Act 91 clearly and unambiguously provided that, before a mortgagee could, inter alia, commence a mortgage foreclosure action against a mortgagor, the mortgagee was required to give the mortgagor a notice as described in Section 1680.403c of Act 91. Pursuant to the plain language employed in Subsection 1680.403c(b)(1), this notice was to, inter alia, advise the mortgagor that the mortgagor has thirty days to have a face-to-face meeting with the mortgagee who sent the notice or a consumer credit counseling agency to attempt to resolve the delinquency or default. In other words, Subsection 1680.403c(b)(1) clearly and unambiguously required a mortgagee to provide to a mortgagor notice that the mortgagor had a choice of whether to meet face-to-face with the mortgagee or a consumer credit counseling agency. While Act 91 undeniably empowered the agency to prepare a uniform notice, the Legislature mandated that the notice include all of the information outlined by Act 91’s notice provision. 35 P.S. § 1680.403c(b)(1) (amended July 8, 2008, effective September 8, 2008) (“The agency shall prepare a notice which shall include all the information required by this subsection . . ..”).
Here, the notice that Appellant provided to Appellee failed to inform Appellee that she could choose to meet face-to-face with Appellant. Consequently, the notice was deficient. Yet, such a conclusion does not end our inquiry.
Relying on Wells Fargo Bank v. Monroe, 966 A.2d 1140 (Pa. Super. 2009), Appellant maintains that Appellee was required to prove that she was prejudiced by the deficiency in the Act 91 notice. According to Appellant, Appellee could not meet her burden of proof in this regard because she, in fact, met with Appellant’s representatives, which led to the parties entering the agreed upon judgment.
In Wells Fargo Bank, the Monroes defaulted on their mortgage. The mortgage servicer sent to the Monroes an Act 91 notice. Wells Fargo later filed a mortgage foreclosure action against the Monroes. The parties filed competing motions for summary judgment. The Monroes argued, inter alia, that the Act 91 notice was deficient. The trial court nonetheless granted summary judgment in favor of Wells Fargo. The Monroes appealed to this Court.
The Monroes’ first issue on appeal was “[w]hether the Trial Court erred by requiring the [Monroes] to show the occurrence of prejudice as the result of their receipt of a defective Act 91 Notice from [Wells Fargo?]” Wells Fargo Bank, 966 A.2d at 1142. This Court described the Monroes’ argument under this issue as follows:
Specifically, the Monroes contend that the Act 91 Notice they received “did not identify the Mortgagee, it only identified the Servicer, Countrywide.” Monroes’ brief at 8. Therefore, they claim that they “did not have the address of the note-holder where they could have sent items pursuant to the Real Estate Settlement Procedures Act or more importantly, a Truth-in-Lending request to rescind their mortgage.” Id. The Monroes further assert that “the Act 91 Notice did not provide a place of cure within Westmoreland County where the property is located, nor did it provide a place of cure within a County contiguous to Westmoreland County” and that it “included additional proscribed costs and fees.” Id. Based upon these identified errors and in addition to them, the Monroes argue that the trial court required them to show that they were prejudiced by the improper notice, a requirement that they claim does not comply with Pennsylvania law. Id. at 9. Essentially, the Monroes assert that if the Act 91 Notice is improper, prejudice should be presumed.
Wells Fargo Bank, 966 A.2d at 1143.
The Court disposed of this argument as follows:
In response to the Monroes’ assertions regarding the Act 91 Notice and the requirement that they show prejudice, we agree with the trial court’s conclusion.FN1 The Monroes received an Act 91 Notice and, even if it was defective, they were given and availed themselves of the opportunity to pursue mortgage assistance through the Pennsylvania Homeowners’ Emergency Mortgage Assistance Program. They met with a credit counseling agency within the thirty days as provided by the Act 91 Notice and applied for the mortgage assistance. Moreover, the Monroes have provided no legal authority for their position, nor do they suggest what rights they were due above and beyond those that were afforded to them. See Pa.R.A.P. 2119; Bombar v. West American Ins. Co., 932 A.2d 78, 93 (Pa. Super. 2007) (stating that failure to cite relevant authority may result in waiver of the issue). Accordingly, we conclude that the Monroes’ first issue is without merit.
FN1. Specifically, the trial court indicated that any issues regarding fees and costs would be addressed at the accounting which takes place after a sheriff’s sale and at the time of distribution of the proceeds. T.C.O. at 3. Moreover, we note as to the assertion that the Act 91 Notice failed to provide a local location at which the mortgagor could cure a default, the Pennsylvania Code indicates that an address to which the cure may be sent by mail is sufficient. See 10 Pa.Code § 7.2(ii) (definition of “performance”). Here, an address for Countrywide in Dallas, Texas, was provided as the location to which any cure could be mailed. The Monroes did not take advantage of this option.
Wells Fargo Bank, 966 A.2d at 1143-44.
We find Wells Fargo Bank to be sufficiently distinguishable from the matter sub judice, such that the decision in Wells Fargo Bank has no impact on our decision in this case. As best we can discern, the deficiencies cited by the Monroes, with regard to the Act 91 notice they received, did not implicate Act 91’s explicit requirement that the mortgagee’s Act 91 notice must inform the mortgagor that the mortgagor can meet face-to-face with the mortgagee or a consumer credit counseling agency. Moreover, unlike in Wells Fargo Bank, there is no failure on the part of the parties to this appeal to provide this Court with pertinent legal authority.
Act 91 contains no language that suggests that an Act 91 notice which fails to advise a mortgagor that the mortgagor can meet with the mortgagee will suffice so long as, during the course of the mortgage foreclosure litigation, the mortgagor cannot prove that he or she was prejudiced by the deficient notice. In fact, Act 91 explicitly states that, before a mortgagee can even commence a mortgage foreclosure action, it must give the mortgagor the notice described in Section 1680.403c; Subsection 1680.403c(b)(1) clearly and unambiguously mandates that the notice must inform a mortgagor, inter alia, that the mortgagor can meet face-to-face with the mortgagee.
We conclude that the trial court did not make an error of law or abuse its discretion by sustaining Appellee’s “Motion to Set Aside Judgment and Sheriff’s Sale.” In conjunction with its ruling, the court properly set aside the sheriff’s sale, vacated the judgment, and dismissed Appellant’s complaint without prejudice. Accordingly, we affirm the court’s order.
Order affirmed.

 


 

Footnotes

 


 

* Retired Senior Judge assigned to the Superior Court.

 

 

1. As to the manner in which we review such orders, our Supreme Court has stated the following:

A petition to set aside a sheriff sale is governed by our rules of civil procedure which provide that [u]pon petition of any party in interest before delivery of the . . . sheriff’s deed to real property, the court, may upon proper cause shown, set aside the sale and order a resale or enter any other order which may be just and proper under the circumstances. In Doherty v. Adal Corp., 437 Pa. 109, 261 A.2d 311 (1970) we held that a petition to set aside a sheriff sale is an equitable proceeding, governed by equitable principles. Appellate review of equitable matters is limited to a determination of whether the lower court committed an error of law or abused its discretion.

 

Marra v. Stocker, 615 A.2d 326, 328 (Pa. 1992) (citations, quotation marks, and footnote omitted).

 

 

 

2. As with all questions of law, when we interpret a statute, “our standard of review is de novo. Our scope of review, to the extent necessary to resolve the legal question before us, is plenary.” Swords v. Harleysville Insurance Companies, 883 A.2d 562, 567 (Pa. 2005).

 

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U.S. Bank calls for court to hear MERS class-action suit

U.S. Bank calls for court to hear MERS class-action suit


Highly recommend that if anyone wants to go after MERS, you first read STATE OF DELAWARE v. MERSCORP, Mortgage Electronic Registration Systems, Inc., (MERS) to get familiar with some specifics. 

 

Observer- Reporter

U.S. Bank National Association has asked U.S. District Court to hear a class-action suit, filed by Washington County on behalf of all counties in the state, over the association’s failure to use the recorder of deeds offices to record mortgages, denying counties the related fees.

Washington County first took the case to Washington County Court, but the bank is now seeking a change in jurisdiction. The county alleges that more than $100 million has been lost in recording fees by all 67 counties in the state.

The county alleges U.S. Bank National Association, as trustee for various residential mortgage-backed security trusts, violated state law by failing to record “each and every mortgage transfer.”

The bank instead used a private entity, Mortgage Electronic Registration Systems Inc., for recording, “thereby depriving Washington County of the accompanying recording fees” for 15 or more years.

[OBSERVER-REPORTER]

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JIM FULLER, CLERK OF THE COURT, DUVAL COUNTY, FLORIDA vs. MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC. (MERS), MERSCORP

JIM FULLER, CLERK OF THE COURT, DUVAL COUNTY, FLORIDA vs. MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC. (MERS), MERSCORP


IN THE CIRCUIT COURT, FOURTH
JUDICIAL CIRCUIT, IN AND FOR
DUVAL COUNTY, FLORIDA

JIM FULLER, CLERK OF THE CIRCUIT
COURT, DUVAL COUNTY, FLORIDA,
in his official capacity and on behalf of
all those similarly situated,

Plaintiff,

vs.

MORTGAGE ELECTRONIC REGISTRATION
SYSTEMS, INC., a Delaware corporation; and
MERSCORP, INC., a Delaware Corporation

Defendants.

[ipaper docId=72570476 access_key=key-2j0q77ii32icyuhv6dnf height=600 width=600 /]

 

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Ka-Booom! Florida Clerk, Jim Fuller of Duval County Sues MERS

Ka-Booom! Florida Clerk, Jim Fuller of Duval County Sues MERS


This is major and pay close attention to the words below

Mortgage Servicing News-

The most recent lawsuit was filed by a county clerk in Florida, and seeks class action status to represent the state’s 67 counties. The complaint alleges the use of MERS does not comply with state property laws and has cost municipalities millions in unpaid recording fees.

Jim Fuller, the clerk of Duval County, filed suit against Merscorp Inc. and its wholly owned subsidiary, Mortgage Electronic Registration Systems, Inc., on Oct. 31, claiming civil conspiracy, unjust enrichment, as well as fraudulent and negligent misrepresentation. The suit also seeks a hearing to determine the validity of tracking note transfers on the MERS System and a court injunction to prohibit the use of MERS in Florida.

“MERS has usurped the rights and privileges of the Florida Clerks of Court by establishing, maintaining and inducing lenders to use its private recording system, which unlawfully interferes and competes with the public recording system,” the suit, filed in state circuit court, reads.

[…]

Both the note and mortgage are to be recorded. The principle issue we’re trying to get at is the punitive distinction of MERS being the mortgagee while the note is shifted from one to another up through the typical securitization process,” Volpe said in a phone interview. “The principle concern about the disconnect is that the public records are not complete insofar as the true beneficial owner of the mortgage is not reflected in the public records.”

[MORTGAGE SERVICING NEWS]

 

[ipaper docId=72570476 access_key=key-2j0q77ii32icyuhv6dnf height=600 width=600 /]

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MERS Registry Targeted by Local Land Offices Over Lost Fees

MERS Registry Targeted by Local Land Offices Over Lost Fees


I can tell you that this is ONLY the beginning… stay tuned for others to come forward soon.

MERS is done, repeat done.

Nancy Becker – You Go Girl!

Bloomberg-

For Nancy J. Becker, recorder of deeds in Montgomery County, Pennsylvania, outside Philadelphia, property records are practically sacred. So much so that her office keeps digital copies of land records dating to 1784 in four separate databases, including one 1,700 miles (2,735 kilometers) away.

If the county seat were leveled tomorrow, she says, “I could still record documents on my laptop on the street corner with a card table.”

Becker may sound tech-savvy, but to some of her constituents’ dismay, she can’t always call up a property with a keystroke and see who holds its note. That’s because more than 200,000 of her records list the lien holder as MERS, the private service that acts as a proxy for banks that bundle and sell off mortgage securities. That can make it all but impossible for a recorder to determine who really holds the paper, Bloomberg Businessweek reports in its Nov. 7 edition.

[BLOOMBERG]

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In RE: ONG | PA Bankr. Court “First Horizon and MERS, who apparently serviced such unrecorded mortgage”

In RE: ONG | PA Bankr. Court “First Horizon and MERS, who apparently serviced such unrecorded mortgage”


IN THE UNITED STATES BANKRUPTCY COURT
FOR THE WESTERN DISTRICT OF PENNSYLVANIA

IN RE:
ROBERT A. ONG and DONNA L. ONG,

Debtors. : Chapter 7

Charles O. Zebley, Jr.,

Trustee/Plaintiff,

v.

First Horizon Loans, a division of
First Tennessee Bank, N.A. and
Mortgage Electronic Registration
Systems, Inc.,

Defendants.

EXCERPT:

The Trustee contends, and First Horizon concedes, that he has reviewed
the records at the Westmoreland County Recorder of Deeds Office, and that
upon such review he was unable to verify that the Mortgage was ever recorded
there. Furthermore, First Horizon admits that it does not affirmatively assert that
(a) such a record search by anyone other than the Trustee would reveal that the
Mortgage was properly recorded, or (b) the Mortgage was ever properly
recorded. First Horizon, however, does not affirmatively concede that the
Mortgage was never properly recorded. Instead, First Horizon asserts, in its
Answer, that (a) it is searching to ascertain whether proof can be located that
would demonstrate that the Mortgage was properly recorded, (b) until such
search is completed, it lacks sufficient information to admit or deny the Trustee’s
allegation that the Mortgage was never properly recorded, and (c) it thus must
temporarily deny such allegation by the Trustee.

[..]

Because the Court converts the Trustee’s motions for judgment on the
pleadings into motions for summary judgment, the Court cannot immediately
dispose of such motions. Instead, the Court must give First Horizon a
reasonable opportunity to defend such converted motions in accordance with
Fed.R.Civ.P. 56. See Id. Therefore, First Horizon shall have 21 days from the
date of the instant Memorandum Opinion to produce evidence sufficient in weight
to withstand summary judgment regarding the Trustee’s contention that the
Mortgage was not properly recorded at the time when the Debtors filed for
bankruptcy, after which the Trustee will have 14 days to file a reply. If First
Horizon fails to timely produce such evidence, then summary judgments will
automatically be granted in favor of the Trustee, without any further hearing or
order by the Court, as to both of the Trustee’s avoidance actions.

[…]

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Washington County, Pennsylvania Brings Class Action on behalf of PA’s 67 counties to Recover Recording “MERS” Fees Lost to Wall Street

Washington County, Pennsylvania Brings Class Action on behalf of PA’s 67 counties to Recover Recording “MERS” Fees Lost to Wall Street


IN THE COURT OF COMMON PLEAS OF WASHINGTON COUNTY, PENNSYLVANIA

Civil Division

COUNTY OF WASHINGTON,
PENNSYLVANIA, on behalf of itself and all
other similarly situated Pennsylvania Counties,

Plaintiff

vs.

U.S. BANK NATIONAL ASSOCIATION,

Defendant

[ipaper docId=70965013 access_key=key-168o3025pdbk6qyzs3ct height=600 width=600 /]

 

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Montgomery County, PA recorder of deeds Nancy Becker to File Lawsuit Against MERS

Montgomery County, PA recorder of deeds Nancy Becker to File Lawsuit Against MERS


Wait until the “BIG” states file one against MERS, et al. This is going to lead all the lawsuits against the banking industry.

Follow the paper and audit MERS. Go down the MERS-HOLE & You’ll find out, what really went down.


Phillyburbs-

Montgomery County’s recorder of deeds on Tuesday said she is going after about $15.7 million she claims is owed to the county by an electronic mortgage registry company and banks doing business with that company.

“I am filing a class action lawsuit against MERS (Mortgage Electronic Registry System) and the banks using MERS for failing to record certain mortgage assignments and, therefore, not paying the required fees,” recorder Nancy J. Becker said.

 Becker said the lawsuit will claim the failure to file these transfers with appropriate recorder offices is an attempt to illegally circumvent the payment.
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HSBC FORECLOSURES AND THE NEWTRAK SYSTEM OF LENDER PROCESSING SERVICES

HSBC FORECLOSURES AND THE NEWTRAK SYSTEM OF LENDER PROCESSING SERVICES


HSBC FORECLOSURES AND THE NEWTRAK SYSTEM
OF LENDER PROCESSING SERVICES

By Lynn E. Szymoniak, Esq., Ed. Fraud Digest,
August 26, 2011

On August 24, 2011, Circuit Judge Fuentes of the United States Third Circuit Court of Appeals, issued an opinion in a case appealing the reversal by the District Court of sanctions originally imposed in the bankruptcy court on attorneys Mark J. Urden and Lorraine Doyle, the Udren Law Firm, and HSBC for violations of Federal Rule of Bankruptcy Procedure 9011. Highlights from that opinion, particularly regarding Lender Processing Services and HSBC, are set forth below. In this decision, the Third Circuit reversed the District Court and affirmed the bankruptcy court’s imposition of sanctions with respect to Lorraine Doyle, the Udren Law Firm, and HSBC. The District Court’s decision reversing the bankruptcy court’s sanctions against attorney Mark Udren was affirmed. The appeal was taken by Acting United States Trustee Roberta A. DeAngelis, In re Nile C. Taylor, et al., Case No. 10- 2154, 3d Cir. 2011. Ultimately, the Taylors lost their home. The sanctions imposed by the Bankruptcy Court, reversed by the District Court and finally affirmed by the Circuit Court, were minimal. Doyle  was ordered to take 3 CLE credits in professional responsibility; Udren himself to be trained in the use of NewTrak and to spend a day observing his employees handling NewTrak; and both Doyle and Udren to conduct a training session for the firm’s relevant lawyers in the requirements of Rule 9011 and procedures for escalating inquiries on NewTrak. The court also required HSBC to send a copy of its opinion to
all the law firms it uses in bankruptcy proceedings, along with a letter explaining that direct contact with HSBC concerning matters relating to HSBC’s case was permissible.

The Court made the following findings:

  • • HSBC does not deign to communicate directly with the firms it
    employs in its high-volume foreclosure work; rather, it uses a
    computerized system called NewTrak (provided by a third party, LPS)
    to assign individual firms discrete assignments and provide the limited
    data the system deems relevant to each assignment. The firms are
    selected and the instructions generated without any direct human
    involvement. The firms so chosen generally do not have the capacity
    to check the data (such as the amount of mortgage payment or time
    in arrears) provided to them by NewTrak and are not expected to
    communicate with other firms that may have done related work on the
    matter. Although it is technically possible for a firm hired through
    NewTrak to contact HSBC to discuss the matter on which it has been
    retained, it is clear from the record that this was discouraged and that
    some attorneys, including at least one Udren Firm attorney, did not
    believe it to be permitted. [The Udren Firm represented HSBC in this
    bankruptcy foreclosure.](Page 6-7)
  • • LPS is also not involved in the present appeal, as the bankruptcy
    court found that it had not engaged in wrongdoing in this case.
    However, both the accuracy of its data and the ethics of its practices
    have been repeatedly called into question elsewhere. See, e.g., In re
    Wilson, 2011 WL 1337240 at 9 (Bankr. E.D.La. Apr. 7, 2011)
    (imposing sanctions after finding that LPS had issued “sham” affidavits
    and perpetrated fraud on the court); In re Thorne, 2011 WL 2470114
    (Bankr. N.D. Miss. June 16, 2011); In re Doble, 2011 WL 1465559
    (Bankr. S.D. Cal. Apr. 14, 2011). (Footnote 5, Page 6)
  • • Doyle [the attorney from the Udren Firm representing HSBC] did
    nothing to verify the information in the motion for relief from stay
    besides check it against “screen prints” of the NewTrak information.
    She did not even access NewTrak herself. In effect, she simply
    proofread the document. It does not appear that NewTrak provided
    the Udren Firm with any information concerning the Taylors’ equity in
    their home, so Doyle could not have verified her statement in the
    motion concerning the lack of equity in any way, even against a
    “screen print.” (Page 8 )
  • • In May 2008, the bankruptcy court held a hearing on both the motion
    for relief and the claim objection. HSBC was represented at the
    hearing by a junior associate at the Udren Firm, Mr. Fitzgibbon. At that
    hearing, Fitzgibbon ultimately admitted that, at the time the motion
    for relief from the stay was filed, HSBC had received a mortgage
    payment for November 2007, even though both the motion for stay
    and the response to the Taylors’ objection to the proof of claim stated
    otherwise.8 Despite this, Fitzgibbon urged the court to grant the relief
    from stay, because the Taylors had not responded to HSBC’s RFAs
    (which included the “admission” that the Taylors had not made
    payments from November 2007 to January 2008). It appears from the
    record that Fitzgibbon initially sought to have the RFAs admitted as
    evidence even though he knew they contained falsehoods. (Page 10)
  • • The bankruptcy court denied the request to enter the RFAs as
    evidence, noting that the firm “closed their eyes to the fact that there
    was evidence that . . . conflicted with the very admissions that they
    asked me [to deem admitted]. They . . . had that evidence [that the
    assertions in its motion were not accurate] in [their] possession and
    [they] went ahead like [they] never saw it.” (App. 108-109.) (Page
    11)
  • • At the next hearing, in June 2008, Fitzgibbon stated that he could
    not obtain an accounting from HSBC, though he had repeatedly placed
    requests via NewTrak. He told the court that he was literally unable to
    contact HSBC—his firm’s client—directly to verify information which
    his firm had already represented to the court that it believed to be
    true. (Page 11)
  • • The bankruptcy court held four hearings over several days, making
    in-depth inquiries into the communications between HSBC and its
    lawyers in this case, as well as the general capabilities and limitations
    of a system like NewTrak. Ultimately, it found that the following had
    violated Rule 9011: Fitzgibbon, for pressing the motion for relief based
    on claims he knew to be untrue; Doyle, for failing to make reasonable
    inquiry concerning the representations she made in the motion for
    relief from stay and the response to the claim objection; Udren and
    the Udren Firm itself, for the conduct of its attorneys; and HSBC, for
    practices which caused the failure to adhere to Rule 9011.
  • • Rule 9011 of the Federal Rules of Bankruptcy Procedure, the
    equivalent of Rule 11 of the Federal Rules of Civil Procedure, requires
    that parties making representations to the court certify that “the
    allegations and other factual contentions have evidentiary support or,
    if specifically so identified, are likely to have evidentiary support.” Fed.
    R. Bank. P. 9011(b)(3). A party must reach this conclusion based on
    “inquiry reasonable under the circumstances.” Fed. R. Bank. P.
    9011(b). The concern of Rule 9011 is not the truth or falsity of the
    representation in itself, but rather whether the party making the
    representation reasonably believed it at the time to have evidentiary
    support.
  • • As an initial matter, the appellees’ insistence that Doyle’s and
    Fitzgibbon’s statements were “literally true” should not exculpate
    them from Rule 9011 sanctions. First, it should be noted that several of
    these claims were not, in fact, accurate. There was no literal truth to
    the statement in the request for relief from stay that the Taylors had
    no equity in their home. Doyle admitted that she made that statement
    simply as “part of the form pleading,” and “acknowledged having no
    knowledge of the value of the property and having made no inquiry on
    this subject.” (App. 215.) Similarly, the statement in the claim
    objection response that the figures in the original proof of claim were
    correct was false. (Page 16)
  • • In particular, even assuming that Doyle’s and Fitzgibbon’s
    statements as to the payments made by the Taylors were literally
    accurate, they were misleading. In attempting to evaluate whether
    HSBC was justified in seeking a relief from the stay on foreclosure, the
    court needed to know that at least partial payments had been made
    and that the failure to make some of the rest of the payments was due
    to a bona fide dispute over the amount due, not simple default.
    Instead, the court was told only that the Taylors had “failed to make
    regular mortgage payments” from November 1, 2007 to January 15,
    2008, with a mysterious notation concerning a “suspense balance”
    following. (App. 214-15.) A court could only reasonably interpret this
    to mean that the Taylors simply had not made payments for the period
    specified. As the bankruptcy court found, “[f]or at best a $540 dispute,
    the Udren Firm mechanically prosecuted a motion averring a $4,367
    post-petition obligation, the aim of which was to allow HSBC to
    foreclose on [the Taylors] “house.” (App. 215.) Therefore, Doyle’s and
    Fitzgibbon’s statements in question were either false or misleading.
    (Pages 16-17)
  • • With respect to the Taylors case in particular, Doyle ignored clear
    warning signs as to the accuracy of the data that she did receive. In
    responding to the motion for relief from stay, the Taylors submitted
    documentation indicating that they had already made at least partial
    payments for some of the months in question. In objecting to the
    proof of claim, the Taylors pointed out the inaccuracy of the mortgage
    payment listed and explained the circumstances surrounding the flood
    insurance dispute. Although Doyle certainly was not obliged to accept
    the Taylors’ claims at face value, they indisputably put her on notice
    that the matter was not as simple as it might have appeared from the
    NewTrak file. At that point, any reasonable attorney would have
    sought clarification and further documentation from her client, in order
    to correct any prior inadvertent misstatements to the court and to
    avoid any further errors. Instead, Doyle mechanically affirmed facts
    (the monthly mortgage payment) that her own prior filing with the
    court had already contradicted. (Page 20)
  • • Doyle’s reliance on HSBC was particularly problematic because she
    was not, in fact, relying directly on HSBC. Instead, she relied on a
    computer system run by a third-party vendor. She did not know where
    the data provided by NewTrak came from. She had no capacity to
    check the data against the original documents if any of it seemed
    implausible. (Page 20)
  • • Although the initial data the Udren Firm received was not, in itself,
    wildly implausible, it was facially inadequate. In short, then, we find
    that Doyle’s inquiry before making her representations to the
    bankruptcy court was unreasonable.
    In making this finding, we, of course, do not mean to suggest that the
    use of computerized databases is inherently inappropriate. However,
    the NewTrak system, as it was being used at the time of this case,
    permits parties at every level of the filing process to disclaim
    responsibility for inaccuracies. HSBC has handed off responsibility to a
    third- party maintainer, LPS, which, judging from the results in this
    case, has not generated particularly accurate records. LPS apparently
    regards itself as a mere conduit of information. Appellees, the
    attorneys and final link in the chain of transmission of this information
    to the court, claim reliance on NewTrak’s records. Who, precisely, can
    be held accountable if HSBC’s records are inadequately maintained,
    LPS transfers those records inaccurately into NewTrak, or a law firm
    relies on the NewTrak data without further investigation, thus leading
    to material misrepresentations to the court? It cannot be that all the
    parties involved can insulate themselves from responsibility by the use
    of such a system. (Page 21)
  • • We also find that it was appropriate to extend sanctions to the Udren
    Firm itself. Rule 11 explicitly allows the imposition of sanctions against
    law firms…In this instance, the bankruptcy court found that the
    misrepresentations in the case arose not simply from the
    irresponsibility of individual attorneys, but from the system put in
    place at the Udren Firm, which emphasized high-volume, high-speed
    processing of foreclosures to such an extent that it led to violations of
    Rule 9011. (citations omitted)(Page 24)
  • • We appreciate that the use of technology can save both litigants and
    attorneys time and money, and we do not, of course, mean to suggest
    that the use of databases or even certain automated communications
    between counsel and client are presumptively unreasonable. However,
    Rule 11 requires more than a rubber-stamping of the results of an
    automated process by a person who happens to be a lawyer. Where a
    lawyer systematically fails to take any responsibility for seeking
    adequate information from her client, makes representations without
    any factual basis because they are included in a “form pleading” she
    has been trained to fill out, and ignores obvious indications that her
    information may be incorrect, she cannot be said to have made
    reasonable inquiry. (Page 26)

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Taylor vs HSBC | U.S. 3rd Circuit Ct of Appeals – Affirms Bk Sanctions for misleading the court in filings

Taylor vs HSBC | U.S. 3rd Circuit Ct of Appeals – Affirms Bk Sanctions for misleading the court in filings


PRECEDENTIAL

UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT

_____________

In re: NILES C. TAYLOR; ANGELA J. TAYLOR, Debtors
ROBERTA A. DEANGELIS, Acting United States Trustee, Appellant.

No. 10-2154.

United States Court of Appeals, Third Circuit.

Argued: March 22, 2011. Opinion Filed: August 24, 2011.

Frederic J. Baker, Esq., Robert J. Schneider, Esq., George M. Conway, Esq., United States Department of Justice, Office of the United States Trustee, 833 Chestnut St., Suite 500, Philadelphia, PA 19107.

Ramona Elliott, Esq., P. Matthew Sutko, Esq., John P. Sheahan, Esq. (argued), United States Department of Justice, Executive Office for United States Trustees, 20 Massachusetts Ave. NW, Suite 8100, Washington, DC 20530, Attorneys for Appellant.

Jonathan J. Bart, Esq. (argued), Wilentz Goldman & Spitzer, P.A., Two Penn Center Plaza, Suite 910, Philadelphia, PA 19102, Attorney for Appellees.

Before: FUENTES, SMITH and VAN ANTWERPEN, Circuit Judges.

OPINION

FUENTES, Circuit Judge.

The United States Trustee, Region 3 (“Trustee”), appeals the reversal by the District Court of sanctions originally imposed in the bankruptcy court on attorneys Mark J. Udren and Lorraine Doyle, the Udren Law Firm, and HSBC for violations of Federal Rule of Bankruptcy Procedure 9011. For the reasons given below, we will reverse the District Court and affirm the bankruptcy court’s imposition of sanctions with respect to Lorraine Doyle, the Udren Law Firm, and HSBC.[1] However, we will affirm the District Court’s reversal of the bankruptcy court’s sanctions with respect to Mark J. Udren.

I.

A. Background

This case is an unfortunate example of the ways in which overreliance on computerized processes in a high-volume practice, as well as a failure on the part of clients and lawyers alike to take responsibility for accurate knowledge of a case, can lead to attorney misconduct before a court. It arises from the bankruptcy proceeding of Mr. and Ms. Niles C. and Angela J. Taylor. The Taylors filed for a Chapter 13 bankruptcy in September 2007. In the Taylors’ bankruptcy petition, they listed the bank HSBC, which held the mortgage on their house, as a creditor. In turn, HSBC filed a proof of claim in October 2007 with the bankruptcy court.

We are primarily concerned with two pleadings that HSBC’s attorneys filed in the bankruptcy court—(1) the request for relief from the automatic stay which would have permitted HSBC to pursue foreclosure proceedings despite the Taylors’ bankruptcy filing and (2) the response to the Taylors’ objection to HSBC’s proof of claim. We are also concerned with the attorneys’ conduct in court in connection with those pleadings. We draw our facts from the findings of the bankruptcy court.

1. The proof of claim (Moss Codilis law firm)

To preserve its interest in a debtor’s estate in a personal bankruptcy case, a creditor must file with the court a proof of claim, which includes a statement of the claim and of its amount and supporting documentation. Tennessee Student Assistance Corp. v. Hood, 541 U.S. 440, 447 (2004); Fed. R. Bank. P. 3001; Official Bankruptcy Form 10. In October 2007, HSBC filed such a proof of claim with respect to the Taylors’ mortgage. To do so, it used the law firm Moss Codilis.[2] Moss retrieved the information on which the claim was based from HSBC’s computerized mortgage servicing database. No employee of HSBC reviewed the claim before filing.

This proof of claim contained several errors: the amount of the Taylors’ monthly payment was incorrectly stated, the wrong mortgage note was attached, and the value of the home was understated by about $100,000. It is not clear whether the errors originated in HSBC’s database or whether they were introduced in Moss Codilis’s filing.[3]

2. The motion for relief from stay

At the time of the bankruptcy proceeding, the Taylors were also involved in a payment dispute with HSBC. HSBC believed the Taylors’ home to be in a flood zone and had obtained “forced insurance” for the property, the cost of which (approximately $180/month) it passed on to the Taylors. The Taylors disputed HSBC’s position and continued to pay their regular mortgage payment, without the additional insurance costs.[4] HSBC failed to acknowledge that the Taylors were making their regular payments and instead treated each payment as a partial payment, so that, in its records, the Taylors were becoming more delinquent each month.

Ordinarily, the filing of a bankruptcy petition imposes an automatic stay on all debt collection activities, including foreclosures. McCartney v. Integra Nat’l Bank North, 106 F.3d 506, 509 (3d Cir. 1997). However, pursuant to 11 U.S.C. § 362(d)(1), a secured creditor may file for relief from the stay “for cause, including the lack of adequate protection of an interest in property” of the creditor, in order to permit it to commence or continue foreclosure proceedings. Because of the Taylors’ withheld insurance payments, HSBC’s records indicated that they were delinquent. Thus, in January 2008, HSBC retained the Udren Firm to seek relief from the stay.

Mr. Udren is the only partner of the Udren Firm; Ms. Doyle, who appeared for the Udren Firm in the Taylors’ case, is a managing attorney at the firm, with twenty-seven years of experience. HSBC does not deign to communicate directly with the firms it employs in its high-volume foreclosure work; rather, it uses a computerized system called NewTrak (provided by a third party, LPS) to assign individual firms discrete assignments and provide the limited data the system deems relevant to each assignment.[5] The firms are selected and the instructions generated without any direct human involvement. The firms so chosen generally do not have the capacity to check the data (such as the amount of mortgage payment or time in arrears) provided to them by NewTrak and are not expected to communicate with other firms that may have done related work on the matter. Although it is technically possible for a firm hired through NewTrak to contact HSBC to discuss the matter on which it has been retained, it is clear from the record that this was discouraged and that some attorneys, including at least one Udren Firm attorney, did not believe it to be permitted.

In the Taylors’ case, NewTrak provided the Udren Firm with only the loan number, the Taylors’ name and address, payment amounts, late fees, and amounts past due. It did not provide any correspondence with the Taylors concerning the flood insurance dispute.

In January 2008, Doyle filed the motion for relief from the stay. This motion was prepared by non-attorney employees of the Udren Firm, relying exclusively on the information provided by NewTrak. The motion said that the debtor “has failed to discharge arrearages on said mortgage or has failed to make the current monthly payments on said mortgage since” the filing of the bankruptcy petition. (App. 65.) It identified “the failure to make . . . post-petition monthly payments” as stretching from November 1, 2007 to January 15, 2008, with an “amount per month” of $1455 (a monthly payment higher than that identified on the proof of claim filed earlier in the case by the Moss firm) and a total in arrears of $4367. (App. 66.) (It did note a “suspense balance” of $1040, which it subtracted from the ultimate total sought from the Taylors, but with no further explanation.) It stated that the Taylors had “inconsequential or no equity” in the property.[6] Id. The motion never mentioned the flood insurance dispute.

Doyle did nothing to verify the information in the motion for relief from stay besides check it against “screen prints” of the NewTrak information. She did not even access NewTrak herself. In effect, she simply proofread the document. It does not appear that NewTrak provided the Udren Firm with any information concerning the Taylors’ equity in their home, so Doyle could not have verified her statement in the motion concerning the lack of equity in any way, even against a “screen print.”

At the same time as it filed for relief from the stay, the Udren Firm also served the Taylors with a set of requests for admission (pursuant to Federal Rule of Bankruptcy Procedure 7036, incorporating Federal Rule of Civil Procedure 36) (“RFAs”). The RFAs sought formal and binding admissions that the Taylors had made no mortgage payments from November 2007 to January 2008 and that they had no equity in their home.

In February 2008, the Taylors filed a response to the motion for relief from stay, denying that they had failed to make payments and attaching copies of six checks tendered to HSBC during the relevant period. Four of them had already been cashed by HSBC.[7]

3. The claim objection and the response to the claim objection

In March 2008, the Taylors also filed an objection to HSBC’s proof of claim. The objection stated that HSBC had misstated the payment due on the mortgage and pointed out the dispute over the flood insurance. However, the Taylors did not respond to HSBC’s RFAs. Unless a party responds properly to a request for admission within 30 days, the “matter is [deemed] admitted.” Fed. R. Civ. P. 36(a)(3).

In the same month, Doyle filed a response to the objection to the proof of claim. The response did not discuss the flood insurance issue at all. However, it stated that “[a]ll figures contained in the proof of claim accurately reflect actual sums expended . . . by Mortgagee . . . and/or charges to which Mortgagee is contractually entitled and which the Debtors are contractually obligated to pay.” (App. 91.) This was indisputably incorrect, because the proof of claim listed an inaccurate monthly mortgage payment (which was also a different figure from the payment listed in Doyle’s own motion for relief from stay).

4. The claim hearings

In May 2008, the bankruptcy court held a hearing on both the motion for relief and the claim objection. HSBC was represented at the hearing by a junior associate at the Udren Firm, Mr. Fitzgibbon. At that hearing, Fitzgibbon ultimately admitted that, at the time the motion for relief from the stay was filed, HSBC had received a mortgage payment for November 2007, even though both the motion for stay and the response to the Taylors’ objection to the proof of claim stated otherwise.[8] Despite this, Fitzgibbon urged the court to grant the relief from stay, because the Taylors had not responded to HSBC’s RFAs (which included the “admission” that the Taylors had not made payments from November 2007 to January 2008). It appears from the record that Fitzgibbon initially sought to have the RFAs admitted as evidence even though he knew they contained falsehoods. (App. 101-102.)[9]

The bankruptcy court denied the request to enter the RFAs as evidence, noting that the firm “closed their eyes to the fact that there was evidence that . . . conflicted with the very admissions that they asked me [to deem admitted]. They. . . had that evidence [that the assertions in its motion were not accurate] in [their] possession and [they] went ahead like [they] never saw it.” (App. 108-109.) The court noted:

Maybe they have somebody there churning out these motions that doesn’t talk to the people that—you know, you never see the records, do you? Somebody sends it to you that sent it from somebody else.

(App. 109.) “I really find this motion to be in questionable good faith,” the court concluded. (App. 112.)

After the hearing, the bankruptcy court directed the Udren Firm to obtain an accounting from HSBC of the Taylors’ prepetition payments so that the arrearage on the mortgage could be determined correctly. At the next hearing, in June 2008, Fitzgibbon stated that he could not obtain an accounting from HSBC, though he had repeatedly placed requests via NewTrak. He told the court that he was literally unable to contact HSBC—his firm’s client—directly to verify information which his firm had already represented to the court that it believed to be true.

At the end of the June 2008 hearing, the court told Fitzgibbon: “I’m issuing an order to show cause on your firm, too, for filing these things . . . without having any knowledge. And filing answers . . . without any knowledge.” (App. 119.) Thereafter, the court entered an order sua sponte dated June 9, 2008, directing Fitzgibbon, Doyle, Udren, and others to appear and give testimony concerning the possibility of sanctions.

5. The sanctions hearings

The order stated that the purpose of the hearing included “to investigate the practices employed in this case by HSBC and its attorneys and agents and consider whether sanctions should issue against HSBC, its attorneys and agents.” (App 96-98.) Among those practices were “pressing a relief motion on admissions that were known to be untrue, and signing and filing pleadings without knowledge or inquiry regarding the matters pled therein.” Id. The order noted that “[t]he details are identified on the record of the hearings which are incorporated herein.” Id. In ordering Doyle to appear, the order noted that “the motion for relief, the admissions and the reply to the objection were prepared over Doyle’s name and signature.” Id. However, this order was not formally identified as “an order to show cause.”

The bankruptcy court held four hearings over several days, making in-depth inquiries into the communications between HSBC and its lawyers in this case, as well as the general capabilities and limitations of a system like NewTrak. Ultimately, it found that the following had violated Rule 9011: Fitzgibbon, for pressing the motion for relief based on claims he knew to be untrue; Doyle, for failing to make reasonable inquiry concerning the representations she made in the motion for relief from stay and the response to the claim objection; Udren and the Udren Firm itself, for the conduct of its attorneys; and HSBC, for practices which caused the failure to adhere to Rule 9011.

Because of his inexperience, the court did not sanction Fitzgibbon. However, it required Doyle to take 3 CLE credits in professional responsibility; Udren himself to be trained in the use of NewTrak and to spend a day observing his employees handling NewTrak; and both Doyle and Udren to conduct a training session for the firm’s relevant lawyers in the requirements of Rule 9011 and procedures for escalating inquiries on NewTrak. The court also required HSBC to send a copy of its opinion to all the law firms it uses in bankruptcy proceedings, along with a letter explaining that direct contact with HSBC concerning matters relating to HSBC’s case was permissible.[10]

B. The District Court’s Decision

Udren, Doyle, and the Udren Firm (but not HSBC) appealed the sanctions order to the District Court, which ultimately overturned the order. The District Court’s decision was based on three considerations: that the confusion in the case was attributable at least as much to the actions of Taylor’s counsel as to Doyle, Udren, and the Udren Firm; that the bankruptcy court seemed more concerned with “sending a message” to the bar concerning the use of computerized systems than with the conduct in the particular case; and that, since Udren himself did not sign any of the filings containing misrepresentations, he could not be sanctioned under Rule 9011. Although HSBC had not appealed, the District Court overturned the order with respect to HSBC, as well.

The United States trustee then appealed the District Court’s decision to this court.[11]

II.

Rule 9011 of the Federal Rules of Bankruptcy Procedure, the equivalent of Rule 11 of the Federal Rules of Civil Procedure, requires that parties making representations to the court certify that “the allegations and other factual contentions have evidentiary support or, if specifically so identified, are likely to have evidentiary support.” Fed. R. Bank. P. 9011(b)(3).[12] A party must reach this conclusion based on “inquiry reasonable under the circumstances.” Fed. R. Bank. P. 9011(b). The concern of Rule 9011 is not the truth or falsity of the representation in itself, but rather whether the party making the representation reasonably believed it at the time to have evidentiary support. In determining whether a party has violated Rule 9011, the court need not find that a party who makes a false representation to the court acted in bad faith. “The imposition of Rule 11 sanctions . . . requires only a showing of objectively unreasonable conduct.” Fellheimer, Eichen & Braverman, P.C. v. Charter Tech., Inc., 57 F.3d 1215, 1225 (3d Cir. 1995). We apply an abuse of discretion standard in reviewing the decision of the bankruptcy court. See Cooter & Gell v. Hartmarx Corp., 496 U.S. 384, 405 (1990). However, we review its factual findings for clear error. Stern v. Marshall, ___ U.S. ___, 131 S. Ct. 2594, 2627 (2011) (Breyer, J., dissenting).

In this opinion, we focus on several statements by appellees: (1) in the motion for relief from stay, the statements suggesting that the Taylors had failed to make payments on their mortgage since the filing of their bankruptcy petition and the identification of the months in which and the amount by which they were supposedly delinquent; (2) in the motion for relief from stay, the statement that the Taylors had no or inconsequential equity in the property; (3) in the response to the claim objection, the statement that the figures in the proof of claim were accurate; and, (4) at the first hearing, the attempt to have the requests for admission concerning the lack of mortgage payments deemed admitted. As discussed above, all of these statements involved false or misleading representations to the court.[13]

A. Alleged literal truth

As an initial matter, the appellees’ insistence that Doyle’s and Fitzgibbon’s statements were “literally true” should not exculpate them from Rule 9011 sanctions. First, it should be noted that several of these claims were not, in fact, accurate. There was no literal truth to the statement in the request for relief from stay that the Taylors had no equity in their home. Doyle admitted that she made that statement simply as “part of the form pleading,” and “acknowledged having no knowledge of the value of the property and having made no inquiry on this subject.” (App. 215.) Similarly, the statement in the claim objection response that the figures in the original proof of claim were correct was false.

Just as importantly, appellees cite no authority, and we are aware of none, which permits statements under Rule 9011 that are literally true but actually misleading. If the reasonably foreseeable effect of Doyle’s or Fitzgibbon’s representations to the bankruptcy court was to mislead the court, they cannot be said to have complied with Rule 9011. See Williamson v. Recovery Ltd. P’ship, 542 F.3d 43, 51 (2d Cir. 2008) (a party violates Rule 11 “by making false, misleading, improper, or frivolous representations to the court”) (emphasis added).

In particular, even assuming that Doyle’s and Fitzgibbon’s statements as to the payments made by the Taylors were literally accurate, they were misleading. In attempting to evaluate whether HSBC was justified in seeking a relief from the stay on foreclosure, the court needed to know that at least partial payments had been made and that the failure to make some of the rest of the payments was due to a bona fide dispute over the amount due, not simple default. Instead, the court was told only that the Taylors had “failed to make regular mortgage payments” from November 1, 2007 to January 15, 2008, with a mysterious notation concerning a “suspense balance” following. (App. 214-15.) A court could only reasonably interpret this to mean that the Taylors simply had not made payments for the period specified. As the bankruptcy court found, “[f]or at best a $540 dispute, the Udren Firm mechanically prosecuted a motion averring a $4,367[] post-petition obligation, the aim of which was to allow HSBC to foreclose on [the Taylors’] house.” (App. 215.) Therefore, Doyle’s and Fitzgibbon’s statements in question were either false or misleading.

B. Reasonable inquiry

We must, therefore, determine the reasonableness of the appellees’ inquiry before they made their false representations. Reasonableness has been defined as “an objective knowledge or belief at the time of the filing of a challenged paper that the claim was well-grounded in law and fact.” Ford Motor Co. v. Summit Motor Prods., Inc., 930 F.2d 277, 289 (3d Cir. 1991) (internal quotations omitted). The requirement of reasonable inquiry protects not merely the court and adverse parties, but also the client. The client is not expected to know the technical details of the law and ought to be able to rely on his attorney to elicit from him the information necessary to handle his case in the most effective, yet legally appropriate, manner.

In determining reasonableness, we have sometimes looked at several factors: “the amount of time available to the signer for conducting the factual and legal investigation; the necessity for reliance on a client for the underlying factual information; the plausibility of the legal position advocated; .. . whether the case was referred to the signer by another member of the Bar . . . [; and] the complexity of the legal and factual issues implicated.” Mary Ann Pensiero, Inc. v. Lingle, 847 F.2d 90, 95 (3d Cir. 1988). However, it does not appear that the court must work mechanically through these factors when it considers whether to impose sanctions. Rather, it should consider the reasonableness of the inquiry under all the material circumstances. “[T]he applicable standard is one of reasonableness under the circumstances.” Bus. Guides, Inc. v. Chromatic Commc’ns Ents., Inc., 498 U.S. 533, 551 (1991); accord Garr v. U.S. Healthcare, Inc., 22 F.3d 1274, 1279 (3d Cir. 1994).

Central to this case, then, is the degree to which an attorney may reasonably rely on representations from her client. An attorney certainly “is not always foreclosed from relying on information from other persons.” Garr, 22 F.3d 1278. In making statements to the court, lawyers constantly and appropriately rely on information provided by their clients, especially when the facts are contained in a client’s computerized records. It is difficult to imagine how attorneys might function were they required to conduct an independent investigation of every factual representation made by a client before it could be included in a court filing. While Rule 9011 “does not recognize a `pure heart and empty head’ defense,” In re Cendant Corp. Derivative Action Litig., 96 F. Supp. 2d 403, 405 (D.N.J. 2000), a lawyer need not routinely assume the duplicity or gross incompetence of her client in order to meet the requirements of Rule 9011. It is therefore usually reasonable for a lawyer to rely on information provided by a client, especially where that information is superficially plausible and the client provides its own records which appear to confirm the information.

However, Doyle’s behavior was unreasonable, both as a matter of her general practice and in ways specific to this case. First, reasonable reliance on a client’s representations assumes a reasonable attempt at eliciting them by the attorney. That is, an attorney must, in her independent professional judgment, make a reasonable effort to determine what facts are likely to be relevant to a particular court filing and to seek those facts from the client. She cannot simply settle for the information her client determines in advance— by means of an automated system, no less—that she should be provided with.

Yet that is precisely what happened here. “[I]t appears,” the bankruptcy court observed, “that Doyle, the manager of the Udren Firm bankruptcy department, had no relationship with the client, HSBC.” (App. 202.) By working solely with NewTrak, a system which no one at the Udren Firm seems to have understood, much less had any influence over, Doyle permitted HSBC to define—perilously narrowly—the information she had about the Taylors’ matter. That HSBC was not providing her with adequate information through NewTrak should have been evident to Doyle from the face of the NewTrak file. She did not have any information concerning the Taylors’ equity in the home, though she made a statement specifically denying that they had any.

More generally, a reasonable attorney would not file a motion for relief from stay for cause without inquiring of the client whether it had any information relevant to the alleged cause, that is, the debtor’s failure to make payments. Had Doyle made even that most minimal of inquiries, HSBC presumably would have provided her with the information in its files concerning the flood insurance dispute, and Doyle could have included that information in her motion for relief from stay—or, perhaps, advised the client that seeking such a motion would be inappropriate under the circumstances.

With respect to the Taylors’ case in particular, Doyle ignored clear warning signs as to the accuracy of the data that she did receive. In responding to the motion for relief from stay, the Taylors submitted documentation indicating that they had already made at least partial payments for some of the months in question. In objecting to the proof of claim, the Taylors pointed out the inaccuracy of the mortgage payment listed and explained the circumstances surrounding the flood insurance dispute. Although Doyle certainly was not obliged to accept the Taylors’ claims at face value, they indisputably put her on notice that the matter was not as simple as it might have appeared from the NewTrak file. At that point, any reasonable attorney would have sought clarification and further documentation from her client, in order to correct any prior inadvertent misstatements to the court and to avoid any further errors. Instead, Doyle mechanically affirmed facts (the monthly mortgage payment) that her own prior filing with the court had already contradicted.

Doyle’s reliance on HSBC was particularly problematic because she was not, in fact, relying directly on HSBC. Instead, she relied on a computer system run by a third-party vendor. She did not know where the data provided by NewTrak came from. She had no capacity to check the data against the original documents if any of it seemed implausible. And she effectively could not question the data with HSBC. In her relationship with HSBC, Doyle essentially abdicated her professional judgment to a black box.

None of the other factors discussed in the Mary Ann Pensiero case which are applicable here affect our analysis of the reasonableness of appellees’ actions. This was not a matter of extreme complexity, nor of extraordinary deadline pressure. Although the initial data the Udren Firm received was not, in itself, wildly implausible, it was facially inadequate. In short, then, we find that Doyle’s inquiry before making her representations to the bankruptcy court was unreasonable.

In making this finding, we, of course, do not mean to suggest that the use of computerized databases is inherently inappropriate. However, the NewTrak system, as it was being used at the time of this case, permits parties at every level of the filing process to disclaim responsibility for inaccuracies. HSBC has handed off responsibility to a third-party maintainer, LPS, which, judging from the results in this case, has not generated particularly accurate records. LPS apparently regards itself as a mere conduit of information. Appellees, the attorneys and final link in the chain of transmission of this information to the court, claim reliance on NewTrak’s records. Who, precisely, can be held accountable if HSBC’s records are inadequately maintained, LPS transfers those records inaccurately into NewTrak, or a law firm relies on the NewTrak data without further investigation, thus leading to material misrepresentations to the court? It cannot be that all the parties involved can insulate themselves from responsibility by the use of such a system. In the end, we must hold responsible the attorneys who have certified to the court that the representations they are making are “well-grounded in law and fact.”

C. Notice

Doyle, Udren, and the Udren Firm also argue on appeal that they had insufficient notice that they were in danger of sanctions.[14] Rule 9011 directs that a court “[o]n its own initiative . . . may enter an order describing the specific conduct that appears to violate [the rule] and directing an attorney . . . to show cause why it has not violated [the rule].” Fed. R. Bank. P. 9011(c)(1)(B). Due process in the imposition of Rule 9011 sanctions requires “particularized notice.” Jones v. Pittsburgh Nat’l Corp., 899 F.2d 1350, 1357 (3d Cir. 1990). The meaning of “particularized notice” has not been rigorously defined in this circuit. In Fellheimer, we noted that this requirement was met where the sanctioned party “was provided with sufficient, advance notice of exactly which conduct was alleged to be sanctionable.” Fellheimer, 57 F.3d at 1225. In Simmerman v. Corino, 27 F.3d 58, 64 (3d Cir. 1994), we held that “the party sought to be sanctioned is entitled to particularized notice including, at a minimum, 1) the fact that Rule 11 sanctions are under consideration, 2) the reasons why sanctions are under consideration . . . .”

The bankruptcy court’s June order was clearly in substance an order to show cause, even if it was not specifically captioned as such. The more difficult question is whether the court adequately described “the specific conduct that appear[ed] to violate” Rule 9011, so as to give sufficient notice of “exactly which conduct was alleged to be sanctionable.” As mentioned above, the court’s June order identified “pressing a relief motion on admissions that were known to be untrue, and signing and filing pleadings without knowledge or inquiry regarding the matters pled therein” as the conduct the court wished to investigate. (App. 119) The judge also told Fitzgibbon, “I’m issuing an order to show cause on your firm, too, for filing these things . . . without having any knowledge. And filing answers . . . without any knowledge.” Id. The June order also made specific reference to “the motion for relief, the admissions and the reply to the objection.”

In these particular circumstances, the notice given to appellees was sufficient to put them on notice as to which aspects of their conduct were considered sanctionable. At that point in the case, the Udren Firm lawyers had only filed three substantive papers with the court—totaling six (substantive) pages—and the court found all of them problematic. Appellees’ claim that they believed that the only issue at the time of the hearing was Fitzgibbon’s inability to contact HSBC is simply not plausible in light of the language of the June order and the bankruptcy court’s statements at the hearing, which were incorporated by reference into the June order. In a case in which more extensive docket activity had taken place, the bankruptcy court’s order might not have been sufficient to inform appellees as to which of their filings were sanctionable, but, given the unusual circumstances here, it was. But see Martens v. Thomann, 273 F.3d 159, 178 (2d Cir. 2001) (requiring specific identification of individual challenged statements to uphold imposition of sanctions).

D. The Udren Firm and Udren’s individual liability

We also find that it was appropriate to extend sanctions to the Udren Firm itself. Rule 11 explicitly allows the imposition of sanctions against law firms. Fellheimer, 57 F.3d 1215 at 1223 n.5. In this instance, the bankruptcy court found that the misrepresentations in the case arose not simply from the irresponsibility of individual attorneys, but from the system put in place at the Udren Firm, which emphasized high-volume, high-speed processing of foreclosures to such an extent that it led to violations of Rule 9011.

However, we do not find that responsibility for these failures extends specifically to Udren, whose involvement in this matter was limited to his role as sole shareholder of the firm.

E. The District Court’s reversal of sanctions against HSBC

Ordinarily, of course, a party which does not appeal a decision by a district court cannot receive relief with respect to that decision. “[T]he mere fact that a [party] may wind up with a judgment against one [party] that is not logically consistent with an unappealed judgment against another is not alone sufficient to justify taking away the unappealed judgment in favor of a party not before the court.” Repola v. Morbark Indus., Inc., 980 F.2d 938, 942 (3d Cir. 1992). However, “where the disposition as to one party is inextricably intertwined with the interests of a non-appealing party,” it may be “impossible to grant relief to one party without granting relief to the other.” United States v. Tabor Court Realty Corp., 943 F.2d 335, 344 (3d Cir. 1991). In Tabor Court Realty, a contract dispute, the assignee of a property had failed to appeal a decision, while the assignor had (and had ultimately prevailed). Given that the dispute was over the disposition of the property, it was impossible to grant relief to the assignor without also granting relief to the assignee.

In this instance, whether the lawyers at the Udren Firm violated Rule 9011 is a question analytically distinct from whether HSBC was responsible for any violations of Rule 9011. A court might find that HSBC was responsible for violations, whereas, say, Udren himself was not. It was entirely possible for HSBC to comply with the sanctions ordered (a letter to its firms informing them that they are permitted to consult with HSBC) without affecting the interests of the lawyers at the Udren Firm. Therefore, the interests of the lawyers at the Udren Firm and HSBC were not “inextricably intertwined,” and the District Court lacked jurisdiction to reverse the sanctions against HSBC.

F. Alternative basis for the District Court’s decision

In reversing the bankruptcy court’s decision, the District Court focused on that court’s apparent attention to the broader problems of high-volume bankruptcy practice in imposing sanctions. It is true that the bankruptcy judge noted that appellees were not the first attorneys to run into these sorts of difficulties in her court. But she nonetheless made individualized findings of wrong-doing after four days of hearings and issued sanctions thoughtfully chosen to prevent the recurrence of problems at the Udren Firm based on what she had learned of practices there. Insofar as she considered the effect of the sanctions on the future conduct of other attorneys appearing before her, such considerations were permissible. After all, “the prime goal [of Rule 11 sanctions] should be deterrence of repetition of improper conduct.” Waltz v. County of Lycoming, 974 F.2d 387, 390 (3d Cir. 1992).

G. Conclusion

We appreciate that the use of technology can save both litigants and attorneys time and money, and we do not, of course, mean to suggest that the use of databases or even certain automated communications between counsel and client are presumptively unreasonable. However, Rule 11 requires more than a rubber-stamping of the results of an automated process by a person who happens to be a lawyer. Where a lawyer systematically fails to take any responsibility for seeking adequate information from her client, makes representations without any factual basis because they are included in a “form pleading” she has been trained to fill out, and ignores obvious indications that her information may be incorrect, she cannot be said to have made reasonable inquiry. Therefore, we find that the bankruptcy court did not abuse its discretion in imposing sanctions on Doyle or the Udren Firm itself. However, it did abuse its discretion in imposing sanctions on Udren individually.

III.

For the foregoing reasons, we will reverse the District Court with respect to Doyle and the Udren Firm, affirming the bankruptcy court’s imposition of sanctions. With respect to HSBC, as discussed previously, the District Court lacked jurisdiction to reverse the sanctions, as do we; therefore, we vacate the District Court’s order with respect to that party, leaving the sanctions imposed by the bankruptcy court in place. We will affirm the District Court with respect to Udren individually, reversing the bankruptcy’s court imposition of sanctions.

[1] Although HSBC was sanctioned by the bankruptcy court, it did not participate in this appeal.

[2] Moss Codilis is not involved in the present appeal. However, it is worth noting that the firm has come under serious judicial criticism for its lax practices in bankruptcy proceedings. “In total, [the court knows] of 23 instances in which [Moss Codilis] has violated [court rules] in this District alone.” In re Greco, 405 B.R. 393, 394 (Bankr. S.D. Fla. 2009); see also In re Waring, 401 B.R. 906 (Bankr. N.D. Ohio 2009).

[3] HSBC ultimately corrected these errors in an amended court filing.

[4] This dispute has now been resolved in favor of the Taylors. (App. 199.)

[5] LPS is also not involved in the present appeal, as the bankruptcy court found that it had not engaged in wrongdoing in this case. However, both the accuracy of its data and the ethics of its practices have been repeatedly called into question elsewhere. See, e.g., In re Wilson, 2011 WL 1337240 at *9 (Bankr. E.D.La. Apr. 7, 2011) (imposing sanctions after finding that LPS had issued “sham” affidavits and perpetrated fraud on the court); In re Thorne, 2011 WL 2470114 (Bankr. N.D. Miss. June 16, 2011); In re Doble, 2011 WL 1465559 (Bankr. S.D. Cal. Apr. 14, 2011).

[6] The U.S. Trustee now points out that the motion also claimed that the Taylors were not making payments to other creditors under their bankruptcy plan and argues that this claim was false as well. Since the bankruptcy court did not make any findings with respect to this issue, we will not consider it.

[7] It is not clear from the briefing whether the last two checks, for February and March 2008, had actually been submitted to HSBC at the time the motion was filed; appellees deny that they were. However, appellees do not dispute that checks for October and November 2007 and January 2008 had been cashed.

[8] Appellees concede that, by the time the May hearing was held, HSBC had received all of the relevant checks.

[9] Appellees now claim that “[i]t is clear from the record, that Mr. Fitzgibbon honestly disclosed to the Court that these checks had just been received by [the] Udren [Firm] and that the only issue was that of flood insurance.” (App’ee Br. 16.) However, this disclosure did not occur until after Fitzgibbon had attempted to enter the RFAs, which made contrary claims, as evidence, and debtor’s counsel raised the issue. As the bankruptcy court described it, “[Fitzgibbon] first argued that I should rule in HSBC’s favor . . . On probing by the court, he acknowledged that as of the date of the continued hearing, he had learned that [the Taylors] had made every payment.” (App. 196, emphasis added.) In a Rule 9011/11 proceeding such as the present one, one would expect the challenged parties to be scrupulously careful in their representations to the court.

[10] Taylor’s counsel was also ultimately sanctioned and removed from the case. Counsel did not perform competently, as is evidenced by the Taylors’ failure to contest HSBC’s RFAs. She also made a number of inaccurate statements in her representations to the court. However, it is clear that her conduct did not induce the misrepresentations by HSBC or its attorneys. As the bankruptcy court correctly noted, “the process employed by a mortgagee and its counsel must be fair and transparent without regard to the quality of debtor’s counsel since many debtors are unrepresented and cannot rely on counsel to protect them.” (App. 214.)

[11] The bankruptcy court had jurisdiction under 28 U.S.C. § 157(a). The District Court had jurisdiction under 28 U.S.C. § 158(a)(1), except as discussed below. We have jurisdiction under 28 U.S.C. § 158(d).

[12] “[C]ases decided pursuant to [Fed. R. Civ. P. 11] apply to Rule 9011.” In re Gioioso, 979 F.2d 956, 960 (3d Cir. 1992).

[13] Appellees expend great energy in questioning the factual findings of the bankruptcy court, but we, like the District Court before us, see no error.

[14] Any claim regarding a due process right to notification of the form of sanctions being considered has been waived by appellees, as it was not raised in their papers, either here or in the district court. United States v. Pelullo, 399 F.3d 197, 222 (3d Cir. 2005).

[ipaper docId=63127059 access_key=key-2ki51goybcvd7k5rv5hl height=600 width=600 /]

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Posted in STOP FORECLOSURE FRAUDComments (1)

Tellado v. INDYMAC MORTGAGE SVS | PA Dist. Court “OneWest Bank shall refund all payments made under the contract, cancel and return any negotiable instrument”

Tellado v. INDYMAC MORTGAGE SVS | PA Dist. Court “OneWest Bank shall refund all payments made under the contract, cancel and return any negotiable instrument”


JOSE TELLADO AND MARIA TELLADO, Plaintiffs,

v.


INDYMAC MORTGAGE SERVICES, a division of OneWest Bank, FSB, Defendant.

Civil Action No. 09-5022.

United States District Court, E.D. Pennsylvania.

August 8, 2011.

MEMORANDUM

PETRESE B. TUCKER, District Judge.

After a bench trial in this matter on November 8, 2010, and pursuant to Fed. R. Civ. P. 52(a), the Court makes the following Findings of Fact:

1. This is an action for damages in connection with the mortgage refinancing services received by Plaintiffs, Jose and Maria Tellado, for their residential real property located at 519 Morris Street, Philadelphia, Pennsylvania (the “Property”).

2. Plaintiffs, who are husband and wife, are also low-income senior citizens who speak primarily Spanish.

3. On or around June 2007, Plaintiff Jose Tellado heard a Spanish-language radio advertisement for mortgage refinance services. Plaintiff Mr. Tellado called the telephone number provided in the advertisement and reached a man named Carlos Enrique, and the two conversed exclusively in Spanish.

4. Mr. Enrique assisted Plaintiff Jose Tellado with the submission of a loan application. Mr. Enrique also arranged for a closing agent to visit the Tellado home with the loan documents.

5. On July 3, 2007, Mr. Philip Bloom, a closing agent and notary, came to the Property with the loan documents. Mr. Bloom acted as a representative of Indymac Bank, F.S.B., and had been provided instructions on how to conduct the loan closing. Plaintiffs received a copy of these instructions.

6. Plaintiffs saw the final loan terms for the first time in their home at closing.

7. The loan transaction, from the initial contact with Mr. Enrique until the loan closing, was conducted in Spanish.

8. The loan documents provided at the loan closing, including the Note, the Mortgage, and the Notice of Right to Cancel, were provided in English.

9. One of the loan documents received by the Plaintiffs was a Notice of Right to Cancel, a model form mandated by the Truth in Lending Regulation Z, referenced in section 226.23 of title 12 of the Code of Federal Regulations, Appendix H.

10. Plaintiffs’ daughter, Marcelina Fuster, was present at the closing, at the suggestion of Mr. Enrique, to act as an interpreter. She assisted in translating the closing agent’s verbal instructions, as well as his explanations of the loan documents, from English to Spanish for the Plaintiffs. Ms. Fuster did not have the opportunity to read, nor to translate the loan documents themselves.

11. Plaintiffs are unable to read English and did not understand the contents of the documents that they were signing at closing. At the time of the closing, Plaintiffs had the intention of entering into a fixed rate mortgage. Plaintiffs were unaware that the first ten years of payments under the loan would not be applied to the principal, that the loan had an adjustable rate, or that the loan documents contained falsified information concerning their monthly income.

12. In connection with the July 3, 2007 transaction, Plaintiffs purchased the mortgage refinancing services for a price in excess of $25. The original lender in this transaction was Indymac Bank, F.S.B.

13. Subsequently, on July 11, 2008, Indymac Bank, F.S.B. went into receivership, and the Federal Deposit Insurance Corporation (FDIC) was appointed its receiver. As a result, certain assets and liabilities of Indymac Bank, F.S.B., including the Plaintiffs’ mortgage loan, were transferred to Indymac Federal Bank, F.S.B., for which the FDIC served as conservator.

14. Under a Master Purchase Agreement (the “MPA”) dated March 18, 2009, Defendant OneWest Bank, FSB (“OneWest Bank”), acquired the Plaintiffs’ loan, formerly held by Indymac Bank, F.S.B., from the FDIC.

15. In the MPA, Defendant agreed to assume certain liabilities associated with loans acquired from the FDIC. In Section 4.02 of the MPA, there are enumerated certain liabilities that the Defendant did not assume, however, such excluded liabilities are unclear, as Schedule 4.02(a) referenced in the MPA detailing excluded liabilities was not provided to the Court.

16. On August 5, 2009, Plaintiffs sent a Notice of Cancellation to Indymac Mortgage Services, a division of Defendant OneWest Bank, alerting the entity of Plaintiffs’ intention to file suit if a favorable response was not received within ten (10) days.

17. OneWest Bank failed to provide any response to the Notice of Cancellation within (10) ten days after receiving such notice. OneWest Bank responded to Plaintiffs in a letter dated October 15, 2009, denying Plaintiffs’ request to rescind the mortgage loan transaction.

18. After commencing this action on August 24, 2009, Plaintiffs began escrowing their monthly payments.

19. Plaintiffs ceased escrowing payments upon receipt from OneWest Bank of a Notice of Intention to Foreclose. Plaintiffs continued to make monthly payments to prevent foreclosure on the Property during the pendency of this action.

20. As of November 8, 2010, the bench trial date in this matter, Plaintiffs were up to date on their payment obligations under the loan at issue.

21. Plaintiffs seek:

a) Determination that the mortgage on their home is void following their submission to OneWest Bank of a notice of cancellation, as required under 73 P.S. § 201-7(g).

b) Determination that, by failing to honor the Notice of Cancellation and inform Plaintiffs of their intent to collect the proceeds of the loan within ten (10) business days as required under 73 P.S. § 201-7 (g), OneWest Bank has forfeited the right to any further payment.

c) If the mortgage is not cancelled, Plaintiffs seek in the alternative triple damages based on the amount of refunded payments they would have received, and the security instrument that would have been terminated if Defendant had taken the appropriate steps to cancel the loan as follows:

i) Triple damages based on the amount of payments made by Plaintiffs to date, at least $30,043.36, for a total of $90,130.08, pursuant to 73 P.S. § 201-9.2(a).

ii) Actual damages in the amount of the security instrument that OneWest failed to terminate, and which OneWest retains as a lien against Plaintiff’s home, in the amount of $115,000.00, pursuant to 73 P.S. § 201-9.2(a).

Conclusions of Law

A. Plaintiffs Asserted a Valid Claim for Damages Arising From OneWest’s Failure to Cancel the Mortgage Transaction

1. A Federal Law Preempts only State Law Directly in Conflict with the Scope of Such Federal Law

a) Generally, the law of preemption, which has its roots in the Supremacy Clause, dictates that federal law preempts state law when Congress has shown intent to create federal regulation in a particular field so pervasive as to leave no room for state supplementation.

b) Pursuant to 12 C.F.R § 545.2, The Office of Thrift Supervision (OTS) has the “plenary and exclusive power . . . to regulate all aspects of the operations of Federal savings associations, as set forth in section 5(a) of the [Home Owners Loan] Act. This exercise of the Office’s authority is preemptive of any state law purporting to address the subject of the operations of a Federal savings association.”

c) The OTS, however, makes an exception for, inter alia, state contract and commercial laws which only incidentally affect the lending operations of Federal savings associations or are otherwise consistent with the purpose of the regulation. 12 C.F.R. § 560.2(c)(1).

d) While the Third Circuit has not yet ruled on the preemptive relationship between the Home Owners Loan Act (“HOLA”) and the Pennsylvania Unfair Trade Practices and Consumer Protection Law, 73 P.S. §201-7 (“UTPCPL”), the Southern District of New York held that the New York Consumer Fraud Statute is not directly aimed at lenders, and has only an incidental impact on lending relationships without creating any conflict with the federal objectives identified in 12 C.F.R. § 560.2. Binetti v. Wash. Mut. Bank, 446 F. Supp. 2d 217 (S.D.N.Y. 2006).

e) In Binetti, the Southern District of New York pointed to a December 24, 1996, OTS opinion which concluded that the New York Consumer Fraud Statute is the type of commercial law designed to “establish the basic norms that undergird commercial transactions” that the OTS has indicated it does not intend to preempt. Id. at 219.

f) A state law that generally dictates the underpinnings of fair trade practices is distinguishable from a state law that is directly aimed at lenders, which courts See have consistently held to be preempted by HOLA and similar federal acts. Binetti v. Wash Mut. Bank at 220 (citing 1999 OTS LEXIS 4).

g) The Court, finding Binetti instructive, holds thatthe Pennsylvania Unfair Trade Practices and Consumer Protection Law (“UTPCPL”) governs the customs and practices surrounding commercial transactions generally, and thus is not preempted by HOLA.

h) Similarly, the UTPCPL is not preempted by the Truth in Lending Act.

I) The Truth in Lending Act preempts state law only where the state law is in conflict. Jamal v. WMC Mortg. Corp., 2005 U.S. Dist. LEXIS 5076 (E.D. Pa. Mar. 28, 2005).

j) As noted in Jamal, “the TILA provides in relevant part at 15 U.S.C. § 1610(a)(1),

`Except as provided in subsection (e) of this section [relating credit and charge card application and solicitation disclosures], this part and parts B and C of this subchapter do not annul, alter, or affect the laws of any State relating to the disclosure of information in connection with credit transactions, except to the extent that those laws are inconsistent with the provisions of this subchapter and then only to the extent of the inconsistency. . . .'”

k) The Court in Jamal further notes that, “[s]imilarly, Regulation Z, 12 C.F.R. § 226.28(a) states in pertinent part:

`Inconsistent disclosure requirements. (1) Except as provided in paragraph (d) of this section [relating to special rule for credit and charge cards], state law requirements that are inconsistent with the requirements contained in chapter 1 (General Provisions), chapter 2 (Credit Transactions), or chapter 3 (Credit Advertising) of the act and the implementing provisions of this regulation are preempted to the extent of the inconsistency. . . .'”

l) The Truth in Lending Act, which focuses on consumer credit disclosures, is not preempted by the UTPCPL, a state law only which generally governs commercial transactions, and is not aimed at federal consumer credit practices.

2. Plaintiffs have a valid claim under the Pennsylvania Unfair Trade Practices and Consumer Protection Law, 73 P.S. § 201-7 (UTPCPL) against OneWest Bank.

a) The loan transaction which Plaintiffs entered into on July 3, 2007 is governed by the door-to-door sales provisions of the UTPCPL. 73 P.S. § 201-7.

b) Under 73 P.S. § 201-7, the right to cancel is afforded “to any consumer who agrees to purchase goods or services with a value of $25 or more `as a result of or in connection with’ contact between the seller and the consumer at the consumer’s home.” Burke v. Yingling, 446 Pa. Super. 16, 21 (1995).

c) At trial, the Court determined that OneWest Bank qualifies as a seller within e definition of the UTPCPL.

d) In this case, the service provided, mortage refinancing, had a value of well over twenty-five dollars ($25).

e) Additionally, such services were contracted as a result of contacts between the Plaintiffs and One West Banka Plaintiffs’ residence, including a telephone call placed by Mr. Tellado from his joome, and the loan closing which occurred at the residence. Thus, as in Fowler v. Rauso, 425 B.R. 1657 (Bankr. E.D. Pa. 2010), the contacts made at the residence of the consumers result in this transaction falling within the scope of 73 P.S. § 201-7.

e) Under the door-to-door sales provision of the UTPCPL, at the time of the sale or contract the buyer shall be provided with a notice of cancellation written in the same language as that principally used in the oral sales presentation and also in English. 73 P.S. § 201-7(b).

f) The buyer shall also be informed in the notice to cancel that he may avoid the contract or sale by providing the seller with a written notice of cancellation within three business days after the date of the transaction. 73 P.S. § 201-7(b).

g) IndyMac Bank, F.S.B., the original mortgagee, did not provide any documents in Spanish, the language of the sales presentation, nor did IndyMac Bank, F.S.B. provide additional notifications of the right to cancel within three business days near the signature line of the Note or Mortgage, as required by the UTPCPL. 73 P.S. § 201-7(b).

h) Thus, IndyMac Bank F.S.B., a division of OneWest Bank, failed to provide proper notice of Plaintiffs’ right to cancel the transaction under the UTPCPL.

i) Further, the door-to-door sales notice to cancel requirements of the UTPCPL are not preempted by HOLA because they only incidentally affect the lending operations of OneWest and are consistent with the purpose of the HOLA.

j) The Court finds that “[t]he UTPCPL is a law of general applicability, and not targeted directly at banking or lending.” Poskin v. TD Banknorth, N.A., 687 F. Supp. 2d 530 (W.D. Pa. 2009).

k) While the Third Circuit has not issued a ruling directly addressing the issue at hand, courts within the Ninth Circuit have provided some guidance.

l) In Reyes v. Premier Home Funding, Inc., 640 F. Supp. 2d. 1147 (N.D.Cal. 2009), the Court considered HOLA’s preemption of the California Translation Law (CTA), which requires that a translation of a contract or agreement be provided in the language in which the contract or agreement was negotiated. The Court held that the CTA was not preempted by HOLA because it did not require any specific statements, information or other content to be disclosed and because it only affects lending incidentally. Id. at 1155 (emphasis added).

m) Reyes, as well as the case at issue, is distinguishable from several other Ninth Circuit cases which called for federal preemption of state regulations.

n) Where the state regulation in question regards specific processing, servicing, or disclosure policies or concerns the substantive financial terms of the loan, preemption has been deemed necessary. See Parcray v. Shea Mortg., Inc., 2010 WL 1659369 (E.D. Cal. Apr. 23, 2010)(concluding that HOLA preempts Cal. Civ. Code § 2923.5 because it “concerns the processing and servicing of [the plaintiff]’s mortgage”); Odinma v. Aurora Loan Servs., 2010 WL 1199886 (N.D. Cal. Mar. 23, 2010); Murillo v. Aurora Loan Servs., LLC, 2009 WL 2160579 (N.D. Cal. July 17, 2009); Silvas v. E*Trade Mortg. Corp., 421 F. Supp. 2d 1315 (S.D. Cal., 2006) (concluding that where federal law preempts an “entire field,” a state’s provision of remedies for a violation of federal law amounts to a form of state regulation of the affected area and is thus preempted).

o) As in Reyes, the Court finds that notice of right to cancel in this matter was incidental to the larger mortgage refinancing transaction, and thus is not preempted by HOLA or TILA, as discussed above.

B. Plaintiffs Fulfilled their Burden of Proof and are Entitled to Damages under the PA UPTCPL

1. The cancellation period provided for in 73 P.S. § 201-7(e) shall not begin to run until buyer has been informed of his right to cancel and has been provided with the required copies of the “Notice of Cancellation.”

2. Because Plaintiffs never received the proper notification of their right to cancel under the UTPCPL, the cancellation period provided for in 73 P.S. § 201-7(e) had not begun to run at the time Plaintiffs sent a Notice of Cancellation to Defendant on August 5, 2009.

3. Because no valid notice of cancellation was issued to Plaintiffs, Plaintiffs’ Notice of Cancellation was sent within the required time constraints pursuant to 73 P.S. § Plaintiffs are not required to show actual losses for remedies to be triggered under 73 P.S. § 201-7(g).

4. Relief granted to Plaintiffs shall be as follows:

a) Defendant OneWest Bank shall refund all payments made under the contract, cancel and return any negotiable instrument executed by the Plaintiffs in connection with the mortgage refinancing, and take any action necessary or appropriate to terminate promptly any security interest created in the mortgage refinancing transaction. 73 P.S. § 201-7(g).

b) Under 73 P.S. 201-9.2(a), the Court may, in its discretion, award up to three times the actual damages sustained [due to “deceptive practices”, as statutorily defined], but not less than one hundred dollars ($100). The Court may provide such additional relief as it deems necessary or proper.

c) Because the acts in question do not rise to the level of unlawful deceptive practices required under 73 P.S. § 201-9.2(a), the Court declines to award damages permissible under this section.

An appropriate order follows.

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IN RE ALCIDE, Bankr. Court, ED Pennsylvania | “EVERHOME, EVERBANK, MERS”

IN RE ALCIDE, Bankr. Court, ED Pennsylvania | “EVERHOME, EVERBANK, MERS”


In re: MICHELIN ALCIDE, Chapter 7, Debtor.

Bky. No. 10-15489 ELF.

United States Bankruptcy Court, E.D. Pennsylvania.

May 27, 2011.

MEMORANDUM

ERIC L. FRANK, Bankruptcy Judge

Excerpts:

II. FACTUAL BACKGROUND

A.

In order to place the present dispute in the proper procedural perspective, it is helpful to summarize certain background information regarding this chapter 13 case.

On July 27, 2010, less than four weeks after the commencement of the case, Everhome, as Servicer for Everbank, filed a proof of claim (Claim No. 3) (“the Proof of Claim”). The Proof of Claim is in the amount of $103,973.26 and states that the claim is secured by the Property. The Proof of Claim also states that instalment payments on the loan are delinquent from March 1, 2005 at $677.07 per month and that the total pre-petition delinquency on the loan is $63,703.80.[6]

The Debtor filed his bankruptcy schedules on August 3, 2010 and a chapter 13 plan on August 4, 2010. (Doc. #’s 15, 16).

In his bankruptcy schedules (“the Schedules”), the Debtor disclosed a one-half ownership interest in the Property. (Doc. # 15, Schedule A).[7] He disclosed the current value of his one-half interest in the Property as $50,000.00. I infer from the Debtor’s disclosure that he calculated the value of his interest in the property by dividing in half the value of the entire Property (i.e., $100,000.00 divided by two).

In his bankruptcy schedules, the Debtor also disclosed that the Property is encumbered by a mortgage in the amount of $103,973.26. In Schedule D, the Debtor identified three creditors as mortgage holders:

(1) MERS, Inc. as Nominee for Everhome Mortgage Co.;[8]

(2) Michael J. Clark, Esquire; and

(3) Everhome Mortgage Co., Inc.

(Doc. # 15, Schedule D).

In Schedule D, the Debtor also disclosed that the Property was encumbered by three municipal liens (two in favor of “Philadelphia Gas Works” and one in favor of “Water Revenue”) in the aggregate amount of $12,364.30.

The Debtor filed a chapter 13 plan (“the Plan”) on August 4, 2010. (Doc. # 16). In substance, the Plan proposed for the Debtor to pay $5.00 per month for 60 months ($300.00 total) to the Chapter 13 Trustee. In addition, the Plan provided for the Debtor to sell the Property and distribute the proceeds in full satisfaction of the allowed secured claim of the holder of the note and mortgage on the Property and the other claims secured by the Property, with any remaining sale proceeds to be turned over to the Trustee.

The Plan made no reference to value the of the Property or the fact that the total amount due on the secured claims, as disclosed on his Schedules, exceeds the value of the Property. The Plan did not explain how the Debtor would be able to consummate the proposed sale or how any net proceeds would be available to the Trustee from the sale of a $100,000 asset encumbered by more than $116,000.00 in liens. The Plan set no deadline for the sale of the Property. But see In re Erickson, 176 B.R. 753, 757 (Bankr. E.D. Pa. 1995) (suggesting that a chapter 13 plan that features the sale of the debtor’s property must state the terms and time of the contemplated sale).

B.

I find the following facts based on the testimony presented and the documents introduced into evidence at the March 17, 2011 hearing.

Everhome and Everbank

1. Everhome and Everbank are separate entities.

2. Everbank is the parent company of Everhome.

3. Everhome “services” mortgages held by Everbank, by accepting payments from borrowers and tracking those payments and any defaults that arise under the mortgage.

the Mortgage

4. On November 18, 1998, the Debtor entered into a mortgage loan transaction (“the Original Transaction”) with Home Mortgage, Inc. (“HMI”).

5. The mortgage loan transaction was guaranteed by the Federal Housing Administration.

6. In the Original Transaction, the Debtor signed a note (“the Note”) and a mortgage (“the Mortgage”) against the Property in favor of HMI. (See Ex. M-2).

7. The Mortgage states that it secures repayment of a debt evidenced by the Note. (Id.).

8. On June 30, 2000, HMI, acting through its Vice President, Teresa N. Jones, executed a written assignment, assigning the Mortgage to PrimeWest Mortgage Corporation (“PrimeWest”).

9. The HMI — PrimeWest assignment was recorded in the Philadelphia Department of Records on July 28, 2000. (Ex. M-4).

10. On June 1, 2005, PrimeWest, acting through its Vice President, Tanya Ault, executed a written assignment, assigning the Mortgage to Mortgage Electronic Registration Systems, Inc. (“MERS”), “as nominee for Everhome Mortgage Company.” (Ex. M-5).

11. The PrimeWest — MERS/Everhome assignment was recorded in the Philadelphia Department of Records on October 25, 2005. (Ex. M-5).

12. On March 8, 2011, MERS, again as “as nominee for Everhome Mortgage Company,” and acting through Ann Johnson, Assistant Secretary, and Marcie Metcalf, Vice President, executed a written assignment, assigning the Mortgage to Everbank. (Ex. M-7).

13. The March 8, 2011 MERS — Everbank mortgage assignment was unrecorded as of March 17, 2011, the date of the hearing in this contested matter.

the Note

14. Attached to the Note is a blank endorsement executed by an individual purportedly acting on behalf of PrimeWest.

15. Everhome does not have physical possession of the Note.

16. U.S. Bank has physical possession of the Note.

17. Everhome considers U.S. Bank to be acting as Everhome’s “custodian” in maintaining physical possession of the Note.[9]

18. The record does not reflect when U.S. Bank came into possession of the Note.[10]

the foreclosure Complaint

19. On September 14, 2005, MERS, acting in its own name (and without the qualifying reference “as nominee”) filed a complaint in mortgage foreclosure (“the Complaint”) against the Debtor in the Court of Common Pleas, Philadelphia County, Pennsylvania, docketed at No. 1150, Sept. Term 2005. (Ex. D-1).

20. In the Complaint, MERS alleged, without any qualification, that it is “the original Mortgagee named in the Mortgage, the legal successor in interest to the original Mortgagee, or is the present holder of the mortgage by . . . Assignment(s).” (Ex. D-1, Complaint ¶2).[11]

21. As of July 2, 2010, MERS’ motion for summary judgment, which the Debtor contested, was pending.

the bankruptcy case

22. The Debtor commenced this chapter 13 bankruptcy case on July 2, 2010.

23. On July 27, 2010, Everhome, acting “as servicer for Everbank,” filed a proof of claim, asserting a claim secured by the Property in the amount of $103,973.26, with pre-petition arrears of $63,703.80.

24. On October 4, 2010, Everhome, again acting “as servicer for Everbank,” initiated this contested matter by filing the Motion, alleging that it is the “holder of a secured claim” against Debtor, secured by a first mortgage on the Property.

25. The Motion requests that the court grant Everhome relief from the automatic stay “to foreclose upon and to otherwise exercise its rights with respect to the [Property].”

26. Since the commencement of this bankruptcy case, the Debtor has made no payments to Everhome or Everbank.

[…]

C. Everhome Has Not Established that It Is A Party In Interest

On the present record, Everhome has not established that it is a party in interest entitled to seek relief from the automatic stay under 11 U.S.C. §362(d) in order to prosecute a foreclosure action against the Property. Everhome has not presented sufficient evidence to permit a finding that it is either: (1) the holder of the mortgage, with the concomitant right to enforce it under Pennsylania law or (2) an agent authorized by the holder of the Mortgage to initiate court proceedings to enforce the Mortgage on the holder’s behalf.

1.

When it filed the Motion, Everhome had a record interest in the Mortgage in the form of the 2005 mortgage assignment from PrimeWest to MERS “as nominee for Everhome.”[20] As stated above, Pennsylvania law unequivocally provides that a mortgage holder may enforce the mortgage in a judicial foreclosure proceeding. See Part III.B.2., supra. Thus, at first blush, Everhome would have appeared to be a party in interest when it filed the Motion. However, other evidence presented conclusively contradicted Everhome’s apparent status as the mortgage holder.

Most significantly, during the hearing, Everhome made no claim that it is the mortgage holder. All of the evidence it presented, through Mr. Ricketson’s testimony, was designed to prove that Everhome is servicing the Mortgage on behalf of its parent company, Everbank. Everhome made no effort to harmonize this position with the inconsistent language in the 2005 mortgage assignment from PrimeWest to MERS — Everhome. Everhome’s own position in the litigation, by itself, makes it impossible to accord it “party in interest” status as the holder of the Mortgage.

Further, by the time the hearing was held in this contested matter, another mortgage assignment had been executed, which on its face removed Everhome as the beneficial mortgagee. Although the March 2011 assignment from MERS to Everbank was not recorded, under Pennsylvania law, the allegation that a party is the owner of a mortgage that is not yet recorded is sufficient to permit that party to proceed as a plaintiff in an action in mortgage foreclosure. Mallory, 982 A.2d at 993. Thus, Everhome’s own evidence tended to prove that Everbank, not Everhome, is the party in interest with the right to enforce the Mortgage under applicable nonbankruptcy law.[21]

Everbank has not made a preliminary showing that it is a holder of the Mortgage with a right of enforcement. Therefore, Everhome may be a party in interest only if the evidence shows that Everhome has been authorized by the party that has the right to enforce the Mortgage to initiate legal proceedings on its behalf.

2.

Everhome’s position is that the Mortgage is held by Everbank and that as the servicer of the Mortgage, it has authority to file a motion for relief from the automatic stay. The Debtor does not concede this.

A number of courts have upheld the authority of a mortgage loan servicer to file a proof of claim on behalf of the mortgage holder.[22] Most of the reported decisions also hold that a mortgage loan servicer has standing and is a party in interest entitled to prosecute a motion for relief from the automatic stay.[23]

After reviewing the relevant case law, I conclude that a servicer’s financial interest in the debtor’s unpaid stream of mortgage payments satisfies the initial, and most fundamental, requirement for “party in interest” status (“injury in fact”), but does not automatically meet the prudential requirement that the movant assert its own legal rights, not that of a third party.

Most commonly, as in this case, a motion for relief from the automatic stay requests that the bankruptcy court authorize the movant to initiate or resume a foreclosure against the secured property. The purpose of the foreclosure action is to subject the secured property to sale, thereby permitting the secured creditor to realize its collateral. In Pennsylvania, it is the mortgage holder that has the right to pursue an action in mortgage foreclosure. Therefore, even though the servicer has an economic interest in the revenue stream generated by the mortgage, the relief requested in a stay relief motion — the right to pursue foreclosure proceedings against the collateral — involves the enforcement of the rights of the mortgage holder, not the servicer. Thus, the servicer’s economic stake in the mortgage does not necessarily mean that the servicer is a party in interest that may seek relief from the automatic stay in order to proceed with foreclosure.

That said, even though the in rem rights to be enforced following the grant of relief from the automatic stay may be those of the mortgage holder and not the servicer, the servicer may nonetheless be a party in interest in the bankruptcy case, with the right to prosecute a stay relief motion, if the servicer is acting within the scope of its authority as the mortgage holder’s agent. Whether it has such authority depends on the content of the servicing agreement between the mortgage holder and the servicer. That agreement may or may not be broad enough in scope as to delegate to the servicer the authority to initiate and manage foreclosure litigation on the mortgage holder’s behalf.[24]

A servicer can establish its authority to initiate the legal action if it demonstrates that its contractual duties to the mortgage holder include not just the collection of payments, but also the conduct of mortgage foreclosure and other legal proceedings on the holder’s behalf. Such authority includes the power to move for relief from the automatic stay in the bankruptcy court. See Martinez, 2011 WL 996705, at *5; Jacobson, 402 B.R. at 367; Woodbury, 383 B.R. at 379. Stated in slightly different terms, a servicer may have standing and be a party in interest if it files the motion for relief from the automatic stay in its capacity as the holder’s attorney-in-fact. See Hwang I, 396 B.R. at 767.[25]

Reduced to its essence, to establish its status as a party in interest entitled to seek relief from the automatic stay under 11 U.S.C. §362(d) in order to enforce legal remedies for a default under a mortgage, a mortgage servicer must demonstrate that:

(1) the initiation of the stay relief motion in the bankruptcy court is within the scope of authority delegated to the servicer by its principal and

(2) the principal itself is a party in interest (i.e., its principal is a party with the right to enforce the mortgage).

In this case, assuming arguendo that the record supports a finding that Everbank is the mortgage holder with the authority to enforce the Mortgage in foreclosure proceedings, but see n. 21, supra, there is a paucity of evidence regarding the scope of Everhome’s authority as servicer. The parties’ servicing agreement was not introduced into evidence; nor were its particulars described by Everhome’s trial witness. In his testimony, Mr. Ricketson described Everhome as having the authority to collect payments, track payments and determine when an the account is in default. There was no evidence that Everbank has appointed Everhome as its agent for the purpose of initiating legal proceedings to enforce the Mortgage.

This is a fatal gap in the evidence. I am unwilling to assume that the mere label of “servicer” is sufficient to cloak Everhome with authority to file a legal action on Everbank’s behalf.

Given the Debtor’s denial of Everhome’s asserted party in interest status in his written response to the Motion, some evidence of Everhome’s authority was necessary and that evidence was not offered. As the Wilhelm court stated

At the pleading stage, plaintiffs in federal court may rely on the allegations of their complaint to establish standing. Similarly, stay relief movants may initially rely upon their motion. But if a trustee or debtor objects to a stay relief motion based upon lack of standing, the movant must come forward with evidence. Additionally, if the stay relief motion itself reveals a lack of standing, movants cannot rest on the pleadings.

407 B.R. at 400 (citation omitted); see also Jacobson, 402 B.R. at 370 (“At a minimum, there must be an unambiguous representation or declaration setting forth the servicer’s authority from the present holder . . . to collect on the note and enforce [the mortgage]”).

Accordingly, the Motion must be denied.[26]

IV. CONCLUSION

This is a case in which the Debtor was substantially in arrears on his home mortgage when he commenced this bankruptcy case, has not paid his monthly mortgage payment over a number of months since filing the case and proposed a chapter 13 plan that contemplates the sale of his residence and that, on its face, is of questionable feasibility due to the apparent lack of equity in the Property. Without prejudging the merits of the motion for relief from the automatic stay, there is no question that the mortgagee has a good faith basis for pressing a motion for relief from the automatic stay.

At the same time, however, it is understandable why the Debtor responded to the Motion by demanding proof that Everhome was the proper party to come before the court. From his perspective, Everhome’s role in the mortgage relationship is, at best, opaque. Prior to the bankruptcy filing it was MERS (purporting, at least initially, to act in its own right), not Everhome or Everbank, that filed the foreclosure action against Debtor in state court. And, as the evidence revealed, Everhome holds itself out as merely the mortgage servicer and not the mortgage holder. There is no doubt that the Debtor acted in good faith in disputing Everhome’s status as a party in interest. In fact, the Debtor’s position was meritorious. At trial, Everhome failed to come forward with sufficient evidence to establish its party in interest status, resulting in the denial of the relief Everhome requested from this court.

To the extent that the outcome in this matter may appear anomalous due to the apparent merits of the request for stay relief and the seemingly technical nature of the issue regarding the identity of the proper moving party, the fault lies with the moving party. When a party claiming to be a secured creditor seeks relief from the automatic stay, the Debtor and the bankruptcy court are entitled to insist that the moving party show that it is the holder of the secured claim or that it is the authorized agent of the holder. This imposes an evidentiary burden “that is not difficult to meet,” requiring only “present[ation of] the rudimentary elements of its claim.” In re Salazar, 2011 WL 1398478, at *2, 3 (Bankr. S.D. Cal. Apr. 12, 2011). Indeed, in this case, the evidentiary shortfall does not appear to have been insurmountable.

In the age of mortgage securitization, meeting the evidentiary burden imposed by the “party in interest” requirement of 11 U.S.C. §362(d) may be a somewhat more cumbersome task for certain stay relief movants than it was for residential mortgagee—movants in the past, but that does not justify diluting the fundamental constitutional and statutory requirement that a party be a “party in interest” before it may obtain redress from a federal bankruptcy court. Any added burden is a product of the business model chosen by the mortgage finance industry and therefore, is simply part of the mortgage loan industry’s cost of doing business. Presumably, the cost is offset by the benefits of the mortgage securitization system.

Furthermore, while a moving creditor may believe that its status as a party in interest is self-evident, the court cannot rule based on factual assumptions or evidentiary leaps. Our legal system is governed by the core principle that court decisions are based on the evidence presented to the court. That principle cannot be compromised because a particular industry has chosen a business model that complicates its legal affairs and makes it inconvenient to come forward with the evidence needed to establish its status as a proper party. In the final analysis, the Motion must be denied to protect the integrity of the legal process.

For these reasons, I will deny the Motion without prejudice.

….

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FBI Investigating Alleged Forged “DOCX” Signature In Michigan

FBI Investigating Alleged Forged “DOCX” Signature In Michigan


MICHIGAN MESSENGER-

Curtis Hertel Jr., Register of Deeds for Ingham County, says that a discovery he made involving alleged fraudulent mortgage documents is now being investigated by both the Ingham County Sheriff’s Department and the FBI.

“Yes, this is, in my opinion, fraud,” Hertel said. “This is a situation where people were forging someone else’s name to a legal document to take another person’s property. That is fraud.”


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Homeowners, counties battle bank loan system

Homeowners, counties battle bank loan system


New York Post-

The $2 billion battle has begun.

When the Suffolk County Legislature meets again next week, the county’s share of an estimated $2 billion in fees big banks saved with their electronic record-keeping system — bypassing paper mortgage records in county clerks’ offices — will top the agenda for legislator Ed Romaine.

In his previous job as county clerk, Romaine fought in court against the Mortgage Electronic Registration System, or MERS, for several years in the early 2000s and lost. But he’s taking another run at it now as the firm’s shaky legal foundation is cracking and so many ordinary homeowners are suffering from questionable foreclosure actions involving MERS.


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MI Ingham County Register of Deeds Curtis Hertel Investigating Linda Green DOCX Forged Documents

MI Ingham County Register of Deeds Curtis Hertel Investigating Linda Green DOCX Forged Documents


Curtis Hertel: “If you look at the signatures, it’s amazing that they thought they could get away with this.”

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John O’Brien: Taking on Bank of America

John O’Brien: Taking on Bank of America


Via: Shame The Banks

The registry of deeds is supposed to be a sleepy place where you go to record your mortgage or look up how much your neighbors paid for their homes.

But at the Southern Essex District Registry of Deeds in Salem, haymakers are being thrown in a bare knuckles brawl featuring Register John O’Brien in one corner and Bank of America Corp. and other large banks in the other.

In O’Brien’s mind, big U.S. banks created a bogeyman called the Mortgage Electronic Registration Systems to dodge paying recording fees when a mortgage is assigned. Early estimates indicate Massachusetts taxpayers have been deprived of anywhere from $200 million to $400 million-plus in lost revenue. O’Brien says his office alone has lost more than $22 million, but he calls that a conservative estimate.

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Montgomery County, PA Recorder of Deeds Nancy Becker Joins O’Brien on MERS, Pulls Funds From Wells Fargo

Montgomery County, PA Recorder of Deeds Nancy Becker Joins O’Brien on MERS, Pulls Funds From Wells Fargo


Via TimesHerald:

COURTHOUSE — Montgomery County Recorder of Deeds Nancy Becker is urging registers of deeds across state and the country to withdraw public money from any banks affiliated with the Mortgage Electronic Registry System (MERS), which she claims is undermining the practice of accurate land recording.

[…]

Since discovering the descrepancies, Becker has pulled the county funds out of Wells Fargo and transferred the money into Univest National Bank and Trust Company, a smaller local bank based in Souderton. The bank had been approached by MERS but decided not to partner with the cyber registry.

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PA: Homeowners Appeal to Third Circuit in Foreclosure Fraud Class Action Against Countrywide, Wells Fargo and Phelan Hallinan & Schmieg

PA: Homeowners Appeal to Third Circuit in Foreclosure Fraud Class Action Against Countrywide, Wells Fargo and Phelan Hallinan & Schmieg


On December 6, 2010, the homeowners filed a brief with the Third Circuit, maintaining that reversal of the July 14th order is necessary because (1) the lower court abused its discretion by altogether ignoring the substance of the proposed Amended Complaint and (2) the lower court erred as a matter of law in misconstruing federal bankruptcy law as a basis for its dismissal of the earlier Complaint.

UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT

No. 10-3431

DENNIS A. RHODES et al, on behalf of themselves and all others
similarly situated,
Plaintiffs-Appellants,

– v.-

ROSEMARY DIAMOND et al,
Defendants-Appellees.

APPEAL FROM AN ORDER OF THE UNITED STATES DISTRICT
COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA,

09-cv-1302

APPELLANTS’ OPENING BRIEF
AND APPENDIX VOLUME I
(Pages A1-A13)

TABLE OF CONTENTS
STATEMENT OF JURISDICTION ……………………………………………… 1
STATEMENT OF ISSUES …………………………………………………………………………… 1
STATEMENT OF THE CASE …………………………………………………… 2
STATEMENTOFFACTS ……………………………………………………… 4
Appellees’ Foreclosure Practices ……………………………………………………………. .4
Facts Alleged in the PAC ……………………………………………………………………….. 8
Independent Confirmation of Abusive Foreclosure Practices ……………………. 11
SUMMARY OF THE ARGUMENT …………………………………………….. 15
ARGUMENT …………………………………………………………………….. 17
I. THE COURT BELOW ABUSED ITS DISCRETION BY DENYING
THE HOMEOWNERS’ MOTION FOR LEAVE TO FILE THE PAC ………… 17
II. THE COURT BELOW ERRONEOUSLY DISMISSED
THE HOMEOWNERS’ ORIGINAL COMPLAINT ………………………………….. 21
A. Bankruptcy Creditors Have A Duty to Amend Inaccurate Claims ………. 21
B. The U.S. Bankruptcy Code Does Not Preclude FDCPA Lawsuits
Brought to Remedy Institutionalized Debt Collection Abuses …………… 21
CONCLUSION …………………………………………………………………… 30
CERTIFICATION REGARDING BAR MEMBERSHIP ……………………….. 31
CERTIFICATE OF COMPLIANCE …………………………………………….. 32
CERTIFICATE OF IDENTICALNESS ………………………………………….. 33
CERTIFICATE OF VIRUS CHECK ……………………………………………. 34

Continue below…

BHN LAW FIRM

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In Re: SHARON DIANE HILL | PA BK Court, Fraud Upon Court, “ReCreated” Letters, Sanctions, Countrywide, GMM and Puida

In Re: SHARON DIANE HILL | PA BK Court, Fraud Upon Court, “ReCreated” Letters, Sanctions, Countrywide, GMM and Puida


In Re: SHARON DIANE HILL, Debtor, ROBERTA A. DeANGELIS,
Acting United States Trustee for Region 3, Movant,

v.

COUNTRYWIDE HOME LOANS, INC., GOLDBECK,
McCAFFERTY AND McKEEVER, and ATTORNEY LESLIE
PUIDA, Respondents.

Case Number 01-22574 JAD, Chapter 13

UNITED STATES BANKRUPTCY COURT FOR THE WESTERN
DISTRICT OF PENNSYLVANIA

2010 Bankr. LEXIS 3313

October 5, 2010, Decided

COUNSEL: [*1] For United States Trustee: Patrick S. Layng, Esq.
for United States Trustee: Lisa D. Tingue, Esq.
For United States Trustee: Norma Hildenbrand, Esq.
For Countrywide Home Loans, Inc: Thomas A. Connop. Esq.
For Countrywide Home Loans, Inc.: Dorothy A. Davis, Esq.
For Goldbeck, McCafferty and McKeever/Atty Leslie Puida: Francis Manning, Esq.

JUDGES: Thomas P. Agresti, Chief Judge.

OPINION BY: Thomas P. Agresti

OPINION
Related to Doc. No. 465

MEMORANDUM OPINION AND ORDER

Excerpt:

DISCUSSION

(A) The Court’s Rule to Show Cause
The Rule is directed against Countrywide, GMM, and Puida and was very deliberately limited to
seven well-defined Items of potentially sanctionable conduct related to this whole matter, four
directed to Countrywide and three to GMM and Puida. The Court’s approach to resolving the
specified matters before it is to set forth each of the Items as stated in the Rule, followed by a
discussion of whether the evidence supports the imposition of any kind of sanction against the
respective party involved. The seven Items of inquiry identified by the Court in the Rule involve the
following, allegedly inappropriate instances of conduct:

(1) Countrywide [*43] failing to properly account for chapter 13 payments made by
the Debtor during the pendency of her case.

(2) Countrywide knowingly and willfully violating the discharge injunction granted
to the Debtor through numerous and sustained attempts to collect on questionable debt
which, by appropriate review of applicable records, was current as of the time of entry
of the discharge order.

(3) Countrywide intentionally, or with reckless disregard and/or indifference to the
applicable facts, misleading the debtor’s attorneys into believing change notices had
been timely sent via the use of three “created” Payment Change Letters, when in fact
they had not, and during such time attempting to resolve a dispute pending before this
Court.

(4) Countrywide intentionally, or with reckless disregard and/or indifference to the
applicable facts, making misrepresentations to this Court in a pleading regarding the
cause of its claimed escrow arrearages account regarding the Debtor.

(5) Goldbeck McCafferty and McKeever and Leslie Puida knowingly and willfully,
or with reckless disregard and/or indifference to the applicable facts, violating the
discharge injunction granted to the debtor by making numerous and [*44] sustained
attempts to collect on debt they knew to be discharged or should have known was
discharged.

(6) Goldbeck McCafferty and McKeever and Leslie Puida intentionally, or with
reckless disregard and/or indifference to the applicable facts, failed to disclose to the
debtor’s attorney that three Payment Change Letters had never actually been sent, all
in an improper attempt to collect on questionable debt while attempting to resolve a
matter that was pending before this Court.

(7) Goldbeck McCafferty and McKeever and Leslie Puida intentionally, or with
reckless disregard and/or indifference to the applicable facts, made inaccurate oral
statements in response to the Court’s inquiry regarding when Leslie Puida told the
Debtor’s attorney that the three Payment Change Letters were not what they purported
to be, but instead were memoranda created years after the event.

3_COUNTRYWIDE RECREATED LETTERS

<SNIP>

ORDER AND RULE TO SHOW CAUSE

AND NOW, this 5th day of October, 2010, for the reasons set forth in the accompanying
Memorandum Opinion, it is ORDERED, ADJUDGED and DECREED that,

(1) Items 1, 2 and 3 of the Rule to Show Cause (“Rule”), Document No. 435, as directed against
Countrywide Home Loans, Inc (“Countrywide”), and Item 5 of the Rule, as directed against
Goldbeck, McCafferty and McKeever (“GMM”) and Attorney Leslie Puida (“Puida”) are
VACATED.

(2) With respect to Item 4 of the Rule, as directed against Countrywide, the Court finds
sufficient cause exists to sanction Countrywide pursuant to Fed.R.Bankr.P. 9011, and that a
sufficient sanction so as to deter repetition of such conduct in the future or comparable conduct by
others similarly situated, is a “public censure” of Countrywide and a reminder of its obligations
under Fed.R.Bankr.P. 9011(b)(3) to make reasonable investigation before making factual
allegations in documents filed with the Bankruptcy Court, or any other court for that matter. The
Court’s comments in the Memorandum Opinion and in this Order constitute that censure and
[*126] reminder. Therefore, no further hearing or action is required in regard to Paragraph (4) of the
Rule.

(3) With respect to Items 6 and 7 of the Rule as directed against GMM and Puida, the Court
finds that sufficient cause exists to impose sanctions pursuant to the Court’s inherent power its
power pursuant to 11 U.S.C. §105(a) and Fed.R.Bankr.P. 7037, incorporating Fed.R.Civ.P.
37(c)(1)(C). Therefore, a hearing is scheduled for November 22, 2010 at 2:00 P.M., in the Erie
Bankruptcy Courtroom, U.S. Courthouse, 17 South Park Row, Erie, PA, for the purpose of
considering and determining appropriate sanctions, at which time Leslie M. Puida and Michael T.
McKeever, in his capacity as a representative of GMM, with authority to speak for the firm, are
directed to personally appear.

(4) With respect to the apparent misconduct of Attorney Charles Townsend (“Townsend”) as
described in the Memorandum Opinion, a Rule to Show Cause is hereby issued directing him to
personally appear on the November 22, 2010 at 2:00 P.M., in the Erie Bankruptcy Courtroom, U.S.
Courthouse, 17 South Park Row, Erie, PA, to show cause why sanctions should not be imposed
against him for providing false or misleading testimony [*127] under oath during his deposition in
this matter, which testimony was then used at the time of trial due to Townsend’s unavailability. The
Court further understands that Townsend may no longer be affiliated with Countrywide. If that is
correct, Countrywide and its Counsel of Record, Thomas P Connop, are directed to effect personal
service of a copy of this Order and Rule to Show Cause, together with the Memorandum Opinion,
on Townsend immediately after receipt of this Order and file a Certificate of Service to that effect
on or before October 12, 2010.

/s/ Thomas P. Agresti
Thomas P. Agresti, Chief Judge
United States Bankruptcy Court

Case Below:

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In re TAYLOR: HSBC, LPS, NewTrak, Codilis, Udren

In re TAYLOR: HSBC, LPS, NewTrak, Codilis, Udren


In re NILES C. TAYLOR and ANGELA J. TAYLOR, Chapter 13, Debtors.

Bankruptcy No. 07-15385-DWS.

United States Bankruptcy Court, E.D. Pennsylvania.

April 15, 2009

OPINION

DIANE WEISS SIGMUND, Bankruptcy Judge

On June 9, 20081 entered an order to show cause (the “June 9 Order”) in response to certain practices of HSBC Mortgage Corp. (HSBC“) and its attorneys and agents, the propriety of which I questioned and which ultimately became the subject of four lengthy evidentiary hearings as described below. The United States Trustee (the “UST”) was invited to participate.

In connection with this inquiry, the UST sought discovery of Lender Processing Services, Inc., f/k/a Fidelity National Information Services, Inc.[1] (“LPS” or “Fidelity”). LPS describes itself as “a leading provider of integrated technology and outsourced services to the lending industry, with market-leading positions in mortgage processing and default management services in the U.S.”[2] Id. In this case, it served as the intermediary between HSBC and its law firms, the Udren Law Office (the “Udren Firm”) and Moss Codilis LLP (“Moss”). The UST’s discovery requests were opposed by LPS[3] (2) the UST’s Motion for Relief from Order Entered on October 23, 2008 (“Second Vacate Motion”) and (3) LPS‘ Objection to the Second Vacate Motion and Subpoena Issued on February 20,2008 (“Protection Motion”). Notwithstanding these contested matters, LPS had produced almost all of the Fidelity documents requested by the UST in the UST Motion but pursuant to a non-disclosure requirement memorialized in an order dated October 21, 2008 (the “Confidentiality Order“) from which the UST sought to be freed. LPS did not oppose the use of its documents in this bankruptcy case with appropriate safeguards but objected to the UST’s intention to share them with other members of the Office of the United States Trustee in other jurisdictions. on confidentiality grounds and resulted in the (1) Motion of the Acting United States Trustee for Rule 2004 Examination (the “UST Motion”) of Lender Processing Services, Inc., f/k/a Fidelity National Information Services, Inc.,

The UST Motion, Second Vacate Motion and Protection Motion have now been settled by an agreement between LPS and the UST have submitted a consent order that reflects their agreement that the Confidentiality Order be vacated and replaced with “Order Directing Filing of Documents Under Seal” (“Order Re: Protected Documents”). and the UST as further explained below.

Still remaining to be addressed is the June 9 Order which contemplated that sanctions could be issued depending on the outcome of the investigation it commenced. Regrettably I have found certain practices and procedures employed by HSBC, its agents and attorneys to implicate the integrity of these proceedings as more specifically described below. I have also found that these same practices and procedures have created an environment where Rule 9011 duties have been subordinated to efficiency and cost-savings so as to require sanctions, and sanctions are appropriately imposed.

BACKGROUND

The June 9 Order

The June 9 Order emanated from a routine Claim Objection hearing held on June 5, 2008.[4] The hearing had previously been continued thirty days from its first listing to allow HSBC to produce documentation requested by Debtors in support of HSBC’s disputed claim. At the continued hearing, David Fitzgibbon, Esquire (“Fitzgibbon”) of the Udren Firm who represented HSBC,[5] advised me that HSBC was unresponsive to his notice that HSBC was directed to produce a loan history. When pressed as to the details of his colloquy with HSBC, he informed me that he had no personal access to his client HSBC but rather communicated solely by means of an electronic information system known as “NewTrak,” NewTrak, I have since learned, is a technology developed by Fidelity and employed to provide foreclosure, bankruptcy and other mortgage loan-related default services to the mortgage industry. Simply stated HSBC and other mortgage lenders upload all or part of the mortgage documents and loan records of specified borrowers into the NewTrak system. Attorneys are engaged on a case by case basis through NewTrak to handle specified tasks. They get their assignments from NewTrak and report and/or seek further direction by “opening up an issue” on NewTrak. In this case, Fitzgibbon claimed to have opened up an issue (i.&. court has directed you to send a loan history immediately) and awaited an electronic response over NewTrak. He asserted that he had no recourse to the client when one was not forthcoming, specifically that he had no ability to discuss my directive about document production with either representatives of HSBC or the attorneys at Moss who had filed the claim for HSBC.[6]

This frank but surprising admission resulted in the entry of the June 9 Order in which I ordered HSBC to “provide a full accounting to Debtors by transmitting a loan history in form that Debtors and their counsel can understand as well as an explanation about the flood insurance charges.” Doc. No. 52. I scheduled a continued hearing on the Claim Objection and directed the following persons to appear in addition to Debtors and their counsel: (1) a representative of HSBC with knowledge of Debtors’ loan; (2) a representative of HSBC with knowledge of the procedures it uses with respect to assertion of claims in bankruptcy; (3) Maria Borrensen, Esquire (“Borrensen”), authorized agent for HSBC’s bankruptcy work at Moss; (5) the partner in charge of HSBC’s bankruptcy work at the Udren Firm; (6) Lorraine Gazzara Doyle (“Doyle”), Esquire of the Udren Firm; and (7) Fitzgibbon. As noted, the United States trustee was expressly invited to attend. The purpose of the hearing, as stated in the June 9 Order, was two-fold: (1) to address the Claim Objection and (2) “to investigate the practices in this case employed by HSBC, its attorneys and agents and consider whether sanctions should issue against HSBC, its attorneys and agents.” Id.[7] who filed the proof of claim and amended proof of claim in this case; (4) the partner in charge of

Continue Reading Below…

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Full Deposition of Residential Funding/GMAC JUDY FABER: US BANK v. Cook

Full Deposition of Residential Funding/GMAC JUDY FABER: US BANK v. Cook


Make sure you read this carefully…This is a transcript of an employee of Residential Funding Company who is in charge of record keeping of original documents. Don’t miss the full deposition down below.

Follow the assets, don’t get lost in the trail…

17 Q. Now, when you said you’re the Director of
18 Records Management for the Minnesota office?

19 A. Uh-huh.

20 Q. Are there other offices of Residential
21 Funding that maintain records that you are
22 not responsible for?

23 A. There are records services sites in Iowa and
24 in Pennsylvania. Those deal mostly with the
25 GMAC mortgage assets.

<snip>

11 Q. And what, if anything, is your responsibility
12 with regard to those records?

13 A. To track the physical paper for those
14 assets — or that asset.

15 Q. Are you what you consider to be the keeper of
16 the records for those documents?

17 A. Sure, yep.

5 Q. Okay. And then when somebody wants to view
6 specific records from your system, is that
7 something that you’re responsible for
8 obtaining as part of your day-to-day
9 responsibilities?

10 A. The people that report to me, yes, or the
11 vendor that — that we have retained to do
12 those functions, yes. I don’t do that
13 myself.

14 Q. Who’s the vendor that you retain to do that?

15 A. A company called ACS.

16 Q. ACS?

17 A. Yep.

18 Q. And what does ACS do with regard to the
19 records?

20 A. They fulfill the request. So if somebody
21 needs a credit folder or a legal folder, they
22 research where those documents are, obtain
23 the documents and then provide that requestor
24 with either the paper documents or images.

<snip>

21 Q. There’s a file folder that shows it came from
22 the outside vendor?

23 A. Yes. Their sticker is affixed to the front
24 of the folder, so I know it came from them.

25 Q. Okay. And then is there anything on the
1 documents themselves that show where they
2 came from?

3 A. No.

4 Q. And by the outside vendor, do you mean ACS?

5 A. No. Actually, the vendor that stores the
6 actual folder is Iron Mountain.

7 Q. So there’s a sticker on that file that shows
8 it came from Iron Mountain?

9 A. Correct, yes.

10 Q. Does Iron Mountain maintain your system or do
11 they just maintain hard copies of documents?

12 A. They maintain the hard copies of the
13 documents.

14 Q. Not any records on your computer system,
15 correct?

16 A. No.

17 Q. Is that correct?

18 A. Correct.

<snip>

18 Q. What’s the relationship between Residential
19 Funding Company, LLC and U.S. Bank National
20 Association?

21 A. In — in this instance, U.S. Bank is the
22 trustee on the security that this loan is in.
23 And RFC was the issuer of the security that
24 was created.

25 Q. Who was the issuer of the security?

1 A. RFC was the issuer of the security.

2 Q. Oh, RFC is what you call Residential Funding
3 Company?

4 A. Yes.

5 Q. So RFC issued the security?

6 A. Right.

7 Q. Can you explain to me what that means?

8 A. No, I can’t.

9 Q. Okay. How do you know RFC issued the
10 security?

11 A. It’s the normal course of business as to how
12 our — our business works. RFC is in the
13 business of acquiring assets and putting them
14 together into securities to sell in the — in
15 the market.

16 MR. SHAW: I would like to
17 register a general objection to this line of
18 questioning. There’s not been a foundation
19 laid for Judy Faber being competent to reach
20 some of these conclusions that are being
21 stated on the record.

22 BY MR. HOLLANDER:
23 Q. So in this particular instance, do you have
24 any personal knowledge of the relationship
25 between RFC and U.S. Bank National
1 Association as trustee?

2 A. No.

3 Q. For whom is U.S. Bank National Association
4 acting as the trustee?

5 A. I believe it would be for the investors of
6 the — that have bought the securities.

7 Q. I’m sorry. Something happened with the phone
8 and I didn’t hear your answer. I’m sorry.

9 A. I believe it would be for the different
10 investors who have bought pieces of that
11 security that was issued.

12 Q. Are there different investors that have
13 purchased the Peter Cook note?

14 A. I don’t think I’m qualified to answer that.
15 You know, I can tell you from what my basic
16 understanding is from the process, but I’m
17 not an expert.

18 MR. SHAW: Once again, I’d like to
19 raise a continuing general objection that she
20 being — testifying with respect to what her
21 job is, and I believe you’re getting into
22 areas that is other than what her job is and
23 you’re asking for possibly even legal
24 conclusions here. So I would like to raise
25 that objection again.

[…]

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FULL DEPOSITION OF BANK OF AMERICA ROBO SIGNER RENEE D. HERTZLER

FULL DEPOSITION OF BANK OF AMERICA ROBO SIGNER RENEE D. HERTZLER


Be sure to catch the Full Depo of Renee Hertzler below after AP Alan Zibel’s article

Bank of America delays foreclosures in 23 states

By ALAN ZIBEL, AP Real Estate Writer Alan Zibel, Fri Oct 1, 7:46 pm ET

WASHINGTON – Bank of America is delaying foreclosures in 23 states as it examines whether it rushed the foreclosure process for thousands of homeowners without reading the documents.

The move adds the nation’s largest bank to a growing list of mortgage companies whose employees signed documents in foreclosure cases without verifying the information in them.

Bank of America isn’t able to estimate how many homeowners’ cases will be affected, Dan Frahm, a spokesman for the Charlotte, N.C.-based bank, said Friday. He said the bank plans to resubmit corrected documents within several weeks.

Two other companies, Ally Financial Inc.’s GMAC Mortgage unit and JPMorgan Chase, have halted tens of thousands of foreclosure cases after similar problems became public.

The document problems could cause thousands of homeowners to contest foreclosures that are in the works or have been completed. If the problems turn up at other lenders, a foreclosure crisis that’s already likely to drag on for several more years could persist even longer. Analysts caution that most homeowners facing foreclosure are still likely to lose their homes.

State attorneys general, who enforce foreclosure laws, are stepping up pressure on the industry.

On Friday, Connecticut Attorney General Richard Blumenthal asked a state court to freeze all home foreclosures for 60 days. Doing so “should stop a foreclosure steamroller based on defective documents,” he said.

And California Attorney General Jerry Brown called on JPMorgan to suspend foreclosures unless it could show it complied with a state consumer protection law. The law requires lenders to contact borrowers at risk of foreclosure to determine whether they qualify for mortgage assistance.

In Florida, the state attorney general is investigating four law firms, two with ties to GMAC, for allegedly providing fraudulent documents in foreclosure cases .The Ohio attorney general this week asked judges to review GMAC foreclosure cases.

Mark Paustenbach, a Treasury Department spokesman, said the Treasury has asked federal regulators “to look into these troubling developments.”

A document obtained Friday by the Associated Press showed a Bank of America official acknowledging in a legal proceeding that she signed up to 8,000 foreclosure documents a month and typically didn’t read them.

The official, Renee Hertzler, said in a February deposition that she signed 7,000 to 8,000 foreclosure documents a month.

“I typically don’t read them because of the volume that we sign,” Hertzler said.

She also acknowledged identifying herself as a representative of a different bank, Bank of New York Mellon, that she didn’t work for. Bank of New York Mellon served as a trustee for the investors holding the homeowner’s loan.

Hertzler could not be reached for comment.


CONTINUE READING…..YAHOO

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FULL DEPOSITION OF RENEE HERTZLER BELOW:

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Posted in assignment of mortgage, bank of america, bank of new york, bogus, chain in title, CONTROL FRAUD, deposition, foreclosure, foreclosure fraud, foreclosure mills, foreclosures, investigation, robo signers, stopforeclosurefraud.comComments (4)


GARY DUBIN LAW OFFICES FORECLOSURE DEFENSE HAWAII and CALIFORNIA
Kenneth Eric Trent, www.ForeclosureDestroyer.com

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