Psa | FORECLOSURE FRAUD | by DinSFLA

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RePOST: Open Letter to all attorneys who aren’t PSA literate by April Charney

RePOST: Open Letter to all attorneys who aren’t PSA literate by April Charney


Via: Max Gardner

Are You PSA Literate?

.

We are pleased to present this guest post by April Charney.

If you are an attorney trying to help people save their homes, you had better be PSA literate or you won’t even begin to scratch the surface of all you can do to save their homes. This is an open letter to all attorneys who aren’t PSA literate but show up in court to protect their client’s homes.

First off, what is a PSA? After the original loans are pooled and sold, a trust hires a servicer to service the loans and make distributions to investors. The agreement between depositor and the trust and the truste and the servicer is called the Pooling and Servicing Agreement (PSA).

According to UCC § 3-301 a “person entitled to enforce” the promissory note, if negotiable, is limited to:

(1) The holder of the instrument;

(2) A nonholder in possession of the instrument who has the rights of a holder; or

(3) A person not in possession of the instrument who is entitled to enforce the instrument pursuant to section 3-309 or section 3-418(d).

A person may be a person entitled to enforce the instrument even though the person is not the owner of the instrument or is in wrongful possession of the instrument.

Although “holder” is not defined in UCC § 3-301, it is defined in § 1-201 for our purposes to mean a person in possession of a negotiable note payable to bearer or to the person in possession of the note.

So we now know who can enforce the obligation to pay a debt evidenced by a negotiable note. We can debate whether a note is negotiable or not, but I won’t make that debate here.

Under § 1-302 persons can agree “otherwise” that where an instrument is transferred for value and the transferee does not become a holder because of lack of indorsement by the transferor, that the transferee is granted a special right to enforce an “unqualified” indorsement by the transferor, but the code does not “create” negotiation until the indorsement is actually made.

So, that section allows a transferee to enforce a note without a qualifying endorsement only when the note is transferred for value.? Then, under § 1-302 (a) the effect of provisions of the UCC may be varied by agreement. This provision includes the right and ability of persons to vary everything described above by agreement.

This is where you MUST get into the PSA. You cannot avoid it. You can get the judges to this point. I did it in an email. Show your judge this post.

If you can’t find the PSA for your case, use the PSA next door that you can find on at www.secinfo.com. The provisions of the PSA that concern transfer of loans (and servicing, good faith and almost everything else) are fairly boilerplate and so PSAs are fairly interchangeable for many purposes. You have to get the PSA and the mortgage loan purchase agreement and the hearsay bogus electronic list of loans before the court. You have to educate your judge about the lack of credibility or effect of the lifeless list of loans as the Uniform Electronic Transactions Act specifically exempts Residential Mortgage-Backed Securities from its application. Also, you have to get your judge to understand that the plaintiff has given up the power to accept the transfer of a note in default and under the conditions presented to the court (out of time, no delivery receipts, etc). Without the PSA you cannot do this.

Additionally the PSA becomes rich when you look at § 1-302 (b) which says that the obligations of good faith, diligence, reasonableness and care prescribed by the code may not be disclaimed by agreement, but may be enhanced or modified by an agreement which determine the standards by which the performance of the obligations of good faith, diligence reasonableness and care are to be measured. These agreed to standards of good faith, etc. are enforceable under the UCC if the standards are “not manifestly unreasonable.”

The PSA also has impact on when or what acts have to occur under the UCC because § 1-302 (c) allows parties to vary the “effect of other provisions” of the UCC by agreement.

Through the PSA, it is clear that the plaintiff cannot take an interest of any kind in the loan by way of an A to D” assignment of a mortgage and certainly cannot take an interest in the note in this fashion.

Without the PSA and the limitations set up in it “by agreement of the parties”, there is no avoiding the mortgage following the note and where the UCC gives over the power to enforce the note, so goes the power to foreclose on the mortgage.

So, arguing that the Trustee could only sue on the note and not foreclose is not correct analysis without the PSA.? Likewise, you will not defeat the equitable interest “effective as of” assignment arguments without the PSA and the layering of the laws that control these securities (true sales required) and REMIC (no defaulted or nonconforming loans and must be timely bankruptcy remote transfers) and NY trust law and UCC law (as to no ultra vires acts allowed by trustee and no unaffixed allonges, etc.).

The PSA is part of the admissible evidence that the court MUST have under the exacting provisions of the summary judgment rule if the court is to accept any plaintiff affidavit or assignment.

If you have been successful in your cases thus far without the PSA, then you have far to go with your litigation model. It is not just you that has “the more considerable task of proving that New York law applies to this trust and that the PSA does not allow the plaintiff to be a “nonholder in possession with the rights of a holder.”

And I am not impressed by the argument “This is clearly something that most foreclosure defense lawyers are not prepared to do.”?Get over that quick or get out of this work! Ask yourself, are you PSA adverse? If your answer is yes, please get out of this line of work. Please.

I am not worried about the minds of the Circuit Court Judges unless and until we provide them with the education they deserve and which is necessary to result in good decisions in these cases.

It is correct that the PSA does not allow the Trustee to foreclose on the Note. But you only get there after looking at the PSA in the context of who has the power to foreclose under applicable law.

It is not correct that the Trustee has the power or right to sue on the note and PSA literacy makes this abundantly clear.

Are you PSA literate? If not, don’t expect your judge to be. But if you want to become literate, a good place to start is by attending Max Gardner’s Mortgage Servicing and Securitization Seminar.

April Carrie Charney

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



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Bank of Am. v Lucido | NYSC Judge Spinner Slams BOA et al & are forever barred, foreclosed and prohibited from demanding, collecting or attempting to collect

Bank of Am. v Lucido | NYSC Judge Spinner Slams BOA et al & are forever barred, foreclosed and prohibited from demanding, collecting or attempting to collect


Decided on April 16, 2012

Supreme Court, Suffolk County

Bank of America N.A., Plaintiff

against

G. Lucido also known as GALINA LUCIDO, JOHN A. LUCIDO et. al., Defendants

2009-03769

Davidson Fink L.L.P.

Attorneys for Plaintiff

28 East Main Street

Rochester, New York 14614

John Lucido

Defendant Pro Se

46 Merrits Path

Rocky Point, New York 11778

Jeffrey Arlen Spinner, J.

Plaintiff commenced this action claiming foreclosure of a mortgage by filing its Notice of Pendency and Summons and Complaint with the Clerk of Suffolk County. The mortgage at issue was given by Defendants to MORTGAGE ELECTRONIC REGISTRATION SYSTEMS INC. As Nominee For FIRST FRANKLIN FINANCIAL CORP. on March 23, 2007 in the original principal amount of $ 494,000.00 and was recorded with the Clerk of Suffolk County in Liber 21524 of Mortgages at Page 751. It was given as collateral security for a simultaneously executed Note in the same amount, the same constituting a first lien encumbering premises known as 46 Merrits Path, Rocky Point, New York.

Sometime thereafter and through no fault of their own, Defendants defaulted upon their monthly installment payments due under the Note. It is undisputed that the principal balance owed to Plaintiff, as of the date of default, was and remains at $ 493,219.75. Following the [*2]commencement of this action, an initial settlement conference, as mandated by CPLR § 3408 was convened on June 2, 2009. Thereafter, seventeen additional or adjourned settlement conferences were held, each one a component part of a continuing albeit fruitless effort to resolve this matter. It was only upon the express directive of the Court that one of Plaintiff’s representatives travelled from Fort Worth, Texas to appear with a view toward some amicable resolution of this action. However, in derogation of the mandatory provisions of CPLR § 3408(c), no person ever appeared on Plaintiff’s behalf who was vested with any authority to settle or otherwise compromise the matter. Further delays were occasioned by serious illness having afflicted both of the Defendants as well as the unfortunate passing of Mrs. Lucido (Mr. Lucido requested that the matter be temporarily removed from the conference calendar because he was unable to move forward while attending to the care of his wife). In addition, Plaintiff’s former counsel, Steven J. Baum P.C., was discharged and the firm was thereafter disbanded.

Defendant JOHN LUCIDO has, in the past, been employed as a commercial mortgage broker. Though he was not involved professionally in the procurement of the loan at issue herein, he apparently enjoys a considerable degree expertise in the area of mortgage financing, which knowledge has been displayed to this Court on multiple occasions. Throughout the settlement conference process, Defendants had, on not less than three occasions in the presence of the Court, submitted the rather voluminous financial documentation demanded by Plaintiff, to be used in considering the initial request for a customary modification. At one point in time, Defendants were offered a so-called “trial modification” with no terms disclosed other than a monthly payment amount to be remitted. However, that offer was never accepted by Defendants because of Plaintiff’s steadfast and continued refusal to disclose any of its terms to them, including the interest rate as well as the manner in which their payments would be applied to the debt, a tactic that was strenuously defended by Plaintiff’s successor counsel as “general industry practice.”

At one of the early settlement conferences, Mr. Lucido informed the Court that the servicing of his loan had been transferred to one of Plaintiff’s wholly-owned subsidiaries and that they had embarked upon a print and internet advertising campaign wherein they were offering principal reductions in an apparent effort to help homeowners bring their delinquent loans current. They advertised basic requirements of a delinquency of over 60 days duration coupled with a principal balance in excess of 120% of the value of the property (as just one example of these blandishments by Plaintiff, see homeloanhelp.bankofamerica.com ). Based in large part upon this inducement, Mr. Lucido repeatedly raised the possibility of a principal reduction and when he was advised, in open court, that it would be “considered” by the bank, he obtained a third party evaluation of the Property, reflecting the fair market value to be $ 250,000.00. He thereupon prepared and submitted a written proposal requesting a principal reduction to $ 250,000.00, coupled with the immediate deposit with Plaintiff of $ 23,588.52, a sum equal to twelve months of principal, interest, taxes and insurance for it to hold in escrow to ensure his performance, a reduction in the interest rate to 4.50% (at that time, HAMP modifications were being offered with interest at 2%) and the immediate commencement of payments upon the new principal amount at the new interest rate. This written proposal was sent to Plaintiff prior to January 26, 2011 and by February 9, 2011 it had advised Defendant, by letter, that it had received his proposal and that the same was under consideration. [*3]

The conference was adjourned several more times until June 9, 2011. At that conference, prior counsel advised Defendant and the Court that Plaintiff was “unwilling” to reduce the principal and actually misrepresented to the Court that there had been “…thirteen conferences and Defendant has never submitted financials.” Prior counsel further misrepresented to the Court that Plaintiff did not offer any loan modification programs that included a principal reduction as a component. At that juncture, the Court warned counsel that if there was found to be a lack of good faith in the settlement conference proceedings, the Court would consider the imposition of financial sanctions upon Plaintiff. The Court adjourned the conference to July 13, 2011 with the directive that a representative appear on Plaintiff’s behalf to provide an explanation to the Court.

On July 13, 2011, the matter again appeared for conference with prior counsel present. Plaintiff’s representative informed the Court that the total debt owed by Defendants and secured by the Property (principal, interest, advances, etc.) now stood at $ 673,959.23 and further, affirmatively stated under oath that “This loan is part of a pooling of loans that entrust mortgage—in fact, securities and their pooling and servicing agreement does not allow us to reduce the principal balance.” When the Court called for production of the pooling and servicing agreement (the “PSA”), counsel stated that their office was just informed “today” of this claimed restriction and, in furtherance of Plaintiff’s position, stated that “We can’t consider a principal reduction. It’s prohibited by the PSA.” The bank representative did concede, however, that Defendants had been assiduously trying to work the matter out and that they had, in fact, been submitting financial documentation as requested by Plaintiff. The bank representative also asserted that she had an appraisal showing the property value to be $ 356,000.00 but when pressed for a copy, she stated that it was “tentative.” No such appraisal was ever provided to the Court (indeed Plaintiff never produced any written indicia of the value of the Property), thusleaving the Court to accept the market value of $ 250,000.00 as advanced by Defendants.

The matter was again adjourned while the Court waited patiently for production of a copy of the PSA. Despite the Court’s order, it was not produced on September 14, 2011 nor was it provided on October 19, 2011. However, upon some intense prodding by the Court, prior counsel generously offered to provide the Court only with what Plaintiff considered to be the “salient portions” of the PSA, despite the Court’s clear and unambiguous order that the entire agreement be provided. Once again, the PSA was not provided for the December 7, 2011 conference, necessitating yet another adjournment, this time to December 21, 2011. A document purporting to be a complete copy of the PSA, consisting of 258 pages in PDF form, was finally e-mailed by prior counsel to the Court late in the day on December 15, 2011 (some 155 days after the Court ordered its production), forcing the Court to continue the matter yet again, from December 21, 2011 to January 4, 2012, and advising the parties that there would be a hearing on that date to consider the entire matter, including the possible imposition of sanctions for a lack of good faith.

At the January 12, 2012 hearing, the office of Steven J. Baum P.C. (Plaintiff’s counsel of record) failed to appear. Instead, a gentleman appeared, stating that he was per diem counsel to Pulvers Pulvers & Thompson who, in turn, was of counsel to Davidson Cook who were now attorneys for Plaintiff, though no substitution of attorney had been filed. Counsel indicated his [*4]readiness to proceed with the matter. The same bank representative who had appeared the prior year was present for the hearing as was Defendant Mr. Lucido. At the hearing, it was quickly established that the “complete” PSA as provided to the Court excluded the schedules to which it referred as an integral part, which included a description of the mortgage loans which were to be part of the pool. Although Plaintiff’s representative claimed that she was in possession of the schedules, like the phantom appraisal, they were never provided to the Court. During questioning by the Court, Plaintiff’s representative conceded that Bank of America “…always had…” the PSA in their possession. This failure to disclose, coming upon the heels of Plaintiff’s 155 day delay in providing the PSA coupled with what appears to be the intent, by Plaintiff and its prior counsel, to deceive this Court by deciding to only provide what it deemed to be the “salient” portions of the PSA, leads this Court toward the conclusion that Plaintiff was not acting in good faith throughout the pendency of this matter.

Further examination of documents revealed that Plaintiff claimed standing by virtue of an Assignment from LaSalle Bank National Association acting as Trustee under the PSA that is at issue herein. That Assignment, clearly prepared by the law firm of Steven J. Baum P.C., was acknowledged on December 22, 2008 but expressly stated that it was “…effective as of March 30, 2007. The PSA deals with an entity denominated as “Merrill Lynch First Franklin Mortgage Trust, Mortgage Loan Asset-Backed Certificates, Series 2007-3.” Examination of the PSA reveals that it was consummated on May 1, 2007 (a fact that is reflected in the Assignment), which was the date on which it came into legal existence. The Assignment however expressly states that it became effective some 32 days prior to the existence of the PSA. Though questions were raised by the Court, this issue was not resolved, either by counsel or by Plaintiff.

The hearing went forward with Plaintiff vigorously asserting that the PSA absolutely prohibited any reduction of the principal. Upon pointed inquiry by the Court, the following colloquy transpired:

THE COURT: Where is it in that agreement that it states that principal reductions are absolutely prohibited?

BANK: Okay. I read through that here, and I don’t know something stating completely prohibited. It doesn’t come right out and say that portion.

THE COURT: That’s what was represented to the Court. Where does it say that? Give me a page.

BANK: I highlighted it.

BANK COUNSEL: I will read it for you.

BANK: Page 86 is what I had highlighted, and then on Page 90.

BANK COUNSEL: There are provisions in the PSA permitting—

THE COURT: You said Page 86?

BANK COUNSEL: 86, it is section 301, servicer to service mortgage loans. The sentence starting with “notwithstanding” approximately fifteen lines down.

THE COURT: All right. This refers to servicer not engaging in any conduct which would essentially cause the REMIC, the Real Estate Mortgage Investment Conduit, to fail to qualify as a REMIC or to result in the imposition of certain taxes under the Internal Revenue Code.

BANK COUNSEL: Correct.

THE COURT: Where does it say that a principal reduction is prohibited?

BANK COUNSEL: What this PSA document does state is that there are provisions that can [*5]prohibit the forgiveness of principal or the reduction of principal, but there are other provisions, specifically Page 90, that put it within the discretion of the servicer to recommend a principal reduction which must be signed off on by the investor.

MR. LUCIDO: Where?

BANK COUNSEL: It begins with “notwithstanding Clause 2 above, in the event that mortgage loan is in default.”

MR. LUCIDO: Where is this? Can you highlight that? Page 90? Okay, I see it. This actually allows for it.

THE COURT: This seems to permit—

BANK COUNSEL: Correct, and that’s what we are trying to tell the Court here. There are provisions that prohibit but there are provisions that do allow the servicer to recommend the reduction of principal. But it must be accepted by the investor. It must be in the best interest of the—

THE COURT: But that’s not what has been represented to this Court by the bank and their prior counsel. In fact, prior counsel explicitly represented to this Court on more than one occasion that it is absolutely prohibited under these documents, under this PSA. That is what has been represented to this Court.

BANK COUNSEL: We do submit that it might have been due to some of the provisions prohibiting principal reduction. They would have thought that those provisions may have been triggered. It might have been the opinion of the Court that they have not been.

THE COURT: Where are the express prohibitions, the ones that the bank relies on that they used here in telling this Court that they will not consider a principal reduction because it is absolutely prohibited under the terms of the PSA?

BANK COUNSEL: Under the initial clause, which is 13 lines down from Section 3.01, servicer of service mortgage loan.

THE COURT: Show me where else that it absolutely prohibits a principal reduction? Is there anywhere else in there that you can find?

BANK COUNSEL: We have not found an absolute bar, a prohibition of forgiving or reducing. It is our position, and we submit to this Court, that there are circumstances that if occurring, which is also the signing off of the client, that a principal reduction could occur under certain circumstances.

Subsequent to the foregoing colloquy and without any further concession to the Court’s line of inquiry, counsel advised the Court that an offer was now being made to Defendant, stating that “We are going above and beyond what—we are bending the rules of our underwriting. We are attempting to put together a product here that is not generally offered to the rest of the populace, the rest of the clientele, a 43.5 year product at 2% without the financials.” When the Court inquired as to the reason for Plaintiff’s abrupt about-face, counsel attempted to deflect attention from Plaintiff, instead intimating that the Court was, in effect, coercing a resolution by having “…held the bank’s feet to the fire…” and further mis-stating the facts by incorrectly asserting that “…This Court was not willing to hear it after learning that there was not a principal reduction.” It must be pointed out that in this matter as in all other foreclosure matters assigned to this Part, the Court has only attempted to fulfill its statutory responsibilities and has not, in any manner forced, coerced nor compelled any particular resolution. It is also important to note here that counsel advised the Court that Plaintiff had a new BPO showing a value of $ 346,000.00 and although requested by the Court, this BPO, like the phantom appraisal referred to on July 13, 2011, was never produced.

Based upon the foregoing factual scenario, the Court has serious and substantial questions as to whether or not Plaintiff and its prior counsel of record have acted in good faith in this [*6]matter. By reason of the lengthy delays herein, interest has been accumulating on the debt along with sums that may be due for advances for property taxes and insurance, to say nothing of Plaintiff’s claimed counsel fees (which are, of course, subject to review by the Court). While it is important to note that the Court has grave reservations related to the actions in this matter of Steven J. Baum P.C., Plaintiff’s former counsel of record, the Court hastens to add that it has absolutely no such issues with either Henry P. DiStefano Esq. or Alicia Menechino Esq. (in fact, the appearances covered by these two most excellent attorneys were the only ones upon which the Court was able to obtain a straight answer about anything on the Plaintiff’s case herein).

In 2008, New York’s Assembly and Senate enacted Chapter 472 of the Laws of 2008 which constituted a sweeping reform of the laws governing sub-prime, high cost and non-traditional home loans. Included as part and parcel of that legislation was the newly enacted CPLR § 3408 which required a mandatory settlement conference in an action to foreclose such a mortgage. Since that enactment, this Court, sitting first as Suffolk County’s Residential Mortgage Foreclosure Conference Part and thereafter as an I.A.S. Part, has mandated that the parties to such an action act and negotiate in good faith. Indeed, in December of 2009, both the Assembly and the Senate amended CPLR § 3408 by way of Chapter 507 of the Laws of 2009, which, among other things, added a requirement that the parties act and negotiate in good faith (see CPLR § 3408(f) which states that “Both the plaintiff and the defendant shall negotiate in good faith to reach a mutually agreeable resolution, including a loan modification, if possible.”). This statutory scheme is further buttressed and implemented by the provisions of The Uniform Rules For The Trial Courts, 22 NYCRR § 202.12-a. Indeed, that Rule vests the Court with broad powers to assist the parties in reaching a settlement of their differences, stating, in pertinent part, that “…The court may also use the conference for whatever other purposes the court deems appropriate,” 22 NYCRR § 202.12-a(c)(2). That Rule further imposes upon the Court the duty to be certain that all parties act in compliance therewith, stating that “…The court shall ensure that each party fulfills its obligation to negotiate in good faith…” 22 NYCRR § 202.12-a(c)(4). For this Court to do anything less would be a serious derogation of its statutory responsibilities and would do a great dis-service to the public that it is obligated to serve..

Since an action to foreclose a mortgage is clearly a suit in equity, Jamaica Savings Bank v. M.S. Investing Co. 274 NY 215 (1937), all of the rules and tenets of equity are fully applicable to the proceeding, including the rules governing punitive or exemplary damages, I.H.P. Corp. v. 210 Central Park South Corp. 12 NY2d 329 (1963). In the timeless words of Judge Benjamin Cardozo “The whole body of principles, whether of law or of equity, bearing on the case, becomes the reservoir drawn upon by the court in enlightening its judgment” Susquehannah Steamship Co. Inc. v. A.O. Andersen & Co. Inc. 239 NY 289 at 294 (1925). In a suit in equity, the Court is vested with jurisdiction to do that which ought to be done. While the formal distinctions between an action at law and a suit in equity have long since been abolished in New York (see CPLR 103, David Dudley Field Code of 1848 §§ 2, 3, 4, 69), the Supreme Court, as New York’s trial court of general jurisdiction, is nevertheless vested with equity jurisdiction and the distinct rules governing the application of the principles of equity are still very much applicable, Carroll v. Bullock 207 NY 567 (1913).

While the Court understands that the instruments upon which a mortgage foreclosure [*7]action is based are contractual in nature and, understanding that “[s]tability of contract obligations must not be undermined by judicial sympathy” Graf v. Hope Building Corp. 254 NY 1 at 4 (1930), it is equally true, as decreed in Noyes v. Anderson 124 NY 175 at 179 (1891) that “a party having a legal right shall not be permitted to avail himself of it for the purposes of injustice or oppression.” Thus, equity will not intervene on behalf of one who acts in an unjust, unconscionable or egregious manner, York v. Searles 97 AD 331 (2nd Dept. 1904), aff’d 189 NY 573 (1907). This Court cannot, and will not, countenance a lack of good faith in the proceedings that are brought before it, especially where blatant and repeated misrepresentations of fact are advanced, neither will it permit equitable relief to lie in favor of one who so flagrantly demonstrates such obvious bad faith.

In those very rare instances where the conduct of a party is unconscionable, shocking or egregious, a Court of equity is vested with the power to award exemplary damages. Exemplary damages may lie in a situation where it is necessary to both effectuate some punishment and to deter the offending party from engaging in such reprehensible conduct in the future. Such an award may also be made to address, as so clearly and succinctly enunciated by our Court of Appeals in Home Insurance Co. v. American Home Products Corp. 75 NY2d 196, 550 NE 2d 930, 551 NYS 2d 481 (1989) “…gross misbehavior for the good of the public…on the ground of public policy”. Indeed, exemplary damages are intended to have a deterrent effect upon conduct which is unconscionable, egregious, deliberate and inequitable, I.H.P. Corp. v. 210 Central Park South Corp. 12 NY2d 329, 189 NE 2d 812, 239 NYS 2d 547 (1963).

In the matter that is sub judice, the record unequivocally demonstrates that Plaintiff, through its deliberate and contumacious conduct, has failed to act in good faith, although required by statute to do so. This Court is driven to the inescapable conclusion that Plaintiff has deliberately acted in bad faith over the preceding thirty four months. Through its repeated and persistent failure and refusal to comply with the lawful orders of the Court including those which directed production of documentation that was essential to address critical issues in the present matter, it has repeatedly caused to be put forth material mis-statements of fact which appear to have been calculated to deceive the Court and has delayed these proceedings without good cause, thereby needlessly increasing the amount owed upon the mortgage debt, to say nothing of the needless waste of the Court’s time and resources, as well as those of Defendant. In short, the conduct of Plaintiff in this matter has been over-reaching, willful and unconscionable, is wholly devoid of even so much as a scintilla of good faith and cannot be countenanced by this Court.

Under the unique circumstances of this matter, the Court determines that it is fair and equitable that Plaintiff be forever barred, precluded, prohibited and foreclosed of and from collecting any of the claimed interest accrued on the loan between the date of default and the date of this Order; that Plaintiff be barred and prohibited from recovering any claimed legal fees and expenses; and further, that the amount due Plaintiff under the Note and Mortgage herein be determined at this time to be no more than the principal balance of $ 493,219.75, exclusive of advances for property taxes and property insurance. The Court also determines that under the circumstances herein, the imposition of exemplary damages upon Plaintiff is equitable, necessary and appropriate, both in light of Plaintiff’s shocking and deliberate bad faith conduct as well as to serve as an appropriate deterrent to any future outrageous, improper and wrongful conduct. The Court hereby fixes and determines [*8]the amount of exemplary damages in the sum of $ 200,000.00, recoverable by Defendants from Plaintiff in the nature of a principal reduction upon the mortgage sought to be foreclosed by Plaintiff.

For all of the foregoing reasons, it is, therefore

ORDERED , ADJUDGED and DECREED that Plaintiff, its successors, assigns and others are forever barred, foreclosed and prohibited from demanding, collecting or attempting to collect, directly or indirectly, any and all of the sums secured by the mortgage under foreclosure herein designated or denominated as interest, attorney’s fees, legal fees, costs, disbursements or any sums other than the principal balance as well as advances for property taxes and property insurance if any, that may have accrued from the date of default up to the date of this Order; and it is further

ORDERED, ADJUDGED and DECREED that the debt due Plaintiff under the Note and Mortgage under foreclosure in this action be fixed at $ 493,219.75, exclusive of any sums advanced for property taxes or property insurance; and it is further

ORDERED, ADJUDGED and DECREED that Defendant JOHN LUCIDO be and is hereby awarded exemplary damages as against Plaintiff in the amount of $ 200,000.00 to abide the event; and it is further

ORDERED, ADJUDGED and DECREED that the foregoing award of $ 200,000.00 in exemplary damages shall be and is hereby applied as a credit against the principal balance of the mortgage under foreclosure herein, amending and reducing the same to $ 293,219.75.

This shall constitute the Decision, Judgment and Order of the Court.

Dated: April 16, 2012

Riverhead, New York

E N T E R:

______________________________________

Jeffrey Arlen Spinner, J.S.C.

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DEUTSCHE BANK vs. WILLIAMS | USDC Hawaii “There is no evidence on the record establishing what mortgages were included in the PSA.”

DEUTSCHE BANK vs. WILLIAMS | USDC Hawaii “There is no evidence on the record establishing what mortgages were included in the PSA.”


IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF HAWAII

DEUTSCHE BANK NATIONAL
TRUST COMPANY, AS TRUSTEE
MORGAN STANLEY ABS CAPITAL
I INC. TRUST 2007-NC1 MORTGAGE
PASS-THROUGH CERTIFICATES,
SERIES 2007-NC1,

Plaintiff,

vs

LEIGAFOALII TAFUE WILLIAMS,
aka LEIGAFOALII TAFUE
KOEHNEN; PAPU CHRISTOPHER
WILLIAMS; REAL TIME
RESOLUTIONS, INC.; CAROLYN
RUTH KOEHNEN, AS TRUSTEE OF
THE CAROLYN R. KOEHNEN
REVOCABLE LIVING TRUST U/A,
DATED APRIL 14, 1986; and JOHN
DOES 1-5,

Defendants.

Excerpt:

Standing is a requirement grounded in Article III of the United States
Constitution, and a defect in standing cannot be waived by the parties. Chapman v.
Pier 1 Imports (US.) Inc., 631 F.3d 939,954 (9th Cir. 2011). A litigant must have
both constitutional standing and prudential standing for a federal court to exercise
jurisdiction over the case. Elk Grove Unified Sch. Dist. v. Newdow, 542 U.S. 1, 11
(2004). Constitutional standing requires the plaintiff to “show that the conduct of
which he complains has caused him to suffer an ‘injury in fact’ that a favorable
judgment will redress.” Id. at 12. In comparison, “prudential standing
encompasses the general prohibition on a litigant’s raising another person’s legal
rights.” Id. (citation and quotation signals omitted); see also Oregon v. Legal
Servs. Corp., 552 F.3d 965, 971 (9th Cir. 2009).

[…]

The basis of Plaintiffs standing to foreclose on the subject property
(at least as alleged in the Complaint) is a January 13,2009 assignment of the
Mortgage and Note from Home 123 to Plaintiff. The assignment, attached to the
Complaint, provides:

This Assignment, made this 13th day of January,
2009, by and between Home 123 Corporation, a
California corporation, hereinafter called the “Assignor”,
and Deutsche Bank National Trust Company, as trustee
for Morgan Stanley ABS Capital I Inc., MSAC 2007NC1,
whose principal place of business and post office
address is c/o Saxon Mortgage Services, Inc., 4708
Mercantile Dr. N., Forth Worth TX 76137-3605,
hereinafter called the “Assignee.”
WITNESSETH:
In consideration of the sum of ONE DOLLAR
($1.00) and other valuable consideration paid by the
Assignee, the receipt of which is hereby acknowledged,
the Assignor does hereby, without recourse, sell, assign,
transfer, set over and deliver unto the Assignee, its
successors and assigns, the mortgage and note hereinafter
described ….CompI. Ex. 4.

The Williamses argue that this assignment cannot be valid because
Home 123 was in bankruptcy liquidation as of January 13,2009. Specifically,
Home 123 filed for Chapter 11 bankruptcy in 2007, Home 123 filed a liquidation
plan in March 2008, and the bankruptcy court confirmed the liquidation plan in
July 2008. In re New Century TRS Holdings, Inc., 407 B.R. 576, 579-80 (Bankr.
D. Del. 2009). Effective August 1, 2008, the liquidation plan:

was created with Alan M. Jacobs as trustee. Also on that
date, the Creditors’ Committee was dissolved; the Plan
Advisory Committee (the “PAC”) was formed; debtors’
officers and directors ceased serving and were replaced
by Jacobs; debtors’ assets were distributed to the
liquidating trust; and NCFC’s outstanding common and
preferred stock, as well as all notes, securities, and
indentures, were cancelled.

Id. at 585-86 (citations omitted). Given this liquidation, it appears that Home 123
could not have validly assigned the Mortgage and Note to Plaintiff on January 13,
2009. And in Opposition, Plaintiff presents no evidence (or even argument)
explaining how this January 13,2009 assignment is valid despite Home 123 ‘s
bankruptcy and liquidation. In fact, Plaintiff argues — without factual support —
that NC Capital Corporation (“NC Capital”) first bought the Note from Home 123
and Plaintiff subsequently received it through a securitized trust. See PI. ‘s Opp’n
at 20. And at the hearing, Plaintiff’s counsel inexplicably stated that discovery is
required to deternrine the Note’s assignment, even though all facts concerning any
valid assignment should certainly be known to Plaintiff without having to conduct
discovery. In other words, even Plaintiff, who is master of its Complaint and by all
accounts should know the basis of its claims, apparently disclaims the allegations
in the Complaint and at this time cannot establish its legal right to enforce the
Mortgage and Note.

The Complaint’s assertion that Plaintiff obtained the Mortgage and
Note through the January 13,2009 assignment is further called into doubt by the
fact that Plaintiff brings this action as “Trustee Morgan Stanley ABS Capital I Inc.
Trust 2007-NCI Mortgage Pass-Through Certificates, Series 2007-NC-I”–
suggesting (as Plaintiffnow argues) that Plaintiffmay have received the Mortgage
and/or Note through a Pooling and Servicing Agreement (“PSA”) in 2007. From
the evidence presented by the Williamses (Plaintiff presented no evidence on
standing in Opposition), Home 123 generally sold mortgages to its affiliate NC
Capital, who then resold the mortgages for inclusion into securitized trusts. See
Williamses’ Ex. Gat 4,-r,-r 9, 11. And NC Capital and Morgan Stanley ABS
Capital I Inc., with Plaintiff as trustee, entered into a PSA dated January 1, 2007.
See Williamses’ Ex. U. The PSA requires NC Capital to deliver to Plaintiff
assignments of mortgage for each mortgage loan, and for Plaintiff to certify
“receipt of a Mortgage Note and Assignment of Mortgage for each applicable
Mortgage Loan.” Id. at 41-42.

This evidence presents two problems for Plaintiff. First, if Plaintiff
did indeed obtain the Mortgage and Note through a 2007 PSA, then the 2007 PSA
is yet another reason why the January 13,2009 assignment is a nullity and the
Complaint’s assertion that Plaintiff obtained the Mortgage and Note from Home
123 is untrue. Second, the evidence presented does not actually establish that
Plaintiff received the Mortgage and Note through the PSA — there is no evidence
on the record establishing what mortgages were included in the PSA. Thus,
although Plaintiff might have obtained the Mortgage and Note through this PSA,
there is no evidence showing or even suggesting that this is indeed the case. As a
result, there is no evidence — at least on the record presented before the court —
creating a genuine issue of material fact that Plaintiffwas assigned the Mortgage
and Note on which it now seeks to foreclose.

In opposition, Plaintiff argues that the Williamses are not parties or
beneficiaries to the assignment such that they cannot challenge it. In making this
argument, Plaintiff relies on caselaw from this court rejecting that a
plaintiff/mortgagee can assert claims raising assignment irregularities and/or
noncompliance with a PSA. See Fed. Nat’! Mortg. Ass’n v. Kamakau, 2012 WL
622169, at *3-4 (D. Haw. Feb. 23, 2012) (relying on Velasco v. Sec. Nat’l Mortg.
Co., — F. Supp. 2d —-, 2011 WL 4899935, at *4 (D. Haw. Oct. 14,2011), to
reject “slander of title” claim challenging assignment of the note and mortgage
because where the borrower is not a party or intended beneficiary of the
assignment, he cannot dispute the validity of the assignment); Abubo v. Bank of
New York Mellon, 2011 WL 6011787, at *8 (D. Haw. Nov. 30,2011) (rejecting
claim asserting violation of a PSA because a third party lacks standing to raise a
violation of a PSA and noncompliance with terms of a PSA is irrelevant to the
validity of the assignment).

Plaintiffs argument confuses a borrower’s, as opposed to a
lender’s, standing to raise affirmative claims. In Williams v. Rickard, 2011 WL
2116995, at *5 (D. Haw. May 25,2011), — which involved the same parties in this
action and in which Lei Williams asserted affirmative claims against Deutsche
Bank — Chief Judge Susan Oki Mollway explained the difference between the two:

[Lei Williams is] confused about the doctrine of legal
standing. [Lei Williams] believers] that, because
Deutsche Bank and Real Time have not proven that they
have standing to enforce the loan documents, they lack
standing to seek summary judgment on the affirmative
claims asserted against them. Had Deutsche Bank or
Real Time filed affirmative claims to enforce the notes
and mortgages, they would have had to establish their
legal right to enforce those documents. However,
Williams has sued Deutsche Bank and Real Time, and
the banks are merely seeking a determination that they
are not liable to Williams for the claims Williams asserts
against them. The banks need not establish that they are
the legal owners of Williams’s loans before they defend
against Williams’s claims. “Standing” is a plaintiff’s
requirement, and Williams misconstrues the concept in
arguing that Defendants must establish “standing” to
defend themselves.

(emphasis added). In this action, the proverbial shoe is on the other foot —
Deutsche Bank asserts affirmative claims against the Williamses seeking to enforce
the Mortgage and Note, and therefore must establish its legal right (i.e., standing)
to do so. See, e.g., IndyMac Bank v. Miguel, 117 Haw. 506, 513, 184 P.3d 821,
828 (Haw. App. 2008) (explaining that for standing, a mortgagee must have “a
sufficient interest in the Mortgage to have suffered an injury from [the
mortgagor’s] default”). As explained above, Deutsche Bank has failed to do so.

The court therefore GRANTS the Williamses’ Motion to Dismiss.

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Johnson v. HSBC BANK USA, Dist. Court, SD California – Pooling and Servicing Agreement (“PSA”) allowed for homeowner to show improper transfers

Johnson v. HSBC BANK USA, Dist. Court, SD California – Pooling and Servicing Agreement (“PSA”) allowed for homeowner to show improper transfers


 

GREGORY JOHNSON, an individual, Plaintiff,
v.
HSBC BANK USA, NATIONAL ASSOCIATION AS TRUSTEE FOR THE ELLINGTON TRUST SERIES 2007-1; BANK OF AMERICA, N.A.; and Does 1-10, inclusive, Defendants.

 

 Case No. 3:11-cv-2091-JM-WVG.

United States District Court, S.D. California. 
March 19, 2012.

ORDER DENYING MOTION TO DISMISS Docket No. 12.

JEFFREY T. MILLER, District Judge.

On September 12, 2011, Plaintiff Gregory Johnson brought a complaint against HSBC Bank USA, National Association as Trustee for the Ellington Trust Series 2007-1 (“HSBC”) and Bank of America, N.A. (“BOA”). BOA has filed a motion to dismiss (“MTD” or “motion”). Plaintiff filed an opposition on February 17, 2012. HSBC originally failed to answer the complaint, but jointly moved with Plaintiff to set aside default. The court granted that motion, and HSBC now joins BOA’s motion to dismiss with no further argument. Neither Defendant has filed a reply brief. For the reasons stated below, the motion is DENIED.

I. BACKGROUND

In December of 2006, Plaintiff obtained a loan from Fremont Investment & Loan (“Fremont”) in order to purchase property located in Oceanside, California. Compl. ¶ 24. The Deed of Trust named Mortgage Electronic Registration Systems (“MERS”) as the nominee and beneficiary of the Deed of Trust. ¶ 24. The complaint alleges that Fremont “attempted to securitize and sell [the] loan to another entity or entities” that were “not HSBC Bank or the Ellington Trust.” ¶ 25. Consequently, HSBC “is merely a third-party stranger to the loan transaction.” ¶ 26. Plaintiff alleges that despite his requests, BOA (apparently his mortgage servicer), has failed to verify the debt and amount owed.[1] ¶ 26.

Specifically, Plaintiff alleges that the document purporting to assign the Deed of Trust from MERS to HSBC (Compl. Ex. A), dated May 29, 2008, was fraudulent, in part because the assignment was executed after the closing date of the trust, which violates the Pooling and Servicing Agreement (“PSA”).[2] ¶ 28-29. Plaintiff also alleges that Treva Moreland, “the purported signatory of the purported `Assignment’, was not the `Assistant Secretary’ for MERS and lacked the requisite corporate and legal authority to effect an actual `assignment’ of Plaintiff’s Note and Mortgage.” ¶ 38. The complaint states that Treva Moreland signs thousands of property record documents without any authority, and thus any amount Plaintiff owes is subject to equitable offset by damages owed by Defendants.

The complaint further alleges that in October of 2010, HSBC “caused a document purporting to be a Substitution of Trustee (`Substitution’) to be recorded with the County of San Diego.” ¶ 57. The substitution purported to substitute Quality Loan Service Corporation (“Quality”) as trustee, but Plaintiff claims that no such transfer ever occurred. ¶ 57. The complaint states that under California law, the lender must be the party to appoint the successor trustee, and HSBC was not the lender.

In the summer of 2009, Plaintiff sought a loan modification from Wilshire, the original servicer of Plaintiff’s loan. ¶ 66. At some point the loan “was sold or transferred to BOA.” ¶ 67. Plaintiff made nine payments under the modified plan, but BOA refused to honor the new plan. ¶ 68. After much confusion, Plaintiff obtained a loan modification from BOA to be effective February 1, 2011. ¶ 79. In March of 2011, Plaintiff sent a Qualified Written Request letter to verify the debt owed, but BOA did not provide a substantive response. ¶ 83.

Plaintiff also alleges that Defendants have not properly credited payments he has made on the mortgage and have incorrectly calculated interest. ¶ 85. He claims that Defendants knew at all times that Plaintiff was paying incorrect amounts. ¶ 86. As a result of their actions, Plaintiff’s credit has been damaged and his home has been made unmarketable because “the title to Plaintiff’s home has been slandered [and] clouded.” ¶ 89. Finally, the complaint states that “Plaintiff has offered to and is ready, willing, and able to unconditionally tender his obligation.” ¶ 96.

Based on these factual allegations, the complaint seeks relief under seven causes of action, each applied to both Defendants: (1) declaratory relief under 28 U.S.C. §§ 2201-2202; (2) negligence; (3) quasi-contract; (4) violation of 12 U.S.C. § 2605; (5) violation of 15 U.S.C. § 1692; (6) violation of Cal. Bus. & Prof. Code § 17200 et seq.; (7) accounting.

II. LEGAL STANDARD AND DISCUSSION

A motion to dismiss under Fed. R. Civ. P. 12(b)(6) challenges the legal sufficiency of the pleadings. De La Cruz v. Tormey, 582 F.2d 45, 48 (9th Cir. 1978). In evaluating the motion, the court must construe the pleadings in the light most favorable to the non-moving party, accepting as true all material allegations in the complaint and any reasonable inferences drawn therefrom. See, e.g., Broam v. Bogan, 320 F.3d 1023, 1028 (9th Cir. 2003). The Supreme Court has held that in order to survive a 12(b)(6) motion, “[f]actual allegations must be enough to raise a right to relief above the speculative level.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). The court should grant 12(b)(6) relief only if the complaint lacks either a “cognizable legal theory” or facts sufficient to support a cognizable legal theory. Balistreri v. Pacifica Police Dep’t, 901 F.2d 696, 699 (9th Cir. 1990).

A. Viability of Attack on Loan Securitization

1. Ability to Challenge Loan Securitization

The threshold issue of whether Plaintiff can make any claim related to the loan’s securitization affects the viability of many of the individual claims discussed below. BOA cites Rodenhurst v. Bank of America, 773 F.Supp.2d 886, 899 (D. Haw. 2011) for its statement that “[t]he overwhelming authority does not support a cause of action based upon improper securitization.” However, the discussion cited in that case centers on plaintiffs who claim that securitization itself violates the agreement between the mortgagor and mortgagee. Here, Plaintiff does not dispute the right to securitize the mortgage, but alleges that as a result of improper procedures, the true owner of his mortgage is unclear. As a result, he has allegedly been paying improper entities an excess amount.

Ninth Circuit district courts have come to different conclusions when analyzing a plaintiff’s right to challenge the securitization process as Plaintiff has here. See Schafer v. CitiMortgage, Inc., 2011 WL 2437267 (C.D. Cal. 2011) (denying defendants’ motion to dismiss declaratory relief claim, which was based on alleged improper transfer due to alleged fraud in signing of documents); Vogan v. Wells Fargo Bank, N.A., 2011 WL 5826016 (E.D. Cal. 2011) (allowing § 17200 claim when plaintiffs alleged that assignment was executed after the closing date of securities pool, “giving rise to a plausible inference that at least some part of the recorded assignment was fabricated”). But see Armeni v. America’s Wholesale Lender, 2012 WL 603242 (C.D. Cal. 2012) (dismissing declaratory relief, quasi-contract, UCL, and accounting claims because “plaintiff lack[ed] standing to challenge the process by which his mortgage was (or was not) securitized because he is not a party to the PSA”); Junger v. Bank of America, N.A., 2012 WL 603262 at *3 (C.D.Cal. 2012).

Here, the court finds that Plaintiff is not categorically excluded from making claims based on allegations surrounding the loan’s securitization.[3] As in Vogan, and unlike Armeni, Plaintiff here alleges both violations of the PSA and relevant law. BOA has not sufficiently demonstrated that violations of law associated with the loan’s securitization can go unchecked because Plaintiff is not a party to the PSA.

Other cases cited by BOA on this issue are irrelevant or inapplicable here.

2. Sufficiency of Allegations of Improper Assignment

BOA also argues that Plaintiff makes no showing that the assignment was improper. It claims that Treva Moreland was authorized to assign the Deed of Trust, and there was no violation of the statute, asserting that “[n]owhere in [the complaint] does [Plaintiff] allege facts showing the Assignment was defective, invalid, or somehow voidable.” MTD at 4. However, the complaint states that MERS had no knowledge of the assignment, that Treva Moreland was never appointed to “assistant secretary” by the MERS board of directors, and thus there was no authority to make the assignment.

While BOA cites no case law on this point, Plaintiff provides persuasive authority to demonstrate that courts have accepted allegations such as his. In Kingman Holdings, LLC v. CitiMortgage, Inc., 2011 WL 1883829 (E.D. Tex. 2011), the court assessed a fraud claim against CitiMortgage in which the plaintiff alleged that MERS’ appointment of an assistant secretary (“Blackstun,” who later made the assignment) was invalid because it was not approved by the board of directors. The court upheld the fraud claim under the 9(b) standard, finding that Plaintiff’s allegations were plausible and that if Blackstun had no authority to bind MERS, then MERS filed a fraudulent document after he executed the assignment.

Similarly, in Vogan, the court denied defendants’ motion to dismiss a § 17200 claim because, as here, the plaintiff pleaded that Wells Fargo recorded a fabricated assignment of the loan because the assignment was executed after the closing date of the mortgage-backed security pool, “giving rise to a plausible inference” of fabrication. Id. at *7. Here, in addition to attacking Treva Moreland’s authority, Plaintiff has alleged that the assignment was made after the closing date of the trust, as required by Section 2.1 of the PSA.

B. Tender Requirement

BOA also argues that a plaintiff “must tender the entire unpaid balance of the loan to maintain an action challenging foreclosure.” MTD at 4. However, as BOA separately points out, Plaintiff is not currently in foreclosure—BOA rescinded its Notice of Default in March of 2011. BOA fails to acknowledge this fact in its argument, merely citing cases supporting the existence of the tender rule in actions for wrongful foreclosure.

Even if the fact of foreclosure were at issue, BOA has not sufficiently demonstrated that the tender rule should apply here. Plaintiff is not challenging Defendants’ compliance with the foreclosure law, but is claiming that defendants did not properly receive the assignment of their loan. The “tender requirement does not apply to this case because” Plaintiff challenges “the beneficial interest held by [Defendants] in the deed of trust, not the procedural sufficiency of the foreclosure itself.” Vogan at *8.

C. Declaratory Relief

BOA seeks dismissal of the declaratory relief claim because the issues “will be resolved by the other claims for relief.” MTD at 5. It also argues that the California foreclosure statute does not recognize a judicial action to determine whether a party foreclosing is authorized to do so.

The Ninth Circuit has explained that while there is no bar to declaratory relief if legal remedies exist, a court’s discretion should lead it to refuse to grant declaratory relief unless it would clarify the parties’ interests or relieve the uncertainty giving rise to the proceeding. U.S. v. Washington, 759 F.2d 1353, 1356-57 (9th Cir. 1985). The Schafer court upheld a declaratory relief claim in a similar action to this one, noting that there was a controversy over whether the assignment of a deed of trust was fraudulent, and the cause of action was not duplicative. 2011 WL 2437267 at *4.

While it is possible that declaratory relief will be unnecessary, it would be premature to dismiss the cause of action at this point. BOA has failed to show how resolution of each of the other claims will necessarily provide all of the requested relief if they are granted. Further, it remains possible that some or all of Plaintiff’s other claims will not survive to trial—if that occurs, declaratory judgment could serve to clarify the parties’ interests.

D. Negligence

The complaint alleges that HSBC and BOA were negligent because they demanded mortgage payments when they did not have the right to enforce that obligation. This allegedly caused Johnson to overpay in interest, among other things. As a result of the “reckless negligence, utter carelessness, and blatant fraud of the Defendants,” Plaintiff’s chain of title has been “rendered unmarketable and fatally defective.” Compl. ¶ 110.

Defendants’ motion to dismiss argues that they had no duty of care here, because Plaintiff “does not plead facts supporting a finding that Defendant’s conduct exceeded the scope of its conventional role as a lender.”[4] MTD at 6. Plaintiff states that his relationship with BOA is not conventional because the loan has been securitized, so “Defendants hold Plaintiff’s payments for the benefit of the certificate holders.” Pl. Opp. at 20. Further, Plaintiff argues that a lender that offers a loan modification has gone beyond its conventional role.

The rule that a lender does not have a duty to a borrower is only a “general rule,” and only applies to situations where a lender plays its conventional role. E.g., Taheny v. Wells Fargo Bank, N.A., 2010 WL 5394315 (E.D. Cal. 2010). Accepting the allegations of the complaint as true, BOA has gone beyond the typical lender’s role. As in Ansanelli v. JP Morgan Chase Bank, N.A., 2011 WL 1134451 at *7 (N.D. Cal. 2011), BOA established a loan modification plan with Plaintiff, made excessive interest charges and made “derogatory credit reports to credit bureaus.” Compl. ¶ 109. More generally, Plaintiff alleges that BOA did not have the legal authority to demand payments from Plaintiff because of the assignment’s invalidity. If BOA was not a lender legally authorized to collect payments from Plaintiff, the general rule shielding actual lenders from liability would not apply.

More generally, the court finds that the allegations Plaintiff has put forth meet the federal pleading standard under Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007). While yet to be proven, Plaintiff presents plausible allegations of misconduct that, if true, would entitle him to relief.

E. Quasi-Contract

Based upon the same factual allegations, Plaintiff seeks to recover on a quasi-contract cause of action. BOA maintains that in California a quasi-contract claim is the same as a claim for unjust enrichment, and such an action does not lie if an express agreement governs the parties’ rights. Further, BOA argues that the rule of tender applies under Cal. Civ. Code § 1691(b), which governs rescission of a contract.

BOA is correct that a plaintiff may not recover on a quasi-contract action if an express agreement exists. E.g., Cal. Med. Ass’n, Inc. v. Aetna U.S. Healthcare of Cal., 94 Cal. App. 4th 151, 172 (2001). However, as Plaintiff points out, the complaint alleges that there is no valid agreement governing the transaction between Plaintiff and BOA. Thus, if Plaintiff succeeds in showing that BOA was not authorized to collect payment, he may be able to recover based on quasi-contract. For the same reason, BOA’s § 1691 argument fails—it does not state why the tender rule should apply if no contract exists.

F. Violation of 12 U.S.C. § 2605 — The Real Estate Settlement Procedures Act

The complaint alleges that Plaintiff sent a Qualified Written Request (“QWR”) to BOA in March of 2011 asking for information to verify the validity of the debt at issue. However, BOA failed to provide the legally-required information, only providing a partial history of the account.

BOA’s motion to dismiss states that instead of including information about why the account was in error, the QWR “includes a list of document demands which appear to be entirely irrelevant to a valid QWR under RESPA.” MTD at 9. Further, BOA maintains that Plaintiff’s damage claims are not sufficiently specific.

1. Whether Plaintiff Failed to Submit a Proper QWR

Generally, Ninth Circuit courts have held that a QWR must relate to the servicing of a loan, rather than its creation or modification. Gates v. Wachovia Mortg. FSB, 2011 WL 2602511 at *3 (E.D. Cal. 2010). Further, the “borrower’s inquiry must include a statement of the reasons for the belief of the borrower . . . that the account is in error or provide sufficient detail to the servicer regarding other information sought by the borrower.” Id; 12 U.S.C. § 2605(e).

BOA has not argued that the QWR was unrelated to servicing of the loan, but states that Plaintiff did not provide “a statement or supporting documentation of his reasons for believing the account was in error.” MTD at 9. While Plaintiff may not have stated the reasons he believed the account was in error, Defendant provides no argument on why it believes that the QWR failed to “provide sufficient detail to the servicer regarding other information sought by the borrower,” merely arguing that the list of document demands “appear to be entirely irrelevant to a valid QWR under RESPA.” MTD at 9. While some courts have found QWRs inadequate because they related to the creation or modification of a loan, the QWR here requested information that related to “making the payments of principal and interest with respect to the amounts received from the borrower.” 12 U.S.C. § 2605. For example, the QWR requested collection notes concerning the loan, as well as the name and contact information of the entity to which BOA was purportedly making the payments received from Plaintiff. While all of the information requested by Plaintiff may not have been validly sought under the statute, the QWR provided sufficient information concerning several requests for information that should have garnered a response by BOA. See Tamburri v. Suntrust Mortg., Inc., 2011 WL 6294472 at *7 (N.D. Cal. 2011) (noting that QWR requesting documentation supporting collection and enforcement efforts, including documents in support of enforcement of promissory note and deed of trust and a list of assignments “arguably request[ed] information as to how the servicer has handled [plaintiff’s] account”).

While BOA states that it provided a complete response following its initial letter confirming receipt and promising to provide a response, it has not detailed or produced the alleged response.

2. Whether Plaintiff Adequately Pled Damages

Plaintiff may recover for actual damages suffered under 12 U.S.C. § 2605(f)(1)(a). BOA asserts that Plaintiff has failed to plead damages adequately. Generally the requirement for damages has been interpreted liberally. Yulaeva v. Greenpoint Mortg. Funding, Inc., 2009 WL 2880393 at *15 (E.D. Cal. 2009). While Plaintiff does not provide substantial factual support, the allegations are sufficient to state a claim at the pleading stage—Plaintiff has specifically alleged that he sought certain information, BOA denied him his statutorily required information, and the failure to receive that information caused him to pay more than was necessary on his loan and to incur costs in repairing his credit.

G. Violation of 15 U.S.C. § 1692 — Fair Debt Collection Practices Act

The complaint states that BOA violated the FDCPA through making various false representations in its attempt to collect on the loan. The MTD asserts that the FDCPA’s definition of a “debt collector” does not include a mortgage servicer or an assignee of the debt, “where the `debt was not in default at the time it was obtained by [a servicing company].'” MTD at 10 (citing 15 U.S.C. §1692a(6)(F)). Further, it argues that a foreclosure on a property based on a deed of trust does not constitute collection of a debt within the meaning of the FDCPA.

Plaintiff agrees that the statute’s definition of “debt collector” does not include an entity attempting to collect a debt that was not in default when the debt was obtained by that entity. However, he has alleged that BOA took over servicing the debt sometime after September 2009, Compl. ¶ 67, and the debt went into default in May 2008. According to BOA, the default notice was not rescinded until 2011. BOA does not address this issue in its MTD.

BOA also argues that “foreclosure on a property based on a deed of trust does not constitute collection of a debt within the meaning of the FDCPA,” citing Hulse v. Ocwen Federal Bank, FSB, 195 F.Supp.2d 1188, 1204 (D. Or. 2002). In that case, the judge decided that “[f]oreclosing on a trust deed is distinct from the collection of the obligation to pay money . . . . Payment of funds is not the object of the foreclosure action.” Id. First, many courts have registered disagreement with this decision. See, e.g., Albers v. Nationstar Mortg., LLC 2011 WL 43584 (E.D. Wash. 2011) (noting that Hulse’s reasoning has been rejected by the Fourth and Fifth circuits and limited in other circumstances).

Second, as Plaintiff points out, he does not allege that foreclosure of the property constituted the violation; instead, he believes the demands of payment and threats were unlawful. Hulse held that “any actions taken by [defendant] in pursuit of the actual foreclosure may not be challenged as FDCPA violations,” but “plaintiffs may maintain any FDCPA claims based on alleged actions by [defendant] in collecting a debt.” Hulse at 1204. Based on this, even if the court were to accept Hulse’s reasoning, the FDCPA claim survives.

H. Violation of Cal. Bus. & Prof. Code § 17200

Plaintiff alleges that BOA has engaged in unfair, unlawful, and fraudulent business practices by executing misleading documents, executing documents without proper authority to do so, and demanding payments for non-existent debt, among other things.

BOA concedes that violation of another law serves as a predicate for stating a cause of action under § 17200, but states that “Plaintiff must plead facts to support the underlying statutory violation.” MTD at 11. Because the court has upheld Plaintiff’s other claims, the § 17200 claim must be upheld under the unlawful prong. See, e.g., Vogan v. Wells Fargo Bank, N.A., 2011 WL 5826016 at *6-7 (upholding § 17200 claim because court had also upheld claim under Truth in Lending Act, 15 U.S.C. §1641(g)).

I. Accounting

Plaintiff also requests an accounting for all payments made. BOA states that a request for accounting must be tied to another actionable claim, and Plaintiff has no viable claims. BOA also states that Plaintiff has not alleged he is owed a balance.

“A cause of action for an accounting requires a showing that a relationship exists between the plaintiff and defendant that requires an accounting, and that some balance is due the plaintiff that can only be ascertained by an accounting.” Tamburri v. Suntrust Mortg., Inc., 2011 WL 6294472 at *17 (N.D. Cal. 2011) (quoting Teselle v. McLoughlin, 173 Cal.App.4th 156, 179 (2009) (also noting that the purpose of requesting an accounting is “to discover what, if any, sums are owed to the plaintiff” and that “an accounting may be used as a discovery device”)).

Further, “[a] request for a legal accounting must be tethered to relevant actionable claims.” Harvey G. Ottovich Revocable Living Trust Dated May 12, 2006 v. Washington Mutual, Inc., 2010 WL 3769459 (N.D. Cal. 2010). While the complaint does not specifically “tether” the request for accounting to another single cause of action, it is clearly based on the same set of circumstances that is the basis for most of the causes of action in this case—the collection of money that was not actually due to Defendants.

Because Plaintiff has pleaded viable claims that are related to the same facts under which he requests an accounting, the court declines to dismiss the accounting claim at this time.

J. Motion to Strike Request for Punitive Damages and Fees

Defendant has made a motion to strike the request for punitive damages, arguing the “complaint is patently insufficient to support” such a claim. Fed. R. Civ. P. 12(f) allows a court to strike an insufficient defense or “any redundant, immaterial, impertinent, or scandalous matter.”

BOA cites to Bureerong v. Uvawas, 922 F.Supp.1450 (C.D. Cal. 1996), which holds that a motion to strike may be used when damages are not recoverable as a matter of law. However, a more recent Ninth Circuit case, Whittlestone, Inc. v. Handi-Craft Co., 618 F.3d 970 (9th Cir. 2010), held that “Rule 12(f) does not authorize district courts to strike claims for damages on the ground that such claims are precluded as a matter of law.” Id. at 974-75. Thus, without any argument that the claim for punitive damages is redundant, immaterial, impertinent, or scandalous, BOA’s motion cannot succeed.

BOA also asks the court to strike the request for attorney’s fees, claiming there is no contractual or statutory basis for the award. However, as Plaintiff points out, RESPA allows for attorney’s fees. 12 U.S.C. §2605(f)(3) (providing that costs may be recovered “together with any attorneys [sic] fees incurred in connection with such action”).

III. CONCLUSION

For the reasons stated above, the motion to dismiss is DENIED. Defendants’ motion has failed to demonstrate that Plaintiff’s claims were implausible or precluded as a matter of law.

IT IS SO ORDERED.

[1] While Plaintiff does not dispute that he owes money on the loan, he disputes the amount owed and “seeks the Court’s assistance in determining who the holder in due course is of his Note and Deed of Trust.” ¶ 22.

[2] Plaintiff admits he is not a party to or beneficiary of the PSA, but claims that the failure to securitize his note should prevent HSBC and BOA from claiming any interest in the mortgage.

[3] BOA has failed to apply its argument concerning the loan’s securitization to any of Plaintiff’s specific claims, and the court declines to perform this task.

[4] BOA also denies the existence of proximately-caused damages, but does not directly address the alleged damages from derogatory credit reports and excessive interest charges.

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IN RE SCHWARTZ | MASS. BK Court Re-Opens Case “The fact that it had possession of the mortgage instrument did not render Deutsche the mortgagee and thus it lacked the power to sell the property”

IN RE SCHWARTZ | MASS. BK Court Re-Opens Case “The fact that it had possession of the mortgage instrument did not render Deutsche the mortgagee and thus it lacked the power to sell the property”


UNITED STATES BANKRUPTCY COURT
DISTRICT OF MASSACHUSETTS
CENTRAL DIVISION

In re:
SIMA SCHWARTZ
Debtor

SIMA SCHWARTZ
Plaintiff

v.

HOMEQ SERVICING, AGENT FOR
DEUTSCHE BANK NATIONAL TRUST
COMPANY, AS TRUSTEE and
DEUTSCHE BANK NATIONAL
COMPANY, AS TRUSTEE
Defendants

MEMORANDUM OF DECISION AND ORDER

After the plaintiff, Sima Schwartz, presented her case in chief during the first day of the trial in
this adversary proceeding, upon oral motion of the defendants, HomEq Servicing and Deutsche Bank
National Trust Company, as Trustee, I granted judgment on partial findings in favor of the defendants
on all counts of the complaint, pursuant to Fed. R. Civ. P. 52(c), made applicable to this proceeding by
Fed. R. Bankr. P. 7052. Ms. Schwartz then moved for a new trial as a result of which judgment was
vacated on count I of the complaint only. Schwartz v. HomEq Servicing (In re Schwartz), 2011 WL
1331963 (Bankr. D. Mass. Apr. 7, 2011). In count I, Ms. Schwartz alleges that the May 24, 2006
foreclosure sale of her home by Deutsche was invalid because Deutsche did not own the mortgage on
the property at the relevant time.1 I reopened the trial so that the defendants could present their case
with respect to that count, which they did on June 1, 2011. Based on the evidence and legal
submissions presented by the parties, my findings of fact, conclusions of law and order are set forth
below.

Jurisdiction and Standing

Core jurisdiction over this case is conferred upon the bankruptcy court by 28 U.S.C.
§ 157(b)(2)(G) and (O). See Atighi v. DLJ Mortg. Capital, Inc. (In re Atighi), 2011 WL 3303454, at
*3 (B.A.P. 9th Cir. Jan. 28, 2011). Ms. Schwartz’s standing to seek relief is based on her property
interest in light of the alleged wrongful foreclosure. Brae Asset Fund, L.P. v. Kelly, 223 B.R. 50, 56
(D. Mass. 1998).

Legal Framework

Mass. Gen. Laws ch. 244, § 14 establishes the procedure for a mortgagee to foreclose a
mortgage by exercise of the statutory power of sale. The statute provides that prior to a foreclosure
sale a notice of the sale must appear weekly for three consecutive weeks in a newspaper either
published in or generally circulated in the city or town where the property is located. The
Massachusetts Supreme Judicial Court has recently clarified that a foreclosing mortgagee must hold
the mortgage as of the date that the first notice of sale is published. U.S. Bank Nat. Ass’n v. Ibanez,

The Defendants’ Case

It is undisputed that Deutsche was not the original mortgagee of the mortgage on Ms.
Schwartz’s home, so it must prove that the mortgage was assigned to it prior to the date when the first
foreclosure notice was published. As discussed in the memorandum and order on the plaintiff’s
motion for a new trial, while the evidence established that an assignment of the mortgage from
Mortgage Electronic Registration Systems, Inc. (“MERS”) to Deutsche was executed on May 23,
2006, the day before the foreclosure sale, this assignment, being well after the notice of foreclosure
sale was first published, did not confer on Deutsche the power to foreclose on May 24. The Supreme
Judicial Court in Ibanez, however, offered an alternative method for a party to acquire sufficient rights
in a mortgage to qualify to foreclose:

Where a pool of mortgages is assigned to a securitized trust, the executed agreement
that assigns the pool of mortgages, with a schedule of the pooled mortgage loans that
clearly and specifically identifies the mortgage at issue as among those assigned, may
suffice to establish the trustee as the mortgage holder.

Ibanez, 458 Mass. at 651.

With this in mind, the defendants introduced into evidence at trial all of the agreements
tracking the transfer of Ms. Schwartz’s mortgage loan from its originator, First NLC Financial
Services, LLC (“First NLC”), to Deutsche, complete with the necessary schedules of the pooled
mortgage loans specifically identifying her mortgage as being among those transferred. The
defendants argue that these agreements, together with other evidence introduced by them, establish that
Deutsche was the holder of the mortgage well in advance of the first publication of the notice of sale.
At trial, Ronaldo Reyes, a Deutsche vice president, testified that he had management
responsibility over the administration of the Morgan Stanley Home Equity Loan Trust 2005-4 (the
“Trust”) and that Deutsche had always been the trustee of the Trust. He testified that in his capacity
as vice president he had access to the books and records of the Trust and was qualified to authenticate
and testify about the documents admitted into evidence by the defendants. During the course of his
testimony, Mr. Reyes authenticated executed copies of each of the agreements discussed below, and
demonstrated that Ms. Schwartz’s mortgage loan was included on the mortgage loan schedules
attached as exhibits to several of the agreements. Mr. Reyes testified that each was used in the
ordinary course of Deutsche’s business as trustee of the Trust.

The following documents were admitted into evidence: (i) the mortgage on Ms. Schwartz’s
home; (ii) the original promissory note executed by Ms. Schwartz, which Mr. Reyes noted was
endorsed in blank by First NLC; (iii) the Amended and Restated Mortgage Loan Purchase Agreement
(the “Loan Purchase Agreement”) dated as of September 1, 2005 by and between Morgan Stanley
Mortgage Capital, Inc. (“MS Mortgage Capital”) and First NLC; (iv) the Assignment and Conveyance
Agreement dated September 29, 2005, by and between First NLC and MS Mortgage Capital; (v) the
Bill of Sale dated November 29, 2005 by and between MS Mortgage Capital and Morgan Stanley ABS
Capital I Inc. (“MS ABS Capital”); and (vi) the Pooling and Servicing Agreement (the “PSA”) dated
as of November 1, 2005 by and among MS ABS Capital, HomEq Servicing Corporation, JPMorgan
Chase Bank, National Association, First NLC, LaSalle Bank National Association and Deutsche. Mr.

Findings of Fact2

1. On July 22, 2005, Ms. Schwartz refinanced the mortgage loan on her property at 23 Sigel Street,
Worcester, Massachusetts, executing a promissory note in the amount of $272,000 payable to First
NLC and a mortgage securing her obligation under the note naming MERS, solely as nominee for
First NLC, its successors and assigns, as mortgagee.

2. The mortgage, which was duly recorded at the Worcester District Registry of Deeds, includes the
statutory power of sale under Mass. Gen. Laws. ch 183, § 21 which is invoked by reference to the
statute and which permits a mortgagee to foreclose a mortgage by public auction sale of the
property upon the mortgagor’s default in performance or breach of any conditions thereof.

3. On May 3, May 10 and May 17, 2006, a notice of foreclosure sale was published in the Worcester
Telegram and Gazette stating that “Deutsche Bank National Trust Company, as Trustee,” the
“present holder” of the mortgage, intended to foreclose the mortgage by public sale of Ms.
Schwartz’s property on May 24, 2006.

4. On May 23, 2006, Liquenda Allotey, described as a vice president of MERS, executed an
Assignment of Mortgage for the purpose of assigning the mortgage from MERS to “Deutsche Bank
National Trust Company, as Trustee.”

5. Deutsche, in its capacity as trustee of the Trust,3 conducted the foreclosure sale as scheduled on
May 24, 2006, bid in its mortgage debt and purchased the property.

6. In its answer, Deutsche admitted that a foreclosure deed conveying the property to itself was
recorded on October 13, 2006. There has been no evidence presented of any subsequent
conveyance of the property and hence I find that Deutsche remains the record owner of the Sigel
Street property.

7. As she testified on the first day of trial, Ms. Schwartz continues to reside in the Sigel Street
Property.

8. The original promissory note executed by Ms. Schwartz was endorsed in blank by an officer of
First NLC.

9. The original mortgagee as identified in the mortgage on Ms. Schwartz’s home was MERS, as
nominee for First NLC, its successors and assigns.

10. In accordance with Section 2 of the Loan Purchase Agreement, First NLC agreed to sell “Mortgage
Loans” to MS Mortgage Capital.

11. The Loan Purchase Agreement defines a “Mortgage Loan” as
An individual Mortgage Loan which is the subject of this Agreement, each Mortgage
Loan originally sold and subject to this Agreement being identified on the applicable
Mortgage Loan Schedule, which Mortgage Loan includes without limitation the
Mortgage File, the Monthly Payments, Principal Prepayments, Liquidation Proceeds,
Condemnation Proceeds, Insurance Proceeds, Servicing Rights and all other rights,
benefits, proceeds and obligations arising from or in connection with such Mortgage
Loan, excluding replaced or repurchased mortgage loans.

12. On September 29, 2005, by way of the Assignment and Conveyance Agreement, First NLC sold,
transferred, assigned, set over and conveyed to MS Mortgage Capital “all right, title and interest of,
in and to the Mortgage Loans listed on the Mortgage Loan Schedule attached hereto as Exhibit A.”

13. Ms. Schwartz’s mortgage loan was listed on the exhibit attached to the Assignment and Conveyance Agreement.

14. First NLC, therefore, transferred all of its right, title and interest in Ms. Schwartz’s mortgage loan
to MS Mortgage Capital on November 29, 2005.

15. By the Bill of Sale dated November 29, 2005, MS Mortgage Capital, as the “Seller,” transferred to
MS ABS Capital “all the Seller’s right, title and interest in and to the Mortgage Loans described on
Exhibit A attached hereto.”

16. Ms. Schwartz’s mortgage loan was listed on Exhibit A to the Bill of Sale.

17. MS Mortgage Capital, therefore, transferred its entire interest in Ms. Schwartz’s mortgage loan to
MS ABS Capital on November 29, 2005.

18. Section 2.01 of the PSA, which was dated November 1, 2005, provides that the MS ABS Capital,
as “Depositor,”

concurrently with the execution and delivery hereof, hereby sells, transfers, assigns, sets
over and otherwise conveys to [Deutsche] for the benefit of the Certificateholders,
without recourse, all the right, title and interest of the Depositor in and to the Trust
Fund, and the Trustee, on behalf of the Trust, hereby accepts the Trust Fund.

19. The “Trust Fund” includes all of the mortgage loans listed on an attached mortgage loan schedule.

20. Ms. Schwartz’s mortgage loan was listed on the mortgage loan schedule attached to the PSA.

21. While the PSA provides that the mortgage loans were transferred from MS ABS Capital to
Deutsche, “concurrently with the execution and delivery hereof” on November 1, 2005, the Bill of
Sale provides that MS ABS Capital did not acquire the mortgage loans until November 29, 2005.
The November 2009 PSA indicates, however, that the transaction in which MS ABS Capital would
transfer the loans to Deutsch, as trustee of the Trust, would not be consummated until November
29, 2005, which is defined as the “Closing Date.” Therefore, MS ABS Capital transferred Ms.
Schwartz’s mortgage loan to Deutsche, as trustee of the Trust, on the Closing Date of November
29, 2005, which is the same date as the Bill of Sale by which MS ABS Capital acquired the loan
from MS Mortgage Capital.

22. Section 2.01(b) of the PSA provides that if

any Mortgage has been recorded in the name of Mortgage Electronic Registration
System, Inc. (“MERS”) or its designee, no Assignment of Mortgage in favor of the
Trustee will be required to be prepared or delivered and instead, the applicable Servicer
shall take all reasonable actions as are necessary at the expense of the applicable
Originator to the extent permitted under the related Purchase Agreement and otherwise
at the expense of the Depositor to cause the Trust to be shown as the owner of the
related Mortgage Loan on the records of MERS for the purpose of the system of
recording transfers of beneficial ownership of mortgages maintained by MERS.

23. Thus MS ABS Capital did not assign to Deutsche the mortgage on Ms. Schwartz’s home in
connection with the transaction through which it transferred Ms. Schwartz’s mortgage loan
pursuant to the PSA.

24. In the chain of transactions by which Ms. Schwartz’s mortgage loan was sold, initially by First
NLC to MS Mortgage Capital, next by MS Mortgage Capital to MS ABS Capital and finally by
MS ABS Capital to Deutsche, the seller sold all of its right, title and interest in the mortgage loans
being transferred. However, as the mortgage itself was originally in the name of MERS as
mortgagee, and not First NLC, First NLC never held legal title to the mortgage and could not have
transferred such title to MS Mortgage Capital. Consequently, neither MS ABS Capital nor
Deutsche, as successors to First NLC and MS Mortgage Capital, obtained legal title to the
mortgage. This is consistent with § 2.01 of the PSA quoted above.

25. As of November 29, 2005, the Closing Date defined in the PSA, MERS continued to hold legal
title to the mortgage on Ms. Schwartz’s home as nominee for First NLC, its successors and assigns.

26. MERS continued to hold legal tile to the mortgage until May 23, 2006, when it assigned the
mortgage to Deutsche.

27. The custodial log establishes that Deutsche received Ms. Schwartz’s mortgage loan documents,
including the promissory note and mortgage instrument, on September 15, 2005 (presumably in
anticipation of the November loan sale), and retained custody of these documents until March 27,
2006, when they were sent to HomEq. The custodial log indicates that the documents were sent
to HomEq for servicing and lists the reason for the transfer as “foreclosure.” According to the
custodial log, the loan documents were returned to Deutsche on May 24, 2006, the day of the
foreclosure sale.
Conclusions of Law

In In re Marron, 2011 WL 2600543, at *5 (Bankr. D. Mass. June 29, 2011), I held that where a
loan was secured by a mortgage in the name of MERS, even when the loan itself changed hands
several times, MERS remained the mortgagee in its capacity as nominee for the original lender, its
successors and assigns.4 As MERS was the mortgagee, it had the authority to assign the mortgage to
the foreclosing entity. In this case too, while Ms. Schwartz’s loan passed from hand to hand, MERS
remained the mortgagee throughout. While MERS held only bare legal title to the mortgage on
behalf of Deutsche, the successor to First NLC, until it assigned the mortgage to Deutsche on May 23,
2006, only MERS had the authority to foreclose.

Having determined that MERS, and not Deutsche, held legal title to the mortgage on Ms.
Schwartz’s home mortgage as of May 3, 2006, when the notice of the foreclosure sale of her home was
first published, it follows that Deutsche did not have the right to exercise the statutory power of sale
and to foreclose the mortgage. See, e.g., Novastar Mortgage, Inc. v. Safran, 79 Mass. App. Ct. 1124,
948 N.E.2d 917 (2011) (finding, in a post-foreclosure eviction proceeding, that the foreclosing entity
had the burden to prove its title to the property by establishing that the mortgage had been assigned to
it by MERS “at the critical stages of the foreclosure process.”). By publishing notice of the
foreclosure sale when it was not the mortgagee, Deutsche failed to comply with Mass. Gen. Laws ch.
244, § 14, and thus its foreclosure sale is void. Ibanez, 438 Mass. at 646-47.5 A declaratory
judgment to that effect shall enter on count I of the complaint.

SO ORDERED.

At Worcester, Massachusetts this 22nd day of August, 2011.

By the Court,
Melvin S. Hoffman
U.S. Bankruptcy Judge

Footnotes:

1 The complaint is unclear as to the relief Ms. Schwartz seeks as a result of the allegedly invalid
foreclosure. In addition to the allegation that the defendants did not own the mortgage, Ms. Schwartz
alleges that she was damaged by the foreclosure sale, which “was conducted fraudulently, in bad faith”
and to her detriment. I previously found that Ms. Schwartz failed to produce any evidence of the
defendants’ intent to defraud her. In addition, Ms. Schwartz failed to establish the extent of her
damages or that the foreclosure sale was conducted in bad faith. Though Ms. Schwartz does not
expressly request a declaratory judgment as to the validity of the foreclosure, based on the allegation of
invalidity in the complaint, and the parties’ arguments in the course of trial, I will consider count I of
the complaint to be a request for a declaratory judgment that the foreclosure sale was invalid.

2 Any finding of fact which should more properly be considered a conclusion of law, and vice versa,
shall be deemed as such.

3 The documents pertaining to the foreclosure sale identify Deutsche as “Deutsche Bank National
Trust Company, as Trustee” without identifying the trust.

4 The sophisticated financial minds who wrought the MERS regime sought to simplify the process of
repeatedly transferring mortgage loans by obviating the need and expense of recording mortgage
assignments with each transfer. No doubt they failed to consider the possibility of a collapse of the
residential real estate market, the ensuing flood of foreclosures and the intervention of state and federal
courts. Professor Alex Tabarrok of George Mason University has observed “[t]he law of unintended
consequences is when a simple system tries to regulate a complex system.” Alex Tabarrok, The Law
of Unintended Consequences, Marginal Revolution (Jan. 24, 2008, 7:47 am),
http://marginalrevolution.com/marginalrevolution/2008/01/the-law-of-unin.html.

5 Deutsche presented sufficient evidence to prove that either it or HomEq, its agent, had possession of
both the Schwartz mortgage and promissory note as of May 3, 2011. The note was endorsed in blank,
which gave Deutsche the right to enforce the note. The fact that Deutsche had possession of the
mortgage, however, is irrelevant to its status as mortgagee. While a promissory note endorsed in
blank may be enforced by the party in possession of the note, this is not the case with a mortgage.
“Like a sale of land itself, the assignment of a mortgage is a conveyance of an interest in land that
requires a writing signed by the grantor.” Ibanez, 458 Mass at 649. Deutsche had not received a
written assignment of the mortgage from MERS prior to May 3, 2011. The fact that it had possession
of the mortgage instrument did not render Deutsche the mortgagee and thus it lacked the power to sell
the property.

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Posted in STOP FORECLOSURE FRAUDComments (1)

LEVITIN | Standing to Invoke PSAs as a Foreclosure Defense

LEVITIN | Standing to Invoke PSAs as a Foreclosure Defense


Make sure you catch who signed the assignment of mortgage down below… but ERICA JOHNSON-SECK!

Credit Slips

A major issue arising in foreclosure defense cases is the homeowner’s ability to challenge the foreclosing party’s standing based on noncompliance with securitization documentation. Several courts have held that there is no standing to challenge standing on this basis, most recently the 1st Circuit BAP in Correia v. Deutsche Bank Nat’l Trust Company. (See Abigail Caplovitz Field’s cogent critique of that ruling here.) The basis for these courts’ rulings is that the homeowner isn’t a party to the PSA, so the homeowner has no standing to raise noncompliance with the PSA.

I think that view is plain wrong.  It fails to understand what PSA-based foreclosure defenses are about and to recognize a pair of real and cognizable Article III interests of homeowners:  the right to be protected against duplicative claims and the right to litigate against the real party in interest because of settlement incentives and abilities.

[CREDIT SLIPS]

ERICA JOHNSON-SECK

INDYMAC FED. BANK FSB v. GARCIA | NYSC Vacates Default JDGMT “Robo-Signer, Fraudulent Erica Johnson-Seck Affidavit”

Full Deposition Of ERICA JOHNSON SECK Former Fannie Mae, WSB Employee

[NYSC] Judge Finds Issues With “NOTE AMOUNTS”, Robo Signer “ROGER STOTTS” Affidavit: ONEWEST v. GARCIA

[NYSC] JUDGE SCHACK TAKES ON ROBO-SIGNER ERICA JOHNSON SECK: DEUTSCHE BANK v. MARAJ (1) (64.591)

[NYSC] JUDGE SCHACK TAKES ON ROBO-SIGNER ERICA JOHNSON SECK: DEUTSCHE BANK v. HARRIS (2) (70.24)

[NYSC] JUDGE SCHACK TAKES ON ROBO-SIGNER ERICA JOHNSON SECK: ONEWEST BANK v. DRAYTON (3)

Wall Street Journal: Foreclosure? Not So Fast

ONEWEST BANK ‘ERICA JOHNSON-SECK’ ‘Not more than 30 seconds’ to sign each foreclosure document

INDYMAC’S/ONEWEST FORECLOSURE ‘ROBO-SIGNERS’ SIGNED 24,000 MORTGAGE DOCUMENTS MONTHLY

WM_Deposition_of_Erica_Johnson-Seck_Part_I

Deposition_of_Erica_Johnson-Seck_Part_II

Thank you to Mike Dillon for pointing and providing this crucial piece below

[ipaper docId=61704717 access_key=key-16i71qddg7jbehlsos7g height=600 width=600 /]

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Posted in STOP FORECLOSURE FRAUDComments (1)

FALSE STATEMENTS: Veal v. American Home Mortgage Servicing, BAP No. AZ-10-1055-MkKiJu

FALSE STATEMENTS: Veal v. American Home Mortgage Servicing, BAP No. AZ-10-1055-MkKiJu


By Lynn Szymoniak, ESQ.

False Statements

American Home Mortgage Servicing
DocX, LLC
Lender Processing Services
Sand Canyon Corporation
Wells Fargo Bank, N.A.

Action Date: June 12, 2011
Location: Phoenix, AZ

On June 10, 2011, the U.S. Bankruptcy Appellate Panel of the Ninth Circuit issued an important and lengthy analysis of standing and real-party-in-interest issues in a foreclosure case in Veal v. American Home Mortgage Servicing, BAP No. AZ-10-1055-MkKiJu.

GSF Mortgage Corporation was the original lender in this case. Wells Fargo Bank, as Trustee for Option One Mortgage Loan Trust 2006-3, and its servicer, American Home Mortgage Servicing, Inc., sought to set aside the automatic bankruptcy stay in order to foreclose on the Veals. The note was not endorsed to Wells Fargo or to the trust. As part of their efforts to establish standing, and real-party-in-interest status, Wells Fargo and American Home Mortgage Servicing, the servicer for the Trust, filed a mortgage assignment.

The Assignment was prepared by Docx, LLC in Alpharetta, GA, the document mill made famous by Fraud Digest, then by 60 Minutes, Reuters, The Washington Post, the New York Times, Huffington Post, Firedoglake, Naked Capitalism, Foreclosure Hamlet, 4closure Fraud, Stop Foreclosure Fraud, the Wall Street Journal, and many others. While Docx is now closed, its documents live on in courts and recorders offices across the country.

The Veal Assignment was signed by Tywanna Thomas and Cheryl Thomas who claimed to be officers of Sand Canyon Corporation formerly known as Option One Mortgage. From deposition testimony of Cheryl Thomas, it is known that both Cheryl and Tywanna Thomas were actually employees of Lender Processing Services, the company that owned Docx. There are many different versions of the Tywanna Thomas signature because, as we now know, the employees in Alpharetta forged each other’s names on witnessed and notarized documents.

The Assignment was signed (by someone) on November 10, 2009, but a line on the Assignment right underneath the legal description of the property states:
“Assignment Effective Date 10/13/2009.”

The closing date of the trust was October 27, 2006, almost three years prior to the Assignment effective date. Investors were told the trust would obtain actual Assignments to the Trust of the mortgages pooled in that trust by the closing date.

Dale Sugimoto, the president of Sand Canyon, said in a sworn affidavit on March 18, 2009, filed in the Ron Wilson bankruptcy case in the Eastern District of Louisiana, Case No. 10-51328, Document 52-3, that Sand Canyon does not own any residential mortgages and has no servicing rights.

To summarize:

1. Cheryl Thomas and Tywanna Thomas were not officers of Sand Canyon, as represented on the Assignment. Someone other than Tywanna Thomas and Cheryl Thomas often forged their names.

2. The Veal loan was not transferred to the Option One trust effective October 13, 2009, as represented on the Assignment.

3. Sand Canyon did not own the Veal mortgage and, therefore, had no authority to assign the mortgage to the Option One Trust. The Latin phrase – Nemo dat quod non habit – best covers this situation. Translation: one cannot give what one does not have.

Investors in this Option One trust, the Bankruptcy Judge in the Veal case, bankruptcy trustees with similar documents, homeowners and their lawyers, the SEC, and the Justice Department must all demand answers (and reparations) from the Trustee, the document custodian, the servicer and Lender Processing Servicing.


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Posted in STOP FORECLOSURE FRAUDComments (2)

IN RE VEAL | AZ 9th Circuit BAP “Reverses Stay, Wells Fargo & AHMSI Lack of Standing, PSA Fail, Assignment Fail, UCC Articles 3 & 9 Applied”

IN RE VEAL | AZ 9th Circuit BAP “Reverses Stay, Wells Fargo & AHMSI Lack of Standing, PSA Fail, Assignment Fail, UCC Articles 3 & 9 Applied”


UNITED STATES BANKRUPTCY APPELLATE PANEL
OF THE NINTH CIRCUIT

In re:
HOWARD RICHARD VEAL, JR., and
SHELLI AYESHA VEAL,
Debtors.

HOWARD RICHARD VEAL, JR.;
SHELLI AYESHA VEAL,
Appellants,

v.

AMERICAN HOME MORTGAGE SERVICING,
INC.; WELLS FARGO BANK, N.A., as
Trustee for Option One Mortgage
Loan Trust 2006-3 Asset-Backed
Certificates, Series 2006-3, and
its successor and/or assignees,
Appellees.

Argued and Submitted on June 18, 2010
at Phoenix, Arizona
Filed – June 10, 2011
Appeal From The United States Bankruptcy Court
for the District of Arizona

Honorable Randolph J. Haines, Bankruptcy Judge, Presiding

Before: MARKELL, KIRSCHER and JURY, Bankruptcy Judges.

EXCERPTS:

The Substantive Law Related to Notes Secured by Real Property

Real party in interest analysis requires a determination of the applicable substantive law, since it is that law which defines and specifies the wrong, those aggrieved, and the redress they may receive. 6A Federal Practice and Procedure § 1543, at 480-81 (“In order to apply Rule 17(a)(1) properly, it is necessary to identify the law that created the substantive right being asserted . . . .”). See also id. § 1544.

1. Applicability of UCC Articles 3 and 9
Here, the parties assume that the Uniform Commercial Code (“UCC”) applies to the Note. If correct, then two articles of the UCC potentially apply. If the Note is a negotiable instrument, Article 3 provides rules governing the payment of the obligation represented by and reified in the Note.

[…]

In particular, because it did not show that it or its agent had actual possession of the Note, Wells Fargo could not establish that it was a holder of the Note, or a “person entitled to enforce” the Note. In addition, even if admissible, the final purported assignment of the Mortgage was insufficient under Article 9 to support a conclusion that Wells Fargo holds any interest, ownership or otherwise, in the Note. Put another way, without any evidence tending to show it was a “person entitled to enforce” the Note, or that it has an interest in the Note, Wells Fargo has shown no right to enforce the Mortgage securing the Note. Without these rights, Wells Fargo cannot make the threshold showing of a colorable claim to the Property that would give it prudential standing to seek stay relief or to qualify as a real party in interest.

Accordingly, the bankruptcy court erred when it granted Wells Fargo’s motion for relief from stay, and we must reverse that ruling.

[…]

AHMSI apparently conceded that Wells Fargo held the economic interest in the Note, as it filed the proof of claim asserting that it was Wells Fargo’s authorized agent. Rule 3001(b) permits such assertions, and such assertions often go unchallenged. But here the Veals did not let it pass; they affirmatively questioned AHMSI’s standing. In spite of this challenge, AHMSI presented no evidence showing any agency or other relationship with Wells Fargo and no evidence showing that either AHMSI or Wells Fargo was a “person entitled to enforce” the Note. That failure should have been fatal to its position.

[…]

IV. CONCLUSION

For all of the foregoing reasons, the bankruptcy court’s order granting Wells Fargo’s relief from stay motion is REVERSED, and the order overruling the Veals’ claim objection is VACATED and REMANDED for further proceedings consistent with this opinion.

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MI Trial Court Finds “MERS Transferred Nothing, Purported Transfers, Endorsements or Assignments Are Void Ab Initio” | HENDRICKS v. U.S. BANK

MI Trial Court Finds “MERS Transferred Nothing, Purported Transfers, Endorsements or Assignments Are Void Ab Initio” | HENDRICKS v. U.S. BANK


H/T Michelle

STATE OF MICHIGAN
WASHTENAW COUNTY TRIAL COURT

JAMES HENDRICKS, et al

v.

US BANK NATIONAL ASSOCIATION
AS SUCCESSOR TRUSTEE TO BANK
OF AMERICA


EXCERPT:

The Court finds that the “Assignment”, recored on Decmeber 30, 2009 in the Washtenaw County Register of Deeds, serves to transfer nothing. The alleged conveyance failed to comply with the terms and conditions of the PSA and the New York Trust Law which governs the PSA. The alleged conveyance stated MERS assigned the mortgage and Promissory Note to USB, however, there has been no evidence presented to support the chain of the required assignments and endorsements of the mortgage and note as required by the terms and conditions of the PSA.

[…]

Therefore, the purported transfers, endorsements or assignments are void ab initio or never properly transferred into the trust. The only defendant with standing to proceed is First Franklin, the originator and original Lender of the Note and Mortgage.

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Posted in STOP FORECLOSURE FRAUDComments (1)

THE DEVIL IS IN THE DETAILS: WHEN DID THE TRUST ACQUIRE THE NOTES AND MORTGAGES – A STUDY OF 4,580 FLORIDA ASSIGNMENTS BY Lynn E. Szymoniak

THE DEVIL IS IN THE DETAILS: WHEN DID THE TRUST ACQUIRE THE NOTES AND MORTGAGES – A STUDY OF 4,580 FLORIDA ASSIGNMENTS BY Lynn E. Szymoniak


THE DEVIL IS IN THE DETAILS:
WHEN DID THE TRUST ACQUIRE THE NOTES AND MORTGAGES –
A STUDY OF 4,580 FLORIDA ASSIGNMENTS

BY LYNN E. SZYMONIAK, JUNE 5, 2011


In 2010, mortgage bankers involved with mortgage-backed securities adopted a mantra: “The mortgage follows the note.” Tom Deutsch, Executive Director of the American Securitization Forum (“ASF”), appeared before the U.S. Senate Banking Committee, and in speeches to mortgage bankers, to argue that $7 trillion dollars of securitized mortgage debt was transferred in a legally sound matter.

The mantra became necessary as revelations piled up that mortgages had not been assigned to mortgage-backed trusts in the manner described in the trusts documents. The most important trust document, the “Pooling and Servicing Agreement (“PSA”), spells out in the definitions section that “mortgage file” documents include the promissory note, the mortgage, a mortgage assignment and a title insurance policy. The trusts promised investors that they would obtain these documents for each loan in the pool of loans that make up the trusts.

[…]

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In RE: PHILLIPS | Alabama BK Court Denies Aurora, U.S. Bank Motion to Dismiss Fraud Claims

In RE: PHILLIPS | Alabama BK Court Denies Aurora, U.S. Bank Motion to Dismiss Fraud Claims


UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF ALABAMA

IN RE PHILLIPS

In re: RICK ALLEN PHILLIPS and REBECCA RUTLAND PHILLIPS, Debtors.
RICK ALLEN PHILLIPS
, Plaintiff,

v.

AURORA LOAN SERVICES, LLC and U.S. BANK, AS TRUSTEE FOR STRUCTURED ADJUSTABLE RATE MORTGAGE LOAN TRUST MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 2007-10.

Case No. 08-11442-MAM-7, Adv. Proc. No. 11-00027.

United States Bankruptcy Court, S.D. Alabama.

May 9, 2011.

Mindi C. Robinson, Adams and Reese, LLP, Birmingham, Alabama, Attorneys for Defendants.
Scott Hetrick and Nicholas F. Morisani, Adams and Reese, LLP, Mobile, Alabama, Attorneys for Defendants.

Nick Wooten, Auburn, Alabama, Attorney for Plaintiff.

ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS’ MOTION TO DISMISS ADVERSARY CASE

MARGARET A. MAHONEY, Bankruptcy Judge

This case is before the Court on Defendants’ Motion to Dismiss this adversary case on various grounds. The Court has jurisdiction to hear this matter pursuant to 28 U.S.C. §§ 157 and 1334 and the Order of Reference of the District Court. The Court has the authority to enter a final order pursuant to 28 U.S.C. § 157(b)(2). For the reasons indicated below, the Court is granting the Defendants’ Motion to Dismiss all grounds for relief, except for the fraud on the court grounds.

FACTS

The Plaintiff’s complaint alleges that the documentation of the Phillips’ mortgage and transfer of it were flawed such that the mortgage is avoidable as a preference or fraudulent transfer. The complaint also asserts that the defendants violated the Phillips’ automatic stay and committed a fraud on the Court. The facts that are relevant to this motion are a limited set of the facts alleged in the complaint.

Phillips entered into a note and mortgage with Lehman Brothers Bank, FSB on September 7, 2007, in the amount of $840,000 when he purchased real estate located at 26200 Perdido Beach Boulevard, Condo Unit 1505, Orange Beach, Alabama. The mortgage indicated that the lender was Lehman Brothers Bank, FSB. The mortgage also indicated that Mortgage Electronic Registration Systems, Inc. (“MERS”) was “the mortgagee under this Security Agreement.” The document also stated that MERS was “acting solely as a nominee for Lender and Lender’s successors and assigns.” The note was in the name of Lehman Brothers Bank, FSB as well. The mortgage was recorded in the Baldwin County, Alabama Probate Court records on October 10, 2007. There was no new filing in the Baldwin County Probate Court until July 28, 2009, when an assignment of the mortgage was filed. MERS, “as nominee for Lehman Brothers Bank, FSB,” assigned the mortgage to Aurora Loan Services.

On April 25, 2008, Rick Phillips and his wife filed a chapter 7 bankruptcy petition. On December 30, 2008, Aurora filed a motion for relief from the automatic stay. The motion stated that Aurora was the “holder of the mortgage” and was a “creditor” of Phillips. The motion had a copy of the note and mortgage attached to it. The note stated that Lehman Brothers Bank, FSB was the note holder. The note was not endorsed to any other party or in blank. The mortgage stated that Lehman Brothers Bank, FSB, was the lender with MERS being the “mortgagee under this Security Instrument” and stating that MERS was “acting solely as a nominee for Lender and Lender’s successors and assigns.” Neither the Debtor nor the Trustee objected to the standing of Aurora to seek relief from the stay. In fact, an order to which the Debtor and Trustee consented was entered on February 12, 2009.

There are other facts asserted in the complaint about the mortgage. U.S. Bank had purchased the note and mortgage of Phillips on or about October 30, 2007, and placed the mortgage in a securitized trust of which U.S. Bank was trustee. Aurora was named servicer for U.S. Bank about the same date. The complaint also states that the mortgage was assigned to U.S. Bank in the MERS system of recordation on about October 1, 2007. These facts support Phillips’ claims in the complaint.

LAW

The complaint asserts that Phillips is entitled to: have the mortgage declared null and void as a fraudulent transfer due to 11 U.S.C. § 544(a)(3); have the transfer of funds to U.S. Bank at foreclosure declared a preference under 11 U.S.C. § 547 and have the funds turned over to the trustee; have the foreclosure and transfer of funds to U.S. Bank declared a violation of the automatic stay pursuant to 11 U.S.C. § 362; have the actions of Aurora and U.S. Bank declared a fraud on the court; and have this court quiet title to the property, declaring title to be in the bankruptcy estate of Phillips. The defendants have filed a motion to dismiss prior to answering the complaint as is their right pursuant to Fed. R. Bank. P. 7012.

To survive a motion to dismiss for failure to state a claim upon which relief can be granted, a complaint must contain sufficient factual allegations such that it raises a right to relief above the speculative level. See Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007). In assessing the merits of a Rule 12(b)(6) motion, the Court must assume that all factual allegations set forth in the complaint are true. See, e.g. Swierkiewicz v. Sorema N. A., 534 U.S. 506, 508 n.1 (2002). Because all factual allegations are taken as true, the failure to state a claim for relief presents a purely legal question. Sinaltrainal v. Coca-Cola Co., 578 F.3d 1252, 1269 n.19 (11th Cir. 2009).

The defendants assert four grounds upon which the complaint should be dismissed. The grounds are res judicata, judicial estoppel, the fact that Aurora was a creditor, and the fact that the defendants could not have violated the stay. The court concludes that res judicata eliminates all grounds except fraud on the court and therefore Counts One, Two, Three and Five are due to be dismissed.

“Application of res judicata is central to the fundamental purpose of the judiciary — the conclusive resolution of disputes.” Curry v. Baker, 802 F.2d 1302, 1310 (11th Cir. 1986) (citing Montana v. United States, 440 U.S. 147, 153 (1979)). “Finality `relieve[s] parties of the cost and vexation of multiple lawsuits, conserve[s] judicial resources, and, by preventing inconsistent decisions, encourage[s] reliance on adjudication.'” Id. (quoting Allen v. McCurry, 449 U.S. 90, 94 (1980)). “Under res judicata, also known as claim preclusion, a final judgment on the merits bars the parties to a prior action from re-litigating a cause of action that was or could have been raised in that action.” In re Piper Aircraft Corp., 244 F.3d 1289, 1296 (11th Cir. 2001). Claim preclusion bars subsequent litigation when the following conditions are met: (1) the prior decision was rendered by a court of competent jurisdiction; (2) there was a final judgment on the merits; (3) both cases involve the same parties or their privies; and (4) both cases involve the same causes of action. Id. “In general, cases involve the same cause of action for purposes of res judicata if the present case `arises out of the same nucleus of operative fact, or is based upon the same factual predicate, as a former action.” Israel Discount Bank, Ltd. v. Entin, 951 F.2d 311, 315 (11th Cir. 1992) (quoting Citibank, N.A. v. Data Lease Fin. Corp., 904 F.2d 1498, 1503 (11th Cir. 1990)).

With regards to the Relief from Stay Order that was entered on February 12, 2008, this Court’s jurisdiction was proper under 28 U.S.C. §§ 157 and 1334 and the Order of Reference of the District Court. The order was entered by consent of the parties and, following entry of that order, no party filed a motion to reconsider. The Consent Order Granting Relief from Stay was a final order. The Motion for Relief from Stay lists the Phillips as debtors and Ms. Littleton as the Trustee. All parties received notice of the motion and the mortgage and note were attached to the motion. Neither the Phillips nor the Trustee raised any objection, rather, the stay was lifted by agreement of the parties. The Plaintiff now brings a complaint seeking to avoid the mortgage, quiet title, and turnover the funds liquidated. Permitting such a challenge to go forward would violate the doctrine of res judicata because each of the elements of claim preclusion have been met in this case. The proper time for the Plaintiff to question the mortgage and note was when the Relief from Stay Motion was filed. However, no one challenged or questioned the mortgage and note at that time. It would be improper to permit them to relitigate those issues now.

With regards to Count Four of the Plaintiff’s complaint alleging Fraud on the Court, that issue has not been previously litigated. The complaint alleges that the Defendants filed false pleadings concealing the true mortgage creditor’s identity, thereby violating the bankruptcy rules and perpetrating a fraud on the court. Inappropriate behavior, including litigation abuse and fraud, can be dealt with by a bankruptcy court pursuant to § 105 of the Code as an “abuse of the bankruptcy process.” Under § 105, sanctions may be warranted against parties who willfully abuse the judicial process. In re Gorshtein, 285 B.R. 118 (Bankr. S.D.N.Y. 2002). This power is broad enough to empower a court to impose sanctions for “filings [in a case] as well as commencement or continuation of an action in bad faith.” Id. (citing In re Spectee Group, Inc., 185 B.R. 146, 155 (Bankr. S.D.N.Y. 1995). Taking the Plaintiff’s factual allegations as true, Aurora claimed in the motion for relief from stay to be a creditor and the holder of the mortgage. There is no document that supports those assertions other than a statement in a Pooling and Servicing Agreement filed with the SEC. This allegation of filing a false pleading is sufficient to raise a right to relief above a speculative level in that the Plaintiff has stated a claim for fraud on the court. The motion for dismissal is due to be denied with regards to Count Four of the complaint.

Therefore it is ORDERED:

1. The Defendants’ Motion to Dismiss as to counts one, two, three, and five is GRANTED;
2. The Defendants’ Motion to Dismiss as to count four is DENIED.

Copy courtesy of LEAGLE

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Full Deposition Transcript of ROY DIAZ Shareholder of Smith, Hiatt & Diaz, P.A. Law Firm

Full Deposition Transcript of ROY DIAZ Shareholder of Smith, Hiatt & Diaz, P.A. Law Firm


Excerpts:

Q. So through that corporate authority as
Exhibit 4 to this deposition, MERS assented to the terms
Of this assignment of mortgage?

A. Through me.

Q. So it was you that assented to the terms of
This assignment of mortgage.

A. The one in this case, yes.

Q. And no one else.

A. Correct

Q. And you signed as vice president of MERS
acting solely as a nominee for America’s Wholesale
Lender; is that correct?

A. Yes, it is.

Q. How did you know that MERS was nominee for
America’s Wholesale Lender?

A. By reviewing documentation.

Q. What documentation?

A. I don’t specifically recall what I reviewed
In this case to see that, to determine that, but I would
have reviewed either the mortgage or I would have
reviewed other documentation that would have established
that to me.

Q. So in this case you don’t remember a single
Document that you looked at that would establish the
Nominee status of MERS for America’s Wholesale Lenders;
Is that correct?

A. I don’t

Q. Did someone at America’s Wholesale Lender
Tell you that MERS was acting as the nominee?

A. No.

Q. Did someone at MERS tell you they were
Acting as Nominee for America’s Wholesale Lender?

A. NO.

Q. Was America’s Wholesale Lender in existence
On May 19, 2010?

A. don’t now.

Q. Did you check that before signing this
assignment of mortgage?

A. No.

<SNIP>

Q. Now, you’ve said you review the MERS
Website and you’ve seen documents like this, like
Composite Exhibit 6. Any reason why you wouldn’t review
the documents contained in Exhibit 6 before executing the
assignment of mortgage?

A. It’s not necessary.

Q. Why not?

A. Because it’s not. Because I decided it’s
not.

Q. You as vice president of MERS?

A. In every possible capacity as it relates to
This case.

Q. Did you sign this assignment of mortgage
after being retained as counsel for the plaintiff?

A. After my law firm was retained?

Q. (Nods head.)

A. Is that the question?

Q. Sure.

A. Yes.

Q. Okay. So you executed an assignment to be
Used as evidence in your case, correct?

A. Sure.

Q. Is that a yes?

A. It’s a sure.

Q. Is that a yes o a no?

A. You said sure earlier. Was that a yes or a
No?

Q. Okay. So…

A. It’s a yes.

Q. It’s a yes.

And were you aware when you signed the
assignment of mortgage that MERS was a defendant in this
Case?

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Adam Levitin’s Amicus Brief in CMBS Deal | La VILLITA MOTOR INNS v. ORIX CAPITAL MARKETS

Adam Levitin’s Amicus Brief in CMBS Deal | La VILLITA MOTOR INNS v. ORIX CAPITAL MARKETS


Could this be the Ibanez of CMBS?

AMICUS BRIEF IN SUPPORT OF APPELLANT’S PETITION FOR REVIEW

La Villita Motor Inns, J.V., Executive Motels of San Antonio, Inc., and S.A. Sunvest
Hotels, Inc
.

Appellant,

v.

Orix Capital Markets, LLC, Bank of America, N.A. LNR Partners, Inc., Capmark
Finance, Inc., Nicholas M. Pyka as Trustee, Michael N. Blue as Trustee, and Greta E.
Goldsby as Trustee
,

Appellees.

Excerpt:

INTRODUCTION

This case involves a controversy about mortgage servicing. Mortgage servicing is the administration of mortgage loans—the collection of payments and management of defaults—on behalf of third parties. Mortgage servicing is an essential component of mortgage securitization, which is the predominant method for financing commercial mortgages in major metropolitan markets and for financing residential mortgages nationwide.

Continue reading below…

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MA BK Judge Vacates Own Ruling “MERS Assignment Fail, Securitization Fail, Deutsche Was NOT Owner of Mortgage” IN RE: SCHWARTZ

MA BK Judge Vacates Own Ruling “MERS Assignment Fail, Securitization Fail, Deutsche Was NOT Owner of Mortgage” IN RE: SCHWARTZ


Ibanez, 458 Mass. at 651 (emphasis added). None of the evidence thus far presented at trial indicated that the plaintiff’s mortgage was part of the Trust Fund, or how the Depositor acquired the Trust Fund.

In re: SIMA SCHWARTZ, Debtor.

SIMA SCHWARTZ, Plaintiff,

v.

HOMEQ SERVICING, AGENT FOR DEUTSCHE BANK NATIONAL TRUST COMPANY, AS TRUSTEE and DEUTSCHE BANK NATIONAL COMPANY, AS TRUSTEE, Defendants.

Case No. 06-42476-MSH, Adv. Pro. No. 07-04098.

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

April 7, 2011.

MEMORANDUM AND ORDER ON PLAINTIFF?S MOTION FOR A NEW TRIAL

Excerpt:

A central question at trial was whether defendant Deutsche was the owner of the mortgage on the plaintiff’s home during the foreclosure process which resulted in the foreclosure sale of the home on May 24, 2006.2 The plaintiff introduced into evidence a document entitled “Assignment of Mortgage” dated May 23, 2006, which reflected the assignment of the plaintiff’s mortgage from the original mortgagee, Mortgage Electronic Registration Systems, Inc., as nominee for First NCL Financial Services, LLC, to defendant Deutsche. During the plaintiff’s case, all parties agreed that this assignment was dated prior to the date of the foreclosure sale. No party disputed its authenticity or validity. Because the assignment was executed prior to the foreclosure sale and its validity was not questioned, I ruled at trial that the plaintiff had failed to carry her burden of proving that Deutsche was not the owner of the mortgage when it foreclosed.

In her motion for a new trial, the plaintiff argues that I misconstrued Massachusetts law, pointing out that the Massachusetts Supreme Judicial Court in U.S. Bank. Nat’l Ass’n v. Ibanez, 458 Mass. 673, 941 N.E.2d 40 (2011) recently held that in order for a foreclosure sale to be valid the mortgage must have been assigned to the foreclosing entity not merely before the sale, but prior to the first publication of notice of that sale required by Mass. Gen. Laws. ch. 244, § 14. Ibanez, 458 Mass. at 647-48. I agree with the plaintiff’s interpretation of Ibanez and since the May 23, 2006 assignment was executed after the foreclosure notices had been published, I could not rely on the assignment exclusively in granting the defendants judgment on partial findings. In light of the foregoing I must determine whether and to what extent to open the March 6, 2011 judgment for the defendants.

In Count I of the complaint, the plaintiff seeks a ruling that the foreclosure sale was invalid. Not only does the March 23, 2006 assignment fail to establish the validity of the foreclosure sale, it constitutes the only evidence presented that at the time Deutsche began publishing notice of the sale, Deutsche was not the holder of the mortgage. The defendants argue that the pooling and servicing agreement dated November 1, 2005 which is listed in the joint pretrial  memorandum as a trial exhibit provides evidence that the mortgage on the plaintiff’s property was assigned to Deutsche well before the foreclosure process had begun. The excerpt of the pooling and servicing agreement that was admitted during the plaintiff’s case in chief, however, provides no such evidence. The excerpt indicates that an entity defined as the “Depositor” assigned the “Trust Fund”, which I presume included mortgages listed on a mortgage loan schedule not provided, to Deutsche, as Trustee for the benefit of the certificateholders of the Morgan Stanley Home Equity Loan Trust 2005-4. In Ibanez, the Supreme Judicial Court held that where, as here, a recordable assignment was not executed prior to the first publication of a notice of a foreclosure sale, the foreclosing entity may nevertheless prove that it was the mortgagee at the relevant time. The Court observed:

[w]here a pool of mortgages is assigned to a securitized trust, the executed agreement that assigns the pool of mortgages, with a schedule of the pooled mortgage loans that clearly and specifically identifies the mortgage at issue as among those assigned, may suffice to establish the trustee as the mortgage holder. However, there must be proof that the assignment was made by a party that itself held the mortgage.

Ibanez, 458 Mass. at 651 (emphasis added). None of the evidence thus far presented at trial indicated that the plaintiff’s mortgage was part of the Trust Fund, or how the Depositor acquired the Trust Fund.

I find that the plaintiff has presented sufficient evidence of the chain of title of the mortgage on her property to carry her burden of persuasion that the mortgage was not owned by Deutsche before the first publication of the notice of foreclosure sale. I must, therefore, vacate and open the judgment for the defendants on Count I of the complaint.

Continue below:

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DailyFinance | COURT: Busted Securitization Prevents Foreclosure

DailyFinance | COURT: Busted Securitization Prevents Foreclosure


On March 30, an Alabama judge issued a short, conclusory order that stopped foreclosure on the home of a beleaguered family, and also prevents the same bank in the case from trying to foreclose against that couple, ever again. This may not seem like big news — but upon review of the underlying documents, the extraordinarily important nature of the decision and the case becomes obvious.

No Securitization, No Foreclosure



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Ka-B°oO°M!!! Alabama Judge Denies Securitization Trustee Standing To Foreclose HORACE v. LaSALLE BANK NA

Ka-B°oO°M!!! Alabama Judge Denies Securitization Trustee Standing To Foreclose HORACE v. LaSALLE BANK NA


Attorney Nick Wooten does it again and again!

PHYLLIS HORACE

v.

LASALLE BANK NATIONAL
ASSOCIATION, et al

EXCERPT:

ORDERED, ADJUDGED, AND DECREED:

Following hearing and review of all submissions from the parties the Court has come to two conclusions necessary for the disposition of this case:

First, the Court is surprised to the point of astonishment that the defendant trust (LaSalle Bank National Association) did not comply with the terms of it’s own Pooling and Servicing Agreement and further did not comply with the New York Law in attempting to obtain assignment of plaintiff Horac’s note and mortgage.

Second, the plaintiff Horace is a third party beneficiary of the Pooling and Servicing Agreement created by the defendant trust (Lasalle Bank National Association). Indeed without such Pooling and Servicing Agreements, plaintiff Horace and other mortgages similarly situated would never have been able to obtain financing.

[…]

Continue below…

[Full Docs]

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Deposition Transcript of SELECT PORTFOLIO SERVICING (SPS) MINDY LEETHAM

Deposition Transcript of SELECT PORTFOLIO SERVICING (SPS) MINDY LEETHAM


EXCERPTS:

Q Have you reviewed the Pooling and
Servicing Agreement in this case?
A No, I haven’t.
Q It’s my understanding I believe it was
objected to being produced. So up till today, have
you reviewed any document that allows you to speak
on behalf of Bank of New York?
A I haven’t.
Q Have you spoken to anyone at Bank of New
York to confirm that you are allowed to speak on
behalf of a separate corporate entity here today?
A No.

Q So as you sit here, do you know whether
you have the authority from the Bank of New York to
testify to these matters and to bind the Bank of New
York as a corporation?
A No.

Q Okay. And let me go back before I get
into the question one. You are not an officer of
the Bank of New York, correct?
A That’s correct.
Q You’re not a director of the Bank of New
York?
A Correct.
Q You’re not a managing agent of the Bank of
New York?
A Correct.

<SNIP>

Q What I’m getting at is the ownership of
the actual note and mortgage, not the servicing, but
the ownership. Do you have any other document that
would either confirm or contest whether

NationsCredit Mortgage Corporation of Florida owned
this note and mortgage in order to assign it as set
forth in Exhibit 2?
A Not that I know of

<SNIP>

Q So again, do you have anything at all that
suggests that NationsCredit Home Equity Services
Corporation ever owned this note?
A I don’t.

<SNIP>

Q Do you agree that the Bank of New York
lacked standing to file the 2004 case?
A Can you be more specific on your question?
Q Do you agree that the Bank of New York did
not own the note and mortgage at the time it filed
the 2004 case?
A Well, I can say that there’s no recorded
document showing that date.

<SNIP>


Q Do you agree that the lack of standing was clear?
A No.
Q Why not?
A Because of the overlapping of dates and
the obvious issues with the assignment chain, it’s not clear that it was straightforward.

Continue below…
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BOMBSHELL | Affidavit of Professor Ira Mark Bloom for U.S. Bank v. Congress

BOMBSHELL | Affidavit of Professor Ira Mark Bloom for U.S. Bank v. Congress


Affidavit of Professor Ira Mark Bloom for U.S. Bank v. Congress

A Must Read…

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L. RANDALL WRAY: Nightmare on Wall Street

L. RANDALL WRAY: Nightmare on Wall Street


L. Randall Wray

Professor of Economics and Research Director of the Center for Full Employment and Price Stability, University of Missouri–Kansas City
Posted: January 12, 2011 10:30 AM

In a ruling that could be historic, the Supreme Judicial Court of Massachusetts ruled against two fraudster banks, US Bancorp and Wells Fargo, who illegally foreclosed on homes. In short, the two banks stole homes to which they had no legal claim.

This rattled stock markets, causing the broad-based KBW Bank Index to fall by 2.2%, with Wells Fargo’s stock prices falling by 3.4% as markets began to recognize that “business as usual” theft of American homes by banksters will be subject to greater scrutiny. Tellingly, the banks have been arguing that they are following industry practice. The ruling in Massachusetts (one of the most respected Supreme Courts in the US) affirms that industry practice is fraudulent. Perhaps as many as 66 million mortgages (those tainted by improper industry recording procedures) could be affected by the ruling.

As I have been arguing in a series of pieces (see here and here and here), in their haste to commit lender fraud, the banks that securitized mortgages also perpetrated tax fraud and securities fraud. The inevitable outcome of those frauds is foreclosure fraud. As Lynn Szymoniak and Ray Brown have written, 2010 became the year in which “‘foreclosure fraud’ emerged in case law’ — defined as ‘fraud by mortgage companies, mortgage servicing companies, and banks servicing as trustees for securitized trusts.” Foreclosure fraud is not a matter of some pesky little paperwork problems. It is the designated solution to paper-over the lending and securities and tax frauds that the banksters used to bubble-up and then collapse the US real estate sector. To put it simply, the Court found that the practices followed by the industry have made legal foreclosure impossible.



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DAVIES ADVERSARY COMPLAINT VS. DEUTSCHE BANK NATIONAL TRUST COMPANY AS TRUSTEE OF RAST 2007-A5

DAVIES ADVERSARY COMPLAINT VS. DEUTSCHE BANK NATIONAL TRUST COMPANY AS TRUSTEE OF RAST 2007-A5


WOW look at all the pages!

Via: Brian Davies

FULL FILED ADVERSARY AGAINST DEUTSCHE BANK NATIONAL TRUST COMPANY BY PAUL NGUYEN, FILED CONCURRENTLY WITH RJN 1 PROSPECTUS AND POOLING AND SERVICING AGREEMENT, RJN 2 LAND TITLE RECORDS

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FL APPEALS 5th DCA REVERSAL “Race-Notice, Unrecorded Instrument” ARGENT v. WACHOVIA

FL APPEALS 5th DCA REVERSAL “Race-Notice, Unrecorded Instrument” ARGENT v. WACHOVIA


ARGENT MORTGAGE COMPANY, LLC, Appellant,
v.
WACHOVIA BANK N.A., ETC., Appellee.

Case No. 5D09-4014.

District Court of Appeal of Florida, Fifth District.

Opinion filed December 30, 2010.

Jeffrey R. Dollinger, of Scruggs & Carmichael, P.A., Gainesville, for Appellant.
W. David Vaughn, of W. David Vaughn, P.A., Jacksonville, for Appellee.

GRIFFIN, J.
Argent Mortgage Company, LLC [“Argent”] appeals the trial court’s entry of judgment in favor of Wachovia Bank National Association, as Trustee Under Pooling and Servicing Agreement Dated as of November 1, 2004, Asset Backed Pass-Through Certificates Series 2004-WWF1 [“Wachovia”]. Argent argues that the trial court erred by finding that the mortgage now owned by Wachovia has priority over Argent’s mortgage. We reverse.
Continue reading below…

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Time to Audit the Remic Trusts

Time to Audit the Remic Trusts


By L. Randall Wray
Benzinga Columnist
December 23, 2010 12:43 PM

As I have written, when we peel back the layers of the real estate “onion” what we find is layer after layer of fraud. From the mortgage brokers to the appraisers and lenders, from the securitizers to the ratings agencies and accountants, from the trustees to the servicers, and from MERS (Mortgage Electronic Registry System) through to the foreclosures, what we find is a massive criminal conspiracy—probably the worst in human history. I realize that is a harsh claim but I cannot find any other words that fit.

In the old days, we used to hang horse thieves. The justification was that a man’s horse was necessary to his way of life, and in some cases, to his very survival. There can be little doubt that a home is equally important to maintenance of a middle class living standard today for most Americans. There is almost no calamity worse than loss of one’s home. It is the main asset that most Americans hold—essential to the educational success of one’s children, and to a comfortable retirement of our citizens. Americans typically borrow against their home equity to put their kids through college, to ease the financial distress caused by unexpected health care expenses, and to finance other large expenditures. The accumulated equity in the home is the only significant source of wealth for the vast majority of Americans. The home is necessary to one’s continuing connection to the neighborhood, school district, and network of friends. Theft of one’s house today is certainly equivalent to theft of a horse 150 years ago.

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GARY DUBIN LAW OFFICES FORECLOSURE DEFENSE HAWAII and CALIFORNIA
Advertise your business on StopForeclosureFraud.com
Kenneth Eric Trent, www.ForeclosureDestroyer.com

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