Rescission | FORECLOSURE FRAUD | by DinSFLA

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In Re: CROMWELL: Mass. BK Court “Consumer Credit Cost Disclosure Act, Notice of Right to Cancel, Truth in Lending Act”

In Re: CROMWELL: Mass. BK Court “Consumer Credit Cost Disclosure Act, Notice of Right to Cancel, Truth in Lending Act”


UNITED STATES BANKRUPTCY COURT
DISTRICT OF MASSACHUSETTS
EASTERN DIVISION

IN RE:
DOUGLAS CROMWELL, JR. AND
MARY CROMWELL,
DEBTORS.
___________________________________
DOUGLAS CROMWELL JR. AND
MARY CROMWELL,
PLAINTIFFS,

v.

COUNTRYWIDE HOME LOANS, INC.
AND MORTGAGE ELECTRONIC
REGISTRATION SYSTEMS, INC.,
DEFENDANTS.
__________________________

MEMORANDUM OF DECISION

I. INTRODUCTION
The matters before the Court are the Second Amended Complaint (the “Complaint”) filed
by Douglas Cromwell, Jr., and Mary Cromwell (collectively, the “Debtors”) against
Countrywide Home Loans, Inc. (“Countrywide”) and Mortgage Electronic Registration Systems,
Inc. (“MERS”) (jointly, the “Defendants”) alleging violations of the Massachusetts Consumer
Credit Cost Disclosure Act1 (the “CCCDA”), as well as the Debtors’ Objection to Proof of Claim
filed by Countrywide Home Loans, Inc. (the “Objection to Claim”) and the Objection to
Confirmation of Second Amended Chapter 13 Plan (the “Objection to Confirmation”) filed by
Countrywide. Through their Complaint, the Debtors seek, inter alia, rescission of a refinancing
transaction and a declaration that the mortgage granted by them to MERS, as nominee for
Countrywide, is void and that they have no tender obligation as a condition to effectuate the
rescission.2 In the Objection to Claim, they, in turn, contend that Countrywide’s claim is now
unsecured in light of the Debtors’ purported rescission. The Defendants dispute the Debtors’
allegations in the Complaint and object to the Debtors’ Chapter 13 plan on the basis that they
propose to treat Countrywide’s claim as unsecured. For the reasons set forth below, I will enter
judgment in favor of the Debtors and order them to file a fee application within thirty days,
sustain the Objection to Claim, and overrule the Objection to Confirmation.3

[…]

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

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


JOSE TELLADO AND MARIA TELLADO, Plaintiffs,

v.


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

Civil Action No. 09-5022.

United States District Court, E.D. Pennsylvania.

August 8, 2011.

MEMORANDUM

PETRESE B. TUCKER, District Judge.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

21. Plaintiffs seek:

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

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

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

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

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

Conclusions of Law

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

4. Relief granted to Plaintiffs shall be as follows:

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

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

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

An appropriate order follows.

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DEUTSCHE v. PELLETIER | Maine Supreme Judicial Court Affirms JGMT “Ameriquest, Rescission, TILA, RESPA”

DEUTSCHE v. PELLETIER | Maine Supreme Judicial Court Affirms JGMT “Ameriquest, Rescission, TILA, RESPA”


MAINE SUPREME JUDICIAL COURT

DEUTSCHE BANK NATIONAL TRUST COMPANY, AS TRUSTEE, IN
TRUST FOR THE REGISTERED HOLDERS OF AMERIQUEST MORTGAGE
SECURITIES INC., ASSET-BACKED PASS-THROUGH CERTIFICATES,
SERIES 2006-R2

v.

DONALD P. PELLETIER et al.

EXCERPT:

[¶13] Although the Pelletiers have not yet tendered to the bank the proceeds
of the loan that they received from Ameriquest, the statute specifies that tender is
not required until the creditor has performed its obligations under the law.
15 U.S.C.S. § 1635(b). The facts established in this summary judgment record
indicate that the creditor—the bank—has not yet performed its obligation to
“return to the obligor any money or property given as earnest money,
downpayment, or otherwise.” Id. Thus, the Pelletiers were not yet required to
tender the proceeds to the bank, and the court did not err in imposing the remedy of
rescission on summary judgment. Further proceedings are necessary, however, to
define the scope of that remedy. Because the parties have not followed the process
specified by statute with precision and clarity, the court may “otherwise order[]”
appropriate procedures to give effect to the remedy of rescission. Id. Accordingly,
although we affirm the court’s judgment granting the Pelletiers’ request for
rescission, we remand the matter for the court to determine how this rescission
should be effectuated.

The entry is:

Summary judgment for the Pelletiers on the
foreclosure complaint affirmed. Remanded for
further proceedings to effectuate the rescission of
the January 18, 2006, agreements.

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ILLINOIS Judge Not Clear, “Discovery IS Necessary On Rescission Claims” STEWART v. BAC, DEUTSCHE BANK, MERS

ILLINOIS Judge Not Clear, “Discovery IS Necessary On Rescission Claims” STEWART v. BAC, DEUTSCHE BANK, MERS


ELLIE STEWART, Plaintiff,
v.
BAC HOME LOANS SERVICING, LP, DEUTSCHE BANK NATIONAL TRUST CO., and MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC., Defendants.

Case No. 10 C 2033.

United States District Court, N.D. Illinois, Eastern Division.

March 10, 2011.

MEMORANDUM OPINION AND ORDER

VIRGINIA M. KENDALL, District Judge.

On April 1, 2010, plaintiff Ellie Stewart (“Stewart”) filed the current complaint against Defendants BAC Home Loans Servicing (“BAC”), Deutsche Bank National Trust Company (“Deutsche Bank”) and Mortgage Electronic Registration Systems (“MERS”) (together, “Defendants”) alleging violations of the Truth In Lending Act (“TILA”) (15 U.S.C. §§ 1601-1667f) and its implementing regulation, 12 C.F.R. § 226 (“Regulation Z”), and demanded rescission of the mortgage on her residence.

Defendants moved to dismiss the Complaint, asserting BAC and MERS are improper defendants under TILA, the Complaint is time-barred and the Complaint fails to state a claim. For the reasons stated below, Defendants’ motion is granted in part and denied in part. The Court dismisses Stewart’s failure to disclose claim because it is untimely, but denies dismissal of Stewart’s rescission claim. The motion to dismiss is denied with regard to the failure to honor rescission claim against defendants Deutsche Bank and BAC.

I. BACKGROUND

A. Complaint Allegations.

Stewart owns her residence in Chicago, Illinois. (Compl., Doc. 1, ¶ 4.) On October 24, 2006, Stewart refinanced her mortgage on this residence through Home 123 Corporation (“Home 123”). (Compl. ¶¶ 5-8, 10.) Home 123 filed for Chapter 11 bankruptcy in April 2007 and Deutsche Bank is the current assignee of this loan. (Compl. ¶¶ 5, 8, 21.) BAC services this loan and MERS is the nominee. (Compl. ¶¶ 7-9; Ex. C.)

This case stems from a dispute concerning the documentation provided at the closing of Stewart’s refinance back in 2006. Stewart alleges that Home 123 violated TILA twice in regards to these documents. First, she claims that Home 123 did not provide her with a copy of the Notice of Right to Cancel (“NORTC”). (Compl. ¶¶ 19-20.) Second, she claims that Home 123 provided a Truth in Lending Disclosure Statement (“TILDS”) that was incomplete because it did not include the timing of the required loan payments. (Compl. ¶¶ 17-18.)

Due to these deficiencies, on October 14, 2009, Stewart’s attorneys sent a letter entitled “Notice of Rescission and Lien” to Home 123 and BAC. (Compl. ¶ 23.) The letter stated that “Ms. Stewart hereby elects to cancel the loan of October 24, 2006 for failure to comply with the Truth In Lending Act,” and specified that Home 123 failed to provide the NORTC and a complete TILDS. (See Doc. 23-1.) The letter also demanded the identity of the owner of the mortgage. (Id.) On January 26, 2010, BAC sent a letter to Stewart which denied her rescission claim. (See Doc. 23-2.) BAC asserted that Stewart’s right to rescind had expired and attached copies of the NORTC and TILDS purportedly signed by Stewart and dated October 24, 2006. (Id.)

B. Procedural History.

On April 1, 2010, Stewart filed this suit and it was assigned to Judge Harry Leinenweber. Defendants filed the present motion to dismiss on August 11 and briefing was completed on October 5. On October 28, Judge Leinenweber requested that the parties provide a copy of Stewart’s rescission letter and submit a supplemental brief addressing whether Stewart’s election to rescind constituted proper notice to Deutsche Bank as assignee of Home 123. Supplemental briefing was completed on November 8. The case was transferred to this Court on December 8.

II. LEGAL STANDARD

A motion to dismiss should be granted if the complaint fails to satisfy Rule 8’s pleading requirement of “a short and plain statement of the claim showing that the pleader is entitled to relief.” Fed. R. Civ. P. 8. “To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to `state a claim to relief that is plausible on its face.'” Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)); see also Tamayo v. Blagojevich, 536 F.3d 1074, 1081 (7th Cir. 2008) (holding well-leaded allegation of the complaint must be accepted as true).

Although a complaint does not need detailed factual allegations, it must provide the grounds of the claimant’s entitlement to relief, contain more than labels, conclusions, or formulaic recitations of the elements of a cause of action, and allege enough to raise a right to relief above the speculative level. Twombly, 550 U.S. at 555. Legal conclusions can provide a complaint’s framework, but unless well-pleaded factual allegations move the claims from conceivable to plausible, they are insufficient to state a claim. Iqbal, 129 S. Ct. at 1950-51.

III. DISCUSSION

The complaint has three core claims. First, Stewart claims that Home 123 violated TILA by failing to provide her with the NORTC and a complete TILDS. For this “failure to disclose” claim, Stewart seeks statutory damages of $4,000 from Deutsche Bank as Home 123’s assignee. (Doc. 1, Prayer for Relief.) Second, Stewart seeks recession of the loan based on this disclosure violation. For this “loan rescission” claim, Stewart seeks a judgment forcing Defendants to void the loan and return her to the position she occupied before entering into the mortgage. (Id.) Third, Stewart alleges that Defendants failed to honor her election to rescind, which is itself a violation of TILA. For this “failure to honor rescission” claim, Stewart seeks actual damages and statutory damages of $4,000 from Defendants. As an additional remedy for all three claims, Stewart seeks an order requiring Defendants to delete all adverse credit information relating to the loan. (Id.)

The present motion presents four legal issues that need to be resolved to determine which, if any, of these three claims may stand. First, Defendants seek to dismiss BAC and MERS, asserting that servicers and nominees are improper defendants in a TILA action. Turning to Stewart’s individual claims, Defendants argue that the failure to disclose claim is barred by a one year statute of limitations because the alleged violation occurred over three years ago. Next, Defendants assert that the rescission claim is barred by a three-year statute of repose because the loan closed on October 24, 2006 but this suit was not filed until April 1, 2010. Finally, Defendants argue that the failure to honor rescission claim fails because assignees are not liable for TILA violations which are not apparent on the face of the loan disclosures.

A. Liability of MERS and BAC Under TILA.

Only creditors and assignees are subject to liability under TILA. See 15 U.S.C. §§ 1640, 1641(a). Stewart acknowledges that MERS is not a creditor or assignee. (See Doc. 15 at 4).[1] Therefore, MERS is not subject to damages under TILA and Stewarts’ failure to disclose and failure to honor rescission damages claims against MERS are dismissed. See 15 U.S.C. §§ 1640, 1641(a); see also Horton v. Country Mortg. Servs., Inc., No. 07 C 6530, 2010 U.S. Dist. LEXIS 67, at *3 (N.D. Ill. Jan 4, 2010) (granting summary judgment to MERS because the plaintiff provided no evidence that MERS was a creditor or assignee). Stewart claims MERS is still a proper party based on the non-monetary relief requested in connection with the rescission. Stewart seeks an order “voiding” her mortgage, (see Doc. 1 at Prayer) and, according to her, “this Court may directly order MERS to record a release or take other actions in connection with the mortgage document that was recorded.” (Doc. 15 at 4.)

The Court notes that courts in this District are split on whether such a party, usually a servicer, may be kept in a case based on such contingent, or future, relief. Compare Miranda v. Universal Fin. Grp., Inc., 459 F. Supp. 2d 760, 765-66 (N.D. Ill. 2006) (denying dismissal of loan servicer as an indispensable party under Rule 19 because a rescission would require return of payments made on the loan and “could impair the borrower’s ability to fully protect his or her interest in rescinding the loan because the servicer could improperly report to credit bureaus”) with Bills v. BNC Mort., Inc., 502 F. Supp. 2d 773, 776 (N.D. Ill. 2007) (finding “a concern that [the servicer] might thereafter engage in improper reporting to the credit agencies or attempt to foreclose on a rescinded loan is purely speculative and does not warrant retaining [the servicer] as a defendant”). The Court agrees with Miranda and the cases it cites because they appear more consistent with the Seventh Circuit’s holding in Handy v. Anchor Mortgage Corporation, 464 F.3d 760, 765-66 (7th Cir. 2006). There, the Seventh Circuit held “more generally . . . the right to rescission `encompasses a right to return to the status quo that existed before the loan.'” Id. (internal citation omitted). Handy makes clear that rescission under TILA entirely unwinds the transaction. Because Stewart alleges, albeit generally, that MERS may be necessary to get her back to that status quo if her rescission is enforced by the Court, MERS cannot be dismissed entirely at this time. Rather, Stewart’s rescission claim stands as to MERS.

As to defendant BAC, TILA expressly disclaims liability for servicers “unless the servicer is or was the owner of the obligation.” 15 U.S.C. § 1641(f)(1). Stewart alleges that BAC “has an interest” in the loan and, as a result, is subject to liability. (Compl. ¶ 7.) While Stewart does not provide any specifics on how a loan servicer gained an interest in the loan, on a motion to dismiss, the Court must accept this allegation as true. See Tamayo, 526 F.3d at 1081. Even if the Court could ignore this allegation, BAC must remain a defendant in any event. The pleadings reveal that the January 26 letter refusing Stewart’s rescission was sent by BAC, not Deutsche Bank. BAC is a necessary defendant on the failure to honor rescission claim because it is not clear whether BAC independently refused rescission, refused as an agent of Deutsche Bank, or merely communicated Deutsche Bank’s refusal. As such, BAC cannot be dismissed outright as it may be liable on this claim.

B. Failure to Disclose Claims.

Stewart asserts that Home 123 committed two disclosure violations during the refinance closing: (1) it failed to provide two copies of the NORTC and (2) it failed to provide a complete TILDS. Although this claim alleges violations by Home 123, the claim is currently against Deutsche Bank based on its status as the assignee of Home 123. TILA permits an individual to assert a claim against a creditor for disclosure violations so long as such action is brought within one year from the occurrence of the violation. See 15 U.S.C. §§ 1640(a), 1640(e); see also Garcia v. HSBC Bank USA, N.A., No. 09 C 1369, 2009 U.S. Dist. LEXIS 114299, at *9-10 (N.D. Ill. Dec. 7, 2009) (finding the § 1635’s three year period for rescission does not extend the one-year period available under § 1640(e) to assert damages claims for disclosure violations and noting that the majority of courts in this District have found “affirmative damage claims for disclosure violations must be brought within one year of the closing of any credit transaction”). Stewart filed this claim on April 1, 2010, over three years after the October 24, 2006 loan closing and well past the one year statute of limitations. Stewart’s failure to disclose claim is time-barred and dismissed with prejudice against all defendants.

C. Loan Rescission Claim.

The next issue in this case is whether Stewart is time-barred from seeking rescission in court. “Under the Truth in Lending Act, [] 15 U.S.C. § 1601 et seq., when a loan made in a consumer credit transaction is secured by the borrower’s principal dwelling, the borrower may rescind the loan agreement” under certain conditions. Beach v. Ocwen Fed. Bank, 523 U.S. 410, 411 (1998). A borrower typically has three days to rescind following execution of the transaction or delivery of the required disclosures. See 15 U.S.C. § 1635(a). However, under § 1635(f) of TILA, the right of rescission is extended to “three years after the date of consummation of the transaction or upon the sale of the property, whichever occurs first,” if any of the required disclosures are not delivered to the borrower. See 15 U.S.C. § 1635(f). Stewart alleges that she did not receive the required disclosures, so this case involves the extended three year period. Here, the loan transaction occurred on October 24, 2006; Stewart sent a letter electing to rescind the transaction on October 14, 2009, and then filed her complaint in court on April 1, 2010. This time line presents the legal question of whether a claim for rescission filed after the three-year time period is timely if a rescission letter is sent within the three-year time period.

Stewart argues that she exercised her right to rescind within the three years, as required by § 1635(f), because her letter actually rescinded the loan. According to Stewart, this suit is just the legal remedy to force Defendants to accept her rescission. Stewart argues that she is entitled to an additional year after Defendants’ failure to accept the rescission to file suit under § 1640(e). Defendants argue that the language of § 1635(f) creates a statute of repose that completely extinguishes the right to rescind after the three year-time period. As Stewart filed suit over three years after the closing, Defendants assert that Stewart’s recession claim under TILA is barred.

Both parties cite authority for their respective positions from many different jurisdictions. E.g., compare Falcocchia v. Saxon Mortg., Inc., 709 F. Supp. 2d 860, 868 (E.D. Cal. 2010), with Sherzer v. Homestar Mortg. Servs., No. 07-5040, 2010 WL 1947042, at *11 (E.D. Pa. July 1, 2010); see also Obi v. Chase Home Fin., LLC, No. 10-C-5747, 2011 WL 529481, *4 (N.D. Ill. Feb. 8, 2011) (Kendall, J.) (noting “[t]here is a split of authority as to whether § 1635(f) requires a borrower to file a rescission claim within three years after the consummation of a transaction or whether the borrower need only assert his right to rescind to a creditor within that three year period” and collecting cases.) Stewart’s authority concludes that a borrower exercises her right of rescission when she mails a notice of rescission to the creditor, so rescission occurs at the time of the letter. See 12 C.F.R. § 226.23(a)(2). Defendants’ authority, on the other hand, holds that a borrower cannot unilaterally rescind a loan, and therefore can only preserve her rights by filing a suit for rescission within the three-year time period. The Seventh Circuit has not yet addressed this issue so this Court has no binding guidance.

As the Court indicated in Obi (albeit in dicta), the Court is persuaded by the authority finding that a borrower may assert his rescission rights under § 1635(f) through notice to the creditor. See Obi, 2011 WL 529481 at *4; see also In re Hunter, 400 B.R. 651, 661-62 (N.D. Ill. 2009) (finding “[t]he three-year period limits only the consumer’s right to rescind, not the consumer’s right to seek judicial enforcement of the rescission” (internal citation omitted)). The approach in Hunter is more consistent with the language of § 1635 and Regulation Z than the approach advocated by Defendants. Section (a)(2) of Regulation Z provides explicit instructions to the consumer as to how to exercise her right to rescind: “[t]o exercise the right to rescind, the consumer shall notify the creditor of rescission by mail, telegram, or other means of written communication.” See 12 C.F.R. § 226.23(a)(2). The next provision of Regulation Z, § (a)(3), describes when a consumer may exercise that right: either within the three-day “cool off” period, if all proper disclosures are made, or within the three-year period, if they are not. See 12 C.F.R. § 226.23(a)(3). The more reasonable interpretation of Regulation Z is that § (2)(a)’s method of exercising the right to rescission applies to both scenarios under § (3)(a). Indeed, this approach is consistent with the wording of the statute. Even if a consumer received all necessary disclosures, § 1635(a) allows a consumer to rescind within the three-day “cool off” period after closing “by notifying the creditor, in accordance with regulations of the [Federal Reserve Board (“FSB”)], of his intention to do so.” 15 U.S.C. § 1635(a). Though § 1635(f) has no comparable reference to the FSB regulations, it seems incongruous for the FSB to allow rescission via letter during the “cool off” period—in accordance with Regulation Z—but require a consumer to bring a suit to exercise that same right to rescind under § 1635(f).

The Court’s approach is not inconsistent with Beach. In that case, the Supreme Court found a defendant could not assert rescission as an affirmative defense under TILA beyond the three-year period. See Beach, 523 U.S. at 418. The Court noted that § 1635(f) “says nothing in terms of bringing an action but instead provides that the `right of rescission [under TILA] shall expire’ at the end of the time period . . . it talks not of a suit’s commencement but of a right’s duration . . . .” Id. at 417. Beach addresses when the right to rescind expires and whether it can be tolled. It leaves unresolved the question of how a consumer must exercise that right to rescind — suit, or notice via letter.

The Court turns to the question of when a consumer, having exercised her right to rescind by sending a letter to her creditor, must bring suit to enforce that exercise. In Hunter, the debtor, like Stewart, sent notice to the creditor before the three-year period expired, but his trustee filed suit after expiration. Hunter, 400 B.R. at 659. As Stewart did here, the trustee brought suit within a year after the creditor allegedly failed to respond to the rescission notice. Id. Hunter,Id.; seeHunter approach. Under this approach, the last day a borrower may send notice to rescind is the three-year anniversary of the transaction. If the borrower has not sent notice by that time, her right to rescind expires under § 1636(f). If the borrower sends timely notice, the creditor then would have 20 days to respond after receipt of that notice. See 15 U.S.C. § 1635(b). The borrower then has one year from the end of that 20-day period to bring a suit to enforce the rescission under § 1640(e)’s limitations period. citing the one-year limitations period in § 1640(e), found that the trustee’s action for rescission was timely, as it was brought within a year of the alleged violation of TILA, namely the refusal to respond to the rescission request. 15 U.S.C. 1635(b) (requiring a creditor to “take any action necessary or appropriate to reflect the termination of any security interest created under the transaction”). The Court adopts the Hunter, 400 B.R. at 660-61, see also Johnson v. Long Beach Mort. Loan Trust 2001-4, 451 F. Supp. 2d 16, 39-41 (D.D.C. 2006) (applying § 1640(e)’s one year period to enforce rescission claim after notice); Sherzer, 2010 WL 1947042, at *11 (following Hunter). This approach balances the creditor’s need for certainty (the borrower cannot indefinitely fail to bring suit to enforce the right to rescind she exercised) with the express language of Regulation Z (which states that a borrower may exercise the right to rescind through notice by mail). Because Stewart brought suit within five months of her recession notice, Stewart’s claim for recession is timely.

D. Failure to Honor Rescission Claim.

A claim for damages for failure to honor rescission is based on § 1635(b) of TILA, which requires a creditor to respond to a notice of rescission within twenty days of receipt. If a creditor does not respond within the statutorily-mandated period, TILA permits an individual to bring a claim for damages against the creditor. 15 U.S.C. § 1640(a). An action for damages must be brought “within one year from the date of the occurrence of the violation.” 15 U.S.C. § 1640(e). An assignee’s failure to honor a valid rescission notice made pursuant to § 1635 may subject the assignee to actual and statutory damages. 15 U.S.C. § 1640(a).

Stewart asserts that she did not receive a NORTC or a complete TILDS as required by TILA, so she had a right to rescind her loan. Specifically, the TILDS does not state the timing of payments, as Regulation Z requires. See 12 C.F.R. § 226.18. Defendants respond that they were not the original creditor, and as assignees (at best), they are only required to rescind if the violations were apparent on the face of the documentation and that they were not in this case. See 15 U.S.C. § 1641(a) (assignee is only liable if the violation “is apparent on the face of the disclosure statement”).

The Seventh Circuit has specifically addressed the requirements for the payment schedule in the TILDS. In Hamm, the TILDS listed the payment schedule as 359 payments of $541.92 beginning on March 1, 2002 and one payment of $536.01 on February 1, 2032. Hamm v. Ameriquest Mortg. Co., 506 F.3d 525, 527 (7th Cir. 2007). The court found that this violated TILA because it did not list all payment dates or state that payments were to be made monthly, and TILA requires such specificity in the TILDS even though “many (or most) borrowers would understand that a mortgage with 360 payments due over approximately 30 years contemplates a payment by the borrower each month during those 30 years.” Id. This case is no different. Stewart alleges that her TILDS listed 359 payments at $3,103.53 but failed to mention that these payments would be made monthly. Exhibit A of Stewart’s complaint, her TILDS, shows the incomplete payment schedule on the face of the document. That schedule is almost exactly the same as the one the Seventh Circuit found insufficient in Hamm. Id. at 527. Consequently, Stewart alleges a disclosure violation apparent on the face of the documents which would grant Stewart the right to rescind against Defendants as assignees. Stewart’s NORTC claim does not need to be evaluated at this time because her failure to honor rescission claim could be based on either a NORTC or TILDS violation, and the TILDS allegations stand.

The final issue is whether Defendants are responsible for refusing to respond and for rejecting rescission. This turns on whether Stewart’s notice of rescission was properly sent to Defendants. In response to a request from Judge Leinenweber prior to reassignment of this case to this Court, the parties addressed whether Stewart properly noticed defendant Deutsche Bank of her election to rescind when she sent letters to only BAC and Home 123, which filed for Chapter 11 bankruptcy in 2007. Courts within the District have reached different conclusions under similar factual scenarios. Compare Harris v. OSI Fin. Servs. Inc., 595 F. Supp. 2d 885, 897-98 (N.D. Ill. 2009) (finding that notice of election to rescind sent to the original creditor did not suffice as notice to the assignee), with Hubbard v. Ameriquest Mortg. Co., 624 F. Supp. 2d 913, 921-22 (N.D. Ill. 2008) (concluding that an election to rescind sent to the original creditor is sufficient to seek rescission against an assignee) and Schmit v. Bank United FSB et al., No. 08 C 4575, 2009 WL 320490, at *3 (N.D. Ill. Feb. 6, 2009) (acknowledging disagreement between Harris and Hubbard and following Hubbard).

Stewart acknowledges that she did not send a notice of rescission to defendant Deutsche Bank. (See Doc. 23-1.) She alleges that she, like many borrowers, was unaware who owned her mortgage note. She did not know that Deutsche Bank was the assignee of her loan, and so she requested notice of the “identity of the owner of this note” from Home 123 and BAC in her rescission letter. (Id.) Stewart argues that she complied with TILA and Regulation Z by mailing notice to the original creditor, Home 123, and the loan servicer, BAC. Stewart distinguishes Harris from the current case because “there is no mention of whether the consumer in Harris mailed a notice to the loan servicer or another party who may be the agent of the holder of the note.” (Doc. 23 at 4). Deutsche Bank concurs that mortgage ownership changes make communication difficult, but suggests that this actually supports the approach of the Harris court. Harris noted that “adopting Stewart’s interpretation of the notice requirement . . . would have the absurd effect of subjecting to rescission and damages assignees that, in some case, have absolutely no means of discovering that a rescission demand has been made.” (Doc. 22 at 2 (quoting Harris).)

The split between Harris and Hubbard does not need to be resolved at this stage of litigation due to the particular facts of this case. Stewart alleges that she sent BAC the rescission notice on October 14, 2009, ten days before the three-year deadline. BAC denied the rescission in a letter sent to Stewart on January 26, 2010. While Harris was concerned that an innocent party with no notice could be subject to damages, this case involves clear notice to at least one party that Stewart seeks to hold responsible. BAC received notice, did not respond within 20 days, and then refused to rescind the transaction. Deutsche Bank’s involvement is less clear, but Stewart alleged sufficient facts to proceed with her case under the theory that BAC either forwarded the notice to Deutsche Bank or acted as its agent in the transaction. This is a reasonable inference given that BAC, the loan servicer, actually responded to the rescission notice and refused it without referring to whether the assignee, Deutsche Bank, assented to the decision. BAC, Deutsche Bank, or both refused to rescind the transaction and discovery is necessary to sort out who is responsible for the decision to deny the rescission.

IV. CONCLUSION

For the reasons stated herein, Defendants’ motion to dismiss (Doc. 10) is:

1. Granted as to Stewart’s failure to disclose claim against all Defendants;

2. Denied as to Stewart’s rescission claim against all Defendants; and

3. Denied as to Stewart’s failure to honor rescission claim against defendants Deutsche Bank and BAC, but granted as to defendant MERS.

SO ORDERED.

[1] The Court also notes that the mortgage instrument attached to the complaint identifies MERS as “a separate corporation that is acting solely as a nominee for Lender and Lender’s assigns.” (See Doc. 1, Ex. C at 1.) Though Stewart alleges MERS has an interest in the loan (see Compl. ¶ 7), the exhibits contradict that pleading and the exhibits control. See N. Ind. Gun & Outdoor Shows, Inc. v. City of S. Bend, 163 F.3d 449, 454 (7th Cir. 1998).

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Posted in STOP FORECLOSURE FRAUDComments (1)

NY SUPREME COURT JUDGE BASHES ‘MERS’ FOR SUING ITSELF…OWNS NOTHING!

NY SUPREME COURT JUDGE BASHES ‘MERS’ FOR SUING ITSELF…OWNS NOTHING!


Further,it appears that there is a conflict of interest in that MERS is both a plaintiff and defendant, at least as far as the original caption shows.

EXCERPTS:

On November 7, 2007, Mortgage Electronic Registration Systems, Inc., (MERS), as nominee for Lend America, assigned the mortgage to Central Mortgage Company (CMC). The assignment states that November 10, 2006 mortgage was made by Defendant Caughman to MERS as nominee for Lend America.

The caption of the action lists MERS, ,as nominee for Lend America, as the plaintiff. Defendants are Sherri Caughman, MERS, as nominee for Lend America, John Doe and Jane Doe.

In this motion, plaintiff seeks an order striking Defendant Caughman’s answer; the appointment of a Referee to compute the amount due and owing and the amendment of the caption. The amended caption would substitute CMC as plaintiff, in place and instead of MERS, as nominee for Lend America. In the amended caption, Sherri Caughmann would remain as a defendant, MERS, as nominee for Lend America, would be added as a defendant and Mr. Caughman and Vicki Douglas were added as defendants.

In support of its motion, plaintiff argues that it is entitled to summary judgment because it has made out a prima facie case and that defendant’s answer does not show that there are any issues of fact which would warrant denial of its motion.

Defendants, in opposing the motion, contends that MERS has no standing, as a nominee, to bring action because its status as nominee is limited and does not give it the power to transfer or assign ownership rights in property on behalf of the party for which it is acting as nominee. They add that MERS has said that it is not in possession of the original promissory note and, as such it allegations are inconsistent with its exhibits. Thus, defendants conclude, this raises issues of fact.

Continuing, defendants conted that the mortgage and note involved here were issued in Violation of the Federal Truth in Lending Act in that plaintiff did not provide them with the disclosures required under 15USC1639(a)(1) and (a)(2)(A) and 12 CFR 226.32. These violations, say defendants, leaves them with a “continuing right” to rescind the deal, which they claim to do in their opposition.

Upon review, defendants’ motion is granted. Neither MERS nor CMC has shown that it had the mortgage and note at the time the action was commenced. Further,it appears that there is a conflict of interest in that MERS is both a plaintiff and defendant, at least as far as the original caption shows.

The parties are directed to appear before this court on May 4, 2010 at 9:30 am for a conference.

Dated: March 23, 2010

……………………
J.S.C.
Diary

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Posted in chain in title, conflict of interest, conspiracy, CONTROL FRAUD, foreclosure, foreclosure fraud, foreclosures, lawsuit, MERS, mortgage, MORTGAGE ELECTRONIC REGISTRATION SYSTEMS INC., note, STOP FORECLOSURE FRAUD, Supreme Court, truth in lending actComments (3)

CALIFORNIA ‘QUIET TITLE’ VICTORY: PAUL NGUYEN V. CHASE et al

CALIFORNIA ‘QUIET TITLE’ VICTORY: PAUL NGUYEN V. CHASE et al


The yellow in the picture represents all the hard work and sweat Mr. Nguyen encountered for this victory.

Quiet Title, Rescission and Damages, and Unfair Business Practices

JUDGMENT


1. This Court has jurisdiction over the subject matter of this case and over the Defendants.

2. Venue as to the Defendants in the Central District of California is proper.

3. Default judgment is hereby entered against Chase Bank USA, N.A. and Chase Home Finance, LLC and in favor of Plaintiffs Paul Nguyen and Laura Nguyen on all claims in Plaintiffs’ SecondAmended Complaint.

4. IT IS THEREFORE ORDERED that the Deed of Trust recorded with Orange County Recorder as instrument No. 2007000731120 on 12/12/2007 is wholly voided as to plaintiff Laura Nguyen.

5. IT IS FURTHER ORDERED that Defendant First American Loanstar Trustee Services record a DEED OF RECONVEYANCE to reconvey unto Plaintiffs thereto all right, title and interest which was heretofore acquired by First American Loanstar Trustee Services under deed of trust recorded with Orange County Recorder as instrument No. 2007000731120 on 12/12/2007.

6. IT IS FURTHER ORDERED that all adverse claims against property known as 16141 Quartz Street, Westminster, CA 92683 are quieted.
The legal description of said property is:

LOT 44 TRACT NO. 8977, IN THE CITY OF WESTMINSTER, COUNTY OF ORANGE, STATE OF  CALIFORNIA, AS PER MAP RECORDED IN BOOK 369, PAGE(S) 46 AND 47 OF MISCELLANEOUS MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY. Assessor’s Parcel No.: 107-903-44.

7. IT IS FURTHER ORDERED that the Promissory Note dated 12/12/2007 executed by Plaintiff Paul Nguyen in favor of Chase Bank USA, N.A. rescinded pursuant to 15 U.S.C. §1635(i).

8. IT IS FURTHER ORDERED that pursuant to 15 U.S.C. §1635(b), Plaintiffs had made offer to tender the loan evidenced by promissory note dated 12/12/2007 and Defendant Chase Bank USA, N.A. did not take possession within 20 days after tender by the Plaintiffs. Therefore, ownership of the loan proceed is vested in the Plaintiffs without obligation on their part to pay for it.

9. IT IS FURTHER ORDERED that Defendant Chase Bank USA, N.A. within 20 days after entry of judgment shall return to the Plaintiffs any money or property given as earnest money, down payment, or otherwise pursuant to 15 U.S.C. §1635(b).

10. IT IS FURTHER ORDERED that Plaintiffs are awarded their costs of suit, to be paid by Defendants Chase Bank USA, N.A. and Chase Home Finance, LLC, in an amount to be determined by the Clerk of the Court.

DATED: September 15, 2010
____________________________
The Honorable A. Howard Matz
JS-6 United States District Judge

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Posted in chain in title, chase, conspiracy, deed of trust, foreclosure, foreclosure fraud, foreclosures, mortgage, quiet title, securitization, trustee, Trusts, Unfair Business PracticesComments (7)

NEVADA is on a ROLL! ALOUA v. AURORA LOAN SERVICES, LLC, Dist. Court, D. Nevada 2010

NEVADA is on a ROLL! ALOUA v. AURORA LOAN SERVICES, LLC, Dist. Court, D. Nevada 2010


PIA MARIE T. CORDERO ALOUA, Plaintiff,
v.
AURORA LOAN SERVICES, LLC; LEHMAN BROTHERS BANK, FSB; QUALITY LOAN SERVICE CORPORATION; Does I-X, inclusive, Defendants.

Case No. 2:09-CV-00207-KJD-RJJ.

United States District Court, D. Nevada.

June 23, 2010.

ORDER

KENT J. DAWSON, District Judge. Currently before the Court is Defendants Aurora Loan Services, LLC, and Lehman Brothers Bank, FSB’s Motion to Dismiss (#15).[1] Plaintiff Pia Marie T. Cordero Aloua filed a Response and Opposition (#18) to Defendants’ Motion on October 5, 2009, to which Defendants filed a Reply (#19) on October 20, 2009.

I. Background

Plaintiff financed the real property located at 116 Peachy Court in Las Vegas, Nevada (“subject property”) on or about the 5th day of July, 2007. At that time, Plaintiff executed an adjustable rate loan (“first loan”) in the principal amount of $768,987.00 and a fixed-rate balloon loan (“second loan”) in the principal amount of $144,185.00. Lehman Brothers, which changed its name to Aurora Bank on April 24, 2009, was the original lender, and Aurora Loan Services (“ALS”) was appointed as the loan servicer on August 16, 2007. Plaintiff’s first loan, which was placed in the sub-prime category, was financed based upon a yearly adjustable interest rate of 9.375% and was to be paid to Lehman Brothers by monthly payments beginning in September 2007. Plaintiff avers that the sub-prime designation of her loan, which led to higher fees and interest, was in error because Plaintiff had verifiable income and a credit score sufficient to qualify for the traditional prime rate. Defendants aver that Plaintiff defaulted on her loans in December 2007, leading to foreclosure proceedings which were ultimately completed on July 14, 2008 through Quality Loan Service Corporation (“QLS”), the appointed substitute trustee. ALS claims to have acquired title to the subject property through said foreclosure proceedings. Plaintiff avers, however, that she did not default on her loans and that the foreclosure sale was carried out without serving the required notices and without giving Plaintiff the appropriate opportunity to avert the sale. On January 7, 2009, Plaintiff commenced this action in the District Court for Clark County, Nevada. The action was removed to this Court on February 2, 2009 on the basis of federal question and diversity jurisdiction. (See #1.) On September 2, 2009, Plaintiff filed an Amended Complaint against all Defendants, alleging the following causes of action: (1) intentional misrepresentation; (2) negligence per se under the federal Real Estate Settlement Procedures Act (“RESPA”) and the federal Truth in Lending Act (“TILA”); (3) negligence; (4) rescission under TILA; (5) wrongful foreclosure; and (6) quiet title. On September 21, 2009, Defendants filed a Motion to Dismiss the First Amended Complaint (#15). For the reasons discussed below, the Court grants the Motion to Dismiss in part and denies it in part.

II. Discussion

A. Motion to Dismiss

A court may dismiss a plaintiff’s complaint for “failure to state a claim upon which relief can be granted.” FED. R. CIV. P. 12(b)(6). A properly pled complaint must provide “a short and plain statement of the claim showing that the pleader is entitled to relief.” FED. R. CIV. P. 8(a)(2); Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007). While Rule 8 does not require detailed factual allegations, it demands “more than labels and conclusions” or a “formulaic recitation of the elements of a cause of action.” Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949 (2009) (citing Papasan v. Allain, 478 U.S. 265, 286 (1986)). “Factual allegations must be enough to rise above the speculative level.” Twombly, 550 U.S. at 555. Thus, to survive a motion to dismiss, a complaint must contain sufficient factual matter to “state a claim to relief that is plausible on its face.” Iqbal, 129 S. Ct. at 1949 (internal citation omitted). In Iqbal, the Supreme Court recently clarified the two-step approach district courts are to apply when considering motions to dismiss. First, the Court must accept as true all well-pled factual allegations in the complaint; however, legal conclusions are not entitled to the assumption of truth. Id. at 1950. Mere recitals of the elements of a cause of action, supported only by conclusory statements, do not suffice. Id. at 1949. Second, the Court must consider whether the factual allegations in the complaint allege a plausible claim for relief. Id. at 1950. A claim is facially plausible when the plaintiff’s complaint alleges facts that allow the court to draw a reasonable inference that the defendant is liable for the alleged misconduct. Id. at 1949. Where the complaint does not permit the court to infer more than the mere possibility of misconduct, the complaint has “alleged—but not shown—that the pleader is entitled to relief.” Id. (internal quotation marks omitted). When the claims in a complaint have not crossed the line from conceivable to plausible, plaintiff’s complaint must be dismissed. Twombly, 550 U.S. at 570.

III. Analysis

A. Intentional Misrepresentation

Plaintiff alleges Defendants knowingly made false misrepresentations to Plaintiff, upon which Plaintiff justifiably relied to her detriment. To state a claim for fraudulent misrepresentation in Nevada, a plaintiff must allege that (1) defendant made a false representation; (2) defendant knew or believed the representation to be false; (3) defendant intended to induce plaintiff to rely on the misrepresentation; and (4) plaintiff suffered damages as a result of his reliance. Bartmettler v. Reno Air, Inc., 956 P.2d 1382, 1386 (Nev. 1998). Misrepresentation is a form of fraud where a false representation is relied on in fact. See Pacific Maxon, Inc. v. Wilson, 96 Nev. 867, 871 (Nev. 1980). Fraud has a stricter pleading standard under Rule 9, which requires a party to “state with particularity the circumstances constituting fraud.” FED. R. CIV. P. 9(b). Pleading fraud with particularity requires “an account of the time, place, and specific content of the false representations, as well as the identities of the parties of the misrepresentations.” Swartz v. KPMG LLP, 476 F.3d 756, 764 (9th Cir. 2007); see also Morris v. Bank of Nev., 886 P.2d 454, 456 n.1 (Nev. 1994). The Ninth Circuit has held, however, that the stricter pleading requirements of Rule 9(b) “may be relaxed with respect to matters within the opposing party’s knowledge,” reasoning that “[i]n such situations, plaintiffs can not (sic) be expected to have personal knowledge of the relevant facts.” Neubronner v. Milken, 6 F.3d 666, 672 (9th Cir. 1993) (citing Wool v. Tandem Computers, Inc., 818 F.2d 1433, 1439 (9th Cir. 1987); Moore v. Kayport Package Express, Inc., 885 F.2d 531, 540 (9th Cir. 1989). Even under this relaxed version of Rule 9(b), however, “a plaintiff who makes allegations on information and belief must state the factual basis for the belief.” Id. Here, Plaintiff alleges that Defendants knowingly concealed the true nature of her credit score and defrauded her by placing her loan in the sub-prime category to charge higher commissions. Plaintiff also alleges, among other things, that Defendants misrepresented the fees charged and paid in association with her loan, as well as her eligibility to participate in a loan modification program. Taking these assertions as true, the Court finds Plaintiff has sufficiently stated a claim for fraud: Plaintiff alleges that Defendants intentionally misrepresented information to her, that she relied on these representations, and that she was damaged as a result.

B. Negligence per se

To state a claim for negligence per se, a plaintiff must allege that (1) he or she belongs to a class of persons that a statute was intended to protect; (2) defendant violated the relevant statute; (3) plaintiff’s injuries are the type against which the statute was intended to protect; (4) the violation was the legal cause of plaintiff’s injury; and (5) plaintiff suffered damages. See Anderson v. Baltrusaitus, 944 P.2d 797, 799 (Nev. 1997). Whether a particular statute establishes a standard of care in a negligence action is a question of law. Vega v. E. Courtyard Assocs., 24 P.3d 219, 221 (Nev. 2001). Plaintiff claims Defendants violated provisions of TILA, 15 U.S.C. § 1601, et seq., and RESPA, 12 U.S.C. § 2601, et seq., dealing with a lender’s disclosure duties. Defendants argue that the TILA claim is time barred because the statute of limitations has run. Section 1640(e) of TILA requires that claims be brought within one year of the date of the loan transaction. Interpreting this provision, the Ninth Circuit has held that while as a general rule the limitations period runs from the date the transaction is consummated, the doctrine of equitable tolling may, when appropriate, toll the limitations period until the borrower has had a reasonable opportunity to discover the facts giving rise to a TILA claim. King v. California, 784 F.2d 910, 915 (9th Cir. 1986). The Ninth Circuit has also held that the equitable tolling analysis is a factual one: the finder of fact must determine whether equitable tolling will prevent unjust results or maintain the integrity of the relevant statute. Id. Because these factual questions are yet to be resolved, the Court is unable to say at this stage in the litigation whether the statute of limitations has run. Therefore, Defendants’ Motion to Dismiss Plaintiff’s TILA claim on statute of limitations grounds is denied. Moreover, after reviewing the Complaint, the Court finds Plaintiff has adequately stated a TILA claim against Defendants. Plaintiff alleges Defendants (1) failed to disclose the identity of persons and entities who share the service fees and other charges for her loans; (2) failed to disclose the percentage of the loan amount paid to the nominal lender; and (3) failed to disclose relevant credit terms to enable Plaintiff to compare market rates and prevent unfair credit practices. (Dkt. #14, Compl. ¶ 26-28.) Taking these assertions as true, Plaintiff has stated a viable claim for relief under TILA. Plaintiff has failed, however, to sufficiently state a claim for negligence per se under RESPA. 12 U.S.C. § 2601, et seq. As a general rule, RESPA does not create an express or implied private right of action. Collins v. FMHA-USDA, 105 F.3d 1366, 1367-68 (11th Cir. 1997); Bamba v. Resource Bank, 568 F. Supp. 2d 32, 34-35 (D.D.C. 2008); Morrison v. Brookstone, 415 F. Supp. 2d 801, 806 (S.D. Ohio 2005); McWhorter v. Ford Consumer Fin. Co., 33 F. Supp. 2d 1059, 1064 (N.D. Ga. 1997). A limited exception to this rule exists: a private right of action exists under RESPA when a specific statutory provision mentions such a right. See Bloom v. Martin, 865 F. Supp. 1377, 1384-85 (N.D. Cal. 1994). Although Plaintiff alleges Defendants violated several provisions of RESPA, the only section she references with any specificity is § 2605. Accordingly, because this section of the statute does not provide a private right of action, Plaintiff’s claim for negligence per se under RESPA fails.

C. Rescission

Plaintiff also alleges she is entitled to a rescission of the mortgage contract under TILA, 15 U.S.C. § 1635. Plaintiff is incorrect. Section 1635 of TILA establishes that lenders must notify borrowers of their right to rescind and outlines the penalties for failure to comply with this requirement. Nonetheless, § 1635 expressly states that these provisions do not apply to “residential mortgage transactions.” A residential mortgage transaction is defined in 15 U.S.C. § 1602(w) as a “transaction in which a mortgage . . . interest is created or retained against the consumer’s principal dwelling.” See also 12 C.F.R. § 226.2(a)(24). This is precisely what Plaintiff’s mortgage contract entailed: the parties entered into a transaction in which Plaintiff attained financing from Defendants to acquire residential property. Because Plaintiff is not entitled to rescind the mortgage contract, her rescission claim under § 1635 fails as a matter of law and Defendant’s Motion to Dismiss is granted as to Plaintiff’s rescission claims.

D. Wrongful Foreclosure

Plaintiff also alleges wrongful foreclosure. “An action for the tort of wrongful foreclosure will lie if the trustor or mortgagor can establish that at the time the power of sale was exercised or the foreclosure occurred, no breach of condition or failure of performance existed on the mortgagor’s or trustor’s part which would have authorized the foreclosure or exercise of the power of sale.” Collins v. Union Federal Sav. & Loan Ass’n, 662 P.2d 610, 623 (Nev. 1983). “The material issue of fact in a wrongful foreclosure claim is whether the trustor was in default when the power of sale was exercised.” Id. Here, Plaintiff affirmatively alleges that she was not in default of payment to the lender at the time the foreclosure occurred, and therefore, the representations as stated on the Notice of Default were false.[2] Taking these assertions as true, the Court finds that Plaintiff has adequately stated a claim for wrongful foreclosure against Defendants. Therefore, Defendants’ Motion to Dismiss is denied as to Plaintiff’s wrongful foreclosure claim.

E. Negligence against QLS

To bring a negligence claim in Nevada, a plaintiff must show that (1) defendant owed a duty of care to plaintiff; (2) defendant breached that duty; (3) defendant’s breach was the actual and proximate cause of plaintiff’s injuries; and (4) plaintiff was injured. Scialabba v. Brandise Constr., 921 P.2d 928, 930 (Nev. 1996). Liability based on negligence does not exist without a breach of duty. Bradshaw v. Blystone Equip. Co. of Nev., 386 P.2d 396, 397 (Nev. 1963). Plaintiff claims that Defendant QLS, “as trustee under the deed of trust, had a duty to Plaintiff to ensure that any party instructing it to conduct a foreclosure sale of the property actually owned and had rights under the note and deed of trust.” (See #14, Compl. ¶ 32.) Plaintiff also alleges that Defendant QLS’s failure to take the appropriate steps to comply with this duty was the actual and proximate cause of damages to Plaintiff. Id. at ¶ 33-39.) At this point, because Plaintiff’s claim for wrongful foreclosure remains, the Court also finds that Plaintiff has sufficiently pled a claim for negligence.

F. Quiet Title

Finally, Plaintiff brings a claim of quiet title, arguing that because foreclosure was wrongful, Plaintiff remains the rightful owner of the subject property. Taking these assertions as true, Plaintiff has stated a claim for wrongful foreclosure against Defendants. Therefore, Defendants’ Motion to Dismiss is denied as to Plaintiff’s quiet title claim.

IV. Conclusion

Accordingly, IT IS HEREBY ORDERED that Defendants’ Motion to Dismiss (#15) is GRANTED in part and DENIED in part as follows:

Defendants’ Motion to Dismiss Plaintiff’s claim for intentional misrepresentation is DENIED.

Defendants’ Motion to Dismiss Plaintiff’s claim for negligence per se under TILA is DENIED.

Defendants’ Motion to Dismiss Plaintiff’s claim for negligence per se under RESPA is GRANTED.

Defendants’ Motion to Dismiss Plaintiff’s claim for negligence against QLS is DENIED.

Defendants’ Motion to Dismiss Plaintiff’s claim for rescission under TILA is GRANTED.

Defendants’ Motion to Dismiss Plaintiff’s claim for wrongful foreclosure is DENIED.

Defendants’ Motion to Dismiss Plaintiff’s claim for quiet title in DENIED.

[1] Defendant Quality Loan Service Corporation filed a Joinder (#22) to Defendant’s Motion to Dismiss that is considered together with Defendant’s Motion herein. [2] If matters outside of the pleadings are submitted in conjunction with a motion to dismiss, Rule 12(b) grants courts discretion to either accept and consider, or to disregard such materials. See Isquith v. Middle S. Utils., Inc., 847 F.2d 186, 193 n.3 (5th Cir.1988). A court exercises this discretion by examining whether the submitted material, and the resulting conversion from the Rule 12(b)(6) to the Rule 56 procedure, may facilitate disposing of the action. Id. at 193 n.3. If the court elects to convert the motion, “[a]ll parties must be given a reasonable opportunity to present all the material that is pertinent to the motion.” Fed. R. Civ. P. 12(d). Here, Defendants have attempted to provide evidence refuting Plaintiff’s no default claim, Plaintiff however, has not had an adequate opportunity to fully brief this issue. Accordingly, without opining whether Plaintiff’s claims may survive a summary judgment motion, the Court elects not to convert Defendants’ immediate Motion into one for summary judgment.

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Posted in aurora loan servicing, breach of contract, concealment, conspiracy, foreclosure, foreclosure fraud, lehman brothers, respa, tila, truth in lending act, ViolationsComments (0)

It’s All About the Principal: Preserving Consumers’ Right of Rescission Under the Truth in Lending Act

It’s All About the Principal: Preserving Consumers’ Right of Rescission Under the Truth in Lending Act


Lea Krivinskas Shepard
Loyola University Chicago School of Law

North Carolina Law Review, Vol. 89, 2010

Abstract:
This Article explores a significant market-based threat to the Truth in Lending Act’s right of rescission, a remedy that attempts to deter lender overreaching and fraud during one of the most complex financial transactions of a borrower’s lifetime. The depressed housing market has substantially impaired many borrowers’ ability to fulfill their responsibilities in rescission’s unwinding process: restoring the lender to the status quo ante by repaying the net loan proceeds of the mortgage transaction.

When a consumer is unable to finance her tender obligation, non-bankruptcy judges’ overwhelming response has been to protect the lender and deny rescission to the borrower. This Article argues that these courts, to fulfill TILA’s consumer-protective function, must take a different approach. Non-bankruptcy courts, which handle the vast majority of TILA rescission actions, should use their equitable authority under TILA to modify borrowers’ repayment obligations by allowing borrowers to tender in installments, over a period of years, and at reasonable interest rates. This approach both averts foreclosures that harm borrowers, lenders, and neighborhoods and ensures that TILA’s consumer-protective mandate will remain viable even in a depressed housing market.

This Article also considers an important aspect of TILA’s rescission remedy that, while tacitly acknowledged by courts and commentators, has been insufficiently explored in the academic literature. There exists an uneasy tension between the goal of the Truth in Lending Act – informing consumers of the financial consequences of their mortgage loan transactions – and borrowers’ frequent use of TILA rescission: defending their homes from foreclosure actions that the lender’s disclosure violation may or may not have precipitated. The Article concludes that TILA rescission actions, albeit a blunt instrument in the consumer protection setting, must be preserved, particularly during periods of economic calamity, since it remains a singular source of borrower leverage in a legal and economic climate that remains generally inhospitable to homeowners.

Accepted Paper Series

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Posted in bankruptcy, mortgage modification, tilaComments (0)

NO STANDING: MORTGAGE ELECTRONIC REGISTRATION SYSTEM, INC., APPELLANT, VS. SOUTHWEST HOMES OF ARKANSAS, APPELLEE

NO STANDING: MORTGAGE ELECTRONIC REGISTRATION SYSTEM, INC., APPELLANT, VS. SOUTHWEST HOMES OF ARKANSAS, APPELLEE


The Kansas appellate court noted that MERS received no funds and that the mortgage required the borrower to pay his monthly payments to the lender. just as in the case at hand, that the notice provisions of the mortgage “did not list MERS as an entity to contact upon default or foreclosure.” declaring that MERS did not have a “sort of substantial rights and interests” that had been found in a prior decision and noting that “a party with no beneficial interest is outside the realm of necessary parties,” the Kansas court concluded that “the failure to name and serve MERS as a defendant in a foreclosure action in which the lender of record has been served” was not such a fatal defect that the foreclosure judgment should be set aside. at 331, 192 P.3d at 181-82.

It is my opinion that the same holds true in the instant case. Here, Pulaski Mortgage, the lender for whom MERS served as nominee, was served in the foreclosure action. But, further, neither MERS’s holding of legal title, nor its status as nominee, demonstrates any interest that would have rendered it a necessary party pursuant to Ark. R. Civ. P. 19(a).

For these reasons, I concur that the circuit court’s order should be affirmed.

IMBER and WILLS, JJ., join.

[ipaper docId=30774283 access_key=key-13lkiaigfhjiknf5bhf2 height=600 width=600 /]

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Posted in case, foreclosure, foreclosure fraud, MERS, mortgage electronic registration systemComments (0)

TILA Statute of Limitations

TILA Statute of Limitations


Source: Livinglies

Editor’s Note: Judges are quick to jump on the TILA Statute of Limitations by imposing the one year rule for rescission and damages. But there is more to it than that.

First the statute does NOT cut off at one year except for items that are apparent on the face of the closing documentation; so for MOST claims arising under securitization where almost every real detail of the transaction was hidden and intentionally withheld, the one year rule does not apply.

Second, the statute of limitations does not BEGIN to run until the date that the violation is revealed. In most cases this will be when the homeowner knows or should have known that the loan was securitized. Since the pretender lenders are so strong on the point that securitization does not affect enforcement, the best point in time for the statute to run is when a forensic analyst or expert tells the homeowner that TILA violations exist.

And THEN, in those cases where the information was hidden, the statute of limitations is three years from the date the information was revealed.

So when you go after undisclosed fees, profits and other compensation of any kind, you are not cut off by one year because — by definition they were not disclosed. The only way the other side can get out of that is by admitting the existence of the fee, and then showing that it WAS disclosed — presumably through yet another fabricated document, signed by a non-existent person with non existent authroity with non- existent witnesses and notarized by someone three thousand miles away (whose notary stamp and forged signature was applied to hundreds of pages of blank documents for later use). [Brad Keiser was the one who discovered this tactic by doing what most forensic analysts don’t do — actually reading every piece of paper sent by the pretender lender and every piece of paper provided by the homeowner. Case law shows that where the notary was improperly applied — and there are many ways for it to be improperly applied, the notary is void. If the statute requires recording the document in the public records, then the document so notarized shall be considered as NOT being in the public records and is ordered expunged from those records].

This comment from Rob elaborates:

Regarding the TILA Statute of Limitations:

STATUTE OF LIMITATIONS
When a violation of TILA occurs, the one-year limitations period applicable to actions for statutory and actual damages begins to run. U.S.C. § 1641(e).
A TILA violation may occur at the consummation of the transaction between a creditor and its consumer if the transaction is made without the required disclosures.
A creditor may also violate TILA by engaging in fraudulent, misleading, and deceptive practices that conceal the TILA violation occurring at the time of closing. Often consumers do not discover any violation until after they have paid excessive charges imposed by their creditors. Consumers who later learn of the creditor’s TILA violations can allege an equitable tolling of the statute of limitations. When the consumer has an extended right to rescind or
pursue other statutory remedies because a violation occurs, the statute of limitations for all the damages the consumers seek extends to three years from the date the violation is revealed.
McIntosh v. Irwin Union Bank & Trust Co., 215 F.R.D. 26, 30 (D. Mass. 2003).

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Posted in forensic mortgage investigation audit, tilaComments (0)


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