Police Evict Residents Of Foreclosed Apt Buildings

MIAMI (CBS4) Two people have been arrested after they reportedly interfered with three evictions from a foreclosed Liberty City low income apartment complex.

The apartment buildings at 8th Avenue and NW 70th Street were foreclosed on late last year by JP Morgan-Chase.

Some residents told CBS4 they made their rent payments to the “landlord” when he came to their door once a month, but their payments never made it to the bank.

The tenants now face eviction because JP Morgan-Chase does not want to renew the leases and upkeep the buildings. Already emptied units have been boarded up.

The apartment buildings have been turned over to ECP Properties of Texas, a subsidiary of JP Morgan-Chase, which specializes in “toxic” foreclosure assets.

On Tuesday police evicted tenants from apartments 3 and 4 in the 830 building and a third tenant in the next apartment building over.

“During a housing crisis, we cannot afford to kick people out of low income housing and board up more vacant living spaces,” said Rameau. “JP Morgan-Chase received a $25 billion bailout while poor people get eviction notices. Therefore, we are engaging in civil disobedience because the laws which allow banks to get bailouts and keep homes vacant while families face homelessness are immoral.”

One of the residents and Rameau were arrested when they offered resistance to the evictions.

By Greg Morcroft , MarketWatch

NEW YORK (MarketWatch) – In another sign of the firms’ financial disintegration, Freddie Mac and Fannie Mae, the giant mortgage finance companies operating in government conservatorship, said Wednesday they are delisting their common and preferred stocks from the New York Stock Exchange.

Freddie /quotes/comstock/13*!fre/quotes/nls/fre (FRE 1.22, +0.02, +1.67%) said in a press release that, “this notice was made pursuant to a directive by the Federal Housing Finance Agency, Freddie Mac’s conservator, requiring Freddie Mac to delist its common and preferred securities from the NYSE.”

According to a press release by FHFA, the agency issued similar directives to both Freddie Mac and Fannie Mae (FNM 0.92, +0.01, +1.14%) .

Freddie said it expects its shares to trade in the over-the-counter bulletin board market after the delisting. The delisting should occur around July 8, the firm said.

Shortly after Freddie’s announcement, Fannie Mae said that it too is delisting its common and preferred shares from the New York Stock Exchange and the Chicago Stock Exchange after being told to take the move by its regulator.

The U.S. government established Fannie Mae in 1938 to make mortgages more available to low income families. In 1979, the government created Freddie Mac, to expand the market for mortgages in the country.

Both firms were put into government conservatorship in August 2008, after the U.S. housing market collapsed, triggering the worst financial crisis since the Great Depression.

Greg Morcroft is MarketWatch’s financial editor in New York.

As many have seen SFF was the first to expose this Bogus Assignment scandal via a YouTubeVideo.

Via: NakedCapitalism by Yves Smith

I’m not quite certain how to calibrate journalism American Banker style, but I found this article, “Challenges to Foreclosure Docs Reach a Fever Pitch,” (sadly, subscription only, e-mailed by Chris Whalen), to be both interesting and more than a tad disingenuous.

The spin starts with the headline, it’s a doozy. The “challenge to foreclosure documents” message persists throughout the article, and it’s perilously close to a misrepresentation:

Because the notes were often sold and resold during the boom years, many financial companies lost track of the documents. Now, legal officials are accusing companies of forging the documents needed to reclaim the properties.

On Monday, the Florida Attorney General’s Office said it was investigating the use of “bogus assignment” documents by Lender Processing Services Inc. and its former parent, Fidelity National Financial Inc. And last week a federal judge in Florida ordered a hearing to determine whether M&T Bank Corp. should be charged with fraud after it changed the assignment of a mortgage note for one borrower three separate times…

In many cases, [plaintiff attorney] Kowalski said, it has become impossible to establish when a mortgage was sold, and to whom, so the servicers are trying to recreate the paperwork, right down to the stamps that financial companies use to verify when a note has changed hands…

In a notice on its website, the Florida attorney general said it is examining whether Docx, an Alpharetta, Ga., unit of Lender Processing Services, forged documents so foreclosures could be processed more quickly.

“These documents are used in court cases as ‘real’ documents of assignment and presented to the court as so, when it actually appears that they are fabricated in order to meet the demands of the institution that does not, in fact, have the necessary documentation to foreclose according to law,” the notice said..

Yves here. Let’s parse the two messages:

1. Note how the problem is presented as one of “documentation”, implying it is not substantive.

2. Because everyone knows mortgages were sold a lot, (which is clearly mentioned in the piece) the idea that some somehow went missing (or as the piece suggests, the “documentation” is missing even though the parties are presented as if they know who really owns the mortgage) is presented as something routine and not very alarming.

OK, let’s dig a little deeper. Even though the media refers to “mortgages”, under the law there are two pieces: the note, which is the indebtedness, and the mortgage (in some states, a “deed of trust”), which is the lien against the property. In 45 of 50 states, the mortgage follows the note (it is an “accessory”) and has no independent existence (as in you can’t enforce the mortgage if you don’t hold the note. You need to have both the note and the mortgage. This is a bit approximate, but will do for this discussion).

Now, the note is a bearer instrument if it is endorsed in blank (as in signed by current owner but not specifically made payable to the next owner, which was common for notes that were sold). It isn’t some damned “documentation”. Remember the days of bonds, when you had the real security, or stock certificates? This is paper with a hard monetary value, the face amount of the note (as long as it’s current, anyhow).

So now go back and look at that little extract. This “oh business was so busy we mislaid a lot of paper” isn’t some mere filing error. It’s like saying you left an envelopes full of cash in the subway on a regular basis. In the late 1960s back office crisis on Wall Street, when the volume of stock trading overwhelmed delivery and settlement infrastructure, a LOT of firms went out of business, in the midst of a bull market.

OK, now the second item with the article finesses is the sale of mortgages versus the role of the servicer. For the overwhelming majority of first mortgages, and I believe about 50% of second mortgages and HELOCs, the servicer is working for a trust that holds the notes pursuant to a securitization.

The standard documentation for a RMBS calls for the trust to gave a certification at closing that it has all the notes and it has to recertify that it has all the assets at two additional future dates, usually 90 days out and a full year after closing.

So this “notes were flyin’ around, yeah we lost track” is presumably impossible if we are discussing securitizations. Or put it another way: it means the fraud here is much more extensive than servicers making up documents ex post facto. It means the fraud extended back into how the securitization took place (as in what investors were told v. what actually happened).

And before you say these reports are exaggerated, my limited sample and my discussions with mortgage professional (not merely plaitiff’s attorneys but mortgage industry lifers) suggests the reverse.

But what about the second claim in the headline, that this activity has reached a “fever pitch”? Wellie, that’s a distortion too, perhaps to energize those who would be enraged by visions of deadbeat borrowers staying in houses due to fancy legal footwork. Trust me, there are FAR more overextended borrowers living in “free” housing due to banks slowing up the foreclosure process than due to legal battles.

First, the story is ONLY about Florida, despite the hyperventilating tone. And Florida is way ahead of other jurisdictions. There is a group of lawyers that are sharing G2 on these cases, and there are also a fair number of sympathetic judges. Note some states (Minnesota in particular) have both extremely pro bank laws and a business friendly bar. So it’s misleading to make sweeping generalizations; you need to get a bit more granular, which this article fails to do.

Second, the “fever pitch” headline also conveys the impression that this is an epidemic, ergo, these cases are widespread. While it is hard to be certain (this activity is by nature fragmented), at this point, that looks to be quite an exaggeration. The vast majority of borrowers, when the foreclosure process moves forward, don’t fight. They lack the energy and the resources. And when the borrower prevails, the case is typically dismissed “without prejudice”, meaning if the servicer and trustee get their act together, they can come back to court and try again.

Most of the battles against foreclosure appear to fall into one of two categories:

1. The borrower can afford the mortgage, but has fallen behind due to what he thinks is a servicing snafu. I can give you the long form, but the way servicers charge extra fees is in violation of Federal law and is designed to put the borrower on a treadmill of escalating fees. And they do not typically inform the borrower that fees have compounded until 6 or more months into the mess, and by that time, the arrearage can be $2000 or more. The borrower is unable to fix the servicing error, the fees continue to escalate, and the house goes into foreclosure.

2. The borrower has filed for a Chapter 13 bankruptcy, but the trustee is fighting the bankruptcy stay and trying to seize the house.

So why this alarmist American Banker article? Even if the numbers of successfully contested foreclosures are not (yet) large, the precedents being set are very detrimental to the foreclosure mills, the servicers, and the trustees. Moreover, the costs of fighting these cases can quickly exceed the value of the mortgage. So it would not take much of an increase in this trend to wreak havoc with servicer economics, and ultimately, the losses on the trust, particularly on prime mortgages, where the loss cushions were considerably smaller than on subprime.

I suspect the real reason for alarm isn’t the “fever pitch,” meaning the current level of activity. It’s that a state attorney general is throwing his weight against the servicers, and what he is uncovering is every bit as bad as what the critics have been saying for some time. That may indeed kick up anti-foreclosure efforts in states with open-minded judges to a completely new level.

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FRAZILE v. EMC MORTGAGE CORPORATION

LUCE FRAZILE, Plaintiff-Appellant,
v.

EMC MORTGAGE CORPORATION, a Foreign corporation, FREMONT REORGANIZING CORPORATION, a foreign corporation, Defendants-Appellees.

No. 09-15560. Non-Argument Calendar.

United States Court of Appeals, Eleventh Circuit.

June 11, 2010.

Before BIRCH, MARTIN and ANDERSON, Circuit Judges.

DO NOT PUBLISH

PER CURIAM:

Luce Frazile brought this action against EMC Mortgage Corporation (“EMC”) and Fremont Reorganizing Corporation (“Fremont”). She alleges that in executing and servicing her mortgage loan the defendants misrepresented the true nature of her obligations and violated various federal loan processing requirements. The district court granted the defendants’ motions to dismiss. This appeal followed. For reasons we will discuss, we affirm in part, reverse in part, and remand to the district court.

I.

Accepting the factual allegations of the complaint as true and construing them in the light most favorable to Frazile, the relevant facts are as follows. In 2006, a Fremont agent approached Frazile and encouraged her to refinance the home mortgage on her primary residence, which she alone owned. After she refinanced, it quickly became apparent that Frazile could not afford the payments on her newly refinanced mortgage and she turned to Fremont to rework the agreement’s terms. On November 16, 2006, Frazile again refinanced her mortgage loan. However, Frazile claims that at closing Fremont never provided her with certain documents, namely a consumer handbook on adjustable rate mortgages, two copies of a notice of right to cancel the mortgage, or a closing package. She further alleges that at some point after closing, EMC was assigned either the mortgage and note, loan servicing responsibility, or some combination of these.

Approximately two years after closing, in November 2008, Frazile attempted to rescind her mortgage loan transaction, a right to which she claimed entitlement under the Truth in Lending Act (“TILA”), 15 U.S.C. §§ 1601-1667f. In December 2008, Frazile finally received a “less-than-complete copy of the closing package” from EMC. In these documents, her monthly income was misstated as $4,000, well above her actual $1,200 monthly earnings. Under the terms of the mortgage, the required monthly payments actually exceeded her monthly income. According to her complaint, “[t]he cumulative effect of increased monthly mortgage payments, property taxes and insurance premiums was to create an onerous financial burden on Frazile that would seriously jeopardize her ownership of the homestead of sixteen (16) years.”

On June 15, 2009, Frazile filed this lawsuit. In addition to three state law claims, she sought relief under the Real Estate Settlement Procedures Act (“RESPA”), 12 U.S.C. §§ 2601-2617, TILA, and relevant federal regulations. The defendants filed Rule 12(b)(6) motions to dismiss for failure to state a claim. The district court granted the defendants’ motions, dismissing with prejudice Frazile’s federal claims, declining to exercise supplemental jurisdiction as to her remaining state law claims, and closing the case. Frazile now appeals, challenging only the district court’s ruling as to her two federal claims.

II.

“We review de novo the district court’s grant of a motion to dismiss under Rule 12(b)(6).” Redland Co. v. Bank of Am. Corp., 568 F.3d 1232, 1234 (11th Cir. 2009). While we accept all allegations of the complaint as true, the “[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, 127 S. Ct. 1955, 1965 (2007). In other words, the plaintiff must “allege[] enough facts to suggest, raise a reasonable expectation of, and render plausible” the claims. Watts v. Fla. Int’l Univ., 495 F.3d 1289, 1296 (11th Cir. 2007). “[T]he tenet that a court must accept as true all of the allegations contained in a complaint is inapplicable to legal conclusions.” Ashcroft v. Iqbal, 556 U.S. ___, 129 S. Ct. 1937, 1949 (2009). Furthermore, although the pleading party is not required to “allege a specific fact to cover every element or allege with precision each element of a claim, it is still necessary that a complaint contain either direct or inferential allegations respecting all the material elements necessary to sustain a recovery under some viable legal theory.” Roe v. Aware Woman Ctr. for Choice, Inc., 253 F.3d 678, 683 (11th Cir. 2001) (citation and internal quotation marks omitted).

A.

Count I of the complaint alleged violation of RESPA. In her complaint, Frazile specifically identified only one provision of that statute as the basis for her claims. She asserted that the defendants’ statutorily required “good faith estimate” failed to “timely provide [her] with full disclosure regarding the nature and the cost of the loan” including the “amount or range of settlement charges.” For this reason, she alleged that the defendants violated 12 U.S.C. § 2604(c).

We have held in the past that “there is no private civil action for a violation of 12 U.S.C. § 2604(c), or any regulations relating to it.” Collins v. FMHA-USDA, 105 F.3d 1366, 1368 (11th Cir. 1997). For this reason, we affirm the district court’s conclusion that all claims brought under this provision must fail.

However, the district court went on to liberally construe Frazile’s complaint. The court examined Frazile’s argument, made in response to the defendants’ motions to dismiss, that she had pleaded sufficient facts to give rise to a claim under 12 U.S.C. § 2605. Section 2605 does afford a private cause of action, and requires that “[e]ach transferee servicer to whom the servicing of any federally related mortgage loan is assigned, sold, or transferred shall notify the borrower of any such assignment, sale, or transfer.” 12 U.S.C. § 2605(c)(1). The district court dismissed any claim arguably brought under § 2605 on the grounds that Frazile failed to allege either (1) actual damage from the nondisclosure of the assignment of the servicing of the loan—as compared to nondisclosure of the terms of the mortgage—or (2) a pattern or practice of nondisclosure by the defendants that would warrant statutory damages. Such an allegation is a necessary element of any claim under § 2605. Id. § 2605(f). After careful review of the complaint, we agree with the conclusion of the district court that Frazile failed to allege facts relevant to the necessary element of damages caused by assignment. She did not, therefore, state a claim under § 2605.

On appeal, Frazile first acknowledges that her “complaint, as drafted, alleges that the [RESPA] violations were of § 2604(c), only.” Despite this fact, and without citation to any statutory provision, relevant regulation, or binding authority, Frazile sets out a series of other RESPA claims that she argues can be inferred from the facts alleged in her complaint. Her attempts to salvage a RESPA claim, however, are without merit. Frazile seems to suggest that she can assert a cause of action under 12 U.S.C. § 2607 (prohibiting kickbacks, markups, and fee splitting for services not performed) or 12 U.S.C. § 2605(e) (setting out the proper form and timing of responses to qualified written requests).

Frazile never raised arguments regarding § 2607 at the district court, even though she had the opportunity to do so. When, for instance, the defendants pointed out in their respective motions to dismiss that § 2604(c) could not support a private cause of action, Frazile did not argue that her complaint alleged facts sufficient to give rise to claims of unlawful markups, kickbacks, or fee splitting. Instead, as it related to RESPA, Frazile’s responsive filing focused entirely on § 2605. She argued that although she had cited only § 2604(c), “[t]he motion to dismiss should be denied because Ms. Frazile is afforded a private or individual cause of action under § 2605.” “[W]e have repeatedly held that `an issue not raised in the district court and raised for the first time in an appeal will not be considered by this court.’” Walker v. Jones, 10 F.3d 1569, 1572 (11th Cir. 1994) (quoting Depree v. Thomas, 946 F.2d 784, 793 (11th Cir. 1991)). If we were to try and address these new arguments on appeal, “we [would] have nothing to go on other than scattered (and unsupported) factual references in the appellant[`s] brief before this Court.” Access Now, Inc. v. Sw. Airlines Co., 385 F.3d 1324, 1332 (11th Cir. 2004). Under this standard, Frazile failed to preserve a § 2607 claim.

In addition, after careful review of Frazile’s complaint, we cannot conclude that Frazile “alleged enough facts to suggest, raise a reasonable expectation of, and render plausible” claims brought under either § 2607 or § 2605(e). See Watts, 495 F.3d at 1296. Relying solely on the allegations of the complaint, we conclude that Frazile’s pleading did not afford the defendants fair notice either that she brought a claim for payment of unlawful kickbacks, markups, or fee splitting, or that she brought a claim based on the inadequacy of their response to her qualified written request. In other words, her complaint did not include factual allegations sufficient “to raise a right to relief above the speculative level.” Twombly, 550 U.S. at 555, 127 S. Ct. at 1965.

For the foregoing reasons, the district court did not err when it held that Frazile’s complaint failed to state a RESPA claim.

B.

Frazile also sought relief under TILA, alleging that the defendants violated 15 U.S.C. §§ 1635, 1640, and 1641 as well as Regulation Z, 12 C.F.R. § 226. She asked that the district court remedy her losses by rescinding her mortgage transaction and awarding damages, costs, and attorney’s fees. The district court rejected Frazile’s TILA claims on the grounds that rescission was not available for residential mortgage transactions of the type at issue in Frazile’s suit and that any claim for damages was time-barred.

The district court turned to 15 U.S.C. § 1635(e)(1) to dispense with Frazile’s rescission claim. However, its reliance on this provision was misplaced. TILA exempts from the right of rescission residential mortgage transactions “to finance the acquisition or initial construction of such dwelling.” See 15 U.S.C. §§ 1635(e)(1), 1602(w); 12 C.F.R. §§ 226.23(f)(1), 226.2(a)(24). However, the facts alleged in Frazile’s complaint clearly demonstrate that the mortgage at issue was obtained as part of a refinancing transaction. Thus, § 1635(e)(1)’s exemption is not applicable.^{[ 1 ]}

Frazile also sought damages, attorney’s fees, and costs under § 1640(a) both for the defendants’ failure to comply with the statute’s disclosure requirements and for their failure to properly respond to her November 2008 rescission request. The district court addressed only the former issue, deeming any claim for damages time-barred under § 1640(e), which requires that plaintiffs bring suit “within one year from the date of the occurrence of the violation.” 15 U.S.C. § 1640(e).

This Court has observed that a TILA nondisclosure “violation `occurs’ when the transaction is consummated,” in other words, at the time of closing of a residential mortgage transaction. Smith v. Am. Fin. Sys., Inc. (In re Smith), 737 F.2d 1549, 1552 (11th Cir. 1984). Insofar as nondisclosure is concerned, we have held that the violation “is not a continuing violation for purposes of the statute of limitations.” Id. We have also recognized that the doctrine of equitable tolling might salvage a stale TILA claim where the debtor “ha[s] been prevented from [bringing suit] due to inequitable circumstances.” Ellis v. Gen. Motors Acceptance Corp., 160 F.3d 703, 706-08 (11th Cir. 1998).

The alleged nondisclosure occurred at closing on November 16, 2006, more than a year prior to the commencement of this suit. As the district court correctly observed, the complaint’s relevant assertions of misconduct all relate to conduct that took place on or before closing. Because Frazile filed this suit on June 15, 2009, more than one year later, her damages action for noncompliance with TILA’s disclosure requirements is time-barred.^{[ 2 ]}

However, the district court did not evaluate whether the defendants’ failure to timely rescind the mortgage transaction amounted to a separate violation of § 1635(b), which is actionable under § 1640(a). See In re Smith, 737 F.2d at 1552. When a borrower exercises a valid right to rescission, the creditor must take action within twenty days after receipt of the notice of rescission, returning the borrower’s money and terminating its security interest. See 15 U.S.C. § 1635(b). Failure to do so constitutes a separate violation of TILA, actionable under § 1640. Therefore, the one-year limitations period for violation of § 1635(b) claims runs from twenty days after a plaintiff gives notice of rescission. See Belini v. Wash. Mut. Bank, FA, 412 F.3d 17, 26 (1st Cir. 2005) (holding that though the plaintiffs had conceded that their disclosure-based TILA claims were time-barred, the statute of limitations had not yet run on claims arising out of noncompliance with § 1635(b)’s twenty-day requirement). Frazile alleged that in November 2008 she exercised her statutory right to rescind and that the defendants failed to timely respond. Frazile then filed this action on June 15, 2009. Thus, Frazile’s cause of action for inadequate response to her notice of rescission is not time-barred.^{[ 3 ]}

We recognize that the defendants set out a series of alternative grounds on which we might affirm the district court’s dismissal of Frazile’s TILA claims. Despite our authority to affirm on other grounds, we think the better course is to leave these issues for appropriate factual and legal development by the district court. See Jones v. Dillard’s, Inc., 331 F.3d 1259, 1268 n.4 (11th Cir. 2003). On remand, the district court should therefore evaluate the defendants’ other grounds for dismissal and determine whether Frazile has, in fact, stated a TILA claim. If she has, the district court must then determine whether the alleged nondisclosures preserved Frazile’s right to rescind for three years, see 15 U.S.C. § 1635(f), and whether Frazile has alleged that the defendants violated TILA’s rescission procedures by failing to adequately respond to her rescission notice, see id. § 1635(b).

III.

For the foregoing reasons, the district court’s dismissal of Frazile’s RESPA claims is AFFIRMED. However, we REVERSE as to Frazile’s TILA claims and REMAND for proceedings consistent with this opinion.

FL BROWARD COUNTY very own DJSP aka TOP FORECLOSURE FIRM Law Office of David J. Stern has alleged to have unloaded OVER 28% shares as it tanked!

CINCINNATI, Jun 14, 2010 (GlobeNewswire via COMTEX) — Attorney Advertising

The class action law firm of Statman, Harris & Eyrich, LLC announced today that it is investigating DJSP Enterprises, Inc. (“DJSP” or the “Company”) (DJSP 6.29, +0.04, +0.64%) for potential violations of state and federal securities laws. The affected stock was purchased between March 11, 2010 and May 27, 2010.

The firm’s investigation was triggered on May 27, 2010, when DJSP announced its operating results for the first quarter 2010. DJSP revealed that the Company would be unable to meet its earnings estimates and revised its earnings guidance from $1.83 to $1.29-1.36 EPS.

As a direct result, on May 28, 2010, DJSP’s stock fell to $6.38 per share, a decline of over 28% on unusually high trading volume.

Shareholders who purchased DJSP stock between March 11, 2010 and May 27, 2010 may have a claim against the Company and are encouraged to contact attorney Melinda Nenning at (513) 658-8867 or mnenning@statmanharris.com for further information without any obligation or cost to you.

Statman, Harris & Eyrich, LLC has offices in Chicago, Illinois; Cincinnati, Ohio; and Dayton, Ohio. www.statmanharris.com

This news release was distributed by GlobeNewswire, www.globenewswire.com

SOURCE: Statman, Harris & Eyrich, LLC

CONTACT:  Statman, Harris & Eyrich, LLC
Melinda S. Nenning, Esq.
(513) 658-8867
Toll-Free: (888) 876-7881
mnenning@statmanharris.com
441 Vine Street, Suite 3700
Cincinnati, Ohio 45202

(C) Copyright 2010 GlobeNewswire, Inc. All rights reserved.

We find that the denial of these motions constituted a gross abuse of discretion, we reverse.

[ipaper docId=33016514 access_key=key-xmq2izaefqys3tk7jfz height=600 width=600 /]

By Lorraine Woellert and John Gittelsohn

June 14 (Bloomberg) — The cost of fixing Fannie Mae and Freddie Mac, the mortgage companies that last year bought or guaranteed three-quarters of all U.S. home loans, will be at least $160 billion and could grow to as much as $1 trillion after the biggest bailout in American history.

Fannie and Freddie, now 80 percent owned by U.S. taxpayers, already have drawn $145 billion from an unlimited line of government credit granted to ensure that home buyers can get loans while the private housing-finance industry is moribund. That surpasses the amount spent on rescues of American International Group Inc., General Motors Co. or Citigroup Inc., which have begun repaying their debts.

“It is the mother of all bailouts,” said Edward Pinto, a former chief credit officer at Fannie Mae, who is now a consultant to the mortgage-finance industry.

Fannie, based in Washington, and Freddie in McLean, Virginia, own or guarantee 53 percent of the nation’s $10.7 trillion in residential mortgages, according to a June 10 Federal Reserve report. Millions of bad loans issued during the housing bubble remain on their books, and delinquencies continue to rise. How deep in the hole Fannie and Freddie go depends on unemployment, interest rates and other drivers of home prices, according to the companies and economists who study them.

‘Worst-Case Scenario’

The Congressional Budget Office calculated in August 2009 that the companies would need $389 billion in federal subsidies through 2019, based on assumptions about delinquency rates of loans in their securities pools. The White House’s Office of Management and Budget estimated in February that aid could total as little as $160 billion if the economy strengthens.

If housing prices drop further, the companies may need more. Barclays Capital Inc. analysts put the price tag as high as $500 billion in a December report on mortgage-backed securities, assuming home prices decline another 20 percent and default rates triple.

Sean Egan, president of Egan-Jones Ratings Co. in Haverford, Pennsylvania, said that a 20 percent loss on the companies’ loans and guarantees, along the lines of other large market players such as Countrywide Financial Corp., now owned by Bank of America Corp., could cause even more damage.

“One trillion dollars is a reasonable worst-case scenario for the companies,” said Egan, whose firm warned customers away from municipal bond insurers in 2002 and downgraded Enron Corp. a month before its 2001 collapse.

Unfinished Business

A 20 percent decline in housing prices is possible, said David Rosenberg, chief economist for Gluskin Sheff & Associates Inc. in Toronto. Rosenberg, whose forecasts are more pessimistic than those of other economists, predicts a 15 percent drop.

“Worst case is probably 25 percent,” he said.

The median price of a home in the U.S. was $173,100 in April, down 25 percent from the July 2006 peak, according to the National Association of Realtors.

Fannie and Freddie are deeply wired into the U.S. and global financial systems. Figuring out how to stanch the losses and turn them into sustainable businesses is the biggest piece of unfinished business as Congress negotiates a Wall Street overhaul that could reach President Barack Obama’s desk by July.

Neither political party wants to risk damaging the mortgage market, said Douglas Holtz-Eakin, a former director of the Congressional Budget Office and White House economic adviser under President George W. Bush.

“Republicans and Democrats love putting Americans in houses, and there’s no getting around that,” Holtz-Eakin said.

‘Safest Place’

With no solution in sight, the companies may need billions of dollars from the Treasury Department each quarter. The alternative — cutting the federal lifeline and letting the companies default on their debts — would produce global economic tremors akin to the U.S. decision to go off the gold standard in the 1930s, said Robert J. Shiller, a professor of economics at Yale University in New Haven, Connecticut, who helped create the S&P/Case-Shiller indexes of property values.

“People all over the world think, ‘Where is the safest place I could possibly put my money?’ and that’s the U.S.,” Shiller said in an interview. “We can’t let Fannie and Freddie go. We have to stand up for them.”

Congress created the Federal National Mortgage Association, known as Fannie Mae, in 1938 to expand home ownership by buying mortgages from banks and other lenders and bundling them into bonds for investors. It set up the Federal Home Loan Mortgage Corp., Freddie Mac, in 1970 to compete with Fannie.

Lower Standards

The companies’ liabilities stem in large part from loans and mortgage-backed securities issued between 2005 and 2007. Directed by Congress to encourage lending to minorities and low- income borrowers at the same time private companies were gaining market share by pushing into subprime loans, Fannie and Freddie lowered their standards to take on high-risk mortgages.

Many of those went to borrowers with poor credit or little equity in their homes, according to company filings. By early 2008, more than $500 billion of loans guaranteed or held by Fannie and Freddie, about 10 percent of the total, were in subprime mortgages, according to Fed reports.

Fannie and Freddie also raised billions of dollars by selling their own corporate debt to investors around the world. The bonds are seen as safe because of an implicit government guarantee against default. Foreign governments, including China’s and Japan’s, hold $908 billion of such bonds, according to Fed data.

‘Debt Trap’

“Do we really want to go to the central bank of China and say, ‘Tough luck, boys’? That’s part of the problem,” said Karen Petrou, managing partner of Federal Financial Analytics Inc., a Washington-based research firm.

The terms of the 2008 Treasury bailout create further complications. Fannie and Freddie are required to pay a 10 percent annual dividend on the shares owned by taxpayers. So far, they owe $14.5 billion, more than the companies reported in income in their most profitable years.

“It’s like a debt trap,” said Qumber Hassan, a mortgage strategist at Credit Suisse Group AG in New York. “The more they draw, the more they have to pay.”

Fannie and Freddie also benefited by selling $1.4 trillion in mortgage-backed securities to the Fed and the Treasury since September 2008, bonds that otherwise would have weighed on their balance sheets. While the government bought only the lowest-risk securities, it could incur additional losses.

‘Hard to Judge’

Treasury Secretary Timothy F. Geithner has vowed to keep Fannie and Freddie operating.

“It’s very hard to judge what the scale of losses is,” Geithner told Congress in March.

One idea being weighed by the Obama administration involves reconstituting Fannie and Freddie into a “good bank” with performing loans and a “bad bank” to absorb the rest. That could cost taxpayers as much as $290 billion because of all the bad loans, according to a May estimate by Credit Suisse analysts.

At the end of March, borrowers were late making payments on $338.4 billion worth of Fannie and Freddie loans, up from $206.1 billion a year earlier, according to the companies’ first- quarter filings at the Securities and Exchange Commission.

The number of loans more than three months past due has risen every quarter for more than a year, hitting 5.5 percent at Fannie as of the end of March and 4.1 percent at Freddie, according to the filings.

Surge in Delinquencies

The composition of the $5.5 trillion of loans guaranteed by Fannie and Freddie suggests that the surge in delinquencies may continue. About $1.98 trillion of the loans were made in states with the nation’s highest foreclosure rates — California, Florida, Nevada and Arizona — and $1.13 trillion were issued in 2006 and 2007, when real estate values peaked. Mortgages on which borrowers owe more than 90 percent of a property’s value total $402 billion.

Fannie and Freddie may suffer additional losses as a result of the Treasury’s effort to prevent foreclosures. Under the program, banks with mortgages owned or guaranteed by the companies must rewrite loan terms to make them easier for borrowers to pay.

The Treasury program is budgeted to cost Fannie and Freddie $20 billion. The companies have already modified about 600,000 delinquent loans and refinanced almost 300,000 more, in some cases for an amount greater than the houses are worth.

The government is using Fannie and Freddie “for a public- policy purpose that may well increase the ultimate cost of the taxpayer rescue,” said Petrou of Federal Financial Analytics. “Treasury is rolling the dice.”

Republican Phase-Out

If the plan works and foreclosures fall, that could help stabilize Fannie’s and Freddie’s balance sheets and ultimately protect taxpayers.

“Avoiding foreclosures can be a route to reducing loss severity,” said Sarah Rosen Wartell, executive vice president of the Center for American Progress, a Washington research group with ties to the Obama administration.

Loans issued since 2008, when the companies raised standards for borrowers, should be profitable and help offset prior losses, Wartell said.

Republicans attempted to include a phase-out of the mortgage companies in the financial reform bill. Democratic lawmakers and the Obama administration opted for further study, and the Treasury began soliciting ideas in April.

Representative Scott Garrett, a New Jersey Republican and co-sponsor of the phase-out amendment, said eliminating Fannie and Freddie would force the government and the housing market to confront the issue.

“It’s somewhat impossible to predict the magnitude of their impact if they continue to be the primary source of lending,” Garrett said in an interview.

Caught in ‘Quandary’

Democrats dismissed the phase-out idea as simplistic.

“We need to have a housing-financing system in place,” Senate Banking Committee Chairman Christopher Dodd said last month. “If you pull that rug out at this particular juncture, I don’t know what the particular result would be. We’re caught in this quandary.”

By delaying action, the Obama administration keeps losses off the government’s books while building a floor under housing prices during a congressional election year.

Keeping Fannie and Freddie functioning could also support an overall economic recovery. Residential real estate — the money spent on rent, mortgage payments, construction, remodeling, utilities and brokers’ fees — accounted for about 17 percent of gross domestic product in 2009, according to the National Association of Home Builders.

‘Already Lost’

Allowing the companies to go under and hoping that private financing will fill the gap isn’t realistic, analysts say. It would require at least two years of rising property values for private companies to return to the mortgage-securitization market, said Robert Van Order, Freddie’s former chief international economist and a professor of finance at George Washington University in Washington.

The price tag of supporting Fannie and Freddie “needs to be evaluated against the cost of not having a mortgage market,” said Phyllis Caldwell, chief of the Treasury’s Homeownership Preservation Office.

Whatever the fix, the money spent will not be recovered, said Alex Pollock, a former president of the Federal Home Loan Bank of Chicago who is now a fellow at the Washington-based American Enterprise Institute.

“It doesn’t matter what you do or don’t do, Fannie and Freddie will cost a lot of money,” Pollock said. “The money is already lost. There’s an attempt to try to avert your eyes.”

To contact the reporter on this story: Lorraine Woellert in Washington at lwoellert@bloomberg.net; John Gittelsohn in New York at johngitt@bloomberg.net.

Last Updated: June 13, 2010 19:00 EDT

*NOT LEGAL ADVICE* This is a must for anyone who wants to understand in simple form what has occurred with most Mortgage Loans and the meaning of bifuraction. Many just do not understand and I hope this comes as a great education tool for many. This is for educational purposes only and not intended to legal advice.

[ipaper docId=33335744 access_key=key-128zh9xi0glm6j9tpup0 height=600 width=600 /]

From: alviec

By Amy Cherry WDEL
Updated Monday, June 14, 2010 – 12:46pm

WDEL’s Amy Cherry reports. Audio Here

Foreclosures skyrocket here in Delaware over the past 12 months, and now, state officials are meeting at a foreclosure summit to come up with ways to combat the challenge.

The seed was planted with the subprime mortgage crisis, and the problem has gotten worse. Foreclosure filings in Delaware tripled over the last year to 6,500.

Anas Ben Addi, Director of the Delaware State Housing Authority, says there’s a number of state programs that can help struggling homeowners.

“The Delaware Emergency Mortgage Assistance Program that offers up to $15,000 deferred loan. We have H-GAP that offers a grant for $5,000.

He offers this advice to anyone who fears losing their home.

“Call your lender. Your lender is not a property manager. They’re not in the real estate business. They’re not interested in owning your property. They will be the first to work with you to keep you in your house.” DinSFLA: Obviously, he is not in the real world, They are not helping! If a lender is selling bank owned this makes them “in the business”.

For those, who’ve already fallen over the edge and filed for foreclosure this year, Ben Addi says there’s help for you too.

“The Neighborhood Civilization Program that helps community rehab and sell. We have rental assistance for folks, who went through foreclosure, and we’ll be talking about this – how can we better use it and get the word out.”

Here is a fable that is making the rounds. It is a collection of half-truths and outright lies:

The financial meltdown was the result of too many people pursuing the American Dream of home ownership. People who couldn’t really afford to be homeowners became speculators. Government added to the damage with cheap mortgages, misguided laws such as the Community Reinvestment Act, and overgrown government-sponsored agencies like Fannie Mae and Freddie Mac.

This stuff is a staple of rightwing talk shows. In a moment, I will rebut each element of this storyline, but first I want to single out a wildly misleading piece by the New York Times financial columnist Joe Nocera. The piece, which ran in Saturday’s business section, was titled “Wake-Up Time for a Dream.”

The dream — surprise — is home ownership. It is depressing that a rightwing theme has invaded the mainstream Times.

Nocera writes, “The financial crisis might well have been avoided if we as a culture hadn’t invested so much political and psychological capital in the idea of owning a home. After all, the subprime mortgage business’s supposed raison d’etre was making homeownership possible for people who lacked the means — or the credit scores — to get a traditional mortgage.”

Now this is just malarkey. And the Nocera piece is worth reading in its entirety to appreciate just how an influential financial columnist can get a critically important story so utterly wrong.

For starters, the homeownership rate was already 64 percent in the mid 1960s. It peaked at about 69 percent just before the bubble burst — but was nearly 68 percent in 2001 before subprime lending took off. Back in the 19th century, thanks to the Homestead Acts of the Lincoln era, homeownership (mainly family farms) was well over 70 percent in much of the west.

Ordinary working people can become homeowners and accumulate property wealth when two elements are present. Government programs have to be competently run and prevent private-industry sharks from abusing them. And working people need a degree of financial predictability in their job security.

In the period between, Franklin Roosevelt and LBJ, both factors prevailed. The Federal National Mortgage Association, later privatized as Fannie Mae, was part of the government. If mortgages met its standards, FNMA bought them from local banks and replenished bank working capital. Just as importantly, wages of working people steadily rose, so that more and more ordinary Americans could afford mortgage payments. Not surprisingly, homeownership rates rose. After Congress passed fair housing legislation in 1968, so that minorities could get a fair shot, black homeownership took off, too.

But beginning in the 1970s, wages stopped increasing with productivity growth. And the financial sharks got hold of programs intended to promote homeownership.

A newly privatized FNMA increasingly thought more about using its implicit government guarantee to increase market share and enrich its executives and shareholders. Not until Bush II, however, in 2004 and 2005 just before the housing collapse, was Fannie directed by the political masters in the White House to lower its standards and purchase pools of dubious mortgages so that Bush’s “Ownership Society” could claim credit for increasing homeownership rates.

Fannie Mae, a corrupted agency, has become a handy all purpose scapegoat. The lack of a provision in the financial reform legislation to resolve the mess at Fannie has become the main alibi that Republican senators give for voting against the whole reform package.

Nocera contends that the subprime industry’s “raison d’etre” was to promote homeownership “for people who lacked the means — or the credit scores — to get a traditional mortgage.” Sorry, Joe. The industry’s reason for being was so that financial wise guys could make a bundle at the expense of suckers. Low income prospective homeowners were merely useful props. They were the poster children, but not the real purpose.

(In 1994, the same Nocera was celebrating prosperity-for-all in a wildly over-optimistic book titled “A Piece of the Action: How the Middle Class Joined the Moneyed Class.” If his latest debunking is Nocera’s way of doing penance for his own earlier misplaced euphoria, it is just not helpful.)

The pity is that carefully run government programs, from the Homestead Acts to Neighborhood Housing Services, to the good work of community development financial institutions such as Chicago’s ShoreBank, have indeed increased the rate of homeownership among working people, and have done so by avoiding bait-and-switch products like subprime loans, not promoting them. The culprit is not the dream of owning your own home, but the utter cynicism of the financial sharks who took advantage of people innocently pursuing the dream.

Large numbers of subprime loans were in fact marketed to elderly people who had low mortgage debts, who could not live on fixed incomes and who needed to refinance their homes to take out equity. This was not about promoting homeownership but destroying it. Many of these victims are now losing their homes. The stripping of home equity is partly a story of a collapsing pension system in the face of rising costs for America’s seniors.

The 1977 Community Reinvestment Act, which encouraged banks to keep credit flowing to less affluent neighborhoods “consistent with sound lending standards” is not part of this fiasco at all. Had CRA been enforced, subprime loans that waived underwriting standards would have been illegal. Most of the mortgage brokers who retailed subprime loans were not even covered by CRA.

It’s certainly true (and no serious person claims otherwise) that 100 percent of Americans will never own their own homes. Some people are too transient or just too poor. Some would prefer to rent. But, maddeningly, one element of the story that the debunkers of the American Dream invariably leave out is the near-collapse of programs for affordable rental housing. Among moderate income Americans who rent, the fraction of income spent on housing rose steadily for three decades.

Ironically, many low income people turned to homeownership as a last resort because they couldn’t find an affordable rental — and the same Bush Administration that gutted subsidies for affordable rental housing refused to enforce laws on the books specifying standards for responsible lending to aspiring homeowners.

A sound housing policy would combine assistance for homeownership with affordable rental housing. A homeownership rate of 70 percent, which is common in several affluent European nations, is perfectly reasonable — if our political system keeps sharks like the subprime gang from wrecking the system and agencies such as FNMA from being corrupted.

Fannie Mae, which over-reached and went broke as a private company with a government guarantee, is now a ward of the federal government. It should be restored to its original form under Roosevelt, as a public corporation with high principles and high standards.

In the aftermath of the subprime collapse, many hard working lower income people, including a great many African Americans, have seen their dreams wiped out. The home ownership rate in black communities, which were targeted for subprime loans, is in free fall. Brandeis University’s Institute on Assets and Social Policy reports a devastating increase in the black-white wealth gap.

The same New York Times recently published a fine piece by reporter Michael Powell on what is happening to the black middle class in Memphis, “Blacks in Memphis Lose Decades of Economic Gains.”

The same story could be told about hundreds of predominantly African American neighborhoods.

The villain of the piece is the mortgage meltdown coupled with rising unemployment rates that are the collateral damage of the same financial collapse. The villain is not moderate income homeowners.

These people paid their mortgages on time, and there was nothing wrong with their dream. What was wrong was the failure of their government to keep the private financial industry from stealing the dream.

Robert Kuttner’s new book is A Presidency in Peril. He is co-editor of The American Prospect and a senior fellow at Demos.

Source: Huffington Post

What in the world does math have to do with foreclosures?? If you lost your job or simply cannot afford the payments chances are you found yourself in foreclosure. You see this took me what 2 seconds to figure out? The study was conducted on 340 people…a pin hole compared to a sink hole! Eh?

Study Says Math Deficiencies Increase Foreclosure Risk

By BOB TEDESCHI Published: June 9, 2010 NyTimes

IF you can’t divide 300 by 2, should you qualify for a loan?

That is one of the questions raised by a new study led by a Columbia University assistant business professor, Stephan Meier, who found that borrowers with poor math skills were three times more likely than others to go into foreclosure.

Mr. Meier conceded that the results were not shocking, but he said he had not expected the connection between math skills and mortgage default to be so pronounced.

About 340 borrowers in Connecticut, Massachusetts and Rhode Island who took out subprime loans in 2006 and 2007 were surveyed in 2008. None were in foreclosure.

The respondents were asked five questions, with the first requiring borrowers to divide 300 by 2, and the second to calculate 10 percent of 1,000. (Since the survey was conducted by telephone, the questioners did not know who was using a calculator.)

About 16 percent of the respondents answered at least one of the first two questions incorrectly. Mr. Meier said that the results were consistent among all levels of education and income.

Over all, 21 percent of the respondents whose math abilities placed them in the bottom quarter of the survey experienced foreclosure, versus 7 percent of those in the top quarter.

Mr. Meier said the fact that the borrowers in the sample had subprime loans — which in 2006 and 2007 were given even to those with dismal financial histories — did not lessen the significance of the findings. A larger survey in Britain, he said, found nearly the same levels of math illiteracy among those questioned about retirement savings.

Mr. Meier said the study had at least two implications for mortgage lenders. “Maybe start adding math tests to the process,” he said, “and screen them away.”

The other alternative, he said, would be working to help borrowers improve their financial literacy before they took out the loan.

“There are a lot of financial decisions you have to make as a homeowner,” he noted, “but some of the more difficult decisions have to do with how to rebudget if you’re hit by an income shock, which a lot of people had to do during the recession.”

Mortgage lenders, brokers and counselors mostly agree that it’s difficult to gauge a borrower’s math skills under the current mortgage-application system.

“A lot of payment numbers are discussed,” said Richard L. Tracy Jr., the chief executive of Campbell Mortgage in West Haven, Conn., “but by that time the computer programs have already done the math.”

Mr. Tracy said that although he believed financial literacy and math skills were important predictors of a borrower’s ability to pay, borrowers deficient in those respects would most likely also have weak credit scores.

Jacqui Atcheson, a senior loan officer with Prospect Mortgage of Sherman Oaks, Calif., said that she worked closely on budgeting possibilities with any borrower whose credit history was checkered. She added that she would not offer a loan to a borrower she found lacking in the mathematical or financial skills needed to pay it back, even if the borrower could qualify for a mortgage.

Eileen Anderson, a senior vice president of the Community Development Corporation of Long Island, a nonprofit housing organization, says her group counsels struggling borrowers through the foreclosure-avoidance process. “Many of them don’t understand how to do a budget — which is basic math, I guess,” she said.

Borrowers who receive prepurchase buyer education are less likely to end up in foreclosure than those who do not, she added.

“In our programs,” Ms. Anderson said, “we’re doing the math with them, not for them.”

And better-educated borrowers are not exempt, either.

“People say they’re doctors, so they don’t really need it,” she said. “So what? We see doctors who took out loans they didn’t understand, and who are in foreclosure now.”

I recently made a post about Shares of DJSP Enterprises Get SLAMMED….FALL 25%. Are we seeing a DownTrend?
Stock fell from $13.65 to $4.94 in 5 months!!!

I guess now we know what may be happening…Stay tuned as I will be watching closely!

Investigation on behalf of investors in DJSP Enterprises, Inc (NASDAQ:DJSP) over possible securities laws violations – Contact the Shareholders Foundation, Inc

mail@shareholdersfoundation.com

FOR IMMEDIATE RELEASE

# # #

RELATED STORY:

ARE FORECLOSURE MILLS Coercing Buyers for BANK OWNED homes? ARE ALL THE MILLS?

Law Firm of David J. Stern (DJSP) Appears to Be Under State And Federal Investigation For Fraud, Stern Law Firm Even Has It’s Own “Michael Clayton”.

IN RE Mortgage Electronic Registration Systems (MERS) Litigation.

No. 09-2119-JAT.

United States District Court, D. Arizona.

June 4, 2010.

ORDER

JAMES A. TEILBORG, District Judge.

In the transfer order establishing this consolidated multidistrict litigation (“MDL”), the Judicial Panel on Multidistrict Litigation (“Panel”) stated, “IT IS FURTHER ORDERED that claims unrelated to the formation and/or operation of the MERS system are simultaneously remanded to their respective transferor courts.” (Doc. #1.) The parties contest which claims in each of the various cases relate to the formation and/or operation of MERS.^[1] This Order addresses the thirteen cases^[2] listed below that were transferred by the MDL Conditional Transfer Order (CTO-2) and Simultaneous Separation and Remand of Certain Claims (Doc. #107):

First Plaintiff's Name   Arizona Case Number   Original Jurisdiction Case Number

Huck[3]               CV 10-401-PHX-JAT     3:09-553 (Nevada)
Gillespie                CV 10-413-PHX-JAT     3:09-556 (Nevada)
Duncan                   CV 10-414-PHX-JAT     3:09-632 (Nevada)
Sieben                   CV 10-416-PHX-JAT     3:09-642 (Nevada)
Huck                     CV 10-417-PHX-JAT     3:09-643 (Nevada)
Vo                       CV 10-425-PHX-JAT     3:09-654 (Nevada)
Eastwood                 CV 10-426-PHX-JAT     3:09-656 (Nevada)
Ellifritz                CV 10-427-PHX-JAT     3:09-663 (Nevada)
McConathy                CV 10-428-PHX-JAT     3:09-665 (Nevada)
Smith                    CV 10-429-PHX-JAT     3:09-666 (Nevada)
Sage                     CV 10-456-PHX-JAT     3:09-689 (Nevada)
Mason                    CV 10-457-PHX-JAT     3:09-734 (Nevada)
Freeto                   CV 10-459-PHX-JAT     3:09-754 (Nevada)
Fitzgerald               CV 10-460-PHX-JAT     3:10-1 (Nevada)
Dominguez                CV 10-461-PHX-JAT     3:10-16 (Nevada)

I. General Interpretation of the Transfer Order

In the initial transfer order, the Panel transferred to this Court all allegations within these actions that “the various participants in MERS formed a conspiracy to commit fraud and/or that security instruments are unenforceable or foreclosures are inappropriate due to MERS’s presence as a party” or that otherwise concern the “formation and operation” of MERS. (Doc. #1.) However, the Panel simultaneously remanded unrelated claims to their transferor courts, finding that “plaintiffs’ claims relating to loan origination and collection practices do not share sufficient questions of fact with claims regarding the formation and operation” of MERS and their inclusion “would needlessly entangle the litigation in unrelated, fact-intensive issues.” Id.

Accordingly, this Court will not retain claims that, although naming MERS as a defendant, allege conduct primarily related to loan origination and collection practices, or otherwise stray from the common factual core of the MDL. Only causes of action that in essence turn on the formation or operation of MERS, no matter how framed, have been transferred to the undersigned.

Defendants Mortgage Electronic Registration Systems, Inc. and MERSCORP, Inc. (collectively, “Moving Defendants”) filed a Motion to Remand Claims. (Doc. #364.) Four responses were filed. Defendant OneWest Bank (“OneWest”) disagrees with Moving Defendants on six claims in one case. (Doc. #420.) Defendants Countrywide Home Loans, Inc., Countrywide Financial Corp., Countrywide Bank, F.S.B., Bank of America Corporation, N.A., ReconTrust Company, N.A., First Horizon Home Loans Corporation, and Wells Fargo Bank (collectively, “Responding Defendants”) disagree as to six types of claims in seven cases. (Doc. #428.) Two other responses were filed that do not dispute the Moving Defendants’ analysis. (Doc. ##415, 416.) MERS replied. (Doc. #433.)

II. Claims on Which the Parties Do Not Agree

Within these “tag-along” actions there are several types of claims over which the parties disagree. Where the parties agree as to the proper determination of a claim, the Court adopts the parties’ determination unless otherwise noted.

A. Fraud in the Inducement

The parties disagree about the status of claims for fraud in the inducement in Duncan (Fourteenth Claim), Sieben (Fourteenth Claim), Huck (Fourteenth Claim), and Ellifritz (Fourteenth Claim). Moving Defendants argue that all of these claims have been transferred to the MDL. Responding Defendants argue that the claims in Duncan, Sieben, and Huck have been split with part of each claim transferred to the MDL and part of each claim remanded to the respective transferor court. OneWest argues that the claim in Ellifritz has been remanded in its entirety.

Each of these claims contains the allegation that defendants “failed to disclose the material terms of the loans” and other allegations relating to the loan origination process.^[4] But these claims also allege that defendants failed to disclose that they “had no lawful right to foreclose upon” the properties and that “[the plaintiffs’] obligations on the notes had been discharged.” These allegations relate to the operation of MERS.^[5]

While either the MERS-related misrepresentations or the non-MERS-related misrepresentations could each be logically sufficient to establish liability, it may be that only all of the misrepresentations together were sufficient to induce the plaintiffs to enter the contract. Thus, these claims cannot be split and—as at least some of the allegations relate to the operation and formation of MERS—these claims have been transferred in their entirety to the MDL.

B. Fraud Through Omission

The Parties disagree about the status of claims for fraud through omission in Duncan (Sixth Claim), Sieben (Sixth Claim), Huck (Sixth Claim), and Ellifritz (Sixth Claim). Moving Defendants argue that these claims have been transferred to the MDL, while Responding Defendants and OneWest argue that these claims have been split with part of each claim transferred to the MDL and part of each claim remanded to the respective transferor court.

Each of these claims contains the allegation that defendants failed to disclose their “predatory, unethical and unsound lending and foreclosure practices” and the “predatory… practices of other major lenders, of which Defendants were aware per the MERS system.”^[6] Thus, these claims involve both MERS-related omissions and non-MERS-related omissions which could serve as the basis for a finding of fraud. However, just as with the fraud in the inducement claims above, the fraud through omission claims cannot be severed. Therefore, these claims have been transferred in their entirety to the MDL.

C. Racketeering

Plaintiffs assert claims for racketeering activity under Nevada law in Duncan (Eleventh Claim), Sieben (Eleventh Claim), and Huck (Eleventh Claim). These claims allege vaguely that defendants have “engaged in racketeering” via the “predatory and abusive lending practices described herein.”^[7] Responding Defendants argue that because these alleged underlying lending practices have been bifurcated, with some retained and some remanded, this racketeering claim must also have been split. Moving Defendants argue that because these claims are unclear as to which practices actually constitute the racketeering claim, they have been transferred to the MDL in its entirety.

The Court finds that these claims incorporate each and every other claim in their respective complaints. Thus, it would be feasible for either a pair of non-MERS-related violations to support a racketeering claim or a pair of MERS-related violations to support a racketeering claim. Therefore, these racketeering claims should be considered by both this Court and the transferor court. Accordingly, these claims have been bifurcated.^[8]

D. Civil Conspiracy

Plaintiffs assert claims for civil conspiracy in, Duncan (Tenth Claim), Sieben (Tenth Claim), and Huck (Tenth Claim). These claims allege vaguely that defendants have “entered into a conspiracy with other members of MERS” in which they “failed to inform Nevada mortgagors of their rights,” continue to illegally “eject Nevadans” from their homes, and commit the violations alleged in the other claims of the complaint.^[9] Responding Defendants argue that because these alleged underlying violations include claims that have been retained and claims that have been remanded, this conspiracy claim must also have been split. Moving Defendants argue that all of the allegations are fused with the alleged MERS conspiracy and have thus been transferred to the MDL.

The Court finds that these claims are cumulative of all other claims in their respective complaints. Thus, it would be feasible for either a pair of non-MERS-related violations to support a conspiracy claim or a pair of MERS-related violations to support a conspiracy claim. Therefore, these civil conspiracy claims should be considered by both this Court and the transferor court. Accordingly, these claims have been bifurcated.^[10]

E. Contractual Breach of Duty of Good Faith and Fair Dealing and Tortious Breach of the Implied Duty of Good Faith and Fair Dealing

The parties disagree on these two types of claims in Duncan (Eighth and Ninth Claims), Sieben (Eighth and Ninth Claims), Huck (Eighth and Ninth Claims), and Ellifritz (Eighth and Ninth Claims). Moving Defendants argue that these claims have been transferred in full, Responding Defendants argue that these claims in Duncan, Sieben, and Huck have been severed with part transferred and part remanded, and OneWest argues that these claims in Ellifritz have been remanded in full.

Plaintiffs allege that defendants’ participation in MERS created a duty of good faith and fair dealing which was breached in the loan origination process.^[11] Thus, even though these claims involve loan origination, they raise questions of fact sufficiently related to operation of MERS. Thus, these claims have been transferred in their entirety to the MDL.

F. Wrongful Foreclosure

Plaintiffs assert a claim for wrongful foreclosure in Ellifritz (Fifth Claim). Moving Defendants argue that the claim has been retained, while OneWest argues that this claim has been split. Specifically, OneWest argues that “Plaintiffs’ allegation that their obligations have been discharged because investors of mortgage-backed securities received federal bailout funds” deals with “collection of payments on the mortgage loan, and whether Plaintiffs’ payment obligation has been discharged” and has been remanded. (Doc. #420 at 5-6.) Moving Defendants contend that because “the federal-bailout allegation concerns the role of [MERS], the `wrongful foreclosure’ claim was transferred to this Court in its entirety.” (Doc. #433 at 6.)

The Panel’s transfer order made clear that the actions transferred to this Court “possess a common factual core regarding allegations that… security instruments are unenforceable or foreclosures are inappropriate due to MERS’s presence as a party.” (Doc. #1 at 2.) Here the allegation is that defendants’ “foreclosures are inappropriate” due to the workings of the federal bailout. This allegation appears to share sufficient questions of fact with claims regarding the formation and operation of MERS that it is properly part of the MDL. Accordingly, the entirety of this claim for wrongful foreclosure has been retained.

G. Conspiracy to Commit Fraud and Conversion

Plaintiffs assert a claim for “conspiracy to commit fraud and conversion” in Ellifritz (Second Claim). Moving Defendants argue that this claim has been transferred to the MDL and OneWest argues that this claim has been remanded. The claim alleges that defendants conspired to defraud plaintiffs “by participating in [MERS]… which was the forming of an association to conspire to deprive Plaintiff(s) of their property through fraud and misrepresentation…”^[12] This allegation relates to the formation and operation of MERS and, thus, the Court finds that this claim has been transferred.

Accordingly,

IT IS ORDERED that the Motion to Remand Certain Claims (Doc. #364) is GRANTED IN PART and DENIED IN PART.

IT IS FURTHER ORDERED that with respect to Huck (CV 10-401-PHX-JAT), Gillespie (CV 10-413-PHX-JAT), CV 10-415-PHX-JAT (Caffee), and CV 10-455-PHX-JAT (Barlow) the motion is denied without prejudice. Moving Defendants shall have ten days after the Court rules on the motions for leave to amend to file a motion to remand all claims that it asserts the panel remanded to the respective transferor courts in the transfer orders; Plaintiffs and the non-moving Defendants shall respond to this motion to remand within ten days and in the responses shall specify what claims they agree were remanded, what additional claims, if any, have been remanded, and what claims, if any, they assert were not remanded; Moving Defendants shall reply (in a consolidated reply) within ten days.

IT IS FURTHER ORDERED that with respect to Duncan (CV 10-414-PHX-JAT), Sieben (CV 10-416-PHX-JAT), Huck (CV 10-417-PHX-JAT), Vo (CV 10-425-PHX-JAT), Ellifritz (CV 10-427-PHX-JAT), McConathy (CV 10-428-PHX-JAT), Smith (CV 10-429-PHX-JAT), and Sage (CV 10-456-PHX-JAT) claims 2, 5-9, 13 and 14 and part of claims 3, 4, 10, 11, and 12 remain with the undersigned as part of the MDL and claim 1 and part of claims 3, 4, 10, 11, and 12 have been remanded to their respective transferor courts. MERS shall file a copy of this Order with each transferor court within the next two business days.

IT IS FURTHER ORDERED that with respect to Eastwood (CV 10-426-PHX-JAT) claims 1-2, 5-9, 13 and 14 and part of claims 3, 4, 10, 11, and 12 remain with the undersigned as part of the MDL and part of claims 3, 4, 10, 11, and 12 have been remanded to the transferor court. MERS shall file a copy of this Order with the transferor court within the next two business days.

IT IS FURTHER ORDERED that with respect to Mason (CV 10-457-PHX-JAT) and Fitzgerald (CV 10-460-PHX-JAT) claims 1-4 and part of claim 6 (i.e., injunctive relief, declaratory relief, and quiet title) remain with the undersigned as part of the MDL and claim 5 and part of claim 6 (i.e., injunctive relief, declaratory relief, and reformation) have been remanded to their respective transferor courts. MERS shall file a copy of this Order with each transferor court within the next two business days.

IT IS FURTHER ORDERED that with respect to Freeto (CV 10-459-PHX-JAT) claims 2, 5-11, and 13 and part of claims 3 and 4 remain with the undersigned as part of the MDL and claims 1 and 12 and part of claims 3 and 4 have been remanded to the transferor court.^[13] MERS shall file a copy of this Order with the transferor court within the next two business days.

IT IS FURTHER ORDERED that with respect to Dominguez (CV 10-461-PHX-JAT) claims 1-2, 5-11, 13 and 14 and part of claims 3, 4, and 12 remain with the undersigned as part of the MDL and part of claims 3, 4, and 12 have been remanded to the transferor court.^[14] MERS shall file a copy of this Order with the transferor court within the next two business days.

IT IS FURTHER ORDERED that the Clerk of the Court shall file a copy of this Order in each member case listed on page 2.

IT IS FURTHER ORDERED that with respect to any claims that are staying with this Court, Defendants shall answer or otherwise respond to those claims within the time limits set in the Initial Practice and Procedure Order (Doc. #25); with respect to any claims that have been remanded to the transferor courts, Defendants shall answer or otherwise respond to those claims within fifteen days of this Order, unless any order of the transferor court is inconsistent with this Order, in which case, the order of the transferor court shall control.

IT IS FURTHER ORDERED within 12 days of this Order, MERS shall file all documents related to a case bifurcated herein into the record of the transferor court in that particular case. (Because this Court will not transfer the entire MDL file and docket to any individual transferor court, this will insure the Judge in the transferor court has a complete record for that specific case).

[1] The parties have fully briefed this issue pursuant to the Court’s Order on Practices and Procedures (Doc. #176). Although the parties sought “remand” of certain claims to the transferor court, under Section 1407(a), remands to a transferor court can only be effected by the Judicial Panel on Multidistrict Litigation. 28 U.S.C. § 1407; see also R.P.J.P.M.L. 7.6. The Court, thus, stresses that this order is solely a determination of which claims are pending before this Court and which claims remain in their respective transferor courts, pursuant to the Panel’s transfer orders.

[2] Twenty-one additional cases transferred by the transfer order have been addressed by a separate set of briefing.

[3] In four cases briefed for this order, CV 10-401-PHX-JAT (Huck), CV 10-413-PHX-JAT (Gillespie), CV 10-415-PHX-JAT (Caffee), and CV 10-455-PHX-JAT (Barlow), Plaintiffs have moved for leave to file amended complaints. (Doc. ##525, 526, 564, 573.) The Court will wait until after it grants or denies those motions to determine which claims have been retained and which claims have been remanded in these four cases. An updated briefing schedule is set forth below.

[4] See, e.g., CV 10-414-PHX-JAT (Duncan), Doc. #1-1 at 48-50

[5] Id.

[6] See, e.g., CV 10-413-PHX-JAT (Duncan), Doc. #1-1 at 31.

[7] See, e.g., CV 10-414-PHX-JAT (Duncan), Doc. #1-1 at 43.

[8] The identical racketeering claims in Vo (Tenth Claim), Eastwood (Tenth Claim), Ellifritz (Tenth Claim), McConathy (Tenth Claim), Smith (Tenth Claim), Sage (Tenth Claim), Freeto (Tenth Claim), and Dominguez (Tenth Claim) are also bifurcated.

[9] See, e.g., CV 10-414-PHX-JAT (Duncan), Doc. #1-1 at 41-42.

[10] The identical civil conspiracy claims in Vo (Eleventh Claim), Eastwood (Eleventh Claim), Ellifritz (Eleventh Claim), McConathy (Eleventh Claim), Smith (Eleventh Claim), Sage (Eleventh Claim), Freeto (Eleventh Claim), and Dominguez (Eleventh Claim) are also bifurcated.

[11] See, e.g., CV 10-414-PHX-JAT (Duncan), Doc. #1-1 at 38-41.

[12] CV 10-437-PHX-JAT (Ellifritz), Doc. #1-1 at 41.

[13] While these remanded claims do not appear to involve Defendants Litton Loan Servicing LP, Bank of New York Mellon as former trustee for the C-BASS Mortgage Loan Asset-Backed Certificates Series 2005-CB4, and JPMorgan Chase Bank, National Association, as former trustee for the C-BASS Mortgage Loan Asset-Backed Certificates Series 2005-CB4 (collectively, “Litton Loan Group”), this argument is better made in a motion to dismiss. Thus, the Court remands these claims even as they relate to the Litton Loan Group.

[14] The Court remands these claims even as they relate to Defendant Litton Loan Servicing LP.

Finally, Borrowers Score Points

By GRETCHEN MORGENSON NYTimes
Published: June 11, 2010

WHILE the wheels of justice have turned very slowly in the years since our nation’s financiers and regulators nearly cratered our economy, the Federal Trade Commission’s settlement last Monday with Countrywide Home Loans suggests that they haven’t entirely ground to a halt.

Countrywide, now a unit of Bank of America, was once led by Angelo Mozilo and was the nation’s largest mortgage lender in the glorious, pre-crisis days of the housing boom. But it was also a predatory institution, and the F.T.C., citing Countrywide’s serial abuse of troubled borrowers, extracted a $108 million fine from Bank of America last week.

That money will go back to some 200,000 customers whom Countrywide forced to pay outsized fees for foreclosure services. These included billing a borrower $300 to have a property’s lawn mowed and levying $2,500 in trustees’ fees on another borrower, when the going rate for that service was about $600.

Though Countrywide’s mortgage contracts specifically barred such practices, they served the company well by generating income during downturns when it was harder to keep making money off new mortgages. This “counter-cyclical diversification strategy,” as Countrywide called it, was designed to “extract the last dollar out of the pockets of the most desperate consumers,” said Jon Leibowitz, the F.T.C. chairman.

[NYTIMES]

2010 NY Slip Op 04868

THE PEOPLE OF THE STATE OF NEW YORK BY ANDREW CUOMO, ATTORNEY GENERAL OF THE STATE OF NEW YORK, Plaintiff-Respondent,
v.
FIRST AMERICAN CORPORATION, ET AL., Defendants-Appellants.

406796/07, 1308.

Appellate Division of the Supreme Court of New York, First Department.

DLA Piper LLP (US), New York (Richard F. Hans, Patrick J. Smith, Kerry Ford Cunningham and Jeffrey D. Rotenberg of counsel), for appellants.

Andrew M. Cuomo, Attorney General, New York (Richard Dearing, Benjamin N. Gutman and Nicole Gueron of counsel), for respondent.

Before: Gonzalez, P.J., Saxe, Catterson, Acosta, JJ.

GONZALEZ, P.J.

This appeal calls upon us to determine whether the regulations and guidelines implemented by the Office of Thrift Supervision (OTS) pursuant to the Home Owner’s Lending Act of 1933 (HOLA) (12 USC § 1461 et seq.) and the Financial Institutions Reform, Recovery and Enforcement Act of 1989 (FIRREA) (Pub L 101-73, 103 STAT 183 [codified in scattered sections of 12 USC]), preempt state regulations in the field of real estate appraisal.

The Attorney General claims that defendants engaged in fraudulent, deceptive and illegal business practices by allegedly permitting eAppraiseIT residential real estate appraisers to be influenced by nonparty Washington Mutual, Inc. (WaMu) to increase real estate property values on appraisal reports in order to inflate home prices. We conclude that neither federal statutes, nor the regulations and guidelines implemented by the OTS, preclude the Attorney General of the State of New York from pursuing litigation against defendants First American Corporation and First American eAppraiseIT, LLC. We further conclude that the Attorney General has standing to pursue his claims pursuant to General Business Law § 349.

In a complaint dated November 1, 2007, plaintiff, the People of the State of New York, commenced this action against defendants asserting claims under Executive Law § 63(12) and General Business Law § 349, and for unjust enrichment. The complaint alleges that in Spring 2006, WaMu hired two appraisal management companies, defendant eAppraiseIT and nonparty Lender’s Service, Inc., to oversee the appraisal process and provide a structural buffer against potential conflicts of interest between WaMu and the individual appraisers. The gravamen of the Attorney General’s complaint asserts that defendants misled their customers and the public by stating that eAppraiseIT’s appraisals were independent evaluations of a property’s market value and that these appraisals were conducted in compliance with the Uniform Standards and Professional Appraisal Practice (USPAP), when in fact defendants had implemented a system allowing WaMu’s loan origination staff to select appraisers who would improperly inflate a property’s market value to WaMu’s desired target loan amount.^[1]

Defendants moved for dismissal of the complaint pursuant to CPLR 3211, asserting that the Attorney General is prohibited from litigating his claims because HOLA and FIERRA impliedly place the responsibility for oversight of appraisal management companies on the OTS, and asserting a failure to state a cause of action. Supreme Court denied defendants’ motion, finding that HOLA and FIRREA do not occupy the entire field with respect to real estate appraisal regulation and that the enforcement of USPAP standards under General Business Law § 349 neither conflicts with federal law, nor does it impair a bank’s ability to lend and extend credit. We affirm.

The Supremacy Clause of the United States Constitution provides that Federal laws “shall be the supreme Law of the Land; and the Judges in every State shall be bound thereby, any Thing in the Constitution or Laws of any State to the Contrary notwithstanding” (US Const, art VI, cl [2]), and it “vests in Congress the power to supersede not only State statutory or regulatory law but common law as well” (Guice v Charles Schwab & Co., 89 NY2d 31, 39 [1996], cert denied 520 US 1118 [1997]). Indeed, “[u]nder the U.S. Constitution’s Supremacy Clause (US Const, art VI, cl 2), the purpose of our preemption analysis is . . . to ascertain the intent of Congress” (Matter of People v Applied Card Sys., Inc., 11 NY3d 105, 113 [2008], cert denied ___ US ___, 129 S Ct 999 [2009]). Congressional intent to preempt state law may be established “by express provision, by implication, or by a conflict between federal and state law” (Balbuena v IDR Realty LLC, 6 NY3d 338, 356 [2006], quoting New York State Conference of Blue Cross & Blue Shield Plans v Travelers Ins. Co., 514 US 645, 654 [1995]). Express preemption occurs when Congress indicates its “pre-emptive intent through a statute’s express language or through its structure and purpose” (Altria Group, Inc. v Good, 555 US ___, ___, 129 S Ct 538, 543 [2008]). Absent explicit preemptive language, implied preemption occurs when “[t]he scheme of federal regulation [is] so pervasive as to make reasonable the inference that Congress left no room for the States to supplement it . . . [o]r the Act of Congress may touch a field in which the federal interest is so dominant that the federal system will be assumed to preclude enforcement of state laws on the same subject” (Rice v Santa Fe El. Corp., 331 US 218, 230 [1947]). Further, when “[a] conflict occurs either because compliance with both federal and state regulations is a physical impossibility, or because the State law stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress,” the State law is preempted (City of New York v Job-Lot Pushcart, 213 AD2d 210, 210 [1995], affd 88 NY2d 163 [1996], cert denied 519 US 871 [1996] [internal quotation marks and citations omitted]).

Here, defendants do not argue, nor have they directed this Court’s attention to any language within HOLA or FIRREA that establishes, that Congress expressly created these statutes to supersede state law governing the causes of actions asserted in the Attorney General’s complaint. Defendants also have not argued that there exists a conflict between federal and State laws or regulations. Rather, defendants assert that because Congress has legislated so comprehensively, and that federal law so completely occupies the home lending field, the Attorney General is precluded from bringing claims against them under the theory of field preemption. Thus, the necessary starting point is to determine whether HOLA and FIRREA so occupy the field that these two statutes preempt any and all state laws speaking to the manner in which appraisal management companies provide real estate appraisal services.

In 1933, Congress enacted HOLA “to provide emergency relief with respect to home mortgage indebtedness at a time when as many as half of all home loans in the country were in default” (Fidelity Fed. Sav. & Loan Assn. v De la Cuesta, 458 US 141, 159 [1982] [internal quotation marks and citations omitted]). HOLA created a general framework to regulate federally chartered savings associations that left the regulatory details to the Federal Home Loan Bank Board (FHLBB). The FHLBB’s authority to regulate federal savings and loans is virtually unlimited and “[p]ursuant to this authorization, the [FHLBB] has promulgated regulations governing the powers and operations of every Federal savings and loan association from its cradle to its corporate grave” (id. at 145 [internal citations and quotation marks omitted]).

When Congress passed FIRREA in 1989, it restructured the regulation of the savings association industry by abolishing the FHLBB and vested many of its functions into the newly-created OTS (see FIRREA § 301 [12 USCA § 1461 et seq.] [establishing OTS], § 401 [12 USCA § 1437] [abolishing the FHLBB]). According to FIRREA’s legislative history

“[t]he primary purposes of the [FIRREA] are to provide affordable housing mortgage finance and housing opportunities for low- and moderate-income individuals through enhanced management of federal housing credit programs and resources; establish organizations and procedures to obtain and administer the necessary funding to resolve failed thrift cases and to dispose of the assets of these institutions . . . and, enhance the regulatory enforcement powers of the depository institution regulatory agencies to protect against fraud, waste and insider abuse”

(HR Rep 101-54 [I], at 307-308, reprinted in 1989 US Code Cong to Admin News, at 103-104). FIRREA was also designed “to thwart real estate appraisal abuses, [by] establish[ing] a system of uniform national real estate appraisal standards.

It also requires the use of state certified or licensed appraisers for real estate related transactions with the Federal National Mortgage Association (Fannie Mae), the Federal Home Loan Mortgage Corporation (Fannie Mac), the RTC, or certain real estate transaction [sic] regulated by the federal financial institution regulatory agencies” (HR Rep 101-54 (I), at 311, reprinted in 1989 US Code Cong to Admin News, at 107).

Further, 12 USCS § 3331, which was enacted as part of FIRREA, states that the general purpose of this statute, is

“to provide that Federal financial and public policy interests in real estate related transactions will be protected by requiring that real estate appraisals utilized in connection with federally related transactions are performed in writing, in accordance with uniform standards, by individuals whose competency has been demonstrated and whose professional conduct will be subject to effective supervision.”

The uniform standards described in 12 USCS § 3331, are defined in 12 USCS § 3339 which requires that the OTS, as a

“Federal financial institution[] regulatory agency . . . shall prescribe appropriate standards for the performance of real estate appraisals in connection with federally related transactions^[2] under the jurisdiction of each such agency or instrumentality. These rules shall require, at a minimum — (1) that real estate appraisals be performed in accordance with generally accepted appraisal standards as evidenced by the appraisal standards promulgated by the Appraisal Standards Board of the Appraisal Foundation; and (2) that such appraisals shall be written appraisals.”

The Appraisal Standards Board (ASB) of the Appraisal Foundation promulgates the appraisal standards mandated by 12 USC § 3339 and are called USPAP. The Appraisal Foundation is a private “not-for-profit organization dedicated to the advancement of professional valuation [and] was established by the appraisal profession in the United States in 1987? (Welcome to The Appraisal Foundation [The Appraisal Foundation], https://netforum.avectra.com/eWeb/StartPage.aspx?Site=TAF [accessed May 27, 2010]). The ASB is responsible for “develop[ing], interpret[ing] and amend[ing]” USPAP (Welcome to The Appraisal Foundation, https://netforum.avectra.com/eWeb/ DynamicPage.aspx?Site=TAF & WebCode=ASB [accessed May 27, 2010]). However, “[e]ach U.S. State or Territory has a State appraiser regulatory agency, which is responsible for certifying and licensing real estate appraisers and supervising their appraisal-related activities, as required by Federal law” (State Regulatory Information [The Appraisal Foundation], https://netforum.avectra.com/eWeb/DynamicPage.aspx?Site=taf & WebCode=RegulatoryInfo [accessed May 27, 2010]; see also State Appraiser Regulatory Programs > State Contact Information [Appraisal Subcommittee], https://www.asc.gov/State-Appraiser-Regulatory-Programs/StateContactInformation.aspx [accessed May 27, 2010] [listing each State appraiser regulatory agency’s website]). Further, the OTS itself has determined that

“[i]t does not appear that OTS is required by title XI of FIRREA to implement an appraisal regulation that reaches all the activities of savings and loan holding companies, at least to the extent that those activities are unrelated to the safety and soundness of savings associations or their subsidiaries. Neither the language of Title XI nor its legislative history indicate that Congress intended title XI to apply to the wide range of activities engaged in by savings and loan holding companies and their non-saving association subsidiaries” (55 Fed Reg 34532, 34534-34535 [1990], codified at 12 CFR 506, 545, 563, 564 and 571).

Indeed, the OTS encourages financial institutions

“to make referrals directly to state appraiser regulatory authorities when a State licensed or certified appraiser violates USPAP, applicable state law, or engages in other unethical or unprofessional conduct. Examiners finding evidence of unethical or unprofessional conduct by appraisers will forward their findings and recommendations to their supervisory office for appropriate disposition and referral to the state, as necessary” (OTS, Thrift Bulletin, Interagency Appraisal and Evaluation Guidelines at 10 [November 4, 1994], http://files.ots.treas. gov/84042.pdf [accessed May 27, 2010]).

In looking at the legislative history it becomes clear that Congress intended to establish

“a system of uniform real estate appraisal standards and requires the use of State certified and licensed appraisers for federally regulated transactions by July 1, 1991. . . The key . . . lies in the creation of State regulatory agencies and a Federal watchdog to monitor the standards and to oversee State enforcement. . . It is this combination of Federal and State action . . . that . . . assur[es] . . . good standards are properly enforced (135 Cong Rec S3993-01, at S4004 [April 17, 1989], 1989 WL 191505 [remarks of Senator Christopher J. Dodd]).

Thus, we conclude that neither HOLA or FIRREA preempts or precludes the Attorney General from pursuing his claims.

Having rejected defendants’ general arguments for preemption under HOLA and FIRREA, “[t]he Court’s task, then, is to decide which claims fall on the regulatory side of the ledger and which, for want of a better term, fall on the common law side” ( Cedeno v IndyMac Bancorp, Inc., 2008 WL 3992304, *7, 2008 US Dist LEXIS 65337, *22 [SD NY 2008] [internal quotation marks and citation omitted]). Defendants assert that the Attorney General is preempted from pursuing his claims because subsequent to FIRREA’s passage, the OTS issued extensive regulations specifically addressing the composition and construction of appraisal programs undertaken by federal savings and loans.

It is well settled that “[a]gencies delegated rulemaking authority under a statute . . . are afforded generous leeway by the courts in interpreting the statute they are entrusted to administer” (Rapanos v United States, 547 US 715, 758 [2006]). Indeed, the OTS regulations “have no less pre-emptive effect than federal statutes” (Fidelity Fed. Sav. & Loan Assn., 458 US at 153). 12 CFR 545.2, states that regulations promulgated by the OTS are “preemptive of any state law purporting to address the subject of the operations of a Federal saving association.” However, 12 CFR 560.2(a) limits the language of 12 CFR 545.2 by setting parameters to the OTS’ authority to promulgate regulations that

“preempt state laws affecting the operations of federal savings associations when deemed appropriate to facilitate the safe and sound operation of federal savings associations, to enable federal savings associations . . . to conduct their operations in accordance with the best practices of thrift institutions in the United States, or to further other purposes of the HOLA” (12 CFR 560.2[a]).

12 CFR 560.2(b) provides a non-exhaustive list of illustrative examples of the types of state laws preempted by 12 CFR 560.2(a). Further, 12 CFR 560.2(c) states that the following types of State law are not preempted

“to the extent that they only incidentally affect the lending operations of Federal savings associations . . . (1) Contract and commercial law; (2) Real property law; (3) Homestead laws specified in 12 U.S.C. 1462a(f); (4) Tort law; (5) Criminal law; and (6) Any other law that OTS, upon review, finds: (i) Furthers a vital state interest; and (ii) Either has only an incidental effect on lending operations or is not otherwise contrary to the purposes expressed in paragraph (a) of this section.”

The OTS advises that when a court is

“analyzing the status of state laws under § 560.2, the first step will be to determine whether the type of law in question is listed in paragraph (b). If so, the analysis will end there; the law is preempted. If the law is not covered by paragraph (b), the next question is whether the law affects lending. If it does, then, in accordance with paragraph (a), the presumption arises that the law is preempted. This presumption can be reversed only if the law can clearly be shown to fit within the confines of paragraph (c). For these purposes, paragraph (c) is intended to be interpreted narrowly. Any doubt should be resolved in favor of preemption” (61 Fed Reg 50951-01, 50966-50967 [1996]).

Defendants argue that the Attorney General’s challenges to defendants’ business practices are preempted because the conduct falls within 12 CFR 560.2(b)(5), which provides examples of loan-related fees “including without limitation, initial charges, late charges, prepayment penalties, servicing fees, and overlimit fees.” Defendants also assert that their alleged conduct is within 12 CFR 560.2(b)(9), which provides

“[d]isclosure and advertising, including laws requiring specific statements, information, or other content to be included in credit application forms, credit solicitations, billing statements, credit contracts, or other credit-related documents and laws requiring creditors to supply copies of credit reports to borrowers or applicants” (id.).

Lastly, defendants assert that their alleged conduct falls within 12 CFR 560.2(b)(10) which states that “[p]rocessing, origination, servicing, sale or purchase of, or investment or participation in, mortgages” is preempted.

The Attorney General’s complaint asserts that defendants engaged in conduct proscribed by Executive Law § 63(12)^[3] and General Business Law § 349^[4] . It further alleges that defendants unjustly enriched themselves by repeated use of fraudulent or illegal business practices, in that they allowed WaMu to pressure eAppraiseIT appraisers to compromise their USPAP-required independence and collude with WaMu to inflate residential appraisal values so that the appraisals would match the qualifying loan values WaMu desired.

Under the first prong of the preemption analysis, we find that this action brought pursuant to Executive Law § 63(12), General Business Law § 349(b) and on the theory of unjust enrichment is not preempted by 12 CFR 560.2(b)(5) because it involves no attempt to regulate bank-related fees. We also find, under the first prong of the preemption analysis, that there is no preemption pursuant to 12 CFR 560.2(b)(9) because these claims do not involve a state law seeking to impose or require any specific statements, information or other content to be disclosed. Although at least one case has held that claims similar to those asserted here were preempted (see Spears v Washington Mut., Inc., 2009 WL 605835 [ND Cal 2009]), we find under the first prong of the preemption analysis that 12 CFR 660.2(b)(10) does not preclude the Attorney General’s complaint because prosecution of the alleged conduct will not affect the operations of federal savings associations (FSA) in how they process, originate, service, sell or purchase, or invest or participate in, mortgages.

The question then becomes whether the Attorney General is nevertheless precluded from litigating his claims under the second prong of the preemption analysis. Because enjoining a real estate appraisal management company from abdicating its publicly advertised role of providing unbiased valuations is not within the confines of 12 CFR 560.2(c), we answer it in the negative.

Defendants argue the OTS’s authority under HOLA and FIRREA is not limited to oversight of a FSA and that its authority under these two statues extends over the activity regulated and includes the activities of third party agents of a FSA. Defendants assert that providing real estate appraisal services is a critical component of the processing and origination of mortgages and represents a core component of the controlling federal regime. Defendants cite 12 USC § 1464(d)(7)(D) and State Farm Bank, FSB v Reardon (539 F3d 336 [6th Cir 2008]) for support. 12 USC § 1464(d)(7) states, in pertinent part, that

“if a savings association . . . causes to be performed for itself, by contract or otherwise, any service authorized under [HOLA] such performance shall be subject to regulation and examination by the [OTS] Director to the same extent as if such services were being performed by the savings association on its own premises . . .”

Here, it is alleged eAppraiseIT and Lender’s Service, Inc., were hired by WaMu to provide appraisal services. However, defendants are incorrect in asserting that providing real estate appraisal services is an authorized banking activity under HOLA. In an opinion letter dated October 25, 2004, OTS concluded that it had the authority to regulate agents of an FSA under HOLA because

“[i]nherent in the authority of federal savings associations to exercise their deposit and lending powers and to conduct deposit, lending, and other banking activities is the authority to advertise, market, and solicit customers, and to make the public aware of the banking products and services associations offer. The authority to conduct deposit and lending activities, and to offer banking products and services, is accompanied by the power to advertise, market, and solicit customers for such products and services . . . A state may not put operational restraints on a federal savings association’s ability to offer an authorized product or service by restricting the association’s ability to market its products and services and reach potential customers . . . Thus, OTS has authority under the HOLA to regulate the Agents the Association uses to perform marketing, solicitation, and customer service activities” (2004 OTS Op No. P-2004-7, at 7, http://files.ots.treas.gov/560404.pdf, 2004 OTS LEXIS 6, at *15 [accessed May 27, 2010]).

State Farm Bank, FSB v Reardon (539 F3d 336 [6th Cir 2008]) follows this principle. In Reardon, the plaintiff, a FSA chartered by the OTS under HOLA, decided to offer, through its independent contractor agents, first and second mortgages and home equity loans in the State of Ohio. The Sixth Circuit concluded that although the statute at issue

“directly regulates [the plaintiff FSA’s] exclusive agents rather than [the FSA] itself . . . the activity being regulated is the solicitation and origination of mortgages, a power granted to [the FSA] by HOLA and the OTS. This is also a power over which the OTS has indicated that any state attempts to regulate will be met with preemption . . . [T]he practical effect of the [statute] is that [the FSA] must either change its structure or forgo mortgage lending in Ohio. Thus, enforcement of the [statute] against [the FSA’s] exclusive agents would frustrate the purpose of the HOLA and the OTS regulations because it indirectly prohibits [the FSA] from exercising the powers granted to it under the HOLA and the OTS regulations” (Reardon, 539 F3d at 349 [internal quotation marks and citation omitted]).

Since appraisal services are not authorized banking products or services of a FSA, defendants have failed to show that the Attorney General is preempted from pursuing his claims under 12 USC § 1464(d)(7)(D). Consequently, under the second prong of the preemption analysis, the result of the Attorney General litigating his claims against a company that independently administers a FSA’s appraisal program would “only incidentally affect the lending operations of [the FSA]” (12 CFR 560.2[c]). Thus, defendants have failed to show that OTS’s regulations and guidelines preempt or preclude the Attorney General from pursuing his claims.

Defendants assert that Cedeno v IndyMac Bancorp, Inc. (2008 WL 3992304, 2008 US Dist LEXIS 65337 [SD NY 2008]) provides this Court with persuasive authority that the federal government and its regulators alone regulate the mortgage loan origination practices of FSAs including all aspects of the appraisal programs they utilize. In Cedeno, the Southern District found preemption precluded a private individual from maintaining a cause of action against a bank. It was alleged that the bank failed to disclose to the plaintiff that it selected appraisers, appraisal companies and/or appraisal management firms who would inflate the value of residential properties in order to allow the bank to complete more real estate transactions and obtain greater profits. This practice resulted in the plaintiff being misled as to the true equity in her home. The Southern District found that the conduct of the bank was

“directly regulated by the OTS: the processing and origination of mortgages, a loan-related fee, and the accompanying disclosure. The appraisals are a prerequisite to the lending process, and are inextricably bound to it. Because the plaintiff’s claim is not a simple breach of contract claim, but asks the Court to set substantive standards for the Associations’ lending operations and practices, it is preempted” (Cedeno, 2008 WL 3992304, *9, 2008 US Dist LEXIS 65337, at *28 [internal quotation marks and citations omitted]).

Contrary to defendants’ assertions, we find that Cedeno is not applicable here because Cedeno does not reach the question as to whether HOLA, FIRREA or OTS’s regulations and guidelines are intended to regulate the conduct of real estate appraisal companies.

Annexed to the OTS’s October 25, 2004 opinion letter is a document entitled Appendix A — Conditions. In this document, OTS requires FSAs that wish to use agents to perform marketing, solicitation, customer service, or other activities related to the FSA’s authorized banking products or services to enter into written agreements that “(4) expressly set[] forth OTS’s statutory authority to regulate and examine and take an enforcement action against the agent with respect to the activities it performs for the association, and the agent’s acknowledgment of OTS’s authority” (2004 OTS Op No. P-2004-7, at 16, http://files.ots. treas.gov/560404.pdf, 2004 OTS LEXIS 6, at *37 [accessed May 27, 2010]). We note that defendants have neither asserted that such written agreements exist nor produced such documents.

Thus, we conclude that the Attorney General may proceed with his claims against defendants because his challenge to defendants’ allegedly fraudulent and deceptive business practices in providing appraisal services is not preempted by federal law and regulations that govern the operations of savings and loan associations and institution-affiliated parties.

Defendants assert that the Attorney General cannot rely upon a substantive violation of a federal law to support a claim under General Business Law § 349 because this is an improper attempt to convert alleged violations of federal law into a violation of New York law. Defendants claim that where a plaintiff seeks to rely upon a substantive violation of a federal law to support a claim under General Business Law § 349, the federal law relied upon must contain a private right of action.

However, the Attorney General is statutorily charged with the duty to “[p]rosecute and defend all actions and proceedings in which the state is interested, and have charge and control of all the legal business of the departments and bureaus of the state, or of any office thereof which requires the services of attorney or counsel, in order to protect the interest of the state” (Executive Law § 63[1]). Indeed, when the Attorney General becomes aware of allegations of persistent fraud or illegality of a business, he

“is authorized by statute to bring an enforcement action seeking an order enjoining the continuance of such business activity or of any fraudulent or illegal acts, [and] directing restitution and damages’ (Executive Law § 63 [12]). He is also authorized, when informed of deceptive acts or practices affecting consumers in New York, to bring an action in the name and on behalf of the people of the state of New York to enjoin such unlawful acts or practices and to obtain restitution of any moneys or property obtained’ thereby (General Business Law § 349 [b])” (People v Coventry First LLC, 13 NY3d 108, 114 [2009]).

It is well settled that “[o]n a motion to dismiss pursuant to CPLR 3211, the court must accept the facts as alleged in the complaint as true, accord plaintiffs the benefit of every possible favorable inference, and determine only whether the facts as alleged fit within any cognizable legal theory’” (Wiesen v New York Univ., 304 AD2d 459, 460 [2003], quoting Leon v Martinez, 84 NY2d 83, 87-88 [1994]). The Attorney General’s complaint alleges that defendants publicly claimed on their eAppraiseIT website that eAppraiseIT provides a firewall between lenders and appraisers so that customers can be assured that USPAP and FIRREA guidelines are followed and that each appraisal is being audited for compliance. The Attorney General charges that defendants deceived borrowers and investors who relied on their proclaimed independence by allowing WaMu’s loan production staff to select the appraiser based upon whether they would provide high values.

We find defendants’ assertions that the Attorney General lacks standing under General Business Law § 349 and that his complaint fails to state a cause of action are without merit.

Indeed, the Attorney General’s complaint references misrepresentations and other deceptive conduct allegedly perpetrated on the consuming public within the State of New York, and “[a]s shown by its language and background, section 349 is directed at wrongs against the consuming public” (Oswego Laborers’ Local 214 Pension Fund v Marine Midland Bank, 85 NY2d 20, 24 [1995]). Therefore, we find that the Attorney General’s complaint articulates a viable cause of action under General Business Law § 349, and that this statute provides him with standing.

Consequently, we conclude that defendants have failed to demonstrate that HOLA, FIRREA or the OTS’s regulations and guidelines preempt or preclude the Attorney General from pursuing the causes of action articulated in his complaint. We additionally find that the Attorney General has standing under General Business Law § 349. We have reviewed defendants’ remaining contentions and we find them without merit.

Accordingly, the order of the Supreme Court, New York County (Charles Edward Ramos, J.), entered April 8, 2009, which, insofar as appealed from as limited by the briefs, denied defendants’ motion to dismiss the complaint on the ground of federal preemption, should be affirmed, without costs.

All concur.

THIS CONSTITUTES THE DECISION AND ORDER OF THE SUPREME COURT, APPELLATE DIVISION, FIRST DEPARTMENT.

[1] USPAP is incorporated into New York law and it prohibits a State-certified or State licensed appraiser from accepting a fee for an appraisal assignment “that is contingent upon the appraiser reporting a predetermined estimate, analysis, or opinion or is contingent upon the opinion, conclusion or valuation reached, or upon the consequences resulting from the appraisal assignment” (NY Exec Law § 160-y; 19 NYCRR 1106.1).

[2] 12 USC § 3350(4) states that “[t]he term federally related transaction’ means any real estate-related financial transaction which—(A) a federal financial institutions regulatory agency or the Resolution Trust Corporation engages in, contracts for, or regulates; and (B) requires the services of an appraiser.”

[3] Executive Law § 63(12) states, in pertinent part, that “[w]henever any person shall engage in repeated fraudulent or illegal acts or otherwise demonstrate persistent fraud or illegality in the carrying on, conducting or transaction of business, the attorney general may apply, in the name of the people of the state of New York . . . for an order enjoining the continuance of such business activity or of any fraudulent or illegal acts, directing restitution and damages. . .”

[4] General Business Law § 349(b) states, in pertinent part, that “[w]henever the attorney general shall believe from evidence satisfactory to him that any person, firm, corporation or association or agent or employee thereof has engaged in or is about to engage in any of the acts or practices stated to be unlawful he may bring an action in the name and on behalf of the people of the state of New York to enjoin such unlawful acts or practices and to obtain restitution of any moneys or property obtained directly or indirectly by any such unlawful acts or practices.”

Coming from one of my favorite blogs!

Thursday, June 10, 2010 The Real Estalker

Another Housewife Bites the Real Estate Dust

Posted by Your Mama at 7:33 AM

Dear Mr. Barlow,

I want to thank you for your excellent service. I cannot tell you how this ruling today saddens many in this situation.

We are witnessing indescribable horror in our judicial system that make us realize the following:

1. One does not need to be Registered to do Business in a state.
2. Promissory Notes are just as good as the paper my trash bag is made of.
3. Anyone can conceal important “facts” from any debtor.
4. Only when a party is in default the “shadow people” come to existence.
5. All we need is a “straw man” to hide assets.

Each day we get closer and closer to exposing the truth.

WE WILL DEFEAT THEM! WE WILL NOT GIVE UP!

IN RE Mortgage Electronic Registration Systems (MERS) Litigation.

No. 09-2119-JAT.

United States District Court, D. Arizona.

June 4, 2010.

ORDER

JAMES A. TEILBORG, District Judge.

In the transfer order establishing this consolidated multidistrict litigation (“MDL”), the Judicial Panel on Multidistrict Litigation (“Panel”) stated, “IT IS FURTHER ORDERED that claims unrelated to the formation and/or operation of the MERS system are simultaneously remanded to their respective transferor courts.” (Doc. #1.) The parties contest which claims in each of the various cases relate to the formation and/or operation of MERS.^[1] This Order addresses the thirteen cases^[2] listed below that were transferred by the MDL Conditional Transfer Order (CTO-2) and Simultaneous Separation and Remand of Certain Claims (Doc. #107):

First Plaintiff's Name   Arizona Case Number   Original Jurisdiction Case Number

Huck[3]               CV 10-401-PHX-JAT     3:09-553 (Nevada)
Gillespie                CV 10-413-PHX-JAT     3:09-556 (Nevada)
Duncan                   CV 10-414-PHX-JAT     3:09-632 (Nevada)
Sieben                   CV 10-416-PHX-JAT     3:09-642 (Nevada)
Huck                     CV 10-417-PHX-JAT     3:09-643 (Nevada)
Vo                       CV 10-425-PHX-JAT     3:09-654 (Nevada)
Eastwood                 CV 10-426-PHX-JAT     3:09-656 (Nevada)
Ellifritz                CV 10-427-PHX-JAT     3:09-663 (Nevada)
McConathy                CV 10-428-PHX-JAT     3:09-665 (Nevada)
Smith                    CV 10-429-PHX-JAT     3:09-666 (Nevada)
Sage                     CV 10-456-PHX-JAT     3:09-689 (Nevada)
Mason                    CV 10-457-PHX-JAT     3:09-734 (Nevada)
Freeto                   CV 10-459-PHX-JAT     3:09-754 (Nevada)
Fitzgerald               CV 10-460-PHX-JAT     3:10-1 (Nevada)
Dominguez                CV 10-461-PHX-JAT     3:10-16 (Nevada)

I. General Interpretation of the Transfer Order

In the initial transfer order, the Panel transferred to this Court all allegations within these actions that “the various participants in MERS formed a conspiracy to commit fraud and/or that security instruments are unenforceable or foreclosures are inappropriate due to MERS’s presence as a party” or that otherwise concern the “formation and operation” of MERS. (Doc. #1.) However, the Panel simultaneously remanded unrelated claims to their transferor courts, finding that “plaintiffs’ claims relating to loan origination and collection practices do not share sufficient questions of fact with claims regarding the formation and operation” of MERS and their inclusion “would needlessly entangle the litigation in unrelated, fact-intensive issues.” Id.

Accordingly, this Court will not retain claims that, although naming MERS as a defendant, allege conduct primarily related to loan origination and collection practices, or otherwise stray from the common factual core of the MDL. Only causes of action that in essence turn on the formation or operation of MERS, no matter how framed, have been transferred to the undersigned.

Defendants Mortgage Electronic Registration Systems, Inc. and MERSCORP, Inc. (collectively, “Moving Defendants”) filed a Motion to Remand Claims. (Doc. #364.) Four responses were filed. Defendant OneWest Bank (“OneWest”) disagrees with Moving Defendants on six claims in one case. (Doc. #420.) Defendants Countrywide Home Loans, Inc., Countrywide Financial Corp., Countrywide Bank, F.S.B., Bank of America Corporation, N.A., ReconTrust Company, N.A., First Horizon Home Loans Corporation, and Wells Fargo Bank (collectively, “Responding Defendants”) disagree as to six types of claims in seven cases. (Doc. #428.) Two other responses were filed that do not dispute the Moving Defendants’ analysis. (Doc. ##415, 416.) MERS replied. (Doc. #433.)

II. Claims on Which the Parties Do Not Agree

Within these “tag-along” actions there are several types of claims over which the parties disagree. Where the parties agree as to the proper determination of a claim, the Court adopts the parties’ determination unless otherwise noted.

A. Fraud in the Inducement

The parties disagree about the status of claims for fraud in the inducement in Duncan (Fourteenth Claim), Sieben (Fourteenth Claim), Huck (Fourteenth Claim), and Ellifritz (Fourteenth Claim). Moving Defendants argue that all of these claims have been transferred to the MDL. Responding Defendants argue that the claims in Duncan, Sieben, and Huck have been split with part of each claim transferred to the MDL and part of each claim remanded to the respective transferor court. OneWest argues that the claim in Ellifritz has been remanded in its entirety.

Each of these claims contains the allegation that defendants “failed to disclose the material terms of the loans” and other allegations relating to the loan origination process.^[4] But these claims also allege that defendants failed to disclose that they “had no lawful right to foreclose upon” the properties and that “[the plaintiffs’] obligations on the notes had been discharged.” These allegations relate to the operation of MERS.^[5]

While either the MERS-related misrepresentations or the non-MERS-related misrepresentations could each be logically sufficient to establish liability, it may be that only all of the misrepresentations together were sufficient to induce the plaintiffs to enter the contract. Thus, these claims cannot be split and—as at least some of the allegations relate to the operation and formation of MERS—these claims have been transferred in their entirety to the MDL.

B. Fraud Through Omission

The Parties disagree about the status of claims for fraud through omission in Duncan (Sixth Claim), Sieben (Sixth Claim), Huck (Sixth Claim), and Ellifritz (Sixth Claim). Moving Defendants argue that these claims have been transferred to the MDL, while Responding Defendants and OneWest argue that these claims have been split with part of each claim transferred to the MDL and part of each claim remanded to the respective transferor court.

Each of these claims contains the allegation that defendants failed to disclose their “predatory, unethical and unsound lending and foreclosure practices” and the “predatory… practices of other major lenders, of which Defendants were aware per the MERS system.”^[6] Thus, these claims involve both MERS-related omissions and non-MERS-related omissions which could serve as the basis for a finding of fraud. However, just as with the fraud in the inducement claims above, the fraud through omission claims cannot be severed. Therefore, these claims have been transferred in their entirety to the MDL.

C. Racketeering

Plaintiffs assert claims for racketeering activity under Nevada law in Duncan (Eleventh Claim), Sieben (Eleventh Claim), and Huck (Eleventh Claim). These claims allege vaguely that defendants have “engaged in racketeering” via the “predatory and abusive lending practices described herein.”^[7] Responding Defendants argue that because these alleged underlying lending practices have been bifurcated, with some retained and some remanded, this racketeering claim must also have been split. Moving Defendants argue that because these claims are unclear as to which practices actually constitute the racketeering claim, they have been transferred to the MDL in its entirety.

The Court finds that these claims incorporate each and every other claim in their respective complaints. Thus, it would be feasible for either a pair of non-MERS-related violations to support a racketeering claim or a pair of MERS-related violations to support a racketeering claim. Therefore, these racketeering claims should be considered by both this Court and the transferor court. Accordingly, these claims have been bifurcated.^[8]

D. Civil Conspiracy

Plaintiffs assert claims for civil conspiracy in, Duncan (Tenth Claim), Sieben (Tenth Claim), and Huck (Tenth Claim). These claims allege vaguely that defendants have “entered into a conspiracy with other members of MERS” in which they “failed to inform Nevada mortgagors of their rights,” continue to illegally “eject Nevadans” from their homes, and commit the violations alleged in the other claims of the complaint.^[9] Responding Defendants argue that because these alleged underlying violations include claims that have been retained and claims that have been remanded, this conspiracy claim must also have been split. Moving Defendants argue that all of the allegations are fused with the alleged MERS conspiracy and have thus been transferred to the MDL.

The Court finds that these claims are cumulative of all other claims in their respective complaints. Thus, it would be feasible for either a pair of non-MERS-related violations to support a conspiracy claim or a pair of MERS-related violations to support a conspiracy claim. Therefore, these civil conspiracy claims should be considered by both this Court and the transferor court. Accordingly, these claims have been bifurcated.^[10]

E. Contractual Breach of Duty of Good Faith and Fair Dealing and Tortious Breach of the Implied Duty of Good Faith and Fair Dealing

The parties disagree on these two types of claims in Duncan (Eighth and Ninth Claims), Sieben (Eighth and Ninth Claims), Huck (Eighth and Ninth Claims), and Ellifritz (Eighth and Ninth Claims). Moving Defendants argue that these claims have been transferred in full, Responding Defendants argue that these claims in Duncan, Sieben, and Huck have been severed with part transferred and part remanded, and OneWest argues that these claims in Ellifritz have been remanded in full.

Plaintiffs allege that defendants’ participation in MERS created a duty of good faith and fair dealing which was breached in the loan origination process.^[11] Thus, even though these claims involve loan origination, they raise questions of fact sufficiently related to operation of MERS. Thus, these claims have been transferred in their entirety to the MDL.

F. Wrongful Foreclosure

Plaintiffs assert a claim for wrongful foreclosure in Ellifritz (Fifth Claim). Moving Defendants argue that the claim has been retained, while OneWest argues that this claim has been split. Specifically, OneWest argues that “Plaintiffs’ allegation that their obligations have been discharged because investors of mortgage-backed securities received federal bailout funds” deals with “collection of payments on the mortgage loan, and whether Plaintiffs’ payment obligation has been discharged” and has been remanded. (Doc. #420 at 5-6.) Moving Defendants contend that because “the federal-bailout allegation concerns the role of [MERS], the `wrongful foreclosure’ claim was transferred to this Court in its entirety.” (Doc. #433 at 6.)

The Panel’s transfer order made clear that the actions transferred to this Court “possess a common factual core regarding allegations that… security instruments are unenforceable or foreclosures are inappropriate due to MERS’s presence as a party.” (Doc. #1 at 2.) Here the allegation is that defendants’ “foreclosures are inappropriate” due to the workings of the federal bailout. This allegation appears to share sufficient questions of fact with claims regarding the formation and operation of MERS that it is properly part of the MDL. Accordingly, the entirety of this claim for wrongful foreclosure has been retained.

G. Conspiracy to Commit Fraud and Conversion

Plaintiffs assert a claim for “conspiracy to commit fraud and conversion” in Ellifritz (Second Claim). Moving Defendants argue that this claim has been transferred to the MDL and OneWest argues that this claim has been remanded. The claim alleges that defendants conspired to defraud plaintiffs “by participating in [MERS]… which was the forming of an association to conspire to deprive Plaintiff(s) of their property through fraud and misrepresentation…”^[12] This allegation relates to the formation and operation of MERS and, thus, the Court finds that this claim has been transferred.

Accordingly,

IT IS ORDERED that the Motion to Remand Certain Claims (Doc. #364) is GRANTED IN PART and DENIED IN PART.

IT IS FURTHER ORDERED that with respect to Huck (CV 10-401-PHX-JAT), Gillespie (CV 10-413-PHX-JAT), CV 10-415-PHX-JAT (Caffee), and CV 10-455-PHX-JAT (Barlow) the motion is denied without prejudice. Moving Defendants shall have ten days after the Court rules on the motions for leave to amend to file a motion to remand all claims that it asserts the panel remanded to the respective transferor courts in the transfer orders; Plaintiffs and the non-moving Defendants shall respond to this motion to remand within ten days and in the responses shall specify what claims they agree were remanded, what additional claims, if any, have been remanded, and what claims, if any, they assert were not remanded; Moving Defendants shall reply (in a consolidated reply) within ten days.

IT IS FURTHER ORDERED that with respect to Duncan (CV 10-414-PHX-JAT), Sieben (CV 10-416-PHX-JAT), Huck (CV 10-417-PHX-JAT), Vo (CV 10-425-PHX-JAT), Ellifritz (CV 10-427-PHX-JAT), McConathy (CV 10-428-PHX-JAT), Smith (CV 10-429-PHX-JAT), and Sage (CV 10-456-PHX-JAT) claims 2, 5-9, 13 and 14 and part of claims 3, 4, 10, 11, and 12 remain with the undersigned as part of the MDL and claim 1 and part of claims 3, 4, 10, 11, and 12 have been remanded to their respective transferor courts. MERS shall file a copy of this Order with each transferor court within the next two business days.

IT IS FURTHER ORDERED that with respect to Eastwood (CV 10-426-PHX-JAT) claims 1-2, 5-9, 13 and 14 and part of claims 3, 4, 10, 11, and 12 remain with the undersigned as part of the MDL and part of claims 3, 4, 10, 11, and 12 have been remanded to the transferor court. MERS shall file a copy of this Order with the transferor court within the next two business days.

IT IS FURTHER ORDERED that with respect to Mason (CV 10-457-PHX-JAT) and Fitzgerald (CV 10-460-PHX-JAT) claims 1-4 and part of claim 6 (i.e., injunctive relief, declaratory relief, and quiet title) remain with the undersigned as part of the MDL and claim 5 and part of claim 6 (i.e., injunctive relief, declaratory relief, and reformation) have been remanded to their respective transferor courts. MERS shall file a copy of this Order with each transferor court within the next two business days.

IT IS FURTHER ORDERED that with respect to Freeto (CV 10-459-PHX-JAT) claims 2, 5-11, and 13 and part of claims 3 and 4 remain with the undersigned as part of the MDL and claims 1 and 12 and part of claims 3 and 4 have been remanded to the transferor court.^[13] MERS shall file a copy of this Order with the transferor court within the next two business days.

IT IS FURTHER ORDERED that with respect to Dominguez (CV 10-461-PHX-JAT) claims 1-2, 5-11, 13 and 14 and part of claims 3, 4, and 12 remain with the undersigned as part of the MDL and part of claims 3, 4, and 12 have been remanded to the transferor court.^[14] MERS shall file a copy of this Order with the transferor court within the next two business days.

IT IS FURTHER ORDERED that the Clerk of the Court shall file a copy of this Order in each member case listed on page 2.

IT IS FURTHER ORDERED that with respect to any claims that are staying with this Court, Defendants shall answer or otherwise respond to those claims within the time limits set in the Initial Practice and Procedure Order (Doc. #25); with respect to any claims that have been remanded to the transferor courts, Defendants shall answer or otherwise respond to those claims within fifteen days of this Order, unless any order of the transferor court is inconsistent with this Order, in which case, the order of the transferor court shall control.

IT IS FURTHER ORDERED within 12 days of this Order, MERS shall file all documents related to a case bifurcated herein into the record of the transferor court in that particular case. (Because this Court will not transfer the entire MDL file and docket to any individual transferor court, this will insure the Judge in the transferor court has a complete record for that specific case).

[1] The parties have fully briefed this issue pursuant to the Court’s Order on Practices and Procedures (Doc. #176). Although the parties sought “remand” of certain claims to the transferor court, under Section 1407(a), remands to a transferor court can only be effected by the Judicial Panel on Multidistrict Litigation. 28 U.S.C. § 1407; see also R.P.J.P.M.L. 7.6. The Court, thus, stresses that this order is solely a determination of which claims are pending before this Court and which claims remain in their respective transferor courts, pursuant to the Panel’s transfer orders.

[2] Twenty-one additional cases transferred by the transfer order have been addressed by a separate set of briefing.

[3] In four cases briefed for this order, CV 10-401-PHX-JAT (Huck), CV 10-413-PHX-JAT (Gillespie), CV 10-415-PHX-JAT (Caffee), and CV 10-455-PHX-JAT (Barlow), Plaintiffs have moved for leave to file amended complaints. (Doc. ##525, 526, 564, 573.) The Court will wait until after it grants or denies those motions to determine which claims have been retained and which claims have been remanded in these four cases. An updated briefing schedule is set forth below.

[4] See, e.g., CV 10-414-PHX-JAT (Duncan), Doc. #1-1 at 48-50

[5] Id.

[6] See, e.g., CV 10-413-PHX-JAT (Duncan), Doc. #1-1 at 31.

[7] See, e.g., CV 10-414-PHX-JAT (Duncan), Doc. #1-1 at 43.

[8] The identical racketeering claims in Vo (Tenth Claim), Eastwood (Tenth Claim), Ellifritz (Tenth Claim), McConathy (Tenth Claim), Smith (Tenth Claim), Sage (Tenth Claim), Freeto (Tenth Claim), and Dominguez (Tenth Claim) are also bifurcated.

[9] See, e.g., CV 10-414-PHX-JAT (Duncan), Doc. #1-1 at 41-42.

[10] The identical civil conspiracy claims in Vo (Eleventh Claim), Eastwood (Eleventh Claim), Ellifritz (Eleventh Claim), McConathy (Eleventh Claim), Smith (Eleventh Claim), Sage (Eleventh Claim), Freeto (Eleventh Claim), and Dominguez (Eleventh Claim) are also bifurcated.

[11] See, e.g., CV 10-414-PHX-JAT (Duncan), Doc. #1-1 at 38-41.

[12] CV 10-437-PHX-JAT (Ellifritz), Doc. #1-1 at 41.

[13] While these remanded claims do not appear to involve Defendants Litton Loan Servicing LP, Bank of New York Mellon as former trustee for the C-BASS Mortgage Loan Asset-Backed Certificates Series 2005-CB4, and JPMorgan Chase Bank, National Association, as former trustee for the C-BASS Mortgage Loan Asset-Backed Certificates Series 2005-CB4 (collectively, “Litton Loan Group”), this argument is better made in a motion to dismiss. Thus, the Court remands these claims even as they relate to the Litton Loan Group.

[14] The Court remands these claims even as they relate to Defendant Litton Loan Servicing LP.

(Salt Lake City, UT) – Federal Judge Clark Waddoups issued the following court order just before noon Friday.

“The court held a hearing on this matter on June 10, 2010. For the reasons to be explained
in a memorandum decision that the court shall file shortly, the court ORDERS as follows:

Plaintiff’s motions to remand are DENIED;

Plaintiff’s motion to amend the complaint is GRANTED;

Defendants’ motion to vacate the Utah state court’s preliminary injunction order is GRANTED;

Defendants’ motion to expedite the hearing is moot; and consideration of Plaintiff’s motion for partial summary judgment is deferred.

The preliminary injunction of May 22, 2010 issued by the Utah state court is hereby DISSOLVED in its entirety.

John Christian Barlow, attorney for the plaintiff, Peni Cox likely is likely surprised by the court ruling that allows Utah law to be trumped by a nationally charter financial institution that can continue to operate faceless in Utah without registration or offices.

As one state lawmaker told KCSG news, this will only serve to get state lawmakers energized to put an end to homeowners (taxpayers) being victimized by mortgage lenders like the Bank of America who acquired Countrywide Home Loans in a stock deal worth billions and with taxpayer bailout money, he said. Barlow’s arguments fell on deaf ears in federal court allowing ReconTrust Company to continue their foreclosures.

Home owners continue to seek redress through the courts without success against lenders which have bundled the homeowner promissory note with others and sold them as securities through Mortgage Electronic Registration Systems (MERES).

Attorney Barlow was traveling and unavailable for comment to KCSG News as was the plaintiff Peni Cox.

Waddoups Order

[ipaper docId=32914740 access_key=key-1ep6ixrbbhxmzht59w6d height=600 width=600 /]

6/9/2010 by DinSFLA

This week Housingwire wrote an article about how Bank of America is putting short sales ahead of REO’s. Matt Vernon, who is the short sale and REO executive at BOF made this statement.

“We’re going to do everything possible to liquidate property prior to foreclosure,” Vernon said. “REO will still be available, but we will do everything we can to do short sales.” Vernon said the goal is to get as close to market value as possible, or even over market value. “Short sales is not an investment strategy to get homes on the cheap,” he said.

He added that agents who want a part of that market need to make short sales a major part of their business strategy through 2010 and into 2011.

Does he even have the slightest clue as to what these short sales have done to many agents? Well let me explain in one word…FORECLOSURE!

Why? You may ask. Simply because BOF like many others took their sweet ole, no good, money hungry ass time, I mean 6-12 months to get approvals and by this time anxious buyers lost their financing not once but maybe 3-4 times.

Last week The Wall Street Journal got an overwhelming viewer response on David Streitfeld’s article Owners Stop Paying Mortgages, and Stop Fretting, which leads me to my point.

Are banks growing desperate and concerned that if people begin to walk a way, this will turn them into toast? I’m afraid so.

Well to make another point. A friend of mine in New York got this letter (below) from Wells Fargo asking them if they want to leave their existing mortgage behind? In return Wells with their “direct transfer option” will let you walk a way with $10,000.00! Basically sign, transfer over the title.

Only there is 34 problems, you see there is a video going around that shows how to Cash Out Before You Dash Out…34 ways to make $39K before giving back the house!

I think Wells Fargo needs to step it up a little. Perhaps they lost your note!

Wells Fargo Letter:

By Steve Eder and Matthew Goldstein

NEW YORK (Reuters) – An Australian hedge fund is suing Goldman Sachs Group Inc over an investment in a subprime mortgage-linked security that contributed to the fund’s demise in 2007.

The lawsuit filed on Wednesday accuses Goldman of misrepresenting the value of the notorious Timberwolf collateralized debt obligation, which garnered a lot of attention during a recent congressional hearing.

Basis Yield Alpha Fund sued Goldman to recoup the $56 million it lost on the CDO, said Eric Lewis, a Washington-based lawyer for the fund. The suit also seeks $1 billion in punitive damages.

continue reading… HERE

[ipaper docId=32830296 access_key=key-2wcu1f5esbi7zb2529a height=600 width=600 /]

When is someone going to really sanction these characters??

Time after time…I will say they’re days are numbered and we are getting closer and closer.

[ipaper docId=32848042 access_key=key-1pk7zslqcl70oojnax38 height=600 width=600 /]