SUPREME COURT OF THE STATE OF NEW YORK Appellate Division, Second Judicial Department
JOHN M. LEVENTHAL, J.P. L. PRISCILLA HALL LEONARD B. AUSTIN SANDRA L. SGROI, JJ.
2013-06616 (Index No. 34089/09)
[*1]Citibank, N.A., etc., respondent,
v
Thomas Herman, et al., appellants, et al., defendants.
Westerman Ball Ederer Miller & Sharfstein, LLP, Uniondale, N.Y. (Christopher A. Gorman of counsel), for appellants.
Eckert Seamans Cherin & Mellott, LLC, White Plains, N.Y. (Geraldine A. Cheverko of counsel), for respondent.
DECISION & ORDER
In an action to foreclose a mortgage, the defendants Thomas Herman and Barbara Herman appeal, as limited by their brief, from so much of an order of the Supreme Court, Suffolk County (Pastoressa, J.), dated April 23, 2013, as denied those branches of their motion which were for summary judgment dismissing the complaint insofar as asserted against them based upon lack of standing and for the cancellation of a certain notice of pendency filed against the subject property.
ORDERED that the order is reversed insofar as appealed from, on the law, with costs, and those branches of the motion of the defendants Thomas Herman and Barbara Herman which were for summary judgment dismissing the complaint insofar as asserted against them based upon lack of standing and for the cancellation of a certain notice of pendency filed against the subject property are granted.
In a mortgage foreclosure action, a plaintiff has standing when it is both the holder or assignee of the subject mortgage and the holder or assignee of the underlying note at the time the action is commenced (see Kondaur Capital Corp. v McCary, 115 AD3d 649, 650; HSBC Bank USA v Hernandez, 92 AD3d 843; Bank of N.Y. v Silverberg, 86 AD3d 274, 279; Wells Fargo Bank, N.A. v Marchione, 69 AD3d 204, 209; U.S. Bank, N.A. v Collymore, 68 AD3d 752, 753). The plaintiff may demonstrate that it is the holder or assignee of the underlying note by showing either a written assignment of the underlying note or the physical delivery of the note (see Kondaur Capital Corp. v McCary, 115 AD3d at 650; Aurora Loan Servs., LLC v Weisblum, 85 AD3d 95, 108; U.S. Bank, N.A. v Collymore, 68 AD3d at 754). As a general matter, once a promissory note is tendered to and accepted by an assignee, the mortgage passes as an incident to the note (see Bank of N.Y. v Silverberg, 86 AD3d at 280). However, the transfer of the mortgage without the debt is a nullity, and no interest is acquired by it (see Bank of N.Y. Mellon v Gales, 116 AD3d 723, 724; Bank of N.Y. v Silverberg, 86 AD3d at 280), because a mortgage is merely security for a debt or other obligation and cannot exist independently of the debt or obligation (see Deutsche Bank Natl. Trust Co. v Spanos, 102 AD3d 909, 911).
In support of that branch of their motion which was for summary judgment dismissing the complaint insofar as asserted against them, the defendants Thomas Herman and Barbara Herman [*2](hereinafter together the Hermans) demonstrated, prima facie, that the plaintiff did not have standing to be entitled to relief in this action. The prima facie showing which a defendant must make on a motion for summary judgment is governed by the allegations made by the plaintiff in the pleadings (see generally Alvarez v Prospect Hosp., 68 NY2d 320, 325; Foster v Herbert Slepoy Corp., 76 AD3d 210, 214). In this regard, the Hermans submitted, among other things, the complaint, which indicated that the plaintiff allegedly obtained its right to foreclose by way of an assignment of the mortgage and note from Mortgage Electronic Registration Systems, Inc. (hereinafter MERS), acting as nominee for the original lender. However, the Hermans established, prima facie, that MERS was never the holder of the note and was without authority to assign the note to the plaintiff. In opposition, the plaintiff failed to raise a triable issue of fact. While the plaintiff submitted, among other things, a copy of the note in opposition to the Hermans’ motion, the plaintiff failed to establish delivery of the note to MERS prior to the execution of the assignment (cf. Midland Mtge. Co. v Imtiaz, 110 AD3d 773, 776). Moreover, the plaintiff failed to raise a triable issue fact as to whether it was the holder of the note at the time the action was commenced (cf. US Bank N.A. v Faruque, 120 AD3d 575, 577; Homecomings Fin., LLC v Guldi, 108 AD3d 506). Therefore, the Supreme Court should have granted that branch of the Hermans’ motion which was for summary judgment dismissing the complaint insofar as asserted against them based upon lack of standing.
Since the Hermans established their entitlement to judgment as a matter of law dismissing the complaint insofar as asserted against them based upon lack of standing, the Supreme Court should have also granted that branch of their motion which was for the cancellation of a certain notice of pendency filed against the subject property (see CPLR 6514[a]; see also Freidus v Sardelli, 192 AD2d 578, 580).
LEVENTHAL, J.P., HALL, AUSTIN and SGROI, JJ., concur. ENTER:
SUPREME COURT OF THE STATE OF NEW YORK I.A.S. PART XVIII SUFFOLK COUNTY
PRESENT: HON. STEPHEN M. BEHAR
BENEFICIAL HOMEOWNER SERVICE CORP., Plaintiff,
-against-
THERESA A. TOVAR A/K/ A THRESA TOVAR; ET AL., Defendants.
In this foreclosure action, Defendant, Tovarl , moves for an Order, pursuant to CPLR 3211 (a) (5), dismissing Plaintiffs Complaint, with prejudice, on the ground that the Complaint is time baITed pursuant to the six-year statute of limitations [see CPLR S 213 (4)], together with an award of attomeys’ fees, costs, and disbursements, pursuant to RPL 9 282, in the amount of $7640.00.
PROCEDURAL HISTORY
THE PRIOR “2007” FORECLOSURE ACTION
Based on Defendant’s alleged default of February 16,2007, Plaintiff accelerated the Consolidated Mortgage and Consolidated Note herein by commencing a foreclosure action (hereinafter the “2007 action”). Said action was filed on October 4, 2007, under Index No.: 31069/2007. (See, infra Ex. 1of Defendant’s April 17,2014 Affim1ation in Support).
On February 4,2008, the Court (Malia, J., presiding) granted Plaintiff’s application for a default Judgment and for an Order of Reference (mot. seq. 001) (See, infra Ex. 2 of Defendant’s April 17,2014 Affirmation in Support). On September 22, 2008, the Court (Malia, J., presiding) granted Plaintiff’s application for a Judgment of Foreclosure and Sale (mot. seq. 004) (id.).
On April 30, 2009, Defendant filed a Chapter 13 Bankruptcy petition (See, infra Ex. 4 of Defendant’s August 20, 2014 Reply Memorandum at Law). On July 14,2009, Defendant’s Chapter 13 Bankruptcy case was dismissed and the automatic bankruptcy stay was terminated (See, infra Ex. 2 of Defendant’s August 20,2014 Reply Memorandum at Law). •
On January 26,2010, Defendant filed an Order to Show Cause (mot. seq. 005), pursuant to CPLR 5015 (4), seeking to dismiss Plaintiff’s 2007 action based on the improper service of the complaint therein. Defendant’s application was granted on May 6,2010. (See, infra Ex. 1 of Defendant’s August 20,2014 Reply Memorandum at Law). Thereafter, on April 3, 2012, Plaintiff filed an unopposed motion to discontinue the 2007 action (mot. seq. 006), which was granted by the Court on April 20, 2012 (See, infra Ex. 4 of Defendant’s August 20, 2014 Reply Memorandum at Law).2
PLAINTIFF’S INSTANT “2014” FORECLOSURE ACTION
Plaintiff filed the instant and second foreclosure action (the “2014 action”) on February 21, 2014, under Index No.: 061092/2014. (See, infra Ex. 1 of Defendant’s August 20, 2014 Reply Memorandum at Law). The instant action min’ors the 2007 action, in that it claims the same Plaintiff against the same Defendant, based on the same previously accelerated Consolidated Mortgage and Note.
Defendant argues that by filing the 2007 action, Plaintiff effectively accelerated the subject Consolidated Mortgage and Consolidated Note, rendering October 4,2007 the “Acceleration Date” for the statute of limitation purposes. Using the October 4,2007 acceleration date, Plaintiff could only satisfy the statute oflimitation herein by re-filing the action (once dismissed) on or before October 3, 2013.
DECISION & ORDER
“On a motion to dismiss a complaint pursuant to CPLR 3211 (a) (5) on statute of limitations grounds, the moving defendant must establish, prima facie, that the time in which to commence the action has expired.” Lake v. NY Hasp. Med. Ctr. of Queens, 119AD3d 843 [2d Dept 2014. If the defendant meets that burden, it is then incumbent upon plaintiff to raise a question of fact as to whether the statute of limitations was tolled or was otherwise inapplicable, or whether it actually commenced the action within the applicable limitations period. Reid v. Inc. Vii. of Floral Park, 107 AD3d 777, 778 [2d Dept 2013].
It is well settled that an action to foreclose a mortgage may be brought to recover unpaid sums which were due within the six-year period immediately preceding the commencement of the action. See, CPLR S 213 (4); Wells Fargo Bank, N.A. v. Burke, 94 AD3d 980, 982 [2d Dept 2012]. “[W]ith respect to a mortgage payable in installments, there are ‘separate causes of action for each installment accrued, and the Statute of Limitations [begins] to run, on the date each installment [becomes] due'” Wells Fargo Bank, N.A. v. Cohen, 80 AD3d 753, 754 [2d Dept 2010]. “However, ‘even if a mortgage is payable in installments, once a mortgage debt is accelerated, the entire amount is due and the Statute of Limitations begins to run on the entire debt’.” Burke, 94 AD3d at 982. “The filing of the summons and complaint and lis pendens in an action accelerate[s] the note and mortgage.” Clayton Nat’l, fnc. v. Guidi, 307 AD2d 982, 982 [2d Dept 2003]. “Once the mortgage debt [is] accelerated, the borrowers’ right and obligation to make monthly installments cease[s] and all sums bec[ome] immediately due and payable.” Fed. Nat’l Mtge. Ass’n v. Mebane, 208 AD2d 892,894 [2d Dept 1994].
Here, the Defendant has met her prima facie showing that Plaintiff s instant foreclosure action was commenced after the applicable statute of limitation period, demonstrating an entitlement to the dismissal of the instant action, with prejudice, pursuant to CPLR S 213 (4) and CPLR 3211 (a) (5). Reid, 107 AD3d at 778.
After reviewing Plaintiffs counsel unsuccessful attempt to rebut Defendant’s prima facie showing, this Court finds that the instant action has been filed after the applicable statute of limitation period, and therefore, must be dismissed.
Plaintiff unsuccessfully argues that Defendant’s Chapter 13 Bankruptcy filing tolled the applicable statute of limitations herein.
The tolling of a statute of limitation period pursuant to CPLR S 204 (a) only applies when a “stay” affects “the commencement of an action”. As such, Plaintiff does not benefit of any tolling of the statute of limitation period under CPLR S 204 (a) because Defendant’s Chapter 13 Bankruptcy filing did not stay Plaintiffs ability to commence an action. Indeed, Plaintiff had already commenced the action on October 4,2007, whereas Defendant filed for Bankruptcy protection in April, 2009. See, e.g., Saini v. Cinelli Enters., 289 AD2d 770, 772 [3Td Dept 2001], Iv denied 98 NY2d 602 [2002] (“With regard to the claimed effect of defendant’s bankruptcy filing on the Statute of Limitations, we find that it neither renewed nor tolled the six-year Statute of Limitations. The first action had been discontinued prior to the time that defendant filed its bankruptcy petition in December 1997 and the bankruptcy petition was dismissed in December 1998, long before this second foreclosure action was commenced and, thus, the bankruptcy proceeding never operated to toll a pending foreclosure action.”).
Accordingly, Plaintiffs counsel’s argument that the Defendant’s bankruptcy filing stayed and/or otherwise tolled the applicable statute of limitations herein is unsupported by the facts of this case.
Plaintiff next argues that the applicable statute of limitations was suspended by Governor Cuomo’s Executive Order’s No.’s 52 & 81 (Hanusek Aff. ~ 6, Ex. B). This argument is also unavailing.
Plaintiff contends that Governor Cuomo’s Executive Order’s 52 and 81 (hereinafter “9 NYCRR S 8.52″ and “9 NYCRR S 8.81 “, respectively) added “an additional 143 days to the statute of limitations expiration of October 4, 2013,” (Hanusek Aff. ,r 6).
This Court disagrees. 9 NYCRR S 8.52 temporarily suspended “[s]ection 201 of the [CPLR], so far as it bars actions whose limitation period concludes during the period,” between October 26, 2012 See, infra Ex. 5 of Defendant’s August 20, 2014 Reply Memorandum at Law) (emphasis added), and December 25,2012 (See, infra Ex. 5 of Defendant’s August 20, 2014 Reply Memorandum at Law). Simply put, 9 NYCRR SS 8.52 and/or 8.81 suspended any statute oflimitations under section 201 of the CPLR if and/or when the statutory time period for an action to be commenced expired between October 26,2012 and December 25,2012. Here, indisputably, upon Plaintiffs counsel’s own concession, the statute of limitations would not expire until October 4,20133. (Hanusek Aff. ’16). Since the applicable statute of limitations for the commencement of this action expired on or before October, 2013, 9 NYCRR SS 8.52 and/or 8.81 did not suspend the statute of limitation period herein.
Plaintiff argues that the mandatory default notices sent by Plaintiff constitute a revocation of the previous acceleration (Hanusek Aff. ’19, Ex. C). This contention also fails to persuade the Court. The Second Department has again and again opined that without an affirmative and unambiguous act by a lender to revoke a prior acceleration, the acceleration remains undisturbed and the limitations statute still runs. UMLIC VP, LLC v. Mel/ace, 19 AD3d 684, 684 [2d Dept 2005]; Guidi, 307 AD2d at 982; Lavin v. Elmakiss, 302 AD2d 638, 639 [2d Dept 2003]. Strictly from a procedural standpoint, the Court notes that Plaintiffs opposition is supported only by the affirmation of Plaintiffs attorney, unsupported by any affidavit from an individual with personal knowledge. As such, Plaintiff has “presented insufficient evidence to [meet its burden which requires it to] raise a triable issue of fact as to whether the statute of limitations was tolled” (Educ. Res. Inst., Inc. v. Piazza, 17 AD3d 513, 515 [2d Dept 2005]), let alone establish whether Plaintiff has made an affirmative and unambiguous act to revoke a prior acceleration.
The Court further notes, without comment, that the 90 day default notices specifically state that “[IIJnder New York State Law, we are required to send you this notice,” and “[wJe are sending yo II this notice as required by New York State law.” (See, infra Ex. 4 of Defendant’s August 20, 2014 Reply Memorandum at Law) (emphasis added). Failure to provide these mandatory notice would mandate dismissal of the action for failure to satisfy the statutory conditions precedent as set forth in RPAPL S 1304. In Aurora Loan Servs., LLC v. Weisblum, 85 AD3d 95, 103 [2d Dept 2011], the Court held: “[P]roper service of the RPAPL 1304 notice containing the statutorily-mandated content is a condition precedent to the commencement of the foreclosure action. The plaintiffs failure to show strict compliance requires dismissal.” Given the mandatory nature of the notices attached, the Court is hard-pressed to find or imply an intent on the part of the Plaintiff to revoke any prior acceleration of the Consolidated Note and Mortgage herein; especially, when such assertion is not supported by an Affidavit of an individual With personal knowledge of the facts surrounding said alleged revocation.
Moreover, the Court of Appeals has held that once a mortgagee makes the election to file a foreclosure summons and complaint, thus accelerating the mortgage debt due and owed in full, said election is “final and irrevocable … and not subject to change at the option of the [mortgagee],” Kilpatrick v. Germania Life Ins. Co., 183 NY 163, 168 [1905]. Notwithstanding, the Second Department has recently opined that “a lender may revoke its election to accelerate all sums due under an optional acceleration clause in a mortgage provided that there is no change in the borrower’s position in reliance thereon. ” Mebane, 208 AD2d at 894 (citation omitted); but, in Patella, 279 AD2d at 604, the Court held: “Although a lender may revoke its election to accelerate the mortgage, the dismissal of the prior foreclosure action by the court did not constitute an affirmative act by the lender. revoking its election to accelerate, and the record is barren of any affirmative act of revocation occurring during the six-year Statute of Limitations period subsequent to the initiation of the prior action.” (internal citations omitted). In Mebane, 208 AD2d at 894, the Court held: “[T]he record is barren of any affim1ative act of revocation occurring within the six-year Statute of Limitations period subsequent to the service of the complaint in the prior foreclosure action, wherein the holder of the mortgage notified the borrowers of its election to accelerate. The prior foreclosure action was never withdrawn by the lender, but rather, dismissed sua sponte by the court. It cannot be said that a dismissal by the court constituted an affirmative act by the lender to revoke its election to accelerate. Indeed, rather than seeking to revoke the prior election to accelerate, the plaintiff made a failed attempt in 1991 to revive the prior foreclosure action, and, in fact, in its complaint in the instant action commenced in 1992, the plaintiff continues to seek recovery of the entire mortgage debt pursuant to the acceleration clause.” (internal citations omitted).
Upon the foregoing, the Court must hold that the mere act of serving mandatory default notices together with summons and complaint, without more, cannot and does not constitute a de facto revocation of a prior election to accelerate the mortgagor’s obligation under the Note and Mortgage. Plaintiff also argues that the previous acceleration of the Note and Mortgage obligation (via the filing of the 2007 action) was invalided by the Court’s subsequent determination (prompting the dismissal of the 2007 action) that service of the Summons and Complaint was either improper or, worse yet, never effectuated. (Hanusek Aff. ‘(10). This contention also fails in the eyes of the Court.
The Second Department has already held that: “[c]ontrary to the plaintiffs contention, the dismissal of the 1992 action for lack of personal jurisdiction did not constitute an affirmative act by the lender to revoke its election to accelerate.” Guidi, 307 AD2d at 982; accord Wydallis v. United States Fid. & Guar. Co., 63 NY2d 872, 873 [1984] (“[w]here a prior action is dismissed for want of personal jurisdiction, [CPLR S 205] cannot be applied to extend the period of limitations.”). Accordingly,
Plaintiffs latest contention, without more, must fail as a matter of law.
Plaintiffs final argument is that pursuant to GOL S 17-105 (1), Defendant’s Bankruptcy filing caused the six (6) year statute of limitations to restart anew (Hanusek Aff. ~ 11). Contrary to Plaintiffs contention, the listing of a mortgage as a secured debt on a bankruptcy petition does not, in and of itself, constitute and affirmative act to re-acknowledge a debt under GOL S 17-105 (1). Erlichman v. Ventura, 271 AD2d 481, 482 [2d Dept 2000] (“[T]he listing of the debt on [defendant’s] bankruptcy petition did not constitute written acknowledgment of the debt with the intent to pay so as to remove any Statute of Limitations bar to recovery.”) (internal citations omitted); see Saini, 289 AD2d at 772 (“[T]he fact that defendant listed this mortgage on its schedule of secured claims on its disclosure statement to its bankruptcy petition did not constitute a promise to pay the mortgage so as to renew or extend the Statute of Limitations but, rather, signified defendant’s intent not to pay it.”) (internal citations omitted); accord Petito v. Piffath, 85 NY2d 1, 8-9 [1994], cert denied 516 US 864 [1995].
In light of the foregoing, this Court must conclude that Plaintiffs proffered excuses for having failed to file the instant action within six years of the first acceleration of the Note and Mortgage obligation herein (as revealed by the filing of the 2007 action) are untenable. Defendant’s application herein to dismiss the instant action pursuant to CPLR 3211 (a) (5) and CPLR 213 (4) is therefore granted.
Defendant’s request for an award of attorney’s fees, however, is denied. Defendant has not established an entitlement to fees (see RPLS 282) under the facts and circumstances of this case.
Accordingly, it is therefore
ORDERED, that Defendant instant motion is granted only to the extent that the within action is dismissed and the notice of pendency filed with the County Clerk under the within index number is vacated; and it is further
ORDERED, that Defendant’s remaining requests, including her request for an award of counsel fees pursuant to RPLS 282, are denied; and it is further
ORDERED, that Defendant, or her counsel, must serve a copy of this Decision and Order together with notice of its entry upon Plaintiffs counsel and upon the County Clerk’s office within twenty (20) days of its receipt hereof.
The foregoing constitutes the Decision and Order of the Court.
Dated: December 22,2014 Central Islip, NY Hon. Stephen
Imagine coming home to find your place ransacked and the locks changed and then you find out it was actually a legitimate Ohio company.
ABC 6 Investigators looked at the long list of homeowners left out and locked out. Our investigation uncovered hundreds of complaints and lawsuits accusing Safeguard Properties of critical mistakes.
Safeguard is hired by banks to inspect, clean and secure abandoned and foreclosed homes, but sometimes that company cleared out homes people were still living in.
“My mouth dropped to the floor,” homeowner Phil Guinaldo said. “They broke into my house.”
A federal judge in Manhattan said a $1.27 billion fine against Bank of America Corp. over an old mortgage-lending program known as Hustle should stick.
Bank of America had asked that the decision be overturned or that the company be given a new trial, arguing that a jury in 2013 was wrong to find the bank liable for fraud. But in his decision Tuesday, Judge Jed Rakoff wrote that “the jury’s conclusion that this was a massive and intentional fraud was amply supported by the evidence.”
The Hustle case revolves around a civil lawsuit the U.S. attorney’s office of Manhattan filed against Bank of America in 2012. It alleged that a precrisis Countrywide Financial Corp. program called Hustle had churned out shoddy mortgages with a focus on quantity, not quality, and then misrepresented those loans when selling them to Fannie Mae and Freddie Mac .
Justice Department and State Partners Secure $1.375 Billion Settlement with S&P for Defrauding Investors in the Lead Up to the Financial Crisis
Attorney General Eric Holder announced today that the Department of Justice and 19 states and the District of Columbia have entered into a $1.375 billion settlement agreement with the rating agency Standard & Poor’s Financial Services LLC, along with its parent corporation McGraw Hill Financial Inc., to resolve allegations that S&P had engaged in a scheme to defraud investors in structured financial products known as Residential Mortgage-Backed Securities (RMBS) and Collateralized Debt Obligations (CDOs). The agreement resolves the department’s 2013 lawsuit against S&P, along with the suits of 19 states and the District of Columbia. Each of the lawsuits allege that investors incurred substantial losses on RMBS and CDOs for which S&P issued inflated ratings that misrepresented the securities’ true credit risks. Other allegations assert that S&P falsely represented that its ratings were objective, independent and uninfluenced by S&P’s business relationships with the investment banks that issued the securities.
The settlement announced today is comprised of several elements. In addition to the payment of $1.375 billion, S&P has acknowledged conduct associated with its ratings of RMBS and CDOs during 2004 to 2007 in an agreed statement of facts. It has further agreed to formally retract an allegation that the United States’ lawsuit was filed in retaliation for the defendant’s decisions with regard to the credit of the United States. Finally, S&P has agreed to comply with the consumer protection statutes of each of the settling states and the District of Columbia, and to respond, in good faith, to requests from any of the states and the District of Columbia for information or material concerning any possible violation of those laws.
“On more than one occasion, the company’s leadership ignored senior analysts who warned that the company had given top ratings to financial products that were failing to perform as advertised,” said Attorney General Holder. “As S&P admits under this settlement, company executives complained that the company declined to downgrade underperforming assets because it was worried that doing so would hurt the company’s business. While this strategy may have helped S&P avoid disappointing its clients, it did major harm to the larger economy, contributing to the worst financial crisis since the Great Depression.”
Attorney General Holder was joined in announcing the settlement with Acting Associate Attorney General Stuart F. Delery, Acting Assistant Attorney General for the Civil Division Joyce R. Branda and Acting U.S. Attorney for the Central District of California Stephanie Yonekura. Also joining the Department of Justice in making this announcement are the attorneys general from Arizona, Arkansas, California, Connecticut, Colorado, Delaware, Idaho, Illinois, Indiana, Iowa, Maine, Mississippi, Missouri, New Jersey, North Carolina, Pennsylvania, South Carolina, Tennessee, Washington and the District of Columbia.
“This resolution provides further proof that the Department of Justice will vigorously pursue investigations and litigation, no matter how challenging, to protect the best interests of the American people,” said Acting Associate Attorney General Delery. “As part of the resolution, S&P admitted facts demonstrating that it misrepresented itself to investors and the public, allowing the pursuit of profits to bias its ratings. S&P also agreed to retract its unsubstantiated claim that this lawsuit was initiated in retaliation for the decisions S&P made about the credit rating of the U.S. government. Today’s announcement is the latest result of our dedicated effort to address misconduct of every kind that contributed to the financial crisis.”
“Today’s historic settlement demonstrates that we will use all of our resources and every legal tool available to hold accountable those who commit financial fraud,” said Acting Assistant Attorney General Branda. “Thanks to the tireless efforts of our team in Washington and California, S&P has not only paid a record-setting penalty, but has now admitted to the American people facts that make clear its own unlawful role in the financial crisis.”
Half of the $1.375 billion payment – or $687.5 million – constitutes a penalty to be paid to the federal government and is the largest penalty of its type ever paid by a ratings agency. The remaining $687.5 million will be divided among the 19 states and the District of Columbia. The allocation among the states and the District of Columbia reflects an agreement between the states on the distribution of that money.
In its agreed statement of facts, S&P admits that its decisions on its rating models were affected by business concerns, and that, with an eye to business concerns, S&P maintained and continued to issue positive ratings on securities despite a growing awareness of quality problems with those securities. S&P acknowledges that:
S&P promised investors at all relevant times that its ratings must be independent and objective and must not be affected by any existing or potential business relationship;
S&P executives have admitted, despite its representations, that decisions about the testing and rollout of updates to S&P’s model for rating CDOs were made, at least in part, based on the effect that any update would have on S&P’s business relationship with issuers;
Relevant people within S&P knew in 2007 many loans in RMBS transactions S&P were rating were delinquent and that losses were probable;
S&P representatives continued to issue and confirm positive ratings without adjustments to reflect the negative rating actions that it expected would come.
In addition, S&P acknowledges that the voluminous discovery provided to S&P by the United States in the litigation does not support their allegation that the United States’ complaint was filed in retaliation for S&P’s 2011 decisions on the credit rating of the United States. S&P will formally retract that claim in the litigation.
“S&P played a central role in the crisis that devastated our economy by giving AAA ratings to mortgage-backed securities that turned out to be little better than junk,” said Acting U.S. Attorney Yonekura. “Driven by a desire to increase profits and market share, S&P blessed innumerable securitizations that were used by aggressive lenders to offload the risks of billions of dollars in mortgage loans given to homeowners who had no ability to pay them off. This conduct fueled the meltdown that ultimately led to tens of thousands of foreclosures in my district alone. This historic settlement makes clear the consequences of putting corporate profits over honesty in the financial markets.”
Today’s settlement was announced in connection with the President’s Financial Fraud Enforcement Task Force. The task force was established to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. Attorneys’ Offices and state and local partners, it is the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes, enhancing coordination and cooperation among federal, state and local authorities, addressing discrimination in the lending and financial markets and conducting outreach to the public, victims, financial institutions and other organizations. Over the past three fiscal years, the Justice Department has filed nearly 10,000 financial fraud cases against nearly 15,000 defendants including more than 2,900 mortgage fraud defendants. For more information on the task force, please visit www.StopFraud.gov.
1. Is the documented events described in these two Orders clear and convincing specific evidence of fraud on the courts?
2. What entities/persons are the architects, engineers and directors of the fabrication of evidence in anticipation of litigation?
3. How will the “UST” office deal with the exposure of the fabricationn of evidence in the bankruptcy cases involved in similar/identical cases in order to facilitate the trustee duties to the court, the borrower, the estate and to the real creditors?
4. What impact will / are these cases having on Wells Fargo’s document credibility?
5. Do the acts described in these cases have the potential of constituting civil and criminal racketeering and other criminal violations?
6. Does the document creation disclosed in great detail and documented in these cases form the basis for criminal claims of filing false documents under false pretenses?
7. Does the document creation disclosed facilitate the declaration of void foreclosure judgments and proofs of claims in bankruptcy? For example, in Florida, a judgment procured by fraud and that is void is forever subject to legal challenge.
8. How will judges in foreclosure cases and in bankruptcy matters be able to consider any endorsements or assignments to be reliable in the future?
9. If the REMIC securitized trusts cannot acquire a pledge of a loan or an equitable interest in a mortgage post closing date of the trust; the trust does not ever hold the note or own the loan pursuant to the PSA and the ultra vires robosigning and other such acts of trustees or other agents of the trust are worthless and not enforceable or subject to ratification (NY or Del), the legal result is that the trust is not a holder with the right to enforce the debt or pursue an equitable mortgage? And, if this is true, what is the proper characterization of the acts committed by the trustees, the lawyers and the law firms?
Big banks hold great sway in Washington these days, far more than troubled homeowners do. But outside the Beltway, many people remain caught in the maw of the financial giants, which is why it is heartening when some judges step into the fray.
Consider two opinions involving Wells Fargo, a bank that enjoys a somewhat better reputation than many of its peers. On Monday, a judge in a state court in Missouri ordered Wells to pay over $3 million in punitive damages and other costs for abusing a borrower. Then, on Thursday, a judge in Federal Bankruptcy Court in suburban New York ruled on behalf of another borrower, concluding that there was substantial evidence Wells Fargo forged documents when it foreclosed on a property.
It was not a good week on the litigation front for Wells Fargo.
Judge Robert Drain has a message for Wells Fargo: “Forged” foreclosure documents don’t cut it in New York’s federal courts.
In a stunning 30-page decision on January 28, Drain, a federal bankruptcy judge in New York’s Southern District, blasted Wells Fargo, America’s largest mortgage servicer, for false documents it used in trying to prove its right to foreclose on Westchester County resident Cynthia Carrsow Franklin’s home.
Drain shredded Wells Fargo’s arguments regarding two crucial documents needed to prove ownership of a loan: an indorsement (another term for endorsement) on a note and an assignment of mortgage.
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