Should another housing market crash occur, the government’s highest priority should be helping cash-short homeowners maintain spending in a weak economy and avoid foreclosure by temporarily reducing or deferring mortgage payments.
In “Efficient Credit Policies in a Housing Debt Crisis,” Janice Eberly of Northwestern University and Arvind Krishnamurthy of Stanford University build a theoretical framework to guide policymakers ahead of a housing collapse and in the aftermath, finding that reducing the loan principal spreads the benefits of government funds over a long period of time, rather than focusing on the crisis period. The housing bust of the late 2000s was at the heart of the worst recession since the Great Depression, and resulted in a set of government programs to help beleaguered homeowners and cushion the blow to the overall economy. The authors focus on the importance of liquidity constraints and consumer spending in the overall economy, especially during a financial crisis when there is a need to support household consumption.
How can you commence an action if you don’t have the proof you’re entitled to to enforce the action in the first place?
Must Lender Have Current Ownership Interest in Promissory Note or Mortgage at the Time Foreclosure Action Is Filed?
Or May Lack of Standing Be ‘Cured’ Through Mortgage Assignment Before Judgment?
Federal Home Loan Mortgage Corp. v. Duane Schwartzwald et al., Case nos. 2011-1201 and 2011-1362 Second District Court of Appeals (Greene County)
ISSUE: If a party files a lawsuit to foreclose on a mortgage and it is later shown that party did not have a current ownership interest in the mortgage or the underlying promissory note on the date the foreclosure action was filed, is the court required to dismiss the suit based on the plaintiff’s lack of standing to bring it? Or may the plaintiff “cure” a defect in standing or in naming the actual party in interest under Civil Rule 17(A) by obtaining an assignment of the mortgage prior to the court’s entry of a judgment in the case?
I got an e-mail the other day from Richard Engle telling me that his son Charlie would be getting out of prison this month. I was happy to hear it.
Charlie’s ordeal isn’t over yet, of course. When he leaves prison on June 20, Charlie, 49, will move temporarily to a halfway house, after which he will be on probation for another five years. And unless he can get the verdict overturned, he will have to spend the rest of his life with a felony on his record.
Perhaps you remember Charlie Engle. I wrote about him not long after he entered a minimum-security facility in Beaver, W.Va., 16 months ago. He’s the poor guy who went to jail for lying on a liar loan during the housing bubble.
We are pleased to present this guest post by April Charney.
If you are an attorney trying to help people save their homes, you had better be PSA literate or you won’t even begin to scratch the surface of all you can do to save their homes. This is an open letter to all attorneys who aren’t PSA literate but show up in court to protect their client’s homes.
First off, what is a PSA? After the original loans are pooled and sold, a trust hires a servicer to service the loans and make distributions to investors. The agreement between depositor and the trust and the truste and the servicer is called the Pooling and Servicing Agreement (PSA).
According to UCC § 3-301 a “person entitled to enforce” the promissory note, if negotiable, is limited to:
(1) The holder of the instrument;
(2) A nonholder in possession of the instrument who has the rights of a holder; or
(3) A person not in possession of the instrument who is entitled to enforce the instrument pursuant to section 3-309 or section 3-418(d).
A person may be a person entitled to enforce the instrument even though the person is not the owner of the instrument or is in wrongful possession of the instrument.
Although “holder” is not defined in UCC § 3-301, it is defined in § 1-201 for our purposes to mean a person in possession of a negotiable note payable to bearer or to the person in possession of the note.
So we now know who can enforce the obligation to pay a debt evidenced by a negotiable note. We can debate whether a note is negotiable or not, but I won’t make that debate here.
Under § 1-302 persons can agree “otherwise” that where an instrument is transferred for value and the transferee does not become a holder because of lack of indorsement by the transferor, that the transferee is granted a special right to enforce an “unqualified” indorsement by the transferor, but the code does not “create” negotiation until the indorsement is actually made.
So, that section allows a transferee to enforce a note without a qualifying endorsement only when the note is transferred for value.? Then, under § 1-302 (a) the effect of provisions of the UCC may be varied by agreement. This provision includes the right and ability of persons to vary everything described above by agreement.
This is where you MUST get into the PSA. You cannot avoid it. You can get the judges to this point. I did it in an email. Show your judge this post.
If you can’t find the PSA for your case, use the PSA next door that you can find on at www.secinfo.com. The provisions of the PSA that concern transfer of loans (and servicing, good faith and almost everything else) are fairly boilerplate and so PSAs are fairly interchangeable for many purposes. You have to get the PSA and the mortgage loan purchase agreement and the hearsay bogus electronic list of loans before the court. You have to educate your judge about the lack of credibility or effect of the lifeless list of loans as the Uniform Electronic Transactions Act specifically exempts Residential Mortgage-Backed Securities from its application. Also, you have to get your judge to understand that the plaintiff has given up the power to accept the transfer of a note in default and under the conditions presented to the court (out of time, no delivery receipts, etc). Without the PSA you cannot do this.
Additionally the PSA becomes rich when you look at § 1-302 (b) which says that the obligations of good faith, diligence, reasonableness and care prescribed by the code may not be disclaimed by agreement, but may be enhanced or modified by an agreement which determine the standards by which the performance of the obligations of good faith, diligence reasonableness and care are to be measured. These agreed to standards of good faith, etc. are enforceable under the UCC if the standards are “not manifestly unreasonable.”
The PSA also has impact on when or what acts have to occur under the UCC because § 1-302 (c) allows parties to vary the “effect of other provisions” of the UCC by agreement.
Through the PSA, it is clear that the plaintiff cannot take an interest of any kind in the loan by way of an “A to D” assignment of a mortgage and certainly cannot take an interest in the note in this fashion.
Without the PSA and the limitations set up in it “by agreement of the parties”, there is no avoiding the mortgage following the note and where the UCC gives over the power to enforce the note, so goes the power to foreclose on the mortgage.
So, arguing that the Trustee could only sue on the note and not foreclose is not correct analysis without the PSA.? Likewise, you will not defeat the equitable interest “effective as of” assignment arguments without the PSA and the layering of the laws that control these securities (true sales required) and REMIC (no defaulted or nonconforming loans and must be timely bankruptcy remote transfers) and NY trust law and UCC law (as to no ultra vires acts allowed by trustee and no unaffixed allonges, etc.).
The PSA is part of the admissible evidence that the court MUST have under the exacting provisions of the summary judgment rule if the court is to accept any plaintiff affidavit or assignment.
If you have been successful in your cases thus far without the PSA, then you have far to go with your litigation model. It is not just you that has “the more considerable task of proving that New York law applies to this trust and that the PSA does not allow the plaintiff to be a “nonholder in possession with the rights of a holder.”
And I am not impressed by the argument “This is clearly something that most foreclosure defense lawyers are not prepared to do.”?Get over that quick or get out of this work! Ask yourself, are you PSA adverse? If your answer is yes, please get out of this line of work. Please.
I am not worried about the minds of the Circuit Court Judges unless and until we provide them with the education they deserve and which is necessary to result in good decisions in these cases.
It is correct that the PSA does not allow the Trustee to foreclose on the Note. But you only get there after looking at the PSA in the context of who has the power to foreclose under applicable law.
It is not correct that the Trustee has the power or right to sue on the note and PSA literacy makes this abundantly clear.
Are you PSA literate? If not, don’t expect your judge to be. But if you want to become literate, a good place to start is by attending Max Gardner’s Mortgage Servicing and Securitization Seminar.
On April 23, 2012, the plaintiff in State of Ohio ex rel. David P. Joyce, Prosecuting Attorney of Geauga County Ohio v. MERSCORP, Inc., et al., N.D. Ohio Case No. 1:11-cv-02474, filed its motion seeking an order certifying the action as a class action, appointing Geauga County as class representative, and appointing plaintiff’s counsel, the New York law firm of Bernstein Liebhard LLP, as class counsel. The plaintiff argues that the case, which the plaintiff is attempting to bring on behalf of all 88 Ohio counties for relief relating to the allegedly unlawful failure of MERS and its member institutions to record millions of mortgages and mortgage assignments throughout Ohio, meets all requirements of Rule 23(a) and that certification is proper under any one of the 3 subsections of Rule 23(b). The plaintiff hopes to persuade the court that the MERS/member institution policy concerning recordation of mortgages and assignments is a “common scheme or course of conduct” that has given rise to claims “ideally suited for class certification.”
What do an insurance agent in Tennessee, a homemaker in Ohio, a private investigator from Wisconsin and a helicopter stunt pilot in Hollywood have in common? Well, for one thing, they’ve all participated in some fashion in “Foreclosure Diaries,” the documentary that my company, Pacific Street Films, has been producing, in fits and starts, since 2006.
When work first started on the film, the original tag was “Follow the Money,” and the road seemed to lead towards a dark and confusing destination. There was all this talk in the industry about scads of money to be made in servicing “subprime” loans. There were seminars, conferences, it seemed all the rage.
by Jamie Ranney, Esq.
Jamie Ranney, PC
4 Thirty Acres Lane
Nantucket, MA 02554 jamie@nantucketlaw.pro
508-228-9224
This memo will focus on MERS-designated mortgages in Massachusetts.
In this author’s opinion two (2) things are evident after a survey of Massachusetts law.
First, MERS cannot be a valid “mortgagee” under Massachusetts law and thus MERS designated mortgages are invalid in the Commonwealth of Massachusetts.
This is because MERS-designated mortgages by definition “split” the security instrument (the mortgage) from the debt (the promissory note) when they are signed. This “split” invalidates the mortgage under Massachusetts law. Where the security interest is invalid upon the signing of the mortgage, MERS cannot occupy the legal position of a “mortgagee” under Massachusetts law no matter what language MERS inserts into their mortgages that purports to give them the legal position of “mortgagee”. Since MERS-designated mortgages are invalid at their inception, it follows logically therefore that MERS mortgages are not legally capable of being recorded in the Commonwealth of Massachusetts by its Registers of Deeds.
Second, even if a MERS-designated mortgage were found to be a valid security instrument in Massachusetts, each and every assignment of the mortgage and note “behind” a MERS-designated mortgage must be recorded on the public land records of the Commonwealth in order to comply with the Massachusetts recording statute at M.G.L. c. 183, s. 4 which requires that “conveyances of an estate” be recorded to be valid. A mortgage is a “conveyance of an estate” under Massachusetts law. Since MERS-designated mortgages exist for the primary purpose of holding “legal” title on the public land records while the “beneficial” interest is transferred and sold multiple times (and a mortgage cannot exist without a note under Massachusetts law), MERS-mortgages unlawfully avoid recording fees due the Commonwealth for the transfer(s) of interests under MERS-designated mortgages.
“If you tell a lie that’s big enough, and you tell it often enough, people will believe you are telling the truth, even when what you are saying is total crap.”1
There is a bill pending in the Massachusetts Legislature called H-04083 that is designed to provide more requirements that lenders work with borrowers to provide real loan modifications before they can commence foreclosure and to hold lenders accountable where they unlawfully foreclose. Unfortunately, the bill suffers from some substantial weaknesses which I have tried to remedy with edits and amendments.
The bill is scheduled to be voted on – THIS WEDNESDAY MAY 16, 2012 – so your immediately action is needed.
I would ask that you take the time to immediately contact your state representative and state senator, ask them to stand up for the homeowners and borrowers of the commonwealth and request that they amend H-04083 to include these changes and amendments. You can email the edits and comments directly to your state rep and state senator.
A South Florida woman succeeded with the unheard of when she was able to get her mortgage wiped out by a lender.
In an effort to save her mother’s home, Idania Castro waged a two-year battle with the bank.
“The mortgage got wiped out, so I have no mortgage payment, everything was completely satisfied,” Castro said.
The woman, who took it upon herself to go through every document related to the mortgage, finally discovered robo-signing. She said the signatures on her foreclosure documents appeared to have been signed by different people.
The foreclosure crisis just resulted in a very expensive mix-up for one Mississippi resident.
Terry Jordan was sold the wrong foreclosed home by her realtor and wasn’t informed until after she had spent thousands of dollars on renovations, WREG 3 reports. Her realtor then admitted she had actually been sold the house a few feet away, one half the size and full of mold.
Mississippi is far from one of the more dense foreclosure landscapes in the country. Only one in 4034 properties received a foreclosure filing in March, according to RealtyTrac. Yet the realty company told WREG 3 that they had been given the wrong information by the bank in charge of the foreclosed home anyway. Jordan planned to sell the home at a profit.
Why hasn’t David J. Stern not been disbarred? Suspended?
Is Fraud upon the court 100,000’s of time & to the face of a judge not a crime?
Why would the original judge not sanction anyone?
Will the Supreme Court allow fraud to slap it in its face 2nd time around?
Where has justice gone?
Reuters-
The Florida Supreme Court heard arguments on Thursday in a landmark lawsuit that could undo hundreds of thousands of foreclosures and open up banks to severe financial penalties in the state where they face the bulk of their foreclosure-fraud litigation.
Legal experts say the lawsuit is one of the most important foreclosure fraud cases in the country and could help resolve an issue that has vexed Florida’s foreclosure courts for the past five years: Can banks that file fraudulent documents in foreclosure proceedings voluntarily dismiss the cases only to refile them later with different paperwork?
The decision, which may take up to eight months, could influence judges in the other 26 states that require judicial approval for foreclosures.
The case at issue, known as Roman Pino v. Bank of New York Mellon, stems from the so-called robo-signing scandal that emerged in 2010 when it was revealed that banks and their law firms had hired low-wage workers to sign legal documents without checking their accuracy, as is required by law.
If the state Supreme Court rules against the banks, “a broad universe of mortgages could be rendered unenforceable,” said former U.S. Attorney Kendall Coffey, author of the book, “Foreclosures in Florida.”
The Florida Supreme Court is set to hear oral arguments Thursday in a lawsuit that could undo hundreds of thousands of foreclosures and open up banks to severe financial liabilities in the state where they face the bulk of their foreclosure-fraud litigation.
The court is deciding whether banks who used fraudulent documents to file foreclosure lawsuits can dismiss the cases and refile them later with different paperwork.
The decision, which may take up to eight months to render, could affect hundreds of thousands of homeowners in Florida, and could also influence judges in the other 26 states that require lawsuits in foreclosures.
Of all the foreclosure filings in those states, sixty three percent, a total of 138,288, are concentrated in five states, according to RealtyTrac, an online foreclosure marketplace. Of those, nearly half are in Florida. In Congressional testimony last year, Bank of America, the U.S.’s largest mortgage servicer, said that 70 percent of its foreclosure-related lawsuits were in Florida.
The case at issue, known as Roman Pino v. Bank of New York Mellon, stems from the so-called robo-signing scandal that emerged in 2010 when it was revealed that banks and their law firms had hired low-wage workers to sign legal documents without checking their accuracy as is required by law.
“This was a case of an intentionally fraudulent document fabricated to use in a court proceeding,” says former U.S. Attorney Kendall Coffey, author of the book Foreclosures in Florida.
The Oral Arguments in Roman Pino v. Bank of New York will be heard before the Florida Supreme Court on Thursday, May 10, 2012 at 9:00 AM. In this case the court will be addressing the circumstances under which a voluntary dismissal (a final judgment or other court action) can be set aside long after the case is over, based on underlying fraud on the court.
As reflected above, the Fourth District certified this issue to be one of great public importance, and in doing so, noted that “many, many mortgage foreclosures appear tainted with suspect documents” and that Pino’s requested remedy, if imposed, “may dramatically affect the mortgage foreclosure crisis in this State.” Pino, 57 So. 3d at 954-55.
Supreme Court of Florida
No. SC11-697
ROMAN PINO,
Petitioner,
vs.
THE BANK OF NEW YORK, etc., et al.,
Respondents.
[December 8, 2011]
PER CURIAM.
The issue we address is whether Florida Rule of Appellate Procedure 9.350 requires this Court to dismiss a case after we have accepted jurisdiction based on a question certified to be one of great public importance and after the petitioner has filed his initial brief on the merits.1 This narrow question arose after the parties to this action filed a joint Stipulated Dismissal, which advised that they had settled this matter and stipulated to the dismissal of the review proceeding pending before this Court. It cannot be questioned that our well-established precedent authorizes this Court to exercise its discretion to deny the requested dismissal of a review proceeding, even where both parties to the action agree to the dismissal in light of an agreed-upon settlement. The question certified to us by the Fourth District Court of Appeal in this case transcends the individual parties to this action because it has the potential to impact the mortgage foreclosure crisis throughout this state and is one on which Florida’s trial courts and litigants need guidance. The legal issue also has implications beyond mortgage foreclosure actions. Because we agree with the Fourth District that this issue is indeed one of great public importance and in need of resolution by this Court, we deny the parties’ request to dismiss this proceeding.
This shouldn’t be so difficult, David J. Stern has TONS of fraudulent documents out there. Pick any County, any documents his firm filed and you’re sure to find fraud. Just read the depositions from his former employees.
“We conclude that this is a question of great public importance, as many, many mortgage foreclosures appear tainted with suspect documents,” the appeals court wrote in certification to the Supreme Court.
PALM BEACH POST-
An unassuming drywall hanger from Greenacres has banks warning of a “widespread financial crisis” if the Florida Supreme Court favors him in a landmark foreclosure case justices will hear this week.
Plucked out of the 4th District Court of Appeal, Roman Pino v. the Bank of New York is the first significant foreclosure complaint to be heard by the high court since the state’s legendary housing collapse.
It’s particularly unusual because the 41-year-old Pino had already settled the case when the Supreme Court decided in December to take up a legal question it said could affect the mortgage foreclosure crisis statewide.
At issue is whether a bank can escape punishment for filing flawed or fraudulent documents in a case by voluntarily dismissing it. (A voluntary dismissal allows the bank to refile at a later date.)
That’s what Royal Palm Beach-based foreclosure defense attorney Tom Ice said happened when he challenged a document created by the Law Offices of David J. Stern and sought to question employees about its veracity. On the eve of those depositions, the bank moved to dismiss the case, blocking the court’s ability to address any sanctions.
“The objective here was to hide from punishment for the wrongdoing,” Ice said.
Hmmmm- Lets see why Fannie refused to? We can maybe name a few dozen since they most likely were in cahoots over the Nothing-Backed Securities.
If there were any punishments happening, there would also be cats coming out the bag from both.
Bloomberg-
Fannie Mae refused to seek large amounts of mortgage repurchases from Countrywide Financial Corp. as housing began to crash, according to the former head of its regulator.
James Lockhart, who led the Federal Housing Finance Agency until 2009 and its predecessor, the Office of Federal Housing Enterprise Oversight, “spent a lot of time” pushing Fannie Mae executives to seek more so-called putbacks on Countrywide loans that failed to match their promised quality, he said today.
“They didn’t want to offend their largest customer,” Lockhart, now the vice chairman at investment firm WL Ross & Co., said during a speech at a Mortgage Bankers Association conference in New York.
The second sentence is wrong. Banks never lost a dime but profited from foreclosing. The banks collect insurance from delinquent loans, jack up insurance, kickbacks on forced-placed insurance, tack on attorney fees, make money via tax liens, pretend to help you with a short sale, pretend to tell you your modification is in process, then double dip by selling the property after they already raked up fees. By the end, they made a fortune off of “scamming servicing” the loan. I’m sure I’ve missed a thing or 5…
Does this sound like they lost any money? Only the taxpayers via the fraudulent twins…
BLOOMBERG-
One of the more confounding aspects of the U.S. housing crisis has been the reluctance of lenders to do more to assist troubled borrowers. After all, when homes go into foreclosure, banks lose money.
Now it turns out some lenders haven’t merely been unhelpful; their actions have pushed some borrowers over the foreclosure cliff. Lenders have been imposing exorbitant insurance policies on homeowners whose regular coverage lapses or is deemed insufficient. The policies, standard homeowner’s insurance or extra coverage for wind damage, say, for Florida residents, typically cost five to 10 times what owners were previously paying, tipping many into foreclosure.
The situation has caught the attention of state regulators and the Consumer Financial Protection Bureau, which is considering rules to help homeowners avoid unwarranted “force- placed insurance.” The U.S. ought to go further and limit commissions, fine any company that knowingly overcharges a homeowner and require banks to seek competitive bids for force- placed insurance policies. Because insurance is not regulated at the federal level, states also need to play a stronger role in bringing down rates.
Thanks to Matt Weidner for flagging this one down, and a must read
In Re: MARK JOSEPH BRANNAN, KELLY ANN BRANNAN, Debtors. MARK JOSEPH BRANNAN, KELLY ANN BRANNAN, Plaintiffs, v. WELLS FARGO HOME MORTGAGE, INC. f/k/a NORWEST MORTGAGE, INC., Defendant.
Steve Olen, Attorney for Plaintiffs, Mobile, AL.Benjamin T. Rowe, Attorney for Plaintiffs, Mobile, AL.Ian David Rosenthal, Attorney for Plaintiffs, Mobile, AL.Henry A. Callaway, III, Attorney for Defendant, Mobile, AL.Jennifer S. Morgan, Attorney for Defendant, Mobile, AL.
ORDER DENYING PLAINTIFF’S MOTION TO CERTIFY THE PROPOSED CLASS BUT ALLOWING LEAVE TO AMEND
MARGARET A. MAHONEY, Bankruptcy Judge
This case involves the affidavit preparation, signing and filing practices of Wells Fargo, its employees, and the law firms representing it over a period from 1996 through 2008 in the Southern District of Alabama Bankruptcy Court. The debtor asserts that the practices were so pervasively improper and/or fraudulent as to require relief for all debtors in this district even if the information contained in each debtor’s particular affidavit was true. The Court has jurisdiction to hear this matter pursuant to 28 U.S.C. §§ 157 and 1334 and the Order of Reference of the District Court. This is a core proceeding pursuant to 28 U.S.C. § 157(b)(2) and the Court has authority to enter a final order. The case is presently before the court at the class certification stage. For the reasons indicated below, the Court is denying the plaintiff’s motion to certify the class proposed by her, but will allow 30 days for plaintiff to amend the proposed class, if appropriate.
FACTS
A.
Wells Fargo was the mortgage and note holder for an unknown but substantial number of homes of people who filed bankruptcy in the Southern District of Alabama from 1996 through 2008. In order to be able to foreclose on the home of any debtor who was delinquent in his or her payments, Wells Fargo needed relief from the automatic stay that was imposed in every bankruptcy case at filing. This relief was necessary until the debtor obtained a discharge or had his or her case dismissed. Kelly Brannan, with her then husband, filed a Chapter 13 bankruptcy case in the Southern District of Alabama on November 21, 2002. Kelly and Mark Brannan owned a home at 1309 Mixon Avenue in Bay Minette, Alabama. They became delinquent in their payments to Norwest Mortgage, Inc., n/k/a Wells Fargo Home Mortgage, Inc., their mortgagee. In order to foreclose on the house, Wells Fargo sought relief from the automatic stay by motion filed pursuant to 11 U.S.C. § 362. The motion was filed on March 31, 2003. In conjunction with the motion, Wells Fargo filed an affidavit supporting the motion.
The affidavit was filed on March 31, 2003. The affiant was Teresa Diaz-Cochran and the notary public was Marian W. Hudson. The affidavit and notary public acknowledgment were dated March 28, 2003. The affiant signature and notary signature were on a page separate from the other two pages of the affidavit. The affiant attested to the financial data surrounding the loan such as the amount owed and the amount in arrears, and stated facts about the mortgage and note. The affidavit also stated that copies of the note and mortgage were attached to the affidavit. The affidavit had only one attachment—the mortgage. From testimony offered at the certification hearing, it is clear that the Brice Vander Linden firm prepared and filed the Motion for Relief from the Stay and it prepared the affidavit that Theresa Diaz-Cochran signed. The testimony also shows that the affidavit was “presigned.” The Wells Fargo employees had sent to Brice Vander Linden multiple signature pages with the affiant’s signature and the notary’s signature on the page as well as the notary seal, with the dates of signing blank. The employee reviewed the affidavit online when it was sent to the employee’s email. If the financial data was correct, the employee emailed approval to the Brice firm and it attached a presigned signature page to the approved wording. The Brice firm also apparently filled in the dates of the affiant’s and notary’s signatures.
The Brannans and Wells Fargo agreed to a conditional denial of the motion for relief from the stay at a hearing held on April 23, 2003. The court signed an order on April 25, 2003 stating, in general terms, that the arrears of the Brannans on their mortgage would be paid through their Chapter 13 plan together with attorney’s fees of $350 and a filing fee of $75. Ms. Brannan never personally paid the mortgage payments after that date. She deeded the home to Wells Fargo in a deed-in-lieu of foreclosure arrangement.
Debtor offered into evidence 631 affidavits with a variety of alleged flaws. Wells Fargo listed the defects in its brief.
1. A person other than the affiant mistakenly named in the body of the affidavit
2. Misdescription of the affiant’s job (i.e., called “bankruptcy representative or “bankruptcy specialist” as opposed to “bankruptcy supervisor”)
3. Notarization undated
4. Missing page
5. Affidavit refers to an exhibit containing an indication that it was printed or faxed later
6. Affidavit refers to an exhibit attached to a motion for relief from stay which had not been filed at the time of the affidavit’s execution
7. First page of the affidavit appears to have been “updated” after the affidavit’s signature to reflect a missed payment subsequent to the date of the affidavit (without the knowledge or consent of any Wells Fargo employee)
8. Handwriting of the date on the notarization appears to be different from that of the notary
9. Affidavit exhibit(s) missing
10. Affidavit refers to a note as an exhibit but instead there is a Lost Note Affidavit
11. Different font for some part of the affidavit
12. Affiant date blank
13. Notarization state or county incorrect
14. McCalla Raymer attorney signed as Assistant Secretary of Wells Fargo
15. Blanks in affidavit not filled in
16. Affiant’s name misspelled
17. Affiant and notary dates are different
18. Affiant’s name wrong in body of affidavit
19. Affiant was allegedly not assistant secretary of MERS
20. Handwritten changes on affidavit
21. Affidavit refers to delinquent payment for month after affidavit filed
22. Missing affiant signature
23. Debtor’s name wrong in some places in affidavit
24. Affiant did not sign in presence of notary
25. Affidavit refers to property value in debtor’s bankruptcy schedules, but affiant does not know whether she/he personally reviewed the schedules[1]
B.
The evidence shows that two law firms handled all or substantially all of the bankruptcy cases in this district from 1996-2008 for Wells Fargo — the Brice Vander Linden firm and the McCalla Raymer firm. The Brice Vander Linden firm has admitted it filed “presigned” affidavits and has provided a list of many of them. Those affidavits are included in plaintiff’s list of 631 affidavits. The affidavits it handled also included affidavits that exhibited most if not all of the other infirmities listed. The McCalla Raymer firm does not admit to filing any presigned affidavits. However, all of the other infirmities appeared in its affidavits.
1.
The Brice Vander Linden firm commenced its representation of Wells Fargo no later than 1996. From 1996-2003, it used (at least part of the time) presigned affidavits from Wells Fargo representatives which it filed in conjunction with relief from stay motions. These presigned affidavits were provided by Wells Fargo and were sanctioned by Wells Fargo’s own Guidelines dated May 27, 2003[2] which authorized the procedure. It is not clear how long the presigned affidavit process was used except that Hillary Bonial, the lawyer from Brice in charge of bankruptcy operations, knows it ended on April 15, 2003 when the Brice Vander Linden firm sent an email to Wells Fargo stating that the firm was terminating the procedure. The Brice firm itself terminated the process, at least in part, because a bankruptcy judge in California called the process into question. Another Brice client, Mitsubishi, had been providing presigned signature pages to Brice and an affidavit with a presigned signature page was discovered to have been filed in Judge Klein’s court. Wells Fargo never told Brice Vander Linden to stop using the procedure. After terminating the policy, the Brice firm provided full affidavits to Wells Fargo by email, using what it called the “corrected execution” procedure. Wells Fargo employees were responsible for reviewing, signing and notarizing the affidavits and returning them by overnight mail to the Brice firm. The Brice firm did not attach any documents that an affidavit stated were attached unless it determined it was not a document available on Wells Fargo’s computer system. If a document came from a third party, some evidence indicated that the Brice firm forwarded it to Wells Fargo.
The evidence is repetitiously substantial that the Brice firm filed the affidavits returned to them by Wells Fargo regardless of condition. Many affidavits bore no date for an affiant’s signature and/or a notary’s signature; many had mistakes as to the names of affiants or job titles; many had statements that documents were attached that were not.
2.
The McCalla Raymer law firm did a substantial amount of Wells Fargo’s work in the Southern District of Alabama over the period 2004-2008. There is no evidence that McCalla Raymer used presigned affidavits. However, the McCalla Raymer affidavits had many of the same defects as the Brice firm affidavits. Many had undated affiant or notary signatures. Many had wrong affiant names or job titles.
In addition, McCalla Raymer affidavits had three other defects. Some McCalla affidavits had attachments added to affidavits after they were signed. This is clear because some affidavits stated that a note was attached, but a lost note affidavit was attached instead. Most troubling was the fact that there were numerous affidavits which stated that payments were in default for periods of time in the future, i.e., an affidavit dated August 25, 2004 stated that the September 2004 payment was in default.
3.
Wells Fargo had guidelines for attorneys working on its bankruptcy cases. In the 2003 version of the guidelines, attorneys were advised that Wells Fargo would supply presigned affidavit signature pages for bankruptcy cases if requested. It is unclear if that was in the guidelines before that date. After the 2003 version, the presigned affidavit signature language was deleted. The guidelines said nothing else about procedures to be followed in regard to affidavit preparation by law firms. Wells Fargo employees repeatedly stated that they relied on their attorneys to tell them what to do. Wells Fargo had no organized training for affidavit signing employees or notary signing employees. When hired, they were told how to do their jobs by their predecessors or supervisors.
Employees signed numerous affidavits every day. One employee described receiving and handling 80-100 affidavits before lunch each day. She averaged about 2 ½-3 minutes per affidavit for collating, stapling, checking content and signing. One employee admitted she didn’t read any of the affidavits she signed. Others testified they read the financial information. When confronted with affidavits with wrong names, wrong job titles, missing or incorrect attachments, they expressed surprise. If the affidavit stated that the debtors’ bankruptcy schedules indicated a property value of a certain amount, the employees testified that they did not verify that fact because they had no access to PACER.
Many affidavits had mortgage and note attachments which appeared to be attached after the preparation and signing of the affidavit. Many affidavits had Lost Note affidavits attached that said a copy of the mortgage and note were attached. Other affidavits stated that the Mortgage and Note were attached to the motion for relief from stay but were not.
The employees signing affidavits testified in numerous instances that the date of their signing of the affidavit was not filled in by them. Notary employees also often testified that they did not fill in the dates on their notarizations. Someone else had done it. Employees signing affidavits did not always sign the affidavits in front of a notary. The affidavits were placed in a file folder and delivered to the notary by the affiant or another employee.
Some notarizations were not dated the same date as the affiant’s signature date. Some affidavits stated that a debtor was in default as to payments which were not yet due. The Wells Fargo employees stated that they did whatever their attorneys told them to do.
4.
Wells Fargo employees, high and low, and its attorneys testified that they saw nothing wrong with their affidavit preparation, signature and notarization procedures. If the financial data in the affidavit was correct, they testified that the affidavit was okay. Their focus was solely on the financial data. The rest was “technicalities.”
LAW
The issue to be decided is whether a class of debtors can be certified pursuant to Fed. R. Bankr. P. 7023. Rule 7023 incorporates Fed.R.Civ.P. 23 into adversary proceedings. The requirements for a class are set forth in the rule.
(a) Prerequisites. One or more members of a class may sue or be sued as representative parties on behalf of all members only if:
(1) The class is so numerous that joinder of all members is impracticable;
(2) There are questions of law or fact common to the class
(3) The claims or defenses of the representative parties are typical of the claims or defenses of the class; and
(4) The representative parties will fairly and adequately protect the interests of the class.
Brannan seeks to certify a class that includes every debtor that had a case in the Southern District of Alabama from 1996 through 2008 in whose case an affidavit was filed by Wells Fargo. Brannan asserts that, based upon the facts outlined above, every affidavit is improper or fraudulent due to the policies and procedures followed by Wells Fargo and its agents and employees in preparing, executing and filing affidavits in debtors’ cases. The Court concludes that a class defined as proposed cannot be certified. However, the Court concludes that Brannan’s case can serve as a vehicle for sanctioning Wells Fargo for its behavior, and/or, perhaps the class can be redefined to include those who have suffered actual harm.
There are three reasons the Court concludes that the proposed class cannot be certified. First, abuse of the bankruptcy process or fraud on the court is a remedy that is based upon injury to the court system as a whole rather than an injury to individual debtors. Therefore, to the extent this case is about punishment of Wells Fargo for all debtors, regardless of actual injury, the relief given must necessarily be to the system—not individuals. Second, no other court that has dealt with similar practices has done more than sanction creditors who use improper practices. Although not determinative of the right to a class wide remedy, it is evidence that such abuses, involving numerous debtors, have been dealt with by courts in a more summary fashion. Third, although the proposed class of debtors was “harmed” in a way by the practices of Wells Fargo, the harm cannot be quantified meaningfully for each debtor. A class that specifically focused on debtors who actually paid an attorneys’ fee or filing fee for Wells Fargo’s shoddy filings might be able to be certified because such debtors suffered actual monetary damages. What the debtors received was actually worth less than the $350-$500 charged and paid by them.
A.
Abuse of the bankruptcy process and/or rules and fraud on the court are complaints which go to the heart of the bankruptcy system—not to any particular debtor. In fact, as Wells Fargo has pointed out, Ms. Brannan can point to no actual monetary harm suffered by her. What is the harm in Wells Fargo’s practices? That Wells Fargo “took the law into its own hands.” It decided unilaterally to disregard South Carolina notary public requirements, this Court’s local practices, and the ages old law of signature or declaration under oath or penalty of perjury. Testimony under oath may not be foolproof, but it is the lifeblood of the courts. If parties have no regard for what it means, those parties’ testimony is suspect and unreliable. The only reason this Court allows evidence to be presented by Wells Fargo and other parties by affidavit is to make the process more convenient and streamlined for the Court and litigants. If the testimony is not trustworthy because the safeguards of the process are not observed, this Court (and one would suspect others too) will have to require parties to appear in person. Disregard of court procedures and rules, notary law and signatures under oath is a courtwide concern.
In Travelers Indemnity Company v. Gore, 761 F.2d 1549, 1552 (11th Cir. 1985) the Eleventh Circuit defined fraud on the court as “that species of fraud which does or attempts to, defile the court itself, or is a fraud perpetrated by officers of the court so that the judicial machinery cannot perform in the usual manner its impartial task of adjudicating cases that are presented for adjudication.” It is an abuse that must be corrected regardless of harm to any individual debtor or creditor. To the extent Brannan seeks to correct or address this courtwide concern, the remedy is not one for damages to be awarded to specific debtors.
Several cases similar to this case are pending in the Middle District of Alabama Bankruptcy Court. Judge Sawyer concluded that a single false affidavit might not be a fraud on the court but an intra-party fraud. However, five factors made the facts alleged in Judge Sawyer’s cases and this Court’s cases fraud on the court. Woodruff v. Chase Home Finance, LLC, 2010 WL 386209 (Bankr. M.D.Ala. 2010).
(1) Large numbers of motions for relief from the automatic stay are filed.
(2) There is only a short period of time to dispose of these motions.
(3) There is a huge economic disparity between the resources available to the parties.
(4) The subject matter is critical to the debtor’s survival.
(5) These matters are only rarely litigated to a final order after a hearing on evidence.
These factors make the actions of Wells Fargo, if proven, a fraud on the court. The sheer numbers, the reliance of the court on the affidavits, and the subject matter of the Wells Fargo motions (debtors’ homeplaces) make even careless, negligent procedures inexcusable.
The Court has found no cases that have certified a class like this one. That alone is not sufficient reason not to certify a class, but it is some support for this ruling. This is particularly true when there is another remedy, a sanction, which is clearly within this Court’s authority.
C.
To have standing to sue, a plaintiff must have “suffered . . . injury in fact,’. . . the injury[] . . . [must be] `fairly traceable’ to the actions of the defendant, and . . . the injury[] . . . [must] likely be redressed by a favorable decision.” Bennett v. Spear, 520 U.S. 154, 162, 117 S.Ct. 1154, 137 L.Ed.2d 281 (1997) (quoting Lujan v. Defenders of Wildlife, 504 U.S. 555, 560-61, 112 S.Ct. 2130, 119 L.Ed.2d 351 (1992). An “injury in fact” must be “(a) concrete and particularized and (b) actual or imminent, not conjectural or hypothetical.” Lujan, 504 U.S. at 560-61, 112 S.Ct. 2130; Griffin v. Dugger, 823 F.2d 1476, 1482 (11th Cir. 1987) (stating that “[u]nder elementary principles of standing, a plaintiff must allege and show that he personally suffered injury”). Although plaintiff characterizes the harm to plaintiff as the order of this Court requiring payment of attorney’s fees and expenses and the posting of the same to plaintiff’s account, Brannan can offer no proof that any information in her tainted affidavit was untrue, nor can she prove she paid Wells Fargo anything for production of the shoddy document. This will be true of many of the proposed class members. Only debtors who actually paid fees for the offending affidavits had an “injury in fact.” The injury was overpayment for improper document preparation. The cause of action of abuse of the rules and process under 11 U.S.C. § 105 is a sufficient basis for this claim coupled with 11 U.S.C. § 506 allowing a creditor to recover only “reasonable costs or charges” from a debtor. If plaintiff can redefine the class to encompass only those debtors who actually paid a fee to Wells Fargo, the class may be able to be certified.
IT IS ORDERED that:
1. The motion of the plaintiff to certify her proposed class is DENIED;
2. The plaintiff shall have 30 days from the date of this order to amend the proposed class, if she desires to do so;
3. A hearing on any amended class proposal shall be held on January 10, 2012, at 1:00 p.m. in Courtroom 2, U.S. Bankruptcy Court, 201 St. Louis Street, Mobile, AL 36602;
4. The plaintiff may file a brief in support of any amended class by December 12, 2012 and the defendant may file any responsive brief by December 23, 2012; and
5. At the hearing on January 10, 2012, the Court will discuss with counsel how to proceed with any sanction hearing in regard to Wells Fargo’s actions as the Court indicated might be appropriate in this ruling.
[1] Defendant’s Brief in Opposition to Plaintiffs’ Motion for Class Certification, Docket Entry #200, pages 4-5.
[2] “If our (Wells Fargo’s) signature is necessary, please send us a supply of the last page of the document and we will pre-sign them (sic) for future use by your firm.” Home Mortgage Default Management Guidelines, May 27, 2003, page 23.
My latest for FireDogLake. For even more confirmation that the Feds aren’t interested in bank accountability, regardless of the State half of the task force’s intentions, see Congressman Brad Miller on why he’s not the task force Executive Director and Richard Eskow on the obviousness of the problem.
As people increasingly realize that the mortgage settlement was an enforcement fraud, attention’s turned to the “new“ joint Federal/State task force that’s supposed to make the settlement into a “down payment,” by delivering much more. And so far people don’t like what they see, and are saying so. What’s striking about the resulting PR push back, however, is that it just highlights how banker-fraud-friendly our federal government is.
For example, Attorney General Eric Schneiderman penned a Daily News Op-Ed in which he pitches “More than 50 attorneys, investigators and analysts have already been deployed to support our investigations, with many more on the way” as somehow adequate to deliver on that “down payment” promise when the Savings and Loan crisis took over 1,000 and Enron alone took over 100. Not only hasn’t the federal government corroborated AG Schneiderman’s claim of “many more on the way”; “many more” than 50+ doesn’t sound like anywhere near the 1,000+ needed to approach the ballpark of accountability.
INTRODUCTION The Court retained this case so that it could give needed guidance to trial courts and other litigants by its answer to a certified question arising from a mortgage foreclosure action. As the Court wrote: The question certified . . . transcends the individual parties to this action because it has the potential to impact the mortgage foreclosure crisis throughout this state and is one on which Florida’s trial courts and litigants need guidance. The legal issue also has implications beyond mortgage foreclosure actions. Pino v. Bank of New York, 36 Fla. L. Weekly S711 (Fla. Dec. 8, 2011). Florida Land Title Association (“FLTA”) and American Land Title Association (“ALTA”) file this brief to address the need for this Court to give guidance to trial courts and litigants on the importance of protecting the rights of third parties that have justifiably relied on the finality of a prior court action when buying, extending financing on, or insuring title to real property.
SUMMARY OF ARGUMENT The Court can expressly limit its decision in this case to the setting aside of a voluntary dismissal in a case where no third party interest in real estate is implicated. Should it choose to do so, FLTA and ALTA have no issues to address. However, if the Court decides to write more broadly, we respectfully ask the Court to emphasize the need to protect the rights of affected third parties when collateral attacks are brought against otherwise final court judgments, orders, decrees or proceedings. The residential mortgage foreclosure crisis has caused a host of problems for homeowners, lenders, and Florida’s court system. The Court addressed many of these problems by forming the Task Force on Residential Mortgage Foreclosures in 2009 and by adopting its recommended amendments to the Florida Rules of Civil Procedure in 2010. However, unlike some other states, the Court has not adequately addressed the protection of third party interests when otherwise final court proceedings are collaterally attacked, especially the interest of those who have purchased foreclosed real estate.
Respectfully, if the Court is to give guidance to trial courts and litigants regarding collateral attacks against foreclosure actions (whether relief is sought under rule 1.540(b) or the use of inherent judicial powers) beyond the narrow facts of this case, it should give guidance on protecting the interests of third parties that purchase, finance and insure title to foreclosed properties. Recognition and protection of these neglected interests is vital to the integrity of our judicial system and to the ultimate resolution of the mortgage foreclosure crisis.
Army Staff Sgt. Phillip Harry learned his house had been foreclosed upon and sold in a letter forwarded to him while he was serving in Iraq.
Harry, a member of the Minnesota National Guard, filed suit on Friday against his mortgage company, alleging the company violated a federal law protecting service members from losing their homes while they are deployed.
Reflecting a convergence of two major social issues: the home foreclosure crisis and the return of thousands of members of the military from Iraq and Afghanistan, attorneys for Harry are seeking to have the suit certified as a class action, saying hundreds of service members are likely to have faced the same situation.
The U.S. Treasury launched an investigation last year into 10 leading banks that may have illegally foreclosed on the mortgages of almost 5,000 members of the U.S. military, some of them activated to duty in Iraq and Afghanistan.
The suit filed in U.S. District Court in Minnesota accuses Illinois-based HSBC Mortgage Services of violations of the Servicemembers Civil Relief Act, signed into law in 2003 as a way of easing the economic and legal burdens on military personnel called to service.
For the next couple of weeks, I’m one of the David Dayen subs at FireDogLake–no one person could fill his shoes–and this post ran there earlier today. This version is slightly updated but essentially the same.
One way to see the double standard at the heart of the foreclosure fraud—one set of laws for the bailed out banks, one for the rest of us—is to focus on the role of notaries public, and then consider that role in light of what our Supreme Court said about notaries in 1984, in a case called Bernal v. Fainter, Secretary of State of Texas.
First, let’s recap the role of notaries in the foreclosure fraud crisis: Notaries are the people who verify that someone actually is who they say they are when that person signs a document. Because banks and their agents industrialized “Document Execution” as part of their foreclosure business model, notaries did not do their jobs. Notaries’ failure to verify identities has been so complete that many people will sign as one person, say, “Linda Green.” Notaries have also been told to sign documents using one name, and then notarize their own “surrogate” signature. “Well, what’s the big deal?” bank defenders say. Beyond the fact that there’s no “business convenience” exception to following the rule of law, consider Bernal.
Bernal involved Texas’s requirement that all notaries be citizens; lawful permanent resident aliens need not apply. Bernal challenged the Constitutionality for the citizenship requirement. To rule on the question, the Court had to consider what notaries did, and whether or not what notaries did was so political, so central to representative democracy, that limiting being a notary to citizens was rational. In finding that notaries were important but not political officers of the state, the Court made some observations of note.
The Obama Administration worked for months on a deal that would have let America’s biggest banks off the hook for a crime wave of runaway mortgage fraud. All they had to do in return was pledge a negligible sum of money, to be paid by their shareholders and not themselves, and which they would dispense themselves. In return, crooked bankers received immunity from prosecution – and even from investigation.
After the deal came under attack from a number of its allies, the Administration settled with the banks anyway. But it promised millions of wronged homeowners – and the nation as a whole – that it would move “aggressively” to investigate criminal misdeeds and prosecute bankers and anyone else who broke the law.
That was then, this is now. Two and half months later the Administration hasn’t even started to take the inadequate steps it promised it would take. The clock is running out on the statute of limitations and there’s no sign that the Administration has lifted a finger to investigate criminal bankers.
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