This is just coming in and I’ll follow up with any developing news.
Here’s a recap meanwhile:
Former employees of Plantation attorney David J. Stern agreed to a preliminary $502,000 settlement after he fired them without giving the required 60-day notice as business at his foreclosure law firm began to dry up.
U.S. District Judge Robert N. Scola Jr. found the settlement “sufficiently fair, reasonable, adequate and in the best interests” of the former workers, according to a preliminary order. There will be a June 8 final hearing.
Workers in the class-action settlement now have until May 3 to opt out of the settlement, while papers in support of it should be filed by May 29.
Former employees of Plantation attorney David J. Stern agreed to a preliminary $502,000 settlement after he fired them without giving the required 60-day notice as business at his foreclosure law firm began to dry up.
U.S. District Judge Robert N. Scola Jr. found the settlement “sufficiently fair, reasonable, adequate and in the best interests” of the former workers, according to a preliminary order. There will be a June 8 final hearing.
Workers in the class-action settlement now have until May 3 to opt out of the settlement, while papers in support of it should be filed by May 29.
Absolutely do not miss this piece from Abigail Field – So head over and please absorb the information.
Abigail C. Field-
If you want to cut through some of the nonsense the banks have managed to sell as information about the housing situation, robosigning, mortgage modifications, check out this very accessible interview of attorney Talcott Franklin by Martin Andelman.
Tal represents the majority of investors hosed once by Wall Streeers selling AAA-rated mortgage backed junk, and constantly being hosed again by the big bank servicers of those mortgages. Interestingly, his perspective sounds very much like homeowners’. Yes, a couple of times it gets a little too legalistic, but only for about 5 minutes of the slightly longer than the hour chat—when you hit the overview of the contracts structuring securitization, or any other topic that is more in the weeds than you want to go, take a deep breath and keep going. Most of the interview is in a rhythm and a language that creates clarity I’ve not seen or heard elsewhere.
Please find some time today or over the weekend to listen to this excellent podcast of Martin Andelman’s interview with Attorney Talcott Franklin, who represents more than half of all the investors in mortgage-backed securities on the planet. Tal’s the co-author of the “Mortgage and Asset-backed Securities Litigation Handbook,” and he’s a very experienced and highly sophisticated litigator. You will learn a whole lot and many thanks to Martin for this super interview.
The podcast is available in two versions… MP4 and MP3. The MP4 version includes a couple of slides that show diagrams of the basic securitization process, but the MP4 format may not play on some computers. The MP3 version is audio only, and should play on most any computer. Most listeners will have no trouble following along either way.
So, turn up the volume on your speakers, and click the MP4 or MP3 version. I loved recoding this podcast. If you want to know more about the foreclosure crisis, you’re about to learn from an expert on the other side of the foreclosures, the investor side… it doesn’t get any better than this!
A federal magistrate in Miami has recommended that former employees of DJSP Enterprises, the legal processing arm of Plantation attorney David J.Stern’s once-powerful foreclosure law firm, be given class action status to sue Stern and his affiliates for violating federal labor laws.
The suit, filed on behalf of four employees but which could affect at least 700, claims workers were fired last fall without the 60 days notice required under the Worker Adjustment and Retraining Notification, or WARN, Act. The action seeks back pay and benefits.
B. Stern and DJSPA as “Employers” under Single Employer Test
Plaintiffs argue that WARN Act liability is imputed to Stern and DJSPA under the single employer test. Stern and DJSPA contend that Plaintiffs fail to sufficiently allege all the elements of the single employer test.
Two or more affiliated businesses which constitute a “single employer” may be held jointly and severally liable for violations of the WARN Act. Pearson v. Component Tech. Corp., 247 F.3d 471, 478 (3d Cir. 2001). The Department of Labor (“DOL”) regulations issued under the WARN Act provide that two or more affiliated businesses may be considered a single business enterprise for WARN Act purposes. 20 C.F.R. § 639.3(a)(2). The regulations provide a five-factor balancing test to assess whether affiliated businesses constitute a “single employer,” which would subject them to joint liability under the WARN Act. See Pearson, 247 F.3d at 478.
The five DOL factors are as follows: (1) common ownership, (2) common directors and/or officers, (3) unity of personnel policies emanating from a common source, (4) dependency of operations, and (5) de facto exercise of control. Id. at 487– 490; 20 C.F.R. § 639.3(a)(2).
Plaintiffs adequately allege the five elements of the single employer test.
The housing market’s woes continue forcing people into rentals, further depressing the home ownership rate in a nation that now has fewer homeowners than were created during the housing boom.
In the first quarter, 66.5% of Americans owned homes, down from 67.2% a year earlier, the Census Bureau reported. The rate last hit this level in 1998.
During the boom, when easy credit made mortgages available with less regard for income or ability to pay, the ownership rate surged to a record 69.2% in 2004?s second and fourth quarters and stayed near that level until the recession deepened.
Alter Ego – Piercing the Corporate Veil of DJSP BVI
99. The Plaintiffs, on behalf of themselves and other persons similarly situated, repeat and reallege
the allegations of the preceding paragraphs as if fully restated herein.
100. As alleged above, at all relevant times herein, DJSP BVI, by its complete exercise of
dominion and control, is the alter ego of DJSP FL, DAL Group and its operating subsidiaries
DJS Processing, Professional Title, and Default Servicing, which constitute a single employer.
Indeed, as set forth above, there is a high interdependency of operations; there is commonality
between management, directors and officers; there is a consolidation of financial, strategic, legal
and human resources operations; and, at all relevant times, DJSP BVI has used and continued to
use DAL Group and its operating subsidiaries and the assets of these entities for its own
purposes.
COUNT II
Alter Ego – Stern
103. The Plaintiffs, on behalf of themselves and other persons similarly situated, repeat and reallege
the allegations in paragraphs one through eighty-five (1-85) as if fully restated herein.
104. As alleged above, at all relevant times herein Stern, by his complete exercise of dominion
and control over said entities, is the alter ego of DJSPA, DJSP BVI, DJSP FL, DAL Group and
its operating subsidiaries DJS Processing, Professional Title, and Default Servicing. The
foregoing entities combine to constitute a single employer, all under the direction and control of
Stern personally. Indeed, as set forth above, there is a high interdependency of operations; there
is commonality between management, directors and officers; there is a consolidation of financial,
strategic, legal and human resources operations; and, at all relevant times, Stern has used and
continued to use DJSPA, DJSP BVI, DJSP FL, DAL Group and its operating subsidiaries and the
assets of these entities for his own purposes.
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF FLORIDA
RENAE MOWAT, NIKKI MACK,
ARKLYNN RAHMING, and QUENNA HUMPHREY individually
and on behalf of all other similarly situated individuals,
Plaintiffs,
vs.
DJSP ENTERPRISES, INC., a Florida Corporation, DJSP
ENTERPRISES, INC., a British Virgin Islands Company,
and LAW OFFICES OF DAVID J. STERN, P.A.,
DAVID J. STERN, individually,
Defendants.
______________________________________/
EXCERPT:
CLASS ACTION COMPLAINT
Plaintiffs Renae Mowat, Nikki Mack, Arklynn Rahming, and Quenna Humphrey individually and on behalf of all others similarly situated, for their Complaint against Defendants, DJSP Enterprises, Inc., a Florida corporation, DJSP Enterprises, Inc., a British Virgin Islands Company, (collectively hereinafter referred to as “DJSP”), Law Offices of David J. Stern, P.A., (“Stern, P.A.”) and David J. Stern (“Stern”) state as follows:
NATURE OF CASE
1) Plaintiffs bring this action on behalf of themselves and other similarly situated former employees who worked for the Defendants in Plantation, Florida and who were terminated as a consequence of mass layoffs by the Defendants beginning on September 23, 2010 and who were not provided sixty (60) days advance written notice of the mass layoffs by Defendants as required by the Worker Adjustment and Retraining Notification Act, 29 U.S.C. § 2101 et seq.
(“WARN Act”).
2) Plaintiffs and all similarly situated employees seek to recover back pay for each day of WARN Act violation and benefits under 29 U.S.C. § 2104.
3) This Court has jurisdiction pursuant to 28 U.S.C. §§ 1331, 1334 and 1367, as well as 29 U.S.C. §§ 2102, 2104(a)(5).
4) Venue over this matter is appropriate in this Court pursuant to 29 U.S.C. 2104(a)(5) because the acts constituting the violation of the WARN Act occurred, and the claims arose in this district. Venue is also proper under 28 U.S.C. §1391(a) and (b). The acts complained of occurred in the State of Florida and, at all relevant times, material hereto, the Defendants conducted business with and through the other named Defendants who also conducted business with and through the other Defendants and their subsidiaries and the named individual Defendant, David J. Stern, resides in this judicial district, and all of or a substantial part of the events or omissions giving rise to this action occurred in this judicial district.
Another 155 employees received pink slips Thursday from the Law Offices of David J. Stern and DJSP Enterprises, which processes home foreclosure cases for the Plantation-based law firm.
The layoffs came as Fannie Mae, which withdrew it business from the Stern firm after becoming one of its biggest clients, announced it had named eight law firms to handle foreclosure cases in Florida.
According to a study released Friday by NeighborWorks America, 58 percent of homeowners who’ve received assistance through its national foreclosure counseling program reported the primary reason they were facing foreclosure was reduced or lost income.
NeighborWorks was created by Congress in 1991 as a nonprofit organization to support local communities in providing its citizens with access to homeownership and affordable rental housing. In January 2008, with the foreclosure crisis raging, Congress implemented theNational Foreclosure Mitigation Counseling (NFMC) Program and made NeighborWorks the administrator.
The organization says that over the course of the NFMCprogram, the percentage of homeowners who’ve cited wage cuts or unemployment as the primary reason they were facing foreclosure has steadily increased.
In November 2009, 54 percent of NFMC-counseled borrowers reported reduced or lost income as the main reason for default. Six months earlier in June 2009, it was 49 percent; in February 2009, 45 percent; and in October 2008, 41 percent.
These steady increases parallel the nation’s unemployment rate, which until the November 2009 employment report, had marched upward since October 2008.
“With unemployment numbers not likely to dip below nine percent in 2010, our report proves what many already believed to be true. Unemployment and reduced income are having a devastating effect on our nation’s homeowners,” said Ken Wade, CEO of NeighborWorks America.
The administration recently announced changes to its Making Home Affordable program to provide assistance to unemployed homeowners by temporarily reducing or suspending mortgage payments for a minimum of three months. The initiative becomes effective July 1, 2010.
The federal government has also awarded additional funding to states where unemployment is high to support localized mortgage relief programs for homeowners who are out of work.
Lawmakers too are on a push to help homeowners who’ve lost their jobs. Congress’ financial reform package includes a measure that uses $3 billion from the Troubled Asset Relief Program (TARP) fund to make loans of up to $50,000 to unemployed homeowners to be used to make their mortgage payments for up to 24 months while they are looking for a new job.
Wade said, “While Congress and state governments have stepped up and extended unemployment benefits to help families survive this tough economic climate, it’s time for mortgage servicers and investors to make meaningful accommodations for homeowners facing foreclosure. If they don’t, we’ll see even more empty houses and devastated neighborhoods in our communities.”
NeighborWorks also noted in its report that 62 percent of all NFMC clients held a fixed-rate mortgage, and 49 percent were paying on a fixed-rate mortgage with an interest rate below 8 percent.
Nearly one million families have received foreclosure counseling as a result of NFMC Program funding. According to NeighborWorks, NFMC clients are 60 percent more likely to avoid foreclosure than homeowners who do not receive foreclosure counseling.
Obama readies steps to fight foreclosures, particularly for unemployed
By Renae Merle and Dina ElBoghdady
Washington Post Staff Writer
Friday, March 26, 2010
The Obama administration plans to overhaul how it is tackling the foreclosure crisis, in part by requiring lenders to temporarily slash or eliminate monthly mortgage payments for many borrowers who are unemployed, senior officials said Thursday.
At a House oversight committee hearing, keys represent foreclosed homes. The administration is planning new steps to fight foreclosures. (Brendan Hoffman/bloomberg News)
Banks and other lenders would have to reduce the payments to no more than 31 percent of a borrower’s income, which would typically be the amount of unemployment insurance, for three to six months. In some cases, administration officials said, a lender could allow a borrower to skip payments altogether.
The new push, which the White House is scheduled to announce Friday, takes direct aim at the major cause of the current wave of foreclosures: the spike in unemployment. While the initial mortgage crisis that erupted three years ago resulted from millions of risky home loans that went bad, more-recent defaults reflect the country’s economic downturn and the inability of jobless borrowers to keep paying.
The administration’s new push also seeks to more aggressively help borrowers who owe more on their mortgages than their properties are worth, offering financial incentives for the first time to lenders to cut the loan balances of such distressed homeowners. Those who are still current on their mortgages could get the chance to refinance on better terms into loans backed by the Federal Housing Administration.
The problem of “underwater” borrowers has bedeviled earlier administration efforts to address the mortgage crisis as home prices plunged.
Officials said the new initiatives will take effect over the next six months and be funded out of $50 billion previously allocated for foreclosure relief in the emergency bailout program for the financial system. No new taxpayer funds will be needed, the officials said.
The measures have been in the works for weeks, but President Obama is finally to release the details days after his watershed victory on health-care legislation. Following that bruising battle on Capitol Hill, his administration is now welcoming a chance to change the subject and turn its attention to the economy and, in particular, the plight of the unemployed — concerns that are paramount for many Americans.
The administration has been facing increasing pressure from lawmakers and housing advocates to overhaul its foreclosure prevention efforts. So far, fewer than 200,000 borrowers have received permanent loan modifications under its $75 billion marquee program, known as Making Home Affordable. In the meantime, there is a growing backlog of distressed borrowers awaiting help from their lenders, which threatens to undercut efforts to stabilize the housing market.
Challenges unmet
Assistant Treasury Secretary Herbert M. Allison Jr. told a House panel Thursday that “we did not fully envision the challenges that we would encounter” when the earlier program was launched.
The efforts have been hampered by the difficulty of helping unemployed homeowners, who struggled to qualify for the government’s mortgage relief plan. In requiring temporary relief for jobless borrowers, known as forbearance, officials are hoping to give them time to find a new job. Some will still need more assistance after the six-month period while others will ultimately lose their homes, administration officials said.
“We certainly support a forbearance opportunity for unemployed borrowers,” said John A. Courson, chief executive of the Mortgage Bankers Association. He said he had not seen full details of the program.
Four measures
In addition to mortgage relief for unemployed borrowers, the program features four other key elements, including several steps to address the growing population of borrowers who owe significantly more than their home is worth, according to officials who spoke on the condition of anonymity because the official announcement had not been made. Underwater borrowers now make up about a quarter of all homeowners, according to First American CoreLogic. Economists consider these homeowners at higher risk of default because they cannot sell or refinance their home when they run into financial troubles.
The first key element is that the government will provide financial incentives to lenders that cut the balance of a borrower’s mortgage. Banks and other lenders will be asked to reduce the principal owed on a loan if the amount is 15 percent more than their home is worth. The reduced amount would be set aside and forgiven by the lender over three years, as long as the homeowner remained current on the loan.
Until recently, administration officials had been reluctant to encourage lenders to cut the principal balance, worrying that this would encourage borrowers to become delinquent. But as federal regulators have struggled to make an impact on the foreclosure crisis, those qualms have weakened.
“We would prefer to see a required principal forgiveness program. But this is helpful,” said David Berenbaum, chief program officer for the National Community Reinvestment Coalition, a nonprofit housing group. “This is another tool that will help consumers weather the crisis.”
Second, the government will double the amount it pays to lenders that help modify second mortgages, such as piggyback loans, which enabled home buyers to put little or no money down, and home equity lines of credit.
These second mortgages are an added burden on struggling homeowners, especially when their total debt, as a result, is greater than their home value.
Federal officials have estimated that about half of all troubled homeowners have a second mortgage and last year launched a program to encourage lenders to restructure them. That effort has struggled to get off the ground.
Third, the new effort also increases the incentives paid to those lenders that find a way to avoid foreclosing on delinquent borrowers even if they can’t qualify for mortgage relief. For example, the administration is scheduled to launch a program next month encouraging lenders to have borrowers sell their homes for less than the mortgage balance in what is known as a short sale.
Fourth, the administration is increasingly turning to the Federal Housing Administration to help underwater borrowers who are still keeping up their payments. The aim is to help these borrowers refinance into a more affordable loan. The FHA will offer incentives to lenders that reduce the amount borrowers owe on their primary mortgages by at least 10 percent.
For those borrowers who have more than one mortgage on their house, the FHA will allow refinancing of the first loan only. The new loan and any second mortgage could not exceed 15 percent of the home’s value. This approach is meant to benefit not only borrowers but also lenders by allowing them to offload mortgages that might otherwise fail.
Only homeowners who are refinancing their main residence, have a credit score above 500 and can document their income are eligible.
Administration official say this refinancing program should not strain the FHA’s already weakened finances because the effort will be financed with up to $14 billion out of the federal bailout program.
March 16 (Bloomberg) — U.S. employers won’t hire enough workers this year to lower the jobless rate much below the level of 9.7 percent reached in February, three Obama administration economic officials said today.
The proportion of Americans who can’t find work is likely to “remain elevated for an extended period,” Treasury Secretary Timothy F. Geithner, White House budget director Peter Orszag and Christina Romer, chairman of the Council of Economic Advisers, said in a joint statement. The officials said unemployment may even rise “slightly” over the next few months as discouraged workers start job-hunting again.
“We do not expect further declines in unemployment this year,” the officials said in testimony prepared for the House Appropriations Committee. They predicted the economy would add about 100,000 jobs a month on average — not enough to bring the jobless rate down substantially.
Today’s projections are in line with the 10 percent average unemployment forecast for this year in last month’s budget plan. Christopher Rupkey, chief financial economist at Bank of Tokyo Mitsubishi UFJ Ltd. in New York, said the administration’s language risks damping expectations for a recovery.
“They need to work on the message, and right now the message is that there is not a lot to be hopeful about,” Rupkey said. “Warning about a slow jobless recovery can help make it a reality.”
Growth Outlook
Geithner, Orszag and Romer reiterated the administration’s forecast that the economy would grow 3 percent this year, as measured by comparing fourth quarter growth in gross domestic product. Growth is projected to rise to 4.3 percent in 2011 and 2012, and inflation probably will remain low, they said.
“The worst now appears to be behind us,” the officials said. “However, the country faces significant and ongoing challenges: high unemployment, the need to build a new and stable foundation for prosperity in the years and decades ahead, and a medium- and long-term fiscal situation that could ultimately undermine future job creation and economic growth.”
The three urged Congress to pass Obama Administration job stimulus proposals including extended unemployment benefits, aid to state and local governments and tax breaks for businesses that hire new workers.
They argued tax benefits for businesses that add new workers would have a large impact in the early stages of an economic recovery.
‘Particularly Effective’
“The current situation — where for many firms the question is not whether to hire but when — is one that may make such programs particularly effective,” they said.
The officials said projected federal budget deficits, which the administration forecasts at more than $1.5 trillion for 2011 and over $751 billion for 2015, “remain undesirably high.”
“Deficits matter. Ours are too high; they are unsustainable,” Geithner said during testimony. “The American people, along with investors around the world, need to have more confidence in our ability to bring them down over time.”
The officials put the greatest blame for the high budget deficits on “years of poor decisions” during the administration of George W. Bush, citing enactment of the Medicare prescription drug benefit and income-tax cuts without corresponding budget savings to pay for them.
“If these two policies had been paid for, projected deficits — without any further deficit reduction — would be about 2 percent of GDP per year by the middle of the decade, and we would have been on a sustainable medium-term fiscal course,” they said.
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