Would you like a bag of chips with your frozen loan audit?

Posted on March 23, 2010. Filed under: Banking, Case Law, Foreclosure Defense, Mortgage Audit, Mortgage Fraud, Mortgage Law, Truth in Lending Act | Tags: , , , , , , , |

Every day I get calls from attorneys or people facing foreclosure asking about my services as a forensic loan auditor and expert witness. Generally the callers are reasonably well informed about my work and know what they can and cannot expect from an audit. But yesterday a nice lady from Ohio called and asked for information on a frozen loan audit! And increasingly I am getting calls from people who begin by asking what I charge, immediately followed by how many pages long my audits are! Maybe I am getting a little sensitive as I am nearing my 49th birthday but I become irritated when I am made to feel like a server at a fast food joint. Not that there is anything wrong with being a server, but what would be an appropriate response to such a dumb question?  Today’s special is all you can read for $299 and a bag of chips at no extra cost. Will that be for here or to go?

What is this fascination with size and quantity that drives the average consumer? He wants a McMansion, a Big Mac, an Extra Large Latte, a Jumbo Dog, a Super Sized Pizza, and a Voluminous Frozen Audit. Or is it forensic? Who cares, as long as you get a lot of pages and one of them money back guarantees. Oh yes, we love a money back guarantee.  But seriously, why would someone facing foreclosure or having difficulty making mortgage payments care about the size of an audit? Are they calling five auditors and going with the cheapest who offers the most words for the money? Is that how you hire a professional these days?

Of course, I can’t place the entire blame on consumers who are simply trying to find the most affordable solution for perhaps the biggest problem they have had to face – losing their home. Understandably they are trying to find a method to measure the value of such an esoteric service as a forensic loan audit, which no one had even heard about until a few months ago. You can’t blame them for wanting to shop and compare products before buying and parting with their hard earned money. It is the service providers who are misleading the public and selling them a thick pile of worthless junk packaged as a forensic loan audit with a guarantee that if no violations are discovered a refund will be issued with no questions asked. I wonder how many refunds on these fake audits have been issued.

There are even law firms now peddling these audits for up to $2500 a pop but delivering nothing more than a standardized list of technical violations with some added legalese and fictitious causes of action thrown in for good measure (such as Rescission and Breach of the Covenant of Good Faith and Fair Dealing, none of which are valid or independent causes of action but they sound good). After all, how can you justify charging $2500 for a template audit, if you don’t embellish it with a few Latin words no one can pronounce or omit citations to inapposite case law inserted to fill space for lack of meaningful research.

This industry has been flooded with unprofessional ex loan officers and underemployed ambulance chasing lawyers who have setup shop as auditors with cheap copycat websites and a subscription to compliance software, representing themselves as experts offering hope to distressed homeowners, who in their desperation for keeping their homes and stopping foreclosure are easy prey.

What these unsavory characters are selling is essentially overpriced data entry and a template report purporting to be a legal analysis of the homeowner’s rights and remedies for alleged violations of the Truth in Lending Act (TILA), Real Estate Settlement Procedures Act (RESPA), Fair Credit Reporting Act, Predatory Lending, Breach of Fiduciary Duty, Negligence, Fraud and Unfair or Deceptive Acts or Practices to name a few. After completion of the audit the borrower is usually encouraged to demand a response from the lender via a Qualified Written Request (QWR), which the auditor/lawyer sometimes offers to draft and submit as an added bonus with the assurance that as soon as the lender is served with their masterfully prepared QWR and sees the auditor’s impressive findings, its lawyers begin trembling with fear of being sued and offer to settle for pennies on the dollar. All that for $399 and a money back guarantee! How can anyone turn down such an offer? Yes please, I will have one audit and a bag of chips to munch on while laying back on my couch watching the bank get on its knees and beg for my forgiveness. I want to watch them grovel before they rescind my predatory loan and hand over the deed to my house free and clear. After all this is America.

TILA/RESPA

Of course the reality is markedly different than what is purported by these overenthusiastic yet incompetent advocates. I have seen hundreds of audits and they all have one thing in common – they are worthless. First, many of the so called violations these audits uncover, such as failure to issue a good faith estimate within three days of application, or failure to issue a HUD-1 one day prior to settlement, provide for no private right of action, so their only value may lie in establishing a pattern and practice of misrepresentation, deception or on rare occasions fraud. But even if sufficient facts exist for allegations of broker or loan officer misconduct, liability for such conduct ordinarily remains with the original tortfeasor and not the assignee of the loan, who in all likelihood is a holder in due course, unless you can show, for example, that the holder had notice of your claims prior to purchasing the Note or that the Note was not properly negotiated or for various reasons it does not qualify as a negotiable instrument.

As mentioned ordinarily the holder in due course is not liable for disputes or claims you may have against the originator or mortgage broker who sold you the loan unless certain conditions pursuant to HOEPA have been met, or the TILA violation is apparent on the face of the loan documents, or you are using the claim as a defense in a collection action, or if you can state with particularity facts that would make the note and mortgage void under other legal theories. Some courts, however, have held that you cannot use certain claims in nature of recoupment in non judicial foreclosure proceedings in states such as California, while, on the other hand,  a West Virginia court has said: “Securitization model – a system wherein parties that provide the money for loans and drive the entire origination process from afar and behind the scenes – does nothing to abolish the basic right of a borrower to assert a defense to the enforcement of a fraudulent loan, regardless of whether it was induced by another party involved in the origination of the loan transaction, be it a broker, appraiser, closing agent, or another”. Generally a fraudulent loan is not enforceable regardless of the holder in due course status of the party with the right to enforce. The trick is in providing sufficient facts to prove fraud, which, under normal circumstances is not an easy task to accomplish.

Fiduciary Duty

A popular finding proffered by some practitioners is an alleged violation of fiduciary duty by the lender. In general, however, a lender does not owe a fiduciary duty to a borrower. “A commercial lender is entitled to pursue its own economic interests in a loan transaction. This right is inconsistent with the obligations of a fiduciary which require that the fiduciary knowingly agree to subordinate its interests to act on behalf of and for the benefit of another.” Nymark v. Heart Fed. Savings & Loan Assn., 231 Cal. App. 3d 1089, 1093 n.1, 283 Cal. Rptr. 53 (1991). “[A]bsent special circumstances . . . a loan transaction is at arm’s length and there is no fiduciary relationship between the borrower and lender.” Oaks Management Corporation v. Superior Court, 145 Cal. App. 4th 453, 466, 51 Cal. Rptr. 3d 561 (2006).

Determining the existence of a fiduciary relationship involves a highly individualized inquiry into whether the facts of a given transaction establish that there has been a special confidence reposed in one who, in equity and good conscience, is bound to act in good faith and with due regard to the interests of the one reposing the confidence. Mulligan v. Choice Mortg. Corp. USA, 1998 U.S. Dist. LEXIS 13248 (D.N.H. Aug. 11, 1998).

As such, an audit must inquire in to the circumstances surrounding the borrower’s initial introduction to and meeting with the lender’s agent and the content of all verbal and written communications between them. It is important for the auditor to determine the level and extent of trust and confidence reposed by borrower in the lender’s agent. A lender may owe to a borrower a duty of care sounding in negligence when the lender’s activities exceed those of a conventional lender. For example if it can be shown the appraisal was intended to induce borrower to enter into the loan transaction or to assure him that his collateral was sound the lender may have a duty to exercise due care in preparing the appraisal. See Wagner v. Benson, 101 Cal. App. 3d 27, 35, 161 Cal. Rptr. 516 (1980) (“Liability to a borrower for negligence arises only when the lender actively participates in the financed enterprise beyond the domain of the usual money lender.”).

Vicarious Liability

A lender may be secondarily liable through the actions of a mortgage broker, who may have a fiduciary duty to its borrower-client, but only if there is an agency relationship between the lender and the broker. See Plata v. Long Beach Mortg. Co., 2005 U.S. Dist. Lexis 38807, at *23 (N.D. Cal. Dec. 13, 2005); Keen v. American Home Mortgage Servicing, Inc., 2009 U.S. Dist. LEXIS 100803, 2009 WL 3380454, at *21 (E.D. Cal. Oct. 21, 2009).

Therefore, the audit must propound sufficient facts to establish an agency relationship between lender and broker. An agency relationship exists where a principal authorizes an agent to represent and bind the principal. Although lenders offer the brokers incentives to act in ways that further their interests, there needs to be a showing that a lender gave the broker authority to represent or bind it, or that a lender took some action that would have given borrower the impression that such a relationship existed. I have yet to see an audit that provided facts for such a conclusion but instead they are filled with conclusory allegations unsupported by facts. It is not enough to merely state that lender is vicariously liable through the broker or that broker is lender’s authorized agent without specific facts to support such conclusions.

Civil Conspiracy

Under the conspiracy theory a party may be vicariously liable for another’s tort in a civil conspiracy where the plaintiff shows “(1) formation and operation of the conspiracy and (2) damage resulting to plaintiff (3) from a wrongful act done in furtherance of the common design.” Rusheen v. Cohen, 37 Cal. 4th 1048, 1062, 39 Cal. Rptr. 3d 516, 128 P.3d 713 (2006) (citing Doctors’ Co. v. Superior Court, 49 Cal.3d 39, 44, 260 Cal. Rptr. 183, 775 P.2d 508 (1989)), see also Applied Equipment Corp. v. Litton Saudi Arabia Ltd., 7 Cal. 4th 503, 511, 28 Cal. Rptr. 2d 475, 869 P.2d 454 (1994). The California Supreme Court has held that even when these elements are shown, however, a conspirator cannot be liable unless he personally owed the duty that was breached. Applied Equipment, 7 Cal. 4th at 511, 514.

Civil conspiracy “cannot create a duty . . . . [i]t allows tort recovery only against a party who already owes the duty.” Courts have specifically held that civil conspiracy cannot impose liability for breach of fiduciary duty on a party that does not already owe such a duty. Everest Investors 8 v. Whitehall Real Estate Ltd. Partnership XI, 100 Cal. App. 4th 1102, 1107, 123 Cal. Rptr. 2d 297 (2002) (citing Doctors’ Co., 49 Cal. 3d at 41-42, 44 and Applied Equipment, 7 Cal. 4th at 510-512).

Thus, civil conspiracy allows imposition of vicarious liability on a party who owes a tort duty, but who did not personally breach that duty. Doctors’ Co., 49 Cal. 3d at 44 (A party may be liable “irrespective of whether or not he was a direct actor and regardless of the degree of his activity.”).

Joint Venture

Participation in a joint venture with a broker or other party in a predatory lending context gives rise to liability for such claims under a claim of joint venture. See Short v. Wells Fargo Bank Minnesota, N.A., 401 F. Supp. 2d 549, 2005 U.S. Dist. LEXIS 28612, available in 2005 WL 3091873, at 14-15 (S.D.W.Va. Nov. 18, 2005); see also generally Armor v. Lantz, 207 W. Va. 672, 677-78, 535 S.E.2d 737, 742-43 (2000); Sipple v. Starr, 205 W. Va. 717, 725, 520 S.E.2d 884, 892 (1999); Price v. Halstead, 177 W.Va. 592, 594, 355 S.E.2d 380, 384 (1987).

Similarly, if one party is directing or exercising control over loan origination in the circumstance of securitized lending, it is a factual question as to whether there is a principal/agency relationship sufficient to impose such liability on all the participants. See Short v. Wells Fargo Bank Minnesota, N.A., supra, 2005 U.S. Dist. LEXIS 28612, 2005 WL 3091873, at 14-15; England v. MG Investments, Inc., 93 F. Supp. 2d 718, 723 (S.D.W.Va. 2000); Arnold, 204 W.Va. at 240, 511 S.E.2d at 865.

An audit must inquire in to the relationships between parties involved in the joint venture and determine the level of control exercised by one party over another. Again, it is not sufficient to merely recite legal conclusions such as “Crooked Funding LLC controlled Scam Brokers Inc.”.

Fraud and Deceit

In most jurisdictions, “[t]he elements of fraud, which give rise to the tort action for deceit, are (a) misrepresentation (false representation, concealment, or nondisclosure); (b) knowledge of falsity (or scienter); (c) intent to defraud, i.e., to induce reliance; (d) justifiable reliance; and (e) resulting damage.” Small v. Fritz Companies, Inc., 30 Cal. 4th 167, 173, 132 Cal. Rptr. 2d 490, 65 P.3d 1255 (2003).

To prove mail fraud, as an example, the auditor must propound facts with particularity as follows:

Johnny Crookland, Crooked Broker’s President, misrepresented his intention to get borrowers the best rate available at their initial meeting in March 2006. The audit should also contain the date and content of all mailings and communications between the Crooked Broker and the borrowers through which the broker with the aid of a warehouse lender (Scam Fundings LLC) effectuated its scheme to defraud: (1) direct mail advertisement from Crooked Broker showing a teaser interest rate of 6.75% with zero broker fees or points (2) a “good faith estimate” of the loan terms mailed by Crooked Broker on March 26 which did not mention anything about a $5,890 fee for origination, (3) the first (rejected) loan document, with an interest rate of 7% which included a $ 5,890 fee, presented to the borrowers on April 13 at the first closing (though presumably mailed or faxed from the warehouse lender’s office in New York shortly before that date) (4) borrowers refusal to sign the closing documents because of the unauthorized fee that appeared on the HUD-1 on closing day, (5) a second good faith estimate mailed by Crooked Broker on April 16, showing 7% interest but this time without the unauthorized fee; and the second (accepted) loan document, which was presented in Baltimore on April 19 but at a higher rate of 7.125% and now subject to a yield spread premium that was never disclosed or explained  as to how it may impact total finance charges over the length of the loan. (6) Crooked Broker’s statement in response to borrowers’ inquiry about the yield spread premium that it was standard practice and paid by lender with no impact on total finance charges payable by borrowers.

Show Me the Note

The template audits invariably omit a detailed inquiry in to the securitization process after the loan was funded by the Originator and sold to investors through securitization. Often the only theory proffered by incompetent auditors revolves around the “show me the note” defense, which has been shot down by almost every court in every jurisdiction because it lacks merit. A lost note affidavit can easily overcome this argument, so by itself as a foreclosure defense strategy this does nothing but cast doubt on a borrower’s credibility.

A skilled auditor will carefully examine all documents including the Note, Mortgage/DOT, Mortgage/DOT Assignment, Note Endorsement/Allonge, Notice of Default and the Pooling and Servicing Agreement to determine the identity of all parties involved in the chain of securitization and their respective interests in the Note and Mortgage.

Once settlement occurs the Note and Mortgage are normally transferred to a document custodian (e.g. Wells Fargo), while numerous book entries record their movement through the securitization chain which normally begins with the Originator (e.g. Mason Mortgage) who then sells them to an aggregator (e.g. Countrywide Home Loans) who then sells them with a thousand other loans to a Depositor (e.g. Asset Securities Inc.) who then deposits them with a Trustee (e.g Wells Fargo) for the benefit of the securitization trust (e.g Asset Securities Trust IV-290989 – 2003) which issues securities backed with the pool of mortgages (MBS).  The trustee also selects a Servicer (e.g Countrywide Home Loans) to collect borrower payments and process foreclosures/short sales on behalf of the investors who own the MBS.

When there is default and in order to effectuate foreclosure, the Servicer asks the document custodian for the collateral file that pursuant to the PSA should contain the original Note indorsed by the Originator (e.g. Mason Mortgage), usually in blank thereby converting it in to a bearer instrument, and the Mortgage/DOT with an executed assignment either already recorded or in recordable form. Usually this is where everything can fall apart for the secured party attempting to foreclose and where the best defense opportunities may be uncovered by a skilled examiner.  Without giving away too much proprietary information here is a list of some questions a diligent auditor should be asking:

  1. Was the execution of the Mortgage/DOT by the borrower properly witnessed and acknowledged?
  2. Was the Note legally negotiated and formally transferred from the Originator to the Aggregator, from the Aggregator to the Depositor and from the Depositor to the Trustee?
  3. Was the Note indorsed by an authorized agent of its holder before each transfer?
  4. Is the Indorsement evidenced by an Allonge while there is room for an Indorsement on the original Note?
  5. Was the Note negotiated to its current holder prior to the date of default?
  6. Did the Mortgage travel with the Note through the chain of securitization?
  7. Is the Mortgage held by MERS?
  8. Has the Mortgage assignment been properly recorded?
  9. Was the Mortgage and Note assigned to the Trustee by MERS?
  10. Was MERS authorized or allowed to assign the Mortgage?
  11. Who signed the assignment on behalf of MERS?

MERS and Splitting the DOT from the Note

The practical effect of splitting the deed of trust from the promissory note is to make it impossible for the holder of the note to foreclose, unless the holder of the deed of trust is the agent of the holder of the note. Without the agency relationship, the person holding only the note lacks the power to foreclose in the event of default. The person holding only the deed of trust will never experience default because only the holder of the note is entitled to payment of the underlying obligation.  The mortgage loan becomes ineffectual when the note holder did not also hold the deed of trust.”  Bellistri v. Ocwen Loan Servicing, LLC, 284 S.W.3d 619, 623 (Mo. App. 2009).

Some courts have found that, because MERS is not the original holder of the promissory note and because there is no evidence that the original holder of the note authorized MERS to transfer the note, the language of the assignment purporting to transfer the promissory note is ineffective. “MERS never held the promissory note, thus its assignment of the deed of trust to Ocwen separate from the note had no force.” 284 S.W.3d at 624; see also In re Wilhelm, 407 B.R. 392 (Bankr. D. Idaho 2009) (standard mortgage note language does not expressly or implicitly authorize MERS to transfer the note); In re Vargas, 396 B.R. 511, 517 (Bankr. C.D. Cal. 2008) (“[I]f FHM has transferred the note, MERS is no longer an authorized agent of the holder unless it has a separate agency contract with the new undisclosed principal. MERS presents no evidence as to who owns the note, or of any authorization to act on behalf of the present owner.”); Saxon Mortgage Services, Inc. v. Hillery, 2008 U.S. Dist. LEXIS 100056, 2008 WL 5170180 (N.D. Cal. 2008) (unpublished opinion) (“[F]or there to be a valid assignment, there must be more than just assignment of the deed alone; the note must also be assigned. . . . MERS purportedly assigned both the deed of trust and the promissory note. . . . However, there is no evidence of record that establishes that MERS either held the promissory note or was given the authority . . . to assign the note.”).

IN CONCLUSION, the value of a forensic loan audit lies not in its word count, size or thickness but rather in the knowledge and expertise of the individual performing the work and examining the documents. Many of the worthless template audits produced by scammers consist of more than 100 pages of garbage and pointless recitations of statutes you can find online or in any library. Moreover, finding a technical violation in loan documents is a virtual certainty, so a money back guarantee is merely a marketing gimmick offered by unscrupulous con artists to gain your trust and to distract you from what really counts. If you are worried about word count and a money back guarantee you are missing the point. And if you are looking for the least expensive audit advertised on the web, you will certainly get what you pay for. An authentic audit done right takes at least 3 hours to complete (a more detailed analysis can take over 8 hours) and a skilled auditor charges between $250 to $300 per hour, so do the math.

Remember an audit is merely a tool that should be handled with care by a seasoned attorney. It does not magically stop foreclosure while you lay back on the couch with a bag of chips. A lengthy template audit attached to a lengthy QWR sent to a lender’s loss mitigation department will most likely end up in the trash. The best way to measure the quality and value of an auditor’s work, short of a referral, is by picking up the phone, speaking to him and making sure he knows what he is talking about. Surround yourself with smart and skilled advocates and you will be a step or two ahead of the bank trying to take your home away.  That I can guarantee.

Dean Mostofi, President

National Loan Audits

Tel: 301-867-3887

E-mail: dean@lenderaudits.com

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Lynne Huxtable and Jeffrey Agnew, v. Timothy F. Geithner, et al.,

Posted on December 29, 2009. Filed under: Case Law, Foreclosure Defense, Legislation, Loan Modification, Mortgage Law, Uncategorized | Tags: , , , , , |

Lender’s refusal to modify loan may have violated borrowers’ Fifth Amendment rights to due process.

____________________________________________________________________________________________

LYNNE HUXTABLE and JEFFREY A. AGNEW, Plaintiffs, v. TIMOTHY F. GEITHNER, et al., Defendants.

Case No. 09cv1846 BTM(NLS)

UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF CALIFORNIA


December 23, 2009, Decided

December 23, 2009, Filed


CORE TERMS: lender, public function, joint action, mortgage, factual allegations, private entities, modification, state action, state actors, quotations, guaranty, notice, home mortgage, mortgage loan, mere fact, federal program, summary judgment, fully developed, fact-bound, foreclosed, defaulted, federally, veteran’s, nexus, government officials, discovery, recorded

COUNSEL: [*1] For Lynne Huxtable, Jeffrey A Agnew, Plaintiffs: Jeffrey Alan Agnew, LEAD ATTORNEY, Jeffrey A Agnew, Attorney at Law, Ramona, CA.

For Timothy F. Geithner, as United States Secretary of the Treasury, United States Department of the Treasury, Defendants: Thomas C Stahl, LEAD ATTORNEY, U S Attorneys Office Southern District of California, San Diego, CA.

For The Federal Housing Finance Agency, as conservator for the Federal National Mortgage Association and for the Federal Home Loan Mortgage Corporation, doing business as Freddie Mac, doing business as Fannie Mae, Defendant: Christopher S Tarbell, LEAD ATTORNEY, Arnold & Porter LLP, Los Angeles, CA.

For National City Corporation, a Delaware corporation, PNC Financial Services Group, Inc, a Pennsylvania corporation, National City Mortgage, a division of National City Bank, National City Bank, a nationally chartered bank, Defendants: Cathy Lynn Granger, LEAD ATTORNEY, Wolfe & Wyman LLP, Irvine, CA.

For Cal-Western Reconveyance Corporation, a California corporation, Defendant: Thomas N Abbott, LEAD ATTORNEY, Pite Duncan LLP, San Diego, CA.

JUDGES: Honorable Barry Ted Moskowitz, United States District Judge.

OPINION BY: Barry Ted Moskowitz

OPINION

ORDER DENYING MOTION TO DISMISS

On  [*2] September 21, 2009, Defendants National City Bank and PNC Financial Services Group, Inc. (“Moving Defendants”) filed a motion to dismiss the Complaint for failure to state a claim. For the following reasons, the motion is DENIED.

I. BACKGROUND

Plaintiffs’ Complaint arises out of non-judicial foreclosure proceedings related to their home in Ramona, California. The following are factual allegations in the Complaint and are not the Court’s findings.

Plaintiffs defaulted on their home mortgage in November 2007. (Compl. P 26.) In February 2008, a notice of default was recorded and served. (Compl. P 27.) And in December 2008, a notice of sale was recorded and served, setting a date for the public auction of Plaintiffs’ home. (Compl. P 29.) Pursuant to a joint motion, the Court has enjoined the sale of Plaintiffs’ home during the pendency of this action. (September 29, 2009 Order, Doc. 25.)

Plaintiffs allege that they are eligible for a loan modification under the Home Affordable Modification Program (“HAMP”). (Compl. P 95.) HAMP is a federally funded program that allows mortgagors to refinance their mortgages and reduce their monthly payments. (Compl. P 66.) Despite their eligibility for HAMP,  [*3] the loan servicer, Defendant National City Mortgage Company, twice denied their application for a loan modification. (Compl. PP 90, 93.) Plaintiffs did not receive a reason for the denial or an opportunity to appeal. (Compl. P 100.)

Plaintiffs’ Complaint contains two counts. Both are for violation of due process under the Fifth Amendment for failing to create rules implementing HAMP that comport with due process. (Compl. PP 114-27.)

Defendants National City Bank and PNC Financial Services Group, Inc. have moved to dismiss the Complaint on the grounds that Plaintiffs have failed to plead that they are state actors.

II. LEGAL STANDARD

Under Federal Rule of Civil Procedure 8(a)(2), the plaintiff is required only to set forth a “short and plain statement of the claim showing that the pleader is entitled to relief,” and “give the defendant fair notice of what the . . . claim is and the grounds upon which it rests.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555, 127 S. Ct. 1955, 167 L. Ed. 2d 929 (2007). When reviewing a motion to dismiss, the allegations of material fact in plaintiff’s complaint are taken as true and construed in the light most favorable to the plaintiff. See Parks Sch. of Bus., Inc. v. Symington, 51 F.3d 1480, 1484 (9th Cir. 1995).  [*4] But only factual allegations must be accepted as true–not legal conclusions. Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949, 173 L. Ed. 2d 868 (2009). “Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice.” Id. Although detailed factual allegations are not required, the factual allegations “must be enough to raise a right to relief above the speculative level.” Twombly, 550 U.S. at 555. Furthermore, “only a complaint that states a plausible claim for relief survives a motion to dismiss.” Iqbal, 129 S.Ct. at 1949.

III. DISCUSSION

Plaintiffs have alleged that Defendants have violated their Fifth Amendment procedural due process rights. The Fifth Amendment, however, only applies to governmental actions, Bingue v. Prunchak, 512 F.3d 1169, 1174 (9th Cir. 2008), and the Moving Defendants are private entities. Therefore, the Moving Defendants argue, the Complaint fails to state a claim against them.

But in some circumstances the Fifth Amendment does apply to private entities. “In order to apply the proscriptions of the Fifth Amendment to private actors, there must exist a sufficiently close nexus between the (government) and the challenged action of the .  [*5] . . (private) entity so that the action of the latter may be fairly treated as that of the (government) itself.” Rank v. Nimmo, 677 F.2d 692, 701 (9th Cir. 1982) (internal quotations omitted). There are four different tests used to determine whether private action can be attributed to the state: “(1) public function; (2) joint action; (3) governmental compulsion or coercion; and (4) governmental nexus. Satisfaction of any one test is sufficient to find state action, so long as no countervailing factor exists.” Kirtley v. Rainey, 326 F.3d 1088, 1092 (9th Cir. 2003). The application of these tests is a “necessarily fact-bound inquiry.” Lugar v. Edmondson Oil Co., Inc., 457 U.S. 922, 939, 102 S. Ct. 2744, 73 L. Ed. 2d 482 (1982).

Plaintiffs argue that two tests apply here: public function and joint action.

1. Public Function

“Under the public function test, when private individuals or groups are endowed by the State with powers or functions governmental in nature, they become agencies or instrumentalities of the State and subject to its constitutional limitations. The public function test is satisfied only on a showing that the function at issue is both traditionally and exclusively governmental.” Kirtley, 326 F.3d at 1093 [*6] (internal quotations and citations omitted). Mortgage loan servicing is neither traditionally nor exclusively governmental, and Plaintiffs cannot show government action under this test.

2. Joint Action

Under the joint action test, the Court considers “whether the state has so far insinuated itself into a position of interdependence with the private entity that it must be recognized as a joint participant in the challenged activity. This occurs when the state knowingly accepts the benefits derived from unconstitutional behavior.” Kirtley, 326 F.3d at 1093 (internal quotations omitted). “A private party is liable under this theory, however, only if its particular actions are ‘inextricably intertwined’ with those of the government.” Brunette v. Humane Soc’y of Ventura County, 294 F.3d 1205, 1211 (9th Cir. 2002). “The mere fact that a business is subject to state regulation does not itself convert its action into that of the State . . . . Nor does the fact that the regulation is extensive and detailed . . . .” Jackson v. Metropolitan Edison Co., 419 U.S. 345, 350, 95 S. Ct. 449, 42 L. Ed. 2d 477 (addressing equivalent provision in Fourteenth Amendment).

The Court does not have sufficient facts before it to determine whether  [*7] state action exists here. As the Supreme Court has stated, this is a “necessarily fact-bound inquiry.” Lugar, 457 U.S. at 939. Although the mere fact that a business is subject to extensive regulation is not sufficient to find joint action, here there may be more than just extensive regulation. Plaintiffs have pled that the HAMP program imposes affirmative duties on lenders, like the Moving Defendants, who participate in the program. If an applicant meets certain federally created criteria, then the lender has no discretion and must grant a loan modification. The federal program is completely administered by the Moving Defendants, and they are essentially acting as the government’s agents in executing HAMP. Making all reasonable inference in Plaintiff’s favor, the Court find that Plaintiff has stated a claim upon which relief can be granted.

Of course, facts developed through discovery may ultimately show that Plaintiff cannot establish state action. But at this stage in the litigation, the Court does not have the answers to several relevant issues, including (1) whether government officials were involved in the decision to deny Plaintiff’s request; (2) whether government officials  [*8] provide guidance to the Moving Defendants regarding the administration of HAMP; (3) the extent of ongoing communication between the government and the Moving Defendants regarding HAMP; (4) and the financial arrangements between the government and the Moving Defendants regarding HAMP. This is not an exhaustive list and the course of discovery may yield other relevant facts not listed here.

Defendant’s best case–which it does not cite–in support of its motion to dismiss is Rank v. Nimmo, 677 F.2d 692 (9th Cir. 1982). In Nimmo, the Ninth Circuit held that a private mortgage lender who foreclosed on a plaintiff’s property was not a state actor. The plaintiff had obtained a mortgage loan through the VA Home Mortgage Guarantee Program, which was a federal program that guaranteed a portion of a qualifying veteran’s mortgage, enabling veterans to obtain mortgage loans without a substantial down payment. 677 F.2d at 693-94. A private commercial lender made a loan to the plaintiff under the program. Id. at 693. When the plaintiff defaulted, the lender foreclosed on the plaintiff’s property. Id. at 695-96. The Plaintiff sued the lender for depriving him of his entitlement to a federal-home-loan  [*9] program without affording him due process under the Fifth Amendment. Id. at 696. The Ninth Circuit held that even though the private lender was subject to extensive federal regulation under the federal home loan guaranty program, the private lender was not a state actor. Id. at 702.

This case is different from Nimmo for at least two reasons. First, and most importantly, the Ninth Circuit decided Nimmo on cross motions for summary judgment and had the benefit of a more fully developed factual record. And second, the guaranty program at issue in Nimmo was very different from HAMP. Under the guaranty program, private lenders applied to the government for participation in the program and the government could deny their participation if the private lender failed to meet certain criteria. 677 F.2d 692, 694. But in this case, Plaintiffs contend that the government required private lenders to participate if they have received federal money, and the private lenders must administer HAMP on the government’s behalf. Whether this is correct or not is not an issue that can be determined on the record before the Court.

IV. CONCLUSION

For the foregoing reasons, the Court DENIES the Motion to Dismiss (Doc.  [*10] 21.) The Moving Defendants may raise their argument again on a motion for summary judgment once the record has been more fully developed.

IT IS SO ORDERED.

DATED: December 23, 2009

/s/ Barry Ted Moskowitz

Honorable Barry Ted Moskowitz

United States District Judge

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Mortgage Assignment & Affidavit Fraud

Posted on October 27, 2009. Filed under: Banking, Finance, Foreclosure Defense, Mortgage Audit, Mortgage Fraud, Mortgage Law, Predatory Lending | Tags: , , , , , , , , , , , , , |

In bankruptcy and government takeovers of financial institutions, missing collateral is a major obstacle for trustees and regulators to overcome. The missing assignment problem is an extension of not carelessness or sloppiness as many have claimed, but of overt acts of fraud.

Skilled attorneys and forensic accounting experts could expose this fraud and as such, the effects and implications are more far reaching than a borrower, simply having their debt extinguished. Debt extinguishment or dismissal of foreclosure actions could be obtained if it can be shown that the entity filing the foreclosure:

• Does not own the note;
• Made false representations to the court in pleadings;
• Does not have proper authority to foreclose;
• Does not have possession of the note; and/or
• All indispensable parties (the actual owners) are not before the
court or represented in the pending foreclosure action.

To circumvent these issues, mortgage servicers and the secondary market have created and maintained a number of practices and procedures. MERS was briefly discussed and will be the sole subject of a major fraud report in the future.

Another common trade practice is to create pre-dated, backdated, and fraudulent assignments of mortgages and endorsements before or after the fact to support the allegations being made by the foreclosing party. Foreclosing parties are most often the servicer or MERS acting on the servicer’s behalf, not the owners of the actual promissory note. Often, they assist in concealing known frauds and abuses by originators, prior servicers, and mortgage brokers from both the borrowers and investors by the utilization of concealing the true chain of ownership of a borrower’s loan.
Ocwen-Anderson-Report-Sue-First-Ask-Questions-Later

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Marcy Kaptur to Banks: “Produce The Note”

Posted on October 12, 2009. Filed under: Foreclosure Defense, Fraud, Loan Modification, Mortgage Audit, Mortgage Fraud, Mortgage Law, Politics, Predatory Lending, right to rescind, Truth in Lending Act | Tags: , , , , , , , , , , , , , , , , |

Fight Club entered popular culture in 1999 when director David Fincher adapted Chuck Palahniuk’s novel into a film that reflected the zeitgeist of modern America with its empty culture, obsession with aesthetic beauty, and slavish under and middle classes.

Warning: Decade-old spoiler coming up.

The film ends with the agents of “Project Mayhem,” protagonist Tyler Durden’s followers, destroying the headquarters of the major credit card companies with many tons of explosives. Durden’s theory is that without the records of debt, everyone gets a fresh start. They are no longer slaves to the banks, and they are free.

This concept resonated hugely with Americans, and not just the douche bag frat boys who taped Brad Pitt’s six-pack to their dorm walls. Citizens are working harder for less these days, and the American ennui originating from Reagan’s tyrannical reign of deregulation, union busting, and middle-class rape has now exploded into severe disillusionment and anger. Americans are being crushed by debt, can’t afford health care, and have less job security than ever.

Even the dimmest Americans know they’re getting screwed by Wall Street fat cats, and nothing could have made that reality clearer than the bailouts: $1 trillion dollars of taxpayer money that went to line the pockets of the guys and gals who crashed the economy.

And if that wasn’t bad enough, once the fat cats and credit card companies’ armies of Repo Men were through collecting the contents of the houses, they came back for the houses themselves. The banks tried to sell the old, familiar lie that “irresponsible people” i.e. “black people” went and got themselves into a mess they couldn’t dig themselves out of, which was almost always a lie. Subprime lenders issued mortgages in a predatory fashion, frequently lied, and used creative math to convince people they could afford mortgages with hidden, adjustable interest rates.

Those that can afford to play Capitalism: The Game prosper, while the rest of society suffers. Of course, those of us who don’t work for the Big 4 banks in the Too Big To Fail gang, wither and die. Today, The New York Times announced the 100th small bank failure of 2009. Don’t expect any mourning. The bank isn’t named “JPMorgan Chase.”

It’s projected that by 2012, there will be eight million home foreclosures in the United States. Lots of politicians are siding with the banks during the foreclosure epidemic, but a few brave souls are standing up to the Wall Street criminals.

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US Senate: STOP BEING STUPID

Posted on October 2, 2009. Filed under: Banking, Foreclosure Defense, Housing, Loan Modification, Mortgage Audit, Mortgage Fraud, Mortgage Law, Politics | Tags: , , , , , , |

The legislation, introduced today by Senator Jack Reed of Rhode Island, would require lenders to evaluate all borrowers for affordable loan modifications before initiating foreclosure. It would also require banks to offer and approve a loan modification if the restructured mortgage returns more money, the so-called net-present value, to investors than would foreclosure.

The proposal would establish new penalties and would let borrowers overturn foreclosures if lenders fail to comply. It would also place new limits on fees charged in foreclosure.

The reason we have this crap going on is quite simple, and fixing it is also quite simple:

Banks are holding homes back and foreclosing when they should be modifying as a direct consequence of the policies and actions of the government.

As just one example the “loss share” agreement made with the buyers of IndyMac has set up a perverse incentive system where the usual incentives to modify loans have been intentionally and wantonly destroyed.

If you remember this was the deal announced:

As part of the deal, the FDIC entered into a loss-sharing agreement with IMB HoldCo. IndyMac will assume the first 20 percent of losses on a portfolio of “qualifying loans,” after which the FDIC will assume 80 percent on the next 10 percent of losses, and 95 percent on losses thereafter.

Ok, so we have a maximum loss that the investors (which include George Soros and Michael Dell, by the way) can take which is:

20% + 2% (80% of 10%) + 3.5% or about 25% of the total is theirs – but note that “theirs” is all at the top – once you get into the “meat” of the losses only 5% of whatever is left is theirs.

via US Senate: STOP BEING STUPID – The Market Ticker.

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LANDMARK NATIONAL BANK V. KESLER

Posted on September 15, 2009. Filed under: Banking, bankruptcy, Case Law, Foreclosure Defense, Mortgage Law | Tags: , , , , , , , , |

No. 98,489

IN THE COURT OF APPEALS OF THE STATE OF KANSAS

LANDMARK NATIONAL BANK,

Plaintiff/Appellee,

v.

BOYD A. KESLER,

Appellee/Cross-Appellant,

MILLENNIA MORTGAGE CORP.,

Defendant,

MORTGAGE ELECTRONIC REGISTRATION

SYSTEMS, INC. AND SOVEREIGN BANK,

Appellants/Cross-Appellees,

and

DENNIS BRISTOW AND TONY WOYDZIAK,

Intervenors/Appellees.

SYLLABUS BY THE COURT

1. A party is not contingently necessary in a mortgage-foreclosure lawsuit when that party is called the mortgagee in a mortgage but is not the lender, has no right to the repayment of the underlying debt, and has no role in handling mortgage payments.

2. In a mortgage-foreclosure lawsuit, a district court does not abuse its discretion when it denies a motion to intervene that is filed by an unrecorded mortgage holder or its agent after the mortgage has been foreclosed and the property has been sold.

Appeal from Ford District Court; E. LEIGH HOOD, judge. Opinion filed September 12, 2008. Affirmed.

Tyson C. Langhofer and Court T. Kennedy, of Stinson Morrison Hecker, L.L.P., of Wichita, for appellants/cross-appellees.

Ted E. Knopp, of Ted E. Knopp, Chartered, of Wichita, for appellee/cross-appellant Boyd A. Kesler.

Ted E. Knopp, of Ted E. Knopp, Chartered, of Wichita, for intervenors/appellees Dennis Bristow and Tony Woydziak.

Before GREENE, P.J., MARQUARDT and LEBEN, JJ.

LEBEN, J.: Landmark National Bank brought a suit to foreclose its mortgage against Boyd Kesler and joined Millennia Mortgage Corp. as a defendant because a second mortgage had been filed of record for a loan between Kesler and Millennia. In a foreclosure suit, it is normal practice to name as defendants all parties who may claim a lien against the property. When neither Kesler nor Millennia responded to the suit, the district court gave Landmark a default judgment, entered a journal entry foreclosing Landmark’s mortgage, and ordered the property sold so that sale proceeds could be applied to pay Landmark’s mortgage.

But Millennia apparently had sold its mortgage to another party and no longer had interest in the property by this time. Sovereign Bank filed a motion to set aside the judgment and asserted that it now held the title to Kesler’s obligation to pay the debt to Millennia. And another party, Mortgage Electronic Registration Systems, Inc. (“MERS”), also filed a motion to set aside the judgment and asserted that it held legal title to the mortgage, originally on behalf of Millennia and later on behalf of Sovereign. Both Sovereign and MERS claim that MERS was a necessary party to the foreclosure lawsuit and that the judgment must be set aside because MERS wasn’t included on the foreclosure suit as a defendant.

The district court refused to set aside its judgment. The court found that MERS was not a necessary party and that Sovereign had not sufficiently demonstrated its interest in the property to justify setting aside the foreclosure.

I. The District Court Properly Refused to Set Aside the Foreclosure Judgment Because MERS Was Not a Necessary Party.

To resolve these claims, we will review some basic concepts of mortgages and foreclosure proceedings. We must pay close attention not only to the terms given to the parties in carefully crafted documents but also to the roles each party actually performed. No matter the nomenclature, the true role of a party shapes the application of legal principles in this case.

A mortgage grants a title or lien against a property as security for the payment of a debt or the performance of a duty. The “mortgagor” is the borrower who grants a mortgage in exchange for a loan; the “mortgagee” is the lender who gives the loan secured by the mortgage. See Black’s Law Dictionary 1031, 1034 (8th ed. 2004). The mortgagee is so well understood as the lender that Black’s Law Dictionary defines a “foreclosure” as an action brought by the lender/mortgagee: a foreclosure is a “legal proceeding to terminate a mortgagor’s interest in property, instituted by the lender (the mortgagee) either to gain title or to force a sale in order to satisfy the unpaid debt secured by the property.” Black’s Law Dictionary 674. Similarly, the tie between a mortgage and an underlying debt is so intrinsic that Kansas law provides that “[t]he assignment of any mortgage . . . shall carry with it the debt thereby secured.” K.S.A. 58-2323. Indeed, an assignment of a mortgage without the debt transfers nothing. 55 Am. Jur. 2d, Mortgages § 1002. Thus, the mortgagee, who must have an interest in the debt, is the lender in a typical home mortgage.

But for reasons thought beneficial by a group of lenders who trade mortgages, the form of mortgage used in this case designates an entity that is not the lender as the mortgagee. See MERSCORP, Inc. v. Romaine, 8 N.Y.3d 90, 96, 828 N.Y.S.2d 266, 861 N.E.2d 81 (2006) (MERS was established by large lenders to allow easy electronic trading and tracking of mortgages). Specifically, the mortgage says that the mortgagee is MERS, though “solely as nominee for Lender.” Does this mean that MERS really was the mortgagee, even though it didn’t lend money or have any rights to loan repayments? Assuming so, MERS argues that it was a necessary party to the foreclosure and that the foreclosure must be set aside. But the premise upon which MERS bases this argument is flawed.

What is MERS’s interest? MERS claims that it holds the title to the second mortgage, not the real estate. So it does, but only as a nominee. In terms of the roles that we’ve discussed in the mortgage business, MERS holds the mortgage but without rights to the debt. The district court found that MERS was merely an agent for the principal player, Millennia. While MERS objects to its characterization as an agent, it’s a fair one.

MERS had no right to the underlying debt repayment secured by the mortgage; MERS did not even act as the servicing agent to receive the payments and remit them to the lender. MERS’s right to act to enforce the mortgage was strictly limited: if “necessary to comply with law or custom,” MERS could foreclose the mortgage or enter a release of the mortgage. MERS certainly could not act at odds to its principal, the lender. Its role fits the classic definition of an agent: one “‘authorized by another to act for him, or intrusted with another’s business.'” In re Tax Appeal of Scholastic Book Clubs, Inc., 260 Kan. 528, 534, 920 P.2d 947 (1996) (quoting Black’s Law Dictionary 85 [4th ed. 1968]).

Only one Kansas case has discussed the meaning of nominee in any detail. In Thompson v. Meyers, 211 Kan. 26, 30, 505 P.2d 680 (1973), the court noted that the meaning of the term may vary from a pure straw man or limited agent to one who has broader authority.

But whatever authority the nominee may have comes from the delegation of that authority by the principal. In its ordinary meaning, a nominee represents the principal in only a “nominal capacity” and does not receive any property or ownership rights of the person represented. See, e.g., Cisco v. Van Lew, 60 Cal. App. 2d 575, 583-84, 141 P.2d 433 (1943); see also Applebaum v. Avaya, Inc., 812 A.2d 880, 889 (Del. 2002) (referring to nominees “as agents of the beneficial owners”). The Millennia mortgage does not purport to give MERS any greater rights than normally given a nominee. The mortgage says that MERS acts “solely as nominee for Lender.” There is no express grant of any right to MERS to transfer or sell the mortgage or even to assign its duties as nominee. Nor does MERS obtain any right to the borrower’s payments or even a role in receiving payments.

MERS and Sovereign correctly note that a foreclosure judgment may be set aside for failure to join a contingently necessary party. E.g., Wisconsin Finance v. Garlock, 140 Wis. 2d 506, 512, 410 N.W.2d 649 (1987). For the purposes of our case, a party is contingently necessary under K.S.A. 60-219 if the party claims an interest in the property at issue and the party is so situated that resolution of the lawsuit without that party may “as a practical matter substantially impair or impede [its] ability to protect that interest.” The real issue is that of the lender, the true mortgagee, to protect its security interest against the property. Whether MERS may act as a nominee for the lender, either to bring a foreclosure suit or for some other purpose, is not at issue in Landmark’s foreclosure lawsuit. Moreover, an agent for a disclosed principal is not a necessary party to a lawsuit adjudicating the substantive rights of the principal. Hotel Constructors, Inc. v. Seagrave Corp., 99 F.R.D. 591, 592 (S.D.N.Y. 1983); Liles v. Winters Independent School District, 326 S.W.2d 182, 188 (Tex. App. 1959).

In support of the necessary-party argument, MERS and Sovereign cite Dugan v. First Nat’l Bank in Wichita, 227 Kan. 201, 606 P.2d 1009 (1980). In Dugan, a bank agreed to act as escrow agent for three parties who loaned money and obtained a mortgage as collateral. The bank was to receive all repayments made on the various loans and then remit them to the lenders in the appropriate percentages; the bank was also the named mortgagee, apparently due to the multiple lenders who were separate actors. The court held that the bank and the lenders were all necessary parties to the lawsuit, in which the borrower sought reformation or cancellation of the mortgages based on fraud and breach-of-fiduciary-duty claims. The bank was a necessary party even though it had no direct financial interest in the loans and would “be affected only tangentially in its position as designated mortgagee and escrow agent.” 227 Kan. at 212.

In response, Kesler cites Moore v. Petroleum Building, Inc. 164 Kan. 102, 187 P.2d 371 (1947). In Moore, a plaintiff had intervened in a past foreclosure action and later filed suit to enjoin a bank and escrow holder from delivering deeds to another party. The bank was used only to hold deeds that would be delivered upon termination of the leases and was not a party to the original foreclosure. The court held that the plaintiff should have raised issues regarding his rights under the escrow agreement in the previous foreclosure case, noting that “there probably was no necessity that [the bank] should have been made a party, for it stood by only as a custodian of the deeds and for no other purpose.” 164 Kan. at 108.

We find Moore closer to our facts than Dugan. Like the bank in Moore, MERS did not receive any funds on behalf of Millennia or Sovereign. The mortgage set out clearly that the borrower, Kesler, was to pay his monthly payments to the lender. The mortgage also suggests that the reputed mortgagee, MERS, was not interested in receiving notices of default. The Millennia mortgage, which was duly recorded in the public record, included a section titled “Request For Notice of Default and Foreclosure Under Superior Mortgages or Deeds of Trust.” As the district court noted, that section provided that both “Borrower and Lender request” the holder of any mortgage with priority “give Notice to Lender, at Lender’s address set forth on page one of this Mortgage, of any default . . . and of any sale or other foreclosure action.” Millennia’s address was noted on page one of the mortgage; the mortgage did not list MERS as an entity to contact upon default or foreclosure.

Two older Kansas cases should also be noted, though the parties didn’t cite them. In Swenney v. Hill, 65 Kan. 826, 70 P. 868 (1902), the court faced a situation somewhat different than today’s typical residential-mortgage. As part of the same transaction, a couple borrowed money and then gave mortgage bonds to two individuals and a mortgage to an investment company. Repayment of the loan was made to the bondholders, but the mortgagee/investment company had “extensive rights and active powers over the relationship” between the borrowers and the bondholders. 65 Kan. at 828. While the court did not concern itself with why this structure had been chosen, it determined that the mortgagee/investment company was a necessary party because it had a right under the written agreements to advance additional funds, thus increasing the amount of the lien, as well as the right to declare the loan matured and bring suit. In addition, the mortgage could not be released by the bondholders alone; the mortgagee/investment company was also required to approve it. We do not know from the court’s opinion whether the investment company organized the transaction initially or made any guarantee of repayment to the bondholders, but the court said that the investment company had “substantial rights and interests.” 65 Kan. at 829.

A second relevant case is Gibson v. Ledwitch, 84 Kan. 505, 114 P. 851 (1911). It involved the converse of our case–a party sued to quiet title against a mortgage, which would clear the title from the encumbrance of that mortgage. But the plaintiff joined only a trustee who had no beneficial interest in that mortgage; the beneficial owner was not made a party. The court held that the judgment did not bind the beneficial holder of the mortgage since the trustee had no right to the payments, was not the party to declare default, and had no authority to transfer or foreclose the mortgage.

We also believe that the decisions in Swenney and Gibson are supportive of the result here. MERS does not have the sort of “substantial rights and interests” that the investment company had in Swenney. MERS points to its ability to foreclose or to release the mortgage, authority provided in the mortgage “if necessary to comply with law or custom.” Kansas law does require through K.S.A. 58-2309a that a mortgage holder promptly release a mortgage when the debt has been paid; MERS could be required as a matter of law to file a mortgage release after a borrower proved that the debt had been paid. Other than that, however, it is hard to conceive of another act that MERS–instead of the lender–would be required to take by law or custom. And although Gibson involves the converse of our case, it suggests that a party with no beneficial interest is outside the realm of necessary parties.

In addition to the claim that MERS was a necessary party under K.S.A. 60-219, MERS and Sovereign also argue that the failure to include MERS violated its due process rights. But MERS had no direct property interests at stake; even its right to act on behalf of its principal was not at issue in Landmark’s suit. Without a property interest at stake, there can be no due process violation. State ex rel. Tomasic v. Unified Gov’t of Wyandotte County/Kansas City, 265 Kan. 779, 809, 962 P.2d 543 (1998).

We do not attempt in this opinion to comprehensively determine all of the rights or duties of MERS as a nominee mortgagee. As the mortgage suggests may be done when “necessary to comply with law or custom,” courts elsewhere have found that MERS may in some cases bring foreclosure suits in its own name. Mortgage Electronic Registration v. Azize, 965 So. 2d 151 (Fla. Dist. App. 2007). On the other hand, some have suggested potential problems created by MERS’s practices, MERSCORP, Inc. v. Romaine, 8 N.Y.3d 90, 100-04, 828 N.Y.S.2d 266, 861 N.E.2d 81 (2006) (Kaye, C.J., dissenting), or with the handling of paperwork documenting who owns what in the residential-mortgage industry in general. E.g., In re Nosek, 386 B.R. 374, 385 (Bankr. D. Mass. 2008); In re Foreclosure Cases, 2007 WL 3232430 (N.D. Ohio 2007) (unpublished opinion). In this case, we are only required to address whether the failure to name and serve MERS as a defendant in a foreclosure action in which the lender of record has been served is such a fatal defect that the foreclosure judgment must be set aside. We hold that it is not.

II. The District Court Did Not Abuse Its Discretion by Denying Motions of MERS and Sovereign to Intervene After the Judgment Had Been Entered.

Neither MERS nor Sovereign argue that Landmark was required to join Sovereign. But both MERS and Sovereign argue that the district court wrongly denied their motions to intervene.

On this argument they face a major hurdle: the Kansas Supreme Court has held that there is no jurisdiction even to consider a motion to intervene made after the entry of judgment and the expiration of the 10-day period for filing new-trial motions. Smith v. Russell, 274 Kan. 1076, Syl. ¶ 4, 58 P.3d 698 (2002). Even so, timeliness is to be determined from the specific circumstances of each case. See Mohr v. State Bank of Stanley, 244 Kan. 555, 562, 770 P.2d 466 (1989). Although some caselaw allows intervention after judgment “where it is necessary to preserve some right which cannot otherwise be protected,” these authorities generally have allowed intervention so that there would be appropriate representation in an appeal when a party that originally participated in the case is no longer adequately representing the intervenor’s interest. E.g., Hukle v. City of Kansas City, 212 Kan. 627, 631-32, 512 P.2d 457 (1973). Of course, that’s not our situation.

The intervention argument faces another hurdle too: the decision whether to permit intervention may be reversed only when no reasonable person could agree with the district court’s decision. See Mohr, 244 Kan. at 561-62; Farmers Group, Inc. v. Lee, 29 Kan. App. 2d 382, 385, 28 P.3d 413 (2001). Sovereign’s motion to intervene was filed 76 days after foreclosure, 53 days after the court ordered the property sold, and 26 days after the property was sold. MERS’s motion to intervene was filed 134 days after foreclosure, 111 days after the court ordered the property sold, and 84 days after the property was sold. Especially in light of Smith‘s holding that a court lacked jurisdiction when the motion to intervene came after the 10-day period for filing new-trial motions, we believe it would be extremely difficult–even if the district court had jurisdiction to grant intervention–to reverse for an abuse of discretion on motions filed as far after judgment as those of Sovereign and MERS.

MERS and Sovereign argue that their intervention motions were timely because the time for filing an appeal had not yet run. They base this argument on a claim that the time to file an appeal doesn’t begin until the sheriff’s sale of the property is confirmed. But a judgment of foreclosure is a final judgment for appeal purposes when it determines the rights of the parties, the amounts to be paid, and the priority of claims. Stauth v. Brown, 241 Kan. 1, 6, 734 P.2d 1063 (1987). The foreclosure judgment in this case did so. We find no abuse of discretion in denying intervention.

III. Separate Claims by Kesler and Other Parties Are Not Properly Raised on Appeal.

Dennis Bristow and Tony Woydziak, who together bought the property at a sheriff’s sale, have sought to proceed with Kesler on a cross-appeal to challenge the district court’s orders enjoining them from finalizing sale of the property while the appeal was heard. They also seek a ruling that Sovereign is bound by the district court’s judgment.

Kesler, Bristow, and Woydziak raise issues that are not based on the same judgments on which MERS and Sovereign have filed their appeal. The joint notice of appeal from MERS and Sovereign noted an appeal from “(1) Journal Entry of Judgment filed September 6, 2006; (2) Order filed January 18, 2007; (3) Supplemental Order filed January 18, 2007; and (4) Order Denying Motions for Reconsideration filed March 22, 2007.” But Kesler, Bristow, and Woydziak attempted to include a separate district court decision, entered May 2, 2007, which had denied their motions to dismiss for lack of jurisdiction the motions to intervene by MERS and Sovereign and also granted a stay pending appeal to MERS and Sovereign. A cross-appeal must involve the same judgment as the underlying appeal, but Kesler, Bristow, and Woydziak argue a separate issue from a different district court order.

Even if the same judgment were involved, notice of a cross-appeal must be filed within 20 days of the notice of appeal. MERS and Sovereign filed their joint notice of appeal on March 28, 2007; Kesler, Bristow, and Woydziak did not seek to file a cross-appeal within 20 days of that date.

This court is without jurisdiction to address the separate issues raised on appeal by Kesler, Bristow, and Woydziak.

Conclusion

The district court properly determined that MERS was not a contingently necessary party in Landmark’s foreclosure action. The district court also was well within its discretion in denying motions from MERS and Sovereign to intervene after a foreclosure judgment had been entered and the foreclosed property had been sold. The judgment of the district court is affirmed.

END

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U.S. partners in home loan modifications accused of broad abuses

Posted on August 9, 2009. Filed under: Foreclosure Defense, Fraud, Housing, Legislation, Loan Modification, Mortgage Audit, Mortgage Fraud, Mortgage Law, Predatory Lending | Tags: , , , , , , , , , , , , , , , , , |

WASHINGTON — Billions of dollars that the government is spending to help financially pressed homeowners avert foreclosure are passing through — and enriching — companies accused of preying on the people they are supposed to help, an Associated Press investigation has found.The companies, known as mortgage servicers, collect monthly payments from homeowners and funnel the money to the banks or investors who hold the loans. As the link between borrowers and lenders, they’re in the best position to rework the terms of loans under the government’s$50 billion mortgage-modification program.The servicers are paid by the government if the changes keep home-owners from falling behind on payments for at least three months.But the industry has a checkered history. At least 30 servicers have been accused in lawsuits of harassing borrowers, imposing illegal fees and charging for unnecessary insurance policies. More recently, the companies also have been criticized for not helping homeowners quickly enough.The biggest players in the servicing industry — Bank of America Corp., Wells Fargo & Co., JPMorgan Chase & Co. and Citigroup Inc. — all face litigation.But the industry’s smaller players, which specialize in riskier subprime loans and loans already in default, face harsher accusations that they systematically abused borrowers.

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DEUTSCHE BANK NATIONAL TRUST COMPANY v. ROLANDO CAMPBELL, et al.

Posted on July 8, 2009. Filed under: Banking, bankruptcy, Case Law, Foreclosure Defense, Legislation, Loan Modification, Mortgage Audit, Mortgage Law | Tags: , , , , , , , , , , , , , , , , , , |

Deutsche Bank has some explaining to do.  Why would they buy a nonperforming loan from MERS 142 days after a payment default?

The instant foreclosure application states that defendant CAMPBELL defaulted on his mortgage payments by failing to make his April 1, 2007 and subsequent monthly loan payments. Yet, on August 20, 2007, 142 days subsequent to defendant CAMPBELL’s alleged May 1, 2007 payment default, plaintiff DEUTSCHE BANK was willing to take an assignment of the instant nonperforming loan from MERS, as nominee for FIRST FRANKLIN. Thus, the Court requires, upon renewal of this motion for summary judgment and an order of reference, a satisfactory explanation from an officer of the FIRST FRANKLIN MORTGAGE LOAN TRUST 2006-FF11 as to why DEUTSCHE BANK purchased a nonperforming mortgage loan from MERS, as nominee for FIRST FRANKLIN.

DEUTSCHE BANK NATIONAL TRUST COMPANY, as trustee for First Franklin Mortgage Loan Trust 2006-FF 11, 3476 Stateview Boulevard Fort Mill, SC 29715, Plaintiff,
v.
ROLANDO CAMPBELL, et al., Defendants.
31764/07
Supreme Court of the State of New York, Kings County.
Decided December 16, 2008.
Tracy M Fourtner, Esq., Steven Baum PC, Buffalo NY, Plaintiff.
ARTHUR M. SCHACK, J.
Plaintiff’s motion for summary judgment and an order of reference for the premises located at 780 New Jersey Avenue, Brooklyn, New York (Block 4299, Lot 43, County of Kings) is denied without prejudice, with leave to renew upon providing the Court with: a copy of a valid assignment of the instant mortgage to plaintiff DEUTSCHE BANK NATIONAL TRUST COMPANY, AS TRUSTEE FOR FIRST FRANKLIN MORTGAGE LOAN TRUST 2006-FF11 (DEUTSCHE BANK); a satisfactory explanation of the conflict of interest by plaintiff’s counsel, Steven J. Baum, P.C., with respect to the August 20, 2007 assignment of the instant mortgage and note from MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC. (MERS), as nominee for FIRST FRANKLIN, A DIVISION OF NATIONAL CITY BANK OF IN (FIRST FRANKLIN), by Darleen Karaszewski, Esq., the assignor, an attorney employed by Steven J. Baum, P.C., plaintiff’s counsel, and the simultaneous representation by Steven J. Baum, P.C., of assignee plaintiff DEUTSCHE BANK; and, an affidavit by an officer of the FIRST FRANKLIN MORTGAGE LOAN TRUST 2006-FF11, explaining why plaintiff DEUTSCHE BANK purchased the instant nonperforming loan.

Background
Defendant ROLANDO CAMPBELL borrowed $420,000.00 from FIRST FRANKLIN on May 1, 2006. The note and mortgage were recorded in the Office of the City Register, New York City Department of Finance on June 2, 2006, at City Register File Number (CRFN) 2006000308921. MERS, the nominee of FIRST FRANKLIN for the purpose of recording the mortgage, purportedly assigned the mortgage and note to plaintiff DEUTSCHE BANK on August 20, 2007, effective August 10, 2007, with the assignment recorded on September 11, 2007, at CRFN 2007000467191. The assignment was executed by “Darleen Karaszewski, Esq. On [sic] behalf of MERS, by Corporate Resolution dated 7/19/07.” Neither a corporate resolution nor a power of attorney to Ms. Karaszewski were recorded with the assignment. Thus, the assignment is invalid and plaintiff DEUTSCHE BANK lacks standing to bring the instant foreclosure action.

Further, the assignor, Ms. Karaszewski, according to the Office of Court Administration’s Attorney Registration, has as her business address, “Steven Baum, P.C., 220 Northpointe Parkway, Suite G, Amherst, NY 14228-1894.” Two days after Ms. Karaszweski executed the invalid MERS assignment, August 22, 2007, plaintiff’s counsel, Steven J. Baum, P.C., commenced the instant action on behalf of purported assignee DEUTSCHE BANK, with the filing of a notice of pendency, and the summons and complaint in the Kings County Clerk’s Office. The Court is concerned that the simultaneous representation by Steven J. Baum, P.C. of both MERS and DEUTSCHE BANK is a conflict of interest in violation of 22 NYCRR § 1200.24, the Disciplinary Rule of the Code of Professional Responsibility, entitled “Conflict of Interest; Simultaneous Representation.”

The instant foreclosure application states that defendant CAMPBELL defaulted on his mortgage payments by failing to make his April 1, 2007 and subsequent monthly loan payments. Yet, on August 20, 2007, 142 days subsequent to defendant CAMPBELL’s alleged May 1, 2007 payment default, plaintiff DEUTSCHE BANK was willing to take an assignment of the instant nonperforming loan from MERS, as nominee for FIRST FRANKLIN. Thus, the Court requires, upon renewal of this motion for summary judgment and an order of reference, a satisfactory explanation from an officer of the FIRST FRANKLIN MORTGAGE LOAN TRUST 2006-FF11 as to why DEUTSCHE BANK purchased a nonperforming mortgage loan from MERS, as nominee for FIRST FRANKLIN.

Discussion
The proponent of a summary judgment motion must make a prima facie showing of entitlement to judgment as a matter of law, tendering sufficient evidence to eliminate any material issues of fact from the case. (Alvarez v Prospect Hospital, 68 NY2d 320, 324 [1986]; Zuckerman v City of New York, 49 NY2d 557, 562 [1980]; Sillman v Twentieth Century-Fox Film Corp., 3 NY2d 395, 404 [1957]). Failure to make such a showing requires denial of the motion, regardless of the sufficiency of the opposing papers. (Matter of Redemption Church of Christ v Williams, 84 AD2d 648, 649 [3d Dept 1981]; Greenberg v Manlon Realty, 43 AD2d 968, 969 [2d Dept 1974];Winegrad v New York University Medical Center, 64 NY2d 851 [1985]).

CPLR 3212 (b) requires that for a court to grant summary judgment the court must determine if the movant’s papers justify holding as a matter of law “that there is no defense to the cause of action or that the cause of action or defense has no merit.” The evidence submitted in support of the movant must be viewed in the light most favorable to the non-movant. (Marine Midland Bank, N.A. v Dino & Artie’s Automatic Transmission Co., 168 AD2d 610 [2d Dept 1990]). Once the movant has established his or her prima facie case, the party opposing a motion for summary judgment bears the burden of “produc[ing] evidentiary proof in admissible form sufficient to require a trial of material questions of fact . . . mere conclusions, expressions of hope or unsubstantiated allegations or assertions are insufficient” (Zuckerman v City of New York, supra at 562; see also Romano v St. Vincent’s Medical Center of Richmond, 178 AD2d 467, 470 [2d Dept 1991]; Tessier v New York City Health & Hospitals Corp., 177 AD2d 626 [2d Dept 1991]).

Summary judgment shall be granted only when there are no issues of material fact and the evidence requires the court to direct judgment in favor of the movant as a matter of law. (Friends of Animals, Inc., v Associated Fur Mfrs., 46 NY2d 1065 [1979]).

Plaintiff, in the instant action, moved for summary judgment and an order of reference on July 9, 2008. Defendant CAMPBELL appeared pro se, with opposition papers, in the Foreclosure Motion Part on August 7, 2008. The motion was adjourned to October 3, 2008 for oral argument before me. On October 3, 2008 the matter was adjourned to December 12, 2008.

Plaintiff appeared on December 12, 2008 for oral argument, but defendant CAMPBELL defaulted. However, the Court is required to review, as noted above, the motion papers to determine if plaintiff made a prima facie showing of entitlement to judgment as a matter of law, tendering sufficient evidence to eliminate any material issues of fact from the case. (Alvarez v Prospect Hospital, supra; Zuckerman v City of New York, supra; Sillman v Twentieth Century-Fox Film Corp., supra). The Court’s review of plaintiff’s moving papers demonstrates that plaintiff DEUTSCHE BANK fails to make such a showing. Therefore, the Court denies the instant motion.

Plaintiff DEUTSCHE BANK must have “standing” to bring this action. The Court of Appeals (Saratoga County Chamber of Commerce, Inc. v Pataki, 100 NY2d, 901, 812 [2003]), cert denied 540 US 1017 [2003]) held that “[s]tanding to sue is critical to the proper functioning of the judicial system. It is a threshold issue. If standing is denied, the pathway to the courthouse is blocked. The plaintiff who has standing, however, may cross the threshold and seek judicial redress.” In Carper v Nussbaum, 36 AD3d 176, 181 (2d Dept 2006), the Court held that “[s]tanding to sue requires an interest in the claim at issue in the lawsuit that the law will recognize as a sufficient predicate for determining the issue at the litigant’s request.

” If a plaintiff lacks standing to sue, the plaintiff may not proceed in the action. (Stark v Goldberg, 297 AD2d 203 [1d Dept 2002]). “Since standing is jurisdictional and goes to a court’s authority to resolve litigation [the court] can raise this matter sua sponte.” (Axelrod v New York State Teachers’ Retirement System, 154 AD2D 827, 828 [3d Dept 1989]).

In the instant action, the August 20, 2007 assignment from MERS to DEUTSCHE BANK is defective. Therefore, DEUTSCHE BANK has no standing to bring this action. The recorded assignment by “Darleen Karaszewski, Esq. On [sic] behalf of MERS, by Corporate Resolution dated 7/19/07,” has neither the corporate resolution nor a power of attorney attached and recorded.

Real Property Law (RPL) § 254 (9) states: Power of attorney to assignee. The word “assign” or other words of assignment, when contained in an assignment of a mortgage and bond or mortgage and note, must be construed as having included in their meaning that the assignor does thereby make, constitute and appoint the assignee the true and lawful attorney, irrevocable, of the assignor, in the name of the assignor, or otherwise, but at the proper costs and charges of the assignee, to have, use and take all lawful ways and means for the recovery of the money and interest secured by the said mortgage and bond or mortgage and note, and in case of payment to discharge the same as fully as the assignor might or could do if the assignment were not made. [Emphasis added]

To have a proper assignment of a mortgage by an authorized agent, a power of attorney is necessary to demonstrate how the agent is vested with the authority to assign the mortgage. “No special form or language is necessary to effect an assignment as long as the language shows the intention of the owner of a right to transfer it [Emphasis added].” (Tawil v Finkelstein Bruckman Wohl Most & Rothman, 223 AD2d 52, 55 [1d Dept 1996]; see Suraleb, Inc. v International Trade Club, Inc., 13 AD3d 612 [2d Dept 2004]).

To foreclose on a mortgage, a party must have title to the mortgage. The instant assignment is a nullity. The Appellate Division, Second Department (Kluge v Fugazy, 145 AD2d 537, 538 [2d Dept 1988]), held that a “foreclosure of a mortgage may not be brought by one who has no title to it and absent transfer of the debt, the assignment of the mortgage is a nullity.” The Appellate Division, First Department, citing Kluge v Fugazy, (Katz v East-Ville Realty Co., 249 AD2d 243 [1st Dept 1998]), instructed that “[p]laintiff’s attempt to foreclose upon a mortgage in which he had no legal or equitable interest was without foundation in law or fact.”

It is clear that plaintiff DEUTSCHE BANK, with the invalid assignment of the instant mortgage and note from MERS, lacks standing to foreclose on the instant mortgage. The Court, in Campaign v Barba (23 AD3d 327 [2d Dept 2005]), held that “[t]o establish a prima facie case in an action to foreclose a mortgage, the plaintiff must establish the existence of the mortgage and the mortgage note, ownership of the mortgage, and the defendant’s default in payment [Emphasis added].” (See Household Finance Realty Corp. of New York v Wynn, 19 AD3d 545 [2d Dept 2005]; Sears Mortgage Corp. v Yahhobi, 19 AD3d 402 [2d Dept 2005]; Ocwen Federal Bank FSB v Miller, 18 AD3d 527 [2d Dept 2005]; U.S. Bank Trust Nat. Ass’n v Butti, 16 AD3d 408 [2d Dept 2005]; First Union Mortgage Corp. v Fern, 298 AD2d 490 [2d Dept 2002]; Village Bank v Wild Oaks Holding, Inc., 196 AD2d 812 [2d Dept 1993]).

Even if plaintiff can cure the assignment defect, plaintiff’s counsel then has to address the conflict of interest in the representation of both the assignor of the instant mortgage, MERS, and the assignee of the instant mortgage, DEUTSCHE BANK. 22 NYCRR § 1200.24, of the Disciplinary Rules of the Code of Professional Responsibility, entitled “Conflict of Interest; Simultaneous Representation,” states in relevant part:
(a) A lawyer shall decline proffered employment if the exercise of independent professional judgment in behalf of a client will be or is likely to be adversely affected by the acceptance of the proffered employment, or if it would be likely to involve the lawyer in representing differing interests, except to the extent permitted under subdivision (c) of this section. (b) A lawyer shall not continue multiple employment if the exercise of independent professional judgment in behalf of a client will be or is likely to be adversely affected by the lawyer’s representation of another client, or if it would be likely to involve the lawyer in representing differing interests, except to the extent permitted under subdivision (c) of this section.(c) in the situations covered by subdivisions (a) and (b) of this section, a lawyer may represent multiple clients if a disinterested lawyer would believe that the lawyer can competently represent the interest of each and if each consents to the representation after full disclosure of the implications of the simultaneous representation and the advantages and risks involved. [Emphasis added]
The Court needs to know if both MERS and DEUTSCHE BANK were aware of the simultaneous representation by plaintiff’s counsel, Steven J. Baum, P.C., and whether both consented. If plaintiff moves to renew its motion for summary judgment and an order of reference, the Court needs an affirmation by Steven J. Baum, Esq., the principal of Steven J. Baum, P.C., explaining if both MERS and DEUTSCHE BANK consented to simultaneous representation in the instant action with “full disclosure of the implications of the simultaneous representation and the advantages and risks involved.

” The Appellate Division, Fourth Department, the Department in which both Ms. Karaszewski and Mr. Baum are registered, (In re Rogoff, 31 AD3d 111 [2006]) censured an attorney, for inter alia, violating 22 NYCRR § 1200.24, by representing both a buyer and sellers in the sale of a motel.

The Court, at 112, found that the attorney, “failed to make appropriate disclosures to either the sellers or the buyer concerning dual representation.” Further, the Court, at 113, censured the attorney, after it considered the matters submitted by respondent in mitigation, including: that respondent undertook the dual representation at the insistence of the buyer, had no financial interest in the transaction and charged the sellers and the buyer one half of his usual fee. Additionally, we note that respondent cooperated with the Grievance Committee and has expressed remorse for his misconduct.

Next, if a power of attorney is used for an agent to act as MERS’ assignor of the instant mortgage and loan to DEUTSCHE BANK, the power of attorney presented to the Court must be an original or a copy certified by an attorney, pursuant to CPLR § 2105. CPLR § 2105 states that “an attorney admitted to practice in the court of the state may certify that it has been compared by him with the original and found to be a true and complete copy.” (See Security Pacific Nat. Trust Co. v Cuevas, 176 Misc 2d 846 [Civ Ct, Kings County 1998]).

Last, the Court requires a satisfactory explanation from an officer of the FIRST FRANKLIN MORTGAGE LOAN TRUST 2006-FF 11 as to why in the middle of our national subprime mortgage financial crisis, plaintiff DEUTSCHE BANK purchased from MERS, as nominee of FIRST FRANKLIN, the instant nonperforming loan. The Court wonders if DEUTSCHE BANK violated a corporate fiduciary duty to the noteholders of the FIRST FRANKLIN MORTGAGE LOAN TRUST 2006-FF11with the purchase of a loan that defaulted 142 days prior to its assignment from MERS to FIRST FRANKLIN MORTGAGE LOAN TRUST 2006-FF11, rather than keep the mortgage loan on FIRST FRANKLIN’s books.

The Court is not sure that the noteholders of the FIRST FRANKLIN MORTGAGE LOAN TRUST 2006-FF11 are aware that DEUTSCHE BANK purchased the instant “toxic” nonperforming mortgage loan for the Trust. It could well be that MERS, as nominee for FIRST FRANKLIN, with the acquiescence of DEUTSCHE BANK, transferred the instant nonperforming loan, as well as others, to the FIRST FRANKLIN MORTGAGE LOAN TRUST 2006-FF11, as part of what former Federal Reserve Board Chairman Alan Greenspan referred to in his October 23, 2008 testimony, before the House Oversight Committee, as “a once in a century credit tsunami.”

Conclusion
Accordingly, it is
ORDERED that the motion of plaintiff DEUTSCHE BANK NATIONAL TRUST COMPANY, AS TRUSTEE FOR FIRST FRANKLIN MORTGAGE LOAN TRUST 2006-FF11, for summary judgment and an order of reference for the premises located at 780 New Jersey Avenue, Brooklyn, New York (Block 4299, Lot 43, County of Kings) is denied without prejudice, and it is further

ORDERED that leave is granted to plaintiff DEUTSCHE BANK NATIONAL TRUST COMPANY, AS TRUSTEE FOR FIRST FRANKLIN MORTGAGE LOAN TRUST 2006-FF11, to renew its motion for summary judgment and an order of reference for the premises located at 780 New Jersey Avenue, Brooklyn, New York (Block 4299, Lot 43, County of Kings), upon presentation to the Court, within sixty (60) days of this decision and order of: (1) a valid assignment of the instant mortgage and note to plaintiff,
DEUTSCHE BANK NATIONAL TRUST COMPANY, AS TRUSTEE FOR FIRST FRANKLIN MORTGAGE LOAN TRUST 2006-FF11; (2) an affirmation from Steven J. Baum, Esq., the principal of Steven J. Baum, P.C., explaining if both MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC., the assignor of the instant mortgage and note, and DEUTSCHE BANK NATIONAL TRUST COMPANY, AS TRUSTEE FOR FIRST FRANKLIN MORTGAGE LOAN TRUST 2006-FF11, the assignee of the instant mortgage and note, pursuant to 22 NYCRR § 1200.24, consented to simultaneous representation in the instant action, with “full disclosure of the implications of the simultaneous representation and the advantages and risks involved” explained to them; and, (3) an affidavit from an officer of the FIRST FRANKLIN MORTGAGE LOAN TRUST 2006-FF11, explaining why plaintiff DEUTSCHE BANK NATIONAL TRUST COMPANY, AS TRUSTEE FOR FIRST FRANKLIN MORTGAGE LOAN TRUST 2006-FF11 purchased a nonperforming loan from MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC., as nominee for FIRST FRANKLIN, A DIVISION OF NATIONAL CITY BANK OF IN.
This constitutes the Decision and Order of the Court.

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Washington Mutual v. Raymond & Rhonda Payne

Posted on July 8, 2009. Filed under: Case Law, Foreclosure Defense, Housing, Mortgage Law | Tags: , , , , , , , , , , , , , , , , |

WASHINGTON MUTUAL BANK, NA, Plaintiff,
v.
RAYMOND R. PAYNE AND RHONDA K. PAYNE, Defendants.

Supreme Court, Suffolk County.
Decided June 15, 2009.
Shapiro & DiCaro, LLP, Rochester, NY, Attys. for Plaintiff.
David Gevanter, ESQ., Hicksville, NY, Attys. for Defendants.
THOMAS F. WHELAN, J.
ORDERED that this motion (#004) by defendant, Raymond R. Payne, for an order staying the public sale of the subject premises, vacating the judgment of foreclosure and sale and dismissing the complaint is considered under CPLR 5015 and is denied.

The plaintiff obtained a judgment of foreclosure and sale in this action on December 1, 2003. Prior thereto, the default on the part of the mortgagor defendants (Raymond and Rhonda Payne) was fixed and determined in an order appointing a referee to compute amounts due under the mortgage. For reasons not reflected in the record adduced on the instant motion, the public sale contemplated by the December 1, 2003 judgment has not yet been consummated.
By prior motion returnable February 23, 2007, the mortgagor/defendants, Raymond R. Payne and Rhonda Payne, moved to stay any impending sale of the premises, for a vacatur of the judgment of foreclosure and sale and dismissal of the complaint on the grounds that the plaintiff failed to acquire personal jurisdiction over them by due service of the summons and complaint. By order dated September 28, 2007, this court denied that application without a hearing, finding that the same was unmeritorious.
By the instant motion, defendant, Raymond R. Payne, moves again for a stay of the impending sale of the subject premises, an order vacating the judgment of foreclosure and sale and dismissal of the complaint pursuant to CPLR 5015. Although the order to show cause by which this motion was interposed lists several grounds for the requested relief, including improper service of the summons and complaint, the gravamen of the defendant’s demands for relief rest upon claims that the plaintiff lacked standing to commence and maintain this action due to its lack of ownership of the subject note and mortgage at the time of commencement of this action. For the reasons set forth below the motion is denied.
Recent case authorities emanating from the Second Department have held that the issue of the plaintiff’s standing is not a matter of subject matter jurisdiction but rather, is more akin to the issue of the plaintiff’s capacity to sue. In Wells Fargo Bank Minnesota National Association v Mastropaolo, 42 AD3d 239, 837 NYS2d 247 (2d Dept 2003), the Appellate Division, Second Department, instructed that “[w]here standing is put into issue by a defendant’s answer, a plaintiff must prove its standing if it is to be entitled to relief (see TPZ Corp. v Dabbs, 25 AD3d 787, 789, 808 NYS2d 746 [2d Dept 2006]; see also Society of Plastics Indus. v County of Suffolk, 77 NY2d 761, 769, 570 NYS2d 778 [1991] [standing is an aspect of justiciability which, when challenged, must be considered at the outset of any litigation’ [emphasis added])”.
Continuing, the Court in Mastropaolo instructed that “where a defendant does not challenge a plaintiff’s standing, the plaintiff may be relieved of its obligation to prove that it is the proper party to seek the requested relief”. The Court went on to hold that “an argument that a plaintiff lacks standing, if not asserted in the defendant’s answer or in a pre-answer motion to dismiss the complaint, is waived pursuant to CPLR 3211(e)” [citations omitted]). (see Wells Fargo Bank Minn., NA v Mastropaolo, 42 AD3d 239, 242, 837 NYS2d 247, 250).
More recently, the Appellate Division, Second Department held that a defaulting defendant who moves for vacatur of a judgment of foreclosure and sale and a dismissal of the complaint on the grounds that the plaintiff was without standing to prosecute its claims for foreclosure and sale due to its lack of ownership of the note and mortgage, could not prevail on such application because said defendant waived the standing defense by failing to assert it in an answer or by way of a pre-answer motion to dismiss under CPLR 3211 (see HSBC Bank v Dammond, 59 AD3d 679, 875 NYS2d 490
Page 3
[2d Dept 2009]).

Since the moving defendant here has taken the same position as the unsuccessful movant in Dammond, this court denies defendant’s motion to vacate the judgment of foreclosure and sale on the grounds that the plaintiff lacked standing to prosecute that claim.
To the extent that this motion may be read as one for a stay of the sale, a vacatur of the December 3, 2003 judgment and a dismissal of the complaint on the grounds of lack of personal jurisdiction, it is denied. This second application for such for relief by the moving defendant, Raymond R. Payne, is procedurally improper and substantively insufficient in light of his prior, unsuccessful application for the same relief and the absence of any proof whatsoever, in support thereof.

Equally unavailing are the vague and conclusory claims of fraud which said defendant now asserts by his counsel against the plaintiff (see Wells Fargo Bank v Linzenberg, 50 AD3d 674, 853 NYS2d 912 [2d Dept 2008]; Aames Capital Corp. v Davidsohn, 24 AD3d 474, 808 NYS2d 229 [2d Dept 2005]).

In view of the foregoing, the instant motion is in all respects denied.

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Why banks want you all alone when negotiating a loan modification

Posted on July 5, 2009. Filed under: Banking, bankruptcy, Case Law, Foreclosure Defense, Housing, Legislation, Loan Modification, Mortgage Audit, Mortgage Law, Politics, Predatory Lending, Refinance | Tags: , , , , , , , , , , , , , , , |

They are telling you to run away from loan modification companies who charge a fee. They are paying the politicians to introduce laws making it difficult for you to hire an attorney when negotiating a loan workout. They want you to contact them directly and without the assistance of an advocate. They are scaring you to think that anyone who charges a fee for helping you negotiate a loan modification must be a crook. They claim all mortgage professionals, lawyers and forensic loan examiners who charge a fee are scam artists. They say it should all be free because theoretically you can do all of it yourself.

Just like you can file your own taxes and represent yourself in court, you can also spend the time and effort to learn the ins and outs and nuances of negotiating a favorable loan modification with the same predatory bank that put you in the mess you are in. You can stay up all night and study law so you can go up against their high priced lawyers. You can take time off work and stay on the phone four hours a day trying to get through to their loss mitigation departments. You can re-send the same documents over and over again because mysteriously they keep losing your entire file more than once. That is right you can certainly do this all yourself.

And the reason why you should go to the negotiating table all alone and without any backup is because they want to protect you from the big bad lawyers, mortgage auditors and loan modification companies who have the nerve to charge a fee for helping you! Imagine that. People actually want to make a living while providing a valuable service. What a crime.

Is anyone with an IQ above 10 buying this nonsense? If you had a choice would you go to an IRS audit without a skilled CPA? Would you defend yourself in a criminal trial without the best lawyer money could buy? So why should negotiating with a bank be any different than negotiating with the IRS? Because bankers are more ethical than IRS agents? That must be it.

More….

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