Friday, September 24, 2010

How 2 Pro Bono Lawyers Uncovered ‘Robo-Signer,’ Halting Foreclosures in 23 States

By Debra Cassens Weiss
A Maine pro bono lawyer’s suspicions helped uncover a “robo-signer” mortgage employee and halt mortgage foreclosures in 23 states.
Pro bono lawyer Thomas Cox, who is retired from law practice, was representing a homeowner in a foreclosure case when he came across several documents signed by one GMAC employee: Jeffrey Stephan.
Cox, a lawyer in South Portland, Maine, turned for help to Geoffrey Lewis, a lawyer in Fryeburg, the Press Herald reports. In June, Cox deposed Stephan and learned that the employee of GMAC, now known as Ally Financial, was signing off on documents without verifying their accuracy.
It turned out that Stephan was signing 10,000 foreclosure documents a month, giving him only 1.5 minutes to review each document. Cox had uncovered information similar to that revealed in a December deposition. Both depositions were cited in a Washington Post story that says the revelations led Ally to halt foreclosures in 23 states and could pave the way to foreclosure challenges across the country.
"What blew me away," Cox told the Portland Press Herald, "was that Stephan admitted he didn't have custody of the file. It was scanned into a computer and he didn't even look at it. He didn't know if it was a true and accurate copy. He didn't read the affidavits. He just checked the numbers."
Cox and Lewis are volunteers with the pro bono group Maine Attorneys Saving Homes. They are still trying to get a summary judgment overturned in their client’s case.
Before retiring, Cox helped collect money from businesses that had borrowed money from a failed Maine bank, according to The Home Equity Theft Reporter blog, citing a story from the Morning Sentinel.

Foreclosure System Is ‘Riddled with Faked Documents’

By Debra Cassens Weiss
Revelations that an Ally Financial "robo-signer" employee routinely failed to review the lender's foreclosures for accuracy may be just the tip of the iceberg.
The admissions by the employee, charged with reviewing 10,000 cases a month, could have an impact beyond the 23 states where Ally has halted foreclosures, the Washington Post reported yesterday. Today the Washington Post reports that Ally isn’t the only lender whose employees failed to review foreclosure information before taking legal action.
According to the newspaper, “The nation's overburdened foreclosure system is riddled with faked documents, forged signatures and lenders who take shortcuts reviewing borrower's files, according to court documents and interviews with attorneys, housing advocates and company officials.”
Other lenders whose work is at issue include:
• JPMorgan Chase. One of its employees said in a May deposition that she signed off on thousands of foreclosures a month without verifying the accuracy.
• An employee of a document lending company owned by Lender Processing Services claimed to be an executive with several large banks, including Bank of America and Wells Fargo, when signing foreclosure affidavits. In one case she listed “bogus assignee” as the owner of a mortgage, and in another she signed as an officer of a fake company called “Bad Bene.” (The company says the names were just “placeholder phrasing.”)
Ally, formerly known as GMAC Mortgage Co., was used by Fannie Mae and Freddie Mac to service its loans.

Thursday, September 16, 2010

Justice Peter Mayer of Suffolk County stalls GMAC's foreclosure action for failure to comply with RPAPL 1304

By:   Nicholas M. Moccia, Esq.

In GMAC Mtge. LLC v. Munoz, 2010 NY Slip Op 51598(U)(Sup. Ct. Suffolk County 2010), Justice Peter H. Mayer of the Supreme Court in Suffolk County, denied a foreclosing bank's application for an order of reference in the furtherance of its foreclosure action due to its failure to comply with RPAPL 1304.  Justice Mayer writes:

The plaintiff's application is denied for failure to submit evidentiary proof, including an affidavit or affirmation from one with personal knowledge, of compliance with the type-size and content requirements of RPAPL §1304 regarding the pre-commencement notice required in foreclosure actions, as well as an affidavit of proper service of such notice by registered or certified mail and by first class mail to the last known address of the borrower as required by RPAPL §1304(2) or, in the alternative, an affidavit from one with personal knowledge sufficient to show why the requirements of RPAPL §1304 do not apply.
Justice Mayer noted that the foreclosing bank's complaint (with an out-of-county verification by an attorney) alleged that a notice pursuant to RPAPL 1304 was sent.  Remarkably, however, Mayer rejected the complaint's allegations with regard to RPAPL 1304 as "vague, boilerplate language, particularly in a complaint verified by an attorney without even personal knowledge."  Instead, Justice Mayer held that an "affidavit or affirmation from one with personal knowledge of compliance with the specific requirements of RPAPL 1304, or in the alternative, an affidavit sufficient to show why the requirements of RPAPL 1304 do not apply," was required.  Accordingly, a complaint with an out-of-county verification by an attorney does not constitute "evidentiary proof" of compliance with RPAPL 1304.

In the instant matter, the foreclosing bank identified the underlying loan as a non-traditional home loan.  For foreclosure actions commenced on or after September 1, 2008, RPAPL 1304 requires that with regard to a "high-cost home loan," a "subprime home loan" or a "non-traditional home loan," at least ninety (90) days before the lender or mortgage loan servicer commences legal action against the borrowe, the lender or servicer must give the borrower a specific, statutorily prescribed notice.  In essence, the notice warns the borrower that he or she may lose his or her home because of the loan default, and provides information regarding assistance for homeowners who are facing financial difficulty. The specific language and type-size requirements of the notice are set forth in RPAPL §1304(1). 

Pursuant to RPAPL 1304(2), the requisite 90-day notice must be "sent by the lender or mortgage loan servicer to the borrower, by registered or certified mail and also by first-class mail to the last known address of the borrower, and if different, to the residence which is the subject of the mortgage. Notice is considered given as of the date it is mailed." The notice must also contain a list of at least five housing counseling agencies approved by the U.S. Department of Housing and Urban Development, or those designated by the Division of Housing and Community Renewal, that serve the region where the borrower resides, as well as the counseling agencies' last known addresses and telephone numbers. Pursuant to RPAPL 1304(3), the 90-day period specified in RPAPL 1304(1) does not apply "if the borrower has filed an application for the adjustment of debts of the borrower or an order for relief from the payment of debts, or if the borrower no longer occupies the residence as the borrower's principal dwelling." 

It should be noted that 90 day notice prescribed by RPAPL 1304 now applies to all  home  loans for foreclosure actions commenced on or after December 15, 2009, not just high cost, subprime and non-traditional home loans.  For a peculiarly biased, but otherwise helpful exposition of the recent changes made by the New York State Assembly with regard to RPAPL 1304, see Bruce Bergman's blog post on this topic. 

Thursday, September 9, 2010

Bergman on Bankruptcy's relationship to foreclosures

By:        Nicholas Moccia, Esq.
             Law Offices of Robert E. Brown, P.C.

Bruce Bergman is a partner with Berkman, Henoch, Peterson & Peddy, P.C., who is a noted authority on New York foreclosure law.

In the N.Y. Real Property Law Journal (Summer 2010 Vol. 38 No. 3), Mr. Bergman provides some insight on the intersection of N.Y. foreclosure law and the Bankruptcy Code, and cites the following highlights:

  • The Bankruptcy Code provides for an automatic stay of certain prescribed actions against a debtor's property (11 U.S.C. s. 362[a]).  This includes foreclosure actions.
  • Imposition of the automatic stay is one of the fundamental protections afforded a debtor by the Bankruptcy Code.
  • The stay is effective immediately upon the filing of a petition without need for further action.
  • The stay is not limited to the litigants, but rather extends to a non-bankruptcy court too so that the stay serves to suspend any non-bankruptcy court authority to continue any judicial proceedings which are then pending against that debtor--including foreclosure actions.
  • Proceedings which the Bankruptcy Code stays upon a petition filing are void if they take place after the stay begins.
  • The power to address legal actions violative of the stay are given to the bankruptcy court itself--not the state court.
Bergman cites a particularly informative decision, namely Carr v. McGriff, 8 A.D.3d 420, 781 N.Y.S.2d 34 (2d Dep't 2004), whereby the Second Department held that the NY Supreme Courts (i.e. the state trial courts) had no power to ratify or annual a state foreclosure action commenced after the imposition of a bankruptcy stay.

Friday, September 3, 2010

American Home Mortgage Charged with Violating Debt Collection Laws

By:  Carrie Bay
Texas Attorney General Greg Abbott says American Home Mortgage Servicing Inc. is using illegal debt collection practices and misleading struggling homeowners, resulting in foreclosure for some borrowers.

Abbott brought formal charges against the company on Monday. According to a statement from the attorney general’s office, state investigators allege that American Home’s collections agents used “aggressive and unlawful tactics” to collect payments from Texas homeowners who had difficulty meeting their mortgage obligations, and then failed to credit homeowners who properly submitted their payments on time.
Investigators allege that in other cases, the servicer’s agents falsely claimed that homeowners did not make payments so they could justify late fees or escrow accounts, and then failed to properly credit homeowners even after withdrawing funds directly from borrowers’ checking accounts. 

“Because of the defendant’s unlawful conduct, homeowners defaulted on their loans, leading to foreclosure proceedings,” according to the attorney general’s office.

Abbott also says that although American Home Mortgage claims to have a “Home Retention Team” to assist distressed homeowners, many customers found that the company could not qualify borrowers for assistance to halt the foreclosure process. 

The attorney general says some homeowners who actually obtained loan modifications found that their monthly payments increased rather than decreased, which worsened their problem with foreclosure. Industry studies show, however, that this is not an uncommon outcome among more servicers than just American Home Mortgage.

The attorney general is charging American Home Mortgage with multiple violations of the Texas Debt Collection Act and the Texas Deceptive Trade Practices Act (DTPA). The state is seeking civil penalties of up to $20,000 per violation.

American Home Mortgage did not respond to requests for comment regarding Abbott’s allegations and the pending lawsuit.

American Home Mortgage Servicing is headquartered in Coppell, Texas, and also has offices in Irvine, California, and Jacksonville, Florida. 

The company is considered to be the nation’s largest independent subprime mortgage servicer, and is owned and funded by the private equity firm WL Ross & Co., named for its founder and chairman, investment sage Wilbur Ross.