Thursday, November 11, 2010

Justice Peter Mayer of Suffolk County clarifies for bank attorneys the implications of the October 20, 2010, Administrative Order of the Chief Administrative Judge pertaining to foreclosure matter.

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

On October 20, 2010, banks attorneys were reeling with the new requirements announced by the Chief Administrative Judge of the State of New York. The Order was the Court’s response to the numerous and widespread insufficiencies in foreclosure filings, which include: failure of banks and their counsel to review documents and files to establish standing and other foreclosure requisites; filing of notarized affidavits which falsely attest to such review and to other critical facts in the foreclosure process; and “robosignature” of documents by parties and counsel. The Office of Court Administration warned, “The wrongful filing and prosecution of foreclosure proceedings which are discovered to suffer from these defects may be cause for disciplinary and other sanctions upon participating counsel.”

The 10/20/10 OCA Order requires bank attorneys to file an affirmation certifying that they inspected the papers filed with the Court in the furtherance of a foreclosure action, and certify that the papers are accurate and complete in all relevant respects. Moreover, there is a continuing obligation to amend the affirmation in light of newly discovered facts following its filing. This affirmation must be filed at certain chronological thresholds during the course of a foreclosure action:

1. with a Request for Judicial Intervention for cases commenced after October 20, 2010;

2. with an application for an Order of Reference or Motion for Judgment of Foreclosure and Sale for cases commenced before October 20, 2010; and

3. within five business days before the foreclosure action for cases where a judgment has already been rendered.

In Citimortgage v. McGee, Justice Mayer of Suffolk County, clarifies these requirements as follows:

[T]he clear intent of the new Rule is to assure accountability for and accuracy of all court filings in foreclosure actions. This Court holds that after October 20, 2010, the mandatory affirmation must accompany all applications made at any and all stages of new and pending foreclosure proceedings, as a mere single filing at only one phase of the case would not comport with the intent of the Chief Administrative Judge's Order. If compliance were sufficient by filing at only one phase, papers filed subsequent to the tendering of the original affirmation could be filed with virtual impunity. Failure to submit the mandatory affirmation at all stages of the proceedings after October 20, 2010 shall result in denial of the requested relief and the potential issuance of any sanction the Court deems appropriate under the applicable circumstances.

Justice Mayer makes the new rule simple—if, at any time, bank attorneys make an application or request to the Court in a foreclosure matter, that application must be accompanied by an affirmation which complies with the 10/20/10 OCA. If they don’t comply, they may be sanctioned and their application may be denied with prejudice.

Justice Mayer is also requiring banks to indicate in their affirmations in support of any motion a paragraph indicating whether or not the statutorily required foreclosure conference was held pursuant to CPLR 3408 and, if so, when such conference was conducted.

I anticipate that the Supreme Court Justices in the five boroughs will promulgate requirements similar or identical to that of Justice Mayer, if they haven’t done so already.


Lynn E. Szymoniak, Esq., Editor, Fraud Digest, November 11, 2010

When men and women leave the military, the business community often does not reward them for their years of service with good-paying jobs. It is not surprising that veterans are among the Americans who are struggling to stave off foreclosure. Like many others, they are hoping that the bank will re-work the terms of their loans and help them through tough economic times - in the same way that the government helped the banks. They are hopeful that the banks will honor the mandate of Fannie and Freddie and offer meaningful re-working of the terms of their loans. Perhaps their 9% adjustable rates will be reduced to a 5% fixed rate. Perhaps the loan balance will be reduced to reflect the loss in value caused by the mortgage meltdown. Perhaps they can stay in their homes, because it would make economic sense for the bank to re-work their loans instead of forcing them out only to sell the house at less than 60% of the loan balance.

In this foreclosure struggle, these veterans are given no respect by the foreclosure mills. The Florida Attorney General has found that in thousands of cases involving members of the military, proof of service of process has been falsified. In thousands of other cases, former military families cannot get legal representation because they cannot afford to retain lawyers, but have just enough income to disqualify them for free representation through legal services programs. Without legal representation, they are left on their own to identify bank fraud. They must prove that the documents being presented by the mortgage-backed trusts are fraudulent and that the banks are fabricating evidence to force them out of their homes. Their years of military training and service did not prepare them for this particular battle.

Instead of a rocket-docket that forces military families out of their homes with no more than a 90-second hearing and a rubber stamp of the bank practices, there could be special measures taken in cases involving military families. The banks could be required to engage in mandated (but most often ignored) meaningful mediation. The banks could be required to present to the Courts a one-page straightforward "before and after" comparison that plainly shows the revised loan terms that were offered to these families.

Where no substantial effort was made by the banks, courts could appoint Special Masters to carefully examine the bank documents to make sure that banks were not relying on documents that had been fabricated just to speed the foreclosure. Where such documents were used to beat military families in foreclosure, courts could sanction the banks by requiring substantial concessions to meaningfully penalize the wrong-doing. Some restaurants and area businesses offer a free sandwich to veterans on Veterans Day. An offer of economic justice is more befitting the many sacrifices of these families.

Lynn E. Szymoniak, Esq.

Monday, November 8, 2010

Lawyer Who Took $36,000 From Homeowners Facing Foreclosure Is Disbarred, Says It's Not His Fault

By Amanda Bronstad

The National Law Journal

A California lawyer will submit to disbarment after admitting that he represented nine struggling homeowners in states in which he was not authorized to practice.

Brian Colombana, who practiced in Irvine and Ontario, Calif., accepted nearly $36,000 from 12 struggling homeowners but did not obtain a single loan modification, according to the State Bar of California.

Colombana was the fifth California lawyer who has agreed to disbarment amid the bar's investigation of loan modification scams. He was placed on involuntary inactive status on June 20. He was admitted to practice in California in 2005.

According to the state bar, two of Colombana's clients lost their homes to foreclosure, while another was forced to sell at a loss. A fourth cashed in insurance policies to avoid foreclosure. Colombana was affiliated with Loan Negotiators of America, the Housing Law Center and Mortgage Relief Law Center.

On Sept. 22, the state bar announced that Colombana had stipulated to committing nine acts of misconduct. In eight of the cases, the clients lived in states in which Colombana was not licensed to practice, including South Carolina, Utah, Nevada, Minnesota and Maryland.

Colombana, representing himself in the matter, said he believed that he could represent clients outside California under the American Bar Association's model rules about transactional matters in federal law. He said bar officials never clarified to him or other loan modification attorneys whether they were allowed to represent those clients.

"The whole thing was just a mess because it was so unclear from the very beginning," he said. "Had they said one time, 'Don't take anybody out of state,' no one would have done it. No one was trying to break the rules. It was unclear."

Friday, November 5, 2010

Onewest Bank, F.S.B. v Drayton, 2010 NY Slip Op 20429 (Sup. Ct. Kings County 2010)

For the full text of Judge Schack's bombshell decision on "robo-signers" follow link:

Brooklyn judge Arthur Schack is a local hero, decision casts light on fraudulent mortgage paperwork

Juan Gonzalez - News

Brooklyn State Supreme Court Judge Arthur Schack has done it again.

The self-described "little judge from Brooklyn" has dismissed another foreclosure case, this time in favor of an East New York homeowner who did not even have a lawyer.

Schack ruled Thursday that California's OneWest, the last of several banks that relied on an admitted "robo-signer" to transfer the $492,000 mortgage on Covan Drayton's Hemlock St. home among them, failed to prove it even owns the property in question.

"To prevent the waste of judicial resources, the instant foreclosure is dismissed without prejudice," Schack wrote.

His startling, 37-page decision is the latest of several that have turned him into a hero of troubled homeowners across the nation.

With 6 million homes nationwide in foreclosure or facing the imminent risk of foreclosure, the federal government's response has been shamefully slow.

Only 475,000 homes are in some form of permanent modification. The Obama administration has spent more effort bailing out a few big lenders than millions of little borrowers.

Shack's opinion, released by the courts Tuesday, is the most detailed picture yet of the shoddy or fraudulent mortgage paperwork too many of those lenders used.

This is not just a matter of minor technicalities, as the banks and their spin masters want us the believe - the same ones who told us the subprime crisis would blow over.

At the heart of the Drayton case is an Austin, Tex., robo-signer named Erica Johnson-Seck. In July, Johnson-Seck admitted in a Florida deposition in another case that she "executes 750 foreclosure documents a week; without a notary present; does not spend more than 30 seconds signing each document; [and] does not read the documents before signing them," Schack noted.

Johnson-Seck's signature appears repeatedly in documents connected to Drayton's mortgage, and in several other foreclosure cases Schack dismissed in the past three years.

At different times, she signed notarized documents assigning the loan, claiming to be a vice president of MERS (a private financial recording service for major banks), a vice president of INDYMAC, a vice president of Deutsche Bank and a vice president of OneWest.

She also claimed to have "signing authority" from several banking institutions, including the Federal Deposit Insurance Corp., Bank of New York and U.S. Bank, noting, "That's all I can think of off the top of my head."

In one particularly pointed exchange, Johnson-Seck admitted she was not employed by MERS and didn't know who its president was or the location of it headquarters.

As he has in previous cases involving her, Schack insisted that Johnson-Seck "must explain to the court ... her employment history for the past three years and why a conflict of interest does not exist" in her various titles.

Johnson-Seck did not respond to calls to her home and office in Austin for comment.

When asked during her deposition about Schack's repeated requests that she appear in his Brooklyn court and explain her employment history, Johnson-Seck claimed she'd gotten no notice.

I wonder if he has the right address," she said. "Maybe that's what we should do, send Judge Schack the most recent [address], and I will gladly show up in his court and provide him everything he wants."

Until then, Schack said, case dismissed.

Monday, November 1, 2010

Is Standing a Waivable Defense in the Second Department?

In Aurora Loan Services, LLC v. Thomas, 70 A.D.3d 986, 897 N.Y.S.2d 140 (2d Dep't 2010), the Second Department appears to have clarified its position regarding the waivability of the defense of standings--i.e. that standing is not a waivable defense as contrasted from a defense based on personal jurisdiction.  The Supreme Court, Suffolk County, allowed Defendant Thomas to amend his answer to include a standing defense.  On appeal, the Second Department affirmed and held that the Defendant did not waive a defense based on the Plaintiff's lack of standing notwithstanding the fact that the Defendant omitted to include this defense in his initial answer.  The Second Department justified its holding by noting that the proposed amendment was "not palpably insufficient or patently devoid of merit."  This decision seems to contradict the Second Department's deeply unpopular decision in Wells Fargo Bank Minnesota, Nat. Ass'n v. Mastropaolo,  42 A.D.3d 239, 244, 837 N.Y.S.2d 247, 251 (2d Dep't 2007) whereby the Second Department held that standing is a waivable defense. 

The judges on the appellate panel were Hon. John M. Leventhal, Hon. Plummer E. Lott and Hon. Reinaldo E. Rivera.