Courts Overstepped in Requiring NY Attorneys to Sign Affirmations in Foreclosures

By Andrew Keshner | New York Law Journal

A state judge on Long Island has ruled that court administrators overstepped their rule-making powers when they required lenders' attorneys to attest to the accuracy of the documents they file in residential foreclosure actions.

Supreme Court Justice Thomas F. Whelan in Suffolk County concluded in LaSalle Bank v. Pace, 15822-2008, that no statute or legislative action gave Chief Judge Jonathan Lippman the power to require the attorney affirmations.

The judge granted summary judgment to LaSalle Bank in the action, approving an order of reference on the foreclosure of a Hampton Bays house. Among other defenses, the homeowners claimed the bank failed to supply the required affirmation.

According to court papers, the bank's attorneys later submitted the affirmation as part of papers in support of summary judgment. At any rate, Justice Whelan observed that the affirmation could be supplied at a later stage of the proceedings.

However, he went further, saying that he was "not convinced that the subject order constitutes a permissible exercise of the rule making authority vested in the chief administrator of the courts."

The judge noted that the Legislature had delegated to the courts the power to regulate the practice and procedure of settlement conferences it had mandated, but he said the administrators' rule-making authority did not give them "carte blanche" to "enlarge or abridge rights conferred by statute."

"This court can find no legislative delegation to the chief administrator by statute or otherwise which empowers the chief administrator to impose the substantive requirements that touch upon the nature and sufficiency of proof which the plaintiff must supply to the court in mortgage foreclosure actions," Justice Whelan wrote.

The affirmation requirement had "significantly" impaired lenders' "statutory remedy for foreclosure and sale," he said, pointing to a "vast reduction" in case filings and a "resounding halt" in the prosecution of foreclosure actions. And he said the requirement had had a "chilling" effect on the court's ability to exercise its own authority.

Christopher H. Thompson of Staten Island, the attorney for homeowners James F. and Linda Pace, said he planned to appeal.

"I am disappointed with the decision and although I respect Judge Whelan, I believe he misunderstands the law," he said. "I believe the court seized the opportunity to challenge the enforceability of the chief administrative judge's rules and directives."

James G. Ryan and Justin F. Capuano of Cullen & Dykman in Garden City represented LaSalle Bank. Mr. Ryan declined to comment.

David Bookstaver, a spokesman for the Office of Court Administration, said the affirmation requirement is still in force.

"We are aware of the decision," he said. "However, we are not a party to the case and we'll be watching to see if there's an appeal filed."

Judge Lippman announced the affirmation requirement last fall, as national concern grew over inaccurate court documents in residential foreclosures. Since then, the number of foreclosure filings has plummeted, with observers attributing that decline, at least in part, to the affirmation requirement.

Other judges are still enforcing the affirmation requirement.

Supreme Court Justice Peter H. Mayer in Suffolk Countyrecently denied a foreclosure action and ordered a sanction hearing. The decision was due, in part, because he faulted a submitted attorney affirmation that replaced the affirmation's official language of "diligent" inquiry with "reasonable" inquiry.

"[T]his Court requires counsel to submit an attorney affirmation in the specific form and with the specific language originally mandated by [Chief Administrative Judge Ann Pfau's] order of October 20, 2010," the judge said in Bayview Loan Servicing v. Bozymowski, 00296-2010.

A call for comment to Rosicki, Rosicki & Associates of Plainview, the firm representing the lender, was not returned.

Judge Thomas Whelan of Suffolk County, New York, defies directive of Chief Judge regarding foreclosures

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

In LaSalle Bank, N.A. v. Pace, 2011 N.Y. Slip Op 21070, Judge Thomas of Whelan, of the Supreme Court of the State of New York, County of Suffolk, allows a foreclosure action to proceed notwithstanding the fact that the foreclosing bank failed to comply with the October 20, 2010, Administrative Order [#548-10] issued by Chief Administrative Judge Ann Pfau.  The Administrative Order, which has gotten much attention by foreclosure practitioners, requires counsel for the foreclosing banks to verify the accuracy of documents filed in support of residential foreclosure actions.

Judge Whelan opines that the Administrative Order is not binding on him based on New York State constitutional grounds.  His Honor writes,

The Administrative Order at issue and the recent amendment of 22 NYCRR 202.12-a, by the addition of subparagraph (f), which purports to establish the continuing authority of the Chief Administrative Judge to require the affirmations and affidavits that are the subject of the October 20, 2010 Administrative Order, are not administrative in nature, as they are not aimed at supervising the administration and operation of the Unified Court System or at the efficient and orderly transaction of business in the trial courts (see Judiciary Law § 211; 212[1]; 22 NYCRR 80.1[b]). They are, instead, "legislative" in nature, as their provisions purport to regulate practice and procedure in the courts (see NY Const. Art. VI, § 30; Judiciary Law § 212[2][d]). The legislative nature of the Administrative Order and the amendment of 22 NYCRR 202.12-a(f) are apparent even upon a most cursory review of their terms, as they impose additional, substantive requirements upon a plaintiff seeking the remedy of foreclosure that is not contemplated by the statutes which now regulate foreclosure actions (see RPAPL Article 13, CPLR 3408 and the Laws of 2009 Ch. 507 §§ 1,3,5,6,9,10,10-a)(Emphasis supplied).

Accordingly, Judge Whelan holds:

[T]his court finds that Administrative Order numbered 548-10 and the newly added subparagraph (f) to court rule 202.12-a, exceed the rule making authority of the Chief Administrative Judge, in her capacity as chief administrator of the courts.  (Emphasis supplied).

Thankfully, Judge Whelan's decision is not binding authority on other judges.  In my opinion--and I don't foresee myself practicing in Suffolk any time soon, so I can be blunt--this is a poor decision and appears to be nothing more that an elaborate rationalization for a deep-seated ideological bias favoring banks.  His decision does a disservice to homeowners, and wholly ignores the rampant documentary irregularities that occur in so many foreclosures. Instead, Judge Whelan concerns himself with the "chilling effect upon [his] court's adjudicatory authority and powers to determine issues raised in pending mortgage foreclosure actions duly assigned to it."

I'd like to hear from the Little Judge from Brooklyn on this one.

Judge Schack threatens Baum with sanctions for apparently attempting to collect a debt...from him!

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

This is a classic Judge Schack moment in Wells Fargo Bank, N.A. v Zelouf, 2011 N.Y. Slip Op 50212[U].  To fully appreciate this, you have to deal with Baum's office on a regular basis.  Nearly every interaction or communication with his office is prefaced by the following mantra ad nauseam:

[t]he law firm of Steven J. Baum, P.C. and the attorneys whom it employs are debt collectors who are attempting to collect a debt. Any information obtained by them will be used for that purpose.

To be sure, Baum is required to give this warning to all his prospective judgment debtors in order to be in compliance with the Fair Debt Collection Practices Act.  However, in Zelouf, it appears an overzealous paralegal--I'll give the attorneys the benefit of the doubt on this one--had the misfortune to include the now-famous Fair Debt Collections mantra in a correspondence with Judge Schack.  You gotta love this guy's sense of humor.  The good Judge writes:

Further, plaintiff's counsel states in his notice of withdrawal, "[t]he Plaintiff will not be discontinuing the above referenced action." Moreover, in his cover letter to myself, plaintiff's counsel states that "[t]he law firm of Steven J. Baum, P.C. and the attorneys whom it employs are debt collectors who are attempting to collect a debt. Any information obtained by them will be used for that purpose." Since this statement was in a cover letter to me and does not appear to be preprinted on the letterhead of the Baum firm, the Court would like to know what debt it [*2]personally owes to the Baum firm or its clients? This statement borders upon frivolous conduct, in violation of 22 NYCRR § 130-1.1. Was it made to cause annoyance or alarm to the Court? Was it made to waste judicial resources? Rather than answer the above rhetorical questions, counsel for plaintiff is directed never to place such a foolish statement in a cover letter to this Court. If this occurs again, the firm of Steven J. Baum, P.C. is on notice that this Court will have the firm and the attorney who wrote this nonsensical statement appear to explain why the firm and the individual attorney should not be sanctioned for frivolous conduct.

Baum, there is no winning with the Little Judge from Brooklyn!

Joy Leopold does not quite get it right with regard to MERS

Nicholas M. Moccia, Esq.

Law Offices of Robert E. Brown, P.C.

Commentary:   The article below by Joy Leopold reports on a recent decision that came down in the Bankruptcy Court for the Eastern District of New York.  The caption of the case is In re: FERREL L. AGARD, Case No. 810-77338-reg.  This article misses the point in two respects with regard to MERS:   

First, a decision from the Bankruptcy Court, EDNY, is not binding on the Supreme Court of the State of New York.  It's perhaps persuasive authority, but it is not binding.  One gets the impression that Ms. Leopold overestimates the significance of this decision.

Second, Ms. Leopold fails to explain why MERS does not have the right to transfer mortgages or file foreclosures on behalf of lenders or its own behalf.  MERS is a "nominee" of banks and acts as a record keeper and clearing house for mortgages that are originated and sold by financial institutions.  MERS is an agent or middleman of sorts.  The most important fact about MERS is that it does not have an ownership interest in any mortgage and is never the holder of the note.  For this reason, it cannot on its own initiative transfer mortgages between banks, nor can it file foreclosure actions on its own behalf.  The problem with MERS is that it transfers mortgages and sometimes commences foreclosures without being able to demonstrate to the courts or to defaulting borrowers that it has the right to do so.  The mere title "nominee" does not give MERS carte blanche.  It needs to show a power of attorney or a corporate resolution from the financial institution that actually owns the mortgage [i.e. "the holder the note and mortgage"] in order to demonstrate that MERS has the capacity to make assignments or commence foreclosure actions.  MERS time and again has been unable to prove that it has such authority--for that reason its assignments of mortgage are defective; for that reason it does not have standing to commence foreclosure actions.  The bottom line is that courts and homeowners need to know that the correct financial institution is bringing the foreclosure action.  After all, this is not just about balance sheets and payment ledgers--it's about people's home.  

Banks, if you want to take someone's home, do it correctly and be able to show that you're doing it correctly.

 

By: Joy Leopold

February 16, 2011

A New York judge has ruled that Mortgage Electronic Registration Systems, Inc. (MERS) does not have the right to transfer mortgages on behalf of its members, meaning it does not have the right to file foreclosures on behalf of lenders. 

The company has recently been under fire for the practice, but the company defended its actions saying that borrowers are required to sign documents stating that MERS can assume rights and responsibilities on behalf of creditors. 

The company’s Web site says, “MERS was created by the mortgage banking industry to streamline the mortgage process by using electronic commerce to eliminate paper.”

In recent years, though, that role has evolved substantially, with MERS taking foreclosure actions on behalf of lenders and servicers all over the country, even becoming embroiled in the robo-signing scandal.

At present, the company has about half of all the mortgages in the United States in its electronic database.
But last week, Judge Robert Grossman ruled MERS does not have the authority to act on behalf of its members, and the actions of the company are actually illegal, no matter what papers MERS requires members sign.

“The court recognizes that an adverse ruling regarding MERS’s authority to assign mortgages or act on behalf of its members/lenders could have a significant impact on MERS and upon the lenders which do business with MERS throughout the United States,” said his statement.

He continued, “However, the court must resolve the instant matter by applying the laws as they exist today. MERS and its partners made the decision to create and operate under a business model that was designed in large part to avoid the requirements of the traditional mortgage recording process. This court does not accept the argument that because MERS may be involved with 50 percent of all residential mortgages in the country, that is reason enough for this court to turn a blind eye to the fact that this process does not comply with the law.”

A New York judge has ruled that Mortgage Electronic Registration Systems, Inc. (MERS) does not have the right to transfer mortgages on behalf of its members, meaning it does not have the right to file foreclosures on behalf of lenders. 

The company has recently been under fire for the practice, but the company defended its actions saying that borrowers are required to sign documents stating that MERS can assume rights and responsibilities on behalf of creditors. 

The company’s Web site says, “MERS was created by the mortgage banking industry to streamline the mortgage process by using electronic commerce to eliminate paper.”

In recent years, though, that role has evolved substantially, with MERS taking foreclosure actions on behalf of lenders and servicers all over the country, even becoming embroiled in the robo-signing scandal. 

At present, the company has about half of all the mortgages in the United States in its electronic database.

But last week, Judge Robert Grossman ruled MERS does not have the authority to act on behalf of its members, and the actions of the company are actually illegal, no matter what papers MERS requires members sign.

“The court recognizes that an adverse ruling regarding MERS’s authority to assign mortgages or act on behalf of its members/lenders could have a significant impact on MERS and upon the lenders which do business with MERS throughout the United States,” said his statement.

He continued, “However, the court must resolve the instant matter by applying the laws as they exist today. MERS and its partners made the decision to create and operate under a business model that was designed in large part to avoid the requirements of the traditional mortgage recording process. This court does not accept the argument that because MERS may be involved with 50 percent of all residential mortgages in the country, that is reason enough for this court to turn a blind eye to the fact that this process does not comply with the law.”

HSBC Halts All Foreclosures and Admits to "Robo-signing" in SEC filing

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

The following regarding HSBC was reported on 4closurefraud.org:

HSBC Bank USA and HSBC Finance Corp. have stopped all home foreclosures until further notice and may face unspecified regulatory actions or fines, after regulators found “certain deficiencies” in servicing and foreclosure procedures, HSBC said in government filings Monday.

The disclosure by HSBC, buried deep within its annual financial report to the Securities and Exchange Commission, marks the first time HSBC has admitted to a foreclosure moratorium in the wake of a legal and paperwork crisis that swept the industry.

That’s a dramatic reversal from its stance just a few months ago, when it said publicly that it would not suspend home seizures because it didn’t feel its procedures were compromised by so-called “robo-signers” and faulty court affidavits.

“Robo-signing” refers to bank or law firm employees signing off on foreclosures without actually being familiar with the cases or reading paperwork.

In the SEC document, known as a 10-K, HSBC said it has “suspended foreclosures until such time as we have substantially addressed the noted deficiencies in our processes.” That suspension took effect in December, said spokesman Neil Brazil.

The company said it is also “reviewing foreclosures where judgment has not yet been entered and will correct deficient documentation and refile affidavits where necessary.”

Link to original:   4closurefraud.org

John Brancato of the Law Offices of Robert E. Brown, P.C. featured in the Staten Island Advance

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

On February 20, 2011, the Staten Island Advance featured an article giving advice to homeowners who face the prospect of foreclosure.  The advice is simple:  If you find yourself in foreclosure, act quickly to seek help.   At the beginning of a foreclosure, there are procedural mechanisms that slow down the process for the benefit of homeowners to find an appropriate exit strategy.  In general, there are three exit strategies: 1.  settling via a loan modification by reinstating the loan at a lower monthly payment; 2.  selling your home outright or selling your home with the cooperation of the bank through a short sale; 3.  voluntarily giving up your home to the bank via a deed-in-lieu of foreclosure while minimizing any further liability you may otherwise have toward the bank.  Each of these exit strategies is preferable to losing your house at auction, and so it is to a homeowner's advantage to explore these exit strategies while they are still available.

John Brancato, who is the loss mitigator for the Law Offices of Robert E. Brown, P.C., observes, ""You have many more options in the beginning of the process than you do when you come to my firm two days before the [foreclosure] auction."

Bottom line for homeowners:   Do not put your head in the sand if you suspect you are in foreclosure.  Take action to mitigate your prospective loss, and seek expert advice.

See link below to Staten Island Advance article by Frank Donnelly featuring John Brancato.  The article contains one error--John Brancato is the loss mitigator for the Law Offices of Robert E. Brown, P.C., not Ronald E. Brown.  

If foreclosure is looming, act quickly

NYLJ Article on Steven J. Baum, P.C.

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

See noteworthy article on the Law Office of Steven J. Baum, P.C.   I believe it's a fair article, and allows Mr. Baum to speak in his own defense.   Admittedly, it is all-too-easy to criticize a law firm in the current economic climate that specializes in taking peoples' homes assembly-line style.  I will say that Baum's attorneys, whom I deal with almost every day, are in general professional and courteous, and do make a considerable effort to work out loan modifications in order to keep people in their homes.  That being said, a firm which files as many as 25,000 foreclosures a year, even with the best of intentions, is bound to make errors.  It is therefore crucial that homeowners who face foreclosure seek counsel to ensure that their rights are protected and they are given every opportunity to keep their homes off the auction block.

I would like to credit Rachel L. Arfa, Esq., for bringing this article to my attention.

NYLJ Firm Dominates Foreclosures but Faces Growing (00094141)

Dems: Obama Broke Pledge to Force Banks to Help Homeowners

by Paul Kiel and Olga Pierce ProPublica, Feb. 4, 2011

 

Before he took office, President Obama repeatedly promised voters and Democrats in Congress that he’d fight for changes to bankruptcy laws to help homeowners—a tough approach that would force banks to modify mortgages.
 

“I will change our bankruptcy laws to make it easier for families to stay in their homes,” Obama told supporters at a Colorado rally on September 16, 2008, the same day as the bailout of AIG.
 

Bankruptcy judges have long been barred from lowering mortgage payments on primary residences, though they could do it with nearly all other types of debt, even mortgages on vacation homes. Obama promised to change that, describing it as exactly “the kind of out-of-touch Washington loophole that makes no sense.”

But when it came time to fight for the measure, he didn’t show up. Some Democrats now say his administration actually undermined it behind the scenes.
 

“Their behavior did not well serve the country,” said Rep. Zoe Lofgren (D-CA), who led House negotiations to enact the change, known as “cramdown.” It was “extremely disappointing.”
 

Instead, the administration has relied on a voluntary program with few sticks, that simply offers banks incentives to modify mortgages. Known as Home Affordable Modification Program, or HAMP, the program was modeled after an industry plan. The administration also wrote it carefully to exclude millions of homeowners seen as undeserving.
 

The administration launched the program with a promise that it would help 3 million to 4 million homeowners avoid foreclosure, but it’s likely to fall far short of that goal. The Congressional Oversight Panel now estimates [1] fewer than 800,000 homeowners will ultimately get lasting mortgage modifications.
 

The number of modifications has remained dramatically low compared to the number of homeowners falling behind. (Source: LPS Applied Analytics and HOPE Now)
 

Over the past year, ProPublica has been exploring why the program has helped so few homeowners. Last week, we reported how the Treasury Department has allowed banks to break the program’s rules with few ramifications [2]. The series is based on newly released data, lobbying disclosures, and dozens of interviews with insiders, members of Congress and others.
 

As the foreclosure crisis grew through 2008, the large banks that handle most mortgages were slow to offer modifications to struggling homeowners. Homeowners were left to navigate an onerous process that usually did not actually lower their mortgage payment. More than half of modifications kept the homeowner’s payment the same or actually increased it.
 

Many in Congress and elsewhere thought that mortgage servicers, the largest of which are the four largest banks, would make modifications only if they were pressured to do so.
 

Servicers work as intermediaries, handling homeowners’ mortgage payments on behalf of investors who own the loans. Since servicers don’t own the vast majority of the loans they service, they don’t take the loss if a home goes to foreclosure, making them reluctant to make the investments necessary to fulfill their obligations to help homeowners.
 

To force those servicers to modify mortgages, advocates pushed for a change to bankruptcy law giving judges the power not just to change interest rates but to reduce the overall amount owed on the loan, something servicers are loath to do [3].
 

Congressional Democrats had long been pushing a bill to enact cramdown and were encouraged by the fact that Obama had supported it, both in the Senate and on the campaign trail.
 

They thought cramdowns would serve as a stick, pushing banks to make modifications on their own.

“That was always the thought,” said Rep. Brad Miller (D-NC), “that judicial modifications would make voluntary modifications work. There would be the consequence that if the lenders didn’t [modify the loan], it might be done to them.”
 

When Obama unveiled his proposal to stem foreclosures a month after taking office, cramdown was a part of the package [4]. But proponents say he’d already damaged cramdown’s chances of becoming law.
 

In the fall of 2008, Democrats saw a good opportunity to pass cramdown. The $700 billion TARP legislation was being considered, and lawmakers thought that with banks getting bailed out, the bill would be an ideal vehicle for also helping homeowners. But Obama, weeks away from his coming election, opposed that approach and instead pushed for a delay. He promised congressional Democrats that down the line he would “push hard to get cramdown into the law,” recalled Rep. Miller.
 

Four months later, the stimulus bill presented another potential vehicle for cramdown. But lawmakers say the White House again asked them to hold off, promising to push it later.
 

An attempt to include cramdown in a continuing resolution got the same response from the president.

“We would propose that this stuff be included and they kept punting,” said former Rep. Jim Marshall, a moderate Democrat from Georgia who had worked to sway other members of the moderate Blue Dog caucus [5] on the issue.
 

“We got the impression this was an issue [the White House] would not go to the mat for as they did with health care reform,” said Bill Hampel, chief economist for the Credit Union National Association, which opposed cramdown and participated in Senate negotiations on the issue.
 

Privately, administration officials were ambivalent about the idea. At a Democratic caucus meeting weeks before the House voted on a bill that included cramdown, Treasury Secretary Tim Geithner “was really dismissive as to the utility of it,” said Rep. Lofgren.
 

Larry Summers, then the president’s chief economic adviser, also expressed doubts in private meetings, she said. “He was not supportive of this.”
 

The White House and Summers did not respond to requests for comment.
 

Treasury staffers began conversations with congressional aides by saying the administration supported cramdown and would then “follow up with a whole bunch of reasons” why it wasn’t a good idea, said an aide to a senior Democratic senator.
 

Homeowners, Treasury staffers argued, would take advantage of bankruptcy to get help they didn’t need. Treasury also stressed the effects of cramdown on the nation’s biggest banks, which were still fragile. The banks’ books could take a beating if too many consumers lured into bankruptcy by cramdown also had their home equity loans and credit card debt written down.
 

While the Obama administration was silent, the banking industry had long been mobilizing massive opposition to the measure.
 

"Every now and again an issue comes along that we believe would so fundamentally undermine the nature of the financial system that we have to take major efforts to oppose, and this is one of them," Floyd Stoner, the head lobbyist for the American Bankers Association, told an industry magazine.
 

With big banks hugely unpopular, the key opponents of cramdown were the nation’s community bankers, who argued that the law would force them to raise mortgage rates to cover the potential losses. Democratic leaders offered to exempt the politically popular smaller banks from the cramdown law, but no deal was reached.
 

“When you’re dealing with something like the bankruptcy issue, where all lenders stand pretty much in the same shoes, it shouldn’t be a surprise when the smaller and larger banks find common cause,” said Steve Verdier, a lobbyist for the Independent Community Bankers Association.
 

The lobbying by the community banks and credit unions proved fatal to the measure, lawmakers say. “The community banks went bonkers on this issue,” said former Sen. Chris Dodd (D-CT). With their opposition, he said, “you don’t win much.”
 

“It was a pitched battle to get it out of the House,” said Rep. Miller, with “all the effort coming from the Democratic leadership, not the Obama administration.”
 

The measure faced stark conservative opposition. It was opposed by Republicans in Congress and earlier by the Bush administration, who argued that government interference to change mortgage contracts would reduce the security of all kinds of future contracts.
 

“It undermines the foundation of the capitalist economy,” said Phillip Swagel, a Bush Treasury official. “What separates us from [Russian Prime Minister Vladimir] Putin is not retroactively changing contracts.”

After narrowly passing the House, cramdown was defeated when 12 Democrats joined Republicans [6] to vote against it.
 

Many Democrats in Congress said they saw this as the death knell for the modification program, which would now have to rely on the cooperation of banks and other mortgage servicers to help homeowners.

“I never thought that it would work on a voluntary basis,” said Rep. Lofgren.
 

At the time that the new administration was frustrating proponents of cramdown, the administration was putting its energies into creating a voluntary program, turning to a plan already endorsed by the banking industry. Crafted in late 2008, the industry plan gave banks almost complete freedom in deciding which mortgages to modify and how.
 

The proposal was drafted by the Hope Now Alliance, a group billed as a broad coalition of the players affected by the mortgage crisis, including consumer groups, housing counselors, and banks. In fact, the Hope Now Alliance was headquartered in the offices of the Financial Services Roundtable, a powerful banking industry trade group. Hope Now’s lobbying disclosures were filed jointly with the Roundtable, and they show efforts to defeat cramdown and other mortgage bills supported by consumer groups.
 

The Hope Now plan aimed to boost the number of modifications by streamlining the process for calculating the new homeowner payments. In practice, because it was voluntary, it permitted servicers to continue offering few or unaffordable modifications.
 

The plan was replaced by the administration’s program after just a few months, but it proved influential. “The groundwork was already laid,” said Christine Eldarrat, an executive adviser at the Federal Housing Finance Agency, which regulates Fannie Mae and Freddie Mac. “Servicers were onboard, and we knew their feelings about certain guidelines.”
 

As an official Treasury Department account of its housing programs later put it, “The Obama Administration recognized the momentum in the private sector reflected in Hope Now’s efforts and sought to build upon it.” It makes no mention of cramdown as being needed to compel compliance.
 

Ultimately, HAMP kept the streamlined evaluation process of the Hope Now plan but made changes that would, in theory, push servicers to make more affordable modifications. If servicers chose to participate, they would receive incentive payments, up to $4,000, for each modification, and the private investors and lenders who owned the loans would also receive subsidies. In exchange, servicers would agree to follow rules for handling homeowner applications and make deeper cuts in mortgage payments. Servicers who chose not to participate could handle delinquent homeowners however they chose.
 

The program had to be voluntary, Treasury officials say, because the bailout bill did not contain the authority to compel banks to modify loans or follow any rules. A mandatory program requires congressional approval. The prospects for that were, and remain, dim, said Dodd. “Not even close.”
 

“The ideal would have been both [cramdown and HAMP],” said Rep. Barney Frank (D-MA), then the chairman of the House Financial Services Committee. But given the political constraints, HAMP on its own was “better than nothing.”
 

“We designed elegant programs that seemed to get all the incentives right to solve the problem,” said Karen Dynan, a former senior economist at the Federal Reserve. “What we learned is that the world is a really complicated place.”
 

The program was further limited by the administration’s concerns about using taxpayer dollars to help the wrong homeowners. The now-famous “rant” by a CNBC reporter [7], which fueled the creation of the Tea Party movement, was prompted by the idea that homeowners who had borrowed too much money might get help.
 

Candidate Obama had portrayed homeowners in a sympathetic light. But the president struck a cautious note when he unveiled the plan in February 2009 [8]. The program will “not rescue the unscrupulous or irresponsible by throwing good taxpayer money after bad loans,” said Obama. “It will not reward folks who bought homes they knew from the beginning they would never be able to afford.”
 

While the government had been relatively undiscriminating in its bank bailout [9], it would carefully vet homeowners seeking help. HAMP was written to exclude homeowners seen as undeserving, limiting the program’s reach to between 3 million and 4 million homes.
 

In order to prove their income was neither too high nor too low for the program, homeowners were asked to send in more documents than servicers had required previously, further taxing servicers’ limited capacity. As a result, some servicers say eligible homeowners have been kept out. According to one industry estimate [10], as many as 30 percent more homeowners would have received modifications without the additional demands for documentation.

 

A lot of the program is focused on “weeding out bad apples,” said Steven Horne, former Director of Servicing Risk Strategy at Fannie Mae. “Ninety percent is not focused on keeping more borrowers in their homes.”

Law Offices of Robert E. Brown, P.C. prevails against Samserv process server

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

In a consumer credit action, Nicholas M. Moccia, Esq., of counsel for the Law Offices of Robert E. Brown, P.C., prevailed against Samserv process server, Michael Mosquera, during a traverse hearing in the Supreme Court, Kings County.  The judicial hearing officer in attendance found that service of process had not been properly effectuated in an action brought by Plaintiff Household Finance Corporation III.  

Of particular note was an apparently false affidavit of service documenting an attempt at service on an unidentified female whose physical description was inconsistent with that of any member of the Defendant's household.  Specifically, the affidavit of service indicated that a female 14-20 years old with brown hair was served at the Defendant's household at 8:40 a.m. on Saturday morning.  The Defendant resides with his 40 year old wife who has black hair, his 8 year old son and 5 year old daughter.  The Samserv process server admitted to having his license revoked by the Department of Consumer Affairs and was unable to demonstrated that he was licensed, as required, at the time he purportedly  served the Defendant.    Interestingly, Samserv and Michael Mosquera are named defendants in a federal class action RICO suit wherein it is alleged that they engaged in unfair debt collection practices and "sewer service" at the expense of thousands of unwitting consumers.  See Sykes v. Mel Harris and Associates, 09 Civ. 8486; see also previous post with NYLJ article dated January 4, 2011, regarding the same.

Mel Harris and Associates and Samserv

January 4, 2011

NYLJ

Consumers charging a law firm and two other entities with a scheme to fraudulently obtain more than 100,000 default judgments in state court have prevailed in their bid to overcome a motion to dismiss in federal court.

Second Circuit Judge Denny Chin, a former Southern District judge sitting by designation, refused to dismiss claims alleging the use of "sewer service," a process involving the intentional failure to serve a summons and complaint followed by the filing of a phony affidavit attesting to service. The debtor, who has no knowledge of the process, fails to appear and defaults.

The term "sewer service" is named after the practice of throwing the summons and complaint into the sewer outside of a defendant's home and claiming to have effectuated service.

Plaintiffs charged the "massive scheme" was perpetrated by a debt-buying company, Leucadia National Corp.; law firm Mel S. Harris and Associates of 5 Hanover Square, which engaged in debt-collection litigation on behalf of Leucadia and its subsidiaries; and Samserv Inc., a Brooklyn-based process serving agency.

In Sykes v. Mel Harris and Associates, 09 Civ. 8486, consumers allege violations of the Fair Debt Collection Practices Act, 15 U.S.C. §1692, the Racketeer Influenced and Corrupt Practices Act, 18 U.S.C. §1961, New York General Business Law §349, and New York Judiciary Law §487.

The plaintiffs claim that the Harris law firm and Leucadia joined to purchase debt portfolios and begin debt collection en masse, filing 104,341 debt collection actions in New York City Civil Court between 2006 and 2008, and hiring Samserv to serve process. In all, the plaintiffs allege, more than 90 percent of the targets defaulted because they were not actually served.

Once a consumer fails to appear, Leucadia and Mel Harris provide proof of service, proof of additional mailed notice and an "affidavit of merit" swearing to their personal knowledge of facts substantiating their claims.

"Leucadia had limited proof to substantiate its claims because it typically did not purchase documentation of the consumers' indebtedness to the original creditors," Judge Chin said. "Nonetheless, the Mel Harris defendants' 'designated custodian of records,' Todd Fabacher, signed the vast majority of the approximately 40,000 affidavits of merit they filed each year."

Mr. Fabacher had to aver to personal knowledge that the debt was due and owing, Judge Chin said, and that means he would have had to issue 20 affidavits per hour or "one every three minutes," during the course of an eight-hour work day.

Judge Chin said that two of the eight named plaintiffs had statute of limitations problems, but the statute in their case was "equitably tolled" because the "defendants deprived them of notice of their debt collection actions."

The Mel Harris defendants, which included the law firm, its principals and affiliated individuals, had argued that the Fair Debt Collection Practices Act does not prohibit the filing of debt collection actions and affidavits of merit.

False Affidavits Claimed

But Judge Chin said the plaintiffs alleged far more than simply the claim that the law firm defendants lacked "physical evidence of the debt."

They also allege, he said, "that they knowingly authorized defendant Fabacher to file false affidavits of merit—misleading both the Civil Court and consumer-defendants—to secure default judgments that enabled them to freeze bank accounts, threaten to garnish wages, or pressure individuals into settlements."

Judge Chin dismissed racketeering claims against five individual process servers, Mel Harris manager David Waldman and two officers of Leucadia or its subsidiaries.

He also rejected the plaintiffs' claim that there were three distinct racketeering enterprises. Nonetheless, Judge Chin found that the complaint properly alleged a single racketeering enterprise.

The defendants had argued that the plaintiffs' pleadings fell short on the racketeering conspiracy claim, and moved for dismissal.

But Judge Chin said "the pleadings sufficiently allege substantive RICO violations and plausibly establish an agreement among the defendants."

He denied the Samserv defendants' motion to dismiss racketeering conspiracy claims with respect to all Samserv defendants, including five individual process servers, and all other defendants. The lone exception here was his dismissal of racketeering conspiracy claims against Mr. Waldman and the two Leucadia officers.

Judiciary Law Claim

Judge Chin then ruled that, under General Business Law §349, which governs deceptive acts or practices, the plaintiffs' claims were not moot even though the default judgments have been vacated by state courts or by agreement with the defendants.

Finally, he refused to dismiss the claim against the Mel Harris defendants under Judiciary Law §487, under which an attorney can be charged with a misdemeanor and be liable for damages when he engages in "any deceit, or collusion, or consents to any deceit or collusion, with intent to deceive the court or any party."

A status conference is scheduled for Jan. 11.

The plaintiffs are represented by Matthew D. Brinckerhoff and Elisha Jain of Emery Celli Brinckerhoff & Abady; Susan Shin, Claudia Wilner and Josh Zinner of the Neighborhood Economic Development Advocacy Project; and Carolyn E. Coffey, Andrew Goldberg and Anamaria Segura of MFY Legal Services Inc.

The Mel Harris defendants are represented by Brett A. Scher of Kaufman Dolowich Voluck & Gonzo.

The Leucadia defendants are represented by Lewis Goldfarb of McElroy, Deutsch, Mulvaney & Carpenter.

The Samserv defendants are represented by Jordan Sklar of Babchik & Young.

Massachusetts Court Voids Foreclosures, Citing Note Transfer Errors

The Massachusetts Supreme Court ruled Friday that U.S. Bank and Wells Fargo did not have the legal right to foreclose on two homes in the state, invalidating the lenders’ seizure of the properties and raising further questions about foreclosure documentation – this time related to the proper transfer of ownership on mortgages packaged as securities

 

Analysts warn that the decision could have far-reaching implications on loans that have already been liquidated, those in the process of foreclosure, and sales of foreclosed bank-owned homes.

In a unanimous 6-0 ruling, the Massachusetts Supreme Court upheld a lower court’s decision that U.S. Bank and Wells Fargo did not have the proper documentation to prove that they owned the mortgages at the time of foreclosure.

U.S. Bank and Wells Fargo were not the originators of the mortgages, but served as trustees of the two separate securitization trusts holding the loans. Interestingly enough, both foreclosures – U.S Bank’s on the mortgage of Antonio Ibanez, and Wells Fargo’s on the mortgage of Mark and Tammy LaRace – occurred on the same day, July 5, 2007. The lenders then turned around and bought each of the respective homes themselves at the foreclosure auction.

At the core of the issue is that the lenders both failed to ensure the assignment of the mortgage notes were executed and recorded in the registry of deeds before the dates of the foreclosure sales.

Justice Robert J. Cordy wrote in a court opinion, “…what is surprising about these cases is not the statement of principles…regarding title law and the law of foreclosure in Massachusetts, but rather the utter carelessness with which the plaintiff banks documented the titles to their assets.”

He went on to say, “There is no dispute that the mortgagors of the properties in question had defaulted on their obligations, and that the mortgaged properties were subject to foreclosure. Before commencing such an action, however, the holder of an assigned mortgage needs to take care to ensure that his legal paperwork is in order.”

The Supreme Court rejected the two banks’ requests to apply the ruling only to future cases, which could have implications for thousands of foreclosures in the state that have already been completed.

Wells Fargo said in a statement, “Wells Fargo believes the court’s ruling does not prevent foreclosures on loans in securitizations. The court simply set forth a standard legal process that mortgage servicers must follow in Massachusetts.”

The analysts at Barclays Capital described the case as “problematic for banks and non-agency investors, since it overturns completed foreclosure sales.”

They say the ruling could raise title issues in the minds of the potential buyers of REO properties, could further reduce prices on distressed sales, and slow foreclosure to REO rolls and liquidations.

File bankruptcy without a social security number?

By David Leibowitz, Esq.

Clients frequently ask whether they need a social security number to file bankruptcy.

The answer is no.

Let’s explain this.  Nothing in the bankruptcy code requires that you have a social security number to file bankruptcy. Yet, the official bankruptcy forms ask for your social security number. Don’t use somebody else’s number.  Don’t use a number you have made up.  Don’t use a number unless it was issued by the Social Security Administration.

If you don’t have a social security number, you still want your taxes addressed properly, so use an individual tax identification number or ITIN.  You get this from the Internal Revenue Service at www.irs.gov

When you file a bankruptcy petition, you’ll be asked to sign a declaration about your social security number. 

 You can indicate one of the following choices:

• You have one – so provide it
• You have an individual tax identification number – so provide that
• You don’t have one – if you don’t just say so.

The worst choice is to make a false statement about your social security number in your bankruptcy petition.  Never, under any circumstances, do that.

People worry that their immigration status will be harmed by bankruptcy.  That’s almost never the case.  On the other hand, a false statement about a social security number is a crime. That can only hurt your immigration status.

Robert Brown, Esq., featured in Staten Island Advance

Foreclosure expert Robert Brown, Esq., of the Law Offices of Robert E. Brown, P.C., opines that the apparent dip in foreclosure filings in the New York metro area for 2010 was more a function of stricter legal and procedural requirements rather than sign of economic improvement.  "I think in 2011 there's going to be a huge spike once [banks and their lawyers] get their arms around what they're going to do," said Robert E. Brown, a Staten Island and Manhattan-based foreclosure defense attorney. [read more]

Was last year's drop in Staten Island foreclosures just the calm before the storm?

By Frank Donnelly 

STATEN ISLAND, N.Y. -- Foreclosure filings on Staten Island last year dropped sharply from 2009, but defense lawyers and others say the numbers represent a misleading lull, as banks, under fire over the integrity of the foreclosure process, regroup.

 Staten Island Advance/ Bill LyonsNilda Martinez and Ruben Martinez stand in front of their home on Coursen Place in Clifton with their attorney Robert Brown, right. Brown was able to stop foreclosure and is countersuing the bank.

Many expect an avalanche of new filings this year to negate the 22 percent dip from the 2,361 foreclosure filings in 2009 to the 1,846 filings in 2010 recorded in the Richmond County Clerk's office.

"I think in 2011 there's going to be a huge spike once [banks and their lawyers] get their arms around what they're going to do," said Robert E. Brown, a New Dorp-based foreclosure defense attorney.

"People aren't paying their mortgages. There's just as many people going into default as did six months ago. It's just that the banks are being more careful in filing suit."

Valerie Wonica of Wonica Realtors & Appraisers agreed.

"I don't think it's a trend," she said of last year's decrease in filings. "I think a lot of it's in the pipeline. [Banks are] making sure all of their paperwork is being done correctly."

Brown said some banks stopped new foreclosure filings late last summer in response to probes by attorneys general around the country.

In numerous cases, there were questions about the actual ownership of the mortgage being foreclosed on, said Margaret Becker, lead attorney with the Homeowner Defense Project of Staten Island Legal Services in St. George.

"A huge, huge issue is who owns the mortgage, and can they prove who owns it," she said, noting that mortgage securities were often improperly bundled and passed from one bank and servicing company to another.

In other instances, affidavits attesting to the foreclosure documents' accuracy were signed by bank representatives who never looked at them, she said.

Brown said employees of some banks signed hundreds of affidavits each day without checking records, a process called "robo-signing."

STRICTER FILING PROCESS

In October, Jonathan Lippman, New York state's chief judge, put the onus on banks' lawyers to ensure proper foreclosure filings.

He required that attorneys sign an affidavit verifying the documents' accuracy. The lawyer must also name the person at the lending institution who supplied the information and certify his own examination of the papers.

"I think a lot of lawyers are skittish to do it," said Brown, adding that Staten Island judges are vigorously enforcing the mandate.

Foreclosure filings in the borough dipped to 78 in December, compared to 224 in December 2009. That represented a 65 percent decline. There were 81 foreclosure filings in November, down 61 percent from the 209 filings in November 2009.

According to published reports, foreclosure filings in mid-December also dropped sharply in counties that have high filing volumes, including Brooklyn, Queens and Suffolk County.

Brown believes that's just the calm before the storm.

"All they're doing is deferring the filings they'd normally be doing now," he said, adding that some discontinued foreclosures will be re-started.

While Brown expects foreclosure filings to jump this year, Ms. Becker said it's hard to say for sure.

Many foreclosures are the result of predatory lending practices, and those types of mortgages declined heavily in 2007 and 2008 with collapses in real-estate and financial markets, she said.

As a result, new mortgage applications slowed, and more current foreclosure filings are primarily due to homeowners' unemployment, said Ms. Becker.

The economy has shown some signs of life, yet the national unemployment rate remains at more than 9 percent -- up from about 5 percent in 2008.

Some experts, like Jonathan Peters, professor of finance at the College of Staten Island, say the country needs to create 8 million jobs just to match the ones it lost in the latest recession. That's not likely to happen soon, they say.

In the meantime, bankruptcy filings are up significantly on Staten Island.

HELP FOR HOMEOWNERS

Still, the news isn't all bad for beleaguered homeowners.

Eligible residents can obtain mortgage modifications through the federal Home Affordable Modification Program (HAMP). Ms. Becker said the process has "gotten better" and likely accounts for some of the dip in foreclosure filings, although some cases still drag on for months.

"It's positive any time foreclosures go down," said Sandy Krueger, chief executive officer of the Staten Island Board of Realtors (SIBOR). "Certainly, there's a lot of re-financing going on, so people had an opportunity to lower their payments and stay in their homes."

Brown, however, maintains HAMP isn't working as well as it should.

"I think in a lot of ways it's a terrible failure," he said. "I don't think the banks are efficiently set up to deal with the problem."

And if cash-strapped borough residents can't modify their mortgages, there's going to be even more pain in store this year, he said.

 

CitiMortgage, Inc. v. Angela Nunez: Judge Arthur Schack dismisses foreclosure action for bank’s failure to comply with new OCA Rule

By:   Nicholas M. Moccia, Esq.

        Law Office of Robert E. Brown, P.C.

Judge Arthur Schack of Kings County dismisses without prejudice a foreclosure action commenced by CitiMortgage, Inc. against Angela Nunez.    CitiMortgage’s counsel agreed to file an affirmation now required by the Chief Administrative Judge for foreclosure cases pursuant to the October 20, 2010 Administrative Order.  After giving CitiMortgage a brief adjournment to obtain the requisite affirmation, Judge Schack ordered a dismissal of the case and commented, “The Court does not work for CITI and cannot wait for CITI, a multi-billion dollar financial behemoth to get its “act” together.”  Judge Schack rejected CITI’s request for more time to comply, stating that “Continuing the instant action without moving for a judgment of foreclosure and sale is the judicial equivalent of a ‘timeout,’ and granting a ‘timeout’ to plaintiff CITI is a waste of judicial resources.  Therefore, the instant action is dismissed without prejudice.”

Judge Schack quotes Chief Judge Lippman in the conclusion of his decision which explains the policy underlying for the new OCA Order:

We cannot allow the courts in New York State to stand by idly and be party to what we now know is a deeply flawed process, especially when that process involves basic human needs — such as a family home — during this period of economic crisis. This new filing requirement will play a vital role in ensuring that the documents judges rely on will be thoroughly examined, accurate, and error-free before any judge is asked to take the drastic step of foreclosure. 

There are reports that the new OCA Order has resulted in a dramatic decrease in the volume of foreclosure actions commenced in the NYC Metro area.  The New York Law Journal reports that foreclosure filings dropped from about 800 in the week the OCA Order was announced to about 100 in the second week of December. The drop off is particularly sharp in counties that had high foreclosure volumes, including Suffolk County (from 274 to 6) and Brooklyn (from 53 to 2). Queens County filings were nearly cut in half -- from 88 to 48 -- but that 48 means Queens accounted for nearly half the filings in the week.

SEC Subpoenas Big Banks' Mortgage Securitization Documents

By: Carrie Bay

The Securities and Exchange Commission (SEC) is reportedly investigating lenders’ procedures for packaging home mortgages into securities bonds for sale to investors. 

Reuters, citing two sources familiar with the probe, says the SEC sent subpoenas last week to Bank of America, Citigroup, JPMorgan Chase, Goldman Sachs, and Wells Fargo.

The news agency says the subpoenas focus on the earliest stage of the mortgage securitization process, in particular, the role of master servicers who manage the selection and maintenance of the home loan pools that go into mortgage-backed bonds, and whether or not the loans were properly transferred to the trusts that issued the securities. 

Sources also told Reuters that the SEC is seeking information about the role banks had in mortgage securitization, and the role trustees that issued the mortgage-backed securities (MBS) had in monitoring the performance of the underlying loans.

Questions about what entities had the legal right to foreclose on mortgages packaged as securities, as well as whether or not transfers of ownership were properly recorded when the loans were sold to investors, emerged when the recent robo-signing scandal surfaced and scrutiny of servicers’ documentation procedures intensified.

 

 

Why New York Foreclosures Are Grinding to a Halt See full article from DailyFinance

By ABIGAIL FIELD

On Oct. 20, New York State Chief Judge Jonathan Lippman ended robo-signing in New York state foreclosures by requiring a special affirmation from the banks' attorneys. They now must swear that they know the banks' documents are true because they checked the paperwork.

At the time, attorneys in the state told me that they expected foreclosure filings by the big banks to halt, or nearly so, for up to several months. Eventually, they said, the banks and their attorneys would create a new process that allowed the attorneys to make the affirmations.

The first empirical evidence is in, and the rule has indeed choked off the filings.

Rapid Response to the New Rule

The New York Law Journal reported that foreclosure filings dropped from about 800 in the week the rule was announced to about 100 in the second week of December. The drop off is particularly sharp in counties that had high foreclosure volumes, including Suffolk County (from 274 to 6) and Brooklyn (from 53 to 2). Queens County filings were nearly cut in half -- from 88 to 48 -- but that 48 means Queens accounted for nearly half the filings in the week.

While the 100 cases in that week were the lowest since the rule started, the bulk of the drop happened quickly, as the New York Law Journal article shows in nifty chart measuring the plunge.

I spoke with three Suffolk County judges or their representatives, and they confirmed that hundreds of foreclosure filings have been withdrawn. Erin Michael Kay, secretary to Suffolk County Supreme Court Judge Jeffrey Arlen Spinner, says his caseload was down to 250 (it was much higher) due to the number of cases withdrawn pending the filing of the "Lippman affirmation." As of now, no such affirmations have been filed in the cases still pending before him.

Further Affirmations Required

Similarly, on Dec. 1, Suffolk County Supreme Court Judge Peter Fox Cohalan issued an order dismissing all 127 foreclosures pending before him because the banks' attorneys hadn't filed the affirmation. While all the cases can be refiled once the banks documents are in order, Cohalan's order requires the banks to go beyond the Lippman affirmation.

In his court at least, a bank employee is going to have to sign an affirmation even more detailed than what Judge Lippman ordered for lawyers. The bank affirmation comes from Cohalan's concern with robo-signing, explains Daniel J. Murphy, Judge Cohalan's chief law assistant.

Going forward, banks that want to foreclose in Cohalan's court will have to have "whoever is looking at the documents provide an affidavit that the amounts are correct, the mortgage is present, the assignments of mortgage have been correctly signed and dated and the paperwork before court is accurate." To prevent robo-signing of those affidavits, Cohalan also requires bank representatives to list every document they reviewed for the affidavit. That list must include the note, and they must explain who they are, how long they've been at the bank and what their educational background is.

Only Real Vice Presidents Can Sign

Murphy explains the purpose of that mini-resume is to make sure these employees understand what they're looking at and that any "person claiming he is the vice president of the bank is in fact a vice president of the bank." While that sounds silly -- why would someone sign a document with an inaccurate title -- the robo-signing scandal has exposed the practice of people signing as a vice president who have no link to the financial institution except for a resolution authorizing them to sign.

Kay says Judge Spinner hadn't decided whether to impose a similar rule in the cases he hears. Judge Patrick A. Sweeney, another Supreme Court Judge sitting in Suffolk County, tells me that since he's retiring in a couple of weeks he's not imposing any new rules now. But he suggests that banks will ultimately be able to get their acts together and file proper papers.

Judge Sweeney oversaw the part of the New York foreclosure process in which banks and homeowners try to negotiate a modification. He says he became frustrated with attorneys and witnesses who appeared for the foreclosing banks with no real knowledge of the case at hand. So, Sweeney started insisting that attorneys in charge of the foreclosure show up, instead of "per diem" attorneys hired to make the appearance who had no knowledge of the case.

Sweeney also requires the owner of the loan, not just the servicing bank, to show up, so someone with real decision power would be present. And, Sweeney notes, the banks usually complied. That's why he expects they'll find a way to enable their lawyers to file the Lippman affirmation, of which Sweeney says the lawyers "should have reviewed the papers all along, but with the volume they got sloppy."

Judge Cohalan isn't trying to stop banks from foreclosing with his new rule, notes Murphy:

"When the paperwork is correct, we'll have a foreclosure settlement conference at which point the judge will conference with both the attorney for the bank and the homeowner, and see if there is some way to save the person's home. And we'll see if the bank is being reasonable. But if the bank is being reasonable, the foreclosure will proceed.

If people can't afford their home, if they can't pay their bills, the foreclosure will happen. Homeowners have to have a plan and the ability to pay. The banks are entitled to be paid."

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.

HONORING VETERANS IN FORECLOSURE

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.

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."