Judge Schack Refuses to be Silenced!

Judge Schack Refuses to be Silenced!

"Once again the ultimate defender of home owner rights steps up and gives the banks the beat down they deserve. The Judge is really vocal on this one! We have heard banks argue many times that JP Morgan Chase OWNS all of the old Washington Mutual loans that went through the FDIC.  We never bought it.  Leave it to Judge Schack to unearth the fact that  Chase never owned the notes – it only owned the servicing rights. However,  for almost two (2) years Chase's attorney(s) stood tall and said YES, we own the note and the mortgage. Then, in late 2011 Chase's attorney finally admitted they DID NOT OWN THE NOTE OR THE MORTGAGE -they only had servicing rights! How about that! Not only a waste of the court's time (and that of the borrower) but also a clear violation of CPLR Rule 3408 (f) BAD FAITH. Imagine that, a bank negotiating in bad faith. Bottom line - Don't mess with Judge Schack. Oh, did I fail to mention that the initial deposit by the borrower of $490,000, Judge Schack released $55,617.11 back to the borrower and declared the mortgage satisfied. How about that for justice???"

- John Brancato, Loss Mitigator

Robert E. Brown, PC

[*1]

JP Morgan Chase Bank, Natl. Assn. v Butler

2013 NY Slip Op 51050(U)

Decided on July 5, 2013

Supreme Court, Kings County

Schack, J.

Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431.

This opinion is uncorrected and will not be published in the printed Official Reports.

Decided on July 5, 2013

Supreme Court, Kings County

JP Morgan Chase Bank, National Association, AS PURCHASER OF THE LOANS AND OTHER ASSETS OF WASHINGTON MUTUAL BANK, FORMERLY KNOWN AS WASHINGTON MUTUAL BANK, FA (THE "SAVINGS BANK") FROM THE FEDERAL DEPOSIT INSURANCE CORPORATION, ACTING AS RECEIVER FOR THE SAVINGS BANK AND PURSUANT TO ITS AUTHORITY UNDER THE FEDERAL INSURANCE ACT, 12 U.S.C. § 1821 (d) 3415 Vinson Drive Columbus, OH 43219, Plaintiff, against Frederick Butler et. al., Defendants.

Plaintiff, JP MORGAN CHASE BANK, NATIONAL ASSOCIATION, AS PURCHASER OF THE LOANS AND OTHER ASSETS OF WASHINGTON MUTUAL BANK, FORMERLY KNOWN AS WASHINGTON MUTUAL BANK, FA (THE "SAVINGS BANK") FROM THE FEDERAL DEPOSIT INSURANCE CORPORATION, ACTING AS RECEIVER FOR THE SAVINGS BANK AND PURSUANT TO ITS AUTHORITY UNDER THE FEDERAL INSURANCE ACT, 12 U.S.C. § 1821 (d) [CHASE], commenced the instant foreclosure action against defendant FREDERICK BUTLER [BUTLER], for the premises located at 325 Macon Street, Brooklyn, New York (Block 1847, Lot 49, County of Kings). After numerous CPLR Rule 3408 mandatory settlement conferences, first conducted by a Special Referee in the Foreclosure Settlement Part and then personally before me, the instant action for the foreclosure of the subject mortgage became moot, with the sale of the subject premises and the recording of a satisfaction by CHASE. The issue before the Court is the distribution of $490,000.00, deposited by defendant BUTLER with the Kings County Clerk, pursuant to my June 27, 2011 order authorizing the sale of the premises. This money is claimed by both CHASE and BUTLER. However, CHASE never owned the subject mortgage and note, despite asserting for almost two years that it did, and BUTLER never paid the balance due.

After numerous misrepresentations to the Court by various counsel for CHASE, it is clear that the actual BUTLER mortgage and note, given in 2007 by the defunct WASHINGTON MUTUAL BANK, FA [WAMU], was acquired in 2007 by the FEDERAL NATIONAL MORTGAGE ASSOCIATION [FANNIE MAE] from WAMU. Despite CHASE'S claims, before December 2011, to the Special Referee and the Court that it owned the subject mortgage and note, plaintiff CHASE only purchased the servicing rights to the subject mortgage and note from the FEDERAL DEPOSIT INSURANCE CORPORATION [FDIC] in September 2008, when WAMU was seized by the FDIC.

Plaintiff CHASE, as will be explained, never owned the subject BUTLER mortgage and note. Therefore, CHASE had no right to foreclose on the subject mortgage and note. Moreover, the continued subterfuge by CHASE and its counsel to the Special Referee and Court that it owned the subject BUTLER mortgage and note demonstrated "bad faith" in violation of CPLR Rule 3408 (f), which requires that "[b]oth the plaintiff and defendant shall negotiate in good faith to reach a mutually agreeable resolution, including a loan modification, if possible."

The Court has before it two orders to show cause by defendant BUTLER. The first order to show cause, dated October 26, 2011, seeks: the release, to defendant BUTLER, pursuant to [*2]CPLR Rule 2606, of the $490,000.00 deposited with the Kings County Clerk; reinstating defendant BUTLER's May 10, 2011 order to show cause which sought dismissal of the instant action with prejudice since plaintiff CHASE was not the holder of the subject promissory note; dismissing the action with prejudice, pursuant to CPLR Rule 3211 (a) (1), (3), (7) and (8); sanctioning plaintiff and plaintiff's counsel, pursuant to 22 NYCRR § 130-1.1; and, declaring the subject BUTLER note to be fully satisfied. Defendant BUTLER's second order to show cause, dated March 29, 2012, seeks leave to amend defendant's February 22, 2010-answer. Plaintiff CHASE, by an amended cross-motion, seeks the release, pursuant to CPLR Rule 2606, of the $490,000.00 deposited by defendant BUTLER with the Kings County Clerk, to plaintiff CHASE.

This case is troubling because various counsel for CHASE falsely claimed for almost two years, from January 20, 2010 until December 2011, that CHASE was the owner of the mortgage and note. Ultimately, in late 2011, after the subject mortgage had been satisfied, plaintiff CHASE's counsel admitted, in opposition to defendant BUTLER's October 26, 2011 order to show cause, that plaintiff CHASE did not own the BUTLER mortgage and note, but only the servicing rights to it. CHASE's counsel, in its opposition papers, submitted an affidavit, dated December 9, 2011, from Greg De Castro, "Director-Servicing Management" of FANNIE MAE, claiming that FANNIE MAE acquired from WAMU the BUTLER Mortgage and Note and "Chase is the servicer of the loan." Further, Mr. De Castro makes the ludicrous claim, in violation of New York law, that "[a]s Fannie Mae's servicer, CHASE has authority to commence a foreclosure action on the Loan and to receive and/or collect the proceeds from the sale of the Property."

For reasons to be explained, in applying the Court's equitable powers, the Court grants the October 26, 2011 order to show cause of defendant BUTLER to the extent that: the Kings County Clerk shall release to defendant BUTLER $55,617.11 from the $490,000.00 deposited with the Kings County Clerk; the Court's declares that the subject BUTLER Note is fully satisfied; and a hearing shall be conducted to (1) determine whether CHASE or FANNIE MAE is entitled to the balance of $434,382.89 deposited with the Kings County Clerk, pursuant to my order and, (2) to give CHASE and its counsel an opportunity to be heard as to whether or not they engaged in frivolous conduct, in violation of 22 NYCRR § 130-1.1, and if so should CHASE and/or its counsel pay any costs and sanctions. The March 29, 2012 order to show cause of defendant BUTLER is denied as moot. The amended cross-motion of plaintiff CHASE for the release of the $490,000.00 deposited with the Kings County Clerk, to plaintiff CHASE, is denied.

Background

Defendant's parents, William Butler and Louisa Butler, purchased the subject premises in 1966 (Reel 224, Page 471 of the New York City Register for Kings County). On July 12, 2002, the subject premises were deeded to defendant BUTLER by Louisa Butler, the surviving spouse of William Butler (Reel 5727, Page 1870 of the New York City Register for Kings County). Defendant BUTLER, on January 30, 2007, refinanced his home by executing a note and mortgage with WAMU for $450,000.00, recorded in the Office of the City Register of the City of New York, at CRFN 2007000123607, on March 7, 2007. Also, on January 30, 2007, Mr. Butler received a home equity line of credit with WAMU, recorded in the Office of the New York City Register, at CRFN 2007000123608, on March 7, 2007. [*3]

The Automated City Register Information System (ACRIS) does not show any assignments of the WAMU mortgage to FANNIE MAE or CHASE. However, a CHASE representative, Yvonne Brooks, "Home Loan Senior Research Specialist," in her December 8, 2011-affidavit attached to plaintiff's cross-motion, claims, in ¶ 6, that FANNIE MAE, in April 2007, purchased the BUTLER loan and WAMU retained the servicing rights. Exhibit D of the cross-motion contains a computer printout, dated April 20, 2007, showing this. Thus, plaintiff CHASE ultimately acknowledged that FANNIE MAE is the "Wizard of Oz," operating behind the curtain, and the real owner of the subject BUTLER note and mortgage.

In 2008 there was a dispute between WAMU and defendant BUTLER about a $10.00 late payment on BUTLER's home equity line of credit. According to defendant BUTLER, WAMU ultimately acknowledged its error and promised defendant BUTLER that the error would be promptly corrected. However, in the interim, WAMU had defendant BUTLER's home equity line of credit rescinded and injured his credit rating by reporting erroneous information to credit bureaus.

Then, on September 24, 2008, WAMU failed and its deposits and assets were seized by the federal government. On September 25, 2008, the Office of Thrift Supervision, a now-defunct federal agency, named the Federal Deposit Insurance 

Corp. (FDIC) as Receiver for WAMU. WAMU had not corrected its errors by re-instituting Butler's line of credit and correcting the erroneous reporting to credit bureaus before it was seized by the FDIC. CHASE, despite its assertions to the contrary for almost two years in the instant action, purchased the servicing rights to WAMU's mortgages and notes, not the actual mortgages and notes.

In a letter, dated October 10, 2008, CHASE advised BUTLER that WAMU was closed by the Office of Thrift Supervision and the FDIC was named Receiver. It then states that CHASE "acquired certain assets of Washington Mutual Bank from the FDIC, including the right to service your loan."

Plaintiff CHASE's counsel, then Steven J. Baum, P.C., commenced the instant foreclosure action on the subject premises, with the filing of a summons, complaint and notice of pendency on January 20, 2010. In the first paragraph of the complaint, Steven J. Baum, P.C., "alleges upon information and belief" that plaintiff CHASE is "the owner and holder of a note and mortgage being foreclosed."

After plaintiff CHASE filed a Request for Judicial Intervention, an initial CPLR Rule 3408 mandatory settlement conference was held on March 22, 2010, followed by at least nine additional conferences, before Special Referee Deborah Goldstein. Defendant BUTLER appeared pro se except for the last conference, when he was represented by Yolande I. Nicholson, Esq. At the conclusion of the April 7, 2011-settlement conference, Special Referee Goldstein ordered that "Plaintiff is directed to appear by Sarah Feor, the attorney of Baum with knowledge of the standing and litigation issues. Production of all title and ownership documentation, including the note and all assignments are required to be produced in accordance with [CPLR] 3408 (e) at the next conference on 4/11/11 and Sarah Feor, Esq. must appear with a Chase rep."

In her April 14, 2011 order, Special Referee Goldstein noted that plaintiff Chase and its counsel "failed to abide by my last directive requiring a Chase representative to be present with a [*4]copy of the Note. In addition, Plaintiff appeared by two different law firms, Baum and Cullen & Dykman LLP, and they cannot agree on who is authorized to appear and negotiate on behalf of Chase." Moreover, Special Referee Goldstein noted that the payoff letters provided by CHASE's counsel included attorneys' fees for settlement conferences. Therefore, Special Referee Goldstein required plaintiff to provide defense "with a clear payoff reflecting only principal and capitalized arrears on or before 4/21/11," and to "produce a copy of the Note and all documents reflecting the transfer of title from WAMU to Chase at the next conference on 5/2/11."

The next conference was held before me on May 2, 2011. Counsel were present from both Baum and Cullen & Dykman for plaintiff, as well as counsel for defendant. CHASE'S new counsel, Cullen & Dykman, finally presented to the Court for its inspection the original note to WAMU executed by BUTLER. Plaintiff's counsel from both Baum and Cullen & Dykman represented to the Court that CHASE was the holder of the note. However, the WAMU note was not endorsed by the FDIC as Receiver or any other entity and ACRIS does not show any assignment of the mortgage. The conference did not result in a settlement.

Several days later, defendant BUTLER received in his home mailbox from the Baum law firm a J. P. Morgan Payment History on his loan, No. 3012577379, for the subject premises. The computerized printout received by defendant BUTLER states that there was full settlement on "5/22/10" and that the loan was "REMOVED LOSS MITIGATION." The printout shows that on "5-22-10" a transaction for "$454,337.35" took place, of which "$434,382.89" is listed as "PRINCIPAL" and "$19,954.46" is listed as "INTEREST." This is no reference as to who paid the $454,337.35. Sarah Feor, Esq., then of the Baum firm, in her December 12, 2011 affirmation attached to plaintiff's cross-motion, states, in ¶ 28:

On or about April 29, 2011, our office [Baum's] received the

previously requested loan payment history from Plaintiff. As the borrower

was previously appearing pro se and had only recently retained counsel,

the payment history was inadvertently [emphasis added] sent to the

Defendant directly by a legal assistant from Plaintiff's counsel office.

The loan history was sent in an effort to comply with a prior directive of

Referee Goldstein.

Defendant's counsel, as a result of this payment history, moved by an order to show cause, dated May 10, 2011, for, among other things: dismissal of the instant action based upon plaintiff's lack of good faith in that "plaintiff had received payment on May 22, 2010 for the amount specified" as owing in the complaint [$434,382.89]; and, awarding costs and sanctions against plaintiff because "plaintiff withheld material information, including the May 22, 2010 payment from the Court." In the May 10, 2011 order to show cause, I directed plaintiff to provide the Court with detailed information as to "the entity or third party that made the payment to it on May 22, 2010 that is specified in the payment history it delivered to defendant on May 4, 2011 . . . which payment resulted in plaintiff marking its loan payment history records fully settled,' in its opposition papers to be filed and served by June 13, 2011." Plaintiff failed to comply with this order and at the June 27, 2011 hearing before me made an application to extend the time to identify the May 22, 2010 payor. I denied this request.

In my June 27, 2011 decision and order, I granted defendant BUTLER's May 10, 2011 order to show cause to the extent that he could close on a long-sale of the subject premises and deposit [*5]$490,000.00 of the proceeds with the Kings County Clerk, pursuant to the CPLR § 1006 (g). Further, I directed that a certified copy of this order be filed with the City Register and that at the closing on the sale of the subject premises the title company could accept no proceeds on behalf of plaintiff CHASE. The parties could then move for distribution of the $490,000.00 deposited with the Kings County Clerk, after the closing of title on the subject premises.

The closing on the sale of the subject premises, for $839,000.00, took place on July 18, 2011. $490,000.00, pursuant to my order, was deposited with Kings County Clerk on that day. As per my June 27, 2011 order, CHASE issued a satisfaction of the subject BUTLER mortgage on September 7, 2011 and recorded it on September 26, 2011, in the Office of the City Register of the City of New York, at CRFN 2011000340485

In her August 25, 2011 order, Special Referee Goldstein referred the instant action back "to Part 27 for all purposes when they [the parties] reached an impasse regarding production of the original note."

The parties then made the orders to show cause and cross-motion now pending before the Court. Cullen & Dykman, in its opposition to defendant's instant order to show cause and in support of its cross-motion for the release of the $490,000.00 deposited with the Kings County Clerk to plaintiff CHASE, asserts that CHASE is entitled to receive the funds, on page 2 of its December 9, 2011-memorandum of law because "Chase, the servicer of the loan made by Washington Mutual Bank, N.A. andnow owned by Fannie Mae, is the designated entity to collect and receive the pay-off funds to satisfy the mortgage on the Property." In his December 9, 2011-affidavit, Greg De Castro, "Director-Servicing Management," for FANNIE MAE states, in ¶ 3, that "Fannie Mae acquired from Washington Mutual Bank, F.A. . . . ownership of the loan executed by Frederick Butler in the principal amount of $450,000.00 which is secured by a lien on the Property . . . Chase is the servicer of the Loan." Further, in ¶ 5, Mr. De Castro claims that "[a]s Fannie Mae's servicer, CHASE has authority to commence a foreclosure action on the Loan and to receive and/or collect the proceeds from the sale."CHASE, Mr. De Castro and FANNIE MAE must be unaware that in New York "[t]o establish a prima facie case in an action to foreclose a mortgage, the plaintiff must establish the existence of the mortgage and mortgage note, ownership of the mortgage, and the defendant's default in payment [emphasis added]." (Campaign v Barba, 23 AD3d 327 [2d Dept 2005]). Further, "foreclosure of a mortgage may not be brought by one who has no title to it." (Kluge v Fugazy, 145 AD2d 537, 538 [2d Dept 1988]). Moreover, "[p]laintiff's attempt to foreclose upon a mortgage in which he had no legal or equitable interest was without foundation in law or fact." (Katz v East-Ville Realty Co., 249 AD2d 243 [1d Dept 1998]). It is clear, that after almost two years of its bad faith assertions to the contrary, CHASE never owned the subject mortgage and note. Therefore, CHASE lacks authority to be the plaintiff in the instant action. "The foreclosure of a mortgage cannot be pursued by one who has no demonstrated right to the debt." (Bank of New York v Silverberg, 86 AD3d 274, 280 [2d Dept 2011]).

Yvonne Brooks, CHASE's Home Loan Senior Research Specialist, in her December 8, 2011-affidavit, admits, in ¶ 6, that FANNIE MAE, in April 2007 "purchased the loan from Washington Mutual . . . However, Washington Mutual retained the servicing rights." Then, Ms. Brooks, in ¶ 7 of her affidavit, states that on September 25, 2008 WAMU was placed into [*6]receivership by the FDIC and CHASE purchased certain assets, "including mortgage servicing rights." She then states, in ¶ 8, "[d]ue to the Chase's purchase of Washington Mutual's servicing rights, Chase took over the servicing obligations of the Loan."

Ms. Brooks, in ¶ 13 of her affidavit, alleges that the Fannie Mae 2006 Servicing Guide, VIII, 102, "Initiation of Foreclosure Proceedings [exhibit H of cross-motion]," allows CHASE to be the plaintiff in the instant action. A reading of this FANNIE MAE regulation demonstrates the lengths to which FANNIE MAE evaded its responsibility to be the real plaintiff in interest in the instant action or other foreclosure proceedings. It demonstrates the "unclean hands" of FANNIE MAE and its servicer, CHASE. It is FANNIE MAE'S roadmap of how to inveigle and deceive a court. This FANNIE MAE regulation states, in relevant part:

Fannie Mae is at all times the owner of the mortgage note, whether

the note is in our portfolio or whether we own it as trustee for an MBS trust.

In addition, Fannie Mae at all times has possession of and is the holder of

the mortgage note, except in the limited circumstances expressly described

below. We may have direct possession of the note or a custodian may have custody of the note for us. If we possess the note through a document

custodian, the document custodian has custody of the note for our exclusive

use and benefit.

In most cases, a servicer will have a copy of the mortgage note that

it can use to begin the foreclosure process. However, some jurisdictions

require that the servicer produce the original note before or shortly after

initiating foreclosure proceedings. If our possession of the note is direct

because the custody documents are at our document delivery facility, to

obtain the note or any other custody documents that are needed, the servicer

should submit a request to our Custody Department . . . the servicer should

specify whether the original note is required or whether the request if for

a copy.

In some jurisdictions, only the "holder" of the note may conduct a

foreclosure. In any jurisdiction in which our servicer must be the holder

of the note in order to conduct the foreclosure, we temporarily transfer

our possession of the note to our servicer, effective automatically and

immediately before commencement of the foreclosure proceeding. When

we transfer our possession, our servicer becomes the holder of the note

during the foreclosure proceedings. If the borrower reinstates the loan or

the servicer ceases to service the loan for Fannie Mae for any reason, then

possession of the note at that time automatically reverts to Fannie Mae and

the note must be returned to the document custodian. At that time, Fannie

Mae also resumes being the holder, just as it was before the foreclosure

proceedings. The transfer of our possession, and any reversion of

possession to us are evidenced and memorialized by our publication of

this paragraph. This Guide provision may be relied upon by a court to

establish that the servicer conducting the foreclosure proceeding has

possession, and is the holder, of the note during the foreclosure proceeding, [*7]

unless the court is otherwise notified by Fannie Mae. [Emphasis added]."

Thus, it appears to the Court that the delay by CHASE in producing the subject BUTLER Note was to give Baum and/or Cullen & Dykman ample time to temporarily borrow the BUTLER Note from FANNIE MAE for its May 2, 2011 presentation to the Court. Despite its December 2011 admission that FANNIE MAE owned the subject BUTLER mortgage and note, CHASE, prior to this, continuously presented its ownership subterfuge to Special Referee Goldstein and the Court. The Court cannot countenance the deceptive behavior of CHASE, the alleged owner of the subject BUTLER mortgage and note, its counsel, and FANNIE MAE, the real owner of the subject BUTLER mortgage and note. FANNIE MAE's Servicing Guide, with its deceptive practices to fool courts, does not supercede New York law.

Further, Ms. Brooks explains the May 22, 2010 transaction, in ¶ 14 of her affidavit, as "an automatic cashless Fannie Mae transaction . . . which reclassifed the loan from being a schedule/schedule loan to an actual actual/actual remittance loan mortgage. See Fannie Mae 2006 Servicing Guide I, 208.06: Reclassification of Certain MBS Pool Mortgages attached hereto as Exhibit "H [sic]." This regulation, in its version of Orwellian Nineteen Eighty-Four "Newspeak," states:

Rather than requiring the servicer to repurchase certain delinquent

MBS pool mortgages that are serviced under the special servicing option -

those for which we have the entire foreclosure loss risk and those for

which Fannie Mae and the servicer share the foreclosure loss risk with

Fannie Mae having the responsibility for marketing the acquired property -

we will automatically reclassify a mortgage that satisfies our selection

criteria as an "actual/actual" remittance type portfolio mortgage. Generally,

we will select mortgages that have at least three payments past due for

reclassification in the month when the fourth payment is delinquent. 

Ms. Brooks, based upon the reclassification of the Butler mortgage, alleges in ¶ 16 of her affidavit, that the BUTLER loan "reclassification presents as FULL SETTLEMENT 5/22/10' on defendant's loan history and does not represent a payment [exhibit G of cross-motion]."

Discussion

In analyzing the instant orders to show cause and cross-motion, the Court is cognizant that, with the sale of the subject premises and the $490,000.00 of the proceeds deposited with the Kings County Clerk, the instant BUTLER foreclosure action is now moot. However, the Court must deal with the aftermath, namely: the issue of bad faith by CHASE, its counsel and FANNIE Mae; the distribution of the $490,000.00 on deposit with the Kings County Clerk; and, whether the bad faith by CHASE and its counsel is frivolous conduct.

"A foreclosure action is equitable in nature and triggers the equitable powers of the court (see Notey v Darien Constr. Corp., 41 NY2d 1055, 1055-1056 [1977]). Once equity is invoked, the court's power is as broad as equity and justice require.' (Norstar Bank v Morabito, 201 AD2d 545 [2d Dept 1994])." (Mortgage Elec. Registration Sys., Inc. v Horkan (68 AD3d 948 [2d Dept 2009]). (See Jamaica Sav. Bank v M.S. Inv. Co., 274 NY 215 [1937]). "Since it is the plaintiff lender who seeks equitable relief from this court, the onus is upon the lender to satisfy the requisites of equity and come to this court with clean hands.' (Junkersfeld v Bank of Manhattan Co., 250 App Div 646 [ld Dept 1937].)" (M & [*8]T Mtge. Corp. v Foy, 20 Misc 3d 274, fn 1 [Sup Ct, Kings County 2008]). (See Wells Fargo Bank, N.A. v Hughes, 27 Misc 3d 628, 634 [Sup Ct, Erie County 2010]). 

A principal of equity is that "[a] wrongdoer should not be permitted to profit from his or her wrong (see Kirschner v KMPG LLP, 15 NY3d 446, 464 [2010]; Campbell v Thomas, 73 AD3d 103, 116-117 [2d Dept 2010]; Beaumont v American Can Co., 215 AD3d 249 [1d Dept 1995])." (Norwest Bank Minn. N.A. v E.M.V. Realty Corp., 84 AD3d 835, 836 [2d Dept 2012]).

CHASE, in the instant action, committed a fraud upon the Court by claiming to be the plaintiff. FANNIE MAE should have been the plaintiff as the owner of the note and mortgage when the BUTLER foreclosure action commenced. Thus, CHASE went to numerous CPLR Rule 3408 mandatory settlement conferences with unclean hands, falsely alleging that it was the plaintiff owner of the BUTLER mortgage and note. Recently, the Court in Wells Fargo Bank, N.A. v Meyers (___ AD3d ___, 2013 NY Slip Op 03085 at

* 1-2 [2d Dept, May 1, 2013]) instructed:

CPLR 3408 provides for mandatory settlement conferences in

certain residential foreclosure actions (see former CPLR 3408). In 2009,

shortly after the passage of the Subprime Residential Loan and Foreclosure

Laws, the Legislature amended a number of the recently enacted statutes,

including CPLR 3408 (see L 2009, ch 507). The purposes of the

amendments were to allow more homeowners at risk of foreclosure

to benefit from consumer protection laws and opportunities to prevent

foreclosure; to establish certain requirements for plaintiffs in foreclosure

actions obligating them to maintain the subject properties; to establish

protections for tenants living in foreclosed properties; and to strengthen

consumer protections aimed at defeating "rescue scams" (Governor's

Mem, Bill Jacket, L 2009, ch 507, at 5). The 2009 amendments include

a provision requiring that "[b]oth the plaintiff and defendant shall

negotiate in good faith to reach a mutually agreeable resolution,

including a loan modification, if possible" (CPLR 3408 [f]).

While CPLR 3408 (f) requires the parties at a settlement

conference to negotiate in good faith, that section "does not set forth

any specific remedy for a party's failure" to do so (Hon. Mark C.

Dillon, The Newly-Enacted CPLR 3408 for Easing the Mortgage

Foreclosure Crisis: Very Good Steps, but not Legislatively Perfect,

30 Pace L. Rev 855 at 875 [2010]).

The Chief Administrator for the Courts promulgated 22 NYCRR 202.12-a, the rules for CPLR Rule 3408 mandatory settlement conferences. 22 NYCRR 202.12-a (c) (4) provides that: [*9]

The parties shall engage in settlement discussions in good faith

to reach a mutually agreeable resolution, including a loan modification

if possible. The court shall ensure that each party fulfills its obligation

to negotiate in good faith and shall see that conferences not be unduly

delayed or subject to willful dilatory tactics so that the rights of both

parties may be adjudicated in a timely manner.

In HSBC Bank, USA v McKenna (37 Misc 2d 885, 905-906 [Sup Ct, Kings County 2012]), the Court provides a lengthy discussion as to the meaning of "good faith," finding:

Generally, "good faith" under New York law is a subjective

concept, "necessitat[ing] examination of a state of mind." (See Credit

Suisse First Boston v Utrecht-America Finance Co., 80 AD3d 485,

487 [1d Dept 2011], quoting Coan v Estate of Chapin, 156 AD2d 318,

319 [1d Dept 1989]). "Good Faith" is an intangible and abstract quality

with no technical meaning or statutory definition." (Adler v 720 Park

Ave. Corp., 87 AD2d 514, 515 [1d Dept 1982], quoting Doyle v

Gordon, 158 NYS 2d 248, 249 [Sup Ct, New York County 1954]).

"It encompasses, among other things, an honest belief, the absence of

malice and the absence of a design to defraud or to seek an unconscionable advantage." (Doyle v Gordon, 158 NYS2d at 259-160; see also UCC

1-201 [19] ["Good Faith' means honesty in fact in the conduct or

transaction concerned."] "Good faith is . . . lacking when there is a

failure to deal honestly, fairly, and openly." (Matter of CIT Group/

Commerical Servc., Inc. v 160-09 Jamaica Ave. Ltd. Partnership,

25 AD3d 301, 303 [1d Dept 2006] [internal quotation marks and

citation omitted]; see also Southern Indus. v Jeremias, 166 AD2d 178,

183 [2d Dept 1978]). "In New York, as elsewhere, good faith'

connotes an actual state of mind—a state of mind motivated by

proper motive." Plotti v Fleming, 277 Fed 864, 868 [2d Cir 1960]).

In the context of negotiations, the absence of agreement does not itself

establish the lack of good faith. (See Brookfield Indus. v Goldman,

87 AD2d, 752, 753 [1d Dept 1982]). [*10]Usually, a finding of lack of good faith in CPLR Rule 3408 settlement conferences has been determined from the conduct of the mortgagee/plaintiff. "Conduct such as providing conflicting information, refusal to honor agreements, unexcused delay, unexplained charges, and misrepresentations have been held to constitute "bad faith." (Flagstar Bank, FSB v Walker, 37 Misc 3d 312, 318 [Sup Ct, Kings County 2012]). (See Wells Fargo Bank, N.A. v Ruggiero, 39 Misc 3d 1233 (A), at * 6 [Sup Ct, Kings County 2013]; One W. Bank, FSB v Greenhut, 36 Misc 3d 1205 (A), at * 4-5 [Sup Ct, Westchester County 2012]). In the instant action, it is obvious that plaintiff CHASE and its counsel provided conflicting information, unexplained charges and misrepresentations. Clearly, CHASE and its counsel engaged in bad faith, with its "failure to deal honestly, fairly, and openly."

The Appellate Division, Second Department, in Wells Fargo Bank, N.A. v Meyers at * 7, discussed the remedies that courts may use if foreclosure plaintiffs violated their obligation, pursuant to CPLR Rule 3408 (f), to negotiate in good faith. The Court observed:

In the absence of specific guidance from the Legislature or the

Chief Administrator of the Courts as to the appropriate sanctions or

remedies to be employed where a party is found to have violated its

obligation to negotiate in good faith pursuant to CPLR 3408 (f), the

courts have resorted to a variety of alternatives in an effort to enforce

the statutory mandate to negotiate in good faith. For example, upon

finding that foreclosing plaintiffs have failed to negotiate in good faith,

courts have barred them from collecting interest, legal fees, and expenses

(see Bank of Am., N.A. v Lucido, 35 Misc 3d 1211 [A] [Sup Ct., Suffolk

County 2012]; BAC Home Loans v Westervelt, 29 Misc 3d 1224 [A]

[Sup Ct., Dutchess County 2010]; . . . Wells Fargo Bank v Hughes,

27 Misc 3d 628 [Sup Ct., Erie County 2010] . . . [and] imposed a

monetary sanction pursuant to 22 NYCRR part 130 (see Deutsche

Bank Trust Co. of Am. v Davis, 32 Misc 3d 1210 [A] [Sup Ct, Kings

County 2011]; cf. BAC Home Loans v Westervelt, 29 Misc 3d 1224. 

Further, in Wells Fargo Bank, N.A. v Meyers at * 9, the Court instructed:

In the absence of a specifically authorized sanction or remedy in the

statutory scheme, the courts must employ appropriate, permissible,

and authorized remedies, tailored to the circumstances of each given

case. What may prove appropriate recourse in one case may be

inappropriate or unauthorized under the circumstances presented in

another. Accordingly, in the absence of further guidance from the

Legislature or the Chief Administrator of the Courts, the courts must

prudently and carefully select among available and authorized remedies,tailoring their application to the circumstances of the case. [*11]

Therefore, in the instant action, the Court has tailored an equitable remedy to the particular circumstances of the BUTLER foreclosure action, that will determine how the $490,000.00 on deposit with the Kings County Clerk will be distributed. According to the CHASE or FANNIE MAE computerized printout sent to defendant BUTLER, in May 2011, there was full settlement of the BUTLER loan on "5/22/10," with the loan "REMOVED LOSS MITIGATION." The printout shows that on "5-22-10" a transaction for "$454,337.35" took place, of which "$434,382.89" is listed as "PRINCIPAL" and "$19,954.46" is listed as "INTEREST." This is no reference as to who paid the $454,337.35. Therefore, a hearing shall be held to determine whether CHASE, FANNIE MAE or any other entity is entitled to the $434,382.89 settlement of the BUTLER loan. Since CHASE failed to negotiate in good faith, not admitting until December 2011 that FANNIE MAE was the real plaintiff, and numerous CPLR Rule 3408 mandatory settlement conferences were conducted before Special Referee Goldstein and myself, CHASE is barred from collecting interest, legal fees, and expenses after May 22, 2010. (See Wells Fargo Bank, N.A. v Meyers at * 7; Bank of Am., N.A. v Lucido, supra; BAC Home Loans v Westervelt, supra; Wells Fargo Bank v Hughes, supra.). $55,617.11, the balance of the $490,000.00 on deposit with the Kings County Clerk, will be distributed to defendant BUTLER. This remedy is necessitated by the bad faith of CHASE in this action. This Court will follow the observations of the Court in Bank of Am., N.A. v Lucido, at * 6, that:

equity will not intervene on behalf of one who acts in an unjust,

unconscionable or egregious manner, York v Searles, 97 AD331

[2d Dept 1907], aff'd 189 NY 573 [1907]). This Court cannot, and will

not, countenance a lack of good faith in the proceedings that are brought

before it, especially where blatant and repeated misrepresentations of

fact are advanced, neither will it permit equitable relief to lie in favor

of one who so flagrantly demonstrates such obvious bad faith. Further, the Court needs to determine if the bad faith of CHASE and its counsel, Cullen & Dykman is frivolous conduct. 22 NYCRR § 130-1.1 (a) states that "the Court, in its discretion may impose financial sanctions upon any party or attorney in a civil action or proceeding who engages in frivolous conduct as defined in this Part, which shall be payable as provided in section 130-1.3 of this Subpart." Further, it states in 22 NYCRR § 130-1.1 (b), that "sanctions may be imposed upon any attorney appearing in the action or upon a partnership, firm or corporation with which the attorney is associated." 

22 NYCRR § 130-1.1(c) states that:

For purposes of this part, conduct is frivolous if:

(1) it is completely without merit in law and cannot be supported

by a reasonable argument for an extension, modification or

reversal of existing law; 

(2) it is undertaken primarily to delay or prolong the resolution of

the litigation, or to harass or maliciously injure another; or 

(3) it asserts material factual statements that are false. 

It is clear that CHASE's representations that it was the plaintiff in the instant action "is [*12]completely without merit in law" and "asserts material factual statements that are false."

Several years before the drafting and implementation of the Part 130 Rules for costs and sanctions, the Court of Appeals (A.G. Ship Maintenance Corp. v Lezak, 69 NY2d 1, 6 [1986]) observed that "frivolous litigation is so serious a problem affecting the proper administration of justice, the courts may proscribe such conduct and impose sanctions in this exercise of their rule-making powers, in the absence of legislation to the contrary (see NY Const, art VI, § 30, Judiciary Law § 211 [1] [b])."

Part 130 Rules were subsequently created, effective January 1, 1989, to give the courts an additional remedy to deal with frivolous conduct, along with Appellate Division disciplinary case law against attorneys for abuse of process or malicious prosecution. The Court, in Gordon v Marrone (202 AD2d 104, 110 [2d Dept 1994], lv denied 84 NY2d 813 [1995]), instructed that: 

Conduct is frivolous and can be sanctioned under the court rule if 

it is completely without merit . . . and cannot be supported by a 

reasonable argument for an extension, modification or reversal of 

existing law; or . . . it is undertaken primarily to delay or prolong 

the resolution of the litigation, or to harass or maliciously injure 

another" (22 NYCRR 130-1.1[c] [1], [2] . . . ).

In Levy v Carol Management Corporation (260 AD2d 27, 33 [1st Dept 1999]) the Court stated that in determining if sanctions are appropriate the Court must look at the broad pattern of conduct by the offending attorneys or parties. Further, "22 NYCRR 130-1.1 allows us to exercise our discretion to impose costs and sanctions on an errant party . . ." Levy at 34, held that "[s]anctions are retributive, in that they punish past conduct. They also are goal oriented, in that they are useful in deterring future frivolous conduct not only by the particular parties, but also by the Bar at large."

The Court, in Kernisan, M.D. v Taylor (171 AD2d 869 [2d Dept 1991]), noted that the intent of the Part 130 Rules "is to prevent the waste of judicial resources and to deter vexatious litigation and dilatory or malicious litigation tactics (cf. Minister, Elders & Deacons of Refm. Prot. Church of City of New York v 198 Broadway, 76 NY2d 411; see Steiner v Bonhamer, 146 Misc 2d 10) [Emphasis added]." The instant action, with CHASE, the improper plaintiff, engaging in bad faith is "a waste of judicial resources." 

This conduct, as noted in Levy, must be deterred. In Weinstock v Weinstock (253 AD2d 873 [2d Dept 1998]), the Court ordered the maximum sanction of $10,000.00 for an attorney who pursued an appeal "completely without merit," and holding, at 874, that "[w]e therefore award the maximum authorized amount as a sanction for this conduct (see, 22 NYCRR 130-1.1) calling to mind that frivolous litigation causes a substantial waste of judicial resources to the detriment of those litigants who come to the Court with real grievances [Emphasis added]." Citing Weinstock, the Appellate Division, Second Department, in Bernadette Panzella, P.C. v De Santis (36 AD3d 734 [2d Dept 2007]), affirmed a Supreme Court, Richmond County $2,500.00 sanction, at 736, as "appropriate in view of the plaintiff's waste of judicial resources [Emphasis added]." [*13]

In Navin v Mosquera (30 AD3d 883 [3d Dept 2006]), the Court instructed that when considering if specific conduct is sanctionable as frivolous, "courts are required to examine whether or not the conduct was continued when its lack of legal or factual basis was apparent [or] should have been apparent' (22 NYCRR 130-1.1 [c])." The Court, in Sakow ex rel. Columbia Bagel, Inc. v Columbia Bagel, Inc. (6 Misc 3d 939, 943 [Sup Ct, New York County 2004]), held that "[i]n assessing whether to award sanctions, the Court must consider whether the attorney adhered to the standards of a reasonable attorney (Principe v Assay Partners, 154 Misc 2d 702 [Sup Ct, NY County 1992])."

Therefore, the Court will examine the conduct of plaintiff CHASE and plaintiff's counsel, in a hearing, pursuant to 22 NYCRR § 130-1.1, to determine if plaintiff CHASE and plaintiff's present counsel, Jennean Rogers, Esq. and her firm, Cullen & Dykman LLP engaged in frivolous conduct, and to allow plaintiff CHASE and plaintiff's present counsel, Jennean Rogers, Esq. and her firm, Cullen & Dykman LLP a reasonable opportunity to be heard.

Conclusion

Accordingly, it is

ORDERED, that the order to show cause of defendant FREDERICK BUTLER, dated October 26, 2011, is granted to the extent that: the Kings County Clerk shall release to defendant FREDERICK BUTLER $55,617.11, made payable to him, from the $490,000.00 deposited with the Kings County Clerk; the Court's declares that the subject BUTLER Note is fully satisfied; and a hearing shall be conducted to (1) determine whether plaintiff JP MORGAN CHASE BANK, NATIONAL ASSOCIATION, AS PURCHASER OF THE LOANS AND OTHER ASSETS OF WASHINGTON MUTUAL BANK, FORMERLY KNOWN AS WASHINGTON MUTUAL BANK, FA (THE "SAVINGS BANK") FROM THE FEDERAL DEPOSIT INSURANCE CORPORATION, ACTING AS RECEIVER FOR THE SAVINGS BANK AND PURSUANT TO ITS AUTHORITY UNDER THE FEDERAL INSURANCE ACT, 12 

U.S.C. § 1821 (d) or the FEDERAL NATIONAL MORTGAGE ASSOCIATION is entitled to the balance of $434,382.89 deposited with the Kings County Clerk, pursuant to my June 27, 2011 decision and order and, (2) to give plaintiff JP MORGAN CHASE BANK, NATIONAL ASSOCIATION, AS PURCHASER OF THE LOANS AND OTHER ASSETS OF WASHINGTON MUTUAL BANK, FORMERLY KNOWN AS WASHINGTON MUTUAL BANK, FA (THE "SAVINGS BANK") FROM THE FEDERAL DEPOSIT INSURANCE CORPORATION, ACTING AS RECEIVER FOR THE SAVINGS BANK AND PURSUANT TO ITS AUTHORITY UNDER THE FEDERAL INSURANCE ACT, 12 U.S.C. § 1821 (d) and its present counsel, Jennean Rogers, Esq. and her firm, CULLEN & DYKMAN LLP an opportunity to be heard as to whether or not they engaged in frivolous conduct, in violation of 22 NYCRR § 130-1.1, and if so should plaintiff JP MORGAN CHASE BANK, NATIONAL ASSOCIATION, AS PURCHASER OF THE LOANS AND OTHER ASSETS OF WASHINGTON MUTUAL BANK, FORMERLY KNOWN AS WASHINGTON MUTUAL BANK, FA (THE "SAVINGS BANK") FROM THE FEDERAL DEPOSIT INSURANCE CORPORATION, ACTING AS RECEIVER FOR THE SAVINGS BANK AND PURSUANT TO ITS AUTHORITY UNDER THE FEDERAL INSURANCE ACT, 12 U.S.C. § 1821 (d) [*14]and/or its present counsel, Jennean Rogers, Esq. and her firm, CULLEN & DYKMAN LLP pay any costs and sanctions; and it is further

ORDERED, that the order to show cause of defendant FREDERICK BUTLER, dated March 29, 2012, is denied as moot; and it is further

ORDERED, that the amended cross-motion of plaintiff JP MORGAN CHASE BANK, NATIONAL ASSOCIATION, AS PURCHASER OF THE LOANS AND OTHER ASSETS OF WASHINGTON MUTUAL BANK, FORMERLY KNOWN AS WASHINGTON MUTUAL BANK, FA (THE "SAVINGS BANK") FROM THE FEDERAL DEPOSIT INSURANCE CORPORATION, ACTING AS RECEIVER FOR THE SAVINGS BANK AND PURSUANT TO ITS AUTHORITY UNDER THE FEDERAL INSURANCE ACT, 12 U.S.C. § 1821 (d), for the release of the $490,000.00 deposited with the Kings County Clerk, to plaintiff JP MORGAN CHASE BANK, NATIONAL ASSOCIATION, AS PURCHASER OF THE LOANS AND OTHER ASSETS OF WASHINGTON MUTUAL BANK, FORMERLY KNOWN AS WASHINGTON MUTUAL BANK, FA (THE "SAVINGS BANK") FROM THE FEDERAL DEPOSIT INSURANCE CORPORATION, ACTING AS RECEIVER FOR THE SAVINGS BANK AND PURSUANT TO ITS AUTHORITY UNDER THE FEDERAL INSURANCE ACT, 12 U.S.C. § 1821 (d), is denied; and it is further

ORDERED, that: (1) to determine the distribution of the $434,832.89 balance on deposit with the Kings County Clerk; and (2) it appearing that plaintiff JP MORGAN CHASE BANK, NATIONAL ASSOCIATION, AS PURCHASER OF THE LOANS AND OTHER ASSETS OF WASHINGTON MUTUAL BANK, FORMERLY KNOWN AS WASHINGTON MUTUAL BANK, FA (THE "SAVINGS BANK") FROM THE FEDERAL DEPOSIT INSURANCE CORPORATION, ACTING AS RECEIVER FOR THE SAVINGS BANK AND PURSUANT TO ITS AUTHORITY UNDER THE FEDERAL INSURANCE ACT, 12 U.S.C. § 1821 (d), plaintiff's present counsel Jennean Rogers, Esq. and her firm, CULLEN & DYKMAN LLP engaged in "frivolous conduct," as defined in the Rules of the Chief Administrator, 22 NYCRR § 130-1 (c), and that pursuant to the Rules of the Chief Administrator, 22 NYCRR § 130.1.1 (d), "[a]n award of costs or the imposition of sanctions may be made . . . upon the court's own initiative, after a reasonable opportunity to be heard"; this Court will conduct a hearing in Part 27, on Thursday, September 12, 2013, at 2:30 P.M., in Room 277, 360 Adams Street, Brooklyn, NY 11201; and it is further

ORDERED, that Ronald David Bratt, Esq., my Principal Law Clerk, is directed to serve this order by first-class mail, upon: Jamie Dimon, Chairman and Chief Executive Officer of plaintiff, JP MORGAN CHASE BANK, NATIONAL ASSOCIATION, 270 Park Avenue, New York, New York 10017; Jennean Rogers, Esq., CULLEN & DYKMAN LLP, 100 Quentin Roosevelt Boulevard, Garden City, New York 11530; CULLEN & DYKMAN LLP, 100 Quentin Roosevelt Boulevard, Garden City, New York 11530; and Yolande I. Nicholson, Esq., 26 Court Street, Suite 602, Brooklyn, New York 11242.

This constitutes the Decision and Order of the Court. [*15]
ENTER 

Foreclosure Auction Defense

ResCap to Pay $230 Million to Borrowers Under Pending Foreclosure Deal

Ally Financial Inc.'s mortgage subsidiary, Residential Capital LLC, received court approval to set aside $230 million to be distributed to borrowers who may have been improperly foreclosed upon under a tentative settlement reached with the Federal Reserve.

U.S. Bankruptcy Judge Martin Glenn said in an order filed in court Wednesday that ResCap has permission to execute a term sheet with the Fed, which would allow the company to end a foreclosure-review program it says has been draining funds for its creditors.

The settlement still requires separate court approval.

The Wall Street Journal reported Tuesday that ResCap had reached a tentative deal with the Fed under which it would set aside at least $200 million that could be distributed to about 230,000 borrowers.

The deal stems from foreclosure reviews that federal banking regulators required mortgage servicers to conduct under consent orders reached in April 2011. Under the orders, the servicers were required to hire independent consultants to review loan files to determine if borrowers were improperly foreclosed upon.

But consumer groups criticized the program, arguing it padded the pockets of consultants rather than assisting homeowners.

In January, the Fed and the Office of the Comptroller of the Currency reached settlements with 13 of the mortgage servicers that replaced the foreclosure-review program.

These servicers, including Bank of America Corp. (BAC), J.P. Morgan Chase & Co. (JPM) and Wells Fargo & Co. (WFC), agreed to pay $3.6 billion in cash to nearly 4.2 million homeowners and provide $5.7 billion in other relief, such as loan assistance to borrowers.

ResCap in February asked the U.S. Bankruptcy Court for a ruling that it could end its participation in the program without facing legal action from the Fed. The review process, it said, was draining $300,000 per day from its bankruptcy estate and diminishing potential returns for creditors. ResCap estimated the total cost of the program could reach $459 million.

ResCap's request prompted Ally to fire back at its subsidiary, saying the mortgage firm shouldn't be allowed to skirt its responsibilities under the foreclosure-review program. Ally also argued that it shouldn't be held liable for ResCap's responsibilities under the program if the mortgage subsidiary failed to meet its obligations.

ResCap, once the country's fifth-largest mortgage servicer and 10th-largest mortgage lender, conducted the bulk of Ally's mortgage operations before filing for Chapter 11 bankruptcy in May 2012. Mounting litigation over soured mortgage securities and looming bond payments led to ResCap's filing, a move intended to help its parent company, Ally, sever itself from those issues so it can repay the $17.2 billion bailout it received during the financial crisis.

Ally is 74% owned by the U.S. government as a result of the bailout.

FULL ARTICLE CLICK HERE

DEVELOPING A SUCCESSFUL LAW PRACTICE A CENTURY AGO.. IDEAS THAT REMAIN RELEVANT TODAY

Found this interesting article in the NYCBA Journal - May 2013

Another Win ~ Judge dismisses Citibank's second attempt to sue our client!

Judge Troia dismissed Citibank's second attempt to sue our client on the second mortgage note as if it was unsecured credit card debt. Foster & Garbus argued on behalf of Citibank that our client was not entitled to the statutory protection of RPAPL 1304, which requires a 90 day notice be sent to the homeowner BEFORE a bank can sue. The Judge disagreed and determined that Citibank was required to send the notice and it was what is called a "condition precedent." Since Citibank didn't satisfy the condition precedent the case was dismissed ... again.

Dd Redacted

Another foreclosure sale stopped by the Law Offices of Robert E. Brown, PC

Our unsuspecting client was never served with a Sale Date Notice, instead John Brancato of our Loss Mitigation Department happened to peruse the Foreclosure section of the Staten Island Advance only to find that our client's home was being sold that week. Robert Brown drafted an emergency Order to Show Cause to stop the sale of the property. Thankfully, Judge Aliotta granted our request.

Judge Maltese rendered a decision on our Order to Show Cause (see last document).

Bank of America lied to distressed homeowners, former employees say

Bank of America Lied?  No way!!

I've often wondered when a big bank "insider" would step up and say what we the public and foreclosure defense experts have known from the beginning - that banks were liars - purposely losing docs, asking for the same info over and over, stating docs were never received (even though you have a confirm fax sheet), announcing that the docs were "stale" and then have borrowers go through the trial process for 9, 10, 12, 24 months only to deny them. Knowing along they would deny the borrower's request AND adding late fees to the file at the same time. How many people have lost their homes due to this? Of course, the only punishment will be a fine. All of this will continue until we begin to see bank executives in handcuffs. Not sure I'll live long enough to see that. Too bad. 

- John Brancato, Loss Mitigation
Robert E. Brown, PC

Bank of America systematically worked to deny thousands of loan modifications with specific delay tactics that included lying to homeowners and repeatedly requesting documents employees knew were already in the system, according to statements added last week to a multi-district lawsuit filed in federal court.

The suit, which is seeking class-action status and includes a Boynton Beach homeowner, claims the lender purposefully hindered modifications requested by borrowers through the federal Home Affordable Modification Program.

According to former employees of the Charlotte, North Carolina-based bank, loan modification agents handled up to 400 cases at a time and eligible borrowers were pushed into foreclosure during periodic “blitzes” where any file with documents 50 days old or older was automatically denied.

“This included files in which the homeowner had provided all required financial documents and fully complied with terms of the trial period,” said William E. Wilson, a former Bank of America underwriter who worked for the company between June 2010 and August 2012. “The delay and rejection programs within Bank of America were methodically carried out.”

Wilson, whose statement was taken June 5 and filed with the court two days later along with affidavits from six other former employees, says he was fired by Bank of America after complaining the denials were unfair.

Bank of America issued a statement Thursday saying the statements are “rife with facutal inaccuracies” that will be addressed in opposition documents filed next month.

“We continue to demonstrate our commitment to assisting customers who are at risk of foreclosure and, at best, these attorneys are painting a false picture of the bank’s practices and the dedication of our employees,” the statement said.

Simone Gordon, who worked for Bank of America between July 2007 and February 2012, said she was told to lie about documents not being received so they would get stale and the process would have to restart.

Employees who placed 10 or more accounts into foreclosure in a month could get gift cards to Target and Bed, Bath and Beyond or $500 bonuses, Gordon said.

“We were regularly drilled that it was our job to maximize fees for the bank by extending HAMP modifications by any means we could, including lying to customers,” Gordon said.

The claims validate years of homeowner complaints about having to fax the same documents to lenders over and over again only to be denied with no reason given, foreclosure defense attorneys say.

The lawsuit, which combined legal actions from several states and is being handled in a federal court in Massachusetts, was first filed in 2010.

Florida Attorney General Pam Bondi recently wrote letters to both Wells Fargo and Bank of America with concerns that the lenders are violating loan servicing rules included in the National Mortgage Settlement.

“The affidavits and the allegations in Bondi’s letter are just more evidence of what consumers have faced all along _ blatant abuse by the banks,” said St. Petersburg foreclosure defense attorney Matt Weidner. “It’s time for Bondi to step in and enforce the terms of the agreement she was so instrumental in negotiating.”

In response to Bondi’s letter, Bank of America said it has provided more mortgage relief to homeowners under the National Mortgage Settlement than all other lenders combined and works “quickly to address any problems brought to our attention.” Through March, Bank of America provided more than $27.8 billion in mortgage relief nationwide, including nearly $5 billion in Florida.

Boynton Beach homeowner Shari Goldman said in her lawsuit that she successfully completed a trial loan modification that reduced her monthly payment by $390. She continued to pay the same amount while repeatedly calling to find out if she would get a permanent modification.

Six months after being approved for the trial plan, she was denied a permanent modification, told she owed $3,158 in back payments, and was threatened with foreclosure. She paid the $3,158, according to the lawsuit, but was wrongly told she couldn’t appeal the modification denial.

Goldman later did appeal, but was denied again. Palm Beach County court and property records show no foreclosure was filed against Goldman and that she is still the owner of the home.

---

The Full Article Can Be Found Here

CFPB bans mandatory arbitration clauses in mortgage contracts

Good news for homeowners! Consumer Financial Protection Bureau has issued a rule to implement Dodd-Frank's ban on mandatory arbitration clauses in mortgage contracts.

- Robert E. Brown, Esq.

The Law Offices of Robert E. Brown, PC

CFPB bans mandatory arbitration clauses in mortgage contracts

Mondaq is reporting that the Consumer Financial Protection Bureau has issued a rule to implement Dodd-Frank's ban on mandatory arbitration clauses in mortgage contracts. The rule is available here. The rule implements changes required by Section 1414 of the Dodd-Frank Wall Street Reform Act.

The full article can be found here: mandatory-arbitration-clauses-in-mortgage-contracts

'robo-signing' settlement checks distributed across Maine

About 1,380 Mainers began receiving settlement checks Tuesday as a result of a national lawsuit over five large mortgage lenders' practice of hastily signing mortgage documents with little or no review, a practice dubbed "robo-signing."

The combined federal-state lawsuit brought about a $1.5 billion settlement between with Ally Bank (formerly GMAC), Bank of America, Citi, JPMorgan Chase and Wells Fargo.

In a press release, the Office of Maine Attorney General Janet Mills said the average settlement check for Maine residents will be approximately $1,480.

Those checks will go to Mainers who lost homes to foreclosure between Jan. 1, 2008 and Dec. 31, 2011 and had their mortgages serviced by one of the five lenders involved in the settlement.

The historic national settlement has its beginnings in Maine, through volunteer attorney Thomas Cox's pro bono work for Pine Tree Legal that set off the national investigation into lending practices of GMAC Mortgage Corp.

For more info: http://www.mainebiz.biz

New York AG Sues HSBC, Alleging Failure to Follow Foreclosure Law

This seems to be another underhanded tactic by many lenders. The banks have more money, legal access and time than the borrower. "Waiting out" the borrower by not filing the RJI to ask for the court's intervention is just another method lenders use to make sure they have an unfair advantage. The AG has done a great job protecting New York borrowers. 

- John Brancato, Loss Mitigation

Robert E. Brown, PC

HSBC faces a lawsuit from New York Attorney General Eric T. Schneiderman, who accused the bank of failing to follow a state foreclosure law that mandates a settlement conference for past due borrowers.

“Companies like HSBC are brazenly ignoring state law, leaving homeowners across New York stuck in a legal limbo where they can’t even get the legally required settlement conference that could help them keep their homes,” said Attorney General Schneiderman. “For homeowners facing foreclosure, time is their greatest enemy. Every day spent waiting for a settlement conference is a day that the lender piles on additional interest, fees and penalties and the homeowner falls further behind.”

According to the statement, the investigation from the attorney general’s office resulted in the identification of nearly 300 instances of delayed RJI filings in four New York counties— Erie, Monroe, Suffolk and Bronx. In some cases, the office says homeowners waited for two years for the bank to file the RJI.

According to first quarter data from RealtyTrac, New York has the longest foreclosure timeline out of any other state at 1,049 days.

“Although identifying these cases takes significant resources, my office will continue to bring these types of cases until every homeowner in the shadow docket receives the relief they are legally entitled to,” added Schneiderman.

In an emailed statement to DSNews, an HSBC spokesperson said, “HSBC is committed to compliance with all applicable laws, which includes those related to foreclosure. We will respond appropriately to the State AG in this matter.”

For the full story: http://www.dsnews.com

Robert E. Brown, PC gets Sandy victim a Loan Modification!

Another win for a local Staten Islander!

Recently the Law Offices of Robert Brown, P.C. Staten Island's foremost authority on foreclosures secured a loan modification as settlement for a client in foreclosure. In addition, the bank also agreed to stop the foreclosure action and reduce the principal balance by $57,000.

If you're having difficulty paying your mortgage or you're in foreclosure and your lender is not interested in helping you give us a call. We'll provide you with a free phone consultation to see if we can help. Here are the details on our agreement with the bank (obviously our client is very happy):

Original loan information

Principal and interest payment $1,313.82

Interest rate 7.75%

New loan modification

Principal and interest payment $509.99

Interest rate 2.0%

Principal reduced by $57,000

**The above settlement is not a guarantee of future results. Because every case is different, you may or may experience the same results.

FINAL MORTGAGE RULES BALANCE CONSUMERS’, LENDERS’ INTERESTS Consumer Financial Protection Bureau Gets It Right

Finally. protection for borrowers! Beginning 2014 new protections will protect borrowers from unfair lending practices. If only lenders and mortgage brokers treated their customers fairly to begin with, these new rules would not be needed.

- John Brancato, Loss Mitigation

Robert E. Brown, PC

Center for Responsible Lending
May 29, 2013

The final rules issued today by the Consumer Financial Protection Bureau strike the right balance: they safeguard consumers from abusive practices while helping lenders comply with new mortgage lending standards. The rules address two key issues related to the Dodd-Frank Act’s mandate that lenders assess a borrower’s ability to repay, particularly the standards a loan must meet to qualify as a “Qualified Mortgage.”  First, they properly prohibit mortgages with higher fees from gaining Qualified Mortgage (QM) status.  Second, they tailor the QM standards for small lenders who hold mortgages in portfolio and for other community-based lenders.

Importantly, the rules implement the Dodd-Frank Act requirement that payments from lenders to brokers –so-called “yield spread premiums”—be included when calculating whether a mortgage falls above or below the points-and-fees limit that defines a Qualified Mortgage.  Including yield-spread premiums will help prevent a lending abuse that fueled the financial crisis, when brokers were paid big fees to steer borrowers into loans with higher interest rates than what borrowers qualified for. The rules also help lenders by exempting from the Qualified Mortgage calculation the commissions paid by mortgage brokerages to individual brokers and by lenders  to individual loan officers.

The rules announced today continue CFPB’s approach of expanding access to credit while ensuring that loans are sustainable for the borrower and the overall economy.

For more information: http://www.responsiblelending.org

Make sure the bank takes your foreclosed home!

So, weary foreclosed home owner, at the end of the long and nerve-wracking foreclosure process not only do you have to deal with a credit that is wrecked and the possibility that the bank may sue you for a deficiency judgment but it appears that you may now have an additional nightmare to deal with  the possibility that although you may have "lost" your home, you may actually still own it............

- John Brancato, Loss Mitigation

The Law Office of Robert E. Brown, PC

-----------------------------------------------------

What happens to a house when the beleaguered owner moves out, and the lender never finishes the foreclosure paperwork?

It becomes a zombie house.

The term "zombie house" applies because the absent homeowner is still legally responsible for the foreclosed property and can be haunted by:

• Property taxes.
• Homeowners association fees.
• Fines for building code violations.
• Other expenses.
  

A zombie house can be plagued by other problems as well, such as:

• Squatters.
• Mosquito-infested swimming pools.
• Natural gas leaks.

Read more: http://www.bankrate.com/finance/real-estate/make-sure-bank-takes-foreclosed-home.aspx#ixzz2Unqtt6Wf 

THE VICIOUS NEW BANK SHAKEDOWN THAT COULD SERIOUSLY RUIN YOUR LIFE

"So, some of the same lenders who have illegally taken borrower's homes are now engaged in illegal credit card collections. Not hard to believe!"

- John Brancato, Loss Mitigator

Robert E. Brown, PC

Gangsta-style big banks have taken up where this character left off. They may not send a guy to break your kneecaps, but they are working in the shadows, chasing down debts from credit cards using methods that are both fraudulent and unlawful. They do this whether you actually owe the money or not.

Here’s the skinny: After widespread outrage over the big banks’ last crime wave against the American consumer – the “robo-signing” scam in which homeowners were hustled out of their houses by banks that sent fraudulent paperwork through the courts, they are at it again. This time, banksters are accused of helping debt collectors pursue faulty judgments against credit card customers by various dirty tricks that include – surprise! – robo-signing.  

California Attorney General Kamala Harris, who filed suit against JPMorgan Chase last Thursday, says that from January 2008 to April 2011 -- just as people were reeling from the Wall Street-driven financial crisis -- the megabank unleashed over 100,000 lawsuits against consumers over uncollected credit-card debt in the state of California alone. That includes 469 lawsuits in a single day. Now, it usually takes time and money to pursue lawsuits through the court system. So how in the world did Chase keep up this breakneck pace? The lawsuit claims that the bank took a number of little shortcuts, like robo-signing, in which bank employees produce sworn documents and other legal filings without bothering to check bank records or examine cases for accuracy.

Another nasty trick Chase is accused of deploying is what’s known, appropriately, as “sewer service.” This means that Chase failed to properly serve notice of debt collection lawsuits against consumers (it dumped the notices “in the sewer”), but then lied and said it did. This means, you, as a consumer, have no idea that a lawsuit has been launched against you. So here’s what happens: you get a default judgment that automatically favors the debt collector. The credit card company can then garnish your wages or freeze your bank account to get the money it says you owe. And you might not even owe it! Banks are sometimes chasing down consumers who have already paid their debts. Other times they are jacking up the size of the debts by adding bogus fees and interest costs.

All of this, of course, is unlawful. But it’s happening on a massive scale.

Last summer, a civil court judge in Brooklyn who presides over as many as 100 credit card cases a day told the New York Times that a whopping 90 percent of the credit card lawsuits that came across his desk were flawed and could not prove that a person owed the debt. Here’s the kicker: The errors in credit card suits often go undetected because the borrowers usually don’t show up in court to defend themselves (how can they, if they don’t know the suit has been filed?). As a result, an estimated 95 percent of lawsuits result in default judgments in favor of lenders.

The really chilling message sent in this new plot to squeeze cash out of hard-pressed Americans is that the big banks are completely undaunted by their exposure in the foreclosure robo-signing scam. Whatever penalties or bad publicity they have received have not restrained them one iota from pulling the exact same fraud again on hapless consumers. Neither has the creation of the Consumer Financial Protection Bureau, which now hangs in limbo with the endlessly delayed confirmation of Richard Cordray as head. The CFPB knows what’s going on, and it sent a friendly little note to Congress saying that “we are concerned about the system-wide problems in the debt collection market…and we want to see good practices come to dominate the market, including improved data integrity.” Well, golly, that’s reassuring.

For the full story click here

Owner of Brighton Beach Russian-themed restaurant busted in $2.2M swindle

"Beware of debt settlement companies."

-Robert E. Brown, Esq.   

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The feds filed suit today to seize an opulent, Russian-themed restaurant and cabaret in Brooklyn after its owner was busted on charges he funded the Rasputin Supper Club by ripping off clients of a crooked debt-relief firm.

Michael Levitis -- a suspended lawyer whose wife, Marina, was a cast member on the short-lived reality TV show "Russian Dolls" -- allegedly masterminded a multimillion-dollar scheme to soak credit-card holders struggling in the wake of the recent financial crisis.

Levitis, 36, and three employees of the Mission Settlement Agency allegedly promised to renegotiate and slash outstanding bills by up to 45 percent, but lied about the company's fees and did little or nothing to actually pay down the debts.

And while the company -- which used the Great Seal of the United States on solicitation letters -- collected about $6.6 million in fees since 2009, it only paid about $4.4 million to creditors, and never paid a nickel on behalf of 1,200 clients from whom it pocketed $2.2 million, authorities said.

"The true mission of Mission turned out to be fraud and deceit," Manhattan U.S. Attorney Preet Bharara said at a news conference this morning.

Bharara also revealed that two former Mission employees, Zakhir Shirinov and Feliz Lemberskiy, secretly pleaded guilty last month and are cooperating with the feds.

The charges against Levitis mark his second brush with the law in recent years.

In 2011, he was sentenced to three years probation and fined $15,000 for lying to FBI agents about serving as a bag man in a scheme to bribe then-state Sen. Carl Kruger, who's now imprisoned for corruption.

A Manhattan federal court indictment says Levitis and his co-defendants -- Denis Kurlyand, Boris Shulman and Manuel Cruz -- "systematically exploited over a thousand financially disadvantaged individuals across the country."

Philip Bartlett, the New York head of the Postal Inspection Service, described the victims as "both desperate and vulnerable."

He also noted that Levitis "ironically" used proceeds from the scheme to pay off credit-card debt incurred by his mom, Eva Levitis.

The case marks the first criminal prosecution based on complaints to the Consumer Financial Protection Bureau, which was established as part of the government response to the 2008 financial meltdown.

"These people are wolves in sheep's clothing," CFPB Director Richard Cordray said.

Cordray, who noted that "30 percent of Americans are being chased by debt collectors," also said that his agency was examining the entire debt-relief industry and predicted "there will be more" criminal prosecutions.

According to the indictment, Mission was purportedly owned by Levitis' mom -- who hasn't been charged -- but her son actually ran its day-to-day operations.

The feds also said that the title for the Rasputin nightclub is in Eva Levitis' name and that she "is the real owner of the club."

In addition to Rasputin, the feds are seeking to seize two other pieces of property and 40 bank accounts that were allegedly used to launder illegal profits from the scheme.

According to the Lifetime TV cable channel's Web site, the "spirited" Eva Levitis frequently went "head-to-head" on "Russian Dolls" with her son's wife, who favors "furs and diamonds" and "is all about status."

Defense lawyer Jeff Lichtman said: "Michael Levitis strongly denies these allegations which we've been aware of for months."

"Not only did he cooperate with the investigation but we tried, unsuccessfully, to present evidence to the prosecutors of rogue employees, no longer with the company, who were engaged in fraud at Mission," Lichtman added.

"Instead, those employees started their own debt settlement business and are continuing to defraud consumers while Michael Levitis is left to clean up their mess."

All four defendants are expected to be arraigned later today.

For more info click here: NYPOST

New York AG: Wells Fargo, BofA Violated National Foreclosure Settlement

"Wells Fargo and Bank of America both violate terms of the National Foreclosure Settlement. Anyone surprised? I was under the impression that the whole basis of being in business was to help your customers? Guess for them it isn't!"

-John Brancato

Robert E. Brown, PC

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New York Attorney General Eric Schneiderman said Monday he may sue Wells Fargo and Bank of America for allegedly violating the terms of last year’s multi-state mortgage settlement, despite questions over his authority to do so.

The agreement, reached by the Department of Justice, Department of Housing and Urban Development and 49 state attorneys general, called for the five largest mortgage companies to significantly revamp their procedures for dealing with distressed borrowers. It called on them to provide billions of dollars in aid to those borrowers and change the way they pursue home repossessions, in exchange for prosecutors dropping legal claims that the companies systematically violated borrowers’ rights when using faulty, so-called “robosigned” documents in foreclosure proceedings.

Consumer advocates have heralded the establishment of standards for how the companies would treat borrowers who fell behind on their payments as the settlement’s signature achievement. The new mortgage servicing provisions were supposed to “address the issues that led to the creation of the settlement,” according to Joseph Smith, the settlement’s official monitor.

The five banks -- JPMorgan Chase, Wells Fargo, Bank of America, Citigroup and Ally Financial -- collectively service more than half of all outstanding U.S. home loans. Since Oct. 2, 2012, they have had to comply with 304 mortgage servicing requirements, including offering struggling borrowers the opportunity to avoid foreclosure and approving or denying loan modifications within 30 days of receiving a complete application.

Schneiderman said Monday his office has uncovered 339 alleged violations of the settlement's terms, 210 concerning Wells Fargo and 129 concerning Bank of America. He said he intends to sue the banks for “repeatedly violating” the settlement if the monitoring committee of representatives from various federal and state agencies declines to take action.

But it’s unclear whether Schneiderman could successfully bring such a lawsuit. The agreement does not specify whether he can independently pursue legal action against the banks without first allowing the Office of Mortgage Settlement Oversight, run by Smith, to determine whether they are complying, a process that could take months.

Smith's office will make public by June 30 its first required report on the banks’ compliance with the mortgage servicing standards. The deal dictates that the companies shall have an opportunity to correct potential violations once they are identified. If the same violations continue, the monitoring committee could launch lawsuits and levy penalties totaling as much as $5 million for each violation.

Regardless, Schneiderman said the agreement allows him to enforce the settlement unilaterally. He said he warned his fellow regulators of his intent to sue on Friday, though some officials in the offices of other state attorneys general said they only learned of his plans in a Monday morning email from his office.

“Wells Fargo and Bank of America have flagrantly violated those obligations, putting hundreds of homeowners across New York at greater risk of foreclosure," Schneiderman said. "I intend to use every tool available to my office to hold these companies accountable."

Schneiderman said his lawsuit threat "obviously has implications" for the other three banks involved in the settlement. Housing organizations in New York said they had lodged similar complaints against the banks with Schneiderman's office.

"I continue to believe there are areas in which the banks must improve their treatment of their customers," Smith said in response. "I intend to use the full breadth of my power under the settlement to hold the banks accountable."

Both Wells Fargo and Bank of America responded to the announcement as well.

"It is unfortunate that the New York Attorney General has chosen this route rather than engage in a constructive dialogue through the established dispute resolution process," a spokesperson for Wells Fargo said. "We fully support the rules established under the Settlement."

Bank of America said it will "work quickly" to address the 129 "customer servicing problems" that Schneiderman identified. The bank added that it has provided more than 10,000 New York homeowners with more than $1 billion in aid.

The settlement for the first time legally requires the five banks to meet a variety of timelines. In addition to the 30-day window to tell borrowers whether their applications have been approved, they must notify borrowers within three business days that they have received loan modification applications and within five days if the application is missing key details or documents.

Over the last few years, consumer advocates and government officials have repeatedly complained of banks losing borrowers’ documents and forcing them to wait months for basic decisions to be made on their applications for loan modifications.

In a February report, Smith said that he had received more than 600 complaints detailing shortcomings in the banks’ dealings with borrowers. The majority of them concerned issues such as failures to decide on loan modification requests within 30 days.

Smith said that of “particular concern” were reports that borrowers were having to submit documents multiple times to their mortgage servicers, sometimes with no response or followed by requests for the same documents yet again.

"The striking thing about the timeline violation is that they’re so pervasive. It’s the exception rather than the rule when modifications requests are addressed without delay," said Joseph Sant, staff attorney with the Staten Island Legal Services Homeowner Defense Project.

Last month, The Huffington Post reported that Schneiderman has complained to key Democratic lawmakers on Capitol Hill that the Obama administration has not aggressively investigated the kind of dodgy mortgage deals that helped trigger the financial crisis. Schneiderman critics allege that he, too, has compiled a lackluster enforcement record against Wall Street.

His threat to sue Wells Fargo and Bank of America comes a few days after he withdrew his objection to a separate proposed $8.5 billion settlement between Bank of America and a group of mortgage investors over soured loans. In 2011, Schneiderman asked a state judge to reject the pact on the grounds that a party to the settlement had committed fraud and had failed to act in the best interests of the investors.

For the full story click here: huffingtonpost.com

NY AG: 2 banks violated mortgage accord

"Kudos to New York's attorney general Eric Schneiderman.   Today, he accused Wells Fargo and Bank of America of violating the terms of last year's national mortgage settlement by failing to process hundreds of refinancing requests promptly.

Schneiderman has notified the national monitoring committee established to enforce the 49 State Agreement, citing complaints of 210 prompt-processing violations by Wells Fargo and 129 by Bank of America. If the committee defers taking action, Schneiderman said he will sue for compliance."

-Robert E. Brown, Esq.

ALBANY, N.Y. (AP) — New York's attorney general on Monday accused Wells Fargo and Bank of America of violating the terms of last year's national mortgage settlement by failing to process hundreds of refinancing requests promptly.

Attorney General Eric Schneiderman has notified the national monitoring committee established to enforce the five-bank agreement, citing complaints of 210 prompt-processing violations by Wells Fargo and 129 by Bank of America. If the committee defers taking action, Schneiderman said he will sue for compliance.

Under the settlement, the banks are required to respond to mortgage modification requests within 30 days. Schneiderman said delays put homeowners further into debt from missed payments and penalties, pushing them closer to foreclosure.

For the full story click here: yahoo.com

FHFA to cherry pick loans Fannie, Freddie can purchase

The Federal Housing Finance Agency is pulling back on the loans that Fannie Mae and Freddie Mac can purchase, noting that beginning Jan. 10, 2014, the enterprises will no longer purchase a mortgage if its not fully amortizing, has a loan term longer than 30 years or includes points and fees in excess of 3% of the total loan amount.

In addition, home loans will not be acquired if other limits outlined in Dodd-Frank’s ability-to-repay provisions are not met.

Essentially, the conservator informed the market today that after this year, the enteprises will not acquire any loan that is not a qualified mortgage under the Consumer Financial Protection Bureau's definition outlined earlier this year.

"Fannie Mae and Freddie Mac will continue to purchase loans that meet the underwriting and delivery eligibility requirements stated in their respective selling guides," the FHFA said.

"This includes loans that are processed through their automated underwriting systems and loans with a debt-to- income ratio of greater than 43 percent. Loans with a debt-to-income ratio of more than 43 percent are not eligible for protection as qualified mortgages under the CFPB’s final rule unless they are eligible for purchase by Fannie Mae and Freddie Mac under the special or temporary qualified mortgage definition," the FHFA said.

Despite reports of the GSEs obtaining temporary waivers from certain Dodd-Frank and QM requirements during the transitional period, this announcement shows the conservator FHFA moving towards a market where GSE loans continue to shrink.

"Adoption of these new limitations by Fannie Mae and Freddie Mac is in keeping with FHFA’s goal of gradually contracting their market footprint and protecting borrowers and taxpayers," the FHFA concluded.

FOR MORE INFO CLICK HERE: http://www.housingwire.com