Friday, July 1, 2011

Office of the Comptroller of the Currency

The Office of the Comptroller of the Currency (OCC) is issuing guidance to communicate the OCC’s expectations for the oversight and management of mortgage foreclosure activities by national banks

The Office of the Comptroller of the Currency issued guidance (OCC Bulletin 2011-29) to its regulated entities as to its expectations regarding the oversight and management of mortgage foreclosure activities.

The guidance does not address detailed mortgage servicing requirements, or broader issues related to working with troubled borrowers, which the OCC indicates will be addressed at a later date.

The guidance is available at:

As you may recall, the OCC previously issued the results of its "Interagency Review of Foreclosure Policies and Practices" in April of 2011. A copy is available at:

Among other things, OCC Bulletin 2011-29 provides additional clarification regarding adequate staffing and training, dual-track processing, management of affidavit and notary practices, documentation, oversight of third-party service providers, and adherence to all laws and regulations related to mortgage foreclosure.

The bulletin also requires all OCC-regulated entities to conduct a self-assessment of foreclosure management practices no later than September 30, 2011 and to correct any weaknesses identified. According to the OCC, national bank examiners will review the self-assessments and corrective actions in the next quarterly review or examination.

Bank of America Opposes Arizona AG’s Bid to Interview Ex-Workers

Bank of NY v Silverberg -NY APP Ct

An intermediate appellate court of the State of New York recently held that Mortgage Electronic Registration Systems, Inc. ("MERS") cannot assign the right to foreclose to a plaintiff in a foreclosure action, absent MERS's right to enforce, or possession of, the related promissory note.

The foreclosure defendant borrowers ("borrowers") received two loans from Countrywide Home Loans ("Countrywide"), each secured by separate mortgages. Both mortgages identified MERS as the mortgagee of record, as nominee of Countrywide.

The borrowers then executed a consolidation agreement with Countrywide (the "consolidation agreement"). The terms of the consolidation agreement again named MERS as mortgagee as nominee of Countrywide, and named Countrywide as the lender and note holder. In addition, the terms of the agreement gave MERS the right to assign the underlying mortgages, but did not specifically give MERS the right to assign the underlying notes.

The borrowers defaulted. After the default, MERS assigned the consolidation agreement to Bank of New York, as Trustee ("Trustee").

Trustee initiated foreclosure proceedings in its name. The borrowers moved to dismiss the foreclosure action for lack of standing. The lower court denied borrowers' motion, and borrowers appealed.

The appellate court noted that, under New York law, "[i]n a mortgage foreclosure action, a plaintiff has standing where it is both the holder or assignee of the subject mortgage and the holder or assignee of the underlying note at the time the action is commenced;" and that "a transfer of the mortgage without the debt is a nullity." Based on that precedent, the Court concluded that "a foreclosure of a mortgage cannot be pursued by one who has demonstrated no right to the debt."

With this in mind, the Court scrutinized the consolidation agreement. It found that although the agreement gave MERS the right to assign the mortgages, it did not specifically give MERS the right to assign the underlying notes. Further, the record did not indicate that the notes were ever physically delivered to MERS. Therefore, MERS did not have the authority to assign the notes. According to the Court, because Countrywide "merely stepped into the shoes of MERS" as the assignee of the mortgages, the Court held that Countrywide and its successors and assigns did not have standing to foreclose.

The Court did not explain how the plaintiff Trustee was somehow not both the holder or assignee of the subject mortgage, and the holder or assignee of the underlying notes, at the time the foreclosure action was commenced.

The foreclosure plaintiff Trustee relied a recent New York appellate court opinion which held that MERS did have the authority to foreclose where MERS is identified in the mortgage as the mortgagee and nominee of record (as was the case in the consolidation agreement). However, the appellate court here noted that the other case involved a lender who transferred the promissory note to MERS prior to the commencement of the foreclosure action. Here, in contrast, there was no such transfer. Thus, the Court found it distinguishable from the matter at hand.

The Court concluded by noting that it was "mindful" of the impact its decision might have on the mortgage industry. However, the Court stated that "the law must not yield to expediency and the convenience of lending institutions."

Wednesday, June 29, 2011

Korte v. US Bank National Association

et al, No. 4D09-4285, June 8, 2011, Fourth District Court of Appeal, Palm Beach County

Brian Korte, Esquire appealed trial court’s award of sanctions under §57.105 against him and his firm for filing unsupported affirmative defenses

Appellate court found statute applicable in mortgage foreclosure cases to sanction defendants/or their counsel for asserting defenses know or should know not supported but assert for primary purpose of delay

Foreclosure case filed March, 2008

Korte filed answer, affirmative defenses alleging that lender failed to provide borrowers with TILA disclosures

Lender served Korte with unfiled motion for sanctions, advising would file in 21 days if not withdrawn

Motion for sanctions filed in court file December, 2008, Korte withdrew as attorney in February, 2009

Lender deposed Korte and borrower: Korte did not investigate defenses

Borrower stated never received copy of defenses or of motion for sanctions, never discussed with Korte

Borrower testified received TILA disclosures

Korte did not appear at hearing on motion for sanctions

Trial court found defenses frivolous, primarily for delay, not acting in good faith

Court awarded fees, accrued interest for delay

Court sanctions $20,563.59 ($18,682.99 accrued interest) against Korte only instead of splitting with client

Korte appealed finding of bad faith, but appellate court noted trial court’s specific findings

Korte appealed award of accrued interest as unsupported by evidence

Appellate court noted lender representative submitted original note showing interest rate into court, representative testified about calculation

Example of appellate courts correcting the excesses of defense bar, trial court judges

Lender/servicer counsel will be more pro-active in addressing similar cases

JP Morgan Chase Bank, N.A. v. Hernandez

No. 3D10-1099, June 22, 2011, 3d District Court of Appeal from Miami-Dade Circuit Court
Bank appealed Miami-Dade trial judge’s order setting aside sale, judgment and lis pendens, dismissing complaint with prejudice

Wife signed note, both signed mortgage in 2005

April, 2008-foreclosure complaint with lost note count filed

May, 2008-wife, by attorney, filed demand for validation of debt but did not answer complaint or file affirmative defenses

May, 2009-summary judgment in favor of bank entered, sale scheduled for October, 2009

September, 2009-borrowers recorded new, unilateral promissory note naming lender as borrower
Sale continued to February 23, 2010 at lender’s request

February 10, 2010-borrowers filed Notice of Intent to File Discharge dated September 9, 2009 which stated it was filed with the recording of the unilateral note

Notice of Intent dated 9/9/2009, filed in court file 2/19/2010, but notarized on 2/22/2010
Notice of Discharge also filed with Notice of Intent on February 19, 2010, but notarized February 22, 2010

Ex parte hearing on 2/23/2011 resulted in sale continued to May 24, 2010, with hearing scheduled on April 14, 2010

April 14th hearing never noticed, no motions pending until April 13, 2010
April 13, 2010: verified motion to vacate judgment, cancel sale, discharge lis pendens and dismiss case with prejudice filed, without certificate of service, and heard on April 14, 2010, without lender present

Defense attorney “…managed to convince the trial court that a mere letter of ‘tender’ and a fabricated Unilateral Note, without payment of any kind, were sufficient to discharge the entire debt owed to (lender).”
Appellate court reversed: note and mortgage merged into judgment and therefore unilateral note after judgment nullity

Unilateral Note nonsensical, no evidence, self-serving

Court granted lender’s motion for fees, sanctions under §57.105 for action without factual or legal merit, reported to Florida Bar