Watching FC Tampa Bay v. Minn Stars
Sent from my Verizon Wireless Phone
Saturday, September 17, 2011
Wednesday, September 14, 2011
DHS to unveil new airport security policy for kids
http://www.msnbc.msn.com/id/44504084?GT1=43001
Children 12 years old and younger soon will no longer be required to remove their shoes at airport security checkpoints, Homeland Security Secretary Janet Napolitano told Congress on Tuesday. The policy also includes other ways to screen young children without resorting to a pat-down that involves touching private areas on the body.
Kids should take there shoes off and go through the screening machine too. hello terrorists do not care about there kids--- Vietnam War- Middle East- ring any bells????
Children 12 years old and younger soon will no longer be required to remove their shoes at airport security checkpoints, Homeland Security Secretary Janet Napolitano told Congress on Tuesday. The policy also includes other ways to screen young children without resorting to a pat-down that involves touching private areas on the body.
Kids should take there shoes off and go through the screening machine too. hello terrorists do not care about there kids--- Vietnam War- Middle East- ring any bells????
Pets as a Medical Expense in Your Ch 13
http://www.feedblitz.com/f/?FBLike=http://lawprofessors.typepad.com/bankruptcyprof_blog/2011/08/pets-and-chapter-13.html
Bankruptcy Filings Down
August consumer bankruptcies decreased 11 percent nationwide from August 2010, according to data from the National Bankruptcy Research Center (NBKRC). The data showed that the overall consumer filing total for August declined to 113,432, down from the 127,028 consumer filings recorded in August 2010. Each month of 2011 has recorded fewer bankruptcies than last year.
9th Cir Allows Oregon UDCPA Claim Based on Failure to Respond Under FCBA, Actual Damages Under FCBA w/o Detrimental Reliance, Multiple Penalties for Multiple FCBA
The U.S. Court of Appeals for the Ninth Circuit recently held that a creditor violated the federal Fair Credit Billing Act ("FCBA"), and Oregon's Unlawful Debt Collection Practices Act ("UDCPA"), when it reported a debt as delinquent to credit agencies and continued its collection activities without first providing an explanation to the debtor who had contested the debt.
According to the Ninth Circuit: (1) these alleged actions by the creditor violated the Oregon UDCPA, based on the alleged violation of the FCBA;
(2) the debtor was entitled to actual damages and attorney fees under the FCBA, regardless of whether the debtor demonstrated detrimental reliance on the representations made by the creditor; (3) TILA's limitation of a single recovery for multiple failures to disclose does not necessarily apply to the FCBA; and (4) the trial court failed to properly apportion an attorneys fee award as to the debtor's successful claims.
A copy of the opinion is available at:
This case arose from a misunderstanding regarding a $645 charge on the credit-card bill of the debtor. The creditor allegedly misidentified the basis for the charge but then allegedly failed to respond to the debtor's requests for information about it. The creditor allegedly continued to seek payment and reported the debt as delinquent to credit agencies, despite the debtor's alleged protest.
In doing so, the Ninth Circuit noted that creditor admittedly violated the federal Fair Credit Billing Act ("FCBA"). After unsuccessfully attempting to get a direct response from the creditor, the debtor filed an action in the District of Oregon, alleging inter alia claims under the FCBA and Oregon's Unlawful Debt Collection Practices Act ("UDCPA").
The trial court dismissed the UDCPA claim and limited the debtor's total recovery under the FCBA to $1000. The Ninth Circuit reversed.
According to the Ninth Circuit, if a credit card holder sends a written notice disputing a charge within sixty days of receiving a bill, FCBA requires a credit-card issuer to acknowledge the dispute within thirty days, investigate the matter, and provide a written explanation of its decision within ninety days. If a creditor fails these requirements, it is subject to civil liability and forfeiture of the disputed amount.
Similarly, the Ninth Circuit held, the Oregon UDCPA prohibits a debt collector from "[a]ttempt[ing] to or threaten[ing] to enforce a right or remedy with knowledge or reason to know that the right or remedy does not exist."
Examining the above statutes, the Court concluded that the trial court erred in holding that the debtor failed to state a claim under the Oregon UDCPA. The Court reasoned, that pursuant to the requirements imposed under the FCBA, the creditor did not have the right to attempt to collect the disputed charge or to report it to credit agencies as delinquent without first providing a written explanation. These allegations, the Court held, also violated the Oregon UDCPA.
The Court also rejected that a detrimental reliance component was required for the debtor's Oregon UDCPA allegations, reasoning that there was simply no relevant disclosure or conduct under these circumstances that the debtor could have relied upon. Thus, the debtor's lack of detrimental reliance was immaterial to a determination of whether the creditor's violations resulted in actual damages. Debtors, explained the Court, cannot rely on unmade explanations. Otherwise, creditors could simply avoid actual damages under FCBA by never responding to billing disputes.
Next, the Court determined that the creditor's collection actions and adverse credit reports were not subject to the single-recovery limitation under 15 U.S.C. 1640(g). Further, the Court also concluded that the debtor was entitled to all reasonable attorney fees, including those incurred for the appeal, related to the debtor's FCBA claims.
NY Banking Dept Reaches Servicing/Foreclosure Practices Agreement with Goldman, Litton, Ocwen
New York's Department of Financial Services and Banking Department entered into an agreement with Goldman Sachs Bank, Ocwen Financial Corp. and Litton Loan Servicing LP regarding certain servicing and foreclosure practices.
A copy of the Agreement on Mortgage Servicing Practices is available at:
df
As part of the Agreement, Goldman Sachs will write down approximately $13 million in unpaid principal, consisting of forgiveness on 25 percent of the principal balance all 60-day delinquent first-lien home loans in New York serviced by Litton and owned by Goldman Sachs and its subsidiaries as of August 1, 2011.
The Agreement is a condition of Ocwen's acquisition of Litton, and does not preclude any future investigations of past practices or release any future claims or actions. In addition, if any party to this Agreement agrees with any other regulator to adopt greater consumer protections or other more rigorous standards than are contained in this Agreement, such other provisions shall be applicable to the party.
Among other things, the Agreement requires servicing and foreclosure practice changes in the following areas:
- Document execution
- Accuracy of documentation
- Standing to foreclose
- Identification and contact information of the note holder, and account/payment history, on request
- Compensation to borrowers, and voiding of third-party sales, in all wrongful foreclosures
- Regular quality assurance audits of foreclosure and bankruptcy proceedings
- Oversight of third-party vendors
- Adequate staffing and training
- Single-point-of-contact notices and related requirements
- Toll-free number set up for new loans upon acquisition or transfer of servicing
- Modification notices
- Independent review of loan mod denials
- Complaint handling and resolution procedures
- Limits on attorneys fees, late fees and delinquency charges, property valuation fees
- Limits on lender-placed insurance
Ocwen and Litton must implement these requirements within 60 days following the acquisition. Goldman, which is exiting the mortgage servicing business with the sale of Litton, has agreed to adopt these servicing practices if it should ever reenter the servicing industry.
Articles of Interest
Foreclosures: Uncle Sam and His 248,000 Homes
U.S. taxpayers are the biggest owners of repossessed homes. For now, they’re stuck with them. http://www.businessweek.com/magazine/foreclosures-uncle-sam-and-his-248000-homes-09012011.html
Robo-signed mortgage docs date back to late 1990s
http://www.google.com/hostednews/ap/article/ALeqM5getrYeAQRv3rG7noQ7QmPQQlnIaw?docId=b6873213020e4758bcd75ad770819850
As county officials review years' worth of mortgage paperwork, in some cases combing through one page at a time, they are finding suspect signatures — either signed with the same name by dozens of different people, improperly notarized or signed without a review of the facts in the paperwork — on all sorts of mortgage documents, dating as far back as 1998, The Associated Press has found.
As county officials review years' worth of mortgage paperwork, in some cases combing through one page at a time, they are finding suspect signatures — either signed with the same name by dozens of different people, improperly notarized or signed without a review of the facts in the paperwork — on all sorts of mortgage documents, dating as far back as 1998, The Associated Press has found.
10.9 million Houses Underwater
Nearly 10.9 million, or 22.5 percent, of all residential mortgages had negative equity at the end of the second quarter of the year, according to a report released Tuesday by the analytics firm CoreLogic. The figure is actually a slight improvement from the 22.7 percent of all mortgages with negative equity in the first quarter of 2011. CoreLogic says nearly three-quarters of homeowners in negative equity situations are also paying higher, above-market interest on their mortgages. Nevada held the top position in terms of negative equity with 60 percent of all of its mortgaged properties underwater, followed by Arizona (49 percent), Florida (45 percent), Michigan (36 percent), and California (30 percent). http://www.corelogic.com/
10.9 million Houses Underwater
Nearly 10.9 million, or 22.5 percent, of all residential mortgages had negative equity at the end of the second quarter of the year, according to a report released Tuesday by the analytics firm CoreLogic. The figure is actually a slight improvement from the 22.7 percent of all mortgages with negative equity in the first quarter of 2011. CoreLogic says nearly three-quarters of homeowners in negative equity situations are also paying higher, above-market interest on their mortgages. Nevada held the top position in terms of negative equity with 60 percent of all of its mortgaged properties underwater, followed by Arizona (49 percent), Florida (45 percent), Michigan (36 percent), and California (30 percent). http://www.corelogic.com/
Tuesday, September 13, 2011
2nd Cir Rejects Borrower's Arguments that Release Provisions Were Obtained by Duress
The U.S. Court of Appeals for the Second Circuit recently affirmed the dismissal of allegations that a lender obtained release agreements from a borrower through economic duress, because no evidence appeared in the record to suggest that the lender made a wrongful threat against the borrower.
Wells Fargo Bank, N.A., ("Wells Fargo") agreed to extend a line of credit to Interpharm, Inc. ("Interpharm"), a drug manufacturer. The line of credit was secured by various assets, including Interpharm's accounts receivable, inventory, and equipment. Interpharm defaulted on the line of credit agreement, and subsequently entered into and defaulted on each of a series of forbearance agreements with Wells Fargo.
Each forbearance agreement included a provision wherein Interpharm released all claims to date against Wells Fargo, as well as a merger clause stating that the written agreement represented the entire agreement between the parties. In addition, one of the forbearance agreements reflected Wells Fargo's decision to exclude certain receivables from the calculation used to determine the amount of money available to Interpharm, as well as to reduce the percentages used for that calculation.
After Interpharm defaulted on the final forbearance agreement, the company was liquidated. Interpharm then sued Wells Faro, alleging numerous causes of action including breach of contract and unjust enrichment.
Interpharm's causes of action were based on the theory that it had been forced to agree to the forbearance agreements through economic duress.
As you may recall, New York law provides that a contract may be voided based on economic duress where the "agreement was procured by means of (1) a wrongful threat that (2) precluded the exercise of its free will. See Stewart M. Muller Constr. Co. v. N.Y. Tel. Co., 40 N.Y. 2d 955, 956 (1976). A threat to exercise a legal right cannot constitute economic
duress. See 805 Third Ave. Co. v. M.W. Realty Assocs., 58 N.Y. 2d 447,453 (1983).
After reciting the relevant case law, the Court had little difficulty in affirming the lower court's decision to dismiss Interpharm's claims.
Wells Fargo had the legal right to terminate the line of credit.
Consequently, the Court held that Wells Fargo's threat to do so was not wrongful, and Wells Fargo's insistence that Interpharm execute various agreements to induce Wells Fargo to forbear from terminating the line of credit did not constitute economic duress.
Interpharm advanced two additional arguments. First, Interpharm argued that Wells Fargo's decision to exclude certain receivables from the calculation used to determine the line of credit was not reasonable, within the meaning of a "reasonable discretion" provision in the contract between the parties. Second, Interpharm argued that Wells Fargo purportedly agreed to maintain a higher percentage of receivables for use in that same calculation, an agreement that did not appear in any of the contracts executed by the parties.
The Court rejected both arguments. The agreement between the parties afforded Wells Fargo "reasonable discretion" in determining both the receivables to be used and the percentages of those receivables to be used to determine the amount of money available to Interpharm. The Court found that Interpharm failed to allege any facts to show that that Wells Fargo's decisions fell outside the bounds of "reasonable discretion." Further, the Court held that as the initial agreement and all subsequent forbearance agreements included merger clauses, any purported agreement that did not appear in the written contracts had no bearing on Wells Fargo's contractual rights.
Thus, the Court affirmed the lower court's judgment of dismissal.
Wells Fargo Bank, N.A., ("Wells Fargo") agreed to extend a line of credit to Interpharm, Inc. ("Interpharm"), a drug manufacturer. The line of credit was secured by various assets, including Interpharm's accounts receivable, inventory, and equipment. Interpharm defaulted on the line of credit agreement, and subsequently entered into and defaulted on each of a series of forbearance agreements with Wells Fargo.
Each forbearance agreement included a provision wherein Interpharm released all claims to date against Wells Fargo, as well as a merger clause stating that the written agreement represented the entire agreement between the parties. In addition, one of the forbearance agreements reflected Wells Fargo's decision to exclude certain receivables from the calculation used to determine the amount of money available to Interpharm, as well as to reduce the percentages used for that calculation.
After Interpharm defaulted on the final forbearance agreement, the company was liquidated. Interpharm then sued Wells Faro, alleging numerous causes of action including breach of contract and unjust enrichment.
Interpharm's causes of action were based on the theory that it had been forced to agree to the forbearance agreements through economic duress.
As you may recall, New York law provides that a contract may be voided based on economic duress where the "agreement was procured by means of (1) a wrongful threat that (2) precluded the exercise of its free will. See Stewart M. Muller Constr. Co. v. N.Y. Tel. Co., 40 N.Y. 2d 955, 956 (1976). A threat to exercise a legal right cannot constitute economic
duress. See 805 Third Ave. Co. v. M.W. Realty Assocs., 58 N.Y. 2d 447,453 (1983).
After reciting the relevant case law, the Court had little difficulty in affirming the lower court's decision to dismiss Interpharm's claims.
Wells Fargo had the legal right to terminate the line of credit.
Consequently, the Court held that Wells Fargo's threat to do so was not wrongful, and Wells Fargo's insistence that Interpharm execute various agreements to induce Wells Fargo to forbear from terminating the line of credit did not constitute economic duress.
Interpharm advanced two additional arguments. First, Interpharm argued that Wells Fargo's decision to exclude certain receivables from the calculation used to determine the line of credit was not reasonable, within the meaning of a "reasonable discretion" provision in the contract between the parties. Second, Interpharm argued that Wells Fargo purportedly agreed to maintain a higher percentage of receivables for use in that same calculation, an agreement that did not appear in any of the contracts executed by the parties.
The Court rejected both arguments. The agreement between the parties afforded Wells Fargo "reasonable discretion" in determining both the receivables to be used and the percentages of those receivables to be used to determine the amount of money available to Interpharm. The Court found that Interpharm failed to allege any facts to show that that Wells Fargo's decisions fell outside the bounds of "reasonable discretion." Further, the Court held that as the initial agreement and all subsequent forbearance agreements included merger clauses, any purported agreement that did not appear in the written contracts had no bearing on Wells Fargo's contractual rights.
Thus, the Court affirmed the lower court's judgment of dismissal.
The FDIC Offers Tips on Preparing Financially For a Natural Disaster or a Fire
Hurricane Irene, the earthquake that shook the East Coast and the deadly tornado that hit Joplin, Missouri are recent reminders that disasters rarely give advance warning and can happen anytime. The Summer 2011 issue of FDIC Consumer News features tips on how to prepare financially for a natural disaster, a fire or another tragedy, especially one that requires people to evacuate their home and not return for days or weeks. Other timely topics in the latest issue include what to know before signing up for person-to-person, or “P2P,” electronic payment services using a smartphone or mobile computer; how to solve mysteries of old bank accounts; and an update on new standards for and disclosures by mortgage loan professionals.
The latest issue can be read or printed online at www.fdic.gov/consumers/consumer/news/cnsum11.
The latest issue can be read or printed online at www.fdic.gov/consumers/consumer/news/cnsum11.
Changes to Federal Bankruptcy Rules and Forms
Changes to Federal Bankruptcy Rules and Forms
Effective December 1, 2011
The following changes to and/or new Federal Rules of Bankruptcy Procedure and Official Bankruptcy Forms take effect December 1, 2011:
Rule 1004.2 - Republication of a new rule requiring entity filing a chapter 15 petition to state the country of the debtor’s main interest, filer to list each country in which a case involving debtor is pending, and setting deadline for challenging the statement asserting the country of the debtor’s main interest.
Rule 2003 - Requires the filing of a statement upon adjourning a meeting of creditors or equity security holders.
Rule 2019 - Expands the scope of the rule’s disclosure requirements by requiring disclosure in chapter 9 and 11 cases by all committees or groups that consist of more than one creditor or equity security holder, as well as entities or that represent more than one creditor or equity security holder. It also authorizes the Court to require disclosure by an individual party in interest when knowledge of that party’s economic stake in the debtor would assist the Court in evaluating the party’s arguments.
Rule 3001 - Prescribes in greater detail the support information required to accompany a proof of claim.
Rule 3002.1 - New rule implements § 1323(b)(5) of the Bankruptcy Code which permits a chapter 13 debtor to cure a default and maintain payments of a home mortgage.
Rule 4004 - Permits a party under limited circumstances to seek an extension of time to object to a debtor’s discharge after the time for objecting has expired.
Rule 6003 - Clarifies that the requirement of a 21-day waiting period before a Court can enter certain orders at the beginning of a case, including an order approving employment of counsel, does not prevent the Court from specifying an effective date for the order that is earlier than the date of its issuance.
A complete list of the changes to and/or new Rules (Appellate, Bankruptcy, Criminal and Rules of
Evidence) that take effect December 1, 2011, is located on the U.S. Courts’ web site at:
www.uscourts.gov/RulesAndPolicies/FederalRulemaking/PendingRules/SupremeCourt042611.aspx.
Form 1 (Voluntary Petition) - Implements new Bankruptcy Rule 1004.2.
Forms 9A - 9I (Notices of Bankruptcy Case, Meeting of Creditors & Deadlines *341 Meeting Notice+) -Conforming to amendments to Bankruptcy Rule 2003(e).
Form 10 (Proof of Claim) - Clarifies that, consistent with Rule 3001(c) and new Rule 3002.1, writings supporting a claim or evidencing perfection of a security interest—not just summaries—must be attached to the proof of claim. Three new forms have been created for claims secured by a security interest in the debtor’s principal residence.
Form 10 (Attachment A) - Mortgage Proof of Claim Attachment
Form 10 (Supplement 1) - Notice of Mortgage Payment Change
Form 10 (Supplement 2) - Notice of Postpetition Mortgage Fees, Expenses, and Charges
Form 25A (Plan of Reorganization in Small Business Case under Chapter 11) - Changes the effective date consistent with 2009 time-computation rules amendments.
You may view the proposed forms or obtain more information on the “Bankruptcy Forms
Pending Changes” page of the U.S. Courts’ web site at
http://www.uscourts.gov/FormsAndFees/Forms/BankruptcyForms/BankruptcyFormsPendingChanges.aspx
Effective December 1, 2011
The following changes to and/or new Federal Rules of Bankruptcy Procedure and Official Bankruptcy Forms take effect December 1, 2011:
Rule 1004.2 - Republication of a new rule requiring entity filing a chapter 15 petition to state the country of the debtor’s main interest, filer to list each country in which a case involving debtor is pending, and setting deadline for challenging the statement asserting the country of the debtor’s main interest.
Rule 2003 - Requires the filing of a statement upon adjourning a meeting of creditors or equity security holders.
Rule 2019 - Expands the scope of the rule’s disclosure requirements by requiring disclosure in chapter 9 and 11 cases by all committees or groups that consist of more than one creditor or equity security holder, as well as entities or that represent more than one creditor or equity security holder. It also authorizes the Court to require disclosure by an individual party in interest when knowledge of that party’s economic stake in the debtor would assist the Court in evaluating the party’s arguments.
Rule 3001 - Prescribes in greater detail the support information required to accompany a proof of claim.
Rule 3002.1 - New rule implements § 1323(b)(5) of the Bankruptcy Code which permits a chapter 13 debtor to cure a default and maintain payments of a home mortgage.
Rule 4004 - Permits a party under limited circumstances to seek an extension of time to object to a debtor’s discharge after the time for objecting has expired.
Rule 6003 - Clarifies that the requirement of a 21-day waiting period before a Court can enter certain orders at the beginning of a case, including an order approving employment of counsel, does not prevent the Court from specifying an effective date for the order that is earlier than the date of its issuance.
A complete list of the changes to and/or new Rules (Appellate, Bankruptcy, Criminal and Rules of
Evidence) that take effect December 1, 2011, is located on the U.S. Courts’ web site at:
www.uscourts.gov/RulesAndPolicies/FederalRulemaking/PendingRules/SupremeCourt042611.aspx.
Form 1 (Voluntary Petition) - Implements new Bankruptcy Rule 1004.2.
Forms 9A - 9I (Notices of Bankruptcy Case, Meeting of Creditors & Deadlines *341 Meeting Notice+) -Conforming to amendments to Bankruptcy Rule 2003(e).
Form 10 (Proof of Claim) - Clarifies that, consistent with Rule 3001(c) and new Rule 3002.1, writings supporting a claim or evidencing perfection of a security interest—not just summaries—must be attached to the proof of claim. Three new forms have been created for claims secured by a security interest in the debtor’s principal residence.
Form 10 (Attachment A) - Mortgage Proof of Claim Attachment
Form 10 (Supplement 1) - Notice of Mortgage Payment Change
Form 10 (Supplement 2) - Notice of Postpetition Mortgage Fees, Expenses, and Charges
Form 25A (Plan of Reorganization in Small Business Case under Chapter 11) - Changes the effective date consistent with 2009 time-computation rules amendments.
You may view the proposed forms or obtain more information on the “Bankruptcy Forms
Pending Changes” page of the U.S. Courts’ web site at
http://www.uscourts.gov/FormsAndFees/Forms/BankruptcyForms/BankruptcyFormsPendingChanges.aspx
Ill App Ct Rejects Borrower's Untimely Challenge as to Service of Process
The Illinois Appellate Court for the First District recently held that a borrower or other defendant waives his right to challenge jurisdiction where he files a motion to stay a foreclosure sale without first or simultaneously filing a motion challenging jurisdiction, or moving for an extension of time to do so.
A copy of the opinion is available at:
http://www.state.il.us/court/Opinions/AppellateCourt/2011/1stDistrict/Sept
ember/1102632.pdf
Plaintiff Deutsche Bank National Trust Company ("Deutsche Bank") filed a mortgage foreclosure action against defendants Carolyn A. Hall-Pilate and John J. Pilate. The special process server executed two returns of service indicating that John was served with a summons and complaint for himself and on behalf of his wife, Carolyn.
When the borrowers did not appear and answer, Deutsche Bank filed a motion for default. The trial court continued the motion on March 18, 2008, because John Pilate had appeared pro se before the court and requested time to consult with an attorney. The borrowers were granted 28 days to file an appearance and answer or otherwise plead to the complaint.
After the borrowers still failed to file an appearance or response to the complaint, the trial court granted Deutsche Bank's motion for default judgment, and entered orders appointing a foreclosure sale officer and for judgment for foreclosure and sale. Deutsche Bank filed a motion for an order approving the report of sale and distribution following the judicial sale.
On September 12, 2008, an "additional" appearance was filed by a law firm, as counsel for the borrowers. The law firm also filed an emergency motion to stay approval of the property sale. The trial court denied the borrowers' emergency motion for a stay, and entered an order approving the report of sale and distribution, confirming the sale and order of possession.
On May 29, 2009, the borrowers filed a motion to quash service through new counsel, asserting that John was out of state when the service of process allegedly occurred. The trial court denied the motion to quash service.
On appeal, the borrowers argued that the trial court erred in denying their motion to quash service because the borrowers did not file any appearance or other pleadings prior to the entry of the default judgment.
Deutsche Bank argued that the borrowers waived their jurisdictional objections when they filed their emergency motion to stay the approval of a judicial sale prior to final judgment in the case.
The Appellate Court noted that section 2-301 of the Illinois Code of Civil Procedure governs challenges to personal jurisdiction. The court held that "[u]nder section 2-301, an objection to the court's jurisdiction must be raised in the first pleading or motion filed, other than a motion for an extension of time to answer or otherwise appear, but such objection may be raised alongside other motions seeking relief on different grounds."
The Court noted that the borrowers "did not comply with the requirements of section 2-301 to preserve their objection to the trial court's jurisdiction because they filed a motion to stay the approval of the property sale without also challenging the court's jurisdiction." In addition, the Court ruled that "by participating in the case without raising an objection to personal jurisdiction," the borrowers "voluntarily submitted to the trial court's jurisdiction and waived any objection."
The borrowers also asserted that any waiver of personal jurisdiction did not apply to Carolyn because she did not appear at the initial hearing.
However, the court was "not persuaded as the relevant action by the defendants was the filing of the emergency motion for a stay which was filed on behalf of both defendants. Thus, [Carolyn], with her husband, sought relief from the trial court and waived any challenge to personal jurisdiction."
The Court held that "[s]ince defendants in the instant case appeared in this case before a final judgment was entered against them by filing a motion seeking relief from the trial court and recognizing its jurisdiction, defendants waived all objections to the trial court's jurisdiction."
A copy of the opinion is available at:
http://www.state.il.us/court/Opinions/AppellateCourt/2011/1stDistrict/Sept
ember/1102632.pdf
Plaintiff Deutsche Bank National Trust Company ("Deutsche Bank") filed a mortgage foreclosure action against defendants Carolyn A. Hall-Pilate and John J. Pilate. The special process server executed two returns of service indicating that John was served with a summons and complaint for himself and on behalf of his wife, Carolyn.
When the borrowers did not appear and answer, Deutsche Bank filed a motion for default. The trial court continued the motion on March 18, 2008, because John Pilate had appeared pro se before the court and requested time to consult with an attorney. The borrowers were granted 28 days to file an appearance and answer or otherwise plead to the complaint.
After the borrowers still failed to file an appearance or response to the complaint, the trial court granted Deutsche Bank's motion for default judgment, and entered orders appointing a foreclosure sale officer and for judgment for foreclosure and sale. Deutsche Bank filed a motion for an order approving the report of sale and distribution following the judicial sale.
On September 12, 2008, an "additional" appearance was filed by a law firm, as counsel for the borrowers. The law firm also filed an emergency motion to stay approval of the property sale. The trial court denied the borrowers' emergency motion for a stay, and entered an order approving the report of sale and distribution, confirming the sale and order of possession.
On May 29, 2009, the borrowers filed a motion to quash service through new counsel, asserting that John was out of state when the service of process allegedly occurred. The trial court denied the motion to quash service.
On appeal, the borrowers argued that the trial court erred in denying their motion to quash service because the borrowers did not file any appearance or other pleadings prior to the entry of the default judgment.
Deutsche Bank argued that the borrowers waived their jurisdictional objections when they filed their emergency motion to stay the approval of a judicial sale prior to final judgment in the case.
The Appellate Court noted that section 2-301 of the Illinois Code of Civil Procedure governs challenges to personal jurisdiction. The court held that "[u]nder section 2-301, an objection to the court's jurisdiction must be raised in the first pleading or motion filed, other than a motion for an extension of time to answer or otherwise appear, but such objection may be raised alongside other motions seeking relief on different grounds."
The Court noted that the borrowers "did not comply with the requirements of section 2-301 to preserve their objection to the trial court's jurisdiction because they filed a motion to stay the approval of the property sale without also challenging the court's jurisdiction." In addition, the Court ruled that "by participating in the case without raising an objection to personal jurisdiction," the borrowers "voluntarily submitted to the trial court's jurisdiction and waived any objection."
The borrowers also asserted that any waiver of personal jurisdiction did not apply to Carolyn because she did not appear at the initial hearing.
However, the court was "not persuaded as the relevant action by the defendants was the filing of the emergency motion for a stay which was filed on behalf of both defendants. Thus, [Carolyn], with her husband, sought relief from the trial court and waived any challenge to personal jurisdiction."
The Court held that "[s]ince defendants in the instant case appeared in this case before a final judgment was entered against them by filing a motion seeking relief from the trial court and recognizing its jurisdiction, defendants waived all objections to the trial court's jurisdiction."
9th Cir Rejects MERS Challenge, Rejects Equitable Tolling Theory Based on Spanish-Language Negotiations, Rejects Borrowers' IIED Claim
The U.S. Court of Appeals for the Ninth Circuit recently ruled in favor of Mortgage Electronic Registration Systems, Inc. ("MERS") in a putative class action challenging the MERS system under common law fraud and state UDAP theories.
The Court also rejected the borrowers' equitable tolling argument as to the TILA and state UDAP statute of limitations, based upon the borrowers speaking only Spanish but their loan documents being only in English. In addition, the Court held that providing an unaffordable loan to a borrower was not "extreme and outrageous" as is required to state a claim for intentional infliction of emotional distress.
A copy of the opinion is available at:
http://www.ca9.uscourts.gov/datastore/opinions/2011/09/07/09-17364.pdf
The three named plaintiffs in the case obtained home loans or refinanced existing loans in 2006. The plaintiffs each executed a deed of trust in favor of their lender, naming MERS as the "beneficiary" and as the "nominee" for the lender and lender's "successors and assigns." The plaintiffs do not speak or read English, and negotiated the mortgage loans with their lenders in Spanish, but were provided with, and signed, copies of their loan documents written in English.
The plaintiffs subsequently defaulted on their loans. Following default, their respective lenders appointed trustees to initiate nonjudicial foreclosure proceedings. MERS's beneficial interests in the deeds of trust were all assigned to a foreclosure trustee.
The plaintiffs filed their putative class action, alleging conspiracy by their lenders and others to use MERS to commit fraud. They also alleged that their lenders violated the federal Truth in Lending Act ("TILA"), and the Arizona Consumer Fraud Act ("ACFA"), and committed the tort of intentional infliction of emotional distress ("IIED") by supposedly targeting the plaintiffs for loans they allegedly could not repay when the loans were extended.
The trial court dismissed the plaintiffs' first amended complaint, without leave to amend. Further, the trial court denied leave to file a proposed second amended complaint, and to add a new claim for wrongful foreclosure.
On appeal, the plaintiffs only addressed the district court's: (1) dismissal of their claim for conspiracy to commit fraud through the MERS system; (2) failure to address their oral request for leave to add a wrongful foreclosure claim; (3) dismissal of the foreclosure trustee from the suit; (4) denial of leave to amend their pleadings regarding equitable tolling of their TILA and ACFA claims; and (5) dismissal of their claim for IIED.
On appeal, the Ninth Circuit noted that the main premise of the plaintiffs' lawsuit was that the MERS system impermissibly "splits" the note and deed of trust by facilitating the transfer of the beneficial interest in the loan among lenders while maintaining MERS as the nominal holder of the deed. The Ninth Circuit rejected this theory.
The plaintiffs' lawsuit was also premised on the fact that MERS does not have a financial interest in the loans, which, according to the plaintiffs, renders MERS's status as a beneficiary a sham. The Ninth Circuit rejected this theory, also.
With respect to the conspiracy to commit fraud claim, the plaintiffs alleged that MERS members conspired to commit fraud by using MERS as a sham beneficiary, supposedly promoting and facilitating predatory lending practices through the use of MERS, and supposedly making it impossible for borrowers or regulators to track the changes in lenders.
In upholding the lower court's ruling that the plaintiffs failed to state a cause of action, the Ninth Circuit held "[t]he plaintiffs' allegations fail to address several of [the] necessary elements for a fraud claim."
Specifically, the plaintiffs failed to identify any false representations made to them about the MERS system, and failed to allege they relied on misrepresentations about MERS in deciding to enter into their home loans.
Moreover, the Ninth Circuit found the plaintiffs' allegations were undercut by the language in the standard deed of trust, which provided that MERS was acting "solely as a nominee for Lender and Lender's successors and assigns" and holds "only legal title to the interest granted by Borrower in this Security Instrument." The Court held that "[b]y signing the deeds of trust, the plaintiffs agreed to the terms and were on notice of the contents." The Court further held that "[i]n light of the explicit terms of the standard deed. . ., it does not appear that the plaintiffs were misinformed about MERS's role in their home loans."
With respect to the wrongful foreclosure claim, the Ninth Circuit held that "[t]he plaintiffs' oral request to add a wrongful foreclosure claim was procedurally improper and substantively unsupported." The plaintiffs based their wrongful foreclosure claim on the novel theory that "all transfers of the interests in the home loans within the MERS system are invalid because the designation of MERS as a beneficiary is a sham and the system splits the deed from the note, and, thus, no party is in a position to foreclose."
The Court rejected this argument, holding "[e]ven if MERS were a sham beneficiary, the lenders would still be entitled to repayment of the loans and would be the proper parties to initiate foreclosure after the plaintiffs defaulted on their loans." The Court further held that "the notes and deeds are not irreparably split: the split only renders the mortgage unenforceable if MERS or the trustee, as nominal holders of the deeds, are not agents of the lenders."
With respect to the allegations against the foreclosure trustee, the Court noted the only allegations the plaintiffs directed against the foreclosure trustee was that the trustee supposedly "failed to recognize that its appointment was invalid." The Ninth Circuit held the plaintiffs failed to state a cause of action, because the trustee had an "'absolute right' under Arizona law 'to rely upon any written direction or information furnished to him by the beneficiary.'"
The plaintiffs also asserted that the district court failed to address the equitable tolling of their purported claims under TILA and the ACFA. The plaintiffs alleged their TILA claim should have been tolled because they only speak Spanish, but received their loan documents in English. The Court disagreed, finding "the plaintiffs have not alleged circumstances beyond their control that prevented them from seeking a translation of the loan documents that they signed and received."
Further, the Court also held that the plaintiffs failed to state a claim for equitable estoppel because they "failed to specify what true facts are at issue, or to establish that the alleged misrepresentation and concealment of facts is 'above and beyond the wrongdoing' that forms the basis for their TILA and [ACFA] claims."
Finally, with respect to the IIED allegations, the Ninth Circuit held the plaintiffs failed to state a cause of action because they "essentially allege that the lenders offered them loans that the lenders knew they could not repay," which was not "extreme and outrageous" as is required to state a claim for IIED.
The Court also rejected the borrowers' equitable tolling argument as to the TILA and state UDAP statute of limitations, based upon the borrowers speaking only Spanish but their loan documents being only in English. In addition, the Court held that providing an unaffordable loan to a borrower was not "extreme and outrageous" as is required to state a claim for intentional infliction of emotional distress.
A copy of the opinion is available at:
http://www.ca9.uscourts.gov/datastore/opinions/2011/09/07/09-17364.pdf
The three named plaintiffs in the case obtained home loans or refinanced existing loans in 2006. The plaintiffs each executed a deed of trust in favor of their lender, naming MERS as the "beneficiary" and as the "nominee" for the lender and lender's "successors and assigns." The plaintiffs do not speak or read English, and negotiated the mortgage loans with their lenders in Spanish, but were provided with, and signed, copies of their loan documents written in English.
The plaintiffs subsequently defaulted on their loans. Following default, their respective lenders appointed trustees to initiate nonjudicial foreclosure proceedings. MERS's beneficial interests in the deeds of trust were all assigned to a foreclosure trustee.
The plaintiffs filed their putative class action, alleging conspiracy by their lenders and others to use MERS to commit fraud. They also alleged that their lenders violated the federal Truth in Lending Act ("TILA"), and the Arizona Consumer Fraud Act ("ACFA"), and committed the tort of intentional infliction of emotional distress ("IIED") by supposedly targeting the plaintiffs for loans they allegedly could not repay when the loans were extended.
The trial court dismissed the plaintiffs' first amended complaint, without leave to amend. Further, the trial court denied leave to file a proposed second amended complaint, and to add a new claim for wrongful foreclosure.
On appeal, the plaintiffs only addressed the district court's: (1) dismissal of their claim for conspiracy to commit fraud through the MERS system; (2) failure to address their oral request for leave to add a wrongful foreclosure claim; (3) dismissal of the foreclosure trustee from the suit; (4) denial of leave to amend their pleadings regarding equitable tolling of their TILA and ACFA claims; and (5) dismissal of their claim for IIED.
On appeal, the Ninth Circuit noted that the main premise of the plaintiffs' lawsuit was that the MERS system impermissibly "splits" the note and deed of trust by facilitating the transfer of the beneficial interest in the loan among lenders while maintaining MERS as the nominal holder of the deed. The Ninth Circuit rejected this theory.
The plaintiffs' lawsuit was also premised on the fact that MERS does not have a financial interest in the loans, which, according to the plaintiffs, renders MERS's status as a beneficiary a sham. The Ninth Circuit rejected this theory, also.
With respect to the conspiracy to commit fraud claim, the plaintiffs alleged that MERS members conspired to commit fraud by using MERS as a sham beneficiary, supposedly promoting and facilitating predatory lending practices through the use of MERS, and supposedly making it impossible for borrowers or regulators to track the changes in lenders.
In upholding the lower court's ruling that the plaintiffs failed to state a cause of action, the Ninth Circuit held "[t]he plaintiffs' allegations fail to address several of [the] necessary elements for a fraud claim."
Specifically, the plaintiffs failed to identify any false representations made to them about the MERS system, and failed to allege they relied on misrepresentations about MERS in deciding to enter into their home loans.
Moreover, the Ninth Circuit found the plaintiffs' allegations were undercut by the language in the standard deed of trust, which provided that MERS was acting "solely as a nominee for Lender and Lender's successors and assigns" and holds "only legal title to the interest granted by Borrower in this Security Instrument." The Court held that "[b]y signing the deeds of trust, the plaintiffs agreed to the terms and were on notice of the contents." The Court further held that "[i]n light of the explicit terms of the standard deed. . ., it does not appear that the plaintiffs were misinformed about MERS's role in their home loans."
With respect to the wrongful foreclosure claim, the Ninth Circuit held that "[t]he plaintiffs' oral request to add a wrongful foreclosure claim was procedurally improper and substantively unsupported." The plaintiffs based their wrongful foreclosure claim on the novel theory that "all transfers of the interests in the home loans within the MERS system are invalid because the designation of MERS as a beneficiary is a sham and the system splits the deed from the note, and, thus, no party is in a position to foreclose."
The Court rejected this argument, holding "[e]ven if MERS were a sham beneficiary, the lenders would still be entitled to repayment of the loans and would be the proper parties to initiate foreclosure after the plaintiffs defaulted on their loans." The Court further held that "the notes and deeds are not irreparably split: the split only renders the mortgage unenforceable if MERS or the trustee, as nominal holders of the deeds, are not agents of the lenders."
With respect to the allegations against the foreclosure trustee, the Court noted the only allegations the plaintiffs directed against the foreclosure trustee was that the trustee supposedly "failed to recognize that its appointment was invalid." The Ninth Circuit held the plaintiffs failed to state a cause of action, because the trustee had an "'absolute right' under Arizona law 'to rely upon any written direction or information furnished to him by the beneficiary.'"
The plaintiffs also asserted that the district court failed to address the equitable tolling of their purported claims under TILA and the ACFA. The plaintiffs alleged their TILA claim should have been tolled because they only speak Spanish, but received their loan documents in English. The Court disagreed, finding "the plaintiffs have not alleged circumstances beyond their control that prevented them from seeking a translation of the loan documents that they signed and received."
Further, the Court also held that the plaintiffs failed to state a claim for equitable estoppel because they "failed to specify what true facts are at issue, or to establish that the alleged misrepresentation and concealment of facts is 'above and beyond the wrongdoing' that forms the basis for their TILA and [ACFA] claims."
Finally, with respect to the IIED allegations, the Ninth Circuit held the plaintiffs failed to state a cause of action because they "essentially allege that the lenders offered them loans that the lenders knew they could not repay," which was not "extreme and outrageous" as is required to state a claim for IIED.
Mortgage rates hit lows
Freddie Mac now puts the average rate for a 30-year fixed mortgage at 4.12 percent and the 15-year rate at 3.33 percent
Freddie Mac Rolls Out New Standard Modification
http://www.freddiemac.com/sell/guide/bulletins/pdf/bll1116.pdf
The Standard Modification replaces Freddie Mac’s classic modification, which is a debt coverage ratio mod, and is part of the Servicing Alignment Initiative underway to bring the two GSEs’ protocol for handling defaulted loans in line with one another.
Freddie Mac says the new formula will help servicers simplify underwriting by using a standard set of modification terms, including a 5 percent interest rate, for all eligible borrowers.
The new Standard Modification is available to borrowers who don’t qualify for the government’s Home Affordable Modification Program (HAMP), and includes a trial period to help ensure borrowers can sustain their modified mortgage payments and reduce re-default rates in servicers’ Freddie Mac portfolios
The Standard Modification replaces Freddie Mac’s classic modification, which is a debt coverage ratio mod, and is part of the Servicing Alignment Initiative underway to bring the two GSEs’ protocol for handling defaulted loans in line with one another.
Freddie Mac says the new formula will help servicers simplify underwriting by using a standard set of modification terms, including a 5 percent interest rate, for all eligible borrowers.
The new Standard Modification is available to borrowers who don’t qualify for the government’s Home Affordable Modification Program (HAMP), and includes a trial period to help ensure borrowers can sustain their modified mortgage payments and reduce re-default rates in servicers’ Freddie Mac portfolios
Dickson- Countrywide (6th Cir.)
The U.S. Court of Appeals for the Sixth Circuit recently ruled that a Chapter 13 debtor whose mobile home was involuntarily converted to real property by court order had standing to seek avoidance of a perfected lien on the real property under Section 522(h)(1) of the bankruptcy code.
The borrower in this matter gave Countrywide Home Loans ("Countrywide") a note and mortgage on an unimproved lot in consideration for a loan. She then used the loan proceeds to purchase a manufactured home, and placed that home on the mortgaged real property. Under the terms of the mortgage, Countrywide was granted a lien against the real property and "all improvements now or hereafter erected on the property, and all easements, appurtenances, and fixtures now or hereafter a part of that property." Several years later, the borrower filed for bankruptcy under Chapter 7 and was granted a discharge; she did not reaffirm the debt.
After a subsequent default, Countrywide initiated foreclosure proceedings.
In its foreclosure complaint, Countrywide asserted that while the parties had intended the mortgage to secure a valid, first lien on the manufactured home, the borrower had failed to surrender the title to the manufactured home, thus preventing the Countrywide from noting its lien on the title to the manufactured home. Countrywide obtained a judgment from the state court that it had a valid first priority lien on the real property, that the real property be sold to satisfy Countrywide's lien, and that the manufactured home be "deemed converted to real estate."
Shortly thereafter, the borrower filed a Chapter 13 petition. Countrywide sought relief from the stay, but the borrower responded by filing an adversarial complaint, asserting that Countrywide had failed to properly perfect its lien on the manufactured home. Countrywide moved for summary judgment on the bases that the borrower lacked standing to bring the adversary proceeding because the mortgage lien was consensual, that the borrower's claim was barred by res judicata as a result of the prior Chapter 7 case, and that the prior state court judgment prevented avoidance of Countrywide's lien. The borrower filed a similar cross motion for summary judgment, disputing each of Countrywide's assertions.
The bankruptcy court denied both parties' motions, and ruled that the borrower did have standing because the lien at issue was created by a non-consensual judgment lien. After renewed cross motions from both parties, the bankruptcy court eventually again ruled in favor of the borrower, concluding that "the only manner in which to perfect a lien on a manufactured home under Kentucky law is by noting the lien on the certificate of title, that Countrywide had failed to perfect its lien, and that even if Countrywide had perfected its lien, such lien was avoidable as a preference." On appeal, the Bankruptcy Appellate Panel upheld the bankruptcy court's judgment and order in favor of the borrower, and Countrywide appealed to the Sixth Circuit.
The Sixth Circuit noted that, under Kentucky law, "a manufactured home is personal property for which a certificate of title is required" and that "[i]n order to perfect a lien on personal property, the lien must be noted on the certificate of title." However, the Court also noted that "a manufactured home may also be converted from personal property to an improvement to real estate.thereby allowing perfection through first recording without notice."
The Court further noted that "the plain language of the mortgage contract did not grant Countrywide a lien on [the borrower's] manufactured home as personal property." Accordingly, "unless converted to an improvement to real estate, Countrywide did not obtain a security interest in the manufactured home through the mortgage contract."
The Court also considered various state-law decisions in ruling that "even if Countrywide obtained a lien against the manufactured home by way of the mortgage contract, it is undisputed that Countrywide did not note this security interest on the certificate of title, and the filing of a lis pendens cannot serve to perfect a security interest in a manufactured home" and thus, "before the state-court foreclosure judgment, Countrywide did not have a perfected lien on the borrower's manufactured home."
The Court then examined the state court order of sale converting the borrower's manufactured home to an improvement to real property, and concluded that the state court judgment created a perfected security interest in the manufactured home. The Court also noted that, because the borrower did not appeal the state court judgment, the conversion was binding under the doctrine of res judicata.
In addition, the conversion also placed the manufactured home "clearly within the terms of the mortgage contract," which then "granted a security interest in favor of Countrywide on the listed real estate, together with 'all the improvements now or hereafter erected on the property.'"
Accordingly, the Court ruled, "upon the entry of the state-court judgment.
Countrywide possessed a perfected lien on the borrower's manufactured home."
The Court then considered whether the borrower had standing to seek avoidance of Countrywide's perfected lien. Considering the language of Section 522(h) of the Bankruptcy Code, the Court ruled that "a Chapter 13 debtor has standing to avoid a transfer under Section 522(h) if five conditions are met: (1) the transfer was not voluntary; (2) the transfer was not concealed; (3) the trustee did not attempt to avoid the transfer;
(4) the debtor seeks the avoidance pursuant to Sections 544, 545, 547, 548, 549, or 724(a) of the Bankruptcy Code; and (5) the transferred property is of a kind that the debtor would have been able to exempt from the estate if the trustee had avoided the transfer under one of the provisions in Section 522(g)."
The Court ruled that Countrywide did not obtain a perfected security interest in the manufactured home until it "was converted to an improvement to real estate, thereby bringing the home within the boundaries of the mortgage contract," and thus, "while a transfer in real property did occur through the mortgage contract, the mortgage was not the triggering transfer."
Rather, the Court ruled, the "conversion of [the borrower's] manufactured home to an improvement to real property was involuntary because it was accomplished by operation of law without consent." Countrywide did not dispute that the borrower met requirements 2 through 4 of Section 522(h), and therefore, the Court ruled, the borrower "possesses direct standing"
to avoid Countrywide's lien pursuant to Section 522(h).
Finally, the Court also considered whether the lien was properly avoided pursuant to Section 547, which as you may recall allows for the avoidance transfers within the 90 days period before the filing of a bankruptcy petition. The Court first examined a prior decision holding that under Section 547, "a transfer is deemed to have been made at the time the transfer is perfected, if perfection takes place more than 30 days after its creation."
However, the Court ruled, "the creation and perfection of Countrywide's interest in the manufactured home occurred at the time of the state-court judgment. [which was] well-within the 90-day preference period" and therefore, the Court ruled "Countrywide's lien on the manufactured home was properly avoided pursuant to Section 547.5."
The borrower in this matter gave Countrywide Home Loans ("Countrywide") a note and mortgage on an unimproved lot in consideration for a loan. She then used the loan proceeds to purchase a manufactured home, and placed that home on the mortgaged real property. Under the terms of the mortgage, Countrywide was granted a lien against the real property and "all improvements now or hereafter erected on the property, and all easements, appurtenances, and fixtures now or hereafter a part of that property." Several years later, the borrower filed for bankruptcy under Chapter 7 and was granted a discharge; she did not reaffirm the debt.
After a subsequent default, Countrywide initiated foreclosure proceedings.
In its foreclosure complaint, Countrywide asserted that while the parties had intended the mortgage to secure a valid, first lien on the manufactured home, the borrower had failed to surrender the title to the manufactured home, thus preventing the Countrywide from noting its lien on the title to the manufactured home. Countrywide obtained a judgment from the state court that it had a valid first priority lien on the real property, that the real property be sold to satisfy Countrywide's lien, and that the manufactured home be "deemed converted to real estate."
Shortly thereafter, the borrower filed a Chapter 13 petition. Countrywide sought relief from the stay, but the borrower responded by filing an adversarial complaint, asserting that Countrywide had failed to properly perfect its lien on the manufactured home. Countrywide moved for summary judgment on the bases that the borrower lacked standing to bring the adversary proceeding because the mortgage lien was consensual, that the borrower's claim was barred by res judicata as a result of the prior Chapter 7 case, and that the prior state court judgment prevented avoidance of Countrywide's lien. The borrower filed a similar cross motion for summary judgment, disputing each of Countrywide's assertions.
The bankruptcy court denied both parties' motions, and ruled that the borrower did have standing because the lien at issue was created by a non-consensual judgment lien. After renewed cross motions from both parties, the bankruptcy court eventually again ruled in favor of the borrower, concluding that "the only manner in which to perfect a lien on a manufactured home under Kentucky law is by noting the lien on the certificate of title, that Countrywide had failed to perfect its lien, and that even if Countrywide had perfected its lien, such lien was avoidable as a preference." On appeal, the Bankruptcy Appellate Panel upheld the bankruptcy court's judgment and order in favor of the borrower, and Countrywide appealed to the Sixth Circuit.
The Sixth Circuit noted that, under Kentucky law, "a manufactured home is personal property for which a certificate of title is required" and that "[i]n order to perfect a lien on personal property, the lien must be noted on the certificate of title." However, the Court also noted that "a manufactured home may also be converted from personal property to an improvement to real estate.thereby allowing perfection through first recording without notice."
The Court further noted that "the plain language of the mortgage contract did not grant Countrywide a lien on [the borrower's] manufactured home as personal property." Accordingly, "unless converted to an improvement to real estate, Countrywide did not obtain a security interest in the manufactured home through the mortgage contract."
The Court also considered various state-law decisions in ruling that "even if Countrywide obtained a lien against the manufactured home by way of the mortgage contract, it is undisputed that Countrywide did not note this security interest on the certificate of title, and the filing of a lis pendens cannot serve to perfect a security interest in a manufactured home" and thus, "before the state-court foreclosure judgment, Countrywide did not have a perfected lien on the borrower's manufactured home."
The Court then examined the state court order of sale converting the borrower's manufactured home to an improvement to real property, and concluded that the state court judgment created a perfected security interest in the manufactured home. The Court also noted that, because the borrower did not appeal the state court judgment, the conversion was binding under the doctrine of res judicata.
In addition, the conversion also placed the manufactured home "clearly within the terms of the mortgage contract," which then "granted a security interest in favor of Countrywide on the listed real estate, together with 'all the improvements now or hereafter erected on the property.'"
Accordingly, the Court ruled, "upon the entry of the state-court judgment.
Countrywide possessed a perfected lien on the borrower's manufactured home."
The Court then considered whether the borrower had standing to seek avoidance of Countrywide's perfected lien. Considering the language of Section 522(h) of the Bankruptcy Code, the Court ruled that "a Chapter 13 debtor has standing to avoid a transfer under Section 522(h) if five conditions are met: (1) the transfer was not voluntary; (2) the transfer was not concealed; (3) the trustee did not attempt to avoid the transfer;
(4) the debtor seeks the avoidance pursuant to Sections 544, 545, 547, 548, 549, or 724(a) of the Bankruptcy Code; and (5) the transferred property is of a kind that the debtor would have been able to exempt from the estate if the trustee had avoided the transfer under one of the provisions in Section 522(g)."
The Court ruled that Countrywide did not obtain a perfected security interest in the manufactured home until it "was converted to an improvement to real estate, thereby bringing the home within the boundaries of the mortgage contract," and thus, "while a transfer in real property did occur through the mortgage contract, the mortgage was not the triggering transfer."
Rather, the Court ruled, the "conversion of [the borrower's] manufactured home to an improvement to real property was involuntary because it was accomplished by operation of law without consent." Countrywide did not dispute that the borrower met requirements 2 through 4 of Section 522(h), and therefore, the Court ruled, the borrower "possesses direct standing"
to avoid Countrywide's lien pursuant to Section 522(h).
Finally, the Court also considered whether the lien was properly avoided pursuant to Section 547, which as you may recall allows for the avoidance transfers within the 90 days period before the filing of a bankruptcy petition. The Court first examined a prior decision holding that under Section 547, "a transfer is deemed to have been made at the time the transfer is perfected, if perfection takes place more than 30 days after its creation."
However, the Court ruled, "the creation and perfection of Countrywide's interest in the manufactured home occurred at the time of the state-court judgment. [which was] well-within the 90-day preference period" and therefore, the Court ruled "Countrywide's lien on the manufactured home was properly avoided pursuant to Section 547.5."
Monday, September 12, 2011
7th Cir Reverses DWP of Putative FDCPA Class Action Claims
Kasalo-Harris& Harris
The U.S. Court of Appeals for the Seventh Circuit recently reversed a lower court's decision to dismiss a putative class action lawsuit against a debt collector for want of prosecution, because the mistakes made by the plaintiff's attorney were not sufficient to justify the dismissal. A copy of the opinion is attached.
A consumer sued a debt collection law firm, Harris & Harris, Ltd. ("Harris") for alleged violations of the federal Fair Debt Collection Practices Act ("FDCPA"). Both parties agreed that Harris violated the FDCPA with respect to the consumer, and that the consumer was entitled to modest statutory damages. However, the consumer's attorney also included in his complaint two putative class counts, which alleged that the envelopes and payment reminders used by Harris to collect debts violated the FDCPA on a classwide basis.
The lower court "expressed doubt that it would ever certify a class" in this matter, but nevertheless continued the matter several times to permit the consumer's attorney to expand on and amend the putative class claims.
On several occasions, the consumer's attorney failed to meet the lower court's deadlines, and arrived for a hearing after the court had already considered his case. Due to the consumer's attorney's failure to appear and repeated failure to meet other deadlines, the lower court dismissed the case for want of prosecution.
As you may recall, Federal Rule of Civil Procedure 41(b) provides that "[i]f a plaintiff fails to prosecute or to comply with.a court order, a defendant may move to dismiss the action or any claim against it." In addition, Federal Rule of Civil Procedure 23 provides that a court "must determine by order whether to certify the action as a class action" at an "early practicable time."
The Seventh Circuit held that the lower's court decision to dismiss the action for want of prosecution was an abuse of discretion. In reaching that conclusion, the Court first noted that dismissal for want of prosecution is an "extraordinarily harsh sanction." Gabriele v. Hamlin, 514 F.3d 734, 736 (7th Cir. 2008). In addition, dismissal for want of prosecution should be imposed based on a consideration of, among several other factors, whether the mistakes made are the responsibility of the plaintiff or the plaintiff's lawyer, and the prejudice to the defendant as a result of those mistakes. Aurora Lamp & Lighting Inc. v. International Trading Corp, 325 F.3d 752, 755 (7th Cir. 2003).
Here, the Court indicated that the attorney's fees Harris had to incur due to the repeated errors of the consumer's counsel were not sufficient prejudice, and noted that all of the mistakes made were attributable to the consumer's attorney, rather than to the consumer herself.
In addition, the Court noted that despite the questionable nature of the class action claims, the borrower's individual allegation against Harris appeared to have merit. It also observed that several less severe mechanisms were available to dismiss the class action claims: the lower court could have used Federal Rule of Civil Procedure 41(b) to dismiss only the class action claims, allowing the individual claim to survive, or it could have declined to certify the action as a class action under Federal Rule of Civil Procedure 23.
The Court placed emphasis on the fact that the borrower's attorney did not receive any warning from the lower court that he was on "thin ice."
Therefore, "[g]iven the nature of [the borrower's attorney's] mistakes, the court's ongoing approach to the case, and the lack of any explicit warning," the Court reversed and remanded the lower court's decision to dismiss the action for want of prosecution.
The U.S. Court of Appeals for the Seventh Circuit recently reversed a lower court's decision to dismiss a putative class action lawsuit against a debt collector for want of prosecution, because the mistakes made by the plaintiff's attorney were not sufficient to justify the dismissal. A copy of the opinion is attached.
A consumer sued a debt collection law firm, Harris & Harris, Ltd. ("Harris") for alleged violations of the federal Fair Debt Collection Practices Act ("FDCPA"). Both parties agreed that Harris violated the FDCPA with respect to the consumer, and that the consumer was entitled to modest statutory damages. However, the consumer's attorney also included in his complaint two putative class counts, which alleged that the envelopes and payment reminders used by Harris to collect debts violated the FDCPA on a classwide basis.
The lower court "expressed doubt that it would ever certify a class" in this matter, but nevertheless continued the matter several times to permit the consumer's attorney to expand on and amend the putative class claims.
On several occasions, the consumer's attorney failed to meet the lower court's deadlines, and arrived for a hearing after the court had already considered his case. Due to the consumer's attorney's failure to appear and repeated failure to meet other deadlines, the lower court dismissed the case for want of prosecution.
As you may recall, Federal Rule of Civil Procedure 41(b) provides that "[i]f a plaintiff fails to prosecute or to comply with.a court order, a defendant may move to dismiss the action or any claim against it." In addition, Federal Rule of Civil Procedure 23 provides that a court "must determine by order whether to certify the action as a class action" at an "early practicable time."
The Seventh Circuit held that the lower's court decision to dismiss the action for want of prosecution was an abuse of discretion. In reaching that conclusion, the Court first noted that dismissal for want of prosecution is an "extraordinarily harsh sanction." Gabriele v. Hamlin, 514 F.3d 734, 736 (7th Cir. 2008). In addition, dismissal for want of prosecution should be imposed based on a consideration of, among several other factors, whether the mistakes made are the responsibility of the plaintiff or the plaintiff's lawyer, and the prejudice to the defendant as a result of those mistakes. Aurora Lamp & Lighting Inc. v. International Trading Corp, 325 F.3d 752, 755 (7th Cir. 2003).
Here, the Court indicated that the attorney's fees Harris had to incur due to the repeated errors of the consumer's counsel were not sufficient prejudice, and noted that all of the mistakes made were attributable to the consumer's attorney, rather than to the consumer herself.
In addition, the Court noted that despite the questionable nature of the class action claims, the borrower's individual allegation against Harris appeared to have merit. It also observed that several less severe mechanisms were available to dismiss the class action claims: the lower court could have used Federal Rule of Civil Procedure 41(b) to dismiss only the class action claims, allowing the individual claim to survive, or it could have declined to certify the action as a class action under Federal Rule of Civil Procedure 23.
The Court placed emphasis on the fact that the borrower's attorney did not receive any warning from the lower court that he was on "thin ice."
Therefore, "[g]iven the nature of [the borrower's attorney's] mistakes, the court's ongoing approach to the case, and the lack of any explicit warning," the Court reversed and remanded the lower court's decision to dismiss the action for want of prosecution.
New Jersey Sup Ct Applies Consumer Fraud Act to Post-Foreclosure Forbearance Agreements as "Extensions of Credit"
The Supreme Court of New Jersey recently held that certain post-foreclosure forbearance agreements were "extensions of credit" covered by the New Jersey Consumer Fraud Act, and that unconscionable practices in negotiating or collecting on such loan agreements would constitute violations of that statute.
A copy of the opinion is available at:
http://www.judiciary.state.nj.us/opinions/supreme/A9909GonzalezvWilshireCr
editCorp.pdf
The borrower on the loan at issue passed away. The surviving mortgagor continued to make payments on the loan in order to avoid foreclosure. The surviving mortgagor eventually defaulted on the loan, and the loan owner filed a foreclosure action.
Before the scheduled sheriff's sale of the property took place, the mortgage servicer and surviving mortgagor entered into a written agreement ("First Agreement") whereby the servicer agreed not to pursue the foreclosure sale if the surviving mortgagor paid a specified lump sum and monthly payments, consisting of the original loan's monthly payments plus certain fees through a specified future date. The servicer also agreed to dismiss the foreclosure action when the account became current. After entering the First Agreement, the surviving mortgagor paid the majority of amounts due, but missed a number of monthly payments. The trial court then calculated the amount of arrears, and a sheriff's sale was again scheduled.
Soon thereafter, the servicer contacted the surviving mortgagor directly to negotiate a second agreement to avoid foreclosure of her home ("Second Agreement"). According to the allegations, neither the servicer nor the loan owner notified the mortgagor's attorney, and the surviving mortgagor allegedly could neither read nor speak English.
The Second Agreement, entirely in English, set the arrearages at roughly 68% higher than the amount calculated by the trial court a short time earlier and required the mortgagor to purchase force-placed insurance despite an active homeowner's insurance policy on the property. As in the First Agreement, the servicer agreed to dismiss the foreclosure action once the mortgage payments became current. Both agreements included language stating that the agreements were an attempt to collect a debt.
The surviving mortgagor made all payments required by the Second Agreement. However, instead of dismissing the foreclosure action as it had agreed, the servicer allegedly contacted the mortgagor when the Second Agreement was about to expire to notify her that another agreement was needed in order to avoid foreclosure. The mortgagor then notified her attorney, who, among other things, requested that the servicer explain how it calculated the amount of arrearages in the Second Agreement and why the loan was not considered current. The servicer allegedly was unable to provide an explanation as to the arrearages or the status of the loan.
The surviving mortgagor filed a complaint alleging that the servicer and loan owner had engaged in deceptive and unconscionable practices in violation of the New Jersey Consumer Fraud Act, N.J.S.A. 56:8-1 - 195 ("NJCFA"). The complaint alleged that the servicer and loan owner, supposedly knowing that the surviving mortgagor did not read or speak English and that she was represented by an attorney, contacted her directly to negotiate the Second Agreement. The complaint further alleged that the servicer included in the Second Agreement improper costs and fees in calculating her arrearages and demanded amounts that were not yet due and owing.
The trial court granted summary judgment in favor of the servicer and loan owner, holding that the NJCFA did not apply to "post-judgment settlement agreements entered into to stave off a foreclosure sale." The court reasoned that the NJCFA was not intended to apply to settlement agreements entered into by parties to a lawsuit, and that the surviving mortgagor's only option for relief was to file a motion to vacate, modify, or enforce the settlement.
The appellate court reversed the trial court judgment, holding that the agreements were contracts covered by the NJCFA and that the surviving mortgagor had standing under the NJCFA because she was a signatory to the post-judgment agreements. The appellate court also concluded, among other things, that, if proven, the surviving mortgagor's monetary damages from the servicer's alleged unconscionable practices satisfied the NJCFA's "ascertainable loss" requirement. The New Jersey Supreme Court affirmed the appellate court's ruling, and reinstated the surviving mortgagor's alleged cause of action.
The Supreme Court of New Jersey held that the NJCFA provides relief if a consumer can prove: (1) an unlawful practice prohibited by the CFA; (2) an "ascertainable loss"; and (3) a causal relationship between the misconduct and the loss. Citing Lemelledo v. Beneficial Mgmt. Corp., 150 N.J. 255 (1997), the Supreme Court noted that the broad language of the NJCFA applies to lending activities and to the sale of insurance related to a loan, and that an unlawful practice under the CFA includes a person's use of "any unconscionable commercial practice . . . in connection with the sale or advertisement of any merchandise or real estate, or with the subsequent performance of such person." The Court further observed that an "ascertainable loss" includes one incurred through improper "loan packing," such as forcing the borrower to purchase unnecessary insurance.
The Court rejected the defendants' assertion that the alleged collection activities of a servicer do not constitute "subsequent performance" in connection with a loan. Without deciding whether the forbearance agreements and the servicer's alleged collection activities were the "subsequent performance" with respect to the original loan, the Court concluded that "the post-judgment agreements, standing alone, constitute the extension of credit, or a new loan, and that [the servicer's] collection activities may be characterized as 'subsequent performance' in connection with [that] extension of credit."
The Court remarked that the servicer's alleged dealings with the surviving mortgagor "placed her on a credit merry-go-round" that "would keep her in a constant state of arrearages." The Court also further pointed out that these were not ordinary settlement agreements, as the mortgagor was not only required to pay the original monthly payments, but also additional charges such as foreclosure, attorney, and lender-placed insurance fees.
The Court enumerated certain factors regarding the servicer's alleged conduct with respect to the forbearance agreements that appeared questionable, including: (1) what this court described as the servicer's "inexplicably" contacting the surviving mortgagor and negotiating with her directly even though she was represented by an attorney and did not speak or read English; (2) the servicer's threat to foreclose even though the mortgagor allegedly had made every payment under the Second Agreement; (3) the servicer's alleged inability to explain how it arrived at the arrearages figure in the Second Agreement or why the loan was not considered current; and (4) the Second Agreement's requirement to purchase supposedly unnecessary lender-placed insurance.
The Court further rejected the servicer's and loan owner's argument that the NJCFA is not an available remedy and that the only options available to the mortgagor were either to seek relief from the post-judgment agreements or to pursue common law claims based on breach of contract and/or fraud. The Court observed that the relief available under the NJCFA is in addition to any other relief provided by state or federal law.
In addition, the Court stated that there was no need to address whether a direct relationship existed with the non-borrower mortgagor and the originating lender. Rather, the assignment of the note and mortgage to the loan owner and the appointment of the servicer substituted them for the originating lender with regard to the mortgagor. The Court also stated that, [a]s a practical matter . . . the agreements were nothing more than a recasting of the original loan," and concluded that the forbearance agreements established privity" between the parties.
In remanding to determine whether the defendants' conduct fell below the NJCFA's permissible standard, the Court stressed that its decision did not extend to settlement agreements generally. The Court limited its holding to the narrow issue of the applicability of the NJCFA to the creation of and collection on a post-foreclosure judgment agreement involving a stand-alone extension of credit.
A copy of the opinion is available at:
http://www.judiciary.state.nj.us/opinions/supreme/A9909GonzalezvWilshireCr
editCorp.pdf
The borrower on the loan at issue passed away. The surviving mortgagor continued to make payments on the loan in order to avoid foreclosure. The surviving mortgagor eventually defaulted on the loan, and the loan owner filed a foreclosure action.
Before the scheduled sheriff's sale of the property took place, the mortgage servicer and surviving mortgagor entered into a written agreement ("First Agreement") whereby the servicer agreed not to pursue the foreclosure sale if the surviving mortgagor paid a specified lump sum and monthly payments, consisting of the original loan's monthly payments plus certain fees through a specified future date. The servicer also agreed to dismiss the foreclosure action when the account became current. After entering the First Agreement, the surviving mortgagor paid the majority of amounts due, but missed a number of monthly payments. The trial court then calculated the amount of arrears, and a sheriff's sale was again scheduled.
Soon thereafter, the servicer contacted the surviving mortgagor directly to negotiate a second agreement to avoid foreclosure of her home ("Second Agreement"). According to the allegations, neither the servicer nor the loan owner notified the mortgagor's attorney, and the surviving mortgagor allegedly could neither read nor speak English.
The Second Agreement, entirely in English, set the arrearages at roughly 68% higher than the amount calculated by the trial court a short time earlier and required the mortgagor to purchase force-placed insurance despite an active homeowner's insurance policy on the property. As in the First Agreement, the servicer agreed to dismiss the foreclosure action once the mortgage payments became current. Both agreements included language stating that the agreements were an attempt to collect a debt.
The surviving mortgagor made all payments required by the Second Agreement. However, instead of dismissing the foreclosure action as it had agreed, the servicer allegedly contacted the mortgagor when the Second Agreement was about to expire to notify her that another agreement was needed in order to avoid foreclosure. The mortgagor then notified her attorney, who, among other things, requested that the servicer explain how it calculated the amount of arrearages in the Second Agreement and why the loan was not considered current. The servicer allegedly was unable to provide an explanation as to the arrearages or the status of the loan.
The surviving mortgagor filed a complaint alleging that the servicer and loan owner had engaged in deceptive and unconscionable practices in violation of the New Jersey Consumer Fraud Act, N.J.S.A. 56:8-1 - 195 ("NJCFA"). The complaint alleged that the servicer and loan owner, supposedly knowing that the surviving mortgagor did not read or speak English and that she was represented by an attorney, contacted her directly to negotiate the Second Agreement. The complaint further alleged that the servicer included in the Second Agreement improper costs and fees in calculating her arrearages and demanded amounts that were not yet due and owing.
The trial court granted summary judgment in favor of the servicer and loan owner, holding that the NJCFA did not apply to "post-judgment settlement agreements entered into to stave off a foreclosure sale." The court reasoned that the NJCFA was not intended to apply to settlement agreements entered into by parties to a lawsuit, and that the surviving mortgagor's only option for relief was to file a motion to vacate, modify, or enforce the settlement.
The appellate court reversed the trial court judgment, holding that the agreements were contracts covered by the NJCFA and that the surviving mortgagor had standing under the NJCFA because she was a signatory to the post-judgment agreements. The appellate court also concluded, among other things, that, if proven, the surviving mortgagor's monetary damages from the servicer's alleged unconscionable practices satisfied the NJCFA's "ascertainable loss" requirement. The New Jersey Supreme Court affirmed the appellate court's ruling, and reinstated the surviving mortgagor's alleged cause of action.
The Supreme Court of New Jersey held that the NJCFA provides relief if a consumer can prove: (1) an unlawful practice prohibited by the CFA; (2) an "ascertainable loss"; and (3) a causal relationship between the misconduct and the loss. Citing Lemelledo v. Beneficial Mgmt. Corp., 150 N.J. 255 (1997), the Supreme Court noted that the broad language of the NJCFA applies to lending activities and to the sale of insurance related to a loan, and that an unlawful practice under the CFA includes a person's use of "any unconscionable commercial practice . . . in connection with the sale or advertisement of any merchandise or real estate, or with the subsequent performance of such person." The Court further observed that an "ascertainable loss" includes one incurred through improper "loan packing," such as forcing the borrower to purchase unnecessary insurance.
The Court rejected the defendants' assertion that the alleged collection activities of a servicer do not constitute "subsequent performance" in connection with a loan. Without deciding whether the forbearance agreements and the servicer's alleged collection activities were the "subsequent performance" with respect to the original loan, the Court concluded that "the post-judgment agreements, standing alone, constitute the extension of credit, or a new loan, and that [the servicer's] collection activities may be characterized as 'subsequent performance' in connection with [that] extension of credit."
The Court remarked that the servicer's alleged dealings with the surviving mortgagor "placed her on a credit merry-go-round" that "would keep her in a constant state of arrearages." The Court also further pointed out that these were not ordinary settlement agreements, as the mortgagor was not only required to pay the original monthly payments, but also additional charges such as foreclosure, attorney, and lender-placed insurance fees.
The Court enumerated certain factors regarding the servicer's alleged conduct with respect to the forbearance agreements that appeared questionable, including: (1) what this court described as the servicer's "inexplicably" contacting the surviving mortgagor and negotiating with her directly even though she was represented by an attorney and did not speak or read English; (2) the servicer's threat to foreclose even though the mortgagor allegedly had made every payment under the Second Agreement; (3) the servicer's alleged inability to explain how it arrived at the arrearages figure in the Second Agreement or why the loan was not considered current; and (4) the Second Agreement's requirement to purchase supposedly unnecessary lender-placed insurance.
The Court further rejected the servicer's and loan owner's argument that the NJCFA is not an available remedy and that the only options available to the mortgagor were either to seek relief from the post-judgment agreements or to pursue common law claims based on breach of contract and/or fraud. The Court observed that the relief available under the NJCFA is in addition to any other relief provided by state or federal law.
In addition, the Court stated that there was no need to address whether a direct relationship existed with the non-borrower mortgagor and the originating lender. Rather, the assignment of the note and mortgage to the loan owner and the appointment of the servicer substituted them for the originating lender with regard to the mortgagor. The Court also stated that, [a]s a practical matter . . . the agreements were nothing more than a recasting of the original loan," and concluded that the forbearance agreements established privity" between the parties.
In remanding to determine whether the defendants' conduct fell below the NJCFA's permissible standard, the Court stressed that its decision did not extend to settlement agreements generally. The Court limited its holding to the narrow issue of the applicability of the NJCFA to the creation of and collection on a post-foreclosure judgment agreement involving a stand-alone extension of credit.
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