The Indiana Supreme Court recently held that a mortgage lender who failed to make a junior lienholder a party to a foreclosure action could not institute a new and subsequent foreclosure action against the junior lienholder, because the first mortgage lender's lien was extinguished by the doctrine of merger.
A copy of the opinion is available at:
http://www.in.gov/judiciary/opinions/pdf/06291102rdr.pdf
Countrywide Home Loans, Inc. ("Countrywide") foreclosed on a property, bid its judgment and took title to the property by way of a sheriff's deed.
In error, Countrywide did not make Citizens State Bank of New Castle ("Citizens") a party to the foreclosure action, although Citizens held a judgment lien on the property. Countrywide then conveyed title to the
property to Federal National Mortgage Association ("FNMA").
When Countrywide discovered Citizens' judgment lien, Countrywide filed an action titled "Complaint for Strict Foreclosure," seeking to foreclose Citizens' interest in the subject property. Citizens filed a separate action against FNMA attempting to foreclose on its judgment lien. The two actions were consolidated, each side moved for summary judgment, and the trial court granted the motion brought by Countrywide and FNMA.
Citizens appealed and the appellate court reversed, on the grounds that through the doctrine of merger, Countrywide's lien was extinguished. The Indiana Supreme Court granted transfer, vacating the opinion of the appellate court.
As you may recall, the doctrine of merger provides that when one party acquires both a lien on and legal title to a property, the two interests merge, and the lien is extinguished. However, merger may produce an arguably unfair result where it operates to give a junior lienholder priority over a senior lienholder. Therefore, an exception to the doctrine of merger provides that merger will not take place if it is against the best interests of the party in whom the interests merge.
The Court began its analysis by nothing that, under Indiana law, a junior lienholder not made a party to a foreclosure action is not bound by the foreclosure. In such circumstances, a purchaser at a foreclosure sale takes the property subject to the junior lienholder's interest.
Next, the Court scrutinized the merger and anti-merger doctrines. It concluded that although courts must presume that the mortgagee intended the result that it was in its best interest, that presumption can be rebutted by evidence finding that a merger had been expressly agreed to.
The Court found such evidence here. When Countrywide conveyed its interest in the property to FNMA, it used language which indicated that the title conveyed was free from all encumbrances. The Court reasoned that Countrywide could only make such a conveyance if Countrywide's lien had been extinguished through merger.
Because "Countrywide demonstrated that it intended a merger of its interests," the Court held that Countrywide was not entitled to the remedy of strict foreclosure. Thus, the decision of the trial court was reversed.
Friday, July 15, 2011
Foreclosure case goes to Supreme Court of Florida
http://pdfserver.amlaw.com/dbr/Nieves-appeal.pdf
In Nieves' case, the 4th District Court of Appeal ruled Feb. 3 that BNY Mellon legally avoided a claim that it committed a fraud on the court by voluntarily dismissing a foreclosure action against Pino, a Lake Worth, Fla., resident. The claim was dismissed after Pino's counsel scheduled depositions and asked for an evidentiary hearing to determine whether BNY Mellon used a fraudulent mortgage assignment.
On appeal is an 8-1 en banc decision saying courts have no authority to rescind voluntary dismissals and that no harm was done. Judge Mark Polen disagreed, saying the allegation of a systemic fraud was the very thing the Supreme Court addressed in its 2010 rule change giving courts greater latitude in sanctioning plaintiffs who make false allegations.
http://www.law.com/jsp/law/sfb/article.jsp?id=1202501156555&src=EMC-Email&et=editorial&bu=Law.com&pt=LAWCOM%20Newswire&cn=nw20110715&kw=Newcomer%20to%20Argue%20High-Stakes%20Foreclosure%20Case%20Before%20Fla.%20Supreme%20Court
In Nieves' case, the 4th District Court of Appeal ruled Feb. 3 that BNY Mellon legally avoided a claim that it committed a fraud on the court by voluntarily dismissing a foreclosure action against Pino, a Lake Worth, Fla., resident. The claim was dismissed after Pino's counsel scheduled depositions and asked for an evidentiary hearing to determine whether BNY Mellon used a fraudulent mortgage assignment.
On appeal is an 8-1 en banc decision saying courts have no authority to rescind voluntary dismissals and that no harm was done. Judge Mark Polen disagreed, saying the allegation of a systemic fraud was the very thing the Supreme Court addressed in its 2010 rule change giving courts greater latitude in sanctioning plaintiffs who make false allegations.
http://www.law.com/jsp/law/sfb/article.jsp?id=1202501156555&src=EMC-Email&et=editorial&bu=Law.com&pt=LAWCOM%20Newswire&cn=nw20110715&kw=Newcomer%20to%20Argue%20High-Stakes%20Foreclosure%20Case%20Before%20Fla.%20Supreme%20Court
FRB/FTC Issue Final Rule on Dodd-Frank Act Changes to Risk-Based Pricing, Adverse Action Notices
The Federal Reserve Board and the Federal Trade Commission (FTC) issued their final rules implementing the new credit score disclosure requirements under Dodd-Frank, specifically relating to adverse actions and risk-based pricing notices under FCRA/Regulation V and ECOA/Regulation B.
Model forms are also provided.
Copies of the Final Rules are available at:
Regulation V:
http://www.federalreserve.gov/newsevents/press/bcreg/bcreg20110706a1.pdf
Regulation B:
http://www.federalreserve.gov/newsevents/press/bcreg/bcreg20110706a2.pdf
Under section 311 of FACTA, if a credit score is used in setting material terms of credit or in taking adverse action, creditors must disclose credit scores and related information to consumers in notices. Section 1100F of the Dodd-Frank Act changed the content required for risk-based pricing notices. Accordingly, the final rules amend Regulation V to revise the content requirements for risk-based pricing notices, and to add related model forms that reflect the new credit score disclosure requirements.
The final rules also amend certain model notices in Regulation B, which combine the adverse action notice requirements for Regulation B and the FCRA, to reflect the new credit score disclosure requirements
The rules under Regulations V and B are effective 30 days after the date of publication in the Federal Register, which is expected shortly.
Model forms are also provided.
Copies of the Final Rules are available at:
Regulation V:
http://www.federalreserve.gov/newsevents/press/bcreg/bcreg20110706a1.pdf
Regulation B:
http://www.federalreserve.gov/newsevents/press/bcreg/bcreg20110706a2.pdf
Under section 311 of FACTA, if a credit score is used in setting material terms of credit or in taking adverse action, creditors must disclose credit scores and related information to consumers in notices. Section 1100F of the Dodd-Frank Act changed the content required for risk-based pricing notices. Accordingly, the final rules amend Regulation V to revise the content requirements for risk-based pricing notices, and to add related model forms that reflect the new credit score disclosure requirements.
The final rules also amend certain model notices in Regulation B, which combine the adverse action notice requirements for Regulation B and the FCRA, to reflect the new credit score disclosure requirements
The rules under Regulations V and B are effective 30 days after the date of publication in the Federal Register, which is expected shortly.
Tuesday, July 12, 2011
9th Circuit Oral Argument on Chapter 13 Mortgage Addendum- Monthly Statements
• In re Monroy, No. 10-60005- 9th Circuit Oral Argument on Chapter 13 Mortgage Addendum
http://www.ca9.uscourts.gov/media/view_subpage.php?pk_id=0000007730
http://www.ca9.uscourts.gov/media/view_subpage.php?pk_id=0000007730
Tuesday, July 5, 2011
Casey Anthony Off on Murder and Manslaughter
It just goes to show that a juror is made up of 12 people too stupid to get out of jury duty!
"What do guilty people do? They lie. They avoid. They run. They mislead, not just to their family, but the police. They divert attention away from themselves and they act like nothing is wrong. That's why you heard about what happened in those 31 days."
"What do guilty people do? They lie. They avoid. They run. They mislead, not just to their family, but the police. They divert attention away from themselves and they act like nothing is wrong. That's why you heard about what happened in those 31 days."
In Re Veal 9th Cir. BAP
The United States Bankruptcy Appellate Panel of the Ninth Circuit recently overturned a bankruptcy court’s orders granting stay relief and allowing the filing of a proof of claim. Under the facts at issue, the Ninth Circuit Bankruptcy Appellate Panel (the “BAP”) held that the parties seeking relief from the automatic stay and filing a proof of claim lacked standing to enforce the mortgage and promissory note at issue.
In two related bankruptcy appeals, the debtors asserted that the asset securitization trust ("Trust") and mortgage loan servicer ("Servicer") lacked standing as real parties in interest to obtain the relief they sought from the bankruptcy court. In one the debtors' Chapter 13 bankruptcy, Trust filed a motion for relief from the automatic bankruptcy stay in order to foreclose its interest in the debtors’ mortgage loan that it purportedly acquired by way of assignment. Similarly, Servicer filed a proof of claim in the bankruptcy as Trust’s servicing agent.
Based in part on the documentation submitted by Trust and Servicer, the bankruptcy court determined that Trust had standing to obtain relief from the stay and also allowed Servicer’s proof of claim, over the debtors’
objection. The debtors appealed, and the BAP reversed.
As to the appeal regarding Servicer’s proof of claim on behalf of the Trust, the BAP noted that the bankruptcy court failed to make any findings necessary to determine the central issue of Servicer’s standing as a “person entitled to enforce” the mortgage obligation or as the agent of such a person. The BAP held that Servicer presented insufficient evidence showing that it had enforcement rights under the Note or that it had an agency relationship with the Trust. The BAP also held that Servicer presented insufficient evidence as to who possessed the Note and insufficient evidence showing indorsement of the Note either in its favor or in favor of the Trust, for which Servicer was allegedly acting as servicer. Thus, according to the BAP, Servicer could not establish that it held enforcement rights under the Note.
Here, Servicer submitted: (1) a copy of the Note bearing indorsement to Servicer's predecessor in interest; (2) a letter from Servicer's in-house counsel attesting to the indorsee's status as predecessor in interest to Servicer; (3) a copy of the Mortgage; and (4) a copy of the Assignment of Mortgage to Servicer's predecessor in interest. The BAP objected to and refused to allow into evidence the unauthenticated letter from Servicer's in-house counsel attesting to the indorsee's status as predecessor in interest to Servicer.
According to the BAP, to obtain stay relief, Trust had to show that it either was a “person entitled to enforce” the Note under Article 3 of the UCC (as a “holder” of the Note or as a “nonholder in possession . . . who has the rights of a holder”), or that it had an “ownership or other property interest in the Note” under Article 9. See UCC §§ 3-301(i); 3-301(ii); 9-109(a)(3)(respectively pertaining to a holder of a note, a nonholder in possession, and transfer of ownership of a note).
As to the appeal regarding Trust's motion for relief from stay, the BAP noted that none of the evidence submitted by Trust placed it into one of these categories. Indeed, the evidence failed to show that the
assignment of the mortgage to Trust included any interest in the promissory Note itself. The BAP pointed out that the record lacked any evidence of an indorsement of the Note to Trust. The BAP further noted that under applicable law, the assignment of a mortgage without the Note is a “nullity,” thereby rendering the mortgage ineffective and the Note an unsecured debt. Thus, the BAP concluded that the bankruptcy court erred in determining that Trust had an enforceable interest in the Note and erred in granting Trust’s motion for relief from stay.
Here, the Trust submitted the following documents: (1) a copy of the Mortgage; (2) an itemization of postpetition amounts due; (3) the debtors' Schedules A and D; (4) a copy of the Note, indorsed to Servicer's predecessor in interest; (5) a copy of the Assignment of Mortgage to Servicer's predecessor in interest; and (6) a copy of another Assignment of Mortgage, recorded after the filing of the first relief from stay motion, from Servicer's predecessor in interest to Trust. The BAP noted that, although the first assignment of mortgage included an assignment of the Note to Servicer's predecessor in interest, the second assignment of mortgage to Trust did not contain such an assignment of the Note. The BAP also noted that the documents were not authenticated.
In summary, the BAP reversed the stay relief order and vacated the bankruptcy court’s order overruling the debtors’ claim objection, and remanded for further proceedings on the proof of claim.
In two related bankruptcy appeals, the debtors asserted that the asset securitization trust ("Trust") and mortgage loan servicer ("Servicer") lacked standing as real parties in interest to obtain the relief they sought from the bankruptcy court. In one the debtors' Chapter 13 bankruptcy, Trust filed a motion for relief from the automatic bankruptcy stay in order to foreclose its interest in the debtors’ mortgage loan that it purportedly acquired by way of assignment. Similarly, Servicer filed a proof of claim in the bankruptcy as Trust’s servicing agent.
Based in part on the documentation submitted by Trust and Servicer, the bankruptcy court determined that Trust had standing to obtain relief from the stay and also allowed Servicer’s proof of claim, over the debtors’
objection. The debtors appealed, and the BAP reversed.
As to the appeal regarding Servicer’s proof of claim on behalf of the Trust, the BAP noted that the bankruptcy court failed to make any findings necessary to determine the central issue of Servicer’s standing as a “person entitled to enforce” the mortgage obligation or as the agent of such a person. The BAP held that Servicer presented insufficient evidence showing that it had enforcement rights under the Note or that it had an agency relationship with the Trust. The BAP also held that Servicer presented insufficient evidence as to who possessed the Note and insufficient evidence showing indorsement of the Note either in its favor or in favor of the Trust, for which Servicer was allegedly acting as servicer. Thus, according to the BAP, Servicer could not establish that it held enforcement rights under the Note.
Here, Servicer submitted: (1) a copy of the Note bearing indorsement to Servicer's predecessor in interest; (2) a letter from Servicer's in-house counsel attesting to the indorsee's status as predecessor in interest to Servicer; (3) a copy of the Mortgage; and (4) a copy of the Assignment of Mortgage to Servicer's predecessor in interest. The BAP objected to and refused to allow into evidence the unauthenticated letter from Servicer's in-house counsel attesting to the indorsee's status as predecessor in interest to Servicer.
According to the BAP, to obtain stay relief, Trust had to show that it either was a “person entitled to enforce” the Note under Article 3 of the UCC (as a “holder” of the Note or as a “nonholder in possession . . . who has the rights of a holder”), or that it had an “ownership or other property interest in the Note” under Article 9. See UCC §§ 3-301(i); 3-301(ii); 9-109(a)(3)(respectively pertaining to a holder of a note, a nonholder in possession, and transfer of ownership of a note).
As to the appeal regarding Trust's motion for relief from stay, the BAP noted that none of the evidence submitted by Trust placed it into one of these categories. Indeed, the evidence failed to show that the
assignment of the mortgage to Trust included any interest in the promissory Note itself. The BAP pointed out that the record lacked any evidence of an indorsement of the Note to Trust. The BAP further noted that under applicable law, the assignment of a mortgage without the Note is a “nullity,” thereby rendering the mortgage ineffective and the Note an unsecured debt. Thus, the BAP concluded that the bankruptcy court erred in determining that Trust had an enforceable interest in the Note and erred in granting Trust’s motion for relief from stay.
Here, the Trust submitted the following documents: (1) a copy of the Mortgage; (2) an itemization of postpetition amounts due; (3) the debtors' Schedules A and D; (4) a copy of the Note, indorsed to Servicer's predecessor in interest; (5) a copy of the Assignment of Mortgage to Servicer's predecessor in interest; and (6) a copy of another Assignment of Mortgage, recorded after the filing of the first relief from stay motion, from Servicer's predecessor in interest to Trust. The BAP noted that, although the first assignment of mortgage included an assignment of the Note to Servicer's predecessor in interest, the second assignment of mortgage to Trust did not contain such an assignment of the Note. The BAP also noted that the documents were not authenticated.
In summary, the BAP reversed the stay relief order and vacated the bankruptcy court’s order overruling the debtors’ claim objection, and remanded for further proceedings on the proof of claim.
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
http://www.occ.gov/news-issuances/bulletins/2011/bulletin-2011-29.html
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:
http://www.occ.gov/news-issuances/bulletins/2011/bulletin-2011-29.html
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:
http://www.occ.gov/news-issuances/news-releases/2011/nr-occ-2011-47a.pdf
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.
http://www.occ.gov/news-issuances/bulletins/2011/bulletin-2011-29.html
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:
http://www.occ.gov/news-issuances/bulletins/2011/bulletin-2011-29.html
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:
http://www.occ.gov/news-issuances/news-releases/2011/nr-occ-2011-47a.pdf
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.
PROGRAM LOOKS TO PROVIDE MORE MONEY FOR STRUGGLING HOMEOWNERS
For the roughly four million homeowners who have fallen behind on their mortgage payments, the federal government is offering yet another remedy: free money to catch up on their loans, SmartMoney.com reported today. The effort, called the Emergency Homeowners Loan Program, is the latest in the federal government's efforts to slow down the flood of foreclosures, a necessary step to a meaningful recovery in the housing market, says a Department of Housing and Urban Development official. Loans of up to $50,000 that do not actually need to be repaid if applicants meet certain requirements. http://www.smartmoney.com/spend/real-estate/more-money-for-struggling-homeowners-1309312646029/#printMode
to apply http://ehlp.nw.org/
docs http://ehlp.nw.org/documents/EHLPDocumentChecklistforHomeownersSelectedintheLottery.pdf
program
http://ehlp.nw.org/findaforeclosurecounselorEHLP.asp
EHLP is only available in the following states/territory: Alaska, Arkansas, Colorado, Hawaii, Iowa, Kansas, Louisiana, Maine, Massachusetts, Minnesota, Missouri, Montana, Nebraska, New Hampshire, New Mexico, New York, North Dakota, Oklahoma, Puerto Rico, South Dakota, Texas, Utah, Vermont, Virginia, Washington, West Virginia, Wisconsin, and Wyoming.
Those states that are not identified above (non-EHLP states) receive direct assistance through the U.S. Treasury's Innovation Fund for Hardest Hit Housing Market Program. The list of Hardest Hit Fund states is provided below. If you live in one of these states, click on that state's name to find out more about Hardest Hit Housing Market Program that is available where you live. Alabama, Arizona, California, Florida, Georgia, Illinois, Indiana, Kentucky, Michigan, Mississippi, Nevada, New Jersey, North Carolina, Ohio, Oregon, Rhode Island, South Carolina, Tennessee, Washington DC
An eligible homeowner:
• Must be a Florida resident;
• Must occupy property as primary residence (the property cannot be vacant, abandoned or rented);
• Borrower/co-borrower must be unemployed or underemployed through no fault of his/her own, which makes the first mortgage unaffordable;
• Must have documented total household income at or below 140% of the area median income (AMI), adjusted for household size;
• Must have an active checking/savings account that can be debited by the ACH method of funds transfer;
• May not have unencumbered assets of $5,000 or more, or three times the current monthly mortgage payment (whichever is greater);
• Cannot have a bankruptcy that has not been discharged or dismissed; and
• Cannot have been convicted of a mortgage-related felony in the last 10 years.
The current mortgage:
• Must be serviced by a participating lender, who agrees to accept payments on behalf of the homeowner;
• Must not be more than 180 days past due at the time of application;
• Must have been originated on or before January 1, 2009; and
• Must have an existing principal balance of less than $400,000.
https://www.flhardesthithelp.org/
http://www.floridamortgagecorp.com/area_median_income.htm
PASCO COUNTY, FL $54,400
PINELLAS COUNTY, FL $54,400
POLK COUNTY, FL $49,500
HILLSBOROUGH COUNTY, FL $54,400
http://homes.point2.com/Neighborhood/US/Florida/Pinellas-County-Demographics.aspx
http://www.huduser.org/portal/datasets/il/il2009/2009ILCalc.odb?inputname=Pinellas%
20County&area_id=METRO45300M45300&fips=1205399999&type=county&year=2009&yy=09&stname=Florida&stusps=FL&statefp=12&ACS_Survey=Yes&State_Count=1.0&areaname=Pinellas%20County&wherefrom=mtsp&level=50
to apply http://ehlp.nw.org/
docs http://ehlp.nw.org/documents/EHLPDocumentChecklistforHomeownersSelectedintheLottery.pdf
program
http://ehlp.nw.org/findaforeclosurecounselorEHLP.asp
EHLP is only available in the following states/territory: Alaska, Arkansas, Colorado, Hawaii, Iowa, Kansas, Louisiana, Maine, Massachusetts, Minnesota, Missouri, Montana, Nebraska, New Hampshire, New Mexico, New York, North Dakota, Oklahoma, Puerto Rico, South Dakota, Texas, Utah, Vermont, Virginia, Washington, West Virginia, Wisconsin, and Wyoming.
Those states that are not identified above (non-EHLP states) receive direct assistance through the U.S. Treasury's Innovation Fund for Hardest Hit Housing Market Program. The list of Hardest Hit Fund states is provided below. If you live in one of these states, click on that state's name to find out more about Hardest Hit Housing Market Program that is available where you live. Alabama, Arizona, California, Florida, Georgia, Illinois, Indiana, Kentucky, Michigan, Mississippi, Nevada, New Jersey, North Carolina, Ohio, Oregon, Rhode Island, South Carolina, Tennessee, Washington DC
An eligible homeowner:
• Must be a Florida resident;
• Must occupy property as primary residence (the property cannot be vacant, abandoned or rented);
• Borrower/co-borrower must be unemployed or underemployed through no fault of his/her own, which makes the first mortgage unaffordable;
• Must have documented total household income at or below 140% of the area median income (AMI), adjusted for household size;
• Must have an active checking/savings account that can be debited by the ACH method of funds transfer;
• May not have unencumbered assets of $5,000 or more, or three times the current monthly mortgage payment (whichever is greater);
• Cannot have a bankruptcy that has not been discharged or dismissed; and
• Cannot have been convicted of a mortgage-related felony in the last 10 years.
The current mortgage:
• Must be serviced by a participating lender, who agrees to accept payments on behalf of the homeowner;
• Must not be more than 180 days past due at the time of application;
• Must have been originated on or before January 1, 2009; and
• Must have an existing principal balance of less than $400,000.
https://www.flhardesthithelp.org/
http://www.floridamortgagecorp.com/area_median_income.htm
PASCO COUNTY, FL $54,400
PINELLAS COUNTY, FL $54,400
POLK COUNTY, FL $49,500
HILLSBOROUGH COUNTY, FL $54,400
http://homes.point2.com/Neighborhood/US/Florida/Pinellas-County-Demographics.aspx
http://www.huduser.org/portal/datasets/il/il2009/2009ILCalc.odb?inputname=Pinellas%
20County&area_id=METRO45300M45300&fips=1205399999&type=county&year=2009&yy=09&stname=Florida&stusps=FL&statefp=12&ACS_Survey=Yes&State_Count=1.0&areaname=Pinellas%20County&wherefrom=mtsp&level=50
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."
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."
Thursday, June 30, 2011
4th Cir Says Offer of Judgment "As Full and Complete Satisfaction" Does Not Include Attorney's Fees and Costs
The U.S. Court of Appeals for the Fourth Circuit recently held that a party who accepts an offer of judgment pursuant to Fed. R. Civ. P. 68(a) "as full and complete satisfaction" of the claims asserted may then still be awarded additional attorney's fees and court costs.
A copy of the opinion is available at:
http://pacer.ca4.uscourts.gov/opinion.pdf/101203.P.pdf
The plaintiff initiated a suit against various public employees and organizations (collectively, the "defendants") in connection with her husband's suicide. The defendants extended an offer of judgment pursuant to Rule 68(a) ("the offer of judgment") in the amount of $30,000.
The offer of judgment provided that it was extended "as full and complete satisfaction of [the plaintiff's] claim against.[the d]efendants." The offer did not mention attorney's fees or court costs.
The plaintiff accepted the offer of judgment. After accepting the offer, the plaintiff asked the lower court for the agreed-upon sum of $30,000, in addition to $120,702.55 to cover attorney's fees and costs. Over defendants' objection, the lower court awarded the plaintiff $66,463.80 in fees and costs. The defendants appealed.
As you may recall, Rule 68(a) provides that "a party defending against a claim may serve on an opposing party an offer to allow judgment on specified terms, with the costs then accrued." In addition, courts are "obliged by the terms of the rule" to award an additional amount for attorneys' fees and costs, "if the offer does not state that costs are included and an amount for costs is not specified." Marek v. Chesy, 473 U.S. 1, 7 (1985).
The defendants advanced several arguments against the lower's court decision, arguing: (1) that because the offer was made in "full and complete" satisfaction of the plaintiff's claim, and the plaintiff asked for attorney's fees and costs as part of that claim, the offer did in fact refer to those fees and costs; (2) that Rule 68 was intended to encourage settlement, and that the lower court's interpretation frustrates that goal; and (3) principles of equity.
The Fourth Circuit did not find any of these arguments convincing.
The Court rejected the defendants' first argument because the cases relied upon by the defendants involved plaintiffs who sought awards of attorney's fees as the principal relief sought. As attorney's fees were not the principal relief sought in this matter, the Court found the cases relied upon to be distinguishable from the matter at hand. The Court rejected the defendants' second argument on the grounds that the defendants could easily have drafted their offer to specify that it included attorney's fees and costs. Finally, the Court rejected the defendants' third argument on the grounds that it was "wholly foreclosed" by the Supreme Court's decision in Marek v. Chesny, among other reasons.
Therefore, the Court affirmed the lower court's decision to award attorney's fees and costs to Plaintiff.
A copy of the opinion is available at:
http://pacer.ca4.uscourts.gov/opinion.pdf/101203.P.pdf
The plaintiff initiated a suit against various public employees and organizations (collectively, the "defendants") in connection with her husband's suicide. The defendants extended an offer of judgment pursuant to Rule 68(a) ("the offer of judgment") in the amount of $30,000.
The offer of judgment provided that it was extended "as full and complete satisfaction of [the plaintiff's] claim against.[the d]efendants." The offer did not mention attorney's fees or court costs.
The plaintiff accepted the offer of judgment. After accepting the offer, the plaintiff asked the lower court for the agreed-upon sum of $30,000, in addition to $120,702.55 to cover attorney's fees and costs. Over defendants' objection, the lower court awarded the plaintiff $66,463.80 in fees and costs. The defendants appealed.
As you may recall, Rule 68(a) provides that "a party defending against a claim may serve on an opposing party an offer to allow judgment on specified terms, with the costs then accrued." In addition, courts are "obliged by the terms of the rule" to award an additional amount for attorneys' fees and costs, "if the offer does not state that costs are included and an amount for costs is not specified." Marek v. Chesy, 473 U.S. 1, 7 (1985).
The defendants advanced several arguments against the lower's court decision, arguing: (1) that because the offer was made in "full and complete" satisfaction of the plaintiff's claim, and the plaintiff asked for attorney's fees and costs as part of that claim, the offer did in fact refer to those fees and costs; (2) that Rule 68 was intended to encourage settlement, and that the lower court's interpretation frustrates that goal; and (3) principles of equity.
The Fourth Circuit did not find any of these arguments convincing.
The Court rejected the defendants' first argument because the cases relied upon by the defendants involved plaintiffs who sought awards of attorney's fees as the principal relief sought. As attorney's fees were not the principal relief sought in this matter, the Court found the cases relied upon to be distinguishable from the matter at hand. The Court rejected the defendants' second argument on the grounds that the defendants could easily have drafted their offer to specify that it included attorney's fees and costs. Finally, the Court rejected the defendants' third argument on the grounds that it was "wholly foreclosed" by the Supreme Court's decision in Marek v. Chesny, among other reasons.
Therefore, the Court affirmed the lower court's decision to award attorney's fees and costs to Plaintiff.
Wednesday, June 29, 2011
Merriganv. Bank of New York Mellon, et al, No. 2D11-178, June 24, 2011, Second District Court of Appeal
April, 2011-ACLU filed petition in appellate court alleging Lee County rocket docket (12-2008), processing foreclosure cases differently than other civil cases, violates due process
Merriganin foreclosure after leaving job to care for husband injured in car accident
Merriganintended to vigorously defend case and sought re-assignment to general civil docket
ACLU: deck stacked against homeowners, Florida Supreme Court said clearing cases must comport with fairly adjudicating cases on merits
Florida legislature funded senior judges for backlog, funding ends June 30th, 2011
Lee chief Circuit Judge responded that rocket docket allows parties to opt out and have norehearings
Appellate Court ruled that case management system does not summarily impact due process, courts can manage caseload
Merriganin foreclosure after leaving job to care for husband injured in car accident
Merriganintended to vigorously defend case and sought re-assignment to general civil docket
ACLU: deck stacked against homeowners, Florida Supreme Court said clearing cases must comport with fairly adjudicating cases on merits
Florida legislature funded senior judges for backlog, funding ends June 30th, 2011
Lee chief Circuit Judge responded that rocket docket allows parties to opt out and have norehearings
Appellate Court ruled that case management system does not summarily impact due process, courts can manage caseload
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
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
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
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