Foreclosure Fraud – Guide to Looking Up Public Records for Fraud

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Foreclosure Fraud – Mortgage Fraud

Assigment Fraud – Forgeries

Living Document – Check Back Often.

Helpful Guide For All States on how to research your recorded documents at county recorder and determine if there are possible forgeries or fraud when facing foreclosure. The evidence may help you stop your foreclosure or set aside a foreclosure. Forgery is illegal & criminal. More and more evidence in coming forth which indicates some of the notorious predatory lenders took shortcuts and did illegal document recordings and some with possible forgeries. Even though screen shots are from Florida counties, the information can be used in any state and for any county recorder.

GO GET YOUR RECORDED DOCUMENTS!!!

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JEROME DALY – THE MAHONEY CREDIT RIVER DECISION

A Minnesota Trial Court’s decision holding the Federal Reserve Act unconstitutional and VOID; holding the National Banking Act unconstitutional and VOID; declaring a mortgage acquired by the First National Bank of Montgomery, Minnesota in the regular course of its business, along with the foreclosure and the sheriff’s sale, to be VOID.

See all case files here Minnesota State Law Library – Credit River

A WORD FROM AN ASSOCIATE JUSTICE WHO KNEW AND WORKED WITH JUSTICE MARTIN V. MAHONEY, STATE OF MINNESOTA, ABOUT THE CASE.

The “Credit River Decision” handed down by a jury of 12 on a cold day in December, in the Credit River Township Hall, was an experience that I’ll never forget.

The Chief Justice of the Minnesota Supreme Court had phoned me a week before the trial and asked me if I would be an associate justice in assisting Justice Martin V. Mahoney since he had never handled a jury trial before. I accepted, and it took me two hours to get my car running in the 22 below zero weather.

I got to the court room about 30 minutes before trial, and helped get the wood stove going, since the trial was being held in an unheated store room of a general store. This was the first time I met Justice Mahoney, and I was impressed with his no nonsense manner of handling matters before him. My OB was to help pick the jury, and to keep Jerome Daly and the attorney representing the Bank of Montgomery from engaging in a fist fight. The court room was highly charged, and the Jury was all business.

The banker testified about the mortgage loan given to Jerome Daly, but then Daly cross examined the banker about the creating of money “out of thin air,” and the banker admitted that this was standard banking practice. When Justice Mahoney heard the banker testify that he could “create money out of thin air,” Mahoney said, “It sounds like fraud to me.” I looked at the faces of the jurors, and they were all agreeing with Mahoney by shaking their heads and by the looks on their faces.

I must admit that up until that point, I really didn’t believe Jerome’s theory, and thought he was making this up. After I heard the testimony of the banker, my mouth had dropped open in shock, and I was in complete disbelief. There was no doubt in my mind that the Jury would find for Daly.

Jerome Daly had taken on the banks, the Federal Reserve Banking System, and the money lenders, and had won.

It is now twenty eight years since this “Landmark Decision,” and Justice Mahoney is quoted more often than any Supreme Court justice ever was. The money boys that run the “private Federal Reserve Bank” soon got back at Mahoney by poisoning him in what appeared to have been a fishing boat accident (but with his body pumped full of poison) in June of 1969, less than 6 months later.

Both Jerome Daly and Justice Martin V. Mahoney are truly the greatest men that I have ever had the pleasure to meet. The Credit River Decision was and still is the most important legal decision ever decided by a Jury.

Bill Drexler

THE MAHONEY CREDIT RIVER DECISION

RE: First National Bank of Montgomery vs. Jerome Daly

IN THE JUSTICE COURT

STATE OF MINNESOTA

COUNTY OF SCOTT

TOWNSHIP OF CREDIT RIVER

JUSTICE MARTIN V. MAHONEY

First National Bank of Montgomery,
Plaintiff
vs
Jerome Daly,
Defendant

JUDGMENT AND DECREE

The above entitled action came on before the Court and a Jury of 12 on December 7, 1968 at 10:00 am. Plaintiff appeared by its President Lawrence V. Morgan and was represented by its Counsel, R. Mellby. Defendant appeared on his own behalf.

A Jury of Talesmen were called, impaneled and sworn to try the issues in the Case. Lawrence V. Morgan was the only witness called for Plaintiff and Defendant testified as the only witness in his own behalf.

Plaintiff brought this as a Common Law action for the recovery of the possession of Lot 19 Fairview Beach, Scott County, Minn. Plaintiff claimed title to the Real Property in question by foreclosure of a Note and Mortgage Deed dated May 8, 1964 which Plaintiff claimed was in default at the time foreclosure proceedings were started.

Defendant appeared and answered that the Plaintiff created the money and credit upon its own books by bookkeeping entry as the consideration for the Note and Mortgage of May 8, 1964 and alleged failure of the consideration for the Mortgage Deed and alleged that the Sheriff’s sale passed no title to plaintiff.

The issues tried to the Jury were whether there was a lawful consideration and whether Defendant had waived his rights to complain about the consideration having paid on the Note for almost 3 years.

Mr. Morgan admitted that all of the money or credit which was used as a consideration was created upon their books, that this was standard banking practice exercised by their bank in combination with the Federal Reserve Bank of Minneapolis, another private Bank, further that he knew of no United States Statute or Law that gave the Plaintiff the authority to do this. Plaintiff further claimed that Defendant by using the ledger book created credit and by paying on the Note and Mortgage waived any right to complain about the Consideration and that the Defendant was estopped from doing so.

At 12:15 on December 7, 1968 the Jury returned a unanimous verdict for the Defendant.

Now therefore, by virtue of the authority vested in me pursuant to the Declaration of Independence, the Northwest Ordinance of 1787, the Constitution of United States and the Constitution and the laws of the State of Minnesota not inconsistent therewith ;

IT IS HEREBY ORDERED, ADJUDGED AND DECREED:

1.That the Plaintiff is not entitled to recover the possession of Lot 19, Fairview Beach, Scott County, Minnesota according to the Plat thereof on file in the Register of Deeds office.

2.That because of failure of a lawful consideration the Note and Mortgage dated May 8, 1964 are null and void.

3.That the Sheriff’s sale of the above described premises held on June 26, 1967 is null and void, of no effect.

4.That the Plaintiff has no right title or interest in said premises or lien thereon as is above described.

5.That any provision in the Minnesota Constitution and any Minnesota Statute binding the jurisdiction of this Court is repugnant to the Constitution of the United States and to the Bill of Rights of the Minnesota Constitution and is null and void and that this Court has jurisdiction to render complete Justice in this Cause.

The following memorandum and any supplementary memorandum made and filed by this Court in support of this Judgment is hereby made a part hereof by reference.

BY THE COURT

Dated December 9, 1968

Justice MARTIN V. MAHONEY

Credit River Township

Scott County, Minnesota

MEMORANDUM

The issues in this case were simple. There was no material dispute of the facts for the Jury to resolve.

Plaintiff admitted that it, in combination with the Federal Reserve Bank of Minneapolis, which are for all practical purposes, because of their interlocking activity and practices, and both being Banking Institutions Incorporated under the Laws of the United States, are in the Law to be treated as one and the same Bank, did create the entire $14,000.00 in money or credit upon its own books by bookkeeping entry. That this was the Consideration used to support the Note dated May 8, 1964 and the Mortgage of the same date. The money and credit first came into existence when they created it. Mr. Morgan admitted that no United States Law Statute existed which gave him the right to do this. A lawful consideration must exist and be tendered to support the Note. See Ansheuser-Busch Brewing Company v. Emma Mason, 44 Minn. 318, 46 N.W. 558. The Jury found that there was no consideration and I agree. Only God can create something of value out of nothing.

Even if Defendant could be charged with waiver or estoppel as a matter of Law this is no defense to the Plaintiff. The Law leaves wrongdoers where it finds them. See sections 50, 51 and 52 of Am Jur 2nd “Actions” on page 584 – “no action will lie to recover on a claim based upon, or in any manner depending upon, a fraudulent, illegal, or immoral transaction or contract to which Plaintiff was a party.”

Plaintiff’s act of creating credit is not authorized by the Constitution and Laws of the United States, is unconstitutional and void, and is not a lawful consideration in the eyes of the Law to support any thing or upon which any lawful right can be built.

Nothing in the Constitution of the United States limits the jurisdiction of this Court, which is one of original Jurisdiction with right of trial by Jury guaranteed. This is a Common Law action. Minnesota cannot limit or impair the power of this Court to render Complete Justice between the parties. Any provisions in the Constitution and laws of Minnesota which attempt to do so is repugnant to the Constitution of the United States and void. No question as to the Jurisdiction of this Court was raised by either party at the trial. Both parties were given complete liberty to submit any and all facts to the Jury, at least in so far as they saw fit.

No complaint was made by Plaintiff that Plaintiff did not receive a fair trial. From the admissions made by Mr. Morgan the path of duty was direct and clear for the Jury. Their Verdict could not reasonably been otherwise. Justice was rendered completely and without denial, promptly and without delay, freely and without purchase, conformable to the laws in this Court of December 7, 1968.

BY THE COURT

December 9, 1968

Justice Martin V. Mahoney

Credit River Township

Scott County, Minnesota.

Note: It has never been doubted that a Note given on a Consideration which is prohibited by law is void. It has been determined, independent of Acts of Congress, that sailing under the license of an enemy is illegal. The emission of Bills of Credit upon the books of these private Corporations for the purpose of private gain is not warranted by the Constitution of the United States and is unlawful. See Craig v. Mo. 4 Peters Reports 912. This Court can tread only that path which is marked out by duty. M.V.M.

JEROME DALY had his own information to reveal about this case, which establishes that between his own revealed information and the fact that Justice Martin V. Mahoney was murdered 6 months after he entered the Credit River Decision on the books of the Court, why the case was never legally overturned, nor can it be.

JEROME DALY’S OWN ENTRY

REGARDING JUSTICE MAHONEY’S MEMORANDUM

FORWARD: The above Judgment was entered by the Court on December 9, 1968. The issue there was simple – Nothing in the law gave the Banks the right to create money on their books. The Bank filed a Notice of Appeal within 10 days. The Appeals statutes must be strictly followed, otherwise the District Court does not acquire Jurisdiction upon Appeal. To effect the Appeal the Bank had to deposit $2.00 with the Clerk within 10 days for payment to the Justice when he made his return to the District Court. The Bank deposited two $1.00 Federal Reserve Notes. The Justice refused the Notes and refused to allow the Appeal upon the grounds that the Notes were unlawful and void for any purpose. The Decision is addressed to the legality of these Notes and the Federal Reserve System. The Cases of Edwards v. Kearnzey and Craig vs Missouri set out in the decision should be studied very carefully as they bear on the inviolability of Contracts. This is the Crux of the whole issue.

Jerome Daly

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American Bankers Association Comments on “QWR”s Qualified Writtern Requests

Scare Mail: Beware of “QWR”s

“Qualified Written Requests” under RESPA put mortgage servicers in a troublesome place. But there’s law on their side to help distinguish legitimate issues from abuse and harassment”

The past several months have seen mortgage lenders and servicers come under an unusual form of legal assault—one bearing the name of “QWR”, or in its unabbreviated form, the “qualified written request.”

QWRs have emerged as a troublesome legal and regulatory issue for banks, involving a somewhat obscure legal provision that is not widely understood by compliance professionals, nor much written about in compliance or legal journals.

Though obscure, they will get your attention if your institution begins receiving them.

How a QWR attack begins
In a typical—and growing—scenario, a bank will receive a letter from a mortgage borrower, or from an attorney or other agent purporting to act on behalf of that borrower. The letter will generally demand that the lender provide the inquirer with a wide-ranging amount of information concerning the borrower’s loan and the transaction in general.

The communication may assert that there is a defect or mistake in the borrower’s account, and  then demand that immediate action be taken to correct that mistake.

The letters often assert the existence of predatory lending and/or fraudulent activities that have hurt or negatively affected the borrower. The letters may make detailed demands for enormous amounts of information relating to all aspects of the loan’s origination and processing.

At other times, the letters may be simpler, asserting only slight oversights in the borrower’s escrow account calculation.

In all cases, the letters are marked as “Qualified Written Request” under Section 6 of RESPA. Whereas mere customer inquiries or complaints are not generally worrisome in the regulatory sense, the “QWR” label stirs legal consequences that servicers and lenders cannot ignore.

Bankers need to be prepared to properly handle this type of correspondence, and be able to distinguish between abusive or harassing letters versus those communications that carry legitimate consumer complaints and that are valid inquiries under federal law.

What the law says
QWRs are special and important because they arise under specific consumer protection law contained in Section 6 of the Real Estate Settlement Procedures Act (RESPA). Section 6 was added to RESPA in 1990, and generally imposes standards and requirements regarding the assignment sale or transfer of mortgage loan servicing. (12 U.S.C. Section 2605.) Under Section 6 of RESPA, borrowers are afforded a dispute resolution mechanism that gives rise to specific duties on the part of servicers where certain conditions are met.

RESPA’s Section 6 and Section 3500.21(e) of RESPA’s implementing regulations (Regulation X), provide that consumer inquiries would constitute QWRs where:

1. They are submitted in writing.

2. They include, or allow the servicer to identify, the name and account of the borrower.

3. They include a statement of the reasons for the borrower’s belief that the account is in error or must provide sufficient detail to the servicer about other information the borrower is seeking. (12 U.S.C. Section 2605(e)(1)(B)(ii))

Where all such items are included in correspondence to a mortgage loan servicer, the servicer must then provide written acknowledgment to the consumer within 20 business days of receipt of the request. The receipt of a QWR triggers an affirmative duty to investigate the problem identified by the consumer, which must be rectified or explained not later than 60 business days after the receipt of the request.

The relevance of the RESPA provisions set forth above is that, unlike other inquiries from consumers, the duties that arise from inquiries that qualify as a QWR have potent legal consequences.

Under RESPA, borrowers can institute a private lawsuit for a Section 6 violation. They can potentially then recover actual and statutory damages (up to $1,000 per violation), plus attorney’s fees.

Furthermore, class-action lawsuits are available in instances of pattern and practices of non-compliance, within three years, of the violation against a loan servicing company who refuses to comply with Section 6.

Lawsuits for violations of Section 6 may be brought in any federal district court in the district in which the property is located or where the violation is alleged to have occurred.

Finally, either HUD, a state attorney general, or state insurance commissioner may bring an injunctive action to enforce violations of Section 6 within three years.

Proper use? Or manipulation?
A quick internet search of the phrase “qualified written request” brings forth over 15 million “hits” on different websites that provide information, advice, and counsel regarding QWRs. The sites’ operators range from law firms to consumer protection outfits offering actual copies of QWR forms and instructions on how to use them.

This level of notice and interest on QWRs is increasingly apparent in bank operations as well, where loan servicers are finding themselves entangled in litigation or legal complaints that are premised on lengthy and elaborate requests from borrowers that demand information about their loans.

It is certainly no coincidence that the marked uptick in QWR filings is occurring in an economic environment of depressed market conditions and record defaults and foreclosures.

Banks very actively engage in outreach efforts to assist delinquent or financially stressed borrowers, in order to modify existing mortgage obligations. However, banking institutions also report marked increases in borrowers, at various stages of loan delinquency, that retain third-party loan workout or modification professionals to represent their interest in managing the default process and communications with the lender.

ABA member banks report that these “foreclosure and default specialists” operate by delivering to the servicer some sort of written correspondence, introducing themselves as representing the borrowers, and then advancing with very aggressive demands for information. Such demands for information are ostensibly made pursuant to “qualified written requests” under Section 6 of RESPA.

Although many borrower requests are simple inquiries for relevant servicing information, an alarmingly increasing share of these requests have evolved into full-fledged complaints that demand action by the servicing bank on a broad range of elements dealing with the mortgage loan that exceed the intended scope of the QWR process. In many instances, these abusive QWRs falsely assert misrepresentation and fraud at the loan origination stage and seek extraneous information about the securitization process. In still other cases, the sender hopes to use the purported QWR to obtain information with which to delay or stop a pending foreclosure.

Banks report that some requests resemble a legal complaint, demanding paragraph-by-paragraph responses to numerous and meticulous queries. Such requests are often frivolous and based on fictitious claims. The complaints are extremely burdensome and time-consuming in terms of response time and effort.

In many instances QWRs interrupt legitimate efforts to accommodate mortgage modification requests by deserving individuals and divert bank resources from helping qualified borrowers to wasting time on individuals that intend to simply game the process to their own ends.

Clearly then, any correspondence received by a bank that is marked as “QWR” should not be ignored.

The proper handling of these qualified requests is crucial for purposes of controlling legal risk and for the public relations interest of the bank. The important question for compliance professionals is, therefore, how should an institution respond to the QWR, and equally important, how should the institution handle requests that are plainly abusive or harassing?

Recognizing a QWR
How do you spot a true QWR?
1. The first step in managing written requests is to identify which filings constitute “qualified written requests” under RESPA and which do not.

As a preliminary matter, a request must specify the particular errors or omissions in the account, along with an explanation from the borrower of why he believes an error exists, in order to qualify as a QWR. A list of unsupported demands for information is not sufficient.

“A qualified written request must … include a statement of the reasons for the belief of the borrower that the account is in error.”  Walker v. Equity 1 Lenders Group, 2009 WL 1364430 *4-5 (S.D.Cal. 2009); Morilus v. Countrywide Home Loans, Inc., 2007 WL 1810676 at *3 (E.D.Pa. June 20, 2007); Harris v. Am. Gen. Fin., Inc., 2007 WL 4393818 *1 (10th Cir.2007); Pettie v. Saxon Mortg. Services, 2009 WL 1325947 *2, fn. 3 (W.D.Wash. 2009).

Thus, not all borrower inquiries or requests qualify as QWRs. Compliance professionals must therefore screen correspondence for proper identification.

2. Please note that if your institution is not a mortgage loan servicer, these provisions do not apply to you.

By coverage and definition, the RESPA provisions under Section 6 apply to only “servicers” as defined by the statute. If you do not service mortgage loans, the requirements described herein are inapplicable to your institution.

3. The bank must consider certain explicit statutory definitional elements. They are:

• A notice on a payment coupon or other payment medium supplied by the servicer does not constitute a QWR. 12 U.S.C. § 2605(e)(1)(B).

• A request made more than “[one] year after either the date of transfer of servicing or the date that the mortgage servicing loan amount was paid in full, whichever date is applicable” is likewise not a QWR. 24 C.F.R. § 3500.21(e)(2)(ii). (This language leaves unclear whether this one-year limitation applies to only the transferor or to both the transferor and the transferee. Some HUD guidance suggests that a loan’s current servicer must respond to a QWR at any time. See HUD-398-H(4), Buying Your Home: Settlement Costs and Helpful Information , 13 (June 1997) (“If you have a question during the life or your loan, RESPA requires [your servicer] to respond to you.”)  )

• The QWR provision applies only to mortgages secured by a first lien, thereby excluding subordinate-lien loans and open-end lines of credit. ( See 24 C.F.R. §§ 3500.21(a) and (e). See also Appendix A, infra, giving an overview of loans which are exempt from all RESPA requirements.)

Generally, then, if the loan is not a first mortgage, the inquiry does not constitute a QWR.

4. Banks and servicers must identify the proper scope of the request in determining whether the correspondence qualifies as a QWR.

Even where written requests meet all the explicit statutory tests set out above, RESPA still restricts such inquiries from becoming boundless requests for vague and indeterminate information.

RESPA requires a QWR to request information “relating to the servicing of the loan.” ( See 12 U.S.C. Section 2605(e)(1)(A)).

“Servicing” is defined as “receiving any scheduled periodic payments from a borrower pursuant to the terms of any loan, including amounts for escrow accounts described in Section10 [of RESPA], and making the payments of principle and interest and such other payments with respect to the amounts received from the borrower as may be required pursuant to the loan.”

(See 12 U.S.C. Section 2605(i)(3); see also MorEquity v. Nameem, 118 F. Supp. 2d 885, 901 (N.D. Ill. 2000).)

A QWR which requests no information related to servicing is not a valid QWR. In particular, requests related to origination do not qualify as QWRs.

(“[C]orrespondence about the validity of a loan does not constitute a qualified written request.”  Kee v. Fifth Third Bank, 2009 WL 735048 *6 (D.Utah 2009).

Although judicial cases have explicitly recognized this limitation when no information relating to servicing was requested, Regulation X explicitly recognizes that borrowers may use the QWR process to generally access information about the loan’s escrow account. (See 24 C.F.R. Section 3500.17(l)(4).)

Certain courts have noted that the QWR process relates to any request for information related to servicing. Cortez v. Keystone Bank, Inc., 2000 U.S. Dist. Lexis 5705, *36-37 (E.D. Pa. May 2, 2000).

(“[The] RESPA borrower inquiry provision applies . . . to any request for information relating to the servicing of a federally related mortgage loan, while the billing error notice provision of TILA applies only to billing errors.”).

A leading case discussing this issue, MorEquity v. Nameem (118 F. Supp. 2d 885 (N.D. Ill. 2000), reached the important conclusion that borrowers fail to state a claim where the borrower’s request merely seeks information concerning the validity of the underlying loan and mortgage documents, but does not seek any information as to the status of the account balance. In such instances, the requests are not QWRs because “the request did not relate to the ‘servicing of the loan.’” (See 188 F. Supp. 2d at 901. )

In summary, requests made in a QWR must relate to servicing and escrow matters; those requests that relate to extraneous issues dealing with the items relating to the loan’s settlement or secondary market information, for instance, are simply outside the proper scope of the QWR process.

In addition, the initial interim rule setting forth implementing regulations for RESPA assumed that the QWR procedure would be limited to servicing and not very burdensome. In promulgating the interim rule, the Department of Housing and Urban Development estimated the compliance costs of two aspects of the servicer regulation—disclosure of projections and historical information about transfer of servicing and notices of servicing transfer—but did not even estimate a compliance cost for QWR responses outside of those bounds. (See Interim Rule, “Real Estate Settlement Procedures Act, Section 6 Transfer of Servicing of Mortgage Loans,” 56 Fed. Reg.19, 506.)

As a final, critical, note, if after considering all the elements listed above, a bank discards a request as not qualifying under RESPA’s QWR provisions, most legal experts recommend that the bank’s rationale should be well explained, and that the bank should document the reasons for rejecting the supposed QWR. Such rejections should, where possible, be sent back in writing. Legal counsel should be involved in ensuring that this procedure meets legal standards.

Dealing with the legitimate QWR
When a servicer receives and properly identifies a valid QWR, the servicer must, by law, both acknowledge receipt of a QWR and respond to the substance of any claims or requests included in the QWR.

In addition, the law directs servicers not to provide information to a consumer reporting agency during the 60 days following receipt of the QWR concerning overdue payments related to that period or to the QWR. (See RESPA Section 2605(e)(3) )

In establishing procedures to comply with RESPA’s QWR provisions, banks should keep in mind that, contrary to some claims, the QWR process does not require a lender or servicer to stop foreclosure proceedings or other legal action on the loan.

(See 24 C.F.R. Section 3500.21(e)(4)(ii); see also Webster Bank v. Linsley, 2001 Conn. Super. Lexis 2407 (Super. Ct. 2001) (holding that “RESPA violations do not discharge mortgage debt and provide no defense to mortgage foreclosure.”); Security Pac. Nat’l Bank v. Robertson, 1997 Conn. Super. LEXIS 2306 (Super. Ct. 1997) (holding that “a violation of RESPA, however, by the terms of the act, does not invalidate the mortgage agreement and thus, does not provide a defense to a foreclosure action.”).

In fact, loan accounts that are deemed in default are generally considered to be out of the scope of RESPA’s escrow and servicing requirements.

To properly respond to the QWR:

1. A servicer must, within 20 business days, provide a written response acknowledging receipt of the QWR. (12 U.S.C. Section 2605(e)(1)(A))

2. Within 60 business days the servicer must investigate the account, make any appropriate corrections, and provide the consumer with a report of their action.  (Id. at Section 2605(e)(2)(A))

3. If the servicer corrects the account, the servicer must provide a written explanation of the corrections.  (Id.)

4. If the servicer does not correct the account, it must provide an explanation or clarification that includes a statement of reasons why the account is correct and the name and telephone number of an employee of the servicer who can be contacted to further assist the borrower. (Id. at Section 2605(e)(2)(B))

5. If other information was requested, the servicer must send a clarification or explanation, including the information requested by the borrower or an explanation why the information is unavailable, and the name and telephone number of an employee who can further assist the borrower.  (Id. at Section 2605(e)(2)(C) ) Also, if the 60-day response is ready within 20 days, the two responses may be combined.  (Id. at § 2605(1)(A))

It is worth noting, however, that a servicer may be able to charge a reasonable fee to prepare a response to a legitimate QWR. Watt v. GMAC Mortg. Corp. (8th Cir. 2006) 457 F.3d 781, 783.

In addition, it is also worth repeating that during the 60-day investigation period, RESPA prohibits the servicer from providing negative information to a consumer reporting agency. RESPA seeks to protect consumers from any confusion that may exist in the account while the inquiry in the problem is going forth.

Parting thoughts
Borrowers and consumers deserve the best possible care and attention from their lending institutions. Such attention includes speedy and thorough answers to all inquiries involving their loan accounts.

However, current laws also contain provisions to recognize that consumer inquiries should be valid and legitimate in intent. RESPA’s qualified written request mechanism has, unfortunately, become a primary tool to harass lenders and mortgage loan servicers. Banks should therefore bear in mind that the law is clear in establishing that QWRs were never intended to be used in a harassing manner or in an effort to delay or dispute foreclosure proceedings.

To be well protected, banks must properly understand the elements of this law, and must carefully implement its provisions in order to effectuate its balance of protecting borrowers while avoiding the negative impact brought about by those that intend to abuse its application. While it may be somewhat more costly to prepare detailed responses to legitimate QWRs and letter objections to improper QWRs, doing so is certainly more cost effective in the long run as it deters potential lawsuits and legal actions.

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Mortgage giants Fannie Mae & Freddie Mac quietly shop $250 billion in bad loans

This could be one of the biggest bad-debt sales in history…
Paul Muolo National Mortgage News

Every so gingerly, Fannie Mae and Freddie Mac are beginning to contemplate selling their nonperforming mortgages — roughly $250 billion worth of single-family product — in the open market. But will it ever happen? And if so, who will step up to the plate with cash?

Investment bankers who play in the nonperforming loan market say the two have quietly begun talking to Wall Street firms and several hedge funds about how they might unload their bad assets. The buyers, I’m told, would presumably be hedge funds and investment partnerships with certain Wall Street trading desks — Goldman Sachs and Morgan Stanley — acting as middlemen.

“There’s been lots of meetings and they’re talking to a lot of people about it,” said one veteran investment banker, requesting his name not be used because of the sensitivity of the matter, “but they’re a long way away from doing anything yet.”

One idea the two are said to be contemplating involves the securitization of NPLs. The GSEs would hire third-party vendors to gather broker price opinions on the properties collateralizing the mortgages. Fannie and Freddie might then issue a security backed by the NPLs based on the new BPO value. “If they could get 80% of the current BPO value they’d be ecstatic,” said one investment banker.

Both GSEs declined to comment for this column. To date, neither has tapped the NPL market but they’ve “force-placed” the servicing of delinquent loans away from certain seller/servicers to specialists such as Ocwen and Nationstar. Both continue to sell single-family properties out of their REO portfolios, offering homes both to owner-occupants and investors. (As reported on the National Mortgage News website recently, Fannie is now once again offering REO assets in bulk.)

Of course, the NPL market continues to operate in a somewhat secretive matter, with little public disclosure on auctions and sales. But if Fannie and Freddie eventually decide to unload their NPL wares all that could change. It also might mean that, potentially, $250 billion in delinquent mortgages might flood a market that already has plenty to offer.

Recently, FDIC chief Sheila Bair signaled her intention to have the agency be a conduit allowing open (and solvent) banks to sell their delinquent mortgages in the secondary market. The agency is shooting for its first such sale in the first quarter of next year.

If the FDIC program proves workable — and if Fannie and Freddie finally decide to auction off their NPLs — it also means that prices for these delinquent assets could fall further, dragging down home values even more. But one thing we keep hearing from both investors and reluctant sellers is that there is too big of a difference between the “bid” and “ask” on these loans which is why more sales haven’t occurred. Then again, Fannie and Freddie are owned by the government and have already set up massive reserves. They no longer have to answer to shareholders and can afford losses that the private sector can’t stomach.

“If Fannie starts selling nonperforming loans it’d be huge,” said Jeff Freud, a principal in LoanMarket.net of California, a Web-based loan auction site for small investors. Mr. Freud believes that eventually the GSEs will unload their NPLs but can’t predict when that eventful day will come. He notes that the NPL market can be a conundrum. “If you admit you’re selling it will drive down prices,” he says. “I know that sounds crazy but that’s why I think so much is happening anonymously.”

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A Judge Judging Himself: Judicial Recusal

 

I don’t know how else to express my frustration with some–not all, of the mortgage lenders in my court…

Why do I cite these institutions to you? Freddie Mac, Fannie Mae, AIG and the Lehman Brothers. I don’t think I cited Washington Mutual, but I’ll cite them. What are they all? They’re all creditors. I used to represent creditors. I used to be a banker before I went to law school. Well, I am finding since I’ve been on the bench, on the creditors’ side, is that we’ve got a culture going of arrogance and hubris. We have forgotten how to be thorough and how to pay attention to detail, and it’s coming home to roost in spades.

I mean, think about it folks, Freddie Mac and Fannie Mae, FDR would be turning over in his grave if he could see those institutions today. The directors, the dispute that’s going on right now is, are we going to pay the two presidents of these institutions golden parachutes of millions of millions of dollars? This, for while they were head of their ships, ran aground.

We’ve got AIG going belly up. By the way, Freddie Mac and Fannie Mae, the institutions that are about buying loans portfolios for loans that never should have been made. That’s why I say we’ve got–we have lost the need–the paying attention to detail.

I’m policing my docket. You’re going to get more opinions, at least from me, and I assume the true–same will be true for at least Judge Isgur and Judge Magner. We want to see the I’s dotted and T’s crossed, and if they’re not, then as I’ve said, 105 sanctions will be–will be used.

 

A Judge Judging Himself: Judicial Recusal
Steve Sather

Judges are in high demand for continuing education seminars. Astute conference planners will often schedule a judges’ panel at the end of the day to insure full attendance. If the judge is outspoken, or at least colorful, so much the better. However, what happens when the outspoken judge displays displeasure with your client’s industry and you have a similar matter pending before him? If you file a motion for recusal, you could find yourself in the interesting position of having the judge judge himself. That is what happened in the case of In re Wilborn, 401 B.R. 848 (Bankr. S.D. Tex. 2009) in which Wells Fargo sought to recuse Judge Jeff Bohm over comments he made at a CLE conference. After a lengthy analysis, Judge Bohm concluded that the movant had not met his burden and that he had “an affirmative duty not to recuse himself.”

The Seminars

At issue were presentations made at two conferences, the State Bar of Texas Advanced Consumer Bankruptcy Conference and one held at the LSU Law School. The motion was based on written materials and oral statements made at the two conferences. However, it turns out that Judge Bohm was not the author of written materials for either forum. In the first case, Judge Bohm was a substitute for Judge Marvin Isgur, who authored in the materials. In the second case, Judge Elizabeth Wall Magner presented a powerpoint which she prepared after which Judge Bohm spoke.

In his Dallas discussion, Judge Bohm began with a rather straightforward discussion of construction of Bankruptcy Rule 2016 and 11 U.S.C. Sec. 1322(b)(2) as they relate to post-petition fees and charges assessed by mortgage creditors. The positions articulated by Judge Bohm, namely, that Rule 2016 applies to mortgageholder fees, that Sec. 1322(b)(2) does not preclude review of the reasonableness of fees and that Sec. 105 allows redress for debtors charged unreasonable fees were not anything that he hadn’t ruled previously.

However, the judge did not stop there. He proceeded to lecture both debtor’s lawyers and creditors about practices in the industry. Speaking to debtor’s lawyers, he said “if you are zealously representing your client, then you want to focus like a laser beam, it seems to me, on what some creditors are doing in terms of charging your clients after they have filed a petition.” He also suggested that debtor’s lawyers to write a monthly letter to the creditors’ attorney stating:

Dear attorney for home lender in chapter 13, I am writing you this letter to inquire as to whether your client is charging any fees and expenses now that my client has filed for bankruptcy. Please advise. Because if I find out that you are and you haven’t disclosed it, I’m going to scream bloody murder in bankruptcy court.

I think you ought to send that letter once every month. that might get the attention of some creditors’ lawyers. And it might–and I say might get the attention of some lenders.
401 B.R. at 855.

Judge Bohm was just warming up. In closing, he got on his soapbox and articulated the following:

Why do I cite these institutions to you? Freddie Mac, Fannie Mae, AIG and the Lehman Brothers. I don’t think I cited Washington Mutual, but I’ll cite them. What are they all? They’re all creditors. I used to represent creditors. I used to be a banker before I went to law school. Well, I am finding since I’ve been on the bench, on the creditors’ side, is that we’ve got a culture going of arrogance and hubris. We have forgotten how to be thorough and how to pay attention to detail, and it’s coming home to roost in spades.

I mean, think about it folks, Freddie Mac and Fannie Mae, FDR would be turning over in his grave if he could see those institutions today. The directors, the dispute that’s going on right now is, are we going to pay the two presidents of these institutions golden parachutes of millions of millions of dollars? This, for while they were head of their ships, ran aground.

We’ve got AIG going belly up. By the way, Freddie Mac and Fannie Mae, the institutions that are about buying loans portfolios for loans that never should have been made. That’s why I say we’ve got–we have lost the need–the paying attention to detail.

* * *

I’m policing my docket. You’re going to get more opinions, at least from me, and I assume the true–same will be true for at least Judge Isgur and Judge Magner. We want to see the I’s dotted and T’s crossed, and if they’re not, then as I’ve said, 105 sanctions will be–will be used.

I hate to end on that kind of note, but given where we are with a lot of the institutions that I just cited, I don’t know how else to express my frustration with some–not all, of the mortgage lenders in my court. I wish to emphasize that I–I think highly of most, virtually all, of the attorneys who appear in my court these days, so I don’t want you to leave this seminar thinking that I am upset with you, but do please convey to your clients tht I feel very strongly that the rules and the statutes need to be complied with.
401 B.R. at 857-58.

The Dallas conference did not single out Wells Fargo. However, one slide in Judge Magner’s powerpoint did:

Wells Fargo manages 7.7 million loans. If only one $15 fee were charged per year on each loan, its revenue would be $115 million.
401 B.R. at 859.

Meanwhile, Judge Bohm was presiding over a class action sought brought against Wells Fargo alleging that it charged improper fees in chapter 13 bankruptcy cases. Judge Bohm’s candor apparently made Wells Fargo feel that he had targeted a bulls eye on them. They filed a motion to recuse. However, as noted by Judge Bohm, a motion to recuse “is committed to the discretion of the targeted judge.” This leaves the judge in the unusual position of sitting as trier of fact with regard to his own impartiality.

The Ruling

In his ruling, Judge Bohm discussed several legal principles applicable to disqualification:

1) Under 28 U.S.C. Sec. 455(a), a judge “shall disqualify himself in any proceeding in which he is presiding in which his impartiality might reasonably be questioned.”

2) The movant must establish that a judge is not qualified by clear and convincing evidence.

3) “(A) judge’s comment is disqualifying only if it connotes . . . a closed mind on the merits of the case.”

4) Recusal based on bias may be based on “a danger that the judge will rely on an extrajudicial source for his rulings” or “where the judge displays such a high degree of favoritism or antagonism as to make fair judgment impossible.”

These principles appear to be in conflict. The statute speaks in terms of situations in which “his impartiality might reasonably be questioned.” This language, particularly in its use of the words “might” and “reasonably” suggests a low standard, one in which the mere appearance of partiality is sufficient to bring about disqualification. However, the requirement of proof by clear and convincing evidence (which must be established to the judge being questioned) and the requirement of a closed mind on the particular case set a very high bar. Indeed, it might be suggested that a motion for recusal should never be necessary, since the conduct demanding recusal should be so obvious to the judge that he should have voluntarily removed himself prior to any motion being filed.

Judge Bohm continued with a very thorough analysis of what comments made outside of the courtroom would merit recusal. Generally, comments made to legal education seminars on general legal issues are permissible, while statements to a newspaper about the merits of a pending case are not. Since Judge Bohm did not single out Wells Fargo or talk about any specific pending case, much less the Wellborn v. Wells Fargo case, recusal was not appropriate.

How Educational Do You Want Your CLE To Be?

Given that recusal requests are addressed to the judge sought to be recused and that judges are given wide latitude, the result in this case is not particularly surprising. The larger question is, should judges be speaking so freely about issues that will come up in their courtrooms? Should they be so blunt, including giving advice to one side about what they should be doing to zealously represent their clients?

With one limited exception, I say preach on Brother Bohm. I say this as an attorney who is more likely to appear in front of His Honor as a creditors’ lawyer than representing a debtor. In fact, I fully expect that I will appear in front of him on one of his hot button issues. It is just a question of when.

When I appear in front of a judge, I want to know as much as possible about his thinking. I am going to study his rulings and talk to attorneys who have appeared in front of him. If I’m going to listen to him speak at a conference, I don’t want to hear namby-pamby platitudes. I want to hear the good stuff. I want to hear the good stuff because it is useful intelligence.

On the other hand, it does give me pause when the judge starts dictating letters for debtor’s lawyers to use, especially when the debtor’s lawyer is invited to scream bloody murder to the bankruptcy court. It almost comes off as a wink, wink, nudge, nudge, follow this procedure and I will sock it to the mortgage company. The issue of disclosure of post-petition fees and charges is a legitimate one and one which is being addressed by amended Rule 2016. It is a bit unseemly for the judge to be encouraging lawyers to engage in guerilla tactics rather than looking for a systemic response. However, beyond that, the judge did not talk about cases currently pending before him or call out lawyers he was unhappy with. Indeed, he went so far as to express his respect for the bar.

On balance, the benefit of getting inside the judge’s head is worth more to me than the risk that he will engage in cheerleading for the other side. I won’t always agree with Judge Bohm, but I will always find him passionate and informative.

4closureFraud
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DEUTSCHE BANK SUES BANK OF AMERICA

Deutsche Bank v. Bank of America 11-25-09

This is an action for damages for breach of contract resulting from BOA’s failure to secure and safeguard over $1.25 billion worth of cash and mortgage loans that it was contractually obligated to secure on behalf of DB and contractual indemnity for the losses caused by BOA’s negligent performance of its duties to DB.

4closureFraud
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They Aren’t Really This Stupid, Are They?

Market Ticker – Karl Denninger
View original article
November 28, 2009

I’ve been slack-jawed a couple of times during this debacle of an economic mess, but this has to take the cake: (<– I highly recommend reading this link in its entirety including the comments.)

Here is the real stunner. A senior person at Treasury said to a small group of us that it is now official Treasury policy to extend and pretend on real estate loans. In other words, the policy statement from last week says, if you can make an analysis that says even if the current value is less than the loan, if you can do a spreadsheet that shows if you extend for 3-5 years, and if the economy gets better, and if the loan can be amortized down to where the loan is no longer more than the value, then the lender does not have to take an impairment -write down. Loans are to be modified by rate reductions, deferral of reserves, deferral of amortization or what ever.

Did ‘ya read all those “ifs” in there?  What if one of the “ifs” doesn’t?

It gets better:

Giant make believe. The free market seeking an equilibrium price is no longer economic policy. In short, the working of the free market is suspended. She went on to say it was administration policy that they will create new employment and by doing so they will boost the economy, and so then real estate values will return to old levels. There were 50 of the most senior and smartest real estate people in the room. They ripped her to pieces. It looked like one of the town hall meetings of August, except everyone there was a very senior, polished professional. At one point everyone was calling out or moaning at her. It was clear to all she had been given a few talking points and she was told to stick to them no matter how foolish she looked. The group told her in no uncertain terms this is terrible public policy. They said for jobs to be created you need to lower rents so the cost of occupancy was at a level to encourage more hiring. If the loan is kept at old levels and building values not reduced, then landlords can’t reduce rents to where they need to be to make taking space by tenants economically viable. Retailers costs remain higher than they should be making it harder to lower prices to induce sales. So there is a massive make believe going on.

The pros get it (as have I and a few others.)  What’s more they communicated it.

When I pressed the issue of political interference she said – what do you want us to do, bankrupt all the banks.

That is the choice.

What does this tell you?

A. The problem is going to take much longer to solve than it should,

B. The banks are still very weak, so lending will not return anytime soon,

C. A massive refi problem is getting deferred to 2013-2015.

D. The administration is playing politics with the economy to a degree that is dangerous. There has to be a massive value reset for real estate. We are deferring the inevitable.

Actually, it tells me something else.

What are the odds that all those “ifs” pan out?

Statistically?

Uhhhhh.

What happens when they don’t?

The banks all go bankrupt anyway, and the economy has been further trashed by the destruction leveled on employment as a consequence of this policy.

What’s even worse is that this jackass of Treasury Representative, assuming the conversation reported really happened, told a bunch of professionals that if all of those “ifs” don’t pan out the banks are all going to blow up.

What do you think those professionals will be doing when, not if, it becomes apparent that they’re right – that the economy is not recovering at a reasonable pace and that the “extend and pretend” game is not only not working but is inhibiting recovery?

And by the way, I’m curious how you all think this is going to work out, given this little ditty (find the source here)…..

These pros are going to short the ever-loving hell out of anything that has a ticker symbol as soon as the turn-down is evident!

There is only thing worse than being stupid – it is admitting that you’re stupid by putting a bankrupt and unworkable “policy” in front of a bunch of professionals who have the acumen to analyze what you’re up to, tell you that you’re nuts, and then act on it to profit while grinding the banks and indeed all of America into dust - but you stick to it as “policy”, even though those who are smarter than you are have told you point-blank that it won’t and in fact can’t work.

Thank you Barack and Turbo Timmy – you own it, this is your policy, this is your legacy…….

……and this will be your political obituary.

4closureFraud
http://4closurefraud.wordpress.com/

Foreclosure Fraud Defense Connecticut – U.S. Bank National Association as Trustee v. Toni Ascenzia et al

Homeowners in Connecticut now have a new tool in fighting against Foreclosure Fraud. A Connecticut Superior Court Judge decided the foreclosing entity can be made to answer for the “sins” of the originating lender.

U.S. Bank National Association as Trustee v. Toni Ascenzia et al.
Superior Court at New Haven No. CV-08-5022527 Memorandum Filed July 30, 2009.

“In view of recent examples of irresolute behavior in the mortgage market, the court finds that there are significant public policy considerations that militate against allowing assignees of mortgages to foreclose without having to answer for the alleged sins of their assignors.”

4closureFraud
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Advice From a Fraudster – White Collar Crime and Criminals

“A common mistake made by victims of white collar crime is “unexamined acceptance.” No financial information received from any source should be taken for granted as being truthful and accurate without any critical analysis.”

Written by:
Sam E. Antar
(former Crazy Eddie CFO and a convicted felon)

White collar crime is a crime of persuasion and deceit. Since the white collar criminal uses persuasion and deceit to commit their crimes, it follows that such felons are artful liars.

People often ask me what characteristics I look for in other people that alert me to possible criminal activity or at least unethical and deceitful people.

Not all questionable conduct is illegal. A person can be unethical or deceitful (however they are defined) without committing any illegal acts as defined under the law.

However, most criminals use tools like spinning (see below) in the conduct of their crimes.

The Art of Spinning:

Sell people hope. My cousin ‘Crazy Eddie’ Antar taught me that “people live on hope” and their hopes and dreams must be fed through our spin and lies. In any situation, if possible, accentuate the positive.

Make excuses as long as you can. Try to have your excuses based on at least one truthful fact even if the fact is unrelated to your actions and argument.

When you cannot dispute the underlying facts, accept them as true but rationalize your actions. You are allowed to make mistakes as long as you have no wrongful intent. Being stupid is not a crime…

My advice to the accounting profession, antifraud professionals, and Wall Street:

Do not trust, just verify. Verify, verify, and verify.

White collar criminals build a wall of false integrity around them to gain the trust of their victims.

White collar criminals measure their effectiveness by the comfort level of their victims.

White collar criminals consider your humanity, ethics, and good intentions as a weakness to be exploited in the execution of their crimes.

White collar crime can be more brutal than violent crime, since white collar crime imposes a collective harm on society.

No criminal finds morality and stops committing crime simply because another criminal went to jail.

We created artificial wealth, then we borrowed against it, and finally we spent it. When the artificial wealth disappeared, we had an implosion.

Our late and great former President Ronald Reagan used to say:

“Trust, but verify.”

As a convicted felon, I advise you:

“Don’t trust, just verify.”

“Verify, verify, verify.”

As a criminal, I considered people’s humanity as a weakness to be exploited.

The inclination to trust first and then verify, gave me the upper hand.

The criminal always has the initiative.

While you initially trust us, we work on ways to solidify your trust before you verify.

Hopefully, you will never verify.

However, by the time you get around to verifying, your skepticism will be corroded by our charm.

Therefore, when you ask questions, you will accept our deceptive answers as fact.

A word of advice from this convicted felon to the capital markets, securities analysts, journalists, the accounting profession, investors, and others, “The word ‘trust’ is a professional hazard you must leave at home before you go to work.”

While you hope, criminals prey…

My cousin Crazy Eddie Antar taught me that “people live on hope.” As white collar criminals, we preyed on your hopes and dreams by feeding you our spin and lies.

Investors demand confident leadership and strong financial performance from company managements. They want to hear management exuding confidence about their company’s future business prospects. Eddie and I built an image of strong and confident leadership by promising investors a prosperous future backed up by our phony financial reports.

As criminals, we considered the humanity of investors as a weakness to be exploited in the cold-blooded execution of our crimes. We measured our effectiveness by the comfort level of our victims.

My cousin Eddie and I built walls of false integrity around us to gain the trust of our victims. We claimed that Crazy Eddie’s accounting policies were “conservative.” In addition, we gave huge sums of money to charity and were involved in many popular social causes in an effort to make investors comfortable with us. While we were in effect, “helping old ladies cross the street,” we were heartlessly executing a massive fraud that wiped out the life savings of thousands of investors and ultimately caused a few thousand people to lose their jobs.

Eddie Antar and I never had a single conversation about morality or right and wrong. We simply did not care about the victims of our crimes. Our conversations only focused on the successful execution of our cold-blooded schemes to defraud investors.

At Crazy Eddie, we committed our crimes simply because we thought we could execute them successfully. We took advantage of investor’s hopes, dreams, and aspirations for a better future. More importantly, we fully exploited investor’s lack of skepticism that resulted from the wall of false integrity we built around ourselves.

Hope is a fine human quality that motivates us to build a better future. Unfortunately, criminals consider your hope as an exploitable weakness to aid them in the successful execution of their crimes.

Do not get mesmerized by neatly packaged story lines and well researched sound bites written by professional high paid media consultants. Criminals know how to “talk the talk and walk the walk” as they inspire you with false promises of a prosperous future…

4closureFraud
http://4closurefraud.wordpress.com/

REVENGE OF THE DEBTORS – WHO CAN LEGALLY ENFORCE A MORTGAGE AFTER A “LANDMARK” CASE

“These cases encourage debtors and other parties to defensively use the mortgage securitization servicing system to prohibit servicers and other non-lending parties from enforcing rights under a mortgage. This trend, if it continues, may have significant impacts for consumer-debtor lawyers, as well as law firms that enforce mortgages and participated in mortgage loan securitization.”

“A note and mortgage may go through multiple transfers. Documentation of these transfers is imperfect, and many assignments were not recorded at the local real estate filing offices.”

“The creation of Mortgage Electronic Registration Systems, Inc. (“MERS”) further complicated matters.”

“For instance, if a debtor raises these or similar defenses, it may only be necessary for the servicers and the mortgagees to complete and file the proper assignment documents.“

The fabricated fraudulant assignment.

4closureFraud
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This Judge “Gets It” Indymac Bank F.S.B. v Yano-Horoski

Indymac Bank F.S.B. v Yano-Horoski

“Upon the Court’s own motion, it is

ORDERED that the Adjustable Rate Note in the amount of $ 292,500.00 dated August 4, 2004 made by Diana J. Yano-Horoski in favor of IndyMac Bank F.S.B. shall be and the same is hereby cancelled, voided, avoided, nullified, set aside and is of no further force and effect; and it is further

ORDERED that the Mortgage in the amount of $ 292,500.00 which secures said Adjustable Rate Note given by Diana J. Yano-Horoski to Mortgage Electronic Registration Systems Inc. As Nominee For IndyMac Bank F.S.B. dated August 4, 2004 and recorded with the Clerk of Suffolk County on August 16, 2004 in Liber 20826 of Mortgages as Page 285, as assigned to IndyMac Bank F.S.B. by Assignment recorded with the Clerk of Suffolk County in Liber 21273 of Mortgages at Page 808 shall be and the same is hereby vacated, cancelled, released and discharged of record; and it is further

ORDERED that the Plaintiff, its successors and assigns are hereby barred, prohibited and foreclosed from attempting, in any manner, directly or indirectly, to enforce any provision of the [*7]aforesaid Adjustable Rate Note and Mortgage or any portion thereof as against Defendant, her heirs or successors; and it is further

ORDERED that the Judgment of Foreclosure & Sale granted under this index number on January 12, 2009 and entered in the Office of the Clerk of Suffolk County on January 23, 2009 shall be and the same is hereby vacated and set aside; and it is further

ORDERED that the Notice of Pendency filed with the Clerk of Suffolk County on July 27, 2005 under sequence no. 172456, which was extended by Order dated September 2, 2008 shall be and the same is hereby cancelled, vacated and set aside; and it is further

ORDERED that the Notice of Pendency filed with the Clerk of Suffolk County on August 29, 2008 under sequence no. 199616, shall be and the same is hereby cancelled, vacated and set aside; and it is further

ORDERED that the Clerk of Suffolk County shall cause a copy of this Order & Judgment to be filed in the Land Records so as to effectuate of record each and every one of the provisions hereinabove set forth with respect to cancellation of the instruments and items of record; and it is further

ORDERED that Plaintiff shall pay to the Clerk of Suffolk County, within ten (10) days from the date of entry hereof, any and all fees and costs required to effect cancellation of record of the Mortgage, Notices of Pendency and any other fees so levied; and it is further

ORDERED that within ten (10) days of the date of entry hereof, Plaintiff’s counsel shall serve a copy of this Order upon the Clerk of Suffolk County and the Defendant.

This shall constitute the Decision, Judgment and Order of this Court.”

2009 NY Slip Op 52333(U)
Decided on November 19, 2009
Supreme Court, Suffolk County
Spinner, J.
Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431.
This opinion is uncorrected and will not be published in the printed Official Reports.

Decided on November 19, 2009

Supreme Court, Suffolk County

Indymac Bank F.S.B., Plaintiff

against

Diana Yano-Horoski, Wells Fargo Bank Minnesota National Association as Trustee for Soundview Home Equity Loan Trust 2001-1 and Kimberly Horoski, Defendants.

2005-17926

Steven J. Baum P.C.

Attorney for Plaintiff

P.O. Box 1291

Buffalo, New York 14240

Diana Yano-Horoski

Defendant Pro Se

8 Oakland Street

East Patchogue, New York 11772-5767

Jeffrey Arlen Spinner, J.

This is an action wherein the Plaintiff claims foreclosure of a mortgage dated August 4, 2004 in the original principal amount of $ 292,500.00 recorded with the Clerk of Suffolk County, New York in Liber 20826 of Mortgages at Page 285. The mortgage secures an adjustable rate note of the same amount with an initial interest rate of 10.375%. The mortgage encumbers real property commonly known as 8 Oakland Street, East Patchogue, Town of Brookhaven, New York and described as District 0200 Section 979.50 Block 05.00 Lot 001.000 on the Tax Map of Suffolk County. Plaintiff commenced this action by filing a Summons, Verified Complaint and Notice of Pendency on July 27, 2005. The Notice of Pendency was extended by Order dated April 28, 2008 and a Judgment of Foreclosure & Sale was granted on January 12, 2009.

Thereafter and in accordance with the Laws of 2008, Ch. 472, Sec. 3-a and in view of the fact that the loan at issue was deemed to be “sub-prime” or “high cost” in nature, Defendant seasonably requested that the Court convene a settlement conference. That request was granted and a conference was commenced on February 24, 2009 which was continued five times in a series of unsuccessful attempts by the Court to obtain meaningful cooperation from Plaintiff. In view of Plaintiff’s intransigence in its continuing failure and refusal to cooperate, both with the Court and with Defendant’s multiple and reasonable requests, the Court directed that Plaintiff produce an officer of the bank at the adjourned conference scheduled for September 22, 2009.

At the conference held on September 22, 2009, Karen Dickinson, Regional Manager of [*2]Loss Mitigation for IndyMac Mortgage Services, division of OneWest Bank F.S.B. (“IndyMac”) appeared on behalf of Plaintiff. IndyMac purports to be the servicer of the loan for the benefit of Deutsche Bank who, it is claimed, is the owner and holder of the note and mortgage (though the record holder is IndyMac Bank F.S.B., an entity which no longer is in existence). At that conference, it was celeritously made clear to the Court that Plaintiff had no good faith intention whatsoever of resolving this matter in any manner other than a complete and forcible devolution of title from Defendant. Although IndyMac had prepared a two page document entitled “Mediation Yano-Horoski” which contained what purported to be a financial analysis, Ms. Dickinson’s affirmative statements made it abundantly clear that no form of mediation, resolution or settlement would be acceptable to Plaintiff. IndyMac asserts the total amount due it to be in excess of $ 525,000.00 and freely concedes that the property securing the loan is worth no more than $ 275,000.00. Although Ms. Dickinson insisted that Ms. Yano-Horoski had been offered a “Forbearance Agreement” in the recent past upon which she quickly defaulted, it was only after substantial prodding by the Court that Ms. Dickinson conceded, with great reluctance, that it had not been sent to Defendant until after its stated first payment due date and hence, Defendant could not have consummated it under any circumstances (Defendant, through Plaintiff’s duplicity, found herself to be in the unique and uncomfortable position of being placed in default of the “agreement” even before she had received it). Plaintiff flatly rejected an offer by Plaintiff’s daughter to purchase the house for its fair market value (a so-called “short sale”) with third party financing. Plaintiff refused to consider a loan modification utilizing any more than 25% of the income of Plaintiff’s husband and daughter (both of whom reside in the premises with her), the excuse being that “We can’t control what non-obligors do with their money” (the logical follow up to this statement is how does the bank control what the obligor does with her money?). The Court found IndyMac’s position to be deeply troubling, especially since a plethora of sub-prime loans in this County’s Foreclosure Conference Part have been successfully modified with the lender’s reliance upon the income of non-obligors who reside in the premises under foreclosure. The Plaintiff also summarily rejected an offer by both Plaintiff’s husband and daughter to voluntarily obligate themselves for payment upon the full indebtedness, thus committing their individual incomes expressly to the purpose of a loan modification. It should be noted here that Defendant did not even request any waiver or “forgiveness” of the indebtedness aside from some tinkering with the interest rate, just a modification of terms so as to enable her to repay the same. It was evident from Ms. Dickinson’s opprobrious demeanor and condescending attitude that no proffer by Defendant (short of consent to foreclosure and ejectment of Defendant and her family) would be acceptable to Plaintiff. Even a final and desperate offer of a deed in lieu of foreclosure was met with bland equivocation. In short, each and every proposal by Defendant, no matter how reasonable, was soundly rebuffed by Plaintiff. Viewed objectively, it is apparent that Plaintiff’s conduct in this matter falls within the definitions set forth in 22 NYCRR § 130-1.1( c)(2), which might well warrant the imposition of monetary sanctions.

On the Court’s own motion, a hearing was held on November 18, 2009 in order to explore the issues herein. At the hearing, Ms. Dickinson appeared as well as Mr. Horoski. IndyMac claimed a balance due, as of September 22, 2009 of $ 527,437.73 which included an escrow overdraft of $ 46,627.88 for taxes advanced since the date of default but did not include attorney’s fees and costs.. Plaintiff was unable to tell the Court the amount of the principal [*3]balance owed. Mr. Horoski advised the Court that according to two letters received from Plaintiff, the principal balance was said to be $ 285,381.70 as of February 9, 2009 and $ 283,992.48 as of August 10, 2009. Plaintiff stated was that Defendant must have made payments though it was conceded that in fact no payment had been made.Plaintiff insisted that it had remained in regular contact with Defendant in an effort to reach an amicable resolution, that it had extended two modification offers to Defendant which she did not accept and further, that due to her financial status she was not qualified for any modification, even under the Federal HAMP guidelines. Plaintiff denied that it had “singled out” Defendants, simply stating that her status was such that she fell outside applicable guidelines. All of these assertions were disputed by Defendant.

That having been said, the Court is greatly disturbed by Plaintiff’s assertions of the amount claimed to be due from Defendant. The Referee’s Report dated June 30, 2008, which has its genesis in a sworn affidavit by a representative of Plaintiff (presumably one with knowledge of the account), reflects a total amount due and owing of $ 392,983.42. The principal balance is reported to be $ 290,687.85 with interest computed at the rates of 10.375% from November 1, 2005 through August 31, 2006 ($ 25,118.62), 12.50% from September 1, 2006 to February 28, 2007 ($ 18,018.66), 12.375% from March 1, 2007 to March 31, 2008 ($ 39,126.39) and 11.375% from April 1, 2008 to June 24, 2008 ($ 7,700.24) totalling $ 89,963.91. Plaintiff also claims $ 20.00 in non-sufficient funds charges, $ 295.00 in property inspection fees and $ 12,016.66 for tax and insurance advances. The Judgment of Foreclosure & Sale dated January 12, 2009 was granted in the amount of $ 392,983.42 with interest at the contract rate from June 24, 2008 through January 12, 2009 and at the statutory rate thereafter plus attorney’s fees of $ 2,300.00 and a bill of costs in the amount of $ 1,705.00. Even computing the accrual of pre-judgment interest of $ 18,299.18 (using Plaintiff’s per diem rate in the Referee’s Report) together with post-judgment interest at a statutory 9% through November 19, 2009 (an additional $ 31,740.90), the application of simple addition yields a total amount due of $ 447,028.50. This figure is $ 80,409.23 less than the $ 527,437.73 asserted by Plaintiff to be due and owing from Defendant. The Court is astounded that Plaintiff now claims to be owed an escrow advance amount of $ 46,627.88 when, under oath, its officer swore that as of June 24, 2008 that amount was actually $ 34,611.22 less. Moreover, it now appears that the elusive principal balance is either $ 290,687.85, $ 285,381.70 or $ 283,992.48.

It is the province and indeed the obligation of the trial court to assess and to determine issues regarding credibility, Morgan v. McCaffrey 14 AD3d 670 (2nd Dept. 2005). In the matter before the Court, the pendulum of credibility swings heavily in favor of Defendant. When the conduct of Plaintiff in this proceeding is viewed in its entirety, it compels the Court to invoke the ancient and venerable principle of “Falsus in uno, falsus in omni” (Latin; “false in one, false in all”) upon Defendant which, after review, is wholly appropriate in the context presented, Deering v. Metcalf 74 NY 501 (1878). Regrettably, the Court has been unable to find even so much as a scintilla of good faith on the part of Plaintiff. Plaintiff comes before this Court with unclean hands yet has the insufferable temerity to demand equitable relief against Defendant.

The Court, over the course of some six substantive appearances in seven months, has been afforded more than ample opportunity to assess the demeanor, credibility and general state [*4]of relevant affairs of Defendant and Plaintiff. Although not actually relevant to the disposition of this matter, the Court is constrained to note that Defendant is afflicted with multiple health problems which outwardly manifest in her experiencing great difficulty in ambulation, necessitating the use of mechanical supports. Moreover, Defendant’s husband, Mr. Gregory Horoski, suffers from a myriad of serious medical conditions which greatly impede most aspects of his daily existence. Nonetheless, both of these persons, together with their adult daughter who resides with them and who is substantially and gainfully employed, receive income which they are more than willing to commit, in good faith, toward repayment of the debt to Plaintiff and indeed, despite their physical challenges, they have appeared at each and every scheduled conference before this Court. At each appearance, they have assiduously attempted to resolve this controversy in an amicable fashion, only to be callously and arbitrarily turned away by Plaintiff. This has been so even in spite of the Court’s continuing albeit futile endeavors at brokering a settlement.

As a relevant aside, the scenario presented here raises the specter of a much greater social problem, that of housing those persons whose homes are foreclosed and who are thereafter dispossessed. It is certainly no secret that Suffolk County is in the yawning abyss of a deep mortgage and housing crisis with foreclosure filings at a record high rate and a corresponding paucity of emergency housing. While foreclosure and its attendant eviction are clearly the inevitable (and in some cases, proper) result in a number of these situations, the Court is persuaded that this need not be the case here. In this matter, Defendant is plainly willing to make arrangements for repayment and both her husband and daughter are likewise willing to allocate their respective incomes in order to reach the same end. Were Plaintiff amenable, she would presumably continue to maintain the property’s physical plant, pay taxes thereon and the property would retain or perhaps increase its market value. Plaintiff would receive a regular income stream, albeit with a reduced rate of interest and without sustaining a loss of several hundred thousand dollars. In addition, no neighborhood blight would occur from the boarding of the property after foreclosure which would, in turn, avert problems of litter, dumping, vagrancy and vandalism as well as a corresponding decline in the property values in the immediate area. In short, a loan modification would result in a proverbial “win-win” for all parties involved. To do otherwise would result in virtually certain undomiciled status for two physically unhealthy persons and their daughter, leading to an additional level of problems, both for them and for society.

Since an action claiming foreclosure of a mortgage is one sounding in equity, Jamaica Savings Bank v. M.S. Investing Co. 274 NY 215 (1937), the very commencement of the action by Plaintiff invokes the Court’s equity jurisdiction. While it must be noted that the formal distinctions between an action at law and a suit in equity have long since been abolished in New York (see CPLR 103, Field Code Of 1848 §§ 2, 3, 4, 69), the Supreme Court nevertheless has equity jurisdiction and distinct rules regarding equity are still extant, Carroll v. Bullock 207 NY 567, 101 NE 438 (1913). Speaking generally and broadly, it is settled law that “Stability of contract obligations must not be undermined by judicial sympathy…” Graf v. Hope Building Corporation 254 NY 1 (1930). However, it is true with equal force and effect that equity must not and cannot slavishly and blindly follow the law, Hedges v. Dixon County 150 US 182, 192 (1893). Moreover, as succinctly decreed by our Court of Appeals in the matter of Noyes v. [*5]Anderson 124 NY 175 (1890) “A party having a legal right shall not be permitted to avail himself of it for the purposes of injustice or oppression…” 124 NY at 179.

In the matter of Eastman Kodak Co. v. Schwartz 133 NYS2d 908 (Sup. Ct., New York County, 1954), Special Term stated that “The maxim of “clean hands” fundamentally was conceived in equity jurisprudence to refuse to lend its aid in any manner to one seeking its active interposition who has been guilty of unlawful, unconscionable or inequitable conduct in the matter with relation to which he seeks relief.” 133 NYS2d at 925, citing First Trust & Savings Bank v. Iowa-Wisconsin Bridge Co. 98 F 2d 416 (8th Cir. 1938), cert. denied 305 US 650, 59 S. Ct. 243, 83 L. Ed. 240 (1938), reh. denied 305 US 676, 59 S Ct. 356 83 L. Ed. 437 (1939); General Excavator Co. v. Keystone Driller Co. 65 F 2d 39 (6th Cir. 1933), cert. granted 289 US 721, 53 S. Ct. 791, 77 L. Ed. 1472 (1933), aff’d 290 US 240, 54 S. Ct. 146, 78 L. Ed. 793 (1934).

In attempting to arrive at a determination as to whether or not equity should properly intervene in this matter so as to permit foreclosure of the mortgage, the Court is required to look at the situattion in toto, giving due and careful consideration as to whether the remedy sought by Plaintiff would be repugnant to the public interest when seen from the point of view of public morality, see, for example, 55 NY Jur. Equity § 113, Molinas v. Podloff 133 NYS2d 743 (Sup. Ct., New York County, 1954). Equitable relief will not lie in favor of one who acts in a manner which is shocking to the conscience, Duggan v. Platz 238 AD 197, 264 NYS 403 (3rd Dept. 1933), mod. on other grounds 263 NY 505, 189 NE 566 (1934), neither will equity be available to one who acts in a manner that is oppressive or unjust or whose conduct is sufficiently egregious so as to prohibit the party from asserting its legal rights against a defaulting adversary, In Re Foreclosure Of Tax Liens 117 NYS2d 725 (Sup. Ct. Kings County, 1952), aff’d on other grounds 286 AD 1027, 145 NYS2d 97 (2nd Dept. 1955), mod. on other grounds on reargument 1 AD2d 95, 148 NYS2d 173 (2nd Dept. 1955), appeal granted 7 AD2d 784, 149 NYS2d 227 (2nd Dept. 1956). The compass by which the questioned conduct must be measured is a moral one and the acts complained of (those that are sufficient so as to prevent equity’s intervention) need not be criminal nor actionable at law but must merely be willful and unconscionable or be of such a nature that honest and fair minded folk would roundly denounce such actions as being morally and ethically wrong, Pecorella v. Greater Buffalo Press Inc. 107 AD2d 1064, 468 NYS2d 562 (4th Dept. 1985). Thus, where a party acts in a manner that is offensive to good conscience and justice, he will be completely without recourse in a court of equity, regardless of what his legal rights may be, Eastman Kodak Co. v. Schwartz 133 NYS2d 908 (Sup. Ct., New York County, 1954), York v. Searles 97 AD 331, 90 NYS 37 (2nd Dept. 1904), aff’d 189 NY 573, 82 NE 1134 (1907).

An objective and painstaking examination of the totality of the facts and circumstances herein leads this Court to the inescapable conclusion that the affirmative conduct exhibited by Plaintiff at least since since February 24, 2009 (and perhaps earlier) has been and is inequitable, unconscionable, vexatious and opprobrious. The Court is constrained, solely as a result of Plaintiff’s affirmative acts, to conclude that Plaintiff’s conduct is wholly unsupportable at law or in equity, greatly egregious and so completely devoid of good faith that equity cannot be permitted to intervene on its behalf. Indeed, Plaintiff’s actions toward Defendant in this matter have been harsh, repugnant, shocking and repulsive to the extent that it must be appropriately [*6]sanctioned so as to deter it from imposing further mortifying abuse against Defendant. The Court cannot be assured that Plaintiff will not repeat this course of conduct if this action is merely dismissed and hence, dismissal standing alone is not a reasonable option. Likewise, the imposition of monetary sanctions under 22 NYCRR § 130-1.1 et. seq. is not likely to have a salubrious or remedial effect on these proceedings and certainly would not inure to Defendant’s benefit. This Court is of the opinion that cancellation of the indebtedness and discharge of the mortgage, when taken together, constitute the appropriate equitable disposition under the unique facts and circumstances presented herein.

After careful consideration, it is the determination of this Court that the indebtedness evidenced by the Adjustable Rate Note dated August 4, 2004 in the original principal amount of $ 292,500.00 made by Diana J. Yano-Horoski in favor of IndyMac Bank F.S.B. should be cancelled, voided and set aside. In addition, the Mortgage which secures the Adjustable Rate Note, given to Mortgage Electronic Registration Systems Inc. As Nominee For IndyMac Bank F.S.B. dated August 4, 2004 and recorded with the Clerk of Suffolk County on August 16, 2004 in Liber 20826 of Mortgages at Page 285, as assigned by Assignment recorded with the Clerk of Suffolk County in Liber 21273 of Mortgages at Page 808 should be cancelled and discharged of record. Further, Plaintiff, its successors and assigns should be forever barred and prohibited from any action to collect upon the Adjustable Rate Note. In addition, the Judgment of Foreclosure & Sale granted on January 12, 2009 and entered on January 23, 2009 should be vacated and set aside and the Notice of Pendency should be cancelled and discharged of record. For this Court to decree anything less than the foregoing would be for the Court to be wholly derelict in the performance of its obligations.

Upon the Court’s own motion, it is

ORDERED that the Adjustable Rate Note in the amount of $ 292,500.00 dated August 4, 2004 made by Diana J. Yano-Horoski in favor of IndyMac Bank F.S.B. shall be and the same is hereby cancelled, voided, avoided, nullified, set aside and is of no further force and effect; and it is further

ORDERED that the Mortgage in the amount of $ 292,500.00 which secures said Adjustable Rate Note given by Diana J. Yano-Horoski to Mortgage Electronic Registration Systems Inc. As Nominee For IndyMac Bank F.S.B. dated August 4, 2004 and recorded with the Clerk of Suffolk County on August 16, 2004 in Liber 20826 of Mortgages as Page 285, as assigned to IndyMac Bank F.S.B. by Assignment recorded with the Clerk of Suffolk County in Liber 21273 of Mortgages at Page 808 shall be and the same is hereby vacated, cancelled, released and discharged of record; and it is further

ORDERED that the Plaintiff, its successors and assigns are hereby barred, prohibited and foreclosed from attempting, in any manner, directly or indirectly, to enforce any provision of the [*7]aforesaid Adjustable Rate Note and Mortgage or any portion thereof as against Defendant, her heirs or successors; and it is further

ORDERED that the Judgment of Foreclosure & Sale granted under this index number on January 12, 2009 and entered in the Office of the Clerk of Suffolk County on January 23, 2009 shall be and the same is hereby vacated and set aside; and it is further

ORDERED that the Notice of Pendency filed with the Clerk of Suffolk County on July 27, 2005 under sequence no. 172456, which was extended by Order dated September 2, 2008 shall be and the same is hereby cancelled, vacated and set aside; and it is further

ORDERED that the Notice of Pendency filed with the Clerk of Suffolk County on August 29, 2008 under sequence no. 199616, shall be and the same is hereby cancelled, vacated and set aside; and it is further

ORDERED that the Clerk of Suffolk County shall cause a copy of this Order & Judgment to be filed in the Land Records so as to effectuate of record each and every one of the provisions hereinabove set forth with respect to cancellation of the instruments and items of record; and it is further

ORDERED that Plaintiff shall pay to the Clerk of Suffolk County, within ten (10) days from the date of entry hereof, any and all fees and costs required to effect cancellation of record of the Mortgage, Notices of Pendency and any other fees so levied; and it is further

ORDERED that within ten (10) days of the date of entry hereof, Plaintiff’s counsel shall serve a copy of this Order upon the Clerk of Suffolk County and the Defendant.

This shall constitute the Decision, Judgment and Order of this Court.

Dated: November 19, 2009

Riverhead, New York

E N T E R:

______________________________________

JEFFREY ARLEN SPINNER, J.S.C.

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