wells fargo bank v. pauquette - vol

1-800-559-5775

STATE OF VERMONT SUPERIOR COURT CIVIL DIVISION.RUTLAND UNIT DOCKET NO. 408-5-10 Rdcv

WELLS FARGO BANK, N.A. ) ) Plaintiff, ) ) VS. ) ) RICHARD J. PAUQUETTE, ) KAREN J. BETIT ) ) Defendants. )

H E A R I N G

held on Thursday, March 29, 2012, at the Rutland Superior Courthouse, Rutland, Vermont, commencing at 1:04 p.m.

HON. MARY MILES TEACHOUT, Presiding

APPEARANCES:

SHELDON KATZ, ESQUIRE On behalf of Plaintiff;

LISA CHALIDZE, ESQUIRE On behalf of Defendant, Richard Pauquette.

BARRY COHEN, RPR - SHORTHAND REPORTER

O'BRIEN REPORTING SERVICES, INC. 223 Killington Avenue Rutland, VT 05701

1

2

3 I N D E X

4

5

6 Witness Name Direct Cross Redirect Recross

7

8STEPHANIE DRUM 23 38 45 48

9 58

10

11

12

13

14 E X H I B I T S

15

16Exhibit No. Exhibit Description Page

17

18

19 Received in evidence:

20 1 FHA guideline document 61

21

1 THE COURT: Please be seated.

2 THE CLERK: Vermont Superior Court,

3 Rutland Civil Division, the Honorable Mary

4 Miles Teachout, presiding.

5 Your Honor, our next case is Docket

6 No. 408-5-10, in the matter of Wells Fargo vs.

7 Richard J. Pauquette, Karen J. Betit. Present

8 in court is Attorney Sheldon Katz for the

9 plaintiff, also present in court is Attorney

10 Lisa Chalidze for the defendant, Richard

11 Pauquette.

12 THE COURT: Good afternoon.

13 ATTORNEY CHALIDZE: Good afternoon.

14 THE COURT: First of all, I

15 understand that Attorney Chalidze has made

16 arrangements for an independent recording of

17 the proceedings.

18 Mr. Katz, do you have any objection

19 to that?

20 ATTORNEY KATZ: No objection, your

21 Honor.

22 THE COURT: We are here for a

23 hearing pursuant to the court's entry order of

24 February 2nd. This is a hearing pursuant to

25 12 VSA, Section 4635(A), for the Court to make

1 a determination as to whether or not the

2 plaintiff has complied with its obligations

3 under 12 VSA, Section 4635(A), the foreclosure

4 mediation statute.

5 The entry order specified that, and

6 I'll quote: "That report indicates that the

7 plaintiff's position is that this FHA backed

8 loan is ineligible for HAMP modification,

9 (because of delay in seeking modification), so

10 no NPV calculation was run or provided. It is

11 not clear what the source is of the position

12 that a delay cost in eligibility or whether in

13 taking that position plaintiff has fulfilled

14 its obligations under the statute."

15 So the scope of the hearing is

16 really quite narrow. And I also want to

17 state, before we get started, that Mr. Katz

18 included quite a bit of material in his

19 objection to the motion to continue that was

20 filed yesterday, a lot of it appeared to be

21 substantive material relating to the subject

22 matter of today's hearing. I did not read it.

23 It appeared to be what the hearing was about,

24 and so I did not read or absorb the specific

25 facts, since that was the purpose of the

1 hearing. So anything that needs to be

2 presented, needs to be presented orally. Mr.

3 Katz, I think you have the burden here.

4 ATTORNEY KATZ: Yes. I'm not

5 entirely sure about that allocation of the

6 burden, but we'd be happy to initiate. I

7 can --

8 THE COURT: The question -- you're

9 right, the statute isn't clear; but, on the

10 other hand, it is the purpose of the hearing

11 to determine whether or not your client has

12 complied with it obligations. So I infer from

13 that statutory requirement that it would be

14 your obligation to show that you have.

15 ATTORNEY KATZ: Just briefly, your

16 Honor, and I do have a witness here to

17 elaborate, but this is a loan that is owned by

18 the FHA, under FHA regulations; and I

19 understand that you didn't read the entire

20 file yesterday.

21 THE COURT: No, I did not.

22 ATTORNEY KATZ: And I understand why

23 you may have chosen not to do that.

24 But, in any event, I did attach the

25 specific FHA regulation that states that loans

1 that are in arrearage by more than twelve

2 months are not eligible for an FHA HAMP. They

3 are eligible for alternative modifications,

4 that are -- you'll hear different terminology,

5 sometimes they're called traditional,

6 standard, or in-house, but, in any event, the

7 loan was and actually still is eligible for an

8 alternative modification. I'm not saying that

9 it's qualified for one, and it wasn't at the

10 time the mediation was handled.

11 And then you asked about the source

12 of the delay. At the time that Mr. Pauquette,

13 who is a co-borrower, applied -- this is well

14 before mediation, this was in 2009, he was

15 unemployed. He was put on a forbearance plan

16 with a payment due at the end of that

17 forbearance plan. He didn't -- the purpose of

18 the forbearance plan was to give him time to

19 get employment so that he could apply for

20 HAMP. As you well may know, your Honor, a

21 borrower who is unemployed is not eligible for

22 HAMP, unemployment income is not considered

23 for HAMP.

24 THE COURT: Before you go on. I

25 just want to find out from Ms. Chalidze if

1 there's any objection to representations of

2 facts in this matter?

3 ATTORNEY CHALIDZE: There is, your

4 Honor.

5 THE COURT: And let me just say that

6 what I want to narrow in on is whether there

7 are any disputes of pertinent facts related to

8 this particular matter.

9 ATTORNEY CHALIDZE: Yes, your Honor,

10 there are definitely disputes of fact. And my

11 only objection to representation of facts is

12 that we have limited time, and we have

13 witnesses here. So my preference would be

14 rather than have the attorneys summarize what

15 we think the facts are, is simply to hear from

16 the witnesses and utilize our time that way.

17 THE COURT: Well, What I am going to

18 do is allow Mr. Katz to continue with his

19 representation, and then I'll give you an

20 opportunity to identify specifically what

21 particular facts are in dispute. Those are

22 the only facts that we need to hear testimony

23 on.

24 ATTORNEY CHALIDZE: Thank you, your

25 Honor.

1 ATTORNEY KATZ: So, your Honor, in

2 November 2009 the borrower was delinquent

3 about three months at that time. And he

4 contacted Wells Fargo. Wells Fargo issued

5 this -- or allowed a forbearance plan -- or

6 put a forbearance plan in place. Wells Fargo

7 wouldn't proceed with foreclosure during that

8 time. During that time it was not necessarily

9 expected, but the hope was that he would be

10 obtaining employment during that time, and, if

11 he did get employment, then he would possibly

12 become ineligible for HAMP.

13 There was a payment at the end of

14 that forbearance plan. He didn't make that

15 payment. There was also -- during that time

16 there were contacts made by Wells Fargo to

17 Mr. Pauquette saying, you know, just saying we

18 need some information about your employment,

19 if you have it. He didn't make the payment.

20 And, after that foreclosure was commenced, in

21 the period during which he could have been

22 eligible for an FHA HAMP loan modification,

23 which was August 2009 to August 2010, there

24 was no proof or no evidence that he submitted

25 that he had become employed. During that

1 period of time, when he could have been

2 eligible forever HAMP, if he was employed, he

3 didn't submit any evidence that he was

4 actually employed during that period. So as

5 of August 2010, he became ineligible for HAMP.

6 He then entered into the mediation

7 program. Apparently by that time he had -- I

8 think he was self-employed by that time. He

9 went through the mediation process. As we

10 advised during the mediation session, he was

11 not eligible for HAMP because he had a -- he

12 was more than twelve month in arrears.

13 THE COURT: But what I haven't heard

14 is what the source is of that requirement.

15 ATTORNEY KATZ: The source of that

16 requirement is an FHA guideline. If I may

17 approach.

18 THE COURT: Is this what you've

19 already filed?

20 ATTORNEY KATZ: It is, but I have an

21 extra copy.

22 THE COURT: It's all right; I'll

23 look at it in the Court record.

24 ATTORNEY KATZ: I've already given

25 Lisa these two as well, because I copied her

1 yesterday.

2 ATTORNEY CHALIDZE: If you have an

3 extra hard copy, I'd appreciate it. Thank

4 you.

5 ATTORNEY KATZ: I think this is

6 really even outside the scope of the mediation

7 statute, in a sense, because this all happened

8 before the mediation statute was even in

9 place. But, in any event, the FHA guideline

10 is very clear that the arrearage cannot exceed

11 twelve months. It was -- I can't remember --

12 if I can approach, I've got a copy right here,

13 it might be easier.

14 THE COURT: All right. Thank you.

15 ATTORNEY KATZ: So at the

16 mediation --

17 THE COURT: Wait just a minute,

18 please.

19 ATTORNEY KATZ: Okay.

20 THE COURT: And what is this

21 document that you've given me? It doesn't

22 look like a regulation.

23 ATTORNEY KATZ: This is a letter

24 issued by HUD on January 28th, 2010.

25 THE COURT: But what is it? It

1 looks like a description of a program. It

2 doesn't look like a regulation.

3 ATTORNEY KATZ: It is -- well, it's

4 basic program guidelines for FHA home -- for

5 the FHA HAMP program.

6 So the borrower was advised that he

7 was no longer eligible forever HAMP. He was

8 also reviewed --

9 THE COURT: I'm sorry; you may have

10 said all this, but it hasn't gelled in my

11 mind.

12 ATTORNEY KATZ: Sure.

13 THE COURT: You say he wasn't

14 overdue -- I mean he wasn't eligible because?

15 ATTORNEY KATZ: His arrearage was

16 greater than twelve months.

17 THE COURT: Okay. And what period

18 is that?

19 ATTORNEY KATZ: Okay. He was due

20 for a payment August of 2009. We mediated

21 this case in August 2011. The mediation

22 started much earlier. There were some issues

23 regarding document production. But, in any

24 event, the mediation started well after August

25 2010, when he became ineligible for an FHA

1 HAMP LOAN modification.

2 THE COURT: So -- okay.

3 ATTORNEY KATZ: Would it help -- do

4 you want me to draw a time line?

5 THE COURT: No, I just wanted to

6 have you identify the dates.

7 ATTORNEY KATZ: So he defaulted in

8 August 2009. As of August 2010 he was no

9 longer eligible. I think some time after that

10 he applied for the Court's mediation program.

11 So by the time he even applied for the

12 mediation program he was already ineligible.

13 He was also reviewed -- as the

14 statute requires, he had to be informed of

15 other foreclosure prevention options. He was

16 also reviewed by Wells Fargo for a traditional

17 modification. And at the time -- and that's

18 based on net income and household expenses.

19 He was showing a very large deficit that could

20 not be bridged by a modification at that time.

21 So, unfortunately, at that time he did not

22 qualify for a traditional modification.

23 He's still eligible for that if his

24 income increases or if his household expenses

25 are reduced somehow to bridge that gap. He

1 may still be eligible. But at this time -- at

2 the time of the mediation, anyway, based on

3 the numbers that he gave us, he was not

4 eligible.

5 THE COURT: Okay.

6 So now, Ms. Chalidze, if you could

7 identify any facts in dispute that relate to

8 the narrow issue that is before the Court

9 right now.


11 Honor. I understand that the Court has the

12 burden of determining whether the mediation

13 took place in good faith and in compliance

14 with the statute. In that regard I think the

15 following factual disputes are important.

16 First, plaintiff has always been,

17 from our perspective, incorrect on the

18 so-called shortfall that would qualify

19 Mr. Pauquette for a non-HAMP modification. We

20 pointed that out.

21 THE COURT: What is the dispute?

22 ATTORNEY CHALIDZE: The bank

23 indicates that Mr. Pauquette makes $700,

24 roughly, and change a month, less than what is

25 needed to support a regular loan, acceptable

1 loan payment.

2 ATTORNEY KATZ: Excuse me,

3 Ms. Chalidze, I think we're really far afield

4 of the scope of the hearing and the scope of

5 the -- we're talking about traditional

6 modification, for which there's absolutely no

7 duty at all for Wells Fargo to provide, is

8 what Ms. Chalidze is talking about. And the

9 order, as I understand it, has only to do with

10 HAMP. So we're way far afield.

11 I mean I'd be happy to talk about

12 these things, because I was there, I know the

13 numbers.

14 ATTORNEY CHALIDZE: Your Honor, may

15 I be permitted to finish?

16 THE COURT: Well, I would like you

17 both to just give me a moment here.

18 Okay; you may. But I want to

19 reiterate, again, that the scope of this

20 hearing is extremely narrow. The mediator did

21 submit a report that said that no party failed

22 to make a good-faith effort to mediate.

23 However, the Court has to make a

24 determination, under the statute and under the

25 section, about whether or not the

1 documentation and so forth was supplied. The

2 mediator checked yes, but then said, quote,

3 "Lender's position is that this FHA-backed

4 loan is ineligible for HAMP modification

5 because of delay in seeking modification. So

6 no NPV calculation was run or provided."

7 The only issues for today are

8 whether in fact this loan is FHA backed,

9 whether there are FHA regs that apply, whether

10 those regs make a person ineligible as a

11 result of delay, and whether there was a

12 delay. Those are the only things that are

13 unclear about from the mediation report. So

14 that's the scope of the hearing.

15 It's not about non-HAMP

16 alternatives, because that was not put in

17 issue by the mediator's report. But the

18 mediator's report suggested that the mediator

19 was restating the plaintiff's position on why

20 there was ineligibility, but it wasn't clear

21 to the Court that that's a valid position. So

22 it's the validity of that position on the part

23 of the plaintiff that was put at issue and is

24 the reason for the hearing. So those are the

25 only facts that are at issue. And, frankly, I

1 haven't heard sufficient support from the

2 plaintiff yet. But -- on a couple of those.

3 But in terms of the scope of the

4 hearing, it won't be broader than that, so

5 it's not necessary for you to deal with

6 possible entitlements to non-HAMP.


8 Honor.

9 Then with that guidance we will

10 leave aside the non-HAMP factual issues that

11 exist, they're for another day apparently.

12 As to HAMP, there is a factual

13 dispute, very definitely, as to whether

14 modification was appropriately sought within

15 the one-year period. And we will submit

16 testimony on that from Mr. Pauquette. And it

17 is also --

18 THE COURT: You're saying that you

19 dispute -- that you have facts indicating that

20 between August of 2009 and August of 2010

21 there was an attempt to seek a HAMP

22 modification?

23 ATTORNEY CHALIDZE: Yes, your Honor.

24 THE COURT: Okay.

25 ATTORNEY CHALIDZE: And I also want

1 to make it clear that I am not acquiescing in

2 plaintiff's position that this asserted

3 one-year FHA limitation actually applies.

4 I've heard today for the first time

5 that the FHA owns this loan. We haven't seen

6 the documents that would effectuate that

7 ownership, it's not disclosed in the

8 complaint, we don't have the documents

9 authorizing Wells Fargo on behalf of FHA, the

10 apparent loan owner. So those may or may not

11 be issues for this area.

12 THE COURT: Those are exactly issues

13 for this hearing --

14 ATTORNEY CHALIDZE: Okay.

15 THE COURT: -- as I identified what

16 the issues were: Is this in fact an FHA loan?

17 And do the regs apply?

18 And you're saying that you don't --

19 haven't been provided information about that?

20 ATTORNEY CHALIDZE: Not to my

21 satisfaction. And I have requested it for

22 quite some time.

23 I also would request, if the Court

24 thinks it's appropriate, to have plaintiff

25 identify the actual CFR citation, or some

1 legal source citation. If in fact its

2 reliance is on a regulation, I had assumed --

3 perhaps incorrectly -- that there was some

4 sort of loan transfer or transactional

5 document or investment document to document

6 the FHA's role in this. We're now told that

7 the FHA is an owner. So I certainly feel

8 there's a lot of unclarity there.

9 THE COURT: All right. Well, we'll

10 go back. It is Mr. Mr. Katz's responsibility

11 then to show what FHA's role is, what the regs

12 are, and whether they apply before we even get

13 to the factual dispute as to whether or not

14 modification was sought within the pertinent

15 period.

16 ATTORNEY KATZ: Your Honor, two

17 quick comments that may cut to the chase here.

18 First, we did -- I mean if this has

19 to be a factual dispute, I don't know -- I

20 mean I was at the mediation.

21 THE COURT: You did what --

22 ATTORNEY KATZ: We clearly said that

23 the FHA is the owner, and that was the reason

24 why we couldn't consider him.

25 But the other thing is that all --

1 during the time when Mr. Pauquette could

2 have -- was eligible for an FHA loan

3 modification, which was between August 2009

4 and August 2010, that period is really outside

5 the Court's purview because the mediation

6 statute wasn't even in place at that time.

7 And my understanding of the mediation statute

8 is that it's looking at the way the mediation

9 was handled, not what happened prior to that.

10 I mean I'm happy to put on my

11 witness to explain all this. But I just want

12 to make that clear. That's really, in my

13 view, outside the Court's -- the scope of the

14 Court's responsibility under the mediation

15 statute.

16 THE COURT: The question for the

17 Court is whether or not the plaintiff

18 sufficiently met its obligations under the

19 statute at the mediation.

20 ATTORNEY KATZ: Yes.

21 THE COURT: But if at the mediation

22 the plaintiff took a position that was

23 indefensible, then that would call into

24 question whether or not it met its

25 obligations.

1 So you've just indicated just now

2 that at the mediation it was stated that this

3 was an FHA loan?


5 THE COURT: Ms. Chalidze, were you

6 at the mediation?

7 ATTORNEY CHALIDZE: My client and I

8 were there in person. Mr. Katz and his client

9 participated by phone.

10 THE COURT: You just said a moment

11 ago that this was the first that you heard

12 this was an FHA loan?

13 ATTORNEY CHALIDZE: For a long time

14 I haven't been told that the FHA is an

15 investor. What I'm being told today is that

16 FHA owns the loan. I have -- I'm sorry.

17 THE COURT: It doesn't really matter

18 whether it's an owner or investor as long as

19 FHA regs apply. And I think that's the heart

20 of this issue, was that the mediator said:

21 Well, the plaintiff says that under FHA regs

22 it was ineligible. But the mediator's report

23 didn't indicate that the mediator really was

24 satisfied with that, that's why the Court has

25 to be involved.

1 ATTORNEY CHALIDZE: And I don't --

2 THE COURT: So the -- I don't think

3 we need to get into whether it's owner or

4 investor. Apparently the FHA was identified.

5 But the question is do the FHA regs apply?

6 And what are they? And, frankly, this summary

7 would not be sufficient.

8 ATTORNEY CHALIDZE: And your Honor,

9 just for the sake perhaps of my own clarity,

10 there must be some reason that the FHA is

11 involved; in other words, there must have been

12 a method, there must have been some paperwork,

13 some mechanism. This loan didn't just

14 magically become an FHA loan. And that's been

15 part of my frustration, that we can't --

16 there's nothing there to show how that

17 occurred. Plaintiff says it is, and plaintiff

18 says there's an E regulation that applies.

19 THE COURT: Was that issue raised at

20 mediation?


22 And before that I've asked Mr. Katz to provide

23 me with that information.

24 THE COURT: Mr. Katz.

25 ATTORNEY KATZ: I think I -- well --

1 I --

2 THE COURT: I don't want to --

3 ATTORNEY KATZ: Okay. I've got to

4 put my witness on.

5 THE COURT: Excuse me. I don't want

6 to get into what did or didn't happen at

7 mediation. I know I've asked a couple of

8 questions about that, but I don't want to get

9 into who said what, who said whom; I just want

10 to find out if that was an issue.

11 The real issue now is the status of

12 FHA, which determines the applicability of any

13 regs, and what those regs are, and whether the

14 position taken at mediation was defendable.

15 So if you would like to put on a

16 witness.

17 ATTORNEY KATZ: I would, your Honor.

18 Plaintiff calls Stephanie Drum.

19

20

21

22

23 (Continued on the next page.)

24

25

1

2 STEPHANIE DRUM

3

4 was called as a witness by and on behalf of the

5 Plaintiff, and after having been first duly sworn

6 was examined and testified as follows:

7

8 DIRECT EXAMINATION

9 BY ATTORNEY KATZ:

10 Q. Could you state your name for the record,

11 please?

12 A. Stephanie Drum.

13 Q. Stephanie, do you work for Wells Fargo?

14 A. Yes.

15 Q. How long have you worked for Wells Fargo?

16 A. For about three years.

17 Q. And what's your title?

18 A. Loan adjustor 2.

19 Q. And what are your responsibilities as a loan

20 adjustor 2?

21 A. To underwrite loans for mediations.

22 Q. So you're underwriting loan modifications?

23 A. Yes.

24 Q. And do you have -- what qualifications are

25 required of you as a Wells Fargo loan

1 adjustor?

2 A. We are required to be delegated with our

3 authority to underwrite these loans. You have

4 to take tests staying in. We are audited, as

5 well, to show that we're underwriting

6 correctly.

7 Q. So the testing, is that testing required by

8 the government agencies that have regulatory

9 oversight for Wells Fargo?

10 A. Yes.

11 Q. Do you know which agencies those are?

12 A. I do not.

13 Q. You know who audits these loans, these loan

14 modifications?

15 A. Well, we have our inside with Wells Fargo, and

16 then also Treasury, Treasury checks, to make

17 sure we are abiding Treasury guidelines.

18 Q. And this is an FHA loan. Does FHA audit this

19 process as well?

20 A. Yes.

21 Q. And are these audits done for both denials of

22 loan modification and approvals?

23 A. Yes.

24 Q. What happens if you make a mistake?

25 A. Well, then, of course, it's fixed and then

1 there's repercussions.

2 Q. Repercussions?

3 A. Yeah, for the employee.

4 Q. So you don't want to make too many mistakes?

5 A. Correct.

6 Q. When was the loan, Mr. Pauquette's and

7 Ms. Betit's loan, when was it originated?

8 A. I believe it was 2007.

9 Q. Okay. And when did it go into default?

10 A. 2009, August 2009.

11 Q. Okay. August -- they're due for August 2009?

12 And who owns the loan or who is the

13 investor in the loan?

14 A. It's an FHA-backed loan.

15 Q. And what's Wells Fargo's role?

16 A. Wells Fargo is the servicer, we service the

17 loan.

18 Q. So after the loan went into default was there

19 contact between Wells Fargo and the borrowers?

20 A. Yes.

21 Q. When did that begin?

22 A. It shows in -- based off my notes -- that we

23 reviewed for modification in 2009, and then we

24 placed -- due to the unemployment we placed on

25 a special forbearance for a couple of months

1 to give time for the borrower to become

2 employed.

3 Q. Can I stop you right there for a moment?

4 A. Yes.

5 Q. So at the time that he first -- that this

6 first encounter between the borrowers and

7 Wells Fargo took place, Mr. Pauquette was

8 unemployed?

9 A. Yes.

10 Q. And so because he was unemployed, was he

11 eligible for HAMP at that time?

12 A. No.

13 Q. So Wells Fargo in response to his -- to this

14 encounter, Wells Fargo put him on a special

15 forbearance plan, is what you said?

16 Briefly tell us what that was all

17 about?

18 ATTORNEY CHALIDZE: Excuse me, your

19 Honor. I note that the witness is making

20 reference to a file that's in front of her.

21 Can we have that marked for

22 identification?

23 THE COURT: You need to turn over

24 your notes and not look at anything, unless

25 you have permission from the Court.

1 And, rather than have it marked for

2 identification, Mr. Katz, it can either be

3 used to refresh you recollection or, if you

4 are going to use it for other purposes, then

5 it would have to be marked.


7 Q. All right. Let me know if you need to refresh

8 your recollection by going to your notes.

9 So we were at the terms of the

10 forbearance plan were what?

11 A. Based off of the review, just by looking back,

12 I recall it being a four-month forbearance.

13 So we had placed foreclosure on hold for a

14 couple of months to give time for employment,

15 and we asked that we be notified, that way we

16 could take a look at retention options where

17 employment was verified. And after the four

18 months, we had put a payment at the end for

19 the reinstatement or to -- we just put it

20 there to give time to -- for the unemployment

21 to stop and employment to begin. But then

22 after we didn't know if there had been any

23 more employment, so we removed from loss

24 litigation.

25 Q. Okay. At the end of the forbearance plan had

1 you heard from Mr. -- from the borrowers that

2 there was employment during the period of the

3 forbearance plan?

4 A. No.

5 Q. Okay. And that was a four-month plan?

6 A. Yes.

7 Q. And you mentioned that at the end of the plan

8 there was a payment due; correct?

9 A. Yes.

10 Q. Did the borrowers make that payment?

11 A. No.

12 Q. Did the borrowers contact Wells Fargo and ask

13 for an extension of the forbearance plan?


15 Honor. I apologize for objecting. I've tried

16 to be liberal. But we have no foundation

17 here. This witness has worked at Wells Fargo

18 for three years, and she has indicated that

19 her duties relate to attending mediations. So

20 it's unclear to me how she would know what

21 occurred during this time frame, and outside

22 the scope of her duties.

23 THE COURT: You can ask some

24 foundation questions.


1 Q. Have you become familiar with the history of

2 this loan?

3 A. Yes.

4 Q. And how did you familiarize yourself with that

5 history?

6 A. Based on Wells Fargo's system notes.

7 Q. Okay. And I want to know a little bit about

8 those system notes. Are those system notes

9 made with the personal knowledge of the person

10 making those notes? Does that person, at the

11 time the notes are made, is that made with the

12 personal knowledge of that person making the

13 notes?

14 A. Yes.

15 ATTORNEY CHALIDZE: Objection.

16 Foundation.

17 THE COURT: Sustained.

18 Q. Is it the duty -- okay. So these people who

19 are making these notes, are they customer

20 service representatives in the loss mitigation

21 department?

22 A. Yes.

23 Q. Do they have a duty to record what occurred in

24 encounters with borrowers?


1 Foundation.

2 ATTORNEY KATZ: Your Honor, I'm

3 asking if they have a duty to make --

4 THE COURT: The objection is

5 overruled.

6 You may answer, if you know. If you

7 don't know, say you don't know.

8 A. Can you ask me again?

9 Q. Sure. Do these people have a duty to make

10 these notes?

11 A. Yes.

12 Q. And are they -- and you were not a customer

13 service representative, but you were a

14 mediation specialist; right?

15 A. Yes.

16 Q. And did you make notes during those

17 mediations?

18 A. Yes.

19 Q. And is it the regular practice of Wells Fargo

20 to make these kinds of notes and records?

21 A. Yes.

22 Q. And are adjusting loans or reviewing them for

23 modifications, is that a regularly conducted

24 business activity of Wells Fargo?

25 A. Yes.

1 ATTORNEY KATZ: Your Honor, I think

2 that the foundation for her testimony is

3 established under 803(6).

4 THE COURT: I'm not quite sure what

5 you're asking. I'm sure Ms. Chalidze will

6 object if you ask a question --


8 THE COURT: -- that she objects to.


10 THE COURT: But I'm concerned that

11 you're getting involved in the specifics of

12 the facts of delay, which may become an issue.

13 But the first thing that needs to be shown is

14 the FHA regs.


16 THE COURT: And I don't know if

17 you're going to be able to get that through

18 this witness or not.


20 Yeah. And I just wanted to

21 establish that between August 2009 and August

22 2010 that no evidence of employment.

23 But I can move on because I think

24 that that is pretty well established, that

25 proof of employment had not been submitted

1 during that period.

2 THE COURT: I'm sorry; but I'm

3 taking very careful notes, and through the

4 evidence I do -- that is not clearly

5 established.

6 ATTORNEY KATZ: Okay. But, again,

7 that's retrospective, which -- I mean I will

8 establish it then.

9 THE COURT: I understand.

10 Let me repeat, the reason that we're

11 having a hearing is that it was unclear from

12 the mediation report whether or not the

13 plaintiff had a defensible position that FHA

14 regs apply, that FHA regs made a person

15 ineligible for HAMP after some delay, and that

16 that applied in this case. So we need all

17 three of those things.

18 ATTORNEY KATZ: All right.

19 BY ATTORNEY KATZ:

20 Q. Is it your understanding that FHA regulations

21 apply to this loan where the FHA is the

22 investor?


24 Honor. We've had no foundation for this.

25 ATTORNEY KATZ: If we can answer the

1 question, I don't understand why there needs

2 to be a foundation.


4 sustained. Her testimony was that this is an

5 FHA-backed loan, that's all she said. That's

6 all we know.


8 Q. Have you adjusted FHA loans previously?

9 A. Yes.

10 Q. Okay. And are you familiar with the

11 guidelines that FHA applies to FHA investor

12 loans?

13 A. Yes.

14 Q. Is one of those guidelines that the loan has

15 to be -- cannot be twelve months or more in

16 arrearage to be eligible for HAMP?


18 Honor, I don't think it's appropriate to lead

19 at this juncture.



22 trying to get through this.

23 THE COURT: That was a very

24 specifically leading question.


1 Q. You're familiar with the guidelines.

2 What do the guidelines have to say

3 about arrearage?

4 A. As far as for HAMP?

5 Q. Yes.

6 A. For HAMP it cannot be twelve months past due

7 to be --

8 THE COURT: Say it again?

9 THE WITNESS: The loan cannot be

10 twelve months past due to qualify for HAMP.

11 Q. And between August 2009 and August 2010 did

12 you ever -- did Wells Fargo receive evidence

13 that the borrower was employed and had an

14 earned income?


16 Honor. Rather than continuing to object, may

17 I voir dire?

18 THE COURT: As to what?

19 ATTORNEY CHALIDZE: As to the scope

20 of this witness' knowledge and duties.

21 THE COURT: No. You may

22 cross-examine when it's appropriate.

23 ATTORNEY CHALIDZE: Thank you.

24 In that case, I make a foundation

25 objection to the pending question.

1 Q. Do you know whether the borrower offered any

2 proof of earned employment income in the

3 period August 2009 to August 2010?

4 A. Not that I'm aware of.

5 Q. And you would be aware of it if he had;

6 correct?

7 A. Correct.

8 Q. Okay. And during that time did Wells Fargo

9 make any efforts to reach out to the borrower

10 and ask for additional information?

11 A. Yes.

12 Q. And how were those communications made?

13 Phone, letter, et cetera?

14 ATTORNEY CHALIDZE: Your Honor, I

15 apologize for -- I keep popping up, and I'm

16 sorry. But this witness has very limited

17 duties, as I understand her testimony. She

18 attends mediations.

19 So I am making a foundation

20 objection as to how she can testify as to

21 prior time periods and what occurred, and what

22 didn't. If she is regurgitating some records,

23 I think we should have those identified and

24 placed in evidence.


1 overruled. She has testified that she is

2 familiar with this loan from system notes, and

3 she testified about what the procedure was for

4 making notes within the system.

5 Q. Okay. And in the mediation or later -- now

6 let's skip to 2011. Were the borrowers back

7 in loss mitigation?

8 A. Yes.

9 Q. Okay. And at that point, based on your past

10 testimony, the borrowers were no longer

11 eligible for HAMP; correct?

12 A. Correct.

13 Q. Were they considered for anything else?

14 A. Yes. They were reviewed for internal

15 modification.

16 Q. And what was the result of that?

17 ATTORNEY CHALIDZE: Excuse me.

18 Relevance. This is outside of the scope of

19 the issues that your Honor --


21 Q. And does NPV -- explain what NPV is briefly?

22 A. It is the net present value. Um, but that's

23 normally -- so with HAMP, if HAMP is not

24 running, then it's not -- the NPV is not

25 running.

1 Q. And so -- and NPV wasn't run in 2011 for this

2 borrower; correct?

3 A. Correct.

4 Q. And the reason being?

5 A. Is because they weren't reviewed for HAMP.

6 Q. Stephanie, let me show you what's been marked

7 as Plaintiff's 1 for identification.

8 (Exhibit No. 1 was marked for

9 identification.)

10 Q. You mentioned before FHA guidelines, one being

11 that the FHA does not allow HAMP modifications

12 for loans that are more than one year in

13 arrearage.

14 Is that the guideline that you were

15 referring to earlier?

16 A. Yes.

17 Q. Thank you, Stephanie. I don't have any other

18 questions. Ms. Chalidze may have some

19 questions, or the Court may have some

20 questions for you.

21 THE COURT: Ms. Chalidze.

22 ATTORNEY CHALIDZE: Thank you your

23 Honor.

24

25 (Continued on the following page.)

1 CROSS-EXAMINATION

2 BY ATTORNEY CHALIDZE:

3

4 Q. I didn't hear your name very clearly. Can you

5 spell it for me?

6 A. It is, S-T-E-P-H-A-N-I-E.

7 Q. Drum?

8 A. D-R-U-M.

9 Q. Did you have a different name earlier? Were

10 you married recently?

11 A. It's been three years.

12 Q. What was your name before that?

13 A. Stephanie Norris, N-o-r-r-i-s.

14 Q. Is it your view that FHA regulations apply to

15 this loan?

16 A. Yes.

17 Q. And can you tell us where those regulations

18 are found?

19 A. Well, we have a way of, when we're

20 underwriting the loans and looking at the

21 loans, that it's in our system that we know

22 that it's a FHA loan.

23 Q. Well, I appreciate that. But I guess my

24 question is can you tell the Court today where

25 that regulation is?

1 ATTORNEY KATZ: I am going to

2 object. I don't -- I have no idea what the

3 question means. Where it is? I mean it's in

4 cyberspace, it's at the FHA. Where it is?

5 It's is just so unclear, your Honor.

6 THE COURT: Sustained. You may

7 rephrase.


9 Honor.

10 Q. Have you read the particular regulations to

11 which you've referred?

12 A. Yes.

13 Q. And would you know where to find a copy?

14 A. Of this (indicating)?

15 Q. Of the regulation.

16 A. This regulation right here (indicating)?

17 Q. Well, I don't know.

18 A. Is -- from the HAMP?

19 Q. Are you referring to a particular document?

20 A. Yes. It's the Making Home Affordable -- this

21 is actually on the Treasury web site.

22 Q. And it's your understanding, as an officer of

23 Wells Fargo, that that's a regulation?

24 A. Yes.

25 Q. I see. Have you been given any training by

1 Wells Fargo about what constitutes a

2 regulation?

3 ATTORNEY KATZ: Objection, your

4 Honor. We're really getting far afield.

5 THE COURT: Overruled. She

6 testified as to regulation, and that

7 Plaintiff's 1 is a regulation.

8 A. Yes.

9 Q. So you have received some training from Wells

10 Fargo in what constitutes a regulation?

11 A. Yes.

12 Q. And can you tell us whether this particular

13 regulation on which you rely has any sort of

14 identifying number?

15 A. Number?

16 Q. Yes.


18 Q. Okay. Can you tell the Court whether this

19 particular regulation on which you rely is

20 published in any kind of book that the public

21 could go look at?


23 Q. Okay. Does Wells Fargo ever lose documents?

24 ATTORNEY KATZ: I'm going to -- I

25 object to that. I also want to just point out

1 that this document is available, as she said,

2 on the Treasury web site.

3 THE COURT: That was her testimony.

4 What's your objection?

5 ATTORNEY KATZ: The question was

6 about lost documents? That's way far afield,

7 your Honor.



10 I state that we'll connect it up through

11 Mr. Pauquette's testimony.

12 THE COURT: Can you make an offer of

13 proof about how it relates to the narrow

14 issues?


16 Mr. Pauquette will testify that he

17 applied for a modification before August 1st,

18 2010, and was told by Wells Fargo that it had

19 been lost.

20 THE COURT: I'm not sure that we're

21 going to get that far, unless, Mr. Katz, do

22 you have any other testimony about the

23 applicability of FHA regs besides what's been

24 offered?

25 ATTORNEY KATZ: The applicability.

1 Well, I mean...

2 ATTORNEY CHALIDZE: So far the

3 testimony has been that this is an FHA-backed

4 loan.

5 ATTORNEY KATZ: It's an FHA owned or

6 investor loan, yes.

7 ATTORNEY CHALIDZE: The testimony is

8 it's an FHA-backed loan. There's no specific

9 information about what that is, of what the

10 relationship is between FHA and the plaintiff

11 in this case.

12 There has also been -- Plaintiff's 1

13 hasn't been admitted, but, even if it were, I

14 haven't seen a regulation. The problem with

15 the mediation report was that it indicated

16 that plaintiff says that the reason that this

17 isn't a HAMP loan, that it's ineligible for

18 HAMP is that this is an FHA-backed loan and

19 there was a delay in seeking modification.

20 Well, that's only a defensible

21 position if this is in fact an FHA-backed

22 loan, if there are FHA regs that say delays

23 make a person ineligible, and if there was a

24 delay. We don't even need to get to the

25 question of whether there was a delay unless

1 the plaintiff is able to show that its

2 statement at mediation, that FHA regs apply to

3 this loan -- if it's shown, and I haven't

4 heard that yet.

5 ATTORNEY KATZ: Your Honor, with all

6 due respect, she testified that the

7 relationship between Wells Fargo and the FHA

8 is that the FHA owns the loan or is the

9 investor.

10 THE COURT: She did not -- you asked

11 her if she was the investor. Her answer was

12 it's an FHA-backed loan. There's nothing more

13 specific than that. I do not know what the

14 relationship is between FHA and this loan. I

15 do not know what the regulations say. I mean

16 I think this is why this is set for hearing,

17 because the mediation report indicated that at

18 the mediation the plaintiff took a position

19 that Mr. Pauquette was ineligible and relied

20 on the fact that this was an FHA-backed loan,

21 and that FHA regs applied, that, under FHA

22 regs, a delay makes a person ineligible and

23 that he delayed. The purpose of this hearing

24 is to see whether or not that was a defensible

25 statement for FHA -- for Wells Fargo to make

1 at the mediation, and, so far, you haven't

2 shown that it was.

3 ATTORNEY KATZ: Well, okay. I mean

4 if I may, I can try. But, by the way those

5 are the mediator's words "the delay." Delay

6 is not the operative criterion. The operative

7 criterion is twelve months in arrearage.

8 THE COURT: Fine. But I haven't

9 seen a reg that says that. And I haven't seen

10 any connection between any regs that I haven't

11 seen and the loan.

12 ATTORNEY KATZ: May I ask --

13 THE COURT: I've heard your

14 statement, and I've heard her testimony. I am

15 looking for it.

16 ATTORNEY KATZ: Okay. You know,

17 maybe I didn't elicit the testimony in the

18 correct way, but if I may.

19 REDIRECT EXAMINATION

20 BY MR. KATZ:

21 Q. Stephanie --

22 ATTORNEY CHALIDZE: Excuse me; I'm

23 in the middle of my cross-examination here.

24 THE COURT: That is true. But you

25 were cross-examining on an issue that we may

1 not need to get to.

2 ATTORNEY CHALIDZE: And I'm happy

3 to -- I understand your Honor's comment, and

4 I'm happy to redirect my cross in light of

5 that comment. Thank you.

6 BY ATTORNEY KATZ:

7 Q. Stephanie --

8 ATTORNEY CHALIDZE: I'm sorry; am I

9 continuing my cross?

10 THE COURT: I was going to let

11 Mr. Katz supplement his direct before you do

12 continue.




16 Q. Stephanie, what agency is the investor in this

17 loan?

18 A. The FHA.

19 Q. And as to FHA loans, do FHA guidelines apply?

20 A. Yes.

21 Q. And you're familiar with those guidelines?

22 A. Yes.

23 Q. And you're familiar with them? You've

24 adjusted many FHA loans in the past; correct?

25 A. Correct.

1 Q. And the guidelines -- what was the relevant

2 criterion in 2011, when Mr. Pauquette applied

3 for a loan modification and he was denied for

4 HAMP, what was the reason for that?

5 A. Because he was past twelve months due.

6 Q. And is that an FHA guideline?

7 A. Yes.

8 Q. And does that apply to this loan?

9 A. Yes.

10 Q. And the reason being because the FHA is the

11 investor in this loan?

12 A. Yes.

13 Q. And, again, the relationship between the

14 plaintiff and the FHA with regard to this

15 loan?

16 A. Wells Fargo's the servicer, FHA is the

17 investor.

18 Q. And delay, that's not really a criterion under

19 the FHA guidelines; right?


21 Honor. This is certainly leading.



24 Q. Again, the relevant criterion on which that

25 was denied for a HAMP modification in 2011 was

1 what?


3 Asked and answered.

4 THE COURT: Overruled.

5 Q. Was what?

6 A. Delinquency past twelve months.

7 Q. And what was the -- okay. So it's delinquent

8 past twelve months. And why is that relevant

9 in this case?

10 A. Because it's an FHA loan, and delinquency past

11 twelve months are not eligible for HAMP view.

12 ATTORNEY KATZ: Your Honor, can I

13 just seek some guidance here. I'm doing my

14 best to give you what you need to make a

15 decision here.

16 THE COURT: I'm going to give

17 Ms. Chalidze an opportunity to cross anymore

18 if she likes, not on the delay, not on the

19 facts of delay, but on the applicability of

20 FHA regs.


22 Honor I would like that.

23

24

25 (Continued on the next page.)

1 RECROSS-EXAMINATION


3

4 ATTORNEY CHALIDZE: May I approach

5 the witness, your Honor.

6 THE COURT: Yes.

7 ATTORNEY CHALIDZE: And for the sake

8 of the court and counsel, I am showing the

9 witness a copy of the plaintiff's complaint in

10 this matter.

11 ATTORNEY KATZ: And could I get a

12 copy of that, please?

13 ATTORNEY CHALIDZE: It's your

14 complaint.

15 ATTORNEY KATZ: I'm going to object

16 to that, the relevance, that there's no

17 requirement in the rules of federal procedure

18 that the investor in the loan be identified,

19 and the investor could change over time.

20 THE COURT: You're anticipating the

21 question.

22 What is the purpose that you're

23 showing her this?

24 ATTORNEY CHALIDZE: The allegation

25 in paragraph 5 refutes the testimony this

1 witness has given.

2 ATTORNEY KATZ: Can I get a copy,

3 Lisa?

4 ATTORNEY CHALIDZE: It's your

5 complaint.

6 ATTORNEY KATZ: I don't have it with

7 me.

8 ATTORNEY CHALIDZE: I'm sorry; I

9 don't have it -- well, you're welcome to look

10 at my pleading book.

11 ATTORNEY KATZ: It's customary, when

12 you show the witness an exhibit, that you

13 provide --

14 THE COURT: Excuse me; she is

15 offering it to you.


17 Q. Ms. Drum, will you please direct your

18 attention to paragraph 5 of the complaint.

19 And would you be so kind as to read that

20 aloud?

21 ATTORNEY KATZ: I object.

22 Relevance. Wells Fargo may be the

23 holder of the note; that doesn't mean that --

24 I mean Ms. Chalidze should know this.


1 sustained.


3 I be heard on that point. I think it is

4 relevant.

5 THE COURT: How so?

6 ATTORNEY CHALIDZE: Because this

7 witness has testified that Wells Fargo is

8 simply the servicer for FHA. That is directly

9 contradicted by paragraph 5 in the complaint

10 in which it alleges that it is the transferee

11 and assignee.

12 ATTORNEY KATZ: Your Honor, it's

13 not. Wells Fargo can be the holder of the

14 note, that doesn't mean --


16 overruled; it does go to credibility.


18 Honor.

19 Q. Would you be so kind as to read paragraph 5

20 into the record?

21 A. "Said promissory note was transferred by

22 endorsements from CTX Mortgage Company, LLC,

23 to plaintiff, who further endorsed said

24 promissory note in blank, and plaintiff is in

25 possession of the note."

1 Q. I apologize if I've been confused by your

2 testimony, ma'am, but would you tell me is FHA

3 an investor in this loan or an owner of this

4 loan?

5 A. FHA is the investor.

6 Q. Okay. And is there -- excuse me, I'll just

7 approach to take my document back, if I

8 might -- is this a different set of

9 regulations for loans that are invested in by

10 the FHA as opposed to owned by the FHA?

11 ATTORNEY KATZ: I object. I mean

12 I'm not sure that -- I object to the

13 foundation. I'm not sure that the FHA owned

14 any loans.


16 sustained.

17 You may lay a foundation.


19 Q. Ms. Drum, will you describe for us, please,

20 the document by which FHA invested in this

21 loan?

22 A. I don't have the document to that.

23 Q. Have you ever seen that document?

24 ATTORNEY KATZ: I -- again, I

25 object. This is going way beyond the scope of

1 the hearing. She's testified that FHA is the

2 investor. I don't think we have to show the

3 papers that show that.


5 overruled. This is cross-examination on the

6 specific point on which she gave direct

7 testimony.


9 Honor.

10 Q. Have you ever seen the document by which FHA

11 invested in this loan?

12 A. I have not.

13 Q. Do you know how much money FHA invested in

14 this loan?

15 A. I do not.

16 Q. Do you know the general mechanism by which FHA

17 invested in this loan?

18 ATTORNEY KATZ: Again, objection.

19 She's testified that the regulations -- that

20 the guidelines apply, and that she's applied

21 them in several instances in the past where

22 she's adjusted loans. It's just getting a

23 little ridiculous, your Honor, really.

24 THE COURT: Mr. Katz, that's up to

25 me.

1 ATTORNEY KATZ: That's what I'm

2 suggesting.

3 THE COURT: I will make a ruling.

4 It's an exaggeration, I think, and not a

5 professional way of making an objection to the

6 Court.

7 The objection's overruled. Whether

8 FHA has a role in this loan and, therefore,

9 whether or not its regs apply and what its

10 regs say is exactly the issue for today's

11 hearing. So questions may be asked pertinent

12 to her knowledge on that point.

13 She has testified that FHA is the

14 investor, and she may be cross-examined on

15 what that means.


17 Honor.

18 Q. Do you have the question in mind, Ms. Drum?

19 A. Can you please repeat.

20 Q. Yes, of course.

21 Do you know the mechanism by which

22 the FHA invested in this loan?

23 A. I do not.

24 Q. Do you know when the FHA invested in this

25 loan?

1 A. I do not.

2 Q. Do you know who input into the Wells Fargo

3 computer system that this is a, quote,

4 FHA-backed loan, close quote?

5 A. I do not.

6 Q. Has that ever been part of your duties at

7 Wells Fargo?

8 A. To know that? No.

9 Q. Okay. Did you receive any instruction or

10 training from Wells Fargo in regard to how FHA

11 investments are made?

12 A. We had to identify the FHA loans.

13 Q. And to identify them you look at a computer

14 system and see a designation made by someone

15 else?

16 A. Yes.

17 Q. Do you know that the FHA made its investment

18 in this loan prior to May of 2010?

19 A. I don't remember.

20 Q. Thank you.

21 ATTORNEY KATZ: You know, it's been

22 asked and answered. But I object to the last

23 question. May 2010 has no relevance.


25 ATTORNEY CHALIDZE: I'm sorry; is

1 it --


3 sustained, the answer is stricken.


5 Honor. The relevance was that the foreclosure

6 was filed in May of 2010 and the witness has

7 indicated that she does not know whether the

8 FHA investment was in place at that time.

9 ATTORNEY KATZ: Still not relevant.

10 THE COURT: We'll take the evidence.


12 Q. Ms. Drum, would you agree with me that if in

13 fact an FHA one-year post-default prohibition

14 applied, the HAMP modification, which is what

15 I believe you've testified, and if the payment

16 default of Mr. Pauquette occurred as of August

17 1st, 2009, would you agree with me that going

18 to mediation to consider HAMP alternatives in

19 October of 2011 would be futile?

20 ATTORNEY KATZ: Objection.

21 A. Would you repeat the question, please.

22 Q. Yes. Would it be futile to go to a mediation

23 in October of 2011 if the lender took the

24 position that there was an FHA prohibition

25 against HAMP modification more than twelve

1 months after the payment default, and the

2 payment default was as of August 12, 2009?

3 ATTORNEY KATZ: I object to the

4 foundation. I didn't offer her as an expert

5 on Vermont's mediation statute.

6 THE COURT: Objection is sustained.

7 ATTORNEY CHALIDZE: I'll try and

8 rephrase it. I apologize.

9 Q. I'm looking for your understanding.

10 As an officer and employee of Wells

11 Fargo, is it your understanding that it would

12 be futile to mediate a HAMP loan modification

13 on what Wells Fargo considered an FHA loan

14 that was past twelve months from date of

15 default?

16 ATTORNEY KATZ: I object to the

17 characterization that HAMP is the only thing

18 that's considered in mediation.



21 Honor.

22 Q. One last question, and, if the Court tells me

23 this is irrelevant for today, I will sit down

24 with no further.

25 Ms. Drum, is it your understanding

1 that Wells Fargo N.A. owns this loan?

2 A. We service the loan.

3 Q. Is it your understanding that Wells Fargo owns

4 the loan?

5 ATTORNEY KATZ: Objection.

6 Foundation. She testified that FHA is the

7 investor and that -- and Wells Fargo is the

8 servicer. Ownership -- if she want to define

9 what ownership is, she can ask that question.

10 THE COURT: It's overruled. It's a

11 fair question.


13 A. I have not seen the assignment for these, if

14 ownership has changed as far as the deed of

15 trust in the note.

16 Q. Is it your testimony, as you sit here today,

17 that you do not know who owns this loan?

18 A. I know that Wells Fargo services the loan and

19 FHA is the investor of the loan.

20 Q. I appreciate that information. And I'll try

21 again; perhaps I'm not being clear.

22 Do you know who owns this loan?

23 ATTORNEY KATZ: I object to the term

24 ownership; she's not a legal expert.

25 THE COURT: If you don't know, you

1 can say you don't know.

2 A. I don't know.


4 Nothing further.

5 THE COURT: Again confining it to

6 the issue of applicability of FHA, Mr. Katz,

7 do you have any redirect?

8 ATTORNEY KATZ: Sure. Yes.



11 Q. You have -- again, you've been an adjustor of

12 loans? You've done FHA loans; right?

13 A. Yes.

14 Q. And how do you know that they're FHA loans?

15 A. In our system, where all of the information is

16 input, we can go in and see who the investor

17 of the loan is. You have to go by the

18 guidelines.

19 Q. Okay. And those records -- is it your

20 understanding that those records are made by

21 someone who knows the facts that they're

22 recording, inputting into your records?

23 A. Yes.

24 Q. And are they generally done at the time of the

25 event?

1 A. Yes.

2 Q. And are those the kind of records that are

3 regularly kept by Wells Fargo?

4 A. I'm not sure.

5 Q. Well, does Wells Fargo regularly keep records

6 of the identity of the investor in the loan?

7 A. Yes.

8 Q. And are those records kept in the course of a

9 regularly conducted business activity of Wells

10 Fargo?

11 A. As far as maintained?

12 Q. Yes.

13 A. Yes.

14 Q. And as a loan adjustor you rely on those

15 records; correct?

16 A. Yes.

17 Q. And the other adjusters rely on those records;

18 correct?

19 A. Yes, correct.

20 Q. And your files are audited; right? So if

21 someone made a mistake on this, and it wasn't

22 an FHA loan, that could show up in an audit of

23 Wells Fargo's loan files; correct?

24 A. Correct.

25 Q. And Wells Fargo -- I mean the individual who

1 put in the wrong information would be subject

2 to penalties?

3 A. Correct.

4 Q. And Wells Fargo could be subject to penalties?

5 A. I'm sure, yeah.

6 Q. Thank you, Stephanie.

7 THE COURT: That completes your

8 testimony. You may step down.

9 ATTORNEY CHALIDZE: May I have my

10 pleadings back, please.


12 going to move Plaintiff's 1.

13 THE COURT: Any objection?


15 I object. This is completely hearsay. We

16 haven't had adequate authentication, and we

17 really haven't had adequate identification.

18 ATTORNEY KATZ: Your Honor, I've

19 pulled this off the Treasury's web site.

20 THE COURT: Objection is overruled.

21 Admissibility is supported by her

22 testimony that these were the FHA guidelines

23 that she referred to in her testimony, that a

24 loan cannot be more than twelve months past

25 due to qualify for HAMP.

1 (Exhibit 1 received in evidence.)

2 THE COURT: Okay. We all know that

3 the foreclosure mediation statute is new, it's

4 unique, and it's something that we all need to

5 work with and understand and figure out how to

6 apply in the large number of cases to which

7 it's applicable.

8 The mediation report in this case

9 indicated that the NPV calculation was not run

10 or provided because of the plaintiff's

11 position that the loan was an FHA-backed loan

12 and, therefore, ineligible for HAMP

13 modification.

14 The wording of the report -- and

15 perhaps I'm putting a fine point on it -- but

16 the wording of the report suggested that the

17 mediator took no position on whether that was

18 true or not, the mediator was informed by the

19 plaintiff that the reason that the NPV

20 calculation was not provided or done at the

21 mediation was that the case was not eligible

22 for HAMP, and the mediator simply reported

23 what the plaintiff's position was on HAMP

24 eligibility. That's the reason for which this

25 hearing was scheduled. And, as I identified

1 earlier, the issue is a narrow one. The Court

2 has to determine whether or not the plaintiff

3 complied with its obligations, and the

4 obligations including -- include providing

5 accurate information about eligibility.

6 What I, frankly, expected to have

7 happen at the hearing was that -- this

8 hearing -- is that the plaintiff would provide

9 to the defendant and the Court the specifics

10 about the status of FHA's role. We have had

11 testimony, and it is credible and undisputed,

12 that FHA is an investor in this loan. It's

13 not very specific, but there does not seem to

14 be a dispute about that, and there has been a

15 representation that that information was

16 provided at the mediation session.

17 However, in order for the

18 plaintiff's position at mediation to have --

19 that there -- about ineligibility, there are a

20 couple of further pieces of information that

21 are important. One is on what basis do

22 specific regulations apply, and what are those

23 regulations, and that's before we even get to

24 the facts of the defendant's situation. And

25 the plaintiff has not provided credible

1 information about that.

2 The -- I haven't been shown the

3 provisions of HAMP that show that -- show why

4 the investor regulations or the regulations of

5 FHA in this particular case would apply. I

6 also haven't been shown the regulations.

7 Plaintiff's 1 has been admitted.

8 The witness identified it as regulations that

9 establish that nonpayment for over twelve

10 months makes a person ineligible, but I do not

11 find that evidence credible. Plaintiff's 1

12 does not, in and of itself, look like a

13 regulation at all. It may be a summary of a

14 program, but it's not a regulation. It is not

15 specific. There's no specific linkage between

16 actual content of regulations and the reason

17 given by the plaintiff at the mediation for

18 obtaining eligibility. So as of now plaintiff

19 has not yet shown compliance. That's not to

20 say that it couldn't, it's just that it hasn't

21 been shown.

22 Because this is a new procedure, and

23 because it may not have been clear what the

24 Court's expectations were for what had been

25 shown at the hearing today, there are really

1 two possible choices. One is to give the

2 plaintiff an opportunity to provide more

3 information; in other words, continue the

4 hearing to another time where the necessary

5 information can be provided. In that case it

6 would seem to me to be reasonable that if the

7 defendant has incurred additional attorney's

8 fees in having to come back twice for this

9 hearing, plaintiff may need to be responsible

10 for that.

11 The second is, just simply, I'll

12 make the decision just based on what I heard

13 today, which there is an insufficient basis to

14 determine that the plaintiff has complied with

15 obligations, in which case the next step is

16 the termination of sanctions. And that is not

17 something we will do today in any case.

18 So let me ask, Mr. Katz, you may

19 want a moment or two to reflect on whether or

20 not you'd like to have a continuation of the

21 hearing in order to have another chance to

22 provide the information that I've identified

23 as what would be needed, or is it your request

24 to have the Court just simply make its

25 determination today?

1 ATTORNEY KATZ: No, that's not my --

2 that's not what I'm asking the Court to do.

3 I will note that this Plaintiff's 1,

4 which was admitted, is -- it's on U.S.

5 Department of Housing and Urban Development

6 letterhead. It talks about FHA loans and the

7 FHA HAMP program. I'm not -- this -- it comes

8 from the HUD web site. I'm not sure -- if you

9 could just give me a little bit of guidance,

10 because this should be easy to do -- and I'm

11 not sure that we need to come back for a

12 hearing.

13 THE COURT: Well, there are two

14 missing links. One is why do fed regulations

15 apply? And, secondly, what are they? What's

16 the content? This appears to be a summary of

17 a program. It does not appear to be a

18 regulation.

19 ATTORNEY KATZ: Yes. And I'm not

20 sure that there is a regulation. But I'll go

21 back and look for it.

22 THE COURT: There is no

23 regulation --

24 ATTORNEY KATZ: This may be it.

25 You may be -- speaking of the --

1 what we're all familiar with, those HAMP

2 guidelines that we've all seen and have been

3 circulated to people who are interested in

4 these sorts of things, and that is

5 specifically not the -- specifically not

6 pertinent to GSE-backed loans, GSE meaning

7 like the FHA, Fannie Mae, and Freddie Mack.

8 So to the extent that you're thinking that

9 that is not applicable in this case.

10 THE COURT: I don't really know what

11 I'm thinking about. But all I can say is that

12 you haven't shown that the plaintiff had a

13 defensible support for its statement, at

14 mediation, that this loan was ineligible

15 because of FHA requirements.

16 ATTORNEY KATZ: And Stephanie's

17 testimony, that this is what they look to is

18 not --

19 THE COURT: It's not credible. It's

20 not sufficiently supported. And, you know,

21 there may be legal materials that you could

22 provide that would do the job.

23 ATTORNEY KATZ: Well, we'll

24 certainly be providing the Court with

25 something.

1 THE COURT: Okay. I certainly don't

2 mean to be critical of Ms. Drum's role,

3 because she has a particular role in the

4 process. This may be beyond her. So I don't

5 mean to imply that she should know something

6 that she doesn't know.

7 But the purpose of the hearing is to

8 determine whether or not there was a -- that

9 was a position that was -- that was a

10 defensible position, and, therefore, properly

11 justified not making an NPV calculation. And

12 so it may not be within the purview of her

13 work to do that analysis. But it was the

14 purpose of today's hearing.

15 But, again, because this is all new,

16 I'm certainly willing to continue the hearing

17 to give you another opportunity.

18 ATTORNEY KATZ: Yes. And I have to

19 say I read the order and I tried to do -- I

20 tried to provide the Court with what --

21 reading the order -- what it appeared to

22 request. And I did not know that I needed to

23 bring, you know, some sort of legal expert to

24 talk about FHA regulations.

25 THE COURT: Certainly issues of law

1 and applicability of legal principals are

2 something a lawyer can argue.


4 THE COURT: But they're also -- it

5 needs to be more than a flat statement.

6 Invite somebody who is perhaps trained to look

7 at the computer and say this is an FHA loan,

8 therefore, something or other happens; but

9 that isn't the same as showing that this is a

10 proper -- that the regs apply, that the regs

11 say a certain thing; and then finally the

12 factual basis. So.

13 ATTORNEY KATZ: And, as you say, due

14 to the newness and the unclarity of the

15 statute.

16 I mean I guess we can argue this at

17 another time, but I think attorney's fees

18 would be particularly inappropriate. And,

19 even if they were, and to the extent they are

20 assessed -- it would be totally inappropriate

21 if they would be -- but they should be an

22 offset to the judgment.

23 THE COURT: We'll reserve the issue

24 of attorney's fees for another day.


1 Honor.

2 THE COURT: So I take it you are

3 asking to be able to continue the hearing to

4 present more evidence?

5 ATTORNEY KATZ: Yes, your Honor. Or

6 being able to maybe provide something and

7 having the Court determine that meets the

8 Court's -- what the Court is looking for.

9 THE COURT: It may be that that

10 would be a practical solution, that you could

11 offer affidavits or something in writing, and

12 then give Ms. Chalidze an opportunity to

13 identify any disputes of facts on that issue

14 or make a request for a hearing, and why a

15 hearing would be needed, so that we could

16 avoid an unnecessary hearing.

17 ATTORNEY CHALIDZE: Your Honor, I do

18 have outstanding document production requests.

19 What I don't want is to be put at

20 the disadvantage is just simply having to get

21 an affidavit, and not be able to view the

22 paper trail myself to really test the validity

23 of that. I think there are roughly a couple

24 of weeks left of response period on the

25 document production request. So I think once

1 we get those -- and I have asked for things

2 for a long time, like what is the document --

3 ATTORNEY KATZ: Excuse me; there has

4 not been any requests, your Honor, and nothing

5 in writing.

6 THE COURT: Okay. What I am going

7 to do is set April 20th as a date by which --

8 well, I'll give a little bit more time than

9 that -- April 30th, a full month, for Mr. Katz

10 to make a written submission, and then you'll

11 have the fifteen-day response time. And I

12 will determine from that whether or not there

13 is need for a continued oral hearing.

14 ATTORNEY CHALIDZE: May I also

15 request then, your Honor, that plaintiff is

16 ordered to respond to my request to produce by

17 the same date, April 30th.

18 THE COURT: Have they already been

19 propounded?

20 ATTORNEY CHALIDZE: Yes, they were

21 propounded some weeks ago.

22 THE COURT: Well, then there's

23 already a due date.


25 But if they don't do it, then they don't do

1 it, and I'll be at the same disadvantage.

2 Whereas, if the Court orders them to, then I

3 would be able to make an informed assessment

4 and then assist the Court in doing the same.

5 THE COURT: I'm not going to do that

6 because any hearing of the type that we're

7 having today should actually be a short

8 summary hearing, it shouldn't open the case

9 wide up. And part of that is that I think it

10 is the expectation of the statute, and the

11 requirement to have this kind of a hearing,

12 that plaintiffs do at mediation provide the

13 necessary documentation to support the

14 position. And that is what I do expect to

15 happen. And I'd hope that prior to today that

16 might have happened so that this hearing might

17 not have even been necessary.


19 Honor.

20 ATTORNEY KATZ: Thank you, your

21 Honor.

22

23 (Whereupon, the hearing was

24 adjourned at 2:25 p.m.)

25 * * * * *

1 C E R T I F I C A T E

2 STATE OF VERMONT

3 RE: Wells Fargo v. Pauquette, et al.

4 DOCKET NO. 408-5-10

5 I, BARRY COHEN, a Registered Professional Reporter and Notary Public in and for the State of

6 Vermont, do hereby certify as follows: 1. That the hearing before the Superior

7 Court, Rutland Division, whose testimony is hereinbefore set forth, was duly recorded by me on

8 March 29, 2012; 2. That such testimony was transcribed by me

9 and is a true and accurate record of the testimony given at the said hearing, to the best of my

10 knowledge, skill and ability; 3. I further certify that I am neither

11 attorney for, nor related to or employed by any of the parties, nor financially interested in this

12 matter; and 4. That a dash as used through this

13 transcript is meant to represent an interruption in thought or between a question and answer.

14 IN WITNESS THEREOF, I hereunto set my hand and Notarial seal this 3rd day of April, 2012.

15

16

17 __________________________________ Barry Cohen, RPR and

18 Notary Public My Commission Expires:

19 February 10, 2015

20

21

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