where are we now and where are we going? roundtable session 5 tuesday, july 21, 2015 – 4:15-5:15...

WHERE ARE WE NOW ANDWHERE ARE WE GOING?

Roundtable Session 5Tuesday, July 21, 2015 – 4:15-5:15 P.M.

Regency Ballroom EB

Joseph A. Camillo, Jr., Esq.Managing Partner – Default ServicingShechtman Halperin Savage, LLP Moderator Email [email protected]

SESSION SPEAKERS

Michael P. Robinson, Esq.PartnerShechtman Halperin Savage, LLPPanel Email [email protected]

Natalie Grigg, Esq., PartnerWoods Oviatt Gilman, LLPPanelEmail [email protected]

James McPherson, Esq.Litigation SupervisorCentral Mortgage CompanyPanel Email [email protected]

QUESTIONS FOR THE PANELISTS?

You can submit them by:

• Texting 66396 and your question to 22333

• Ask questions or make comments verbally by using the microphones provided in the session room

POLLING QUESTIONS

MERS/STANDING

Bank of America, N.A. v. Greenleaf 2014 ME 89, 96 A.3d 700.

• Court decision to separate the mortgage from the note for the purpose of analyzing standing to foreclose departs from established Maine law (that the beneficial interest in a mortgage follows, and is not separated from, the note it secures when the note is transferred).

• The court validated an older argument that the only power MERS is given through the mortgage documents is to record the mortgage as nominee for the lender. It is only the original lender that is the true mortgagee with the actual rights to assign the mortgage and an assignment from that entity is required. Because the assignment of mortgage in the case at bar was from MERS, the court concluded it had no effect and the bank lacked standing to foreclose. It is unclear at this time what the proper mechanism will be to correct MERS assignments for pending cases and cases that have gone to sale.

Questions for the panelists? Text 66396 and your question to 22333

In re Montieth in Nevada (Case 11-27788)

• Certified a question to the NV Sup Court (SC Case 62745) about whether a post-petition assignment from MERS to Lender is void, and the Lender loses its status as a secured creditor because it did not have an interest in the property prior to the petition. Nevada requires unification of note and mortgage prior to foreclosure proceedings (Edelstein v. Bank of New York Mellon, 286 P.3d 249 (Nev. 2012)), and bankruptcy court needs to know if the recording of an assignment after a bankruptcy petition should be barred, and thus the secured right of a mortgage creditor denied due to the lack of unity at the time of the petition. Oral arguments were 10/6/14, but no decision yet.


MEDIATION LITIGATION

ELIGIBILITY• Does a lender’s election to mediate with a borrower who is otherwise not eligible open the door to unnecessary

exposure ?

Eligibility:

• 1-4 Family residential property

• Primary residence

• Owner Occupied

Bad Faith:

• Claiming that a homeowner’s documents were never received when in fact they were received many times;

• Repeatedly requesting new documentation due to staleness

• Claiming an investor restriction on modification when none exists.

• Failure of representative to have authority to settle claims, including authority to approve or deny requests for a loan modification.

• Failure to follow HAMP guidelines

• Failing to give a permanent modification after trial payment plan is successfully completed.

• Delays in responding to, or providing decisions on modifications , deed-in-lieu or other loss mitigation.

• Failure to appear at a mediation

• Failure to have real time access to mortgagor account and/or ability to perform HAMP “net present value” calculations


NONCOMPLIANCE = SANCTIONS

• Tolling/forgiveness of accrual of interest and fees: Whereby the accrual of same is prohibited for a period of time in the past or until a specific action is taken by the servicer.

• Monetary sanctions: Court ordering bank to pay attorneys fees and costs as well a punitive damages; lost wages and travel expenses.

• Court orders to execute a loan modification agreement

• Orders directing the servicer’s representative with full settlement authority to appear.

• Dismissal of the foreclosure action: Could be with or without prejudice.

• Combination of any of the above


RULE 408: PROTECTION OF MEDIATION PROCEEDINGS

• Does Evid. Rule 408 prevent a party from disclosing or introducing general facts of the mediation to establish or defend an allegations of bad faith?

• The best-known and most widely applied evidentiary rule as to confidentiality is the rule of evidence 408 and its state counterparts.

• Admissibility of evidence of statements made or discussions occurring during foreclosure mediation is subject to Evid. 408 COMPROMISE AND OFFERS TO COMPROMISE in various jurisdictions.

• Some Jurisdictions provide that the process is confidential without defining any protections, while others provide that evidence concerning mediation is inadmissible.

• A recent trend we are starting to see is borrower claims that a servicer violated the Rule and a significant set of ethical standards regarding confidentiality when general facts from a mediation are referenced in a non-specific chronology recitation of what transpired in order to defend allegations of bad faith and/or motion for sanctions


MISCELLANEOUS ISSUES• Service Transfers: Pose a logistical break in continuity that can lead to sanctions.

• Mediation Eligibility : If a borrower is not eligible for mediation or fails to cooperate motion to have the mediation terminated.

• HAMP: Understand HAMP guidelines and eligibility. Many mediators, judges and borrower counsel have limited knowledge of loss mitigation programs and will assume they all apply.

• Lack of Knowledge: Some mediators are not extremely familiar with HAMP guidelines, lender policies and the foreclosure process. This sometimes results in the misapplication of the statute and HAMP guidelines.

• Mediator Selection: If the jurisdiction allows for parties to select mediators, be proactive and choose the mediator that has the best track record with resolving cases and understanding HAMP.

• Beware of Mediators acting as advocates for borrowers and their attorneys with completing applications and getting documentation together.


MISCELLANEOUS ISSUES

• Be proactive before the first mediation to collect documentation. The first mediation rarely accomplishes much as borrowers often have not submitted any documentation

• In most jurisdictions, Mediation fees of the lender are not recoverable from the borrower.

• There should be continuity with respect to bank representatives who attend multiple mediations. One loan – One Rep.


STATUTE OF LIMITATIONS

STATUTE OF LIMITATIONS

• What is the defining moment per state law that starts the running of the statute of limitations?

• Acceleration – an affirmative act to call the entire amount due

• Optional acceleration vs. Mandatory acceleration

• Language in mortgage and demand letters vs commencement of action

• Deacceleration must be an affirmative act by the lender

• Tolling of the Statute of Limitations by bankruptcy filings or court orders

• Renewal of the Statute of Limitations

• Reputational risks to be considered when moving files

• What to do with Vacant and Abandoned properties


EFFECT OF DISMISSAL WITH

PREJUDICE

EFFECT OF DISMISSAL WITH PREJUDICE

• Legal Prejudice is “the impairment of ‘some legal interest, some legal claim, [or] some legal argument.’” Staten Island Terminal, LLC v. Elberg, 2012 U.S. Dist. LEXIS 72147 (E.D.N.Y. 2012).

• Dismissal with prejudice indicates an adjudication on the merits that bars a subsequent action on the same claim

• Res Judicata does not preclude a subsequent action based on a subsequent default.

• Res Judicata does prevent an action based upon the same claim arising out of a transaction or occurrence that was the subject matter of a previous action.

• State laws setting forth two voluntary dismissals equate to a dismissal with prejudice


TILA/RESPA

TILA/RESPAJesinoski v. Countrywide Home Loans, Inc., 135 S.Ct. 790 (2015).

– 3 year rescission is met by sending notice to servicer; no requirement to file suit

So far, several challenges to existing orders have been brought by debtors under FRCP 60 seeking to overturn judgments on the heels of Jesinoski. So far no success. (In re Macklin, 2015 WL 1945160 (Bankr. E.D. Cal, April 8, 2015; In re Residential Capital, LLC, et al., 2015 WL 1598090 (Bankr. S.D.N.Y., April 9, 2015))

Response to a rescission letter within 20 days of receipt is mandatory if Lender disputes facts about the transaction raised by Borrower.

What is the effect of a rescission letter that has been disputed in Bankruptcy court? Issue presented in Macklin but not addressed as Rule 60 issue not overcome.

TRID “Know Before You Owe” – Effective October 1st

Strict rules on fees that can be charged, when disclosures must be revised, areas with some tolerance, areas with no tolerance. Ripe for litigation as lenders will have to immediately switch systems on August 1st. CFPB enforcement actions; TILA private rights of action (statutory penalties up to $4,000 and attorney fees).


NOTICE OF ERROR/INFORMATION REQUESTS

• “Notice of error” doesn’t need to be specific if complaint gives enough information to find the error. (Guccione v. JPMorgan Chase Bank, 2015 WL 1968114 (N.D. Cal. SF Div., May 1, 2015).

• Borrower who has to jump through hoops to get desired MOD, but ultimately gets the correct MOD isn’t entitled to damages. Nunez v. J.P. Morgan Chase Bank, 2015 WL 1638242 (M.D. Fla, Orlando Div., April 13, 2015 – appeal pending)

• Failure to comply with RESPA without damages plead will not survive MSJ. Yanes v. Ocwen Loan Servicing, LLC, --- F. Supp ---, 2015 WL 968108 (E.D.N.Y., March 6, 2015). Description of whether correspondence was in fact a notice of error must be plead in non-conclusory terms, with specificity as to when and how correspondence was sent. Miller v. HSBC Bank, U.S.A., N.A., 2015 WL 58589 (S.D.N.Y., February 11, 2015)

• Response to notice of error doesn’t have to give the resolution desired by the borrower as long as it describes the Lender’s reasoning for taking the action it did. Renfroe v. Nationstar Mortg., LLC, 2015 WL 541495 (S.D. Ala., February 10, 2015).


STRICT VS.

SUBSTANTIAL COMPLIANCE

“Strict” vs. “Substantial” Compliance with Pre-foreclosure Mortgage Provisions

• Paragraph 22 of Fannie Mae/Freddie Mac uniform Massachusetts (non-judicial) mortgage instrument:

22. Acceleration; Remedies. Lender shall give notice to Borrower prior to acceleration following Borrower’s breach of any covenant or agreement in this Security Instrument . . .The notice shall specify: (a) the default; (b) the action required to cure the default; (c) a date, not less than 30 days from the date the notice is given to Borrower, by which the default must be cured; and (d) that failure to cure the default on or before the date specified in the notice may result in acceleration of the sums secured by this Security Instrument and sale of the Property. The notice shall further inform Borrower of the right to reinstate after acceleration and the right to bring a court action to assert the non-existence of a default or of any other defense of Borrower to acceleration and sale. If the default is not cured on or before the date specified in the notice, Lender at its option may require immediate payment in full of all sums secured by this Security Instrument without further demand and may invoke the STATUTORY POWER OF SALE and any other remedies permitted by Applicable Law…

http://www.freddiemac.com/uniform/doc/3022-MassachusettsMortgage.doc


http://www.freddiemac.com/uniform/doc/3022-MassachusettsMortgage.doc

Massachusetts Statutory Power of Sale/Notice of Default and Right to Cure

• M.G.L. Ch. 183 §21. Statutory Power of Sale in Mortgage. But upon any default in the performance or observance of the foregoing or other condition, the mortgagee . . . may sell the mortgaged premises . . .by public auction . . .first complying with the terms of the mortgage and with the statutes relating to the foreclosure of mortgages by the exercise of a power of sale . . .

• U.S. Bank Nat’l Ass’n v. Ibanez, 458 Mass. 637, 646 (2011)(“Recognizing the substantial power that the statutory scheme affords to a mortgage holder to foreclose without immediate judicial oversight, we adhere to the familiar rule that one who sells under a power [of sale] must follow strictly its terms. If he fails to do so there is no valid execution of the power, and the sale is wholly void.’”)(internal quotations omitted).

• U.S. Bank Nat’l Ass’n v. Schumacher, 467 Mass. 421, 431 (2014) (statute requiring notice of default and right to cure prior to acceleration is designed to give a mortgagor “a fair opportunity to cure a default before the debt is accelerated and before the foreclosure process is commenced through invocation of the power of sale,” and therefore is not a statute relating to the foreclosure of mortgages by the exercise of a power of sale.)


Rhode Island• In re Demers, 511 B.R. 233 (2014) (loan Servicer not entitled to recover fees and costs associated with

initiation of foreclosure proceedings based on failure to provide notice required by the mortgage. “The notice requirement of [mortgage] Paragraph 22 was a condition precedent to acceleration and foreclosure.”)

Ohio• Flagstar Bank, FSB v. Cintron, 984 N.E.2d 398 (Ct. of Appeals OH 2012) (rejecting borrowers’ “hyper-

technical” claim that pre-foreclosure notices were insufficient because they did not use the precise words in the mortgage instrument).

Florida• Samaroo v. Wells Fargo Bank, 137 So.3d 1127 (Ct. of App. Fla, 5 th Dist. 2014) (rejecting mortgagee’s

argument that it substantially complied with the provisions of paragraph 22 of the mortgage. The Bank’s “own mortgage specified the important information that it was bound to give its borrower in default, and it simply failed to do so.”). See also, Kurian v. Wells Fargo Bank, N.A., 114 So.3d 1052 (Ct. of App. Fla, 4th Dist. 2013); Judy v. MSMC Venture, LLC, 100 So.3d 1287 (Ct. of App. Fla., 2nd Dist. 2012); But see, Vasilevsky v. Wachovia Bank, N.A., 2015 Fla. App. LEXIS 7710 (Ct. of App. Fla., 5 th Dist. 2015) (“Although Appellee breached the contractual provision that required a full thirty-day notice [of default and opportunity to cure], we conclude that the breach of contract was not material because Appellants never attempted to cure the default before, during or after suit was filed. . . Absent some prejudice, the breach of a condition precedent does not constitute a defense to the enforcement of an otherwise valid contract.”).

QUESTIONS AND ANSWERS

where are we now and where are we going? roundtable session 5 tuesday, july 21, 2015 – 4:15-5:15...

Documents

assignment of mortgage

mortgage creditor

mortgage documents

protecting mortgage

original lender

bankruptcy court

court decision

session room4polling