Claims And Issues

ADVISING ABOUT YOUR PREVIOUS "PRIVILEGED" ADVICE?

The person who is now in charge of counseling the current Secretary of the Treasury on what to do about Fannie Mae and Freddie Mac, the two conduits both of Federal government mortgage guarantees and of Federal government revenue from their continuing operations, has previous experience it seems.  When he previously made his money in the financial sector, the same individual was in charge of a unit at a "huge asset manager."  The current counselor's former employer, the huge asset manager, advised the Federal government on the future of Fannie Mae and Freddie Mac. 

Shareholders of Fannie Mae and Freddie Mac sued the Federal government because the Federal government diverted Fannie's and Freddie's revenues to the Federal Treasury and away from the shareholders.

In their lawsuit, the shareholders requested many documents showing the analysis the advisers gave to the Federal government about whether and how Fannie and Freddie are profitable now and in the future.  These are of course exactly the issues on which the Treasury counselor, well, now counsels the Treasury.

The Federal government understandably has refused to let those analyses see the light of day, or for that matter, let the shareholders see them.

Many questions come to mind now.  Among them:  Does it make any difference to that discovery dispute that the supervising consultant of "Fannie and Freddie's loss and capital projections" is now a counselor to Treasury on Fannie and Freddie's loss and capital projections?

Does it add anything that the current counselor helped to bundle mortgage loans for Fannie and Freddie to buy, which went south very badly.  In fact, they performed so badly that the allegedly bad mortgage loans were one of the reasons that the Fannie and Freddie's Federal overseer, the Federal Housing Finance Administration, sued and settled for $1.25 billion?

Or that the company that bundled the loans and employed the current Treasury counselor and former consultant on Fannie and Freddie's finances, settled with the Department of Justice for $2.6 billion in large measure because of those mortgages?  See Gretchen Morgenson, "Business Day / Fair Game / The Man in Charge of Fixing Fannie and Freddie Knows Them All Too Well" (New York Times Online, posted Friday, April 7, 2017), also available at https://nyti.ms/2oax0J3.

Please Read The Disclaimer.  ©2017 by Dennis J. Wall.  All Rights Reserved.

FILED RATE DOCTRINE IN FLORIDA INSURANCE CASES: QUESTIONS OF FACT.

 

Foreclosure Order.  Image courtesy of New York Public Library Collection.

Florida Statute Section 627.062 requires the Florida Office of Insurance Regulation (i.e., the Office of the Florida Insurance Commissioner in all respects but name) to approve or disapprove insurance premium rate requests based on rate filings provided by insurance companies.  It is very long (click the link to see how long it is), but the statute itself is not explicit about what needs to be in a rate filing in order to be approved.  It is certain that this very long statute requires the O.I.R. to consider a great many things in making its determination, and that those things must be included in the insurance company's rate filing before the requested rate can be approved.

The Florida Administrative Code contains the Florida Office of Insurance Regulation's requirements 'read between the lines' of the Florida Statute.  In particular, Rule 69O-170.013(3), F.A.C., was published verbatim in FILED RATE DOCTRINE IS A FARCE IN INSURANCE CASES, an article posted on Insurance Claims and Bad Faith Law Blog on December 3, 2015.

Please Read The Disclaimer.  ©2016 by Dennis J. Wall, author of "Lender Force-Placed Insurance Practices" (American Bar Association 2015).  All rights reserved.

Related articles

No "Lender Force-Placed Insurance Practices" Cases Have Gone to Trial.

REVERSE MORTGAGES NEED ATTENTION.

               Reverse Mortgages:  The more we know about them before we sign up for one, the better off we and our clients are.

               A reverse mortgage is a loan.  “A reverse mortgage is a special type of loan that allows homeowners 62 and older to borrow against the accrued equity in their homes.  The loan must be paid back when the borrower dies, moves, or no longer lives in the home.”  Nora David Eisenhower, “Consumer Advisory:  Don’t be Misled by Reverse Mortgage Advertising” (Consumer Financial Protection Bureau, posted online on June 4, 2015).

               A reverse mortgage loan is based on home equity.  “The home is pledged as collateral on the loan.”  Gabriela Rico, “Diligence Urged for Homeowners Seeking Reverse Mortgages” (Tucson, Arizona Daily Star posted online May 30, 2015).

               When a reverse mortgage loan is insured by the Federal Government, it is known as a Home Equity Conversion Mortgage or “HECM”.  See Gabriela Rico, “Diligence Urged for Homeowners Seeking Reverse Mortgages” (Tucson, Arizona Daily Star posted online May 30, 2015).

               If the homeowner does not keep up the homeowner’s insurance and any other insurance required by the reverse mortgage loan, the homeowner runs the risk of foreclosure.  Nora David Eisenhower, “Consumer Advisory:  Don’t be Misled by Reverse Mortgage Advertising” (Consumer Financial Protection Bureau, posted online on June 4, 2015).   “Tapping into home equity is one of the reasons older people run real risks of foreclosure, warned Lori A. Trawinski, who wrote an AARP Public Policy Institute Report on mortgage debt [‘Nightmare on Main Street:  Older Americans and the Mortgage Market Crisis’],” quoted by Elizabeth Olson, “Paying Off the Mortgage Grows Harder for Older Workers” p. B4, col. 1 (New York Times Nat’l ed., “Personal Business,” Saturday, June 15, 2015).

                For more information, contact these among other possible sites:

 

In the above CFPB Consumer Advisory, these steps are recommended:

 

If you have a question about reverse mortgage requirements, contact a HUD-approved housing counselor near you.

 * * *

For more information about how reverse mortgages work and questions to ask, read our guide to reverse mortgages for older consumers and their families. Do you or a loved one have a reverse mortgage loan? Here are three steps you should take.

 

In the above Arizona Daily Star article, these sites are recommended:

 

Q. Where can I get more information?

A. The National Council on Aging recommends the following sources for more information on using and protecting the value in your home:

• Home Equity Advisor, www.homeequityadvisor.org
• BenefitsCheckUp, www.benefitscheckup.org
• Consumer Financial Protection Bureau, www.consumerfinance.gov
• The National Reverse Mortgage Lenders Association, www.reversemortgage.org
• U.S. Department of Housing and Urban Development, www.hud.gov (type reverse mortgage into the search bar at the top of the page)

Please Read The Disclaimer.  ©2015 by Dennis J. Wall, author of “Lender Force-Placed Insurance Practices” (American Bar Association 2015).  All Rights Reserved.

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US regulators warn: Ads for reverse mortgages can mislead

INSURANCE COVERAGE FOR WRONGFUL FORECLOSURE BECAUSE NO STANDING TO FORECLOSE?

Not if the foreclosure plaintiff proves standing before and during trial, even if the complaint does not show standing.

                In the case of Le v. U.S. Bank, ___ So. 3d ___, 2015 WL 2414456 (Fla. 5th DCA May 22, 2015), Ms. Le challenged the standing of Wachovia Bank to foreclose on property mortgaged  by Ms. Le and her husband.  Wachovia was the original plaintiff in foreclosure in this case, suing as Trustee for Certificate Holders of Mortgage Pass-Through Certificates.  U.S. Bank was substituted as the proper plaintiff “[b]ased on a name and trustee change”.

               When Wachovia filed its foreclosure complaint, Wachovia attached a copy of the note it sued on.  However, the note attached to Wachovia’s complaint “did not contain the endorsement to Wachovia.”  Le v. U.S. Bank, ___ So. 3d ___, 2015 WL 2414456 *2 (Fla. 5th DCA May 22, 2015).  So, the complaint did not show why or how Wachovia had standing to foreclose.

               Not to worry, at least under Florida law and in this case.  The Florida appellate court held that “Wachovia” (or U.S. Bank by another name) established its standing to sue by filing the proper endorsement to the note before trial, and by putting on evidence at trial which showed its standing to sue :

Wachovia established standing by filing the original note containing the endorsement before trial and presenting evidence at trial from which the court could determine that the endorsement occurred prior to filing the complaint.

 Le v. U.S. Bank, ___ So. 3d ___, 2015 WL 2414456 *2 (Fla. 5th DCA May 22, 2015).

               Whether and when there will be liability or other insurance coverage for wrongful foreclosure due to lack of standing is apparently still an open question in Florida.  Certainly in this case, there was standing and so the foreclosure proceeding was legally righteous.

Please Read The Disclaimer.  ©2015 by Dennis J. Wall, author of “Lender Force-Placed Insurance Practices” (American Bar Association 2015).  All Rights Reserved.  No Claim to Original U.S. Government Works.

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FL 4th DCA Slaps Foreclosure Mills

FORECLOSURES ATTRACT HOME INVESTORS, CHANGE OF OWNERSHIP AND RENTALS.

    Ever since the Great Financial Fiasco that began in 2007-2008, home owners have become house renters.  Investors became the new home owners after the previous owners were foreclosed.  The new owners, meaning the investors and their agents, became landlords and the former homeowners are now renters.  See Floyd Norris, "Off the Charts / More Americans are Preferring the Lease to the Mortgage" p. B3, col. 1 (New York Times Nat'l ed. Saturday, November 1, 2014).

    The new set of renters are so numerous that as a group they should take a look at renter's insurance to protect their personal property -- and perhaps to protect their exposure to bodily injury and property damage claims,or even to obtain Additional Living Expense Coverage for "additional living expenses incurred when the home can't be occupied because of a fire or other covered peril."  Randy Hutchinson, "If Renting, You May Want to Consider Having Insurance" (Jackson Sun (Tennessee) Online, posted Thursday evening, October 30, 2014)(also citing evidence that 95% of homeowners have homeowner's insurance, while only 37% of renters have renter's insurance).

    Renter's insurance.  Definitely something for former homeowners and all renters to consider.

Dennis Wall is working on a book on "Lender Force-Placed Insurance".  The American Bar Association is scheduling it for publication in the Spring of 2015.

Please Read The Disclaimer.  Copyright 2014 by Dennis J. Wall.  All rights reserved.

 

HELP WANTED: MUST HAVE EXPERIENCE PRACTICING INSURANCE, SETTLING CLAIMS.

Interested parties please apply to the United States Department of Justice.

          Investment banks are increasingly assigning contracts for mortgage servicing to "specialty" servicers, which are businesses which exist for the purpose of servicing mortgages.  In basic and simple terms, a mortgage servicer is a party which stands between the mortgagor-borrower and the mortgagee-lender.

          Borrowers have a lot more contact with the current servicer of their mortgage than they will ever have with the lender or the lender's current stand-in.  The servicer collects the monthly mortgage payments, applies proceeds from escrow toward taxes and insurance, force-places insurance at the borrower's expense and on the lender's behalf, and initiates foreclosure against the borrower on behalf of the lender.

          The spark that set off the so-called National Mortgage Settlement, was certain attention-getting conduct of the 5 investment banks which were released.  The conduct which drew national attention originally was how the 5 investment banks conducted themselves in their roles as mortgage servicers.

           In 2012, an election year, the idea of a national settlement agreement was pushed hard by the United States represented by the Department of Justice and HUD.  See, for example, the articles posted here on January 25, 2012, and the four-part series which concluded on February 2, 2012 on Insurance Claims and Bad Faith Law Blog with  links to the other articles in the series.

          The Department of Justice and HUD pushed an agreement to settle and release potential claims including claims involving lender force-placed insurance, which the Federal Government held against the 5 mortgage servicers.  (The settlement agreement eventually expanded to also include mortgage lending activities by the 5 investment banks.  See the article posted on Insurance Claims and Bad Faith Law Blog on July 26, 2012, for example, in addition to the articles linked above.)  The U.S. Attorney General and the Secretary of Housing and Urban Development pressured many States to join in settling and releasing potential claims held by the States.

          The DOJ, HUD, and the States all were represented by legal counsel in this effort.

          They may have forgotten to require that the settlement agreement should be binding on the released mortgage servicers' successors and assigns.

           The investment banks are selling their mortgage servicing contracts in greater numbers to specialty servicers, as noted above.  The specialty servicers are reportedly now doing the same allegedly bad things that drove the investment banks into the so-called National Mortgage Settlement.  The specialty servicers are not inhibited let alone restrained by that settlement, to which they were not parties and in which they were apparently never foreseen.  See Jessica Silver-Greenberg and Michael Corkery, "Loan Complaints by Homeowners Rise Once More / Old Abuses, New Front / Taking Over For Banks, Mortgage Servicers Sidestep Rules" p. A1, col. 6 (New York Times Nat'l ed., Wednesday, February 19, 2014).

          The reports have it that the successors or assignees to these mortgage servicing contracts are repeating the same alleged abuses as were supposedly settled by the investment banks, "because" the banks are regulated and the specialty servicers are not.  The reporters have it wrong.

          Specialty mortgage servicers are engaging in allegedly bad behaviors, including force-placing insurance abuses on behalf of lenders, simply and completely because they do not see themselves as bound by any agreements the investment banks made with the United States or the States which participated in the "National Mortgage Settlement".

 © 2014 by Dennis J. Wall.  All rights reserved.  No claim to original U.S. Government works.

 Please Read The Disclaimer.

DID MORTGAGE SERVICERS AGREE NOT TO REPEAT PREVIOUS INSURANCE TACTICS?

          "Specialty" mortgage servicers are businesses whose business purpose is to make their money by servicing mortgages. Specialty mortgage servicers are now reportedly engaging in the same allegedly unfair mortgage servicing practices which investment banks settled.  See Jessica Silver-Greenberg and Michael Corkery, "Loan Complaints by Homeowners Rise Once More / Old Abuses, New Front / Taking Over For Banks, Mortgage Servicers Sidestep Rules" p. A1, col. 6 (New York Times Nat'l ed., Wednesday, February 19, 2014).

          Investment banks have settled potential claims over their mortgage servicing activities in the so-called National Mortgage Settlement, and they have settled actual claims in suit in individual litigated cases over their allegedly unfair mortgage servicing practices including lender force-placed insurance.

          Did they agree not to do it again by other means?

          Did they agree to bind the parties to which they sold their contracts for mortgage servicing?

          Putting it another way, did the investment banks agree, when they settled their mortgage servicing practices, that their agreement would be binding on specialty mortgage servicers to which they sold their servicing contracts?

 

          This is a very important issue especially for future mortgage servicing activities involving lender force-placed insurance.  More to come on this subject.

 © 2014 by Dennis J. Wall.  All rights reserved.  No claim to original U.S. Government works.

 Please Read The Disclaimer.

EMINENT DOMAIN AND THE PUBLIC ENTITIES POLICY.

          Cities across the country face a budding catastrophe.  In staggering numbers, houses are rapidly falling into ruin and homes are in foreclosure.  Empty dwellings that once were neighborhood homes and a part of the tax base, are largely inhabited now by criminals.

          To combat the rising crime rates and to solidify the home-ownership goals of their citizens, many cities are considering eminent domain.  Their consideration involves a twist from what might be thought of as traditional uses of eminent domain, however.  This case provides a good example of such traditional uses of eminent domain, in which the cities' powers of eminent domain could be exercised in condemning the property, throwing out the homeowners in the process, paying off the investors holding any mortgages and other liens, and hoping to resell the property.  This is always a losing economic proposition for the cities, it seems.

          Enter the consideration of exercising powers of eminent domain, with a twist from the traditional use of those powers.  Cities are currently considering whether to exercise powers of eminent domain to first negotiate with mortgagees and, if the negotiations are not successful, then condemning the mortgages and paying the same price as the cities offer in the negotiations except that now they are offering the same price in an eminent domain proceeding.  This creative use of eminent domain would terminate the mortgagees' rights over the properties in the process -- and thereby also terminate the mortgagees' rights over the homeowners.  The homeowners, neighbors all and taxpayers too, would not have to leave their homes or their neighborhoods.

          Not willing to stand for this invasion of their asserted rights to foreclose, and voicing no objections to traditional uses of foreclosures and of eminent domain during the course of both of which homeowners are evicted, "Wall Street and real estate interests" have filed lawsuits against cities which have exercised powers of eminent domain in this way, and they have threatened lawsuits against cities which have the audacity even to consider using eminent domain in this way.  See Shaila Dewan, "More Cities Consider Using Eminent Domain to Halt Foreclosures" p. B4, col. 1 (New York Times Nat'l ed., Saturday, November 16, 2013).

          Public Entities and Officials Liability Insurance Policies may provide some protection to many of these cities and municipal officials who are sued by the litigious "Wall Street and real estate interests".  Public Entities Insurance provides very similar coverage as Directors and Officers Liability Insurance Coverage provides to the private sector -- ironically, very similar coverage as the D&O Coverage passionately invoked by many of the same "Wall Street and real estate interests" who have been sued since they helped to cause the Great Recession in the first place.

Please Read The Disclaimer.  

A Call for Assistance: Insurance Coverage for Mortgage Servicers?

And:  Insurance Coverage for Property Management Corporations?

   Investment banks either hire mortgage servicers, or they contract for their subsidiaries or divisions to be hired out as mortgage servicers for other lenders and mortgagees.  If the investment banks hold the mortgages themselves, they generally hire mortgage servicers.  If the investment banks do not hold the mortgages, they almost always hire themselves out as mortgage servicers to the lenders that do hold the mortgages.

    Do any of my readers know what kind of insurance policies if any would or may provide coverage for the investment banks in either capacity, either as the principal when they hire mortgage servicers, or for their own direct liability when they act as mortgage servicers for others?

    Another role investment banks have is as property managers of properties which are either in foreclosure or are forced into foreclosure.  See the post on Insurance Claims Bad Faith Law Blog on Sunday, September 15, 2013, in which this clear potential bad faith issue is addressed.  What insurance coverage might be available to the investment banks when they hire property management corporations which commit the acts explored in the Insurance Claims Bad Faith Law Blog article, including boarding up properties which have neither been abandoned nor are in foreclosure in order to treat the properties as "abandoned," identifying properties as "abandoned" when in fact the properties are not even in foreclosure, billing the investment banks for hauling away trash after the managers lock up the house, and so on?

    Thanks in advance for any help you can give on answering these questions.  I appreciate it.

Please Read The Disclaimer.

Part 3 of 4: Residential Mortgage-Backed Securities Working Group ...

... Is the Fix In?

This is the Third in a series of Four posts.  The series began on Insurance Claims and Issues Web Log on Monday, January 30, 2012 and continued on Insurance Issues and Bad Faith Law Blog on Tuesday, January 31, 2012.

   After HUD Secretary SHAUN DONOVAN had his meeting with Democratic Attorneys General in Chicago to try to convince them to settle with the Banks for their unknown liabilities from the Great Financial Fiasco (see post 1), the Illinois Attorney General joined the Residential Mortgage-Backed Securities Working Group.  However, she is not listed as one of the five (5) Co-Chairs appointed to run the Group, even in her own press release.  None of the press releases released to date clarify her participation.  See, e.g., Illinois Attorney General's Press Release, January 27, 2012, "Attorney General Madigan Joins National Mortgage-Backed Securities Working Group"; Jim Puzzanghera, "New Initiative Will Coordinate Probes of Mortgage Meltdown" (Los Angeles Times Online, January 27, 2012).

   The Attorney General of Delaware is the son of the Vice President of the United States.  However, Attorney General Biden has carefully crafted his statements about the Federal Residential Mortgage-Based Securities Working Group, and about the scope of the Great Financial Fraud settlement with the Banks that is so highly favored by the Administration of which his father is a member.

   Attorney General Biden has made it clear that he will support the Federal RMBS Working Group, and even participate in it, but his participation in the Working Group does not include participating in any settlement demanded by the Banks before the State investigations are concluded into what the Banks actually did, and for which they now demand immunity in a settlement.   See Interview of Delaware Attorney General Joseph "Beau" Biden, III with Dylan Rattigan, entitled, "DE AG Beau Biden:  Too Big to Fail Banks Believe The Enforcement Side is 'Scared'".

The "New Golden Rule":  "The One Who Has The Gold, Makes The Rules."

      Even if further staffing of the RMBS Working Group may include some State or other non-Federal employees, apparently the Federal Government will fund it.  See Edward Wyatt, "New Fraud Investigation Group Issues Subpoenas to Financial Companies" p. B3, col. 1 (New York Times Nat'l ed., "Business" Section, Saturday, January 28, 2012).

Not Participating, Yet, But Continuing to Pursue Investigations They Began Long Before the Federal Government's New Working Group.

   As of the beginning of this week, or as of Monday, January 30, 2012, there was no announcement, let alone a press release, about the Federal RMBS Working Group, on the websites of any of the three other State Attorneys General who have expressed reservations about, or withdrawn from the current Mortgage Servicer Fraud settlement talks with the Banks:

1. California;
2. Massachusetts; and
3. Nevada.

As noted, they filed lawsuits long before the Federal Government got around to releasing press releases about the new Federally headed Residential Mortgage-Backed Securities Working Group.

To be continued in the final installment of this series, on Insurance Claims and Bad Faith Law Blog.

Please Read The Disclaimer.

Mortgage Foreclosure Fraud ... Again?

   The Fix is almost in.  Maybe.

   As these words are written, the 2012 State of the Union Address has not yet been given.  2012 is also an election year for the President, of course.

   Obama Administration officials, chiefly the Secretary of Housing and Urban Development, are reportedly engaged in pressuring State Attorneys General to release Mortgage Servicers not only from fraud claims or causes of action based on their conduct as Mortgage Servicers, but also from all their liability to all civil claims based on their conduct in lending and securing Mortgages in the first place including subprime Mortgage lending.  See Nelson D. Schwartz and Shaila Dewan, "Political Push Moves a Deal On Mortgages Inches Closer" p. B1, col. 5 (New York Times Nat'l ed., "Business Day" Section, Tuesday, January 24, 2012) .

   The current Banks a/k/a Mortgage Servicers involved in these talks include:

1. Bank of America;
2. Citigroup;
3. JPMorgan Chase;
4. Wells Fargo; and
5. Ally Financial.

The current payment configuration would be for an average payment of "about $20,000" to "[a]bout one million homeowners".  There are 8 million Homeowners currently in Foreclosure.  Id.

   In addition, there are 11 million Homeowners whose home value exceeds the Mortgaged amount.  On average, they alone owe two to two-and-one-half times the average amount payable to 1/19 of all the Homeowners in question.  See id.  Even with that average amount of $20,000.00 which would be paid by the Banks-Mortgage Servicers, in other words, eleven million more Homeowners are still subject to Foreclosure if this deal is accepted, leaving a total of 19 MILLION Homeowners still subject to Foreclosure.

   Some deal.  But that is not all.

   The "average amount" payable by the Banks-Mortgage Servicers fluctuates depending on how many States agree to release the Banks-Mortgage Servicers from unknown liabilities.  It may be less.

   In any event, at this time, the Attorneys General of California, Massachusetts, Nevada, and New York, among other States, are having none of it.  The Homeowners and all citizens of their States are fortunate to have them on the job.

Please Read The Disclaimer.

Silence on the Mortgage Fraud Settlement Front, For Now.

This updates posts here and on Insurance Claims Bad Faith Law Blog addressing why and how the Attorney Generals of California, Massachusetts and Nevada, among other jurisdictions, have all rejected the idea of engaging in settlement talks over uninvestigated, unknown liabilities of Mortgage Servicers and their Banks as a part of settlement negotiations over established fraudulent Mortgage lending and servicing practices.

   Talks led by the Iowa Attorney General, with assistance and a push from the Obama Administration, apparently continue with Mortgage Servicers and Lenders to settle potential claims over their Mortgage servicing and lending practices.  The talks apparently continue even without the California Attorney General, and without the approval of Attorneys General from other jurisdictions including Massachusetts and Nevada:

Why strike a deal -- one that would, say, shield banks from new litigation over toxic loans, flawed securitizations and the mess at MERS, the registry that has made such a jumble of land records -- without knowing what happened?

Gretchen Morgenson, "Fair Game / From East And West, Foreclosure Horror Stories" p. 1, col. 1 (New York Times Online, "SundayBusiness" Section, Sunday, January 8, 2012).

   Why, indeed?

Please Read The Disclaimer.

Recent Developments in Title Insurance: Duty to Defend; Foreclosure Performance.

   In Download 266 Summit, LLC v. Lawyers Title Insurance Corp. (D. Minn. Case No. 10.4051, Memorandum of Law and Order Filed July 22, 2011) PUBLIC ACCESS, also published as 2011 WL 3020301 *5-*8 (D. Minn. July 22, 2011)(authorized password required to access Westlaw), the Court applied established Insurance Coverage Rules which apply to a Duty to Defend in Liability Insurance Cases.  This may be one of the first times that a Court has applied Duty to Defend Rules which are traditionally associated with Liability Insurance Policies, to Title Insurance Policies too.

   Parenthetically, in the 266 Summit case, the Federal Court also held that there was no requirement in the Title Insurance Policy before it "that it [the Title Insurance Company] prosecute actions on behalf of the insured."  266 Summit, LLC v. Lawyers Title Insurance Corp., 2011 WL 3020301 at *8.  [Emphasis entirely by the Federal Court.]

   The ubiquity of Title Insurance is phenomenal.  Consumers, i.e., individual Homeowners, "pay one-time premiums for title insurance" for as long as the person owns the house.  A Lender's Title Policy, on the other hand, "must be repurchased each time a loan is refinanced".  The Financial Fiasco has battered Title Insurance Companies nonetheless.  They collect far few Premiums than they did before the Great Collapse.  However, Foreclosures reportedly bring them a ray of hope.  "When a bank forecloses, it orders a title review, and that has become" an ever-increasing revenue source.  Maryann Haggerty, "Paying For Title Insurance" (New York Times Online, Thursday, July 28, 2011).

Please Read The Disclaimer. 

Fiduciary Duties of Trustees of Mortgage Loan Securitizations: ...

... The Two Attorneys General of the Two States Imposing Duties Investigate.

   Trustees of Mortgage Loan Securities, such as reportedly Bank of New York Mellon and Deutsche Bank, may have had a Fiduciary Duty to examine whether the paperwork was proper and, if not, to require that it be made proper for the protection of the Investors in the Trust.  The Securitizations were also reportedly set up mostly in New York State, and the rest in Delaware.  If so, only New York and Delaware Law would seemingly apply.  Only New York and Delaware Fiduciary Law would impose obligations of inquiry, disclosure and Good Faith and Fair Dealing, for examples.

   It is of great interest to Mortgage Investors and Trustees therefore that the New York State and Delaware State Attorneys General are investigating whether the Trustees violated any of their Fiduciary Duties at the beginning of their trust responsibilities, when they received the Mortgage Loan Securitization papers and presumably were or should have been on inquiry.  See Gretchen Morgenson, "Two States Ask if Paperwork in Mortgage Bundling Was Complete" p. B1, col. 2 (New York Times, "Business Day" Section, Monday, June 13, 2011).

 Although this news is probably too recent to draw attention on other sites, in general terms it appears to be questionable how far the Fiduciary Law of Delaware would adapt to the situation under investigation by the Attorneys General.  See generally "Delaware Corporate and Commercial Litigation Blog".  New York Law may or may not present a different story.  See also "Contracts Law Fallout From the Madoff Affair" (Contracts Prof Blog posted May 31, 2011).  In addition, see also the post here about recent Court decisions including the New Jersey Federal District Court decision addressed in the post here on May 25, 2011, "Rescission of JPMorgan Chase Mortgage Coverage:  'Materially False or Misleading'...".

Please Read The Disclaimer. 

Foreclosures Overwhelming Courts: Problem No. 1, and Solutions in Good Faith.

This is the second in an occasional series of posts on this problem.  The series continues on Insurance Claims Bad Faith Law Blog today.

The effects of this systemic problem on Mortgage Insurance are among the issues to be addressed in this series.

Please Read The Disclalimer.

Frivolous Foreclosure Fraud Attempt to Overcome Courts.

    There is a business model that requires the filing of Foreclosure lawsuits, and in overwhelming numbers.  If you look in the dictionary, as they say, there is a picture of that next to the word "frivolous."

   The model on which our Court system is built requires a case-by-case determination.  (This is particularly true in an era in which class actions are disfavored.)

   Proponents of the Frivolous Foreclosure Lawsuit model know this about the Court system's model.  They know that filing Foreclosure Lawsuits in overwhelming numbers will likely make it easier for them to foreclose because otherwise their own lawsuits will threaten to overcome the Court system.

   One of Florida's responses, for example, to the filing of an overwhelming number of Foreclosure Lawsuits, was to launch a so-called "rocket docket" for them.  Foreclosure Lawsuits on the "rocket docket" would supposedly be handled quicker because retired Judges would be hired to set Hearings and resolve a greater number of Foreclosures, often in Lawsuits that were not contested.   Now, the budget for the rocket docket in Florida is reportedly coming to an end.  See "Demise of the Rocket Docket" in Beth Kassab, "What to Watch This Summer" p. 1, col. 4 (Orlando Sentinel "Central Florida Business" Section, Monday, June 6, 2011).

   It is easy to predict that with the demise of the rocket docket in Florida, whatever its shortcomings and whatever its strengths, pressure will rise on the Court system to once again resolve the "backlog" of lawsuits that will descend upon Florida Judges.  In fact, that was the reason for instituting a "rocket docket" for Foreclosure Lawsuits in the first place, to relieve the Court system of the pressure of a "backlog" of cases -- the vast majority of them being recently filed Foreclosure Lawsuits.

   If the Court system does not take measures to again accommodate them, Plaintiffs in Foreclosure Lawsuits may also attend Court-ordered Mediations without any tangible inclination to settle the Foreclosures, ask the Courts to relax evidentiary rules, to shorten Hearing times, or to reduce Notice requirements, among other things.  These things already appear to be happening in many reported cases.  There is an irony here.  Many of the Foreclosure Plaintiffs -- banks, large lenders -- object loudly to so-called "frivolous" lawsuits being filed by other people.

   In light of the current situation, I plan a series of occasional posts on the issue.  I want to reiterate how we got here, where we are now, and what can be done about this problem that affects the very existence of the System of Justice I have served throughout my professional career.

Please Read The Disclaimer.

HUD Program Offers Hope of Relief ... to Mortgage, Title Insurers.

 

   There is a program to take the squeeze off Mortgage Insurance Companies and Title Insurance Companies.  Do you remember the sensation of losing blood when you were punched in the nose during your childhood (not that long ago)?  Mortgage Insurance Companies and Title Insurance Companies have been paying money to lawyers and on Claims a lot since late 2006, early 2007.

   The program to let up the pressure is not a proposal.  It is operational.

   However, you and your clients may never see it.  You may only get the chance to read about it in online newspapers from far-away places.

   The program is called the Emergency Homeowners Loan Program.  It is a joint effort by the United States Government through Housing and Urban Development, and the State Governments.  Therein lies a snare.  Will your State Government participate or will it turn away program money to preserve Mortgage Servicers' and Mortgagees' current streams of income?

   The only Homeowners who should even think about applying for the Emergency Homeowners Loan Program, where it is available, are people who:

• Have lost income during the Great Economic Collapse or because of a medical condition;
• Are 3 to 12 months behind on their Mortgage payments, interest, principal, and servicing fees hidden and disclosed;
• Are a Defendant or about to become a Defendant in a Foreclosure lawsuit filed by a Plaintiff who may or may not know who really owns the Mortgage;
• Have income below the median income of their neighbors; and
• Have what is reported to be "a 'reasonable likelihood' of resuming mortgage payments within two years."

See Ovetta Wiggins, "Maryland Joins HUD Foreclosure Loan Program" (Washington Post Online, Friday, April 1, 2011).

   After meeting each of these qualifications, an eligible person can receive a maximum loan of $50,000.00, hardly enough to pay down the Mortgage on any property in the high-rent district, so to speak.  The loan is limited to 12 months "of overdue debt" as well.

   Under the business model which existed some 30 years ago, under which Homeowners payed off their Mortgages to banks and were done, this program would have made enough profit even for the banks.  Under the business model which caused the Great Collapse, and which is inexplicably still in charge of us, this program will undoubtedly be opposed by those who stand to make even more money from interminable debt followed by Foreclosures.

   For the sake of the Mortgage Insurance Companies and the Title Insurance Companies, in addition to the Homeowners, this program is worth joining.  You and your clients can join it, if your State Government is available to meet your needs and the needs of your clients, and of the distressed Mortgage and Title Insurance Companies.

Please Read The Disclaimer.

  

Foreclosure Failures Raise Insurance Coverage Issues, To Be Determined.

   In an action filed by servicing companies or banks on behalf of securitized trusts ("foreclosers"), the highest Court in Massachusetts affirmed lower court decisions and held itself that the Plaintiffs were not entitled to a declaration of perfection.  The Plaintiffs requested a judicial declaration that their real estate titles were perfected.  Instead, the Courts unanimously held that the foreclosers failed to obey the Law which allows nonjudicial foreclosures.   Download U.S. Bank National Association v. Ibanez (Mass., Opinion Filed January 7, 2011) PUBLIC ACCESS SLIPSHEET OPINION STATED SUBJECT TO REVISION.  You can also try this link for the Public Access Official Opinion:  http://weblinks.westlaw.com/result/default.aspx?action=Search&cnt=DOS&db=MA=ORS, or do an internet search for "Massachusetts Supreme Judicial Court" and click on decisions or opinions.

   Other aspects of this decision are posted on Insurance Claims and Bad Faith Law Blog. 

   There is potential resulting from this decision for a number of Insurance Coverage Issues under Director's and Officer's Liability Insurance Coverage and under Commercial General Liability Insurance Coverages, to name two examples.

   Further, as the Concurring Justice noted in this case:

   What is more complicated, and not addressed in this opinion, because the issue was not before us, is the effect of the conduct of banks such as the plaintiffs here, on a bona fide third-party purchaser who may have relied on the foreclosure title of the bank and the confirmative assignment and affidavit of foreclosure recorded by the bank subsequent to that foreclosure but prior to the purchase by the third party, especially where the party whose property was foreclosed was in fact in violation of the mortgage covenants, had notice of the foreclosure, and took no action to contest it.

   This decision, which clearly has landmark potential, is also the subject of reporting by, for example, E. Scott Reckard, "Foreclosure Ruling Could Be Setback for Banks" (Los Angeles Times Online, Friday, January 7, 2011), and by Gretchen Morgenson, "Massachusetts Ruling on Foreclosures is a Warning to Banks" p. A1, col. 1  (New York Times Nat'l ed., Saturday, January 8, 2011).

Please Read The Disclaimer.

MORE: Federal Immunity for Foreclosure False Swearing?

   As is now generally known, Foreclosure False Swearing in Lawsuits has caused a crisis in Mortgage Insurance and in Title Insurance both.  See the many recent previous posts here in particular under the Categories of Mortgage Insurance and Title Insurance.

   Apropos of proposals for Federal Immunity for Foreclosure False Swearing:

   The banks and other players in the securitization industry now seem to be looking to Congress to snap its fingers to make the whole problem go away, preferably with a law that relieves them of liability for their bad behavior.  But any such legislative fiat would bulldoze regions of state laws on real estate and trusts, not to mention the Uniform Commercial Code.  A challenge on constitutional grounds would be inevitable.

   Asking for Congress's help would also require the banks to tacitly admit that they routinely broke their own contracts and made misrepresentations to investors in their Securities and Exchange Commission filings.  Would Congress dare shield them from well-deserved litigation when the banks themselves use every minor customer deviation from incomprehensible contracts as an excuse to charge a fee?

Yves Smith, "How the Banks Put the Economy Underwater" p. 9, col. 1 (New York Times "Week In Review" Section, Sunday, October 31, 2010).

   Anybody else care to answer that last question?

   I will try for an answer:  "Heck, yes."  Expect a bill or bills to be introduced in the U.S. House of Representatives this week, tabled by the current majority, and passed by the majority to come in January, 2011.

 Please Read The Disclaimer.

UPDATE ON OUR PREVIOUS POSTS on Residential Mortgage ...

  ... Foreclosure False Swearing Issues.  Our Previous Posts can be accessed primarily in the Categories of Foreclosures, Mortgage Insurance and Title Insurance.  Some Previous Posts are also archived under Deceptive and Unfair Practices Acts, Fraud and Misrepresentation, and Market Performance.

    Not to be left out, Rolling Stone magazine just released an article on what the reporter clearly sees as the ill effects of Foreclosure Frauds by some Plaintiff Lenders and Mortgage Servicers, or perhaps as the ill effects of Foreclosure Lawsuit Systems as inherent Frauds, by Matt Taibbi, "Courts Helping Banks Screw Over Homeowners" (Rolling Stone Online, November 10, 2010; print publication issue November 25, 2010).

Please Read The Disclaimer.

MORE on "Force-Placed" Insurance by Lenders and Mortgage Servicers.

   This updates the discussion in a series of posts here of False Swearing and other practices apparently indulged by some Foreclosure Plaintiffs, most recently on Wednesday, November 10, 2010.

   The selection of "force-placed" Insurance, with Premiums to be paid by Borrowers in amounts added to their Mortgage Payments, is under scrutiny according to recent reports.  Mortgage Servicers and their Insurance subsidiaries which are funneled the business, are of particular concern to some observers.  "With little regulatory oversight or even private investor awareness, force-placed insurance has helped make drawn-out foreclosures lucrative for servicers -- far more so, in some cases, than helping a borrower return to performing status.  As the intermediary between borrower and investor, servicers appear to be benefiting themselves at the expense of both."  See Jeff Horwitz, "Ties to Insurers Could Land Mortgage Servicers in More Trouble" (American Banker, Wednesday, November 10, 2010).

Please Read The Disclaimer.

MORE ABOUT Fraud Upon Courts by Foreclosure PLAINTIFFS, Insurance Crisis.

"I'm very concerned about activity by some I read about that go to the integrity of the system.  But we're tied to (ruling on) what comes before us in a case.  And if no one is there to say it's not true, we're in a tough position."  Honorable J. Thomas McGrady, Florida Circuit Court Judge, quoted by Kris Hundley, "Judge:  Foreclosure Cases Starting to Clog the System" (St. Petersburg Times Online, Friday, November 5, 2010).

This post continues from posts which began on Sunday, October 31, 2010  and continued on Monday, November 1, 2010 and on Wednesday, November 3, 2010.

.

   Another Congressional Response:  Immunize All Foreclosure Plaintiffs Who Have Filed False Affidavits.

   Congress is reportedly likely to confront proposed Bills to immunize all Foreclosure Plaintiffs who have filed false affidavits and otherwise sworn falsely in Foreclosure Lawsuits.  Whether the Bills pass or not is open to question, apparently.  See Marketplace on Public Radio, "Weekly Wrap:  What Lies Ahead" (Friday, October 29, 2010) .

   The immunity would presumably extend to subrogation suits filed by Mortgage Insurance Companies who are going broke paying for defaulting Mortgagors (i.e., for the Defendants in the Foreclosure Suits) but who do or may have remedies available as a result of the false Affidavits filed in Court.  See, e.g., Dakin Campbell, "Genworth's Profit Misses Analysts' Estimates on Mortgage-Insurance Losses" (Bloomberg.com, Thursday, October 28, 2010)( "Mortgage insurers, which pay lenders when homeowners default and foreclosures fail to recoup costs, have lost money over the past three years because of the surge in soured loans."); Michael Powell, "Owners Seek to Sell at a Loss, But Bankers Push Foreclosure" p. A1, col. 2 (New York Times Nat'l ed., Monday, October 25, 2010)("And lenders can try to collect on private mortgage insurance.").

   Parenthetically, in some cases Mortgage Insurance Premiums lead to Foreclosure Suits because they are too high to pay when they are the result of "force-placed" Insurance, i.e., forced by the Lender.  See Gary Blankenship, "Sloppy Paperwork Exacerbates the Foreclosure Crisis/'People Weren't Paying Attention to the Paperwork, and They are Trying to Fix it During the Foreclosure Process'" p.1, col. 1 (Florida Bar News, October 15, 2010)("Lenders require that owners maintain insurance.  But if an error accidentally lets that insurance lapse for a few days, the lender can bring in an insurer, with the premiums passed to the owner.").

   The proposed immunity would also presumably extend to bar recoupment suits by those Title Insurance Companies which have issued Title Insurance Policies to people who bought Foreclosure homes.  The state of the title on many Foreclosure homes now is or may be questionable.  Title questions on Foreclosed homes are likely subject to legal actions and other expense incurred by the Title Insurance Companies to clear the title.  See, e.g., Andrew Martin and David Streitfeld, "Halt in Foreclosures a New Blow to Home Sales" p. A1, col. 3 (New York Times Nat'l ed., Friday, October 8, 2010); Anjali Fluker, "Foreclosure Halt Stymies Local Realtors, Investors" p. 1, col. 4 (Orlando Business Journal, Oct. 15-21, 2010).

   In fact, at least some Title Insurance Companies have stopped issuing Title Insurance for these very reasons.  David Streitfeld, "Document Flaws Have Put Brakes on Foreclosures" p. A1, col. 6 (New York Times Nat'l ed., Friday, October 1, 2010).

   Like Mortgage Insurance Companies, Title Insurance Companies are also losing money as a result of the many lenders' Foreclosure Lawsuits.  See Kathleen M. Howley, "Foreclosure Errors Cloud Homeownership With 'Blighted Titles'" (Bloomberg.com, Friday, October 1, 2010)("The costs for title insurers to defend customers and reimburse for lost properties rose 14 percent to $480.5 million in 2010's first half from a year earlier ....").

   CONCLUSION:

Some people have a right to swear falsely and submit false Affidavits, if we let them.  But they have no right to call their False Swearing the Truth.

   There is a crisis.  It is a crisis of False Swearing, part of a business model fueled by cash and ways to generate more. 

   It has within it the potential of Fraud and the certainty of greed.

   The Judicial System is in question because of numbers.  Foreclosure Plaintiffs have filed so many Lawsuits that the basis for these Lawsuits is often disregarded, including who is the proper Plaintiff and who has the Note and who holds the Mortgage.  There is no question that the owners are most often in default.  The questions come because of the conduct of the Foreclosure Plaintiffs.  There are few questions caused by the conduct of the Foreclosure Defendants.

   "It's not the money, stupid."  "It's the Justice," far more than money or the pursuit of money.

   Time will tell whether the litigious Foreclosure Plaintiffs, with great wealth and plans to make more, will be allowed to overwhelm the Court System with False Swearing as a way of doing business, and be immunized in all Foreclosures from the consequences of their conduct in litigating some Foreclosures.  Or whether they will face the consequences of False Swearing, just as other Plaintiffs in past cases have faced the consequences of False Swearing.

   To say again, Time will Tell.  In the meantime, Mortgage Insurance Companies and Title Insurers are going broke, they are being sued by the litigious Foreclosure Plaintiffs, and the Judicial System is under attack.

   The outcome is not certain.

Please Read The Disclaimer.

   

 

"Fraud Upon the Courts?" Insurance Crisis Result of False Swearing.

   Third in a series:

This post continues from posts which began on Sunday, October 31, 2010  and continued on Monday, November 1, 2010.

   Some people have a right to swear falsely and submit false Affidavits, if we let them.  But they have no right to call their False Swearing the Truth.

   There are so many Foreclosure Lawsuits that the sheer number of them overwhelmed the abilities of the people and organizations responsible for filing them.  There is a current Crisis in False Swearing as a result.  Affidavits have apparently been filed in many Foreclosure Lawsuits in an effort to obtain Summary Judgments without Trial, because many Plaintiffs cannot prove their Foreclosure Cases if they have to go to Trial.  "The foreclosure machinery that has forced millions of Americans out of their homes is beginning to seize up as some lenders and their lawyers are accused of cutting corners in their pursuit of rapid home repossessions."  David Streitfeld, "Document Flaws Have Put Brakes on Foreclosures/Focus on Cut Corners" p. A1, col. 6 (New York Times Nat'l ed., Friday, October 1, 2010).

   The effects have been felt by Title Insurance Companies, for example, which have refused to issue Title Insurance to cover title to properties foreclosed on by certain mortgage servicers and lenders who are suspected of filing false Affidavits in Foreclosure Lawsuits.  See id.  As one report put it:

   The missteps stemmed from the affidavits the lenders file as they seek a quick or summary judgment in thousands of foreclosure cases.  The affidavits state certain facts about the case, including the amount owed, which the signer indicates [actually, testifies] he has personal knowledge of.  Without the affidavit, the lender would have to prove the facts at trial.

Id.

REMEDIES FOR THE FALSE FORECLOSURE AFFIDAVITS "CRISIS".

   First, there is no "crisis" at all. There are apparently some litigious Foreclosure Plaintiffs who are willing to lie under oath in order to make money.

   So what is new?  "'The whole essence of this crisis is fraud and unless we restore the rule of law and transparency of disclosure, we are not going to fix this.'"  Professor Laurence J. Kotlikoff, quoted by Gretchen Morgenson, "Fair Game/One Mess That Can't Be Papered Over" p. 1, col. 2 (New York Times Nat'l ed., "SundayBusiness" Section, Sunday, October 24, 2010).

   This is not the first time that people may have lied under oath.  If it can be proved that they did, they are subject to the same consequences as any other person previously proven to have lied under oath.  See Gretchen Morgenson, "Banks' Flawed Paperwork Throws Some Foreclosures Into Chaos" p. A1, col. 3 (New York Times Nat'l ed., Monday, October 4, 2010), quoting Linda M. Tirelli, Esquire:  "'This is not about getting a free house for my client.  It's about getting a level playing field.  If I submitted false documents like this to the court, I'd have my license handed to me.'"

   Fifty (50) State Attorneys General are jointly investigating whether the False-Swearing-Affidavits-in-Foreclosures procedure is an unfair and deceptive trade practice by Lenders and Mortgage Servicers in their States' Courts.  If this business practice exists of backing up Foreclosure Cases with false testimony, they vow to take appropriate action to prevent it.  See National Association of Attorneys General Press Release, "50 States Sign Mortgage Foreclosure Joint Statement," October 13, 2010.  Parenthetically, the Federal-State prosecutor relationship is reportedly frayed past the point of forbearance due to the Feds favoring the Banks.  See Joe Nocera, "Talking Business/The States Take on Foreclosures" (New York Times Online Friday, October 29, 2010).

PREVIOUS FEDERAL RESPONSES TO FORGIVE THE FRAUD; DEAD ON ARRIVAL. 

   A Congressman from Texas has reportedly introduced a bill in  many past Sessions of Congress, without success until this year, which would require all States and the District of Columbia to accept Affidavits at the lowest common denominator favored by any one State, which could theoretically include no oath, no personal knowledge, no notary, and so on.  The Bill, as noted, passed Congress this year.  President Obama vetoed it by refusing to sign it while Congress was in recess, a process called a "pocket veto".  See Jackie Calmes and David Streitfeld, "Obama Will Veto Notary Bill That Could Speed Foreclosures" p. B1, col. 1 (New York Times Nat'l ed., "Business Day" Section, Friday, October 8, 2010).

More About Suggestions for a "Fix" For Foreclosure False Swearing "Crisis" to Come, and More to Come on the Insurance Crisis that REALLY is the result of the False Foreclosure Swearing ....

 Please Read The Disclaimer.

  

    

False Swearing: Part of a "Fraud Upon the Court?"

   Some people have a right to file false Affidavits, if we let them.  But they have no right to call their false Affidavits the Truth.

   A witness giving testimony in an Affidavit must ordinarily swear or affirm under Oath.  She or he swears that what's in the Affidavit is the Truth and that it is based on the personal knowledge of the person testifying in the Affidavit.

   Failure to comply with these requirements is not a "procedural defect" or a mere failure to "follow the letter of the law in preparing foreclosure paperwork."  Gary Blankenship, "Sloppy Paperwork Exacerbates the Foreclosure Crisis/'People Weren't Paying Attention to the Paperwork, and They are Trying to Fix it During the Foreclosure Process'" p.1, col. 1 (Florida Bar News, October 15, 2010).  See Press Release, National Association of Attorneys General, "50 States Sign Mortgage Foreclosure Joint Statement," October 13, 2010 (Statement of action based on appearance of "procedural defects" in Mortgage Foreclosure Lawsuits).

   If a person swears to Truth as her or his own personal knowledge, and that is not the Truth, it is a fraud upon the Court.

   A witness giving testimony in an Affidavit must also execute (sign) the Affidavit in front of a Notary, ordinarily.  The Notary is supposed to administer an Oath before the witness signs the Affidavit.  In my own personal experience, some Notaries seem not to know how to do that, or even that they have to.

   No-one disputes, however, that witnesses swearing to Affidavits filed in Foreclosure Lawsuits, were swearing or affirming to the Truth of what was in the Affidavits, even if they did not take an Oath before they signed the Affidavit and even if they said they did.

   An Affidavit is also ordinarily required to be executed in the presence of the Notary.  Existing practice has never accepted notarized signatures from people who signed in other States or at other times when the Notary was not present.  One of the problems that may exist with some Affidavits in some Foreclosure Lawsuits is that witnesses executed Affidavits in different States and otherwise at times when Notaries were not present in some cases.

   If witnesses do not execute their Affidavits in the presence of the Notary, but swear that they do, it is not simply a "technical omission" or simply "shoddy paperwork."  See Gary Blankenship, "Faulty Filings Hamper Clearing Foreclosures" p. 1, col. 4 (Florida Bar News, October 1, 2010).

   In that case, it is a lie.

   The Law's (or perhaps many Trial Lawyers') and the Good Book's treatment of lying are based on the same experience:  Human beings are sometimes reluctant to be honest when being honest stands in the way of personal preferences, such as making money.  Arguably, says the experienced Trial Lawyer, those who cannot be trusted in small things, cannot be trusted in large ones.

   If swearing or affirming the Truth of testimony is a "small thing," then that witness is likely not to be trusted in larger things, such as:

   That a Note or other document necessary to proceed with the Foreclosure on a person's home are somehow "missing," and that the absence of that documentation should be excused accordingly; or

   The identity of the correct Plaintiff in the Foreclosure Lawsuit; or

   The correct amount owed by the Defendants.  (In some reports, it is to be doubted whether the Defendants are correctly named as Defendants at all; in some cases, reportedly, Foreclosure Lawsuits have been filed against Homeowners who are either current in their Mortgage payments, or who do not even have a Mortgage.)

To be continued including regarding the Effects of False Swearing on Title Insurance, Mortgage Insurance, and the Court System ....

Please Read The Disclaimer.

 

 

Halloween Treat in Florida: "No Tricks From You!"

   In a new and interesting decision, a Florida Appellate Court has pulled together various strands of settled Florida Law this Halloween.

   In Florida, the Plaintiff in a Foreclosure Lawsuit must present evidence, either in proper support of its Motion for Summary Judgment or at the Trial of the case, that it owns and holds the note and mortgage in question.  Its proof must consist either of a "tender [of] the original promissory note," or of proof that will successfully  reestablish a lost note as provided by the Florida Statutes.

   In addition, if the note does not identify the Plaintiff as the party to be paid on it, then it must either "bear a special indorsement" naming the Plaintiff, or a blank indorsement.  The Plaintiff may, in the alternative, submit proper evidence of either (1) the true payee's assignment to the Plaintiff of proceeds payable under the note, or (2) "an affidavit of ownership," in order to prove that it, the Plaintiff, holds the note.

    This is pretty basic.  These settled rules of Florida Law were recently applied in time for Halloween in the case of Servedio v. US Bank Nat'l Ass'n, Download Servedio v. US Bank National Association (Fla. 4th DCA Case No. 4D10.1898, Opinon Filed October 27, 2010)(PUBLIC ACCESS; STATED NOT FINAL), also published as 35 Fla. L.W. D2368a (Fla. 4th DCA October 27, 2010)(Subscription required to access Florida Law Weekly).  After applying these rules of Law, the Court in this Halloween treat (no tricks, please) held on the facts of record in that particular matter:

The record on appeal does not contain the original note, evidence of an assignment of the mortgage and note to appellee, or an affidavit of ownership by appellee. Appellee filed no other admissible “pleadings, depositions, answers to interrogatories, admissions, affidavits, and other materials” to support its contention that it owns and holds the note and mortgage. Fla. R. Civ. P. 1.510(c). “[I]t is apodictic that summary judgments may not be granted . . . absent the existence” of admissible evidence in the record. TRG-Brickell Point NE, Ltd v. Wajsblat, 34 So. 3d 53, 55 (Fla. 3d DCA 2010). Without evidence demonstrating appellee's status as holder and owner of the note and mortgage, genuine issues of material fact remain, and summary judgment was improper.

[Emphasis added electronically on Halloween.}

The devastatingly bad effects on Mortgage Insurance and on Title Insurance, of shorting these established Rules of Law, are explored in continuing posts over the next several days.

Please Read The Disclaimer.

UPDATE MEDIATOR INFORMATION: Residential Mortgage Foreclosure Mediations: Wealthy Strategic Defaults.

   This post provides newly received information in an Update of the post here on Mediation of Residential Mortgage Foreclosures and the information available on the role of strategic defaults, on Wednesday, July 7, 2010.

"The rich are different; they are more ruthless."

Sam Khater, Senior Economist at Core Logic, quoted by David Streitfeld, "Biggest Defaulters on Mortgages Are The Rich" p. A1, col. 3 (New York Times Nat'l ed., Friday, July 9, 2010).

   Any concern with so-called "strategic defaults" needs to take this statistic into account to be realistic:

   Homeowners with Million Dollar Mortgages, of which there are apparently quite a few, plan and act out their strategic defaults at a rate of about 2-to-1 compared to people who owe lesser amounts of money on their mortgaged homes.

   It appears that these "wealthier" Homeowners are not deterred by accusations of moral depravity or by threats that the Lender will pursue them for the amount they owe beyond the value of the house the Homeowners leave behind in their strategic defaults.  See David Streitfeld, "Biggest Defaulters on Mortgages Are The Rich" p. A1, col. 3 (New York Times Nat'l ed., Friday, July 9, 2010).

   These are things which Mediators need to be aware of, before attempting to conduct successful Mediations of Residential Mortgage Foreclosures in such cases.

Please Read The Disclaimer. 

Mediation of Florida Residential Mortgage Foreclosures Taking Effect.

   Mediation of Florida Residential Mortgage Foreclosures is taking effect.  In some Florida Counties, such as Pinellas and Pasco, mandatory Mediation is already in effect for Homesteads, i.e., where the Homeowner lives in the home.  See Editorial, "New Foreclosure Mediation Program is Win-Win For Homeowners, Taxpayers" (St. Petersburg Times Online, Friday, July 2, 2010).

   As Lenders increasingly take possession of more and more Foreclosed Properties which simply cannot be sold, nor sold at anything like the vanished balance of the Foreclosed Mortgage, the price seems to be rising for so-called "strategic defaults," or defaults planned by the Borrower who owes more on the Mortgage than the Property is worth.  Mediators in Residential Mortgage Foreclosure cases in any State or other jurisdiction will want to have available perhaps a list of resources for uninformed Borrowers who may think that they do not face any downside risk other than impairing their Credit.  The price now includes not only impaired Credit, but "[t]he lender could sue you for the balances you owe....  You may want to talk to an attorney familiar with debtor protection in you state (a bankruptcy attorney might be a good choice) to get an assessment of your risk."  Liz Pulliam Weston, "What Landlords Risk by Abandoning Mortgages" (latimes.com, Sunday, July 4, 2010).  See also Adam Geller, Associated Press copyrighted story, "Finding Gold in Them Thar Foreclosures" (Washington Post Online, Sunday, July 4, 2010).

   "Homeowners in volatile boom-and-bust states such as California and Florida have been especially prone to walk away from deeply negative equity situations."  Kenneth R. Harney, "Lenders' Focus Turns to Strategic Defaults" (latimes.com, Sunday, July 4, 2010).  This linked report mentions a couple of results of a study funded by the Federal Reserve Board that we already knew, but here they are:

1.  Strategic defaults have geographic implications, meaning that there apparently tend to be a greater number of strategic defaults in places like "California and Arizona, where state law limits lenders' ability to collect post-foreclosure deficiencies on principal residence mortgages," unlike other states "such as Florida and Nevada, where lenders face fewer restrictions."  Id.  It is not reported how this finding squares with the fact that Florida has one of the greatest numbers of strategic defaults, but there you are.

   The highly paid Fed researchers conclude from this that "'borrowers may factor into the costs of default the potential legal liabilities resulting from a foreclosure.'"  Id.  [Emphasis added.]  In other words, Borrowers contemplating not paying off a Mortgage balance that is far greater than a house is worth, may know that they live in a State that affords them certain protections if the Lenders come after them for more than the house.  Duh!

2.  "The Fed researchers [also] concluded that the depth of borrowers' negative equity positions is an important tripwire to their decision to send back the keys."  Id.  "The more people owe, the more they are likely to walk away," is not a revelation.  Let alone one to pay Taxpayer money for.

Mediators in Residential Mortgage Foreclosures will be sure to want to know these things for a good and productive Mediation.

P.S.

Residential Mortgage Foreclosure lawsuits have apparently had little or no effect on luxury vacation housing projects, however.  "Walt Disney Co. this morning [June 23, 2010] officially unveils its plans to begin building luxury vacation homes on its land near its Orlando theme parks."  Robert Trigaux, Venture Blog on St. Petersburg Times web site, post of June 23, 2010 entitled, "High Risk (Or Insanity) Lurking in Orlando's Luxury and Stratospheric Housing Markets?"

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