California Bankruptcy Attorney Blog

Vincent Howard and our team of San Bernardino foreclosure defense attorneys have followed California's progress in the "robo-signing" settlement talks with great interest. Attorney General Kamala Harris has made waves in the past months by refusing to sign on to the national settlement, calling it inadequate to compensate Californians for the many losses they incurred in the housing crash. Indeed, she has launched her own investigations, including some in cooperation with Nevada. According to a Jan. 25 article from the Los Angeles Times, Harris and her team were invited back to negotiate by further concessions from lenders, but ultimately did not receive an offer they felt was sufficient. A spokesperson for Harris told the media that the settlement would prevent her and other AGs from pursuing their current outside investigations.

No deal has officially been reached, despite nearly 16 months of investigation and negotiation and the original participation of AGs from all 50 states and Washington, D.C. The investigation has been plagued by politics, with conservative AGs arguing that the settlement is too aggressive and liberal ones countering that it doesn't go far enough. In particular, AGs in New York, Delaware, California, Nevada and elsewhere have opted out or threatened to and started their own investigations into lending practices. Harris said in late September that the settlement offer at that time did not include enough remedies from the five major lenders for the foreclosure crisis. She and the other breakaway AGs said they'd prefer to see efforts to stop foreclosures and their negative effects, going beyond addressing the fallout from robo-signing itself. The current deal still is not transparent enough or sufficient to address Californians' needs, a spokesperson said.

California's participation in the talks is considered important to any settlement because the state is so big -- and has the resources to bring large lawsuits on its own. According to the article, the latest proposal includes a $17 billion program that would reduce principal on loans that are "underwater," or larger than the value of the home. Another $5 billion would be earmarked for people directly harmed by robo-signing and other bad servicing practices, and $3 billion would help underwater homeowners refinance at a rate of 5.25%. (Current rates for a 30-year prime mortgage are 4 to 4.5%.) In return, the AGs would agree to release lenders from actions for improper servicing or origination of mortgages -- a provision that Harris and some colleagues believe would stop their existing investigations. Delaware has filed a lawsuit alleging MERS has engaged in deceptive practices; Massachusetts has sued five lenders, alleging they knowingly pursued illegal foreclosures.

At Howard Law, P.C., our Westminster foreclosure defense lawyers are pleased to see California sticking to its guns and pursuing a settlement that could provide meaningful help to people who were hurt in the housing crisis. That includes people who were directly harmed by robo-signing or other illegal and unethical behavior by lenders, as well as people who are suffering because housing prices have dropped through no fault of their own. Throughout the robo-signing scandal, lenders have downplayed their responsibility, arguing that there was likely no real harm from that particular kind of illegal behavior. This may or may not be true -- instances of wrongful foreclosures have been reported -- but there's certainly widespread harm from, for example, their refusal to give meaningful consideration to loan modifications. Vincent Howard and our team of Norwalk foreclosure defense attorneys applaud Harris for refusing to let lenders off the hook for their actions.

Continue reading "Kamala Harris Rejects Another Attempt to Include California in Robo-Signing Settlement" »

Led by partner Vincent Howard, our Claremont foreclosure defense lawyers have written here extensively about the Home Affordable Modification Program, HAMP, and its many problems. Less has been written about its sister program, HARP, which offers refinancing help -- possibly because eligibility is limited to people who are only slightly underwater at worst. But this may change in the coming days, since the president announced a new refinancing initiative in this week's State of the Union speech. Acknowledging that housing continues to be a thorn in the side of the economy, President Obama called for a refinancing program that expands eligibility to people who are further underwater. Details are not yet available, but the speech indicated that the program would be paid for with a tax on large financial institutions, a likely tough sell in the House.

HARP, the existing program, is available to borrowers who are current on their mortgages and owe no more than 125 percent of their homes' value. However, not everyone who is underwater met the original criteria, since there can be no recent delinquent payments and the loan must be owned by Fannie Mae or Freddie Mac. In October, the federal government announced that it would expand eligibility under the Fannie/Freddie loans. The current proposal, according to the Wall Street Journal, would build on this, in part by including people with loans owned by other institutions. Borrowers who are current on their mortgages would most likely take out FHA loans, but the article notes that Congress would have to change the current requirement for a 3.5% down payment. Like anyone taking out a new loan to refinance, they would need to apply and go through the usual closing process.

Analysts are pessimistic about the chances of the program in the House of Representatives, where Republicans control voting and generally oppose new taxes on banks. The tax in question was first proposed two years ago in January of 2010, with Obama calling for a "financial crisis responsibility fee" of 0.15% on the liabilities, other than domestic deposits, of financial institutions with at least $50 billion in assets. Analysts said it would raise $9 billion a year, but it faced strong opposition from banking interests and ultimately did not pass even when the House was controlled by Democrats. A real estate economist told the Los Angeles Times that the refinance proposal would not be as helpful as other potential interventions in the housing market, because it would likely just put more money in the pockets of people with current mortgages.

Vincent Howard and our team of Mission Viejo foreclosure defense attorneys would be pleased to see eligibility for refinancing expanded to more borrowers, even if this is not the ideal solution. Owing more than the home is worth traps borrowers in their homes, which is a serious hardship for people who are seeking to refinance loans they took out at the height of the bubble, under much higher interest rates. Indeed, many people who took out loans in that era were glibly promised that they would be able to refinance in a year or so, only to see their homes lose value or their subprime loans add to the loans faster than they could pay down principal. Ideally, however, the Temecula foreclosure defense lawyers at Howard Law, P.C., would prefer to see this initiative followed up by something that would allow principal reductions for people who are stuck in highly overvalued loans, something experts agree is the best solution to the housing downturn.

Continue reading "President Announces New Refinance Program for Underwater Homeowners Based on HARP" »

Led by Vincent Howard, our Norco foreclosure defense attorneys have avidly watched the litigation by our neighboring states against Countrywide Financial. That company (through Bank of America, its successor in interest) settled in 2009 with states charges that it had engaged in consumer fraud in its mortgage lending. In particular, it faced accusations that it steered borrowers into loans it knew they couldn't afford, and sometimes engaged in race-based "reverse redlining." Perhaps not surprisingly, two of the states participating in that settlement were hard-sit southwestern neighbors of California's, Nevada and Arizona. Arizona made a splash in late 2010 when it sued Countrywide again, alleging failure to keep to the terms of its settlement. Now, the Ninth U.S. Circuit Court of Appeals has declined to hear an appeal in that case.

Arizona's lawsuit was originally filed in December of 2010, alleging violations of Arizona law in loan servicing by Countrywide, Bank of America and related companies. It accused the companies of continuing widespread consumer fraud, in large part because of the way they handle loan modification requests. According to the complaint, the defendants misrepresented to customers whether the customers were eligible for loan modifications in the first place; when and whether they would be approved for a modification; why the lender declined to make a loan modification; and whether and when a foreclosure would take place. This violates the part of the 2009 settlement requiring an $8.4 billion commitment by Bank of America to provide loan modifications, the lawsuit said.

Bank of America sought to remove that case to federal court under the Class Action Fairness Act, arguing that the state of Arizona was seeking relief for a large group of consumers. In an opinion from March of 2011, the Arizona federal court disagreed and remanded the case to Arizona state court. The federal district judge said CAFA does not apply because the state had filed a parens patriae action, which means it was acting in the interest it has in the well-being of its people. Thus, the district court said, the state was the real party in interest, rather than a discrete group of Arizona homeowners, and CAFA does not apply. The case was not filed as a class action, it said; nor does it raise a federal question or involve bankruptcy jurisdiction. Bank of America appealed the issue to the Ninth Circuit, which declined to hear an appeal in an order dated Jan. 3. Judge Gould, dissenting from that order, argued that hearing the case, consolidated with a related appeal from Nevada, would help resolve opposing decisions in Arizona and Nevada district courts.

The Fullerton foreclosure defense lawyers at Howard Law, P.C., will look forward to reading about the Ninth Circuit's decision in the Nevada case. Though we believe there was no basis to claim CAFA is involved in this case, the Ninth Circuit's dissent suggests that at least one Nevada judge disagrees. If that's upheld, it could mean major changes for the way all states file parens patriae actions. Those actions include the original Countrywide lawsuit, which led to the 2009 settlement, as well as any other consumer protection action pursued by a state attorney general rather than an individual. (Indeed, California is one of the few states that allows "public attorney general" suits.) Vincent Howard and our team of Murrieta foreclosure defense attorneys would prefer to see attorneys general allowed to do the necessary work of protecting their states without undue roadblocks.

Continue reading "Ninth Circuit Rejects Appeal by Bank of America in Arizona Lawsuit Over Countrywide - Arizona v. Countrywide et al." »

Vincent Howard and our team of Moreno Valley predatory lending lawyers were interested to see a recent ruling out of Missouri permitting an unjust enrichment claim against a mortgage broker. In Hargis v. JLB Corp., Bonnie Hargis also originally alleged unauthorized practice of law by JLB, saying it prepared legal documents. The trial court ultimately rejected this claim, finding that third parties not under JLB's control prepared the documents, and the Missouri Supreme Court upheld that ruling. However, it reversed summary judgment as to Hargis's unjust enrichment claim, saying this claim was not related to unauthorized practice of law and JLB did nothing to rebut it in its motion.

JLB is a mortgage broker that helps borrowers prepare financial documents. Loans also require a note and mortgage or deed of trust, but the Missouri Supreme Court noted that the record appears to show JLB relied on third parties like title companies to prepare those legal documents. In 2009, Hargis used JLB to refinance her home in Barnhart, Missouri, for which she was charged a $1,890.50 loan origination fee; a $1,923.58 loan discount; a $900 broker fee; a $550 underwriting fee; a $208 administrative fee; and an $899 processing fee. JLB said it did not charge for the preparation of the legal documents, but charged the processing and administrative fees for gathering information, transferring documents and helping to prepare loan application documents. Hargis, however, was dissatisfied with the fees and filed suit, alleging JLB practiced law without a license when it charged her for preparation of the legal documents; and was unjustly enriched by charging for services not provided. After discovery, the trial court granted summary judgment on all counts, finding JLB did not draft the legal documents.

The Missouri Supreme Court noted that Missouri caselaw has allowed mortgage brokers to fill out legal forms in the past, as long as -- among other things -- they did not charge a higher or separate fee for helping to fill them out. In this case, Hargis claims that JLB charged her for procuring or assisting with the preparation of legal documents. This raises the issue of what it means to "procure" a document, the court said. After considering past cases, it ultimately decided procuring requires active involvement in obtaining something; it's more than the mechanical act of gathering information. And the record on summary judgment shows that JLB outsourced the legal document preparation, and did not charge for this or roll the cost into another fee. Other documents for which Hargis was charged are not legal documents, it said. Thus, it upheld the trial court on the law practice counts. However, it reversed on the unjust enrichment claim. JLB's summary judgment motion did not address the unjust enrichment claim, the high court said -- and her claim does not rely on the unauthorized practice of law. Thus, it sent that issue back to the trial court.

Led by partner Vincent Howard, our Lake Forest predatory lending attorneys handle many cases of borrowers alleging underhanded behavior by lenders and mortgage brokers. However, claims for unauthorized practice of law were not common even in the worst days of the mortgage crisis. It's not unreasonable to suggest that the kind of practices described here as illegal -- the active procurement of legal documents by nonlawyers -- went on during the mortgage bubble, particularly among lenders and brokers that used high-pressure sales tactics and filled out forms on behalf of their clients. This issue may surface as more and more borrowers turn to the courts and Escondido predatory lending lawyers like us.

Continue reading "Missouri Supreme Court Resurrects Lawsuit Alleging Unjust Enrichment by Mortgage Broker- Hargis v. JLB Corp." »

Our Upland predatory lending attorneys, led by partner Vincent Howard, were interested to see a recent Ninth Circuit decision about a Truth in Lending Act case taking place right here in southern California. In Balderas v. Countrywide et al., Victor and Belen Balderas accuse Countrywide Home Loans, the now-defunct home loan company made famous and bankrupt by its specialty in subprime lending, of pressuring them into taking out a loan that Countrywide employees knew they couldn't afford, misrepresented their income to get and failed to adequately document. Among their allegations is that they never received the legally required written notice of their right to cancel the loan under TILA, which would extend their right of rescission from three days to three years. The district court ruled that the Balderases had indeed gotten the notice and dismissed the case, but the Ninth Circuit reversed and sent it back for more proceedings.

The Balderases' complaint says they were cold-called by a Countrywide mortgage broker offering to refinance their home into a fixed-rate mortgage and allow them to cash out $50,000. A different Countrywide employee filled out a loan application form on the couple's behalf, overstating their income by $40,000 a year, and showed up at their home asking them to sign it. The Balderases do not read English, so they acceded when the loan officer told them it was "an informal document the bank needed." Three days later, the mortgage broker came to the home with a notary public and a slew of English-language loan documents, claiming Countrywide needed their signatures that night and refusing to leave without them. They tried to delay the closing until their daughter could translate for them, but after six hours with the broker pressuring them, they signed. Two days later, they called the broker and asked to cancel the loan, which he would not. They also called Countrywide, which incorrectly said it was too late to cancel.

The Balderases filed a TILA lawsuit, alleging their Notice of Right to Cancel was defective because it was missing the closing date and last date to cancel. The federal district court dismissed their lawsuit, finding that they did get an adequate notice. That finding was based on a letter from Countrywide that the Balderases submitted to the court. Countrywide attached to its letter a Notice of Right to Cancel that was filled out properly, and the judge used this as a basis to rule that the Balderases had gotten proper notice.

The Ninth Circuit reversed, noting that this "ersatz document production" creates hazards for the courts. In fact, the majority wrote, the Notice attached to the letter proves only that the Balderases signed a proper notice that was in Countrywide's possession; it does not prove that the couple themselves had a proper notice. This created a rebuttable presumption that the Balderases received proper notice, the court said -- but it's improper to use evidentiary presumptions during early pleadings. Thus, it said, Countrywide's argument that the Balderases didn't submit enough facts to rebut that presumption fails because pleadings are not the time for submitting facts. The Balderases should have a chance to make the case before a jury that they had a different notice, the court said. It also rejected Countrywide's argument that it must have "delivered" the TILA notice because the Balderases had it long enough to sign it, but the Ninth observed that delivery generally means being allowed to keep the thing delivered. Thus, it resurrected the lawsuit and returned it to district court.

This ruling is welcomed by Vincent Howard and all of our Anaheim predatory lending lawyers here at Howard Law, P.C. Countrywide became notorious a few years ago for its alleged high-pressure or outright illegal sales tactics, including reports of presenting English-language documents to people who speak another language. Bank of America, which purchased Countrywide after it failed, has agreed to several legal settlements of claims based on this kind of illegal behavior. Even if there's no TILA violation in this case, California state law expressly forbids bait-and-switch loans that are negotiated in one language and legally formalized in another -- which means this couple may have a state-law case as well. As Cerritos predatory lending attorneys, we wish them luck.

Continue reading "Ninth Circuit Allows Lawsuit Alleging Bank Withheld Correct TILA Notice to Go Forward - Balderas v. Countrywide at al." »

At Howard Law, P.C., our Riverside County foreclosure defense attorneys have written here many times about the paperwork problems that have flooded the courts since the mortgage crisis. This includes some instances of shady or semilegal behavior by lenders, such as robo-signing, post-dating documents and failure to check into evidence. However, we have never read a case in which the lender was accused of outright forgery, until Sutter v. U.S. National Bank, a Sixth U.S. Circuit Court of Appeals decision. Daniel and Sheryl Sutter refinanced their Michigan mortgage in 2004, but never signed a mortgage at the closing. The refinance proceeded normally otherwise, but the Sutters began missing payments and filed for Chapter 13 bankruptcy. U.S. National Bank, the assignee of the mortgage, filed a proof of claim with an attached mortgage bearing false signatures. The bankruptcy court ultimately decided to impose an equitable mortgage, but the district court voided the mortgage outright and the Sixth Circuit agreed.

The Sutters caught the forgery because they had arranged to close the loan in Sacramento, California, where they happened to be vacationing at the time their refinance closed. The forged mortgage expressly said it had been signed and notarized in Michigan. The Sutters used the forgery to object to the proof of claim, then filed an adversary proceeding seeking to disallow the claim or avoid the transfer of the debt. The bankruptcy court granted both requests and expressly reserved the right to decide on an equitable mortgage. The court then allowed the trustee to sell the mortgage back to the bank for $30,000, then abandon the home to allow foreclosure to finish, in exchange for a waiver of any additional claims on the estate. The Sutters appealed to the district court, which sent the case back for an equitable mortgage ruling. The bankruptcy court imposed an equitable mortgage, holding that the Sutters had gotten the benefit of the mortgage and the assignee did not have unclean hands. The district court voided this on appeal, however, saying the mortgage was void because no transfer ever occurred.

U.S. National appealed the ruling that there was no mortgage on the property and that the original mortgage was void under Michigan law. After dismissing some threshold issues, the Sixth Circuit considered the question of whether the mortgage is void in Michigan. It is undisputed that the Sutters could not have signed the mortgage; U.S. National admitted that forgery by its predecessor was the most likely explanation, and steps have been taken to penalize the notary. Furthermore, the Sixth said, caselaw says a forged mortgage is void ab initio in Michigan, even when innocent successors in interest are affected. An equitable mortgage is possible, the court noted, but Michigan does not allow an equitable mortgage when one party has unclean hands, and assignees stand in the shoes of their predecessors. Thus, U.S. National cannot benefit from an equitable mortgage. Finally, the court dismissed claims that the Sutters would inequitably get a "free house" from this decision, since they intended to grant a mortgage in the first place. Filing for bankruptcy is not inherently inequitable, the court said, and the Sutters will remain obligated on the unsecured note they actually did sign.

As Irvine foreclosure defense lawyers, we're pleased to see the courts take such a firm stance on the rights of mortgage borrowers to be free of illegal and deceptive conduct. The case ultimately did not leave the Sutters in a great position, since they were ultimately unable to receive a bankruptcy discharge. (They converted to Chapter 7 but were unable to obtain a discharge because they had filed a previous Chapter 7 case.) However, nor did it allow the forgers or their successors in interest to benefit from patently illegal behavior -- and that's as it should be. It's becoming clear that during the mortgage bubble, when the Sutters refinanced their home, many untrustworthy companies sought to make a quick dollar from refinances like this one, without regard to the risk of the loans. In this case, apparently it was also done sloppily and fixed in a blatantly illegal manner. Led by experienced attorney Vincent Howard, our San Diego County foreclosure defense attorneys aggressively defend cases with these kinds of improprieties.

Continue reading "Sixth Circuit Affirms Voiding of Mortgage Due to Banks Alleged Forgery of Signatures - Sutter v. U.S. National Bank" »

In legal terms, a lien -- a legal encumbrance on property that secures a debt, like a house or a car -- cannot be enforced unless it is "perfected" by meeting standards set out by state law. Since the housing downturn began, some bankruptcy filers have sought to avoid debts by claiming they are based on liens that were not perfected, but this is a tough claim to prove. That's why the Claremont foreclosure defense lawyers at Howard Law, P.C., were interested to see a case where the Sixth U.S. Circuit Court of Appeals agreed that a lien had not been perfected, canceling a large debt owed by a couple from Kentucky. In Salyersville National Bank v. Bailey, Jackie and Peggy Bailey took out two secured loans from the bank, but were unable to pay even in bankruptcy and ultimately had their home repossessed and sold. They had reaffirmed the debts, thinking the loans were secured, but this was later proven false. In this action, the Sixth voided their reaffirmation based on mutual mistake.

The Baileys filed for bankruptcy four months after filing for divorce (actions that often go together, in our experience as Anaheim foreclosure defense attorneys). They had taken out a loan secured by their home and another secured by their truck, and reaffirmed both debts in the bankruptcy. However, they stopped paying after reaffirmation, in part because the truck had been stolen and partially destroyed. For the truck-secured loan, the bank then filed an unsecured claim. The bankruptcy trustee sued to avoid the mortgage because it had never been perfected, an action that was settled by an agreement to sell the property at auction, with the proceeds going to the estate. If the bank bought the property, the agreement said the avoidance action would be dismissed and the mortgage still in effect. The bank bought the property from the trustee at auction and immediately sold it to a third party for a $33,400 profit, then filed an unsecured claim in the bankruptcy for the full balance owed on the mortgage.

The Baileys paid $37,000 toward the unsecured debts in bankruptcy. After the bankruptcy ended, however, the bank immediately sued them for balances owed on both loans. They moved to reopen their bankruptcy case and have their reaffirmation declared void. The bankruptcy court agreed to void the reaffirmation on the grounds of mutual mistake -- both parties had incorrectly believed the bank had security interests in the debts when the debt was reaffirmed. The district court in Kentucky affirmed, and the bank appealed.

In a reaffirmation, the Sixth Circuit observed, bankruptcy filers agree to exclude some debt from discharge at the end of their bankruptcy, a sacrifice they make in order to keep the property. On appeal, the bank argues that it was in fact a secured creditor, so there was no mutual mistake. This argument contradicts the past history of the case, the Sixth said. The bank had elected to treat the truck loan as an unsecured claim, in part because the vehicle's bad condition made it bad collateral. It cannot legally change its mind later, the court said. On the real estate, the trustee had disputed whether there was a perfected lien, resolved by the sale and the bank's unsecured claim. Again, the bank had waived its right to pursue a secured claim by acting as an unsecured creditor, the Sixth said, and being treated like one. The court also rejected the bank's argument that Kentucky law allowed it to enforce the reaffirmation even if it's a unsecured creditor. Reaffirmations of debt must be enforceable under state law, and Kentucky law allows cancellation of contracts made when both parties were mistaken about a material fact. In this case, they were mistaken as to whether the debts were secured, an extremely material fact for the Baileys. Thus, it affirmed the district and bankruptcy courts.

Our Escondido foreclosure defense lawyers are pleased that the Sixth chose to protect this couple from the legal maneuverings of their mortgage lender. As the Sixth noted dryly, "people do not generally agree to pay more than $150,000 in exchange for nothing." It's also worth noting that the bank was attempting to collect the full unpaid balance of the loan despite having collected $33,400 in the foreclosure sale -- essentially squeezing a profit from recently bankrupt (and divorced) people. Reaffirming a debt may make sense in bankruptcy cases where the filer wants to keep the home, but doesn't have a big enough exemption to do it. However, this puts the filer on the hook for large payments, and as this case shows, those payments will continue to be enforceable after bankruptcy.

Continue reading "Sixth Circuit Upholds Cancellation of Mortgage Debt Because Lien Was Never Perfected - Salyersville National Bank v. Bailey" »

Our Ontario foreclosure defense lawyers were pleased to see a recent announcement that California and Nevada will jointly investigate banks' fraud and wrongdoing during the foreclosure crisis. At Howard Law, P.C., we recently noted that our own state Attorney General, Kamala Harris, has broken away from the multistate negotiations with the banking industry to settle the "robo-signing" controversy of late 2010. Those talks had been focused on the revelation that banks had a widespread practice of signing legal affidavits without knowing whether they were accurate, which was at best a violation of legal procedures. At worst, the "robo-signed" documents could have allowed wrongful foreclosures to take place. Many courts responded by temporarily stopping foreclosures altogether, or putting stricter rules in place for foreclosure litigants.

Harris said in late September that she was leaving the robo-signing talks because she felt they were not offering sufficient remedies for the scope of the foreclosure crisis. The multistate group has taken several blows, including the departure of attorneys general from both liberal and conservative states and a federal settlement that critics said could undermine the AGs' talks. Harris and other more liberal AGs felt that the talks were an opportunity to discuss remedies that might curb foreclosures and the suffering they cause for both foreclosed borrowers and government agencies. Observers said the alliance between Harris and Nevada AG Catherine Cortez Mastro could further undermine those talks. However, they join AGs in several other states that have taken individual action, including New York and Massachusetts, which sued several lenders in early December for alleged irregularities in foreclosures.

The partnership between California and Nevada combines two neighboring states that were both hit hard in the foreclosure crisis. They are also both non-judicial foreclosure states, which means evidence of fraud will be less obvious than the fraudulent affidavits submitted in judicial foreclosure states. Their announcement said they will share litigation strategies, evidence and perhaps personnel between offices. Each has been busy on her own foreclosure investigations. In Nevada, Masto has widened an investigation of Lender Processing Services, a Florida foreclosure firm accused of robo-signing; Harris is also investigating the firm. Masto is suing Bank of America and its Countrywide division, accusing them of reneging on a settlement of an earlier predatory lending case, and Harris is investigating Bank of America, along with Citibank, Fannie Mae and Freddie Mac, for other reasons.

The Anaheim foreclosure defense attorneys at Howard Law, P.C., are pleased to see this partnership. California has major weight, as partner Vincent Howard has noted in earlier blog posts, because we have the most people of any state and a lot of economic importance. Adding Nevada to our independent investigations only adds more weight to any litigation that might eventually come out of the work, and Nevada is hard-hit in its own right. Unfortunately, we agree with Harris that the 50-state settlement talks were toothless; they dragged on for more than a year and were undermined from within and without. Given the actual criminal conduct at issue here -- and the grave effects on the lives and finances of ordinary borrowers -- our Pomona foreclosure defense lawyers do not feel it is unreasonable of the AGs to push for real penalties.

Continue reading "California and Nevada AGs Join Forces For Independent Investigation of Foreclosure Fraud" »

The Rancho Cucamonga foreclosure defense attorneys at Howard Law, P.C., have written many, many times about the use of shoddy paperwork during the foreclosure crisis. This includes the admitted use of "robo-signed" documents in foreclosures; foreclosing without proof of ownership; and failing to offer genuine assistance to homeowners who come to the lenders for help, even if that means violating the rules of the Home Affordable Modification Program. So we were pleased to see the Dec. 1 announcement that the state of Massachusetts has sued five major lenders and the Mortgage Electronic Registration System, the private company they use to buy and sell loans, for foreclosure fraud. Massachusetts Attorney General Martha Coakley said she took action after waiting for more than a year for a settlement with the major lenders in the "robo-signing" investigation, who she said demand too much immunity for their actions.

The complaint (PDF) accuses the lenders of foreclosing on some homes without any right to do so; using false documents in foreclosures; deceiving borrowers about their loan modification programs and practices, including foreclosures while in modification; and failing to comply with the Massachusetts law requiring property to be registered with government offices. That last allegation is a reference to MERS, which was created in the 1990s expressly to allow lenders to avoid using local land offices when they bought and sold mortgages. The foreclosure crisis has exposed many cases in which the chain of title between the original lender and the foreclosing lender is broken. In some cases, lenders have been accused of falsifying the required documents, such as assignments, in order to meet legal requirements for foreclosure. Some of the foreclosures that went through with these shoddy documents were illegal, the lawsuit alleged, citing many pages of examples.

The fourth allegation was that the banks were deceptive, though their servicing arms, in offering and implementing loan modifications. It noted that each bank defendant has claimed since the beginning of HAMP to be actively helping customers qualify for loan modifications. In reality, it said, the lenders have modified only a fraction of the eligible loans; and approved for a permanent modification less than half of those that did win a trial modification. In rejecting so many borrowers, the suit said, lenders frequently miscalculated borrowers' income by more than 5 percent, an error the commonwealth said was unacceptable "when the homeowner's ability to stay in their home hangs in the balance." They also lied to customers about the need to be delinquent before they would be considered, or the need to have a steady income, the complaint said. And some modifications were rejected after months of steady payments, it said, with foreclosure begun immediately. The commonwealth sought an injunction against the practices, a declaratory judgment forbidding the use of MERS and $5,000 for each foreclosure that violated the law.

As Garden Grove foreclosure defense lawyers, we applaud this lawsuit, which reflects many of the problems we've seen firsthand here at Howard Law, P.C. For example, at the height of media coverage of the foreclosure crisis, it was well known that lenders were incorrectly telling borrowers they had to go into default to be eligible for a HAMP loan modification. This is not just a delaying tactic; it hurts the borrower's credit and credibility in later loan modification or foreclosure defense proceedings. So do many of the other illegal practices around HAMP alleged in the lawsuit. Our lead Gardena foreclosure defense attorney, Vincent Howard, has handled numerous HAMP lawsuits accusing the banks of breaking HAMP rules in their eagerness to deny loan modifications to people who meet eligibility requirements. If Massachusetts prevails in this lawsuit, it could change national foreclosure practices for the better.

Continue reading "State of Massachusetts Sues Five Major Lenders With Allegations of Fraudulent Foreclosures" »

The Fontana foreclosure defense lawyers at Howard Law, P.C., represent a lot of clients who believe they were pushed around and mistreated by their lenders. While mortgage servicers and lenders have the same rights to legal remedies that everyone else has, some of the practices that have become widespread during the mortgage crisis cross the line into illegal or negligent behavior. Our lead attorney, Vincent Howard, has won many victories for clients who were foreclosed without a discussion of alternatives, for example, or issued a predatory loan to begin with. So we were interested to see a decision from the South Dakota Supreme Court about a bank's attorney who allegedly abused his position as a prosecutor to pressure an older woman into giving up title to her home. In Fix v. First State Bank of Roscoe, the court ultimately sent the case back for a new examination of a claim for intentional infliction of emotional distress.

Rita Fix sold her home to her son and daughter-in-law in 1997, but retained a life estate on the property. Two years later, the couple took out a farm loan from the Bank and borrowed against the home, which required Fix to sign a warranty deed to the couple. The Bank assured her in writing that she would retain possession even if the couple defaulted. In 2004, Fix filed for bankruptcy. In 2005, her son and daughter-in-law defaulted on their loan and conveyed the home to the Bank in lieu of foreclosure. The Bank sold the house and sought to remove Fix, despite its written promise. Fix sued the Bank in federal bankruptcy court, and the case eventually made its way to the Eighth Circuit, which ruled that Fix's trustee must bring each of her claims except the one for intentional infliction of emotional distress. She brought this in state court.

Meanwhile, the family was indicted in state court for a fraudulent scheme in which Fix's son sold grain in her name and had her send him the profits, in order to avoid having the income taken by the Bank to satisfy his debt. The son pleaded guilty, but the charges against Fix remained dormant despite her attorney's requests to proceed or dismiss. The county prosecutor on that case also represented the Bank civilly. He eventually approached Fix and offered to drop the charges if she would deed her house to the Bank. She modified her state-court lawsuit to include a claim for abuse of process against the prosecutor as well as the Bank, alleging they conspired to use the criminal case to resolve the dispute over the home's ownership. The prosecutor settled; the court dismissed the count for intentional infliction of emotional distress. The abuse of process count against the bank went to a jury, which found for Fix but awarded no damages.

On appeal, Fix argued that the trial court was incorrect to tell jurors she needed to suffer "extreme and disabling" emotional distress to recover for emotional distress from the abuse of process. The South Dakota Supreme Court agreed. The trial court incorrectly relied on a previous decision that was not a tort action like this one, it said. Indeed, that case said emotional damages were unavailable except in cases accompanied by an independent tort. For an intentional tort like abuse of process, the court said, South Dakotans may claim emotional distress damages without proving the heightened standard of "extreme and disabling" emotional distress. Because the jury received bad instructions, the high court reversed and remanded for a new trial. Fix had less luck with her other arguments, but the court also noted that any damages awarded on retrial, not just compensatory damages, should be reduced by the amount of the prosecutor's settlement.

As Aliso Viejo foreclosure defense attorneys, we're pleased to see penalties are again possible for what appears to have been an abuse by the bank and its attorney. Southern California's larger legal community makes this kind of case less likely in Orange County, but businesses and lawyers across the United States should be barred from abusing their power. At Howard Law, P.C., we very often work with mortgage borrowers who believe their lenders and loan servicers abused their power by railroading them into foreclosure. Often, these clients are facing a foreclosure after months of fruitless attempts to work with the lender on a loan modification, and sometimes after intentionally hurting their finances in order to qualify for help that never appeared. Our Perris foreclosure defense lawyers help clients hold these lenders responsible whenever they broke the law.

Continue reading "South Dakota Supreme Court Returns Case of Alleged Abuse by Bank Attorney to Trial - Fix v. First State Bank of Roscoe" »

The Moreno Valley foreclosure defense lawyers at Howard Law, P.C., wrote earlier this year about a case alleging fraudulent foreclosure documents, which seemed headed for the Florida Supreme Court. In Pino v. Bank of New York Mellon, Roman Pino alleged that the foreclosure documents used by BNY were fraudulent, then asked the court to sanction BNY for attempting to repeat a foreclosure it had already dismissed. The case made it to Florida's Fourth District Court of Appeal, which upheld the lower court's dismissal of Pino's motion. However, in an unusual move, the appeals court asked the Florida Supreme Court to review its ruling. The parties later settled and asked to dismiss the case, but the Florida Supreme Court declined, agreeing that the topic needs judicial resolution.

When BNY originally filed the foreclosure case, Pino objected because there was no document showing that the mortgage had been assigned to BNY. The bank amended its complaint to include an assignment, but this assignment had not been filed with the county and was dated just before the foreclosure was filed. Pino moved for sanctions for fraudulent documentation, and BNY voluntarily dismissed the case. Five months later, however, it re-filed the foreclosure. Pino responded by filing a new motion in the original foreclosure to vacate the dismissal for fraud on the court, then sanction BNY by dismissing its new foreclosure case. The trial court dismissed this, holding that it had no jurisdiction to decide because the case was voluntarily dismissed. The Fourth District agreed, but ruled that the underlying issue of potentially tainted foreclosure documents could affect numerous Florida foreclosures, and certified the case to the high court.

While that appeal was pending, Pino and BNY settled their case and filed a joint stipulated dismissal with the Florida Supreme Court. In the instant ruling, the court explained why it declined to dismiss the case. It started by noting that the Florida Rules of Appellate Procedure do not require courts to dismiss cases on request, but merely make it possible. Indeed, the court has recognized that when a case is of great public importance and likely to recur, it has discretion to keep the case alive. This case may be moot, the high court said, but the issue of whether BNY can face sanctions for a fraudulent assignment of mortgage after voluntary dismissal could affect many other foreclosures. In fact, the court said, it has implications outside mortgages and foreclosures as well. Thus, it disapproved the stipulation of dismissal and took the case. A dissent said parties should not be "dragooned" into spending resources briefing a case they have already settled, and that precedent cited by the majority is wrong.

At Howard Law, P.C., we are pleased to see the high court take up this case. Like California, Florida is one of the hardest hit states in the foreclosure crisis, and any decision on the merits of this issue could affect many people who are fighting pending foreclosure cases. Our lead Placentia foreclosure defense attorney, Vincent Howard, wrote earlier in 2011 about this case and its potential to give more foreclosures the close scrutiny they deserve. Here in southern California, the foreclosure process is not judicial, which means there's no court or judge to examine the validity of the paperwork unless the borrower takes the initiative to file a lawsuit. Often, it's only when a Murrieta foreclosure defense lawyer steps in that the lender realizes the borrower is serious about protecting the home.

Continue reading "Florida Supreme Court Denies Parties' Request to Dismiss Case of 'Great Public Importance' - Pino v. Bank of New York Mellon" »

The Rubidoux predatory lending attorneys at Howard Law, P.C., were interested to see a recent appeals court ruling allowing a relatively rare Truth in Lending Act lawsuit to go forward. In Marr v. Bank of America, Richard Marr of Wisconsin sued Bank of America for failing to give him the required number of notices of his right to rescind his 2007 refinance. Rather than send him both notices required under TILA, Marr alleges, the bank sent only one. After he sued in federal district court, the bank successfully moved for summary judgment to dismiss the case. But on appeal, the Seventh U.S. Circuit Court of Appeals ruled that there were enough genuine issues of material fact to survive summary judgment.

TILA requires the lender to provide clear and conspicuous notice of the borrower's right to cancel the transaction within three business days, and the federal Regulation Z requires two such notices. If the lender fails to comply, the right to rescind expands from three days to three years. Marr refinanced his home in 2007 in response to a cold call pitching the idea, thinking it would help pay off credit card bills. At the closing, he alleges that the title insurer gave him a series of documents to sign without giving him time to read them; one such document was an acknowledgement that he had received the two required TILA notices. Marr was given a folder full of the closing documents, which he promptly stored and did not touch for two years, when his attorney examined it for unrelated reasons. At that time, they discovered only one copy of the TILA notice. He sued for rescission. The district court granted summary judgment to Countrywide (BofA's predecessor) and the title company, finding that Marr's signature on the acknowledgement allowed the court to presume he had received both copies.

On appeal, the Seventh Circuit reversed this, finding that Marr's testimony that he received only one copy of the TILA notice was sufficient to rebut the presumption that he'd received both. To survive summary judgment, the court noted, parties must not prove their cases, but merely show admissible evidence that could support their cases. Thus, the question is whether Marr's testimony was enough to allow a reasonable jury to find he never received a TILA notice. The Seventh thought it was. The district court considered only Marr's attorney's testimony that he found only one copy, and Marr's own testimony that no one else could have disturbed the folder; it did not consider Marr's testimony that the closing practices were other than the title company claimed. Citing with approval the Third Circuit's recent ruling in Cappuccio v. Prime Capital Funding LLC, the Seventh ruled that Marr's testimony alone is enough to rebut the presumption for summary judgment purposes. Thus, it reversed and remanded the case.

As Westminster predatory lending lawyers, we're pleased to see that Marr will have the chance to prove his case. Though a jury may ultimately find his testimony is not credible, the ruling allows a jury of his peers to make that decision. As the Seventh noted, this case can be boiled down to whether Marr remembers correctly that the title agent did not review all of the documents Marr signed. Long Beach predatory lending attorney Vincent Howard believes that human beings tend to cut corners, especially when they have done the same job over and over again for many years and don't need to think about which steps to take. That's why we carefully review all of our TILA cases to ensure that Regulation Z was followed.

Continue reading "Seventh Circuit Allows Survival of Homeowners TILA Lawsuit Alleging Faulty Notice - Marr v. Bank of America" »

Our Rubidoux foreclosure defense attorneys were interested to see yet another challenge to a bank's right to foreclose reach the federal appeals courts. In Stein v. Chase Home Finance, Minnesotan Kenath Stein challenged the right of Chase to foreclose, arguing that it did not have both the note and the mortgage for the home in its possession when it started the foreclosure. Stein also challenged the validity of a redemption of the home by a junior lienholder, National City Bank. After removal to federal court, the two lenders successfully moved to dismiss, finding both actions valid. Stein appealed to the Eighth U.S. Circuit Court of Appeals, but it upheld the district court.

Stein refinanced in October 2006 with a $484,000 loan from Chase, and took out a second loan from National City in January of 2007. Unfortunately, he started missing payments in March of 2008 and could never cure the default entirely. Chase notified him in September of that year that it would start foreclosure proceedings; a few weeks later, Chase Bank assigned the mortgage to its Chase Home Finance arm. Chase later sold the home to itself at the foreclosure sale, and National City exercised its right to redeem the property by buying it within six months. Stein then filed a pro se lawsuit in state court, arguing that Chase did not have the right to foreclose because it needed to possess both the note and the mortgage when initiating foreclosure. The banks removed the case to federal court, which granted summary judgment, finding Chase Bank had validly assigned its home finance arm both the note and the mortgage. Stein appealed, with an attorney.

On appeal, Stein argued that there were genuine issues of material fact as to whether it did have the note when it started the foreclosure, making summary judgment inappropriate. The Eighth Circuit disagreed. The Minnesota Supreme Court made a relevant decision with 2009's Jackson v. Mortgage Electronic Registration Systems, where it ultimately found that an assignment of a promissory note need not be recorded before a foreclosure by advertisement may take place. In its analysis, the Minnesota Supreme Court found that a party may hold the mortgage without any interest in the note; the right to foreclose lies with the legal holder of the mortgage, not a note-holder with an equitable interest. Thus, because the mortgage was assigned to Chase 11 days after the foreclosure notice, the foreclosure was valid. In any case, the Eighth noted, the assignment expressly included the note, so Stein's argument fails. It affirmed the district court.

As Placentia foreclosure defense lawyers, we would be interested to know how Stein's case may have come out if he had had an attorney. In particular, we suspect the banks moved the case to federal court because Stein was representing himself, and federal court is generally considered a more difficult forum for doing this. It may be true that Stein was mistaken about the need for both a note and a mortgage, but we also notice that the court didn't address the issue of when exactly those documents must be in the foreclosing institution's possession. Our Carson foreclosure defense attorneys have seen cases in which this mattered a great deal, because the lender made the necessary assignments to comply with state law only after the foreclosure was started. This issue is worth looking into for any homeowner who suspects the foreclosure did not respect state law.

Continue reading "Minnesota Law Does Not Require Foreclosing Bank to Hold Note and Mortgage - Stein v. Chase Home Finance" »

As San Bernardino foreclosure defense attorneys, we read a lot in the early days of the mortgage crisis about contributions to the bubble from mortgage professionals. In the days when mortgage lending was easy, some observers say, banks made credit far too easy to obtain and pressured prices upward, knowing they would quickly securitize the loans and face no risk. Sometimes, the appraiser responsible for ensuring the home's price was fair would be corrupt or pressured by other players to appraise the home at a higher value than it actually possessed. This kind of appraisal fraud allegation is behind the New York Court of Appeals decision in People v. First American Corp., a lawsuit brought in 2007 by then-Attorney General Andrew Cuomo of New York, now the state's governor. In this ruling, the court allowed the suit to proceed.

Cuomo alleged that First American's appraisal subsidiary, eAppraiseIt, engaged in repeated fraudulent and deceptive acts in the course of its business. Washington Mutual, a bank now owned by Chase, hired eAppraiseIt in 2006 and quickly became the appraisal firm's biggest client, providing about 30 percent of its business in the state of New York. While eAppraiseIt was supposed to remove a conflict of interests for WaMu by doing independent appraisals, the lawsuit charges that WaMu began to pressure eAppraiseIt to make the appraised values of homes higher, without apparent justification. This was "to allow the loans to proceed to closing," but of course also inflated the value of the loans the home buyers took out from WaMu. eAppraiseIt's management was aware of the pressure and at first resisted, but eventually bowed and allowed WaMu to completely control eAppraiseIt's appraisal panel, in violation of professional ethics laws. After Cuomo sued in 2007, First American tried unsuccessfully to move the case to federal court and then to have it dismissed, arguing that it was preempted by several federal laws. The Appellate Division affirmed the ruling denying a dismissal.

First American appealed to the New York Appeals Court, the highest court in the state. It had no better luck there. It argued that the federal Home Owners' Loan Act and Financial Institutions Reform, Recovery and Enforcement Act occupied the entire regulatory field for real estate appraisals, and also that the state of New York's lawsuit impermissibly attempted regulation that impeded WaMu's ability to finance real estate transactions. In its analysis, the high court said this case is about implied or field preemption, in which federal law is so pervasive that it leaves no room for state laws. The court disagreed with First American that this was the case for HOLA and FIRREA. HOLA created a board that was the precursor to the Office of Thrift Supervision; FIRREA created the OTS. The laws regulate federal savings & loan institutions, and FIRREA established uniform national real estate appraisal standards. FIRREA expressly permits state regulation, the court said, through state appraisal licensing. Furthermore, the lawsuit only indirectly affects the activities of any federal savings association. The high court upheld the previous rulings and allowed the case to go forward.

Our Santa Ana foreclosure defense lawyers are pleased to see this case stay alive. Though the defendants have apparently succeeded in fighting them for four years without reaching the merits, the allegations involved are quite damning for WaMu and possibly its new parent, Chase. Inflating appraisals takes advantage of home buyers who cannot have the same skills and knowledge as the appraiser (except in rare cases) and thus have no idea whether the appraisal is accurate. This is why appraiser independence is so important. After an inflated appraisal, home buyers are essentially cheated out of the difference between the true value and the inflated amount they borrow, locked into extra interest. As Los Angeles County foreclosure defense attorneys, we suspect this kind of wrongdoing, a form of predatory lending, was more pervasive during the real estate bubble than lenders would like us to believe.

Continue reading "New York High Court Allows Lawsuit Alleging Appraisal Company Inflated Home Prices - People v. First American Corp." »

Our Moreno Valley foreclosure defense lawyers have written many, many posts recently about the negative consequences of the poor communications and sloppy work at major lenders. Occasionally, these mistakes come back to haunt the banks, as in one case that resulted in court sanctions -- but usually, they hurt the borrower the most. That was the case in Johnson v. Wells Fargo Home Mortgage, a Ninth U.S. Circuit Court of Appeals decision in which Wes Johnson claims Wells Fargo's mistake ruined his business of buying, upgrading and re-selling homes. Johnson's on-time payment was misapplied, and the bank failed to correct the problem before his credit was destroyed and left Johnson unable to get more home loans. As a result, Johnson sued and the case eventually went to arbitration, and a dispute arose over the disposition of that award.

Johnson had purchased 200 to 300 homes across the United States since the 1970s, and was in the business of refurbishing, renting and selling them. The homes were purchased with risky subprime mortgages, which means the quality of his credit mattered. In 2004, Johnson's wife sent payments on two mortgages, both for homes located in Oregon, but made a mistake that led Wells Fargo to apply both payments to the same mortgage. This led it to report a delinquency on the other mortgage, and this kicked off a long series of phone calls and letters from Johnson attempting to straighten the problem out. The arbitrator noted that Wells Fargo has multiple teams to deal with these issues, none of whom communicate well with one another. In the end, Wells Fargo admitted its mistake, but only after reporting the late payment and starting foreclosure proceedings on both homes. Johnson sold both homes ahead of the foreclosure, but was unable to get any new loans as a result of the negative reports. This, he said, effectively put him out of business.

Johnson sued for negligence and violations of the Fair Credit Reporting Act, the Fair Debt Collection Practices Act and the Real Estate Settlement Procedures Act. The district court eventually dismissed all claims by the FCRA claims and sent the case to arbitration, in an order giving the parties "appeal rights." The arbitrator found for Johnson on about half of his FCRA claims. Wells Fargo tried twice to move to vacate, modify or amend the award, but the district court rebuked it, explaining that the appeal rights meant Wells Fargo had the right to appeal to the Ninth Circuit. Wells Fargo appealed the procedure behind this ruling; Johnson appealed the dismissal of his negligence and RESPA claims.

On appeal, the Ninth Circuit found that the issue was not properly before it. The appeals courts have the power to review only adoption or vacation of arbitration awards, it said -- there's no jurisdiction over the underlying arbitration awards. The parties' agreement to arbitrate defaults to the Federal Arbitration Act, which gives only federal district courts the authority to review awards. The bank's arguments to the contrary were dismissed as "inventive." For similar reasons, the Ninth did not take up Wells Fargo's argument that the standard of review should go beyond the FAA; nothing in the record suggests this, it said. However, the court was no kinder to Johnson in his cross-appeals of the dismissal of his RESPA and negligence claims. RESPA does not apply to loans taken out for business purposes, it noted; Johnson's arguments to the contrary were not persuasive. Finally, it affirmed the district court's ruling that Oregon tort law bars some of Johnson's negligence claim -- but reversed the district court's decision that the FCRA barred another part, finding that the court misread FDCPA claims as FCRA claims.

This case is long, but it could have important effects on our work as Newport Beach foreclosure defense attorneys. The Ninth Circuit has made it clear in this ruling that it won't directly review arbitration awards, which should clarify things for lower courts that either order arbitration or are asked to affirm privately ordered arbitration. Unfortunately, Johnson was not able to collect on all of his claims, although the opinion does note that he collected on the FCRA claims, which pertain to the egregious credit reporting violations. However, it's pleasing to our Whittier foreclosure defense lawyers that some of Johnson's claims were only unavailable because he was a real estate investor. An ordinary homeowner in the same position would likely be able to prevail on RESPA and FDCPA claims. Given the poor records of major lenders, this right may be needed.

Continue reading "Home Refurbisher Claims Wells Fargo Ruined His Business by Misstating His Credit - Johnson v. Wells Fargo Mortgage" »