WHERE ARE WE NOW AND
WHERE ARE WE GOING?
Roundtable Session 5
Tuesday, July 21, 2015 – 4:15-5:15 P.M.
Regency Ballroom EB
SESSION SPEAKERS
Joseph A. Camillo, Jr., Esq.
Managing Partner – Default Servicing
Shechtman Halperin Savage, LLP
Moderator
Email jcamillo@shslawfirm.com
Natalie Grigg, Esq., Partner
Woods Oviatt Gilman, LLP
Panel
Email ngrig@woodsoviatt.com
Michael P. Robinson, Esq.
Partner
Shechtman Halperin Savage, LLP
Panel
Email mrobinson@shslawfirm.com
James McPherson, Esq.
Litigation Supervisor
Central Mortgage Company
Panel
Email jmcpherson@arvest.com
QUESTIONS FOR THE PANELISTS?
You can submit them by:
• Texting 66396 and your question to 22333
• Ask questions or make comments verbally by using the microphones
provided in the session room
POLLING QUESTIONS
POLLING QUESTIONS
POLLING QUESTIONS
MERS/STANDING
Bank of America, N.A. v. Greenleaf
2014 ME 89, 96 A.3d 700.
•
Court decision to separate the mortgage from the note for the purpose of analyzing
standing to foreclose departs from established Maine law (that the beneficial interest in a
mortgage follows, and is not separated from, the note it secures when the note is
transferred).
•
The court validated an older argument that the only power MERS is given through the
mortgage documents is to record the mortgage as nominee for the lender. It is only the
original lender that is the true mortgagee with the actual rights to assign the mortgage and
an assignment from that entity is required. Because the assignment of mortgage in the
case at bar was from MERS, the court concluded it had no effect and the bank lacked
standing to foreclose. It is unclear at this time what the proper mechanism will be to
correct MERS assignments for pending cases and cases that have gone to sale.
Questions for the panelists? Text 66396 and your question to 22333
In re Montieth in Nevada (Case 11-27788)
•
Certified a question to the NV Sup Court (SC Case 62745) about whether a post-petition
assignment from MERS to Lender is void, and the Lender loses its status as a secured
creditor because it did not have an interest in the property prior to the petition. Nevada
requires unification of note and mortgage prior to foreclosure proceedings (Edelstein v.
Bank of New York Mellon, 286 P.3d 249 (Nev. 2012)), and bankruptcy court needs to know
if the recording of an assignment after a bankruptcy petition should be barred, and thus
the secured right of a mortgage creditor denied due to the lack of unity at the time of the
petition. Oral arguments were 10/6/14, but no decision yet.
Questions for the panelists? Text 66396 and your question to 22333
MEDIATION
LITIGATION
ELIGIBILITY
•
Does a lender’s election to mediate with a borrower who is otherwise not eligible open the door to unnecessary
exposure ?
Eligibility:
•
1-4 Family residential property
•
Primary residence
•
Owner Occupied
Bad Faith:
•
Claiming that a homeowner’s documents were never received when in fact they were received many times;
•
Repeatedly requesting new documentation due to staleness
•
Claiming an investor restriction on modification when none exists.
•
Failure of representative to have authority to settle claims, including authority to approve or deny requests for a loan
modification.
•
Failure to follow HAMP guidelines
•
Failing to give a permanent modification after trial payment plan is successfully completed.
•
Delays in responding to, or providing decisions on modifications , deed-in-lieu or other loss mitigation.
•
Failure to appear at a mediation
•
Failure to have real time access to mortgagor account and/or ability to perform HAMP “net present
value” calculations
Questions for the panelists? Text 66396 and your question to 22333
NONCOMPLIANCE = SANCTIONS
• Tolling/forgiveness of accrual of interest and fees: Whereby the accrual of
same is prohibited for a period of time in the past or until a specific action is
taken by the servicer.
• Monetary sanctions: Court ordering bank to pay attorneys fees and costs as
well a punitive damages; lost wages and travel expenses.
• Court orders to execute a loan modification agreement
• Orders directing the servicer’s representative with full settlement authority to
appear.
• Dismissal of the foreclosure action: Could be with or without prejudice.
• Combination of any of the above
Questions for the panelists? Text 66396 and your question to 22333
RULE 408: PROTECTION OF MEDIATION PROCEEDINGS
•
Does Evid. Rule 408 prevent a party from disclosing or introducing general facts of
the mediation to establish or defend an allegations of bad faith?
•
The best-known and most widely applied evidentiary rule as to confidentiality is the
rule of evidence 408 and its state counterparts.
•
Admissibility of evidence of statements made or discussions occurring during
foreclosure mediation is subject to Evid. 408 COMPROMISE AND OFFERS TO
COMPROMISE in various jurisdictions.
•
Some Jurisdictions provide that the process is confidential without defining any
protections, while others provide that evidence concerning mediation is inadmissible.
•
A recent trend we are starting to see is borrower claims that a servicer violated the
Rule and a significant set of ethical standards regarding confidentiality when general
facts from a mediation are referenced in a non-specific chronology recitation of what
transpired in order to defend allegations of bad faith and/or motion for sanctions
Questions for the panelists? Text 66396 and your question to 22333
MISCELLANEOUS ISSUES
•
Service Transfers: Pose a logistical break in continuity that can lead to sanctions.
•
Mediation Eligibility : If a borrower is not eligible for mediation or fails to cooperate
motion to have the mediation terminated.
•
HAMP: Understand HAMP guidelines and eligibility. Many mediators, judges and
borrower counsel have limited knowledge of loss mitigation programs and will
assume they all apply.
•
Lack of Knowledge: Some mediators are not extremely familiar with HAMP
guidelines, lender policies and the foreclosure process. This sometimes results
in the misapplication of the statute and HAMP guidelines.
•
Mediator Selection: If the jurisdiction allows for parties to select mediators, be proactive
and choose the mediator that has the best track record with resolving cases and
understanding HAMP.
•
Beware of Mediators acting as advocates for borrowers and their attorneys with
completing applications and getting documentation together.
Questions for the panelists? Text 66396 and your question to 22333
MISCELLANEOUS ISSUES
•
Be proactive before the first mediation to collect documentation. The first
mediation rarely accomplishes much as borrowers often have not submitted any
documentation
•
In most jurisdictions, Mediation fees of the lender are not recoverable from the
borrower.
•
There should be continuity with respect to bank representatives who attend
multiple mediations. One loan – One Rep.
Questions for the panelists? Text 66396 and your question to 22333
STATUTE OF
LIMITATIONS
STATUTE OF LIMITATIONS
•
What is the defining moment per state law that starts the running of the statute of limitations?
•
Acceleration – an affirmative act to call the entire amount due
• Optional acceleration vs. Mandatory acceleration
• Language in mortgage and demand letters vs commencement of action
•
Deacceleration must be an affirmative act by the lender
•
Tolling of the Statute of Limitations by bankruptcy filings or court orders
•
Renewal of the Statute of Limitations
•
Reputational risks to be considered when moving files
•
What to do with Vacant and Abandoned properties
Questions for the panelists? Text 66396 and your question to 22333
EFFECT OF
DISMISSAL WITH
PREJUDICE
EFFECT OF DISMISSAL WITH PREJUDICE
•
Legal Prejudice is “the impairment of ‘some legal interest, some legal claim, [or] some legal
argument.’” Staten Island Terminal, LLC v. Elberg, 2012 U.S. Dist. LEXIS 72147 (E.D.N.Y.
2012).
•
Dismissal with prejudice indicates an adjudication on the merits that bars a subsequent action
on the same claim
•
Res Judicata does not preclude a subsequent action based on a subsequent default.
•
Res Judicata does prevent an action based upon the same claim arising out of a transaction
or occurrence that was the subject matter of a previous action.
•
State laws setting forth two voluntary dismissals equate to a dismissal with prejudice
Questions for the panelists? Text 66396 and your question to 22333
TILA/RESPA
TILA/RESPA
Jesinoski v. Countrywide Home Loans, Inc., 135 S.Ct. 790 (2015).
– 3 year rescission is met by sending notice to servicer; no requirement to file suit
So far, several challenges to existing orders have been brought by debtors under FRCP 60 seeking
to overturn judgments on the heels of Jesinoski. So far no success. (In re Macklin, 2015 WL
1945160 (Bankr. E.D. Cal, April 8, 2015; In re Residential Capital, LLC, et al., 2015 WL 1598090
(Bankr. S.D.N.Y., April 9, 2015))
Response to a rescission letter within 20 days of receipt is mandatory if Lender disputes facts about
the transaction raised by Borrower.
What is the effect of a rescission letter that has been disputed in Bankruptcy court?
presented in Macklin but not addressed as Rule 60 issue not overcome.
Issue
TRID “Know Before You Owe” – Effective October 1st
Strict rules on fees that can be charged, when disclosures must be revised, areas with some
tolerance, areas with no tolerance. Ripe for litigation as lenders will have to immediately switch
systems on August 1st. CFPB enforcement actions; TILA private rights of action (statutory penalties
up to $4,000 and attorney fees).
Questions for the panelists? Text 66396 and your question to 22333
NOTICE OF ERROR/INFORMATION REQUESTS
•
“Notice of error” doesn’t need to be specific if complaint gives enough information to
find the error. (Guccione v. JPMorgan Chase Bank, 2015 WL 1968114 (N.D. Cal. SF
Div., May 1, 2015).
•
Borrower who has to jump through hoops to get desired MOD, but ultimately gets the
correct MOD isn’t entitled to damages. Nunez v. J.P. Morgan Chase Bank, 2015 WL
1638242 (M.D. Fla, Orlando Div., April 13, 2015 – appeal pending)
•
Failure to comply with RESPA without damages plead will not survive MSJ. Yanes v.
Ocwen Loan Servicing, LLC, --- F. Supp ---, 2015 WL 968108 (E.D.N.Y., March 6,
2015). Description of whether correspondence was in fact a notice of error must be
plead in non-conclusory terms, with specificity as to when and how correspondence
was sent. Miller v. HSBC Bank, U.S.A., N.A., 2015 WL 58589 (S.D.N.Y., February
11, 2015)
•
Response to notice of error doesn’t have to give the resolution desired by the
borrower as long as it describes the Lender’s reasoning for taking the action it did.
Renfroe v. Nationstar Mortg., LLC, 2015 WL 541495 (S.D. Ala., February 10, 2015).
Questions for the panelists? Text 66396 and your question to 22333
STRICT
VS.
SUBSTANTIAL
COMPLIANCE
“Strict” vs. “Substantial” Compliance with Pre-foreclosure Mortgage Provisions
•
Paragraph 22 of Fannie Mae/Freddie Mac uniform Massachusetts (non-judicial) mortgage
instrument:
22. Acceleration; Remedies. Lender shall give notice to Borrower prior to acceleration
following Borrower’s breach of any covenant or agreement in this Security Instrument . . .The
notice shall specify: (a) the default; (b) the action required to cure the default; (c) a date, not
less than 30 days from the date the notice is given to Borrower, by which the default must be
cured; and (d) that failure to cure the default on or before the date specified in the notice may
result in acceleration of the sums secured by this Security Instrument and sale of the Property.
The notice shall further inform Borrower of the right to reinstate after acceleration and the
right to bring a court action to assert the non-existence of a default or of any other
defense of Borrower to acceleration and sale. If the default is not cured on or before the
date specified in the notice, Lender at its option may require immediate payment in full of all
sums secured by this Security Instrument without further demand and may invoke the
STATUTORY POWER OF SALE and any other remedies permitted by Applicable Law…
http://www.freddiemac.com/uniform/doc/3022-MassachusettsMortgage.doc
Questions for the panelists? Text 66396 and your question to 22333
Massachusetts Statutory Power of
Sale/Notice of Default and Right to Cure
•
M.G.L. Ch. 183 §21. Statutory Power of Sale in Mortgage. But upon any default in the
performance or observance of the foregoing or other condition, the mortgagee . . . may
sell the mortgaged premises . . .by public auction . . .first complying with the terms of
the mortgage and with the statutes relating to the foreclosure of mortgages by the
exercise of a power of sale . . .
•
U.S. Bank Nat’l Ass’n v. Ibanez, 458 Mass. 637, 646 (2011)(“Recognizing the substantial
power that the statutory scheme affords to a mortgage holder to foreclose without
immediate judicial oversight, we adhere to the familiar rule that one who sells under a
power [of sale] must follow strictly its terms. If he fails to do so there is no valid execution
of the power, and the sale is wholly void.’”)(internal quotations omitted).
•
U.S. Bank Nat’l Ass’n v. Schumacher, 467 Mass. 421, 431 (2014) (statute requiring notice
of default and right to cure prior to acceleration is designed to give a mortgagor “a fair
opportunity to cure a default before the debt is accelerated and before the foreclosure
process is commenced through invocation of the power of sale,” and therefore is not a
statute relating to the foreclosure of mortgages by the exercise of a power of sale.)
Questions for the panelists? Text 66396 and your question to 22333
Rhode Island
•
In re Demers, 511 B.R. 233 (2014) (loan Servicer not entitled to recover fees and costs
associated with initiation of foreclosure proceedings based on failure to provide notice required
by the mortgage. “The notice requirement of [mortgage] Paragraph 22 was a condition
precedent to acceleration and foreclosure.”)
Ohio
•
Flagstar Bank, FSB v. Cintron, 984 N.E.2d 398 (Ct. of Appeals OH 2012) (rejecting borrowers’
“hyper-technical” claim that pre-foreclosure notices were insufficient because they did not use
the precise words in the mortgage instrument).
Florida
•
Samaroo v. Wells Fargo Bank, 137 So.3d 1127 (Ct. of App. Fla, 5 th Dist. 2014) (rejecting
mortgagee’s argument that it substantially complied with the provisions of paragraph 22 of the
mortgage. The Bank’s “own mortgage specified the important information that it was bound to
give its borrower in default, and it simply failed to do so.”). See also, Kurian v. Wells Fargo
Bank, N.A., 114 So.3d 1052 (Ct. of App. Fla, 4 th Dist. 2013); Judy v. MSMC Venture, LLC, 100
So.3d 1287 (Ct. of App. Fla., 2 nd Dist. 2012); But see, Vasilevsky v. Wachovia Bank, N.A., 2015
Fla. App. LEXIS 7710 (Ct. of App. Fla., 5 th Dist. 2015) (“Although Appellee breached the
contractual provision that required a full thirty-day notice [of default and opportunity to cure], we
conclude that the breach of contract was not material because Appellants never attempted to
cure the default before, during or after suit was filed. . . Absent some prejudice, the breach of a
condition precedent does not constitute a defense to the enforcement of an otherwise valid
contract.”).
QUESTIONS AND
ANSWERS