Ben Carter - Foreclosure Continuing Legal Education
-
Upload
glenn-augenstein -
Category
Documents
-
view
218 -
download
0
Transcript of Ben Carter - Foreclosure Continuing Legal Education
-
8/13/2019 Ben Carter - Foreclosure Continuing Legal Education
1/48
1
FORECLOSURE:
ITS TIME TO OCCUPY THE
COURTHOUSE
CLE Credit: 1.0Wednesday, June 6, 2012
1:40 p.m. - 2:40 p.m.Combs-Chandler Room
Galt House HotelLouisville, Kentucky
-
8/13/2019 Ben Carter - Foreclosure Continuing Legal Education
2/48
2
A NOTE CONCERNING THE PROGRAM MATERIALS
The materials included in this Kentucky Bar Association Continuing LegalEducation handbook are intended to provide current and accurate informationabout the subject matter covered. No representation or warranty is made
concerning the application of the legal or other principles discussed by theinstructors to any specific fact situation, nor is any prediction made concerninghow any particular judge or jury will interpret or apply such principles. The properinterpretation or application of the principles discussed is a matter for theconsidered judgment of the individual legal practitioner. The faculty and staff ofthis Kentucky Bar Association CLE program disclaim liability therefore. Attorneysusing these materials, or information otherwise conveyed during the program, indealing with a specific legal matter have a duty to research original and currentsources of authority.
Printed by: Kanet Pol & Bridges7107 Shona Drive
Cincinnati, Ohio 45237
Kentucky Bar Association
-
8/13/2019 Ben Carter - Foreclosure Continuing Legal Education
3/48
3
TABLE OF CONTENTS
The Presenter .................................................................................................................... i
Timeline for a Foreclosure Proceeding ............................................................................. 1
Alternatives to Foreclosure Borrowers Copy ................................................................. 3
What is HAMP? ................................................................................................................. 5
HAMP Loan Modification Application ................................................................................ 9
Foreclosure Clinic Data Sheet ........................................................................................ 13
Securitization Diagram .................................................................................................... 15
Franklin County Rules of Court Rule 18: Foreclosure Mediation Program ................. 17
Foreclosure Defense ....................................................................................................... 23
-
8/13/2019 Ben Carter - Foreclosure Continuing Legal Education
4/48
4
-
8/13/2019 Ben Carter - Foreclosure Continuing Legal Education
5/48
i
THE PRESENTER
Ben W. CarterMorris & Player
1211 Herr Lane, Suite 205Louisville, Kentucky 40222
(502) 416-3430
BEN W. CARTER is an attorney with Morris & Player in Louisville. Prior to joining thefirm, Mr. Carter worked at Legal Aid Society and helped Jefferson County build aninnovative, county-wide response to its foreclosure crisis. For this work, the KentuckyBar Association recognized him as the Outstanding Young Lawyer of 2010. After
graduating from Davidson College in North Carolina in 2001 and the University ofKentucky College of Law in 2006, Mr. Carter clerked in the Franklin County Circuit Courtfor the Honorable Thomas Wingate. In 2007, he and his wife moved to the Republic ofPalau where he served as one of two Public Defenders for the small island nation. Uponreturn to their native Kentucky, they moved to Louisville and Mr. Carter began defendinghomeowners in foreclosure for the Legal Aid Society.
-
8/13/2019 Ben Carter - Foreclosure Continuing Legal Education
6/48
ii
-
8/13/2019 Ben Carter - Foreclosure Continuing Legal Education
7/48
1
Notice of DefaultDefault occurs as soon as you miss a payment. After default, yourbank sends you a notice of default, usually waiting until a paymentis at least 30 days late. Afterward, your bank sends notice that it isaccelerating the debt, which means that the entire sum that you
owe is now due.
Judgment & Order of SaleIf you do not respond to the complaint, yourbank will seek a default judgment. If you dorespond, you and/or your bank may ask the
judge for summary judgment. The judgemakes a final ruling, often based on therecommendation of the MasterCommissioner.
Complaint Is FiledYour bank files a complaint in Circuit Court.
The case is assigned to one of 13 divisions.You are served by the Sheriff or certified mailand have 20 days to respond to theComplaint. If you cannot be servedpersonally, a Warning Order Attorney isappointed. A hearing may be held if you filean Answer or respond to a motion forsummary judgment.
Pre-Foreclosure PhaseLenders refer loans to their foreclosureattorneys at 60-90 days past due.
Case Sent to Commissioners OfficeThis office conducts an appraisal, sets a sale
date, and gives notice of the sale.
Foreclosure AuctionA public auction (you can attend) is held at 514W. Liberty Street. The highest bidder wins andreceives the deed to the property uponpayment.
Redemption PeriodIf your home sells for less than 2/3 of itsappraised value, you have one year to buy itback for the price paid at auction plus interest at10%.
Timeline for a Foreclosure Proceeding
This Is When Legal Aid SocietyCan Take Cases
Legal Aid Society may not take a foreclosure
case before the complaint is filed or after thetime to file an Answer has passed.
Eviction & Cash for KeysThe new owner of the property asks the court fora writ of possession. Deputy sheriffs supervisethe setting-out of your things. In order to avoidthis hassle and expense, the new owner maypay you $500-$1,000 to move out voluntarily
and leave the house in good condition.
-
8/13/2019 Ben Carter - Foreclosure Continuing Legal Education
8/48
2
-
8/13/2019 Ben Carter - Foreclosure Continuing Legal Education
9/48
3
ALTERNATIVES TO FORECLOSUREBORROWERS COPY
Leave the Home
Option What Happens When it works best
Sale Sell your home and use the
proceeds to pay off the loan.
You owe less than the sale price
of the home.Deed in Lieu Give your bank the deed to the
home.You owe less than the fair marketvalue of the home and there areno junior liens on the home. Youlose your equity in the home butavoid the expenses offoreclosure.
Short Sale Sell your home for less than youowe.
You are under water, and youhave your banks permission to dothis.
Keep the Home
Option What Happens When it works best
ForbearanceAgreement
Your bank allows you to suspendpayments temporarily.
You cannot currently afford yourmonthly payments, but expect tobe able to afford them in thefuture.
LoanModification
You and your bank renegotiatethe terms of the loan, includingprincipal, interest rate andduration.
You can no longer afford yourmonthly payments because of, forexample, increased interest ratesor reduced income.
ReverseMortgage
You get a new mortgage, with nomonthly payment or with amonthly payment toyou, which ispaid off when you sell the homeor pass away.
You are sixty-two (62) or olderand have some equity in yourhome.
Chapter 13Bankruptcy
You file for bankruptcy protection. You have regular income and canafford monthly payments outsidebankruptcy and payments withinbankruptcy.
Chapter 7Bankruptcy
You file for bankruptcy protection. Your bank agrees to reaffirm thedebt outside of bankruptcy.
Reinstatement You pay missed payments plusany applicable late fees, legalfees and foreclosure fees.
You can afford it. This is often avery expensive option.
Refinance You find another bank to borrowmoney to pay back original bank.
You owe less than the house isworth, and have regular incomeand a good credit score.
-
8/13/2019 Ben Carter - Foreclosure Continuing Legal Education
10/48
4
Worst-Case Scenario: Cash for Keys
If your home is sold in a foreclosure auction and the buyer wants to avoid the expensesof eviction by the Sheriff, the buyer may pay you to move out and leave the home ingood condition.
-
8/13/2019 Ben Carter - Foreclosure Continuing Legal Education
11/48
5
WHAT IS HAMP?
HAMP is a voluntary, incentive-based plan that requires servicers to review their portfolioof loans for modification under a specific regime of changes to a loans interest-rate,
amortization period, and principle balance.
HAMP Handbook for Servicers: Google HAMP Handbook
The HAMP Three-Step
I. IS SERVICER PARTICIPATING?
A. Eighty-five Percent of All Loans Are Being Serviced by ParticipatingServicers
B. Full List of Participating Servicers at www.makinghomeaffordable.gov
C. Mandatory for All Fannie Mae and Freddie Mac Insured Loans, Even IfServicer Not Participating
D. For Non-GSE Loans, Servicers Choose Whether to Participate or Not
E. Similar HAMP Programs for VA and FHA Loans
F. Servicer Incentives
1. $1,000 for each completed modification.
2. $1,000/year for three years for sustained loan modification.
II. IS HOMEOWNER ELIGIBLE?
A. Has to Be a Homeowner (No Investment Property, No Rental Property)
B. One to Four Units
C. $729,450 Loan Cap (for One-Unit Homes)
D. Not Previously Modified under HAMP
E. Default or Imminent Risk of Default
1. Default caused by hardship.
2. Default is imminent due to hardship: loss of income, resetting rate,divorce, death, low cash reserves.
F. Current Payment of 31 Percent or More (PITIA)
-
8/13/2019 Ben Carter - Foreclosure Continuing Legal Education
12/48
6
III. DOES THE HOMEOWNER QUALIFY?
A. HAMP Application
1. Hardship affidavit.
2. Verified income.
3. 4506-T: Request for Transcript of Tax Return.
B. Net Present Value (NPV) Test: Is Our Investor Going to Lose MoreMoney Foreclosing or Modifying This Loan under HAMP?
1. How much money theyre going to lose in foreclosure.
Value of existing loan x probability of default
2. How much money theyre going to lose modifying the loan.
Value of modified loan (less revenue stream) x probabilityof re-default
3. Default model.
FICO score, MTM Loan-to-Value, Current delinquency, DTI
IV. HOW TO ADVISE AND REPRESENT HOMEOWNERS
A. What Homeowners Can Expect
1. Degradation.
2. Waterfall.
B. Things That Can and Probably Will Go Wrong
1. Servicers encourage current homeowners to miss payment inorder to qualify.
a. Equity, negligent/fraudulent misrepresentation, breach ofduty of good faith and fair dealing.
b. Default model based on current delinquency and FICOscore (both impacted by servicers actions).
2. Servicers dont modify an eligible and qualifying homeowner (theydo the NPV math wrong).
a. NPV test is not public.
i. Demand in discovery.
-
8/13/2019 Ben Carter - Foreclosure Continuing Legal Education
13/48
7
ii. FDIC Mod in a Box.
ii. Dodd-Frank requires disclosure of certain inputs.
b. Servicers who sign contracts must modify eligible andqualifying homeowners (and comply with existing laws, p.
12).
c. Marques v. Wells Fargo Home Mortgage, Inc., 2010 WL3212131 (S.D. Cal. Aug. 12, 2010): homeowner has rightto sue for failure to comply with HAMP requirements underthird-party beneficiary theory.
d. Equity prohibits a servicer from enjoying the extremeremedy of foreclosure while it is not complying with afederal program designed to preserve home ownership
3. Investor isnt participating.
a. HAMP doesnt override PSA, but HAMP is the usual andcustomary industry standards.
b. If investor forbids modification, servicer must requestwaiver.
c. MHA Handbook, p. 11: servicers are required to usereasonable efforts to get approval and provide a list ofnon-participating investors and to contact each in writing atleast once to encourage participation.
V. SERVICER DOES WHAT ITS SUPPOSED TO DO
-
8/13/2019 Ben Carter - Foreclosure Continuing Legal Education
14/48
-
8/13/2019 Ben Carter - Foreclosure Continuing Legal Education
15/48
I want to: Keep the Property Sell the Property
The property is my: Primary Residence Second Home Investment
The property is: Owner Occupied Renter Occupied Vacant
Borrowers name Co-borrowers name
E-mail address
Home phone number with area code Home phone number with area code
Cell or work number with area code Cell or work number with area code
Mailing address
Property address (if same as mailing address, just write same)
Social Security number Date of birth Social Security number Date of birth
Is the property listed for sale? Yes No
Have you received an offer on the property? Yes No
Date of offer _________ Amount of offer $_____________________
Agents Name: ___________________________________________
Agents Phone Number: ____________________________________
For Sale by Owner? Yes No
Have you contacted a credit-counseling agency for help Yes No
If yes, please complete the following:
Counselors Name: _________________________________________
Agency Name: ____________________________________________
Counselors Phone Number: __________________________________
Counselors E-mail: ________________________________________
Who pays the real estate tax bill on your property?
I do Lender does Paid by condo or HOA
Are the taxes current? Yes No
Condominium or HOA Fees Yes No $ __________________
Paid to:_________________________________________________
Who pays the hazard insurance premium for your property?
I do Lender does Paid by Condo or HOA
Is the policy current? Yes No
Name of Insurance Co.: ______________________________________
Insurance Co. Tel #: _________________________________________
Have you led for bankruptcy? Yes No If yes: Chapter 7 Chapter 13 Filing Date:_________________________
Has your bankruptcy been discharged? Yes No Bankruptcy case number_________________________________
page 1 of
Additional Liens/Mortgages or Judgments on this property:
Lien Holders Name/Servicer Balance Contact Number Loan Number
I (We) am/are requesting review under the Making Home Affordable program.I am having difficulty making my monthly payment because of nancial difficulties created by (check all that apply):
My household income has been reduced. For example: unemployment,
underemployment, reduced pay or hours, decline in business earnings,
death, disability or divorce of a borrower or co-borrower.
My monthly debt payments are excessive and I am overextended with
my creditors. Debt includes credit cards, home equity or other debt.
My expenses have increased. For example: monthly mortgage payment
reset, high medical or health care costs, uninsured losses, increased
utilities or property taxes.
My cash reserves, including all liquid assets, are insufficient to maintain
my current mortgage payment and cover basic living expenses at the
same time.
Other:
Explanation (continue on back of page 3 if necessary): __________________________________________________________________________
______________________________________________________________________________________________________________________
Loan I.D. Number____________________________________ Servicer ____________________________________
Making Home Affordable ProgramRequest For Modication and Affidavit (RMA)
HARDSHIP AFFIDAVIT
BORROWER CO-BORROWER
REQUEST FOR MODIFICATION AND AFFIDAVIT (RMA) page 1 COMPLETE ALL THREE PAGES OF THIS FORM
9
PrintF
-
8/13/2019 Ben Carter - Foreclosure Continuing Legal Education
16/48page 2 of
INCOME/EXPENSES FOR HOUSEHOLD1
Monthly Household Income
$
$
$
$
$
$
$
$
$$
$
$
$
$
$
$
$
$
$$
Child Support / Alimony /
Separation2
Social Security/SSDI
First Mortgage PaymentMonthly Gross Wages
Insurance
Property Taxes
Overtime Second Mortgage Payment
Other monthly income frompensions, annuities orretirement plans
Tips, commissions, bonusand self-employed income
Credit Cards / InstallmentLoan(s) (total minimumpayment per month)
Alimony, child supportpayments
Rents Received
Unemployment Income
Net Rental Expenses
HOA/Condo Fees/PropertyMaintenance
$
$
$
$
$
$
$
$
$
Checking Account(s)
Checking Account(s)
Savings/ Money Market
CDs
Stocks / Bonds
Other Cash on Hand
Other _____________
Other _____________
Do not include the value of life insurance orretirement plans when calculating assets (401pension funds, annuities, IRAs, Keogh plans, et
Other Real Estate(estimated value)
Food Stamps/Welfare Car Payments
Other ________________
_____________________
INCOME MUST BE DOCUMENTED
1Include combined income and expenses from the borrower and co-borrower (if any). If you include income and expenses from a household
member who is not a borrower, please specify using the back of this form if necessary.2You are not required to disclose Child Support, Alimony or Separation Maintenance income, unless you choose to have it considered by your servicer
$ $$ Total Debt/ Expenses Total AssetsTotal (Gross Income)
Other (investment income,royalties, interest, dividendsetc.)
Monthly Household Expenses/Debt Household Assets
Ethnicity:
Race:
Sex:
To be completed by interviewer
Interviewers Name (print or type) & ID Number
Interviewers Signature Date
Name/Address of Interviewers Employer
Interviewers Phone Number (include area code)
This request was taken by:
BORROWER
Ethnicity:
Race:
Sex:
CO-BORROWER
Hispanic or Latino
Not Hispanic or Latino
American Indian or Alaska Native
AsianBlack or African American
Native Hawaiian or Other Pacific Islander
White
I do not wish to furnish this information
Female
Male
Hispanic or Latino
Not Hispanic or Latino
American Indian or Alaska Native
AsianBlack or African American
Native Hawaiian or Other Pacific Islander
White
I do not wish to furnish this information
Female
Male
The following information is requested by the federal government in order to monitor compliance with federal statutes that prohibit discrimination in
housing. You are not required to furnish this information, but are encouraged to do so. The law provides that a lender or servicer may not
discriminate either on the basis of this information, or on whether you choose to furnish it. If you furnish the information, please provide both
ethnicity and race. For race, you may check more than one designation. If you do not furnish ethnicity, race, or sex, the lender or servicer is required to
note the information on the basis of visual observation or surname if you have made this request for a loan modification in person.If you do not wish
to furnish the information, please check the box below.
INFORMATION FOR GOVERNMENT MONITORING PURPOSES
Face-to-face interview
Mail
Telephone
Internet
REQUEST FOR MODIFICATION AND AFFIDAVIT (RMA) page 2 COMPLETE ALL THREE PAGES OF THIS FORM
Number of People in Household:
10
-
8/13/2019 Ben Carter - Foreclosure Continuing Legal Education
17/48
NOTICE TO BORROWERS
1. That all of the information in this document is truthful and the event(s) identified on page 1 is/are the reason that Ineed to request a modification of the terms of my mortgage loan, short sale or deed-in-lieu of foreclosure.
2. I understand that the Servicer, the U.S. Department of the Treasury, or their agents may investigate the accuracy of mystatements and may require me to provide supporting documentation. I also understand that knowingly submitting falsinformation may violate Federal law.
3. I understand the Servicer will pull a current credit report on all borrowers obligated on the Note.4. I understand that if I have intentionally defaulted on my existing mortgage, engaged in fraud or misrepresented any
fact(s) in connection with this document, the Servicer may cancel any Agreement under Making Home Affordable andmay pursue foreclosure on my home.
5. That: my property is owner-occupied; I intend to reside in this property for the next twelve months; I have not receiveda condemnation notice; and there has been no change in the ownership of the Property since I signed the documentsfor the mortgage that I want to modify.
6. I am willing to provide all requested documents and to respond to all Servicer questions in a timely manner.
7. I understand that the Servicer will use the information in this document to evaluate my eligibility for a loan modification or short sale or deed-in-lieu of foreclosure, but the Servicer is not obligated to offer me assistance based solely on
the statements in this document.
8. I am willing to commit to credit counseling if it is determined that my financial hardship is related to excessive debt.
9. I understand that the Servicer will collect and record personal information, including, but not limited to, my name,address, telephone number, social security number, credit score, income, payment history, government monitoringinformation, and information about account balances and activity. I understand and consent to the disclosure of mypersonal information and the terms of any Making Home Affordable Agreement by Servicer to (a) the U.S. Departmentof the Treasury, (b) Fannie Mae and Freddie Mac in connection with their responsibilities under the HomeownerAffordability and Stability Plan; (c) any investor, insurer, guarantor or servicer that owns, insures, guarantees or servicesmy first lien or subordinate lien (if applicable) mortgage loan(s); (d) companies that perform support services inconjunction with Making Home Affordable; and (e) any HUD-certified housing counselor.
If you have questions about the program that your servicer cannot answer or need further counseling,you can call the Homeowners HOPE Hotline at 1-888-995-HOPE (4673). The Hotline can help with questions about
ACKNOWLEDGEMENT AND AGREEMENT
Be advised that by signing this document you understand that any documents and information you submit to your servicer in connection with the MakingHome Affordable Program are under penalty of perjury. Any misstatement of material fact made in the completion of these documents including but notlimited to misstatement regarding your occupancy in your home, hardship circumstances, and/or income, expenses, or assets will subject you to potentiacriminal investigation and prosecution for the following crimes: perjury, false statements, mail fraud, and wire fraud. The information contained in thesedocuments is subject to examination and verification. Any potential misrepresentation will be referred to the appropriate lawenforcement authority for investigation and prosecution. By signing this document you cer tify, represent and agree that:Under penalty of perjury, all documents and information I have provided to Lender in connection with the Mak ing HomeAffordable Program, including the documents and information regarding my eligibility for the program, are true and correct.
If you are aware of fraud, waste, abuse, mismanagement or misrepresentations affiliated with the Troubled Asset Relief Program,please contact the SIGTARP Hotline by calling 1-877-SIG-2009 (toll-free), 202-622-4559 (fax), or www.sigtarp.gov. Mail can be sent
to Hotline Office of the Special Inspector General for Troubled Asset Relief Program, 1801 L St. NW, Washington, DC 20220.
HOMEOWNERS HOTLINE
Borrower Signature Date
Co-Borrower Signature Date
page 3
REQUEST FOR MODIFICATION AND AFFIDAVIT (RMA) page 3 COMPLETE ALL THREE PAGES OF THIS FORM
11
-
8/13/2019 Ben Carter - Foreclosure Continuing Legal Education
18/48
12
-
8/13/2019 Ben Carter - Foreclosure Continuing Legal Education
19/48
13
Foreclosure Clinic Data Sheet
Contact InformationName Case Number
Address KHC Case Number
Phone Servicer
Email Opposing Counsel
Selling the HomeFMV of Home Current Payment
Unpaid Balance Amount Behind
Loan Mod/ForbearanceCurrent Payment Monthly Income
Taxes & Insurance Other Income
Interest Rate Escrow: Income x .31
ARM Fixed Working with HPI UL N/A
Counselor
BankruptcyOther Debts Date Filed
Filed: Ch. 7 Ch 13 N/A Date Discharged
OtherDate of Loan Place Closed
Loan Purpose
-
8/13/2019 Ben Carter - Foreclosure Continuing Legal Education
20/48
14
Case Acceptance_____ LAS Eligible _____ Needs KHC entry
_____ Not LAS eligible because:
Not in foreclosure Does not want to remainin home
Not income eligible
Received complaint longago
Defenses outside LASpriorities
Next Steps_____ Work with HPI/UL_____ Go to a conciliation conference_____ Sell the home_____ Explore bankruptcy
_____ Hire an attorney_____ File a pro se answer_____ Get a reverse mortgage_____ Other:
Notes:
LAS Representative: _____________________________
Homeowner: _____________________________
Potential DefensesNote Unavailable Lack of Endorsement Servicing Abuses
Blank Endorsement Rescission Possibility Origination Abuses
-
8/13/2019 Ben Carter - Foreclosure Continuing Legal Education
21/48
RelatedDocuments
ReturnOnInvestment
Net
OfferingProceeds
MonthlyPayments
MonthlyDistributions
Certificates
Certificates
NetOfferingProceeds
OfferingProceeds
Certificates
RelatedDocuments
Lo
anPurchasePrice
CashtoFund
MortgageLoan
Consumer
MORTGAGOR/CONSUMER
May19,2005
A.FremontInvestment&Loan
ORIGINATOR
PROCESSESANDFUNDSINDIVIDUAL
LOANS
WellsFa
rgoBank,N.A.
MASTERSERVICER&CUSTODIAN
SERVICES
INDIVIDUALLOANS;
AGGREGATESCOLLECTIONS;PERFORMS
DUTIESUNDE
RTRUST'SPOOLING&
SERVIC
INGAGREEMENT
B.DBStructuredProducts,Inc.
SELLER
PURCHASESLOANSFROM
ORIGINATOR;FORMSPOOL
C.AceSecuritiesCorp.
DEPOSITOR
CREATESISSUINGENTITY
CUTOFFDATE:8/1/2005
D.ACESecuritiesCorp.HomeEquity
LoanTrust,Series2005-HE5
TRUSTFUND/ISSUINGENTITY
HOLDSPOOLOFLOANS;ISSUESCERTIFICATE
S
DeutscheBan
kSecuritiesInc.
UNDERWRITERS
SELLSCERTIFIC
ATESTOINVESTORS;
COLLECTSOFFERINGPROCEEDS
WellsFargoBank,N
.A.
SECURITIESADMINISTR
ATOR
PAYINGAGENTFORCERTIFICA
TEHOLDERS
Cede&Co.
(DTC)
MORTGAGEE/
CERTIFICATEHOLDERS
PURCHASEMORTG
AGEBACKED
SECURITIESASD
EFINEDIN
CERTIFIC
ATES
SEC
URITIZATIONDIAGRAM
ACESecuritiesCorp.
HomeEquityoanTrust,Series2
005-HE5
ARROW
LEGEND
Purple-MortgageDocuments
Blue
-SecuritiesCertificates
Orange-InvestorFunds
Green-BorrowerFunds
TruthInL
endingAudit&
RecoveryServices,L
LC
Copyright2009
TheMurrayhillCompany
CREDITRISKMANAGER
PROVIDESDELINQUENCY,DEFAULTAND
PREPAYMENTREPORTS&
RECOMMENDATIONSTOTHEDEPOSITO
R
HSBCBankUSA,NationalAssociation
TRUSTEE
REMITSCOMPLAINTS,CLAIMSANDNOTICESTO
SERVICERREGARDINGMORTGAGEDPROPERT
Y
Unknown
INTER
IMSERVICER
SERVICESINDIVIDUALLOANS;
AGGREGATESCOLLECTIONS;PERFORMS
DUTIESUND
ERTRUST'SPOOLING&
SERVICINGAGREEMENT
Unknown
SWAPCOUNTERPARTY
SeeSWAPAGREEMENT
HomelandMortgageCompany
MORTGAGEBROKER
RECEIVEDABROKER'SANDPROCESSING
FEEFROMLOANPROCEEDS
15
-
8/13/2019 Ben Carter - Foreclosure Continuing Legal Education
22/48
16
-
8/13/2019 Ben Carter - Foreclosure Continuing Legal Education
23/48
17
COMMONWEALTH OF KENTUCKY 48THJUDICIAL CIRCUITFRANKLIN COUNTY RULES OF COURT
RULE 18: FORECLOSURE MEDIATION PROGRAM
18.01 Definitions. As used in this Rule 18:
(a) Program means the Franklin County Foreclosure Diversion Program.
(b) Mediator means the person appointed as the Foreclosure Mediator forthe Program.
(c) Qualifying Foreclosure means an action seeking as a remedyforeclosure on owner-occupied residential property, or upon property thatwas owner-occupied following its purchase or construction by aDefendant.
(d) Court means the Franklin Circuit Court.
18.02 Appointment of Mediator. A regularly-practicing member of The Bar of the Courtshall be appointed by the Court Judges as the Mediator for the Program.
18.03 General Duties of Mediator. The Mediator shall conduct the Program and assistPlaintiffs and Defendants participating in the program. The Mediator shallconduct meetings between the parties, including mediation, and issue reportsand recommendations to the Court.
18.04 Automatic Stay. All proceedings in a Qualifying Foreclosure action shall be
stayed upon commencement of the action. No answer or motion shall berequired of any defendant subject to the automatic stay until the stay is dissolvedas to that defendant or the Court otherwise orders.
(a) As to each Defendant the automatic stay shall terminate without furtherorder of the Court upon the earlier of:
(1) That Defendants failure to contact the Mediator within 20 days ofservice of process upon that defendant and that Defendantsfailure to elect to participate in the Program;
(2) The filing and service by the Mediator of notice that after electing
to participate in the Program that Defendant has not participatedin the Program;
(3) The filing and service by the Mediator of notice that mediation ofthe claims against that Defendant has concluded.
(b) The automatic stay may be terminated as to any Defendant by order ofthe Court upon motion by Plaintiffs counsel to lift the stay.
-
8/13/2019 Ben Carter - Foreclosure Continuing Legal Education
24/48
18
(c) Upon termination of the automatic stay as to any Defendant, thatDefendant shall have 20 days to answer, move or take any other actionrequired or permitted under the Rules of Civil Procedure.
(d) Notwithstanding the termination of the automatic stay under this Rule 18,any Judge of the Court may order any foreclosure case to mediation.
18.05 Plaintiffs Duties Upon Filing Of The Complaint. Upon commencement of aQualifying Foreclosure Action the Plaintiff:
(a) Shall file with the Clerk of the Court and cause to be served with eachQualifying Foreclosure Complaint a Notice conspicuously printed oncolored paper containing the following:
(1) The Mediators contact information. The contact information maybe obtained by the Plaintiff from the Clerk of the Court.
(2) A statement that within 20 days of service of process each
Defendant may contact the Mediator by telephone, e-mail or in-person to request a mandatory Status Conference.
(3) A statement that a Defendants failure to contact the Mediatorwithin 20 days of service of process will result in dissolution of theautomatic stay as to that Defendant without further order of theCourt.
(b) Shall provide to the clerk and cause to be served with each QualifyingForeclosure Complaint the following forms:
(1) A Request for Modification Affidavit (RMA) in the form illustrated at
Appendix FM-1 to these rules;
(2) Dodd-Frank Certificate; and
(3) 4506T-EZ.
(c) Shall serve the Mediator with a copy of the Qualifying ForeclosureComplaint.
18.06 Information To Be Provided To Defendants. Upon contact by a Defendant theMediator shall provide the Defendant with information regarding the Program,including fees, and determine whether the Defendant elects to participate in the
Program.
18.07 Notice of Election. If a Defendant elects to participate in the Program theMediator shall file a Notice of Election with the Court identifying the electingDefendant and provide copies of the Notice to the Plaintiff and all Defendantsnamed in the Qualifying Foreclosure Complaint. Upon filing of a Notice ofElection in a Qualifying Foreclosure Proceeding, all papers required to be servedshall also be served on the Mediator until further Order of the Court.
-
8/13/2019 Ben Carter - Foreclosure Continuing Legal Education
25/48
-
8/13/2019 Ben Carter - Foreclosure Continuing Legal Education
26/48
20
18.10 Plaintiffs Obligations Upon Receipt of Hardship Packet. No later than 14 daysafter delivery by a Defendant of a Hardship Packet the Plaintiff shallacknowledge receipt of the Hardship Packet and serve on the submittingDefendant one of the following:
(a) A loan modification or trial payment plan offer; or
(b) A written notice describing the additional documents required by thePlaintiff to review of the loan for modification or other alternative toforeclosure; or
(c) A written statement denying a loan modification and a detailedexplanation of the reasons Defendant does not qualify for a loanmodification.
18.11 Loan Modification Application. Within thirty (30) days after service by aDefendant of a completed loan modification application, the Plaintiff must serveone of the following on the submitting Defendant:
(a) A written offer of trial or permanent loan modification; or
(b) A written denial of the application that articulates the reasons for Plaintiffsrefusal to modify the loan. The written denial must also explain why otheralternatives to foreclosure, including a deed-in-lieu of foreclosure, a shortsale, a repayment plan, or a forbearance agreement, are not appropriate.
18.12 Failure to Perform Mediation Agreement. A Plaintiff may request that theMediator recommend to the Court that a stay be terminated as to any Defendantwho fails to perform under any agreement reached through mediation. Uponsuch request, the Mediator may file a report with the Court recommending that
the stay be lifted. The Plaintiff may move the Court to terminate a stay withoutregard to the Mediators recommendation, or the necessity of seeking such arecommendation.
18.13 Mediators Fee. The Mediators fee of $300.00 is payable at or before theMandatory Status Conference.
(a) One-half of the fee ($150.00) shall be paid by the Plaintiff(s).
(b) One half of the fee ($150.00) shall be paid by those defendants who arealleged in the Complaint to be liable for the debt giving rise to theforeclosure proceeding.
(c) No additional Mediator fees will be assessed absent good cause (e.g.failure of a party to appear at a status conference or to have the requiredauthority.)
(d) Plaintiff may not charge the Defendants or the Defendants account the$150.00 fee payable by the Plaintiff.
-
8/13/2019 Ben Carter - Foreclosure Continuing Legal Education
27/48
21
(e) For good cause, the Court may adjust or reallocate the Mediators$300.00 fee based on the time and expense incurred in the mediation, thefailure a party to participate in good faith, a Defendants inability to paythe fee, or other equitable cause.
18.14 Modification or Waiver of Local Rule 18. This local rule governing the Program
may be waived or modified in a pending action only by Order of the Courtentered following hearing on a motion with notice to all parties and the Mediator.The Mediator may move to waive or modify the local rule governing the Program.
Any party to the action or the Mediator may make a motion to modify or waivethis local rule in that action.
18.15 Order of Sale. A motion for an Order of Sale must be accompanied by themoving partys certification that:
(a) The moving party complied with the requirements of Local Rule 18; and
(b) The Defendant(s) alleged in the Complaint to be liable for the debt giving
rise to the foreclosure proceeding elected not to participate in theProgram or the mediation was unsuccessful.
-
8/13/2019 Ben Carter - Foreclosure Continuing Legal Education
28/48
22
-
8/13/2019 Ben Carter - Foreclosure Continuing Legal Education
29/48
23
FORECLOSURE DEFENSE OUTLINEBen W. Carter
I. INTRODUCTION
A. How We Got Here
1. Subprime mortgage lending.
2. Opposing counsel.
In re Taylor, 407 B.R. 618 (Bankr. E.D. Pa. 2009): gives excellentbackground as to how opposing counsel interact with their clientthrough computer program; the role of Lender ProcessingSystems (sanctions reversed by 2010 WL 624909 (E.D.Pa. Feb18, 2010), and affd in part, reversed in part by 655 F.3d 274 (3 rd
Cir. 2011)).
B. The Stakes
C. What Every Lawyer (and Homeowner) Needs to Know about Foreclosure
1. Long process.
2. Many can afford and should hire an attorney.
3. Communicating with bank.
D. Empowering Homeowners: The Psychology and Rhetoric of Foreclosure
II. PART ONE: DEFENDING CLIENTS FROM FORECLOSURE IN COURT
A. UCC Standing
1. Real party in interest with standing to enforce the note.
a. As a practical matter, the foreclosing plaintiff must be thereal party in interest and have standing to pursue fore-closure. Technically, these are separate inquiries, thoughthey often get blended in court opinions and in the heat of
argument in our cases. I use the phrase real party ininterest with standing to enforce the note as an all-encompassing statement of what interests the Plaintiffmust prove it possesses in the case. I like to focus on therequirements of standing for two reasons: 1) the standardfor showing standing is higher, and 2) it can be raised atany time. Technically, a claim that a Plaintiff is not the realparty in interest should be brought in a motion to dismissprior to (or contemporaneously with) filing an answer.
-
8/13/2019 Ben Carter - Foreclosure Continuing Legal Education
30/48
24
Defendants can assert the Plaintiff lacks standing at anytime after discovery is over, for example. Which routeyou go is a matter of personal preference and the clientssituation.
b. Real Party in Interest (CR 17.01): Every action shall be
prosecuted in the name of the real party in interest.
i. Taylor v. Hurst, 216 S.W. 95 (Ky. 1919) (citationomitted). The real party in interest, within themeaning of the Code provision, is the party who willbe entitled to the benefits of the action upon asuccessful termination thereof; one who is actuallyand substantially interested in the subject-matter. ...Does he satisfy the call for the person who has theright to control and receive the fruits of thelitigation? In foreclosures, this is the party entitledto be paid from the foreclosure sale.
ii. In Kentucky, at minimum, real party in interest musthave a significant interest, Kentucky Center for the
Arts v. Whittenberg Engineering & ConstructionCompany, 746 S.W.2d 71, 73 (Ky. App. 1987).
a) Question is whether KCA is RPI.
b) Suing for breach of construction contract ofKCA in downtown Louisville.
c) Charged with supervising construction and
had statutory power to take, acquire andhold property.
d) KCA held no legal or equitable title toproperty, however, and had no contract withWhittenberg.
iii. If a party is not the real party in interest, the partylacks standing to prosecute the action. Bank ofNew York v. Stuart, 2007 WL 936706 (Ohio. App.Mar. 30, 2007). SeeState ex. Rel. Jones v. Suster,701 N.E.2d 1002, 1008 (Ohio 1998).
iv. However, the D must be prejudiced by a mid-suitshowing of RPI for SJ to be inappropriate. Stuart.
v. RPI claim must be by demurrer (motion todismiss). Thompson-Starret Co. v. Masons Admrs,201 S.W.2d 876 (Ky. 1947). If not, such claims arewaived. Johnson v. Ruby Lumber Co., 278 S.W.2d
-
8/13/2019 Ben Carter - Foreclosure Continuing Legal Education
31/48
25
71 (Ky. 1955) (note: standing can never bewaived).
c. See generally, Chris Markus, et. al., "From Main Street toWall Street: Mortgage Loan Securitization and NewChallenges Facing Foreclosure Plaintiffs in Kentucky," 36
N. Ky. L. Rev. 395. This article can be relied upon for ananalysis of the real party in interest problem for servicers,banks, and trustees of securitized trusts. It CANNOT berelied on for the ways in which foreclosing Plaintiffs mayprove their status as real party in interest with standing toforeclose.
2. Standing requirements.
a. Standing requires a judicially recognizable interest insubject matter. The interest may not be remote andspeculative, but must be a present and substantial interest
in the subject matter. City of Louisville v. Stockyards Bank& Trust Co., 843 S.W.2d 327, 328-329 (Ky. 1992)
b. Burden is on Plaintiff to prove standing to invoke thejurisdiction of the Court. J.N.R. v. OReilly, 264 S.W.3d 587(Ky. 2008), overruled on other grounds by J.A.S. v.Bushelman, 342 S.W.3d 850 (Ky. 2011).
c. Court can inquire sua sponte into parties standing (as itimpacts subject matter jurisdiction) at any time. KentuckyEmployers Mut. Ins. v. Coleman, 236 S.W.3d 9, 15 (Ky.2007).
d. Plaintiff must have standing at the time the suit is filed.
i. City of Louisville v. Stockyards Bank & Trust Co.,843 S.W.2d 327 (Ky. 1992).
ii. Bank of Commerce of Louisville v. Abell, 184S.W.2d 86, 89 (Ky. 1944). In order to determinethe time when a transferee becomes a holder indue course, it is necessary to look at the date whenthe endorsement is actually made as that is thetime negotiation takes effect for that purpose.
iii. Wells Fargo v. Jordan, 2009 WL 625560 (OhioApp. Mar. 12, 2009.).
iv. Wells Fargo Bank, N.A. v. Byrd, 897 N.E.2d 722(Ohio App. 2008); Plaintiff bank cannot get standinghalfway through the case through assignment ofmortgage, but dismissal with prejudice was a littlemuch; just dismiss without prejudice. Bank of New
-
8/13/2019 Ben Carter - Foreclosure Continuing Legal Education
32/48
26
York v. Gindele, 2010 WL 571981 (Ohio App. Feb.19, 2010) follows Byrd.
v. Citibank v. Carroll, 220 P.3d 1073, 1078 (Idaho2009). Because [Plaintiff] was the sole owner ofCarrolls account at the time it brought suit, it is
entitled to recovery on the funds on that account,and therefore, has standing to sue. Questions ofstanding must be decided by this Court beforereaching the merits of the case.
e. Judgments entered without Plaintiff having standing arevoid and subject to collateral attack.
f. Ripeness: Section 112(5) of the Kentucky Constitutionstates in relevant part that [t]he Circuit Court shall haveoriginal jurisdiction of all justiciable causes not vested insome other court. Questions that may never arise or are
purely advisory or hypothetical do not establish a justi-ciable controversy. Because an unripe claim is not just-iciable, the circuit court has not subject matter jurisdictionover it. It is well-established that the issue of subject matter
jurisdiction can be raised at any time, even sua sponte, asit cannot be acquired by waiver, consent, or estoppel.Buckley v. Kroger Co., 2007 WL 4210675 at *3 (Ky. App.Nov. 30, 2007).
g. Servicers standing to sue.
i. Green Tree Servicing, LLC v. Sanders, 2006 WL
2033668 (Ky. App. July 21, 2006): Servicer hasstanding to sue if agreement between it and holdergive it that authority.
ii. CWCapital Asset Management, LLC v. ChicagoProperties, LLC, 610 F.3d 497 (7th Cir. 2010).Provides support to Green Trees position thatservicer has standing to foreclose (but only afterinquiring into the PSA terms). Judge Posner gives agood background of the legal ramifications of theservicer/trustee relationship.
h. Trustees standing to sue.
Trustees standing depends on whether trustee possessescertain customary powers to hold, manage, and dispose ofassets for the benefit of others. Navarro Sav. Assn v. Lee,446 U.S. 458, 464 (1980).
3. Plaintiffs prima facie case.
-
8/13/2019 Ben Carter - Foreclosure Continuing Legal Education
33/48
27
a. Plaintiffs burden.
Here is the whole point of requiring the Plaintiff to prove itscase: it becomes essential to establish that the personwho demands payment of a negotiable note, or to whompayment is made, is the duly qualified holder. Otherwise,
the obligor is exposed to the risk of double payment, or atleast to the expense of litigation incurred to preventduplicative satisfaction of the instrument. These risksprovide makers with a recognizable interest in demandingproof of the chain of title. HSBC v. Thompson, 2010 WL3451130 at *11 (Ohio App. Sep. 3, 2010).
b. According to 6 Hawklands Uniform Commercial CodeSeries 308:3 (Rev. 2009). (Also, theres the test inGeiselman v. Cramer Financial Group, Inc., 965 S.W.2d532 (Tex. App. 1997)).
i. Establish the effectiveness of the obligors signa-ture.
ii. Produce the instrument.
KRS 355.3-308(2) states, If the validity of signa-tures is admitted or proved and there is compliancewith subsection (1) of this section, a plaintiffproducing the instrument is entitled to payment ifthe plaintiff proves entitlement to enforce the instru-ment under KRS 355.3-301, unless the defendantproves a defense or claim in recoupment. If a
defense or claim in recoupment is proved, the rightto payment of the plaintiff is subject to the defenseor claim, except to the extent the plaintiff provesthat the plaintiff has rights of a holder in due coursewhich are not subject to the defense or claim.
iii. Prove that he is a person entitled to enforce theinstrument.
Three ways to be PETE under 355.3-301: Personentitled to enforce an instrument means: (1) Theholder of the instrument; (2) A nonholder in posses-
sion of the instrument who has the rights of aholder; or (3) A person not in possession of theinstrument who is entitled to enforce the instrumentpursuant to KRS 355.3-309 or KRS 355.3-418(4). Aperson may be a person entitled to enforce theinstrument even though the person is not the ownerof the instrument or is in wrongful possession of theinstrument.
-
8/13/2019 Ben Carter - Foreclosure Continuing Legal Education
34/48
28
a) (1) Negotiation 3-201: (1) Negotiationmeans a transfer of possession, whethervoluntary or involuntary, of an instrument bya person other than the issuer to a personwho thereby becomes its holder. (2) Exceptfor negotiation by a remitter, if an instrument
is payable to an identified person, negoti-ation requires transfer of possession of theinstrument and its indorsement by theholder. If an instrument is payable to bearer,it may be negotiated by transfer of posses-sion alone.
i) The instrument sued on is payableto order and can be negotiated onlyby the endorsement of the Bank ofCommerce and completed by deliv-ery. Bank of Commerce of Louisville
v. Abell, 184 S.W.2d 86, 89 (Ky.1944).
ii) Harponola Co. v. Conklin, 266 S.W.626 (Ky. 1924). This case from theold Court of Appeals stands for afew important propositions. First, it isthe Plaintiffs burden to prove theelements of negotiation. Second,mere possession of a note payableto the order of another is subject to amotion to dismiss.
iii) Transfer of possession.
a. The transfer of possessionrequires the physical deliveryof the note for the purposeof giving the person receivingdelivery the right to enforcethe instrument. In re Wells,407 B.R. 873 (Bkrtcy. N.D.Ohio 2009).
b. Banks physical possessionof note (and date of indorse-ment) is a genuine issue ofmaterial fact that precludessummary judgment. In reKoontz, 2010 WL 5625883(Bankr. N.D. Ind. Sep. 30,2010).
-
8/13/2019 Ben Carter - Foreclosure Continuing Legal Education
35/48
29
iv) Indorsement by the holder.
a. Blank indorsements.
b. KRS 355-109: (1) A promiseor order is payable to bearer
if it: (a) States that it is pay-able to bearer or to the orderof bearer or otherwise indi-cates that the person inpossession of the promise ororder is entitled to payment;(b) Does not state a payee;or (c) States that it is payableto or to the order of cash orotherwise indicates that it isnot payable to an identifiedperson.
b) (2) Transfer 355-3.203: (1) An instrument istransferred when it is delivered by a personother than its issuer for the purpose ofgiving to the person receiving delivery theright to enforce the instrument. (2) Transferof an instrument, whether or not the transferis a negotiation, vests in the transferee anyright of the transferor to enforce theinstrument, including any right as a holder indue course, but the transferee cannotacquire rights of a holder in due course by a
transfer, directly or indirectly, from a holderin due course if the transferee engaged infraud or illegality affecting the instrument.(3) Unless otherwise agreed, if an instru-ment is transferred for value and the trans-feree does not become a holder because oflack of indorsement by the transferor, thetransferee has a specifically enforceableright to the unqualified indorsement of thetransferor, but negotiation of the instrumentdoes not occur until the indorsement ismade. (4) If a transferor purports to transfer
less than the entire instrument, negotiationof the instrument does not occur. The trans-feree obtains no rights under this article andhas only the rights of a partial assignee.
i) Comment 1 to 3-203: right to enforcedepends on obtaining possession ofthe instrument.
-
8/13/2019 Ben Carter - Foreclosure Continuing Legal Education
36/48
30
ii) Transferring the Mortgage withoutthe Note is a nullity.
a. An assignment of the deed oftrust [mortgage] separatefrom the note has no force.
Bellistri v. Ocwen Loan Ser-vicing, LLC, 284 S.W.3d 619(Mo. App. 2009).
b. U.S. v. Hoffman, 826 P.2d340, 343 (Ariz. App. 1992),overruled by Rodney v.
Arizona Bank, 836 P.2d 434(1992). The law is clear in
Arizona that while an assign-ment of the note carries themortgage with it, the assign-
ment of the mortgage alonedoes not give the assigneeany interest in the note or itsproceeds.
c) (3) Lost Note (3-309).
i) (1) A person not in possession of aninstrument is entitled to enforce theinstrument if: (a) The person seekingto enforce the instrument: 1. Wasentitled to enforce the instrument
when loss of possession occurred;or 2. Has directly or indirectlyacquired ownership of the instru-ment from a person who was entitledto enforce the instrument when lossof possession occurred; (b) The lossof possession was not the result of atransfer by the person or a lawfulseizure; and (c) The person cannotreasonably obtain possession of theinstrument because the instrumentwas destroyed, its whereabouts
cannot be determined, or it is in thewrongful possession of an unknownperson or a person that cannot befound or is not amenable to serviceof process.
(2) A person seeking enforcement ofan instrument under subsection (1)of this section must prove the terms
-
8/13/2019 Ben Carter - Foreclosure Continuing Legal Education
37/48
31
of the instrument and the person'sright to enforce the instrument. If thatproof is made, KRS 355.3-308applies to the case as if the personseeking enforcement had producedthe instrument. The court may not
enter judgment in favor of the personseeking enforcement unless it findsthat the person required to pay theinstrument is adequately protectedagainst loss that might occur byreason of a claim by another personto enforce the instrument. Adequateprotection may be provided by anyreasonable means.
ii) Kentucky has made it easier to en-force lost notes with recent changes
to UCC.
iii) Attorneys should not sign lost noteaffidavits. See In re Cook, 457 F.3d561 (6thCir. 2006).
c. Proving holder status in practice.
i. Production of the original.
KRE 1003: A photocopy is admissible to the sameextent as the original unless: 1) A genuine question
is raised as to the authenticity of the original; or 2)In the circumstances it would be unfair to admit theduplicate in lieu of the original.
ii. Allonges.
a) Traders Deposit Bank v. Chiles, Thompson& Co., 14 Ky. L. Rptr. 617 at *2 (Ky. Sup.Ct. 1893): As a general rule the legal title toa negotiable paper, payable to order,passes, according to the law merchant, onlyby the payee's indorsement on the security
itself. The established exception to this ruleis, when the indorsement is made on apiece of paper so attached to the originalinstrument as in effect to become partthereof or be incorporated with it. Thisaddition is called, in the adjudged cases andelementary treatises, an allonge. The devicehad its origin in cases where the back of theinstrument had been covered with indorse-
-
8/13/2019 Ben Carter - Foreclosure Continuing Legal Education
38/48
32
ments or writing, leaving no room for furtherindorsements thereon. But neither thegeneral doctrines of commercial law nor anyestablished exception thereto make wordsof mere assignment and transfer of suchpaper, contained in a separate instrument
executed for a wholly different and distinctpurpose, equivalent to an indorsementwithin the rule which admits the payor tourge, as against the holder of an unindorsednegotiable security, payable to order, anyvalid defense which he had against theoriginal payee.
b) McRae stands for the common sense pro-position that when indorsements andallonges start showing up in the middle oflitigation, they were created for litigation
(and are not therefore business records).
c) In re Weisband, 427 B.R. 13 (Bankr. D. Ariz.2010): a piece of paper not attached to thenote at the time the note was produced wasnot an effective indorsement sufficient tonegotiate the note to make the party aholder with standing to enforce the note.Further, the fact that the piece of papercalled an allonge was not included with thecopy of the note provided at an earlier datewas a further indication that the allonge
containing the Endorsement was not affixedto the note. See also Adams v. MadisonRealty & Dev., Inc., 853 F.2d 163, 167 (3dCir. 1988): The Codes requirement that anindorsement be firmly affixed to its instru-ment is a settled feature of commercial law,adopted verbatim by every American state,the District of Columbia, and the VirginIslands. With a unanimity unusual in deci-sional law, the directibe has been faithfullyobserved. The court continues to note thatthis requirement serves to prevent fraud and
preserves a traceable chain of title. Seealso HSBC v. Thompson, 2010 WL3451130 (Ohio App. Sep. 3, 2010) holdingthat dismissal is appropriate when Plaintifffails to prove that allonge is actually affixedto the Note.
-
8/13/2019 Ben Carter - Foreclosure Continuing Legal Education
39/48
33
iii. Business records exception.
a) This arises with letters sent to the home-owner, payment histories, etc.
b) For a business record to be admissible as
an exception to the hearsay rule, it mustmeet three requirements: 1) the maker ofthe record as well as the person providingthe information for the record must havebeen acting under a business duty toreport the information; 2) the record musthave been made in the regular practice ofthat business activity; and 3) the recordmust be made at or near the time of theactivity by someone with knowledge. 9 Ky.Prac. Crim. Prac. & Proc. 27:239 (2011-2012).
c) Commercial paper, though, is self-authen-ticating. (Note: whether something is au-thentic and therefore admissible under BREhas no bearing on whether admission of acopy would be unfair on KRE 1003.)
d) The burden is on the party wishing to usethe exception to establish that foundation.
iv. Attacking affidavits.
The problems with supporting affidavits:
a) They dont exist.
Servicer forecloses and produces originalnote and mortgage endorsed in blank, butno supporting affidavits or deposition testi-mony that establish valid transfer toservicer. Riggs v. Aurora Loan Services,LLC, 2010 WL 1561873 (Fl. App. Apr. 21,2010).1
1 This opinion was withdrawn and superseded on rehearing by Riggs v. Aurora Loan Services,LLC, 36 So.3d 932 (Fla. App. 2010). The circuit court granted summary judgment in favor of
Aurora over Riggs's objections that Aurora's status as lawful owner and holder of the note wasnot conclusively established by the record evidence. We agree with the circuit court that Aurorasufficiently established that it was the holder of the note. Id. at 933
-
8/13/2019 Ben Carter - Foreclosure Continuing Legal Education
40/48
34
b) They are based on computer evidence.
In re Vee Vinhnee, 336 B.R. 437 (9th Cir.B.A.P. 2005), outlines a detailed inquiry forverifying the authenticity of business re-cords SeeEdward J. Imwinkelried, Eviden-
tiary Foundations, 4.03[1] (5thed. 2002).
c) The affiants have no idea what they aresaying.
i) Affidavit traditionally used by fore-closure mills is self serving, lackscredibility, and is entirely unper-suasive on the question of whetherthe Note and Deed of Trust wereproperly assigned to BAC. Thestatement, claiming to be the
holder is a legal conclusion, not afact, and inappropriate for such anaffidavit. In re Box, 2010 WL2228289 (Bankr. W.D. Mo. June 3,2010) quoting Bellistri v. OcwenLoan Servicing.
ii) Midland Funding, LLC v. Brent, 2009WL 2437243 (N.D. Ohio Aug. 11,2009).
d) They are also communications for purposes
of FDCPA (cannot be false or misleading)Gionis v. Javitch, Block, Rathbone, LLP,238 F. Appx 24, 27-30 (6thCir. 2007).
v. Additional requirements of assignee.
Attacking sufficiency of pleadings
vi. Proving lost note cases.
4. Additional problems of securitization.
a. Locating and reading securitization documents.
EDGAR
b. Who has standing to sue under the PSA?
This question can only be answered by looking at thelanguage of the Pooling and Servicing Agreement. SeeGreen Tree Servicing, LLC v. Sanders for Kentucky
-
8/13/2019 Ben Carter - Foreclosure Continuing Legal Education
41/48
35
analysis. Both Green Tree and CWCapital AssetManagement both find that the servicer has standing tosue on behalf of the trust, but only AFTER looking at thelanguage in the PSA. Do not let servicers foreclose withoutproducing the Pooling and Servicing Agreement.
c. Attacking securitization processes.
Servicer or other foreclosing Plaintiff must connect thedots in order to have standing to foreclose. In reWeisband.
d. How securitization works.
Governed by New York law:
i. McKinneys EPTL 7-2.4 Act of Trustee inContravention of the Trust.
ii. If the trust is expressed in the instrument creatingthe estate of the trustee, every sale, conveyance orother act of the trustee in contravention of the trust,except as authorized by this article and by anyother provision of law, is void.
5. Additional problems of MERS.
a. Understanding MERS.
b. Attacking MERS arguments.
i. MERS is not a real party in interest.
MERS has no financial interest in the notes,therefore assignees of MERS have no standing,either. In re Weisband.
ii. Assignment of mortgage is totally irrelevant toquestion of entitlement to enforce.
a) Note follows mortgage, not the other wayaround. Securities Inv. Co. of St. Louis v.
Harrod Bros., 7 S.W.2d 492, 493 (Ky.1928).
b) Negotiation of note creates equitableassignment: Though the mortgage was notassigned of record, it was in effect amortgage to Mrs. Drinkard, and the transferof the notes operated as an equitable
-
8/13/2019 Ben Carter - Foreclosure Continuing Legal Education
42/48
36
assignment of the mortgage. Drinkard v.George, 36 S.W.2d 56 (Ky.1930).
WM Specialty Mortgage, LLC v. Solomon,874 So.2d 680 (Fla. App. 2004). Possessionof the note created equitable interest in the
person possessing it.
c) Missouri: An assignment of the deed of trust[mortgage] separate from the note has noforce. Bellistri v. Ocwen.
d) Michigan Bankruptcy: a [creditors] interestin a mortgage assigned to him must beanalyzed separately from that [creditors]interest in the corresponding underlyingnote. In re Atlantic Mortgage Corporation,69 B.R. 321, 324 (Bankr. E.D. Mich. 1987).
e) Ohio Bankruptcy: Assignment of mortgagedid not transfer the right to enforce the noteto [Plaintiff]; it only gave that entity a claimto ownership of the Note. Plaintiff would notbecome PETE until compliance with theUCC for negotiation or transfer. In re Wells,407 B.R. 873 (Bankr..N.D. Ohio 2009). SeeU.C.C. 3-23 cmt. 1 (2002).
f) Assignment of mortgage after suit is filed isespecially damning.
i) Assignment of mortgage subse-quent to initiation of suit deprivesPlaintiff of standing to bring foreclo-sure. Wells Fargo Bank, N.A. v.Jordan, 2009 WL 625560 (Ohio App.Mar. 12, 2009).
ii) Wells Fargo Bank, N.A. v. Byrd, 897N.E.2d 722 (Ohio App. 2008);Plaintiff bank cannot get standinghalfway through the case through
assignment of mortgage, but dis-missal with prejudice was a littlemuch; just dismiss without prejudice.
iii) U.S. Bank Nat. Assn v. Ibanez,2009 WL 3297551 at *3 (Mass. LandCt. Oct. 14, 2009) (citation omitted):While mortgagee has been definedto include assignees of a mortgage,
-
8/13/2019 Ben Carter - Foreclosure Continuing Legal Education
43/48
37
in other words the current mort-gagee, there is nothing to suggestthat one who expects to receive themortgage by assignment may under-take any foreclosure activity.
iv) MERS case out of Kansas: Land-mark Nat. Bank v. Kesler, 216 P.3d158 (Kan. 2009).
v) There are some cases against us.
Deutsche Bank Nat. Trust Co. v.Pagani, 2009 WL 3440028 (Ohio
App. Oct. 23, 2009): assignment ofmortgage after start of suit is allow-able so long as there is evidenceplaintiff is the current holder and
owner of the note.B. Equitable Standing
1. SeeEquity Memo for full treatment.
2. See alsoPearman v. West Point Nat. Bank, 887 S.W.2d 366 (Ky.App. 1994).
3. Fleet Real Estate Funding Corp v. Smith, 530 A.2d 919 (Pa.Super. Ct. 1987). Failure to review homeowners for loss mitigationoptions under federal program (FHA in this case) impacted thePlaintiffs equitable standing to pursue foreclosure.
C. HAMP Enforcement
1. General program guidelines.
a. Standard waterfall within NPV test.
b. Communication requirements.
2. Common problems.
a. Failure to review.
b. Failure to provide reason why homeowner is not eligible.
c. Failure to calculate income correctly.
d. Failure to request additional documentation.
e. Failure to timely review for permanent modification.
-
8/13/2019 Ben Carter - Foreclosure Continuing Legal Education
44/48
38
D. Affirmative Defenses
1. Waiver.
2. Equitable estoppel.
SeeJury Instructions document for elements
E. Torts
1. Fraudulent misrepresentation.
SeeJury Instructions document for elements
2. Negligent misrepresentation.
SeeJury Instructions document for elements
F. Breach of Contract
1. Breach of duty of good faith and fair dealing.
a. All contracts under the UCC are governed by a duty ofgood faith and fair dealing: KRS 355.1-304.
b. Kentucky law recognizes that every mortgage contract hasan implied covenant of good faith and fair dealing.Pearman.
i. In Pearman: A bank cannot sell real property
subject to a foreclosure proceeding to a third partyduring the proceeding. To do so violates the impliedcovenant of good faith and fair dealing. Before theforeclosure proceedings were complete, the WestPoint Bank sold the house to a third party for aprofit. The court held that the bank had a duty to actin a bona fide manner and this sale ran contrary tothat duty.
ii. Harvest Homebuilders LLC v. Commonwealth Bank& Trust Co., 310 S.W.3d 218 (Ky. App. 2010). Theduty of good faith and fair dealing does not extend
to an obligation to accept a third party offer topurchase a property subject to foreclosure.
2. Mortgage servicing.
In re Stewart, 391 B.R. 327 (Bankr. E.D. La. 2008). Exhaustive,damning, inside-look at the mortgage servicing industry; bogusfees not allowed, servicers multiple late fees not allowed, legalfees partly not allowed.
-
8/13/2019 Ben Carter - Foreclosure Continuing Legal Education
45/48
39
G. Statutory Violations
1. TILA.
2. RESPA.
3. HOEPA.
Yield-Spread-Premium as a HOEPA point and fee: Short v. WellsFargo Bank Minnesota, N.A., 401 F.Supp.2d 549 (S.D. W.Va.2005).
4. Kentucky Consumer Protection Act.
a. UDAP: KRS 367.110-367-300.
i. People protected: people who purchased goods orservices primarily for personal, family, or household
purposes.
a) Gooch v. E.I. Dupont de Nemours & Co., 40F.Supp.2d 857, 865 (W.D. Ky. 1998).
b) Keeton v. Lexington Truck Sales, Inc., 275S.W.3d 723, 726 (Ky. App. 2008).
ii. Burden of proof: Under KCPA, a consumer mustdemonstrate intentional or grossly negligent con-duct which amounts to substantial wrongs ratherthan mere irritations. Taylor v. First Security Trust
Bank, Inc., 2008 WL 4267847 (Ky. App. Sep. 19,2008).
iii. Credit as service under KCPA.
A federal court has interpreted case law and theKCPA to determine that the sale of credit, so longas it was purchased for personal use, is covered byKCPA. Stafford v. Cross Country Bank, 262 F.Supp.2d 776, 792-793 (W.D. Ky. 2003).
iv. Mortgages and real estate.
a) KCPA does not apply to real estate trans-actions such as a contract with a builder tobuild a home. Craig v. Keene, 32 S.W.3d 90(Ky. App. 2000).
b) KCPA does not apply to purchase moneymortgage transactions. Todd v. Ky. Heart-
-
8/13/2019 Ben Carter - Foreclosure Continuing Legal Education
46/48
40
land Mortgage, Inc., 2003 WL 21770805(Ky. App.).
c) KCPA does not apply to mortgages madefor business or commercial uses. Durbin v.Bank of the Bluegrass & Trust Co., 2006
WL 1510479 (Ky. App. Aug. 1, 2003)
v. Jury instructions.
See Jury Instructions Document for elements
vi. Critical questions.
a) Is servicing a good or service that can bepurchased?
b) Can violations of HAMP be an unfair or
deceptive act or practice?
c) Can statements made to homeowners dur-ing the loan modification process be KCPAviolations?
b. Home solicitation.
5. FDCPA.
Law firms as debt collectors: Miller v. McCalla, Raymer, Padrick,Cobb, Nichols, and Clark, L.L.C., 214 F.3d 872 (7 th Cir. 2000).
FDCPA applies to lawyers. FDCPA prohibits law firms statementof debt that only includes principle balance but does not includethe interest, late charges, and other charges.
6. FCRA.
Credit card case: whether credit card companys inquiry into aconsumers dispute satisfies the requirements of the FCRA is aquestion for the jury: Johnson v. MBNA America Bank, NA, 357 F.3d 426 (4thCir. 2004).
7. Proving joint venture.
Proving joint venture between loan brokers, title companies,realtors, and/or loan originators.
H. Punitive Damages
1. Available in fraudulent misrepresentation, Kentucky ConsumerProtection Act.
-
8/13/2019 Ben Carter - Foreclosure Continuing Legal Education
47/48
41
2. Compensatory damages are not necessary in order for a jurysaward of punitive damages to survive appeal. Roberie v.Vonbokern, 2006 WL 2454647 (Ky. Aug. 24, 2006).
3. Jurors allowed to consider the financial resources of defendant inawarding punitive damages. Provost v. City of Newburgh, 262
F.3d 146,163 (2nd Cir. 2001).
I. Discovery Requests
J. Defeating Summary Judgment Motions
1. Homeowner must have opportunity to complete discovery.
Suter v. Mazyck, 226 S.W.3d 837, 841 (Ky. App. 2007): Entry ofjudgment is proper only after the party opposing summaryjudgment has been given ample opportunity to complete discoveryand then fails to offer controverting evidence.
2. Fleet Real Estate Funding Corp v. Smith. Mortgagees failure tocomply with loss mitigation procedures (FHA in this case) createda genuine issue of material fact that precluded foreclosure (andimpacted the foreclosing Plaintiffs equitable standing).
K. Protecting Your Client Following Foreclosure
Securing a release of the lien: KRS 382.365. (Kates bonanza claims)
III. PART TWO: HELPING CLIENTS PURSUE ALTERNATIVES TO FORE-CLOSURE
A. Preparing the Client to Consider Options
B. Leaving the House
1. Avoiding foreclosure.
a. Sale.
b. Deed-in-lieu.
c. Short sale.
2. Mitigating the impact of foreclosure.
a. Chapter 7 bankruptcy.
b. Cash-for-keys.
-
8/13/2019 Ben Carter - Foreclosure Continuing Legal Education
48/48
C. Saving the House
1. Loan modification.
a. General considerations.
b. HAMP.
c. In-house products.
d. Forbearance agreements.
2. Chapter 13 bankruptcy.
3. The res.
a. Repayment.
b. Reinstatement.
c. Refinance.
4. Reverse mortgage.