August 4, 2011

These guys just keep getting more and more brazen. This latest scam comes out of American Home Mortgage Servicing, Inc. (AHMSI) who, as our readers know, was recently slammed in the In Re Veal decision as not having any standing to file a Proof of Claim in a borrower bankruptcy. AHMSI is the servicing unit of the now-bankrupt American Home Mortgage, which was sold out of the AHM Bankruptcy proceeding to a Wilbur Ross and which now is going around the country seeking to foreclose on mortgages which, we suspect, have been paid through one or more sources.

Up until now, all “loan mod” offers from servicers have come in the form of an inquiry letter as to whether the borrower is interested in pursuing a loan modification, and if so, the servicer sends a package of documents to be completed and returned to the servicer with certain documents relating to proof of income and expenses, etc. As we all also know, almost all loan mods are rejected after the borrower is subjected to multiple requests for more documents, or having to submit them time and again because the documents were “lost”, or for “updated” documents because the servicer sat on the documents submitted by the borrower for long periods of time with the servicer claiming that the submission was “stale” or “outdated”.

Yesterday, we were advised that a borrower, who is not in default, was told by AHMSI that in order for any loan mod application to be reviewed, AHMSI wants a fee of $600.00 if paid now, and if not, $900.00 later. Apparently AHMSI is trying to take money from the borrower to pay for its own ineptitude, and/or so it can get paid for going through the process of jerking borrowers around before the loan mod application is ultimately denied.

Bottom line: borrowers beware. You may have recently seen the article in the media that the major “banks” do not have sufficient cash reserves to pay their own attorneys to defend foreclosure challenges, so possibly this latest scam might also be an effort by the banks (who are the principals of the servicers) to roust up monies to pay their attorneys to beat up borrowers using the borrowers’ monies.

Jeff Barnes, Esq., www.ForeclosureDefenseNationwide.com

August 2, 2011

A Chapter 7 Trustee for the United States Bankruptcy Court for the Western District of Washington has retained Jeff Barnes, Esq. and local Washington BK counsel John Sterbick, Esq. to file an adversary proceeding against Residential Credit Solutions, Inc., which claims to “own and hold” a mortgage loan originally made in favor of Franklin Bank FSB, which went into FDIC Receivership. Mr. Barnes is also currently representing borrowers in other Bankruptcy proceedings in Washington BK courts opposing proofs of claim and challenging Motions for Relief From Stay filed by servicers and “banks” attempting to foreclose.

FDN has added local counsel in the States of New Mexico and Minnesota. We are pleased to welcome John R. Fox, Esq. as local counsel in Santa Fe, New Mexico, and Marcus Jarvis, Esq. in Minneapolis, Minnesota.

We are also in the process of expanding our attorney network in Maui, Hawaii, due to the volume of cases which we are being asked to become involved with there and other of the Hawaiian Islands.

Mr. Barnes has recently filed a RICO action against M&I (Marshall & Isley) Bank in Tuscon, Arizona after discovery depositions and documents revealed that the manager of the M&I branch in Tuscon was “approving” jumbo mortgage loans knowing that the borrowers could never meet the debt service on the life of the loans, and telling borrowers that they would be approved for such loans before any loan applications were even completed. M&I has been recently purchased by another bank.

Jeff Barnes, Esq., www.ForeclosureDefenseNationwide.com

July 26, 2011

The Vermont Supreme Court has issued an opinion dated July 22, 2011 which has upheld the trial court’s dismissal with prejudice of a foreclosure complaint filed by US Bank National Association as Trustee for a securitized mortgage loan trust, and remanded the case to the trial court for the assessment of the borrower’s attorneys’ fees which the Supeme Court held were wrongfully not considered by the trial court. USB had originally relied on a MERS assignment executed by the notorious robo-signer Jeffrey Stephan. USB later changed its position and claimed that it held the original note and owned it by virtue of a series of blank endorsements. This “position” was allegedly “supported” by the affidavit of Mr. Stephan which was filed by USB in support of its cross-motion for summary judgment. The borrower had filed an MSJ based on lack of standing.

The original loan was with the (now bankrupt) Accredited Home Lenders. USB claimed that the Note was endorsed in blank to it, thereby giving it standing to foreclose.

They key points in this opinion are that USB failed to demonstrate that it owned the loan at the time that the complaint was filed, and that there was no evidence as to the date or timing of the alleged endorsements. The Court cited cases from other jurisdictions, including the Raftoganis decision from New Jersey, in support of its ruling.

As we all know, trustee banks and servicers repeatedly rely on the alleged “open endorsement” theory to argue that they have the rights to the note and can thus foreclose. The narrow legal point on which the Vermont Supreme Court focused was evidence as to when these alleged open endorsements were made (which there was none), which was critical to a determination as to whether USB owned the note when it filed the Complaint. The Court found that Mr. Stephan’s affidavit as to the alleged endorsements could not have been made on personal knowledge as to matters which took place years before he became associated with the corporate entity with which he was employed when he executed the affidavit.

This decision is an important milestone for any challege to the “open endorsement” argument which we are all too often confronted with. Coupled with the lack of evidence as to when these alleged “open eodorsements” took place and compounded by an affidavit of a known robo-signer as to events which allegedly took place years before his employment with the “certifying entity”, this decision demonstrates that the State of Vermont is not going to permit a foreclosure to take place without the proper evidentiary proof of standing at the time that the Complaint is filed.

We thank one of our dedicated readers for bringing this matter to our attention. The opinion was issued on the same day that Mr. Barnes took the deposition of a Vice President of Deutsche Bank National Association in another matter where the deponent claimed, under oath no less than 4 times, that “there is no PSA which governs this trust” (which is the securitized mortgage loan trust of which DBNA is the alleged “trustee” which is claiming the right to foreclose)

This sworn testimony is in direct contradiction to the papers filed by Deutsche Bank in the case which repeatedly reference a PSA for the trust, and is also in direct contradiction to the prior deposition testimony of the representative of DBNA’s servicer (whose deposition Mr. Barnes took several months ago) in the same case where the deponent testified, under oath, to the PSA for the trust at issue and matters therein including the fact that the “Closing Date” of the trust “is the date when all of the loans have to be in the trust”.

Jeff Barnes, Esq., www.ForeclosureDefenseNationwide.com

July 18, 2011

FDN’s Newport Beach, California office will be closed the week of July 25 through 29, 2011 as our staff is on vacation and as Mr. Barnes will be in court in New Jersey on Monday, July 25; in litigation meetings July 26 and 27 in his Boca Raton, Florida office; in transit on July 28; and in a Mediation in Key West, Florida on July 29.

Mr. Barnes will be monitering e-mails during next week and responding most likely during the evening hours.

Jeff Barnes, Esq., www.ForeclosureDefenseNationwide.com 

July 14, 2011

An Iowa District Court has issued a 5-page Order denying Wells Fargo’s (second) Motion for Summary Judgment. Wells Fargo had originally been granted summary judgment against the borrower, who was pro se at the time, in 2005 based upon a sworn affidavit that Wells Fargo was the holder of the note. The borrower had filed an affidavit which stated that she had spoken to Wells Fargo and was told that the “investor” on her loan was Lehman. The case languished in an appellate posture and was continued for various reasons.

Jeff Barnes, Esq. began representing the borrower in early 2010 with local Iowa counsel Christine Sand, Esq., who immediately initiated extensive discovery. The Court ordered Wells Fargo to submit an original of the Note by July 20, 2010. The next day (after the time for compliance with the Court’s Order had already passed), Wells Fargo filed a Motion for additional time to comply with the Order, and a Motion to Substitute Plaintiff which stated that pursuant to a servicing agreement between Wells Fargo and Lehman Brothers Bank FSB that the holder of the note and mortgage was Lehman. The 2005 summary judgment was thus vacated.

Wells Fargo filed a “lost note affidavit” a month later on August 20, 2010 which the Court found did not disclose the specific facts in the “record of account” which was reviewed by the Wells Fargo affiant upon which she based her conclusion. On February 23, 2011, Wells Fargo filed an Amended Foreclosure Petition alleging that Wells Fargo was the owner and holder of the note and that Lehman Brothers Bank, Lehman Brothers Holdings, and a securitized mortgage loan trust of which US Bank was the “trustee” were added “for the purposes of quieting title to subject property and to comply with” Iowa statutory law. The court noted that it was unclear what form of relief was being sought with the addition of these parties.

Wells Fargo filed another affidavit executed by the same Wells Fargo affiant who executed the “lost note” affidavit. This “new” affidavit stated that the original note and mortgage were sent to Wells Fargo’s prior counsel in November 2004 and were lost while in the custody of said counsel. The Court again found that the affiant did not state the facts upon which the affiant relied for her conclusions nor what parts of the file she reviewed upon which she relied.

In its Reply to the borrower’s opposition (which is termed “Resistance” in Iowa) to Wells Fargo’s second Motion for Summary Judgment, Wells Fargo attached a copy of a lost note affidavit which the Court stated was “purportedly” executed by Wells Fargo’s attorney in 2005. Wells Fargo’s current counsel represented to the Court in its Reply that Wells Fargo’s previous counsel filed a lost note affidavit on March 28, 2005. The Court stated that it had reviewed both the docket sheet and the court file and found no evidence that the original of the alleged 2005 lost note affidavit was ever filed.

Based on these matters, the Court found that there were factual issues as to whether or not the note has been lost and whether the note has been “transferred”, and denied summary judgment to Wells Fargo on its foreclosure claim.

Our question to Wells Fargo is, were you lying then or are you lying now? Round and around and around we go, and where Wells Fargo and its attorneys will stop, nobody knows! Note, note, who has the note? Lehman? Lehman Holdings? The USBank securitization? None of the above?

Separately, the Supreme Court of Nevada issued two opinions on July 7, 2011 which finally compel foreclosing parties in Nevada to produce material documentation as to chain of title to the Note and Deed of Trust in order to be permitted to continue with a foreclosure action when mediation is requested. in Leyva v. National Default Servicing et al., No. 55216, 127 Nev. Advance Opinion 40, the Supreme Court held that strict compliance is required with Nevada statutes governing the production of certain documents including any assignment of the Deed of Trust; that a foreclosing party’s failure to do so “is a sanctionable offense; and the district court is prohibited from allowing the foreclosure process to proceed”. Wells Fargo was also the culprit in this case.

Significantly, in discussing the transfer of the Note, the Supreme Court of Nevada cited to the recent In Re Veal decision from the 9th Circuit Bankruptcy Appeals Panel (which was previously discussed on this website), holding that the borrower “has the right to know the identity of the entity that is ‘entitled to enforce’ the mortgage note under Article 3 (of the Uniform Commercial Code).” The Court concluded that Article 3 “clearly requires Wells Fargo to demonstrate more than mere possession of the original note to be able to enforce a negotiable instrument”. The court found that there was no endorsement and no assignment, and reversed the District Court.

The opinion in Leyva cited to the Court’s opinion in Pasillas v. HSBC Bank as Trustee, No. 56393, 127 Nev. Advance Opinion 39 (also decided July 7, 2011), which also reversed the District Court and also cited to Veal , setting forth the requirements for production of evidence of chain of title to the note and Deed of Trust in a foreclosure.

The multiple citations to Veal, which is a Federal Bankruptcy appellate court opinion, by the state Supreme Court of Nevada, is more than important. It demonstrates that simply because a foreclosure issue is decided by a Bankruptcy court does not mean that it is not applicable to a non-Bankruptcy (or non-Federal) foreclosure case. Time and again, when we argue that an issue in a state foreclosure case has already been decided by a Bankruptcy court in the foreclosure context, attorneys representing foreclosing “lenders” and servicers argue “Well, Judge, that was a Bankruptcy case, and we are not in Bankruptcy Court”. Leyva and Pasillas have now put that argument to bed. If a Federal Bankruptcy decision is good enough for the Supreme Court of Nevada in two separate opinions, it should be good enough for any state court.

We thank one of our dedicated readers for alerting us to these two highly significant Nevada decisions.

Jeff Barnes, Esq., www.ForeclosureDefensenationwide.com

July 8, 2011

Today, a state court Judge in Tennessee declined to rule on a Motion to Dismiss and Motion to Stay Discovery filed by Bank of New York as trustee of a securitized mortgage loan trust, which Motions were filed against the borrowers’ Amended Complaint for Declaratory and Permanent Injunctive relief. The sale had been cancelled with the original pro se Complaint was filed. FDN attorneys Jeff Barnes, Esq. and Andrew Farmer, Esq., who filed the Amended Complaint, represent the borrowers. Mr Barnes argued the Motions in open court in Tennessee today.

The Judge has sent the case to a Special Master to oversee and coordinate discovery, including depositions and written discovery, after Mr. Barnes raised the threshold issues related to standing, real party in interest, chain of title to the mortgage loan, MERS, and issues surrounding securitization including compliance with the PSA. It is believed that this is the first case in the State of Tennessee to raise these issues, and there is no decisional law from the appellate courts in Tennessee as to any of the issues raised, including any case law as to MERS.

This represents progress for borrowers in Tennessee, and demonstrates that at least one court is not going to dismiss a borrower’s challenge to a foreclosure simply on Motion to Dismiss of the Defendant foreclosing party and its agents (here, MERS and ReconTrust as the trustee sale company).

Jeff Barnes, Esq., www.ForeclosureDefenseNationwide.com

July 7, 2011

FDN is now entering its fourth year assisting borrowers nationwide in challenging and defending foreclosures. Our attorney network has grown from the Barnes Firm and one local counsel in the eastern United States in early 2008 to some 38 local counsel nationally in over 30 states ranging from Hawaii to New Jersey to Minnesota to Texas to Arizona and throughout the US. The website has had over 3.8 million hits to date.

Our network has successfully brought issues such as to securitization, MERS, toxic assignments, and foreclosure irregularities to the attention of courts in each of the states where we litigate, and we have had numerous foreclosures dismissed and have been awareded attorneys’ fees in others. We have forced the lenders and servicers to produce discovery which, from 2008 to 2009, they claimed to be “privileged” or “subject to privacy interests”. We have successfully established in Michigan the fatal flaw of noncompliance with the PSA resulting in summary judgment for the borrower. 

The Oregon Trial Lawyers’ Association has recently filed an Amicus Curiare Brief in support of our pending appeal in the Oregon Court of Appeals on the MERS issue, which is as yet undecided on the appellate level in Oregon. Recently, we have implemented the holding from In Re Veal to challenge Proofs of Claim and Motions for Relief From Stay in the Bankruptcy Courts, as the Veal case has, according to at least one Washington Bankruptcy Judge, “changed everything”. Our network is becoming more and more involved in Federal Bankruptcy work due to the wealth of positive decisions from the BK courts.

Which brings us to Veal. The decision is a 46-page virtual encyclopedia as to issues arising out of Article 3 and Article 9 of the Uniform Commercial Code as they relate to promissory notes and mortgage instruments (finally dispelling the myth propounded by foreclosing attorneys that a promissory note on a mortgage loan is a “negotiable instrument” under Article 3 when in fact it is not as it is tied to a security instrument, thus implicating Article 9 of the UCC and the issues of delivery and proof of delivery), and standing and real party in interest requirements for POCs and stay relief requests. The case, which reversed the Arizona Bankruptcy Court’s grant of stay relief and denial of the borrower’s objection to claim, emanates from the 9th Circuit Bankruptcy Appellate Panel, which covers the Bankruptcy Courts in Alaska, Hawaii, Washington, Oregon, California, Nevada, and Artizona.

The decision clarifies and binds those Bankruptcy trial courts listed above on issues which borrowers have been raising for years, and provides a framework for objections to POCs and challenges to Motions for Relief From Stay. We expect the impact of the decision to “travel east” to other Bankruptcy courts, with our network attorneys advancing the principles from Veal across the nation.

Jeff Barnes, Esq., www.ForeclosureDefenseNationwide.com

July 6, 2011

Many attorneys and paralegals have been inquiring about our next foreclosure defense seminar. Unfortunately, someone who Mr. Barnes recently met with in Florida to discuss a possible seminar has, without Mr. Barnes’ permission or consent, posted that there will be a seminar on July 26, 2011 at the Hyatt hotel in Sarasota, Florida.

THERE WILL BE NO SUCH SEMINAR ON THAT DATE. The person who posted this announcement on several internet bases had no authority to do so and did not even clear the announcement or date with Mr. Barnes.

This website will announce when Mr. Barnes will be conducting any seminar, and will advise if any third-party sources as to such seminars is valid or not.

Jeff Barnes, Esq., www.ForeclosureDefensenationwide.com

June 23, 2011

We have recently received a literal avalanche of inquiries in view of the now almost daily positive developments in court decisions as to issues such as those surrounding MERS, securitization, real party in interest, and the like. The problem, however, is that a great number of these inquiries are from borrowers whose cases have already gone to final judgment or whose properties have already gone to sale.

All of the information on the “other blogs” is great, but what these other blogs do not talk about is PROCEDURE. All courts in all jurisdictions, state and Federal, have specific timing requirements for asserting defenses to a foreclosure. The very Summons that accompanies a Complaint for Foreclosure in a judicial state has a specific number of days set forth in which any papers must be filed in response to the Complaint. If not, the foreclosing party may seek the entry of a default and a Final Judgment, as there is nothing in the court file from the borrower telling the court that they have defenses.

In the non-judicial states, a challenge to a foreclosure generally has to be made PRIOR to the sale. As we have repeatedly pointed out on this website, Washington state, for example, has a “use it or lose it” statute which provides that if a borrower does not challenge the sale prior to the sale date that the borrower is thereafter FOREVER barred from seeking to undo the foreclosure, and the ONLY remedy is damages. Although some jurisdictions permit a borrower to raise defenses to a foreclosure in an eviction proceeding, there are timing requirements for this as well.

Substantive defenses are meaningless without their being asserted pursuant to the proper procedures and within the timing requirements of court rules. Those websites which are managed by non-litigators who do not actually practice in court are thus giving borrowers false hopes if they do not qualify their information by stating that all such matters must be properly and timely raised by an attorney who regularly practices in this area.

We have seen many, many situations where a borrower pulled something off of some blog or website and tried to bring it up after a Final Judgment has been entered or on appeal when the matter was not raised before the case was appealed, and they are shocked and angered that the court did not accept their “defense” because it was not timely raised. The court is just following the law as to procedure, which is equally if not more important than the substantive law.

We have also seen many cases where the borrower claims that they were in “loan mod negotiations” and were told “not to worry” about the foreclosure, and did nothing to defend the case. If a borrower is told “not to worry about the foreclosure”, then the borrower needs to let the court know that, in writing filed with the court and copied to the foreclosing party’s attorney setting forth names, dates, etc., and do so IMMEDIATELY after the borrower is told this and within the response timeframe of the court rules. Remember, the Court only knows what is in the court file, and if there is nothing, the court presumes that the borrower chose not to defend or has no defenses. Trying to bring it up after the fact will most likely not work.

Jeff Barnes, Esq., www.ForeclosureDefenseNationwide.com

June 22, 2011

In an 11-page Order dated June 2, 2011, the United States District Court for the Central District of California has denied JPMorgan Chase Bank’s Motions to dismiss a borrower’s claims for violations of CA Civ. Code 2923.5, Wrongful Foreclosure, Quiet Title, Quasi Contract, Declaratory Relief, and Injunctive Relief in the matter of Javaheri v. JPMorgan Chase Bank, Case No. CV10-08185 ODW. The decision cites case law from the United States Supreme Court, the United States Court of Appeals for the 9th Circuit, and California state courts.

The borrower filed a Second Amended Complaint for numerous causes of action including those identified above. The loan had been originated by Washington Mutual Bank (WaMu), with the loan thereafter being securitized. JPM relied upon the Purchase and Assumption Agreement between JPM and the FDIC as Receiver for WaMu, contending that it had succeeded to all of WaMu’s assets, including the borrower’s note. (Significantly, and although not mentioned in the Javaheri Order, JPM has affirmatively represented to the United States District Court for the District of Columbia in separate Federal litigation that it is NOT the “successor in interest” to WaMu, and that it only purchased certain assets of WaMu from the FDIC.)

The borrower claimed that between November 13 and 30, 2007, WaMu transferred his Note to Washington Mutual Mortgage Securities Corporation and that the Note was sold to an investment trust and became part of a loan pool, PSA, CDO, mortgage-backed security or pass-through certificate, credit default swap, investment trust, and/or a special purpose vehicle. The loan was identified with a CUSIP number and the pool number. The court found that “Coupled with Plaintiff’s allegation that JPMorgan never properly recorded its claim of ownership in the subject property, the above mentioned facts regarding the transfer of Plaintiff’s Note prior to JPMorgan’s acquisition of WaMu’s assets raise Plaintiff’s right to relief above a speculative level”, warranting denial of JPM’s Motions to Dismiss as to the claims set forth above.

One of the more interesting theories raised was the “Quasi Contract” claim, where the borrower alleged that JPM was unjustly enriched by any payments made by the borrower to JPM which were not paid to the lender or beneficiary. The Court concluded, for purposes of pleading, that “if indeed JPMorgan did not own the Note yet received payments therefrom, those payments may have been received unjustly”. We believe that if in fact JPM fraudulently represented to the borrower that it did own or have rights to collect monies under the Note when in fact it did not, this would support a fraud-based claim as well.

The Court specifically found that “in the face of these specific factual allegations (by the borrower as to the securitization of the loan) JPMorgan’s assertion that the P&A Agreement suffices to establish their ownership of the Note is no longer viable. Indeed, the P&A Agreement does not specifically identify Plaintiff’s Note.” 

That quote exemplifies a central issue we have been confronted with in the numerous Chase/WaMu cases we have in litigation in various states: Chase claims to be the “successor in interest” to WaMu by virtue of its “acquisition” of the “assets” of WaMu, when in fact no such wholesale “acquisition” of mortgage loans across the board ever occurred, as evidenced in Javaheri and in the Federal litigation in the District of Columbia. Honestly, does JPM think that it can get away with taking one position in its contract and in “East Coast” Federal litigation and take a completely contradictory position in California Federal court?

Jeff Barnes, Esq., www.ForeclosureDefenseNationwide.com