Recently, FDN has been deluged with a rash of cases where the borrowers were not provided with copies of their executed loan documents following closing and which they were provided with only after repeated demand and after a foreclosure issue arose. A disturbing pattern of conduct is emerging in these cases involving what appears to be the creation of fraudulent or altered loan documents with forged borrower initials and forged borrower signatures.

 In several cases from California and other western states, the “income” page of the loan application has been altered, including such forms as closing the loops on a number “3” so that the borrowers’ income which was put down as $3,000.00 per month was changed to $8,000.00 per month. Another situation has occurred where a number “1” placed in front of the income figure so that for example $4,000.00 per month becomes $14,000.00 per month. The borrower’s initials on these altered pages have been forged, and forged signatures have come up on Prepayment Riders, Adjustable Rate Riders, and Option ARM Riders. In more than one case, the box which the borrower marked on the loan application for “fixed rate” was “whited out”, and the “Adjustable” or “ARM” box was checked. All of these alterations were done post-closing without prior knowledge or consent of the borrower, and in situations where the loan was sold as part of the securitization process.

 As readers are aware from prior postings on this blog and others, the mortgages which were the most attractive (or necessary) for the “lenders” to provide to the aggregators and investment bankers were Option ARMs with prepayment penalties. It has become more than obvious that the lenders and their agents went to any extreme and engaged in any conduct, even illegal and felonious actions, in order to provide the “right” type of loan to the aggregator or investment banker. The innocent borrowers are only learning of this when they are threatened with or sued for foreclosure.

 The arrogance of the lenders and their counsel has also extended to the Courts. In one case in Florida, the foreclosing party (Wells Fargo as the alleged “trustee” for holders of asset-backed bonds) moved for summary judgment claiming that the borrower’s mortgage had been assigned to the foreclosing party. No Assignment had been filed with the Court. When called on this by FDN attorney Jeff Barnes, Esq., the attorneys for the foreclosing party filed an alleged “Assignment” which contained no name or identity of any Assignee, yet the attorney still attempted to proceed with summary judgment! Needless to say, the summary judgment was denied, and the Court was not amused with the conduct of the attorney for the foreclosing party. The borrower has since moved for his own summary judgment which will be heard by the Court in the coming months.

In another case in Massachusetts, the borrower entered into a forbearance agreement with the lender. The agreement called for payments to be made by certain dates. Although the borrower made the payments by the dates required, the lender refused to accept the payments, sent the checks back to an incorrect address, and then claimed a “default”, thus manufacturing a fraudulent basis for instituting a foreclosure. To add insult to injury, the lender also claimed that the payment due date had been changed (which it was not) to further the lender’s intent to fraudulently manufacture an alleged default. The intervention of FDN attorney Jeff Barnes, Esq. stopped the post-foreclosure possession action (which was taking place between New Year’s Eve and the first week of January). The borrower has sued to vacate the foreclosure and restore possession of the property.


Jeff Barnes, Esq.

E-mail: [email protected]


FDN attorney Jeff Barnes, Esq. has just been successful, with the assistance of local counsel, in halting, at 1:58 p.m. today (January 29, 2009), an eviction order in Washington State which would have, as of 6:00 p.m. this evening, caused four tenants to be literally thrown out into the cold and the street as a result of an eviction order which was procured illegally by the “lender” who wrongfully foreclosed in violation of state statutes. The property owner has also sued the lender for damages and other relief.

[Lender’s name redacted] through its attorneys in Washington, obtained stay relief in the borrower’s bankruptcy proceeding to pursue a foreclosure. Washington, which is a non-judicial “trustee” state, requires that a Notice of Sale be not only recorded but sent to the borrower by certified mail 90 days prior to the date of the sale in order to place the borrower on notice of the lender’s intent to sell the property. The statute provides that if no challenge to the sale is made prior to the sale that the borrower waives any right to challenge the sale.

In blatant and deliberate violation of the Statute and in an apparent attempt to manufacture an alleged “waiver,” [lender name redacted] conducted a “sale” less than 4 days after obtaining stay relief and “sold” the property to itself without ever providing any notice to the borrower. It then sought to evict the tenants of the property incident to the wrongful foreclosure.

Swift and decisive action by FDN attorney Barnes resulted in the Superior Court entering a Temporary Restraining Order today which halted the eviction of the 4 tenants, who include a single mother with a 2 year-old child, a single man with disabilities and two other tenants with difficulties as well.

[Lender’s name redacted] has also recently engaged in fraudulent conduct in another case in Florida. After previously selling a borrower’s mortgage and note to [lender’s name redacted] as of the date of the closing in 2005, [lender’s name redacted] allegedly “assigned” the mortgage to an entity called “Liquidation Properties, Inc.” in 2008. Written confirmation has been obtained that Citimortgage still owns the subject mortgage and thus the “Assignment” filed with the Court by [name redacted] and [name redacted] attorneys (which assignment was drafted by the same attorneys) was per se fraudulent and utilized to fraudulently obtain a foreclosure. The borrower has filed for post-judgment relief and the actions of the offending attorneys are being investigated by regulatory authorities.

Tiffany Goldwater

FDN Professional Assistant

Mortgage Meltdown: City Of Baltimore, Wells Fargo Slug It Out As Lender Seeks Dismissal Of Reverse Redlining (Discrimination) Lawsuit

In Baltimore, Maryland, The Maryland Daily Record reports:

  • Attorneys for the city of Baltimore and Wells Fargo traded arguments in federal court about the viability of the city’s first-of-its-kind “reverse-redlining” lawsuit against the nation’s biggest consumer bank. The San Francisco-based bank has asked the judge to dismiss the case, in which the city claimed Wells Fargo systematically targeted Baltimore’s black neighborhoods and borrowers for high-rate subprime loans — a practice the city alleged is illegal under the federal Fair Housing Act.

For more, see Attorneys spar in ‘reverse-redlining’ suit against Wells Fargo.

See also, The Baltimore Sun: City says Wells Fargo mortgages were predatory (Bank says complaint doesn’t prove that subprime loans hurt black neighborhoods).

For the lawsuit alleging predatory lending filed by the City of Baltomore, see:

Foreclosure Relief: Countrywide To Temporarily Freeze All Pennsylvania Foreclosures As Part Of $150M Suit Settlement With State AG

Reuters reports:

  • Countrywide Financial Corp has agreed to provide an estimated $150 million in mortgage relief and cash assistance for Pennsylvania homeowners to settle a state lawsuit over its lending practices, officials said on Wednesday.
  • Countrywide, once the nation’s largest mortgage lender and now part of Bank of America Corp, also agreed to freeze foreclosure proceedings until it determines whether borrowers are eligible to take part in the settlement. […] The settlement would provide them with loan modifications, relocation assistance and foreclosure relief as well as waivers of default or delinquency fees, Pennsylvania Attorney General Tom Corbett said.

Source: Countrywide settles Pa. lawsuit for $150 million.

Foreclosure Prevention: Foreclosure Mediation Now Available In All 88 Ohio Counties

In Columbus, Ohio, WTTE-TV Channel 28 reports:

  • The Ohio Supreme Court says a foreclosure mediation program it launched less than a year ago is now available in all 88 counties. The high court provides step-by-step instructions to common pleas courts around the state to try to reach solutions in foreclosure cases. The local courts gather information from homeowners and lenders to reach a mutual agreement.
  • Some courts are using court staff, while others are using contract mediators. Others are using volunteers. Counties began joining the program after it launched in February. Local courts are to submit data to the Supreme Court so that the effectiveness of the county programs can be measured.

Source: Foreclosure mediation available in Ohio counties.

For the Ohio Supreme Court’s “11 Step Program,” see The Foreclosure Mediation Program Model.

Foreclosure Offense: Foreclosing Lender Claims Mortgage Is Nine Years In Arrears; 68-Year Old Homeowner Says “Prove It!” As Bank Admits It Can’t Find The Promissory Note

In Decatur, Georgia, The Atlanta Journal Constitution reports:

  • [C]itigroup and Wells Fargo say [68-year old Zella Mae] Green has failed miserably as a homeowner and is nine years behind on her payments. And they want to take the house. “Nine years? There ain’t no way,” Green said. “Ain’t no way you can stay someplace for nine years without paying anything.”
  • Determining whether a homeowner is truly years behind on a mortgage seems like a straightforward question. But Green and a string of lenders have been arguing about the matter in court for years now — with no resolution in sight. Her lawyer says the lenders have not even proven who owns the mortgage, let alone established how much Green owes.
  • Green’s case illustrates the complexities of the modern mortgage market and just how difficult it can be to unwind the history of a mortgage. Most mortgages are originated by one lender, then sold — often repeatedly — to other lenders or groups of investors. Other companies are often brought in to process payments and manage escrow accounts.
  •  “I’m just trying to find out two things: What Ms. Green’s proper loan balance is and who she owes it to,” [her bankruptcy attorney Howard Rothbloom] said. So far, who owns the mortgage has not been resolved.
  • A lender proves ownership of a mortgage by producing the “promissory note,” the document signed at closing in which the borrower agrees to the debt. The note is valuable and can be bought and sold by lenders. But like a personal check, it is only valuable in its original form. Green’s lenders have admitted in court documents they can’t find her note. Legal experts say that’s a big deal.
  • “There is no excuse for the inability of mortgage lenders to know where the note is,” said Frank Alexander, an Emory University law professor and a leading expert on real estate law. “Without the note, you have virtually nothing. That is the one thing that is always locked in a vault.”

        For more, see Mortgage market clouds who owns woman’s house.

  • For posts that reference the failure of mortgage lenders and their attorneys to prove ownership of the promissory note when starting foreclosure actions, Go Here, Go Here, Go Here, Go Here, and Go Here.

Court Order For Following Post

United States Bankruptcy Court District of Massachusetts

In re: ) )

JACALYN S. NOSEK, ) Chapter 13  DEBTOR. ) Case No. 02-46025 -JBR

____________________________________) )

JACALYN S. NOSEK, ) Adversary Proceeding PLAINTIFF, ) No. 04-4517 and

) No. 07-4109 v. ) AMERIQUEST MORTGAGE COMPANY, ) et al. )

DEFENDANTS )                                                                         )


This matter came before the court for a hearing on the Court’s Order to Show Cause why

sanctions should not be imposed for apparent misrepresentations as to the status of Ameriquest

Mortgage Company as the holder of the note and mortgage at issue in this case and adversary



The facts surrounding the dispute between the Debtor and Ameriquest Mortgage

Company (“Ameriquest”) as found by the Court after trial in adversary proceeding 04-4517 are

set forth in In re Nosek,   2006 WL 1867096 at *6 (Bankr. D. Mass. June 30, 2006).  The facts

pertinent to the issues now before the Court can be summarized as follows.  On October 2, 2002

the Debtor filed a voluntary petition pursuant to Chapter 13 of the United States Bankruptcy

Code.  On November 1, 2002 she filed her schedules, including Schedule D on which she listed a

secured, albeit disputed, debt owed to “Norwest Bank Minnesota, NA, Tr, c/o Ablitt & Caruolo,

P.C.” as well as the firm’s address.  The same schedule also lists “Ameriquest Mortgage

Company Representing: Norwest Bank Minnesota, NA, Tr” and “Buchalter, Nemer, Fields et al

Representing: Norwest Bank Minnesota, NA, Tr” and their respective addresses.  Ameriquest,

Norwest Bank Minnesota, NA, Tr. and the Buchalter firm are listed on the amended creditor

matrix.  Throughout the course of the bankruptcy case and Adversary Proceeding 04-4517,

Ameriquest and its attorneys have represented that Ameriquest was the “holder” of a note and

mortgage given by the Debtor/Plaintiff to Ameriquest.1  The Court’s judgment in Adversary

Proceeding 04-4517 is currently on appeal before the Court of Appeals for the First Circuit. 

On July 27, 2007 the Debtor commenced Adversary Proceeding 07-4109 against

Ameriquest and the two standing Chapter 13 Trustees for the District of Massachusetts and

sought, among other things, an order for trustee process.  On September 27, 2007 Ameriquest

filed an opposition [# 20] and in it, for the first time in this case, informed the Court that

“Ameriquest merely collects these funds [which the Debtor sought to attach] on behalf of their

owners.  It does not own these funds….”  The Affidavit of Eileen Driscoll Rubens,2 dated

September 27, 2007, reads in part:

Prior to March, 2005, Ameriquest acted as a loan servicer both for certain of the loans it originated and for loans originated by other parties. 

Rubens Affidavit at ¶ 8 (emphasis added).

1As discussed below, the term “holder” has a specific meaning when used in connection with a promissory note.

2Ms. Rubens identifies herself as “a Senior Counsel for ACC Holdings Corporation (“ACC”) and the Assistant Secretary for the ACC subsidiaries Ameriquest Mortgage Company (“Ameriquest”) and AMC Mortgage Services, Inc. (“AMC Mortgage Services”).”  Rubens Affidavit at ¶ 1. 


A flurry of motions and cross-motions ensued, including Ameriquest’s cross-motion to

dismiss Adversary Proceeding 07-4109 on the grounds that the Court lacked jurisdiction because

of the pending appeal and the Debtor’s motion to amend the complaint in Adversary Proceeding

07-4109 to add Norwest Bank, Minnesota, N.A. (“Norwest”) as a defendant.3  Ameriquest

opposed the motion to amend the complaint on the grounds that the Plaintiff had elected to sue

Ameriquest instead of Norwest, its allegedly disclosed principal.  The complaint was dismissed

as to Ameriquest but the Debtor was permitted to amend her complaint to add Norwest as the


On January 9, 2008 Norwest Bank, Minnesota, N.A., now known as Wells Fargo Bank,

N.A., as Trustee for Amresco Residential Securities Corp. Mortgage Loan Trust, Series 1998-2

filed a Request for Judicial Notice, which, along with its attached exhibits, evidence the


1.  On November 25, 1997 the Debtor gave Ameriquest a note and mortgage on her

principal residence to secure the note.

2.  On November 30, 1997, five days after Ameriquest originated the loan, Ameriquest

assigned the note and mortgage to Norwest.

3.  On May 22, 2000 the assignment of the note and mortgage was recorded.

4.  On March 31, 2005 an assignment of the servicing rights in connection with the

November 30, 1997 note and mortgage were assigned by Ameriquest to AMC Mortgage

3The Debtor also sought to add Citi Residential Lending, Inc. as a trustee defendant.  Citi Financial is not a party to this Order to Show Cause.



Despite the above chronology which indicates that Ameriquest was the loan originator

and had not held the note since November 30, 1997 and despite the fact that Ameriquest ended

its servicer role as of March 31, 2005, the Court noted that Ameriquest and its attorneys made

contrary representations as to Ameriquest’s status.  For example

• On February 13, 2003, Ameriquest filed a proof of claim [Claim # 1], which was

amended by a proof of claim dated April 22, 2003 [Claim #16] and signed by one

John Teston, to which the note and mortgage were attached without any reference

to the assignment.

• In the February 17, 2003 Response to Debtor’s Objection to Ameriquest’s Proof

of Claim, attorney Jennifer G. Haskell of the law firm of Ablitt & Caruolo, P.C.

signed the pleading containing the following statement: “That Ameriquest is the

holder of the first mortgage on real property known as 60 Bolton Road, South

Lancaster, Massachusetts, and [sic] was recorded in the Worcester County

(Worcester District) registry of Deeds in Book 19404, Page 164.”  (Emphasis


• By letter dated October 26, 2002 Ameriquest’s Customer Service Department sent

the debtor a letter in which Ameriquest stated “Ameriquest Mortgage Company

(AMC) holds an Adjustable Rate Note secured by a mortgage (or Deed of Trust)

4The trial in Adversary Proceeding 04-4517 began on November 28, 2005.  At that time Ameriquest, while it could be held accountable for its past behavior, had no role with respect to the note and mortgage, a fact not disclosed to the Court.


against the residential real property….”5

• On or about February 24, 2003 attorney Jennifer G. Haskell signed a Motion for

Relief in the Debtor’s bankruptcy case on behalf of Ameriquest and represented

that “[t]he movant is the holder of a first mortgage ….”6

• On January 3, 2005 attorney William J. Amann of the law firm of Ablitt &

Caruolo P.C. signed an answer to the complaint in Adversary Proceeding 04-4517

in which he admitted the allegation in the complaint filed December 2, 2004 that

Ameriquest “is” the holder of the first position mortgage.

• Attorney Robert F. Charlton defended Ameriquest in the 8-day trial in Adversary

Proceeding 04-4517 without advising the Court that Ameriquest was neither the

noteholder nor mortgagee.7

• Attorney Jeffrey K. Garfinkle of the law firm of Buchalter Nemer filed an

appearance in Adversary Proceeding 04-4517 on July 17, 2006 and failed to

advise the Court until the pleadings of January 9, 2008 filed in Adversary

Proceeding 07-4109 of Ameriquest’s true role in these proceedings.

Consequently the Court issued its Order to Show Cause requiring Ameriquest; John Teston, who

5Ameriquest sent more than one letter containing this language.  See for example, Ameriquest’s letter of April 26, 2003. 

6Failure to identify Norwest as the subsequent holder of the obligation and identify Ameriquest as the agent for the holder violates the current iteration of MLBR 4001-1(b)(2)(F), a requirement not contained in the local rules then in effect. There is nothing in MLRB 4001-1, as it existed when the motion was filed, that permits the misrepresentation of the movant’s role, however.

7At the time of the trial, Ameriquest was no longer the servicer. 5

signed proofs of claim on behalf of Ameriquest; the law firm of Ablitt & Caruolo, PC;
8 Attorney

Jennifer G. Haskell; Attorney William Amann, Attorney Robert F. Charlton; the law firm of

Buchalter Nemer Fields & Younger (“Buchalter”); Attorney Jeffrey K. Garfinkle; Kirkpatrick &

Lockhart Preston Gates Ellis (“K&L Gates”); and Norwest to show cause why they should not

be sanctioned for their apparent misrepresentations.  In addition. Attorney R. Bruce Allensworth

was ordered to provide evidence for his representation during the November 28, 2007 hearing on

the Motion to Amend the Complaint in Adversary Proceeding 07-4109 that “following whatever

initial pleadings may have been followed [sic] in this case, it is the case that in the course of

discovery there was testimony at deposition that these loans had been sold.”
9  He was also

ordered to provide support for his contention that Norwest’s identity was disclosed by virtue of

the 2000 recordation of the assignment of the note and mortgage when Ameriquest’s own

counsel improperly referred to Ameriquest as the holder of the note and mortgage throughout the

bankruptcy and adversary proceedings until January 9, 2008. .

Shortly after the Order to Show Cause entered on the docket, Citi Residential Lending,

Inc., in its capacity as loan servicer for the note, through attorneys David Liu and Jason E.

Goldstein of the Buchalter Nemer firm, filed a “Transfer of Claim Other than for Security” and

listed Ameriquest as the transferor of the claim evidenced by claim number 16.10  The Debtor has

8At some point prior to the trial in Adversary Proceeding 04-4517, the law firm of Ablitt & Caruolo, P.C. became Ablitt & Charlton, P.C.  A response was filed on behalf of Ablitt & Charlton, P.C. (The “Ablitt Firm”).

9The Debtor’s attorney had advised the Court that he was also unaware of the assignment until learning of it in the most recent adversary proceeding.

10The Transfer of claim form indicates that claim # “16 (Amended #1)” was transferred. There is no amended proof of claim regarding claim #16.


requested that the Court take judicial notice of the fact that Ameriquest is listed as the transferor;

Ameriquest responded that it was entitled to file the proof of claim in its own name pursuant to a

“Pooling and Servicing Agreement” dated June 1, 1998, a copy of which was filed at the hearing

on the Order to Show Cause on February 21, 2008 [docket #214].

All of the individuals and entities named in the Order to Show Cause, with the exception

of John Teston, filed written responses as required by the Order.11  The responses focused on

several common themes: first, nobody intended to mislead the Court; second, the Debtor and her

attorney knew that Ameriquest was not the noteholder and thus she was not harmed; third, notes

and mortgages are bought and sold so frequently, that it is difficult to know at any given moment

who holds the note and mortgage; and fourth, that the Pooling and Service Agreement permitted

Ameriquest to undertake some actions in its own name.  In addition, Ablitt & Caruolo and its

attorneys urged the Court to find that their reliance on representations of individuals at the

Buchalter firm was reasonable.  The Court held a hearing on the Order to Show Cause at which

these same points were reiterated and took the matter under advisement.


Throughout most of these proceedings, Ameriquest and its attorneys represented that

Ameriquest was the “holder” of the note of the note and mortgage.  The word “holder” has a

very specific definition when used in connection with a negotiable instrument such as a note.

11Ameriquest advised the Court that Mr. Teston was no longer employed by Ameriquest and that his current whereabouts are unknown.  Although Ameriquest mailed a copy of the Order to Show Cause to Mr. Teston’s last known address, Ameriquest is unsure whether he received the Order.  The Court will not proceed against Mr. Teston given this uncertainty and in light of Buchalter’s acceptance of responsibility for the preparation of the proofs of claim.


“Holder” with respect to a negotiable instrument, means the person in possession if the instrument is payable to bearer or, in the case of an instrument payable to an identified person, if the identified person is in possession….

M.G.L.A. 106 § 1-201(20).    The term “holder” is similarly defined when used in connection

with a mortgage.  See B LACKS LAW DICTIONARY, 1034 (8th ed. 2004)(mortgage-holder or

mortgagee is “one to whom property is mortgaged; the mortgage creditor or lender”). 

Unfortunately the parties’ confusion and lack of knowledge, or perhaps sloppiness, as to

their roles is not unique in the residential mortgage industry.  In re Maisel, 378 B.R. 19 (Bankr.

D. Mass. 2007);  In re Schwartz, 366 B.R. 265 (Bankr. D. Mass. 2007).   See also In re

Foreclosure Cases, 2007 WL 3232430 (N.D. Ohio 2007).  Nor are “mistakes” and

misrepresentations limited to the identification of roles played by various entities in this

industry.  In re Schuessler, 2008 WL 1747935, *3 (Bankr. S.D.N.Y. 2008) (movant’s motion

misrepresented debtor’s equity); Porter, Katherine M., “Misbehavior and Mistake in Bankruptcy

Mortgage Claims” (November 6, 2007).  University of Iowa Legal Studies Research Paper No.

07-29. Available at SSRN:   As this Court has noted on

more than one occasion, those parties who do not hold the note or mortgage and who do not

service the mortgage do not have standing to pursue motions for relief or other actions arising

from the mortgage obligation.  Schwartz, 366 B.R. at 270.  The Court has had to expend time and

resources, as have debtors already burdened in their attempts to pay their mortgages, because of

the carelessness of those in the residential mortgage industry and the bombast this Court and

others have encountered when calling them on their shortcomings.  In re Foreclosure Cases,

2007 WL 3232430 at *3, n.1.

 “The purpose of Rule 9011 is to deter baseless filings in bankruptcy and thus avoid the


expenditure of unnecessary resources by imposing sanctions on those found to have violated it.”

In re MAS Realty Corp., 326 B.R. 31, 37 (Bankr. D. Mass. 2005).  Pursuant to Fed. R. Bankr.

9011(b), an attorney or unrepresented party who signs “a pleading, written motion, or other

paper” is, among other things, certifying to the Court that “the allegations and other factual

contentions have evidentiary support, or if specifically so identified, are likely to have

evidentiary support after a reasonable opportunity for further investigation or discovery….”  The

certification is not an absolute guaranty of accuracy, however; the rule expressly permits the

representations to be based upon the signer’s best knowledge, information, and belief “formed

after an inquiry reasonable under the circumstances.”  The standard to be applied is “an objective

standard of reasonableness under the circumstances.”    Cruz v. Savage, 896 F.2d 626, 631 (1st

Cir. 1990).  “Courts, therefore, must inquire as to whether ‘a reasonable attorney in like

circumstances could believe his actions to be factually and legally justified.’” Cabell v. Petty,

810 F.2d 463, 466 (4th Cir.1987).  Cullen v. Darvin, 132 B.R. 211, 215 (D. Mass. 1991).   A

finding of unreasonableness must be shown by a preponderance of the evidence.  Miller-

Holzwarth, Inc. v. U.S., 2000 WL 291728, 3  (Fed. Cir. 2000).12

When Fed. R. Civ. P. 11 was amended in 1983,13 the Advisory Committee noted that

what constitutes a reasonable inquiry may depend on such factors as how much time for investigation was available to the signer; whether he had to rely on a client for information as to the facts underlying the pleading, motion, or other paper; whether the

12All parties, except Mr. Teston, who did not respond, submitted affidavits.  None of the parties requested an evidentiary hearing.

13In determining whether the imposition of sanctions is appropriate in [a] case, the Court may look to authorities interpreting Fed. R. Civ. P. 11 as a guidepost.  In re M.A.S. Realty Corp. 326 at 38, n.7.


pleading, motion, or other paper was based on a plausible view of the law; or whether he depended on forwarding counsel or another member of the bar.

In commenting upon the revisions made to subdivisions (b) and (c) of the Rule in 1993, the

Advisory Committee explained

The revision in part expands the responsibilities of litigants to the court, while providing greater constraints and flexibility in dealing with infractions of the rule. The rule continues to require litigants to “stop-and-think” before initially making legal or factual contentions. It also, however, emphasizes the duty of candor by subjecting litigants to potential sanctions for insisting upon a position after it is no longer tenable and by generally providing protection against sanctions if they withdraw or correct contentions after a potential violation is called to their attention.

If Rule 9011 is violated, the Court may impose sanctions.  “The imposition of sanctions

under Rule 9011 is a very serious matter. The decision regarding whether they should be

imposed requires a great deal of thought and care. Only those actions deemed to fall squarely

within the purview of Rule 9011 will result in a finding that it has been violated and the

concomitant imposition of sanctions by this Court.”   In re M.A.S. Realty Corp., 326 B.R. at 37.

If sanctions are imposed, “the Court must limit the amount imposed to ‘what is sufficient to deter

repetition of such conduct or comparable conduct by others similarly situated.’ Fed. R. Bankr. P.

9011(c)(2); Arcari v. Marder, 225 B.R. 253, 257 (D. Mass. 1998).”  Id. at 38.

With these tenets as a guide, the Court must examine the conduct of each party required

to show cause but before doing will dispense with some common arguments.  Virtually all of

parties argue that there was no intent to mislead the Court. Because the standard to be applied is

an objective one,  the Court may quickly dispatch this argument.  Intent is irrelevant.  The

argument that the assignment of the note and mortgage was a matter of public record and


therefore the Debtor knew or should have known of Norwest’s identity is relevant but

disingenuous, indeed even arrogant, since many of these same parties asserting this position

allege they had no way of knowing about the assignment.  They seek to bind the Debtor to one

standard and themselves to a much lower one.  Moreover the attorneys and law firms’ argument

that notes and mortgages frequently change hands multiple times, often with written

documentation executed later, which they offer as explanation as to why its reasonable for them

to rely on the representations of their clients should provide little shelter when they insist that the

Debtor should have known better than to take their pleadings literally.  This Court will not

countenance creditors and creditors’s attorneys holding themselves to a different and clearly

lower standard than what they expect of the Debtor.  It will not tolerate a lender’s or servicer’s

disregard for the rules that govern litigation, including contested matters, in the federal courts.  It

is the creditor’s responsibility to keep a borrower and the Court informed as to who owns the

note and mortgage and is servicing the loan, not the borrower’s or the Court’s responsibility to

ferret out the truth. 


Ameriquest attempts to portray itself as the victim; in its view, the Debtor knew the true

identity of the mortgage holder and that Ameriquest was the servicer.  As proof it cites to the

Debtor’s schedules and amended matrix.  Of course this argument has two major flaws.  First,

the Order to Show Cause was not issued to deal with misrepresentations to the Debtor and her

counsel but rather to determine whether the misrepresentations to the Court were indicative of

very sloppy practice at best or an intentionally deceptive practice at worst.  Second, as noted

above, that these obligations are frequently bought and sold imposes a responsibility to know


and correctly represent the status of the loan.  That Ameriquest had no role after March 2005 —

well before the trial in Adversary Proceeding 04-4517, was unknown to the Court. 

Similarly Ameriquest’s argument that the noteholder’s identity was disclosed during a

deposition of one of its employees misses the mark and, as noted above, so does the argument

that the assignment of the note and mortgage ultimately became a matter of public record.

Ameriquest argues that assignments of notes and mortgages frequently occur with

documentation of the transfers recorded, and even executed, at a later time.  Moreover

Ameriquest represents that it is not uncommon for the original noteholder or mortgagee to take

back the note and/or mortgage when a borrower defaults.  Using these excuses, the parties’

attitude appears to be that  confusion as to a party’s role is understandable against the current

commercial climate.  If the transfer of such negotiable instruments occurs at such a fast pace and

without timely recorded evidence of the transfers, why should the Court and Debtor’s counsel be

expected to know the roles of the parties?  The burden is clearly on the sophisticated, albeit

careless, lenders and servicers.

Ameriquest also seeks to hide behind the Pooling and Servicing Agreement by arguing

that the document gave Ameriquest the power to act in its own name, including for the purpose

of filing proofs of claim.  That may be true but proofs of claim filed under a written power of

attorney MUST have the power of attorney attached.  Fed. R. Bankr. P. 3001 and Official Form

10.  No part of the agreement was attached to the proof of claim.  It is worth repeating as a

warning to lenders and servicers that the rules of this Court apply to them.  Their private

agreements and the frenzied trading market for mortgages do not excuse compliance with the

Bankruptcy Rules any more than they would justify ignoring the Bankruptcy Code.


This Court finds that Ameriquest made repeated misrepresentations and its behavior in

failing to properly disclose its role was unreasonable under the circumstances.  Although

Ameriquest has informed the Court that it is no longer engaged in originating and servicing loans

and therefore presents no danger to misrepresent its status in the future, it ignores the fact that it

could reenter the residential mortgage arena in the future.  Moreover, sanctions are designed to

deter future actions not only those of the offending party but also “comparable conduct by others

similarly situated.”  Fed. R. Bankr. P. 9011(c)(2).  Therefore Ameriquest is sanctioned $250,000.


By its express terms Rule 9011 applies to law firms as well as attorneys.  Fed. R. Bankr.

P. 9011(c).  The Ablitt Firm and its attorneys, Jennifer Haskell and William Amann, filed a joint

response in which they assert that they had no knowledge of any mistaken or incomplete

information, that their filings and statements were based upon and consistent with Ameriquest’s

proof of claim and the information they received from Ameriquest and its national counsel, the

Buchalter Firm.  They also state that notes and mortgages are frequently sold back to the

originator when the notes are in default.  The Ablitt Firm also submitted the affidavit of Attorney

Steven Ablitt, who testified that the firm “relied upon the direction of its institutional clients

regarding what name relief should be sought in or a foreclosure action prosecuted in part because

of the uncertainty of unrecorded transfers.”  He cites to Title Standard No. 58 of the Real Estate

Bar Association of Massachusetts, which opines that a title is not defective solely because a

foreclosure is done in the name of an assignee even though the assignment of mortgage is not

executed until after the foreclosure, as evidence that memorialization of an assignment of the

mortgage is not the operative document by which mortgages are sold.  Thus he argues that


reliance upon an institutional client’s representations in a foreclosure referral is an accepted

practice. Neither Attorney Ablitt nor the response addresses the fact that, prior to the Debtor’s

current bankruptcy, the Ablitt firm had been retained to commence foreclosure proceedings and

seek relief from stay in the Debtor’s prior bankruptcy cases.  If they had, they would have seen

all those actions were undertaken in the name of Norwest.  So the question becomes whether a

firm should be permitted to rely on representations of its client without reviewing its own files.

At a time when mortgages and notes are bought and sold at a pace so swiftly that the assignor

and assignee cannot keep up with the paperwork, had the attorneys at the Ablitt firm checked the

firm’s file, they would have seen that Norwest was perhaps the real party in interest, at least

when prior actions were taken, and thus sought additional information.  The firm cannot shield

itself from its institutional knowledge.  Therefore the Court will impose sanctions of $25,000 on

the firm.

Attorneys Haskell and Amann aver that they were both associates at the firm at the time

of their involvement in these matters.  They assert essentially that they were carrying out the

bidding of their client, Ameriquest, and its national counsel, the Buchalter firm.  Nevertheless

they had an independent obligation to the Court pursuant to Rule 9011.  Yet the Court is mindful

that young associates are often not in a position to question the assignments given to them.

Because the affidavits are unclear as to what each associate was told when given the assignment,

the Court will not impose monetary sanctions on Attorneys Haskell and Amann but will let this

decision serve as a warning that in the future the Court expects associates will be cognizant of

and fulfill their responsibilities under Rule 9011.



Attorney Charlton was a partner at the Ablitt firm at the time he conducted the trial in

this matter but in his response he avers that he had not been involved in this matter since October

2006 and that he never heard of Norwest.  The response begs the question; should he have

known about Norwest.  For the same reasons that the Ablitt firm knew of Norwest, so should

Attorney Charlton.  Therefore Attorney Charlton is sanctioned $25,000.


K&L Gates did not enter this matter until February 2008.  The Court finds that the

conduct of the K&L Gates attorneys did not violate Rule 9011.


The Buchalter firm is one of the prime sources of the problem in this case.  One of its

unnamed paralegals prepared the proof of claim forms and by its own admission, the firm cannot

determine whether it had information as to the identity of the owner at the time the forms were

prepared, although it was aware of the Pooling and Servicing Agreement.  But as the Court has

noted, that agreement cannot change the requirements for filings proofs of claim in accordance

with the Bankruptcy Rules or Official Form 10.  The Buchalter firm’s response blithely ignores

the role it played in setting the series of misrepresentations in motion.  As national counsel to a

mortgage lender, it has a responsibility to know its client’s role in a case.14  It cannot rely on the

representations of its client; it has a responsibility to question and probe to the extent necessary

to ensure that it has elicited correct information.  The firm fell far short of what was required. 

14The Court notes that the Buchalter firm and Attorney Garfinkle filed pleadings on behalf of Norwest/Wells Fargo in Adversary Proceeding 07-4109.  None of the pleadings filed in response to the Order to show cause address the firm’s current and historical relationship with Norwest or Wells Fargo.  It would be curious indeed if the firm was national counsel to both yet incapable of distinguishing between the roles each played in a given case.


Consequently the firm is sanctioned $100,000.

Attorney Garfinkle became involved after the trial in Adversary Proceeding 04-4517 was

concluded.  His and the firm’s response argues that there was no reason for him to question

Ameriquest’s role.  Given that the court had awarded damages against Ameriquest, there was

nothing inherently improper about Attorney Garfinkle’s representations in this case.  His

involvement centered on pursuing an appeal of the judgment and opposing the imposition of

costs and attorney’s fees.  Thus attorney Garfinkle was dealing with the facts as they had

historically been presented to the Court, and made no representations of Ameriquest’s then-

current status.  Therefore the Court does not impose sanctions on Attorney Garfinkle.


Norwest/Wells Fargo seeks to hide behind the Pooling and Servicing Agreement.  Its

position is that it turned all responsibilities over to Ameriquest and it knew nothing about what

Ameriquest was doing.  The Court notes, however, that it knew nothing about what Ameriquest

was doing because it chose not to know.  It has attempted to bifurcate the benefits of the note,

namely its right to receive repayment of the loan, from all responsibilities associated with

servicing and collecting payments.  If Norwest/Wells Fargo wishes to engage servicers, as it is

certainly free to do, it cannot turn a blind eye to the actions of the servicers.  Had Norwest/Wells

Fargo shown even a modicum of oversight or review of Ameriquest’s behavior, it should have

been able to correct the misrepresentations.  The Court does not accept that one can simply by

contract sever the benefits and burdens associated with residential mortgage lending.  The Court

joins in the frustration expressed by the courts in In re Schuessler and In re Parsley, 2008 WL

622859 at * 19 (Bankr. S.D.Tex. 2008) (“Tracing the steps leading up to the filing of the Motion


shows that this is an assembly line process.”).  The link between lender and borrower in the

current residential mortgage industry is a multilayered, tightly-if not hopelessly-entangled

“assembly line,” the purpose of which seems to be the avoidance of responsibility.  In re

Schuessler, 2008 WL 1747935at *25 (“Notwithstanding Chase Home Finance’s [the apparent

servicer] disingenuous claim that its system is designed to protect debtors, it primarily exists to

protect Chase Home Finance and JPMorgan Chase Bank [the apparent noteholder and

mortgagee].”).  Under the guise of creating a complex structure to suit their needs, Wells Fargo

and Ameriquest have attempted to jettison the obligation to be forthright and diligent with the

Court and the Debtor.  This Court will not allow Wells Fargo or any other mortgagee to shirk

responsibility by pointing fingers at their servicers.  Moreover because Wells Fargo continues as

a participant in the mortgage industry, the Court is cognizant that the sanction must be sufficient

to deter its cavalier behavior in the future.  Therefore the Court will impose a sanction of

$250,000 on Wells Fargo.  In imposing the sanction on Wells Fargo, the Court is not limiting the

sanction against Wells Fargo solely and to the extent that there are assets in the AMERESCO

Residential Securities Corporation Mortgage Loan Trust 1998-2, which was established under

the Pooling and Servicing Agreement.  That the note and mortgage were subsequently assigned

to a trust holding a pool of notes and mortgages by Wells Fargo’s predecessor, Norwest, is

simply another example of the layers interposed between borrower and lender in today’s

marketplace.  It cannot serve as a vehicle to deflect ultimate responsibility from Wells Fargo.


For the reasons set forth herein, sanctions will be imposed as set forth above on

• Ameriquest in the amount of $250,000;


• Ablitt & Charlton, P.C., formerly known as Ablitt & Caruolo, P.C., in the amount

of $25,000;

• Attorney Robert Charlton in the amount of $25,000;

• Buchalter Nemer Fields & Younger in the amount of $100,000; and

• Wells Fargo in the amount of $250,000.

Sanctions will not be imposed on

Attorney Jennifer Haskell;

Attorney William Amann;

Attorney R. Bruce Allensworth; and Kirkpatrick & Lockhart Preston Gates Ellis.

A separate order will issue.

Dated: April 25 , 2008 ___________________________ Joel B. Rosenthal United States Bankruptcy Judge. 


Mortgage Defense and Offense: Bankruptcy Judge Whacks “Assembly Line” Attorneys For $150K In Sanctions For Misrepresenting Ownership Of Promissory Note In Mortgage Foreclosure

The Wall Street Journal Law Blog reports:

  • On Friday, two law firms — Buchalter Nemer and Ablitt & Charlton, along with name partner Robert Charlton — got whacked with a combined $150,000 in sanctions. In a decision regarding an order to show cause in the case, called Nosek v. Ameriquest, bankruptcy judge Joel Rosenthal found that, throughout earlier proceedings, lawyers at both firms, in representing Ameriquest, had continually represented that Ameriquest was the holder of Nosek’s mortgage, when in fact it had been assigned, at least twice, to other lenders.
  • Judge Rosenthal held: “At a time when mortgages and notes are bought and sold at a pace so swiftly that the assignor and assignee cannot keep up with the paperwork, had the attorneys at the Ablitt firm checked the firm’s file, they would have seen that Norwest was perhaps the real party interest. . . . The firm cannot shield itself from institutional knowledge.” Rosenthal fined the firm $25,000, and attorney Robert Charlton another $25,000. (The Buchalter firm was fined the remainder, or $100,000.)

According to the court order, the lender/servicer and trustee involved, Ameriquest and Wells Fargo, were also clipped for $250,000 each in sanctions. Judge Rosenthal, however, declined to sanction the two associates who assisted Charlton in the case.

For more, see Judge Has Stern Words (But No Fine) for Associates at Sanctioned Firm.

See also, The Wall Street Journal: Wells Fargo Is Sanctioned For Role in Mortgage Woes:

  • Joel B. Rosenthal, a Massachusetts federal bankruptcy judge, wrote in a decision that Wells Fargo “turned all responsibilities over” to the servicer but “turn[ed] a blind eye” to the servicer’s mistakes. Had the company “shown even a modicum of oversight or review” of the servicer’s behavior, “it should have been able to correct the misrepresentations” made to the court. He added: “This court will not allow Wells Fargo or any other [mortgage holder] to shirk responsibility by pointing fingers at their servicers.” A Wells Fargo spokeswoman said in a statement: “We believe the judge failed to appreciate Wells Fargo’s limited role as trustee in the servicing of the home loan. As a result, Wells Fargo plans to appeal the order.”

For the relevant court documents in this case, see:

For other posts that reference the failure of some mortgage lenders and their attorneys to file the required loan documents when starting foreclosures, Go Here, Go Here, Go Here and Go Here.

Foreclosure Defense: Countrywide Faces Civil RICO, RESPA Charges In Washington Class Action Suit; Accused Of Using Do-Nothing Subsidiary To Inflate, Pocket Appraisal Fees

In Seattle, Washington, the law firm Hagens Berman Sobol Shapiro LLP announced last week:

  • A group of Washington homeowners this week filed a lawsuit against Countrywide, a wholly owned subsidiary of Bank of America (NYSE: BAC) and the nation’s largest mortgage company, claiming the mortgage giant illegally rigged the appraisal process in a scheme to boost profits at the expense of homeowners and independent appraisers.
  • Filed under the Racketeering Influenced and Corrupt Practices Act (RICO), the suit claims that Countrywide forces homeowners to use its wholly owned subsidiary LandSafe, for appraisals. The company then turns around and subcontracts the work to independent appraisers while charging homeowners as much as 200 percent of the actual cost of the appraisal.


  • The lawsuit, filed in U.S. District Court in Seattle, seeks to represent all homeowners who purchased or refinanced their home through Countrywide and LandSafe, and asks the court to award plaintiffs damages. […] The lawsuit cites violations of federal law under RICO and RESPA. Other counts include unjust enrichment, breach of fiduciary duty and violation of California unfair competition law. You can learn more about this case by visiting

For the press release, see Hagens Berman Files Class Action Against Lending Giant Countrywide.

For the lawsuit, see Clark v. Countrywide Home Loans, Inc., et al.

Foreclosure Offense: HUD Launches Program In Six Cities To Help Homeowners Not Yet In Foreclosure

In Miami, Florida, The Miami Herald reports:

  • [A]nother effort to keep borrowers from losing their homes to foreclosure was launched Wednesday by the Department of Housing and Urban Development. Called ”Keep Your Home, Know Your Loan,” the campaign includes public service announcements and print materials that will be distributed in six major metropolitan areas where home foreclosures rates are soaring, including Chicago, Los Angeles, Detroit, New York, Phoenix, and, naturally, Miami.(1)
  • This is an opportunity for us to reach out to people who may not be in foreclosure yet, but could be facing one this year, due to a rate change, the economic downturn, job loss or having their hours cut,” said Armando Fana, director of HUD’s field office in South Florida.

For more, see Miami homes get HUD lifeline (Federal housing officials chose Miami and five other cities to launch a foreclosure prevention campaign, complete with a hot line, and warned home owners to watch out for ‘rescue’ scams).

Go here for more information on the HUD program – Keep Your Home. Know your Loan.