FDCPA Claims May Extend Beyond 2 Year Statute of Limitations

And another analysis from one of my trusted “anonymous” contributors who really know what is going on:

FDCPA also has a 2 year SOL for most states, and most judges go back to the supposed transaction from which it stems (The supposed home loan, as to when clock starts ticking). Many homeowners can prove the claims of the Servicers having an interest in the loan is false, therefore the REMIC Trust is false, and therefore there was no 2 year lapse traceable back to a defined transaction, FDCPA claims should not toll either.

So what that means to me is interesting in two scenarios:

A.) Every letter you receive to Modify a loan from a “Servicer” (i.e, become indebted further to someone you never owed in the first place), is really a disguised new loan, because the original debt never existed with them. Therefore as a new loan, it falls back under TILA and REG Z, and they have violated it all over in a “mod”, starting the TILA clock ticking again, as well as violating the FDCPA all over again.

B.) If it is a straight collection notice, this, coupled with your monthly billing statement, violates a few things:

– The Servicer has already violated TILA’s payment processing requirements: Payment Processing—12 CFR 1026.36(c)(1)
– The Servicer has already violated Periodic Statements for Residential Mortgage Loans—12 CFR 1026.41
– Each new collection notice, since it is in fact not traceable back to a real world loan transaction, and is being sent by someone with no interest to collect from you, is in fact a separate and distinct “roll of the dice” or “fishing expedition” to extort money from a stranger fraudulently, with the threat of a debt that was never owed them. This seems to me that every notice is unique (you never know which one the person it is sent to will cave on and send the fraudster money for, they all are usually for ever increasing $ amounts, therefore the amounts they are trying to collect is unique) and much like a lottery ticket, the bogus bill collector is playing a numbers game to see which ticket might “hit”. In this sense, I don’t think you can claim the FDCPA ever tolls, which is important given the wide latitude of claims the FDCPA allows for.

Also important, look at which claims allow for Joint and Several liability. If you are just suing Chase that is one thing; But you sue Chase as Servicer, the Trustee of the REMIC, LPS as agent, and the Law firm they used to effectuate a scheme, you just quadrupled your claim amount (Not sure which claims allow for this, but you get a good $180K hit, quadruple it, your close to a Million right there)..

Modification Minefields as Foreclosures Resume Upward Volume

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Listen to Neil Garfield Show on Thursday February 26, 2015 at 6pm EDT., and each Thursday

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see http://www.njspotlight.com/stories/15/02/02/new-foreclosure-procedures-put-to-test-as-number-of-cases-climbs-in-nj/

New Jersey now has an upsurge of Foreclosure activity. It is on track to become first in the nation in the number of foreclosures. What is clear is that the level of foreclosure activity is being carefully managed to avoid attention in the media. Right now, foreclosure articles and the infamous acts of the banks in pursuing foreclosures is staying off Page 1 and usually not  anywhere in newspapers and other media outlets online and and in distributed media. The pattern is obvious. After one area becomes saturated with foreclosures, the banks switch off the flow and then move to another geographical area. This effectively manages the news. And it keeps foreclosures from becoming a hot political issue despite the fact that millions of Americans are being displaced by illegal foreclosures based upon invalid mortgage documents and the complete absence of any real creditor in the mix.

As foreclosures rise, the number of attempts at modification also rise. This is a game used by “servicers” to assure what appears to be an inescapable default because their marching orders are to get the foreclosure sales, not to resolve the issue. The investment banks need foreclosures; they don’t need the money and they don’t need the house —- as the hundreds of thousands of zombie foreclosures attest where the bank forecloses and abandons property where the borrower could and would have continued paying.

The problem with modifications is the same as the problem with foreclosures. It constitutes another layer of mortgage fraud perpetrated by the Wall Street banks, who are now facing increasingly successful challenges to their attempts to complete the cycle of fraud with a foreclosure.

The “servicer” whom nearly everyone takes for granted as having some authority to move forward is in actuality just as much a stranger to the transaction as the alleged Trust or “Holder”. The so-called servicer alleged authority depends upon powers conferred on it by the Pooling and Servicing Agreement of an unfunded Trust that never completed its mission to originate or acquire loans. If the REMIC trust doesn’t own the loans, the servicer claiming authority from the PSA is claiming vapor. If the Trust doesn’t own the loan then the PSA is irrelevant and the powers conferred in the PSA are pure vapor.

This brings us full circle to where we were in 2007-2008 when it was the banks themselves that claimed that there were no trusts and that there was no securitization. They were, as it turns out, telling the truth. The Trusts were drafted but never funded, never used as conduits and never engaged in ANY transaction in which the Trust had funded the origination or acquisition of loans. So anyone claiming authority from the trust was claiming authority from a fictional character — like Donald Duck.

Complicating matters further is the issue of who owns the loan when there is a claim by Freddie or Fannie. Both of them say they “have” the mortgage online when they neither “have it” nor “own it.” Fannie and Freddie were one of two things in this mess: (1) guarantors, which means they have no interest until after a creditor liquidates the property and claims an actual money loss and Fannie and Freddie actually pays off the loss or (2) Master trustee (and probably guarantor as well) for a REMIC Trust that probably has no greater value than the unfunded REMIC Trusts that are unused conduits.

Further complicating the issue with the former Government Sponsored Entities (Fannie and Freddie) is the fact that many banks have been forced to buy back or pay damages for violating underwriting standards and other types of fraud.

So how do you get or sign a modification with a servicer that has no authority and represents a Trust that has no interest in the loan? The answer is that there is no legal way to do it — BUT there is a way that would allow a legal fiction to be created if a Court issued an order approving the modification and declaring the rights of the parties. The order would say that XYZ is the servicer and ABC is the creditor or owner of the loan and that the homeowner is the borrower and that the modification agreement is approved. If proper notice (including publication) is given it would have the same effect as a foreclosure and would eliminate all questions of title. Without that, you will have continuing title problems. You should also request that the “Servicer” or “Trustee” arrange for a “Guarantee of Title” from a title company.

For the tricks and craziness of what is happening in modifications and the issues presented in New Jersey and other states click the link above.

Adam Levitin on Backdating: A Pattern of Conduct at Ocwen and Other Players in the Foreclosure Frenzy

see also http://themreport.com/news/government/01-13-2015/california-moving-suspend-ocwens-mortgage-license

Adam Levitin has definitely established himself as one of the more respected figures in analyzing and commenting on mortgage and foreclosure practices. In this article below, he reveals the fraudulent nature of even the most benign looking foreclosures. Various parties, including Ocwen which he cites in particular, regularly backdated denials of modification and backdated ownership paperwork.

His emphasis is on the pattern of conduct dating back many years which continues unabated despite administrative findings of wrongdoing, and settlements in which they agreed to correct these practices. If you look at Select Portfolio Servicing, formerly Fairfield Capital, (and now owned by Credit Suisse) you will see that they were guilty of fraudulent servicing practices as far back as 2003.In a recent case where Patrick Giunta and I represented the homeowners the court found that there was no authority of the servicer and no loan transfer to the alleged Trust. The Judge specifically expressed her displeasure with the obvious indications of backdating and fabrication of endorsements, assignments and the attempt at using Powers of Attorney that were a fabricated work-around

Levitin is right in his conclusion. And I would add that any “presumption” rebuttable or otherwise, should not be allowed regarding any paperwork that is produced by these players. Levitin should be a regular read for those of you who are following this evolving mess.

http://www.creditslips.org/creditslips/

Corporate Recidivism? Ocwen’s Charter Problems

posted by Adam Levitin
Last month mortgage servicer Ocwen (that’s NewCo backwards) was mauled by the NY State Department of Financial Services. Now the California Department of Corporations is seeking to revoke Ocwen’s license to do business in that state.
Here’s the thing that is often forgotten: this ain’t the first time! Ocwen used to be a federal thrift. In 2005, however, Ocwen “voluntarily” surrendered its thrift charter in the face of predatory lending/servicing investigation. And here we are, a decade later. What’s changed? By the NY and California allegations, not much. In other words, we’re looking at a potential case of corporate recidivism. I’ll refrain from commenting on the merits of the allegations, but there should be zero tolerance for corporate recidivism.
While I’m at it, a word about the substance of the NY allegations and remedy. NYDFS accused Ocwen of backdating loan modification denial letters to borrowers facing foreclosure (and thereby depriving the borrowers of a chance to timely appeal the denial). Sadly, this isn’t the first time backdating has reared its head in the servicing business. Remember how the robo-signing story broke? A GM/Ally employee named Jeffrey Stephan stated in a deposition that he personally signed some 10,000 foreclosure affidavits a month. That was the story that the media glommed onto. But the 10,000 affidavits/month was an unexpected deposition by-product. The real issue uncovered in that deposition was that GM/Ally had been backdating foreclosure documents to show that it had standing at the time it filed foreclosure suits, despite not actually being the noteholder and mortgagee until a subsequent date. Loans were supposedly transferred on Christmas Day, Easter, New Year’s Day, etc. So it would seem that backdating may not be an isolated problem to Ocwen. Lastly, it’s worth comparing the NYDFS remedy with the National Mortgage Settlement. NYSDFS got $150 million in “hard dollar” loan mods (not mods paid for on investors’ dime). Ocwen is subject to an independent monitor’s supervision for three years and cannot acquire any more mortgage servicing rights (MSRs). And, Ocwen’s Chairman must resign and two additional independent board members must be added.
In contrast, the National Mortgage Settlement (NMS) was largely based on “soft dollar” mods, rather than real borrower relief. It did come with an independent monitor, but the NMS monitor isn’t able to be in the banks’ face the way the Ocwen monitor can. The NMS didn’t limit acquisition of MSRs. And it didn’t touch existing bank management or board structure. Put it this way: if the federal government and state AGs had as much spine as Ben Lawsky, Mssrs. Dimon, Moynihan, and Stumpf would be looking for new jobs (or enjoying their retirement). Of course, Ocwen is a scrappy, non-bank, non-SIFI. So it doesn’t enjoy the kid glove treatment.
The NYDFS Ocwen settlement sets out a new potential paradigm for mass consumer financial abuse settlements: real money, serious monitoring, and heave-ho to the old management. If senior management thinks that their job security is at risk for consumer abuse, they might well be more proactive at preventing it in the first place.

JDSupra: It isn’t the crime — it is the cover up

For further information please call 954-495-9867 or 520-405-1688

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Bryan G. Scott has written an excellent article that should be read in its entirety at http://www.jdsupra.com/legalnews/its-not-the-crime-its-the-cover-up-e-39616/

This article runs to the heart of the mortgage mess, the cover-up and the potential impact on past, present and future foreclosures in the application of statutes of limitation relating to causes of action for violation of the truth in lending act, statutory remedies, and common-law actions in negligence and fraud. Using law from construction defects suits, the author has identified key factors in challenging the defense of the statute of limitations.

Because of the obvious danger posed by dishonest defendants concealing defects to take advantage of the statute of repose, many state legislatures have enacted fraud exceptions to their statutes of repose. The North Carolina statute of repose explicitly excludes “any person who shall have been guilty of fraud, or willful or wanton negligence” in the course of improving real property, and further excludes any person who has “wrongfully concealed” the fraud or willful or wanton negligence. N.C. Gen. Stat. § 1-50(a)(5)(e). Establishing the fraud or willfulness or wantonness necessary to invoke this exception is a high standard and typically requires proving the contractor or developer deliberately covered or concealed defects that it knew or should have known of in conscious disregard of the eventual owner’s rights. Where the defendant’s actions do not rise to this level, the North Carolina statutory exception does not apply.

[EDITOR’S NOTE: We already know that the servicers, investment banks and originators committed various acts of forgery, perjury, fabrication, robo-signing and other things that NO BANK WOULD ACCEPT IF THEY WERE ON THE OTHER SIDE OF THIS ISSUE. They continue to hide the true facts, cover-up and otherwise obscure or wear down beleaguered homeowners. These are facts that lay solely within the care, custody and control of the banks who control the servicers and the trustees. The investors, trustees and borrowers are considered barred from even inquiring into the nonexistent transactions that lay at the base of the chain of fabricated documentation and the only way to get it is through illegal means that cannot be used in court or discovery which the courts won’t allow. In my opinion there are very few TILA violations where the statute of limitations should bar a claim because the basic facts of the loan contract have been withheld and intentionally misrepresented.]

The North Carolina Court of Appeals reaffirmed the application of equitable estoppel to construction defect disputes in its September 2014 decision in Trillium Ridge Condominium Association, Inc. v. Trillium Links & Village, LLC, No. COA14-183, ___ N.C. App. ___ (Sept. 16, 2014) (slip op.).

As explained in Trillium Ridge, equitable estoppel is available in proper cases under North Carolina law to bar a defendant from relying on either a statute of limitations or statute of repose. Equitable estoppel requires “(1) conduct on the part of the party sought to be estopped which amounts to a false representation or concealment of material facts; (2) the intention that such conduct will be acted on by the other party; (3) knowledge, actual or constructive, of the real facts.” White v. Consol. Planning, Inc. 166 N.C. App. 283, 305 (2004), disc. review denied, 359 N.C. 286 (2005). The party asserting the defense must have “(1) a lack of knowledge and the means of knowledge as to the real facts in question; and (2) relied upon the conduct of the party sought to be estopped to his prejudice.” Id. at 807. Furthermore, the plaintiff must have been induced to delay filing its legal action by the defendant’s misrepresentations. Jordan v. Crew, 125 N.C. App. 712, 720, disc. review denied, 346 N.C. 279 (1997).

UNFUNDED TRUSTS: WHY IT MATTERS

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Or call in at (347) 850-1260, 6pm Eastern Thursdays

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For further information please call 954-495-9867 or 520-405-1688

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On tonight’s show we will talk about the alleged trusts that allegedly own the loans. In most cases, they do not own the loan nor do they represent the interests of the owners. The owners of the DEBT are the investors who advanced money to the investment bank that sold mortgage bonds to the investor (pension fund). There are two main reasons why this is important:

  1. An unfunded trust has no money to buy or originate loans. Therefore it is an improper party to bring any action to collect or enforce the debt. This is especially true when the unfunded trust has no legal claim to enforce the loan on behalf of the owners. The REMIC Trust should not be allowed to cause a foreclosure, or interfere with the rights of borrowers and investors. Its “servicers” have no right to collect money and when they do collect money from the borrower, they owe the money back to the borrower who paid it to the servicer. This has been discussed in cases highlighted on this blog over the last week.
  2. The unfunded trust is evidence of a fraudulent scheme in which the investors (pension funds) were tricked into advancing money to an investment bank who then misused the money, didn’t deliver it to the trust that issued the mortgage bonds that were sold, and then acted as a conduit between the investors and the borrowers — without either one knowing what was really happening. In a foreclosure, this means that the alleged enforcement of the loan is really furtherance of the fraudulent scheme against investors. Raising this issue does NOT mean there is no debt. It means, in most cases, that foreclosure is not an option because the perpetrators of the fraud and the initiators of the collection and enforcement of the alleged “loan” are one and the same. Hence the Court SHOULD be interested in not being part of a fraudulent scheme. It is a classic case of unclean hands.

The issue is proof and mores specifically the willingness of the court to let you prove your case. This comes down to pleading, discovery, motions to compel that spell out your narrative for the case and investigation through forensic auditors and private investigators. Unfunded REMIC Trusts represent a potential attack against the party initiating foreclosure that can be fatal to their claim if properly presented.

As a general observation these attacks are met with claims of presumptions when dealing with negotiable paper, and the claim that the borrower has no standing to raise the issue. But the borrower clearly does have standing to raise the issue if the borrower is claiming return of all money paid and claiming that the foreclosure action is part of a fraudulent scheme to the detriment of the real creditor and the detriment of the borrower, both of whom under Federal Law are required to pursue options for modification or settlement.

And the legal presumptions only apply to paper that is truly negotiable and where there is no evidence of trustworthiness or lack of credibility. The recent transfers from Chase and other entities to SPS are not really transfers of servicing rights. The “loan” is clearly already declared to be in default — making the claim of negotiable paper (and the presumptions) moot. So the entrance of SPS or another “servicer” under these circumstances is just another layer to fool the court and the borrower.

They are merely hiring SPS to

(a) enforce, because SPS is not processing payments from the borrower nor making payments to the investors (that is done by Chase or whoever is the the named servicer in the PSA) and

(b) create the illusion of business records by having an SPS representative testify that the business records of SPS should be admitted because SPS examined the prior records of the prior servicers and found them to be correct in what they call a “boarding” process. This is a blatant attempt to circumvent the rules of evidence. Both the attempt at creating legal presumptions regarding the note and mortgage and the attempt to use the business records of an “enforcer” posing as a “servicer” should be rejected.

THIS ARTICLE IS MY OPINION AND SHOULD NOT BE USED AS A SUBSTITUTE FOR THE ADVICE FROM AN ATTORNEY LICENSED TO PRACTICE IN THE JURISDICTION IN WHICH YOUR PROPERTY IS LOCATED.

Wisconsin BKR Judge Orders Wells Fargo to Disgorge Payments It Received

For further information please call 954-495-9867 or 520-405-1688

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Hat tip to anonymous

The full case was 25 pages, I redacted to about 4 below, but very substantial topics and analysis on this similar to Rivera in full version.
– A win on recovery of mortgage payments made to Wells, $73,000.
– Loss on recovery of attorneys fee’s to Debtor, BUT, court stated these would be proper if circumstances met criteria, just not here, and
Very interesting analysis on return of note, which backs up your prior analysis; Note will not be returned to Debtor, as even though note is not enforceable by Wells or its servicers, real party in interest may show up at some point. Debtor also did not point to any prior case law that would require return of note.

I question whether the bankruptcy judge had the required jurisdiction to enter this order in all respects. But the analysis he presents is pretty much on target and once again Wells Fargo is shown to be making false statements and representations in court with virtual immunity even in this case.

Decision dated 10/21/14
http://stopforeclosurefraud.com/wp-content/uploads/2014/12/2014-10-21-In-Re-Thompson-.pdf

UNITED STATES BANKRUPTCY COURT

FOR THE EASTERN DISTRICT OF WISCONSIN

In re Chapter 13 Dennis E. Thompson and Pamela A. Thompson, Case No. 05-28262-svk Debtors.

MEMORANDUM DECISION ON DEBTORS’ MOTIONS FOR CERTAIN RELIEF AGAINST WELLS FARGO

Since this case’s inception in 2005, it has been fraught with litigation, failed mediations, discovery disputes, accusations of attorney misconduct and otherwise tumultuous actions. In 2013, these proceedings eventually culminated in this Court’s disallowance of the proof of claim filed on behalf of Wells Fargo Bank after it was established that Wells Fargo was not the holder of the mortgage note underlying the claim. As a result, the pro se debtors filed a flurry of motions to effectuate the claim disallowance decision. This memorandum decision will hopefully end the litigation concerning the mortgage note, at least in the bankruptcy court………………

……..“On January 12, 2006, the Court confirmed the Debtors’ Chapter 13 plan. Under the plan, the Debtors proposed to make direct current mortgage payments and cure their pre-petition mortgage arrearage via payments to the trustee. On June 27, 2011, the Debtors filed a motion to enter into the Court’s mortgage modification mediation program with Litton. (Docket No. 142.) In preparation for the mortgage mediation, the Debtors hired an attorney and conducted a title search on their property. (Hearing Recording, Docket No. 164, at 10:53:15.) The title search revealed that Wells Fargo did not hold the title to their mortgage. (Id.) Mediation attempts with both Litton and Ocwen Loan Servicing, LLC4 (“Ocwen”), the current servicer for Wells Fargo, failed. (Docket No. 168; Docket No. 213.) On March 19, 2012, the Debtors filed a motion that the Court construed as an objection to the Claim. (Docket No. 159.) On April 2, 2012, Ocwen responded to the objection. After several preliminary hearings, discovery disputes, and a final evidentiary hearing, the Court entered an order disallowing the Claim. (Docket No. 217, 5.) The Court determined that neither Wells Fargo nor its servicers had standing to file a claim in the Debtors’ bankruptcy case. (Id.) Wells Fargo appealed. U.S. District Judge J.P. Stadtmueller affirmed the Court’s decision to disallow Wells Fargo’s Claim, holding:

“[E]ven if each version of the note self-authenticates under FRE 902(9), without testimony or other evidence from Ocwen to “‘connect the dots’” between the disputed allonge and the note, the evidentiary record contained only equally probable “authentic” versions of the note countervailing one another. Against that evidentiary backdrop, the bankruptcy court committed no error in finding insufficient evidence to confer standing on Ocwen to prosecute the disputed proof of claim.

Ocwen Loan Servicing, LLC v. Thompson, No. 13-CV-487, 2014 U.S. Dist. LEXIS 2109, at *14- 15 (E.D. Wis. Jan. 7, 2014).

Prior to the district court decision, the Debtors filed motions for reimbursement of mortgage payments (Docket No. 222) and attorneys’ fees. (Docket No. 223.) The Court entered an order determining that no action would be taken on the Debtors’ motions until after the district court entered a final order in the appeal. (Docket No. 225.) After the district court decision, the Debtors filed a motion to require the return of the original note to them. (Docket No. 239.) The Court set a briefing schedule. The parties have filed briefs. The motions are now ripe for decision.

 

ANALYSIS

Reimbursement of Mortgage Payments made on Disallowed Claim

Based on the disallowance of the Claim, the Debtors request a refund of all mortgage payments and trustee payments made to Litton and Ocwen since their bankruptcy case was filed in 2005. (Docket No. 222, 1.) Arguing that they “have every legal right to believe that they were or should have been paying the proper party,” (Id.), the Debtors calculate that a total of $146,972.45 should be reimbursed to them. (Docket No. 257, 4.) This amount includes $21,587.64 for “lost mortgage payments,” $106,167.91 for mortgage payments made outside the plan from July 2005 to December 2011, $11,716.90 for disbursements made by the Chapter 13 trustee on the disallowed Claim, and $7,500.00 for “return of sanction.”5 (Id.)

Wells Fargo raises only two objections to the Debtors’ motion for a refund of mortgage payments. First, Wells Fargo contends that the Court previously denied this motion at the March 14, 2013 hearing on the Debtors’ objection to Wells Fargo’s Claim……………….”

Second, Wells Fargo argues that the Court must balance the equities under the circumstances.6 Wells Fargo notes that Ocwen and Litton both expended funds during the course of the bankruptcy to prevent the Debtors’ property from going into tax foreclosureWells Fargo also argues that the Court’s decision disallowing the Claim did not alter the fact that the “Debtors borrowed money on April 14, 2000, and have yet to repay their debt,” and “[u]nder the circumstances, it would be inequitable to require Ocwen to take yet another loss on this account.” (Id. at 5-6.)

“The Court rejects Wells Fargo’s attempt to characterize the Court’s comments at the March 13, 2013 hearing as a definitive ruling on whether Wells Fargo should have to refund the payments it received from the Debtors during the bankruptcy case…………..

Wells Fargo’s second argument requests that the Court balance the equities under the circumstances. Wells Fargo cites one case to support its position, which notes that “[c]ourts exercising equitable powers must behave akin to doctors operating under the Hippocratic Oath: first, do no harm. We must do equity to all parties and not just the party seeking equitable assistance . . .” Briarwood Club, LLC v. Vespera, LLC, 2013 WI App 119, ¶ 1, 351 Wis. 2d 62, 839 N.W.2d 124. Wells Fargo suggests that if the Court grants the Debtors’ request, the Debtors will gain a free house. It notes that the Debtors borrowed money that they have not fully repaid, and as long as they are not required to repay it twice, the Debtors are obligated under the mortgage note. (Docket No. 246, 6.) Wells Fargo explains that while it may not have legal enforcement power under Wisconsin law, it does still hold physical possession of the note. (Id.)

And, according to Wells Fargo, since there have not been any competing claims for repayment on the loan, it would be inequitable for the Court to require Wells Fargo to take another loss on this delinquent account. (Id. at 7.)

A similar argument was made and rejected in Thomas v. Urban P’ship Bank, Residential Credit Solutions, Inc., 2013 U.S. Dist. LEXIS 59818 (N.D. Ill. April 26, 2013). In that case, Barbara Thomas filed suit against Urban Partnership Bank, alleging that Urban sought payments on a mortgage loan that it did not own. The central issue involved whether Thomas’s mortgage loan was included in an asset purchase agreement executed between Urban and Thomas’s original lender, ShoreBank. Urban moved to dismiss the complaint, arguing among other theories that there were no competing claims for payment on the note. But Thomas’s unjust enrichment claim survived the motion to dismiss. According to the district court:

Thomas clearly alleges that she owes someone money under the mortgage loan and that that someone is not Urban, and so it is irrelevant that no one else is currently making claims to her mortgage payments. If Thomas is correct that she owes money to someone other than Urban, then by paying Urban she has lost money without reducing the debt she owes to the loan’s true owner. . . . That amounts to the enrichment of Urban to Thomas’s detriment, since Thomas has lost and Urban has gained money for nothing . . . If, as Thomas adequately alleges, Urban had no right under the mortgage loan to the payments it received and Thomas made the payments on the mistaken premise that Urban was the loan’s owner, then fundamental principles of justice, equity, and good conscience require that Urban disgorge the payments . . . .

Id. at *27-29 (internal citations and quotations omitted).8

The district court in Thomas relied on Bank of Naperville v. Catalano, 86 Ill. App. 3d 1005, 408 N.E.2d 441, 444, 42 Ill. Dec. 63 (Ill. App. 1980), in which the court held,

“As a general rule, where money is paid under a mistake of fact, and payment would not have been made had the facts been known to the payor, such money may be recovered.”

The court also cited the Restatement (Third) of Restitution and Unjust Enrichment § 6 (2011) “Payment of Money Not Due” to the effect that payment by mistake gives the payor a claim in restitution against the recipient to the extent payment was not due, and a payor’s mistake as to liability may be a mistake about the identity of the creditor. The Restatement discusses two examples of payment by mistake that may be applicable here: mistake as to payee and mistake as to liability.9 Under mistake as to payee, the Restatement notes that “[a] mistaken payor has a claim in restitution when money is mistakenly transferred to someone other than the intended recipient.”…………..

Under mistake as to liability, the Restatement states that “[a] payor’s mistake as to liability may be a mistake about the identity of the creditor. In such a case, the payor believes that an obligation runs to the payee when in fact the obligation is to someone else.” The latter example applies here.10 The Debtors mistakenly believed that Wells Fargo was entitled to enforce the mortgage note. Wells Fargo’s servicers filed proofs of claim in the bankruptcy case, and they directed the Debtors to send their mortgage payments to Wells Fargo, in care of the servicers. The servicers accepted the Debtors’ mortgage payments on behalf of Wells Fargo, when in fact, Wells Fargo did not validly hold the mortgage note, and Wells Fargo was not entitled to the payments.

Although Wells Fargo has responded to the Debtors’ request for a refund with a plea for equity,11 in fact, the equities here favor the Debtors.

“A claim for unjust enrichment is based on the “universally recognized moral principle that one who received a benefit has the duty to make restitution when to retain such a benefit would be unjust.” Puttkammer v. Minth, 83 Wis. 2d at 689 (quoting Fullerton Lumber Co. v. Korth, 37 Wis. 2d 531, 536 (Wis. 1968))…..

 However, it is not enough to merely establish that a benefit was conferred and retained; the retention must also be inequitable. Id. This Court previously determined that Wells Fargo is not the holder of the Debtors’ mortgage note with legal authority to enforce it; that determination was affirmed on appeal. Without authority to enforce the note, Wells Fargo is not entitled to receive payments under the note. Only the party with a legally enforceable right to enforce the note is entitled to retain the benefit of the Debtors’ mortgage payments. Nevertheless, Wells Fargo, through its servicers, received voluntary payments from the Debtors and payments from the Trustee since the commencement of this bankruptcy case, subjecting the Debtors to the possibility of having to pay twice if the true owner of the note appears. Since Wells Fargo and its servicers have no legal right to the Debtors’ mortgage payments, retention of the Debtors’ mortgage payments would be inequitable.

 

Adding all of the entries for “payment” shows that the Debtors paid $97,979.68 from February 2006 to July 2011. (Docket No. 211, Ex. 11).12 Additionally, Wells Fargo should credit the Debtors with $7,500 for the sanctions awarded in the prior claim objection proceeding. (See Docket No. 103, at 10), for a total of $105,479.68. Wells Fargo points out that it made real estate tax payments on the Debtors’ behalf that should be deducted from any refund claim. The Court agrees. After subtracting $32,438.19 for the tax payments made on the Debtors’ behalf, the Debtors’ total claim for unjust enrichment is $73,041.49. Under the circumstances, Wells Fargo should be required to return this amount to the Debtors to avoid being unjustly enriched………….

Attorney Fee’s

“The Debtors also filed a motion for attorneys’ fees, arguing that Wells Fargo should pay approximately $12,500 in fees and costs the Debtors expended in connection with the failed mediations with Litton and Ocwen. According to the Debtors, “[u]nnecessary protracted negotiations have been ongoing since 2010. Starting with Litton Loan and ending with Ocwen. The plaintiff has misrepresented their standing, despite the efforts of the debtors to discuss this matter in the mediation process.” (Docket No. 223 at 1-2.) The Debtors also request punitive damages under 28 U.S.C. § 1927 for “vexatious litigation conduct” by Litton and Ocwen. (Id. At 2.) They note that Litton failed to attend several scheduled mediation sessions, and when Ocwen reinitiated mediation proceedings in 2012, there was a “delay to the debtors of 6 hours in the first and only scheduled mediation, with the debtors believing that progress was being established.”……………………… Although the Debtors have the right to be disappointed that the mediation did not succeed despite the attorneys’ fees that the Debtors expended, Wells Fargo’s attorneys acted under the impression that their client had proper standing. The Court finds that Wells Fargo’s attorneys did not unreasonably and vexatiously multiply the proceedings by their conduct in this case, and the Debtors’ request for attorneys’ fees is denied.

Request for Return of Note

The Debtors’ final motion asks the Court to order Wells Fargo to turn over the original mortgage note to them. Despite the Court’s ruling that Wells Fargo cannot enforce the note, the Debtors are concerned that Wells Fargo will somehow sell, transfer or trade the note, subjecting the Debtors to further litigation, emotional distress and financial hardship. Wells Fargo responds by attempting to discern the legal theories under which the Debtors are attempting to proceed, and then casting aspersions on those theories. The Court generally agrees with Wells Fargo that the Debtors could not succeed on a replevin claim or turnover action based on the note as property of the bankruptcy estate. However, the theory that the surrender of the original note consequently follows from the disallowance of Wells Fargo’s Claim warrants further analysis. The Court also takes this opportunity to clarify that, while not “undoing” any part of the Foreclosure Court’s judgment, Wells Fargo’s ability to enforce that judgment was never finally determined by the Foreclosure Court, and the disallowance of Wells Fargo’s Claim on standing grounds strongly suggests that Wells Fargo has no such ability………………..

Neither the Debtors nor Wells Fargo cited any case law supporting their position on whether the note should be returned to the Debtors after disallowance of the Claim, and the Court’s independent research uncovered no case directly on point…………………..Here, while the validity of the note and mortgage in favor of Provident was actually litigated and determined in the Foreclosure Case, Wells Fargo’s substitution as the plaintiff was summarily ordered without notice to the Debtors or any hearing on the issue. The Debtors were not afforded a reasonable opportunity to obtain review of the substitution order before the automatic stay intervened. That the party sought to be precluded had a reasonable opportunity to obtain review of the prior court’s order is a basic premise of the fundamental fairness prong of the issue preclusion analysis. Id. This Court previously denied Wells Fargo’s attempt to establish its standing to file the Claim based on the judgment and order of substitution in the Foreclosure Case. For the same reasons, issue preclusion does not act to bar the Debtors’ claim for return of the note……………..

“The court agreed with other courts that simply because a creditor lacks standing to enforce a note, the debtor is not discharged of her obligations under the note. Id. This Court has concluded (and the district court on appeal agreed) that Wells Fargo is neither the holder of the note nor a nonholder in possession of the instrument with the rights to enforce it. (Docket No. 233, 11.) Therefore, Wells Fargo (and its affiliates, servicers, successors and assigns) cannot enforce the note, but that fact does not cancel the note nor discharge the Debtors’ obligations to the true owner. In the absence of any authority for their request for turnover of the original note and analogizing to the cases requesting dismissal with prejudice, the Debtors’ motion to require Wells Fargo to surrender the original note is denied….

CONCLUSION

The Debtors’ motion for reimbursement of the payments made on Wells Fargo’s disallowed Claim is granted, subject to offset for real estate taxes paid by Wells Fargo. Within 30 days of the date of this Order, Wells Fargo must pay $73,041.49 to the Debtors and $11,716.90 to the Chapter 13 trustee. The Debtors’ motions for reimbursement of attorneys’ fees and turnover of the original note are denied. The foregoing constitutes the Court’s findings of fact and conclusions of law. The Court will enter separate orders on each motion.

Dated: October 21, 2014

GETTING YOUR HOUSE BACK: RIGHT OF REDEMPTION IS WORTH A TRY

For further information or assistance please call 954-495-9867 or 520-405-1688

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see http://www.bankrate.com/finance/real-estate/get-house-back-after-foreclosure.aspx

There are numerous ways to reverse or cure the foreclosure process. We have outlined legal procedures to vacate judgements, set aside the sale etc. in other articles. One way that we have not explored in depth is the right of redemption. The government sponsored entities (GSEs) have long had a policy of not allowing the borrower to bid on the property at auction or even allowing the borrower to buy the house after it is foreclosed. This policy has been followed industry wide. Martha Coakley Attorney General in Massachusetts has filed a lawsuit to prohibit this practice and allow borrowers or charitable organizations to front the money to get the house back for the homeowner.

The banks are fighting this tooth and nail because of their fear of liability from insurers, investors, guarantors and counterparts on hedges like credit default swaps — all vehicles for the effective sale of the same loan over and over again. This means they could have a liability for as much as 5-10 times the stated amount on the note. So they want the foreclosure sale even if it nets nothing and the property is abandoned.

But in the end this about money between a debtor and creditor. Both are getting screwed by the current policies, which continue to protect the big banks from massive liabilities rivaling the entire GDP of the Untied States. And many states allow for rights of redemption by statute and even in the states that don’t allow redemption (in exchange for a statutory waiver of a deficiency judgment) there are common law actions that might be present to allow the homeowner to redeem or reacquire the the title to the home. The problem I see is that if the foreclosure was fraudulent to begin with and/or the initial origination was fraudulent and faked, the title of the homeowner will remain clouded absent some legislative adjustment in what title means after considering the variables present when there are claim of securitization whether true or not.

Most Judges will agree that if you offer to redeem the property for the amount demanded, you should be allowed to do so. And there is frequently a process by which a borrower can apply to the court for a hearing on the amount of the redemption when the bank balks at giving the information (which is nearly always now).

My point is that even after the foreclosure judgment or foreclosure sale, don’t give up. See an attorney licensed in the geographical area in which your property is located and ask him or her to do the research and let you know what your options include and what is excluded procedurally.

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