CHECKLIST — FDCPA Damages and Recovery: Revisiting the Montana S Ct Decision in Jacobson v Bayview

What is unique and instructive about this decision from the Montana Supreme Court is that it gives details of each and every fraudulent, wrongful and otherwise illegal acts that were committed by a self-proclaimed servicer and the “defective” trustee on the deed of trust.

You need to read the case to see how many different times the same court in the same case awarded damages, attorney fees and sanctions against Bayview who persisted in their behavior even after the judgment was entered.

Get a consult! 202-838-6345

https://www.vcita.com/v/lendinglies to schedule CONSULT, leave message or make payments.
 
THIS ARTICLE IS NOT A LEGAL OPINION UPON WHICH YOU CAN RELY IN ANY INDIVIDUAL CASE. HIRE A LAWYER.
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This case overall stands for the proposition that the violations of federal law by self proclaimed servicers, trusts, trustees, substituted trustees, etc. are NOT insignificant or irrelevant. The consequences of merely applying the law in a fair and balanced way could and should be devastating to the TBTF banks, once the veil is pierced from servicers like Bayview, Ocwen et al and the real players are revealed.

I offer the following for legal practitioners as a checklist of issues that are usually present, in one form or another, in virtually all foreclosure cases and the consequences to the bad actors when the law is actually applied. The interesting thing is that this checklist does not just represent my perspective. It comes directly from the Jacobson decision by the high court in Montana. That decision should be read, studied and analyzed several times. You need to read the case to see how many different times the same court in the same case awarded damages, attorney fees and sanctions against Bayview who persisted in their behavior even after the judgment was entered.

One additional note: If you think about it, you can easily see how this case represents the overall infrastructure employed by the super banks. It is obvious that all of Bayview’s actions were at the behest of Citi, who like any other organized crime figure, sought to avoid getting their hands dirty. The self proclamations inevitably employ the name of US Bank whose involvement is shown in this case to be zero. Nonetheless the attorneys for Bayview and Peterson sought to pile up paper documents to create the illusion that they were acting properly.

  1. FDCPA —abusive debt collection practices by debt collectors
  2. FDCPA who is a debt collector — anyone other than the creditor
  3. FDCPA Strict Liability 
  4. FDCPA for LEAST SOPHISTICATED CONSUMER
  5. FDCPA STATUTORY DAMAGES
  6. FDCPA COMPENSATORY DAMAGES
  7. FDCPA PUNITIVE DAMAGES
  8. FDCPA INHERENT COURT AUTHORITY TO LEVY SANCTIONS
  9. CUMULATIVE BAD ACTS TEST — PATTERN OF CONDUCT
  10. HAMP Modifications Scam — initial and incentive payments
  11. Estopped and fraud: 90 day delinquency disinformation — fraud and UPL
  12. Rejected Payment
  13. Default Letter: Not authorized because sender is neither servicer nor interested party.
  14. Default letter naming creditor
  15. Default letter declaring amount due — usually wrong
  16. Default letter with deadline date for reinstatement: CURE DATE
  17. Late charges improper
  18. Extra interest improper
  19. Fees even after they lose added to balance “due.”
  20. Notice of acceleration based upon default letter which contains inaccurate information. [Not authorized because sender is neither servicer nor interested party.]
  21. Damages: Negative credit rating — [How would bank feel if their investment rating dropped? Would their stock drop? would thousands of stockholders lose money as a result?]
  22. damages: emotional stress
  23. Damages: Lost opportunities to save home
  24. Damages: Lost ability to receive incentive payments for modification
  25. FDCPA etc: Use of nonexistent or inactive entities
  26. FDCPA Illegal notarizations
  27. Illegal notarizations on behalf of nonexistent or uninvolved entities.
  28. FDCPA naming self proclaimed servicer as beneficiary (creditor/mortgagee)
  29. Assignments following self proclamation of beneficiary (creditor/mortgagee)
  30. Falsely Informing homeowner they cannot reinstate
  31. Wrongful appointment of Trustee under deed of trust
  32. Wrongful and non existent Power of Attorney
  33. False promises to modify
  34. False representations to the Court
  35. Musical entities
  36. False and fraudulent utterance of a document
  37. False and fraudulent recording of a false document
  38. False representations concerning “US Bank, Trustee” — a whole category unto itself. (the BOA deal and others who “sold” trustee position of REMICs to US Bank.) 

Quiet Title “Packages”

The promise by some title search vendors of a cheap lawsuit that will get rid of your mortgage is generally not based in reality. You might be able to beat a foreclosure with title issues but you probably won’t get rid of the mortgage or deed of trust without pleading and proving that the mortgage or deed of trust is completely void — like it never should have existed or doesn’t exist now by operation of law.
THIS ARTICLE IS NOT A LEGAL OPINION UPON WHICH YOU CAN RELY IN ANY INDIVIDUAL CASE. HIRE A LAWYER.
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Get a consult! 202-838-6345

https://www.vcita.com/v/lendinglies to schedule CONSULT, leave message or make payments.
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There are many people out there who are pursuing a business model of offering a quiet title package, sometimes using the word “Turnkey.” Most of these people are well-meaning but not lawyers and they are lacking basic legal knowledge. While the title work by people like BPInvestigations is excellent, the promise by some title search vendors of a cheap lawsuit that will get rid of your mortgage is generally not based in reality. You might be able to beat a foreclosure with title issues but you probably won’t get rid of the mortgage or deed of trust without pleading and proving that the mortgage or deed of trust is completely void — like it never should have existed or doesn’t exist now by operation of law.

Personally I think that condition is satisfied by TILA rescission, but the courts are still rebelling against the idea of giving that much power to borrowers. So while I am certain it is correct, I am equally certain that the defense shield raised by the banks is working even though it does not pass muster legally and will probably be struck down again by the US Supreme Court.

While these offers may sound attractive there are many pitfalls and trap doors that will prevent a homeowner from actually achieving anything by focusing on a strategy that is dependent upon a court issuing a declaration quieting title. The very word “quiet” should give you a hint. There must be an actual controversy or dispute involving a present situation requiring the court to decide the rights of the parties. Courts are NOT in the business of issuing advisory opinions.

The Marketing title says it all — it is a “turnkey” “quiet title” package suing for damages. There is no such thing as turnkey title — they don’t know all the possibilities of defects in title. And they won’t know it even after they produce a title report either, although they will have a pretty good list of possibilities of title defects.
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Without a title expert (usually an attorney) analyzing the title going back to the last time that a real title examiner looked carefully at title to the subject property, nobody knows what is a defect, what can be corrected by affidavit, and what prevents the grantee of an instrument from doing anything with it. This might mean going back 30 years or more.

*

Quiet title is an action in equity that is a complaint for declaratory relief wherein the court says “here are the names of the stakeholders and here is the stake of each holder.” But no court is going to allow the lawsuit for that without pleading a present controversy — because that would be the Court giving legal advice.

So you would have to say “A is the owner of the property but B (or B, C and D) is/are saying it is the owner of the property (or B is saying that it has a valid encumbrance upon the land. I am trying to sell, refinance the land and I can’t complete the transaction because of B’S claim, which I think is bogus because [fill in the blank, e.g., the mortgage is a void or wild instrument because …]. So in order to complete my pending transaction I need a declaration from the court as to whether B is a stakeholder, like they say or B is not a stakeholder like I say.” If you don’t have those elements present the court will dismiss the lawsuit 99 times out of 100.

The promise of damages is bogus. That is an action at law that could be derived from any number of breaches or torts by the defendant(s). It could never derive from a turnkey quiet title package even if there was one. It would be a different lawsuit saying B had this duty, they breached it, or committed an intentional tort, and that was the proximate cause of actual damages to me that include x, y and z.

 

And as many people have found out when they sued for quiet title and had their suit dismissed or judgment entered against them there are two main reasons for that. First, they could not properly plead a present controversy or the competing “stakes” in the property. Second, they could not tie in ACTUAL damages to a breach of duty or intentional tort by the defendant. Proximately caused means legally caused.

Most judges view such lawsuits as “”B is bad. Give me title and whatever monetary damages you think will punish them.” The homeowners are skipping the part that where there are no actual damages you don’t get punitive damages. You can’t sue for JUST punitive damages. If you don’t have actual damages you don’t have standing to sue. The Latin for this is damnum absque injuria. Just because somebody was negligent or greedy doesn’t mean you can sue if you are not a party who suffered actual damages from their illegal act.

FDCPA and FCCPA: Temperatures rising

FDCPA and FCCPA (or similar state legislation) claims are getting traction across the country. Bank of America violated the federal Fair Debt Collection Practices Act (“FDCPA”) and the related Florida Consumer Collection Practices Act (“FCCPA”). (Doc. 26). The Goodin case is a fair representation of the experience of hundreds of thousands of homeowners who have tried to reconcile the numbers given to them by Bank of America and others.

In a carefully worded opinion from Federal District Court Judge Corrigan in Jacksonville, the Court laid out the right to damages under the FDCPA and FCCPA. The Court found that BOA acted with gross negligence because they continued their behavior long after being put on notice of a mistake on their part and awarded the 2 homeowners:

  • Statutory damages of $2,000
  • Actual damages for emotional distress of $100,000 ($50,000 per person)
  • Punitive damages of $100,000
  • Attorneys fees and costs

 

See http://www.leagle.com/decision/In%20FDCO%2020150623E16/GOODIN%20v.%20BANK%20OF%20AMERICA,%20N.A.

The story is the same as I have heard from thousands of other homeowners. The “servicer” or “bank” misapplies payments, negligently posts payments to the wrong place and refuses to make any correction despite multiple attempts by the homeowners to get their account straightened out. Then the bank refuses to take any more payments because the homeowners are “late, ” “delinquent”, or in “default”, following which they send a default notice, intent to accelerate and then file suit in foreclosure.

The subtext here is that there is no “default” if the “borrower” tenders payment timely with good funds. The fact that the servicer/bank does not accept them or post them to the right ledger does not create a default on the part of the borrower, who has obviously done nothing wrong. There is no default and there is no delinquency. The wrongful act was clearly committed by the servicer/bank. Hence there is no default by the borrower in any sense by any standard. It might be said that if there is a default, it is a default by Bank of America or whoever the servicer/bank is in another case.

Using the logic and law of yesteryear, we frequently make the mistake of assuming that if there is no posting of a payment, no cashing of a check or no acceptance of the tender of payment, that the borrower is in default but it is refutable or excusable — putting the burden on the borrower to show that he/she/they tendered payment. In fact, it is none of those things. When you parse out the “default” none of the elements are present as to the borrower.

This case stands out as a good discussion of damages for emotional distress — including cases, like this one, where there is no evidence from medical experts nor medical bills resulting from the anguish of trying to sleep for years knowing that the bank or servicer is out to get your house. The feeling of being powerless is a huge factor. If an institution like BOA fails to act fairly and refuses to correct its own “errors,” it is not hard to see how the distress is real.

I of course believe that BOA had no procedures in place to deal with calls, visits, letters and emails from the homeowner because they want the foreclosure in all events — or at least as many as possible. The reason is simple: the foreclosure judgment is the first legally valid instrument in a long chain of misdeeds. It creates the presumption that all the events, documents, letters and claims were valid before the judgment was entered and makes all those misdeeds enforceable.

The Judge also details the requirements for punitive damages — i.e., aggravating circumstances involving gross negligence and intentional acts. The Judge doesn’t quite say that the acts of BOA were intentional. But he describes BOA’s actions as so grossly negligent that it must approach an intentional, malicious act for the sole benefit of the actor.

 

PRACTICE NOTE ON MERGER DOCTRINE AND EXISTENCE OF DEFAULT:

It has always been a basic rule of negotiable instruments law that once a promissory note is given for an underlying obligation (like the mortgage contract), the underlying obligation is merged into the note and is suspended while the note is still outstanding. Discharge on the note would (due to the rule that the two are merged) result in discharge discharge of the underlying obligation. Thus paying the note would also pay the obligation. Because of the merger rule, the underlying obligation is not available as a separate course of action until the note is dishonored.

 

The problem here is that most lawyers and most judges are not very familiar with the UCC even though it constitutes state law in whatever state they are in. They see the UCC as a problem when in fact it is a solution. it answers the hairy details without requiring any interpretation. It just needs to be applied. But just then the banks make their “free house” argument and the judge “interprets a statute that is only vaguely understood.

The banks know that judges are not accustomed to using the UCC and they come in with a presumed default simply because they show the judge that on their own books no payment was posted. And of course they have no record of tender and refusal by the bank. The court then usually erroneously shifts the burden of proof, as to whether tender of the payment was made, onto the homeowner who of course does not  have millions of dollars of computer equipment, IT platforms and access to the computer generated “accounts” on multiple platforms.

This merger rule, with its suspension of the underlying obligation until this honor of the note cut is codified in §3-310 of the UCC:

(b) unless otherwise agreed and except as provided in subsection (a), if a note or an uncertified check is taken for an obligation, the obligation is suspended to the same extent the obligation would be discharged if an amount of money equal to the amount of the instruments were taken, and the following rules apply:

(2) in the case of a note, suspension of the obligation continues until dishonor of the note or until it is paid. Payment of the note results in the discharge of the obligation to the extent of the payment.

thus until the note is dishonored there can be no default on the underlying obligation (the mortgage contract). All foreclosure statutes, whether permitting self-help or requiring the involvement of court, forbid foreclosure unless the underlying debt is in”Default.” That means that the maker of the promissory note must have failed to make the payments required by the note itself, and thus the node has been dishonored. Under UCC §3-502(a)(3) a hello promissory note is dishonored when the maker does not pay it when the footnote first becomes payable.

Bank of America Hit with FDCPA Damages PLUS PUNITIVE Damages $100,000

For more information please email us at gtchonors.llblog@gmail.com or call 954-495-9867 or 520-405-1688.

This is not a legal opinion on your case. It is general information only. Consult an attorney before you make any decisions.

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Hat tip to Ken McLeod

see Goodin v Bank of America NA

I think this case decision should be studied. While it is easy to be dismissive of emotional distress damages, this case clearly enunciates the basis for it. I think we tend to demote the claim because of the underlying bias that the borrower has been getting a “free ride.” This case states quite clearly that the ride was neither wanted nor free.Perhaps just as importantly, the Court finds that punitive damages are appropriate in order to get the attention of Bank of America — such that it will stop it’s malevolent behavior. It sets the bar at deterring the bank from this behavior and not just a “cost of doing business.”

For those who don’t think we have turned the corner, this case shows clearly that judges are not allowing themselves to be spoon-fed the diet of illusion, smoke and mirrors that has prevailed so long in the American court system. If these decisions were made 10 years ago we would not have had a foreclosure crisis.

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KM Writes:

This is an interesting new FDCPA decision.  The judge found that BANA violated the FDCPA and awarded 50k/each to husband and wife for compensatory damages, based mainly on emotional distress as proved by the consumers’ testimony of anxiety, frustration, and sleeplessness.  Also, he awarded $100,000 in punitives under the FDCPA, even given a very stringent Florida statute, because BANA’s negligence was gross, by a clear and convincing standard, primarily because the debtors tried to fix the discrepancy numerous times, but the bank did not fix it, and initiated foreclosure.  The “Bank employees were inattentive, unconcerned and haphazard,” but more importantly, in taking no action to prevent errors from continuing, despite repeated notice, “the Bank employees’ conduct was so wanting in care that it constituted a conscious disregard and indifference to the Goodins’ rightsIt was as if the Goodins did not exist.”  And it was “only stopped by the filing of this federal lawsuit.”  Moreover, in creating a system where one Bank department did not communicate with another, where there were inadequate internal controls to ensure statements provided correct information, and where there was no way for Bank customers to get the attention of the Bank to correct the Bank’s errors, the Bank engaged in grossly negligent conduct. As such, it should be held liable for punitive damages for its employees’ gross negligence.”

Other interesting snippets:

 

As we know, BANA is a debt collector if “acquired the loan at issue while the loan was in default.”

Bank of America contends, however, that it is not a debt collector. A mortgage servicing company is a debt collector under the FDCPA if it acquired the loan at issue while the loan was in default. Williams v. Edelman, 408 F.Supp.2d 1261, 1266 (S.D.Fla.2005). Under the terms of their note, the Goodins were in default if they missed two or more consecutive payments. (Doc. 75 at 15). When Bank of America took over their loan, the Goodins had previously missed two or more consecutive payments and remained behind by more than two payments. (Trial Tr. vol. I at 30). Nevertheless, Bank of America argues that the Goodins were not in default because their bankruptcy plan cured any pre-existing default and the Goodins never defaulted on any payment due under the bankruptcy plan.7 (Doc. 101 at 6).

*5 While a bankruptcy plan may “provide for the curing or waiving of any default,” this does not mean, as Bank of America argues, that the entry of a bankruptcy plan itself cures a default. See11 U.S.C. § 1322(b)(3) (2014). Indeed, the bankruptcy statute also provides that the plan may “provide for the curing of any default within a reasonable time and maintenance of payments while the case is pending on any unsecured claim or secured claim on which the last payment is due after the date on which the final payment under the plan is due ….“ § 1322(b)(5). This provision suggests what is common sense: that the curing of the default occurs upon the repayment of the back payments owed, not upon the mere institution of the bankruptcy plan. See In re Agustin, 451 B.R. 617, 619 (Bankr.S.D.Fla.2011) (“Using [§ ] 1322(b)(5), the Debtors are able to cure arrearages over a time period exceeding the life of the Chapter 13 Plan.”); see also In re Alexander, 06–30497–LMK, 2007 WL 2296741 (Bankr.N.D.Fla. Apr.25, 2007) (finding it reasonable to cure a default over the five-year life of the bankruptcy plan). Bank of America is a debt collector.

Goodin v. Bank of Am., N.A., No. 3:13-CV-102-J-32JRK, 2015 WL 3866872, at *4-5 (M.D. Fla. June 23, 2015)

Act “in connection with the collection of a debt” only must have “animating purpose” to induce payment:

To be “in connection with the collection of a debt,” a communication need not make an explicit demand for payment. Grden v. Leikin Ingber & Winters PC, 643 F.3d 169, 173 (6th Cir.2011). However, “an animating purpose of the communication must be to induce payment by the debtor.”Id.; see also McIvor v. Credit Control Servs., Inc., 773 F.3d 909, 914 (8th Cir.2014); cf. Caceres v. McCalla Raymer, LLC, 755 F.3d 1299, 1303 n. 2 (11th Cir.2014) (noting that an implicit demand for payment constituted an initial communication in connection with a debt). Where a communication is clearly informational and does not demand payment or discuss the specifics of an underlying debt, it does not violate the FDCPA. Parker v. Midland Credit Mgmt., Inc., 874 F.Supp.2d 1353, 1358 (M.D.Fla.2012).

*6 Some of the communications alleged to be FDCPA violations did not have the animating purpose of inducing the Goodins to pay a debt. Specifically, Bank of America’s October 8, 2010 notice that the Goodins may be charged fees while their loan is in default status (Pl.’s Ex. 5), the December 3, 2010 letter alerting the Goodins to the existence of a program to avoid foreclosure despite their “past due” home loan payment (Pl.’s Ex. 6),9 the refusal to accept an alleged partial payment (Pl.’s Ex. 17), and the notice that the Goodins’ loan had been referred to foreclosure (Pl.’s Ex. 27), did not ask for or encourage payment and were not intended to induce payment. Likewise, the Bank of America branch employee’s refusal to accept Mr. Goodin’s payment was not an act in connection with the collection of a debt.

A regular bank statement sent only for informational purposes is also not an action in connection with the collection of a debt. See Helman v. Udren Law Offices, P.C., No. 0:14–CV–60808, 2014 WL 7781199, at *6 (S.D.Fla. Dec.18, 2014). As such, the Goodins’ November 10, 2009 account statement, which did not have the purpose of inducing payment from the Goodins, was not an FDCPA violation. (See Pl.’s Ex. 4 at 5).

The letter Bank of America’s counsel sent to the Goodins on October 25, 2013 (Joint Ex. 11) was likewise not an FDCPA violation because it did not falsely represent the amount or status of the Goodins’ debt, did not threaten an action Bank of America could not or did not intend to take, and did not constitute the use of a false representation or deceptive means in an attempt to collect a debt.

Goodin v. Bank of Am., N.A., No. 3:13-CV-102-J-32JRK, 2015 WL 3866872, at *5-6 (M.D. Fla. June 23, 2015)

Foreclosure as debt collection activity, only if seeks deficiency judgment

 

The lone remaining alleged violation is Bank of America’s filing of a foreclosure complaint against the Goodins. (Pl.’s Ex. 28). Foreclosing on a home is the enforcement of a security interest, not debt collection. Warren v. Countrywide Home Loans, Inc., 342 F. App’x 458, 461 (11th Cir.2009). However, a deficiency action does constitute debt collection activity.Baggett v. Law Offices of Daniel C. Consuegra, P.L., No. 3:14–CV–1014–J–32PDB, 2015 WL 1707479, at *5 (M.D.Fla. Apr.15, 2015). Communication that attempts to enforce a security interest may also be an attempt to collect the underlying debt. Reese v. Ellis, Painter, Ratterree & Adams, LLP, 678 F.3d 1211, 1217–18 (11th Cir.2012).

When a foreclosure complaint seeks a deficiency judgment if applicable, it attempts to collect on the security interest and the note. Roban v. Marinosci Law Grp., No. 14–60296–CIV, 2014 WL 3738628 (S.D.Fla. July 29, 2014). As such, two cases have found that foreclosure complaints that ask for a deficiency judgment “if applicable” constitute debt collection activity under the FDCPA. See id.; Rotenberg v. MLG, P.A., No. 13–CV–22624–UU, 2013 WL 5664886, at *2 (S.D.Fla. Oct.17, 2013). Similarly, a foreclosure complaint constitutes debt collection activity where it requests “that the court retain jurisdiction to enter a deficiency decree, if necessary.”Freire v. Aldridge Connors, LLP, 994 F.Supp.2d 1284, 1288 (S.D.Fla.2014).

Goodin v. Bank of Am., N.A., No. 3:13-CV-102-J-32JRK, 2015 WL 3866872, at *7 (M.D. Fla. June 23, 2015)

What they knew and when they knew it

At least two people in the Bank, Duane Dumler and Leslie Hodkinson, knew long before Mr. Juarez’s error that the Bank needed to file a transfer of claim to obtain the missing funds. Either because of the Bank’s size, because its departments were compartmentalized and did not properly communicate with each other, or some other reason, this knowledge did not make its way to the foreclosure department or to the part of the Bank responsible for sending out the communications that violated the FDCPA. Then, after Mr. Juarez’s negligent audit, the Goodins’ attorney contacted Bank of America to fix the problem, but the Bank still proceeded to misrepresent the amount the Goodins owed and ultimately filed a foreclosure complaint, only dismissing the foreclosure action after the Goodins literally had to make a federal case out of it.

Goodin v. Bank of Am., N.A., No. 3:13-CV-102-J-32JRK, 2015 WL 3866872, at *9 (M.D. Fla. June 23, 2015)

Factual Evidence of Emotional Damages; No Doctor Testimony Necessary

Since Bank of America began servicing the Goodins’ loan, Mrs. Goodin has felt anxious every day, worrying about the status of her loan. (Id. at 239–40). At times, she has lost sleep because of her concern about the loan. (Id. at 240). However, she never went to a doctor for treatment, in part because she did not have insurance to do so and in part because she did not believe a doctor would make a difference. (Id. at 241).

Mr. Goodin likewise suffered anxiety and sleeplessness as a result of Bank of America’s improper servicing. (Trial Tr. vol. II at 105). Mr. Goodin was immensely frustrated by Bank of America’s lack of responsiveness to his attempts to fix the problems with his loan. (Id. at 74). He sent letters, talked to a Bank of America employee face-to-face, and tried everything that he could think of, but could not find a way to get Bank of America to file the transfer of claim or correct its servicing of the Goodins’ loan. (Id. at 74). While Mr. Goodin’s description of his life as “a pure living hell” is perhaps hyperbolic, it is clear that Bank of America’s letters and Mr. Goodin’s inability to correct the problem made him feel powerless and caused him considerable anger and distress. (See id. at 74, 86).

Most of the Goodins’ testimony dealt generally with emotional distress they suffered throughout the Bank’s servicing of their loan. However, Mrs. Goodin was especially concerned when the Goodins’ bankruptcy was discharged because Bank of America was not getting their payments and she knew that, absent payment, Bank of America would take legal action against them. (Id. at 18). The Goodins noted that they also suffered particular stress upon being served with the foreclosure complaint. (Id. at 79). The possibility of losing their home to foreclosure upset Mr. Goodin and left Mrs. Goodin worried and scared. (Id. at 79).

Bank of America was not the only cause of stress in the Goodins’ lives. Mrs. Goodin was under stress before they filed for bankruptcy because the Goodins were having trouble paying their bills. (Id. at 13). She also suffered the loss of her mother around 2011. (Id. at 69). In June 2013, the Goodins sued TRS Recovery Services, Bennett Law, PLLC, and Wal–Mart (Id. at 22), alleging that they were the victims of check fraud in September 2011 (Id. at 24). Because of the wrongful debt incurred by the fraud, TRS sent the Goodins collection letters from October 2011 through November 2012 and called frequently from October 2011 until July 2012. (Id. at 24–25). As a result, the Goodins lost sleep, felt anxious, and suffered other symptoms of emotional distress. (Id. at 26). However, the Goodins testified credibly that the stress, anxiety, and sleeplessness caused by the events underlying the TRS lawsuit pale in comparison to the emotional distress the Goodins suffered as a result of Bank of America’s actions. (Id. at 64, 106).

*11 While not accepting every aspect of their testimony, overall, the Court found the Goodins’ testimony regarding the emotional distress caused by the Bank’s FDCPA and FCCPA violations to be believable. The tumult of receiving repeated erroneous communications from the Bank, their inability to get anybody at the Bank to listen to them, their feelings of loss of control and the very real fear of losing their home combined to create a very stressful situation.

Goodin v. Bank of Am., N.A., No. 3:13-CV-102-J-32JRK, 2015 WL 3866872, at *10-11 (M.D. Fla. June 23, 2015)

  1. THE COURT’S DECISION ON DAMAGES
  2. Statutory Damages

Under both the FDCPA and FCCPA, prevailing plaintiffs are entitled to statutory damages of up to $1,000. 15 U.S.C. § 1692k; Fla. Stat. § 559.77. In determining the appropriate amount, the Court must consider “the frequency and persistence of noncompliance by the debt collector, the nature of such noncompliance, and the extent to which such noncompliance was intentional ….“ 15 U.S .C. § 1692k; see alsoFla. Stat. § 559.77(2). Upon consideration of the Bank’s repeated statutory violations and inability to correct the problems with the Goodins’ loans despite a plethora of chances to do so, the Court finds Mr. and Mrs. Goodin are each entitled to $1,000 under the FDCPA and $1,000 under the FCCPA.

  1. Actual Damages

The Goodins also each seek $500,000 in actual damages to compensate for their emotional distress. (Doc. 100–1 at 17). A plaintiff may recover actual damages for emotional distress under the FDCPA and FCCPA. Minnifield v. Johnson & Freedman, LLC, 448 F. App’x 914, 916 (11th Cir.2011) (finding that a plaintiff can recover for emotional distress under the FDCPA); Fini v. Dish Network L.L.C., 955 F.Supp.2d 1288, 1299 (M.D.Fla.2013) (finding the same under the FCCPA).

In determining what actual damages are appropriate in this case, the Court has only considered those damages caused by the Bank’s FDCPA and FCCPA violations, and not any distress caused by other aspects of the Bank’s improper servicing of the Goodins’ account. To recap, Bank of America violated the FDCPA when it (1) mailed ten statements from April 25, 2011 to March 29, 2012, indicating, amongst other misstatements, an overstated balance on the loan; (2) mailed statements in March and August 2011 misstating that the Goodins owed foreclosure fees; (3) sent the Goodins six letters between December 27, 2011 and March 16, 2012 requesting over $15,000 in payments and threatening to accelerate the debt or foreclose in the absence of payment; and (4) filed a foreclosure complaint on September 17, 2012. Any emotional distress the Goodins suffered as a result of the Bank’s violations therefore occurred between March 2011, the date of the first violation, and October 2013, when the Bank finally corrected its servicing errors.

“Emotional distress must have a severe impact on the sufferer to justify an award of actual damages.”Alecca v. AMG Managing Partners, LLC, No. 3:13–CV–163–J–39PDB, 2014 WL 2987702, at *2 (M.D.Fla. July 2, 2014). As such, a number of courts have declined to award damages for emotional distress where the plaintiff’s testimony was not supported by medical bills. See, e.g., Lane v. Accredited Collection Agency Inc., No. 6:13–CV–530–ORL–18, 2014 WL 1685677, at *8 (M.D.Fla. Apr.28, 2014) (adopting a report and recommendation recommending no actual damages despite testimony that the plaintiff suffered nervousness, anxiety, and sleeplessness); compare Marchman v. Credit Solutions Corp., No. 6:010–CV–226–ORL–31, 2011 WL 1560647, at *10 (M.D.Fla. Apr.5, 2011)report and recommendation adopted,No. 6:10–CV–226–ORL–31, 2011 WL 1557853 (M.D.Fla. Apr.25, 2011) (awarding no actual damages where the plaintiff testified that she spent nights awake with worry and was withdrawn and depressed but did not provide evidence she required medical or professional services) with Latimore v. Gateway Retrieval, LLC, No. 1:12–CV–00286–TWT, 2013 WL 791258, at *10–11 (N.D.Ga. Feb.1, 2013)report and recommendation adopted,No. 1:12–CV–286–TWT, 2013 WL 791308 (N.D.Ga. Mar.4, 2013) (awarding $10,000 in emotional distress damages where the plaintiff submitted medical bills to support her testimony). Indeed, both courts and juries have rejected claims for emotional distress in cases involving serious FDCPA violations. See Montgomery v. Florida First Fin. Grp., Inc., No. 6:06–CV–1639ORL31KR, 2008 WL 3540374, at *9 (M.D.Fla. Aug.12, 2008) (adopting a Report and Recommendation recommending no actual damages despite the defendant threatening six times, to plaintiff, plaintiff’s daughter, and plaintiff’s mother, that it would have plaintiff arrested, and despite plaintiff’s testimony she was scared and struggled to sleep for fear that she would be arrested); Jordan v. Collection Services, Inc., Case No. 97–600–CA–01, 2001 WL 959031 (Fla. 1st Cir. Ct. April 5, 2001) (jury awarded no damages despite defendant’s debt collection calls that threatened, amongst other consequences, that a hospital would refuse to admit plaintiffs’ ill child if they did not pay their debt).

*12 Still, other courts have awarded actual damages for emotional distress for FDCPA and FCCPA violations, albeit usually in relatively small amounts. For example, in Barker v. Tomlinson, No. 8:05–CV–1390–T–27EAJ, 2006 WL 1679645 (M.D.Fla. June 7, 2006), the plaintiff received $10,000 in actual damages where the defendant called her at work to demand payment for an illegitimate debt, threatened her with arrest if she did not pay, and faxed a request for an arrest warrant to her workplace. Barker, at *3. Similarly, where the plaintiff suffered three panic attacks after the defendant threatened that she could go to jail, threatened to send a deputy to her house, and told her daughter that her mom would be arrested, the court awarded $1,000 in actual damages.Rodriguez v. Florida First Fin. Grp., Inc., No. 606CV–1678–ORL–28DAB, 2009 WL 535980, at *6 (M.D.Fla. Mar.3, 2009).

There are two notable exceptions to the small damages awards usually given in FDCPA cases. In Mesa v. Insta–Service Air Conditioning Corp., Case No. 03–20421 CA 11, 2011 WL 5395524 (Fla. 11th Cir.Ct. Aug. 2, 2011), a jury awarded $150,000 in compensatory damages where an air conditioning company defrauded the plaintiff into buying a defective air conditioner and, unbeknownst to the plaintiff, took out a line of credit in his name. However, it is unclear what amount of those compensatory damages were based on emotional distress and what amount were economic damages. In Beasley v. Anderson, Randolf, Price LLC, Case No. 16–2007–CA–005308, 2010 WL 6708036 (Fla. 4th Cir. Ct. April 19, 2010), a jury awarded $75,000 for mental anguish, inconvenience, or loss of capacity for the enjoyment of life after the defendant repeatedly called the plaintiff’s cell phone to collect a debt, even after being told that it was a work phone number, after receiving a cease and desist letter, and after learning the plaintiff was represented by an attorney.

While not precisely on point, there are two FDCPA cases that represent somewhat similar facts to this case.13In Campbell v. Bradley Fin. Grp., No. CIV.A. 13–604–CG–N, 2014 WL 3350054 (S.D.Ala. July 9, 2014), the defendant repeatedly called the plaintiff, wrongfully alleging that she owed a debt, that she would be sued, and that her wages would be garnished if she did not pay. Campbell, at *4. The plaintiff tried to explain that she had already paid the debt but, because the defendant insisted, she paid the illegitimate debt. Id. Based on the plaintiff’s testimony of her fear of legal action being taken against her, the threatening nature of the phone calls, and the fact that the plaintiff paid the illegitimate debt, the court awarded $15,000 in emotional distress damages. Id.

Similarly, in Gibson v. Rosenthal, Stein, & Associates, LLC, No. 1:12–CV–2990–WSD, 2014 WL 2738611 (N.D.Ga. June 17, 2014), the defendant called the plaintiff and alleged that she owed a debt that she did not owe. Gibson, at *2. The defendant threatened to call the sheriff and have the plaintiff arrested if she did not make a payment. Id. Afraid of going to jail, the plaintiff paid the illegitimate debt using money she needed for living expenses, causing her to go without electricity for two weeks and without water. Id. The court therefore awarded her $15,000. Id.

*13 While these cases are useful as guidance, ultimately, the Court as fact-finder must determine the appropriate amount of damages based on the evidence in this case. Emotional distress damages are particularly difficult to quantify. For example, the Eleventh Circuit pattern jury instructions for emotional distress damages in employment actions contain this language: “You will determine what amount fairly compensates [him/her] for [his/her] claim. There is no exact standard to apply, but the award should be fair in light of the evidence.”Eleventh Circuit Pattern Jury Instructions (Civil) Adverse Employment Action Claims Instructions 4.1, 4.2, 4.3, 4.4, 4.5, 4.9 (2013 Edition).

The Goodins suffered prolonged (over two and a half years) stress, anxiety, and sleeplessness as a result of Bank of America’s misrepresentations regarding the amount of the debt the Goodins owed. This emotional distress reached its peak when the Bank repeatedly threatened the Goodins that, if they did not pay in excess of $15,000, the Goodins’ debt would be accelerated and the Goodins could face foreclosure. The Bank then filed the foreclosure action, and did not dismiss it until six months later (and only after the Goodins were forced to file this lawsuit). While the Goodins did not present evidence from an expert or doctor and in fact did not seek medical attention for their emotional distress, the Court found credible their testimony that they suffered real and severe emotional distress. See supra Part III. Mr. Goodin had worked all his life (Trial Tr. vol. II at 72), but the family was forced into bankruptcy by a poor business investment (Id. at 119). Nevertheless, the Goodins remained ready to continue paying on their mortgage, even while in bankruptcy, but for Bank of America’s gross negligence. While they had other causes of stress as well, their fear of losing their home and feeling of helplessness in the face of Bank of America’s indifference was far and away the primary cause of stress in their lives. Given the facts of this case and the duration of the Goodins’ emotional distress, the Court finds the Goodins are entitled to a larger award than in the mine-run FDCPA case (but nowhere near their request of $500,000 each). Accordingly, the Court, as fact-finder, finds that Mr. and Mrs. Goodin have proven entitlement to $50,000 each for their emotional distress.

  1. Punitive Damages

In addition to statutory and actual damages, the Goodins request ten million dollars in punitive damages under the FCCPA.14(Doc. 100–1 at 21). The Court may award punitive damages under the FCCPA. Fla. Stat. § 559.77. The Goodins argue that punitive damages are appropriate where the defendant acted with malicious intent, meaning that it did a wrongful act “to inflict injury or without a reasonable cause or excuse.”(Doc. 100–1 at 18) (quoting Story v. J.M. Fields, Inc., 343 So.2d 675, 677 (Fla.Dist.Ct.App.1977). Bank of America likewise cites this standard (Doc. 101 at 16), as have a number of courts that considered punitive damages under the FCCPA, see, e.g., Crespo v. Brachfeld Law Grp., No. 11–60569–CIV, 2011 WL 4527804, at *6 (S.D.Fla. Sept.28, 2011); but see Alecca, 2014 WL 2987702, at *1 (finding unpersuasive the plaintiff’s argument that behavior that had no excuse was equated with malicious intent).

*14 As Bank of America points out, however, Fla. Stat. § 768.72 was amended in 1999, subsequent to the decision in Story, to provide a new standard for punitive damages. Now, “[a] defendant may be held liable for punitive damages only if the trier of fact, based on clear and convincing evidence, finds that the defendant was personally guilty of intentional misconduct or gross negligence.”Fla. Stat. § 768.72(2). Punitive damages may be imposed on a corporation for conduct of an employee only if an employee was personally guilty of intentional misconduct or gross negligence and (1) the corporation actively and knowingly participated in that conduct; (2) the officers, directors, or managers of the corporation knowingly condoned, ratified, or consented to the conduct; or (3) the corporation engaged in conduct that constituted gross negligence and that contributed to the loss suffered by the claimant. § 768.72(3).“ ‘Intentional misconduct’ means that the defendant had actual knowledge of the wrongfulness of the conduct and the high probability that injury or damage to the claimant would result and, despite that knowledge, intentionally pursued that course of conduct, resulting in injury or damage.”§ 768.72(2)(a).“ ‘Gross negligence’ means that the defendant’s conduct was so reckless or wanting in care that it constituted a conscious disregard or indifference to the life, safety, or rights of persons exposed to such conduct.”§ 768.72(2)(b). Barring the application of certain exceptions not present here, any punitive damages award is limited to the greater of: “Three times the amount of compensatory damages awarded to each claimant entitled thereto” or $500,000. § 768.73(1).

Those cases that have applied the Story standard subsequent to the amendment to § 768.72 have not addressed § 768.72. See, e.g., Montgomery, 2008 WL 3540374, at *10. The Goodins contend that the punitive damages provisions of § 768.72 et seq. do not apply to this case because those provisions are in the “Torts” section of the Florida code rather than the “Consumer Collection Practices” section where the FCCPA is. However, the punitive damages section applies to “any action for damages, whether in tort or in contract.”Fla. Stat. § 768.71. Thus, the Eleventh Circuit has assumed that the punitive damages cap in Fla. Stat. § 768.73(1)(a) applies to FCCPA cases. McDaniel v. Fifth Third Bank, 568 F. App’x 729, 732 (11th Cir.2014). A number of other courts have also assumed that the procedural requirements in § 768.72 would apply to FCCPA actions if they did not conflict with the Federal Rules of Civil Procedure. See, e.g., Brook v. Suncoast Sch., FCU, No. 8:12–CV–01428–T–33, 2012 WL 6059199, at *5 (M.D.Fla. Dec.6, 2012).15 As such, the Court will apply the punitive damages standard dictated by the statute. Cf. City of St. Petersburg v. Total Containment, Inc., No. 06–20953–CIV, 2008 WL 5428179, at *25–26 (S.D.Fla. Oct.10, 2008)report and recommendation adopted in part, overruled in part sub nom. City of St. Petersburg v. Dayco Products, Inc., No. 06–20953, 2008 WL 5428172 (S.D.Fla. Dec.30, 2008) (applying § 768.72’s provisions instead of the common law standard laid out in White Const. Co. v. Dupont, 455 So.2d 1026, 1028–29 (Fla.1984)).

*15 As well documented in earlier sections of these findings, the Bank employees were inattentive, unconcerned, and haphazard in their repeated and prolonged mishandling of the Goodins’ loan. Then, the auditor whose very job it is to correct errors, was himself negligent in his review of the Goodins’ file. If that was the sum of Bank of America’s actions, it would be guilty of negligence many times over, but perhaps not gross negligence.

It is the Bank’s employees’ failure to respond to the Goodins’ many efforts to correct the Bank’s errors that sets this case apart. Bank of America received numerous communications from the Goodins and their attorney explaining the problems with the Bank’s servicing. (Joint Ex. 5 at 2; Joint Ex. 6 at 37, 39, 40; Pl.’s Ex. 23). Yet, beyond noting that the communications were received, the Bank employees did nothing to correct the servicing errors. With their home at stake, the Goodins might as well have been talking to a brick wall.

In taking no action to prevent the errors from continuing, even after being repeatedly notified of them, the Bank employees’ conduct was so wanting in care that it constituted a conscious disregard and indifference to the Goodins’ rights. It was as if the Goodins did not exist. Because the Bank’s employees disregarded the Goodins’ complaints, the servicing errors continued unabated, the Bank continued to send the Goodins false information about the amount of their debt, and then the Bank filed a misbegotten foreclosure action. The Bank employees’ continued gross negligence was only stopped by the filing of this federal lawsuit.

Moreover, in creating a system where one Bank department did not communicate with another, where there were inadequate internal controls to ensure statements provided correct information, and where there was no way for Bank customers to get the attention of the Bank to correct the Bank’s errors, the Bank engaged in grossly negligent conduct. As such, it should be held liable for punitive damages for its employees’ gross negligence.

In justifying their request for $10 million in punitive damages, the Goodins cite to only one case they believe to be similar, Toddie v. GMAC Mortgage LLC, No. 4:08–cv–00002, 2009 WL 3842352 (M.D.Ga. March 26, 2009), where the Court awarded $2,000,0001 in punitive damages and $570,000 in compensatory damages. (Doc. 100–1 at 19–20).Toddie, however, was a wrongful foreclosure and breach of contract case, not an FCCPA case, and involved much more egregious facts, as the defendant actually foreclosed on the plaintiff’s home.

Where courts have awarded punitive damages in FCCPA cases, the amounts have typically been small. See Rodriguez, 2009 WL 535980, at *6 (awarding $2,500 in punitive damages); Montgomery, 2008 WL 3540374, at *11 (awarding $1,000 in punitive damages); Barker, 2006 WL 1679645, at *3 (awarding $10,000 in punitive damages).16 However, this case presents a different situation, one of a very large corporation’s institutional gross negligence.

*16 The goal of punitive damages is to punish gross negligence and to deter such future misconduct. Thus, the award must be large enough to get Bank of America’s attention, otherwise these cases become an acceptable “cost of doing business.” Bank of America is a huge company with tremendous resources, a factor that the Court may and has considered in determining an appropriate award. See Myers v. Cent. Florida Investments, Inc., 592 F.3d 1201, 1216 (11th Cir.2010).17 Also, this is a serious FCCPA case, in which there were a large number of violations that occurred over a long period of time, and in which the Bank ignored the Goodins’ repeated attempts to fix its many errors. The Court, as fact-finder, finds that the Goodins have proven by clear and convincing evidence that a punitive damages award of $100,000 is appropriate.18

Goodin v. Bank of Am., N.A., No. 3:13-C

Missouri Wrongful Foreclosure: Trial Court Awards over $3 Million Including Punitive Damages and Quiet Title

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

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see Quiet title Wrongful foreclosure Punitive Damages Missouri judgment.1-26-15.pdf ocr

Missouri had been impenetrable. Things change. This case finds that neither the GSE nor anyone else in the chain had the power to enforce the paper because they did not really have ownership of the loan, that their title was false, that quiet title is granted to plaintiffs, that foreclosure was wrongful, that compensatory damages are awarded and that punitive damages would be awarded. Total Judgment $3 million +.

Important takeaways —

  1. The tide has turned. Courts are no longer looking the other way on intentionally sloppy foreclosures that cover up a larger fraud on investors. The courts are not clear on how that occurred, partially because nobody has been allowed to present  it, but they have enough of a feel of the situation to see that there is something fundamentally wrong with the mortgage origination and foreclosure practices.
  2. Quiet title can be awarded supported only by a finding that the mortgage is unenforceable. Whether this will stick on appeal is unknown. My view is that the mortgage stays although there is nobody (yet) claiming a genuine right to enforce it.
  3. At this point, if the foreclosing parties don’t have it right, it is viewed as an intentional or grossly negligent act, giving rise to compensatory damages, attorney fees, costs, and punitive damages.
  4. The value of a wrongful foreclosure case might be $3 million + which falls into line with other decisions.
  5. Judges are getting angry over the fact that they accepted false representations in the past.
  6. Judges are perceiving the difference between the debt and the paper that purports to describe the debt — i.e., the note and mortgage. While it is not expressed in so many words, this decision and others like it, sees the paper as largely fictitious even though there is a genuine debt out there. By implication, the courts are saying the debt has no paper that applies and that therefore nobody should be allowed to enforce the paper. It is close to declaring the mortgage void ab initio.

Damages Rising: Wrongful Foreclosure Costs Wells Fargo $3.2 Million

Damage awards for wrongful foreclosure are rising across the country. In New Mexico a judge issued a $3.2 million judgment (including $2.7 million in punitive damages) against Wells Fargo for foreclosing on a man’s home after his death even though he had an insurance policy through the bank that paid the remaining balance on his mortgage. The balance “owed” on the mortgage was $125,000. Despite the fact that the bank knew about the insurance (because it was purchased through the bank) Wells Fargo continued to pursue foreclosure, ignoring the claim for insurance. It is because of cases like this that people are asking “why would they do that?”

The answer is what I’ve been saying for years.  Where a loan is subject to claims of securitization, and the investment banks lied to insurers, investors, guarantors and other co-obligors, they most likely have been paid many times for the same loan and never gave credit to the investors. By not crediting the investors they created the illusion of a higher balance that was due on the loan. They also created the illusion of a default that probably never occurred. But by pursuing foreclosure and foreclosure sale, they compounded the illusion and avoided claims for refund and repayment received from third parties and created claims for recovery of servicer advances. In many foreclosures that I have  reviewed, payments received from the FDIC under loss-sharing were never taken into account. Thus the bank collects money repeatedly for a loss it never incurred.

This case is another example of why I insist on following the money. By following the money trail you will discover that the documents upon which the foreclosure relies referred to  fictitious transactions. The documents are worthless, but nevertheless accepted in court unless a proper objection is made based upon preserving issues for trial and appeal by proper pleading and discovery.

Lawyers should take note of this profit opportunity. Most homeowners are looking for attorneys to take cases on contingency. Typical contingency fee is 40%. If these lawyers were on a typical contingency fee arrangement, their payday would have been around $1.2 million.

I should add that for every one of these judgments that are reported, I hear about dozens of confidential settlements that are of similar nature, to wit: clear title on the house, damages and attorneys fees.

Wells Fargo Ordered to Pay $3.2 Million for “Shocking” Foreclosure

Countrywide Found Guilty of Fraud, JPM Criminal Responsibility for Madoff PONZI Scheme

“The words PONZI SCHEME and FRAUD applied to the mortgage meltdown has been largely dismissed by policy makers, law enforcement and regulators. Instead we heard the terms RISKY BEHAVIOR and RECKLESSNESS. Now law enforcement has finally completed its investigation and determined that those who set the tone and culture of Wall Street were deeply involved in the Madoff PONZI scheme and were regularly committing FRAUD in the creation and sale of mortgage bonds and the underlying “DEFECTIVE” loans. The finding shows that these plans were not risky nor reckless. They were intentional and designed to deceive and cause damage to everyone relying upon their false representations. The complex plan of false claims of securitization is now being pierced making claims of “plausible deniability” RISKY and RECKLESS.

And if the loans were defective there is no reason to believe that this applies only to the loans claimed to be in default. It applies to all loans subject to false claims of securitization, false documentation for non existent transactions, and fraudulent collection practices by reporting and collecting on balances that were fraudulently stated in the first instance. At this point all loans are suspect, all loan balances stated are suspect, and all Foreclosures based on these loans were frauds upon the court, should be vacated and the homeowner reinstated to ownership of the property and possession of the property. All such loans should have the loan balance adjusted by the courts for appropriate set off in denying the borrowers the benefit of the bargain that was presented to them.

“It is now difficult to imagine a scenario where the finding of the intentional use and creation of defective mortgages will not trickle down to all mortgage litigation. The Countrywide decision is the first that expressly finds them guilty of creating defective loans. It is impossible to believe that Countrywide’s intentional acts of malfeasance won’t spread to the investment banks that used Countrywide as the aggregator of defective loans (using the proprietary desk top underwriting software for originators to get approval). The reality is coming up, front and center. And Judges who ignore the defenses of homeowners who were of course defrauded by the same defective mortgages are now on notice that bias towards the banks simply doesn’t work in the real world.” — Neil F Garfield,www.livinglies.me October 24, 2013

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By Neil F Garfield, Esq. Tallahassee, Florida October 24, 2013. If the mortgages were defective and were used fraudulently to gain illicit profits it is not possible to avoid the conclusions that homeowners are among the victims. By using false appraisals the huge banks created the illusion of rising prices. This was manipulation of market prices just as the banks were found guilty of manipulating stated market rates for interbank lending “LIBOR” and use of the manipulated pricing to trade for further benefit knowing that the reality was different. The banks have continued this pattern behavior and are still doing it, and laying fines as a cost of doing business in the manipulation and ownership of natural resources. They are a menace to all societies on the planet. The threat of that menace must be removed In the face of a clear and present danger posed by the real world knowledge that where an opportunity arises for “moral hazard” the banks will immediately use it causing further damage to government, taxpayers, consumers and investors.

None of it was disclosed or even referenced at the alleged loan closing with borrowers despite federal and state laws that require all such undisclosed profits and compensation to be disclosed or suffer the consequence of required payment to the borrower of all such undisclosed compensation. The borrowers are obviously entitled to offset for the false appraisals used by lenders to induce borrowers to accept defective loan products.

Further, borrowers have a clear right of action for treble damages for the pattern of conduct that constituted fraud as a way of doing business. In addition, borrowers can now be scene through a clear lens — that they are entitled to the benefit of the bargain that they reasonably thought they were getting. That they were deceived and coerced into accepting defective loans with undisclosed players and undisclosed compensation and undisclosed repayment terms raises the probability now that borrowers who present their case well, could well start getting punitive damages awards with regularity. It’s easy to imagine the closing argument for exemplary or punitive damages — “$10 billion wasn’t enough to stop them, $25 billion wasn’t enough to stop of them, so you, members of the jury, must decide what will get their attention without putting them out of business. You have heard evidence of the tens of billions of dollars in profits they have reported. It’s up to you to decide what will stop the banks from manipulating the marketplace, fraudulently selling defective loans to borrowers and pension funds alike with the intention of deceiving them and knowing that they would reasonably rely on their misrepresentations. You decide.”

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U.S. prepares to take action against JPMorgan over Madoff
In what would be an almost unheard of move when it comes to U.S. banks, the FBI and the U.S. attorney’s office are in talks with JPMorgan (JPM) about imposing a deferred prosecution agreement over allegations that the bank turned a blind eye to Bernie Madoff’s Ponzi scheme, the NYT reports.
Authorities would suspend criminal charges against JPMorgan but impose a fine and other concessions, and warn the bank that it will face indictments over any future misconduct.
However, the government has not decided to charge any current or former JPMorgan employees.
The report comes as the bank holds talks with various regulators over a $13B deal to settle claims about its mortgage practices.

Countrywide found guilty in U.S. mortgage suit
A federal jury has found Bank of America’s (BAC -2.1%) Countrywide unit liable for defrauding Fannie Mae (FNMA +22%) and Freddie Mac (FMCC +19.4%) by selling them thousands of defective mortgages.
The judge will determine the amount of the penalty – the U.S. has requested $848M, the gross loss to the GSEs as calculated by its expert witness.
The suit centered on Countrywide’s HSSL – High Speed Swim Lane – program instituted in August 2007, says the government, to keep the music playing as the property market was falling apart.

DOJ probes nine leading banks over sale of mortgage debt
The Department of Justice is reportedly investigating nine major banks over the sale of problematic mortgage bonds, although the probes are for civil infractions rather than criminal ones.
The banks are Bank of America (BAC), Citigroup (C), Credit Suisse (CS), Deutsche Bank (DB), Goldman Sachs (GS), Morgan Stanley (MS), RBS (RBS), UBS (UBS) and Wells Fargo (WFC).
The inquiries span U.S. attorney’s offices from California to Massachusetts, and come as JPMorgan tries to reach a multi-billion dollar settlement over the issue.

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