Problems with a Loan Modification: 10 POINTS TO CONSIDER


Problems with a Loan Modification:

  1. The borrowers will think they are modifying their current loan when in fact they are starting all over again.
  2. The Foreclosing entity which lacks standing to bring lawsuit, is not authorized to modify anything since they are not the owner of the loan in question.
  3. Since the real parties in interest are no where to be found, they are taking it upon themselves with the help of their lawyers to steal your property.
  4. The borrower is actually getting a new loan which may enjoin borrower from rescinding new transaction.
  5. The foreclosing entity is STILL not using their own funds to modify (new loan) loan. They are getting funds to lend borrowers through Federal bail outs, insurance proceeds and believe it or not Investors. [same process]
  6. Their lawyers are not acting in a lawyer’s capacity but as BROKERS; [middlemen] they are getting paid commission on every new loan they help brokered.
  7. What Does Loan Modification Mean?
    A modification to an existing loan made by a lender in response to a borrower’s long-term inability to repay the loan. Loan modifications typically involve a reduction in the interest rate on the loan, an extension of the length of the term of the loan, a different type of loan or any combination of the three. A lender might be open to modifying a loan because the cost of doing so i
    s less than the cost of default.
  8. Why would they need to re-qualify if they claim they would make the borrowers payments and rates to be less?
  9. The borrower took the loan out with lender “A” but an unknown lender “B” is trying to modify it.
  10. When the modification is said and done, the borrower will have lender “B” as the lender. What happened to lender “A”???

33 Responses

  1. Anyone know if it is customary that the consumer have the actual bank’s MERS transaction transfer paper?
    This document has two MERS ID numbers created in 2010 and were 3 days apart and the later of the two is inactive and can be accounted for but the other (1st) remains active and the two loan amounts are 500 dollar difference.

  2. Reblogged this on Dolores Peers.

  3. I was denied a modification loan due to the fact that my name was not on the mortgage note .my name was on the mortgage and my name was on the property in which the house sat upon but, my name was not on the refinance note so there for they claimed that I was not qualified and I lost my property.
    Is there anything I can do?

  4. I’m extremely impressed with your writing skills and also with the structure to your blog. Is that this a paid topic or did you modify it your self? Either way keep up the nice quality writing, it’s uncommon to see
    a nice blog like this one these days..

  5. I was one of the lucky few who was successful in getting a loan mod. Unfortunately due to illness and unemployment I am facing foreclosure. I was wondering the same thing: how can lender X modify a loan they do not own? If they did, will that make the loan fraudulent and unenforceable?

    I have a mers deed of trust and min # upon it. There is clear evidence of movement not withstanding an audit. I am wondering if anyone has been successful in getting their loan mod thrown out of court because the lender modifying the loan was not the original lender nor the holder in due course?

    Any help will be appreciated.

    Houston, Texas

  6. Try to mod with BOA….This is turning in to a long process….what is the process and how long should it be. They say they will email me every 10 days …….it has been 3 weeks.. Can i do this myself or do i need a laywer .i am in GA! HELP!

  7. After reading what you have posted here Mr. Garfield, I feel, after getting a mod in early 2010, I am doomed again. This is extremely concerning and make me want to walk away from this mess as I am just trying to keep a home for my daughter and my two grandsons. there is no one here for them but me and I getting too old to fight this fight again and again. This feels terrible, I truly thought I was doing the best thing for my self and them most of all. Now I am in the middle of trying to mod a 2nd which has been horrible. I am truly baffled and now scared to death!!

  8. READ Richard Zombecks article from today

    Posted: July 30, 2010 01:34 PM

    Treasury Used Bogus Info In Report To Homeowners

  9. People v First Am. Corp.
    2010 NY Slip Op 04868
    Decided on June 8, 2010
    Appellate Division, First Department
    Gonzalez, J.
    Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431.
    This opinion is uncorrected and subject to revision before publication in the Official Reports.

    Decided on June 8, 2010

    First Judicial Department
    Luis A. Gonzalez, P.J.
    David B. Saxe
    James M. Catterson
    Rolando T. Acosta, JJ.


    [*1]The People of the State of New York by Andrew Cuomo, Attorney General of the State of New York, Plaintiff-Respondent,


    First American Corporation, et al., Defendants-Appellants.

    Defendants appeal from the order of the Supreme Court, New York County (Charles Edward Ramos, J.), entered April 8, 2009, which, insofar as appealed from as limited by the briefs, denied their motion to dismiss the complaint on the ground of federal preemption.

    DLA Piper LLP (US), New York (Richard F. Hans,
    Patrick J. Smith, Kerry Ford
    Cunningham and Jeffrey D.
    Rotenberg of counsel), for
    Andrew M. Cuomo, Attorney General, New York
    (Richard Dearing, Benjamin
    N. Gutman and Nicole
    Gueron of counsel), for respondent. [*2]


    This appeal calls upon us to determine whether the regulations and guidelines implemented by the Office of Thrift Supervision (OTS) pursuant to the Home Owner’s Lending Act of 1933 (HOLA) (12 USC § 1461 et seq.) and the Financial Institutions Reform, Recovery and Enforcement Act of 1989 (FIRREA) (Pub L 101-73, 103 STAT 183 [codified in scattered sections of 12 USC]), preempt state regulations in the field of real estate appraisal.

    The Attorney General claims that defendants engaged in fraudulent, deceptive and illegal business practices by allegedly permitting eAppraiseIT residential real estate appraisers to be influenced by nonparty Washington Mutual, Inc. (WaMu) to increase real estate property values on appraisal reports in order to inflate home prices. We conclude that neither federal statutes, nor the regulations and guidelines implemented by the OTS, preclude the Attorney General of the State of New York from pursuing litigation against defendants First American Corporation and First American eAppraiseIT, LLC. We further conclude that the Attorney General has standing to pursue his claims pursuant to General Business Law § 349.

    In a complaint dated November 1, 2007, plaintiff, the People of the State of New York, commenced this action against defendants asserting claims under Executive Law § 63(12) and General Business Law § 349, and for unjust enrichment. The complaint alleges that in Spring 2006, WaMu hired two appraisal management companies, defendant eAppraiseIT and nonparty Lender’s Service, Inc., to oversee the appraisal process and provide a structural buffer against potential conflicts of interest between WaMu and the individual appraisers. The gravamen of the Attorney General’s complaint asserts that defendants misled their customers and the public by stating that eAppraiseIT’s appraisals were independent evaluations of a property’s market value and that these appraisals were conducted in compliance with the Uniform Standards and Professional Appraisal Practice (USPAP), when in fact defendants had implemented a system allowing WaMu’s loan origination staff to select appraisers who would improperly inflate a property’s market value to WaMu’s desired target loan amount.[FN1]

    Defendants moved for dismissal of the complaint pursuant to CPLR 3211, asserting that the Attorney General is prohibited from litigating his claims because HOLA and FIERRA impliedly place the responsibility for oversight of appraisal management companies on the OTS, and asserting a failure to state a cause of action. Supreme Court denied defendants’ motion, finding that HOLA and FIRREA do not occupy the entire field with respect to real estate appraisal regulation and that the enforcement of USPAP standards under General Business Law § [*3]349 neither conflicts with federal law, nor does it impair a bank’s ability to lend and extend credit. We affirm.

    The Supremacy Clause of the United States Constitution provides that Federal laws “shall be the supreme Law of the Land; and the Judges in every State shall be bound thereby, any Thing in the Constitution or Laws of any State to the Contrary notwithstanding” (US Const, art VI, cl [2]), and it “vests in Congress the power to supersede not only State statutory or regulatory law but common law as well” (Guice v Charles Schwab & Co., 89 NY2d 31, 39 [1996], cert denied 520 US 1118 [1997]). Indeed, “[u]nder the U.S. Constitution’s Supremacy Clause (US Const, art VI, cl 2), the purpose of our preemption analysis is . . . to ascertain the intent of Congress” (Matter of People v Applied Card Sys., Inc., 11 NY3d 105, 113 [2008], cert denied
    _ US _, 129 S Ct 999 [2009]).

    Congressional intent to preempt state law may be established “by express provision, by implication, or by a conflict between federal and state law” (Balbuena v IDR Realty LLC, 6 NY3d 338, 356 [2006], quoting New York State Conference of Blue Cross & Blue Shield Plans v Travelers Ins. Co., 514 US 645, 654 [1995]). Express preemption occurs when Congress indicates its “pre-emptive intent through a statute’s express language or through its structure and purpose” (Altria Group, Inc. v Good, 555 US __, __, 129 S Ct 538, 543 [2008]). Absent explicit preemptive language, implied preemption occurs when “[t]he scheme of federal regulation [is] so pervasive as to make reasonable the inference that Congress left no room for the States to supplement it . . . [o]r the Act of Congress may touch a field in which the federal interest is so dominant that the federal system will be assumed to preclude enforcement of state laws on the same subject” (Rice v Santa Fe El. Corp., 331 US 218, 230 [1947]). Further, when “[a] conflict occurs either because compliance with both federal and state regulations is a physical impossibility, or because the State law stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress,” the State law is preempted (City of New York v Job-Lot Pushcart, 213 AD2d 210, 210 [1995], affd 88 NY2d 163 [1996], cert denied 519 US 871 [1996] [internal quotation marks and citations omitted]).

    Here, defendants do not argue, nor have they directed this Court’s attention to any language within HOLA or FIRREA that establishes, that Congress expressly created these statutes to supersede state law governing the causes of actions asserted in the Attorney General’s complaint. Defendants also have not argued that there exists a conflict between federal and State laws or regulations. Rather, defendants assert that because Congress has legislated so comprehensively, and that federal law so completely occupies the home lending field, the Attorney General is precluded from bringing claims against them under the theory of field preemption. Thus, the necessary starting point is to determine whether HOLA and FIRREA so occupy the field that these two statutes preempt any and all state laws speaking to the manner in which appraisal management companies provide real estate appraisal services.

    In 1933, Congress enacted HOLA “to provide emergency relief with respect to home mortgage indebtedness at a time when as many as half of all home loans in the country were in default” (Fidelity Fed. Sav. & Loan Assn. v De la Cuesta, 458 US 141, 159 [1982] [internal [*4]quotation marks and citations omitted]). HOLA
    created a general framework to regulate federally chartered savings associations that left the regulatory details to the Federal Home Loan Bank Board (FHLBB). The FHLBB’s authority to regulate federal savings and loans is virtually unlimited and “[p]ursuant to this authorization, the [FHLBB] has promulgated regulations governing the powers and operations of every Federal savings and loan association from its cradle to its corporate grave” (id. at 145 [internal citations and quotation marks omitted]).

    When Congress passed FIRREA in 1989, it restructured the regulation of the savings association industry by abolishing the FHLBB and vested many of its functions into the newly-created OTS (see FIRREA § 301 [12 USCA § 1461 et seq.] [establishing OTS], § 401 [12 USCA § 1437] [abolishing the FHLBB]). According to FIRREA’s legislative history

    “[t]he primary purposes of the [FIRREA] are to provide affordable housing mortgage finance and housing opportunities for low- and moderate-income individuals through enhanced management of federal housing credit programs and resources; establish organizations and procedures to obtain and administer the necessary funding to resolve failed thrift cases and to dispose of the assets of these institutions . . . and, enhance the regulatory enforcement powers of the depository institution regulatory
    agencies to protect against fraud, waste and insider abuse” (HR Rep 101-54 [I], at 307-308, reprinted in 1989 US Code Cong to Admin News, at 103-104).

    FIRREA was also designed
    “to thwart real estate appraisal abuses, [by] establish[ing] a system of uniform national real estate appraisal standards. It also requires the use of state certified or licensed appraisers for real estate related transactions with the Federal National Mortgage Association (Fannie Mae), the Federal Home Loan Mortgage Corporation (Fannie Mac), the RTC, or certain real estate transaction [sic] regulated by the federal financial institution regulatory agencies” (HR Rep 101-54 (I), at 311, reprinted in 1989 US Code Cong to Admin News, at 107).

    Further, 12 USCS § 3331, which was enacted as part of FIRREA, states that the general purpose of this statute, is
    “to provide that Federal financial and public policy interests in real estate related transactions will be protected by requiring that real estate appraisals utilized in connection with federally related [*5]transactions are performed in writing, in accordance with uniform standards, by individuals whose competency has been demonstrated and whose professional conduct will be subject to effective supervision.”

    The uniform standards described in 12 USCS § 3331, are defined in 12 USCS § 3339 which requires that the OTS, as a
    “Federal financial institution[] regulatory agency . . . shall prescribe appropriate standards for the performance of real estate appraisals in connection with federally related transactions [FN2] under the jurisdiction of each such agency or instrumentality. These rules shall require, at a minimum — (1) that real estate appraisals be performed in accordance with generally accepted appraisal standards as evidenced by the appraisal standards promulgated by the Appraisal Standards Board of the Appraisal Foundation; and (2) that such appraisals shall be written appraisals.”
    The Appraisal Standards Board (ASB) of the Appraisal Foundation promulgates the appraisal standards mandated by 12 USC § 3339 and are called USPAP. The Appraisal Foundation is a private “not-for-profit organization dedicated to the advancement of professional valuation [and] was established by the appraisal profession in the United States in 1987” (Welcome to The Appraisal Foundation [The Appraisal Foundation], [accessed May 27, 2010]). The ASB is responsible for “develop[ing], interpret[ing] and amend[ing]” USPAP (Welcome to The Appraisal Foundation,
    DynamicPage.aspx?Site=TAF & WebCode=ASB [accessed May 27, 2010]). However, “[e]ach U.S. State or Territory has a State appraiser regulatory agency, which is responsible for certifying and licensing real estate appraisers and supervising their appraisal-related activities, as required by Federal law” (State Regulatory Information [The Appraisal Foundation], & WebCode=RegulatoryInfo [accessed May 27, 2010]; see also State Appraiser Regulatory Programs > State Contact Information [Appraisal Subcommittee], Regulatory-Programs/StateContactInformation.aspx [accessed May 27, 2010] [listing each State appraiser regulatory agency’s website]). Further, the OTS itself has determined that

    “[i]t does not appear that OTS is required by title XI of FIRREA to [*6]implement an appraisal regulation that reaches all the activities of savings and loan holding companies, at least to the extent that those activities are unrelated to the safety and soundness of savings associations or their subsidiaries. Neither the language of Title XI nor its legislative history indicate that Congress intended title XI to apply to the wide range of activities engaged in by savings and loan holding companies and their non-saving association subsidiaries” (55 Fed Reg 34532, 34534-34535 [1990], codified at 12 CFR 506, 545, 563, 564 and 571).

    Indeed, the OTS encourages financial institutions
    “to make referrals directly to state appraiser regulatory authorities when a State licensed or certified appraiser violates USPAP, applicable state law, or engages in other unethical or unprofessional conduct. Examiners finding evidence of unethical or unprofessional conduct by appraisers will forward their findings and recommendations to their supervisory office for appropriate disposition and referral to the state, as necessary” (OTS, Thrift Bulletin, Interagency Appraisal and Evaluation Guidelines at 10 [November 4, 1994], http://files.ots.treas. gov/84042.pdf [accessed May 27, 2010]).
    In looking at the legislative history it becomes clear that Congress intended to establish

    “a system of uniform real estate appraisal standards and requires the use of State certified and licensed appraisers for federally regulated transactions by July 1, 1991. . . The key . . . lies in the creation of State regulatory agencies and a Federal watchdog to monitor the standards and to oversee State enforcement. . . It is this combination of Federal and State action . . . that . . . assur[es] . . . good standards are properly enforced (135 Cong Rec S3993-01, at S4004 [April 17, 1989], 1989 WL 191505 [remarks of Senator Christopher J. Dodd]).

    Thus, we conclude that neither HOLA or FIRREA preempts or precludes the Attorney General from pursuing his claims.
    Having rejected defendants’ general arguments for preemption under HOLA and FIRREA, “[t]he Court’s task, then, is to decide which claims fall on the regulatory side of the ledger and which, for want of a better term, fall on the common law side” (Cedeno v IndyMac Bancorp, Inc., 2008 WL 3992304, *7, 2008 US Dist LEXIS 65337, *22 [SD NY 2008] [internal quotation marks and citation omitted]). Defendants assert that the Attorney General is preempted from pursuing his claims because subsequent to FIRREA’s passage, the OTS issued extensive [*7]regulations specifically addressing the composition and construction of appraisal programs undertaken by federal savings and loans.

    It is well settled that “[a]gencies delegated rulemaking authority under a statute . . . are afforded generous leeway by the courts in interpreting the statute they are entrusted to administer” (Rapanos v United States, 547 US 715, 758 [2006]). Indeed, the OTS regulations “have no less pre-emptive effect than federal statutes” (Fidelity Fed. Sav. & Loan Assn., 458 US at 153). 12 CFR 545.2, states that regulations promulgated by the OTS are “preemptive of any state law purporting to address the subject of the operations of a Federal saving association.” However, 12 CFR 560.2(a) limits the language of 12 CFR 545.2 by setting parameters to the OTS’ authority to promulgate regulations that

    “preempt state laws affecting the operations of federal savings associations when deemed appropriate to facilitate the safe and sound operation of federal savings associations, to enable federal savings associations . . . to conduct their operations in accordance with the best practices of thrift institutions in the United States, or to further other purposes of the HOLA” (12 CFR 560.2[a]).
    12 CFR 560.2(b) provides a non-exhaustive list of illustrative examples of the types of state laws preempted by 12 CFR 560.2(a). Further, 12 CFR 560.2(c) states that the following types of State law are not preempted

    “to the extent that they only incidentally affect the lending operations of Federal savings associations . . . (1) Contract and commercial law; (2) Real property law; (3) Homestead laws specified in 12 U.S.C. 1462a(f); (4) Tort law; (5) Criminal law; and (6) Any other law that OTS, upon review, finds: (i) Furthers a vital state interest; and (ii) Either has only an incidental effect on lending operations or is not otherwise contrary to the purposes expressed in paragraph (a) of this section.”
    The OTS advises that when a court is

    “analyzing the status of state laws under § 560.2, the first step will be to determine whether the type of law in question is listed in paragraph (b). If so, the analysis will end there; the law is preempted. If the law is not covered by paragraph (b), the next question is whether the law affects lending. If it does, then, in accordance with paragraph (a), the presumption arises that the law is preempted. This presumption can be reversed only if the law can clearly be shown to fit within the confines of paragraph (c). For these purposes, paragraph (c) is intended to be interpreted narrowly. Any doubt should be resolved in favor of preemption” (61 Fed Reg 50951-01, 50966-50967 [1996]).
    Defendants argue that the Attorney General’s challenges to defendants’ business practices are preempted because the conduct falls within 12 CFR 560.2(b)(5), which provides examples of loan-related fees “including without limitation, initial charges, late charges, prepayment penalties, servicing fees, and overlimit fees.” Defendants also assert that their alleged conduct is within 12 CFR 560.2(b)(9), which provides

    “[d]isclosure and advertising, including laws requiring specific statements, information, or other content to be included in credit application forms, credit solicitations, billing statements, credit contracts, or other credit-related documents and laws requiring creditors to supply copies of credit reports to borrowers or applicants” (id.).

    Lastly, defendants assert that their alleged conduct falls within 12 CFR 560.2(b)(10) which states that “[p]rocessing, origination, servicing, sale or purchase of, or investment or participation in, mortgages” is preempted.
    The Attorney General’s complaint asserts that defendants engaged in conduct proscribed by Executive Law § 63(12)[FN3] and General Business Law § 349 [FN4]. It further alleges that defendants unjustly enriched themselves by repeated use of fraudulent or illegal business practices, in that they allowed WaMu to pressure eAppraiseIT appraisers to compromise their USPAP-required independence and collude with WaMu to inflate residential appraisal values so that the appraisals would match the qualifying loan values WaMu desired.

    Under the first prong of the preemption analysis, we find that this action brought pursuant to Executive Law § 63(12), General Business Law § 349(b) and on the theory of unjust [*9]enrichment is not preempted by 12 CFR 560.2(b)(5) because it involves no attempt to regulate bank-related fees. We also find, under the first prong of the preemption analysis, that there is no preemption pursuant to 12 CFR 560.2(b)(9) because these claims do not involve a state law seeking to impose or require any specific statements, information or other content to be disclosed. Although at least one case has held that claims similar to those asserted here were preempted (see Spears v Washington Mut., Inc., 2009 WL 605835 [ND Cal 2009]), we find
    under the first prong of the preemption analysis that 12 CFR 660.2(b)(10) does not preclude the Attorney General’s complaint because prosecution of the alleged conduct will not affect the operations of federal savings associations (FSA) in how they process, originate, service, sell or purchase, or invest or participate in, mortgages.

    The question then becomes whether the Attorney General is nevertheless precluded from litigating his claims under the second prong of the preemption analysis. Because enjoining a real estate appraisal management company from abdicating its publicly advertised role of providing unbiased valuations is not within the confines of 12 CFR 560.2(c), we answer it in the negative.

    Defendants argue the OTS’s authority under HOLA and FIRREA is not limited to oversight of a FSA and that its authority under these two statues extends over the activity regulated and includes the activities of third party agents of a FSA. Defendants assert that providing real estate appraisal services is a critical component of the processing and origination of mortgages and represents a core component of the controlling federal regime. Defendants cite 12 USC § 1464(d)(7)(D) and State Farm Bank, FSB v Reardon (539 F3d 336 [6th Cir 2008]) for
    support. 12 USC § 1464(d)(7) states, in pertinent part, that

    “if a savings association . . . causes to be performed for itself, by contract or otherwise, any service authorized under [HOLA] such performance shall be subject to regulation and examination by the [OTS] Director to the same extent as if such services were being performed by the savings association on its own premises . . .”
    Here, it is alleged eAppraiseIT and Lender’s Service, Inc., were hired by WaMu to provide appraisal services. However, defendants are incorrect in asserting that providing real estate appraisal services is an authorized banking activity under HOLA. In an opinion letter dated October 25, 2004, OTS concluded that it had the authority to regulate agents of an FSA under HOLA because

    “[i]nherent in the authority of federal savings associations to exercise their deposit and lending powers and to conduct deposit, lending, and other banking activities is the authority to advertise, market, and solicit customers, and to make the public aware of the banking products and services associations offer. The authority to conduct deposit and lending activities, and to offer banking products and services, is accompanied by the power to advertise, market, and solicit customers for such products and services . . . A state may not put operational restraints on a federal savings [*10]association’s ability to
    offer an authorized product or service by restricting the association’s ability to market its products and services and reach potential customers . . . Thus, OTS has authority under the HOLA to regulate the Agents the Association uses to perform
    marketing, solicitation, and customer service activities” (2004 OTS Op No. P-2004-7, at 7,, 2004 OTS LEXIS 6, at *15 [accessed May 27, 2010]).
    State Farm Bank, FSB v Reardon (539 F3d 336 [6th Cir 2008]) follows this principle. In Reardon, the plaintiff, a FSA chartered by the OTS under HOLA, decided to offer, through its independent contractor agents, first and second mortgages and home equity loans in the State of Ohio. The Sixth Circuit concluded that although the statute at issue

    “directly regulates [the plaintiff FSA’s] exclusive agents rather than [the FSA] itself . . . the activity being regulated is the solicitation and origination of mortgages, a power granted to [the FSA] by HOLA and the OTS. This is also a power over which the OTS has indicated that any state attempts to regulate will be met with preemption . . . [T]he practical effect of the [statute] is that [the FSA] must either change its structure or forgo mortgage lending in Ohio. Thus, enforcement of the [statute] against [the FSA’s] exclusive agents would frustrate the purpose of the HOLA and the OTS regulations because it indirectly prohibits [the FSA] from exercising the powers granted to it under the HOLA and the OTS regulations” (Reardon, 539 F3d at 349 [internal quotation marks and citation omitted]).
    Since appraisal services are not authorized banking products or services of a FSA, defendants have failed to show that the Attorney General is preempted from pursuing his claims under 12 USC § 1464(d)(7)(D). Consequently, under the second prong of the preemption analysis, the result of the Attorney General litigating his claims against a company that independently administers a FSA’s appraisal program would “only incidentally affect the lending operations of [the FSA]” (12 CFR 560.2[c]). Thus, defendants have failed to show that OTS’s regulations and guidelines preempt or preclude the Attorney General from pursuing his claims.

    Defendants assert that Cedeno v IndyMac Bancorp, Inc. (2008 WL 3992304, 2008 US Dist LEXIS 65337 [SD NY 2008]) provides this Court with persuasive authority that the federal government and its regulators alone regulate the mortgage loan origination practices of FSAs including all aspects of the appraisal programs they utilize. In Cedeno, the Southern District found preemption precluded a private individual from maintaining a cause of action against a bank. It was alleged that the bank failed to disclose to the plaintiff that it selected appraisers, appraisal companies and/or appraisal management firms who would inflate the value of [*11]residential properties in order to allow the bank to complete more real estate transactions and obtain greater profits. This practice resulted in the plaintiff being misled as to the true
    equity in her home. The Southern District found that the conduct of the bank was

    “directly regulated by the OTS: the processing and origination of mortgages, a loan-related fee, and the accompanying disclosure. The appraisals are a prerequisite to the lending process, and are inextricably bound to it. Because the plaintiff’s claim is not a simple breach of contract claim, but asks the Court to set substantive standards for the Associations’ lending operations and practices, it is preempted” (Cedeno, 2008 WL 3992304, *9, 2008 US Dist LEXIS 65337, at *28 [internal quotation marks and citations omitted]).

    Contrary to defendants’ assertions, we find that Cedeno is not applicable here because Cedeno does not reach the question as to whether HOLA, FIRREA or OTS’s regulations and guidelines are intended to regulate the conduct of real estate appraisal companies.
    Annexed to the OTS’s October 25, 2004 opinion letter is a document entitled Appendix A – Conditions. In this document, OTS requires FSAs that wish to use agents to perform marketing, solicitation, customer service, or other activities related to the FSA’s authorized banking products or services to enter into written agreements that “(4) expressly set[] forth OTS’s statutory authority to regulate and examine and take an enforcement action against the agent with respect to the activities it performs for the association, and the agent’s acknowledgment of OTS’s authority” (2004 OTS Op No. P-2004-7, at 16, http://files.ots., 2004 OTS LEXIS 6, at *37 [accessed May 27, 2010]). We note that defendants have neither asserted that such written agreements exist nor produced such documents. Thus, we conclude that the Attorney General may proceed with his claims against defendants because his challenge to defendants’ allegedly fraudulent and deceptive business practices in providing appraisal services is not preempted by federal law and regulations that govern the operations of savings and loan associations and institution-affiliated parties.

    Defendants assert that the Attorney General cannot rely upon a substantive violation of a federal law to support a claim under General Business Law § 349 because this is an improper attempt to convert alleged violations of federal law into a violation of New York law. Defendants claim that where a plaintiff seeks to rely upon a substantive violation of a federal law to support a claim under General Business Law § 349, the federal law relied upon must contain a private right of action.

    However, the Attorney General is statutorily charged with the duty to “[p]rosecute and defend all actions and proceedings in which the state is interested, and have charge and control of all the legal business of the departments and bureaus of the state, or of any office thereof which requires the services of attorney or counsel, in order to protect the interest of the state” (Executive Law § 63[1]). Indeed, when the Attorney General becomes aware of allegations of persistent fraud or illegality of a business, he [*12]

    “is authorized by statute to bring an enforcement action seeking an order enjoining the continuance of such business activity or of any fraudulent or illegal acts, [and] directing restitution and damages’ (Executive Law § 63 [12]). He is also authorized, when informed of deceptive acts or practices affecting consumers in New York, to bring an action in the name and on behalf of the people of the state of New York to enjoin such unlawful acts or practices and to obtain restitution of any moneys or property obtained’ thereby (General Business Law § 349 [b])” (People v Coventry First LLC, 13 NY3d 108, 114 [2009]).
    It is well settled that “[o]n a motion to dismiss pursuant to CPLR 3211, the court must accept the facts as alleged in the complaint as true, accord plaintiffs the benefit of every possible favorable inference, and determine only whether the facts as alleged fit within any cognizable legal theory'” (Wiesen v New York Univ., 304 AD2d 459, 460 [2003], quoting Leon v Martinez, 84 NY2d 83, 87-88 [1994]). The Attorney General’s complaint alleges that defendants publicly claimed on their eAppraiseIT website that eAppraiseIT provides a firewall between lenders and appraisers so that customers can be assured that USPAP and FIRREA guidelines are followed and that each appraisal is being audited for compliance. The Attorney General charges that defendants deceived borrowers and investors who relied on their proclaimed independence by allowing WaMu’s loan production staff to select the appraiser based upon whether they would provide high values.

    We find defendants’ assertions that the Attorney General lacks standing under General Business Law § 349 and that his complaint fails to state a cause of action are without merit. Indeed, the Attorney General’s complaint references misrepresentations and other deceptive conduct allegedly perpetrated on the consuming public within the State of New York, and “[a]s shown by its language and background, section 349 is directed at wrongs against the consuming public” (Oswego Laborers’ Local 214 Pension Fund v Marine Midland Bank, 85 NY2d 20, 24 [1995]). Therefore, we find that the Attorney General’s complaint articulates a viable cause of action under General Business Law § 349, and that this statute provides him with standing.

    Consequently, we conclude that defendants have failed to demonstrate that HOLA, FIRREA or the OTS’s regulations and guidelines preempt or preclude the Attorney General from pursuing the causes of action articulated in his complaint. We additionally find that the Attorney General has standing under General Business Law § 349. We have reviewed defendants’ remaining contentions and we find them without merit.

    Accordingly, the order of the Supreme Court, New York County (Charles Edward Ramos, J.), entered April 8, 2009, which, insofar as appealed from as limited by the briefs, [*13]denied defendants’ motion to dismiss the complaint on the ground of federal preemption, should be affirmed, without costs.

    All concur.
    Order, Supreme Court, New York County (Charles Edward Ramos, J.), entered April 8, 2009, affirmed, without costs.

    Opinion by Gonzalez, P.J. All concur.
    Gonzalez, P.J., Saxe, Catterson, Acosta, JJ.

    ENTERED: JUNE 8, 2010



    Footnote 1: USPAP is incorporated into New York law and it prohibits a State-certified or State licensed appraiser from accepting a fee for an appraisal assignment “that is contingent upon the appraiser reporting a predetermined estimate, analysis, or opinion or is contingent upon the opinion, conclusion or valuation reached, or upon the consequences resulting from the appraisal assignment” (NY Exec Law § 160-y; 19 NYCRR 1106.1).

    Footnote 2: 12 USC § 3350(4) states that “[t]he term federally related transaction’ means any real estate-related financial transaction which—(A) a federal financial institutions regulatory agency or the Resolution Trust Corporation engages in, contracts for, or regulates; and (B) requires the services of an appraiser.”

    Footnote 3: Executive Law § 63(12) states, in pertinent part, that “[w]henever any person shall engage in repeated fraudulent or illegal acts or otherwise demonstrate persistent fraud or illegality in the carrying on, conducting or transaction of business, the attorney general may apply, in the name of the people of the state of New York . . . for an order enjoining the continuance of such business activity or of any fraudulent or illegal acts, directing restitution and damages. . .”

    Footnote 4: General Business Law § 349(b) states, in pertinent part, that “[w]henever the attorney general shall believe from evidence satisfactory to him that any person, firm, corporation or association or agent or employee thereof has engaged in or is about to engage in any of the acts or practices stated to be unlawful he may bring an action in the name and on behalf of the people of the state of New York to enjoin such unlawful acts or practices and to obtain restitution of any moneys or property obtained directly or indirectly by any such unlawful acts or practices.”

  10. I need help to find a lawyer in TX. My home was with Americas Wholesale Lender/CW and know BofA. Need some advise on this. My e-mail is

  11. One of our family friend’s home got sold last week on trustee sale. She was in the process of a modification and it got sold half way. Cash for keys is coming up in 30 days. Is there any way to get the trustee sale rescinded? It’s a Fannie Mae loan and the loan is back to the REO right now.

    We need someone who are experienced in this area to help getting the home back. The homeowner is willing to reinstate. Please email me at We are in Orange County, CA. thanks.

  12. Lori: Funny you should ask. I was just thinking about that and I already wrote about the moral hazards readily apparent in non-judicial and judicial sales. If you take the majority of judges at their words, then the answer to your question is YES. File some papers, foreclose on the home, sell it to the highest bidder and you end up with a formidable armor of title. Sure the pretender lenders will scream fraud. But in order to do that they will have to show standing by being the plaintiff in a lawsuit against the parties you put together to do this. It certainly beats the heck out of just standing around wondering what to do next. There is already a variation of this going on under the radar that I won’t comment on. It is working so I don’t want to disclose it.

  13. Is there a way for a homeowner to securitize their own loan?
    For example, a homeowner decides that this Making Home Affordable Program is a failed program and decides not to pursue the modification route.
    The homeowner has not made several payments and is in default, therefore the due on sale or acceleration clause has been invoked.
    I know that it is legal for a homeowner to form a corporation or LLC and transfer their property into the corporation or LLC. The the homeowner can form a second corporation and have the first corporation transfer the house to the second,…. see where I’m going with this?

    I am trying to figure out a way to securitize our own loans.

    I realize that this will only delay the foreclosure process and in the end, a quiet title action would be started to clear the title.

    Can anyone suggest legal strategies along these lines?

  14. I run a small non-profit organization. We own an inner city mission in the Chicago area. 3 years ago our organization purchased a historic building and began restoration work. Last fall we had a major decrease in donations due to the economy. Our bank promised us a loan modification IF we made a good faith down payment of 2 months ( double payment ). They decided to not fulfill their promise and not modify the loan after we made the good faith downpayment. Now they are trying to foreclose on us, but Judge has denied the summary judgement, but we are headed to mediation and trial. What can I do to force the loan modification we were promised?? The bank is killing us with 11% interest.

  15. Hi Scot Hedrick:

    Just read your post. I have been looking for help since this company has taken over my loan 13 years ago. Everyone says I can’t do anything. Now the worst has happened — they foreclosed and “cash for keys” date is Jan. 13th. I know that is to be a binding agreement however I did not want the shame of a sheriff coming to evict me. My son is getting married in two years. He wants to buy the house he grew up in (we have been here for 22 years). With my salary and his combined and a modest “income” from my husband’s business we could definitely swing a loan. Every attorney we have talked to have all said “can’t help you”. I find that hard to believe. We have wasted so much money on Chap 13 attorneys. We are good people (I know — people say that all the time) but we are. We want a chance to stay in this home that Ocwen mortgage servicer took over in 1997. Ever since then we have had nothing but trouble. PLEASE email me back at Even if it is to tell me to go away. We live in PA and I’m sure you’re probably not even close because that’s the way our luck has run. Thank you

  16. litton loan and me R.B.OAKES agreed on loan mod 4/08 I defaulted served papers 7/08.due to job loss and my wifes health.still in process of foreclosre, but litton sent me loan mod agreement back because the notary signed on diff-days they want me to resign agreement with notary was sent back 4/09 now its 12/4/09 do ihave a leg up if you know what i mean any help will do bristol ct. thanks

  17. Due to a divorce I had to refi. Franklyn Mortgage did the refi and Chase bought it 3 weeks later. I have had numerous problems with Chase ever since including trying to increase my escrow based on false information that took me three months to sort out. Last Nov 2008, I got an offer from chase to refi and they would take at least a point off and that I was prequalified if I remember right. I started the process and they immeadiately took out a loan ap fee of $475. After 6 months of jumping thru numerous hoops and submitting and resubmitting info at a cost to me total of abou t$1,000, I was shot down on the day of the closing because my debt to income ratio didn’t work. I was called by a notary 3 days before the closing that she was going to bring the documents by to close the deal and on the morning of the day to close i got a call from the loan officer that I didn’t qualify. Another detail was about 3 months into the loan ap process the loan officer quit Chase. it took about a month to restart everything which involved resubmitting everything plus a new appraisal request. i contacted the loan officer that quit and he told me he quit because he was working for an immoral boss, Chase. There are many other details that demonstrate just how crooked that outfit is. I was told by the loan officer that finally shut me down to call their modification Dept. and she gave me a number to call. After a day on the phone talking to 3 different agents in India and one in Panama all of which where very difficult if not impossible to understand i just gave up. That was back in May. Every month is a struggle to keep current with my mortgage payment. I have never missed one due to the wonderful world of credit and good friends, but I don’t think I will be able to keep up much longer in that I am at the end of my credit possibilities and hocked up to Kingdom Come. I am the primary caregiver to my 3 children, 9,13, and 14, and I am worried about holding on to my place and continuing to care for them. My photography business has about tanked although is some sales as of late. I am extremely ticked off at Chase but don’t know if i have any recourse. I would have great difficulty hiring an attorney due to my present financial straits and was hoping someone would read this and possibly give me some direction or wisdom on what to do. Thankyou for this web site and i hope to hear from someone. take care and thanks. Mike

  18. If the lender has agreed to the short sale and issued a 1099 for forgiveness of debt, how can they come after you for the debt when they have forgiven it? my email is

  19. I am desperately looking for an aggressive, champion of the underdog, foreclosure defense attorney in the Orlando/Central Florida area, preferably trained by April Charney, who would be willing to help me save my home. Thanks!


  21. I would like to know i have a servicer Homeq, loan is owned 1st and 2nd by Wells Fargo as a Trustee…we have a settlement conference on 5/13. Wells attorneys would not accept 15k down for a mod they want 23K, we said no. We are about 18mths behind, all stating from a job loss reducing household income. My question is at this conference should we give them lets say 20K? We utltimately want to keep the home, and we also dont want a 5/25..we want a 30 or 40 yr fixed. Is this possible?

  22. I posted this one place else on this site, but would love to get feedback on the idea.

    Predatory lending is just one bad practice of this whole mortgage mess. I was curious if you think it makes sense to create a class and sue the investment banks for creating this whole mess in the first place.

    I would think it makes sense to start a class action where homeowners can band together as a class and sue the Wall Street firms including Lehman Brothers, who happens to allegedly own my note via a CDO(collateralized debt obligation), which are these securitized bundles of mortgages. Everyone who has a mortgage is part of a CDO.

    The problem is that way back when, Wall Street firms (Lehman, Merrill, Bear Stears, etc) decided they could bundle mortgages into multi-layered single securities and sell these like hotcakes if they were to successfully obtain a AAA rating on the top layer. They were able to obtain this and they did sell the heck out of these to all kinds of investors everywhere including whole governments, banks, money market funds, and insurance companies.

    This led to the housing bubble which I and everyone else participated in via our owner-occupied home purchases and home improvements. Others participated via housing speculation (flipping and the like).

    These Wall Street firms started owning increasing amounts of CDO’s on their balance sheets. The former Merrill CEO was quoted as saying Merrill Lynch started “committing suicide” in 2005 by never selling any of it’s CDO’s and completely removing their risk. Lehman and Bear Stearns were no different.

    Seeing this increased concentration of assets that were benefiting from the housing bubble, Hedge Funds (these evil unregulated inefficient and costly mutual funds) decided a great strategy to capitalize on this was to buy insurance on the bet that the Wall Street firms would be succumbed by their risky CDO holdings and that this would cause the entire firm to fail. Such insurance (a.k.a. credit default swaps) was happily sold to the hedge fund firms by the largest of insurance companies – AIG, and the hedge funds were even allowed to buy, if they wanted to, up to 40 times (40x!) the amount of the risk, a completely irresponsible practice but I digress.

    The hedge funds knew they would benefit if they were able to sink Lehman and the rest as they would cash in on the insurance. So they issued press releases essentially warning about the failure of the Wall Street firms. This caused traders everywhere to sell Lehman stock. And these very same hedge funds who sent the press releases started shorting the stock of these firms at the same time! Since the “uptick rule” was abolished by President Bush, another irresponsible act but I again digress, anyone could short a stock (betting on the stock price going down, not up) to their heart’s delight. The uptick rule allowed shorting twice only after a stock price’s “uptick” or increase in it’s price, but the rule was not in effect. All of this shorting and all of the negative press releases, drove the Wall Street firm’s stock price into the gutter and caused the firm’s to fail.

    Washington’s first reaction, thanks to the self-regulation ideology of the Bush administration, was to let the first of these firm’s to simply fail. This happened to be Leman Brothers.

    And so the hedge funds were victorious in their strategy because they not only made billions shorting Lehman stock, but could also now cash in on the AIG swap insurance policies.

    Yet these very insurance policies bankrupted AIG or could bankrupt them. Having learned that letting Lehman fail was a terrible mistake because of the message it sent and the ensuing financial panic that resulted, the Bush administration and later the Obama administration decided to bailout AIG multiple times and with multiple billions of dollars.

    Once the housing market bubble finally popped, it was learned that these AAA CDO’s, that originally started this whole mess, were really not AAA and were very sensitive to the housing market going down and foreclosures going up. This began the falling of the “house of cards” that CNBC reported David Fabier so eloquently reported on, because it decimated the CDO market and caused further financial panic because banks held a lot of these and they were required to mark the value of these CDO’s to their market price (a.k.a. mark to market). Well, there was no market anymore and a zero value meant banks could not lend anymore. They were essentially “maxed-out” in a credit card analogy of sorts.

    This caused the feds to bail them out, pumping more and more of our taxpayer money into banks to keep them alive and lending.

    Meanwhile, the folks who are bailing everyone out, the taxpayer, are left holding the bag. Many taxpayers are also homeowners. And even though we are bailing out the banks with tax dollars, for generations to come I might add, these same banks are breathing down our thoats with foreclosure lawsuits because we cannot either sell our home at all or for any reasonable amount, or we were stuped into mortgages that were ridiculous to any trained eye, and aren’t even sold anymore, or we simply have less income thanks to this whole economic mess brought on by the Wall Street firm’s way back when they decided to create mortgage-back CDO’s and sell them to everyone.

    The start of the house of cards being built was the creation of the mortgage-CDO.

    Thus, I think a new defense for us homeowners in trying to save our homes is to sue the owners of the notes, or the alleged owners as it is in most cases. In my case, this would be Citibank as trustee for Lehman Brothers (Lehman has failed and Citibank is working things out for their assets I guess). Other firms are still in business such as Merrill Lynch. Or they have been taken over as is the case with Bear Stearns who is now owned by JP Morgan. Banks such as BofA and Chase should also be sued, but many were simply servicers, although they certainly benefited from the bubble.

    All of these firms contributed to this whole mess and have shared culpability in my view. Homeowners are now having to pay for the cleaning up of this mess while also having to pay increased taxes for generations to come.

    In essence, we are being forced to pay twice the amount borrowed for our homes because of the increased taxes that will definitely be needed to pay this nation’s deficit.

    That was not part of the deal when we took out our mortgages. That is wholly unfair. And that is just plain wrong.

    We need to sue these firms, as a class action, to at least get our note returned to us free-n-clear because getting cash in these class actions is, generally, not going to happen since the atty’s get the lion’s share of settlements, which is fine by me, and that is only after expenses which will be sizeable(years of court battles). But we can be given our notes back while any cash can go to the attorney’s for fighting the good fight. Fine by me.

    Ultimately, I think it is in the nation’s interest to simply give the mortgagees back their notes from the lenders because of the situation created. We don’t ask for free housing. We are going to pay for our housing, believe me. All of us. Increased taxation is the only way to crawl out of this. So, it is not a handout. It is a bailout, which if it is good for banks, it darn well should be good for us homeowners.

    This will cure the property tax problem that so many cities are now suing for damages. People will start paying taxes again, having a home free and clear.

    A class action lawsuit seeking to obtain relief from the alleged owners of the CDO’s is just what is needed in addition to the standard fights everyone should already be doing alongside their good real estate attorney or other advocate like livinglies.

  23. nice to talk with ur blog, i like it

  24. I have a Bank of America Heloc of $180,000. They filed a 2nd notice of default Feb 20th. (The first notice of default with a sale date of Nov & Dec was cancelled)

    My 1st loan is with Countrywide (which B of A bought) at $320,000.

    Feb. 5th Countrywide sent me application for modification to a low rate Interest only payment for 10 years.

    With the 2 loans there is no equity in the house.

    What are the chances of Bank of America going thru with a foreclosure sale?

    Do you think they will renegotiate ?-so far they refuse.

    What can I do?

    Thank you!

  25. Scot Hedrick, that is.

  26. Scott,
    Do you do loans in California- if so how do I contact you?

  27. I live in Oakland County Michigan, I am looking for a “PRODUCE THE ORIGINAL BANK NOTE” at the Sheriff sale or to file on my behalf at the County Court house, can anyone help me out with this?

    My Sale is comming up quickly and I need immediate help.

    I am going to lock my gates an barracade myself on my property, please someone help me.

    Thank you,

    Jeff B
    Oakland County Michigan

  28. Scot
    what state do you deal in?

  29. My dad is a lender. When I say my dad is a lender, I mean *he* is a lender. He uses his own money to provide private mortgages. We can usually close in 2-3 days and we hardly ever need more than 3-4 sheets of paper. I do a public records search and almost never a credit check. Frankly, I am at a loss as to where these loan problems are coming from. We’ve had very little trouble and have had few foreclosures. The closing costs are minimal and we don’t deal in points or origination fees or any of that nonsense. The money we make off the interest is pretty good, so I don’t see need to gunk things up with junk fees. I’m a notary, but I can’t notarize stuff involving my dad. If I could, we could save the borrowers the notary fees as well. I charge $100 for the paperwork and records search in nearly every case, and the other closing costs are the actual cost of recording the documents and paying taxes. Closing costs should not be a profit center.

    One key difference is that we shake the hands of everyone we loan money to, and the borrower knows at all times where the paperwork is located. We service our own loans. This gives us the flexibility to work with the borrower in times of trouble. The biggest problem we have is when the borrower gets in trouble and then won’t talk to us. We tell them to keep in touch, give us a sob story, it will work for a while. If we have to chase them down, however, we’re much less likely to be sympathetic. I realize that some people are ashamed to admit they can’t pay their bills, but if they won’t talk to us, we’re going to assume they don’t intend to pay.

    The other key difference is that we don’t have any investors. Every penny of loss comes directly out of my dad’s pocket. We don’t need so much paperwork because we aren’t dealing with other people’s money.

    The idea of bundling mortgages, which are no more than promises to pay and have no inherent value, and selling them as security for other loans is mind-boglingly stupid. Do this several layers deep and it’s no wonder nobody knows who to pay and who has the loan. Someone who is in the loan business, and not the loan arranging business, won’t have those problems.

    Read “The Richest Man in Babylon” by George Classon. Even today, it’s possible to make a good living by dealing honestly, even in the lending business. Junk fees lead to junk loans.

  30. So it seems to me (not an attorney and have not done or seen a loan mod – and of course, just my own opinion), that there are tons of problems in your average loan closing. If they only give you one or two docs to sign, it seems you are back to square one – no Truth in Lending disclosure, no Respa, etc. Sounds like they are making even more mistakes then before. Does a single waiver waive your claims on the previous closing AND the current closing (or whatever you call the current loan mod “closing”)?

    That really sounds absurd. But it sounds par for the course. They just want the waiver and your cash. They could care less about anything else.

    Dan Edstrom

  31. Thanks for posting about this ny.

    In my mod with Chase (18 months ago), they just had me sign a single page stating what the new payment and interest rate is and a waiver/release of claims. (Without any specific waiver of fraud or misrepresentation.)

    No additional documents were provided other than that one page.

    Thankfully, Mr. Garfield has pointed me in the direction of Quiet Title in my fight (as ny has pointed out in point #10). But now I am wondering if the mod was in fact a new loan and if so, where were the additional disclosures? I seem to remember in my NCLC book reading that you can’t waive your rights to TILA disclosures.

    Might this be an area of attack for those of us who signed a mod before finding livinglies?

  32. They’ll make you sign paperwork all over again. Why? didn’t you do that already? They’ll make sure they give 2 rescission notices this time.

  33. Re: point #1, so, borrowers are actually getting a new loan and starting over and Not just modifying the existing loan?? Is that correct?

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