Bank Lawyers Beware!

I know from past experience that the prosecuting attorneys at bar associations tend to move in packs. There is actually a pretty good reason for this. Certain practices by attorneys are emulated by other attorneys and spreads from state to state. Based upon a recent decision in New York State, I believe we’re going to see some serious prosecutions against attorneys for the pretender lenders.

In this case the censured attorney, David A. Cohen,  and his Long Island firm was trying to collect debts from people who weren’t already pay their bills or were not the ones who owed money to the firm’s client – creditors. I will concede that this is not the case against a foreclosure mill. And I think there is still political resistance to going after the lawyers  who represent the pretender lenders. But if you look at the reasoning in this case, it is not hard to see where the New York State Bar Association is going with this.

There were voluminous complaints about the firm spanning a 16 year period. That suggests that in cases where the homeowner believes that the attorney representing the pretender lender is violated ethical rules, or where the attorney for the homeowner believes that to be the case, a grievance should be filed.  But I caution people about doing this because they  frequently don’t know enough about the facts to be sure if a violation occurred.  It is unfair to attribute unethical conduct to an attorney who was merely advocating on behalf of a client and taking positions with which you do not agree. False filings will also create a paper jam in which the real filings for real violations get lost. SO don’t take this article as a green light to pepper the Bar Associations with vague grievances.

Cohen and his firm received numerous admonitions about his firm’s practices.

The court concluded in Matter of Cohen & Slamowitz, 2008-10218, that Cohen and Cohen & Slamowitz “engaged in a pattern and practice of conduct prejudicial to the administration of justice” under the Code of Professional Responsibility DR 1-102(A)(5)(223 NYCRR 1200.3[a][5]. The judges said an attorney does not necessarily have to have personal knowledge of the specifics of his firm’s misconduct to be held responsible.“Even if the individual respondent lacked personal knowledge of the particular client matters … the pattern and practice of misconduct established at the hearing, which were pervasive within C&S [Cohen & Slamowitz] since 1996, were sufficient to impute such knowledge to him as senior partner of C&S,” [e.s.] the panel held in its per curiam ruling. The judges added that not only was Cohen personally advised in 2002 to “exercise caution,” “supervise [his] staff adequately,” and put in place “appropriate and reasonable procedures” that could be monitored, but he and his firm also received numerous letters of caution and admonition. The court said Cohen & Slamowitz has about 300 employees, including attorneys, paralegals and other staff.

Among the problems noted by the court was an attempt in 2005 to collect from a debtor identified as “Ghulam Mujtaba” of Flushing. The court said that Cohen & Slamowitz mistakenly pursued collection from Dr. Gholam Mujtaba of Corona.
 Given the various settlement and OCC consent decrees that have been entered against virtually all of the major banks and servicers, it is hard to imagine a scenario in which the lawyers have not been put on notice of the existence of major defects in the claims of their clients. Unlike civil litigation, lawyers are held to a higher standard of behavior in connection with their practice of law. The ethical and disciplinary rules make it clear that the lawyer should avoid even the appearance of impropriety. Here in this case, the court opened up the possibility for imputing knowledge to the attorney even though there are attempts to create compliance departments and other organizational tools that are meant to isolate the actual licensed attorneys from the illegal conduct perpetrated by their firm.
 If a bank came to me for representation in the foreclosure properties based upon loans that are subject to claims of securitization, I would make absolutely certain that there were procedures in effect within the bank to make sure that we were naming the right plaintiff, naming the right defendant, that a default was definitely present, and that we could account for the balance due. I would ask the bank “are you actually owed the money on this loan?”
 The use of professional witnesses that are hired specifically for that purpose is somewhat understandable given the volume of foreclosure litigation. What is not understandable or forgivable is hiring people specifically for the purpose of giving false testimony based upon records that were specially prepared for trial and not prepared in the ordinary course of business. It is improper and perhaps perjury to state that the entire business record is present when it clearly does not show the original loan transaction, all the transactions that occurred between the time of the loan closing and the filing of foreclosure, and all the transactions that occurred as disbursements to trust beneficiaries or other third parties. It is improper and perhaps perjury to state that the entire business record is present when the witness cannot state from personal knowledge or with the use of business records that qualify as an exception to the hearsay rule, that the record of disbursements is also present —  including all payments received by the alleged creditor.
 Some attorneys haven’t thrown under the bus, but there are dozens of other law firms that may be involved in the production or proffering of false, fraudulent, fabricated or forged documents.
 On the other hand it should be stated that withholding evidence is not necessarily a violation of the code of conduct for attorneys —  unless the withholding of that evidence results in making prior testimony or evidence subject to a charge of perjury. I don’t think that attorneys can or should be held to a standard in which their conduct is subject to variable interpretations. Any grievance filed on these grounds must be very specific as to what is being alleged is a violation. I publish this article merely as a prediction and warning that certain behavior which is now condoned in the foreclosure mills can be and probably will be imputed to the partners, regardless of how well they think they have insulated themselves.
 One of the things I wonder about is the practice of asserting in court that the attorney for the foreclosure represents “everybody.” The risk here is twofold: first that might include the trust beneficiaries that his client is screwing; second that might include the borrower because some of the parties included in “everybody” have a fiduciary duty to the borrower. I wonder if there are potential trap doors for the attorneys who are representing pretender lenders that include not only disciplinary complaints but perhaps joinder as defendants in a lawsuit filed for negligent undertaking.
 As always, nothing in this article should be interpreted as a definitive statement on the law. Pro se litigants should consult with an attorney licensed in the area in which the property is located before making a decision or taking any action. Attorneys should do their own research and make their own decisions as to what constitutes a breach of ethics or a breach of the disciplinary rules.

FORECLOSURE DEFENSE: OWNERSHIP OF THE MORTGAGE

Mortgage Lender Must Have Ownership Of Loan When Foreclosure Is Filed, Holds Brooklyn Judge

May 21, 2008

The case of Indymac Bank, FSB v. Ross, Supreme Court, Kings County Index No. 24713/07 (January 15, 2008) began normally enough. Indymac filed a summons and complaint on July 6, 2007. The borrower failed to appear or answer, and Indymac asked the court to grant a judgment of foreclosure on default.

What Indymac got was a denial not only of the judgment, but a denial of the entire foreclosure case.

The original lender of the subject October 4, 2006 mortgage was Mortgage Electronic Registration Systems, Inc. (MERS) as nominee for Mortgageit, Inc. MERS then assigned the loan to Indymac. But that assignment was not dated until July 11, 2007 – five full days AFTER the foreclosure was filed.

Though the assignment states that “[tjhis assignment is effective on or before June 1, 2007,” the court found such retroactive assignment to be ineffective.

The court stated as follows:

. . . such an attempt to retroactively assign the mortgage is insufficient to establish plaintiff’s ownership interest at the time the action was commenced. See Countrywide Home Loans, Inc. v. Taylor, 17 Misc3d 595 (Sup. Ct. Suffolk Co. 2007). Plaintiffs attempt to foreclose upon a mortgage in which it had no “legal or equitable interest was without foundation in law or fact…” Katz v. East- Ville Realty Co., 249 AD2d 243 (1st Dept 1998). See US Bank Nat. Ass’n v. Merino, 16 Misc3d 209, 212 (Sup. Ct. Suffolk Co. 2007). Moreover, “foreclosure of a mortgage may not be brought by on who has no title to it….” Kluge v. Fugazy, 145 AD2d 537, 538 (2d Dept 1998). See RCR Services Inc. v. Herbil Holding Co.,229 AD2d 379 (2d Dept 1996). Finally, plaintiffs standing to bring the within action goes to the basis of a court’s authority to adjudicate a dispute. See Stark v. Goldberg, 297 AD2 203 (1st Dept 2002) (wherein the court held that sua sponte dismissal of the action was warranted despite the lack of any assertion by defendants of an objection to plaintiffs’ standing) .

So what does this all mean for you, the person going into foreclosure? It means that it’s important for you to fight back and to defend the foreclosure. Don’t think that there’s no hope for you, that an inability to pay the mortgage means you automatically lose. You have powerful rights, and need to be sure to use them.

Foreclosure Defense: New York State Homeowners get SOME Help

It is a step in the right direction

June 19, 2008

Court Offers Homeowners Help Avoiding Foreclosure

Homeowners in New York who face foreclosures would be offered help by the courts to save their homes or at least make the overall process easier under a new program announced on Wednesday by the state’s chief judge.

The program calls for the creation of a new section of the court charged with helping borrowers and lenders reach speedy settlements. Homeowners would be notified almost immediately that they face a foreclosure proceeding; they would receive a list of legal and foreclosure counselors who can help them; and they would be invited to court for a settlement conference.

Parts of the program would be voluntary. The court would encourage, but not require, a settlement conference, and lenders would still be able to foreclose.

The chief judge, Judith S. Kaye, however, said that she hoped that getting the courts involved in the process early would allow them to be more than the final arbiters who order people removed from their homes.

“New Yorkers are losing their homes in record numbers,” Judge Kaye said on Wednesday during a news conference in Lower Manhattan. “Some neighborhoods are being ravaged by foreclosures. Can we be part of an influence for the good?”

A pilot version of the program is scheduled to start in Queens this summer.

According to court data, foreclosure filings across the state have increased by 150 percent since January 2005, Judge Kaye said. In Queens, she said, that figure is 223 percent. She said an additional increase of 40 percent was expected by the end of 2008.

United States Senator Charles E. Schumer said Judge Kaye’s plan was “just what the doctor ordered.”

He said more than half of the people facing foreclosure who received adequate professional counseling could save their homes.

“There are some who can’t afford to stay in their homes,” Mr. Schumer said. “There are many who can easily afford to stay in their home and were just given a terrible deal. A refinancing by a counselor can work.”

Congress is considering legislation that would refinance mortgages with federally insured loans. The legislation would authorize the Federal Housing Administration to insure an additional $300 billion in mortgages. Only homeowners whose primary residences were in danger of foreclosure could apply, and their lenders would first have to voluntarily reduce the principal balance of the original loan so that the new loan was more affordable.

Sponsors hope to send the bill, which has been approved by the House and is awaiting Senate action, to President Bush before the July 4 break.

Congress has already appropriated $180 million toward nonprofit foreclosure counselors, and another $180 million is proposed in a pending bill.

In Albany, there are different proposals before the Legislature. Under a plan favored by Gov. David A. Paterson, lenders would have to take steps to ensure that the people they lend money to have the ability to pay, and banks foreclosing on a house would have to give the homeowner 60 days notice before they begin foreclosure proceedings. A plan that passed the Assembly last month would go a step further by declaring a one-year moratorium on home foreclosures throughout the state.

Under the current state statute, lenders have 120 days to notify a borrower that they have filed for a foreclosure proceeding, which is usually done at the county clerk’s office. The lender then has an unspecified amount of time to file a request for the court’s assistance. That starts a series of motions and hearings that could take up to 18 months, said Ann T. Pfau, the chief administrative judge.

But under the court’s plan, the lender would be required to send the borrower a notification of complaint as soon as the foreclosure papers are filed with the county clerk. And once the lender asks for judicial help, the court will send the homeowner a letter with referrals to legal advisors and mortgage counselors who can help them for free, Judge Pfau said.

Mike Thompson, a mortgage counselor and the executive director of Iowa Mediation Service, said organizing conferences between borrowers and lenders could be complicated for several reasons. For one, the people who service loans for lenders can be anywhere in the country, which would make an in-person conference difficult. Also, borrowers are often reluctant to be upfront with pertinent information needed for negotiations, such as pay stubs and account information.

But the mere attempt to get the parties to sit down and talk before going through the full legal proceedings could represent a positive step, Mr. Thompson said.

“They’re setting up a new time frame,” he said. “What deadlines do in negotiations is it makes people be more realistic.”

David M. Herszenhorn and Jeremy W. Peters contributed reporting.

%d bloggers like this: