Certified Forensic Loan Auditors, LLC

 
  Upcoming Classes

Search CFLA's Article Archive:

Why Judges Are Scowling at Banks

nytimes.com | September 30, 2013

By Gretchen Morgenson

Last week, for the first time since the financial crisis, the government faced off in court against a major bank over lending practices during the mortgage mania. Lawyers for the Justice Department contend that Countrywide Financial, a unit of Bank of America, misrepresented the quality of mortgages it sold to Fannie Mae and Freddie Mac, the taxpayer-owned mortgage finance giants, starting in 2007. Fannie and Freddie incurred gross losses of $850 million on the defective loans and net losses of $131 million, the government said.

Bank of America disagrees. Its lawyers say that Countrywide did not defraud Fannie or Freddie.

This case is undoubtedly big, but it is only one of many mortgage-related matters inching through the judicial system. And what is notable about some of the lower-profile matters is the tone and tack that federal judges are taking in their rulings. District court judges are not generally known as flamethrowers, but some seem to be losing patience with the banks.

For decades leading up to the foreclosure debacle, plaintiffs’ lawyers say, judges generally took the side of lenders when borrowers came to court complaining of problematic lending or predatory loan servicing. Many judges still do. But some are getting tough, perhaps having seen too many examples of dubious bank behavior.

“Maybe the judges are tired of the diet of baloney sandwiches the banks have been feeding them,” said April Charney, a foreclosure defense lawyer who for years represented troubled borrowers at Jacksonville Area Legal Aid in Florida. She is now in private practice.

Two recent rulings — one in New York involving Bank of America and one in Massachusetts involving Wells Fargo — serve as examples. In the Wells Fargo case, a ruling on Sept. 17 by Judge William G. Young of Federal District Court was especially stinging. In it, he required Wells Fargo to provide him with a corporate resolution signed by its president and a majority of its board stating that they stand behind the conduct of the bank’s lawyers in the case.

The case involved a borrower named Joseph Henning who fell behind on his mortgage, which he received from Wachovia, an entity later absorbed by Wells Fargo. In a suit filed against Wells Fargo in May 2009, Mr. Henning contended that the loan was predatory.

Judge Young agreed with the bank’s argument that federal laws pre-empted the state-law remedies Mr. Henning was seeking. But he did so reluctantly, calling it a win based “on a technicality.”

Then he chastised the bank. “The disconnect between Wells Fargo’s publicly advertised face and its actual litigation conduct here could not be more extreme,” the judge wrote. “A quick visit to Wells Fargo’s Web site confirms that it vigorously promotes itself as consumer-friendly,” he continued, “a far cry from the hard-nosed win-at-any-cost stance it has adopted here.”

If Wells Fargo does not supply the corporate resolution within 30 days of the ruling, the case will go to a jury trial, the judge said.

Mary Eshet, a spokeswoman for Wells Fargo, called the judge’s remarks in the ruling “inflammatory and unsubstantiated,” and added: “We believe Judge Young should follow the law which he recognizes and finalize his own judgment in this case.” The bank is asking an appellate court to require the judge to enter his dismissal order without the corporate resolution.

Valeriano Diviacchi, the lawyer for the borrower, said he had never seen a ruling requiring a corporate resolution as Judge Young’s did. Mr. Diviacchi said that he didn’t know why the judge made the ruling but that the judge appeared to want the case to be heard by a jury of Mr. Henning’s peers, people who may have had their own experiences with questionable bank practices.

“Judge Young is one of the few judges who will refer matters to juries — even when a cause of action does not entitle a party to a jury right — because he believes in it as a foundation of the justice system and a democratic society,” Mr. Diviacchi said.

The second case arose after Edwin Ramos and Michelle Ava Stouber-Ramos filed for bankruptcy and had the first and second mortgage on their Tampa, Fla., condominium discharged by the court. That kind of discharge protects a borrower from any attempts to collect the debts as a personal liability.

Bank of America received notice of the discharge in September 2010. But in spring 2012, the bank began sending letters to the Ramoses, saying their $26,991 second mortgage was “seriously delinquent” and demanding that they pay the amount owed immediately. Otherwise, the bank said, it would proceed with “collection action.”

According to Michael H. Schwartz, a lawyer in White Plains who represented the borrowers, Mr. Ramos started getting three phone calls a day from the bank, demanding repayment. When Mr. Ramos advised the bank’s representatives that the debt had been expunged in a bankruptcy proceeding, he was told “too bad,” according to a court filing.

The phone calls and letters continued even after Mr. Schwartz went back to court to ask that Bank of America be sanctioned for illegal attempts to collect the debt. During this time, Bank of America sold the servicing rights on the first mortgage to another company, which soon began sending its own demand letters to the Ramoses.

This month, the matter came before Robert D. Drain, a federal bankruptcy judge in New York. Judge Drain found Bank of America in contempt of the debt discharge order protecting the Ramoses and required the bank to pay Mr. Schwartz’s legal bills in the case. The judge also ordered the bank to pay $10,000 a month in sanctions to the Ramoses until it stopped making the repayment demands.

Judge Drain acknowledged that it wasn’t a lot of money to Bank of America. But, he said, he hoped that its lawyers would get the message. “This is not just a stupid mistake” by the bank, the judge said. “This is a policy.”

A Bank of America spokeswoman said the bank was working to resolve the court’s issues and “researching and investigating what transpired.”

But Mr. Schwartz said the Ramos case was just one of several in which he represented homeowners who were pursued by Bank of America over discharged debts. In another of his cases, court filings show that a homeowner received 105 phone calls and four threatening letters from the bank. “I believe the bank has made a conscious decision that it is less expensive to pay sanctions than to change its internal processes,” he said. “This problem is nationwide.”

Judges who take a more aggressive stance against the banks in such cases are doing what they can to hold these institutions accountable. It may not seem like a lot, but it is progress.

Back to September 2013 Archive

CFLA was founded by the Nation's Leading Foreclosure Defense Attorneys back in 2007 to serve the Foreclosure Defense Industry and fight pervasive Bank Fraud. Since opening our virtual doors, CFLA has rapidly expanded to become the premier online legal destination for small businesses and consumers. But as the company continues to grow, we're careful to hold true to our original vision. For us, putting the law within reach of millions of people is more than just a novel idea—it's the founding principle, just ask Andrew P. Lehman, J.D.. With convenient locations in Houston and Los Angeles, you can contact Our National Account Specialist and General Manager / Member Damion W. Emholtz at 888-758-2352 for a free Mortgage Fraud Analysis or to obtain samples of work product, including cutting edge Bloomberg Securitization Audits, Litigation Support, Quiet Title Packages, and for more information about our Nationally Accredited and U.S. Department of Education Approved "Mortgage Securitization Analyst Training Certification" Classes (3 days) 24 hours for approved CLE & MCLE Credit (Now Available Online).

SEE BELOW- http://www.certifiedforensicloanauditors.com

Call us toll free at 888-758-2352

Bookmark and Share
spacer
Facebook Like us on Facebook
Twitter Follow us on Twitter
YouTube View our YouTube Videos
LinkedIn Connect to us on Linkedin
 
BBB Logo

 

spacer
Contact us or view our Sample Documents & Audits by completing the form below.

  • Reload
  • Should be Empty:




 

DVD Sets Only $99

 

FREE Mortgage Fraud Analysis

 

Order Cutting-Edge Services Now

 

Quiet Title Packages from Licensed Attorneys

 

Affiliate Services

 

CFLA Sponsored Attorney Links

 

Take-Home Education Package

 

ALB Law Firm

 

Advocate Legal

 

The True News Network

 

Rubenstein Business Law

 

Atighechi Law Group

 

Scunziano & Associates

 

Get Certified to Perform Mortgage Securitization Audits

 

CFLA Training Academy

 

Expert Witness Services

 

Cutting Edge Expert Securitization Reports

 

CFLA Credit Cards

 

Breaking News

 

Letters to the Editor

 

CFLA Weekly Newsletters

 

Code of Ethics

 

Testimonials

 

Instructional Videos

 

Job Opportunities

 

License Opportunities

 

MARS Rule

 

Product Samples

 

Resource Links

 

Servicer Information

 

Foreclosure Laws

 

REST Report

 

Quiet Title Packages from Licensed Attorneys

 

Advertise on CFLA

 

Advertising Space: Mortgage Securitization, Quiet Title

 

Certified Forensic Loan Auditors, LLC
13101 West Washington Blvd.
Suite 444
Los Angeles, CA 90066

Toll Free: 888-758-CFLA (2352)
Mobile Users: CLICK TO CALL
info@certifiedforensicloanauditors.com

   
 
CFLA IS NOT A LAW FIRM AND DOES NOT PROVIDE ANY LEGAL ADVICE. CFLA DOES NOT OFFER FORECLOSURE CONSULTING OR FORECLOSURE RELIEF
SERVICES. CFLA DOES NOT OFFER OR ASSIST WITH ANY LOAN MODIFICATION SERVICE. CFLA ALWAYS RECOMMENDS THAT CLIENTS RETAIN COMPETENT COUNSEL IN THEIR RESPECTIVE JURISDICTION. CFLA HAS A FREE PROGRAM TO REFER CFLA CLIENTS TO LAW FIRMS IN NEARLY EVERY STATE AND CFLA
DOES NOT CHARGE OR OBTAIN REFERRALS FEES FOR THESE SERVICES. SERVICES NOT OFFERED TO RESIDENTS OF THE STATE OF NEVADA.

 
Home About Us Privacy Policy Terms of Service Disclaimer SERVICES Careers Contact Us
 
COPYRIGHT © 2007-2016 Certified Forensic Loan Auditors ™ All rights reserved