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Litigation Trends in Servicing, Foreclosure and REO Areas

MERS the good, the bad and the ugly. The Good":Jackson v. Mortgage Electronic Registration Systems, Inc., 770 N.W.2d 487 (Minn. 2009)Bucci v. Lehman Brothers Bank, FSB, No. 09-3888 (R.I. Super. Ct. Aug. 25, 2009)Ramos v. Mortgage Electronic Registrations System, Inc., No. 2:08-CV-1089-ECR-RJJ (D. Nev. March 4, 2009)Cervantes v. Countrywide Home Loans, Inc., No. CV 09-517-PHX-JAT (D. Ariz. Sept. 23, 2009).

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Litigation Trends in Servicing, Foreclosure and REO Areas

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    1. Litigation Trends in Servicing, Foreclosure and REO Areas Presentation Subtitle

    2. MERS the good, the bad and the ugly The Good: Jackson v. Mortgage Electronic Registration Systems, Inc., 770 N.W.2d 487 (Minn. 2009) Bucci v. Lehman Brothers Bank, FSB, No. 09-3888 (R.I. Super. Ct. Aug. 25, 2009) Ramos v. Mortgage Electronic Registrations System, Inc., No. 2:08-CV-1089-ECR-RJJ (D. Nev. March 4, 2009) Cervantes v. Countrywide Home Loans, Inc., No. CV 09-517-PHX-JAT (D. Ariz. Sept. 23, 2009)

    3. MERS the good, the bad and the ugly The Bad: Landmark National Bank v. Kesler, 2009 WL 2633640 (Kan. 2009) Bellistri v. Ocwen Loan Servicing, LLC, 284 S.W.3d 619 (MO. Ct. App. 2009) In re Hawkins, 2009 WL 901766 (Bankr. D. Nev. 2009)

    4. MERS the good, the bad and the ugly The Ugly: Nevada (4), California (1) and Arizona (2) Lopez v. Executive Trustee Services, LLC, No. 3:09-cv-180-ECR-VPC (D. Nev.) Goodwin v. Executive Trustee Services, LLC, No. 3:09-cv-00306-ECR (D. Nev.) Green v. Countrywide Home Loans, Inc., No. 3:09-cv-00374-BES (D. Nev.) Dalton v. CitiMortgage, Inc. No. 3:09-cv-00534-RCJ (D. Nev.) Cervantes v. Countrywide Home Loans, Inc., No. 09-cv-517-JAT (D. Ariz.) Robinson v. GE Money Bank, No. 4:09-cv-227 (D. Ariz.) Vargas v. Countrywide Home Loans, Inc., No. 2:09-cv-2309-SJO (C.D. Cal.) Plaintiffs allege that the designation of MERS impermissibly splits the note from the security and thus rendered the note unsecured. Relies primarily on the negative Nevada BK decision. Seeking to enjoin all foreclosures in CA/NV/AZ

    5. TILA Rescission Litigation Borrowers Right to Rescind: Up to 3 business days after consummation of the loan; or Up to 3 years after consummation of the loan if TILA disclosures are not made. Typical claims to extend the right of rescission include: Failure to provide two (2) copies of the Notice of Right to Rescind; Failure to provide copies of loan docs at closing; Failure to make the proper TILA disclosures (especially as to Option ARM loans); Misrepresentation in the original loan terms 5 Wright, Finlay & Zak

    6. Common TILA Rescission Claims Notice of Right to Rescind: Typical Fact Pattern: No date or wrong date on one copy of the NOR Compare: Even a blank date on one Notice violates TILA. Horton v. Cal. Credit Corp. Retirement Plan, 2009 WL700223 (S.D. Cal. March 16, 2009) Semar v. Platte Valley Federal Savings and Loan Association, 791 F.2d 699 (9th Cir. 1986) A blank date does not extend the 3 day right of rescission to 3 years. Melfi v. WMC Mortgage Corporation, 568 F.3d 309 (1st Cir. 2009) When is rescission not allowed: Purchase money loan Non- Owner occupied property Terminates with sale of property (including foreclosure sale) 3 year SOL 6 Wright, Finlay & Zak

    7. 3 Step Rescission Process (15 U.S.C. 1635; 12 C.F.R. 226.23) Written notice of rescission. Within 20 days of receipt of the written notice, the lender must: Return to borrower any money or property given as down-payment; AND Terminate the security interest of the loan. After the lender has performed, the borrower must return any money or property received from the loan, less any finance or other charges incurred under the loan. If the lender does not take possession of borrowers tender within 20 days, the borrower may keep the money or property without any further obligation. 7 Wright, Finlay & Zak

    8. Conditioning TILA Rescission The 9th Circuit Approach to Tender: Security instrument is NOT automatically void upon delivery of the notice of rescission as a strict reading of the code would specify, but rescission is conditioned equitably on the borrowers ability to tender. Yamamoto v. Bank of New York, 329 F.3d 1167 (9th Cir. 2003). Recent Favorable Decisions: Carlos v. Ocwen Loan Servicing, LLC, No. CV F 09-0260LJOGSA (E.D.Cal. May 08, 2009); Sitanggang v. Indymac Bank, F.S.B., No. CVF09-0367LJOSMS (E.D.Cal. May 06, 2009); Guerrero v. Citi Residential Lending, Inc., No. CVF08-1878 LJO GSA (E.D.Cal. Apr. 03, 2009); Pagtalunan v. Reunion Mortg. Inc., No. C-09-00162EDL (N.D.Cal. Apr. 08, 2009); Garza v. American Home Mortg., No. CV F 08-1477LJOGSA (E.D.Cal. Jan. 27, 2009); and Edelman v. Bank of America Corp., No. SACV 09-00309-CJC (MLGx) (C.D.Cal. Apr. 17, 2009). 8 Wright, Finlay & Zak

    9. Attacking TILA Rescission Claims Remove the matter to Federal Court; MTD: Challenging the right to rescind and requiring a tender as condition of rescission; Dispute the factual allegations of TILA violations; AND Counter Claim for the Declaratory Relief (tender) and for Equitable Subrogation and an Equitable Lien 9 Finlay/Wutscher

    10. Californias Foreign Languages Act: Civil Code 1632 Provides right of rescission if the loan was primarily negotiated in a foreign language, but reduced into an English writing and not translated orally. Limited to: Spanish Chinese Tagalog Vietnamese Korean Right to rescind is absolute. Many foreign speaking homeowners are alleging violation of this code in an attempt to get out of the debt obligation or force a loan modification. Wright, Finlay & Zak 10

    11. Defending 1632 Claims Exception 1632 does not apply to loans secured by real property; Exception to the exception, applies to real estate loans procured by licensed Real Estate Brokers; 2. Was the loan truly negotiated in the foreign language? Whos agent is the Broker? Does the borrower read/write English? 3. Tender Requirement; and 4. Cross-claim for Dec Relief and Equitable Subrogation. Wright, Finlay & Zak 11

    12. Loan Mod Litigation Minnesota Class Action: Williams v. Geithner, No. 09-cv-01959-ADM-JJG (D. Minn. Filed July 28, 2009) NV notice claims Michael Harker Litigation to Shut Down Unscrupulous Loan Mod Companies Californias Legislative Efforts on Advance Fees Wright, Finlay & Zak 12

    13. Compliance Litigation California: SB 1137 (Civil Code 2923.5 and 2923.6) Civil Code 2923.52 CAs Foreclosure Prevention Act Nevada: New Nevada Mediation laws Other States: As States continue to add legislative layers on the pre-foreclosure, foreclosure and REO process, we will see more and more litigation over the industrys compliance with those new laws. Wright, Finlay & Zak 13

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