HOT TOPIC LEGAL UPDATES

1. HOT TOPICLEGAL UPDATES William 1:00:00 � 1:02:30William 1:00:00 � 1:02:30

2. SPEAKERS William 1:02:30 � 1:05:00William 1:02:30 � 1:05:00

3. Lappin v. Titanium Solutions, Inc., 1:06-cv-01320, U.S. District Court, C.D. Illinois (Peoria Division) (filed 12/28/ 2007) Lige v. Titanium Solutions, Inc., 2:06-cv-0400ts, U.S. District Court, N.D. Indiana (Hammond Division) (filed 11/30/2006) Letter To Borrower On Titanium letterhead (�Titanium Letter�) Reference subject line: Lender name; loan number; property address Signed as �independent agent for your Lender� States Titanium is not a debt collector Titanium�s services at no cost to borrower (implies lender pay the costs) Lender requested that Titanium contact �because of certain payment arrearages on your loan� �We must collect information from you to analyze your current financial situation� Encloses �Financial Information form� Requests copies of pay stubs and federal income tax return FDCPA Class Actions V. Loss mitigator Carolyn 1:05:00 � 1:07:30Carolyn 1:05:00 � 1:07:30

4. Lappin & Lige v. Titanium SolutionsFDCPA Loss Mitigation Class Actions Lige Unique Facts: ? elderly widow ? medically disabled at time of home loan refinance ? letter = only written communication from Titanium ? letter included hand written note from agent ? subsequent telephone calls from local agent representing - refinancing services to bring loan current - only Titanium authorized to assist in foreclosure avoidance and offer �short sale� for best possible price with deficiency waiver ? Titanium web site: communications to over 50,000 homeowners annually relative to mortgage debt collection Carolyn 1:07:30 � 1:10:00Carolyn 1:07:30 � 1:10:00

5. Lappin & Lige v. Titanium SolutionsFDCPA Loss Mitigation Class Actions Alleged FDCPA violations: False/misleading representations (15 U.S.C. � 1692c) Unfair/conscionable debt collection practices (15 U.S.C. � 1692f) Failure to give mini-Miranda warning (15 U.S.C. � 1692g) Relief Sought: Statutory damages Attorneys fees and costs National class certification Note: Loss Mitigation Agent = defendant Same lender; not currently named party Different plaintiff�s counsel Carolyn 1:10:00 � 1:12:30Carolyn 1:10:00 � 1:12:30

6. Lappin Class Action Settlement$ 17,750 Final Judgment: 8/28/07 (Docket 24 and 25) ? �class� for settlement All individuals in Illinois to who received Titanium letter on or after one year prior to filing suit and less than 20 days after suit filed (3,619) ? individual recovery -- $ 750 (FDCPA statutory and individual damage claims) ? class recovery - $ 10,000 (estimated 1% creditor�s net worth) ? attorneys fees - $ 7,000 ? �opt out� option Carolyn 1:12:30 � 1:15:00Carolyn 1:12:30 � 1:15:00

7. Lige Class Action Settlement- $ 20,250 Final Judgment: 1/17/08 (Docket 37) ? �class� for settlement All individuals with �Indiana address� who after 11/30/05 received the Titanium or similar letter ? individual recovery to Lige -- $ 1,000 (FDCPA statutory and individual damage claims) ? class recovery - $ 9,000 ($ 50.00 cap per class member) ? attorneys fees - $ 10,250 ? �opt out� option Carolyn 1:15:00 � 1:17:30Carolyn 1:15:00 � 1:17:30

8. Practice Pointers Assume third party loss mitigators ARE debt collectors Confirm financial wherewithal of loss mitigator to stand behind its contractual agreements Include indemnity, hold harmless, independent contractor and confidentiality provisions in contract with loss mitigator Obtain proof of legally required bond/surety debt collector coverage Limit loss mitigator activities and information access to avoid breach of consumer privacy/confidentiality of financial data Carolyn 1:17:30 � 1:20:00Carolyn 1:17:30 � 1:20:00

9. Loss Mitigation Class Action v. Lender Gburek v. Litton Loan Servicing, LP, 08cv3188, U.S. Dist. Court, N. D. Illinois (Eastern Division) (filed 6/3/08) First Communication Litton letterhead Encloses �Financial information Form� identifying Litton as debt collector Second Communication Titanium letterhead Encloses �Financial information Form� - identifies Titanium as sender, - disclaims debt collector status and - contains servicer name, loan number and property address Both directly to borrower despite knowledge of legal representation Carolyn 1:20:00 � 1:22:30Carolyn 1:20:00 � 1:22:30

10. Loss Mitigation Class Action v. Lender Gburek v. Litton Loan Servicing Alleged FDCPA violations: False/misleading representations (15 U.S.C. � 1692c) Unfair/conscionable debt collection practices (15 U.S.C. � 1692f) Failure to give mini-Miranda warning (15 U.S.C. � 1692g) Circumventing legal representation by direct contact (15 U.S.C. � 1692c(a)) Relief Sought: Statutory damages Attorneys fees and costs National class certification Case Status: Time to file answer extended to 9/12/08 (Docket 20) Carolyn 1:22:30 � 1:25:00Carolyn 1:22:30 � 1:25:00

11. Practice Pointers require legal opinion from loss mitigator�s legal counsel confirming that all written communications, procedures and practices are legally complaint define and restrict scope of loss mitigator�s contact with consumer in contract establish internal procedures to monitor and audit third party loss mitigator�s activities and consumer complaints arising there from restrict access to and use of consumer personal financial information modify loan contract to include consumer consent to disclosure of confidential personal financial information and use of third party debt collectors/loan workout specialists Carolyn 1:25:00 � 1:27:30Carolyn 1:25:00 � 1:27:30

12. Class Action v. Lender and Loss Mitigator Russell and Lige v. Ameriquest Mortgage Company and Titanium Solutions, Inc., 2:06cv401ts, U.S. District Court, N. D. Indiana (Hammond Division) Russell Facts: � 1988 home purchase for $ 86,000 � Ameriquest � solicited refinance in 2003 ��obtained� appraisal of $ 118,000 � offered adjustable rate loan of $ 107,000, with interest change date two years after origination � represented no prepayment penalty � 1% loan discount fee (bigger loan = bigger fee) � $ 10,000 borrower improvements � 2005 sale for $ 119,000 Alleges: � lender�s appraisal grossly over-inflated ($ 118,000 v. $ 98,000) � payoff improperly included $ 60.00 for payoff statement and $ 4,622.30 prepayment penalty Carolyn 1:27:30 � 1:30:00Carolyn 1:27:30 � 1:30:00

13. Russell & Lige v. Ameriquest and Titanium Solutions Lige Facts: � Ameriquest solicited refinance in 2002 � borrower elderly widow, unemployed and medically disabled (heart condition, depression, anemia, diabetes, osteoarthritis) � Ameriquest promised interest rate less than current 8% rate � Ameriquest provided appraisal of $ 110,000 � loan closed was adjustable rate of 9.99% (2% more than existing � closing costs of $ 3,629.89 included 2.65% loan discount fee Alleges: � bait and switch; promised lower fixed rates, no or low fee � pressured to sign documents without reading � stripped equity preventing refinance (high loan amount vs. value) Carolyn 1:30:00 � 1:32:30Carolyn 1:30:00 � 1:32:30

14. Russell & Lige v. Ameriquest and Titanium Solutions Alleged LENDER violations: � Truth in Lending Act (15 U.S. C. � 1601 et. seq.) � RESPA (12 U.S. C. � 2601 et. seq.) � Equal Credit Opportunity Act (15 U.S. C. � 1691 et. seq.) � Fair Credit Reporting Act (15 U.S. C. � 1681 et. seq.) � Indiana Deceptive Consumer Sales Act (I.C. 24-5-0.5-3. 5.4) � Indiana Home Loan Practices Act (I.C. 24-9-2-6) Alleged TITANIUM violations � Indiana Home Loan Practices Act (I.C. 24-9-2-6) Carolyn 1:32:30 � 1:35:00Carolyn 1:32:30 � 1:35:00

15. Russell & Lige v. Ameriquest and Titanium Solutions Alleged Truth in Lending and RESPA Violations failure to give statutory notices, including � notice of right to cancel � �good faith estimate � settlement process information booklet, failure to provide understandable and non-misleading TILA disclosures including � high end/ARM rates and associated risks � high deceptive �discount fees� and closing costs added to principal � prepayment penalties impairing future refinancing failure to consider loan repayment ability (15 U.S.C. � 1639(c)) � Carolyn 1:35:00 � 1:37:30Carolyn 1:35:00 � 1:37:30

16. Russell & Lige v. Ameriquest and Titanium Solutions Alleged Equal Credit /Fair Credit Reporting Act Violations � failure to give notice of adverse action when declined to grant credit on terms initially requested � offering less favorable, more costly credit � basing credit decision on information in consumer credit report Alleged Indiana Deceptive Consumer Sales/ Home Loan Practices Act Violations � failure to give high cost loan disclosures � material misrepresentations/concealment of material facts � no borrower authorization for lender to provide personal financial information to Titanium � refinance allows lender to recover full debt, including prepayment penalty Carolyn 1:37:30 � 1:40:00Carolyn 1:37:30 � 1:40:00

17. Russell & Lige v. Ameriquest and Titanium Solutions Titanium� s Alleged Violations of Indiana Deceptive Consumer Sales Act ? used private confidential financial information to pressure borrower into loan workout ? pressure borrower to enter into listing agreement ? falsely represented only entity able to complete short sale �work together � � at no cost� to borrower ? Titanium recovers either real estate commission (sale) or referral fee/commission (refinance) Case Status: Transferred to Multi-District Litigation Panel �N.D. Illinois (Docket 23. 3/27/07) Carolyn 1:40:00 � 1:42:30Carolyn 1:40:00 � 1:42:30

18. Practice Pointers ? Avoid appearance of impropriety-- consider not using loss mitigation services of third party who received monetary compensation at loan origination ? Discontinue use of third party for loss mitigation where loan origination activity questioned Carolyn 1:42:30 � 1:45:00Carolyn 1:42:30 � 1:45:00

19. Litigation Best Practices Florida judicial circuit requiring mediation in �contested� owner occupied foreclosure cases WHAT: Administrative Order dated July 28, 2008 WHERE: 18TH Judicial Circuit, Seminole County, Sanford, FL Michelle 1:45:00 � 1:47:30Michelle 1:45:00 � 1:47:30

20. Michelle 1:47:30 � 1:50:00Michelle 1:47:30 � 1:50:00

21. Litigation Best Practices �The Judges in Seminole County�are routinely advised by owner-occupant litigants that it is difficult, if not outright impossible, to negotiate settlements due to the inability to communicate with appropriate representatives of the lender or the lender�s attorneys�first opportunity�is at a hearing�or at foreclosure sale�the law abhors a forfeiture.� Michelle 1:50:00 � 1:52:30Michelle 1:50:00 � 1:52:30

22. Litigation Best Practices After 7/28/08, owner-occupied residential. Responsive pleadings filed for any type of relief by any Defendant. Plaintiff�s attorney responsible for scheduling prior to scheduling for judgment Plaintiff absorbs mediation costs, min. $200 via court mediation dept.; taxed as cost if not settled. Michelle 1:52:30 � 1:55:00Michelle 1:52:30 � 1:55:00

23. Litigation Best Practices Plaintiff provides written notice via court form Mediation may be waived only upon filing of verified motion all defaulted, matter uncontested. Court mediation agenda shall be served on lender�s rep, homeowner and undefaulted jr. liens: requires consideration of several options (repayment, home save advance - Fannie, forbearance, mod, short sale, DIL, consent to FJ, reverse mortgage). Michelle 1:55:00 � 1:57:30Michelle 1:55:00 � 1:57:30

24. Litigation Best Practices Representative with full settlement authority must participate May appear telephonically if noticed, toll free number provided and appearance by phone is continuous. Certificate of Settlement Authority (name, number, method, affirm settlement authority) must be filed. If defendant no show or impasse, may proceed to judgment. If Plaintiff no show, dismissal w/o prejudice. Michelle 1:57:30 � 2:00:00Michelle 1:57:30 � 2:00:00

25. Bill Signed into Law in New York by Governor Impacts New and Existing Foreclosure Actions New York�s Governor Patterson signed Bill 10817/S.8143-A on August 5, 2008. Said Bill affects several different provisions of New York law most notably requiring 90 Day Notices to be sent by lenders before initiating the foreclosure of certain loans, and requiring mandatory settlement conferences in pending foreclosure actions. The statute took effect immediately upon signing by the governor. However, one provision of the law, Section 2, which requires 90 days notice before commencing the foreclosure of certain loans, will not become effective until September 1, 2008. Cynthia 2:00:00 � 2:02:30Cynthia 2:00:00 � 2:02:30

26. Bill Signed into Law in New York by Governor Impacts New and Existing Foreclosure Actions Highlights of the New Legislation Section 1304 of the Real Property Actions and Proceedings Law (RPAPL) being added. This requires lenders and mortgage servicers to send a notice to borrowers at least 90 days prior to commencement of the foreclosure of a loan that originated between January 1, 2003 and September 1, 2008 and is a - high-cost home loan - �sub-prime home loan� or - �non-traditional� loan. Definitions for each of the above are provided by the statute. The notice will provide names and telephone numbers of housing counseling agencies approved by HUD or designated by Division of Housing and Community Renewal. Approved agencies are listed on the New York State Banking Department�s website: http://www.banking.state.ny.us Cynthia 2:02:30 � 2:05:00Cynthia 2:02:30 � 2:05:00

27. Bill Signed into Law in New York by Governor Impacts New and Existing Foreclosure Actions Section 1303 of the RPAPL amended. This statute went into effect in February, 2007 and requires plaintiffs� attorneys in foreclosure to serve an additional notice to the borrower with the Summons and Complaint. The language of that notice has been changed by this new legislation. Section 1302 of the RPAPL amended to provide that the complaint filed in any foreclosure of a loan that fits the criteria of the statute, shall affirmatively assert that the lender has standing to commence the foreclosure action. Cynthia 2:05:00 � 2:07:30Cynthia 2:05:00 � 2:07:30

28. Bill Signed into Law in New York by Governor Impacts New and Existing Foreclosure Actions Section 3408 of the CPLR is added which requires that the Court in a residential foreclosure of a sub-prime or �non-traditional� loan originated between January 1, 2003 and September 1, 2008, schedule a settlement conference within 60 days of filing affidavits of service of the Summons and Complaint. The purpose of the conference is to determine ��whether the parties can reach a mutually agreeable resolution to help the defendant avoid losing his or her home and evaluating the potential for a resolution in which payment schedules or amounts may be modified or other work out options agreed to�� The plaintiff or representative with authority to settle must appear at the conference. Plaintiff may be able to appear by tele-conference. Section 3408 also requires that the court notify plaintiffs in pending foreclosure actions commenced prior to September 1, 2008 where a Judgment of Foreclosure and Sale has not yet been granted, to identify whether the loan is a subprime home loan or high-cost loan and if so, the court will notify the defendant that a settlement conference may be requested. Cynthia 2:07:30 � 2:10:00Cynthia 2:07:30 � 2:10:00

29. Bill Signed into Law in New York by Governor Impacts New and Existing Foreclosure Actions The Banking Law will be amended as to the regulation and definition of �high-cost loans.� The new rules pertaining to high cost loans will prohibit negative amortization, prohibit prepayment penalties, prohibit �abusive yield spread premiums,� require that taxes and insurance be escrowed and prohibit teaser rates (initial interest rates with duration of less than six months). The Banking Law will also be amended so as to define and regulate �sub-prime home loans.� These loans are defined as a first mortgage where the APR exceeds by 1 � points or a subordinate lien exceeds by 3 � points the average commitment rate for loans in the northeast region with comparable duration as published by Freddie Mac. The new rules prohibit negative amortization, an increased interest rate after default, �loan flipping�, prepayment penalties, abusive yield spread premiums, and requires that the lender reasonably have a good faith belief that the borrower is able to repay the loan. Various disclosures will also have to be made to the borrower at the time of origination. Cynthia 2:10:00 � 2:12:30Cynthia 2:10:00 � 2:12:30

30. Bill Signed into Law in New York by Governor Impacts New and Existing Foreclosure Actions There are also new regulations of mortgage brokers and lenders that will affect loan origination. For example, a lender and mortgage broker are prohibited from attempting to improperly influence the appraiser�s findings. The mortgage broker must �diligently work to present the borrower with a range of loan products�� The banking board is also authorized to promulgate regulations which establish grounds to impose a fine or penalty on mortgage loan servicers and to require that they file annual reports regarding mortgage foreclosures and delinquencies. Violations of these new requirements could constitute a defense to the foreclosure action or result in counterclaims for damages The bill also adds the new crime of residential mortgage fraud. This crime is committed where false information is contained in loan application. Cynthia 2:12:30 � 2:15:00Cynthia 2:12:30 � 2:15:00

31. Best Practices 90 Day Notice: The 90 day notice is separate and apart from any breach/demand letter required to be sent under the terms of the mortgage instruments. Lenders will still need to send breach/demand letters in the usual course. Lenders should consider sending the 90 day letter upon a first payment default. Lenders should time the sending of the 90 day notice and the demand/breach letter, so that both expire simultaneously. Settlement Conferences: Servicers will need to have authority to enter into settlement agreements and should designate individuals who can appear at these conferences by telephone. Where the Court does not allow a tele-conference, lenders should give counsel the parameters by which they may settle a particular matter. Cynthia 2:15:00 � 2:17:30Cynthia 2:15:00 � 2:17:30

32. Best Practices Determining if loan falls under Statute: When determining whether a particular loan falls under the statute, lenders should be conservative. Judges have advised that they will err on the side of caution. If it is questionable that the loan fits the criteria, then it should be considered to fit under the statute. Standing: Lenders should consider procuring a complete chain of assignments prior to commencement of the foreclosure action from original mortgagee to named plaintiff. Cynthia 2:17:30 � 2:20:00Cynthia 2:17:30 � 2:20:00

33. ConclusionQuestion & Answer Period If you have any further questions that were not addressed in this presentation, or want to contact one of our speakers, please email Matt Bartel, COO of AFN, at mbartel@e-afn.org. Thank you for your participation in this webinar. Please complete the brief survey which you will be directed to at the conclusion of this presentation. * AFN provides the information contained in these webinars as a public service for educational and general information purposes only, and not provided in the course of an attorney-client relationship. It is not intended to constitute legal advice or to substitute for obtaining legal advice from an attorney licensed in the relevant jurisdiction. William & All 2:20:00 � 2:30:00William & All 2:20:00 � 2:30:00