Sunday, April 24, 2011

Bankruptcy Judge sanctions mortgage servicer for lying.

This one is a must read for anyone working in or around the mortgage foreclosure industry.  Bankruptcy Judge Elizabeth Manger sanctioned a lawyer, an affiant, and a mortgage servicer for botching the accounting of a debtor's post-petition payments, and then presenting false and incomplete affidavits and pleadings to the court in an effort to lift the automatic stay.  This particular order addresses the culpable actions of the loan servicer, LPS.

If you have PACER access, search for case #07-11862, styled as "LaRhonda Wilson" in the Eastern District of Louisiana. This will take you to the April 7, 2011 opinion of Judge Manger, where she details the "fraud perpetrated on the court, Debtors and trustees..."

If you don't have Pacer, start  with this 2010 article.  A more recent article appears in this 2011 blog post, after discovery on the issue had been concluded.

I've read the opinion and reviewed the court's docket of prior orders in the case.  Counsel for the lender was sanctioned $1,000 for filing pleadings that did not properly report payments received in his office from the debtor.  The lender, Option One and an employee who executed affidavits prepared by counsel in reliance only on information shown on a screen shot, were each sanctioned $5,000 in prior orders.  The court's docket shows these sums were actually paid in July, 2008.  This particular order is directed at the loan servicer's conduct.

After discovery and a merits trial, Judge Manger held that the affiant/employee was not qualified to execute the affidavits, and that her training by the mortgage servicer, Lender Processing Services, Inc. (a Fidelity National related entity) had been "insufficient and negligent."

This order is a wonderful cautionary tale for anyone dealing with servicers, and who regularly obtains affidavits from loan servicers in connection with litigation.  Judge Manger also cites to other bankruptcy cases that discuss different aspects of the loan servicing industry that are worth a read:  In re Stewart, 391 B.R. 327 (E.D. La. 2008) (post petition application of payments and errors in automated programs); Jones v. Wells Fargo, 366 B.R. 584 (E.D. La. 2007) (automated software and mis-application of debtor payments).

Judge Manger ends her opinion, saying that "one hopes the bottom of the barrel has been reached and that the industry will self correct. Sadly, this doesn't appear to be a reality."


Monday, April 18, 2011

A funky HUD-1 may earn this lawyer a five year term in the slammer.

I'm originally from Connecticut, so I poke around their papers.  The on-line "ctpost" often has little items that mainstream Hartford Courant doesn't catch (because the Courant, owned by the same company that ruined our own Baltimore Sun, tends to sling the same old syndicated articles shared by everyone).

Here's one that caught my eye:  Attorney Byrk may go to jail for five years for playing games with a HUD-1.  His clients took a loan from Argent Mortgage, with a second mortgage to be held by the sellers.  But because Argent's guidelines barred a second mortgage, the lawyer simply omitted it from the HUD-1. That was in 2007.

Roll forward a few years, and his clients get caught up in fraudulent activity involving their family company.  The far reaching investigation into the couple's finances reveals the lawyer's sneaky work.  He now faces at least 6 months in jail, and maybe five years.  He will surely lose his license.

Oh yes, this investigation also snagged a Superior Court judge involved in other fraud involving the same couple.  He must have been a Yankee fan.

Your creditors can't stalk you on least in Florida.

On April 17th, the Orlando Sentinel reported that a Pinellas Circuit Court judge has banned a creditor from posting to her Facebook page, and from communicating with her friends and family through the site.  Now, this decision has no value as a legal precedent, but it does suggest how the federal laws intended to protect consumers will be extended to social media. 

The article says there are lots more of these cases pending in Florida.  It will take one of these cases reaching an appellate court before something really important is established.

Nothing prevents lawyers from trolling your public pages for evidence and potential witnesses, of course.