And now we wait for the Maryland Court of Appeals to do its work.

On June 7, 2011, I was privileged to argue questions of law certified from the U.S. Bankruptcy Court before the Maryland Court of Appeals.  At issue is the effect of Maryland's curative statutes, and how it operates to bar the bankruptcy trustee's 130+ lien avoidance actions, and oppositions to lender motions for relief from the automatic stay.

The court's website has a webcast of the oral arguments, if you are so inclined to burn your billable time over a cup of coffee. The case is captioned Guttman v. Wells Fargo, Misc. #20.  I believe the link is at the top of the page.

This issue will impact the title industry in a significant way.  The 35 cases in this office, alone, implicate over $7 Million in secured liens that could be rendered unsecured.

Stay tuned.

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."

Amen.

imMERSed in a sea of differing opinions.

On February 11, 2011, Judge Karlin of the Kansas bankruptcy court sent more waves through the foreclosure and title community pool (a "title pool?"). The Martinez decision upholds MERS status as the lender's agent, for purposes of establishing standing by the current lienholder.

Compare this to New York bankruptcy Judge Grossman's February 10, 2011 Agard decision, for purposes of assignments that establish standing.

Read for yourself, and you'll be left to ask, "who's steering this boat?" I've talked with several local trustees, and they simply don't know what to do with this patchwork of analysis that is dropping from the various courts. I personally believe that recent state court decisions defining "non-possessory holders" will cut through this issue.

Ameriquest- it's like jogging in deep snow.

The Maryland Court of Appeals decided this "bad affidavit" case on August 31, 2010. It has now been left to the bankruptcy court to deal with over 100 pending cases where Trustees are suing to invalidate, or "strip", liens. This office, alone, has over 20 cases, valued at close to $6 million. Each is a potential total loss under a title policy, as each lender may potentially be stripped of its lien and relegated to "general unsecured" status.

I have heard that Judge Kier, Chief Judge of the bankruptcy court, has assigned one law clerk to research the issue for all the judges. I think he wants to avoid potentially conflicting results from the four judges handling the cases.

It has become rather comical, though, to see both Trustees and counsel for the lienholders declare victory when the Ameriquest decision really does little more than amplify exisiting law.

But enough, for now. I have 20+ briefs to write!