Cybersecurity Measures & Their Importance in the Workplace

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5th Circuit Opinion Natural Disaster Prep USF N Events RecapCOURT CLARIFIES SERVICER

OBLIGATIONS FOR MULTIPLE LOSSMITIGATION APPLICATIONS

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HOW TO IMPLEMENT PLANS TO ENSURE POST-DISASTER ORGANIZATIONAL SUCCESS

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USFN MEMBERS & MORTGAGE SERVICERS PARTICIPATE IN TWO

SUCCESSFUL EVENTS Page 20

OFFICIAL USFN PUBLICATIONUSFN REPORT SUMMER 2019

Upcoming USFN Events

USFN BriefingREO/Eviction

July30

USFN BriefingLegal Issues

August20

USFN Executive Servicer Summit (By invitation only)Palm Beach, FLSeptember 26-29

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USFN BriefingBankruptcy17

USFN BriefingREO/Eviction

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USFN Member Retreat(Members Only)Vail, CONovember 7-10

November7

USFN BriefingLegal Issues19

USFN BriefingBankruptcy

December17

USFN is a resource network serving the mortgage industry and is the largest not-for-profit associa-tion of law firms and trustee companies in the nation. More information about USFN is available at www.usfn.org.

USFN Report is published quarterly for members of the mortgage banking and lending community. The USFN Report contains comments from counsel in various states, and the information provided is not intended as legal advice. The comments are solely those of the identified authors and may or may not be the same as other attorneys within USFN. Specific questions should be referred to local counsel who is familiar with the laws, rules, practices and interpretations of the particular jurisdic-tion. Because of the complexities of the law, and changes in legislation, the summary and discussion contained in the USFN Report should not be relied upon but should be used for facilitating dialog with your counsel, after a careful review of the legislation and cases to which reference is made.

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USFNdustry ForumSan Antionio, TXJune 2-4, 2020

June 20202

USFN BOARD OF DIRECTORSMarty M. Stone, Esq.

PresidentKip J. Bilderback, Esq.

Vice PresidentWendy Lee, Esq.

SecretaryEdward W. Kirn, Esq.

Immediate Past PresidentAndrew W. Saag, Esq.

CFO/Treasurer

James E. Clarke, Esq.

Thomas P. Dore, Esq.

Sally E. Garrison, Esq.

Douglas J. Hannoy, Esq.

Hilton T. “Hutch” Hutchens, Jr., Esq.

Jay B. Jones, Esq.

Lori A. King, Esq.

Lisa A. Lee, Esq.

Kelly Ann Poole, Esq.

Shellie Wallace, Esq.

Jeffrey D. Weisserman, Esq.

Daniel A. West, Esq.

Pamela L. Donahoo, CAE Chief Executive Officer

Shae Craft Director, Membership &

Industry RelationsAaron Wolowiec, CAE

Senior Director, Education & Content StrategyTracy Vecchio

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Executive Assistant

USFN STAFF

From the President

MARTY M. STONE, ESQ.

MCCALLA RAYMER LEIBERT PIERCE, LLCIn This Issue

USFN REPORT SUMMER 2019

SUMMER 2019 | 3

Features

Fifth Circuit Clarifies Servicer’s Loss Mitigation Obligations

Preparing an Organization for Natural Disasters

The Importance of Cybersecurity Measures in the Workplace

New Jersey: Nine Key Industry-Related Bills Recently Enacted

New York: New Division Combines Seven Departments

Illinois: Court Offers Guidance in Prosecuting Foreclosure Actions

California: Anti-Deficiency Statute Application Limited By Court

Florida: Bank Entitled to Designate Corporate Representative for Deposition

State Articles

Upcoming Events

Member Moves + News

USFN Events

Member Directory

USFN Committee Chairs

Connections26

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8

10

14

16

17

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I hope everyone is having a great summer. I’m writing this just a couple days after our first ever USFNdustry Forum in Nashville. We talked about it a lot in the months leading up, and I think it was a great success. The weather was unsea-sonably mild, the discussions were lively, and the music was abundant. I’m glad we kicked off a new tradition here at USFN, and I’m looking forward to many more successful events to come. I hope everyone can join us next June in San Antonio for the next Forum.

Education for our members and our clients has always been one of the strengths of USFN, and in 2019 we are really trying to raise the bar. As we celebrated our 30th anniversary last year, we examined all of our offerings to enhance the best, reformat a few, and create some new events so that we could reach the entire industry. We have developed programs for every level, whether you have been working in the mortgage servicing business for years or are just starting your career.

• Our new NStruct seminars are specifically targeted to newer employees to learn the basics of foreclosure and bankruptcy. We kicked off this series this past April in Dal-las and have a second event planned for the Phoenix area in the fall. We will sponsor at least two of these events each year moving forward in areas around the country with a concentration of servicers to make it convenient for attendees. Best of all, this offering is made available to our clients free of charge!

• Building off our annual Legal Issues Conference in Chica-go each year, for 2020, we are creating one day seminars to be held annually that will focus on issues and devel-opments in Bankruptcy as well as REO/Eviction. The first Bankruptcy Issues Conference will debut in January in Dallas, while the REO/Eviction conference will be held next April in Denver.

• Each year, USFN hosts an invitation only summit for all of the executives in the industry to gather together to discuss policy, issues, and solutions at our annual Execu-tive Servicer Summit. We’re very proud of this conference and this year’s event will be held at the Breakers in Palm Beach in September.

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Why Companies Can’t Wait on Implementing Cybersecurity MeasuresBY KIM BILDERBACK - GSEC, CISSPSENIOR DIRECTOR, NATIONAL BUSINESS MARKETSEAST | AT&T CYBERSECURITY

American self-help author Napoleon Hill is credited with saying, “Do not wait: the time will never be ‘just right.’ Start where you stand, and work with whatever tool you may have at your command and better tools will be found as you go along.”

This advice is appropriate when thinking about corpo-rate cybersecurity programs. Too many times, a client has described to me what they’re going to do. Too many times, that same client called seeking assistance with a breach.

One reason for the procrastination is cost, which organiza-tions mistakenly classify as an IT expense. Cybersecurity is actually an important component of a business risk man-agement program. The consequences of a cybersecurity breach are not just something intangible, like loss of brand trust or theft of intellectual property. They’re cold, hard cash out of a firm’s pockets due to individual lawsuits, class action lawsuits, contractual violations, or regulatory fines.

SUMMER 2019 | 5

Court ruling after court ruling has made it clear that the time for action is now. Businesses of all sizes are responsible for cybersecurity and accountable for damages when they fail that responsibility. Regulators and governments are increasingly tight-ening the cybersecurity requirements and the penalties for noncompliance.

It’s becoming clearer that custom-ers and business partners, even if they cannot demonstrate monetary impact from a breach, have basis for filing lawsuits for breach damages.

In a May 2019 ruling in United States ex rel. Markus v. Aerojet Rocketdyne Holdings, Inc., et. al, a U.S. District Court ruled that a defense contrac-tor had violated the False Claims Act when it entered into, and invoiced under, U.S. government contracts despite failing to fully satisfy (or oth-erwise disclose the scope of its gaps with) its contracts’ requisite cyberse-curity controls.

Essentially making cybersecurity an even larger business risk, a recent U.S. Supreme Court ruling in Zappos.com v. Stevens confirms customers can sue companies when their data is stolen, even if that data is not used for things like identity theft or making fraudulent charges. The Zappos case will go a long way toward deciding how much liability corporations will have if customer data is exposed, regardless of how it is used.

Think cyber insurance will amelio-rate this risk? Think again. Recently, executives for the snack company Mondelez took some solace in their huge cyber breach knowing that cy-ber insurance would help cover their costs. Or, so they thought.

Mondelez, the victim of a crippling NotPetya malware attack in 2017, learned its insurer, Zurich Insurance, would not cover the attack. Zurich declared Mondelez’s losses collateral damage in a cyberwar and invoked the policy’s “war exclusion” clause. Since the U.S. government assigned responsibility for NotPetya to Rus-sia, all cyber insurers were provided justification to invoke “war exclusion”

clauses to not pay claims. The issue is still in the courts.

Consider this analysis by attorneys Karen K. Karabinos, Esq. and Eric R. Mull, Esq. on the implications of Columbia Casualty v. Cottage Health System:

“While the issues surrounding a cyberattack may be complex, com-pliance with the terms and condi-tions of a cyber policy may be as simple as determining if an insured has in place and is following the practices and procedures required under the terms of the policy. As cyber liability and coverage continue to be a growing and ever-changing concern, more and more companies will turn to their insurance carriers for protection. Insureds should be mindful that their failure to answer application questions accurately, their failure to comply with certain practices relating to computer and data security, or their failure to maintain security policies, practices, and procedures may result in the forfeiture of coverage, and in turn, exposure to substantial costs and liability.”

Finally, there is the obligation to prevent risk from insiders. In a re-cent ruling, the UK Court of Appeal upheld a lower court’s decision that the supermarket giant Morrisons is liable for its employees’ misuse of data. In 2015, a former Morrisons employee was convicted of criminal charges for leaking employee pay-roll records. The Court of Appeal’s landmark ruling confirms that Mor-risons is “vicariously liable” for their employee’s criminal misuse of the leaked data.

Morrisons now faces a potential-ly massive payout. The Court of Appeal’s decision paves the way for compensation claims by 5,518 former and current staff members whose personal details were posted on the internet.

What to do? Implementing at least five security essentials is key to cy-bersecurity risk management.

Security Essential 1: IT Asset Dis-covery & InventoryThink about it. How can you report something stolen if you don’t know what you’ve got in the first place?

Security Essential 2: Vulnerability ScanningHaving inventoried your IT and data assets with asset discovery, you now need to make sure the doors and windows to the assets are shut and locked. That’s what vulnerability scanning does. It scours the perime-ter to make sure all is secure – that known vulnerabilities are patched against.

Security Essential 3: Log Manage-ment & Threat DetectionLog management in cybersecurity is similar to a video camera trained on the front door of a convenience store.

The video camera records the image, date and time of everyone coming into and going out of the store. If the video is monitored indicators of po-tential crime (system compromise) can be detected, an alert sounded, and possible crime averted. Some-one coming through the door, wear-ing a mask, and brandishing a gun could be interpreted as an indicator of potential compromise yielding an alert and proactive crime prevention action taken.

The saved video recordings are a treasure trove of forensic data for the police seeking to investigate after a crime is committed. The video recordings are referenced to identify when a crime occurred, what was stolen and to identify the perpetrator. Absent the video recordings the po-lice would have little hard evidence for investigation. This is exactly what log management and threat detec-tion do for cybersecurity.

Security Essential 4: Security Awareness TrainingIf the budget allows to manage one cyber risk, this is it.

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Christopher C. Drout (Marquette 2004), Patricia C. Lonzo (University of the Pacific 2002), and Robert M. Piette (Marquette 1992) have been named partners with Gray & Associates, LLP (USFN Member – WI), New Berlin, Wisconsin. Attorneys Drout, Lonzo, and Piette will continue their practice on behalf of the firm’s lender clientele.

Robert Wichowski, William Dziedzic, and Heather McRoberts of Bendett & McHugh, PC (USFN Member – CT, MA, ME, NH, RI, VT) have been select-ed to the 2019 Connecticut Rising Stars list, an honor reserved for those lawyers who exhibit excellence in practice. Only 2.5% of attorneys in Connecticut receive this distinction.

Scott & Corley, PA (USFN Member – SC) is pleased to an-nounce Ronald “Ron” C. Scott has been selected as one of 24 business professionals being recognized for their positive influences on the Greater Columbia community in Columbia Regional Business Report’s 2019 inaugural list of Icons and Phenoms.

From the PresidentContinued from Page 3

• The new USFNdustry Forum is where all of these groups and more come together each year for large and small group sessions focusing on man-agement, servicing, and other topics.

We also realize that we work in a fast, ever changing industry and that sometimes it’s difficult to get away for one of the above con-ferences. To that end, we offer monthly USFN Briefings for our clients and members that ro-tate among the Bankruptcy, Legal Issues, and REO/Eviction sections. I encourage each of you to partici-pate from the comfort of your own desk. They are free of charge, and all you have to do is register and call in.

We also try to deliver updates and analysis for any late breaking news and developments in mortgage servicing. So far this year, we have had individual webinars to cover the Obdusky ruling and the chang-es in the New Jersey foreclosure process.

Finally, this year we have created a new USFN Diversity and Inclusion Committee that is chaired by Sally Garrison. This committee is open to members and servicers alike. Its mission is to develop content and programming at our events to assist our audience in intentionally representing the diversity of our communities at all levels of the organizational structure. It is com-mitted to providing practical tools and training so that our industry can better serve our clients, and our clients’ clients, with broader perspectives, integrity, and equality.

Affinity Consulting Group (USFN Associate Member – FL) has taken its Affinity University one step forward with an enhanced version of their on-demand training platform that provides law firms with all the con-tinuing education resources they need for one nominal price. The chief feature of the Affinity University makeover is the all-new Course Man-ager, a feature that allows firms to personalize the learning experience for their users by adding individual logins, assigning courses to specific learners, and generating reports.

Member Moves + News

Rosenberg and Associates, LLC (USFN Member – DC) welcomes Cristián Alec Mendoza to the firm as an associate attorney in its Bethesda, Mary-land office. Mendoza will practice in the firm’s foreclosure department, with a focus on Maryland foreclosures, mediations and status hearings. He earned his undergraduate Bachelor of Arts Degree from Binghamton University in Binghamton, New York and his Juris Doctor from the Uni-versity of Maryland School of Law.

Safeguard Properties (USFN Associate Member – OH) announces that Joe Iafigliola has been promoted to Chief Financial Officer. Iafigliola is responsible for oversight of the Control, Quality Assurance, Accounting, and Information Security departments.

6 | SUMMER 2019

Stay current with USFN updates and news on our LinkedIn page: https://www.linkedin.com/company/usfn-amba

Scott & Corley, PA (USFN Member – SC) is pleased to announce Ronald “Ron” C. Scott has been selected as one of 24 business professionals being recognized for their positive influences on the Greater Columbia community in Columbia Regional Business Report’s 2019 inaugural list of Icons and Phenoms.

USFN Members and Associate Members may send possible items for the “Member Moves + News” section to Jeff Loy at jloy@usfn.org.

In a 2018 article, cybersecurity expert Michelle Drolet wrote, “The sad truth is that employees are the weakest link in cyber defenses. They are vul-nerable to phishing scams and ran-somware. They also make mistakes. Sometimes they don’t fully under-stand compliance requirements and sensitive data is mishandled.”

“81% of hacking-related breaches over the last year leveraged stolen or weak passwords and 1 in 14 users admitted being tricked into following a link or opening an attachment they shouldn’t have,” said Drolet.

Security Essential 5: Email/Web FilteringEmail alone is the top cybersecurity threat vector. Deploying inexpen-sive technologies that scan emails and monitor web browsing actively detecting and preventing access by

Cybersecurity Measures Continued from Page 5

known viruses or malicious websites delivers an effective risk manage-ment ROI.

When thinking about implementing cybersecurity measures, it’s import-ant to repeat Napoleon Hill’s warning: “Do not wait.” It may not be a conve-nient moment to implement cyber-security security essentials, but the time is right. Legislation, regulations, and court rulings all show that the consequences of not doing so can have profound risk implications to your business.

THE AUTHOR

KimBilderback

1. IT Asset Discovery & Inventory

2. Vulnerability Scanning

3. Log Management & Threat Detection

4. Security Awareness Training

5. Email/Web Filtering

ESSENTIALS OF 5

In Germain v. U.S. Bank National Association, an opinion out of the 5th Circuit Court of Appeals, the court clarifies a servicer’s obligations in reviewing multiple loss mitigation applications. Additionally, the court sends a warning to borrowers and attor-neys who manipulate statutory and judicial safeguards in order to escape the borrower’s mortgage obligations.

In July of 2012, Ocwen Loan Servicing, LLC (“servicer”) began servicing Germain’s loan. By August, Germain defaulted on the loan and the servicer-initiated foreclosure proceedings. Germain submitted his first request for a loan modification, which was denied on the basis that the owner of the note did not allow for modification. Germain brought the loan out of default, and the servicer did not continue processing the borrower’s loss mitiga-tion application.

Over the next two years, Germain went in and out of default sev-eral times, filed for bankruptcy, which was later dismissed, and submitted two more applications for a loan modification. The servicer denied each request and presented alternative loss miti-gation options. Germain failed to take advantage of any options presented.

In February 2014, the borrower again submitted a loss mitigation application and requested a loan modification. The request was denied in writing on the grounds that the owner of the loan did not allow for loan modification and other loss mitigation options were presented, including the option of a short sale.

In 2015, the servicer accelerated the loan and Germain filed suit alleging two primary claims: 1) the servicer was in violation of the

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Fifth Circuit Clarifies Servicer’s Loss Mitigation Obligations

BY SHAWNIKA L. HARRIS, ESQ. | BARRETT DAFFIN FRAPPIER TURNER & ENGEL, LLP | BDF LAW GROUPUSFN MEMBER (AZ, CA, CO, GA, NV, TX)

8 | SUMMER 2019

iting the servicer for its compliance with 1024.41 prior to the effective date of the statute. In other words, section 1024.41(i) should be retroac-tively applied because the purpose of the statute was to bring servicers into compliance, not make compliant servicers repeat their compliance.

Germain also raised TDCA violation claims which the court quickly dis-mantled. Germain alleged that the servicer violated the TDCA by threat-ening to foreclose on the property without complying with RESPA, and “urging [him] to submit a loss mitiga-tion application, although the De-fendants knew that [his] application would be treated as a loan modifica-tion and would be summarily denied without consideration.”

The first TDCA claim was dismissed by the court based on their findings that the servicer was not in violation of RESPA. Germain’s second TDCA claim relied on language in Tex. Fin. Code § 392.304(a)(14) and (19) which forbids fraudulently, deceptively, or falsely misrepresenting the nature of services rendered by the debt collec-tor or any other false representation to collect a debt or obtain informa-tion from the consumer. Germain argued that the servicer violated this provision by encouraging Germain to submit loss mitigation applications that would be treated as a request for loan modification and subse-quently denied.

The court disagreed, reasoning that the servicer did not promise a loan modification, nor did Germain offer any evidence that the servicer requested loss mitigation materials knowing the application would be denied. Further, the servicer provided Germain with several loss mitigation options other than a loan modifica-tion, including the option of a short sale. Germain failed to take advan-tage of any of the suggested options.

What does the Germain decision mean for mortgage servicers?First, servicers are only required to comply with the requirements of 1024.41(i) for a single complete loss

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Real Estate Settlement Procedure Act (“RESPA”) by failing to provide a writ-ten explanation of its loss mitigation analysis for all four times the borrow-er submitted an application; and 2) violating the Texas Debt Collection Act (“TDCA”) by proceeding with foreclo-sure without complying with RESPA and urging Germain to submit loss mitigation applications knowing that it would be treated as a loan modifica-tion and subsequently denied.

Section 1024.41 (c) and (d) of the Code of Federal Regulations, relied on by the borrower, states that the loan servicer must evaluate the borrow-er for all loss mitigation options and provide a written explanation of all options or the specific reasons the borrower was denied for loss mitiga-tion. Section 1024.41(i), which states the servicer is only required to com-ply with the requirements of sections (c) and (d) for one complete loss mit-igation application for the borrower’s mortgage account came into effect in 2014. The court in Germain ruled that servicers should be credited for its compliance, even if that compliance occurred prior to the effective date of the statute.

The court relies on the analysis in Campbell v. Nationstar Mortgage out of the 6th Circuit and the district court opinion in Allen v. Wells Fargo Bank, N.A. to determine whether sec-tion 1024.41 should apply retroactively in this instance. In Campbell, the court concluded that 1024.41 could not be applied retroactively because doing so would have imposed a duty on the servicer to not foreclose on the prop-erty when no such duty existed at the time of the foreclosure. The court in Allen reasoned that a servicer’s past conduct should apply when reading 1024.41(i) because failing to do so would exclude an entire category of borrowers from the limitation on du-plicative requests where there was no intention to exclude such borrowers.

The court in Germain reconciles these seemingly conflicting opinions by de-lineating the difference between ap-plying 1024.41 retroactively to impose a new duty to prior actions and cred-

mitigation application for the bor-rower’s mortgage loan account. The purpose of the statute is to eliminate the necessity for servicers to review and advise findings on duplicative loss mitigation appli-cations. To be in compliance with 10241.41 the servicer must provide the borrower with one complete written notification of its loss miti-gation determination, an explanation for any rejections, and any available options the servicer will provide the borrower.

In addition, the court determined that when a servicer has previous-ly provided the borrower with the name of the owner of the note, and that owner has not changed, the servicer’s compliance with 1024.41 is not defeated because the writing does not include the name of the note holder.

Additionally, servicers are not re-quired to raise section 1024.41(i) as an affirmative defense. Germain argued that he did not receive proper notice and adequate time to prepare for the servicer’s motion to dismiss because 1024.41(i) was not raised as an affirmative defense, re-lying on Amarchand v. CitiMortgage, Inc. where the court contended that section 1024.41(i) was better raised an affirmative defense.

The court in Germain disagreed. The court determined that when the defendant raised section 1024.41(i) in their motion for summary judgment, it was an expansion of the denial in their answer, arguing that they did not violate RESPA because they did, in fact, comply with the statute. Therefore, 1024.41(i) should not be considered an affirmative defense, and servicers are not required to raise it as such.

Finally, section 1024.41(i) should be applied retroactively for servicers who were in compliance with the statute prior to its effective date to eliminate the necessity for repeat-ed compliance. The court looks at whether the statute expressly

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To parse a phrase from “Game of Thrones”: Hurricane season is com-ing (or at this point, is here). For those of us that live and work in the southeastern U.S. this time of year can and usually does have a huge impact on our lives and businesses. Effects from the hurricanes in late 2018 are still impacting some areas near the Atlantic Coast. Point being, a hurricane or any natural disaster will decimate communities for pro-longed periods of time. Specifically, in the default servicing industry, the impacts are wide-ranging, and the ef-fects felt from all parties: creditors to borrowers, law firms to government agencies. This is further compound-

ed by the multiple unknowns that occur prior to and after the fact of the disaster (i.e., timing of the natu-ral disaster event, extent of damage inflicted, and total geographic im-pact). Regardless of the unpredict-ability, post-disaster success requires preparation, planning, and a proactive mindset with governing those crite-ria that are within an organization’s domain and control. Guidance during a natural disaster situation is often waning, but instilling proper proactive and pragmatic concepts in an institu-tionalized and organizational manner through a well-defined business con-tinuity plan will mitigate the overall impact of the proverbial storm.

Controlling What You Can When Managing a Natural DisasterBY JEREMY B. WILKINS, ESQ., DEVIN CHIDESTER, ESQ. & JASON BRANHAM, ESQ. BROCK & SCOTT, PLLC | USFN MEMBER (AL, CT, FL, GA, MA, ME, MD, MI, NC, NH, OH, RI, SC, TN, VA, VT)

CompassionCompassion is the most important underlying concept to any organiza-tion’s business preparedness through a natural disaster. People and how they are treated is the fundamental root that ensures businesses contin-ue to operate after the event. As the old saying goes, “Things are replace-able, people are not.” Any business continuity plan must be drafted in light of compassion towards employ-ees and the likelihood of individual needs that flow from the ramifica-tions of a natural disaster. People are the most important and most valuable asset of any organization. Awareness of any community evac-

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Image courtesy of NASA

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uation plans is essential to ensuring employees that elect to evacuate on their own personal volition are afforded enough time while balanc-ing work needs. Disastrous events threaten the safety and stability of a person’s life, loved ones, home, community, and livelihood for un-known lengths of time. People are understandably distracted, and decision making becomes difficult. Imparting an emergency plan that is straightforward and guides, informs, and comforts employees during desperate times is the foundation to a successful emergency plan. In fact, the organization should look exter-nally to involve itself in the com-munity as part of any clean up and recovery efforts and look internally to help those employees adversely impacted. There is a collective power in altruism that will inure positively in many ways.

Follow A Written PlanA viable business continuity plan (“plan”) must be in writing, clear yet instructive, and adequately commu-nicated throughout an entire organi-zation. The plan will set forth duties, responsibilities, and directives for all staff and management to follow be-fore, during, and after the natural di-saster. In the event you have multiple office locations, the plan should be specific to each office to the extent necessary, but also broadly devel-oped for the entire organization.

The plan should serve as the road-map for your organization’s response and actions both pre- and post-nat-ural disaster event. The plan should assess possibilities for a broad array

of possible natural disasters in-cluding potential levels of severity, responses, and security threats. After implementation, a viable plan should be subject to continual review to ensure successes are maximized and necessary remedial measures are taken.

The plan is the starting point for managing preparedness and by its very nature is a proactive document that will bind the foregoing compo-nents by developing controls within the organization for any possibly nat-ural disaster event. A plan must be in place within each organization–even if the likelihood of a natural disaster is slim to none. It is a fundamental, controllable, and proactive measure to ensure employee safety and busi-ness stability post disaster.

Protect AssetsYour organization is only as viable

as the assets that define it, includ-ing employees, tangible goods, and infrastructure. Protecting your as-sets is culturally rooted in caring for the well-being of your people. An organization’s duty of protection for its assets is predicated on the idea of not placing the assets in a risky situation. Having a plan that identifies individual leaders/facilitators, estab-lishing communication through read-ily available methods of checking in or points of contact (i.e., phone tree, text/email address, online portal, etc.), and having known methods of contact for leaders and management to establish employee safety both before, during, and after the natural disaster event.

For instance, Brock & Scott’s North Carolina foreclosure operations were greatly impacted by Hurricane Flor-ence. Thankfully, the firm’s Business Continuity Plan and the Emergency Response Plan for the Wilmington office included necessary contact points and team members tasked with identifying employee safety as well as office security. Regular check-ins helped give peace of mind during a hurricane that devastated Wilming-ton and the surrounding area.

Similarly, Brock & Scott’s Ft. Lau-derdale location uses a plan on the same fundamentals around employ-ee safety, clearly identified check-in methods, evacuation routes, and other asset protecting methods. Communication with staff is not always easy during a natural disas-ter, especially with potential power outages, but advance knowledge of everyone’s location and an estab-lished system of contact will allow an organization to succeed in the midst of adversity. Employee safety is paramount and should be encour-aged at all costs, then focus needs to be on protecting tangible goods and other non-human assets (i.e., original documents, computers, office secu-rity, etc.).

It is essential to safeguard tangible assets belonging to your organization and any others placed in your care. Depending upon your location, your office structure should be prepared properly in the event of a prolonged power outage or obstructed access (i.e., downed trees, impassable roads, etc.) for an extended period. Includ-ing a reporting system, having regu-larly scheduled calls with emergency leadership in your organization, and identifying who is responsible for ac-cessing offices/building locations and how ensures assets are safeguarded. A good plan will encourage reme-dial measures to ensure doors are boarded or locked, tangible items are secured, and technology (comput-ers/servers) are managed to prevent security breach and destruction. It is prudent to take basic remedial measures such as unplugging all electronics and elevating any com-

Organizations “weather” natural disasters by having a plan which incorporates: a true sense of care for its people, a clear plan of action for likely contingencies, measures to protect physical assets including facilities and property, and a means for effectively communicating relevant information to both internal and external recipi-ents who need it to maximize performance and safety.

12 | SUMMER 2019

puters or other physical items from potentially preventable destruction, such as flooding.

With respect to original documents, preventative measures such as cata-loguing ones on hand, returning ones to proper holders, or removing to a secured location in another office will ensure unnecessary destruction and help identify any documents that may be lost. If it is best to relocate them temporarily, ensure appropriate measures for chain of custody are taken.

These measures are necessarily proactive in nature and keeping your client informed and document-ed will further instill confidence in preparations. Importantly, these are measures that should exist within your organization’s plan and the im-plementation is within your control. Every decision or criteria for such that can be made or set prior to the disaster, should be made and set and incorporated in the plan.

CommunicationCommunication is the lifeline of a successful plan. As always, success at any level requires a communica-tion structure both internally and externally as it pertains to the orga-nization. As part of a successful plan, you must communicate clearly and directly. The messaging should not be left to interpretation.

Employees should all know expec-tations and duties both pre-disaster and post-disaster as appropriate to their location and job responsibili-ties. The means of communication should be consistent and within the confines of resources available under the circumstances. As previously mentioned, communicating with staff throughout is of the utmost impor-tance. It goes beyond protecting your employee as an asset; it solidifies the strength of the organization.

Further, communication outside of the organization to clients, court officials, and vendors should also be done clearly and directly. It is incum-

bent to ensure external communica-tions project a sense of organizational strength and address in real time (e.g. office operational hours, court clo-sures and delays). It is advantageous to have resources physically located outside of the natural disaster impact area that are capable of communi-cating with those inside the impact area to convey the message with accuracy. Ask yourself: “who needs to know what…and when?” Relevance and timeliness are key components of effective communication.

Often a state of emergency is de-clared and this may have long term impacts to pending litigation, avail-able court resources/schedules, or cause legal remedies for distressed individuals (i.e., FEMA claims, in-surance claims, delayed mortgage payments, etc.). Specific facilities may be damaged, closed, or inacces-sible. External communications are going to be a snapshot of the situa-tion on the ground and they will have a long-term impact if not done so with clarity and purpose in a timely manner. Even in an event of minimal impact, communication should be continuously envisioned, planned for, and part of the written plan.

Outside the Box ThinkingAdmittedly, when a natural disaster hits, you must be prepared to move outside of your comfort zone. A pro-active approach to business opera-tions is necessary and should be part of any governing plan. For example, in organizations with multiple office locations, a preventative approach may be to reposition staff from a danger zone to one of safety prior to any disaster hitting. We are fortunate to have a few days’ notice before hurricanes, winter storms, or the like hit a specific jurisdiction. Operating from another location may have in-creased cost, but the business main-tains function and is not stopped completely. Another workaround is to utilize remote access for qualified employees post-disaster. This takes some pressure off employees who are balancing work needs with the personal stresses of the disaster.

A plan should have in place the abil-

THE AUTHORS

Jeremy B. Wilkins, Esq.

Devin Chidester, Esq.

JasonBranham, Esq.

ity to cross train staff in other loca-tions. This ensures minimal function-ality and prevents all operations from coming to a screeching halt. This is where established and proactive uni-formity in processes and methodol-ogy within an organization’s plan can allow for outside of the box success and planning.

Furthermore, as a natural disaster makes its impact, there could be extended power outages and travel routes that could additionally impact delivery services, specifically U.S. Mail and overnight mail delivery options. This could impact processes at all levels, and the downline timelines of matters could be greatly crippled. Having a backup location for mailings to be sent or processed from will prevent any downturn or timeline delay from occurring.

With Hurricane Florence, Brock & Scott used a backup office location not on the coast. This allowed for mail collection and processing to have minimal interruptions while travel to and from Wilmington was extremely limited. Another possible remedial step is to include the use of private air travel or even boat couri-ers to transport documents in and around the impacted locations.

Organizations “weather” natural disasters by having policies in place and a plan which is composed well in advance and proactively imple-mented which incorporates: a true sense of care for its people, a clear plan of action for likely contingencies, measures to protect physical assets including facilities and property, and a means for effectively communi-cating relevant information to both internal and external recipients who need it to maximize performance and safety. After taking these steps, creative and resourceful outside-the-box thinking can take the quality of an organization’s response to an even higher level.

Managing Natural Disasters Continued from Page 11

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invokes retroactivity, and if not, the court must determine whether the new provision attaches new legal consequences to events complet-ed prior to enactment. Although the court believes that section 1024.41 is not retroactive as a whole, the language of the statute takes into account the servicers past actions.

If the servicer was not in compliance prior to the effective date of the statute, their foreclosures cannot be challenged on the basis of compli-ance because doing so would im-pose a duty not present at the time of the foreclosure sale. However, if the servicer provided a complete written explanation of their loss mitigation determination to the bor-rower, the 5th Circuit contends that retroactivity applies in order to credit the servicer for the prior compliance.

Servicer Loss Mitigation Obligations Continued from Page 9

In the ad hominem conclusion, the Germain court sends a clear message to borrowers and attorneys using the protections put in place to protect borrower’s interests as a weapon to avoid making payments.

“The history of this case demon-strates beyond cavil that Germain has spent the last 10 years gaming the system through a series of applications for loan modification, a flawed bankruptcy filing, and the institution of this lawsuit. Doing so has enabled him to achieve his one overarching goal: The prolonged oc-cupancy of his residence with little or no payment on his mortgage debt. With the help of cunning counsel, Germain used the intended shield of RESPA, TDCA, and various state and federal laws as a sword to avoid (or at least minimize) his mortgage payments while continuing the de-cade-long occupancy of his encum-bered house. Today’s termination of Germain’s abuse of the system is

long overdue. We caution Germain, and his present and future counsel, if any, that further machinations to prolong this litigation or delay fore-closure proceedings could and likely will be met with sanctions.”

Germain is a win for the industry. It eliminates the need for duplicative response and provides protections for servicers who began CFPB com-pliance prior to the effective date of the rules. It also eases the plead-ing requirements in defending suits alleging CFPB violations. The court also makes clear it will not tolerate continued gamesmanship by bor-rowers and their counsel to delay foreclosures.

THE AUTHOR

Shawnika L.Harris, Esq.

Report: REO/EvictionNew Jersey Enacts Nine Bills Affecting Residential Foreclosure Process

In late 2018, the New Jersey Ju-diciary released a report from its Special Commit-tee on Residen-tial Foreclosure. The report

contained specific proposals for re-vising state statutes and court rules to improve the foreclosure process. In response to the Committee’s report, the legislature passed, and Governor Murphy enacted, nine bills affecting the residential foreclosure process. Signed on April 29, 2019, some of the bills went into effect immediately, with all taking effect by November 1, 2019.

New Disclosure Requirements for the NOI to Foreclose The most immediate impact for lenders is a series of new disclo-sure requirements for the Notice of Intention to Foreclose (“NOI”) that take effect between April and November 2019. As of April 29, 2019, the lender identified in the NOI must disclose whether it is licensed under the New Jersey Residential Mortgage Lending Act (“NJRMLA”) or if it is exempt. The “lender” in the NOI is the intended plaintiff in the foreclosure action, entitled to enforce the note, and the assign-ee of the mortgage. By August 1, 2019 the NOI must disclose that the borrower has a right to housing counseling at no cost through the

court’s foreclosure mediation pro-gram and if the mortgaged property meets certain conditions set forth in the statute, the lender must then seek appointment of a rent receiv-er. And, by November 1, 2019, the NOI must disclose that if the lender initiates foreclosure the borrower has the option to participate in the foreclosure mediation program. This disclosure must be in English and Spanish. The Court has communi-cated an expectation that the entire mediation application be provided with the NOI. The mediation ap-plication does include an English/Spanish disclosure, but all appli-cation forms are written as if the foreclosure action had already been filed, which may confuse borrowers.

New Expiration Period Created for an NOI Another critical change to the NOI is the creation of an expiration period. Effective August 1, 2019, once an NOI is sent, the lender has 180 days to file the foreclosure complaint. If the lender fails to meet the deadline a new NOI must be sent and the cure period, which is 30 days, for the borrower must be allowed to run before the complaint is filed. The statute does not contain any excep-tions or tolling language.

Statute of Limitations Shortened Related to Date of Default The legislature shortened the 20-year statute of limitations relating to

the date of default. The time frame is now six years from the date of default for mortgages originated on or after April 29, 2019. Also, effec-tive August 1, 2019, the Court may reinstate a foreclosure complaint dismissed without prejudice no more than three times. One caveat to this rule is that if the dismissal was caused by the lender’s obliga-tion to comply with federal laws or regulations then the related rein-statement of the complaint will not count toward the maximum num-ber of allowable reinstatements.

Counseling Now Mandatory to Participate in Mediation ProgramThe legislature also codified the Court’s foreclosure mediation pro-gram. Much of the structure and process will remain the same, but borrowers will be required to meet with a certified housing counselor and submit a certification of partic-ipation. If they do not participate in counseling they cannot participate in mediation.

Lenders who fail to mediate in good faith will be subject to civil penalties of up to $1,000 and other sanctions, including the borrower’s attorney’s fees. Also, lenders must be prepared to evaluate borrowers for most loss mitigation options including loan modification, loan workout, refinancing agreement, short sale, deed in lieu of foreclo-sure, and any agreement leading to the dismissal of the foreclosure

BY ROSEMARIE DIAMOND, ESQ. | PHELAN HALLINAN DIAMOND & JONES, PCUSFN MEMBER (FL, GA, NJ, PA)

14 | SUMMER 2019

SUMMER 2019 | 15

THE AUTHOR

RosemarieDiamond, Esq.

action. The mediation program will be funded through a $155 increase in the cost to file a foreclosure complaint.

Sheriff’s Sale Process Undergoes Multiple Changes The sheriff’s sale process is also undergoing significant changes. The sheriff will have 150 days to sched-ule a sale. This is up from 120 days. Also, the sale can only be postponed five times without a court order. Postponements will be allocated - two for the borrower, two for the lender, and one that the parties can mutually request. Postponements are lengthened from 14 days to 30 days. Lender’s counsel will be re-sponsible to prepare and provide the Sheriff’s Deed to the sheriff within 10 days of the sale. The sheriff has two weeks to deliver the deed, provided the bid has been paid.

Requirements for Municipal Notic-es Expanded The legislature also expanded the requirements for municipal notic-es. Contact information must be 1) sent to the municipal clerk and chief executive of the municipality; 2) filed with the foreclosure complaint; and 3) recorded with the Lis Pendens. If any of the information in the notice changes, the lender has 10 days to mail, file, and record the new notice. The notice must include full names, addresses, and telephone numbers for representatives responsible for receiving complaints and code viola-

tions and the full name and contact information for anyone retained by the lender for care, maintenance, security, and upkeep of a vacant and abandoned property. The notice must also contain the telephone number of an in-state represen-tative who can be contacted if the property becomes vacant and abandoned.

Limited Lien Priority Expanded Beyond Condo Associations The limited lien priority previously provided only to condominium as-sociations has been expanded to all common ownership communities except cooperative corporations. A qualifying limited priority lien is now cumulative, renewable annually for five years, and no longer subject to expiration after five years. Com-munity associations must provide a unit owner or a purchaser of the unit with a certificate of the amount due within 10 days of receiving a request. Any person who relies on the certificate, other than the owner, will be liable only for the amounts on the certificate.

Residential Mortgage Servicing Act Created The legislature created the Residen-tial Mortgage Servicing Act, authoriz-ing the Department of Banking and Insurance (“DOBI”) to oversee the li-censing and registration of mortgage servicers. There are exemptions to the Act as well as civil and criminal penalties for failure to comply.

Expedited Foreclosure Process Updated Lastly, the legislature changed certain aspects of the expedited foreclosure process enacted in 2008. The changes do not require lenders to expedite foreclosure, but if a lender chooses to do so and the Sheriff cannot expedite the sale then the lender must file a motion requesting appointment of a special master. Also, if the lender requests a properly supported, expedited foreclosure post-judgment then the Court must enter an order expe-diting the foreclosure and cannot require a hearing if the motion is uncontested.

As the industry sorts through the many changes enacted by the New Jersey legislature, it is recommend-ed lenders and their counsel work together to adjust statute of limita-tions management, timeline report-ing, and approvals for new proce-dures and the associated fees and costs. Over the course of the next year the full effects of the changes will emerge, and we will all gain a better understanding of the long-term impact on residential foreclo-sure process.

Report: Legal Issues

The New York Department of Financial Ser-vices (“DFS”) announced the creation of the Consumer Protection and Financial En-

forcement Division (“CPFED”) on April 29, 2019. In the press release, Linda Lacewell, the acting DFS Superinten-dent, stated that the CPFED would be a “powerhouse” that combines seven previously separate units and departments into one united division under the leadership of Katherine A. Lemire, the newly appointed Execu-tive Deputy Superintendent.

The seven departments that are now consolidated into the CPFED include the Enforcement Division, the Investigations and Intelligence Division, the Civil Investigations Unit, the Producers Unit, the Consum-er Examinations Unit, the Student Protection Unit, and the Holocaust Claims Processing Office.

Lacewell stated in the press release that the purpose of the CPFED is to protect and educate consumers against consumer fraud. In addi-tion, the department will enforce state and federal law with respect to banking, insurance, and financial services. The press release specifi-cally stated that the CPFED “is also responsible for developing investiga-tive leads and intelligence in further-ance of the Department’s efforts to

enforce the Banking, Insurance and Financial Services laws, with particu-lar focus on the review and response to cybersecurity events and the de-velopment of supervisory, regulatory and enforcement policy and direc-tion in the area of financial crimes.”

The creation of the CPFED appears to be a reaction to what is perceived by DFS as a policy shift within the Consumer Financial Protection Bu-reau (“CFPB”) to be friendlier to the financial services industry leaders. Notably, in January 2018, then DFS Superintendent, Maria Vullo said, “I am disappointed by the new admin-istration’s sudden policy shift, which is clearly intended to undermine necessary national financial services regulation and enforcement.”

Vullo further stated that “DFS remains committed to its mission to safeguard the financial services industry and protect New York con-sumers, and will continue to lead and take action to fill the increasing number of regulatory voids created by the federal government.”

Since January 2018, the scene and its players have changed dramat-ically. Specifically, Vullo left her position as DFS Superintendent, with Lacewood taking over, and the CFPB appointed Kathy Kraninger as its director in place of acting direc-tor Mick Mulvaney. This shakeup is expected to have a dramatic impact on the shape of both CFPB and DFS. As a result, mortgage servicers and their lawyers may be paying close

attention to the climate change and the affect that it will have on the foreclosure process.

In late 2016, New York State im-plemented new regulations with respect to vacant and abandoned properties, also known as “zom-bie-houses.” These regulations put greater requirements on lenders and mortgage servicers to secure and maintain vacant properties that are in foreclosure. In addition, the failure to comply came with the potential for substantial fines from DFS. The creation of the CPFED is likely to yield additional regulations in line with the zombie-house initiative, and as such, will likely lead to fore-closure actions being a prime focus of the division.

While it is hard to predict the di-rection of this newly created de-partment, it is expected to involve cybersecurity. DFS promulgated 23 NYCRR Part 500, a regulation estab-lishing cybersecurity requirements for financial services companies, which took effect March 1, 2017. These requirements may affect how the CPFED will focus its efforts on enforcing these regulations as DFS did with zombie-houses.

16 | SUMMER 2019

New York Announces Creation of Consumer Protection and Financial Enforcement DivisionBY MEGAN K. MCNAMARA, ESQ. | BERKMAN, HENOCH, PETERSON, PEDDY & FENCHEL, PCUSFN MEMBER (NY)

THE AUTHOR

Megan K.McNamara, Esq.

Report: REO/Eviction

allegation is denied, specific facts must be alleged showing where there was a failure to perform. Bank of New York Mellon v. Wojcik, 2019 IL App (1st) 180845, ¶ 20.

Further, relying on other Illinois decisions, the Wojcik Court stated, “[A] general denial to an allegation of the performance of a condition precedent in a contract is treated as an admission of that performance.” Bank of New York Mellon v. Wojcik, 2019 IL App (1st) 180845, ¶ 21. Accordingly, the Court refused to allow contradic-tion at the summary judgment stage and instead found that the defen-dants’ judicial admission in their an-swer as to the deemed allegations of the Complaint to Foreclose did not lead to an issue of fact, thereby af-firming the decision of the trial court denying defendants’ cross-motion for summary judgment.

SUMMER 2019 | 17

The Appellate Court of Illinois has offered guidance for practitioners in prosecuting mortgage fore-closure actions. The Court in

Bank of N.Y. Mellon v Wojcik, 2019 IL App (1st) 180845, was presented with the issue of whether the trial court erred in denying the defendants’ cross-motion for summary judgment in a foreclosure action concerning defendants’ condominium unit.

In answering the Complaint to Fore-close, defendants’ answer denied the deemed allegation found in 735 ILCS 5/15-1504(c)(9) that any and all notices of default or election to declare the indebtedness due and payable or other notices required to be given have been properly given. Bank of New York Mellon v. Wojcik, 2019 IL App (1st) 180845, ¶ 7.

In response, Bank of New York ar-gued that defendants had waived their argument because there were no specific facts raised to show how the condition precedent had not been met. In essence, Bank of New York utilized the requirements of Illinois Supreme Court Rule 133(c). As the Court in Wojcik found, Rule 133(c) requires when pleading a condition precedent, e.g., sending of a notice of default, that it is sufficient to allege that the party completed the con-ditions on their part and that if the

This opinion sent a strong lesson on Illinois Supreme Court Rule 133(c): “As our supreme court has recognized: “The rules of court we have promul-gated are not aspirational. They are not suggestions. They have the force of law, and the presumption must be that they will be obeyed and en-forced as written.” Bank of New York Mellon v. Wojcik, 2019 IL App (1st) 180845, ¶ 24 citing Bright v. Dicke, 166 Ill. 2d 204, 210, 652 N.E.2d 275, 209 Ill. Dec. 735 (1995).

In practice, it has been common for defendants’ answers to Complaints to Foreclose to include gener-al denials of deemed allegations, including the deemed allegation that required notices were sent. Often, when a party denies a deemed alle-gation, Illinois Courts have required plaintiffs, at the summary judgment stage, to establish that notices were sent, which makes this opinion particularly beneficial to plaintiffs in foreclosure matters. Adopting the approach in Wojcik in Illinois will im-prove judicial economy and ensure that cases are decided upon the merits rather than simply making a plaintiff jump through hoops after already establishing a prima facie case for foreclosure.

Illinois Court Finds General Denial as Admission of Condition PrecedentBY MARCOS POSADA, ESQ. | MCCALLA RAYMER LEIBERT PIERCE, LLCUSFN MEMBER (AL, CA, CT, FL, GA, IL, MS, NV, NJ, NY)

THE AUTHOR

A general denial to an allegation of the performance of a

condition precedent in a contract is treatment as an admission of that

performance.- Illinois Appellate Court

MarcosPosada, Esq.

California Supreme Court Limits Application of the State’s Anti-Deficiency Statute

In Black Sky Cap-ital, LLC v. Cobb1, the Supreme Court of California recently held that where a creditor holds two deeds of trust on the same property, a

nonjudicial foreclosure of the senior lien does not preclude the creditor from obtaining a monetary judgment on the extinguished junior lien, where there is no allegation of evasive loan splitting or other “gamesmanship scenarios.”

California’s anti-deficiency statute2 prohibits a creditor from collecting a deficiency judgment — that is, the difference between the amount of in-debtedness and the fair market value of the property — following a nonjudi-cial foreclosure, even if the property is sold for less than the amount of the outstanding debt.

For the past 20 years, the leading case on this topic has been Simon v. Supe-rior Court3, which held that “where a creditor makes two successive loans secured by separate deeds of trust on the same real property and forecloses under its senior deed of trust’s power of sale, thereby eliminating the secu-rity for its junior deed of trust, Section 580d [California’s anti-deficiency stat-ute]…bars recovery of any ‘deficiency’ balance due on the obligation the junior deed of trust secured.” Thus, a creditor that forecloses on its senior

deed of trust is precluded from any recovery for the amount owing under the junior deed of trust. There have been several cases following the rea-soning provided in Simon, as did the trial court in this case.

However, both the Court of Appeal and Supreme Court of California disagreed with this reasoning, instead concluding that although the lien-holder is the same for the senior and junior, “[a]ny debt owed on the junior note in this case has no relationship to the debt owed on the senior note.”4 The Supreme Court noted that the language of section 580d makes clear that it was only intended to prevent a deficiency judgment on the deed of trust securing the note that was foreclosed, and not under some other deed of trust. Therefore the anti-de-ficiency analysis should only apply to the senior deed of trust.

It is important to keep in mind, however, that the Supreme Court’s decision was driven in part by the factual scenario presented in the case. The Court noted that “in Simon, the junior and senior loans were issued just four days apart, and the deeds of trust securing the loans were recorded on the same date.” But in this case, the loans were issued more than two years apart and there was no “evidence of gamesmanship” or “loan splitting.” Therefore, the loans were treated separately, and since no sale occurred under the junior deed of trust, the statute does not bar a

deficiency judgment with respect to the note it secured.

Although this case brings some clarity to the issue, it should not be relied upon blindly. The Court spent time reflecting that it has “consistently looked to the purposes of the statute and to the substance rather than the form of loan transactions in deciding the … applicability [of antideficiency statutes].” And although this case was distinguishable from Simon, the opinion cautions against “games-manship scenarios” or where there is clear evidence of intentional loan splitting. Thus, when a creditor holds both senior and junior deeds of trust, a case-by-case analysis should be undertaken to determine whether it is permitted to sue for judgment on the note secured by the junior deed of trust after completion of a nonjudicial foreclosure on the senior.1 Black Sky Capital, LLC v. Cobb (2019) 7 Cal.5th 156.2 Code of Civil Procedure Section 580d3 Simon v. Superior Court (1992) 4 Cal.App.4th 63, 66.4 Black Sky, at p.8975 Simon, supra, 4 Cal.App.4th at p. 66.6 Coker v. JPMorgan Chase Bank, NA (2016) 62 Cal.4th 6678, 676.

BY MELISSA COUTTS, ESQ. & ANDREW J. BOYLAN, ESQ. | MCCARTHY & HOLTHUS, LLPUSFN MEMBER (AZ, CA, CO, ID, NM, NV, OR, TX, WA)

18 | SUMMER 2019

Report: Legal Issues

THE AUTHORS

MelissaCoutts, Esq.

Andrew J.Boylan, Esq.

Report: Legal Issues

In May, the Fifth District Court of Appeal granted certiorari relief to U.S. Bank, quashing a cir-cuit court’s order compelling the bank to produce a specific person

for an out-of-state deposition in a residential foreclosure action (U.S. Bank Nat’l Ass’n as Tr. for Certificate-holders of Structured Asset Mortgage Investments II, Inc., Bear Stearns Arm Tr., Mortgage Pass-Through Certifi-cates, Series 2006-2 v. Williamson).

In Williamson, the bank-initiated foreclosure proceedings against the Williamsons by filing a veri-fied complaint. Five years into the litigation, the bank filed an amend-ed complaint which “was verified by Nicholas Raab, an employee of Bank’s loan servicer…”

The borrowers sought to depose Mr. Raab and moved to have him “treated as the Bank’s ‘corporate of-ficer’” under Fla. R. Civ. P. 1.310(b)(6), but the bank objected. The request-ed designation as corporate officer was significant for two reasons:

1. If Mr. Raab was designated as U.S. Bank’s corporate representa-tive, the bank would be required to produce Mr. Raab for depo-sition in Orange County, Florida, where the bank filed the foreclo-sure action. Mr. Raab lived and worked in Colorado.

2. If deemed U.S. Bank’s cor-porate representative, Mr. Raab would be required to testify re-gardless of his familiarity with the specifics of the Williamsons’ loan or U.S. Bank’s records, policies, and procedures. Notwithstanding the clear language of rule 1.310((b)(6) which gives the bank authority to designate its own corporate representative, the circuit court granted the Williamsons’ motion to compel. The bank sought cer-tiorari relief from the Fifth District Court of Appeal.

Certiorari relief is rarely sought and even more rarely granted. Appellate courts seldomly grant certiorari relief because it pertains only to non-final orders which can be in-corporated into a plenary appeal of a final order. Review of non-final or-ders can lead to piecemeal litigation which the courts understandably seek to avoid.

Notwithstanding, if a party can demonstrate the lower court de-parted “from the essential require-ments of the law” and that said departure will result in “material injury…throughout the remainder of the proceedings below” the Court may grant certiorari relief. The District Court of Appeal concluded the order compelling Mr. Raab to appear for deposition in Florida as the bank’s designated corporate representative constituted such a departure.

The District Court of Appeal pointed out that Mr. Raab was not a party to the litigation and was not employed by U.S. Bank but rather the bank’s loan servicer, “a separate corporate entity.” Although the bank would be required to produce its corpo-rate representative for deposition in Florida under rule 1.310(b)(6), the borrowers were not permitted to unilaterally designate Mr. Raab as the bank’s corporate representative.

The Court explained that only the bank had the authority to designate who would testify at the deposi-tion on the corporation’s behalf. The Court granted certiorari, quashed the order compelling Mr. Raab to appear for the deposition in Florida and the order was final on May 26, 2019.

This ruling is appropriate and con-sistent with the way the servicing industry operates. Considering the number of servicing staff that touch loans being serviced, it would be untenable to allow an opposing party to select who should testify as the corporate witness. The law simply does not support such a position.

Fifth District Court Holds Bank Entitled to Designate Corporate Representative for DepositionBY ROY DIAZ, ESQ. | SHD LEGAL GROUP, PAUSFN MEMBER (FL)

THE AUTHOR

RoyDiaz, Esq.

SUMMER 2019 | 19

USFN recently debuted a new event, USFNdustry Forum, in Nashville, Tennessee. The event, held June 3-5, featured a wide range of key-note speakers, panel discussions and networking opportunities for USFN’s attorney and associate members, as well as attendees from a number of mortgage servicing companies. USFNdustry Forum replaces USFN’s yearly Loan Management & Servicing Seminar event.

More than 140 attorney and associate members, servicers and GSEs regis-tered for the inaugural USFNdustry Forum and the education-focused event featured networking oppor-tunities, keynote speakers, breakout discussions and learning lounges.

Keynote topics and speakers for this year’s event included violinist Kai Kight

Held at the Hurst, Texas Convention Center next to the USFN offices April 9-10, over 55 attorneys from USFN member firms and more than 75 servicers registered for the two-day USFNstruct regional training event. Sessions focused on bank-ruptcy and foreclosure and includ-ed two sections labeled “Building Blocks” and “Road Blocks.” Building Blocks focused on general, initial processing, average or expected timelines, judicial and nonjudicial milestones, and file closings. Road blocks captured the bumps, detours, and delays a typical file may face.

USF N Events

covering innovative ways to view change, new approaches to cyberse-curity from Kim Bilderback, director of AT&T Cybersecurity Solutions and author Jessica Pettitt discussing im-proving communications and rela-tionships in the workplace.

Continuing Legal Education (CLE) hours were available for attending breakout sessions covering bank-ruptcy, foreclosure and operations, and session titles included “Loss Mitigation Today - Including the Impact of SII” and “Post-Foreclosure Sale Survival Guide.” Panel discus-sions on the recent Obduskey v. McCarthy & Holthus LLP Supreme Court decision and working with gov-ernment-sponsored enterprises and were also available for CLE credit.

Struct

During the event, USFN announced that the next

USFNdustry Forum will take place in San Antonio, Texas,

June 2-4, 2020.

Photo Credit: Sandy Marak, Sandy Marak Photography

20 | SUMMER 2019

SUMMER 2019 | 17

AlabamaBrock & Scott, PLLC (910) 392-4988 McCalla Raymer Leibert Pierce, LLC (205) 216-4238McFadden, Rouse & Bender, LLC (251) 342-9172Sirote & Permutt, PC (205) 930-5100

ArizonaBarrett Daffin Frappier Turner & (972) 386-5040Engel, LLP McCarthy & Holthus, LLP (619) 243-3964The Mortgage Law Firm, PC (619) 465-8200Tiffany & Bosco, PA (602) 255-6000

ArkansasMickel Law Firm, PA (501) 664-4808Wilson & Associates, PLLC (501) 219-9388

CaliforniaAldridge Pite, LLP (858) 750-7600Barrett Daffin Frappier Turner & (972) 386-5040Engel, LLP McCalla Raymer Leibert Pierce, LLC (562) 983-5360McCarthy & Holthus, LLP (619) 243-8402The Mortgage Law Firm, PC (619) 465-8200The Wolf Firm, A Law Corporation (949) 480-1764Tiffany & Bosco, PA (602) 255-6000

ColoradoBarrett Daffin Frappier Turner & (972) 386-5040Engel, LLP Barrett Frappier & Weisserman, LLP (303) 350-3711Halliday, Watkins & Mann, PC (469) 323-8566McCarthy & Holthus, LLP (619) 243-8402Weinstein & Riley, PS (303) 539-8607

ConnecticutBendett & McHugh, PC (860) 677-2868Brock & Scott, PLLC (401) 217-8701 McCalla Raymer Leibert Pierce, LLC (860) 808-0606

DelawareOrlans, PC (302) 854-0380The Alba Law Group, PA (443) 541-8650

District of ColumbiaBWW Law Group, LLC (301) 469-3510Cohn, Goldberg & Deutsch, LLC (410) 296-2550Orlans, PC (703) 777-6403Rosenberg & Associates, LLC (301) 907-8000Samuel I. White, PC (757) 457-1442

FloridaBrock & Scott, PLLC (910) 392-4988 McCalla Raymer Leibert Pierce, LLC (407) 674-1850Phelan Hallinan Diamond & Jones PC (770) 393-4300SHD Legal Group, PA (954) 564-0071Sirote & Permutt, PC (407) 712-9202

GeorgiaAldridge Pite, LLP (404) 994-7400Barrett Daffin Frappier Turner & (972) 386-5040Engel, LLP Brock & Scott, PLLC (910) 392-4988 McCalla Raymer Leibert Pierce, LLC (678) 281-3950Phelan Hallinan Diamond & Jones PC (770) 393-4300

HawaiiAldridge Pite, LLP (858) 750-7611Clay Chapman Iwamura Pulice & (808) 535-8406Nervell Leu Okuda & Doi (808) 538-1921The Mortgage Law Firm, PC (619) 465-8200

IdahoAldridge Pite, LLP (858) 750-7605Halliday, Watkins & Mann, PC (469) 323-8566Lundberg & Associates, PC (801) 263-3400McCarthy & Holthus, LLP (206) 596-4843The Wolf Firm, A Law Corporation (949) 480-1764Weinstein & Riley, P.S. (307) 462-2690

IllinoisAnselmo Lindberg & Associates, LLC (630) 453-6153McCalla Raymer Leibert Pierce, LLC (312) 476-5156

IndianaDoyle & Foutty, PC (317) 264-5000Feiwell & Hannoy, PC (317) 237-2727

IowaPetosa Law, LLP (515) 222-9400SouthLaw, PC (913) 663-7600Walentine O’Toole, LLP (712) 388-2244

KansasMartin Leigh PC (913) 685-3113Millsap & Singer, LLC (636) 537-0110SouthLaw, PC (913) 663-7600

KentuckyDoyle & Foutty, PC (317) 264-5000Lerner, Sampson & Rothfuss (513) 412-6615Millsap & Singer, LLC (636) 537-0110Reimer Law Co. (502) 371-1510

LouisianaDean Morris, L.L.C. (318) 388-1440

MaineBendett & McHugh, PC (860) 677-2868Brock & Scott, PLLC (401) 217-8701

MarylandBrock & Scott, PLLC (401) 217-8701BWW Law Group, LLC (301) 469-3510Cohn, Goldberg & Deutsch, LLC (410) 296-2550

Maryland (continued)Orlans, PC (703) 777-6403Samuel I. White, PC (757) 457-1442The Alba Law Group, PA (443) 541-8600

MassachusettsBendett & McHugh, PC (860) 255-5003Brock & Scott, PLLS (401) 217-8701Harmon Law Offices, PC (617) 558-8411Orlans, PC (781) 790-7800

MichiganBrock & Scott, PLLC (910) 392-4988Orlans, PC (248) 502-1500Trott Law, PC (248) 642-2515

MinnesotaTrott Law, PC (651) 209-9776Usset, Weingarden & Liebo, PLLP (952) 925-6888Wilford Geske & Cook, PA (651) 209-3300

MississippiDean Morris, LLC (318) 330-9020McCalla Raymer Leibert Pierce, LLC (662)388-5464Mickel Law Firm, PA (501) 664-4808Underwood Law Firm, PLLC (601) 981-7773 Wilson & Associates, PA (501) 219-9388

MissouriMartin Leigh, PC (816) 221-1430Millsap & Singer, LLC (636) 537-0110SouthLaw, PC (913) 663-7600

MontanaHalliday, Watkins & Mann, PC (469) 323-8566Lundberg & Associates, PC (801) 263-3400Mackoff Kellogg Law Firm (701) 456-3210

NebraskaEric H. Lindquist, PC, LLO (402) 829-0400SouthLaw, PC (402) 342-4644Walentine O’Toole, LLP (402) 330-6300

NevadaBarrett Daffin Frappier Turner & (972) 386-5040Engel, LLP McCalla Raymer Leibert Pierce, LLC (562) 983-5360McCarthy & Holthus, LLP (619) 243-8402Tiffany & Bosco, PA (602) 255-6006

New HampshireBendett & McHugh, PC (860) 255-5003Brock & Scott, PLLC (401) 217-8701 Harmon Law Offices, PC (617) 558-8400Orlans, PC (781) 790-7824

New JerseyKML Law Group, PC (215) 825-6332

Member Directory

22 | SUMMER 2019

Members listed alphabetically within each state

SUMMER 2019 | 23

New Jersey (continued)McCalla Raymer Leibert Pierce, LLC (732) 902-5387Phelan Hallinan Diamond & Jones PC (856) 813-5500Powers Kirn, LLC (856) 802-1000Schiller, Knapp, Lefkowitz & Hertzel, LLP (518) 786-9069

New MexicoMcCarthy & Holthus, LLP (206) 596-4843Tiffany & Bosco, PA (602) 255-6000Weinstein & Riley, P.S. (307) 462-2690

New YorkAldridge Pite, LLP (631) 768-8420Berkman, Henoch, Peterson, Peddy & (516) 222-6200Fenchel, PC Druckman Law Group PLLC (516) 876-0800McCalla Raymer Leibert Pierce, LLC (732) 902-5388Schiller, Knapp, Lefkowitz & Hertzel, LLP (518) 786-9069

North CarolinaBrock & Scott, PLLC (336) 354-1200Hutchens Law Firm, LLP (910) 864-6888

North DakotaHalliday, Watkins & Mann, PC (469) 323-8566Mackoff Kellogg Law Firm (701) 227-1841

OhioBrock & Scott, PLLC (910) 392-4988 Lerner, Sampson & Rothfuss (513) 241-3100Reimer Law Co. (440) 600-5500

OklahomaBaer & Timberlake, PC (405) 842-7722Kivell, Rayment & Francis, PC (918) 254-0626The Mortgage Law Firm, PC (619) 465-8200

OregonAldridge Pite, LLP (619) 326-2402McCarthy & Holthus, LLP (206) 596-4843The Mortgage Law Firm, PC (619) 465-8200The Wolf Firm, A Law Corporation (949) 480-1764Weinstein & Riley, PS (206) 269-3490

PennsylvaniaKML Law Group, PC (215) 825-6332Phelan Hallinan Diamond & Jones, LLP (215) 556-3700Powers Kirn, LLC (856) 802-1000Vitti Law Group, Inc. (412) 281-1725

Rhode IslandBendett & McHugh, PC (860) 255-5003Brennan, Recupero, Cascione, (401) 453-2300Scungio & McAllister, LLP Brock & Scott, PLLC (401) 272-1400Harmon Law Offices, PC (617) 558-8474Orlans, PC (781) 790-7824

South CarolinaBrock & Scott, PLLC (910) 392-4988 Hutchens Law Firm, LLP (803) 726-2700Scott & Corley, PA (803) 252-3340

South DakotaHalliday, Watkins & Mann, PC (469) 323-8566Mackoff Kellogg Law Firm (701) 456-3210

TennesseeBrock & Scott, PLLC (910) 392-4988Mickel Law Firm, PA (501) 664-4808Wilson & Associates, PLLC (901) 578-9914

TexasBarrett Daffin Frappier Turner & (972) 386-5040Engel, LLP Bonial & Associates, PC (972) 643-6600McCarthy & Holthus, LLP (619) 243-3964Mickel Law Firm, PA (501) 664-4808

UtahAldridge Pite, LLP (619) 326-2402Halliday, Watkins & Mann, PC (801) 990-3711Lundberg & Associates, PC (801) 263-3400Weinstein & Riley, PS (702) 504-6434

VermontBendett & McHugh, PC (860) 677-2868Brock & Scott, PLLC (401) 217-8701Schiller, Knapp, Lefkowitz & Hertzel, LLP (518) 786-9069

VirginiaBrock & Scott, PLLC (910) 392-4988 BWW Law Group, LLC (301) 469-3510Orlans, PC (703) 777-6403Samuel I. White, PC (757) 490-9284Shapiro & Brown, LLP (703) 449-5800

WashingtonAldridge Pite, LLP (619) 326-2401McCarthy & Holthus, LLP (206) 596-4843The Mortgage Law Firm, PC (619) 465-8200The Wolf Firm, A Law Corporation (949) 480-1764Weinstein & Riley, PS (800) 349-3739

West VirginiaPill & Pill, PLLC (304) 263-4971Samuel I. White, PC (757) 457-1442Reimer Law Co. (502) 371-1510

WisconsinGray & Associates, LLP (414) 224-8404Velnetske Law Offices, LLC (262) 241-9339

WyomingHalliday, Watkins & Mann, PC (469) 323-8566Lundberg & Associates, PC (801) 263-3400Weinstein & Riley, PS (307) 462-2690

a360inc (813) 466-1100Affinity Consulting Group (727) 544-5400Auction.com, LLC (949) 639-3536CaseMax (844) 679-2273Firefly Legal (708) 326-1410First American Mortgage Solutions, LLC (714) 250-7796Five Brothers Asset Management Solutions (586) 772-7600Mortgage Connect, LP (855) 595-3563National Field Representatives, Inc. (800) 639-2151NetDirector (813) 774-4797PERFECT PRACTICE/ADC Legal (407) 843-8992Systems, Inc.ProVest, LLC (813) 877-2844Quality Claims Management Corp. (619) 450-8602Safeguard Properties Management, LLC (216) 739-2900ServiceLink (800) 777-8759Shea Barclay Group, Inc. (813) 251-2580

ASSOCIATE MEMBERS

Diversity & InclusionSally E. Garrison, Esq.

EducationJames E. Clarke, Esq.

FC Resources & PublicationsKayo Manson-Tompkins, Esq.

Finance/AuditAndrew W. Saag, Esq.

MarketingBrian Vaughn

MembershipThomas P. Dore, Esq.

BankruptcyMichael J. McCormick, Esq.

Legal IssuesRobert Wichowski, Esq.

REO/EvictionMike Anselmo, Esq.

STANDING COMMITTEE & SECTION CHAIRS

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