Litigation Servicing

8/3/2019 Litigation Servicing

1/19

Litigation Forum - LitigationInvolving Servicing

MBA Regulatory Compliance Conference / September 2011

Standing, Affidavits & Other

Procedural Challenges

Leah Getlan

Assistant General Counsel

Capital One


2/19

2

Introduction

RealtyTrac reports August 2011as 11th consecutive month of

year over year activity decreasein foreclosures

August foreclosure filings down33% from previous year

But uptick in mortgage defaultsoverall, and first time defaultnotices at nine month high lastmonth (up 33% from previousmonth)

Are Lenders Starting to PushThrough After Foreclosure

Delays?

How Will This Affect LitigationVolume?


3/19

3

IntroductionPassing the SATs

Standing

Affidavits

Technical Violations of State Law


4/19

4

Standing

Lender or Assignee Must Prove Ownership or

Possession of the Note to Bring ForeclosureAction

Complications:

MERS

Defective Assignments

Lost Notes / Assignments

Pooling and Servicing Agreements /Securitizations


5/19

5

Standing

U.S. Bank National Association v. Ibanez

(Mass. Jan. 7, 2011) Foreclosure sale void where securitization

trustee cannot provide valid assignment of loanpre-foreclosure

Securitization agreement / executed purchase& sale agreement with related schedulesattached can establish right to foreclose, even if

no recordation in land records


6/19

6

Standing

US Bank v. Congress (Cir. Ct. Ala., Feb. 23,

2011)

Trustee of securitized trust has standing tobring foreclosure if it holds the Note; party does

not have to own the Note to have standing

Listing of loan on PSA schedules evidence that

loan transferred timely into trust

Borrower does not have standing to invoke

PSA choice of law provision


7/19

7

Standing

Deutsche Bank National Trust Co. v.

Mitchell(N.J. Super. App. Div, Aug. 9, 2011)

Foreclosing Plaintiff lacked standing when itinitiated foreclosure action one day before ittook assignment of the mortgage

Amended pleading could not cure standingdefect

Must own or possess the note to have standing


8/19

8

Standing - MERS

Cervantes v. Countrywide Home Loans

Inc, et al. (9th Cir. (Ariz.), Sept7, 2011)

9th Circuit affirmed dismissal with prejudice of putativeclass action against MERS for conspiracy to commit fraud

Security Instrument discloses the role and rights of MERSand plaintiff signed the contract and agreed to terms

Borrowers suffered no injury as a result of MERS asbeneficiary (e.g. terms of loan, ability to repay or ability tomodify loan terms)


9/19

9

Standing - MERS

Jenkins v. McCalla Raymer(N.D. Ga., Aug. 31,2011)

Court dismissed putative class action and rejectedtheory that MERS assignment of SIs fraudulent

Henderson v. MERS(Ala. , Sept. 9, 2011)

As mortgagee and nominee of the originating

lender, MERS has legal right to enforce terms ofthe mortgage, including foreclosure rights


10/19

10

Standing - MERSDallas County v. Merscorp Inc., et al(Dallas County,

TX) Lawsuit brought by Dallas County D.A. alleging MERS

tracking system violates Texas law

BofA sued as shareholder of MERS for allegedly knowing

the system would cause improper filing in Texas

Residential Funding Co. LLC v. Saurman (Mich. App.,April 21, 2011)

MERS cannot foreclose by advertisement under Michiganlaw because it did not own the requisite interest in the debt

Contractual provisions providing right to foreclose toMERS could not override state law requirements


11/19

11

Affidavits


12/19

12

Affidavits

Witnesses must have knowledge of the facts to which they

are attesting Assertions should be supported by the evidence

Complications:

Overuse and inappropriate use of phrase personalknowledge

Delegated review of business records & accountinformation

Missing or defective documentation Delegated signatories


13/19

13

Affidavits

Glarum v. LaSalle Bank, N.A. (Fla. 4thDCA,

Sept. 7, 2011) Servicers foreclosure affidavit containing

payment information from prior servicerconstituted inadmissible hearsay

Business records exception to hearsay did notapply where affiant did not know who how orwhen data entries made and could not verify

that the entries were correct


14/19

14

Affidavits

Deutsche Bank National Trust Company v.Hansen (Ohio App., March 10, 2011)

Foreclosure affidavit confirming unpaid balance andinterest rate and attaching screen shot from system

did not meet business records exception to hearsaywhere affiant did not know who entered informationinto system and how the information was collectedand compiled

To authenticate business records must be sufficientlyfamiliar with business operations and circumstancesof records preparation, maintenance & retrieval


15/19

15

Other Issues & Challenges

Vacant Property Laws & Lawsuits

City of LA v. Deutsche Bank City of Chicago vacant property bill

Foreclosure Prevention Mediations

Pasillas v. HSBC Bank USA Sanctions appropriateagainst lender for failure to strictly comply withForeclosure Mediation Program requirements regardingdocumentation and personal attendance by someone

authorized to modify loan


16/19

16

FDCPA Case of Note

Atwood v. Johnson, Rodenburg & Lauinger, PLLP(D. Minn, August 1, 2011)

Class cert denied in lawsuit claiming second collection letterdemanding immediate payment sent after debt validation letterviolated FDCPA by overshadowing right to challenge validity of the

debt

Court found individual question existing as to when second letterreceived by each borrower

Plaintiff failed to meet Rule 23(b)(3) because based on estimated sizeof class and FDCPA limit for class recovery, individual borrowers couldrecover $1000 statutory damages plus actual damages individually vs.$7.43 as a class


17/19

17

Tips From The Trenches

Get it right from the beginning

Bad facts make bad law - Dont litigate with badfacts

Have witnesses personally review loan level data,understand where it comes from & be comfortablewith the facts


18/19

18


Fully Engage in Loss Mitigation Discussions

Early To Avoid Unnecessary Delays & Costs

Document The Process

Set Firm Deadlines and Expectations

Always keep long term goals and the big picture inmind


19/19

19


Hold high standards for foreclosure,

eviction & bankruptcy proceedings

Expediency should not be the only priority dont letthe need for speed cloud judgment

Your reputation is on the line always

Documents

Litigation Servicing