Judge Maltese Gives Homeowner a Another Chance to Answer

By:       Kate Cavallaro and Nicholas Moccia, Esq.

            Law Offices of Robert E. Brown, P.C.

            In HSBC Mtge. Corp. (USA) v. Enobakhare, 2010 NY Slip Op 31925(U)(Sup. Ct. Richmond County 2010), Plaintiff HSBC seeks summary judgment dismissing the Defendant homeowner’s answer and granting Plaintiffs application for an Order of Reference.  HSBC commenced the instant foreclosure action in January of 2009 and the homeowner entered an answer pro se in February of the same year.  Later in 2009 defendant homeowner retained counsel, and new counsel filed a motion for leave to amend the original answer on behalf of the homeowner. 

            HSBC argues that it is entitled to summary judgment dismissing the Defendant homeowner’s answer in its entirety because HSBC has provided the mortgage, note, proof of assignment of the note and mortgage and evidence of the Defendant’s default.  The Court notes that a ruling on a summary judgment in this matter was not yet “ripe for decision and must be denied with leave to renew,” since a mandatory settlement conference has not been held as required by CPLT 3408.  CPLR § 3408 provides that “in any residential foreclosure action involving a high-cost home loan…, or a subprime or nontraditional home loan, … in which the defendant is a resident of the property subject to foreclosure, the court shall hold a mandatory conference within sixty days after the date when proof of service is filed with the country clerk, … for the purpose of holding settlement discussions pertaining to the relative rights and obligations of the parties under the mortgage loan documents, including, but  not limited to determining 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 amount may be modifies or other workout option may be agreed to, and for whatever other purpose the court deems appropriate.” Once a settlement conference has been held pursuant to CPLR 3408, the plaintiff may renew its summary judgment motion if applicable. 

            The Defendant seeks leave to serve an amended answer to the Plaintiff’s complaint which includes several affirmative defense and counterclaims that were previously unasserted.  “Leave to amend pleasing is a discretionary matter that is generally favorably exercised in the absence of prejudice or surprise or unless it appears that the proposed amendment plainly lacks merit.”  In this matter, the Court opined that the homeowner’s proposed affirmative defenses may have merit and the Plaintiff has failed to show surprise or prejudice due to the Defendant’s delay in asserting the affirmative defenses.  Since Plaintiff HSBC has not established that it will be prejudiced by allowing the Defendant to serve an amended answer and the proposed affirmative defenses may have merit, the Court held that it is within the Court’s discretion to permit the Defendant to submit an amended answer. 

            The Plaintiff also argues against the Defendant’s attempt to include certain affirmative defenses that the Plaintiff claims have been waived (pursuant to CPLR 3211) since the Defendant failed to allege them in its original answer.  The Court notes that while the affirmative defenses should have been raised in the original answer, defenses that are ordinarily waived under CPLR 3211 “can nevertheless be interposed in an answer amended by leave of court… so long as the amendment does not cause the other party prejudice or surprise resulting directly from the delay.”  For this reason the Court permitted the Defendant to include the affirmative defenses that were allegedly waived for failure to raise them in the original answer. 

            Accordingly, Judge Maltese denied Plaintiff HSBC’s motions for summary judgment and for the dismissal of Defendant’s Answer is denied with leave to amend upon completion of a mandatory settlement conference; and Judge Maltese further ordered that Defendant’s motion for leave to serve an amended answer was granted.  Lastly, Judge Maltese ordered that all parties appear for a mandatory settlement conference pursuant to CPLR § 3408. 

             

Warning to Homeowners in Foreclosure, “Comply or the Court will Deny”

By:       Kate Cavallaro and Nicholas Moccia, Esq.

            Law Offices of Robert E. Brown, P.C.

Recently, Judge Joseph J. Maltese of the Richmond County Supreme Court, denied a defendant homeowner’s motion to vacate a judgment of foreclosure and sale because of the Defendant’s failure to comply and facilitate the mediation process held by the Courts.  See Central Mtg. Co. v. Elfassy, 2010 NY Slip Op 31926 (U)(Sup. Ct. Richmond County 2010).  The homeowner began defaulting on her loan in late 2008 when the homeowner failed to make any payments.  Plaintiff subsequently accelerated the mortgage and brought an action to foreclose its mortgage by filing a summons and complaint in May of 2009.  The homeowner’s first mistake in dealing with this foreclosure action was her failure to file an answer to the banks’ summons and complaint.  It appears that the homeowner was also properly served with the summons and complaint and, therefore, the Court noted that the homeowner did not otherwise have a reasonable excuse for her failure to answer.  Despite the fact that the defendant homeowner failed to appear in the foreclosure action, discussions between the parties occurred thought the proceedings with regard to the potential for a loan modification.  The homeowner also made an application for hardship assistance, yet, failed to provide the plaintiff Bank with requisite documentation and proof of hardship.  Additionally, two separate conferences were held, in which the court acted as mediator.  Judge Maltese notes that “despite the court’s suggestion as to what documents to bring … [Defendant] failed to bring the documents to court for either of the conferences.” He further notes that the conferences and separate discussions between the parties never resulted in a loan modification.

            The Defendant homeowner argued, among other things, that Defendant was entitled to vacate the default judgment and that the Court should have granted the Defendant an extension of time to appear or enter a pleading in this case.  In its decision, the Court notes that “in order to vacate a default judgment …the defendant must establish both a reasonable excuse for default and a meritorious defense.”  Here, the Court observed that the homeowner failed to provide any excuse for her failure to appear in the action prior to the entry of default.  Since the homeowner “has failed to offer a reasonable excuse for her default, the Default Judgment of Foreclosure and Sale cannot be vacated.”   Furthermore, the Court does note that “there is a string public policy to resolve cases on the merits, rather than on default, [Defendant] fails to set forth a reasonable excuse for default and a meritorious defense.”  Judge Maltese clarifies that while the Court is not unsympathetic to the home homeowner’s situation, that sympathy does not justify setting aside a duly entered judgment absent some showing of a reasonable excuse for default and a meritorious defense. 

            This action is a prime example of how a homeowner cuts off potential avenues of relief and hopes of loan modifications by simply failing to take the appropriate measures to address an impending foreclosure.  Had the homeowner initially entered an answer in this action or at the very least complied with the document requests from the Court, the homeowner may have a much greater opportunity of mitigating her losses and/or securing a loan modification from the bank.  Unfortunately, this homeowner’s inattention and non-compliance has caused the Court, despite its sympathies to the homeowner, to deny Defendant homeowner’s motion in its entirety and affirm the Plaintiff bank’s default judgment of foreclosure and sale. 

Nassau County Court seeks to sanction Steven J. Baum, P.C. for irregularities in foreclosure eviction

 By Kate Cavallaro and Nicholas M. Moccia, Esq.

      Law Offices of Robert E. Brown, P.C.

Petitioner Federal Home Loan Mortgage Corporation ("FHLMC") commenced a holder-over proceeding to evict Respondent Paul Raia from his home. The underlying eviction stems from the foreclosure brought by Well Fargo Home Mortgage, Inc. (“Wells Fargo”), resulting in the sale of the Paul Raia’s home (“Subject Premises”). At the sale, Petitioner Federal Home Loan purported to be the successful bidder and the rightful occupant of the Subject Premises. However, the court found that this was not in fact the case.

A later examination of the documents submitted in support of FHLMC’s petition indicated that Wells Fargo was the actual lender that had a security interest in the Subject Premises. Additionally, it was revealed that a number of the sworn allegations that were asserted in the petition were false. Specifically, the court took issue with certain representations made by the law office of Steven J. Baum, P.C. regarding FHLMC’s right to evict Paul Raia post-auction. The court held that it “will hold a hearing to determine what sanctions if any, that may be imposed upon Steven J. Baum, P.C. for the false representations made in the petition,” as counsel for FHLMC’s.

The court found that Wells Fargo—and not FHLMC—was the successful bidder at the foreclosure auction of the Subject Premises. However, FHLMC claims that Wells Fargo assigned its auction bid to FHLMC. Upon examination of “Assignment of Bid” document, the court noted that it contained the signature of an attorney from Steven J. Baum, P.C., although there was no indication on whose behalf the firm was signing. “Mr. Baum’s office claims to have the authority to execute the document for Wells Fargo but provides no evidence in support of that allegation.” Respondent asserts that the "Assignment of Bid" is invalid and ineffective because it is not executed by Wells Fargo, thus FHLMC never acquired title to the bid, the collateral, or the right to the possession of the cooperative apartment, and Petitioner lacks standing to institute this proceeding. The firm of Steven J. Baum, P.C. alleges to have the authority to assign the bid on behalf of Wells Fargo because the firm represented Wells Fargo in the cooperative foreclosure sale on January 5, 2010. However, neither a power of attorney to Steven J. Baum, P.C. nor a supporting affidavit from Wells Fargo was presented with the "Assignment of Bid." For this reason the Court found the assignment invalid.

This court granted Respondent Raia’s motion dismissing the holdover proceeding with prejudice due to the finding that FHLMC lacked a possessory interest in the subject premises. As noted earlier, the Court has also set a date for a hearing to determine what, if any, sanctions should be imposed against the law firm of Steven J. Baum, P.C., for the false statements made in the original petition. 

See Federal Home Loan Mtge. Corp. v Raia, 2010 NY Slip Op 51287(U), (District Court Nassau County, 2010).

Financial Freedom SFC v. Slinkosky, Supreme Court Suffolk County

By Kate Cavallaro

     Law Offices of Robert E. Brown, P.C.

The plaintiff commenced this action on March 26, 2009 to recover loan proceeds allegedly given pursuant to an agreement to obtain a Home Equity Conversion Mortgage loan [i.e. a reverse mortgage] on the Defendant’s home. The plaintiff alleges that it advanced monthly funds to William Slinkosky totaling $297,344.08 and that upon his death, his estate failed to pay the note that came due as required under the terms of the note and mortgage. The defendants answered asserting a defense of unconscionability and unclean hands; alleging that the Plaintiff engaged in predatory lending practices and schemes, both by unreasonably inducing the homeowner to enter into the mortgage and because the loan origination fee exceeded the maximum allowable fee. 

The plaintiff now moved for summary judgment. “A plaintiff seeking foreclosure must establish that it was the owner or holder of the note and mortgage at the time that it commenced the foreclosure action.  See, Mortgage Elec. Registration Sys. v. Coakley, 41 AD3d 674 (2nd Dept., 2007); Federal Natl. Mtge. Assn. v. Youkelsone, 303 AD2d 546 (2nd Dept., 2003); see also, Wells Fargo Bank, N.A. v. Marchione, 69 AD3d 204 (2nd Dept., 2009)).

Here, the plaintiff sought to foreclose the first mortgage but failed to submit a copy of the first note.  The estate that now represents the homeowners also moved for summary judgment. 

“According to the plaintiff's attorney, the Slinkosky house was appraised at $375,000.00, two percent of which would be $7,500.00. He points out that the loan origination fee of $7,255.80 is less than the maximum permitted fee of $7,500.00. However, the plaintiff's attorney does not clearly indicate what "the maximum mortgage amount for a one-family residence that HUD will insure in an area under Section 203 (b)(2) of the National Housing Act" would have been…”  Without certain documents to prove the truth of certain allegations the Court is unable to render proper decisions and for that reason the initial motions were denied, without prejudice and allowed for renewal. If seeking to renew, the plaintiff “shall submit complete copies of all loan and mortgage documents relating to the subject transaction including the first note in favor of Somerset, the Home Equity Conversion Loan Agreement and any attached payment plan for repairs and the Repair Rider” and “a statement in affidavit form from someone with personal knowledge explaining: how the plaintiff is related to Somerset, whether Somerset was an FHA approved lender; why two notes and two mortgages were executed on the same date on the subject property and which has priority; which entity actually provided the loan proceeds and which entity received the loan origination fee; whether the Slinkoskys received information pursuant to 12 USC §1715z-20 (former [d][2][B], [d][2][C] and [f]); and whether the plaintiff is seeking to foreclose a term or tenure reverse mortgage loan (see, Real Property Law §280-a [1]).”

Based on the foregoing, explanation the Court ordered that the default judgment against the homeowners; estate be vacated, and a referee is to be appointed.  Additionally, the Defendant’s motion for summary judgment dismissing the complaint is similarly denied but without prejudice for leave to renew.  

Link to  Financial Freedom SFC v. Slinkosky, 2010 NY Slip Op 31602(U)(Suffolk County 2010)

California attorneys disbarred for misconduct associated with loan modification services

By Kate Cavallaro
     Law Offices of Robert E. Brown, P.C.

The California State Bar Association is cracking down on lawyers whose misconduct is associated with loan modification services. The State Bar of California launched a task force on loan modification and since its launch about a year ago; the Bar “has obtained the resignation of 13 attorneys.” Most recently, two attorneys were disbarred for lending their names as attorneys to several non-attorney organizations. One individual attorney was cited because he “lacked control and failed to supervise and of the organizations” and “this lack of control and failure to supervise consequently led to, among other things, the unauthorized practice of law, misrepresentations and client harm.” Another attorney who was recently disbarred owned and operated a loan modification business by the name of Advocate for Fair Lending. The article notes that there were 18 examples in which the attorney’s clients were not helped and also asked for refunds. It further noted that the attorney is accused of using “Advocate [the loan modification business] and his status as an attorney to convince cash strapped homeowners to pay him thousands of dollars in hopes of saving their homes from foreclosure.” It is even alleged that some clients were in an even worse position after retaining the services!

“Homes lost to foreclosure on track for 1M in 2010”

By Kate Cavallaro
     Law Offices of Robert E. Brown, P.C.

An article from dailyfinance.com provides information  on the thousands of homeowners who are likely to lose their homes to foreclosure this year.  “Nearly 528,000 homes were taken over by lenders in the first six months of the year,” according to Realty Trac Inc. The article states the “surge in foreclosures reflect a crisis that has shown signs of leveling off in recent months but remains a crippling drag on the housing market and the economy.”  Statistics from the article provide that “on average, it takes about 15 months for a home loan to go from being 30 days late to the property being foreclosed and sold.” Furthermore the “number of homeowners that received a legal warning that they could lose their homes in the first half of the year climbed 8 percent from the same period last year.”  Additionally, about 1.7 million homeowners received a foreclosure-related warning,” which is equivalent to about one in 78U.S. homes.   Foreclosed home obviously have a terrible effect on the individual homeowners but also on the community as a whole.  When a home is sold as a result of foreclosure it is generally done do at a severely depressed value, ultimately effecting the market value of surrounding homes in the area.

Banks repossess US homes at record pace

Thu Jul 15, 2010 12:01am EDT

By Lynn Adler

NEW YORK July 15 (Reuters) - Banks repossessed a record number of U.S. homes in the second quarter, but slowed new foreclosure notices to manage distressed properties on the market, real estate data company RealtyTrac said on Thursday.

The root problems of job losses and wage cuts persist, making a sustained U.S. housing recovery elusive.
Banks took control of 269,962 properties in the second quarter, up 5 percent from the prior quarter and a 38 percent spike from the second quarter of last year, RealtyTrac said in its midyear 2010 foreclosure report.
Repossessions will likely top 1 million this year.

"The underlying conditions haven't improved," RealtyTrac senior vice president Rick Sharga said in an interview.

The housing market still grapples with "unemployment, economic displacement in general, and still sits on over 5 million seriously delinquent loans that in all likelihood will at some point go into foreclosure," he said.
In 2005, the last "normal" year in housing, Sharga said, about 530,000 households got a foreclosure notice and banks took over a comparatively minuscule 100,000 houses.

This year more than 3 million households are likely to get at least one foreclosure filing, which includes notice of default, scheduled auction and repossession, Irvine, California-based RealtyTrac forecasts.

In the first half of the year, foreclosure filings were made on 1.65 million properties. That was down 5 percent from the last half of 2009 but up 8 percent from the first half of last year.

One in every 78 households got at least one foreclosure filing in the first six months of this year.

Justice Minardo vacates a default judgment and dismisses Bank’s foreclosure action

By:  Kate Cavallaro

       Law Offices of Robert E. Brown, P.C.

Justice Minardo of the Supreme Court, Richmond County, granted a defendant homeowner’s order to show cause to vacate a default judgment of foreclosure and dismissing the entire action without prejudice due to plaintiff bank’s lack of standing. The defendant was represented by the Law Offices of Robert E. Brown, P.C. This action to foreclose a mortgage was commenced by the filing of a summons and complaint in December of 2006. Defendant homeowner was never personally served and defendants did not receive any acceleration notice as required. Unbeknownst to the defendant, the Court granted Plaintiff’s unopposed default judgment in June of 2009. Remarkably, at the same time the default judgment was entered, the parties were involved in settlement discussion. This unilateral action of moving forward without defendants knowledge indicates plaintiffs breach of its duty of good faith. Additionally, an audit of the loan documents revealed numerous other violations on both the State and Federal level, including Truth in Lending Act violations. Furthermore, the audit indicated that the plaintiff bank lacked the necessary standing and capacity to prosecute the foreclosure action. Defendants through their counsel, the Law Offices of Robert E. Brown, P.C., also argued that plaintiff failed to elect its remedies by pursuing simultaneous actions for both a judgment on a note and a judgment of foreclosure under the mortgage should be dismissed. Defendant’s counsel argues that “New York law has long been clear that a plaintiff with rights on a note and a mortgage must elect between the remedy of an action on the note or the remedy in foreclosure…. A plaintiff may not have causes of action for both remedies in a single action.” Citing President and Directors, Etc. Co. v. Callister Bros., 526 A.D. 1097, 11 N.Y.S.2d 593 (2d Dep’t 1939), aff’ed 282 N.Y. 629 (1940); see also White v. Wielandt, 259 A.D. 676, 678, 20 N.Y.S.2d 560, 561-563 92d Dep’t 1940. The rule that a plaintiff cannot simultaneously seek a judgment on the note and a judgment of foreclosure is echoed in New York RPAPL § 1301(a,) which states that without prior leave of the Court, simultaneous actions of this kind are barred.

With regard to vacating the default judgment, Defendants further argue that pursuant to CPLR 317, the Court has discretion to grant relief from judgment where defendant was served with a summons other than by personal delivery and has a meritorious defense to the underlying foreclosure action, Larman v. Russel, 240 A.D.2d 473 (2d Dep’t 1997). Defendant was not personally served and submitted to the Court, an affidavit of merit. Pursuant to CPLR 317 “the movant may apply to the court for relief only if he or she was served other than by personal service under CPLR 308(1).” Wells Fargo Bank v. Mondesir, 13 Misc. 3d 1210A; 824 N.Y.A. 2d 759 (Sup. Ct. 2006). If service is effected other than by personal delivery a court may still vacate a default judgment under CPLR 317, if it it is shown that the defendant did not have an opportunity to make its meritorious defense to the court due to the lack of knowledge of the action because of failure to be personally served.

For the foregoing reasons, Justice Minardo found that Plaintiff LaSalle Bank failed to properly serve defendant homeowner and that defendant homeowner had therefore been unable to bring forth its meritorious defenses. Plaintiff’s default judgment was vacated pursuant to CPLR 317 and the foreclosure action was dismissed in its entirety without prejudice.

Justice Minardo currently holds the position of Administrative Judge in the Thirteen Judicial District (Appointed by Chief Administrative Judge Ann Pfau). Previously Justice Mianrdo was the Administrative Judge to the Supreme Court of Richmond Country from 2005 to 2009 and was elected as a Supreme Court Justice for Richmond County from 1996 to 2009 and has been recently re-elected for 2010 through 2023. Justice Minardo also served as Special Counsel to State Senator John Marchi, 1988 to 1995 and Richmond County Assistant District Attorney from 1969 to 1976. Justice Minardo was also in private practice from 1976 to 1995. Minardo received his Bachelor of Arts from Manhattan College and his juris doctor from St. John’s University School of Law. He is admitted to the New York State Bar, the Appellate Division and Second Department.

“Government’s Push for Participants in Loan Modification Program Causes More Homeowners to Face Foreclosure”

By:  Kate Cavallaro
       Law Offices of Robert E. Brown, P.C.

An article from the Washington Post’s Associated Press cites that more than a third of the 1.24 million borrowers who have enrolled in the $75 billion mortgage modification program have dropped out. The article claims that the effort by the Obama administration to help people from losing their homes is falling short.  According to the article 150,000 homeowners have left the program.  Spokespersons for the program claim that despite the drop in participants in the program, those homeowners who are no longer part of the program will still find assistance from other places.  Perhaps these homeowners will find loan modifications or loan assistance from non governmental agencies.  “A major reason so many have fallen out of the program is the Obama administration initially pressured banks to sign up borrowers without insisting first on proof of their income. When banks later moved to collect the information, many troubled homeowners were disqualified or dropped out.”  Apparently the initial pressure to  have participants in the program caused some to fail to thoroughly determine if the homeowner is actually eligible for assistance via the government’s program.

NY Post “ Homeowners’ Hero Judge Slaps US Bank”

By Kate Cavallaro
     Law Offices of Robert E. Brown, P.C.

Brooklyn Judge, Arthur M. Schack, dismisses yet another foreclosure case brought by the offices of Steven Baum. Schack dismissed this particular foreclosure action “because the lawyer on the case, ... represented the mortgage broker, the bank that brought the loan and the industry registration service serving as the nominee of the loan.” Apparently the conflict of interest issues were not the only problems with this action. Additionally, Judge Schack “found that the bank, US Bank, never should have filed the foreclosure action because of an ‘ineffective assignment of the subject mortgage and note to it.” Also at issue in this case was the role of Baum lawyer, Elpiniki Bechhakas, who, according to the Post article “singed paper claiming to be an executive of Mortgage Electronic registration System (MERS),… while simultaneously representing Fremont and US Bank, which filed the foreclosure in July 2009.” The NY Post also reported the Baum’s “Buffalo based foreclosure mill” had filed 12,551 foreclosure actions in the New York area just last year.