Friday, February 25, 2011

Judge Schack dismisses another attempt to foreclose WITH PREJUDICE

2011 NY Slip Op 50191
NYCTL 2008-A Trust AND THE BANK OF NEW YORK AS COLLATERAL AGENT AND CUSTODIAN, Plaintiffs,
v.
Estate of Locksley Holas a/k/a Lockaley Holas, et. al., Defendants
10815/09
Supreme Court Of The State Of New York
Kings County
Decided on February 17, 2011

        Plaintiff
        Josef Abt
        Windels Marx Lane & Mittendorf, LLP
        NY, NY

Arthur M. Schack, J.

In this tax lien certificate foreclosure action, plaintiffs, NYCTL 1998-1 TRUST AND THE BANK OF NEW YORK AS COLLATERAL AGENT AND CUSTODIAN (THE TRUST), moved on September 9, 2009 for an order of reference and related relief for the premises located at 856 Hancock Street, Brooklyn, New York (Block 1490, Lot 33, County of Kings). In my May 3, 2010 decision and order, with respect to the motion for an order of reference and related relief, I held:

The affidavit submitted in support of this application... was not executed by an officer of... THE TRUST, or someone with a power of attorney from plaintiffs. Leave is granted to plaintiffs to renew their application, within sixty (60) days of this decision and order, for an order to appoint a referee to compute and amend the caption upon plaintiffs' presentation to the Court of its compliance with the statutory requirements of CPLR § 3215 (f), with "an affidavit of facts" executedby someone who is an officer of THE TRUST or someone who has a valid power of attorney from THE TRUST.

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Further, I noted that the affidavit of merit was submitted by one Hillary Leonard, who stated that "I am the Authorized Signatory of PLYMOUTH PARK TAX SERVICES, LLC, servicing agent for plaintiffs in the within action." Plaintiffs failed to provide the Court with any "power of attorney authorizing PLYMOUTH PARK TAX SERVICES, LLC to go forward with the instant foreclosure action. Therefore, the proposed order for the appointment of a referee to compute and amend the caption must be denied without prejudice."

Moreover, I observed that:

The plaintiffs have failed to meet the clear requirements of CPLR § 3215 (f) for a default judgment.

On any application for judgment by default, the applicant shall file proof of service of the summons and the complaint, or a summons and notice served pursuant to subdivision (b) of rule 305 or subdivision (a) of rule 316 of this chapter, and proof of the facts constituting the claim, the default and the amount due by affidavit made by the party... Where a verified complaint has been served, it may be used as the affidavit of the facts constituting the claim and the amount due; in such case, an affidavit as to the default shall be made by the party or the party's attorney. [Emphasis added].

Plaintiffs' counsel, Windels Marx Lane & Mittendorf, LLP, never submitted a renewed motion for an order of reference to the Court. Then, on February 14, 2011, the Court received a letter, dated February 9, 2011, from Windels Marx Lane & Mittendorf, LLP, in which plaintiffs' counsel stated that the September 9, 2009 motion "for the appointment of a Referee to compute was submitted to the Court and is currently pending before your Honor for determination [Emphasis added]. I respectfully request that Plaintiffs' ex-parte application be withdrawn at this time without prejudice to renew at a later date." Today is two hundred and ninety (290) days, more than three-quarters of a year, since I issued my May 3, 2010 order giving Windels Marx Lane & Mittendorf, LLP sixty (60) days to renew their motion for an order of reference and related relief. I have not yet received a renewed motion for an order of reference with the requested affidavit of merit "by someone who is an officer of THE TRUST or someone who has a valid power of attorney from THE TRUST."

Further, it is my policy to mail copies of my orders to litigants' counsel. Even if Windels Marx Lane & Mittendorf, LLP, for whatever reason, did not receive by U.S. Mail a copy of the May 3, 2010 order, it must to be suffering from corporate amnesia. The May 3, 2010 order was properly filed with Kings County Clerk. Plaintiffs' counsel should have ascertained that I issued my May 3, 2010 order giving them sixty (60) days to renew their motion for an order of reference and related relief with proper documentation. Therefore, I grant the request of Windels Marx Lane & Mittendorf, LLP that their "application be withdrawn at this time." However, for violation of my May 3, 2010 order, the instant tax lien foreclosure action is dismissed with prejudice and the notice of pendency is cancelled and discharged. The Court cannot countenance utter disregard of a court-ordered deadline.

Discussion

The failure of plaintiffs' counsel, Windels Marx Lane & Mittendorf, LLP, to comply

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with my May 3, 2010 order demonstrates delinquent conduct by Windels Marx Lane & Mittendorf, LLP. This mandates the dismissal with prejudice of the instant action. Failure to comply with court-ordered time frames must be taken seriously. It cannot be ignored. There are consequences for ignoring court orders. Recently, on December 16, 2010, the Court of Appeals, in Gibbs v St. Barnabas Hosp. (16 NY3d 74; 2010 NY Slip Op 09198), instructed, at *5:

As this Court has repeatedly emphasized, our court system is dependent on all parties engaged in litigation abiding by the rules of proper practice (see e.g. Brill v City of New York, 2 NY3d 748 [2004];Kihl v Pfeffer, 94 NY2d 118 [1999]). The failure to comply with deadlines not only impairs the efficient functioning of the courts and the adjudication of claims, but it places jurists unnecessarily in the position of having to order enforcement remedies to respond to the delinquent conduct of members of the bar, often to the detriment of the litigants they represent. Chronic noncompliance with deadlines breeds disrespect for the dictates of the Civil Practice Law and Rules and a culture in which cases can linger for years without resolution. Furthermore, those lawyers who engage their best efforts to comply with practice rules are also effectively penalized because they must somehow explain to their clients why they cannot secure timely responses from recalcitrant adversaries, which leads to the erosion of their attorney-client relationships as well. For these reasons, it is important to adhere to the position we declared a decade ago that "[i]f the credibility of court orders and the integrity of our judicial system are to be maintained, a litigant cannot ignore court orders with impunity [Emphasis added]." (Kihl, 94 NY2d at 123).

"Litigation cannot be conducted efficiently if deadlines are not taken seriously, and we make clear again, as we have several times before, thatdisregard of deadlines should not and will not be tolerated (see Miceli v State Farm Mut. Auto Ins. Co., 3 NY3d 725 [2004]; Brill v City of New York,2 NY3d 748 [2004];Kihl v Pfeffer, 94 NY2d 118 [1999]) [Emphasis added]." (Andrea v Arnone, Hedin, Casker, Kennedy and Drake, Architects and Landscape Architects, P.C., 5 NY3d 514, 521 [2005]). "As we made clear in Brill, and underscore here, statutory time frames —like court-order time frames (see Kihl v Pfeffer, 94 NY2d 118 [1999]) — are not options, they are requirements, to be taken seriously by the parties. Too many pages of the Reports, and hours of the courts, are taken up with deadlines that are simply ignored [Emphasis added]." (Miceli, 3 NY3d at 726-726).

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Further, the dismissal of the instant foreclosure action requires the cancellation of the notice of pendency. CPLR § 6501 provides that the filing of a notice of pendency against a property is to give constructive notice to any purchaser of real property or encumbrancer against real property of an action that "would affect the title to, or the possession, use or enjoyment of real property, except in a summary proceeding brought to recover the possession of real property." The Court of Appeals, in 5308 Realty Corp. v O & Y Equity Corp. (64 NY2d 313, 319 [1984]), commented that "[t]he purpose of the doctrine was to assure that a court retained its ability to effect justice by preserving its power over the property, regardless of whether a purchaser had any notice of the pending suit," and, at 320, that "the statutory scheme permits a party to effectively retard the alienability of real property without any prior judicial review."

CPLR § 6514 (a) provides for the mandatory cancellation of a notice of pendency by: The Court, upon motion of any person aggrieved and upon such notice as it may require, shall direct any county clerk to cancel a notice of pendency, if service of a summons has not been completed within the time limited by section 6512; or if the action has been settled, discontinued or abated; or if the time to appeal from a final judgment against the plaintiff has expired; or if enforcement of a final judgment against the plaintiff has not been stayed pursuant to section 551. [emphasis added]

The plain meaning of the word "abated," as used in CPLR § 6514 (a) is the ending of an action. "Abatement" is defined as "the act of eliminating or nullifying." (Black's Law Dictionary 3 [7th ed 1999]). "An action which has been abated is dead, and any further enforcement of the cause of action requires the bringing of a new action, provided that a cause of action remains (2A Carmody-Wait 2d § 11.1)." (Nastasi v Nastasi, 26 AD3d 32, 40 [2d Dept 2005]). Further, Nastasi at 36, held that the "[c]ancellation of a notice of pendency can be granted in the exercise of the inherent power of the court where its filing fails to comply with CPLR § 6501 (see 5303 Realty Corp. v O & Y Equity Corp., supra at 320-321;Rose v Montt Assets, 250 AD2d 451, 451-452 [1d Dept 1998]; Siegel, NY Prac § 336 [4th ed])." Thus, the dismissal of the instant complaint must result in the mandatory cancellation of plaintiffs' notice of pendency against the subject property "in the exercise of the inherent power of the court."

Conclusion

Accordingly, it is

ORDERED, that the instant action, Index Number 10815/09, is dismissed with prejudice; and it is further

ORDERED that the Notice of Pendency in this action, filed with the Kings County Clerk on May 1, 2009, by plaintiffs, NYCTL 1998-1 TRUST AND THE BANK OF NEW YORK AS COLLATERAL AGENT AND CUSTODIAN, to foreclose on a tax lien certificate for real property located at 856 Hancock Street, Brooklyn, New York (Block 1490, Lot 33, County of Kings), is cancelled and discharged.

This constitutes the Decision and Order of the Court.

Page 5

ENTER

________________________________

HON. ARTHUR M. SCHACK
J. S. C.

Washington Post:

Government settlement with financial industry over foreclosure practices draws near

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By Brady Dennis

Washington Post Staff Writer
Thursday, February 24, 2011; 12:18 AM

State and federal officials, who have been negotiating with financial firms over how to address widespread abuses in foreclosure practices, are moving closer to a settlement that could force banks to reduce the principal on mortgages for some borrowers who owe more than their homes are worth.

An official familiar with discussions between the government and the financial industry said the settlement also could require that banks increase their efforts to modify mortgages for distressed borrowers and pay penalties that could be used as restitution for homeowners who have wrongfully faced foreclosure.
"State attorneys general are working closely with a number of federal agencies on a potential settlement," Geoff Greenwood, a spokesman for Iowa Attorney General Tom Miller (D), who is leading a 50-state investigation of the foreclosure mess, said in an interview Wednesday. He added, "We haven't finalized anything, and we're still working on some very complicated issues."
For months, the state officials have been conducting separate negotiations with a handful of firms, such as Bank of America and J.P. Morgan Chase, and pressing them to accept similar terms. Officials said the talks have been complex because each firm's situation is different. Moreover, multiple state attorneys general and nearly a dozen federal agencies are involved in the discussions.
"We're all trying to work to find some common ground," Greenwood said.

The core group of attorneys general heading up the foreclosure effort has been debating the best course of action - both among themselves and with their federal counterparts - even as sensitive talks with bank executives over the final details of the agreements continue.
State attorneys general, the Obama administration and independent federal regulators have been conducting several parallel inquiries into the nationwide foreclosure breakdown for months.
Since last May, the Federal Housing Administration has been investigating why large mortgage companies have not modified the loans of borrowers who are struggling to pay them. These firms are required by law to make such modifications because the loans are guaranteed by the FHA, which promotes lending to first-time home buyers. The FHA has found that some major mortgage lenders have not followed the law in their modification programs but the agency has not named the lenders publicly.
In addition, a task force involving the Justice Department and Securities and Exchange Commission is examining the potential for fraud in how banks have seized homes from borrowers facing foreclosures, and in how mortgage companies and banks have disclosed to investors details of foreclosure options.

Read the rest here.

Wednesday, February 23, 2011

Allstate and others sue banks for toxic MBS. Great summary of the tactics that led to the bubble and the crash.

FROM THE COMPLAINT:

NATURE OF ACTION
1. This action arises out of Defendants’ fraudulent sale of residential mortgagebacked
securities in the form of pass-through certificates (the “Certificates”) to Allstate.
Whereas Allstate was made to believe it was buying highly-rated, safe securities backed by pools
of loans with specifically-represented risk profiles, in fact, Defendants knew the pool was a toxic
mix of loans given to borrowers that could not afford the properties, and thus were highly likely
to default.

2. Defendants made numerous material misrepresentations and omissions regarding
the riskiness and credit quality of the Certificates in registration statements, prospectuses,
prospectus supplements, and other written materials (the “Offering Materials”). For example:
(i) Underwriting Guidelines. The Offering Materials represented that a
particular, reasonable underwriting process was followed to ensure that only loans that the
borrower could repay would be included in the pools underlying the Certificates (the “Mortgage
Loans”). In fact, the disclosed underwriting standards were systematically ignored in originating
or otherwise acquiring non-compliant loans. For instance, recent reviews of the loan files
underlying some of Allstate’s Certificates reveal a pervasive lack of proper documentation,
facially absurd (yet unchecked) claims about the borrower’s purported income, and the routine
disregard of purported underwriting guidelines. Based on data compiled from third-party due
diligence firms, the federal Financial Crisis Inquiry Commission (“FCIC”) noted in its January
2011 report:
The Commission concludes that firms securitizing mortgages
failed to perform adequate due diligence on the mortgages they
purchased and at times knowingly waived compliance with
underwriting standards. Potential investors were not fully
informed or were misled about the poor quality of the mortgages
contained in some mortgage-related securities. These problems
appear to be significant.
(FCIC Report at 187 (emphasis added).)
(ii) Percentage of Known Non-Conforming Loans. Defendants fraudulently
omitted the fact that both the underwriters’ internal due diligence, as well as third-party due
diligence firms, had identified numerous loans that did not conform to the stated underwriting
guidelines. Nor did Defendants disclose that many of those very same non-conforming loans
had been “waived” into the collateral pools underlying the Certificates anyway. That high
numbers of rejected loans were knowingly being included in the underlying mortgage pools is
not only a fraudulent omission in its own right, but makes even more misleading Defendants’
disclosures about their underwriting process. Defendants intended for Allstate to understand that
their underwriting and due diligence procedures were being used to keep problem loans out – not
just to go through the motions of appearing to search for such loans only to have them routinely
approved for inclusion anyway.

(iii) Owner Occupancy Statistics. The Offering Materials made specific
representations regarding the percentage of borrowers who would be occupying the property
being mortgaged – a key risk metric given that borrowers are less likely to “walk away” from
properties they live in, as compared to properties being used as vacation homes or investments.
Analytical tools recently made available to investors confirm that, in truth, a far greater
percentage of the loans underlying Allstate’s Certificates than represented were given to
borrowers who lived elsewhere.
(iv) Loan-to-Value Ratios. The Offering Materials represented that the
underlying loans had specific loan-to-value (“LTV”) and combined loan-to-value (“CLTV”)
ratios. These are additional key risk metrics, because they represent the equity “cushion” that
borrowers have, and the likelihood of repayment to lenders upon foreclosure. Analytical tools
recently made available to investors confirm that the Offering Materials vastly overstated the
value of the collateral being included in the loan pools, and hid additional liens that had been
placed on the properties. This falsely reduced the loans’ LTV and CLTV ratios.
(v) Purpose And Use Of Exceptions. The Offering Materials represented
that loans which did not meet certain criteria were approved as “exceptions” only on the basis of
countervailing features of the borrowers’ risk profiles that ‘made up’ for negative aspects of the
risk profile. In truth, however, “exceptions” were used as a way to increase loan volume by
circumventing the applicable underwriting guidelines. For instance, recent reviews of the loan
files underlying some of Allstate’s Certificates reveal that non-compliant mortgage loans did not
have any identified countervailing features, and that various undisclosed procedures were
employed to create loan pools outside of the disclosed underwriting guidelines.

(vi) Credit Ratings. The Offering Materials represented that the Certificates
had specific investment grade credit ratings. Defendants fed the same misrepresentations found
in the Offering Materials to the ratings agencies in an attempt to manufacture predetermined
ratings. The rating agencies relied on this inaccurate loan information when rating the
Certificates, and employed outdated assumptions and relaxed ratings criteria. This not only
rendered false Defendants’ representations about how the ratings process really functioned, but
also assured that the ratings themselves in no way reflected the actual risk underlying the
Certificates.
(vii) Credit Enhancement Features. The Offering Materials represented that
the Certificates had certain “credit enhancements” used to improve the likelihood that holders of
such certificates would receive regular principal and interest payments thereon. “Credit
enhancements” are features designed to reduce the risk of loss to investors in the senior tranches
of certificates. These features can include overcollateralization (i.e., the value of the collateral
underlying the certificates is greater than the principal balance of the certificates), the
subordination in right of payment of junior certificates to senior certificates, the establishment of
reserve accounts, a mortgage pool insurance policy, an interest rate swap agreement, or a
combination of such features.
The level of credit enhancement utilized for each Offering was to be correlated to
the risk associated with the underlying loan pool. However, due to the pervasive underwriting
deficiencies that rendered the Mortgage Loans far riskier and less valuable than disclosed, the
credit enhancements described in the Offering Materials were never adequate to protect
certificateholders from loss. As a result, the purported “credit enhancements” were really no
protection at all.

3. In reliance on these and the other misrepresentations and omissions, Allstate
purchased over $700 million of Defendants’ mortgage-backed securities, as follows:
Asset Purchase Price
JPMMT 2004-S1, 1A7 $1,882,541.68
JPMAC 2005-OPT2, M1 $4,000,000.00
JPMAC 2005-OPT2, M2 $10,499,630.40
JPALT 2006-A2, 2A1 $12,250,000.00
JPMAC 2006-CH2, AF6 $1,609,954.44
JPMAC 2006-CH2, MF1 $2,069,942.36
JPMAC 2006-CH2, MF2 $6,299,847.81
JPMAC 2006-CH2, MF3 $4,906,527.47
JPMAC 2006-CW2, AF6 $59,780,514.68
JPMAC 2006-FRE2, A3 $20,000,000.00
JPMAC 2007-CH1, MF1 $28,860,355.53
JPMAC 2007-CH1, MF2 $15,117,635.57
JPMAC 2007-CH1, MF3 $5,134,204.59
JPMAC 2007-CH1, MF4 $6,349,473.50
JPMAC 2007-CH1, MF5 $19,352,044.81
JPMAC 2007-CH2, AF6 $24,349,559.17
JPMAC 2007-CH2, MF1 $14,260,028.06
JPMAC 2007-CH2, MF2 $19,621,394.99
JPMAC 2007-CH2, MF3 $28,617,484.45
JPMAC 2007-CH2, MF4 $9,106,844.62
JPMAC 2007-CH2, MF5 $5,300,777.93
WMALT 2005-4, CB11 $7,726,845.31
WaMu 2005-AR2, 2A-1B $50,000,000.00
WaMu 2006-AR1, 2A-1A $22,709,125.17
WaMu 2006-AR5, A1-B2 $13,006,094.40
WaMu 2006-AR9, A1-B2 $8,000,000.00
WaMu 2006-AR11, CA-1B2 $17,050,719.58
WaMu 2007-OA1, A-1B $25,185,695.78
WaMu 2007-OA3, 2A $18,355,168.40
WaMu 2007-HY7, 1-A1 $20,637,626.29
WMHEN 2007-WM1, N1 $6,346,688.52
LBMLT 2006-6, 2A2 $20,000,000.00
BALTA 2005-4 1A2 $19,141,911.07
BALTA 2006-5 11A2 $10,000,000.00
BSABS 2006-HE4, IA2 $20,000,000.00
BSMF 2006-SL1, A $50,000,000.00
BSSLT 2007-SV1A, A1 $25,000,000.00
BSSLT 2007-SV1A, A3 $25,000,000.00

Asset Purchase Price
SACO 2006-3, A1 $40,000,000.00
SACO 2006-6, A $60,000,000.00
Total $757,528,636.58
Exhibits A and B provide further detail on the Certificates. All of the exhibits attached to this
Complaint are incorporated as if set forth fully herein.

4. Allstate invested in the Certificates as part of a broader plan to invest in a diverse
array of mortgage-backed securities. Allstate typically purchased senior classes of mortgagebacked
securities (i.e., those rated AAA/Aaa or AA/Aa by the rating agencies Standard & Poor’s
and Moody’s Investors Service). Allstate purchased the Certificates to generate income and total
return through safe investments. But Allstate also purchased the securities with the expectation
that the investments could be – and indeed some would be – sold on the secondary market.

5. The systemic (but hidden) abandonment of the disclosed underwriting guidelines
has predictably led to soaring default rates in the mortgage loans underlying the Certificates. For
instance, despite the fact that most of the of the Certificates started out with AAA ratings – the
same rating given to treasury bills backed by the full faith and credit of the United States
government – 97% are now not even considered to be investment grade. These problems are so
drastic and their onset was so rapid (in comparison to the long-term security of the investments
Allstate thought it was purchasing) that the Certificates’ poor performance to date is itself
powerful evidence that the Mortgage Loans were not underwritten according to the procedures
represented to Allstate. With the underlying loans performing so poorly, the market value of
Allstate’s Certificates has plummeted, causing Allstate to incur significant losses.

The full complaint can be accessed here.

Land Records Register in MA to seek $22mil. in lost revenue from MERS -- When Will VA Come to Its Senses? Hmm... MERS is located in Reston, VA...

http://salemdeeds.com/pdf/MERSRelease02-22-11.pdf

Tuesday, February 22, 2011

MERS flaws in street (or should I say, home) language

I have finally come to one conclusion: if you can’t beat ‘em, join ‘em!
My proposal is quite simple–a paperless marriage recording system, called SERS, (Spouse Electronic Recording System) for the electronic recording of marriages. To avoid the high costs of (not to mention the hassle of) the filing of marriage certificates, a SERS member would be able to simply record himself or herself as a “nominee” for A marriage to A spouse. The SERS system will record that A marriage has taken place, but the person to whom the SERS member becomes married does not have to be specified until just prior to the termination of the marriage–via divorce or death.
In this manner, one is able to “leave one’s options open.” It is a perfect system for those who would like the stability of the institution of marriage, yet, at the same time, yearn for the flexibility of non-commitment. It announces to the world, “I’m married–I’m just not saying to whom it is that I am married.”

Mind you–the flexibility provided by SERS would have its limits. For example, a SERS marriage could only be assigned to a SERS member, and the marriage would have to be “officiated” by a SERS authorized officer. Nevertheless, virtually anyone with a pulse, $25 for an official SERS certifying officer stamp, an ink jet printer, and access to a SERS terminal could become a certifying officer of SERS. (And then there is Provision K, the “Kunkle Provision,” which provides for dead certifying officers, as well.)
At the “consecration” of the relationship–which is technically an “agency relationship,” the marriage will be given a SIN number, or Spouse Identification Number. In this manner, through the SIN number, any married person can track who their actual spouse is–except in the case of most situations–where the SERS member prefers to keep that information private. Rest assured, however, if you die or if you cause a divorce, a spouse will be assigned to you at least 30 days prior to such death or divorce, except in the case of most situations, where the spousal nominator doesn’t know what the heck is going on—wherein an assignment will be backdated to reflect that the spousal assignment transpired 30 days prior to said death or divorce.
Due to the high-tech nature of the proprietary data tracking software used by SERS, only one employee of SERSCORP will be necessary, and the cost of her salary and generous bonus structure will be virtually unnoticeable as it is skimmed off one marriage transaction fee at a time as SERS marital swaps are traded seamlessly Over The Counter through Cayman Island accounts. Due to the swapping functionality enabled by their individual (original) SINs, SERS marriages will facilitate the marital churning process without the pain, humiliation, or cost of conventional marital swapping. The cost of SERS transaction fees will be recouped in the sheer volume of marital business as marriage certificates are securitized into MBS (Marriage-Backed Securities.)
... Read the rest here.

Thursday, February 17, 2011

MERS to require assignments out of its name before foreclosure even where state law does not require assignments (as in Virginia)

See MERS Announcement Re: Foreclosure Processing and CRMS Scheduling

This is a tacit admission that MERS loans do not comply with centuries-old property recording law.

That is why I (and others) have been saying that one of the best ways to deal with a MERS loan is to challenge the fact that your loan's current owner has not recorded its interest in the county land records and to knock them out of your chain of title before they ever get to fixing the situation themselves. For more on this, see my posts here and here.

GA court allows discovery to proceed to determine MERS' standing

PATRICIA GORDON, as Executrix of the Estate of Louise R. Freeman, Plaintiff,
v.
MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC.,
as Nominee for HSBC Bank, USA, National Association as Trustee, by Litton Loan Servicing, LP,
and LITTON LOAN SERVICING LP, Defendants.
Case No. CV410-228
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF GEORGIA
SAVANNAH DIVISION
Date: December 29, 2010
ORDER

Defendants Mortgage Electronic Registration Systems, Inc. ("MERS") and Litton Loan Servicing, LP ("defendants") move to stay discovery and pretrial deadlines pending resolution of their motion to dismiss in this home foreclosure case. (Doc. 15.) Plaintiff opposes the stay, asserting that the certain discovery is necessary and that the motion to dismiss is unlikely to succeed. (Doc. 20.)

A brief review of defendants' motion to dismiss (doc. 5) reflects that it has some heft to it. Arriaga-Zacarias v. Lewis Taylor Farms, Inc., 2008 WL 4544470 at *2 (M.D. Ga. Oct. 10, 2008) ("it may be helpful for the court to take a 'preliminary peek' at the merits of the dispositive motion to assess the likelihood that such motion will be granted"). According to defendants, certain bankruptcy

Page 2

judgments may have a preclusive effect upon some of plaintiff's allegations. (Doc. 5-1 at 4-22.) However, the total dismissal defendants seek seems unlikely. None of the earlier rulings directly determined whether defendants were legally empowered to judicially foreclose upon the house in accordance with Georgia law. Thus, even if plaintiff admitted the home mortgage debt's legitimacy, the intricacies of judicial foreclosure law may still stand in the way.

Moreover, plaintiff rather persuasively argues that some discovery is necessary for the Court to rule on defendants' motion to dismiss and that some specific depositions should be taken before witnesses become unavailable or memories fade. (Doc. 24.) According to plaintiff, MERS purports to hold the deed to Ms. Freeman's house but does not hold the promissory note or any other evidence of ownership of the underlying debt obligation. (Doc. 20 at 7; doc. 10 at 4-5.) Plaintiff thus contends that MERS lacks standing to commence judicial foreclosure under Georgia law and needs discovery to fully factually develop the standing claim. (Doc. 10 at 4.) Too, the issue of Freeman's mental capacity to enter into the mortgage has been raised, but the only witnesses who can offer any evidence on that score are the closing attorney, Richard R. Harste, and Ms. Freeman's nurse. (Doc. 20 at 6.) Harste was the only first-hand witness to the closing and his "license to practice law was suspended for matters relating to his

Page 3

responsibilities as a closing attorney." (Id.)

The Court is satisfied that at least some discovery is warranted. Chudasama v. Mazda Motor Corp., 123 F.3d 1353, 1367 (11th Cir. 1997)(where no discovery is required and a motion to dismiss raises purely legal questions a stay may be warranted). Further, plaintiff may be prejudiced by staying it. See Feldman v. Flood, 176 F.R.D. 651, 652 (M.D. Fla. 1997) ("In deciding whether to stay discovery pending resolution of a pending motion, the Court inevitably must balance the harm produced by a delay in discovery against the possibility that the motion will be granted and entirely eliminate the need for such discovery."). Accordingly, defendants' motion to stay discovery and certain pretrial deadlines is DENIED.

Pursuant to Federal Rule of Civil Procedure 16(b) and the Local Rules of this Court, and after considering the motion to stay and the parties' Rule 26(f) report, the Court imposes the following deadlines in the above styled case:

COMMENCEMENT OF DISCOVERY 01/28/2011
LAST DAY TO FURNISH EXPERT WITNESS REPORT
by PLAINTIFF¹ 03/28/2011

Page 4

LAST DAY TO FURNISH EXPERT WITNESS REPORT
by DEFENDANT 04/28/2011
JOINT STATUS REPORT DUE 05/16/2011
CLOSE OF DISCOVERY 06/28/2011
LAST DAY FOR FILING CIVIL MOTIONS
EXCLUDING MOTIONS IN LIMINE 07/28/2011

Motions in limine shall be filed no later than 5 days prior to the pre-trial conference. The parties are further advised that all motions, other than summary judgment motions and motions to dismiss, shall be accompanied with a proposed order.

SO ORDERED this 29th day of December, 2010.

UNITED STATES MAGISTRATE JUDGE

SOUTHERN DISTRICT of GEORGIA

--------

Notes:

1. The Court disfavors open-ended scheduling deadlines. Rather than running time from the date that the motion to dismiss is decided, the Court will delay the commencement of discovery for a short time and then grant the parties five months to complete discovery. The parties' request to delay initial disclosures is denied. (Doc. 16 at 1-2.)

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