Huff Post: John, Anna Canaday Claim JPMorgan Chase Called Them 75 Times A Week

How many phone calls is too many? For one elderly couple, roughly 75 per week.

JPMorgan Chase allegedly called John and Anna Canaday 15 to 75 times a week between 2009 and 2012, claiming they were at risk of losing their home to foreclosure, according to a lawsuit filed by the couple earlier this month. The Canadays, both over 65 years old, claim they aren't late on their mortgage payments (h/t: Courthouse News).

"It defies logic what seems to be happening here," James McKiernan, the Canaday's attorney, told The Huffington Post. "They brought in letters and dunning notices and it just continues. As I see it, they are fully current on all their obligations."

The lawsuit alleges that the couple met with their local District Attorney and, with the DA's advice, sent a cease and desist letter to the bank. Though the bank acknowledged that they received the letter, the harassment continued, according to the lawsuit.

JPMorgan Chase did not respond to multiple requests for comment.

This is the second time in a month that JPMorgan has been accused of mistreating its elderly customers. In Louisiana, a man with Alzheimer's sued the bank after his legal guardian claimed that a JPMorgan employee stole more than $100,000 dollars from the elderly man.

Of couse, JPMorgan Chase isn't the first bank to take heat over wrongfully harassing its customers. Bank of America allegedly called one family more than 400 times demanding they pay a debt that had already been settled, according to AOL Daily Finance. BofA also allegedly threatened a quadriplegic man with foreclosure and eviction over a 10 year period.

Continued here...

An example of how an ostensibly "valid" mortgage can be wiped out (he who has ears let him hear)...

In Re: JOHN G. MCCORMICK, Debtor. SUNTRUST BANK, N.A., Plaintiff-Appellant, v. MARC MACKY; MARYANN MACKY, Plaintiffs-Appellees, v. JOHN A. NORTHEN, Trustee, Defendant-Appellee, and MICHAEL D. WEST, Bankruptcy Administrator, Party-in-Interest.

No. 10-2027

UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT

669 F.3d 177; 2012 U.S. App. LEXIS 2658; Bankr. L. Rep. (CCH) P82,165; 67 Collier Bankr. Cas. 2d (MB) 68

December 7, 2011, Argued
February 10, 2012, Decided

 NIEMEYER , Circuit Judge:

In this bankruptcy case, in which John McCormick is the debtor, SunTrust Bank, N.A., filed a proof of claim for repayment of a loan that it claimed was secured by a deed of trust on two contiguous parcels of McCormick's real property in Orange County, North Carolina, known as "Tract I" and "Tract II." The Trustee commenced this action under 11 U.S.C. § 544(a)(3) to avoid the lien on Tract I because the deed of trust, while recorded on the official recordation index of Orange County as to Tract II, was not  [**2] so recorded as to Tract I.

SunTrust contended that even though the recordation was deficient, the Trustee was imputed with constructive knowledge of the lien on Tract I because either (1) he had constructive knowledge of the deed of trust that was properly recorded as to Tract II, which by its terms also created a lien on Tract I; or (2) the deed of trust was recorded in an unofficial index in Orange County and a careful and prudent title examiner would have found the lien on Tract I in that index.

The bankruptcy court rejected SunTrust's arguments and ordered SunTrust's lien on Tract I avoided under § 544(a)(3), and the district court affirmed. We too affirm. Because the Trustee's status vis-a-vis the title of Tract I is, under § 544(a)(3), that of a bona fide purchaser under North Carolina law, the Trustee is only imputed with the notice that would be imputed to a bona fide purchaser of Tract I under North Carolina law. And HN1North Carolina law allows a purchaser to rely exclusively on the official recordation index of the county to discover liens, regardless of what other independent knowledge that purchaser might have.

I

In 1994, John McCormick and his wife acquired two contiguous parcels  [**3] of real property in Orange County, North Carolina—"Tract I," consisting of six lots, and "Tract II," consisting of two lots. The  [*179]  deed for both tracts was properly recorded on January 5, 1995, on the PIN (parcel identifier number) index in Orange County. The PIN index, which is the County's official real property recording index, was adopted by Orange County in 1983 as the official index in lieu of its previous grantor/grantee index system used by the County before 1983. Under the PIN index system, each parcel of real property in the county is given a unique "parcel identifier number," which is then used as the basis for recording all instruments relating to that parcel. Orange County continued to use the traditional grantor/grantee index system, but it did so only as an unofficial index on which to record instruments on an interim basis for the period between when the instrument is offered for recordation and when its recordation on the PIN index is certified, usually a few days.

In 1999, the McCormicks borrowed $178,275 from Central Carolina Bank and Trust Company (later merged into SunTrust Bank, N.A.) (herein, "SunTrust"), and they secured the loan with a deed of trust given as to  [**4] both Tracts I and II. When submitted for recordation, however, the deed of trust included only the PIN number of Tract II and not the PIN number for Tract I. Accordingly, it was recorded only on the PIN index against Tract II.

In 2004, John McCormick borrowed $60,000 from Marc and Maryann Macky, and he secured that loan with a deed of trust on four lots (lots 1, 4, 5, and 6) in Tract I. That deed of trust was properly recorded on the PIN index in Orange County.

McCormick was placed into involuntary bankruptcy in August 2006, and John Northen was appointed Trustee of the bankruptcy estate. In administering the estate, Northen sold all of the lots in Tract I and transferred the liens recorded against Tract I to Tract I's proceeds of sale. He thereafter commenced this adversary proceeding under 11 U.S.C. § 544(a)(3) to avoid SunTrust's 1999 lien claimed by SunTrust against the proceeds, because the lien against Tract I had not been properly recorded on the PIN index and, as the parties agreed, a search of the PIN index as to Tract I on the date of the bankruptcy petition would not have disclosed the existence of SunTrust's 1999 deed of trust on Tract I. The Mackys, whose lien for $60,000  [**5] was created in 2004 (after SunTrust's 1999 lien), supported the Trustee's position, which would benefit the Mackys' lien by avoiding SunTrust's prior but improperly recorded lien.

In response to the Trustee's motion for summary judgment, SunTrust argued that even though its 1999 deed of trust was not recorded on the PIN index against Tract I, "a competent title searcher, upon examining the deed of trust for Tract II, would have discovered Tract I as a result of such examination," because the text of the deed of trust created liens on both Tracts I and II. SunTrust also argued that a search of the unofficial grantor/grantee index would have "revealed the existence of the SunTrust Deed of Trust as a lien against both Tracts I and II."

The bankruptcy court rejected SunTrust's arguments, observing that HN2North Carolina is a "pure race" jurisdiction such that "the first to record an interest in land holds an interest superior to all other purchasers for value, regardless of actual or constructive notice as to any unrecorded conveyances." The court concluded that North Carolina's "Indexing Statutes indicate a legislative intent to require that when a county has adopted a PIN index as its official  [**6] index, an instrument must be indexed in such an official index in order to be registered." Thus, "where, as is the case in Orange County, a county has implemented a PIN index that complies with  [*180]  the requirements of N.C. Gen. Stat. § 161-22.2, such a PIN index is the only index that is required by statute to be maintained. . . . [T]he result is that when a county adopts a PIN index as its official index, an instrument must be indexed as provided for in N.C. Gen. Stat. § 161-22.2 in order to be registered." Accordingly, based on N.C. Gen. Stat. § 47-20(a) and 11 U.S.C. § 544(a), the court avoided SunTrust's lien against Tract I.

On appeal, the district court affirmed for substantially the same reasons given by the bankruptcy court, entering judgment dated August 6, 2010, in favor of the Trustee and the Mackys. This appeal followed.

II

SunTrust acknowledges that its 1999 deed of trust on Tract I was not recorded against Tract I on the PIN index as of August 2006, when the bankruptcy petition was filed. It also acknowledges that the PIN index was the official index on which to record real property instruments in Orange County, and that a title search of Tract I in the PIN index in August 2006  [**7] would not have disclosed its deed of trust. It argues nonetheless that the Trustee cannot avoid its 1999 lien on Tract I, relying on two facts: (1) the deed of trust was recorded on the PIN index in connection with Tract II, and anyone searching the title to Tract II would have seen the deed of trust, which, by its terms, creates a lien also on Tract I; and (2) the deed of trust was recorded in the grantor/grantee index, and the lien on Tract I would have been discovered by a search of that index. Accordingly, it contends that a bona fide purchaser would have had constructive notice of its lien on Tract I, and the Trustee, who stands in the shoes of a bona fide purchaser, would have been imputed with the same notice.

The Trustee agrees that he stands in the shoes of a bona fide purchaser at the time the bankruptcy petition was filed. But he argues that a bona fide purchaser of Tract I at that time would not have purchased Tract I subject to SunTrust's 1999 lien, regardless of the knowledge imputed to the purchaser, because the lien was not recorded in the official recordation index in Orange County—the PIN index.

The Trustee's authority to avoid liens arises from 11 U.S.C. § 544(a)(3),  [**8] which provides:
HN3The trustee shall have, as of the commencement of the case, and without regard to any knowledge of the trustee or of any creditor, the rights and powers of, or may avoid any transfer of property of the debtor or any obligation incurred by the debtor that is voidable by—

* * *

(3) a bona fide purchaser of real property . . . from the debtor, against whom applicable law permits such transfer to be perfected, that obtains the status of a bona fide purchaser and has perfected such transfer at the time of the commencement of the case, whether or not such a purchaser exists.
(Emphasis added). Thus, HN4when determining whether a Trustee can avoid a lien created before the bankruptcy petition was filed, the Trustee's actual knowledge of the lien is irrelevant. His right to avoid is determined by whether, under state law, a bona fide purchaser of the property would have taken the property subject to the lien. If a bona fide purchaser would not have taken it subject to the lien, then neither would the Trustee. See Havee v. Belk, 775 F.2d 1209, 1218 (4th Cir. 1985) (explaining that 11 U.S.C. § 544 "gives the Trustee the status of a hypothetical lien creditor . . . but . . . his exercise  [**9] of such  [*181]  power and its extent are governed entirely by the applicable state law"). In this case, therefore, the Trustee's right to avoid SunTrust's lien on Tract I turns on whether a bona fide purchaser of Tract I in August 2006 would, under North Carolina law, have acquired the property free of the lien.

HN5North Carolina law has established a precise recording system on which purchasers of real property can rely when searching for the existence of prior liens. If a prior lien is not properly recorded in accordance with the system, then the purchaser can count on taking property as if no lien exists, even though the purchaser may have knowledge that an earlier lien had been created. See Hill v. Pinelawn Mem'l Park, Inc., 304 N.C. 159, 282 S.E.2d 779, 782 (N.C. 1981). Manifesting this understanding, North Carolina law provides categorically that "instruments registered in the office of the register of deeds shall have priority based on the order of registration as determined by the time of registration." N.C. Gen. Stat. § 47-20(a). The North Carolina Supreme Court has articulated the full implication of the rule, as well as its rationale, as follows:
HN6The purpose of [the recording statute] is to enable  [**10] intending purchasers and encumbrancers to rely with safety on the public record concerning the status of land titles. It serves to provide constructive notice of claims to real property. It has been characterized as a pure race statute. Where a grantor conveys the same property to two different purchasers, the first purchaser to record his deed wins the race to the Register of Deeds' office and thereby defeats the other's claim to the property, even if he has actual notice of the conveyance to the other purchaser. Thus, in order to protect himself against the possibility that his grantor has conveyed the same property to another, a purchaser must examine the public registry. If he finds no record of such, even if he knows there has been a prior conveyance, he may record his deed with the assurance that his title will prevail.
Hill, 282 S.E.2d at 782 (emphasis added) (citations and internal quotation marks omitted). In short, the recordation of real property instruments in North Carolina on the appropriate recording index is a "cook-book" process that, when followed, gives the only enforceable notice to subsequent purchasers of the instrument, thereby assuring such purchasers that the  [**11] status of title is as appears on the index, regardless of that purchasers' knowledge about matters not appearing on the index.

HN7North Carolina authorizes counties in North Carolina to select one of two methods for indexing real property instruments—either the traditional "grantor/grantee index" system or the PIN index system. N.C. Gen. Stat. § 161-22(a), 161-22.2(a). Section 161-22.2(a) provides that the PIN index system, if selected, would be "[i]n lieu of" the grantor/grantee index system, such that either one or the other index would be the official recordation index, but not both.

In 1983, Orange County elected to adopt the PIN index system in lieu of the grantor/grantee index, and by county ordinance, the Register of Deeds in Orange County is instructed HN8"not [to] accept for registration any . . . instrument containing a description of the real property affected by the instrument unless the parcel identifier numbers of all parcels affected have been assigned and written on the instrument by the County Land Records Office." Orange County, N.C., Code of Ordinances § 22.2(b). In practice, Orange County has retained the grantor/grantee index as an unofficial index to be used for the few  [**12] days between when an instrument is offered for recordation and when the certificate of  [*182]  registration on the PIN index issues. But the official index remains the PIN index. *

FOOTNOTES

* While we have not found a North Carolina case addressing precisely the interplay between a PIN index as the official index and a grantor/grantee index as the unofficial index, especially when an instrument is recorded only on the unofficial index, North Carolina law likewise does not provide a mechanism by which we could certify the question to North Carolina's Supreme Court, unlike the law in the other States in the circuit. See MLC Automotive, LLC v. Town of Southern Pines, 532 F.3d 269, 284 (4th Cir. 2008).


In this case, McCormick borrowed $178,275 in 1999 from SunTrust, giving SunTrust a deed of trust creating a lien on both Tracts I and II. At the time of recordation, however, only the parcel identifier number for Tract II was placed on the instrument, and accordingly it was recorded on the PIN index only against Tract II. The 1999 deed of trust did not appear in the PIN index chain of title for Tract I.

SunTrust argues nonetheless that because the Trustee is imputed with notice of the status of title with respect  [**13] to all real property in the bankruptcy estate and both Tract I and Tract II were part of the bankruptcy estate, he had constructive notice that the deed of trust created a lien on both Tract I and Tract II, even though recorded only against Tract II. It asserts, "The Trustee is incapable of claiming entitlement to the status of a [bona fide purchaser] under 11 U.S.C. § 544(a) as to Tract I because his duty to have examined title to Tract II (as of the Petition Date) would admittedly have revealed the existence of the SunTrust deed of trust and, thus, its valid lien upon both Tracts I and II." In making this argument, however, SunTrust blurs the distinction between the notice given by a properly recorded lien and notice derived from other sources. It also bypasses the limitation that a trustee's notice is limited to that imputed to a bona fide purchaser.

First, HN9under § 544, the Trustee is imputed with only the knowledge imputable to a bona fide purchaser, "without regard to any knowledge of the trustee." 11 U.S.C. § 544(a)(3) (emphasis added). Accordingly, SunTrust's efforts to impute knowledge to the Trustee of its 1999 lien through his role as Trustee of the bankruptcy estate must  [**14] fail except to the extent that a bona fide purchaser is imputed with knowledge.

Second, a bona fide purchaser of Tract I would have no reason to examine the title to Tract II, as might the Trustee, and thus cannot be imputed with knowledge of the status of title other than as appears with respect to Tract I. And as the parties agree, a search of title as to Tract I would not have disclosed the SunTrust lien.

Third and most importantly, the simple knowledge of the deed of trust's application to Tract I is irrelevant under North Carolina law. HN10Under North Carolina law, a person seeking to encumber property with an enforceable lien must record the lien against that property in the official index such that a purchaser looking at that index would discover the lien. As the North Carolina courts have pointed out, a purchaser looking at that index can rely on the fact that no lien exists as to the parcel if it does not appear on the index, even "if [the purchaser] has actual notice" of the lien. See Hill, 282 S.E.2d at 782. A lien becomes enforceable against a purchaser only by recording the lien against the property on the official index, not by imputing knowledge to the purchaser through some  [**15] other source or mechanism. See Turner v. Glenn, 220 N.C. 620, 18 S.E.2d 197, 201 (N.C. 1942) ("[I]t has become axiomatic with us that no notice, however full and formal, will take the place of registration" (internal quotation marks omitted)). Indeed, under North Carolina law,  [*183]  compliance with North Carolina's real property recording system is the only way to provide constructive notice of a lien to subsequent purchasers. See Cuthrell v. Camden Cnty., 254 N.C. 181, 118 S.E.2d 601, 603 (N.C. 1961) ("In order for a recordation to be effective as notice there must be a substantial compliance with the indexing statutes").

Because a bona fide purchaser of Tract I would not, at the time of the bankruptcy petition, be imputed with knowledge of SunTrust's 1999 lien because it did not appear on the PIN index for Tract I, the purchaser would not have taken the property from the debtor subject to a preexisting lien not so recorded, even if the purchaser had knowledge of the lien. Because the Trustee simply stands in the same shoes as the bona fide purchaser, he likewise is not imputed with knowledge of SunTrust's prior lien on Tract I.

SunTrust argues that in any event its deed of trust substantially complied with North Carolina's  [**16] indexing system in that SunTrust recorded its lien "in the proper county, with the proper legal descriptions, was properly indexed as to both Tracts I and II under Orange County's grantor/grantee index, and was properly indexed under the PIN system as to Tract II. Additionally, the legal description for both Tracts I and II appear on the same page of the SunTrust deed of trust." It maintains that any careful and prudent title examiner would have discovered its lien on Tract I, either by examining the title to Tract II or by looking at the grantor/grantee index.

While HN11North Carolina recognizes substantial compliance with a recording requirement, see Cuthrell, 118 S.E.2d at 603, SunTrust cannot demonstrate that it substantially complied, or complied to any extent, with Orange County's requirement to record its lien on Tract I in the PIN index. That requirement demands that a deed of trust, to be effective against a parcel of real property, be recorded in the PIN index for that parcel. Concededly, SunTrust never recorded the deed of trust in any manner on the PIN index for Tract I.

HN12North Carolina law is clear that when a county elects to use a PIN index system, it does so "[i]n lieu of"  [**17] the grantor/grantee index system, N.C. Gen. Stat. § 161-22.2(a), and upon doing so that index becomes "the official real property index" for the county, id. § 161-22.2(e). We would effectively be laying waste to North Carolina's recordation system if we were to conclude that recording a deed of trust on some unofficial index, not the official index, amounted to substantial compliance or that recording a deed of trust with respect to the wrong parcel substantially complied with the recordation requirements. As the North Carolina Supreme Court has explained, "It is necessary in the progress of society, under modern conditions, that there be one place where purchasers may look and find the status of title to land." Turner, 18 S.E.2d at 200-01 (emphasis added). And SunTrust did not record its lien at all in that "one place," much less in substantial compliance with the requirements.

Finally, SunTrust devotes a substantial effort to making the distinct argument that any careful and prudent title examiner would have discovered SunTrust's lien, and therefore the Trustee should be imputed with knowledge of what would have been discovered. This argument, however, still gains SunTrust no advantage.  [**18] Again, HN13the test under North Carolina law is not whether a bona fide purchaser had knowledge of a lien or whether the trustee in bankruptcy is imputed with knowledge of a lien. Rather, the test is whether the lien was recorded on the official index, and this test gives no effect to the knowledge of the  [*184]  bona fide purchaser or the Trustee acquired from some source other than the official index. See Hill, 282 S.E.2d at 782.

At bottom, we conclude that because a bona fide purchaser of Tract I in August 2006, when the bankruptcy petition was filed, would not be charged with notice of SunTrust's 1999 lien based on an examination of the PIN index in Orange County, the Trustee likewise is not imputed with such knowledge. Therefore, the Trustee was properly allowed to avoid the lien under 11 U.S.C. § 544(a)(3). The judgment of the district court is

AFFIRMED.

Good FDCPA opinion by the 6th Circuit

We previously reported that Bryllaw won an FDCPA case in Virginia against HSBC Mortgage Corporation, obtaining damages, sanctions, and attorney fees on behalf of an Ashburn homeowner.

Now an Ohio homeowner was able to win on appeal in the 6th Circuit, overturning a typical pro-bank/judicial-bailout ruling by an Ohio federal district judge.

The 6th Circuit held that a homeowner successfully stated a claim under the Federal Debt Collection Practices Act (FDCPA) where Washington Mutual  foreclosed on property before receiving an assignment and transfer of the promissory note and before recording the transfer.  A full text of the opinion is set forth below.


683 F.3d 323; 2012 U.S. App. LEXIS 12971, *;
2012 FED App. 0197P (6th Cir.), **

BETTY WALLACE, Plaintiff-Appellant, v. WASHINGTON MUTUAL BANK, F.A.;WELLS FARGO BANK N.A., Defendants, LERNER, SAMPSON & ROTHFUSS, Defendant-Appellee.

No. 10-3694

UNITED STATES COURT OF APPEALS FOR THE SIXTH CIRCUIT

June 26, 2012, Decided
June 26, 2012, Filed

PRIOR HISTORY:  [*1]
Appeal from the United States District Court for the Southern District of Ohio at Cincinnati. No. 1:09-cv-481—Sandra S. Beckwith, District Judge.
Wash. Mut. Bank, FA v. Wallace, 194 Ohio App. 3d 549, 2011 Ohio 4174, 957 N.E.2d 92, 2011 Ohio App. LEXIS 3483 (Ohio Ct. App., Warren County, 2011)

 MERRITT , Circuit Judge. Washington Mutual  foreclosed on property before receiving an assignment and transfer of the promissory note and the delinquent home mortgage and before recording it in the Warren County, Ohio, Recorder's Office.  [**2]  Because Washington Mutual  did not own the mortgage, the homeowner and mortgagor, plaintiff Betty Wallace, brought a lawsuit for an allegedly false claim of ownership under the Fair Debt Collection Practices Act, 15 U.S.C. §§ 1692 et seq., against the law firm of Lerner, Sampson and Rothfuss,  acting for the purported mortgagee, Washington Mutual,  in the foreclosure action.1 Plaintiff claims that defendant law firm violated the Act, the Ohio Consumer Sales Practices  [*2] Act, and intentionally inflicted emotional distress on her under Ohio law when the foreclosure action was filed against her claiming that Washington Mutual  was the holder of her mortgage, a fact plaintiff alleges was completely false at the time of the foreclosure filing because, as stated above, the mortgage had not been assigned or recorded at that time. The district court dismissed her complaint under Federal Rule of Civil Procedure 12(b)(6), finding that she did not state a claim under the Act. The district court then declined to exercise supplemental jurisdiction as to the state claims. The relevant portions of the complaint at issue are as follows:
11. On information and belief, at some point after April 2008, Wells Fargo  sold or transferred the note and mortgage to WaMu.  Although it transferred its ownership interest in the note and mortgage, Wells Fargo  still serviced the loan on behalf of WaMu.  This meant that Wells Fargo  collected the payments and provided other services in managing the mortgage loan. It also made all decisions regarding the collection of the note and enforcement of WaMu's  rights under the mortgage. At all times after the transfer of ownership of the note  [*3] and mortgage, Wells Fargo  acted as WaMu's  agent with respect to the Plaintiff's loan.
 [**3]  The complaint then alleged that the law firm filed a foreclosure action containing false assertions when it claimed that Washington Mutual  was the owner:
12. On July 11, 2008, WaMu,  through its attorney, LSR, and based on the decision of Wells Fargo,  instituted the Foreclosure Case. In the Complaint, WaMu  asserted that it was the holder of the note. That assertion was false when made. It also asserted that the mortgage had been assigned to it and that it was the holder of the mortgage. Those assertions were false when made. The mortgage was actually assigned by Wells Fargo  to WaMu  on August 14, 2008 by an instrument recorded at Book 4731, Page 91 [sic — the actual page is 90] of the Warren County, Ohio Recorder's Office. At the time the Complaint was filed in the foreclosure case, all defendants knew that WaMu  was not the holder of the note; that WaMu  was not the holder of the mortgage; and that the mortgage had not been assigned to WaMu.
Complaint at ¶¶ 11-12 (emphasis added) (R. 2).

FOOTNOTES

1 15 U.S.C. § 1692e states in relevant part:
HN1A debt collector may not use any false, deceptive, or misleading representation  [*4] or means in connection with the collection of any debt. Without limiting the general application of the foregoing, the following conduct is a violation of this section:

. . .


(2) The false representation of--
(A) the character, amount, or legal status of any debt; or

. . .

(10) The use of any false representation or deceptive means to collect or attempt to collect any debt or to obtain information concerning a consumer.
Plaintiff does not specify in her complaint which subsection of Section 1692e she is invoking, but we have included here the only two subsections relevant to her claim.

Plaintiff also sued other entities at the same time, but appealed the decision below only as to defendant law firm Lerner, Sampson & Rothfuss.  Lerner, Sampson does not dispute that it is a "debt collector" under the Act. Plaintiff does not pursue her original claims against Washington Mutual  and Wells Fargo  on appeal. She appeals only the dismissal of Count III of her complaint, the claim that alleged that the law firm used "false, deceptive or misleading representations" in connection with the collection of any debt in violation of 15 U.S.C. § 1692e.

I.

For purposes of the motion to dismiss the complaint, we  [*5] take the following facts as true. In 1999, plaintiff purchased a home in Waynesville, Ohio, with a mortgage originating with Norwest Mortgage. Plaintiff signed a promissory note in the amount of $66,000 and gave a mortgage to Norwest to secure the note. Norwest and Wells Fargo  later merged and plaintiff began making her payments to Wells Fargo.  In March or April 2008, Wells Fargo  notified plaintiff that she was delinquent on her mortgage, although she was not yet delinquent at that time. Complaint at ¶ 10. (R.2). On August 14, 2008, Wells Fargo  transferred and recorded the note and the delinquent mortgage to Washington Mutual.  On July 11, 2008, more than a month before the transfer and assignment, Washington Mutual,  through its attorneys, Lerner,  [**4]  Sampson & Rothfuss, filed a foreclosure action against plaintiff in the Warren County Court of Common Pleas in Ohio, asserting that Washington Mutual  was the holder of the note and the mortgage.

The problem in this case arises from the fact that the recordation and transfer of ownership of the note and mortgage to Washington Mutual  did not occur until August 14, 2008, a little more than a month after Washington Mutual  filed the foreclosure  [*6] action asserting that it owned the mortgage. An Ohio appellate court has so found. Washington Mutual Bank, N.A. v. Wallace, 194 Ohio App. 3d 549, 559, 2011 Ohio 4174, 957 N.E.2d 92, 99 (Ohio Ct. App.) ("[I]t is undisputed that [Washington Mutual]  became the real party in interest in the foreclosure action 34 days later on August 14, 2008, when . . . Wells Fargo  executed a written assignment of Wallace's note and mortgage to [Washington Mutual] ".), appeal allowed by 130 Ohio St. 3d 1493, 2011 Ohio 6556, 958 N.E.2d 956 (2011) (briefing stayed pending resolution of Fed. Home Loan Mortg. Corp. v. Schwartzwald, 194 Ohio App. 3d 644, 2011 Ohio 2681, 957 N.E.2d 790 (Ohio Ct. App.), motion to certify and appeal allowed by 129 Ohio St. 3d 1488, 2011 Ohio 5129, 954 N.E.2d 661 (Ohio Oct. 5, 2011)). Plaintiff did not respond to the foreclosure notice, and a default judgment was entered against her on August 20, 2008. A sheriff's auction of her home was scheduled for December 8, 2008. When plaintiff learned of the sale, she contacted Lerner, Sampson and tried to arrange to pay off the loan. When her attempts to work out the loan were unsuccessful, plaintiff contacted Pro Seniors, an organization  [*7] that provides free legal services to senior citizens. She was able to get the sale postponed. On December 15, 2008, defendants petitioned the state court to set another sale date, which it did for late February or early March 2009. It appears from the docket sheet in the foreclosure action that plaintiff's home has since been sold at auction. Journal Entry Confirming Sale in Washington Mutual Bank  v. Wallace, 08-cv-71941 (Warren Cnty. [Ohio] Ct. of Common Pleas Jan. 24, 2011) (found at http://www.co.warren.oh.us/clerkofcourt/search).

Plaintiff filed her complaint in this action in July 2009, alleging that Lerner, Sampson and the banks violated the Fair Debt Collection Practices Act, 15 U.S.C. § 1692 et seq., as well as the Ohio Consumer Sales Practices Act, Ohio Rev. Code § 1345.01 et seq., when Lerner, Sampson filed the foreclosure complaint against plaintiff in state court on behalf of Washington  [**5]  Mutual. The district court found that plaintiff failed to state a claim under the Fair Debt Collection Practices Act because the failure to record an Assignment of Mortgage before filing a foreclosure action is not a deceptive practice under the Act. The single issue before us is whether  [*8] the filing of foreclosure action by the law firm claiming ownership of the mortgage by its client Washington Mutual  constitutes a "false, deceptive or misleading representation" under the Fair Debt Collection Practices Act when the bank has not received a transfer of the ownership documents. We hold that the complaint states a valid claim and reverse the dismissal of the case.

II.

HN2The Fair Debt Collection Practices Act prohibits a debt collector from the use of "any false, deceptive, or misleading representation or means in connection with the collection of any debt." 15 U.S.C. § 1692e. Section 1692k of the statute allows the consumer to recover statutory or actual damages for violations of the Act. HN3In order to establish a claim under § 1692e: (1) plaintiff must be a "consumer" as defined by the Act; (2) the "debt" must arises out of transactions which are "primarily for personal, family or household purposes;" (3) defendant must be a "debt collector" as defined by the Act; and (4) defendant must have violated § 1692e's prohibitions. Whittiker v. Deutsche Bank Nat'l Trust Co., 605 F. Supp. 2d 914, 926 (N.D. Ohio 2007). Only the fourth element is at issue.

HN4Whether a debt collector's actions  [*9] are false, deceptive, or misleading under § 1692e is based on whether the "least sophisticated consumer" would be misled by defendant's actions. Harvey v. Great Seneca Fin. Corp., 453 F.3d 324, 329 (6th Cir. 2006). In addition, in applying this standard, we have also held that a statement must be materially false or misleading to violate Section 1692e. See Miller v. Javitch, Block & Rathbone, 561 F.3d 588, 596-97 (6th Cir. 2009) (applying a materiality standard to a Section 1692e claim that was based on alleged misstatements in legal pleadings). The materiality standard simply means that in addition to being technically false, a statement would tend to mislead or confuse the reasonable unsophisticated consumer.

 [**6]  Plaintiff alleges that the statement in the foreclosure complaint that Lerner, Sampson filed against her on behalf of Washington Mutual  contained the false statement that Washington Mutual  was the holder of her mortgage. District courts have decided, and we agree, that HN5a clearly false representation of the creditor's name may constitute a "false representation . . . to collect or attempt to collect any debt" under Section 1692e. Hepsen v. J.C. Christensen and Assocs., Inc., No. 8:07-CV-1935-T-EAJ, 2009 U.S. Dist. LEXIS 92717, 2009 WL 3064865, at *5 (M.D. Fla. Sept. 22, 2009) [*10]  (imposing liability based on a statement incorrectly identifying the name of a creditor comports with the purposes of the Act); Blarek v. Encore Receivable Mgmt., Inc., No. 06-C-0420, 2007 U.S. Dist. LEXIS 22549, 2007 WL 984096, at *15 (E.D. Wis. Mar. 27, 2007) (same). Lerner, Sampson does not dispute that the foreclosure complaint identifies Washington Mutual  as the actual holder of plaintiff's mortgage, but claims that Ohio law permits Washington Mutual  to anticipate that it would become the title holder after the foreclosure action was initiated but before it becomes final. We disagree that the issue of standing in Ohio, even if resolved in Lerner, Sampson's favor, has any bearing on whether misidentifying a creditor is materially misleading under the Fair Debt Collection Practices Act.1

FOOTNOTES

1 The Ohio Supreme Court allowed an appeal and stayed briefing in plaintiff's state case against Washington Mutual,  Wallace v. Wash. Mut. Bank, N.A., 130 Ohio St. 3d 1493, 2011-Ohio-6556, 958 N.E.2d 956 (Dec. 21, 2011), pending resolution of Fed. Home Loan Mortg. Corp. v. Schwartzwald, 194 Ohio App. 3d 644, 2011 Ohio 2681, 957 N.E.2d 790 (Ohio Ct. App.),  [*11] motion to certify and appeal allowed by 129 Ohio St. 3d 1488, 2011 Ohio 5129, 954 N.E.2d 661 (Ohio Oct. 5, 2011) (Consolidating cases and certifying a conflict in the Ohio appellate courts on the issue of whether in order to have standing as a plaintiff in a mortgage foreclosure action, a party must show that it owned the note and the mortgage when the complaint was filed.). Should the Ohio courts decide that a potential mortgagee may anticipate transfer of the note and mortgage and bring valid foreclosure proceedings in advance, the district court will have to decide the impact of such a holding on Wallace's claim for damages under the Fair Debt Collection Practices Act. HN6We do not agree, however, with the district courts of this Circuit that have treated the debate in Ohio over standing to bring a foreclosure action as dispositive of whether a statement was materially misleading under the Act. See, e.g., Whittiker v. Deutsche Bank Nat'l Trust Co., 605 F. Supp. 2d 914, 930-31 (N.D. Ohio 2009); Kline v. Mortg. Elec. Sec. Sys., No. 3:08cv408, 2010 U.S. Dist. LEXIS 26666, 2010 WL 1133452, at *7 (S.D. Ohio Mar. 22, 2010). Certainly, should the Ohio courts decide that Washington Mutual  did not have standing to bring  [*12] the foreclosure action in the first place, the materiality of the false statement of ownership would be patent. However, even if Ohio holds the opposite, HN7the Act protects the unsophisticated consumer from false statements tending to mislead or confuse—whether Washington Mutual  may ultimately succeed in an Ohio court in its foreclosure action has no bearing on whether the initial false statements misled Wallace. The issue arises in the shadow of the recent subprime mortgage crises in which financial institutions are charged with encouraging reckless lending standards and rapid transfer and sale of subprime mortgages so as to profit from the mass securitization and sale of the mortgages.

Plaintiff alleges that identifying Washington Mutual  as the holder of the note caused her confusion and delay in trying to contact the proper party concerning payment on her loan and resolution of the problem. She alleges that she called Washington Mutual,  the purported owner  [**7]  of the mortgage, to try to obtain information about her home loan and was told she had to have a ten-digit account number for her loan, not the account number she had from Wells Fargo.  Plaintiff also alleges that her daughter ultimately  [*13] contacted an attorney, as well as the Ohio Attorney General's Office, in an attempt to stop the sale of plaintiff's home and get the loan reinstated. Complaint at ¶ 15. Given these allegations, plaintiff has sufficiently alleged a material misrepresentation that would confuse or mislead an unsophisticated consumer. By reversing the district court on the Rule 12(b)(6) motion, we, of course, do not make any findings about the merits of plaintiff's claim under the Act or any defenses that may be raised by Lerner, Sampson. We hold only that plaintiff has alleged sufficient facts to survive a motion for dismissal on the pleadings.

For the foregoing reasons, we reverse the judgment of the district court and remand for proceedings consistent with this opinion.

Oregon Supreme Court Will Consider Legality of MERS in Oregon

Oregon Supreme Court will consider the legality of MERS in Oregon.  The order accepting certified questions from the Oregon Federal District Court can be accessed here.  This is a separate case from the one recently ruled upon by the Oregon Court of Appeals.

Oregon Court of Appeals rules against banks, MERS in foreclosure case

By Brent Hunsberger, The Oregonian 


The Oregon Court of Appeals struck a blow to the mortgage industry in Oregon Wednesday, ruling that its controversial document-registry system could not be used to skirt state recording law in out-of-court foreclosures.

In a decision with implications beyond the Mortgage Electronic Registration Systems Inc., the state's second-highest court also held Wednesday that a lender must ensure a complete ownership history of the mortgage is filed in county records before it can foreclose outside a courtroom.

More

Continuing coverage of theMortgage Electronic Registration Systems, the mortgage industry's digital registry often used to streamline foreclosure paperwork.

MERS was created by the mortgage industry to bundle and sell loans to investors without having to record every assignment with county clerks. It is involved in most mortgages across the country.

But the court found that the Oregon Trust Deed Act requires the party that receives loan payments to publicly record all changes in mortgage ownership before starting a so-called nonjudicial foreclosure.

MERS does not take loan payments and does not qualify as a “beneficiary” of a trust deed, so the digital registry cannot be used to avoid the recording requirement, the court ruled.

“A beneficiary that uses MERS to avoid publicly recording assignments of a trust deed cannot avail itself of a nonjudicial foreclosure process that requires that very thing--publicly recorded assignments," the court ruled. Judge Lynn Nakamoto wrote the decision.

The ruling won't be the final say on the matter.

In a statement, MERS said it disagreed with the ruling and would appeal it to the Oregon Supreme Court. 

"MERS validity as beneficiary has been affirmed in 48 prior Oregon rulings, including 30 since this case was filed," MERS spokeswoman Janis Smith said in the statement.

But other judges have ruled against MERS. The state Supreme Court was asked earlier this year by Chief U.S. District Court Judge Ann Aiken in Portland to resolve the differing opinions. Stephen Armitage, a spokesman for the court, said he did not know when the justices would address the matter.

A third Oregon case is on appeal before the 9th U.S. Circuit Court of Appeals.

The Oregon Legislature could also change the law, though the financial industry's attempt to do during the 2010 session prompted homeowner outrage. 

Some banks already have decided to file some foreclosures in court, a process known as judicial foreclosure that lenders say will take longer and cost more. 

In Hawaii last year, when a new law requiring judicial foreclosures went into effect, foreclosure activity dropped by more than half, said Darren Blomquist, a vice president with RealtyTrac, a real estate research firm. The average time to complete a foreclosure grew from 278 days in the second quarter of 2011 to 505 days a year later.

But foreclosure starts have jumped significantly this year, he said. 

"The pattern in Hawaii shows us that although the switch to the judicial process will forestall foreclosure activity in the short term, it by and large will not eliminate foreclosure activity for the long term," Blomquist said. "The lenders will eventually adapt to the new process and start catching up on delayed foreclosures."

For the time being, lower state courts will likely have to follow Wednesday's ruling, said Kelly Harpster, a Lake Oswego attorney who represents homeowners.

"Right now, it is the first and last word in Oregon," said Phil Querin, a real estate attorney in Portland. "The Supreme Court will have to make the final decision." 

Smith of MERS noted that the ruling does not affect judicial foreclosures filed in court and does not overturn any completed foreclosures. 

But attorneys representing homeowners speculated that it might compel some homeowners to try to overturn previous foreclosures where assignments aren't completely recorded. 

In Wednesday's decision, the court reversed a Clackamas County Circuit Court judge's ruling against homeowner Rebecca Niday, a Realtor in Rhododendron. Niday bought a home in August 2006, borrowing $236,000 from GreenPoint Mortgage Funding Inc., a MERS member that was shut down a year later by owner Capital One Financial Corp. 

Executive Trustee Services Inc. sent Niday a default notice in April 2009 and scheduled a foreclosure sale on behalf of MERS and GreenPoint, the decision says. She sued to block the foreclosure sale, saying that MERS and GMAC, the loan servicer, had failed to provide evidence that they had interest in the property.

The court found that while GreenPoint might have sold the loan, or note, it never recorded that sale, or assignment, at the Clackamas County Recorders Office.

The court said that since MERS can't take loan payments, it has no interest in the loan and could not be considered as a "beneficiary," as stated on the trust deed securing the loan. 

"Because there is evidence that GreenPoint assigned its beneficial interest in the trust deed but did not record that assignment, the trial court erred," the court wrote.

Continued here

The opinion can be accessed here.

Countrywide made discount loans to buy influence with members of Congress, House report says (What else is new???)

The former Countrywide Financial Corp., whose subprime loans helped start the nation's foreclosure crisis, made hundreds of discount loans to buy influence with members of Congress, congressional staff, top government officials and executives of troubled mortgage giant Fannie Mae, according to a House report.

The report, obtained by The Associated Press, said that the discounts -- from January 1996 to June 2008, were not only aimed at gaining influence for the company but to help mortgage giant Fannie Mae. Countrywide's business depended largely on Fannie, which at the time was trying to fend off more government regulation but eventually had to come under government control.

Fannie was responsible for purchasing a large volume of Countrywide's subprime mortgages. Countrywide was taken over by Bank of America in January 2008, relieving the financial services industry and regulators from the messy task of cleaning up the bankruptcy of a company that was servicing 9 million U.S. home loans worth $1.5 trillion at a time when the nation faced a widening credit crisis, massive foreclosures and an economic downturn.

The House Oversight and Government Reform Committee also named six current and former members of Congress who received discount loans, but all of their names had surfaced previously. Other previously mentioned names included former top executive branch officials and three chief executives of Fannie Mae.

"Documents and testimony obtained by the committee show the VIP loan program was a tool used by Countrywide to build goodwill with lawmakers and other individuals positioned to benefit the company," the report said. "In the years that led up to the 2007 housing market decline, Countrywide VIPs were positioned to affect dozens of pieces of legislation that would have reformed Fannie" and its rival Freddie Mac, the committee said.

Some of the discounts were ordered personally by former Countrywide chief executive Angelo Mozilo. Those recipients were known as "Friends of Angelo."

The Justice Department has not prosecuted any Countrywide official, but the House committee's report said documents and testimony show that Mozilo and company lobbyists "may have skirted the federal bribery statute by keeping conversations about discounts and other forms of preferential treatment internal. Rather than making quid pro quo arrangements with lawmakers and staff, Countrywide used the VIP loan program to cast a wide net of influence."

The Securities and Exchange Commission in October 2010 slapped Mozilo with a $22.5 million penalty to settle charges that he and two other former Countrywide executives misled investors as the subprime mortgage crisis began. Mozilo also was banned from ever again serving as an officer or director of a publicly traded company.

He also agreed to pay another $45 million to settle other violations for a total settlement of $67.5 million that was to be returned to investors who were harmed.

The report said that until the housing market became swamped with foreclosures, "Countrywide's effort to build goodwill on Capitol Hill worked."

The company became a trusted adviser in Congress and was consulted when the House Financial Services Committee and Senate Banking Committee considered reform of Fannie and Freddie and unfair lending practices.

"If Countrywide's lobbyists, and Mozilo himself, were more strictly prohibited from arranging preferential treatment for members of Congress and congressional staff, it is possible that efforts to reform (Fannie and Freddie) would have been met with less resistance," the report said.

The report said Fannie assigned as many as 70 lobbyists to the Financial Services Committee while it considered legislation to reform the company from 2000 to 2005. Four reform bills were introduced in the House during the period, and none made it out of the committee.

Hit with staggering losses, Fannie and Freddie came under government control in September 2008. As of Dec. 31, 2011, the Treasury Department had committed over $183 billion to support the two companies -- and there's no end in sight.

Among those who received loan discounts from Countrywide, the report said, were:

--Former Senate Banking Committee Chairman Christopher Dodd, D-Conn.

--Senate Budget Committee Chairman Kent Conrad, D-N.D.

--Mary Jane Collipriest, who was communications director for former Sen. Robert Bennett, R-Utah, then a member of the Banking Committee. The report said Dodd referred Collipriest to Countrywide's VIP unit. Dodd, when commenting on his own loans, has said he was unaware of the discount program.

--Rep. Howard "Buck" McKeon, R-Calif., chairman of the House Armed Services Committee.

--Rep. Edolphus Towns, D-N.Y., former chairman of the Oversight Committee. Towns issued the first subpoena to Bank of America for Countrywide documents, and current Chairman Darrell Issa, R-Calif., subpoenaed more documents. The committee said that in responding to the Towns subpoena, Bank of America left out documents related to his Towns' loan.

--Rep. Elton Gallegly, R-Calif.

--Top staff members of the House Financial Services Committee.

--A staff member of Rep. Ruben Hinojosa, D-Texas, a member of the Financial Services Committee.

--Former Rep. Tom Campbell, R-Calif.

--Former Housing and Urban Development Secretaries Alphonso Jackson and Henry Cisneros; former Health and Human Services Secretary Donna Shalala. The VIP unit processed Cisneros's loan after he joined Fannie's board of directors.

--Rep. Pete Sessions, R-Texas, was an exception. He told the VIP unit not to give him a discount, and he did not receive one.

--Former heads of Fannie Mae James Johnson, Daniel Mudd and Franklin Raines. Countrywide took a loss on Mudd's loan. Fannie employees were the most frequent recipients of VIP loans. Johnson received a discount after Mozilo waived problems with his credit rating.

The report said Mozilo "ordered the loan approved, and gave Johnson a break. He instructed the VIP unit: `Charge him 1/2 under prime. Don't worry about (the credit score). He is constantly on the road and therefore pays his bills on an irregular basis but he ultimately pays them."

Johnson in 2008 resigned as a leader of then-candidate Barack Obama's vice presidential search committee after The Wall Street Journal reported he had received $7 million in Countrywide discounted loans.

The report said those who received the discounts knew the loans were handled by a special VIP unit.

"The documents produced by the bank show that VIP borrowers received paperwork from Countrywide that clearly identified the VIP unit as the point of contact," the committee said.

The standard discount was .5 waived points. Countrywide also waived junk fees that usually ranged from $350 to $400.

Read more: http://www.foxnews.com/politics/2012/07/05/countrywide-made-discount-loans-to-buy-influence-with-members-congress-report/?test=latestnews#ixzz1zxWJP9M0

Struggling homeowners avert foreclosure via mediation

Thu, Jul 05 01:19 AM EDT

By Leah Schnurr

NEW YORK (Reuters) - Verise Campbell was excited. She could finally help struggling homeowners negotiate deals with their lenders to avoid foreclosure, but the angry response to her first phone call shocked her.

"There will be no mediation! There will be no mediation! There will be no mediation!" she recalls the representative of the lender shouting.

"And then he took the phone, and he struck something hard three times," said Campbell, who is deputy director of Nevada's mediation program.

It was 2009, the financial crisis was roiling the world economy and Nevada had just started the program to try to stem the flood of people losing their homes in one of the states hardest hit by the housing collapse.

The program was a big change in the way the state handled foreclosures, and critics slammed it as a tactic to postpone them while giving homeowners a free ride in the meantime. But advocates now cite Nevada as a model, and mediation is used in more than 20 states.

The aim: to put borrowers, lenders and an impartial third party in the same room to negotiate a way to help owners keep their homes - or get out of them as painlessly as possible.

"Of all the legislation that I've seen pass, it seems to be the most effective in actually reducing foreclosures for a longer period of time," said Daren Blomquist, vice president of online foreclosure property marketplace RealtyTrac.

The U.S. housing market is showing signs of stabilization six years after home prices peaked, but the foreclosure crisis could be only halfway through.

About 1.4 million homes were at some stage of foreclosure in May, according to data provider CoreLogic, and 1.6 million more households were behind on payments at the start of 2012.

Not only do steeply discounted foreclosure sales weigh on home prices, but the process can drag on for more than two years in some states due to backlogged courts, allegations of improper documentation and sheer volume.

Some observers say the housing market would heal faster by clearing out pending foreclosure cases as quickly as possible, even if it means evicting millions of families.

Others, however, say that kind of pain is avoidable and expect mediation to increase.

"People are seeing that you can actually get good modifications from these conferences," said Geoff Walsh, staff attorney at the National Consumer Law Center in Boston.

The face-to-face sessions are also a way to assess a homeowner's eligibility for government assistance, such as the federal Home Affordable Modification Program.

About 14 states and the District of Columbia now have mediation programs, as do cities and counties in other states. Paying for them are government money, fees from lenders and sometimes borrowers, or a combination of funding and fees.

Data on their effectiveness is patchy, but figures from some programs suggest they help some people to lower their monthly payments, allowing them to keep their homes and avoid defaulting again.

Of the 12,805 mediations completed in Connecticut from July 2008 through December 2011, more than half resulted in a loan modification. Two-thirds of owners in the program were able to stay in their homes, according to state data.

Another 15 percent had to move out, but were able to strike a deal with their lender, such as for a short sale, where the owner is allowed to sell the home for less than the amount owed on the mortgage, avoiding a lengthy foreclosure.

Other programs have worked well, according to a report from the Boston Federal Reserve in September.

Among the success stories are Philadelphia, with 84 percent of households in mediation avoiding foreclosures; Nevada, 89 percent; and Cuyahoga County, Ohio, 61 percent.

However, participation rates vary, ranging from 20 percent in Nevada, where the homeowner opts in to the program, to 70 percent in Philadelphia, where enrollment is automatic, the report said.

Mediation has not succeeded in all states.

Last year New Hampshire scrapped a program that relied on lenders for referrals and suffered from low participation. Florida also got rid of its statewide program after limited outreach to homeowners hurt its overall success rate, although there are still local programs there.

HOW LONG?

Lenders and companies that service mortgages question the need for mediation laws, saying their own programs for working with struggling homeowners are more effective.

Steve O'Connor, senior vice president of public policy at the Mortgage Bankers Association, said an industry alliance known as Hope Now had done more than 5 million permanent loan modifications since mid-2007.

Asked about homeowners' statements that they cannot work with their lenders, O'Connor said that was more of a problem early in the crisis, when banks were not equipped to deal with the level of foreclosures and delinquencies.

"Lenders welcome the opportunity to interact with the borrower and try to figure out what the best solutions are," he said. But with mediation, "you get caught in this morass of requirements and steps that can actually drag out the process."

And that is the crux of the debate: whether mediation prolongs already lengthy foreclosures. Analysts caution, however, that many factors can affect the length of a foreclosure, making it difficult to isolate any one cause.

Data is limited, but Cuyahoga County, which includes Cleveland, found that borrowers who participated in its program resolved their cases in slightly more than six months on average, compared with nearly a year for others.

PREEMPTIVE MEDIATION

Some programs go a step further by offering mediation to homeowners who are not yet in foreclosure.

Since late 2010, Fannie Mae, the top U.S. provider of mortgage money, has been running a pilot program in Florida for homeowners who are just behind on their payments.

Through a new program in Oregon, mediation is available to "underwater" homeowners, who have not yet missed a payment, but whose houses are worth less than their mortgages, putting them at risk of default in the future.

Salem, Oregon resident Ginny Real was a fixture in the push for the program, meeting with lawmakers to tell them how she lost her home of 24 years after being swamped by medical bills.

Continued here...

CNNMoney: Whistleblowers Win $46.5 Million in Foreclosure Settlement

By James O'Toole

NEW YORK (CNNMoney) -- Getting served with foreclosure papers made Lynn Szymoniak rich.

While she couldn't have known it at the time, that day in 2008 led to her uncovering widespread fraud on the part of some of the country's biggest banks, and ultimately taking home $18 million as a result of her lawsuits against them.

Szymoniak is one of six Americans who won big in the national foreclosure settlement, finalized earlier this year, as a result of whistleblower suits. In total, they collected $46.5 million, according to the Justice Department.

In the settlement, the nation's five largest mortgage lenders --Bank of America, Wells Fargo, J.P. Morgan Chase, Citigroup and Ally Financial -- agreed to pay $5 billion in fines and committed to roughly $20 billion more in refinancing and mortgage modifications for borrowers.

A judge signed off on the agreement in April, and in May -- Szymoniak received her cut.

"I recognize that mine's a very, very happy ending," she said. "I know there are plenty of people who have tried as hard as I have and won't see these kinds of results."

Whistleblower suits stem from the False Claims Act, which allows private citizens to file lawsuits on behalf of the U.S. when they have knowledge that the government is being defrauded. These citizens are then entitled to collect a portion of any penalties assessed in their case.

The act was originally passed in 1863, during a time when government officials were concerned that suppliers to the Union Army during the Civil War could be defrauding them.

In 1986, Congress modified the law to make it easier for whistleblowers to bring cases and giving them a larger share of any penalties collected. Whistleblowers can now take home between 15% and 30% of the sums collected in their cases.

In the cases addressed in the foreclosure settlement, the whistleblowers revealed that banks were gaming federal housing programs by failing to comply with their terms or submitting fraudulent documents.

In Szymoniak's case alone, the government collected $95 million based on her allegations that the banks had been using false documents to prove ownership of defaulted mortgages for which they were submitting insurance claims to the Federal Housing Administration.


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