July 10, 2014
The court in deciding Bank of Am., N.A. v. Samaha, 2013 Conn. Super. (Conn. Super. Ct., 2013) granted the plaintiff’s motion for summary judgment.
In this action, the plaintiff sought to foreclose a mortgage executed by Joseph Samaha and Denise Samaha in favor of the Webster Bank.
The defendant raised several special defenses to this foreclosure action. First, the defendant asserted that the plaintiff did not have standing to bring this litigation. Second, defendant claimed that as a result of the death of one of the makers of the note, Joseph Samaha, that his estate had an indivisible interest in the subject property and was subject to probate court jurisdiction. Third, the defendant challenged the authority of MERS to assign this mortgage to the plaintiff. Fourth, the defendant alleged that she had tendered payment with regard to the note and she alleged accord and satisfaction. Fifth, the defendant challenged whether or not the note in question was a negotiable instrument.
With regard to the first special defense, the court found that the affidavits supplied by the plaintiff established that they had standing for the purposes of doing this litigation.
In regards to the second defense, the court found that there was simply no authority for this assertion. The third special defense challenged the authority of the MERS to assign the note and mortgage. The court found that there were no facts alleged in the special defense and there was no affidavit from the defendant providing any factual foundation for her assertions.
The court found that the fourth defense was a mere assertion, without any evidence to support it, and thereby contest or create a material issue of fact for a motion of summary judgment is insufficient. Finally, the fifth special defense was deemed to be an assertion of a legal conclusion.
July 8, 2014
The Federal Reserve Board issued its Independent Foreclosure Review. By way of background,
Between April 2011 and April 2012, the Office of the Comptroller of the Currency (OCC), the Board of Governors of the Federal Reserve System (“Federal Reserve”), and the Office of Thrift Supervision (OTS) issued formal enforcement actions against 16 mortgage servicing companies to address a pattern of misconduct and negligence related to deficient practices in residential mortgage loan servicing and foreclosure processing identified by examiners during reviews conducted from November 2010 to January 2011. Beginning in January 2013, 15 of the mortgage servicing companies subject to enforcement actions for deficient practices in mortgage loan servicing and foreclosure processing reached agreements with the OCC and the Federal Reserve (collectively, the “regulators”) to provide approximately $3.9 billion in direct cash payments to borrowers and approximately $6.1 billion in other foreclosure prevention assistance, such as loan modifications and the forgiveness of deficiency judgments. For participating servicers, fulfillment of these agreements satisfies the foreclosure file review requirements of the enforcement actions issued by the OCC, the Federal Reserve, and the OTS in 2011 and 2012. (1)
The government’s actions regarding the Independent Foreclosure Review have been its controversial, with some believing that it was completed too hastily. I am less interested in that debate than in FRB’s sense of the the servicing sector going forward.
The report states that “the initial supervisory review of the servicer and holding company action plans has shown that the banking organizations under Consent Orders have implemented significant corrective actions with regard to their mortgage servicing and foreclosure processes, but that some additional actions need to be taken.” (24) Overall, the report reflects an optimism that endemic servicer problems are a thing of the past.
A drumbeat of reports and cases seems to be at odds with that assessment, although there is obviously a significant lag between the occurrence of problems and the report of them in official sources. As a close observer of the mortgage industry, however, I am not yet convinced that regulators have their hands around the problems in the servicer industry. Careful monitoring remains the order of the day.
July 7, 2014
The FHFA’s Inspector General issued an audit, FHFA Actions to Manage Enterprise Risks from Nonbank Servicers Specializing in Troubled Mortgages. The audit identified two major risks in the current environment:
- Using short-term financing to buy servicing rights for troubled mortgage loans that may only begin to pay out after long-term work to resolve their difficulties. This practice can jeopardize the companies’ operations and also the Enterprises’ timely payment guarantees and reputation for loans they back; and
- Assuming responsibilities for servicing large volumes of mortgage loans that may be beyond what their infrastructures can handle. For example, of the 30 largest mortgage servicers, those that were not banks held a 17% share of the mortgage servicing market at the end of 2013, up from 9% at the end of 2012, and 6% at the end of 2011. This rise in nonbank special servicers has been accompanied by consumer complaints, lawsuits, and other regulatory actions as the servicers’ workload outstrips their processing capacity. (1-2)
The audit notes that “nonbank special servicers do not have a prudential safety and soundness regulator at the federal level for their mortgage servicing operations.” (6)
I think the important story here is more about consumer protection than it is about safety and soundness regulation. That is not to say that the Inspector General’s audit ignored consumer protection. Indeed, it it does spend a significant amount of time addressing that topic, noting that other federal regulators such as the CFPB have also zeroed in on the impact that non-bank servicers have on consumers.
July 3, 2014
This is the second great web resource for land use geeks that I have seen within the last week. The Municipal Arts Society has launched Accidental Skyline. MAS describes it as follows: “Too often, New Yorkers are caught off guard by new development in their neighborhoods. The Accidental Skyline offers tools to help demystify the city planning process and bring the public into the conversation.”
Accidental Skyline shows “where new development could occur across New York City – allowing New Yorkers to assess how their neighborhoods could be impacted. These maps add to a body of work available on this site, including The Accidental Skyline, presentations and media coverage. Additional reports will highlight how other cities are responding to these challenges.”
MAS created Accidental Skyline
in response to the super-tall towers rising along the southern border of Central Park. For the most part, these buildings are being built as-of-right, without public or environmental review. When completed, they will cast new shadows on the park and change views of the city. While MAS’s work started in response to the buildings near Central Park, the issue is one that increasingly concerns neighborhoods across the city. Many New Yorkers feel left out of the planning process and are unaware of development proposals until shovels hit the ground.
MAS has four main goals for Accidental Skyline:
- Ensure robust civic engagement as the city develops and grows
- Bring greater transparency to the city’s planning process
- Highlight the impacts of development on NYC neighborhoods, including parks, open space, infrastructure and the skyline
- Secure policy and regulatory changes that protect the city’s vital open spaces and create a better balance between benefits received by private developers and impact on the public realm
This is a great resource for all New Yorkers, both those who favor preservation and those who favor development. It is also a useful tool to rely upon as New York embarks on its ambitious affordable housing plan. The housing plan will certainly require increased density in certain parts of the city and Accidental Skyline can help us develop that skyline with some intentionality.
July 2, 2014
Law360 quoted me in High Court Environmental Ruling Could Clear Air For Banks (behind a paywall). The article reads in part,
A recent U.S. Supreme Court ruling that a federal environmental law does not preempt state statutes of repose has inspired banks and other targets of Wall Street enforcers to test the decision’s power to finally fend off lingering financial crisis-era cases on timeliness grounds.
The high court on June 9 found that the Comprehensive Environmental Response, Compensation and Liability Act could not extend the 10-year statute of repose in a North Carolina environmental cleanup suit in the in CTS Corp. v. Waldburger case. Although the decision pertained to a case outside of the financial realm, attorneys say it could limit the ability of federal financial regulators to bring claims on behalf of failed financial institutions under two of their favored tools: the Financial Institutions Reform, Recovery and Enforcement Act and the Housing and Economic Recovery Act.
That’s because the defendants in those cases, including banks but others as well, will now be able to argue that regulators like the National Credit Union Administration, the Federal Housing Finance Agency and the Federal Deposit Insurance Corp. missed their chance to bring claims on behalf of institutions in receivership.
Given the Supreme Court’s interpretation, the regulators may be on shaky ground.
“The government is going to have a much more difficult time sustaining the arguments it’s been making after CTS,” said Jeffrey B. Wall, a partner with Sullivan & Cromwell LLP and a former assistant solicitor general.
In its CTS ruling, the Supreme Court found that CERCLA does not preempt state statutes of repose like the one in North Carolina, citing CERCLA’s exclusive use of the phrase “statute of limitations.”
Statutes of repose and statutes of limitations are distinct enough terms in their usage that it’s proper to conclude that Congress didn’t intend to preempt statutes of repose when it crafted CERCLA, Justice Anthony M. Kennedy said in the majority opinion. The justice cited a 1982 congressional report on CERCLA that recommended repealing state statutes of limitations and statutes of repose but acknowledged that they were not equivalent.
According to a memo released June 10 by Sullivan & Cromwell, both FIRREA and HERA are susceptible to similar readings by courts.
Both statutes include extenders that allow government agencies suing on behalf of failed financial institutions to move beyond statutes of limitations on state law claims. However, much like CERCLA, both say nothing about extending statutes of repose, the memo said.
And that could make a major difference for a large number of defendants trying to fend off claims from the FDIC, NCUA and FHFA, Wall said.
* * *
The CTS ruling is likely to play out in cases brought by financial regulators in smaller cases over losses incurred by failed financial institutions using FIRREA and HERA. But FIRREA has also become a favored tool in the U.S. Department of Justice’s big game hunts against ratings agency Standard & Poor’s and Bank of America.
Because those cases are largely predicated on federal claims, the CTS case is unlikely to be a help for those institutions, according to Brooklyn Law School professor David Reiss.
“I don’t read it as having an extension on the higher-profile FIRREA cases,” he said.
But even if CTS is limited to state law claims brought by financial regulators, that could have a major impact given the sheer number of cases the FDIC, NCUA and FHFA bring.