May 30, 2014
Reiss on GSE Litigation
Inside Mortgage Finance profiled me in Legal Expert: GSE Shareholder Plaintiffs, U.S. Want ‘Total’ Victory (behind a paywall). It reads,
Look for the various GSE shareholder lawsuits against the federal government to take a “very long time to be decided” with the courts taking up to a year to resolve just the introductory motions and an ultimate appeal to the U.S. Supreme Court.
That’s the view of one legal expert speaking during a recent Bloomberg Industries webinar on Fannie Mae and Freddie Mac litigation. Brooklyn Law School Professor David Reiss noted there are some parallels to the savings and loan lawsuits brought by owners against the federal government 20 years ago. But the attorney stressed that the litigation from the Fannie and Freddie investors against the government offers an entirely different and deeper set of legal complexities.
“These are factually and legally complex cases and don’t trust anyone that thinks this is a slam dunk for any one of the parties,” predicted Reiss. He added that neither the government nor GSE shareholders can cut a deal and settle for anything short of total victory.
In its motion to dismiss, the government argues that the plaintiffs – hedge funds that have speculated in the junior preferred – are not entitled to recover anything, either on their individual or derivative claims, in light of the extensive powers that the Housing and Economic Recovery Act granted to the Federal Housing Finance Agency in its capacity as conservator.
With the “entire range of private, administrative and constitutional principles” due to be called into question in this litigation, Reiss said there’s a great deal of uncertainty over how the courts will decide the issue, including whether the Supreme Court will hear the inevitable appeal by plaintiffs or defendant.
May 30, 2014 | Permalink | No Comments
Connecticut Court Rejects Invalid Assignment and Standing Claims
The court in deciding Bank of Am., N.A. v. Samaha, 2013 Conn. Super. (Conn. Super. Ct., 2013) granted summary judgment in favor of the plaintiff.
Plaintiff sought to foreclose a mortgage executed by Joseph Samaha and Denise Samaha in favor of the Webster Bank in the principal amount of $162,000.00.
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, the 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. Four, that the defendant 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.
Regarding the first special defense, the court decided that the plaintiff had standing.
The court found there was simply no authority for the defendant’s second assertion. Further, the court found there were no facts alleged in the special defense and there is no affidavit from the defendant providing any factual foundation for the third assertion. Regarding the fourth special defense the court found that the mere assertion of this defense, without any evidence to support it, and thereby contest or create a material issue of fact for a motion of summary judgment is insufficient. Lastly, the fifth special defense was deemed to be an assertion of a legal conclusion.
The court in deciding this case granted the plaintiff’s motion for summary judgment.
May 29, 2014 | Permalink | No Comments
Reiss on Prepaying Your Mortgage
Newsday quoted me in Prepaying Your Mortgage. It reads,
You’ve heard that it’s good to be early — whether for work, a job interview, or going to bed. But what about prepaying your mortgage? When does it make sense?
THE PROS
Fewer payments and a faster payoff are appealing. “For many people it’s a no-brainer to prepay . . . Essentially you’re getting a guaranteed return in the form of the interest you aren’t paying,” says David Reiss, who teaches residential real estate finance at Brooklyn Law School. “It’s hard to find an investment in today’s market that gives you an equivalent risk-adjusted return.”
Money you no longer put toward the mortgage can go elsewhere. Being mortgage-free in retirement helps cash flow on a fixed income, points out Leslie Tayne, a Melville attorney specializing in financial issues.
Take your monthly payment, divide it in half and make that payment every two weeks. On a typical mortgage, this could shave off almost four years, says Jason Auerbach of First Choice Lending Services in Manhattan.
THE CONS
Paying extra on your loan “means you can’t use that money for other more important things such as contributing to a retirement account,” Tayne says. If your assets are earning a higher rate of return than the interest rate on your mortgage, it doesn’t make sense to pay early. Run the numbers.
Also, once the loan is paid, will you miss the tax deduction? Does your loan carry a prepayment penalty? Can you really afford to pay extra? Better know the answers to such questions, advises Jeff Tanenbaum, a broker with Halstead Property in Manhattan.
May 29, 2014 | Permalink | No Comments
May 28, 2014
Reiss on Castro at HUD
Law360 quoted me in Obama Chooses San Antonio Mayor As Next HUD Chief (behind a paywall). It reads in part,
President Barack Obama on Friday nominated San Antonio Mayor Julian Castro to be the next secretary of housing and urban development, a move that observers say will result in the continuation of his administration’s housing policies.
If confirmed, Castro would take over an agency that is still dealing with the after-effects of the bursting of the housing bubble in 2007 and the resulting foreclosure crisis. HUD is also struggling to deal with a dearth of affordable housing in major metropolitan areas and reforming the Federal Housing Administration’s work.
Obama called Castro an “all-star” who has done a “fantastic job” in San Antonio over the last five years.
“He’s become a leader in housing and economic development,” the president said.
Speaking at the White House on Friday, Castro said that he looked forward to helping Americans get access to “good, safe affordable housing.”
“We are in a century of cities. America’s cities are growing again and housing is at the top of the agenda,” Castro said.
Castro would take over HUD from outgoing Secretary Shaun Donovan, whom Obama nominated to lead the Office of Management and Budget. Donovan would in turn replace Sylvia Mathews Burwell, Obama’s nominee to be the next secretary of health and human services.
Among his major tasks will be overseeing the FHA, which provides a government guarantee on mortgages issued to low-income and first-time homebuyers. The agency, which is led by Commissioner Carol Galante, last year was forced to take a $1.7 billion bailout from the Treasury Department as its reserves were depleted due to losses on bad loans.
In response, the FHA has increased insurance premiums on most new mortgages by 10 basis points and sold off some defaulting mortgages as part of a series of reforms aimed at bolstering its capital levels. Even with those changes, the bailout was necessary.
HUD has also been a key player in the Obama administration’s heavily criticized programs aimed at stemming foreclosures, including the Home Affordable Mortgage Program, and in efforts to develop affordable housing stock around the country.
The department is also at the center of fair lending and fair housing litigation against banks and other lenders.
Castro’s views on those subjects are unknown, but observers expect him to follow closely policies established by his predecessor Donovan.
“Our conversations lead us to believe that Castro is unlikely to deviate materially from the existing FHA single-family strategy,” Isaac Boltansky, an analyst at Compass Point Research & Trading LLC, said in a note to clients.
Castro, 39, is serving his third term as San Antonio’s mayor. A rising star in the Democratic party, Obama tapped Castro to give the keynote address at the 2012 Democratic National Convention in Charlotte, North Carolina.
In many ways the appointment is seen as a political decision as much as a policy one for housing experts, and a departure from Donovan, an expert on housing policy.
“Donovan focused his entire career on housing and affordable housing in particular. He is known for his deep understanding of housing issues. Mayor Castro has had a broader portfolio of concerns as a big city mayor,” said Brooklyn Law School professor David Reiss.
* * *
While Castro has focused on affordable housing issues, the mayor of San Antonio is a nonexecutive position, Reiss noted.
“So his ability to implement his vision will be tested in this new position,” he said.
May 28, 2014 | Permalink | No Comments
May 27, 2014
California Court Rejects Improper Pooling and Servicing Agreement Argument Brought by Plaintiffs
The court in deciding Sollenne v. United States Bank Nat’l Ass’n, 2013 U.S. Dist., (S.D. Cal., 2013) dismissed the plaintiffs’ claims.
Plaintiffs alleged three causes of action: 1) quiet title; 2) declaratory relief to determine the validity of the deed of trust on the date the note was assigned and to determine if any defendant has authority to foreclose; and 3) injunctive relief to stop further collection activity, including the sale of the property.
Plaintiffs’ desired remedies also include a request for an order compelling the defendants to transfer or release legal title and any alleged encumbrances, and possession of the property to plaintiffs.
The plaintiffs listed the following deficiencies which they contended rendered invalid any security interest in the deed of trust: 1) the separation of title, ownership and interest in the note and deed of trust; 2) the lack of assignments to or from the intervening entities when the loan was sold; 3) the failure to assign and transfer the beneficial interest in the DOT to Defendants in accordance with the PSA; 4) the failure to endorse, assign, and transfer the note to USBNA in accordance with the PSA and California law; 5) that there were no assignments of beneficiary or endorsements of the note to each intervening entity; and 6) Defendants violated terms of the PSA.
After considering the plaintiffs’ arguments, this court dismissed the claims premised upon the securitization of the loan and violations of the PSA as well as the plaintiffs’ remaining claims.
May 27, 2014 | Permalink | No Comments
Vermont Court Rejects Homeowners’ Request to Dismiss Complaint for Lack of Standing
The court in deciding Deutsche Bank National Trust v. Merritt, 2013 Vt., 225 (Vt. Oct. 1, 2013) ultimately
Defendant homeowners sought to appeal the lower court’s order, which granted substitute plaintiff bank’s motion to dismiss the foreclosure action.
The homeowners raised several arguments regarding the bank’s standing to enforce homeowners’ promissory note, and sought an order dismissing the case. The defendant specified the bank’s lack of standing as the basis for the dismissal request, ordering that any legal charges, assessments and fees assessed by a bank against homeowners in connection with this action be removed from their mortgage debt, and ordering that initial plaintiff OneWest return all mortgage payments received from homeowners with statutory interest.
After considering the defendant’s claim, this court followed the lower court in dismissing the case.
May 27, 2014 | Permalink | No Comments
May 29, 2014
Ohio Appeals Court Denies Assignment Error Claim Brought by Appellee
By Ebube Okoli
The court in deciding United States Bank Nat’l Ass’n v. McHugh, 2013-Ohio-5473 (Ohio Ct. App., Lucas County, 2013) concluded that the trial court properly denied mortgagors’ motion under Civ.R. 60(B)(2).
Appellants argued that appellee lacked standing and was not the real party in interest. They also alleged that they were entitled to relief pursuant to their discovery of new evidence in the form of a pooling service agreement that confirmed appellee’s lack of standing.
Appellee opposed appellants’ motion on the basis that it was barred by res judicata, untimely, and failed to establish grounds for relief pursuant to Civ.R. 60(B)(2).
After considering the parties’ arguments, the court denied appellants’ motion. In its judgment entry, the court determined that the evidence relied upon by appellants in supporting their Civ.R. 60(B) motion was available to them prior to summary judgment and, therefore, was not newly discovered evidence. Further, the court found that appellants failed to demonstrate the existence of a meritorious defense as required under the Ohio Supreme Court. Finally, the court concluded that appellants’ motion was not filed within a reasonable time pursuant to Civ.R. 60(B).
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May 29, 2014 | Permalink | No Comments