August 21, 2013
The Future of Affordable Housing in NYC
Yesterday, NYU’s Furman Center started a great series, #NYChousing: 10 Issues for NYC’s Next Mayor:
Over each of the next 10 days, #NYChousing will release an issue brief that presents a housing policy question that will confront the next mayor of NYC. The #NYChousing briefs do not provide policy recommendations, but instead provide the background facts, point out potential trade-offs, and pose questions to be considered in order for the candidates and the public to make informed decisions about competing policy proposals.
The first two issues are:
1. HOUSING BUDGET: Should the next mayor commit to build or rehabilitate more units of affordable housing than the Bloomberg Administration has financed?
2. PERMANENT AFFORDABILITY: Should the next mayor require developers to permanently maintain the affordability of units developed with public subsidies?
There are Twitter chats about both of these issues, with eight more to come. Tomorrow’s topic is
3. MANDATORY INCLUSIONARY ZONING: Should the next mayor adopt a mandatory inclusionary zoning program that requires developers to build or preserve affordable housing whenever they build market-rate housing?
The Center provides the following guidance for its Twitter chat:
Throughout the #NYChousing series, the Furman Center will host a series of Twitter chats to discuss each of these policy questions. Each one-hour Twitter chat will start at 11:00am ET and will focus on that day’s policy question. We encourage and welcome your participation.
What’s a Twitter chat? It’s an interactive Twitter conversation spanning a specific period of time. The Furman Center (@FurmanCenterNYU) will pose a handful questions about that day’s #NYChousing policy question. Participants will follow the conversation and tag their responses with the hashtag #NYChousing.
How do you participate? If there’s a question you want to answer or a point you want to make, simply chime in with your insight, a link to a blog post you’ve written-whatever you’d like to add to the conversation. There’s no pressure to follow along for the entire hour or to answer every single question. Be sure to include the hashtag–#NYChousing-in your response.
I will be giving my own two cents as this chat progresses.
August 21, 2013 | Permalink | No Comments
August 20, 2013
Judge Rakoff Is All FIRREA-ed Up
Law360 quoted me in a story, Rakoff Gives DOJ License To Be Bold In Bank Crackdown (behind a paywall), that reads in part,
U.S. District Judge Jed S. Rakoff’s expansive Monday opinion backing the federal government’s $1 billion mortgage fraud suit against Bank of America Corp. leaves the U.S. Department of Justice wide latitude to use its favorite financial fraud tools in cases linked to the recent financial crisis.
Judge Rakoff’s opinion expanded his May decision allowing the Justice Department’s October suit against Bank of America over lending practices during the housing bubble and financial crisis to move forward under the Financial Institutions Reform Recovery Enforcement Act, while also explaining why portions of its case using the False Claims Act failed.
The ruling, which accepted the government’s broad view of which federally insured financial institutions can be sued under FIRREA and on what grounds, gives the government further ammunition to bring such cases in the future, said Brooklyn Law School professor David Reiss.
“The federal government has taken an expansive view of this phrase, and Judge Rakoff agrees that it can be read broadly in certain circumstances, such as when the affected federally insured financial institution is the alleged wrongdoer itself,” he said.
* * *
[T]he Second Circuit will look closely at other appellate rulings related to interpreting congressional intent, as well as any rulings dealing specifically with FIRREA should an appeal come its way, as many observers expect.
However, it is likely to look closely at Judge Rakoff’s opinion when rendering an ultimate decision, which is why he considered those issues, Reiss said.
“Judge Rakoff stated that this result clearly flowed from the plain language of FIRREA, so the defendants may have a hard time on appeal,” he said.
August 20, 2013 | Permalink | No Comments
Court Rules MERS is Not Required to Register With the Secretary of State Because Enforcing Deeds of Trust Does Not Qualify as “Doing Business” in California
The court in Sulak v. Mortgage Electronic Registration Systems, Inc., et al., DCA No. E039775, (2004) found that the lower court properly denied the preliminary injunction and that the orders denying the TRO were proper.
In this case, the plaintiffs-borrowers stopped making payments on their loan and initiated a suit for damages and injunctive relief against MERS. The plaintiff claimed that stoppage of payment was proper as they alleged that MERS could not enforce or collect the note and deed of trust [1] without holding a Certificate from the Secretary of State, [2] without responding to multiple requests for validation of the debt under the Fair Debt Collection Practices Act (FDCPA), and [3] without having endorsements on the note or recorded assignments to successors in interest to the original lender.
The court rejected the plaintiff’s contentions and went further to characterized the plaintiff’s approach as “[e]ssentially, plaintiffs called ‘Olly-olly oxen free’ on the note and deed of trust, and stopped making payments.”
August 20, 2013 | Permalink | No Comments
Arizona Court Holds That MERS is the Beneficiary With the Authority to Foreclose
The court in Ciardi v. The Lending Company, Inc. et al., 2010 WL 2079735 (D. Ariz. 2010) held that that MERS is the beneficiary with the authority to foreclose. In doing so the court granted the defendant’s motion to dismiss and motion to vacate temporary restraining order.
In December 2005, plaintiff [Bianca Ciardi] borrowed $270,500 from ‘The Lending Company’ for the purpose of purchasing real property. Plaintiff also executed a promissory note and a deed of trust. Soon after, the plaintiff’s note was sold.
Plaintiff eventually defaulted on their note and their home was nearing auction in a non-judicial trustee’s sale. A lower court granted the plaintiff’s temporary restraining order (“TRO”) without notice. Defendants removed to this court, and sought to have the TRO dissolved and Plaintiffs’ first amended complaint dismissed pursuant to FRCP 12(b)(6).
In their analysis, the court noted, that the Plaintiff’s amended complaint was not the model of clarity and that the plaintiff did not allege any specific causes of action, rather much of their amended complaint was simply a narrative concerning the mortgage securitization industry.
In reaching their conclusion, the court, reviewed the plaintiff’s amended complaint. And concluded that even considering the plaintiff’s pro se status and, in so doing, construing plaintiff’s amended complaint liberally, the court found that the plaintiff failed to state a claim upon which relief may be based. Plaintiff also sought a preliminary injunction to halt the planned foreclosure of their home. However, the court reasoned, in order to obtain preliminary injunctive relief, the moving party must show a likelihood of success on the merits.
Accordingly, because the court found the plaintiff’s amended complaint failed for a failure to state a claim, the court found that the plaintiff failed in showing a likelihood of success on the merits. As such, the Court denied the plaintiff’s request for a preliminary injunction.
August 20, 2013 | Permalink | No Comments
MERS’ Assignments are Recognized as Valid as New York Appellate Court Overturns ‘N.Y. v. Alderazi’ & ‘LaSalle v. Lamy’
In the case of Bank of New York v. Eddie Sachar, et al., 95 A.D.3d 695 (2012), the court found the Bank of New York Mellon had standing to foreclose based on a MERS assignment and the delivery of the note.
The court’s ruling granted the plaintiff’s [Bank of New York Mellon] motion for summary judgment on its complaint against defendant [Sachar]. The plaintiff-bank proved its standing to commence the foreclosure action by demonstrating that it was both the holder or assignee of the subject mortgage and the holder or assignee of the underlying note at the time the action was commenced.
Although the defendant correctly alleged that, although Mortgage Electronic Registration System [MERS] validly assigned the mortgage to plaintiff, and the assignment was properly recorded in the public records, MERS had not been given any interest in the underlying note by the lender (see Bank of N.Y. v Silverberg, 86 AD3d 274, 283 [2011]).
However, the complaint and the documents annexed to plaintiff’s motion establish that an assignment of the note had been effectuated by physical delivery of the note before the current action was commenced.
August 20, 2013 | Permalink | No Comments
August 19, 2013
NJF and UCC and Contract Law, Oh My!
Parsing how a court should approach a particular deed of trust foreclosure case can put you to sleep faster than crossing the poppy fields next to the yellow brick road. Does the Non-Judicial Foreclosure (NJF) statute govern? Does the state’s Uniform Commercial Code (UCC) govern? Does the contract terms of the deed of trust itself govern? Or, more likely, do all three govern? And, if so, how do they interact with each other?
Brad Borden and I have recently noted that while
“show me the note” does come up in federal cases, federal courts defer to the applicable state law in reaching their results. [T]he courts’ holdings tend to flow from a careful reading of the relevant state foreclosure statute, so a particular state’s law can have a big effect on the outcome. We would note that many scholars and leaders of the bar are befuddled by courts’ failure to do a comprehensive analysis under the UCC as part of their reasoning in mortgage enforcement cases, but judges make the law, not scholars and members of the bar. See Report of The Permanent Editorial Board for The Uniform Commercial Code Application of The Uniform Commercial Code to Selected Issues Relating to Mortgage Notes at 1 (Nov. 14, 2011).
Zadrozny v. Bank of New York Mellon, No. 11-16597 (June 28, 2013), a recent 9th Circuit case demonstrates the problem of an incomplete analysis in an Arizona non-judicial foreclosure case. The Court notes that
The PEB [Permanent Editorial Board] Report [] clarifies:
the UCC does not resolve all issues in this field. Most particularly, the enforcement of real estate mortgages by foreclosure is primarily the province of a state’s real property law (although determinations made pursuant to the UCC are typically relevant under that law).
Given the PEB Report’s recognition that state law is typically controlling on foreclosure issues, the Zadroznys are unable to allege a cause of action premised on the PEB Report . . ..(14-15, citation omitted)
This is confusing in a few ways. First, the UCC is state law, adopted with variants by all of the states’ legislatures. What the PEB is calling for is for courts to apply state UCC law as appropriate.
Second, state foreclosure law does not “control” foreclosure issues in some inchoate and expansive way. It governs it to the extent that it governs it and not one bit more. So if state UCC law governs one facet of a foreclosure case, it is not trumped by the states’ foreclosure law. Or if the terms of the deed of trust were to govern, it would not be trumped by the foreclosure law either (so long as it did not violate it).
Finally, it is just plain weird to say that the Zadroznys would have a “cause of action premised on the PEB report.” How would that work?!? The PEB report is merely an interpretation of general UCC principles. The Court should be asking how the Arizona UCC applies to this case.
I am not saying that the Court reached the wrong result under Arizona law in this regard, but the Court’s incomplete analysis offers no clarity to litigants, no more than the Wizard of Oz offered real solutions to his supplicants’ pleas. But judges decide the cases, not me and not you . . ..
August 19, 2013 | Permalink | No Comments
August 16, 2013
Stalled Foreclosures in NY Not a Violation of Federal Law
Judge Townes (EDNY) dismissed a putative class action, Cole v, Baum, 11-cv-3779 (July 11, 2013), against notorious foreclosure mill Steven J. Baum, P.C. and its principal relating to their failure to submit filings that would have triggered mandatory settlement conferences for homeowners under a new New York law. The plaintiffs alleged that the defendants violated the federal Fair Debt Collections Practices Act. Judge Townes found that the failure to comply with the NY law was not the equivalent of an unfair debt collection prohibited by the FDCPA.
In reaching its result, the Court stated that not “every violation of state or city law amounts to a violation of the FDCPA.” (16, quoting Nero v. Law Offices of Sam Streeter, P.L.L.C., 655 F. Supp. 2d 200, 209 (E.D.N.Y. 2009)). It further found that even “debt collection practices in violation of state law are not per se violations of the FDCPA.” (17) The Court concluded that in the present case,
the defendants’ debt collection practices did not violated the provisions of the FDCPA. Defendants allegedly violated 22 NYCRR § 202.12-a, a procedural rule promulgated by the Chief Administrator of the New York Courts to facilitate implementation of CPLR 340B. However, CPLR 340B is not a state analog of the FDCPA. That statute does not prohibit unfair, misleading or deceptive collection practices, but merely furthers a state interest in forestalling or preventing foreclosures. Although defendants may be debt collectors, and their alleged violation of Section 202.12-a may be characterized as unfair, defendants’ violation of this state procedural provision neither resulted in, nor contributed to, the sort of unfair debt collection practices prohibited by the FDCPA. (18)
I am not sure if I see the principled difference between the scope of the FDCPA and the NY law. The Court acknowledges that the FDCPA, is meant “to protect consumers from deceptive or harassing actions taken by debt collectors with the purpose of limiting the suffering and anguish often inflicted by independent debt collectors.” (10, quoting Gabriele v. American Home Mortg. Servicing, Inc., No. 12-985-cv, 2012 WL 5908601 at *3 (2d Cir. Nov. 27, 2012)). The mere fact that the NY law was an amendment to the Civil Practice Law and Rules (CPLR) does not seem to undercut the fact that it was passed expressly to address the “mortgage foreclosure crisis.” (2) I would think that if procedural violations amounted to a substantive injustice, it could be sufficient to violate the FDCPA.
August 16, 2013 | Permalink | No Comments
