Pro Se Guide To Civil Litigation

B. Theories of Adjudication − FRCP 1: Rules shall be construed and administered to secure the just, speedy and inexpensive determination of every action. FRCP 1 does not provide much guidance. Therefore, the three theories below are applied

1. Fair Fight

a. Judge is passive referee that simply follows and enforces the rules

b. The only interests are those party to the litigation.

c. Mitchell v. A&K − Truck on the premises

2. Justice Between the Parties

a. Judge is active and corrects for disparities between the parties

b. Only interests are those party to the litigation

c. Conley − Black workers’ complaint lacks sufficiency but is accepted because need discovery

3. Greater Good

a. Judge is active and considers larger interests of society

b. Takes into account third parties (other interest than just those before the court)

c. Band’s Refuse − Judge called own witnesses and introduced own evidence

II. Initiating the Lawsuit

A. Plaintiff’s Claim (Complaint)

1. Process

a. File − FRCP 3: Action is started by filing the complaint with the court

b. Serve − Complaint is given to the opposing party or parties

2. Rules for assessing a complaint

a. FRCP 8(a) − A pleading which sets forth a claim for relief shall contain

· 8(a)(1) − A short plain statement of the grounds upon with the court’s jurisdictions depends, unless the court already has jurisdiction and the claim needs no new grounds for jurisdiction to support it;

· 8(a)(2) − Short, plain statement of a claim showing pleader is entitled to relief; and

§ Flaws to avoid

§ Missing an element

i. Concerns include

· Δ cannot answer

· Notice to the court

· Flush out meritless claims

§ Negating an element

§ Establishing an affirmative defense

· When flawed − Subject to motion to dismiss

§ Particularity

§ Beyond reasonable doubt that plaintiff can prove no set of facts to establish claim Connely = Mere possibility

§ Particular enough that can draw fair inference
Sutliff = fair inference

· 8(a)(3) − a demand for judgment for the relief the pleader seeks; relief in the alternative or of several different types may be demanded

b. Background rules

· Allegations taken as true

· Allegations considered on their face (no evidence) Mitchell v. A&K

· No legal argument Sutliff

3. Notice Pleading − level of detail or specificity

a. FRCP 12(b)(6) − complaint should not be dismissed for failure to state a claim unless it appears beyond a doubt that plaintiff can prove no set of facts in support of claim

i. Mere possibility
Complaint should not be dismissed for failure to state a claim unless it appears beyond a doubt that the plaintiff can prove no set of facts in support of his claim that would entitle him to relief

1. Conely v. Gibson − Black union members sue for discrimination, defendant moves to dismiss for failure to state a claim, court holds for plaintiff

ii. Fair inference
Complaint must contain either direct allegations on every material point necessary to sustain a recovery or allegations from which an inference fairly may be drawn that evidence of material points will be introduced at trialSutliff v. Donovan

iii. Specific facts
Not good law Gillispie

b. FRCP 12(e) – Request for the Π to give a more definite statement of the allegations in the complaint

i. Board of Harbor Commissioners
Facts: Oil discharged into waterway. Unclear who did it. D moves for more definite statement in order to frame an appropriate response pursuant to Rule 7. Court held for P.
Rule: Leans toward the fair inference standard. Information is specific enough b/c all of the elements are addressed.
(If P gives more definite statement that is still not specific enough can follow up with motion to dismiss)

c. FRCP 12(f) − Motion to strike redundant, immaterial, impertinent and scandalous matter

4. Policy considerations for determining whether the complaint is specific enough (background policy considerations for borderline cases)

a. Sufficient notice to the D

b. Allows investigation

c. Provides early assessment of the merits

d. Prevents a fishing expedition

e. Who has access to the additional info

f. Harm is worthy of the litigation

5. Pleading in the alternative

a. FRCP 8(e)(2): A party may set forth 2 or more statements of claim or defense alternately or hypothetically

i. If by the nature of the circumstance the P would not know which allegations are right

ii. Lack of knowledge – pleading in alternative is OK

iii. If facts should be known – pleading in the alternative not OK

iv. Can only collect on one of the claims

b. McCormick v Kopmann (Car Crash Case)
Facts: McCormick dies in head on collision. Wife sues (1) bar owner (Huls) for over-serving alcohol and (2) driver (Koppman) for crossing over the center line, causing the collision with her husband. Koppmann moves to dismiss b/c of contradicting allegations. Denied.
Rule: Pleading in the alternative is allowed where the P lacks knowledge about the key facts in good faith
Policy: Look at the models of adjudication

i. Justice between the parties − Should not be able to plead in the alternative if she knows the truth

ii. Fair fight − Should be able to use the evidence b/c it could be used against her

6. Heightened Pleading Standard

a. FRCP 9(b)– In all averments of fraud or mistake, the circumstances constituting fraud or mistake shall be stated with particularity. Malice, intent, knowledge and other condition of the mind of a person may be averred generally

i. Strong inference standard

b. PSLRA(Private Securities Litigation & Reform Act) − State with particularity facts giving rise to a strong inference that D acted with required state of mind

i. 2nd Circuit – Strong Inference Standard (majority approach)

· P must show motive and opportunity to commit fraud

ii. 9th Circuit – Great Detail Standard

· P must plead with great detail for deliberately reckless OR conscious misconduct (allegations in detail of who, what, when, where, how)

c. Background policies for general particularity and heightened pleading

i. Giving notice to the D and the court

ii. Sometime giving the court the ability to assess the merits

iii. Preventing fishing expeditions

iv. Being attentive to who has the factual information

d. Ross v. Robins (Faulty Birth Control Case) – 2nd Circuit
Facts: Ross purchases shares of Robins. Robins did not report safety and efficiency problems with the Dalkon Shield, but knew about them. After FDA made a public disclosure of the problem, stock prices fell. D moves to dismiss under 12(b)(6) for failure to comply with 9(b). Move to dismiss granted. P appeals.
Rule: Cases involving the Private Securities & Litigation Reform Act must meet a heightened pleading standard. . . strong inference standard.

e. Cash Energy v. Weiner (Environmental Cleanup Case)
NOT GOOD LAW
Facts: Cash Energy engaged in storage and/or transfer of chemical solvents on a site adjacent to Weiner’s property. Weiner believes his land has been contaminated as a result of this activity. D moves to dismiss under 12(b)(6) for failure to comply with 9(b). Court grants motion to dismiss. P appeals.
Rule: Court holds cases involving CERCLA to heightened pleading standard, but this is not the law.

f. Leathermann v.Tarrant County (Drug Bust Case)
GOOD LAW
Facts: Tarrant Co. obtains search warrants. Homeowners claimed assault. Rule: Rule 9(b) only applies to cases involving fraud, mistake or PSLRA. Rule 8(a)(2) still stands otherwise. Cash Energy is NOT the law. Rely on Leatherman.

7. Voluntary dismissal

a. FRCP 41(a)(1) − P can dismiss the case unilaterally as long as it is before service of an answer or a motion for summary judgment. If after the answer or motion, must have stipulation of both parties.

b. FRCP 41(a)(2) − If parties are not in agreement, will need dismissal by order of the court

i. First time dismissed without prejudice

ii. Second time dismissed with prejudice

iii. If court doesn’t otherwise say, it is dismissed without prejudice.

c. Reasons for voluntary dismissal

i. To file in another jurisdiction (don’t like the judge)

ii. A way to avoid sanctions under Rule 11

iii. If judge may grant a motion to dismiss under Rule 12, might want to pre-empt the ruling

iv. The SOL may be running so just decide to go away quietly

B. Defendant’s Response

1. RULE 12 MOTIONS

a. Rule 12(a) − Timing to file responsive pleading

i. 12(a)(1)(A) − Answer complaint w/in 20 days

ii. 12(a)(4)(A) − After filing and serving 12(b)(6) motion, wait to hear back from court

iii. 12(a)(4)(A) − 12(b)(6) denied then must answer within 10 days

iv. 12(a)(4)(A) − If court postpones ruling on 12(b)(6), must answer withing 10 days

v. If court grants motion to dismiss do not need to answer

vi. 12(a)(1)(A) − Grants leave to amend, court will specify timing

vii. 12(a)(4)(A) − If court denies motion to strike then must answer within 10 days

viii. 12(a)(4)(B) − If court grants motion to strike then must answer within 10 days

Timing under 12(a)	Within 20 days	Within 10 days	Never
Answer complaint	12(a)(1)(A)
File and serve a 12(b)(6) motion			12(a)(4)(A) wait for court to rule
12(b)(6) motion is denied		12(a)(4)(A)
Court postpones ruling on 12(b)(6) motion		12(a)(4)(A) after notice by court
12(b)(6) motion is granted			Never
Grants leave to amend		12(a)(1)(A) Once P has amended, court will specify timing
Denies 12(e) motion for more definite statement		12(a)(4)(A)
Grants 12(e) motion for more definite statement		12(a)(4)(B) after P fixes complaint

b. Rule 12(b)
(b)(1) − Court lacks jurisdiction over the subject matter of the suit
(b)(2) − Court lacks proper jurisdiction over D
(b)(3) − Court is not the proper location for the suit; improper venue
(b)(4) − Insufficiency of process
(b)(5) − Insufficiency of service of process
(b)(6) − Failure to state a claim upon which relief may be granted

i. Motion to dismiss flaws

1. Missing an element

2. Negating an element

3. Establishing an affirmative defense

ii. Use Conely and Sutliff standards to assess whether 12(b)(6) should be granted

iii. Court is limited to the four corners of the complaint and must take all of the allegations as true

(b)(7) − Failure to join a party

c. Rule 12(c) − Motion for judgment on the pleadings (after the complaint and answer are done)

i. Vehicle for the D to answer

ii. For failure to state a claim

iii. Motion by the P if the Δ admits all of the relevant allegations

iv. Can be just like motion to dismiss for failure to state a claim, but is normally after the answer; same analysis

v. Must be brought forward without undue delay

d. Rule 12(e) − Motion for a more definite statement

i. Usually used b/c unintelligible, not for want of detail

ii. If you understand what the P is saying but want more detail, some courts grant the motion; others don’t (e.g. US v. Board of Harbors)

e. Rule 12(f) − Motion to strike

f. Rule 12(g) − All then available Rule 12 motions must be consolidated into one pleading. All defenses not brought are waived except as under 12(h)

g. Rule 12(h): Waiver or preservation of certain defenses

i. 12(h)(1) − Disfavored defenses

· Lack of personal jurisdiction – 12(b)(2)

· Improper venue – 12(b)(3)

· Insufficiency of process – 12(b)(4)

· Insufficiency of service of process – 12(b)(5)

ii. 12(h)(2) − Favored defenses

· Failure to state claim upon which relief can be granted – 12(b)(6)

· Failure to join a party – 12(b)(7)

iii. 12(h)(3) − Most favored defenses

· Lack of subject matter jurisdiction – 12(b)(1)

Rule	Rule Explanation	Defenses	Timing
12(b)(1)	Lack of subj matter jurisdiction	Most favored 12(g), 12(h)(3)	Bring at any time
12(b)(6)	Failure to state a claim upon which relief can be granted	Favored 12(g), 12(h)(2)	Can be made in any pleading or by motion for judgment on the pleadings or at trial on merits
12(b)(7)	Failure to join a party	Favored 12(g), 12(h)(2)	Can be made in any pleading or by motion for judgment on the pleadings or at trial on merits
12(b)(2)	Lack of personal jurisdiction	Disfavored 12(g), 12(h)(1)	Will be waived forever if you did not bring it with other Rule 12 motions
12(b)(3)	Improper venue	Disfavored 12(g), 12(h)(1)	Will be waived forever if you did not bring it with other Rule 12 motions
12(b)(4)	Insufficiency or process	Disfavored 12(g), 12(h)(1)	Will be waived forever if you did not bring it with other Rule 12 motions
12(b)(5)	Insufficiency of service or process	Disfavored 12(g), 12(h)(1)	Will be waived forever if you did not bring it with other Rule 12 motions

2. DEFAULT

a. FRCP 55(a) − Default entry by the clerk when the Δ has failed to respond

b. FRCP 55(b) − Default judgment by
(b)(1) − Clerk if the award amount is certain; have to give 3 days notice
(b)(2) − Court, P must show damages

c. FRCP 55(c) − Setting aside entry of default for good cause shown; if judgment has been entered, may likewise set aside under Rule 60(b)

d. FRCP 60(b) − relevant grounds for setting aside default judgment would be mistake, inadvertence, excusable neglect, surprise; this is more likely to not be set aside because it is that much more in the process

e. Three factors courts use to evaluate setting aside (Shepard Claims)

i. Non-defaulting party will not be prejudiced

· Witnesses, evidence, SOL

ii. Defaulting party has meritorious defense

iii. No culpable conduct by defaulting party

· If no prejudice and has meritorious defense, then culpable conduct must be willful for default to the set aside

f. Shepard v. Darrah
Facts: Shepard (independent claims adjuster) alleges that Darrah (insurance broker) failed to pay him for services rendered. After delivery of the complaint Darrah’s attorney misses filing date for answer due to confusion about extension
Rule: Default judgment will be set aside if P is not prejudiced, D has a meritorious defense and the conduct was not willful

3. ANSWER

a. Admitting or Denying

i. Admit an allegation as true

ii. Deny

iii. Lack knowledge or information sufficient to form a belief

iv. Hybrid- give more particular responses, combo of above

b. Rules

i. FRCP 8(b) − D shall respond to each averment by either (1) admit, (2) deny or (3) lack of knowledge or information sufficient to form a belief

· LKISFB is treated as a denial

· If it is found that you have sufficient knowledge or info, then LKISFB is treated as an admission (David v. Crompton & Knowles)

ii. FRCP 8(d) − Failure to deny – All averments are taken as admitted when not denied. All averment to which no responsive pleading is required or permitted shall be taken as denied or avoided

iii. FRCP 10(b) − Form of pleadings. Each claim or defense should be in a separate numbered paragraph; one allegation per paragraph

c. Purpose of the answer

i. Respond to the allegations

ii. Assert defenses

iii. Provide any counter or cross claims

d. David v. Crompton & Knowles
Facts: David was injured by a shredding machine in a factory. Δ says they don’t have sufficient knowledge to respond an allegation, then want to move to amend the answer to a denial. Motion to amend denied.
Rule: If you claim lack of knowledge and are found to have knowledge, could have acquired the knowledge (“Should have known”) or the info was within your control (“Only one who could have known”), then you have improperly used lack of knowledge answer and your answer will be deemed admitted instead of denied.

e. Affirmative Defenses (shield)

i. FRCP 8(c) − Affirmative Defenses (list is not exhaustive)

· D must include in answer, answer to amended complaint, or motion to dismiss or lose them FRCP 12(h)(1)

· D must raise the issue and the D must prove it

· SOL is a common affirmative defense

· 15(a) says you may amend an answer to insert affirmative defense

f. Counter Claim and Cross Claim (sword)

i. FRCP 13(a) − Compulsory Counterclaims must be brought or lost

· Must arise from same T&O weigh following factors

§ Logical relationship between the claims for them to be compulsory (liberal view)

§ Substantially the same evidence/facts – If the same evidence would substantially dispose of the issues raised by the opposing claims then the counterclaims are compulsory; if not, then they are permissive

§ Substantially same law applies

ii. FRCP 13(b) − Permissive Counterclaims may be brought but do not have to; different T&O

iii. FRCP 13(g) − Cross-Claim against Co-Party may be brought if same T&O as any of claims or counter-claims

iv. Purpose

· Judicial efficiency − same jury, same case load

· Consistency − Courts could rule differently on the same case or issue if raised at different times in different courts

· Destroys P’s image

Type of Claim	Against	Same T&O	Different T&O
Counter	Opposing Party	Compulsory 13(a) Must be brought	Permissive 13(b) May be brought
Cross	Co-party	13(g) May be brought	13(g) Cannot bring

v. Wigglesworth v. Teamster’s Union
Facts: During union meetings, Wigglesworth was prevented from exercising his free speech rights. After the complaint was filed, Wigglesworth holds a press conference at which he accused the union of being mafia run and that certain union elections had been fixed. Δ files counterclaim. Δ files motion to dismiss under 12(b)(1). Motion to dismiss granted.
Rule: Test for same Transaction and Occurrence:
Logical relationship between the claims for them to be compulsory (liberal view)
Substantially the same evidence/facts – If the same evidence would substantially dispose of the issues raised by the opposing claims, then the counterclaims are compulsory; if not, then they are permissive
Substantially same law applies
NOTE: All of the above factors do not need to be met for there to be same transaction and occurrence

C. Amended Pleadings

1. Process for amending

a. FRCP 15(a) − Party allowed to amend once as of right

i. Before a responsive pleading is served or

ii. If no responsive pleading is permitted, the party may amend within 20 days after it is served

Otherwise may only amend by:

(1) leave of the court or

(2) stipulation of the parties.

Leave shall be freely given as justice so requires

b. FRCP 15(b) − When issues not raised in the pleadings are tried by express or implied consent of both parties, they shall be treated as if they are part of the pleadings. Amended pleading allowed, but not required

c. If a disfavored Rule 12 motion is not brought in the answer, you can still amend the answer to include this Rule 12 motion so long as it is in the 20 day period

2. Standard for the court to allow a party to amend

a. Leave to amend will be given freely when justice so requires

3. Factors the court will take into account in denying leave to amend:

a. Undue delay

b. Bad faith

c. Prejudice to the opposing party

4. Relation back of an amended pleading

a. FRCP 15(c) − Relation back of amendment

i. 15(c)(2) − Relation back of a claim – amending to add a new claim when the statute of limitations has run from the original service of the pleading, must be same T&O (T&O test as above)

ii. 15(c)(3) − Relation back of a party − changing a party’s name or adding a party

· Change the D or the name of the D

· Name T&O (T&O test as above)

· Timing of notice – date of filing of original complaint + 120 days (Rule 4(m))

· Form of notice

§ Can be informal, just need to notify the party

· D is aware that but for a mistake of identity, he would have been named

§ Some jurisdictions say ignorance is not a mistake

iii. Swartz v. Gold Dust Casino
Facts: Swartz falls down stairs at the Gold Dust Casino. She alleges that the stair were thread bare, worn and slippery. Also, the stair violates the building code. Π files and serves a complaint against Gold Dust and Does I through V for negligence. Δ answers by denying the allegations. After discovery and interrogatories, Π discovered the true identity of Doe I and requests leave to amend their complaint. Δ files motion for summary judgment. Judge denies the motion for summary judgment. Motion for leave to amend is granted. Amended complaint is filed and served upon John Cavanaugh. Δ Cavanaugh raises 2-year statute of limitations as an affirmative defense in answer to amended complaint and moves for judgment on the pleadings.
Rule: Meets requirements for relation back

· Changing the party or changing the name of the party − Yes, Doe I becomes Cavanaugh

· Same transaction and occurrence − Yes, same day, same woman, same stairs (facts and evidence are the same); they are both negligence claims (doesn’t have to be the exact same claim)

· Timing of the notice − Notice (not filing) within 120 days of the filing of the complaint; ONLY NOTICE OF THE COMPLAINT IS REQUIRED, NOT FILING

· Form of notice − Cavanaugh got the amended complaint in the motion for leave to amend, also companies are so overlapped it is reasonable to assume that Cavanaugh would have known of the action

· But for a mistake about identity − Cavanaugh knew but for a mistake of identity that they would have been sued
Cavanaugh would argue wasn’t a mistake, it was ignorance

iv. David v. Crompton & Knowles
Rule: Meets the requirements for relation back

· Change the defendant − Yes, change Crompton to Hunter

· Same T&O − Yes, same accident, law, etc.

· Timing of notice − Maybe, Hunter is a division of Crompton (overlap of corporate entities)

· Form of notice − yes

· But for a mistake − Hunter would recognize that they would be on the hook for the machine; David thought Crompton was the manufacture. Maybe a mistake about ownership rights, not who is the manufacturer

D. Rule 11

1. FRCP 11(a) − Failure to sign a pleading, written motion or other written paper

2. FRCP 11(b) − In representations to the court attorney is certifying that he has made a reasonable inquiry and that to the best of his knowledge, information and belief

a. No improper purpose

b. Claims, defenses or other legal contentions are supported by existing law or by a non-frivolous argument for the extension of existing law

c. Allegations have evidentiary support

d. Denials of factual contentions are warranted on the evidence or are reasonably based on a lack of information or belief

3. FRCP 11(c) − Sanctions

4. FRCP 11(d) − Rule 11 sanctions do not apply to discovery (Rules 26-37)

5. Rule 11 Sanctions Process – 11(b)

a. Basis under 11(b)(1)-(4)

i. 11(b)(1) − Improper purpose, including delay

ii. 11(b)(2) − No basis in existing law
(two components, only have to meet one)

· Subjective − must believe had legal argument

· Objective − must actually have legal argument

iii. 11(b)(3) − No basis in evidence for the allegation or assertion

iv. 11(b)(4) − No basis in evidence for the denial

v. Creates standards/duty

vi. Notwithstanding your good faith if knowledge or information was not reasonably researched, subject to sanctions

b. Initiating Process − by motion or by court (no safe harbor when court initiates)

i. Serve motion on party who then has 21 days to correct problem or motion is filed in court

ii. Motion has to describe conduct

iii. Motion has to be separate from any other motion

c. Decision Process

i. Court has to give party chance to respond

ii. Describe conduct explicitly

iii. Describe basis for sanctions

d. Discretion

i. Can violate the basis and not be sanctioned

e. Type of Sanctions

i. Designed to deter not to compensate, because court was using as cost shifting mechanism

ii. Only strong enough sanction to deter conduct

iii. Court can refer to state bar, or to go to school, reprimand

iv. A represented party can be sanctioned

· Not monetary if basis is 11(b)(2) because client is not expected to know the law

v. Attorney’s fees and costs only available on motion

f. Target

i. Attorney

ii. Firm

iii. Party

Identify the action

Basis for sanction

Initiation

Decision

Process

Discretion

Types of Sanctions

Target of Sanction

Signing

11(a): Failure to sign paper

Notify party, court

N/A

Shall. 11(a)

No other option

Strike

N/A

Signing, filing, submitting, or later advocating position with…

-improper purpose (b)(1)

-no basis in law (b)(2)

-no basis in evidence for allegation or assertion (b)(3)

-no basis in evidence for denial (b)(4)

Sanctioned if frivolous either:

-subjectively (belief) or

-objectively (no reasonable inquiry; frivolous legal argument) 11(b)

Party’s motion:

-serve 21 days before filing (safe harbor)

-describe conduct

-only if not corrected

-not combine with other motion 11(c)(1)(A)

Court:

-order to show cause (OSC)

-describe conduct at issue 11(c)(1)(B)

Notice and opportunity to respond 11(c)

Order:

-describe conduct

-explain basis for sanction 11(c)(3)

May. 11(c) Can use discretion

Goal: Deter, not compensate 11(c)(2)

Options:

-nonmonetary directive (go to classes)

-monetary fine to court

pay other side’s attorney’s fees or costs 11(c)(2)

Restrictions:

-represented party not pay money under (b)(2). 11(c)(2)(A)

-attorney’s fees and costs only if on motion. 11(c)(2)

-no monetary sanction on court’s initiative unless OSC before voluntary dismissal or settlement. 11(c)(2)(B)

Party, attorney, law firm, or combination. 11(c)

6. Zuk
Facts: Zuk, psychologist, had EPPI record therapy sessions for rental. Writes books that has transcripts from session and gets copyright. Zuk furloughed (fired). Zuk requests copies of the tapes. EPPI ignores the requests. Requests them again 1994. Requests are denied.
Rule:

DISCOVERY

III. Discovery

A. Analyze

1. Proper use of device

a. Must be described with reasonable particularity

2. Responsive

a. Did the party ask for it?

3. Relevance − Rule 26(b)(1)

a. Reasonably calculated to lead to discovery of admissible evidence pertaining to claim or defense

i. Merits

ii. Background

iii. Impeach/Corroborate

iv. Clues

Ø If relevant to claim or defense do not need to make showing

Ø If relevant to subject matter, burden of proof shifts to party seeking discovery (need court order and good cause shown)

4. Protected

a. Privacy − Rule 26(c)

i. Annoyance, embarrassment

ii. Undue burden or expense − Rule 26(b)(2)

· Other means, source for same information

· Already been ample opportunity for discovery

· Rule 26(b)(2)(iii)

§ How much is it in controversy

§ What are parties’ resources

§ Needs of case

§ How relevant

§ What are important issues

§ Are there alternative sources of information

§ Consider models of adjudication

iii. Trade secrets − Rule 26(c)(7)

· Economic detriment

· Secret not generally known

· Injury has to be clearly defined, serious injury

· Competitive disadvantage

· Balance between harm of disclosure and necessity to litigation

b. Protective Order − Rule 26(c)

5. Privilege

a. Elements

i. With client (or prospective client)

· Upjohn − Modified control group test which stated that only those in corporation who are in a position to control or even take a substantial part in decision about any action which the corporation may take upon advice of attorney

§ Modification to protect parties (lower and mid-level employees) who disclose and in corporation will need lower level employees to disclose in order to find out what happened

ii. Legal advice

iii. Legal advisor

iv. Relate to advice

v. In confidence

6. Product − Rule 26(b)(3)

a. Prepared in anticipation of litigation or for trial

b. By or for another party, or by of for that other party’s representative (including attorney)

· Party may obtain discovery of ORDINARY WORK PRODUCT (but not opinion work product) if:

i. Substantial need

ii. Party cannot get the substantial equivalent without undue hardship

· In ordering discovery of such materials, court shall protect against disclosure of mental impressions, conclusions, opinions or legal theories of attorney or other representative (OPINION WORK PRODUCT)

§ Courts generally abide by this and protect against disclosure of opinion work product

§ 9th Circuit (minority view) − Allows discovery of opinion work product if (1) pivotal issue and (2) compelling need (not applied to attorney opinion work product)

v Must list in privilege log

B. Discovery Devices

1. Initial Disclosures − Rule 26(a)(1)

a. 26(a)(1)(A) − Party must disclose (provide or describe) what she is going to use to support her claim or defense (do not have to provide that which is harmful at this stage)

i. Potential witnesses (name, address, telephone)

ii. Documents

iii. Damages

iv. Insurance

2. Depositions − Rule 30

a. Testimony under oath that is recorded

b. Reasonable notice

c. Limited to 10 depositions

d. One day, seven hours per depositions

e. Only get to depose person once

f. Third parties can be deposed (special rules apply)

g. Rule 30(b)(6) − Describe in reasonable terms the category of person you want to depose, other side must provide the person that fits that category

h. Objections to form

i. Compound

ii. Confusing/Unintelligible

iii. Vague or ambiguous

iv. Misleading

v. Asked and answered

vi. Argumentative

vii. Mischaracterized witness testimony/Assumes facts not in evidence

· If objections not made at deposition, waive right for answer not to be admitted into evidence later

· Even after objection witness may answer, objections only serve to make answer inadmissible later

· Rule 30(d)(1)

§ Instruct not to answer

§ Privilege

§ Protective order in place or going to seek one

§ Any objection must be state concisely, speaking objections not permitted

3. Request for production (RFPs) − Rule 34

a. Describe a category with reasonable particularity

b. 30 days to respond (written response including objections)

c. Rule 34(b) − Produce those documents that are in producing party’s protection, control or custody (as kept or in categories, but not scrambled)

d. Rule 26(b)(5) − Privilege or work product

i. Materials that are attorney-client privilege

ii. Work product in preparation of litigation

· Privilege log − Must create a log of those items that are privileged, describe in general terms with objection

4. Interrogatories (Rogs) − Rule 33

a. Limited to 25 in number including subparts

b. 30 days to respond

i. Written answers by attorney and signed off by party

ii. Obligation to answer if reasonably obtainable

· Rule 33(d) − If have to look through a large amount of records can just give other party records in lieu of answering (shift burden to requesting party)

c. Contention interrogatories − Identify every fact (or all evidence) that supports your contention that X

i. Most courts will not allow early on

ii. Used to prove negative (to prove other side has no evidence of X)

5. Exams − Rule 35

a. Parties or those in care, custody or control of party (read narrowly)

b. Must be “in controversy”

c. Good cause shown

d. Must have stipulation by parties or court order

6. Request for admission (RFAs) − Rule 36

a. Extension of pleadings

C. Limitations on discovery

1. Rule 26(b)(2)(iii) − Undue burden

a. Outweighs likely benefits

b. Needs of case

c. Amount in controversy

d. Parties’ resources

e. Importance of the issue at stake

f. Importance of proposed discovery in resolving the issue

SUMMARY JUDGMENT

IV. Summary Judgment

A. Rule 56(a)

1. Claimant can move 20 days after commencement of action or after opposing party moves for summary judgment

B. Rule 56(b)

1. Defending party can move for summary judgment at any time

C. Rule 56(c)

1. Motion must be served at least 10 days before hearing (most courts require at least 21 days)

2. Standard − Summary judgment shall be granted if moving party makes showing that there is no genuine issue as to any material fact

a. What is fact at issue and why is it material?

i. Material if relevant to an element or affirmative defense

b. Is there a genuine issue about it?

i. Is it plausible that could come out either way?

· Adickes v. S.H. Kress & Co.

§ Key fact − Was there police officer in store?

§ Material to whether there was a conspiracy

§ D did not come up with enough evidence to initiate

§ D cannot do nothing in moving for SJ, must make some kind of showing (vague as to what this requires)

· Celotex v. Catrett

§ Key fact − Was P exposed to D’s product?

§ Material to causation

§ Rather than showing through affirmative evidence, D made showing that absence of evidence on other side (contention interrogatories often used)

§ Absence of evidence − Courts are split on moving party’s burden

Ø Point out there is no evidence (just state)

Ø Point to evidence in record to show lack of evidence

D. Rule 56(f)

1. Not enough chance for discovery on issue (premature)

E. Burden of production − Whether party has sufficient evidence to go to trial

F. Burden of persuasion − Which party must convince trier of fact

G. Party with burden of proof moves

1. Every reasonable jury would conclude that it is more likely than not that moving party is right

2. Ex. − Every reasonable jury would conclude that it is more likely than not that Jacques threw the rock

a. Required to make initial showing

b. Only if initial showing is strongly supported does opposing party have to respond

i. Burden of opposing party is to provide enough evidence to undermine moving party’s evidence sufficiently such that a reasonable jury could conclude that moving party is not more likely than not right

H. Party who does not have burden of proof moves

1. No reasonable jury would conclude that more likely than not that party opposing summary judgment is right

2. Ex. − No reasonable jury would conclude that it is more likely than not that Jacques threw the rock

a. Initial showing − Logically would make sense not to require initial showing, but if this were the case could be used as a weapon too easily

· Celotex − Ambiguous which of two standard applies

o Either merely point out that other side has no evidence

o Or must do discovery to show that other side has no evidence

i. Burden of opposing party is to provide enough evidence that a reasonable jury could conclude that it is more likely than not right

ii. Note that since party opposing summary judgment will have burden of persuasion at trial, if moving party has met its burden, simply attacking the moving party’s evidence will not suffice to survive summary judgment

For More information How You Can Use Some of These Pro Se Civil Litigation Guidelines To Effectively Challenge and Successfully Win Your Wrongful Foreclosure and Save Your Home Visit http://www.fightforeclosure.net

What Homeowners Needs to know About Mortgage Assignments and Endorsements

04 Thursday Jul 2013

Posted by BNG in Affirmative Defenses, Appeal, Foreclosure Defense, Fraud, MERS, Mortgage Laws, Non-Judicial States, Note - Deed of Trust - Mortgage, Your Legal Rights

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IOU, MERS, Mortgage Electronic Registration System, Mortgage law, Mortgage loan, Promissory note, Trust deed (real estate), Uniform Commercial Code

When a potential homeowner takes out a loan to purchase a home, you are required to sign two documents: a promissory note and a mortgage (or deed of trust).

Assignments and endorsements are the ways that these documents are transferred between banks. Read on to learn the difference between an assignment of mortgage (or deed of trust) and an endorsement of the note.

How To Understand Mortgage Transactions

To fully understand the difference between an assignment of mortgage (or deed of trust) and endorsement of the note, you must understand the basic terms and documents involved in a residential mortgage transaction.

Mortgagee and mortgagor. A “mortgagee” is the lender. The mortgagee gives the loan to the “mortgagor,” who is the homeowner/borrower.

Loan documents. The loan transaction consists of two main documents: the mortgage (or deed of trust) and a promissory note. The mortgage (or deed of trust) is the document that pledges the property as security for the debt and permits a lender to foreclosure if you fail to make the monthly payments, whereas the promissory note is the IOU that contains the promise to repay the loan. The purpose of the mortgage (or deed of trust) is to provide security for the loan that is evidenced by a promissory note.

Loan Transfers. Banks often sell and buy mortgages from each other. An “assignment” is the document that is the legal record of this transfer from one mortgagee to another. In a typical transaction, when the mortgagee sells the debt to another bank, an assignment is recorded and the promissory note is endorsed (signed over) to the new bank.

These documents are separate and each has its own distinct set of rules that govern how they are exchanged between banks.

Assignments of Mortgage (or Deed of Trust)

An assignment transfers all of the interest the original mortgagee had under the mortgage (or deed of trust) to the new bank. Generally, the mortgage (or deed of trust) is recorded shortly after the mortgagors sign it and, if the mortgage is subsequently transferred, each assignment is to be recorded in the county land records.

The Role of MERS in the Assignment Process

When mortgages are transferred frequently, assignments are sometimes neglected. MERS (the Mortgage Electronic Registration System, Inc.), a company created by the mortgage banking industry, was developed to track ownership of mortgages. This eliminates the need for separate assignments when the loan is transferred. In some mortgage transactions, the mortgage will designate MERS as the mortgagee (solely as a nominee for the lender). These loans are referred to as MERS as Original Mortgagee (MOM) loans. In other cases, the loan may be assigned to MERS (solely as a nominee for the lender) at some point later in its life cycle after the loan closes. MERS then acts as an agent for the owner of the loan, but it never owns the mortgage loan or services it.

Promissory Notes

When a loan changes hands, the promissory note is endorsed (signed over) to the new owner of the loan. In some cases, the note is endorsed in blank which makes it a bearer instrument under Article 3 of the Uniform Commercial Code. This means that any party that possesses the note has the legal authority to enforce it.

Assignments and endorsements prove which bank owns the debt and may bring the foreclosure action. If the documentation was not proper, this can be a defense to foreclosure in some cases.

To find out how you can effectively use solid mortgage assignments and endorsement arguments and case laws for wrongful foreclosure defense visit: http://www.fightforeclosure.net

How Nevada Residents Can Effectively Use Mediation To Save Their Home

01 Monday Jul 2013

Posted by BNG in Affirmative Defenses, Foreclosure Defense, Non-Judicial States, Pro Se Litigation, Your Legal Rights

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administrative office of the courts, Business, district court judges, Foreclosure, Home insurance, July, Mediation, mediation program, Nevada, Nevada Supreme Court, Owner-occupier, Real estate, robert estes, Robert Gaston

The program allows homeowners and lenders to sit down with trained mediators to discuss alternatives to foreclosure. The mediations, which are confidential, are required to be conducted within 80 days of a Notice of Default and Election to Sell being recorded by the lender and served on the homeowner.

1) Only owner-occupied homes are eligible under the law

Only owner-occupied homes are eligible under the law and only if a notice of default was recorded on or after July 1, 2009. Once a homeowner elects mediation, the lender must participate. The $400 mediation fee is split equally between the two parties. The Administrative Office of the Courts is administering the program and has established a webpage with a variety of information and forms, including some information in Spanish.

2) Mediators Appointed For Foreclosure Mediation Program

The Nevada Supreme Court initially appointed the first 97 mediators for the Nevada Foreclosure Mediation Program a major step that set the stage for the scheduling of the first mediations. The 97 include former Supreme Court Justice Deborah Agosti and former District Court judges Robert Gaston, Robert Estes, and Leonard Gang. Also on the list are current State Bar of Nevada President Kathy England and former Nevada Supreme Court Clerk Janette Bloom. The list of mediators has increase since then.

3). Homeowners who receive notices have 30 days from the day they received their notice to seek mediation

Homeowners who receive foreclosure notices technically Notices of Default and Election to Sell have 30 days from the day they received their notice to seek mediation under the program that was created by the Nevada Legislature effective July 1, 2009. We have seen a wave of requests for mediation and the wave is getting larger, said Verise Campbell, Foreclosure Mediation Program Manager. This is what we expected. We knew, because of the mandated time frames, that it would take some time for the requests for mediation to come rolling in and for the program to come up to speed.

4). Once all submissions are in, cases will be assigned to mediators within 10 days

In the process, homeowners must submit their election of mediation form along with a $200 fee to their lenders within 30 days of receiving foreclosure notices. The lenders then forward the request and the homeowner’s funds, along with the lender’s $200 payment and other documents, to the Foreclosure Mediation Program. Once all submissions are in, cases will be assigned to mediators within 10 days and mediations will be scheduled within 80 days of the date the foreclosure notice was recorded.

5). Training sessions for the Nevada Foreclosure Mediation Program

The list of individuals selected to attend the first training sessions for the Nevada Foreclosure Mediation Program has been set and the participants have been notified. Those training sessions include Aug. 5 in Reno and Aug. 6-7 in Las Vegas and were designed to provide foreclosure-specific information to experienced mediators.

6). Mediation is an alternative method to help parties resolve disputes by agreement with the help of trained mediators.

The Foreclosure Mediation Program was established as a result of the Assembly Bill 149, passed during the 2009 session of the Nevada Legislature.Its purpose is to address the foreclosure crisis head-on and to help keep Nevada families in their homes. This law establishes a Foreclosure Mediation Program for owner-occupied residential properties that are subject to foreclosure notices formally known as a Notice of Default and Election to Sell filed on or after July 1, 2009. Mediation is an alternative method to help parties resolve disputes by agreement with the help of trained mediators.

7). Lenders must have someone at the mediation or available with the authority to modify a loan

Under the Supreme Court Rules, the homeowner must submit copies of financial records and indicate the amount of a mortgage payment that could be made if a loan modification could be reached. Lenders must submit documents indicating current appraisals of a home’s value and estimates of what it could sell for in a so-called short sale. Lenders must have someone at the mediation or available with the authority to modify a loan and provide the original or certified copies of the mortgage note, deed of trust, and any assignments of the mortgage note or deed of trust. The rules require that the parties to mediate in “good faith.”

8). the program will offer homeowners the opportunity to sit down with their lenders, mediation will not be the solution for everyone

In July of 2011 when the program first started, 4,205 foreclosure notices were recorded in Nevada. (15 of 17 counties reporting; That was down from the monthly average of about 7,600 and well below the more than 11,000 filed in June. In addition to the owner-occupied homes eligible for the Foreclosure Mediation Program, the foreclosure notices include commercial properties and residential housing not occupied by the owners.

9). New recording fee for Notices of Default and Election to Sell

The Nevada Foreclosure Mediation Program has also resulted in a new recording fee for Notices of Default and Election to Sell. The new fee, established by Assembly Bill 65, is $50. On this website is an information brochure announcing the new recording fee for the Notice of Default The Election/Waiver of Mediation Form to be served with the Notice of Default and Election to Sell is included along with instructions for the individuals recording the notices involved in the new foreclosure procedures.

10). If there is an agreement, the parties will execute the appropriate documents.

Within 10 days of the mediation, the mediator will prepare the necessary Statement of Agreement or Non-agreement and serve it on the parties. The original will be filed with the Foreclosure Mediation Program Administrator and the mediation will be closed. Within 10 days of the mediation, the mediator will prepare the necessary Statement of Agreement or Non-agreement and serve it on the parties. The original will be filed with the Foreclosure Mediation Program Administrator and the mediation will be closed. If there is an agreement, the parties will execute the appropriate documents. If there is no agreement, the parties will be free to pursue other legal remedies.. If there is no agreement, the parties will be free to pursue other legal remedies.

TIMELINE FOR NEVADA FORECLOSURE
DAY     EVENT
DAY 1 – –    Notice of Default and Election to sell is recorded.
An State of Nevada Election/Waiver of Mediation is sent to homeowner along with copy of Notice of Default and Election to Sell.
Within the Next 10 Days     Notice of Default and Election to Sell must sent out to the Trustor/Owner and all the Lien Holders by U.S. Post Office Certified Mail.
1st Day after Mailing the NOD – –   A 35 day reinstatement period begins.
DAY 30 – –    Election to Mediate expires 30 days from the date of the Notice of Default and Election to sell.
DAY 35 – – The right to reinstate expires. Not at midnight but at the end of the working day.
25 Days before Foreclosure     Lender notifies the IRS (if applicable).
DAY 91 – – The lender has the right to send out a Notice of Trustee’s Sale. From the date of the Notice of Trustee’s Sale it’s 20 days to foreclosure, unless otherwise specified in the notice. Notice of Trustee’s Sale must be sent via U.S. Registered Mail to all parties who require notification. The notice must also be posted within the County where the sale is to be held and where the property is located.
1 Week before Foreclosure     A bid price is typically established at this point. The bid amount includes principal, interest, advances and costs.
DAY 111 – – Day of Trustee’s Sale also known as the foreclosure day. Anyone interested in buying the property can bid on the property. Only cash or certified funds are accepted. After the sale, a new deed is provided for the new owner. The new owner may be the bank or the winning bidder.

Note: Over the last few years, we saw that many times lenders did not act this quickly in their execution of foreclosures but it is important to note that they have the right to do so.

Quick Facts

– Judicial Foreclosure Available: Yes

– Non-Judicial Foreclosure Available: Yes

– Primary Security Instruments: Deed of Trust, Mortgage

– Timeline: Typically 120 days

– Right of Redemption: Yes

– Deficiency Judgments Allowed: Yes

In Nevada, lenders may foreclose on deeds of trusts or mortgages in default using either a judicial or non-judicial foreclosure process.

Judicial Foreclosure

The judicial process of foreclosure, which involves filing a lawsuit to obtain a court order to foreclose, is used when no power of sale is present in the mortgage or deed of trust. Generally, after the court declares a foreclosure, your home will be auctioned off to the highest bidder.

The borrower has one year (12 months) after the foreclosure sale to redeem the property if the judicial foreclosure process is used.

Non-Judicial Foreclosure

The non-judicial process of foreclosure is used when a power of sale clause exists in a mortgage or deed of trust. A “power of sale” clause is the clause in a deed of trust or mortgage, in which the borrower pre-authorizes the sale of property to pay off the balance on a loan in the event of the their default. In deeds of trust or mortgages where a power of sale exists, the power given to the lender to sell the property may be executed by the lender or their representative, typically referred to as the trustee. Regulations for this type of foreclosure process are outlined below in the “Power of Sale Foreclosure Guidelines”.

Power of Sale Foreclosure Guidelines

If the deed of trust or mortgage contains a power of sale clause and specifies the time, place and terms of sale, then the specified procedure must be followed. Otherwise, the non-judicial power of sale foreclosure is carried out as follows:

A copy of the notice of default and election to sell must be mailed certified, return receipt requested, to the borrower, at their last known address, on the date the notice is recorded in the county where the property is located. Any additional postings and advertisements must be done in the same manner as for an execution sale in Nevada.
Beginning on the day after the notice of default and election was recorded with the county and mailed to the borrower, the borrower has anywhere from fifteen (15) to thirty five (35) days to cure the default by paying the delinquent amount on the loan. The actual amount of time given is dependent on the date of the original deed of trust.
The owner of the property may stop the foreclosure proceedings by filing an “Intent to Cure” with the Public Trustee’s office at least fifteen (15) days prior to the foreclosure sale and then paying the necessary amount to bring the loan current by noon the day before the foreclosure sale is scheduled.
The foreclosure sale itself will be held at the place, the time and on the date stated in the notice of default and election and must be conducted in the same manner as for an execution sale of real property.

Lenders have three (3) months after the sale to try and obtain a deficiency judgment. Borrowers have no rights of redemption.

NEVADA FORECLOSURE TIMELINE

DAY	EVENT
DAY 1	Notice of Default and Election to sell is recorded. An State of Nevada Election/Waiver of Mediation is sent to homeowner along with copy of Notice of Default and Election to Sell.
Within the Next 10 Days	Notice of Default and Election to Sell must sent out to the Trustor/Owner and all the Lien Holders by U.S. Post Office Certified Mail.
1st Day after Mailing the NOD	A 35 day reinstatement period begins.
DAY 30	Election to Mediate expires 30 days from the date of the Notice of Default and Election to sell.
DAY 35	The right to reinstate expires. Not at midnight but at the end of the working day.
25 Days before Foreclosure	Lender notifies the IRS (if applicable).
DAY 91	The lender has the right to send out a Notice of Trustee’s Sale. From the date of the Notice of Trustee’s Sale it’s 20 days to foreclosure, unless otherwise specified in the notice. Notice of Trustee’s Sale must be sent via U.S. Registered Mail to all parties who require notification. The notice must also be posted within the County where the sale is to be held and where the property is located.
1 Week before Foreclosure	A bid price is typically established at this point. The bid amount includes principal, interest, advances and costs.
DAY 111	Day of Trustee’s Sale also known as the foreclosure day. Anyone interested in buying the property can bid on the property. Only cash or certified funds are accepted. After the sale, a new deed is provided for the new owner. The new owner may be the bank or the winning bidder.

Over the last few years, we saw that many times lenders did not act this quickly in their execution of foreclosures but it is important to note that they have the right to do so.

– See more at: http://michaelsrealestate.com/nevada-foreclosure-law/#sthash.CfhtdkBI.dpuf

For more information about foreclosure defense please visit: http://www.fightforeclosure.net

What California Residents Needs To Know When Faced With Foreclosure Challenges

01 Monday Jul 2013

Posted by BNG in Affirmative Defenses, Appeal, Foreclosure Defense, Judicial States, Non-Judicial States, Your Legal Rights

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Business, Deed in lieu of foreclosure, Foreclosure, Lien, Mortgage loan, Real estate, Trust deed (real estate), Trustee

What is a foreclosure?
“Foreclosure” is a common term used to describe a trustee’s sale proceeding- the correct terminology to use when describing the procedure for enforcing a lender’s rights once an obligation secured by a Deed Of Trust (or similar instrument) is in default.

What constitutes a breach or a default?
A breach exists when the borrower fails to make the payments of principal and interest when due pursuant to the note secured by deed of trust. If the balance of the note is due, the breach would be the failure to make the principal payment due plus interest, by the maturity date. Most deeds of trust have provisions for default being declared when a senior lien, insurance, taxes and assessments have not been paid, or if the property is transferred without the lenders approval.

Should I forego a foreclosure and take a deed in lieu?
Before you can even consider an alternative, the borrower must be willing to offer a deed in lieu. There are advantages to taking a deed in lieu. It could save you time and money. You should order a preliminary title report and review it carefully to determine if there are any junior liens that would survive the deed in lieu. If you are satisfied with the title report, you would take the deed in lieu subject to a title insurance policy being issued in your favor as reflected in the preliminary report. This procedure would take a lot less time than the approximate four months of foreclosure. The main disadvantages to taking a deed in lieu of foreclosure are the junior liens will not be extinguished and that the borrower may later have a change of heart and seek to have the courts set the deed in lieu aside.

Must the original trustee process a non-judicial foreclosure?
No. The beneficiary may substitute trustees anytime.

Should I notify a senior lender of the existence of my junior lien? Yes. A senior lender may have a provision in his deed of trust that provides for senior priority for additional advances to the borrower. When advances are “obligatory” to protect the lender’s security interest, they are so secured. However, if the advances are “optional” and the senior lender has knowledge of a junior lien, the advances may not be senior to the junior lien of trust. A junior lender, therefore, should give the senior lender notice of their lien. Many lenders would like to reduce their collection efforts by having the junior lienholder advance to their loan. Send the senior lender a notice which tells them that you are willing to reinstate their loan.

Must I give notice of delinquency to a junior lienholder even if I don’t file an NOD?
No. Junior lienholders may request status of senior lien by doing the following:
Under the California civil code section 2924e, a lender is required to send a notice to a junior lienholder within 15 days after the delinquency reaches four months, when certain conditions exist: the borrower must consent; the junior lienholder must submit the request in writing by certified mail along with $40; the property must contain one to four residential units; the request shall be recorded in the county in which the property is situated; and it has not been longer than five years since the original request, unless a renewal payment of $15 has been made.
Junior lenders who acquire interest by assignment, now have the same rights as the original beneficiary to require senior lenders to provide information regarding delinquencies of four months. The new junior beneficiary must pay a processing fee of $15 to the senior beneficiary. See section 2924e(b).

If my loan is in a senior position, when should I start my foreclosure?
You may have to consider various constraints before you can file a notice of default. Is this a standard Fannie Mae/Freddie Mac document? If it is, you must send the borrower a notice of intent to foreclose 30 days prior to the filing of the NOD. You may have sold the loan to some other lender; they may have certain procedures and standards that you must adhere to, such as asking their permission to foreclose after a suitable effort has been made to work with the borrower to encourage repayment. If your loan is insured, you have be required to follow certain steps in order to be allowed to file a claim with the insurer.
The most important consideration when deciding to start a foreclosure is “Am I well secured if I wait?” If there is adequate protection between the value of your loan and the value of the property, delay should cause no loss. If there is inadequate protection, then every day delayed will cost you money. Choose a trustee who will record your NOD without any unnecessary delays and will stand behind their work.

If my loan is in a junior position, when should I start my foreclosure?
If you service a loan for someone else, if it is insured, or it is a standard FNMA/FHLMC document, then you have the same constraints mentioned in the previous question. Being in junior position adds one other very important dimension for your consideration. The senior lender can foreclose you out of your security or certainly diminish your protection as their loan interest balance grows.
If the senior lender begins foreclosure, and neither you nor the borrower bring them current, the lender could very well go to sale and eliminate your security. It is much better for you to initiate foreclosure early, go to auction, acquire the property and sell it, before the senior lender can complete the foreclosure. Of course, if necessary, you may have to reinstate the first lender to allow enough time for you to complete your foreclosure.

Should I reinstate the senior loan which is in foreclosure, or bid at its sale?
Reinstating the senior loan should require considerably less cash than bidding at its sale. If the loan has matured, then you may pay off the loan prior to the sale or bid at the sale.

If the senior lender filed a notice of default several months earlier, you may be able to save time by bidding at the senior’s sale. However there are some pitfalls to this strategy. The senior may delay his foreclosure; you have no control over when they may go to sale. File your own notice of default as soon as possible so that at least you are proceeding to your own sale. If you intend to bid at the senior’s sale, come to the sale early, bring sufficient certified funds to bid the amount of the debt plus your lien. You cannot credit bid the amount owed to you under your deed of trust; your standing as a bidder is the same as any others. If you fail to arrive on time for the sale, your lien may be eliminated.

Do I need the borrower’s permission to foreclose?
No. You already have their permission; they gave it when they signed the note and deed of trust.

What documents do I need to foreclose?
You will need to provide the trustee with the note and deed of trust, any modification or extension agreements, additional notes and any assignments. If an original document is lost, it may be necessary to provide a lost instrument bond. Consult with your trustee. You also need to provide the trustee with certain essential information, such as the unpaid balance of the note, the date to which the interest is paid, the reason for the default (such as failure to make the payment which became due on a certain date), information regarding any advances you have made, the last known residence or business address of the last known owner, and the property address. If you are not using the original trustee, a substitution of trustee must be signed and notarized by the beneficiary.

Why is an accurate “last known address” of the last known owner vital?
Failure to send notice to an accurate business or residence address of the last known owners may invalidate the foreclosure. Search all your records completely and carefully. If the borrower has more than one loan with your firm, review all sets of records. If the borrowers are married and you receive word from one of them that (s)he is no longer residing at the property address and you are provided with a new address, be sure to communicate that information to the trustee as soon as possible.

How long does it take to foreclose?
If there are no delays, a foreclosure will be completed in about four months. After the recording of the NOD there is a mandatory three-month waiting period before the trustee can publish the notice of trustee’s sale. Generally the sale will take place four weeks after the pre-publication period has ended. The date of the sale is influenced by the county where the property is located, the regular schedule of sales for that county and by the frequency of publication of the newspaper in which the trustee is required to publish. The trustee must also consider the newspaper deadlines for advertising and the time-necessary for preparation of the notice of sale and its delivery to the newspaper. The California Civil Code also requires that the notice of sale be posted on the property and a public place at least 20 days prior to the sale; adequate time must be allowed for this to be completed. If the IRS has recorded a federal tax lien at least 30 days before the sale, they require notification at least 25 days before the sale. If the loan is insured by the Veterans Administration, the sale date must be set to allow time enough for them to provide bid instructions.

Who pays the foreclosure fee and costs?
If the borrower brings the loan current or pays it off, the borrower is responsible to the lender for the foreclosure fee and costs. Since the lender is obligated to pay the trustee, the lender should be sure to not overlook these foreclosure expenses. If the property is sold to an outside bidder at the foreclosure auction, the foreclosure expenses will be paid by the bidder. Only when the lender is the successful bidder at the sale will the lender not be able to look to someone else to recover the trustee’s fee and costs. Hopefully, when the property is resold, the lender can expect to recover their foreclosure expenses.

Do all trustees charge the same?
No. The California Civil Code sets the maximum fee that is deemed to be valid and lawful. A trustee need not charge that maximum amount. The quality of service and the trustee’s financial strength should be of primary concern when selecting a trustee.

What is a Declaration of Default?
This document contains the official written instruction from the beneficiary to the trustee. Most deeds of trust require the beneficiary to furnish the trustee with a Declaration of Default. It identifies the deed of trust to be foreclosed, states the breach, and directs the trustee to sell the property to satisfy the indebtedness.

What is the fastest way to record the NOD? You may send the trustee a pre-signed substitution along with the other documents, or the trustee can prepare one and return it to you for your signature. If you are to be regularly using a trustee, you might consider giving the trustee a limited power of attorney authorizing them to sign the substitution of trustee and the notice of default. Sending pre-signed substitutions or giving a limited power of attorney reduces the time between your decision to foreclose and the actual recording of the notice of default to as little as 24 to 48 hours.

What are the most common delays to the foreclosure process?

The most common delay comes from the filing of bankruptcy.
A temporary restraining order (TRO) is used to preserve the status quo pending a court hearing for a preliminary injunction.
A preliminary injunction is used to preserve the status quo pending a final determination of the action on the merits.
The beneficiary or his servicer doesn’t send the trustee the most current assignment. The trustee prepares the NOD and the substitution with the wrong beneficiary shown. Several days after the documents are recorded the title company discovers the error. The trustee now must rescind the original NOD and re-record new documents. If there is uncertainty regarding the current beneficiary, ask the trustee handling the foreclosure to check with the title company for current information.
The recording information on the deed of trust was incorrect. A copy of the deed of trust has the recording information written incorrectly or the original deed of trust was re-recorded later.
The paid-to-date was incorrect.
The unpaid balance was incorrect.
The last known address was incorrect or incomplete.
Money (partial payment) is accidentally accepted from the borrower.
Instructions are misunderstood. The beneficiary instructs the trustee to cancel the sale rather than postpone, or postpone rather than sell.
The NOD is re-recorded (start-over) because of failure to notify someone.
Correspondence requiring response is accidentally filed rather than handled.
Opening bid information given to the trustee too late to order a date down of the trustee’s sale guarantee.

What law authorizes foreclosures through a trustee’s power of sale?
There is no law that authorizes a trustee’s non-judicial foreclosure; that power is created by the borrower when he signs that deed to trust, pledging the real property as security. The words used in the deed of trust are; “with power of sale.” There are, however, many laws that regulate the trustee. See California Civil Code section 2924.

How does bankruptcy of the borrower affect the foreclosure?
The filing of a petition of bankruptcy by the borrower, by a lessee (tenant) who has a recorded lease, or by the beneficiary of a junior deed of trust, immediately stops the foreclosure, with or without notice. The trustee may not proceed in any way; he may, however, postpone an already scheduled and noticed sale. If the trustee conducts a sale after a bankruptcy is filed, but without any knowledge of it, the sale is void or voidable depending on circumstances. See section 2924j. Before the trustee can continue the foreclosure, the lender must obtain relief from the bankruptcy court. You should seek legal advice immediately from an attorney who specializes in bankruptcy. Relief must terminate the stay against the property of the debtor and the property of the estate in bankruptcy. Relief as to the debtor is not relief as to the estate. The trustee’s sale cannot be held within seven days after the expiration of the stay in bankruptcy unless the court order so provides. See Civil Code section 2924g(d). Attorneys representing lenders in bankruptcy should include as part of their relief orders a statement that a foreclosure sale may occur immediately upon entry of the bankruptcy relief order.

Could a senior lender get relief from the bankruptcy stay and go to sale while the junior lender is still stayed?
Yes. If you are a junior lienholder, notify your attorney as soon as you get word of a bankruptcy. Assist them in every way to get relief before the senior lender does.

Who is entitled to receive a copy of the Notice of Default?
Within ten business days after the NOD records, notice must be mailed by certified/registered mail to the original trustors at the address shown on the deed of trust; the current owners,if known, at their last known business or residence mailing addresses, and to those who have recorded a request for a copy of a Notice of Default. In addition to the required certified/registered mailings, simultaneous mailings must be made by regular, first class mail to the trustors and current owners. See section 2924b(B)(1).
Within one month after the notice of default is recorded, a copy of the NOD must be mailed certified/registered to those entitled to notice under the California Civil Code section 2924b(c)(1), including the current owner of record and those lienholders with a recorded interest.

Does the borrower need actual notice to have a valid foreclosure?
No. The non-judicial foreclosure sections of the California Civil Code were designed to balance the needs of the borrower and lender. The procedure is supposed to be clear and easy to follow so that there is little reason to go into court to argue issues. The notification procedure provides many opportunities for the borrower to receive notice. If they do not make the effort to keep the lender of the trustee informed, they may lose their property without notice. The trustee has no obligation to search for a lost borrower. The borrower can give constructive notice with their current address. See I.E. Assocs., v. Safeco Title Ins. Co. (1985) 39 C3d 281, 216 CR 438.

What is a Trustee’s Sale Guarantee report?
The Trustee’s Sale Guarantee (TSG) report provides the foreclosing trustee with the information necessary to process your foreclosure and guarantees the correctness of that information. It sets forth the record owners and lists all exceptions of record against the secured property. It provides the names of those who are to receive notices and the name of the newspaper in which the trustee must publish. The TSG is provided by a title company in the county where the property is located. When you receive your copy from the trustee, you should be alert to certain items:

New Owners.
Delinquent real estate taxes.
Notice of defaultrecorded by a senior deed of trust. You should contact the senior beneficiary to determine if their loan is still delinquent.
Federal (IRS) tax liens recorded.
Bankruptcy.
Lis Pendens. This provides constructive notice of pending litigation, the outcome of which will not be affected by the foreclosure.
Notice of substandard dwelling.
Any irregularities noted therein.

Who should record a request for a copy of a Notice of Default?
If you are a junior lienholder and have changed you address from that shown on the upper left hand corner of your recorded deed of trust, you should record a request for notice pursuant to Civil Code section 2924b(a) showing your current address. Failure to do this may prevent you from receiving notice of a pending foreclosure on a senior deed of trust. Additionally, if you want a copy of a Notice of Default mailed to you within ten business days of its recording, record a request.

When can I refuse reinstatement?
For NOD’s recorded prior to January 1, 1986, reinstatement is allowed by law (unless the loan has reached full maturity) during the first three months; after the first three months you can refuse reinstatement. For Nod’s recorded after January 1,1986, you may not refuse reinstatement until five business days before the date set for sale or a postponed sale; after that you may refuse reinstatement. See Civil Code section 2924c(e). The standard FNMA/FHLMC deed of trust allows reinstatement by the borrower up to five calendar days before the sale date.

Who is entitled to reinstate the loan?
The trustor and any junior lienholder of record have the right to reinstate the loan. The reinstatement amount should be enough to restore the entire loan to its original installment basis and include attorney fee and costs which were necessary to protect the security, foreclosure fee and costs, late charges, and advances. Contact the trustee for updated fees and costs before accepting reinstatement. A partial payment may not cure the default. Accepting partial payment may invalidate the foreclosure. If you believe it is in your best interest to accept partial payments, consult your attorney regarding a written agreement between you and the borrower.

What costs can be included in the reinstatement or payoff amount?
Money advanced to protect the lender’s security, other than improvement of the property, are allowable. For instance, repairing a leaking roof, that would result in damage and decrease the value of the property, would be allowable. Replacing the whole roof would not be allowable. The costs of collection letters and advice from an attorney in certain instances now appear allowable. See Buck v. Barb 147 CA 3rd 920. Additionally, attorney fees and costs incurred while defending yourself in court or seeking relief from bankruptcy are allowable. Check with your attorney before including any questionable items. Also there are regularly allowable trustee’s costs for recording, mailing, publishing, posting, trustee’s sale guarantee, and one postponement fee of $50 upon the written request of the trustor pursuant to section 2924c(c).

How long does the publication period last?
After the three month pre-publication period has ended, a notice of trustee’s sale is prepared and sent to the newspaper for publication. The first ad must run at least 20 days before the scheduled sale date. The time between the first ad and the sale date is the publication period.

Where is the Notice of Sale published and how often?
The Notice of Sale is published in an adjudicated newspaper of general circulation in the city where the property is located.If there is not a paper adjudicated to run legal notices in that city; then a newspaper in the judicial district may be used.
The Notice of Sale must publish once a week for three weeks with the first ad running no later than 20 days before the sale.

Who is entitled to receive the notice of trustee’s sale?
All parties pursuant to Civil Code section 2924b and (b3).

What should the beneficiary do during the publication period?
During this period the lender should assess their equity position in the property to determine if they should bid less than their total debt.

Am I limited to only three postponements?
The lender or the trustee is limited to three discretionary postponements, after which it is necessary to republish the Notice of Sale. The lender may agree with the borrower to any number of postponements; it is best to get this agreement in writing and signed by the borrower. The sale can be postponed any number of times “by operation of law” or one time only for bankruptcy determination. See section 2924g(c). A Notice of Sale is generally considered stale after one year. It would then be best to re-notice the trustee’s sale.

Must I bid the full indebtedness, plus advances and costs?
No. It is not required and there may be good reasons not to. For instance, it you would like to encourage outside bidders, set the opening bid low and credit bid price upward until you reach your total indebtedness. Another reason that you might want to bid less than the full amount would be to allow for a claim to an insurance company for a casualty loss against the property. If you had bid the full indebtedness, the insurance company could claim that your debt had been fully satisfied. There may also be some tax consequences to consider.

Are the trustee’s sales really held on the steps of the county courthouse?
Yes. Most trustees use the same place to conduct their sales. The most common spot is the front entrance to the county courthouse, city hall, or hall or records. The only requirement by law is that it be conducted in a public place.

Is the trustee’s sale conducted orally or by sealed bid?
The sale is conducted verbally. The trustee will essentially announce that they are offering to sell at public auction to the highest bidder all right, title and interest conveyed to and now held by the described deed of trust. The sale will be made, but without covenant or warranty, express or implied, regarding title, possession or encumbrances. After the auctioneer makes an announcement, they will ask if there are any bidders who wish to qualify. If there are, each must show the auctioneer funds in excess of the opening bid. A junior lienholder must qualify as any other bidder and cannot use their lien for bidding purposes. Nomellini Const. Co. v. Modesto Savings & Loan Assoc. (1969) 275CA2d 114,79 CR 717. The auctioneer will note the total amount of funds each bidder possesses, so that they know when a bidder is no longer qualified to enter a bid. If a bidder tries to enter a bid that exceeds their funds, the auctioneer will ask them to requalify. Each bid is an irrevocable bid and replaces the previous bid. If a bidder reneges, they may be liable to the trustee for damages and subject to criminal prosecution and penalties. The successful bidder is the one who enters the final bid that is accepted by the auctioneer. See sections 2924g and 2924h.

Must I attend the sale and enter my own bid?
No. The trustee’s auctioneer will enter your opening bid on your behalf. However, you may attend the sale and enter your own bid. If you wish to bid more than your total debt due you, it would be necessary for you to appear at the sale with certified funds to cover any bids you make over the amount of your debt.

When am I entitled to possession of the property?
The title a successful bidder receives through a trustee’s deed entitles them to immediate possession. The purchaser may allow the previous owners or tenants to stay or they may bring an unlawful detainer action (eviction) to remove them. However, a lease recorded prior to the recording date of the deed of trust entitles the lease to priority over the title received through the foreclosure. A unrecorded lease, where it was reasonable to assume that a lease existed at the same time the deed of trust was recorded, may provide the same priority as a prior recorded lease. Alternately, if the lease is unrecorded and it was not reasonable to assume that a lease existed at the time the deed of trust was recorded or if the lease was recorded subsequent to the deed of trust which has been foreclosed, the purchaser at the foreclosure sale may choose to evict the tenants or allow the tenants to stay.

Is there a redemption period after the sale?
In a non-judicial sale there is no redemption period for the previous owner or junior lienholders. The Internal Revenue Service (IRS) has a 120-day right of redemption, if it had a properly recorded notice of a federal tax lien subsequent to your deed of trust.

What liens or rights may survive the trustee’s sale?
Failure of the trustee to notify a junior lienholder of record (absent his actual knowledge of the sale) may allow the junior lien to survive. It is as yet unclear under California law whether the buyer can claim “bona fide purchase” status to defeat the junior lien’s attachment. In any event, the junior lien could sue for damages if a BFP’s interest eliminated the junior. An IRS tax lien will not be extinguished for 120 days; during that time the IRS has the right to redeem the property. The rights of a plaintiff in a legal action, who has a properly recorded lis pendens, will survive the trustee’s sale. City and county liens, easements, homeowner’s association assessments, and mechanic’s liens, where the work was begun before the foreclosing deed of trust was recorded, may survive the trustee’s sale. Leases that were recorded prior to the foreclosing deed of trust will survive. An unrecorded lease where it was reasonable to assume that a lease existed may survive. If the foreclosing lender subordinated to a subsequent deed of trust, it will survive. Any liens that were recorded prior to the foreclosing deed of trust (which has not subordinated itself to the foreclosing deed of trust) will survive.

Who gets the over bid surplus?
Any moneys that exceed the foreclosing lender’s total indebtedness, including advances and expenses, will go to junior lienholders of record in the order of priority, and finally to the previous owner of record. If the trustee has doubts about where the moneys should be paid, they should commence an action for interpleader to avoid potential liability.

What happens if I feel sorry for the sold out borrower and deed the property back to them?
If your intent is to replace your original deed of trust with a new one having the same priority…BEWARE. The extinguished junior liens will revive; your new deed of trust will be subordinate. See Jensen v. Duke (1925) 71 Cal. App. 210.

When is the trustee’s sale complete?
The sale is final upon the auctioneer saying “sold” and the sale is deemed perfected as of 8am on the day of sale provided the Trustee’s Deed Upon Sale is recorded within 15 days of the actual sale date.

To find out how you can effectively challenge and save your home when faced with foreclosure challenges visit http://www.fightforeclosure.net

How to Effectively and Strategically Challenge and Win Your Wrongful Foreclosure Against Your Bank or Lender

18 Saturday May 2013

Posted by BNG in Affirmative Defenses, Foreclosure Defense, Judicial States, Loan Modification, Non-Judicial States, Your Legal Rights

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California, Foreclosure, Mortgage loan, Real Estate Settlement Procedures Act, RESPA, TILA, Trustee, United States

The key factors in making sound decision as to how to fight your foreclosure are based on whether your State has a Judicial or non-judicial foreclosure process.

It is vital to determine your strengths and weaknesses in order to know whether to use OFFENSIVE or DEFENSIVE tactics and strategies.

First of all you have non-judicial and judicial foreclosure states. Non-judicial basically means that instead of signing a conventional mortgage and note, you signed a document that says you give up your right to a judicial proceeding. So the pretender lender or lender simply instructs the Trustee to sell the property, giving you some notice. Of course the question of who is the lender, what is a beneficiary under a deed of trust, what is a creditor and who owns the loan NOW (if anyone) are all issues that come into play in litigation.

In a non-judicial state you generally are required to bring the matter to court by filing a lawsuit. In states like California, the fore-closers usually do an end run around you by filing an unlawful detainer as soon as they can in a court of lower jurisdiction which by law cannot hear your claims regarding the illegality of the mortgage or foreclosure.

In a judicial state the foreclosure must be the one who files suit and you have considerably more power to resist the attempt to foreclose.

These are the stage process:

Stage 1: No notice of default has been sent.

In this case you want to get a forensic analysis that is as complete as humanly possible TILA, RESPA, securitization, title, chain of custody, predatory loan practices, fraud, fabricated documents, forged documents etc. I call this the FOUR WALL ANALYSIS, meaning they have no way to get out of the mess they created. Then you want a QWR (Qualified Written Request) and DVL (Debt Validation Letter along with complaints to various Federal and State agencies. If they fail to respond or fail to answer your questions you file a suit against the party who received the QWR, the party who originated the loan (even if they are out of business), and John Does 1-1000 being the owners of mortgage backed bonds that are evidence of the investors ownership in the pool of mortgages, of which yours is one. The suit is simple, it seeks to stop the servicer from receiving any payments, install a receiver over the servicer’s accounts, order them to answer the simple question as to Who is my creditor and how do I get a full accounting FROM THE CREDITOR? Alternative counts would be quiet title and damages under TILA, RESPA, SEC, etc.

Tactically you want to present the forensic declaration and simply say that you have retained an expert witness who states in his declaration that the creditor does not include any of the parties disclosed to you thus far. This [prevents you from satisfying the Federal mandate to attempt modification or settlement of the loan. You’ve asked (QWR and DVL) and they won’t tell. DON’T GET INTO INTRICATE ARGUMENTS CONCERNING SECURITIZATION UNTIL IT IS NECESSARY TO DO SO WHICH SHOULD BE AFTER A FEW HEARINGS ON MOTIONS TO COMPEL THEM TO ANSWER.

IN OTHER WORDS YOU ARE SIMPLY TELLING THE JUDGE THAT YOUR EXPERT HAS PRESENTED FACTS AND OPINION THAT CONTRADICT AND VARY FROM THE REPRESENTATIONS OF COUNSEL AND THE PARTIES WHO HAVE BEEN DISCLOSED TO YOU THUS FAR.

YOU WANT TO KNOW WHO THE OTHER PARTIES ARE, IF ANY, AND WHAT MONEY EXCHANGED HANDS WITH RESPECT TO YOUR LOAN. YOU WANT EVIDENCE, NOT REPRESENTATIONS OF COUNSEL. YOU WANT DISCOVERY OR AN ORDER TO ANSWER THE QWR OR DVL. YOU WANT AN EVIDENTIARY HEARING IF IT IS NECESSARY.

Avoid legal argument and go straight for discovery saying that you want to be able to approach the creditor, whoever it is, and in order to do that you have a Federal Statutory right (RESPA) to the name of a person, a telephone number and an address of the creditor i.e., the one who is now minus money as a result of the funding of the loan. You’ve asked, they won’t answer.

Contemporaneously you want to get a temporary restraining order preventing them from taking any further action with respect to transferring, executing documents, transferring money, or collecting money until they have satisfied your demand for information and you have certified compliance with the court. Depending upon your circumstances you can offer to tender the monthly payment into the court registry or simply leave that out.

You can also file a bankruptcy petition especially if you are delinquent in payments or are about to become delinquent.

STAGE 2: Notice of Default Received

Believe it or not this is where the errors begin by the pretender lenders. You want to challenge authority, authenticity, the amount claimed due, the signatory, the notary, the loan number and anything else that is appropriate. Then go back to stage 1 and follow that track. In order to effectively do this you need to have that forensic analysis and I don’t mean the TILA Audit that is offered by so many companies using off the shelf software. You could probably buy the software yourself for less money than you pay those companies. I emphasize again that you need a FOUR WALL ANALYSIS.

Stage 3 Non-Judicial State, Notice of Sale received:

State statutes usually give you a tiny window of opportunity to contest the sale and the statute usually contains exact provisions on how you can do that or else your objection doesn’t count. At this point you need to secure the services of competent, knowledgeable, experienced legal counsel professionals who have been fighting with these pretender lenders for a while. Anything less and you are likely to be sorely disappointed unless you landed, by luck of the draw, one of the increasing number of judges you are demonstrating their understanding and anger at this fraud.

Stage 4: Judicial State: Served with Process:

You must answer usually within 20 days. Failure to do so, along with your affirmative defenses and counterclaims, could result in a default followed by a default judgment followed by a Final Judgment of Foreclosure. See above steps.

Stage 5: Sale already occurred

You obviously need to reverse that situation. Usually the allegation is that the sale should be vacated because of fraud on the court (judicial) or fraudulent abuse of non-judicial process. This is a motion or Petitioner but it must be accompanied by a lawsuit, properly served and noticed to the other side. You probably need to name the purchaser at sale, and ask for a TRO (Temporary Restraining Order) that stops them from moving the property or the money around any further until your questions are answered (see above). At the risk of sounding like a broken record, you need a good forensic analyst and a good lawyer.

Stage 6: Eviction (Unlawful Detainer Filed or Judgment entered:

Same as Stage 5.

What are some examples of financial injury due to errors, misrepresentations, or other deficiencies in the foreclosure process?

Listed below are examples of situations that may have led to financial injury. This list does not include all situations.

The mortgage balance amount at the time of the foreclosure action was more than you actually owed.

You were doing everything the modification agreement required, but the foreclosure sale still happened.

The foreclosure action occurred while you were protected by bankruptcy.
You requested assistance/modification, submitted complete documents on time, and were waiting for a decision when the foreclosure sale occurred.

Fees charged or mortgage payments were inaccurately calculated, processed, or applied.

The foreclosure action occurred on a mortgage that was obtained before active duty military service began and while on active duty, or within 9 months after the active duty ended and the service member did not waive his/her rights under the Service Members Civil Relief Act.

If you are ready to take the battle to these interlopers, in order to reclaim the home that is rightfully yours, visit http://www.fightforeclosure.net

Fight Your Foreclosure Protect Your Most Valuable Asset

18 Saturday May 2013

Posted by BNG in Foreclosure Crisis, Foreclosure Defense, Fraud, Judicial States, Non-Judicial States, Your Legal Rights

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Business, Colorado, Foreclosure, Home insurance, Investing, Law, Real estate, Services

Homeowners have been the victims in this foreclosure epidemic. In every criminal act there is the criminal and the victim. And like any criminal prosecution, unless the victim comes forward and prosecutes the criminal, the criminal will most likely be set free. So what does this mean? It means that more homeowners need to come forward and fight their foreclosures. There are only a handful of true to the cause advocates that are fighting this fight with an army of pro-se soldiers.

We have now in the homeowners corner, a handful of prosecutors (Senators) that are willing to put the criminals feet to the fire. We have the potential in front of us to give a criminal element to fraudulent foreclosure actions (which it is and should have always been to begin with).

There is a systematic approach I would like to share with homeowners facing foreclosure and attorneys alike that are engaged in foreclosure defense and that is the sales dynamic. See there is a simple philosophy in sales that sales managers train their sales representative to do and follow. Sales is a numbers games so the first rule of sales is (1) the more people you contact the greater your chance at closing a sale. Sales mangers would require reps to make 100 calls a day because out of those 100 calls maybe 10 could be closed.

This is the same approach being used by foreclosure law firm mills. File 100 foreclosure and maybe 10 fight back. This means 90% of their foreclosures go to summary judgment without resistance. To the parties initiating foreclosures these are great statistics. It is for this very reason foreclosure law firm mills charge a flat rate of approximately $1,200 per foreclosure. Any attorney will tell you that they normally charge a retainer of $2,500 to $10,000 to take a case depending on the circumstances surrounding the case at which point they will bill out anywhere from $200 to $350 per hour. Think about that for a second. An attorney that spends 10 hours on your case alone who bills out at say $300 an hour cost $3,000. So what does it say of a foreclosure law firm mill that bills out a flat rate of $1,200 to a multi-million dollar financial institution?

If you can understand the sales philosophy that this is a numbers game with the bets on the homeowner that will not fight to keep their home, then try to understand the adverse affect those initiating these foreclosure actions will face if the homeowner actually defends themselves in litigation. It would mean the foreclosure law firm mills would not be able to charge a flat rate of $1,200 to the banks or servicers. It would mean they would have to charge more money to prosecute these foreclosure suits. Banks don’t want to spend so they would look to other foreclosure mills to represent them which would open up a biding war for their work (which already exist on another level). It would cause the banks to have to spend more money in litigation to defend their fraudulent behavior and their statics of 90% success to straight summary judgment would decrease.

For The Necessary Tools Needed To Effectively and Vigorously Challenge Your Wrongful Foreclosure, Against Those Interlopers Who Are Fraudulently Trying to Steal Your Home From You, Visit http://www.fightforeclosure.net

Litigating Trial Loan Modification Against Your Bank or Lender

17 Friday May 2013

Posted by BNG in Banks and Lenders, Foreclosure Defense, Litigation Strategies, Loan Modification, Your Legal Rights

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Foreclosure, HAMP, Home Affordable Modification Program, Loan servicing, Mortgage loan, Mortgage modification, United States, Wells Fargo

If you find yourself wondering whether you can litigate your Trial Loan Modification which your Bank/Lender failed to make permanent, you are not alone. Many homeowners all across the nation found themselves in similar situation. This question has arisen many times lately, and still we do not have a confirmed answer. But nonetheless it can be litigated because the trial loan modification is afterall a contract, and every contract can be enforced. This goes back to the first year law school class of contract. It means offer, acceptance, consideration and execution. Here, it has all the elements of contract formation. All the judicial remedies of a contract are available in this litigation also. Why not? A lender cannot be compelled to modify a contract unless they had taken governmental bailout money and there are federal guidelines about foreclosure and the requirements one has to meet. We are talking about folks who had gotten trial loan modification and the banks is reneging on it. Here, someone signed, accepted the trial loan modification and sent quite few payments in executing the offer, and did their part of the bargain.

In the recent past, NCLS has brought four class action suits on behalf of Massachusetts residents to challenge the failure of Wells Fargo Bank, Bank of America , J.P. Morgan Chase Bank and IndyMac Mortgage Servicers/OneWest Bank to honor their agreements with borrowers to modify mortgages and prevent foreclosures under the United States Treasury’s Home Affordable Modification Program (”HAMP”). The complaints are filed with the United States District Court for the District of Massachusetts and assert claims for breach of contract, breach of the implied covenant of good faith and fair dealing and promissory estoppel under Massachusetts common law arising from the financial institution’s alleged failure to keep its promises to modify eligible loans to prevent foreclosures against homeowners who have lived up to their end of the bargain as required by HAMP.

Here are some of the complaints filed for such litigation.

Complaint NO. 1
http://www.nclc.org/issues/cocounseling/content/hamp-BosqueWFComplaint.pdf

Complaint No. 2
http://www.nclc.org/issues/cocounseling/content/hamp-Johnson-BOA-Complaint.pdf
Complaint No. 4
http://www.nclc.org/issues/cocounseling/content/hamp-DurmicJPMorganChase-Complaint.pdf

Complaint No. 4
http://www.nclc.org/issues/cocounseling/content/hamp-Reyes-OneWest-Complaint.pdf

If you are not getting your permanent loan modification with your Bank or Lender, you can contact your congressman or regulatory agencies using the sample letter below.

Regulatory Agency

123 Someplace

Some Where In USA

Dear Regulatory Agency

I am writing to you as a homeowner in foreclosure and wish to draw your attention to issues regarding mortgage loan modification, including the Making Homes Affordable program. The prevailing loan modification policies imposed by government entities and loan servicers expose homeowners to substantial risks in a system designed to generate additional profits to loan servicers and others who reap financial rewards in the foreclosure process, at the expense of consumers.

1. The prohibition against partial payments imposed by many loan servicers quickly forces many homeowners into expensive and unnecessary foreclosure proceedings. A loan servicer may decline a mortgage payment check that is $20 less than the full amount due, with full knowledge – and presumably hope – that it may soon result in thousands of extra dollars in profit should the homeowner later be forced into foreclosure. Such policies are calculated to increase profits to loan servicers, their attorneys and other entities that benefit in the foreclosure process.
2. The notorious “Three Month Trial Period” offered by many loan servicers is fraught with many jeopardizing the homeowners who accept such offers.
a. As loan servicers repeatedly extend the trial period, three months may become a year or two.
b. More than half of all trial periods are cancelled by the loan servicer, most of the time despite the fact the homeowner made timely payments.
c. During this period, foreclosure proceedings remain pending, which permits loan servicers to demand an auction date for the sale of the house, even in cases where the homeowner has fully complied with the Trial Period.
d. No warranty, pledge or agreement is made by the loan servicer upon initiation of the trial period. Servicers are under no obligation to do anything other than re-review the loan modification application. This provides ample incentive to loan servicers to prolong the trial period and revive foreclosure proceedings, after gaining many thousands more dollars from hapless homeowners who were led to believe the trial period would end in a timely manner, including an approval of their loan modification.
e. No details are revealed in advance to homeowners by loan servicers regarding the vaguely-possible, future successful loan modification. Many distressed homeowners have completed the trial period only to receive a loan modification that is financially questionable, such as an ARM mortgage.
f. Further, many loan servicers are misrepresenting the “Three Month Trial” to homeowners as a HAMP product, when in fact the only loan modification available to such homeowners is one of the loan servicer’s own creation and often designed to maximize the potential for default and thus, servicer profits.
3. In many cases, homeowners are awaiting loan modification review while simultaneously in foreclosure. As loan servicers are notoriously slow to both review such applications and respond to homeowner inquiries, auction dates are often set before the loan modification application has been approved or denied. No auction date should be set before a loan modification application has been approved or denied.
4. Many loan servicers require that homeowners not attempt to sell their homes while undergoing a loan modification review. For homeowners already in foreclosure, this policy places them significantly at risk of losing their homes and/or equity in the event the loan modification is denied or has not been approved before the auction date imposed by a court.
a. Homeowners participating in the trial period are also prohibited from placing their homes on the market, which as described above can be a lengthy process, again exposing them to the risk of losing their homes and/or equity.
b. When facing or defending themselves in a foreclosure or while undergoing the often lengthy process of loan modification, a homeowner’s right to sell the property themselves must not be infringed upon in order to generate additional profit to loan servicers. These policies effectively remove a distressed homeowner’s last recourse to mitigate their losses.

In summary, distressed homeowners are inadequately protected under these predatory policies. To more fairly balance the needs of loan servicers and the protection of homeowners, these policies should be implemented and enforced by the appropriate regulatory agencies:

1. Loan servicers should accept and properly apply partial payments of overdue mortgage accounts.
2. Efforts must be made and enforced to ensure that homeowners are able to reliably reach and/or obtain responses to their inquiries of loan servicers.
3. Loan modifications must be reviewed in a timely manner, preferably with a pre-defined time limit.
4. “Three Month Trial Periods” should be accurately identified to homeowners as to whether or not the trial period is related to a HAMP loan modification or the loan servicer’s in-house loan modification.
5. “Three Month Trial Periods” should not be extended, except upon homeowner’s request.
6. Pending foreclosure cases should be promptly dismissed upon the initiation of any loan modification “Trial Period.”
7. Truth-in-Lending Disclosures and all other such disclosures and settlement statements currently required of mortgage lenders should be provided to homeowners before the initiation of any “Trial Period.” This would allow homeowners to make an informed decision regarding the financial suitability of the future loan modification, while still allowing loan servicers to rescind such agreements upon the failure of the homeowner to successfully complete the “Trial Period.”
8. In a pending foreclosure proceeding, no auction date should be set before a loan modification application has been approved or denied.
9. The right of a homeowner to sell the property should not be restricted during foreclosure or loan modification review.
10. All regulations and laws applying to consumer loans, such as RESPA and TILA, must also fairly apply to loan modifications. If first mortgage and refinanced mortgages are subject to such regulations, why are loan modifications not?

Please look into this matter at your earliest convenience.

Thank you in advance for your prompt attention to this important urgent matter.

Sincerely,

John/Jane Doe

After contacting the regulatory agencies or your congressman, if you are not getting the attention or permanent loan modification you feel you deserve, you can visit www.fightforeclosure.net to get your foreclosure litigation package and effectively pursue your next Cause of Action in order to get your Trial Loan Modification Offer, permanently modified.

Qualified Written Request For Homeowners

17 Friday May 2013

Posted by BNG in Loan Modification, Mortgage Laws, Pro Se Litigation, Your Legal Rights

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Escrow, Good faith estimate, Loan, Loan servicing, Mortgage loan, Real estate, Real Estate Settlement Procedures Act, RESPA

There are excellent provisions in RESPA dealing with Qualified Written Requests. Today, we are going to elaborate on these provisions. However, they are not all inclusive. Section 6 of RESPA provides borrowers with important consumer protections relating to the servicing of their loans. Under Section 6 of RESPA, borrowers who have a problem with the servicing of their loan (including escrow account questions), should contact their loan servicer in writing, outlining the nature of their complaint. The servicer must acknowledge the complaint in writing within 20 business days of receipt of the complaint. Within 60 business days the servicer must resolve the complaint by correcting the account or giving a statement of the reasons for its position. This does not absolve borrowers from continuing the payments. They are no defense to payments.
The Real Estate Settlement Procedures Act (RESPA) is a consumer protection statute, first passed in 1974. RESPA covers loans secured with a mortgage placed on a one-to-four family residential property. These include most purchase loans, assumptions, refinances, property improvement loans, and equity lines of credit.

Loan servicing complaints

A borrower may bring a private law suit, or a group of borrowers may bring a class action suit, within three years, against a servicer who fails to comply with Section 6’s provisions. Borrowers may obtain actual damages, as well as additional damages if there is a pattern of noncompliance. The following is a sample qualified written request from you, the borrower, to a lender.

However, as usual, use of this is not equivalent substitute of a licensed Nevada attorney.
Attention Customer Service:
Subject: [Your loan number]
[Names on loan documents]
[Property and/or mailing address]

This is a “qualified written request” under Section 6 of the Real Estate Settlement Procedures Act (RESPA).
I am writing because:
-Describe the issue or the question you have and/or what action you believe the lender should take.
-Attach copies of any related written materials.
-Describe any conversations with customer service regarding the issue and to whom you spoke recently.
-Describe any previous steps you have taken or attempts to resolve the issue.
-List a day time telephone number in case a customer service representative wishes to contact you.
I understand that under Section 6 of RESPA you are required to acknowledge my request within 20 business days and must try to resolve the issue within 60 business days.

Sincerely,

[Your name]

Here is another example:

Attention Customer Service:
Subject: Loan number xxxxxxxxxx
xxxxxxxx xxxxxxxx xxxxxxxxxxx
x xxxxxxx
Xxxxxxxx, CA xxxxx
This is a “Qualified Written Request” under Section 6 of the Real Estate Settlement Procedures Act (RESPA).

I am writing to request:

(1) Copies of all documents pertaining to the origination of my mortgage including my loan application, Right to Cancel, Deed of Trust, note, adjustable rate note, addendum to the note for the interest only payment period, Truth in Lending statements, Good Faith Estimate (GFE), HUD 1, appraisal, and all required disclosures and rate sheets associated with this transaction for the above referenced loan. The copies should be legible and all documents shall be copied in their entirety.

(2) A copy of the loan history including all payments made, all fees incurred, what has been paid out of the escrow account, and how all payments were applied. This information should cover the entire life of the loan.

(3) We have reasons to believe that the loan terms were misrepresented to us at the time of application and further obscured and/or modified prior to signing. I believe that our income was inflated on the application. I also have reason to believe that certain statements were not provided for my approval prior to closing, and that signatures may have been forged on various documents. It is also my /ours belief that certain documents may have not presented at all. Additionally, I believe that a notary was not present to witness my signatures on several pertinent documents and that this transaction did not take place in a legitimate title/escrow/real-estate office with any title/escrow/real-estate professionals therefore leaving us ill advised at the time of closing.

I/we started the process of trying to renegotiate this loan————when I spoke with your HOPE department. On ——-, I faxed a letter of hardship, along with bank statements and pay stubs as she recommended. I was advised that someone would contact me within 7-10 working days and there would be no problem getting assistance to bring the account current and capitalize the negative escrow. On ——-, I called back, as I hadn’t heard from anyone. I was told my payment was going to be ——

Give details, more details, specific facts here about your dealing with your lender on each time you called them.

Most recently you COUNTRYWIDE have sent a demand for payment. This is an enormous amount which just cannot be paid at this time due to very hardship. The situation is urgent. We and COUNTRYWIDE can not drag there feet in this process. We do not want to incur further inflated fees by our home going into foreclosure.

We are very proactive in keeping our family home. This is our primary homes by all means. We do not want to loose it nor do we have to we can make a reasonable payment.

We have been given the runaround by the voice recognition call routing system on numerous occasions.

We have talked to various agents with different versions of what the loan modification process really entails.

We have been re-routed to the wrong department or individual at dozens of times.

We have been disconnected from helpful individuals, when I unsuccessfully tried to call her back I am told it is because she has no extension.

We have been told that the negotiator handling my loan is unavailable to speak to anyone via telephone. All of these calls are documented in your records.

The customer service provided to us has been less than adequate.

We understand that under Section 6 of RESPA you are required to acknowledge our request within 20 business days and must try to resolve the issue within 60 business days.

In closing, we want a payment we know we can live with one that will not get us in trouble again

Sincerely,

REMEMBER: This letter SHOULD NOT be included with your mortgage payment, but should be sent separately to the customer service address.

You SHOULD continue to make the required mortgage and escrow payment until the request is resolved.

You may bring a private right of action under Section 6, if you suffer damages due to the lender’s servicing of the loan. See the RESPA statute and regulations.

Filing a RESPA complaint

Persons who believe a settlement service provider has violated RESPA in an area in which the Department has enforcement authority (primarily sections 6, 8 and 9), may wish to file a complaint. The complaint should outline the violation and identify the violators by name, address and phone number. Complainants should also provide their own name and phone number for follow up questions from HUD. Requests for confidentiality will be honored. Complaints should be sent to:

Director, Office of RESPA and Interstate Land Sales
US Department of Housing and Urban Development
Room 9154
451 7th Street, SW
Washington, DC 20410
Important Tips From HUD:

What Are the Duties of Loan Servicer to Respond to Borrower Inquiries

-(1) Notice of receipt of inquiry
-(A) In general
-If any servicer of a federally related mortgage loan receives a qualified written request from the borrower (or an agent of the borrower) for information relating to the servicing of such loan, the servicer shall provide a written response acknowledging receipt of the correspondence within 20 days (excluding legal public holidays, Saturdays, and Sundays) unless the action requested is taken within such period.
-(B) Qualified written request
For purposes of this subsection, a qualified written request shall be a written correspondence, other than notice on a payment coupon or other payment medium supplied by the servicer, that–
(i) includes, or otherwise enables the servicer to identify, the name and account of the borrower; and
(ii) includes a statement of the reasons for the belief of the borrower, to the extent applicable, that the account is in error or provides sufficient detail to the servicer regarding other information sought by the borrower.
(2) Action with respect to inquiry
Not later than 60 days (excluding legal public holidays, Saturdays, and Sundays) after the receipt from any borrower of any qualified written request under paragraph (1) and, if applicable, before taking any action with respect to the inquiry of the borrower, the servicer shall–
(A) make appropriate corrections in the account of the borrower, including the crediting of any late charges or penalties, and transmit to the borrower a written notification of such correction (which shall include the name and telephone number of a representative of the servicer who can provide assistance to the borrower);
(B) after conducting an investigation, provide the borrower with a written explanation or clarification that includes–
(i) to the extent applicable, a statement of the reasons for which the servicer believes the account of the borrower is correct as determined by the servicer; and
(ii) the name and telephone number of an individual employed by, or the office or department of, the servicer who can provide assistance to the borrower; or
(C) after conducting an investigation, provide the borrower with a written explanation or clarification that includes–
(i) information requested by the borrower or an explanation of why the information requested is unavailable or cannot be obtained by the servicer; and
(ii) the name and telephone number of an individual employed by, or the office or department of, the servicer who can provide assistance to the borrower.
(3) Protection of credit rating
During the 60-day period beginning on the date of the servicer’s receipt from any borrower of a qualified written request relating to a dispute regarding the borrower’s payments, a servicer may not provide information regarding any overdue payment, owed by such borrower and relating to such period or qualified written request, to any consumer reporting agency (as such term is defined under section 1681a of title 15).

(f) Damages and costs
Whoever fails to comply with any provision of this section shall be liable to the borrower for each such failure in the following amounts:
(1) Individuals
In the case of any action by an individual, an amount equal to the sum of–
(A) any actual damages to the borrower as a result of the failure; and
(B) any additional damages, as the court may allow, in the case of a pattern or practice of noncompliance with the requirements of this section, in an amount not to exceed $1,000.
(2) Class actions
In the case of a class action, an amount equal to the sum of–
(A) any actual damages to each of the borrowers in the class as a result of the failure; and
(B) any additional damages, as the court may allow, in the case of a pattern or practice of noncompliance with the requirements of this section, in an amount not greater than $1,000 for each member of the class, except that the total amount of damages under this subparagraph in any class action may not exceed the lesser of–
(i) $500,000; or
(ii) 1 percent of the net worth of the servicer.
(3) Costs
In addition to the amounts under paragraph (1) or (2), in the case of any successful action under this section, the costs of the action, together with any attorneys fees incurred in connection with such action as the court may determine to be reasonable under the circumstances.
(4) Nonliability
A transferor or transferee servicer shall not be liable under this subsection for any failure to comply with any requirement under this section if, within 60 days after discovering an error (whether pursuant to a final written examination report or the servicer’s own procedures) and before the commencement of an action under this subsection and the receipt of written notice of the error from the borrower, the servicer notifies the person concerned of the error and makes whatever adjustments are necessary in the appropriate account to ensure that the person will not be required to pay an amount in excess of any amount that the person otherwise would have paid.
(g) Administration of escrow accounts

If the terms of any federally related mortgage loan require the borrower to make payments to the servicer of the loan for deposit into an escrow account for the purpose of assuring payment of taxes, insurance premiums, and other charges with respect to the property, the servicer shall make payments from the escrow account for such taxes,insurance premiums, and other charges in a timely manner as such payments become due.
(h) Preemption of conflicting State laws

Notwithstanding any provision of any law or regulation of any State, a person who makes a federally related mortgage loan or a servicer shall be considered to have complied with the provisions of any such State law or regulation requiring notice to a borrower at the time of application for a loan or transfer of the servicing of a loan if such person or servicer complies with the requirements under this section regarding timing, content, and procedures for notification of the borrower.

The Real Estate Settlement Procedures Act (RESPA) is a consumer protection statute, first passed in 1974. RESPA covers loans secured with a mortgage placed on a one-to-four family residential property. These include most purchase loans, assumptions, refinances, property improvement loans, and equity lines of credit. HUD’s Office of RESPA and Interstate Land Sales is responsible for enforcing RESPA.

Loan servicing complaints

The following is a sample qualified written request from you, the borrower, to a lender. Use this format to address complaints under the Real Estate Settlement Procedures Act (RESPA). Be sure to read more about RESPA, and your rights under this Act, elsewhere on the RESPA site.

Attention Customer Service:
Subject: [Your loan number]
[Names on loan documents]
[Property and/or mailing address]
This is a “qualified written request” under Section 6 of the Real Estate Settlement Procedures Act (RESPA).

I am writing because:
-Describe the issue or the question you have and/or what action you believe the lender should take.
-Attach copies of any related written materials.
-Describe any conversations with customer service regarding the issue and to whom you spoke.
-Describe any previous steps you have taken or attempts to resolve the issue.
-List a day time telephone number in case a customer service representative wishes to contact you.
-I understand that under Section 6 of RESPA you are required to acknowledge my request within 20 business days and must try to resolve the issue within 60 business days.

Sincerely,

[Your name]

For a more comprehensive ‘Trial Ready’ Qualified Written Request that is inclusive in your Foreclosure Defense package, please visit http://www.fightforeclosure.net

Homeowner’s Right of Rescission During Foreclosure

16 Thursday May 2013

Posted by BNG in Affirmative Defenses, Banks and Lenders, Foreclosure Crisis, Foreclosure Defense, Litigation Strategies, Mortgage Laws, Your Legal Rights

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Annual percentage rate, Consumer Credit Protection Act, Federal Home Loan Bank Board, Loan, Real Estate Settlement Procedures Act, Rescission, TILA, Truth in Lending Act

The Right of Rescission:
The right-of-rescission rules are technical, and the consequences of noncompliance can be very costly to the Banks. Take the time to review the right of rescission rules for closed-end credit.

What is the right of rescission?
The right of rescission is a consumer protection law found within the Truth in Lending Act

Truth In Lending Act — Regulation Z

The Truth in Lending Act (TILA), Title I of the Consumer Credit Protection Act, is aimed at promoting the informed use of consumer credit by requiring disclosures about its terms and costs. In general, this regulation applies to each individual or business that offers or extends credit when the credit is offered or extended to consumers; the credit is subject to a finance charge or is payable by a written agreement in more than four installments; the credit is primarily for personal, family or household purposes; and the loan balance equals or exceeds $25,000.00 or is secured by an interest in real property or a dwelling.

TILA is intended to enable the customer to compare the cost of cash versus credit transaction and the difference in the cost of credit among different lenders. The regulation also requires a maximum interest rate to be stated in variable rate contracts secured by the borrower’s dwelling, imposes limitations on home equity plans that are subject to the requirements of certain sections of the Act and requires a maximum interest that may apply during the term of a mortgage loan. TILA also establishes disclosure standards for advertisements that refer to certain credit terms.

In addition to financial disclosure, TILA provides consumers with substantive rights in connection with certain types of credit transactions to which it relates, including a right of rescission in certain real estate lending transactions, regulation of certain credit card practices and a means for fair and timely resolution of credit billing disputes. This discussion will be limited to those provisions of TILA that relate specifically to the mortgage lending process, including:

1. Early and Final Regulation Z Disclosure Requirements
2. Disclosure Requirements for ARM Loans
3. Right of Rescission
4. Advertising Disclosure Requirements

Early and Final Regulation Z Disclosure Requirements:

TILA requires lenders to make certain disclosures on loans subject to the Real Estate Settlement Procedures Act (RESPA) within three business days after their receipt of a written application. This early disclosure statement is partially based on the initial information provided by the consumer. A final disclosure statement is provided at the time of loan closing. The disclosure is required to be in a specific format and include the following information:

Name and address of creditor
Amount financed
Itemization of amount financed (optional, if Good Faith Estimate is provided)
Finance charge
Annual percentage rate (APR)
Variable rate information
Payment schedule
Total of payments
Demand feature
Total sales price
Prepayment policy
Late payment policy
Security interest
Insurance requirements
Certain security interest charges
Contract reference
Assumption policy
Required deposit information

Disclosure Requirements for ARM Loans:

If the annual percentage rate on a loan secured by the consumer’s principal dwelling may increase after consummation and the term of the loan exceeds one year, TILA requires additional adjustable rate mortgage disclosures to be provided, including:

The booklet titled Consumer Handbook on Adjustable Rate Mortgages, published by the Board and the Federal Home Loan Bank Board or a suitable substitute.
A loan program disclosure for each variable-rate program in which the consumer expresses an interest. The loan program disclosure shall contain the necessary information as prescribed by Regulation Z.
TILA requires servicers to provide subsequent disclosure to consumers on variable rate transactions in each month an interest rate adjustment takes place.

Right of Rescission:

In a credit transaction in which a security interest is or will be retained or acquired in a consumer’s principal dwelling, each consumer whose ownership is or will be subject to the security interest has the right to rescind the transaction. Lenders are required to deliver two copies of the notice of the right to rescind and one copy of the disclosure statement to each consumer entitled to rescind. The notice must be on a separate document that identifies the rescission period on the transaction and must clearly and conspicuously disclose the retention or acquisition of a security interest in the consumer’s principal dwelling; the consumer’s right to rescind the transaction; and how the consumer may exercise the right to rescind with a form for that purpose, designating the address of the lender’s place of business.

In order to exercise the right to rescind, the consumer must notify the creditor of the rescission by mail, telegram or other means of communication. Notice is considered given when mailed, filed for telegraphic transmission or sent by other means, when delivered to the lender’s designated place of business. The consumer may exercise the right to rescind until midnight of the third business day following consummation of the transaction; delivery of the notice of right to rescind; or delivery of all material disclosures, whichever occurs last. When more than one consumer in a transaction has the right to rescind, the exercise of the right by one consumer shall be effective for all consumers.

When a consumer rescinds a transaction, the security interest giving rise to the right of rescission becomes void and the consumer will no longer be liable for any amount, including any finance charge. Within 20 calendar days after receipt of a notice of rescission, the lender is required to return any money or property that was given to anyone in connection with the transaction and must take any action necessary to reflect the termination of the security interest. If the lender has not delivered any money or property, the consumer may retain possession until the lender has complied with the above.

The consumer may modify or waive the right to rescind if the consumer determines that the extension of credit is needed to meet a bona fide personal financial emergency. To modify or waive the right, the consumer must give the lender a dated written statement that describes the emergency, specifically modifies or waives the right to rescind and bears the signature of all of the consumers entitled to rescind. Printed forms for this purpose are prohibited.

Advertising Disclosure Requirements:

If a lender advertises directly to a consumer, TILA requires the advertisement to disclose the credit terms and rate in a certain manner. If an advertisement for credit states specific credit terms, it may state only those terms that actually are or will be arranged or offered by the lender. If an advertisement states a rate of finance charge, it may state the rate as an “annual percentage rate” (APR) using that term. If the annual percentage rate may be increased after consummation the advertisement must state that fact. The advertisement may not state any other rate, except that a simple annual rate or periodic rate that is applied to an unpaid balance may be stated in conjunction with, but not more conspicuously than, the annual percentage rate.

The closed-end rescission rules discussed in this article are found in Title 12 CFR Regulation Z 226.23

The open-end rescission rules rules discussed in this article are found in Title 12 CFR Regulation Z 226.15

Who is able to rescind a loan?

The right of rescission doesn’t apply just to borrowers. All consumers who have an ownership interest in the property have the right to rescind.

While other parts of Regulation Z typically focus on the borrowers, this is one area where you need to look beyond the applicants, and identify any and all owners of the home being pledged on the transaction. Often times this will require looking at title work and making note of all fee owners of the property.

What does the right of rescission require of lenders?

The right of rescission requires lenders to provide certain “material disclosures” and multiple copies of the right of rescission notice to EACH owner of the property. Following proper disclosures, lenders must wait at least three business days (until you are reasonably satisfied that the owners have not rescinded) before disbursing loan proceeds.
When does the three-day rescission time clock begin to tick?

The three-day right of rescission period begins once the material disclosures and notice have been given, and lasts three full business days. Business days are defined by Regulation Z to include all calendar days except Sundays and federal holidays. Saturday IS considered a business day for rescission purposes, regardless of whether your offices are open.

In order to properly complete the Notice of Right to Rescind form, you need to know how to calculate the rescission period. Consider the following example.

Assume a closing is set for Thursday, November 15th, 2001, and that all material disclosures and notices are provided to the parties at that time. The rescission period would run:

Friday, November 16, 2001;

Saturday, November. 17, 2001, and

Monday, November 19, 2001.

Sunday is not counted since it is not considered a business day. The rescission period would end at midnight on November 19, 2001.
When may a borrower waive the right of rescission?

Regulation Z allows borrowers to waive their rescission rights, but this exception only applies in very limited circumstances. The law is protective of the right of rescission, and you should be too.

Borrowers may waive their rescission rights and receive their loan proceeds immediately only if they have what is called a “bona fide personal financial emergency.” This means a financial emergency of the magnitude that waiting an additional three days will be personally or financially devastating to the borrower. It might include situations involving natural disasters such as flooding, or a medical emergency that requires immediate funds. When this type of situation does arise, the borrower must provide a written explanation of his or her circumstances to the financial institution. This is not a document that you should draft for the borrower.

Waiving the right of rescission is not a common practice, mostly because doing it wrong can backfire and create a rescind able loan, causing all kinds of problems down the road.

What happens once the rescission period is over?

After the right-of-rescission period has expired, make sure you feel reasonably certain that the consumer has not rescinded before you disburse the loan proceeds. There are some risks in disbursing after the third day. For example, the law allows consumers to exercise their rescission rights by mail, and a rescission is effective when mailed. Thus, a rescission mailed on the third day after closing is effective even though the lender may not receive it until the fourth or fifth day after the closing. Because of this potential timing problem, Regulation Z suggests that lenders take extra precautions to ensure that the loan has not been rescinded.

To avoid further delay of the loan proceeds, you may want to obtain a confirmation statement from all the owners stating that they have not exercised their rescission rights. Such a written confirmation provides written documentation that the transaction has not been rescinded. Notice of rescission form contains this confirmation language, which can be an effective way to resolve the rescission issue quickly.

(Note, however, that owners should not sign this confirmation until after the three day period is over. Otherwise, it may look like they have improperly waived their rescission rights.)

What are the consequences of noncompliance?

There are serious consequences for failing to follow the right-of-rescission rules. First, until a lender provides the material disclosures and the proper Notice of Right to Rescind, the three-business day rescission period does not start to run, and the transaction remains rescindable for up to three years. And once a consumer rescinds a transaction, the security interest in the property becomes void and you must reimburse the consumer for all of the finance charges collected over the life of the loan.

Keep in mind that most rescission errors are alleged in response to collection actions or other litigation initiated by the lender. Because of this, it is important to regularly review your institution’s right of rescission compliance program generally, as well as to verify compliance on the individual level before initiating action against any one borrower.

The following article discussed other particulars of this matter:

Right of Rescission in Times of Foreclosure
By Ken Shim, Senior Examiner, Federal Reserve Bank of New York

Reports of rising numbers of foreclosures continue to dominate the evening news. A joint report from the Office of the Comptroller of the Currency (OCC) and the Office of Thrift Supervision (OTS) issued in March 2010 stated that for the institutions they supervise, mortgages classified as seriously delinquent (in bankruptcy or 60 or more days past due) increased 13.8 percent during the fourth quarter of 2009. Serious delinquencies for prime mortgages, which make up two-thirds of the mortgages in the institutions’ portfolios, showed a 75 percent increase from a year ago. The report further states that nearly 40 percent of residential mortgage loans for institutions supervised by the OCC and OTS that went through loan modification programs became seriously delinquent only 12 months after the modification. In this economic environment, the number of foreclosures is not likely to decline any time soon.

It is therefore important that lenders pay close attention to the rescission provisions of Regulation Z, the implementing regulation for the Truth in Lending Act (TILA). Rescission provides consumers with the right to rescind certain credit transactions secured by their principal dwelling for up to three business days after consummation. However, if creditors fail to provide borrowers with the notice of the right of rescission or the material TILA disclosures, the rescission period is extended to three years. Attorneys representing borrowers in foreclosure will typically scrutinize the notice and TILA disclosures for any violations that would extend the rescission period to three years.

Transactions Subject to the Right of Rescission

In general, the right of rescission applies to both open-end (§226.15) and closed-end (§226.23) consumer credit transactions secured by the consumer’s principal dwelling. However, certain transactions are exempt. For open-end credit, §226.15(f) exempts a “residential mortgage transaction” (a loan to purchase or construct a principal dwelling) and a credit plan in which a state agency is a creditor. For closed-end credit, §226.23(f) exempts the following transactions: (1) a residential mortgage transaction; (2) a refinancing by the same creditor for a previous extension of credit already secured by the consumer’s principal dwelling; (3) a transaction in which a state agency is a creditor; (4) an advance, other than the initial advance, in a series of advances; and (5) a renewal of optional insurance premiums not considered a refinancing under §226.20(a)(5).

These exemptions can create ambiguities. For example, if a borrower offers her current residence as collateral to finance the construction or purchase of another property to be used as a principal residence in the near future, is the loan subject to rescission? The Official Staff Commentary (OSC) to Regulation Z addresses this issue in comment 226.23(a)(1)-4 for closed-end credit and comment 226.15(a)(1)-6 for open-end credit: Transactions such as bridge loans are subject to the right of rescission. The right of rescission also applies when the bridge loan is secured by both the current residence and the new property to be used as a principal residence. The consumer’s current principal dwelling triggers rescission rights in this circumstance because the bridge loan is secured by the current dwelling and is not for the purpose of purchasing that dwelling. But if the consumer’s construction loan for a new principal dwelling is secured only by the new dwelling, the loan would qualify as a residential mortgage transaction that is exempt from rescission.

Another complex situation is whether the residential mortgage transaction exemption applies when a consumer obtains an open-end credit line and uses a portion of the line for a down payment to purchase a dwelling securing the remainder of the line. In this circumstance, comment 226.15(f)-1 clarifies that only the portion of the line used for the down payment is exempt from the right of rescission.

For refinancing of closed-end credit, the right of rescission applies under comment 226.23(f)-4 if a new creditor is involved or if a new advance is made by the existing creditor. A new advance does not include the cost of the refinancing, such as attorney’s fees, title examination, and insurance fees, if bona fide and reasonable. It also does not include any finance charges paid or payable with the new loan.
Regulatory Requirements

Congress included the right of rescission in the TILA legislation to protect homeowners from the practices of unscrupulous home improvement contractors who obtain liens on their customers’ houses, often without their customers’ knowledge. Representative John Sullivan stated that TILA’s rescission requirements would “strike at home improvement racketeers who trick homeowners, particularly the poor, into signing contracts at exorbitant rates, which turn out to be liens on the family residences.”

To protect homeowners from such abuses, Regulation Z requires lenders to provide, in addition to the TILA disclosure statement, two copies of the notice of the right to rescind to each consumer who has an ownership interest in the property. One copy is for the consumer to send to the lender to rescind the loan during the three-business-day period, and the other copy is for the consumer to keep for his or her records, since it contains important information about the consumer’s rights and responsibilities. However, if the notice is delivered in electronic format in accordance with the Electronic Signatures in Global and National Commerce Act (the E-Sign Act), only one copy has to be provided to each consumer.4 The notice must disclose the retention or acquisition of a security interest in the consumer’s principal dwelling, the consumer’s right to rescind, the procedure for the consumer to exercise the right, the effect of exercising the right of rescission, and the date the rescission period ends.

If the lender fails to provide a properly completed rescission notice or if the creditor fails to deliver any of the material disclosures, the consumer’s right to rescind is extended for a period of three years.5 For example, the United States Court of Appeals for the Seventh Circuit held in Handy v. Anchor Mortgage Corporation, 464 F.3d 760 (7th Cir. 2006), that the rescission period was extended from three business days to three years because the creditor provided the borrower with two different model rescission notice forms: H-8 (the general form) and H-9 (refinancing with original creditor). Form H-8 was appropriate for the transaction. The court held that providing two forms, one of which was incorrect for the transaction, violated TILA’s “clear and conspicuous” requirements. Similarly, in Harris v. OSI Financial Services, Inc., 595 F.Supp.2d 885 (N.D. Ill. 2009), the court extended the rescission period to three years because the creditor used model form H-8 when it should have used form H-9.

Lenders are prohibited from disbursing the funds (other than in escrow), performing services for the consumer, or delivering materials to the consumer until the three-business-day rescission period has ended, and the lender has reasonable assurance that the consumer has not rescinded the transaction. Failure to comply with the three-business-day waiting period requirement can have serious consequences. For example, in Rand Corporation v. Yer Song Moua, 559 F.3d 842 (8th Cir. 2009), the Eighth Circuit held that a creditor who required borrowers to sign a statement at loan closing acknowledging receipt of the rescission notice and falsely stating that the three-day rescission period had passed and that the borrowers had not rescinded the transaction violated TILA and extended the rescission period from three business days to three years. The court cited numerous other decisions that reached the same conclusion.

All consumers with an ownership interest in the property that will be encumbered by the creditor’s security interest must receive a rescission notice, even if they are not applying for credit. Only one consumer’s exercise of the rescission right is necessary to rescind the loan. Therefore, lenders must be certain that each consumer with an ownership interest has agreed not to rescind by the end of the rescission period. The only time lenders are permitted to disburse the funds prior to the end of the rescission period is when the consumer requests the funds based on a bona fide personal financial emergency.

The three-business-day rescission period begins following the date of consummation, delivery of two notices of the right to rescind to each consumer, or delivery of all material disclosures, whichever occurs last. For the purpose of the right of rescission, business day includes all calendar days except Sundays and legal public holidays. Lenders must disclose the last day for the consumer to rescind the loan by applying this correct definition of business day. In Cornerstone Mortgage, Inc. v. Ponzar, 254 S.W.3d 221 (Mo.App. E.D. 2008), the creditor’s rescission notice erroneously stated that the last day for the borrowers to exercise their right of rescission was January 15, 2006. The correct date was January 17, 2006, but the creditor failed to exclude Sunday and a legal holiday when calculating three business days. As a result, the court held that the rescission period was extended to three years. A related problem occurs when the creditor fails to disclose the deadline for exercising the right of rescission in the rescission notice. In Johnson v. Chase Manhattan Bank USA, N.A., 2007 WL 2033833 (E.D.Pa. July 11, 2007), the court extended the rescission period to three years because the creditor left a blank in the deadline area of the rescission notice: “If you cancel by mail or telegram, you must send the notice no later than midnight of [left blank] (or midnight of the third business day following the latest of the three events listed above).”

It is important to understand the definition of “consummation” for the purpose of calculating the three-business-day rescission period. Section 226.2(a)(13) defines “consummation” as “the time that a consumer becomes contractually obligated on a credit transaction.” Comment 226.2(a)(13)-1 clarifies that this determination must be made by reference to applicable state law. For example, in Murphy v. Empire of America, FSA, 746 F.2d 931, 934 (2d Cir. 1984), the Second Circuit concluded, based on New York law, that consummation occurred once the borrowers accepted the lender’s commitment offer.

The meaning of “consummation” is also important for determining whether a consumer can exercise the right of rescission. The Fourth Circuit recently had to determine whether loan applicants could exercise the right of rescission for an unconsummated credit transaction. In Weintraub v. Quicken Loans, Inc., 594 F.3d 270 (4th Cir. 2010), applicants who had been approved for a loan attempted to rescind it prior to closing to obtain a refund of their deposit because the rate increased. The court rejected their rescission request because it found that rescission applies only to consummated credit transactions, and the loan was never consummated. The Weintraub case is discussed in greater detail in “On the Docket.”

Material Disclosures for the Purpose of Rescission

The three-business-day rescission clock commences following the date of consummation, delivery of two notices of the right to rescind, or delivery of all the material disclosures, whichever occurs last. Material disclosures are defined in footnote 36 of §226.15(a)(3) for open-end credit and in footnote 48 of §226.23(a)(3) for closed-end credit. For open-end transactions, the material disclosures are:

the method of determining the finance charge and the balance upon which a finance charge will be imposed;
the annual percentage rate (APR);
the amount or method of determining the amount of any membership or participation fee that could be charged;
the length of the draw period and any repayment period;
an explanation of how the minimum payment is calculated;
the timing of the payments; and
if payment of only the minimum periodic payment may not repay any of the principal or may repay less than the outstanding balance, a statement of this fact as well as that a balloon payment may result.

For closed-end transactions, the material disclosures are:

the APR;
the finance charge;
the amount financed;
the total of payments;
the payment schedule;
the high-cost loan disclosures in §226.32(c) and restrictions in §226.32(d); and
the restrictions on prepayment penalties for higher priced mortgage loans in §226.35(b)(2)

Rescission Tolerance

Creditors should be especially careful with disclosures for the APR, the finance charge, and the payment schedule because violations of these disclosures most frequently trigger the three-year rescission period. Section 226.23(g) provides a tolerance for errors in disclosures affected by the finance charge, including the amount financed and the APR. These disclosures are considered accurate if the disclosed finance charge is understated by no more than 0.5 percent of the face amount of the note or $100, whichever is greater, or if it is overstated by any amount. For a refinance with a new creditor, the disclosures are considered accurate if the finance charge is understated by no more than 1 percent of the face amount of the note or $100, whichever is greater. A special rule applies when the consumer’s principal dwelling securing a consumer credit transaction is in foreclosure. The disclosed finance charge is accurate if it is understated by no more than $35 or if it is overstated. Thus, the margin of error in foreclosure proceedings is lower.

The regulation does not provide any accuracy tolerances for the payment schedule disclosures. Therefore, any error involving this material disclosure can trigger a three-year rescission period. For example, in Hamm v. Ameriquest Mortgage Company, 506 F.3d 525 (7th Cir. 2007), the Seventh Circuit held that a creditor’s disclosure statement that identified the payment amount and the number of payments (360) but failed to state that payments were due monthly violated TILA. As a result, the consumer was granted three years to exercise the right to rescind.

Exercising Rescission Rights

Once the borrower exercises the right of rescission, any security interest the creditor obtained is void, regardless of its status and whether it was recorded or perfected. The borrower cannot be required to pay any amount to the lender or a third party in connection with the credit transaction. Any amounts already paid, including broker fees, application and commitment fees, or fees for a title search or an appraisal, must be refunded. Within 20 calendar days after receipt of the notice of rescission, the lender must take action to terminate the security interest and return any money in connection with the transaction. When the lender has complied with these requirements, the borrower must tender the money or property to the lender.8 If the lender fails to take possession of the money or property within 20 calendar days after the borrower’s tender, the borrower may keep it without further obligation. However, these procedures may be modified by court order.

Statute of Limitation for Rescission

In cases where the right of rescission is extended to three years, the question has arisen whether courts can extend the three-year period. The United States Supreme Court addressed this issue in Beach v. Ocwen Federal Bank, 523 U.S. 410 (1998), where the court held that the borrower’s right of rescission expires three years after the date of consummation of the transaction or upon the sale of the property, whichever occurs first, even if the lender failed to provide all material disclosures or notice of the right of rescission. The court based this conclusion on the express language in §125(f) of TILA (15 U.S.C. §1635(f)): “An obligor’s right of rescission shall expire three years after the date of consummation of the transaction or upon the sale of the property, whichever occurs first, notwithstanding the fact that the information and forms required under this section or any other disclosures required under this part have not been delivered to the obligor.”

This limitation on extending the three-year period also applies to mortgages in foreclosure under §125(i)(1) of TILA (15 U.S.C. §1635(i)(1)).

Another important limitation on the right of rescission concerns lawsuits seeking class-action certification for violations of the right of rescission. A number of courts have recently held that the right of rescission cannot be adjudicated in a class-action lawsuit because rescission raises individual issues that are not appropriate for class-wide determination. See Andrews v. Chevy Chase Bank, 545 F.3d 570 (7th Cir. 2008), McKenna v. First Horizon Home Loan Corp., 475 F.3d 418 (1st Cir. 2007), and LaLiberte v. Pacific Mercantile Bank, 53 Cal. Rptr.3d 745 (Cal. Ct. App. 2007).

In addition, institutions purchasing loans are subject to the right of rescission. Under §131(c) of TILA, (15 U.S.C. §1641(c)), any consumer who has the right to rescind a transaction may rescind against any assignee. See, for example, Shepeard v. Quality Siding & Window Factory, Inc., 730 F.Supp. 1295 (D.Del. 1990) (allowing consumers to exercise rescission against an assignee).

Conclusion

The current mortgage crisis has made compliance with the requirements of the right of rescission under TILA more important than ever. Creditors must ensure compliance with Regulation Z technical rules related to rescission. At a minimum, lenders must establish clear and detailed procedures and provide sufficient training to their staff to ensure day-to-day compliance with these provisions. One mistake can result in a three-year rescission period and lost fees and interest over that period. Specific issues and questions should be raised with the consumer compliance contact at your Reserve Bank or with your primary regulator.

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1) Only owner-occupied homes are eligible under the law

7). Lenders must have someone at the mediation or available with the authority to modify a loan

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