Firm Commentary: For the last three years this office is has advocated OneWest Bank’s practice of “creating” foreclosure documents so as to create the illusion that Indy Mac Bank, which was closed by the FDIC in March 2009, was the proper party in California foreclosure cases. Unfortunately, California judges have been unwilling to acknowledge the practice and have allowed improper non-judicial foreclosures to occur. The article below classically describes how one New York judge has finally labeled the practice ILLEGAL.
Unfortunately for California homeowners, we live in a non-judicial foreclosure state as opposed to New York where lenders must go to court to foreclosure. The difference has resulted in unwillingness on the part of judges to review foreclosures. Thankfully, this is expected to change in January of 2013 when the CA Homeowner Bill of Rights takes effect. The new law requires lenders to have “standing” before a Notice of Default is filed. But a reading of the statute suggests that those already in foreclosure are still not protected. Call the office for a specific analysis of your case.
NEW YORK, Oct 5 (Reuters) – Something scary has been haunting a homeowner facing foreclosure in Brooklyn — a “living dead” bank that a judge compared to Dracula.
In a decision Thursday involving an apparent case of robo-signing, Kings County Supreme Court Justice Arthur Schack questioned how the failed thrift IndyMac Federal Bank could have initiated a foreclosure on a $460,000 mortgage when the bank ceased to legally exist three weeks earlier.
For IndyMac to have standing to foreclose on homeowner Mendel Meisels’ property “would be the legal equivalent of a vampire — the ‘living dead,'” Schack said.
The judge, a frequent critic of mortgage servicing abuses, also chastised the law firm that brought the foreclosure action, Fein, Such & Crane.
The firm faces possible sanctions from Schack for “engaging in frivolous conduct” by bringing the case on behalf of the defunct bank, the decision said.
Schack compared Fein Such to Dracula’s servant Renfield in the 1931 film about Bram Stoker’s vampire staring Bela Lugosi.
“[Fein Such], similar to Renfield, throughout its papers and at oral argument demonstrated its loyalty by not betraying its client and Master, the ‘living dead’ IndyMac Fed,” Schack wrote.
Derrick Hanna, a lawyer for Meisels at Hanna & Vlahakis, said defense lawyers and the courts won’t stand idly by while banks file fraudulent and forged documents supporting foreclosure cases.
“Proper documentation in compliance with current laws should be the only documents filed in court,” he said in an email. “The banks have rights, but the consumer homeowner does as well and the law protects them equally.”
Mark Broyles, a lawyer at Fein Such handling the case, did not return a call seeking comment.
The decision is one of a series of rulings where judges have zeroed in on questionable foreclosure practices by banks on mortgages taken out in the years before the U.S. housing downturn.
In 2010, Chief Judge Jonathan Lippman instituted strict rules aimed at requiring banks and servicers to conduct foreclosures properly.
Five banks agreed in February to a $25 billion settlement with state attorneys general over civil violations related to the servicing of mortgages.
IndyMac, a lender based in Pasadena, California, that was not part of that settlement, was seized by federal regulators in July 2008 as the U.S. economy began to go into a tailspin. In March 2009, the Federal Deposit Insurance Corp sold IndyMac to OneWest Bank, a newly formed institution formed by an investor group including J.C. Flowers & Co.
Amidst the changes at IndyMac, lawyers at Fein Such filed the foreclosure case in April 2009 against Meisels, who had taken out a mortgage in 2005 to finance the $765,000 purchase of a two-family property in the Brooklyn neighborhood of Mapleton.
In his decision, Schack said IndyMac ceased to exist by the time of the foreclosure and was unable to be named as a party in the lawsuit following its sale to OneWest. Schack cited a 2009 appellate decision, which held that after a merger, the acquired bank ceases to exist and can’t be named as a party in litigation.
The judge also faulted the “numerous defects” in how the mortgage and note were assigned to IndyMac by Mortgage Electronic Registrations Systems, Inc, the privately held electronic mortgage registry set up by the banks.
Even if IndyMac had existed, Fein Such did not present documents authorizing MERS to assign the mortgage and note to the bank, the judge said. The assignor for MERS was a robo-signer, Schack said, a bank official who signed off on foreclosure documents without reading them.
Schack dismissed the lawsuit. But he said the “correct owner” of Meisels’ mortgage could bring a new lawsuit, leaving a possibility that the case will be resurrected from the grave.
A spokesman for OneWest declined comment.
The case is IndyMac Federal Bank, FSB v. Meisels, Kings County Supreme Court, 8752/2009.
For IndyMac: Mark Broyles, Fein, Such & Crane.
For Meisels: Derrick Hanna, Hanna & Vlahakis.