Archive | October, 2011

The Law of Capitalism THE MASS MISS JOINDER

21 Oct

I attended the Attorney General and state Bar hearing as to the intervention of the state bar into the law practice of Mitchell Stein and the K2 mass Joinder cases in Los Angeles in front of Judge Johnson. The tentative was a scathing implication of Mitchell Stein and his purported involvement with the “marketing companies” and the allegations of unfair business practices all needed for the AG and the State Bar to step in and confiscate 1.6 million in various accounts.

I was there to opine the status of the case itself and the merits of the cases and as to the victims rights as against the banks. If the Bar took over the practice would they defend the cases would they protect the victims right. No they are not; right now they the State Bar are telling the victims they are on there own.

Once again these suits I have been following and hoping could get past the Demur stage the Banks would be forced to answer. Then there would be motions for Summary Judgement and if the Victims could survive the Summary Judgement and thousands of requests for admissions and interrogatories propounded on the thousands of plaintiffs. It could be done I would have to associate about 10 other lawyers and 30 paralegals but it could be done for about $700,000.00. Then I believe the Banks would enter settlement negotiations with the victims witch I calculate to be about 6500 victims to date.

Mandelman characterized the case as follows:

The case at the core of the Kramer and Kaslow mass joinder lawsuit is: Ronald vs. Bank of America. Basically, the case accuses Countrywide (subsequent cases being filed include Citibank, One West, GMAC/Ally Bank, and perhaps others) of perpetrating a massive fraud upon homeowners by knowingly inflating appraisals, creating a bubble the bank knew would pop and leave homeowner equity devastated, violate privacy statutes, and then Civil Code sections when they refused to modify… you get the idea.

The case says that Countrywide execs knew and did it anyway in order to make zillions of dollars securitizing the loans and therefore only others would incur the future losses.

Here’s an overview of what the third amended complaint says in its Introduction section:

2. This action seeks remedies for the foregoing improper activities, including a massive fraud perpetrated upon Plaintiffs and other borrowers by the Countrywide Defendants that devastated the values of their residences, in most cases resulting in Plaintiffs’ loss of all or substantially all of their net worths.

6. Hand-in-hand with its fraudulently-obtained mortgages, Mozilo and others at Countrywide hatched a plan to “pool” the foregoing mortgages and sell the pools for inflated value. Rapidly, these two intertwined schemes grew into a brazen plan to disregard underwriting standards and fraudulently inflate property values – county-by- county, city-by-city, person-by-person – in order to take business from legitimate mortgage-providers, and moved on to massive securities fraud hand-in-hand with concealment from, and deception of, Plaintiffs and other mortgagees on an unprecedented scale.

7. From as early as 2004, Countrywide’s senior management led by Mozilo knew the scheme would cause a liquidity crisis that would devastate Plaintiffs’ home values and net worths. But, they didn’t care, because their plan was based on insider trading – pumping for as long as they could and then dumping before the truth came out and Plaintiffs’ losses were locked in.

9. It is now all too clear that this was the ultimate high-stakes fraudulent investment scheme of the last decade. Couched in banking and securities jargon, the deceptive gamble with consumers’ primary assets – their homes – was nothing more than a financial fraud perpetrated by Defendants and others on a scale never before seen. This scheme led directly to a mortgage meltdown in California that was substantially worse than any economic problems facing the rest of the United States. From 2008 to the present, Californians’ home values decreased by considerably more than most other areas in the United States as a direct and proximate result of the Defendants’ scheme set forth herein.

This massive fraudulent scheme was a disaster both foreseen by Countrywide and waiting to happen. Defendants knew it, and yet Defendants still induced the Plaintiffs into their scheme without telling them.

10. As a result, Plaintiffs lost their equity in their homes, their credit ratings and histories were damaged or destroyed, and Plaintiffs incurred material other costs and expenses, described herein. At the same time, Defendants took from Plaintiffs and other borrowers billions of dollars in interest payments and fees and generated billions of dollars in profits by selling their loans at inflated values.

14. Since the time Plaintiffs filed the initial Complaint herein, Defendants’ improper acts have continued, including, inter alia: (i) issuing Notices of Default in violation of Cal. Civil Code §2923.5; (ii) misrepresenting their intention to arrange loan modifications for Plaintiffs, while in fact creating abusive roadblocks to deprive Plaintiffs of their legal rights; and (iii) engaging in intrinsic fraud in this Court and in Kentucky by stalling in addressing Plaintiffs’ legitimate requests to cancel notices of default and for loan modifications, and by refusing to respond, in any way, to Plaintiffs’ privacy causes of action.

Now, there’s no question… this is a real lawsuit. Some attorneys believe it will be a very difficult case to win, while others think it’s quite viable and likely to settle. I can see both sides of that argument.

On one hand, it would seem difficult to prove that Countrywide caused the housing bubble; there were certainly many parties involved and numerous other contributing factors as well. On the other hand, the case has numerous aspects that are unquestionably true and certainly wrong.

Then there’s what’s known as “the banker factor.” Actually, I’m making that up, but you know what I mean. The banks aren’t going to lay down for this as it would open an enormous can of litigating worms… so they have to fight… or is there no percentage in that either? Well, now you’ve seen first hand why I chose not to go to law school.

I really haven’t the foggiest idea what’s going to happen… and neither does anyone else.

But then, Columbus couldn’t exactly stop and ask for directions either, which, it’s worth noting is why, when sailing for The New World, he landed in the Bahamas and named them San Salvador, but assumed he had found the Indies so he named the native people Indians (leading me to always wonder what he would have named them had he not gotten so hopelessly lost.)

(What if his favorite word was “Jujubees,” and he had named the natives “Jujubees?” Then I would have grown up playing Cowboys & Jujubees?)

So, since no one can know what’s going to happen in the future of this case, I thought I’d take a look at where it is today. From a review of the Los Angeles Superior Court’s online records database we find these events have transpired to-date or are set for the near future…
1. Original complaint was filed in March 2009.
2. First amended complaint was in June of 2009.
3. Second amended complaint March 2010.
4. August 2010: the banks try to remove the case to federal court, but fail.
5. Third amended complaint was filed July 7, 2010.
6. The defendant banksters have demurred again, but it doesn’t appear that the demurs filed in December have been heard.
7. Status conference set for Thursday, February 3rd, 2011.
8. There is a hearing date scheduled for March 29, 2011, but it’s not clear to me what will be happening at that hearing.

So, this is their third “amended complaint.” That means the defendants… the banks… have demurred twice. That means that the banks have come to court claiming that the mass joinder plaintiffs don’t state a cause of action… or in other words saying the plaintiffs have no case… and the court has allowed the plaintiffs to amend the complaint three times so far.

Like almost everything in the law, I guess you could read that a couple of different ways. On one hand it seems positive… the case brought by the mass joinder plaintiffs has not been tossed out by the judge yet. That’s good, right?
On the other hand… the court could “sustain the demur without leave to amend,” in which case the mass joinder suit would be over and done.

And that’s why litigating is always a gamble, and by no means a sure thing.
Here’s an oversimplified look at the mass joinder’s causes of action.

First Cause of Action… Fraudulent Concealment – This is saying that the bank was hiding things from the borrowers.

Second Cause of Action… Intentional Misrepresentation – This is lying when you knew you were lying. In other words, you knew an appraisal was wrong… it came in at $500,000, but you knew it was worth $400,000 and you passed it off anyway.

Third Cause of Action… Negligent Misrepresentation – This is like saying that you’re lying but it wasn’t intentional. Let’s say that you ordered an appraisal but never really looked at the appraisal to make sure it was done correctly. You include this cause of action in case the conduct doesn’t rise to the level of intentional misrepresentation, and perhaps because some insurance policies don’t cover intentional acts.

Fourth Cause if Action… Invasion of Constitutional Right to Privacy – This is saying that the banks disclosed personal information… perhaps when selling the loans to another investor.

Fifth Cause of Action… Violation of California Financial Information Privacy Act – See above or read the actual complaint.

Sixth Cause of Action… Civil Code 2923.5 – Defendants are prohibited by statute from recording a Notice of Default against the primary residential property of any Californian without first making contact with that person as required under § 2923.5 and then interacting with that person in the manner set forth in detail under § 2923.5. Nothing special here, but its been upheld by other courts in California.

Seventh Cause of Action… Civil Code 1798 – When they gave away your private information, they didn’t tell you they did it? Defendants failed to timely disclose to Plaintiffs the disclosure of their personal information as required under California Civil Code § 1798.82

Eighth Cause of Action… Unfair Competition Against All Defendants – Defendants’ actions in implementing and perpetrating their fraudulent scheme of inducing Plaintiffs to accept mortgages for which they were not qualified based on inflated property valuations and undisclosed disregard of their own underwriting standards and the sale of overpriced collateralized mortgage pools, all the while knowing that the plan would crash and burn, taking the Plaintiffs down and costing them the equity in their homes and other damages, violates numerous federal and state statutes and common law protections enacted for consumer protection, privacy, trade disclosure, and fair trade and commerce.

In Conclusion…

Attorney Phillip Kramer, in his own words, made it quite clear that his firm was not responsible for the mailer I received or the telemarketing about which I’ve been notified. Once again, he says…

“I know of no outbound calling. If asked, I would not approve of that. I knew that some law firms wanted to send out mailers. I have insisted that everyone comply with State Bar rules and that anything with my name must be pre-approved. As of this date, no one has submitted any proposed marketing for my review. That piece was done without my knowledge.

I am happy to pay a referral fee to other law firms. I do not split fees, pay commissions, nor do I pay referral fees to non-lawyers. I do not use cappers, and have never authorized anyone to robocall, telemarket, spam email, or undertake any mass marketing on my behalf.”

With that said I was going to apply to the Bar to take over the cases if they would relinquish the 1.6 to pay for the work to be done for the victims. Before making such a wild leap into this caos I called my State bar lawyer. He informed me that I should not even go close to these cases that all lawyers involved will be DISBARRED. I said wow but what about the merits of the cases the judge in the case had already overruled the demur as to some of the causes of action. The State Bar (by their actions in not finding a lawyer to protect the victims) is recommending that case be dismissed the Attorney General IS NOT PURSUING THE RIGHTS OF THE VICTIMS . I persisted with my lawyer. To which he exclaimed ” DON’T YOU GET IT MCCANDLESS THE AG AND THE BAR ARE WORKING FOR THE BANKS”.

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Fannie Mae Foreclosure Lawyers Acted Improperly

10 Oct

Thumbnail image for Foreclosure.jpgHomeowners in Northern California have questioned the practices of Fannie Mae and Freddie Mac in foreclosure proceedings. If you are facing a foreclosure, you may be able to keep the property by filing for bankruptcy. You should consult with an attorney regarding your legal options.

After news reports in mid-2010 began to describe the dubious practices, like the routine filing of false pleadings in bankruptcy courts, Fannie Mae’s overseer started to scrutinize the conduct of its attorneys. The inspector general of the Federal Housing Finance Agency severely criticized the FHFA’s oversight of Fannie Mae and the practices of its foreclosure attorneys in a report issued Tuesday. “American homeowners have been struggling with the effects of the housing finance crisis for several years, and they shouldn’t have to worry whether they will be victims of foreclosure abuse,” Inspector General Steve Linick told the New York Times. “Increased oversight by F.H.F.A. could help to prevent these abuses.”

According to the New York Times, the report is the second in two weeks in which the inspector general has outlined lapses at both the Federal Housing Finance Agency and the companies it oversees Federal National Mortgage Assn (Fannie Mae) and Federal Home Loan Mortgage Corp (Freddie Mac). The agency has acted as conservator for the companies since they were taken over by the government in 2008. Its duty is to ensure that their operations do not pose additional risk to the taxpayers who now own them. The companies have tapped the taxpayers to cover mortgage losses totaling about $160 billion. The new report from the inspector general tracks Fannie Mae’s dealings with the law firms handling its foreclosures from 1997, when the company created its so-called retained attorney network. At the time, Fannie Mae was a highly profitable and powerful institution, and it devised the legal network to ensure that borrower defaults would be resolved with efficiency and speed.

The law firms in the network agreed to a flat-rate fee structure and pricing model based on the volume of foreclosures they completed. The companies that serviced the loans for Fannie Mae, were supposed to monitor the law firms’ performance and practices, the report noted

After receiving information from a shareholder in 2003 about foreclosure abuses by its law firms, Fannie Mae assigned its outside counsel to investigate, according to the report. That law firm concluded in a 2006 analysis that “foreclosure attorneys in Florida are routinely filing false pleadings and affidavits,” and that the practice could be occurring elsewhere. “It is axiomatic that the practice is improper and should be stopped,” the law firm said.

The inspector general’s report said that it could not be determined whether Fannie Mae had alerted its regulator, then the Office of Federal Housing Enterprise Oversight, to the legal improprieties identified by its internal investigation.

The inspector general said that both Fannie Mae and its regulator appear to have ignored other signs of problems in their foreclosure operations. For example, the Federal Housing Finance Agency did not respond to borrower complaints about improper actions taken by law firms in foreclosures received as early as August 2009, even though foreclosure abuse poses operational and financial risks to Fannie Mae.

The report cited a media report from early 2008 detailing foreclosure abuses by law firms doing work for Fannie Mae. Nevertheless, a few months later and just before its takeover by the government, Fannie Mae began requiring the banks that serviced its loans to use only those law firms that were in its network. By then, 140 law firms in 31 jurisdictions were in the group. Fannie Mae, the mortgage finance giant, learned as early as 2003 of extensive foreclosure abuses among the law firms it had hired to remove troubled borrowers from their homes. But the company did little to correct the firms’ practices,.

Finally last fall, after an outcry over apparently forged foreclosure documents and other improprieties, the Federal Housing Finance Agency began investigating the company’s process. In a report issued early this year, it determined that Fannie Mae’s management of its network of lawyers did not meet safety and soundness standards. Among the reasons: the company’s controls to prevent or detect foreclosure abuses were inadequate, as was the company’s monitoring of the law firms. “If a law firm self-reported no issues as it processed cases,” the inspector general said, “then Fannie Mae presumed the firm was doing a good job.” The agency is still deciding how to handle the lawyer network, the inspector general said.

Officials at the housing agency have agreed with the recommendations in the inspector general’s report. Corinne Russell, a spokeswoman for F.H.F.A. said the agency was concluding its supervisory work in this area and would direct Fannie Mae to take necessary action when the work was completed.

In a response, the agency said that by Sept. 29, 2012, it would review its existing supervisory practices and act to resolve “deficiencies in the management of risks associated with default-related legal services vendors.”

If you are having problems with a loan or foreclosure, we provide free legal consultations for bankruptcy in San Francisco County, Sacramento County, Alameda County, Contra Costa County, San Mateo County, Santa Clara County, Stanislaus County, San Joaquin County, Marin County, Solano County and throughout Northern California. Contact us for a free legal consultation today.925-957-9797

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