Daily Archives: July 13, 2014

Jackson woman endures nightmare of mistaken foreclosure by Ocwen

Dana Novelli, of Jackson Township, had her house cleaned out by Ocwen Mortgage Co. when she was at work one day in October. But it was the wrong house. They ransacked the place, winterized it, tore off fixtures, took jewelry. She has had no satisfaction in getting anything back or any answers since then and now has filed a lawsuit in hopes of getting back her possession and some answers.

JACKSON TWP.

One morning last October, Dana Novelli drove away from her home and headed to work, like she always does. She finished her day teaching at an Akron Public School, and drove back home, like she always does. Finally, she pulled into her driveway, like she always does.

That’s when this story takes a sharp turn.

Nothing she saw or experienced after that was familiar.

She was greeted by a large note on the front door of the raised ranch house she has called home for 28 years. She said she noticed a lock box on the door handle. She read the note: The home had been winterized — pipes and hot water tank drained; locks changed; the automatic garage door opener disconnected.

“I was hysterical …. sick, physically ill,” Novelli recalled.

It had to be a dream, or at least a mistake, she thought.

She said she phoned her mortgage company, Ocwen. She said they told her it was a mistake, that there was no active foreclosure case, which she already knew. Novelli said they provided her the lockbox security code over the phone, so she could get back into her house. That, she said, is when it got even worse.

LAWSUIT

According to Novelli, and a civil lawsuit filed last month in Stark County Common Pleas Court, here’s what happened next:

Once inside her house, she found every closet door and drawer opened and the contents in disarray; her jewelry box had been rifled through and pieces were missing; prescription medicine was missing from her bedroom; other possessions were missing or scattered on floors; electrical outlets were damaged and the electricity was off; fixtures had been torn off bathroom walls.

“It’s really one of the most outrageous, over-the-top, unbelievable things I’ve seen,” said Jeff Lookabaugh, one of Novelli’s four attorneys. “Her computer was on. They even went through her underwear drawer.”

Stacie Roth and Sam Ferruccio, two more of her attorneys, said Novelli phoned Ocwen again. They said she was advised to contact Altisource, the contractor Ocwen hired to clean out the “foreclosed” house.

By the end of the night, after many phone calls, Novelli said she believed the problem may be on its way to being resolved.

Then, she said, it got worse again.

According to her and the complaint, Altisource and Jackson Township police showed up the next morning, pounding on her window. She had to get out, they told her. Altisource was back to finish emptying the house.

“At this point, she’s standing on her porch crying,” Lookabaugh said.

Read more: Click here.

How a Raid in Benghazi Helped Shape Citigroup’s $7 Billion Settlement

 The Department of Justice should be renamed as Department of Settlements…

 

The stage was set for another public shaming of a Wall Street bank.

The Justice Department flew in a lead prosecutor from Colorado and planned for a news conference in Washington to announce a lawsuit against Citigroup over mortgage securities that had imploded during the financial crisis.

But an event a world away that day in June unexpectedly changed the Justice Department’s plans. The capture of a suspect in the deadly attack on the United States Mission in Benghazi, Libya, led federal prosecutors to conclude that those headlines would overshadow the Citigroup case. The prosecutors, knowing that the Citigroup case represented one of their last chances to send a public message that the government was holding Wall Street accountable for the crisis, were loath to squander that opportunity.

“We’ve got a lot going on right now, so we’re putting the lawsuit temporarily on hold,” Tony West, the government’s lead negotiator

and the Justice Department’s No. 3 official, said to the bank’s lawyers in a phone call just hours after he told them that a lawsuit was coming, according to people briefed on the matter.

That twist of fate — which some bank officials viewed as the Justice Department looking to escape its own costly legal battle — opened the door to last-minute negotiations that have now culminated in a $7 billion settlement the government expects to announce on Monday, the people briefed on the matter said.

The deal caps months of heated talks that began with a $363 million offer by Citigroup followed by a $12 billion demand from the Justice Department. The reasons for such a yawning gap, the people said, were the radically divergent methods used to calculate the cost of the settlement.

Citigroup linked its initial offer to the bank’s relatively small share of the market for mortgage securities, the people said. The Justice Department, however, rejected that argument, emphasizing instead what it saw as Citigroup’s level of culpability based on emails and other evidence it had uncovered.

At one point, one of Mr. West’s deputies told the bank’s lawyers before a meeting that “there’s no way you’ll get anywhere with us if you are only going to make the market share argument.”

A behind-the-scenes account of the negotiations, based on interviews with the people briefed on the matter, who were not authorized to speak publicly, shows for the first time that the government’s bargaining position often hinges not only on a huge penalty but also on a desire to destroy Wall Street’s argument that market share should dictate punishment.

Read on.

Why Title Insurance Is A “Joke” When It Comes To MERS …

Hilarious photo makes us wish we were flies on the wall at President Obama’s and Texas Gov. Perry’s border crisis meeting

  

I certainly would have want to be the fly on the wall on what was going on in Texas Governor Rick Perry’s mind in that photo. New York TimesStaff Photographer Doug Mills posted this gem from President Barack Obama and Governor Rick Perry’s July 9th border crisis summit in Dallas

Federal Court In Pennsylvania Strikes At The Heart Of The Residential Mortgage System; Can Commercial Syndicated Loans And Mortgage Securitizations Survive Unscathed?

On June 30, 2014, the United States District Court for the Eastern District of Pennsylvania issued an important decision on Pennsylvania’s recording statutes in the case of Montgomery County, Pennsylvania, Recorder of Deeds, on its own behalf and on behalf of all others similarly situated v. MERSCORP, Inc., and Mortgage Electronic Registration Systems, Inc.,No. 11-CV-6968 (E.D. Pa. 2014). Although the immediate effect of the decision is to eviscerate the electronic system for registering residential mortgages known as MERS, the reasoning (if upheld on the inevitable appeal) may affect syndicated loan transactions, the securitization of commercial mortgages, and the recording of documents in Pennsylvania generally.

The Montgomery County Recorder Case

The Recorder of Deeds of Montgomery County, Pennsylvania brought this lawsuit on behalf of herself and all other Pennsylvania recorders of deeds, alleging that MERS violates 21 P.S. §351, which provides that land conveyances shall be publicly recorded in the county recorder of deeds offices. The district court described the MERS system in residential mortgage finance transactions as follows:

MERS [is named] in the mortgage instrument, “as the mortgagee (as nominee for the lender and its successors and assigns).”… The attendant promissory note is sold on the secondary mortgage market and may, over its term, have many owners. Sale of the note onto the secondary mortgage market principally takes two forms. In one, relatively straightforward, transaction, a lender who retains a note as part of its own loan portfolio transfers the note to another party for that party to hold for its own account or portfolio. … In the other, a more complex process called securitization, the note is transferred, along with many other notes, through several different entities into a special purpose vehicle, typically a trust; the trust then issues securities backed by the trust corpus, i.e., the notes, to investors. … Regardless of the secondary market route which the note takes, MERS remains the named mortgagee as “nominee” for the subsequent owners of the note as long as the note is held by a MERS member.

The district court first announced that §351, and its predecessors as far back as 1863, make recording of conveyances mandatory. The court then acknowledged the contrary lines of Pennsylvania cases describing mortgages variously as conveyances or liens for different purposes. Citing Pines v. Farrell, 848 A.2d 94 (Pa. 2004), however, the district court found that mortgages and mortgage assignments (and mortgage satisfactions and releases) are conveyances subject to the recording mandate of §351. The district court then found that a mortgage and the note it secures are inseparable, such that a transfer of the note effects a transfer of the mortgage. Thus, the district court declared that the failure to create and record documents evidencing the transfers of promissory notes secured by mortgages on real estate in Pennsylvania violates §351. In a footnote, the district court volunteered that this failure also violates 21 P.S. §§444 and 621, the so-called “stale instrument statues,” which require that conveyances be recorded within 90 days and mortgages be recorded within six months, respectively.1

The Montgomery County Recorder case strikes at the heart of the modern system for selling residential mortgage loans on the secondary market. But how might it affect commercial syndicated loans and mortgage securitizations?

Commercial Syndicated Loans

A commercial syndicated loan is a credit facility that is provided by a group of lenders and is structured, arranged and administered by one or several banks, one of which is the “lead bank” and also a lender. The lead bank serves as the collateral agent for the lenders and is named as the mortgagee, for the benefit of the lenders, on any mortgage securing the loan. The original lenders are not named in the mortgage and their interests in the loan may be transferred on a secondary market. Loan sales on the secondary market generally contemplate transfer of all of the rights and obligations of the lenders in the credit facility, including all rights under any collateral documents such as mortgages. The lenders are not named in the mortgage and the mortgagee remains the same notwithstanding transfers. As a result, the secondary loan market does not treat the transfer of rights as an assignment of the mortgage itself.

Unlike the residential MERS system, there is no electronic book entry system for tracking the ownership of commercial secured debt and no club that lenders must join to participate in the ownership and trading of commercial mortgage debt. But in other respects, a commercial syndicated loan is very much like a MERS residential loan. Like MERS in the residential system, the collateral agent in the syndicated loan market serves as the agent for lenders.2 Like the notes in the residential system, the lenders’ interests in the syndicated loan transfer freely and remain secured by the mortgage notwithstanding transfers. Under the reasoning of the district court that the obligation and the mortgage are inseparable, the failure to create and record documents evidencing the transfers of interests in the syndicated loan could be argued to violate §351 and the stale instrument statutes.

Commercial Mortgage Securitizations

In commercial mortgage securitizations, loans secured by mortgages are originated by a lender. The loans and mortgages are then pooled and transferred to a trust. The trust issues series of rated bonds that may vary in yield, duration and payment priority. Payments of principal and interest on the pooled loans are paid to the bondholders, starting with those holding the highest-rated bonds, then to the holders of the next-highest-rated bonds, and so on. If there is a shortfall in contractual loan payments from the borrowers, or if the trustee liquidates the mortgaged property and does not generate sufficient proceeds to meet payments on all bond classes, the holders of the highest-rated bonds are paid first.

Although the mortgages may be assigned of record to a trust, and assignments are often executed and held for recording if necessary, the parties typically rely on the provisions of Article 9 of the Uniform Commercial Code (UCC), which define a “security interest” to include the sale of a promissory note, and govern the “attachment” and “perfection” of a sale of a promissory note and of the liens and security interests that secure it, including a mortgage. Sections 9-203(g) and 9-308(e) of the Pennsylvania UCC, taken together, provide that to the extent a mortgage secures a promissory note, if a party takes the steps necessary under the UCC to acquire a perfected security interest in (which in this context includes assignment of) the promissory note, that party acquires a perfected security interest in (i.e., an assignment of) the related mortgage. Article 9 allows for automatic perfection of a purchaser’s interest in a promissory note by the filing of a financing statement or possession of the promissory note by the secured creditor. Therefore, solely under Article 9 of the UCC, recordation of an assignment of mortgage is not considered necessary to create or perfect a security interest in a mortgage securing a note against claims of purchasers from or creditors of the assignor of the note and mortgage. Since these provisions of Article 9 of the UCC, as currently codified, were enacted after §351 and the stale instrument statutes, it can be argued that Article 9 repealed §351 and the stale instrument statutes for transactions covered by Article 9.

The district court in the Montgomery County Recorder case was not presented with this argument. The district court did, however, mention §9-203(g) of the Pennsylvania UCC as being in accord with the general proposition that a mortgage and the note it secures are inseparable. Following the district court’s logic, therefore, assigning a promissory note and mortgage by delivering the note to the trustee and filing a financing statement, without also assigning the mortgage of record, would violate §351 and the stale instrument statutes.

Read on.

Trump Plaza To Close In September As Atlantic City in NJ Claims Fourth Casino

The Philadelphia Inquirer reports, Trump Plaza has decided not to bother with continuing the sale process and will instead shutter permanently.“Trump Plaza Hotel & Casino will shut its doors for good in mid-September, according to state officials who were briefed Friday by lawyers for the casino.

“I believe Sept. 16 is the targeted closure date that we were told,” said Assemblyman Vince Mazzeo (D., Atlantic). Mazzeo said he and State Sen. Jim Whelan (D., Atlantic) received a phone call late Friday afternoon from a Trump Plaza lawyer. Atlantic County officials also were briefed, he said.

Mazzeo said the attorney told him that Trump Plaza management plans to make a formal announcement and issue 60-day layoff notices to about 1,600 employees Monday.

“This is another blow to the casino industry here,” Mazzeo said. “With mid-September the timing of the closing, it will have a devastating impact on the local economy.”

……………………………………….

 

Whelan, a former Atlantic City mayor, expressed his displeasure Friday night. “I go from depressed and sad to being angry,” he said. “When these casinos close, people lose their jobs and their careers. It’s a very sad situation.”

Employees at Trump Plaza had not been notified Friday of the planned closure, but slot attendant Stan Jelesnianski, who said he has worked there for 21 years, said employees had been worried “for a long time.”

“Business has been slow,” he said.

According to May 2014 monthly revenues from the New Jersey Division of Gaming Enforcement, the latest monthly data available, Trump Plaza ranked last among the 11 casinos in total revenue, making $5.2 million. Of that total, it generated about $4.6 million from slots, down 19.8 percent from May 2013. And it took in $660,666 from table games, a decrease of 45.6 percent from a year ago.

Its year-to-date total casino revenue of $21.9 million was down 26.7 percent from the same period a year ago.

Charles Pinkett, a Boardwalk rolling-chair operator, said the casino has seemed to be on life support for a while. “The people have been talking about how there’s no room service,” he said.

 Here is New Jersey WARN Notice website.

JP Morgan credit default swaps creator Blythe Masters’ ex-husband launches offshored bitcoin hedge fund

We learn from Newsweek that:

 
 

Daniel Masters, a 50-year-old veteran commodities trader, started working for some of the largest companies in the world right out of university, trading in London, New York and Zug, Switzerland, for JPMorgan Chase and Phibro before moving on to the New York Mercantile Exchange, a short walk from Wall Street. By all appearances, it was your standard Wall Street career.

 

Then, in 2008, he moved to a tiny island off the coast of France called Jersey, which this week opened its doors to the island’s first fully regulated Bitcoin hedge fund—run by none other than Masters himself—as part of a push to create a nascent Silicon Valley in the heart of the English Channel, replete with government-funded entrepreneurial hubs and startup accelerators.

 

No sooner did word of the offshore Bitcoin fund get out than Reddit spluttered to life, devoting two pages, here and here, to debating whether the virtual currency’s baby steps into the institutional investing realm is really good news or bad news for Bitcoin, whose meteoric rise has thus far been mostly successful in eschewing traditional finance.

 

Masters, co-principal of Global Advisors Jersey Ltd.—which trades up to $2 billion of energy and equities—is the latest of a handful of fund managers trotting out new Bitcoin investment funds in recent months, as investors clamor for innovative ways to skim the froth off the digital currency’s impressive, if often unpredictable, price pops and drops and, occasionally, collapses.

 

He believes Bitcoin’s prices will stabilize as the currency and technology mature—similar to what has happened over the past decade with oil—but in the meantime, he estimates the value of Bitcoin could rise to $2,000 or more. “Right now, Bitcoin has about 1,000 percent annualized volatility,” he says. “Compare that to oil at 15 to 20 percent and stocks at 10 to 15 percent.” In other words, the potential upside, in the eyes of an experienced trader, are too appealing to resist.

 

Speaking from CoinSummit in London, Simon Hamblin, CEO of Netagio, a year-old U.K. company that specializes in secure Bitcoin storage and is a custodian for the Bitcoin fund being launched by Masters, says any fund must take numerous precautions to guard against the loss of Bitcoins. “We keep our Bitcoin in cold storage, in different forms both physical and media, and always keep it offline, heavily encrypted and in multiple locations,” he told Newsweek.

 

This week, Netagio, based in the Isle of Man—a Crown dependency, like Jersey—announced the debut of a London-based Bitcoin exchange that will allow individuals to trade Bitcoin against the British pound and gold. Netagio spun off this spring from Jersey’s GoldMoney Network Ltd., which stores $1.4 billion of metals in five undisclosed locations for clients across Europe.