Archive for June, 2010

For a very long time now, myself and other attorneys and advocates have been sounding alarms about the long term damage short cuts taken in the the foreclosure process are having not just on those who are in foreclosure, but on court systems across this country.

Although our courts are overwhelmed and our judges and staff have not been provided anywhere near the resources they need to deal with this crisis, there are many good judges across this state who have recently become aware that these problems are very real and these judges are now taking very hard looks at files that pass through their courtrooms.  It’s no secret that the judges in the Sixth Judicial Circuit of Florida in particular are closely scrutinizing their files and that the standards of practice in these courts are among the toughest in the state.

Last month I first published the latest and most clear example of the emerging phenomena of judges really recognizing that disturbing trends are emerging in foreclosure courtrooms.  I again include that transcript below, but I also enclose two motions that are the follow up to that hearing.  Regular readers will recall that in a Motion to Reconsider a Summary Judgment hearing, Pinellas Judge Rondolino became concerned that not only was something not right in the case before him, but in a great many of other cases that were pending before his court.  His response was as follows:

“You know what I’d like to see?  I’d like to see in one of these cases where a defense attorney cross-examines, takes the deposition of these people and we can see whether they should be charged with perjury for all these affidavits.”

Well my friend and fellow Foreclosure Fraud Fighter Michael Wasylik immeidately attempted to fulfill his obligations to the court and schedule the deposition as the judge had suggested…what was the response from the attorneys from The Law Offices of David Stern (or more accurately David J. Stern Enterprises, Inc.)..the short layman’s version of their response is, “We don’t agree with the good judge, we don’t think Mr. Wasylik should be permitted to take the deposition as suggested by the judge.” (Given the judge’s explicit direction, the response is in practical terms is in fact not nearly that polite or respectful.)  But you judge for yourself. The competing motions are attached below, as is the original hearing transcript (which is far more interesting reading):

viscarooppmotion

viscaroprotective

wasyliktranscript

The Motion for Protective Order is frankly absurd. The bottom line is if you’re going to provide testimony to a court.  If you’re going to stand before a judge and swear to facts or evidence that you’re asking the court to consider (that’s what an affidavit is), you’d damn sure better be willing to sit for questioning about that testimony under oath.  The foreclosure mills seem not to understand this because the standard practice if forced to testify under oath is to move to withdraw the questionable evidence and shield the affiant from testifying. (Search also “Cullaro” for another example of a mill fighting bloody hell to prevent a witness from being submitted to questioning under oath.)

Anyway, back to the much larger issues confronting courts all across this state.  The pressure to “push foreclosure judgments through” is contributing to a fundamental breakdown in the rule of law and a degradation of the judiciary in general.  This breakdown will be dramatically accelerated as more and more courts move to establish “rocket dockets” or when judges operating normal dockets fail to hold foreclosure cases to the same standards of law and rules that all other areas of the law are held to.  The short term outcome of such practices may indeed be pushing cases through, but the long-term consequences are profoundly dramatic and potentially catastrophic.  Those who recognized this early on will be looked to provide leadership to help find our way out of the incredible mess that was allowed to be created.

And finally, the one document that I insist every person who subscribes to this blog must read….

sternprospectus

In courtrooms all across this country, basic rules of practice and fundamental rules of evidence and law are being totally ignored and cast aside because, “it’s only foreclosure” and “we’ve got to move these cases along”.  But the real question is….

Why the big rush to foreclose on homes?

I mean in this current economy, it’s not like there are nearly enough qualified buyers out there to absorb the current inventory of already foreclosed homes, much less the millions of properties that are in various stages of foreclosure.

Related to this line of questioning is a troubling phenomena of the shifting plaintiff or the unidentified plaintiff, which brings us to the next question I’ve been asking for months now…

Judge, do you have any idea who you are granting foreclosure to?

The fact of the matter is that in the vast majority of foreclose cases sloshing around the system now, noone has any real idea who is the ultimate beneficiary of the foreclosure judgment.  I’ve read through many of the Pooling and Servicing Agreements and many of the loans that were supposedly transferred into these trusts were not transferred in at the outset, so why should we believe they will be transferred post judgement?  Even when you think a property would go to Citibank because that’s the Plaintiff name and that’s the name on the note, the truth is that loan may be securitized and transferred to another party.

And now back to the shifting plaintiff or the unidentified plaintiff.  This phenomena represents a very troubling development for our national security, sovereignty and economic stability. Courthouses all across this country are processing, “substitution of party plaintiff”, “assignments of bid”, “phantom certificates of title” without even thinking of the consequences.  In what other court proceeding would judges permit parties to be substituted or switched around mid-litigation on an unsupported request from the litigant?  I get that this might happen a time or two, but the widespread nature of this practice is disturbing.  Total up the billions of dollars in property that is being transferred in foreclosure courts all across the country, then try and figure out who is taking title and who is benefitting….are they blank check Chinese corporations as we learned from the David Stern prospectus or is it Deustche Bank who is the real Wizard Behind the Curtain, as I recently discovered in a case I am taking to trial July 12, 2010 in Pinellas County? (For more on Deutsche Bank read here.)

Rather than ask any of these questions, we could just adopt the current prevailing philosophy….

Who Cares? It’s Only Foreclosure.

On Thursday, July 1, 2010, beginning at 7:00 a.m. and running until 9:00 a.m., I will participate in Tampa Bay, Fox 13′s Ask a Lawyer consumer call in talk show.  This is a great chance to spread the word to the larger community about what good lawyers are doing to help defend homeowners and protect their community and to draw attention to the out of control unethical behavior of the Plaintiff’s Bar.  The abuse of homeowners and the flagrant disregard of the rules and laws of our courts has got to stop.

It will stop if we turn up the volume on this debate.

Please call in and ask the tough questions.  I would especially love to have consumers calling in and asking why these foreclosure mills continue to get away with unethical behavior, why mortgage modification scams continue to operate and what will it take to make the new mediation programs successful.

Please share the numbers with your clients and lets get the whole community talking about foreclosures and what’s happening in our courtrooms…

(800)826-4434

or

(813)845-8255

This message goes out not just to those in the Tampa Bay area, anyone is encouraged to call in!

The “Law Offices of David J. Stern” is perhaps the biggest, by volume, Foreclosure Mill in the State of Florida. The general consensus in the legal community and my personal opinion is that the pleading and legal work that bears the identification of the Law Offices of David J. Stern is sloppy and unsophisticated at best and merely word processed non-legal form documents spit out by a computer that no lawyer could possibly sign his bar number to at worst.

I’m particularly offended by the “signatures” that are found on the legal documents submitted by the Law Offices of David J. Stern.  When an attorney signs a document, it’s supposed to be an affirmation and an oath and a professional responsibility.  But take a look at the arrogant, sloppy mess of a mark that appear on Stern pleadings.  Those non-signature sloppy marks are an offense to me and to the court.  I don’t think they should qualify as a signature under the rules of civil procedure and even if they might meet the technical definition, if I were a judge, I would strike the pleading just because I find them so arrogant and offensive….I would also be questioning the lawyer who supposedly signed the pleading to determine if that lawyer that allegedly signed them wants to take credit for the “signature”

And now comes the revelations contained within the prospectus filed with the Securities and Exchange Commission for an entity known as  DJSP Enterprises….read on…

DJSP Enterprises, Inc. (“DJSP”, “we,” “us” or “our”) is a holding company whose primary business operations are
conducted through three wholly owned subsidiaries, DJS Processing, LLC (“DJS LLC”), Professional Title and Abstract Company of
Florida, LLC (“PTA LLC”), and Default Servicing, LLC (“DSI LLC”) of DAL Group LLC (“DAL”), a company in which DJSP holds
a controlling interest. DAL, through its operating subsidiaries, provides non-legal services supporting residential real estate foreclosure, other related legal actions and lender owned real estate (“REO”) services, primarily in Florida.

Now what exactly are those “non-legal services supporting residential real estate foreclosure”?  Is this the legal pleadings and real work involved in a Stern foreclosure case?  Where is the line between the legal work and non-legal services?

What role does the “Chardan 2008 China Acquisition Corp.”, the “blank check company which has its principal business and/or material operations in China.” have in the prosecution of foreclosure cases in front of Circuit Court Judges throughout Florida?

What exactly were the “non-legal business and assets” that David J. Stern and the Law Offices of David J. Stern (“DJS”) transferred to the DAL Group  for:

“(i) $58,500,080 in cash; (ii) $52,469,000 in a promissory note issued by DAL to DJS (the “Stern Deferral Note”); (iii) 1,200,00 DAL Common Units; (iv) 1,666,667 DAL Series A Preferred Units; (v) 3,133,333 DAL Series B Preferred Units; and (vi) the right to receive $35 million in post-closing cash.”

As a result of the Transaction, DAL acquired membership interests in the three limited liability companies (DJS LLC, PTA
LLC and DSI LLC) that together constitute a provider of non-legal residential mortgage foreclosure processing and other services,
principally in the state of Florida.

During the three months ended March 31, 2010, the Company’s revenues from mortgage foreclosure related services, net of revenue from client reimbursements, decreased by $0.6 million, or 2%, to $27.6 million, compared to $28.1 million for the same period lastyear. (What exactly are the kind of mortgage foreclosure related services that a non-lawyer can provide that would generate $27.6 million dollars in three months?)

Our REO liquidation business has a sole customer
through which we generated $3.3 million in revenue for the first quarter of 2010 compared to $1.9 million in the same period last
year, primarily due to an increase in the number of REO liquidation files which grew to 1,728 files in the first quarter of 2010, an
increase of 56%, from 1,111 files in the first quarter of 2009. (Who exactly is this undisclosed sole customer that made this much money off the backs of consumers and shouldn’t the judges granting foreclosure be concerned about who this is?)

Mr. Stern may encounter
conflicts of interest in the execution of his duties on behalf of us. These conflicts may not be resolved in a manner favorable to us. For
example, he may be precluded by his ethical obligations as an attorney or may otherwise be reluctant to take actions on behalf of us
that are in its best interests but are not in the best interests of DJS, his law firm, or its clients. Further, as a licensed attorney, he may
be obligated to take actions on behalf of DJS or its clients that are not in our best interests.

DJS LLC has one law firm customer in Florida, DJS. Each foreclosure, bankruptcy, eviction, litigation, and other mortgage
default related case file referred to DJS will typically have a fixed fee associated with it that is based on a schedule established by
government sponsored entities, such as Freddie Mac and Fannie Mae. DJS LLC will be paid a fixed fee by DJS for the services it
renders to DJS.

Regulation of the legal profession may constrain DJS LLC’s, PTA LLC’s and DSI LLC’s s operations, and numerous issues
arising out of that regulation, its interpretation or evolution could impair our ability to provide professional services to
customers and reduce revenues and profitability.

Each state has laws, regulations and codes of professional responsibility that govern the conduct and obligations of attorneys
to their clients and the courts. Adherence to those codes of professional responsibility are a requirement to retaining a license to
practice law in the licensing jurisdiction. The boundaries of the “practice of law,” however, can be indistinct, vary from one state to
another and are the product of complex interactions among state law, bar association standards and constitutional law as formulated
by the U.S. Supreme Court. Many states define the practice of law to include the giving of advice and opinions regarding another
person’s legal rights, the preparation of legal documents or the preparation of court documents for another person. Although we are
not aware of any ruling or interpretation of laws, regulations or other applicable standards that would result in the operations that DJS
LLC will perform being considered the practice of law, we cannot say with certainty that no existing law, regulation or standard will
be interpreted to produce that result, or that a new law, regulation or standard leading to that result will not be adopted in the future.
In addition, all states and the American Bar Association prohibit attorneys from sharing fees for legal services with non-attorneys, so
that if any aspect of our business is deemed to constitute the practice of law, it would not be possible for DJS LLC, PTA LLC or DSI
LLC to perform those services.

The Law Offices of David Stern is probably the single busiest foreclosure mill operating in the State of Florida.  The information quoted below comes directly from documents filed with the Securities and Exchange Commission.  I encourage everyone who practices in foreclosure or who cares one bit about the impact foreclosures are having on our state and our courts to read the document very carefully and consider the implications of each of the statements.

• We were incorporated in the British Virgin Islands on February 19, 2008 under the name “Chardan 2008 China Acquisition Corp.” as a blank check company for the purpose of acquiring, engaging in a merger or share exchange with, purchasing all or substantially all of the assets of, or engaging in a contractual control arrangement or any other similar transaction with an unidentified operating business which has its principal business and/or material operations in China. When the global financial crisis occurred soon after the completion of Chardan 2008’s initial public offering in August 2008, Chardan 2008’s management believed that US equity markets would be less receptive to a transaction with a Chinese company.

• Revenue from foreclosure fees increased by 9% to $19.6 million during the three month period ended March 31, 2010 as compared to $17.9 million for the same period in 2009.  This increase is primarily due to an increase in the per file fee we receive for providing such services that became effective as of the beginning of 2010.  Revenue from closing services increased to $2.6 million during the first quarter of 2010 from $1.7 million during the first quarter of 2009, representing an increase of 55.5%.

• During the three months ended March 31, 2010, our REO liquidation services business became an increasingly significant source of revenue, generating approximately 5% of our total revenue during that period.  Our REO liquidation business has a sole customer through which we generated $3.3 million in revenue for the first quarter of 2010 compared to $1.9 million in the same period last year, primarily due to an increase in the number of REO liquidation files which grew to 1,728 files in the first quarter of 2010, an increase of 56%, from 1,111 files in the first quarter of 2009.

• Net income decreased by $5.4 million, or 40.6%, to $7.9 million in the three months ended March 31, 2010, as compared to $13.3 million in the same period of 2009.  Adjusted net income, which is a non-GAAP financial measure discussed in more detail below, decreased by $2.2 million to $8.7 million or 21% in the three months ended March 31, 2010 as compared to $11.0 million in the three months ended March 31, 2009.

• From 2006 to 2009, our foreclosure case load increased from 15,332 to 70,382.

• Beginning in April, one of DJS’ largest bank clients for which we provide mortgage foreclosure services initiated a previously undisclosed foreclosure system conversion that has resulted in a marked decrease in the number of foreclosure files emanating from it nationwide.  We have been advised by the bank that the system conversion is quite extensive and affects most loan types other than those associated with certain government sponsored entities.  While DJS is still receiving new foreclosure files from the bank for loan types that are not affected by the conversion, the bank has advised DJS that it does not expect to generate new foreclosure files for the affected loan types until the conversion is complete. Due to this conversion, we experienced a decline of approximately 1,500 new foreclosure files in each of April and May, 2010 from this client.

• During calendar years 2007, 2008 and 2009, DJS referred to us case files totaling 61,480, 96,509 and 98,259, respectively.

• The majority of file referrals to DJS come from fewer than a dozen lenders and loan servicing firms. If DJS were to lose any of these sources of business, in whole or in part, it would adversely affect our financial performance.

• In 2008, the top ten clients for DJS, on an aggregate basis, accounted for 94% of its case files referred to DJS for mortgage default and other processing services; and its largest single customer, accounted for 21% of DJS’ total foreclosure file volumes for the same period.

“You know what I’d like to see?  I’d like to see in one of these cases where a defense attorney cross-examines, takes the deposition of these people and we can see whether they should be charged with perjury for all these affidavits.”

While I certainly share the exact sentiment expressed in the above quote, those aren’t my words.  They are the words of a judge. A Circuit Court Judge who is acutely aware of the solemn power and responsibility his position holds.  I encourage everyone who reads this blog to read the first transcript below and see just how seriously this judge takes his job.  There is a reason why Pinellas County and the Sixth Circuit is known as one of the toughest circuits in the state and why the case law that comes from this circuit is so powerful.

When mediation programs collapse in other areas of the state because lenders will not negotiate in good faith.  When lawyers and their clients are prosecuted for engaging in systemically unethical and fraudulent practices.  When real estate markets suffer even more catastrophic collapse.  When title insurance companies go bankrupt from claims of void judgments and fraud on the court, we will all look back at hearings like the one memorialized in this transcript and recognize that there were many judges and practitioners who understood the issues and began working to resolve them a long time before the collapse occurs.

THERE IS A SOLUTION TO THE FORECLOSURE CRISIS

There very much is a way out of the foreclosure mess that we’re all in and it’s all very simple.  Lenders participate in mediations in good faith. Borrowers accurately and timely disclose financial information.  Borrower and lender enter into long term settlement agreements that allow the borrower to stay in and maintain a home based upon the resources available to them.  That’s the best deal a bank’s ever going to get, but they’re not yet prepared to accept that deal.  Until they come to understand this, we must continue to press the very real issues that are detailed in the motions and transcripts below:

Rondolino Transcript

transcripthsbcvjohnson

Calvin Johnson Affidavit, Obj to Hearing, Req for Contin, D’s Obj to P’s Mot for SJ-1

And finally, the touchstone case on admissibility of affidavits:

IN RE FORFEITURE OF 1998 FO..