SC13-2384 Comments
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Filing # 22365514 E-Filed 01/09/2015 11:36:40 AM IN THE SUPREME COURT OF FLORIDA IN RE: AMENDMENTS TO THE FLORIDA NO. SC13-2384 RULES OF CIVIL PROCEDURE COMMENTS OF LYNN E. SZYMONIAK, ESQ. COMES NOW, Lynn E. Szymoniak, Director, The Housing Justice Foundation by and through the undersigned counsel and submits the following comments on behalf of herself and The Housing Justice Foundation, on the changes to the Florida Rules of Civil Procedure in foreclosure matters, as follows: 1. I am a member in good standing of the Florida Bar, admitted on November 10, 1981, and a Director of The Housing Justice Foundation, Inc., a non-profit organization in West Palm Beach, Florida. 2. I am a mortgage fraud whistleblower, having recovered $95 million for the Federal Housing Administration in a settlement with Bank of America Corporation, J.P. Morgan Chase & Co., Wells Fargo & Company and Citigroup, Inc. in March, 2012. The settlement was reached as part of the $25 billion dollar global resolution between the same defendants, the United States of America, the state attorneys general, and others. 3. I have reviewed mortgage documents in several thousand Florida foreclosure cases, as well as from cases from other states. I also have regularly observed courtroom RECEIVED, 1/9/201511:38:43 AM,Clerk,Supreme Court proceedings in foreclosure cases for the past five years. 4. My work was featured on 60 Minutes in a story that won the Loeb Award in 2012, the most prestigious award in business journalism. The story exposed fraudulent document practices by certain mortgage servicing companies. 5. I have conducted extensive research on foreclosure-related issues and published articles on the Housing Justice Foundation’s website to assist those facing foreclosure in understanding foreclosure issues in general, and mortgage-backed securities in particular. 6. Based on my research, experience and courtroom observations, I believe that real change in the morass of foreclosure litigation will only be achieved by strict, meaningful regulation of mortgage servicers, as more fully set forth herein. 7. Since the Financial Crisis began in 2008, there have been over 10 million U.S. foreclosures filings.i Florida was the top state for new foreclosure filings in November, 2014, with one in every 462 housing units receiving a foreclosure filing, while the national average was one in every 1,170 units.ii 8. My extensive work with foreclosure cases in Florida, primarily as an expert witness on behalf of homeowners, has led me to conclude that much of the confusion and delay in foreclosure cases stems from the frequent sale of mortgage notes, particularly during the height of mortgage securitization, from 2004 to 2007. During this period, loan originators often sold their loans within a few days of the closings. These loans were sold to securities companies, and bundled into what has come to be known as Residential Mortgage-Backed Securitized Trusts, or more commonly, RMBS Trusts. These loan bundles often included over 5,000 loans with an initial value of over $1.5 billion per bundle. From 2004 to 2007, several trillion dollars in mortgage loans were securitized. Securitization of this magnitude was unprecedented and, in retrospect, largely unregulated and misunderstood. 9. Courts regularly struggle to even understand the nomenclature, not understanding, for example that “CWMBS – CHL Mortgage PT Trust 2005-4” is mortgage-industry 2 jargon for Countrywide Mortgage Backed Securities – Countrywide Home Loans Mortgage Pass Through Trust” or that the “2005-4” designation indicates that this particular trust was created, registered with the Securities & Exchange Commission and sold to investors in 2005, and was the fourth in a series of such trusts created in 2005. Lawyers representing banks acting as trustees for these RMBS Trusts, and lawyers representing homeowners in default, seldom understood mortgage securitization, and the complex path that a mortgage traveled from origination to the foreclosure courtroom. 10. Mortgage servicers play a critical role in most foreclosure litigation. Mortgage servicers perform a range of mortgage-related services, including collecting monthly mortgage payments from borrowers. Mortgage servicing rights (MSRs) are a very lucrative segment of the mortgage industry. When many mortgage companies became insolvent and filed for bankruptcy from 2007 – 2009, the Mortgage Servicing Rights were the only substantial asset. These MSRs were often sold in the bankruptcy proceedings to outside bidders, including start-up companies. In retrospect, it has become apparent that many employees of mortgage servicing companies were inadequately trained and supervised.iii 11. Many mortgage servicers employees also served as signing officers for the Mortgage Electronic Registration Systems, Inc. (“MERS”) an entity that did not own any mortgages or loans, and was (and is) only a registry for mortgages. The majority of mortgages in RMBS Trusts were “MERS” mortgages – where the mortgagee was identified as MERS as nominee for the actual lender. Thus, in the majority of foreclosures in Florida, there is a third-party vendor, the servicer, that often acts on behalf of another third-party vendor, the MERS registry, making representations to the Courts, 3 most often based on records from prior servicers, defunct mortgage companies and non- existent banks.iv Employees of major mortgage servicers continue to act as “attorney in fact” for mortgage companies that ceased to exist many years prior. In 2014, many Ocwen employees, for example, signed mortgage Assignments as attorney-in-fact for Ameriquest Mortgage, Argent Mortgage and New Century Mortgage, companies that had ceased operations. Servicing company employees also continue to transfer properties for mortgage companies after these companies file for bankruptcy, without seeking leave of the bankruptcy court to make such transfers or even reporting such transfers to the bankruptcy courts. 12. The problem of the lack of first-hand knowledge was made even more complex when foreclosures are filed by RMBS Trusts, because the claim of ownership by the trusts is almost always unsubstantiated except by documents prepared by mortgage servicers acting as MERS officers. Almost all trust documents specifically stated that no mortgage assignments would be required assigning any MERS mortgages to the trusts, but that, in place of Assignments, the MERS Registry would show that the mortgage had been transferred to the trust. Assignments were to be prepared and filed for MERS mortgages held by RMBS trusts in the event of a default by the borrower. The MERS system, however, was plagued with inaccuracies.v 13. When defaults became widespread, many servicers incorrectly prepared the Assignments, showing that the mortgages had not been assigned to the trusts until the approximate time of the default, or after the foreclosure was commenced. Servicers also outsourced the preparation of assignments to third-party vendors who also incorrectly prepared the assignments showing the wrong dates.vi In most cases, servicers then began 4 preparing and using these incorrect assignments for all mortgages, including non-MERS mortgages. 14. In tens of thousands of cases in Florida, these incorrect assignments were prepared and signed by law firm employees, including attorneys, paralegals and clerks, who used MERS titles when signing.vii These Assignments caused tremendous confusion and misunderstanding in foreclosure cases. 15. In the majority of foreclosure cases, there is no finding as to when the trust that is seeking to foreclose actually acquired the mortgage because the only documents presented to the Court are 1) a Note with an undated endorsement, or without any endorsement, and 2) an Assignment with an incorrectly stated date of the transfer of the mortgage. 16. The mortgage Assignment problem was exacerbated because many mortgage servicers also prepared and filed mortgage assignments when only the servicing rights to the mortgage – and not the mortgage itself – were being transferred. In the vast majority of cases, RMBS Trusts were not transferring defaulted mortgages to servicers, despite the statements in the Assignments that such transfers had occurred. 17. In addition to wrongly stating the date of transfer, and wrongly stating the grantor, on Assignments of MERS mortgages, many Assignments state that the transfer is from MERS, instead of MERS as Nominee for the particular lender. Still other Assignments wrongly use industry shorthand or jargon, identifying the grantor, for example, as “ABC” when the grantor was actually American Brokers Conduit. In other cases, the person signing as a MERS officer has never been authorized by MERS or the lender to sign. 5 18. After the misconduct of mortgage servicers was exposed, and multi-billion settlements were made, many banks no longer wanted to participate in the mortgage servicing business. Many major banks sold their mortgage servicing subsidiaries, or major portions thereof.viii In 2013, over $1 trillion in home loan servicing rights were transferred from traditional banks to non-bank companies.ix When such transfers occurred, many servicers again filed erroneous Assignments wrongly stating that the mortgage itself had been transferred when, in fact, only the servicing rights had been transferred. 19. In addition to wrongly stating the dates that the trusts acquired the mortgages, many of these Assignments incorrectly identified the grantor as the loan originator when, in fact, there had