Foreclosure Protections for All - The New York Times - By BOB TEDESCHI

Dear Readers:  This is such a good summary of what is happening right now - including some terrific weblinks, that I am respectfully posting here Mr. Tedeschi's article from the Times, published November 29, 2009, in its entirety.  As you know, I am a foreclosure mediator for New Jersey and I encourage the use of foreclosure mediators in New York BUT we need some "teeth" put into the process to achieve results.  I lobbied to extend the protection to cooperative home owners and the new legislation incorporates these home owners who were left out previously - Bravo!

 

Last year, a new law was put into place in New York to help protect subprime mortgage borrowers from foreclosure. Now the state is on the verge of extending similar protections to prime borrowers, too.
A bill passed by the State Legislature this month would require, among other things, that lenders give all borrowers 90 days’ warning before starting foreclosure proceedings and that they take part in settlement conferences with borrowers before proceeding with a foreclosure action. The bill also covers co-op owners.
Gov. David A. Paterson is expected to sign the legislation; most of the measures would then take effect within two months.

Richard J. Biondi, the immediate past president of the New York Association of Mortgage Brokers, said the new legislation was welcome, if a bit overdue. “It’s terrific that they finally opened the door to prime borrowers and made these protections available,” he said.

Richard H. Neiman, the superintendent of the New York State Banking Department, said that given the recent deadlock in the Legislature, he was pleased by the speed with which the bill was passed.
Of the nearly 20 measures in the legislation, mandatory mediation could provide the most relief for struggling borrowers, some of whom have been unable to get their lenders to consider loan modifications. Because of the high volume of mortgage defaults, many lenders have been unable to keep pace with such inquiries from borrowers.

The foreclosure mediation, free for homeowners, would require lenders to provide a representative at a certain date and place. Lenders may be subject to sanctions if they fail to come with financial documents and other information required by mediators.

New York’s mediation program for subprime borrowers has had only limited success, its administrators say, in large part because borrowers often do not attend the sessions.

Under the new legislation, when lenders notify the state of an impending foreclosure action, the state must send the borrower’s name to housing counseling agencies, which can then inform the borrower about foreclosure avoidance strategies like the mediation program.

The new measures relating to co-ops, meanwhile, highlight the difficulties faced by those who fail to make their monthly maintenance payments, which go toward building expenses and the building’s underlying mortgage.
Co-op units do not fit the legal definition of real property, and therefore do not qualify for the protections of traditional foreclosure processes. As a result, Mr. Neiman said, co-op owners can often be forced to evacuate a unit within two months of the time their building’s board takes formal action against a nonpaying resident. Now that the new law gives occupants 90 days before they lose their ownership shares, he said, owners will have more time to seek help.

The legislation also includes protections for tenants of multifamily housing units that go into foreclosure.
Jane Azia, the director of nondepository institutions and consumer protection for the State Banking Department, says that because New York’s housing market includes a heavy mix of multifamily units, the protections for tenants are especially meaningful. By law, she said, a lender can evict tenants only after a foreclosure judgment, which typically takes about 15 months in the state.

“There are tenants out there who are harassed into leaving after the foreclosure process begins,” Ms. Azia said, “and they aren’t aware of their rights.”

The new law would give tenants more time to get out, but Mr. Biondi of the New York Mortgage Brokers Association said this measure could further damage the financial health of lenders.

“Tenants will probably just stop making payments,” he said. “And for lenders, getting any sort of legal enforcement against that will probably be difficult in the current environment.”

Corcoran Group Sanctioned for Failure to Preserve E-Mail for Discovery

As reported in the November 17, 2009, New York Law Journal, "A real estate company defendant in a lawsuit has been sanctioned by a Manhattan judge for its failure to preserve evidence and for persisting in deleting e-mails in spite of the court's repeated warnings to comply with discovery."

What's important in this decision (which is being appealed), is that when the court orders e-mails to be presented in discovery, just going ahead and deleting them - and wiping the hard drive (of server and personal computers alike), is not going to elicit warm regards from the court.

This is a good lesson to everyone involved in litigation.  I present below the article which appears in today's Law Journal.

Eighteen months after plaintiffs Harold Einstein and Jennifer Boyd sued the Corcoran Group in connection with the alleged deceptive marketing of a condominium, New York Supreme Court Justice Charles Ramos learned that three of Corcoran's brokers were continuing to delete e-mails from their individual mailboxes.


"[T]he failure to implement any litigation hold, not only after the commencement of litigation, but also after this court's repeated warnings that counsel should 'read [their] client the riot act', was grossly negligent and rises to the level of 'culpable conduct' required for a finding of spoliation" said the judge, in Einstein v. 357 LLC, 604199/07, ruling that Corcoran "willfully misled" the plaintiffs during the sale of the condominium.

Jay B. Itkowitz of Itkowitz & Harwood, who represented the condominium's buyers, called the ruling "groundbreaking."

He said in an interview that the ruling was the first in the state to send the "critical message" that "when you are sued or know you are going to be sued ... you have to take immediate and significant steps to preserve electronic evidence."

Errol Margolin of Margolin & Pierce, who represented the Corcoran defendants, said that he "disagreed completely" with the ruling, which he plans to appeal. Corcoran added in a statement that "we disagree with the discovery ruling and intend to file an appeal at the appropriate time. This case is still in the discovery phase and no decision has yet been made on the merits of the case."

Einstein and Boyd purchased a condominium in June 2007 for $1.3 million.

According to the complaint, Christina Coats, a Corcoran broker, had previously told the couple that the unit in Park Slope, Brooklyn had been taken off of the market because of a water leak, but that the condition had since been repaired.

Shortly after moving in, the buyers "experienced massive" flooding in the unit's recreation room during a period of heavy rain.

After repeated flooding, the plaintiffs retained an expert who advised them that the "water penetration to the recreation room had spawned a mold condition," and that the condominium was unsafe for the couple and their two children.

In December 2007, Einstein and Boyd sued Corcoran, three of its brokers, including Coats, and a number of other defendants in connection with the alleged defective design and deceptive marketing of the unit.

In June 2008, the plaintiffs served Corcoran and the brokers with a document demand.

The Corcoran defendants' lawyers claimed at an October hearing that the defendants had produced all e-mail traffic from the individual brokers, but the defendants later admitted that they had not handed over a relevant e-mail from Adam Paceli, the vice president of Corcoran, to a co-defendant.

On Dec. 10, 2008, Justice Ramos ordered the individual brokers to "produce their respective hard drives to a non-affiliated vendor ... for inspection and deleted file recovery."

But according to plaintiffs, the Corcoran defendants failed to supply them with a list of the devices and in February 2009, the plaintiffs moved to strike defendants' pleadings or compel compliance with discovery.

Corcoran responded with an affidavit from Terence Thomas, director of information technology for Corcoran, who testified that "all Corcoran e-mails, outgoing and incoming, are forwarded to a central server. As e-mails are sent and received, an exact replica of the central server is recorded on the hard drives of agents' individual computers."

The real estate company also turned over two hard drives, despite the fact that their attorneys had previously told the plaintiffs that they had no list of devices with potentially relevant data.

The plaintiffs hired Kroll OnTrack to search the hard drives, and discovered that certain e-mails were missing.

In May 2009, Thomas submitted a second affidavit, in which he said Corcoran had an e-mail deletion policy as a result of limited server space. If an individual deleted an e-mail from a local computer prior to a scheduled month-end backup, the file was not recoverable, Thomas said.

He later testified at a hearing that he had never spoken to the individual brokers about their e-mail deletion policies, did not investigate what types of electronic communication devices they used, and failed to advise anyone that a possibility existed that e-mails relevant to the litigation were being deleted.

'LITIGATION HOLD'

Justice Ramos concluded that the defendants' engaged in spoliation by selectively deleting e-mails and failing to implement a "litigation hold."

While New York case law and the Civil Practice Law and Rules are "silent" on the obligations of parties to implement a litigation hold, Ramos relied on cases from the Southern District of New York in concluding that the "failure to suspend the deletion policy or to investigate the basic ways in which e-mails were stored and deleted constitutes a serious discovery default on the part of the Corcoran Defendants and their counsel rising to the level of gross negligence or willfulness."

The judge also took to task Corcoran's attorneys with Margolin & Pierce for making "numerous" materially false statements, such as representing to the court that all e-mail traffic had been produced.

"This Court repeatedly warned counsel for the Corcoran Defendants that the failure to make a complete production of e-mails caused the Court great concern and needed to be remedied properly. Yet the Plaintiffs, and this Court, only learned about the manual deletion policy in May 2009," Ramos wrote.

By disclosing that fact 18 months into the litigation, the judge said, Corcoran defendants "willfully and unnecessarily caused extensive motion practice and delay without any reasonable justification."

Ramos found that a "reasonable fact-finder" could conclude that "at least some of the deleted e-mails were relevant to this litigation and favorable to the Plaintiffs," including one which suggested that the brokers cancelled an open house because of "heavy rain."

In addition to sanctioning the Corcoran defendants by finding they misled the plaintiffs about a walter infiltration problem, the judge also held that defendants' "contumacious conduct" entitled plaintiffs to attorney fees and costs in connection with reviewing the two hard drives and counsel fees spent in bringing discovery motions and sanctions.

Itkowitz estimated that the plaintiffs were entitled to roughly $100,000 as a result of Ramos' ruling.

All told, the plaintiffs are requesting $5 million plus punitive damages in the litigation.

Federal Regulators Issue Final Model Privacy Notice Form Nov 17 2009 Press Release

Eight federal regulatory agencies today released a final model privacy notice form that will make it easier for consumers to understand how financial institutions collect and share information about consumers. Under the Gramm-Leach-Bliley Act (GLB Act), institutions must notify consumers of their information-sharing practices and inform consumers of their right to opt out of certain sharing practices. The model form issued today can be used by financial institutions to comply with these requirements.

The Financial Services Regulatory Relief Act of 2006 amended the GLB Act to require the agencies to propose a succinct and comprehensible model form that allows consumers to easily compare the privacy practices of different financial institutions, and has an easy-to-read font.

The agencies conducted extensive consumer research and testing in developing the model form issued today. Then they solicited public comments and considered those comments in developing a model form that is easier for consumers to understand and use. The final rule provides that a financial institution that chooses to use the model form obtains a "safe harbor" and will satisfy the disclosure requirements for notices. The rule also removes, after a transition period, the sample clauses now included in the appendices of the agencies' privacy rules.

The final model privacy form was developed jointly by the Board of Governors of the Federal Reserve System, Commodity Futures Trading Commission, Federal Deposit Insurance Corporation, Federal Trade Commission, National Credit Union Administration, Office of the Comptroller of the Currency, Office of Thrift Supervision, and Securities and Exchange Commission.

Homebuyer tax credit extension and expansion update

On November 6, President Barack Obama signed into law the extension and expansion of the current homebuyer tax credit, an important step in ensuring a real estate and economic recovery.

The measure extends the present $8,000 tax credit program for first-time homebuyers through April 30, 2010.

It expands the program, effective November 7, 2009, to include current homeowners, who are now eligible for an up to $6,500 tax credit (10 percent of the purchase price) through April 30, 2010 provided they have lived in the home they are selling, or have sold, as principal residence for five consecutive years in the past eight years.

If potential homebuyers have a binding contract on or before April 30, they will have until June 30 to close the transaction.

Income limits for eligible homebuyers are expanded to $125,000 for single buyers and $225,000 for couples. The purchase price of the home cannot exceed $800,000. To help guard against fraud, buyers are required to attach documentation of purchase to their tax return.

Click here http://www.realtor.org/fedistrk.nsf/files/government_affairs_tax_credit_ext_chart_110409.pdf/$FILE/government_affairs_tax_credit_ext_chart_110409.pdf  for detailed information about the legislation.

Mortgage Program Gathers Steam After Slow Start - The Wall Street Journal, Wednesday, November 11, 2009

Some excerpts:

"Whether the program will ultimately be judged a success will depend upon how many trial modifications become permanent."

"The administration won't release figures on completed modifcations until December, but so far it appears that very few trial modifications are becoming permanent, often because of lack of documentation."

"'It's a fiasco in the making,' said Alan White, an assistant professor at Valparaiso University in Indiana, citing preliminary information about low numbers of permanent modifications and complaints from attorneys and housing counselors. "The good news is you've gotten all these homeowners in from the cold and on these temporary modifications," Mr White said. "The bad news is we are stumbling in getting all these people ... all the way" to keeping their homes.

"At Morgan Stanley's Saxon Mortgage Services, about 26,000 to 39,000 borrowers in the program have made more than three trial payments. Roughly 500 have received completed modifications." "'It's hard to get the documents in,' said Saxon Chief Executive Anthonly Meola ..."
"The Treasury department last month gave borrowers who have made three trial payments sixty additional days to hand in their paperwork and relaxed some documentation requirements."

"Freddie Mac, the government-controlled mortgage company, recently hired Titanium Solutions Inc. to go door-to-door gathering needed documents. 'Most of our borrowers got into the loan with assistance' and need similar help with the modification process, said Freddie Mac Senior Vice President Ingrid Beckles."

"Susan Cook, a real-estate broker who works as a home-retention consultant for Titanium said borrowers often report that they have sent in their paperwork 'two or three times.' But there is always some little piece that is probably missing.' she said."

UPDATE: The Proposed Homebuyers Tax Credit Legislation

What it is in a nutshell:

The legislation extends the availability of the tax credit to purchases made before May 1, 2010. Prospective purchasers with binding contracts in place as of April 30, 2010 will be allowed an additional 60 days to complete the transaction.

The credit will remain $8,000 for first-time buyers, while repeat buyers who purchase between December 1, 2009 and May 1, 2010 will be eligible for a credit of $6,500.

Repeat buyers must have lived in their homes consecutively for 5 of the previous 8 years. Income limits are expanded to $125,000 on a single return and $225,000 on a joint return.

Please keep in mind the income restrictions. That is a puzzle piece I find most people are not aware of.

Here's a recent Associated Press news article: http://www.google.com/hostednews/ap/article/ALeqM5hJJraNRE6DjWj2orF7SYJ12PADEAD9BPFFR01