Source: https://www.weltmosk.com/blog.php?tag_id=384
Timestamp: 2019-04-20 12:51:13+00:00

Document:
In an opinion of interest to both debtors and judgment creditors, the Court of Appeals for the Second Circuit recently upheld the dismissal of a chapter 7 involuntary bankruptcy petition filed against debtor, Matthew Murray (“Debtor”), over the opposition of judgment creditor Wilk Auslander LLP (“Creditor”). Wilk Auslander LLP v. Murray, 17-1272 (2d Cir. Aug. 14, 2018). Read the full opinion here.
A familiar scenario which Credit Unions and other lenders face is when their borrower obtains a discharge in bankruptcy, but still wishes to maintain a banking relationship with lender rather than try and obtain credit with a different institution. It is also common for Credit Union membership agreements to include standard verbiage that if the Credit Union incurs a loss due to borrower’s activities, or if an account is maintained in a manner to cause a loss to the Credit Union, then, in that instance, the Credit Union may terminate all accounts and services.
In a recent decision of particular relevance to mortgage lenders, Veltre v. Fifth Third Bank, 2017 WL 387361 (Bankr. W.D. Pa. Jan. 27, 2017), the United States Bankruptcy Court for the Western District of Pennsylvania held that property sold at a properly conducted and non-collusive foreclosure sale may not serve as the basis for a preference action under section 547 of the Bankruptcy Code. This decision focuses attention on the debate over whether a creditor who forecloses on real property receives a preference or fraudulent transfer, even if the foreclosure sale complied with applicable state law.
In a recent decision of consequence to mortgage lenders, the United States Bankruptcy Court for the District of Massachusetts concluded that a Chapter 7 Trustee may avoid a debtor’s mortgage and maintain it for the benefit of the bankruptcy estate. See Eastern Bank v. Benton (In re Thomas H. and Nancy C. Benton), 2016 WL 53581 (Bankr. D. Mass. Jan. 4, 2017). Simply put, the Bankruptcy Court held that, when a mortgage contains a correct street address but an incorrect legal description, the mortgage lien is avoidable by the bankruptcy trustee in his or her role as a hypothetical bona fide purchaser of a debtor’s property under section 544 of the Bankruptcy Code.
In an opinion dated February 6, 2017, the Bankruptcy Court for the Northern District of Ohio disallowed a mortgage servicer’s untimely proof of claim in a Chapter 13 case, holding that secured creditors are subject to the same 90-day deadline for filing proofs of claim as unsecured creditors. In re Dumbuya, 2017 WL 486917 (Bankr. N.D. Ohio Feb. 6, 2017). Read the full opinion here.
Weltman & Moskowitz, LLP is proud to announce that founding partners Richard Weltman and Michael Moskowitz have both been selected as Metro New York Area Super Lawyers for 2017. This is the fourth consecutive year each has been recognized as a top bankruptcy/debtor and creditors’ rights attorney. This honor is a product of a rigorous investigative process by the publishers of Law and Politics. Attorneys are selected based on professional accomplishments, licensing and certifications, peer recognition and personal achievement. The final published list represents no more than 5% of the lawyers in each state. The firm is also proud to announce that Melissa Guseynov, an associate of the firm, has been selected as a New York Metro Rising Star! This selection is limited to no more than 2.5% of the attorneys in New York State. The Super Lawyers objective is to create a credible list of outstanding attorneys, and the lawyers of Weltman & Moskowitz, LLP are proud to be recognized for their hard work and client dedication.
Our firm was tasked by one of our lender clients to file a residential mortgage foreclosure case in New Jersey after borrower’s failure to make mortgage payments. Borrower, assisted by a purported residential foreclosure defense expert, sought to place numerous roadblocks to the foreclosure action, including the filing of an answer containing the usual boilerplate meritless “defenses.” Ultimately, after extensive discovery and unnecessary litigation caused by borrower’s “scorched-earth” tactics, final judgment of foreclosure was rendered in favor of lender. Of course, this is not the end of the story, only the beginning.
We previously reported about Lenders’ Chapter 13 obligations set forth in Bankruptcy Rule 3002.1, entitled Notice Relating to Claims Secured by Security Interest in the Debtor’s Principal Residence (click here). To reiterate, a mortgage lender must provide to debtor, debtor’s counsel, and the chapter 13 bankruptcy trustee, notice of any fees, expenses or charges incurred by lender in connection with its claim, following commencement of the chapter 13 case. In addition, lender must notify the same parties about any changes to the monthly mortgage payments which come due post-petition.
On September 23, 2016, Bankruptcy Judge Christine M. Gravelle, U.S.B.J. held that a chapter 13 debtor may strip off a wholly unsecured lien on a primary residence where the debtor is the sole owner of the property, even if the non-debtor ex-spouse is liable on the debt which the debtor seeks to strip. In re Mensah-Narh, 2016 WL 5334973 (Bankr. D.N.J.. Sept. 23, 2016). Read the full opinion here.
On October 27, 2016, the Court of Appeals for the Ninth Circuit held that a credit union’s proofs of claim were properly rejected by the Bankruptcy Court as untimely, and that the debtor’s acknowledgment of debt owed to the credit union in her bankruptcy schedules was not an informal proof of claim. In re Barker, 2016 WL 6276078 (9th Cir. Oct. 27, 2016). Read the full opinion here.
In Part I we highlighted how the amendments to the NY Real Property Actions and Proceedings Law (“RPAPL”), which became effective on December 20, 2016, affect lenders duties and obligations with respect to vacant and abandoned properties in foreclosure. In Part II we will address how the RPAPL amendments impact the foreclosure settlement conferences and pre-foreclosure notices.
On June 23, 2016, Governor Andrew Cuomo signed into law Chapter 73 of the Laws of New York 2016. We addressed the new law in a previous post which you can see here. We will address these changes in two separate blog posts. This first post addresses vacant and abandoned properties. Part II will address changes to foreclosure settlement conferences and the required pre-foreclosure notices.
On September 12, 2016, the Chief Bankruptcy Judge for the District of Vermont directed a mortgage servicer to pay $375,000 in sanctions for failing to adequately notify debtors before imposing certain post-petition mortgage account charges. The court relied upon Rule 3002.1 of the Federal Rules of Bankruptcy Procedure (“Rules”). In re Gravel, 2016 WL 4765773 (Bankr. D. Vt. Sept. 12, 2016). Read the full decision here.
Rule 3002.1(c) requires creditors to file and serve notice of all fees, expenses, or charges (i) that were incurred post-petition in connection with a claim, and (ii) that the creditor asserts are recoverable against debtor or debtor’s principal residence. In addition, the rule provides that the requisite notice must be served within 180 days after the date on which the fees, expenses, or charges are incurred.
Weltman & Moskowitz, LLP is proud to announce that Richard Weltman and Michael Moskowitz have both been selected as Metro New York Area Super Lawyers for 2016. This is the third consecutive year each has been recognized as a top bankruptcy/debtor and creditors’ rights attorney. This honor is a product of a rigorous investigative process by the publishers of Law and Politics. Attorneys are selected based on professional accomplishments, licensing and certifications, peer recognition and personal achievement. The final published list represents no more than 5% of the lawyers in each state. The Super Lawyers objective is to create a credible list of outstanding attorneys, and the partners of Weltman & Moskowitz, LLP are proud to be recognized for their hard work and client dedication.
In June, a Bankruptcy Judge for the Northern District of Ohio calculated $250,000 in punitive damages against a mortgage lender for violating the automatic stay by incorrectly filing a proof of claim on a car loan that had not been transferred to that lender. In re Mocella, 552 B.R. 706 (Bankr. N.D. Ohio 2016).
Here, the originating lender held a mortgage on debtors’ residence as well as a car loan. As part of a bulk transfer of loans, the originating lender assigned the mortgage to a new lender. The car loan was not transferred. Due to a bookkeeping error, the new lender mistakenly thought the car loan had been transferred to it, along with the mortgage loan. As a result of this error, the new lender filed a proof of claim for both the mortgage and car loan.
On June 23, 2016, New York Governor Andrew Cuomo signed into law legislation which amends section 1307 of the New York Real Property Actions and Proceedings Law (RPAPL). The new law becomes effective 90 days from June 23, 2016.
We previously reported on In re Sherwood, a Southern District of New York bankruptcy decision, wherein the court held a debtor could not confirm a chapter 13 plan over a lender’s objection where the plan would vest title to surrendered property in the mortgagee without its consent. See In re Sherwood, 2016 WL 355520, at * 7 (Bankr. S.D.N.Y. Jan. 28, 2016).
In a recent appeal of a bankruptcy court decision, the District Court for the Eastern District of New York agreed with In re Sherwood and other “persuasive authority,” in confirming that a secured creditor’s rights under the Bankruptcy Code are “impermissibly compromised by a Chapter 13 plan that provides for non-consensual” vesting of collateral. HSBC Bank USA, N.A. v. Zair, 2016 WL 1448647, at * 1 (E.D.N.Y. April 12, 2016).
In a recent opinion, Bankruptcy Judge James L. Garrity, Jr., sitting in the Southern District of New York, held that a debtor cannot confirm a chapter 13 plan over a lender’s objection where the plan would compel the transfer of title to the secured creditor, explaining that forcing title onto the creditor would transform the creditor’s right to recover its collateral into an obligation, thereby rewriting the Bankruptcy Code and the underlying loan documents. In re Sherwood, 2016 WL 355520, at * 7 (Bankr. S.D.N.Y. Jan. 28, 2016).
We previously reported on cases where lenders are forced to forfeit accrued mortgage interest as a result of a court’s finding of “bad faith,” regarding borrower requests for mortgage modifications. The foreclosure courts are continuing to find new ways to sanction lenders as evidenced below.
We previously reported on the importance of strict compliance with the mailing of the 90-day pre-foreclosure notice pursuant to RPAPL §1304 (“Notice”). Such strict compliance has become fodder for defendants’ lawyers as failure to give such notice to all persons signing either the note or mortgage, as a borrower, is a fatal defect. Lender’s failure to comply with this important condition precedent will result in case dismissal.
We have previously reported on the nuances of the federal Fair Debt Collection Practices Act (“FDCPA”) and the pitfalls to lenders who fail to strictly adhere to its requirements. However, in two recent unrelated federal court decisions, Judge Colleen McMahon of the District Court for the Southern District of New York and Judge John Curtin of the District Court for the Western District of New York, both concluded that the mere appearance of an account number on a collection envelope, without more, does not violate FDCPA.
In the recent case of Federal National Mortgage Assoc. v. Singer (Case No. 850039/2011, Sup Ct, NY County, July 21, 2015), Manhattan Supreme Court Justice Peter Moulton determined that two mortgage banks, Federal National Mortgage Association and Bank of America, N.A. (“Lenders”), must forfeit more than $100,000.00 in accrued mortgage interest for acting in bad faith regarding borrower requests for mortgage modifications.
The United States Supreme Court has been asked to resolve another split among the circuit courts assessing fraud in consumer bankruptcy cases. At issue is whether debtors in chapter 7 and chapter 13 cases can have their debt discharges blocked under section 523(a)(2)(A) of the bankruptcy code, following pre-petition efforts to transfer assets away from creditors without directly misleading them. The First and Seventh Circuit Courts of appeal have both issued holdings that directly conflict with a recent ruling by the Fifth Circuit. The Second Circuit has not directly addressed whether a court may find “actual fraud” absent a specific finding of misrepresentation by a debtor.
The United States Supreme Court recently reversed a ruling from the Eleventh Circuit in the case of Bank of America, N.A. v. Caulkett, which had permitted individual chapter 7 debtors to “strip” junior liens off their homes when the first mortgage lien was underwater. The Supreme Court held that a debtor in a chapter 7 proceeding may not void a junior mortgage lien under section 506(d) of the Bankruptcy Code when the debt owed on a senior mortgage lien exceeds the current value of the collateral, if the creditor’s claim is both secured by a lien and allowed under section 502 of the Bankruptcy Code.
In the case of In re Washington, No. 14-14573-TBA, 2014 WL 5714586 (Bankr. D.N.J. Nov. 5, 2014), the United States Bankruptcy Court for the District of New Jersey held that the mortgagee and mortgage servicer (“the Mortgagees” or “Plaintiff”) were time-barred under New Jersey state law from enforcing borrower’s default under both the note and mortgage. As a result, the borrower hit the jackpot and was entitled to own his home, free and clear of the mortgage debt, even though he only made three mortgage payments before the loan went into default.
New York’s Real Property Actions and Proceedings Law (“RPAPL”) § 1304 requires a mortgage lender to notify a residential home borrower of an impending foreclosure action at least 90 days before the foreclosure action is commenced, using specific statutory language, printed in 14 point type, sent by registered or certified mail, as well as by first class mail, to the borrower. The emphasis of this article is the peril which will befall a lender if it fails to timely register the statutorily mandated notice.
In December 2014, the Chief U.S. Bankruptcy Judge for the Southern District of New York, Cecelia Morris, handed a setback to lenders (In re Weidenbenner, Bankr. S.D.N.Y., No. 14-35443, 12/12/14), when she concluded a financial institution violates the automatic stay imposed upon the filing of a chapter 7 petition pursuant to 11 U.S.C. §362, simply by freezing a debtor’s bank account where it turns out no right of setoff exists.
A New Jersey Appeals Court recently held that homeowners who enter into trial agreements to modify their mortgages under the Federal Home Affordable Modification Program (“HAMP”), and comply with the terms thereof, may commence suit for breach of contract, and possibly consumer fraud, if lenders deny them permanent modifications.
In our previous article, we shared the story of a personal injury attorney that was recently sued in an adversary proceeding filed in the United States bankruptcy court. Weltman & Moskowitz successfully established that the complaint was without merit and Plaintiff agreed to withdraw the complaint before answers were required to be filed or discovery ensued. In doing so, we saved our client the time and expense associated with protracted litigation.. Today, we bring you the story of another client of ours, a large regional banking institution, in the same position with the same successful results.
The Federal Rules of Bankruptcy Procedure were amended late in 2011 to include Rule 3002.1, entitled Notice Relating to Claims Secured by Security Interest in the Debtor’s Principal Residence. Simply put, a mortgage lender must provide to the debtor, debtor’s counsel, and the chapter 13 bankruptcy trustee, notice of any fees, expenses or charges incurred by lender in connection with its claim, following commencement of the chapter 13 case. The lender must use Official Form B10, Supplement 2, found here. A deviation from the use of this official form and its noticing procedure can result in an unwanted motion seeking damages for technical violation of the bankruptcy stay. The lesson here for lenders is to be careful and adhere to strict protocols.
NEW YORK, NY – On October 18, 2012, the New York Court of Appeals held that federal credit unions are subject to New York State’s Mortgage Recording Tax. The Mortgage Recording Tax requires a payment to New York State of one half of one percent (.5%) for the privilege of recording a mortgage.rpt info here.
On December 22, 2010, an upstate New York bankruptcy court in an adversary proceeding filed by debtor Christopher Weber against SEFCU (“Credit Union”), granted Credit Union’s motion for summary judgment.
Often people with less than perfect credit scores are surprised that locating one standardized credit profile or a “uniform” credit report is more myth than reality. Judgments, repossessions, slow payment history, tax liens--as well as bankruptcy filings--are reported to a varying degree by creditor filings or with public record databases maintained by one of the three largest consumer credit reporting agencies (“CRAs”). Sometimes adverse information is reported by other sources as well. In order to learn how badly your credit rating may have been damaged, you must first identify what personally identifiable credit information has been reported about you to the CRAs.

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