As I reported two weeks ago, the large-volume foreclosure firm Steven J. Baum PC of Amherst NY is closing. The Buffalo News is now reporting that Pillar Processing LLC, a foreclosure services company affiliated with the Baum office is also shutting its doors. Pillar employees 590 full-time and part-time employees in Amherst. I wrote an extensive blog last year (October 22, 2010) exploring the unisual arrangement between Pillar and the Baum office. My analysis is that Baum basically spun off the back office foreclosure processing services into a separate non-law firm entity, and then sold it to private investors for something like $60 million. If this is accurate, I would suspect those investors might be somewhat unhappy now.
The New York Times (DealBook article by Peter Lattman, 11/21/2011), and The Buffalo News (article 11/21/2011 by Jonathan Epstein) , are reporting that the troubled foreclosure law firm Steven J. Baum PC is shutting down. The firm filed notices with the government of intention to dismiss a mass number of employees. The firm has at least 90 employees.
Being picketed by 'Occupy Buffalo' is bad enough. But things just got a whole lot more challenging for the Amherst-based foreclosure law firm of Steven J. Baum PC: Fannie Mae joins Freddie Mac in banning the firm from foreclosure work on their mortgages, effective new business after November 15, 2011 (see Buffalo News article November 16, 2011, by Jonathan Epstein.) The ban extends to bankruptcy wok as well, according to the New York Law Journal.Fannie Mae issued a list of hundreds of law firms around the country that their mortgage servicers may use for foreclosure work. Eight New York firms are listed, but the Baum office is described as "not eligible for new referrals." No other firm on the 31 page list is described as not eligible for new referrals.
New York Times columnist Joe Nocera ran a story on October 29 alleging that staff members at the Buffalo foreclosure law firm of Stephen J. Baum ridiculed foreclosure defendants and opposing attorneys at a 2010 Halloween party. The column was based on accusations by, and pictures provided by, a former Baum employee. The pictures that accompanied the story allegedly showed staff members dressed as homeless people squatting in foreclosed houses, ridiculed defendant motions for an order to show cause in foreclosures, and included a "rest in peace, Crazy Susie" sign and picture of New York foreclosure defense attorney Susan Chana Lask.
I wrote on March 9 about the Agard bankruptcy decision by the Easterd District of New York Bankruptcy Court, issued February 10, finding that MERS (Mortgage Electronic Registration Systems. Inc.) did not have thge authority, under New York law, to assign a mortgage.
The private system for registering mortgages around the country is coming under increased attach by foreclosure and bankruptcy courts, according to the New York Times. And now a bankruptcy judge on Long Island has questioned the whole concept of the system. In an article by Michael Powell and Gretchen Morgenson, dated March 6, 2011, the current status of the MERS Corporation is reviewed and explored. MERS - the Mortgage Electronic Registration Systems - is a private company located in Reston, VA, which purports to be the holder of 60 million mortgages, even though it actually loans no money and has fewer than 50 employees. And Bloomberg News (Article by Thom Weidlich, dated Feb. 14, 2011) reports on the Long Island bankruptcy case , where the judge ruled that the MERS does not appear to have the authority to assign mortgages (more on that case below.)
In an article published January 10, 2011 (author: John Schwartz), the New York Times reports that courts in the Metro New York area are increasingly critical of the professional practices of lawyers representing banks in foreclosures.
In a Bloomberg News article December 8, 2010 (Authors: Thom Weidlich and Karen Freifeld), the Amherst, NY foreclosure law office of Steven J. Baum is apparently the subject of several state and federal court lawsuits concerning alleged shoddy legal practices - and is defending its practices vigorously. The article reports that in one state court case, the Baum office has been ordered to pay $14,532.50 in legal fees and costs and a $5,000 fine (Federal Home Loan Mortgage Corp. v. Raia, SP 002253/10, District Court of Nassau County, New York, Hempstead; Hon. Scott Fairgrieve ). The article further reports that Baum's office has also been sued in Federal Court over charging attorney fees for foreclosure settlement conferences (Menashe v. Steven J. Baum P.C., U.S. District Court, Eastern District of New York; Central Islip; case #10-cv-5155). One lawsuit mentioned in the article summarizes two different orientations to current foreclosures. In a class action federal suit brought in Brooklyn, the court is being asked to chose between two dramatic alternatives: are mistakes made in litigating foreclosures trivial errors easily corrected? Or are they stunning examples of widespread fraud and litigation abuse?
In a case out of The Bronx, a bankruptcy judge refused to allow the mortgage servicer to proceed with foreclosure. In re Mims (Bankr. SDNY Bk 10-14030; Judge Glenn; decision Oct. 27, 2010; decision attached below). Wells Fargo moved the bankruptcy court for permission to start a foreclosure against the debtor's residence (a "lift stay" motion, asking for the automatic stay of Bankruptcy Code Sect. 362 to be lifted.) The debtor did not oppose the motion, nor did the bankruptcy trustee. Never the less, the court denied the motion, apparently on its own initiative. The mortgage was originated in 2004, when Lend America recorded a first mortgage against the debtor's house (technically, the mortgage was recorded by MERS, or Mortgage Electronic registration System, as 'nominee' for Lend America.) The mortgage note was endorsed to Washington Mutual, a bank later taken over by the FDIC and its assets sold to Chase. There was no evidence that the mortgage note was ever assigned to Wells Fargo. Wells Fargo may have been the "title owner" of the mortgage itself (that is, the security interest.) Seven days before the lift stay motion was filed, the mortgage but not the note was assigned by MERS to Wells Fargo. The bankruptcy court concluded that Wells Fargo was not a party in interest, as it had not shown that it was the owner or holder of the mortgage note. Wells Fargo could not bring a foreclosure in New York State unless it owns the note being foreclosed. There was no written assignment of the note, and Wells Fargo was not in physical possession of the original note (in New York, a note can be assigned by physical delivery of the original note to a new owner.) The court was also troubled by the timing of the mortgage assignment, seven days before the motion, with no "credible explanation, describing how, when and from whom Wells Fargo derived its rights." (Decision, page 8.) The court also noted that the Assignment from MERS was signed by an officer residing in Florida, his signature was notarized in South Carolina. The attorney for Wells Fargo was unable at the motion hearing to verify where the document was actually signed. This decision adds to the uncertainty surrounding foreclosures caused by missing paperwork and other problems (see my three blogs posted Oct. 23, 2010 under the topic Mortgages and Mortgage Foreclosures.) That the court denied the lift stay motion of Wells Fargo on its own initiative shows that some courts in New York are examining all manner of foreclosure proceedings closely, even absent objection from opposing parties. The motion was denied without prejudice, so Wells Fargo may be entitled to relief in the future if it can overcome the court's difficulties with its paperwork. The attorney for Wells Fargo in this motion was the Law Office of Steven J. Baum, PC, of Amherst NY.
New York Governor Patterson signed a new law on October 20, the "Access to Justice in Lending Act" (Chapter 550 of the Laws of 2010), which allows defendants who are successful in defending against foreclosures to have the bank pay their attorney fees. Bill A01239 (also known as S2614b), passed the New York State Assembly and Senate in June.