About Me
“ Craig D. Robins, Esq., has been a practicing Long Island bankruptcy attorney for over twenty-four years ”
Mortgages & Sub-Prime Mortgage Meltdown
Written by Craig D. Robins, Esq.The Obama Administration’s effort to assist struggling homeowners save their homes had been widely criticized. See my post: Problems with HAMP — Too Many to Count?
Treasury Department statistics released this week show that although HAMP has helped a number of American homeowners save their homes by enabling them to permanently modify their mortgages, the number has been substantially less than the administration had hoped for.\
To date, the HAMP program has helped 691,000 homeowners. This is a major disappointment from the projected goal of helping close to four million Americans with mortgage troubles. The HAMP program is almost two and a half years old.
What is very upsetting is that more than 891,000 of those who signed up for HAMP have had their modifications canceled.
One of the reasons the program has not worked as planned is because the troubled mortgage industry had great difficulty adopting procedures to adequately process the HAMP applications, leading to a great amount of frustration suffered by hapless homeowners.
I previously posted a detailed article about the difficulties homeowners in HAMP were facing. WARNING: HAMP Can Drive Homeowners Into Bankruptcy .
New York University law professor Neil Barofsky, who released testimony that he prepared for a Congressional hearing this past week, said “Treasury rushed HAMP out the door in a manner best described as ‘ready, fire, aim,’ leading to mistakes that are still ricocheting today.”
Written by Craig D. Robins, Esq.For Those with Mortgage Problems, Bankruptcy Offers Options
This post was my monthly column that was published in the September 2011 issue of the Suffolk Lawyer. It was aimed at general practitioners and non-bankruptcy attorneys who may not be that familiar with how bankruptcy can be used to help clients with mortgage problems during these recessionary times.
This post should also be helpful to those consumers who are facing foreclosure and need to explore their bankruptcy options.
In the past two years I’ve helped a great deal of clients who were either in foreclosure or who owned homes that were very much underwater. I am also seeing a lot of clients who have been rejected after trying to modify their mortgages, such as under the HAMP program. Many consumers have found HAMP to be a dismal failure as I wrote in Problems with HAMP — Too Many to Count?
Also see my post: Warning: HAMP Can Drive Homeowners into Bankruptcy.
There are several bankruptcy options that can provide great relief for such clients.
Chapter 13 Bankruptcy
Consumers who have seriously fallen behind on their mortgages and who want to keep their homes, can use a Chapter 13 payment plan to cure mortgage arrears over a five-year period.
Chapter 13 Bankruptcy
Consumers who have seriously fallen behind on their mortgages and who want to keep their homes, can use a Chapter 13 payment plan to cure mortgage arrears over a five-year period.
However, this option is only available to those consumers who can not only afford to make their new post-petition mortgage payments, but can also make an additional monthly Chapter 13 plan payment approximately equal to 1/60th of the mortgage arrears.
A benefit of filing Chapter 13 is that the consumer can also resolve all credit card and medical debt as well, often paying just cents on the dollar.
There is a further significant benefit to those consumers who have a second mortgage that is totally underwater. In these situations where the house is worth less than the balance owed on the first mortgage, the consumer can bring a “cram-down” proceeding and effectively “strip-off” and totally eliminate the second mortgage. This benefit alone can often save the consumer over a hundred thousand dollars.
In order to qualify for Chapter 13 filing, the consumer must have a regular and steady source of income. Some clients who would like to save their home, unfortunately cannot do so if they do not have sufficient monthly income.
Chapter 7 Bankruptcy
Chapter 7 bankruptcy enables a consumer to discharge most obligations including liability on a mortgage.
When I meet with a client who has significant mortgage arrears, and whose mortgage balances greatly exceed the value of their home, I discuss the concept that it may no longer be viable to save the home. Chapter 7 bankruptcy can provide a way out of bad, highly-leveraged real estate. A recent study indicated that one-fourth of all U.S. homes were underwater.
One of the judges in the Central Islip Bankruptcy Court permits Chapter 7 debtors to cram-down second mortgages.
Also see my post: What Happens to Your House if You File for Bankruptcy?
Walking Away from Real Estate
With these clients I often recommend a two-step process to extend their ability to remain in the home for a period of time, and to discharge their liability on the mortgage and ultimately any deficiency owed after a foreclosure sale. It is often possible to remain in the house for one to two years or more, without paying any mortgage or real estate tax payments.
Assuming that you can interpose one or more genuine, good faith defenses in a foreclosure proceeding in Supreme Court, you can then prevent a default judgment and take the foreclosure proceeding out of the automatic conveyor belt type of processing, effectively delaying the process by many months, or a year or more.
These days there are a host of possible foreclosure defenses. These include bringing shoddy or defective paperwork to the court’s attention; citing issues which may indicate that the lender may not have proper standing; and identifying improper mortgage assignments.
These days there are a host of possible foreclosure defenses. These include bringing shoddy or defective paperwork to the court’s attention; citing issues which may indicate that the lender may not have proper standing; and identifying improper mortgage assignments.
By defending a foreclosure proceeding, the foreclosure process can be greatly slowed down.
Strategic Default
Sometimes I come across a client who is current on his or her mortgage, but whose home is extremely underwater. In such instances I discuss the possibility of a “strategic default” which is when the consumer stops paying the mortgage, not because he or she can no longer afford it, but because keeping the house is no longer viable or financially worthwhile.
A Morgan Stanley report last year revealed that about 12 percent of all mortgage defaults are now “strategic,” which is a great increase from mid-2007, when the level was only 4 percent
A Morgan Stanley report last year revealed that about 12 percent of all mortgage defaults are now “strategic,” which is a great increase from mid-2007, when the level was only 4 percent
Bankruptcy Eliminates Recourse
By filing a bankruptcy and possibly engaging in foreclosure defense, the consumer will have to eventually walk away from the home, but they will probably be able to stay in it for several years without making any payments – all without financial recourse from the mortgage company.
There is also a strategy for timing the filing of the bankruptcy. Although the bankruptcy filing can be done at any time, doing so at the right time will get the homeowner a few extra months in the house, as the bankruptcy stay will stop the foreclosure proceeding until the lender can get permission to lift it.
Although most consumers are eligible for Chapter 7 filing, they must nevertheless pass the means test which Congress imposed about six years ago. As such, this approach should work for most consumers except those with high incomes or substantial non-exempt assets.
If the dream of home ownership has become a nightmare, then remember that there are bankruptcy options out there.
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About the Author. Long Island Bankruptcy Attorney Craig D. Robins, Esq., is a regular columnist for the Suffolk Lawyer, the official publication of the Suffolk County Bar Association in New York. This article appeared in the October 2011 issue of the Suffolk Lawyer. Mr. Robins is a bankruptcy lawyer who has represented thousands of consumer and business clients during the past twenty years. He has offices in Mastic, Patchogue, Commack, West Babylon, Coram, Woodbury and Valley Stream. (516) 496-0800. For information about filing bankruptcy on Long Island, please visit his Bankruptcy web site: http://www.BankruptcyCanHelp.com.
Written by Craig D. Robins, Esq.
Filing for bankruptcy enables consumers to discharge most debts. However, when the bankruptcy laws were radically changed six years ago through BAPCPA, various homeowners associations lobbied Congress for special protection.
Accordingly, not all homeowners association fees can be eliminated through bankruptcy.
We regularly meet with clients who are seeking to walk away from their homes since the real estate is underwater and no longer worth keeping. (An underwater home is one in which the homeowner owes more on the home than what is owed to the bank). Filing a bankruptcy can enable a homeowner to eliminate any obligation on a mortgage — even for an eventual deficiency judgment after a foreclosure.
However, as Long Island is home to a number of co-ops and condominiums, we have to be especially careful with the advice we give such clients.
Homeowner association (HOA) dues and fees, commonly known as maintenance, CAN be discharged in a bankruptcy proceeding — BUT only those dues and fees owed up through the date the bankruptcy petition is filed.
Any homeowner association dues and fees that accrue AFTER the petition is filed CANNOT be discharged. This provision is set forth in Bankruptcy Code § 523(a)(16) which states that a consumer cannot discharge a debt:
(16) for a fee or assessment that becomes due and payable after the order for relief to a membership association with respect to the debtor’s interest in a unit that has condominium ownership , in a share of a cooperative corporation, or a lot in a homeowners association, for as long as the debtor or the trustee has a legal, equitable, or possessory ownership interest in such unit, such corporation, or such lot, but nothing in this paragraph shall except from discharge the debt of a debtor for a membership association fee or assessment for a period arising before entry of the order for relief in a pending or subsequent bankruptcy case.
Thus, as long as the consumer continues to own the co-op or condo, HOA fees will continue to accrue after filing, and the consumer will be responsible for those fees. This also applies to homeowners with townhouses in gated communities that have common areas and homeowners association dues.
This legal provision can create a difficult scenario if the consumer is seeking to walk away and abandon the home, especially since many lenders drag their feet with foreclosure process.
Basically, as long as the consumer continues to own the home, even if he or she does not reside there, the consumer is responsible for the post-petition HOA fees.
This means that the homeowners association can pursue the homeowner for these post-petition monthly charges, and sometimes that does happen. However, I believe most homeowners associations do not take such aggressive action and instead wait until the unit is sold at auction, at which time they deduct all outstanding HOA fees from the proceeds.
Steven J. Baum Foreclosure Firm Being Pursued with Same Laws Used to Go After Organized Crime
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Steven J. Baum is in the Fire
Written by Craig D. Robins, Esq.
In March 2010, I wrote a rather detailed review of the Baum law firm as they had gained a significant amount of notoriety for not only being the largest foreclosure firm in New York but also the one most plagued by allegations of foreclosure misconduct. See Has Steven J. Baum, P.C. Served You with Foreclosure Papers?
I then provided an update with my second post about Baum in which I compared Baum, as the Foreclosure King of New York, with David J. Stern, a former foreclosure king in Florida who tumbled from grace amid robo-signing scandal. See: Is Steven J. Baum, the Foreclosure King of New York, Worth $50 Million?
Update on the Baum Firm — Foreclosure Mill Extraordinaire
In this post I will now provide you with an additional update on some of the ongoing trials and tribulations of the Steven J. Baum foreclosure mill.
If you have been served by Baum in a foreclosure case, are in the process of litigating against that firm, or are simply intrigued, as I am, about this monster of a foreclosure factory, then read on.
In a nutshell, the firm has preserved its reputation for engaging in shoddy and improper foreclosure litigation as indicated in a host of court opinions, lawsuits and investigations.
Since my prior post about the Steven J. Baum firm, Baum has been hit with two federal class action suits, he has been sanctioned, and a Long Island judge described his conduct as “out of the Twilight Zone.”
I Succeed In Getting Baum Foreclosure Dismissed — and Case is Discussed in New York Times Cover StoryI was also successful in having the Suffolk County Supreme Court toss out a foreclosure case that Baum had brought against one of my clients and this was just reported in the New York Times: Craig Robins Mentioned in New York Times Cover Story About Sloppy Foreclosure Lawyers Who Represent Lenders.
In that case, Baum represented mortgagee Wells Fargo, who it turned out failed to have standing to bring the case in the first place.
The Campbell v. Baum Class Action Suit
In August, a federal class action suit was filed against the Baum firm alleging that tens of thousands of New York State homeowners were victims of foreclosure fraud orchestrated by the Baum law firm.
The case, Connie Campbell v. Steven Baum, MERSCORP, Inc., et. al., is pending here in the Eastern District of New York. The case alleges that the Baum firm engaged in a bevy of improprieties worthy of being sued under RICO, which is the federal criminal statute designed to permit the authorities to punish members engaged in organized criminal enterprises.
The RICO statute also permits victims of organized crime to seek redress in a civil suit for acts that are orchestrated as part of a criminal enterprise. This class action involves that type of civil suit. RICO’s original intended use was to prosecute the Mafia.
MERS Allegations Are a Chief Component of the Campbell Class Action Suit
In the suit, Ms. Campbell, who lost her Brooklyn home in a foreclosure proceeding that the Baum firm had brought, alleged that the foreclosure filings were false.
She claimed that Baum sued her, claiming that HSBC was the owner of the mortgage. Yet, Ms. Campbell asserts that the loan was never assigned to HSBC, but instead, was assigned to MERS.
MERS is a very controversial, privately-held electronic registry that does not really own a mortgage, but tracks servicing rights and ownership.
I previously wrote about special defenses that a homeowner can assert to defend a foreclosure action involving a MERS mortgage. See: A New Powerful Mortgage Foreclosure Defense — Compliments of MERS.
In essence, Ms. Campbell alleged that any MERS mortgagee does not have standing to sue, and the Baum firm was complicit in bringing improper foreclosure suits.
She also alleged that the Baum firm was in cahoots with MERS with the robo-signing of various foreclosure documents.
Current Status of the Campbell v. Baum Class Action Suit
Since New York City attorney Susan Chana Lask commenced the suit in August, 2010, she amended it twice. You can see a copy of the Second Amended Campbell v. Baum Class Action Complaint. The case is Campbell v. Baum, 10-cv-3800.
Since the class action started half a year ago the parties have been bitterly bickering about exchanging documents and information in the discovery phase of the suit. This has resulted in Ms. Lask having to make a number of applications seeking to have the court determine that Baum’s discovery requests were unreasonably burdensome.
In other words, she has claimed that Baum is papering her to death — a grossly unfair tactic that is used to abusively smother and sidetrack an opponent while draining their resources by serving an excess of papers and demands, thereby creating unnecessary legal work. But looking at Baum’s less-than-stellar history, perhaps that could have been expected.
Baum also engaged in what many believe to be the dirtiest of dirty pool — he counter-sued Ms. Lask, claiming he defamed her by discussing the suit. Yet, in interviews that she gave to the press, she insisted that everything she said was true, based on various court decisions against Baum.
Another Baum Class Action Suit: Menashe v. Baum
More than one attorney believes Baum has violated the rights of many. Baum must now defend against another class action suit that is now pending in the Central Islip Courthouse of the U.S. District Court for the Eastern District of New York.
In November 2010, Jacob Manashe filed a class action against the Baum firm, alleging that Baum was illegally charging homeowners for attending settlement conferences.
This case is Menashe v. Steven J. Baum P.C., 10-cv-5155. The attorney for that case is New York City attorney Randall S. Newman.
Mr. Newman sent me a copy of the complaint which you can view for yourselves. Click Menashe v. Baum federal class action complaint.
Baum Fined and Sanctioned in Nassau County Case Containing 50% Falsities
It seems that New York courts regularly criticize the Baum firm for shoddy, sloppy and problematic foreclosure practices. Last year, Baum’s firm foreclosed on a Garden City home owned by Pal Raia.
After Baum succeeded in conducting a foreclosure sale, he sought to evict the homeowner. However, Baum neglected to properly identify the mortgagee owner that took over the property.
Nassau County District Court Judge Scott Fairgrieve dismissed the proceeding in November 2010, stating, “Falsities were contained in five paragraphs out of only ten paragraphs in the entire petition.”
In this case, Baum’s firm was ordered to pay about $15,000 in legal fees and costs, on top of a $5,000 fine.
Baum Investigated for Overcharging
I’ve read reports that the Baum firm is being investigated by New York’s Attorney General for overcharging, filing false documents and representing parties on both sides of a mortgage transfer.
The Judge Schack Attack Against Baum — Not Only in the Twilight ZoneArthur M. Schack, a New York State Supreme Court Judge sitting in Brooklyn, has been especially vocal with his criticisms of the Baum firm.
In one case he called the firm’s explanations “so incredible, outrageous, ludicrous and disingenuous that they should have been authored by the late Rod Serling,” referring of course to the old, black & white classic TV show, theTwilight Zone (which I have recently been watching on the Syfy channel) about science fiction and the supernatural.
That case involved another improper mortgage assignment. Judge Shack stated, “Steven J. Baum PC appears to be operating in a parallel mortgage universe, unrelated to the real universe.”
Judge Schack, writing in a manner that makes reading his decisions a fun and enjoyable exercise, continues, “Rod Serling’s opening narration, to episodes in the 1961 - 1962 season of The Twilight Zone, could have been an introduction to the arguments presented in support of the instant motion by plaintiff’s counsel, Steven J. Baum, P.C. - ‘You are traveling through another dimension, a dimension not only of sight and sound but of mind. A journey into a wondrous land of imagination. Next stop, the Twilight Zone.’”
Read Judge Schack’s Twilight Zone case for yourself: HSBC Bank USA, N.A. v. Yeasmin, 2010 NY Slip Op 50927(U).
In Another Case, Judge Schack Accuses Baum of Engaging in a Conflict of InterestIn a foreclosure case last year pending in the Kings County Supreme Court, Judge Schack admonished Baum for representing two parties in the same action, which is a conflict of interest.
In the case, Lasalle Bank, N.A. v. Smith, Judge Schack denied the mortgagee’s motion for a judgment of foreclosure that the Baum firm had brought on the ground that they failed to provide an affidavit of facts executed by an officer of the mortgagee who had knowledge of the facts.
However, Schack also criticized the Baum firm for simultaneously representing both first and second mortgagees in violation of 22 NYCRR 1200.24 of the Disciplinary Rules of the Code of Professional Conduct since Baum was unable to demonstrate that his clients consented to such representation after full disclosure of the risks involved. The slip opinion was rendered on March 22, 2010.
Baum in Litigated Divorce Proceeding with Spouse
Upon searching for various Baum foreclosure cases, one other interesting case turned up: Baum v. Baum.
It appears that Baum is involved in a heavily litigated divorce case pending in upstate New York before Judge John O’Donnell who recently ordered Baum to pay pendente lite support.
More About Baum to Come
I’ve also prepared a rather lengthy and detailed list of various decisions that New York judges have issued in various Baum foreclosure cases, most of which have highlighted various irregularities and sloppy conduct on the part of the Baum firm.
I am hoping to assemble that for a future blog post.
This Post About Steven J. Baum Is Merely a Follow-Up – See My Prior Posts for Lots More on Baum’s Bumbling
If you think the above is something, you must see my first Baum Post from 2010 About the Stephen J. Baum Foreclosure Mill.
Also see my second Baum post: Is Steven J. Baum, the Foreclosure King of New York, Worth $50 Million? .
Written by Craig D. Robins, Esq.The HAMP mortgage modification program, according to recent figures, continues to demonstrate that it is a failure.
Only one in four of the 2.7 million homeowners who sought assistance in the HAMP program actually succeeded in getting their monthly payments permanently reduced, according to a report in today’s Wall Street Journal. HAMP is the Homes Affordable Modification Program.
Most of the participants failed to qualify for the program or were disqualified after being initially accepted into the program.
I have previously reported on the abysmal results from the HAMP program — Problems with HAMP — Too Many to Count?
The WSJ article also reported that about 6.7 million homes were lost in foreclosure during the decade, 2000 to 2010. In the next three years, however, another 3.6 million foreclosure will likely occur, according to a report by Moody’s Analytics.The HAMP program has faced sharp criticism. Many Congressmen have called the program a waste of money and some Republicans are even considering a bill this week to end the program.
One of the biggest problems with the program is the number of applicants who were rejected because they did not submit the necessary paperwork, or, as is often the case, the homeowners’ mortgage companies lost the paperwork. Over a quarter million homeowners were rejected for this reason.
I can attest to meeting with numerous clients who complained that they submitted requested papers several times, only to be repeatedly told that the mortgage companies had no record of this.
Another quarter million homeowners were rejected because they were considered to have affordable mortgages. According to HAMP guidelines, the monthly mortgage payments must be more than 31% of pre-tax income. Other homeowners were turned down because they were either current (HAMP requires the homeowner to be in default) or were not considered in danger of defaulting soon.
When a client comes to us after unsuccessfully applying for HAMP benefits, we usually assist them with either bankruptcy or foreclosure defense.
What will become of Steven J. Baum -- the reviled King of Foreclosures in New York
Written by Craig D. Robins, Esq.
Will Steven J. Baum, King of New York Foreclosures, Lose His Crown?
Foreclosure entrepreneur Steven J. Baum is somewhat of a curiosity here in New York.
I, for one, have my own fascination of the man and his law firm, as evidenced by having written three lengthy blog posts about his escapades, dealings and bungling in the New York court system.
Why? For starters, Baum has filed more foreclosure proceedings against New York homeowners than any other attorney in our state’s history. See my detailed post on him – Has Steven J. Baum, P.C. Served You with Foreclosure Papers?
As a foreclosure defense attorney, I regularly defend clients who were served with foreclosure pleadings that his firm prepared.
Secondly, Baum has developed a reputation for not being a good king, but rather, a wicked king. To me, taking illegal shortcuts to evict people from their homes is truly heinous.
Constantly criticized by the courts for sloppy and shoddy foreclosure practices, he does not enjoy a stellar reputation. He has been sanctioned, criticized and lambasted by the courts. A Long Island judge recently described his conduct as “out of the Twilight Zone.”
But if Baum is King of Foreclosure here in New York, he should take heed of the fate of David J. Stern, the King of Foreclosure of Florida, who is currently in a viscous free fall from grace, and in the process of losing his crown in the Sunshine State.
Before addressing Baum, lets look at his brethren King in Florida.
Florida King of Foreclosure – David J. Stern – Loses His Kingdom
David J. Stern, for a time, seemed to have it all. In 2009, his Florida firm handled an incredible 70,000 foreclosures – about five times more than Baum here in New York. The Stern firm brought in $260 million in revenue that year.
The firm had 1,200 employees which enabled Stern to enjoy a lifestyle that included grand mansions, flashy sports cars and a yacht named Misunderstood. Money was flowing big-time. It was reported that one of his 13 or so exotic luxury cars is a $1.85 million 2008 Bugatti Veyron.
Stern owns a $15 million mansion on an island in Fort Lauderdale, a $6 million beachfront condominium in the city, and another $6 million home.
But here’s some news most people did not know, as reported in this week’s New York Times. Stern actually took his foreclosure mill public by selling his foreclosure operations to a newly-formed, publicly-traded corporation, set up by investors just to securitize Stern’s business of providing foreclosure services. The company is listed on NASDAQ.
Stern pocketed about $60 million from this transaction and still retains a large percentage of stock in the newly-formed company, known as DJSP Enterprises. Stern became chairman of the new company and still receives a handsome salary. The company even has a fancy website: http://www.djspenterprises.com/.
Here’s the Working Relationship Between the Public Corporation, DJSP, and Stern’s Foreclosure Law Firm
The corporation now owns the law firm’s “back office operations.” The corporation then sells these services back to the law firm. The law firm’s clients, consisting of big banks with large mortgage portfolios, then pay fees to the law firm to bring foreclosure proceedings. Finally, the law firm shares these fees with the corporation. Investors who have invested in the corporation receive dividends on their stock, and the value of the stock can rise or fall.
If that sounds weird, it should. Imagine if I took my law firm’s paralegals, sold them to a company for a profit, and then bought back their services, this time from the company. What kind of investors would be foolish enough to fall for something like that, especially when one can argue that such an unconventional arrangement constitutes an illegal splitting of legal fees?
Incidentally, DJSP states that it out-sources a large part of its paperwork and document preparation services to the Philippines. So, many of those who were foreclosed upon in Florida were served with foreclosure pleadings that were prepared in Manilla.
Stern must feel that there’s nothing like enlisting help from foreigners abroad to assist in evicting our own citizens.
The Kingdom Comes Crashing Down
We are all aware that our country’s mortgage meltdown mess was created by the securitization of mortgages that were sold and traded like stocks on the secondary mortgage market. Now we have one of the country’s largest mortgage foreclosure law firms going public by securitizing itself into publicly-traded stock.
However, in the past few months, there have been revelations that the Stern foreclosure mill had engaged in what appeared to be a massive, wholesale robo-signing foreclosure enterprise involving documents that were falsified to speed up the foreclosure process. Not exactly good news for the corporate investors or Stern. The business is now under major scrutiny.
The Florida Attorney General began an investigation into possible mortgage foreclosure fraud. Numerous homeowners began asserting various fraud and robo-signing defenses. Several foreclosure defense attorneys brought class actions against the firm. Embarrassing videos of depositions of foreclosure mill employees admitting to robo-signing went viral on Youtube.
To add to Stern’s woes, here’s some recent happenings:
● The Stern firm lost its biggest clients – Citibank and Fannie Mae
● Many of the firms’s executives left
● The firm laid off 80% of its employees (that’s 800 people)
● Shares in the company went from $14 to 50 cents
● The company is facing lawsuits from its investors alleging they were defrauded and misled
● Employees who were laid off have sued, arguing the company broke federal laws
● There may be issues as to whether the scheme to sell the company is really an illegal scheme to split profits, which attorneys are prohibited from doing
● It has been revealed that some of the ”consultants” and investment bankers who developed this deal have a history of run-ins with regulators and the S.E.C., and previously settled charges of engaging in fraudulent transactions in other deals.
● Many of the firms’s executives left
● The firm laid off 80% of its employees (that’s 800 people)
● Shares in the company went from $14 to 50 cents
● The company is facing lawsuits from its investors alleging they were defrauded and misled
● Employees who were laid off have sued, arguing the company broke federal laws
● There may be issues as to whether the scheme to sell the company is really an illegal scheme to split profits, which attorneys are prohibited from doing
● It has been revealed that some of the ”consultants” and investment bankers who developed this deal have a history of run-ins with regulators and the S.E.C., and previously settled charges of engaging in fraudulent transactions in other deals.
Will Baum Lose His Crown Too? How Much Is At Stake?
First, let’s put a value on Baum. If Stern received $60 million for his law firm and still retained a substantial interest, not to mention an impressive salary, and also knowing that he made many, many millions before that time, then by my most unscientific measure, Steven J. Baum has got to be worth at least $50 million or more – money that he made by evicting New Yorkers from their homes.
Now, let’s ponder if Baum could be headed into similar trouble.
Baum, too, has a production-line foreclosure mill, more similar to a factory than a law firm.
The Baum Firm Has Placed Some of Its Back-Office Operations into a Separate Legal Entity – Pillar Processing, LLC
Like Stern, Baum, too, appears to have turned a large part of his back-office operation into a separate, but private company – Pillar Processing, LLC. However, no one seems to know how many millions of dollars Baum received for selling it.
Since Pillar Processing is not a publicly-traded corporation, there is little info about this company. What we do know is who purchased it – Manhattan heavy-hitter private-equity firm Tailwind Capital LLC. This is an independant private equity firm, which, according to its website, is focused on controled investments in middle-market healthcare, media/communications, and business services companies.
The firm, which was founded in 2003, manages about $2 billion.
As a bicycle racer, I’ve heard of the firm before. A former partner of Tailwind Capital, Thomas Weisel, started Tailwind Sports, which was one of the sponsors of the United States Postal Service Bicycle Team – the world-famous team of Lance Armstrong who won the Tour de France seven times, several of which he was wearing a jersey that listed Tailwind Sports as one of the sponsors.
Like Stern’s corporation, DJSP Enterprises, Pillar Processing has its own website – http://www.pillarproc.com/. The website states: Pillar Processing LLC is a leading provider of business process outsourcing services to the default management sector of the residential mortgage industry.
Also, doing a quick WHOIS internet domain search reveals that Pillar Processing is the registrant of the Baum Law Firm website.
The Baum relationship with Tailwind is not necessarily good for homeowners, as it means that there is now $2 billion of muscle behind the drive to evict New York homeowners from their homes.
Baum, Pillar Processing and Chase Mortgage Get in Trouble
In a 2007 bankruptcy case pending in New York City (SDNY) before Judge Cecelia G. Morris, Baum’s firm brought a motion for relief from the stay. After the court raised some issues with the mortgage and scheduled an evidentiary hearing, Pillar Processing filed a letter with the court advising the court that the lift-stay motion “has been withdrawn.”
Judge Morris was understandably quite upset as Pillar Processing was a total stranger to the court. The letter did not identify or explain its relationship with the Baum firm, nor was it a part of any court record for any case. The letter was filed by a Baum attorney.
Judge Morris refused to recognize the letter and instead denied the pending lift-stay motion. She also issued a decision as a warning that the conduct here amounted to an abuse of process and she sanctioned the mortgagee (Chase) for the debtor’s actual expenses incurred in response to the motion. (In re: Schuessler, SDNY 07-35608).
What Will Be the Fate of the Baum Firm and Pillar Processing?
Will Baum suffer the same fate as the fiendish Florida Foreclosure King?
Stay tuned. At the rate his firm is going, with class action suits, ongoing criticisms from the courts, new revelations about possible robo-signing conduct, and more, the answer is possibly yes.
Read More About the Steven J. Baum and his Foreclosure Mill
I discussed many of these issues in my prior post: Has Steven J. Baum, P.C. Served You with Foreclosure Papers?
In that post I discussed the numbers of foreclosure cases he filed, the concept that his firm is really a factory, and some of the questionable conduct that he has engaged in including filing botched papers and failing to divulge information.
Also see my continuation of this article — Steven J. Baum Foreclosure Firm Pursued with Same Laws Used to Go After Organized Crime.
In this other post, I reviewed many of the court decisions that have criticized Baum’s practices including the now famous Judge Schack Twilight Zone case.
This is what shredded mortgage files look like
Written by Craig D. Robins, Esq.
In the news this week was an interesting convergence between the need to investigate mortgage fraud and the desire to maximize the distribution to creditors of a defunct mortgagee.
I first wrote about American Home Loan Mortgage Company in 2007, which was based on Long Island. At the time they were one of the country’s largest mortgage lenders and they quickly and utterly collapsed as one of the earliest victims of the sub-prime mortgage meltdown. (see: The Sub-Prime Mortgage Meltdown ).
In 2009, I wrote how the CEO of the company had engaged in fraud — Ex-CEO Of American Home Mortgage Settles SEC Fraud Charges .
Now we have an issue of what will happen to the many thousands of sub-prime mortgage files sitting in a storage room of the now-abandoned company’s Melville, Long Island headquarters — a five-minute drive from my Woodbury office.
What Happens to Mortgage Files When a Mortgagee Goes Out of Business?
American Home Loan, which hasn’t operated since it collapsed in 2007, has been in a Chapter 7 bankruptcy liquidation proceeding for several years now. Earlier this week, the operating trustee asked the bankruptcy court for permission to destroy 4,100 boxes of loan documents.
The trustee is arguing that the local fire marshal wants the boxes of mortgage files removed as it is posing a fire hazard. The trustee is also complaining that it will cost too much to move them and that they should instead be destroyed.
Paying to remove the file boxes to a storage facility costs money — money that would have gone to the creditors of American Home Mortgage who filed claims in the bankruptcy proceeding. The cost of having maintained storage of the files was approximately $15,000 a month.
Two years ago, the trustee had made a similar request which was approved, and several thousand boxes were destroyed at that time after banks and other loan servicers had been given a chance to pick up the files but neglected to do so.
Now there are 4,100 boxes left. My guess is that each box contains 20 files, meaning that the boxes contain the records of nearly 80,000 sub-prime mortgages.
Is Evidence of Mortgage Fraud Being Destroyed by Destroying the Mortgage Files?
Since the earlier batch of files was destroyed, the subject of mortgage fraud has risen to become major headline news.
The robo-signing scandal only became national news this past October when it was revealed that incredible numbers of original mortgage documents were missing and new documents were created for the purpose of bringing foreclosure proceedings. See: New Forelosure Law in New York Requires Attorneys to Verify Foreclosure Papers .
That led the attorneys general in all 50 states to immediately begin investigations into foreclosure procedures, improper mortgage assignments, and all sorts of other mortgage document deficiencies.
Also in the past few months, we have seen massive amounts of evidence turning up all around the country showing that original mortgage loan documents were never transferred as required when the mortgages were securitized and sold to investors.
Now, these ever-so important mortgage files are about to be destroyed. Yesterday the Delaware Bankruptcy Court approved the trustee’s document destruction request.
However, a Legal Aid Society attorney, who also appeared in the proceeding, was successful in requiring the trustee to set aside several hundred of the storage boxes which may contain records still relevant to some pending foreclosures.
She argued that many low income homeowners were victims of deception about how much their mortgage loans would cost, and that the original mortgage files could contain evidence that they had been defrauded. This is another concept I previously wrote about in The Sub-Prime Mortgage Meltdown .
Who Benefits When Mortgage Files Are Destroyed?
As I mentioned, the creditors of the defunct mortgage company stand to receive a (very slightly) larger distribution.
But what about the hapless homeowners who are defending foreclosure proceedings? Perhaps this could be good news for them. Judges are becoming more and more willing to toss out foreclosure suits when the mortgagee is unable to produce various original mortgage documents.
The defense du jour is “show me the note!” A series of recent decisions in foreclosure cases emphasizes the importance of producing original loan documents, holding that they are essential for investors to prove ownership of the mortgages and that the have the right, known as “standing’” to pursue foreclosure. This is something I wrote about a year ago: Mortgage Companies Entitlement to Bring Foreclosure Proceedings: Prove It or Lose It .
If a mortgage which was originated by American Home Mortgage is foreclosed upon (and many tens of thousands are in the foreclosure process now), then it may become easier for the homeowner to defend if the current mortgagee is unable to adequately produce sufficient paperwork.
On the other hand, such document destruction can be the equivalent of a get-out-of-jail card for those business executives in the mortgage industry who took illegal shortcuts. Destroying thousands of files means that valuable evidence that can be used in criminal investigations will be forever gone.
The wholesale destruction of mortgage files has become big news in several other areas of the country this week. A Bankruptcy Judge temporarily blocked the trustee of sub-prime lender Mortgage Lenders Network USA from destroying 18,000 boxes of original loan files after federal prosecutors pleaded that they may be needed as evidence in more than 50 criminal investigations.
Today's NY Times Cover. The story is the first article on the upper left.
One of the biggest news stories of the past three months has centered around the flood of foreclosure cases which have exposed the shoddy practices of foreclosing lenders and the attorneys who represent them.
Today, in a New York Times front-page story, “Judges Berate Bank Lawyers in Foreclosures,” reporter James Schwartz wrote about how judges are looking ever more critically at home foreclosures, especially here in New York.
This is an issue that I’ve covered repeatedly in my blog over the past year. For example, see: Judge Cancels Mortgage Due to Mortgagee’s Shocking Behavior in Long Island Foreclosure Action and my post Has Steven J. Baum, P.C. Served You with Foreclosure Papers?
Also, in today’s New York Times article, it was reported how judges have accused lenders’ attorneys of processing shoddy or even fabricated paperwork in foreclosure actions.
Here in New York, the mortgage litigation mess grew so severe that our Chief Judge adopted new court rules requiring attorneys to verify the information in foreclosure cases, which I addressed in New Forelosure Law in New York Requires Attorneys to Verify Foreclosure Papers .
The article mentioned one of my foreclosure defense clients, Sunny D. Eng, who we successfully defended in a Suffolk County Supreme Court foreclosure case brought by Wells Fargo. In that case, which I will discuss in greater detail in a follow-up post, we were able to persuade the court to dismiss the entire foreclosure action.
Written by Craig D. Robins, Esq.Over the past several months I have written several articles in which I addressed how HAMP, the Homes Affordable Mortgage Program, has utterly failed to live up to its expectations. (For my most recent post, see: Problems with HAMP — Too Many to Count? ).
I regularly receive comments from my blog readers across the country and wanted to share an e-mail which I just received from a very upset and frustrated homeowner in Hawaii who is seeking help in locating the appropriate agency to complain to about how his bank failed to accommodate him with his HAMP application.
The homeowner initially sent the following letter to someone at HAMP with no reply. He also remarked that he unsuccessfully searched and searched online to find someone to make the complaint to. He asked me to assist him in determining who can help him at this point.
What can be more upsetting than being told you’re disqualified from HAMP because you got laid off, then being told you were approved, and then being told again that you were disqualified. Read on. . .
Actual HAMP Complaint Letter from One of My Blog Readers
Dear HAMP:
The reason for this email is simply this, why does the program only allow ONE chance to get on? Most of the people trying to get on this program are already underwater, already laid-off, already under heavy stress…can’t you allow at least two or three chances?
We applied for the HAMP program with our lender Carrington Mortgage Services and they told us that we needed to make 3 payments on time or else we will be disqualified for the program.
In this trial period I got laid-off of my job and my wife’s hours reduced. We tried selling things, even looked into borrowing money but just couldn’t make the payment.
We were told that we were disqualified and that they (Carrington Mortgage Services) would be willing to help us out if we can make 3 more payments of $2600 on time.
We made the three payments, then was later told they couldn’t help us and that the underwriters were not aware that we defaulted the first time.
A few weeks later we get a call from Carrington Mortgage, and now it’s a different representative named Michelle.
She tells us that she may be willing to help us out to get back on some kind of modification. Two days ago she calls and say we are APPROVED for the HAMP program!!
She then gives us the percentage rate, our new monthly etc., at this point my wife an I are moved to tears in joy…the very next day another person calls from Carrington notifying us that we were not approved and that Michelle wasn’t aware that we defaulted the first time. Now they will be foreclosing on our home.
Isn’t there something in this program that gives people in our situation another chance!!!?
Not only have I been laid off, but our mortgage company mislead us twice into thinking we could get some kind of assistance!!!
Please help!!!
[name withheld]
What to Do If You’ve Been Unfairly Rejected for a HAMP Mortgage Modification and Who to Complain to
This is exactly what the above person needs to know. I will cover this topic in a future blog article that I will post in the next day or two.
__________________________
About the Photo — That’s my son, Max Robins, in one of my fine art photos.
Written by Craig D. Robins, Esq.
I am often asked to represent Long Island homeowners with loan modifications and I almost never do. A while back I even commented about Why I Won’t Negotiate Loan Modifications. The reason is that it is extremely difficult, results are often impossible to achieve and the vast majority of homeowners are never approved.
There are several reasons why mortgage banks are reluctant to modify mortgages, and in those rare cases that they do, the lenders move at a painfully slow pace, often at the same time they are continuing with pending foreclosure actions.
Big Banks Have an Incentive to Avoid Mortgage Modifications
Big Banks Have an Incentive to Avoid Mortgage Modifications
Yesterday, in the course of testimony before a Senate committee, another reason emerged. It appears that the big banks have big financial reasons for moving at a snail’s pace to modify mortgages.
Senator Tim Johnson (D-S.D.), who is in line to chair the Senate Banking Committee, said that he had “serious concerns” that banks have been unwilling to offer more generous concessions on the first loans of troubled borrowers because they were afraid of taking big losses on their massive portfolios of second mortgages, according to an article in today’s Congress Daily.
Law Professor Adam Levitin of Georgetown University Law Center testified before the Committee that our country’s four largest banks had more than $400 billion worth of second mortgage liens - which is roughly equal to their collective market capitalization.
The banks carry those second mortgages and home-equity loans on their own books as very significant assets with substantial value. However, the banks would be forced to take immediate losses if they were modified. Instead of carrying very large assets on their books, as they are doing now, they would have to immediately adjust their value.
Levitan testified that “If they start writing off their second lien mortgages, they would have no capital. They would be insolvent.” He then went on to explain that this “creates a strong incentive not to recognize losses and just try to pretend it is not there.”
Why the banks have not already adjusted their books because of a legal obligation to do so, is beyond me, and an issue that should be investigated in and of itself.
In any event, homeowners continue to pull their hair out trying to get their lender or mortgage servicer to modify their mortgage. We now know an additional reason why that is the case.
For more posts about mortgage modification, see the post What If My Home Loan Modification Isn’t Approved? written by my associate, Jason S. Leibowitz.
Also, I have written numerous posts about the failures of the HAMP program, most recently, Problems with HAMP — Too Many to Count?
Why the banks have not already adjusted their books because of a legal obligation to do so, is beyond me, and an issue that should be investigated in and of itself.
In any event, homeowners continue to pull their hair out trying to get their lender or mortgage servicer to modify their mortgage. We now know an additional reason why that is the case.
For more posts about mortgage modification, see the post What If My Home Loan Modification Isn’t Approved? written by my associate, Jason S. Leibowitz.
Also, I have written numerous posts about the failures of the HAMP program, most recently, Problems with HAMP — Too Many to Count?