UNITED STATES BANKRUPTCY COURTNORTHERN DISTRICT OF OHIOEASTERN DIVISION

IN RE:Marlynn R. O’Neal,DEBTOR.Daniel M. McDermott, United StatesTrustee for Region 9,PLAINTIFF,vs.Countrywide Home Loans, Inc.,DEFENDANT.))))))))))))))))CASE NO. 07-51027CHAPTER 13ADVERSARY NO. 08-5031JUDGE MARILYN SHEA-STONUM

MEMORANDUM OPINION

In a prior Memorandum Opinion

entered on the docket of this adversary proceeding on May

All capitalized terms (unless otherwise defined herein) shall have the meaningascribed to them in the prior Memorandum Opinion.

IT IS SO ORDERED.Dated:03:07 PM July 31 2009

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1, 2009, this Court found that certain conduct of Countrywide Home Loans, Inc.

(“Countrywide”)was not reasonable, was reckless and is sanctionable pursuant to § 105 and Federal Rule of Bankruptcy Procedure 9011. On May 11, 2009, the Court held a trial with respect to the issue of sanctions. Although monetary sanctions may have been appropriate, the UST did not ask for them.Therefore, the focus is on sanctions “sufficient to deter repetition of such conduct or comparableconduct by others similarly situated,” including how Countrywide can modify and improve internalpractices to ensure the accuracy of filings in future bankruptcy cases.

See

Fed. R. Bankr. P.9011(c)(2).Such improvement is necessary not just in light of what happened in Ms. O’Neal’sbankruptcy case, but because of the sloppy participation of Countrywide in many chapter 13 casesacross the country. As the Court noted during the trial, the problems created by the mortgageservicing industry have been pervasive in many of the cases on this Court’s docket and have beenthe subject of respected empirical studies. The UST cited to the “Mortgage Study”

and specifically

On May 8, 2009, the parties to this litigation filed the following stipulation:Countrywide Home Loans, Inc. is a wholly owned subsidiary of CountrywideFinancial Corporation. Countrywide Financial Corporation is a wholly ownedsubsidiary of Bank of America Corporation. On April 27, 2009, CountrywideHome Loans Servicing, LP, a subsidiary of Bank of America, N.A., changed itsname to BAC Home Loans Servicing, L.P. Countrywide Home Loans, Inc., hastransferred the servicing rights to loans it previously serviced or it has contractedwith BAC Home Loans Servicing, LP to subservice those loans on its behalf.The United States Trustee (“UST”) asks the Court to impose sanctions uponCountrywide and its successors and/or assigns. The defendant presented noevidence to support any other result.

The Mortgage Study, led primarily by Tara Twomey and Katherine Porter, is amultistate study designed to facilitate research on the intersection of mortgage-2-

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to the field data analyzed most recently by one of the most deservedly respected scholars workingto shed light on bankruptcy practices across the country. In the article cited by the UST, that scholarnotes[M]ortgage companies frequently do not comply with bankruptcy law. A majorityof mortgage claims are missing one or more of the required pieces of documentationfor a bankruptcy claim. Furthermore, fees and charges on claims often are poorlyidentified, making it impossible to verify if such fees are legally permissible oraccurate. In nearly all cases [studied], debtors and mortgage companies disagree onthe amount of the outstanding mortgage debt.Porter,

supra

note 2, at 121;

see also

, Hank E. Hildebrand, III,

The Sad State of Mortgage ServiceProviders

, 22 SEP Am. Bankr. Inst. J. 10 (September 2003) (“mortgage servicers are having a verydifficult time dealing with chapter 13"); Deb Miller Testimony before the United States SenateJudiciary Subcommittee on administrative oversight, available athttp://judiciary.senate.gov/hearings/testimony.cfm (May 6, 2008) (there are “systemic problems inthe mortgage servicing industry”).Despite these known problems, most claims in bankruptcy do not draw an objection. Porter,

supra

note 2, at 168 (the vast majority of all claims (96%) pass undisturbed through the bankruptcysystem without objection). Although the consumer debtors’ bar should make it a routine part of theirrepresentation to scrutinize mortgage claims, the reality is that the typical consumer bankruptcypractitioner deals with extensive information gathering and documentation requirements for verymodest compensation; against that busy backdrop few practitioners undertake a careful review of every mortgage claim.

Id.

Those that do often find themselves dealing with initial information fromlending and bankruptcy. Katherine Porter,

Misbehavior and Mistake in Bankruptcy Mortgage Claims

, 87 Tex. L. Rev. 121, 140-44 (Jan. 31, 2009).-3-

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