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1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Court Reporter:

UNITED STATES DISTRICT COURT WESTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION _______________________________________ PABLO BOCARDO, an individual, and GUADALUPE BOCARDO, an individual, Plaintiffs, vs. SELECT PORTFOLIO SERVICING, INC., a Delaware corporation, and THE FEDERAL NATIONAL MORTGAGE ASSOCIATION, Defendants. ________________________________________/ DOCKET NO. 1:12-cv-177

TRANSCRIPT OF RULE 16 SCHEDULING CONFERENCE BEFORE THE HONORABLE ROBERT J. JONKER UNITED STATES DISTRICT JUDGE GRAND RAPIDS, MICHIGAN May 7, 2012

Glenda Trexler Official Court Reporter United States District Court 685 Federal Building 110 Michigan Street, N.W. Grand Rapids, Michigan 49503

Proceedings reported by stenotype, transcript produced by computer-aided transcription.

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A P P E A R A N C E S: FOR THE PLAINTIFFS: MR. JASON DOUGLAS JENKINSON JESSE L. WILLIAMS, PLLC 125 Park Street, Suite 100 Traverse City, Michigan 49684 Phone: (231) 929-8340 Email: jdjenkinsonlaw@gmail.com FOR THE DEFENDANTS: MR. WILLIAM TODD VAN ECK VAN ECK & ASSOCIATES 39 South Main Street, Suite D Rockford, Michigan 49341 Phone: (616) 866-6064 Email: todd@vaneck-law.com * * * * *

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 THE COURT:

Grand Rapids, Michigan May 7, 2012 10:34 a.m. P R O C E E D I N G S We're here on Bocardo against We have a Rule 16 on the So

Select Portfolio, 1:12-cv-177. calendar today.

There's also a motion to dismiss pending.

let's start with appearances and go from there. MR. JENKINSON: Jason Jenkinson, Your Honor, on

behalf of Pablo Bocardo and Guadalupe Bocardo. THE COURT: All right. Thank you.

MR. VAN ECK:

Good Morning, Your Honor, William

Todd Van Eck on behalf of the defendants standing in the place of Orleans Associates this morning because of a conflict they had. THE COURT: Okay. Thank you. In terms of where we are on

MR. VAN ECK: THE COURT:

All right.

the case, we have the motion to dismiss that we ought to address, because if it's granted, there's really no point in a schedule. There's also a discussion about settlement in the

joint status report that suggests there's an offer from plaintiffs or at least a discussion from the plaintiffs to talk about some kind of a mortgage modification. where they are on that. And I don't know

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Let me start with that.

You know, I have two What's

cases -- we've had a lot of mortgage foreclosure cases.

happened in the last, I don't know, maybe six months, maybe a little less than that, anything that Fannie Mae has been involved in I've been getting motions to adjourn case management schedules because Fannie Mae is in the process of reviewing things for possible modifications. I just took, I

mean, two that are on my pile from last week in case number 11-cv-1134 and one in case number 12-cv-265. Fannie Mae is not a party in either of those cases, but they are referenced in both of the proposed scheduling matters by the actual lending parties who say, you know, that there's a modification in the works that they are looking at. So what is the status in this case? hope for that? Is there any

I know Bocardos say, "We thought we were doing

that," and apparently they put their money with an untrustworthy person, you know, not somebody that ultimately they should have, and that may or may not have ultimate impact on what Fannie Mae thinks about the case or on what the resources of the plaintiffs are for the case. But, you know,

before we do any kind of scheduling or discussion of the case, if mortgage modification is in the wind, we might as well know that at the beginning and save everybody time and money. Is that -- I mean, where is that? MR. VAN ECK: Your Honor, it's my understanding in

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light of the fact that this case is a post-redemption period, a post-eviction filing -THE COURT: Well, so were the other two. -- and with a motion to dismiss

MR. VAN ECK:

pending, I can't tell the Court it's not something that is being considered, but I have no information that it is being considered. And I've done some work for Orleans and I haven't

seen that post-eviction, but if the Court is seeing it, I certainly wouldn't -THE COURT: Well, I'm not sure Orleans & Associates But, I

is in on it, although they are in on a lot of them.

mean, as a practical matter if you've got a whole bunch of stuff in the pipeline and you've got debtors who have an income -- at least from the bankruptcy schedule at the time it looked like they had a combined income of about $5,500 a month. I don't know if that's changed. MR. JENKINSON: THE COURT: No, Your Honor, it hasn't. But if it's changed, they had

Okay.

equity in the house, they lost 14,000 or so to the unscrupulous person. So that hurts. I get that. And that means that

there's more money that hasn't been actually paid, I take it, to the creditor. that. Then that's going to be a burden. I get

But by the same token you've got somebody living in the You know, that's the makings of a And

house with income to pay.

deal typically, no matter where they are in the process.

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I've just had two where the settlement involved undoing the foreclosure sale, the sheriff's deed in a recordable form that was put on the record. So it doesn't seem like the parties in at least other cases have found it as a barrier. Now, you know, we can go

ahead and deal with the case, but again, if this is a practical solution that the parties want to explore, then I don't want to do anything to get in the way of that. with it. MR. JENKINSON: Well, Your Honor, in my discussions So that's why I start

with Mr. Goudie who has been handling the case, it is my understanding that post today and what your decision is today moving forward, that would determine whether or not we would move forward with the modification. I have experienced in at least a dozen cases in upper Michigan where even though it is post-eviction, post-sheriff's sale and eviction, summary proceedings, the lenders are now starting to modify if the mortgagors have the requisite income. THE COURT: I don't know. Mr. Van Eck?

MR. VAN ECK:

I don't have any information, candidly, I will -- I can certainly pass it

whether it's a no-go or go. along.

With a motion to dismiss pending, I don't know if that

is an indication of which way the defendants want to go either. So I cannot give the Court a solid yes or no on that matter. THE COURT: All right. All right. Well, you know,

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there's a whole bunch of bad cases out there in the sense that the economics just don't work. There's no equity in the house,

they are underwater, income is low, arrearages are huge. Sometimes even they make a modification work. Though whether But we just

they will over the long term is an open question.

looked at the bankruptcy petition online a few minutes ago. You don't usually see 5,500 bucks in combined income, a mortgage of I think it was 180 at inception, it's probably more than that now with the arrearages, but even then, you know, equity I think estimated at twenty, twenty-five thousand. You

know, even if the bank has a complete winning hand from a legal point of view, you know, why take it if you've got somebody in the house who wants to stay there and can afford to pay for it? That's ultimately a question the parties have to resolve, obviously. And I realize Fannie Mae is flooded with all kinds

of things and maybe they need hard-and-fast rules in order to, you know, to evaluate it. worry about. But here is the scenario that I

I mean, let's say they have a hard-and-fast rule

that says with a motion to dismiss pending we don't consider it. Or a motion to dismiss granted, tough you're out of luck, And now, you know, six months from now Including Fannie Mae, because

eviction goes forward. everybody loses.

Everybody.

they have got to sell the house at a discount in a distressed market. When if everybody knew the real facts they'd say, We'd

"Jeez, we'd rather not have a motion to dismiss decided.

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rather see if there's a mod possible, especially under these circumstances." And then I've lost that opportunity just And that's what I don't want to do.

because of something I do.

I don't want to take an action or fail to take an action that puts the parties potentially in a worse position. So I don't

know, I'll have to think about it as we go forward, I guess, here today, but from either parties' perspective is there anything else you want to add on that topic? MR. JENKINSON: Only that the Bocardos have actually

been escrowing money since the summary proceeding to -- in hopes to entice a modification. THE COURT: hold at this point? MR. JENKINSON: THE COURT: Yes, there's a stay. Okay. And so that was The summary proceeding, I take it, is on

Nobody has moved.

after they discovered that they were entrusting their 14,000 or whatever it was to a bad actor? MR. JENKINSON: Unfortunately they didn't realize

that until they got a notice of hearing to go to the eviction proceeding. They had no idea what was happening before that. She's being And

The woman is now in Leelanau County. charged with conversion.

And it's a five-year felony.

also using a computer to do that.

And she's currently under I have been

investigation by the Attorney General of Michigan.

privy to some of those discussions because I had worked with

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other clients.

And there's some serious allegations and

charges that she's looking at. THE COURT: against her? Are you pursuing a separate action

I know she may not have the money anymore, but is

that on the books? MR. JENKINSON: We have not, because she's completely

uncollectible, and the Bocardos don't have the funds to go in that direction. We've been focusing on a modification. Okay. All right. Mr. Van Eck, anything

THE COURT: else?

MR. VAN ECK:

I don't have any information to dispute I don't

what's being said about the person who took the money.

know that a scheduling conference or completion of our work today would impinge on anything moving forward, modification or anything else, simply because it's a scheduling matter. THE COURT: Well, it's not just that. I mean, a

scheduling matter, when I have a motion pending, I typically address the pending motion. start in just a minute. MR. VAN ECK: So that's where I would normally

But anyway. I'm okay with delaying the pending

motion, because I do think if the Court enters a motion to dismiss that it will or it may very well close the door. That's something that's a little more significant. Obviously a

little more substantive and a determination of the case at whole. So if the Court wants to delay that with its concerns,

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because I do think that would have an effect on a modification. I can't say that it would have a permanent effect, but it seems to me like it would have some effect. THE COURT: All right. But unfortunately I think my

MR. JENKINSON:

conversations with Mr. Goudie -- or Goudie -- suggest that simply delaying the motion -- they are going to wait for the determination of the motion before they decide whether they are going to do a modification. THE COURT: All right. Meaning they have no intention of

MR. JENKINSON:

modifying, so they would probably wait until this motion gets heard again. THE COURT: then, Mr. Van Eck. All right. Well, let's go to the motion

I'll give you a chance to start as the

moving party, and then we'll hear from Mr. Jenkinson. MR. VAN ECK: Thank you, Your Honor. The motion

itself, the Court has a copy of the brief I'm presuming and has also reviewed it. I don't have a whole lot to add to the brief

itself, so we'll stand on the brief and the motion itself at this point unless the Court has specific questions of me. THE COURT: Okay. Well, let's hear from

Mr. Jenkinson, then, and then we can get any rebuttal from the defense. Go ahead. MR. JENKINSON: Yes, Your Honor. I would just like

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to begin with the issue of standing. brief.

I am going to rest on my I do

I just want to make sure that I am clear.

understand that the courts have held that the expiration of the redemption period does extinguish rights to challenge a foreclosure. However, as stated in the brief, in

Manufacturers v. Snell and Reid v. Rylander, the courts believe that we should be able to look at these foreclosures post-redemption period. And that was stated in Langley in an

excerpt where I believe the court states that it is the people who are holding over after the redemption period and through the summary proceeding and challenging the actual functioning of the foreclosure at the summary proceeding who are the -have the most standing. I believe that, you know, the state of Michigan recognizes that we can't just take away a defendant in the summary proceeding, their rights to challenge a foreclosure, simply because they may have not understood the process before that or simply because they waited or they got legal counsel later. I believe that they have -- they have purchased the

home, they have lived in the home, and they have every right to hold over and challenge those proceedings as long as it is done at the summary proceeding level. It has been claimed by the defendants that they made no attempt to challenge this foreclosure or to in any way move on to try and modify. And I believe that we have shown that

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they have done that. attempting.

The Bocardos did do that.

They were

Now, whether or not they put their trust into someone who wasn't trustworthy, I can say that there's nearly a hundred families in Michigan that did the exact same thing and are in this exact same place. So I believe that they -- I believe they have met their burden of challenging at the summary proceeding and so they do have standing post sheriff's sale and post redemption period expiration to be here. With that being said, I believe that the defendant's position is that even if there is standing that the foreclosure procedure was done properly under MCL 600.3204(1)(d), meaning there is a proper chain of title. are challenging that. And what we are doing is we

We are challenging that, as stated in

the brief, under the idea that Fannie Mae claims the ownership of the mortgage note, and they also at the end of the process are claiming or alleging that they are bona fide purchasers of this property at the sheriff's sale. And as you will see in our brief, that, in our eyes, means that the execution of the mortgage with Credit Suisse at the beginning, with MERS as a nominee, and the transfer to SPS, is merely a nullity. We believe that they are acting as a

servicer, which is in their own correspondence when they say that they are a servicer for Fannie Mae, meaning that

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Fannie Mae has some type of ownership.

And we believe that And if that is not

Fannie Mae has owned it the entire time.

true and if SPS is actually the owner through an assignment from Credit Suisse and MERS, then there should have been some type of transfer of funds, some type of sale as evidenced by the sheriff of Antrim County. Now, the defendants also allege that they have affidavits. And I would like to say that an affidavit is

merely someone notarizing a piece of paper to say that they saw that person sign it. Now, that doesn't necessarily mean that

the information contained in the affidavit is true, and that doesn't also necessarily mean that the person signing the affidavit doesn't believe that what's in it is true. But what That's

I'm saying is that SPS is trying to wear several hats. how I posited it in our brief.

Meaning they are going to act

as though they are the servicer or they are going to act as if they are the owner. And what I am saying, that there is not a I think the way that this is set up with

clear chain of title.

Fannie Mae claiming ownership, underwriting the loans and just taking over ownership at the end means that everything going on in between is an attempt at the banks to name anybody and everyone as an owner in the indebtedness or has an interest in the indebtedness so that way anybody involved can foreclose. And at the end of the day I believe that because of this we have the problem that we're looking at now, which is Fannie Mae

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is not in position to modify these loans.

As far as on That's not

information and belief, they don't give loans. their duty.

So now we have a position where the people in the middle, SPS, Credit Suisse, they have no -- there's no incentive for them to modify because they don't really have any interest in the loan. The loan is either going to be paid off,

it's going to be handed back to Fannie Mae at the end, and I believe that what's happening. It lacks transparency. I think

the intermediate actions in the foreclosure are a nullity, and I believe that this foreclosure should -- we should not dismiss this case and we should further, you know, explore what it is that Fannie Mae's process is and what they are in this process. What is the hat they are wearing? If they are the ones who are

attempting to evict our clients right now in the district court summary proceeding, therefore, that is why we brought an action against them in the circuit court. They have not relayed to us who they are, what hat they are wearing, and exactly how they are going to explain to my clients, the Bocardos, that they are taking their home. And

there was no direct line -- or there was no unbroken chain of title or there are people missing from the chain of title at the inception or at the end when Fannie Mae takes possession with no transfer of funds. THE COURT: Thank you.

Before you sit down, after Sauerman from

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the Michigan Supreme Court, short decision though it was, the issue of -- and you haven't talked about it exactly in these terms. You haven't talked about it in terms of splitting the I realize that. But, you know, hasn't that

note and mortgage.

essentially closed the door on the kinds of arguments you're making? How did you get around Sauerman? MR. JENKINSON: Well, Your Honor, I don't think that

Sauerman addressed 3204(1)(d) -THE COURT: All right. -- which is the actual assignments,

MR. JENKINSON: okay?

The chain of title. THE COURT: So you're saying even if it's a proper

party to bring the action, somebody has still got to clean up the title satisfactorily under (d), and Sauerman doesn't give us guidance on that? MR. JENKINSON: Your Honor. I don't believe Sauerman does,

I believe Sauerman just names the parties who may

be able to foreclose because of their interest in the indebtedness. Whether the note is separated, a bona fide

mortgagee and a holder of the record mortgage does have the power to foreclose. And what I am saying is I don't believe

that that is the party that did foreclose. THE COURT: Okay. Thank you.

MR. JENKINSON: THE COURT:

Thank you. I'll give you

Go ahead, Mr. Van Eck.

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time for rebuttal. MR. VAN ECK: Yes, Your Honor. Some of the argument

as I understood it from plaintiffs was that there's some form of a subjective nature in this. Foreclosure by advertisement The first

through Michigan is really a three-phase process.

phase is the default phase wherein payments are not made timely and notices are given. The second phase commences at the

foreclosure sale, and at that point it's put on the courthouse steps for auction and the highest bidder wins title subject to redemption rights. redemption. And then the third phase is the post

If the property is not redemptioned or redeemed by

the party who originally owned the property, they lose it automatically upon expiration of the redemption period. In this case, or in any case, the party who is the highest bidder at the foreclosure sale can be any party, candidly. Todd Van Eck can walk in at a foreclosure sale, bid And

higher than a bank, and get legal title to the property.

at each phase in the foreclosure the ability of the debtor to come in and to make argument, legal argument, is reduced. In other words, during the default phase, the first phase, they can ask for accounting of their mechanisms along those lines. Trying to make sure that the amount outstanding In the second phase, in the redemption And in the

is correct, et cetera.

phase, they can argue the amount of redemption.

third phase they are really foreclosed for it's an eviction

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proceeding.

They are essentially foreclosing most arguments.

The only argument that remains is the title argument and whether sufficient process was followed under the foreclosure action. The argument here seems to be that the parties themselves aren't the proper parties. However, the Supreme --

the Michigan Supreme Court has determined that a servicer can commence foreclosure, can take the steps of foreclosure. And

if those are not objected to during the redemption period in the eviction phase, many of those arguments fall off. In this case the servicer did take the foreclosure action, did process it, and in the case that was just cited and under MCL 600.3204(1)(d), any of the following parties may foreclose by advertisement: The owner of the indebtedness, the

owner of an interest in the indebtedness, or the servicing agent of the mortgage. There's no requirement that any one of I'm sorry, it's not a

them, it just has to be one of them.

requirement that all of them participate, just any one of them. It appears here that the servicer did the foreclosing. They met all the statutory criteria. The

sheriff's deed was properly recorded.

At the expiration of the It could be

sheriff's deed a new owner owned the property.

William Todd Van Eck, it could be anybody as long as they were the highest bidder, and in this case it's Fannie Mae, who then commenced an eviction as the title owner of the property. So

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we would ask that the Court dismiss this case. THE COURT: Okay. Let me take -- for both parties a

minute, I want to make sure I understand the sequence that happened in bankruptcy. There was a bankruptcy, as I understand it, a Chapter 7 discharge. And was there a reaffirmation? How did Was

the mortgage note come out of the bankruptcy, do you know? it a reaffirmation of the debt? MR. JENKINSON: THE COURT: Does either party know?

No, Your Honor, I do not know.

All right. I do not know.

MR. VAN ECK: THE COURT:

Then I was noticing in the defense brief,

the opening brief, the allegation or the statement is that the default was in April of 2009, which would have been either during or before the bankruptcy, and it seemed like the actual foreclosure papers reference April 2010 as the default time. Does either party know what the actual sequence of default is? MR. JENKINSON: incorrect. THE COURT: you think? MR. JENKINSON: are contesting the dates. THE COURT: Okay. Do you know, Mr. Van Eck, what Yes, Your Honor. I don't think we The April of 2009 would be incorrect do I think that the first date is

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your records show or your client's records show on default? MR. VAN ECK: THE COURT: I'm sorry, I do not. Okay. Well, as I said, the motion

Okay.

to dismiss has been pending, and when there's a motion to dismiss pending at the time of a Rule 16, I typically take that up when I think the record is ripe for it as we discussed earlier at the beginning of the process. And there's, I think, two fundamental bases that the defense says the case ought to be dismissed. The first is that

once the redemption period has run on the sheriff's sale the plaintiffs don't have any standing to bring a claim like this challenging the foreclosure by advertisement. And the second

is even if we give them standing to do it, there's nothing wrong here with the process, at least nothing wrong that Sauerman hasn't blessed from the Michigan Supreme Court. want to deal with those in turn. With respect to standing, I've held in an earlier case, or at least I've stated and then held in subsequent cases, I don't think the standing argument works for the defense. It may be that the Michigan Court of Appeals in the And I

Overton case, which was an unpublished Court of Appeals case where I think this issue first came up, was using somewhat loose language. And I know that other courts since then have But at least from my perspective, It deals with

used the same language.

standing is an Article III jurisdictional issue.

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injury in fact first of all.

And I can't imagine anybody

better than the party that says they are entitled to lawful possession of the house because something was wrong with the foreclosure process. And even one better than that, to In fact, they are probably

actually establish injury in fact.

the only people in a case like this who could do it. More than it, it seems to me they are clearly within the scope of the intended beneficiaries of the foreclosure by advertisement statutory process. Plainly, if their rights are

going to be foreclosed, they are within the scope of what's going on there. So even though they are late -- and they are In this case in particular they

late to the table clearly.

didn't even file the action before the foreclosure process had run its course and the sheriff's sale happened. And for that

matter they didn't even file it before the end of the redemption period. So they are late, and they are later than But from an

in most other cases where I've applied this.

Article III perspective, from a pure constitutional standing perspective, I don't think that matters. I think they are

still parties injured in fact if what they say is true and if what they claim from a legal point of view is correct, and so I think they have standing in a technical sense to make the claim. Things about timing can still matter for sure with things like equity when we're talking about a laches defense.

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It might even matter with respect to remedy.

If, for example,

we were dealing with a contest between plaintiffs in possession of the property now under the original mortgage and a third-party purchaser at a sheriff's sale, you know, remedy might be different. There might not be an equitable remedy

to upset that, but there might still be a damages remedy against the parties who wrongfully foreclosed if in fact it could be approved. Here, though, I don't think we need to

confront that since the successful purchaser, whether by credit bid or otherwise, at the sheriff's sale was the putative lender, or at least the person who says they came into possession of the note. So I think the issues involving the

timing of the lawsuit are best addressed on things like potential defenses, whether it's by laches or by remedy, but I don't think they close the courthouse door to a plaintiff in this position. Now, on the merits I think it's a closer question. The reading of Sauerman that Mr. Jenkinson gives it is, I think, technically correct. It is a very short opinion. It is

one in which the Supreme Court of Michigan exercised its power to basically make a plenary ruling without the normal briefing and argument. They have that power under their rules. But it

means for judges like me who have to interpret what it means, it's a little bit more difficult. The question is: Does it apply to the facts of this

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case in a way that I ought to say as a matter of law on a Rule 12(b)(6) motion the case needs to be dismissed here and now without any further factual development? The question is, I think as I said, a close one, and I've dismissed several cases post Sauerman in which I've believed that the fundamental claim urged by the plaintiff is that something went wrong at the inception of the mortgage when the note itself was severed from the mortgage rights or some piece of the mortgage rights. It's a little hard to tell

what's actually been directed to MERS under the language of the mortgage here as in the other MERS mortgages. Before Sauerman

I had some problems with that and would have thought under common law of property that created some difficulties. wasn't alone in that. A number of bankruptcy courts, And I

particularly one from the Eastern District of New York, had taken that process to task. But at least the Michigan Supreme Court said, I think, in Sauerman, "That's okay with us. We think the mere

fact that mortgage and note have been split or that some piece of the mortgage rights were peeled off to MERS and then later assigned through multiple parties to the party that actually initiates the foreclosure by advertisement, that's okay. think that's compliant with the statute." And so to that We

extent I would think I would be bound to apply Sauerman. What I hear from Mr. Jenkinson and what I think a

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liberal reading of the pleadings here permits, at least at the Rule 12(b)(6) context, is that his challenge is really different than that. He may or may not have problems with that

aspect of the MERS mechanism, but what he's saying is under 600.3204, I think we've talked about (1)(d), but I think he's actually referencing sub 3 which says, "If the party foreclosing the mortgage by advertisement is not the original mortgagee, a record chain of title shall exist prior to the date of sale under Section 3216 evidencing the assignment of the mortgage to the party foreclosing the mortgage." I think the defense has asserted we've got that here where the papers are in place. And as I said, I think it's

close, but I think there's at least for purposes of 12(b)(6) and reading the plaintiffs' allegations enough to carry the case beyond the motion to dismiss and into the discovery phase and whatever else may come in the case so we have a full and complete record when we finally do adjudicate the merits. In particular a couple things strike me that at least raise questions. One actually is the record of default itself The papers initially submitted by the

as we confirmed here.

defendants admitted that the default date was April 2009, which is a little difficult to believe. If it were that, it should

have been dealt with in the bankruptcy, and we don't have information on how the bankruptcy court dealt with that. The defense -- or rather the plaintiffs I think say

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it was April 2010, and there's some other indications in the actual foreclosure documents that support that. And so with a

question on the timing of the default itself, particularly in the case of a bankruptcy that's played a part here and is kind of a black hole of information for us right now, I think that's an issue that would require some development. And secondly, and more significantly for purposes of the statutory section I referenced, there's ambiguity, inconsistency in my mind on when exactly and what exactly was assigned to SPS, the ultimate servicer here. For example, I think the pleadings indicate and the defendant's own documents indicate -- and I'm looking at Exhibit 3 of the plaintiffs' response, third paragraph -- that SPS acquired the servicing of the lien from Credit Suisse effective May 18th of 2007. So that goes all the way back to nearly the inception of the loan, and that's based on the SPS letter addressed to somebody I don't know. Dibbert. MFI Miami, Attention Steve Dibert or

Anyway, the purpose for my point is May 18, 2007. When I look, though, at Exhibit 2 of the same

package, the corporate assignment to SPS, it's actually dated -- well, it looks to me anyway like September 21, 2009, two years later. More than that, it doesn't assign simply

rights to service or rights to the mortgage, it actually says the mortgage and the note are assigned, which opens up the

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question of if so, what's the actual chain of title for the note? What's moved it beyond that? It may ultimately be that these questions have answers. The secondary market for mortgages is well And there's

established, or at least was well established.

questions that Fannie Mae may be able to answer and SPS may be able to answer, but it does seem to me the more prudent course here is to say we'll take the plaintiffs' allegations with permitted inferences for all they are worth at the early stage of the case and deny the motion to dismiss giving both sides the opportunity to develop the record and come back on a motion for summary judgment or other appropriate response. meantime that opens the door to evaluation of loan modification, which as I indicated at the outset I'm seeing in a lot of Fannie Mae cases right now, so much the better. We have plaintiffs here who have good income, unlike a lot of people in default on a mortgage. We have, moreover, If in the

plaintiffs who were the victims of an admitted fraud, not by any party of this case, by a third party of the case, but that certainly implicates the equity considerations, also suggests that they may well have a greater ability to pay than their payment history most recently would suggest. And finally, we have the fairly unusual situation of people in possession with equity in the house. happen very much anymore in cases like this. That doesn't

So not only will

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denying the motion to dismiss give the parties a chance to develop their factual basis for the legal issues here, but it also gives them a window to see if there's a practical resolution. So we'll enter an Order denying the motion to dismiss for the reasons articulated here, and then I can just go on and give the parties a case schedule based on the joint status report which I think is essentially a schedule that works from my perspective. So I'd say -- and, Mr. Jenkinson, I think you indicated you don't have any intention of pursuing the actual fraudulent party who is in jail right now, so you're not going to add her to this case and try to do anything, this is strictly between you and the lender at this point? MR. JENKINSON: THE COURT: Yes, Your Honor. And from the lender's point of

Okay.

view, you think you've got everybody you need here right now? MR. VAN ECK: THE COURT: I believe so. So if you're going to make In

Okay.

amendments to the pleadings or parties, do it by motion.

light of the denial of the motion to dismiss, the defendants will have the time they'd normally have to file an Answer, obviously, but if you make changes to pleadings after that, do it by motion. I'll give you discovery through November 30, and then

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if you are going to use experts, do it on this schedule: August 31 for the plaintiffs' preliminary expert disclosures, the (a)(2)(A) disclosures, reports by September 30. for the defendants, (a)(2)(A) expert disclosures by September 30 and reports by October 31. The initial disclosures, the parties are proposing June 1. I'm just going to bump that to June 15 so you'll have And then

the Answer of the defendants on file before you have to do your disclosures. And I'll give you a dispositive motion cutoff of

December 31 which you're requesting. The actual report suggested no ADR, but that may or may not be the way you want to go once you get into discovery. So by June 15 when you do your initial disclosures also do a supplemental joint status report that simply indicates the parties' position on ADR given the current status of the case. And it could be the same. Maybe you'll think "We don't want

ADR" or "We can work this out on our own" if it can be worked out. But if not, you know, or in any case tell me what your

position is, and then I'll pick something if it's appropriate. And then for trial it looks like the parties are saying a bench trial, so we'll schedule that and give you a normal pretrial conference schedule for that and magistrate judge settlement conference right before it. And that will

come into play if all of the dispositive motions are resolved in a way that has an issue left for trial.

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So I think that covers your joint status report.

Are

there any other items we should take up today, Mr. Jenkinson? MR. JENKINSON: THE COURT: No, Your Honor.

Mr. Van Eck? No, Your Honor. Thank you all.

MR. VAN ECK: THE COURT:

Okay.

MR. JENKINSON: THE CLERK:

Thank you, Your Honor. Court is in recess.

All rise, please.

(Proceeding concluded at 11:14 a.m.) * * * * *

I certify that the foregoing is a correct transcript from the record of proceedings in the above-entitled matter.

May 15, 2012

/s/ Glenda Trexler __________________________________ Glenda Trexler, CSR-1436, RPR, CRR