Defending Your Company Against Individual Cases: Lawsuits Arising Out of Foreclosure MBA s Legal Issues and !

egulatory Compliance Conference "##$ May 5, 2009 Robert R. Maddox Bradley Arant Boult Cummings LLP

Lawsuits Arising Out of Foreclosure: Overview
• ! "tatisti#s on t$e Current %ore#losure &n'ironment in t$e (nited "tates 2! )e'elo*ing a strategy to $andle %ore#losure Related Litigation +! ,denti-ying t$e areas in'ol'ed in %ore#losure Related Litigation .! /oing on t$e 0--ensi'e1Motion to &s#ro2 %unds 5! &xam*les o- Motion Pra#ti#e in 'arious states

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%tatistics on t&e Current Foreclosure 'nvironment

3$ree "tatisti#s on t$e Current %ore#losure &n'ironment in t$e (nited "tates4

!&'ery + se#onds a -ore#losure is -iled against anot$er Ameri#an -amily.
• Center -or Res*onsible Lending

%tatistics on t&e Current Foreclosure 'nvironment

3$ree "tatisti#s on t$e Current %ore#losure &n'ironment in t$e (nited "tates4

2! Pro5e#ted 2,.00,000 ne2 -ore#losures 2ill ta6e *la#e in #alendar year 2009.
• Based u*on +7 2008 MBA 9ational )elin:uen#y "ur'ey

%tatistics on t&e Current Foreclosure 'nvironment

3$ree "tatisti#s on t$e Current %ore#losure &n'ironment in t$e (nited "tates4

+! 9umber o- -ore#losures in Mar#$ 2009 2as estimated bet2een 290,000 and +. ,000.
• 9e2 ;or6 3imes May +, 2009 #iting to t$e 0bama Administration

%ervicers (eed to Develop a %trategy for )andling Foreclosure !elated Litigation

• /i'en t$e un*re#edented 'olume o- -ore#losures and t$e #urrent and anti#i*ated in#reased le'els o- litigation -lo2ing -rom -ore#losures, ser'i#ers #an and need to de'elo* a strategy -or de-ending and de-eating -ore#losure related litigation.

Brea*ing Down Foreclosure Litigation
• 3$oug$ 2e #an ne'er de-initi'ely determine t$e *at$ o- any litigation < -ore#losure litigation usually -alls 2it$ 2 main #ategories and + s*e#i-i# areas4 %ore#losures are a #reature o- state la2 and t$ey -all into 2 dominant #ategories4 = >udi#ial -ore#losure = Po2er o- "ale19on?>udi#ial %ore#losure @it$in t$e dominant #ategories, 2e #an brea6 it do2n again into + main areas o- -o#us4 = 0rigination = "er'i#ing = %ore#losure

Litigation +&ilosop&y

• Litigation P$iloso*$y4
= Anytime real *ro*erty is in'ol'ed in litigation it is a non?-un#tioning asset t$at is #osting money rat$er t$an *rodu#ing money and t$e goal is to return t$e *ro*erty to 2$ate'er #ondition, status or *ro#ess it 2as in immediately be-ore t$e Borro2er -iled suit or a #ounter#laim.

Litigation Arising From Foreclosure: ,enesis • Litigation arises -rom eit$er4
= ! Counter#laim -iled by t$e borro2er in >udi#ial %ore#losure states = 0r = 2! 0--ensi'e Litigation -iled by t$e borro2er in Po2er o- "ale states • ,n eit$er e'ent t$e litigation 2ill li6ely lead to delay ot$e -ore#losure, 2$i#$ in turn t$e ser'i#er li6ely does t2o t$ings4 = ! Put t$e -ore#losure on $old to de-end t$e Borro2erAs #laims = 2! Continues to re#ei'e no money -rom t$e Borro2er

Litigation Arising From Foreclosure: Identify t&e Area w&ic& Forms t&e Basis of t&e Borrower s claims

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+ Areas4 0rigination, "er'i#ing and %ore#losure 0rigination = )is#losures = 0rigination %raud = ,m*ro*er Produ#t "er'i#ing = &s#ro2 = Payment Misa**li#ation %ore#losure = %ailure to -ollo2 state statute = 9oti#e

Litigation Arising From Foreclosure: Identify t&e Area: Origination

0rigination
= )is#losures • Pro'ide )is#losures • Pro'ide Analysis1Case La2 "u**orting Position • %ile Motion &stablis$ing Res#ission Pro#edures = 0rigination %raud • Analysis o- ,n-ormation Pro'ided Borro2er
B B B B )id not sue any ot$er *arties in'ol'ed in t$e 0rigination Pur#$ase Money Mortgage Re-inan#e < Cas$ 0ut, *ay o-- unse#ured #reditors Put t$em on t$e de-ensi'e, 2e #an -ile a -raud #laim as 2ell

• %o#us on bene-it *ro'ided to Borro2er -rom transa#tion • Counter#laim -or -raud against Borro2er = ,m*ro*er Produ#t • )eri'ation o- %raud • %o#us on bene-it *ro'ided to Borro2er -rom transa#tion
B B ARM or ,nterest 0nly < mont$s or years 2it$ redu#ed *ayments %o#us t$e Court t$at t$is is a de-ault and t$ey Borro2er is trying to ba#6 into a de-ense

• 9o Com*laint until inability to *ay and de-ault

Litigation Arising From Foreclosure: Identify t&e Area: %ervicing

"er'i#ing
= &s#ro2 • 3axes and ,nsuran#e • "er'i#er does not set t$ese amounts • Pro'ide es#ro2 $istory • ,llustrate -ailure by Borro2er leads to a#tion by "er'i#er to *rote#t interest and *ayment o- 31,. = Payment Misa**li#ation • "us*ense A##ounts < i- insu--i#ient *ayment made by Borro2er, it is $eld in sus*ense until -ull *ayment #an be made • Pro'ide Mortgage ,nstrument < Mortgage1)eed o- 3rust #learly *ro'ides *ayment *riority < ,nterest -irst, t$en earliest *rin#i*al, t$en mo'e to next *ayment • 3rans-er Problems < Pro'ide Cello and /oodbye Letters = %or#ed Pla#ed ,nsuran#e • %ailure by Borro2er to *ro'ide *roo- o- insuran#e allo2s ser'i#er to -or#e *la#e insuran#e to *rote#t interest in #ollateral D,- you donAt t$en it is a loser argument but t$ey 2ill #ertainly sue you -or it! • %or#ed Pla#ed ,nsuran#e is -or bene-it o- ser'i#er and

Litigation Arising From Foreclosure: Identify t&e Area: Foreclosure

%ore#losure
= 9oti#e • Pro'ide t$e Mortgage • Mortgage #learly *ro'ides noti#e is *ro*er at t$e *ro*erty address unless t$e Borro2er *ro'ides *rior 2ritten dire#tion t$at noti#e is to be sent else2$ere = %ailure to -ollo2 a**li#able state statute • 0btain a #o*y o- t$e -ore#losure -ile and analyEe -or #om*lian#e • A--ida'it o- -ore#losure attorney or trustee stating -ollo2ed statute and *ro#edure • Pro'ide rele'ant do#uments atta#$ed to A--ida'it B 9oti#e o- )e-ault B A##eleration o- )ebt B 9oti#e do#uments, *ubli#ation or %ore#losure Com*laint, 2$i#$ 2ill already $a'e do#umentation and rele'ant timing e'ents = %ore#losure1Loan Modi-i#ation "#ams • ,llustrate abo'e *lus Borro2erAs *arti#i*ation 2it$ s#$eme, e'en i- t$ey 2ere du*ed, 'i#tim 2as ser'i#er

Litigation Arising From Foreclosure: Manage and Control t&e Litigation

Manage and Control t$e Litigation = 0n#e you $a'e identi-ied t$e areaDs!, t$en you #an de-end t$e #ase :ui#6ly and e--i#iently = %ile a res*onsi'e *leading4

• Motion to )ismiss • Ans2er • Counter#laim
B %raud By Borro2er

• "ummary >udgment
= 9o2 you #an go on t$e o--ensi'e

Litigation Arising From Foreclosure: ,o on t&e Offensive • • /oing on t$e 0--ensi'e %o#us t$e Court t$at t$e genesis o- t$is litigation is a de-ault by t$e Borro2er and t$eir goal is delay and a desire to stay in t$e $ouse 2it$out *ayment. Argue assuming t$e Borro2erAs #laims are #orre#t, t$e Borro2er 2ill -all -urt$er be$ind in mortgage *ayments and 2ill be at a se'ere disad'antage in trying to be#ome #urrent. ,- t$e "er'i#er is #orre#t t$en t$e Borro2er 2ill re#ei'e a 2ind-all i- during t$e *enden#y o- t$e litigation t$ey are allo2ed to stay in t$e $ouse 2it$out any *ayment. 3$e ser'i#er 2ill be -or#ed to *ay taxes and insuran#e during t$e *enden#y o- t$e litigation. %ile Motion to &s#ro2 %unds

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Litigation Arising From Foreclosure: Motion to 'scrow Funds

Motion to &s#ro2 %unds = (se Borro2erAs *leadings against t$em < t$ey are arguing it is an 0rigination, "er'i#ing or %ore#losure issue < 3C&9 t$ey s$ould be able to ma6e t$eir *ayment. = ,n order to eliminate *ayment misa**li#ation argument by Borro2er, o--er not to a##e*t -unds but rat$er allo2 mortgagor to ma6e *ayments dire#tly into #ourt on same date t$at *ayments 2ould be made to ser'i#er. = ,- t$ere are allegations o'er *ayment amount, dis*uted late -ees, in#orre#t *rodu#t < t$en o--er to #al#ulate t$at amount -or *ayment into Court, 2it$out 2ai'er o- t$e original amount o2ed. = At a minimum, re:uest Court $a'e es#ro2 amount *aid into Court to *rote#t bot$ Borro2er and "er'i#er in t$e e'ent o- loss and *ayment otaxes.

Litigation Arising From Foreclosure: Motion to 'scrow Funds ,oals

/oals -or Motion to &s#ro2 %unds
= ! %o#uses Court t$is is really a de-ault issue. = 2! Borro2er ma6es some *ayments into Court < Prior Cistory is t$e best indi#ator o- %uture Per-orman#e < ,Borro2er #ould not ma6e *ayments *re'iously, li6ely unable to ma6e -ull *ayments no2. = +! Borro2erAs inability to ma6e *ayments -o#uses Court not on 5ust *ast *ayments but also #urrent Borro2erAs -inan#ial inability. = .! Borro2erAs inability to ma6e *ayments into Court ma6es t$em mu#$ more li6ely to settle on terms you #an di#tate. = 5! ,- Borro2er #an ma6e *ayments, t$en s$o2s delin:uen#y 2as tem*orary issue so *ossible #andidate -or loss mitigation o*tions = F! ,- Borro2er #an ma6e *ayments, 2$en you are su##ess-ul in de-ending matter < you 2ill $a'e -unds to a**ly to loan. "a'ed ser'i#er1in'estor money.

Motion to 'scrow Funds - .ennessee

Motion to 'scrow Funds - .ennessee

Motion to 'scrow Funds - .ennessee

Order 'scrowing Funds / .ennessee

Order 'scrowing Funds - .ennessee

0oint %tipulation 'scrowing Funds After Filing Motion to 'scrow Funds - Ala1ama

0oint %tipulation 'scrowing Funds After Filing Motion to 'scrow Funds - Ala1ama

Memo of +oints and Aut&orities In %upport of Motion to 'scrow Funds - California

Memo of +oints and Aut&orities In %upport of Motion to 'scrow Funds - California

Memo of +oints and Aut&orities In %upport of Motion to 'scrow Funds - California

2rongful Foreclosure Complaint - .e3as

2rongful Foreclosure Complaint Based 4pon Origination Fraud- .e3as

2rongful Foreclosure Complaint Based 4pon Origination Fraud - .e3as

2rongful Foreclosure Complaint Based on Origination Fraud - .e3as

Counterclaim for Fraud By %ervicer to 2rongful Foreclosure Complaint - .e3as

Counterclaim for Fraud By %ervicer to 2rongful Foreclosure Complaint - .e3as

Counterclaim for Fraud By %ervicer to 2rongful Foreclosure Complaint - .e3as

Counterclaim for Fraud By %ervicer to 2rongful Foreclosure Complaint - .e3as

Counterclaim for Fraud By %ervicer to 2rongful Foreclosure Complaint - .e3as

Motion to 'scrow Funds in !esponse to 2rongful Foreclosure due to Inade5uate Disclosures - Illinois

Motion to 'scrow Funds in !esponse to 2rongful Foreclosure due to Inade5uate Disclosures - Illinois

Motion to 'scrow Funds in !esponse to 2rongful Foreclosure due to Inade5uate Disclosures - Illinois

Motion to 'scrow Funds In !esponse to 2rongful Foreclosure Due to +ayment Misapplication - Florida

Motion to 'scrow Funds In !esponse to 2rongful Foreclosure Due to +ayment Misapplication - Florida

Motion to 'scrow Funds In !esponse to 2rongful Foreclosure Due to +ayment Misapplication - Florida

Motion to 'scrow Funds In !esponse to 2rongful Foreclosure Due to +ayment Misapplication - Florida

Memo in %upport of Motion to 'scrow Funds for 2rongful Foreclosure Due to +ayment Misapplication - Florida

Memo in %upport of Motion to 'scrow Funds for 2rongful Foreclosure Due to +ayment Misapplication - Florida

Memo in %upport of Motion to 'scrow Funds for 2rongful Foreclosure Due to +ayment Misapplication - Florida

Memo in %upport of Motion to 'scrow Funds for 2rongful Foreclosure Due to +ayment Misapplication - Florida

Memo in %upport of Motion to 'scrow Funds for 2rongful Foreclosure Due to +ayment Misapplication - Florida

Memo in %upport of Motion to 'scrow Funds for 2rongful Foreclosure Due to +ayment Misapplication - Florida

Consent Order to Deposit Funds in !esponse to Motion to 'scrow Funds Attac*ing 6alidity of Foreclosure - .ennessee

Consent Order to Deposit Funds in !esponse to Motion to 'scrow Funds Attac*ing 6alidity of Foreclosure - .ennessee

Memo In %upport of Motion to 'scrow in 2rongful Foreclosure for violations of .ILA7 4D.+A and Attac*ing t&e Foreclosure - Minnesota

Memo In %upport of Motion to 'scrow in 2rongful Foreclosure for violations of .ILA7 4D.+A and Attac*ing t&e Foreclosure - Minnesota

Memo In %upport of Motion to 'scrow in 2rongful Foreclosure for violations of .ILA7 4D.+A and Attac*ing t&e Foreclosure - Minnesota

Memo In %upport of Motion to 'scrow in 2rongful Foreclosure for violations of .ILA7 4D.+A and Attac*ing t&e Foreclosure - Minnesota

Lawsuits Arising Out of Foreclosure: %ummary
• ! "tatisti#s on t$e Current %ore#losure &n'ironment in t$e (nited "tates 2! )e'elo*ing a strategy to $andle %ore#losure Related Litigation +! ,denti-ying t$e areas in'ol'ed in %ore#losure Related Litigation .! /oing on t$e 0--ensi'e1Motion to &s#ro2 %unds 5! &xam*les o- Motion Pra#ti#e in 'arious states

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