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KEVIN HAHN #9821 MALCOLM CISNEROS, A Law Corporation 608 South 8th Street Las Vegas, Nevada 89101 (702)382-1399 Phone (702)382-0925 Fax kevin@mclaw.org Attorneys for Secured Creditor, PHH MORTGAGE CORPORATION UNITED STATES BANKRUPTCY COURT DISTRICT OF NEVADA LAS VEGAS DIVISION ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) )

E-filed October 27, 2011

Bankruptcy Case No. 10-31903-lbr

In re

Chapter 13 RESPONSE TO DEBTORS SECOND AMENDED OBJECTION TO PROOF OF CLAIM FILED BY J.P. MORGAN AND REPLY TO OPPOSITION TO MOTION FOR RELIEF FROM AUTOMATIC STAY FILED BY PHH MORTGAGE CORPORATION HEARING DATE: DATE: November 10, 2011 TIME: 10;30 AM ROOM: LBR- Courtroom 1

JOAN MARIA ANDERSON, and TODD J. SHELLY,


Debtors.

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TO THE HONORABLE LINDA B. RIEGLE, UNITED STATES BANKRUPTCY COURT JUDGE, THE DEBTORS, DEBTORS COUNSEL, THE CHAPTER 13 TRUSTEE, AND ALL OTHER INTERESTED PARTIES: PLEASE TAKE NOTICE that PHH Mortgage Corporation (PHH), as servicer for J.P. Morgan Mortgage Acquisition Corp. (J.P. Morgan) hereby responds to Debtors Second Amended Objection to Proof of Claim Filed by J.P. Morgan and Replies to Opposition to Motion for Relief From Automatic Stay Filed by PHH Mortgage Corporation filed on September 13, 2011. FACTUAL BACKGROUND On June 18, 2007, Joan M. Anderson (Debtor) borrowed $680,800.00 from PHH
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Mortgage Corporation and signed a Fixed/Adjustable Rate Rider (Note) secured by a Deed of Trust (DOT), which was executed on the same day. A true and correct copy of the Note is attached to this response as Exhibit 1. The true and correct copy of the Note includes an Allonge to Note (Allonge 1) transferring interest from PHH to Bishops Gate Residential Mortgage Trust (Bishops) without recourse. (See Exhibit 1). A subsequent Allonge to Note (Allonge 2) was executed by PHH, an administrative agent for Bishops and in blank and without recourse. (Exhibit 1). Allonge 1 and Allonge 2 were also attached to the Amended Proof of Claim, which was filed on October 21, 2011. The DOT identified PHH Mortgage Corporation as the Lender and Mortgage Electronic Registration System as the Nominee and Beneficiary. Under the terms of the DOT, the Debtor granted and conveyed to the Trustee, in trust with power of sale, the real property located at 8570 West La Madre Way, Las Vegas, Nevada 89149 (Property) as security for the Note. A true and correct copy of the DOT is attached to this response as Exhibit 2. By executing the DOT, the Debtor acknowledged that MERS had the right to exercise any or all of those interests, including, but not limited to, the right to foreclose and sell the Property. (See Exhibit 2, Page 3). On April 19, 2010, MERS executed an Assignment of Deed of Trust (Assignment) on behalf of its successors or assignees. A true and correct copy of the Assignment is attached to this response as Exhibit 3. The assignment granted, assigned, and transferred interest under the Note and DOT to J.P. Morgan Mortgage Acquisition Corp. The Assignment was recorded in Clark County on May 18, 2010. (See Declaration of Lawrence Riggs in Support of PHHs Response to Debtors Amended Objection to Proof of Claim Filed by J.P. Morgan (Declaration) on June 7, 2011, Listed as #66 on Docket Report). On January 31, 2011, PHH filed its Proof of Claim in the secured amount of $738,399.51 with arrears totaling $54,259.89. The Creditor was identified as J.P. Morgan Mortgage Acquisition Corp (J.P. Morgan). Attached to the Proof of Claim were a true and correct copy of the Note, DOT, and Assignment, evidencing J.P. Morgans interest in the Note. On October 21, 2011, PHH filed its Amended Proof of Claim. Attached to the Amended Proof of Claim were a true and correct copy of the Note, Allonge 1, Allonge 2, the DOT, and Assignment.
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DEBTORS OBJECTION First, as discussed below, an adversary proceeding is required to determine the validity, extent, and priority of J.P. Morgans lien. However, Debtors have failed to file an adversary proceeding and are seeking to have this debt be deemed unenforceable without doing so. This is not permitted under the Bankruptcy Rules and a violation of due process. Notwithstanding,

Debtors contentions in the Amended Objection are without merit as discussed below. J.P. Morgan holds an enforceable Note and Deed of Trust which is secured on the Property. Furthermore, PHH filed the below response in reliance on the exhibits attached and the Declaration (Listed as #66 on Docket Report) to support the following opposition. PHH, as the servicer for J.P. Morgan, is authorized to file the Proof of Claim on behalf of J.P. Morgan. The Objection must be overruled. RESPONSE TO DEBTORS SECOND AMENDED OBJECTION TO CLAIM I. DEBTORS OBJECTION IS AN ATTEMPT TO DISALLOW A CLAIM WHICH REQUIRES AN ADVERSARY PROCEEDING. Debtors are attempting to have the Court determine the validity and extent of the liens in question by way of an improper objection to claim. It is an attempt to bypass the requirements of an adversary proceeding and ignore the due process protections afforded to parties by disguising this matter as an Objection to Claim. An Adversary Proceeding is required and the relief sought cannot be obtained through an Objection to Claim. Federal Bankruptcy Rule 3007 provides that if an objection to a claim is joined with a demand for relief of a kind specified in Rule 7001, it becomes an adversary proceeding. Rule 3007(b) provides that a demand for relief requiring an adversary proceeding may not be included in an objection to claim. Bankruptcy Rule 7001(2), in turn, provides that an adversary proceeding is required for an action challenging the validity, priority or extent of a lien. Thus, if Debtors objection to a secured claim is combined with a challenged to the lien, an adversary proceeding is required. In re Kleibringk, 346 B.R. 734, 749 (Bankr. N.D.Tex. 2006). In this case, Debtors request, despite their admissions that they borrowed the monies under the Note secured by the Deed of Trust, that the debt be unenforceable against them or their property. This is clearly an attempt to challenge the validity, priority and extent of the lien.
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II.

DUE TO THE FACTUAL DIFFERENCES, THE ANALYSIS OF LEYVA DOES NOT PERTAIN TO THE CASE AT HAND AND THEREFORE PHH HAS AN ENFORCEABLE INTEREST IN THE PROPERTY.

A. Holding of Leyva In the Nevada Supreme Court case of Leyva v. National Default Servicing Corp., the Court ruled that during a Foreclosure Mediation proceeding, Wells Fargo (creditor) failed to produce the documents to show that it had an enforceable interest in the property that was the subject of the mediation, under NRS 107.086 and the Foreclosure Mediation Rules. See Leyva v. National Default Servicing Corp., 127 Nev. ___, ___, ___ P.3d ___, ___ (Adv. Op. No. 40, July 7, 2011). In its analysis, the Court determined that the language in Nevada Revised Statutes (NRS) 107.086 and the FMRs necessitates strict compliance. Using this strict compliance standard, the Court

determined that since the mortgage assignment provided by Wells Fargo was defective and the fact that the mortgage note was not endorsed according to Article 3 of the Uniform Commercial Code, Wells Fargo did not substantially comply, and thereby failed to produce the documents required under NRS 107.086(4). Id. B. Statutes Governing Leyva First, Foreclosure Mediation and Proof of Claims are governed by different statutes that require the submission of different evidence. Foreclosure Mediation is governed by NRS 107.086. Specifically, NRS 107.086(4) states that, The beneficiary of the deed of trust shall bring to the mediation the original or a certified copy of the deed of trust, the mortgage note and each assignment of the deed of trust or mortgage note. Among other documents, this statute clearly and unambiguously requires that the beneficiary bring the original or a certified copy of an assignment of the deed of trust or note. Assignments of deeds of trust and the notes are mandatory, and Wells Fargo never provided them in Leyva. In contrast, the case at hand pertains to an Objection to Claim. The filing of a Proof of Claim is governed by Rule 3001. Rule 3001(d) simply states that the proof of claim, be accompanied by evidence that the security interest has been perfected. In contrast to NRS

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107.086, Rule 3001 simply states that evidence is required to show the security interest. In this case, evidence was provided to show that the security interest was perfected. In addition to providing a copy of the original Note and DOT, PHH submitted a copy of the assignment of DOT and the Allonge to the Note along with the declaration of Lawrence Riggs, which was filed June 7, 2011. These same documents were also attached to the Amended Proof of Claim, filed on October 21, 2011. The required documents were provided by PHH in accordance to Rule 3001, which is the governing rule for a Proof of Claim. C. Consequences In Leyva, the Court determined that since the foreclosing party did not bring the required documents to mediation, it is a sanctionable offense under NRS 107.086 and the FMRs. NRS 107.086(5) states, If the beneficiary of the deed of trust or the representativedoes not bring to the mediation each document required by subsection 4 or does not have the authority or access to a person with the authority required by subsection 4, the mediator shall prepare and submit to the Mediation Administrator a petitionThe court may issue an order imposing such sanctions against the beneficiary of the deed of trust or the representative as the court determines appropriate, including, without limitation, requiring a loan modification in the manner determined proper by the court. The sanctions under NRS107.086 do not include making a claim unenforceable by the moving party. Therefore, even if this Court finds that the required documents were not provided, the result should not render the claim unenforceable. III. J.P. MORGAN IS THE HOLDER OF THE ENDORSED AND NEGOTIATED PROMISSORY NOTE THAT IS THE BASIS OF THIS CLAIM. As set forth herein and in the Declaration of Lawrence Riggs, J.P. Morgan is the current holder of the Note. NRS 104.3205(2) states, When endorsed in blank, an instrument becomes payable to bearer and may be negotiated by transfer of possession alone until specially endorsed. Pursuant to NRS 104.3201(1), Negotiation means a transfer of possession, whether voluntary or involuntary, of an instrument by a person other than the issuer to a person who thereby becomes its holder. As evidenced in 5 of the Declaration, J.P. Morgan is the current holder of the Note, and the Note includes Allonge 1 and Allonge 2. (See Exhibit 1, See Declaration, Page 2, 5, See Amended Proof of Claim filed on October 21, 2011). As Allonge 1 indicates, the Note was
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transferred from PHH to Bishops Gate Residential Mortgage Trust (Bishops).

Bishops

subsequently signed in blank and transferred possession to J.P. Morgan (See Allonge 2). J.P. Morgan is now the holder of bearer paper and entitled to payments thereunder. IV. DEBTORS OBJECTION AS TO MERS FAILS GIVEN DEBTORS AGREED TO MERS INVOLVEMENT BY VIRTUE OF SIGNING THE DEED OF TRUST. Debtors arguments that MERS did not have any rights to transfer the Note and DOT are not supported by the facts or the law. The parties documented their intention to appoint MERS as the agent for the Lender, its successors and assigns, through the plain language of the DOT. The DOT identifies MERS as the nominee for the Lender, and its successor and assigns (Declaration, Exhibit 2, page 2, paragraph (E)). Additionally, page 3 of the DOT provides that the beneficiary of this Security Instrument is MERS (solely as nominee for Lender and Lenders successor and assigns) and the successors and assigns of MERS. (See Declaration, Exhibit 2, page 3). The DOT goes on to further define MERS role as mortgagee and MERS relationship with the Lender and its successors and assigns as nominee: Borrower understands and agrees that MERS holds only legal title to the interests granted by Borrower in this Security Instrument, but if necessary to comply with law or custom, MERS (as nominee for Lender and Lenders successors and assigns), has the right: to exercise any or all of those interests, including, but not limited to, the right to foreclose and sell the Property, and to take any action required of Lender, including, but not limited to, releasing or cancelling this Security Instrument (See Declaration, Exhibit 2, Deed of Trust, Page 3). Though MERS never held the Note, it could by virtue of its nominee status, transfer the DOT on behalf of the Note Holder. Although the Assignment contains language purporting to assign both the Note and Mortgage, MERS lacked the assignable interest in the Note. While this surplusage evidences poor drafting, it does not affect the validity of MERSs assignment of the Deed of Trust. In re Kiah, 2010 U.S. Dist. LEXIS 121252, 2010 WL 4781849. In re Huggins, 357 B.R. at 183. Contrary to Debtors assertion that the assignment split the DOT and the Note, which would render the debt unenforceable, courts have recently found that MERS has the capacity to assign instruments. Furthermore, these courts have determined that the mere language of MERS on the
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DOT was not sufficient to split the Note from the Deed. See Hubert v. Metlife Home Loans, et al., A-10-620408. (D. Nevada, 2010) (holding that MERS does not split the mortgage and the note, or render the mortgage invalid); Cosgrave v. American Home Mortgage Corp., MERS, et al., A-10623894-C. (D. Nevada. 2010) (holding that the presences of MERS on the security instrument does not in and of itself cause the note and mortgage to be split or separated and does not invalidate the mortgage). Based upon the above, it is clear that MERS has the authority to assign the DOT and that the debt encumbered by the Debtors is enforceable and should not be disallowed. V. PHH BY VIRTUE OF ITS SERVICING RIGHTS WITH JPMORGAN, HOLDER OF THE CLAIM, HAS STANDING TO FILE THE PROOF OF CLAIM. PHH Mortgage Corporation is the servicer for J.P. Morgan Mortgage Acquisition Corp. (See Declaration, Page 2, 6) Federal Rule of Bankruptcy Procedure 3001(b) states in pertinent part that, A proof of claim shall be executed by the creditor or the creditors authorized agent. Section 501(a) of the Bankruptcy Code also states that a creditor may file a proof of claim. A servicer of a mortgage is a creditor pursuant to its duties as a servicer, and therefore, has standing to file a proof of claim. In re Conde-Dedonato, 391 B.R. 247, 250 (Bankr. E.D.N.Y. 2008); In re Minbatiwalla, 424 B.R. 104, 109 (Bankr. S.D.N.Y. 2010); In re Woodberry, 383 B.R. 373, 379 (Bankr. D.S.C. 2008); see also Bankers Trust v. 236 Beltway Inv., 865 F. Supp. 1186, 1191 (E.D. Va. 1994); In re Tainan, 48 B.R. 250, 252 (Bankr. E.D. Pa. 1985). A servicer has standing to bring a claim because it has a tangible interest in the estate, and its pecuniary interest was derived from its servicing activities, for which it received compensation. In re Viencek, 273 B.R. 354, 356 (Bankr. N.D.N.Y. 2002); In re Conde-Dedonato, 391 B.R. at 250. Numerous courts have held that a servicer, pursuant to their duty as a servicer, is a party in interest in proceedings involving loans which it services [holding that a servicer was allowed to defend a proof of claim on behalf of its principal]. In re O'Dell, 268 B.R. 607, 618 (N.D.Ala.2001) aff'd, 305 F.3d 1297, 1302 (11th Cir. 2002). The loan servicers interest in the note is by virtue of its servicing activities for which it receives compensation. In re Viencek, 273 B.R. 354, 357-58 (Bankr. N.D.N.Y. 2002)).
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It has been held that mortgage servicers are parties in interest with standing by virtue of their pecuniary interest in collecting payments under the terms of the notes and mortgages they service. In re: Henry Lopez, 2011 Bankr. LEXIS 476, *16, (Bank. E.D. Mass. 2011). This is further support that PHH has standing because it has a right to payment pursuant to its duties as a servicer on a loan and it can be injured by a Debtor when it loses it servicing fees as a result of the Debtors nonpayment of the loan. PHH has shown that it is the servicer for J.P. Morgan and has standing to file a proof of claim on behalf of JPMorgan. The proof of claim that was filed on January 31, 2011 identifies the Name of the Creditor, the person or other entity to whom the debtor owes money of property, as J.P. Morgan. As the Court explained in the case of In re Henry, a party in interest need only demonstrate a colorable claim to property of the estate, Id., at 18, citing Grella v. Salem Five Cent Sav. Bank 42 F.3d, 26, 32 (1st Cir. 1994), which PHH has done by providing the chain of title from PHH to J.P. Morgan. As set forth herein, PHH is currently the servicer of the Note and DOT and is entitled to file a proof of claim as the servicer for J.P. Morgan. As a result of its servicing rights and compensation as a servicer, J.P. Morgan has a tangible interest in the Note and DOT. Based upon this, it is clear that PHH is entitled to execute the Proof of Claim on behalf of J.P. Morgan. VI. DEBTORS OBJECTION TO CLAIM FAILS TO SET FORTH ANY LEGAL OR FACTUAL ARGUMENTS AS TO WHY PHHS CLAIM SHOULD NOT BE CONSIERED AN ENFORCEABLE CLAIM Notwithstanding the attempted technical arguments by Debtors to try to wipe out the debt on the Property, the debt is enforceable against the Debtors and Debtors property. Pursuant to Code Section 502(a), a claim shall be deemed allowed unless an objection is filed. Even when an objection is filed, the claim shall be allowed, except to the extent that it is disallowed on one of the grounds provided by Section 502(b). 11 U.S.C. 502(b). Section 502(b) provides the sole grounds on which a party can object to a proof of claim. In re Heath, 331 B.R. 424, 435 (B.A.P. 9th Cir. 2005)(citing Dove Nation v. eCast Settlement Corp., 318 B.R. 147, 150-52 (B.A.P. 8th Cir. 2004)).
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An objection to claim must raise sufficient legal or factual grounds on which to disallow or reduce the claim. A Proof of Claim that does not actually contest Debtors liability or the amount of the debt is insufficient to disallow a proof of claim, even if the Proof of Claim lacks the documentation required by Rule 3001(c). In re Campbell, 336 B.R. 430, 432 (B.A.P. 9th Cir. 2005). While a creditor may have an obligation to respond to an objection to claim that is sufficiently specific about the information required, the Heath Court noted that such an objection should not be inconsistent with sworn schedules that concede all or some portion of the debt. In re Heath, 331 B.R. 436-437, n.6; see also In re Lasky, 364 B.R. 385, 389-390 (Bankr. C.D. Cal. 2007). In the

event sufficient legal or factual grounds are raised, the Court would then turn to the usual burdens of proof associated with claims litigation, including the admissions contained in the bankruptcy schedules, as well as any relevant documentation provided by the claimant. In re Campbell, 336 B.R. at 436. In this case, even if the contentions in Debtors objection could be considered to raise sufficient legal or factual grounds to come within Section 502(b), PHHs claim is entitled to prima facie validity. The Debtors cannot overcome the presumption by filing objections that do not actually dispute the liability or the amount of the claim. Rule 3001(f) provides that a claim filed in accordance with the rules shall constitute prima facie evidence of the validity and amount of the claim. Fed. R. Bankr. P. 3001(f); Diamant v. Kasparian (In re Southern California Plastics, Inc.), 165 F.3d 1243 (9th Cir. 1999). When the claim is based upon a writing, a copy of the writing shall be filed with the claim. Fed. R. Bankr. P. 3001(c). Noncompliance with Rule 3001(c) is not a statutory ground for disallowance. Debtors cannot claim that the claim is unenforceable against the Debtors and the property of the Debtors because the debt is in fact, owing. Except for evidence that the security interest has been perfected, as required by Rule 3001(d), the rules do not require any other evidence be attached to the proof of claim. In re Garner, 246 B.R. 617, 621 (B.A.P. 9th Cir. 2000). In this case, the claim was accompanied by both the Note, the writing on which the claim is based, a recorded copy of the DOT securing the Note, and an Assignment transferring interest in the DOT. Therefore, the burden is on the Debtors to produce sufficient evidence to rebut the validity of the claim. Debtors state that the promissory note attached to the Proof of Claim is devoid of any
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endorsements. However, PHH has provided the Note with Allonge 1 and Allonge 2. On the other hand, the Debtors have failed to provide any substantive evidence to rebut the prima facie validity of PHHs claim. Fullmer vs. United States, 962 F.2d 1463 (10th Cir. 1992) (holding that claims are presumed to be valid on prima facie basis and presumption can be overcome only if the objection party offers equally probative evidence to the contrary). Accordingly, Debtors request that the Proof of Claim be deemed unenforceable should be denied. CONCLUSION PHH has provided substantial evidence and has shown that it is entitled to file a Proof of Claim on behalf of J.P. Morgan. For the foregoing reasons, PHH respectfully requests the Court to overrule Debtors Second Amended Objection to Proof of Claim and grant PHHs Motion for Relief from Automatic Stay.

DATED:

October 27, 2011

Respectfully Submitted, MALCOLM CISNEROS, A Law Corporation /s/Kevin Hahn KEVIN HAHN Attorney for Secured Creditor, PHH MORTGAGE CORPORATION

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PROOF OF SERVICE ss.

I am employed in the County of Orange, State of California. I am over the age of eighteen and not a party to the within action; my business address is: 2112 Business Center Drive, Second Floor, Irvine, California, 92612. On October 27, 2011, I served the following document described as RESPONSE TO DEBTORS AMENDED OBJECTION TO PROOF OF CLAIM FILED BY J.P. MORGAN on the interested parties in this action by placing a true copy thereof enclosed in a sealed envelope with postage thereon fully prepaid in the United States mail at Irvine, California (and via telecopy or overnight mail where indicated), addressed as follows: Joan Maria Anderson Todd J Shelly 8570 W. La Madre Las Vegas, NV 89149 Arun Gupta 800 N. Rainbow Blvd., #208 Las Vegas, NV 89107 Jeffrey J. Whitehead 2431 W. Horizon Ridge Pkwy, Ste 110 Henderson, NV 89052 Rick A. Yarnall 701 Bridger Ave. #820 Las Vegas, NV 89101 I declare under penalty of perjury that the foregoing is true and correct. Executed on October 27, 2011, at Irvine, California. /s/Dave Kim DAVE KIM

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