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1. 2 William M. LeRoy - Moderator President & CEO American Legal & Financial Network “ALFN” William G. Malcolm, Esq. - Panelist Partner Malcolm Cisneros.

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Presentation on theme: "1. 2 William M. LeRoy - Moderator President & CEO American Legal & Financial Network “ALFN” William G. Malcolm, Esq. - Panelist Partner Malcolm Cisneros."— Presentation transcript:

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2 2 William M. LeRoy - Moderator President & CEO American Legal & Financial Network “ALFN” William G. Malcolm, Esq. - Panelist Partner Malcolm Cisneros Ronda Winnecour, Esq. - Panelist Chapter 13 Standing Trustee Western District of Pennsylvania Stacy Kim, Esq. - Panelist Attorney Malcolm Cisneros

3 In July, 2009 the NACTT held its 44th Annual Seminar, in Boston, MA. During this event, Clifford J. White, III., the Director of the Executive Office for U.S. Trustees, Department of Justice commented regarding the work of the United States Trustee Program and their efforts to improve the administration of bankruptcy cases. This presentation will discuss the major points he addressed in Boston and in particular the third of the three areas of the new U.S. Trustee Program Initiative focused upon “Mortgage Fraud and Abuse.” NOTE ~ In his own words, Mr. White said; “There is probably no issue that I personally have devoted more attention to over the past year... ”

4 US Trustee’s new initiative has three prongs ~ 1 st ~ First, we combat debtor fraud. 2 nd ~ Foreclosure rescue schemes. 3 rd ~ Mortgage Servicer Violations of the Bankruptcy Code. Note ~ The US Trustee’s office said; “We aim to hold mortgage servicers to the same standard of completeness and accuracy in their filings that we do the debtors who owe them money.”

5 The US Trustee has undertaken a significant amount of litigation in this area. 1 ~ On May 1, 2009, the bankruptcy court in the Northern District of Ohio ruled in their favor on a complaint against Countrywide Home Loans, Inc. The judge found that Countrywide’s conduct in preparing court filings was “reckless” and reflected “an indifference to the truth.” 2 ~ And, in the Southern District of Florida, the district court recently reversed the bankruptcy court’s dismissal of the United States Trustee’s adversary proceeding against Countrywide. The district court found that the United States Trustee had standing. In reversing the bankruptcy court, the district court held that they could seek sanctions for Countrywide’s past misconduct, including injunctive relief to prevent future harm caused by Countrywide’s practices and conduct.

6 3 ~ The US Trustee also recently prevailed in a case involving HSBC. In that case, the court criticized HSBC’s use of a third party electronic system to manage defaulted loans in bankruptcy, stating that its “thoughtless mechanical employment of computer-driven models and communications to inexpensively traverse the path to foreclosure offends the integrity of our American bankruptcy system.” Critical Question ~ What is the Message?

7 In their own words; “Let me provide one final example of our mortgage servicer and creditor abuse enforcement efforts... “I am pleased to announce that we have entered into a settlement agreement with a major lender to resolve complaints involving the bank’s improper disclosure of more than 2,500 Social Security numbers on proofs of claims filed in bankruptcy courts in approximately 45 judicial districts. Under that agreement, the bank will notify affected debtors, file appropriate papers to correct the court filings, and take remedial steps to prevent a recurrence of these impermissible breaches of privacy. This case is one of many that we have taken in recent month against creditors who have failed to comply with legal requirements to protect the personal information of their customers in bankruptcy.”

8 A couple of quick updates: On July 31, 2009, in the case out of the Northern District of Ohio, the bankruptcy court issued its decision on remedies against Countrywide. Although the decision did not include our more robust request for an independent auditor and other corrective measures, the court did affirm its broad equitable powers and imposed additional paperwork requirements that must accompany Countrywide’s proofs of claim. Note ~ Countrywide has appealed the bankruptcy court’s decision.

9 We will continue our efforts to expose significant mortgage servicer violations and to seek meaningful relief that will make the victims whole and spur the industry to correct its deficiencies once and for all. We are particularly encouraged by a recent decision handed down in the Eastern District of Louisiana, upholding the bankruptcy court’s imposition of sanctions against Wells Fargo for systematically filing flawed proofs of claim. The UST filed an amicus brief in that case, and I am gratified that the court agreed with us that the bankruptcy judge acted within her powers when she required Wells Fargo to audit and amend its proofs of claim.

10 Per the US Trustee ~ One of our biggest challenges in attacking improper mortgage servicer practices is the ability to identify the right cases to bring. In the ordinary paper flow, we often do not see evidence that gives rise to knowledge of inaccurate proofs of claim or motions for relief from stay. To help us address this issue, I came to your convention last summer and announced that we would work with the NACTT to develop Guidelines for Reviewing Mortgage Proofs of Claim.

11 Although I am leaving out scores of people who deserve public recognition, let me single out Ronda Winnecour for her work. Among other things, Ronda developed a checklist for trustees in reviewing proofs of claim. We are encouraging other trustees to consider adopting Ronda’s checklist or a version of it. Let me also highlight the work of Andrea Celli. Not only has Andrea been a leader in identifying abusive cases, but she, along with Byron Meredith and Marge Burks, traveled to the Justice Department’s National Advocacy Center in May to help train USTP staff on combating creditor abuse. The mortgage fraud and abuse work you are doing is important. It makes a real difference for homeowners and for the integrity of the bankruptcy system.


13 Attachments to POC Loan documents Note and recorded mortgage Assignment, if necessary Redaction warning

14 Additional district/trustee requirements Local form addendum Escrow analysis/escrow statement Copies of invoices or receipts for certain expenses Billing statement

15 Bar date for filing POC’s ECF filing requirements PDF formatting, size and scanning resolution Page and size limits for attachments Signature requirements (no signature required, signature must be scanned) Certificate of service/proof of service format Full document or summary of exhibits required

16 Itemization of the claim Escrow breakdown Payment breakdown (P&I, escrow) Principal balance Interest from last paid installment

17 Itemization of the claim, cont. Arrearage detail Date and amount of missed payments Suspense balance Date of escrow arrears

18 Itemization of the claim, cont. Identifying information Property address Escrow/non-escrowed loan Fixed or adjustable rate Exotic mortgages (DSI, balloon notes) Current monthly payment

19 Fees that are scrutinized or require additional detail Foreclosure fees Attorney’s fees Corporate advance Property inspection fees Property preservation fees Bankruptcy fees Appraisal fees

20 B10 form – required information and formatting

21 Informational messages for district requirements during pendency of case Payment change notices and local forms Post-petition notices of fees and costs incurred Notice of protective advances Escrow analysis Monthly statements Fee applications 12-month summary of loan activity Copies of all correspondence relating to payment changes Amended POC showing application of pre-confirmation payments

22 Service of POC – required parties and form of service Validation of user entry fields against docket record and Schedule D information Secured amount claimed Party information – debtor, attorney, trustee

23 Documents that are generated by NCF ~ Reconciliation letter flagged and sent to debtor’s attorney to notify if: Claim amount differs from the amount scheduled by debtor Debtor has not filed schedules Debtor has not listed the claim

24 Documents that are generated by NCF, cont. Addendum - local forms generated with the POC Notice of payment change Payment change letters Post-petition notice of fees and costs Monthly statements

25 If you have any further questions that were not addressed in this presentation, or want to contact one of our speakers, please email Matt Bartel, COO of ALFN, at Thank you for your participation in this webinar. Please complete the brief survey which you will be directed to at the conclusion of this presentation. ALFN provides the information contained in these webinars as a public service for educational and general information purposes only, and not provided in the course of an attorney-client relationship. It is not intended to constitute legal advice or to substitute for obtaining legal advice from an attorney licensed in the relevant jurisdiction. Use of ALFN Webinar Materials The information, documents, graphics and other material made available through this Webinar are intended for use solely in connection with the American Legal and Financial Networks (hereinafter “ALFN”) educational activities. These materials are proprietary to ALFN, and may be protected by copyright, trademark and other applicable laws. You may download, view, copy and print documents and graphics incorporated in the documents from this Webinar ("Documents") subject to the following: (a) the Documents may be used solely for informational purposes related to the educational programs offered by the ALFN; and (b) the Documents may not be modified or altered in any way. Except as expressly provided herein, these materials may not be used for any other purpose, and specifically you may not use, download, upload, copy, print, display, perform, reproduce, publish, license, post, transmit or distribute any information from ALFN Webinars in whole or in part without the prior written permission of ALFN. 25

26 ALFN’s 8 th Annual Leadership Conference July 18-21, 2010 Grand Hyatt Washington D.C. Register on our website at 26

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