Archive | January, 2019

One aspect of the recent government shutdown that has received too little attention is that it significantly increased the risk that thousands of struggling homeowners across the nation would lose their homes. For example: in California, an elderly woman who recently lost her husband is on the verge of losing her family home due to the shutdown. Her lender wrongfully denied her for a deferral program designed to protect certain newly widowed spouses from foreclosure and eviction, but the Housing and Urban Development (HUD) representative who was helping her was furloughed during the shutdown. Even though the shutdown has ended, this widow is still facing foreclosure in February unless HUD takes action to address cases like hers that have piled up while critical agency resources were unavailable.

Sadly, this is not an isolated example. Over 9 million borrowers, most of them low-income, seniors, and/or residents of rural areas, have home mortgages that are either provided or insured by government mortgage programs run by HUD or the Department of Agriculture (USDA). Because key departments at both agencies were operating at drastically reduced capacity or not at all for over a month, thousands of homeowners could not get the help they needed to save their homes. Some may already have undergone foreclosure, and many remain at risk as HUD and the USDA reopen with a substantial backlog of requests for assistance. Unnecessary foreclosures on HUD and USDA borrowers will not just impact vulnerable homeowners; they will also lead to needless losses to the agencies’ mortgage insurance funds.

But HUD and the USDA can prevent further serious damage by taking a few simple steps: First, they should extend or waive any foreclosure-related deadline by at least 35 days. Second, they should issue a stay on foreclosures until they clear the backlog of pending requests for assistance. Third, they should direct lenders to rescind any foreclosures that occurred during the shutdown. And, in the event of another shutdown, the agencies should hit the pause button on foreclosures and related deadlines as they should have done during the recent shutdown.

A home owner has filed a class action lawsuit against Seterus Inc., a specialty mortgage service company, citing alleged violations of the Fair Debt Collection Practices Act, violations of the Pennsylvania Fair Credit Extension Uniformity Act, and violation of the Pennsylvania Unfair Trade Practices and Consumer Protection Law.

Kay Wenger filed a complaint on behalf of herself and others similarly situated on Dec. 18 in the U.S. District Court for the Middle District of Pennsylvania against Seterus Inc., alleging the specialty mortgage service uses unlawful and unfair debt collection practices to collect upon residential consumer mortgage loans.

According to the complaint, the plaintiff alleges that on April 1, 2016, her mortgage was transferred to Seterus while in a state of default.

IBM’s mortgage servicing business Seterus has been hit with a proposed class action in Florida accusing it of trying to intimidate homeowners into paying delinquent amounts by making false ultimatums to foreclose on their homes.

Filed on Friday in Ft. Myers federal court, the lawsuit said as many as thousands of Florida homeowners received letters from Seterus falsely warning they could lose their homes if they did not pay the entire amount overdue on their loans. Seterus, which services defaulted mortgage loans for Fannie Mae, is being sold to Mr. Cooper Group, parent company of mortgage lender and servicer Nationstar Mortgage Holdings, IBM announced earlier this month.

COMING TO YOU LIVE DIRECTLY FROM THE DUBIN LAW OFFICES AT HARBOR COURT, DOWNTOWN HONOLULU, HAWAII

LISTEN TO KHVH-AM (830 ON THE AM RADIO DIAL)

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Sunday – January 27, 2019

Listeners Forum #2: What the Legal System Can Learn from Our Listeners Regarding Why There Is Increasing Disrespect Among This Nation’s Homeowners and Their Families for Our Legal System

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The toxic effects of the Mortgage Crisis of 2008 continue to devastate America’s homeowners despite the daily cosmetology of a generally uncaring legal system.

There is no greater evidence of this urgent crisis of confidence in our legal system than the barrage of voice mail messages that John and I receive almost daily, detailing the continuing horrific abuses of America’s homeowners.

Today John and I share with you a representative sample of some of these recorded complaints in the own words of our listeners, detailing the failures of our legal system:

1. There is little if any competent legal help available to homeowners facing foreclosure and those lawyers venturing into this field are frequently met with sanctions, suspension, and disbarment in return.

2. The foreclosure laws and procedures are so complicated that they are incomprehensible to lay persons and often even to system professionals themselves.

3. The legal system is so expensive that most homeowners cannot afford to retain legal counsel even if they could find competent legal counsel, which tips the scales of justice in favor of those who can afford prolonged litigation.

4. America’s law schools have not and most still do not train law students in foreclosure defense, as most law professors are themselves ignorant regarding such homeowner rights.

5. Congress and state legislatures fail to monitor the consequences of the consumer laws they enact, despite their assumed best of intentions.

6. Most federal and state court judges are not only ignorant of the inner workings of securitized trusts, but responding to the crush of court backlogs caused by foreclosure calendars appear to believe or want to believe that homeowners in foreclosure are just deadbeats and therefore not entitled to otherwise customary evidential and procedural rights.

7. The American media generally ignores the financial slaughter of homeowners, only occasionally highlighting individual cases represented too often as oddities without reporting how widespread such abuses actually are.

8. Our Judges too often are oblivious to appearances of impropriety when owning directly or indirectly ownership interests in financial entities.

9. Regulators levying billions of dollars in fines as the result of found predatory lending practices, that total however a mere fraction of all of the money literally stolen by investment banks and securitized trusts, make no adequate efforts to ensure that any of the money ever reaches abused homeowners.

10. The foreclosure system often lacks compassion, evicting homeowners without regard to time to move, protection of their personal property, their health, their pets, or their general welfare.

Only when homeowners fully understand the widening scope of these underlying problems and abuses and as individual homeowners that they are not alone, and only when they then unite, will needed reforms ever emerge, whether or not in time to save this Nation from internal collapse under the weight of such abuses of mainly America’s shrinking middle class.

Join John and me this Sunday and listen to the complaints of America’s homeowners for yourself.

“The interesting thing about Deutsche Bank is they seem to be pretty much the only entity out there willing to lend to The Trump Organization.”

Politico-

Two powerful House committee chairs are planning a joint investigation into German lending giant Deutsche Bank, which is under scrutiny from Democrats over its business dealings with President Donald Trump.

House Intelligence Chairman Adam Schiff and Financial Services Chairwoman Maxine Waters coordinating oversight of the bank, which also faces questions about its role in money laundering schemes.

The two California Democrats have been talking about areas of interest for each committee and where there’s common ground, Schiff said in an interview.

“We’re going to work jointly,” he said. “We think we’ll be more effective doing it that way.”

The United States Supreme Court heard oral argument in the case Obduskey v. McCarthy & Holthus LLP on January 7, 2019. The Court’s ruling in this case could have major implications for all organizations—including law firms—that utilize non-judicial foreclosure regarding defaulted mortgages.

The primary question in Obduskey is whether the Fair Debt Collection Practices Act (the “FDCPA”), 15 U.S.C. § 1692-1692p, applies to non-judicial foreclosures. There is currently a circuit split regarding this question: the Fourth, Fifth, and Sixth Circuits apply the FDCPA to non-judicial foreclosures, while the Ninth and Tenth Circuits have held that the FDCPA does not apply to non-judicial foreclosures. The Obduskey decision should resolve this split.

The FDCPA only applies to “debt collectors,” defined under the statute as any person who “regularly collects or attempts to collect, directly or indirectly, debts owed or due . . . another.” 15 U.S.C. § 1692(a)(6). This definition, however, has certain carve-outs and does not traditionally apply to parties who are seeking only to enforce a security interest without obtaining any payment (e.g. repossessing a car). In the foreclosure context, judicial foreclosure where the creditor is seeking a deficiency judgment has traditionally fallen under the rubric of the FDCPA, as actions taken in such a proceeding are to collect a monetary debt. With non-judicial foreclosure where no deficiency is sought, however, the question becomes murkier. Hence the circuit split.

Some cities in Massachusetts are cashing in on homeowners who have failed to pay tax bills by running auctions that pull in thousands of dollars more than they’re actually owed in taxes.

At Worcester’s annual auction last May, small tax lien debts of just a few hundred dollars routinely set off bidding wars from private investors who paid the city far more than a homeowner actually owed in unpaid taxes. The process may also make it more likely the homeowner will wind up in foreclosure.

City records show that private investors have paid Worcester more than $2.6 million in premiums in the last three years. Worcester only keeps that extra cash when the homeowner gets foreclosed on, and records from the city show Worcester has a balance of more than $900,000 in premiums paid to the city.

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Listeners to our show know that Hawaii Courts have recently been at the forefront of foreclosure reform.

Unlike in most other States, the Hawaii Supreme Court has been systematically improving almost every aspect of its mostly judge made foreclosure system just in recent years.

For example, when compared to an otherwise thought to be progressive judiciary and legislature in California:

1. Hawaii now allows a wrongful foreclosure claim to be brought simultaneously in defense of foreclosure, whereas California homeowners in foreclosure irrationally must wait until evicted.

2. Hawaii now allows challenges to a foreclosing plaintiff’s standing to foreclose based on its lack of ownership and possession of a Promissory Note now considered a jurisdictional defense, whereas California homeowners in foreclosure irrationally are precluded from challenging standing by misconceived threshold notions of “voidability.”

3. Hawaii now reverses nonjudicial foreclosure sales where evidence of true market value does not accompany a nonjudicial foreclosure auction sale, whereas California homeowners in foreclosure irrationally are permitted to be nonjudicially foreclosed on without any evidence of true market value shown as considered to be irrelevant.

5. Hawaii now requires strict adherence to evidentiary requirements for proof of every element supporting a lender’s burden for proving a foreclosure case based upon personal firsthand knowledge testimony, whereas California homeowners in foreclosure are generally irrationally unable to challenge unsworn business records of prior loan servicers.

6. Hawaii now allows homeowners to defend against foreclosure without first tendering the full amount of a claimed accelerated loan default, whereas California homeowners in foreclosure are still required in some California courts irrationally to tender before being allowed to present defenses including those based on lack of standing.

Yet there is one area of foreclosure litigation in which for decades Hawaii has trailed behind California: failure to protect borrowers from unfair, inequitable deficiency judgments (the amount of an unpaid loan balance that exceeds the net proceeds of a foreclosure sale, which then becomes a money judgment against a borrower in foreclosure).

Whereas California has long prohibited deficiency judgments for most residential purchase money home loans and also in cases of nonjudicial foreclosures, Hawaii has yet to change its historic judge-made foreclosure deficiency procedures which have created a gigantic thieves market in Hawaii in which credit-bidding rigged forced auction sales have resulted in a forfeiture of hundreds of millions of dollars of Hawaii homeowner equity and continue to do so.

However, the Hawaii Supreme Court now has before it all of those deficiency judgment issues in HawaiiUSA Federal Credit Union v. Monalim, on certiorari, which was orally argued on January 11, 2019.

The Monalim Application for Writ of Certiorari will be posted on our Website www.foreclosurehour.com when the recording of this Sunday’s show is posted thereafter in the Past Broadcast Section.

The Foreclosure Hour is pleased this Sunday to play for our listeners the oral argument in Monalim.

Due to time limitations, we are unable to play the brief oral rebuttal argument in Monalim, but listeners will find the entire oral argument in the Past Broadcast Section of our Website www.foreclosurehour.com attached to the posting of this Sunday’s show shortly after aired.

It is important to understand that Monalim is no isolated instance where true market value of foreclosed property is not considered in awarding a deficiency judgment in Hawaii.

For example, on Maui in our Second Circuit Court such unfair inequitable deficiency judgments are the rule rather than the exception in every foreclosure case no matter how inequitable.

Thus, in Romspen v. L & E Ranch, nearly 2,000 acres of prime vacant land, recently appraised at $48.2 Million, was sold and finalized last week in the Second Circuit Court to the foreclosing plaintiff credit bidding at $15 Million, awarded a deficiency judgment of $11 Million, now allowed to foreclosure on a multi-million dollar Canadian residence of an 85-year-old woman, her property given as additional collateral.

Thus, in LCP-Maui v. Tucker, a $1.3 Million deficiency judgment was awarded in the Second Circuit Court, mechanically subtracting the forced auction sale net proceeds from the amount of the outstanding loan balance claimed, with no consideration given to the true market value of eight foreclosed properties, notwithstanding that the confirmed sale price being burdened by the foreclosure blight, whose original purchase prices combined exceeded ten times the forced sale price, the original loan amount being nearly $4 Million.

Thus, in DB Private Wealth Mortgage, Ltd. v. Bouley, in the Second Circuit, a credit bid of $6.3 Million was confirmed on a $7 Million claimed loan balance due, which another subsidiary of Deutsche Bank flipped weeks later selling the property then appraised at nearly $9 Million for more than $2 Million above the confirmed sale price.

We have featured many other unfair deficiency judgments awarded against Hawaii homeowners on our show for years and years, and nothing has been done about it.

This literal theft of Hawaii homeowner equity takes place weekly in every judicial circuit in Hawaii, with most of the stolen monies going outside Hawaii to Mainland securitized trusts or federal government insider assignees.

Even worse, foreclosing plaintiffs pretending to own or otherwise owning most of these securitized loans bought the loans way below face value, or were already paid with partial or full no recourse insurance proceeds or with government guaranties against loss, resulting in being paid many times more than what they loaned or purchased the loans for.

The Monalim case is the first time that the Hawaii Supreme Court has agreed to review Hawaii judicial deficiency procedures.

The foreclosure world is watching. Will it narrow its reversal to laches, or will it broaden the scope of its reversal, agreeing, for instance, with Justice Douglas in Gelfert v. National City Bank of New York, 313 U.S. 221, 233 (1941), that “Mortgagees are constitutionally entitled to no more than payment in full”?

Five Justices of the Hawaii Supreme Court can now finally put an end to such prolonged gross injustice with the stroke of their pens.

A foreclosure crisis spurred by climate change is becoming a real threat to the mortgage industry as extreme storms and other natural disasters increasingly occur in places where borrowers might not have flood or fire insurance.

The industry is not prepared for the effects of such extreme weather and rising sea levels, according to Ed Delgado, CEO of national mortgage trade association the Five Star institute and a former executive at Freddie Mac.

“If we look at the basic foundation of what drives the mortgage market, it is the application of credit risk. What’s missing is the understanding of weather risk and where those weather events can take place,” Delgado said.

The current system is reactive and local and doesn’t include plans for the widespread effects of climate change. That could affect several major housing markets at once.

On Appeal from the United States District Court for the Eastern District of Michigan.

BEFORE: BATCHELDER, DONALD, and THAPAR, Circuit Judges.

NOT RECOMMENDED FOR FULL-TEXT PUBLICATION

ALICE M. BATCHELDER, Circuit Judge.

This case is about a debtor, Scott, who claimed a debt collector, Trott, deceptively and fraudulently tried to foreclose on his mortgage. Scott’s Complaint asserted six counts of civil violations under federal and state law. After three months of discovery concluded, the district court granted summary judgment to Trott and dismissed all six counts. Scott appealed one count as a matter of statutory interpretation and appealed the district court’s decision to end discovery and consider summary judgment. We hold that the district court did not abuse its discretion ending discovery and considering summary judgment but that the court erred interpreting the statute. We REVERSE and REMAND.

I.

Although the facts of this case involve a debtor with previous litigation relating to his mortgage and the lender, this case is limited to the interactions between a debt collector and the debtor. In 2004, Kevin Scott (Scott) executed a mortgage with Bank of America, N.A. (BANA) on his home in Farmington Hills, Michigan. Between 2012 and 2016, Scott and BANA litigated over various issues relating to the mortgage; those issues were ultimately resolved by an order of this court in June 2016, dismissing Scott’s appeal of the district court’s order granting summary judgment to the defendants and dismissing the Complaint. Kevin Scott v. Bank of America, N.A. et al, No. 15-2188, (6th Cir. Jun. 7, 2016). In September of 2016, BANA retained Trott Law, P.C. (Trott) as a debt collector to manage foreclosure proceedings on Scott’s mortgage due to nonpayment.

On September 20, 2016, in compliance with the Fair Debt Collection Practices Act[1] (FDCPA), Trott sent a Fair Debt Letter to Scott informing him of Trott’s role as a debt collector acting on behalf of its client, BANA, to foreclose on Scott’s mortgage for the total outstanding indebtedness of the mortgage. The Fair Debt Letter stated:

Unless you notify this office within thirty (30) days after receiving this notice that you dispute the validity of this debt, or any portion thereof, this office will assume this debt is valid. If you notify this office in writing within thirty (30) days after receiving this notice that you dispute the validity of this debt, this office will obtain verification of the debt or a copy of the judgment, if applicable, and mail a copy of such verification or judgment to you. If you request, in writing, within thirty (30) days after receiving this notice, this office will provide you with the name and address of the original creditor, if different from the current creditor.

On October 5, Trott took three actions. First, Trott arranged a sheriff’s sale for a Foreclosure of Mortgage by Advertisement with an auction date of November 8, 2016. Pursuant to Michigan law,[2] Trott prepared a Notice of Mortgage Foreclosure Sale (Notice) to be posted on the premises of Scott’s home and published for four consecutive weeks in a newspaper in the county of Scott’s residence, stating the date of sale and amount of outstanding mortgage debt. Second, Trott contacted the local newspaper to schedule the home posting and the four publications of the Notice for October 7, 14, 21, and 28. The newspaper had the Notice posted on the premises on October 14. Third, Trott mailed a copy of the Notice to Scott. On October 8, Scott sent a certified letter (Dispute Letter) to Trott disputing the validity of the debt, claiming he was current on his mortgage, and that all payments had been made to BANA’s attorneys pursuant to a court order entered in the prior litigation over the delinquency of this mortgage. Trott received the Dispute Letter on October 11.

Trott claimed that after receiving the Dispute Letter it ceased collection of the debt and contacted its client BANA to confirm the debt’s validity. The Notice, however, was posted on the premises on October 14 and published in the newspaper on October 14, 21, and 28. Trott did not send Scott a verification of the debt. Scott claimed he tried to contact Trott but that it would not respond to his communications.

On October 20, 2016, Scott filed the complaint against Trott including a motion for a temporary injunction to enjoin the November 8 sheriff’s foreclosure sale. On November 4, Trott filed a response opposing the injunction, and on November 7, hours prior to the hearing on the motion for the preliminary injunction, Scott filed for Chapter 13 bankruptcy. The scheduled sheriff’s foreclosure sale did not take place, and the motion for an injunction was stayed pending verification of the debt.

On December 13, the district court entered a scheduling order that, among other things, gave the parties three months for discovery, and set a jury trial for August 8, 2017. In January, Trott moved for summary judgment or for dismissal of Scott’s complaint for failure to allege sufficient facts to state a claim. In April, the district court held a hearing on the motion at which Scott argued that he did not fairly have the opportunity to make his case.

The district court found that there were no material facts in dispute between the parties and granted summary judgment on the FDCPA claim, holding that as a matter of law, the FDCPA did not require that Trott verify the debt and that Trott had “cease[d] collection of the debt” pursuant to the statute because Trott itself performed no more activity. The court dismissed Counts 2-6, holding that Scott failed to state sufficient facts or make allegations with sufficient particularity to state any claim. The district court held all outstanding discovery motions moot and dismissed the case.

Scott raises two issues on appeal. First, Scott argues that the district court erred in interpreting the language of the FDCPA and finding that Trott ceased collection of the debt. Second, Scott contends that the district court’s ruling on a summary judgment motion before all discovery motions and requests had been completed denied him a meaningful opportunity to gather facts and evidence to make his case. Scott does not appeal the district court’s order dismissing Counts 2-6 of his complaint and he therefore waives argument on those claims.

II.

We review de novo a district court’s grant of summary judgment. Rogers v. O’Donnell, 737 F.3d 1026, 1030 (6th Cir. 2013). Summary judgment is proper when the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(a). The court must consider the evidence in the light most favorable to the non-moving party. Rogers, 737 F.3d at 1030. The record in this case demonstrates that there was no genuine dispute of material fact between the parties regarding Count 1, only a question of law. The district court ruled that, as a matter of law, the statutory language of the FDCPA’s command to “cease collection of the debt” did not require Trott to intervene and stop the actions of Trott’s agents and/or third parties that Trott put into motion prior to receiving Scott’s Dispute Letter. We find the district court erred in that determination.

This shift five years ago has had heightened implications for the Michigan foreclosure industry. Michigan is among the few states that permit non-judicial mortgage foreclosures. See-Mich. Comp. Laws § 600.3201 (Foreclosure of Mortgage by Advertisement). Because this non-judicial process is faster and less cumbersome for lenders, the majority of Michigan foreclosures are executed in that manner. However, Michigan’s process requires some actions that implicate the FDCPA in perhaps unexpected ways. In the aftermath of Glazer, litigation regarding the FDCPA’s requirements as they pertain to Michigan’s foreclosure industry has increased. We take this opportunity to provide some clarity.

Under Michigan law, a party executing a Foreclosure of Mortgage by Advertisement must publish a detailed Notice for four consecutive weeks in a county newspaper and post the Notice in a conspicuous place on the premises. Id.§ 600.3208. This publication of notice qualifies under the FDCPA as an “initial communication” with the debtor, 15 U.S.C. § 1692a(2). The FDCPA requires that within five days of that initial communication, the debt collector must send to the debtor a Fair Debt Letter containing specific information about the debt, its intention to collect the debt, and the debtor’s rights, unless the published notice contains that information. 15 U.S.C. § 1692g(a). That information includes the amount of the debt, the identity of the creditor, the right of the debtor, within thirty days of receipt of that notice, to dispute the validity or the amount of the debt, and the right of the debtor to notify the debt collector within that thirty-day period of its demand to obtain from the debt collector verification of the debt. Id. Finally, the FDCPA provides:

If the consumer notifies the debt collector in writing within the thirty-day period . . . that the debt, or any portion thereof, is disputed . . . the debt collector shall cease collection of the debt, or any disputed portion thereof, until the debt collector obtains verification of the debt or a copy of a judgment . . . and a copy of such verification or judgment . . . is mailed to the consumer by the debt collector. 15 U.S.C. § 1692g(b).

Scott originally claimed three violations[3] under the FDCPA but here he appeals only one: whether Trott ceased collection of the debt after receiving Scott’s Dispute Letter on October 11 as the FDCPA requires. Scott claims that the events occurring after October 11 constitute collection activity by Trott: (1) the newspaper advertisements on October 14, 21, and 28; (2) the posting of the Notice at Scott’s home on October 14; (3) Trott’s failure to cancel the sheriff’s sale scheduled for November 8; (4) Trott’s refusal to engage in communications with Scott after October 11; (5) Trott’s November 4 response in opposition to Scott’s October 20 motion for temporary injunction.

We consider the newspaper advertisements, the home posting, and sheriff’s sale together. Scott contends that since these activities were necessary to satisfy the requirements of a Foreclosure of Mortgage by Advertisement under Michigan law, they must be construed to be continued collection activity under the FDCPA. Scott has strong grounds for this assertion. “If a purpose of an activity taken in relation to a debt is to `obtain payment’ of the debt, the activity is properly considered debt collection.” Glazer, 704 F.3d at 461. It is uncontested that these three activities are statutorily required under Michigan law. See Mich. Comp. Laws § 600.3201, § 600.3208, § 600.3216.

Trott does not address whether the activity was debt collection taken after the Dispute Letter was received, but rather claims that Trott was not the one performing the activity arguing that, “[t]he publications and posting, that Scott attempts to bootstrap to Trott, were ordered by Trott prior to the receipt of the [Dispute Letter] and were actions by third-parties other than Trott.”. The district court found this compelling, stating, “Scott has not shown, however, that these were collection activities on the part of Trott.” The court also determined that the FDCPA did not require Trott “to take any positive action to stop” third parties.

The issue before us is whether FDCPA’s requirement that a debt collector must “cease collection of the debt” after receiving a Dispute Letter required Trott to stop the subsequent newspaper publications from appearing, stop the home posting from occurring, and stop the sheriff’s sale from taking place. We find that it does. To read the FDCPA as the district court did would render the Dispute Letter a nullity.

Trott admits that it ordered the newspaper advertisements and the home posting, mailed the Notice, and scheduled the sale with the sheriff all contemporaneously on October 5. These activities set into motion all the requirements to satisfy Michigan foreclosure law and the FDCPA. Trott then claims that after receiving the Dispute Letter on October 11, it did nothing more towards debt collection. However, Trott fails to mention that there was nothing else for it to do—parties directed by Trott would continue to do everything else necessary. Ostensibly, Trott is suggesting that even though Scott sent a Dispute Letter, the foreclosure sale could have still occurred because Trott itself had “ceased.” This reading of the statute produces a result contrary to the plain intent of the FDCPA and this circuit’s case law.

Although the FDCPA contains a definitions section, it omits a statutory definition of “cease” or “collection of the debt.” Thus, we begin with a clean slate. The verb “cease” is defined in Black’s Law Dictionary[4] as, “to stop,” “to come to an end,” “to suspend or forfeit.” Within § 1692g(b), the noun subject of the verb “cease” is the “debt collector.” The direct object of the verb “cease” is “collection of the debt.” It follows then that the statute imposes on the “debt collector” an obligation to stopthe “collection of the debt.” This is more obviously true when the debt collector has been the one to initiate the “collection of the debt.” This obligation exists only until the debt collector “obtains verification” of the debt and sends it to the debtor, after which the debt collector is free to resume collection of the debt.

The contours of “collection of the debt” are a more difficult matter to determine. As mentioned above, this circuit is breaking new ground in the application of the FDCPA to mortgage foreclosures. See, Glazer, 704 F.3d at 360. Given the vast differences between judicially managed foreclosures and non-judicial foreclosures, we cabin this holding to the latter. We find that, at a minimum, “collection of the debt” in a statutorily created process such as Michigan’s foreclosure by advertisement must include any activities that attempt to satisfy the essential statutorily required elements of that process.

This reading is congruent with our post-Glazer case law regarding the purpose of the Dispute Letter and verification requirement. Haddad v. Alexander, et al, 758 F.3d 777, 784 (6th Cir. 2014). (“The baseline for [the Dispute Letter and verification requirement] is to enable the consumer to `sufficiently dispute the payment obligation’ . . . . [S]uch an approach is consonant with the congressional purpose of the verification provision.”). The district court’s reading of § 1692g(b) would frustrate the FDCPA’s purpose of giving the debtor the opportunity to dispute the debt—the Dispute Letter would become irrelevant for Michigan foreclosures by advertisement. We therefore hold that the Dispute Letter must “stop the clock” on the initiated foreclosure. The debt collector cannot allow the essential statutory elements of a Michigan foreclosure to proceed after receiving a timely Dispute Letter until it obtains sufficient verification of the debt. This approach obviates the need to explore the activities of the debt collector’s agents or independent contractors and instead imposes on the debt collector the duty to “cease” the collection of the debt until the debt collector obtains verification of the debt.

Trott did not cease the collection of the debt after receiving Scott’s Dispute Letter. Not only did Trott not cancel the sheriff’s sale[5] after it received the Dispute Letter on October 11, three of the newspaper advertisements were published and the home posting occurred after that date. Each of these activities was statutorily required to satisfy Michigan’s Foreclosure of Mortgage by Advertisement law. Hence, Trott’s failure to stop them after it received the Dispute Letter violated provisions of § 1692g(b) of the FDCPA.

We now consider Scott’s other claimed collection activities by Trott. Scott also complains that Trott refused to engage him when he sought clarification of the Notice. Scott cites no legal authority for the contention that Trott was required to respond to Scott’s communications. In fact, the FDCPA generally discourages and in some respects outright prohibits extraneous communications between a debt collector and a debtor. See 15 U.S.C. § 1692c. Trott was acting within the general custom of practice and requirements of the FDCPA by not communicating with Scott.

Finally, Scott alleges that Trott’s response in opposition to Scott’s motion for temporary injunction should be considered continued debt collection activity under the FDCPA. Scott does not cite, nor are we aware of, any legal principle that would allow filings made during the course of litigation to be used against the moving litigant to satisfy the elements of the alleged civil violation that precipitated the lawsuit. We decline to adopt this position now. Furthermore, opposition to an injunction to preserve an issue is fairly characterized as zealous advocacy on behalf of clients as required by Michigan’s rules of professional conduct. Mich. Prof’l Conduct R. 1.3. (CMT: “A lawyer should act with commitment and dedication to the interests of the client and zeal in advocacy upon the client’s behalf.”).

Scott argues that the district court erred in granting summary judgment because several discovery motions remained unresolved. However, most of Scott’s outstanding motions were presented after the expiration of the three-month discovery period set out in the scheduling order. He complains that Trott refused to comply with discovery, however, the district court determined that many of Scott’s requests were covered by privilege. After three months, Scott had still not produced evidence bolstering the allegations of his complaint with respect to Counts 2-6. It was well within the district court’s discretion to determine either that additional discovery would not lead to adducing material facts or that Scott already had sufficient discovery opportunity. The district court therefore did not abuse its discretion.

IV.

For the foregoing reasons we find that Trott violated the FDCPA by continuing collection activities after receiving Scott’s Dispute Letter. We REVERSE the district court’s summary judgment with respect to the FDCPA claim and REMAND for further proceedings consistent with this decision. We AFFIRM the remaining portions of the judgment.

[3] Scott’s Complaint asserted that the FDCPA required debt collectors to verify the debt upon receipt of the Dispute Letter and that the FDCPA required debt collectors to independently investigate the amount of debt. The district court appropriately dismissed these claims as incorrect as a matter of law. Scott did not appeal these determinations.

[5] We pause to note that Trott does not even allege that it made an effort, much less a good faith one, to cancel the sheriff’s sale, and had Scott’s property in fact been sold as originally scheduled, the buyer would have received voidable title. See Jackson Inv. Corp. v. Pittsfield Products, Inc., 162 Mich App. 750, 755-56 (Mich. Ct. App. 1987) (holding that a buyer receives a voidable title where there is a defect in the notice of a foreclosure sale under Mich. Comp. Laws § 600.3208). It seems obvious to us that an unnecessary and onerous legal dispute between a rightful title holder and a bonafide purchaser is precisely among the injustices Congress sought to avoid in including the Dispute Letter requirement in the FDCPA.

Arguments in Obduskey v. McCarthy & Holthus LLP held Jan. 7 show the complexity of the Fair Debt Collection Practices Act when it comes to nonjudicial foreclosures and debt collectors, according to an analysis by Danielle D’Onfro, a lecturer on law at Washington University in St. Louis, on the U.S. Supreme Court’s blog .

In June 2018, the Supreme Court granted certiorari in the case, Obduskey v. McCarthy & Holthus LLP, to determine whether nonjudicial foreclosure proceedings and those who are involved in them are subject to the FDCPA, ACA International previously reported. (Members may read more background on this case on the Industry Advancement Program website.)

In November 2018, the Consumer Financial Protection Bureau filed an amicus brief with the U.S. Supreme Court supporting that a law firm hired by a mortgage company after a consumer defaulted on a loan is not defined as a debt collector as outlined in the FDCPA, ACA International previously reported.

COMING TO YOU LIVE DIRECTLY FROM THE DUBIN LAW OFFICES AT HARBOR COURT, DOWNTOWN HONOLULU, HAWAII

LISTEN TO KHVH-AM (830 ON THE AM RADIO DIAL)

ALSO AVAILABLE ON KHVH-AM ON THE iHEART APP ON THE INTERNET

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Sunday – January 13, 2019

Listeners’ Forum #1: Mortgage Abuse Is Not Limited To Individual States

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Being a homeowner in foreclosure is for most a very lonely ordeal, confronted by often incomprehensible substantive laws and procedural rules, unfriendly judges, uncooperative loan servicers, distant pretender lenders, dishonest process servers, mountains of confusing if not fake paperwork, contradictory Internet bloggers, ballooning costs, and difficulties finding competent foreclosure defense attorneys, except for those few who are usually either untrained or generally incompetent or just plain crooks.

But you are not alone.

The Foreclosure Hour receives thousands of emails and voice mail messages annually from homeowners from virtually every State in the Nation complaining about similar if not identical mortgage abuses.

If foreclosure laws are ever to be reformed, it is absolutely necessary for homeowners, judges, and legislators alike to understand that mortgage fraud is not only a local problem, but pervasively national in scope.

In the past, The Foreclosure Hour has highlighted on individual shows the plight of a few individual homeowners.

Today, in order to demonstrate how widespread the problems actually are, John and I have selected a few representative emails we have received from listeners in recent years to read and discuss on today’s show, and anticipate dedicating some future shows as similarly a “Listeners’ Forum.”

It is of course not possible for John and me to specifically respond to all of the many thousands of comments we receive.

We will today play only a representative few of your emails as time permits, removing last names for privacy reasons, so our listeners can fully appreciate that, facing foreclosure and mortgage abuse, they are not alone.

John and I hope that that too will give our judges and legislators listening a better understanding of the broad scope of mortgage abuse in America, and a better understanding that homeowners in foreclosure are not deadbeats, but deserve better respect and treatment than the present court decapitation by procedural dynamics which too often takes place and the irrational forfeiture of homeowners’ life savings equity in their homes.

On Monday, the United States Supreme Court heard oral arguments in Obduskey v. McCarthy & Holthus LLP. As a brief recap, the case questions whether a law firm engaging in non-judicial foreclosure is considered a debt collector under the Fair Debt Collection Practices Act (FDCPA). The Consumer Financial Protection Bureau filed an amicus brief in this case back in November, siding with McCarthy & Holthus (McCarthy) on the issue.

The crux of the oral arguments seemed to rest on whether the FDCPA intended the exclusion of those enforcing a security interest to mean only those who do not engage with consumers. The justices asked counsel for both parties to discuss the difference between a law firm engaging in non-judicial foreclosure versus a repossessor. McCarthy’s counsel argued that there is no distinction, both are enforcing a security interest, whereas Obduskey’s attorney argued that sending a pre-foreclosure notice constitutes debt collection. Some of the justices seemed to side with Obduskey’s attorney. differentiating that repossessor only engages with the collateral “in the dark of night,” whereas a foreclosure attorney engages with the consumer by, for example, sending a pre-foreclosure notice.

In a rather unexpected turn, two of the right-leaning, pro-business justices — Chief Justice John Roberts and Justice Brett Kavanaugh — both seemed to side with Obduskey’s counsel on this question. Since such a notice encourages payment, Chief Justice Roberts referred to it as “indirect collection.” Justice Kavanaugh, the newest addition to the Supreme Court’s bench, likewise indicated that the purpose of a foreclosure notice is to tell someone that they need to pay or they will lose their home.

Markets are racked by turmoil, and there are signs the booming U.S. economy could slow down later this year. Yet the Supreme Court is reckoning with the lingering fallout from the financial crisis that rocked the global economy a decade ago.

The top court on Monday attempted to resolve a legal question that could have broad ramifications on hundreds of thousands of Americans who are foreclosed on without a judicial process each year. A key issue in the matter is who or what can be considered a “debt collector.”

The justices were divided, but not into clear ideological zones. Chief Justice John Roberts and Justice Brett Kavanaugh, Republican-appointed conservatives who are typically business friendly, were among the most skeptical questioners of the respondent in the case, a law firm working on behalf of Wells Fargo.

More than 20 Democratic lawmakers on Wednesday introduced legislation that would protect federal employees from foreclosures or evictions during the shutdown of the federal government.

The bill, sponsored by Sen. Brian Schatz of Hawaii and Rep. Derek Kilmer of Washington, is designed to provide some level of emotional stability during a period of financial insecurity for the thousands of federal employees who have been furloughed or working without pay since Dec. 22.

“Thousands of federal workers and their families are struggling to pay rent and make ends meet,” Sen. Schatz said in a statement. “It’s absolutely unacceptable. Our bill will protect federal workers and make sure they aren’t harmed because of a political stunt.”

The measure, known as the Federal Employee Civil Relief Act, would also prevent federal government employees who have been impacted by the shutdown from having cars or other property repossessed, being penalized for falling behind in student loan programs, or from losing insurance because of missed payments on premiums.

In the home mortgage industry, loans insured by the Fair Housing Authority (“FHA”) come with statutory prerequisites that are embedded in the loan contracts and that must be followed prior to foreclosure. One such obligation put forth by the Department of Housing and Urban Development (“HUD”) is the “face-to-face meeting” requirement. This meeting, however, is not required in several scenarios, including when the mortgaged property is not within 200 miles of the mortgagee, its servicer, or a branch office of either.

The bounds and application of those two words – branch office – bring us to a recent opinion handed down on December 18 by the U.S. District Court for the Western District of Virginia. There, on a motion to dismiss for failure to state a claim, the Court defined a “branch office” as “one where some business related to mortgage is conducted” and dismissed the complaint with prejudice.

The borrower had brought suit claiming improper foreclosure on her home because the lender failed to offer, attempt, or conduct a face-to-face meeting prior to foreclosing on the subject property. The borrower alleged that the exemption did not apply because there was an office of the lender within 200 miles of the property. It was undisputed that this office was not open to the public and did not provide services related to mortgage origination or servicing.

Sunday – January 6, 2019

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In recent years the Hawaii Supreme Court has gained national recognition for its leadership in attempting to bring fairness to and modernizing the Hawaii judge-made foreclosure defense system.

In doing so, the Hawaii Supreme Court has openly even rejected in its decisions the contrary holdings by our local Hawaii federal district court impinging on the rights of Hawaii mortgage borrowers.

The result has been a number of far reaching decisions that have arguably afforded more protection to mortgage borrowers today than in any State in the Nation.

Among such significant decisions, discussed on our prior shows available for listening in the Past Broadcast Section of our Website at www.foreclosurehour.com, have been:

1. Santiago v. Tanaka, 137 Haw. 137, 366 P.3d 612 (2015), restoring, inter alia, as a precondition to the right to foreclose the service of notice of a mortgage borrower’s right to cure whether or not contractually provided for;

5. Wells Fargo v. Behrendt, 142 Haw. 37, 414 P.3d 89 (2018), restoring, inter alia, standing in judicial foreclosures as a jurisdictional requirement not based on contract alone, enabling any interested third-party non-borrower to challenge the standing of a plaintiff to foreclose; and

6. Bank of America v. Reyes-Toledo 2, 2018 Haw. LEXIS 214, 2018 WL 4870719, restoring, inter alia, common law notice pleading standards contrary to federal newly stringent dismissal standards which impose unfair pleading burdens on mortgage borrowers, and also permitting mortgage borrowers for the first time to sue or counterclaim for wrongful foreclosure without waiting until a judicial foreclosure lawsuit is concluded.

The 2019 foreclosure defense agenda of the Hawaii Supreme Court moreover is off to a good start at the very beginning of the New Year and promises equally significant bellwether decisions, so far consisting of potentially three Hawaii Intermediate Court of Appeals decisions granted certiorari review and three more in various pending stages.

The three now accepted for review and before the Hawaii Supreme Court include:

1. Bank of Hawaii v. Bruser (In the Matter of the Trust Agreement Dated June 6, 1974, as Amended), SCWC 15-0000623 (no oral argument deemed necessary by the Hawaii Supreme Court), questioning, inter alia, whether a Probate Court has jurisdiction to interpret and revise a lease contract between a Trustee and a third party, raising fees leading to foreclosure;

2. Hawaii USA Federal Credit Union v. Monalim, SCWC-16-0000807 (oral argument January 11, 2019), questioning, inter alia, for the first time various aspects of the judge-made foreclosure deficiency judgment system in the context of a judicial foreclosure case where the foreclosing plaintiff waited four years to eventually seek a deficiency judgment and without the lower court conducting an evidentiary hearing to determine the true value of the foreclosed property at time of sale, notwithstanding the forced sale auction price; and

3. Nationstar Mortgage LLC v. Kanahele, SCWC-16-0000319 (oral argument scheduled for January 17, 2019), questioning, inter alia, whether summary judgment is appropriate where a foreclosing plaintiff summits contradictory supporting declarations, whether a foreclosing plaintiff who is not a holder in due course is subject to a defendant’s affirmative defenses, and whether the lower court abused its discretion by denying a defendant’s motion to compel discovery when a foreclosing party refuses to answer interrogatories and refuses to respond to requests for admissions.

The other three foreclosure appeals requesting or about to request certiorari review by the Hawaii Supreme Court at the start of 2019 include:

1. Kiowa v. Christiana Trust, CAAP-16-0000728, decided by the Hawaii Intermediate Court of Appeals on September 28, 2018, holding that although a promissory note may be unenforceable due to the expiration of the six-year contract statute of limitations in Hawaii, the underlying property may still be foreclosed on as the statute of limitations governing the enforceability of a mortgage as a real property interest is supposedly 20 years (a certiorari petition requesting Hawaii Supreme Court certiorari review will shortly be filed);

2. HSBC Bank USA v. Marcantonio, CAAP-17-0000807, decided by the Hawaii Intermediate Court of Appeals on December 28, 2018, holding, inter alia, that a mortgage borrower against whom summary judgment has been granted and who did not appeal the granting of summary judgment cannot defeat confirmation of sale even though having proof that the foreclosing plaintiff had no right to foreclose, not even owning the mortgage loan, and even if the foreclosing plaintiff had committed fraud on the court, and even though the lower court had no subject matter jurisdiction to hear the foreclosure case at the outset, because of the doctrine of res judicata based supposedly on an earlier decision of the Hawaii Supreme Court in Mortgage Electronic Registration Systems, Inc. v. Wise, 130 Haw. 11, 304 P.3d 1192 (2013) (a certiorari petition requesting Hawaii Supreme Court certiorari review will shortly be filed); and

3. Sakal v. AOAO Hawaiian Monarch, CAAP-15-0000573, decided by the Hawaii Intermediate Court of Appeals on July 26, 2018, reversing in the mortgage borrower’s favor, Sakal, confirming that a power of sale is contractual and not created by statute, which against the ICA decision the AOAO recently requested Hawaii Supreme Court review on behalf of reportedly thousands of Hawaii condo Associations; yet certiorari review was denied by the Hawaii Supreme Court last month in SCWC-15-0000529, leaving remaining Sakal’s own petition for writ of certiorari on another discussed nondispositive issue in the case where the Hawaii Intermediate Court of Appeals mentioned that the entry of a new ownership certificate called a TCT in Land Court records cuts off all mortgage borrowers’ defenses to foreclosure, however a TCT not filed in this case until after the foreclosure, now challenged by Sakai as being unconstitutional state action needing correction (certiorari petition pending on that separate issue before the Hawaii Supreme Court).

The above cases not only should have enormous potential interest locally, but nationally as well, and which outcome might well make a huge difference in many of our listeners’ foreclosure cases.

At the conclusion of today’s show, time permitting, we will also have an important announcement regarding foreclosure defense in California.

Please join John and me for another informative Foreclosure Hour as a weekly public service of the Dubin Law Offices.