Mortgage Servicing Fraud
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Tuesday, December 18, 2007

Complaint Claims Consumer Clipped For $50K+ By Mortgage Servicer

According to a lawsuit recently filed in a West Virginia state court, Select Portfolio Servicing, Inc. (the firm formerly known as Fairbanks Capital Corp.) is being accused of collecting over $50,000 more than what was due from a West Virginia homeowner, whose mortgage balance had been previously reduced pursuant to a legal settlement in a previously litigated class action lawsuit. The current lawsuit, filed on November 14, 2007, alleges, among other things:
  • "The Defendant [Select] failed to follow the ordered new payoff schedule consistent with the reduced loan. Despite the Court Order, the Defendant continued to treat the entirety of the loan as due, and have month-by-month demanded the full payment. Since January 2001, the Defendant has sent over eighty-two demands for payment that misrepresent the total amount due."
In a procedural maneuver, counsel for Select has filed a request last week to move the case from the state court to a West Virginia Federal Court.

Representing the consumer is attorney Daniel F. Hedges, Charleston, West Virginia.

To view the lawsuit, see Helen B. Moss v. Select Portfolio Servicing, Inc. f/k/a Fairbanks Capital Corp.

To view the request to move the case, see Notice of Removal. questionable mortgage servicing practices tactics yak
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To what advantage, if any, does this serve?(moving from state to federal court) Is it because of the monetary amount? Why do defendants such as this do this?
Don't understand the implications.
Thanks
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Joe B
Yankee-

     I am going to paint my answer with a fairly wide brush; so all you folks who disagree, that's fine, there are always exceptions...

     Essentially, most federal courts are pro business, while most local and state courts are pro-consumer. The reason is that judges in Federal Courts are appointed by the President, while local judges are elected by their local constituency. So, who has the tie to the local community? Who has the more political ties? Most political ties therefore, are influenced by Federal (i.e. big business) issues, rather than the local guy. Moreover, most of these judges look down on folks that will be presented as "deadbeats," and are more inclined to believe the business and their records. This is a big challenge to overcome!

     While judges are supposed to be apolitical, the fact is, like most people, we all carry a certain degree of bias, whether we realize it or not. Some can minimize this, and others can't help but put its thumbprint on everything they do. So, it is a bit riskier for a consumer to end up in federal court, while most companies will do what they can to have it moved there.

     Another reason is that there is generally a very long delay before a case will be heard in Federal court, and most people cannot afford the freight to carry it this long. The servicers will attempt to outspend you by filing motion after frivolous motion in Federal Court, thereby driving up your legal bills until you cry Uncle! They can afford this long delay tactic, while you are trying to minimize the costs. Eventually it forces most people to settle on unfavorable circumstances due to the exhaustion of resources (money).

     So, there are two of the biggest (there are certainly others) reasons why most of these companies attempt to have the cases moved to a federal venue. I know others here will tell you their reasons why as well, but these are my two biggest!

     If I haven't answered your question sufficiently, let me know.

JB
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To what advantage, if any, does this serve?(moving from state to federal court) Is it because of the monetary amount? Why do defendants such as this do this?
Don't understand the implications.


First, I want to indicate that your question is somewhat far afield from my own mortgage market expertise and would be better answered by an attorney with formal legal training and civil practice experience in state and federal courts.  I am NOT an attorney and CANNOT give you legal advice!  But I will share my LAY IMPRESSIONS as a foundation for your further research and inquiry.

Generally, both state and federal courts litigating a question will apply the same substantive law, the law where the transaction occured and the real property is situated.  However, federal courts will apply federal procedural rules rather than the procedural rules of the jurisdiction where the matter arose.  Depending upon the court rules of the jurisdiction, differences can be small or large.

For example, a number of states now have discovery rules which largely mirror the federal rules.  But other states might make discovery either more or less liberal.  The discovery environment might sometimes favor one of the parties.

Federal rules for getting temporary restraining orders may be more onerous than the rules of many state court jurisdictions.

Rules with respect to service and subpoenas may in some cases be MORE potent in a federal setting, particularly with respect to a distant or an out of state party.

Court access and docket congestion may be another issue.  I had understood that Deutsche Bank brought the foreclosure actions in Ohio Federal Court in the Boyko case, due in part to state court docket congestion.  They seem to have hoped to obtain a sooner court date and quicker judicial foreclosure, but this collided with a perceptive federal judge, Judge Christopher BOYKO, who correctly held the plainitff to federal standing and real party at interest standards resulting in dismissal.

Nor should one ASSUME that federal courts are LESS overcrowded than state courts.  Due to a variety of issues, the dockets in one federal jurisdiction may be heavy while in another they are lighter.  And similarly state court docket congestion varies widely within the various states.  Very often, the urban dockets are more congested.  So a plaintiff bringing a foreclosure action in an urban area like Cleveland might hope for speed in federal rather than state court.

The personality and characteristics of the Judge assigned to a case might come into play, as well, though in a routine foreclosure judge shopping would seem to be less common.  That is to say that once a matter is assigned to one state court judge, getting that judge to recuse himself for other than significant reasons or otherwise getting a matter assigned to another different judge may be difficult.  Federal removal trumps the original assignment to a particular state court judge and gets a new federal judge on the case.

In those jurisdictions where judges are elected rather than appointed, judges may be somewhat more sympathetic to the economic situations of their constitutents.  I recall circumstances in past decades where publicly elected officials in judicial foreclosure states seem to have deliberately SLOWED foreclosures in periods of acutely severe local economic stress.  Federal removal can shift the matter to a forum more inclined to zealously follow the law as written.

In matters pertaining to federal questions, for example Truth-In-Lending and RESPA violations, federal case law is more likely to provide some robust certainty as to outcome.  That is to say there is something to be said for KNOWING how a court may rule based upon a larger body of established precedent.  THis might militate in favor of federal rather than state court.

This reply is NOT intended to be exhaustive, but rather to stimulate your thinking, research and INQUIRY relating to the possibility of and reasons for a federal removal.  In the end, you are going to need to do your own research and/or consult an experienced lawyer.  But the matter somewhat reduces to laying the alternative jurisdictions side by side and weigh the pros and cons of each forum with respect to multiple criteria.

I would conclude by pointing out that "forum shopping" is often NOT limited to a choice of state or federal court.  In many instances other than real estate foreclosure, as in a suit where a contract matter is performed in multiple places, or where there are multiple defendants in various locations, a plaintiff may have a number of possible alternatives as to WHERE to file a suit.  In a foreclosure, the real estate tends to more narrowly FIX choice of forum.  If other ancilliary servicing fraud issues were being litigated separately from the foreclosure itself, as in post-foreclosure litigation in a non-judicial foreclosure state, there might be certain circumstances where the matter could be litigated in a forum OTHER THAN where the property is situated.

And once divorced from the situs of the real property, forum shopping can in some instances go national!  Consider, for example, the circumstance where a class action is being brought.  Since there are multiple named plaintiffs bringing a suit for a class where injury may have taken place nationally, the matter might be properly brought in a number of alternative places.  In such circumstances, the identity of the individual named plaintiffs becomes important, as this may be a ticket to a favored forum!

I hope this reply imparts the complexity of the matter!  Trying to understand and assess choice of forum possibilities within the context of a single foreclosure suit as a lay person may be daunting.  Since most defendants are struggling to get represented at all and often DELAY getting an attorney until it is too late to request removal, the forum is most often set by the plaintiff's filing or the plaintiff's removal petition in a TRO / injunction circumstance.  But where one has the luxury of deliberate selection, choice of forum can be critical to a successful outcome in a close case.

I hope this helps!  
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Originally posted by Joe B
Essentially, most federal courts are pro business, while most local and state courts are pro-consumer. The reason is that judges in Federal Courts are appointed by the President, while local judges are elected by their local constituency. So, who has the tie to the local community? Who has the more political ties? Most political ties therefore, are influenced by Federal (i.e. big business) issues, rather than the local guy. Moreover, most of these judges look down on folks that will be presented as "deadbeats," and are more inclined to believe the business and their records. This is a big challenge to overcome!

     While judges are supposed to be apolitical, the fact is, like most people, we all carry a certain degree of bias, whether we realize it or not. Some can minimize this, and others can't help but put its thumbprint on everything they do. So, it is a bit riskier for a consumer to end up in federal court, while most companies will do what they can to have it moved there.


I do NOT want to seem to be overly sharpshooting Joe B.'s answer here.  I think that his answer is generally helpful and informative.

But I want to clarify a couple of things that I believe help to further elaborate the complexity and richness of choice of forum issues.

Joe tells us "Essentially, most federal courts are pro business, while most local and state courts are pro-consumer."  I am unsure whether I would AGREE with that statement.  But I certainly do NOT pretend to have specific information which would tend to refute it. 

But I DO take issue with Joe's next statement which I believe is factual inaccurate as to state court judges and fails to appreciate the actual appointment mechanisms driving federal judicial selection.

State court judges are NOT uniformly ELECTED.  Many states have various other mechanisms for judicial selection (See for example http://www.judicialselection.us/ and more particularly http://www.judicialselection.us/judicial_selection/methods/selection_of_judges.cfm?state= ).  And in these places, the responsiveness to the electorate may be different.  However, California, Texas, New York, Florida and Michigan all ELECT their judges, so I think that Joe is MOSTLY RIGHT.

Moreover, the sensitivity of elected judges to popular concerns is also uneven.  First, terms of elected VARY widely amongst the states.  Texas elects District Judges to four year terms.  California and Pennsylvania elect judges to ten year terms.  Florida is in the middle with six year terms for district judges.  In Texas, the judges are exposed to competitive direct election every four years.  In Pennsylvania, after an initial ten year term, judges stand for retention in a YES/NO election.  Until a bit of a political earthquake last year, judges were almost ALWAYS RETAINED.

It stands to reason that Texas judges are going to be a bit more publicly responsive as Joe B. postulates than the better insulated Pennsylvania judges!

Nor is election universally a key to responsiveness.  IN states where judges are ELECTED campaign finance takes a part, as well.  Well funded lawyers and law firms have a disproportionate role in the financing of judicial elections everywhere that judges are elected.

My caution here is COMPLEXITY.  I would NEVER assume a state court judge to be pro-consumer.

*

While Joe B. is CORRECT that federal judges are appointed by the President to lifetime terms, even that is NOT as simple as it seems.  From the very earliest days of our Republic, our United States Senate found itself discontented with the Constitutional provision providing that the President appoint federal judges.

Since ALL federal judicial appointments have to be confirmed by the United States Senate, the Senate developed an alternative procedure for judicial appointments referred to generally as "Senatorial courtesy" (See generally http://en.wikipedia.org/wiki/Senatorial_courtesy .  In essence, BY AGREEMENT the United States Senate has agreed for over 200 years NOT to confirm a federal judge to the bench over the OBJECTION of the Senators of the state in which that federal judge will preside.

There are complexities as to Senatorial courtesy, as when one Senator from a state agrees with an appointment and the other disagrees.  And the rule of Senatorial courtest has somewhat evolved over time.

But in its essence, the Senate will NEVER confirm a judicial nominee to the federal district bench absent the support or at least non-objection of at least one Senator.  In practice, the Senators of a state of tend to make lists of candidates they deem acceptable and the President then chooses and nominates one of the candidates from this short list.

Where only one Senator is from the President's political party, that Senator tends to choose.  Where there are two Senator's from the President's party, they tend to reach some accomodation, usually with deference to the senior Senator. 

When both Senator's are from the opposite party, the President would usually resist or refuse to simply appoint a candidate identified by the opposition Senators if the person was viewed as ideologically unacceptable.  In those instances, opposition Senators would tend to MODERATE their choices and select candidates which would be acceptable to both themselves and the President.

Over the past several decades, I would suggest that the Republican Party has been identified as the more pro-business party and the Democratic Party the more pro-consumer party (I am a Republican).  I believe that one would generally find that federal courts in states where there have consistently been two Democratic United States Senators (e.g. Maryland or more recently California) would tend to be more pro-consumer, while states that have persistently had two Republican Senators (e.g. Mississippi or, until recently, Pennsylvania) would have a more pro-business bench.  Note that this is WITHOUT RESPECT to the identity of the President, though the President clearly DOES clearly have much influence over judicial appointments particularly in the many states where the delegation is split.

And bear in mind that like any other political barter, votes and support may be TRADED, a vote for this appointee in exchange for a vote on that bill, etc.

I would wholeheartedly AGREE that judges ARE political.  Anyone that think that a federal court judge gets picked by a United States Senator WITHOUT political consideration is naive.  And whether elected or appointed, state court judges are political, too.  As explained above the character of their political participation and their responsiveness depends upon the precise judicial selection process used, to include all of the mechanics of campaign finance laws when elected.

This level of detailed discussion is probably overkill as to choice of forum, but may be helpful to forum participants to better understand the judicial landscape.
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Sleuth

There are some discussions in this thread that are interesting.

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