Mortgage Servicing Fraud
occurs post loan origination when mortgage servicers use false statements and book-keeping entries, fabricated assignments, forged signatures and utter counterfeit intangible Notes to take a homeowner's property and equity.
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A new decision out of the New York Supreme Court Appellate Decision, Third Department, gives an interesting illustration of a defendant's limitations defense, while showing some cautionary points. The case is:

[i]US Bank Natl. Assn. v Gestetner, 2013 NY Slip Op 00972 (N.Y. Sup. Ct. App. Div., 3rd Dept., February 14, 2013)[/b]

In this case, the Lender sought foreclosure based upon a mortgage executed by Steven D. SKLAR and Sandor GESTETNER. Later, Stephen SKLAR's wife Ermina SKLAR intervened in the action alleging that GESTETNER had executed the mortgage pursuant to a forged power of attorney.

The bank later amended its complaint to allege new causes of action for fraud and conspiracy, restitution and/or unjust enrichment and subrogation and/or an equitable mortgage.

The defendants interposed the affirmative defense of limitations.

See the opinion for a discussion and the disposition of this case. I thought the case was interesting and instructive, since it discussed tolling of limitations under a New York "discovery rule", tolling due to bankruptcy and the invalidity of tolling when the plaintiff lacked diligence in amending its complaint to introduce the new claims after Mrs. SKLAR sought to intervene.

Several of the seniors at this Forum have made cautionary posts about the importance of considering ALL possible bases for tolling of limitations when there is a bankruptcy or other circumstances that might invoke tolling. A lot of the swindlers and scam artists are standing on the sidelines cheerleading in favor of immediate invocation of various defenses and even encouraging gullible marks to file Quiet Title actions, etc. Seniors here at the Forum have shown in many posts that these strategies are not only vacuous but often counterproductive.

I take two lessons from this case. First, it is almost always to the advantage of defendants to draw a case out as much as possible. If Mrs. SKLAR had intervened sooner or if the matter of her intervention had been decided in a more timely way, the SKLARS might have never gotter beyond limitations.

Second, it is almost always better to play one's cards as close to the vest as possible and to avoid prematurely telegraphing strategies and intentions. With or without intervention, if Mrs. SKLAR had made the plaintiff aware of the forged power of attorney earlier then the plaintiff could have timely amended its complaint to include the additional counts within the limitations period.

My point here is simply that Mrs. SKLAR took a very bad hand and played it successfully with great skill.

One additional note is also in order. It would NOT appear as though the SKLARs are getting a "free house". My reading of the decision is that Mr. SKLAR was probably liable under the original mortgage, but Mrs. SKLAR was not, though the actual disposition seems a little murky without examining all orders from which the appeal was taken. Under such circumstances, the plaintiff may possibly proceed to sell Mr. SKLARs interest after appointment of a referee under an order of reference as to his interest (if the plaintiff hasn't already done so) and the lender (or other purchaser at auction) may thereby become a partner as to undivided interest in the subject property with Mrs. SKLAR.

This is not an altogether unhappy outcome. As a co-owner, Mrs. SKLAR may still have a right to occupy and use the subject property. The plaintiff will probably seek a partition and order of sale, but that could be tied up in court for additional years. The Lender will probably be eager to settle on terms reasonably favorable to Mrs. SKLAR. Lets just say that Mrs. SKLAR seems to have possibly won 1/2 a "free house", subject to some additional litigation. Of course, to the extent that Mrs. SKLAR was totally innocent in the mortgage transaction and didn't benefit in any way from the mortgage transaction by Mr. SKLAR and Sandor GESTETNER, one could argue that she didn't "win" anything. I surmise from the additional amended claims that the bank was alleging that she benefitted from the payoff of a prior mortgage, etc.

The case just gives a small practical lesson in the application of limitations in New York and some rather sophisticated and well played litigation strategy. Mrs. SKLAR probably had very sharp attorney. This is not the kind of outcome one gets using one of the defense foreclosure mill law firms.
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