On June 7th, the Eleventh Circuit affirmed the entry of summary judgment dismissing Chapter 13 debtors' claims against Wells Fargo, which holds debtors' mortgages. Debtors alleged that Wells Fargo violated the Bankruptcy Code's automatic stay provisions by recording in its internal records the fees it incurred to file its proof of claim. The Eleventh Circuit held that Wells Fargo did not violate the automatic stay because it had not collected or attempt to collect those fees. Similarly, a claim based on Wells Fargo's failure to disclose the fees was not yet ripe for action.
On June 7th, Bloomberg reported that the FDIC, as receiver for Downey Savings & Loan Association, has sued Amerifund Financial Inc., a mortgage broker. The FDIC alleges that Amerifund altered or misstated borrowers' financial information while processing mortgage applications for Downey. Lawsuit.
On February 16th, the Third Circuit addressed an issue of first impression and held that the discounted cash flow method was the proper measure of damages under Bankruptcy Code Section 562 when a market price cannot be determined. The parties had entered into a $1.2 billion repurchase agreement for a portfolio of home mortgages. On the day the debtor defaulted, the distressed state of the credit markets made it commercially unreasonable for the purchaser to sell the portfolio and the market price would not reflect the asset's worth.
On December 23rd, the Third Circuit addressed whether the automatic stay provisions of the Bankruptcy Code prevents a home mortgage lender from accounting for the pre-petition escrow shortage in its post-petition calculation of future monthly escrow payments. The Court concluded that when the terms of the loan allow the lender to escrow taxes and insurance payments, the lender has a pre-petition claim. In re Francisco Rodriguez.
On September 15th, the Sixth Circuit resolved a conflict among the district courts within the circuit. It held that a bank holding the undersecured home mortgage of a Chapter 13 debtor who is in arrears at the time of filing, is entitled to receive under the Chapter 13 bankruptcy plan fees and costs in the arrearage cure. Deutsche Bank National Trust Co. v. Tucker.
On June 14th, the First Circuit modified the bankruptcy court's $250,000 sanction award against a mortgage servicer who erroneously claimed to be the mortgage holder. The mortgage servicer did not deliberately or intentionally seek to mislead the bankruptcy court and its actions were not prejudicial. First Circuit therefore modified the award to $5,000. In re Jacalyn S. Nosek.
On April 26th, the Eleventh Circuit held that the anti-injunction provision of the Financial Institutions Reform, Recovery and Enforcement Act prohibits a federal district court from enjoining the FDIC. A trial court had initially imposed a TRO against a failing bank prohibiting it from taking any action with respect to $1 billion worth of mortgage proceeds it held in trust for petitioner, Bank of America, who held legal title. When the FDIC was appointed receiver, the FDIC moved to dissolve the TRO. The trial court refused converting the TRO into a preliminary injunction.
On April 1st, the FDIC closed on a sale of an equity interest in a limited liability company (LLC) created to hold certain assets transferred from 19 failed bank receiverships. The purchaser of the interest in the Multibank Structured Transaction Single Family Residential 2010-1 is Roundpoint Mortgage Servicing Corporation. The sale was conducted through a competitive auction held on February 24, 2010. Nine different qualified groups submitted bids to purchase either a 50% leveraged ownership interest or a 20% unleveraged ownership interest in the newly formed LLC.
On January 28th, the Ninth Circuit addressed the issue of whether a Chapter 7 bankruptcy trustee had actual notice of an unrecorded refinanced mortgage when the bankruptcy petition was electronically filed simultaneously with schedules listing the mortgage as a secured debt. The Court held that the trustee lacked actual notice. The Court found that the filing of the petition was a separate event from the filing of the schedules. The trustee was therefore a bona fide purchaser for value without notice and under state bona fide purchaser law, the trustee could avoid the unrecorded mortgage.
On January 11th, the Eighth Circuit held that a bankruptcy court properly awarded summary judgment to the bankruptcy trustee in a suit seeking to avoid as a preferential transfer, the pre-petition transfer of a mortgage from the debtor to the bank. Because the bank failed to record the home mortgage prior to the borrower's filing of a Chapter 7 bankruptcy petition, Section 547(e)(2)(C) of the Bankruptcy Code deemed the transfer of the mortgage to have occurred immediately before the debtor filed his bankruptcy petition.