Monday, October 26, 2009

Judge in New York wpes out Mortgage in Chapter 13 Bankruptcy

My new hero . . . . David B. Shaev, consumer bankruptcy lawyer in Manhattan who is responsible for getting this result!

"Oct. 9 in federal bankruptcy court in the Southern District of New York. Ruling that a lender, PHH Mortgage, hadn’t proved its claim to a delinquent borrower’s home in White Plains, Judge Robert D. Drain wiped out a $461,263 mortgage debt on the property. That’s right: the mortgage debt disappeared, via a court order."

I totally get what he did. There is a good chance that if your loan was registered with MERS you could get lucky too. Who knows what the ultimate outcome will be but, at the end of the day, Wells Fargo and PPH got SLAPPED! Way to go Mr. Shaev!

Friday, October 2, 2009

Judge Philip S. Gutierrez Get's It Wrong! Civil Code, §1632 - State Law Requiring Language Translations Does Apply to Federally Chartered Banks!

In a recent opinion by the US District Court on July 30, 2009 in the matter of Alberto Paz v. Wachovia Mortgage Corp, et al. Judge Philip S. Gutierrez issued an Order determining that Civil Code, §1632 is preempted by federal law. As you will read below, the basis of his ruling is that federal law requires that any state law attempting to regulate what must be disclosed on a loan is preempted. However, our Hon. Judge Gutierrez fails to recognize that Civil Code, §1632 is not a substantive law of "WHAT" must be disclosed, it is a law that governs the "FORMAT" of what must be disclosed. The information disclosed should have been in Spanish! I hope Attorney James E. Curtis, IV is able to appeal.

Some of the details from the decision

"Congress enacted the Home Owners’ Loan Act of 1933 (“HOLA”) to regulate banks chartered under federal law. Through HOLA, Congress gave the Office of Thrift Supervision (“OTS”) the authority to issue regulations related to federal savings associations. OTS regulations “preempt state laws affecting the operations of federal savings associations” with few exceptions. 12 C.F.R. § 560.2(a); Silvas v. E*Trade Mortg. Corp., 514 F.3d 1001, 1006 (9th Cir. 2008) (noting that only state laws with an incidental effect on federal savings associations are not preempted). 12 C.F.R. § 560.2(b) provides “illustrative examples,” without limitation, of the types of state laws preempted by federal banking law. When analyzing whether a state law is preempted, a court must determine whether the type of law in question is listed in paragraph (b). If so, the analysis will end there; the law is preempted. If the law is not covered by paragraph (b), the next question is whether the law affects lending. If it does, then, in accordance with paragraph (a), the presumption arises that the law is preempted. The presumption can be reversed only if the law can clearly be shown to fit within the confines of paragraph (c). For these purposes, paragraph (c) is intended to be interpreted narrowly. Any doubt should be resolved in favor of preemption. Silvas, 514 F.3d at 1005.

Thus, in order to determine whether Cal. Gov. Code § 1632 is preempted by federal law, the Court must first ascertain if a law of its kind is listed in 12 C.F.R. § 560.2(b). Among the 13 examples in paragraph (b) are state requirements regarding licensing by creditors, the terms of credit, loan-related fees, and access to and use of credit reports. The example most pertinent to the instant action is 12 C.F.R. § 560.2(b)(9), which provides for the preemption of, among other
things, state laws that require specific information or content to be included in credit contracts or other credit-related documents.

Courts have held that state regulations that require specific statements in disclosures and documents, such as section 1632, are preempted by OTS
regulations. In Amer. Bankers Ass’n v. Lockyer, 239 F. Supp. 2d 1000 (E.D. Cal. 2002), the court considered whether a California law could require federally chartered banks to include warnings to cardholders in credit card billing statements about the consequences of paying the monthly minimum balance. The court held that the state law directly conflicted with 12 C.F.R. §560.2(b)(9) because it mandated “that specific information be included in cardholders’ billing statements.” Id. at 1011."

NOTE: This was a substantive requirement.

"Similarly, section 1632 requires a “specific statement,” namely that all credit-related documents be translated for the borrower into one of five foreign languages."

But 1632 does not require a substantive disclosure like the Amer. Bankers case.

The Ninth Circuit also addressed the preemptive effect of 12 C.F.R. § 560.2(b)(9) in Silvas. The court held that two California laws regulating disclosures and advertisements were preempted by federal law because the state laws fell within the specific examples listed in paragraph (b). Silvas, 514 F.3d at 1006. Similarly, the translation of Plaintiffs’ loan documents into Spanish also falls within paragraph (b) because section 1632 regulates information and content in credit-related documents created by federally chartered banks. Yet, OTS regulations exclusively govern “the operations, and the deposit and lending-related practices of federal savings banks.” Bank of America v. City and County of San Francisco, 309 F.3d 551, 560 (9th Cir. 2002). Section 1632 aims to govern the operations of a federally chartered bank by requiring banks to translate and reprint loan documents for a borrower, which is the exclusive territory of OTS regulations as specified in 12 C.F.R. § 560.2(b)(9)."

Similar problem here. A translation of a document is not a regulation of actual "INFORMATION OR CONTENT" it is merely changing the format of the content.

Again I really hope that Mr. Curtis gives it another try!