And this is why we have appellate courts …

(BREAKING NEWS) — The author of this post is a paralegal, author, national talk show host and consultant to attorneys on consumer law issues and foreclosure defense. This post is for educational purposes only and is not intended to pontificate legal advice.

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The United States Court of Appeals for the Second Circuit has reversed and remanded a RESPA-related case back to the District Court for the Western District of New York in a case involving Ocwen Loan Servicing, LLC’s (NOTE: Ocwen has been purchased by PHH Mortgage of New Jersey.) alleged failure to record the homeowner’s mortgage instruments and its actions in losing key mortgage documents. The district court found for Ocwen in its summary judgment motion, stating that the Plaintiff’s asserted “errors” did not fall within Regulation X’s “catch-all provision”. The appellate court disagreed and reversed the lower court’s decision and sent the case back for further proceedings as directed by the appellate court.

This case involved an alleged defaulted loan and a subsequent loan modification. The homeowner, Kim Naimoli, sued Ocwen because Ocwen denied her loan modification because of its own failure to record the mortgage documents.


Of note here is that Ocwen failed to record the mortgage. What lien right does it have it the mortgage document isn’t publicly recorded? There is no specific notice to the world, is there?

The mortgage at issue was originally secured in favor of IndyMac Bank, F.S.B., which should raise red flags to most consumers because of the way IndyMac securitized its paper.

As usual, the mortgage loan servicers play handball with the borrower’s documents inside of a loan modification and thus, Ocwen never sent the documents to Naimoli for re-execution. This is problematic for any loan servicer because any lender knows that if the mortgage documents don’t represent a perfected interest, it leaves potential legal loopholes for the homeowner to slip through.

Ocwen denied Naimoli her loan mod because of its own alleged errors and the district court (which these days has become more politicized than not) ruled in favor of Ocwen, claiming that errors in the evolution of loss mitigation options are not covered under RESPA (Real Estate Settlement Procedures Act; Regulation X)’s catch-all provision and Naimoli appealed.

The Second Circuit clearly explain why Naimoli’s complaint was covered under Regulation X. This is why we have appellate courts. The CFPB also stepped in and filed an amicus brief, which contradicted Ocwen’s claim. No matter, the district court looked past all that and ruled in favor of the lender (servicer; “We can’t hurt the banks!”)

This is a great case to review when it comes to challenging screw-ups under RESPA. See below:

In other news, the rate of foreclosures seems to be holding steady at the moment … not to the level of the massive amount of foreclosures that occurred between 2009 and 2015. This would indicate that the federal government’s bail-out plans for consumers might have worked in some cases, but not so much in others, especially those not on the dole from D.C.

For more updates, listen to Dave Krieger on The Power Hour.

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