December 21, 2012
This article was originally published in Lynn Szymoniak’s previous publication, ‘Fraud Digest,’ and is republished here as a resource for those interested in foreclosures and document fraud.
January 14, 2010
In a few foreclosure cases, judges have noticed that the same individual appears as an officer of various banks. In several of these cases, the judges have dismissed the foreclosure actions and ordered that such actions cannot be refiled unless the foreclosing party presents an Affidavit with the three-year employment history of the bank “officer.”
In most of these cases, the Bank has never refiled – presumably unable to explain the issue of the same individual appearing as an officer of many banks.
The following cases address this issue:
Bank of NY v. Mulligan, 2008 NY Slip Op 31501 (U)(June 3, 2008):
“…Additionally, plaintiff BNY must address a third matter if it renews its application for an order of reference. In the instant action, as noted above, Ely Harless, as Vice President of MERS, assigned the instant mortgage to BNY on October 9, 2007. Then, as Vice President of COUNTRYWIDE, on March 20, 2008, he executed the affidavit in this action. Is Mr. Harless the Vice President of MERS or the Vice President of COUNTRYWIDE? Did he change his employment between October 9, 2007 and March 20, 2008? The Court is concerned that Mr. Harless might be engaged in a subterfuge, wearing various corporate hats. Before granting an application for an order of reference, the Court requires an affidavit from Mr. Harless describing his employment history for the past three years…”
Bank of NY v. Orosco, 2007 NY Slip Op 33818(U)
“Plaintiff must address a second matter before it applies for an order of reference after demonstrating that the alleged assignment was recorded. Plaintiffs application is the third application for an order of reference received by me in the past several days that contain an affidavit from Keri Selman. In the instant action, she alleges to be an Assistant Vice-president of the Bank of New York. On November 16,2007, I denied an application for an order of reference (BANK OF NY AS TRUSTEE FOR THE CERTIFICATE HOLDERS OF CWABS, INC. ASSET-BACKED CERTIFICATES, SERIES 2006-8 v JOSE NUNEZ, INDEX No. 10457/07), in which Keri Selman, in her affidavit of merit claims to be “Vice President of COUNTRYWIDE HOME LOANS, Attorney in fact for BANK OF NEW YORK.” The Court is concerned that Ms. Selman might be engaged in a subterfuge, wearing various corporate hats. Before granting an application for an order of reference, the Court requires an affidavit from Ms. Selman describing her employment history for the past three years…”
Deutsche Bank National Trust Co. v. Castellanos, 2008 NY Slip Op 50033 (U)
…Two additional matters plaintiff needs to address in a renewed motion. In my recent review of the moving papers in the renewed motion, I noticed that the July 21, 2006 “affidavit of merit” was executed by Jeff Rivas, who claims to be Deutsche Bank’s Vice President Default Timeline Management. On the same day, Mr. Rivas executed, before the same notary public, M. Reveles, a mortgage assignment from Argent Mortgage Company, LLC, claiming to be Argent’s Vice President Default Timeline Management. Did Mr. Rivas somehow change employers on July 21, 2006 or is he concurrently a Vice President of both assignor Argent Mortgage Company, LLC and assignee Deutsche Bank? If he is a Vice President of both the assignor and the assignee, this would create a conflict of interest and render the July 21, 2006 assignment void.
Also, Mr. Rivas claims that Argent Mortgage Company, LLC is located at 1100 Town and County Road, Suite 200, orange, California. Did Mr. Rivas execute the assignment at 100 Town and County Road, Suite 200, and then travel to One City Boulevard West, with the same notary public, M. Reveles, in tow? The court is concerned that there may be fraud on the part of Deutsche Bank, Argent Mortgage Company, LLC and/or MTGLQ Investors, L.P., or at least malfeasance. If plaintiff renews its motion for a judgment of foreclosure and sale, the Court requires a satisfactory explanation by Mr. Rivas of his recent employment history…
HSBC Bank, N.A. v. Cherry, 2007 NY Slip Op 52378 (U), 18 Misc 3d 1102 (A):
“…Additionally, plaintiff HSBC must address a second matter if it renews its application for an order of reference upon compliance with CPLR § 3215 (f). In the instant action, as noted above, Scott Anderson, in his affidavit, executed on June 15, 2007, states he is Vice President of OCWEN. Yet, the June 13, 2007 assignment from MERS to HSBC is signed by the same Scott Anderson as Vice President of MERS. Did Mr. Anderson change his employer between June 13, 2007 and June 15, 2007. The Court is concerned that there may be fraud on the part of HSBC, or at least malfeasance. Before granting an application for an order of reference, the Court requires an affidavit from Mr. Anderson describing his employment history for the past three years…
In the instant action, with HSBC, OCWEN and MERS, joining with Deutsche Bank and Goldman Sachs at Suite 100, the Court is now concerned as to why so many financial goliaths are in the same space. The Court ponders if Suite 100 is the size of Madison Square Garden to house all of these financial behemoths or if there is a more nefarious reason for this corporate togetherness. If HSBC seeks to renew its application for an order to reference, the Court needs to know, in the from of an affidavit, why Suite 100 is such a popular venue for these corporations.”
Deutsche Bank National Trust Company v. Rose Harris, Index No. 35549/07, Supreme Court of NY (Brooklyn), February 5, 2008:
“…Plaintiff’s affidavit, submitted in support of the instant application for a default judgment, was executed by Erica Johnson-Seck, who claims to be a Vice President of plaintiff DEUTSCHE BANK. The affidavit was executed in the state of Texas, County of Williamson… The Court is perplexed as to why the Assignment was not executed in Pasadena, California, at 460 Sierra Madre Village, the alleged “principal place of business” for both the assignor and the assignee. In my January 31, 2008 decision (Deutsche Bank National Trust Company v. Maraj [citation omitted]), I noted that Erica Johnson-Seck claimed that she was a Vice President of MERS in her July 3, 2007 INDYMAC to DEUTSCHE BANK assignment, and then in her July 31, 2007 affidavit claimed to be a DEUTSCHE BANK Vice President. Just as in Deutsche Bank National Trust Company v. Maraj, at 2, the Court, in the instant action, before granting an application for an order of reference, requires an affidavit from Ms. Johnson-Seck, describing her employment history for the past three years.
Further, the Court requires an explanation from an officer of plaintiff DEUTSCHE BANK as to why, in the middle of our national subprime mortgage financial crisis, DEUTSCHE BANK would purchase a non-performing loan from INDYMAC, and why DEUTSCHE BANK, INDYMAC, and MERS all share office space at 460 Sierra Madre Villa, Pasadena, CA 91107.”
HSBC Bank USA v. Perboo, 2008 NY Slip Op 51385 (U), 20 Misc 3d 1117(A):
“Further, plaintiff must address a second matter if it renews its application for an order of reference upon compliance with CPLR § 3215 (f). In the instant action, as noted above, Victor F. Parisi, in his affidavit, dated December 14, 2007, states he is Vice President of EQUITY ONE. Yet, the September 28, 2007 assignment from MERS as nominee for PEOPLE’S CHOICE to HSBC is signed by the same Victor F. Parisi, as Vice President of MERS. In my November 20, 2007 decision and order in HSBC BANK USA, NATIONAL ASSOCIATION AS TRUSTEE FOR NOMURA HOME EQUITY LOAN, INC. ASSET-BACKED CERTIFICATES SERIES 2006-FM2 v SANDOVAL, Index Number 8758/07, the same Victor F. Parisi assigned the underlying mortgage and note as Vice President of MERS to HSBC on March 13, 2007, and then signed the affidavit of merit as Vice President of EQUITY ONE, authorized servicer for HSBC, the next day, March 14, 2007. Did Mr. Parisi change his employment from March 13, 2007 to March 14, 2007, and again from September 28, 2007 to December 14, 2007? The Court is concerned that Mr. Parisi might be engaged in a subterfuge, wearing various corporate hats. Before granting an application for an order of reference, the Court requires an affidavit from Mr. Parisi describing his employment history for the past three years.”
An individual who falsely claims to be a bank officer – that is, who acts without the authorization of the bank – commits fraud. Because mortgage assignments are sent repeatedly through the U.S. Mail, the fraud becomes the federal offense of mail fraud. If a bank has actually authorized non-employees to use the title of Vice President of the bank on mortgage assignments, other issues arise. Banks are highly regulated, as are bank relations with affiliated companies.
Sections 23A and 23B of the Federal Reserve Act (FR Act), as applied by the Federal banking agencies under various Federal banking statutes, govern transactions between banks and affiliated business organizations. The Gramm-Leach-Bliley Act (GLBA) amended many laws governing the affiliation of banks and other financial service providers. Among other laws, the GLBA amended the Banking Act of 1933, the Bank Holding Company Act of 1956, (BHC Act), the Interstate Banking and Branching Efficiency Act of 1994, the Investment Company Act of 1940, the Investment Advisers Act of 1940, the Securities Exchange Act of 1934, the International Banking Act of 1978, the FR Act, the Federal Deposit Insurance Act (FDI Act), and the Home Owners’ Loan Act.
Section 18(j) of the FDI Act extends the provisions of Sections 23A and 23B of the FR Act to state nonmember banks. Section 23A regulates transactions between a bank and its “affiliates,” as that term is specifically defined in Section 23A. Section 23B of the FR Act was enacted as part of the Competitive Equality Banking Act of 1987 to expand the range of restrictions on transactions with affiliates. Section 10(b)(4) of the FDI Act authorizes FDIC examiners in the course of examining insured banks “to make such examinations of the affairs of any affiliate of any depository institution as may be necessary to disclose fully — (i) the relationship between such depository institution and any such affiliate; and (ii) the effect of such relationship on the depository institution.” “Affiliate” is defined in Section 3(w)(6) of the FDI Act as having the same meaning as the definition of that term in Section 2(k) of the BHC Act.
According to the FDIC Risk Management Manual of Examination Policies, all bank activities, including those performed by dual employees, should be subject to the authority of an independent board of directors. Bank officers (whether they are dual employees or direct employees) must have sufficient expertise, authority, and information to act in the best interests of the insured institution at all times, under the direction of the board. A comprehensive framework of policies, procedures, legal agreements, controls, and audit must be established to govern the activities of dual officers and employees. A formal written employee sharing agreement should be established to define the employment relationship between the banking entity and affiliate. The following factors should be addressed:
1. The agreement needs to be independently reviewed by the bank’s board of directors to ensure that it is fair and in the best interest of the insured bank.
2. Compensation arrangements need to be clearly delineated to ensure they are equitable for both the bank and affiliated entity.
3. The location where the dual employee is to perform duties needs to be established and detailed, along with reporting and authority.
4. The agreement should require dual employees to avoid conflicts of interest. Additionally, the agreement should state that dual employees or officers must act in the best interest of the bank while performing any activities on behalf of the bank.
5. Sanctions for noncompliance should be contained in the bank’s agreement.
6. The agreement should provide for a periodic determination concerning the status of a dual-employee and the factors to be considered for terminating the dual-employee relationship in favor of either full-time bank or affiliated entity employment.
7. Authority for managing the dual-employee relationships should be clearly assigned.
8. Lines of authority for dual employees should be established. While dual employees may have other responsibilities, they must also report through appropriate lines of authority within the banking institution. The dual employee’s bank responsibilities and decision-making should take precedence over any affiliate responsibilities. All activities conducted on behalf of the bank must be subject to appropriate review and authorization by bank officers, and ultimately the bank’s board of directors.
Affiliate officers and employees who conduct activities on behalf of the bank (even if not formally designated as dual employees) are subject to the same level of legal and corporate duties and liabilities as a direct officer or employee of the bank. Additionally, examiners should have reasonable access to dual employees and any other affiliate employees who perform services on behalf of the bank.
The insured banking institution utilizing a dual-employee needs to have policies and procedures in place covering account settlement for dual-employees that stipulate the manner and timing for payment in order to ensure an unanticipated affiliated loan does not occur in contravention of Sections 23A & 23B of the FR Act.
Policies and procedures dealing with dual-employee relationships should include a mechanism to ensure compliance with 12 U.S.C 1831g (Adverse Contracts). Under that statute, an institution may not enter into a written or oral contract with any person to provide goods, products, or services to, or for the benefit of, a depository institution if the performance of such contract would adversely affect the safety and soundness of the insured institution.
In thousands of foreclosure cases, key documents may have been fabricated by employees of mortgage servicing companies who have falsely held themselves out as bank officers. Because most foreclosures are the result of defaults, the validity of these assignments has most often gone unchallenged. Almost three million U.S. properties were involved in some form of foreclosure action in 2009, a 44% increase from the end of 2008 to the end of 2009. In 2010, the issue of the validity of Assignment is likely to finally come under examination by regulators, courts, lawyers and distressed homeowners.