Who Do the Foreclosure Mills Represent?
I received a motion in today’s mail that appears inocuous but is an eye-opener on many levels. Butler & Hoesch, P.A., moved to withdraw as counsel and sought a charging lien on the Plaintiff’s recovery in a pending foreclosure case. The Plaintiff in the case is a securitized trust; Wilmington Trust Company is Trustee. In its Motion to Withdraw, though, the foreclosure mill makes no mention of Wilmington. Rather, the mill says it used to represent the servicer, Litton Loan Servicing, Inc. but that Litton has been sold to Ocwen Financial Corporation and that it has no attorney-client relationship with Ocwen.
Are you confused yet? Read the motion so you see what I mean. This foreclosure mill has been litigating a foreclosure lawsuit on behalf of Wilmington, but as far as I can tell, has never represented Wilmington. Moreover, although the mill talks about its relationships (or lack thereof) with Litton and Ocwen, neither Litton nor Ocwen is a party in the case.
So who, exactly, is the mill trying to withdraw from representing? Presumbly Wilmington, the Plaintiff, as that’s the only plaintiff in this case. But the mill’s own motion makes it clear it has no attorney-client relationship with Wilmington anyway.
Call me crazy, but shouldn’t the mill have an attorney-client relationship with the party who is prosecuting the lawsuit?
The unseemly nature of this aside, I see a few significant issues which merit discussion:
First, the Florida Supreme Court requires via Fla.R.Civ.P. 1.110(b) that the Plaintiff verify its Complaint in all residential foreclosure cases. Given the relationship between the foreclosure mills, the servicers, and the trustees, it seems clear the required verifications aren’t being done by the plaintiffs, but by the servicers. Many learned judges in Florida before whom I appear have made it clear that verification by a servicer is insufficient – the complaints are supposed to be verified by the “plaintiff.” Remember, the Rule doesn’t permit verification by a third party, but by “the plaintiff.” In fact, Shapiro & Fishman moved for rehearing of the Florida Supreme Court’s ruling on this precise issue, and the Court rejected its motion.
This prompts a significant question – if verification is required by the plaintiff, and the attorneys representing the plaintiff have no relationship with the plaintiff, how on earth can they get the required verification? Undoubtedly, this is why the mills ask for 90 days or 120 days to get the requisite verification (when complaints are dismissed with leave to amend), as they often don’t even represent the plaintiff prosecuting the foreclosure case! Literally, the mills are in the position of calling up an entity who they don’t represent and saying “You don’t know me, but I’m representing you in this foreclosure case, and I need you to verify under penalty of perjury that the allegations we’ve raised are correct.”
A bit awkward, eh? Yet that’s the position in which the mills have put themselves (in a large percentage of foreclosure cases in Florida).
Second, though I’m hesitant to call out others on ethical issues where the answer is not black-and-white, I struggle to see how the mills can prosecute lawsuits on behalf of plaintiffs without the plaintiffs’ knowledge or consent in a manner consistent with The Rules Regulating The Florida Bar. I’ve spoken with the Bar on this, and given our conversation, I’m not prepared to say it’s impossible, but I will say this. Personally, I couldn’t imagine appearing as counsel for a party in any lawsuit without that party’s knowledge or consent, much less doing so on a widespread, systematic basis.
Think about it this way. An attorney is able to act on behalf of a client because the attorney’s actions bind the client. Stipulations, representations, court filings, etc. … we as attorneys are, quite literally, agents for our clients. If a client is going to be bound in this manner, the attorney’s authority to represent/bind the client must be clearly established. This is why, for example, there are strict rules about how an attorney may appear as counsel, failing which the attorney’s actions don’t bind the client. See Pasco County v. Quail Hollow Props., Inc., 693 So. 2d 92 (Fla. 2d DCA 1997).
If these foreclosure attorneys don’t have an attorney-client relationship with the plaintiff, it seems to me they cannot represent the plaintiff at all and should be disqualified from doing so. After all, how can an attorney bind the plaintiff when the attorney has no relationship with the plaintiff? Why should any court accept the representations or stipulations of a plaintiff’s attorney when that attorney has no relationship with the plaintiff?
There must be a better answer than “there are lots of foreclosure cases in Florida, and this is just how it’s done.”
Third, on the issue of a charging lien, Florida law plainly requires that a charging lien be signed, in writing, by the party against whom the lien is sought. How does any foreclosure mill expect a court to award a lien in its favor on the recovery of a securitized trust (in this case, Wilmington), when the attorney has no relationship with Wilmington and no signed fee agreement? Should Wilmington really have to pay some of its recovery to a law firm with whom it has no relationship? And no signed fee agreement?
Fourth, you want to know why the Florida Supreme Court’s mediation program failed? Take another look at this motion. How can anyone expect to get a binding agreement with Wilmington Trust Company when the attorneys prosecuting this foreclosure case don’t even represent Wilmington? This is a good illustration why loan modifications and reasonable settlements are so hard to get – the appropriate parties aren’t even at the bargaining table.
Fifth, when the plaintiff alleges in the complaint that it is the owner and holder of the Note and Mortgage, what exactly does that mean? Taking plaintiff’s allegations literally, the plaintiff is the owner/holder. But in all of these cases where the entity driving the suit is actually the servicer, it seems that the servicer is the “holder” of the Note, not the Plaintiff. Remember, to be the holder, the “plaintiff” must be in “possession” of the Note. See Fla. Stat. 671.201(21). Are these plaintiffs really in possession when they don’t even know a case has been filed? I suppose it’s possible, but when the Note is subsequently put into the court file, how did it get there? If it’s from the servicer, as I’d think it must since the servicer is the only one who knows about the case, then doesn’t that show the servicer was in possession, not the Plaintiff? And that the servicer was the “holder,” not the Plaintiff? Actually, no – where the Note is specifically indorsed to the plaintiff, the servicer isn’t the holder, either. In that situation, the servicer has possession, but the plaintiff has the indorsement, so neither one is the “holder.”
So what’s the solution to all of this madness? It’s two-fold: (1) Require verifications by the plaintiff (not the servicer, the plaintiff) and dismiss all cases without it; and (2) Require the foreclosure mills to have attorney-client relationships with the plaintiff (not the servicer, the plaintiff prosecuting the case) and disqualify all attorneys who lack such a relationship. That sounds harsh, but it’s ridiculous to inundate our courts with garbage pleadings that languish for years without a resolution when the parties prosecuting them don’t even know they’ve been filed.
Mark Stopawww.stayinmyhome.com
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OKAY you said Second, though I’m hesitant to call out others on ethical issues, I struggle to see how the mills can prosecute lawsuits on behalf of plaintiffs without the plaintiffs’ knowledge or consent in a manner consistent with The Rules Regulating The Florida Bar. I’ve spoken with the Bar on this, and while I’m not prepared to say it’s impossible, I will say this. Personally, I couldn’t imagine appearing as counsel for a party in any lawsuit without that party’s knowledge or consent, much less doing so on a widespread, systematic basis.”
Can I point out that there shoudl be NO hestancy to report blatent lawyer misdeeds, and or bank misdeeds. WHICH ethics are more troublesome… in the case of not saying anything some poor homeowner could end up in litigation a second time from other people claiming thye own the note. mortgagge, deed whatever. Par tof the reason we are in this mess is because judges “hesitate” to question the lawyers representing the banks.
Lawyers representing the bank lie outright in court and are not brought up on ethics charges because people are “hesitant” to call lies lies.
That’s a fair response, and I should have worded it better.
Here’s the problem. I’ve spoken with the Florida Bar about a lawyer from representing a client without the client’s knowledge and consent. Surprisingly, the Bar didn’t seem to think there was a black-and-white rule against it.
Oddly, the Bar is usually confronted with precisely the opposite situation, i.e. a lawyer trying to disclaim an attorney-client relationship where the client claims one exists.
There have been very few cases where lawyers represented clients without their knowledge/consent, so, hence, the lack of a Bar rule on it.
As such, the issue isn’t just my hesitancy, but whether it’s actually a Bar violation. I tend to think it’s axiomatic that it is, but perhaps not under the Rules as written.
Nuts, I know.
Hi Mark,
Apparently most of these mills only have contact with LPS (Lender Processing Services) or other default servicing companies. They may not even have contact with the servicer, who is acting on behalf of the alleged “owner”, who may be acting on behalf of some “investors”.
Worse yet, the mills apparently don’t even have access to human beings at LPS. They interact only with LPS software systems that dole out the foreclosure files to the various mills. And each mill is apparently graded with red/yellow/green lights on how speedily they can move the cases through the system. The faster they go, the more work they get from LPS, etc. (Forget quality and accuracy!)
If memory serves, some of these issues came to light in City of St. Clair Shores Employees’ Retirement System v. LPS, et. al., and/or Thorne v. LPS. If you’re not familiar with these cases, they’re incredibly important to what’s been going on in foreclosure land.
City of St. Clair v. LPS (3rd amended complaint):
http://findsenlaw.files.wordpress.com/2011/05/5-20-2011-city-of-st-clair-shores-employees-retirement-system-v-lps-et-al-amended-complaint-may-18-2011.pdf
Thorne v. LPS (there may be later amended complaints):
http://www.msfraud.org/law/lounge/In-re-Thorne-LPS-Prommis-Great-Hill-Class-Action-Complaint%20%281%29.pdf
Also note the latest HSBC v. Taher decision in New York, where HSBC claimed ignorance and plausible deniability about Ocwen suing the homeowner on their behalf, and of course distancing themselves from Shapiro DiCaro submitting robo-signed docs and false affidavits.
The infamous and delightful Judge Arthur Schack would have nothing of it:
http://www.nycourts.gov/reporter/3dseries/2011/2011_51208.htm
http://www.nycourts.gov/reporter/3dseries/2011/2011_52317.htm
So here we have Shapiro DiCaro filing suit on behalf of Ocwen, who is allegedly representing HSBC, who is representing the Trust (plaintiff), as a Trustee for a trust who may not even be able to prove they own the loan.
And I would not be surprised if Shapiro DiCaro got their assignment from LPS.
So if all of this is true (and so far, there’s no reason to believe otherwise), the attorneys are far more than one degree of separation from their actual client.
P.S. I think this point you raise is a HUGELY important point that I have not seen mentioned much elsewhere. It needs to be scrutinized by attorneys, state bars, and judges everywhere.
Exactly who has the right to bring these lawsuits? Why are servicers allowed to bring them, pretending to be the actual owner, in case after case??
Rarely do I ever see a case where the foreclosing entity says they’re the authorized agent of the owner of the loan…usually they’re claiming they are the owner and holder of the note and mortgage. Even Fannie Mae guidelines seem to encourage this behavior.
Thank you.
Good stuff, JL. Thanks for sharing.
Mark, welcome to the party. The points you make in this entry are points I’ve made in pleadings for the past three years. If you want to make it really interesting, how’s this? When a potential client signs a representation agreement with an attorney/lawfirm, is the client bound by the attorney or the lawfirm? A lawfirm acting as “Counsel for …” is in violation of Fla.R.Jud.Admin.2.505, creating all kinds of conflicts. In fact, I would like to know how one of your agreements reads. Does it bind your client to you, an attorney member in good standing with the Florida Bar, or to your Firm which is NOT?
When I draft a Notice of Appearance, it generally says “Mark P. Stopa, Esq. and the Stopa Law Firm hereby make an appearance on behalf of …”
I agree the issue is murky.
Rule 2.505 contemplates an appearance by an attorney, not a law firm.
But in how many foreclosure cases have young attorneys for the mills signed the Complaint, then left the firm?
Invariably, everyone acts as if the law firm is still representing the client.
I guess this is one of those things where practicality controls over the way the rules are written.
Hi Mark,
I am a Pro Se litigant homeowner fighting foreclosure fraud for 18 months in CA. I discovered that the party hired the law firm to commence the Unlawful Detainer action against me in the name of “US Bank NA, as Indenture Trustee” fought tooth & nail in opposition that that party was a “Fictitious Party”, but I was completely ignored. I was unable to get a straight answer out of opposing counsel (surprised?). I called US Bank NA, and was told by their VP that they had taken no legal action against me, and that my loan was not even in default. I told the VP that there was indeed a court action against me in their name, and I was being put in a position to have to file a suit against the bank as the only named plaintiff. He made some phone call and told me it was the loan servicer who was behind it. I then called the law firm and asked who was the party who hired the law firm to take such legal action, and sure enough, it was the servicer. I still was not surprised, as this is what I had suspected all along. Confirmation only showed that now I had to address the issue of “power of attorney”, which the servicer finally admitted to be behind the lawsuit. They claimed to be “Attorney in Fact” got the Trustee Bank on behalf of the Trust according tooth PSA. So far, no PSA can be found. Without a separate document giving express permission to the servicer to act on behalf of the trustee for the trust, there is no such relationship no power granted to the servicer to act independently for either trustee or trust. I’m still in the middle of my case so I don’t know how this will be viewed by the court. This is only intended as an example of how I figured this out. If push comes to shove, and the bank does not want to be implicated by the actions of the loan servicer or be sued for the independent acts of the rogue loan servicer, it is likely the servicer may be thrown “under the bus” by the bank. I also have some other info from the US DOT and HAMP re the actions of the loan servicer, which I’ll get to you if you are interested.
Millie,
It sounds to me like you could move to disqualify the lawyers for U.S. Bank, N.A.
The argument would be that they don’t have an attorney-client relationship with said entity and cannot bind said entity in court.
You could support your argument with an affidavit that U.S. Bank told you that it did not sue you, did not authorize a suit against you, etc.
When the lawyer takes the position that the servicer authorized the suit, so what? The servicer isn’t a party to the case, and, at minimum, the lawyer better have some really good documentation showing the servicer’s authority to bind U.S. Bank.
But even if it provides that documentation, your testimony that U.S. Bank did not authorize the lawsuit should be a big red flag.
Good stuff.
Mark
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The question that is obvious is: if the foreclosure mill doesn’t represent Wilmington, the trustee, and, in the case discussed here, has no relationship with Litton nor Ocwen, who on earth is paying its legal expenses and attorney fees???
Good question. I’d presume the servicers. But that’s a good question.
When I used to work for a collection firm as a paralegal, we never talked to the clients. We talked to the forwarders, who were collection agencies, middle men. Im sure the same applies with foreclosure mills.
Interesting, William. Thanks.
If the attorney fails to have an attorney client relationship with the Plaintiff, what happens to all of the Plaintiff’s objections to discovery based on attorney client privilage? Especally the ones that must be answered under oath. It seems to be a diffuclt argument that a business 2x removed from the Plaintiff has personal knowledge of much at all.
Good thought. The attorney-client privilege cannot apply when there is no attorney-client relationship.
It could, and I believe should, be argued that, pursuant to 2.505, unless there is a proper substitution of counsel or notice of appearance filed, the only attorney that can legally bind the client is the attorney that actually signed the Initial Pleading. Never mind any references to “Counsel”. “Counsel” and “Attorney” are interchangeable. For multiple attorneys to act as Attorney of Record, they must be acknowledged individually by their signature, so that when one attorney signs on the signature line under which is contained a number of other attorneys names and Bar numbers, still, only the attorney that signed can be recognized by the Court as Attorney of Record with authority to bind the Plaintiff client. Mr. Stopa commented earlier that “the issue is murky”; I disagree. If the issue is murky, it has been made intentionally murky by the accepted interpretation of an unconstitutionally integrated, self-regulated, self-proclaimed “official” arm of the State Supreme Court to the benefit [only] of the members of that Cartel.
“Murky” self-serving Florida Bar rules aside, OTHER regulations (actual laws) still apply, do they not? How is such behavior – i.e., foreclosing attorneys lying in “verified” complaints and to the courts that “Party A” is “owner and holder” (and plaintiff in action) when same attorneys and parties know full well that Party B, C or D is actual “owner and holder” – how is this NOT subbornation of perjury? Does that not apply to Florida attorneys?
I believe these laws do apply, but are simply not enforced against attorneys (by their fellow attorneys), just as I believe other laws, like Florida’s FDCPA must apply to attorneys as well, regardless of “the Guild’s” assertions to the contrary…
I hear you. And I’m not afraid to go the route you’re suggesting.
But first we need better proof that the servicer is actually in possession of the Note, not the plaintiff.
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Mark, Where can we get a template for the Motion to show Proof of Representation? And when is that filed?
I hear you, foreclosureweary.
I’m actively discussing this concept with colleagues right now.
The issue, of course, is what procedural method to use to bring this issue to the courts.
I will figure something out, and I’ll let everyone know.
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It just seems so obvious — it’s remarkable we even have to discuss such things.
When I was working for Lee County DCD a few years back, we held Land Use Cases which were quasi-judicial in nature. The first step for every new case was to review it for Completeness with regard to the submittal Checklist. If the Land Use application was not submitted by the owner of the property (often attorneys, engineers, real estate agents, or professional land use planners would represent the property owner) then the party making the application was required to have an Agent Authorization Form signed by the true property owner.
It boggle the mind that something as simple as this isn’t required as part of the intake process for a Foreclosure case.
Tyzaão
I am fd attorney in South Carolina. I have had clients ask me this. I have one case where the attorney for foreclosure mill pretty much came out and said “I work for the servicer” My client was more on things than I was. This article makes sense. I borrowed some discovery from another attorney and it talks about who institued the foreclosure filing. It makes sense and the pieces are fitting together. Thanks
“I work for the servicer.” Yikes.
My response? No, counselor, you work for the plaintiff you’re representing in the court case.
It doesn’t matter if the servicer pays your bills. It doesn’t matter if the servicer retained you. You represent the party who’s a party in the lawsuit.
This is madness, it really is.
Ok, I am pro se but a 30 year lawyer. the Trust Citi as Trustee for MLMI2006-HE-5 apparently does not exist –or at least my note did not make it in the pool. The case has been in procedural hell for almost 20 months going back and forth to state nad fed ct on removals. However in all that time no one has come forward claiming to rep the trust. BOA/BAC/Wilshire/CW/ML/MERS/MERSCORP/Kozeny & McCubbin-trustee replacing Hamby are all def. Suddenly out of the blue I get an email from defense counsel for boa telling me that “BOA told him to enter an appearance for the trust”. I was not in foreclosure at the time I filed my qt/dc action. BOA just ceased taking payments from me after denying my loan mod when Wilshire had approved it (after BOA took over servicing from Wilshire) I want to contest this–what type of motion would you file to contest and get info as to whether BOA’s lawyers actually represent the trust????? There would seem to be att/client issues still
Gwen,
Good question. I’m still chewing on this, but my instinct right now is to do a Request for Production and ask for a copy of all fee agreements.
There is case law (in Florida, anyway) that says fee agreements are not barred by the attorney-client privilege.
The issue, actually, is typically relevance – how are the fee agreements relevant? That’s the issue in most cases, anyway, but I think we can show the relevance in foreclosure cases, esp. those with securitized trusts as plaintiffs.
Once you get the fee agreement, or don’t get it, as the case may be, I’d suspect some type of motion to disqualify counsel may flow from it.
Mark
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Question.
If an attorney alleges to be “attorney In Fact” for the plaintiff (pretender lender) I would assume then that the plaintiff would have to give the alleged Attorney In Fact a Power Of Attorney in order to represent the Plaintiff right?
And if the alleged Attorney in Fact is in direct violation of the law.
(In my case alleged attorney for the plaintiff is in violation of F.S. 454.20, Rule 2.060(f) and posted the Non-Resident Cost Bond as “Attorney in Fact as Surety” on behalf of the plaintiff.)
Then wouldn’t it be fair to say that since the alleged attorney in fact is in conflict and violation of the law that the attorney for the plaintiff should not be allowed to represent the plaintiff?
here is the law.
http://www.flsenate.gov/laws/statutes/2011/454.11
454.11 Powers of attorneys.—Every attorney duly admitted or authorized to practice in this state shall have the right to appear before any court of the state, or any public board, committee, or officer in the interest of any client, and may appear as amicus curiae when so permitted. All attorneys shall be deemed officers of the court for the administration of justice, and amenable to the rules and discipline of the court in all matters of order or procedure not in conflict with the constitution or laws of this state.
History.—s. 11, ch. 10175, 1925; CGL 4189; s. 7, ch. 22858, 1945.
http://www.flsenate.gov/Laws/Statutes/2011/454.20
454.20 Attorneys not to be sureties.—No attorney shall become surety on the official bond of any state, county, or municipal officer of this state, nor surety on any bond of a client in judicial proceedings.
History.—s. 20, ch. 10175, 1925; CGL 4198.
in a recent motion to dismiss hearing, Judge Selph in Bartow, FL Did not care that the attorney was in violation of F.S. 454.20, Rule 2.060(f) (amongst other reasons to dismiss) and allowed the attorney to get away with it.
after the Judge Denied my Motion To Dismiss I filed a motion for sanctions against the attorney and plan to appeal the MTD as well.
I would love to hear every ones opinions and ideas or recommendations on this matter. reply to this post + email me if you have time. Thank you!
If someone purports to act as an “attorney in fact,” I’d want to see a Power of Attorney.
If you haven’t seen it yet, ask for it in discovery (a Request for Production).
As for the Order denying the Motion to Dismiss, that is not appealable until the end of the case.
Good luck
Mark