Monday, November 16, 2009

Shuster & Saben Seek Sanctions against Bank of America on behalf of Sebastian, FL homeowner

For Immediate Release: On Tuesday, November 17, 2009, Shuster & Saben served a Motion For Sanctions against Bank of America, N.A. for failing to mediate in good faith with a Sebastian, Florida homeowner. The firm’s client, an elite estates and trusts paralegal (who spent over twenty years working with some of South Florida’s top law firms) attended mediation, in Vero Beach, pro-se, prior to hiring the foreclosure defense litigation department of Shuster & Saben, LLC.

Under the Administrative Order of 2009-01 of Indian River County Chief Judge Willaim Roby, lenders seeking to foreclose on the primary residence of Indian River County homeowners are required to conduct mediation prior to moving for summary judgment. Under the administrative order, the lender must have its counsel appear in person and a representative of the plaintiff/lender may appear by phone or in person. The administrative order requires that individual appearing for the lender must have “full authority to modify the existing loan and mortgage and to settle the foreclosure case.”

Prior to the mediation, the lender’s law firm, Kahane & Associates of Plantation, Florida filed a “Form A” identify Krystal Martin as the respresenative of the lender who would appear at the mediation. The subject homeowner, via federal express provided pertinent financial documents, a release of her tax returns, and a hardship letter to the loan servicer, Litton, so that Litton and Bank of America could evaluate modification of the loan prior to the mediation.

According to the firm’s client, when the mediation commenced for the first 30 minutes of the mediation Bank of America had no representative what so ever. The person listed on the “Form A”, Krystal Martin never appeared for the mediation and in her place, a representative of Litton, the servicer on the loan appeared by phone. Since the person appearing was not a Bank of America employee but only a employee of the loan servicer hired by Bank of America, it was apparent that the representative had no authority to do anything without talking to the lender. When the mediation began the Litton representative did not know the current balance on the loan. The lender’s attorney who signed the “Form A” did not bother to attend the mediation. In her place was a local Vero Beach attorney, Nina Ferraro, who is NOT an employee of Kahane & Associates (the law firm hired by Bank of America to bring the foreclosure). Ms. Ferraro had no prior involvement in the case and also did not have the borrower’s current balance.

Despite the homeowner having proof of delivery by Federal Express, the representative of Litton did not have the financial disclosures and hardship letter sent to Litton long before the mediation.

At mediation the lender’s representative could not make a single offer that was specific enough to form the basis of a written contract. There were no offers of interest rate reduction. There were no specific proposals that the borrower would know what her payment would be if the offer was accepted. There was no proposal for forbearance or even for lump sum payment to bring the loan current.
The mediator, who described herself as a real estate attorney, was more than willing to overlook the failure of the lawyer who signed the Form A to be present and the failure of Krystal Martin, (the person listed as Bank of America’s representative of the Form A) to appear. We find it troubling that the mediator did no suspend the mediation until the attorney and the listed representative with full authority was present. Instead the mediator wrote up a form stating that Bank of America had agreed to review the borrowers request for loan modification.

In the mediation of personal injury cases defendants and their insurance companies offer a specific amount of money to the injured party for the release of the pending claims. If the offer is accepted the accident victim knows exactly what they will receive and the insurance company knows how much it will have to pay. We believe that mediation of foreclosure cases should work the same way. In a foreclosure mediation the lender should make proposals that specifically state what the interest rate will be reduced to, whether the loan balance will be reduced, explain the disposition of late fees and attorney’s fees, specify the amount of the new payment and explain the terms for the dismissal of the case.

An example of an offer that is sufficiently specific that it could be accepted and form the basis of a settlement would be an offer to lower the current interest from 8.75% to 5.125%, with a corresponding reduction in monthly payments from $1,298.06 to $898.40 per month, no reduction of loan balance, lender waiver of accrued late fees, and borrower payment of $3,200.00 within seven days of execution as payment toward lender’s filing fees, court costs, and accrued interest. Such agreement should define that if the initial payment is made and subsequent mortgage payments are made for a set number of months (usually 3 to 6 months) then the foreclosure action will be dismissed.

It is acceptable for the lender to precondition loan modification upon the borrower to making three trial payments so long as the borrower receives a written offer that states the interest rate and payment amount the will apply once the three trial payments are made. The terms should specify that if the three trial payments are made in a timely basis then the borrower shall receive the modification. The lender should not use offer a modification to induce the borrower to make three payments only to deny the modification because some form or document was not received. Many borrowers have seen promises of loan modifications that never materialize and end up feeling like Charlie Brown after Lucy pulls away the football at the last possible moment.

It is troubling that the mediator who presided over the subject mediation considers the mediation a success when all Bank of America agreed to do was review the homeowner for loan modification, an action that they were required to do before the mediation. It would appear that the mediator is more concerned about form that substance. The lender and its counsel apparently feel that going through the motion of mediation is enough. We believe that Bank of America’s effort fell far short of mediating in good faith and have moved for sanctions so that the spirit and intent of Chief Judge Roby’s Mediation Order is complied with. Homeowners who have had foreclosure mediations in which no specific offers were made are encouraged to share their experiences in the comments section of this blog.


  1. The problem is that, as much as you may rightly scream about someone with authority to settle needing to be at mediation, it is still completely voluntary as to whether the lender will offer the borrower any kind of modification. And so even if you get someone with authority to settle, they are still completely free to offer no modification or the bait-and-switch trial payments, and if you reject it, they simply have a summary judgment hearing and win by waving nothing more than an affadavit stating that some mysterious bank person who isn't present would prove everything if he had to. How come the borrower doesn't get to win a case by just bringing an affadavit saying "this person and his notary thinks the bank is wrong. Just trust him, there's a signature and a really cool stamp on it!"

  2. Franker... thank you for reading and your comment. It has been our experience that in a very substantial portion of the cases we handle the lender is unable to prevail on their summary judgment motions. In cases where the homeowner is substantially upside down the bank must choose which of two bitter pills to swallow. The big pill is to spend a year or longer and ten to thirty thousand dollars attempting to complete a foreclosure case, and take possession of the house ...only to pay the insurance, taxes, electric and upkeep on the house, pay a real estate commission and perhaps sell the property 6 months later for $100,000 less than what was owned on the loan. In many cases the smaller, less bitter pill is to make substantial concessions on interest rate (to 2% to 4%) to make it more appealing and more affordable for the homeowner to start paying their mortgage again. We have seen concessions on interest rates made to homeowners making north of $150,000 a year who could easily afford their mortgage but choose not to pay because their home had fallen 60+% in value. As for affidavits used by lender's counsel in support of summary judgments, if we do not believe the content of the affidavit we set the deposition of the person making the affidavit. We do not judge our clients, we Defend them, aggressively, and with every tool and technicality at our disposal.

  3. This is similar to our case. We went to mediation today at the Collins Center. Our lender Bank of America had a representative there but he could not get anyone on the phone. After 45 minutes the meeting was called. The Collins Center said that the mediation never took place and Bank of America failed to appear. The mediator told us we should have an attorney. What would have happened if we had an attorney present?