CFLA Scam Report

Scam Report:

Certified Forensic Loan Auditors, LLC.

Subject of this report:

Certified Forensic Loan Auditors, LLC (CFLA)
13101 West Washington Blvd. Suite 444
Los Angeles, CA 90066
310-579-7422
Andrew Lehman, CFLA President/Owner

Warning to Borrowers Facing Foreclosure: In my opinion, a securitization audit or chain of title audit will not help mortgagors who defaulted on their loan win a foreclosure battle in court and such audit services are therefore virtually worthless.  Numerous pundit and court opinions, cited below, support this warning.  You might agree with me after you finish reading this article and following its links to other text.

First, understand the concept of securitization and chain of title audits from this article of denunciation I wrote years ago:

https://livingliesthetruth.com/2015/06/04/how-a-securitization-audit-wastes-foreclosure-victim-money/

Furthermore, see how and why securitization trust beneficiaries can ratify violations of the securitization trust pooling and servicing agreement, and that the borrower has no standing to dispute or enforce such violations. Pay particular attention to the explanation by Storm Bradford in this article:

http://mortgageattack.com/2014/07/27/securitization-audits-worthless-in-spite-of-glaski/

CFLA is a major purveyor of such audit services and conducts training courses to teach others to perform and sell the audits. CFLA aggressively promotes its loan audit, securitization audit, and chain of title audit services to home loan borrowers (mortgagors) who have defaulted on their loans and feel desperate to prevent foreclosure. CFLA gives such desperate borrowers false hope that the borrowers can use their audits and expert witness testimony to avert foreclosure, even though borrowers breached the terms of their loan contracts and really ought to lose their homes to foreclosure. A mortgagor in foreclosure who purchases a loan-related audit from CFLA or any other company has little to no chance of averting foreclosure because of information contained in the audit. The following statements by experts show why.

Florida Foreclosure Defense Attorney Matthew Weidner warned the public against securitization audits in his blog:

MORTGAGE LOAN SECURITIZATION AUDITS ARE A CRIME!
VIOLATIONS.””A person who violates any provision of this section commits an unfair and deceptive trade practice as defined in part II of this chapter. Violators are subject to the penalties and remedies provided in part II of this chapter, including a monetary penalty not to exceed $15,000 per violation.
Just this week I had another client in my office who almost lost their home because they had given thousands of dollars to a loan audit/securitization “expert” who told the to ignore the lawsuit that was filed against them. They did not respond to the lawsuit and the bank was prepared to set a sale. The judge did not have to let my new client defend the case, but the judge recognized that this old, immigrant family had indeed been the victim of a widespread and rampant fraud so the judge allowed them to defend their case and their home is safe…for now. Good call by the judge. Fair. Balanced. So now, I’m going to bust my hump to make sure this client fills out all their paperwork and gets the modification done. Here’s the thing….with their income, they could have had the modification done months ago….if only the scammer had not sold them up the river.
I get variations of the loan audit scam in my office nearly every single day. Hapless consumers are either directly approached by companies or they respond directly to any one of the hundreds of websites that have sprung up everywhere. Here’s the rap: The company or expert will audit their loan, show them how the bank committed fraud or their documents are bad or whatever and the homeowner can use that information to get a free house….for a small upfront fee of several thousand dollars…and maybe a small monthly fee if the mark can swing it.
ANY REPRESENTATIONS LIKE THIS ARE A VIOLATION OF STATE AND FEDERAL LAW!

The Federal Trade Commission (FTC) has warned mortgagors that forensic loan audits are a scam:

“there is no evidence that forensic loan audits will help you get a loan modification or any other foreclosure relief, even if they’re conducted by a licensed, legitimate and trained auditor, mortgage professional or lawyer.”

California’s Department of Real Estate warned borrowers against forensic loan audits.

This alert and warning is issued to call to your attention the often overblown and exaggerated “sales pitch(es)” regarding the supposed value of questionable Forensic Loan Audits. It is critical to note that a loan audit (audit report) has absolutely no value as a stand-alone document.
Whether they call themselves Forensic Loan Auditors, Certified Forensic Loan Auditors (there are no such certifications in the State of California), Mortgage Loan Auditors, Forensic Attorney-Backed Foreclosure Prevention Auditors, or some other official, important or lofty sounding title(s), there are thousands of individuals and companies that have popped up and appeared all over the State of California. Most of these individuals and companies are unlicensed, and some were previously engaged in illegal foreclosure rescue and loan modification scams.
The DRE has seen a wide variety of claims and sales pitches, where impressive sounding loan review services are offered with the goal of taking your money. Quite simply, the bad players market hope – and all too often, it is false hope.

A Georgia US District Court in Demilio v US Bank issued a scathing indictment of Demilio’s effort to subvert a foreclosure with a CFLA securitization audit.

Having reviewed the Complaint and all appropriate exhibits, the Court finds that Plaintiff has failed to set forth sufficient facts to show he is entitled to relief on any of his asserted claims. In fact, rather than alleging any material facts in his pleading, Plaintiff attempts to “lodge” “[t]he facts and statements made in the securitization audit attached herein.”13Frankly, the Court is astonished by Plaintiff’s audacity. Instead of providing the “short and plain statement” of facts required by the Federal Rules of Civil Procedure,14 Plaintiff requires the Court to scour a poorly‐copied, 45‐page “Certified Forensic Loan Audit” in an attempt to discern the basic facts of his case. This alone would be sufficient for dismissal.15 However, the Court is equally concerned by Plaintiff’s attempt to incorporate such an “audit,” which is more than likely the product of “charlatans who prey upon people in economically dire situation,” rather than a legitimate recitation of Plaintiff’s factual allegations.16As one bankruptcy judge bluntly explained, “[the Court] is quite confident there is no such thing as a ‘Certified Forensic Loan Audit’ or a ‘certified forensic auditor.’”17In fact, the Federal Trade Commission has issued a “Consumer Alert” regarding such “Forensic Loan Audits.”18 The Court will not, in good conscience, consider any facts recited by such a questionable authority.19
16 In re Norwood, 2010 WL 4642447, at *2.
17 Id.
18 Id. at *2 n.2; see (Mar. 2010), http://www.consumer.ftc.gov/articles/0130‐forensic‐loan‐audits. The State of California Department of Real Estate issued a similar alert entitled Fraud Warning Regarding Forensic Loan Audits (Feb. 2010), http://www.dre.ca.gov/Consumers/ConsumerAlerts.html.
19 See, e.g., Fidel, 2011 WL 2436134, at *1 (disregarding a “Securitization Audit and Forensic Audit” attached as exhibits to plaintiff’s complaint); accord Hewett v. Shapiro & Ingle, No. 1:11CV278, 2012 WL 1230740, at *4, n.4 (M.D.N.C. Apr. 12, 2012) (discussing various “audits” and noting that such documents “confirm the empty gimmickery of these types of claims.”).

State and federal courts across the land have denounced securitization and chain of title audits, and have uniformly ruled against the clients of CFLA or those who relied on “CFLA” audits to save their homes from foreclosure. The end of this report lists 27 court opinions which borrowers should read BEFORE deciding to spend money on a CFLA loan/securitization/chain-of-title audit. None of the judges in those case ruled in favor of the borrower. The Leadbeater v JP Morgan opinion provides this comment in footnote 9:

Judge Madeline Cox Arleo has previously cautioned that she has “concern over the dubious nature of such reports [prepared by Certified Forensic Loan Auditors, LLC.]Hicks v. The Bank of New York, et al., Civil Action No. 15-1620, Letter Order, D.E. 22 (Feb. 22, 2016). The FTC has recently warned consumers to be wary of “forensic mortgage loan audits.” Federal Trade Commission, Forensic Loan Audits, https://www.consumer.ftc.gov/articles/0130-forensic-loan-audits (last visited September 13, 2017) (“According to the Federal Trade Commission (FTC), the nation’s consumer protection agency, the latest foreclosure rescue scam to exploit financially strapped homeowners pitches forensic mortgage loan audits.”).

Blogger and mortgage pundit Martin Andelman wrote this about one of CFLA’s attorney-instructors:

Patricia Rodriguez, Attorney at Law –Patricia is another of CFLA’s instructors. She also has been very active representing homeowners. Going back to June of 2012,Westlaw shows her handling 20 cases, (and you can find a list of her cases at that link).
None were any sort of win for the homeowners… in one she was sanctioned by the court and the 19 others were dismissed, many with prejudice or without leave to amend… the three quiet title cases were all dismissed.She also filed a mass joinder lawsuit that was also dismissed.But it’sMcGough v. Wells Fargo Bank, 2012 WL 6019108 (U.S. DC N.D. Ca. 12/3/12), that deserves to be highlighted because in this case, Ms. Rodriguez ended up being sanctioned by the court for violating Rule 11 of the Federal Rules of Civil Procedure, and ordered to attend 20 hours of continuing legal education. Here’s what the court said about Ms. Rodriguez…
The Court is disheartened by counsel’s failure in this case, even in responding to the present motion, to recognize that she has erred. If she had approached her practice with a measure of common sense, Counsel might have reconsidered her position…
And on a very basic level, the Court wishes to remind counsel that if an ordinary person cannot understand what she is saying in her pleadings—a neighbor, friend, or family member—then it is very likely that the Court and opposing counsel will not be able to either. The kind of garbled pleading that counsel has three times submitted to this Court imposes a burden that all involved would like to avoid in the future.
Accordingly, the Court hereby orders counsel, Patricia Rodriguez, to attend a minimum of twenty (20) hours of MCLE-accredited legal education courses, apart from any compliance hours regularly required by the California Bar Association. These hours shall include a minimum of eight hours in complaint-drafting or other legal writing, eight hours addressing the substantive law of foreclosure, if indeed it is an area in which Ms. Rodriguez wishes to continue practicing, and two hours of legal ethics training.
And remember that Patricia is a CFLA Instructor, training lawyers and others around the country in how to represent homeowners in quiet title cases and how to use CFLA’s securitization audits in foreclosure defense.
Look, I understand that foreclosure defense has been incredibly difficult even for the most dedicated and experienced attorneys. So losing is not necessarily a bad thing all by itself. But the way CFLA markets the company’s instructors, experts and seminars as leading the industry is at least misleading.

Andelman wrote a monumental expose of CFLA at this web page, exhaustively detailing numerous reasons to doubt the validity of CFLA audit services and technical competence of its instructors.  See it here: https://mandelman.ml-implode.com/2014/10/homeowner-alert-mortgage-investors-fraud-recoverys-50-2-40-program-cflas-quiet-title-audits-and-experts/ Apparently,  CFLA owner Andrew Lehman threatened to sue Andelman for exposing CFLA. Andelman ended his article with this challenging rebuke:

And Andrew, don’t bother sending me another letter telling me how powerful you are, and how you’re going to sue me for whatever you think you can sue me for… I’ve got an idea of how big and powerful you are… and yet, I still wrote this… so that should clear up any questions you might have as to the nature of my response to such threats. On the other hand, if you want to present any facts that would show me that what you’re doing is actually doing some good, you’ll find me both open and a very reasonable person with whom to converse. I don’t need much, by the way.  How about a couple of cases where homeowners were awarded quiet title when they still owed on their mortgages?  Or, how about even one such case? How about any sort of favorable outcome based on the use of your products and services… or based on your experts testifying Anything, Andrew… can I see anything at all?

Mortgagors facing foreclosure might wonder why they cannot find more consumer complaints against CFLA at sites like RipoffReport.com. Upon visiting that site a search for CFLA under its full name will reveal multiple pages of advertising showing CFLA to be a model company, but no complaints at all. The reason: CFLA’s principal has apparently paid the principal of RipoffReport to remove all complaints against CFLA from the site and replace them with advertisements making CFLA seem honorable. It seems apparent to me that CFLA and its minions have earned so much money selling useless services to troubled mortgagors that  CFLA can afford to pay bribes or issue threats to get webmasters to remove complaints and to get angry customers to retract their complaints. The court opinions that follow prove foreclosure victims cannot rely upon CFLA securitization, chain-of-title, and loan audit services.  Why? Because the borrowers who tried to rely on them lost in court. Caveat emptor (let the buyer beware)…

Court Opinions Showing Borrowers LOSE by Relying on CFLA Audits

Google Scholar search for “Certified Forensic Loan Audit” and “Certified Forensic Loan Auditors” produced 27 results 2019-03-04

  1. DEMILIO v. CITIZENS HOME LOANS, INC. Dist. Court, MD Georgia, 2013

  2. Barrionuevo v. Chase Bank, NA 885 F. Supp. 2d 964- Dist. Court, ND California, 2012
  3. Blanchard v. FREMONT HOME LOAN TRUST 2005-D Dist. Court, WD Washington, 2017
  4. BARRIONUEVO v. CHASE BANK, NA Dist. Court, ND California, 2013
  5. JP Morgan Chase Bank, NA v. Galloway NM: Court of Appeals, 2018
  6. WAN v. PULTE MORTGAGE Dist. Court, D. Nevada, 2014
  7. MANTOVANI v. WELLS FARGO BANK, NA Dist. Court, D. New Jersey, 2018
  8. GILARMO v. US BANK NA AS TRUSTEE FOR CSAB MORTGAGE BACKED TRUST 2006-1 Court of Appeals, 3rd Circuit, 2016
  9. Sarkar v. WORLD SAVINGS FSB Dist. Court, ND California, 2014
  10. VIERA LOPEZ v. BAYVIEW LOAN SERVICING, LLC Dist. Court, SD New York, 2017
  11. IM v. BAYVIEW LOAN SERVICING LLC Dist. Court, SD New York, 2018
  12. Dumas v. JPMorgan Chase Bank, NA Cal: Court of Appeal, 3rd Appellate Dist., 2014
  13. McGough v. WELLS FARGO BANK, NA Dist. Court, ND California, 2012
  14. Hernandez v. RESIDENTIAL CREDIT SOLUTIONS, INC. Dist. Court, ND California, 2016
  15. English v. RYLAND MORTGAGE COMPANY Dist. Court, D. Maryland, 2016
  16. Cox v. NATIONSTAR MORTGAGE LLC Dist. Court, SD New York, 2016
  17. LEADBEATER v. JP MORGAN CHASE, NA Dist. Court, D. New Jersey, 2017
  18. Hylton v. JP Morgan Chase Bank, NA Dist. Court, SD New York, 2018
  19. Sanders v. SUTTON FUNDING, LLC Dist. Court, SD California, 2014
  20. Sylvester v. INTERBAY FUNDING LLC Dist. Court, SD New York, 2017
  21. Suggs v. M & T BANK 230 F. Supp. 3d 458- Dist. Court, ED Virginia, 2017
  22. Avila v. MORTGAGE ELECTRONIC REGISTRATION SYSTEM, INC. Dist. Court, SD Texas, 2012
  23. Williams v. Ward Md: Court of Special Appeals, 2016
  24. Stephens v. BANK OF AMERICA HOME LOANS, INC. Dist. Court, North Carolina, 2017
  25. Baker v. CitiMORTGAGE, INC. Dist. Court, Minnesota, 2018
  26. GONSALVES-CARVALHAL v. AURORA BANK Dist. Court, ED New York, 2014
  27. Kennedy v. WORLD SAVINGS BANK, FSB Dist. Court, ND California, 2015

* * *

CFLA scam report, rev 2

Stay-In-My-Home Subsumes Pretender Defender Mark Stopa’s Failed Law Practice

What a Mess Mark Stopa Made

Mark Stopa photo
Mark Stopa Before Disbarment

Look at this mess.  Florida Foreclosure Pretense Defense Attorney Mark Stopa loses his bar license, and a well-intentioned attorney takes over his business.  The below email had an attached letter that includes the Florida Supremes’ order suspending Stopa from the practice of law and says his law firm has been dissolved.

It happened because Stopa cheated Foreclosure Defense clients.

That attorney called me on 21 September 2018 to tell me that he found the Stopa law practice in such a mess that he decided to shut it down for good, and that he hoped Stopa’s foreclosure victim client base would reach out to me for help.
———- Forwarded message ———
From: Help
Date: Fri, Aug 17, 2018, 12:55 PM
Subject: Important Time Sensitive Message

Dear Client, Attached is an important letter concerning your case with Stopa Law Firm, P.A. Please review attached letter and stipulation. It is important that you respond.  We thank you for your attention to this matter.

———- END of Forwarded message ———

Why Foreclosure Defense Attorneys Deserve Censure

Now it’s time for a little honesty.  Mark Stopa and thousands of attorneys like him deserve censure and public humiliation because of their horrific record of cheating their desperate foreclosure victim clients out of money and an honest advocacy.  Such attorneys have built their practice on pretending to defend clients against foreclosure, but without doing any research to discover precisely who injured the clients in the loan transaction and how the injuries happened.

If they had done honest research, they would have discovered that upwards of 90% of home loan borrowers have suffered appraisal fraud, mortgage fraud, contract breaches, regulatory violations, legal errors in their documents, servicing abuse, and/or legal malpractice by the attorneys they hired to help save their home.

Why Typical Foreclosure Defense Attorneys Cannot Help Mortgage Borrowers in Trouble

Even the attorney taking over Stopa’s failed practice thought he could help keep foreclosure victims IN their homes.

But, he concluded that he can’t keep the clients in their homes.  He could only do what Stopa did – delay the client’s loss of the home while charging absurd annual and/or monthly fees for the hand-holding until the inevitable foreclosure final judgment and sale of the home occurs.

Why?  Because Stopa and other Foreclosure Pretense Defense attorneys NEVER do the full investigation required to prove that someone injured the borrower in the loan transaction.  And so, they DO NOT KNOW whether and how the borrower got injured.  Therefore, they cannot take legal action against the perps to win compensation for their mortgage victim clients.

SO, they can only DEFEND by seeking a dismissal without prejudice for failure to fulfill conditions precedent to foreclosing, or for lack of standing, or tolling of the statute of limitations.  That means the right creditor will correct his errors and foreclose again, this time winning a final judgment.

What It Takes to Win Compensation

Unless the practitioner PROVES someone involved in the loan transaction or associated activities INJURED the borrower who faces foreclosure for breaching the note, then the vast majority of such borrowers will lose their homes to foreclosure, and the pretender defender attorney will merely delay the process while bilking the foreclosure victim out of monthly payments for the privilege.

In order to discover such injuries, a professional team must analyze the background story of the loan and examine every document in the loan transaction from day one to present time, including litigation documents, servicer correspondence, closing papers, appraisal, loan application, forbearance agreements, loan modification efforts, etc.  Few if any (NONE that I know of) foreclosure pretense defense attorneys have such skill.  Even if some had the skill, they would charge upwards of $15,000 to $20,000 at their hourly rates to do the examination, analysis, and reporting, which take 40 to 60 hours.  What foreclosure victims can afford that?

Why Foreclosure Pretender Defenders Commit Legal Malpractice

The foregoing explains why foreclosure defense attorneys only pretend to defend against foreclosure, and never win actual compensation for their client’s injuries.   And yet, those attorneys hold themselves out as experts in the law.

Think about this.  The creditor accused the borrower of breach of contract by failing to make timely payments.  Doesn’t it make sense that the defending attorney should investigate the circumstances and documents related to the contract in order to find out whether the contract is valid and whether the client suffered injuries in it?

An attorney commits legal malpractice who takes on such a client and fails to perform a comprehensive investigation and go on the attack for the injuries discovered.  And that can justify a legal malpractice action against attorneys like Mark Stopa.  But again, what foreclosure victim can afford such an action?

The Ultimate Solution for Mortgage Victims

The only solution to the above dilemma lies in finding an affordable mortgage examination service.  The borrower should buy that service, and use the information in the examination report as the basis for demanding settlements from the injurious parties, or for filing actions for fraud, breach of contract, and breach of regulatory laws.  In the vast majority of situations, the injurious parties far prefer settling with the borrower than fighting the borrower in a court case that the borrower will surely win.

For more information on the right way to attack the validity of the loan, see http://mortgageattack.com, and fill in the contact form.

Bob Hurt
Consumer Advocate and Mortgage Attack Maven
727 669 5511
Clearwater, FL

SCOTUS: NO 3-year right of rescission without a TILA violation – Eat Crow, Garfield

Crow to eat
Time to Eat Some Crow

Dear Neil Garfield:

You’ll find a serving serving of crow in the 8th Circuit’s post-Jesinoski Keiran v Home Capital, Inc., F. 3d 1127 opinion. After reading it, I imagine you will craft a huge apology to your LivingLies blog readers for misleading them for years about the proper understanding of TILA rescission AND of the Jesinoski v. Countrywide Home Loans, Inc., 135 S. Ct. 790 opinion.

Keirans propounded the same lame excuse as the Jesinoskis. They signed an acknowledgment of receipt of Right to Cancel disclosures, and later gave the court an affidavit claiming they only received one copy, instead of two, each. They appealed the judgment against them to the 8th circuit, then to SCOTUS which granted cert and remanded for consideration in light of Jesinoski. After trial and appeal, the 8th circuit affirmed the trial court’s denial of rescission and damages.

Keiran relied on the same false legal theory that you have espoused for years about TILA rescission, and yet, in the wake of Jesinoski, SCOTUS, the 8th Circuit, and USDC all agree that TILA rescission does NOT work the way you wish it did. The borrow gets NO 3-year right of rescission UNLESS a TILA violation occurred.

The SCOTUS instructs you from the Jesinoski opinion:

Jesinoski TILA Scribble Photo
Whatever did Scalia Mean?

“The Truth in Lending Act gives borrowers the right to rescind certain loans for up to three years after the transaction is consummated. The question presented is whether a borrower exercises this right by providing written notice to his lender, or whether he must also file a lawsuit before the 3-year period elapses.”

There you have the question before the court: does conditional TILA rescission written notice or notice plus lawsuit within 3 years after consummation? Now the fun part, where SCOTUS explains TILA’s extended, conditional right to rescind requiring a TILA violation:

“Congress passed the Truth in Lending Act, 82 Stat. 146, as amended, to help consumers “avoid the uninformed use of 792*792 credit, and to protect the consumer against inaccurate and unfair credit billing.” 15 U.S.C. § 1601(a). To this end, the Act grants borrowers the right to rescind a loan “until midnight of the third business day following the consummation of the transaction or the delivery of the [disclosures required by the Act], whichever is later, by notifying the creditor, in accordance with regulations of the [Federal Reserve] Board, of his intention to do so.” § 1635(a) (2006 ed.).[*] This regime grants borrowers an unconditional right to rescind for three days, after which they may rescind only if the lender failed to satisfy the Act’s disclosure requirements. But this conditional right to rescind does not last forever. Even if a lender never makes the required disclosures, the “right of rescission shall expire three years after the date of consummation of the transaction or upon the sale of the property, whichever comes first.” § 1635(f).”

garfield photo
Neil Garfield of LivingLies

My point: Neil Garfield, you have bloviated that SCOTUS, when it gets a case like Jesinoski back, will agree with YOUR interpretation of TILA rescission law, that a TILA violation is not a condition of the extended right to rescind. Well, SCOTUS did get precisely such a case in 2015 (Keiran), and the justices and the 8th Circuit panel made it clear that NO 3- year right of rescission exists in the absence of a TILA violation.

But who needs the Keiran opinion when Justice Scalia explained conditional TILA rescission PERFECTLY in the Jesinoski opinion?

Eat some crow. I’ll do you good.

Keiran – IF NO DISCLOSURE VIOLATION OCCURS, THE RIGHT TO RESCIND ENDS AT THE CLOSE OF THE THREE-DAY WINDOW.pdf

8th Circuit Finally Puts Jesinoski TILA Case to Rest

The Jesinoskis might finally understand that TILA rescission does not work the way Neil Garfield claims. They spent upwards of $750,000 on trial and appeals, and never bothered purchasing a Mortgage Examination so they could go on the attack.  Instead, the case yo-yo’d between trial appellate courts, and the Jesinoskis ended up losing, badly.  Here’s the summary from the most recent opinion at JESINOSKI v. Countrywide Home Loans, Inc., Court of Appeals, 8th Circuit 2018 :

Mortgage loan borrowers Larry and Cheryle Jesinoski received Truth in Lending Act (“TILA”) disclosure documents at their loan closing. Pursuant to TILA and its regulations, borrowers may rescind their loan within three days of closing, but the rescission period extends to three years if the lender fails to deliver “the required notice or material disclosures.” 12 C.F.R. 1026.23(a)(3)(i); see also 15 U.S.C. § 1635(a), (f). Admitting that the lender delivered the required notice (the “Notice”) and material disclosures, but arguing that the lender did not provide the required number of copies, the Jesinoskis sought to rescind their loan on a date just shy of the three-year anniversary of loan execution.

The lender denied rescission, asserting the Jesinoskis had signed an acknowledgment indicating receipt of the required disclosures. The Jesinoskis sued more than three years after closing, alleging TILA violations. The district court dismissed the action as untimely, holding that, even if the three-year limitation period applied, borrowers must file suit and not merely provide notice within the three-year time period. On appeal, our court affirmed, recognizing that our circuit had already taken a position on this issue within an existing circuit split. Jesinoski v. Countrywide Home Loans, Inc., 729 F.3d 1092, 1093 (8th Cir. 2013) (per curiam). The Supreme Court granted certiorari and reversed, holding the three-year limitation period applied to the provision of notice rather than the filing of suit. Jesinoski v. Countrywide Home Loans, Inc., 135 S. Ct. 790, 792 (2015).

On remand, the district court[1] granted summary judgment, concluding the signed acknowledgment created a rebuttable presumption that the Jesinoskis had received the required number of copies. The court also concluded the Jesinoskis failed to generate a triable question of fact rebutting the presumption. We affirm.

THE CURRENT BIAS: EVEN IF HOMEOWNER WINS, NO FEE RECOVERY

Dear Neil Garfield:

You recently complained that the Florida 4th DCA in Sabido v Bank of NY Mellon, the court denied recovery of attorney fees to the Sabidos even though they won at trial.

Clearly you don’t understand the American Rule, or you wouldn’t complain. That rule provides that each party is responsible for paying its own attorney fees unless specific authority granted by statute or contract allows assessment of fees against the other party.

The Florida uniform mortgage security instrument does provide the creditor with the right to recover from the borrower all costs of collecting the mortgage debt, including attorney fees. If Sabidos wanted the same right, they should have written it into the security instrument before signing it.

Florida Statute 57.105 provides for sanctions and recovery of attorney fees by a party that raised unsupported claims. You know about that law first hand because the appellate court awarded recovery of fees to the creditors you sued in the Maslanka case because you lodged unsupported (some might say delusional) claims on behalf of Zdzislaw Maslanka.

The Sabido court based its opinion on the following:

“The borrowers’ motion for fees is denied because the Bank of New York Mellon was not a party to the note and mortgage, and because the borrowers successfully argued that the Bank of New York Mellon was not entitled to enforce the instrument containing the attorney fee provision.”

Ooops.  Maybe the Sabidos should have asked the court to sanction Bank of New York Mellon for lodging an unsupportable claim.  In this case, the borrower stuck his hand in the wrong cookie jar.

Bob Hurt
Mortgage Attack

On 2018-02-13 10:39, Livinglies’s Weblog wrote:

WordPress.com

HSBC v BUSET FLA 3rd DCA Remands for Final Judgment of Foreclosure

nuke going off
Sorry, Neil. Bad Idea.

A few months ago, attorney Neil Garfield wrote a glowing endorsement of the Florida 11th Circuit trial opinion in HSBC v Buset sending forth HSBC without day for a variety of reasons, none of them sensible. The Stop-Foreclosure blog echoed Garfield’s sentiment.  In due course the Florida 3rd District Court of Appeals overturned all of the holdings of the Buset opinion, and remanded the case back to trial court for a final judgment of foreclosure, holding the following:

  1. The trial court erred in accepting expert testimony on legal issues;
  2. The note is not merely a secured interest under UCC Article 9, but rather a negotiable instrument under UCC Article 3 and Florida law, in spite of its reference to the mortgage without incorporating it, and the definition of Note Holder does not destroy negotiability of the note;
  3. HSBC, as note holder and “PETE” (Person Entitled To Enforce the note under the UCC) or agent of the PETE, had standing to foreclose, irrespective of the incomplete or broken chain of ownership of the note during its securitization, and does not need to prove ownership or an unbroken chain of ownership of the note, AND the trial court erred by focusing on the irrelevant chain of ownership of the note instead of the relevant PETE;
  4.  Purported violations of the Pooling and Servicing Agreement (PSA) are irrelevant to the PETE status of the note holder and did not destroy HSBC’s standing to sue for foreclosure because borrowers are not parties to or beneficiaries of the PSA, and therefore borrowers may not raise PSA violations as defenses to foreclosure
  5. Assignment of the mortgage did not destroy HSBC’s standing to foreclose because the mortgage always follows the note and the PETE always has authority over the mortgage.
  6. The servicer’s business records were admissible, and the trial court erred by blocking admission of borrower payment history, default letters, and payoff printout.
  7. HSBC did not have unclean hands justifying dismissal

What does this prove?

Well, to begin with, borrowers facing foreclosure cannot trust attorneys like Bruce Jacobs and Neil Garfield to save them from foreclosure.  They will just make failing arguments, and waste a lot of money while leading their victim into the hungry jaws of foreclosure.

Second, it suggests that borrowers must find out how the creditor, servicer, lender, mortgage broker, loan officer, title company, or appraiser injured them in the loan transaction, and then GO ON THE ATTACK.

Where do we find such a strategy in action?

In foreclosure activities across the land every business day.  The borrower injures the creditor by breaching the loan agreement, so the creditor files a foreclosure lawsuit or takes the case to the trustee, and a foreclosure and sale of the property follow in due course.

Of course, creditors and their allies in the loan transaction make a host of errors in most loans, and if the borrower hires a competent examination firm like Mortgage Fraud Examiners to look for tortious conduct, legal errors, contract breaches, or violations of law, the examination will turn up injuries (typical of 95% of the loans in the past 15 years).  Some of the injuries might justify huge compensatory and punitive damages.

Don’t expect a foreclosure pretense defense attorney to look for causes of action in a loan transaction.  Such attorneys usually bilk their clients and withdraw from the case just in time for foreclosure.

Bob Hurt

Maven at MortgageAttack

 

 

Sanctions Pummel Neil Garfield Legal Theories

Neil Garfield’s frivolous filings and bogus legal theories have already cost at least one client, Zdislaw Maslanka, a wad of attorney fees in an utterly frivolous action to get his house free even though he remained current in his mortgage payments.  As the below docket entries show, the Florida 4th District appellate panel affirmed the 17th Circuit trial court’s dismissal of the case and ordered Maslanka to pay the attorney fees of the two mortgage creditors that he sued.

  • 4D14-3015-Zdzislaw E. Maslanka v. Wells Fargo Home Mortgage and Embrace Home Loans
05/12/2016 Affirmed ­ Per Curiam Affirmed  
05/12/2016 Order Granting Attorney Fees­Unconditionally ORDERED that the appellee Embrace Home Loans Inc.’s September 2, 2015 motion for attorney’s fees is granted. On remand, the trial court shall set the amount of the attorney’s fees to be awarded for this appellate case. If a motion for rehearing is filed in this court, then services rendered in connection with the filing of the motion, including, but not limited to, preparation of a responsive pleading, shall be taken into account in computing the amount of the fee
05/12/2016 Order Granting Attorney Fees­Unconditionally ORDERED that the appellee Wells Fargo Home Mortgage’s September 3, 2015 motion for attorneys’ fees is granted. On remand, the trial court shall set the amount of the attorneys’ fees to be awarded for this appellate case. If a motion for rehearing is filed in this court, then services rendered in connection with the filing of the motion, including, but not limited to, preparation of a responsive pleading, shall be taken into account in computing the amount of the fee.

Federal Rules of Civil Procedure Rule 11 (See Below) allows the court to award attorney fees to the party against whom a litigant files frivolous (unsupported or nonsensical) motions.

34 States have embraced FRCivPro Rule 11 in their own rules of civil procedure, but Florida embraced it in Florida Statute 57.105 (See Below).  It requires the attorney propounding the unsupported motion to pay one half of the sanction cost and the attorney’s client to pay the other half.  That has raised the hackles of a lot of attorneys who claim it chills their willingness to mount an aggressive advocacy on behalf of the client.  Obviously, lawmakers see overaggressiveness as vexatious, and they decided, finally, to punish the lawyer for it.

Mortgage loan creditors have begun to get sick and tired of dealing with mindless litigation by idiotic practititoners like Neil Garfield.

Johnson v. BANK OF NEW YORK MELLON, Dist. Court, WD Washington 2016

I write now to show a case in point (full text of opinion below).  Lajuana Locklin Johnson, a TILA rescission mortgagor,  provoked the ire of a USDC judge in Washington State by filing a notice of rescission 10 (TEN!) years after consummation of the loan (obviously following Neil Garfield’s ridiculous strategy) when the TILA statute of repose window closes after 3 years.  She knew she had no case, but filed it anyway in a silly and misguided effort to get a free house.  So, the judge spanked her.

Oh, and she claimed she relied on the clear meaning of the SCOTUS Jesinoski opinion to do it. She claimed SCOTUS meant one can send notice of rescission after 3 years, but the high court actually meant the borrower with a valid TILA rescission claim may sue after 3 years.  Incidentally, the Minnesota USDC ruled in July 2016 that Jesinoski had no TILA rescission case because he and his wife had written an acknowledged receipt of the proper TILA disclosures. Jesinoski claimed he had invested over $800,000 in the case, much of which came from attorney fees.

Well, first Judge James L. Robart ordered Lajuana and her attorney Smith to show cause why he shouldn’t sanction them under Rule 11 for bringing an utterly hopeless TILA rescission action she knew would fail.  And in that order he berated attorney Jill J. Smith of Natural Resource Law Group, PLLC, for filing the action in spite of having filed and been sanctioned for one or more prior frivolous actions like Lajuana’s.  Smith idiotically claimed the table-funding meant the loan had never been consummated and so the statute of repose could not have tolled.  But she did not explain how Lajuana could rescind a non-consummated loan.

The judge said this about the essential argument Smith (taken directly from Garfield) propounded:

Excerpt from opinion

Ms. Smith indicates that on October 6, 2005, Ms. Johnson “entered into what she thought was a mortgage loan to purchase” property. (OSC Resp. at 1.) At oral argument, Ms. Smith argued that if the loan was never funded then the loan was never consummated.[3] However, Ms. Smith conceded at oral argument that the relevant parties signed the loan paperwork, money was transferred to the sellers of the house, and Ms. Johnson took possession of the property. These facts unarguably give rise to a contract under Washington Law. See Keystone, 94 P.3d at 949; see also Grimes, 340 F.3d at 1009-10. Ms. Smith nonetheless argued that the loan was unconsummated at that juncture based on the manner in which it was funded and the subsequent history of the loan.

Ms. Smith’s protestations in her response and at oral argument that the loan was table-funded[4] (id. at 4-5) and her account of the history of the loan subsequent to its consummation (OSC at 2-4) are both irrelevant to her allegation that “the loan was never consummated” (Compl. ¶ 13). Despite being afforded numerous opportunities to do so, Ms. Smith has failed to provide any legal authority—or even a cogent argument— supporting the proposition that the type of funding or subsequent transfers of a loan impact whether the loan was consummated.[5] (See, e.g., OSC Resp. at 5 (“One of the questions at issue is that if a party is merely an originator and NOT a lender or creditor, is there some theory where a loan contract could be considered consummated? If Plaintiff’s loan was a table-funded loan, the answer must be `no.'”).) Nor has Ms. Smith pointed to any further evidence providing “information and belief” that “the subject loan was never consummated.” (Compl. ¶ 13.)

The foregoing analysis leads the court to conclude that Ms. Smith’s factual allegation that “the loan was never consummated” and the legal theories underpinning that allegation violate Rules 11(b)(2) and 11(b)(3).[6] See Fed. R. Civ. P. 11(b)(2) (requiring that “the claims, defenses, and other legal contentions are warranted by existing law or by a nonfrivolous argument for extending, modifying, or reversing existing law or for establishing new law”); Fed. R. Civ. P. 11(b)(3) (requiring that “factual contentions have evidentiary support or, if specifically so identified, will likely have evidentiary support after a reasonable opportunity for further investigation or discovery”). The court analyzes the appropriate sanctions below.

Then, Judge Robart ordered these sanctions:

(1) No more than 30 days after the date of this order, Ms. Smith and the Natural Resource Law Group must jointly pay sanctions of $10,000.00 to the court;

(2) No more than 30 days after the date of this order, Ms. Smith and the Natural Resource Law Group must fully reimburse Ms. Johnson for any attorneys’ fees or costs paid by Ms. Johnson in conjunction with this case and file certification with the court that they have done so; and

(3) The court dismisses the complaint with prejudice.

I would raise yet another point about this case.  The above excerpt provided that “Ms. Smith indicates that on October 6, 2005, Ms. Johnson “entered into what she thought was a mortgage loan to purchase” property…  Ms. Smith conceded at oral argument that the relevant parties signed the loan paperwork, money was transferred to the sellers of the house, and Ms. Johnson took possession of the property.”

I fail to see how TILA rescission can apply at all to a purchase money loan.

12 CFR Part 1026.23(f) “Exempt transactions.  The right to rescind does not apply to the following:  1. A residential mortgage transaction.” (“Residential mortgage transaction means a transaction in which a mortgage, deed of trust, purchase money security interestarising under an installment sales contract, or equivalent consensual security interestis created or retained in the consumer‘s principal dwelling to finance the acquisition or initial construction of that dwelling.”)

See the whole opinion below.

And let this be a lesson to Neil Garfield Klingons (those who cling to his every utterance:

Heed Neil Garfield at your peril!

 

FRCivPro Rule 11. Signing Pleadings, Motions, and Other Papers; Representations to the Court; Sanctions

(a) Signature. Every pleading, written motion, and other paper must be signed by at least one attorney of record in the attorney’s name—or by a party personally if the party is unrepresented. The paper must state the signer’s address, e-mail address, and telephone number. Unless a rule or statute specifically states otherwise, a pleading need not be verified or accompanied by an affidavit. The court must strike an unsigned paper unless the omission is promptly corrected after being called to the attorney’s or party’s attention.

(b) Representations to the Court. By presenting to the court a pleading, written motion, or other paper—whether by signing, filing, submitting, or later advocating it—an attorney or unrepresented party certifies that to the best of the person’s knowledge, information, and belief, formed after an inquiry reasonable under the circumstances:

(1) it is not being presented for any improper purpose, such as to harass, cause unnecessary delay, or needlessly increase the cost of litigation;

(2) the claims, defenses, and other legal contentions are warranted by existing law or by a nonfrivolous argument for extending, modifying, or reversing existing law or for establishing new law;

(3) the factual contentions have evidentiary support or, if specifically so identified, will likely have evidentiary support after a reasonable opportunity for further investigation or discovery; and

(4) the denials of factual contentions are warranted on the evidence or, if specifically so identified, are reasonably based on belief or a lack of information.

(c) Sanctions.

(1) In General. If, after notice and a reasonable opportunity to respond, the court determines that Rule 11(b) has been violated, the court may impose an appropriate sanction on any attorney, law firm, or party that violated the rule or is responsible for the violation. Absent exceptional circumstances, a law firm must be held jointly responsible for a violation committed by its partner, associate, or employee.

(2) Motion for Sanctions. A motion for sanctions must be made separately from any other motion and must describe the specific conduct that allegedly violates Rule 11(b). The motion must be served under Rule 5, but it must not be filed or be presented to the court if the challenged paper, claim, defense, contention, or denial is withdrawn or appropriately corrected within 21 days after service or within another time the court sets. If warranted, the court may award to the prevailing party the reasonable expenses, including attorney’s fees, incurred for the motion.

(3) On the Court’s Initiative. On its own, the court may order an attorney, law firm, or party to show cause why conduct specifically described in the order has not violated Rule 11(b).

(4) Nature of a Sanction. A sanction imposed under this rule must be limited to what suffices to deter repetition of the conduct or comparable conduct by others similarly situated. The sanction may include nonmonetary directives; an order to pay a penalty into court; or, if imposed on motion and warranted for effective deterrence, an order directing payment to the movant of part or all of the reasonable attorney’s fees and other expenses directly resulting from the violation.

(5) Limitations on Monetary Sanctions. The court must not impose a monetary sanction:

(A) against a represented party for violating Rule 11(b)(2); or

(B) on its own, unless it issued the show-cause order under Rule 11(c)(3)before voluntary dismissal or settlement of the claims made by or against the party that is, or whose attorneys are, to be sanctioned.

(6) Requirements for an Order. An order imposing a sanction must describe the sanctioned conduct and explain the basis for the sanction.

(d) Inapplicability to Discovery. This rule does not apply to disclosures and discovery requests, responses, objections, and motions under Rules 26 through37.

 

Florida Statute
57.105 Attorney’s fee; sanctions for raising unsupported claims or defenses; exceptions; service of motions; damages for delay of litigation.

(1) Upon the court’s initiative or motion of any party, the court shall award a reasonable attorney’s fee, including prejudgment interest, to be paid to the prevailing party in equal amounts by the losing party and the losing party’s attorney on any claim or defense at any time during a civil proceeding or action in which the court finds that the losing party or the losing party’s attorney knew or should have known that a claim or defense when initially presented to the court or at any time before trial:

(a) Was not supported by the material facts necessary to establish the claim or defense; or
(b) Would not be supported by the application of then-existing law to those material facts.
(2) At any time in any civil proceeding or action in which the moving party proves by a preponderance of the evidence that any action taken by the opposing party, including, but not limited to, the filing of any pleading or part thereof, the assertion of or response to any discovery demand, the assertion of any claim or defense, or the response to any request by any other party, was taken primarily for the purpose of unreasonable delay, the court shall award damages to the moving party for its reasonable expenses incurred in obtaining the order, which may include attorney’s fees, and other loss resulting from the improper delay.

(3) Notwithstanding subsections (1) and (2), monetary sanctions may not be awarded:

(a) Under paragraph (1)(b) if the court determines that the claim or defense was initially presented to the court as a good faith argument for the extension, modification, or reversal of existing law or the establishment of new law, as it applied to the material facts, with a reasonable expectation of success.
(b) Under paragraph (1)(a) or paragraph (1)(b) against the losing party’s attorney if he or she has acted in good faith, based on the representations of his or her client as to the existence of those material facts.
(c) Under paragraph (1)(b) against a represented party.
(d) On the court’s initiative under subsections (1) and (2) unless sanctions are awarded before a voluntary dismissal or settlement of the claims made by or against the party that is, or whose attorneys are, to be sanctioned.
(4) A motion by a party seeking sanctions under this section must be served but may not be filed with or presented to the court unless, within 21 days after service of the motion, the challenged paper, claim, defense, contention, allegation, or denial is not withdrawn or appropriately corrected.
(5) In administrative proceedings under chapter 120, an administrative law judge shall award a reasonable attorney’s fee and damages to be paid to the prevailing party in equal amounts by the losing party and a losing party’s attorney or qualified representative in the same manner and upon the same basis as provided in subsections (1)-(4). Such award shall be a final order subject to judicial review pursuant to s. 120.68. If the losing party is an agency as defined in s. 120.52(1), the award to the prevailing party shall be against and paid by the agency. A voluntary dismissal by a nonprevailing party does not divest the administrative law judge of jurisdiction to make the award described in this subsection.
(6) The provisions of this section are supplemental to other sanctions or remedies available under law or under court rules.
(7) If a contract contains a provision allowing attorney’s fees to a party when he or she is required to take any action to enforce the contract, the court may also allow reasonable attorney’s fees to the other party when that party prevails in any action, whether as plaintiff or defendant, with respect to the contract. This subsection applies to any contract entered into on or after October 1, 1988.
History.s. 1, ch. 78-275; s. 61, ch. 86-160; ss. 1, 2, ch. 88-160; s. 1, ch. 90-300; s. 316, ch. 95-147; s. 4, ch. 99-225; s. 1, ch. 2002-77; s. 9, ch. 2003-94; s. 1, ch. 2010-129.

57.115 Execution on judgments; attorney’s fees and costs.

(1) The court may award against a judgment debtor reasonable costs and attorney’s fees incurred thereafter by a judgment creditor in connection with execution on a judgment.

(2) In determining the amount of costs, including attorney’s fees, if any, to be awarded under this section, the court shall consider:

(a) Whether the judgment debtor had attempted to avoid or evade the payment of the judgment; and
(b) Other factors as may be appropriate in determining the value of the services provided or the necessity for incurring costs in connection with the execution.
History.s. 13, ch. 87-145.

 

LAJUANA LOCKLIN JOHNSON, Plaintiff,
v.
BANK OF NEW YORK MELLON, et al., Defendants.

Case No. C16-0833JLR.United States District Court, W.D. Washington, Seattle.

August 10, 2016.Lajuana Locklin Johnson, Plaintiff, represented by Jill J. Smith, NATURAL RESOURCE LAW GROUP PLLC.

ORDER ISSUING SANCTIONS AND DISMISSING CASE

JAMES L. ROBART, District Judge.

I. INTRODUCTION

This matter comes before the court sua sponte. Previously, the court ordered Jill J. Smith of the Natural Resource Law Group, PLLC, counsel for Plaintiff Lajuana Locklin Johnson, to show cause why the court should not sanction her pursuant to Federal Rule of Civil Procedure 11. (OSC (Dkt. # 3); see alsoCompl. (Dkt. # 1).) The court then ordered Ms. Smith to appear, and she presented argument on July 28, 2016, on why the court should not issue sanctions. Having considered the written and oral arguments of counsel, the appropriate portions of the record, and the relevant law, and considering itself fully advised, the court DISMISSES this case WITH PREJUDICE and SANCTIONS Ms. Smith as described more fully herein.

II. BACKGROUND

On June 6, 2016, Ms. Smith filed a complaint on behalf of Ms. Johnson seeking to enforce and obtain damages pertaining to her purportedly rescinded loans. (Compl.) The rescission notices that Ms. Johnson attached to her complaint make clear that she sent those notices more than a decade after executing the loans. (See Rescission Notices (Dkt. # 1-1).) The Truth in Lending Act (hereinafter, “TILA”), 15 U.S.C. § 1635 et seq., permits rescission of certain loans but includes a three-year statute of repose. Jesinoski v. Countrywide Home Loans, Inc., ___ U.S. ___, 135 S. Ct. 790, 792-93 (2015)(“The Truth in Lending Act gives borrowers the right to rescind certain loans for up to three years after the transaction is consummated.”).

Having presided over several of Ms. Smith’s TILA rescission cases that feature substantially similar complaints to the one in this case, the court researched Ms. Smith’s other filings in this district. (See OSC at 5-6 (collecting cases).) Ms. Smith has filed a troubling series of such cases.[1] The Honorable Thomas S. Zilly sanctioned Ms. Smith $5,000.00 plus over $10,000.00 in attorneys’ fees after ordering Ms. Smith to show cause regarding how binding Supreme Court caselaw does not foreclose her claim and receiving no response.Johnson v. Nationstar Mortg. LLC, et al., No. C15-1754TSZ, Dkt. ## 35, 41. The claim in Johnson v. Nationstar strongly resembles Ms. Johnson’s untimely effort to rescind pursuant to TILA in this case.

In light of this backdrop, the court stayed this case and ordered Ms. Smith to show cause no later than July 7, 2016, why the court should not issue sanctions pursuant to Federal Rule of Civil Procedure 11. (OSC at 8-10.) The court indicated that it was specifically considering sanctioning Ms. Smith and Ms. Johnson by “dismissing this case, issuing monetary sanctions against Ms. Smith, and requiring Ms. Smith to file a copy of this order each time she files a new case in federal court.” (Id. at 9.) Ms. Smith failed to file a timely response to the court’s order to show cause. (See Dkt.) The court therefore ordered Ms. Smith to appear on July 28, 2016, for an in-court sanctions hearing. (7/18/16 Min. Ord. (Dkt. # 4) at 1-2.)

On July 27, 2016, almost three weeks after her response was due and the day before the sanctions hearing, Ms. Smith filed a response to the order to show cause. That response states the facts of the case as Ms. Smith sees them but without reference to any affidavit or other verified source. (OSC Resp. (Dkt. # 5) at 1-4.) In addition, Ms. Smith attempts to address some of the specific considerations the court ordered her to respond to in its prior order. (Id. at 5-6.) However, she makes no reference to any of the prior cases she has filed in this court or “the Ninth Circuit and Supreme Court cases cited” in the order to show cause. (See OSC at 9 (“Ms. Smith’s response to this order must address how Ms. Johnson’s claims, as stated in the complaint, comply with Rule 11(b)(2) in light of Nieuwejaar, Green Tree, the other cases in this District identified above, and the Ninth Circuit and Supreme Court cases cited therein. Finally, Ms. Smith must address what “information and belief” she has that Ms. Johnson’s loan in this case “was never consummated.”); see generally OSC Resp.)

Ms. Smith appeared in court on July 28, 2016, and defended the factual allegations and legal theory underpinning Ms. Johnson’s claim. (7/28/16 Min. Entry (Dkt. # 6).) In general terms, Ms. Smith argued that circumstances surrounding the loan, such as the manner in which it was funded, make it questionable whether the loan was ever consummated. If the loan was never consummated, she reasons, the three-year statute of repose never began and therefore never expired.

The matter of Rule 11 sanctions is now before the court.

III. ANALYSIS

A. Legal Standard

Federal Rule of Civil Procedure 11 governs sanctions of the type issued herein. Rule 11(b) provides in full:

By presenting to the court a pleading, written motion, or other paper— whether by signing, filing, submitting, or later advocating it—an attorney or unrepresented party certifies that to the best of the person’s knowledge, information, and belief, formed after an inquiry reasonable under the circumstances: (1) it is not being presented for any improper purpose, such as to harass, cause unnecessary delay, or needlessly increase the cost of litigation; (2) the claims, defenses, and other legal contentions are warranted by existing law or by a nonfrivolous argument for extending, modifying, or reversing existing law or for establishing new law; (3) the factual contentions have evidentiary support or, if specifically so identified, will likely have evidentiary support after a reasonable opportunity for further investigation or discovery; and (4) the denials of factual contentions are warranted on the evidence or, if specifically so identified, are reasonably based on belief or a lack of information.

Fed. R. Civ. P. 11(b). In its June 22, 2016, order, the court placed Ms. Smith on notice and allowed her to respond regarding potential violations of Rules 11(b)(2) and 11(b)(3).

B. Violations of Rule 11

Ms. Johnson alleges that “[u]pon information and belief, the subject loan was never consummated.” (Compl. ¶ 13.) This conclusory allegation appears intended to circumvent TILA’s three-year statute of repose, which begins upon consummation of the loan.[2] See 15 U.S.C. § 1635(f) (“An obligor’s right of rescission shall expire three years after the date of consummation of the transaction or upon the sale of the property, whichever occurs first. . . .”);Jesinoski, 135 S. Ct. at 792-93. At the hearing, Ms. Smith argued that if the loan was never consummated, the three-year statute of repose has not begun, has not expired, and therefore the rescission is timely.

In the numerous opportunities the court has afforded Ms. Smith to provide a factual basis for this allegation, she has provided none. Ms. Smith has also provided no evidence of any legal or factual “inquiry” that she performed, and accordingly the court can only determine whether the inquiry was “reasonable under the circumstances” based on the allegations and arguments that Ms. Smith has advanced in opposition to the frivolity of Ms. Johnson’s claim. Fed. R. Civ. P. 11(b).

Under TILA, “[c]onsummation means the time that a consumer becomes contractually obligated on a credit transaction.” 12 C.F.R. § 226.2(a)(13); see also Grimes v. New Century Mortg. Corp., 340 F.3d 1007, 1009 (9th Cir. 2003). “Under the Official Staff interpretation, state law determines when a borrower is contractually obliged.” Grimes, 340 F.3d at 1009 (citing 12 C.F.R. § 226, Supp. 1 (Official Staff Interpretations), cmt. 2(a)(13)); see also id. at 1010 (applying California law to determine whether a California loan was consummated for purposes of TILA). In Washington, “for a contract to form, the parties must objectively manifest their mutual assent” to “sufficiently definite” contractual terms. Keystone Land & Dev. Co. v. Xerox Corp., 94 P.3d 945, 949 (Wash. 2004). In addition, “the contract must be supported by consideration to be enforceable.” Id. (citing King v. Riveland, 886 P.2d 160, 164 (Wash. 1994)).

Ms. Smith indicates that on October 6, 2005, Ms. Johnson “entered into what she thought was a mortgage loan to purchase” property. (OSC Resp. at 1.) At oral argument, Ms. Smith argued that if the loan was never funded then the loan was never consummated.[3] However, Ms. Smith conceded at oral argument that the relevant parties signed the loan paperwork, money was transferred to the sellers of the house, and Ms. Johnson took possession of the property. These facts unarguably give rise to a contract under Washington Law. See Keystone, 94 P.3d at 949; see also Grimes, 340 F.3d at 1009-10. Ms. Smith nonetheless argued that the loan was unconsummated at that juncture based on the manner in which it was funded and the subsequent history of the loan.

Ms. Smith’s protestations in her response and at oral argument that the loan was table-funded[4] (id. at 4-5) and her account of the history of the loan subsequent to its consummation (OSC at 2-4) are both irrelevant to her allegation that “the loan was never consummated” (Compl. ¶ 13). Despite being afforded numerous opportunities to do so, Ms. Smith has failed to provide any legal authority—or even a cogent argument— supporting the proposition that the type of funding or subsequent transfers of a loan impact whether the loan was consummated.[5] (See, e.g., OSC Resp. at 5 (“One of the questions at issue is that if a party is merely an originator and NOT a lender or creditor, is there some theory where a loan contract could be considered consummated? If Plaintiff’s loan was a table-funded loan, the answer must be `no.'”).) Nor has Ms. Smith pointed to any further evidence providing “information and belief” that “the subject loan was never consummated.” (Compl. ¶ 13.)

The foregoing analysis leads the court to conclude that Ms. Smith’s factual allegation that “the loan was never consummated” and the legal theories underpinning that allegation violate Rules 11(b)(2) and 11(b)(3).[6] See Fed. R. Civ. P. 11(b)(2) (requiring that “the claims, defenses, and other legal contentions are warranted by existing law or by a nonfrivolous argument for extending, modifying, or reversing existing law or for establishing new law”); Fed. R. Civ. P. 11(b)(3) (requiring that “factual contentions have evidentiary support or, if specifically so identified, will likely have evidentiary support after a reasonable opportunity for further investigation or discovery”). The court analyzes the appropriate sanctions below.

C. Appropriate Sanctions

Rule 11(d) limits sanctions to “what suffices to deter repetition of the conduct or comparable conduct by others similarly situated.” Fed. R. Civ. P. 11(d). Ms. Smith’s actions in this case demonstrate that the previous sanctions she incurred—dismissal with prejudice, $11,972.50 in attorneys’ fees payable by her client, and a $5,000.00 sanction payable to the court—constituted insufficient specific deterrence. See Johnson v. Nationstar, No. C15-1754TSZ, Dkt. ## 35, 41-43. The court finds it appropriate to impose greater monetary sanctions payable by Ms. Smith and her law firm and dismiss the case with prejudice.[7] The court accordingly issues the following sanctions:

(1) No more than 30 days after the date of this order, Ms. Smith and the Natural Resource Law Group must jointly pay sanctions of $10,000.00 to the court;

(2) No more than 30 days after the date of this order, Ms. Smith and the Natural Resource Law Group must fully reimburse Ms. Johnson for any attorneys’ fees or costs paid by Ms. Johnson in conjunction with this case and file certification with the court that they have done so; and

(3) The court dismisses the complaint with prejudice.

IV. CONCLUSION

Based on the foregoing analysis, the court DISMISSES the case WITH PREJUDICE and SANCTIONS Ms. Smith as described above.

[1] See Pelzel v. GMAC Mortg. Grp., LLC, No. C16-5643RBL, Dkt. # 1 (filing a complaint on July 20, 2016, which alleges that “[u]pon information and belief, the subject loan was never consummated” and appears to suffer the same legal and factual deficiencies as this case); Elder v. Pinnacle Capital Mortg. Corp., et al., No. C16-5355RBL, Dkt. ## 1, 1-1 (filing a complaint on May 13, 2016, which is nearly identical to the complaint in this case and seeks to rescind a loan pursuant to TILA without providing a date for that loan); Velasco, et al. v. Mortg. Elec. Registration Sys., Inc., et al., No. C16-5022RBL, Dkt. # 30 (dismissing a claim for enforcement of TILA rescission filed more than six years after the date of the rescission notice on res judicata grounds); Maxfield v. Indymac Mortg. Servs., et al., No. C16-0564RSM, Dkt. # 3 (filing a complaint on April 19, 2016, which is nearly identical to the complaint in this case and seeks to rescind a loan pursuant to TILA without providing a date for that loan); Jenkins, et al. v. Wells Fargo Bank, N.A., No. 16-0452TSZ, Dkt. # 1 (filing a complaint on March 31, 2016, which is nearly identical to the complaint in this case and seeks to rescind a loan pursuant to TILA without providing a date for that loan); Burton, et al. v. Bank of Am., et al., No. C15-5769RBL, Dkt. # 20 at 5 (citing Jesinoski, 135 S. Ct. at 792) (“The Supreme Court’s Jesinoskidecision— quoted by the Burtons—reiterates that while the three year limitation period may not apply to the commencement of an action, it absolutely applies to the time frame for sending a rescission notice. . . . The Burtons’ loan was consummated in 2005. Their conditional right to rescind expired in 2008—seven years before they sent the notice upon which this action relies. . . .”);Johnson v. Green Tree Servicing, LLC, et al., No. C15-1685JLR, Dkt. # 22 at 8-9 (dismissing the case and rejecting the arguments that TILA “rescission is effective upon mailing, regardless of when mailing occurs” and that “the court cannot presume consummation until after discovery is conducted on the matter”); Stennes-Cox v. Nationstar Mortg., LLC, et al., No. C15-1682TSZ, Dkt. # 15 at 3-5 (rejecting the plaintiff’s arguments based on Jesinoski and Paatalo and dismissing with prejudice her claim seeking to rescind a loan eight years after consummation); Nieuwejaar, et al. v. Nationstar Mortg. LLC, et al., No. C15-1663JLR, Dkt. ## 22 at 6-7 (“Plaintiffs also attempt to address the timeliness issue by raising the possibility that the loan was never consummated. . . . Plaintiffs’ complaint contains no allegations regarding the failure to establish a contractual obligation. . . . Thus, Plaintiffs have not pleaded facts that allow the court to reasonably infer that Plaintiffs’ notice of rescission was effective. . . .” (internal citations omitted)), 28 at 7 (“Moreover, despite the court’s guidance that Plaintiffs must allege facts about the loan transaction before the court can infer a problem with consummation . . ., Plaintiffs’ second amended complaint does not contain a single factual allegation to suggest the subject loan was never consummated. . . . Thus, Plaintiffs again fail to allege facts from which the court can infer that their May 2015 notice of rescission was timely.” (internal citations omitted)).

[2] In Nieuwejaar, the plaintiffs—also represented by Ms. Smith—”attempt[ed] to address the timeliness issue by raising the possibility that the loan was never consummated.” Nieuwejaar, Dkt. # 22 at 6. However, the plaintiffs’ original complaint “contain[ed] no allegations regarding the failure to establish a contractual obligation,” and the court accordingly dismissed that complaint with leave to amend. Id. at 7-8. The plaintiffs’ amended complaint added the same conclusory allegation that Ms. Johnson alleges in this case—that “[u]pon information and belief, the subject loan was never consummated.” Id., Dkt. # 24 ¶ 12. In dismissing the amended complaint with prejudice, the court unequivocally indicated to the plaintiffs that this allegation is insufficient:

[L]ike their original complaint, Plaintiffs’ second amended complaint makes no factual allegations about consummation of the subject loan. . . . Plaintiffs’ only allegation about consummation is that “[u]pon information and belief, the subject loan was never consummated.” . . . That statement is a legal conclusion, which is not entitled to a presumption of truth. . . . At this stage, the court considers the factual allegations in the complaint in the light most favorable to Plaintiffs. . . . However, as the court explained in its previous order of dismissal, Plaintiffs must actually allege facts that, if true, would support their claims. . . . The court still cannot infer a problem with consummation because Plaintiffs still have not pleaded any facts to support such an inference.

Id., Dkt. # 28 at 7 (internal citations omitted).

These events occurred before Ms. Smith filed the instant case on behalf of Ms. Johnson. (SeeCompl.) Ms. Smith’s troubling inability or unwillingness to heed the court’s prior ruling further demonstrates that Ms. Smith is engaged in progressively more frivolous efforts at pleading around TILA’s period of repose despite lacking a factual basis for her allegations.

[3] This court has previously rejected this argument by Ms. Smith. See Johnson v. Green Tree Servicing, LLC, No. C15-1685JLR, 2016 WL 1408115, at *4 n.9 (W.D. Wash. Apr. 6, 2006) (“Ms. Johnson’s only challenge to consummation suggests that `if the loan was never actually funded, but was part of a hedge fund investing scheme . . . then the loan was never consummated, for example.’ This hypothetical fails to support a plausible inference that the subject loan was not consummated because Ms. Johnson does not connect her hypothetical situation with specific allegations about the subject loan.” (alteration in original) (internal citations omitted)).

[4] “In a table-funded loan, the originator closes the loan in its own name, but is acting as an intermediary for the true lender, which assumes the financial risk of the transaction.” Easter v. Am. W. Fin., 381 F.3d 948, 955 (9th Cir. 2004).

[5] Ms. Smith’s argument regarding consummation is also inconsistent with her theory of the case. If the subject loan was never consummated, Ms. Johnson need not bring “an enforcement action of the rescission notice.” (OSC Resp. at 1.)

[6] In previous cases before the court, Ms. Smith has advanced a different—but equally frivolous—legal theory in support of her clients’ untimely TILA rescission actions. In Nieuwejaar, Dkt. # 14 at 4-6, for instance, Ms. Smith argued that Jesinoski vitiates the three-year statute of repose imposed by TILA. According to this theory, irrespective of the timeliness or legal effect of an obligor’s notice of rescission, sending such notice triggers a 20-day period in which the lender must respond; otherwise the loan is deemed rescinded. Id. Ms. Smith supported that argument by taking out of context the Supreme Court’s statement that the right to rescind under TILA is effective upon providing notice to the creditor. Id. at 4 (“Justice Scalia made a point of repeating that the rescission was effective by operation of law on the date that it was mailed and pointed out that the statute makes no distinction between disputed and undisputed rescissions — they are all effective when mailed.”). However, as Judge Zilly made clear in sanctioning Ms. Smith, “because plaintiff’s attempt at rescission was void ab initio, there was no obligation for defendants to file a suit challenging the attempted rescission.” Johnson v. Nationstar Mortg., Dkt. # 35 at 4; see also Jesinoski, 135 S. Ct. at 791 (“The Truth in Lending Act gives borrowers the right to rescind certain loans for up to three years after the transaction is consummated. The question presented is whether a borrower exercises this right by providing written notice to his lender, or whether he must also file a lawsuit before the 3-year period elapses.”).

When confronted with Jesinoski at the hearing, Ms. Smith fell back on the factually unsupported and legally frivolous consummation argument described above. The consummation argument represents only the most recent permutation of Ms. Smith’s futile efforts to maintain frivolous, untimely TILA rescission claims in federal court.

[7] The court liberally considers granting amendment. See Fed. R. Civ. P. 15(a). However, after affording Ms. Smith numerous opportunities to persuade the court otherwise, the court concludes that Ms. Johnson’s case is based on frivolous legal theories. Accordingly, the court finds that amendment would be futile. See Greenspan v. Admin. Office of the U.S. Courts, No. 14cv2396 JTM, 2014 WL 6847460, at *11 (N.D. Cal. Dec. 4, 2014) (citing Saul v. United States, 928 F.2d 829, 843 (9th Cir. 1991)) (“While leave to amend is to be freely given under [Federal Rule of Civil Procedure] 15(a), the court denies the motion [to amend] because . . . amendment is futile under the legal theories asserted in the proposed [amended complaint].”).

In addition, the court considered requiring Ms. Smith to file a copy of this order with each new TILA-based complaint she files in this District. (See OSC at 9.) However, because that sanction could prejudice Ms. Smith’s present and future clients, the court declines to impose that sanction at this time.