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The following is from the Consumer Financial Protection Bureau: Banks to Pay $35.7 Million After Loan Officers Illegally Traded Referrals for Cash and Marketing Services
The Consumer Financial Protection Bureau (CFPB) and the Maryland Attorney General took action against Wells Fargo and JPMorgan Chase for an illegal marketing-services-kickback scheme they participated in with Genuine Title, a now-defunct title company. The Bureau and Maryland also took action against former Wells Fargo employee Todd Cohen and his wife, Elaine Oliphant Cohen, for their involvement.  Genuine Title gave the banks’ loan officers cash, marketing materials, and consumer information in exchange for business referrals. The proposed consent orders, filed in federal court, would require $24 million in civil penalties from Wells Fargo, $600,000 in civil penalties from JPMorgan Chase, and $11.1 million in redress to consumers whose loans were involved in this scheme. Cohen and Oliphant Cohen also will pay a $30,000 penalty.
“Today we took action against two of the nation’s largest banks, Wells Fargo and JPMorgan Chase, for illegal mortgage kickbacks,” said CFPB Director Richard Cordray. “These banks allowed their loan officers to focus on their own illegal financial gain rather than on treating consumers fairly. Our action today to address these practices should serve as a warning for all those in the mortgage market.”
“Homeowners were steered toward this title company, not because they were the best or most affordable, but because they were providing kickbacks to loan officers who referred consumers to them,” said Maryland Attorney General Brian Frosh. “This type of quid pro quo arrangement is illegal, and it’s unfair to other businesses that play by the rules.”
Copies of the proposed consent orders filed in federal court and of the Bureau’s administrative consent orders will be available later today.
The post CFPB Takes Action Against Wells Fargo and Chase for Illegal Mortgage Kickbacks appeared first on Diane L. Drain - Phoenix Bankruptcy & Foreclosure Attorney.

When you hear “meeting of creditors,” you might imagine yourself having to face a room of people representing the banks and credit card companies. The reality is that the meeting of creditors is used by the trustee to ask you questions about your financial situation. These questions and your answers will help him or her carry out the responsibilities of the trustee. Creditors will rarely show up at this meeting. Bankruptcy judges are not allowed to attend the meeting of creditors.
The post Chapter 7 Bankruptcy Basics: Part Two appeared first on Tucson Bankruptcy Attorney.

The law governing Arizona anti-deficiency protection for residential property has finally been clarified by the Arizona Supreme Court.
Arizona Revised Statute: 33-814 G. If trust property of two and one-half acres or less which is limited to and utilized for either a single one-family or a single two-family dwelling is sold pursuant to the trustee’s power of sale, no action may be maintained to recover any difference between the amount obtained by sale and the amount of the indebtedness and any interest, costs and expenses.
History:  Property not yet fully constructed does not qualify as “limited to and utilized for one or two family dwelling” Borrowers never intended on residing in the real property.  DEFICIENCY allowed.: Mid Kansas, id at 129, 804 P2d at 117.  But the Court of Appeals put a bizarre twist on that concept in M&I vs Mueller, (Az Ct Appeals, Div 1, 12/27/11) 1 CA-CV 10-0804, CV 2009-031468 (explanation – in Mid Kansas, where the borrower was a corporation that never intended to occupy the property, the Muellers intended to live in the single-family home upon its completion.
FACTS: In 2005, the Muellers purchased a plot of vacant land (the “Property”) in Arizona. In June 2006, the Muellers borrowed $444,000 from M&I to construct a single-family home on the Property for their own use.  Several months into construction, the Muellers discovered that the contractor was behind schedule, and much of the construction was defective. The Muellers notified M&I that they would need advances on loan disbursements to remedy the defects. M&I did not disburse additional funds, and the Muellers abandoned the Property and defaulted on the note.
In September 2009, M&I foreclosed and sued to recover a deficiency judgment for $68,196.91, the difference between the appraised value of the home prior to the foreclosure sale. The trial court dismissed M&I’s deficiency claim, finding as a matter of law that the Muellers were entitled to anti-deficiency protection under Arizona Revised Statutes (“A.R.S.”) section 33-814(G) (2010). Court of Appeals upheld lower court.
FINAL WORD: BMO Harris Bank N.A. v. Wildwood Creek Ranch, No. CV-14-0101-PR (AZ Sup. Ct. 1/23/2015 – vacated Court of Appeals decision in Wildwood and, in essence overturning Mueller) Finding: 1) there must be a completed structure on the property suitable for dwelling purposes and, 2) even the homeowner who has not yet moved into the completed residence would be entitled to anti-deficiency protection. “Mueller’s emphasis on intent arguably would extend anti-deficiency protection to owners of a vacant lot so long as they intend to build and eventually live in a residence.” ‘Our holding in Mid Kansas clarified, for purposes of the anti-deficiency statute, both what constitutes a dwelling” and when property is “utilized for” a dwelling.   A structure is a “dwelling” if it is suitable for residential purposes and a person resides in the structure, or the structure is intended for such use. Id. at 128, 804 P.2d at 1316. Thus, a property contains a “dwelling” for purposes of the anti-deficiency statute when a borrower has purchased but not yet occupied a home, given that the structure is suitable and intended for human abode.”
The post Arizona Supreme Court Clarifies Anti-Deficiency Protection for Residential Property appeared first on Diane L. Drain - Phoenix Bankruptcy & Foreclosure Attorney.

A good friend of mine, Larry Karandreas, said “good advice = bad faith?”.  This is a warning to all consumer debtor attorneys and their clients.  The adage refers to the reality that the consumer bankruptcy world is changing.  Reduced bankruptcy filings result in the bankruptcy trustees, their attorneys and the US Trustee’s Office having more time to spend nit-picking every bankruptcy case filed.  What was good solid pre-bankruptcy planning yesterday may result in a bankruptcy action alleging “bad faith” today.
The behind the scenes reason for this increased scrutiny is that the bankruptcy trustees and their attorneys are hungry.  Their firm and life style were built  on earning a certain amount of money.  For instance, 0ne trustee attorney in Arizona received over One Million dollars in 2013.   When bankruptcy filings were up there was plenty of work to be done on those files where debtors actually did something inappropriate.  The bankruptcy system was well-served by the trustees and their attorneys pursuing the bad actors who had committed a bad faith act.  This was healthy for the system and the creditors.  The debtor received their discharge and all was well with the world.
Not so much today.  Bankruptcy filings are down.  This is good for the economy, but the trustees and their attorneys still have a lifestyle that reflects a more affluent time.  The only way they can feed that lifestyle is to pick at the small and most innocent of acts.  Including those acts that were never considered inappropriate or “bad faith” yesterday.  Innocent debtors receive good legal advice from their experienced bankruptcy counsel.  According to the law or prior cases this advice was long settled as good advice.  These innocent debtors follow their attorneys direction and take the appropriate action.  Actions such as using their vehicle as collateral for funds; funds used to feed their family.
Unfortunately, the hungry trustees and/or their attorneys jump on the innocent debtor alleging “bad faith”.   Defending this action will cost the debtor, and perhaps their attorney.  Threatening this action really amounts to blackmail.  Trustees and/or their attorney know the debtor cannot afford to litigate.  They realize they can strong-arm the debtor into paying something in order to make the lawsuit stop.  Unfortunately, most of the Arizona bankruptcy judges have not admonished these trustees and their attorneys.  This only encourages their continued blackmail.
How are these blackmail funds used?  The funds are paid first to the trustee, then to the trustee’s attorney and, lastly, to the creditors.  The trustee is paid 25% of the first $5,000 collected, with a sliding scale from there.  The trustee’s attorney is paid all of their fees and costs.  Which really rewards the attorney for bringing or threatening to bring a bad faith action.   How about the creditors?  One of the trustee’s duties is to maximize the return to creditors.  With these types of actions is there normally something left to pay to the creditors?  Typically very little, if any.  In fact, it may cost the creditor more money than they receive due to the overhead related to applying accounts receivable.  Too complicated to explain here, but just know the creditors are really irritated by the trustees sending them checks in small amounts ( e.g. under $250).
The point of this blog?  A good bankruptcy attorney is supposed to give their clients good legal and practical advice.  Unfortunately, even if they give good advice and the client correctly follows that advice, bad things may happen.  A system is broken when it encourages (perhaps through non-action) blackmail of those who can little to defend.  I don’t the answer to this problem, other than to stand up to the blackmailers and force them into court.  We can only hope the judge will see what is really happening and send a message to the trustee and their attorneys.  Only time will tell.
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