U.S. Bank Natl. Assn. v Louis

[*1] U.S. Bank Natl. Assn. v Louis 2008 NY Slip Op 52241(U) [21 Misc 3d 1126(A)] [21 Misc 3d 1126(A)] Decided on November 6, 2008 Supreme Court, Kings County Schack, J. Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. This opinion is uncorrected and will not be published in the printed Official Reports.

Decided on November 6, 2008
Supreme Court, Kings County

U.S. Bank National Association, AS TRUSTEE, ON BEHALF OF THE HOLDERS OF THE ADJUSTABLE RATE MORTGAGE TRUST 2007-1, ADJUSTABLE RATE MORTGAGE-BACKED PASS-THROUGH CERTIFICATES, SERIES 2007-1 c/o Select Portfolio Servicing, Inc. 3815 Southwest Temple Salt Lake City, UT 84114, Plaintiff,

against

Kenneth Louis, et. al., Defendants.



21101/07



Plaintiff:

Michael J. Wrona, Esq.

Steven Baum PC

Buffalo NY

Defendant

Defendant did not answer or interpose any response in this foreclosure action.

Arthur M. Schack, J.

Plaintiff U.S. BANK NATIONAL ASSOCIATION, AS TRUSTEE, ON BEHALF OF THE HOLDERS OF THE ADJUSTABLE RATE MORTGAGE TRUST 2007-1, ADJUSTABLE RATE MORTGAGE-BACKED PASS-THROUGH CERTIFICATES, SERIES [*2]2007-1 (U.S. BANK) renewed application for an order of reference for the premises located at 604 Bainbridge Street, Brooklyn, New York (Block 1511, Lot 21, County of Kings) is denied without prejudice. Plaintiff is granted leave to renew its application for an order of reference upon providing the Court with a satisfactory explanation to questions related to: the employment history of John Shelley, who is Vice President of plaintiff's mortgage servicer in its first application for an order of reference and is plaintiff's Vice President in the instant application; possible fraud in the origination of the instant mortgage and note; and, why plaintiff purchased the instant nonperforming loan.

Background

Defendant KENNETH LOUIS (LOUIS) executed the instant mortgage and note on December 19, 2006, and borrowed $540,000.00 from CREDIT SUISSE FINANCIAL CORPORATION (CREDIT SUISSE). The LOUIS Mortgage was recorded by Mortgage Electronic Registrations Systems, Inc. (MERS), as nominee for CREDIT SUISSE, on January 9, 2007, in the Office of the City Register of the City of New York, City Register File Number (CRFN) 2007000014875 [exhibit E of application]. MERS assigned the mortgage, on June 13, 2007, to plaintiff U.S. BANK, with the assignment recorded on July 5, 2007, in the Office of the City Register of the City of New York, CRFN 2007000344271 [exhibit F of application].

The LOUIS adjustable rate note [exhibit D of application] had an initial interest rate of 8.75% for the first five years, and then will be adjusted every six months, commencing with the January 1, 2012 payment. Defendant LOUIS was to pay interest only for the first ten years of the note. The interest-only payments for the first five years were to be $3,937.50 per month. Then, commencing with the January 1, 2012 payment, and every six months thereafter, the interest rate could change on the "change date," based upon an "index" that is the average of interbank offered rates for the six-month U.S. dollar-denominated deposits in the London market (LIBOR) as published in the Wall Street Journal. The specific terms of the LOUIS Note provided that the new interest rate would be the LIBOR rate plus 5.00%, rounded to the nearest .125%. The interest-rate could increase on the first "change date" to a maximum of 14.75%. The Note capped the interest rate at 14.75% and set 5.00% as the floor.

In my December 17, 2007 decision and order, I rejected plaintiff's initial application for an order of reference and denied the application without prejudice, because the affidavit of merit did not comply with CPLR § 3215 (f). The affidavit of merit was executed by John Shelly, "Vice President of SELECT PORTFOLIO SERVICING, INC. [SPS], Attorney in Fact for U.S. BANK NATIONAL ASSOCIATION, AS TRUSTEE, ON BEHALF OF THE HOLDERS OF THE ADJUSTABLE RATE MORTGAGE TRUST 2007-1, ADJUSTABLE RATE MORTGAGE-BACKED PASS-THROUGH CERTIFICATES, SERIES 2007-1." An attached "Limited Power of Attorney," presented to the Court, from US BANK to SPS, its servicing agent, did not grant SPS the power to engage in foreclosure actions and did not refer to U.S. BANK as the Trustee for THE HOLDERS OF THE ADJUSTABLE RATE MORTGAGE TRUST 2007-1, ADJUSTABLE RATE MORTGAGE-BACKED PASS- THROUGH CERTIFICATES, SERIES 2007-1. I granted plaintiff leave to renew its application for an order of reference, upon presentation to the Court of plaintiff's "compliance with the statutory requirements of CPLR § 3215 (f), with an affidavit of facts by someone with authority to execute such an affidavit."

Discussion[*3]

Plaintiff, in the renewed instant application, presents an affidavit of merit from an officer of plaintiff U.S. BANK. This officer, who alleges in his January 10, 2008-affidavit [exhibit B of application] to be "Vice President of U.S. BANK NATIONAL ASSOCIATION, AS TRUSTEE, ON BEHALF OF THE HOLDERS OF THE ADJUSTABLE RATE MORTGAGE TRUST 2007-1, ADJUSTABLE RATE MORTGAGE-BACKED PASS-THROUGH CERTIFICATES, SERIES 2007-1," is the same John Shelley, who in the rejected initial application for an order of reference, stated he was Vice President of SPS. The Court does not know for whom Mr. Shelley is currently employed. Did he switch employers or did plaintiff make him a Vice President solely to satisfy the Court? Therefore, the Court needs to know Mr. Shelley's employment history.

Defendant LOUIS, according to the moving papers, made only one payment on the Note. He defaulted on the March 1, 2007 payment. The Court is concerned that LOUIS' default could be a strong indicator of either his inability to pay or outright fraud. Therefore, to determine whether the instant mortgage loan was fraudulent, plaintiff's application for an order of reference is denied without prejudice for plaintiff to provide the Court with all the documentation used in granting the underlying loan. The Court will determine whether the borrower did not have sufficient income to make any payment, which could mean that the loan may have been in violation of federal statutes, or that the entire mortgage event was a fraud.

Further, the moving papers present SPS' April 17, 2007-demand letter to defendant LOUIS [exhibit G of application], for $8,709.22 to cure his loan default. The letter states that "[t]his letter is a formal demand to pay the amount due. If this amount is not paid to Select Portfolio Servicing, Inc. (SPS) within 30 days of the date of this letter, the entire unpaid balance, together with accrued interest, fees and expenses, may be ACCELERATED and your loan may be referred to outside counsel to commence foreclosure actions." Yet, almost two months later, and more than three months subsequent to defendant LOUIS' initial payment default, on March 1, 2007, plaintiff U.S. BANK was willing to take an assignment of the instant nonperforming loan from MERS, as nominee for CREDIT SUISSE. The Court requires a satisfactory explanation by U.S. BANK of why it purchased a nonperforming loan from MERS, as nominee for CREDIT SUISSE. This explanation must be in an affidavit by an officer of U.S. BANK. The Court is not sure that the stockholders of U.S. BANK and the noteholders of the Trust are aware that U.S. BANK purchased the instant "toxic" nonperforming mortgage loan. It could well be that MERS, as nominee for CREDIT SUISSE, transferred the instant nonperforming loan, as well as others to U.S. BANK, as part of what former Federal Reserve Board Chairman Alan Greenspan referred to in his October 23, 2008 testimony, before the House Oversight Committee, as "a once in a century credit tsunami."

Conclusion

Accordingly, it is

ORDERED that the renewed application of plaintiff U.S. BANK NATIONAL

ASSOCIATION, AS TRUSTEE, ON BEHALF OF THE HOLDERS OF THE ADJUSTABLE RATE MORTGAGE TRUST 2007-1, ADJUSTABLE RATE MORTGAGE-BACKED PASS-THROUGH CERTIFICATES, SERIES 2007-1, for an order of reference for the premises located [*4]at 604 Bainbridge Street, Brooklyn, New York (Block 1511, Lot 21, County of Kings) is denied without prejudice; and it is further

ORDERED, that leave is granted to plaintiff U.S. BANK NATIONAL

ASSOCIATION, AS TRUSTEE, ON BEHALF OF THE HOLDERS OF THE ADJUSTABLE RATE MORTGAGE TRUST 2007-1, ADJUSTABLE RATE MORTGAGE-BACKED PASS-THROUGH CERTIFICATES, SERIES 2007-1, to renew its application for an order of reference for the premises located at 604 Bainbridge Street, Brooklyn, New York (Block 1511, Lot 21, County of Kings), provided it presents to the Court, within 60 days from the date of this decision and order: an affidavit from John Shelley, describing his employment history for the past three years; all documentation used to grant the underlying loan to defendant KENNETH LOUIS; and, an affidavit from an officer of plaintiff U.S. BANK NATIONAL ASSOCIATION, AS TRUSTEE, ON BEHALF OF THE HOLDERS OF THE ADJUSTABLE RATE MORTGAGE TRUST 2007-1, ADJUSTABLE RATE MORTGAGE-BACKED PASS-THROUGH CERTIFICATES, SERIES 2007-1, explaining why plaintiff purchased the instant nonperforming loan from MERS, as nominee for CREDIT SUISSE FINANCIAL CORPORATION.

This constitutes the Decision and Order of the Court.

ENTER

___________________________

HON. ARTHUR M. SCHACKJ. S. C.