Tuesday, June 06, 2017

$13K In Emotional Distress Damages Award Part Of $44K In Sanctions Against Bankster For Violating Bankruptcy Rules By Making Continuing Contact w/ Bankrupt New Hampshire Homeowner After Home Loan Debt Was Formally Discharged

In Concord, New Hampshire, Bloomberg BNA reports:
  • Ocwen Loan Servicing LLC and Bank of New York Mellon were fined more than $44,000 for attempting to collect on a mortgage after the property was in foreclosure and the debtors received a bankruptcy discharge (Todt v. Ocwen Loan Servicing, LLC (In re Todt) , 2017 BL 165139, Bankr. D.N.H., No. 15-1040-JMD, 5/17/17 ).

    The May 17 opinion by Judge J. Michael Deasy of the U.S. Bankruptcy Court for the District of New Hampshire may serve as a reminder to mortgagees and mortgage servicers of what they can and can’t do when a borrower is awarded a discharge in bankruptcy.

    Suffering from illness and financial setbacks, Randall and Sharon Todt filed a Chapter 7 case July 1, 2011. At that point they stopped paying for the mortgage on their house.

    The Todts received their discharge—effectively wiping out their debts, including under the mortgage—Jan. 26, 2012.

    Ocwen began foreclosure in 2013 but continued to send invoices for the debt and contact them regarding “resolving” their “mortgage problems.”

    Although the bankruptcy code allows lenders to attempt to collect payments in lieu of foreclosure, that provision doesn’t apply once the foreclosure is underway, the court said.

    No Get Out of Jail Free Card

    Ocwen argued that because the Todts had received a discharge its invoices were informational only, pointing to language on their backs saying as much.

    But the language was mere boilerplate and didn’t overcome the fact that the statements were clearly seeking payments for the mortgage, the court said. “The use of a pro forma bankruptcy disclaimer is not a ‘get out of jail free’ card that can absolve a creditor of liability for a pattern of conduct that is inconsistent with the terms of the disclaimer,” it said.

    The court awarded $13,000 actual damages for the Todts’ emotional distress(1) from the collection efforts, plus attorneys’ fees and costs of $31,077.

    The court denied the Todts’ request for punitive damages, noting that the debtors had already had the advantage of living in their house for many years without paying their mortgage, property taxes, insurance, or any kind of rent.
Source: Ocwen Fined for Violating Bankruptcy Injunction.
(1) From the court ruling:
  • The Court held a trial on March 9, 2017, in order to determine whether any other actions by Ocwen and BONY violated the discharge injunction and whether the Debtors are entitled to damages. Mr. Todt was unable to testify due to his ongoing medical issues. Mrs. Todt testified as did one of her health care providers and a former co-worker.

    The health care provider testified that she has seen Mrs. Todt on an annual basis since 2005 and that starting three or four years ago (so starting in 2013 or 2014) Mrs. Todt reported that she was feeling stressed, was teary, and was having difficulty sleeping. She further told her provider that her husband was ill, that she was the only one working, and that the Debtors were having financial issues and were concerned about losing their home and being out on the street.

    Mrs. Todt's co-worker testified that she and the Debtor worked together, speaking on a daily basis, for a five-year period from 2011 through 2016. She observed that Mrs. Todt was emotionally upset and cried often at work. The co-worker indicated that the crying started gradually over time, probably starting in 2014 and 2015, and that she (and other co-workers) noticed it, with consistent crying occurring during the last six months of 2016. She testified that Mrs. Todt was often distraught at work and that her issues escalated over time. She indicated that Mrs. Todt informed her that she was experiencing financial difficulties, had filed bankruptcy, and was feeling pressure from her mortgagee. She testified that Mrs. Todt was afraid someone would come to her home and lock her out.