The“Who’s On First” problem of lien strip service haunted my weekend at the Sacramento Bankruptcy Forum and the week that has followed back in the office.
As one judge so kindly pointed out, if it turns out your service of the lien strip motion was inadequate, it will be the debtor’s attorney in the cross hairs.
Where most bankruptcy issues are relatively small dollar value problems, second mortgages range from tens of thousands of dollars to hundreds of thousands of dollars.
Get tagged with screwing this up and you (and your carrier if you have one) are toast.
My game plan
The unknowns, as I see it:
1) whether good service on the servicer binds the actual owner of the obligation; and
2) how are you supposed to flush out who actually owns the note to serve them.
Since only time and appeals courts will give us the answer to the first question, I’m tackling the second.
When a mortgage creditor files a proof of claim, you get some bread crumbs in the search for the note’s owner. But pretty uniformly these days, we are expected to file motions to value collateral before the claims bar date passes.
For the cases where I’ve gotten orders valuing collateral, I have some time.
I plan to audit the claims register for any claims filed after my motion. If new players turn up, I’ll serve them with the motion and order, and file a certificate of service.
If it appears that it was a servicer who got the motion, I envision a Qualified Written Request .
My experience with QWR’s has been that they are slow (60 business days for a response). Finding the QWR address for the institution is only marginally easier than intuiting who holds the note. And recipients have no commitment to being forthcoming. (Other than that, it’s a marvelous tool!)
In the past, I have not served the beneficiary of the recorded security interest. I am inclined to go back and do so. I want to build the argument that if the true holder of the interest in real property can’t be bothered to make their interest part of the public record, why is that my client’s problem?
And I’m considering recording the orders that come out of the motion to value, not because they are definitive, but again to trigger the laches defense, in the future. “The debtor’s attempts to void your lien have been public knowledge for X years, Mr. Holder. Why aren’t you bound to defend your position if you claim to have had no actual notice?”
Our Bay Area courts have sometimes taken the position that vesting at confirmation removes the debtor’s property from the estate and deprives the court of jurisdiction.
Asked about going back and correcting lien strip errors, one judge suggested modifying the confirmed plan to revest property in the debtor, then bringing an amended motion.
Going forward, I plan on embracing Rule 2004 . It’s hard to imagine language that is broader:
On motion of any party in interest, the court may order the examination of any entity.
I have some concerns about geography and the need to get a subpoena from the court where the witness does business.
My thought is to see if the court will make an order for either an examination on a written interrogatory, or a production of documents by mail.
I don’t want to be trekking to where ever the servicer is, or calling on friends in far off places to get the frigging banks to tell me who should care about my motion.
I’ll report back on how it works.
Judge Ludin reported that he was itching to be presented with a motion under §342(f), seeking to require the banks designate an address for service within his district. Anyone?
Now, I’m for some shut eye.
Image courtesy of DVIDSHUBS