Memorandum

To: JLS

From: NAV

Re: BAC vs. Damiano Case Evaluation

Date: July 31, 2013

EVALUATION OF THE ACTION AND THE DEFENSES

Like most of the early foreclosure cases, standing and failure to comply with conditionsprecedent are the largest problems to BAC’s foreclosure case. There are also technical problemswith the complaint, and potential evidentiary issues. Here is a list of some of the obstacles thatBAC faces:• The complaint has a count to foreclose and a count to reestablish the lost note. The

factual basis for these counts conflict, which can potentially weaken BAC’s case if theircomplaint is not amended prior to a trial. BAC has filed a notice of dropping their lostnote count, but there is case law that states that the lost note count needs to be droppedthrough an amended complaint.

• The complaint did not attach a note. Damiano raised this issue in a motion to dismisswhich the court denied. This defect can be resurrected at trial and possibly even appealedif it is not cured through an amended complaint.

• There is reason to doubt that the amount of debt claimed is the amount of debt actuallyowed. The Complaint alleges that $157,500.00 is owed as an “Approximate AmountDue.” This amount may be accurate. $157,500.00 is the original principal on themortgage and the payments were interest-only until January 2012. If Damiano everoverpaid, this amount would not be accurate. If Damiano paid only the minimum on theinterest-only plan, this amount would be accurate.

• There is a default letter, but BAC will have to prove that it was sent. This can sometimesbe difficult due to the complexity of the business records exception and the fact that mostbanks do not proffer any document that verifies that the letter was sent.

• The default letter may be defective. The default letter, as provided by Michael Germain, isdated on October 17, 2008. It states that $2,154.28 was due on the date of the defaultwhich was September 1, 2008. However, the note identifies the monthly payments as$820.31. Therefore, the $2,154.28 cited by the default letter is arguably incorrect. It isinaccurate because $2,154.28 was not likely due on September 1, 2008. It may be correctif that sum constitutes the mortgage, taxes, and insurance for both September andOctober, but BAC will have to explain how much taxes and insurance are included in eachmonthly payment. Arguments over the correct amount due can be technical, and BAC’switness may not be able to navigate those technicalities. BAC will also need to overcomeevidentiary objections since these numbers come from Countrywide’s business records(i.e., they will have to lay the predicate for the business records exception). Theseobjections would likely be overcome through a records custodian who worked for

Countrywide before being transferred to BAC.• The default letter may have not complied with some of the technical requirements of

paragraph 22 of the mortgage. Paragraph 22 requires the mortgagee to inform the debtorthat the foreclosure and sale will be by a judicial proceeding. The default letter sent doesnot mention that the foreclosure and sale will be through a judicial proceeding. Also,paragraph 22 requires the mortgagee to inform the debtor of the right to assert in thejudicial proceeding the non-existence of the default or any other defense. The defaultletter sent does not comply with this requirement because it states that a defense must beraised by bringing a separate court action.

• The assignment of mortgage, and the endorsements on the note were signed byrobosigners who have fairly damning depositions that are available on the internet. Thedeposition of Michelle Sjolander, who endorsed the note in blank, reveals that she did notsign or “rubber stamp” the notes herself, other people did. The deposition of ReneeHertzler, who signed the assignment of mortgage, reveals that she signed thousands ofdocuments per day and that she did not read any of the documents that she signed. Admissions verifying the veracity of these facts may be helpful. However the depositionsmay be admissible themselves since these signatories are within BAC’s corporate structureand may be admissions by a party opponent.

Under these facts, standing is the strongest defense. BAC can attack this defense throughunder three different theories: (1) that BAC took ownership and possession of the note as thecorporate successor to Countrywide; (2) that BAC is the holder in due course of the note throughpossession and an endorsement in blank, and therefore entitled to enforce the note and mortgage;(3) that the assignment of mortgage to BAC made BAC the owner of the note and mortgage. The first theory is probably the best, because it can avoid the robo-signing issues that taint theother two theories. Under the first theory, BAC may be able to proffer evidence of a chain ofcorporate buyouts to demonstrate that the note transferred to the current plaintiff. While thiswould be the best proof, rarely do foreclosure Plaintiffs attempt this type of proof.

A holder in due course theory might be difficult because BAC did not attach the note tothe complaint and it also alleged a lost note count. Therefore, BAC will need to proffer testimonythat it both held the note at the time of the complaint, and that the endorsements existed on thenote at that time. BAC would also have to overcome objections over the validity of theendorsements. Michele Sjolander, the individual who signed the blank endorsement on the note,has testified at a deposition that others stamp her name on the notes and she only oversees thisstamping process during an audit conducted once every three months. The stampers allegedlyhave power of attorney to use her name, but it is uncertain whether that can or will be proven.

BAC could also rely on the assignment of mortgage that it attached to its complaint. Under this theory, the assignment of mortgage equitably assigned with the note. The weakness inthis theory is Renee Hertzler. Renee Hertzler signed the assignment of mortgage in this case, andshe has testified in a deposition that she did not review the underlying validity of the assignments,and that her assignments were not signed in the presence of a notary. She also testified that shesigned 6000 to 7000 documents per month, and that at that volume she did not have time to readthe documents or confirm their validity.

Litigating standing may win the case, but there may be an easier way. Eventuallythreatening sanctions may pressure the plaintiff to dismiss the case. Butler and Hosch has been

the plaintiff’s counsel since this case’s inception, and they were the ones that created the robo-signed assignment. If threatened with a motion for sanctions addressing potentially fraudulentdocuments that Butler and Hosch created and filed with the court, the mill and its client maychoose to dismiss the case rather than litigate the issue.

EVALUATION OF THE CURRENT CASE STATUS

Recently, the Plaintiff has signaled its readiness for trial by filing a Notice of Non-JuryTrial on July 24, 2013, and a Notice Case is Ready for Trial on July 25, 2012. They arerequesting a 15 minute trial, which is not enough time. There are a number of things that I wouldlike to fix before a trial occurs. Here is a list of the work that I believe should be done:• Damiano needs relief from technical admissions resulting from an untimely response to

BAC’s request for admissions (his counsel was served with a request for admissions onSeptember 8, 2011, who did not file responses to the admissions until November 21,2011–well past the 30 day mark).

• Damiano needs discovery. His counsel sent out a very broad request for production ofdocuments. BAC did not really provide anything, so Damiano’s counsel filed a motion tocompel. For reasons unknown, the judge denied the motion to compel on October 2,2012. Reasons why the judge may have denied the discovery: (a) much of the discoverywas overly broad; (b) much of the discovery would not have lead to relevant evidence; (c)Damiano never certified that he made a good faith effort to resolve the discovery dispute. Since there really has not been any true discovery, here are some areas where discovery isneeded:• Production of a statement of Damiano’s account, which will likely be presented at

trial. • Discovery on facts surrounding the signatories on the note and the assignment of

mortgage since they are all known robo-signers. • Discovery on the issue of standing since the complaint contains a lost note count

and the copy of the note was not attached to the complaint. • Discovery pertaining to BAC’s compliance with the national mortgage settlement

as it relates to this case (under the national mortgage settlement, BAC is supposedto review their foreclosure documents for robosigning and other sloppiness).

• BAC needs discovery. BAC sent out interrogatories and request to produce which havenot been answered. Damiano’s counsel filed a motion for extension of time to respondand the Court denied that motion on October 2, 2012. BAC may not want this discovery,since they have not filed a motion to compel, and it is not really helpful.

• Damiano needs an amended answer. The current answer does not include a lack ofcondition precedent defense. Florida’s Consumer Collection Practices Act also requires acreditor to give a written notice of an assignment to the debtor prior to a suit to collectthat debt. Some circuit courts have held that this is a statutory condition precedent to aforeclosure action (the issue has not reached an appellate court). Also, BAC signed anational mortgage settlement with the federal government and the attorney generals ofalmost all 50 states which arguably places conditions precedent to a foreclosure judgment.