wells fargo bank v. pauquette - vol
TRANSCRIPT
1-800-559-5775
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STATE OF VERMONT SUPERIOR COURT CIVIL DIVISION.RUTLAND UNIT DOCKET NO. 408-5-10 Rdcv
WELLS FARGO BANK, N.A. ) ) Plaintiff, ) ) VS. ) ) RICHARD J. PAUQUETTE, ) KAREN J. BETIT ) ) Defendants. )
H E A R I N G
held on Thursday, March 29, 2012, at the Rutland Superior Courthouse, Rutland, Vermont, commencing at 1:04 p.m.
HON. MARY MILES TEACHOUT, Presiding
APPEARANCES:
SHELDON KATZ, ESQUIRE On behalf of Plaintiff;
LISA CHALIDZE, ESQUIRE On behalf of Defendant, Richard Pauquette.
BARRY COHEN, RPR - SHORTHAND REPORTER
O'BRIEN REPORTING SERVICES, INC. 223 Killington Avenue Rutland, VT 05701
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1
2
3 I N D E X
4
5
6 Witness Name Direct Cross Redirect Recross
7
8STEPHANIE DRUM 23 38 45 48
9 58
10
11
12
13
14 E X H I B I T S
15
16Exhibit No. Exhibit Description Page
17
18
19 Received in evidence:
20 1 FHA guideline document 61
21
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1 THE COURT: Please be seated.
2 THE CLERK: Vermont Superior Court,
3 Rutland Civil Division, the Honorable Mary
4 Miles Teachout, presiding.
5 Your Honor, our next case is Docket
6 No. 408-5-10, in the matter of Wells Fargo vs.
7 Richard J. Pauquette, Karen J. Betit. Present
8 in court is Attorney Sheldon Katz for the
9 plaintiff, also present in court is Attorney
10 Lisa Chalidze for the defendant, Richard
11 Pauquette.
12 THE COURT: Good afternoon.
13 ATTORNEY CHALIDZE: Good afternoon.
14 THE COURT: First of all, I
15 understand that Attorney Chalidze has made
16 arrangements for an independent recording of
17 the proceedings.
18 Mr. Katz, do you have any objection
19 to that?
20 ATTORNEY KATZ: No objection, your
21 Honor.
22 THE COURT: We are here for a
23 hearing pursuant to the court's entry order of
24 February 2nd. This is a hearing pursuant to
25 12 VSA, Section 4635(A), for the Court to make
Page 4
1 a determination as to whether or not the
2 plaintiff has complied with its obligations
3 under 12 VSA, Section 4635(A), the foreclosure
4 mediation statute.
5 The entry order specified that, and
6 I'll quote: "That report indicates that the
7 plaintiff's position is that this FHA backed
8 loan is ineligible for HAMP modification,
9 (because of delay in seeking modification), so
10 no NPV calculation was run or provided. It is
11 not clear what the source is of the position
12 that a delay cost in eligibility or whether in
13 taking that position plaintiff has fulfilled
14 its obligations under the statute."
15 So the scope of the hearing is
16 really quite narrow. And I also want to
17 state, before we get started, that Mr. Katz
18 included quite a bit of material in his
19 objection to the motion to continue that was
20 filed yesterday, a lot of it appeared to be
21 substantive material relating to the subject
22 matter of today's hearing. I did not read it.
23 It appeared to be what the hearing was about,
24 and so I did not read or absorb the specific
25 facts, since that was the purpose of the
Page 5
1 hearing. So anything that needs to be
2 presented, needs to be presented orally. Mr.
3 Katz, I think you have the burden here.
4 ATTORNEY KATZ: Yes. I'm not
5 entirely sure about that allocation of the
6 burden, but we'd be happy to initiate. I
7 can --
8 THE COURT: The question -- you're
9 right, the statute isn't clear; but, on the
10 other hand, it is the purpose of the hearing
11 to determine whether or not your client has
12 complied with it obligations. So I infer from
13 that statutory requirement that it would be
14 your obligation to show that you have.
15 ATTORNEY KATZ: Just briefly, your
16 Honor, and I do have a witness here to
17 elaborate, but this is a loan that is owned by
18 the FHA, under FHA regulations; and I
19 understand that you didn't read the entire
20 file yesterday.
21 THE COURT: No, I did not.
22 ATTORNEY KATZ: And I understand why
23 you may have chosen not to do that.
24 But, in any event, I did attach the
25 specific FHA regulation that states that loans
Page 6
1 that are in arrearage by more than twelve
2 months are not eligible for an FHA HAMP. They
3 are eligible for alternative modifications,
4 that are -- you'll hear different terminology,
5 sometimes they're called traditional,
6 standard, or in-house, but, in any event, the
7 loan was and actually still is eligible for an
8 alternative modification. I'm not saying that
9 it's qualified for one, and it wasn't at the
10 time the mediation was handled.
11 And then you asked about the source
12 of the delay. At the time that Mr. Pauquette,
13 who is a co-borrower, applied -- this is well
14 before mediation, this was in 2009, he was
15 unemployed. He was put on a forbearance plan
16 with a payment due at the end of that
17 forbearance plan. He didn't -- the purpose of
18 the forbearance plan was to give him time to
19 get employment so that he could apply for
20 HAMP. As you well may know, your Honor, a
21 borrower who is unemployed is not eligible for
22 HAMP, unemployment income is not considered
23 for HAMP.
24 THE COURT: Before you go on. I
25 just want to find out from Ms. Chalidze if
Page 7
1 there's any objection to representations of
2 facts in this matter?
3 ATTORNEY CHALIDZE: There is, your
4 Honor.
5 THE COURT: And let me just say that
6 what I want to narrow in on is whether there
7 are any disputes of pertinent facts related to
8 this particular matter.
9 ATTORNEY CHALIDZE: Yes, your Honor,
10 there are definitely disputes of fact. And my
11 only objection to representation of facts is
12 that we have limited time, and we have
13 witnesses here. So my preference would be
14 rather than have the attorneys summarize what
15 we think the facts are, is simply to hear from
16 the witnesses and utilize our time that way.
17 THE COURT: Well, What I am going to
18 do is allow Mr. Katz to continue with his
19 representation, and then I'll give you an
20 opportunity to identify specifically what
21 particular facts are in dispute. Those are
22 the only facts that we need to hear testimony
23 on.
24 ATTORNEY CHALIDZE: Thank you, your
25 Honor.
Page 8
1 ATTORNEY KATZ: So, your Honor, in
2 November 2009 the borrower was delinquent
3 about three months at that time. And he
4 contacted Wells Fargo. Wells Fargo issued
5 this -- or allowed a forbearance plan -- or
6 put a forbearance plan in place. Wells Fargo
7 wouldn't proceed with foreclosure during that
8 time. During that time it was not necessarily
9 expected, but the hope was that he would be
10 obtaining employment during that time, and, if
11 he did get employment, then he would possibly
12 become ineligible for HAMP.
13 There was a payment at the end of
14 that forbearance plan. He didn't make that
15 payment. There was also -- during that time
16 there were contacts made by Wells Fargo to
17 Mr. Pauquette saying, you know, just saying we
18 need some information about your employment,
19 if you have it. He didn't make the payment.
20 And, after that foreclosure was commenced, in
21 the period during which he could have been
22 eligible for an FHA HAMP loan modification,
23 which was August 2009 to August 2010, there
24 was no proof or no evidence that he submitted
25 that he had become employed. During that
Page 9
1 period of time, when he could have been
2 eligible forever HAMP, if he was employed, he
3 didn't submit any evidence that he was
4 actually employed during that period. So as
5 of August 2010, he became ineligible for HAMP.
6 He then entered into the mediation
7 program. Apparently by that time he had -- I
8 think he was self-employed by that time. He
9 went through the mediation process. As we
10 advised during the mediation session, he was
11 not eligible for HAMP because he had a -- he
12 was more than twelve month in arrears.
13 THE COURT: But what I haven't heard
14 is what the source is of that requirement.
15 ATTORNEY KATZ: The source of that
16 requirement is an FHA guideline. If I may
17 approach.
18 THE COURT: Is this what you've
19 already filed?
20 ATTORNEY KATZ: It is, but I have an
21 extra copy.
22 THE COURT: It's all right; I'll
23 look at it in the Court record.
24 ATTORNEY KATZ: I've already given
25 Lisa these two as well, because I copied her
Page 10
1 yesterday.
2 ATTORNEY CHALIDZE: If you have an
3 extra hard copy, I'd appreciate it. Thank
4 you.
5 ATTORNEY KATZ: I think this is
6 really even outside the scope of the mediation
7 statute, in a sense, because this all happened
8 before the mediation statute was even in
9 place. But, in any event, the FHA guideline
10 is very clear that the arrearage cannot exceed
11 twelve months. It was -- I can't remember --
12 if I can approach, I've got a copy right here,
13 it might be easier.
14 THE COURT: All right. Thank you.
15 ATTORNEY KATZ: So at the
16 mediation --
17 THE COURT: Wait just a minute,
18 please.
19 ATTORNEY KATZ: Okay.
20 THE COURT: And what is this
21 document that you've given me? It doesn't
22 look like a regulation.
23 ATTORNEY KATZ: This is a letter
24 issued by HUD on January 28th, 2010.
25 THE COURT: But what is it? It
Page 11
1 looks like a description of a program. It
2 doesn't look like a regulation.
3 ATTORNEY KATZ: It is -- well, it's
4 basic program guidelines for FHA home -- for
5 the FHA HAMP program.
6 So the borrower was advised that he
7 was no longer eligible forever HAMP. He was
8 also reviewed --
9 THE COURT: I'm sorry; you may have
10 said all this, but it hasn't gelled in my
11 mind.
12 ATTORNEY KATZ: Sure.
13 THE COURT: You say he wasn't
14 overdue -- I mean he wasn't eligible because?
15 ATTORNEY KATZ: His arrearage was
16 greater than twelve months.
17 THE COURT: Okay. And what period
18 is that?
19 ATTORNEY KATZ: Okay. He was due
20 for a payment August of 2009. We mediated
21 this case in August 2011. The mediation
22 started much earlier. There were some issues
23 regarding document production. But, in any
24 event, the mediation started well after August
25 2010, when he became ineligible for an FHA
Page 12
1 HAMP LOAN modification.
2 THE COURT: So -- okay.
3 ATTORNEY KATZ: Would it help -- do
4 you want me to draw a time line?
5 THE COURT: No, I just wanted to
6 have you identify the dates.
7 ATTORNEY KATZ: So he defaulted in
8 August 2009. As of August 2010 he was no
9 longer eligible. I think some time after that
10 he applied for the Court's mediation program.
11 So by the time he even applied for the
12 mediation program he was already ineligible.
13 He was also reviewed -- as the
14 statute requires, he had to be informed of
15 other foreclosure prevention options. He was
16 also reviewed by Wells Fargo for a traditional
17 modification. And at the time -- and that's
18 based on net income and household expenses.
19 He was showing a very large deficit that could
20 not be bridged by a modification at that time.
21 So, unfortunately, at that time he did not
22 qualify for a traditional modification.
23 He's still eligible for that if his
24 income increases or if his household expenses
25 are reduced somehow to bridge that gap. He
Page 13
1 may still be eligible. But at this time -- at
2 the time of the mediation, anyway, based on
3 the numbers that he gave us, he was not
4 eligible.
5 THE COURT: Okay.
6 So now, Ms. Chalidze, if you could
7 identify any facts in dispute that relate to
8 the narrow issue that is before the Court
9 right now.
10 ATTORNEY CHALIDZE: Thank you, your
11 Honor. I understand that the Court has the
12 burden of determining whether the mediation
13 took place in good faith and in compliance
14 with the statute. In that regard I think the
15 following factual disputes are important.
16 First, plaintiff has always been,
17 from our perspective, incorrect on the
18 so-called shortfall that would qualify
19 Mr. Pauquette for a non-HAMP modification. We
20 pointed that out.
21 THE COURT: What is the dispute?
22 ATTORNEY CHALIDZE: The bank
23 indicates that Mr. Pauquette makes $700,
24 roughly, and change a month, less than what is
25 needed to support a regular loan, acceptable
Page 14
1 loan payment.
2 ATTORNEY KATZ: Excuse me,
3 Ms. Chalidze, I think we're really far afield
4 of the scope of the hearing and the scope of
5 the -- we're talking about traditional
6 modification, for which there's absolutely no
7 duty at all for Wells Fargo to provide, is
8 what Ms. Chalidze is talking about. And the
9 order, as I understand it, has only to do with
10 HAMP. So we're way far afield.
11 I mean I'd be happy to talk about
12 these things, because I was there, I know the
13 numbers.
14 ATTORNEY CHALIDZE: Your Honor, may
15 I be permitted to finish?
16 THE COURT: Well, I would like you
17 both to just give me a moment here.
18 Okay; you may. But I want to
19 reiterate, again, that the scope of this
20 hearing is extremely narrow. The mediator did
21 submit a report that said that no party failed
22 to make a good-faith effort to mediate.
23 However, the Court has to make a
24 determination, under the statute and under the
25 section, about whether or not the
Page 15
1 documentation and so forth was supplied. The
2 mediator checked yes, but then said, quote,
3 "Lender's position is that this FHA-backed
4 loan is ineligible for HAMP modification
5 because of delay in seeking modification. So
6 no NPV calculation was run or provided."
7 The only issues for today are
8 whether in fact this loan is FHA backed,
9 whether there are FHA regs that apply, whether
10 those regs make a person ineligible as a
11 result of delay, and whether there was a
12 delay. Those are the only things that are
13 unclear about from the mediation report. So
14 that's the scope of the hearing.
15 It's not about non-HAMP
16 alternatives, because that was not put in
17 issue by the mediator's report. But the
18 mediator's report suggested that the mediator
19 was restating the plaintiff's position on why
20 there was ineligibility, but it wasn't clear
21 to the Court that that's a valid position. So
22 it's the validity of that position on the part
23 of the plaintiff that was put at issue and is
24 the reason for the hearing. So those are the
25 only facts that are at issue. And, frankly, I
Page 16
1 haven't heard sufficient support from the
2 plaintiff yet. But -- on a couple of those.
3 But in terms of the scope of the
4 hearing, it won't be broader than that, so
5 it's not necessary for you to deal with
6 possible entitlements to non-HAMP.
7 ATTORNEY CHALIDZE: Thank you, your
8 Honor.
9 Then with that guidance we will
10 leave aside the non-HAMP factual issues that
11 exist, they're for another day apparently.
12 As to HAMP, there is a factual
13 dispute, very definitely, as to whether
14 modification was appropriately sought within
15 the one-year period. And we will submit
16 testimony on that from Mr. Pauquette. And it
17 is also --
18 THE COURT: You're saying that you
19 dispute -- that you have facts indicating that
20 between August of 2009 and August of 2010
21 there was an attempt to seek a HAMP
22 modification?
23 ATTORNEY CHALIDZE: Yes, your Honor.
24 THE COURT: Okay.
25 ATTORNEY CHALIDZE: And I also want
Page 17
1 to make it clear that I am not acquiescing in
2 plaintiff's position that this asserted
3 one-year FHA limitation actually applies.
4 I've heard today for the first time
5 that the FHA owns this loan. We haven't seen
6 the documents that would effectuate that
7 ownership, it's not disclosed in the
8 complaint, we don't have the documents
9 authorizing Wells Fargo on behalf of FHA, the
10 apparent loan owner. So those may or may not
11 be issues for this area.
12 THE COURT: Those are exactly issues
13 for this hearing --
14 ATTORNEY CHALIDZE: Okay.
15 THE COURT: -- as I identified what
16 the issues were: Is this in fact an FHA loan?
17 And do the regs apply?
18 And you're saying that you don't --
19 haven't been provided information about that?
20 ATTORNEY CHALIDZE: Not to my
21 satisfaction. And I have requested it for
22 quite some time.
23 I also would request, if the Court
24 thinks it's appropriate, to have plaintiff
25 identify the actual CFR citation, or some
Page 18
1 legal source citation. If in fact its
2 reliance is on a regulation, I had assumed --
3 perhaps incorrectly -- that there was some
4 sort of loan transfer or transactional
5 document or investment document to document
6 the FHA's role in this. We're now told that
7 the FHA is an owner. So I certainly feel
8 there's a lot of unclarity there.
9 THE COURT: All right. Well, we'll
10 go back. It is Mr. Mr. Katz's responsibility
11 then to show what FHA's role is, what the regs
12 are, and whether they apply before we even get
13 to the factual dispute as to whether or not
14 modification was sought within the pertinent
15 period.
16 ATTORNEY KATZ: Your Honor, two
17 quick comments that may cut to the chase here.
18 First, we did -- I mean if this has
19 to be a factual dispute, I don't know -- I
20 mean I was at the mediation.
21 THE COURT: You did what --
22 ATTORNEY KATZ: We clearly said that
23 the FHA is the owner, and that was the reason
24 why we couldn't consider him.
25 But the other thing is that all --
Page 19
1 during the time when Mr. Pauquette could
2 have -- was eligible for an FHA loan
3 modification, which was between August 2009
4 and August 2010, that period is really outside
5 the Court's purview because the mediation
6 statute wasn't even in place at that time.
7 And my understanding of the mediation statute
8 is that it's looking at the way the mediation
9 was handled, not what happened prior to that.
10 I mean I'm happy to put on my
11 witness to explain all this. But I just want
12 to make that clear. That's really, in my
13 view, outside the Court's -- the scope of the
14 Court's responsibility under the mediation
15 statute.
16 THE COURT: The question for the
17 Court is whether or not the plaintiff
18 sufficiently met its obligations under the
19 statute at the mediation.
20 ATTORNEY KATZ: Yes.
21 THE COURT: But if at the mediation
22 the plaintiff took a position that was
23 indefensible, then that would call into
24 question whether or not it met its
25 obligations.
Page 20
1 So you've just indicated just now
2 that at the mediation it was stated that this
3 was an FHA loan?
4 ATTORNEY KATZ: Yes.
5 THE COURT: Ms. Chalidze, were you
6 at the mediation?
7 ATTORNEY CHALIDZE: My client and I
8 were there in person. Mr. Katz and his client
9 participated by phone.
10 THE COURT: You just said a moment
11 ago that this was the first that you heard
12 this was an FHA loan?
13 ATTORNEY CHALIDZE: For a long time
14 I haven't been told that the FHA is an
15 investor. What I'm being told today is that
16 FHA owns the loan. I have -- I'm sorry.
17 THE COURT: It doesn't really matter
18 whether it's an owner or investor as long as
19 FHA regs apply. And I think that's the heart
20 of this issue, was that the mediator said:
21 Well, the plaintiff says that under FHA regs
22 it was ineligible. But the mediator's report
23 didn't indicate that the mediator really was
24 satisfied with that, that's why the Court has
25 to be involved.
Page 21
1 ATTORNEY CHALIDZE: And I don't --
2 THE COURT: So the -- I don't think
3 we need to get into whether it's owner or
4 investor. Apparently the FHA was identified.
5 But the question is do the FHA regs apply?
6 And what are they? And, frankly, this summary
7 would not be sufficient.
8 ATTORNEY CHALIDZE: And your Honor,
9 just for the sake perhaps of my own clarity,
10 there must be some reason that the FHA is
11 involved; in other words, there must have been
12 a method, there must have been some paperwork,
13 some mechanism. This loan didn't just
14 magically become an FHA loan. And that's been
15 part of my frustration, that we can't --
16 there's nothing there to show how that
17 occurred. Plaintiff says it is, and plaintiff
18 says there's an E regulation that applies.
19 THE COURT: Was that issue raised at
20 mediation?
21 ATTORNEY CHALIDZE: Yes, your Honor.
22 And before that I've asked Mr. Katz to provide
23 me with that information.
24 THE COURT: Mr. Katz.
25 ATTORNEY KATZ: I think I -- well --
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1 I --
2 THE COURT: I don't want to --
3 ATTORNEY KATZ: Okay. I've got to
4 put my witness on.
5 THE COURT: Excuse me. I don't want
6 to get into what did or didn't happen at
7 mediation. I know I've asked a couple of
8 questions about that, but I don't want to get
9 into who said what, who said whom; I just want
10 to find out if that was an issue.
11 The real issue now is the status of
12 FHA, which determines the applicability of any
13 regs, and what those regs are, and whether the
14 position taken at mediation was defendable.
15 So if you would like to put on a
16 witness.
17 ATTORNEY KATZ: I would, your Honor.
18 Plaintiff calls Stephanie Drum.
19
20
21
22
23 (Continued on the next page.)
24
25
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1
2 STEPHANIE DRUM
3
4 was called as a witness by and on behalf of the
5 Plaintiff, and after having been first duly sworn
6 was examined and testified as follows:
7
8 DIRECT EXAMINATION
9 BY ATTORNEY KATZ:
10 Q. Could you state your name for the record,
11 please?
12 A. Stephanie Drum.
13 Q. Stephanie, do you work for Wells Fargo?
14 A. Yes.
15 Q. How long have you worked for Wells Fargo?
16 A. For about three years.
17 Q. And what's your title?
18 A. Loan adjustor 2.
19 Q. And what are your responsibilities as a loan
20 adjustor 2?
21 A. To underwrite loans for mediations.
22 Q. So you're underwriting loan modifications?
23 A. Yes.
24 Q. And do you have -- what qualifications are
25 required of you as a Wells Fargo loan
Page 24
1 adjustor?
2 A. We are required to be delegated with our
3 authority to underwrite these loans. You have
4 to take tests staying in. We are audited, as
5 well, to show that we're underwriting
6 correctly.
7 Q. So the testing, is that testing required by
8 the government agencies that have regulatory
9 oversight for Wells Fargo?
10 A. Yes.
11 Q. Do you know which agencies those are?
12 A. I do not.
13 Q. You know who audits these loans, these loan
14 modifications?
15 A. Well, we have our inside with Wells Fargo, and
16 then also Treasury, Treasury checks, to make
17 sure we are abiding Treasury guidelines.
18 Q. And this is an FHA loan. Does FHA audit this
19 process as well?
20 A. Yes.
21 Q. And are these audits done for both denials of
22 loan modification and approvals?
23 A. Yes.
24 Q. What happens if you make a mistake?
25 A. Well, then, of course, it's fixed and then
Page 25
1 there's repercussions.
2 Q. Repercussions?
3 A. Yeah, for the employee.
4 Q. So you don't want to make too many mistakes?
5 A. Correct.
6 Q. When was the loan, Mr. Pauquette's and
7 Ms. Betit's loan, when was it originated?
8 A. I believe it was 2007.
9 Q. Okay. And when did it go into default?
10 A. 2009, August 2009.
11 Q. Okay. August -- they're due for August 2009?
12 And who owns the loan or who is the
13 investor in the loan?
14 A. It's an FHA-backed loan.
15 Q. And what's Wells Fargo's role?
16 A. Wells Fargo is the servicer, we service the
17 loan.
18 Q. So after the loan went into default was there
19 contact between Wells Fargo and the borrowers?
20 A. Yes.
21 Q. When did that begin?
22 A. It shows in -- based off my notes -- that we
23 reviewed for modification in 2009, and then we
24 placed -- due to the unemployment we placed on
25 a special forbearance for a couple of months
Page 26
1 to give time for the borrower to become
2 employed.
3 Q. Can I stop you right there for a moment?
4 A. Yes.
5 Q. So at the time that he first -- that this
6 first encounter between the borrowers and
7 Wells Fargo took place, Mr. Pauquette was
8 unemployed?
9 A. Yes.
10 Q. And so because he was unemployed, was he
11 eligible for HAMP at that time?
12 A. No.
13 Q. So Wells Fargo in response to his -- to this
14 encounter, Wells Fargo put him on a special
15 forbearance plan, is what you said?
16 Briefly tell us what that was all
17 about?
18 ATTORNEY CHALIDZE: Excuse me, your
19 Honor. I note that the witness is making
20 reference to a file that's in front of her.
21 Can we have that marked for
22 identification?
23 THE COURT: You need to turn over
24 your notes and not look at anything, unless
25 you have permission from the Court.
Page 27
1 And, rather than have it marked for
2 identification, Mr. Katz, it can either be
3 used to refresh you recollection or, if you
4 are going to use it for other purposes, then
5 it would have to be marked.
6 ATTORNEY KATZ: Okay.
7 Q. All right. Let me know if you need to refresh
8 your recollection by going to your notes.
9 So we were at the terms of the
10 forbearance plan were what?
11 A. Based off of the review, just by looking back,
12 I recall it being a four-month forbearance.
13 So we had placed foreclosure on hold for a
14 couple of months to give time for employment,
15 and we asked that we be notified, that way we
16 could take a look at retention options where
17 employment was verified. And after the four
18 months, we had put a payment at the end for
19 the reinstatement or to -- we just put it
20 there to give time to -- for the unemployment
21 to stop and employment to begin. But then
22 after we didn't know if there had been any
23 more employment, so we removed from loss
24 litigation.
25 Q. Okay. At the end of the forbearance plan had
Page 28
1 you heard from Mr. -- from the borrowers that
2 there was employment during the period of the
3 forbearance plan?
4 A. No.
5 Q. Okay. And that was a four-month plan?
6 A. Yes.
7 Q. And you mentioned that at the end of the plan
8 there was a payment due; correct?
9 A. Yes.
10 Q. Did the borrowers make that payment?
11 A. No.
12 Q. Did the borrowers contact Wells Fargo and ask
13 for an extension of the forbearance plan?
14 ATTORNEY CHALIDZE: Excuse me, your
15 Honor. I apologize for objecting. I've tried
16 to be liberal. But we have no foundation
17 here. This witness has worked at Wells Fargo
18 for three years, and she has indicated that
19 her duties relate to attending mediations. So
20 it's unclear to me how she would know what
21 occurred during this time frame, and outside
22 the scope of her duties.
23 THE COURT: You can ask some
24 foundation questions.
25 ATTORNEY KATZ: Sure.
Page 29
1 Q. Have you become familiar with the history of
2 this loan?
3 A. Yes.
4 Q. And how did you familiarize yourself with that
5 history?
6 A. Based on Wells Fargo's system notes.
7 Q. Okay. And I want to know a little bit about
8 those system notes. Are those system notes
9 made with the personal knowledge of the person
10 making those notes? Does that person, at the
11 time the notes are made, is that made with the
12 personal knowledge of that person making the
13 notes?
14 A. Yes.
15 ATTORNEY CHALIDZE: Objection.
16 Foundation.
17 THE COURT: Sustained.
18 Q. Is it the duty -- okay. So these people who
19 are making these notes, are they customer
20 service representatives in the loss mitigation
21 department?
22 A. Yes.
23 Q. Do they have a duty to record what occurred in
24 encounters with borrowers?
25 ATTORNEY CHALIDZE: Objection.
Page 30
1 Foundation.
2 ATTORNEY KATZ: Your Honor, I'm
3 asking if they have a duty to make --
4 THE COURT: The objection is
5 overruled.
6 You may answer, if you know. If you
7 don't know, say you don't know.
8 A. Can you ask me again?
9 Q. Sure. Do these people have a duty to make
10 these notes?
11 A. Yes.
12 Q. And are they -- and you were not a customer
13 service representative, but you were a
14 mediation specialist; right?
15 A. Yes.
16 Q. And did you make notes during those
17 mediations?
18 A. Yes.
19 Q. And is it the regular practice of Wells Fargo
20 to make these kinds of notes and records?
21 A. Yes.
22 Q. And are adjusting loans or reviewing them for
23 modifications, is that a regularly conducted
24 business activity of Wells Fargo?
25 A. Yes.
Page 31
1 ATTORNEY KATZ: Your Honor, I think
2 that the foundation for her testimony is
3 established under 803(6).
4 THE COURT: I'm not quite sure what
5 you're asking. I'm sure Ms. Chalidze will
6 object if you ask a question --
7 ATTORNEY KATZ: Sure.
8 THE COURT: -- that she objects to.
9 ATTORNEY KATZ: Sure.
10 THE COURT: But I'm concerned that
11 you're getting involved in the specifics of
12 the facts of delay, which may become an issue.
13 But the first thing that needs to be shown is
14 the FHA regs.
15 ATTORNEY KATZ: Okay.
16 THE COURT: And I don't know if
17 you're going to be able to get that through
18 this witness or not.
19 ATTORNEY KATZ: Sure.
20 Yeah. And I just wanted to
21 establish that between August 2009 and August
22 2010 that no evidence of employment.
23 But I can move on because I think
24 that that is pretty well established, that
25 proof of employment had not been submitted
Page 32
1 during that period.
2 THE COURT: I'm sorry; but I'm
3 taking very careful notes, and through the
4 evidence I do -- that is not clearly
5 established.
6 ATTORNEY KATZ: Okay. But, again,
7 that's retrospective, which -- I mean I will
8 establish it then.
9 THE COURT: I understand.
10 Let me repeat, the reason that we're
11 having a hearing is that it was unclear from
12 the mediation report whether or not the
13 plaintiff had a defensible position that FHA
14 regs apply, that FHA regs made a person
15 ineligible for HAMP after some delay, and that
16 that applied in this case. So we need all
17 three of those things.
18 ATTORNEY KATZ: All right.
19 BY ATTORNEY KATZ:
20 Q. Is it your understanding that FHA regulations
21 apply to this loan where the FHA is the
22 investor?
23 ATTORNEY CHALIDZE: Excuse me, your
24 Honor. We've had no foundation for this.
25 ATTORNEY KATZ: If we can answer the
Page 33
1 question, I don't understand why there needs
2 to be a foundation.
3 THE COURT: The objection is
4 sustained. Her testimony was that this is an
5 FHA-backed loan, that's all she said. That's
6 all we know.
7 ATTORNEY KATZ: Okay.
8 Q. Have you adjusted FHA loans previously?
9 A. Yes.
10 Q. Okay. And are you familiar with the
11 guidelines that FHA applies to FHA investor
12 loans?
13 A. Yes.
14 Q. Is one of those guidelines that the loan has
15 to be -- cannot be twelve months or more in
16 arrearage to be eligible for HAMP?
17 ATTORNEY CHALIDZE: Excuse me, your
18 Honor, I don't think it's appropriate to lead
19 at this juncture.
20 THE COURT: Sustained.
21 ATTORNEY KATZ: Your Honor, I'm
22 trying to get through this.
23 THE COURT: That was a very
24 specifically leading question.
25 ATTORNEY KATZ: Okay.
Page 34
1 Q. You're familiar with the guidelines.
2 What do the guidelines have to say
3 about arrearage?
4 A. As far as for HAMP?
5 Q. Yes.
6 A. For HAMP it cannot be twelve months past due
7 to be --
8 THE COURT: Say it again?
9 THE WITNESS: The loan cannot be
10 twelve months past due to qualify for HAMP.
11 Q. And between August 2009 and August 2010 did
12 you ever -- did Wells Fargo receive evidence
13 that the borrower was employed and had an
14 earned income?
15 ATTORNEY CHALIDZE: Excuse me, your
16 Honor. Rather than continuing to object, may
17 I voir dire?
18 THE COURT: As to what?
19 ATTORNEY CHALIDZE: As to the scope
20 of this witness' knowledge and duties.
21 THE COURT: No. You may
22 cross-examine when it's appropriate.
23 ATTORNEY CHALIDZE: Thank you.
24 In that case, I make a foundation
25 objection to the pending question.
Page 35
1 Q. Do you know whether the borrower offered any
2 proof of earned employment income in the
3 period August 2009 to August 2010?
4 A. Not that I'm aware of.
5 Q. And you would be aware of it if he had;
6 correct?
7 A. Correct.
8 Q. Okay. And during that time did Wells Fargo
9 make any efforts to reach out to the borrower
10 and ask for additional information?
11 A. Yes.
12 Q. And how were those communications made?
13 Phone, letter, et cetera?
14 ATTORNEY CHALIDZE: Your Honor, I
15 apologize for -- I keep popping up, and I'm
16 sorry. But this witness has very limited
17 duties, as I understand her testimony. She
18 attends mediations.
19 So I am making a foundation
20 objection as to how she can testify as to
21 prior time periods and what occurred, and what
22 didn't. If she is regurgitating some records,
23 I think we should have those identified and
24 placed in evidence.
25 THE COURT: The objection is
Page 36
1 overruled. She has testified that she is
2 familiar with this loan from system notes, and
3 she testified about what the procedure was for
4 making notes within the system.
5 Q. Okay. And in the mediation or later -- now
6 let's skip to 2011. Were the borrowers back
7 in loss mitigation?
8 A. Yes.
9 Q. Okay. And at that point, based on your past
10 testimony, the borrowers were no longer
11 eligible for HAMP; correct?
12 A. Correct.
13 Q. Were they considered for anything else?
14 A. Yes. They were reviewed for internal
15 modification.
16 Q. And what was the result of that?
17 ATTORNEY CHALIDZE: Excuse me.
18 Relevance. This is outside of the scope of
19 the issues that your Honor --
20 THE COURT: Sustained.
21 Q. And does NPV -- explain what NPV is briefly?
22 A. It is the net present value. Um, but that's
23 normally -- so with HAMP, if HAMP is not
24 running, then it's not -- the NPV is not
25 running.
Page 37
1 Q. And so -- and NPV wasn't run in 2011 for this
2 borrower; correct?
3 A. Correct.
4 Q. And the reason being?
5 A. Is because they weren't reviewed for HAMP.
6 Q. Stephanie, let me show you what's been marked
7 as Plaintiff's 1 for identification.
8 (Exhibit No. 1 was marked for
9 identification.)
10 Q. You mentioned before FHA guidelines, one being
11 that the FHA does not allow HAMP modifications
12 for loans that are more than one year in
13 arrearage.
14 Is that the guideline that you were
15 referring to earlier?
16 A. Yes.
17 Q. Thank you, Stephanie. I don't have any other
18 questions. Ms. Chalidze may have some
19 questions, or the Court may have some
20 questions for you.
21 THE COURT: Ms. Chalidze.
22 ATTORNEY CHALIDZE: Thank you your
23 Honor.
24
25 (Continued on the following page.)
Page 38
1 CROSS-EXAMINATION
2 BY ATTORNEY CHALIDZE:
3
4 Q. I didn't hear your name very clearly. Can you
5 spell it for me?
6 A. It is, S-T-E-P-H-A-N-I-E.
7 Q. Drum?
8 A. D-R-U-M.
9 Q. Did you have a different name earlier? Were
10 you married recently?
11 A. It's been three years.
12 Q. What was your name before that?
13 A. Stephanie Norris, N-o-r-r-i-s.
14 Q. Is it your view that FHA regulations apply to
15 this loan?
16 A. Yes.
17 Q. And can you tell us where those regulations
18 are found?
19 A. Well, we have a way of, when we're
20 underwriting the loans and looking at the
21 loans, that it's in our system that we know
22 that it's a FHA loan.
23 Q. Well, I appreciate that. But I guess my
24 question is can you tell the Court today where
25 that regulation is?
Page 39
1 ATTORNEY KATZ: I am going to
2 object. I don't -- I have no idea what the
3 question means. Where it is? I mean it's in
4 cyberspace, it's at the FHA. Where it is?
5 It's is just so unclear, your Honor.
6 THE COURT: Sustained. You may
7 rephrase.
8 ATTORNEY CHALIDZE: Thank you, your
9 Honor.
10 Q. Have you read the particular regulations to
11 which you've referred?
12 A. Yes.
13 Q. And would you know where to find a copy?
14 A. Of this (indicating)?
15 Q. Of the regulation.
16 A. This regulation right here (indicating)?
17 Q. Well, I don't know.
18 A. Is -- from the HAMP?
19 Q. Are you referring to a particular document?
20 A. Yes. It's the Making Home Affordable -- this
21 is actually on the Treasury web site.
22 Q. And it's your understanding, as an officer of
23 Wells Fargo, that that's a regulation?
24 A. Yes.
25 Q. I see. Have you been given any training by
Page 40
1 Wells Fargo about what constitutes a
2 regulation?
3 ATTORNEY KATZ: Objection, your
4 Honor. We're really getting far afield.
5 THE COURT: Overruled. She
6 testified as to regulation, and that
7 Plaintiff's 1 is a regulation.
8 A. Yes.
9 Q. So you have received some training from Wells
10 Fargo in what constitutes a regulation?
11 A. Yes.
12 Q. And can you tell us whether this particular
13 regulation on which you rely has any sort of
14 identifying number?
15 A. Number?
16 Q. Yes.
17 A. Not that I'm aware of.
18 Q. Okay. Can you tell the Court whether this
19 particular regulation on which you rely is
20 published in any kind of book that the public
21 could go look at?
22 A. Not that I'm aware of.
23 Q. Okay. Does Wells Fargo ever lose documents?
24 ATTORNEY KATZ: I'm going to -- I
25 object to that. I also want to just point out
Page 41
1 that this document is available, as she said,
2 on the Treasury web site.
3 THE COURT: That was her testimony.
4 What's your objection?
5 ATTORNEY KATZ: The question was
6 about lost documents? That's way far afield,
7 your Honor.
8 THE COURT: Sustained.
9 ATTORNEY CHALIDZE: Your Honor, may
10 I state that we'll connect it up through
11 Mr. Pauquette's testimony.
12 THE COURT: Can you make an offer of
13 proof about how it relates to the narrow
14 issues?
15 ATTORNEY CHALIDZE: Yes, your Honor.
16 Mr. Pauquette will testify that he
17 applied for a modification before August 1st,
18 2010, and was told by Wells Fargo that it had
19 been lost.
20 THE COURT: I'm not sure that we're
21 going to get that far, unless, Mr. Katz, do
22 you have any other testimony about the
23 applicability of FHA regs besides what's been
24 offered?
25 ATTORNEY KATZ: The applicability.
Page 42
1 Well, I mean...
2 ATTORNEY CHALIDZE: So far the
3 testimony has been that this is an FHA-backed
4 loan.
5 ATTORNEY KATZ: It's an FHA owned or
6 investor loan, yes.
7 ATTORNEY CHALIDZE: The testimony is
8 it's an FHA-backed loan. There's no specific
9 information about what that is, of what the
10 relationship is between FHA and the plaintiff
11 in this case.
12 There has also been -- Plaintiff's 1
13 hasn't been admitted, but, even if it were, I
14 haven't seen a regulation. The problem with
15 the mediation report was that it indicated
16 that plaintiff says that the reason that this
17 isn't a HAMP loan, that it's ineligible for
18 HAMP is that this is an FHA-backed loan and
19 there was a delay in seeking modification.
20 Well, that's only a defensible
21 position if this is in fact an FHA-backed
22 loan, if there are FHA regs that say delays
23 make a person ineligible, and if there was a
24 delay. We don't even need to get to the
25 question of whether there was a delay unless
Page 43
1 the plaintiff is able to show that its
2 statement at mediation, that FHA regs apply to
3 this loan -- if it's shown, and I haven't
4 heard that yet.
5 ATTORNEY KATZ: Your Honor, with all
6 due respect, she testified that the
7 relationship between Wells Fargo and the FHA
8 is that the FHA owns the loan or is the
9 investor.
10 THE COURT: She did not -- you asked
11 her if she was the investor. Her answer was
12 it's an FHA-backed loan. There's nothing more
13 specific than that. I do not know what the
14 relationship is between FHA and this loan. I
15 do not know what the regulations say. I mean
16 I think this is why this is set for hearing,
17 because the mediation report indicated that at
18 the mediation the plaintiff took a position
19 that Mr. Pauquette was ineligible and relied
20 on the fact that this was an FHA-backed loan,
21 and that FHA regs applied, that, under FHA
22 regs, a delay makes a person ineligible and
23 that he delayed. The purpose of this hearing
24 is to see whether or not that was a defensible
25 statement for FHA -- for Wells Fargo to make
Page 44
1 at the mediation, and, so far, you haven't
2 shown that it was.
3 ATTORNEY KATZ: Well, okay. I mean
4 if I may, I can try. But, by the way those
5 are the mediator's words "the delay." Delay
6 is not the operative criterion. The operative
7 criterion is twelve months in arrearage.
8 THE COURT: Fine. But I haven't
9 seen a reg that says that. And I haven't seen
10 any connection between any regs that I haven't
11 seen and the loan.
12 ATTORNEY KATZ: May I ask --
13 THE COURT: I've heard your
14 statement, and I've heard her testimony. I am
15 looking for it.
16 ATTORNEY KATZ: Okay. You know,
17 maybe I didn't elicit the testimony in the
18 correct way, but if I may.
19 REDIRECT EXAMINATION
20 BY MR. KATZ:
21 Q. Stephanie --
22 ATTORNEY CHALIDZE: Excuse me; I'm
23 in the middle of my cross-examination here.
24 THE COURT: That is true. But you
25 were cross-examining on an issue that we may
Page 45
1 not need to get to.
2 ATTORNEY CHALIDZE: And I'm happy
3 to -- I understand your Honor's comment, and
4 I'm happy to redirect my cross in light of
5 that comment. Thank you.
6 BY ATTORNEY KATZ:
7 Q. Stephanie --
8 ATTORNEY CHALIDZE: I'm sorry; am I
9 continuing my cross?
10 THE COURT: I was going to let
11 Mr. Katz supplement his direct before you do
12 continue.
13 ATTORNEY CHALIDZE: Thank you.
14 REDIRECT EXAMINATION
15 BY ATTORNEY KATZ:
16 Q. Stephanie, what agency is the investor in this
17 loan?
18 A. The FHA.
19 Q. And as to FHA loans, do FHA guidelines apply?
20 A. Yes.
21 Q. And you're familiar with those guidelines?
22 A. Yes.
23 Q. And you're familiar with them? You've
24 adjusted many FHA loans in the past; correct?
25 A. Correct.
Page 46
1 Q. And the guidelines -- what was the relevant
2 criterion in 2011, when Mr. Pauquette applied
3 for a loan modification and he was denied for
4 HAMP, what was the reason for that?
5 A. Because he was past twelve months due.
6 Q. And is that an FHA guideline?
7 A. Yes.
8 Q. And does that apply to this loan?
9 A. Yes.
10 Q. And the reason being because the FHA is the
11 investor in this loan?
12 A. Yes.
13 Q. And, again, the relationship between the
14 plaintiff and the FHA with regard to this
15 loan?
16 A. Wells Fargo's the servicer, FHA is the
17 investor.
18 Q. And delay, that's not really a criterion under
19 the FHA guidelines; right?
20 ATTORNEY CHALIDZE: Excuse me, your
21 Honor. This is certainly leading.
22 THE COURT: Sustained.
23 BY ATTORNEY KATZ:
24 Q. Again, the relevant criterion on which that
25 was denied for a HAMP modification in 2011 was
Page 47
1 what?
2 ATTORNEY CHALIDZE: Objection.
3 Asked and answered.
4 THE COURT: Overruled.
5 Q. Was what?
6 A. Delinquency past twelve months.
7 Q. And what was the -- okay. So it's delinquent
8 past twelve months. And why is that relevant
9 in this case?
10 A. Because it's an FHA loan, and delinquency past
11 twelve months are not eligible for HAMP view.
12 ATTORNEY KATZ: Your Honor, can I
13 just seek some guidance here. I'm doing my
14 best to give you what you need to make a
15 decision here.
16 THE COURT: I'm going to give
17 Ms. Chalidze an opportunity to cross anymore
18 if she likes, not on the delay, not on the
19 facts of delay, but on the applicability of
20 FHA regs.
21 ATTORNEY CHALIDZE: Thank you, your
22 Honor I would like that.
23
24
25 (Continued on the next page.)
Page 48
1 RECROSS-EXAMINATION
2 BY ATTORNEY CHALIDZE:
3
4 ATTORNEY CHALIDZE: May I approach
5 the witness, your Honor.
6 THE COURT: Yes.
7 ATTORNEY CHALIDZE: And for the sake
8 of the court and counsel, I am showing the
9 witness a copy of the plaintiff's complaint in
10 this matter.
11 ATTORNEY KATZ: And could I get a
12 copy of that, please?
13 ATTORNEY CHALIDZE: It's your
14 complaint.
15 ATTORNEY KATZ: I'm going to object
16 to that, the relevance, that there's no
17 requirement in the rules of federal procedure
18 that the investor in the loan be identified,
19 and the investor could change over time.
20 THE COURT: You're anticipating the
21 question.
22 What is the purpose that you're
23 showing her this?
24 ATTORNEY CHALIDZE: The allegation
25 in paragraph 5 refutes the testimony this
Page 49
1 witness has given.
2 ATTORNEY KATZ: Can I get a copy,
3 Lisa?
4 ATTORNEY CHALIDZE: It's your
5 complaint.
6 ATTORNEY KATZ: I don't have it with
7 me.
8 ATTORNEY CHALIDZE: I'm sorry; I
9 don't have it -- well, you're welcome to look
10 at my pleading book.
11 ATTORNEY KATZ: It's customary, when
12 you show the witness an exhibit, that you
13 provide --
14 THE COURT: Excuse me; she is
15 offering it to you.
16 BY ATTORNEY CHALIDZE:
17 Q. Ms. Drum, will you please direct your
18 attention to paragraph 5 of the complaint.
19 And would you be so kind as to read that
20 aloud?
21 ATTORNEY KATZ: I object.
22 Relevance. Wells Fargo may be the
23 holder of the note; that doesn't mean that --
24 I mean Ms. Chalidze should know this.
25 THE COURT: The objection is
Page 50
1 sustained.
2 ATTORNEY CHALIDZE: Your Honor, may
3 I be heard on that point. I think it is
4 relevant.
5 THE COURT: How so?
6 ATTORNEY CHALIDZE: Because this
7 witness has testified that Wells Fargo is
8 simply the servicer for FHA. That is directly
9 contradicted by paragraph 5 in the complaint
10 in which it alleges that it is the transferee
11 and assignee.
12 ATTORNEY KATZ: Your Honor, it's
13 not. Wells Fargo can be the holder of the
14 note, that doesn't mean --
15 THE COURT: The objection is
16 overruled; it does go to credibility.
17 ATTORNEY CHALIDZE: Thank you, your
18 Honor.
19 Q. Would you be so kind as to read paragraph 5
20 into the record?
21 A. "Said promissory note was transferred by
22 endorsements from CTX Mortgage Company, LLC,
23 to plaintiff, who further endorsed said
24 promissory note in blank, and plaintiff is in
25 possession of the note."
Page 51
1 Q. I apologize if I've been confused by your
2 testimony, ma'am, but would you tell me is FHA
3 an investor in this loan or an owner of this
4 loan?
5 A. FHA is the investor.
6 Q. Okay. And is there -- excuse me, I'll just
7 approach to take my document back, if I
8 might -- is this a different set of
9 regulations for loans that are invested in by
10 the FHA as opposed to owned by the FHA?
11 ATTORNEY KATZ: I object. I mean
12 I'm not sure that -- I object to the
13 foundation. I'm not sure that the FHA owned
14 any loans.
15 THE COURT: The objection is
16 sustained.
17 You may lay a foundation.
18 BY ATTORNEY CHALIDZE:
19 Q. Ms. Drum, will you describe for us, please,
20 the document by which FHA invested in this
21 loan?
22 A. I don't have the document to that.
23 Q. Have you ever seen that document?
24 ATTORNEY KATZ: I -- again, I
25 object. This is going way beyond the scope of
Page 52
1 the hearing. She's testified that FHA is the
2 investor. I don't think we have to show the
3 papers that show that.
4 THE COURT: The objection is
5 overruled. This is cross-examination on the
6 specific point on which she gave direct
7 testimony.
8 ATTORNEY CHALIDZE: Thank you, your
9 Honor.
10 Q. Have you ever seen the document by which FHA
11 invested in this loan?
12 A. I have not.
13 Q. Do you know how much money FHA invested in
14 this loan?
15 A. I do not.
16 Q. Do you know the general mechanism by which FHA
17 invested in this loan?
18 ATTORNEY KATZ: Again, objection.
19 She's testified that the regulations -- that
20 the guidelines apply, and that she's applied
21 them in several instances in the past where
22 she's adjusted loans. It's just getting a
23 little ridiculous, your Honor, really.
24 THE COURT: Mr. Katz, that's up to
25 me.
Page 53
1 ATTORNEY KATZ: That's what I'm
2 suggesting.
3 THE COURT: I will make a ruling.
4 It's an exaggeration, I think, and not a
5 professional way of making an objection to the
6 Court.
7 The objection's overruled. Whether
8 FHA has a role in this loan and, therefore,
9 whether or not its regs apply and what its
10 regs say is exactly the issue for today's
11 hearing. So questions may be asked pertinent
12 to her knowledge on that point.
13 She has testified that FHA is the
14 investor, and she may be cross-examined on
15 what that means.
16 ATTORNEY CHALIDZE: Thank you, your
17 Honor.
18 Q. Do you have the question in mind, Ms. Drum?
19 A. Can you please repeat.
20 Q. Yes, of course.
21 Do you know the mechanism by which
22 the FHA invested in this loan?
23 A. I do not.
24 Q. Do you know when the FHA invested in this
25 loan?
Page 54
1 A. I do not.
2 Q. Do you know who input into the Wells Fargo
3 computer system that this is a, quote,
4 FHA-backed loan, close quote?
5 A. I do not.
6 Q. Has that ever been part of your duties at
7 Wells Fargo?
8 A. To know that? No.
9 Q. Okay. Did you receive any instruction or
10 training from Wells Fargo in regard to how FHA
11 investments are made?
12 A. We had to identify the FHA loans.
13 Q. And to identify them you look at a computer
14 system and see a designation made by someone
15 else?
16 A. Yes.
17 Q. Do you know that the FHA made its investment
18 in this loan prior to May of 2010?
19 A. I don't remember.
20 Q. Thank you.
21 ATTORNEY KATZ: You know, it's been
22 asked and answered. But I object to the last
23 question. May 2010 has no relevance.
24 THE COURT: Sustained.
25 ATTORNEY CHALIDZE: I'm sorry; is
Page 55
1 it --
2 THE COURT: The objection is
3 sustained, the answer is stricken.
4 ATTORNEY CHALIDZE: Thank you, your
5 Honor. The relevance was that the foreclosure
6 was filed in May of 2010 and the witness has
7 indicated that she does not know whether the
8 FHA investment was in place at that time.
9 ATTORNEY KATZ: Still not relevant.
10 THE COURT: We'll take the evidence.
11 ATTORNEY CHALIDZE: Thank you.
12 Q. Ms. Drum, would you agree with me that if in
13 fact an FHA one-year post-default prohibition
14 applied, the HAMP modification, which is what
15 I believe you've testified, and if the payment
16 default of Mr. Pauquette occurred as of August
17 1st, 2009, would you agree with me that going
18 to mediation to consider HAMP alternatives in
19 October of 2011 would be futile?
20 ATTORNEY KATZ: Objection.
21 A. Would you repeat the question, please.
22 Q. Yes. Would it be futile to go to a mediation
23 in October of 2011 if the lender took the
24 position that there was an FHA prohibition
25 against HAMP modification more than twelve
Page 56
1 months after the payment default, and the
2 payment default was as of August 12, 2009?
3 ATTORNEY KATZ: I object to the
4 foundation. I didn't offer her as an expert
5 on Vermont's mediation statute.
6 THE COURT: Objection is sustained.
7 ATTORNEY CHALIDZE: I'll try and
8 rephrase it. I apologize.
9 Q. I'm looking for your understanding.
10 As an officer and employee of Wells
11 Fargo, is it your understanding that it would
12 be futile to mediate a HAMP loan modification
13 on what Wells Fargo considered an FHA loan
14 that was past twelve months from date of
15 default?
16 ATTORNEY KATZ: I object to the
17 characterization that HAMP is the only thing
18 that's considered in mediation.
19 THE COURT: Sustained.
20 ATTORNEY CHALIDZE: Thank you, your
21 Honor.
22 Q. One last question, and, if the Court tells me
23 this is irrelevant for today, I will sit down
24 with no further.
25 Ms. Drum, is it your understanding
Page 57
1 that Wells Fargo N.A. owns this loan?
2 A. We service the loan.
3 Q. Is it your understanding that Wells Fargo owns
4 the loan?
5 ATTORNEY KATZ: Objection.
6 Foundation. She testified that FHA is the
7 investor and that -- and Wells Fargo is the
8 servicer. Ownership -- if she want to define
9 what ownership is, she can ask that question.
10 THE COURT: It's overruled. It's a
11 fair question.
12 ATTORNEY CHALIDZE: Thank you.
13 A. I have not seen the assignment for these, if
14 ownership has changed as far as the deed of
15 trust in the note.
16 Q. Is it your testimony, as you sit here today,
17 that you do not know who owns this loan?
18 A. I know that Wells Fargo services the loan and
19 FHA is the investor of the loan.
20 Q. I appreciate that information. And I'll try
21 again; perhaps I'm not being clear.
22 Do you know who owns this loan?
23 ATTORNEY KATZ: I object to the term
24 ownership; she's not a legal expert.
25 THE COURT: If you don't know, you
Page 58
1 can say you don't know.
2 A. I don't know.
3 ATTORNEY CHALIDZE: Thank you.
4 Nothing further.
5 THE COURT: Again confining it to
6 the issue of applicability of FHA, Mr. Katz,
7 do you have any redirect?
8 ATTORNEY KATZ: Sure. Yes.
9 REDIRECT EXAMINATION
10 BY ATTORNEY KATZ:
11 Q. You have -- again, you've been an adjustor of
12 loans? You've done FHA loans; right?
13 A. Yes.
14 Q. And how do you know that they're FHA loans?
15 A. In our system, where all of the information is
16 input, we can go in and see who the investor
17 of the loan is. You have to go by the
18 guidelines.
19 Q. Okay. And those records -- is it your
20 understanding that those records are made by
21 someone who knows the facts that they're
22 recording, inputting into your records?
23 A. Yes.
24 Q. And are they generally done at the time of the
25 event?
Page 59
1 A. Yes.
2 Q. And are those the kind of records that are
3 regularly kept by Wells Fargo?
4 A. I'm not sure.
5 Q. Well, does Wells Fargo regularly keep records
6 of the identity of the investor in the loan?
7 A. Yes.
8 Q. And are those records kept in the course of a
9 regularly conducted business activity of Wells
10 Fargo?
11 A. As far as maintained?
12 Q. Yes.
13 A. Yes.
14 Q. And as a loan adjustor you rely on those
15 records; correct?
16 A. Yes.
17 Q. And the other adjusters rely on those records;
18 correct?
19 A. Yes, correct.
20 Q. And your files are audited; right? So if
21 someone made a mistake on this, and it wasn't
22 an FHA loan, that could show up in an audit of
23 Wells Fargo's loan files; correct?
24 A. Correct.
25 Q. And Wells Fargo -- I mean the individual who
Page 60
1 put in the wrong information would be subject
2 to penalties?
3 A. Correct.
4 Q. And Wells Fargo could be subject to penalties?
5 A. I'm sure, yeah.
6 Q. Thank you, Stephanie.
7 THE COURT: That completes your
8 testimony. You may step down.
9 ATTORNEY CHALIDZE: May I have my
10 pleadings back, please.
11 ATTORNEY KATZ: Your Honor, I'm
12 going to move Plaintiff's 1.
13 THE COURT: Any objection?
14 ATTORNEY CHALIDZE: Yes, your Honor.
15 I object. This is completely hearsay. We
16 haven't had adequate authentication, and we
17 really haven't had adequate identification.
18 ATTORNEY KATZ: Your Honor, I've
19 pulled this off the Treasury's web site.
20 THE COURT: Objection is overruled.
21 Admissibility is supported by her
22 testimony that these were the FHA guidelines
23 that she referred to in her testimony, that a
24 loan cannot be more than twelve months past
25 due to qualify for HAMP.
Page 61
1 (Exhibit 1 received in evidence.)
2 THE COURT: Okay. We all know that
3 the foreclosure mediation statute is new, it's
4 unique, and it's something that we all need to
5 work with and understand and figure out how to
6 apply in the large number of cases to which
7 it's applicable.
8 The mediation report in this case
9 indicated that the NPV calculation was not run
10 or provided because of the plaintiff's
11 position that the loan was an FHA-backed loan
12 and, therefore, ineligible for HAMP
13 modification.
14 The wording of the report -- and
15 perhaps I'm putting a fine point on it -- but
16 the wording of the report suggested that the
17 mediator took no position on whether that was
18 true or not, the mediator was informed by the
19 plaintiff that the reason that the NPV
20 calculation was not provided or done at the
21 mediation was that the case was not eligible
22 for HAMP, and the mediator simply reported
23 what the plaintiff's position was on HAMP
24 eligibility. That's the reason for which this
25 hearing was scheduled. And, as I identified
Page 62
1 earlier, the issue is a narrow one. The Court
2 has to determine whether or not the plaintiff
3 complied with its obligations, and the
4 obligations including -- include providing
5 accurate information about eligibility.
6 What I, frankly, expected to have
7 happen at the hearing was that -- this
8 hearing -- is that the plaintiff would provide
9 to the defendant and the Court the specifics
10 about the status of FHA's role. We have had
11 testimony, and it is credible and undisputed,
12 that FHA is an investor in this loan. It's
13 not very specific, but there does not seem to
14 be a dispute about that, and there has been a
15 representation that that information was
16 provided at the mediation session.
17 However, in order for the
18 plaintiff's position at mediation to have --
19 that there -- about ineligibility, there are a
20 couple of further pieces of information that
21 are important. One is on what basis do
22 specific regulations apply, and what are those
23 regulations, and that's before we even get to
24 the facts of the defendant's situation. And
25 the plaintiff has not provided credible
Page 63
1 information about that.
2 The -- I haven't been shown the
3 provisions of HAMP that show that -- show why
4 the investor regulations or the regulations of
5 FHA in this particular case would apply. I
6 also haven't been shown the regulations.
7 Plaintiff's 1 has been admitted.
8 The witness identified it as regulations that
9 establish that nonpayment for over twelve
10 months makes a person ineligible, but I do not
11 find that evidence credible. Plaintiff's 1
12 does not, in and of itself, look like a
13 regulation at all. It may be a summary of a
14 program, but it's not a regulation. It is not
15 specific. There's no specific linkage between
16 actual content of regulations and the reason
17 given by the plaintiff at the mediation for
18 obtaining eligibility. So as of now plaintiff
19 has not yet shown compliance. That's not to
20 say that it couldn't, it's just that it hasn't
21 been shown.
22 Because this is a new procedure, and
23 because it may not have been clear what the
24 Court's expectations were for what had been
25 shown at the hearing today, there are really
Page 64
1 two possible choices. One is to give the
2 plaintiff an opportunity to provide more
3 information; in other words, continue the
4 hearing to another time where the necessary
5 information can be provided. In that case it
6 would seem to me to be reasonable that if the
7 defendant has incurred additional attorney's
8 fees in having to come back twice for this
9 hearing, plaintiff may need to be responsible
10 for that.
11 The second is, just simply, I'll
12 make the decision just based on what I heard
13 today, which there is an insufficient basis to
14 determine that the plaintiff has complied with
15 obligations, in which case the next step is
16 the termination of sanctions. And that is not
17 something we will do today in any case.
18 So let me ask, Mr. Katz, you may
19 want a moment or two to reflect on whether or
20 not you'd like to have a continuation of the
21 hearing in order to have another chance to
22 provide the information that I've identified
23 as what would be needed, or is it your request
24 to have the Court just simply make its
25 determination today?
Page 65
1 ATTORNEY KATZ: No, that's not my --
2 that's not what I'm asking the Court to do.
3 I will note that this Plaintiff's 1,
4 which was admitted, is -- it's on U.S.
5 Department of Housing and Urban Development
6 letterhead. It talks about FHA loans and the
7 FHA HAMP program. I'm not -- this -- it comes
8 from the HUD web site. I'm not sure -- if you
9 could just give me a little bit of guidance,
10 because this should be easy to do -- and I'm
11 not sure that we need to come back for a
12 hearing.
13 THE COURT: Well, there are two
14 missing links. One is why do fed regulations
15 apply? And, secondly, what are they? What's
16 the content? This appears to be a summary of
17 a program. It does not appear to be a
18 regulation.
19 ATTORNEY KATZ: Yes. And I'm not
20 sure that there is a regulation. But I'll go
21 back and look for it.
22 THE COURT: There is no
23 regulation --
24 ATTORNEY KATZ: This may be it.
25 You may be -- speaking of the --
Page 66
1 what we're all familiar with, those HAMP
2 guidelines that we've all seen and have been
3 circulated to people who are interested in
4 these sorts of things, and that is
5 specifically not the -- specifically not
6 pertinent to GSE-backed loans, GSE meaning
7 like the FHA, Fannie Mae, and Freddie Mack.
8 So to the extent that you're thinking that
9 that is not applicable in this case.
10 THE COURT: I don't really know what
11 I'm thinking about. But all I can say is that
12 you haven't shown that the plaintiff had a
13 defensible support for its statement, at
14 mediation, that this loan was ineligible
15 because of FHA requirements.
16 ATTORNEY KATZ: And Stephanie's
17 testimony, that this is what they look to is
18 not --
19 THE COURT: It's not credible. It's
20 not sufficiently supported. And, you know,
21 there may be legal materials that you could
22 provide that would do the job.
23 ATTORNEY KATZ: Well, we'll
24 certainly be providing the Court with
25 something.
Page 67
1 THE COURT: Okay. I certainly don't
2 mean to be critical of Ms. Drum's role,
3 because she has a particular role in the
4 process. This may be beyond her. So I don't
5 mean to imply that she should know something
6 that she doesn't know.
7 But the purpose of the hearing is to
8 determine whether or not there was a -- that
9 was a position that was -- that was a
10 defensible position, and, therefore, properly
11 justified not making an NPV calculation. And
12 so it may not be within the purview of her
13 work to do that analysis. But it was the
14 purpose of today's hearing.
15 But, again, because this is all new,
16 I'm certainly willing to continue the hearing
17 to give you another opportunity.
18 ATTORNEY KATZ: Yes. And I have to
19 say I read the order and I tried to do -- I
20 tried to provide the Court with what --
21 reading the order -- what it appeared to
22 request. And I did not know that I needed to
23 bring, you know, some sort of legal expert to
24 talk about FHA regulations.
25 THE COURT: Certainly issues of law
Page 68
1 and applicability of legal principals are
2 something a lawyer can argue.
3 ATTORNEY KATZ: Yes.
4 THE COURT: But they're also -- it
5 needs to be more than a flat statement.
6 Invite somebody who is perhaps trained to look
7 at the computer and say this is an FHA loan,
8 therefore, something or other happens; but
9 that isn't the same as showing that this is a
10 proper -- that the regs apply, that the regs
11 say a certain thing; and then finally the
12 factual basis. So.
13 ATTORNEY KATZ: And, as you say, due
14 to the newness and the unclarity of the
15 statute.
16 I mean I guess we can argue this at
17 another time, but I think attorney's fees
18 would be particularly inappropriate. And,
19 even if they were, and to the extent they are
20 assessed -- it would be totally inappropriate
21 if they would be -- but they should be an
22 offset to the judgment.
23 THE COURT: We'll reserve the issue
24 of attorney's fees for another day.
25 ATTORNEY CHALIDZE: Thank you, your
Page 69
1 Honor.
2 THE COURT: So I take it you are
3 asking to be able to continue the hearing to
4 present more evidence?
5 ATTORNEY KATZ: Yes, your Honor. Or
6 being able to maybe provide something and
7 having the Court determine that meets the
8 Court's -- what the Court is looking for.
9 THE COURT: It may be that that
10 would be a practical solution, that you could
11 offer affidavits or something in writing, and
12 then give Ms. Chalidze an opportunity to
13 identify any disputes of facts on that issue
14 or make a request for a hearing, and why a
15 hearing would be needed, so that we could
16 avoid an unnecessary hearing.
17 ATTORNEY CHALIDZE: Your Honor, I do
18 have outstanding document production requests.
19 What I don't want is to be put at
20 the disadvantage is just simply having to get
21 an affidavit, and not be able to view the
22 paper trail myself to really test the validity
23 of that. I think there are roughly a couple
24 of weeks left of response period on the
25 document production request. So I think once
Page 70
1 we get those -- and I have asked for things
2 for a long time, like what is the document --
3 ATTORNEY KATZ: Excuse me; there has
4 not been any requests, your Honor, and nothing
5 in writing.
6 THE COURT: Okay. What I am going
7 to do is set April 20th as a date by which --
8 well, I'll give a little bit more time than
9 that -- April 30th, a full month, for Mr. Katz
10 to make a written submission, and then you'll
11 have the fifteen-day response time. And I
12 will determine from that whether or not there
13 is need for a continued oral hearing.
14 ATTORNEY CHALIDZE: May I also
15 request then, your Honor, that plaintiff is
16 ordered to respond to my request to produce by
17 the same date, April 30th.
18 THE COURT: Have they already been
19 propounded?
20 ATTORNEY CHALIDZE: Yes, they were
21 propounded some weeks ago.
22 THE COURT: Well, then there's
23 already a due date.
24 ATTORNEY CHALIDZE: Yes, your Honor.
25 But if they don't do it, then they don't do
Page 71
1 it, and I'll be at the same disadvantage.
2 Whereas, if the Court orders them to, then I
3 would be able to make an informed assessment
4 and then assist the Court in doing the same.
5 THE COURT: I'm not going to do that
6 because any hearing of the type that we're
7 having today should actually be a short
8 summary hearing, it shouldn't open the case
9 wide up. And part of that is that I think it
10 is the expectation of the statute, and the
11 requirement to have this kind of a hearing,
12 that plaintiffs do at mediation provide the
13 necessary documentation to support the
14 position. And that is what I do expect to
15 happen. And I'd hope that prior to today that
16 might have happened so that this hearing might
17 not have even been necessary.
18 ATTORNEY CHALIDZE: Thank you, your
19 Honor.
20 ATTORNEY KATZ: Thank you, your
21 Honor.
22
23 (Whereupon, the hearing was
24 adjourned at 2:25 p.m.)
25 * * * * *
Page 72
1 C E R T I F I C A T E
2 STATE OF VERMONT
3 RE: Wells Fargo v. Pauquette, et al.
4 DOCKET NO. 408-5-10
5 I, BARRY COHEN, a Registered Professional Reporter and Notary Public in and for the State of
6 Vermont, do hereby certify as follows: 1. That the hearing before the Superior
7 Court, Rutland Division, whose testimony is hereinbefore set forth, was duly recorded by me on
8 March 29, 2012; 2. That such testimony was transcribed by me
9 and is a true and accurate record of the testimony given at the said hearing, to the best of my
10 knowledge, skill and ability; 3. I further certify that I am neither
11 attorney for, nor related to or employed by any of the parties, nor financially interested in this
12 matter; and 4. That a dash as used through this
13 transcript is meant to represent an interruption in thought or between a question and answer.
14 IN WITNESS THEREOF, I hereunto set my hand and Notarial seal this 3rd day of April, 2012.
15
16
17 __________________________________ Barry Cohen, RPR and
18 Notary Public My Commission Expires:
19 February 10, 2015
20
21