Bankr. E.D.N.C.: In re Sessoms- Lack of Evidence of Default and 9011 Sanctions

Summary: Ocwen filed a Motion for Relief from Stay.  At the hearing, the Debtor testified she was under a loan modification with Ocwen and provided copies of the loan modification agreement and bank account statements showing that payments under the loan modification had been made.  Ocwen provided absolutely no evidence to support its position that the Debtor was in default. In addition to denying the Motion for Relief from Stay, sua sponte, the Bankruptcy Court has ordered Ocwen to show cause why it should not be sanctioned pursuant to Rule 9011(c)(1)(B) for filing a baseless motion. Commentary: Because this order to show cause is from the Court, and not on the motion of the Debtor, this motion cannot just be settled by Ocwen.  And if you think that Ocwen will get off easily, start listening to the audio transcript of this hearing at  the 15:00 mark- Judge Leonard: If you got somebody from Ocwen who wants to show and testify differently, that would have been fine.  But I can’t really see... and I’m going to go a step further- you’re getting no fees and I’m going to issue an order under 9011 why Ocwen shouldn’t be sanctioned for filing a baseless stay motion.  I’m done with these fake modifications where banks agree to these modifications and come in here a year later and pretend like they never happened.  Ocwen is going to come in here and explain to me how they handled this modification, why a year later they asserted there was no modification and Ms.  Sessoms was in default, or they’re going to pay her some money.  Thank you. Obviously, there is more to come in this matter, but hopefully this is a watershed moment in the Eastern District of North Carolina and the bankruptcy courts, throughout the state, will start to not only seriously question the filings (including Proofs of Claim) by mortgage servicers, but also seek solutions for a clearly broken system. Reactive solutions such as the sanctions that seem likely in this case are helpful, but even better would be if the North Carolina Bankruptcy Courts were to adopt the proactive mandatory mortgage mediation procedures that an increasing number of bankruptcy courts around the country have implemented. For a copy of the opinion and audio transcript: Sessoms- Lack of Evidence of Default and 9011 Sanctions.PDF Sessoms Hearing Audio .MP3 Sessoms- Show Cause Order.PDF