Digitally signed by Joseph

H Zernik
DN: cn=Joseph H Zernik, o,
ou,
email=jz12345@earthlink.
net, c=US
Location: La Verne,
California
Date: 2009.10.17 09:04:37
-07'00'

Joseph H Zernik, DMD, PhD

PO Box 526, La Verne, CA 91750; Fax: 801.998.0917; E-Mail: jz12345@earthlink.net

08-01-08 Countrywide’s recreated letters, transcript, and news reports

The news that were the direct cause of the collapse of Countrywide and the notice of take
over on January 11, 2008.

1) January 8, 2008 Indiana Law Blog ………………. 02

2) January 8, 2008, New York Times ………………. 04

3) December 20, 20008 Case Conference Transcript in Borrower Sharon Dianne Hill,
Pittsburgh, PA (01-22574) ………………. 07

4) December 27, 2008 – Three recreated letters filed by Countrywide……… 28

1 / 31
10/17/2009 The Indiana Law Blog: Law - Mortgag…

The Indiana Law Blog

Focus is on Indiana law, and on int eresting developments in law, government, and more (not just in Indiana).

« In d. Deci si on s - Y et m ore on tom orrow's v oter ID case | Mai n | In d. Deci si on s - Ev en m ore on In di an a v oter ID oral argu m en t »

Tu esda y , Ja n u a ry 08, 2008

LA W - MORTGA GE SERVICING COMPA NY "RECREA TES" LETTERS

Don 't m i ss th i s, especi al l y i f y ou do an y con su m er ban kru ptcy work. It i n v ol v es l en ders pu rsu i n g "borrowers for addi ti on al
m on ey after th ei r ban kru ptci es h a v e been di sch arged," a n ot u n com m on si tu ati on . It al so tou ch es on m ortgage serv i cers wh o
di scard borrowers' m on th l y pay m en ts an d th en decl are th ei r m ortgages "del i n qu en t" so th at th ey m ay i m pose extra fees. Oh ,
an d y es, i t al so cov ers l en ders wh o "recreate" l etters th ey cl ai m to h av e sen t i n th e past.

"Le nde r Te lls Judge I t ‘ Re cre ate d’ Le tte rs" i s th e h eadl i n e to a l on g story today by Gretch en Morgen son of th e NY Ti mes. Som e
qu otes:

Th e Cou n try wi de Fi n an ci al Corporati on fabri cated docu m en ts rel ated to th e ban kru ptcy case of a
Pen n sy l v an i a h om eown er, cou rt records sh ow, rai si n g n ew qu esti on s abou t th e bu si n ess practi ces of th e
gi an t m ortgage l en der at th e cen ter of th e su bpri m e m ess.

Th e docu m en ts — th ree l etters from Cou n try wi de addressed to th e h om eown er — cl ai m ed th at th e borrower

owed th e com pan y $4,700 becau se of di screpan ci es i n escrow dedu cti on s. Cou n try wi de’s l ocal cou n sel
descri bed th e l etters to th e cou rt as “recreated,” rai si n g con cern from th e federal ban kru ptcy ju dge ov erseei n g
th e case, Th om as P. A gresti .

“Th ese l etters are a sm oki n g gu n th at som eth i n g i s n ot ri gh t i n Den m ark,” Ju dge A gresti sai d i n a Dec. 20
h eari n g i n Pi ttsbu rgh .

Th e em ergen ce of th e fabri cated docu m en ts com es as Cou n try wi de con fron ts a ri si n g ti de of com pl ai n ts from
borrowers wh o cl ai m th at th e com pan y pu sh ed th em i n to ri sky l oan s. Th e m atter i n Pi ttsbu rgh i s on e of 300
ban kru ptcy cases i n wh i ch Cou n try wi de’s practi ces h av e com e u n der scru ti n y i n western Pen n sy l v an i a.

Ju dge A gresti sai d th at di scov ery sh ou l d proceed so th at th ose i n v ol v ed i n th e case, i n cl u di n g th e Ch apter 13

tru stee for th e western di stri ct of Pen n sy l v an i a an d th e Un i ted States tru stee, cou l d determ i n e h ow
Cou n try wi de’s sy stem s m i gh t gen erate su ch docu m en ts.

A spokesm an for th e l en der, R i ck Si m on , sai d: “It i s n ot Cou n try wi de’s pol i cy to create or ‘fabri cate’ an y
docu m en ts as ev i den ce th at th ey were sen t i f th ey h ad n ot been . We bel i ev e i t wi l l be sh own i n fu rth er
di scov ery th at th e Cou n try wi de ban kru ptcy tech n i ci an wh o gen erated th e docu m en ts at i ssu e di d so as an
effi ci en t way to con v ey th e dates th e escrow an al y ses were don e an d th e cal cu l ati on s of th e pay m en ts as a
resu l t of th e an al y ses.”

Th e docu m en ts were gen erated i n a case i n v ol v i n g Sh aron Di an e Hi l l , a h om eown er i n Mon roev i l l e, Pa. Ms.
Hi l l fi l ed for Ch apter 13 ban kru ptcy protecti on i n March 2001 to try to sav e h er h om e from forecl osu re.

A fter m eeti n g h er m ortgage obl i gati on s u n der th e 60-m on th ban kru ptcy pl an , Ms. Hi l l ’s case was di sch arged
an d offi ci al l y cl osed on March 9, 2007. Cou n try wi de, th e serv i cer on h er l oan , di d n ot object to th e di sch arge;
cou rt records from th at date sh ow sh e was cu rren t on h er m ortgage.

Bu t on e m on th l ater, Ms. Hi l l recei v ed a n oti ce of i n ten ti on to forecl ose from Cou n try wi de, stati n g th at sh e
was i n defa u l t an d owed th e com pan y $4,166.

Cou rt records sh ow th at th e a m ou n t cl ai m ed by Cou n try wi de was from th e peri od du ri n g wh i ch Ms. Hi l l was

m aki n g regu l ar pay m en ts u n der th e au spi ces of th e ban kru ptcy cou rt. Th ey i n cl u ded “m on th l y ch arges”
total i n g $3,840 from N ov em ber 2006 to A pri l 2007, l ate ch arges of $128 an d oth er ch arges of al m ost $200.

A l awy er represen ti n g Ms. Hi l l i n h er ban kru ptcy case, Ken n eth Stei dl , of Stei dl an d Stei n berg i n Pi ttsbu rgh ,
wrote Cou n try wi de a few weeks l ater stati n g th at Ms. Hi l l h ad been deem ed cu rren t on h er m ortgage du ri n g

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th e peri od i n qu esti on . Bu t i n May , Cou n try wi de sen t Ms. Hi l l an oth er n oti ce stati n g th at h er l oan was
indianalawblog.com/…/law_mortgage_… 1/2
10/17/2009 The Indiana Law Blog: Law - Mortgag…
del i n qu en t an d dem an di n g th at sh e pay $4,715.58. * * *

Ju sti fy i n g Ms. Hi l l ’s arrears, Cou n try wi de sen t h er l awy er copi es of th ree l etters on com pan y l etterh ead
addressed to th e h om eown er, as wel l as to Mr. Stei dl an d Ron da J. Wi n n ecou r, th e Ch apter 13 tru stee for th e
western di stri ct of Pen n sy l v a n i a.

Th e Cou n try wi de l etters were dated Septem ber 2003, October 2004 an d March 2007 an d sh owed ch an ges i n
escrow requ i rem en ts on Ms. Hi l l ’s l oan . “Th i s l etter i s to adv i se y ou th at th e escrow requ i rem en t h as ch an ged
per th e escrow an al y si s com pl eted today ,” each l etter began .

Bu t Mr. Stei dl tol d th e cou rt h e h ad n ev er recei v ed th e l etters. Fu rth erm ore, h e n oti ced th at h i s address on th e
fi rst Cou n try wi de l etter was n ot th e l ocati on of h i s offi ce at th e ti m e, bu t an address h e m ov ed to l ater. N ei th er
di d th e Ch a pter 13 tru stee’s offi ce h av e an y record of recei v i n g th e l etters, cou rt records sh ow.

Wh en Mr. Stei dl di scu ssed th i s wi th Lesl i e E. Pu i da, Cou n try wi de’s ou tsi de cou n sel on th e case, h e sai d Ms.
Pu i da tol d h i m th at th e l etters h ad been “recreated” by Cou n try wi de to refl ect th e escrow di screpan ci es, th e
cou rt tran scri pt sh ows. Du ri n g th ese di scu ssi on s, Ms. Pu i da redu ced th e am ou n t th at Cou n try wi de cl ai m ed
Ms. Hi l l owed to $1,500 from $4,700.

Un der qu esti on i n g by th e ju dge, Ms. Pu i da sai d th at “a processor” at Cou n try wi de h ad gen erated th e l etters to
sh ow h ow th e escrow di screpa n ci es arose. “Th ey were n ot offered to prov e th at th ey h ad been sen t,” Ms. Pu i da
sai d. Bu t sh e al so sai d, u n der qu esti on i n g from th e cou rt, th at th e l etters di d n ot carry a di scl ai m er
i n di cati n g th at th ey were n ot actu al correspon den ce or th at th ey h ad n ev er been sen t. ***

“I ju st, I ca n ’t get ov er wh at I’m bei n g tol d h ere abou t th ese recrea ti on s,” Ju dge A gresti sai d, “an d wh at th e
pu rpose i s or was an d wh at was i n ten ded by th em .” * * *

Ms. Wi n n ecou r sai d i n cou rt fi l i n gs th at sh e was con cern ed th at ev en as Cou n try wi de h ad m i spl aced or
destroy ed th e ch ecks, i t l ev i ed ch arges on th e borrowers, i n cl u di n g l ate fees an d l egal costs. A spokesm an i n
h er offi ce sai d sh e wou l d n ot com m en t on th e Hi l l case.

O. Max Gardn er III, a l awy er i n N orth Carol i n a wh o represen ts trou bl ed borrowers, say s th at h e rou ti n el y sees
l en ders pu rsu e borrowers for addi ti on al m on ey after th ei r ban kru ptci es h av e been di sch arged an d th e cou rts
h av e determ i n ed th at th e defau l t h as been cu red an d borrowers are cu rren t. R egardi n g th e Hi l l m atter, Mr.
Gardn er sai d: “Th e real probl em i n m y m i n d wh en readi n g th e tran scri pt i s th at Cou n try wi de’s l awy er cou l d
n ot expl ai n h ow th i s h appen ed.”

Th e NYT al so prov i des l i n ks to copi es of th e recreated l etters, an d th e 21-page tran scri pt of th e cou rt exch an ge on th e
Cou n try wi de l etters.

P os ted by M arc ia O ddi on J anuary 8 , 2 0 0 8 0 6 :2 6 P M

P os ted to G eneral L aw Related

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10/17/2009 Lender Tells Judge It ‘Recreated’ Lette…

January 8, 2008

Lender Tells Judge It ‘Recreated’ Letters

By GRET CHEN MORGENSON

The Country wide Financial Corporation fabricated docum ents related to the bankruptcy case of a Pennsy lv ania

hom eowner, court records show, raising new questions about the business practices of the giant m ortgage lender at
the center of the subprim e m ess.

The docum ents — three letters from Country wide addressed to the hom eowner — claim ed that the borrower owed the
com pany $4 ,7 00 because of discrepancies in escrow deductions. Country wide’s local counsel described the letters to

the court as “recreated,” raising concern from the federal bankruptcy judge ov erseeing the case, Thom as P. Agresti.

“These letters are a sm oking gun that som ething is not right in Denm ark,” Judge Agresti said in a Dec. 2 0 hearing

in Pittsburgh.

The em ergence of the fabricated docum ents com es as Country wide confronts a rising tide of com plaints from
borrowers who claim that the com pany pushed them into risky loans. The m atter in Pittsburgh is one of 3 00

bankruptcy cases in which Country wide’s practices hav e com e under scrutiny in western Pennsy lv ania.

Judge Agresti said that discov ery should proceed so that those inv olv ed in the case, including the Chapter 1 3 trustee

for the western district of Pennsy lv ania and the United States trustee, could determ ine how Country wide’s sy stem s
m ight generate such docum ents.

A spokesm an for the lender, Rick Sim on, said: “It is not Country wide’s policy to create or ‘fabricate’ any docum ents
as ev idence that they were sent if they had not been. We believ e it will be shown in further discov ery that the

Country wide bankruptcy technician who generated the docum ents at issue did so as an efficient way to conv ey the
dates the escrow analy ses were done and the calculations of the pay m ents as a result of the analy ses.”

The docum ents were generated in a case inv olv ing Sharon Diane Hill, a hom eowner in Monroev ille, Pa. Ms. Hill filed
for Chapter 1 3 bankruptcy protection in March 2 001 to try to sav e her hom e from foreclosure.

After m eeting her m ortgage obligations under the 60-m onth bankruptcy plan, Ms. Hill’s case was discharged and

officially closed on March 9, 2 007 . Country wide, the serv icer on her loan, did not object to the discharge; court
records from that date show she was current on her m ortgage.

But one m onth later, Ms. Hill receiv ed a notice of intention to foreclose from Country wide, stating that she was in
default and owed the com pany $4 ,1 66.

Court records show that the am ount claim ed by Country wide was from the period during which Ms. Hill was
m aking regular pay m ents under the auspices of the bankruptcy court. They included “m onthly charges” totaling

$3 ,84 0 from Nov em ber 2 006 to April 2 007 , late charges of $1 2 8 and other charges of alm ost $2 00.

A lawy er representing Ms. Hill in her bankruptcy case, Kenneth Steidl, of Steidl and Steinberg in Pittsburgh, wrote

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10/17/2009 Lender Tells Judge It ‘Recreated’ Lette…
Country wide a few weeks later stating that Ms. Hill had been deem ed current on her m ortgage during the period in
question. But in May , Country wide sent Ms. Hill another notice stating that her loan was delinquent and dem anding

that she pay $4 ,7 1 5.58. Neither Mr. Steidl nor Julia Steidl, who has also represented Ms. Hill, returned phone calls
seeking com m ent.

Justify ing Ms. Hill’s arrears, Country wide sent her lawy er copies of three letters on com pany letterhead addressed to
the hom eowner, as well as to Mr. Steidl and Ronda J. Winnecour, the Chapter 1 3 trustee for the western district of

Pennsy lv ania.

The Country wide letters were dated Septem ber 2 003 , October 2 004 and March 2 007 and showed changes in escrow
requirem ents on Ms. Hill’s loan. “This letter is to adv ise y ou that the escrow requirem ent has changed per the escrow

analy sis com pleted today ,” each letter began.

But Mr. Steidl told the court he had nev er receiv ed the letters. Furtherm ore, he noticed that his address on the first

Country wide letter was not the location of his office at the tim e, but an address he m ov ed to later. Neither did the
Chapter 1 3 trustee’s office hav e any record of receiv ing the letters, court records show.

When Mr. Steidl discussed this with Leslie E. Puida, Country wide’s outside counsel on the case, he said Ms. Puida told
him that the letters had been “recreated” by Country wide to reflect the escrow discrepancies, the court transcript

shows. During these discussions, Ms. Puida reduced the am ount that Country wide claim ed Ms. Hill owed to $1 ,500
from $4,7 00.

Under questioning by the judge, Ms. Puida said that “a processor” at Country wide had generated the letters to show
how the escrow discrepancies arose. “They were not offered to prov e that they had been sent,” Ms. Puida said. But she

also said, under questioning from the court, that the letters did not carry a disclaim er indicating that they were not
actual correspondence or that they had nev er been sent.

A Country wide spokesm an said that in bankruptcy cases, Country wide’s autom ated sy stem s are som etim es

ov erridden, with technicians m aking m anual adjustm ents “to com ply with bankruptcy laws and the requirem ents
in the jurisdiction in which a bankruptcy is pending.” Asked by Judge Agresti why Country wide would go to the

trouble of “creating a letter that was nev er sent,” Ms. Puida, its lawy er, said she did not know.

“I just, I can’t get ov er what I’m being told here about these recreations,” Judge Agresti said, “and what the purpose

is or was and what was intended by them .”

Ms. Hill’s m atter is one of 3 00 bankruptcy cases inv olv ing Country wide that hav e com e under scrutiny by Ms.

Winnecour, the Chapter 1 3 trustee in Pittsburgh. On Oct. 9 , she asked the court to sanction Country wide,
contending that the com pany had lost or destroy ed m ore than $500,000 in checks paid by hom eowners in

bankruptcy from Decem ber 2 005 to April 2 007 .

Ms. Winnecour said in court filings that she was concerned that ev en as Country wide had m isplaced or destroy ed the

checks, it lev ied charges on the borrowers, including late fees and legal costs. A spokesm an in her office said she
would not com m ent on the Hill case.

O. Max Gardner III, a lawy er in North Carolina who represents troubled borrowers, say s that he routinely sees

lenders pursue borrowers for additional m oney after their bankruptcies hav e been discharged and the courts hav e
determ ined that the default has been cured and borrowers are current. Regarding the Hill m atter, Mr. Gardner said:

“The real problem in m y m ind when reading the transcript is that Country wide’s lawy er could not explain how this
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happened.”

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 UNITED STATES BANKRUPTCY COURT
WESTERN DISTRICT OF PENNSYLVANIA

IN RE: . Case No. 01-22574

.
.
SHARON DIANE HILL, .
. USX Tower - 54th Floor
. 600 Grant Street
. Pittsburgh, PA 15219
Debtor, .
. December 20, 2007
. . . . . . . . . . . . . . . . 2:47 p.m.

TRANSCRIPT OF STATUS CONFERENCE

BEFORE HONORABLE THOMAS P. AGRESTI
UNITED STATES BANKRUPTCY COURT JUDGE

APPEARANCES:

For the Debtor: Steidl & Steinberg

By: JULIA STEIDL, ESQ.
Suite 2830 Gulf Tower
707 Grant Street
Pittsburgh, PA 15219

For Countrywide Home Loan, LESLIE E. PUIDA, ESQ.

Inc.: Mellon Independence Center
Suite 5000
701 Market Street
Philadelphia, PA 19106-1532

Audio Operator: Cathy Younker

Proceedings recorded by electronic sound recording, transcript

produced by transcription service.
_______________________________________________________________

J&J COURT TRANSCRIBERS, INC.

268 Evergreen Avenue
Hamilton, New Jersey 08619
E-mail: jjcourt@optonline.net

(609) 586-2311 Fax No. (609) 587-3599

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 2

APPEARANCES (Cont'd.):

For the U.S. Trustee: Office of the U.S. Trustee

By: NORMA HILDENBRAND, ESQ.
1001 Liberty Avenue
960 Liberty Center
Pittsburgh, PA 15222

For the Chapter 13 Trustee: Babst, Calland, Clements & Zomnir

P.C.
By: DAVID W. ROSS, ESQ.
MARK A. LINDSAY, ESQ.
Two Gateway Center
Pittsburgh, PA 15222

8 / 31
 3

1 THE COURT: All right. The next matter before the

2 Court is the matter of Sharon Hill, Case Number 01-22574. This

3 is a status conference on a motion to enforce discharge. Would

4 counsel please come forward and enter your appearances?

5 MS. STEIDL: Julie Steidl for the debtor.

6 MS. PUIDA: Leslie Puida on behalf of Country --

7 THE COURT: All right. Anybody else?

8 MS. PUIDA: Leslie Puida on behalf of Countrywide.

9 THE COURT: Okay. Anybody else?

10 MS. HILDENBRAND: Norma Hildenbrand on behalf of the

11 United States Trustee, Your Honor.

12 MR. ROSS: David Ross and Mark Lindsay on behalf of

13 the Chapter 13 Trustee, Your Honor.

14 THE COURT: Anybody else?

15 (No verbal response)

16 THE COURT: Okay. Attorney Puida, you can have a

17 seat. Now I know why you're here. All right. That's -- okay.

18 Attorney Steidl, do you want to tell me about, first of all,

19 your motion and where we are with this?

20 MS. STEIDL: Our client, Ms. Hill, went through her

21 bankruptcy. She did everything right. She made all of her

22 payments. The application for approval of completion was

23 filed. Nobody objected. An order was -- default ordered was

24 granted. An order discharging the debtor was signed. A filing

25 report and accounting was signed, and then when she started to

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 4

1 make payments on her own, Countrywide sent them back and said

2 that they wouldn't take them, because she was in default, and

3 that was immediately after she was discharged that that

4 started.

5 In the process of going back and forth Countrywide

6 did supply us with a loan history. They also supplied me with

7 some letters that I didn't understand, but I spoke to Attorney

8 Puida about it, and she explained to me that there are three

9 letters in my file, all with different dates, where they're

10 saying Countrywide's mortgage went up during the process of the

11 plan.

12 The first letter is dated September of '03 that talks

13 about the first increase. The problem with that is we weren't

14 in our offices in '03. We were at a whole different address,

15 and our carbon copy is to Ken Steidl at the new address where

16 we are now, which we weren't then. And she explained to me

17 that --

18 THE COURT: Wait a minute. Wait a minute. Hold it.

19 Wait a minute. You're saying that you -- there's a letter

20 dated 2003 at a certain address that you weren't in until a

21 subsequent time?

22 MS. STEIDL: Yes, sir.

23 THE COURT: Yet this is a letter that was represented

24 to acknowledge or support the first change notice on this

25 property?

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1 MS. STEIDL: Yes, sir. The letter was dated

2 September 22nd, 2003, directed toward my client, carbon copied

3 to Ronda Winnecour and Ken Steidl at the Gulf Tower address,

4 but on September 22nd, 2003, we were at 210 Grant Street. So I

5 just asked Ms. Puida to explain the two, because I didn't

6 understand the discrepancy, and she told me that these letter

7 that they sent -- they sent three -- are recreation letters.

8 They're not the first letter that was sent. They're just --

9 THE COURT: What is a -- never heard of a recreation

10 letter. That's a letter that they don't have, and now they've

11 recreated to support the allegation that they actually sent a

12 prior letter?

13 MS. STEIDL: Well, that would be how it sounds. I

14 don't mean to mis-characterize it, but that's how it sounds.

15 All of these letters were -- there are three of them, and they

16 were all recreated.

17 THE COURT: All recreated letters.

18 MS. STEIDL: That's one in '03, one in '04, and one

19 in '05.

20 THE COURT: Okay. That's pretty interesting. Go

21 ahead.

22 MS. STEIDL: Okay, so --

23 THE COURT: Well, what were the letters purportedly

24 to represent or offer?

25 MS. STEIDL: The change -- apparently, some of the

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1 problem was, according to Countrywide, that the loan amounts

2 changed with escrow changes, because she doesn't have a

3 variable rate. It's a fixed rate. So the first letter in

4 September 22nd, 2003, and we didn't move to our new office

5 until October 27th, so there's like a six-week difference

6 there. And it says, "This letter is to advise you that the

7 escrow requirement has changed per the escrow analysis. The

8 amount of the escrow is now this, 2235.07," and it goes on to

9 explain about the escrow. And then it says that they're

10 raising her monthly mortgage payment to 603 from approximately

11 500. We didn't get that letter.

12 THE COURT: All right. Let me -- you said the other

13 two are recreation letters, too. It's not the same -- how do

14 you know that? Based on a same address issue or for other

15 reasons?

16 MS. STEIDL: No, Ms. Puida told me.

17 THE COURT: All right.

18 MS. STEIDL: She said that they put them into

19 evidence when it happened, so we could understand that it

20 happened. That they were recreated.

21 THE COURT: Oh, that's nice. All right, but -- and

22 they allege that they actually sent these letters at one time,

23 but they don't have the originals? Is that it?

24 MS. STEIDL: You would have to ask her. I didn't go

25 that far.

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1 THE COURT: So that hasn't been -- that -- all right.

2 I will ask her. Yes, that's interesting. Go ahead.

3 MS. STEIDL: And then today when we were talking, she

4 said that she was kind enough to lower what she want -- what

5 Countrywide wanted by some number.

6 THE COURT: All right. Let me stop. Let me stop you

7 there. You said that there was a final -- after the Trustee

8 filed its final account and report and a discharge order was --

9 our standard discharge order was entered in the normal course?

10 MS. STEIDL: Yes, sir, in March of '07.

11 THE COURT: All right. Does that discharge order

12 have language in it that says that the loans -- the secured

13 loans, mortgages, whatever are current as of the date of the

14 last distribution of the Trustee?

15 MR. STEIDL: It does.

16 THE COURT: So why is Countrywide even making a claim

17 for pre-discharged claims in light of that discharge order?

18 MS. STEIDL: I don't know how to answer that, Your

19 Honor.

20 THE COURT: All right. I mean you got Attorney Puida

21 agreeing to change the amounts, but it sounds like that Court

22 order, which I assume became final and no objection was filed,

23 already says that Countrywide's current.

24 MS. STEIDL: Yes, sir.

25 THE COURT: Okay. Go ahead.

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1 MS. STEIDL: And the amount has dropped now to 15

2 hundred, because they audited it. It didn't start as a

3 Countrywide loan. It started as a Mellon Bank loan. It was

4 then transferred to Countrywide, and Countrywide apparently

5 audited payments made to Mellon Bank, and they knocked it down

6 to about half -- a little more than half. But I'm wondering if

7 there might be other payments that didn't get knocked down, and

8 we don't have anything regarding that. So as far as the status

9 conference part of this goes, I would like to have discovery,

10 so we could see --

11 THE COURT: All right. Let me stop you. It's been

12 represented that this case was in a settlement posture. Is

13 that an --

14 MS. STEIDL: From a -- my client doesn't -- well, it

15 was in a settlement posture at 33 hundred dollars. Now it's 15

16 hundred dollars, but --

17 THE COURT: I'm not sure what -- all right. Tell me.

18 It was represented by Countrywide at another hearing, which did

19 involve this matter and nine other cases, that this particular

20 -- unless I misunderstood, and I might have, but I was under

21 the impression -- and I believe Attorney Connick (phonetic)

22 represented that this matter was going away, because it was

23 settled. Are you now backing off a settlement, or did you ever

24 have a settlement to begin with, or -- tell me about that.

25 MS. STEIDL: We did not -- our client did not approve

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1 any kind of settlement, and when we sent it to her for

2 approval, she did not want it. She didn't want a settlement.

3 She --

4 THE COURT: So there was a settlement offer on the

5 table, but it had never been approved by your client.

6 MS. STEIDL: Correct.

7 THE COURT: All right. Well, that explains why I've

8 never seen a motion to settle this case then. I was wondering

9 what happened. I assumed -- right?

10 MS. STEIDL: Correct.

11 THE COURT: All right. Okay. I think I understand.

12 Attorney Puida, what is going on here? I mean I guess there's

13 a couple things on the table I need to know about. What are

14 these recreated letters all about?

15 MS. PUIDA: Your Honor, the letters --

16 THE COURT: How about -- could you -- would you mind

17 remaining seated and speak into that microphone? I can't hear

18 you. Otherwise, or if you stand -- some lawyers are more

19 comfortable standing. Make sure you bend over and talk into

20 the microphone. Okay?

21 MS. PUIDA: I'm sorry, Your Honor. Is this better?

22 THE COURT: Yes, that's fine as long as you're

23 comfortable.

24 MS. PUIDA: Your Honor, regarding the letters, they

25 were never held out to be letters that were sent notifying any

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1 one of the payment changes. They were purely generated -- what

2 happens is, is they were generated based on what the payments

3 were in 2003, 2004, and 2007.

4 THE COURT: When were they generated?

5 MS. PUIDA: They were generated when we first were in

6 settlement negotiations with Mr. Steidl regarding this case.

7 There was a question as to what the payments were at various

8 times within the bankruptcy. So we -- they were not offered to

9 prove that they had been sent. They were merely showing what

10 the breakdown was of the PMI and escrow at those various points

11 in time.

12 THE COURT: Who created these letters?

13 MS. PUIDA: A processor at Countrywide.

14 THE COURT: Does it say anything on the letters

15 themselves that has a disclaimer that these are not actual

16 letters sent or simply used to show if a letter had been sent

17 what the payment would've been at the time in question?

18 MS. PUIDA: No, it does not.

19 THE COURT: Boy, that's a strange one. I don't know.

20 Why would you -- when did you disclose that these letters were

21 not what they purported to be but, in fact, were just memoranda

22 of an event created years after the event in order to document

23 the event?

24 MS. PUIDA: Throughout my discussions with Mr. Steidl

25 when we were trying to resolve this matter.

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1 THE COURT: From the very beginning you sent him

2 copies of letters, and you described the fact --

3 MS. PUIDA: I had --

4 THE COURT: Go ahead.

5 MS. PUIDA: I'm sorry, Your Honor. We had been

6 providing him with payment histories, escrow analyses,

7 breakdowns of all of the escrow that had been advanced

8 throughout the case. It was just one of various things that

9 were being sent to him just showing what the case status was at

10 the time the discharge was entered, what the status is now, and

11 what we were showing as being due on the loan.

12 THE COURT: All right. Now, you know, you're here

13 representing your client. I want to -- you know, it's -- I

14 want you to be totally candid with me, because I'm going to ask

15 these questions of Mr. Steidl as well at some point.

16 Obviously, it looks like we have to, because this concerns me.

17 I'm having trouble with these recreated letters that purport to

18 be sent to a number of parties at a date -- prior date well

19 into the past and created at a subsequent date to show or

20 represent, at least at first blush, the state of a record which

21 didn't really exist as such. When was Mr. Steidl informed by

22 you or anyone at Countrywide, to your knowledge, that these

23 letters are not what they would purport to be on a cold reading

24 and view if received in a packet of papers?

25 MS. PUIDA: Your Honor, I wouldn't be able to give

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1 you an exact date. I had a conversation with Mr. Steidl where

2 he indicated that he had never received the letter. He had

3 checked his file, and I had told him, well, you wouldn't have,

4 because this was -- these were not sent out. It's just drawing

5 -- the system at Countrywide currently has Mr. Steidl as

6 counsel. He was not counsel when this case was initially

7 filed. It has the Trustee's information in the system, so when

8 they were recreated, it pulled that information in. But the

9 point of the letters was to show what the payment changes were

10 during the course of the bankruptcy.

11 THE COURT: Well, why wouldn't you just show that by

12 an in-house document generated by Countrywide? Why would you

13 go to the steps of creating a letter that never was sent, which

14 appears -- which could be used by a loan processor or somebody

15 at Countrywide when a debtor calls up on their own to find out

16 the background of a loan, and these letters were forwarded on

17 without the benefit of counsel or you and Mr. Steidl talking

18 about post-discharge injunction violations? Why would that

19 type of document ever even be part of this system?

20 MS. PUIDA: Your Honor, I can't speak as to that. I

21 don't know the answer.

22 THE COURT: All right. Anything else? There's no

23 settlement. You've been discussing a proposed resolution, but

24 the --

25 MS. PUIDA: No, we -- Mr. Steidl and I had been

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1 discussing various things. We have been going back and forth,

2 but I was apprised as of Tuesday of a number that was

3 acceptable to the debtor, and then I understand today that

4 there is no number that's acceptable. So there is no

5 settlement at this time.

6 THE COURT: All right. Well, Attorney Steidl --

7 Julie Steidl said they never had the acceptance of the debtor.

8 That it was just passed on to the debtor.

9 MS. PUIDA: Correct. We were --

10 THE COURT: Was your understanding different than

11 that?

12 MS. PUIDA: No, all along Mr. Steidl indicated that

13 he needed his client to sign off on any settlement, and that he

14 had forwarded the documentation to her for review.

15 THE COURT: Okay. All right. Anything else on this

16 issue?

17 MS. PUIDA: No, Your Honor.

18 THE COURT: All right. Attorney Hildenbrand, do you

19 have any comments to make in light of where we're at?

20 MS. HILDENBRAND: Thank you, Your Honor. I was here

21 today in particular to preserve the status quo. As the Court's

22 aware, we have a pending discovery request of Countrywide in

23 the miscellaneous matter, and the issues that were told to the

24 Court today are of grave concern to the United States Trustee.

25 We're not certain where these letters -- these recreated

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1 letters, the purpose of them, and I would just reiterate the

2 United States Trustee's argument that this is even more reason

3 to grant our discovery request in order to in the other case --

4 although I'm not arguing that position today, this is just

5 another example of why the United States Trustee feels that

6 it's important to understand that Countrywide -- to get the

7 information regarding this case as well as the other non-

8 context cases and to allow us to investigate how all this comes

9 about. I appreciate the Court's letting -- giving me an

10 opportunity to speak on that.

11 THE COURT: Well, you've entered an appearance by

12 your appearance today as well as raising this issue in the non-

13 context cases even though we consolidated it under a

14 miscellaneous number for purposes of administrative

15 convenience. In a sense, you have already filed in this case a

16 request for your 2004 exam alleging this particular issue, so I

17 couldn't proceed.

18 And to be honest with you, based on what I -- my

19 understanding prior to today, this case was in settlement

20 posture, and I thought I would be getting a copy of a proposed

21 consent order here. But I see that we're not even close to

22 that, so even more reason not -- I can't do anything today, and

23 it's good we had the status conference to further alert the

24 Court as to the pending issues. Mr. Ross, did you have any

25 comments to the Court?

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1 MR. ROSS: Thank you, Your Honor. Your Honor, the

2 reason I'm present today is --

3 THE COURT: Well, I'm going to stop you right there.

4 Now, typically, we'd turn to Mr. Bedford on Chapter 13 matters.

5 You represent the Trustee in the miscellaneous Number 203,

6 which -- I believe it's 203 with the 293 cases. That was the

7 first miscellaneous. Two 0 four is the second miscellaneous.

8 So really you represent the Trustee, I thought, for the limited

9 purpose of those issues and not necessarily in this case. I

10 thought maybe you were here for purposes of information only

11 possibly, but if Mr. Bedford is deferring to you to represent

12 the Chapter 13 Trustee on this particular matter, then I

13 believe your appearance -- I need some clarification here as to

14 your role versus Mr. Bedford's traditional role on these types

15 of issues.

16 MR. ROSS: Your Honor, I'm here today on behalf of

17 the Trustee. Mr. Bedford is sitting to my right and has

18 deferred to me for purposes of this matter, and I have that

19 authority from Ms. Winnecour.

20 THE COURT: All right. Okay. Mr. Bedford, that's

21 what we're going to do today, and you're out. Okay?

22 MR. BEDFORD: Yes, I understand, Your Honor. And

23 while I do have the file, I'm certainly able to provide any

24 information that Your Honor may wish to have from the file.

25 THE COURT: Well, I appreciate that, but I'm going to

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1 -- you know the rule. There's no tag team lawyering. I just

2 let the one lawyer, and Mr. Ross, you're the man. Go ahead.

3 MR. ROSS: Thank you, Your Honor. Your Honor, as

4 Your Honor stated, we are counsel to the Trustee in the action

5 that consolidated 293 cases. This particular case is one of

6 those actions, and this particular case involves one of the

7 checks the Trustee alleges that Countrywide has misplaced.

8 THE COURT: That's different. That's totally

9 different from this post-injunction -- post-discharge

10 injunction violation.

11 MR. ROSS: Not necessarily, Your Honor. With all due

12 respect, the Trustee's concern in the 293 cases -- one of her

13 concerns has always been the timely application payments. We

14 have a situation in this particular debtor where the Trustee

15 believes that or knows that these three checks have been lost.

16 Two -- checks have been lost twice. There's been a third check

17 issued to Countrywide. Countrywide is now asserting post-

18 confirmation post-discharge that there is an arrearage. The

19 question --

20 THE COURT: But is -- pardon me. Just to cut to the

21 quick here, is it related to a change in escrow amounts --

22 these three changes in escrow amounts as these letters pre --

23 post-created letters reflect, or does it -- your claim in the

24 -- you're wearing the hat for the Chapter 13 Trustee in all

25 matters, but the other -- I don't want to confuse the issues.

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1 The other one related to six or seven checks that weren't

2 cashed much later in time than -- I don't think it -- in my

3 mind -- and I'm not as close to it as you, but the two seem to

4 be unrelated.

5 MR. ROSS: Your Honor, I cannot tell you as a matter

6 of fact that they're not unrelated. They may very well be

7 related. There's two issues, Your Honor, and that's exactly

8 why we're here today. It may be that as a result of these

9 checks being misplaced or mis -- inappropriately applied, that

10 that led to the arrearages.

11 Also, Your Honor, with respect to the three letters

12 that Ms. Steidl has referenced, what I'd like to bring to the

13 Court's attention is that the Chapter 13 Trustee is also

14 referenced as a CC on those letters as well. I reviewed the

15 Trustee's files. I have met with Mr. Bedford. We have not

16 received those letters. Your Honor, the 293 cases are about

17 receipt of payments and timely application. This, Your Honor,

18 is the same issue, and --

19 THE COURT: Well, I don't know if I agree with you on

20 that. It's a similar issue with different facts. Totally

21 different facts from -- I mean they're talking about -- unless

22 you tie it in time -- what's the date of the last letter?

23 Attorney Steidl, what's the date of the most recently recreated

24 letter, 2007?

25 MS. STEIDL: Yes, Your Honor.

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1 THE COURT: All right. Well, maybe it is part of it

2 then. I'm wrong. I thought it was 2003 and 2005, but maybe

3 I'm -- all right.

4 MS. STEIDL: It was 2003, 2004, and 2007.

5 THE COURT: All right. Two thousand seven gets you

6 in the door. All right. Maybe they are related. Go ahead,

7 Mr. Ross.

8 MR. ROSS: Your Honor, at this point we would join in

9 with the debtor's request that we be permitted -- that the

10 Trustee be permitted to conduct discovery. Remember, Your

11 Honor, in this case, as in all Chapter 13 cases that are

12 completed, the Trustee is required to file a final report,

13 which the Trustee did. I think based on a large part on that

14 Trustee's final report this Court entered an order in this case

15 discharging the debtor.

16 From the Trustee's standpoint, if, in fact, the

17 Trustee's records are incorrect, then we would welcome

18 Countrywide to show us why they're incorrect. At this point I

19 think it's the Trustee's responsibility to verify that her

20 report filed in this case is accurate, and based upon that,

21 Your Honor, with respect to the debtor's request to open

22 discovery, we would join in that.

23 With respect to the U.S. Trustee's request, we do not

24 join in with that, because we understand the issues attendant

25 thereto. But with respect to the debtor's request, Your Honor,

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1 we believe that the debtor has the right and it really makes

2 sense with what we've -- what the Court has learned today.

3 THE COURT: Well, there's definitely a need for

4 discovery here. These letters are a smoking gun that something

5 is not right in Denmark. I just -- I can't get over what I'm

6 being told here about these recreations and what the purpose is

7 or was and what was intended by them. It just -- I don't see

8 any credible reason for doing that other than to create a

9 perception that notices were timely sent. But maybe there is,

10 and that's why there's a need for discovery, obviously.

11 Attorney Puida, anything -- any response here?

12 MS. PUIDA: Yes, Your Honor. Again, the -- we were

13 doing nothing more than providing counsel with a history of

14 what escrow was received and payments during the course of the

15 bankruptcy, what was paid out, what difference between the two

16 there may have been. The letters again were never offered as

17 being something that was sent out to debtor's counsel or to the

18 Trustee. It was just a starting point to show this is the

19 breakdown for that particular year's escrow.

20 THE COURT: All right. I appreciate that. This is

21 your understanding of what you did, but when I asked some

22 rather pointed questions to further explain the purpose behind

23 these letters, you couldn't respond. You could not answer, and

24 I can appreciate that, and that's just more reason why there

25 has to be some discovery here to find out what is going on and

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1 why it was done, because that will determine -- you know, if it

2 can't otherwise be settled or resolved, that will be an item of

3 concern for this Court in assessing the appropriate damage or

4 remedy. So it's highly, extremely relevant, and important for

5 a decision in this matter, so I'm going to -- Attorney Steidl,

6 how much time do you need?

7 MS. STEIDL: Sixty days.

8 THE COURT: All right. I'm going to grant -- I'm

9 going to schedule an evidentiary hearing on this matter. I'll

10 issue a general pretrial order, so that discovery can commence

11 for a 60-day period, and I assume there's no problem with that

12 from Chapter 13 Trustee?

13 MR. ROSS: No, Your Honor. Would the Chapter 13

14 Trustee have the ability to be part of the discovery?

15 THE COURT: Absolutely. Absolutely. Yes, you're a

16 party in interest as will the U.S. Trustee. This -- I mean

17 you're all involved in this case. The U.S. Trustee's entitled

18 to be heard and involved in any matter pending before the

19 Court, and in a very broad reading of the statute even raise

20 matters. We still haven't determined that, but definitely. We

21 have a proceeding in progress here that even Countrywide in the

22 related matters admitted that the Trustee had the right to be

23 heard and involved -- the U.S. Trustee. Definitely, a Chapter

24 13 Trustee. Countrywide's admitted that in related matters.

25 Definitely, the debtor.

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1 And the Court's concerned about this. The Court's

2 very concerned. Again, I'm totally surprised at what I'm

3 hearing. I didn't anticipate this at all today, but it's

4 definitely a matter that needs to be vetted further through

5 discovery and assuming a resolution cannot otherwise be had.

6 All right. I'll issue the order. We'll have an

7 evidentiary hearing to be scheduled according to the Court's

8 schedule. I'll have to be down there for that I assume, and

9 we'll go forward, and I'll issue that order in -- probably by

10 tomorrow. Definitely by tomorrow. I doubt if it will be

11 today, but we'll issue a standard pretrial order in this

12 matter. All right. Anything else? Anything else, counsel?

13 MS. STEIDL: That's all.

14 THE COURT: All right. Thank you. We'll recess.

15 THE CLERK: All rise.

16 * * * * *

17 CERTIFICATION

18 I, PATRICIA C. REPKO, court approved transcriber,

19 certify that the foregoing is a correct transcript from the

20 official electronic sound recording of the proceedings in the

21 above-entitled matter to the best of my ability.

22

23 /s/ Patricia C. Repko Date: January 3, 2008

24 PATRICIA C. REPKO
25 J&J COURT TRANSCRIBERS, INC.

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