Thursday, September 25, 2008

Motion To Set Aside Foreclosure Sale

http://rcxloan.com/Motion_To_Set_Aside_Foreclosure_Sale.htm

“A good name is more desirable than great riches; to be esteemed is better than silver or gold.” - Proverb 22:1

Praises & Thanks be unto The Lord My God for the wisdom, knowledge and understanding on legal matter because I received countless feedbacks from folks facing foreclosure and bankruptcy around the United States as follows:

Comments: "I have been inundated with TILA questions. So I went out hunting to see if anyone had already written about it in terms that a lay person might be able to understand. What I found is shown below. I believe it to be generally correct and the citations are good citations of law. See this site for the entire write-up. It should give most lay people an idea on how to handle this and it will be valuable to your lawyer if he/she is not totally familiar with the TILA context at the following link:" http://rcxloan.com/Civil_Action_BK_Motion_14.htm. Statement made by Attorney at Law, Neil F. Garfield, M.B.A., J.D.

A STORY TO THINK ABOUT
“Once upon a time in the Ancient Roman Empire, 27 BC, there were two men living in Jerusalem. One was named Ameriquest-New Century-Chase Home Finance-Deutsche Bank National Trust, a rich man whose land was worth close to $700 billion in today‘s money; the other, Mr. Augustin, a farmer whose land was worth $300,000. One day, Ameriquest-New Century-Chase Home Finance-Deutsche Bank National Trust asked Mr. Augustin to give him his land, that he may have it for a vegetable garden. But, Mr. Augustin said to Ameriquest-New Century-Chase Home Finance-Deutsche Bank National Trust, “The Lord forbid me that I should give to you the inheritance of my fathers”.

When Jezebel, the wife of Ameriquest-New Century-Chase Home Finance-Deutsche Bank National Trust, heard what Mr. Augustin said to him. She said, don‘t worry love, I will take care of the matter? Arise, eat bread, and let your heart be joyful; I will give you Mr. Augustin‘s land. So, Jezebel wrote letters in Ameriquest-New Century-Chase Home Finance-Deutsche Bank National Trust’s name and seal them with his seal and sent letters to the elders and to the nobles who were living in Jerusalem. Now she wrote in the letters, saying, proclaim a ‘relief of stay trial’ in the absence of Mr. Augustin. Then, issued a decree that Mr. Augustin’s land is now Ameriquest-New Century-Chase Home Finance-Deutsche Bank National Trust.

So the men of Jerusalem, the elders and the nobles did as Jezebel had sent word to them, just as it was written in the letters which she had sent them. Ameriquest-New Century-Chase Home Finance-Deutsche Bank National Trust take possession of Mr. Augustin’s land which he had refused to give. The sad part is that Mr. Augustin was forced off his land illegally and fraudulently. Mr. Augustin left with nothing and forced to seek refuge from Jerusalem to a land called ‘Fairfax, Virginia’ to start from scratch. Whereas, Ameriquest-New Century-Chase Home Finance-Deutsche Bank National Trust became more wealthy with the unwarranted possession of his and hold more than $700 billion of assets as a result.

Questions? Why was Mr. Augustin absent in the relief of stay trial? Why did the elders and the nobles just do as Jezebel asked them? Let us all fast forward in 2008, what do you think the elders and the nobles should have done differently?”

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UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF MASSACHUSETTS
Pierre Richard Augustin, PRO SE )
Debtor ) C.A. No. 05-46957 (JBR)
)
) Amendment to the Motion Objecting to
) Propose Sale Of Debtor’s Property
v. ) on May 16, 2007 pursuant Rule 6004 (b)
)
DANVERSBANK, ET AL., )
Defendants. )

Amendment to the Motion Objecting to Propose Sale (docket # 169) for the consolidation of Debtor‘s Motions & ‘affirmative defense adversary proceedings’ since they are both governed by Rule 9014 with a Motion of Relevant Evidences to Support both Motions

Your Honor, “parties appearing pro se are allowed greater latitude with respect to reasonableness of their legal theories (Patterson V. Aiker, 111 F.R.D. 354, 358 [N.D. GA 1986])”. To the extent that Debtor did not confine strictly to the rules, specifically relating to formatting, Debtor respectfully apologizes to this court. In consequence, the court is supposed to judge the case based on its merits even if procedural errors are made. Therefore, the court must give a Pro Se Debtor, “every favorable inference arising from his pro se status” (Hall v. Dworkin, 829 F. Supp. 1403, 1409 (ND NY 1993).

Despite Debtor’s timely legal objections and defenses, the propose sale or ‘Illegal Foreclosure’ of his property took place on May 23, 2007. Thus, Debtor is amending his previously filed motion scheduled for the Hearing scheduled for 6/7/2007:

1. to ‘set aside the sale of the Illegal Foreclosure of May 23, 2007;
2. to consolidate his ‘affirmative defense adversary proceedings’ and the motion filed on May 11, 2007 (Docket # 169) under rule 6004(b) since they are both governed by Rule 9014 and are considered contested matter or core proceedings.

FUNDAMENTAL BASIS OF ARGUMENT
Ronald Dworkin regards law as an interpretive process under which individual rights are paramount. Therefore, let us consider the following two situation by Dworkin:

1. First Quotation by Dworkin
“An impatient beneficiary under a will murder the testator. Should he be permitted to inherit?”

2. Debtor’s Contextual Analogy of First Quotation
Chase Home Finance as an impatient beneficiary strips away Debtor’s property rights despite his timely legal objections and defenses. Should Chase Home Finance be permitted to inherit the profit by selling Debtor’s property now set for May 23, 2007?

3. Second Quotation by Dworkin
“A chess grand master distracts his opponent by continually smiling at him. The opponent objects. Is smiling in breach of the rule of chess?

4. Debtor’s Contextual Analogy of Second Quotation
Chase Home Finance blind folded their eyes and put their two hands over their ears by not answering to Debtor’s timely legal objections and defenses by maintaining silence. Debtor objects but no one is looking or listening. Is the silence of Chase Home Finance in breach of the rules of law?

5. Fraud On The Court By An Officer Of The Court As Basis To Set Aside The Illegal Foreclosure
all attorneys are considered as officers of the court. Whenever any officer of the court commits fraud during a proceeding in the court, he/she is engaged in "fraud upon the court". In Bulloch v. United States, 763 F.2d 1115, 1121 (10th Cir. 1985), the court stated "Fraud upon the court is fraud which is directed to the judicial machinery itself and is not fraud between the parties or fraudulent documents, false statements or perjury. ... It is where a member is corrupted or influenced or influence is attempted)".

"Fraud upon the court" has been defined by the 7th Circuit Court of Appeals to "embrace that species of fraud which does, or attempts to, defile the court itself, or is a fraud perpetrated by officers of the court so that the judicial machinery can not perform in the usual manner its impartial task of adjudging cases that are presented for adjudication." Kenner v. C.I.R., 387 F.3d 689 (1968); 7 Moore's Federal Practice, 2d ed., p. 512, ¶ 60.23. The 7th Circuit further stated "a decision produced by fraud upon the court is not in essence a decision at all, and never becomes final."

"Fraud upon the court" makes void the orders and judgments of that court. It is also clear and well-settled law that any attempt to commit "fraud upon the court" vitiates the entire proceeding. (See In re Village of Willowbrook, 37 Ill. App.2d 393 (1962) ("It is axiomatic that fraud vitiates everything."); Dunham v. Dunham, 57 Ill. App. 475 (1894), affirmed 162 Ill. 589 (1896); Skelly Oil Co. v. Universal Oil Products Co., 338 Ill. App. 79, 86 N.E.2d 875, 883-4 (1949)). Under Federal law, when any officer of the court has committed "fraud upon the court", the orders and judgment of that court are void, of no legal force or effect.

6. Homestead rights and Federal Rule Civil Procedure 60(b)
Debtor does not in anyway waive his homestead rights (State, ex rel., O'Brien v. Superior Court, 173 Wash. 679, 24 P.2d 117 (1933); State, ex rel., White v. Douglas, 6 Wn.2d 356, 107 P.2d 593 (1940)). Thus, the illegal foreclosure be vacated under rules allowing vacating judgments, e.g. F.R.Civ.P 60(b).

7. Analogous Cases For Basis to Set Aside the ‘Illegal Foreclosure Sale’
Anyone having an interest in the real property security, including the borrower, may restrain the non-judicial foreclosure of a deed of trust on any proper ground (See, e.g., Reiserer v. Foothill Thrift and Loan, 208 Cal.App.3d 1082, 256 Cal.Rptr. 508 (1989) (unpublished opinion); Metropolitan Life Insurance Company v. La Mansion Hotels & Resorts, Ltd., 762 S.W.2d 646 (Tex.App.1988); Bekins Bar V Ranch v. Huth, 664 P.2d 455 (Utah 1983); National Life Insurance Co. v. Cady, 227 Ga. 475, 181 S.E.2d 382 (1971); Peoples National Bank v. Ostrander, 6 Wn.App. 28, 491 P.2d 1058 (1971).

See, generally, note, Court Actions Contesting The Nonjudicial Foreclosure of Deeds of Trust in Washington, 59 Wash.L.Rev. 323 (1984); Restraining Orders in Non-Judicial Deed of Trust Foreclosures, Property Law Reporter, June 1987 (Vol. 3 Nos. 4 & 5)). Proper grounds to set aside this illegal foreclosure include: (1) there is no default on the obligation, Salot v. Wershow, 157 CA.2d 352, 320 P.2d 926 (1958) and (2) proposed conduct of the sale is defective, Crummer v. Whitehead, 230 CA.2d 264, 40 CR 826 (1964) are analogous to Debtor’s situations since he has timely and legally rescinded the mortgage per TILA.

8. Debtor’s Mortgage & Note Were Timely & Properly Rescinded per TILA
A mortgage and a note are two different documents. The note is the pledge that you will pay back the money you "borrowed" to purchase your house. The mortgage is the instrument used to establish your house as collateral. In the event you do not comply with the provisions of your note, the mortgage is the instrument used to establish the right to foreclose. The note dictates what terms and conditions fees, late charges, etc. can be imposed. The note dictates when a "default" can be declared. The note dictates when a mortgage can be accelerated. The note dictates when foreclosure proceedings can commence. The note dictates if the money must be applied to P&I first, or fees first.

The statute and regulation specify that the security interest, promissory note or lien arising by operation of law on the property becomes automatically void. (15 U.S.C. § 1635(b); Reg. Z §§ 226.15(d)(1), 226.23(d)(1). As noted by the Official Staff Commentary, the creditor’s interest in the property is “automatically negated regardless of its status and whether or not it was recorded or perfected.” (Official Staff Commentary §§ 226.15(d)(1)-1, 226.23(d)(1)-1.).

ARGUMENT
The first quotation mentioned above by Dworkin is “drawn from the New York Decision of Riggs v. Palmer in 1899. The will in question was validly executed and was in the murderer’s favour. But whether a murderer could inherit was uncertain: the rules of testamentary succession provided no applicable exception. The murderer should therefore have a right to his inheritance. The New York Court held, however, that the application of the rules was subject to the principle that ‘no person should profit from his own wrong’. Hence, a murderer could not inherit from his victim.”

According to Dworkin, in the second quotation, “the referee is called upon to determine whether smiling is in breach of the rules of chess. The rules are silent. He must therefore consider the nature of chess as a game of intellectual skill; does this include the use of psychological intimidation? He must, in other words, find the answer that best ‘fits’ and explains the practice of chess.”

Debtor is a victim of Predatory Lending (See Motion on ‘Relevant Evidences’) and Mortgage Fraud initiated by New Century Mortgage Company. Debtor’s mortgage was assigned to Chase Home Finance or Deuthsche National Trust Company. As illustrated above in Debtor’s contextual analogy, he has been injured as a result of Chase Home Finance and Deutsche National Trust’s silence and other creditors wrongdoings. However, ‘relevant new evidences’ have surfaced in the Washington Post (See Motion on Relevant Evidences) that confirm the fact that Debtor is a victim of predatory lending and mortgage fraud.

Also, according to an article entitled Mortgage fraud seen as prolonging U.S. housing slump, by Bob Ivry of Bloomberg News published on April 26, 2007 states that, "Misstatements about employment and income are being made every day," said Robert Russell, counsel to the director of the Office of Thrift Supervision, which oversees savings and loans. "The brokers are just putting down on paper what the underwriters would require.” The above mentioned article substantiate what Debtor’s has been arguing in his pleadings and motions.

1. Irrefutable Facts
Chase Home Finance and Deuthsche National Trust Company and other creditors failed to respond to Debtor’s timely TILA notice of rescission and the Mortgage Fraud issue as a defense to foreclosure. As Massachusetts is a non-judicial foreclosure jurisdiction, Debtor will lose his rights of due process, if an entry to set aside the illegal foreclosure sale by this Court is not granted. The whole purpose of the law is that New Century Mortgage, Chase Home Finance or Deuthsche National Trust Company are responsible for the harm that arise out of their act. It should not fall on the Debtor, the innocent victim of that act who have acted timely to protect his property interests.

2. Affirmative Defenses based on TILA
The first circuit court of appeals has unequivocally stated that any violation of TILA, regardless of the technical nature of the violation, must result in a finding of liability against the lender. Bizier v. Globe Financial Services, Inc., 654 F.2d 1, 3 (lst Cir. 1981). TILA is a remedial statute which is designed to balance the scales "thought to be weighed in favor of lenders," and is therefore to be liberally construed in favor of borrowers. Id. A creditor who fails to comply with TILA in any respect is liable to the consumer under the statute, regardless of the nature of the violation or the creditor's intent. Thomka v. A.Z. Chevrolet Inc., 619 F.2d 246, 249-50 (3d Cir. 1980). Even if the borrower can demonstrate no actual damages, TILA's penalties are applied regardless of whether the borrower was misled or injured. See, Griggs v. Provident Consumer Discount Co., 680 F.2d 927, 932-33 (3d Cir.), vacated on other grnds, 459 U.S. 56, 103 S.Ct. 400, 74 L.Ed.2d 225 (1982).

This strict compliance rule is what makes TILA so effective. "This strict interpretation of the TILA has largely been responsible for the TILA's success in achieving widespread compliance with its requirements." In re Brown, 106 B.R. 852, 857 (Bankr. E.D. Pa. 1989).

3. TILA and the Courts
This rule is inviolate and is followed by courts in all jurisdictions. See, e.g., Smith v. Fidelity Consumer Discount Co., 989 F.2d 896, 898 (3rd Cir. 1990)(The federal Truth in Lending Act (TILA) achieves its remedial goals by a system of strict liability in favor of consumers when mandated disclosures have not been made); Lewis v. Dodge, 620 F.Supp. 135, 138 (D. Conn. 1985); In re Porter, 961 F.2d 1066 (3rd Cir. 1992); Rowland (John M., Carol S.) v. Magna Millikin Bank of Decatur, N.A., 812 F.Supp. 875 (C.D. Ill. 1992) ("even technical violations will form the basis for liability"); New Maine Nat. Bank v. Gendron, 780 F.Supp. 52 (D. Me. 1992); Dixon v. S & S Loan Service of Waycross, Inc., 754 F.Supp. 1567 (S.D. Ga. 1990); Woolfolk v. Van Ru Credit Corp., 783 F.Supp. 724 (D. Conn. 1990) (same with Unfair Debt Collection Practices Act); Morris v. Lomas and Nettleton Co., 708 F.Supp. 1198 (D. Kan. 1989); Jenkins v. Landmark Mortg. Corp. of Virginia, 696 F.Supp. 1089 (W.D. Va. 1988); Laubach v. Fidelity Consumer Discount Co., 686 F.Supp. 504 (E.D. Pa. 1988); Searles v. Clarion Mortg. Co., 1987 WL 61932 (E.D. Pa. 1987); "Liability will flow from even minute deviations from requirements of the statute and Regulation Z." Dixon v. S & S Loan Service of Waycross, Inc., 754 F.Supp. 1567, 1570 (S.D. Ga. 1990); Shroder v. Suburban Coastal Corp., supra. at 1380; Charles v. Krauss Co., Ltd., 572 F.2d 544 (5th Cir. 1978).Shroder v. Suburban Coastal Corp., 729 F.2d 1371, 1380 (11th Cir. 1984) ; Goldberg v. Delaware Olds, Inc., 670 F.Supp. 125 (D. Del. 1987); Curry v. Fidelity Consumer Discount Co., 656 F.Supp. 1129 (E.D. Pa. 1987); Laubach v. Fidelity Consumer Discount Co., 1986 WL 4464 (E.D. Pa. 1986); In re Wright, 133 B.R. 704 (E.D. Pa. 1991); Moore v. Mid-Penn Consumer Discount Co., 1991 WL 146241 (E.D. Pa. 1991); In re Marshall, 121 B.R. 814 (Bankr.C.D. Ill. 1990); In re Steinbrecher, 110 B.R. 155 (Bankr.E.D. Pa. 1990); Nichols v. Mid-Penn Consumer Discount Co., 1989 WL 46682 (E.D. Pa. 1989); In re McElvany, 98 B.R. 237 (Bankr.W.D. Pa. 1989); In re Johnson-Allen, 67 B.R. 968 (Bankr.E.D. Pa. 1986); In re Cervantes, 67 B.R. 816 (Bankr.E.D. Pa. 1986); In re McCausland, 63 B.R. 665, 55 U.S.L.W. 2214, 1 UCC Rep.Serv.2d 1372 (Bankr.E.D. Pa. 1986); In re Perry, 59 B.R. 947 (Bankr.E.D. Pa. 1986); In re Schultz, 58 B.R. 945 (Bankr,E.D. Pa. 1986); Solis v. Fidelity Consumer Discount Co., 58 B.R. 983 (E.D. Pa. 1986).

4. HOEPA Disclosures Affirmative Defense
HOEPA disclosure notice must be delivered to Debtor at least three business days prior to the closing of the loan. 15 U.S.C. § 1639(b); 12 C.F.R. 226.31(c). The notice must inform the Debtor that he need not enter into the loan, and that if he does enter the loan, he could lose his home and any money he has put in it. 15 U.S.C. § 1639(a); 12 C.F.R. 226.32(c)(1). The notice must also include an accurate statement of APR, monthly payment and balloon payment amount, and maximum payment amount on a variable-rate loan. 15 U.S.C. § 1639(a)(2); 12 C.F.R. 226.32(c)(2)-(4); Official Staff Commentary 12 C.F.R. 226.32(c)(3)-2.

Failure to deliver the required HOEPA notice or inclusion of a prohibited term triggers an extended (three-year) right of rescission (described above). 15 U.S.C. § 1639(j); 12 C.F.R. 226.23(a)(3) n.48.; Bryant v. Mortgage Capital Resource Corp., 2002 U.S. Dist. LEXIS1566 (N.D. Ga. Jan. 14 ,2002); In re Barber, 266 B.R. 309 (Bankr. E.D. Pa. 2001); In re Jackson, 245 B.R. 23 (Bankr. E.D. Pa. 2000); In re Murray, 239 B.R. 728, 733 (Bankr. E.D. Pa. 1999). In addition to regular TILA monetary damage remedies (see above), HOEPA violations give rise to “enhanced” monetary damages under 15 U.S.C. § 1640(a)(4), namely, all payments made by the borrower. In re Williams, 291 B.R. 636, 663-64 (Bankr. E.D. Pa. 2003).

As with any TILA violation (see above), the rescission remedy runs against any assignee of the loan. 15 U.S.C. § 1641(c). In addition, where the loan documents demonstrate that the loan is covered by HOEPA coverage, assignees “shall be subject to all claims and defenses with respect to that mortgage that the consumer could assert against the creditor.” 15 U.S.C. § 1641(d)(1). This provision mirrors the FTC Holder Rule and creates assignee liability for all state and federal claims and defenses.

5. Breach of Fiduciary Duties (Trustee in the following is referring to Deutsche National Trust)
The breach proximately caused the injury to the Debtor since he was misled as to the true terms of the loan since the secure loan was a higher-than-par rate and the broker pocket a yield-spread premium (a commission on the higher rate) from the lender since it was acting as finder for New Century Mortgage. (Martin v. Heinold Commodities, Inc., 163 Ill. 2d 33, 53, 205 Ill. Dec. 443, 643 N.E.2d 734 (1994)). At the time of the closing, Debtor did know the true meaning of “yield-spread premium” on the loan documents and is a violation of RESPA.

A. “Hostility or Indifference to Rights of Debtor - In Dingus, supra, at 289, it is stated: In an action to set aside a foreclosure sale under a deed of trust, evidence showing that the trustee was hostile and wholly indifferent to any right of the mortgagor warrants setting aside the sale. Lunsford v. Davis, 254 S.W. 878 (Mo. 1923).”

B. Failure to meet these requisites may render the trustee's sale void. In Cox v. Helenius, 103 Wn.2d 383, 693 P.2d 683 (1985), the court concluded that a trustee's sale was void under circumstances where the borrower had filed an action contesting the obligation and that action was pending at the time of the trustee's sale. The action was filed after service of the notice of default but before service of the notice of foreclosure and trustee's sale.

C. Chase Home Finance transfer the note after Debtor has exercised his legal right to rescind the mortgage and the note. Thus, Deutsche National Trust Company as the trustee was not properly appointed and do not have the authority to act and foreclose on Debtor‘s property. When an eager, Deutsche National Trust Company, "jumps the gun", the actions are equally void.

6. Fraud On The Court By An Officer Of The Court and The Illegal Foreclosure based on Previously Statement provided in Federal Courts
Debtor believes in the Justice System whereby all parties whether Attorneys or individual such as myself, self-represented, will not, in any way, grossly file and provide false statements in order to achieve one’s end. The unthinkable had happened in Federal Court; Counsel for Chase Home Finance has provided, in bad faith, not only misstatements of facts but also less than candid, inaccurate and absolutely false information to mislead this court.

Based on personal ethic and principle, Debtor stands by the motto that the ‘truth will set him free’ or the truth shall prevail. For that matter, Debtor repudiated the fact that Counsel for Chase had to result to smear tactics in his March 16, 2007 Motion responding to an order of a Federal Judge as evidences that fraud upon the court and the silencing of Debtor‘s rights have been committed. Also, Chase Home Finance and Deutsche National Trust Company knowingly accepted the “fruits of the fraud” by New Century Mortgage (Moore v. Pinkert, 28 Ill. App. 2d 320, 333, 171 N.E. 73 (1960); Pulphus v. Sullivan, No. 02 C 5794, 2003 U.S. Dist. LEXIS 7080, at **61-62 (N.D. Ill. April 25, 2003)).

A. 1st FALSE and INACCURATE Statements made by Counsel of Chase in Paragraph labeled #1 of page 1
Based on the transcript on page 9, line 22-25 of the bankruptcy hearing on December 7, 2005, Attorney Robert L. Marder, of DanversBank provided documents to state their second mortgage is now the first lien holder as follows:

Excerpt on page 12, line 21-25 of the Judge’s Rosenthal statement at that hearing:

Excerpt on page 13, line 23-25 of the Judge’s Rosenthal statement at that hearing:

A full copy of the transcript of that hearing is included as Exhibits. Based on the provided excerpt of that hearing, the matter of priority has not been resolved legally. On that same day, Chase customer service department told me that if the court states that they are not in first position then Chase is not the first lien holder. However, on September 21, 2006, Debtor invoked his right of rescission per the Truth-in-Lending Act which voided the security interest of those two mortgages in his property. Thus, Counsel of Chase submitted [F]alse and Inaccurate statements to the court in bad faith and willfully despite knowing the facts.

B. 2nd FALSE and INACCURATE Statements made by Counsel of Chase in Paragraph labeled #7 of page 2
On July 3, 2006, Debtor filed a motion at the Bankruptcy Court to amend schedule B & C which was allowed with “No Objection” by the bankruptcy court (See Docket # 94). Debtor cited his civil suit, case#: 06-10368, as an asset in Schedule B and exempted it in Schedule C. According to Collier on Bankruptcy, the debtor has a right to amend the petition, lists, schedules or statement as a matter of course until the case is closed. Thus, for example, before the closing of the case, the debtor may amend the exemption schedule to include property that had been omitted (Lucius v. McLemore, 741 F.2d 125, 11 C.B.C.2d 296 (6th cir. 1984). No court approval is necessary for
an amendment filed before the case is closed (In re Michael, 163 F.3d 526 (9th Cir. 1998)).

The permissive approach to amendments has been construed to give courts no discretion to reject amendments unless the debtor has acted in bad faith or concealed property or the amendment would prejudice creditors (In re Yonikus, 996 F. 2nd 866 (7th Cir. 1993) (clear and convincing evidence of prejudice or bad faith required to deny right to amend); In re Williamson, 804 F.2d 1355, 15 C.B.C. 2d 1225 (5th Cir. 1986); In re Doan, 672 F.2d 831, 6 C.B.C.2d 306 (11th cir. 1982)). Thus, for example, the Court of Appeals for the Eight Circuit in Kaelin v Bassett (In re Kaelin), (308 F.3d, 885 (8th Cir. 2002)), allowed a debtor to amend his schedule of exemptions to claim as exempt a cause of action soon after he learned that the cause of action existed. Because the debtor acted promptly to exempt the cause of action and because the debtor had not concealed the property, the court found that no bad faith existed.

In retrospect, Debtor states that there was absolutely no objection by the Trustee or Creditors/Lenders to the motion to amend schedules and the motion was allowed by the bankruptcy court uncontested. Also, neither the Trustee nor the creditors ever filed an appeal within the 10 days or time limit. Hence, the order entered by Judge Rosenthal (See docket # 94) on July 19, 2006 was deemed final and unappealable. Thus, Counsel of Chase submitted [F]alse and Inaccurate statements to the court in bad faith and willfully despite knowing the facts.

C. 3rd FALSE and INACCURATE Statements made by Counsel of Chase in Paragraph labeled #8 on page 2
Counsel of Chase is misleading the court by stating that Debtor amendment as a matter of right according to Rule 1009 of the Bankruptcy code as long and tortured which contrary to the facts. Here are the reasons why Plaintiff had to amend his schedules according to the text docket entry of the bankruptcy court:

1. October 11, 2005 – Motion to Amend Schedules A through J, Summary of Schedules and Statements
10/11/2005 8
Motion filed by Debtor Pierre R. Augustin to Amend Schedules A-J, Summary of Schedules and Statements RE: 1 Voluntary Petition (Chapter 7)) Receipt Number 527970, Fee Amount $26. (ach, usbc) (Entered: 10/13/2005)

2. November 10, 2005 – Motion to Correct Schedules A through J, Statement of Financial Affairs and Matrix
11/10/2005 15
Motion filed by Debtor Pierre R. Augustin to Correct Schedules A-J, Statment of Financial Affairs and Matrix 1 Voluntary Petition (Chapter 7). (ach, usbc) (Entered: 11/10/2005)
11/10/2005 16
Court's Order of Deficiency RE: 15 Motion filed by Debtor Pierre R. Augustin to Correct Schedules. Deficiency Due 11/21/2005. (ach, usbc) (Entered: 11/10/2005)

3. February 17, 2006 – Motion to Amend Schedule F to add Unsecured Creditor
02/17/2006 42
Motion filed by Debtor Pierre R. Augustin to Amend Schedules F RE: 1 Voluntary Petition (Chapter 7). c/s. Receipt Number 00529133. Fee Amount $26. (ach, usbc) (Entered: 02/21/2006)

4. April 10, 2006 – Motion to Amend Schedule F to add Unsecured Creditor
04/10/2006 86
Motion filed by Debtor Pierre R. Augustin to Amend Schedules F RE: 1 Voluntary Petition (Chapter 7). Receipt Number 529413, Fee Amount $26. (ach, usbc) (Entered: 04/10/2006)

5. July 3, 2006 – Motion to Amend Schedule F to add Unsecured Creditor
07/03/2006 90
Motion filed by Debtor Pierre R. Augustin to Amend Schedules F RE: 1 Voluntary Petition (Chapter 7). Fee Not Paid in Amount $26 with certificate of service. (ach, usbc) (Entered: 07/06/2006)

6. July 3, 2006 – Motion to Amend Schedule B & C for Civil Suit; 06-10368
07/03/2006 91
Motion filed by Debtor Pierre R. Augustin to Amend Schedules B and C RE: 1 Voluntary Petition (Chapter 7) with certificate of service. (ach, usbc) (Entered: 07/06/2006)

7. September 21, 2006 – Motion to Amend Schedules B and C to moved Secured Creditors as Unsecured because Plaintiff’s TILA Right of Rescission has voided the security interest in his home
09/21/2006 100
Motion filed by Debtor Pierre R. Augustin to Amend 1 Schedules B and C with certificate of service. (ach, usbc) (Entered: 09/26/2006)

In determining whether Debtor’s amendment would prejudice Chase or other creditors, the appropriate inquiry is not whether a creditor will recover less or be adversely affected by the amendment (Kaelin v. Bassett (In re Kaelin), 308 F.3d 885 (8th Cir. 2002); see also In re Arnold, 252 B.R. 778 (B.A.P. 9th Cir. 2000) (neither delay, by itself, nor disappointment of creditors’ expectations is prejudice)). Thus, Debtor was merely adjudicating for his right by correcting errors in his schedules, adding creditors and classifying secured creditors as unsecured note holder since TILA states that upon rescission, the security interest is void, rendering the debt, if any, unsecured (See in re Perkins, 106 B.R. 863, 874 (Bankr. E.D.Pa. 1989); In re Brown, 134 B.R. 134 (Bankr. E.D.Pa. 1991); In re Moore, 117 B.R. 135 (Bankr.E.D. Pa. 1990)). Thus, Counsel of Chase submitted [F]alse and Inaccurate statements to the court in bad faith and willfully despite knowing the facts.

D. 4th FALSE and INACCURATE Statements made by Counsel of Chase in Paragraph labeled #8 on page 2
Counsel for Chase [F]alsely and [I]naccurately stated that as follows:

Unfortunately, whether or not the attorneys for Chase like it, the facts are the facts and Debtor has included a copy of Schedule C below that clearly states that his property is claimed as exempt and his original filing (See Exhibit 2).
According to case law, debtor has claimed his property as exempt was not objected by neither the Trustee nor the creditors. Thus, the property or claim will be deemed exempt, even if there is no basis for the exemption. (Taylor v. Freeland & Kronz, 503 U.S. 638, 643-45 (1992)). Thus, Counsel of Chase is acting maliciously by providing the court with absolutely false information.

CONCLUSION
Debtor cannot undo the damages that preceded. But, however harsh it may seems, the law provides Debtor with the right of rescission if he catches any technical violation within 3 years of the signing of the loan documents. Thus, Debtor’s TILA rescission notice was timely sent to Chase Home Finance, Deuthsche National Trust Company Lawyers’ and other creditors on September 21, 2006. Therefore, Debtor’s right of rescission has precedence, negated any foreclosure actions and voided the security interest in his property.

For that matter, Chase Home Finance and Deutsche National Trust [cannot be allowed]:
1. To profit from the Predatory Lending practices that it inherited from New Century Mortgage.
2. To remain ‘silent’ on the issues of mortgage fraud and TILA rescission.
3. To continuously defying, trampling and usurping Debtor’s rights and the rule of law
4. To commit ‘Fraud’ upon the court by approving the ‘illegal foreclosure’.

Further, given Chase Home Finance and Deutsche’s recalcitrance in refusing to honor this clearly valid assertion of federally mandated rights, it is appropriate in this instance to give effect to the clear language of §1635(b), and declare that the tender obligation has been vitiated by the lender's violation of TILA, requiring the intervention of this court in a matter which is clearly not subject to either factual or legal dispute.

Where a debtor rescinds within the context of a bankruptcy, courts have held that the rescission effectively voids the security interest, rendering the debt, if any, unsecured. See, e.g., In re Perkins, 106 B.R. 863, 874 (Bankr. E.D.Pa. 1989). See also, In re Brown, 134 B.R. 134 (Bankr. E.D.Pa. 1991); In re Moore, 117 B.R. 135 (Bankr.E.D. Pa. 1990); In re Brown, 106 B.R. 852, 862 (Bankr.E.D. Pa. 1989). The creditor would then be entitled to payment upon the same terms as other unsecured creditors.

"[O]nce the court finds a violation, no matter how technical, it has no discretion with respect to liability." In re Wright, supra. at 708; In re Porter v. Mid-Penn Consumer Discount Co., 961 F.2d 1066, 1078 (3d. Cir. 1992); Smith v. Fidelity Consumer Discount Co., supra. at 898. "Any misgivings creditors may have about the technical nature of the requirements should be addressed to Congress or the Federal Reserve Board, not the courts.

Requested Relief
WHEREFORE, the Debtor respectfully requests a Jury Trial and that this honorable Court will Grant the Objection to the Sale, Grant the Motion to Set Aside the Sale and:

a. to declare that the Debtor has validly rescinded the transaction, that the illegal foreclosure sale is therefore void and unenforceable per TILA enacted by Congress;

b. to declare that the Creditors' failure to honor the Debtor 's valid rescission notice in accordance with the dictates of 15 USC §1635 and M.G.L. c. 140D §10 vests in the Debtor the right to retain the net loan proceeds and that the Creditors has no allowable unsecured claim in this bankruptcy case;

c. to ‘set aside the sale of the Illegal Foreclosure of May 23, 2007 and award damages for wrongful foreclosures

d. to consolidate Debtor‘s ‘affirmative defense adversary proceedings’ and the motion filed under rule 6004(b) since they are both governed by Rule 9014 and are considered contested matter or core
proceedings.

e. to vacate the illegal foreclosure under rules allowing vacating judgments, F.R.Civ.P 60(b).

Respectufully Submitted,

Pierre R. Augustin, 28 Cedar Street, Lowell, MA 01852, Tel; 617-202-8069

UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF MASSACHUSETTS

Pierre Richard Augustin, PRO SE )
Debtor ) C.A. No. 05-46957 (JBR)
)
)
)
v. )
)
DANVERSBANK, ET AL., )
Defendants. )

Amended Motion on Relevant Evidences in Support of Motion
Filed (Docket# 169) to Object to and Amended Motion to Set Aside the Sale of May 23, 2007 since the original mortgage holder, New Century Mortgage had assigned the mortgage to Chase Home Finance

Attorney General Dann moves to shut down New Century Financial in Ohio
Court grants TRO to stop sub-prime lender from making loans, foreclosing on homes, evicting homeowners
March 14, 2007

CLEVELAND – Late this afternoon, Cuyahoga County Common Pleas Judge Eileen A. Gallagher granted a Temporary Restraining Order in response to a complaint filed by Attorney General Marc Dann to bar New Century Financial Corporation, the troubled sub-prime lender teetering on the brink of financial collapse, from operating in Ohio.

“We are doing everything in our power to protect homeowners whose mortgages are held by New Century as well as consumers who have pending applications,” Attorney General Dann said. “And we are also demanding that this company be held accountable for all its misdeeds.”

Mr. Dann said that New Century “provides a glaring and disturbing look at the problems associated with predatory lending. If nothing else, this debacle underscores the need for us to drive New Century and unscrupulous operators out of our state once and for all.”

In the suit, Attorney General Dann and John Reardon, Superintendent of Financial Institutions, allege the company, whose well-publicized financial problems have caused upheaval in the world’s financial markets, has committed numerous violations of the Consumer Sales Practices Act, as well as the Ohio Mortgage Loan Act and Ohio Mortgage Brokers Act. Those violations include making false and misleading statements, accepting money from consumers to process loans even though the company knew it did not have the money to fund them, failing to promptly deliver promised services, and failing to act in good faith.

In light of these acts, the Attorney General asked the Court for a declaratory judgment stating that each act alleged in the complaint is a violation of the Consumer Sales Practices Act and an injunction to stop New Century and it subsidiaries from doing any of the following:
• Soliciting consumers for brokers services or mortgage loans
• Accepting fees from consumers to process loans
• Accepting mortgage loan applications in Ohio
• Arranging appraisals
• Initiating new foreclosure actions
• Pursuing pending foreclosures
• Enforcing foreclosure sale notices
• Evicting consumers from houses in foreclosure

The suit also asks the court to require the company to notify all consumers whose loans are in process that they will not be funded, return all fees paid by consumers whose loans are pending, and release consumers with pending loans from any contract or liability. Attorney General Dann is also asking the court to impose fines against New Century and to order the lender to maintain all business records related to transactions in Ohio for a period of five years.

• Complaint for Declaratory Judgment, Restitution, Injunctive Relief, and Civil Penalties
• Plaintiffs' Motion for Temporary Restraining Order
• Temporary Restraining Order

For more information contact:
Leo Jennings III at 614-374-8355 or 614-387-1108

New Century probe may widen
From Times Staff and Wire Reports
May 26, 2007
Federal bankruptcy regulators urged a bankruptcy judge to expand the scope of a probe of New Century Financial Corp., the Irvine sub-prime mortgage lender that failed this year.

Kelly Beaudin Stapleton, U.S. trustee for the Delaware court where New Century collapsed, on May 21 won the power to appoint an examiner, who has yet to be named, to look into the roots of the company's demise.

But now the U.S. trustee wants the examiner to have the power to examine New Century's accounting for 2005 in addition to records from 2006, which were already on the agenda because the firm admitted accounting irregularities that would require the restatement of reported financial results for that year.

New Century says probably overstated 2005 earnings
Jonathan Stempel, Reuters

Thursday, May 24, 2007
A man walks into the entrance to the corporate headquarters of New Century Financial Corporation in Irvine, California March 15, 2007. New Century Financial Corp., the largest U.S. subprime lender in bankruptcy, said on Thursday it probably inflated 2005 earnings because of accounting errors, a disclosure that might add fuel to federal criminal and regulatory examinations into the company. REUTERS/Fred Prouser

By Jonathan Stempel

CHICAGO (Reuters) - New Century Financial Corp. , the largest U.S. subprime lender in bankruptcy, said on Thursday it probably inflated 2005 earnings because of accounting errors, a disclosure that might add fuel to federal criminal and regulatory examinations into the company.

The errors concerned losses on repurchased loans, and how New Century valued other mortgage-related assets, the company said in a U.S. Securities and Exchange Commission filing.
It said the errors "more likely than not" caused it to "materially" overstate 2005 pretax earnings, and that investors should not rely on its financial statements for that year.

The problems surfaced 3-1/2 months after New Century said it planned to restate results for the first nine months of 2006, citing increases in loan losses. They also come nearly three months after New Century said the SEC asked for talks on events preceding the announcement of the restatement, and that federal prosecutors in California were examining trading in its securities and accounting errors.
"What motivates prosecutors is the possibility of ongoing fraud over a long period of time," said Robert Mintz, a partner at McCarter & English LLP in Newark, New Jersey, and a former federal prosecutor in that state. "If indeed (the 2005 errors are) new, it will likely ratchet up the investigation. It's an indication that potential wrongdoing was more widespread and more prolonged than originally thought."

Paul Kranhold, an outside spokesman for New Century, declined to elaborate on Thursday's filing or the Irvine, California-based company's dealings with the government. He said "we continue to work cooperatively with the SEC and the Justice Department."

SEC spokesman John Heine and Thom Mrozek, a spokesman for the U.S. Attorney in the Central District of California, declined to comment. New Century said it does not expect to restate any results because it is liquidating.

EXPANDED REVIEW
New Century had been one of the largest U.S. providers of home loans to people with poor credit histories before filing for Chapter 11 bankruptcy protection on April 2. It shut down its lending unit and has sold most other major assets.

Dozens of subprime lenders have sold or quit their businesses or gone bankrupt in the last year as defaults soared. Many defaults were "early payment defaults" by borrowers who fell behind shortly after getting their loans.

"The previously announced restatement suggested to me that New Century had been pushing the accounting envelope as far as it could, certainly as it related to early payment defaults," said Matt Howlett, who at the time covered the company for Fox-Pitt Kelton Inc. in New York. "It seems like the scope of the review of accounting practices is expanding."

New Century has said at least 27 lawsuits have been filed against the company, its officers and its directors.

Shares of New Century were down 3 cents at 45 cents in afternoon trading on the Pink Sheets.
(Additional reporting by Gina Keating, John Poirier and Rachelle Younglai)

© Reuters 2007

Wells Fargo Protests New Century Deal, Associated Press 05.18.07, 4:33 PM ET

Citing concerns that Carrington Capital Management doesn't have what it takes to handle the business, Wells Fargo Bank has moved to block the hedge fund's $188 million purchase of the New Century Financial Corp. mortgage loan-servicing unit. New Century goes before a bankruptcy judge Monday to seek approval of the sale of its last remaining operating business to Carrington, a hedge fund it helped start. Wells Fargo (nyse: WFC - news - people ) says it's looking out for investors in five pools of New Century mortgage loans that Carrington, of Greenwich, Conn., will be servicing if the deal goes through. Wells Fargo is trustee on five securitization deals, or packages of mortgage loans, that are being serviced by New Century and will be serviced by the winning buyer.

There's no assurance the hedge fund has the financial capacity or the licensing to ensure that the subprime mortgage loans that came out of New Century's failed lending operation stay healthy, Wells Fargo said in court papers filed Thursday. The lack of licensing as a loan servicer and a lack of information about how much capital Carrington will commit to the business it's buying could cause rating agencies to cut ratings on deals affected by the transfer of loan-servicing rights, said Wells Fargo. "New Century and the creditors committee strongly oppose the Wells Fargo position and will be responding," said Dan Gagnier, outside spokesman for New Century, an Irvine, Calif., subprime housing lender that filed for Chapter 11 protection April 2. A representative of Carrington Capital, reached Friday, declined to comment on the objection from Wells Fargo. If the court on Monday allows New Century to hand over its servicing business to Carrington, Wells Fargo says, it means an "immediate breach" of the servicing arrangements New Century is trying to sell "and the violation of numerous state laws."

Carrington has already purchased the actual mortgages packaged in the Wells Fargo-supervised securitization deals and is now seeking to buy the rights to service the loans. Sophisticated institutions that invest in securitization deals make sure their interests are safeguarded by contracts that spell out how the mortgage loans must be handled. According to Wells Fargo, Carrington has not demonstrated it can meet its obligations under those contracts. For one thing, Carrington is not qualified as a loan servicer by the Federal National Mortgage Association (nyse: FNMPRG - news - people ) or the Federal Home Loan Mortgage Corp.

Additionally, Wells Fargo says it has been asking since April for assurances that the hedge fund plans to make sure the loan-servicing unit it's buying has the capital it will need to keep going. It's up to the loan servicer to make sure that a securitization deal stays healthy. That can mean advancing funds and forcing sellers to buy back loans gone wrong. One of the factors New Century cited in explaining its decision to file for Chapter 11 protection was a liquidity crisis that forced it to dip into its own funds to fuel the loan servicing operation.

Wells Fargo is not the only securitization trustee worried about New Century's loan servicing sale. Before the auction was held and Carrington declared the winner, Deutsche Bank (nyse: DB - news - people ) National Trust Co. expressed general reservations about the sale. Deutsche Bank is trustee for 23 mortgage-backed securities trusts containing $13 billion worth of home loans originated and serviced by New Century. Deutsche Bank said in court papers that it has hired an accounting firm to examine New Century's loan servicing operation. Results of that probe indicate there were more problems in the loan-servicing business than New Century has admitted so far. expected to bring from $4.5 million to $6.5 million.

Pressure at Mortgage Firm Led To Mass Approval of Bad Loans
By David Cho
Washington Post Staff Writer
Monday, May 7, 2007; A01

Maggie Hardiman cringed as she heard the salesmen knocking the sides of desks with a baseball bat as they walked through her office. Bang! Bang!

" 'You cut my [expletive] deal!' " she recalls one man yelling at her. " 'You can't do that.' " Bang! The bat whacked the top of her desk. As an appraiser for a company called New Century Financial, Hardiman was supposed to weed out bad mortgage applications. Most of the mortgage applications Hardiman reviewed had problems, she said. But "you didn't want to turn away a loan because all hell would break loose," she recounted in interviews. When she did, her bosses often overruled her and found another appraiser to sign off on it.

Hardiman's account is one of several from former employees of New Century that shed fresh light on an unfolding disaster in the mortgage industry, one that could cost as many as 2 million American families their homes and threatens to spill over into the broader economy.

New Century has become the premier example of a group of companies that grew rapidly during the housing boom, selling working-class Americans with questionable credit huge numbers of "subprime" loans with "teaser" rates that typically rose after the first two years. This business transformed the once-tiny New Century into a lending powerhouse that was held up as a model of the mortgage industry's success.

But now, with home values falling and adjustable loan rates rising, record numbers of homeowners are failing to make their payments. And a detailed inquiry into the situation at New Century and other subprime lenders suggests that in the feeding frenzy for housing loans, basic quality controls were ignored in the mortgage business, while the big Wall Street investment banks that backed these firms looked the other way.

New Century, which filed for bankruptcy protection last month, has admitted that it underreported the number of bad loans it made in its financial reports for the first three quarters of 2006. Hardiman and other former employees of New Century interviewed said there was intense pressure from bosses to approve loans, even those with obviously inflated housing appraisals or exaggerated homeowner incomes.

"The stress in that place was ungodly. It was like selling your soul," said Hardiman, who worked for New Century in 2004 and 2005. "There was instant notification to everyone as soon as you rejected a loan. And you dreaded doing it because you paid for it. Two guys would come with a bat, and they were all [ticked] off because you cut their deals."

New Century officials would not publicly respond to the ex-employees' allegations. A senior executive, who spoke on condition of anonymity because of state and federal investigations into the company, acknowledged that the atmosphere in some branches might have been intense at times. But he said the firm had safeguards to make sure workers did not feel pressure to approve questionable loans. Hearing what Hardiman went through, he said, was "upsetting" and "not representative of our offices."

"In an organization with this size . . . I'm not naive to think that [such behavior] didn't happen," the executive said. "But I find it highly implausible over the last 10 years that something systemic was going on and somehow it was disguised. . . . There were pressures, especially in a declining market, and those pressures became more robust. But we turned up our controls and our vigilance at the very same time."

As Industry Grew, Standards Loosened
Once a little-used lending tool, subprime loans made up 20 percent, or about $600 billion, of all mortgages issued in the country last year. These loans carry a high risk of default because they generally are made to home buyers with questionable credit. But because they require borrowers to pay high interest rates, they have been a gold mine for lenders in recent years, accounting for 30 percent of all profits made in the mortgage business, according to Mercer Oliver Wyman, a consulting firm.

Lenders also made a fortune selling subprime loans to Wall Street. Investment banks charged huge fees for packaging them into massive bonds called mortgage-backed securities. Investors received high returns for buying and selling these bonds. But there is growing evidence that along this chain, the filters that were supposed to catch bad loans did not work.

Salespeople were supposed to be the "first line of defense" against fraud and bad loans, said Steve Krystofiak, president of the Mortgage Broker Association for Responsible Lending, a group that is trying to retool practices in the industry. But salespeople worked on commission -- meaning the more loans they sold, the more bonus money they received. "That's a bad business model. It's absolutely contradictory," Krystofiak said, adding that he has witnessed salespeople tweak numbers in mortgage applications to ensure that the loans would be approved.

Automated underwriting software that searches for irregularities and possible fraud was also supposed to stop bad loans. But industry professionals say such programs were easily manipulated. Meanwhile, some appraisers and underwriters, who examine housing values and other claims made on loan applications, say they felt pressure from bosses to let questionable loans through.

New Century and other lenders sold their mortgages through auctions to investment banks. Once a bid was accepted, the investment banks performed their own detailed review and could return any loans deemed questionable without paying for them.

Several investment banks, including Merrill Lynch, Morgan Stanley and Goldman Sachs said they rigorously examined the subprime mortgages they had bid on. Morgan Stanley, for instance, said it reviewed every loan appraisal and the credit histories of about 25 percent of borrowers.

Traders familiar with the bidding process said competition for mortgages from New Century began to heat up in 2005. Mortgage-backed securities based on New Century loans had been performing better for investors than those from other subprime lenders, in some cases producing two or three times the return of a U.S. Treasury bond. Many banks felt they had to loosen their standards and agree to return fewer bad loans in order to win the auctions, the traders said.

The head of a large Wall Street bank's mortgage group contended that his firm regularly lost out on New Century's business because its due diligence process was stringent and it had been returning a high number of loans. New Century wanted the bank to ease its standards, and the issue became a source of friction between the companies.

"The entire industry, over time, became more lax," he said, speaking on condition of anonymity because he was not authorized to talk about his company's inner workings. "The more [loans] you accepted, the better relationship and the better price you would have. The name of the game was definitely volume." A New Century spokeswoman said negotiating with banks to reduce both their due diligence and the number of loans they returned was a "generally accepted practice" that was "always a matter of discussion."

There was little downside for banks to push paper through the pipeline, said Kevin Beyers, a forensic accountant at Parkside Associates in Atlanta who specializes in the mortgage industry. Besides returning loans, these firms could require a lender to buy back loans that had cleared the banks' reviews but later turned out to be bad. Loose underwriting was not a secret," Beyers said. "[Investment] banks had to have known what was going on. They just have too much information and sophistication at their fingertips. And they knew the lenders pretty well."

Firm Unravels With Market's Slump
To address the problem of bad loans, New Century said since 2000 it has been reducing the compensation of branch managers if they approved loans that were later determined to bad. Underwriters have always been paid on the quality of their work rather than the volume of loans approved. New Century said it always had monitored the performance of employees and last year implemented a statistical program that tracked whether they were approving a high number of bad loans.

A spokeswoman said these moves helped the firm reject or reduce the appraisal value of 20 percent of the loan applications it received in the Northeast last year. The firm's comments are difficult to square with accounts from rank-and-file workers. These employees worked at five different branches that handled subprime loans all over the country. All except Hardiman spoke on condition of anonymity, citing recent e-mails from the firm telling them not to comment publicly, although the company said that is standard corporate media policy. Hardiman said she was fired for refusing to approve weak loans. Others said they left because they were pressured to pump loans through the system. A few were interviewed while they were worked at New Century but then lost their jobs after the firm filed for bankruptcy.

Although there were variations in their descriptions of the atmosphere in their offices, most said they were pushed to approve questionable loans. Several of the interviewed employees said they faced "unofficial quotas" of loans that had to be approved each day. The pressure to meet these expectations was so unrelenting that a worker in Foxboro, Mass., collapsed from stress and was taken to the hospital, two employees said. In the firm's Long Island branch, the atmosphere resembled a fraternity, largely because the average age was 23, an appraiser there said.

A veteran appraiser who worked in Pearl River, N.Y., said he joined New Century because he had heard the pay was good. That turned out to be true, but he quickly discovered that the place was a pressure cooker. He said he often was encouraged "to make loans work." His boss generally supported him when he wanted to reject a questionable loan, he said. But other office managers "were all about the numbers just so they got their bonuses." Still, the veteran appraiser didn't blame them. "They were pressured to make loans, that's how you do business," said the man. "They were trying to do more and more business. That's essentially what Wall Street wanted."

For years, the volume strategy worked. Shares in the Irvine, Calif., company rose from $5 in early 2001 to $66 at the end of 2004, cementing its status as a Wall Street favorite. Last year it issued $51.6 billion in loans, more than any other specialized subprime mortgage lender.

When times were good, the company showered lavish gifts on its salespeople, treating them to vacations in Europe and Caribbean cruises hosted by sports celebrities. As recently as March, a few weeks before it filed for bankruptcy, the company had a trip to Ireland scheduled, employees said.

The boom continued for New Century until 2006, when mortgage payment default rates spiked. That happened because homeowners who bought houses last year generally saw their values drop. And, in a declining housing market, many homeowners, especially those who are poor, choose to let their mortgages fall into delinquency rather than try to keep up with the payments, analysts said.

At first, it appeared the cumulative effect of these defaults would have only a moderate effect on New Century's earnings. Then, in February, the company said it would need to revise its financial results for the first three quarters of 2006. A few weeks later, it acknowledged that federal investigators had launched probes into the timing of the stock sales of some of its executives. The company declined to comment on the investigations.

The announcements rattled the markets because the firm was so well regarded. The stock price plummeted 90 percent, and the firm was delisted from the New York Stock Exchange. (Shares now trade under a dollar on an obscure exchange.) New Century filed for bankruptcy April 2 but said current customers would be unaffected and could continue making their mortgage payments.

The appraiser in the Pearl River branch said he considered himself a loyal employee and planned to stick by the company through its struggles. But he was fired the day after the bankruptcy filing, along with 3,200 employees, or half the firm's workforce. Most of those interviewed said they were offered two weeks of pay at rates lower than their salary. A few said they did not receive any severance.

New Century announced Thursday that it is laying off 2,000 more associates. The firm is left with about 750 employees, a company spokeswoman said. Hardiman, the former New Century appraiser, said she was not surprised by the company's downfall. Few at the company seemed to be thinking long-term when she was there. The message she heard constantly from headquarters, which was broadcast at work conferences and in e-mails, was to approve more loans.

"We were constantly told, 'If you look the other way and let an additional three to four loans in a day that would mean millions more in revenue for New Century over the course of the week,' " Hardiman said. She added that it seemed "no one, from the top levels down to the lower levels of the office, didn't want those loans to go through."


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