LAWSUIT CLAIMS DEUTSCHE BANK, LOAN SERVICERS AND LAW FIRMS DEFRAUDED HOMEOWNERS DURING POST-FORECLOSURE PROCEEDINGS
Complaint details widespread, systematic scheme to inflate amounts due to mortgagee and misappropriating surplus funds from foreclosure sales
NEW YORK (April 3 2025) – Attorneys representing families who lost their homes to foreclosure filed an extensive complaint in federal court today claiming that Deutsche Bank National Trust Company along with loan serving companies and multiple law firms all conspired to fraudulently reduce the amount of surplus monies homeowners would otherwise receive following a foreclosure. The complaint, which is seeking class action status, spotlights a complex pattern and practice used to defraud an unknown number of homeowners as well as the IRS, The New York State Department of Taxation and Finance, and junior lienholders.
A full copy of the complaint can be found here.
The complaint alleges that the defendants, including Select Portfolio Servicing Inc. and the law firm of Eckert, Seamans, Cherin and Mellott, LLC, actively filed documents with New York State Courts using fraudulent interest figures calculated before foreclosure proceedings were finalized. The miscalculation of interest were ultimately used to deprive homeowners of significant monies they would otherwise be entitled to receive following the foreclosure on the their property. These artificial amounts were later submitted to federal and state tax collecting agencies, which is a criminal offense.
“Foreclosure is among the most traumatic events in a person’s life and New York State has an established timeline that must be followed before a property can be taken,” said Mark Anderson, a partner with Anderson, Bowman, Wallshein, PLLC, who is representing the plaintiffs in this matter. “As we have learned, countless mortgage-holders were deprived of surplus funds as a result of the collective failures by foreclosing banks, loan servicing agents and their attorneys in a scheme to unlawfully accelerate that process. What is most egregious are the negligent law firms who have a legal duty to submit accurate reports ensuring that any surplus funds are returned to the borrowers.”
The complaint, which seeks to represent all New York homeowners and their creditors, outlines multiple violations of the law including:
- Engaging in an organized scheme to defraud homeowners as defined by the Civil RICO (Racketeer Influenced and Corrupt Organizations Act);
- Deceptive practices in foreclosure proceedings as detailed in the Fair Debt Collection Practices Act (FDCPA);
- Engaging in deceptive business practices and conduct that targets homeowners under New York General Business Law § 349;
- The participation by the bank’s attorneys by knowingly participating in the deceptive and fraudulent scheme which is a criminal act under New York Judiciary Law § 487;
According to the specific instance outlined in the complaint, Deutsche Bank acquired the property from the plaintiff at the foreclosure auction for $785,000. However, when the actual deed transfer occurred, the court appointed referee, having been provided with fraudulent figures, reported that the property had been sold to Deutsche Bank for just $207,071.28. No explanation was provided as to why the purchase price dropped by nearly six hundred thousand dollars.
Under New York State Law, once a borrower defaults on mortgage payments and is sent the requisite 90 Day Pre-Foreclosure Notice, a noteholder may commence a court case against the borrower. This initiates a complex and highly structured litigation process:
- A foreclosure action is formally begun when the noteholder files a summons and complaint which details the principal balance owed on the mortgage loan and the date of the alleged default. The law firm representing the noteholder then typically files a motion for summary judgment or default judgment and simultaneously asks for an order of reference. If granted, the matter is referred to a court appointed referee to calculate the amounts owed on the mortgage, plus any costs and fees.
- The court appointed referee then files a report outlining the amounts due and owing on the outstanding mortgage. After this report is provided to the law firm, the noteholder must make a motion to confirm the Referee’s Report and for a judgement of foreclosure and sale. In this motion, the noteholder, oftentimes through its servicing agent and its attorney, attest to reviewing all relevant documents and their accuracy.
- The presiding judge makes a determination on the noteholder’s motion and, if the motion is granted, signs off on the proposed order submitted by the law firms and enters the judgment of foreclosure and sale. Once the judgment of foreclosure and sale is entered, the noteholder can then proceed to auction the real property encumbered by the mortgage.
- The noteholder and court personnel then arrange for a public auction to be held by the court appointed referee and the encumbered property is either sold to the highest bidder or, in some instances, to the noteholder itself. The winning bidder, thereafter, remits a down payment of ten percent of the purchase price to the referee and schedules a final closing date. At the closing, the winning bidder remits the remainder of the purchase price to the court appointed referee, and the deed to the foreclosed property is conveyed to the winning bidder.
- At the final step, the court appointed referee, using figures provided by the bank, issues a Referee Report of Sale which details the amount the property was sold for, how much is owed to the noteholder, and how much money, if any, is left to be distributed to the homeowner and other creditors. If there are surplus monies, creditors of the borrower are permitted to file proofs of claim and, if approved by the referee, some or all of the surplus monies are distributed to those creditors that file a claim. If any surplus monies remain, they are paid to the borrower, their estate, or their assignee and the process concludes.
“There exists a critical time period in the foreclosure process when simple interest on the outstanding balance can be calculated,” Anderson said. “We believe that a systematic effort has been implemented for years that has enabled attorneys to push documents through the courts at breakneck speed in a manner that has miscalculated the interest amounts. This has been detrimental to the financial well-being of homeowners who have already experience the pain of losing their home and we hope this action brings and end to this widespread, unfair, and illegal activity.”
Case: SHEILA BIDAR AS LEGAL GUARDIAN OF RUTH ATHILL, individually and on behalf of all
others similarly situated v. ECKERT, SEAMANS, CHERIN AND MELLOTT, LLC; DEUTSCHE BANK NATIONAL TRUST COMPANY; SELECT PORTFOLIO SERVICING, INC., and THE JOHN AND JANE DOE INVESTORS, JOHN DOE AND JANE DOE 1-10,
Number: 1:25-cv-01828 in the United States District Court in the Eastern District of New York
About Anderson, Bowman Wallshein PLLC
Anderson, Bowman, Wallshein represents individuals, families, and businesses navigate complex legal processes, remedy disputes, and find relief amid uncertainty. The firm focuses on matters pertaining to commercial litigation, real estate litigation, construction disputes, landlord-tenant matters, quiet title actions, real estate partitions, family law cases, and immigration matters. Learn more at https://www.abwpllc.com/
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CONTACT: Bennett Kleinberg, 917-416-4012, bkleinberg@jupiterstrategies.com