United States District Court, E.D. New York
RICHARD P. DONOGHUE United States Attorney, Cadman Plaza.
East, By: Maria Cruz Melendez Margaret Gandy Attorneys for
BERNSTEIN LEWIS, By: Meredith Stacy Heller Attorneys for
Defendant Shane Browne.
IRIZARRY, Attorney for Defendant Cassandra Cean.
BLANCH LAW By: Bradley L. Henry Paul John Wiegartner, Jr.
Ryan Gorcfori Blanch Attorneys for Defendant Kim Ramlochan.
AKERMANLLP, By: Ashley Sparrow Miller Attorneys for
Interested Party PennyMac Loan Services, LLC.
ORDER ADOPTING REPORT AND RECOMMENDATION
STERLING JOHNSON JR. U.S.D.J.
before the Court is the Report and Recommendation issued by
Magistrate Judge Reyes on December 2, 2016 (the
"Report") (Dkt. 295), recommending that Defendants
Shane Browne, Cassandra Cean and Kim Ramlochan be
ordered' pursuant to the Mandatory Victims Restitution
Act ("MVRA"), to pay restitution totaling $243,
148.51, plus prejudgment interest, to Impact Funding
Corporation as master servicer for Impac Secured Asset Series
2007-2 Trust ("Impac"). Familiarity with the Report
is assumed. Defendants Cean and Ramlochan, and alleged victim
PennyMac Loan Services, LLC, as servicer for PennyMac Loan
Trust 2011-NPL-1 ("PennyMac"), timely filed
objections to the Report (collectively, the "Objecting
Parties"). (Dkts. 297, 298 & 299.)
district court judge may designate a magistrate judge to hear
and determine certain motions pending before the Court and to
submit to the Court proposed findings of fact and a
recommendation as to the disposition of the motion
See 28 U.S.C. § 636(b)(1). Within 10 days of
service of the recommendation, any party may file written
objections to the magistrate's report. See id.
Upon de novo review of those portions of the record
to which objections were made, the district court judge may
affirm or reject the recommendations. See id. The
Court is not required to review, under a de novo or
any other standard, the factual or legal conclusions of the
magistrate judge as to those portions of the report and
recommendation to which no objections are addressed. See
Thomas v. Anu 474 U.S. 140, 150(1985).
Ramlochan and Cean object to the Report because they disagree
with Judge Reyes' finding that Impac is entitled to
restitution. Ramlochan argues that Impac is not a victim
under the MVRA because it severed the causal relationship
between Defendants' fraud and its loss by accepting an
"objectively unreasonable" short sale price on the
property at issue, breaching the representations and
warranties contained in the Pooling and Servicing Agreement
("PSA"), and failing to unwind the loan after
default. These arguments, previously made by Defendants and
considered by Judge Reyes in advance of issuing the Report,
are without merit. It is common for short sales to occur for
less than market price, making the eventual sale price a
foreseeable result of Defendants' fraud, and there is
ample evidence that the sale was appropriately conducted so
as not to create a windfall for Impac. Additionally, there is
no evidence of active fraud perpetrated by Impac, and, even
if Impac breached the PSA representations and warranties,
Defendants' conduct is still the but-for cause of
Impac's loss, in that Defendant's' "created
the circumstances under which the ... loss occurred."
United States v. Erayud, 809 F.3d 462, 469 (9th Cir.
2015) (citation omitted).
argues that Impac is not a victim because its
"deliberate misconduct" in knowingly selling
defaulted mortgages and lack of reliance on representations
made by Cean severed the causal relationship between the
fraud and the loss. Cean's arguments are also without
merit. A successor lender is not required to conduct a new
underwriting of every loan it purchases, especially where a
loan is purchased in close temporal proximity to its
origination. Further, the PSA required that the seller both
comply with underwriting standards in originating the loan
and represent that the loan is in good standing. Finally,
even if Impac breached the PSA's representations and
warranties, the causation requirement of the MVRA is not so
rigid as to require that Defendants' fraud be the
sole cause of Impac's loss. For the same reason,
Santander National Bank ("Santander") is also a
also argues that Impac has not suffered an identifiable loss,
as the government presented no evidence as to how Impac's
losses were allocated by the trust and the individual
investors. However, this argument, also previously made and
considered, is without merit, because Impac paid an
identifiable sum for the loan at issue, making a detailed
analysis of every loan in the trust pool unwarranted. Cean
further objects that Impac neither suffered a loss, nor has
standing to receive restitution. This argument, again
previously made and considered, is also without merit. A loan
servicer has standing to receive restitution. See United
States v. Hymas, 605 Fed.Appx. 622, 624 (9th Cir. 2015).
Mac objects to the Report because it disagrees with Judge
Reyes' findings that it is not a victim under the MVRA,
and that it has not suffered an identifiable loss sufficient
to mandate restitution. However, the but-for causation
necessary to determine that a successor investor is a victim,
present with respect to Impac and Santander, is not present
with respect to PennyMac. Namely, there is no evidence that
PennyMac reviewed or otherwise relied on the original
underwriting, and, unlike Impac, there is no evidence that
PennyMac required the seller to represent that the loan at
issue was sound. This, combined with the four-year period of
time that elapsed between the fraud and the transfer of the
loan at issue to PennyMac, as well as the delay in completing
the foreclosure proceedings that commenced more than four
years ago, is sufficient to sever the causal relationship
between the fraud and the alleged loss. Further, there is no
way to determine whether the delay in foreclosure is linked
to Defendants' fraud, making any loss PennyMac alleges
with respect to maintenance fees unidentifiable.
reviewing Judge Reyes' Report and the Objecting
Parties' submissions, and after reviewing de
novo those portions of the record to which the
objections were made, as well as hearing argument regarding
the same on May 26, 2017, October 26, 2017 and November 2,