UNITED STATES BANKRUPTCY COURT WESTERN DISTRICT OF PENNSYLVANIA

UNITED STATES BANKRUPTCY COURT WESTERN DISTRICT OF PENNSYLVANIA IN RE:. Case No. 0-.. SHARON DIANE HILL,.. USX Tower - th Floor. 00 Grant Street. Pittsburgh, PA Debtor,.. December 0, 00................ : p.m. TRANSCRIPT OF STATUS CONFERENCE BEFORE HONORABLE THOMAS P. AGRESTI UNITED STATES BANKRUPTCY COURT JUDGE APPEARANCES: For the Debtor: For Countrywide Home Loan, Inc.: Steidl & Steinberg By: JULIA STEIDL, ESQ. Suite 0 Gulf Tower 0 Grant Street Pittsburgh, PA LESLIE E. PUIDA, ESQ. Mellon Independence Center Suite 000 0 Market Street Philadelphia, PA 0- Audio Operator: Cathy Younker Proceedings recorded by electronic sound recording, transcript produced by transcription service. Evergreen Avenue Hamilton, New Jersey 0 E-mail: jjcourt@optonline.net (0) - Fax No. (0) -

APPEARANCES (Cont'd.): For the U.S. Trustee: For the Chapter Trustee: Office of the U.S. Trustee By: NORMA HILDENBRAND, ESQ. 00 Liberty Avenue 0 Liberty Center Pittsburgh, PA Babst, Calland, Clements & Zomnir P.C. By: DAVID W. ROSS, ESQ. MARK A. LINDSAY, ESQ. Two Gateway Center Pittsburgh, PA

0 0 THE COURT: All right. The next matter before the Court is the matter of Sharon Hill, Case Number 0-. This is a status conference on a motion to enforce discharge. Would counsel please come forward and enter your appearances? MS. STEIDL: Julie Steidl for the debtor. MS. PUIDA: Leslie Puida on behalf of Country -- THE COURT: All right. Anybody else? MS. PUIDA: Leslie Puida on behalf of Countrywide. THE COURT: Okay. Anybody else? MS. HILDENBRAND: Norma Hildenbrand on behalf of the United States Trustee, Your Honor. MR. ROSS: David Ross and Mark Lindsay on behalf of the Chapter Trustee, Your Honor. THE COURT: Anybody else? (No verbal response) THE COURT: Okay. Attorney Puida, you can have a seat. Now I know why you're here. All right. That's -- okay. Attorney Steidl, do you want to tell me about, first of all, your motion and where we are with this? MS. STEIDL: Our client, Ms. Hill, went through her bankruptcy. She did everything right. She made all of her payments. The application for approval of completion was filed. Nobody objected. An order was -- default ordered was granted. An order discharging the debtor was signed. A filing report and accounting was signed, and then when she started to

0 0 make payments on her own, Countrywide sent them back and said that they wouldn't take them, because she was in default, and that was immediately after she was discharged that that started. In the process of going back and forth Countrywide did supply us with a loan history. They also supplied me with some letters that I didn't understand, but I spoke to Attorney Puida about it, and she explained to me that there are three letters in my file, all with different dates, where they're saying Countrywide's mortgage went up during the process of the plan. The first letter is dated September of '0 that talks about the first increase. The problem with that is we weren't in our offices in '0. We were at a whole different address, and our carbon copy is to Ken Steidl at the new address where we are now, which we weren't then. And she explained to me that -- THE COURT: Wait a minute. Wait a minute. Hold it. Wait a minute. You're saying that you -- there's a letter dated 00 at a certain address that you weren't in until a subsequent time? MS. STEIDL: Yes, sir. THE COURT: Yet this is a letter that was represented to acknowledge or support the first change notice on this property?

0 0 MS. STEIDL: Yes, sir. The letter was dated September nd, 00, directed toward my client, carbon copied to Ronda Winnecour and Ken Steidl at the Gulf Tower address, but on September nd, 00, we were at 0 Grant Street. So I just asked Ms. Puida to explain the two, because I didn't understand the discrepancy, and she told me that these letter that they sent -- they sent three -- are recreation letters. They're not the first letter that was sent. They're just -- THE COURT: What is a -- never heard of a recreation letter. That's a letter that they don't have, and now they've recreated to support the allegation that they actually sent a prior letter? MS. STEIDL: Well, that would be how it sounds. I don't mean to mis-characterize it, but that's how it sounds. All of these letters were -- there are three of them, and they were all recreated. THE COURT: All recreated letters. MS. STEIDL: That's one in '0, one in '0, and one in '0. THE COURT: Okay. That's pretty interesting. Go ahead. MS. STEIDL: Okay, so -- THE COURT: Well, what were the letters purportedly to represent or offer? MS. STEIDL: The change -- apparently, some of the

0 0 problem was, according to Countrywide, that the loan amounts changed with escrow changes, because she doesn't have a variable rate. It's a fixed rate. So the first letter in September nd, 00, and we didn't move to our new office until October th, so there's like a six-week difference there. And it says, "This letter is to advise you that the escrow requirement has changed per the escrow analysis. The amount of the escrow is now this,.0," and it goes on to explain about the escrow. And then it says that they're raising her monthly mortgage payment to 0 from approximately 00. We didn't get that letter. THE COURT: All right. Let me -- you said the other two are recreation letters, too. It's not the same -- how do you know that? Based on a same address issue or for other reasons? MS. STEIDL: No, Ms. Puida told me. THE COURT: All right. MS. STEIDL: She said that they put them into evidence when it happened, so we could understand that it happened. That they were recreated. THE COURT: Oh, that's nice. All right, but -- and they allege that they actually sent these letters at one time, but they don't have the originals? Is that it? MS. STEIDL: You would have to ask her. I didn't go that far.

0 0 THE COURT: So that hasn't been -- that -- all right. I will ask her. Yes, that's interesting. Go ahead. MS. STEIDL: And then today when we were talking, she said that she was kind enough to lower what she want -- what Countrywide wanted by some number. THE COURT: All right. Let me stop. Let me stop you there. You said that there was a final -- after the Trustee filed its final account and report and a discharge order was -- our standard discharge order was entered in the normal course? MS. STEIDL: Yes, sir, in March of '0. THE COURT: All right. Does that discharge order have language in it that says that the loans -- the secured loans, mortgages, whatever are current as of the date of the last distribution of the Trustee? MR. STEIDL: It does. THE COURT: So why is Countrywide even making a claim for pre-discharged claims in light of that discharge order? MS. STEIDL: I don't know how to answer that, Your Honor. THE COURT: All right. I mean you got Attorney Puida agreeing to change the amounts, but it sounds like that Court order, which I assume became final and no objection was filed, already says that Countrywide's current. MS. STEIDL: Yes, sir. THE COURT: Okay. Go ahead.

0 0 MS. STEIDL: And the amount has dropped now to hundred, because they audited it. It didn't start as a Countrywide loan. It started as a Mellon Bank loan. It was then transferred to Countrywide, and Countrywide apparently audited payments made to Mellon Bank, and they knocked it down to about half -- a little more than half. But I'm wondering if there might be other payments that didn't get knocked down, and we don't have anything regarding that. So as far as the status conference part of this goes, I would like to have discovery, so we could see -- THE COURT: All right. Let me stop you. It's been represented that this case was in a settlement posture. Is that an -- MS. STEIDL: From a -- my client doesn't -- well, it was in a settlement posture at hundred dollars. Now it's hundred dollars, but -- THE COURT: I'm not sure what -- all right. Tell me. It was represented by Countrywide at another hearing, which did involve this matter and nine other cases, that this particular -- unless I misunderstood, and I might have, but I was under the impression -- and I believe Attorney Connick (phonetic) represented that this matter was going away, because it was settled. Are you now backing off a settlement, or did you ever have a settlement to begin with, or -- tell me about that. MS. STEIDL: We did not -- our client did not approve

0 0 any kind of settlement, and when we sent it to her for approval, she did not want it. She didn't want a settlement. She -- THE COURT: So there was a settlement offer on the table, but it had never been approved by your client. MS. STEIDL: Correct. THE COURT: All right. Well, that explains why I've never seen a motion to settle this case then. I was wondering what happened. I assumed -- right? MS. STEIDL: Correct. THE COURT: All right. Okay. I think I understand. Attorney Puida, what is going on here? I mean I guess there's a couple things on the table I need to know about. What are these recreated letters all about? MS. PUIDA: Your Honor, the letters -- THE COURT: How about -- could you -- would you mind remaining seated and speak into that microphone? I can't hear you. Otherwise, or if you stand -- some lawyers are more comfortable standing. Make sure you bend over and talk into the microphone. Okay? MS. PUIDA: I'm sorry, Your Honor. Is this better? THE COURT: Yes, that's fine as long as you're comfortable. MS. PUIDA: Your Honor, regarding the letters, they were never held out to be letters that were sent notifying any

0 0 0 one of the payment changes. They were purely generated -- what happens is, is they were generated based on what the payments were in 00, 00, and 00. THE COURT: When were they generated? MS. PUIDA: They were generated when we first were in settlement negotiations with Mr. Steidl regarding this case. There was a question as to what the payments were at various times within the bankruptcy. So we -- they were not offered to prove that they had been sent. They were merely showing what the breakdown was of the PMI and escrow at those various points in time. THE COURT: Who created these letters? MS. PUIDA: A processor at Countrywide. THE COURT: Does it say anything on the letters themselves that has a disclaimer that these are not actual letters sent or simply used to show if a letter had been sent what the payment would've been at the time in question? MS. PUIDA: No, it does not. THE COURT: Boy, that's a strange one. I don't know. Why would you -- when did you disclose that these letters were not what they purported to be but, in fact, were just memoranda of an event created years after the event in order to document the event? MS. PUIDA: Throughout my discussions with Mr. Steidl when we were trying to resolve this matter.

0 0 THE COURT: From the very beginning you sent him copies of letters, and you described the fact -- MS. PUIDA: I had -- THE COURT: Go ahead. MS. PUIDA: I'm sorry, Your Honor. We had been providing him with payment histories, escrow analyses, breakdowns of all of the escrow that had been advanced throughout the case. It was just one of various things that were being sent to him just showing what the case status was at the time the discharge was entered, what the status is now, and what we were showing as being due on the loan. THE COURT: All right. Now, you know, you're here representing your client. I want to -- you know, it's -- I want you to be totally candid with me, because I'm going to ask these questions of Mr. Steidl as well at some point. Obviously, it looks like we have to, because this concerns me. I'm having trouble with these recreated letters that purport to be sent to a number of parties at a date -- prior date well into the past and created at a subsequent date to show or represent, at least at first blush, the state of a record which didn't really exist as such. When was Mr. Steidl informed by you or anyone at Countrywide, to your knowledge, that these letters are not what they would purport to be on a cold reading and view if received in a packet of papers? MS. PUIDA: Your Honor, I wouldn't be able to give

0 0 you an exact date. I had a conversation with Mr. Steidl where he indicated that he had never received the letter. He had checked his file, and I had told him, well, you wouldn't have, because this was -- these were not sent out. It's just drawing -- the system at Countrywide currently has Mr. Steidl as counsel. He was not counsel when this case was initially filed. It has the Trustee's information in the system, so when they were recreated, it pulled that information in. But the point of the letters was to show what the payment changes were during the course of the bankruptcy. THE COURT: Well, why wouldn't you just show that by an in-house document generated by Countrywide? Why would you go to the steps of creating a letter that never was sent, which appears -- which could be used by a loan processor or somebody at Countrywide when a debtor calls up on their own to find out the background of a loan, and these letters were forwarded on without the benefit of counsel or you and Mr. Steidl talking about post-discharge injunction violations? Why would that type of document ever even be part of this system? MS. PUIDA: Your Honor, I can't speak as to that. I don't know the answer. THE COURT: All right. Anything else? There's no settlement. You've been discussing a proposed resolution, but the -- MS. PUIDA: No, we -- Mr. Steidl and I had been

0 0 discussing various things. We have been going back and forth, but I was apprised as of Tuesday of a number that was acceptable to the debtor, and then I understand today that there is no number that's acceptable. So there is no settlement at this time. THE COURT: All right. Well, Attorney Steidl -- Julie Steidl said they never had the acceptance of the debtor. That it was just passed on to the debtor. MS. PUIDA: Correct. We were -- THE COURT: Was your understanding different than that? MS. PUIDA: No, all along Mr. Steidl indicated that he needed his client to sign off on any settlement, and that he had forwarded the documentation to her for review. THE COURT: Okay. All right. Anything else on this issue? MS. PUIDA: No, Your Honor. THE COURT: All right. Attorney Hildenbrand, do you have any comments to make in light of where we're at? MS. HILDENBRAND: Thank you, Your Honor. I was here today in particular to preserve the status quo. As the Court's aware, we have a pending discovery request of Countrywide in the miscellaneous matter, and the issues that were told to the Court today are of grave concern to the United States Trustee. We're not certain where these letters -- these recreated

0 0 letters, the purpose of them, and I would just reiterate the United States Trustee's argument that this is even more reason to grant our discovery request in order to in the other case -- although I'm not arguing that position today, this is just another example of why the United States Trustee feels that it's important to understand that Countrywide -- to get the information regarding this case as well as the other noncontext cases and to allow us to investigate how all this comes about. I appreciate the Court's letting -- giving me an opportunity to speak on that. THE COURT: Well, you've entered an appearance by your appearance today as well as raising this issue in the noncontext cases even though we consolidated it under a miscellaneous number for purposes of administrative convenience. In a sense, you have already filed in this case a request for your 00 exam alleging this particular issue, so I couldn't proceed. And to be honest with you, based on what I -- my understanding prior to today, this case was in settlement posture, and I thought I would be getting a copy of a proposed consent order here. But I see that we're not even close to that, so even more reason not -- I can't do anything today, and it's good we had the status conference to further alert the Court as to the pending issues. Mr. Ross, did you have any comments to the Court?

0 0 MR. ROSS: Thank you, Your Honor. Your Honor, the reason I'm present today is -- THE COURT: Well, I'm going to stop you right there. Now, typically, we'd turn to Mr. Bedford on Chapter matters. You represent the Trustee in the miscellaneous Number 0, which -- I believe it's 0 with the cases. That was the first miscellaneous. Two 0 four is the second miscellaneous. So really you represent the Trustee, I thought, for the limited purpose of those issues and not necessarily in this case. I thought maybe you were here for purposes of information only possibly, but if Mr. Bedford is deferring to you to represent the Chapter Trustee on this particular matter, then I believe your appearance -- I need some clarification here as to your role versus Mr. Bedford's traditional role on these types of issues. MR. ROSS: Your Honor, I'm here today on behalf of the Trustee. Mr. Bedford is sitting to my right and has deferred to me for purposes of this matter, and I have that authority from Ms. Winnecour. THE COURT: All right. Okay. Mr. Bedford, that's what we're going to do today, and you're out. Okay? MR. BEDFORD: Yes, I understand, Your Honor. And while I do have the file, I'm certainly able to provide any information that Your Honor may wish to have from the file. THE COURT: Well, I appreciate that, but I'm going to

0 0 -- you know the rule. There's no tag team lawyering. I just let the one lawyer, and Mr. Ross, you're the man. Go ahead. MR. ROSS: Thank you, Your Honor. Your Honor, as Your Honor stated, we are counsel to the Trustee in the action that consolidated cases. This particular case is one of those actions, and this particular case involves one of the checks the Trustee alleges that Countrywide has misplaced. THE COURT: That's different. That's totally different from this post-injunction -- post-discharge injunction violation. MR. ROSS: Not necessarily, Your Honor. With all due respect, the Trustee's concern in the cases -- one of her concerns has always been the timely application payments. We have a situation in this particular debtor where the Trustee believes that or knows that these three checks have been lost. Two -- checks have been lost twice. There's been a third check issued to Countrywide. Countrywide is now asserting postconfirmation post-discharge that there is an arrearage. The question -- THE COURT: But is -- pardon me. Just to cut to the quick here, is it related to a change in escrow amounts -- these three changes in escrow amounts as these letters pre -- post-created letters reflect, or does it -- your claim in the -- you're wearing the hat for the Chapter Trustee in all matters, but the other -- I don't want to confuse the issues.

0 0 The other one related to six or seven checks that weren't cashed much later in time than -- I don't think it -- in my mind -- and I'm not as close to it as you, but the two seem to be unrelated. MR. ROSS: Your Honor, I cannot tell you as a matter of fact that they're not unrelated. They may very well be related. There's two issues, Your Honor, and that's exactly why we're here today. It may be that as a result of these checks being misplaced or mis -- inappropriately applied, that that led to the arrearages. Also, Your Honor, with respect to the three letters that Ms. Steidl has referenced, what I'd like to bring to the Court's attention is that the Chapter Trustee is also referenced as a CC on those letters as well. I reviewed the Trustee's files. I have met with Mr. Bedford. We have not received those letters. Your Honor, the cases are about receipt of payments and timely application. This, Your Honor, is the same issue, and -- THE COURT: Well, I don't know if I agree with you on that. It's a similar issue with different facts. Totally different facts from -- I mean they're talking about -- unless you tie it in time -- what's the date of the last letter? Attorney Steidl, what's the date of the most recently recreated letter, 00? MS. STEIDL: Yes, Your Honor.

0 0 THE COURT: All right. Well, maybe it is part of it then. I'm wrong. I thought it was 00 and 00, but maybe I'm -- all right. MS. STEIDL: It was 00, 00, and 00. THE COURT: All right. Two thousand seven gets you in the door. All right. Maybe they are related. Go ahead, Mr. Ross. MR. ROSS: Your Honor, at this point we would join in with the debtor's request that we be permitted -- that the Trustee be permitted to conduct discovery. Remember, Your Honor, in this case, as in all Chapter cases that are completed, the Trustee is required to file a final report, which the Trustee did. I think based on a large part on that Trustee's final report this Court entered an order in this case discharging the debtor. From the Trustee's standpoint, if, in fact, the Trustee's records are incorrect, then we would welcome Countrywide to show us why they're incorrect. At this point I think it's the Trustee's responsibility to verify that her report filed in this case is accurate, and based upon that, Your Honor, with respect to the debtor's request to open discovery, we would join in that. With respect to the U.S. Trustee's request, we do not join in with that, because we understand the issues attendant thereto. But with respect to the debtor's request, Your Honor,

0 0 we believe that the debtor has the right and it really makes sense with what we've -- what the Court has learned today. THE COURT: Well, there's definitely a need for discovery here. These letters are a smoking gun that something is not right in Denmark. I just -- I can't get over what I'm being told here about these recreations and what the purpose is or was and what was intended by them. It just -- I don't see any credible reason for doing that other than to create a perception that notices were timely sent. But maybe there is, and that's why there's a need for discovery, obviously. Attorney Puida, anything -- any response here? MS. PUIDA: Yes, Your Honor. Again, the -- we were doing nothing more than providing counsel with a history of what escrow was received and payments during the course of the bankruptcy, what was paid out, what difference between the two there may have been. The letters again were never offered as being something that was sent out to debtor's counsel or to the Trustee. It was just a starting point to show this is the breakdown for that particular year's escrow. THE COURT: All right. I appreciate that. This is your understanding of what you did, but when I asked some rather pointed questions to further explain the purpose behind these letters, you couldn't respond. You could not answer, and I can appreciate that, and that's just more reason why there has to be some discovery here to find out what is going on and

0 0 0 why it was done, because that will determine -- you know, if it can't otherwise be settled or resolved, that will be an item of concern for this Court in assessing the appropriate damage or remedy. So it's highly, extremely relevant, and important for a decision in this matter, so I'm going to -- Attorney Steidl, how much time do you need? MS. STEIDL: Sixty days. THE COURT: All right. I'm going to grant -- I'm going to schedule an evidentiary hearing on this matter. I'll issue a general pretrial order, so that discovery can commence for a 0-day period, and I assume there's no problem with that from Chapter Trustee? MR. ROSS: No, Your Honor. Would the Chapter Trustee have the ability to be part of the discovery? THE COURT: Absolutely. Absolutely. Yes, you're a party in interest as will the U.S. Trustee. This -- I mean you're all involved in this case. The U.S. Trustee's entitled to be heard and involved in any matter pending before the Court, and in a very broad reading of the statute even raise matters. We still haven't determined that, but definitely. We have a proceeding in progress here that even Countrywide in the related matters admitted that the Trustee had the right to be heard and involved -- the U.S. Trustee. Definitely, a Chapter Trustee. Countrywide's admitted that in related matters. Definitely, the debtor.

0 0 And the Court's concerned about this. The Court's very concerned. Again, I'm totally surprised at what I'm hearing. I didn't anticipate this at all today, but it's definitely a matter that needs to be vetted further through discovery and assuming a resolution cannot otherwise be had. All right. I'll issue the order. We'll have an evidentiary hearing to be scheduled according to the Court's schedule. I'll have to be down there for that I assume, and we'll go forward, and I'll issue that order in -- probably by tomorrow. Definitely by tomorrow. I doubt if it will be today, but we'll issue a standard pretrial order in this matter. All right. Anything else? Anything else, counsel? MS. STEIDL: That's all. THE COURT: All right. Thank you. We'll recess. THE CLERK: All rise. * * * * * CERTIFICATION I, PATRICIA C. REPKO, court approved transcriber, certify that the foregoing is a correct transcript from the official electronic sound recording of the proceedings in the above-entitled matter to the best of my ability. /s/ Patricia C. Repko Date: January, 00 PATRICIA C. REPKO