Wednesday, January 28, 2015

U.S. Department Of Justice Tells State, Local Cops To Keep Hands Off Asset Seizures Under Federal Forfeiture Laws Unless Accompanied By Warrants Or Criminal Charges; Loopholes Remain As Use Of Police Power To Pull Off Unwarranted Property Ripoffs Still Possible If Feds Participate In Joint Seizures; State Law Seizures Also OK

In Washington, D.C., The Washington Post reports (via Public Citizen's Consumer Law & Policy Blog):
  • Attorney General Eric H. Holder Jr. on Friday barred local and state police from using federal law to seize cash, cars and other property without warrants or criminal charges.

    Holder’s action represents the most sweeping check on police power to confiscate personal property since the seizures began three decades ago as part of the war on drugs.

    Since 2008, thousands of local and state police agencies have made more than 55,000 seizures of cash and property worth $3 billion under a civil asset forfeiture program at the Justice Department called Equitable Sharing.

    The program has enabled local and state police to make seizures and then have them “adopted” by federal agencies, which share in the proceeds. It allowed police departments and drug task forces to keep up to 80 percent of the proceeds of adopted seizures, with the rest going to federal agencies.

    “With this new policy, effective immediately, the Justice Department is taking an important step to prohibit federal agency adoptions of state and local seizures, except for public safety reasons,” Holder said in a statement.

    Holder’s decision allows limited exceptions, including illegal firearms, ammunition, explosives and property associated with child pornography, a small fraction of the total.(1) This would eliminate virtually all cash and vehicle seizures made by local and state police from the program.

    While police can continue to make seizures under their own state laws, Equitable Sharing was easy to use and required most of the proceeds from the seizures to go to local and state police agencies. Some states have higher standards of proof for forfeitures and some require seized proceeds to go into the general fund.
For more, see Holder limits seized-asset sharing process that split billions with local, state police.

For U.S. Department of Justice press release, see Attorney General Prohibits Federal Agency Adoptions of Assets Seized by State and Local Law Enforcement Agencies Except Where Needed to Protect Public Safety:
  • The new policy applies only to adoptions, not to seizures resulting from joint operations involving both federal and state authorities, or to seizures pursuant to warrants issued by federal courts. The policy does not limit the ability of state and local agencies to pursue the forfeiture of assets pursuant to their respective state laws.
Go here for earlier posts on the abuse of asset forfeiture laws to seize property, cash.

(1) See Hit & Run Blog: The Fine Print in Holder's New Forfeiture Policy Leaves Room for Continued Abuses (An exception for joint task forces allows evasion of state property protections).

Wednesday, January 14, 2015

U.S. Supremes: Filing A Lawsuit Not Necessary To Rescind Consumer Loan Under Truth In Lending Act; Simply Notifying Creditor In Accordance With Regulations Is Sufficient

From Public Citizen's Consumer Law & Policy Blog:
  • Resolving a split among the federal courts of appeals in favor of consumers, the Supreme Court held today in Jesinoski v. Countrywide Home Loans, Inc., that a consumer may exercise the right to rescind a loan under the federal Truth in Lending Act simply by notifying the creditor rather than (as the creditor contended and as several federal courts had held) by filing a lawsuit.

    The unanimous opinion by Justice Scalia relied on the plain language of the statute, which provides that a borrower “shall have the right to rescind . . . by notifying the creditor, in accordance with regulations of the Board, of his intention to do so.” Obviously, it's much easier to provide notice than to file a lawsuit, so this is a clear win for consumers (an increasingly rare event at the Supreme Court these days).

Tuesday, January 06, 2015

Bay State Real Estate Operator Gets Canned For Ten Months, Faces Ten Years Probation & $112K Restitution Order For Ripping Off Nearly 100 Wanna-Be Homeowners In Blatant Rent-To-Own Racket Targeting 1st Time Buyers, Consumers w/ Crappy Credit

From the Office of the Massachusetts Attorney General:
  • An Easton man has pleaded guilty and been sentenced to jail in connection with stealing $112,000 from customers in a “Rent to Own” advance-fee scheme, Attorney General Martha Coakley’s Office announced []. He was also ordered to make full restitution to his victims.

    Joshua Leventhal, age 44, of Easton, pleaded guilty today in Bristol Superior Court to the charges of Larceny over $250 (4 counts) and Larceny by a Single Scheme.

    “This defendant tricked consumers into believing his program would result in easy homeownership, when in fact, not one of his nearly 100 customers was ever able to purchase a home through that program,” said AG Coakley. “He will now serve time in jail for his crimes and will be required to pay full restitution to the victims.”

    After the plea was entered, Superior Court Judge Robert J. Kane sentenced Leventhal to two years in the House of Correction, with 10 months to serve and the balance suspended for 10 years, during which time he will be on probation. Judge Kane also ordered Leventhal to pay restitution in the full amount of $112,000. Leventhal will begin serving his sentence on Feb. 17, 2015.

    Several victims were present in court today and provided impact statements about the effect of Leventhal’s actions.

    The AG’s Office began an investigation in the fall of 2012 after the matter was referred by the Bristol District Attorney’s Office and the Easton Police Department. The investigation revealed that Leventhal operated a “Rent to Own” scheme out of his Easton home, ultimately stealing over $100,000 from customers between 2010 and 2011.

    Leventhal described his “Rent to Own” program as a way for first-time home buyers or people with poor credit to rent a property through a complicated agreement with the homeowner, which allowed the buyer to later purchase the property for a set price and for a portion of each monthly check to be set aside for the renter to use as a deposit for that purchase. Investigation revealed that not one of Leventhal’s customers ever purchased a property under his program.

    Leventhal targeted first-time homebuyers and consumers with poor credit through online advertisements. Leventhal posted thousands of online advertisements including deceptive claims, such as: “Our rent2own program WILL turn you into a homeowner ASAP,” and “Rent 2 Own WILL Turn You Into A Homeowner Even If You Have Bad Credit and/or No Down Payment.”

    Leventhal, on a now-shuttered website, also fabricated customer testimonials, including one in which a customer purportedly wrote, “I saved $44,000 on my Rent 2 Own Purchase. All I can say is WOW.”

    In reality, investigators learned that out of Leventhal’s nearly one hundred customers, only three customers ended up occupying a property through his program, and not one of his customers ever purchased a property through his program.

    According to investigators, after he convinced potential customers that his program was a functional and successful path to homeownership, Leventhal charged them an enrollment fee, typically ranging from $150 to $2,000.

    In some cases, Leventhal also received additional deposit money from his customers, ranging from $4,350 to $7,000. However, Leventhal did not use these funds to pursue homeownership for his customers, but rather kept the money for his own personal use.

    A Statewide Grand Jury returned indictments against Leventhal on August 15, 2013 and he was later arraigned in Bristol Superior Court. He pleaded guilty and was sentenced [] in Bristol Superior Court. He will begin serving his sentence on Feb. 17, 2015.

    The case was prosecuted by Assistant Attorney General Andrew Doherty of AG Coakley’s Fraud and Financial Crimes Division, with assistance from Investigator Marco DePalma, Victim Advocate Megan Murphy, and Sergeant Jack Lynn of the Easton Police Department.(1)
Source: Easton Man Pleads Guilty, Sentenced to Jail in Connection with Stealing More Than $100,000 in "Rent to Own" Scheme (Sentenced to Jail, Ordered to Pay Restitution to Victims in Full Amount of $112,000).

See Would-Be Homeowner Victimized In Rent-To-Own Racket: "If Somebody Says, 'We Finance Homes; Ugly Credit, No Credit,' Don't Buy It! Do Your Research. I Didn't, & I Got Stung!" for an earlier story of a Pennsylvania consumer who got similarly screwed on a rent-to-own ripoff.

Go here for earlier posts on "rent-to-own" rackets.

(1) As a reminder to those who mistakenly believe that these apparent ripoff deals are nothing more than civil cases (as opposed to criminal matters), it is clear that all the sophisticated paperwork in the world (ie. business/purchase contracts, leases, closing statements, etc.) isn't enough to permit scammers to insulate themselves from criminal prosecution when they target their victims with scams masquerading as legitimate-looking business propositions when screwing them over. Criminal prosecutors have the authority to "pierce through" such attempts to disguise a blatant criminal real estate ripoff as a normal, arms-length business transaction.

Clear precedent exists for such a "pierce through" approach to overcome any objections that will certainly arise when the scammers make the argument that the arrangement was just a civil transaction that, if challenged, should be done with a civil lawsuit, not a criminal prosecution. See, for example:
  • People v. Frankfort, (1952) 114 Cal.App.2d 680, 700; 251 P.2d 401:

    Defendants insist these contracts insulate them from this prosecution because they contain the statement that they constitute the entire agreement between the parties, that the Spa Corporation is not bound by any representations outside the contract, that no salesman is authorized to make any additional or contrary representations, and that the club member has read and understands what he is signing. The simple answer to this argument is that "The People prosecuting for a crime committed in relation to a contract are not parties to the contract and are not bound by it. They are at liberty in such a prosecution to show the true nature of the transaction." (
    People v. Chait, 69 Cal.App.2d 503, 519 [159 P.2d 445]; People v. McEntyre, 32 Cal.App.2d Supp. 752, 760 [84 P.2d 560]; People v. Jones, 61 Cal.App.2d 608, 620 [143 P.2d 726]; People v. Pierce, supra, p. 605.)
  • People v. Jones, (1943) 61 Cal.App.2d 608, 620 [143 P.2d 726]:.
    Defendant argues that the deal with each "seller" was a
    civil transaction; [...] Cloaked in the draperies of his corporation and pretending to act in its behalf, he boldly approached his unsuspecting victims.

    Although each deal in its incipiency
    bore the color and trappings of a normal, civil contract, yet when subjected to a postmortem it exhaled the stench and disclosed the carcass of a fraud. (People v. Epstein, 118 Cal.App. 7, 10 [4 P.2d 555].) There appears no sign of good faith at any turn. Each taking and appropriation was a grand theft.
    The use of the corporate name and the promises made in accomplishing his purpose
    were a camouflage of such common variety that no excess of genius was required to discern the fraud. Parol evidence of all that occurred was admissible to show the intention of defendant. (People v. Robinson, 107 Cal.App. 211, 221 [290 P. 470].)

Wednesday, December 31, 2014

Another Snoozing Bankster Sleeps Through Foreclosure Statute Of Limitations; Court Denies Foreclosure On $1M+ Penthouse, But Also Refuses To Cancel Note & Mortgage, Will Not Quiet Title In Favor Of Property Owner

In Miami, Florida, the Daily Business Review reports:
  • Deutsche Bank snoozed and lost on a foreclosure suit that took about seven years to play out in Miami-Dade.

    While the bank's case wound its way through the court system, Aqua Master Association Inc. started its own foreclosure claim to enforce liens and collect unpaid dues for a penthouse at 201 Aqua Ave. in Miami Beach.

    The condo association gained ownership of the penthouse in 2011, and successfully argued in court that Deutsche Bank waited too long to pursue the case.

    The Third District Court of Appeal agreed, siding with the condominium association and barring the bank from continuing the foreclosure.

    The case shows the "negative consequences that lenders can face if they go too far with their delay tactics in foreclosure cases," condo association attorneys Nicholas and Steven Siegfried said in a statement.

    The case was Deutsche Bank Trust Co. Americas v. Harry Beauvais, a borrower who defaulted on his mortgage within months of securing it in early 2006.

    Loan servicer American Home Mortgage Servicing Inc. filed suit in January 2007, demanding accelerated payments for the full $1.44 million.

    Ironically it was this move for upfront payments that would unravel the lender's case and cost the bank the million-dollar property, because the condo association successfully argued the demand started a five-year clock for resolving the foreclosure.

    Statute of Limitations

    The court booted American Home Mortgage's case without prejudice when the servicer failed to attend a hearing.

    That dismissal led the condo group to start its own efforts to claim outstanding fees on the penthouse.

    "Like a lot of associations, this one was waiting to see what would happen with the foreclosure action," said Nick Siegfried, shareholder at Siegfried, Rivera, Hyman, Lerner, De La Torre, Mars & Sobel in Coral Gables. "But since the bank didn't proceed and the case was dismissed, the association had no choice but to proceed on its own."

    Aqua Master Association won control of the penthouse in 2011, but its claim remained subject to the mortgage.

    When Deutsche Bank took over American Home's foreclosure suit in December 2012, Aqua said the clock had already been ticking for five years and was about 11 months outside the statute window.

    The bank argued the earlier dismissal "decelerated" the loan, but a judicial panel disagreed.

    In an opinion issued Dec. 17, judges Frank Shepherd, Kevin Emas and Edwin Scales barred Deutsche Bank from pursuing the foreclosure. They found the bank never withdrew the original demand for accelerated payments, and so had to abide within the five-year window.

    Mortgage Still in Play

    But it was a case of good news and bad news for the Aqua condo association, because while the Third DCA blocked the lender from pursing the foreclosure, the court did not wipe out the mortgage. It means Aqua can continue to rent the penthouse, but can't sell it without approval from Deutsche Bank, whose mortgage lien is valid until 2041.

    Siegfried said the group is considering an appeal to challenge the lien.

    Deutsche Bank attorneys William McCaughan, Steven Weinstein and Stephanie Moot of K&L Gates in Miami did not respond to requests for comment by deadline.

    "Even though the bank can't enforce the mortgage, it has the ability to prevent a sale from going through," Siegfried said. "The association would have to deal with them on some level and perhaps negotiate a payoff with them, otherwise hold off the sale of the property."
Source: Statute of Limitations Dooms Deutsche Bank in Foreclosure.

For the court ruling, see Deutsche Bank Trust Company Americas v. Beauvais, Case No. 3D14-575 (Fla. 3d DCA, December 17, 2014).

Wednesday, December 24, 2014

Court Rejects Sneaky Bank's Scheme To Improperly Circumvent Judicial Foreclosure By Requiring Escrowed Contingent Deed, To Be Recorded Upon Future Default, As Condition To Grant Homeowner Forbearance Agreement

A recent court ruling by a U.S. Bankruptcy Court in Rockford, Illinois (In re Primes, 9/26/14) illustrates how the doctrine of equitable mortgage applies in the context of a transaction involving a financially distressed homeowner facing the loss of her home, and the lender currently holding the mortgage and threatening foreclosure.

More specifically, and given the particular facts of this case, it illustrates how a bank requiring the defaulting homeowner to sign over a deed to be held in escrow in connection with obtaining a forbearance agreement will be prevented from taking possession of the premises upon a subsequent default by the homeowner without first bringing a foreclosure action. In such a case, the bank is prohibited from obtaining possession of the premises by simply recording the escrowed deed and booting the homeowner through a forcible detainer (eviction) action. Such a scheme was looked at by the court as nothing more than the bank's attempt to improperly extinguish the homeowner's equitable right of redemption to evade judicial foreclosure.

An oversimplified summary of the fact follows (the reader is referred to the court's opinion for a full recitation of all the minutiae):
  1. After the homeowner defaulted on her payments on her home mortgage, the bank commenced a foreclosure proceeding.
  2. The homeowner filed for Chapter 13 bankruptcy to halt the foreclosure action, and subsequent thereto, reached a forbearance agreement with the bank that called for regular monthly payments and a balloon payment.
  3. In addition, the bank required the homeowner to sign over a quit claim deed (which purported on its face to be in lieu of foreclosure) to the bank as security for homeowner's performance of her obligations pursuant to the forbearance agreement.
  4. The bank agreed to hold the deed in escrow, but that in the event of homeowner's default, the bank was authorized to record the deed and take possession of the home.
  5. As part of the agreement, the bank dismissed the ongoing foreclosure action.
  6. After approximately two years of monthly payments on the forbearance agreement (and shortly after the bankruptcy case was closed and the Chapter 13 trustee was discharged), the homeowner defaulted again.
  7. The bank sent notice to the homeowner that if the payment default was not timely cured, it would record the deed held in escrow.The homeowner failed to cure; the bank then recorded the deed.
  8. The homeowner then filed a second Chapter 13 case, (a) proposing to make up the back payments to reinstate the forbearance agreement, and (b) claiming that she was still the owner of the home, despite the deed she signed over to the bank a couple of years earlier.
The court described the legal issue to be addressed as follows ("Alpine" is Alpine Bank & Trust Co., the mortgage lender, Mrs. Primes is the Debtor/homeowner):
  • Alpine argues that the pre-petition recording of the quit claim deed transferred ownership in the Mila Ave. property to the bank. Alpine thus contends that as of the petition date the Debtor had no interest in her residence and no right to redeem the property, and, therefore, the property is not necessary for her reorganization. See, e.g., Colon v. Option One Mortgage Corp., 319 F.3d 912 (7th Cir. 2003) (automatic stay may be lifted because at the time debtor filed her plan under Chapter 13 she "had no right to redeem").

    Ms. Primes argues in response that under Illinois law the quit claim deed given in connection with the Forbearance Agreement must be treated as an equitable mortgage, that the bank's recording of the deed without judicial foreclosure is ineffective to transfer her ownership interest, and that she is entitled to cure her default and satisfy the bank's secured claim through her Chapter 13 plan.

    Under the facts presented, the court finds the Debtor's argument to be correct under Illinois law.
As the basis for its conclusion, the court goes through an extensive analysis of the Illinois law (refer to the court's opinion for its full analysis of the law), and its application of the law to the facts of the case. Interesting to note that, while the underlying principles are the same, the case law reviewed by the court was a different line of cases than the line of cases often cited when the equitable mortgage doctrine is invoked in Illinois in the context of a sale leaseback foreclosure rescue scheme (compare the line of cases cited in In re Primes with the line of cases cited in Hatchett v. W2X, Inc., 993 NE 2d 944 (Ill. App., 1st Dist., 1st Div. 2013), a sale leaseback foreclosure rescue case).

After its analysis of the applicable Illinois law, the court reached its conclusion, making these findings and observations:
  • The doctrine of equitable mortgage applies not only to purported transfers executed at the time money is lent, but also to deeds executed after the time the debt is created such as in the context of an amendment, a refinancing, a forbearance agreement or other work-out situation.


    Applying the principles discussed above to the facts in this case, it is clear that the execution, delivery and recording of the Debtor's quit claim deed was ineffective to transfer title in her Rockford, Illinois property from Ms. Primes to Alpine Bank. Instead, the Debtor still owned the Mila Ave. property as of the petition date. Alpine Bank holds only a secured claim which could be modified through a plan pursuant to and in accordance with Chapter 13 of the Bankruptcy Code.

    The evidence establishes that the parties did not intend for the quit claim deed to immediately transfer title to the Mila Ave. property from the Debtor to Alpine Bank on July 13, 2011. The Forbearance Agreement provided that the deed would be held in escrow and not recorded until after a future default in the Debtor's payment obligations. Additionally, at least for some period after July 13, 2011, the Debtor continued to make and Alpine Bank continued to accept payments. Alpine instead simply held the deed for the contingency of a later default. The bank's officer admitted at trial that it was not his bank's understanding that it was receiving the property at the time the Debtor deliver the deed; rather the instrument was security to secure the loan. Therefore, the deed here is not a deed in lieu of foreclosure as contemplated by 735 ILCS 5/15-1401.

    Further, it is clear from the language of the Forbearance Agreement and the bank's actions that Alpine Bank did not intend that the recording of the quit claim deed would extinguish or satisfy the debt owed by the Debtor to the bank. The Agreement expressly states that the "recording of the Deed will not extinguish the debt of Borrower to Bank." The Agreement also provides that the debt would not be reduced until the further step of a sale of the property to a third party. The Agreement states that "[u]pon the sale of the Property, Bank shall provide a credit to Borrower against the indebtedness which is due at that time" and that any "deficiency which remains after the sale of the Property shall be due and payable in full to Bank from Borrower." Again, as the bank's officer admitted, the quit claim deed was security for its loan that it only recorded after the Debtor missed several payment installments.

    Alpine cannot have it both ways. As stated in Sutphen v. Cushman, the bank cannot argue that it holds the property absolutely and at the same time retain the right to enforce payment of the full debt. 35 Ill. 186 (Ill. 1864). At most, the parties intended to agree upon a mechanism that they believed would allow Alpine Bank to obtain title to the property upon a future default without the need for judicial foreclosure and without requiring future cooperation of the Debtor. But as stated by the Illinois Supreme Court in Bearss, parties cannot "by mere agreement . . . even by express stipulation" agree in advance to "cut off the right of redemption" in such a manner. 108 Ill.16.

    Even were this court able — which it is not — to set aside Bearss and the well-established law of Illinois and, as Alpine now proposes, adopt the approach taken by the courts in Ringling Joint Venture II and Guam Hakubotan, Inc., it does not appear that result here would change. In marked contrast with those decisions, the instant case involves an individual debtor's residential property in a consumer transaction with an unsophisticated borrower. There is no evidence that the Forbearance Agreement was drafted at the insistence of the Debtor or that she signed it in bad faith. Indeed the Debtor testified without dispute that she intended to make payments under the agreement at the time she signed it, that she did initially make payments and only fell behind after she broke her wrist and was out of work for several months.

    Accordingly, the Debtor held title to the property as of the date of the petition.
For the court ruling, see In re Primes, Bankr. No. 13-B-83310 (Bankr. N.D. Ill., Western Div. September 26, 2014).

Sunday, December 21, 2014

Fair Housing Feds Squeeze Major NYC Developer For Up To $2M To Settle Allegations That Design & Construction Of Newly-Built Rental Housing Failed To Comply w/ Accessibility Requirements; Lawsuit Triggered By Non-Profit Civil Rights Advocate's Undercover Testing Probe

In New York City, the Fair Housing Justice Center recently announced:
  • On December 10, 2014, Preet Bharara, the United States Attorney for the Southern District of New York, announced the settlement of a lawsuit filed earlier this year against a major New York City real estate developer for failing to design and construct rental housing in compliance with the accessibility requirements of the federal Fair Housing Act.

    The defendants entering into the settlement include Related Companies, L.P., and its subsidiaries and affiliates, Upper East Lease Associates, LLC and Tribeca Green, LLC. The settlement ensures that current and future residential development projects, including the Hudson Yards development on Manhattan’s west side, will comply with federal accessibility requirements.

    The consent order, signed by federal Judge Shira A. Sheindlin, details retrofits that will be made at four residential rental complexes in Manhattan to make them more accessible including, One Carnegie Hill, Tribeca Green, 500 West 30th Street, and 529 West 29th Street. In addition, twelve other apartment complexes will be inspected under the order to determine whether additional retrofits are required in these developments. If residents are temporarily displaced due to modifications of occupied apartments, the order requires defendants pay them for food and lodging at federal government per diem rates.

    All totaled, 4,500 units of rental housing are impacted by the order. In addition, the defendants agree to provide training on fair housing design and construction requirements for their employees and agents and take other steps that will ensure future compliance with fair housing laws.

    Finally, the order establishes a settlement fund to compensate aggrieved persons who have been harmed by the discriminatory practices and lack of accessible features at the affected properties. The defendants are required to pay up to $1.9 million in settlement funds for victims, in addition to paying a civil penalty of $100,000.

    In 2006, the Fair Housing Justice Center (FHJC) completed an undercover testing investigation that was aimed at learning whether architects and developers of new multifamily rental housing in Manhattan were complying with federal accessibility requirements. FHJC’s investigation found that all of the new developments tested were not in compliance with federal requirements. The FHJC turned over the results of its investigation to the US Attorney’s Office (SDNY). Since the FHJC investigation was completed, the U.S. Attorney’s Office has filed nine lawsuits alleging fair housing accessibility violations and, as of the filing of this order last week, obtained settlements in eight of these cases. A ninth lawsuit involving the Durst Organization is still pending.

    FHJC Executive Director Fred Freiberg praised the U.S. Attorney’s office for vigorously enforcing the accessibility provisions of the federal Fair Housing Act and protecting the rights of persons with disabilities. Freiberg stated, “The outcome achieved by the parties to this litigation will expand housing opportunities for persons with disabilities in New York City.” Freiberg added, “It also sends a potent message to architects, developers, and builders of multifamily housing. If you take steps to ensure that new multifamily housing is designed and constructed in an accessible manner, you can avoid the significant costs associated with protracted litigation, damages, and retrofits.”

    Aggrieved individuals who may be entitled to monetary compensation from the settlement fund in this case include persons who were injured by the lack of accessible features at One Carnegie Hill, Tribeca Green, or other properties constructed by the Related Companies. This includes persons who were:

    1) discouraged from living at one of these properties because of the lack of accessible features;
    2) injured by the lack of accessible features at one of these properties;
    3) prevented from having visitors because of the lack of accessible features at one of these properties;
    4) required to pay to make apartments accessible at one of these properties; or
    5) discriminated against on the basis of disability as a result of the design and construction of one of these properties.

    Persons who may be entitled to compensation should file a claim by contacting the U.S. Attorney’s Office Civil Rights Complaint line at (212) 637-0840 or by using a Civil Rights Complaint Form available at
Source: Settlement Aimed at Making Rental Housing Accessible to Persons with Disabilities (Order Covers 4,500 apartments; Defendants Pay Up to $2 Million to Resolve Lawsuit).

Saturday, December 20, 2014

Owner/Operators Of Downstate NY Senior Living Residences & Assisted Living Facility Agree To Cough Up $297K+ To Settle Alleged Fair Housing Act Violations

From the Fair Housing Justice Center:
  • On December 11, 2014, federal Magistrate Ronald L. Ellis signed an agreement to settle a lawsuit filed by the Fair Housing Justice Center (FHJC) against the owners and operators of four senior living residences located in Staten Island, Manhattan, Westchester County, and Rockland County as well as one assisted living/adult home facility in Rockland County. The federal complaint, filed in May 2013, alleged various discriminatory policies and practices based on disability, religion, and race.

    The allegations in the complaint included, among other things, maintaining a separate dining room for wheelchair users at one site, a prohibition on the use of power wheelchairs at another site, intrusive medical inquiries, questions about the religious practices of potential applicants, as well as the use of only white human models in marketing materials. The complaint was based on a four-month testing investigation conducted by the FHJC in 2012.


    While the defendants denied any wrongdoing, the settlement requires, among other things, that the defendants comply with fair housing laws; adopt policies to prevent future discrimination; obtain fair housing training; prominently market themselves as an equal housing opportunity provider; and pay $297,500 in damages, attorney fees, and costs. Most provisions of the agreement continue for a period of four years. During this time the defendants will maintain certain records and make them available for inspection by the FHJC. These provisions are designed to ensure future compliance with fair housing laws.
Source: Settlement Ensures Non-Discrimination in Senior Living Residences and Adult Home Facility (Defendants Pay $297,500 to Resolve Fair Housing Lawsuit).

Friday, December 19, 2014

More On The Slumbering New Jersey Lender Who Slept Through Statute Of Limitations On Foreclosing Mortgage, Leaving Lucky Homeowner w/ Free & Clear Home

The Philadelphia, Pennsylvania-based law firm Duane Morris LLP has recently published a post about the recent New Jersey court case where a homeowner who had defaulted on his house payments on a $520,000 mortgage had the outstanding balance of his mortgage wiped out where the lender apparently "fell asleep" for six years without bringing a foreclosure action, and whose statute of limitations "alarm clock" apparently didn't awaken it from its slumber until after the applicable limitations period had expired, leaving it time-barred from initiating a lawsuit.

For the post, see Bankruptcy Court Finds Debtor Entitled To A "Free House" Because Mortgage Foreclosure Complaint Barred By New Jersey Statute Of Limitations.

For the court ruling, see In re Washington, 2014 Bankr. LEXIS 4649 (Bankr. D.N.J. Nov. 5, 2014).

Editor's Note:

Not unlike some others, I found myself confronted with the temptation of employing "rhetorical flourish" and using the term "free house" to describe the homeowner's windfall in the headline for this piece, as well as in my original post on this story (see Expiring Statute Of Limitations Leaves New Jersey Homeowner With Free & Clear Home While Foreclosing Lender Left Holding The Bag).

While I don't feel that it's such a horrible thing to"keep the facts from getting in the way of a good headline" every once in a while, I resisted on this post because, according to the facts of the case - see The acquisition of the property:
  • The homeowner did, in fact, put a $130,000 down payment (20% down) on a $650,000 purchase price - not exactly "chump change" (presumably, there were thousands of dollars in additional out-of-pocket expenses paid for closing costs as well),
  • The homeowner did, in fact, make three mortgage payments on a $520,000 loan (not to mention any escrow cash for real estate taxes & insurance) before defaulting,
  • The homeowner purchased his home on February 27, 2007 (which, for students of 21st century history of the U.S. real estate market, was right around the time when the market was at its absolute peak, if it hadn't already begun to stall, crash, and burn); presumably the value of the subject home in this case began to tank shortly after purchase, and probably has yet to fully recover.
While the homeowner scored a great win in this case, the home certainly did not turn out to be as "free" as I first thought it might be.

Wednesday, December 17, 2014

Does Recorded, Properly Prepared But Improperly Indexed Deed Provide Constructive Notice To Bona Fide Purchasers? Yes, Says Bay State Bankruptcy Court

  • A chapter 7 trustee sought to avoid a transfer of the debtor’s real property using his “strong arm” powers based on an argument that the deed conveying the property did not provide constructive notice since it was not properly indexed in the real estate records.

    The debtor owned property in Boston that he transferred in July 2003 by a deed that correctly identified the grantor as “William O. Hultin.” However, when the deed was recorded, it was listed in the grantor index under “William Hiltin.” The original deed from the debtor was followed by a deed from his purchaser in 2005, a foreclosure deed in 2008, another deed in 2008, and a mortgage in 2011.

    A trustee’s strong arm powers include the ability to avoid transfers that could be avoided under state law by a bona fide purchaser of real estate as of the petition date. Typically under state law (1) a purchaser can take free of an interest unless it has notice of the interest, and (2) a properly recorded deed provides constructive notice of the grantee’s interest.

    As of the date that the debtor filed bankruptcy in 2013, the deed was indexed under William Hiltin. (This is significant because someone examining the grantor index to determine the status of the property would conclude that it was still owned by William Hultin.) Thus, the trustee’s argument was that the 2003 deed was not properly recorded, with the result that it did not provide constructive notice that the debtor transferred the property and a bona fide purchaser in 2013 could acquire the property free of the interests of the subsequent owners and lender.

    The analysis turned on a state statute that provided (emphasis added):

    No instrument shall be deemed recorded in due course unless so recorded in the registry of deeds for the county or district in which the real estate affected lies as to be indexed in the grantor index under the name of the owner of record of the real estate affected at the time of the recording.

    The defendant lender contended that this meant only that a document must be presented for recording that could be properly indexed, and did not require the recording party to confirm that proper indexing occurred. The lender argued that the deed complied with the statute so that the question of whether it provided constructive notice was a question of common law. Under common law, there were a number of cases holding that an indexing error did not prevent an otherwise properly recorded document from providing constructive notice.

    In contrast, the trustee argued that the requirement that the deed be “so recorded… as to be indexed in the grantor index” meant that it must be properly indexed in order to be deemed recorded. The trustee countered the lender’s position by arguing that (1) the purpose was to insure parties had constructive notice by requiring the interest to be in the grantor index, (2) enactment of this section abrogated many of the earlier cases relied on by the lender, and (3) in many of the cases the document was accessible notwithstanding the error, which was not the case here since a party searching the grantor index to determine whether the debtor owned property would not have found the deed transferring his interest.

    The court concluded that the statute was not precise so that it should turn to common law. The court reviewed several cases holding that a mistake made by a clerk in indexing does not invalidate constructive notice. The court predicted that the state supreme court “would uphold the common law rule concerning mistakes by a registry and ‘[hold] in favor of a person who has done all he could to have a transaction recorded, as against a subsequent creditor or purchaser who has relied on an erroneous record.’”

    The court specifically rejected the view that the decision should turn on whether the document would be found in a search of the real estate records. According to case law:

    Instances are not rare in which the constructive notice provided for by statutes requiring the registration of instruments proves insufficient to protect the interests of those for whose benefit they are intended, but who do not, for that reason, have a right to priority.

    As for legislative intent, the court concluded that the requirement for indexing was intended to eliminate “indefinite references” in recorded instruments. In particular, it did not place the burden on a recording party to assure that a document was in fact indexed properly.

    Since the deed correctly identified the grantor and the registry was the source of the indexing error, the court determined that the deed provided constructive notice of the transfer of the debtor’s interests in the property, and accordingly dismissed the trustee’s claims.

    Note that the issue in this case arose ten years after the deed was recorded. It can be difficult to predict whether a court will find that an improperly indexed real estate document provides constructive notice so that the interests of subsequent purchasers and lenders are protected.

    Although there are periodic discussions among real estate lawyers about whether it is necessary to verify proper indexing of recorded real estate documents, as a practical matter, the usual approach is to rely on title insurance.
For the ruling, see Agin v. Dookhan (In re Hultin), 516 B.R. 190 (Bankr. D. Mass. 2014).

Tuesday, December 16, 2014

Federal Court To Multiple Sclerosis-Afflicted Tenant Requesting Entitlement To Reasonable Accommodation Under Fair Housing Act For Doctor-Prescribed, Medical Marijuana Use: No Chance!

From the Fair Housing Defense blog:
  • In an age when more states continue to decriminalize use of small amounts of marijuana, apartment management employees are getting a more common request: can medical marijuana be a reasonable accommodation because of a disability?

    Earlier this month, a federal district court answered that question with a resounding no. In a case from Michigan involving an affordable housing community (Michigan permits medical marijuana pursuant to the state’s Medical Marijuana Act), a U.S. District Court judge ruled that because marijuana is still classified as a controlled substance under federal law (in other words, use of marijuana is still against federal law), the resident is not entitled to a reasonable accommodation for medical marijuana use under the Fair Housing Act (“FHA”).(1)

    In so ruling, the judge reviewed applicable state and federal law as well as guidance from the U.S. Department of Housing and Urban Development (“HUD”) written in 2011 in which HUD concluded that persons using illegal drugs (including medical marijuana) are categorically disqualified from relief pursuant to the FHA, Section 504 of the Rehabilitation Act of 1973 and/or the Americans with Disabilities Act as the requested accommodation was not reasonable and would constitute a fundamental alteration in the nature of the housing operations.
Source: Medical Marijuana as a Reasonable Accommodation Because of a Disability? One Court Says No.

For the court ruling, see Forest City Residential Management, Inc. v. Beasley, Case No. 13-14547 (E.D. Mich. December 3, 2014).

(1) From the court's opinion:
  • Beasley's [the tenant's] physician prescribed medicinal marijuana to help with her symptoms of Multiple Sclerosis. [...] Beasley obtained a Medical Marijuana card issued by the State of Michigan pursuant to the Michigan Medical Marihuana [sic] Act.

Monday, December 15, 2014

Pennsylvania Appeals Court Kiboshes Tax Sale Where Widow Had $250K Home Sold Out From Under Her Over $6.30 Late Fee; Ruling Reverses Lower Court Decision That Initially Gave Her The Boot

In Harrisburg, Pennsylvania, Reuters reports (via Public Citizen's Consumer Law & Policy Blog):
  • A widow whose western Pennsylvania home was sold by the county after she failed to pay interest accrued on $6.30 in late tax fees was overjoyed when a court ruled she can keep her home, her lawyer said on Friday.

    Eileen Battisti, who is in her early 50s and lost her husband in 2004, was unfamiliar with managing her finances and did not understand in 2009 that she owed the $6.30 late fee, which subsequently accrued $234.72 in interest, prompting the tax sale of her home in 2011, said her lawyer, Ed Santillan.

    A judge in Pittsburgh on Thursday ruled Battisti could keep ownership of the home in Aliquippa, about 20 miles northwest of Pittsburgh.

    She has remained in the home with two of her three adult children since it was sold by the Beaver County Tax Claim Bureau to S.P. Lewis, a man who buys tax delinquent properties and sells them back to their former owners for a profit, according to court papers.

    "We are thrilled with the decision of the commonwealth court and my client cried tears of joy when she heard the news," Santillan said.

    "I think when you read the opinion it is clear that the property should never have been sold," he added.

    Pennsylvania Commonwealth Court Judge Mary Leavitt ruled that county tax officials failed to provide Battisti with proper notification or warning regarding the sale of her house.

    "A reasonable tax claim bureau would have responded to Taxpayer's payment on the 2008 taxes with an invoice for $6.30, and it would have invoiced Taxpayer in 2010 for the 2009 shortage of $234.72," the judge wrote in her ruling.

    The home, which is worth between $250,000 and $280,000, was sold to Lewis for $113,000. He offered to sell the property back to Battisti for $160,000, Santillan said.

    Lewis did not immediately respond to a request for comment.

    The bureau still has the money from the sale and is expected to return it to Lewis, Santillan said, but Lewis has 30 days to appeal the court ruling.
Source: Court lets Pennsylvania widow keep home sold over interest on $6.30 tax bill.

For the court ruling, see Battisti v. Beaver County Tax Claim Bureau, No. 733 C.D. 2014 (Pa. App. December 11, 2014).

Go here for a 'friend of the court' brief filed in this case by The American Association of Retired Persons (AARP), the National Association of Consumer Advocates (NACA), and the National Consumer Law Center (NCLC). AARP is a nonprofit organization which promotes the interests of individuals over the age of 50 and seeks to protect older individuals from unfair and abusive business practices. NACA is a nonprofit corporation comprised of attorneys, law professors, and law students who primarily focus on the protection of consumers. NCLC is an advocacy organization which focuses on the needs of low income and elderly consumers.

Sunday, December 14, 2014

San Bernardino DA Puts Pinch On Pair Accused Of Hijacking Title To Vacant Home, Then Flipping It To Unwitting Buyer For $440K+; Duo Faces 22 Felony Counts Of I.D. Theft, Forgery, Procuring & Offering False/Forged Instruments, Conspiracy

From the Office of the San Bernardino County, California District Attorney:
  • A Rancho Cucamonga man and woman were recently arrested for stealing Title on a home and selling it for profit.

    Investigators from the District Attorney’s Office Real Estate Fraud Unit arrested Emma Adel, 45, and Mazen Fazah, 39, on Nov. 25, 2014. Both Adel and Fazah were booked at West Valley Detention Center on felony arrest warrants for various criminal acts involving felony real estate fraud.

    Following the arrest, DA Investigators executed a search warrant on their homes and Upland-based business, Smart Edge Auto.

    “During the search we were able to seize additional evidence related to the investigation,” said Senior Investigator John Vega, who is assigned to the case.

    In June 2014, Adel and Fazah allegedly unlawfully acquired a vacant house in Rancho Cucamonga and forged the names of the owner and notary public on the grant deed. Next, they transferred the property into their own business called “Perking’s Trust.”

    According to Vega, shortly after recording the false grant deed with the County Recorder, the pair deceived the escrow and title companies and sold the house to an unsuspecting buyer for over $440,000.

    Adel and Fazah were booked on 22 felony charges (see attached copy of the complaint) with more charges pending in San Bernardino and Riverside Counties. Deputy District Attorney Vance Welch will prosecute this case. Adel and Fazah were arraigned via video Nov. 26, and both pleaded not guilty to all counts. A Disposition/Reset Hearing is scheduled Dec. 22 at the San Bernardino Justice Center.

Tuesday, December 09, 2014

More On Use Of Eminent Domain To Write Down Unpaid Balances On Underwater Mortgages

From Public Citizen's Consumer Law & Policy Blog:
  • Robert C. Hockett of Cornell has written 'We Don't Follow, We Lead': How New York City Will Save Mortgage Loans by Condemning Them, 124 Yale Law Journal Forum 131 (2014).

    Here is the abstract:

    This brief invited essay lays out in summary form the eminent domain plan for securitized underwater mortgage loans that the author has been advocating and helping to implement for some years now. It does so with particular attention in this case to New York City, which is now actively considering the plan. The essay's first part addresses the plan's necessity. Its second part lays out the plan's basic mechanics. The third part then systematically addresses and dispatches the battery of remarkably weak legal and policy arguments commonly proffered by opponents of the plan.

Sunday, December 07, 2014

Local D.C. Lawmakers Vote In Favor Of Overhauling City Forfeiture Laws In Effort To Crack Down On "Policing For Profit;" Some Law Enforcement Agencies View Legal Loopholes In Law Allowing Asset Seizures As Handy Source Of Slush Funds

In Washington, D.C., Forbes reports (via Public Citizen Consumer Law & Policy Blog):
  • The Council of the District of Columbia voted unanimously [last week] in favor of overhauling the city’s civil forfeiture laws, which lets police seize property from people never charged with a crime. Law enforcement can then pocket all of the proceeds gained from forfeiture.

    The Civil Asset Forfeiture Amendment Act of 2014 stabs at the heart of what makes civil forfeiture so potentially corrupting: Letting cops and prosecutors keep what they forfeit creates “at best, the appearance of a conflict of interest, and at worst, an unchecked incentive for slush funds,” remarked Councilman Tommy Wells, who authored the reform.

    If the bill becomes law, Washington, D.C. would join just eight states that ban policing for profit. Rather than padding law enforcement budgets, any revenue generated with civil forfeiture instead would be deposited into the general fund.
For more, see Washington, D.C. Council Votes to Reform City's Civil Forfeiture Laws, Ban Policing for Profit.

See also:
Go here for some earlier posts on civil forfeiture. forfeiture feds

Friday, December 05, 2014

South Florida Feds Pinch Paralegal For Allegedly Looting $3.78 Million From Law Firm's Trust Account; Cash Meant For Real Estate Transactions, Loan Payoffs, Etc.; Suspect Continued To Make Lulling Payments To Banks In Attempt To Conceal Ripoff

In Fort Lauderdale, Florida, the South Florida Sun Sentinel reports:
  • A paralegal pleaded not guilty Wednesday to allegations that he stole more than $3.78 million from client trust accounts at the Hollywood law firm where he worked, court records show.

    Steven Sacks, 57, was released on bond after pleading not guilty to four counts of wire fraud in federal court in Fort Lauderdale.

    Sacks used his position at the Gilbert & Caddy law firm to embezzle from clients whose money was kept in the firm's trust accounts to pay for mortgages and other real estate transactions, according to a charging document filed by prosecutors.

    Sacks set up a corporation in Nevada and diverted clients' money to a related bank account between 2011 and March of this year, according to the charges. Prosecutors wrote that Sacks continued to make mortgage payments for some clients to conceal the missing funds but investigators gave no other information about what happened to the rest of the money.

    Efforts to contact Sacks' lawyer late Wednesday were unsuccessful. If convicted, Sacks faces up to 20 years in prison and a $250,000 fine on each of the four charges.
Source: Broward paralegal stole $3.78M from clients, feds say (Paralegal set up Vegas corporation, stole millions from South Florida law firm clients, feds say).