Saturday, February 14, 2009

Vacant Home Hijackers On The Radar For Dallas-Area Cops, Prosecutors

Buried in a recent story from Dallas County, Texas on scammers hijacking vacant homes involved in the foreclosure process and renting them out, The Dallas Morning News references these recent efforts to prosecute the alleged perpetrators:
  • [O]n Thursday, a judge convicted pastor Jackie Lewis, 53, of Cedar Hill, on one count of securing execution of a document by deception in connection with renting a foreclosed home in Cedar Hill. The charge is normally a third-degree felony, but because of a 1994 theft conviction, he could face two to 20 years in prison. His sentencing is scheduled for March 6.


  • DeSoto, Cedar Hill and Lancaster investigators have all arrested [Morris] Mosley on charges related to the foreclosure scheme. Late last month, [police] arrested Mosley outside a southeast Oak Cliff home that Mosley wanted to rent out. He's being held on two counts of suspicion of burglary of a habitation and one count of securing execution of a document by deception. Mosley, 48, is being held at Lew Sterrett Justice Center. His trial is set for April 20.

For the story, see Scammers finding open door at foreclosed homes.

Go here, go here, and go here for posts on phony landlord rent scams. PhonyLandlordScamZeta

The Work Of An Eviction Deputy Not Without Surprises

In San Diego, California, the North County Times reports on the experiences of two San Diego County sheriff's deputies in connection with foreclosures. The two men are among seven deputies in North County tasked with removing people from their homes.

  • [T]here are surprises. [One deputy] said that last year he walked into an Encinitas place and found the body of a man who had committed suicide. [He] also found a note, in which the man had written that he had no place to go. Another deputy said he served notice on a house, and found four kids at home and Mom at work. But this was the day and time to kick the residents out, so deputies had to call social workers to take the kids into protective custody.

In another incident, deputies escorted a pregnant woman with a the little girl at her knee out of her home. It didn't matter that she had no car to drive, nowhere to go, and that her baby was due the next day.

For more, see With evictions on the rise, deputies make the rounds to clear residents out of homes.

Go here and go here for other posts on the encounters of police and sheriff's deputies carrying out home evictions. DeputyEvictionTheta

2nd Floor Walkway In 15-Unit Building In Foreclosure Comes Crashing Down; Structure Condemned, Residents Forced Out

In Truro Township, Ohio, The Columbus Dispatch reports:
  • After years of complaints about code violations and management problems at an apartment complex in Reynoldsburg, a second-story walkway there collapsed yesterday just as a construction crew prepared to fix it, Truro Township Fire Battalion Chief Allen Deaver said. The incident occurred at the White Birch Crescent Apartments. One woman suffered minor injuries. Nine families living in the 15-unit building [...] have been relocated, Deaver said.


  • "We'd come home every day, and you could see it just keep sagging and sagging," [one resident] said. "Then all of a sudden we heard this 'bam.'"[...] The building, one of 14 in the apartment complex, was condemned by the city's chief building officer [...] after the walkway fell.


  • White Birch Crescent Apartments was one of six complexes owned by Columbus Properties Limited Partnership that have been battling foreclosure. It was placed in [a receiver's] care by a federal court order until the original owners could find a responsible buyer.(1)

For the story, see 2nd-floor walkway caves during Reynoldsburg apartment building repair (15-unit building condemned; 1 woman hurt).

(1) While the building involved was a landlord-owned rental building, the incident could just as easily happen in a condominium. Given the financial problems many condo associations are having paying its bills (like the landlord in this story ) while its unit owners are suffering with foreclosure problems and maintenance fee delinquencies, one may want to think long and hard before buying a condo in a multi-story, decades-old building that may have hidden (or possibly not-so-hidden) deferred maintenance surprises.

Bernanke's Boyhood Home Falls To Foreclosure

The Wall Street Journal reports:
  • Travis Jackson walks through his modest ranch house, admiring the kitchen's built-in spice rack and the red-oak floors. He draws back the curtains, and sunlight illuminates the pride on his face. The young banker just bought Federal Reserve Chairman Ben Bernanke's childhood home at a foreclosure sale. [...] Mr. Bernanke's family sold the property more than a decade ago. It ended up on the block late last year after its former owners fell behind on their mortgage payments.

For the story, see Fed Chief's Boyhood Home Is Sold After Foreclosure.

Foreclosed Homeowner Commits Suicide As Sheriff's Deputy Stood Outside Home About To Carry Out Eviction

In Colorado Springs, Colorado, The Gazette reports:
  • Wayne "Mike" Anderson knew what the knock at the door of his Stratmoor Valley home meant: He was being evicted. He wasn't ready to leave. Unemployed, awash in debt and hiding an October foreclosure from loved ones, the 55-year-old shot himself Wednesday morning as a sheriff's deputy stood outside. His live-in girlfriend was at work. She never knew they were being forced out, friends said.


  • Friends believe Anderson, who they say used to work as a surgical nurse, began sliding into depression after losing his job about two years ago. Unable to find work in his field, Anderson turned to the same risky borrowing that helped plunge the country into a foreclosure crisis, borrowing against the modest split-level home [...] his parents bought in 1969 and left him in their will.

For more, see Facing eviction, a man killed himself while a deputy stood at door.

Go here and go here for other posts on police incidents during home evictions.

Go here for other posts on evictions and suicide. suicide homeowner foreclosure zeta DeputyEvictionTheta

Federal Class Action Suit Targets Use Of "Chinese Drywall" Used In Building Florida Homes

The South Florida Business Journal reports:
  • A federal lawsuit alleges that fly ash residue from Chinese power plants was used in drywall that's the subject of growing scrutiny in Florida. The suit, which seeks class action status in U.S. District court in Fort Myers, alleges 10 million square feet of the drywall was used in Florida homes. If true, the allegation indicates more than 200,000 sheets of the drywall were used in the state – enough to build 800 to 2,000 homes, depending on their size.


  • The federal suit claims that the defendants, [...] negligently manufactured and sold the defective drywall, which was "unreasonably dangerous" in normal use because it caused corrosion to air-conditioning and electrical components, and caused coughing and irritation of sinuses, eyes and throats. It goes on to state that, “when combined with moisture in the air, these sulfur compounds create sulfuric acid.”

For more, see Class action lawsuit filed over Chinese drywall.

In related stories from The Wall Street Journal, see:

Go here for links to recent media reports on the problems with "Chinese drywall."

California AG Warns Against "Property Tax Reduction" Scams

In Sacramento, California, the Office of the California Attorney General announces:
  • Attorney General Edmund G. Brown Jr. [Thursday] issued a Consumer Alert to California homeowners about a “blatant and costly scam” targeting homeowners with declining property values. “This blatant and costly scam holds out hope to homeowners that their property taxes will be reduced if they pay hundreds of dollars to a middleman to have their property re-evaluated,” Attorney General Brown said. “In point of fact, homeowners can seek relief directly from their county assessor free of charge. Homeowners should be on high alert.”(1)

For the entire press release, see Attorney General Brown: Homeowners Should be on High Alert for Property Tax Scams.

(1) According to the press release, companies are sending deceptive mailers to homeowners offering help in reducing property tax assessments, if the homeowner pays the company hundreds of dollars in fees. The companies use official-sounding names such as “Tax Adjusters,” “Tax Readjustment” or “Tax Review” to make victims believe the company is a government agency.

Race Bias In Twin Cities' Mortgage Lending, Says Report

In Minneapolis, Minnesota, the Twin Cities Daily Planet reports:
  • Lenders discriminate. Housing is segregated. Communities of color are hit harder by the foreclosure crisis than anyone else. That’s the ugly face of racial discrimination in the Twin Cities revealed in a 54-page report released by the Institute on Race and Poverty at the University of Minnesota Law School.

  • People of color “continue to receive home loans on worse terms and at a higher cost than similarly situated white borrowers, according to “Communities in Crisis: Race and Mortgage Lending in the Twin Cities”. Higher incomes did not protect people of color from lending disparities, with high-income black, Latino and Asian applicants denied loans at higher rates than low-income white borrowers.

For more, see Report documents mortgage discrimination in Twin Cities.

Go here, Go here, and Go here for other posts on alleged discrimination in real estate transactions. DiscriminationPredatoryLendingAlpha

County Commission Votes Against Clipping Landowners With Upfront Tax Penalties When Entering Into Natural Gas Leases

In Bradford County, Pennsylvania, WNEP-TV Channel 16 reports:
  • Drilling for natural gas is becoming very profitable for landowners in the northern tier but in Bradford County it looked as though farmers and landowners would be penalized just to begin the drilling, whether there was gas or not. [Last week] all that changed.

  • Bradford County commissioners voted two-to-one to prevent landowners from having to pay a penalty for natural gas drilling on their property. [...] Now, those landowners won't have to pay up until natural gas is actually pumped from their properties.

  • It's a victory for many of the property owners who were at the county courthouse in Towanda [...]. Some would have had to pay a lot of money as a penalty for allowing natural gas drilling on land that got a tax break. "Farmers just don't have the money. It's just that plain and simple. They don't have the money," said Commissioner John Sullivan. Farming is a way of life for Sullivan and so many others in Bradford County. That's why he voted to change how the state's Clean and Green Law is interpreted.

For more, see Commissioners Side with Landowners. MineralRightsAlpha

Broward Sheriff Uses Roadside Checkpoints To Crack Down On Unlicensed Home Improvement Contractors

In Broward County, Florida, WTVJ-TV Channel 6 reports:
  • It’s a scenario that happens too often in South Florida when residents and businesses are duped after hiring unlicensed contractors, but now the Broward Sheriff's Office is making sure you get what you pay for. With the help of city, county and state partners, BSO was able to set up a commercial vehicle observation checkpoint Tuesday morning [...]. The operation started with a commercial vehicle observation checkpoint. BSO deputies in marked units and on motorcycles stopped commercial vehicles not displaying the proper license numbers on the sides of their vehicles. [...] Deputies said two men were arrested during Tuesday's vehicle checkpoint.

Source: BSO Cracks Down On Unlicensed Contractors.

More Trouble For Shaky Auto Dealerships

In the San Francisco Bay Area, The Oakland Tribune reports:

  • Four GMC Pontiac Buick dealerships, located in Dublin, Newark, Colma and San Jose, have abruptly closed their doors, as a fresh wave of shutdowns and consolidations roils the ranks of Bay Area auto dealers in the new year. About 100 employees lost their jobs because of the closure of Dublin Buick Pontiac GMC in Dublin and the shutdown of Fremont Pontiac GMC in Newark. Those East Bay operations closed Jan. 29.

For more, see More Bay Area auto dealerships closing.


In Central New York, The Syracuse Post Standard reports:

  • Since 2007, 11 car dealerships eight in Onondaga County have closed in Central New York.
    The 2007 Verizon Yellow Pages listed 46 new-car sales operations, handling 92 franchises. One veteran dealer estimated that the eight lost dealerships in Onondaga County sold about 15 percent of the cars there during an average year.

For more, see Area has lost 11 car dealerships.


In Gilroy, California, The Gilroy Dispatch reports:

  • After 60 years in business, Gilroy Pontiac Buick GMC has run out of gas, leaving 26 people without a job and causing other auto dealers and city officials to wonder who's next.(1)

For more, see Car dealership giant falls.

(1) These stories serve as a reminder for those either trading in, or buying, a used car to exercise extreme caution when selecting a dealership with which to do business. For a description of the kind of trouble awaiting an unwitting consumer who does business with the wrong dealership, see Folding dealers shock car buyers with unpaid liens ("It's becoming a serious problem because the consumer, through no fault of their own, may be facing financial ruin just because they purchased a car," [California state Senator Ellen] Corbett said.).

Friday, February 13, 2009

Fannie, Freddie Foreclosure Suspensions Extended Through March 6

The Associated Press reports:
  • Government-controlled mortgage finance companies Fannie Mae and Freddie Mac said Friday they have immediately suspended all foreclosure sales involving occupied single-family and 2-4 unit properties through March 6, to give troubled borrowers more time to work with loan servicers to avoid losing their homes. The move, which doesn't apply to vacant properties in foreclosure, is ahead of the Obama administration's roll-out of its national foreclosure prevention and loan modification program.

For more, see Fannie Mae, Freddie Mac again suspend foreclosures.

Florida AG Hits Orlando Loan Modification Firm With First Lawsuit Under New State Foreclosure Fraud Law

From the Office of the Florida Attorney General:
  • Attorney General Bill McCollum today announced that his Economic Crimes Division has filed a lawsuit against an Orlando company allegedly providing loan modification services to homeowners facing foreclosure -- the first lawsuit filed under the new Foreclosure Rescue Fraud Protection Act. According to the lawsuit filed today in Orange County, FMA Servicing, Inc. and its owners are in violation of the law which, among other provisions, prohibits a company providing foreclosure-related rescue services from charging consumers any up-front fee.


  • An investigation conducted by the Economic Crimes Division revealed that FMA Servicing, which does business under the name Financial Management Advisors,(1) allegedly charges an up-front fee as high as $2,500 to homeowners seeking loan modification services. Additionally, the lawsuit claims the company misrepresented relationships with lenders and falsely advertised the presence of attorneys and certified public accountants on staff. The Attorney General has also filed a motion seeking to temporarily prevent FMA Servicing from charging up-front fees.


  • Florida Statutes 501.1377, which took effect on October 1, 2008, protects homeowners who are in foreclosure or nearing foreclosure from companies offering potentially fraudulent foreclosure "rescue" services. Specifically, the statute governs companies providing foreclosure-related rescue services including loan modification and short sale services. These companies are prohibited from charging homeowners an up-front fee for these services and must provide homeowners with a written agreement.

For more, see McCollum: First Lawsuit Filed Under New Foreclosure Rescue Fraud Law (Orlando company sued for allegedly engaging in fraudulent foreclosure rescue services).

For the lawsuit, see State of Florida v. FMA Servicing, Inc., et al.

(1) Other defendants named are Edward Billings, Joseph Esposito, and Salvatore Esposito. They face civil charges of violating:

  • §§501.1377(3)-(4), Florida Statutes, (2008), Violations Involving Homeowners during the Course of Residential Foreclosure Proceedings;
  • §817.06(1), Florida Statutes, (2008), False Advertising;
  • §817.41(1)-(2), Florida Statutes, (2008), Misleading Advertising; and
  • §865.09(3), Florida Statutes (2008), Fictitious Name Act.

Three Financial Giants Declare Foreclosure Moratorium On "Some" Foreclosures

Reuters reports:
  • Citigroup Inc, JPMorgan Chase & Co, and Morgan Stanley said they had placed a moratorium on foreclosing on some home loans to give the government time to launch a $50 billion mortgage relief program.


  • Citigroup said its moratorium, which started on February 12, will last until either President Barack Obama has finalized the details of a program for modifying mortgages, or until March 12, whichever comes first. It applies to mortgages that Citi owns, to borrowers living in their homes. Morgan Stanley's moratorium started this week, and will last until March 6. It applies to the bank's Saxon unit, which collects payments on loans. JPMorgan Chase & Co said its moratorium will last through March 6, which it believes is enough time for the Treasury to announce a new mortgage modification plan.

For the story, see Big banks place moratorium on some foreclosures.

Detroit-Area Sheriff Sued Over Foreclosure Moratorium

In Wayne County, Michigan, the Detroit Free Press reports:
  • A mortgage company today sued Wayne County Sheriff Warren Evans, saying the sheriff has no legal basis to halt the sale of foreclosed homes. The lawsuit, filed in U.S. District Court in Detroit, on behalf of Towne Mortgage Co. in Troy, asks Judge Paul Borman to order Evans to start holding the sales again. [...] Evans announced last week that he believes the federal Troubled Asset Relief Program, approved by Congress last fall, trumps state law and preempts him from selling foreclosed homes.

For more, see Evans is sued over foreclosure plans.

For Sheriff Evans response to Towne Mortgage's announcement, see Full statement from Sheriff Warren Evans.

Hawaii Feds Bust Four Foreclosure Rescue Operators In Alleged Equity Stripping, Sale-Leaseback Scam Targeting Financially Strapped Homeowners

In Honolulu, Hawaii, the Honolulu Advertiser reports:
  • The two top executives of a Honolulu mortgage company were indicted by a federal grand jury for allegedly coordinating a scheme that bilked banks and troubled homeowners out of hundreds of thousands of dollars, court documents show.(1)


  • They are accused of targeting homeowners on the brink of foreclosure — including some who were members of Calvary Chapel Pearl Harbor — and offering relief if the homeowners agreed to a temporary sale of the house to a third party "investor" who worked for John Dimitrion, according to court documents.

  • The four allegedly told the homeowners they could remain in their homes and their title would be returned to them after a set period of time. Homeowners paid John Dimitrion $20,000 for the service, thinking their mortgage payments would be handled by Dimitrion's company, court documents said.

  • John Dimitrion and his associates applied for larger loans than what the homeowners owed and allegedly stole the proceeds by funneling the money into fake escrow accounts created by Julie Dimitrion, the documents said. In each case the homeowner was unable to make the payments on the larger loan, the documents show.

For more, see Honolulu mortgage company executives indicted in scam (Company's founder, wife, 2 others accused in home loan scheme).

(1) According to the story, John M. Dimitrion, founder and chief executive of Mortgage Alliance LLC and his wife, Julie A.B. Dimitrion, the firm's chief financial officer, were indicted with Rick Kealoha Pa Jr. and Benjamin Yoshito Thompson after they allegedly defrauded homeowners and lending institutions by promising to stave off foreclosure.

Philly DA Announces Issuance Of Arrest Warrants In Alleged Deed Theft Operation; Among Targeted Victims Were The Non-English Speaking & The Deceased

From the Philadelphia, Pennsylvania District Attorney's Office:
  • District Attorney Lynne Abraham [Wednesday] announced that arrest warrants have been issued for fifteen people for engaging in a continuing conspiratorial and criminal enterprise to steal homes, [...] among other crimes.(1)


  • The Grand Jury investigation revealed that generally, this ring forged and recorded deeds to abandoned or otherwise uninhabited properties, transferring these properties from their true and rightful owners to codefendants, or fictitious person, and then "sold" these properties to unsuspecting victims. [...] In each case of fraud, the lawful owner was totally unaware, and never consented to the "sale" of his property. In many instances the true and lawful owners of the property were dead for a number of years. Often the conspiratorial ring targeted immigrant, non-English speaking citizens specifically because of the lack of sophistication with the laws and procedures of the transfer of property in this state.

For the entire press release, with the list of addresses of the stlen homes, see Fifteen Arrest Warrants Issued in House Stealing Cases Based on Grand Jury Presentment (More than 80 Properties Illegally Sold Victimizing Legal Homeowners and Unsuspecting Buyers).

For Philadelphia Daily News' coverage on these charges, see:

  • 15 charged as house thieves ("House-stealing is a regular and cottage industry in the city," Abraham said);
  • Stealing houses (Abraham says that as many as 500 fraudulent sales are being investigated);
  • Hot line for house thefts (The DA's Office has set up a special hot line - 215-686-9901 - for those who are victims of "house stealing," in which scammers prey on homeowners by forging documents for empty homes, then selling them to another buyer).

For an old NBC10 television story on the deed theft problem in Philadelphia, see Stolen Homes.

Go here, Go here, Go here, go here, go here, and go here for other posts related to deed or refinancing scams by forgery, swindle, etc.

(1) Those charged are Carlos Quiles, Ivan Delgado, Troy Baylor, Richard Smith, Kenneth Lyons, Lenora Irene Jackson, Rebecca A. Robinson, Tyrone Davenport, Juanita Torres, Alberto Rodriguez, Daralease Brown, Vincent Wilder, David Lespier, Maria Roman, Zoraida Cuevas and Marino Rodriguez. They face numerous counts of:

  1. Corrupt Organizations, 18 Pa.C.S.A. §911 ( F-1);
  2. Criminal Conspiracy, 18 Pa.C.S.A. §903 (F-3);
  3. Theft by Unlawful Taking or Disposition, Pa.C.S.A. §3921 (F-3);
  4. Theft by Deception, 18 Pa.C.S.A. §3922 (F-3);
  5. Forgery, 18 Pa.C.S.A. §4101 (F-3);
  6. Perjury, 18 Pa.C.S.A. §4902 (F-3);
  7. Burglary, 18 Pa.C.S.A. §3502 (F-1);
  8. Criminal Trespass, 18 Pa.C.S.A. §3503 (F-2 );
  9. Tampering with Records or Identification, 18 Pa.C.S.A. §4104 (M-1);
  10. Securing Execution of Documents by Deception, 18 Pa.C.S.A. §4114 (M-2); and
  11. Tampering with Public Records or Information, 18 Pa.C.S.A. §4911 (F-3). DeedGammaTheft

Nevada Dems, GOP Lawmakers Supportive Of Proposed State Foreclosure Mediation Bill

In Carson City, Nevada, the Las Vegas Review Journal reports:
  • Conservative Republicans expressed tentative support [Wednesday] for a Democratic bill to require banks and other lenders to participate in mediation hearings with homeowners who are in danger of losing their homes to foreclosure. "This bill represents intervention into the private sector that I would generally be uncomfortable with," said Sen. Warren Hardy, R-Las Vegas. "But these are not normal circumstances and I want to be part of the solution."


  • Under the proposal, people in danger of losing their homes would apply to the Administrative Office of the Courts, at the Nevada Supreme Court, and request a mediation hearing. Lenders would be required to attend or send a representative who has the power to renegotiate loans. "We recognize the importance of this issue to the citizens of the state," Chief Justice Jim Hardesty said. "This is an all-hands-on-deck crisis."

For more, see Republicans offer tentative support for Buckley's foreclosure mediation bill.

Elderly Homeowner In Foreclosure Allegedly Victimized By Predatory Loan Commits Suicide

In East Palestine, Ohio, The Youngstown Vindicator reports:
  • A 72-year-old woman who feared she’d lose her home to foreclosure hanged herself to death, the family lawyer said. [She] died the morning of Jan. 24 at her home, just days after receiving her second summons and foreclosure complaint from her mortgage lender, said Atty. Robert B. Holman of Bedford.


  • The foreclosure complaint was filed Jan. 6 in Columbiana County Common Pleas Court by Chase Home Finance in Columbus. [...] In a 31-page counterclaim lawsuit,(1) Holman names as third-party defendants Lake Erie Title Agency in Dayton, North Coast Capital Funding in Cuyahoga Falls and SML Corporation, a real estate agency in Hudson, Ohio.

For more, see Family says suicide caused by foreclosure action (Lawyer: Couple in their 70s and on fixed income was given a 30-year, $160,000 loan).

Go here for other posts on foreclosures and suicide.

(1) Holman alleges in the lawsuit filed on behalf of the [homeowners] that [they] were the victims of a predatory lending scheme. He said the bank, mortgage company and title insurance company used an inflated appraisal of $200,000 to create an over-inflated mortgage loan, thereby putting [them] on the path to financial ruin. He said the property [...] had a market value of $80,000. suicide homeowner foreclosure zeta

North Carolina Couple Loses Home To Foreclosure After Loan Modification Firm Allegedly Beat Them Out Of $1,300

In Raleigh, North Carolina, WRAL-TV Channel 5 reports on a local couple who found themselves stuck with an "exploding" adjustable rate mortgage on their home that doubled their house payment within six months of obtaining the loan, and who needed help:
  • That was beyond what they could handle, so the Mizers looked for refinancing. They tried 40 lenders, but all of them turned down the family down. Then they got a letter from mortgage restructuring firm Augustus, Rae & Reed that claimed to have a "95.5 percent resolution success" rate in stopping foreclosures. “I remember us hugging (and saying) ‘Baby, we're going to get to keep the house,’ (and) telling the kids we're going to be able to keep the house," Mizer said.

  • The company charged more than $1,300 upfront and told the Mizers not to communicate with their lender. Company representatives said they would handle everything, according to Mizer, who said that was the last time she heard from the company. One month later, the family's bank started foreclosure proceedings and told them it had never been contacted by Augustus, Rae & Reed. The Mizers lost their house.

For the story, see Facing foreclosure? Watch out for scammers.

Unwitting Investor Involved In Alleged $100M Mortgage & Investment Fraud Left Holding The Bag

Buried in a recent story on an alleged $100 million mortgage and investment fraud operation based in Sacramento, California is this excerpt describing one of the apparently unwitting investors who was duped into participating in the investment program:
  • One Sacramento-area investor who asked not to be identified told News10 she and her husband bought four properties in California, Arizona and Florida through Loomis [Wealth Solutions] with the promise that Loomis would cover the mortgage, taxes and homeowners dues with the rents collected. The investor said three of the four properties were never rented and Loomis stopped making payments in August. She said the couple is left with at least $250,000 in losses and four pending foreclosures on their credit.

For the story, see Sacramento Fraud Fugitive a "Big Fat Liar?"

For more on this story, see Two Fugitives Nabbed In Alleged Mortgage & Investment Fraud Scam Involving 100s Of Homes, Many Now In Foreclosure; Lender Losses About $100M, Say Feds.

Avoiding Income Taxes On Debt Cancellation Not Automatic; Must File Required Form; New Law Applies Only To Loans Used To Buy, Improve Primary Home

In a story from KUSA-TV Channel 9 (Denver, Colorado), IRS National Taxpayer Advocate Nina Olson is reported as giving this reminder on avoiding income taxes on the cancellation of debt when homeowners lose their primary residence to foreclosure, or when the debt cancellation is incident to either a loan modification or a short sale of the their primary residence:
  • [T]he amount of debt that is cancelled is actually taxable income under the tax laws, unless there is a rule that it is not taxable. In 2007 Congress passed a law that says if you lost your home to foreclosure and you used the mortgage to buy or improve your home, then the amount of cancelled debt would not be taxable to the extent that you used it to buy or improve your home.(1)

For more, see Taxpayer advocate offers tips for homeowners.

Go here for more on Dodging The Income Tax On Real Estate Foreclosure & Short Sales.

(1) What this means is that if a homeowner refinanced a home, took cash out, and blew it on a vacation, a wedding, or used it to pay off car loans, credit card balances, student loans, medical bills or anything else other than making home improvements, then to that extent, the homeowner is out of luck and will owe taxes on the cancelled debt attributable to the amount blown, acording to the new law passed in 2007.

However, even if the debt cancellation does not qualify for favorable tax treatment under the new law, it might nevertheless qualify for similar favorable tax treatment under already existing law (in connection with debt cancellation (a) by reason of filing for bankruptcy, or (b) when the taxpayer was insolvent, or (c) in a number of other circumstances). For more on this point, see IRS Publication 525 (pages 19-20 - "Canceled Debts") and IRS Publication 908 (pages 21-23 - "Debt Cancellation"). If qualified, this favorable tax treatment is available to anyone, is not limited to homeowners, and applies to cancellation of any debt (ie. car loans, credit cards, etc.) and IRS Publication 4681: Canceled Debts, Foreclosures, Reposessions and Abandonments. short sale income tax

Misinformation Provokes Stampede Of Homeowners Filing Homestead Affidavits To Avoid Foreclosure

In Prescott, Arizona, The Daily Courier reports:
  • The Yavapai County Recorder's Office is on the receiving end of a small stampede of county residents filing homestead affidavits. The reason - homeowners have a mistaken belief it will protect them from banks or creditors foreclosing on their homes."That is a totally false rumor," Jill Hoogendyk, president of Arizona Mortgage Lenders Association said. "Homestead protects you from losing your equity in a home if you are getting sued, but it has nothing to do with foreclosure." [...] Hoogendyk said that the misinformation about a homestead exemption protecting against foreclosures, sounds to her like "a sign of our times with so many people getting foreclosed on."

For more, see Homestead filing no protection against foreclosure.

Thursday, February 12, 2009

North Carolina Developer Accuses Wachovia Of Shakedown, Fraud, Unfair Practices; "Not Us!" Says Lender

In Guilford County, North Carolina, The Business Journal of the Greater Triad Area reports:
  • A Mount Airy developer has filed suit against Wachovia Bank, alleging extortion, fraud and unfair and deceptive trade practices. Granite Development LLC filed the suit in Guilford County Superior Court in relation to construction loans the company says it had to build [area] retail centers [...] according to an announcement from the developer. The suit says Wachovia used threats of foreclosure and other predatory practices to try to force Granite to accept unreasonable loan demands on an extension the developer wanted on the construction loans. [... A Wachovia spokesperson] said she could not comment on any specifics of the suit, but she said Wachovia “strongly disagrees” with the allegations it contains.

For more, see Developer sues Wachovia for "predatory" practices.

Hiring A Contractor For Home Improvement Work? Don't Forget Those Lien Waivers

An excerpt in a recent Q & A column appearing in the Daily Herald, Illinois attorney Tom Resnick gives this reminder of the importance obtaining lien waivers anytime a property owner hires others to make home improvements on a home.
  • [A]nyone who performs work or furnishes materials that ultimately improve your property obtains certain rights under the mechanics lien act. The most basic of these rights is that the contractor may record and ultimately foreclose his or her lien. In the event the contractor prevails on his or her lien claim, if the contractor is not paid, he or she can force the sale of the property to satisfy the claim.

  • Accordingly, it is imperative that anytime a party performs work at your property, upon final payment, you should insist on receiving a Final Waiver of Lien. This document generally states that the contractor waives any lien rights he or she has on the property. A properly drafted and executed Final Waiver of Lien will generally defeat a lien claim that evolved before the execution of the Final Waiver.(1)

For more, including some options applicable to Illinois homeowners when a contractor slaps a lien on their property, see Don't forget a final, important step in dealing with contractors.

(1) Obtaining lien waivers from any subcontractors and suppliers involved in the job may not be a bad idea, either. Buyers of newly-constructed homes are also well-advised to assure themselves that the appropriate lien waivers have been obtained by the title insurance agent handling the closing. For an example of what could happen if the lien waivers are not obtained and the homebuilder or general contractor goes out of business, see Stiffed Sub Sues Contractor For Unpaid Work At New Development; Slaps Liens, Seeks Foreclosure On Residents' Homes. StiffingContractorsTheta

Another Upfront Fee Foreclosure Rescue, Loan Modification Firm Under Fire From Feds

The Federal Trade Commission announced Wednesday:
  • In a case that affects consumers throughout the nation, the Federal Trade Commission has charged a mortgage foreclosure “rescue” company with falsely claiming that it will stop foreclosure or fully refund consumers’ money.(1) A federal court ordered a halt to the alleged practices and froze the defendants’ assets pending trial. Many people who paid the company ultimately lost their homes to foreclosure, and others avoided foreclosure only through their own efforts. The FTC seeks to prohibit the deceptive claims and make the company pay consumer redress.

  • According to the Commission, the company promotes its “Fresh Start Program” by mailing ads to consumers who are behind on their mortgage payments and facing foreclosure. [...] Consumers who call the company are told that negotiations with lenders will begin once consumers pay a fee ranging from $300 to more than $1,000, which typically is paid before the consumer receives a contract.

For the entire press release, see FTC Sues Mortgage Foreclosure “Rescue” Operation.

For the FTC legal documents filed in this case, see:

  • Temporary Restraining Order With Asset Freeze, Appointment of Temporary Receiver and Other Equitable Relief, and Order to Show Cause,
  • Complaint for Permanent Injunction and Other Equitable Relief

(1) The defendants are National Foreclosure Relief Inc., David Ealy, Chele Stone, also known as Chele Medina, and Hugo Tapia. The Commission vote to authorize staff to file the complaint was 4-0. The complaint was filed in the U.S. District Court for the Central District of California on February 2, 2009; the court entered a temporary restraining order and asset freeze later that day.

Filmmaker Seeks Volunteers To Help Prove Wall Street Bailout Is "The Biggest Swindle In American History"

Bloomberg News reports:
  • Filmmaker Michael Moore, who says the Wall Street bailout is “the biggest swindle in American history,” is asking bankers to help him make a movie proving it. The 55-year-old Michigan native posted an open letter on his Web site yesterday seeking volunteers to “step up as an American and do your duty of shedding some light” on the almost $1.1 trillion in losses and writedowns globally. Moore also sent the letter to people on his e-mail list.

For more, see Michael Moore Asks Bankers to Help Prove Bailout Is ‘Swindle.’

For Moore's letter, see Will You Help Me With My Next Film? (a request from Michael Moore).

Missouri Homebuilder Cops Plea To Bank Fraud; Accused Of Using Straw Buyers To Unload 16 Homes That Ended Up In Foreclosure

In St. Louis, Missouri, the St. Louis Post-Dispatch reports:
  • The owner of a Crestwood development company pleaded guilty a federal bank fraud charge this morning and admitted orchestrating a mortgage fraud scheme that netted him hundreds of thousands of dollars and sent 16 area homes into foreclosure. Joseph A. Baumeister, 55, of St. Louis County, admitted that between January 2007 and October 2008, he used straw purchasers and false information on loan documents to buy 16 homes, Assistant U.S. Attorney Jeff Jensen said in court.

For more, see Crestwood developer admits mortgage fraud scheme.

Two Fugitives Nabbed In Alleged Mortgage & Investment Fraud Scam Involving 100s Of Homes, Many Now In Foreclosure; Lender Losses About $100M, Say Feds

In Sacramento, California, The Sacramento Bee reports:
  • A second fugitive in what officials describe as one of the nation's largest mortgage and investment fraud cases was captured [...] as he tried to re-enter the U.S. from Canada. Christopher Jared Warren, 26, of Sacramento was arrested at 11:15 [Tuesday] night (EST) at the Canadian border as he attempted to enter the United States in a taxi at the Peace Bridge in Buffalo, N.Y.


  • Warren is the second of three men who went on the lam in an ongoing federal probe into purchases of hundreds of homes nationwide, many of which are now in foreclosure. The deals have allegedly led to about $100 million in losses by lenders.

  • Officials on Tuesday announced that Garret Griffith Gililland III, 27, is in custody in Barcelona, Spain, fighting extradition to the U.S. Still considered a fugitive is Scott Edward Cavell, 25, fled the country last week. U.S. State Department records show Cavell obtained a passport in San Francisco on Jan. 27 under an assumed name -- Adam Kingsbury Curry. Warren, Gililland and Cavell are part of a federal probe that has zeroed in on Roseville-based Loomis Wealth Solutions.

For more, see Sacramento fraud fugitive caught with $70,000 in shoes.

Feds Drop Most Charges Against Cincy Cop/Foreclosure Rescue Operator Accused Of Preying On People Facing Foreclosure

In Cincinnati, Ohio, the Cincinnati Enquirer reports:
  • A Cincinnati police officer admitted Wednesday he cheated on his taxes and stole a widow’s life insurance benefits. Officer Adrian Mitchell, who has been suspended without pay since last May, pleaded guilty in U.S. District Court to charges of mail fraud and filing a false tax return. He faces up to three years in prison when he is sentenced later this year.

  • Mitchell, 36, had been charged with mail, wire and bank fraud, and federal prosecutors had accused him of preying on people who lost their homes to foreclosure. Most of those charges were dropped Wednesday when Mitchell agreed to the plea deal that slashed his potential prison time from 30 years to three.


  • Mitchell, the owner of Rich Properties, bought homes on the brink of foreclosure and then offered to rent them back to the original homeowners with promises they could eventually buy back the properties, court records say. Prosecutors said last year that Mitchell sometimes misled banks by using “sham” buyers or other tactics to obtain loans to buy properties.

  • When one renter hanged himself, prosecutors say, Mitchell filled out life insurance forms intended for the man’s widow. They say he then cashed checks totaling $188,000 from an account the life insurance company set up for the widow.

For more, see Cincy cop fleeced widow.

Central Florida Woman Loses Home To Foreclosure Despite Paying Thousand$ For Loan Modification

In Orlando, Florida, WFTV Channel 9 reports:
  • An Orlando woman hired a foreclosure rescue service. She not only lost thousands of dollars, she's also losing her home. "I'm scared every day every minute," said Michelle Campbell. The bank has already foreclosed on her home in west Orlando--so she faces eviction any day. Michelle says her daughter's sudden death from a rare seizure -- left her scrambling to make mortgage payments. That's when the realtor she hoped could sell her house ---- instead told her to hire a foreclosure rescue company.


  • Michelle says he recommended U.S. Loss Mitigation and the American Housing Authority. Both out-of-state firms promised to negotiate with her bank to lower the payments and save her house ... But first she had to pay the rescue companies 3 thousand dollars up front.(1) According to Michelle, both failed to even contact her lender---her home was sold by the bank last month.

For more, see Woman Loses Home After Paying Thousands To Home Rescue Companies.

(1) Upfront fees for these services is now against Florida law. See Florida AG Shuts Down Tampa-Area Foreclosure Rescue Operator; Accused Of Taking Upfront Fees In Violation Of New Law.

Arrest Warrants Issued For Suspects Accused Of "Hijacking" Vacant, Foreclosed Home In Gated Community

In Sacramento, California, News10 reports:
  • The neighbors were suspicious but the tenants showed police a lease to prove they belonged. But now, the case of mystery tenants moving into a vacant upscale Natomas house in the Westlake subdivision last week has brought arrest warrants for those tenants and their real estate broker.(1)

  • After a one-week investigation, Sacramento Police Department detectives confirmed the couple who moved into 3700 Clubside Lane in the exclusive neighborhood had no legal right to be there. The suspicion is that with help from a friend who's a real estate broker, the couple moved in and may have planned to get money from the legal owner in return for moving out later without going through the long eviction process, according to police Sgt. Norm Leong.

For more, see Natomas Rental Fraud Brings Arrest Warrants.

(1) Arrest warrants have been issued for real estate broker Phillis Powers, 52. Also sought under the warrants are Carver Barney, 57, and his wife Sandra Barney, 54, the couple who had moved into the house. A fourth suspect is Dennis Eugene, 49, who Powers or the tenants allegedly hired to clean up the house. The warrants are all for a charge of criminal trespass. The legal owner of the house is Aurora Loan Services of Colorado which purchased the house at auction on Jan. 29. PhonyLandlordScamZeta

Middle Tennessee Foreclosure Rescue Operator Faces Civil Suits; Accused Of Selling Houses Out From Under Homeowners

In Donelson, Tennessee, Newschannel 5 reports:
  • [N]ewsChannel 5 investigated one company that promised homeowners it would help save their homes. Charles Jones is behind and the man who claimed he could help homeowners who were facing foreclosure keep their home.

  • "I thought he was going to be my savior and help me out," said Kelly Reynolds. Reynolds was two months behind in her house payments for her home in Donelson. She said Jones claimed his company would cover her mortgage for a year, and then she could start paying him back. "He was very reassuring, and he said ‘I promise that you will not lose your home,'" Reynolds said. The Reynolds now face eviction because, it turns out, Jones sold their home right out from under them.


  • The amazing thing is that Jones actually bought the Reynolds' house a year ago. The Reynolds, who have lived at their home the entire time, had absolutely no idea until Jones stopped paying the mortgage. Now, his bank is telling the Reynolds they have to get out. NewsChannel 5 found at least three others in Middle Tennessee who are now suing Jones and his company, claiming he did the same thing to them.(1)

  • "The fact that all of these people feel like they were taken for a ride, believe they were defrauded out of their houses - I believe that says something," said attorney Sharmila Murthy. Murthy was involved with one of those lawsuits, which accuses Jones and his company of fraud. The Reynolds now fear they have not only lost their house, but also the $100,000 they had in equity.

For more, see Company Claimed It Could Save Homes From Foreclosure (read text) (watch video).

For additional coverage from Newschannel 5, see Accused of Fraud, Misrepresentation.

(1) Whether the financially strapped homeowners can successfully void the title transfers (and any mortgage liens created incident thereto) to subsequent purchasers and encumbrancers could turn on whether the subsequent purchasers and encumbrancers can be charged with inquiry notice of the alleged fraud and/or any other unrecorded rights (ie. equitable mortgage - see Perry v. Queen, (M.D. Tn. Civil No. 3:05-0599) 2006 U.S. Dist. LEXIS 17120, February 27, 2006 (unpublished); Hensley v. Britt, 1996 Tenn. App. LEXIS 793, No. 01A01-9607-CH-00296, 1996 WL 709375 (Tenn. Ct. App. Dec. 11, 1996)) the scammed homeowners can establish that they had at the time of the relevant conveyances. Lack of participation in the scam, and lack of any actual knowledge thereof, by the subsequent purchasers / encumbrancers is not enough to sustain a claim of bona fide purchaser. See Aslinger v. Price, No. E2006-00029-COA-R3-CV, 2006 Tenn. App. LEXIS 584, (Ct. App. at Knoxville; September 1, 2006), in which a Tennessee appeals court, quoting from earlier Tennessee cases, stated that a subsequent purchaser is:

  • "(c)hargeable with notice, by implication, of every fact affecting the title which would be discovered by an examination…of every fact as to which the purchaser, with reasonable prudence or diligence, ought to become acquainted."

The court also points out that "whatever is sufficient to put a person upon inquiry, is notice of all the facts to which that inquiry will lead, when prosecuted with reasonable diligence and good faith." See also: Wash. Mut. Bank v. N.K.T. Land Acquisitions Inc., No. M2007-02040-COA-R3-CV, 2008 Tenn. App. LEXIS 414 (Tenn. Ct. App. at Nashville; July 23, 2008) for a discussion of actual notice, constructive notice, and inquiry notice under Tennessee law, and their interplay with the Tennessee recording statutes.

Inasmuch as the scammed homeowners continued in possession of their homes after being duped by the foreclosure rescue operator, such possession, arguably, could end up creating notice of the fraud which might be imputed to the subsequent purchasers / encumbrancers. Being chargeable, by imputation, with notice of the fraud could then defeat any claim that they are bona fide purchasers / encumbrancers. For cases that support the proposition that possession of real estate by one other than the seller is enough to trigger this imposition of the duty to inquire as to possible unrecorded rights of the possessor, see Bona Fide Purchaser Doctrine, Possession Of Property By Occupants Other Than The Vendor & The Duty To Inquire.

Connecticut Courts On Legal Standing

The stories abound on foreclosure actions where the foreclosing lender was said not to have legal standing to bring the lawsuit.
What follows below are excerpts from decisions of the Connecticut Supreme Court and the Connecticut Appellate Court that describes what standing is, and the importance of having it before walking into a courthouse to initiate a lawsuit. It also addresses the connection, under Connecticut law, between standing, which a plaintiff must have before bringing a lawsuit, and subject matter jurisdiction, which is what a judge must have before rendering judgment in a particular case.(1)

From Webster Bank v. Zak, 259 Conn. 766, 774, 792 A.2d 66 (2002):

  • We begin our analysis by underscoring that a party must have standing to assert a claim in order for the court to have subject matter jurisdiction over the claim. Ramos v. Vernon, 254 Conn. 799, 808, 761 A.2d 705 (2000). ‘‘Standing is the legal right to set judicial machinery in motion. One cannot rightfully invoke the jurisdiction of the court unless he has, in an individual or representative capacity, some real interest in the cause of action, or a legal or equitable right, title or interest in the subject matter of the controversy.’’ (Internal quotation marks omitted.) Ganim v. Smith & Wesson Corp., 258 Conn. 313, 347, 780 A.2d 98 (2001).

  • ‘‘This court has often stated that the question of subject matter jurisdiction, because it addresses the basic competency of the court, can be raised by any of the parties, or by the court sua sponte, at any time.’’ Daley v. Hartford, 215 Conn. 14, 27–28, 574 A.2d 194, cert. denied, 498 U.S. 982, 111 S. Ct. 513, 112 L. Ed. 2d 525 (1990). ‘‘[T]he court has a duty to dismiss, even on its own initiative, any appeal that it lacks jurisdiction to hear.’’ Sasso v. Aleshin, 197 Conn. 87, 89, 495 A.2d 1066 (1985). Moreover, ‘‘[t]he parties cannot confer subject matter jurisdiction on the court, either by waiver or by consent.’’ Sadloski v. Manchester, 228 Conn. 79, 83, 634 A.2d 888 (1993), on appeal after remand, 235 Conn. 637, 668 A.2d 1314 (1995).

  • ‘‘Standing [however] is not a technical rule intended to keep aggrieved parties out of court; nor is it a test of substantive rights. Rather it is a practical concept designed to ensure that courts and parties are not vexed by suits brought to vindicate nonjusticable interests and that judicial decisions which may affect the rights of others are forged in hot controversy, with each view fairly and vigorously represented.’’ (Internal quotation marks omitted.) Harris v. New Milford, 259 Conn. 402, 409–10, 788 A.2d 1239 (2002).


From Seguro v. Cummiskey, 82 Conn. App. 186, 199, 844 A.2d 224 (2004):

  • A party must be aggrieved to have standing to invoke the jurisdiction of the court. In re Shawn S., 262 Conn. 155, 164–65, 810 A.2d 799 (2002). ‘‘The fundamental test for determining aggrievement encompasses a well settled twofold determination: first, the party claiming aggrievement must successfully demonstrate a specific, personal and legal interest in [the subject matter of the challenged action] . . . . Second, the party claiming aggrievement must successfully establish that this specific personal and legal interest has been specially and injuriously affected by the [challenged action].’’ (Internal quotation marks omitted.) Cardi Materials v. Connecticut Landscaping Bruzzi Corp., 77 Conn. App. 578, 581, 823 A.2d 1271 (2003).


Inasmuch as the state high court makes the observation that a court in Connecticut has no subject matter jurisdiction over a case when the plaintiff lacks standing, trial court judges may want to consider their judicial obligation to determine whether a foreclosing lender has any business appearing in their courtroom by carefully scrutinizing its court filings before granting a judgment in the case, even when the defendant/homeowner does not make an appearance in court. After all, a foreclosure judgment from a court that has no jurisdiction over the subject matter is vulnerable to being subsequently voided;(2) and if voided after a foreclosure sale has already taken place, leaves the foreclosure sale (as well as any and all subsequent sales of the subject property to innocent purchasers) also potentially vulnerable to being voided.

In states where a plaintiff's lack of standing to bring a foreclosure action leaves a court without subject matter jurisdiction to hear such an action, it should become the preferred practice for lower court judges to carefully scrutinize the plaintiff's right to bring the action from the outset.(3) Taking this approach will avoid creating the problem of unwinding a potentialy big mess down the road, when an attorney representing the homeowner files a motion (months, if not years, down the road) to declare void the foreclosure judgment, the foreclosure sale, and any title transfers subsequent to the foreclosure sale to innocent purchasers.

Those outside the state of Connecticut may wish to review their applicable laws to determine if a plaintiff's lack of standing leaves a court without subject matter jurisdiction.


(1) The issue of standing was also recently addressed by a Connecticut lower court in which it stopped a foreclosing lender from proceeding with a sale because of its lack of standing at the time the foreclosure action was filed. See Aurora Loan Servs., LLC v. Nuzzo, NNHCV075011888S Superior Court of Connecticut, Judicial District of New Haven at New Haven, 2008 Conn. Super. LEXIS 3002 (November 13, 2008) (access may require free registration at LexisOne Free Case Law).

(2) In Bicio v. Brewer, AC 25462 , 92 Conn. App. 158; 884 A.2d 12; 2005 Conn. App. LEXIS 458, (Ct. App. Ct. 2005), the Connecticut Appellate Court quoted from its earlier decision in General Motors Acceptance Corp. v. Pumphrey, 13 Conn. App. 223, 229, 535 A.2d 396 (1988), in which it indicated that "no principle is more universal than that the judgment of a court without jurisdiction is a nullity . . . . Such a judgment, whenever and wherever declared upon as a source of right, may always be challenged. . . . If a court has never acquired jurisdiction over a defendant or the subject matter . . . any judgment ultimately entered is void and subject to vacation or collateral attack." (Citation omitted; internal quotation marks omitted.)

(3) For an example of one Brooklyn, New York judge who has shown no reluctance in booting "standing-lacking" lenders and their attorneys from his courtroom, see Brooklyn Trial Judge Nixes "Rubber Stamp Method" Of Adjudicating Foreclosures; Lenders, Lawyers Lacking Legal Standing To Bring Actions Get Bounced.

For a related post on this issue, see Thousands Of Foreclosures Are Void, Says Massachusetts Class Action Demanding Lenders & Their Lawyers Prove Note Ownership. KappaMtgDocsMissing SloppyForeclosuresAlpha

Wednesday, February 11, 2009

Sarasota Attorney Cops Plea In Mortgage Fraud Scheme Involving $82M+ In Fraudulent Loan Activity

From the U.S. Attorney's Office (Tampa, Florida):
  • United States Attorney A. Brian Albritton [last week] announced that defendant JOHN A. YANCHEK, age 49, a resident of Sarasota, Florida, and a practicing attorney licensed by the State of Florida, pleaded guilty [...] to three counts of a 47-count Indictment charging four individuals with conspiracy, making false statements in connection with bank loans, scheming to defraud several FDIC - insured banks, and money laundering. [...] The total face amount of the commercial loans fraudulently obtained from seven banks was $82.7 million.

For more, see Sarasota Attorney Pleads Guilty In $82.8 Million Mortgage Loan Fraud.

Central Florida Chief Judge Revokes "Phone Privileges" For Foreclosure Attorneys Due To Actions Of Sloppy "Foreclosure Mills"

In Bradenton, Florida, the Bradenton Herald reports:
  • The area’s top judge has lost patience with so-called foreclosure mills so he’s ordering them to appear in court. Non-local law firms that specialize in mass foreclosure filings have ignored local court procedures, filed incomplete or inaccurate court documents and “widely abused” the privilege of appearing at court hearings by telephone, 12th Judicial Circuit Chief Judge Lee Haworth said. He’s cracking down, requiring lawyers in foreclosure cases filed in Manatee, Sarasota and DeSoto counties to attend all foreclosure-related hearings in person.


  • While the order affects all lawyers in foreclosure cases within the district, it’s pointed directly at so-called foreclosure mills that file the bulk of local cases. Those firms’ heavy workloads often result in incomplete court files and missed court hearings, causing delays and wasting court resources, Haworth said.(1)


  • He declined to name the firms that have drawn his ire. But court records show the biggest filers of foreclosure actions in Manatee include Florida Default Law Group in Tampa; the David J. Stern law firm in Plantation; and the Marshall C. Watson law firm in Fort Lauderdale.

For more, see Area's top judge cracks down on foreclosure mills.

See also, Sarasota Herald Tribune: Judge requires lawyers to show up for foreclosure hearings.

For an earlier report on this story and links to the local court procedures established for foreclosure actions filed in Florida's 12th Judicial Circuit, see The Sloppiness Continues For Attorneys Representing Foreclosing Lenders; "They Are Totally Disorganized!" Says Florida's 12th Judicial Circuit Chief.

Go here for other posts on the foreclosure mediation program in Florida's 12th Judicial Circuit (Manatee, Sarasota, and Desoto Counties).

(1) For posts that reference the failure of mortgage lenders and their attorneys to file the proper paperwork when bringing foreclosure actions, Go Here, Go Here, Go Here, Go Here, and Go Here. KappaMtgDocsMissing

Florida AG Shuts Down Tampa-Area Foreclosure Rescue Operator; Accused Of Taking Upfront Fees In Violation Of New Law

From the Florida Attorney General's Office:
  • Attorney General Bill McCollum [Tuesday] announced that his Economic Crimes Division has reached a settlement with a Tampa business engaged in foreclosure rescue services over allegations the conduct violated the newly enacted Foreclosure Fraud Protection Act.(1) Attorney Debt Services, LLC, which conducted business under the name HomeKeeper USA, will cease its operations until it is able to fully comply with the law. Additionally, it will pay $10,000 to the Attorney General's Seniors vs. Crime program.

  • A four-week investigation by the Economic Crimes Division revealed Attorney Debt Services was allegedly providing foreclosure rescue services to homeowners who were in various stages of the foreclosure process. The company allegedly offered, for an advance fee, to assist consumers in arranging an alternative payment plan with the homeowners' lender for the purpose of avoiding foreclosure.

For more, see Foreclosure Rescue Company Shut Down for Fraud (First company closed under Attorney General's new foreclosure rescue fraud prevention law).

Go here for the the settlement agreement between the Florida AG and Attorney Debt Services, LLC, dba HomeKeeper USA and James T. Pappas.

(1) Florida Statute Sec. 501.1377.

County Quashed In Attempt To Take 8-Acre Property From Owner Over Failure To Include $24 Interest With Delinquent Tax Payment, Rules NY Appeals Court

In Canandaigua, New York, the Daily Messenger reports:
  • A Monks Road property owner has won his court case against Ontario County. The state Appellate Division’s Fourth Department ruled Friday that Bruce Middlebrook should be allowed to keep his 8-acre wooded parcel the county had scheduled to be auctioned off last May for unpaid property taxes.

  • The record establishes” Middlebrook “in fact paid his property taxes by the deadline provided ... in order to avoid losing his property,” stated the court decision. Even assuming the property owner received notice he owed roughly $24 in interest on the delinquent property taxes, “that minor amount of interest would result in a disproportionately harsh result,” concluded the court.

  • We are pretty happy,” said Middlebrook’s attorney, David Whitcomb with Muehe and Newton, LLP in Canandaigua. He said the panel of seven judges ruled unanimously, recognizing his client shouldn’t lose his property over $24.

For more, see Canandaigua landowner wins county foreclosure case.

For the court decision, see Matter of County of Ontario, 2009 NY Slip Op 00912 (NYS Sup. Ct. App. Div., 4th Dept., February 6, 2009).

For an earlier report on this story, see County, homeowner battle over auction.

Fannie, Freddie Trash Requirement That Homeowners Sign Away Their Rights To Sue In Order To Obtain Loan Modifications

The Washington Independent reports:
  • [C]onsumer groups and Rep. Barney Frank (D-Mass), the chairman of the House Financial Services Committee, were not aware that the waivers [requiring homeowners to sign away their rights to sue, in order to get their loan payments restructured on more affordable terms by Fannie Mae and Freddie Mac] were included in the loan modification agreements until after TWI’s story ran on Jan. 15. The story was brought to Frank’s attention during an on-camera interview with Talking Points Memo reporter Elana Schor.

  • I did not know until you just told me that Fannie and Freddie were [requiring mortgage holders to sign waivers],” Frank said in the interview. “And I can pretty much guarantee you that we will have put an end to that within a few days.

  • Since then, the waivers have been eliminated, said Brad German, a spokesman for Freddie Mac. Fannie Mae spokesperson Amy Bonitatibus also confirmed the waivers have been removed. New sample modification agreements - without the waivers - were posted on Freddie Mac’s website during the last week of January, German said. Both Fannie and Freddie use the same agreements.

For more, see Borrowers to Keep Legal Rights Under Foreclosure Plan (Fannie, Freddie Requirement That Forced Mortgage Holders to Sign Legal Waivers Eliminated).

Title Company Owner, Appraiser, Straw Buyer Recruiter Sentenced In Mortgage Scam Involving 55 Condos Netting $18.5M

In Miami, Florida, WTVJ-TV Channel 6 reports:
  • Authorities say the owner of a West Palm Beach real estate title company has been sentenced to five years in prison for her part in a a mortgage fraud scheme. Federal prosecutors say Evelyn Rivera, a licensed title agent and owner of Asset Title LLC, received her sentence on Friday.

  • Rivera had previously pleaded guilty to participating in a scheme to net $18.5 million from fraudulent mortgages on 55 Fort Lauderdale condominium units. Authorities discovered the fraud after about $690,000 in fraudulent mortgage loans had been issued on two units.

  • Mike Acosta, a licensed property appraiser, and William Louisma, a recruiter of straw buyers, were also convicted for their roles in the scheme. Acosta was sentenced to 41 months in prison, and Louisma was sentenced to 46 months.

Source: Title Company Owner Sentenced For Mortgage Fraud.

For the U.S. Attorney's press release, see West Palm Beach Title Agent Sentenced On Mortgage Fraud Charges.

Colorado Regulators Seek License Surrender From Two Brokers Implicated In Alleged Mortgage Scam; Case Referral To Criminal Prosecutors A Possibility

In Colorado Springs, Colorado, The Gazette reports:
  • A mortgage meltdown on a Colorado Springs street where five houses went into foreclosure amid allegations of fraud has resulted in disciplinary action against two Colorado Springs real estate agents. The Colorado Real Estate Commission voted to ask Stephen Teegardin, of Teegardin Realty & Investments, to surrender his license and pay a $25,000 fine for his "dishonest dealings" and "unworthiness or incompetency" in the Balsam Street sales, state regulators said Monday. The commission also asked for the license of his son, Robert B. Teegardin, and fined him $20,000.

  • The Teegardins are accused of being key players in a mortgage fraud scam in which straw buyers were recruited and paid a kickback to buy houses at inflated prices that they never intended to live in. [... Agency investigations and compliance director Marcia] Waters said the case could be referred to the Fourth Judicial District Attorney's Office for consideration of criminal complaints once her agency's case is further along.

For more, see Two Springs real estate agents disciplined in fraud case.

Straw Buyer Cops Plea In Alleged DC-Area Mortgage Fraud Scam Involving 25 Homes; Two Others Face Charges

The D.C. Examiner reports:
  • Federal authorities say they’ve broken a nearly $5 million real estate scheme in which several suspects allegedly filed false mortgage documents so they could buy about 25 properties in the Washington area, only to let many slip into foreclosure.

  • So far, at least one member of the scheme, Sabrina Weinberg of Bethesda, has pleaded guilty to mail fraud for buying seven properties between February and October 2006. Weinberg bought the homes using $4.6 million in mortgage loans obtained by filing fraudulent loan applications, court documents filed in Maryland’s federal court said.

  • At least two other suspects, Terrence White and Timothy Reed, have been charged with mail fraud for their alleged roles. Four other suspects are alluded to in charging documents, but their names are not included. According to prosecutors, Reed and White would entice straw buyers such as Weinberg by offering them $10,000 per property purchase to lie on loan applications.

For more, see 1 convicted, 2 charged in $5 million false mortgage document scheme.

For story update, see U.S. Attorney's press release: A Beltsville Leader In Mortgage Fraud Scheme Pleads Guilty (Paid Over 15 Straw Purchasers and Used False Documents to Buy 25 Properties; Received Over $3.8 Million in Fraud Proceeds).

Tuesday, February 10, 2009

Legal Services Firm Files Housing Discrimination Suits Alleging Bias Against Families With Kids; Landlords Accused Of Failure To De-Lead Apartments

In Worcester, Massachusetts, the nonprofit legal services firm Legal Assistance Corporation of Central Massachusetts (LACCM) last month filed two housing discrimination lawsuits on behalf of tenants alleging unlawful housing practices by steering parents of minor children away from apartments, or refusing to show them apartments in an attempt to avoid the cost of remediating potential lead-based paint issues in the apartments.
  • [L]egal Assistance Corp. [...] stated that according to the 2000 Census, nearly 85 percent of the houses in Worcester were built before 1978, and most likely contain lead paint. A landlord is required to make an apartment safe from lead paint if the tenant family has a child six years or younger living in the apartment, Legal Assistance Corp. said.

  • Some landlords may decide not to rent to families with young children in an attempt to avoid the cost of deleading, the plaintiff stated. It is illegal under state and federal fair housing laws for an owner or realty agent to refuse to rent to someone because of their familial status, Legal Assistance added.

For more, see:

Sample Foreclosure Defense Legal Documents

For those who want some idea of what the legal documents in a foreclosure action look like, Broken Credit Blog has made available some of the documents filed in a Duval County, Florida case involving foreclosure defense attorney April Charney from Jacksonville Area Legal Aid. Among the documents that were filed on behalf of the homeowner facing a foreclosure action are:

For links to all of the 14 documents currently available on Broken Credit Blog, see Anatomy of a Florida Foreclosure Defense.

See also: Foreclosure defense a popular subject at Bar convention:

April Charney's foreclosure defenses, many based on Florida court rulings, as outlined in her materials, include:

  • Failure to produce original note and mortgage or to re-establish.
  • Fraud, including misrepresentation or omission of material fact made with intent to deceive.
  • Duress, or unjustified pressure to sign a mortgage, particularly in a home improvement or solicitation setting or upon a refinancing.
  • Unconscionability, when the mortgage terms are unreasonably favorable to the lender (must be proven procedurally and substantively).
  • Unfair and unacceptable loan servicing, failure to follow HUD requirements for residential single-family mortgage lending and servicing.
  • Scrutinizing foreclosure attempts under debt collection laws.


Additional legal documents that can be helpful in fighting off foreclosure are available online courtesy of the Consumer Warning Network:

Forms that can be used when a foreclosure lawsuit has already been filed against a homeowner:

  • Request for Production of Document, a fill-in-the-blank legal request to the foreclosing lender asking that the original note be produced, before it can proceed with the foreclosure,
  • Motion to Compel to be filed with the court and request that the court set a hearing on your motion if the lender’s attorney does not respond within 30 days to the Request for Production of Document. That, in effect, asks the judge to order the lender to produce the documents.

If a foreclosure action has not yet been filed:

  • Letter to the Lender, a fill-in-the-blank form which also requests they produce the original note, before taking foreclosure action against you.

For more, including informational videos, see Produce The Note “How-To."

For those in states that do not require a lender to initiate foreclosure proceedings in court to carry out a foreclosure sale, see How to use "Produce the Note” in Non-judicial Foreclosure States.


Disenfranchised Homeowners Blog offers the following foreclosure legal document which may be helpful:


From the Legal Advocacy Center of Central Florida, Inc. and the Volunteer Lawyers Project of Community Legal Services of MidFlorida, Inc.:

Alleged 1031 Exchange Scam Leaves Real Estate Investors With Big Tax Bill & No Money To Pay It With

The New York Post reports:
  • Federal authorities are investigating a Virginia-based finance company that went belly-up last year, sticking hundreds of real-estate investors with millions of dollars in losses, The Post has learned. The 440 investors had parked the proceeds from their real-estate sales with LandAmerica 1031 Exchange Services Inc. in hopes of delaying capital gains taxes - only to find their entire investment nest egg missing.


  • And worse, the Internal Revenue Service wants those burned in the failure of LandAmerica and other so-called "qualified intermediaries" to pay taxes on the profits they no longer have. [...] The LandAmerica failure and FBI probe highlight a growing issue for 1031 accounts. When Congress created these so-called "Starker exchanges," they forgot to regulate the companies that run the 1031 accounts.

For more, see Helter Shelter (Feds Probing Tax Haven 'Ponzi Scheme').

Go here for other posts on problems with 1031 exchange intermediaries. EscrowRipOffAlpha

Title Insurance: What Risks Does It Protect A Property Owner Against?

A recent article by the Kaua‘i, Hawaii Board of Realtors (appearing in gives a basic explanation of what risks a title insurance policy actually insures a real estate buyer against.
  • [A]lmost every parcel of land has had many owners. What they did or did not do can affect title to the land. Have assessments and taxes been paid? Were there lawsuits or judgments against former owners? Does a contractor or a spouse or utility company have any rights?

  • Title losses arise from three principal sources: (1) Errors in searching the records, (2) errors in interpreting the legal effect of those records, (3) facts outside the records, known as “off-record risks.”(1)

  • The title insurance company protects itself and the policyholder in the case of the first two sources of risks set out above by employing trained, competent searchers and examiners who are qualified to search and interpret records.

  • There are, however, many sources of title defects outside the record, any one of which may also involve loss of title. The owner must assume these hidden defects if the owner does not possess a title insurance policy. Some of these off-record risks are: fraud, forgery, false impersonation, alteration, copyists’ errors, acts of minors, insanity, rights of unrevealed spouses and children, and void judgments(2) and decrees.

For more, see Title insurance: Do you need it?

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(1) A list of 35 off-record risks, or "hidden hazards," that a title insurance policy protects a homeowner and mortgage lender against are (1) false personation of the true owner of the land, (2) forged deeds, releases, etc., (3) instruments executed under fabricated or expired power of attorney, (4) deeds delivered after death of grantor or grantee, or without consent of grantor, (5) deeds to or from defunct corporations, (6) undisclosed or missing heirs, (7) misinterpretation of wills, (8) deeds by persons of unsound mind, (9) deeds by minors, (10) deeds by aliens, (11) deeds by persons supposedly single but secretly married, (12) birth or adoption of children after date of a will, (13) surviving children omitted from a will, (14) mistakes in recording legal documents, (15) want of jurisdiction of persons in judicial proceedings (ie. where a court lacks subject matter jurisdiction over a case, or where it lacks personal jurisdiction over a defendant, for example, failure to properly serve a defendant with legal process), thereby leading to judgments that are either void or voidable, (16) discovery of will of apparent intestate, (17) errors in indexing, (18) falsification of records, (19) capacity of foreign fiduciaries, (20) claims of creditors against property sold by heirs or devisees, (21) deeds in lieu of foreclosure given under duress, (22) ultra vires deed given under false corporate resolution, (23) easements by prescription not discovered by a survey, (24) deed of community property recited to be separate property, (25) errors in tax records (ie. listing payment against wrong property), (26) deed from a bigamous couple, (27) defective acknowledgements (ie. notary public screw-ups when notarizing legal documents, (28) federal condemnation without filing notice, (29) descriptions apparently, but not actually, adequate, (30) corporation franchise taxes, a lien on all corporate assets, (31) erroneous reports furnished by tax officials, (32) administration of estates of persons absent but not deceased, (33) undisclosed divorce of spouse who conveys as consort's heir, (34) marital rights of spouse purportedly, but not legally, divorced, (35) duress in execution of instruments.

(2) With all the foreclosure sales that have already taken place where the foreclosing lender lacked standing to bring the action (which, depending on the law of the particular state in which the property is located, may mean that the court granting the judgment might have lacked jurisdiction over the subject matter of the case, which would consequently make the judgment void - see #15 in footnote 1, above), there are plenty of void foreclosure judgments flotaing around out there. I suspect that the issue of void foreclosure judgments and the complications relating to the legal title to the foreclosed real estate will begin rearing its ugly head as foreclosure defense attorneys begin bringing motions to void these judgments on behalf of their clients. See Thousands Of Foreclosures Are Void, Says Massachusetts Class Action Demanding Lenders & Their Lawyers Prove Note Ownership. title insurance legal issues