Sunday, February 15, 2009

CBS' 60 Minutes On World Savings' Whistleblower

CBS' 60 Minutes ran a story Sunday night featuring the story of Paul Bishop, a plainspoken former loan salesman who is blowing the whistle on his former employer, one-time subprime lending giant World Savings, about the kinds of loans they were making to homeowners who couldn't afford to repay, and how they went about making the loans. While working at World, he reportedly told executives what they didn't want to hear about three years before the real estate market exploded. According to him, they responded by canning him. He has since filed a lawsuit against them. He now tells his story to 60 Minutes.

For the report (13+ minutes), see World of Trouble (read story) (watch video).

For the initial report on this story from KPIX-TV Channel 5 in May, 2008, when Bishop first filed his lawsuit against World Savings, see Oakland Bank's Lending Sparks Ex-Employee Lawsuit (read story) (watch video).

Go here for other posts on whistleblower suits involving alleged fraudulent mortgage lending practices.

Federal Judge, State Bar Slam Attorney For Stiffing Clients Referred By Loan Modification Firm; Lawyer/Foreclosure Consultant Ties Now Facing Scrutiny

San Francisco Weekly reports:
  • Thanks in part to a recent SF Weekly column detailing the latest exploits of longtime con man Paul Noe II, a federal judge recently announced he would advise federal, state, and municipal prosecutors to investigate a suspicious statewide "foreclosure assistance" operation that targeted defaulted homeowners in the San Francisco Bay Area.

  • "I am referring these matters to the State Bar of the State of California, to the State Bar of the State of Nevada, to the United States Attorney in the Central District of California, and to the district attorney of Los Angeles and San Bernadino and Orange Counties, so that they can make an investigation of this matter, and do what is required under the law of the State of California," U.S. District Judge Manuel Real said during a Jan. 13 hearing.

  • Real had just heard allegations that Mitchell Roth, a longtime attorney of Noe's, had filed multiple lawsuits on behalf of clients, then failed to show up in court to prosecute the cases. The filings were submitted on behalf of customers of a Noe front company called United First, Inc. whose business model involved convincing desperate homeowners that they might have grounds for a so-called "missing title" lawsuit. These suits would supposedly be based on the legal theory that banks had lost track of buildings' titles when mortgages were bundled into securities, and thus had no right to foreclose.

***

  • Rick Jurgens, an advocate with the National Consumer Law Center in Washington, D.C., reviewed a copy of a Roth/Noe contract SF Weekly sent him, and noted: "Bogus doesn't begin to define it ... To have these for-profit enterprises come in and throw a deal that's just there to squeeze the last penny out of a victim's pocket is really horrifying to see."

A September 23, 2008 article in San Francisco Weekly contained a description of an arrangement entered into by the loan modification firm and one homeowner needing help:

  • Under the arrangement, [the homeowner] would enter a joint venture with the company and add United First to his homeowners' insurance policy, retain Sherman Oaks–based attorney Mitchell Roth as legal counsel, and pay the firm an initial $2,250, then $1,750 per month. According to the contract, the monthly payments are supposed to end "upon termination of legal proceedings," or whenever Roth stops representing Lopez.

For more, see Justice Closing in On Notorious 'Foreclosure Assistance' Firm.

**************

In related stories on California attorney Mitchell Roth, see:

The State Bar of California: On Application Of State Bar, Superior Court Assumes Jurisdiction Over foreclosure Law Practice:

  • State Bar of California prosecutors [February 11] obtained a Superior Court order effectively shutting down the Sherman Oaks, San Diego and Riverside law offices of attorney Mitchell Roth.

Metropolitan News Enterprise: State Bar Takes Over Ex-Judicial Candidate’s Law Offices:

  • The State Bar of California [Thursday] disclosed that it has taken over the Sherman Oaks, San Diego and Riverside law offices of attorney Mitchell Roth. [...] The State Bar alleged that an estimated 2,000 clients were referred to Roth by a company doing business as United First, which is not a law firm. Roth’s phone message informs callers that the office has been temporarily closed and refers foreclosure clients back to United First.

The National Law Journal: Three offices of attorney declared a 'vexatious litigant' are shut down:

  • The State Bar of California has shut down three Southern California offices of attorney Mitchell W. Roth, who was recently declared a vexatious litigant by a federal judge in Los Angeles, according to the State Bar.

The San Diego Daily Transcript: State bar shuts down foreclosure law practice (subscription required):

  • State Bar of California prosecutors Wednesday obtained a Superior Court order effectively shutting down the Sherman Oaks, San Diego and Riverside law offices of attorney Mitchell Roth.

**************

For a five-page, heavily footnoted, ethics alert recently issued by The California State Bar Association Committee on Professional Responsibility and Conduct addressing the relationship between lawyers and loan modification & foreclosure consultants (and addresses the above-referenced conduct), see ETHICS ALERT: Legal Services to Distressed Homeowners and Foreclosure Consultants on Loan Modifications.

Go here and go here for other posts on issues relating to attorneys, loan modifications, and the unlicensed/unauthorized practice of law. UnauthPractOfLawKappa

Cincinnati Bar, Ohio Supreme Court Slam Attorneys Teaming Up With Upfront Fee Loan Modification, Foreclosure Rescue Operators

In a 2008 court decision, the Ohio Supreme Court disciplined three attorneys for professional misconduct in connection with working with the customers of foreclosure rescue operator Foreclosure Solutions, L.L.C. Among the types of conduct that landed the attorneys in hot water were:
  • using a person or organization to recommend or promote the lawyers’ services,
  • aiding nonlawyers in the unauthorized practice of law,
  • improperly sharing legal fees with nonlawyers,
  • failing to seek lawful objectives of clients by failing to assess their individual needs, and
  • handling legal matters without adequate preparation.

For the specific facts and surrounding circumstances that led to the filing of the complaints with the Cincinnati Bar Association by the homeowners facing foreclosure, see Cincinnati Bar Assn. v. Mullaney, 119 Ohio St.3d 412, 2008-Ohio-4541 (2008).

Go here and go here for other posts on issues relating to attorneys, loan modifications, and the unlicensed/unauthorized practice of law. UnauthPractOfLawKappa

California Bar Committee Issues Ethics Advisory Cautioning Attorneys Teaming Up With Loan Modification Firms

The California State Bar Association Committee on Professional Responsibility and Conduct has issued an ethics alert addressing the relationship between lawyers and loan modification & foreclosure consultants.
  • [T]here is evidence that some foreclosure consultants may be attempting to avoid the statutory prohibition on collecting a fee before any services have been rendered by having a lawyer work with them in foreclosure consultations. Many of the proposed relationships between these foreclosure consultants and lawyers violate the Rules of Professional Conduct and other ethical rules and, therefore, could result in lawyer discipline.

  • The purpose of this Ethics Alert is to remind California lawyers of several ethics rules that may apply in the event a foreclosure consultant or another non-lawyer requests assistance from a lawyer and/or refers potential distressed homeowner clients to the lawyer.

***

  • Distressed homeowners may need legal assistance. California lawyers should be wary, however, of non-lawyers – such as foreclosure consultants – who, seeking to capitalize on the vulnerability of distressed homeowners, offer to provide distressed homeowners assistance in renegotiating their loans and/or assessing and protecting their legal rights. These non-lawyers may propose arrangements that would violate one or more of a lawyer’s ethical obligations. They may attempt to loop California lawyers into their businesses with promises of large numbers of referrals and/or "easy money," that is, fees for the lawyer for little or no work. They may request that a lawyer pay them a referral or marketing fee. They may propose an agreement to split legal fees obtained from the distressed homeowners. They may request that the lawyer enter into a joint venture with them and a distressed homeowner. They may request that a lawyer approve loan modification documentation. They may request that a lawyer serve as the general counsel to their business in order to provide legal advice to homeowners. They may ask that the lawyer file a frivolous lawsuit on behalf of a homeowner with whom the lawyer has had little or no contact in order to buy time so that the foreclosure consultant will have more time to negotiate a loan modification directly with a homeowner’s lender. [... M]uch of this conduct – accepting referral fees, fee splitting, forming a business with a non-lawyer that performs legal services, helping a non-lawyer engage in the unauthorized practice of law, filing frivolous lawsuits – violates the Rules of Professional Conduct and/or ethics rules set forth in the Business and Professions Code. A California lawyer should consider carefully the applicable ethical rules before agreeing to participate in any such venture involving people acting as foreclosure consultants or in a similar capacity. Failure to do so may result in lawyer discipline.

For the entire five-page, heavily footnoted, advisory, see ETHICS ALERT: Legal Services to Distressed Homeowners and Foreclosure Consultants on Loan Modifications.

To file a complaint with the State Bar Association against a California attorney for violating state ethics rules, or a loan modification firm for engaging in the unauthorized practice of law, see Overview Of Attorney Discipline System (go here for a Complaint Form).

Go here and go here for other posts on issues relating to attorneys, loan modifications, and the unlicensed/unauthorized practice of law. UnauthPractOfLawKappa

Legal Aid Saves Ohio Couple From Foreclosure; Files Suit Against Loan Modification Firm & Attorney Team For Taking Money For Bogus Help

In North Avondale, Ohio, the Kentucky Post reports on the case of Chris and Dorthy Gillium, a financially strapped couple who was facing foreclosure on their home when the decided to retain the services of a loan modification firm that was working in tandem with an attorney to purportedly help homeowners avoid foreclosure.
  • [B]ecause the Gilliums were [...] desperate for help, they turned to American Foreclosure Professionals in Mason. Chris said that for a $950 fee paid in advance, the firm guaranteed that one of their attorneys could help him and his wife rescue their mortgage and stay in their home.

  • "The attorney took the first step that any attorney does in a lawsuit and filed an answer," said Noel Morgan, of the Legal Aid Society of Southwest Ohio. "That's all he did." The next thing Chris knew was that the house was scheduled for a foreclosure sale conducted each week by the Hamilton County Sheriff's Office.

  • "The mortgage company put us in default," Chris said. Attorneys with the Ohio Attorney General's Office put the Gilliums in touch with Legal Aid. Morgan began working the case and had the default judgement set aside. He's still working on trying to negotiate new loan terms for the couple.

  • However, that's not all that Morgan did. "We've got a malpractice claim against the attorney for professional negligence," Morgan stated. "We have consumer sales or deceptive sales claims against the mortgage rescue firm and similarly against the mortgage broker who set it up."

  • Those cases are still pending, but for now the Gilliums are still in their dream home and singing the praises of the help that they received. "God, through the Legal Aid Society, is the reason that me and my wife are still sitting in our home right now," Chris said.

For the story, see Caution Urged When Hiring Foreclosure Rescue Firms. UnauthPractOfLawKappa

CBS Evening News On South Florida Loan Modification Firm Currently Facing Civil Charges From State AG

The CBS Evening News recently ran a story on South Florida loan modification firm Outreach Housing, which summarized their approach to financially strapped homeowners with this excerpt:
  • [F]or homeowners the pitch went like this: They would pay Outreach Housing an upfront fee of about $1,200. They would then stop paying their lender and instead pay Outreach every month an amount equal to two-thirds of their monthly mortgage.

  • That's money homeowners like Frank Kosa believed they would go toward their mortgage while Outreach worked with his bank to reduce his payment. "They said 'don't worry about anything. Don't pay anything. We are taking care of everything,'" said Kosa. But they didn't. Instead, as victim after victim told CBS News, they got taken.

  • According to a lawsuit filed by Florida Attorney General Bill McCollum, Outreach Housing was engaged in a "systematic pattern" of "fraudulent," "unfair" and "deceptive" practices, leaving behind at least 600 victims.

For more, see Scams Rampant In Foreclosure Fraud Hotbed (CBS Evening News: Growing Number Of Scams Target Homeowners Struggling To Keep Homes); or go here for CBS News video, Inside Mortgage Rescue Scams.

For the Florida Attorney General's 10-16-08 press release announcing the filing of the lawsuit against Outreach Housing, see Broward Foreclosure Debt Mitigation Company Sued for Deceptive Practices.

Go here for other posts on this case.

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 News10.net 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 dont4close.com 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 Dont4close.com 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.