Owners Of $1M+ Downtown NYC Apartments Face The Boot As Condo Developer Faces Foreclosure; Association Broke, Utilities Shutoff Threatened

In Battery Park City, the New York Post reports:

• Dozens of financial-industry professionals may lose their new Battery Park City condos because the building's developer allegedly defaulted on debt payments, which forced the property into foreclosure and threatens an immediate shut-off of heat and electricity. It's a bitter irony for the residents of 225 Rector St. - many of whom made fortunes on Wall Street - that the nationwide bank-fueled foreclosure crisis has come full circle to hit them in their own homes.

***

• The common fund to pay for doormen, heat and electricity is nearly broke and all services could be cut off by the end of the week, [one owner] said. [...] New buyers, who paid more than $1 million for a one-bedroom, started moving in last summer as construction on the building's common areas continued. But suddenly in mid-December, all work stopped and the sales office closed.

• "People spent millions to live in a first-class building, and they're living in a permanent construction zone," says Marc Held, an attorney for Lazarowitz & Manganillo, who represents the buyers.

Reportedly, the developer only sold about 70 units in the 306-unit building.

For the story, see CONDO CRISIS HITS WALL ST. HIGH ROLLERS.

Rental Of Foreclosed Home By Former Owner To Two Separate Unwitting Victims Leads To Dispute That Lands One In Jail On Assault Charges

In Springfield, Massachusetts, The Republican reports:

• A Springfield man who was tricked into believing he could live in an apartment that had been rented to someone else was sentenced to the time he spent in jail awaiting trial, after the prosecution and defense detailed the events that led to his arrest and detention on a variety of charges.

***

• A dispute ensued over who was entitled to the apartment, and [Justo Davila, 43,] threw a brick through the woman's car, threatened the man him with a gun and a piece of molding and wood from the unit.

***

• The victims had signed the purported lease with the former owners seven days after it was sold to a corporation after a foreclosure action, [Assistant District Attorney Elizabeth G.] Dineen said. Davila had been working in the apartment he thought was his for about two months, said [defense attorney Nikolas] Andreopoulos.

For more, see Judge listens to saga. SkimmingKappaRent

"Multiple Hat-Wearing" Mortgage Servicing Exec Back In The News; May Be "Contemporary Millinery Rival" To Hopper, Abzug, Says Respected B'klyn Jurist

A recent New York Times' story on mortgage companies offering financially strapped homeowners an opportunity to modify their mortgage loans contained the following blurb:

• “Our biggest hurdle is reaching out and talking to people,” said Margery A. Rotundo, Ocwen’s senior vice president for residential loss mitigation. “If a borrower has a desire and the ability to stay in the home, we can help them.” Ms. Rotundo said the company’s decades-long experience with borrowers with blemished credit histories informed its approach.

The last time Ms. Rotundo made the news (at least on this blog) was last summer, when Brooklyn, New York Supreme Court Justice Arthur Schack, in a foreclosure action over which he presided, commented in his written opinion that he found court documents filed in various foreclosure actions in which Ms. Rotundo swore that she was Senior Vice President for:

1. Residential Loss Mitigation of Ocwen Loan Servicing, LLC,
2. Residential Loss Mitigation of HSBC Bank USA, N.A.,
3. Loss Mitigation for Nomura Credit & Capital, Inc., and
4. an unnamed servicing agent for HSBC.

The perplexed Justice Schack then went on to make this observation on Ms. Rotundo's apparent knack to freely move from mortgage company employer to mortgage company employer, as the need appeared to demand ("Ms. Rotundo's merry-go-round of employment" as he referred to it):

• [T]he late gossip columnist Hedda Hopper and the late United States Representative Bella Abzug were famous for wearing many colorful hats. With all the corporate hats Ms. Rotundo has recently worn, she might become the contemporary millinery rival to both Ms. Hopper and Ms. Abzug. The Court needs to know the employment history of the peripatetic Ms. Rotundo. Did she truly switch employers or did plaintiff have her sign the "affidavit of merit and amount due" as its Senior Vice President solely to satisfy the Court?(1)

I don't know how this issue was ultimately resolved, but as of press time of the above-referenced New York Times' article, Ms. Rotundo was apparently wearing her "Ocwen corporate hat."

For Justice Schack's written opinion containing his observations on Ms. Rotundo's alleged "multiple hat-wearing activities," see HSBC Bank USA, N.A. v Charlevagne, 2008 NY Slip Op 51652 [20 Misc 3d 1128]; Decided on August 4, 2008.

(1) Justice Schack also commented on his discovery that multiple financial giants, including the plaintiff, were all listing "the ever popular Suite 100" at the same South Florida street address as their place of business. Inaddition to demanding an affidavit describing Ms. Rotundo's employment history for the last three years, Justice Schack also went on to demand an affidavit from the plaintiff explaining "why the plaintiff HSBC BANK USA, N.A., [...], shares office space at Suite 100, 1661 Worthington Road, West Palm Beach, Florida 33409, with Ocwen Loan Servicing, LLC, Mortgage Electronic Registration Systems, Inc., Deutsche Bank and Goldman Sachs." ThetaMissingDocsMtg

Massachusetts Foreclosure Defense Class Action Asks Lenders, "Who The Hell Owns These Promissory Notes???"

In Mattapan, Massachusetts, WBZ-TV Channel 38 reports:

• "I thought this was going to be my American dream," said Deborah Nicholas, looking at her Mattapan home. But two years after purchasing the green-trimmed two-family house, Deborah Nicholas is living the new American nightmare. "We are in foreclosure right now."

• Foreclosure attorney Gary Klein argues it wasn't done legally. "We're arguing there have been hundreds, maybe thousands of unlawful foreclosures in Massachusetts because the lenders don't actually own the mortgage at the time of the foreclosure," said Klein.

***

• In a class action lawsuit, Klein argues her mortgage holder and others moved to foreclose before they actually had the paperwork. "Our research shows that 15 to 30 percent of foreclosures are affected by this problem. That is, in 15 to 30 percent of these cases, the lenders don't have the legal authority to foreclose at the time they begin the foreclosure process."

For more, see Thousands Of Unlawful Foreclosures In Mass.? (read story) (watch video).

For earlier articles on this story, see

• Boston Herald: Lawyer to lenders: Prove you own mortgages (or try here for a free version), and
• The Boston Globe: Lenders' right to foreclose is challenged. KappaMtgDocsMissing

Moving Cases From State To Federal Court: A Defense Ploy To Make Filing Suit More Costly, Burdensome On Individual Plaintiffs?

A recent story in the Toledo Blade involved an Ohio couple fighting off foreclosure by challenging the right of mortgage servicing companies and trustees to commence foreclosure proceedings. The foreclosing lender responded to the challenge by employing a defense tactic not uncommon in consumer cases: it is seeking to move the case from a state court to a federal court.

An article in the ABA Journal offers this observation on the defense tactic commonly used in civil cases of moving a case from a state to a federal court:

• [I]t is widely believed that plaintiffs, particularly individuals rather than corporations, fare better in state courts where they have greater likelihood of getting to a jury and often benefit from more favorable interpretations of law. Defendants in turn tend to prefer the federal courts. Thus removals can become a cat-and-mouse game in which a plaintiff names a party having nothing to do with the matter as one of the defendants to prevent the other side from removing the matter to federal court. That court can find fraudulent joinder and keep the case or remand it.

• But studies have shown a greater increase in recent years of defendants removing cases to federal court, only for them to be dispatched back to state court for erroneous removal. One researcher, a third-year student at New York University School of Law, found that most often in such situations, the plaintiffs are individuals. And the rate of their cases being remanded back to state court is higher, too, wrote Christopher Terranova in last summer’s edition of the Willamette Law Review (PDF).

• He adds that “the delays and costs of that extra procedural step to federal court are more costly and burdensome for most individual plaintiffs than they are for bigger defendants with more assets.”

For more on the ABA Journal story, see Judge Says Firm Must Explain ‘Fraudulent’ Removals or Pony Up $25K.

For the Willamette Law Review article, see Erroneous Removal As A Tool For Silent Tort Reform: An Empirical Analysis Of Fee Awards And Fraudulent Joinder (article also available at http://ssrn.com/abstract=1073402).

Mo. Homebuyer In Failed Contract For Deed Gets Deposit Refund From Rent-Skimming Owner/Agent After Notification That TV Station Was Running Story

In Republic, Missouri, KY3 reports:

• With credit getting ever tighter, you might be considering a contract for deed to try to buy a home. One woman hopes you'll reconsider. After thinking she'd be in her home for years, Edna Nelson had to pack up her life this montlh after living in her dream house for just eight months. “January 28, I received a call saying my property had been foreclosed and I had 30 days to move."

• Eight months ago, she signed a contract for deed. She paid $2,000 down and $926 a month. [...] Despite making her payments on time, the seller didn't make his payments - and the bank foreclosed on the home late last month. “It was a shock,” she said.

• She tried for nearly a month to get her money back to no avail. Finally a Contact KY3 reporter called the owner to tell him we were running a story. That same day, she had a check in her hand.

• Nelson got lucky. Many others see their contracts for deed fall through without ever getting a penny back. That's why she wants to warn others to consider every possibility before signing a contract for deed.

For the story, see Consider options before renting to own home (read story) (watch video).

Go here and go here for stories on how easy some tenants found it in getting screwed over in these lease/option, "rent to own" and contract for deed real estate deals. rent to own lease purchase option scams yellowstone

Wife Survives Failed Attempted Double Suicide, Arson Fire Of Home Lost In Foreclosure; Now Faces Charges In Death Of Husband

In Clark County, Washington, The Columbian reports:

• A former Sifton woman faces an arson charge in connection to a two-alarm house fire that killed her husband nearly two years ago. Prosecutors filed a first-degree arson charge against Sandra J. Cooper, 62, last week in connection to the May 31, 2007, fire.

***

• Cooper is believed to have aided her husband, Allen F. Cooper, 67, in starting the fire that destroyed their rental house [...] according to court documents. Allen Cooper died a day later from smoke inhalation, while Sandra Cooper recovered from her injuries and was eventually discharged from Providence Portland Medical Center. The Coopers had lost the house through foreclosure but had been allowed to rent it back, said Senior Deputy Prosecutor John Fairgrieve.

• Sandra Cooper had given written notice that she and her husband would be vacating the house May 31. According to a probable cause affidavit filed by Fairgrieve, the couple were in financial trouble and weren’t working. At some point, Allen Cooper told his wife "he was going to burn the damn house down with him in it," according to the affidavit.

• The night before the fire, Sandra Cooper confronted her husband about a gasoline odor. He told her he had poured gasoline on furniture. She then went to the garage, took a can of gasoline and allegedly poured it over two antique automobiles, the affidavit said. "She told detectives that she then went back upstairs to be with Al and that she took a series of medications," Fairgrieve wrote in the affidavit. Firefighters found the couple unconscious upstairs in their home just before 5 a.m.

***

• Fairgrieve said detectives had enough physical evidence to deem it arson, but at first lacked suspects. After Sandra Cooper recuperated from her injuries several months later, she told investigators what happened.

For the story, see Woman faces charge in 2007 fire (She allegedly set it with husband, who died from injuries).

For earlier story, see Washington Authorities Investigating Fire Of Home Involved In Foreclosure; Arson Suspected. ForeclosureHomeVacantBeta suicide homeowner foreclosure zeta

"Rubber Stamp" Method vs. Mandatory Mediation: CBS News Goes Into The Courtroom For A Look At Foreclosure Adjudication

The CBS Evening News has a story on its website contrasting the approaches being taken in adjudicating foreclosures in two different courtrooms:

• The "Rocket Docket" in Fort Myers, Florida (described in The Wall Street Journal article, A Florida Court's 'Rocket Docket' Blasts Through Foreclosure Cases (2 Questions, 15 Seconds, 45 Days to Get Out; 'What's to Talk About?' Says a Judge)), and

• The swap meet-like affair that meets every Thursday in Courtroom 676 in Philadelphia, Pennsylvania (described in the Philadelphia Daily News article, The miracle of Courtroom 676: Saving lives, one address at a time).

For the CBS Evening News' story, see Glut Of Foreclosures Clogs Courts (CBS Evening News: A Look At "Fast-Court" In Florida And An Innovative Program In Philly For Those Facing Losing Their Homes).

For the CBS' Evening News video on the "Rocket Docket" foreclosure proceedings in Fort Myers, Florida (1:40), see Pay Up Or Move Out.

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

Editor's Note: CBS News could have spiced up their story a little had they included something on the courtrooms of:

• Brooklyn, New York jurist Arthur Schack, a judge who has unequivocally rejected the "rubber stamp" approach to handling foreclosures, and has demonstrated no reluctance at giving unprepared lenders and their attorneys the boot from his courtroom (at times threatening sanctions on lenders' attorneys when their paperwork is garbage) when they fail to file the proper paperwork (see Brooklyn Trial Judge Nixes "Rubber Stamp Method" Of Adjudicating Foreclosures; Lenders, Lawyers Lacking Legal Standing To Bring Actions Get Bounced), and

• Miami, Florida Judge David C. Miller, who, in a recent denial of a foreclosing lender's motion to proceed with foreclosure because it hadn't complied with a pro se homeowner's document request, reportedly punctuated his decision by tearing the lender's motion in half and throwing it over his shoulder in open court (see The home you save could be your own (In foreclosure crisis, more Americans representing themselves in court)). ThetaMissingDocsMtg

Legal Aid To File Predatory Lending, Fraud Suit On Behalf Of Foreclosed California Homeowner In Attempt To Prevent Loss Of Family Home

In Chico, California, the Chico Enterprise Record reports:

• A woman facing eviction from the home her parents left her may be able to remain there at least temporarily. Emily Fisher, a staff attorney with Legal Services of Northern California [...] said she and other lawyers are working to enable Jan Poythress to stay in her house and, they hope, to get it back.

• Poythress said her problems started after she ran up a large credit-card debt and then allowed a telemarketer to persuade her to take a loan that would pay off what she owed. Poythress is disabled and lives on a small income from Social Security.(1) Because she couldn't pay off the loan, her house was foreclosed upon.

***

• Fisher said a petition was filed in court in Chico Tuesday asking that the eviction be "stayed until some of these issues can be worked out." She said it's hoped a judge will cancel the eviction and allow a new trial to be held over whether Poythress ought to be evicted. [...] "We are planning to file an affirmative complaint on the predatory lending issues and the fraud that appears to have happened," she said.

For more, see Lawyers hope to halt woman's eviction.

For an earlier report describing how the homeowner was allegedly screwed over by the loan originator, see On the edge: Chico woman faces loss of home, uncertain future.

For other posts on homeowners using state & federal law to try and undo bad mortgage loans, Go Here, Go Here, and Go Here.

(1) Reportedly, Fisher said Poythress has an income of around $900 a month in disability payments, yet the loan documents state her income as $4,000 a month and claim that she was able to repay $2,500 a month on the loan. This wasn't a case where a borrower got greedy and tried to buy more than she could afford, Fisher said. Rather, Poythress was in a vulnerable position and was taken advantage of. UndoMortgageLoans TILAdelta

"Courtroom 676" - Home Of Philadelphia's Residential Mortgage Foreclosure Diversion Pilot Program Back In The News

Philadelphia, Pennsylvania's Courtroom 676 - Home of the city's Residential Mortgage Foreclosure Diversion Pilot Program received mention in recent media reports. For the stories, see:

• CBS Evening News: Glut Of Foreclosures Clogs Courts (A Look At "Fast-Court" In Florida And An Innovative Program In Philly For Those Facing Losing Their Homes), and

• WPVI-TV Channel 6 (Philadelphia): Save Your Home Philly Hotline (Inside Courtroom 676 at Philadelphia City Hall, homes and families are saved from foreclosure every Thursday).

For an earlier story reported in the Philadelphia Daily News (1-28-09), see The miracle of Courtroom 676: Saving lives, one address at a time.

Minn. Cops Suspect Two In Alleged I.D. Theft Racket Used To Scam Banks Out Of Million$; Involved About 50 Bogus Home Sales; Many Now In Foreclosure

In Minnetonka,. Minnesota, KAAL-TV Channel 6 reports:

• Police say two suspects took identity theft to a new level—using stolen ID’s, elaborate forged documents, and help from industry insiders to defraud mortgage banks out of millions of dollars in the Metro and across the country.

***

• Tynessia Snoddy worked as a realtor for a Minnetonka-based company and helped Bernard Holmes put together up to 50 fraudulent home purchases, according to police. "In dollars, it was tens of millions of dollars in properties being sold," said Minnetonka Police Det. Sgt. Dave Riegert.

***

• Holmes and Snoddy—who are believed to be part of a larger criminal ring—walked away from the closing table with commission and cash-back checks, leaving the lenders out of the money they put up. [...] While Holmes and Snoddy’s company has been shut down—officials said the damage has already been done. [...] In fact, many of the homes that were bought by the ring are now in foreclosure.

For more, see Pair's scheme leaves Metro mortgage banks out millions.

NYC Feds Charge Four In Alleged Cash Back, Mortgage Scam; Ex-Cons, Public Housing Tenants Recruited As Straw Buyers; Homes End Up Foreclosed

The New York Post reports:

• The feds [Wednesday] charged four people with running a $10 million scam that used ex-cons and public-housing tenants to secure subprime loans from banks tied to the mortgage meltdown.

***

• The swindle - involving distressed properties in Brooklyn, Queens, Long Island and Westchester - targeted lenders, including Fremont Investment and Loan, First Franklin, and Mortgage Lenders Network USA, authorities said.

• According to the feds, the ring, led by Sharmon Howell, 35, obtained phony appraisals, which the buyers used to claim they were purchasing the homes for more than they actually cost. They allegedly obtained 100 percent financing for mortgages at the inflated values. Then the ring pocketed the difference between those amounts and the real purchase prices - and let the houses go into foreclosure, according to acting Manhattan US Attorney Lev Dassin.(1)

For the story, see $10M LOAN-SCAM RING BUSTED: FEDS.

For the Manhattan U.S. Attorney's press release, see Four Indicted In Mortgage Fraud Scheme Involving Over $10 Million In Loans.

(1) Others charged were David Moore, 40, June Persaud, 45, of Brooklyn, and Oscar Ancrum, 54, of Manhattan.

Dozen Suspects Cop Pleas In Southwest Cash Back, Flipping, Mortgage Scam

From the Arizona Office of the U.S. Attorney:

• Marcus Dozzell, 34, of Henderson, Nevada was sentenced [this week] to 45 months in prison for his conviction in April 2008 for leading a mortgage fraud scheme in Phoenix, Arizona, San Diego, California and Las Vegas, Nevada. Co-defendant Lutrell Sharpe was sentenced to 88 months in prison on January 29, 2009.

• Sharpe pleaded guilty to twenty-five counts related to mortgage fraud, including Mail and Wire Fraud, False Loan Applications, Using a Social Security Number Belonging to Obtained by Fraud, Money Laundering and Conspiracy as part of a 37-count indictment related to his leadership of a 5-year conspiracy involving the purchase of nineteen properties and ten vehicles using fraudulent loan documents. Ten other co-conspirators were also charged and have pleaded guilty for their involvement in the conspiracy and many will be sentenced in the next few months.

For the U.S. Attorney's press release, see Mortgage Fraud Leaders Sentenced To Prison.

For story update, see Real Estate Agent and Two Others Sentenced to Prison for Role in Mortgage Fraud Scheme (Scheme involved approximately $2.5 million in losses to lending institutions):

• Micah Bowens, 39, of Henderson, Nevada was sentenced yesterday to 48 months in prison for his conviction in July 2008 for leading a mortgage fraud scheme in Phoenix, San Diego and Las Vegas. Jennifer Sellers, a real estate agent, 30, of Las Vegas, was sentenced to 24 months in prison on February 23, 2009 and Alonzo Love, 34, of San Diego, was sentenced to 14 months on February 17, 2009.

Maryland Feds Run Up String Of Guilty Pleas In Mortgage Related Fraud Scams

The Maryland Office of the U.S. Attorney has run up a string of real estate/mortgage related fraud convictions this month, as evidenced by these press releases:

• REAL ESTATE AGENT PLEADS GUILTY IN SCHEME TO DEFRAUD MORTGAGE LENDERS (12 Fraudulently Obtained Properties End Up in Foreclosure);

• THIRD DEFENDANT IN MORTGAGE FRAUD SCHEME PLEADS GUILTY AND TWO MORE DEFENDANTS INDICTED (Terrence White Admits to Paying Over 15 Straw Purchasers, Using False Documents to Buy 25 Properties and Receiving Over $3.8 Million in Fraud Proceeds; Six Defendants Have Been Charged in Fraudulent Loan Scheme Totaling Approximately $18 Million);

• 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);

• VICE PRESIDENT OF FINANCIAL SERVICES FIRM PLEADS GUILTY IN METROPOLITAN MONEY STORE MORTGAGE FRAUD SCHEME (Responsible for Over $4 Million in Losses Under the Scheme; involved foreclosure rescue, sale leasebacks).

Justice Trampling Over Homeowners' Rights As "Rocket Docket" Foreclosure Hearings Before "Rubber-Stamping" Judges Can Last Less Than 20 Seconds

In Fort Myers, Florida, The Wall Street Journal reports:

• Hoping to save her house, Saundra Hill Scott arrived at the county courthouse clutching dog-eared mortgage bills and letters from her lender. She need not have bothered. The foreclosure hearing lasted less than 20 seconds, with Judge John Carlin asking her two questions: Are you current on your mortgage and are you living in the home? She answered no and yes and then offered to show him her paperwork.

• "I don't need to see that. That's between you and the bank," he said as he gave Ms. Hill Scott, her husband and three grandchildren 60 days to work out a deal with their lender or vacate their three-bedroom house.

***

• To clear a huge backlog of foreclosures, judges are hearing "rocket dockets" of nearly 1,000 cases a day and calling retired colleagues back to the bench to help ease the workload.

***

• Many defendants in Fort Myers are speculators who never lived in the houses and don't bother to show up for the hearings or respond to court summonses. But some of the homeowners who do come to court are annoyed that they're given only a few seconds to speak to the judge. "The judge didn't want to hear from me," said a frustrated Reed Morgan, a self-employed business consultant, wearing loafers and a blue oxford shirt, after Judge Carlin gave him 60 days to work out a modification plan with his lender or vacate his three-bedroom house.

***

• Lee County judges say they are trying to screen for cases that would benefit from mediation, but Chief Judge G. Keith Cary opposes making such a requirement. "A guy hasn't paid his mortgage in over a year,'' says Judge Cary. "What's there to talk about?"(1)

For more, see A Florida Court's 'Rocket Docket' Blasts Through Foreclosure Cases (2 Questions, 15 Seconds, 45 Days to Get Out; 'What's to Talk About?' Says a Judge).

(1) Chief Judge Cary asks "What's there to talk about?" The obvious point to talk about is whether or not the foreclosing lenders have standing to bring the foreclosure actions in the first place, and whether the courts have any jurisdiction to hear these cases should the foreclosing lenders fail to establish proper standing to file them.

In Dep't of Revenue v. Daystar Farms, Inc., NO.: 5D01-1554 , 803 So. 2d 892; 2002 Fla. App. LEXIS 27 (Fla. 5th DCA 2002), a Florida appellate court, quoting from prior precedent, made this observation about standing and jurisdiction (bold text is my emphasis):

• "In the administrative context, '[s]tanding has been equated with jurisdiction of the subject matter of litigation and has been held subject to the same rules . . . .'" Grand Dunes, Ltd. v. Walton County, 714 So. 2d 473, 475 (Fla. 1st DCA 1998).

***

• "[C]ourts are bound to take notice of the limits of their authority and if want of jurisdiction appears at any stage of the proceedings, original or appellate, the court should notice the defect and enter an appropriate order." Polk County v. Sofka, 702 So. 2d 1243, 1245 (Fla. 1997).

I wonder if the court has taken it upon itself to specifically inquire of the foreclosing lenders as to their standing to bring these actions, or whether it simply opts for a "head in the sand" approach in dealing with the issue. I also wonder if Chief Judge Cary has given consideration to the possiblitity that foreclosure judgments granted by courts without having jurisdiction may be void. The above observation made in Dep't of Revenue v. Daystar Farms, Inc. appears to indicate that the court has an obligation to make some inquiry as to the foreclosing lenders' standing to sue and enter the appropriate dismissal order where standing is lacking, leaving it without jurisdiction to hear the case.

Given everything written in numerous media reports from across the country over the last couple of years on the carelessness of lenders, servicers, and their attorneys in their failure to establish having proper standing when bringing foreclosure actions, it would seem that judges hearing foreclosure cases, generally, should consider themselves to be on notice that the standing issue should, as a matter of practice, be automatically addressed in every foreclosure action. The rule that a litigant's standing to sue is a threshold issue to be resolved before the matter can be reached on the merits is so well established in jurisdictions throughout the country that citation of authority is hardly necessary. Apparently not, however, in the Fort Myers' courtrooms under Chief Judge Cary's supervision. KappaMtgDocsMissing

Suspected Head Of Alleged $100M Mortgage Fraud/Flipping/Ponzi Scheme Admits Screwing Lenders, Investors, Says FBI Agent

In Sacramento, California, News10.net reports:

• An FBI agent investigating a suspected $100 million real estate Ponzi scheme said the man at the center of the probe admitted deceiving his investors. Lawrence Leland "Lee" Loomis, 52, is the founder of Loomis Wealth Solutions and several related companies that the FBI and IRS believe defrauded hundreds of investors and lenders in a multi-layered investment scheme.

• Among the allegations is that Loomis lulled investors in his NARAS fund into thinking their money was safe by sending them false statements indicating a steadily-increasing balance. Loomis' literature promised a 12% annual return.

***

• [FBI special agent Kathleen] Nicolls said Loomis and his associates approached new home and condominium builders in California, Nevada, Arizona, Colorado and Florida and bought distressed properties in bulk at substantial discounts. In an almost simultaneous transaction, Loomis would then sell the properties to his investors at up to double his cost, she said. Bank financing was obtained using inflated appraisals and fraudulent loan documents with Loomis and his associates pocketing the difference, according to Nicolls.

• Victims of the scheme told News10 Loomis promised to cover their mortgage, taxes, insurance and homeowners dues by placing tenants in the properties they purchased. In addition they were promised a payment of several hundred dollars a month.

For more, see FBI: Fraud Probe Target Admits Deceiving Investors.

Go here for FBI special agent Nicolls' affidavit (at page 9, and Exhibit A attached thereto).

ACORN To Kick Off National Civil Disobedience Campaign In Support Of Families Facing Foreclosure Eviction

The New York Times reports:

• As resistance to foreclosure evictions grows among homeowners, community leaders and some law enforcement officials, a broad civil disobedience campaign is starting in New York and other cities to support families who refuse orders to vacate their homes.

• The community organizing group Acorn unveiled the campaign with a spirited rally on Friday at a Brooklyn church and will roll it out in at least 22 other cities in the coming weeks. Through phone trees, Web pages and text-messaging networks, the effort will connect families facing eviction with volunteers who will stand at their side as officers arrive, even if it means risking arrest.

***

• At the onset of the foreclosure crisis, the problem was regarded by some as one of a homeowner’s own making, the result of irresponsible decisions made by families who chose to live beyond their means. But as foreclosures spread across the country, devastating even solidly middle-class communities, the blame has slowly shifted to the financial companies that made questionable loans and have received billions of dollars in federal aid to stave off collapse.

For more, see Effort Takes Shape to Support Families Facing Foreclosure.

Binding Arbitration Bites Builders' Buyers; Hearing "A Kangaroo Court," Says One Homeowner Feeling Screwed Over In Purchase Of New Home

The Atlanta Journal Constitution reports:

• Greg and Kimberly Cole and their three children have slept in cars, in a tent, in a motel, at friends’ houses — all to avoid staying at their $429,000 house in Marietta. The Coles say construction problems at their 3,400-square-foot house led to cracks, leaks and mold that’s sickened them.

• They went to binding arbitration with John Wieland Homes and Neighborhoods because that’s what their home warranty required. Builders require buyers to agree to arbitration to avoid costly litigation when conflicts arise. But the Coles say arbitration failed them. Many of the repairs they sought were rejected by the arbitrator, and the ones that were ordered almost two years ago have not been made.(1)

***

• The Coles and other homeowners believe arbitrators are closely tied to home builders, to the detriment of homeowners.

• Bill Clements was involved in a dispute with Sharp Residential over problems with joists and wood floors at his new home in Kennesaw. “It’s a kangaroo court for the homeowner,” Clements said. “We won but it was a grossly short amount of money considering what had to be done. My hardwood floors are a disaster.” And because the arbitration decision is binding, “there’s no appeal whatsoever,” Clements said.

For more, see Homeowners say arbitrators biased toward builders.

(1) Reportedly, the home is in foreclosure because the Coles stopped making payments two years ago. “The roof leaks, the windows leak, the door leaks,” Greg Cole said. “The house is basically worthless.” Inasmuch as it will also be the mortgage lender who ends up holding the bag in this case (as it often is), lenders may want to consider refusing to finance new home purchases that contain builder-prepared arbitration clauses. As long as it's owed significant sums on the loans, the lenders have as much of an interest in protecting the home as the owner does.

Mother Nature Accused Of Snatching Property Right Out From Under Celebrity Homeowners; No Charges Pending, Locals Fighting Back

In the Hamptons area of Long Island, the New York Post reports:

• First, property values in the Hamptons started sinking - now it's the properties themselves. Beachfront homes in the Hamptons hamlet of Wainscott - including the one belonging to cosmetics heir and former mayoral candidate Ronald Lauder - are slipping into the ocean, thanks to severe erosion brought on by high winds.

• "These houses are sitting ducks," said Larry Penny, the director of the town's Natural Resources Department. "The erosion is relentless. We don't see any relief in sight."

***

• Faring little better is the nearby mansion of Marci Klein, the daughter of fashion legend Calvin Klein and a producer for "Saturday Night Live" and "30 Rock." A stairway meant to lead from the dunes in her backyard down to the beach is now submerged at high tide.

***

• Penny estimated that the Klein and Lauder homes had lost about 20 feet of dune since November, thanks mostly to two big snowstorms in December and higher-than-usual tides.

***

• Late "Jaws" star Roy Scheider was forced to stack sandbags outside his $16.75 million home to protect against beach erosion in 2006. He later sold the house to Billy Joel.

For the story, see ERODE TO RUIN (Big 'Drop' In Celebs Hamptons Real Estate).

Utah AG Busts Alleged Equity Stripping, Foreclosure Rescue Ring; Hurting Homeowners Get Boot From Homes As Unwitting Straw Buyers Left Holding The Bag

From the Office of Utah Attorney General Mark Shurtleff:

• Four people were arrested [last week] for allegedly defrauding financially troubled homeowners out of more than $1 million in property.(1) The alleged victims were all Polynesian and were offered new mortgages to help save their homes from foreclosure. The defendants allegedly had straw buyers purchase the properties and then took out all of the equity.(2)

***

• Here is how the scheme allegedly worked: Polynesian homeowners were approached for help after they fell behind on their mortgage payments. The victim would sign a quit claim to give title to the property. Another Polynesian would be asked to purchase the property with the promise that all the mortgage bills would be paid. However, the monthly payments were not paid, the homeowners were evicted and the straw buyers were left with bad credit.

The suspects were variously charged with multiple felony counts of second degree:

• communications fraud,
• identity fraud, and
• racketeering.

For the Utah AG's press release, see Four Arrested In Mortgage Fraud Scheme Targeting Polynesian Victims.

(1) Those arrested were: Elenoa Moala, 46, Salt Lake City, Haloti Moala Liavaa, 42, Salt Lake City, Laura Solorio, 40, Salt Lake City, and Kathryn Thompson, 45, South Jordan.

(2) Should the homeowners victimized by the alleged fraud attempt to void or cancel the deed to the straw buyer, or the mortgage obtained by the straw buyer, central to such an effort (assuming the lender had no actual knowledge of the fraud) would be the ability to charge them with notice of the fraud and/or any other unrecorded rights and equities (ie. equitable mortgage) the victimized homeowners may have had at the time the straw buyer took title and the lender made the mortgage loan. Lack of participation in the fraud, and lack of any actual knowledge thereof, by subsequent purchasers & encumbrancers is not enough to sustain a claim of bona fide purchaser / encumbrancer. In this case, the homeowners' continued possession of the property after signing away the quit claim deed may have triggered a duty to inquire, upon both the straw buyer, and the the straw buyer's mortgagee, into the nature of the homeowners' continued occupancy. See Ault v. Holden, 2002 UT 33; 44 P.3d 781; 444 Utah Adv. Rep. 3; 2002 Utah LEXIS 60 (2002), where the Utah Supreme Court observed:

• [P]ossession requires [...] inquiry into any rights in the property the possessor may hold. Hottinger v. Jensen, 684 P.2d 1271, 1273 (Utah 1984). Traditionally, in race-notice states like Utah, a purchaser takes subject to rights of parties in possession that are open and visible. See, e.g., Mathis v. Madsen, 1 Utah 2d 46, 57, 261 P.2d 952, 959 (1953); Neponset Land & Livestock Co. v. Dixon, 10 Utah 334, 336-37, 37 P. 573, 574 (1894); Ayers v. Jack, 7 Utah 249, 252-53, 26 P. 300, 300 (1891). In other words, possession by someone other than the seller engenders a duty to inquire on the part of the purchaser into the rights of the party in possession. See Webster v. Knop, 6 Utah 2d 273, 278, 312 P.2d 557, 560 (1957); Salt Lake, Garfield & W. Ry. Co. v. Allied Materials Co., 4 Utah 2d 218, 222, 291 P.2d 883, 886 (1955); Williams v. Barney, 119 Utah 61, 84-85, 224 P.2d 1042, 1053 (1950); Meagher v. Dean, 97 Utah 173, 179, 91 P.2d 454, 456 (1939).

Should a court determine that, had such an inquiry been pursued, the fraud upon the homeowners would have been discovered, both the straw buyer and the mortgage lender could find themselves being charged, by imputation, with notice of the fraud, thereby defeating any claim of bona fide purchaser / encumbrancer that they may assert. For support for the proposition that "the continued exclusive possession of a vendor after his formal conveyance of the legal title is a fact in conflict with the legal effect of his deed, and is presumptive evidence that he still retains an interest in the premises, and is sufficient to put a purchaser upon inquiry [...]", see Pell v. McElroy, 36 Cal. 268, 1868 Cal. LEXIS 186 (Cal. 1868).

For cases, generally, 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 and equities of the possessor, see Bona Fide Purchaser Doctrine, Possession Of Property By Occupants Other Than The Vendor & The Duty To Inquire.

Developers, Construction Lenders Nervous As Buyers Begin To Claim Equitable Liens, File Lis Pendens, Threaten Foreclosure To Force Return Of Deposits

In South Florida, the Daily Business Review reports on a tactic some disgruntled customers of condo developers are using to force a return of deposits paid on purchase contracts that have yet to close:

• [F]rustrated contract holders [...] have stepped up their fights against construction lenders, claiming they have an equitable interest in the properties where they planned to buy a condo. They are not necessarily interested in foreclosing on projects but hope the new strategy will persuade developers and construction lenders to return their deposits — or, at least, a portion of them.

• The strategy could be troubling for lenders and developers because a lis pendens casts a cloud over the property title. And banks looking to sell the notes and mortgages secured by the projects may have a hard time finding buyers as a result.

***

• Several buyers have sued lenders claiming their deposits have seniority over the construction loan because their contracts were signed before the construction loan was obtained.(1) Often, developers had to line up contracts for at least half of a project’s units to secure a construction loan.(2) For that reason, some frustrated buyers are dragging construction lenders into their deposit recovery lawsuits.

For more, see Condo Meltdown: Latest strategy involves pursuing lenders.

For examples of two lawsuits in which disgruntled condo purchasers are, among other things, asserting equitable lien claims, and seeking foreclosure thereof, see:

• Duque, et al. v. W/K Sawgrass LLLP, et al. (count XIV - pages 40-41),
• Abercrombie, et al. v. SB Hotel Associates, LLC, et al. (count XII - page 33-34).

(1) The story quotes one local attorney involved in the deposit refund litigation as saying: “There is long-standing case law which holds that a buyer who pays money toward the purchase of a home receives an equitable interest in the property, and this interest can be legally superior to any interest in the property obtained by a construction lender[.]”

(2) Even if the construction lender recorded its mortgage in the county records before the contract holders recorded their interests, the contract holders' unrecorded interests (including any possible equitable liens a court may establish) could very well have priority over the recorded interest of the lender. The real estate recording statutes, which determine the priority of interests in property, only protect bona fide purchasers (buyers) and bona fide encumbrancers (lenders). If it can be shown that the lender either:

• had actual knowledge, or
• can be chargeable with notice

of the existence of the earlier purchase contracts, a case can be made defeating any claim/defense by the lender asserting bona fide purchaser/encumbrancer status, thereby making the construction loan inferior to the contract holders' equitable liens. See generally, Flanigan's Enters. v. Shoppes at 18th & Commer., Inc., 954 So. 2d 758; 2007 Fla. App. LEXIS 7065; 32 Fla. L. Weekly D 1241 (Fla. App. Ct., 4th Dist. 2007).

Inasmuch as the lender here required the developer to pre-sell half the units in the project before it would fund the loan, it may be tough for the lender to now say it had no knowledge of those existing contracts. I wonder if the purchase contracts contained a subordination clause making the purchasers' interests inferior to a future construction loan??? The story is silent on this point.

The Publicity Continues For The "Produce The Note" Strategy In Fighting Foreclosure

The Associated Press yesterday ran a story on the so-called "Produce The Note" strategy used in defending homeowners facing foreclosures against careless lenders and sloppy, "foreclosure mill, assembly-line" law firms who have contributed to a nationwide mess.

• Kathy Lovelace lost her job and was about to lose her house, too. But then she made a seemingly simple request of the bank: Show me the original mortgage paperwork.
  And just like that, the foreclosure proceedings came to a standstill.

• Lovelace and other homeowners around the country are managing to stave off foreclosure by employing a strategy that goes to the heart of the whole nationwide mess. During the real estate frenzy of the past decade, mortgages were sold and resold, bundled into securities and peddled to investors. In many cases, the original note signed by the homeowner was lost, stored away in a distant warehouse or destroyed.

• Persuading a judge to compel production of hard-to-find or nonexistent documents can, at the very least, delay foreclosure, buying the homeowner some time and turning up the pressure on the lender to renegotiate the mortgage.(1)

***

• Tom Deutsch, deputy executive director of the American Securitization Forum, a group that represents banks, law firms and investors, dismissed the strategy as merely a stalling tactic, saying homeowners are "making lawyers jump through procedural hoops to delay what's likely to be inevitable."

• Deutsch said the original note is almost always electronically retained and can eventually be found. Judges are often willing to accept electronic documentation. And lenders are sometimes allowed to produce other paperwork to establish they are the holder of a loan. Still, assembling such documents to a judge's satisfaction takes time, which to homeowners is the point.

For more, see Homeowners' rallying cry: Produce the note (if link expires, try here).

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.

(1) It should be noted that, technically, it is impossible to renegotiate the loan terms with the foreclosing mortgage company until they have first proven, through the production of the appropriate paperwork, that they have the legal authority to do so. Negotiating the repayment terms with a mortgage company that subsequently is found to have acted with no authority to do so leaves a homeowner with an agreement that is null and void. An illustration of the current confusion existing with mortgage holders and servicers is contained in an account describing an incident where two different mortgage companies filed for foreclosure involving the same mortgage loan. See The Wall Street Journal Law Blog: Foreclosure Mess: Two Different Plaintiffs Claim to Own Same Mortgage.

At least one foreclosure defense attorney has reportedly pointed out that, because of the way mortgages have been securitized, it’s often unclear who actually owns the debt, and further, in many cases, the originating lenders only pledged these loans and didn’t actually transfer ownership of them to the trusts that are supposed to hold them and issue the securities. See 'Angel' of foreclosure defense bedevils lenders (Florida attorney trains hundreds of others to help troubled borrowers). KappaMtgDocsMissing

Nevada Regulators Have Hands Full With Complaints About Foreclosure Consultants, Loan Modification Firms; Lawmakers Look To Close Loopholes

In Reno, Nevada, the Reno Gazette Journal reports:

• [E]very day, agencies such as the state's Mortgage Lending Division and Consumer Affairs Division are contacted by home owners victimized by fraud. [...] Minorities who have difficulty communicating in English are especially susceptible, said Joe Waltuch, commissioner of the State of Nevada Mortgage Lending Division.

• "Right now we have a lot of complaints," Waltuch said. "We get complaints daily regarding people who have paid money up front to either a foreclosure or loan modification specialist who claimed they would deal with the lender and help the borrower stay out of default or modify the terms of their mortgage. There have already been a couple of arrests and warrants outstanding for people."

***

• Waltuch said his state office has the statutory authority to go after foreclosure consultants but not loan modification consultants who work with properties not in foreclosure. He said his agency work in a roundabout way using loopholes available through the Consumer Affairs Division. "It's a Band-Aid," said James Campos, commissioner of the Consumer Affairs Division. "There needs to be a more specific and targeted law in the books." On Feb. 11, the Assembly Commerce and Labor Committee held its first hearing on a bill sponsored by Assemblyman Marcus Conklin, D-Las Vegas, to address regulation of foreclosure and loan modification consultants, including the need for licensing.(1)

For more, see Struggling homeowners: Beware of scams.

(1) It may be that the state bar association should begin looking into some of these loan modification firms and foreclosure consultants. To the extent these operators are purporting to review homeowners' loan documents looking for violations of federal and state consumer & lending laws, those activities may constitute the unauthorized / unlicensed practice of law.

To the extent non-lawyer loan modification firms are teaming up with lawyers to provide these services, some activities (ie. 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, handling legal matters without adequate preparation, etc.) may constitute violations under the state bar's ethics rules.

For evidence of activities of attorneys involved with non-attorney loan modification firms that have caught the attention of state bar asociations, see:

• Cincinnati Bar Assn. v. Mullaney, 119 Ohio St.3d 412, 2008-Ohio-4541 (2008);
• Federal Judge, State Bar Slam Attorney For Stiffing Clients Referred By Loan Modification Firm; Lawyer/Foreclosure Consultant Ties Now Facing Scrutiny,
• ETHICS ALERT: Legal Services to Distressed Homeowners and Foreclosure Consultants on Loan Modifications (issued by The California State Bar Association Committee on Professional Responsibility and Conduct).

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

Vacant Multi-Million Dollar Homes Littered Throughout Greenwich, Connecticut

The New York Post reports:

• It's a gold-plated ghost town. Almost 50 mansions built on spec for the hedge-fund set - and priced from $5 million to upwards of $25 million - sit empty in Greenwich, Conn., where the real-estate market has tanked. [...] Those who still have cash can find spectacular, never-occupied estates in move-in condition, complete with wine cellars for their Bordeaux and Sub-Zero refrigerators for their caviar, [...].

For more, see GREENWICH GHOST TOWN (50 Mansions Are Begging For Buyers).

For addresses and photos, see Greenwich Mansions Begging For Buyers.

Minneapolis Non-Profit Solicits, Obtains Sale-Leaseback Offer On Building To Bail Itself Out Of Possible Foreclosure; City Debt To Be Paid In Full

In Minneapolis, Minnesota, Finance and Commerce reports:

• St. Paul-based Wellington Management Inc. has a deal to buy the Minneapolis home of the nonprofit Green Institute, an environmental consultant/salvage center that has struggled to stay current on loans from the city and its bank. With the sale of the building, “We’ll be completely out of debt, which will be nice,” said Jamie Heipel, executive director of the Green Institute.

***

• The Green Institute was behind on payments to the city on two loans: a construction loan and a delinquency loan, related to the nonprofit’s ongoing efforts to keep up with payments. As the city of Minneapolis grew frustrated with the nonprofit’s financial struggles, it weighed options including foreclosure on the property.

***

• Heipel said that the Green Institute will remain a tenant in the building, leasing about 2,200 square feet of office space and about 6,500 square feet for its ReUse Center, a retail operation that sells salvaged building supplies.

• The Green Institute retained Kraus-Anderson Realty to broker the property. Heipel said the nonprofit ultimately drew three offers on the building, and added that the Green Institute accepted the offer from Wellington last week.(1)

For more, see Green Institute to sell, lease back headquarters from Wellington (Minneapolis-based environmental nonprofit has struggled to stay current on loans).

(1) The fact that the Green Institute hired a real estate broker to market the property (presumably as a sale-leaseback opportunity for an investor), and the fact that it obtained three (presumably arms-length) offers from which to select are factors that could weigh heavily against it if, a couple of years down the road (especially if the building's value at that time is much higher than the current sale price), it changes its mind and decides it wants the title to its building back, and goes to court to try and have the sale-leaseback arrangement recharcterized as an equitable mortgage. For a case where a court ruled against a property seller attempting to invoke the equitable mortgage doctrine four years after the sale in order to reacquire a property it sold for fair value, and which had increased in value subsequently thereafter, see Hamud v. Hawthorne, 52 Cal. 2d 78; 338 P.2d 387; (Cal. 1959).

Another Rent-Paying Section 8 Tenant Caught Up In Foreclosure Eviction May Be Failing To Exercise Special Rights Under Federal Law

In Pittsburg, California, the Contra Costa Times reports:

• Pittsburg resident Casandra Jackson-Gordon is moving — again. For the second time in less than two years, Jackson-Gordon says she has lost her subsidized rental home to foreclosure. The first time, she also lost her $1,500 security deposit — but the bank offered her $3,500 to move out fast so it could sell the property. That money helped her get into another house. She's hoping the lender that holds the mortgage on her current residence will be equally generous.

***

• The city of Fairfield[, California], which also has been hard hit by foreclosures, set up a program late last year to help low-income residents whose landlords went into foreclosure by giving them grants of up to $3,000 to cover the security deposit on a new place in the city. Recipients must be documented U.S. citizens without criminal records.

***

• Like Jackson-Gordon, other residents who receive Section 8 housing assistance also have been forced to move when their landlords lost their houses.(1)

For more, see Renters, too, feeling effects of foreclosure crisis.

(1) It may be important to note that, in the case of a tenant who receives a Section 8 federal rent subsidy (ie. a "Section 8" tenant), it has been reported that federal law prohibits a new owner, including foreclosure purchasers and foreclosing lenders, from evicting Section 8 tenants unless they first go to court and prove they’re being economically harmed by having a tenant remain in a building, or show other good cause. However, many Section 8 tenants panic and don’t fight eviction notices, not realizing they have these special rights granted by Federal law. For more on this point, see Foreclosures hit tenants (Activists: New owners trample on renters’ rights).

For the specific federal regulation on this point, see 24 CFR 982.310(d)(1). Go here for the regulations (24 CFR 982) regulating the Section 8 rent subsidy program. SkimmingKappaRent

Town Rental Restrictions Leaves Real Estate Investor With Home He Can't Rent

In Northfield, Minnesota, the Northfield News reports:

• [I]n late 2007, the city council approved a rental ordinance that permits no more than 20 percent of homes in a block to be licensed as rentals. The idea was to limit rentals, which the council said tended not to be kept to the standard of owner-occupied properties.

***

• Carl Almen has lived in Northfield for 50 years. For almost 10 years he has been a landlord, renting five apartments and two storefronts — all in Dundas. So when he and his wife bought a foreclosure [in Northfield], he never imagined he wouldn’t be able to rent it. “I think it’s the most ridiculous thing I ever heard,” Almen said of the city’s density limits, adding that rule gives the impression that city leaders value homeowners more than tenants and landlords. “What they’re saying is you should be on the back of the bus, and if you’re a landlord, you’re scum. I really resent that.”

• The ordinance, which Almen says forced him to sell the house, isn’t stopping him from owning rental property. Just not in town. “It will make me not invest in Northfield,” he said.

For more, see Rental code: Keeping homes vacant?

Breaking Into Vacant Foreclosed Houses & Moving In The Homeless "The Modern Underground Railroad," Says Twin Cities' Activist

In Minneapolis, Minnesota, the Twin Cities Daily Planet reports:

• Poverty rights activists broke into at least a dozen vacant Minneapolis buildings [last] week and helped homeless families move in. “This is the modern underground railroad,” said Cheri Honkala, National Organizer for the Poor People’s Economic Human Rights Campaign, the group organizing the “takeovers.” [Last] week’s actions are part of a growing national movement to illegally open up thousands of vacant, foreclosed homes to provide housing for the growing number of homeless people.

For more, see Neighbors helping neighbors—to break into vacant houses.

Go here for similar efforts by a Miami homeless activists.

Go here for posts on squatters moving into vacant homes, foreclosures. squatter foreclosure zebra

50-State Report On Unfair & Deceptive Acts & Practices Statutes

From the National Consumer Law Center:

• Serious gaps and weaknesses have compromised consumer protection laws in most of the 50 states, and recent court rulings have opened the door to predators and abuses in billions of everyday transactions. So says a new report by the non-profit National Consumer Law Center: "Consumer Protection in the States: A 50-State Report on Unfair and Deceptive Acts and Practices Statutes."

Go here for the entire press release.

A permanent link to the report appears in the right-hand sidebar for future reference.

More On World Savings' Whistleblower Paul Bishop

On CBS News' The Early Show this morning, World Savings whistleblower Paul Bishop spoke with Harry Smith about when he first noticed the company was taking on unstable loans. The interview was a follow-up on last night's 60 Minutes story in which Bishop described the kinds of mortgage loans his former employer was making, and how they were making them.

For today's interview (about 5 minutes), see Mortgage Whistleblower.

For last night's story (13+ minutes), see World of Trouble (read story) (watch video).

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

Ohio Homeowners Facing Foreclosure Fight Back; Claim Lender Has No Right To Sue; Seek Class Action Status

In Sandusky County, Ohio, the Toledo Blade reports:

• Facing the loss of their home in the tiny northwest Ohio village of Gibsonburg, Jeffrey and Katrina Weickert pleaded for more time. Instead, lawyers for their mortgage holder asked a judge in Sandusky County Common Pleas Court to expedite foreclosure proceedings.

• Now, Mr. and Mrs. Weickert are using the court system to fight back. They are among thousands of homeowners nationwide who are challenging the right of mortgage servicing companies and trustees to commence foreclosure proceedings. "We have 20 of these cases pending all over northwestern Ohio," said John Murray, a lawyer with the Sandusky firm of Murray & Murray.

• Few of the complaints deny that homeowners have fallen behind in mortgage payments. Rather, they typically question whether mortgage servicing firms and trustees seeking foreclosure have the right to sue. It's often a legitimate question, said Lauren Saunders, an attorney with the National Consumer Law Center in Washington. In the mortgage craze that led to the economic crisis, proper documentation sometimes wasn't finished on behalf of investment trusts that own most mortgages, she explained.

For more, see Toledo area couple fighting foreclosure in court (More homeowners resist mortgage firms).

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

ABA Chief Nudges Obama Administration For Cash To Create 1,000 Attorney "Legal Corps" To Supplement Current Legal Aid, Pro Bono Efforts

The ABA Journal reports:

• Emboldened by the fact that there is not just one, but two lawyers at the executive branch helm, [American Bar Association] President H. Thomas Wells Jr. headed to the White House to see if he could make some progress on ABA initiatives.

***

• One initiative Wells raised is the creation of Legal Corps, which would direct more lawyers into efforts to represent a broad segment of working people in matters arising out of the economic crisis, such as foreclosures. Legal Corps lawyers would bolster services already being provided by lawyers in local offices supported by federal funding channeled through the Legal Services Corp. and lawyers working on a pro bono basis. The ABA’s initial proposal calls for federal funding to help support some 1,000 salaried lawyers providing services to clients meeting certain economic need criteria.

For the story, see ABA Pushes for 1,000-Lawyer Legal Corps.

Million Dollar Dallas-Area Homes Renting For Less Than $1,000/Month?

In Cedar Hill, Texas, The Dallas Morning News reports on a foreclosure-related scam that has gotten the attention of local police - scammers hijacking vacant homes and renting them out, pocketing cash in the process and leaving the unwitting renters out of luck.

• [T]he neighborhood had become a victim of the latest housing foreclosure scam. It wasn't the only one. The Lake Ridge development in Cedar Hill had renters living in million-dollar homes for less than $1,000 per month. A subdivision near Singing Hills in southeast Oak Cliff also became a prime target. And there could be more.

***

• Here's how the scheme works: When a home enters foreclosure, someone files an appeal bond, which delays the court's foreclosure process for 30 to 60 days or longer. With the case tied up, the scammers change the door locks and find people to move in. The scammer collects rent until the homeowner, real estate agent or authorities disrupt the ruse.

• "It's so novel. It's ingenious, really," said Dallas County prosecutor Stephanie Martin, who won a conviction this week in a groundbreaking case. The scammers typically have a keen knowledge of the foreclosure process and the brazenness to bilk the system, authorities say.

***

• Despite the recent arrests, [an investigator with the Dallas County district attorney's office] said he doesn't expect the scheme to subside because it's too easy.

For more, see Scammers finding open door at foreclosed homes.

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

John & Jane Doe Lawsuits Prohibited In Connecticut?

It is not uncommon when a party bringing a lawsuit is ignorant of the name of a defendant, he must state that fact in the complaint and simply designate such a party as a John or Jane Doe defendant.

However, according to a recent decision by a Connecticut trial court, designating such unknown defendants in this manner is not allowed in lawsuits brought in the state courts of Connecticut. In Younger v. City of E. Haven,(1) (Superior Court, judicial district of New Haven, Docket No. CV 085020500S, 2008 Conn. Super. LEXIS 1965 (August 4, 2008, Bellis, J.)), the court ruled that Connecticut practice does not permit actions to be initiated against fictitious defendants, and accordingly, dismissed an action against a defendant designated as John Doe.

The approach of designating defendants in this manner is quite common in mortgage foreclosure actions, where an encumbered property is often in the occupancy and possession of unknown tenants. It appears that, to the extent the foreclosing lender's attorney fails to ascertain the true names of all the occupants in possession of the foreclosed home and simply designates them with a fictitious name, a good argument could be made (based on Younger v. City of E. Haven, and the cases cited therein) that the foreclosure action and/or subsequent eviction proceedings should be dismissed, and that any judgment arising therefrom should be declared void for lack of personal jurisdiction, as to those unnamed "John & Jane Doe" occupants. Just something to think about when fighting off foreclosure evictions on behalf of Connecticut tenants.

For the longer version of this post, see "John & Jane Doe" Immune From Connecticut Civil Lawsuits?

(1) Link may require free registration at LexisOne Free Case Law.

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.

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• 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