Thursday, February 18, 2010

St. Louis Man Invests $137K+ To Buy, Rehab Home, Then Loses It For $6K In Municipal Foreclosure Sale; Says City Failed To Notify Him Of Pending Action

In St. Louis, Missouri, the St. Louis Post Dispatch reports on Mark Siebels, a local real estate investor who bought a burned-out two-family building in south St. Louis for $37,500 four years ago, invested an additional $100,000 to rehab it, and then lost it for $6,000 in a city foreclosure sale triggered by his failing to pay periodic vacant building registration fees. He says he had no clue about the sale, and did not receive any notice thereof.
  • Matt Moak, a city attorney in charge of the problem properties unit, said the city foreclosed on the property late last year because Siebels failed to pay a vacant-building registration fee. The city charges the owners of vacant buildings with code violations a $200 fee every six months. Moak was unsure Monday what the code violations were on the Siebels property. The fee is a way to deter investors from leaving land derelict, he said.

  • And if the notices are ignored, the property can be foreclosed on.In Siebels' case, the notices — numbering in "double digits," according to Moak — were sent to an address in Jefferson County. But he had moved by then. Siebels acknowledged he should have updated the city with his new address in Kirkwood. But he can't believe an innocent mistake could cost him the property, which he insists he has been maintaining.

  • City officials say they deal with hundreds of a properties each year and can't afford to track down homeowners. Many simply don't want to be found. Moak said it's Siebels' fault for not filing the address change, pointing out that notice of the foreclosure auction was published in the Post-Dispatch.

***

  • Alan Baker, a local real estate attorney, said Siebels could sue to try to turn back the sale of the property. The case would likely hinge on whether the city gave "reasonably calculated notice"(1) that it was foreclosing on his property, he said. "The ultimate answer lies with a judge," Baker said.

For more, see Rehabber puts 4 years into duplex, loses it to city.

(1) The words "reasonably calculated notice" come directly from the U.S. Supreme Court in at least two rulings that voided foreclosure sales in which the foreclosing entity did a miserable job at trying to track down property owners to provide them with notice of the pending actions. See Jones v. Flowers, 547 U.S. 220, 126 S. Ct. 1708 (2006):

  • [W]e have stated that due process requires the government to provide "notice reasonably calculated, under all the circumstances, to apprise interested parties of the pendency of the action and afford them an opportunity to present their objections."

citing Mullane v. Central Hanover Bank & Trust Co., 339 U. S. 306, 314 (1950):

  • An elementary and fundamental requirement of due process in any proceeding which is to be accorded finality is notice reasonably calculated, under all the circumstances, to apprise interested parties of the pendency of the action and afford them an opportunity to present their objections. [citations omitted].

Go here for the links to the transcript of the oral argument, and the various briefs filed in Jones v. Flowers, referenced above, filed by the Public Citizen Litigation Group attorneys who successfully represented the improperly-foreclosed-upon homeowner in the U.S. Supreme Court.

$300K Proceeds From Reverse Mortgage Part Of $750K Ripoff From Victimized Senior; POA Called "License To Steal From The Elderly"

In Honolulu, Hawaii, the Honolulu Advertiser reports:
  • A trusting 82-year-old 'Aiea man is struggling to restore his financial footing after giving away his durable power of attorney to a female acquaintance who used it to raid his bank account and obtain credit cards and a reverse mortgage that plunged him into staggering debt.(1)

  • Friends who are helping the elderly man said cash losses and new debt from years of financial exploitation could top $750,000, with no guarantee of getting any of it back. The 'Aiea man's predicament, now under investigation by the state Department of Human Services Adult Protective Services, is an example of how powers of attorney — used since ancient times to allow individuals to act on behalf of others in business transactions and other affairs — have become a license to steal from the elderly.(2)

For more, see More Hawaii seniors financially exploited (Lawmakers considering ways to guard against exploitation; Couple helping exploited widower pick up the pieces ).

(1) According to another report (see Couple helping exploited widower pick up the pieces), the ripped off funds consisted, in part, of the proceeds from an alleged fraudulently obtained mortgage on the elderly man's home in the amount of approximately $300,000.

(2) Reportedly, most often the thieves are relatives or caregivers who take advantage of a senior's poor health or diminished mental capacity to gain control of bank accounts, homes and other assets for their own benefit, according to elder law experts and other advocates for the elderly. "It's a huge problem," said Bruce Bottorff, associate state director of AARP. "We continue to do education and outreach because it is so prevalent and, frankly, underreported. People need to be vigilant as the population grows older."

Disbarred Attorney Cops Plea To Looting $3M+ From Escrow Account Used To Close Real Estate Transactions; 15 Deals Left Unfunded

From the Office of the U.S. Attorney (Minneapolis/St.Paul, Minnesota):
  • [Earlier this month] in federal court in Minneapolis, Minnesota, [] 38-year-old [now-disbarred in Minnesota(1)] lawyer [Jason Eric Fischer] from Hudson, Wisconsin, pleaded guilty to mortgage fraud by stealing more than $3 million from the escrow account at the real estate title and settlement company he jointly owned.

***

  • In his plea agreement, Fischer admitted that from 2006 through May 2009, he orchestrated a scheme to divert funds from the escrow account at Real Source Title, a company he jointly owned and managed. The company, which had offices in Mahtomedi and Burnsville in addition to Illinois and Hudson, Wisconsin, routinely accepted wire transfers and checks from buyers and lenders. Those funds were to be held in escrow for the sole purpose of closing residential real estate transactions.

  • To further his scheme, Fischer represented to buyers, lenders, underwriters, and others that the money deposited into the company’s escrow account was, in fact, used only to close real estate transactions. He made those representations by producing and mailing false HUD-1 settlement statements to people of interest. In truth, however, Fischer regularly withdrew escrow-account money to pay for personal and business expenses as well as fund prior company real estate transactions.

  • Between 2006 and May 2009, Fischer diverted approximately $3 million from the escrow account at Real Source Title; and by May 2009, the account was depleted and unable to fund 15 loans. As a result, buyers, sellers, lenders, underwriters, and others suffered significant financial loss.(2)

For the U.S. Attorney press release, see Lawyer pleads guilty to more than $3 million mortgage fraud scheme.

(1) For the disbarment order, see In re Petition for Disciplinary Action against Jason Eric Fischer.

(2) If a Minnesota attorney, either in the course of representing you or acting as a fiduciary, screws you out of money or property through dishonest conduct, go to the Minnesota Client Security Board for information on how to recover some or all of your losses from the fund.
For other states and Canada, see:

Maps available courtesy of The National Client Protection Organization, Inc.

Fight To Successfully Recover Home Stolen, Mortgaged Out From Under Leaves Elderly Couple Exhausted, Out Thousand$ In Legal Fees

In Frostproof, Florida, The Ledger reports:
  • An elderly couple whose house in Frostproof was targeted for real estate fraud has reclaimed the home but might never recover money spent in a two-year legal battle. The outcome of a Feb. 5 court hearing means Albert and Nancy Pascell would have to pursue further legal action if they hoped for financial reparations. They are unlikely to do that, despite racking up thousands of dollars in legal bills, said their daughter, Nancy Houle of New York. "My parents are exhausted, both financially and emotionally," said Houle, whose parents are in their late 70s. "It's disrupting our entire lives every single day. We vowed we weren't going to talk about it any more. We're going to move on. We're done."(1)

For more, see Frostproof Deed Fraud Victims Regain Home (Frostproof couple reclaims house but might never recover legal expenses).

(1) According to the story, Polk County property records show two people with Tampa addresses, Maria Blanco and Armando Borges, recorded a quit-claim deed on Nov. 10, 2007, claiming the Pascells, who live part of the year in New York, had granted them ownership of the property. The Pascells said their signatures were forged. The same day the deed was filed, Blanco and Borges secured a $48,000 mortgage on the property, said the Pascells' lawyer, Keith Merritt of Lakeland.

Reportedly, the Pascells sued Blanco and Borges as well as the South Florida mortgage lender, 8 & 62 Corporation Profit Sharing Plan Trust. At a hearing last October in Polk County civil court, Circuit Judge Charles B. Curry voided the fraudulent deed and conveyed title to the Pascells. The Polk County Sheriff's Office has issued two warrants for Blanco's arrest, a spokeswoman said.

Lender Found Liable For Role In Broker's Forgery Scam That Mortgaged 70-Year Old Woman's Home Out From Under Her

From a press release from the law office of Orange County, California attorney Douglas J. Pettibone:
  • 70-year-old Arizona resident Mona Dobben stands up and takes down a 20-billion-dollar Mortgage Company by winning a $100,000.00 judgment which includes punitive damages. American Home Mortgage (AHM) was found liable for aiding and abetting a fraud perpetrated on Dobben by an unlicensed real estate broker (In Re: American Home Mortgage Holdings, et al.; United States Bankruptcy Court District of Delaware; Case No: 07-11047 (CSS)).

  • Dobben is represented by Orange County attorney Douglas J. Pettibone who alleges Dobben is victim of loan fraud by an unlicensed real estate broker and convicted felon Patrick Downey. According to Pettibone, Downey stole Dobben's identity, forged Dobben's signature and submitted false loan documents to AHM without Dobben's knowledge. Trial Judge Christopher Sontchi said, "It shocks the conscious of the court what went on here".(1)

  • After Dobben received foreclosure notices from AHM she discovered the fraud and contacted AHM for help who turned a deaf ear and never responded. AHM then filed Bankruptcy. In the bankruptcy court Dobben claimed AHM aided and abetted the fraud perpetrated upon her by Downey and that her claim against AHM should not be discharged in the AHM bankruptcy.

For more, see Mortgage Company Liable for Aiding and Abetting Real Estate Broker Fraud (70-year-old Arizona resident, Mona Dobben stands up and takes down a 20-billion-dollar Mortgage Company by winning a $100,000.00 judgment which includes punitive damages).

(1) Reportedly, Judge Sontchi awarded actual damages of $32,000.00. However, given Dobben's deteriorating credit score and the clear emotional distress displayed in the courtroom, the court granted her treble damages. The total award was a judgment in the amount of $100,000. Following the trial AHM immediately appealed the judgment. The appeal is currently pending.

Wednesday, February 17, 2010

2nd Pa. Attorney To Go Down In Alleged Scam That Peddled Bogus Sale Leasebacks That Purported To Save Homeowners From Foreclosure

In Philadelphia, Pennsylvania, the Bucks County Courier Times reports:
  • Attorney and Doylestown Township Supervisor Jeffrey Bennett will plead guilty to criminal charges of conspiracy, mail fraud and wire fraud, and conspiracy to commit money laundering Wednesday in Philadelphia. [...] [Defense attorney Gavin] Lentz announced his client's intentions Monday afternoon, less than a week after Bennett's law partner - Stephen Doherty - pleaded guilty to similar charges in U.S. District Court. The pair ran Doylestown Township's Bennett & Doherty P.C.

  • Bennett, Doherty and three others were indicted two months ago on charges of skimming equity from homes of owners facing foreclosure in a mortgage fraud scheme.(1) [...] The five defendants are accused of conspiring to obtain fraudulent mortgages totaling $14.6 million for at least 35 struggling homeowners, [...]. The mortgages generated money for the defendants but often cost the victims their homes.

  • "(Bennett) got involved with an unscrupulous mortgage broker, that mortgage broker being Ed McCusker," Lentz said. "It's unfortunate that McCusker was as unscrupulous as he was and, unfortunately, (Bennett) was involved with him."

***

  • Residents involved in the program complained that, in some cases, they thought their troubled mortgages were being refinanced. But, at settlements organized by the defendants, they unknowingly signed away their properties to third parties and ended up paying rent in houses they no longer owned. The transactions did pay off the homeowners' original mortgages but, authorities claimed, the money left over - the home's equity - was divided up by the defendants.

For more, see Supervisor to plead guilty in fraud case (Doylestown Township Supervisor Jeffrey Bennett "wants to move on with his life," his attorney said).

For the indictment, see U.S. v. McCusker, et al.

(1) Also charged were Upper Makefield's Ed McCusker, head of the now-defunct Axxium Mortgage Inc., his wife, Jacqueline, and Mount Laurel mortgage broker John Bariana, the story states. foreclosure rescue equity stripping

Seattle FHLBB Goes After Wall Street Firms In Attempt To Force Them To Buy Back Soured Mortgage-Backed Securities

In Seattle, Washington, The Wall Street Journal reports:
  • The Federal Home Loan Bank of Seattle has launched a series of lawsuits against Wall Street banks, seeking to force them to buy back souring mortgage-backed securities. In 11 separate lawsuits filed in late December in King County Superior Court in Washington, the Seattle bank alleges that it was misled by underwriters about the quality of $4 billion of securities it purchased as investments at the height of the housing boom. The Seattle bank is seeking to force the firms to repurchase the securities, plus interest.

For more, see Home Loan Bank Sues Wall Street Firms (requires paid subscription; if no subscription, try here, then click link for the story).

Indy Pair Get 5+ Years In Mortgage Scam Using Unwitting Victims' Stolen I.D.s To Score $23M+ In Home Loans

In Indianapolis, Indiana, The Indianapolis Star reports:
  • [Beverly A. Ross, 51,] was sentenced to more than five years in prison for her role in a multi-million dollar mortgage fraud scheme.(1) [...] Ross's partner in the scheme, Donella Locke, 60, Indianapolis, was sentenced to 71 months in prison last month and must pay $2.3 million to 13 different lenders who were defrauded. Locke went to trial and was convicted in September.

  • The two women were arrested in 2008 after authorities discovered they used other people's credit information to obtain more than $23.5 million in loans on more than 30 expensive properties in Indianapolis, Fishers, Carmel, Zionsville and other Indiana communities. Few payments were made on the properties, and Ross filed five bankruptcy petitions to help keep some of the properties from going into foreclosure, according to the press release. The investigation began in 2005 when one of Ross's relatives discovered she used his credit information to buy and lease properties and vehicles.

Source: 2nd woman sentenced in mortgage fraud scheme.

(1) Ross was reportedly ordered to serve 63 months in prison and repay $5.6 million to 21 lenders she defrauded as part of a plea agreement, according to a press release from U.S. Attorney Tim Morrison's office.

Attorneys Offering Dubious Loan Modification Services To Financially Strapped Homeowners Hits National Media

In Dallas, Texas, CBS News reports:
  • [Dallas-area homeowner Warren Jacobs] unwittingly became one of the many thousands of homeowners authorities allege have been taken in by unscrupulous or incompetent loan modification attorneys who rushed into a burgeoning legal niche: helping financially struggling homeowners re-negotiate their mortgages. Ripoffs of homeowners have become so commonplace that state bar associations from Florida to Arizona are warning their members of the many ethical pitfalls awaiting those who exploit the mortgage crisis.

  • The California State Bar launched a task force a year ago to examine thousands of homeowner complaints about foreclosure lawyers. Currently, the California Bar is investigating more than 400 attorneys who are suspected of ripping off thousands of homeowners across the country.The organization that licenses and disciplines California's more than 250,000 lawyers already has suspended or obtained the resignations of 15 lawyers while disciplinary charges are pending.

***

  • "The complaints are still going through the roof," said Suzan Anderson, the Bar's lead mortgage fraud prosecutor, who receives more than 30 complaints daily and expects many more lawyers to lose their licenses. Many of the complaints, like Texas homeowner Jacobs', are about do-nothing attorneys.

For more, see Lawyer Misconduct Rises With Foreclosure Record (Hundreds Of Foreclosure Attorneys Investigated In Calif. For Duping Desperate Homeowners).

Tuesday, February 16, 2010

Florida Appeals Court "Deep-Sixes" Rubber-Stamped Foreclosure Judgment; Kicks Case Back To Trial Court For Further Proceedings

Another rubber-stamping trial judge has ostensibly been caught with egg on his face by a state appeals court in a mortgage foreclosure action. This time, a three-judge panel of Florida's 2nd District Court of Appeal "threw the flag" on Sarasota County Circuit Court Robert B. Bennett, Jr. for what should be the equivalent of a 15-yard penalty (and subject to a league fine) in a National Football League game.

In a unanimous decision, the appellate court reversed a summary judgment of foreclosure in favor of a lender which was granted, according to the court, "[d]espite the lack of any admissible evidence that U.S. Bank validly held the note and mortgage[.]"

The facts in the case, as copied & pasted from the court's written opinion [except for the addition of the footnote and bold text, which is my own handiwork], follows:

  • On December 14, 2007, U.S. Bank filed an unverified mortgage foreclosure complaint naming the Jean-Jacqueses and BAC as defendants.(1) The complaint included one count for foreclosure of the mortgage and a second count for reestablishment of a lost note. U.S. Bank attached a copy of the mortgage it sought to foreclose to the complaint; however, this document identified Fremont Investment and Loan as the "lender" and Mortgage Electronic Registrations Systems, Inc., as the "mortgagee." U.S. Bank also attached an "Adjustable Rate Rider" to the complaint, which also identified Fremont as the "lender."

  • Rather than answering the complaint, BAC responded by filing a motion to dismiss based on U.S. Bank's lack of standing. BAC argued that none of the attachments to the complaint showed that U.S. Bank actually held the note or mortgage, thus giving rise to a question as to whether U.S. Bank actually had standing to foreclose on the mortgage. BAC argued that the complaint should be dismissed based on this lack of standing.

  • U.S. Bank filed a written response to BAC's motion to dismiss. Attached as Exhibit A to this response was an "Assignment of Mortgage." However, the space for the name of the assignee on this "assignment" was blank, and the "assignment" was neither signed nor notarized. Further, U.S. Bank did not attach or file any document that would authenticate this "assignment" or otherwise render it admissible into evidence.

  • For reasons not apparent from the record, BAC did not set its motion to dismiss for hearing. Subsequently, U.S. Bank filed a motion for summary judgment. At the same time, U.S. Bank voluntarily dismissed its count for reestablishment of a lost note, and it filed the "Original Mortgage and Note" with the court. However, neither of these documents identified U.S. Bank as the holder of the note or mortgage in any manner. U.S. Bank did not file the original of the purported "assignment" or any other document to establish that it had standing to foreclose on the note or mortgage.

  • Despite the lack of any admissible evidence that U.S. Bank validly held the note and mortgage, the trial court granted summary judgment of foreclosure in favor of U.S. Bank. BAC now appeals, contending that the summary judgment was improper because U.S. Bank never established its standing to foreclose.

For the rest of the appellate court's opinion, including its ruling reversing the trial judge and its analysis of the Florida law applied in this case, see BAC Funding Consortium Inc. v. Jean-Jacques, et ano., Case #2D08-3553 (February 12, 2010).(2)

Go here for BAC Funding's appellate brief, describing the sloppy, careless conduct of the lender and its assembly line, foreclosure mill attorney in prosecuting this case (available online courtesy of MattWeidnerLaw.com).

(1) Listed as attorney for the foreclosing lender in this case is Florida Default Law Group, PL, of Tampa, Florida. This outfit has attained some level of notoriety as an alleged foreclosure mill law firm/"foreclosure factory."

(2) I remind my friends in Florida that, to the extent this ruling constitutes binding precedent in future cases, it is binding not only on the trial courts within the jurisdiction of the 2nd District Court of Appeal, but probably on all trial courts throughout Florida. See Pardo v. State, 596 So. 2d 665 (Fla. 1992), in which the Florida Supreme Court stated:

  • This Court has stated that "the decisions of the district courts of appeal represent the law of Florida unless and until they are overruled by this Court." Stanfill v. State, 384 So. 2d 141, 143 (Fla. 1980). Thus, in the absence of interdistrict conflict, district court decisions bind all Florida trial courts. Weiman v. McHaffie, 470 So. 2d 682, 684 (Fla. 1985). The purpose of this rule was explained by the Fourth District in State v. Hayes:

  • "The District Courts of Appeal are required to follow Supreme Court decisions. As an adjunct to this rule it is logical and necessary in order to preserve stability and predictability in the law that, likewise, trial courts be required to follow the holdings of higher courts--District Courts of Appeal. The proper hierarchy of decisional holdings would demand that in the event the only case on point on a district level is from a district other than the one in which the trial court is located, the trial court be required to follow that decision. Alternatively, if the district court of the district in which the trial court is located has decided the issue, the trial court is bound to follow it. Contrarily, as between District Courts of Appeal, a sister district's opinion is merely persuasive." 333 So. 2d 51, 53 (Fla. 4th DCA 1976) (footnote and citations omitted).

I trust my friends throughout Florida who are appealing rubber-stamped foreclosure judgments in scenarios similar to the one in BAC Funding will try to get some "mileage" out of this ruling.

More On Multiple Hat-Wearing Vice Presidents & Their Role In Residential Mortgage Foreclosure Actions

Recently stumbled upon while floating around in cyberspace is a Motion For Sanction Of Dismissal With Prejudice filed in July, 2009 by legal counsel for a defendant/homeowner in a 2008 mortgage foreclosure action (Indymac Federal Bank FSB v. Israel A. Machado - Case #50-2008 CA 037322) in Palm Beach County, Florida.

The 29-page document features the ostensibly, ever-growing-in-notoriety, multiple corporate hat-wearing vice president Erica A. Johnson-Seck, and her alleged antics in connection with signing documents in foreclosure actions while purporting to be acting as an authorized corporate officer for multiple foreclosing institutions simultaneously. It makes for some interesting reading if you're into this kind of stuff.(1)(2)

For more, see Motion For Sanction Of Dismissal With Prejudice.

Go here for the transcript of the corresponding deposition taken of Ms. Seck in the lawsuit, and go here for links to other posts on Erica Johnson-Seck, all available online courtesy of 4closureFraud - Fighting Foreclosure Fraud by Sharing the Knowledge.

(1) By the way, listed as attorney for the foreclosing lender in this case is Florida Default Law Group, PL, an outfit who has attained some level of notoriety in its own right as an alleged foreclosure mill law firm/"foreclosure factory."

(2) The motion makes reference to two earlier cases in which Ms. Johnson-Seck receives a less-than-honorable mention:

Ohio Appeals Court Gives Reminder On Importance Of "Real Party In Interest" Rule

In a recent ruling by an Ohio Court of Appeals in which it unanimously reversed a trial court's decision to grant what ostensibly was a rubber-stamped summary judgment in a foreclosure action, the three-judge panel gave this reminder of the importance that a foreclosing entity be a "real party in interest" in order to bring the lawsuit (reference to "Moore," below is a reference to the defendant/homeowner):
  • {¶ 21} Civ.R. 17(1) requires that a civil action be prosecuted by the real party in interest. A real party in interest is one who is directly benefitted or injured by the outcome of the case rather than one merely having an interest in the action. Mickey v. Denk, Cuyahoga App. No. 90484, 2008-Ohio-3983, citing State ex. rel. Village of Botkins v. Laws, 69 Ohio St.3d 383, 387, 1994-Ohio-518, 632 N.E.2d 897. The purpose behind the real party in interest rule is “to enable the defendant to avail himself of evidence and defenses that the defendant has against the real party in interest, and to assure him finality of the judgment, and that he will be protected against another suit brought by the real party at interest in the same matter.” Morelli v. Walker, Cuyahoga App. No. 88706, 2007-Ohio-4832, citing Shealy v. Campbell (1985), 20 Ohio St.3d 23, 24, 485 N.E.2d 701.(2)

  • {¶ 22} This action was filed by Sovereign Bank on December 27, 2006, one day after a letter was issued from Flagstar Bank to Moore stating that Flagstar Bank had assigned the loan to Countrywide Mortgage. Another document in the record indicates that on May 23, 2007, “MERS, Mortgage Electronic Registration Systems, Inc., as nominee for Lenders Choice Mortgage LLC (Assignor)” transferred and assigned the note and mortgage to Flagstar Bank, FSB. On this record, genuine issues of material fact exist as to who is the real party in interest and the trial court erred in granting judgment in favor of Flagstar Bank.

For the ruling, see Flagstar Bank, FSB v. Moore, 2010-Ohio-375 (February 5, 2010).

(1) Refers to Rule 17 of the Ohio Rules of Civil Procedure.

(2) For other Ohio appellate court rulings related to this point, see Lender Not Entitled To Foreclosure Judgment Due To Failure To Prove Promissory Note Ownership, Says Ohio Appeals Court.

Federal Judge Refuses To Intervene In Alleged Rubber-Stamping, Rocket Docket System Of Handling F'closures Against "No-Show" Homeowners In C. Florida

In Sarasota, Florida, the Sarasota Herald Tribune reports:
  • A federal judge has issued a warning to Florida's homeowners in foreclosure: You'd better fight if you want your rights. U.S. District Judge James Moody threw out a lawsuit that claimed the judicial system in Sarasota and Manatee counties violates the rights of homeowners who do not contest their foreclosure.

  • Two homeowners who filed the lawsuit, both of whom have since lost their houses, cited a study that found lenders used incorrect or fraudulent paperwork in three of every four foreclosure cases. The lawsuit called for a halt to all foreclosures until judges could verify all documents filed by lenders, to keep property from being taken by fraud or mistake.

  • But Moody, in his order throwing out the case, wrote that Florida's homeowners must defend their rights or raise any claims in the state foreclosure actions. "Though participating in the state court proceedings may be personally difficult for them, the opportunity is available," Moody wrote of the plaintiffs.

For more, see Judge: Homeowners must fight for rights.

(1) The Florida Supreme Court recently enacted new procedural rules designed to help Florida's judicial system better cope with the flood of foreclosures. See Fla. High Court Enacts Procedural Rules To Apply In Residential F'closre Mediations; Seeks To Tamp Down Use Of "Lost Note" Affidavits, "Sewer Service."

Monday, February 15, 2010

Hawaii Feds Win Conviction Of Man Who Used Straw Buyers In Sale Leaseback Foreclosure Rescue Ripoffs; Pocketed $430K+ In Two Equity Stripping Scams

In Honolulu, Hawaii, the Star Bulletin reports:
  • A Nevada businessman was convicted Wednesday of 22 felony counts, for swindling banks and two struggling homeowners on Oahu out of their homes and loan proceeds. A federal jury convicted John Gilbert Mendoza, 58, on one count of conspiracy, 10 counts of mail and wire fraud, two counts of loan fraud, six counts of money laundering and three counts of failure to file a tax return,(1) the U.S. Attorney's Office announced [last] week. Five others have pleaded guilty in connection with the scheme and are awaiting sentencing.

  • U.S. Attorney Florence Nakakuni said the evidence showed Mendoza, president of a Nevada corporation with bank accounts in Hawaii, had befriended Hawaii homeowners facing foreclosure. He told them he had a plan to stop foreclosure proceedings that would allow them to keep their homes.

  • But instead, Mendoza organized the sale of the homes to third-party straw buyers, who took out loans in their names and used falsified information concerning income, who was going to live in the home and who would make monthly payments. After obtaining the loans, Mendoza deposited the proceeds totaling more than $431,000 into his own accounts. When the loans were defaulted on, the properties were foreclosed on and sold.

For the story, see Swindler is convicted of 22 felony counts.

For an earlier post announcing the indictments in this case, see Hawaii Feds Indict Five In Alleged Straw Buyer Foreclosure Rescue Scam.

(1) The conviction on the Federal tax charges should serve as a reminder that, if you can't bag the perpetrators of these scams with proof beyond a reasonable doubt on the substantive criminal charges, you can generally count on them to fail to file their tax returns and pay the income tax on the illegal profits thereon. Accordingly, you can nail them for that, the same way the Feds put alleged gangster Al Capone out of commission.

Role Played By Unlicensed "Broker" In Foreclosure Rescue Ripoff Violated State R/E License Law, Enough To Sink Sale Leaseback, Says C. Fla. Civil Jury

In Sarasota, Florida, the St. Petersburg Times reports:
  • In 2005, Thomas Cook told 68-year-old Yolanda Rodriguez that the St. Petersburg company he worked for could help save her home from foreclosure. Instead, Garco Inc. got the deed to the house, and Rodriguez, who was evicted, lost as much as $200,000 in equity.(1) But on Thursday, a Sarasota County jury found that the transaction that cost Rodriguez her home was invalid because Cook, acting as a broker on the deal, did not have a Florida real estate license.

  • The verdict paves the way for Rodriguez to get back her 2,300-square-foot Englewood pool home. It could also provide legal ammunition for others who have lost their houses to "foreclosure rescue" companies like Garco and its owner, Gideon Rechnitz,(2) whose real estate license was revoked for alleged fraud in 1990. "A licensed real estate agent would not have been allowed to do anything Thomas Cook did," says Elizabeth Boyle, a Gulfcoast Legal Services(3) attorney who represented Rodriguez.

***

  • Rodriguez's case is thought to be the first in which a jury verdict hinged on whether someone involved in property transactions for a foreclosure rescue company is subject to the Florida Real Estate License Act.(4) But it is not the first case against Rechnitz and Cook to go to trial. In October, another Sarasota jury awarded $93,467 to Wanda Costa, who claimed the men scammed her out of her Port Charlotte home in violation of Florida's Deceptive and Unfair Trade Practices Act. That verdict is under appeal.

For more, see Second jury finds fault with controversial foreclosure rescue deals.

(1) Reportedly, Rodriguez, now 72, said she stopped paying rent because foreclosure rescue operator Gideon Rechnitz failed to make promised repairs. He evicted her and her deaf brother in 2006 and had all of their possessions, including family photos, loaded into portable storage units, the story states. Rodriguez reportedly said she was unable to retrieve the items because they were stored in Rechnitz's name. Everything was sold at public auction, and brother and sister spent weeks in a Salvation Army shelter and cheap hotels before landing in a small apartment with donated furniture, according to the report.

(2) Rechnitz, not unknown to the reporters at the St.Petersburg Times, has been the subject of several Times articles.

(3) Gulfcoast Legal Services is a non-profit law firm providing free legal aid to income eligible residents of the greater Tampa Bay, Florida area, having offices in Pinellas, Manatee, Sarasota and Hillsborough counties; and is dedicated to providing comprehensive, personal legal advocacy, counseling and education to vulnerable individuals and families.

(4) Florida law defines a broker as someone paid for acting on behalf of another person in real estate transactions. Reportedly, in a sworn deposition before trial, Cook called himself "a broker" and acknowledged he had been paid $1,975 for his dealings with Rodriguez. By finding for Rodriguez on the licensing issue, the verdict voided the entire transaction and set the stage for a March hearing in which Circuit Judge Lee Haworth could return the deed to her.

Peddling Bogus Sale Leasebacks To Homeowners In Danger Of Foreclosure Among Criminal Allegations Facing Missouri Pair, Say St. Louis Feds

In St. Louis, Missouri, the St. Louis Business Journal reports:
  • A St. Charles developer and mortgage broker and a Lake St. Louis woman have been indicted on multiple mortgage fraud charges. Jeremy Beadle, 37, of St. Charles, was president of Network Ventures, a business engaged in mortgage processing and real estate brokerage, and also the rehabilitation of real estate properties in need of repairs. Beadle also operated and managed Premier Mortgage Funding, a mortgage brokerage company, owned by Network Ventures. Rebecca Domecillo, 48, of Lake St. Louis, was an officer of Network Ventures and also participated in the operations and management of Premier Mortgage Funding.

Among other allegations:

  • [B]eadle offered to purchase real estate properties from individuals who needed to refinance the mortgages on their residences because they were in danger of foreclosure. Beadle offered to buy these properties for a price in excess of the balance of the existing mortgage and told the sellers they could rent the properties and he would apply the rent payment to the mortgage. But Beadle failed to make the mortgage payments as agreed, and these properties were foreclosed, resulting in losses to the mortgage lenders, according to the indictment.

For more, see St. Charles developer indicted on mortgage fraud charges.

Fla. High Court Enacts Procedural Rules To Apply In Residential F'closre Mediations; Seeks To Tamp Down Use Of "Lost Note" Affidavits, "Sewer Service"

In Tallahassee, Florida, The Associated Press reports:
  • Lenders will be required to pick up the tab for investigating and verifying ownership and then try mediation before foreclosing Florida home mortgages under new rules approved Thursday by the Florida Supreme Court.(1) The rules are designed to help Florida's judicial system better cope with a flood of foreclosures. They follow a December administrative order by Chief Justice Peggy telling local judges to adopt a uniform mediation program.(2)

***

  • The rules and corresponding legal forms were proposed by a pair of Florida Bar panels. "They found that many cases were being filed by plaintiffs that didn't' own the mortgages any more," said Miami lawyer Mark Romance, who chairs the Civil Procedures Rules Committee. Romance said other cases were being filed against people who no longer owned the homes.

For the story, see Justices Adopt Fla. Foreclosure Mediation Rules (Supreme Court requires mediation to help cope with flood of Florida foreclosure cases).

(1) The court's new rules address the ever-proliferating use of "lost note" affidavits by foreclosing lenders' attorneys, and "sewer service" engaged in by process servers delivering the lawsuits to homeowners. See Case No. SC09-1460 and Case No. SC09-1579 (consolidated): In Re: Amendments To The Florida Rules Of Civil Procedure, pp.3-6:

  • First, rule 1.110(b) is amended to require verification of mortgage foreclosure complaints involving residential real property. The primary purposes of this amendment are (a) to provide incentive for the plaintiff to appropriately investigate and verify its ownership of the note or right to enforce the note and ensure that the allegations in the complaint are accurate; (b) to conserve judicial resources that are currently being wasted on inappropriately pleaded ―lost note counts and inconsistent allegations; (c) to prevent the wasting of judicial resources and harm to defendants resulting from suits brought by plaintiffs not entitled to enforce the note; and (d) to give trial courts greater authority to sanction plaintiffs who make false allegations.

  • Next, the Task Force proposed a new form Affidavit of Diligent Search and Inquiry. In its petition, the Task Force explained that many foreclosure cases are served by publication. The new form is meant to help standardize affidavits of diligent search and inquiry and provide information to the court regarding the methods used to attempt to locate and serve the defendant. We adopt this form as new form 1.924, with several modifications. [...]

(2) The December, 2009 court order adopted last August's recommendations by the court’s Task Force on Residential Mortgage Foreclosure Cases.

Sunday, February 14, 2010

Ohio Appeals Court Rejects "Rubber Stamp Method" In Adjudicating Foreclosure; "Servicer Switch" Caused Payment Posting Screw-Up, Says Homeowner

The following facts have been extracted from a recent ruling of an Ohio appeals court involving a residential foreclosure action:
  • Flagstar Bank files a complaint commencing a foreclosure action against homeowners Moore and Braxton, alleging a default in the loan payments.

  • Homeowners file an answer to the complaint, asserting the following affirmative defenses: (1) failure to state a claim; (2) plaintiff was not the real party in interest; and (3) payment.

  • In connection with the "payment" defense, Moore averred in court papers to have made his monthly payments to Flagstar Bank and continued to do so through December 2006.

  • Moore averred in court papers that after he sent his December 2006 payment to Flagstar Bank, he received a letter dated December 26, 2006, advising that the note had been assigned to Countrywide Mortgage and was no longer serviced by Flagstar Bank; Moore's December payment was returned.

  • According to Moore, at no time prior to the December 26 letter was he advised that the note had been assigned and/or that he was to direct payment other than to Flagstar Bank.

  • Moore further averred in court papers that after receiving the December 26 letter, he called Flagstar Bank and Countrywide Mortgage and both claimed the note was in default and that no payment on it would be accepted.

  • According to Moore, none of the payments made on the note from August 2006 through November 2006 were returned to him. Moore submitted copies of the checks (and postage receipts) sent to Flagstar Bank from June 2006 through November 2006.

  • Moore also averred in court papers that he never received notice of being in default on the note.

  • Flagstar Bank did not file a reply brief in the trial court addressing any of Moore's contentions.

Despite the bank's failure to reply to any the homeowners' contentions, the magistrate found that no genuine issues of material fact existed and the bank was entitled to judgment as a matter of law. Moore and Braxton filed objections to the magistrate's decision. The trial court overruled the objections and rubber-stamped the bank's motion for summary judgment.

On appeal, Moore and Braxton contended that the trial court erred in granting the bank's summary judgment motion. The bank did not filed a brief on appeal, and, as noted above, did not file a reply brief in the trial court.

The Ohio appeals court reversed the summary judgment granted in favor of the bank. In reaching its decision, the court stated:

  • The party moving for summary judgment [ie. the bank] bears the burden of showing that there is no genuine issue of material fact and that it is entitled to judgment as a matter of law. Dresher v. Burt (1996), 75 Ohio St.3d 280, 292-293, 662 N.E.2d 264. Once the moving party satisfies its burden, the nonmoving party [ie. the homeowner] "may not rest upon the mere allegations or denials of the party's pleadings, but the party's response, by affidavit or as otherwise provided in this rule, must set forth specific facts showing that there is a genuine issue for trial." Mootispaw v. Eckstein (1996), 76 Ohio St.3d 383, 385, 667 N.E.2d 1197; Civ.R. 56(E). Doubts must be resolved in favor of the nonmoving party. Murphy v. Reynoldsburg (1992), 65 Ohio St.3d 356, 358-59, 604 N.E.2d 138.

Because of the bank's failure to respond to any of the homeowners' claims set forth in his filed affidavit, the Ohio appeals court found that the bank failed to meet its burden of showing that there was no genuine issue of material fact as to who is the real party in interest, the claimed default, and as to whether the bank provided Moore a notice of being in default. Accordingly, summary judgment was deemed inappropriate.(1)

For the court ruling, see Flagstar Bank, FSB v. Moore, 2010-Ohio-375 (February 5, 2010).

(1) Fortunately for Moore, he was in a position to pursue an appeal of the trial court's ruling, an option few homeowners facing foreclosure are in a financial position to avail themselves of. It wouldn't surprise me if the trial judge (and the magistrate) felt, in the back of their minds, that the homeowner was not in a position to appeal their dubious ruling, thereby allowing them to simply "rubber-stamp" the judgment and "keep the foreclosure 'rocket docket' conveyor belt moving forward."

This type of rubber-stamping conduct on the part of some in the judiciary is, I suspect, what New York judge Timothy J. Walker had in mind when, in his recent ruling in Deutsche Bank Natl. Trust Co. v McRae, 2010 NY Slip Op 20020 [Allegany County, January 25, 2010], made this observation expressing his concern for unrepresented homeowners in foreclosure actions:

  • For the unrepresented homeowner, the issues of standing and real party in interest status of the foreclosing party are never considered. Without such scrutiny, there is a risk that the courts will give the judicial "seal of approval" to foreclosures against unrepresented homeowners who have little, if any, understanding of these issues, much less the legal significance thereof. To quote my colleague in Kings County, "[a]llowing this case to proceed on behalf of a plaintiff without standing at the commencement of the action would [also] open the door to potential fraud and place in jeopardy the integrity of title to the property to be foreclosed." [Citigroup Global Markets Realty Corp. v. Bowling, 25 Misc 3d 1244; 2009 NY Slip OP 52567U (Kings County, December 18, 2009)].

Even homeowners who have legal representation may be facing impediments in defending themselves as a result of some judges adopting questionable practices when hearing foreclosures. One Central Florida attorney writes in his blog that, overwhelmed by their caseloads, two judges in Pinellas County, Florida have been said to have adopted practices that, in my view, are consistent with use of the "rubber stamp method" of adjudicating foreclosures (see Matt Weidner Blog: An Anarchist’s Strategy To Dismiss Every Foreclosure In Florida):

  • Things have gotten so bad for the judges that I’m told at least two Circuit Court Judges in Pinellas County (Linda Allan and Douglas Baird) have announced they were no longer going to hear Motions to Dismiss filed by Defendants in foreclosure cases, but were going to start just denying them across the board without even having a hearing on the matter. Now that’s one way to deal with the crisis. It’s an unconstitutional, unfair and totally biased approach that completely ignores the law and the rights of the citizens these judges took an oath to serve, but it is one way to deal with the crisis. (Look for Appeals To Come If This Practice Really Begins to Take Hold.)

Connecticut Real Estate Agent Cops Plea In Short Sale Scam

In Bridgeport, Connecticut, The Bridgeport News.com reports:
  • A Bridgeport man has pleaded guilty to one count of bank fraud stemming from his involvement in a “short sale”(1) mortgage fraud scheme. Sergio Natera, 35, a licensed real estate agent who lives in Bridgeport, admitted his involvement in the crime in Bridgeport federal court on Feb. 11.

***

  • According to court documents and statements made in court, Natera worked with another real estate agent to defraud Regions Bank, which held two mortgages on a residential property in Bridgeport. On Dec. 5, 2007, the other real estate agent, who was a listing agent for the property, received an offer to purchase the property for a price of $132,500, according to a release from the U.S. Attorney’s Office.

  • However, Natera subsequently communicated to Regions Bank that the highest offer to purchase the property was for $102,375 by BOS Asset Management LLC, an entity that Natera controlled, the release said. The bank reportedly agreed to a short sale of the property for the lower price, and released its mortgages on the property. On June 9, 2008, Natera, through BOS Asset Management, sold the property for $132,500 to the original bidder on the property, according to the release.

For more, see Bridgeport resident pleads guilty to mortgage fraud.

For earlier post on this case, see CT Feds Indict Two In Alleged "Short Sale" Flipping Scam Using Straw Buyers To Dupe Lenders Into Accepting Less Than Full Payment On Underwater Loans.

(1) A short sale transaction involves a mortgage holder or lender entering into an agreement to release a mortgage or lien on real property in exchange for payment of less than the total amount owed on the underlying debt.

New Hampshire Man Faces Charges Of Illegally Pocketing Upfornt Fees, Failing To Make Good On Promises In Separate Loan Modification, Refinance Scams

From the New Hampshire Department of Justice:
  • [Eric W.] Eliason [aka Ricky Masci], 30, of Tamworth New Hampshire, is charged with crimes that occurred in connection with his business, Deaf and Hard of Hearing Mortgage Consultants.(1) The first set of complaints allege that the defendant took up-front money to assist hard of hearing victims in completing a loan modification of their home mortgage. The complaints allege that numerous representations were made to the homeowners that the modification was in process, and then that the modification was denied. It is further alleged that the defendant had never contacted the mortgage company to perform a modification. It is also alleged that Eliason intended to take advantage of the victim’s physical condition that impaired the victim’s ability to manage their property or financial resources or to protect their rights or interests.

  • A second set of complaints allege that the defendant attempted to broker a re-finance of a home loan for another hard of hearing couple. It is alleged that he obtained up-front fees with the promise that in the event the re-finance was not completed, money would be refunded. No loan was obtained, and no money was refunded. Eliason was not licensed to conduct any of these transactions.

For the NHDOJ press release, see Arrest for Class A Felony Theft with extended term of imprisonment, Class B Felony Mortgage Fraud, Class A Misdemeanor Mortgage Fraud.

(1) Eliason faces charges of Theft by Deception, Failure to Obtain a Debt Adjustment License, Untrue Statement and Fraudulent Business Practice; and Failure to Obtain a Mortgage Originators License and Untrue Statements, according to the NHDOJ press release.

Signing Over Deed & Handing Over Keys To Distressed NYC Rental Complex Not As Easy As It Sounds; Proposed Transfer Estimated To Cost $90M In Fees

In New York City, Bloomberg reports:
  • Tishman Speyer Properties LP and BlackRock Inc. haven’t handed Manhattan’s biggest apartment complex to creditors as they pledged two weeks ago, in part because of questions over payment of about $90 million in taxes. The companies said Jan. 25 they would cede control of Stuyvesant Town-Peter Cooper Village to lenders after missing a payment on the $3 billion mortgage.

  • Even in foreclosure, any property transfer in Manhattan requires payment of city and state taxes, and Tishman is negotiating with CWCapital, the special servicer for the senior debt, over who must pay them, said Rafael Cestero, New York City’s commissioner of Housing Preservation and Development. “The reality is they can’t just turn back the keys,” Cestero said in an interview. “There are some impediments.”

  • Under New York law, the party that owns the property and is getting rid of it must pay the taxes on the transfer, according to Owen Stone, a spokesman for the New York City Department of Finance. Otherwise, the burden shifts to the receiver of the property, he said. “CW doesn’t want to pay the $100 million so they’re going to have to negotiate this,” said Cestero, estimating the taxes. “They have not initiated foreclosure proceedings.” Transfer taxes for the city and the state equal 3.025 percent of the “consideration,” or the price of the real property, said Joshua Stein, a partner in the real estate practice group of law firm Latham & Watkins LLP in New York.

For more, see Stuyvesant Town Ownership Hinges on $90 Million Tax.

Saturday, February 13, 2010

Lender's 40 Cent Posting Error When Deducting Automatic Payment From Bank Account Leaves Homeowner In Fear Of Foreclosure

In Lee County, Florida, WINK News reports:
  • In the middle of the multi-billion dollar foreclosure crisis, there's a southwest Florida family that could lose their house over a 40 cent mistake. According to the homeowner, that mistake was his lender's fault. "I'm fearful to send them more money," said the homeowner, who is also afraid of losing his job for talking about the situation publicly. "Mark" said he modified his mortgage to match his lower income after a layoff and thought everything would be alright, until his lender took an automatic payment incorrectly. "They posted it 40 cents short ... three weeks later we get a letter saying you've missed your payment so you're out," said "Mark".

***

  • [Local foreclosure defense attorney Carmen] Dellutri said his phones are ringing off the hook with homeowners just like "Mark" who think they've resolved their mortgage issues.

For more, see Foreclosed Over 40 Cents? (Homeowner says mistake was lender's fault).

Name Of Famous Fictional TV Character Invoked In NYC Federal Fair Housing Lawsuit To Describe Alleged Race-Discriminatory Practices At Bronx Co-Op

In New York City, Courthouse News Service reports:
  • A real estate broker barred black people from two large "racially segregated enclaves" in the Bronx, telling them that residents of Silver Beach Gardens and Edgewater Park are "kind of prejudiced" and the co-ops are "Archie Bunker territory," the Fair Housing Justice Center claims in Federal Court.(1) "Silver Beach Gardens and Edgewater Park (the Co-ops) are a throwback of the very worst kind - two racially segregated enclaves with over 1,100 single-family homes occupied almost exclusively by white residents who evidently wish to keep it that way," the complaint states. (Parentheses in complaint.)(2)

For more, see Bronx Co-Op Called 'Archie Bunker Territory.'

For the lawsuit, see Fair Housing Justice Center, Inc. et al. v. Silver Beach Gardens Corporation, et. al.

(1) According to their website, the Fair Housing Justice Center is a 501(c)(3) non-profit group organized to challenge systemic housing discrimination, promote open and inclusive communities, and strengthen fair housing enforcement.

(2) According to the story, the Justice Center says "although the Co-ops purport to 'require' three references from existing Co-op shareholders for applying purchasers, this 'requirement' is not truly applied to whites, who are told that a seller or the sellers' friends - whom the applicants do not otherwise know - can provide the 'references.' "In stark contrast, African-American testers - plaintiffs Justin Carter and Lisa Darden - were told of the strict reference policy, never even offered the opportunity to view available properties, and steered away from the communities because there are very few people of 'any kind of ... ethnic color' living at the Co-ops."

Defendant Amelia Lewis, dba Amelia Lewis Real Estate, allegedly told the tester that she had "raised all three of her children in Edgewater Park" and the co-ops were "very nice ... mostly ethnic Irish, German, Italian ... there's some Puerto Rican, not many." Lewis allegedly told them that when "people of color" bought a house just outside Edgewater 15 to 20 years ago, a cross was burned on their lawn. "Lewis also stated that she had once 'gotten some Spanish in, but they were kinda light, you know' and they had references," the complaint states.

Unwitting Couple Purchase Property Once Used As Meth Lab; Now Face F'closure After Making 3+ Years Of House Payments On Toxic Home Used For One Week

In Prattville, Alabama, the Montgomery Advertiser reports:
  • The only room in this one-story house safe enough for human inhabitation is a small, non-ventilated room with a toilet, and even that is toxic. Brenda Maitland bought the house, hidden just off Alabama 59, about four years ago. It is where she, her husband and two young daughters were going to swim, ride their new horse, plant a garden -- make a home.

  • But just after a week of living there, Maitland's youngest daughter got sick: sore throat, earaches, watery eyes, burning skin. They were the same symptoms that Brenda Maitland came down with while scrubbing the house the week before the family moved in. "I thought it was the flu," she said. The people who lived there before them were heavy smokers -- so it could have been from that, the family thought.

  • But they learned it was far more than that. They learned they had bought a home that the previous owners had used as a methamphetamine lab. Standing outside the home recently -- the doors are locked, and nobody is allowed inside because of the toxicity level -- Maitland talked about when she found the house on-line.(1)

***

  • The Maitlands wish they had found out about this before moving in. The family has since paid their mortgage every month for three and a half years as advised by their attorney. About $1,200 a month -- more than $50,000 was spent on a house they lived in for just more than a week. They stopped making the payments in July, and the house was foreclosed a few months after.

For more, see Home hazardous: Family's residence in Prattville had been used as a meth lab.

For a story on meth-lab related lawsuits, see The National Law Journal: Meth Lab Residue in Homes Triggers Litigation (Lawsuits over contaminated homes focus on failure to disclose issue).

Go here for other posts on home-based meth lab horror stories.

(1) According to the story, they took six months to find the home after moving from Texas. It had grape and blueberry bushes, a green house, a pool. Azaleas lined the front sidewalk. Dogwoods welcomed them home. Before moving in, the family spent about $10,000 on hardwood floors, new furniture, a computer, stereo equipment. But it wasn't just the family that was coming in contact with the toxins. Not only did the poisons coat the house, they also coated many of the possessions that the family brought into it. The Maitlands were advised not only to leave the house as quickly as possible but to abandon most of their furniture and clothing. "I was told to keep everything in the house," Maitland said. "When the house was put under foreclosure in December, the flooring and everything that was in the house was toxic, so that has been removed and destroyed."

Alleged $2,500 Loan Modification Ripoff Leaves Denver Senior Facing Foreclosure; Ownership Of Home Of 25 Years In Jeopardy

In Denver, Colorado, KDVR-TV Channel 31 reports:
  • 70-year-old Connie Somerhalder thought she was going to stay in the home she has owned for 25 years. Instead, she just found out she got scammed out of $2500.00 and her home is in foreclosure. "I've been here almost 25 years, then somebody comes along and takes it all away, it hurts," Connie said. Connie lives on her Social Security income. She wanted to modify her existing home loan to reduce her monthly payment and contacted "American Mortgage Consultants," after hearing an advertisement on a local radio station.

  • "I thought they were helping me out."American Mortgage Consultants told Connie she would have to pay $2500.00 up-front, and she was told to stop paying her mortgage and don't contact the bank. "They told me not to contact the bank. They were taking care of everything." Six months later, Connie found out her home was in foreclosure and she had been scammed. "I cried a lot, believe me, I cried a lot," Connie told us.

  • We went looking for answers at the company's Aurora location. The door was locked and when the receptionist opened the door she wouldn't let us in."Please leave," she said. "I only work here. Oliver Maldonado (the company owner) is not here."

For more, see Loan modification scams running rampant in Colo.

Law Firm Uses "Reverse Foreclosure" To Stick Foot-Dragging Lender With Title To Unwanted Condo Unit; Has 82 More Cases In Pipeline

In Miami, Florida, Historic City Times reports:
  • In a process known as a “reverse foreclosure,” a Miami-Dade Circuit Court judge has forced a bank to take title to a property from a homeowners association. “It’s new, and it addresses what we think is a huge problem in Florida,” according to published reports from attorney Ben Solomon who represented the South Miami-Dade homeowners association in the case.

  • When the owner [in one case] stopped paying their monthly maintenance fee, the association foreclosed on the home, however, because of the bank’s lien, they could not sell it. The bank had foreclosed but hadn’t pursued the case for a period of 2 1/2 years, leaving the association stuck with a home — and no one paying dues.

  • Solomon said his firm is telling the judge that as the defendants in the bank’s foreclosure proceedings; they want a summary judgment — against themselves. Next, they request an immediate sale date; waiving their rights to a waiting period. Reportedly, Solomon’s firm has filed another 82 similar “reverse foreclosure” requests in courts around the state.

  • The association in this case has 3,000 homes and owns title to about a dozen of them through foreclosures, Solomon said. The reverse foreclosure can only be filed after a homeowner is out of the picture and the home is legally the property of the homeowner association. “That waiting period protects the consumer, but banks are taking advantage of the judicial backlog, and then in many cases they are canceling the sale date and resetting it”, according to Solomon. “What we did was tell the judge, we don’t need more time.” HSBC Bank USA, which acted as trustee in the case, declined to comment. Circuit Judge Jerald Bagley granted the homeowners association motion, and the title was awarded to the bank the same day.

  • We’re not saying they need to complete a foreclosure more quickly than normal,” Solomon said. “But there’s no good reason why that lender has taken 2 1/2 years to foreclose on this particular unit.”

Source: Ruling may help homeowner associations.

Friday, February 12, 2010

Ten Southwest Ohio Homeowners Demand Actual, Punitive Damages From BofA For Stiffing Them On Loan Modification Promises, Says Suit

In Cincinnati, Ohio, Business Courier of Cincinnati reports:
  • Lawyers at the Legal Aid Society of Southwest Ohio have filed a lawsuit against Bank of America, alleging it failed to follow through on promises it made to modify mortgage loans. The lawsuit was filed on behalf of 10 Ohio homeowners who participated in a federal “borrower outreach” program in Cincinnati last October.

  • Bank of America representatives agreed to modify their loans at the event, but it has never honored its commitments, the complaint contends. The homeowners relied on the bank’s promises and representations, missing out on other opportunities to address their financial problems, it said. The lawsuit was filed Feb. 10 in U.S. District Court for the Southern District of Ohio in Cincinnati.

  • Mark Lawson is one of three lawyers at the Legal Aid Society representing the plaintiffs. The homeowners now face imminent foreclosure and damage to their credit ratings, he said in a statement. The lawsuit seeks a court order compelling Bank of America to modify the loans and to pay actual and punitive monetary damages.

Source: Ohio homeowners sue Bank of America over mortgage program.

Loan Mod Outfit Settles Suit w/ State AG Alleging Unlicensed Activity; Agrees To Refund Customer Cash, Pay $5K Penalty, Promises Never To Do It Again

From the Office of the Nevada Attorney General:
  • Nevada Attorney General Catherine Cortez Masto announced [] that an agreement has been reached with Focus 2000 Financial Corporation regarding its unlicensed loan modification program. The State of Nevada has alleged that Focus 2000 Financial Corporation operated a loan modification service without the proper licensing by the Nevada Mortgage Lending Division and took payment for services prior to the completion of the loan modification in violation of Nevada deceptive trade law.

***

  • As a result of the settlement, Focus 2000 Financial Corporation will agree to refund all monies paid by homeowners who did not have their loan modification completed and to pay a civil penalty of $5000. Focus 2000 Financial Corporation will provide documentation to show that refunds were paid as promised and has agreed not to engage in any loan modification or other credit repair activities without the proper licenses and permits.

Source: Attorney General Masto Announces Civil Agreement In Mortgage Fraud Case.

Failure To Allege Charging Of Excessive Interest In Sale Leaseback, Foreclosure Rescue Suit Fatal To Usury Claim

In a recent ruling awarding a six-figure judgment to a New Jersey homeowner/couple who were swindled in an equity stripping, foreclosure rescue ripoff, a Federal bankruptcy judge recharacterized a sale leaseback as an equitable mortgage, and granted relief on most of the Plaintiff/homeowners' claims. However, he refused to grant relief on a claim that the equitable mortgage violated the state usury statute. The judge's reason, according to the written ruling, follows:
  • Plaintiffs' pre-trial brief raises for the first time the allegation that this transaction violates the state criminal usury law. N.J. STAT. ANN. §2C:21-19. By Plaintiffs' calculation the annual interest rate could be as high as 227% . Charging interest over 30% per annum [in New Jersey] is a crime. They ask the court to treat their contract with Cleveland as illegal and refuse to enforce it. As a remedy they seek a return of their property and damages. This theory was not plead in the complaint and the court will not grant any relief based on the alleged violation of the state criminal usury statute.

The judge's refusal to grant relief on the homeowners' usury claim was based strictly on procedural grounds, and, given their success on other claims in the suit, may not have affected the total award they could have reasonably expected to obtain anyway. However, the ruling nevertheless serves as a reminder that, in any attempt to undo this type of deal by asserting that the arrangement was an equitable mortgage (ie. a loan disguised as a sale leaseback), it's a good idea to plead in the complaint that, if applicable, the state usury statute was violated(1).

For the ruling, see In re O'Brien (aka O'Brien v. Cleveland), Case No. 03-17448, Adversary Proceeding Case No. 08-1676; (USBC, D. N.J., January 22, 2010).

(1) Especially in states where certain violations of usury statutes render the debt unenforceable. For example, in Florida, willfully and knowingly charging interest on a loan in excess of 45% is a felony criminal offense and could ostensibly obliterate the foreclosure rescue operator's entire investment in the deal. Sec. 687.071(3), 687.071(7), Florida Statutes.

Rent Scammers Among Those Targeted By Brooklyn DA In Recent Real Estate Scam Sweep

In Brooklyn, New York, the New York Daily News recent report on indictments obtained by the Brooklyn District Attorney against 12 people in unrelated real estate scams described the following alleged rent scams ensnared by his probe:
  • Earl Davis placed an ad on Craigslist and collected a full year's rent in advance after giving the victim a forged lease,

  • Correction Officer Margareth Blanc collected more than $30,000 in federal rent subsidies with forged applications while living in her sister's apartment,

  • Deric Nelson worked a phony deed scam, making it look like he owned a building he'd already sold - then renting vacant apartments.

Reportedly, in one of the "phony landlord" rent scams, the suspect allegedly pocketed $16,250.(1)

Source: 3 lawyers and correction officer among 12 charged with real estate fraud.

See also, See also, Kings County District Attorney press release: Kings County District Attorney Charles J. Hynes, New York State Senator Carl Kruger And United States Senator Charles E. Schumer Announce Charges Against 12 People, For Real Estate And Mortgage Fraud.

(1) In addition, a fourth suspect, Todd Graham, was bagged on charges of Attempted Grand Larceny in the Third Degree and Grand Larceny in the Fourth Degree, for allegedly placing an ad on Craigslist for a rental apartment in a building he neither owned nor managed, and then pocketing the first month’s rent and security deposit from two different people, for the same apartment, according to the Brooklyn DA's office.