Thursday, March 18, 2010

BofA Continues Pocketing Mortgage Workout Payments While Refusing To Recognize Predecessor's Loan Mod Deal, Says Kentucky Couple Now Facing F'closure

In Louisville, Kentucky, WAVE-TV Channel 3 reports:
  • Jason and Melissa Mattingly are finding out that mortgage modifications can become nightmares. Two years ago they fell behind on a couple of mortgage payments and received a mortgage modification through their lender, Countrywide Homes. Shortly thereafter, Countrywide was acquired by Bank of America and the Mattingly's had to file the paperwork again - but now Bank of America is taking steps to foreclose on the home. "We've never gotten anything like this, we've made our payments, they've accepted (them)," said Melissa Mattingly. "So I just don't see how they can foreclose on us if we've honored our payments every month."

  • The Mattingly's receive up to a dozen phone calls a day from Bank of America saying they are only making 'partial' payments on their home mortgage. When Melissa or Jason bring up the home mortgage modification they sent in, bank representatives say there's no reference to a modification in their computer records. The bank admits they're receiving the Mattingly's payments, but refuses to recognize the modification.

For more, see Bank refuses to recognize loan modification.

Ten Facts About Mortgage Debt Forgiveness

Syndicated real estate columnist Kenneth R. Harney writes:

  • The IRS gets involved in mortgage principal write-downs because the federal tax code generally treats any forgiveness of debt by a creditor in excess of $600 as ordinary taxable income to the recipient. However, under legislation that took effect in 2007, certain home mortgage debt cancellations - such as through loan modifications, short sales or foreclosures - may be exempted from tax treatment as income.

For more, see IRS issues loan write-down rules.

See also:

Bank President Laments: "Never Do Business With Family!" As Improper Notarization Allows Brother-In-Law/Borrower To Successfully Void Lender Mortgage

The following facts have been extracted from a recent court ruling by a Federal Bankruptcy Court in Nebraska that resulted in a borrower successfully voiding a mortgage:
  • Businessman borrows approximately $8,000,000 from Bank.
  • Businessman signs all loan documents.
  • Bank President, who just so happens to be Businessman's brother-in-law, notarizes all loan documents signed by Businessman.
  • Businessman defaults on loan shortly thereafter.
  • Bank starts foreclosure action.
  • Businessman files Chapter 11 bankruptcy.
  • In the bankruptcy proceeding, Businessman attempts to void Bank's mortgage on the grounds of improper notarization by Bank President, his (probably now-estranged) brother-in-law.

According to the court (my emphasis added, not in the original text):

  • In this case, the issue is the validity of the notarization of the signatures on the deed of trust. Nebraska law plainly provides that "[a] notary public is disqualified from performing a notarial act as authorized by Chapter 64, articles 1 and 2, if the notary is a spouse, ancestor, descendant, or sibling of the principal, including in-law, step, or half relatives." Neb. Rev. Stat. § 64-105.01.

***

  • As Mr. Baer's brother-in-law, Mr. Maher [ie. Bank President] was disqualified from notarizing his signature. The exception at section 64-214 permitting bank officers or employees who are notaries public to acknowledge any written instrument given to the bank does not salvage this transaction because section 64-105.01 disqualifies a relative from performing the notarial acts authorized in article 2, which includes the exception for banks.

***

  • The bank's deeds of trust and modifications thereto were improperly acknowledged, were not lawfully recorded, and are therefore void. Separate judgment will be entered for the plaintiff [ie. Buisnessman].

For the ruling, see In re BowlNebraska, L.L.C. (USBC, D. Neb. March 15, 2010).

Feds Get AIG Units To Cough Up $7.1M To Settle Race-Based Discrimination Claims In Home Mortgage Lending Practices

The Washington Post reports:
  • Two AIG units settled federal charges that they discriminated against black home buyers on fees for mortgages and will pay $7.1 million for restitution and education efforts, the U.S. Justice Department said.(1)

  • The units, AIG Federal Savings Bank and Wilmington Finance Inc, will provide $6.1 million to about 2,500 borrowers in at least 19 major metropolitan cities who were affected by the alleged discrimination, according to the department. "This sort of practice is what I often call discrimination with a smile, because I would predict that many of the victims that we will contact will have no idea that they were victimized," said Thomas Perez, head of the Justice Department's civil rights division.

  • Blacks were charged fees by mortgage brokers that were on average one-fifth of a percentage point higher than whites for the mortgages, which were all subprime loans, Perez said. The victims will receive on average about $2,300 back. He also said that there were some 45 lending discrimination cases pending.

For more, see AIG units settle mortgage discrimination case.

(1) The settlement was filed in conjunction with a civil lawsuit brought under the federal Fair Housing and Equal Credit Opportunity Acts, which alleges African American borrowers nationwide were charged higher fees on wholesale loans. For the U.S. Department of Justice press release, see Financial Fraud Enforcement Task Force Announces Settlement with AIG Subsidiaries to Resolve Allegations of Lending Discrimination.

Philly Candidate For State Legislature Once Served As Notarizing Dupe For Convicted Scammer In Deed Theft Racket; Elderly Among Those Victimized

In Philadelphia, Pennsylvania, the Philadelphia Daily News reports:
  • Michelle Brownlee, an aide to state Rep. Frank Oliver for 37 years, says she forgot all about the criminal trouble she got into in 2002 until somebody told her the other day that info about the case had been circulating in the 195th District.

  • Brownlee was charged with forgery and other crimes in 2002, after she notarized a deed for the sale of an Olney home. The deed held phony signatures from the couple who owned the home but who had been dead for decades, according to court records. Brownlee, who is hoping to replace her retiring boss, said a ward leader got an anonymous call last week about her arrest, then received paperwork from her court case. "I know the perception is bad," said Brownlee, one of seven Democrats on the primary-election ballot. "It's being circulated so I expect somebody is going to use it."

  • Brownlee agreed to cooperate against Melvin Lindsey, aka Ali Abu Lumumba, who was being investigated by the District Attorney's Office for using bogus deeds to steal several houses. Brownlee entered the Accelerated Rehabilitative Disposition program, meaning her record would be cleared if she stayed out of trouble for six months. "Of course, that was a piece of cake for me," Brownlee said.

  • Brownlee said - and the D.A.'s office agreed - that she hadn't profited from Lindsey's scam and had been duped by the conman into notarizing the deeds. She said Lindsey had come into Oliver's district office asking for help with clients who were too elderly to come themselves.

  • "Some of the people in the community seemed to think he was a pretty good guy," Brownlee said. "I thought I was doing a community service." The state Constitution says no person "convicted of embezzlement of public moneys, bribery, perjury or other infamous crime" can serve in the General Assembly. The Department of State said that would not apply to Brownlee, since she completed the ARD program and has no conviction.

  • Lindsey, now in state prison, ran under the name Lumumba as a Republican for City Council in 1995 and in 1983, and for mayor in 1979 on the Consumer Party line.

Source: Clout: Free advice: Mariano offers redistricting help.

Wednesday, March 17, 2010

Another One West Bank / IndyMac Horror Story: Lender Approves Loan Modification For Couple Several Months After Foreclosing & Giving Them The Boot

In Las Vegas, Nevada, KLAS-TV Channel 8 reports:
  • One local family believes what happened to them may be happening to others facing foreclosure. The Stelton family tried for months to get a home loan modification after they fell on tough times but it didn't work and they were evicted. [...] IndyMac foreclosed on them and auctioned off the house. The Steltons now rent a home. What they didn't expect, was a call from IndyMac this week, congratulating them on being approved for a loan modification, several months after IndyMac kicked them out.

For more, see Family Approved for Loan Modification After Eviction.

North Texas Feds Sack NFL Defensive Line Coach, 39 Others In Alleged Mortgage Fraud Scam; Losses Close To $19M Involving 114 Homes: Authorities

In North Texas, CBS-TV Channel 11 reports:
  • A federal task force has uncovered a massive mortgage fraud conspiracy operating in North Texas. And an NFL coach is among the 40 people who have been indicted. [...] In this case, officials say some of those indicted collected a large volume of fees, while others took kickbacks to participate in the scheme. Law enforcement officers held a news conference in an affluent McKinney neighborhood to talk about the indictments.

***

  • So, what happened to the houses? "The purchasers end up in foreclosure. The lenders end up with bad loans and the neighborhoods end up with abandoned properties," explained Erick Martinez with the Internal Revenue Service. [...] Law enforcement officials say the fraud accounts for nearly $19 million in losses and 114 properties were involved. Federal officials say in the grand scheme of the case, [the c]oach [] played a relatively minor role as a buyer.

For the story, see Dozens Indicted In N. Texas Mortgage Fraud Scheme.

See also: The Times Picayune: New Orleans Saints assistant indicted by U.S. attorney in Texas a victim, attorney says (Claims to be unwitting straw buyer).

Mortgage Fraud Racket Used 3rd Party Payouts, "Double Escrows" In Straw Buyer, Flipping Scam, Say Las Vegas Feds

From the Office of the U.S. Attorney (Las Vegas, Nevada):
  • Brett Depue, 36, a former resident of Las Vegas, but currently a resident of Gilbert, Arizona, Brian Barney, 36, of Fairfield, California, and Maria Ornelas, 32, of Las Vegas, are charged with conspiracy to commit bank fraud, mail fraud, and wire fraud, 11 counts of wire fraud, and criminal forfeiture.

***

  • The Indictment alleges that from about February 1, 2005, to May 31, 2007, in Nevada and elsewhere, the defendants participated in a mortgage fraud conspiracy in which they used “third party disbursements(1) and “double escrow(2) methods to fraudulently obtain monies from the financial institutions.

***

  • The defendants recruited home owners in the Las Vegas area and elsewhere who agreed to sell their property at a price substantially above the asking price. The home owners were told that the difference would go to Depue for improvements. The defendants then recruited straw buyers to apply for mortgage loans to purchase the homes using false and fraudulent information concerning the straw buyers’ income, assets, employment, and intent to occupy the homes. In some instances, the defendants had the straw buyers apply for mortgages for more than one house at a time and concealed from the lenders that they were purchasing more than one property. The Indictment specifically discusses 17 homes in Las Vegas and Henderson which were purchased fraudulently between April 2005 and April 2007 at the direction of and for the benefit of the defendants.

For the U.S. Attorney press release, see Federal Mortgage Fraud Charges Filed Against Owner And Employees Of Former Nevada Investment Companies.

(1) A third party disbursement is the issuance of money at the closing of a mortgage loan to a person or entity that is not typically entitled to the money, the press release states.

(2) A double escrow is where two sales of the same property are conducted at the same time, the press release states. Typically, the property is sold to a middleman, who then sells the property to a straw buyer at a substantially inflated price. The difference between the first sale price and second price is distributed to a conspirator as seller proceeds. The paperwork on the second sale is concealed from the seller, and the paperwork on the first sale is concealed from the lender, according to the press release.

National Call For Loan Documents Signed By Multiple Corporate Hat-Wearing Vice Presidents

From Florida Attorney Lynn E. Szymoniak, Esq.(1) in the March 12, 2010 entry on Fraud Digest:
MORTGAGE DOCUMENTS
Action Date: March 12, 2010
Location: WEST Palm Beach, FL

CALL FOR MORTGAGE ASSIGNMENTS & AFFIDAVITS - March 12, 2010:
  • Researchers at Fraud Digest are comparing the job titles on Mortgage Assignments and Affidavits of the individuals listed below. If you have any Mortgage Assignment or Affidavit in Support of Summary Judgment in a Foreclosure action signed by any of the following individuals, please scan the document(s) and send it as a pdf. attachment to szymoniak@mac.com. This request is for research regarding mortgage-related documents. The individuals named below are not accused of wrong-doing or fraudulent activity: Christina Allen; Scott Anderson; Brent Bagley; China Brown; Eric Friedman; Linda Green; Ely Harless; Korell Harp; Laura Hescott; Erica Johnson-Seck; Dennis Kirkpatrick; Topako Love; Jessica Ohde; Shelly Scheffey; Keri Selman; Kathy Smith; Roger Stout; Eric Tate; Tywanna Thomas; Linda Thoresen.

For other postings by attorney Szymoniak on suspected muiltiple corporate hat-wearing vice presidents, see:

  • TOO MANY JOBS: A report that lists the names Linda Green, Tywanna Thomas, Korell Harp and Shelly Scheffey that frequently appear on so-called "Docx-prepared" documents and some of the many job titles used by Green, Thomas, Harp and Scheffey.

  • MORTGAGE ASSIGNMENTS AS EVIDENCE OF FRAUD: Highlights the apparent manufacturing & use of "backdated" and "retroactive" assignments of mortgage by foreclosing entities to satisfy paperwork requirements in foreclosure actions.

  • AN OFFICER OF TOO MANY BANKS: Addresses some legal issues arising when multiple corporate hat-wearing vice presidents hold themselves out as acting as officers of multiple companies.

  • SIGNATURE COMPARISONS: A collection of copies of the signature section from legal documents that aids in the comparison of signatures from the same small group of suspected multiple corporate hat-wearing vice presidents.

Much of the information set forth in the above links are also set forth in greater detail in a class action complaint filed in a Miami Federal Court in February that alleges document manufacturing practices by lenders, servicers, and others in foreclosure actions (as I understand it, the suit has been withdrawn, subject to refiling in the future).

Creditor's Failure To Record Request For Notice Allows Ex-Homeowner To Snatch Away Surplus Out From Under Subordinate Lienholder After F'closure Sale

In Southern California, Lexology reports:
  • In Banc of America Leasing & Capital, LLC v. 3 Arch Trustee Services, Inc. (2009) 180 Cal.App. 4th 1090, defendant 3 Arch Trustee Services (“Arch”) properly conducted a nonjudicial foreclosure. After Arch recorded notices of default and sale, a creditor recorded an abstract of judgment against the property owner. The creditor later transferred the judgment to Banc of America Leasing & Capital (“BofA”).

  • A month later, the property was sold at a foreclosure sale, conducted by Arch, and there were excess sale proceeds. Three months later, Arch remitted the excess proceeds to the former property owner.(1)

  • BofA filed suit claiming Arch owed a duty to pay excess proceeds to junior lien holders. The trial court agreed with BofA and awarded it damages in the amount of the excess proceeds, plus interest. Arch appealed claiming it had no duty to BofA. The appellate court agreed, and reversed the judgment, holding Arch had no duty to search out junior lien holders to remit excess proceeds.

  • The court reasoned that, “[t]he rights and powers of trustees in nonjudicial foreclosure proceedings are ‘strictly limited and defined by the contract of the parties and the statutes.’ Thus, a trustee owes no duty to provide notices to any person unless the trust deed or the statute specifically provides for such notice.” The court went on to hold that under Civil Code section 2924b, BofA, as a judgment lien holder, was not entitled to automatically receive a notice of default or notice of sale. Additionally, BofA did not record a statutory request for notice.

  • Further, the court stated that under section 2924j, when there are excess sale proceeds, a trustee must notify those persons who would have been entitled to receive a copy of the notice of default; i.e., those that are automatically entitled to receive such notice and those that recorded a statutory request for notice. Anyone who receives a notice from the trustee, must submit a written claim to the trustee and the trustee distributes the excess proceeds in order of priority of the claims.

For more, see Trustee has no duty to seek out junior lien holders following foreclosure sale (requires registration; if no registration, go here, then click link for the story).

(1) According to the court ruling, the excess sale proceeds generated by the foreclosure sale which the ex-homeowner successfully snatched away from BofA Leasing by reason of the latter's failure to record a statutory request for notice was $114,797.77.

Forced Placed Insurance Causes Unit Owner's Mortgage Payment To Skyrocket After HOA Drops Windstorm Coverage; Suit Filed Seeking Reimbursement

In Oakland Park, Florida, The Miami Herald reports:
  • Carla Gemmati, 45, a resident at the Lake Pointe Condominium in Oakland Park, saw her mortgage almost double from $975 to $1,700 in December. The additional cost was to cover a windstorm insurance that her condominium's association had just eliminated,(1) forcing her mortgage lender, Bank of America, to purchase a policy of more than $4,500 on her behalf and charge the cost against her monthly mortgage payment. "I haven't been able to make the whole payment,'' Gemmati said. "If I can't make the payments, I foresee that [a foreclosure] can happen.''

  • Windstorm insurance coverage is mandated under Chapter 718 of Florida Statutes, or the Condominium Act. According to the law, insurers issuing residential property insurance policies, in this case the condominium's association, are required to include hurricane windstorm coverage. In February, Gemmati filed an unprecedented lawsuit against the condominium association and members of its board in order to regain the windstorm coverage and get reimbursed for the price hike in her mortgage.

  • The lawsuit states that, "the defendants intentionally refused to obtain and maintain adequate insurance, specifically windstorm coverage.'' Robert Kaye, a managing member of Kaye & Bender in Pompano Beach, is representing Gemmati, who is a collection specialist in the same firm. "Florida Statute and the declaration of the condominium require the association to provide a certain level of insurance for the buildings and that includes the windstorm insurance,'' Kaye said.

  • Gemmati has been living at the Lake Pointe Condominium for five years. Up until last September, the windstorm coverage was provided by the association and included in the $375 fee homeowners paid each month to the association. "All the insurances are supposed to be included,'' Gemmati said.

For the story, see Lawsuit targets wind insurance.

(1) I suspect that this condo association, like many throughout Florida, is getting stiffed left and right by delinquent unit owners on their monthly maintenance payments (many facing foreclosure), and the association is simply looking for a way to cut expenses without having to jack up the monthly fees on the fee-paying owners. Such an increase may serve to push some of those owners into the delinquent category.

Arizona Couple Seeking Help With House Payments Accuse Loan Modification Outfit Of $2500 "Hit & Run" Fleecing

In Sun City West, Arizona, KNXV-TV Channel 15 reports:
  • A Sun City West couple trying to get help with their mortgage was apparently scammed out of $2500 by a company they thought was legit. Noah and Joan Adams said they paid a company called Choice out of Mesa to help them negotiate they're mortgage. But several months later the company that promised "to make things less scary" is no where to be found. "What did they do with the $2500?" asked Noah. "[I] told Joan my wife that they're scamming us."

  • The lady who came to their home had the name Kay Henning. She had business cards and paperwork. Noah said the company had the fancy forms, made the couple fill out a ton of documents, but then they just stopped returning the calls.

For more, see Sun City West couple becomes victim of foreclosure scam.

Tuesday, March 16, 2010

Ex-Granite State Lawyer Gets 51 Months In $2.3M+ Ripoff Of Deceased Client's Estate; Handiwork Included Selling Family Home Out From Under Heirs

In Concord, New Hampshire, the New Hampshire Union Leader reports:
  • A longtime Manchester attorney and city water commissioner was sentenced [] to four years and three months in a federal corrections facility. Thomas J. Tessier, a partner in the now shuttered Christy & Tessier law firm, pled guilty in November to bank fraud, mail fraud and money laundering in an agreement with U.S. Attorney's Office. [...] Tessier pleaded guilty to bilking a client of more than $2.3 million over several years.

***

  • The case involves the family of Beatrice Jakobiec, who died in 2001 without a will, but had set up trusts for her two sons [...]. According to the agreement with the U.S. Attorney's Office, Tessier submitted documents to banks with forged signatures, which gave him access to certificates of deposit from Jakobiec's estate.

  • Tessier also created fraudulent documents indicating he had the power of attorney to sell the family homestead, which he did and deposited most of the money into his personal bank account. And he cashed in Jakobiec's insurance policies, investment accounts and trust accounts, claiming he had the legal right to do so and created fraudulent trusts to hide much of the money.

  • Although he funneled small amounts of money to the family members, Tessier kept more than $2.3 million for himself, according to court documents. Assistant U.S. Attorney Robert Kinsella said earlier that Tessier spent most of the money on personal expenses. [...] A substantial amount of money has been repaid to the victims, Kinsella said. Tessier was disbarred in December 2008 by the State Supreme Court.

For the story, see Tessier sentenced to 4 years in federal facility.

Five Named In 327-Count Indictment In Alleged NYC Mortgage Fraud Scam Using Stolen IDs; Deceased Woman’s Home Allegedly Sold Out From Under Her Estate

From the Office of the Queens County District Attorney:
  • Queens District Attorney Richard A. Brown [] announced that five individuals [...] have been charged in a 327-count indictment in connection with an approximately $2 million mortgage fraud scheme in which stolen identities were allegedly used to buy and sell three properties in Queens.(1)

***

  • District Attorney Brown said that the investigation began after one of the owners of a property located at 120-18 132nd Street in South Ozone Park began receiving mail indicating that the mortgage had been paid off and the home was now in the name of another individual – who also had come to the District Attorney’s office complaining that he, too, had been the victim of identity theft.

  • An investigation revealed that the property was allegedly sold during a closing on July 13, 2006, that began in an attorney’s office in Westbury but concluded that evening in a restaurant parking lot in Deer Park, Long Island. It is alleged that three unidentified individuals showed up at the closing with fake identification and pretended to be the two actual homeowners (one of whom had died three months earlier) and the buyer. The house was sold for $500,000, of which $340,948 was due the two homeowners – less their existing mortgage. However, it is alleged that $250,0000 of that amount went to [Martina] Duran – who organized and was present at the closing – and her co-conspirators.

For the details of the other two fraudulent home sales, see Five Charged In $2 Million Fraud Operation That Used Stolen Identities To Illegally Obtain Mortgages (Deceased Woman’s Home Allegedly Sold Out From Under Her Estate).

(1) According to the press release, nightclub owners Roger Arias and his mother, Martina Duran, allegedly orchestrated the three transactions and pocketed the majority of the fraudulent proceeds from the closings, which the other three defendants helped facilitate. According to the DA's office, the others are: Aldo Bussi, 41, of Levittown, Long Island, Ramon Gaston, 29, from parts unknown, Percy Randall, 54, of Westbury, Long Island. Four of the defendants are in custody and the fifth is presently being sought.

Family Friend Charged With Swindling $130K+ Proceeds From Sale Of Investment Home Sold Out From Under Grieving, Recently-Widowed Senior

In Naples, Florida, the Naples Daily News reports:
  • A man who claimed he was a broker is accused of bilking a long-time family friend out of more than $130,000. Brian William Cramer, 33, who used to live in [...] Marco Island, was arrested [...] at his house [...] in Cincinnati by a Cincinnati police officer, said Hamilton County (Ohio) Sheriff's Office spokesman Steve Barnett. Cramer remained in an Ohio jail pending Wednesday extradition to Lee County.

***

  • The case dates back to September 2005 when Deborah and Joe Workman of Naples decided to sell a Fort Myers Beach investment home. Joe Workman died Sept. 5, 2005 at the age of 72. Deborah Workman, still grieving and taking care of her late husband's estate, didn't know anything about the Sept. 7, 2005, sale of the house until several months later. She learned about it from one of Cramer's friends.

***

  • In records dated Sept. 7, 2005, Deborah Workman's signature appears on closing paperwork for the house. The money from the sale, $132,841.39, was to be placed in escrow. She told investigators it was not her signature on the documents and she never received the money.

  • Deborah Workman said she didn't find out about the sale until March 2006 when she was told by a friend of Cramer's it had sold. She began contacting Cramer about the money, and he said it was in an escrow account. "Deborah Workman gave the issue no more thought for several months as she had complete confidence and trusted Brian Cramer," Lee County Sheriff's Office Detective Mark Zellman wrote in his report.

  • She began losing that trust when, "as time went by, it became increasingly difficult to reach him and ... eventually he stopped returning her calls...." Several months later, after numerous attempts to get the money, she contacted an attorney to get things straightened out. "He dropped the ball," she said Wednesday, explaining the two-year gap before trying to report the theft to the Sheriff's Office on April 28, 2008.

  • Sheriff's Office records show an offense report was not taken and she was told her only recourse was to file civilly. She continued to try to recover her money, but was eventually told by an attorney to again report it to the Sheriff's Office. She did so and spoke with Zellman on May 22, 2009. Zellman's investigation and the packet of information Workman gave to the detective, shows that the money was put into Cramer's business account listed under BC Properties LLC at a Wachovia bank and he was the sole signatory on it. A Wachovia employee told the detective the account was not an escrow account, but has been Cramer's business account since Nov. 18, 2004.

For more, see Marco Island man arrested in Ohio on grand theft charge.

R/E Agent Faces Charges Of Using Downpayment Cash From Would-Be Homebuyers To Take Title To House; Unwitting Couple Left As Tenants In Own Home

In Newman, California, The Modesto Bee reports:
  • Carlos Gonzales and Ernestina Valladarez said they have faced 13 judges in criminal, civil and bankruptcy courts in what's become a five-year fight to save their home. The couple said then-PMZ agent Erica Burdg of Modesto took $350,000 from them, including a down payment and monthly mortgage payments on their Newman house. Then Burdg tried to evict them.

***

  • Gonzales, 59, and Valladarez, 60, said they believed they were buying a home in the summer of 2002, when they gave Burdg $22,481 and moved into a three-bedroom, two-bathroom house on a corner lot in Newman. [Attorney Mike] Linn said Burdg crafted a purchase agreement for Gonzales, but sold the home to her husband, then to her son. He claims the signatures of Gonzales and the home's previous owners were forged on sales documents. Burdg later filed a lawsuit to evict the Newman couple, who prevailed in November 2006 when a Superior Court jury said Gonzales and Valladarez didn't have to move out. A three-judge appellate panel agreed.

Reportedly, Judge John G. Whiteside said Burdg and her son, Carlos Obando, must face a jury in September after the two pleaded not guilty [] to all charges.

For the story, see Judge orders trial on Newman couple's claims of real estate fraud.

For an earlier story, see Who owns home? Newman case tied up in courts.

Ex-Agent Charged w/ Theft By False Representation In Contract For Deed Home Sale; Collected Cash From Would-Be Buyer, Failed To Pay Pre-Existing Loan

In Kenosha, Wisconsin, the Kenosha News reports:
  • Arraignment has been set for April 14 for a former real estate salesman accused of embezzlement and theft. Michael H. Granger, 50, appeared Wednesday in Kenosha County Circuit Court for his two felony files — one for allegedly pocketing a $12,000 commission, the other for allegedly taking more than $7,800 from a would-be home buyer, according to criminal complaints.

***

  • In the theft case, the charges stem from an August 2008 land contract [aka "contract for deed" or an “installment sale agreement”] meant to purchase a $140,000 property [...] in Kenosha. The would-be buyer said she wrote Granger seven checks for what she believed were mortgage payments and other fees. All the checks were cashed. But, she later learned, the land contract was never filed and the home went into foreclosure in February 2009.

  • When the woman asked Granger about the money she gave him, she reported that he said it was “none of her business” and it was spent, a criminal complaint says. The homeowner said Granger told him the land contract was needed because the buyer had trouble getting financing. He said he was never presented any paperwork until February 2009, when he said Granger met him at a bar, scrawled out a statement and had him sign it. The broker for whom Granger worked at the time confirmed that the land contract had not been filed; the incomplete contract was later found in Granger’s desk. Granger faces two felonies for theft by false representation for the deal.

Source: Former real estate salesman arraigned (Granger facing embezzlement, theft charges).

Monday, March 15, 2010

How Some Of Wall Street's Finest Minds Managed To Destroy $1.75 Trillion Of Wealth In The Subprime Mortgage Markets

CBS News' 60 Minutes reported last night:
  • If you had to pick someone to write the autopsy report on the Wall Street financial collapse 18 months ago, you couldn't do any better than Michael Lewis. He is one of the country's preeminent non-fiction writers with a knack for turning complicated, mind numbing material into fascinating yarns.

***

  • His new book, called "The Big Short: Inside the Doomsday Machine," comes out later this week and it explains how some of Wall Street's finest minds managed to destroy $1.75 trillion of wealth in the subprime mortgage markets. "60 Minutes" and correspondent Steve Kroft spent two days debriefing Lewis at his home in California.

To read the entire transcript of this story on last night's 60 Minutes program, see Wall Street: Inside the Collapse (Author Tells "60 Minutes" What Led to Wall Street Collapse and Who Predicted It).

To watch the 60 Minutes' program,(1) see:

  • Inside The Collapse, Part 1 (Michael Lewis writes about a handful of Wall Street outsiders who realized the subprime mortgage business was a house of cards and found a way to bet against it),
  • Inside The Collapse, Part 2 (Michael Lewis talks about the current situation on Wall Street, the large bonuses still being paid and his predictions for the future of the industry).

(1) 60 Minutes provides these "web extra" videos on its website on last night's story:

New Washington State Law Targets Foreclosure "Surplus-Snatching" Scams; Caps "Overage-Chaser/Scavenger" Fees At 5% In Tax Sales

In Olympia, Washington, LegalNewsline reports:
  • Washington residents who lose their home because of back property taxes could get a little extra money in the end thanks to a bill championed by state Attorney General Rob McKenna that was signed into law Friday. Signed by Democratic Gov. Chris Gregoire, the new law places a 5 percent cap on fees charged by firms that contact owners of foreclosed properties offering to obtain money remaining after their land's auction.

***

  • "As foreclosures have increased, we've seen an uptick in get-rich-quick schemes that prey on those who have lost their homes," McKenna said. "This new law is part of our ongoing efforts to help financially-strapped families keep the little money they have left."

***

  • The group's legislative chair, Lewis County Treasurer Rose Bowman, said in a statement that firms charging property owners exorbitant fees was a growing problem. "We were looking for a way to protect our most vulnerable population - people who, for whatever reason, have lost their property to tax foreclosure - and figure out how we can get their money to them and not to others who are trying to claim it," Bowman said. Bowman added there is no need for residents to even use outside help to get surplus funds returned to them. All that is needed is a notarized from, and a notary at the county will provide the service for no charge, she said.(1)(2)

For the story, see Washington AG gets finder-fee cap in foreclosure cases.

For the Washington State Attorney General press release, see New law protects families in foreclosure.

(1) According to the state AG's press release, individuals who provided such services previously kept as much as 50-70 percent of the former homeowner’s money; Bowman added that many of the “finders” use shady tactics, including hounding the original homeowner to sign a paper or trying to convince county officials that they are a relative of the original homeowner, and therefore entitled to the money. “It’s amazing the lengths they go to try to intercept these funds,” she reportedly said.

(2) In May, 2009, the Washington Attorney General's office won a civil jury verdict which hammered a foreclosure rescue operator whose activities allegedly included the snatching of foreclosure surplus funds due to homeowners after they lost their homes in tax sales. The jury found that the business practices engaged in by the operator violated the state Consumer Protection Act. See Washington AG Scores Big Win In Bogus Equity Stripping, Land Trust/Sale Leasebacks & Surplus Ripoffs; Foreclosure Rescue Operator Tagged For $4.2M.

Ex-Lawyer Gets 21 Months In $2.4M+ Escrow Swindle; Issued Title Policies, Pocketed Payoff Proceeds Leaving Existing Mortgages Unpaid In R/E Closings

In Atlanta, Georgia, Forsyth County News reports:
  • A Forsyth County man who kept a law practice in Sugar Hill will spend nearly two years behind bars on a federal mail fraud conviction. Trent Edward Wright, 38, was sentenced Friday to one year and nine months in federal prison by U.S. District Judge Timothy C. Batten Sr. Wright will also spend three years on probation following his release and must pay more than $2.4 million in restitution.

***

  • Acting U.S. Attorney Sally Quillian Yates said in a statement that lenders and title companies relied on Wright as their closing attorney and agent. “He was supposed to pay off all prior encumbrances on properties to secure loans and pass clear title as warranted by the title insurance,” she said. “He didn’t. Now he is going to federal prison.”

  • According to the statement, information presented in court showed Wright closed about 17 loans during fall 2006 “in which lenders were falsely assured that all prior loans encumbering the properties securing their loans had been paid off.” As a result, the lenders thought they would be in the first position to recoup their loan amounts from the sale of the properties if they went into foreclosure, the statement shows.

  • In addition, Wright reportedly wrote title insurance for the loans, though he failed to pay off several prior recorded liens encumbering the properties. According to the statement, “Rather than ordering title searches and requesting payoff amounts from all prior lenders as required before the new loan closings, Wright either failed to order title searches or disregarded recorded prior encumbrances, causing over $2.4 million in losses.” Wright closed his Sugar Hill law practice in 2007. In December, he surrendered his license to practice law.

  • It appears Wright didn’t operate alone. Edward William Farley, 47, of Hoschton is identified in the statement as a co-conspirator in a related case.

For more, see Ex-attorney sentenced to federal prison (Forsyth man pleaded guilty in mortgage scheme).

For a press release from the U.S. Attorney's Office in Atlanta, see Former Georgia Closing Attorney Sentenced to Prison in Multimillion Dollar Mortgage Fraud.

Loan Mod Scammer Serving 2 To 5 Years Gets Another 6 To 24 Months On Theft By Deception Charge As "Poor Business Decisions" Defense Falls On Deaf Ears

In Wyoming County, Pennsylvania, The Times Tribune reports:

  • A New Jersey woman who claimed to help people with potential foreclosure problems was sentenced in Wyoming County on Thursday for theft by deception. Shirley Matthews, 54, of Willingboro, N.J., was ordered to serve six months to two years in prison on the theft by deception conviction for bilking a Tunkhannock man out of $8,000.

  • Ms. Matthews will serve that sentence after she finishes a 2- to 5-year prison term on similar charges from Monroe County, Judge Russell Shurtleff ordered.

  • Also, additional charges are now pending against Ms. Matthews in Luzerne County. In all of the cases, Ms. Matthews was accused of taking payments from home­owners in exchange for helping solve mortgage foreclosure problems, then failing to follow through. [...] Her attorney, Robert Saurman, told the court Ms. Matthews may have made some poor business decisions, but it wasn't her intent to harm.(1)

For the story, see N.J. woman gets 2 to 5 years in prison for taking from people facing foreclosure.

(1) The problem that some police and prosecutors have in dealing with scams like this one that are disguised as legitimate business transactions is that it's too easy for the scammer, once "caught," to hide behind the terms of what purports to be a "legitimate" business contract. A scammer who pocketed money in exchange for performing a slew of failed loan modifications may assert that the terms of the business contract with the victims insulate him/her from criminal prosecution, and at most, may simply "confess" to being a crappy businessperson who made lousy business decisions, but without any intention of actually screwing anybody, leading some authorities to decline investigation and prosecution. It's not uncommon for authorities to claim that such incidents are "civil cases," suggesting the victim would need to file a civil lawsuit against the scammer to seek a remedy. Fortunately for the victim in this case, the police and prosecutors did not adopt that approach here and, instead, looked through the paperwork to show the true nature of the transaction.

See People v. Frankfort, (1952) 114 Cal.App.2d 680; 251 P.2d 401, for the following commentary by a California appellate court on how it dealt with a scammer who tried to hide behind the terms of a "legitimate" contract with a "customer/victim" in a failed attempt to dodge criminal prosecution (case law links are found at Findlaw.com - may require free registration):

  • Defendants insist these contracts insulate them from this prosecution because they contain the statement that they constitute the entire agreement between the parties, that the Spa Corporation is not bound by any representations outside the contract, that no salesman is authorized to make any additional or contrary representations, and that the club member has read and understands what he is signing. The simple answer to this argument is that "The People prosecuting for a crime committed in relation to a contract are not parties to the contract and are not bound by it. They are at liberty in such a prosecution to show the true nature of the transaction." (People v. Chait, 69 Cal.App.2d 503, 519 [159 P.2d 445]; People v. McEntyre, 32 Cal.App.2d Supp. 752, 760 [84 P.2d 560]; People v. Jones, 61 Cal.App.2d 608, 620 [143 P.2d 726]; People v. Pierce, supra, p. 605.) The practical wisdom of the rule is illustrated in this case. Upon at least three occasions prospective purchasers complained to defendant Nudelman that the written agreement did not seem to conform to what they had been told, whereupon he assured each party, in effect, that everything would be taken care of and he need not worry.

See also:

People v. Pierce, (1952) 110 Cal.App.2d 598, 243 P.2d 585):

  • The determination of the intention is not limited to a construction of the writing. This is particularly true in the criminal field since the prosecution is not bound by any such contract. (People v. Sidwell, 27 Cal.2d 121, 126 [162 P.2d 913]; People v. Robinson, supra, p. 221; People v. Martin, 102 Cal. 558, 566 [36 P. 952].)

People v. Sidwell, (1945) 27 Cal.2d 121, 162 P.2d 913, in which the California Supreme Court made this observation:

  • And in this criminal prosecution the state is not bound by the written provisions of the civil contract between the defendants and Moore. (People v. Martin (1894), 102 Cal. 558, 566 [36 P. 952]; People v. Eiseman (1926), 78 Cal.App. 223, 241 [248 P. 716]; People v. Kelley (1927), 81 Cal.App. 398, 403 [253 P. 773]; People v. Robinson (1930), 107 Cal.App. 211, 221 [290 P. 470].

Effort To Curb "Sewer Service" May Require NYC Process Servers To Use GPS To Electronically Record All Attempts To Deliver Lawsuit Notice To Defendnts

In New York City, The New York Times reports:
  • In a proposal aimed at unscrupulous debt collectors, the City Council is considering legislation that would require process servers to use global positioning systems to show that they have actually visited consumers’ homes or workplaces to deliver notices of collection proceedings.

  • Lawmakers hope the measure will help curb a long-running practice known in legal circles as “sewer service,” which occurs when process servers fail to serve court papers on defendants but file affidavits swearing that they did so — which allows the cases to proceed.(1) [...] The bill would require process servers in New York City to electronically record every instance in which they serve or try to serve someone, using a global positioning system that would pinpoint their exact location.

  • Advocates for consumers say that sewer service has grown in recent years because of the recession and an increase in the number of collection firms that buy bad debts from credit card companies for pennies on the dollar and then seek to collect them.(2)

***

  • A federal class-action lawsuit(3) was filed in Manhattan in December against several debt-purchasing companies and firms that help them collect debts, accusing them of fraudulently obtaining judgments against debtors.

  • The bill was introduced amid an investigation by the state attorney general, Andrew M. Cuomo, into fraudulent process serving. Last year, Mr. Cuomo’s office arrested the owner of a Long Island process serving firm, accusing the company’s servers of frequently filing false affidavits in which they claimed to have attempted to serve three and four people at the same time.(4)

For the story, see Council Seeks to Crack Down on Process Servers Who Lie.

(1) According to the story, the victims are often debtors involved in collection suits who, when they fail to show up in court, are nailed with default judgments, often for thousands of dollars. Councilman Daniel Garodnick, a Manhattan Democrat who is the bill’s lead sponsor, reportedly said “Tens of thousands of people are being sued for debts that they may or may not truly owe, but they only learn that they’ve been sued after they’ve lost, and find their bank accounts are frozen and their wages are garnished.”

(2) For more on the "sewer service" problem, see MFY Legal Services: Justice Disserved (A Preliminary Analysis of the Exceptionally Low Appearance Rate by Defendants in Lawsuits Filed in the Civil Court of the City of New York ) (documents problem of improper service of process in debt collection lawsuits that have led to judgments entered against unknowing victims).

(3) According to an earlier New York Times story [Suit Claims Fraud by New York Debt Collectors]:

  • The class-action lawsuit [...] goes after an entire debt collection chain, starting with the debt-buying companies, the law firm they hired to collect the debt, and the process-serving firm used to notify debtors. The suit names five debt-buyer firms with variations of the names L-Credit and LR Credit. All are subsidiaries of Leucadia National, a $6 billion publicly traded holding company engaged in various businesses, including timber and manufacturing. The company, which is also named as a defendant, declined comment on the suit.

  • Mel S. Harris & Associates, the law firm named in the suit, did not return phone calls seeking comment. The process-serving company, Samserv Inc., out of Brooklyn, denied allegations that it filed false affidavits of service. [...] The lawsuit was filed by MFY [Legal Services], the Neighborhood Economic Development Advocacy Project and the law firm of Emery Celli Brinckerhoff & Abady. It claims it could represent more than 100,000 victims of judgments won through the actions of the companies in New York civil courts since 2006. A central claim of the action is that most debt-buying firms do not get enough information in the volume data they buy to meet the burden of proof to win a debt case. They therefore seek default judgments.

See also: Civil Rights Advocates File Civil Racketeering Lawsuit Against Major Debt Collection Network.

For the class action lawsuit, see Sykes, et al. v. Mel S. Harris and Associates LLC, et al.

(4) The Times reports that one server, according to the AG's complaint, claimed to have made 77 service attempts on one day, interspersed at locations in Brooklyn and Cattaraugus County, roughly 400 miles apart — a feat that would have required 11 round trips covering 8,194 miles.

Sunday, March 14, 2010

BofA's Recent Illegal Padlocking Of Home Not In Foreclosure, Coupled With Abduction Of Homeowner's Pet Parrot Hits Major National News Media

In Allegheny County, Pennsylvania, Bank of America's recent blunder of improperly padlocking and taking possession of a home believed to be in foreclosure and taking the owner's pet parrot, Luke, has hit the major national media outlets, evidenced by the following stories:(1)

The Wall Street Journal reports that:

  • [The homeowner's] lawyer, Michael Rosenzweig, a partner at Edgar Snyder & Associates in Pittsburgh, said Ms. Iannelli was seeking damages of more than $50,000. The amount of any damages would be decided by a jury if the case goes to trial.(2)

This is not Bank of America's first screw up in this regard, according to the ABC News' story:

For other published reports of similar Bank of America screw-ups, see:

----------------------

(1) The media appear to be having a field day reporting on this story, as evidenced by the following headlines:

(2) Based on a few recent reports of litigation involving foreclosing lender screw-ups in this regard, damage awards to the victimized homeowners in cases of improper lockouts have ranged from $150,000 to well over $1,000,000. See:

  • Plaintiff home sick by decision (Attorneys seeking to lower a $1,050,000 award to $200,000 obtained a tentative reduction of $550,000, and left the status of another $300,000 in punitive damages up in the air. The remaining $200,000 in damages was left untouched),

  • Court reduces $3 million judgment in wrongful foreclosure case (A company that wrongfully foreclosed on a Las Vegas family’s condominium will pay the owners $1.29 million, not the original $3 million jury verdict. The Nevada Supreme Court reduced the amount that Countrywide Home Loans Inc. must pay Gerald and Katrina Thitchener and their family in general and special damages, but upheld the $968,070 in punitive damages; for the actual ruling of the Nevada Supreme Court, see Countrywide Home Loans v. Thitchener, 192 P.3d 243; 2008 Nev. LEXIS 79; 124 Nev. Adv. Rep. 64 (September 11, 2008)).

Cal. Federal Judge Ditches Cash Bond Requirement In Granting Injunction Blocking F'closure; OneWest Unilaterally Xcelled Loan Mod Agreement, Says Suit

In Sacramento, California, News 10.net reports:
  • A Fair Oaks homeowner suing OneWest Bank in Sacramento federal court achieved a notable victory last week. Judge John Mendez granted a preliminary injunction March 3 blocking a foreclosure auction while not requiring the homeowner to post a cash bond equal to the home's value.

  • The homeowner's attorney, Jonathan Stein, told News10 it was the first case he knows of in California where the customary bond requirement was lifted.

  • Stein said OneWest had entered into a loan modification with his client and then unilaterally cancelled it.

Source: Homeowners claim bank prefers FDIC bailout over house payments.

Go here for a video presentation on an explanation of the sweetheart deal that the Indymac/One West operators were given by the FDIC on mortgages it acquired and are now looking to foreclose on.

Use of Adverse Possession "Defense" By Vacant Home Hijackers Now Drawing Attention From Florida Lawmaker

In Tallahassee, Florida, The Tampa Tribune reports:
  • State lawmakers may beef up protections of property owners' rights by rewriting a law this spring that is at the center of a case of alleged fraud in Pasco County. Florida, like most states, has a statute enabling people to stake a legal claim to property that already belongs to someone else. The intent behind the so-called adverse possession statute is to encourage the best use of land that may otherwise go neglected and to maximize the taxes collected on it.

  • To initiate an adverse possession, a person must file notice with the county property appraiser of his intention within a year of occupying it. The prospective owner must then occupy, improve and pay taxes on the property for seven years before gaining title.

  • That's what Stephen Bybel said last month that he was in the process of doing when he took over 72 vacant properties, mostly in central Pasco County, cleaned them up and then rented out 31 of them. Bybel claimed he was following the adverse possession statute to make money and clean up the community at the same time.

  • Local law enforcement took a different view, saying that he broke into properties that didn't belong to him and changed the locks before renting the properties to unsuspecting tenants. Pasco County Sheriff's detectives arrested him in February on a charge of scheming to defraud; Bybel has pleaded not guilty, and the case is still pending.

***

  • Among other things, [Florida state Senator Paula] Dockery is proposing to require anyone filing an adverse possession claim to send notice to the owner of record. A county receiving a tax payment from someone seeking to take over a property would have to hold onto it until after the tax due date, and then return the payment to the adverse possessor if the owner of record pays the tax bill on time.(1)

For more, see Ownership rights to get another look.

(1) Before lawmakers in any state begin thinking about passing laws addressing these bogus adverse possession claims, they may simply want to take a look at their existing laws (including their state's case law) to conclude that the hijacking of possession of these homes is actionable as a trespass.

For example, a New York trial judge recently reviewed the case law of New York addressing trespass in the context of a mortgage lender taking wrongful possession of real estate in a home foreclosure action (Wells Fargo v. Tyson, 2010 NY Slip Op 20079 (Sup. Ct., Suffolk County, March 5, 2010)) (my emphasis added, not in the original text of the case):

  • Distilled to its very essence, trespass is characterized by one's intentional entry, with neither permission nor legal justification, upon the real property of another, Woodhull v. Town of Riverhead 46 AD3d 802, 849 NYS2d 79 (2nd Dept. 2007).

  • The injury arising therefrom afflicts the owner's right of exclusive possession of the property, Steinfeld v. Morris 258 AD 228, 16 NYS2d 155 (1st Dept. 1939), Kaplan v. Incorporated Village of Lynbrook 12 AD3d 410, 784 NYS2d 586 (2nd Dept. 2004).

  • The elements of a claim for trespass are intent coupled with the entry upon the land that is in possession of another. In order for trespass to lie, general intent is legally insufficient. Instead, there must be a specific intent, either to enter the land or to engage in some act whereby it is substantially certain that such entry onto the land will result therefrom, Phillips v. Sun Oil Co. 307 NY 328, 121 NE2d 249 (1954).

  • The intent need not be illegal or unlawful, MacDonald v. Parama Inc. 15 AD2d 797, 224 NYS2d 854 (2nd Dept. 1962) but even one who enters the land upon the erroneous belief that he has the right to enter thereon will be held liable in trespass, Burger v. Singh, 28 AD3d 695, 816 NYS2d 478 (2nd Dept. 2006).

  • Trespass will lie against a party if entry upon the land was perpetrated by a third party, such as an independent contractor or other party, at the direction of the party to be charged, Gracey v. Van Kamp 299 AD2d 837, 750 NYS2d 400 (4th Dept. 2002).

  • It follows then, both logically and legally, that the injured party must have been in possession, whether actual or constructive, at the time that the alleged wrongful entry occurred, Cirillo v. Wyker 51 AD2d 758, 379 NYS2d 505 (2nd Dept. 1976).

LA Law Firm Accused Of F'closure Defense Ripoff Of Over 2 Dozen Clients In Civil Suit; Accused Of Clipping Homeowners For Close To $7K In Upfront Fees

In Los Angeles, California, JD Journal reports:

  • According to the L.A. Times March 10 article, center attorney Yungsuhn Park said testimony indicates that the firm targeted hundreds of Korean immigrants, whose limited English and unfamiliarity with U.S. law made them particularly vulnerable.

  • Trinity lawyer Timothy D. Thurman used agents who spoke Korean to recruit clients, the Center’s complaint alleges. Allegedly, Thurman and others charged clients a retainer up front around $7,000. The clients were told their litigation against lenders would forestall foreclosure and reduce the principal they owed. However, Trinity provided no actual services, the complaint also alleges. Thurman was arrested last year in conjunction with a fraud case involving another loan modification.

For the story, see Center’s Complaint Accuses Trinity Law Associates, Inc. of Defrauding Korean Immigrants.

See also:

  • KABC-TV Channel 7: Lawsuit alleges firm targeted Korean immigrants: (The suit says Trinity Law Firm hired Koreans to place ads, then illegally paid them, like bounty hunters, to bring in customers. "This practice known as 'running and capping' is against the law,"(1) said Yungsuhn Park, of the Asian Pacific American Legal Center. "Attorneys are prohibited from paying non-attorney agents to find clients.").

(1) See California Business and Professions Code sections 6151 and 6152.

Upstate NY Judge Excoriates Wells Fargo For Acting In Bad Faith By Offering "Adjustable Rate" Loan Modification To Homeowner In Foreclosure

In a January, 2010 ruling, New York Supreme Court Justice Timothy J. Walker takes Wells Fargo to task for its feeble attempt in a case before him to modify a loan for a homeowner in foreclosure.(1) Walker prefaces his evaluation of Wells' conduct in the case with a recitation of the severe criticism adjustable rate mortgage loans ("ARMS") have received from various sources, the part these mortgages played in the current foreclosure crisis, and recent New York State legislation intended to help homeowners stay in their homes, afterwhich he gives the following analysis of the lender's actions in this foreclosure action [emphasis added, not in the original text of the ruling]:
  • It is against this universal condemnation of ARM loans and their contributory role in the current foreclosure crisis that this Court evaluates Well's Fargo's conduct in this case.

  • Commencing on August 13, 2009, and through the end of October 2009, this Court conducted several conferences with counsel for the parties, pursuant to CPLR §3408. The conference process concluded with Wells Fargo offering Hughes a proposed loan modification agreement, dated October 27, 2009 (the "Modification Agreement"), which included, inter alia, the following terms:

  • Interest Rate: An initial interest rate of 7.850% for the first five years of the modified loan, but, thereafter, rate changes would resume in accordance with the terms of the original Note. Not surprisingly, Hughes objected to the proposed Modification Agreement because it included an ARM. This Court informed Wells Fargo that it rejected the ARM and directed Wells Fargo to offer Hughes a modification agreement that included a fixed interest rate. Wells Fargo refused to do so.

  • Amounts Past Due to be Capitalized: As of October 27, 2009, Wells Fargo determined that Hughes owed it $24,414.65 in arrears, which it agreed to recapitalize into the modified loan. Included in this amount were unspecified "corporate advances" of $3,708.02 and an unexplained charge of $5,562 identified as "OSFC."

  • Amortization Term: The amortization term did not change and the loan, as proposed to be modified, would have matured on April 1, 2035 as set forth in the original Note. Wells Fargo's refusal to extend the term resulted in a monthly principal and interest payment in the Modification Agreement, commencing on November 1, 2009, of $703.67, as compared to the monthly payment of $520.81, which Hughes was required to pay commencing on May 1, 2005 in accordance with the original Note. The required monthly payment of $703.67, which does not reflect any upward adjustments created by the adjustable rate provision, was approximately 35% higher than the Note's original monthly payment of $520.81, which Hughes could not afford.

  • It is well settled that a plaintiff seeking equitable relief, such as Wells Fargo in the instant foreclosure action, has the burden of satisfying the requisites of equity by coming to court with "clean hands." [Dunn v. Moss, 64 AD2d 838 (4th Dept. 1978); see also, M & T Mortgage Corp. V. Foy, supra, at 275]. The terms of the proposed Modification Agreement, particularly but not exclusively the inclusion of an adjustable rate component, are unacceptable to the this Court.

  • The proposed Modification Agreement flies in the face of the above-described legislation passed in 2008 and in December of 2009, which was designed to assist borrowers in foreclosure cases to remain in their homes and to prevent a foreclosure crisis like the one currently gripping this State and the nation from re-occurring in the future.

  • Moreover, Wells Fargo has acted in bad faith and contrary to CPLR §3408 by presenting Hughes with the Modification Agreement described above and, notwithstanding the Court's directive, obstinately refusing to revise its terms in accordance with the stated intention of the Legislature.(2)

----------------------

In light of the foregoing, and the fact that Wells Fargo failed to prove that it had standing to foreclose anyway,(3) Walker dismissed the foreclosure action, without prejudice.

For the ruling, see Wells Fargo Bank, N.A. v Hughes, 2010 NY Slip Op 20081 (Sup. Ct. Erie County, January 13, 2010).(4)

Thanks to "Deontos .is" for the heads-up on the court ruling.

(1) In another of his court rulings [Deutsche Bank Natl. Trust Co. v McRae, 2010 NY Slip Op 20020 (Sup. Ct. Allegany County, January 25, 2010)], Walker discussed the significance of standing and real party in interest in foreclosure litigation and analyzes the applicable law in New York in connection thereto, and in which he emphasizes the importance of judges exhibiting the necessary initiative to scrutinize the status of the plaintiffs bringing these foreclosure actions in cases involving homeowners unrepresented by legal counsel.

(2) There is usually an implied requirement of "good faith and fair dealing" in a contract-based relationship. For additional commentary on the principles of "good faith and fair dealing" in the context of a loan workout, see Lexology: How to avoid lender liability - part 2 (requires registration; if no registration, either (a) go here, or (b) try here, then click link for the article).

(3) With respect to Wells' Fargo lack of standing in this case, Justice Walker stated:

  • The complaint alleges that Wells Fargo is "the owner and holder of the subject mortgage and note, or has been delegated the authority to institute a mortgage foreclosure action by the owner and holder of the subject mortgage and note." Wells Fargo, however, has failed to attach a copy of an applicable assignment of mortgage and note, assuming one exists. Nor has Wells Fargo submitted an affidavit of merit from a representative of Wells Fargo, with knowledge, attesting to the delivery of the Note and Mortgage to Wells Fargo prior to the commencement of this action. Similarly, in the event Wells Fargo did not own the Note and Mortgage at the commencement of this action, Wells Fargo has failed to submit a power of attorney from the holder of said Mortgage and Note, authorizing it to proceed with the action. Accordingly, Wells Fargo has not established that it has standing to commence this action. [see Mortgage Electronic Registration Systems, Inc. V. Coakley, 41 AD3d 674 (2nd Dept. 2007); see also HSBC Bank USA, N.A. v. Cherry, 18 Misc 3d 1102(A) (Sup. Ct.., Kings County 2008)].

(4) Representing the homeowner was the Buffalo-based Western New York Law Center, a not for profit law and technology firm that represents low-income and underserved clients and groups in civil cases and that provides legal, training and technical assistance to legal service organizations.

Saturday, March 13, 2010

Inspectors Give Dozens Of High-Rent NYC Tenants The Boot After Discovery Of 60 Resident'l Units Carved Out Of 16-Story "Deathtrap" Sans Proper Permits

In New York City, the New York Post reports:
  • Dozens of families who thought they found luxury housing in a Manhattan landmark were homeless [this week] after city inspectors ordered them out of what one source described as a "deathtrap" that was illegally converted from office space. Inspectors from the Buildings and Fire departments slapped a vacate order on the 16-story landmark building at 1182 Broadway Tuesday after getting a tip that the office building was turned into an apartment building without any permits.
  • But inspectors also found that the building, which can be legally used only for offices, was converted without essential fire-safety systems, including sprinklers, alarms and a second stairway for residents to use in emergencies. "You've got one staircase in this building and no sprinkler system. If there's a fire, what's going to happen? This was a deathtrap," said a source familiar with the city's investigation, which was prompted by a tip phoned in late Monday.
  • The owners, who carved 60 apartments out of the top 13 floors, never received city permits to perform the renovations, or to convert the building to residential. Tenants, many with young children, were devastated by the sudden rush from their homes. [...] The building is owned by Mocal Enterprises, whose principals include Calvin Haddad and his daughter, Dana Haddad, who lives in the building, where monthly rents range from $2,900 to $5,000 for the one- and two-bedroom units.
For the story, see Deluxe tenants are 'evict'ims (Tossed from 'deathtrap' apts.). subdivided

Ex-Real Estate Agent Bagged For Allegedly Scamming Rent Deposits From Would-Be Tenants For Vacant HUD Homes; Used Craigslist, Fake Name, Say Cops

In Indianapolis, Indiana, therepublic.com reports:
  • A former real estate agent conned at least eight people by renting them properties actually owned by a federal agency and then running off with their deposits, prosecutors said. Authorities in three Indiana counties accuse Richard Swoveland, 38, of scamming people by persuading them to rent empty homes the U.S. Department of Housing and Urban Development was in the process of selling.

  • Investigators say the Greenfield man advertised the homes on the Craigslist Web site under a fake name. He allegedly showed prospective renters the homes using a HUD master key. HUD is investigating how he obtained the key, but officials suspect he got it while he was a licensed agent. Swoveland was a licensed real estate agent in Indiana until 2008. Swoveland, who is being held in the Hamilton County Jail, has pleaded guilty to a felony theft charge in that county and faces other charges in Hancock and Marion counties.

For more, see Greenfield man accused of housing scam.

Duo Facing Theft By False Pretenses Charge Accused Of Leasing Vacant Homes In Some Stage Of Foreclosure To Unwitting Tenants, Pocketing Deposits, Rent

In Barstow, California, the Desert Dispatch reports:
  • Barstow Police have arrested two people in connection with recent housing fraud involving foreclosed or pre-forclosure homes that were rented out to unsuspecting tenants. According to police reports, a Barstow code enforcement officer was checking out a vacant, pre-foreclosed home in early February and found tenants living inside the home. The tenants said they were renting from Evelyn Thompson, 50, who was arrested in Colton, Calif. on Wednesday and charged with theft by false pretenses.

  • Edward Tafoya, 52, — who police say assisted Thompson — was also arrested and charged with theft by false pretenses. Police say both are Barstow-area residents.

  • Over the course of the police investigation, additional renters were found to be in the same situation and all were renting from Thompson, who allegedly would pose as a property manager and collect deposit fees and subsequent rent.

For more, see Agent charged with defrauding renters (Police: woman posed as property manager, rented foreclosed homes).

Long Island Man Faces Charges In Alleged $140K+ Home Improvement Ripoff Of 74-Year Old Queens Woman

From the Office of the Queens County, New York District Attorney:
  • Queens District Attorney Richard A. Brown [] announced that a Long Island contractor has been charged with bilking a 74-year-old Queens homeowner out of more than $140,000 that she paid him over two years ago for an extension to her residence that he never started.(1)

***

  • District Attorney Brown said that, according to the criminal charges, 74-year-old Lilian Miller retained [Ron] Scott to build an extension to her house located [...] in the St. Albans section of Queens on August 4, 2007. At the request of Scott, it is alleged that Ms. Miller gave him that day a bank check in the amount of $138,500 (from a line of credit she obtained against the equity in her home) and a personal check totaling $5,000. [...] It is further alleged that Scott failed to return or perform any work on Ms. Miller’s residence and that despite numerous attempts by Ms. Miller to contact him via mail, telephone calls and emails to recover her funds, she was unsuccessful.

For the entire Queens DA press release, see Long Island Contractor Charged With Stealing $140,000 from 74-Year-Old St. Albans' Woman.

(1) The defendant, identified as Ron Scott, 68, of West Islip, Long Island, faces a three-count criminal complaint charging him with second-degree grand larceny, second-degree criminal possession of stolen property and a violation of New York State Lien Law 79-A (misappropriation of funds of trust). If convicted, he faces up to 15 years in prison.

Texas Woman Hounded By Zombie Bill Collector Over Debt Belonging To Another Belts Back By Filing Federal Lawsuit

In Tyler, Texas, The Southeast Texas Record reports:
  • A Tyler woman is suing a credit collection agency for repeatedly calling her about a debt that is not hers. Seeking $1,000 for each telephone call, Brandy Samuel filed suit against ER Solutions Inc. and Does 1-10 on Feb. 23 in the Tyler Division of the Eastern District of Texas.

  • According to the original complaint, Samuel claims the debt does not belong to her yet the collection agency continues to call her between 10 and 20 times per day. She alleges the defendants are rude and abusive, constantly harassing her and telling her to take over the debt. Samuel claims she has demanded that the creditor stop calling her about someone else's debt but the "defendants continued in their harassing tactics."

  • The plaintiff alleges the telephone calls violate the Fair Debt Collection Practices Act, the Texas Debt Collection Act and are an invasion of privacy. Samuel is asking the judge to award $1,000 for each violation of the Fair Debt Collection Practices Act, costs of litigation, punitive damages and actual damages including humiliation, anger, anxiety, fear, frustration, embarrassment and emotional distress.

Source: Texas woman sues debt collector over harassing phone calls. zombie debt

Friday, March 12, 2010

Chapter 7 Proceeding No Shield For Operators Of Alleged Idaho-Based Loan Modification Racket, Says Bankruptcy Trustee Chasing Nine Officers For $1.3M+

In Coeur d'Alene, Idaho, The Spokesman Review reports:
  • The trustee for a bankrupt Coeur d’Alene mortgage modification company is suing nine former officers for as much as $1.3 million he says they did not earn. Apply 2 Save Inc. closed its doors last May, and filed for liquidation in June. The company allegedly ripped off hundreds of consumers who paid as much as $1,500 for help staving off foreclosure.

  • Few got the help they paid for. Many lost their homes. Dozens of employees, many with debt issues of their own, were not paid for their last weeks of work. “The whole thing was a complete sham from start to finish,” said Ford Elsaesser, the Sandpoint attorney leading the effort to sort out Apply 2 Save’s affairs.

  • He estimated the company received $9 million in revenues during its one-year existence. Slightly more than $1.3 million went to nine officers, some unqualified for the positions they held, or were overpaid for the work they did, and all of whom he said did nothing to protect the consumers they were supposed to be assisting.

  • Elsaesser Tuesday asked the U.S. Bankruptcy Court in Coeur d’Alene to order the officials to account for the money they received, surrender money obtained improperly, and to impose liens to prevent “unjust enrichment.”(1)

Source: Bankrupt company’s officers face suits (Trustee calls Apply 2 Save ‘sham,’ seeks repayments).

(1) Accoring to the story, the defendants and the maximum sums they allegedly owe are:

  • Steven Lux, senior vice president for sales, $331,647;
  • Russell Ratshin, senior vice president for technology, $185,953;
  • Jesse Daly, creative director, $170,460;
  • Colleen Damiano, senior vice president for human resources, $158,147;
  • Marc Bonanni, legal counsel, $157,137;
  • Joe Doyle, senior vice president of marketing and business development, $137,030;
  • Richard Dawley, director of retail, $79,487;
  • David Shaidell, network administrator,$71,608; and
  • Enrique Garibay, vice president of software development, $69,913.

Reportedly, former President Derek Oberholtzer, who filed a separate bankruptcy, was not among those sued, but trustee Elsaesser said more litigation may be filed.