Federal Judge Gives BofA & Affiliates The Go-Ahead On Foreclosures Throughout Utah; Issues Order Dissolving State Court Directive Halting Sales

In Salt Lake City, Utah, The Salt Lake Tribune reports:

• A federal judge on Friday dissolved a court order that had stopped one of the country's largest banks from selling foreclosed homes in Utah. U.S. District Court Judge Clark Waddoups, after hearing legal arguments Thursday, has granted a Bank of America request a to cancel the preliminary injunction against its trustee sales in the state.

• Waddoups' decision wipes out the injunction issued May 22 by 5th District Court Judge James L. Shumate. That order had halted hundreds of Utah foreclosure sales by Bank of America and its subsidiary ReconTrust.

***

• Judge Waddoups also turned down a motion by Cox's attorney, J. Christian Barlow of St. George, to have the case transferred back to state courts. The issue of state vs. federal jurisdiction was a major issue of contention Thursday. Bank lawyers argued they were governed by the federal National Bank Act and not state law. [...] In his order, rendered early Friday afternoon, Waddoups said he would file a memorandum shortly explaining his legal reasoning.

For the story, see BofA can resume Utah foreclosure sales (Reversal » Federal court judge dissolves an order issued last month in a 5th District ruling).

See also, KCSG-TV Channels 14, 16: Bank of America Foreclosure Injunction Dissolved by Federal Judge.

Bergen County DA Charges NC Man With $550K Ripoff Of Stepmom, Leaving Her Facing Eviction Notices From Assisted Living Residence

In Bergen County, New Jersey, the Greensboro [NC] News & Record reports:

• A Greensboro man was arrested [] and charged with stealing about $550,000 from his stepmother in New Jersey. [He] is charged with theft by deception and theft by failing to make required disposition of property received, according to a statement from the Bergen County (N.J.) Prosecutor's Office. [He] was held in jail on $25,000 bail.

• In March, a family member of [the stepmother] reported to authorities that [the stepson] took about $550,000 from her bank account with PNC Bank. [He] then used the money for his personal benefit by having power of attorney for his stepmother, according to the release.

• In August 2006, [the stepmother] had been placed in an assisted living residence in Paramus, N.J., and had been given a notice of eviction on two separate occasions for non payment.

For the story, see Greensboro man charged with taking thousands from stepmother.

Man Gets 20 Months For Use Of POA In Ripping Off Elderly Mother; State Steps In, Picks Up Nursing Home Bills To Avoid Mom's Eviction

In Denbighshire County, UK, the Daily Mail reports:

• A man who took out 'power of attorney' over his elderly mum's financial affairs cheated her of £86,000, a court heard []. Stephen Moss' spending spree also jeopardised his ailing mother's placement at a residential nursing home in North Wales.

***

• Mr Moss pleaded guilty to the theft [] in court and received a jail sentence of 20 months. His mother's mental health, however, is in such a condition that she is unaware of the scandal.

***

• The family home was sold in March 2006 and her bank balance at that point stood at £111,000. But arrears of £4,000 quickly built up in payments for her placement. Payments were sporadic and communication with the defendant difficult. Correspondence was not answered.

***

• Following a threat of legal action, Mr Moss agreed to pay £200 a month but by then the arrears reached £13,000. In view of the worsening situation, the care home contacted Denbigshire County Council in July 2008 and the council took over the funding at £500 a week. No further payments were made by the defendant after August last year.

For the story, see Thieving son uses 'power of attorney' to cheat ailing mother out of £86,000.

Move To Cheaper Nursing Home Probable For 82-Year Old Woman After Niece's Hubby Forged POA That Led To £200,000+ Ripoff

In St Albans, Hertfordshire (UK), The Jewish Chronicle reports:

• A 59-year-old man who forged a legal document to obtain thousands of pounds of his elderly relative's savings has been jailed for three years. The fraudulent document made by Malcolm Laster, of Edgware, gave him control of more than £200,000 belonging to his wife's aunt, 82-year-old Sadie Joseph.

• Over a two-year period Laster spent £218,208 on holidays to America and gifts for friends and family, St Albans Crown Court heard. The former taxi driver even paid for haircuts for friends, while saving cash by cancelling Mrs Joseph's own hair appointments at the Sunrise Care Home in Elstree.

• Laster was married to Mrs Joseph's niece Shirley, but she was too ill with motor neurone disease to accept power of attorney over her aunt's affairs. She died two years ago. Mrs Joseph has been left with just £10,000 and will probably have to move to a cheaper care home.

For the story, see Cabbie stole £200,000 of aunt's savings.

Beauticians' Tipoff To Cops That Elderly Customer Was Urged To Refi Home Triggers Probe Leading To Scammer's Guilty Plea; Swindle Estimated At $180K+

In Montgomery County, Maryland, The Washington Post reports:

• The scheme got its start, Montgomery County prosecutors said [], when an 87-year-old woman pulled into a gas station 3 1/2 years ago looking for directions home. A man playing Keno, James Brian Gendimenico, offered to help, and led her and her husband to their nearby house in his own car.

• During the next 2 1/2 years, according to prosecutors, he engaged in a crime that is expected to increase nationwide as the population grows older: He won her confidence, helping her with errands, bills and chores. And stole her money.

• Gendimenico, 48, pleaded guilty to a theft scheme []. He could face 15 years in prison when he is sentenced Aug. 9, but he is likely to get less because of state sentencing guidelines. How much he took remains unclear and is expected to be determined at a hearing before sentencing.

• Prosecutors say he stole at least $180,000 from the couple, who had no children and lived modestly on fixed incomes in the Glenmont area. As the husband's health deteriorated, Gendimenico persuaded the wife to grant him power of attorney and received more than 350 checks from the couple's bank accounts, according to prosecutors. By the time her husband died, she could no longer afford to bury him. "He picked her clean," said Robert McCarthy, a lawyer appointed by the court to manage the widow's finances.

• Montgomery County is seeing more cases like this. In early March, Roger Greenberg, 68, was convicted of swindling more than $100,000 from an 84-year-old woman whom he persuaded to marry him in a ceremony in the front seat of his car. "People are figuring out we've got a bunch of rich old people here," said McCarthy, who also is involved in the Greenberg case. "I'm seeing too many of these cases," Montgomery District Court Judge Gary Crawford said last year at an early hearing in the Gendimenico investigation. "It's a huge problem," said Peggy Odick, an attorney for the county. "We're seeing tons of them, but he's actually wiped her out. There's nothing left."

***

• One of the few trips she makes every week is to Ruffles of London, a salon near her home. It was there that beauticians started noticing her showing up with Gendimenico about three years ago. They said they got concerned when she told them that Gendimenico was advising her to take out a loan against her house. "She's so naive and innocent, and things weren't adding up," beautician Tina Becker said. "She's just a very sweet lady who didn't have anyone to care for her." The beauticians decided to call the county authorities, which led to an investigation.

For the story, see Man pleads guilty in swindle of elderly Montgomery County woman.

Bill Collector's Recorded Threat To Blow Up Their House Over $300 Cell Phone Bill Forces Couple To Move 500+ Miles Away, Says Verizon Customer

Inside Edition reports:

• A New Mexico couple has been living in fear ever since receiving a terrifying phone call."I'm going to blow your [expletive deleted] house up," said the caller. The threatening call is allegedly from a debt collector calling about a $300 cell phone bill! "It was scary, very scary," says Al Burrows.

***

• Burrows called Verizon, and he says he was shocked by their response. Burrows tells INSIDE EDITION, "He said to me, 'You might as well tell me to turn on the TV, that aliens have landed if you expect me to believe a story like that.'" But Burrows says he had the voicemail as proof. He and his family found the incident so upsetting they moved over 500 miles away to Denver, Colorado.

• Attorney Jim Sherr is representing the family. "Recording the conversation is evidence that you cannot dispute, it's there," says Sherr.

For more, see Family Says They Were Terrorized by an Overzealous Debt Collector.

Landlord Charged With Using "911" Call & Making False Report To Cops In Attempt To Give Delinquent Renters The Boot

In North Lauderdale, Florida, the South Florida Sun Sentinel reports:

• A landlord was arrested after she tried to evict tenants from a North Lauderdale apartment by calling 911 and falsely reporting them as intruders, authorities say. Mable Henry-Morgan, 54, of West Palm Beach was taken into custody Saturday night on one count of misusing the 911 service, according to a Broward Sheriff's Office arrest report.

• Authorities said she reported a break-in at one of her rental apartments in the 7700 block of Southwest 10th Street. Henry-Morgan told a 911 dispatcher the residence should be vacant, but later admitted to deputies she knew the occupants and that there had not been a burglary, the report said.

***

• When deputies arrived and spoke with a couple inside the apartment, the pair said they have lived there since last year, the report said. The couple, Salvador Postilla, 34, and Mercedes Aparicio, 33, showed a receipt that they received in April for paying that month's rent. They told deputies that they had not paid their rent recently and that their landlord was trying to kick them out, the report said.

For the story, see North Lauderdale landlord accused of misusing 911 in bid to evict tenants (Mable Henry-Morgan, of West Palm Beach, falsely reported break-in, authorities say).

100s Of FBI Mortgage & Foreclosure Scam Arrests To Begin Next Week???

The Financial Times reports:

• The Federal Bureau of Investigation is preparing a nationwide crackdown on mortgage fraud, the latest in a series of efforts to curb lending practices that contributed to the housing meltdown, according to people familiar with the matter.

• The FBI is preparing to arrest hundreds of people across the US as early as next week for offences including encouraging borrowers to falsify income on mortgage applications, misleading home owners about foreclosure rescue programmes, and inflating home appraisals, said two people with knowledge of the operation. An FBI spokesman declined to comment. [...] A multi-agency effort is also expected to be behind the latest crackdown, said a person familiar with the operation.

For more, see FBI to target mortgage fraud.

Feds, Others Continue Bringing Attention To Increase In Short Sale "Flopping" Scams

Bloomberg News reports:

• Two Connecticut real estate agents found a way to profit in the U.S. housing bust: Buy low, sell fast. Their tactic was also illegal. Sergio Natera and Anna McElaney are scheduled to be sentenced in Hartford’s federal court in August after pleading guilty to fraud. Their crime involved persuading lenders to approve the sale of homes for less than the balance owed -- known as a short sale -- without disclosing that there were better offers. They then flipped the houses for a profit.

• The Federal Bureau of Investigation, the California Department of Real Estate and mortgage finance company Freddie Mac have warned that such schemes may be spreading after a plunge in values left homeowners owing more than their properties are worth. The scams threaten to deepen losses for lenders that are increasingly agreeing to short sales as an alternative to more costly foreclosures.

***

• A prevalent scam involves a practice called “flopping,” [special inspector general for the Troubled Asset Relief Program Neil] Barofsky said. In that scheme, investors or home buyers hire brokers to assess a home for less than its market value and convince banks to accept a sale at that level.(1) The buyer conceals from the lender that he has lined up a higher offer and then quickly resells the property for a profit, as in the Connecticut case.(2)(3)

For more, see Banks Face Short-Sale Fraud as Home ‘Flopping’ Schemes Spread.

(1) For an instructional video on how one company goes about convincing lenders to take lower prices on their approved short sales, see How To Influence A Broker Price Opinion - BPO, So They Consider Your Low Price.

(2) Jumana Bauwens, a spokeswoman for Bank of America Corp., reportedly said ““We have language in our short sale approval letter that prohibits the flipping of a property and after closing we will audit transactions to identify ‘flips’ or ‘flops.’ It’s not in the best interest of our investors or communities at large to encourage or allow flipping.”

Morgan McCarty, executive vice president for mortgage servicing at Birmingham, Alabama-based Regions Bank reportedly added that his company company requires a full appraisal before a resale, and also demands short-sale buyers sign statements affirming the transactions are arms length, with no hidden buyer-seller relationships, and that there are no agreements to resell the property.

(3) For other stories on alleged short sale flipping scams, see:

• Title insurance group's move could stymie short sale flips (Attorneys' Title Insurance Fund notified its 6,000 member attorneys this week that it will not insure deals made with a popular – but controversial – method for closing flips of short sales),
• ATIF Refuses To Issue Title Insurance On Controversial Short Sale Deals Involving Simultaneous Investor "Flips",
• NY Feds Indict Four In Alleged Short Sale, Flipping Fraud Targeting Homeowners In Foreclosure; Unwitting Straw Buyers Left Holding The Bag,
• Shaky Loan Modifications That Turn Into Questionable Short Sales?,
• Unwitting Prospective Buyer Gets Caught Up In Controversial Short Sale Flipping Attempt Involving Vacant Home In Foreclosure,
• Detroit Feds Indict Five In Alleged Straw Buyer Scam Involving Fraudulent Short Sales Of Luxury Condos.

Texas Couple Files Suit Saying Insurance Company Stiffed Them On Claim For Flood Damage Caused By "Ike" Storm Surge

In Beaumont, Texas, The Southeast Texas Record reports:

• When their property in Bridge City was flooded by Hurricane Ike's storm surge on Sept. 13, 2008, Milton and Mary Perio believed the flood insurance they had purchased just a month before would cover their damage claim. However, the insurance company denied their claim stating that the flood insurance was not in effect on the date of the loss.

***

• According to the complaint, the Perios claim that when they paid for the flood policy on Aug. 27, 2008, an employee of the insurance company told them the flood insurance "would in fact take full force and effect immediately upon the closing of the property."

• However, National Lloyds told them the flood insurance policy did not go into effect on the date of closing, Aug. 29, 2008, because it was not purchased while "making, increasing, extension or renewal of a loan, as required by the federal statutes, to allow the flood coverage be effective as of the date of closing." Claims against Lloyds include violations of the Texas Deceptive Trade Practices Act, fraud and negligent misrepresentation.

For the story, see Flood insurance did not cover flooded home, Bridge City couple's lawsuit claims.

(1) Possibly in an attempt to make the litigation more costly for the homeowners, and/or possibly in an attempt to shop for a friendlier litigation forum, the insurance company reportedly had the case, initially filed in state court, removed to a Beaumont, Texas Federal court.

New Report Addresses Lack Of Enforcement Of Federal Law Protecting Tenants Against Illegal Foreclosure Evictions

The National Law Center on Homelessness and Poverty recently announced:

• Despite a federal law enacted in 2009(1) to protect renters living in foreclosed properties, many tenants across the country are still being threatened with eviction and are being forced to leave their homes on short notice. A report released [] by the National Law Center on Homelessness & Poverty, Staying Home: The Rights of Renters Living in Foreclosed Properties, explains the impact of the new law and discusses problems with its implementation, and summarizes the results of a 50-state survey of developments in state laws protecting tenants living in foreclosed properties since early 2009.

• The report reveals that while progress has been made at both the federal and state levels to protect the rights of renters living in properties subject to foreclosure, further protections for renters - and better enforcement of existing protections - are needed.

For the entire announcement, see Staying Home: The Rights of Renters Living in Foreclosed Properties.

(1) In May 2009, the federal government enacted the Protecting Tenants at Foreclosure Act of 2009 ("PTFA"), which provides important federal protections for tenants in foreclosed properties, including the right to receive 90 days' notice before being required to leave the property and, in many cases, the right to remain for the length of the tenant's existing lease term. Unless the Protecting Tenants at Foreclosure Act is extended, it will expire on December 31, 2012.

Florida Trial Judges Continue Getting Hammered In Foreclosure Cases As Appeals Court Reverses Another Screw-Up

In another, short and sweet, one paragraph ruling, a Florida appeals court, this time for the 4th appellate district, reversed a ruling, favorable to a foreclosing lender, of a state trial judge. This time, it's Broward County Circuit Court Judge Ronald J. Rothschild who apparently has yet to receive the memo about the assembly line foreclosure mill law firms flooding the courts with sloppy filings. Notable in this case is that foreclosure mill law firm David Stern, P.A. was also listed as a party in this appeal.

• We reverse the circuit court’s final summary judgment of foreclosure against Stelian Lazuran (the “defendant”). Citimortgage’s complaint alleged that all conditions precedent to the mortgage note’s acceleration had been fulfilled, and Citimortgage’s affidavit in support of its motion for summary judgment stated “[t]hat each and every allegation in the Complaint is true.” Such a conclusory allegation is insufficient to refute the defendant’s affirmative defense that Citimortgage failed to provide him with notice of the acceleration pursuant to the procedures specified in paragraph 22 of the mortgage. Therefore, reversal is required. See Frost v. Regions Bank, 15 So. 3d 905, 906-07 (Fla. 4th DCA 2009) (“Because the bank did not meet its burden to refute the Frosts’ lack of notice and opportunity to cure defense, the bank is not entitled to final final summary judgment of foreclosure.”).
  
  Reversed.

For the ruling, see Lazuran v. Citimortgage, Inc, David Stern, P.A. et al., No. 4D09-1340 (Fla. 4th DCA June 9, 2010).

Representing the appellant/homeowner was Mitchell Sens of Law Office of Mitchell Sens, P.A., Plantation, Florida.

Appeals Court Tags Another Florida Trial Judge With "Abuse Of Discretion" In Case Involving Two Lenders Simultaneously Foreclosing On Same Mortgage

Another Florida trial court gets tagged for "abuse of discretion." This time it was Miami-Dade County Circuit Court Judge Mark King Leban being held accountable by Florida's 3rd District Court of Appeal. The case apparently involved a situation where two different mortgage lenders were foreclosing on the same mortgage in two separate actions occurring simultaneously in different divisions of the trial courts in Miami. The ruling was limited to one, short & sweet, paragraph (bold text is my emphasis, not in the original text):

• Based on the unique circumstances of this case,(1) we conclude that the trial court abused its discretion by denying the motion to continue the final summary judgment hearing and by failing to grant the motion to transfer the foreclosure action to the division where a separate foreclosure action was pending in which another bank was simultaneously seeking to foreclose the same mortgage. Accordingly, we reverse the final judgment of foreclosure and remand with instructions to reinstate the foreclosure action filed by plaintiff, HSBC Bank USA, and to allow the defendants, Glazy Ruscalleda and Jose Ruscalleda, to answer the complaint and assert affirmative defenses.
  
  Reversed and remanded.

For the ruling, see Ruscalleda v. HSBC Bank USA, Case No. 3D09-997 (Fla. 3rd DCA, June 9, 2010).

Representing the appellant/homeowners were Miami's John H. Ruiz and Karen Baker. For the lender was Boca Raton's own Shapiro & Fishman and Heidi J. Weinzetl.

(1) I wonder how unique the circumstances of this case actually are, given the light being shined on the sloppy (and possibly fraudulent) work being churned and cranked out by the assembly line, foreclosure mill law firms.

Arizona AG Releases Free Video Warning Against Foreclosure Scams

From the Office of the Arizona Attorney General:

• Stepping up his efforts to prevent home loan rescue scams, Arizona Attorney General Terry Goddard [] announced the release of a free, five-and-half-minute educational video that provides useful information about home foreclosure and tips to avoid becoming a victim of scam artists.

• The video is available on the Attorney General’s website, www.azag.gov, or on YouTube at http://www.youtube.com/user/AZAttorneyGeneral. It was made possible by last year’s historic settlement between the State of Arizona and Countrywide Financial Corporation.

***

• The video will be distributed across Arizona to housing counseling offices, faith-based organizations, corporations and non-profit organizations. Residents can also contact the Attorney General’s Office at 602.542.2123 to request a copy. Goddard also noted that a new state law, which takes effect July 29, will assist efforts to stop housing scam artists. The new law prohibits "foreclosure consultants" from charging upfront fees for their services.

For the Arizona AG press release, see Terry Goddard Releases Video to Help Stop Mortgage Scams.

For the video, see Facing the Foreclosure Crisis.

Maryland, DC Bars Boot Attorney For Role In $35M Metropolitan Money Store Sale Leaseback, Equity Stripping Foreclosure Rescue Ripoff

In Baltimore, Maryland, The Daily Record reports:

• A Camp Springs lawyer who pleaded guilty in a $35 million scheme to defraud homeowners facing foreclosure has been disbarred in Maryland. The Court of Appeals ordered Richard Wayne Allison II to be removed from the register of attorneys [] as a reciprocal sanction, following Allison’s disbarment by the District of Columbia Court of Appeals ...

Source: Camp Springs foreclosure-scheme lawyer disbarred.

State Bar Boots Lawyer For Role In Combined Straw Buyer/Flipping, Rent Skimming Racket Targeting Novice Investors, Would-Be Buyers In Rent-To-Own Scam

In Providence, Rhode Island, The Providence Journal reports:

• Attorney Jon A. Mills, of Lincoln, has been disbarred by the Rhode Island Supreme Court. The court released an order [] authorizing the disbarment after Mills agreed to voluntarily give up his law license and cooperate with authorities in the prosecution of a wide-ranging $16-million mortgage-fraud case.

• He was charged last year in Superior Court in connection with a wide-ranging $16-million mortgage-fraud case, a scheme that involved defrauding six banks, 25 investors, dozens of renters, and involved 73 properties.(1) Court records show that Mills, 61, [...] pleaded no contest on April 12 to aiding and abetting in obtaining money under false pretenses. He was given a deferred five-year sentence, which essentially means he is on probation for five years, said Attorney General spokeswoman Beryl Kenyon.

For the story, see Lincoln lawyer disbarred in mortgage-fraud case.

(1) An earlier story (see Two enter pleas in mortgage fraud case) reported the racket, allegedly headed by accused mastermind Pierre “Peter” Chabot, 75, of North Providence, as follows:

• The state police say the complex plan began five years ago, when Chabot placed newspaper advertisements inviting people to invest with him and make money. He attracted 25 amateur investors to fund $16.7 million into 73 rental properties, the state police say, and told them that their money would be protected by a lease-purchase agreement that renters would sign. The renters would use their lease payments as part of the down payments.

• However, the state police allege that Chabot was buying the properties for less than he told the investors and was pocketing the difference. Although Chabot was supposed to be making the mortgage payments on behalf of the investors, the state police say that he failed to make payments on most of the loans. The banks foreclosed, the investors lost their money, and the renters ended up without homes.

"It's Like The Wild West Out There" Says Lawyer As F'closing Banks Skip Eviction Process When Snatching Homes, Grant Salvage Rights To Trash-Out Crews

In Detroit, Michigan, the Detroit Free Press reports:

• Some Michigan residents have returned home to find their windows broken, houses ransacked and valuables missing. Not from burglars, but overzealous mortgage lenders and their trash-out teams: unlicensed crews hired to clean out and secure property during foreclosures. Lawsuits filed across Michigan and the nation paint an ugly picture of impersonal foreclosures bent on speed that cut legal corners without concern for homeowners who have paid up.

***

• Lawyers in [some] suits contend that some lenders, their lawyers and property management firms are granting salvage rights to trash-out crews, who then take TVs, furniture and other personal property. "It's like the Wild West out there," said attorney William Yochim, representing a Royal Oak homeowner whose residence was trashed out even after he paid it off.(1)

***

• Although evictions require court orders -- even on foreclosed homes -- the Free Press found several cases in which court orders for evictions were never sought, including the Powelson case. One legal step that could have prevented the Powelson trash-out was an eviction proceeding. Real estate law experts say it's a necessary step before entering someone's home.

• "Just because you have a foreclosure and just because the redemption period has expired doesn't mean that the lender has the right to go in and seize personal property," said Lawrence Shoffner, a Detroit lawyer who specializes in real estate and has written educational materials on the matter for the Michigan Bar Association. "You still have to go to court and get an eviction order."

• Shoffner said the eviction process is straightforward. The lender seeks an eviction order from the local district court, which typically schedules a hearing within 10 days. If no one contests the order, it's usually granted through a summary judgment. With the court order in hand, the lender can then go to the property, typically with a court officer or bailiff, to enforce it. Any personal belongings remaining in the property are supposed to be left at the curb for the owner to reclaim.

For more, see Foreclosures go wrong as lenders, cleanup crews cut legal corners.

For a Detroit Free Press editorial, see Prosecute lenders responsible for gross foreclosure abuses.

(1) "They are like vultures," another attorney said. "Whoever gets in there first takes the possessions."

Illinois Supremes: Courts Lack Jurisdiction In F'closure Actions Against Dead Homeowners; Banks Must Name Estate's Personal Rep Before Going Forward

The Illinois Supreme Court recently decided the legal question whether a mortgagee must name a personal representative for a deceased mortgagor in a mortgage foreclosure proceeding in Illinois in order for the circuit court to acquire subject matter jurisdiction. For the reasons the court sets forth in its ruling, it concluded that naming a personal representative for a deceased mortgagor is required.

The ruling has been summarized as follows (bold text is my emphasis, not in the original text):

• In Cook County, mortgage foreclosure actions were filed in 2006 against two property owners, one in Chicago and one in Bellwood, who were deceased. In each case, the circuit court held that a personal representative must be named by the mortgage lender for the court to have subject matter jurisdiction. For failure to do this, both suits were dismissed. The lenders appealed and the causes were consolidated in the appellate court. No one appeared for the appellees, but an amicus brief was filed in support of the trial court’s decision.
  
  The appellate court reversed, holding that mortgage foreclosures are in rem actions in which no personal representative has to be named.
  
  In this decision, the supreme court disagreed with the appellate court, holding that a mortgage foreclosure is properly characterized as quasi in rem. Although the Mortgage Foreclosure Law does not deal with this issue, the Code of Civil Procedure provides for substitution of a deceased party’s personal representative. Otherwise, a lawsuit against a decedent is a nullity.(1)
  
  The circuit court was affirmed as to both cases and the appellate court was reversed.

(The Illinois high court granted a motion by the Chicago Volunteer Legal Service Foundation(2) for leave to file a petition for leave to appeal, as amicus curiae, the intermediate state appellate court ruling, and later granted the Office of the Cook County Public Guardian leave to file an amicus brief.)

Source: Illinois Supreme Court Summary (ABN AMRO Mortgage Group, Inc. v. McGahan).

For the text of the ruling, see ABN AMRO Mortgage Group, Inc. v. McGahan, Docket No. 107954 (Ill. June 4, 2010).

(1) I wonder how many void, already-conducted foreclosure sales in Illinois this ruling will result in. If the lawsuit is a nullity, the foreclosure judgment arising from the lawsuit, the subsequent foreclosure sale, and any subsequent sales of the foreclosed property thereafter will presumably also be nullities.

(2) According to their website, the Chicago Volunteer Legal Services Foundation was formed to coordinate, promote and support the involvement of the legal community in the voluntary pro bono representation of individual clients from the ranks of Chicago area's poor and working poor, resolving non-fee-generating family, consumer, probate, tort, government benefits, immigration and miscellaneous cases.

Home Improvement Contractor Gets 8 Months For Pocketing Customer Deposits & Failing To Deliver Promised Services

From the Office of the Santa Clara County, California District Attorney:

• Peter Be, age 42, was convicted of four felony counts of Diversion of Construction Funds and a misdemeanor of Contracting Without a License. Be was CEO of Beohana Solar Corporation, a company advertising for the sale and installation of solar systems. Many homeowners were lured by Be’s advertisement for a unique way to receive a “Free Solar Program” to qualified homeowners. The advertising claimed that after a 12 year lease term, the solar system was “FREE.” After paying huge deposits, the homeowners were given a written contract which stated in small print that the solar systems were not free at the end of the lease, but the homeowners were required to pay for the equipment at fair market value. Be failed to return many deposits or install the homeowners’ equipment. Be also represented himself as a licensed contractor, which he was not.

***

• Peter Be was sentenced last week to 8 months in county jail and ordered to pay restitution of $178,146.90 to the victims.

For the Santa Clara County DA press release, see Unlicensed Contractor Convicted of Diversion of Construction Funds and Contracting Without a License.

Florida Appeals Court Reverses Another Lower Court Screw-Up; Calls Denial Of Lender's Request To Cancel F'closure Sale "A Gross Abuse Of Discretion"

A recent ruling from Florida's 5th District Court of Appeal brings continued attention to a foreclosure case emanating from Volusia County involving rubber-stamped denials of motions to cancel foreclosure sales filed by plaintiff/lenders, allowing foreclosure sales to take place, and then refusing lenders' requests to vacate the sales.

A May 26, 2010 post(1) addressed three cases from the same judge which were kicked back to him by the appeals court which, due to a procedural technicality, lacked jurisdiction to hear the appeal until the lower court complied with the court's direction.

The story now continues with respect to one of the cases (bold text is my emphasis, not in the original text):

• When Wells Fargo initially appealed the denial of these motions, we were compelled to relinquish jurisdiction to the trial court because the trial court's action did not constitute "rendition" of a final order so as to permit appellate review. Wells Fargo Bank, N.A. v. Lupica, 17 So. 3d 864 (Fla. 5th DCA 2009). We further directed the trial court to provide the basis for its denials of Wells Fargo's motion to cancel sale and subsequent motion to vacate sale. Id. at 866.

• The trial court then entered a final order denying the motions. The purported basis for the denial of Wells Fargo's two unopposed motions was the failure to attach a stipulation and/or a copy of the loan modification or forbearance agreement signed by all parties. The trial judge further suggested that the parties should have discussed the modification of the loan prior to entry of the final judgment "which could have avoided unnecessary consumption of the time of two courts."

• Foreclosures are equitable proceedings under Florida law and settlements between litigants are favored. The trial court's denial of Wells Fargo's unopposed motions flies in the face of these principles. Furthermore, it was not necessary for Wells Fargo to have attached a stipulation and/or copy of a signed loan modification or forbearance agreement.(2) There was no basis for the trial court to reject Wells Fargo's counsel's representation, as an officer of the court, that an agreement had been reached between the parties — particularly where the Lupicas never disputed such representation. The trial court's actions constituted a gross abuse of discretion. See, e.g., Opportunity Funding I, LLC v. Otetchestvennyi, 909 So. 2d 361 (Fla. 4th DCA 2005).
  
  REVERSED and REMANDED.

For the entire ruling, see Wells Fargo Bank, N.A. v. Lupica, Case No. 5D09-2902 (Fla. 5th DCA, June 4, 2010).

(1) See Chronic, Rubber-Stamping Florida Judge Once Again Draws Appellate Court Attention For Denying Plaintiff/Lenders' Motions To Cancel Foreclosure Sales.

(2) The appellate court noted, in a footnote, that subsequent to the trial court's entry of its final order, the Florida Supreme Court approved a form motion for the cancellation of a foreclosure sale and pointed out that the form motion does not reference the attachment of a stipulation or copy of a forbearance agreement.

Long Foreclosure Process Makes "Free Rent" Option Appealing To Some Financially Strapped, "Underwater" Homeowners

In Grand Junction, Colorado, KJCT-TV Channel 8 reports:

• Foreclosure rates in Mesa County continue to be well below the national rate, but people are staying longer than ever in houses they're no longer making payments on. A look at the latest numbers shows people in foreclosed Colorado homes are staying in their houses for an average of 331 days before being forced out. That's nearly a year with no payments. But the banks are the ones telling them to stay. It's a mix between an investment to keep the property in good shape, and a hope that the owners will find a way to afford to live there.

For the story, see People staying for free in foreclosed homes.

BofA Wakes Up To Realities Of Offering Sustainable, Good Faith Loan Mods; Acknowledges That "Free Rent" Option Is Huge Incentive For Many Homeowners

CNBC's Reality Check blog reports:

• [Recently] executives at Bank of America rolled out their new "Principal Reduction Enhancement" program, which is an earned principal forgiveness plan for borrowers behind on their mortgages and whose loans are at least 20 percent underwater in value.

***

• Why are they getting more aggressive on modifications? Because more borrowers are walking away. Yes, I know we've talked about this forever on this blog and on CNBC, and the New York Times did a piece [] on it, and 60 Minutes did a piece on it a few weeks ago.(1) The fact of the matter is it's getting worse, and B of A execs are acknowledging that openly.

• On the conference call to announce the program this morning, BofA's credit loss mitigation executive, Jack Schakett, said the amount of strategic defaulters (those who can pay their loans but opt not to) are "more than we have ever experienced before." He went on to say, "there is a huge incentive for customers to walk away because getting free rent and waiting out foreclosure can be very appealing to customers."(2)

For the story, see BofA: Mortgage Walkaways Have Huge Incentive.

In a related story, see The Huffington Post: Bank Of America Executive Acknowledges Poor Service In Mortgage Mod Program.

(1) For the CBS' 60 Minutes' piece, see Mortgages: Walking Away (or for the 60 Minutes' transcript, see Strategic Default: Walking Away from Mortgages (60 Minutes: A Million Have Walked Away; Trend Could Undermine the Fragile Economic Recovery).

(2) Especially if the lenders and the sloppy (and allegedly sometimes-fraudulent) paperwork-producing foreclosure mills can't establish that they have legal standing to carry out the foreclosure process.

Feds Slam Loan Servicers For $108M For Squeezing Delinquent Borrowers With Illegally Inflated Fees, Providing False Info In Consumer Bankruptcy Cases

The Federal Trade Commission announced:

• Two Countrywide mortgage servicing companies will pay $108 million to settle Federal Trade Commission charges that they collected excessive fees from cash-strapped borrowers who were struggling to keep their homes. The $108 million represents one of the largest judgments imposed in an FTC case, and the largest mortgage servicing case. It will be used to reimburse overcharged homeowners whose loans were serviced by Countrywide before it was acquired by Bank of America in July 2008.

***

• According to the complaint filed by the FTC, Countrywide’s loan-servicing operation deceived homeowners who were behind on their mortgage payments into paying inflated fees – fees that could add up to hundreds or even thousands of dollars.

***

• When homeowners fell behind on their payments and were in default on their loans, Countrywide ordered property inspections, lawn mowing, and other services meant to protect the lender’s interest in the property, according to the FTC complaint. But rather than simply hire third-party vendors to perform the services, Countrywide created subsidiaries to hire the vendors. The subsidiaries marked up the price of the services charged by the vendors – often by 100% or more – and Countrywide then charged the homeowners the marked-up fees. The complaint alleges that the company’s strategy was to increase profits from default-related service fees in bad economic times. As a result, even as the mortgage market collapsed and more homeowners fell into delinquency, Countrywide earned substantial profits by funneling default-related services through subsidiaries that it created solely to generate revenue.

***

• In addition, in servicing loans for borrowers trying to save their homes in Chapter 13 bankruptcy proceedings, the complaint charges that Countrywide made false or unsupported claims to borrowers about amounts owed or the status of their loans. Countrywide also failed to tell borrowers in bankruptcy when new fees and escrow charges were being added to their loan accounts. The FTC alleges that after the bankruptcy case closed and borrowers no longer had bankruptcy court protection, Countrywide unfairly tried to collect those amounts, including in some cases via foreclosure.

For the FTC press release, see Countrywide Will Pay $108 Million for Overcharging Struggling Homeowners; Loan Servicer Inflated Fees, Mishandled Loans of Borrowers in Bankruptcy.

DC High Court Affirms Punitive Damages Award Slamming Sale Leaseback Peddlers For $3.3M In Equity Stripping Foreclosure Rescue Ripoff

In Washington, D.C., notorious foreclosure rescue operators Vincent Abell ($2 million), the sole owner of Modern Management Company ($1.1 million), and Calvin Baltimore ($200K) are back in the news(1) as the District of Columbia Court of Appeals recently affirmed a jury verdict that slammed them with punitive damages of $3.3 million for scamming a local homeowner dealing with family health problems(2) and facing foreclosure out of her home that she owned for twenty-two years in an equity stripping, sale leaseback ripoff.(3)

The court also affirmed a jury award to the homeowner of $60,000 in compensatory damages as the group's liablity for common law fraud and for violating the D.C. Consumer Protection Procedures Act ("CPPA") for their various misrepresentations and omissions of material facts and for including "unconscionable terms" in the transaction, and which the trial judge tripled to $180,000 pursuant to the CPPA, D.C. Code § 28-3905 (k)(1).(4)

For the ruling, see Modern Mgmt Co. v. Wilson, Case Nos. 08-CV-18, 08-CV-85 & 08-CV-187 (D.C. June 3, 2010).

Representing the victimized homeowner was Jessica L. Ellsworth, with whom N. Thomas Connally III and Jeffrey D. Pariser were on the brief, with the firm Hogan Lovells in Washington, D.C.

See also:

• Washington City Paper: Old Lady Wins Out in Seven-Year Battle Over Petworth Home,
• Washington Examiner: D.C. court upholds $3.3 million penalty for foreclosure scam: ("Abell spent time in prison 20 years ago for playing a role in loan-insurance fraud case. He is now operating under a new company called Phoenix Real Estate, according to a woman who answered the phone at a number listed for Modern Management.")

(1) For other stories on Vincent Abell and his foreclosure rescue racket, see:

• Hogan & Hartson Wins $3.3 Million Verdict in Pre-Foreclosure Scam Case,
• Md. couple wins $1M in rescue-scam lawsuit (homeowners awarded $350,000 for their mental anguish, which was then tripled after a finding the defendants "willfully and knowingly violated" Maryland's Protection of Homeowners in Foreclosure Act),
• Prince George's County Circuit Court awards $500K to victim of foreclosure scam (for the related court order, see Smith v. Abell, (Prince George's County Cir. Ct., Feb. 7, 2006),
• Loan Scam Targets Seniors' Homes (Washington Con Artists Preyed On Elderly People In Financial Trouble) (go here to watch related CBS News' video),
• From Foreclosure to the Cleaners (Indebted Homeowners Say 'Rescue' Services Bilked Them),
• Foreclosure Rescue Scam, Businessman Vincent Abell pays five homeowners $120,000 settlement,
• Testimony of Mr. Walter Malone [foreclosure rescue victim] Before Senate Aging Committee (U.S. Senate, Feb. 13, 2008),
• Wilson v. Modern Management Co. (homeowner's brief in an appeal of a lower court eviction order),
• Bilaal v. Abell, et al., 983 A.2d 349; 2009 D.C. App. LEXIS 573 (2009),
• Media Coverage Not New For D.C.-Area Foreclosure Rescue Operator,
• Anatomy Of An Equity Stripping, Sale Leaseback Foreclosure Rescue Scam.

(2) A severe head injury at work prevented her from being able to work consistently. After her injury, she suffered two additional head injuries causing her to develop epilepsy and suffer seizures. She also spent much of her time caring for her elderly mother after the death of her father.

(3) The victimized homeowner filed suit alleging common law fraud, and statutory fraud pursuant to:

• the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C.A. §§1961-1964.;
• the District of Columbia Consumer Protection Procedures Act ("CPPA"), D.C. Code §§ 28-3901 to 3-905 (2001 & 2009 Supp.);
• the Truth In Lending Practices Act ("TILPA"), 15 U.S.C.A. §§ 1635-1640;
• the District of Columbia Loan Sharking Act, D.C. Code § 26-901 (2009 Supp.);
• the District of Columbia Consumer Credit Services Amendment Act, D.C. Code §§ 28-4601 to -4603 (2001);
• the Home Ownership and Equity Protection Act ("HOEPA"), 15 U.S.C.A. §§ 1602, 1639; and
• the District of Columbia Usury Statute, D.C. Code § 28-3301 (2009 Supp.).

(4) The legal issues contested on appeal involved assertions by the defendants that:

• the award of punitive damages against them was constitutionally excessive;
• the trial court erred in permitting the victimized homeowner to pursue her RICO claims and admitting evidence that appellants had completed one hundred similar transactions, which caused the jury to inflate the punitive damages awards;
• the compensatory damage award must be reduced by the amount of the settlement agreement the victimized homeowner reached before trial with appellants' former co-defendant;
• the trial court erred in submitting to the jury the issue of whether the victimized homeowner was a "consumer" as defined in the CPPA; and
• the jury verdict finding appellants liable for common law fraud and for violations of the CPPA was against the weight of the evidence.

The court affirmed on all points, except it did kick the case back to the lower court with directions to modify the compensatory damage award. The Court of Appeals ruled that the three co-defendants are entitled to a pro rata setoff against the $180,000 trebled compensatory award in the amount of $40,000, the amount a former fourth co-defendant, the law firm Houlon Berman, coughed up to "buy" its way out of this litigation pursuant to a settlement agreement with the homeowner before trial, thereby reducing the total "net" compensatory damages award to $140,000.

Judge Halts All BofA Mortgage Foreclosures In Utah; Says Bank Failed To Register To Do Business & Lacks Offices Within State As Required By Law

In St. George, Utah, KCSG-TV reports:

• A court order issued by Fifth District Court Judge James L. Shumate May 22, 2010 in St. George, Utah has stopped all foreclosure proceedings in the State of Utah by Bank of America Corporation, ; Recontrust Company, N.A; Home Loans Serving, LP; Bank of America, FSB []. The Court Order if allowed to become permanent will force Bank of America and other mortgage companies with home loans in Utah to adhere to the Utah laws requiring lenders to register in the state and have offices where home owners can negotiate face-to-face with their lenders as the state lawmakers intended (Utah Code ' 57-1-21(1)(a)(i).).

***

• The lawsuit filed by John Christian Barlow, [...] has drawn the ire of the high brow BofA attorney and those on the case in the law firm of Reed Smith, LLP, the 15th largest law firm in the world. Barlow said Bank of America claims because it’s a national chartered institution, state laws are trumped, or not applicable to the bank. That was before the case was brought before Judge Shumate who read the petition, supporting case history and the state statute asking for an injunctive relief hearing filed by Barlow. The Judge felt so strong about the case before him, he issued the preliminary injunction order without a hearing halting the foreclosure process.

• The attorney’s for Bank of America promptly filed to move the case to federal court to avoid having to deal with the Judge who is not unaccustomed to high profile cases and has a history of watching out for the “little people” and citizen’s rights. The legal gamesmanship has begun with the case moved to federal court and Barlow’s motion filed to remand the case to Fifth District Court.(1) [...] Barlow said the Bank of America attorneys are working overtime filing motions to overwhelm him and the court. “They simply have no answer for violating the state statutes and they don't want to incur the wrath of Judge Shumate because of the serious ramifications his finding could have on lenders in Utah and across the nation where Bank of America and other financial institutions, under the guise of a mortgage lender have trampled the rights of citizens,” he said.

***

• The second part of the motion, Barlow filed, claims that neither the lender, nor MERS*, nor Bank of America, nor any other Defendant, has any remaining interest in the mortgage Promissory Note. The note has been bundled with other notes and sold as mortgage-backed securities or otherwise assigned and split from the Trust Deed. When the note is split from the trust deed, “the note becomes, as a practical matter, unsecured.” Restatement (Third) of Property (Mortgages) § 5.4 cmt. a (1997). A person or entity only holding the trust deed suffers no default because only the Note holder is entitled to payment. Basically, “[t]he security is worthless in the hands of anyone except a person who has the right to enforce the obligation; it cannot be foreclosed or otherwise enforced.” Real Estate Finance Law (Fourth) § 5.27 (2002).

For the story, see Judge James L. Shumate Orders Halt to Bank of America Foreclosures in Utah.

For a follow-up story, see Federal vs State Rules Governing Mortgage Lenders the Case to be Argued Before Federal Judge Clark Waddoups Thursday.

(1) For a Willamette Law Review article that addresses the apparent abuse by some corporate defendants in civil cases of removing state court cases to Federal court (which imposes a cost in time and money on plaintiffs and the court system) in an attempt to shop for a friendlier litigation forum, see Erroneous Removal As A Tool For Silent Tort Reform: An Empirical Analysis Of Fee Awards And Fraudulent Joinder (article also available at http://ssrn.com/abstract=1073402).

Ponzi-Scheming Boyfriend's $300K+ Cash Gift Leads To Florida Woman's Loss Of Home, Despite No Knowledge Of Fraud; Used Loot To Pay Off Mortgage

The following facts have been taken from a recent ruling from the U.S. Court Of Appeals - 5th Circuit:

• One, Hudgins, engages in Ponzi scheme, screwing investors out of a ton of loot.

• Hudgins gives Florida woman (presumably his girlfriend, mistress, etc.) cash gifts of $368,500, which came from the proceeds of his illicit business activities.

• Florida woman was unaware of the fraud.

• She used part of the money to pay off a $328,000 mortgage on her Florida condo, which was her homestead.

• A federal regulatory agency brought a legal action against Hudgins to enjoin his scheme and seek civil penalties and other relief.

• A U.S. District Court appoints a receiver to reclaim Hudgins's assets for the benefit of the defrauded investors.

• The receiver demanded that Florida woman return the loot gifted to her by Hudgins.

• Florida woman refused, responding that she used the money to pay off her mortgage.

• The receiver petitioned the district court to require Florida woman to turn over the condominium because it was purchased with fraudulently obtained money.

• Florida woman contended that the condominium was her homestead and protected by the Florida constitution's liberal homestead exemption.

• The district court rejected Florida woman's argument, holding that while Florida's homestead exemption did apply, state law nonetheless allowed the imposition of an equitable lien because the homestead was purchased with fraudulently obtained money.

• The court then directed that the woman turn over title to the condo to the receiver and gave her 30 days to vacate the premises.

• Florida woman appeals the ruling.

The 5th Circuit Court of Appeals interpreted Florida case law to conclude that Florida woman, although innocent of any fraud, was not entitled to the protection of the Florida homestead exemption from forced sales set forth in Article X, Section 4 of the Florida Constitution.(1) Accordingly, the lower court order directing her to turn over title to her homestead to the receiver and move out was affirmed.(2)

For the ruling, see Crawford v. Silette, No. 09-40641 (5th Cir. June 3, 2010).

(1) Not to be confused with Article VII, Section 6 of the Florida Constitution which, among other things, deals with the entitlement to a $25,000 real estate tax exemption available to Florida homeowners, and has absolutely nothing to do with the application of the exemption from forced sales under Article X, Section 4 (Contrary to what some in Florida mistakenly believe, the local County Property Appraiser has nothing to do with granting homestead exemptions from forced sales under Article X, Section 4. He/She merely approves applications for the tax exmption under Article VII, Section 6.).

(2) In interpreting Florida case law, the Federal appeals court made these observations:

• In Palm Beach Savings & Loan Ass'n v. Fishbein, the Florida Supreme Court held that, when imposing equitable liens, courts should focus on whether the party claiming the homestead exemption would be unjustly enriched. 619 So.2d 267, 270 (Fla. 1993).

***

• [U]nder Florida law, to impose an equitable lien on a homestead, three conditions must exist: (1) the owner used fraudulently obtained funds to purchase or retire a mortgage interest in the homestead; (2) the owner was unjustly enriched; and (3) the owner would be no worse off if the court imposed an equitable lien in favor of the fraud victim. Each prong is met here. The funds were fraudulently obtained by Hudgins. Silette did not earn the money and was unjustly enriched. Silette will not be worse off; imposing an equitable lien for $328,000 puts Silette in the same position as if she had never met George Hudgins.

***

• The Florida Supreme Court could not be clearer: a party's innocence in the fraud is not relevant to whether the court can impose an equitable lien. The only relevant factor is whether the party is unjustly enriched by fraudulently obtained funds. The Eleventh Circuit reached the same conclusion. In re Financial Federated, 347 F.3d at 890 ("Unjust enrichment can be the basis for the assertion of an equitable lien."). If the court does not impose an equitable lien, Silette will receive a $328,000 windfall. As Florida has not chosen to protect the innocent beneficiary of fraudulently obtained proceeds, the federal court may not do so.

***

• The key factors, we believe, are that the fraudulently obtained funds can be traced directly into the homestead. Havoco carefully identified this situation — the Fishbein case — as the paradigmatic narrow exception to Florida's otherwise generous homestead laws. See Havoco, 790 So.2d at 1024-28 (discussing cases). This case is an application, not an expansion, of Havoco's principles.

Go here for links to all briefs filed in Palm Beach Savings & Loan Ass'n v. Fishbein, 619 So.2d 267 (Fla. 1993).

Go here for links to all briefs filed, and video of oral argument, in Havoco of Am., Ltd. v. Hill, 790 So.2d 1018 (Fla. 2001).

Florida Supremes Issue Rule Clarification Targeting Mess Created By Foreclosure Mills' Sloppy Paperwork

In Central Florida, the Sarasota Herald Tribune reports:

• The Florida Supreme Court has reaffirmed its fight against the sloppy legal work being used to retake homes in thousands of foreclosure cases across the state.

• A review of Manatee and Sarasota county cases showed attorneys for banks and lenders had widely ignored a new high court rule that requires them to verify -- under penalty of perjury -- the accuracy of allegations and paperwork in the foreclosure case. When local judges started throwing out the foreclosure cases for that reason, some attorneys for lenders contended that the rule, created in February, was not yet in effect.

• But the top court this week clarified that attorneys must immediately follow its verification rule as part of its overall battle against the flood of foreclosure cases clogging the court system when the housing market crashed.

• The uncertainty over the high court ruling illustrates the chaos in foreclosure courts across the state. The vast majority of the state's housing lawsuits come from Florida's five so-called foreclosure mills, where attorneys can each handle thousands of cases. Sloppy paperwork could mean banks and lenders foreclose on properties they are not legally entitled to retake, unfairly forcing homeowners out of their properties, attorneys say. The shoddy and incomplete filings also waste judicial resources.

***

• Thursday's ruling clears the way for a local court-sponsored program -- unofficially dubbed "Stop the Slop" -- to once again review all foreclosure filings and dismiss those that are incomplete. Of the 52 cases in the first round of review in Sarasota, all lacked the new verification requirement or other proof the bank is entitled to take the property, an attorney who reviewed the cases says. The vast majority reviewed since then have also failed to meet the requirements.

For more, see Florida Supreme Court tightening foreclosure rules.

NC Appeals Court: Lender's Failure To Provide Sufficient Evidence That It Was "Holder" Of Promissory Note Precludes Foreclosure

Another trial court screw-up in a foreclosure action was recently reversed - this time by the North Carolina Court of Appeals, which ruled that a lender seeking to foreclose on a mortgage had failed to properly provide sufficient competent evidence that it was the holder of the promissory note secured by the mortgage. Accordingly, it ruled that the lender was not entitled to go forward with a foreclosure sale.(1)

For the ruling, see In re Foreclosure of Adams, No. COA09-1455 (N.C. App. June 1, 2010).

(1) An excerpt from the ruling (bold text is my emphasis, not in the original text):

• [S]ince the photocopies of the Note and Deed of Trust presented to the trial court indicate that the original holder of both instruments was Novastar, not Deutsche Bank for Soundview, and since these photocopies do not indicate that Novastar negotiated, indorsed or transferred the Note to Deutsche Bank for Soundview, respondents contend the photocopied instruments alone were not sufficient to establish that Deutsche Bank for Soundview is the current holder of the Note.

***

• We recognize that, in the present case, the testimony by affidavit from Ms. Smith, the assistant secretary of Deutsche Bank for Soundview——an out-of-state entity——as well as the in-person testimony offered by Ms. Cole indicated that Deutsche Bank for Soundview is the current holder of the Note and Deed of Trust. However, neither the in-person testimony from Ms. Cole nor the testimony by affidavit from Ms. Smith expressly showed that Novastar transferred or assigned its interest in the Note and Deed of Trust to Deutsche Bank for Soundview.

• Moreover, as we discussed above, the photocopied Note and Deed of Trust, which were described in Ms. Smith's affidavit as "exact reproductions" of the original instruments, do not show that the Note was indorsed, transferred, or otherwise made payable by Novastar, the original holder of the instrument, to Deutsche Bank for Soundview.

• Thus, whereas the record in In re Foreclosure of Brown, 156 N.C. App. 477, 577 S.E.2d 398 (2003), also included an Assignment of Deed of Trust as evidence showing that the original holder of the note and deed of trust had assigned its interest in said instruments to the party seeking to foreclose on the respondent—borrowers, the record before the trial court in the present case contained no such additional evidence.

• Accordingly, because a foreclosure under a power of sale is not favored in the law and must be "watched with jealousy," see In re Foreclosure of Goforth Props., 334 N.C. at 375, 432 S.E.2d at 859 (internal quotation marks omitted), we must conclude that the evidence presented to the trial court was not sufficient to establish that the Note was payable to Deutsche Bank for Soundview, and so was not sufficient to support the trial court's finding of fact that "Novastar Mortgage, Inc., . . . transferred and assigned its interest in the Note and Deed of Trust to Deutsche Bank National Trust Company, as Trustee for Soundview Home Loan Trust 2005-4 (`Lender')."

Orange County DA Slams Suspect With Multiple Felony Charges In Alleged Vacant Home-Hijacking, Title-Swiping, Rent-Pocketing Racket

In Orange County, California, the San Clemente Times reports:

• According to a June 4, 2010 Orange County District Attorney’s press release, Blair Christopher Hanloh, 46, of Long Beach was charged with grand theft for stealing more than $3.5 million in a fraudulent real estate scheme, renting out houses in Dana Point, San Clemente and Anaheim. The problem with him renting these homes?—he neither owns them nor acted as an agent on behalf of the owners.(1)

• Hanloh would allegedly look for vacant properties that were in foreclosure, post a notice on the home labeling it an “abandoned property,” then return a few weeks later, drill the locks and “take possession” of the home. He would then change the locks and post “no trespassing” signs at the properties.

• Hanloh would then file fake quitclaim deeds on the properties via his company, Blair Hanloh Trustee of Diversified Management Trust, to change “ownership” from himself to his company in order to perpetrate his scheme. [...] He would then advertise the homes for rent [online, on Craigslist] and lease them to unsuspecting tenants via fraudulent lease agreements and begin collecting rent.(2)

For more, see Man Charged With Renting Out San Clemente and Dana Point Homes He Did Not Own.

For the Orange County DA press release, see Man Charged With Grand Theft Over $3.5 Million In Fraudulent Scheme Of Real Property Theft And Renting Out Houses.

For an earlier post on this story, see S. Calif. Man Suspected Of Openly Hijacking Title To Vacant Homes & Renting Them Out, Leaving Owners Frustrated, Neighbors Rattled, Cops Flat-Footed.

(1) Hanloh is charged with eight felony counts of grand theft, five felony counts of recording false and forged instruments, one felony count of second degree commercial burglary, and sentencing enhancement allegations for property theft over $65,000, $200,000, $1.3 million, $3.2 million, and aggravated white collar crime over $100,000 and $500,000, according to the Orange County DA press release.

(2) Go here for a map of a slew of homes Hanloh is suspected of swiping, including five in Orange County.

Loan Modification Scam Awareness Events Featured During Nat'l "NeighborWorks Week"

In Dover, New Jersey, the Daily Record reports:

• The Housing Partnership will fight loan modification scams in Dover by distributing Loan Scam Alert literature to 2,000 households in Dover. The event is one of more than 150 loan modification scam awareness events held during national NeighborWorks Week, June 5 to 12. It alerts homeowners on how to avoid and report loan modification scams.

• Eight volunteers will be canvassing Dover in bright yellow Loan Scam Alert T-shirts. Other events being held around the country include hundreds of volunteers canvassing neighborhoods also distributing tip sheets and fliers, dozens of one-on-one and group workshops about reputable loan modification programs, and more.

Source: Loan scam fliers will be distributed in Dover.

Failure To Note Lien On Title Certificate On Mobile Home & Land Refinancing Transaction Sinks Lender In Homeowners' Bankruptcy Proceeding

The following facts have been taken from a recent ruling by a U.S Bankruptcy Court in London, Kentucky:

• Debtors borrowed $67,500.00 from a mortgage lender, pledging their real estate and a 1998 Southern 28' x 52' double-wide mobile home. This transaction was to refinance the Debtors' mobile home and land.

• The lender duly recorded its mortgage on the land, but failed to note its lien on the mobile home on a certificate of title.

• Bankruptcy Trustee sought to avoid the lien on the 1998 Southern 28' × 52' double-wide mobile home under rules that allow the Trustee to avoid an unperfected lien.

The judge ruled that, because the sole means to perfect the lien on a mobile home in Kentucky is by a certificate of title as stated in the state statute (KRS 186A.190), the lien on the mobile home is unperfected and, accordingly, allowed the Trustee to avoid the lender's lien on the double-wide.(1)(2)

For the ruling, see In re Owens, Case No. 09-62087, Adv. No. 10-6014 (Bankr. E.D. Kentucky, London Div. June 2, 2010).

(1) The court dealt with the creditors' objections as follows (bold text is my emphasis, not in the original text):

• Defendants American Home Mortgage Servicing, Inc. and Deutsche Bank National Trust Company object to the Trustee's Motion for Summary Judgment because there are factual issues as to where the mobile home is now and how the mobile home got there. However, that is immaterial to the motion because the Trustee is seeking solely to avoid the lien on the mobile home.

• Also, these Defendants oppose the motion because they seek to establish an equitable lien on the mobile home. However, no equitable lien was established before the bankruptcy filing. Moreover, even assuming that an equitable lien arose in favor of the creditor on account of its improperly executed lien, any such lien is ineffective against the Trustee. See In re Anderson, 266 B.R. 128 (Bankr. N.D. Ohio 2001).

(2) Owners of mobile homes who are having trouble making their house payments may want to check their title documents and their local public records to see if their lender committed a similar screw-up in failing to record its lien on the title certificate. If so, that fact may provide some ammunition for squeezing a loan modification on favorable terms from the lender (under threat of the homeowner filing for bankruptcy, potentially leading to the lender being left holding the bag on an unsecured loan due to the unperfected lien).

Attorney Who Put Client Facing F'closure Into Bankruptcy w/out His Knowledge Temporarily Banned From Filing New Cases, Ordered To Pay New Counsel $10K

In White Plains, New York, The Journal News reports:

• A White Plains lawyer who was accused of putting a client in bankruptcy court without authorization has agreed to a ban from filing new bankruptcy cases. Christopher Cabanillas also agreed to have attorneys at his firm receive training on bankruptcy court filing procedures.

• Cabanillas and U.S. Trustee Greg Zipes signed the stipulation in the wake of a hearing where a federal bankruptcy judge ordered Cabanillas to return $1,250 to a former client and pay $10,000 to the man's new lawyer.

• The client, Domingo Hernandez, charged in court papers that he went to Cabanillas to get help fending off foreclosure proceedings on a Yonkers building he owned. Instead, Hernandez charged, Cabanillas filed for bankruptcy on Hernandez's behalf without his knowledge. Cabanillas denied the charge but did admit his firm filed Hernandez's bankruptcy petition without a signature.

For the story, see White Plains lawyer banned from filing bankruptcies.

Ex-Lawyer Gets 18 Months For Ripping Off Client Facing Foreclosure Seeking Bankruptcy Help

In Billings, Montana, the Billings Gazette reports:

• A former lawyer who admitted stealing money from his bankruptcy clients will be going to federal prison for a year and a half. Marvin Earl “Toby’’ Alback, 62, of Billings, offered little explanation during his sentencing hearing [] for why he stole about $17,000 from two clients for his personal use.(1)

***

• In the bankruptcy fraud, Alback was hired by a family in March 2008 to represent them in a bankruptcy case. When the family had trouble making their mortgage payment, Alback told them to write their settlement and mortgage payments to him and he would deposit the money with the bank. Alback deposited the money into his trust account and never made the mortgage payments. Although he eventually paid back the money, he caused significant back payments and late fees to avoid foreclosure, said Assistant U.S. Attorney Ryan Archer.

For the story, see Ex-lawyer gets prison in fraud.

For the U.S. Attorney (Billings, MT) press release, see Marvin Earl Alback Sentenced In U.S. District Court.

(1) Reportedly, the federal case was the second time Alback has been convicted of misappropriating clients’ funds. In the late 1980s, Alback was convicted in state court of felony theft for taking more than $95,000 from two clients and was sentenced to 16 years in state prison, with 13 years suspended, the story states. He was disbarred, then was reinstated in 2000, and has permanently resigned his license in September, according to the story. The state conviction was reportedly too old to count against him for sentencing in the federal case.