Sexual Assault Victim's Attempt To Satisfy Money Judgment By Snatching Now-Vacated, Jailed Perpetrator's Texas House Squelched By Homestead Claim

A recent ruling by a Texas appeals court serves as another reminder that, once an individual/debtor establishes real estate as his/her homestead, a subsequent criminal conviction resulting in his/her being shipped off to prison for a long time is not enough to terminate the benefit from the exemption against a creditor's attempted forced sale or other taking of the individual/debtor's home that is available in some states. The following facts have been extracted (mostly verbatim, but slightly adapted) from the case:

• One, Conley, has previously been convicted of, and is serving 35 years in prison for, sexual assaults against one, Driver.(1)

• For those torts, Driver obtained a civil money judgment against Conley. As part of Driver's efforts to collect that judgment, she appeals from the denial of her request for a turnover order(2) on a house and lot that Conley claims as his homestead.

• Driver argues that "someone who intentionally commits criminal acts of sexual assault within a home against a minor child may [not] be entitled to claim continuing homestead exemption" since "imprisonment in a new residence" should be deemed abandonment of homestead.

• Because the appeals court held that Conley's imprisonment for his crimes does not constitute abandonment of his homestead, it affirmed the trial court's denial of Driver's request for a turnover order concerning the house and lot in question.(3)

For the ruling, see Driver v. Conley, No. 06-10-00004-CV (Tex. App. [6th Dist.] Texarkana, August 11, 2010).

(1) Conley was convicted of two counts of aggravated sexual assault, three counts of sexual assault, and four counts of indecency with a child. He was sentenced to thirty-five years' incarceration on both counts of aggravated sexual assault and twenty years' incarceration on all remaining counts, all to be served concurrently.

(2) To try to collect on the judgment, Driver filed with the trial court a motion for turnover order asking the court to order Conley to turn over his home and lot along with other unimproved lots. While the trial court ordered turnover of the unimproved lots, it agreed with Conley that the property containing his home remained his homestead.

(3) In reaching its conclusion, the Texas appeals court made a detailed analysis of the Texas case law; the bulk of its analysis follows (bold text is my emphasis, not in the original text):

• “Homestead rights have historically enjoyed great protection in our jurisprudence.” Florey v. Estate of McConnell, 212 S.W.3d 439, 443 (Tex.App.-Austin 2006, pet. denied) (prisoner who murdered his wife was entitled to claim homestead exemption). Our Texas Constitution provides that “[t]he homestead of ... a single adult person, shall be, and is hereby protected from forced sale, for the payment of all debts” not specifically enumerated within. Tex. Const. art. XVI, § 50.

• Homestead rights are liberally construed to prevent citizens from losing their homes. Florey, 212 S.W.3d at 443. The party seeking a turnover order must prove that the property is not exempt. Hanif v. Clarksville Oil & Gas Co., No. 06-09-00110-CV, 2010 WL 2105936, at *3 (Tex.App.-Texarkana May 27, 2010, no pet.) (mem.op.); see Tex. Civ. Prac. & Rem.Code Ann. § 31.002(a)(2), (b)(1) (Vernon 2008); Tanner v. McCarthy, 274 S.W.3d 311, 322 (Tex.App.-Houston [1st Dist.] 2008, no pet.).

***

• All parties agree that the property in question was the homestead of Conley at some point. “Once acquired, homestead rights are not easily lost. Property may lose its homestead character only by the claimant's death, abandonment, or alienation.” Duran v. Henderson, 71 S.W.3d 833, 842 (Tex.App.-Texarkana 2002, pet. denied).

• Driver argues that Conley's incarceration constituted an abandonment of his homestead. “Abandonment of a homestead requires both the cessation or discontinuance of use of the property as a homestead, coupled with the intent to permanently abandon the homestead.” Womack v. Redden, 846 S.W.2d 5, 7 (Tex.App.-Texarkana 1992, writ denied). Evidence relied on as establishing “abandonment of a homestead must make it undeniably clear that there has been a total abandonment with an intention not to return and claim the exemption.” Id.

• Driver's first argument is that Conley's homestead was abandoned due to his long-term imprisonment. Driver had the burden of proving abandonment with legally and factually sufficient evidence. Florey, 212 S.W.3d at 446. Conley was married and divorced several times. The home was purchased as his separate property in 1985. He testified, “I've lived there ever since. I have supported it fully. I have not abandoned it or anything of that type․ I have never left my home with the intention of not going back.” Records from the appraisal district list the property as Conley's homestead. [...] Conley's responses to discovery establish that his books and records are still kept at his home and that his daughter lived in the home from time to time. Conley testified he planned on living in the home on his release from incarceration.

• Abandonment of a homestead must be voluntary. Id. at 444 (citing King v. Harter, 70 Tex. 579, 8 S.W. 308, 309 (1888)).

• “An act of necessity is not a voluntary abandonment of the homestead.” R.B. Spencer Co. v. Green, 203 S.W.2d 957, 959 (Tex.Civ.App.-El Paso 1947, no writ). While Conley voluntarily committed the crime, he did not voluntarily change his residence.

• A homestead is not abandoned merely because a person does not occupy the home during a prison sentence. Florey, 212 S.W.3d at 447. We conclude that there was some evidence to support the trial court's finding that Conley's homestead was not abandoned.

90-Year Old Homeowner To Escape Foreclosure After Media Report; Son Said Servicer Refused For Months To Take His Money Even Though He Co-Signed Loan

In Stratford, Connecticut, WTNH-TV Channel 8 reports:

• A 90-year-old Stratford woman who faced foreclosure won't lose her home after all. John Puchowicz said he was contacted by Chase bank after his story aired on News 8 earlier this week.(1) Puchowicz told News 8 Monday his mother was threatened with foreclosure on her condo. Making matters worse, he said the bank didn't notify him about the foreclosure, even though he was a co-signer, and they refused to let him pay it off.

• It went on for months but has now been settled. Puchowicz said Chase will be sending a payoff statement that will allow him to pay off the mortgage. The bank says as long as it's paid the home won't go through foreclosure.

Source: Foreclosure threat ends for 90-year-old.

(1) See Bank foreclosing on man willing to pay for condo:

• A man says his 90-year-old mother is being threatened by foreclosure on her Stratford home. He says he is all too willing to pay her debt but claims the bank is the one doing the stonewalling.

Title Insurer Not Responsible For Incorrect Informal Statements Made As To Lien Status Of Property; Leads To $1M Hit For Foreclosure Sale Bidder

A recent ruling by a California appellate court highlights the importance of obtaining title insurance protection when buying (or renting) real estate. The basic facts of the case have been extracted (mostly verbatim, but slightly adapted) from the ruling as follows:

• Individual/Plaintiff alleges that he was an investor in distressed real estate. His business plan involved the purchase of real properties that were being foreclosed upon by mortgage holders.

• In order to decide whether to bid on a particular property, he needed to know if the foreclosing lender was in fact the senior lender on that property. Put another way, if he made a successful bid at a foreclosure sale and the foreclosing lender held a secured position junior to other more senior liens, then plaintiff's title would be subject to such liens.

• In order to avoid such a result, plaintiff alleges that he entered into an oral agreement with Chicago Title Company ["Chicago"] agent, Miguel Escutia, in which it was agreed that Escutia, on behalf of Chicago, would provide title information upon which plaintiff would rely in deciding whether to make a bid at a particular foreclosure sale.

• In exchange, plaintiff alleges that he agreed that he would place business with Chicago upon the subsequent resale of the foreclosed properties. The information that plaintiff wanted from Chicago was limited, specific and time sensitive.

• He needed, usually within twenty-four hours before a particular foreclosure sale, a "yes" or "no" answer to the question of whether a particular designated foreclosing loan was a senior lien.

• Plaintiff emphasizes he neither sought nor obtained a "preliminary title report." What he sought and what Escutia allegedly provided were simple short e-mail answers to his questions as to the senior status of multiple loans. Other than his promise of future title insurance business, plaintiff neither paid nor agreed to pay for these services.

• On March 6, 2008, plaintiff requested seniority information as to a loan that was being foreclosed upon a property located in Encino, California. Through Escutia, Chicago allegedly informed plaintiff that the foreclosing loan (in the amount of $990,000) was in a senior position. In fact, it was junior to a first deed of trust held by Citimortgage, Inc., in the sum of $1,600,000.

• Plaintiff alleges that, in reliance on Chicago's one-word "yes" e-mail response to his inquiry about the mortgage loan, he submitted a bid at the foreclosure sale on March 11, 2008 in the sum of $1,000,000.01. He further alleges that he was only able to sell the property for $1,200,000 and, after negotiating a reduction in and then paying the balance remaining on the senior Citimortgage lien, he sustained a loss in the sum of $1,000,000.

• He then filed a lawsuit against Chicago for negligence and negligent misrepresentation, which he subsequently amended by adding causes of action for breach of oral contract and so-called "abstractor negligence."

Given these facts, the state appeals court found that Chicago Title Company had no responsibility for the investor's loss that may have resulted from the incorrect statements of its agent and, accordingly, affirmed a lower court ruling dismissing the lawsuit.(1)

For the entire ruling, with the analysis of the California law applied in resolving this lawsuit, see Soifer v. Chicago Title Co., No. B217956, ___ Cal App. 4th ___ (2nd Dist. Div.3, August 10, 2010) (certified for publication).

(1) In holding in favor of the title insurer, the court summarized their decision and legal analysis as follows (bold text is my emphasis, not in the original text):

• In Southland Title Corp. v. Superior Court (1991) 231 Cal.App.3d 530 (Southland), we held that a title company could not be held liable for the negligent preparation of a preliminary report of title. Rather, if a representation was sought from the title company as to the condition of the title to a particular property, an abstract of title should have been obtained.

• Here, plaintiff neither sought, obtained nor desired a policy of title insurance or an abstract of title, but nonetheless seeks to hold the respondent, Chicago Title Company (Chicago), liable in both tort and contract for alleged negligence and misrepresentations with respect to the seniority status of encumbrances on certain properties that were in the process of trust deed foreclosure.

• We adhere to our analysis in Southland and extend and apply it here to the several claims asserted by plaintiff. We hold that a plaintiff cannot recover for errors in a title company's statements regarding the condition of title to a property in the absence of a policy of title insurance or the purchase of an abstract of title. We therefore will affirm the judgment.

Free Legal Documents May Help Financially Strapped Homeowners Against Being Bulldozed By Foreclosure Mills, "Rocket Dockets" In Attempts To Take Homes

In Central Florida, the Sarasota Herald Tribune reports on Richard Kessler, a local retired lawyer who offers an electronic packet of foreclosure defense legal forms he calls the "Rocket Docket Annihilator" -- complete with an instruction sheet and fill-in-the-blank templates -- free on his website for homeowners looking to thwart attempts by foreclosure mills to take their homes by filing error-filled and allegedly fraudulent documents in "rocket docket" court proceedings.

• [J]udges in those slam-bam proceedings know they sign papers that take homes away even though the documents are often faulty, incomplete and ripe to be shot down, if only a defense lawyer or savvy homeowner raised a simple objection or two. Most judges insist they don't have time, or legal responsibility, to check for flaws themselves. That's a task for homeowners or their lawyers, the argument goes.

• That bothers Kessler, a rabble-rouser who urges people to fight because lawyers on the other side count on people rolling over. "If you don't show up at all, you're going to lose," Kessler said, so better to give yourself a chance by playing lawyer. At the least, that should force the judge to read the documents filed.

***

• Few people would know which parts of Kessler's online document apply to their own mortgage. The result, [Florida's 12th Circuit Chief Judge Lee] Haworth warns, may be filings more flawed than the ones from the other side. Could be. But so what?

• The other side's legal professionals barely blink, it seems, when their many "errors" are found, like untrue claims that the owner had no desire to work out a loan modification. The lawyers blame clerical blunders and get away with it. Why should a homeowner be so afraid to make a legal goof if the only alternative is giving up?

For more, see Online foreclosure form may beat doing zip.

In a related story, see Retiree says he can halt foreclosure's 'rocket docket'.

Uncooperative Lenders Holding 2nd Mortgages On Underwater Homes Have Much To Fear From Lien-Stripping Homeowners Filing Chapter 13 Bankruptcy

Lien stripping in a Chapter 13 bankruptcy has been described as an unexpected financial life raft that underwater homeowners are jumping onto to escape crippling second mortgage debts and keep their homes.(1)

It applies in the case of a homeowner with two or more mortgages on their home. In short, it allows a homeowner with a home worth less than the amount owed on the first mortgage to reclassify the second mortgage debt (as well as 3rd, 4th, 5th liens, etc.) as an unsecured loan, thereby freeing the home from that lien. Depending on the debtor's financial circumstances, the now-unsecured debt may not have to be paid in full, and could possibly be wiped out for pennies on the dollar.

For links to resources of information in this regard, see Law on Rice: Lien stripping resources.

See also, Introduction to Cramdown and Lien Stripping for a technical discussion on lien stripping basics in bankruptcy that lawyers might find useful.

Go here for earlier posts on lien stripping a 2nd mortgage in a Chapter 13 bankruptcy proceeding.

(1) See In Re Pond, 252 F.3d 122 (2d Cir. 2001) for some case law that approves the "lien stripping" maneuver in Chapter 13 bankruptcy proceedings, in which the U.S. Court of Appeals for the 2nd Circuit held:

• We therefore join the Third, Fifth, and Eleventh Circuits, as well as the Bankruptcy Appellate Panels of the First and Ninth Circuits, in holding that a wholly unsecured claim, as defined under Section 506(a), is not protected under the antimodification exception of Section 1322(b)(2). See McDonald, 205 F.3d at 611; Bartee v. Tara Colony Homeowners Ass'n (In re Bartee), 212 F.3d 277 (5th Cir. 2000); Tanner v. FirstPlus Fin., Inc. (In re Tanner), 217 F.3d 1357 (11th Cir. 2000); Domestic Bank, 249 B.R. at 838; Lam v. Investors Thrift (In re Lam), 211 B.R. 36 (B.A.P. 9th Cir. 1997), appeal dismissed on other grounds, 192 F.3d 1309 (9th Cir. 1999). But cf. American Gen. Finance, Inc. v. Dickerson (In re Dickerson), 222 F.3d 924, 926 (11th Cir. 2000) (explaining that, if the panel were to decide the issue on a clean slate, it would adopt the minority view, but that it was bound by the majority view because the Circuit had already adopted this view).

See also In re Bollerud, No. 08-12177 (Bankr. S.D. Cal. 2009) for an interesting ruling that allowed a junior lien to be stripped in a Chapter 13 case, even though discharge was not eligible to the debtor. According to the facts of this case, discharge was unavailable because the debtor had previously filed a chapter 7 petition, and the new bankruptcy laws prevented a subsequent discharge within 8 years of that filing in another chapter 7 or 4 years in a chapter 13. See Bankruptcy Law Network: Chapter 20: San Diego Bankruptcy Court allows Lien Stripping in Chapter 13 after Chapter 7.

Loan Servicing Racket Horror Stories Continue; Local Media Outlet Intervenes, Obtains Some Resolution w/ Tax Escrow, Forced Placed Insurance Problems

In Dallas, Texas, a recent story from KDFW-TV Channel 4 points to the problem of unregulated mortgage loan servicing companies by highlighting three stories involving homeowners driven into foreclosure, allegedly due to paperwork screw-ups by American Home Mortgage Servicing, Inc., the outfit handling their house payments.(1)

• [Beth] Shores says the trouble started last year. The company that manages their mortgage account sent a notice stating her mother was delinquent on her property taxes. But Shores’ mother, Helen Jordan had deferred her Dallas County property taxes, as Texas law allows for people over the age of 65. And she had written proof. But the mortgage servicer went ahead and paid the back taxes of $14,348.82 and demanded repayment. “There is no dealing with this company,” said shores. “I faxed. I called. I certified lettered. I did everything to everybody, including the tax office that this was deferred…including the original deferral affidavit and it was totally ignored.” Then the foreclosure letter arrived.

***

• Charles Smith says he is irate and at his wits end. He says he has never missed a mortgage payment yet he fears he could also lose his home because of delinquent taxes. Even though Smith has written proof from the county tax office that his taxes have been paid in full, he says his mortgage servicer set up an escrow account to cover the taxes. Then, the company nearly doubled his monthly payment. But he kept making his regular monthly payments. "Now I am in default and now they can accelerate the loan and put me in foreclosure and put my house on the auction for sale,” Smith told FOX 4.

***

• For the Christophers, of Port Arthur, Texas, it wasn’t their taxes, but their insurance. Even though they had a letter from Farmers [Insurance] stating their policy had never lapsed, AHSMI set up an escrow account, purchased a policy and then jacked up their payment. “I had just spoke to a supervisor telling me all this will be straightened out in 10 days and then the very next day is when we get the letter saying they were wanting to do the foreclosure,” Connie Christopher told FOX 4. Connie says she gets calls at work demanding payment. The Christophers say they can’t refinance because their credit is now a mess.

Reportedly, after being asked by FOX 4 for comment on these three stories, American Home Mortgage Servicing stated that it “resolved all open issues” with all the homeowners. Smith said his monthly mortgage payment has now been returned to the original amount, and Shores said her mother received a letter stating her tax issue has been cleared up, the story states. The Christophers, however, reportedly have a pending lawsuit against the loan servicer.

For the story, see Mortgage Servicing Companies Unregulated in Texas.

(1) See More and Better Predatory Loan Servicing Fraud for commentary on the loan servicing racket recently appearing in RisMedia.com. Among the "tricks" reportedly used by loan servicers when setting up borrowers for a screwing-over described in this story are:

• “We take so long to process our mail it could really cost you.”
• “We didn’t get your payment and you can’t prove we did.”
• “Please try our easy-pay program.”
• “You didn’t pay your property taxes, so we did.”
• “You do not have insurance.”
• “For your benefit, we’ve established an escrow account.”
• “We’re here to help in your time of need.”

BofA Begins F'closure On House Homeowner No Longer Owns; Property Sold In Bank-Approved Short Sale Months Earlier; Apology Given When Media Intervenes

In Lee County, Florida, WINK News reports:

• [C]ape Coral homeowners spent a year trying to avoid a foreclosure. [...] Finally, after three short sale offers fell through, Bank of America approved an offer for $128,000 in cash. They closed on the sale in February.

• The Schunemann's nightmare was over; or so they thought. "My husband said to me, a few weeks ago, opening the mail, 'you are not going to be happy about this,' and I took a look at it and I cannot believe that we are being sued by Countrywide," she recalls. That's right. Countrywide, now Bank of America, was taking the Schunemanns to court to foreclose on a property no longer in their possession.

***

• After contacting the law firm that filed the foreclosure lawsuit, the Schunemanns say they haven't heard one word, back. They aren't sure what will happen on their court date. "There's nothing more they can take. There's nothing more. They can't take-- they took the house, they can't take anymore. There's nothing," she says.

• We talked to Bank of America, trying to get some answers for the Schunemanns. While the law firm never called us back, we did get a response from the bank. In an email BOA told us, "We apologize to the Schunemanns, for this was a mistake and we are correcting the records to stop the court actions."

For the story, see WINK gets results after case of bad bank communication.

Lending, Servicing Operations Cause Conflict Of Interest For Major Banks; Attributed As Reason For Ineffectiveness Of Government's Loan Mod Program

A recent The New York Times story decribes a significant conflict of interest facing the major banks like Bank of America, JPMorgan Chase, Wells Fargo, Citibank and others that also provide loan servicing operations for other institutions/securitized mortgage investors:

• So where does the conflict of interest lie? Often, the same bank that services a primary mortgage owned by another institution also owns a second mortgage or home equity line of credit on the same property. When that borrower has trouble meeting both payments, the servicer has an interest in making sure that amounts owed on the second lien, which it owns, continue to be paid even if the first loan, which it has no interest in, slides into delinquency. About two-thirds of primary mortgages are serviced by banks who do not own them but hold the accompanying seconds.

• This conflict is a crucial reason that the government’s loan modification program has been so woefully ineffective. The Treasury Department never forced the second-lien holders who service troubled primary mortgages to reduce the amount they are owed by borrowers, even though such a move would give them a better shot at keeping their homes.

For more, see In This Play, One Role Is Enough.

Maine High Court Boots MERS For Lack Of Standing To Initiate F'closure Action, Okays Post-Filing Substitution Of Bank As Real Party In Interest

The Maine Supreme Court recently weighed in on whether everyone's favorite mortgage electronic registration system, MERS, had any business initiating foreclosure actions. In a nutshell, the court ruled as follows:

• MERS is not a "mortgagee" within the meaning of the state's foreclosure statute, 14 M.R.S. §§ 6321-6325, and therefore had no standing to institute foreclosure proceedings;

• it OK'd the substitution of the bank, as the real party in interest, for MERS in the lawsuit, subsequent to the commencement of the foreclosure action; and

• given the facts of the case, the Bank was found not to be entitled to summary judgment as a matter of law and, accordingly, the court vacated the judgment of foreclosure and kicked the case back to the lower court for further proceedings.

For the ruling, see Mortgage Electronic Registration Systems, Inc. v. Saunders, et al., 2010 ME 79 (August 12, 2010).

Thanks to Mike Dillon of GetDShirtz.com for the heads-up on the ruling.

Texas Couple Asks Judge To Stop Non-Judicial Foreclosure; Says MERS Was Out Of Line In Attempted Note Transfer; Demands Loan, Lien Docs, PSA

In Sherman, Texas, The Southeast Texas Record reports:

• In an attempt to stop a non-judicial foreclosure on their property, Collin County residents Alan and Kelley Anderson filed a lawsuit against CitiMortgage Inc. and Mortgage Electronic Registration Systems, also known as MERS, on July 23 in Collin County District Court.(1)

***

• The home owners state that they executed a loan to purchase real property located in Lucas, Texas, with lender WR Starkey Mortgage on Aug. 26, 2005. The Andersons claim the promissory note was improperly transferred by MERS to CitiMortgage on June 23 in an attempt to foreclose on their property. Defendant MERS is assigned to act only as a nominee for the lender and cannot act on its own, according to court documents.

• "CitiMortgage is attempting to assume the role of Mortgagee Servicers and Beneficiary in a deceptive and fraudulent attempt to foreclose on Plaintiffs real property," the lawsuit states.

• Causes of action filed against the defendants include deception and fraud, bifurcation of security instrument and negotiable instrument, violations of the Real Estate Settlement Procedures Act and breach of contract, violation of the Fair Debt Collection Practices Act and unjust enrichment.

• The plaintiffs are asking the court for a temporary injunction stopping the foreclosure, to require the defendants to produce the original promissory note, all lien documents and pool servicing agreements,(2) and require the defendants to remove all detrimental credit history regarding the mortgage.

Source: Lawsuit filed to stop wrongful foreclosure of property.

(1) Possibly in an attempt to shop for a friendlier litigation forum, or possibly to impose an additional cost in time and money on the homeowners, the defendants reportedly removed the case from state court to the U.S. District Court in Sherman, Texas on Aug. 6.

(2) See Max Gardner’s Top Reasons for Wanting a Pooling & Servicing Agreement for 20 reasons to ask for these documents. See also, The Alphabet Problem and the Pooling and Servicing Agreement.

NJ AG Bags Pair In Alleged Short Sale, Straw Buyer Flipping Scam Using Phony I.D.s That Scored $100-300K Per Deal

From the Office of the New Jersey Attorney General:

• Attorney General Paula T. Dow and Criminal Justice Director Stephen J. Taylor [] announced that a Union County mortgage loan solicitor has been charged with conspiring with others – including a Kearny woman who was charged previously – in a scheme to steal millions of dollars by obtaining mortgage loans using false identities and counterfeit documents.

• According to Director Taylor, Nuno J. Sousa, 34, of Elizabeth, was arrested [] (Aug. 11) by detectives of the Division of Criminal Justice Major Crimes Bureau as a result of an ongoing investigation into the conspiracy. The Elizabeth Police assisted in the arrest. He was charged by complaint with first-degree conspiracy, first-degree money laundering, second-degree securities fraud and second-degree theft by deception. He is being held in jail with bail set at $200,000.

• Sousa is charged in connection with an alleged conspiracy that also included Genilza R. Nunes, 36, of Kearny, who was arrested by the Division of Criminal Justice on March 9. She was charged by complaint with the same offenses. Those charges are pending, and she is being held in jail with bail set at $2 million.(1)

***

• Nunes, Sousa and their co-conspirators allegedly defrauded numerous lending institutions of millions of dollars through what is known as a “short sale mortgage loan property flip scheme.” [...] In this case, individuals involved in the scheme were purchasing the properties as straw buyers, using false identities supported by counterfeit driver’s licenses, false financial records, and fictitious credit histories.

• Through a series of fraudulent transactions, the short sale properties were then sold or “flipped” at inflated values derived from fraudulent appraiser reports. A second straw buyer applied for a mortgage loan on the inflated property and obtained the loan under a false identity. The short sale property was then purchased with the loan proceeds, and, by design, the straw buyer made no payments on the loan, causing a loan default.

• Because the straw buyer used a false identity, the lending institution was unable to locate the borrower. The difference between the sales price for the short sale transaction and the inflated loan obtained represented the net proceeds of the fraudulent scheme. Typically Nunes, Sousa and their co-conspirators obtained $100,000 to $300,000 per transaction.

• The fraudulent enterprise allegedly included other licensed and unlicensed professionals, including real estate agents, mortgage loan brokers, real estate appraisers, notaries, lawyers, straw buyers and counterfeit document makers.

For the NJ AG press release, see Union County Mortgage Broker Charged in Multi-Million Dollar Scheme to Obtain Loans Using Fake Identities & Documents.

(1) According to the press release, the state has specifically alleged that Nunes and Sousa – with Sousa acting as the mortgage loan solicitor – engaged in fraudulent transactions involving five properties, with a total fraud of $2,152,800. However, it is believed that the scheme is much larger.

Targeting Foreclosure-Related Scams A Good Talking Point For State AG's Running For Governor?

Sarasota Herald Tribune columnist Tom Lyons raises a question on the timing of the recent announcement by Florida Attorney General and gubernatorial candidate Bill McCollum regarding the probe into three foreclosure mill law firms that have been the target of many accusations alleging the manufacturing of phony legal documents in foreclosure actions.

• What does it take for our Attorney General to finally notice the smell of potential fraud? I'm wondering if maybe it helps that he is in a scary dead heat primary race with his hope of becoming the Republican nominee for governor. Targeting sneaky lawyers in a criminal fraud investigation could make for a nice talking point.(1)

For the entire column, see Investigation's timing is reason for skepticism.

(1) Other state attorneys general who are running for governor of their respective states who may be getting pretty decent mileage out of targeting foreclosure-related scams are:

• Andrew Cuomo (New York): see Attorney General Cuomo Expands Investigation Into Mortgage Rescue Companies That Abuse Homeowners (Cuomo Orders Over 30 Additional Mortgage Rescue Companies to Cease Fraudulent Practices; 213 Companies Have Now Been Put on Notice),
• Jerry Brown (California): Four Arrested, Five Wanted for Fleecing Hundreds of Homeowners Seeking Foreclosure Relief (one example out of several cases announced by his office),
• Mike Cox (Michigan): see Cox Files Criminal Charges Against 19 for "Foreclosure Rescue" Scams.

Southern California Man Gets 4 Years After Copping Grand Theft Plea In $300K Home Equity Refinancing Ripoff

In Southern California, The Downey Patriot reports:

• A convicted con man who operated a Montebello realty company was sentenced Aug. 6 to four years in state prison, the District Attorney’s office has announced. Raul Altamirano, 53, pleaded guilty on June 14 to one count of grant theft and admitted an allegation that the taking was more than $150,000. Los Angeles Superior Court Judge James Bianco ordered Altamirano to pay $301,470 in restitution. Bianco dismissed three counts – grand theft, loan application fraud and filing a false document – under the terms of the plea agreement.

• Altamirano was charged on May 13 for defrauding a victim in 2007. The victim sought the defendant’s assistance for the purpose of taking $100,000 out of the equity of her home. Without the victim’s knowledge, Altamirano went on to take out two loans worth $429,000, stripping the home of all its equity. The victim never received any money, prosecutors said.

• Altamirano, owner of Wings Realty Inc., was the one-time subject of investigative news reports(1) for allegedly baiting victims through foreclosure and loan modification seminars. Altamirano began holding seminars shortly after pleading no contest to one count of grand theft and being placed on five years probation in a 2004 real estate fraud case.

Source: Man sentenced in real estate fraud case.

(1) See Predators Prey On Homeowners Facing Foreclosures for video report showing Altimarano in action.

Cops: Unwitting Homebuyers Face F'closure After Seller Pockets $100K In Sale Proceeds Owed To Lienholder; Title Insurer's Police Report Triggers Probe

In Monroe County, Pennsylvania, the Pocono Record reports:

• The owner of Signature Real Estate in East Stroudsburg was charged Friday with falsely reporting a property he owned as being mortgage-free, selling that property and then keeping the money from the sale for himself. Eric Kerchner, a detective with the Monroe County District Attorney's Office, arrested John E. Fitzmorris, 55, of Stroud Township, who was then placed in Monroe County Correctional Facility in lieu of $10,000 bail.

• Kerchner began an investigation after a Stewart Title Guarantee Co. representative on Feb. 17 reported a theft of $99,674.25. The investigation revealed the following:
  
  In November 2001, Moises T. Ramos bought a 161 E. Wood Drive, Penn Estates, property with a Wells Fargo home mortgage.
  
  In February 2007, Ramos sold the property to Fitzmorris with the understanding that Fitzmorris would pay off the mortgage in one lump sum, but Fitzmorris did not do so and continued making monthly payments on that mortgage.
  
  In November 2008, Fitzmorris sold the property to Eltrice and Rawle Davidson. At the closing, Fitzmorris submitted a false owner's affidavit that did not list the Wells Fargo mortgage and received $99,674.25 from Bank of America, the Davidsons' mortgage company. He kept that money as if it were his own, instead of using it to pay off the Wells Fargo mortgage. He also stopped making the monthly Wells Fargo loan payments on the property.
  
  Wells Fargo later initiated a mortgage foreclosure action against the Davidsons as the property owners and against Ramos as the mortgage holder.

• Charged with theft and tampering with public records, Fitzmorris will appear in district court at a future date.

Source: Eastburg Realtor charged in theft case.

State Regulator, California Bar Have Hands Full Hammering Real Estate Agents, Attorneys In Loan Modification, Short Sale, "Lawyer-Renting" Scams

California Watch reports:

• Amid the downturn in California's real estate market, the state has disciplined a record number of real estate licensees and is investigating thousands of attorneys involved in loan modification and short-sale scams.

***

• The [California Department of Real Estate] revoked, suspended or accepted the surrender of 886 real estate licenses from July 2009 through June 30, 2010. That's a 60 percent jump during the past three years. The department has nearly 5,400 open investigations, many for scams involving loan-modification scams and, increasingly, short sales. It has also issued nearly 600 desist and refrain orders to unlicensed firms and individuals since July 2006.

• Similarly, the State Bar of California is investigating more than 2,000 of its members for involvement in foreclosure fraud. Twelve attorneys have resigned, three have been disbarred, and five have trials pending, said Suzan Anderson, supervising trial counsel of the bar's special team on loan modification. "I can't remember a time, not to this extent," when so many attorneys were being disciplined for misconduct, Anderson said.

***

• The attorneys tend to join companies that want to purport being a law firm, she said. "The attorney is pretty much renting and leasing his bar number to the loan modification company," she said.(1)

For the story, see Real estate, attorney scams rise amid foreclosures.

(1) See ETHICS ALERT: Legal Services to Distressed Homeowners and Foreclosure Consultants on Loan Modifications for guidance on the types of loan modification activities The State Bar of California discourages its members from engaging in.

Duo To Snatch Control Of Financially Troubled 110-Building, NYC Housing Complex For $45M? 11,000-Unit Property Sold For $5.4B In 2006

In New York City, Crain's New York Business reports:

• If all goes according to plan, next Thursday a new partnership led by hedge fund honcho William Ackman will buy Manhattan's largest housing complex—the 110-building Stuyvesant Town / Peter Cooper Village—paying as little as $45 million in a foreclosure auction. Incredible as such a scenario may seem, real estate experts say that it—or something like it—could well come to pass.

***

• In a surprising development, Mr. Ackman announced last week that his hedge fund, Pershing Square Capital Management, had been tapped by Winthrop Realty Trust, one of Stuy Town's creditors, to help it take control of the 80-acre complex. Acting in concert, the duo quietly paid $45 million—15 cents on the dollar—to scoop up a $300 million mezzanine loan, a key slice of the complex's debt that stands between the owner's equity and the first mortgage.(1)

• Mr. Ackman also scheduled an auction for Aug. 25, when he plans to foreclose on the property and take control of Stuy Town. If he succeeds, he intends to assume the complex's nearly $4.5 billion in debts and quickly begin a voluntary, noneviction co-op conversion on the rental property to generate cash to pay off its loans.

***

• [Mr.] Ackman appears to have a key advantage. If the foreclosure auction is held, he can open with a bid of $300 million, the face value of his mezzanine debt. Other bidders will have to pony up $300 million in cash for a property now estimated to be worth a mere $1.8 billion. In addition, the first notice of the auction appeared in the papers on Aug. 8, giving bidders little time to get their act together.

For the story, see Upstart roils Stuy Town battle (Fledgling duo may get complex for as little as $45 million in foreclosure).

Go here for other posts on the Stuyvesant Town / Peter Cooper Village fiasco in NYC.

(1) According to the story, several recent deals suggest that the partner's chosen route to ownership may work, such as one involving the 60-story John Hancock Tower in Boston, which was bought by a partnership that had snapped up the mezzanine debt and put the property into foreclosure. At the auction, the partnership won the tower with a bid of $20 million and an agreement to take on its $640 million first mortgage, the story states. The story also cites the W Union Square Hotel, 100 Church St. and several other properties in New York City that have also been successfully foreclosed on by their mezzanine lenders. “This trend will continue as more troubled assets hit the fan,” says Edward Hunter, chair of the real estate practice group at law firm Lowenstein Sandler.

Spotlight Continues To Shine On Florida Foreclosure Mills

The American Bar Association's ABA Journal recently weighed in with coverage of the alleged fraudulent document rackets being run by Florida foreclosure mill law firms.

For the story, see Fla. AG Probe: Did 3 Law Firms Get 1,000s of Foreclosure Judgments By Possible Wrongdoing?

For earlier ABA Journal stories on one of the foreclosure mill operations, see:

• Small Foreclosure Firm’s Big Bucks: Back Office Grossed $260M in 2009;
• ‘Like Hamsters in a Cage’: Foreclosure Firm Cut Corners to Make Money, Story Says;
• RICO Suit Seeks Billions from David Stern and His Foreclosure-Mill Law Firm.

Sacramento DA Beefs Up Forces Targeting Loan Modification, Home Equity, Forged Land Document Ripoff Rackets

In Sacramento, California, CBS13 reports:

• Sacramento County is cracking down on criminals targeting desperate homeowners. The DA's office is beefing up their Real Estate Fraud Task Force. They're going after people claiming they can bail out homeowners from foreclosure, and also those who steal home equity, and forge documents.

• "It was a crime we didn't prosecute much before the real estate crash, but criminals are entrepreneurs, they see an opportunity and they move in," said Sacramento County Chief Deputy DA Marv Stern. The dedicated staff is fully funded by a fee paid for every document filed in the Sacramento County Clerk-Recorder's Office.

Source: Sac DA Task Force Targets Real Estate Fraud.

Victims: Crooked Contractor Left Trail Of Homeowners Facing Possible Mechanics Lien F'closures; Accused Of Pocketing Customer Deposits, Stiffing Subs

In West Palm Beach, Florida, The Palm Beach Post reports:

• Roofer Gregory Haddox followed Hurricane Wilma to the tarp-covered homes of Palm Beach County. Soon after, in 2006, he was jailed because he had no license.(1)

• Despite his guilty plea, Haddox has continued to operate, leaving a trail of lawsuits and angry home­owners and subcontractors in his wake. The people who hired United Roofing Systems LLC say Haddox has failed to perform in a variety of ways:
  
  1) He has taken their deposits and done no work.
  2) He has installed shoddy roofs.
  3) He has failed to pay subcontractors, leaving homeowners with the bill.

• At least 30 homeowners are now facing possible foreclosure from unpaid [sub] contractors.

***

• In May, Lido Holdings, doing business as Campany Roofing of West Palm Beach, was awarded an $893,000 judgment plus $446 a day in interest against United in Palm Beach County Circuit Court. [...] In late July, Campany sent 30 homeowners notices of intent to file foreclosure, [Campany's attorney Duncan] Farmer said. Before that, the firm worked out arrangements with 17 other homeowners. The majority are in Palm Beach County.

For more, see West Palm roofer leaves long trail of lawsuits, unpaid bills, misery.

(1) Reportedly, Haddox, 37, came to South Florida from Ohio, where he had a string of judgments, foreclosures, bankruptcies, federal and state tax liens and other problems, according to court records. In October, an Akron, Ohio municipal court issued a warrant for his arrest on theft charges, the story states.

Blind Senior Bilked For $100K+, Left Facing Foreclosure In Home Improvement Horror Story After Fire Damages Home

In Jacksonville, Florida, The Florida Times Union reports:

• [Mary] Lindsey, 66, has gone totally blind since [a] January 2009 fire devastated her Westside Jacksonville home. But she doesn't need her eyes to see that things have gone horribly awry.

• Where a contractor promised new replacement appliances, there is an old, cracked stove and an aging refrigerator. Where she believed there were improvements to her backyard, the old fence still stands and her pool is filled with construction debris. Where she thought she was financially stable if not comfortable, she now finds herself out more than $100,000.

• And although advocates call her case extreme, they also believe that there could be more and more seniors who, like Lindsey, are falling victim to fraud and scams. Yet there have never been more resources to help seniors avoid them or get help if they do have a problem. It's just a matter of finding them before it's too late.

***

• For Mary Lindsey, there is now a glimmer of hope in the 18-month ordeal that left her with incomplete home repairs and facing foreclosure after she signed one too many papers at the request of a contractor. Her daughter and son-in-law have arrived to help. And after a well-placed call to ElderSource,(1) she is getting legal help as well as help from volunteers in the community who heard her story.

For more, see First Coast seniors get more help to avoid scams (New programs offer assistance to those in need of protection from fraud and scams).

(1) According to their website, ElderSource is a a private, not for profit, independent agency, is the state designated Area Agency on Aging and Aging Resource Center for Northeast Florida covering Baker, Clay, Duval, Flagler, Nassau, St. Johns and Volusia counties, and belongs to a nation wide network of over 650 Area Agencies on Aging.

Unpaid Water Bill Leads To Another Shutoff For One S. Fla. Condo; Unpaid HOA Fees Cause Assoc's Cash Shortage; May Need To Start "Reverse F'closures"

In Lake Worth, Florida, WPEC-TV Channel 12 reports:

• Residents of a Lake Worth condo are once again without water. People who live at the Sun Home Condominium say the water went out Monday. Residents fear a repeat of what happened in June when the water was off for a week. Tuesday, the condo's bookkeeper tells us the building is again behind on its utility bills by $1,400.

• With many owners overseas, the bookkeeper says it's hard to raise the money needed. Compounding the problem, sources tell us half the units are in foreclosure and those owners are not paying the maintenance fee which pays the water bill.(1) Condo resident Tenille DeJesus says, "My boyfriend had to go to work without taking a shower. I can't cook really. I can't clean my dishes. My toilet, I can't flush." The condo's bookkeeper says she hopes to get the water back on in a few days.

Source: Condo residents left without water-again.

(1) This condo association may be a prime candidate for the process being referred to in Florida as "reverse foreclosure." See South Florida Sun Sentinel: South Florida homeowner associations get tough collecting delinquent fees.

• Homeowner associations throughout South Florida are becoming more assertive in the fight to maintain property values and their own bottom lines amid one of the worst housing collapses since the Great Depression.

• A new legal strategy and a sweeping condominium reform bill are empowering boards hit hard by budget shortfalls after a deluge of foreclosures in recent years. Associations now are attempting so-called reverse foreclosures, which force lenders to seize homes more quickly than they otherwise would. Banks often delay taking back these troubled properties to avoid having to pay past-due assessments.

37 Disabled Vets Face The Boot As Non-Profit Albuquerque Group Home Faces Foreclosure

In Albuquerque, New Mexico, KOB-TV Channel 4 reports:

• A local non-profit that provides a home for dozens of vets is behind on its mortgage payment and if money doesn’t come soon, the apartment complex could shut down leaving many of its tenants homeless. For the last five years, the local charity has been providing permanent housing in Northeast Albuquerque for mentally disabled vets who otherwise wouldn’t have a place to live. Now, the organization is $160,000 dollars behind on its mortgage and in danger of shutting down.

• Thirty-seven mentally disabled veterans call the apartments home. Some of them used to be homeless. “It’s given me a lot of security, and I’m happy here,” said Veteran Floyd Sullivan.

• But their security is at risk. Highpointe Solutions, which runs the facility, is behind on mortgage payments. And the bank intends to foreclose. “I don’t know where these people are going to have to end up going. Maybe shelters,” said Highpoint Caregiver Hanz Heredia. He says the charity need to come up with $160,000 by September 1st. “We take care of them, feeding them, giving them their medication, basically taking care of their needs,” Heredia explained.

• The non-profit operates without government help and without public donations. Rental income from the vets is the sole funding for the charity. But it’s not enough. To make up for the deficit, the charity’s founder pays some of the expenses out of her own pocket and borrows the rest from a local bank. “You got people that tend to have schizophrenic, they lose their memory, Alzheimers, you never know,” Heredia added.

***

• The charity is [] applying for grants to help pay off the mortgage. A website has been set up for donations, which is www.forourveterans.us.

For the story, see Disabled veterans facing eviction.

New Bay State Law Requires "Just Cause" Before Booting Renters From Foreclosed Properties

In Boston, Massachusetts, Harvard Law School News reports:

• Groundbreaking legislation originally drafted by students from the Harvard Legal Aid Bureau (HLAB) to protect tenants from losing their homes after foreclosure was signed into law on August 7 by Massachusetts Governor Deval Patrick ’82, former president of HLAB. [...] The new law, if applied appropriately, will be a very important tool in keeping people in their homes and protecting neighborhoods from falling into decay, says [HLAB Director and Clinical Professor of Law David] Grossman. “It provides rights to tenants that no law in Massachusetts has for years,” he says. “It could solve the problem that’s plagued our communities and cost us thousands of hours trying to solve in a less-efficient fashion, through litigating against banks in court.”

***

• HLAB students drafted what is considered the heart of the bill, a critically important “just cause” section that prohibits banks from evicting tenants from foreclosed-on properties unless the tenant fails to pay rent, harms the property, or otherwise gives “just cause” for eviction. It is believed to be the first “just cause” law in the country pertaining specifically to tenants in foreclosed-on properties.

• In addition, the bill imposes a longer pre-foreclosure period on banks that don’t make a good-faith attempt to restructure loans with homeowners, and it criminalizes mortgage fraud. It also provides property tax exemptions for purchasers of foreclosed properties.

For the story, see Massachusetts enacts landmark foreclosure protections drafted by Harvard Law School students.

Ex-Firefighter Gets Six Months For Torching Home While Facing Foreclosure; Ordered To Pay $16K In Restitution

In Waupaca, Wisconsin, WSAU Radio 550 AM / 99.9 FM reports:

• A former firefighter will spend four years on probation, including six months in jail, for deliberately setting his house on fire in September 2005. A Waupaca County judge also ordered Chris Doering to pay court costs and more than $16,000 in restitution to the holder of the land contract and an insurance agency.

• A crime lab analysis found gasoline on Doering’s shoes and blue jeans and in a bedroom closet where he first noticed the fire. A special police dog also found evidence of an accelerant in the kitchen and dining room areas, where a burn pattern analysis showed the fire likely started.

• Doering admitted that he knew his house was in foreclosure and that he set the fire a day he was notified that it would be sold at a sheriff’s sale. Doering also submitted a claim for insurance proceeds shortly after the fire.

Source: Ex-firefighter sentenced for starting house fire.

Tenant Hit w/ Civil "Pigeon-Feeding" Charges; Faces The Boot Over Health, Safety Issues; Bread-Supplying Bakeries Eyed As "Unindicted Co-Conspirators"

In Coney Island, Brooklyn, the New York Post reports:

• Coney Island is a continent away from Alcatraz, but the spirit of the "Birdman" lives on in a neighborhood woman who loves and feeds pigeons -- and it might cost her her home. Sabina Mickiewicz's landlords have taken the disabled woman to Housing Court and are trying to evict her for creating "a health and safety issue" in her apartment complex, according to legal papers.

• And it doesn't stop at birds. The landlord, Bay Park Two Co., claims she "has been observed" feeding opossums, squirrels and cats. Now Mickiewicz, 59, who says she has an inoperable brain tumor, has hired a lawyer to fight the avian eviction.

• Mickiewicz, who grew up behind the Iron Curtain, has established relationships with several of Brooklyn's large Italian and Russian factory bakeries, which give her about 20 loaves of unsold bread a day.

Source: Pigeon lover may lose nest.

Texas Woman The Latest "Blame Obama" Bandwagon Jumper; Lawsuit Claims Prez, Housing Officials Hypnotized & Abused Her, Forcing Her To Flee Home

In Jefferson County, Texas, The Southeast Texas Record reports:

• Claiming she had to flee her government sanctioned home because of psychological and sexual abuse, Amy Modica, who has filed around a dozen suits in the past three years, filed two fresh lawsuits Monday against President Barack Obama. This is the second time in two months Modica has sued a government official. In June, Modica sued Jefferson County Judge Ronald Walker claiming he and his secretary caused her personal injury when they would not allow her to fill out commitment papers on her mother.

• In her most recent lawsuits, filed July 30 in Jefferson County District Court, Modica alleges Obama, along with the Housing Authority of Beaumont and U.S. Department of Housing and Urban Development, psychologically abused her to the point that she had to flee her apartment home.

• Modica claims officials hypnotized her against her will and then performed "inappropriate actions" on her, court papers say. The suit does not give specific dates but does state that she was living at the Loree Grand Apartments and the Seville Apartments when the alleged abuse occurred. Both complexes have also been named as defendants. "All of the wantonly acts and or incompetence has pushed me to the limit and a lawsuit is definitely due deserving," the suit states. Modica is seeking punitive damages to punish the defendants. She is representing herself. Modica's previous lawsuits have been dismissed.

Source: Latest Modica suit alleges she was hypnotized by Obama, housing officials.

Bronx Tenants Target Fannie, Freddie; Bang Drums Chanting "The Bronx Is Not For Sale" In Protest Over Deteriorating Conditions In Dilapidated Bldgs

In New York City, WNYC Radio 93.9 FM/820 AM reports:

• A group of Bronx tenants rallied Thursday outside the midtown offices of Fannie Mae and Freddie Mac. They began their march at Fannie Mae's midtown offices and ended up near Grand Central Terminal, where they banged drums and chanted "the Bronx is not for sale." Police formed a line in front of the high-rise building that houses Freddie Mac.

• Tenants say their buildings were purchased during the housing boom by companies that overpaid for the properties, allowed them to fall into disrepair and ultimately ended up in foreclosure or near it. They say Fannie Mae and Freddie Mac own the loans on their buildings and they are fearful the properties will get auctioned to the highest bidders, causing the same problems all over again.

• One tenant, J. Ahleezah Sims, wants Freddie Mac to lower the debt on the dilapidated building where she lives and then sell it to a reputable owner. Last year, Fannie Mae agreed to do just that with a portfolio of 16 buildings after being pressured by elected officials and the city's Department of Housing Preservation and Development. Freddie Mac says Sims' building isn't in foreclosure yet, and it's working with the current owner to address the violations.

• Tony Perez lives at 2427 Webster Avenue and says his building has been in disrepair for years, with tenants having to deal with broken elevators and no heat and hot water in the winter. Fannie Mae ended up taking the building over and Perez says they reneged on a promise to notify the tenants association before selling to a new owner.

For the story, see Bronx Tenants Rally Against Fannie and Freddie.

See also, NY1: Bronx Tenants Call For End To Predatory Lending (Dozens of Bronx tenants who say they are being forced out of their apartments because of predatory lending to slumlords rallied Thursday in Midtown).

Thugs Hijack Condemned Apartment Building In Foreclosure After City Boots Four Dozen Residents Over Health, Safety Issues; Bank Left Holding The Bag

In Springfield, Massachusetts, The Republican reports:

• The living conditions inside two Locust Street apartment buildings, which the city condemned Thursday, had deteriorated dramatically during the past few months. Things got so bad that on Wednesday, when a number of city agencies conducted an emergency inspection of the properties at 244-252 and 258-262 Locust St., they found near-lawless environment inside, a scary free-for-all in which squatters were living rent-free or, even worse, paying rent to people who had no business collecting it.

• “Thugs took over the building and were offering units to rent,” said Geraldine McCafferty, director of the municipal Office for Housing. As a result of the condemnation, about four dozen people were evicted in Housing Court procedures and a California-based bank was ordered to put them up in a hotel for a week while they search for more permanent housing.(1)

• Although McCafferty said that corner of the city’s Forest Park neighborhood has long been depressed, the property’s most recent woes began when its owner, Riverview Apartments went into foreclosure.

***

• Over the past few months police began responding to an increasing number of 911 calls regarding the property, and complaints made to the Office of Housing started coming in as well, McCafferty said. The emergency joint inspection, in the works for about two weeks, found that property’s central fire alarm system had been ripped out of the building.

• Inspectors found a number of other code violations as well included a leaking roof, and waste oil and raw sewage in the basement, according to David H. Cotter, deputy director of the city Department of Code Enforcement. Some of the apartments were in horrible condition and could not be fully inspected due to such hazards as garbage, feces and exposed electrical wires, Cotter said.

***

• The failed properties on Locust Street and a number of others like them in the city are byproducts of the housing bubble and the mortgage crisis that unfolded with it’s puncture. During the bubble, investors from outside the area saw what were highly-inflated property values for Springfield.

For the story, see Springfield officials say conditions in Locust Street apartments has been deteriorating for months.

(1) A companion story (see Springfield condemns Locust Street apartments; Judge orders bank to put tenants up in hotel) reports:

• [City lawyer Lisa] DeSousa told [Housing Court Judge Robert G.] Fields the conditions there were the most appalling she had seen during her career as a housing lawyer. “There were collapsing ceilings, no working plumbing, no functioning stoves or refrigerators (in some units),” she said, faltering. “I’m sorry, your honor, I’m struggling because this is actually the worst I’ve ever seen.” The courtroom was packed with couples, mothers, children with pacifiers and the aged, all awaiting to hear where they would lay their heads that night.

Foreclosed Homeowner Faces Felony Theft, Criminal Mischief Charges For Stripping Fixtures Before Vacating Premises; Damages Estimated At Approx. $50K

In Baxter County, Arkansas, KAIT-TV Channel 8 reports:

• A Midway woman turns herself in on felony charges of theft of property and criminal mischief following a complaint filed April 9 by First National Bank and Trust Company of Mountain Home. According to police reports, Cathy Jo Cain, 39, of Midway turned herself in after damaging her previous home after it was foreclosed.

***

• Following the foreclosure sale, the bank representative came back to the property and found the home to be stripped of all fixtures including sink faucets, handles, doorknobs, deadbolts, floor moldings, chandeliers, cabinets, center-island and marble, appliances, all interior doors, and the back deck. Most of the carpet was pulled up and the front desk was partially dismantled. Estimated damages to the home are approximately $50,000.

For the story, see Region 8 woman turns self in after destroying own home.

Several Homeowners In Foreclosure Win Unexpected Extension In Cases As Judge Gets Trapped In Elevator, Causing Hearing Cancellations

In Sarasota, Florida, the Sarasota Herald Tribune reports:

• A judge was stuck in an elevator at the Sarasota judicial center for more than 30 mintues Monday morning. Several foreclosure hearings scheduled for 9:30 a.m. were cancelled after Magistrate Deborah Bailey could not get off the elevator to go to her 5th floor courtroom.

• Bailey said the elevator car went up to the fifth floor, and the doors only opened slightly as she tried to go to the courtroom. Then the elevator went up to 10th floor — the building’s highest floor — before again opening only a slight amount.

• The elevator is behind the scenes and unavailable to the public, one of two that provide service from the secure judge parking to the judges offices and back doors to courtrooms. After elevator workers removed Bailey from the elevator car, they told her the problem would have to be repaired. Bailey got to court in time to hear the rest of the cases on her morning docket.

Source: Judge trapped in elevator.

23-Year Old Med School Dropout Seeks $1.7B From Lender In F'closure Defense Suit; Bank Try To Move Case To Federal Court Gets Boot Back To State Forum

In Pomona, California, the Los Angeles Times reports:

• As foreclosure fights rage in the nation's courts, the battle over Shahida and Ather Ali's house in Diamond Bar looks like a classic mismatch. In one corner, weighing in at $2.5 trillion in assets, sits Deutsche Bank, which is attempting to evict the Alis from their home of 24 years.

• In the other is Zeenat Ali, the couple's diminutive 23-year-old daughter, who dropped out of medical school and sued Deutsche Bank after it foreclosed on the property. Hoping to reclaim title for her parents, Ali has spent half a year litigating in state and federal courts without the help of a lawyer. And though she has no formal legal training, the soft-voiced, 120-pound bantam is more than holding her own.

***

• The banks have learned not to underestimate her. In a challenge to her budding legal skills, they sought in May to move her lawsuit to federal court in Los Angeles, where they thought they'd have an easier go of it. Ali responded with 170 pages of legal filings. After reviewing them, U.S. District Judge Gary Feess sided with Ali and last month sent the case back to Pomona Superior.(1)

For more, see Fighting parents' foreclosure, Diamond Bar student wins rounds against Deutsche Bank (With no legal training, Zeenat Ali, 23, has been doing battle in court, winning judgments against the bank and two other companies mainly on procedural grounds).

For a story update, see Eviction stayed 45 more days in Diamond Bar woman's foreclosure fight.

(1) For a Willamette Law Review article that addresses, among other things, 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).

"Buy & Bail" Activities By "Underwater" Homeowners Continue, Despite Beefed Up Fannie, Freddie Mortgage Lending Underwriting Standards

Bloomberg News reports:

• Harvey Collier, a mortgage broker in Fort Lauderdale, Florida, says he gets as many as 10 calls a month from people planning to default on their loans. The twist: They first want financing to buy another home.

• Real estate professionals call it “buy and bail,” acquiring a new house before the buyer’s credit rating is ruined by walking away from the old one because it’s “underwater,” or worth less than the mortgage. It’s an attempt to escape payments on a home whose value may never recover while securing a new property, often at a lower price with a more affordable loan.

• The practice, which constitutes fraud if borrowers lie on loan applications, is continuing even after Fannie Mae and Freddie Mac, the biggest U.S. mortgage-finance companies, beefed up standards to prevent it, according to brokers such as Collier and Meg Burns, senior associate director for congressional affairs and communications at the Federal Housing Finance Agency.

For more, see 'Buy and Bail' Homeowners Get Past Loan Restrictions.

Victimized Homeowners Receive $125K+ Restitution For Unpaid Taxes & Insurance In Escrow Ripoff; State Loan Originators Pick Up Tab For Defunct Racket

From the Office of the Indiana Attorney General:

• Attorney General Greg Zoeller [] announced 97 financial fraud victims have received $125,679.22 in restitution for taxes and insurance bills that went unpaid by defunct American Escrow, a Chicago-based company.

• "Paying property taxes and insurance is not optional for homeowners. Escrow accounts give people a peace of mind that critical bills will be paid on time by money held in trust. That peace of mind turned into a nightmare for thousands of homeowners all over the country when they discovered their tax and insurance bills had not been paid and the money had been squandered," Zoeller said. "This restitution will not undo the stress or erase the experience of being defrauded, but it will hopefully allow them an opportunity to gain back the financial stability for which they have been fighting."

***

• Zoeller filed suit against American Escrow in June 2009 for violations of state consumer protection laws. A court judgment was ordered in January requiring the company to pay more than $600,000 in fines, attorneys' fees and consumer restitution.

• The judgment proved uncollectible because the company had no assets so the state legislature passed a new law making restitution funds available for the fraud victims. The new law, House Enrolled Act 1332, set aside $150,000 out of a loan broker account held by the securities division of Secretary of State Todd Rokita's office. The account is funded from license registration and renewal fees collected from loan brokers, mortgage loan originators, and principal managers.

For the Indiana AG press release, see Victims of escrow fraud receive $125,000 in restitution (Indiana lawmakers created unique solution to aid fraud victims).

Ex-Ski Area Operator Accuses Connecticut Town, Officials Of Wrestling Away Ownership Of 278 Acre Property; Files Suit Seeking $11M In Damages

In Middlefield, Connecticut, The Middletown Press reports:

• The former Powder Ridge operator and his family announced [last week] that they have filed a lawsuit against the town of Middlefield and several of its officials after they used “bully tactics” to take over the approximately 278 acres where the former ski area once stood.

• Ken Leavitt, who has spent the last seventeen years of his life purchasing, developing and maintaining the Powder Ridge Ski Area, said he is seeking, among other things, $9 million from the town and $2 million in damages from an investment company, Middlefield Holdings, LLC.

• “While operating Powder Ridge for ten seasons, certain town officials who had their own personal designs on the ski area, have played every devious trick in the book to obstruct our business and take over the property at the lowest possible point,” Leavitt said. Town officials mentioned in the lawsuit are First Selectman Jon Brayshaw and former Chairman of the Middlefield Board of Finance Paul Pizzo.

For more, see Former Powder Ridge owner files suit against town.