Thursday, October 07, 2010

Obama To Nix Notary Bill

The Washington Post reports:
  • Amid growing furor over the legitimacy of foreclosure proceedings, White House officials said Thursday that President Obama will not sign a two-page bill passed by lawmakers without public debate after critics said the legislation could loosen standards for foreclosure documents.

  • The bill, named the Interstate Recognition of Notarizations Act, would require courts to accept document notarizations made out of state. Its sponsors intended the effort to promote interstate commerce. But homeowner advocates warn the new law could allow lenders to cut even more corners as they seek to evict homeowners.

For more, see Obama won't sign bill that would affect foreclosure proceedings.

Obama Administration Aware Of Mortgage Industry Attempt To Sneak Through Proposed Law Affecting Document Notarizations

The Huffington Post reports:
  • White House is taking a careful look at legislation recently passed by Congress with little notice that would require courts to recognize notarizations from out-of-state, which some consumer advocates say would make it more difficult to fight bogus foreclosures by banks.

  • "There were a series of meeting on that this morning here," said White House spokesman Robert Gibbs, who added the White House would have a more definitive statement later on Thursday. "It is something that, as you said, there has been a lot of news on, the processing of documentation, the resulting impact on foreclosures, and that is being evaluated....In general, there is concern, ultimately, about the situation."

  • Max Gardner, a foreclosure defense attorney, said the timing of the bill was suspicious, considering fraudulent notarization of bogus foreclosure affidavits is at the heart of a scandal that has prompted the nation's largest banks to pause foreclosures in 23 states.

  • "The timing is just a little curious to me that all of a sudden you can't get anything through the Senate at all and then all a sudden on a voice vote," Gardner said. "This was first introduced in the House in 2007."

  • The legislation, titled the "Interstate Recognition of Notarizations Act," would "require any Federal or State court to recognize any notarization made by a notary public licensed by a State other than the State where the court is located when such notarization occurs in or affects interstate commerce." The bill would also require courts to recognize electronic notarizations.

  • "The thing that concerns me about the bill is that the provisions in it that allow for digital notarization by electronic means," said Gardner, "which implies that anyone with the appropriate software could notarize a digital document or image of a document, which would allow someone to notarize a document without seeing someone execute the document or doing the things a notary is supposed to do. In my mind that would lead a broad exception for more fraudulent practices."

For more, see White House Has 'Concerns' About Notarization Bill Seen As Foreclosure Cover.

DeKalb Cops, Feds Raid Suspected Loan Modification Scam Operation; Walk Off With Four Car Loads Of Records, Dozens Of Computers

In DeKalb County, Georgia, WGCL-TV reports:
  • DeKalb police executed a search warrant at Matrix Capital Resources Tuesday. They are sorting out the details of the sale pitch that lured in hundreds of unsuspecting mortgage clients. Police hope the evidence will seal their case against Fred Lee, who they said is the mastermind behind Matrix Capital.

***

  • [P]olice filled four car loads with records from the company. Police are investigating allegations of fraud and theft. One of those boxes may hold the key that could land Lee behind bars. “We are out here conducting a search warrant on Matrix Capital Resources, looking for documents and uncovering other victims that we may not know about at this time,” said Sgt. John Germano of the DeKalb County Police Fraud Unit.

  • The DeKalb police and Secret Service agents confiscated dozens of computers. Each of the computers they believe holds the stories of victims who have lost their homes. “We are looking at any related documents that would reveal any loan modifications either successful or unsuccessful,” Germano said.

  • The files confiscated in this search warrant will likely detail how the ploy worked, police said. Police say Lee travels from state to state, community to community, and church to church selling hundreds of people on the hope of a lowering their mortgages. The cost was $1,500 up front. Police said Lee told clients that while the loan is in the modification process, they don’t have to make payments.

For the story and video, see Search Warrant Executed At Loan Modification Company.

Fla. F'closure Mill Wins Round 1 In State AG's Dubious Document Probe; Is Appeal Next, Or Will AG Give Up & Throw In The Towel? (Everyone's Watching!)

In West Palm Beach, Florida, The Palm Beach Post reports:
  • Florida's attorney general has no authority to investigate or discipline one of the state's large foreclosure law firms, a Palm Beach County judge ruled Monday.

  • The five-page ruling from Circuit Judge Jack S. Cox was in response to a request from the Shapiro & Fishman law firm to quash an attorney general's subpoena for information. The attorney general's office announced in August it was investigating Shapiro & Fishman, which has offices in Boca Raton and Tampa, as well as two other large firms that represent lenders in foreclosure hearings.

  • Cox said the Florida Bar, not the attorney general's office, is responsible for investigating allegations of misconduct, including complaints that foreclosure paperwork was doctored in order to rush cases through the courts.(1)

For more, see Judge rules in favor of so-called foreclosure mill.

(1) A notation on the Florida AG's website indicates that its probe "relates to a civil -- not a criminal -- investigation." The AG's office was not probing possible criminal conduct, but possible civil violations of the Florida Deceptive and Unfair Trade Practices Act (F.S. 501.201 et seq.).

I may be wrong on this, but on the surface, this court's ruling supports the seemingly ridiculous proposition that Florida attorneys and law firms are immune from civil lawsuits (at least those brought by the state attorney general) for violations of the Florida Deceptive and Unfair Trade Practices Act. An appeal should be forthcoming, in my view.

Maybe the state AG's office would be better off conducting a (or "recruiting" the local county prosecutor's office and/or U.S. Attorney's office for participation in a joint) criminal investigation, which clearly is not within the purview of The Florida Bar ("A guardian for the integrity of the legal profession" in Florida, according to its website).

Wells Fargo Stands Pat On Mass-Produced Foreclosure Document Scandal; Insist Robosigned Affidavits Are Accurate

Bloomberg News reports:
  • Wells Fargo & Co. is standing by the accuracy of foreclosure filings and won’t follow competitors in delaying seizures, after an employee testified he signed documents for proceedings without personally reviewing records. The bank said yesterday it doesn’t plan to halt repossessions because its “procedures and daily auditing demonstrate that our foreclosure affidavits are accurate.”

For more, see Wells Fargo Foreclosures Proceed After Data Queried.

See also the San Francisco Chronicle's The Bottom Line blog: Wells Fargo on foreclosure checks: "We don't need no stinkin' audits."

Ohio Secretary Of State Warns Against Mortgage Industry Gambit To Minimize Problems With Bogus Notarizations

In a recent interview with American Public Media, Ohio Secretary of State Jennifer Brunner made this observation on an apparent mortgage industry response to the recent brouhaha involving bogus notarizations(1) and foreclosure robosigners:
  • And what's very interesting is that on Sept. 27, Congress very quickly passed House Resolution 3808 (PDF) and it requires that state and federal courts honor notarizations from another state as long as they were lawful in that state.

  • It seemed innocuous at first, but when you really look into it, and you look into what's happening out there with technology and mortgages, and see that there are states with very lax laws and allow for electronic notarization without even presenting in front of a notary.

  • It seems very clear that there an attempt of the banking industry to flank what's being discovered by consumers with a lot of indignation.

For the transcript of the entire interview, see Faulty foreclosure papers notarized.

(1) See Ohio Secretary Of State Asks Feds To Open Criminal Probe Into 'Robo-Notary' Abuses Involving Mass-Produced Foreclosure Docs; Lists 5 Violations Of Law for recent action taken by Secretary of State Brunner in connection with dubious notarizations on foreclosure documents.

Wednesday, October 06, 2010

Stall Foreclosures As Long As Possible, Say Junior Mortgage Bond Investors As Loan Servicers Keep Coughing Up The Cash, Absorbing Up The Pain

A recent story in The Wall Street Journal noted the effect the foreclosure suspensions in connection with the recent robosigner brouhaha may have on cash flow for the holders of junior mortgage bonds:
  • While it is unclear whether the delays will have a deep impact on the market for bonds, the changes are already creating some unexpected outcomes, say investors.

  • When houses that have been packaged into a mortgage bond are liquidated at a foreclosure sale—the very end of the foreclosure process—the holders of the junior, or riskiest debt, would be the first investors to take losses.

  • But if a foreclosure is delayed, the servicer must typically keep advancing payments that will go to all bondholders, including the junior debt holders, even though the home loan itself is producing no revenue stream.

  • The latest events thus set up an odd circumstance where junior bondholders—typically at the bottom of the credit structure—could actually end up better off than they expected. Senior bondholders, typically at the top, could end up worse off.

  • Not surprisingly, senior debt holders want banks to foreclose faster to reduce expenses. Junior bondholders are generally happy to stretch things out. What is more, it isn't entirely clear how the costs of re-processing tens of thousands of mortgages will be allocated. Those costs could be "significant" said Andrew Sandler, a Washington, D.C., attorney who represents mortgage companies.

  • "This is sort of an extraordinary situation," said Debashish Chatterjee, a vice president for Moody's Investors Service who covers structured finance. By delaying foreclosures, "it means the subordinate bondholders don't get written down for a much longer period of time, and they keep getting payments."

For the story, see Mortgage Investors Are Set for More Pain.

LI Judge "Extends Invite" To RoboSigning Duo To Appear At F'closure Settlement Meeting While Hammering Lender's Lawyer In Failed 'Bamboozle' Attempt

In Riverhead, New York, a recent ruling in a foreclosure action presided over by Suffolk County Supreme Court Justice Peter H. Mayer merits a quick note here.

In his ruling denying, without prejudice, a motion for an Order of Reference,(1) Justice Mayer sounds like someone who believes he may have just nabbed a couple of multiple corporate hat-wearing robosigners, along with the attorney representing the foreclosing lender, attempting to bamboozle him with the various documents that they submitted in court in their effort to force a sale of the home securing the loan purportedly owned by the plaintiff.(2)

Those interested in the facts should read the ruling; it suffices to say here the lender's attorney took a bit of a hammering, and that robosigners Sherry Hall (possibly also known as "Sherri D. Hall") and Nikole Shelton have been ordered to appear at the Foreclosure Settlement Conference scheduled in this case for November 17, 2010.(3)

For the ruling, see Deutsche Bank Trust Ams. v McCoy, 2010 NY Slip Op 51664(U) (NY Sup. Ct. Suffolk County, September 21, 2010).

(1) Justice Mayer set forth the following legal basis under New York law for denying the lender's request to move forward with the foreclosure:
  • Only where the plaintiff is the assignee of the mortgage and the underlying note at the time the foreclosure action was commenced does the plaintiff have standing to maintain the action (U.S. Bank, N.A. v Collymore, 68 AD3d 752, 890 NYS2d 578 [2d Dept 2009]; Federal Natl. Mtge. Assn. v Youkelsone, 303 AD2d 546, 755 NYS2d 730 [2d Dept 2003]; Wells Fargo Bank, N.A. v Marchione, 69 AD3d 204, 887 NYS2d 615 [2d Dept 2009]; First Trust Natl. Assn. v Meisels, 234 AD2d 414, 651 NYS2d 121 [2d Dept 1996]).

  • An assignment executed after the commencement of an action, which states that it is effective as of a date preceding the commencement date, is valid where the defaulting defendant appears but fails to interpose an answer or file a timely pre-answer motion that asserts the defense of standing, thereby waiving such defense pursuant to CPLR 3211[e] (see, HSBC Bank, USA v Dammond, 59 AD3d 679, 875 NYS2d 490 1445 [2d Dept 2009]).

  • It remains settled, however, that foreclosure of a mortgage may not be brought by one who has no title to it and absent transfer of the debt, the assignment of the mortgage is a nullity (U.S. Bank, N.A. v Collymore, 68 AD3d 752, 890 NYS2d 578 [2d Dept 2009]; Kluge v Fugazy, 145 AD2d 537, 536 NYS2d 92 [2d Dept 1988]).

  • Indeed, a plaintiff has no foundation in law or fact to foreclose upon a mortgage in which the plaintiff has no legal or equitable interest (Wells Fargo Bank, N.A. v Marchione, 69 AD3d 204, 887 NYS2d 615 [2d Dept 2009]; Katz v East-Ville Realty Co., 249 AD2d 243, 672 NYS2d 308 [1st Dept 1998]).

  • Either a written assignment of the underlying note or the physical delivery of the note prior to the commencement of the foreclosure action is sufficient to transfer the obligation, and the mortgage passes with the debt as an inseparable incident (U.S. Bank, N.A. v Collymore, 68 AD3d 752, 890 NYS2d 578 [2d Dept 2009]).

  • Although the February 28, 2008 assignment states it is "effective January 19, 2008," such attempt at retroactivity is ineffectual. If an assignment is in writing, the execution date is generally controlling and a written assignment claiming an earlier effective date is deficient, unless it is accompanied by proof that the physical delivery of the note and mortgage was, in fact, previously effectuated (see, Bankers Trust Co. v Hoovis, 263 AD2d 937, 938, 694 NYS2d 245 [1999]).

  • A retroactive assignment cannot be used to confer standing upon the assignee in a foreclosure action commenced prior to the execution of the assignment (Countrywide Home Loans, Inc. v Gress, 68 AD3d 709, 888 NYS2d 914 [2d Dept 2009]; Wells Fargo Bank, N.A. v Marchione, 69 AD3d 204, 887 NYS2d 615 [2d Dept 2009]). Plaintiff's failure to submit proper proof, including an affidavit from one with personal knowledge, that the plaintiff was the holder of the note and mortgage at the time the action was commenced, requires denial of the plaintiff's application for an order of reference.

(2) A similar paperwork gambit used in another New York case (Deutsche Bank Natl. Trust Co. v Maraj, 18 Misc 3d 1123, 2008 NY Slip Op 50176; January 31, 2008, Schack, J.) left one Brooklyn trial judge scratching his head wondering if he was the target of a "corporate 'Kansas City Shuffle' - a complex confidence game" (a reference to the 2006 film, Lucky Number Slevin, in which the term is explained by a hitman played by Bruce Willis). See also Brooklyn Judge Presides Over A Corporate "Kansas City Shuffle" In Foreclosure Action?

(3) Justice Mayer expresses some of his "dismay" towards the foreclosing lender's attorney in this unaltered excerpt:

  • Counsel also submits an Affirmation of Compliance with CPLR 3408, which states that "[w]e have determined that this loan is not subprime," and that the defendants "are not entitled to a court conference" (emphasis in original).

  • Despite counsel's assertions, the plaintiff's own affidavit of merit states that "[w]e have determined that this loan is subprime" and that "the defendants are entitled to court conference" (emphasis added).

  • The direct contradiction between counsel's "belief" and the assessment of one whose affidavit states, as in this case, that she has "first-hand knowledge of the facts and circumstances surrounding this action," validates this Court's approach in refusing to accept counsel's assertions as fact in any given foreclosure action.

  • The mistaken "belief" of an attorney who has no personal knowledge of the facts, yet opines in court documents that a homeowner-defendant is not entitled to a statutorily required court conference, may prejudice the homeowner's rights while subjecting the attorney to otherwise avoidable court sanctions.

Jurist, Media Reporter Give Their Views On Foreclosure Robo-Signers

Democracy Now! recently did an on-camera interview with Kings County (Brooklyn), New York Supreme Court Justice Arthur Schack and Mother Jones magazine reporter Andy Kroll for their views on the recent foreclosure brouhaha getting major coverage from media outlets around the country.

For the interview (approximately 15 minutes), see Lenders Forced to Suspend Thousands of Foreclosures.

Citigroup, Ally/GMAC, MERS Face Civil Racketeering Class Action Filed On Behalf Of Kentucky Homeowners Facing Foreclosure

Bloomberg News reports:
  • Citigroup Inc. and Ally Financial Inc. units were sued by homeowners in Kentucky for allegedly conspiring with Mortgage Electronic Registration Systems Inc. to falsely foreclose on loans. The lawsuit, filed as a civil-racketeering class action on behalf of all Kentucky homeowners facing foreclosure, also names as a defendant Reston, Virginia-based MERS, the company that handles mortgage transfers among member banks. The suit claims that through MERS the banks are foreclosing on homes even when they don’t hold titles to the properties.

For more, see Citigroup, Ally Sued for Racketeering Over Database.

Tuesday, October 05, 2010

Florida Judge Sticks Standing-Lacking Lender With $30K Tab For Homeowner's Legal Bill After Booting Case

In Loxahatchee, Florida, The Wall Street Journal reports:
  • Israel Machado's foreclosure started out as a routine affair. In the summer of 2008, as the economy began to soften, Mr. Machado's pool-cleaning business suffered and like millions of other Americans, he fell behind on his $400,000 mortgage.
  • But Mr. Machado's response was unlike most other Americans'. Instead of handing his home over to the lender, IndyMac Bank FSB, he hired Ice Legal LP in nearby Royal Palm Beach to fight the foreclosure. The law firm researched the history of Mr. Machado's loan and found two interesting facts.
  • First, the affidavits IndyMac used to file the foreclosure were signed by a so-called robo-signer named Erica A. Johnson-Seck, who routinely signed 6,000 documents a week related to foreclosures and bankruptcy. That volume, the court decided, meant Ms. Johnson-Seck couldn't possibly have thoroughly reviewed the facts of Mr. Machado's case, as required by law.
  • Secondly, IndyMac (now called OneWest Bank) no longer owned the loan—a group of investors in a securitized trust managed by Deutsche Bank did. Determining that IndyMac didn't really have standing to foreclose, a judge threw out the case and ordered IndyMac to pay Mr. Machado's $30,000 legal bill.(1)

***

  • Mr. Ice, who started Ice Legal four years ago, portrays his firm's work as defending the integrity of the legal process surrounding foreclosures. Banks can't repossess houses if they're using sloppy, and in some cases fraudulent paperwork, or if they can't prove that they own the loan. He says his firm has between 300 and 500 similar cases pending.

For more, see Foreclosure? Not So Fast.

(1) Florida foreclosure defense attorneys have got their motions ready for attorneys fees requests as courts have begun dismissing foreclosures based on these bogus documents. In Florida, where an agreement allows for an attorney fee award to one of the contracting parties (mortgage loan agreements typically allow a foreclosing lender to tack on its attorney fee to the amount owed on a loan when suing a homeowner to enforce the mortgage terms), state statute mandates an award of prevailing party attorney's fees to the other party under the reciprocity provisions of section 57.105(7), Florida Statutes; Landry v. Countrywide Home Loans, Inc., 731 So. 2d 137 (Fla. 1st DCA 1999).

Not only might the lender and servicer be court-ordered to cough up fees to the homeowners' attorneys, it's possible that the foreclosure mill law firms representing the lenders/servicers (at least in Florida) may also be ordered to foot part of the tab as well by reason of
section 57.105(1), Florida Statutes (bold text is my emphasis, not in the original text):

  • Upon the court’s initiative or motion of any party, the court shall award a reasonable attorney’s fee, including prejudgment interest, to be paid to the prevailing party in equal amounts by the losing party and the losing party’s attorney on any claim or defense at any time during a civil proceeding or action in which the court finds that the losing party or the losing party’s attorney knew or should have known that a claim or defense when initially presented to the court or at any time before trial:

    (a) Was not supported by the material facts necessary to establish the claim or defense; or

    (b) Would not be supported by the application of then-existing law to those material facts.

(For an old (July/August, 2000) article in The Florida Bar Journal that may be of some value in providing guidance to lawyers in requesting court-ordered, prevailing party attorneys fees from losing defendants (ie. lenders, servicers, etc.), see Pleading Requirements for a Claim for Attorneys' Fees.)

Two Canadian Tourists Find Themselves Illegally Locked Out Of Rented Home By Foreclosing Lender After Returning From Day At Beach

In Punta Gorda, Florida, the Sarasota Herald Tribune reports:
  • Two Canadian tourists returning to their rental home from a day at the beach found evidence burglars had struck -- or so it seemed. Their laptop computer and MP3 player were missing, as were six bottles of wine. A half-empty beer opened by the intruders was still cold and sitting on the kitchen counter.

  • But why, then, had the locks on the front door been changed? It turns out that a Sarasota company working for a lender trying to retake the property through foreclosure sent two men to the Punta Gorda home to break in and change the locks, even though the home was obviously occupied.

  • It is illegal for any bank representative to enter a property if they have not yet retaken it at a foreclosure sale, especially if there is any sign the home is occupied, foreclosure experts say. The process of banks hiring people to break into homes, even when occupied, is just the latest oddity of the messy foreclosure crisis in Florida. Some property owners are reporting the break-ins to law enforcement as burglaries. Yet investigators consider the disputes a civil matter because the contractors do not display criminal intent. That essentially leaves the property owners without recourse.(1)

***

  • In North Port, one family returned home from a weekend vacation and called their attorney in a panic: The front door lock was changed, the alarm system dismantled and family gerbil gone.

  • Landlord Brenda Perron of Sarasota has been in a three-year battle with Bank of America, which has sent people to change the locks on Perron's rented condo three times because the bank mistakenly believed her condo was in foreclosure.

***

  • Another man went to check on the North Port property his father owned to find his keys no longer worked, magazines moved from where they were in the home, cabinets opened and some tools missing.

For more, see Bank changes locks on occupied, foreclosed homes.

(1) Other than to file a civil lawsuit against the bank and the trash-out contractor. Other media reports reveal that at least one Massachusetts law firm is apparently going around the country taking on these illegal lockout cases on behalf of screwed-over homeowners. See:

For those homeowners who've been screwed over by wrongful lockouts by foreclosing lenders (and their confederates) and seek some possible guidance on how much their cases might be worth if they seek to sue, see:

Maryland Man Cops Plea In Sale Leaseback, Equity Stripping Ripoff That Targeted High-Equity Homeowners With Unaffordable House Payments

From the Office of the U.S. Attorney (Baltimore, Maryland):
  • James William Fox II, age 40, of Crofton, Maryland, pleaded guilty [] to conspiracy to commit wire fraud in connection with a mortgage fraud scheme which promised to help homeowners facing foreclosure keep their homes, but left them with no equity and no longer holding the title to their properties.

***

  • According to Fox’s plea agreement, he met James Hooper Dan, age 45, of Annapolis, Maryland, when both were loan officers at a mortgage brokerage in Annapolis. Beginning in 2006, Fox began to identify prospective borrowers who owned and had equity in their homes, but who could not afford their mortgage payments and were at risk of losing their homes because they were either in foreclosure, bankruptcy or financial distress.

  • Fox, and sometimes Fox and Dan, told potential victims that they could "rescue" them and save their houses. The promises involved transferring the home to Fox or Dan, who would obtain a new mortgage loan. Fox and Dan promised to make the payments on the new mortgage loan for six months or a year, during which time the individual would "repair" their credit, refinance the property and reacquire it. During this six month or one-year period, the individual was to continue living in the house.

For the entire U.S. Attorney press release, see Crofton Loan Officer Pleads Guilty to Mortgage Fraud Scheme.

Minn. Sale Leaseback, Equity Stripping Victim Wins Back Free & Clear Home With Help From Non-Profit Law Firm As Judge Voids Sale & Subsequent Mortgage

In St. Paul, Minnesota, the Housing Preservation Project announces:
  • The Foreclosure Relief Law Project(1) won a major victory [...] in a prolonged equity stripping lawsuit. After a two day trial, the Court ordered that the homeowner now owns her home free and clear of a mortgage.

  • Almost two years ago, Ms. Sandra Gustafson approached the Foreclosure Relief Law Project because she was facing eviction from the home she has owned for almost 20 years. Ms. Gustafson was the victim of an elaborate equity stripping scheme orchestrated by a now-defunct company called Midwest Equity Consultants. Midwest Equity linked homeowners in foreclosure with “investors.”

  • An “investor” purchased Ms. Gustafson’s house and immediately sold it back to her on a contract for deed. Per the terms of the contract for deed, Ms. Gustafson was to refinance her home after 15 months. As is true with most equity stripping transactions, Ms. Gustafson was in no position to refinance her property, leaving her on the brink of eviction, as well as the loss of her $125,000 in equity to the “investors.”

***

  • In previous hearings before the Court, the Plaintiff successfully argued that Midwest Equity and the “investors” violated various provisions of Minnesota’s equity stripping laws. The Court also agreed with the Plaintiff that the mortgage that financed the transaction was void, because it violated state law and public policy.(2)

  • At trial, the bank that financed the transaction asked the Court to force Ms. Gustafson to repay the bank for its loss. The Court held that there was no legal basis to do so and denied the bank’s request.

For the entire press release, see Major Victory For Coon Rapids Homeowner In Equity Stripping Case.

(1) The Foreclosure Relief Law Project is a program of the Housing Preservation Project (“HPP”). HPP is a non-profit law firm based in St. Paul, Minnesota. Ms. Gustafson was represented by Jane Bowman and Mark Ireland.

(2) I suspect that the court found that the mortgage lender (presumably unwittingly) financing the sale leaseback ripoff was not entitled to bona fide purchaser status and, accordingly, was not entitled to the protection of the state recording statutes, thereby leading to its security interest in the premises being voided in favor of the superior, albeit unrecorded, rights and equities of the defrauded homeowner.

When dealing in real estate under Minnesota law (and under the law of most, if not all, other states as well), it is not enough for a purchaser or mortgage lender to merely examine defects in the record chain of title, but also, to discover anyone who is in open possession of land. If a person other than the seller/mortgage borrower is found to be in open possession of the premises, the purchaser/mortgage lender has a duty to inquire directly of the person in possession as to what the nature of that possession is.

A purchase/mortgage loan against the premises without first inquiring into the facts underlying that possession has generally been regarded as the strongest evidence of bad faith on the part of the purchaser/lender, and accordingly, said purchaser/lender acquires its interest in the premises subject to any unrecorded rights and equities that the possessor can establish. Such a failure to make inquiry, a negligent or willful closing of the eyes to visible pertinent facts, has been regarded as an intentional avoidance of the truth which it would have disclosed.

Such a purchaser/mortgage lender is generally considered to be on notice of such outstanding unrecorded rights and equities and, accordingly, is not a bona fide purchaser entitled to the protection of the state recording statutes.

For a survey on some of the Minnesota case law in this regard, see Minnesota Bona Fide Purchaser, Possession, Duty Of Inquiry.

For other states, see Bona Fide Purchaser Doctrine, Possession Of Property By Occupants Other Than The Vendor & The Duty To Inquire.

Monday, October 04, 2010

Maine Residents File Class Action Suit In Effort To Hold Lender Accountable For Allegedly "Routinely & Systematically" Using False F'closure Documents

In Biddleford, Maine, the Molleur Law Office announces:
  • Five Maine residents filed a complaint(1) today [Oct 1, 2010] against GMAC Mortgage, LLC ("GMAC") on behalf of themselves and a class of Maine homeowners alleging that the company routinely and systematically files false certifications that it has a right to foreclose on Maine homeowners, and false affidavits when asking courts to enter foreclosure judgments.

***

For more, see Molleur Law Files Class Action Complaint Against GMAC.

See also Lexology: Archibald v. GMAC Mortgage, LLC may be start of new class action wave over allegedly defective affidavits (requires subscription; if no subscription, GO HERE, then click appropriate link for the story).

(1) For the GMAC Maine Class Action Lawsuit and related documents, see:

(2) Mr. Cox, an attorney who reportedly has retired from the practice of law but apparently has yet to leave the "playing field" (see Retired Maine Attorney Joins Fight Against Foreclosures; Volunteers Services With Local Legal Aid Program), successfully represented a homeowner facing foreclosure as co-counsel in a case decided by the Maine Supreme Court in August. Based on the facts in that case, the Maine high court found that MERS was 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. See Mortgage Electronic Registration Systems, Inc. v. Saunders, et al., 2010 ME 79 (August 12, 2010).

Central Florida's "Hang 'Em High, Harry" Ready To Wield Heavy Gavel To Hammer Sloppy Foreclosure Mills Unable To Follow Simple Court Rules

In Sarasota, Florida, the Sarasota Herald Tribune reports:
  • Criminal defense attorneys used to call Judge Harry Rapkin "Hang 'Em High Harry" for his tough prison sentences, and his latest crackdown in foreclosure court might have home lenders trying to come up with a similar nickname.

  • Rapkin unleashed a new order last week, aimed at attorneys for lenders who are still making the kind of simple errors that would be considered ridiculous in any courtroom. A lot is at stake; Rapkin sees hundreds of cases where the lender is minutes away from taking someone's property. Rapkin's new order completely dismisses foreclosure cases when they do not follow the simplest of rules.

***

  • "This isn't brain surgery," said Sarasota attorney Michael Belle, who reviews foreclosure filings for the judges as part of a court-sponsored program. On Sept. 24, the day Rapkin debuted the order, a quarter of the 250 cases seeking his permission to retake property made one of the errors, 61 in all.

  • Rapkin's checkboxes [listing the most common mistakes he sees in foreclosures] give him a quick way to make rulings on the cases. But it also has a twinge of ridicule: as in, can you believe professional attorneys can get things this wrong? Belle said it is a sad commentary about how a judge feels he must hold the hand of these attorneys just to meet elementary standards. "Judge Rapkin is now finally saying I can't trust these guys anymore, so here's what I'm going to do," Belle said.

For more, see Sarasota judge simplifies foreclosure cases (COURTROOM: A checklist of filing errors can bring a case to a halt).

Fort Lauderdale-Area Court System Not Immune To 'Kangaroo-Itis' In Foreclosure Actions As Local Chief Judge Takes "See No Evil, Hear No Evil" Posture

In Fort Lauderdale, Florida, WFOR-TV Channel 4 ran a story that made the following reference to the goings-on at the local county courthouse in connection with foreclosure actions that, to some, may appear to be a rubber-stamping kangaroo court system, and where the local chief judge is seemingly taking his cues from Mizaru, Kikazaru, and Iwazaru, better known as the proverbial "Three Wise Monkeys":
  • If there's any question about how bad the mortgage foreclosure crisis is, all you need to do is sit in on special courts like the one in Broward County. They do nothing but handle mortgage foreclosure cases using retired judges paid by the state of Florida. The special foreclosure courts were set up by the state in July with $9.6 million in seed money to try to reduce the backlog of some 67,000 foreclosure cases statewide.

  • In Broward County, the I-Team found the line of lawyers handling these cases stretching out the door and some cases before a judge lasting mere minutes to close. "We're under a mandate from the legislature to track the cases," said the Honorable Victor Tobin. Judge Tobin heads Broward County's special foreclosure court and oversees its operations. "We're under the gun to move 62% of those cases (off the docket) in one year," said Judge Tobin.

  • Though the retired judges preside over as many as 600 to 700 cases a week, Judge Tobin disagrees with those who charge that the cases are rushed through. "There is no pressure on that judge in the contested docket to move the cases in any particular fashion," said Judge Tobin. "You take your time, give everybody a hearing, be sure they're heard, listen to the arguments and (then) rule (in the case on the merits.)"

  • But critics, such as [local foreclosure defense attorney Roy] Oppenheim, say that pressure to clear the calendar and move the cases has resulted in rushed judgments, sloppy judicial decisions and even cases of judges overlooking forged or unverified documents such as unverified bank notes and mortgages.

  • "The banks effectively, in my opinion, hijacked the judicial system where the judicial system to a large extent became a private collection agency for the banking industry," said Oppenheim. Oppenheim calls these special foreclosure courts "rocket dockets" And he says homeowners get burned when judges more often than not side with banks at times without even seeing or reading evidence presented by the homeowner.

  • "These (unverified) affidavits these judges have known have had problems for well over a year and allowed these to steam roll through," said Oppenheim. "And not fulfill, in my opinion, their constitutional oath of office as judges. In terms of protecting and upholding both the United States Constitution and the Florida Constitution in terms of protecting the Constitutional rights, the property rights of homeowners and citizens of this state."

  • Judge Tobin disagrees."They (the judges) are under no edict to side with the bank as opposed to the homeowner," said Judge Tobin. Judge Tobin admits mistakes get made but he defends the system of specialized foreclosure courts. "You can't look at 50,000 cases…and not have a problem in individual cases," said Judge Tobin. "I haven't really seen it here in the 17th (Judicial Circuit.) I know they've had (problems or) issues have been raised in other jurisdictions. I know the (Florida) Attorney General is looking at the issue. We haven't really had it. But that doesn't mean that it's not there."

  • In fact, the problem of fraudulent court documents is so bad Florida's Attorney General has now opened a criminal investigation.

Source: I-Team: Mortgage Help Not Helping.

In a related column, see Naked Capitalism: Florida’s Kangaroo Foreclosure Courts: Judges Denying Due Process on Behalf of Banks.

DOCX Foreclosure "Document Fabrication" Price Sheet?

4closurefraud.org has an interesting post on the DOCX’s GetNet™ Document Recovery solution, which DOCX describes in its promotional literature as:
  • "[a] national network of runners that is engaged to provide document recovery, expedited recordation services, title searches, and insurance submissions.

DOCX claims in its promotional literature that:

  • "The service is unique in that our clients can request that DOCX obtain any missing recordable documents through this web site through our online GetNet™ Work Order Form. Status of existing projects can also be obtained through our Online Services."

For more on this document retrieval service, including the DOCX price sheet (in downloadable form, ready for easy distribution to foreclosure defense attorneys, government investigators, journalists, members of Congress, consumer advocates, homeowners, and any other interested persons), see Psst. Hey you, yea, you. I got just what you need. Lender Processing Services’ DOCX Document Fabrication Price Sheet.

Mortgage Loan Servicing's 'Dirty Dozen'

In West Palm Beach, Florida, Fraud Digest reports:
  • On September 28, 2010, Fraud Digest released its list of the Dirty Dozen - the mortgage servicing companies most responsible (in the opinion of Fraud Digest) for flooding courts with millions of fraudulent mortgage assignments and Affidavits in foreclosure cases. Robo-signing (preparing over 10,000 sworn statements each month with no actual knowledge of the truth of the matters asserted) was certainly not limited to Jeffrey Stephan and GMAC Mortgage.(1)

Go here for Fraud Digest's Dirty Dozen.

Thanks to Deontos .is for the heads up on the Dirty Dozen list.

(1) Recent Fraud Digest reports cite the work of some of the more seemingly notorious "multiple corporate hat-wearing vice presidents" (also commonly referred to as "robo-signers" and "affidavit slaves") around the country that no doubt appear to have played significant roles in the creation of the "flood" of dubious documents currently clogging the courts (linked names below contain additional information on each):

September 30, 2010 report:

  • To assist JPMorgan Chase, Fraud Digest suggests that it dismiss those actions where the Affidavits or Mortgage Assignments were signed by the following robo-signers: Beth Cottrell, Whitney Cook, Christina Trowbridge and Stacy Spohn from the Chase Home Finance office in Franklin County, OH; Margaret Dalton and Barbara Hindman from the Jacksonville, FL office of JPMorgan Chase; and any of the Lender Processing Services robo-signers from the Dakota County, MN office including Christina Allen, Liquenda Allotey, Christine Anderson, Alfonzo Greene, Laura Hescott, Bethany Hood, Cecelia Knox, Topako Love, Jodi Sobotta, Eric Tate, Amy Weis and Rick Wilken.

September 29, 2010 report:

  • On September 29, 2010, another "Corrective Assignment" came to light, filed by the Florda law firm of Shapiro & Fishman. (See Corrective Assignment #2 in the Pleadings Section of Fraud Digest.) Like the first Corrective Assignment, a statement appears in bold that the new Assignment was filed because Linda Green [go here for even more on Linda Green], now infamous robo-signer from Lender Processing Services in Fulton County, GA, did not have authority to sign as an officer of Mortgage Electronic Registration Systems (MERS) when she signed the first Assignment.

September 23, 2010 report:

  • China Brown has been employed for many years in the Ft. Mill, SC offices of America's Servicing Company, a division of Wells Fargo Bank, N.A. She signed many different job titles on mortgage-related documents, often using different titles on the same day. She often signs as an officer of MERS ("Mortgage Electronic Registration Systems, Inc.") On many Mortgage Assignments signed by China Brown, Wells Fargo, or the trust serviced by ASC, is shown as acquiring the mortgage weeks or even months AFTER the foreclosure action is filed. Titles attributed to China Brown include the following: Assistant Secretary, MERS, as Nominee for 1st Continental Mortgage Corporation; Assistant Secretary, MERS, as Nominee for American Brokers Conduit; Assistant Secretary, MERS, as Nominee for American Financial Resources, Inc.; Assistant Secretary, MERS, as Nominee for Amtrust Bank; Assistant Secretary, MERS, as Nominee for DSKL Enterprises, Inc. dba Mortgage Masters of the Treasure Coast; Assistant Secretary, MERS, as Nominee for First Magnus Financial Corp., an Arizona Corp.; Assistant Secretary, MERS, as Nominee for Guaranty Bank; Assistant Secretary, MERS, as Nominee for Impac Funding Corporation; Assistant Secretary, MERS, as Nominee for Ivanhoe Financial, Inc., a Delaware Corp.; Assistant Secretary, MERS, as Nominee for Lenders Direct Capital Corp.; Assistant Secretary, MERS, as Nominee for RBC Mortgage Company; Assistant Secretary, MERS, as Nominee for Shelter Mortgage Company, LLC; and Vice President of Loan Documentation, Deutsche Bank National Trust Company, as Trustee for First Franklin Mortgage Loan Trust 2006-FF11, by Wells Fargo Bank, N.A., as Attorney-in-Fact.

September 21, 2010 report:

  • Tywanna Thomas was employed for many years in the Alpharetta, GA offices of Lender Processing Services. She signed many different job titles on mortgage-related documents, often using different titles on the same day. She often signed as an officer of MERS ("Mortgage Electronic Registration Systems, Inc.") There are at least four distinct versions of the Tywanna Thomas signature, indicating that several different persons signed the name “Tywanna Thomas.” Titles attributed to Tywanna Thomas include the following: [click here for the list of at least 20 "corporate hats" allegedly worn by Tywanna Thomas].

September 20, 2010 report:

  • In thousands of cases, [Jeffrey] Stephan signed as an officer of many different banks and mortgage companies, including [lists approximately 20 job titles]. [...] Stephan often signed as an officer of mortgage companies that had filed for bankruptcy or dissolved. (Go here and go here for more on Jeffrey Stephan).

September 20, 2010 report:

  • Kathy Smith has been employed for several years in the Jacksonville, FL (Duval County) offices of Lender Processing Services, Inc. She signs many different job titles on mortgage-related documents, often using different titles on the same day. She often signed as an officer of MERS ("Mortgage Electronic Registration Systems, Inc.") She often signs documents with other LPS-Jacksonville employees including Alisa Dhimitri, Theresa Esposito, Michelle Halyard, Michael Hunt, Joseph Kaminski and Cynthia Stevens. Titles attributed to Kathy Smith include the following: [lists 7 titles ].

September 19, 2010 report:

  • Denise Bailey has been employed for several years in the Houston, TX (Harris County) offices of Litton Loan Servicing, LP. She signs many different job titles on mortgage-related documents, often using different titles on the same day. [...] She often signs documents with other Litton Loan Servicing employees Diane Dixon and Marti Noriega. She often does not disclose that she is working for Litton Loan Servicing and signs to assign mortgages TO Litton Loan Servicing or its client trusts. [...] Titles attributed to Denise Bailey include the following: [lists 5 titles].

September 16, 2010 report:

  • Jessica Ohde was employed for many years in the Alpharetta, GA offices of Lender Processing Services. She signed many different job titles on mortgage-related documents, often using different titles on the same day. She often signed as an officer of MERS ("Mortgage Electronic Registration Systems, Inc.") There are at least four distinct versions of the Jessica Ohde signature, indicating that several different persons signed the name “Jessica Ohde.” Titles attributed to Jessica Ohde include the following: [lists six titles].

Mass. AG Begins Probe Into Mortgage Lenders Over Foreclosure Irregularities; Asks Them To Stop Actions Until They Can Show State Law Was Complied With

In Boston, Massachusetts, The Boston Globe reports:
  • Attorney General Martha Coakley said yesterday that her office is investigating Bank of America and other creditors for their possible failure to follow state foreclosure laws, and she asked the lenders to put a temporary freeze on foreclosure proceedings in Massachusetts.

  • We are concerned about revelations that Bank of America and other major lenders have failed to properly review foreclosure documentation,’’ Coakley said in a statement. "In light of these revelations, we are asking Bank of America and other major creditors to cease foreclosure proceedings for Massachusetts homeowners until they can demonstrate that they have complied with Massachusetts law.’’

For more, see Coakley is investigating Bank of America, others.

Sunday, October 03, 2010

Title Insurer Extends Policy-Writing Suspension To JP Morgan Chase Foreclosures

The New York Times reports:
  • A major title insurance company has stopped insuring homes foreclosed by JPMorgan Chase, another sign that the controversy over the legal practices of the big lenders is starting to influence the housing market.

  • The company, Old Republic National Title Insurance, told its agents Friday that it would not write policies on foreclosed Chase properties until “the objectionable issues have been resolved,” according to a memorandum sent out by the firm’s underwriting department.(1)

  • A Chase spokesman declined to comment. Old Republic executives did not return calls for comment. The title insurer, which is based in Minneapolis, said earlier in the week that it would not write policies for properties that had been foreclosed by another big lender, GMAC Mortgage.

For more, see Company Stops Insuring Titles in Chase Foreclosures.

See also, USA Today: Old Republic to stop writing policies for some foreclosures:

  • [M]aryln Weiner, a title agent and real estate lawyer in Boca Raton, Fla., said she received a bulletin saying that Old Republic would also not insure title policy to a purchaser who has bought a property from Chase when the bank has foreclosed on the home and are now selling it to third parties.

  • "They won't insure it after completion after the foreclosure," Weiner says. "This is going to set us back years. It's really going to be a mess. I think you're going to see actions to reopen foreclosures that already took place. This will have tremendous consequences and all title companies will do the same thing. We've never seen anything like this before."

(1) It seems to me that the underwriting department should also be concerned with the mortgages purportedly held by Chase, GMAC, etc. on those homes that are not in foreclosure as well. It stands to reason that if these companies can't prove that they own the loans that are in foreclosure, they probably can't prove that they own the loans they purportedly hold that aren't in foreclosure, either. Should a non-delinquent borrower decide to sell his/her home in a standard, conventional transaction (or any borrower for that matter, delinquent or not, who is trying to unload the home in a short sale), who does the title/closing agent look to for the satisfaction of mortgage when paying off the home seller's existing loan??? (If the purported existing mortgage lender can't prove that it owns the loan they claim to hold, they certainly have no authority to sign the satisfaction of mortgage.)

In theory, at least, it seems that the entire residential real estate sales industry, in my view, should be coming to a grinding halt by the end of the month.

Florida Congressman Takes To YouTube To Explain The Foreclosure Mess Created By The Home Loan Industry

Congressman Alan Grayson of Florida's 8th District (Orlando area) has taken to YouTube to provide a clear, cogent explanation of what foreclosing lenders, loan servicers, foreclosure mills, Mortgage Electronic Registration Services ("MERS"), "robosigners"/"affidavit slaves"/multiple corporate hat-wearing vice presidents and others have done to create the foreclosure mess we all find ourselves in, and which is beginning to cause the major loan servicers to begin suspending foreclosure actions and withdrawing the dubious documents they've been filing in court.

For the video (just under 8 minutes), see Fraud Factories: Rep. Alan Grayson Explains the Foreclosure Fraud Crisis.

Thanks to Deontos .is for the heads-up on the video.

The Ghosts Of The Dearly Departed WAMU, Lehman Brothers Continue Cranking Out Foreclosure Docs?

Shelter Island, New York attorney Abigail Field writes in AOL's DailyFinance:
  • GMAC, JPMorgan Chase and Bank of America and One West Bank employees routinely sign hundreds of documents without verifying what they're signing. Those documents are then submitted to courts as if the documents were true, to enable the banks to foreclose on delinquent properties. Wells Fargo and CitiMortgage told the New York Times their employees do not engage in similar practices. Yet new evidence I've found shows they have. At deadline, I was still awaiting response from the banks.

***

  • For example, in one case I reviewed, Herman John Kennerty of Wells Fargo gave a deposition describing the department he oversees for Wells Fargo. It's a department dedicated to simply signing documents. Kennerty testified that he signs 50 to 150 documents a day, verifying only the date on each.

  • What else might he want to verify? Well, in one document he signed that I've reviewed, he supposedly transferred the mortgage from Washington Mutual Bank FA to Wells Fargo on July 12, 2010. But that's impossible, since Washington Mutual Bank FA changed its name in 2004, and by any name WaMu ceased to exist in 2008, when the FDIC took it over.

***

  • In a similar example, one M. Matthews signed a number of documents that CitiMortgage has used to try to foreclose on properties. While Matthews may or may not sign hundreds of documents a day -- I have not yet found a deposition in which he swears that he does -- he certainly does not seem to verify the contents of the documents he's signing.

  • For example, he signed a document supposedly transferring a mortgage from Lehman Brothers to Citi in 2009. It's hard to see how that's possible, since Lehman had already ceased to exist. When confronted with its nonsensical filing, Citigroup decided not to foreclose. Instead, it gave the homeowner a meaningful mortgage modification -- $15,000 principal reduction, plus a 30-year fixed mortgage at 3%.

For more, see Robo-Signing Scandal Spreads: Documents Show Citi and Wells Also Committed Foreclosure Fraud.

1st Time Homebuyers May Be Out Thousand$ In Tax Credits Due To Stalled Closings Resulting From Recent 'Robo-Signer' Mess

HousingWire reports:
  • Homebuyers who were set to close on the purchase of a foreclosed home may not qualify now for the homebuyer tax credit after lenders suspended those sales in 23 states, real estate agents tell HousingWire. The closing deadline for the homebuyer tax credit was extended earlier in the year from July 30 to Sept. 30 in order to make sure more first-time buyers received the $8,000 credit. Existing homeowners were set to get $6,500.

***

  • "There are brokers who were at the closing table, with their buyers, and GMAC (Ally) pulled the carpet out from underneath them. Can you imagine the lawsuits they are going to have, for the people expecting the tax credit, which had to transfer title by Sept. 30?" one REO broker told HousingWire.

For more, see Foreclosure robo-signers put homebuyers' tax credit at risk.

Lawsuit: Timeshare Outfit Uses Foreclosure Threat In Attempt To Squeeze $276 In Late Fees Over "Missing Penny"

In Passaic County, New Jersey, Courthouse News Service reports:
  • An attorney claims his Hawaiian timeshare company charged him $276 in late fees and threatened to foreclose on his property because he owed it a penny. Jonathan Dorman says the Kahana Beach Vacation Club subjected him to abuse and threats until he wrung from it the information that it was charging him 20 months of late fees for a penny - which a supervisor said "appeared to be the result of a computer glitch."

***

  • He says he offered to pay the penny, but the accounts receivable rep refused to accept it, but "continued to verbally berate plaintiff," and said he "was on the phone to get plaintiff to the pay $276.77 that was past due." [...] Dorman seeks punitive damages for fraud and violations of the Fair Debt Collection Act. He filed the case pro se.

For more, see Lawyer Fights $276 in Late Fees & Foreclosure Threat, Over a Penny.

For the lawsuit, see Dorman v. Kahana Beach Vacation Club an Consolidated Resorts, Inc.

Fresno Feds: Duo Pocketed Bank Loan Proceeds While Simultaneously Conning High-Equity Elderly Home Sellers Into Owner Finance, Equity Stripping Ripoff

In Fresno, California, The Sacramento Bee reports:
  • The founder and longtime owner of Century 21 Apollo real estate was arrested Friday and charged with defrauding banks and elderly homeowners of more than $10 million. Jim Lankford, 71, and his roommate, Jon McDade, 46, bilked seniors and lenders for 11 years, according to a federal grand jury indictment [].

***

  • Authorities say the men targeted seniors who owned homes free and clear and ran schemes that enriched the two with multiple loans on each property. Some homes were sold in short sales with Lankford's firm reaping commissions or lost to foreclosure, the indictment says.

  • "Lending institutions did not know the loans they were extending were going to purchase property for which there was seller-backed financing, and sellers who agreed to finance the purchases did not know that the defendants had [simultaneously] obtained loans from lending institutions to purchase the properties," the document reads.

  • In some cases, Lankford filed deeds with forged signatures or deceived elderly owners into signing away their homes "by telling them it had another legal purpose," authorities allege.

***

  • Authorities previously said Lankford was the mastermind behind erasing a $22,400 loan by filing a document in 1999 -- "signed" by a woman who had died in 1995. He faced six felony charges, but a judge threw them out because investigators discovered the alleged crime after the statute of limitations had expired.

For the story, see Feds indict Modesto men in real estate scheme.

For the U.S. Attorney (Sacramento/Fresno) press release, see Modesto Century 21-Apollo Realty Owner Charged With Defrauding Elderly Homeowners ($10 Million in Losses Alleged):

  • The indictment alleges that the defendants would divert the proceeds of the mortgage loan to themselves, and would lull the elderly property owners by mailing them monthly interest-only payments.

For the indictment, see U.S. v. Lankford, et ano.

Pending NYS Law Targets Loan Modification Scams, Deed Ripoffs; Bill Awaits Governor's Sign-Off

In the Throgs Neck section of The Bronx, the New York Daily News reports:
  • The bottom-feeders are back, but a bill on Gov. Paterson's desk could protect distressed Bronx homeowners from fraud. Two years after the subprime mortgage crisis imploded, unscrupulous loan modification consultants are still scamming homeowners like Angeleta Beckford.

  • The 54-year-old coughed up more than $17,000 for consultants who promised to save her Throgs Neck home from foreclosure - not knowing she could have gotten free help from the state, said Senator Jeff Klein (D-Bronx, Westchester), the bill's sponsor.

  • One firm took $400 per month from Beckford. Another persuaded her to sign over the deed and title to her home, she charged. "They scammed me," said Beckford. "I spent so much money. ... It's a nightmare."

  • Many scammers have been charged with fraud in federal court. But other cold-blooded consultants continue to prey on Bronx homeowners, Klein said, by flooding their mailboxes with flyers that make false promises.

  • The bill requires consultants to put a disclaimer on loan modification ads telling homeowners they can receive similar services for free through the New York State Banking Department.

For the story, see Home fraud shield law on Gov. Paterson's desk would fight loan scams.

Saturday, October 02, 2010

Schwarzenegger Signs Bill Targeting Forensic Loan Audit Ripoffs

In Sacramento, California, The Sacramento Bee reports:
  • California homeowners could get protection from "foreclosure-relief" scams under a bill signed into law by Gov. Arnold Schwarzenegger. Assemblyman Ted Lieu, D-Torrance, said his measure targets so-called forensic loan audits, where homeowners paid upfront fees, purportedly to determine their lender's compliance with state and federal mortgage laws.

For the story, see New state law targets mortgage relief scams.

California AG: "I'm Directing Chase To Prove It Is Following The Law Before It Continues Foreclosures In California!"

From the Office of the California Attorney General:
  • Attorney General Edmund G. Brown Jr. has demanded that JP Morgan Chase prove immediately that it is complying with state law or, if it cannot, halt foreclosing on California homes. "I'm taking this action to further protect California homeowners on the brink of foreclosure," Brown said, "JP Morgan Chase, like GMAC/Ally Financial, has admitted that its review of key foreclosure documents was a ruse." "I'm directing Chase to prove it is following the law before it continues foreclosures in California," Brown added.(1)

For the California AG press release, see Brown Demands JP Morgan Chase Suspend Foreclosures Unless It Can Demonstrate Compliance with California Law.

Go here for AG Brown's letter to JP Morgan Chase.

(1) The recent revelations about JP Morgan Chase and GMAC/Ally couldn't have come at a better time for AG Brown, who currently finds himself in a tight race for governor.

BofA Joins Parade Of Lenders Hitting Brakes On F'closures In 23 States; Company 'Robo-Signer' Signed Up To 8,000 Docs/Month Without Reviewing Them

The Washington Post reports:
  • Bank of America, the nation's largest bank, on Friday became the latest lender to put foreclosures on hold in 23 states because of concerns that court documents it submitted were improperly prepared.

  • Bank of America and other mortgage companies have been under pressure to review their paperwork after employees and contractors said in sworn depositions that, because of the enormous volume, they hadn't had the time to read the documents, much less check them for accuracy.

***

  • A Bank of America executive, Renee Hertzler, said in a February deposition in Massachusetts that she signed as many as 8,000 foreclosure documents a month without reviewing them. The deposition is similar to others taken from document processors at J.P. Morgan Chase and Ally Financial, which have also frozen foreclosures over the past week. The statements were taken by lawyers for homeowners contesting the seizure of their homes.

For more, see Bank of America latest to put hold on foreclosures amid paperwork concerns.

Atlanta-Area Law Enforcement Probes Alleged Loan Modification Racket Accused Of Ripping Off Thousand$ From Financially Strapped Homeowners

In Atlanta, Georgia, WGCL-TV Channel 46 reports:
  • A CBS Atlanta exclusive investigation has exposed a local company victimizing people who are trying to lower their home and car loans. CBS Atlanta has spoken with dozens of families who say they've been devastated by one man who's profiting off their misfortune.

  • Fred Lee, an agent with Matrix Capital, has been served with a cease-and-desist order in Georgia and he is under investigation by the DeKalb County Police Department, but you'd never know it. His business is booming and the number of victims is growing.

***

  • Lee and his company, Matrix Capital, sell people the promise of a loan modification for $1,500 up front. He said he'll get you a lower interest rate, and while he's negotiating, you don't have to make a payment. You can live mortgage free. And people have believed him. He holds packed meetings across the Southeast, luring in new clients. [...] But his victims say they were never told their homes might go into foreclosure. And no one we spoke with had a successful modification through Lee.

***

  • DeKalb County Police now tell us they have also launched an investigation into Fredrick Lee's company. They started investigating Lee four months ago when 30 victims stepped forward to police to tell them the same story. "Essentially it is a theft, a fraud,"(1) Sgt. John Germano said.

  • Germano told us Lee has been skirting the law, moving from state to state,(2) changing his company name, and preying on people in dire financial situations. In fact, CBS Atlanta News found out in 2007 the Georgia Department of Banking and Finance issued Lee a cease and desist letter ordering him to stop brokering mortgages in Georgia. "That company changed names, but continued to do business," Germano said.

***

  • If you have information on Fred Lee or Matrix Capital, please email [CBS Atlanta's Wendy Saltzman] at wendy.saltzman@cbsatlanta.com. You can also contact the DeKalb County Police Fraud Unit at 770-724-7704.

For the story, see Company Promises Lower Mortgage Payments (Lands Clients In Foreclosure).

(1) Georgia law enforcement authorities recently charged another alleged loan modification scammer with racketeering and theft by deception (see Self-Proclaimed Minister Faces Racketeering, Theft By Deception Charges For Allegedly Ripping Off Homeowners By Peddling Bogus Loan Modifications).

(2) According to the report, Lee was busted in Maryland doing the same thing. Another cease and desist order was issued there, but police say Lee has worked his way around the system and around the country making the same sales pitch. Reportedly, Lee also applied for and got a mortgage license in North Carolina in 2002, but his license was later revoked. Lee was said to have been sued over loans he brokered in Virginia.

Customers Claim Forensic Loan Audit Outfit Left Them Out Thousand$ & Homeless

In Rancho Cordova, California, KOVR-TV Channel 13 reports on companies U.S. Loan Auditors and My U.S. Legal, two firms who have been accused by disgruntled clients of ripping them off out of thousands of dollars by claiming to perform forensic loan audits on their home loan documents, purportedly in an effort to avoid foreclosure.

For the story, see Call Kurtis Investigates: U.S. Loan Auditors (Families Say The Company Took Thousands; They Ended Up Homeless).

Store Owner Suspects City Of Using Code Enforcement Rules To Take His Property, Squeeze Him Out Of Business

In Plantation, Florida, the South Florida Sun Sentinel reports:
  • For the latest example of local government run amok, look no further than the small Farm Store owned by Nasir Ahmed on Peters Road in Plantation. It's a drive-through convenience store where people roll up to buy beer, cigarettes and milk.

  • After nearly 15 years of ownership — after working hard, paying his taxes and paying off the mortgage — Ahmed might lose the store because of a city code-enforcement nightmare. What Ahmed says were minor violations have turned into a $156,700 fine and a foreclosure judgment.

  • "I think the city wants this property," said Ahmed, 52, an immigrant from Bangladesh. "Ever since I paid off the mortgage, there's been problems."

***

  • If the city wants this property for a public purpose, eminent domain allows government to take it by paying the owners fair market value. But this seems like a squeeze play to force Ahmed off the land.

For more, see Plantation store owner could lose property in code-enforcement nightmare (City gets foreclosure order after fine surpasses $150,000).

Bedbug Invasion In Rented Condo Has Tenant's Skin Crawling; Complex Management Says It's Not Their Problem; Says Unit Owner May Be In Foreclosure

In Phoenix, Arizona, KPHO-TV Channel 5 reports:
  • They are trapped in Scotch tape like fingerprints from a crime scene. Bree Daniels said it's the evidence that bedbugs have infested her Phoenix condo. "I woke up one night and saw one crawling out of my electrical socket, and I freaked out," Daniels said.

  • Daniels lives at the Paradise Village II complex near 19th Avenue and Cactus Road, and said the problem started a month ago. "I got rid of my bed, I threw out all the comforters, all the sheets, and the pillows," she said. Daniels said the infestation was so widespread, that the only safe place to sleep was the bath tub. "I haven't had a good night's sleep since this started," she said.

  • Daniels contacted CBS 5 News because she said she couldn't get anyone from the complex management to take care of the problem. They told us that she might be out of luck. "Unfortunately in her situation, we're not the ownership or management in charge of her unit," said complex manager Jaramiah Cox.

  • Cox said Daniels' unit might be going through foreclosure and whoever owns it has not contracted with his management company. Meanwhile, Daniels is stuck with a problem that makes her skin crawl just thinking about it. "A hair falls on your arm and you think something's crawling on you. It's psychologically damaging," she said.

Source: Phoenix Woman Losing Sleep Over Bedbugs (Complex Manager Says He Can't Help Battle Infestation).

Would-Be Renter Out $1350 In Craigslist Rent Ripoff; Scammer Tricked Victim Into Transacting Bogus Deal Inside Bank Where He Claimed To Be Employed

In Sarasota, Florida, the Sarasota Herald Tribune reports:
  • Nothing Betty Baker experienced after she replied to an ad on Craigslist for a $750-per-month apartment in June gave the single mother any reason to pause. The owner walked Baker through the spotless duplex, the paperwork was in perfect order. So she met the owner at the bank where he worked to sign the lease and hand over a $1,350 check for the deposit and rent.

  • The check was cashed. Then, citing damage from a water leak, the owner postponed the move-in date several times. Then he stopped calling, and Baker could not find him. She returned to Synovus Bank on Main Street in Sarasota -- she had previously handed the man her money there -- and was given the bad news by an employee in the lobby.

  • "He said, 'I hope you didn't give him any money because someone else was just there with the same story,'" Baker said. "That is the moment when my heart sank and I knew this guy just got me for nearly $1,400." The "owner" turned out to be anything but. He also was not a bank employee. The lease was bogus.

***

  • Sarasota police identified the man who they say scammed Baker as Teddy Foster and discovered that he allegedly bilked two more people out of $1,000 on the same property in the same manner a month earlier. There is a warrant for his arrest.

  • He is part of a fast-growing national scam tied closely to the foreclosure crisis and the Great Recession. The millions of vacant homes that have resulted are ready-made bait for stressed people looking for the cheapest rent possible. The prevalence of the swindle -- with endless variations that also can target the real owner or property manager -- is also a sign of scammers desperate for quick cash.

***

  • The basic scam works this way: The fraudster finds a vacant home from the ranks of foreclosures, or via a legitimate for-rent advertisement, and places an ad on Craigslist for a below-average price. Included are various perks: all utilities included, or perhaps multiple pets allowed.

***

  • Sarasota Police Det. Jack Carter had no complaints of online rental scams last year but already has had a dozen since January, three now in various stages of prosecution. The charge is a third-degree felony that carries with it the potential for five years in jail and a fine of up to $5,000.

  • "The permutations are unbelievable," Carter said. "Sometimes the victims show up on the same day and say, 'I'm renting this place,' and the other says, 'No, I'm renting this place,' and the third says, 'No, I'm renting this place." The scammer often gets the renter off Craigslist but converses with them in other ways to avoid the site's roving online security teams looking for fraud. "They have gone as far as to get a transient to meet the renter at the house," Carter said. "They think the guy is a gardener or caretaker letting them into the house." The house in question has been broken into ahead of time and unlocked.

***

  • Many law enforcement agencies in Southwest Florida say they have not received any complaints, but Julie LeLande, owner of Sarasota's LeLande Properties, said many cases she has dealt with have gone unreported. "None of the people I've talked to have reported it to the police," she said. "It is just so rampant."

For more, see Web-based scam snaring renters.

Friday, October 01, 2010

Ohio Secretary Of State Asks Feds To Open Criminal Probe Into 'Robo-Notary' Abuses Involving Mass-Produced Foreclosure Docs; Lists 5 Violations Of Law

From the Office of the Ohio Secretary of State:
  • Ohio Secretary of State Jennifer Brunner, Ohio’s chief elections officer and the state officer responsible for licensing notary publics, [...] revealed that she has referred specific instances of notary abuse occurring at Chase Home Mortgage in Columbus and by the Mortgage Electronic Registration Systems, Inc. (MERS) to a federal prosecutor for investigation.

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  • Secretary Brunner, in two letters dated Aug. 11, 2010 and Sept. 1, 2010, referred matters of alleged notary abuse in thousands of home mortgage foreclosures by Chase Home Mortgage and the Mortgage Electronic Registration Systems, Inc. to U.S. District Attorney Steven Dettelbach in Cleveland. Citing two depositions, (one & two) of Chase employee Beth Cottrell, taken in Columbus in May of 2010, and a deposition of MERS Secretary and Treasurer, William Hultman taken in New Jersey in April of 2010. These depositions contain sworn testimony that at Chase Home Mortgage, 18,000 documents per month are executed and notarized per month by eight people, with admissions that:

    1) it is the notary and not the document signer who gives an oath who fills in numbers in the affidavits used in court ordered foreclosures,

    (2) no oath is administered for the signing of each document,

    (3) notarized documents are not verified by the person signing and giving oath that they have personal knowledge of the contents of the documents, but rather, signers are relying on verification by others,

    (4) documents are signed in bulk and notarized in bulk separately,

    (5) notaries know this at the time they notarize documents in this process.

  • It’s not fair to consumers or to the employees who by virtue of their jobs, are signing these documents. I urge the U.S. Department of Justice to take up this investigation with vigor and purpose to protect consumers and hold financial institutions to the standards of scrutiny and exactitude required by law, even if it means prosecuting some of our largest corporations. These apparent violations of state law point to schemes that merit federal investigation of large institution lending practices and use of the U.S. Postal Service.

For the entire Ohio Secretary of State press release, see Secretary Brunner Outlines Two Lines of Attack in Fighting High Ohio Foreclosure Rates.