Central Florida Woman Threatened With Foreclosure Says She Was Scammed Out Of Her Deed By Sale Leaseback Peddler; Now Sues To Recover Title To Home

In Orange County, Florida, WFTV-TV Channel 9 reports:

• An Orange County woman thought she was being rescued from foreclosure, only to realize she was scammed out of the deed to her home. Now, she's fighting to get her home back. Claudina Mills worked two jobs to try to keep her Azalea Park home, but in 2007, the bank threatened to put it into foreclosure. She thought Tim Moore and the company Goodbye Foreclosure was the answer.

• Mills signed a contract she thought would allow her to lease her home from Goodbye Foreclosure until she got back in good financial standings with the bank, but what she didn't realize is she signed the deed of her home over to the company.

• "Back in 2007 this was extremely popular and what they would do is get it deeded to them and ultimately sell it at a higher amount and make a profit and kick the homeowner out," Matt Englett of KEL Attorneys said.

• Englett thinks that's what Moore had planned to do with Mills' home, but then the market collapsed and he couldn't sell the house for more than what was owed on the mortgage. Mills is now suing to get her name back on the deed and get out of foreclosure.

***

• Her attorney said it's a breech of contract. Goodbye Foreclosure was supposed to pay off her mortgage and never did. [...] Englett says their chances in court are excellent, but he says the right thing for Goodbye Foreclosure to do is sign Claudina Mills' deed back over to her out of court.(1)

For the story, see Woman Says She Was Scammed Out Of Deed To Home.

(1) For some insights on the various legal theories and startegies to attacking this type of scam in civil litigation brought on behalf of the screwed-over homeowner, see:

• Foreclosure Rescue Scams I (part of a larger work from the National Consumer Law Center),
• Foreclosure Rescue Scams II (work made available online by the State of Washington Office of the Attorney General).

Title Mix-Up Leads To Home Sale Out From Under Now-Homeless Kansas City Senior

In Kansas City, Missouri, WDAF-TV Channel 4 reports:

• An elderly woman was evicted [last month] from the house she's lived in for more than 10 years on Kansas City's east side, but not because she was behind on her mortgage or because of foreclosure.

• Norma Rozzelle could only watch and cry as sheriff's deputies removed her belongings from her home. The 70-something-year-old woman lived in the home for more than 10 years and claims to be the rightful owner.

• "The house has been paid for since 1989," Rozzelle said. "It belonged to Elbertdine Madison, and she deeded everything over to me." But when Rozzelle's friend and roommate Elbertdine Madison passed away in 2005, Rozzelle's attorney said the transfer of the deed was never recorded properly. As a result, relatives of Madison staked a claim to the house and a long protracted probate battle over her estate ensued.

• A court eventually determined Madison's relatives to be the rightful owners, and unbeknownst to Rozzelle, they sold the house on the courthouse steps for a little more than $13,000. "I would describe this situation as someone has taken total advantage of this mother," said Spencer Lamar Booker. "There's complex problems here of paperwork miscommunications. The legal administrator is not contacting her properly. She has something that was put up on her doorstep that says landlord tenant. She clearly has the warranty deed to this house."

• The new owner, Realty AQ, offered to sell the home to Rozzelle for $60,000. Rozzelle refused, still believing she is the rightful owner. Now she doesn't know where she'll live. The Bethel AME Church is collecting Rozzelle's belongings and will put her up until she can find someplace else to live. She has vowed to fight on, saying she does have a warranty deed showing she's the legal owner of the house.

Source: Property Deed Mix Up Evicts Elderly Woman from Home of 10 Years.

Court Tacks $55K In Homeowner's Attorney Fees Onto $41K Damage Award Against Home Contractor Found Liable For Substandard Work

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

• A Jefferson County jury recently found that a contractor failed to honor his agreement with local resident Fred Pouncy, awarding the man $41,270 in damages and his attorney, David W. Starnes, an additional $55,000.

• As the Southeast Texas Record previously reported, Pouncy filed a lawsuit against Jesse and Bonnie Blankenship of Blankenship Welding on Dec. 30, 2008, alleging the substandard building the company constructed prevented him from obtaining windstorm insurance. The case went to trial on Oct. 25 and ended four days later, with jurors finding that the Blankenships committed fraud and deceptive trade practices(1) and breached their contract with Pouncy.

For more, see More than half of 96K verdict awarded to attorney.

(1) In Texas, successful lawsuits brought for violations of the Texas Deceptive Trade Practices Act entitle the winning consumer to have a court tack on his/her legal fees onto any damage award granted by a court, as was done in this case.

An important note here is that it is not all that uncommon for the attorney fee award in these types of consumer cases to exceed the damages awarded to the consumer. The beauty of some of these consumer protection laws (if you're the screwed over consumer, that is) is that experienced consumer protection attorneys who are used to working on a contingency fee basis are out there and will take on cases over seemingly small amounts, provided, of course, that there are strong facts and ample proof that the applicable consumer protection law was violated (and, of course, there is(are) a defendant(s) having deep enough pockets to cough up the cash for the legal fees in a successful suit). Consumer litigators experienced at bringing actions under the Federal Fair Debt Collection Practices Act are particularly known for bringing suits over small damage claims.

The story is silent as to whether the homeowner's attorney took the case on a contingency fee basis, and if so, whether there was any contingent fee risk multiplier (see generally, The Yale Law Jounal: The Contingency Factor In Attorney Fee Awards) applied when calculating the $55,000 legal fee.

For a survey of state consumer protection laws throughout the U.S., see National Consumer Law Center: CONSUMER PROTECTION IN THE STATES: A 50-State Report on Unfair and Deceptive Acts and Practices Statutes.

For informative articles from The Florida Bar Journal on how these attorney fee "tack-ons" work in Florida for violations of its consumer protection law (ie. the Florida Deceptive & Unfair Trade Practices Act - "FDUTPA", see:

• Entitlement to Attorney's Fees Under FDUTPA,
• Pleading Requirements for a Claim for Attorneys' Fees.

TX Couple Sue To Recover Home Sold Out From Under Them In F'closure; Say Lender's Broken Loan Mod Promises Violate State Deceptive Trade Practices Act

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

• In hopes [to] keep the bank from taking their home, Groves residents Keith and Julia Keen have filed suit against Sun Trust Mortgage. [...] In April, the Keens could no longer afford to pay their mortgage and contacted U.S. Mortgage Solutions to apply for relief under the Obama Home Affordability Program.

• In their suit, the Keens claim Sun Trust told them they would review a new loan agreement structured by U.S. Mortgage Solutions, but on Sept. 28 Sun Trust opted to foreclose on the property "in spite of repeated representations that the paperwork was being reviewed."

• On Nov. 4 Sun Trust filed a forcible entry and detainer action to evict the plaintiffs from their home, court papers say. The Keens maintain that they would have brought their loan current if Sun Trust would have told them from the onset that it had no intention of modifying the loan agreement.

• The Keens are accusing Sun Trust of deceptive trade practices(1) and are willing to pay $10,000 to bring the loan current if the court halts the foreclosure, court papers say. They are represented by Beaumont attorney Thomas Roebuck Jr. of Roebuck Thomas Roebuck & Adams.

Source: Groves couple claims it was deceived by loan modification agreement, sues mortgage company.

(1) For those of you wondering how a couple who have already had their home sold out from under them in a foreclosure sale can afford to pay an attorney for legal services in a case like this, note that in Texas, a successful lawsuit alleging acts or omissions that constitute violations of the Texas Deceptive Trade Practices Act will allow a judge to tack on the homeowner's attorneys fees to any damages and/or other relief awarded to the homeowner, to be paid by the losing defendant.

"Zombie Debt" Buyers Cancel $9.5M+ In Consumer Debt In Settlements With WV AG; Lawyer Accused Of Threatening Suits To Collect Time-Barred Obligations

From two press releases from the Office of the West Virginia Attorney General:

• West Virginia Attorney General Darrell McGraw [last week] announced settlement agreements with three unlicensed collection agencies that will result in $1,277,648.33 in cancelled debts for 161 West Virginia consumers and $15,337.50 in cash refunds.

• The Attorney General’s Consumer Protection Division had opened an investigation against the companies – Trailhead Capital, LLC, a debt buyer based in Chicago, IL; Hollis Cobb Assoc., Inc., Trailhead’s affiliated collection agency in Norcross, GA; and Troy Capital, LLC, a debt buyer based in Las Vegas, NV – after receiving complaints that revealed the three businesses were collecting debts in West Virginia without a license and surety bond as required by state law. Records also showed that the debts the companies were attempting to collect were primarily charged-off credit card accounts originally owed to Chase, Wells Fargo Bank, and GE Capital.

• In West Virginia, businesses that purchase defaulted debts for collection, as Trailhead and Troy Capital did, cannot avoid being licensed and bonded by hiring other agencies to assist them in collecting the debts.(1)

For more, see Attorney General McGraw Recovers $1.25 Million From Three Unlicensed Collection Agencies.

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

• West Virginia Attorney General Darrell McGraw [] announced a settlement with Laurence A. Hecker, a New Jersey lawyer, and several out-of-state debt collection agencies that Hecker represents known as the APM Companies resulting in more than $7.9 million dollars in cancelled debts for West Virginians.(2)

***

• McGraw’s office began investigating Hecker and the APM Companies in 2006 after receiving complaints from West Virginia consumers who reported they were threatened with lawsuits and excessively pressured to pay alleged debts. To further embellish the lawsuit threat, Hecker sent letters to consumers on his law office stationery to demand payment of the debts. The Attorney General’s investigation revealed that the majority of the collection attempts were for "time-barred" debts, i.e., debts so old that the statute of limitations to sue had expired and lawsuits were therefore barred by law.

For more, see Attorney General McGraw Recovers $7.9 Million for West Virginians from NJ Lawyer Hecker and APM Collection Agencies.

(1) The West Virginia AG observed: "Debt buyers often take overly aggressive collection actions that include the filing of lawsuits – even when they have little proof of the debts they seek to collect from consumers."

(2) McGraw’s Consumer Protection Division entered into an agreement with Hecker and his two affiliated Pennsylvania collection agencies, APM Financial Solutions, LLC, and Account Portfolio Management, LLC. The settlement requires the cancellation of $7.9 million dollars in charged-off credit card debt that Hecker and the APM Companies attempted to collect from 1,922 West Virginia consumers. The companies also paid $45,000 toward customer refunds and consumer education and agreed to delete the debts from credit records.

L.A. Extends "Boot Ban" For Tenants In Foreclosure Evictions Thru End Of 2011

In Los Angeles, California, KABC-TV Channel 7 reports:

• Los Angeles lawmakers have made a move to protect renters from becoming victims of the foreclosure crisis. The Los Angeles City Council has voted to extend a moratorium that protects renters from being evicted when their home or apartment is foreclosed on and a new owner takes over. The council's president says the ordinance protects as many as 10,000 families from eviction.

• "They can still be kicked out for the normal reasons like not paying rent, breaking the rules, but if they're paying their rent and playing by the rules, the new owner, usually a bank, can't kick them out of a home or apartment they've been a good tenant in," said L.A. City Council President Eric Garcetti. The eviction ban will be in effect at least through the end of 2011 and does not affect rent-controlled properties.

Source: Eviction protection extended for L.A. renters.

NYC Homeowner Targets Former Owners Dead For 100 Years In Lawsuit To Quiet 'Cloudy' Title

In Elmhurst, Queens, the New York Post reports:

• A Queens woman is "summons"-ing the dead -- suing the former owners of her Elmhurst home, who died a century ago. Miriam Castro, 61, has summoned Charles Simonson, Wilder Pallez and their descendants to court to verify past ownership of the property her $700,000 house is built on.

• Chances are they won't answer -- absent a psychic. Castro, who bought the house in 1992, was denied a title-insurance policy last winter because the chain of ownership, dating back to the 1870s, was unclear. "It's certainly not the kind of lawsuit you see very often," said a source familiar with the case.(1)

Source: Qns. homeowner sues dead people.

(1) The type of lawsuit typically employed to clear up a 'cloudy' title problem on real estate is known as an action to quiet title, although I am informed that in some places, an action for declaratory relief is also a possibility.

For more on actions to quiet title (especially for those in Texas, since this work cites profusely to Texas case law), see this Quiet Title Handbook.

Fed Proposal Will Pull Rug Out From Under Homeowners Enforcing "Truth In Lending" Rights When Fighting Illegal Loans: Consumer Advocates

From a press release from the National Consumer Law Center:

• Hundreds of consumer, civil rights, legal services, community and labor groups and private and public interest attorneys representing homeowners, along with the coalition Americans for Financial Reform, urged the Federal Reserve Board to withdraw a proposed rule that would destroy a key legal tool to unwind illegal loans and avoid foreclosure.

• "We are astonished that, with the nation facing its greatest foreclosure crisis since the Great Depression, the Board's proposal would eliminate the single most powerful legal tool that homeowners currently have to stop wrongful foreclosures, the federal right to rescind an illegal loan," said Margot Saunders, Counsel to the National Consumer Law Center.

• "The proposed rule not only weakens protections against predatory lending and foreclosures, but it would give lenders more freedom to provide inaccurate information about the cost of their loans," said Michael Calhoun, President of the Center for Responsible Lending.

For more, see Fed Proposal Would Eviscerate Homeowners' Most Powerful Remedy to Stop Foreclosures of Illegal Loans (Hundreds of consumer, civil rights groups, homeowner attorneys sign letter demanding withdrawal of proposed rule).

Go here for the letter from hundreds of consumer advocates, attorneys, etc. sent to the Board of Governors of the Federal Reserve System.

Massachusetts Foreclosure Rescue Operator Gets 2-2.5 Years As Mastermind In Fraud Scam; Sale Leaseback Deals Among Ripoffs Run On Desperate Homeowners

From the Office of the Massachusetts Attorney General:

• An Oxford man has been sentenced to State Prison after pleading guilty in Worcester Superior Court for his role in a complex scheme in which fraudulent documents were used to defraud homeowners and mortgage lenders in numerous real estate transactions involving distressed properties in the Worcester County area,(1) Attorney General Martha Coakley’s Office announced [].

• Allen Seymour, age 42, pled guilty to charges of Forgery (4 counts), Uttering (8 counts), Inducing a Lender to Part with Property (12 counts), and Larceny by False Pretenses. After the change of plea, Superior Court Judge James R. Lemire sentenced Seymour to serve two years to two and a half years in State Prison, followed by five years of probation. Seymour’s State Prison sentence will begin following the completion of a federal prison sentence on an unrelated matter. Judge Lemire also ordered Seymour to pay restitution in the amount of $750,000 to the victims. While on probation, Seymour is prohibited from working in the real estate industry.

For the Massachusetts AG press release, see Oxford Man Pleads Guilty, Sentenced to State Prison in Connection with Orchestrating Complex Mortgage Fraud Scheme.

(1) According to authorities, Seymour targeted properties in danger of foreclosure. He personally approached the owners of these properties and presented a variety of rescue options. For those homeowners who merely wished to sell their property to avoid foreclosure, Seymour offered to purchase the property for the amount owed to the foreclosing lenders. For the several homeowners who wanted to remain in their homes, Seymour presented rescue plans which ranged from “lifetime leases” and “reverse mortgages” to a simple refinance. Some of these homeowners were told they would need to transfer title of the property to an “investor,” and some were not. Seymour had some homeowners sign innocuous documents to begin the process. These innocuous pages were then discarded and substituted with pages purporting to grant Power of Attorney from the homeowner to an associate of Seymour.

MD Closing Agent Cops Plea To Pocketing Real Estate Closing Cash Meant For Existing Mtg Payoffs; Title Insurance Underwriter Left Holding $3.7M Bag

From the Office of the U.S. Attorney (Baltimore, Maryland):

• Anthony V. Weis, age 45, of Phoenix, Maryland, pleaded guilty [] to wire fraud in connection with a mortgage fraud scheme to defraud lenders of approximately $3.7 million in just eight months.

***

• According to Weis’s plea agreement, Weis was the president and a shareholder of Maple Leaf Title LLC (MLT), a real estate title agency located in Towson, Maryland. Weis directed MLT employees in 13 real estate closings conducted between February and September 2009 to withhold the payoff checks from institutions that held the existing mortgage loan notes on the properties. In each instance, the settlement statement sent to the borrower’s lender falsely represented that the payoff was being made.

• In an effort to conceal the fraud scheme, Weis caused monthly mortgage payments to be made to the banks holding the mortgage notes. Believing that the bank had been paid off as a result of the settlement, the borrower stopped making monthly payments on that mortgage. And since that lender was receiving monthly payments, it had no reason to notify the borrower of any delinquency. However, because Weis was unable to send checks in every case where he had misappropriated the payoffs from escrow, a number of MLT clients received delinquency notices for non-payment of the mortgage note. A few were threatened with foreclosure and were forced to hire attorneys to prevent being ejected from their homes.

• Because the existing mortgages had not been paid off, the liens against the property were not removed and a title free of pre-existing liens and claims (clear title) could not be passed to the new lender and borrower. An insurance company had issued title insurance policies to the borrowers guaranteeing clear title. As a result of Weis’s criminal conduct, the title insurance company ultimately paid out $3.7 million to financial institutions that held mortgage notes.

For the U.S. Attorney press release, see Towson Title Agency Operator Pleads Guilty in $3.7 Million Mortgage Fraud Scheme (Failed to Make $3.7 Million in Pay Offs to Mortgage Lenders Holding Liens on 13 Properties).

NJ Scammer Used Forged Documents To Pocket $700K In Mortgage Proceeds On Elderly Woman's Home; Senior Now Faces Foreclosure

In Ocean Grove, New Jersey, WCBS-TV Channel 2 reports:

• A New Jersey woman was scammed out of all of her money after being duped by a woman she met at church. [... Nancy] Yobbagy worked hard, saved her money, and expected to retire on the Jersey Shore. Now, though, her house is in foreclosure and all of her money has been lost to a scam artist.

***

• Yobbagy trusted that woman, Zina Martin, to invest her money. They met at church, and Yobbagy eventually handed over her modest pension, as well as that of her husband. Yobbagy received statements every month showing impressive returns of 15 percent and more, but those statements were false. Prosecutors said Martin spent the money on herself, and it didn’t stop there.

• “I got a call from a bank saying, ‘you’re in default on your mortgage,’” Yobbagy said. “I said, ‘you must have the wrong number, because my mortgage is paid.’” Yobaggy hired a lawyer who said Zina Martin forged the paperwork for two mortgages – adding up to about $700,000 – and then let them go into default.

• “She caused this house to go into foreclosure,” Yobbagy’s attorney, Richard DeVita, said. "Nancy has lost every cent of every dollar she’s ever worked for.”

For the story, see NJ Woman Victim Of Scam Artist She Met In Church (Nancy Yobbagy, 78, says a scam artist she met at church stole her life savings).

Foreclosure Mill Does The "Affidavit Two-Step" In Central Florida; Begins To Flood Court With Letters Requesting Judges To OK "Document Do-Overs"

In Central Florida, the St. Petersburg Times reports:

• Judges in Pinellas-Pasco Circuit Court say they've never seen anything like the letters they've been receiving over the past few weeks from the South Florida foreclosure law firm of David J. Stern.

• Referring to Florida Bar rules that say lawyers have a duty to disclose false evidence presented to the court, the letter said that unbeknownst to Stern's attorneys, previously submitted affidavits in foreclosure cases "may not have been properly verified" by the lender. But no worries: Substitute documents, this time "verified," would be forthcoming.

• This highly unusual move — call it the affidavit two-step — is hitting foreclosure courts around the country as lenders try to regroup from revelations that employees never read or properly notarized critical loan documents that were processed at mind-boggling speed.

***

• The legal system is trying to figure out how to respond to lenders' requests for do-overs while foreclosure cases continue to clog the courts. In Maine, a judge ruled that GMAC's submission of a [robosigning Jeffrey] Stephan affidavit amounted to "bad faith" and ordered the lender to pay the homeowner's attorney fees and costs.

***

• McGrady, the chief judge, said the timing of when substitute affidavits are filed could determine their impact. "If the affidavits differ and there's a contradiction in facts, that could prevent a summary judgment and then it would have to go to trial or it could be dismissed," McGrady said. "But if the case has already gone to summary judgment or sale, there could be a motion to vacate the judgment, then a hearing and we'll start all over again. There will be a problem where the house has already been purchased by a third party."(1)

For more, see Robosigning in Florida foreclosure cases leads to requests for affidavit 'do-overs' in local courts.

(1) If the bogus affidavits are found to be absolutely void (as opposed to merely voidable), the foreclosure judgments based on the void affidavits could arguably be found to be absolutely void as well. In this case, any innocent third party would be out of luck regarding the ownership of their home (even if they had no knowledge of the facts surrounding the dubious documents), and would have to rely on their title insurance policies to obtain indemnification for their losses.

Alternatively, if the bogus affidavits are found to be merely voidable, the foreclosure judgments would probably found to be voidable as well, in which case, a third party purchaser's ownership claim to the home will withstand an attack, if and only if, said purchaser qualifies for protection as a bona fide purchaser.

The distinction between void and voidable judgments in Florida was described by a state appeals court deciding a mortgage foreclosure case in Sterling Factors Corp. v. U.S. Bank Nat'l Ass'n, 968 So. 2d 658 (Fla. App. 2d 2007):

• There is distinction between a judgment that is "void" and one that is "voidable." See generally Malone v. Meres, 91 Fla. 709, 109 So. 677 (Fla. 1926).
  
  A void judgment is so defective that it is deemed never to have had legal force and effect.
  
  In contrast, a voidable judgment is a judgment that has been entered based upon some error in procedure that allows a party to have the judgment vacated, but the judgment has legal force and effect unless and until it is vacated. Id.; see also State v. Chillingworth, 126 Fla. 645, 171 So. 649, 652 (Fla. 1936); Chisholm v. Chisholm, 98 Fla. 1196, 125 So. 694 (Fla. 1929); Paleias v. Wang, 632 So. 2d 1132 (Fla. 4th DCA 1994) (Klein, J., concurring).
  
  A voidable judgment can be challenged by motion for rehearing or appeal and may be subject to collateral attack under specific circumstances, but it cannot be challenged at any time as void under rule 1.540(b)(4).
  
  A trial court's lack of subject-matter jurisdiction makes its judgment void. N.W.T. v. L.H.D. (In re D.N.H.W.), 955 So. 2d 1236, 1238 (Fla. 2d DCA 2007). So, too, a judgment that is entered against a defendant when the court has no personal jurisdiction over the defendant is generally regarded as a void judgment. Great Am. Ins. Co. v. Bevis, 652 So. 2d 382, 383 (Fla. 2d DCA 1995).

For a survey of court rulings from across the U.S. on void judgments, see:

• Everything You Always Wanted To Know About Void Judgments But Were Afraid To Ask!,
• LibertyForLife.com: Law of Voids (if link expires, TRY HERE).
• For those of you in Virginia, see The Difference Between Void and Voidable Judgments In Virginia.

Spooked Home Loan Industry Looks To Dodge Criminal Responsibility For Robosigner Mess Through Settlement Talks With State AGs

The Washington Post reports:

• State attorneys general and the country's biggest lenders are negotiating to create a nationwide fund to compensate borrowers who can prove they lost their home in an improper foreclosure, state and industry officials said. The fund would present a solution for both sides, helping banks avoid lengthy and costly court challenges from homeowners and aiding state investigators in their efforts to seek relief for homeowners who were wronged, the officials said.

***

• The fund, the first of its kind in the mortgage industry, would mirror victim-compensation efforts set up in recent years in response to the BP oil spill in the Gulf of Mexico, the shootings at Virginia Tech and the terrorist attacks of Sept. 11, 2001. Those were all administered by a specially appointed czar, Kenneth Feinberg, who had the tough task of figuring out what each victim should receive.(1)

For more, see States, mortgage lenders in talks over fund for borrowers in foreclosure mess.

(1) At this point, it may be that homeowners and their attorneys could be better off continuing to bring their cases in court without regard to any attempt by the state attorneys general to intervene on their behalf and reach a monetary "settlement." The lenders should probably be told to take their proposed settlement fund and shove it. This entire problem could have been avoided a couple of years ago had the lenders dealt with this problem in good faith. Their new-found "willingness" to negotiate (and stop their profuse 'bleeding') is just an attempt to wiggle their way off the hook in a matter that, to the extent the government intervenes, it should probably do so in criminal, not civil, court proceedings.

Florida Bar Puts Out Call To Judges Around State To Blow The Whistle On Rule-Breaking Foreclosure Mill Attorneys

The Florida Times Union reports:

• Out of the more than 200 lawyers the Bar suspended or stripped of licenses this year, none was punished for lying in a foreclosure trial or making fake documents for one, behavior that a cottage industry of critics works to document. But that could change quickly.

• This month, the Bar was investigating 43 reports of some type of foreclosure fraud involving 32 lawyers. One involves a Jacksonville judge’s ruling this year that lawyers from a South Florida firm committed “fraud on the court.” A new category solely for foreclosure fraud was added recently to the Bar’s system for tracking complaints.

• To find new cases, the head of the Bar is asking judges around the state to report lawyers who break the rules — and pointing specifically to news coverage of claims about foreclosure suits.

For more, see Foreclosure firms facing action from the Florida Bar (Lenders’ lawyers have already been taking some knocks in court).

The Bleeding Continues For South Florida Assembly Line Foreclosure Mill King

Mother Jones reports:

• The bleeding just won't stop for David J. Stern, the South Florida foreclosure baron and attorney who built an empire within the foreclosure industry, only to see it crumble. The subject of an eight-month investigation by Mother Jones published in August, Stern and his companies learned [last] week that Wells Fargo was the latest bank cutting ties with Florida's foreclosure king, who handled thousands of foreclosures for the bank. Wells said it will instead send cases to other Florida foreclosure firms, the The Palm Beach Post reported.(1)

For more, see Wells Fargo Dumps Foreclosure King.

(1) For other Mother Jones reporting on the now near-defunct Law Office of David J. Stern, see:

• Exposing David J. Stern, Foreclosure Baron (The MoJo must-read that launched a national investigation);
• Inside Foreclosure King David Stern's Downfall (How bad is it for David J. Stern's foreclosure empire? Business is down 90 percent, 70 percent of staff is laid off);
• Fannie, Freddie Seize Stern Documents (The latest blow to the Florida foreclosure king, the subject of an eight-month MoJo investigation);
• Fannie, Freddie Ditch Foreclosure King (A few months after a MoJo investigation, the housing giants drop a controversial "foreclosure mill");
• How MoJo Exposed David J. Stern and Launched a National Investigation (The story behind the exclusive story that helped ignite the robo-signing scandal).

Florida Chief Justice To State Trial Judges: 'Open Up Doors To Foreclosure Proceedings'

The Palm Beach Post reports:

• [Florida Supreme Court] Chief Justice Charles Canady ordered judges throughout the state to open up foreclosure proceedings, responding to requests from civil rights lawyers, the media and First Amendment advocates. Florida law already requires that the foreclosure cases be open, but judges and court officials have barred the public from attending them in part because the onslaught of foreclosures has forced some judges to hear the cases in their chambers.

For more, see Chief Justice orders judges to open foreclosure proceedings.

Go here for Florida Chief Justice Canady's letter to trial judges throughout the state.

Atlanta's Largest Foreclosure Mill, Document Processor Among Those Targeted In Federal Robosigner Suit Seeking Class Action Status

In Atlanta, Georgia, WSB-TV Channel 2 reports:

• A Channel 2 consumer investigation is now the basis for a federal class action lawsuit. Distressed homeowners accuse Atlanta’s largest foreclosure law firm, and its document processor, of fraud and racketeering. Fraud is among the allegations in the lawsuit filed against Prommis Solutions and several employees, foreclosure firm McCalla Raymer and two of its attorneys, and several client lenders.(1)

• “This is wrong; it's fraud,” said homeowner Jeff Crawford, whose wife is named as a plaintiff. Foreclosure of Crawford’s Marietta home is central to the case. “You hear about all this mess going on with foreclosures across the country. This is robo-signing, pure and simple,” he told Channel 2’s Jim Strickland.

• The lawsuit accuses Prommis Solutions and McCalla Raymer of churning out improperly executed foreclosure documents. A Channel 2 investigation revealed attorney Troy Crouse’s signature on Crawford’s document doesn't match the attorney's own mortgage signature. Channel 2 also uncovered the notary wasn't a notary at the date of signing on the document.

• Attorney Ebony Ameen said the different signatures occured over and over again. “When you make one mistake that's one thing, but when you make thousands of mistakes, that rises to conduct that's unacceptable,” Ameen said.

• Ameen is using a Facebook page called Georgia Mortgage Class Action to find other Georgians whose homes were foreclosed who believe their documents are dubious. Prommis said outside auditors are reviewing its procedures. The company told Strickland it has new strict guidelines for notaries, and even a hot line to report irregularities. “Now they may be doing it the correct way. That doesn't cancel out the thousands of times they did it the wrong way,” said Ameen.

Source: Class Action Suit Filed After Channel 2 Document Investigation.

Go here for the WSB-TV Channel 2 video report.

For the lawsuit, see Jenkins, et ano. v. McCalla Raymer LLC, et al.

(1) The defendants named in the lawsuit:

• McCalla Raymer, LLC,
• Thomas A. Sears, Esq.,
• Charles Troy Crouse, Esq.,
• Merscorp, Inc.,
• Bank of America, N.A.,
• BAC Home Loans Servicing, LP,
• Wells Fargo Bank, N.A.,
• Prommis Solutions, LLC,
• Prommis Solutions Holding, Inc,
• Great Hill Partners, Inc,
• Mortgage Electronic Registration Systems, Inc,
• Americas Servicing Company,
• Taylor Bean & Whitaker,
• Crystal Wilder,
• Elizabeth Lofaro,
• Chiquita Raglin,
• Victoria Marie Allen,
• Iris Gisella Bey,
• Jamela Reynolds, and
• Latasha Daniel.

BofA Seeks To Dodge State Court Adjudication In Ohio Robosigner Suit; Requests Removal To Federal Court

In Sandusky, Ohio, The Morning Journal reports:

• A lawsuit brought by a Sandusky woman, who lost her home to foreclosure and is suing the bank, claiming the paper work was done improperly, could be moved to federal court. Rhonda McLaughlin filed the lawsuit against the Bank of America claiming a “robosigner” signed an affidavit during the foreclosure process, thus violating the law.

• Bank of America wants the case moved to federal court because McLaughlin and her attorney, Daniel McGookey, are claiming the bank violated the Fair Debt Collections Practices Act, the Ohio Consumer Sales Practices Act, Ohio’s RICO Act and Ohio common law, which are all federal offenses. Bank of America also states because the judgment of the suit is more than $75,000, the action should be shifted to federal court. McGookey said [] he believed the case should remain in Erie County Common Pleas Court.(1)

For the story, see Robosigner suit should be moved, bank says.

For the lawsuit, as filed in Erie County Common Pleas Court, see McLaughlin v. Bank of America, et al.

(1) An ABA Journal article (see Judge Says Firm Must Explain ‘Fraudulent’ Removals or Pony Up $25K) offers this observation on the legal maneuver reported in this story, one commonly used in civil cases by big-time corporate defendants and their white-shoe law firms in lawsuits brought by individuals and other (possibly under-financed) plaintiffs, of moving a case from a state to a federal court:

• [I]t is widely believed that plaintiffs, particularly individuals rather than corporations, fare better in state courts where they have greater likelihood of getting to a jury and often benefit from more favorable interpretations of law. Defendants in turn tend to prefer the federal courts. Thus removals can become a cat-and-mouse game in which a plaintiff names a party having nothing to do with the matter as one of the defendants to prevent the other side from removing the matter to federal court. That court can find fraudulent joinder and keep the case or remand it.

• But studies have shown a greater increase in recent years of defendants removing cases to federal court, only for them to be dispatched back to state court for erroneous removal. One researcher, a third-year student at New York University School of Law, found that most often in such situations, the plaintiffs are individuals. And the rate of their cases being remanded back to state court is higher, too, wrote Christopher Terranova in last summer’s edition of the Willamette Law Review (PDF).

• He adds that “the delays and costs of that extra procedural step to federal court are more costly and burdensome for most individual plaintiffs than they are for bigger defendants with more assets."

For the above-referenced Willamette Law Review article, 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).

For an example of one Federal judge excoriating a lawyer and law firm for, according to the judge, their history of fraudulent removal requests of cases from state court to Federal court, see Hollier v. Willstaff Worldwide, Case 6:08-cv-01382-TLM-CMH (W.D. La. 2009):

• Sadly, the Court is not surprised by G.W. Premier’s counsels’ tactics in this proceeding as Ungarino & Eckert, L.L.C.’s reputation proceeds it. This case is but one in a long line of fraudulent and improper removals that Ungarino & Eckert, and more specifically Matthew Ungarino, have filed in this and other districts. [...] [For more, see Hollier v. Willstaff Worldwide (pp. 4-9).]

End Drawing Near For S. Fla. Foreclosure Mill? Stiffs Landlord On Office Rent; Affiliate Enters Into Loan Forbearance Over $12M Credit Line Default

In Plantation, Florida, The Miami Herald reports:

• The Law Offices of David J. Stern, which has helped banks seize thousands of homes from homeowners who missed mortgage payments, is now having trouble paying its own bills. One of its subsidiaries is seeking bank forbearance for defaulting loans, and the shrinking company has fallen behind on rent payments at its Plantation offices, according to a regulatory filing Monday.

***

• The law firm has already stopped paying some of its bills. The company also has not paid its rent for the month of November at its office space at 900 S. Pine Island Road, in Plantation. [...] Much like the troubled real estate market, Stern's firm has been enduring a post-boom decline of its own recently. After the growing five-fold in the last five years to more than 1,100 employees, a lightning round of negative news has leveled the foreclosure-processing giant in the last few months.

***

• The same day layoffs were announced, employees from a document shredding company spent hours taking boxes from the firm to a truck parked outside. The DJSP stock price fell 32 percent on Monday to close at $0.48. It has plunged more than 95 percent since April, when it peaked at $13.65. In a letter announcing the layoffs to Florida Agency for Workforce Innovation, a Stern representative wrote that a complete closing of the firm "remains a possibility.''

For more, see Foreclosure attorney Stern struggling to pay his bills.

Florida Media Outfits, ACLU Call On State High Court To Leave Foreclosure Proceedings Open To Public

The South Florida Sun Sentinel reports:

• A group of Florida news organizations and the American Civil Liberties Union Monday called on Florida’s Supreme Court to preserve open access to foreclosure proceedings.

• In a letter to Chief Justice Charles T. Canady, the group cites “numerous reports” of barriers to access for the news media and the general public that have taken place since August in Duval, Hillsborough, Orange and Citrus Counties. The letter is signed by representatives of the ACLU, The First Amendment Foundation, Florida Association of Broadcasters, Florida Press Association, The Florida Society of Newspaper Editors and James Denton, editor of The Florida Times-Union, a newspaper based in Jacksonville.

• The letter also referred to an incident in Jacksonville in which a legal aid attorney was told she might be cited for contempt of court in the future after the attorney attended a foreclosure proceeding with a reporter from Rolling Stone magazine.(1)

For more, see ACLU wants courts to keep foreclosure cases open to public.

(1) See Rubber-Stamping Judge Threatens Foreclosure Defense Legal Aid Lawyer With Contempt For Bringing Media Member To Observe Rocket Docket.

NY F'closures Screech To A Halt? Lender Lawyers Reluctant To Risk Bar Ticket By Filing Crappy Paperwork In Violation Of State High Court Directive

The New York Post reports:

• Bank lawyers prosecuting the 80,000 foreclosure cases in New York are all but admitting that the cases they have filed over the past number of years have been riddled with fraud.

• In the three weeks-plus since New York State Chief Judge Jonathan Lippman put the foreclosure lawyers on notice that any fraud in foreclosure paperwork would be met with severe penalties -- he is making lawyers sign affirmations promising they took "reasonable" steps to make sure the legal papers are true -- practically no new foreclosure cases have been filed, The Post has learned. And existing cases have ground to a halt, a source close to the state's foreclosure practice said.

• "Banks do not want to be the first to test the new rules," the source said. The virtual shutdown of New York's foreclosure business comes despite chest-thumping, bravado-filled statements made by some banks in October that they had nothing to be afraid of when it came to foreclosure fraud and that the lawsuits aimed at kicking delinquent homeowners from their houses would continue shortly.

• It seems lawyers pressing the foreclosure cases are not willing to bet their law licenses on such claims. [...] While many banks are not prosecuting foreclosures, they are still preparing those cases by sending paperwork to law firms on new homeowners who are behind on payments. The cases are just not being filed in court. "The spigot has not been shut off much, to my surprise," a foreclosure industry insider told The Post, of the bank's sending of the foreclosure paperwork to their lawyers.

For more, see Fraud-closure biz fizzles out.

'Lender' Targets Cash-Strapped, High-Equity Homeowners For Easy Profits; Tactics Embarrassing, Undermine Industry Reputation, Says Hard Money Lender

In Seattle, Washington, The Seattle Times reports:

• Emiel Kandi forever changed the lives of a pregnant hairdresser, a jobless mechanic and a single mom when he loaned them money. These unsophisticated, desperate borrowers thought a short-term loan from the well-dressed professional could save them from financial collapse or foreclosure. But the very asset they were trying to hold on to — their home — was what Kandi was determined to take.

• Kandi is the lender of last resort for some people who've been turned down by banks because of poor credit or limited income. He says his requirement for a borrower is merely "a pulse and a legal ability to sign." He admits he charges borrowers as much as he can get away with — 45 percent interest in one case — and makes it clear to them that if they fail to comply with the loan agreements, he will take their property. "I am a wolf," he explained.

• A Seattle Times examination of numerous Kandi loan deals shows that they are set up so he can quickly take borrowers' homes and in some cases flip them for a profit. And he gets away with it. "He's in the business of taking people's property," said Martin Burns, a lawyer who sued Kandi on behalf of the mechanic. "He finds vulnerable people and exploits them."(1)

***

• Established hard-money lenders, some of whom handle multimillion-dollar loans, say people like Kandi undermine the reputation of their industry. "They are trying to fly under the radar with these tactics that are embarrassing," said John Odegard, president of Seattle Funding Group, the Northwest's largest private lending company. "It isn't at all what our industry represents." Erik Egger, co-president of WADOT Capital, one of at least two dozen hard-money lenders that offer loans in the state, said no reputable lender would use a quitclaim deed to secure a loan. "It circumvents foreclosure," he said. "Those borrowers can be put in a bad situation."(2)

For more, including the stories of a couple of the victims, see Lender seizes desperate borrowers' homes (A Seattle Times examination of numerous Emiel Kandi loan deals shows that they are set up so he can quickly take borrowers' homes and in some cases flip them for a profit. And he gets away with it).

(1) Reportedly, one of Kandi's common practices is to have his victims sign over their title to the property using a quitclaim deed, writing the loan as a purported 'commercial' (as opposed to a 'consumer') loan in attempt to dodge certain consumer protections, and employing 'hair-trigger' default clauses in the loan agreement that allow him to take possession of the house immediately using the deed after a missed payment without going through foreclosure, which includes a 190-day waiting period and several consumer protections, the story states.

In one case, Kandi reportedly had a homeowner sign a promissory note for $170,000, even though he was getting only $17,000, and a quit claim deed to the home. Six days after a purported default (a point that was disputed by the parties), Kandi used the quitclaim deed to record a new owner of the property, a company in his mother's name, and subsequently flipped it for $235,000, walking away with more than $200,000.

After a lawsuit was filed by the homeowner, a court determined Kandi had violated the Washington State Consumer Protection Act by using "unfair and deceptive practices" and ordered Kandi to pay the homeowner $211,538, an amount Kandi has yet to pay, the story states. See Marsh v. Kandi, et al, NO. 9-2-11247-4 (Wn. Sup. Ct. Pierce County, October 20, 2010).

In another lawsuit (see Provost v. Kandi, et al., NO. 09-2-15191-6 SEA, May 30, 2010), Kandi was found to have violated the Washington Criminal Profiteering Act (RCW 9A.82), The Credit Services Act (RCW 19.134) the Distressed Property Act (RCW 61.34), and the Usury Act (RCW 19.52). In addition to $110,000+ in net damages, the victim was awarded her home back free and clear as a result of a successful action to quiet title.

Other homeowners who borrowed from Kandi have had different outcomes. A single mother of two children took out a loan for $5,000, missed a payment, and lost her Graham home and $70,000 in equity. In another case, a Puyallup woman who borrowed from Kandi filed a lawsuit against him, but lost.

For whatever its worth, in addition to other legal theories that are available to unwind or undo these type of home equity ripoffs, the judiciary in the State of Washington has a long history dating back over a century of recognizing the equitable mortgage doctrine, which when applicable, disregards the signing over of a deed in a racket like this and treats the entire deal as a loan secured by a mortgage. See Equitable Mortgage Doctrine In Washington State.

(2) A similar type of home equity ripoff was successfully prosecuted last year in a civil lawsuit alleging violations of the state Consumer Protection Act brought by the Washington State Attorney General's Office. See Washington AG Scores Big Win In Bogus Equity Stripping, Land Trust/Sale Leasebacks & Surplus Ripoffs; Foreclosure Rescue Operator Tagged For $4.2M (for the lawsuit setting forth the allegations, see State of Washington v. Kaiser, et al.).

For more on combatting home equity scams in court, see Foreclosure Rescue Scams, as well as this summary of legal theories available in undoing or unwinding these types of home equity scams (the latter made available online by the Washington State Attorney General's Office).

Cops Pinch Recently Disbarred Attorney; Suspect Accused Of Forging Court Documents While Peddling Foreclosure Defense Services

In Miami, Florida, The Miami Herald reports:

• A Coral Springs lawyer forged the signatures of two Miami-Dade judges while lying to a client about a bogus lawsuit settlement, authorities said Wednesday. The lawyer, Frank J. Ingrassia, who was working with a disgraced foreclosure rescue company called Outreach Housing, was arrested last week in Broward County and charged with three felonies involving the forgery of court documents.

• Ingrassia, who was disbarred last month for the misconduct, drew headlines in 2008 after he began preemptively suing banks for providing allegedly fraudulent mortgages. Aventura businessman William Klein hired Ingrassia to sue his bank after reading a Miami Herald article about the attorney's efforts.

• According to an arrest affidavit released Wednesday, Ingrassia presented Klein with paperwork showing a $1 million settlement signed by Miami-Dade Circuit Judge Maxine Cohen Lando, and a foreclosure dismissal order signed by Miami-Dade Circuit Judge Ronald Dresnick.

• But neither judge had signed any such legal documents, and they were never filed in court, according to an arrest affidavit by Florida Department of Law Enforcement Agent Michelle Bufalino.

For more, see Lawyer accused of forging foreclosure documents (A Coral Springs lawyer is facing three felony charges relating to the alleged forgery of court documents in a foreclosure case).

DC Now Requires Six-Month Mediation Period Before Proceeding With Foreclosure

In Washington, D.C. (a non-judicial foreclosure sale jurisdiction), The Washington Post reports:

• [Last] week, the D.C. Council approved a measure requiring lenders to go through six months of mediation with a homeowner before proceeding with a foreclosure. Mediation allows the borrower and the lender's representative to negotiate, with the guidance of an impartial go-between, over possible alternatives to a foreclosure, such as a loan modification. But neither side can be compelled to agree to a mediated solution.

• Peter Tatian, research associate with the Urban Institute, a social policy think tank, said mediation can be useful in a place such as the District, which does not require courts to review foreclosure cases.

***

• The new D.C. program was proposed by Ward 4 council member Muriel Bowser and will be managed by the District's Department of Insurance, Securities and Banking. The department offers a printed "Foreclosure Mitigation Kit," which can be downloaded from disb.dc.gov.

For the story, see Mediation now required for District foreclosures.

For related information from the District's Department of Insurance, Securities and Banking, see DISB to Deal with Irregularities in Foreclosures.

Thanks to Donald Marritz of the nonprofit law firm Regional Housing Legal Services for the heads-up on the story.

MERS Primed For Congressional Bailout?

CNBC's NetNet blog reports:

• When Congress comes back into session next week, it may consider measures intended to bolster the legal status of a controversial bank owned electronic mortgage registration system that contains three out of every five mortgages in the country.

• The system is known as MERS, the acronym for a private company called Mortgage Electronic Registry Systems. Set up by banks in the 1997, MERS is a system for tracking ownership of home loans as they move from mortgage originator through the financial pipeline to the trusts set up when mortgage securities are sold.

• The system has come under scrutiny by critics who charge MERS with facilitating slipshod practices. Recently, lawyers have filed lawsuits claiming that banks owe states billions of dollars for mortgage recording fees they avoided by using MERS.

***

• Now it appears that Congress may attempt to prevent any MERS meltdown from occurring. MERS is owned by all the biggest banks, and they certainly do not want it to be sunk by huge fines. Investors in mortgage-backed securities also do not want to see the value of their bonds sink because of doubts about the ownership of the underlying mortgages.

• So it looks like the stage may be set for Congress to pass a bill that would limit MERS exposure on the recording fee issue and perhaps retroactively legitimate mortgage transfers conducted through MERS private database.

For more, see Get Ready for the Great MERS Whitewash Bill.

Scrutiny Into Short Sale 'Flopping' Deals Continues

In Phoenix, Arizona, The Arizona Republic reports:

• As more houses in metro Phoenix go on the market for short sales, some investors have begun buying and reselling them quickly for a profit, using strategies that some in the housing industry say could be unethical or worse. The deals work in a variety of ways, but all involve the same basic strategy. An investor persuades a lender to agree to a short sale, buying a house for less than what the lender is owed. But the investor has another buyer lined up who is willing to pay more.

• The bank, usually unaware of the other waiting buyer, accepts a lower price from the investor, who then quickly resells the home - for a higher price - to the waiting buyer. The deals, which have become more common as short sales have increased, are now drawing the attention of real-estate and financial regulators. Most lenders object to such deal-making because, had they been aware of the other waiting buyer, they would have taken the higher price. Banks take a loss on short sales, and the deals can make their losses greater.

• Real-estate professionals disagree over the nature of the deals. Some insist they are a smart way to make a profit in a tough market. Others call them unethical at best and question whether investors violate the law if they conceal information from a lender.

***

• The Arizona Department of Real Estate, mortgage giants Fannie Mae and Freddie Mac and the FBI are all investigating flopping deals. "Short-sale flopping is one of our real-estate industry's biggest issues right now," said Judy Lowe, Arizona Department of Real Estate commissioner. "We are all looking at the legality and ethics of these deals. And it varies by flop because it appears every deal is done a little differently."

For more, see Phoenix real estate strategy of 'flopping' examined (Manipulated short sales resold for quick profits).

Online Videos Expose Multi-Hatted 'Corporate Vice Presidents' As Clueless Robosigners Cranking Out Foreclosure Documents In Assembly Line Operation

In Central Florida, the St. Petersburg Times reports:

• Over the past several years, Bryan Bly, Crystal Moore and Dhurata Doko have signed thousands of mortgage assignments as vice presidents of Citi Residential and other major lenders. Yet when asked in a recent deposition what a mortgage assignment is, Bly replied: “I’m really not sure.”

• Moore, meanwhile, defined a promissory note as something “that says the interest rate and stuff like that on it.’’ And Doko, a native of Albania who speaks shaky English, expressed befuddlement at the whole idea of loaning someone money to buy a house. “We don’t do mortgages in my country,’’ she said.

• Bly, Moore and Doko work for Nationwide Title Clearing, a Pinellas County company that found itself in an unwelcome spotlight this week when video depositions they gave in a foreclosure case popped up on YouTube and AOL. “We kind of suspected those would be some of the answers we’d get, but to hear it done in sworn testimony was disturbing,’’ says Christopher Forrest, the lawyer who questioned the three on Nov. 4 and uploaded the videos to the Internet. “This issue potentially affects so many, I thought people should be able to see for themselves what’s going on.’’

***

• Pressed in his deposition to say how many banks he had represented as vice president, Bly demurred. When asked if it would be "in excess of 20,'' he said, "That would be accurate.''

***

• All three employees described an assembly-line process in which they signed huge stacks of documents at a time and attached “routing’’ forms that showed who should get the paperwork next. Moore said some documents she signed were notarized by a notary public who was in another part of the room and couldn’t see her. State law requires the notary to be in the presence of the person signing.

For more, see On video, alleged 'robo-signers' describe assembly line work.

For links to the videos, see Nationwide Title Clearing Robosigners On Parade.multiple corporate hat-wearing

Homeowner's Payment In Full Not Enough For Citi To Call Off Foreclosure Mill As Action To Take Colorado Home Continues

In Fruita, Colorado, The Denver Post reports:

• Brent and Wendy Diers of Fruita thought their foreclosure nightmare would end in April when they sent a check to pay off their mortgage. But more than six months later, CitiMortgage hasn't followed through on repeated assurances it would release the lien and give them title.

• And despite a judge's ruling that they are not in default, the lender's law firm, Castle Meinhold & Stawiarski, continues to pursue a foreclosure sale. "We are not in default and they do not have authorization to sell our house," a frustrated Wendy Diers said.

• Although the Diers case is extreme, it is just one of several stories of borrowers in Colorado and elsewhere who find themselves trapped in a frustrating state of limbo. [...] The couple don't deny missing payments after Brent suffered a work injury and lost his job in 2008. But unlike most people in that predicament, they had a relative willing to lend them enough to pay off the mortgage, more than $212,000 in their case. "We did everything we were supposed to do," Wendy said. "This is such a boondoggle of a mess."

For more, see Foreclosure paperwork miscues piling up.

Sloppy Bay State Banks Resort To Foreclosure "Do-Overs" As Title Insurers Refuse To Insure Crappy Titles; Opportunities Open Up For Booted Homeowners

In Boston, Massachusetts, The Boston Globe reports:

• Zepheniah Taylor lost his Dorchester three-decker to foreclosure two times in 17 months. Now the 59-year-old grandfather has returned home to stay. The scenario, once implausible, is becoming more common in the crazed and fast-changing world of foreclosures.

• Hundreds — and possibly thousands — of Massachusetts homeowners are facing back-to-back foreclosures as lenders realize there were problems with property titles the first time around. Those lenders, often unable to obtain title insurance, are opting to start from scratch with what is being called a “re-foreclosure.’’

• The prospect of going through a foreclosure all over again may seem nightmarish for homeowners, but in a growing number of cases the do-overs are creating opportunities for them to repossess their homes. Such was the case with Taylor, who decided to fight the second foreclosure. The tactic paid off: He won the right to repurchase the home at current market value.(1)

***

• The recent burst in re-foreclosures can be traced to a 2009 Massachusetts Land Court ruling(2) that called into question the validity of a home’s ownership in cases where foreclosure paperwork was incomplete or inaccurate. The finding is now being reviewed by the state Supreme Judicial Court.(3) Its decision could determine whether tens of thousands of homes with foreclosures in their backgrounds have valid titles. [...] Many lenders believed they could still proceed with a foreclosure and later sort out the legal mess by proving they held the mortgage. That premise was rejected by the Land Court.

***

• [Elizabeth J. Barton, chairwoman of the Massachusetts Bar Association’s Foreclosure Legislation Task Force,] said lenders are primarily targeting properties for which they have been denied title insurance because the original foreclosure did not comply with the court’s ruling. “Title insurance companies hesitate to extend protection to a loan that violates the ruling,’’ said Barton, title counsel at Connecticut Attorneys Title Insurance Co., which has offices throughout New England. “A lot of lenders have had to re-foreclose.’’

• The problem of cloudy title histories also is providing a boost to an increasing number of homeowners who are going to court to force lenders to prove they have a legal right to seize their properties.

For more, see Legal twist forces foreclosure redos (Creates second chance for former owners).

Thanks to Bill Collins of Frontier Abstract, Rochester, NY for the heads-up on this story.

(1) According to the story, after leaving his home, Mr. Taylor returned several months later upon the urging from community activists at City Life/Vida Urbana in Jamaica Plains. He then challenged the foreclosure in Boston Housing Court with the help of attorneys from the non-profit law firm Greater Boston Legal Services, claiming Wells Fargo made additional errors in the second foreclosure and still could not prove it had clear title to the home, the story states.

(2) There were actually two rulings issued by Massachusetts Land Court Judge Keith C. Long:

• U.S. Bank Nat’l Ass’n v. Ibanez (Ibanez #1), 17 Mass. Land Court Rptr. 202 (Mar. 26, 2009),
• U.S. Bank Nat’l Ass’n v. Ibanez (Ibanez #2), 17 Mass. Land Court Rptr. 679 (Oct. 14, 2009).

(3) For links to the briefs filed with the Massachusetts Supreme Judicial Court, see Massachusetts High Court Hears Arguments In 'Ibanez' Case That Threatens To Open The Door To Voiding Thousands Of State Foreclosures.

Opportunity To Reclaim Homes For Foreclosed Owners Victimized By "Nail & Mail" Sewer Service?

As the number of ex-homeowners looking to reclaim their unlawfully foreclosed-upon homes increases, a number of methods to accomplish this goal will gain attention. One method is to challenge the propriety of the manner in which the notice of the foreclosure lawsuit was purportedly served upon the homeowner.

In New York, one approach to "sewer service" engaged in by lazy or corrupt process servers involves the use of the "nail and mail" (also known as "post and mail" in some parts of the country) method of serving notice on the homeowner when the server fails to first use "due diligence" in attempting to locate the homeowner. (The "nail & mail" method allows the process server to simply affix the foreclosure notice - the summons and complaint - on the front door of the homeowner's last known residence - ie. "nailing" - and follow up by mailing the notice to said residence).

For those homeowners in New York (and possibly elsewhere) who were purportedly served notice by this method, and now seek to void the foreclosure judgment and the subsequent foreclosure sale (even if the home has since been sold to a new homeowner), the following excerpt from a 2009 Suffolk County, New York lower court ruling may provide some perspective as to what to look for when reviewing the affidavits the process server filed in court swearing that he/she properly served the required notice (bold text is my emphasis, not in the original text):

• The "due diligence" portion of the plaintiffs affidavit of service indicates that prior to the "nail and mail" service, the process server attempted to deliver the summons and complaint to the defendant(s) on 4/30/08 at 5:30 pm, on 5/17/08 at 10:30 am. The "nailing" was then accomplished on 6/7/08, with the '"mailing" being effectuated several days later. There is no indication that the process server attempted to inquire about or serve the defendant(s) at a place of employment.
  
  The "nail and mail" method of service pursuant to CPLR §308(4) may be used only where personal service under CPLR §308(1) and (2) cannot be made with "due diligence" (Lemberger v Khan, 18 AD3d 447, 794 NYS2d 416 [2d Dept 2005]).
  
  The due diligence requirement of CPLR §308(4) must be strictly observed, given the reduced likelihood that a summons served pursuant to that section will be received (McSorley v Spear, 50 AD3d 652, 854 NYS2d 759 [2d Dept 2008]; Estate of Waterman v Jones, 46 AD3d 63, 843 NYS2d 462 [2d Dept 2007]; O'Connell v Post, 27 AD3d 630, 811 NYS2d 441 [2d Dept 2006]; Scott v Knoblock, 204 AD2d 299, 611 NYS2d 265 [2d Dept 1994]; Kaszovitz v Weiszman, 110 AD2d 117, 493 NYS2d 335 [2d Dept 1985]).
  
  What constitutes due diligence is determined on a case-by-case basis, focusing not on the quantity of the attempts at personal delivery, but on their quality (McSorley v Spear, supra; Estate of Waterman v Jones, supra). Attempting to serve a defendant at his or her residence without showing that there was a genuine inquiry about the defendant's whereabouts and place of employment is fatal to a finding of due diligence as required by CPLR §308(4) (Id.; see also, Sanders v Elie, 29 AD3d 773, 816 NYS2d 509 [2d Dept 2006]).
  
  Further, absent any evidence that the process server attempted to determine that the address where service was attempted was, in fact, the actual dwelling or usual place of abode of the defendant(s), such as by searching telephone listings or making inquiries of neighbors, the requirement of CPLR §308(4), that service under CPLR §308(1) and (2) first be attempted with "due diligence," is not met (Kurlander v A Big Stam. Corp., 267 AD2d 209, 699 NYS2d 453 [2d Dept 1999]).
  
  Since the plaintiff has failed to meet the ''due diligence" requirement for "nail and mail" service under CPLR §308(4), jurisdiction over the defendant has not been established(1) and the plaintiffs motion must be denied (Sanders v Elie, supra; Earle v Valente, 302 AD2d 353, 754 NYS2d 364 [2d Dept 2003]; Annis v Long, 298 AD2d 340,751 NYS2d 370 [2d Dept 2002]) Earle v Valente, supra; Annis v Long, supra).

For the ruling, see Countrywide Home Loans, Inc. v Bouvin, 2009 NYSlipOp 32670(U) (NY Sup. Ct. Suffolk County, September 28, 2009).

Go here for links to court rulings involving "nail & mail" method of process-serving and the due diligence required before using this method.

See also:

• Arizona Real Estate Inv., Inc. v. Schrader, 244 P.3d 565 (Az. Ct. of App. Div. 1, November 9, 2010) for an Arizona ruling reaching the same result involving the "post and mail" method of service, where it found a process server's affidavit of service deficient in that it was silent as to whether he made more than one attempt to serve the homeowner, who still resided in the home. The affidavit also included no facts attesting to any impediments to or evasion of personal service.

• Bogus v. Bank of New York, No. 2081195 (Ala. Civ. App. April 16, 2010) for an Alabama ruling holding that a lower court had no jurisdiction to boot a homeowner out of his recently foreclosed home where there was no attempt to personally serve the homeowner with process. All the process server did was post the notice on the premises without any attempt to first physically locate the homeowner's whereabouts and provide him with the required notice personally.

(1) Keep in mind that it is "axiomatic that the failure to serve process in an action leaves the court without personal jurisdiction over the defendant, and all subsequent proceedings are thereby rendered null and void." Elm Mgt. Corp. v. Sprung, 33 A.D.3d 753; 823 N.Y.S.2d 187; 2006 N.Y. App. Div. LEXIS 12494 (App. Div. 2nd Dept. 2006). This means that the foreclosure judgment, the foreclosure sale, and any subsequent sale to unwitting third parties would also be null and void. (To those under the mistaken belief that an unwitting purchaser, for value and without notice of the defects in the foreclosure sale is a bona fide purchaser whose claim will defeat the claim of the foreclosed homeowner, I would point out that bona fide purchaser status is only relevant if the judgment is found to be merely voidable, as opposed to absolutely void (wholly void, void ab initio, or just plain void). Stated another way, there is no such thing as bona fide purchaser status in the context of an absolutely void judgment).

For more on void judgments, see:

• Everything You Always Wanted To Know About Void Judgments But Were Afraid To Ask!,
• Law of Voids (if link expires, TRY HERE).

Rubber-Stamping Judge Threatens Foreclosure Defense Legal Aid Lawyer With Contempt For Bringing Media Member To Observe Rocket Docket

Buried in a recent story in Rolling Stone, in which columnist Matt Taibbi writes about, among other things, his experience witnessing the proceedings in the Jacksonville, Florida foreclosure 'rocket docket' of Judge A.C. Soud, is the following excerpt:

• Just minutes before, I had watched what happens when defendants don't show up in court: kerchunk! The judge more or less automatically rules for the plaintiffs when the homeowner is a no-show. But when the plaintiff doesn't show, the judge is suddenly all mercy and forgiveness. Soud simply continues [homeowner Shawnetta] Cooper's case, telling [foreclosure mill lawyer Mark] Kessler to get his [*]hit together and come back for another whack at her in a few weeks. Having done this, he dismisses everyone.

• Stunned, Cooper wanders out of the courtroom looking like a person who has stepped up to the gallows expecting to be hanged, but has instead been handed a fruit basket and a new set of golf clubs. I follow her out of the court, hoping to ask her about her case. But the sight of a journalist getting up to talk to a defendant in his kangaroo court clearly puts a charge into His Honor, and he immediately calls Cooper back into the conference room. Then, to the amazement of everyone present, he issues the following speech:
  
  "This young man," he says, pointing at me, "is a reporter for Rolling Stone. It is your privilege to talk to him if you want." He pauses. "It is also your privilege to not talk to him if you want."

• I stare at the judge, open-mouthed. Here's a woman who still has to come back to this guy's court to find out if she can keep her home, and the judge's admonition suggests that she may run the risk of pissing him off if she talks to a reporter.

• Worse, about an hour later, [Jacksonville Area Legal Aid's] April Charney, the lawyer who accompanied me to court, receives an e-mail from the judge actually threatening her with contempt for bringing a stranger to his court. Noting that "we ask that anyone other than a lawyer remain in the lobby," Judge Soud admonishes Charney that "your unprofessional conduct and apparent authorization that the reporter could pursue a property owner immediately out of Chambers into the hallway for an interview, may very well be sited [sic] for possible contempt in the future."

• Let's leave aside for a moment that Charney never said a word to me about speaking to Cooper. And let's overlook entirely the fact that the judge can't spell the word cited. The key here isn't this individual judge — it's the notion that these hearings are not and should not be entirely public. Quite clearly, foreclosure is meant to be neither seen nor heard.

For more (column contains a sprinkle of "f-bombs" and other equally indelicate "terms of art"), see Matt Taibbi: Courts Helping Banks Screw Over Homeowners (Retired judges are rushing through complex cases to speed foreclosures in Florida).

Be Prepared To Ask Questions About Legal Fees When Hiring A Foreclosure Defense Attorney

For those homeowners looking to hire a foreclosure defense attorney and are wondering how they get paid, attorney Mark Stopa offers his views on the subject:

• The New York Times did a story over the weekend about how Florida foreclosure attorneys are charging homeowners facing foreclosure. I’ve read the article and, with respect to my colleagues, I’m disturbed.

For more, see Paying a Foreclosure Defense Lawyer.

For The New York Times story, see Taking On a Second Mortgage to Pay the Foreclosure Lawyer.