Central Florida Judge Heightens Scrutiny In Cases Involving Process Servers Charging "Ridiculous" Fees, Arousing Suspicions Of Wrongdoing

In Central Florida, The Tampa Tribune reports:

• Pasco County Circuit Judge Susan Gardner decided to take a closer look at her foreclosure cases after law firms were accused recently of overbilling and forging documents. She doesn't like what she's finding – a mountain of fees to serve notice of foreclosure lawsuits to homeowners and to people who don't exist.

• "Routinely, routinely, I'm seeing charges of $1,600, $1,800, $1,000, $800, any of those are ridiculous, and there had better be a good reason for it," Gardner said, noting that these fees should typically be $45 to a couple hundred bucks.

• The judge chose 12 random files and said she found 11 of them had what she says appear to be inflated charges to serve homeowners with lawsuits. Some of the lawyers who submitted affidavits to the court saying the fees are "reasonable" often sign their names and bar numbers in an illegible scribble, court records show.

• "I used to think this was just sloppy work, but I truly have begun to wonder if it's not concealment," Gardner said. The files in question involve two of the law firms that are currently under investigation by the Florida Attorney General's Office for submitting fabricated or misleading documents in foreclosure cases.

For more, see Judge wants answers to foreclosure document fees.

Another Homeowner Falls For Servicer's Loan Modification Promise, Then Has Home Sold Out From Under Her

In Birmingham, Michigan, WXYZ-TV Channel 7 reports:

• Debra Graves has been begging her bank for help for years. [...] Graves seemed like the ideal borrower – she put 30% down on her home in Birmingham, and says she always paid on time. Until – like so many in Michigan – she lost her job. “I have done everything that Wells Fargo has asked me to do, and they have not worked with me at all,” said Graves.

• Graves says, after 3 years of calling -- she finally got through to someone in the president’s office at the bank – she was assured they were trying to modify her loan. “She made promises to me. She said they would bump my Sheriff’s sale back to November 7th,” said Graves.

• Graves took on roommates -- she even took a low-paying retail job just to show she had some income to qualify for the modification. But then Graves found out, her house had been sold at Sheriff’s sale in September – and Wells Fargo never told her. “How could they do this to me? I never thought, at my age, that I would be worried about whether or not I would have to move in with my mom. It’s just a really bad situation to be in,” said Graves.

For more, see Steaming mad about loan modifications.

Oregon AG Targets Loan Modification Outfit In Lawsuit For Allegedly Clipping Homeowners Out Of $80K+ In Illegal Fees

From the Office of the Oregon Attorney General:

• Attorney General John Kroger [] announced a lawsuit that accuses the California-based American Team Mortgage, Inc., of repeatedly violating Oregon's Unfair Trade Practices Act and Mortgage Rescue Fraud Protection Act.

***

• The lawsuit filed [] in Marion County Circuit Court alleges that since January 2009, American Team Mortgage charged 32 homeowners a total of more than $80,000 in fees for mortgage loan modifications. Most of those fees were charged in advance of providing services in violation of Oregon law, the suit alleges.

• The company obtained loan modifications for only a fraction of their Oregon clients, and possibly as few as two, the suit claims. Despite American Team Mortgage's poor record of obtaining loan modifications and despite promises to refund clients it could not help, the company refunded only two of the 32 Oregon homeowners who paid advance fees for loan modifications.

• By June 2010, the lawsuit alleges, American Team Mortgage effectively went out of business. Its phone number was disconnected. Mail was returned. Dozens of Oregon homeowners were left without a loan modification or a refund. At least one client lost his home to foreclosure. Others are facing foreclosure.

For the Oregon AG press release, see Lawsuit Accuses California Loan Modification Company Of Cheating Oregon Homeowners (The lawsuit alleges that American Team Mortgage charged more than $80,000 in fees from nearly three dozen Oregon homeowners in violation of Oregon law).

Mercedes-Driving Squatter Makes Himself At Home Using Vacant Three-Story Mansion In Foreclosure As 'Party House'

In Southern California, NBC Los Angeles reports:

• In an upscale enclave in the San Fernando Valley, there's a new neighbor on the block. He drives a big Mercedes, sometimes a fancy SUV and residents say he's been living in a three-story mansion, which was empty and going into foreclosure.

• His name is Dawud Walli, and neighbors say he moved into a huge empty home last July, furnishing nearly every room of the house. "We feel unsafe. We can't sleep. We have families," say some of the residents who live nearby. They say Walli made this a party house.

• Inside, we found booze and condoms scattered about. But no one really knew what went on here, because some of the windows were covered with tape and garbage bags. "They don't want to make contact with the neighbors. They do not want to make eye contact with you. They do not talk to you," says someone who lives nearby.

• Prosecutors say this is happening across Southern California. They've caught squatters illegally living in homes in Bel-Air, Marina Del Rey and Winnetka. "It's a huge problem and growing every day," says Los Angeles City Attorney Maureen Rodriguez. "It's just amazing how nervy they can be: presenting false leases," says Rodriguez.

For more, see Is Your New Neighbor a Squatter?

Alleged Foreclosure Fraudulent Document Manufacturing Racket Now Faces Charges Of Federal Securities Law Violations; Suit Seeks Class Action Status

The law firm Robbins Geller Rudman & Dowd LLP announces:

• Robbins Geller Rudman & Dowd LLP (“Robbins Geller”) [...] announced that a class action has been commenced on behalf of an institutional investor in the United States District Court for the Middle District of Florida on behalf of purchasers of the common stock of Lender Processing Services, Inc. (“LPS” or the “Company”) between July 29, 2009 and October 4, 2010 (the "Class Period"), inclusive, seeking to pursue remedies under the Securities Exchange Act of 1934 (the “Exchange Act”).(1)

***

• The complaint charges LPS and certain of its officers and executives with violations of the Exchange Act. LPS operates in the mortgage industry and is the industry’s number one provider of mortgage processing services, settlement services and default solutions, and the nation’s leading provider of integrated data, servicing and technology solutions for mortgage lenders.

• The complaint alleges that, throughout the Class Period, defendants failed to disclose material adverse facts about the Company’s true financial condition, business and prospects. Specifically, the complaint alleges that defendants failed to disclose:
  
  (i) that the Company had engaged in improper and deceptive business practices;
  
  (ii) that the Company’s subsidiary Docx had been falsifying documents through the use of robo signers;
  
  (iii) that the Company had engaged in improper fee sharing arrangements with foreclosure attorneys and/or law firms, including, but not limited to, undisclosed contractual arrangements for impermissible legal fee splitting, which are camouflaged as various types of fees;
  
  (iv) as a result of the Company’s deceptive business practices, the Company reported misleading financial results; and
  
  (v) further, as a result of the foregoing, at all relevant times, the Company’s financial outlook lacked a reasonable basis.

For more, see Robbins Geller Rudman & Dowd LLP Files Class Action Suit Against Lender Processing Services, Inc.

For the lawsuit, see City of St. Clair Shores General Employees' Retirement System v. Lender Processing Services, Inc., et al.

Note: If you purchased LPS securities between July 29, 2009 and October 4, 2010, you may qualify to serve as a lead plaintiff in this action. To inquire about serving as lead plaintiff, see Notice of Opportunity to Serve as Lead Plaintiff.(2)

(1) Receiving prominent mention in the lawsuit is LPS' now-shuttered, notorious subsidiary, Docx.

(2) If you "sold short" shares of LPS stock (or stock in foreclosure mill attorney David J. Stern's DJSP Enterprises, for that matter) during the relevant period, you are to be congratulated for your keen foresight.

BofA Facing Doom By Countrywide Ticking Time Bomb?

Attorney Abigail Field writes in AOL's Daily Finance:

• Testimony in a New Jersey foreclosure case decided last week may spell big trouble for Bank of America. If what one bank employee said on the stand proves to be accurate, paperwork problems it acquired when it purchased the failing mortgage provider Countrywide in 2008 could leave BofA on the hook for billions of dollars.

• As first reported by Kate Berry for American Banker, Linda DiMartini, a supervisor and operational team leader for the Litigation Management Department of BAC Home Loans Servicing, testified in the foreclosure case of John T. Kemp that it was "customary for Countrywide to maintain possession of the original note and related documents."(1)

• If that's true, then Bank of America may discover that it has millions of loans on its books that it thought it had transferred to trusts that issued mortgage backed securities, because 96% of Countrywide loans were ostensibly securitized. As the Congressional Oversight Panel explained, that outcome alone could cause massive damage to a bank's balance sheet. And as bad as that would be, it isn't the only problem that could result from Countrywide hanging on to the notes.

For more, see Countrywide's Mortgage Document Errors May Doom Bank of America.

For the court ruling, see Kemp v. Countrywide Home Loans, Inc.

(1) Go here for the transcript of court hearing in which BofA's attorney conceded that DiMartini's testimony was accurate and that as a result, BofA had failed to deliver the note at issue in that case to the trust under the contract or otherwise applicable law.

Do-It-Yourself Mortgage Cancellation Racket A New Foreclosure Avoidance Technique?

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

• A Channel 2 Action News Investigation has uncovered a new scheme homeowners are using to avoid foreclosure. It involves canceling their own mortgage, and some homeowners told Investigative Reporter Jodie Fleischer it’s working. But at least one local official calls it fraud.

• The Internet is flooded with offers promising to help save your house. Susan Weidman started her research after losing her husband to a brain tumor. With mounting bills, she didn’t want to lose her home, too. “I didn’t really set out to think that I could possibly get a free house. I just wanted to stall,” Weidman said. Weidman said she hasn’t paid her mortgage in a year. She received several foreclosure notices but the sale never happened.

• “I’d like to think it was the paperwork I filed all right, because everything I filed was basically with fair warning and asking them questions that they refused to answer,” she said.

• Weidman filed several documents with the Cobb County clerk of court including a document that challenged the mortgage and another that revoked her power of attorney.
  “The way they foreclose,” she said “is basically signing your name to a foreclosure document.”

• But Weidman told Fleischer there was one document in particular that made the difference. She canceled her own mortgage by signing her name for World Savings Bank. “You actually signed this as attorney-in-fact for the CEO of the mortgage company,” Fleischer asked. “That’s right…, for John Stumpf,” replied Weidman. She sent a letter to the bank telling the CEO she was going to sign his name. Because he didn’t respond, she said, that effectively gave her permission to do so.

• But the Cobb Clerk of Court said it’s fraud and a felony. Fleischer found at least 15 different homeowners who have done the same thing in Cobb County. “They’re desperate, they’re reaching for straws and these people tell them they have a straw,” said Cobb County Clerk of Court Jay Stephenson.

• Stephenson said “these people” are the ones teaching homeowners what to file. Fleischer found one advertisement for a seminar held in DeKalb County last year by a group called the Underground Railroad Network. Lateef Kareem-Bey spoke at the group’s Stone Mountain office on behalf of one Gwinnett county couple facing foreclosure. The couple signed for the bank and said their mortgage was fully paid, but still got evicted.

• Stephenson said it won’t be long before desperate homeowners start getting prosecuted for their paperwork.

For more, see 2 Investigates: Homeowner Tricks To Get Out of Paying Mortgage.

Minnesota AG Files Unrelated Suits Charging Two Out-Of-State Outfits With Running Illegal Upfront Fee Loan Modification Rackets

In Hennepin County, Minnesota, the Star Tribune reports:

• Minnesota Attorney General Lori Swanson filed lawsuits Wednesday against two out-of-state firms that she says are taking advantage of people in or near foreclosure who seek mortgage modifications. Swanson said the firms represent a new tactic of "advance-fee" mortgage-modification cons that try to capitalize on negative publicity about such schemes by portraying themselves as good guys who can help protect homeowners.

***

• The latest lawsuits were filed in Hennepin County District Court. One alleges that a Los Angeles law firm called the Balanced Legal Group and a California lawyer named Deepak S. Parwatikar offered mortgage modification services in Minnesota without being licensed to practice here, and they collected upfront fees of $3,500 or more from clients before performing any services. That's against the law, Swanson said.

***

• The defendant in the other lawsuit is a Cheyenne, Wyo.-based firm called Home Protection Coalition, which did business under the name Housing Recovery Program. The suit says the firm claims to be a tax-exempt organization sponsored by the federal government to help struggling homeowners, but it isn't registered as a tax-exempt organization.(1)

For more, see Swanson targets new foreclosure schemes (Attorney general files suits against two firms, accusing them of using a new type of "advance-fee" mortgage-modification con).

For the lawsuits, see:

• State of Minnesota v. The Balanced Legal Group, et ano.,
• State of Minnesota v. Home Protection Coalition, dba Housing Recovery Program.

(1) Reportedly, the firm allegedly copied the distinctive logo of a federal campaign called the "Loan Modification Scam Alert," simply deleting the word "scam" from the logo, and it claims its services are free of charge, but, in fact, it solicits a "donation" of $2,300 before working with clients, the suit says.

Judge Slams 'Adverse Possession' Defense; Trial Gets 'Go-Ahead' For Attorney Accused Of Hijacking Vacant Home In F'closure, Pocketing Rent From Tenant

In Allegan, Michigan, The Allegan County News reports:

• Allegan attorney John Watts has been ordered to stand trial on all the charges against him. Watts, 65, was in Allegan County District Court Friday, Nov. 19, for a preliminary hearing before visiting Judge Richard A. Santoni.

• Watts, of Cheshire Township, was arrested in May and charged with five felonies in three cases including two counts of false pretenses and one count each of embezzlement between $1,000 and $20,000, unlawfully driving away a motor vehicle and passing false title. He has pleaded not guilty to all charges.

• At the hearing Friday, Santoni heard testimony on one of the false pretense charges. Police and prosecutors allege that in that case, Watts rented a home in Martin that didn’t belong to him and tried to collect rental income from it.

***

• [Watts' defense attorney James] Shek [] made an argument regarding the state’s adverse possession laws that in this state it was technically legal to occupy unoccupied property and take ownership if the rightful owner didn’t attempt to eject you over a certain term of years. Shek said this was a “conundrum” of Michigan law.

• Santoni, a Kalamazoo County district judge brought in because both of Allegan County’s district judges recused themselves, didn’t agree with any of those arguments. “Adverse possession is not a defense to a criminal act and I find that legal argument without merit,” he said.

For more, see Watts case moves to circuit court.

'Ike' Victim Sues Loan Servicer Claiming Improper Withholding Of Insurance Proceeds Makes It Difficult To Complete Repairs To Hurricane-Damaged Home

In Galveston, Texas, The Southeast Texas Record reports:

• Shirley Peebles seeks to recover from Green Tree Servicing insurance funds she claims are necessary for repairs to her property in Bacliff. Peebles and Green Tree Servicing were issued a check in the amount of $9,759 after Hurricane Ike inflicted damage to the complainant's property, according to a lawsuit filed Nov. 16 in Galveston County District Court.

• Recent court documents state that the defendant maintained a security interest in the aforementioned property by way of a loan. Green Tree Servicing "has continued to hold a portion of the proceeds and has made it extremely difficult for (Peebles) to make repairs," the original petition says.

For more, see Bacliff woman wants insurance funds released so home can be repaired.

NH Attorney Peddling Loan Modifications Abandons Clients After Regulator Issues Cease & Desist Order

In Concord, New Hampshire, the Concord Monitor reports:

• Closed firm fulfilled duties, he says. The website is still up, but the phone line has been cut off. Dan Dargon's law firm no longer exists. Not all of Dargon's clients got the memo, however. A month after the Dargon Law Firm shut its doors amid an investigation by the state into its loan modification practices, clients who say they were never informed of the firm's closure don't know what's happened to their cases.

• "I never got a phone call, never got an e-mail - I didn't get mail," said Glen Whelden, 43, of Pelham, who paid Dargon $2,500 last year to get help lowering his monthly mortgage payments.

***

• Dargon said [] clients have no reason to be angry with him. He said he's fulfilled the terms of their contracts, which specified that he would submit their loan modification requests to lenders but didn't guarantee specific results. "If they want to call somebody, call (Banking Commissioner) Peter Hildreth, or whoever that deputy guy is," Dargon said. "Ask them what they're thinking and how they're going to take care of them now. "Not to be rude about it," he added, "but this was not our fault."

• Dargon said Gorham attorney Don Lader agreed to take on the 300 client files that were still active when Dargon closed the doors to his Concord office in September, months after the state Banking Department issued him a cease-and-desist order to stop modifying loans without a state license.

For more, see Irate clients want word from lawyer.

Nevada Regulator Clips Loan Modification Outfits Out Of $110K In Fines, Probe Costs In Unrelated Cease & Desist Orders

In Carson City, Nevada, the Las Vegas Sun reports:

• A Las Vegas loan modification and foreclosure consulting business has been fined $50,000 by the state for mishandling the money of homeowners. The state Division of Mortgage Lending also issued a closure order against U.S. Loan Modification Services, owned by Jeff and Gail Strum, which was licensed in January.

• The order, signed by Commissioner Joseph L. Waltuch, said the business didn't keep the money of its clients in a separate account as required by regulations and it converted the money from homeowners to its own use. The complaint said the Strums “withdrew moneys collected from homeowners from its bank account without being able to explain what the money was used for.”

• It ordered the business to return the money collected from homeowners and for the Strums to hire a certified public accountant to reconcile the books. The Las Vegas business, after an appeal hearing, was also ordered to pay the division more than $15,000 to cover the cost of its investigation, lawyer time and administrative work.

• The division also announced it has ordered a closure order and imposed a $15,000 fine on Pronto Solutions and Angela Gavilan. It directed the company to cancel all of its contracts with homeowners and refund them their money. Waltuch said the company has been operating without a state license. It did not request an appeal hearing.

• The division imposed a $30,000 fine and ordered GSH 360 FM and Marsha Tolentino of Las Vegas to stop acting as a foreclosure and loan modification consultant. The order says GSH 360 and Tolentino never applied for a state license and is not a tax-exempt, nonprofit corporation as advertised. GSH 360 FM can ask for an appeal hearing.

• It also ordered Mortgage Planners Advantage and Roy Donald to stop conducting its business as a foreclosure and loan modification consulting business without being licensed by the state. It also ordered the company to refund all the money it collected from homeowners. No appeal hearing was requested.

Source: Las Vegas loan modification, foreclosure firm fined $50,000.

For the Cease & Desist Orders and imposed fines, see:

• U.S. Loan Modification Services, LLC, Jeff Strum and Gail Strum,
• Pronto Solutions and Angela Gavilan,
• GSH 360 FM and Marsha Tolentino,
• Mortgage Planners Advantage and Ray Donald.

Recent Bankruptcy Court Ruling Provides Evidence Supporting View That Many Mortgage Securitizations Are Invalid

Georgetown University Associate Professor of Law (and witness testifying in November 6, 2010 Congressional hearings on "Problems In Mortgage Servicing From Modification To Foreclosure") Adam J. Levitin writes in Credit Slips:

• Last week the US Bankruptcy Court for the District of New Jersey issued an opinion in a case captioned Kemp v. Countrywide Home Loans, Inc. This case looks like the first piece of evidence in what might turn out to be the Securitization Fail or, in homage to Michael Lewis, The Big Fail.

• Briefly, Countrywide as servicer filed a proof of claim for a mortgage in a bankruptcy case on behalf of Bank of New York as trustee for a securitization trust. The bankruptcy court denied the claim because there was no evidence that Bank of New York ever owned the mortgage. The mortgage note had never been negotiated or delivered to Bank of New York, despite the requirement to do so in the Pooling and Servicing Agreement (PSA) that governed the securitization of the loan. That meant that Bank of New York as trustee had no interest in the loan, so the proof of claim filed on its behalf was disallowed.

• This opinion could turn out to be incredibly important. It provides a critical evidence for the argument that many securitization transactions simply failed to be effective because non-compliance with the terms of the transaction: failure to properly transfer the mortgage meant that the mortgages were never actually securitized. The rest of this post explains the chain of title issue in mortgage securitizations and how Kemp fits into the issue.

For more, see The Big Fail.

Go here for Professor Levitin's written testimony during the recent Congressional hearings.

Go here for the transcript of lender attorney's failed attempt at giving the judge a satisfactory explanation for the bank's screw-up in the Kemp case.

Central Florida Sale Leaseback Peddler Linked To 50 Ripoff Deals Gets 10 Years On Racketeering Charge; Targeted Cash-Strapped, High-Equity Homeowners

In Orlando, Florida, the Orlando Sentinel reports:

• One after another, the victims explained the scheme in court: They needed loans. John Pavao reached out to them and offered help. They signed some documents. And the next thing they knew, they were losing their homes.

• Those victims, several of them sick and elderly, faced Pavao at his sentencing [earlier this month], like ghosts from his past. The Windermere man once made the cover of Opportunist magazine, proclaiming, "All you need is a passion to succeed."

• But Pavao actually needed more than passion, prosecutors said. They said he needed a technique that exploited people in financial duress and at risk of foreclosure and robbed them of their homes in many cases and, especially, their equity in those properties. Officials familiar with the case said the so-called "equity-stripping" scheme is the kind of behavior that fueled the real estate crisis.

• [... T]hat behavior caught up with Pavao when Circuit Judge Alan Apte sentenced the 44-year-old to 10 years in prison after he pleaded guilty to a single count of felony racketeering in late September. Financial-crimes investigators and the prosecution said Pavao's actions resulted in the loss of millions of dollars worth of property and equity across Central Florida.

***

• Seniors and others who had lived in their homes for many years and had significant equity in those properties were especially vulnerable and prime targets. [...] Michelle Dygon, a financial-crimes investigator with the state, told the judge they identified 50 cases linked to the Pavaos, but focused on nine properties worth about $2 million. "They were conned. They were lied to. They lost their homes," Dygon said. "They were not aware they were deeding their property over. They had no intention of selling their homes or deeding their homes."

For more, see John Pavao: Windermere man sentenced to 10 years in property-fraud case.

Colorado Judge Slams Brakes On Foreclosure As Homeowner Claims Bank "Showed Up With A Forged Document" To Rule 120 Hearing In Attempt To Take Home

In Crestone, Colorado, Boulder Weekly reports on the successful effort of homeowner Wooddora Eisenhauer, 70, to get a judge at a Rule 120 hearing to slam the brakes on the bank some believe is the home lending industry's 'stagecoach to hell' - Wells Fargo, and an ostensibly illegal foreclosure attempt:

• The third and current foreclosure involves her primary residence, a 650-square-foot, one-bedroom, one-bath home that Wells Fargo is attempting to foreclose on after buying the loan from Washington Mutual, Eisenhauer says. At her March 1 Rule 120 hearing, the administrative procedure held to determine whether a house can be foreclosed on and sold, she claims that Wells Fargo “showed up with a forged document.”

• She and her attorney, Erich Schwiesow of the law firm Lester, Sigmond, Rooney and Schwiesow in Alamosa, argue that the first page of the promissory note clearly did not match the rest of the document, in part because it didn’t have the same fax stamp. In addition, they claim, the initials and signature on the document do not match Eisenhauer’s handwriting.

• “It was clear it was manufactured,” Schwiesow says, adding that a local judge agreed and denied authorizing the sale of the property. Wells Fargo initially filed a motion asking the judge to reconsider the decision, but dropped that motion [last] week.

For the story, see Twice bitten? Second Crestone resident claims fraud.

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

Countrywide Comes Clean, Admits Screw-Up In Failure To Convey Promissory Notes Into Mtg Securitization Trust; Says It Was Customary To Keep Possession

Naked Capitalism reports:

• Testimony in a New Jersey bankruptcy court case provides proof of the scenario we’ve depicted on this blog since September, namely, that subprime originators, starting sometime in the 2004-2005 timeframe, if not earlier, stopped conveying note (the borrower IOU) to mortgage securitization trust as stipulated in the pooling and servicing agreement.

***

• As we indicated back in September, it appeared that Countrywide, and likely many other subprime orignators quit conveying the notes to the securitization trusts sometime in the 2004-2005 time frame. Yet bizarrely, they did not change the pooling and servicing agreements to reflect what appears to be a change in industry practice. Our evidence of this change was strictly anecdotal; this bankruptcy court filing, posted at StopForeclosureFraud provides the first bit of concrete proof. The key section:
  
  As to the location of the note, Ms. DeMartini testified that to her knowledge, the original note never left the possession of Countrywide, and that the original note appears to have been transferred to Countrywide’s foreclosure unit, as evidenced by internal FedEx tracking numbers. She also confirmed that the new allonge had not been attached or otherwise affixed to the note. She testified further that it was customary for Countrywide to maintain possession of the original note and related loan documents.

For more, see Countrywide Admits to Not Conveying Notes to Mortgage Securitization Trusts.

For the court's ruling, see In re Kemp, Case No. 08-18700-JHW (Bankr. D. N.J. November 16, 2010) (for publication).

See also:

• Seeking Alpha: Countrywide Never Sent Mortgages to Trust,
• The New York Times: Trying to Put a Price on Bank Errors:
  
  In an opinion published last Tuesday, the chief judge, Judith H. Wizmur, cited testimony from an executive at Bank of America, which bought Countrywide. The lender’s practice, the executive said, was “to maintain possession of the original note and related loan documents.” Countrywide did this even though the pooling and servicing agreement governing the mortgage pool that supposedly held the note required that it be delivered to the trustee, the court document shows.
  
  If Countrywide’s practice was to hold onto the note, then investors in this pool and others may question whether the security was constructed properly and legally and may be able to require Bank of America to buy back their securities.
  
  Larry Platt, a partner at the law firm K & L Gates in Washington, spoke on behalf of Bank of America on Friday. He said the New Jersey decision did not constitute a basis for broad mortgage repurchase requests. “We believe the loan was sold to the trust even if there wasn’t an actual delivery of the note,” he said. “The risk of repurchase is going to depend on the unenforceability of the loan and we think the loan is enforceable. We think this is an aberration; Countrywide’s practice was to deliver the notes.”

NY Trial Judge: Buffalo-Based Foreclosure Mill Law Firm's Actions "A Dereliction Of Professional Responsibility!"

In Suffolk County, New York, State Supreme Court Justice Melvyn Tanenbaum has recently been giving the notorious, Buffalo-based foreclosure mill law Steven J. Baum, P.C. a real hammering.

Over the last month and a half or so, Justice Tanenbaum has denied a request to proceed with foreclosure sales in thirty (30) of Baum's cases. A sample of his 'standard' execoriation of Baum contained in his orders follows:

• This Court has repeatedly directed plaintiff's counsel to submit proposed orders of reference and judgments of foreclosure in proper form and counsel has continuously failed to do so. The court provided counsel's office directly with copies of orders and judgments which would satisfy the requirements and counsel has responded by submitting correspondence addressed to the Court from non-attorney employees with improper and inadequate submissions. The court deems plaintiff's counsel's actions to be an intentional failure to comply with the directions of the court and a dereliction of professional responsibility.

Go here for the short form copies of each of Justice Tanenbaum's 30 orders excoriating foreclosure mill Steven J. Baum, P.C. (made available online courtesy of StopForeclosureFraud.com).

Loan Servicer Pockets Three Months Of Loan Modification Payments, Then Forecloses Home Out From Under Unwitting Borrower Anyway

In Ceres, California, KXTV-TV Channel 10 reports:

• After struggling for more than a year to get their house payments reduced, Carol Ann Rangel received formal notification from Citimortgage in May that her family had been approved for a loan modification.

***

• News10 first featured the Rangels in November, 2008, as they began the long process of seeking a loan modification. The letter from Citimortgage was dated May 20, 2010:
  
  Congratulations! You are approved to enter into a trial plan under the Home Affordable Modification Plan! This is the first step toward lowering your mortgage payments. If you make your new payments timely . . . we will not conduct a foreclosure sale.

• Rangel provided News10 with banking statements showing electronic payments to Citimortgage in the amount of $723.15 on June 1, June 29 and July 29.

• Rangel called Citimortgage on Aug. 30 because she had not received a coupon for the September payment. That's when she learned her home had been sold at auction 11 days earlier. "I never received a letter, never received a phone call, never received any notice that my home was being auctioned," Rangel said.

For more, see Ceres homeowner's loan modified; house auctioned anyway.

(1) This homeowners and others who are similarly situated could have a claim against the loan servicer to enforce its promise to hold off on foreclosure, even if not contractually obligated to do so. For more, see Court: "Promissory Estoppel" Could Make Lender’s Verbal Agreement To Halt F'closure Sale Enforceable, Even Absent Consideration For Promise To Stall.

Aggressive Lobbying Campaign Targeting Congress For Passage Of "Great MERS Whitewash Bill" In Full Swing

The Washington Post reports:

• The financial services industry has launched an aggressive campaign on Capitol Hill to bolster the legality of the way companies have turned mortgages into securities and traded them across the globe in recent years.

• The companies have opened wide their wallets for lobbying and are flying top executives to Washington for one-on-one meetings with lawmakers. They are holding briefings for key staffers, including an event last week that drew more than 60 aides. And they are blanketing Congress with white papers, memos and other documents that lay out their arguments.

• The focal point of their efforts is Mortgage Electronic Registration Systems, or MERS, the controversial, privately run electronic database that is used by practically every lending institution and investment company to track the transfer of the ownership of mortgages as they are packaged into securities and traded at lightning speed around the globe.

***

• The industry is seeking legislation that would effectively affirm MERS's legality and block any bill that would call into question what MERS does. MERS has spent more than $1 million in lobbying since fall 2008, when lower courts around the country began to rule against it. But MERS had kept its name under the radar until the recent uproar over foreclosures revealed broad problems in mortgage paperwork.

• If successful on Capitol Hill, the industry could in one quick swoop make all lawsuits related to MERS across the country moot and remove one of the key uncertainties dangling over the mortgage industry. On the flip side, lawmakers could create a new federal registry, effectively killing MERS's business and forcing the industry to submit to greater oversight.

***

• Some of the [consumer] advocates are referring to the idea as the "great MERS whitewash bill."

For more, see Aggressive lobbying defends mortgage-trading system.

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

NJ Federal Judge Upholds Ruling Awarding $690K To Homeowner Screwed Out Of $116K In Sale Leaseback Scam; OK's Add'l $34K For Victims' Attorney Fees

A January, 2010 ruling by a U.S. Bankruptcy Court judge (O'Brien v. Cleveland (In re O'Brien), 423 B.R. 477 (Bankr. D.N.J. 2010)) slamming a peddler of a sale leaseback, foreclosure rescue scam who stripped the home equity from a financially strapped homeowner was affirmed in all aspects earlier this month by U.S. District Judge Garrett E. Brown of New Jersey.(1)

According to a January 28, 2010 New Jersey Law Journal story reporting on the bankruptcy court ruling (see Real Estate Lawyer Liable for Damages for Role in Client's Mortgage Scam), the total damages awarded to the homeowners was $690,210,(2) even though they were only screwed out of $116,791.

In a subsequent U.S. Bankruptcy Court hearing, U.S. Bankruptcy Judge Raymond Lyons then approved an additional award for the victim-homeowners' attorney fees in the net amount of $33,932.50 for 81.5 hours of work and $627.50 in costs.(3)

For those involved in unwinding these types of scams, especially in cases where a state's equitable mortgage doctrine is successfully invoked (ie. which treats the substance of the arrangement as a secured loan, and disregards the 'masquerading' form of a sale leaseback - ie. "substance over form"), in order to then apply Federal and state consumer lending laws to the scam, the ruling makes for some good reading.

For Judge Brown's ruling, see Cleveland v. O'Brien, Civ. No. 10-3169 (GEB), (D. N.J., November 12, 2010).

(1) Specifically, the Bankruptcy Court found in favor of the screwed-over homeowners:

• on the First Count of the complaint, for fraud, for damages in the amount of $116,791.49;
• on the Second Count of the complaint, for violations of the New Jersey Consumer Fraud Act ("CFA"), for treble damages in the amount of $350,374.47;
• as additional equitable relief for violation of CFA voiding the deed from Plaintiffs to Cleveland dated July 31, 2007;
• on the Fourth and Sixth Count of the complaint, for violation of the Federal Truth In Lending Act ("TILA"), as amended by the Federal Home Ownership and Equity Protection Act ("HOEPA"), damages equal to the sum of all finance charges and fees in the amount of $240,875.32 plus statutory damages of $4,000;
• for violation of TILA rescinding the transaction by voiding the deed from Plaintiffs to Defendant Frederick Cleveland dated July 31, 2007;
• on the Fifth Count of the complaint, for violation of the New Jersey Home Ownership Security Act of 2002 ("HOSA"), N.J. STAT. ANN. § 46:10B-22, et seq., for statutory damages equal to the finance charges plus 10% of the amount financed being a total of $293,836.17;
• on the Seventh Count of the complaint, breach of contract, for damages in the amount of $46,000 plus pre-judgment interest to be calculated at the federal rate from the date of filing of the complaint.

In an attempt to seek a reversal of the Bankruptcy Court ruling, the sale leaseback peddler presented the following issues on appeal:

• 1. Whether the Bankruptcy Court erred in permitting Edward Hanratty, Esq. to testify as an expert witness regarding `mortgage foreclosure rescue scams' . . . .
  
  2. Whether the Court erred in considering the expert testimony and a purported expert report by Edward Hanratty, Esq. . . . .
  
  3. Whether the Court erred in finding in favor of Plaintiffs regarding their claim for fraud, and entering judgment: (a) avoiding Plaintiffs' deed to Cleveland and (b) awarding damages in the amount of $116,791.49.
  
  4. Whether the Court erred in finding in favor of Plaintiffs regarding their [CFA] claim, and entering judgment awarding treble damages to Plaintiffs in the amount of $359,374.47.
  
  5. Whether the Court erred in finding that the transaction between Cleveland and Plaintiffs constituted an equitable mortgage.
  
  6. Whether the Court erred in finding that the Plaintiffs did not act with unclean hands, and finding that Cleveland could not rely on such equitable defense with respect to the Court's findings.
  
  7. Whether the Court erred in finding, with respect to [TILA]: (a) that Cleveland is a `creditor' under TILA; (b) that the transaction between Plaintiffs and Cleveland constituted a `high interest loan' under TILA; (c) that Cleveland was required to make standard disclosures under TILA; (d) that Cleveland was required to make enhanced disclosures under [HOEPA], as incorporated by TILA; and (e) that Cleveland failed to comply with TILA and HOEPA's prohibition of certain terms.
  
  8. Whether the Court erred in finding in favor of Plaintiffs regarding their claim(s) under TILA and HOEPA, awarding damages in the amount of $242,875.32, along with attorneys' fees and costs, and rescinding the transaction between Plaintiffs and Cleveland.
  
  9. Whether the Court erred in finding in favor of Plaintiffs regarding their claim under [HOSA], awarding damages in the amount of $293,836.17.
  
  10. Whether the Court erred in finding in favor of Plaintiffs on their breach of contact claim, awarding damages in the amount of $46,000 plus prejudgment interest.
  
  11. Whether the Court erred in granting Plaintiffs an award of attorneys' fees in the amount of $33,932.50, plus costs in the amount of $627.50 for violations of [CFA, TILA, and HOSA].

(2) The following excerpt in Real Estate Lawyer Liable for Damages for Role in Client's Mortgage Scam explains the breakdown of the $690,210 damages award (alterations added, bold text is my emphasis, not in the original text):

• The O'Briens' [actual] damages were the difference between the new mortgage of $646,000 and the amount paid to benefit the O'Briens [ie. $529,209 - presumably, the outstanding balance of any existing mortgage that was paid off during the execution of the scam, as well as any other liens on the home or other expenses legitimately owed by the victim-homeowners], $116,791, which [U.S. Bankruptcy Judge Raymond Lyons] tripled to $350,374.
  
  Lyons also found the sale-leaseback was an equitable mortgage and violated laws governing mortgages: New Jersey's Homeowner Security Act and two federal laws, the Truth in Lending Act and the Home Ownership and Equity Protection Act.
  
  Cleveland failed to make disclosures required under TILA and HOEPA and the loan included a prohibited balloon payment, resulting in a right to rescind and damages of $240,875 in finance charges and fees, plus $2,000 in statutory damages, held Lyons.
  
  The sale-leaseback agreement contained excessive late fees barred by HOSA, resulting in statutory damages of $293,836, an amount that includes the $240,875 awarded under TILA and HOEPA, plus punitive damages.
  
  Lyons added $46,000 for Cleveland's breach of his agreement to pay that sum for the Chapter 13 balance, bringing the damages to $690,210.

(3) In re O'Brien, (Bankr. D. N.J., May 18, 2010).

Elderly Chicago Woman Recovers Home Of 40 Years Swindled In Sale Leaseback Foreclosure Rescue Scam; Disgraced Peddler Faces No Criminal Charges

In Chicago, Illinois, WLS-TV Channel 7 reports:

• A woman who nearly lost her South Side residence in a mortgage rescue scheme gets to keep the home she has lived in for the last 40 years. The man who operated the mortgage company is now banned from working in the mortgage business in Illinois for life. Lessie Towns launched a fight in court to keep her home. She won and her case [and] triggered a new law to better protect homeowners.

***

• Five years ago Towns was facing foreclosure, and she signed what she thought was a refinancing agreement that would keep her in her home. That agreement, state investigators say, was with Oak Brook-based Trust One Mortgage and its President Paul Shelton.

• "Mr. Shelton was essentially coordinating a mortgage-rescue scheme, whereby he would be [convincing] home owners to eventually sign over their homes," said Brent Adams, Illinois Department of Financial and Professional Regulation secretary. "Those homes would be sold to a straw buyer and effectively flipped at a higher appraised value." Towns continued to live in her home completely unaware it had been sold twice to straw buyers who failed to pay the mortgage. Then, one evening, sheriff's police come to evict the owner.

***

• Towns got mad, went to court, and earlier this year won a settlement that allows her to stay in her home.(1)

For the story, see Victory for South Side victim of mortgage fraud.

For earlier WLS-TV reports on this story, see:

• Chicago owner loses home in mortgage scam,
• Woman allegedly swindled out of home allowed to stay.

(1) This story is illustrative of how a homeowner scammed in a sale leaseback foreclosure rescue scam can retain ownership of his/her home, even if the home is subsequently sold or mortgaged to an unwitting third party.

In this case, the scammed homeowner retained and maintained continued possession of her home after signing the 'ripoff' documents conveying title to another. In Illinois (as well as in most other jurisdictions), any subsequent purchaser of the home, or lender acquiring a security interest in the home, has a duty to conduct a physical inspection of the home, and where a physical inspection of the property would reveal an adverse interest or where there is a party in possession other than the record title owner, the subsequent purchaser or lien claimant has a duty to inquire of the possessor as to his interest and is charged with knowledge of the facts discoverable from such an inquiry or inspection.

Failure to make such inspections or inquiries will disqualify the subsequent purchaser or lender from the protections accorded a bona fide purchaser or bona fide encumbrancer, and accordingly, will leave any interest in the property acquired by them subject and subordinate to any legal rights or equities in the premises the occupants in possession thereof can establish.

For more on the duty of a subsequent purchaser or encumbrancer to conduct inspections and make the appropriate inquiries of persons in possession of real estate in Illinois (for which there is case law dating back 150+ years), see:

• Illinois Bona Fide Purchaser, Possession, Duty Of Inquiry (for Illinois Supreme Court cases),
• Illinois Bona Fide Purchaser, Possession, Duty Of Inquiry - State Appellate Cases, Federal Cases.

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

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).

NY Appellate Court Tells Trial Judge: Cancelling Mortgage, Note Because Of Lender's "Repugnant, Shocking & Repulsive" Conduct Goes A Bit Too Far

The New York Law Journal reports:

• A judge who blasted a lender's "repugnant, shocking and repulsive" conduct in trying to foreclose on a Long Island home exceeded his authority when he canceled the mortgage on the property, a state appeals court has ruled. After IndyMac Bank obtained a foreclosure judgment against Diana J. Yano-Horoski, who took out a $292,500 mortgage in 2004, the East Patchogue homeowner requested a settlement conference with the bank.

• In a decision last year, Supreme Court Justice Jeffrey A. Spinner in Suffolk County criticized an IndyMac representative for what he called her "opprobrious demeanor and condescending attitude" during the conference, and said she had made it "abundantly clear that no form of mediation, resolution or settlement would be acceptable to the bank."

***

• Blasting IndyMac for its "egregious" conduct, he concluded that monetary sanctions would not benefit Ms. Yano-Horoski, and took the unusual step of canceling the debt and discharging the mortgage (NYLJ, Nov. 23, 2009).

***

• Last week, the Appellate Division, Second Department, held in an unsigned ruling that the "severe sanction…was not authorized by any statute or rule…nor was the plaintiff given fair warning that such a sanction was even under consideration." "The reasoning of the Supreme Court that its equitable powers included the authority to cancel the mortgage and note was erroneous, since there was no acceptable basis for relieving the homeowner of her contractual obligation to the bank," the panel wrote in its unanimous unsigned ruling in IndyMac Bank, F.S.B. v. Yano-Horoski, 2010 NY Slip Op 08532 (App. Div. 2nd Dept., November 16, 2010).(1)

For the story, see Panel Upsets Ruling That Canceled Mortgage.

(1) After getting hammered in the lower court (during which the lender was represented by the foreclosure mill law firm Steven J. Baum, P.C.), the lender rolled out a couple of heavyweight law firms (4 attorneys named for the filing of one brief) to win reversal of the earlier ruling. The homeowner, unrepresented by counsel in the lower court, remained unrepresented on appeal.

Clueless Robosigner Backpeddles From Statements Made In Videotaped Deposition; Now Claims To Have Known Significance Of Documents He Cranked Out

In Central Florida, a recent ABC Action News story on foreclosure document mill Nationwide Title Clearing had this excerpt regarding company employee Bryan Bly, a prolific robosigner who distinguished himself recently in a videotaped deposition in which he admitted that he didn't have a clue as to the significance of the paperwork he was cranking out:

• In a videotaped deposition earlier this month, one of the company's processors Brian Bly, was asked, "What is an assignment of mortgage?” His response? “I have no idea."

• Despite not even knowing what an assignment of mortgage actually is, he signs thousands of them a day. "I would say 5,000," Bly testified.

• Bly isn't charged with anything. In a statement to ABC Action News, Bly says he wants to correct his testimony saying, "I know exactly what the purpose and types of documents are that I have signed."

For the story, see INVESTIGATION: Questions mount about documents used in foreclosures.

Go here for Nationwide Title Clearing's statement to the media on the distribution of the videotaped depositions on the Internet.

Compensation Fund Proposal An Attempt To Buy Off State AGs, Keep Them From "Digging Deeper & Uncovering More Rot In The Mortgage System": Legal Expert

Buried in a recent New York Times story on the ongoing foreclosure scandal is this excerpt describing one legal expert's view of the banking industry's latest attempt to sweep their wrongdoing under the rug:

• For 18 months, the Obama administration has promoted modifications that would keep families in their homes over foreclosures that would kick them out. The programs have had some success but ultimately have done little to stem the tide.

• “The banks’ act was to put their tail between their legs, act contrite before Congress and change nothing,” said Adam Levitin, an associate profesor of law at Georgetown University who testified before Congress on Tuesday and will testify again on Thursday.

• The banks hope to buy off the attorneys general with money, perhaps to establish a compensation fund for victims, Mr. Levitin said. That, he said, would prevent attorneys general from “digging deeper and uncovering more rot in the mortgage system. My fear is that the banks’ calculus is correct.”

Source: Foreclosure Fix Is Seen as Distant.

RICO Suits May Pose Big Problem For Banks In Robosigner Scandal As Class Actions Begin To Pile Up

Bloomberg News reports:

• Foreclosure-fraud class action lawsuits are starting to pile up against major banks across the U.S., threatening a besieged industry with billions more in potential losses.

***

• The class actions, which could be expanded nationally, seek damages for homeowners whose properties were illegally foreclosed upon by banks using fraudulent documents. Suits have been filed in Maryland, New Jersey and Massachusetts that target Bank of America Corp., Wells Fargo & Co., HSBC PLC and JPMorgan Chase & Co. In Florida and Maine, Ally Financial, formerly known as GMAC Mortgage, is also being targeted.

• Perhaps an even bigger threat are the lawsuits that contend the banks' foreclosure machinery amounted to a racketeering enterprise. One such case, an Indiana lawsuit against Bank of America, was filed under civil Racketeering Influenced and Corrupt Organizations or RICO laws, which allow damages to be tripled.(1)

For more, see Foreclosure class actions pile up against banks.

(1) For the Indiana RICO suit, see Davis v. Countrywide Home Loans, Inc., et al.

See also:

• Indiana foreclosure suit seeks class action (Knightstown couple who lost home allege document 'robo-signers' aided lenders),
• Indiana Class Action Quotes Brooklyn Jurist's Description Of Robosigner As "A Milliner's Delight By Virtue Of The Number Of Hats She Wears."

Sewer Service, Inflated Process Server Billings A Possibility For Recent Foreclosed Home In Which Dead Body Was Discovered In Garage

In Cape Canaveral, Florida, WESH-TV Channel 2 reports:

• Authorities have not yet been able to positively identify a body that was found in a foreclosed Brevard County townhome, but the remains are believed to be that of the owner, Kathryn Norris.

• Court records paint a muddy picture of a foreclosure case that moved quickly with little regard for what may have happened to Norris. "It's the typical sloppiness we see when it comes to the server process," said Orlando attorney Matt Englett, who represents homeowners in foreclosure cases. Englett reviewed Norris' foreclosure documents with WESH 2 News.

• The foreclosure on Norris' property was filed in February and ended just days ago with the sale of the townhome for $68,000. The new buyer, on his first inspection of the property after the sale, discovered the remains in the passenger side of a vehicle in the townhome's garage. Up until Norris' disappearance, sometime around September of 2009, records show she was up to date on her mortgage payments.

• Foreclosure documents in the case show a number of irregularities. For example, a company called ProVest submitted an affidavit of diligent search and inquiry which stated that it found no records of a drivers license or a vehicle in Norris' name. However, the Brevard County Sheriff's Office confirmed that the vehicle in Norris' garage was registered to her. ProVest was working for the Florida Default Law Group, which was working for Wells Fargo in the foreclosure case.

• Other documents show ProVest charged more than $854 for research, including billing for trying to reach two tenants, even though Norris lived alone. "Judges have allowed these banks and these attorneys to skate and skirt around the process, and that's why we're experiencing these problems," said Englett.

For the story, see Foreclosure Docs Questioned After Body's Discovery (Body Found By New Owner On Thursday).

In a related story, see Woman Found Dead In Foreclosed Home (Neighbors Say Owner Missing For More Than A Year).

Disbarred Attorney Cops Plea To Ripping Off Clients, Lenders; $128K Score In Owner Finance Scam Among Swindles

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

• Frank P. Jenkins II, age 45, of LaPlata, Maryland, pleaded guilty [last week] to wire fraud and mail fraud in connection with a scheme to defraud clients of his law practice and lenders in real estate transactions.

***

• Jenkins admitted that from about 2006 through 2009, he caused clients to transfer money into bank accounts that he controlled, then embezzled the funds for his own purposes, rather than fulfilling his fiduciary obligations to his clients. [...] According to the plea agreement, Jenkins also made false statements to his clients as to his handling of estates and civil litigation and to lenders. Jenkins also provided his clients with fraudulent documents, including deeds and deeds of trust relating to property. Jenkins admitted that he forged the signatures of his clients, including on a consent decree requiring the clients to pay $150,000 to settle a breach of contract suit.

• In June 2009, Jenkins applied for a loan to refinance a property that he fraudulently told the lender he had purchased. In fact, Jenkins had entered into a contract to purchase the property, misrepresenting to the owners of the property that he would file a deed of trust and promissory note. Jenkins did record the deed showing he had purchased the property, but did not record the deed of trust.

• Jenkins received a check for $128,654.19 from the lender based on the fraudulent loan application. The deed Jenkins filed was subsequently rescinded and restored to the original owners, who were also awarded $150,000 each in compensatory and punitive damages, as well as attorney’s fees, by the Circuit Court for St. Mary’s County.

For the entire U.S. Attorney press release, see Former Charles County Attorney Pleads Guilty To Defrauding Clients And Lenders (Losses Totaled Between $1 Million and $2.5 Million).

(1) The Client Protection Fund of the Bar of Maryland was created to help reimburse clients for money they may have lost because of misappropriation or embezzle­ment by their attorneys.

For similar "attorney ripoff reimbursement funds" that sometimes help cover the financial mess created by the dishonest conduct of lawyers licensed in other states and Canada, see:

• Directory Of Lawyers' Funds For Client Protection (list now includes Canadian protection funds, courtesy of the American Bar Association);
• Check the USA Client Protection Funds Map;
• Check the Canada Client Protection Funds Map.

Maps available courtesy of The National Client Protection Organization, Inc.

R/E Scammer Dodges Restitution Order; Judge Says Ripoffs Too Complex To Figure Out Who Gets What; "Owner-Finance" Sellers Among Those Left Holding Bag

In Marco Island, Florida, the Marco Eagle reports:

• A 64-year-old Marco Island businessman serving 2½ years in a federal prison for mortgage fraud won’t have to pay restitution to his victims — unless they sue and win. U.S. District Judge John Steele ruled [] after Chief Assistant U.S. Attorney Douglas Molloy and Assistant U.S. Public Defender Russell Rosenthal agreed that due to mortgage transfers, the government is unable to identify the total loss or what people, banks or lenders lost money because of Douglas Lee Carter Sr.

• In a two-page order following a restitution hearing [], the judge said determining that would involve complex issues and cause delays, outweighing the need for mandatory restitution.

***

• His record of land deals in Collier Circuit Court is six pages long, with more than $30 million in foreclosures, lawsuits, judgments and dissatisfied sellers and buyers dating to 1984, so the FBI was asked to investigate.

• In most cases, Carter signed promissory notes, stopped paying sellers after financing homes for more than they were worth, then pocketed the difference. Although some sellers were indicted, most were innocent victims who lost millions.

***

• Victims say attorney John P. White of Naples, who handled most of his deals, is now under investigation. He was suspended from practicing law for 21 days by the Florida Supreme Court in November after the victims in this federal case filed a complaint and he was charged with dishonesty, fraud and misrepresentation; he pleaded to general misconduct. However, a pending complaint by a former employee says he continued taking clients after the Supreme Court ordered him not to, which was 30 days before his suspension went into effect.

• He now works with attorney E. James Kurnik II at Naples Law Group PL, operating a loan modification and foreclosure defense business. White couldn’t immediately be reached for comment.

For the story, see Judge rules Marco Island man in prison for mortgage fraud won’t have to pay restitution.