ACLU Jumps Into Robosigner Fray; Files Motion To Reverse Lower Court Injunction Prohibiting Posting, Distributing Of Depositions On YouTube

In Central Florida, the Sarasota Herald Tribune reports:

• The ACLU of Florida filed a motion [] appealing Sarasota Judge Rick DeFuria's decision not to allow a law firm to put depositions of so-called “foreclosure robo-signers” on its web site.

• The motion in Florida's Second District Court of Appeal asked the court to reverse an injunction directing Christopher Forrest and The Forrest Law Firm, of Tampa, to remove video depositions of mortgage robo-signers from YouTube, and barring Forrest and others from distributing the depositions, according to a statement from the ACLU. Forrest represents Sarasota homeowners Peter and Barbara Morlon in a foreclosure proceeding.

• “Putting the videotaped depositions of “robo-signers” on YouTube gives the world an opportunity to see how the practices of banks and title companies are affecting homeowners facing serious financial problems,” Howard Simon, ACLU of Florida Executive Director, said in the statement. “This is a public service that shouldn't be subject to a court-imposed gag order.”

For more, see Court fight over 'robo-signer' depositions.

See Forrest v. Deutsch Bank National Trust Company for the initial appellate brief filed by the ACLU.

Florida Retiree Dodges House Payments For 25 Years; Holds Off Foreclosing Lenders By Tying Them In Legal Knots

In Okeechobee County, Florida, The Wall Street Journal reports:

• Patsy Campbell could tell you a thing or two about fighting foreclosure. She's been fighting hers for 25 years. The 71-year-old retired insurance saleswoman has been living in her house, a two-story on a half acre in a tidy middle-class neighborhood here in central Florida, since 1978. The last time she made a mortgage payment was October 1985.

***

• Ms. Campbell has challenged her foreclosure on the grounds that her mortgage was improperly transferred between banks and federal agencies,(1) that lawyers for the bank had waited too long to prosecute the case, that a Florida law shields her from all her creditors, and for dozens of other reasons. Once, she questioned whether there really was a debt at all, saying the lender improperly separated the note from the mortgage contract.

• She has managed to stave off the banks partly because several courts have recognized that some of her legal arguments have some merit—however minor. Two foreclosure actions against her, for example, were thrown out because her lender sat on its hands too long after filing a case and lost its window to foreclose.

• Ms. Campbell, who is handling her case these days without a lawyer, has learned how to work the ropes of the legal system so well that she has met every attempt by a lender to repossess her home with multiple appeals and counteractions, burying the plaintiffs facing her under piles of paperwork. She offers no apologies for not paying her mortgage for 25 years, saying that when a foreclosure is in dispute, borrowers are entitled to stop making payments until the courts resolve the matter.

For more, see The 25-Year 'Foreclosure From Hell'.

(1) Reportedly, Ms. Campbell stopped making mortgage payments in 1985 because of an illness that caused her to lose income and get behind on her bills, she says. By then, the savings-and-loan crisis had begun to take hold. First Federal merged with First Fidelity Savings and Loan, which assumed ownership of the Campbell loan. In 1987, First Fidelity sold the mortgage to American Pioneer Savings Bank, an Orlando-based lender that collapsed in the early 1990s. The loan would change hands four more times, and four different lenders would try to foreclose on her. But every lender that held her loan either merged or collapsed. Each time ownership of the lender changed, the foreclosure case against Ms. Campbell would be dropped.

The loan eventually made its way to the Resolution Trust Corp., the federally owned asset manager that liquidated assets of insolvent S&Ls, and later, to the Federal Deposit Insurance Corp. In June 1998, the FDIC sold the mortgage to Commercial Services of Perry, which filed to foreclose in 2000. After another illness, Ms. Campbell deeded the house to her daughter, Deborah Pyper. Years later, after Ms. Campbell recovered, the house was deeded back to her. Ms. Pyper declined to comment.

She maintains that at this point, no one owns her mortgage note, and that because of fraud and paperwork mistakes by the banks that transferred it over and over again in the 1990s, the debt has been made void, the story states.

'Zombie Debt' Buyer Hit With Federal Lawsuit For Allegedly Calling Consumer A "Lowlife S.O.B." In Attempt To Squeeze Him For Payment Of 'Stale' Debt

In Beaumont, Texas, The Southeast Texas Record reports:

• A debt collection agency is being sued after one of its debt collectors allegedly referred to the debtor as a "lowlife." Tommy Hubert filed suit against Capital Management Services on Nov. 18 in the Eastern District of Texas, Beaumont Division.

• Hubert states the defendant called his home after 9 p.m.,(1) a time which was inconvenient, and called Hubert a "lowlife S.O.B." The plaintiff states he has been called the abusive name after he repeatedly refused to pay any monies towards the debt as the alleged debt is more than 15 years old. Hubert claims that Capital Management made multiple phone calls regarding the debt and made false representations about the debt.

• "Defendant's actions were done maliciously and in willful, wanton and reckless disregard for the rights of the Plaintiff," the lawsuit states. The defendant is accused of violations of the Fair Debt Collection Practices Act, the Texas Debt Collection Practices Act and the [Texas] Deceptive Trade Practices Act.

• Hubert is asking for an award of statutory and actual damages, attorney's fees and interest and for an injunction prohibiting Capital management from continuing the behavior.(2)

Source: Debt collector is sued after calling debtor abusive names.

(1) The Federal Fair Debt Collection Practices Act generally prohibits debt collectors from contacting consumers before 8:00 am and after 9:00 pm. 15 USC 1692c(a)(1).

(2) See 'Zombie Debt' Buyer Slammed For $300K+ In Damages, $100K+ In Consumer's Attorney Fees For Pursuing Lawsuit On 'Stale' Debt for another story where a debt buyer files a lawsuit after the expiration of the applicable statute of limitations in an attempt to collect a 'stale' debt.

Incarceration Over Unpaid Debts On The Upswing? De Facto 'Debtors' Prisons' May Be Making A Comeback As Market For 'Zombie Debt' Zooms

In Anoka, Minnesota, the Minneapolis Star Tribune reports:

• As a sheriff's deputy dumped the contents of Joy Uhlmeyer's purse into a sealed bag, she begged to know why she had just been arrested while driving home to Richfield after an Easter visit with her elderly mother.

• No one had an answer. Uhlmeyer spent a sleepless night in a frigid Anoka County holding cell, her hands tucked under her armpits for warmth. Then, handcuffed in a squad car, she was taken to downtown Minneapolis for booking. Finally, after 16 hours in limbo, jail officials fingerprinted Uhlmeyer and explained her offense -- missing a court hearing over an unpaid debt. "They have no right to do this to me," said the 57-year-old patient care advocate, her voice as soft as a whisper. "Not for a stupid credit card."(1)

• It's not a crime to owe money, and debtors' prisons were abolished in the United States in the 19th century. But people are routinely being thrown in jail for failing to pay debts. In Minnesota, which has some of the most creditor-friendly laws in the country, the use of arrest warrants against debtors has jumped 60 percent over the past four years, with 845 cases in 2009, a Star Tribune analysis of state court data has found.

• Not every warrant results in an arrest, but in Minnesota many debtors spend up to 48 hours in cells with criminals. Consumer attorneys say such arrests are increasing in many states, including Arkansas, Arizona and Washington, driven by a bad economy, high consumer debt and a growing industry that buys bad debts and employs every means available to collect.

• Whether a debtor is locked up depends largely on where the person lives, because enforcement is inconsistent from state to state, and even county to county. In Illinois and southwest Indiana, some judges jail debtors for missing court-ordered debt payments. In extreme cases, people stay in jail until they raise a minimum payment. In January, a judge sentenced a Kenney, Ill., man "to indefinite incarceration" until he came up with $300 toward a lumber yard debt.

***

• How often are debtors arrested across the country? No one can say. No national statistics are kept, and the practice is largely unnoticed outside legal circles. "My suspicion is the debt collection industry does not want the world to know these arrests are happening, because the practice would be widely condemned," said Robert Hobbs, deputy director of the National Consumer Law Center in Boston.

***

• The laws allowing for the arrest of someone for an unpaid debt are not new. What is new is the rise of well-funded, aggressive and centralized collection firms, in many cases run by attorneys, that buy up unpaid debt and use the courts to collect.

• Three debt buyers -- Unifund CCR Partners, Portfolio Recovery Associates Inc. and Debt Equities LLC -- accounted for 15 percent of all debt-related arrest warrants issued in Minnesota since 2005, court data show.(2) The debt buyers also file tens of thousands of other collection actions in the state, seeking court orders to make people pay. The debts -- often five or six years old -- are purchased from companies like cellphone providers and credit card issuers, and cost a few cents on the dollar.

***

• Todd Lansky, chief operating officer at Resurgence Financial LLC, a Northbrook, Ill.-based debt buyer, said firms like his operate within the law, which says people who ignore court orders can be arrested for contempt. By the time a warrant is issued, a debtor may have been contacted up to 12 times, he said. "This is a last-ditch effort to say, 'Look, just show up in court,'" he said.

• Few debtors realize they can land in jail simply for ignoring debt-collection legal matters. Debtors also may not recognize the names of companies seeking to collect old debts. Some people are contacted by three or four firms as delinquent debts are bought and sold multiple times after the original creditor writes off the account.

***

• A year ago, Legal Aid attorneys proposed a change in state law that would have required law enforcement officials to let debtors fill out financial disclosure forms when they are apprehended rather than book them into jail. No legislator introduced the measure.

***

• Many debtors, like Robert Vee, 36, of Brooklyn Park, get a second surprise after being arrested -- their bail is exactly the amount of money owed. Hennepin County automatically sets bail at the judgment amount or $2,500, whichever is less. This policy was adopted four years ago in response to the high volume of debtor default cases, say court officials. Some judges say the practice distorts the purpose of bail, which is to make sure people show up in court.

For more, see In jail for being in debt (You committed no crime, but an officer is knocking on your door. More Minnesotans are surprised to find themselves being locked up over debts).

In related stories, see:

• St. Petersburg Times: Debtors' prison— again (In a little-noticed trend blamed on the state's hard economic times, several courts in Florida have resurrected the de facto debtor's prison — having thousands of Floridians jailed for failing to pay assessed court fees and fines),

• Atlanta Journal Constitution: Deal frees 'debtor prison' woman (A woman held in a halfway house for months beyond her original sentence because she could not pay a $705 fine was released Tuesday after an agreement between the state Department of Corrections and the Southern Center for Human Rights. Ora Lee Hurley had been caught in a legal Catch-22 that kept her confined to the Gateway Diversion Center in Atlanta for eight months beyond her initial 120-day sentence for a probation violation),

• AlterNet: Owe Money? Be Careful, or You Might End Up in Jail (Owing money is not a criminal offense in the USA. But big business has found a way to end-run this process. Reports of mild-mannered Americans getting arrested for being in debt are starting to pop up in states across the country. All over the Net, we've been reading about these poor saps snatched off the street -- right in front of their horrified children -- by glowering cops and locked up just for missing a few credit card payments),

• Public News Service: A Return to Debtor’s Prisons? (Debtor's prisons were outlawed in the 19th century, but recent practices by debt collectors in Iowa have civil rights experts wondering if the prisons are back in a new form. Here's the tactic being used by some collection agencies - ask a judge to issue a warrant for the arrest of a debtor if they don't make good on a court-ordered payment).

(1) Reportedly, Uhlmeyer walked free after her nephew posted $2,500 bail. It took another $187 to retrieve her car from the city impound lot. Her 86-year-old mother later asked why she didn't call home after leaving Duluth. Not wanting to tell the truth, Uhlmeyer said her car broke down and her cell phone died.

(2) See Top Five Companies Using Debt Arrest Warrants in Minnesota (To their credit, the Minneapolis Star Tribune confesses to using these warrants four times during 2005-2009).

Upstate New York Foreclosure Mill Operation Continues To Attract Media Spotlight

Bloomberg News recently ran a less-than-flattering 'profile' on Buffalo, NY-based foreclosure mill law firm Steven J. Baum, P.C. that highlights some of the attention this outfit has recently attracted. A couple of excerpts:

• Steven J. Baum’s New York foreclosure law firm has attracted lawsuits and fines for its actions during the housing crisis, with one judge likening its arguments to something out of the “Twilight Zone.” As recently as last month, Baum’s firm, which one lawyer for homeowners said processes about half the foreclosures in New York state, was ordered to pay $14,532.50 in legal fees and costs and a $5,000 fine by Nassau County District Court Judge Scott Fairgrieve in Hempstead, New York.

• The judge said that when Paul Raia refused to vacate a Garden City co-op after foreclosure, Baum’s firm filed an eviction petition that misidentified the lender. “Falsities were contained in five paragraphs out of only ten paragraphs in the entire petition,” Fairgrieve wrote in his Nov. 23 decision.(1)

***

• New York State Supreme Court Justice Arthur M. Schack in Brooklyn called the firm’s explanations in one case “so incredible, outrageous, ludicrous and disingenuous that they should have been authored by the late Rod Serling.” [...] “Steven J. Baum PC appears to be operating in a parallel mortgage universe, unrelated to the real universe,” the judge wrote in that May decision.(2) “Next stop, the Twilight Zone,” he said, quoting from Serling’s TV series about science fiction and the supernatural.

***

• In January, Diana Adams, the U.S. trustee monitoring bankruptcy cases in Manhattan, reserved the right to seek sanctions against Baum’s firm in the bankruptcy case of a Bronx homeowner. The trustee accused Baum client JPMorgan of filing documents “that appear to be either patently false or misleading,” according to a court a filing recommending sanctions against the bank.

For more, see `Twilight Zone' Foreclosure Law Firm Draws Fine, Suits in New York Courts.

See also:

• "The MERS Mortgage Twilight Zone",

• NY Trial Judge: Buffalo-Based Foreclosure Mill Law Firm's Actions "A Dereliction Of Professional Responsibility!" (which notes that Suffolk County, New York, State Supreme Court Justice Melvyn Tanenbaum has also given the foreclosure mill law firm Steven J. Baum, P.C. a real hammering as evidenced by these short form copies of Justice Tanenbaum's 30 recent orders excoriating this outfit over its court filings in which "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").

(1) Federal Home Loan Mtge. Corp. v Raia, 2010 NY Slip Op 52003 (Dist. Ct. Nassau Cty, 1st Dist., November 23, 2010).

See also Federal Home Loan Mtge. Corp. v Raia, 28 Misc 3d 1212, 2010 NY Slip Op 51287 (Dist. Ct. Nassau Cty, 1st Dist., July 22, 2010) for an earlier ruling in this litigation from Judge Fairgrieve that ultimately led to the sanctions imposed on the Baum law office in the latest ruling.

(2) HSBC Bank USA, N.A. v Yeasmin, 27 Misc 3d 1227, 2010 NY Slip Op 50927 (NYS Sup. Ct. Kings County, May 24, 2010).

See also Brooklyn Judge Journeys Through "The Twilight Zone" In Recent Ruling Slamming Standing Lacking Lender, Notorious Foreclosure Mill Law Firm.

In his ruling, Justice Schack gives this parting shot that merits some note if you're a plaintiff's attorney or stockholder in HSBC Bank contemplating a future stockholder derivative action against HSBC:

• The Court can only wonder if this journey through the mortgage twilight zone and the dissemination of this decision will result in [Vice President Loan Documentation Thomas] Westmoreland's affidavit used as evidence in future stockholder derivative actions against plaintiff HSBC. It can't be comforting to investors to know that an officer of a financial behemoth such as plaintiff HSBC admits that "[a]n investigation of each and every loan included in a particular mortgage pool, however, is not conducted, nor is it feasible" and that "the fact that a particular mortgage pool may include loans that are already in default is an ordinary risk of participating in the secondary market."

Wells Fargo, Upstate NY Foreclosure Mill To Face The Heat In Explaining Dubious Documents Filed In Foreclosure Matter

Attorney Abigail Field writes at AOL's Daily Finance:

• The banks' constant refrain during this mortgage mess is that the paperwork issues are mere technicalities -- nothing to be concerned about. The documents are all true, they assert, we just didn't honor the proper procedures.

• But it doesn't take much digging into the issue to find a case like that of Tandala Mims of New York, which calls into question the whole foreclosure process and the systems that support it. In Mims's case, which will be argued again on Thursday, her lawyer, consumer bankruptcy attorney Linda Tirelli, argues that Wells Fargo should not be able to foreclose during Mims's bankruptcy because the bank's documents claiming ownership of the mortgage appear to be false in several ways.(1)

For more, see A Foreclosure Fiasco: The Case of Tandala Mims v. Wells Fargo.

(1) See In re Mims - Objection To Motion for Automatic Relief From Automatic Stay etc. etc. for bankruptcy attorney Linda Tirelli's motion setting forth the ostensible indicators of fraud in the filed foreclosure documents in the matter being litigated.

The motion features the activities of prolific robosigner John Kennerty; the outfit listed as representing the lender in this case is the notorious, Buffalo, NY-based foreclosure mill Office of Steven J. Baum, P.C.).

Report: LPS Shifted Robosigning Operations To Others In Response To Heat About Phony F'closure Docs Allegations; Notaries w/ Too Many Questions Axed

A recent investigative report by Reuters contains this excerpt reporting how foreclosure services outfit Lender Processing Services reacted to the heat brought upon on when it began being hit with allegations manufacturing bogus documents in foreclosure cases:

• Reuters has learned that rather than stamping out the practice, LPS in December 2009 began transferring signing operations out of its own offices and into those of firms it has close relationships with. [LPS spokeswoman Michelle] Kersch confirmed that LPS sent personnel to work "at client locations to assist clients during this period."

• For example, LPS arranged through a local employment service to hire about a dozen notaries, sending them to work at a new signing operation set up in the Jacksonville office of American Home Mortgage Servicing, one of LPS's biggest clients.

• Records from county recorders' offices show that at least as recently as October, American Home Mortgage Servicing employees signed exactly the same type of questionable mortgages assignments that LPS staffers at DocX and in Minnesota had signed. These included assignments done on behalf of defunct companies like American Brokers Conduit, and after foreclosure actions already had been filed. Reuters obtained a partial list of the names of the LPS-hired notaries. Copies of mortgage assignments available publicly show that these notaries notarized many of these assignments, including ones signed on behalf of defunct companies.

• In interviews, two of the notaries, who asked that they not be identified, said the American Home Mortgage Servicing office also set up a "robosigning" operation for affidavits, another type of document required in foreclosure cases. The employees who signed the affidavits were swearing that they had verified the facts listed in them, such as the specific amounts owed by homeowners.

• But the two notaries, who said they were dismissed after raising questions with supervisors about the practices, said that each morning about a half-dozen American Home Mortgage Servicing employees in about an hour would sign some 200 affidavits received via LPS's computer system, without reading them, let alone verifying the facts they contained. "In that time, come on, you have not verified figures in 200 documents. That's impossible," one of the notaries said.

For the story, see Special report: Legal woes mount for a foreclosure kingpin (requires a five-page "click-through" to read the entire story; for those who prefer the entire story on one web page, TRY HERE, TRY HERE, or TRY HERE).

Minnesota AG: Loan Modification Rackets Touted 'Attorney' & 'Charitable' Status To Dupe Homeowners Into Paying Illegal Upfront Fees

From the Office of the Minnesota Attorney General:

• Minnesota Attorney General Lori Swanson [] filed lawsuits against two out-of-state companies that charged Minnesota homeowners up to $3,500 in unlawful fees to help them renegotiate their home mortgages. [...] The first lawsuit was filed against Balanced Legal Group of California and its attorney, Deepak Parwatikar, which charged homeowners up to $3,500 for supposed mortgage help. The second lawsuit was filed against Home Protection Coalition of Wyoming, which charged homeowners up to $2,300.

• As regulators around the country have cracked down on widespread mortgage assistance scams, Attorney General Swanson said that her Office has seen an uptick of complaints involving companies that (1) tout their attorney status to build credibility to get people to sign up for their services, and (2) get people to sign up for expensive services by warning homeowners to hire them because there are other fraudulent companies that make false promises of mortgage help.(1)

For the Minnesota AG press release, see Attorney General Swanson Files Lawsuits Against Two Companies That Use The Threat Of Foreclosure Scams To Dupe Citizens Into Paying Thousands Of Dollars In Unlawful Fees For Supposed Mortgage Help (Attorney General warns citizens not to pay advance fees to companies for assistance in renegotiating their home mortgages).

(1) In connection with the lawsuit against Balanced Legal Group of California and its attorney, Deepak Parwatikar, the AG alleges that they peddles the following pitches on its website:

• “The banks have attorneys so you need to have a law firm on your side to protect your interests. Your home is one of your most treasured assets. DON’T use a non-attorney company that claims to work with attorneys to try and negotiate a solution concerning this treasured asset” and

• “BEWARE of brokers, ‘attorney based’, ‘attorney assisted’ and other boiler room type providers. Remember this is a relatively new industry and there is little regulatory control. The laws are constantly changing and these entities often skirt or break laws.”

Regarding the lawsuit against Home Protection Coalition of Wyoming, the AG alleges:

• [I]n 2009, the United States Congress funded a campaign called the “Loan Modification Scam Alert” to warn homeowners of fraudulent modification scams. The lawsuit against Home Protection Coalition alleges that the organization falsely posed as 501(c)(3) corporation and mailed Minnesota homeowners solicitations that bear an almost identical logo to the “Loan Modification Scam Alert.” Home Protection Coalition’s website also states as follows:
  
  “Due to the current foreclosure crisis, a bill has been introduced to Congress. This bill allows Home Protection Coalition to offer assistance to homeowners through the Economic Foreclosure Stimulus Plan.
  
  This initiative may reduce your mortgage payment by as much as 40%. . . . Home Protection Coalition is a not for profit housing counseling agency that employs forensic mortgage auditors, paralegals, attorneys and highly skilled lender specific negotiators that will write a loan modification that fits your specific financial needs.”

• To further deceive consumers, Home Protection Coalition calls its $2,300 fee a charitable “donation.” In addition to charging the company with violations of Minnesota’s mortgage modification laws which prohibit advance fees, the lawsuit alleges that the organization engaged in charitable solicitation fraud.

Long Island Judge Smacks Upstate NY Foreclosure Mill w/ $5K In Fines, Order To Pay $15K+ Legal Fees To Lawyer For Foreclosed-Upon Homeowner

In Hempstead, New York, a recent court ruling by Nassau County District Court Judge Scott Fairgrieve hammered the notorious foreclosure mill law office of Steven J. Baum, P.C. for filing what he (Fairgrieve) said were a number of sworn allegations that were false.

The following excerpts from Judge Fairgrieve's opinion reflect some of what went on in this action, an attempt to boot a local foreclosed homeowner (bold text is my emphasis, not in the original text):

• At the hearing, the attorney for Baum repeatedly attempted to excuse the firm's past conduct on the basis that it is sometimes acceptable to swear to false statements if the statements are immaterial.
  
  Further, counsel exacerbated the situation by trying to evade questions concerning whether false statements had been made, apparently trying to appeal to a substantive difference between the terms "incorrect" and "false." Conversely, every statement in the petition was material to a determination by this court in this case.
  
  The misrepresentation of the material statements here was outrageous. If not for the false statements, this case could have been dismissed more easily for lack of standing. Baum has not convinced this court that they have acted professionally responsible either in submitting truthful documents or accepting accountability for their mistakes.
  
  ***************************** ***
  
  While it may be possible to overlook an error in one paragraph of a petition, despite thorough proofreading, overlooking falsities in five paragraphs is repugnant and will not be tolerated in this court. This is especially the case when falsities were contained in five paragraphs out of only ten paragraphs in the entire petition, one of the truthful paragraphs being that the petitioner's attorney correctly swore to counsel's own name. A brief proofreading of the petition before submission should have led to the production of a petition that was more than half correct.
  
  Willful carelessness of this sort will not be accepted. Also, substituting reasoned and considered statements for computer generated ones displaces the verifying attorney's responsibility to make even a cursory investigation into the truthfulness of the statements to which he swears.
  
  **********************************
  
  The attention and time of the Volunteer Lawyers Project have been unnecessarily diverted in dealing with the underlying case and Baum's behavior. Mr. de Winter appeared in the sincere interest of and commitment to justice. In this regard, this court finds it appropriate to award attorney's fees and costs of $14,532.50 to go to the benefit of the Volunteer Lawyers Project.
  
  Specifically, this represents attorney's fees at $250.00 per hour for 57.75 hours and $95.00 in costs. This court also imposes monetary sanctions on Steven J. Baum, P.C. in the amount of $5,000.00. This amount is appropriate for the foregoing reasons.
  
  Further, it has come to this court's attention that this is not the first time Baum has been unethical. In Ameriquest Mortg. Co., Baum fought the imposition of sanctions on substantially similar facts only three years ago. [Ameriquest Mortg. Co. v. Basevich, 16 Misc 3d 1104(A), 841 NYS2d 825 (2007).] Analogous to the facts here, in Ameriquest Mortg. Co. Baum faced sanctions concerning Baum's submission of incorrect documents in an attempt to bypass lack of standing. There the court declined to sanction Baum. The relief granted to Baum therein stood as a reminder to be more cautious in the future, especially concerning standing issues. It is apparent from this case, such a short time later, that Baum has failed to heed this command.(1)

For Judge Fairgrieve's ruling, see Federal Home Loan Mtge. Corp. v Raia, 2010 NY Slip Op 52003 (Dist. Ct. Nassau Cty, 1st Dist., November 23, 2010).

(1) See also NY Trial Judge: Buffalo-Based Foreclosure Mill Law Firm's Actions "A Dereliction Of Professional Responsibility!" for additional evidence that Baum has ostensibly failed to heed this command, and in which is reported that Suffolk County, New York State Supreme Court Justice Melvyn Tanenbaum has recently issued these short form copies of 30 recent orders excoriating the Baum firm over court filings in which "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").

Media Report: Storm Clouds Continue To Darken Over Accused Bogus F'closure Document Manufacturing Racket; Feds Impanel Grand Jury, Join Class Action

In Jacksonville, Florida, an invetigative report by Reuters on the alleged fraudulent foreclosure document manufacturing racket Lender Processing Services ("LPS") reveals that LPS' legal problems are more serious than the outfit's CEO Jeff Carbiener recently let on to Wall Street analysts in an October 29, 2010 conference call:

• Questionable signing and notarization practices weren't limited to its subsidiary, called DocX, but occurred in at least one of LPS's own offices, mortgage assignments filed in county recorders' offices show.

• And rather than halt such practices after the federal investigation got underway, the company shifted the signing to firms with which it has close business ties. LPS provided personnel to work in the new signing operations, according to information from an LPS spokeswoman and court records including an October 21 ruling by a judge in Brooklyn, New York.(1) Records in county recorders' offices, and in the judge's opinion, show that "robosigning" and preparation of apparently false documents went on at these sites on a large scale.

***

• A spokeswoman for LPS confirmed to Reuters that it had helped other firms establish operations that performed the same function. [...] Interviews with key players and court records also show that pending investigations and lawsuits pose a bigger threat to the company than Carbiener let on.

***

• The criminal investigation in Jacksonville by federal prosecutors and the Federal Bureau of Investigation is intensifying. The same goes for a separate inquiry by the Florida attorney general's office. Individuals with direct knowledge of the federal inquiry said that prosecutors have impaneled a grand jury, begun calling witnesses and subpoenaed records from LPS.

***

• Meanwhile, the threats from four class action lawsuits filed in federal courts appear to be greater than the company has indicated, especially one filed in Mississippi. In a highly unusual move, a unit of the U.S. Justice Department has joined that suit as a plaintiff.

• The lawsuit alleges that LPS extracted many millions of dollars in kickbacks from law firms through an illegal fee-sharing arrangement, in exchange for doling out lucrative foreclosure work to them. The lawsuit also charges that LPS illegally practices law and routinely misleads homeowners and federal bankruptcy judges.

***

• Copies of LPS internal documents obtained by Reuters and testimony in lawsuits shed new light on the company's unusual dealings with its vast network of law firms. LPS relentlessly pressed them for speed. The result was almost instant filing of foreclosure documents, mostly prepared by clerical workers, not lawyers, according to court records, including deposition testimony by LPS officials. Several judicial opinions from around the country and evidence from investigations in Florida show that these documents often were riddled with inaccurate information about the amount homeowners owed, and were signed and notarized en masse without anyone at the firms checking the information in them.

***

• In an April 2009 court decision, Diane Weiss Sigmund, a federal bankruptcy judge in Philadelphia, specifically faulted lawyers whose firm filed LPS-transmitted documents in court using clerical workers to sign the name of a lawyer who hadn't looked at them. In that case, it turned out that, contrary to the documents supplied via the LPS system, the homeowners weren't in default on their mortgage.

• Referring to the LPS computer system, the judge stated, "the flaws in this automated process become apparent." She added: "An attorney must cease processing files and act like a lawyer."(2)

For more, see Special report: Legal woes mount for a foreclosure kingpin (requires a five-page "click-through" to read the entire story; for those who prefer the entire story on one web page, TRY HERE, TRY HERE, or TRY HERE).

(1) For Justice Arthur M. Schack's ruling, see OneWest Bank, F.S.B. v Drayton, 2010 NY Slip Op 20429 (NY Sup. Ct., Kings County, October 21, 2010).

(2) In re Taylor, Case No. 07-15385-DWS (Bankr. E.D. Pa., April 15, 2009), at page 32. Judge Sigmund concludes her 58-page opinion with this parting shot at robosigning foreclosure document processor outfits and the foreclosure mill law firms they hop into bed with:

• At issue in these cases are the homes of poor and unfortunate debtors, more and more of whom are threatened with foreclosure due to the historic job loss and housing crisis in this country. Congress, in its wisdom, has fashioned a bankruptcy law which balances the rights and duties of debtors and creditors. Chapter 13 is a rehabilitative process with a goal of saving the family home. The thoughtless mechanical employment of computer·driven models and communications to inexpensively traverse the path to foreclosure offends the integrity of our American bankruptcy system. It is for those involved in the process to step back and assess how they can fulfill their professional obligations and responsibly reap the benefits of technology. Nothing less should be tolerated.

MERS: The Central Player Responsible For Clouding The Title To Millions Of Homes Through Destruction Of The U.S. Land-Record System?

Attorney Abigail Field writes at AOL's Daily Finance:

• On Dec. 2, the House Judiciary Committee held a hearing on the mortgage mess. Perhaps the most disturbing testimony was the written submission from Christopher Petersen, associate dean for academic affairs and law professor at the University of Utah.

• Petersen detailed how the banks, Fannie Mae, Freddie Mac and Ginnie Mae destroyed America's land-record system, a method of tracking property sales that's existed since colonial times. Instead, they put in place a system called "MERS" (for Mortgage Electronic Registration Systems) that's legally shaky, makes tracking mortgage-note ownership extremely hard and may be clouding the title of millions of properties.

• But the MERS situation could be even worse than Petersen described to Congress: Millions of documents, including millions of foreclosure documents, may have been signed in MERS's name by people without the power to do so. A lack of authority would call into question the validity of all those documents. While the ramifications are uncertain, the bottom line is, as Petersen told me: "This issue injects yet another level of uncertainty into the already murky swamp of foreclosure nonsense."

• At a minimum, the deposition of William Hultman, MERS corporate secretary and treasurer, and related documents that expose the issue reveal yet another example of the mortgage and foreclosure industry's carelessness with the rule of law.

For more, see MERS: The Mortgage Database That's Clouding Millions of Titles.

Vacant Foreclosed Home Hijacker Scraps "Adverse Possession" Defense; Cops Plea To Organized Fraud, Dodges Jail Time, Gets Two Years Probation

In Fort Lauderdale, Florida, Broward-Palm Beach New Times reports:

• The State Attorney's Office has wrapped up its case against Mark Guerette, the guy written about in the New York Times and here on the Juice for his work leasing empty, foreclosed homes to families in need by way of an antiquated squatter's-rights law.

• Guerette found around 100 foreclosed homes that had been neglected in Broward County, particularly North Lauderdale, and informed the banks that he intended to move in and start renting them out. He used "adverse possession," an old clause in the Florida Statutes that grants someone ownership of a neglected property if he takes care of it for seven years.

• After multiple meetings with detectives and Broward prosecutors in which Guerette and his lawyer say they cooperated fully, he pleaded "no contest" to charges of organized fraud in the second degree. He was then adjudicated guilty without a trial and given two years' probation. Guerette says he wanted to avoid a trial because he needs to deal with his own foreclosure and take care of his two children. [...] As part of his plea deal, Guerette agreed not to file any more claims of adverse possession for two years.

For more, see Fraud Case Ends With Probation for Rogue Foreclosure Landlord Mark Guerette.

Norfolk Feds Score Guilty Plea From Foreclosure Rescue Operator Involving Sale Leaseback Equity Stripping Ripoffs

From the Office of the U.S. Attorney (Norfolk, Virginia):

• Shanita Lacy, age 34, of Chesapeake, VA, pleaded guilty [] in Norfolk federal court to conspiring to commit mail and wire fraud in connection with a scheme to fraudulently obtain home mortgages.

***

• According to court documents, Lacy admitted that, during 2007 and 2008, she conspired with others to fraudulently obtain eight mortgage loans worth $1,549,170. Through her Virginia Beach business known as Clean Slate Financial Services, Lacy targeted homeowners in financial distress with false promises of credit repair and action to enable them to save their homes from foreclosure.

• Lacy then oversaw the sale of the homes at inflated prices to straw buyers, who Lacy helped to obtain mortgage loans based upon falsified income and down payment data. At or soon after the closings, Lacy liquidated and made off with the homeowners’ equity. Soon thereafter, the straw buyers defaulted on the mortgage loans and the homes were foreclosed upon.

For the U.S. Attorney press release, see Chesapeake Woman Pleads Guilty to “Foreclosure Rescue” Mortgage Fraud Scheme.

Bank of America In Middle Of Another Mortgage Servicing Screw-Up; Promises To Give Back Home It Now Admits Was Foreclosed On In Error

In Jamaica, Queens, author and New York Times' columnist Joe Nocera gives his account of another Bank of America foreclosure fiasco resulting in the wrongful foreclosure of the home of 73-year old Lilla Roberts, and the subsequent efforts to fight back with the help of her attorney, Elizabeth Lynch with MFY Legal Services.(1) Combined with some 'media heat', Bank of America and Fannie Mae ultimately acknowledged that foreclosing on Ms. Roberts home had been a mistake.(2)

He concludes his column with this less-than-optimistic observation:

• Let’s face it: Ms. Roberts got a break. Because she had a dogged lawyer, who had the wit to get a New York Times columnist interested in her case, a terrible mistake was uncovered. As a result, an unjustified foreclosure may well be reversed. But it has to make you wonder how many other people have lost their homes because of similar mistakes. I can’t bear to venture a guess. It’s too sickening to contemplate.

For the story, see A Happy Ending to a Raw, but Common, Tale.

(1) MFY Legal Services is a not-for-profit law firm in New York City that provides free legal advice, counsel and representation to low-income New Yorkers on a wide range of civil legal issues, including housing, public benefits and entitlements, employment, mental health and adult home issues, consumer problems, and adoptions by foster care parents.

(2) According to the story, the notorious Buffalo, NY-based foreclosure mill law firm of Steven J. Baum, P.C. participated in the foreclosure process, and which, at one point, tried to get Ms. Roberts to waive her legal rights as a condition for a loan modification agreement.

Disbarred South Florida Title Attorney Gets 70 Months For Looting $2.7M From Escrow Account; Cash Intended To Pay Off Mortgages In R/E Closings

The South Florida Sun Sentinel reports:

• Disbarred Boca Raton attorney James B. Hayes was sentenced Friday to 70 months in federal prison for stealing clients' funds. Hayes, who pled guilty in September to making false statements on residential real estate settlement documents, was also ordered to pay more than $2.7 million in resititution.

• According to a release from U.S. Attorney Wilfredo Ferrer, Hayes, 57, a title attorney, withheld funds from clients and mortgage lenders during real estate transactions. The money was supposed to be used to pay off loans and cover transaction costs. The Florida Bar suspended his license to practice law last spring, but it found Hayes continued to practice law until he was permanently disbarred in August.

Source: Boca Raton attorney who stole $2.7 million from clients' funds jailed 70 months.

For the U.S. Attorney (Miami, Florida) press release, see Title Lawyer Sentenced For Stealing Trust Funds (Among those ccoperating in the investigation were The Florida Bar and title insurance companies Attorneys Title, Old Republic and Chicago Title).

Buyer Of Foreclosed Home Illegally Gives Unwitting Tenants The Boot Without Prior Notice, Ignoring Federal Protections Against Foreclosure Evictions

In Mableton, Georgia, WXIA-TV Channel 11 reports:

• It should not have happened: A family's belongings in heaps; and the family -- Patrick Duff, Sasha Davis and their now 10-day-old daughter Mia -- evicted from their rented house in Mableton on Thursday morning, without any warning, they say, insisting they did not know that their landlords had lost the home in a foreclosure on the Cobb County Courthouse steps. "The rug was yanked out from under us," Duff said on Thursday.

• "It says to me that something is very awry," Karen Gandolfo, an Atlanta mortgage and foreclosure consultant, said on Friday. "It says to me that there's the possibility that due process wasn't served."

***

• Maggie Kinnear of Atlanta Legal Aid told 11Alive News that what happened to Duff and Davis "should not happen anymore," because of the federal law signed by President Barack Obama in May, 2009 called the "Protecting Tenants At Foreclosure Act." She said the law was meant to prevent evictions of tenants when the landlords lose the houses in foreclosure.

• "If the tenant has a lease," which Duff and Davis did, from February, 2010 until February, 2011, "the law says they cannot be evicted after the foreclosure, they can stay on the property until the lease expires." If the buyer of the foreclosed house is not a financial institution or private investor, if it is someone who intends to move into it and live in it, then the tenants' lease is null and void, but "they must receive 90 days' notice to vacate," Kinnear said.(1)

***

• Duff and Davis said about the only contact they've had with the [foreclosed landlords] in recent weeks was on Thursday afternoon, a few hours after the eviction, when the[y] gave them their deposit back, a check for $1,600 -- their first and last months' rent.(2)

For the story, see Family Evicted Despite Law Protecting Tenants From Landlord's Foreclosure.

(1) According to the foreclosure deed recorded in this matter, the foreclosure sale took place on October 5, 2010, and the property was purchased by an outfit called REO Funding Solutions, LLC.

(2) While failing to tell the family the home was in some stage of foreclosure wasn't a very nice thing to do on the part of the now-foreclosed landlord, the Federal Protecting Tenants At Foreclosure Act takes the former owner off the hook for any responsibility for illegal evictions in violation of the statute and places it on the purchaser at the foreclosure sale, and any subsequent purchasers. The attention given in this story to the former landlords for failing to inform the tenants of the foreclosure (but who at least refunded the family of their security deposit) should be redirected to the lowlife(s) who now own(s) the home, and, if applicable, the snoozing judge who rubber-stamped the eviction proceeding without regard to the legal rights under the Federal law of any non-owner-occupants in possession of the home.

'Zombie Debt' Buyer Slammed For $300K+ In Damages, $100K+ In Consumer's Attorney Fees For Pursuing Lawsuit On 'Stale' Debt

Buried in a story on explosion of debt collection lawsuits by 'zombie debt" buyers, which recently appeared in The Wall Street Journal, contained these excerpts:

• Once debt buyers sue to retrieve debt, they are subject to state laws that impose a statute of limitations, often between five and seven years after the borrower stops making loan payments.

• In 2007, CACV, a unit of debt collector SquareTwo Financial Corp., sued Timothy McCollough in state court in Montana to recover $3,800 on a credit card from J.P. Morgan Chase & Co., and another $5,500 in interest, collection costs and $480 in lawyer's fees.

• Mr. McCollough wrote to the court in March 2008, explaining that he had been living on Social Security income since suffering a head injury in 1990. He says that he hadn't made any payments or used the credit card for more than eight years, putting his account beyond the state's statute of limitations for debt collection. He asked the court to dismiss the suit, saying: "This is the third time they have brought me to court on this account. Do I have to sue them so I can live quietly in pain?"

• In April 2009, a judge awarded damages of $310,000 plus $108,000 in legal fees and costs to Mr. McCollough.

Source: Boom in Debt Buying Fuels Another Boom—in Lawsuit.

Pittsburgh Bankruptcy Chief Sanctions Lying Lawyer, Foreclosure Mill Firm For Filing Manufactured Docs; Orders Both To Report To Disciplinary Board

In Pittsburgh, Pennsylvania, the Pittsburgh Tribune Review reports:

• The chief bankruptcy judge for Western Pennsylvania sanctioned an attorney and her Philadelphia law firm for filing deceptive documents in a foreclosure proceeding and then lying about them in a case against a Monroeville woman.

• The firm filed copies of three key letters created after the fact and never sent to the homeowner or her lawyer, U.S. District Judge Thomas O. Agresti ruled. Under Agresti's order last week, attorney Leslie A. Puida and the firm Goldbeck, McCafferty and McKeever must report to the Disciplinary Board of the state Supreme Court, which could impose penalties.(1)

• Puida could not be reached. The firm did not respond to a request for comment [last week]. A partner in the firm told the judge it initiated practices and procedures to avoid a recurrence.

For more, see Judge sanctions attorney, law firm in Monroeville case.

In related stories, see:

• ABA Journal: Law Firm Accused of UPL, After Admittedly Filing Foreclosures Without Attorney Review,(2)
• AOL's Daily Finance: Thousands of Pennsylvania Foreclosures Could Be on Shaky Ground.

(1) Under Judge Agresti's order, the court declined to slam the firm with monetary sanctions (the Trustee suggested the firm cough up $50K), "[g]iven the magnitude of the financial loss which GMM has already experienced in the form of attorney fees and lost client revenue as a result of this matter" (around $400K in out-of-pocket expenses which will not be reimbursed by insurance coverage), saying that banging them for more cash "could jeopardize the continued operation of GMM, possibly threatening the livelihoods of innocent employees who had nothing to do with the violations addressed in the Rule."

Likewise, Judge Agresti declined to impose monetary fines on Puida or suspend her from practicing in the bankruptcy court in the state's Western District (the Trustee suggested one year), for reasons that can be described as practical (and possibly humanitarian) as set forth in his order.

Judge Agresti's ruling is the latest in the ongoing litigation involving Countrywide Home Loans, and alleged fabricated evidence, suspected forgeries, and requests for allegedly improper fees or payments from bankrupt homeowners filed in this and other cases he has overseen in the U.S. Bankruptcy Court in Pittsburgh. See:

• The Wall Street Journal: Judge Rejects Countrywide Plan To Settle Suit on Foreclosure Bid (requires paid subscription; if no subscription, TRY HERE),
• The Wall Street Journal: Judge Dings C’wide Settlement Over Alleged Forgeries (free access),
• In re Countrywide Home Loans, Inc. (Judge Agresti's April 1, 2008 opinion and order that OKs go-ahead for Countrywide subpoenas. "In each of these 10 cases, the UST identified actions engaged in by Countrywide that she claims were questionable or raised issues going to the integrity of the bankruptcy system" Agresti said in this order.).

(2) The following comment to the ABA Journal story was left by William A. Roper, Jr. which merits attention:

• Readers, reporters and editors have long since forgotten that the firm named in this suit was at the center of the In Re Hill case which led to the collapse of Countrywide and which telegraphed today’s robo-perjury and foreclosure fraud scandal almost three years ago. A review of some of the primary materials in In Re Hill is appropriate:
  
  http://www.scribd.com/doc/40761878/In-Re-Hill-Transcript-of-20-Dec-2007-Hearing?in_collection=2711712 (This document is the hearing transcript in the case In Re Hill, Case No. 01-22574, U.S. Bankruptcy Court, W.D. Pa. In a hearing before the Hon. Thomas P. AGRESTI it emerged that Countrywide had sent "recreated letters" to the counsel for the debtor),
  
  http://www.scribd.com/doc/40762581/In-Re-Hill-the-Recreated-Letters?in_collection=2711712 (Copies of the three "re-created" letters),
  
  http://www.scribd.com/doc/41551941/In-Re-Hill-Memorandum-Opinion-and-Order-05-Oct-2010?in_collection=2711712 (Chief Judge Agresti's October 5, 2010, memorandum opinion and order in In re Hill).
  
  *
  Nor was In Re Hill the first occasion when a U.S. Court found it appropriate to sanction GMM and attorney Ledlie PUIDA. Consider the Bankruptcy Court’s In Re Ennis decision from 2006:
  
  http://www.scribd.com/doc/44629988/In-Re-Ennis-Memorandum-Opinion-and-Order-of-28-Jul-2006?in_collection=2703239 (Judge Robert W. BENTZ Memorandum and Order imposing sanctions upon Countrywide, its foreclosure mill law firm Goldbeck, McCafferty & McKeever, and attorney Leslie PUIDA in the case of In Re Robert E. and Kathleen L. ENNIS, Case No. 05-11985, a matter before the U.S. Bankruptcy Court W.D. Pa.),
  
  Now, in December of 2010, we learn from the In Re Kemp case that BAC witnesses such as Linda DeMartini are asserting under oath that Countrywide NEVER DELIVERED the mortgage collateral to the mortgage trusts:
  
  http://www.scribd.com/doc/44619866/In-Re-Kemp-Decision-16-Nov-2010
  
  But BAC tells us that its witness was “mistaken” and that its outside counsel misunderstood its business. This is nothing more than business as usual at Countrywide/BAC where evidence fabrication, perjury and forgery are considered to be core competencies from which the firm derives a competitive advantage.

Widespread Unauthorized Practice Of Law Under Cover Of Philadelphia Foreclosure Mill To Throw Title To Foreclosed Homes Into Question?

Attorney Abigail Field writes at AOL's Daily Finance:

• Two Pennsylvania cases, one state and one federal, have exposed new types of document problems in foreclosure cases. One of the cases has potentially transformative consequences for thousands of troubled Pennsylvania homeowners.

• At the center of each is the same law firm: Goldbeck McCafferty & McKeever (GMM). A lawsuit filed by Patrick Loughren against GMM details how the firm allowed -- and perhaps still allows -- nonlawyers in its firm to file and prosecute thousands(1) of foreclosures. As long as a lawyer supervises foreclosure filings, and at least reads them before they're submitted to the court, that is acceptable.

• But Loughren is suing because all three named partners of GMM, Joseph Goldbeck, Gary McCafferty and Michael McKeever, have admitted under oath -- during depositions last September and in a separate case in December 2009 -- that no attorney ever read the filings.(2) The partners made clear that the practice has gone on for the past several years.

***

• [L]oughren's complaint is so detailed, and the partners' admissions so damning, that if this case is decided on the merits, it's hard to see how Loughren could lose. If Loughren does win, the consequences could be far-reaching: All current foreclosure actions filed by GMM could be dismissed on the grounds that lawsuits filed by nonlawyers are a "nullity," meaning they don't count. That's hundreds, potentially thousands, of cases across Pennsylvania.

• All completed foreclosures that were brought using this method could also be called into question for the same reason, and given that the practice has been going on for years, a Loughren win could throw into question the title to thousands of Pennsylvania properties. In addition, any homeowners who paid legal fees to the banks and GMM during their foreclosures could get that money back.

***

• Although the practice of having nonlawyers file suit wasn't at issue in that case, learning of it upset U.S. Bankruptcy Court Judge Thomas Agresti [in an unrelated case] so much he wrote in his Oct. 5, 2010 order:(3)
  
  "During the trial the Court also became aware of some apparently routine practices at GMM that raise issues that cannot be ignored. McKeever testified to a procedure at his firm whereby foreclosure complaints are prepared and filed by non-attorneys and never reviewed by an attorney, even though the "signature" of an attorney appears on the document. . . . Even though these actions are not being filed in this Court. . .concern for our sister courts in this Commonwealth compel the Court to at least make publicly known what it learned during the trial. Furthermore, often these fundamentally flawed foreclosure actions, form the basis for related relief in this Court should the state court defendant subsequently file a bankruptcy petition. Therefore, the Court is concerned about the continuation of this practice by GMM."

For more, see Thousands of Pennsylvania Foreclosures Could Be on Shaky Ground.

See also, ABA Journal: Law Firm Accused of UPL, After Admittedly Filing Foreclosures Without Attorney Review.

(1) Robinson v. Countrywide Home Loans, Inc. et al. (W.D. Pa. Motion to Compel - filed Oct. 8, 2010).

(2) Loughren v. Lion, et al. (Court of Common Pleas, Allegheny County, Pennsylvania - Complaint In Equity).

(3) DeAngelis v. Countywide Home Loans, Inc., et al. (In re Hill) (Bankr. W.D. Pa. Oct. 5, 2010 - Memorandum Opinion And Order sanctioning Countrywide).

Westchester County Sale Leaseback, Equity Stripping Foreclosure Rescue Ripoff Leads To Six Convictions, One Acquittal; One Mistrial

In Westchester County, New York, the Westwood-Washington Township Patch reports:

• Westwood resident Wilma Shkreli, also known as Wilma Gecay, will be sentenced Tuesday for her role in a $1.4 million mortgage fraud scheme in Westchester County, N.Y. Shkreli, 33, pled guilty in April to one count of Grand Larceny in the Second Degree, a class C Felony, according to the Westchester County District Attorney's Office. She could now be sent to New York state prison for between 1 1/3 and three years. She also faces a fine of $34,000.

• Four other defendants in the case pled guilty. One defendant was found guilty at trial, another was acquitted and a third proceeding was declared a mistrial.(1)

***

• Charges came after a nine-month investigation by the District Attorney's Office and the New York State Banking Department's Criminal Investigations Bureau. The defendants allegedly defrauded four families and two mortgage lenders in Westchester County out of $1.4 million from March 2004 to January 2007.

• According to officials, the defendants convinced property owners facing foreclosure to sign over their homes with the option of re-purchasing them in one to two years. The investigation found four families that were victims: from Croton-on-Hudson, Yorktown Heights, Cortlandt Manor and the City of Mount Vernon, all in Westchester County, N.Y.(2)

Source: Westwood Resident To Be Sentenced In New York Mortgage Fraud Case (Wilma Shkreli faces up to three years in prison).

See also, The Journal News: 1 convicted, 1 exonerated, 1 mistrial in mortgage-fraud trial (when link expires, TRY HERE and TRY HERE).

(1) The other defendants in this racket:

• Amerigo DiPietro, Brewster, N.Y.: Pled guilty Aug. 23 to three counts of Grand Larceny in the Second Degree, one count of Scheme to Defraud in the First Degree and one count of Conspiracy in the Fourth Degree. DiPietro faces five to 15 years in state prison and a forfeiture order of $243,795. He will be sentenced Jan. 31, 2011.
• Doreen Swenson and Herbert "Phil" Hall, Tarrytown, N.Y.: Pled guilty May 4 to one count of Grand Larceny in the Second Degree. The husband and wife who posed as foreclosure rescue specialists were sentenced to two to six years in state prison Aug. 5.

The following attorneys were also prosecuted in this matter:

• Attorney David Reback, Rye Brook, N.Y.: Pled guilty July 23 to four counts of Grand Larceny in the Second Degree, one count of Scheme to Defraud in the First Degree and one count of Conspiracy in the Fourth Degree. He faces five to 15 years in state prison and a forfeiture order of $50,000 and will be sentenced Jan. 31, 2011.
• Attorney Eileen Potash, Fresh Meadows, N.Y.: Convicted Nov. 29 on one count of Conspiracy in the Fourth Degree. Potash faces 1 1/3 to three years in state prison and will be sentenced Feb. 28, 2011.
• Attorney Frank Corigliano, Newtown, Conn.: Was acquitted of the charges against him following a jury trial.
• Attorney Mildred Didio, New York, N.Y.: Remains charged with two counts of Grand Larceny in the Second Degree, one count of Scheme to Defraud in the First Degree and one count of Conspiracy in the Fourth Degree. Her case resulted in a mistrial Nov. 30 and will reportedly be retried, according to this story.

(2) For earlier reports on this story, see:

• Westchester District Attorney press release: Indictment Unsealed In Countywide Mortgage Fraud Scheme (Eight Individuals Defrauded 4 Families For 1.4 Million Dollars),
• The Record: 4 Lawyers Indicted In $1.4 Million NY Scam.

2 Sale Leaseback Peddling Cops Accused Of Consumer Fraud Violations; "Equitable Mortgages" Required Disclosures Under TILA, HOEPA: Arizona AG

In Phoenix, Arizona, Courthouse News Service reports:

• Two men defrauded 140 homebuyers by acquiring title to their homes through so-called "sale-leaseback," then selling the homes elsewhere for hefty profits, the Arizona attorney general says. The state says Lee Brent Shaw and Mark P. Tallman and their companies, Better Choice Investments and Better Solutions, stripped their victims of their equity and their homes.(1)

• "This case involves an equity stripping scheme that defrauded over 140 Arizona homeowners, ultimately causing them to lost both their home and their home's equity," the complaint states. "Defendants obtained the homes through a foreclosure rescue scheme aimed at vulnerable, often low-income homeowners facing imminent foreclosure. In what is known as a sale-leaseback, defendants took title to the homes after the payment of the arrears on the homeowner's mortgages, in exchange for allowing the homeowner to stay in the property as a tenant. This transaction, also known as an equitable mortgage, violates Arizona law,"(2) the state attorney general says in Maricopa County Court.

• The state claims that no homeowners were told that their home would be immediately sold to an investor, nor that that if a trustee's sale took place "they would be entitled to excess proceeds," nor were they given the required information by the Homeowners Equity Protection Act or the Truth in Lending Act.(3)(4)

For more, see State Busts Sale-Leaseback Home Scheme.

For the lawsuit, see State of Arizona v. Shaw, et al.

(1) Earlier media reports identify this duo as police lieutenants with the Phoenix Police Department. See:

• KPHO-TV Channel 5: Two Phoenix Cops Accused Of Fraud, Racketeering (Lieutenants Lee Brent Shaw And Mark Tallman Face Multiple Investigations);
• The Arizona Republic: Phoenix lieutenants face probe over real-estate business (Two Phoenix police lieutenants are under investigation after residents complained that some of the 120 real-estate purchases conducted by their off-duty business were unethical or illegal).

(2) In a recent New Jersey case involving only one sale leaseback deal (see 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), substantially all of the court-awarded damages granted to a homeowner-couple were attibutable to actual damages for the stripped equity of $116,791.49 (which was then tripled to $350,374.47 pursuant to the applicable state consumer fraud statute), and $293,836.17 in statutory damages for violations of the Federal Truth In Lending Act, Federal Home Ownership and Equity Protection Act, and a state consmer lending law.

I wonder if anyone at the Arizona Attorney General's office has attempted to calculate the financial exposure that this duo faces resulting from the 100+ ripoffs they've been accused of perpetrating.

For the treatment of sale leaseback arrangements as equitable mortgages, see generally:

• When is a Sale-Leaseback an Equitable Mortgage?,
• Sale-Leasebacks: Things May Not Be What They Seem,
• Online References On Sale Leaseback Recharacterization.

(3) The pair was also accused of acting as unlicensed mortgage brokers and mortgage bankers.

(4) In this case and others (assuming the scammed homeowner can't establish that the conveyance is absolutely void, such as in the case involving forged land documents - in which case all subsequently acquired interests in the home are also absolutely void) where the scammed homeowner retains and maintains continued, undisturbed possession of the home after signing the 'ripoff' documents conveying title to another, a strong case can arguably be made that a successful attempt to void the title conveyance to the scammers could also lead to the voiding of any subsequent mortgage placed on the home, even if the lender had no actual knowledge of the scam and claims to have the protection of the recording statutes as a bona fide purchaser.

In Arizona, (as well as in most other jurisdictions), any purchaser of real estate, or lender acquiring a security interest therein, has a duty to conduct a physical inspection of the realty, 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 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 could potentially:

• leave the purchaser's or lender's interest in the property subject and subordinate to any legal rights and equities that the scammed victim can establish, and

• disqualify the subsequent purchaser or lender from the protections accorded a bona fide purchaser or bona fide encumbrancer.

See, for example, Bianconi v. Smith, 3 Ariz. 320; 28 P. 880 (1892):

• "Common, ordinary business prudence would have suggested some investigation as to the source of appellee's title, and some inquiry as to who was in possession, before purchasing the property; and appellant's neglect of these indicated either gross carelessness or a degree of credulity not usually exhibited by men of ordinary experience."

and Keck v. Brookfield, 409 P.2d 583 (Ariz. App. Ct. 1965):

• A purchaser of land in possession of one other than the holder of the record title is compelled to inquire of the possessor by what title he holds possession, or he will be held to have taken subject to whatever rights a proper inquiry would disclose that the possessor had. Roy & Titcomb, Inc. v. Villa, 37 Ariz. 574, 577, 296 P. 260 (1931).

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 Arizona, (for which there is case law dating back over a century), see:

• Arizona Bona Fide Purchaser, Possession, Duty Of Inquiry.

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 strategies to attacking this type of scam in 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).

Trio Charged In Foreclosure Rescue Scam Involving Fractional Interest Deed Transfers, Abuse Of Bankruptcy Process Affecting $750M In Mtgs, 1500 Homes

In Southern California, the Los Angeles Times reports:

• Federal prosecutors have accused three Southern California residents of running a massive foreclosure rescue scam that used phony bankruptcy filings to stall foreclosures of nearly 1,500 homes, involving $750 million in mortgages.

• The three suspects allegedly found homeowners on the verge of foreclosure and promised to ward off the proceedings for fees usually amounting to $1,500 a month.

• Prosecutors said the suspects secretly assigned partial ownership of the participating homes to fictitious people and filed bankruptcies using the fake names, forcing lenders to delay foreclosures for months or in some cases years.

• Irving Cohen, 74, of Van Nuys and Robin Phillips, 53, of Claremont have agreed to plead guilty to bankruptcy fraud charges, according to the U.S. attorney's office of the Central District of California. A third suspect, Darwin Bowman, 74, of Van Nuys was indicted in September and is awaiting a Feb. 8 trial at the federal courthouse in Los Angeles.

***

• The homeowners, who responded to advertisements placed by the suspects, did not know about the false bankruptcies or that fractional ownership of their homes had been transferred to fictitious people, prosecutors said. "The defendants in this case exploited bankruptcy rules as they methodically victimized lenders in their scheme and targeted vulnerable homeowners while enriching themselves," said Steven Martinez, assistant director in charge of the FBI's Los Angeles office, which investigated the case.

For more, see 3 Southern Californians accused of running foreclosure rescue scam (The suspects allegedly used phony bankruptcy filings to stall foreclosures of nearly 1,500 homes, involving $750 million in mortgages).

See Final Report Of The Bankruptcy Foreclosure Scam Task Force for a report describing fractional interest deed transfer and other foreclosure scams involving the abuse of the bankruptcy courts.

Go here for other posts on fractional interest deed transfer, foreclosure rescue bankruptcy scams.

"Concern For Our Sister Courts In This Commonwealth" Cause PA Bkptcy Judge To Ring Warning Bell Regarding Unreviewed F'closures Filed By Non-Lawyers

In an October 5, 2010 order issued from a U.S. Bankruptcy Court in Pittsburgh, Pennsylvania, Chief Judge Thomas P. Agresti expressed his concerns over certain dubious practices by Philadelphia-based foreclosure mill law firm Goldbeck, McCafferty and McKeever ("GMM") in the following excerpt:

• During the trial the Court also became aware of some apparently routine practices at GMM that raise issues that cannot be ignored. McKeever testified to a procedure at his firm whereby foreclosure complaints are prepared and filed by non-attorneys and never reviewed by an attorney, even though the “signature” of an attorney appears on the document. 12/8 Tr. at 83-84.

• This would seem to be a violation of the Pennsylvania Rules of Civil Procedure, which provide that the signature of an attorney on a document filed with a Pennsylvania court is a certification that the document has been read by the attorney. See Pa.R.Civ.P. 1023.1(c).

• Even though these foreclosure actions are not being filed in this Court and thus do not expose GMM to sanctions, concern for our sister courts in this Commonwealth compel the Court to at least make publicly known what it learned during the trial. Furthermore, often these fundamentally flawed foreclosure actions, form the basis for related relief in this Court should the state court defendant subsequently file a bankruptcy petition. Therefore, the Court is concerned about the continuation of this practice by GMM.(1)

For Chief Judge Agresti's order, see DeAngelis v. Countywide Home Loans, Inc., et al. (In re Hill) (Bankr. W.D. Pa. Oct. 5, 2010 - Memorandum Opinion And Order sanctioning Countrywide).

In a related story, see Thousands of Pennsylvania Foreclosures Could Be on Shaky Ground.

(1) Judge Agresti's ruling is the latest in the ongoing litigation involving Countrywide Home Loans, and alleged fabricated evidence, suspected forgeries, and requests for allegedly improper fees or payments from bankrupt homeowners filed in this and other cases he has overseen. See:

• The Wall Street Journal: Judge Rejects Countrywide Plan To Settle Suit on Foreclosure Bid (requires paid subscription; (requires paid subscription; if no subscription, TRY HERE),
• The Wall Street Journal: Judge Dings C’wide Settlement Over Alleged Forgeries (free access),
• In re Countrywide Home Loans, Inc. (Judge Agresti's April 1, 2008 opinion and order that OKs go-ahead for Countrywide subpoenas).