Couple Holding Purchase Money Note & Mortgage Left Holding The Bag After Unwittingly Signing Negligently-Prepared Satisfaction By Closing Agent

A Florida appeals court recently let a closing agent off the hook for any potential damages caused by negilgently preparing a satisfaction of mortgage and getting the unwitting couple holding the promisssory note secured by said mortgage to sign the satisfaction.

The Court said that, because the unwitting couple "never intended to extinguish [the debtor/maker's] obligations under the note, the mistaken satisfaction of the mortgage is subject to rescission and reformation and thus the [unwitting couple] never lost the ability to collect on the note."

Accordingly, because the unwitting couple never lost the ability to collect from the debtor/maker on the note, they failed to establish injury or damage proximately caused by the closing agent's screw-up, an essential element in supporting a negligence claim against the agent.(1)

I guess the court is telling the unwitting couple that their legal gripe is primarily with the guy who owes them the money, and not the closing agent who screwed up the paperwork.(2)

For the ruling, see All Real Estate Title Services, Inc. v. Vuu, Case No. 2D09-1196 (Fla. App. 2d DCA, November 17, 2010).

(1) In reaching its conclusion, the Florida appeals court found as follows (and essentially makes the legal case that the unwitting couple should have made against the debtor/maker obligated on the promissory note; bold text is my emphasis, not in the original text):

• Cancellation or renunciation of a promissory note and release of security is ineffective if it is unintentional or procured by mistake. Gover v. Home & City Sav. Bank, 574 So. 2d 306 (Fla. 1st DCA 1991); see also § 673.6041, Fla. Stat. (2001). A court may apply equitable principles to reverse the cancellation of a mortgage satisfaction when that satisfaction is the result of mistake or inadvertence. United Serv. Corp. v. Vi-An Constr. Corp., 77 So. 2d 800, 803 (Fla. 1955); First Family Mortg. Corp. of Fla. v. White, 549 So. 2d 1049, 1050 (Fla. 3d DCA 1989). Thus, the Vuus' unintentional renunciation of the note by way of the mistaken satisfaction of mortgage did not, and could not, have extinguished their rights under the note.
  
  To support a negligence claim, the Vuus were required to show (a) the existence of a duty recognized by law requiring Boyd and All Real Estate to conform to a certain standard of conduct for the protection of others, including the Vuus; (b) a failure on the part of Boyd and All Real Estate to perform the duty; and (c) injury or damage proximately caused by such failure. See Lisanti v. City of Port Richey, 787 So. 2d 36, 37 (Fla. 2d DCA 2001); Landrum v. John Doe Pit Digger, 696 So. 2d 926, 928 (Fla. 2d DCA 1997). Because the Vuus' right to recover under the note has not been extinguished, they have failed to carry their burden of showing that they have suffered any injury from the preparation of the satisfaction of the mortgage.
  
  Accordingly, we reverse the judgment in favor of the Vuus and remand for the entry of a judgment in favor of Boyd and All Real Estate.

(2) For those wondering if there may have been possible fraud and/or collusion betwween the closing agent and the debtor/maker obligated on the promissory note against the unwitting couple, they were not issues addressed by the ruling; the ruling was silent as to whether the unwitting couple made any allegations with regard thereto.

Indiana Appeals Court: Failure To Comply With HUD Servicing Regulations A Valid Affirmative Defense In Foreclosure Action Involving FHA-Insured Loan

Lexology reports:

• In a recently-published case of first impression in Indiana, the Court of Appeals of Indiana has held that a lender’s failure to comply with HUD servicing regulations on an FHA-insured loan may be asserted as a valid affirmative defense to a mortgage foreclosure action.

• In Lacy-McKinney v. Taylor, Bean & Whitaker Mortgage Corp., 2010 Ind. App. LEXIS 2161 (Ind. Ct. App. Nov. 19, 2010), the appellate court reversed the trial court’s grant of summary judgment in favor of the lender, and remanded the matter for further proceedings to resolve the factual dispute over whether HUD’s servicing guidelines had been followed.

• In reaching its result, the court drew from reported cases in Illinois, New York, Florida, Pennsylvania and New Jersey which essentially conferred third party beneficiary rights on borrowers arising out of the HUD servicing regulations pertinent to FHA-insured loans.(1)

• It proceeded to hold that as a “condition precedent to foreclosure,” the lender was required to demonstrate its compliance with the HUD regulations regarding acceptance of partial payments (24 CFR § 203.556) and the face-to-face meeting protocols in default situations (24 CFR § 203.604(d)). Having found that a genuine issue of fact existed as to both, the appeals court held that summary judgment for the lender should not have been granted.

Attorney Joseph F. Zielinski of Indiana Legal Services, Inc., South Bend, Indiana, represented the homeowner in this case.(2)

For more, see Indiana Appeals Court allows HUD regulations to be affirmative defense to foreclosure (requires subscription; if no subscription GO HERE, then click appropriate link for the story).

(1) The Indiana appeals court made these observations regarding the out-of state cases:

• The rationale for allowing noncompliance with HUD servicing responsibilities to be used as an affirmative defense to foreclosure on an HUD-insured mortgage was set forth by the Illinois Appellate Court in Bankers Life Co. v. Denton, 458 N.E.2d 203 (Ill. App. Ct. 1983). There, a mortgagee filed a complaint seeking to foreclose on the Dentons‘ HUD-insured mortgage, which was in default. Denton, 458 N.E.2d at 206. In their answer, the Dentons raised the mortgagee‘s noncompliance with the HUD servicing responsibilities as an affirmative defense. Id. The trial court granted mortgagee‘s motion to strike the Dentons‘ affirmative defense and entered a judgment of foreclosure and sale against the Dentons. The Dentons appealed, contending that they could use noncompliance of HUD regulations as an affirmative defense to the foreclosure.

• After citing to the applicable mortgage servicing responsibilities, which included the requirement of a face-to-face meeting, the Denton court noted:
  
  It is evident from the language of the servicing regulations that the mortgagee must comply with these provisions prior to the commencement of a foreclosure proceeding. Therefore, . . . we believe that the failure to comply with these servicing regulations which are mandatory and have the force and effect of law can be raised in a foreclosure proceeding as an affirmative defense.
  
  While it is true that 24 C.F.R. 203.500 provides that a pattern of refusal or failure to comply with the servicing requirements will be cause for withdrawal of a mortgagee‘s approval to participate in the federal mortgage insurance program, we do not believe this to be an adequate remedy for the individual mortgagor. The legislative purpose of the National Housing Act . . . is to assist in providing a decent home and a suitable living environment for every American family. Thus, the primary beneficiaries of the act and its implementing regulations are those receiving assistance through its various housing programs. This would include the defendant as mortgagors of a H.U.D. insured mortgage.
  
  Therefore, in order to effectively insure that the interests of the primary beneficiaries of the H.U.D. mortgage servicing requirements are being protected, mortgagors must be allowed to raise noncompliance with the servicing requirements as a defense to a foreclosure action. H.U.D.‘s withdrawal of a mortgagee‘s approval to participate in the mortgage insurance program after repeated violations of the servicing requirements is a useless remedy for the individual faced with the immediate problem of the foreclosure action; an action which could possibly be avoided by . . . further efforts to arrange a revised payment plan.
  
  Id. at 205.

***

• Following reasoning similar to that found in Denton, the states of Florida, Maryland, and New York have likewise held that HUD servicing responsibilities may be raised as an affirmative defense in foreclosure actions even though the regulations do not create a private right of action. See Cross v. Fed. Nat’l Mort. Ass’n, 359 So.2d 464 (Fla. Dist. Ct. App. 1978) (mortgagee‘s failure to provide defaulted HUD-insured mortgagor with notice required under mortgage servicing regulations was affirmative defense that precluded summary judgment in favor of mortgagee); Wells Fargo Home Mortg., Inc. v. Neal, 922 A.2d 538,547 (Md. 2007) (mortgagor may not wield HUD regulations as sword but may assert regulatory noncompliance as shield to foreclosure on HUD mortgage); Federal Nat’l Mortg. Ass’n v. Ricks, 372 N.Y.S.2d 485, 497 (N.Y. Sup. Ct. 1975) (mortgagors may interpose as first defense, failure of mortgagee to comply with provisions of HUD Handbook).

• Some courts have styled a mortgagee‘s noncompliance with HUD regulations as an equitable defense (unclean hands and failure to do equity). See e.g., Heritage Bank, N.A. v. Ruh, 465 A.2d 547 (N.J. Super. Ct. Ch. Div. 1983) (courts may exercise equity power in refusing to grant foreclosures when mortgagees have flagrantly disregarded forbearance or casting); Fleet Real Estate Funding Corp. v. Smith, 530 A.2d 919 (Pa. Super. Ct. 1987) (summary judgment in favor of mortgagee reversed upon finding that court could exercise equity powers to restrict foreclosure by mortgagee who had not followed or applied forbearance provisions of the HUD regulations and Handbook). We find it problematic to treat such noncompliance merely as an equitable remedy. If noncompliance with HUD regulations is merely ―unclean hands,‖ a court may be precluded from requiring compliance in cases where the mortgagor is also deemed to have unclean hands. See Ruh, 465 A.2d at 558 (court of equity, fulfilling reasons and objects for its existence may, in furtherance of natural justice, aid one who is comparatively more innocent). Hence, the equitable approach is limited in its ability to promote a mortgagee‘s compliance with HUD regulations. Instead, we agree with the reasoning of Denton and view the affirmative defense of noncompliance with HUD regulations as the failure of the mortgagee to satisfy a HUD-imposed condition precedent to foreclosure.

• To hold that compliance with these regulations is not an affirmative defense, as Taylor-Bean suggests, would circumvent the public policy of HUD. The New Jersey Superior Court described this policy as follows:
  
  
  Families who receive HUD-insured mortgages do not meet the standards required for conventional mortgages. It would be senseless to create a program to aid families for whom homeownership would otherwise be impossible without promulgating mandatory regulations for HUD-approved mortgagees to insure that objectives of the HUD program are met. Foreseeable obstacles to these families‘ maintaining regular payments, such as temporary illness, unemployment or poor financial management, should be handled with a combination of understanding and efficiency by mortgagees or servicers. Poor servicing techniques such as computerized form letters and unrealistic forbearance agreements as were used by Associated defeat the purpose of the National Housing Act and the HUD program. The prevention of foreclosure in HUD mortgages wherever possible is essential. The HUD program‘s objectives cannot be attained if HUD‘s involvement begins and ends with the purchase of the home and the receipt of a mortgage by a low-income family. Id.
  
  Associated E. Mortg. Co. v. Young, 394 A.2d 899, 906 (N.J. Super. Ct. Ch. Div. 1978).

(2) Indiana Legal Services, Inc. is a nonprofit law firm that provides free civil legal assistance to eligible low-income people throughout the state of Indiana.

Central Florida Robosigning Operation Goes On The Offensive; Sues Foreclosure Defense Attorney For Alleged Libel, Slander

Barry Ritholtz writes in The Big Picture:

• Sometimes, the best defense is a good offense. That seems to be the approach that notorious robo-signing firm Nationwide Title Clearing has taken in responding to some of its critics.

• If you are unfamiliar with their name, you might recall earlier this Fall when depositions of several Nationwide robo-signers employees went viral on YouTube (We mentioned these here and here).

• This, amongst other perceived sleights has upset Nationwide Title, who has sued a St. Petersburg foreclosure defense lawyer, Matthew Weidner, for alleged libel and slander. This is likely to be a terrible, terrible idea.

For more, see When Robosigners Attack!

Recently-Recorded, Forged Mystery Lien Threatens To Kibosh Short Sale Of Home Facing Imminent F'closure; Title Agents Refuse To Insure Over Dirty Deed

In Elk Grove, California, KXTV-TV Channel 10 reports:

• The pending sale of a home on the brink of foreclosure could collapse because of a fraudulent deed of trust recorded on the property-- and no one involved in the transaction can imagine a possible motive.

***

• [Homeowner JT] Tiumalu's Realtor found a buyer and got approval from both the first and second mortgage holders to close escrow by the end of December. But this week, a preliminary title report showed a mysterious new $26,500 deed of trust that was recorded on Oct. 13.

• The phony deed of trust puts the house in Alameda County, the signatures of the homeowners are forged, and the notary stamp appears to be counterfeit. Although the document is clearly fraudulent, it's enough to cloud the title and kill the sale.

***

• Realtor Megan Laherrere, who was negotiating the short sale with the lenders for Montoya, said a quiet title action could take months and cost thousands of dollars in legal fees. "We contacted title and their bonds will not cover removing it. The title insurance won't cover it. Nobody wants to touch it," Laherrere said.

For more, see Mystery lien could torpedo Elk Grove home sale.

Foreclosed Minnesota Homeowner Says She Was Duped Into Signing Away Deed & Redemption Rights For $5K; Sues To Undo Title Transfer

In Washington County, Minnesota, Minnesota Public Radio reports:

• Many [Minnesota] homeowners in foreclosure may not be aware there's another option that would allow them to keep their homes. Under state law, they can buy their home back after the sheriff's sale for the price of the winning bid. That bid can be tens or even hundreds of thousands of dollars less than what they owed on the house.

• But the law is not widely known, and as a result many homeowners have lost out on the chance to stay in their homes. Marie Forsell, who owned a home in Washington County, is one of them.

***

• After Forsell's house was sold at a sheriff's sale this fall, people started showing up at her doorstep with offers of help. Investors offered her money -- $5,000 -- in exchange for her deed. The $5,000 sounded pretty good at that time, because Forsell figured she could never scrape together enough money to redeem her house.

• What Forsell didn't know was how much her house had sold for at the sheriff's sale. After she'd agreed to take the $5,000, Forsell found out that her house -- on which she owed close to $600,000 -- had sold at auction for only about $86,000. [...] That's when Forsell discovered something else: under state law she could have bought her home back during the redemption period that follows the sheriff's sale, for far less than what she owed.

***

• The investors who bought Forsell's deed also bought her rights to redeem her house. Now, they can put it back on the market for a profit. [...] The deal Forsell agreed to amounts to equity stripping, according to her attorney Jerome Ritter. He says homeowners in foreclosure are vulnerable to such deals because they may not know their rights.

• "They trusted people who said, 'I am here to help, here is some money, it's the best you can get,'" he said. "They made it work because they did not tell the homeowner the true set of facts, and that is wrong."

• Minnesota updated its foreclosure laws this year in an effort to prevent mortgage fraud. The law requires people seeking title to a foreclosed property after the sheriff's sale -- and before the end of the redemption period -- to notify the homeowner that the house can be redeemed for the sheriff's sale price, if it's less than the amount owed before the sale.

***

• Forsell is suing the investors she made the deal with, claiming they broke the law. She hopes a judge will grant her a second chance to get her house back.

For the story, see Little-known law could help foreclosed homeowners.

Foreclosure Mill's Apparent Failure To Arrange For Orderly Transfer Of Cases To New Counsel Leads To Chaos At South Florida Foreclosure Sales

In South Florida, The Palm Beach Post reports:

• The transfer of thousands of files from the deposed David J. Stern law firm caused not just a foul-up in recent Palm Beach County foreclosure auctions, but is shutting down cases to the point that one defense attorney called the lack of action "malpractice."

• Between Nov. 29 and Friday, there were 110 foreclosure sales in Palm Beach County in which the bank made no bid for the home, according to the Palm Beach County Clerk's office.

• Unwitting investors put in winning offers as low as $200 for homes they'll probably never get because the auctions were not properly advertised, likely lost in the shuffle from Stern's office to other firms.

• Foreclosure defense attorneys said hearings are being canceled, they don't know who is representing the banks in their cases, and that motions for Stern to withdraw from cases aren't being filed, leaving the firm as attorney of record.

• The problems led Broward County Chief Judge Victor Tobin to issue a temporary administrative order outlining how Stern cases should be handled and requiring legal evidence be shown that the firm was terminated and new counsel hired. "It appears that Stern has not made arrangements for the orderly transfer of cases from him or his firm to new counsel for pending cases," Tobin wrote.

• And Palm Beach County Clerk of Court Sharon Bock said the transfers are "just adding to the misery that is already happening" in the foreclosure courts.

For more, see Foreclosed homes hit auctions with no legal representation.

See also A house for $200? Foreclosure confusion leads to rock bottom auction prices.

Central Florida Judge Lets Foreclosure Mills Off The Hook On Inflated Process Server Fees

In Central Florida, The Tampa Tribune reports:

• Pasco County Circuit Judge Susan Gardner has agreed to let some attorneys "off the hook" – this time - for legal fees she says are inflated. "But I'm not approving these fees to be added to the final judgment," Gardner said. "And I think attorneys now know that I'm watching, and I'm not tolerating unreasonable fees."

• Gardner decided last month to take a closer look at her foreclosure cases after former employees of a large foreclosure firm testified to overbilling and forging documents. The judge plastered files with adhesive notes detailing concerns over 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 at the time. These fees should typically be $45 to a couple hundred bucks, she said.

• 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. The judge ordered five lawyers to show why the fees were reasonable. Their explanations didn't please Gardner, but she said she decided to make this a warning.

• "I was a little weak on holding someone's feet to the fire because I wasn't sure who to blame," Gardner said. "Everyone involved was following someone else's instructions."

For more, see Pasco judge warns attorneys about high foreclosure fees.

Sticky-Fingered Closing Agents Get Prison For Roles In $4.1M Escrow Account Ripoff; Used Check-Kiting Scheme In Failed Attempt To Conceal Dirty Deeds

From the Office of the U.S. Attorney (Springfield, Missouri):

• Beth Phillips, United States Attorney for the Western District of Missouri, announced [] that the owners of Guaranty Title, formerly headquartered in Nixa, Mo., have been sentenced in federal court for their roles in $4.1 million wire fraud, bank fraud and money laundering conspiracies.

• Richard G. “Rick” Burton, 60, of Nixa, Mo., and Kathy Cyrena Allen, also known as Kathy Stanton, 53, of Sarcoxie, Mo., were sentenced in separate hearings before U.S. District Judge Greg Kays on Tuesday, Nov. 30, 2010. Burton was sentenced to six years and six months in federal prison without parole. Allen was sentenced to three years and three months in federal prison without parole. The court also ordered Burton and Allen to pay $4,150,663 in restitution, for which they are jointly and severally liable.

• Burton and Allen participated in a scheme to defraud financial institutions and individuals of more than $4.1 million through a series of illegal financial transfers related to stolen escrow payments. They attempted to conceal their criminal activities through a substantial check-kiting scheme. Both Burton and Allen pleaded guilty to conspiracy to commit wire fraud and conspiracy to commit money laundering. Allen also pleaded guilty to conspiracy to commit bank fraud.

***

• Burton and Allen admitted that they took a portion of the escrow money that had been transferred into these escrow accounts. In violation of Guaranty’s promise not to do so, they caused $3,467,709 of stolen escrow funds to be diverted into the firm’s business operations account and used the money for the day to day business operations of Guaranty.

For the U.S. Attorney press release, see Owners Of Guaranty Title Sentenced For $4.1 Million Fraud.

Judge Cancels Previously-Ordered Foreclosure Sale After Reviewing Testimony In Expert's Affidavit As To Dubious Nature Of Robosigner Documents

A recent story in the South Florida Sun Sentinel describes the approach taken by homeowner Gerta Kachko and foreclosure defense attorney Geoff Sherman in an attempt to get a previously-scheduled foreclosure sale cancelled:

• Sherman said the Aug. 10 [summary judgment] hearing lasted only a few minutes, with a Broward County Circuit Court judge ruling in favor of Deutsche Bank and setting a date of Dec. 8 for the condo to be repossessed.

• Sherman said he later read about issues in other cases involving an accused robo-signer. Intrigued, Sherman investigated further while Eugene Kachko hired an expert on mortgages and foreclosures to review his mother's case.

• The expert, West Palm Beach attorney Lynn Szymoniak, wrote in an affidavit that "it is clear" that Deutsche had not acquired the Kachko mortgage at the time it moved to foreclose. Szymoniak testified that Deutsche filed a document proving that it owned the Kachko mortgage only after filing the initial foreclosure, and it attempted to make the document effective retroactively.

• The document was signed by Linda Green and Linda Thoresen, who were identified as representatives of America Home Mortgage. But Szymoniak said Green and Thoresen actually were employees of Lender Processing Services Inc., a Jacksonville-based company whose services include drafting missing documents to facilitate foreclosures.

• Green and Thoresen "signed thousands of documents each week as needed in foreclosure cases, without any personal knowledge of the documents, often without any authority from the entities they claimed to be their employers and, in most cases, without ever reading such documents," Szymoniak wrote.

• She also noted that LPS told federal regulators in August that its document production operations were the subject of state and federal investigations. A spokewoman for LPS did not respond to an interview request.

• On Aug. 20, Sherman filed a motion for a rehearing, asking that the judge's ruling for Deutsche be vacated on the grounds that the bank allegedly committed fraud. Judge Eli Breger granted the order on Sept. 24, canceling the Kachko foreclosure. Four days earlier, GMAC Mortgage had become the first lender to suspend foreclosures.

Source: Broward homeowner alleges robo-signer wrongdoing in foreclosure case.

Bank Fails Again To Convince NY Bkrptcy Judge It Has Standing To F'close On Bronx Borrower; Invited To Try Again; Admits It Doesn't Know Who Owns Note

In New York City, AOL's Daily Finance reports:

• U.S. Bankruptcy Court Judge Martin Glenn denied Wells Fargo's request for permission to foreclose on Tandala Mims's house in the Bronx for a second time on Thursday because he still wasn't satisfied that Wells -- as opposed to some other bank -- had the right to do so.(1)

• In its attempts to prove its legal standing to foreclose so far, Wells Fargo has submitted two different versions of Mims's note, certifying each as a true and accurate copy of the original. The bank has also submitted a document assigning the mortgage to it that was problematic, as I explained in an article earlier this week.

• One issue with the assignment was that the company allegedly doing the assigning is defunct. Another is that -- through the magic of MERS -- a Wells Fargo employee was signing on behalf of the assigner. Essentially, that puts Wells Fargo on both sides of the contract, a conflict of interest.

***

• Describing himself as "deeply concerned," Judge Glenn noted that, in looking at the documents, questions kept "popping out," and he made the point that Wells Fargo hadn't answered the questions he had raised in his initial order against it. In one of the hearing's more dramatic moments, the judge asked Wells Fargo who the investor in the note was -- the MERS database doesn't say -- and Wells admitted it didn't know.

For more, see Judge Rejects Wells Fargo Foreclosure Documents Again.

See Wells Fargo, Upstate NY Foreclosure Mill To Face The Heat In Explaining Dubious Documents Filed In Foreclosure Matter for last week's post on this story.

(1) See In re Mims II - Order. While the judge ruled against Wells, he gave the bank permission to try again, the story states.

Two Phoenix Cops Shelved On Administrative Leave After Agreeing To $458K Settlement With AZ AG For Roles In Alleged Illegal Sale Leaseback Deals

From the Office of the Arizona Attorney General:

• Attorney General Terry Goddard [last week] announced a judgment totaling $458,000 in civil penalties and restitution(1) for consumers as a result of a mortgage fraud investigation and lawsuit. [..] On November 24, 2010, Goddard filed a lawsuit(2) on behalf of his Office and the Arizona Department of Financial Institutions against Lee Brent Shaw of Gilbert and Mark Tallman of Chandler and their limited liability companies, Better Choice Investments, LLC, and Better Solutions, LLC, alleging that they defrauded some 148 Arizonans of their homes. Both Shaw and Tallman are also Phoenix Police Officers.

The Associated Press reports that Shaw and Tallman have been put on administrative leave after agreeing to the settlement, and further reports that a police statement says an internal investigation is now under way. See 2 Phoenix officers on leave after settling suit with AG that accused them of mortgage fraud.

For the Arizona AG press release, see Goddard Announces $458,000 Judgment in Fraud Case Involving Two Police Officers.

For the lawsuit and the consent judgments in this case, see:

• Lawsuit,
• Consent Judgment-Shaw,
• Consent Judgment-Tallman,
• Consent Judgment-Better Choice Better Solutions.

See also 2 Sale Leaseback Peddling Cops Accused Of Consumer Fraud Violations; "Equitable Mortgages" Required Disclosures Under TILA, HOEPA: Arizona AG for an earlier post on this story.

(1) According to the terms of the settlement, the defendants must:

• Pay $310,000 in restitution to homeowners victimized by their scheme.
• Pay $148,000 in civil penalties to the Attorney General’s Office and the Arizona Department of Financial Institutions.
• Pay $27,717 in costs and attorney’s fees.
• Refrain from participating as a director or officer in any financial institution or enterprise licensed by the Arizona Department of Financial Institutions.
• Refrain from engaging in any activity requiring the issuance of a license under the authority of the Arizona Department of Financial Institutions.
• Refrain from any ownership interest in a sale-leaseback transaction.

It sounds like the duo got a pretty good deal from the state AG's office. Unlike this suit involving multiple sale leaseback deals and 100+ alleged victims, a recent New Jersey civil lawsuit resulted in a significantly higher monetary award and related to only one sale leaseback deal with one homeowner-couple. 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 the homeowner-couple in the New Jersey case were attibutable to actual damages for the stripped equity and statutory damages for violations of the Federal Truth In Lending Act, Federal Home Ownership and Equity Protection Act, and a state consmer lending law.

Presumably, the settlement with the Arizona Attorney General also insulates the pair from any possible criminal liability that may have possibly arisen from their alleged activities. See Criminal Prosecutions Of Sale Leaseback Peddlers In Equity Stripping Foreclosure Rescue Deals for those incidents that led to criminal prosecutions in sale leaseback deals.

For some insights on the various legal theories and strategies to attacking this type of scam in civil lawsuits brought on behalf of screwed-over homeowners, 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),
• DREAMS FORECLOSED: The Rampant Theft of Americans' Homes Through Equity-stripping Foreclosure 'Rescue' Scams (a publication from the National Consumer Law Center).

(2) According to the Arizona AG's press release:

The lawsuit alleged that between 2003 and 2007, the two defendants, through their Better Choice Investments, LLC, purchased sale-leaseback transactions from solicitors who had convinced homeowners to sell their homes for far less than the market value, promising to save them from foreclosure.

The solicitors persuaded struggling homeowners to deed them their homes in return for assuming their monthly mortgage payments and paying off the full value of their delinquent payments, often using funds advanced by defendants. The lease agreement provided for a monthly fee equivalent to the mortgage payment to remain in the home as a renter. Neither the owner’s mortgage lender nor servicer was notified of the transfer of title.

After the initial paperwork was signed, the deal was quickly turned over to defendants Shaw and Tallman, in return for a commission paid to the solicitors. The defendants recruited a pool of investors willing to assume co-ownership and refinance, for a 50 percent share in the profits.

The owners-turned-renters had the option to repurchase the house within one year for a fee of approximately $15,000, if they met all of the conditions of the sale-leaseback agreement. If the owner-turned-renter violated any of the conditions, such as by making a late rental payment or being evicted, the option to repurchase the home became void and the individual was subject to immediate eviction.

Almost all of the owners-turned-renters proved unable to repurchase their properties, at which time the defendants sold or refinanced the home at full market value, earning profits in the tens of thousands of dollars.

Colorado AG Announces Two Civil Lawsuits Targeting Alleged Sale Leaseback, Equity Stripping Foreclosure Rescue Ripoff Operations

From the Office of the Colorado Attorney General:

• Colorado Attorney General John Suthers announced [last week] that his office has filed separate lawsuits against three businesses and five individuals accused of defrauding homeowners in Denver, Boulder, Broomfield and Adams counties through deceptive foreclosure rescue schemes. [...] All of these defendants are suspected of defrauding homeowners out of substantial equity in their homes through an elaborate foreclosure rescue scheme in violation of the Colorado Foreclosure Protection Act.

• According to the complaints filed in Denver District Court, consumers facing foreclosure were approached by the defendants with a proposal to save their homes. The defendants promised to use the equity in the homes to halt the foreclosures and, in some cases, to make improvements to the properties.

• Homeowners were instructed to transfer title to their properties to investors arranged by defendants,(2) who would then lease the properties back to the original homeowner with an option to repurchase their homes. The complaints allege that many homeowners were subsequently evicted and that none of them were ever able to exercise their repurchase options. All of the equity in their homes was lost to the defendants.(3)

For the Colorado Attorney General press release, see Attorney General announces lawsuits against individuals, companies engaged in fraudulent foreclosure rescue activities.

(1) The first complaint, State of Colorado v. Lynn, et ano., charges Jason L. Lynn (DOB: 3/10/1977) and Lynn’s company, Superior Financial Group.

The second complaint, State of Colorado v. Brunner, et al., charges Patrick C. Brunner (DOB: 7/27/1979), Brunner’s company, Platinum Financial Group, Jerry Ohu (DOB: 6/10/1974), Ohu’s company, Fortune Financial Group, Gregory D. Hoffman (DOB: 8/21/1969) and William J. Schultz (DOB: 7/29/1974).

(2) According to the civil lawsuits filed by the Colorado Attorney General, the sale leaseback peddlers arranged for a sale of the homes to investors, converting any of the home equity into cash by financing the deal with a mortgage loan from a financial institution, and subsequently using assignments to divert those net proceeds into their own pockets.

Attorneys General in Massachusetts, Arizona, Maryland and Washington State have enjoyed recent success in bringing civil lawsuits prosecuting sale leaseback foreclosure rescue peddlers by invoking their respective state consumer protection statutes, See:

• Massachusetts: Massachusetts AG Concludes Civil Action Against Equity Stripping Attorney, Five Confederates For Using Sale Leaseback Racket To Rip Off Homeowners (for the lawsuit setting forth the allegations, see Commonwealth of Massachusetts v. Sohmer, et al.),

• Massachusetts: Mass AG Obtains Civil Judgments Against Five Accused In Equity Stripping, Sale Leaseback, F'closure Rescue Racket; Case Against 9 Others Still Pending,

• Arizona: Two Phoenix Cops Shelved On Administrative Leave After Agreeing To $458K Settlement With AZ AG For Roles In Alleged Illegal Sale Leaseback Deals (for the lawsuit setting forth the allegations, see State of Arizona v. Shaw, et al.),

• Arizona: Foreclosure Rescue Operator To Cough Up $690K+ To Resolve Arizona AG Civil Charges In Alleged Sale Leaseback Equity Stripping Scam (for the lawsuit setting forth the allegations, see State of Arizona v. Winer, et al.),

• Arizona: Arizona Foreclosure Rescue Operator Ordered To Pay $1.2M In Home Sale, Leaseback Program (for the Arizona Attorney General press release setting forth the allegations, see Terry Goddard Files Fraud Suit Against Virtual Realty),

• Maryland: MD AG Wins "Rescue" Scam Civil Suit; Settles w/ Lenders Who Financed Bogus Sale Leasebacks, Saves Homes For Some, Clips Closing Agent For $100K (for the Maryland Attorney General press release setting forth the allegations, see Attorney General Gansler Announces Judgment of More Than One Million Dollars in Restitution and Penalties in Foreclosure Rescue Scam),

• Washington State: Washington AG Scores Big Win In Bogus Equity Stripping, Land Trust/Sale Leasebacks & Surplus Ripoffs; Foreclosure Rescue Operator Tagged For $4.2M (for the lawsuit setting forth the allegations, see State of Washington v. Kaiser, et al.).

The New Jersey Attorney General's Office has also brought civil lawsuits in sale leaseback cases which are currently pending:

• Foreclosure Rescue Operator Violated State Consumer Fraud Act By Using Bogus Sale Leasebacks To Strip Equity From Homeowners, Says NJ AG In Civil Suit (for the lawsuit, see Milgram v. Property Solutions of NJ Inc., et al.),

• NJ AG Targets 39 In Suits Alleging Equity Stripping, Sale Leaseback Scams; Involved $13.5M In Bogus Loans & 48 Homeowners Screwed Out Of $3M+, Says AG (for the lawsuits, see Milgram v. Vest Financial LLC, et al. and Milgram v. JP Global Property Management, Inc., et al.).

(3) Although this action was brought as a civil lawsuit in which no criminal allegations have been made, the sale leaseback arrangements alleged by the Colorado AG, which employ the use of a third party investor to obtain institutional financing to sap the equity out of the target homes, appear to be simliar in nature to those deals that have been the subject of criminal prosecutions by various law enforcement authorities. See Criminal Prosecutions Of Sale Leaseback Peddlers In Equity Stripping Foreclosure Rescue Deals.

Sale Of Property Coupled w/ Buyback Right Under Contract For Deed Deemed An Equitable Mortgage; MN Federal Court Looks To Substance Over Form Of Deal

A U.S. District Court in Minnesota recently had an opportunity to review a somewhat complex transaction involving a title transfer of real estate by a property owner to another, coupled with a Contract for Deed calling for a future title transfer back to the property owner that was designed to obtain needed funds.

In declaring the arrangement to be an equitable mortgage,(1) the court disregarded the form of the arrangement as an outright sale with a repurchase contract and ruled that the deal, in substance, was merely a financing transaction intended to generate needed cash.(2)

For the ruling, see Hartman v. Smith, Civil File No. 09-01618-MJD/RLE (D.Minn. Sept. 17, 2010).

(1) For the treatment of sale transactions coupled with leaseback or other deferred buyback 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.

(2) The court made the following analysis of Minnesota law in reaching its conclusion (bold text is my emphasis, not in the original text):

• Courts generally presume that a deed is a conveyance. Ministers Life & Cas. Union v. Franklin Park Towers Corp., 239 N.W.2d 207, 210 (Minn. 1976).
  
  However, Minnesota courts have adopted the doctrine of "equitable mortgage" "to prevent any overreaching by one party which would unfairly exploit the other party's financial position or relative lack of experience in real estate dealings." Id.
  
  Essentially, if "the real nature of the transaction between the parties is that of a loan, advanced upon the security of realty granted to the party making the loan, it may be treated as an equitable mortgage." First Nat'l Bank of St. Paul v. Ramier, 311 N.W.2d 502, 503 (Minn. 1981).
  
  The intent of the parties is paramount, and to overcome the presumption that a deed is a conveyance, it must be clear that both parties intended that the transaction result in a mortgage. Ministers Life & Cas. Union, 239 N.W.2d at 210.
  
  In order to determine intent, courts may look to the documents relating to the transaction. Id. The lack of terms such as "debt," "security," or "mortgage" are strong evidence indicating that the transaction is not a mortgage. Id. However, the fact that documents do not express the existence of a loan is not conclusive, and the intention of the parties is to be ascertained by looking at "all the facts and circumstances surrounding a transaction." Gagne v. Hoban, 159 N.W.2d 896, 899 (Minn. 1968). "In the final analysis, the question of whether the parties to a conveyance really intended it to be absolute or security for indebtedness is for the triers of fact." Id. at 900. The true inquiry is whether the parties intended an outright sale or whether the "purpose and effect of the transaction is to give security on real property for a debt." Id. at 899.

***

• In addition to looking to the intent of the parties, courts will also consider the following factors in making a determination as to whether a conveyance should be construed as an equitable mortgage:
  
  1) the disparity between the value of the property and the price paid;
  2) the nature of the solicitation that gave rise to the transaction;
  3) attempts to sell the property on the open market;
  4) whether there was a negotiated sale price; and
  5) whether there was continuous occupancy.
  
  Brown v. Grant Holding, LLC., 394 F. Supp.2d 1090, 1098-99 (D. Minn. 2005).
  
  Turning to the Brown factors, the Court concludes that they also weigh in favor of finding an equitable mortgage. The vast disparity between the Subject Property’s sale price of $280,000 and the appraised value of $2.5 million suggests that the transaction operated as a loan. See Jones v. Rees-Max, LLC, 514 F. Supp. 2d 1139, 1146 (D. Minn. 2007) (holding that a disparity of $278,000 in value and purchase price of $214,000 was large enough to weigh in favor of equitable mortgage).
  
  The nature of the solicitation involved frequent assurances from Smith that this arrangement would allow them to keep their home. The home was never placed on sale in the open market. There was no negotiated sale price, but rather an amount of money needed for the Plaintiffs’ financial needs at the time.
  
  Plaintiffs continued to occupy the premises upon executing the Contract for Deed and continued to pay real property taxes and homeowner’s insurance as a part of their monthly payments.
  
  Finally, Plaintiffs made post-conveyance improvements to the property.
  
  In light of these facts, the Smiths’ admissions, and Prime’s failure to state a position on this issue, the Court finds it appropriate to enter a declaratory judgment that the agreements the Smiths and Plaintiffs entered into on February 21, 2007 constituted an equitable mortgage.

Lenders & Their Attorneys Continue To Litter U.S. Courtrooms With False Affirmations In Home Foreclosure Actions

Among the latest attorneys ruffling New York Supreme Court Justice Arthur M. Schack's feathers in a foreclosure action is Donna D. Maio, Esq. of Matthews & Matthews, as evidenced by this excerpt from a recent ruling:

• Both Mr. Phelps and Ms. Maio should have discovered the defects in Ms. Taylor's verification of the subject complaint. The jurat states that the verification was executed in the State of New York and the County of Suffolk [the home county of plaintiff's counsel], but the notary public who took the signature is Deborah Yamaguichi, a Florida notary public, not a New York notary public. Thus, the verification lacks merit and is a nullity.

• Further, Ms. Yamaguchi's notarization states that Ms. Taylor's verification was "Sworn to and subscribed before me this 4th day of June 2008." Even if the jurat properly stated that it was executed in the State of Florida and the County of Duval, where Jacksonville is located, the oath failed to have a certificate required by CPLR § 2309 (c) for "oaths and affirmations taken without the state." CPLR § 2309 (c) requires that:
  
  An oath or affirmation taken without the state shall be treated as if taken within the state if it is accompanied by such certificate or certificates as would be required to entitle a deed acknowledged without the state to be recorded within the state if such deed had been acknowledged before the officer who administered the oath or affirmation.

• The Court is distressed that Ms. Maio falsely affirmed on November 11, 2010 that "pursuant to CPLR § 2106 and under the penalties of perjury," that "the Summons and Complaint and all other documents filed in support of this action for foreclosure are complete and accurate in all relevant respects," when the instant motion papers are incomplete and the verification is defective.

• Moreover, the purpose of the October 20, 2010 Administrative Order requiring affirmations by plaintiff's counsel in foreclosure cases is, according to Chief Judge Lippman, in his October 20, 2010 press release, to ensure "that the documents judges rely on will be thoroughly examined, accurate, and error-free before any judge is asked to take the drastic step of foreclosure."(1)

For the court ruling, see Washington Mut. Bank v Phillip, 2010 NY Slip Op 52034 (NY Sup. Ct. Kings County, November 29, 2010).

(1) Go here for the required Attorney Affirmation form.

Arizona AG Files Separate Suits Against Two Outfits Peddling Mtg Principal Reduction Services; Allegedly Promised Discount Purchases Of Existing Loans

From the Office of the Arizona Attorney General:

• Attorney General Terry Goddard [] filed complaints against two Arizona companies, alleging violations of the Arizona Consumer Fraud Act in connection with the marketing of purported "principal reduction” services for home mortgages.

• One lawsuit was filed against Principal Reduction Group, LLC, of Scottsdale, and its owner, Brian Cutright. It alleges that between July and September of this year the company has charged some 100 Arizona homeowners up to $6,000 to participate in its principal reduction program.(1)

***

• Goddard, together with Superintendent Lauren W. Kingrey of the Arizona Department of Financial Institutions, filed a second lawsuit [] against Queen Creek Mortgage, LLC, of Mesa, a licensed mortgage broker, which has marketed its service to some 180 homeowners this year at fees of up to $5,500.

For the Arizona AG press release, see Goddard Sues Two Companies over ‘Principal Reduction’ Services.

(1) The complaint alleges that Principal Reduction Group mailed hundreds of thousands of mailers to Arizona homeowners that were designed to appear as if they were from the homeowners' lenders announcing the lenders' principal reduction program and the possibility that the homeowners might qualify for it. The complaint further alleges that Principal Reduction Group misled consumers by emphasizing its purported relationship with investors who would purchase homeowners' mortgage notes at a discount and then pass on some of the savings to the homeowner in the form of a lower mortgage payment.The company allegedly failed to disclose that the company had no binding agreement with any investor to do anything for its clients and misrepresented successful results when, in fact, the company had not achieved principal reductions for any of its clients. The company is also accused of falsely telling consumers that federal programs and funds were a component of its services.

(2) The complaint alleges that the company touted its partnership with investors who would purchase its clients' mortgage notes at a discount and pass on some of the savings to consumers in the form of lower mortgage payments. In fact, Queen Creek Mortgage had no binding agreement with any investors to do anything on behalf of the company's clients. The complaint also alleges that Queen Creek Mortgage misrepresented the relevancy of federal programs and funds to its program. The company is alleged to have misled clients by telling them they could expect significantly lower mortgage payments if they joined the program. The company is further accused of failing to disclose that it would send clients' files and personal information to an out-of-state third party for work on their files once Queen Creek Mortgage collected the clients’ fees. The out-of-state company was not licensed to engage in mortgage broker or mortgage banker activities in Arizona.

Bay Area Prosecutors: Duo Who Ripped Off 60 In Loan Modification Racket Face Multiple Felony Fraud, Theft Charges

In Alameda County, California, Westlaw News & Insight reports:

• Two Californians took thousands of dollars from residents with the false promise that they would stop banks from foreclosing on their homes and renegotiate their loans, state prosecutors have alleged in a criminal complaint. Instead, Angeline Lisa Lizarrago, 68, and Michael Douglas Young, 67, pocketed the money, according to the complaint filed in the Alameda County Superior Court.

• Many of their clients lost their homes to foreclosure and did not receive refunds from the defendants as promised, prosecutors said. Lizarrago and Young allegedly ran the scheme for a year through their company, Avemos Financial Group in Fremont, Calif.

• They are charged with a total of 23 counts of felony fraud and theft. If convicted Lizarrago could spend more than 15 years in prison, while Young faces up to 12 years. Lizarrago has four prior convictions for writing bad checks and grand theft, the complaint says.

• Prosecutors also accuse Lizarrago of duping an 89-year-old man and his wife into paying $25,000 for a foreclosed property. She allegedly took the money but never provided them with the home. Although the charges that Lizarrago and Young face stem from 11 cases of fraud and theft, prosecutors said there are 50 more victims who have yet to be identified.

People v. Lizarrago et al., No. 429998, criminal complaint filed (Cal. Super. Ct., Alameda County Sept. 29, 2010).

Source: Two persons charged in California foreclosure rescue scam.

Alleged Forensic Loan Audit Racket, Sister Outfit Seek Bankruptcy Court Protection

In Rancho Cordova, California, KXTV-TV Channel 10 reports:

• A foreclosure rescue company described as a "scam" in a lawsuit filed by the state attorney general has filed for bankruptcy protection. US Loan Auditors filed for Chapter 7 liquidation and its sister company, My US Legal Services, filed for Chapter 11 reorganization in US Bankruptcy Court in Sacramento last Thursday.

• Both companies and their principals have been named in a $60 million lawsuit filed by the attorney general's office Oct. 6. The lawsuit claims US Loan Auditors was a foreclosure rescue scam that snared hundreds of California homeowners.

• US Loan Auditors allegedly promised troubled homeowners it could save them from foreclosure by conducting a "forensic audit" to challenge the loan documents. According to the lawsuit, the sister company, My US Legal Services, would then file "cookie cutter" lawsuits against lenders that were generally dismissed by the courts. [...] One of the principals, attorney James Sandison, has also filed for personal bankruptcy protection.

***

• [Company attorney Austin] Cooper suggested homeowners who believe they are entitled to a refund file a claim with the US Bankruptcy Court for the Eastern District of California.

For the story, see Rancho Cordova firm accused as 'scam' in lawsuit files bankruptcy.

See Media Pounding Continues For California-Based Forensic Loan Audit Peddler; Federal Judge Calls Outfit's Practices "The Blue Ribbon Of Shams!" for an earlier post on this group.

Criminal Prosecutions Of Sale Leaseback Peddlers In Equity Stripping Foreclosure Rescue Deals

This post is an attempt to organize the links for some of the posts appearing on this blog on criminal prosecutions of alleged sale leaseback, equity stripping scams by the various law enforcement authorities throughout the country, which I expect to update occasionally, as time permits.

1. California (Los Angeles County DA): Convicted Foreclosure Rescue Scammer Could Face Life Sentence On New Charges In Alleged Sale Leaseback, Equity Stripping Ripoff That Fleeced 5 Victims,
   
2. California (San Diego County DA): Foreclosure Rescue Scam Mastermind Found Guilty Of Dozens Of Felonies; Ran Upfront Fee Land Grant Scheme, Sale Leaseback Rent Skimming Racket,
   
3. California (San Diego County DA): Judge Hammers Mastermind In San Diego-Area Foreclosure Rescue Racket That Ran Land Grant & Sale Leaseback Scams On 400-500 Victims w/ 46 Years In Pen,
   
4. California (Sacramento County County DA): Victim Of Sale Leaseback Foreclosure Rescue Scam Still Waiting For Installment Restitution Payments As County Falls Short In Enforcing Court Order,
   
5. California (U.S. Attorney - Central District): Co-Ringleaders In S. California Sale Leaseback Racket Get 15, 10 Years For $12M+ Equity Stripping Ripoff Of Homeowners Seeking Foreclosure Rescue,
   
6. California (U.S. Attorney - Central District): Foreclosure Rescue Sale Leaseback Racket That Drained Equity From Unwitting Victims' Homes Among Scams California Man Pleads Guilty To,
   
7. California (U.S. Attorney - Central District): 100+ Victims Of Sale Leaseback Foreclosure Rescue Operators Get Stiffed; Scammers Left Such A Convoluted Mess That Judge Unable To Order Restitution,
   
8. California (U.S Attorney - Eastern District): F'closure Rescue Hit Parade Continues As Sacramento Feds Slam Four; Charges Describe Sale Leaseback Peddling, Equity Stripping, Rent Skimming Racket,
   
9. California (U.S Attorney - Eastern District): Feds "Operation Homewrecker" Bust Of Nationwide Alleged Sale Leaseback Scam,
   
10. Delaware (state AG's office): Delaware AG Levels 21-Count Indictment Against Alleged Foreclosure Rescue Racket Using "Divine" Cover In Sale Leaseback, Equity Stripping Ripoff,
    
11. Florida (state AG's office/Orange County DA): Central Florida Sale Leaseback Peddler Linked To 50 Ripoff Deals Gets 10 Years On Racketeering Charge; Targeted Cash-Strapped, High-Equity Homeowners,
    
12. Florida (state AG's office/Orange County DA): 85-Year Old Victim Of Convicted Sale Leaseback, Equity Stripping Peddler Temporarily Dodges The Boot As Judge Grants '11th Hour' Stay Of Eviction,
    
13. Hawaii (U.S. Attorney): Foreclosure Rescue Operator Gets Six Years In Sale Leaseback Scams That Ripped Off $880K From Lenders, Financially Strapped Homeowners,
    
14. Hawaii (U.S. Attorney): Hawaii Feds Win Conviction Of Man Who Used Straw Buyers In Sale Leaseback Foreclosure Rescue Ripoffs; Pocketed $430K+ In Two Equity Stripping Scams,
    
15. Hawaii (U.S. Attorney): Loan Officer Gets Five Months In Sale Leaseback, Foreclosure Rescue Scam; Equity Stripping Victim Hopes To Recover Title To Home,
    
16. Hawaii (U.S. Attorney): FBI Manhunt For Hawaiian Sale Leaseback Peddlers Continues; Couple Who Copped Pleas To Ripping Off Homeowners Failed To Show Up For Sentencing,
    
17. Illinois (U.S. Attorney - Northern District): Chicago Federal Jury Slams Ex-Attorney With Guilty Verdict In Sale Leaseback, Equity Stripping Foreclosure Rescue Ripoff,
    
18. Illinois (Chisago County DA): Foreclosure Rescue Operator Accused Of Misappropriating $25K+ From Escrow Account Set Up In Connection With Sale Leaseback Of Home,
    
19. Maryland (U.S. Attorney): Maryland Man Cops Plea In Sale Leaseback, Equity Stripping Ripoff That Targeted High-Equity Homeowners With Unaffordable House Payments,
    
20. Maryland (U.S. Attorney): MD Feds Obtain Guilty Plea From Loan Officer Who Screwed Homeowners By Stripping & Pocketing Their Home Equity In Sale Leaseback F'closure Rescue Scam,
    
21. Maryland (U.S. Attorney): Maryland Feds Continue "Money Store" Sale Leaseback, Equity Stripping, F'closure Rescue Racket Prosecution; Nail Loan Officer With 11-Count Indictment,
    
22. Maryland (U.S. Attorney): MD Feds Wrap Up Metropolitan Money Store Sale Leaseback, Equity Stripping Foreclosure Rescue Criminal Prosecution As Final Defendant Cops Guilty Plea,
    
23. Massachusetts (state AG's office): Alleged Mastermind In Sale Leaseback F'closure Rescue Scam Arraigned On 25 Counts; Investors Left Holding Bag As Homeowners Got Boot, Say Prosecutors,
    
24. Massachusetts (state AG's office): Massachusetts Foreclosure Rescue Operator Gets 2-2.5 Years As Mastermind In Fraud Scam; Sale Leaseback Deals Among Ripoffs Run On Desperate Homeowners,
    
25. Massachusetts (U.S. Attorney): Boston Feds Pinch Mortgage Broker In Fraudulent Sale Leaseback Foreclosure Rescue Scam; Suspect Stripped Home Equity, Leaving Owner With More Debt,
    
26. Minnesota (U.S. Attorney): Minnesota Man Accused Of Sale Leaseback, Foreclosure Rescue Ripoffs Cops Plea To Money Laundering, Tax Dodging Charges; 50+ Victims Clipped For $2.46M,
    
27. Minnesota (U.S. Attorney): Foreclosure Rescue Operator Gets 7+ Years For Tax Evasion, Money Laundering In Connection With Equity Stripping, Sale Leaseback Peddling Racket,
    
28. Minnesota (U.S. Attorney): Federal Judge Clobbers Sobbing Sale Leaseback Peddler With 270 Months For Victimizing 17 Minn. Homeowners In Equity Stripping, F'closure Rescue Ripoff,
    
29. Missouri (U.S. Attorney - Eastern District): St. Louis Feds Squeeze Guilty Plea From Alleged Rent Skimming, Sale Leaseback, Foreclosure Rescue Peddler Accused Of Causing $439K In Losses,
    
30. New Jersey (U.S. Attorney): Newark Feds Charge Trio In Alleged Sale Leaseback, Equity Stripping Foreclosure Rescue Ripoff,
    
31. New Jersey (U.S. Attorney): NJ Feds Squeeze Guilty Plea From Brooklyn-Based Foreclosure Rescue Operator; Admits To Role In Peddling Sale Leaseback, Equity Stripping Scams,
    
32. New Jersey (U.S. Attorney): Newark Feds Obtain Indictment Of Previously-Charged Brooklyn Man Peddling Sale Leaseback, Equity Stripping Foreclosure Rescue Scams,
    
33. New Jersey (U.S. Attorney): Veteran Fraudster Gets 97 Months For Running Realty Scams; Bogus Sale Leaseback Foreclosure Rescue Deals Among Rackets Resulting In $1M+ In Losses,
    
34. New York (state AG's office): Five Face Criminal Charges For Roles In Now-Defunct Upstate NY Sale Leaseback, Equity Stripping Foreclosure Rescue Peddling Operation,
    
35. New York (state AG's office): NY AG Squeezes Guilty Pleas From 4 For Roles In Alleged Sale Leaseback, Equity Stripping Foreclosure Rescue Racket; 1 Awaits Trial On 23 Felony Counts,
    
36. New York (Westchester County DA): NY Couple Gets 2 To 6 Years For Roles In Equity Stripping, Sale Leaseback Scam; Homeowners Who Sought Foreclosure Rescue Have Civil Suits Pending,
    
37. New York (Westchester County DA): Westchester County Sale Leaseback, Equity Stripping Foreclosure Rescue Ripoff Leads To Six Convictions, One Acquittal; One Mistrial,
    
38. New York (Rockland County DA): Rockland County DA Charges Duo In Equity Stripping Foreclosure Rescue Scam; Allegedly Duped Struggling Homeowner Into Bogus Sale Leaseback Ripoff,
    
39. New York (Queens County DA): Queens DA Bags Seventeen Suspects In Alleged Sale Leaseback, Equity Stripping Foreclosure Rescue Racket,
    
40. New York (U.S. Attorney - Southern District): Paralegal Gets Three Years For Role In Sale Leaseback Foreclosure Rescue Ripoff Targeting Financially Distressed Homeowners In Brooklyn, The Bronx,
    
41. Pennsylvania: (U.S. Attorney - Eastern District): Philly Feds Continue Attack On Equity Stripping Sale Leaseback Peddlers; Indict 4, File Civil Suit In Alleged Racket Involving 120 Properties,
    
42. Pennsylvania: (U.S. Attorney - Eastern District): Philly Feds: F'clsure Rescue Operator In Sale Leaseback, Rent Skimming Scam Stalled Lenders w/ Bogus Bankrptcy Filings, Stiffed IRS On Illegal Profits,
    
43. Pennsylvania (U.S. Attorney - Eastern District): Pennsylvania Attorney First To Cop Plea In Alleged Sale Leaseback, Equity Stripping Ripoff Targeting Homeowners Seeking Foreclosure Rescue,
    
44. Utah (state AG's office): Sale Leaseback Peddler Aquitted Of Charges Accusing Him Of Tricking Couple Facing Foreclosure Into Signing Over Deed To Home,
    
45. Virginia (U.S. Attorney - Eastern District): Norfolk Feds Score Guilty Plea From Foreclosure Rescue Operator Involving Sale Leaseback Equity Stripping Ripoffs.

Homeowner Files Suit Seeking Class Action Status; Says Wells Told Her To Stop Mortgage Payments To Qualify For Loan Modification, Then Foreclosed

In Cobb County, Georgia, Courthouse News Service reports:

• A homeowner claims Wells Fargo instructed her to stop making her monthly mortgage payments to qualify for its loan modification program, then foreclosed after she followed the bank's instructions. The class action seeks damages for RICO fraud, in Cobb County Court.

• Lisa Smoak Reid claims the bank "lulled [her] into inaction by offering to work out options to resolve her delinquency, but failed to provide any means to do so, and has failed to provide the plaintiff with the amount of the deficiency."

***

• Reid wants an emergency hearing and injunction to stop the foreclosure proceedings and set aside the foreclosure permanently. She also wants $15 million in punitive damages for RICO fraud, breach of fiduciary duty, breach of contract and emotional distress.

For more, see Mortgage 'Modification' Called RICO Fraud.

For the lawsuit, see Reid v. Wells Fargo Bank NA.

Incidents Of Wrongful Foreclosures Growing, Say Lawyers, Consumer Advocates

The Associated Press reports:

• People have always loved to complain about their banks. The push-button circus that passes for customer service. The larding on of fees. But the false foreclosure cases are hardly the usual complaints. These homeowners paid their mortgages — or loan modifications — on time. Some even paid off their loans. Worse, those on the receiving end of a bad foreclosure claim tell similar stories of getting bounced from one bank official to the next with no resolution while the foreclosure process continues apace.

• Many have to resort to paying a lawyer, even after presenting documentation. They say they have to sue not only to stop the wrongful foreclosure but also to attempt to win back their costs. There are no official statistics for these homeowners, but lawyers, real estate agents and consumer advocates say their ranks are growing.

For more, see Wrongful Foreclosures Puzzle Homeowners.

South Florida Synagogue Dodges Foreclosure; Torahs, Ark, Other Religious Artifacts Receive Repo Reprieve From Earlier Yom Kippur Threat

In Boynton Beach, Florida, The Wall Street Journal reports:

• Is it a Hanukkah miracle? Congregation Chabad-Lubavitch Greater Boynton resolved a loan dispute with lender Stonegate Bank [last week], paving the way for the Florida synagogue to say goodbye to bankruptcy. The dispute involves a lawsuit the bank filed against the synagogue, to which it had given a $3.8 million mortgage loan, to foreclose on the property. In the agreement, the synagogue agreed to raise a minimum sum of $1.2 million. Court documents say that $800,000 of the $1.2 million is to be escrowed pending closing.

• In addition to Stonegate providing a partial release of the mortgage, it must also release its lien on all of the synagogue’s religious artifacts, including all Torahs, prayer books, talit (prayer shawls), the ark where the Torahs are housed and memorial boards.

• According to the Sun-Sentinel, Rabbi Sholom Ciment kvelled that the congregation rallied to help pay part of the loan by the deadline, which was Nov. 30. “We are joyfully grateful that all of this will be put behind us,” he said.

• This isn’t the first synagogue’s first lender kerfuffle that’s taken place during the holidays. Stonegate sought to recoup some of the aforementioned religious artifacts a few months ago during Yom Kippur.

Source: Florida Synagogue Resolves Foreclosure Dispute.

See also The Palm Beach Post: On eve of Hanukkah, synagogue near Boynton Beach gets best gift of all.

For an earlier post on this story, see Lender Threatens To Grab Five Torahs In F'closure Action Against Synagogue; "Oh, Too Bad!" Says Bank Prez When Told It Was Holiest Time Of Jewish Year.

Indiana AG: Loan Modification Outfit, Out-Of-State Attorney Illegally Peddled Loan Modification Services To State Homeowners

In Evansville, Indiana, the Evansville Courier & Press reports:

• Indiana Attorney General Greg Zoeller personally filed a lawsuit in Vanderburgh Circuit Court [] claiming a for-profit foreclosure consulting company violated state consumer protection law.

• The lawsuit alleges that the California-based Hope4Homes signed contracts with an Evansville couple and 10 other Indiana residents for services as credit services organization and foreclosure consultant. The lawsuit claims the company is owned and operated by attorney Mahan Abbasi.

• According to the complaint, the company promised Harold and Sharon Matthews of Evansville that it would lower the interest rate on their mortgage by 2 percent. The couple signed numerous documents and an agreement to pay Hope4Homes $2,250 in three installments and they did pay $1,800 for the company's services, according to the complaint.

• The company then told the couple to stop making payments on their mortgage while it was "negotiating" a loan modification for them. The couple had been current on their mortgage payments, but as a result of agreement they fell three months behind and new loan terms were never negotiated, Zoeller said.

• No refund was provided, according to the complaint, even though the company advertised a complete money back guarantee and the couple demanded a refund.

• Molly Butters, the attorney general office's spokeswoman on consumer issues, said the Hope4Homes name was deceiving. "The name Hope4Homes is playing on some of those nationally recognized organizations that are legitimate," she said.

• Zoeller said the company is not registered to do business in Indiana and Abbasi is a licensed attorney in California but not Indiana. Additionally, the company had not registered with the attorney general's office with proof that it had a $25,000 surety bond.

For the story, see Greg Zoeller visits Evansville to sue foreclosure counselor.

South Florida Foreclosure Mill Files Lawsuit On Behalf Of Lender Against Woman For Foreclosure On Home She Sold In 1994

The South Florida Sun Sentinel reports:

• Cathy Hammers was abruptly awakened by a continuous loud banging on the front door of her Virginia home the Saturday night after Thanksgiving. She was then served foreclosure papers by Texas-based Nationstar Mortgage and the Fort Lauderdale law firm of Marshall Watson on a Port St. Lucie home Hammers and her parents sold in 1994 — 15 years ago, reports The Palm Beach Post.

• “When I talked to Marshall Watson, Sonya in their litigation department, and asked why I was being served foreclosure papers on a mortgage I did not sign, on a property I haven’t lived in for almost 20 years, she got snippety with me and asked if I had an attorney. Why would I need an attorney when they’ve made the mistake?” Hammers told The Palm Beach Post.

• By Thursday, Hammers said Marshall Watson had completely changed their tune. However, Hammers said she still planned to file her complaint with the Florida Attorney General’s Office to document Marshall Watson’s treatment of the situation, according to The Palm Beach Post.

For the full story, see Virginia resident gets foreclosure notice on Port St. Lucie home she sold in 1994.

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.