Wednesday, December 22, 2010

Alabama Woman Files Federal Suit Accusing BofA Of Jerk-Around In Loan Mod Process; Action Joins Others Transferred To Boston For Pre-Trial Proceedings

(This a revision of a story posted earlier today & reflects a revision of footnote 1)

In Mobile, Alabama, the Mobile Press Register reports:
  • A Mobile woman is suing Bank of America and its home lending service, claiming it wrongfully attempted to foreclose on her house after breaking an agreement to modify her loan.

***

  • Kimberley George filed suit in U.S. District Court in Mobile last month. According to the lawsuit, George began discussing a loan modification agreement with Bank of American in January 2009, reaching an agreement that summer. It required her to make three monthly "trial" payments of $648 before the bank would permanently modify her loan.

  • She made those payments for September, October and November, completing the trial program, according to the lawsuit. She paid the same amount in December, the lawsuit states, then was told by a bank representative to stop making payments so that the bank could "process the permanent modification and calculate a new mortgage payment based on current balance."

  • In June, Bank of America told George that it would not approve a modification of her loan, and said that she was in default of her mortgage, according to the lawsuit. "The gist of the suit is, she made her trial period payments, and they didn't give us the permanent modification," said Earl P. Underwood Jr., one of her attorneys. "It's a breach of contract."

  • The bank began a foreclosure proceeding in August, but later canceled it after her attorneys told the bank that she planned to seek an injunction, according to the lawsuit. Bank of America has not responded to the lawsuit, according to court records.

  • The case has been transferred to U.S. District Court in Massachusetts. Pre-trial proceedings for this and similar cases will be conducted there, and then the cases will be returned to their original districts, according to Underwood.(1)

Source: Mobile woman sues Bank of America over foreclosure.

See also, Mobile-Baldwin Consumer Law Firm files Mortgage related Class Action.

(1) According to the law firm's press release, it has associated the National Consumer Law Center as co-counsel in the George case. For similar HAMP-related lawsuits brought by the National Consumer Law Center with its co-counsel, see:

Wells Agrees To $2B+ In Loan Mods On "Pick-A-Pay" ARMs In Settlement Of California AG's Civil Lawsuit; Will Pay Add' $32M To Foreclosed Ex-Homeowners

From the Office of the California Attorney General:
  • Attorney General Edmund G. Brown Jr. announced [] that Wells Fargo has agreed to provide loan modifications worth more than $2 billion to thousands of California homeowners with "pick-a-pay" loans and to pay an additional $32 million to thousands of borrowers who lost their homes through foreclosure.

  • None of the loans were made by Wells Fargo. All were originated by World Savings and Wachovia, banks Wells Fargo acquired. "Customers were offered adjustable-rate loans with payments that mushroomed to amounts that ultimately thousands of borrowers could not afford," Brown said. "Recognizing the harm caused by these loans, Wells Fargo accepted responsibility and entered into this settlement with my office."

For the California AG press release, see Brown Reaches Settlement With Wells Fargo Worth More Than $2 Billion to Californians With Risky Adjustable-Rate Mortgages.

Refinance Gone Haywire Leaves Virginia Couple Facing Foreclosure As Payoff Proceeds From Now-Defunct Lender Fail To Reach Existing Mortgage Holder

In Amelia County, Virginia, the Richmond Times Dispatch reports:
  • Terry and Donna Hunt have never missed a mortgage payment. But their original lender has tried to foreclose on their house in Amelia County three times.

  • The Hunts weren't involved in a loan modification, nor were they trying to take equity out of their house. Rather, things went awry when they refinanced their $211,000 mortgage in October 2009 to lower their interest rate from 7.8 percent to 5 percent. Now, no one knows who owns the loan, said Jason Krumbein, the couple's attorney.

  • The new loan servicer, a government-approved lender that took over the refinanced loan from the originator, says it owns the loan, Krumbein said. But CitiMortgage, the original lender, claims it never received the payoff from Lend America, once one of the largest originators of mortgages backed by the Federal Housing Administration but now banned by the FHA from doing business.

***

  • Jay Speer, an attorney with the Virginia Poverty Law Center, said that since hearing a few weeks ago about the Hunts' situation, he has been alerted to a few more cases in Virginia involving Lend America not paying off previous loans. "It's a big can of worms," Speer said.(1)

For more, see Amelia couple faces a refinancing gone bad.

(1) Reportedly, the Hunts would later learn that Lend America abruptly ceased operations within weeks after it closed on their refinance. The U.S. Attorney for the Eastern District of New York had filed a complaint in federal court, accusing Lend America of fraudulent lending practices that compromised the integrity of the FHA mortgage insurance program and contributed to increases in loan defaults and foreclosures, the story states.

Fear Of 'Flopping' Fraud Leads Loan Servicers Away From Short Sales, Opting To Foreclose Instead

The Boston Globe reports:
  • [A]s more homeowners attempt to stave off foreclosure by striking [short sale] deals, lenders are denying or delaying many of these transactions even when it appears the sales would be in their best interest, according to real estate agents and housing advocates.(1)

  • Eventually, some of the properties are sold at auction for less than the lender would have recouped through a short sale, they say. That not only costs banks, but it further damages homeowners’ credit and depresses overall property values.

***

  • Indeed, lenders are growing more cautious about short sales as evidence of fraud in the process escalates along with volume, said Frank McKenna, vice president of fraud strategy for CoreLogic, a California research company. Lenders are losing about $310 million annually in short-sale fraud, with about one in every 53 sales plagued by problems, according to CoreLogic.

  • Those problems include a fraudulent process known as flopping, through which an outside investor or buyer hires a real estate agent to assess a home for less than its true market value and then convinces a lender to sell at that price. The buyer then quickly resells the home at a higher price. “There is a fear of not getting the right valuation because you have some shady investors,’’ McKenna said.

***

  • [S]tories of botched short sales are becoming more common in Massachusetts. Tony Nakhle, a real estate agent in Stoughton, said he had two deals fall through last year after lenders foreclosed upon homes even after sales were approved. In one case, the lender foreclosed on a house after approving a $136,000 deal, he said. Instead, the home was sold at auction for just $109,000. The buyer then sold the property back to the former owner for $136,000, he said.(2)

For more, see Wary lenders denying short sales (Citing price concerns, many opt to foreclose).

For an opposite viewpoint, see Housing Wire: Higher loss severities on foreclosures will push servicers to short sales in 2011: Fitch:

  • Loss severities are expected to increase between 5% and 10% on residential mortgage-backed securities in 2011 as loss mitigation costs and foreclosure expenses go up, according to Fitch Ratings. This, analysts said, will push servicers to short sales.

(1) In actuality, it is the loan servicer, not the lender/mortgage investor, that is denying or delaying many of these transactions. While it may appear that these short sales would be in the lender/mortgage investor's best interest, the loan servicer is the one calling the shots. Since the servicer isn't the one taking the financial hit, it apparently doesn't care one way or the other if the lender/mortgage investor loses money.

(2) See also NPR: Housing Nightmare Upends Family, Enriches Investor, for a story on loan servicer Wells Fargo who reportedly, unwilling to work out a deal with a homeowner, auctioned off a house at a foreclosure sale to a private investor for $115,000 — a fraction of the original $584,000 borrowed. The investor who bought the home at the auction then flipped the property to another investor two weeks later for $270,000, making a profit of $155,000. Michael DeVito, an executive vice president for Wells Fargo Home Mortgage, would not comment about this particular case, the story states.

Alabama Woman Files Federal Suit Accusing BofA Of Jerk-Around In Loan Mod Process; Action Joins Others Transferred To Boston For Pre-Trial Proceedings

In Mobile, Alabama, the Mobile Press Register reports:
  • A Mobile woman is suing Bank of America and its home lending service, claiming it wrongfully attempted to foreclose on her house after breaking an agreement to modify her loan.

***

  • Kimberley George filed suit in U.S. District Court in Mobile last month. According to the lawsuit, George began discussing a loan modification agreement with Bank of American in January 2009, reaching an agreement that summer. It required her to make three monthly "trial" payments of $648 before the bank would permanently modify her loan.

  • She made those payments for September, October and November, completing the trial program, according to the lawsuit. She paid the same amount in December, the lawsuit states, then was told by a bank representative to stop making payments so that the bank could "process the permanent modification and calculate a new mortgage payment based on current balance."

  • In June, Bank of America told George that it would not approve a modification of her loan, and said that she was in default of her mortgage, according to the lawsuit. "The gist of the suit is, she made her trial period payments, and they didn't give us the permanent modification," said Earl P. Underwood Jr., one of her attorneys. "It's a breach of contract."

  • The bank began a foreclosure proceeding in August, but later canceled it after her attorneys told the bank that she planned to seek an injunction, according to the lawsuit. Bank of America has not responded to the lawsuit, according to court records.

  • The case has been transferred to U.S. District Court in Massachusetts. Pre-trial proceedings for this and similar cases will be conducted there, and then the cases will be returned to their original districts, according to Underwood.(1)

Source: Mobile woman sues Bank of America over foreclosure.

See also, Mobile-Baldwin Consumer Law Firm files Mortgage related Class Action.

(1) According to the law firm's press release, it has associated the National Consumer Law Center as co-counsel in the George case.

Tuesday, December 21, 2010

NJ High Court Chief Justice Declares War On Robosigner Practices, Rogue Foreclosure Filings

In Trenton, New Jersey, The Newark Star Ledger reports:
  • Citing a staggering increase in filings and voicing fears of inaccurate applications, New Jersey’s top judge announced a series of initiatives Monday to combat rogue foreclosure filings.

  • "It’s our hope that these three steps will provide greater confidence" in the foreclosure process, Chief Justice Stuart Rabner said in a conference call with reporters. "It is important the judiciary ensures that judges are not rubber-stamping questionable documents that may not be reliable."

  • This practice of rubber stamping is known as "robo-signing," and refers to mortgage lender and service employees who sign hundreds, if not thousands, of affidavits submitted in support of foreclosure claims but without any personal knowledge of the information included in the application. This year, there were more than 65,000 applications filed statewide, up from nearly 22,000 four years ago. And the vast majority of foreclosure actions – 94 percent – are uncontested, Rabner said.

  • The judge ordered six mortgage lenders, including Bank of America, JPMorgan Chase and Citibank, to file to the court by Jan. 19 documents proving their internal foreclosure application processes are up to standards, or the applications will be suspended. The other companies are the mortgage divisions of Wells Fargo, OneWest Bank and Ally Financial. Rabner appointed General Equity Judge Mary Jacobson, who sits in Trenton, to oversee foreclosure matters in the state.

  • The announcement comes after a report prepared by Legal Services of New Jersey alleged industry-wide deficiencies in foreclosure filings, according to court documents. "The mortgage servicing and foreclosure industry really is rife with this certification without personal knowledge," said Melville Miller, president of Legal Services. The group published a 28-page report detailing information found in depositions and testimony about foreclosure proceedings in November, which was presented to Rabner. "From the best we can tell, at a national level and also in New Jersey, it’s a widespread practice."

  • Other states have issued similar orders, according to the order. In October, New York directed attorneys filing residential foreclosure actions to certify they have personally reviewed the documents’ accuracy. And at least four state attorneys general and the attorney general for Washington D.C., have required certain lenders, including those named in New Jersey’s order, to prove the validity of their residential mortgage foreclosure processes, the order states.

Source: N.J. top judge pushes for measures to target bad foreclosure practices.

For the New Jersey Supreme Court press release, see New Jersey Courts Take Steps to Ensure Integrity of Residential Mortgage Foreclosure Process.

Go here for links to the three orders issued in his matter.

Affidavit-Signing Vice Presidents Now Required To File 'Mini-Resume' In Foreclosure Actions In One Long Island Judge's Courtroom

A recent story in Daily Finance notes how one Suffolk County, New York judge is imposing additional requirements on foreclosing lenders to that contained in State Chief Judge Jonathan Lippman's recent order requiring a special affirmation from the banks' attorneys when pursuing foreclosure actions:

  • While all the cases can be refiled once the banks documents are in order, Cohalan's order requires the banks to go beyond the Lippman affirmation. In his court at least, a bank employee is going to have to sign an affirmation even more detailed than what Judge Lippman ordered for lawyers.

  • The bank affirmation comes from Cohalan's concern with robo-signing, explains Daniel J. Murphy, Judge Cohalan's chief law assistant. Going forward, banks that want to foreclose in Cohalan's court will have to have "whoever is looking at the documents provide an affidavit that the amounts are correct, the mortgage is present, the assignments of mortgage have been correctly signed and dated and the paperwork before court is accurate."

  • To prevent robo-signing of those affidavits, Cohalan also requires bank representatives to list every document they reviewed for the affidavit. That list must include the note, and they must explain who they are, how long they've been at the bank and what their educational background is.

  • Murphy explains the purpose of that mini-resume is to make sure these employees understand what they're looking at and that any "person claiming he is the vice president of the bank is in fact a vice president of the bank."

  • While that sounds silly -- why would someone sign a document with an inaccurate title -- the robo-signing scandal has exposed the practice of people signing as a vice president who have no link to the financial institution except for a resolution authorizing them to sign.

For the story, see Why New York Foreclosures Are Grinding to a Halt.

Frank "Appalled By The Insensitivity & Cruelty" Of Some Republicans As Congress Stiffs Non-Profit Law Firms Out Of TARP Cash For Foreclosure Defense

The Wall Street Journal reports:
  • U.S. House Republicans on Friday blocked a last-minute effort to allow foreclosure-prevention funds to be directed to legal aid groups, arguing it was an inappropriate use of financial rescue money. Lawmakers failed to pass a bill sponsored by Rep. Marcy Kaptur (D., Ohio) that would allow those groups to receive money through a federal program to assist homeowners on the verge of foreclosure.

***

  • Rep. Barney Frank (D., Mass.), the outgoing chairman of the House Financial Services Committee, said recent revelations of sloppy foreclosure practices at large banks underscore the need for homeowners to receive professional legal assistance when facing foreclosure.

  • Frank said he was “appalled by the insensitivity and the cruelty” of Republicans opposing the measure, and said it “does not extend the TARP in any way.”

  • But Rep. Steven LaTourette (R., Ohio) spoke in favor of the measure, saying he was disappointed that a partisan fight had broken out on the issue. “The money is already out there,” he said. “We should stop the nonsense, approve the bill and move on.”

For the story, see Lawmakers Reject Legal Aid Money for Troubled Borrowers.

Philly Federal Judge Grants TRO Delaying Foreclosure Of Homes Involved In Recent Sale Leaseback Foreclosure Rescue Indictment

In Philadelphia, Pennsylvania, The Philadelphia Inquirer reports:
  • A federal judge [Friday] morning granted a temporary restraining order in the U.S. Attorney's civil case against Anthony J. DeMarco, who was also charged criminally Tuesday in a mortgage foreclosure rescue scheme involving $31 million in fraudulent loans on 120 properties.(1)

  • The restraining order shields an unspecified number of properties from sheriffs' sales until at least February. A hearing on a longer-term preliminary injunction was scheduled by U.S. District Judge Michael M. Baylson for Feb. 2.

For the story, see Sheriff sales blocked in alleged foreclosure fraud.

(1) See Philly Feds Continue Attack On Equity Stripping Sale Leaseback Peddlers; Indict 4, File Civil Suit In Alleged Racket Involving 120 Properties.

Accused Central Florida Vacant Home Hijacker Bagged Again On New Charges; Vows To Continue Snatching Homes, Claiming Adverse Possession Defense

In Lutz, Florida, the St. Petersburg Times reports:
  • At lunchtime Wednesday at the Royal Lanes bowling alley, fugitive task force deputies and U.S. marshals moved in on their suspect: 60-year-old Joel McNair, a smooth-talking felon who, authorities say, just can't quit the con. McNair had warrants out for scheme to defraud and grand theft in Sarasota and Manatee counties, where he's accused of finding empty homes in foreclosure and renting them out — even though he didn't own the properties.

  • The Sarasota Sheriff's Office said McNair cited a centuries-old legal concept called adverse possession. Chapter 95 of Florida Statutes spells out how someone can take possession of a property through squatter's rights.(1) The law requires that a person occupy the property for at least seven years and fulfill other legal requirements, such as paying taxes on the property, in order to obtain ownership.

  • "I will continue until someone can show me that I'm breaking the law," McNair told the Sarasota Herald-Tribune earlier this week while he was out on bail from a November arrest on similar charges. "But until then," he said, "I'm going to keep on going."

***

  • McNair told the Herald-Tribune his company has at least 11 houses in Sarasota County and about 60 in counties from Pasco to Charlotte. Kevin Doll, spokesman for the Pasco Sheriff's Office, said the agency is investigating the matter. As of Thursday, McNair faced no charges in Pasco.

  • "We have had that same scam tried in our county before," Doll said, referring to the February arrest of Stephen Bybel, a 49-year-old who set up a company called Real T Solutions LLC, with the listed purpose of being a "short sale specialist; legally and ethically working with distressed home owners."

  • Bybel is accused of claiming squatter's rights on 72 properties in Pasco. When he was arrested and charged with scheme to defraud, Bybel was actively renting 31 homes, authorities said. His trial is slated for March 21.

For more, see Felon accused of home fraud in Florida squatter's rights case.

(1) See:

  • Ch. 95.16, Florida Statutes: Real property actions; adverse possession under color of title, and
  • Ch. 95.18, Florida Statutes: Real property actions; adverse possession without color of title.

Monday, December 20, 2010

Nevada AG Slams BofA w/ Suit Over Allegedly Deceptive Loan Servicing Practices, Loan Modification Program Misrepresentations

From the Office of the Nevada Attorney General:
  • Attorney General Catherine Cortez Masto announced today that her office is filing a lawsuit against Bank of America Corporation, N.A., BAC Home Loans Servicing, LP, Recon Trust Company ("Bank of America") for engaging in deceptive trade practices against Nevada homeowners.

  • The lawsuit, filed in the Eighth Judicial District of the State of Nevada, was triggered by consumer complaints and follows an extensive investigation into Bank of America’s alleged deceptive practices involving its residential mortgage servicing, particularly its loan modification and foreclosure practices.

***

  • Because of Bank of America’s false promises, many Nevada consumers continued to make mortgage payments they could not afford, running through their savings, their retirement funds or their children’s education funds. Additionally, due to Bank of America’s misleading assurances, consumers deferred short-sales and passed on other attempts to mitigate their losses. And they waited anxiously, month after month, calling Bank of America and submitting their paperwork again and again, not knowing whether or when they would lose their homes. Whatever the consumers’ particular circumstances, they all suffered the stress and frustration of being misled by Bank of America while trying to take responsible action to modify their mortgages so they could continue to make their payments and remain in their homes.

***

  • Bank of America’s misconduct in misrepresenting its mortgage modification program was confirmed in interviews with consumers, former employees and other third parties and through review of relevant documents. Former employees describe an environment in which Bank of America failed to staff its modification functions with employees who had the necessary training, skills and experience. According to employees, the modification process was chaotic, understaffed and not oriented to customers. Employees were even reprimanded for spending too much time with individual consumers.(1)

For the Nevada AG press release, see Nevada Attorney General Sues Bank Of America For Deceiving Nevada Homeowners.

For the lawsuit, see State of Nevada v. Bank of America Corporation, et al.

(1) See The New York Times: Two States Sue Bank of America Over Mortgages:

  • One former employee said, “The main purpose of the training is to teach us how to get customers off the phone in less than 10 minutes.” Another employee said, “When checking on a borrower’s status, I often found that the modification request had not been dealt with or was so old that the request had become inactive. Yet, I was instructed to inform borrowers that they were ‘active and in status.’ One time I complained to a supervisor that I felt I always was lying to borrowers.”

Arizona AG Slams BofA With Lawsuit Saying Lender Showed "Callous Disregard" In Jerking Around Borrowers Seeking Loan Modifications

From the Office of the Arizona Attorney General:
  • Attorney General Terry Goddard announced that his Office [] filed a lawsuit against Bank of America Corporation and its affiliated companies (“Bank of America”) alleging violations of the Arizona Consumer Fraud Act and violations of the consent judgment entered in March 2009 between Arizona and the Countrywide companies owned by Bank of America.

  • The lawsuit, filed in Maricopa County Superior Court, was triggered by hundreds of consumer complaints and follows a year-long investigation into Bank of America’s residential mortgage servicing practices, particularly its loan modification and foreclosure practices.(1)

  • Goddard stated that Bank of America, the nation’s largest residential mortgage loan servicer, should be leading the way out of the country’s foreclosure crisis. Instead, he said, “Bank of America has been the slowest of all the servicers to ramp up loss mitigation efforts in response to the housing crisis. It has shown callous disregard for the devastating effects its servicing practices have had on individual borrowers and on the economy as a whole.”

***

  • As a result of Bank of America’s deceptive practices, many homeowners who were already contending with other financial hardships have been led to unnecessarily deplete their dwindling savings in futile attempts to obtain the promised relief and save their homes.

  • Many homeowners who tried to obtain a modification from Bank of America ended up owing more principal on their loans or having less equity (becoming more “underwater”) in their homes. Others gave up their chances to pursue other financial options, such as short sales, while trying to modify their loans with Bank of America. These consumers endured months of frustrating delays, not knowing whether or when they would lose their homes. They called Bank of America and resubmitted their paperwork over and over again in futile efforts to get the help they were promised.

For the Arizona AG press release, see Terry Goddard Charges Bank of America with Mortgage Fraud.

For the lawsuit, see State of Arizona v. Countrywide Financial Corporation, et al.

Go here for FAQ’s regarding the State’s Lawsuit against Bank of America.

(1) According to the press release, the complaint alleges that, since the consent judgment was entered, Bank of America has repeatedly violated the judgment’s provisions related to loan modifications. Instead of providing the relief to which eligible homeowners were entitled, Bank of America has failed to make timely decisions on modification requests and proceeded with foreclosures while modification requests were pending in violation of the agreement.

The complaint also alleges that Bank of America has violated the Consumer Fraud Act by misleading Arizona consumers about its loss mitigation process and programs, including matters such as:

  • Whether homeowners must be delinquent on their mortgage payments to be considered for a loan modification.
  • How much time it would take to receive a decision from Bank of America on a modification request or a short sale request.
  • Whether foreclosure would proceed while a modification or short sale request was pending, or while a homeowner was making trial payments.
  • Whether the homeowner had been approved for a loan modification.
  • Failure to provide valid reasons why the homeowner was declined for a modification.
  • Whether the homeowner would be approved for a permanent modification if the consumer successfully made all trial modification payments.

Brooklyn Judge Rips Foreclosing Lender, Lawyer For Littering Courtroom With Unverified Paperwork

In Brooklyn, New York, the New York Post reports:
  • Lawyers handling foreclosures in New York will think twice about showing up in court without the proper paperwork after a Brooklyn judge ripped into lender Citigroup and its unprepared lawyer.

  • On Monday, Brooklyn Supreme Court Judge Arthur Schack mocked the bank and its lawyer for failing to ensure the accuracy of papers filed in a foreclosure case. "The court does not work for Citi and cannot wait for Citi, a multi-billion-dollar financial behemoth to get its act together," Schack said, in throwing out the case.

For more, see Judge reams Citi housing lawyer.

For Justice Schack's ruling, see CitiMortgage, Inc. v Nunez, 2010 NY Slip Op 52142(U) (NY Sup. Ct., Kings County, December 13, 2010).

(1) According to an October 20, 2010 press release, New York State Chief Judge Jonathan Lippman said the purpose of the new rule is 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."

Recent Jury Verdict Proves Borrowers Aren't Alone In Being Screwed Over By Sleazy Servicers As Litigation Exposes Their Bag Of Tricks

The New York Times reports:
  • ALL the revelations this year about dubious practices in the mortgage servicing arena — think robo-signers and forged signatures — have rightly raised borrowers’ fears that companies handling their loans may not be operating on the up and up.

  • But borrowers aren’t the only ones concerned about potential mischief. Investors who hold mortgage securities are increasingly worried that servicers may be putting their interests ahead of those who own the loans.

***

  • Last week, a jury in federal district court in Reno, Nev., awarded a group of 50 mortgage investors $5.1 million in punitive damages against defendants in a loan servicing case. Although the numbers in the case aren’t large, its facts are fascinating. Indeed, the case exposed some of the tricks of the servicers’ trade.

***

  • Because loan servicers operate behind the scenes, it’s hard for investors who own these mortgages to monitor fee-gouging. In addition, the servicing contracts make it difficult to fire administrators — under a typical arrangement, investors holding at least 51 percent of the loans must agree on termination. In short, loan servicing is a perfect setup for administrators who want to take advantage of both borrowers and lenders.

For more, see Opening the Bag of Mortgage Tricks.

Feds Raid Foreclosure Rescue, Sale Leaseback Peddler's Office; Snatch Computer Files, Documents; 'F-Rated' Outfit Targeted By Complaints, Media Probe

In Rancho Bernardo, California, KGTV-TV Channel 10 reports:
  • The FBI raided the office of a Rancho Bernardo financial firm on Thursday after a joint investigation by 10News and 10News' media partner The San Diego Union-Tribune into the firm's owner and practices. At the office, agents took computer files and other documents on Thursday belonging to Michael Monaco, the owner of Investors Finance, Inc., which offers to buy homes in foreclosure and lease them back to the people living there.

***

  • Last month, in a joint investigation with the 10News I-Team and 10News' media partner The San Diego Union-Tribune, Monaco squirmed when he was asked about the 1,300 desperate homeowners who each paid him $1,400 upfront to save their homes and then could not even get a call back from him.

***

  • Monaco has been sued for fraud and breach of contract 17 times. Investors Finance has an "F" rating with the Better Business Bureau and several complaints have been filed.

For more, see FBI Raids Rancho Bernardo Financial Firm's Office (Investors Finance, Inc. Offers To Buy Homes In Foreclosure, Leasing Them To People Living There).

For a previous story, see Customers Unhappy With Rancho Bernardo Man's Mortgage Firm.

Sunday, December 19, 2010

Lenders Face Difficulties In Scramble To Find Qualified Attorneys Willing To Pick Up Dumped South Florida Foreclosure Mill's Caseload

In Plantation, Florida, the Daily Business Review reports:
  • As the one-time largest plaintiffs foreclosure law firm in Florida, the Law Offices of David J. Stern at its peak handled 20 percent of all foreclosures in the state, processing more than 70,000 foreclosure cases on behalf of major lenders like Fannie Mae, Freddie Mac, Bank of America and JPMorgan Chase in 2009.

  • Now that the Plantation law firm has been dropped by a number of lenders and servicers including Fannie Mae and Freddie Mac, ex-clients are scrambling to find law firms and lawyers to fill the void.

***

  • But the replacement law firms haven't found it easy to find enough qualified law firms to take the work, and the transition has slowed a system already clogged with overwhelming numbers of cases. Some judges are not willing to delay cases due to the change in attorneys as Stern files are turned over to new lawyers.(1) More and more counties are requiring in-person rather than telephonic hearings.

For more, see Lenders, Servicers Scramble to Shift Foreclosure Cases to New Firms (The head of one coverage attorney service has been swamped with requests but says there's a shortage of qualified attorneys).

(1) Reportedly, transitioning cases from Stern's firm to others has not been seamless, judging by one hearing. According to the story, some banks have assigned their main counsel as transition firms to farm out the work. That is the case with CitiMortgage, which handed Akerman Senterfitt 30,000 residential foreclosure files. According to a Nov. 23 hearing transcript obtained by the Daily Business Review, Edmund Whitson III, a Tampa-based Akerman attorney, pleaded with a Punta Gorda judge for a postponement on a 2-year-old foreclosure case, and the judge wasn't happy.

Approved "Sandbagging" Of Homeowners At Court Hearings, Banks Filing Incomplete Affidavits Reflect Disregard For Procedure By Some F'closure Judges

Jacksonville, Florida foreclosure defense attorney Chip Parker writes in The Florida Times Union:
  • With all due respect to Judge J. Thomas McGrady, his recent guest column reflects the state of denial demonstrated by our judiciary about the general failure of Foreclosure Court in Jacksonville and throughout Florida.(1) In the nearly two decades that I have practiced law in Florida’s courtrooms, I have never witnessed a process so blatantly tilted in favor of one party, which happens to be the mortgage industry.

  • McGrady references a procedure known as summary judgment, which he correctly points out as an efficient proceeding for disposing of cases when no issue of fact is present. Because summary judgment is an extraordinary measure that terminates a homeowner’s ability to keep his home, there are strict legal requirements that ensure fairness in the process.

  • All evidence upon which the mortgage company intends to present to prove its case must be provided to a homeowner 20 days before the hearing, but in reality, the bank lawyers often “sandbag” defendants by presenting key evidence at the hearing.

  • Additionally, affidavits — written testimony sworn under penalty of perjury — are always used to prove the bank’s case. Since the bank affidavits reference amounts due by the homeowner, business records must be attached but, in reality, never are. These affidavits are particularly disturbing because many servicers now admit that they were executed by employees who had no idea whether the statements were true.

  • Judges’ own statements reflect how out of touch they are with the issue of foreclosure fraud and how willing they are to overlook thousands of instances of lying by plaintiffs in most every foreclosure case. As a group, they shrug off the lies as sloppy paperwork.”

  • While McGrady correctly states that a judge’s job isn’t to “go behind the paperwork submitted in summary judgment,” it is the judge’s job to disallow evidence that clearly fails to comply with the rules of procedure even if the homeowner isn’t present.

  • Area judges have stated on the record that they do not require these rules to be followed in foreclosure cases, and lawyers throughout the state describe similar situations in their courtrooms.

For more, see Guest column: In reply: Serious flaws in foreclosure courts allowed to continue.

(1) See J. Thomas McGrady: 'Rocket docket' is a misnomer.

Process Servers Probed For Alleged Slipshod Business Practices

In Fort Lauderdale, Florida the South Florida Sun Sentinel reports:
  • The Florida attorney general is investigating two companies that deliver foreclosure notices to homeowners, one based in South Florida, on civil allegations of slipshod business practices.

  • State regulators this month began examining Gissen & Zawyer Process Service Inc., of Miami, for "numerous complaints." Among them: filing questionable statements with the court, back-dating documents and questionable billings. The attorney general also has begun investigating ProVest LLC of Tampa, one of the largest process servicing outfits in the nation, for similar complaints.

For more, see AG investigates two companies delivering foreclosure court papers.

9 To 33 Year Sentence No Bar To O.J.'s Florida Homestead Exemption; Ex-Football Star To Keep Benefit Despite 'Scoring' Extended Stay In Nevada Prison

In Miami, Florida, The Miami Herald reports:
  • O.J. Simpson may not be coming back to South Florida for a good long while, but he's still entitled to a homestead exemption on his Kendall home. So ruled the Miami-Dade County property appraiser's office after a neighbor complained that the convicted armed robber and long-ago football and TV star's current extended residency at a Nevada prison should preclude him from receiving the property-tax break usually afforded to Florida homeowners.

  • Now the miffed neighbor, David Weston, thinks someone in Tallahassee should take another look. What bothers Weston, he says, is not so much the fact that it's Simpson getting the tax break, but more generally that state rules allow felons serving prison sentences -- even those doing so out of state -- to keep their exemptions.

***

  • Florida Department of Revenue rules, which govern the homestead exemption, require that the property be the homeowner's primary residence. But the rules also clearly state that a felony conviction by itself doesn't disqualify anyone. Nor does a temporary absence -- "regardless of the reason for such,'' the rule book says, "providing an abiding intention to return is always present.''

  • So there is no legal basis to rescind Simpson's exemption, said Lazaro Solis, deputy property appraiser. In fact, the only way Simpson could lose the exemption is if he rents out the home, Solis said.

  • A county inspector paid a visit and found Simpson's son, Justin, living there. Justin Simpson, 22, told the inspector he's going back and forth to an out-of-town school, Solis said.

***

  • O.J. Simpson, now 63, moved to Miami with Justin and his older sister, Sydney, who is now 25, in 2000, five years after he was acquitted of murdering their mother, Nicole Brown, in Los Angeles. Simpson's Miami sojourn was cut short when he and a co-defendant were convicted in October 2008 of leading a bungled heist at a Las Vegas hotel to retrieve memorabilia the disgraced star claimed was stolen by dealers. Simpson, who has appealed, was sentenced to serve nine to 33 years at a Nevada state prison on charges of armed robbery, kidnapping and conspiracy.(1)

For the story, see O.J. Simpson in jail, but still gets tax break.

(1) The right of convicted felons to retain their homestead rights, despite being shipped off to prison for a long time, is not unique to Florida. See Sexual Assault Victim's Attempt To Satisfy Money Judgment By Snatching Now-Vacated, Jailed Perpetrator's Texas House Squelched By Homestead Claim, involving a recent Texas Court of Appeals ruling holding that the home of a convicted felon retained its homestead character, and thereby exempted it from forced sale by judgment creditors - including the victim of his crime, despite his having to spend the next 35 years away from it in a state prison.

Disbarred Lawyer Cops Plea In $2.4M+ Client Trust/Escrow Funds Swindle; Admits Snatching Closing Cash Meant For Loan Payoffs, Ripping Off Dead Client

In Broward County, Florida, the South Florida Sun Sentinel reports:
  • A disbarred Fort Lauderdale attorney pleaded guilty Thursday to a mail fraud charge, admitting he ripped off clients of more than $2.4 million. Joseph Sindaco, who practiced law in South Florida for three decades, stole from four clients' trust funds and used the money to pay personal expenses. He had specialized in estate and trust cases and real estate closings.

  • Sindaco, 63, now faces up to 20 years in federal prison when sentenced Feb. 24 by U.S. District Judge James I. Cohn. The recommended federal sentencing guidelines call for Sindaco to serve a prison term of at least 41 months, according to his plea agreement. In addition, he agreed to pay $2.4 million in restitution to his four victims. One of them lost $1.8 million. Sindaco's attorney, Robert Trachman, did not return a call to his office on Thursday.

  • Sindaco cut a deal in August with the Florida Bar to surrender his law license and be disbarred for five years. He admitted during those proceedings he misappropriated about $445,000 from two clients. The mail fraud charge against Sindaco arose from his handling of the estate of Werner Clauss, an 82-year-old who died at a Lauderdale Lakes nursing home in 2008. Sindaco liquidated Clauss' investment account and transferred the money to his law firm's trust account, according to federal court records.

  • Sindaco was supposed to send the money to one of Clauss' cousins but never did, according to Florida Bar records. The cousin alleged in a state court lawsuit that Sindaco claimed multiple times that a check was on the way, but it never came. The former attorney admitted he stole the $2.4 million from April 2006 to December 2009.(1)

Source: Disbarred attorney admits stealing $2.4 million (Joseph Sindaco faces up to 20 years in prison).

For the U.S. Attorney (Fort Lauderdale) press release, see Broward Lawyer Pleads Guilty To Stealing More Than $2 Million From Trust Funds:

  • As an attorney, he handled real estate closings for clients, mortgage lenders and estate transactions. In this capacity, Sindaco misappropriated approximately $2,4443,857 of funds that were supposed to be used to pay off prior loans and also clients’ funds from his law firm’s trust account. Instead of using the money as directed, however, Sindaco stole the money and sent letters to clients falsely stating that he was holding their money or disbursing it according to their directions.

(1) The victims in this story may be able to turn to the The Florida Bar's Clients' Security Fund (which was created to help reimburse clients for money they may have lost because of misappropriation or embezzle­ment by their attorneys) to recover some, if not all, of the swindled money.

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

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

Saturday, December 18, 2010

Residents In Waterfront Townhouse Complex Forced To Flee From Homes After 'Rogue' Canal Swallows Up Backyard

In Sunrise, Florida, the South Florida Sun Sentinel reports:
  • The bizarre collapse of a canal bank in Sunrise forced the evacuation of a strip of townhouses, as residents scrambled into their clothes and hustled their children onto the sidewalk for safety.

  • No one knows yet what caused the accident Thursday night, which swallowed the backyards of several homes in the Spring Tree Cove West complex just north of Oakland Park Boulevard.

  • Engineers from the homeowners' insurance companies were on the scene Friday, walking along the jagged, muddy cliff that reached within a foot or two from the townhouses' back doors.

***

  • Six units were evacuated, and bright orange unsafe structure stickers were placed on the doors. A seventh unit is vacant. Lawn decorations of Santa, Christmas trees and snowmen stood behind yellow police tape. On Friday afternoon, as a police officer stood by, residents were allowed back into their homes to retrieve perishables, valuables and personal belongings.

***

  • Although sinkholes are rare in Broward, Miami-Dade and Palm Beach counties, where the limestone layer is thin, their numbers have been growing. [...] Palm Beach County did not have enough claims to be listed separately. [...] Sinkholes are abundant in the state's "sinkhole belt" of Hernando, Pasco and Hillsborough counties, where thicker limestone can form major sinkholes and where insurers have paid hundreds of millions of dollars for sinkhole damage.

***

  • [Resident Alan] Lueck, the man who saw the bank collapse, said he had alerted the city about a year and a half ago to a hole that had appeared in his backyard and led down to the canal. A city inspector came out and told him not to worry about it, he said, so he filled it in and forgot about it, until Thursday night.

For the story, see Sunrise condo residents displaced after backyards fall into canal.

Recently Defeated In Election, Consumer-Friendly Ohio AG To Take Battle Against Financial Fraud National

In Columbus, Ohio, The Colombus Dispatch reports:
  • Outgoing Ohio Attorney General Richard Cordray has a new federal job lined up, but he still has his eye on a statewide office - most likely governor - in 2014. Cordray confirmed [] that he has been appointed enforcement watchdog for the new U.S. Consumer Financial Protection Bureau, an agency under the umbrella of the Federal Reserve System.

  • "It gives me the opportunity to work on a 50-state basis on the issues that are near and dear to my heart in the state of Ohio," Cordray said. He will be the chief enforcer over a broad range of consumer issues, including mortgages, credit cards, student loans and nonbanking financial activities.

***

  • Cordray, 51, a Democrat, lost his re-election bid last month to Republican Mike DeWine, a former U.S. senator and lieutenant governor. [...] In his two years as attorney general, Cordray was zealous in pursuing fraudulent mortgage and foreclosure practices. He went after GMAC Mortgage; its parent, Ally Financial Inc.; American International Group; and Bank of America Corp.

For more, see Cordray headed to Washington.

City Gives 40+ South Beach Tenants The Boot; Safety Issues Lead To 3-Day Notice To Vacate Shaky Structure, Leaving Residents Homeless For The Holidays

In Miami Beach, Florida, WPLG-TV Channel 10 reports:
  • Dozens of residents in Miami Beach were forced to move out by Thursday because of safety concerns at their apartment building. Repairs have been under way at the building on Fifth Street and Meridian Avenue for the past eight months. But the work was not finished in time, forcing the more than 40 residents who live there to move. Residents said they received notice Monday that they must move out by Thursday.

  • "I paid my rent, and two days later, I find out the building is going to be closed down and I've got to pack up everything I own to try to find a place," said 64-year-old resident Richard Main. The three-story building has been plagued by shoddy repair work and several code violations, including a subpar fire safety system and a deteriorating structure that officials said needs an engineer's assessment.

***

  • Eula Imperato is disabled and on a fixed income. She said she cannot just pick up and move away on such short notice. "I can't walk well. I lose my balance, so I have to use a wheelchair," Imperato said. "I don't know what I'll do if I don't find a place." Without the luxury of time, the residents, most of whom are senior citizens, are not sure where they will spend the holidays. "Without money, I'm homeless on the streets," Main said.

  • City officials said it is the building owner's responsibility to relocate the residents. The owner has told the city that will be done by Thursday, but if that does not happen, the city will arrange for temporary housing for the residents and bill the building owner.

For the story, see Citing Safety Concerns, City Forces Residents Out Of Apt. Bldg. (City Agreed To Provide Families With Housing For One Week).

Stroke-Stricken Mom To Lose Family Home After Convicted Thief/Son Scammed Her In $137K Ripoff, Stiffing Bank On House Payments

In Spokane, Washington, KXLY-TV Channel 4 reports:
  • A South Hill woman is about to lose her home to foreclosure because her son looted her life savings to feed his gambling addiction. Mary Jo English developed some health problems a couple of years ago and so her oldest son Mark assumed command of her finances including mailing the mortgage payments on her home.

  • However Mark never sent those checks because that would have limited the amount of money available for him to steal from his own mother. “We have to find some place to live within two weeks and I just don't know how that's going to happen,” Mary Jo English said.

***

  • It started with the pair of strokes that has left Mary Jo English's speech slurred. Her son used her illness to assume command of her finances. Police say he stole $137,000 of his mom’s money and lost it to the casinos.

***

  • Mary Jo didn't know she was behind on her house payments because Mark had redirected all of her mail to a post office box. Now her other son Daniel is struggling to raise the $21,000 Mary Jo needs to stop the foreclosure. “I’m hoping somehow to get the banks to give her her money back to replenish the money back into her account so she can pay back the money in arrears and to keep her house,” Daniel said.

  • Mark English was convicted of theft last month and ordered to make restitution to his mother but the money won't come soon enough to save his mom’s home.

For more, see Woman Loses Savings To Son's Gambling Habit.

Town Blocks Sale Of Flood-Prone, Nearly Uninhabitable Home; Says It Can't Afford R/E Tax Revenue Loss If State Converts Premises To Public Green Space

In Hillsdale, New Jersey, The Record reports:
  • The borough is refusing to allow a homeowner to sell a property that chronically floods to the state for public green space. Rosanne Vaccaro was accepted into a state program that buys properties in flood-prone areas, but she needs the borough's approval to complete the transaction. Mayor Max Arnowitz is blocking the deal, arguing that the borough can't afford to lose precious tax revenue.

  • Vaccaro pays almost $7,000 in annual property taxes on the home, which is valued at $355,000. After Hurricane Floyd hit in 1999, she said the house — located near the Pascack Brook — became nearly uninhabitable.

  • She has petitioned her state legislators, who have contacted Arnowitz on her behalf, but he refuses to budge. "It is amazing that I am still expected to pay property taxes on a house that is uninhabitable and give good money to a community that doesn't value me as a citizen," said Vaccaro, who moved to London six months ago after getting married. "Frankly, I feel persecuted, but for what I am not sure."

For more, see Hillsdale blocks home from being sold into flood program.

NYC Feds File Civil Suit Charging Rockland County Landlord Of 96-Unit Complex With Discriminatory Practices Targeting African-Americans

From the Office of the U.S. Attorney (NYC/Manhattan):
  • PREET BHARARA, the United States Attorney for the Southern District of New York, announced [] that the United States has filed a federal civil rights lawsuit under the Fair Housing Act against BURGUNDY GARDENS, LLC, for discriminating against African-Americans seeking to rent apartments at Burgundy Gardens Apartments, located in Valley Cottage, Rockland County, New York.

***

  • Burgundy Gardens Apartments is a residential complex consisting of approximately 96 rental apartment units. [...] Specifically, the United States alleges that Burgundy Gardens has engaged in racially discriminatory housing practices, including failing to inform African-American prospective tenants about available apartments, or telling African-Americans that certain apartments are not available, while telling non-African-American persons that such apartments were in fact available.

  • In addition, the Complaint alleges that Burgundy Gardens told African-American prospective tenants that the prices for rental apartments were higher than the prices quoted to non African-American persons. The United States further alleges that Burgundy Gardens failed to show African-American prospective tenants available apartments, while at the same time showing similarly situated non-African-American persons available apartments.

For the U.S. Attorney press release, see Manhattan U.S. Attorney Files Civil Rights Suit Against Rockland County Landlord For Discrimination Against African-American Prospective Tenants.

BofA Looks To Unload At Least $1B In Crappy Paper; Lender/Servicer May Be Tiring Of Continued Hammering To Public Image

The New York Post reports:
  • Bank of America, the country's No. 1 mortgage lender, battling to fix or get out of more than 1 million past due home loans, has put at least $1 billion of the toxic paper on the block, The Post has learned.

  • Buyers for the loans, which BofA has already written off, are circling. Bids are due by the end of December, sources said. The sale of the block of mortgage assets, which includes loans and mortage-servicing rights, seems to signal that Chief Executive Brian Moynihan, who has said he will battle to clean up the mess, thinks the best way out is through a sale.

***

  • Moynihan's move may be prompted by upcoming regulations that would force the bank to set aside more reserves for risky assets. [...] BofA also wants to improve its public image by not being in the news for foreclosing on homeowners.

For the story, see Bank of America to sell $1B in toxic paper.

The Screw-Ups Continue At BofA; Servicer Sends Notices Of Tax Delinquency To 1,100 Borrowers Who'd Actually Paid Their Taxes

In Clark County, Washington, The Columbian reports:
  • A letter sent to hundreds of Bank of America’s mortgage borrowers in Clark County contained news no one wants to hear: Your home could be foreclosed for nonpayment of property taxes. The letter from a Bank of America affiliate was sent to about 1,100 Clark County homeowners who’d actually paid their taxes.(1)

  • Homeowners were quick to take action. Clerks at the Clark County Treasurer’s office fielded hundreds of queries last week from worried homeowners, said Michelle Denman, the office’s tax service manager.

  • A Bank of America official acknowledged the mixup Monday, saying the bank had requested tax payment status reports on Bank of America mortgage-holders before the final payments were due. Many people do not pay taxes until close to the due date.

  • We sincerely apologize to those customers who received the letter in error,” said [the frequently apologetic] Jumana Bauwens, spokesperson for Bank of America Home Loans.

For more, see Bank of America’s tax letter misses its mark (Bank said payments for 1,100 homes were late — before due date).

(1) Reportedly, the letter offers a toll-free number for property owners to call if they are unable to pay the taxes, and a final section, with additional website and phone contact information, falls under the heading “THANK YOU FOR YOUR BUSINESS.”

West Virginia State Bar Disciplinary Board Stiffs Low, Middle Income Pro Se Litigants With New "Ghostwriting" Rule

In Charleston, West Virginia, The West Virginia Record reports:
  • The [West Virginia] State Bar's Lawyer Disciplinary Board recently ruled that attorneys no longer can offer behind-the-scenes legal help to people [representing themselves in court proceedings].

  • The new "ghostwriting"(1) rule seemingly will force many people to either hire an attorney or receive no legal assistance at all when they go before the court. In short, a lawyer must either be in a case all the way or not at all. "While the board finds that ghostwriting as a form of undisclosed representation is permissible under the Rules of Professional conduct, the attorney must disclose his or her identity when preparing pleadings and other documents filed with a tribunal," Board Chairman David A. Jividen wrote in his Nov. 8 opinion.(2)

***

  • The West Virginia Access to Justice Commission(3) voiced displeasure with the opinion. The opinion "will damage the ability of many low- and middle-income West Virginians to obtain access to justice in West Virginia," wrote Chairman Robert S. Baker in a June 9 letter to the LDB.

  • He said it "places unusually strong limitations on the practice of ghostwriting." "At a time when the American Bar Association and many state bars have voiced support for ghostwriting, the West Virginia Lawyer Disciplinary Board now seeks effectively to do away with the practice. This will injure both pro se litigants and our courts that serve substantial numbers of pro se litigants."

  • Baker said that changing economic times have brought "a sea change" in how people seek access to justice. "A litigant with limited means would rather obtain some help than none at all, and courts would rather pro se litigants have some attorney assistance than none at all. Unbundled representation is especially important in West Virginia Family Court, where estimates are that in about 75 percent of the cases both parties are appearing pro se."

  • Baker says West Virginians deserve better than to be lost without help in a legal system they often don't understand. "When the most important parts of pro se litigants' lives are at stake, attorneys can do better than leave them out in the cold," Baker wrote. He said alternatives exist.

  • "The ability to ghostwrite documents that do not result in an appearance by the attorney is essential to give litigants a guiding light through a confusing legal system," Baker wrote.

For the story, see State Bar board cracks down on ghostwriting.

(1) The story decribes "ghostwriting" as the authoring of a legal document for another who appears to be the actual author, and can include preparing pleadings or other documents filed with a court or preparing letters or other documents on behalf of a client.

(2) The opinion does say that attorneys don't need to disclose their identities if a letter or document is not intended to be filed with a court or "authorship is not otherwise required by law," the story states. Also, helping a client prepare forms adopted by or used by courts and government agencies does not require disclosure, according to the story.

(3) The West Virginia Access to Justice Commission addresses barriers to justice faced by moderate and low income West Virginians.

Friday, December 17, 2010

"We Will Put People In Jail!" Vows Iowa AG Referring To Ongoing Robosigner Probe

Reuters reports:
  • Iowa's attorney general, who is leading a nationwide probe of questionable home foreclosures, met with struggling homeowners on Tuesday and said he may bring criminal charges in his state.

  • "We will put people in jail," Iowa Attorney General Tom Miller said, referring to cases in his state he plans to prosecute with the U.S. Attorney in southern Iowa.

  • A public furor erupted in September over whether banks cut corners in the foreclosure process, using so-called "robo-signers" of legal documents to justify taking homes. Miller heads up the multi-state foreclosure probe comprised of all 50 state attorneys general. They have met with leading U.S. mortgage servicers to discuss a settlement over allegations related to shoddy foreclosure paperwork, which some homeowners say have resulted in illegal evictions.

For more, see Iowa may bring criminal charges in foreclosures scandal.

Duo Forks Over $25K In Upfront Restitution For Conditional 'Buyout' Of Convictions For Running Illegal Loan Mod Operation

In Livingston County, Michigan, the Daily Press & Argus reports:
  • Two women accused of illegally charging an estimated 15 customers money upfront for loan modification services were ordered Tuesday to complete community service and probation under a delayed sentence.

***

  • Michelle Rene Garbuschewski and Lisa Marie Joboulian both pleaded guilty in November to one count of violating the Credit Services Protection Act in exchange for the state attorney general's office dismissing a second identical count for illegally charging homeowners facing foreclosure upfront fees for mortgage-modification assistance.

***

  • Garbuschewski, of Howell, and Joboulian, of Northville, were each given an 11-month delayed sentence that will leave both with no conviction if they successfully complete probation during that time frame. They also were ordered to serve 10 hours of community service.

***

  • The plea deal calls for both women to pay a total of $40,000 in restitution to an estimated 15 victims even though only two victims are identified in the charges. On Tuesday, [District Judge Theresa] Brennan ordered $25,000 in restitution, which was paid Tuesday and will repay seven victims. The judge set a Jan. 14 hearing date to determine the amount, if any, of additional restitution to other victims, according to court records.

For the story, see Women accused of illegal service charges get probation, community service.

Lawsuit: Title Company Ruined Texas Home Seller's Credit By Failing To Pay Off Existing Mortgage From Escrow Funds

In Jefferson County, Texas, The Southeast Texas Record reports:
  • A Jefferson County man claims his credit score was ruined after a title company failed to pay off a loan after he sold his home. Ronald Carlin filed a lawsuit Dec. 2 in Jefferson County District Court against Stewart Title Guaranty Co.

  • Carlin claims he hired Stewart Title to handle the transaction after he sold his home on Dawn Drive in Beaumont. "As part of the transaction, the Defendant was to pay any outstanding monies owed to Progressive Financial Services, the lender holding the mortgage on 5130 Dawn Drive at the time of the sale," the suit states. "Defendant has never paid off the Progressive Financial Services loan."

  • As a result of Stewart's failure to pay off the loan, Carlin suffered damage to his credit score and suffered mental anguish, the complaint says. In his complaint, Carlin alleges negligence and negligent misrepresentation, breach of fiduciary duty and breach of contract against the defendant.

Source: Beaumont man sues title company for ruining credit.

Colorado Homeowner Files Federal Suit Challenging Constitutionality Of State's Foreclosure Process & Law

In Denver, Colorado, The Denver Post reports:
  • Denver attorney John Prater sued the state of Colorado in federal court Friday, alleging that it is allowing lenders to seize properties without the due process required under the U.S. Constitution. "Colorado's foreclosure process and law are unconstitutional," said Andrew O'Connor with the Prater Legal Offices.

  • He said borrowers aren't getting a fair hearing under the state's current system of public trustees and limited "Rule 120" court hearings. Prater is fighting a foreclosure on his Douglas County home and filed a federal lawsuit after failing to get the hearing he wanted in state courts.

  • Under Colorado's current system, lenders can foreclose even if a fraudulent origination contributed to the delinquency. They can foreclose even while promising a loan modification that never gets fulfilled. And they can foreclose without ever providing proof before a judge that they have clear legal standing to do so, O'Connor said.

  • He said Colorado serves a lender's interest by having judges in Rule 120 hearings address only two issues: Is a borrower in the active military, which allows special consideration, or are they delinquent?

For more, see State's foreclosure rules challenged (Borrowers say they don't get a fair hearing from public trustees and limited court hearings).

Thursday, December 16, 2010

Philly Feds Continue Attack On Equity Stripping Sale Leaseback Peddlers; Indict 4, File Civil Suit In Alleged Racket Involving 120 Properties

In Philadelphia, Pennsylvania, the Philadelphia Inquirer reports:
  • The U.S. Attorney's Office in Philadelphia filed criminal charges Tuesday against the operator of a local mortgage foreclosure rescue scheme involving $31 million in fraudulent loans on 120 properties.

  • Anthony J. DeMarco III offered to buy the houses of people facing foreclosure, allowing victims to stay in the houses and pay rent until they recovered financially and could buy the house back, the government said. In reality, the indictment alleged, DeMarco's real estate companies, DeMarco REI Inc. in Philadelphia and OPM Group L.L.C. in King of Prussia, lined up straw buyers for the houses, used fraudulent documents to obtain mortgage loans, and stole $11 million in the process.

  • Authorities arrested DeMarco, 31, of Conshohocken, on Tuesday. He is being held pending a detention hearing Friday. His attorney, Chris Warren, did not return a call seeking comment. A call to DeMarco's residence in Conshohocken before the arrest was not returned.

***

  • In what it called a novel move, the U.S. Attorney's Office on Tuesday asked U.S. District Judge Michael M. Baylson for broad relief that would stop evictions and foreclosures related to DeMarco's companies.(1)

  • Robert P. Cocco, a Philadelphia consumer lawyer who has several cases pending against DeMarco, welcomed that effort. "It helps save the victimized homeowner the emotional and financial burden of foreclosure defense or stay of sheriff sale," he said.

  • Also charged in the 15-count indictment were DeMarco REI employees Michael R. Roberts and Eric Boscove, as well as Sean Ryan, a title agent at Settlement Engine Inc. of Pittsburgh. Ryan allegedly played a vital role in the scheme by helping to make fake the down payments needed for the loans. Charges include conspiracy, mail fraud, bank fraud, and money laundering. Only Ryan could be reached Tuesday. Contacted at his work number, he said: "No comment."

Source: U.S. charges local foreclosure-rescue operator with fraud.

For the U.S. Attorney (Philadelphia) press release, see Charges & Civil Complaint Filed In Foreclosure Rescue Scheme (Civil Complaint Seeks Help For Scam Victims Facing Foreclosure).

For the charges brought in this criminal/civil, 'dual' prosecution, see:

See Criminal Prosecutions Of Sale Leaseback Peddlers In Equity Stripping Foreclosure Rescue Deals for other incidents that led to criminal prosecutions in sale leaseback deals.

(1) The novel move here is that, in addition to bringing the criminal indictment against the four suspects, the U.S. Attorney's Office has also filed a civil lawsuit against DeMarco and his two companies in an attempt to, according to the civil complaint (see U.S. v. DeMarco REI, Inc., et al, at paragraph 5):

  • "seek[] relief that will extend beyond the parties to reach the homeowners, the "straw" purchasers, and the mortgage lenders. One purpose of the action is to bring all the individuals and entities that have a stake in the properties before the Court to create an orderly process by which the damage caused by the defendants' fraud can be mitigated. That process, sanctioned by the applicable statutes, will mean that non-party, non-defendants should be enjoined from engaging in any transactions that will affect the properties at issue here."

Media Attention Continues On Use Of False Attorney Signatures On Foreclosure Documents

ProPublica reports:
  • Many foreclosures have been thrown into question because of flawed documentation such as inaccurate affidavits describing a mortgage's history. But three recent court cases point to another type of flaw in foreclosure filings that could place thousands more cases in doubt: false attorney signatures on court documents.

***

***

  • In October, the Baltimore Sun reported that lawyers from two Maryland firms that handle foreclosures acknowledged that they had not in fact signed many affidavits filed with their signatures and had submitted "corrective affidavits" to try to remedy the problem. The two lawyers, who have reportedly filed more than 20,000 foreclosure cases in Maryland since 2008, told the Sun that they had reviewed the content of all their affidavits although they did not always sign them themselves.

***

For more, see False Attorney Signatures Cast New Doubts on Foreclosures.

Boston Retiree Faces The Boot From Family Home Of 50+ Years After Being Victimized In $500K+ Home Equity Ripoff

In Boston, Massachusetts, The Boston Herald reports:
  • Nancy Henry could be spending Christmas out on the street. In what her attorney called a mortgage swindle, the 76-year-old retired accountant is facing foreclosure of the two-bedroom row house in Cambridge that has been her family home for more than 50 years.

  • "I’m supposed to be out by Dec. 15, but I don’t know where I would go,” said Henry, who lives in the home with her adult son. “I’m praying something can be worked out at the last minute, so I can stay put.”

  • Todd Kaplan, an attorney with Greater Boston Legal Services,(1) said Henry was the victim of a complicated scheme to deprive her of the home and take more than $500,000 of equity from the property that was never repaid, forcing the foreclosure. “Miss Henry was the victim of a scam to deed over her house,” Kaplan said. “She is facing eviction and holding on by her fingernails.”

  • Henry said the scammer promised to sell the home for her and use the proceeds to purchase a ranch-style house where she could live on one floor. Instead, she said, the man sold the home - which has an assessed value of $443,000 - for $228,000 in 2007 to a “straw buyer” and “flipped” the property six months later for $580,000. The new “owner,”, with Henry still living in the home, took nearly $500,000 out in home-equity loans that were never repaid.

  • City Life/Vida Urbana, a Boston anti-poverty agency, organized a “stop the foreclosure vigil” at Henry’s home last night. They argue that the mortgage holder, Provident Funding Associates, should stop the eviction while any one of several solutions is explored. They want Provident to agree to sell the house to a Cambridge nonprofit as an affordable home or rental. Sarah Billeri, the attorney representing Provident Funding Associates at Harmon Law Offices, did not return a call seeking comment.

Source: Homeowner to be on street after alleged scam.

See also Cambridge resident says she was scammed into foreclosure.

(1) Greater Boston Legal Services provides free civil (non-criminal) legal assistance to low-income people in Boston and thirty-one additional cities and towns, ranging from legal advice to full case representation, depending on client need.

"I Lost My House. I Lost Everything" Says Widow After Underwriter Allegedly Stiffed Her Of $250K Payout From Deceased Hubby's Life Insurance Policy

In Southern California, the Los Angeles Times reports:
  • American General Life Insurance Co. markets its policies as protection for "the hopes and dreams of American families" — a promise Ian Weissberger took to heart during his losing battle with Lou Gehrig's disease.

  • But after the Cathedral City mortgage broker died in 2005, American General cancelled his life insurance policy and refused to pay his widow the $250,000 benefit. The Weissbergers' premiums were paid up. There was no foul play suspected. There was no question Sheila Weissberger was the widow and sole beneficiary. And Ian's illness was diagnosed months after he took out the policy.

  • The problem, the insurer told Sheila Weissberger, was that Ian's application for coverage was incomplete. American General concluded that he had failed to disclose conditions, including bipolar disorder and pulmonary disease, that, according to his doctors, he did not have.

  • For the company, which collected $2.3 billion in premiums last year, the amount at issue was minute. But it was no small matter for Sheila, 62, who reached a confidential financial settlement with American General earlier this year.

  • "I lost my house. I lost everything," she said in an interview. "It was very, very devastating."(1)

For more, see Flaws can cancel life insurance — after death (If a policy is less than 2 years old, companies may dispute the claim, and thousands were denied last year).

(1) According to the story, most states long ago banned limitless rescissions to stop abuses by insurers, but in California and elsewhere, they are allowed during the two years immediately after a policy is signed. Experts and consumer advocates say some insurers have turned that into a "gotcha period," seizing on flaws after claims are made that they could have looked for before issuing coverage, the story states.