Lenders Begin Reviewing Foreclosure Procedures Involving Active Duty Servicemembers After Major JP Morgan Chase Screw-Up In Violating SCRA

The Wall Street Journal reports:

• Some of the nation's biggest lenders are double-checking that their home-lending operations haven't broken a law meant to shield military personnel in active service from foreclosure. So far, the lenders say they haven't uncovered any problems like those J.P. Morgan Chase & Co. acknowledged last week.

• But after Chase found it overcharged more than 4,000 active-duty service members and took the homes of 14, in possible violation of the act that caps interest rates and stops foreclosure, lenders say they are making sure they are in compliance. They are also making sure members of the military know to alert them of their status.

***

• At issue is the Servicemembers Civil Relief Act, which says loans for active-duty service members can't exceed a 6% annualized interest rate. The law also halts all foreclosure proceedings up until nine months after the service member returns from active duty. The law defines active duty as "full-time" service, including tours and training, and says those who knowingly break the act face prison and fines.

• The issue began to surface when a U.S. Marine Corps captain filed a civil lawsuit in federal court in South Carolina last year, alleging he was overcharged by Chase, and seeking punitive damages.(1) Last week, Chase said it discovered its problems in its own review and is mailing about $2 million to victims; it said it had already moved to correct the foreclosures.

***

• Richard Harpootlian, the lawyer for South Carolina Marine Capt. Jonathan Rowles, said more potential victims from all over the country, including some who aren't customers of Chase, have contacted him since last week. The suit is seeking class-action status.

For more, see Lenders Step Up Reviews of Military Foreclosure Practices (requires paid subscription; if no subscription, GO HERE, then click appropriate link for the story).

Go here for more on the rights under the Servicemembers Civil Relief Act.

(1) See Marine shows willingness to fight for what's right.

F'closure Mill Lawyer Invokes "Pure Heart, Empty Head" Defense, Describes Signing Practices As "Stupid" As 18 Notaries Hide Behind 5th Amendment Right

In Baltimore, Maryland, The Daily Record reports:

• Attorney Thomas P. Dore on Tuesday conceded that five pending foreclosure proceedings should be dismissed because he could not vouch for his signature on documents filed with the Baltimore City Circuit Court. Judge W. Michel Pierson must still determine what action to take, if any, with regard to at least 15 other foreclosures involving notarized documents not actually signed by Dore, who represents lenders.

• Eighteen current and former notaries public invoked their Fifth Amendment rights and refused to testify regarding their certification of Dore’s signature on the documents. "Truthful answers to questions posed might tend to incriminate them,” the notaries’ attorney, David B. Irwin, of Irwin Green & Dexter LLP in Towson, told Pierson. “I have no doubt that they have a good-faith invocation right.”

• Notaries who knowingly certify false signatures face possible criminal sanctions for misconduct in office or fraud.(1)

***

• Dore came under heavy questioning from the judge and a special master appointed to review his foreclosure documents for irregularities. At the end of his testimony, Dore expressed regret to the court for failing to sign the documents himself but said he always acted in good faith.

• “I apologize for having put you through this,” Dore told Pierson from the stand. “I made a terrible mistake,” he added. “It was never my intent to deceive the court. It was frankly stupid, your honor.”

***

• [D]ore’s system of authorizing others to sign for him “had gotten out of hand” and he discovered that staff members whom he had not authorized to sign his name had, in fact, signed foreclosure documents, he said.

• “Ethically, I should have signed those affidavits myself,” Dore said. “I realized I made a stupid mistake and we changed our practice.” Dore insisted that at no time did documents leave his office without being carefully reviewed for accuracy.

For more, see Notaries invoke Fifth Amendment in foreclosure hearings (if link expires, TRY HERE).

(1) The recent foreclosure robosigner disaster has revealed that the role of the Notary Public and the fundamentals of notarization are not fully understood either by the public at large or by many of the notaries themselves.

In light of this disaster, the National Notary Association has stepped up and released a whitepaper entitled, “Why Notarization Is More Relevant And Vital Than Ever.”

According to their recent press release, this whitepaper addresses why notarization remains essential to protecting the integrity of today’s transactions, what specifically occurs in a notarial act, and the three primary types of official notarizations. It also details how America’s Notaries Public are supposed to help deter fraud and forgery by serving as trusted, impartial witnesses to millions of business transactions every day, an obligation that these robosigners obviously need to be periodically reminded of. According to the white paper:

• Impartiality [] means that Notaries must operate independently and resist improper or illegal requests or demands of supervisors, customers, friends or family members. There may be times when signers, employers or other third parties request that a Notary take "shortcuts" — like not requiring the personal appearance of a signer — for the sake of expedience. But, such improprieties are a violation of state law and can carry severe criminal and civil penalties.

NC AG Scores 13th Win Against Upfront Fee Loan Modification Rackets

From the Office of the North Carolina Attorney General:

• A California foreclosure assistance company is the latest outfit to be banned from offering loan modification and foreclosure assistance services in North Carolina, Attorney General Roy Cooper said [].

***

• This week, Wake County Superior Court Judge Abraham Penn Jones granted Cooper’s request for a default judgment against Peoples First Financial, Inc., which permanently bans the California company from performing or offering foreclosure assistance, loan modification and debt relief services in the state. The judgment also orders Peoples First Financial to pay $9,497.50 in refunds to consumers and $25,000 in civil penalties to local public schools.

• This is the thirteenth case won by Cooper’s Consumer Protection Division against foreclosure assistance and loan modification scams in the past five years and the second such win so far in 2011.(1)

For the North Carolina AG press release, see Foreclosure assistance scheme banned from NC, announces AG Cooper.

(1) With all due respect to the North Carolina AG's Office, obtaining a default judgment for approximately $35K against a now-defunct company, where none of the individual operators behind this racket have any liability for payment thereof is not exactly something to declare victory over. Anything short of a criminal prosecution will only encourage the continuation of these ripoffs.

Suspects Arrested For Allegedly Hijacking Possession Of Vacant Foreclosure, Using Craigslist Ad To Pocket $2K From Unwitting Renter

In Albuquerque, New Mexico, KOB-TV Channel 4 reports:

• Police say they have arrested some people who may have tricked a family into renting a house the suspects don't own. And now the victims are about to be out of a home.

• Police say the whole thing started from a rental advertisement on Craigslist. A couple with eight small children saw the ad and contacted who they thought were the owners of the property.

• After paying a deposit, the first and last month's rent and signing a contract, they got the keys to a house near Irving and Unser. Police say the people who posted the ad are scammers, and the home is a foreclosure owned by the bank.

• The bank is giving the victims who rented the home a little time to find another place to live. Police tell KOB Eyewitness News 4 there could be other foreclosures involved in the scam.

Source: Scammers trick family into renting home they don't own.

See also, KRQE-TV Channel 13: Man behind home scam still on the loose:

• Investigators say the scam began earlier this month when a family of 10 contacted a man about a rental listing posted on Craigslist. The family moved into the home around Jan. 11 after paying about $2,000 for the first and last months rent to a false landlord.

'Bear' E-Mails Describing Mortgage Securities Peddled To Institutional Investors As A "Sack Of Shi*" May Leave JP Morgan Chase Holding The Bag

Investigative reporter Terri Buhl writes in The Atlantic:

• Former Bear Stearns mortgage executives who now run mortgage divisions of Goldman Sachs, Bank of America, and Ally Financial have been accused of cheating and defrauding investors through the mortgage securities they created and sold while at Bear. According to e-mails and internal audits, JPMorgan had known about this fraud since the spring of 2008, but hid it from the public eye through legal maneuvering.

• Last week a lawsuit filed in 2008 by mortgage insurer Ambac Assurance Corp against Bear Stearns and JPMorgan was unsealed. The lawsuit's supporting e-mails, going back as far as 2005, highlight Bear traders telling their superiors they were selling investors like Ambac a "sack of shit."(1)

• News of internal whistleblowers coming forward from Bear's mortgage servicing division, EMC, was first reported by The Atlantic in May of last year. Ex-EMC analysts admitted they were sometimes told to falsify loan-level performance data provided to the ratings agencies who blessed Bear's billion-dollar deals. But according to depositions and documents in the Ambac lawsuit, Bear's misdeeds went even deeper.

For more, see E-mails Suggest Bear Stearns Cheated Clients Out of Billions (Lawsuit alleges the bank took extreme measures to defraud investors, and now JPMorgan may be on the hook).

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

(1) According to the story, Bear deal manager Nicolas Smith wrote an e-mail on August 11th, 2006 to Keith Lind, a Managing Director on the trading desk, referring to a particular bond, SACO 2006-8, as "SACK OF SHIT [2006-]8" and said, "I hope your [sic] making a lot of money off this trade."

Sale Leaseback Peddler Guilty In Rent Skimming Racket; Tried To Use $50M+ In Phony Notes To Pay Off Liens As 250+ Victims Signed Over Home Titles

In Los Angeles, California, The Associated Press reports:

• A Washington state man is facing up to 180 years in federal prison for defrauding people who lost their homes to foreclosure. Jeff McGrue of Tacoma man was convicted last Friday in Los Angeles.

• Federal prosecutors say McGrue's company, Gateway International, promised to delay or prevent foreclosures by having at least 250 victims sign over title to their homes.(1)

• In return, McGrue sent the lenders more than $50 million in phony promissory notes that he claimed were backed by the U.S. Treasury.

• Authorities say McGrue didn't save a single home but he collected at least $800,000 in fees and rent from victims. He also got titles so he could resell the properties.(2) Three other men pleaded guilty last year to taking part in the scheme and are facing prison terms.

Source: Man convicted in LA of foreclosure scam (A Washington state man is facing up to 180 years in federal prison for defrauding people who lost their homes to foreclosure).

For the FBI press release, see Washington State Man Found Guilty of Orchestrating Foreclosure Rescue Scheme that Falsely Promised to Help Distressed Homeowners Keep Their Homes.

(1) According to the FBI press release, McGrue worked with two others – Gerald Guidry, who owned a company called My Debt Solutions, and Ronald Morgan, who owned a company called Omnipoint – to defraud homeowners by promising to delay or prevent foreclosures and to pay-off delinquent mortgages in exchange for the homeowners making payments and transferring title to Gateway International.

Through the Gateway Program, McGrue and the others falsely told homeowners that, if they paid an enrollment fee and monthly rent and signed over title of their homes to Gateway, McGrue would use "bonded promissory notes" purportedly drawn on a U.S. Treasury Department account to pay off their mortgages, thereby stopping foreclosure proceedings, according to the FBI. The homeowners were falsely told that lenders were legally required to accept the notes, that they would be able to buy their homes back from Gateway at a discount, and that they would receive up to $25,000, even if they chose not to re-purchase their houses, the FBI said.

(2) While sale leaseback ripoffs are typically associated with equity stripping scams (where a victimized homeowner has a high level of home equity ripped off from out from under), this story illustrates how the sale leaseback deal can be equally applied to a situation where the homeowner has little or no home equity, when used in conjunction with an upfont fee, rent skimming racket. The scammers' profits come from the rent they collect from the victim on the leaseback arrangement (while failing to pay the existing mortgage payments, thereby subjecting the home to foreclosure), as well as any upfront fees the scammer can squeeze out of the unwitting victim for the 'privilege' of being ripped off.

S. California Duo To Get Hard Time In Mortgage Scam That Duped Homeowners Into Investing Proceeds From 'Cash-Out' Refinancings In Bogus R/E Program

In Southern California, The Press Enterprise reports:

• The accused ringleader of a $142 million mortgage and securites fraud centered in Southwest Riverside County agreed Monday to spend nearly 20 years in state prison rather than go to trial. James B. Duncan, who prosecutors say masterminded the scheme, and Maurice McLeod, his alleged second in command, both agreed in court to negotiated guilty pleas.

• The two men, both from Murrieta, were arrested with five other defendants more than a year ago for their roles in what authorities described as a series of complex investment scams that enabled the top organizers to live lavishly and defraud hundreds of investors in California and Arizona, pushing 201 Riverside County homes into foreclosure. After a day of negotiations at the Riverside County courthouse in Corona, the Riverside County district attorney's office reached settlements with lawyers for the two men.

• Duncan, 40, pleaded guilty to six counts of securities fraud and one count of corporate identity theft. Superior Court Judge Patrick F. Magers said if Duncan abides by the terms of a memorandum of understanding with the district attorney, he will receive a sentence of 19 years, eight months in state prison. If he fails to comply, the sentence will be increased to 22 years.

• McLeod, 38, pleaded guilty to five counts of securities fraud, and agreed to a memorandum of understanding under which he will receive a prison sentence of six years, with credits for time already served if he complies and 12 years if he does not.

• Deputy District Attorney Cormac Kehoe had the court seal the terms of the memorandum, until the state's case against the five remaining defendants is resolved. Formal sentencing could occur as early as May 5.

***

• Victims allegedly were recruited on the promise that they would become wealthy and achieve their dreams in three years. They were prone to believe the pitch because they were referred by friends, relatives or co-workers, investigators said.

• The investors said they were persuaded to refinance their homes to buy multiple investment properties, primarily in southwest Riverside County, with the guarantee that mortgage payments would be covered. However, ultimately the mortgage payments stopped and the houses fell into foreclosure.

For the story, see Murrieta men agree to prison in fraud case.

(1) In all, the seven defendants were accused of 249 felony counts that included securities fraud, grand theft, elder abuse and corporate identity theft, the story states. In previous testimony, an investigator described an elaborate scheme to shield Duncan and associates from the law, including bank accounts in Malta and the Cayman Islands, according to the story.

Fannie, Freddie Forked Over Nearly $50M In Legal Bills To Foreclosure Mills

Mother Jones reports:

• In late November, as the "Foreclosure-gate" scandal spread throughout the country, Rep. Randy Neugebauer (R-Tex.) demanded to know how much money Fannie Mae and Freddie Mac, the wounded quasi-government housing corporations, had paid to multiple sleazy law firms at the heart of the foreclosure crisis. One of the firms Neugebauer had in his crosshairs, the Law Offices of David J. Stern in southeastern Florida, had been the subject of a long Mother Jones investigation in August, which also detailed how Fannie and Freddie gave rise to this unscrupulous and greedy breed of law firms.

• This week Neugebauer got his response: according to data reviewed by HousingWire, the firms in question received nearly $50 million in legal fees from Fannie and Freddie.

For more, see Foreclosure Mills Pocketed $50 Mln From Fannie, Freddie.

Robosigning Scandal Just As Bad (If Not Worse) In Non-Judicual Foreclosure States

CNBC reports:

• It's the next big shoe to drop in the robo-signing foreclosure scandal. Call it part two. We already know some banks halted foreclosure sales nationwide in October when it was discovered that servicers took short cuts, so-called "robo-signing" in the foreclosure sale process in judicial foreclosure states - about half the country.

• Now it appears they may have done the same thing in a different part of the process, the Notice of Default, which takes place in the other half - i.e. the non-judicial states - this happens before the foreclosure sale.

***

• Last week an article from American Banker titled, "New Point of Foreclosure Contention: Default Notice" circulated widely among the folks who follow the mortgage mess. It talked about how several lawsuits are now being filed contending that the Notice of Default process was flawed and the foreclosure therefore invalid.(1)

For more, see The Next Robo-Signing Crisis?

(1) From the American Banker story:

• In a deposition on Jan. 4, Stanley Silva, a title officer at Ticor Title of Nevada Inc., said he "technically signed" default notices for clients, which were often acting as agents of other parties, which in turn worked for others.
  
  "The person at the bottom of the chain, by executing the document, has taken an action on behalf of all of them through their various agency agreements," Silva said. In one case, for example, he said he had signed "on behalf of Ticor Title of Nevada, who is agent for LPS Title, who is agent for National Default Servicing."
  
  "Who is agent for Fidelity National?" [Reno, Nevada attorney Robert] Hager asked. "Apparently, yes," Silva replied. "Which is a servicer for Wilshire?" "Apparently."
  
  Silva said under oath that he never reviewed any documents or knew what company was the holder of the original note at the time he signed the notice of default. He said he signed about 200 default notices over a four-year period.
  
  When asked by Hager if he signed notices of default "without verifying the accuracy of the information," Silva replied: "Correct."

***

• "Because there's no court reviewing anything in nonjudicial states," abuses are "probably even more rampant," [North Carolina consumer attorney O. Max] Gardner said. "This is just another example of robo-signing in a different context."

Nevada State Court Halts BofA Unit's Statewide Foreclosures; Defect In Appointing Trustee May Lead To Wrongful Sale Process

In Nye County, Nevada, the Las Vegas Review Journal reports:

• A Nye County district judge has ordered ReconTrust Co., a unit of Bank of America Corp., to stop most of its foreclosures in Nevada, based on allegations made by a Pahrump woman. The order signed by Nye County District Judge Robert Lane on Jan. 20 restrains ReconTrust from foreclosing on "any real or personal property situated in the State of Nevada." The bank holding company is also named in the lawsuit.

• Suzanne North, who operates a children's day care center out of her home, originally alleged that ReconTrust was operating without a state business license. In an amended complaint, she claimed that ReconTrust served her with a foreclosure notice before Bank of America appointed ReconTrust as trustee. The Las Vegas Review-Journal was unable to obtain a copy of the amended complaint.

***

• In the order, however, the judge said there is a "substantial likelihood that (North) will establish that ReconTrust does not have any contractual privities with respect to the contract between (North) and the other defendants regarding the promissory note and deed of trust." If the allegations are proven, an attorney could argue that ReconTrust improperly foreclosed on properties, Las Vegas attorney Tisha Black-Chernine said. "It could give rise to lawsuits for wrongful foreclosure," she said.

For the story, see BofA unit ordered to halt foreclosures.

Countrywide, BofA Targeted Again By Investors In Lawsuit For Allegedly Peddling Crappy Mortgage Backed Securities

A number of insurance companies and retirement funds have recently filed suit against Countrywide Financial Corporation, Bank of America, and some of their officers and affiliates alleging that, between 2005 and 2007, the latter unloaded hundreds of millions of dollars in crappy Countrywide mortgage-backed securities in 148 Offerings.

The plaintiffs summary of their legal action begins with this excerpt:

• 1. This action concerns a massive fraud perpetrated by Defendant Countrywide Financial and certain of its officers and affiliates against the Plaintiffs, which are investors in mortgage-backed securities (“MBS”) issued by Countrywide’s subsidiaries. The Plaintiffs are institutional investors that wanted conservative, low-risk investments and thus bought Countrywide MBS (the “Certificates”) that were represented to be backed by mortgages issued pursuant to specific underwriting guidelines and rated investment-grade (primarily AAA). In purchasing the Certificates, the Plaintiffs and their investment managers relied on term sheets, prospectuses and other materials prepared by and provided to them by the Defendants, which made representations about the Countrywide Defendants’ purportedly conservative mortgage underwriting standards, the appraisals of the mortgaged properties, the mortgages’ loan-to-value (“LTV”) ratios, and other facts that were material to Plaintiffs’ investment decisions. Plaintiffs and their investment managers also relied on Defendants’ public statements concerning the Countrywide Defendants’ adherence to prudent underwriting guidelines and careful credit analysis. These representations by Defendants were recklessly or knowingly false when made. In reality, Countrywide was an enterprise driven by only one purpose – to originate and securitize as many mortgage loans as possible into MBS to generate profits for the Countrywide Defendants, without regard to the investors that relied on the critical, false information provided to them with respect to the related Certificates.
  
  
  2. The scope of the Countrywide Defendants’ fraud is reflected by, among other things: (i) a securities fraud action brought by the United States Securities and Exchange Commission (“SEC”) against three former senior executives of Countrywide Financial, in which the Court denied those Defendants’ motion for summary judgment and which then culminated in an historic settlement (the “SEC Action”); (ii) regulatory actions initiated by multiple state attorneys general which resulted in settlements worth over eight billion dollars; (iii) other fraud actions brought against the Countrywide Defendants by other MBS investors and insurers related to the same wrongdoing alleged herein, along with federal securities fraud claims brought against Countrywide for its misstatements to the investing public regarding the company’s mortgage loan underwriting standards; and (iv) the enormous number of defaults and foreclosures in the underlying mortgages supporting the MBS resulting in substantial damages to investors in Countrywide’s MBS.

For the entire lawsuit, see Dexia Holdings, Inc., et al. v. Countrywide Financial Corporation, et al.

Thanks to Harold for the heads-up on this lawsuit.

Complaints Alleging Upfront Fee Loan Modification Rackets Continue In Florida, Despite Recently Passed Prohibitions

The South Florida Sun Sentinel reports:

• Some Florida foreclosure rescue companies and law firms that offer loan modifications continue to charge upfront fees and do little to help struggling homeowners, according to thousands of complaints filed with state regulators. New laws enacted over the last two years made such practices illegal.

• The Florida Attorney General received 2,600 complaints about mortgage loan modifications last year and has 78 active investigations against companies offering them.

• American Residential Law Group, based in Fort Lauderdale, was the target of complaints from 48 homeowners nationwide. Consumers said they paid up to $3,000 for the company to negotiate with their lenders but had received little or no help. One complainant said he got a 0.25 percent interest rate reduction, but had $12,000 added to his principle balance.

• The Florida Attorney General has five active lawsuits in South Florida and four in the Orlando area involving companies offering mortgage or loan modifications. The Florida Bar, which monitors and disciplines attorneys, has 163 cases under investigation involving 49 lawyers, in regards to loan modifications. That's compared to 67 cases the Bar is reviewing for foreclosure fraud, 20 cases related to mortgage fraud and 30 cases involving foreclosure defense fraud. The bar closed 258 modification cases last year, and so far has issued sanctions in 84 cases involving seven lawyers.

• Consumer advocates say that while foreclosure paperwork fraud and "robo-signing" may have taken over the mortgage crisis spotlight, questionable loan modifiers have not gone away.

For more, see Florida regulators receiving new complaints about mortgage modifications.

Homeowners In Non-Judicial States Face Tough Battle Fighting Foreclosures Tainted By Rogue Robosigning Trustees Conducting Public Sales

The following excerpt from a recent story in The Huffington Post highlights the difficulty faced by homeowners in non-judicial foreclosure states to fight back against foreclosures tainted by rogue robosigners:

• Notice of Default Robo-Signing. About half the states are "nonjudicial states" (including California, Nevada, and Arizona -- important states so far as the foreclosure crisis goes). As Kate Berry writing for the American Banker argues, the foreclosure process in these states begins with a formal "notice of default" (NOD) letter sent to the delinquent homeowner; this is followed up by a notice published in a local newspaper.(1)

• The NOD is supposed to be signed by an agent of the "party of interest"--the company with legal standing to foreclosed. By signing the letter, that agent certifies that she has reviewed the relevant documents to determine, most importantly, that the homeowner had defaulted on payments and that the company for which she is acting as agent really does have standing to foreclose. But in practice, these letters are Robo-signed by people who never look at documents. They do not even seem to know for whom they are acting as agent!

• For example, in the Nevada case studied by Berry, Stanley Silva (a title officer at a title firm) gave a deposition asserting that he never reviewed documents before signing NOD letters. Further, he said he was acting "on behalf of Ticor Title of Nevada, who is agent for LPS title, who is agent for National Default Servicing" who is "apparently" agent for Fidelity National, which is "apparently" a servicer for Wilshire, which acted as agent for Wells Fargo, which claimed to have standing to foreclose!

• Now that is a nice "daisy chain" that successfully hides the party of interest from the homeowner trying to avoid foreclosure! Lawyer Walter Hackett, [with Inland Counties Legal Services, in San Bernardino, Calif.,](2) who is handling a number of such cases, says "A huge percentage of notices of default and notices of trustee sales are legally questionable and probably void."

• Since foreclosures in these nonjudicial states do not have to go through the courts, it is probable that abuses are common -- and hard to expose because homeowners have to file a lawsuit to get to a judge. Heck, the homeowner would need a sleuth better than Sherlock Holmes to find out who holds the interest in the mortgage.

Source: Requiem for MERS (and the Banks That Created the Frankenstein Monster).

(1) See American Banker: New Point of Foreclosure Contention: Default Notice.

(2) Inland Counties Legal Services provides free legal assistance for eligible low-income clients in case priority areas adopted by the firm's Boards of Directors.

Texas Man Cops Plea In "Contract For Deed" Racket; Pocketed Proceeds On Home Sales To Unwitting Buyers Without Making Payments On Pre-Existing Liens

In Midland, Texas, the Midland Reporter Telegram reports:

• A former Midland firefighter has pleaded guilty to multiple counts of attempt to commit mail fraud as well as federal charges of failing to register as a sex offender. Jason Heath Morrison, 34, went before U.S. Magistrate Judge David Counts Friday morning to enter a guilty plea for the charges.

• He and partner Marcus Jacob Rosenberger were described as "self-employed individuals working together in the field of real estate," according to an indictment. The two operated Vanguard Properties in Midland and would purchase residential properties to "flip," or resell at a profit.

• The indictment alleges the two would obtain a list of foreclosed homes scheduled to be sold at auction and contact the home owner, persuade them to relinquish the property and then resell it to another individual.

• Court records showed that Morrison and Rosenberger "consistently failed to pay off the mortgage" and "retained the monies from the new buyers for their own benefit." While the various homes were "still in arrears and proceeding towards foreclosure," court documents state that Morrison used the mortgage payments he was receiving to pay for his personal expenses [...].

• Most of the money came from home buyers who had provided down payments and mortgage payments to Vanguard Properties. The scheme involved 10 homes around Midland, between February 2009 to March 2010, according to the indictment.

For the story, see Ex-firefighter pleads guilty to real estate fraud.

For background on this story, see Pair Held On $200K Bond For Allegedly Pocketing Proceeds On "Contract For Deed" Home Sales Without Making Payments On Existing Liens.

Failure To Produce The Note No Problem, Says New Jersey Trial Court

In Bergen County, New Jersey, Mondaq News Alerts reports ("footnote 1" appears in the original text of the story):

• In contrast to other recent well-publicized decisions, a New Jersey state court has held that, in order to seek foreclosure of a mortgage that has been securitized, a lender need not demonstrate actual physical possession of the note memorializing the underlying debt. In Bank of America, NA v. Alvarado, BER-F-47941-08 (N.J. Super. Ct. Ch. Div. Jan. 7, 2011), the court held that the plaintiff was entitled to summary judgment striking the borrower's answer, dismissing her counterclaim and entering default, even though the plaintiff's predecessor, which was the original lender, had lost the note before transferring its interests to the plaintiff. The court found that this result was compelled by the doctrines of equitable/common law assignment and unjust enrichment.

• The Alvarado decision marks a departure from prior holdings over the past year in which courts throughout the nation have been unwilling to allow lenders to enforce their security interests absent a demonstration of actual physical possession of the note.(1)

For more, see New Jersey Court Rules That Lost Note Does Not Preclude Foreclosure (if link requires subscription, TRY HERE, then click appropriate link for the story).

See also Lexology: New Jersey court rules that lost note does not preclude foreclosure (requires paid subscription; if no subscription, TRY HERE, then click appropriate link for the story).

For the ruling see Bank of America, NA v. Alvarado, BER-F-47941-08 (N.J. Super. Ct. Ch. Div. Jan. 7, 2011) (when this link expires, TRY HERE).

(1) Bank of New York v. Raftogianis, ____ N.J. Super. _____, ATL-F-7356-09, 2010 N.J. Super. LEXIS 221 (N.J. Super. Ct. Ch. Div. Jun. 29, 2010), the court dismissed the plaintiff's complaint, without prejudice, upon a determination after trial that the plaintiff could not prove it had possession of the note at the time the complaint was filed. In In re Kemp, Case No. 08-18700-JHW, Adversary No. 08-2448, 2010 Bankr. LEXIS 4085 (Bankr. D.N.J. Nov. 16, 2010), the court expunged the creditor's proof of claim in a bankruptcy adversary proceeding where the creditor never received possession of the original note from the originating lender.

Defunct Mortgage Lenders Seek Bkptcy Court OK To Physically Destroy 1000s Of Boxes Of Original Loan Documents Despite Paperwork Concerns In F'closures

In Wilmington, Delaware, Reuters reports:

• Federal bankruptcy judges in Delaware are due to hold separate hearings Monday on requests by two defunct subprime mortgage lenders to destroy thousands of boxes of original loan documents.

• The requests, by trustees liquidating Mortgage Lenders Network USA and American Home Mortgage, come despite intense concerns that paperwork critical to foreclosures and securitized investments may be lost. A series of recent court rulings have increased the importance of original loan documents, holding that they are essential for investors to prove ownership of mortgages and to have the right to foreclose.

• In the Mortgage Lenders case, the U.S. Attorney in Delaware has formally objected to the requested destruction because loss of the records "threatens to impair federal law enforcement efforts." The former subprime lender shut down in February 2007. In a January 6, 2010, motion, Neil Luria, the liquidating trustee, asked Bankruptcy Judge Peter J. Walsh for permission to destroy nearly 18,000 boxes of records now warehoused by document storage company Iron Mountain Inc. Luria stated that destruction is necessary to eliminate $16,000 per month in storage costs as he disposes of the last assets of the bankrupt company.

• In the American Home Mortgage case, the liquidating trustee, Steven Sass, has asked Bankruptcy Judge Christopher Sontchi to approve destruction of 4,100 boxes of loan documents stored in a dank parking garage beneath the company's former headquarters in Melville, Long Island. AHM had been one of the biggest originators of subprime loans until it abruptly collapsed and closed in August 2007. The boxes are the last still held by AHM. Sass stated that the local fire marshal wants the documents removed as a fire hazard, and he said the cost of moving them would be prohibitive.

• In accordance with a 2009 court order, the bankrupt company earlier had destroyed the contents of thousands of other boxes after banks and other loan servicers had been given a chance to request and pick up particular files.

• The issue of document destruction is sensitive because in recent months evidence has turned up that vast numbers of original loan documents by major lenders were never transferred as required when the mortgages were securitized and sold to investors.

***

• The two companies' bankruptcy cases are unrelated, and the overlapping timing of the two hearings Monday in Wilmington, Delaware, bankruptcy court is coincidental, people involved with the cases said.

For the story, see Judges to weigh mortgage document destruction.

Attempts To Bulldoze Through Foreclosure Legal Process Continue For Paperwork-Lacking Lenders; Uptick Seen In Judges' Impatience

In Staten Island, New York, the New York Post reports:

• A house divided cannot stand. A house foreclosure case divided by two banks probably doesn't have standing -- in court -- either. Two banks, Home123 Corporation and US Bank, both lay claim to owning a house in Staten Island, according to a foreclosure filing.

• The original lender, Home123, is the mortgage holder on the county's tax rolls, but US Bank and its servicer, Ocwen Loan Servicing, have filed the court papers, saying they have the right to the action. US Bank claims that they purchased the mortgage from Home123. But, the bank admits, "due to unforseen circumstances, the original Assignment of Mortgage and Endorsement Note were lost before they could be recorded."

• That doesn't sit well with Joseph Sant, the lawyer representing the homeowner, who did not wish to be named. "US Bank is foreclosing on a home without proof that it owns the mortgage. That should not surprise anyone after the revelations of widespread robo-signing and document falsification in foreclosures," Sant says.

• "What does surprise me is that the bank admits that it lacks key evidence needed to foreclose, yet is trying to bulldoze through the legal process anyways," Sant adds. A US Bank spokesman said the bank, acting as a trustee, did not bring the action. He said the bank is named so there is a plaintiff to send paperwork to.

***

• Now, with thousands of foreclosure cases clogging New York's courts, local judges are growing increasingly impatient with faulty or erroneous paperwork that further burdens an already overstrained system. [...] Attorneys that represent homeowners are still wading through reams of problematic paperwork by lenders and servicers, which are attracting new scrutiny from the judicial bench.

For the story, see 2 banks, 1 house (SI foreclosure shows paperwork nightmare).

No State Insurance, Bonding Requirement For Closing Agents Leaves Unwitting Couple Victimized By Refinancing Ripoff Holding The Bag, Facing F'closure

In Parker, Colorado, The Denver Post reports:

• Tim and Kim Canning of Parker did what tens of thousands of other Coloradans do each year: They refinanced their home, showed up at the closing, signed the papers, and that was that. So they thought.

• But the $277,000 that was to be sent from the bank that refinanced the Cannings' home to pay off the old mortgage was stolen along its electronic journey, the target of organized cybercriminals out of Eastern Europe or perhaps Russia, according to people familiar with the case who refused to be identified because of the ongoing investigation.

• What seemed an innocuous transaction got twisted into a two-year nightmare that's all but ruined the couple's credit, unnerved their patience and has them staring at the possible foreclosure of their dream home without ever having missed a single mortgage payment.

• Worse still, what's happening to the Cannings could happen to anyone — and it has. The Colorado Division of Insurance, which regulates the title industry, said in a report to the legislature this month that "recently there has been an uptick in reported thefts," though it did not quantify the trend.

• And the title company that handled the closing — Classic Title Agency in Aurora — isn't insured for the theft because state law doesn't require it, even though title companies handle billions of dollars in real estate transactions yearly.

***

• Unless a homeowner hires a special licensed company whose job is to hold the proceeds of a sale — known as a "qualified intermediary" or a "1031 exchange" firm — and who must be bonded and insured, the proceeds are not protected.

***

• "You can't imagine how upset I was when I heard that," Kim Canning said. "We hand them all this money and there's no guarantee that I'll still have my house in the end." Whether it's a loophole or a massive gap in regulations, title companies at a minimum should be required to have a bond and crime insurance, said industry advocate Garry Wolff, owner of TI Services.

• At the moment, companies and their agents merely need to be licensed — pay a fee and pass a test — and prove a $10,000 net worth. "That's it," said Wolff, who has pressed for the insurance coverage for years without success. "With so much money on the table, consumers need to know they're protected."

For more, see Homeowners stuck if refinance money is stolen.

See also KMGH-TV Channel 7: Did Russian Mafia Steal Family's Refinancing Money? (Title Company Claimed Russian Mob Stole Money During Wire Transfer).

Media Spotlight, Public Interest Lawyer's Efforts Shame BofA, Fannie Into Returning Foreclosed Home, Giving Sustainable Loan Mod To Elderly Retiree

In Jamaica, Queens, columnist Joe Nocera writes in The New York Times:

• In physics, the Heisenberg Uncertainty Principle states that the process of observing subatomic particles affects their behavior. We have a similar principle in journalism: the process of reporting a story can sometimes affect the behavior of those being reported on. Last Wednesday, the Heisenberg Journalism Principle was on full display in a courtroom at the Queens County Courthouse, in New York.

• The case involved Lilla Roberts, the 73-year-old retired physical therapist I wrote about last month, whose home in Jamaica, N.Y., had been foreclosed on last summer by Bank of America without her knowledge and turned over to Fannie Mae, which was in the process of trying to evict her. With the help of a young public interest lawyer, Elizabeth Lynch, Ms. Roberts filed a lawsuit aimed at stopping the eviction and reversing the foreclosure, something Ms. Lynch conceded was a long shot.

For more, see Shamed Into Altering a Mortgage.

Post-'Ibanez' Fallout Begins; Mass. High Court Takes Case Of Unwitting 3rd Party Buyer Left Holding The Bag w/ Void Title On Improperly F'closed Home

In Boston, Massachusetts, Bloomberg reports:

• Massachusetts’ highest court will consider whether a home buyer can rightfully own a property if the bank that sold it to him didn’t have the right to foreclose on the original owner.

• The state’s Supreme Judicial Court, which agreed last month to take the appeal, already ruled Jan. 7 that banks can’t foreclose on a house if they don’t own the mortgage. The lower court decision now under review said the buyer of residential property in Haverhill, Massachusetts, never really owned it because U.S. Bancorp foreclosed before it got the mortgage.

• “It appears to be the next step in the conversation,” Paul R. Collier III, who represented the borrower in the earlier case, U.S. Bank v. Ibanez, said in a phone interview. Like the Ibanez case, the court’s decision may resonate with other states as they grapple with the rights of new homebuyers who may be hesitant to complete a purchase for fear of uncertain title, and with how such a trend may hobble the broader housing market.

***

• The latest case, Bevilacqua v. Rodriguez, could affect trusts that bundled mortgages and sold securities to investors. [...] The Ibanez and Bevilacqua cases both originated before Massachusetts Land Court Judge Keith C. Long in Boston.

• Francis J. Bevilacqua III went to Long’s court to force the original owner to say whether he had a claim on the property in Haverhill, about 36 miles (58 kilometers) north of Boston. A city assessment website lists four condominiums at the location with a total value of $600,300.

• Bevilacqua asked Long whether he could try to find the original owner through newspaper notices, said his lawyer Jeffrey B. Loeb, of Rich May PC in Boston, in a phone interview. In August, Long ruled that Bevilacqua wasn’t the property’s owner and didn’t have standing to inquire about claims. U.S. Bancorp, which sold Bevilacqua the property in 2006, conducted an invalid foreclosure because it didn’t properly own the mortgage at the time, Long said.

• The mortgage transfer to U.S. Bancorp, which oversees the mortgage-backed trust containing the loan, happened after the foreclosure, Long said. All Bevilacqua had was a deed from an invalid foreclosure sale, the judge said.(1)

• “I have great sympathy for Mr. Bevilacqua’s situation -- he was not the one who conducted the invalid foreclosure, and presumably purchased from the foreclosing entity in reliance on receiving good title -- but if that was the case his proper grievance and proper remedy is against that wrongfully foreclosing entity on which he relied,” Long wrote.

***

• The Supreme Judicial Court agreed to take the appeal directly, bypassing an intermediate panel. The court may do that when a case has “broad implications,” Kevin Costello, a lawyer at Roddy Klein & Ryan in Boston, said in a phone interview. Costello represents borrowers in a statewide class action accusing banks of conducting faulty foreclosures.

• Both Costello and Collier, the lawyer for Ibanez, said Bevilacqua is the first so-called third-party buyer case to come before the high court since the Ibanez decision.(2) “The third-party buyers obviously have claims against the selling entity, the servicing entity and any title insurer and any attorney that was engaged,” Collier said. The court has tentatively set oral argument for April, according to Susan Mellen, the court clerk.

***

• The third-party issue has become a major one for title insurers in the state, said Richard D. Vetstein, a real-estate lawyer in Framingham, Massachusetts. “What’s going to happen to all these people?” Vetstein said. “The people who don’t have title insurance are really in big trouble.”

• The court may have left the issue of third-party buyers unaddressed in Ibanez anticipating a ruling in the Bevilacqua case, said Thomas Adams, a partner at New York law firm Paykin Krieg & Adams LLP. “That’s a big issue to leave outstanding,” said Adams, a former analyst at bond insurer Ambac Financial Group Inc. “If Judge Long’s decision holds, then that’s a big deal.”

For the story, see Faulty Foreclosure Case in Massachusetts High Court May Hurt Home Buyers.

For Massahusetts Land Court Judge Keith C. Long's ruling now under review before the state high court, see Bevilacqua v. Rodriguez, MISC 10-427157 (KCL), 2010 WL 3351481 (Mass. Land Ct. Aug. 26, 2010) (go here for Judge Long's one-sentence judgment).

(1) Judge Long kicked off his ruling now under review with the following Introduction (bold text is my emphasis, not in the original text):

• Plaintiff Francis Bevilaqua holds no title to the property at 126-128 Summer Street in Haverhill. That title is held by defendant Pablo Rodriguez. What Mr. Bevilaqua has is a quitclaim deed from US Bank, N.A., which conducted an invalid foreclosure sale on the property (it was not the holder of the mortgage at the time the sale was noticed and conducted as required by G.L. c. 244, § 14) [Note 1] and thus acquired nothing from that sale. See US Bank v. Ibanez, 17 LCR 202 (Mar. 26, 2009) & 17 LCR 679 (Oct. 14, 2009) and cases cited therein. US Bank therefore had nothing to convey, and its purported conveyance to Mr. Bevilaqua was a nullity. See Bongaards v. Millen, 440 Mass. 10, 15 (2003).
  
  Despite this, Mr. Bevilaqua now seeks to create a full, fee simple title in himself — quite literally, something from nothing — through the “try title” procedure of G.L. c. 240, §§1-5. He cannot do so, for the reasons set forth below. Accordingly, his complaint is DISMISSED in its entirety, with prejudice.

(2) See Albice v. Premier Mortgage Services Of Washington, Inc. (if link expires, TRY HERE, or TRY HERE - latter link may require free registration with Findlaw.com), 157 Wn. App. 912; 239 P.3d 1148 (Wn. Ct. of App., Div. II, September 28, 2010) for an example of a case outside of Massachusetts where the Washington State Court of Appeals ruled that a 3rd party foreclosure purchaser was left holding the bag where one of the technicalities of the state foreclosure process was not strictly followed when the sale of real estate owned by a defaulting borrower was conducted.

Use Of Undisclosed “Appearance Attorneys” In Foreclosure Actions - No "Interloping Counsel" Allowed In My Courtroom, Says Bankruptcy Judge

A recent story in the Sarasota Herald Tribune on The Florida Bar's failure to take disciplinary action against Florida foreclosure mill attorneys for their alleged ethical lapses alludes to one of the practices that is arguably making it difficult to affix fault on the these attorneys - the use of 'coverage' or 'appearance' attorneys:

• Circuit Judge Lee Haworth, chief judge of the judicial district that includes Sarasota and Manatee counties, says he only reports lawyers after he sees a pattern of egregious violations in cases.
  
  "I think one of the problems we have is identifying exactly who it is at fault here," Haworth said. "Lawyer A will file the pleadings, but Lawyer B will show up."
  
  Law firms from across the state also hire local lawyers to represent them at hearings. "The judges are not always face to face with the people who are causing the most problems," Haworth said.

The use of a late-appearing, undisclosed 'appearance' or 'coverage' attorney - was addressed and rejected by U.S Bankruptcy Judge Philip H. Brandt in a 2009 ruling (involving a failed attempt by mortgage loan servicer to establish that it was a "real party in interest" in a homeowner/debtor's Federal bankruptcy proceeding) in this excerpt from the ruling (footnotes in the orginal text omitted, bold text is my emphasis, not in the original):

• The careful reader will have noticed that none of the foregoing rules directly address the situation where the original attorney continues as counsel of record, but another lawyer, not of the same firm, joins for some portion of the representation. But, read together, the requirement of corporate representation and the continuing role of counsel of record preclude interloping counsel. For other attorneys not part of the same firm as record counsel to represent a party, something must be done of record. Customarily, this is accomplished by filing a notice of association, and it is common when lead counsel is distant and the use of local counsel for particular matters in the case will promote efficiency, or the new counsel provides particular expertise. Once the notice of association is served and filed, all parties to the case are aware of the changed representation, and associated counsel receives notice directly of events and filings in the case.
  
  The practice of undisclosed “appearance attorneys” creates problems — other parties (and the court) are sandbagged, and the Debtor, trustee, other creditors, and counsel cannot readily communicate regarding scheduling or substance. In addition to the ramifications of this practice, explored in In re Wright, 290 B.R. 145 (Bankr. C.D. Cal. 2003); Hon. Jim D. Pappas, Simple Solution = Big Problem, 46 The [Idaho] Advocate 31 (Oct. 2003); and Neil M. Berman, Judge, This is Not My Case . . ., Norton Bankr. L. Adviser 3 (May 2004), the lack of formal association could raise questions about the informally-appearing attorney’s authority to speak for, and make judicial admissions on behalf of, the client (the contrary suggestion would not be a promising argument).
  
  While this defect is not dispositive, clarity of representation on the record is important to judicial economy and the orderly representation of other parties. So I will require, absent emergency or significant hardship, formal notice of association to be filed not later than the confirmation of the hearing. And there is no remedy for self-inflicted harm — law firms undertaking distant representations must be prepared to appear or timely associate local counsel who will. As corporations must be represented by counsel in federal court, the consequence of not having counsel of record at hearing will be that the party’s position may be deemed without merit. See LBR 9013-1(e)(1).6 This is the flip side of Woody Allen’s observation that “Eighty per cent of success is showing up” — if you (or your counsel of record if you are a corporate entity) don’t, your chance of success approaches zero.
  
  In short, henceforth only counsel of record or individuals representing themselves will be heard.

It may be that judges presiding over foreclosure actions may want to take a cue from Judge Brandt and stop allowing these foreclosure mill law firms from freely substituting attorneys when handling these cases without imposing some measure of control so that fault can be less difficult to assign when screw-ups occur.

For Judge Brandt's ruling, see In re Jacobson, 402 B.R. 359 (Bankr. W.D. Wash. 2009).

L.A. Feds Pinch Pair For Allegedly Using Property They Didn't Own As Loan Collateral & Fabricating Documents To Support Their False Claims

From the Office of the U.S. Attorney (Los Angeles, California):

• Two brothers were taken into federal custody [...] on charges that they bilked private lenders out of more than $5 million by pledging as collateral properties they did not own and fabricating numerous documents to support their false claims.

• Henrik Sardariani, 42, and his brother, Hamlet Sardariani, 40, both of Sylmar, were arrested without incident [...] by special agents with the Federal Bureau of Investigation and IRS - Criminal Investigation.

***

• According to the indictment, which was unsealed after their arrests this morning, the Sardarianis used their fraudulent scheme to obtain well over $5 million from the victim lenders in under eight months.

• The indictment alleges that, to obtain the loans on several properties, the Sardarianis created fraudulent deeds of trust, corporate records and other documents to make it appear that they held title to the properties. The brothers allegedly fabricated fraudulent reconveyances to create the false impression that the other loans on the properties had been paid off and that there was sufficient equity to secure the loans.

• The fraudulent reconveyances bore forged signatures and fraudulent stamps of notaries public, according to the indictment which further alleges that the Sardariani brothers and a co-conspirator presented these fraudulent reconveyances to title companies and victim lenders.

For the U.S. Attorney press release, see Sylmar Brothers Arrested In Loan Fraud Case That Collected Over $5 Million In Only Eight Months.

Suit: BofA Pocketed Entire $60K Insurance Cash From 'Ike-Damage' Claim To Cover $24K Foreclosure Deficiency; Refuses To Refund Balance To Homeowner

In Galveston, Texas, The Southeast Texas Record reports:

• Ross Durant and Ilva Lucia Rodriguez of La Porte seek approximately $36,000 from Bank of America after their settlement check from the Texas Windstorm Insurance Association ["TWIA"] was used to cover costs generated by the foreclosure sale of their Galveston County property.

• Durant and Rodriguez argue that Bank of America foreclosed their Hurricane Ike-damaged residence in Santa Fe and took their settlement funds without providing a refund, a lawsuit filed Jan. 12 in Galveston County District Court says.

• According to the original complaint, the plaintiffs received a check in the amount of $60,000 from TWIA as a result of their lawsuit against the insurer. Bank of America acquired their mortgage from Countrywide Mortgage and seized the dwelling when Durant and Rodriguez fell behind on their payments, the original petition says. The place was sold at foreclosure for $205,000. The balance owed on the mortgage at the time was $228,627, resulting in a deficiency of $23,627.

• "Because of the mortgage, the settlement check from the Texas Windstorm Insurance Association named both plaintiffs and Countrywide Mortgage as a payee," the suit says. Anthony Gunn, the complainants' original attorney, forwarded the check with their signatures to the defendant with a request that they receive the balance of the settlement less the deficiency, or an amount claimed of $36,373.

• "The defendant has failed and refused to refund that balance," the suit says. "That refusal to refund the difference is a breach of contract."

Source: La Porte couple sues to recover settlement funds.

Beach Homes Along Central Oregon Coast Make For Trendy Targets For Off-Season Squatters

In Lane County, Oregon, The Examiner reports:

• Elmer “Slim” Buchanan pulls a wagon full of his earthly possessions through this trendy coastal community that attracts high end lawyers, doctors and professionals from nearby Eugene who keep summer and weekend getaway homes along this picturesque seashore; at the same time, Buchanan says he’s “invisible to such people” until they find “us squatters living in their places.”

***

• Police say it’s no surprise that “we have all these break-ins,” as the recession grows and so does the practice of squatting. In turn, the number of people living as squatters along Oregon’s coast during the off-season has more than doubled, say local police who are often called in to “kick the riff-raff out.” While police say it’s difficult to guess how many people are living in abandoned or seasonal homes along the coast, a volunteer organization in Eugene thinks as many as 2,000 or more are living this way in Western Lane County.

***

• [T]here’s little or no surveillance of properties dubbed as seasonal or in foreclosure. The squatters say they know this, and then take advantage of this opportunity by getting one or more night’s rest from a cold and sometimes cruel world outside.

For the story, see Eugene area homeowners "dealing" with new wave of squatters.

Plumbing Assessments On Aging Fort Pierce Condo Complex Begin Overwhelming Elderly On Fixed Incomes

In Fort Pierce, Florida, WPTV-TV Channel 5 reports:

• Nearly $6,000 in assessments per unit for plumbing repairs some call unnecessary have some residents at Inlet House Condominiums — where many homeowners are elderly and on fixed incomes — unable or unwilling to pay their bills.

• Foreclosure measures have begun on nine of 60 units at the 55-and-up condo community at 2302 Sunrise Boulevard in Fort Pierce since July. The condo association put liens on another three units.

For more, see Plumbing assessments causing problems for Fort Pierce condo owners (Homeowners charged $6,000 for repairs).

See Deferred, Unfunded Maintenance A "Ticking Time Bomb" For Condo Associations; Tanking Real Estate Market, Unit Foreclosures Complicate Problem for an earlier post on a major problem sneaking up on unit owners in aging condominium complexes.

Upstate NY Media Outlet Calls For End Of Indian Nations' Real Estate Tax-Dodging "Charade"

In upstate New York, the editorial board of the Auburn Citizen writes:

• The U.S. Supreme Court, in choosing to kick back a case involving county foreclosure on Oneida Indian Nation land, perpetuated the use of the state and federal court systems as a business strategy for New York state Indian nations.

• What’s become clear in the past couple of years is that tribes such as the Oneidas and the Cayuga Indian Nation of New York have well-oiled litigation machines whose primary purpose is to avoid abiding by property and sales tax laws.

• A few months ahead of a Supreme Court hearing on the foreclosure matter, the Oneidas suddenly decide to waive their right to sovereign immunity in those cases, thus kicking the case back to a lower court to consider other aspects of their contention that they’re not subject to foreclosure. The Oneidas knew that a ruling on the sovereign immunity issue by the high court would have brought an end to the charade, so they once again employed the strategy of delay through legal maneuvers.

***

• We’re disappointed in the Supreme Court’s punting of the Oneida case because there are key legal questions that need some final answers. There’s a good chance that a similar foreclosure effort in Cayuga and Seneca counties against the Cayuga Nation will be headed up the appeals chain. We urge our leaders to fight that battle all the way to the Supreme Court, which we hope will do better the next time around.

For the op-ed, see Our View: Foreclosure issue needs a final ruling.

For bakground on this story, see Oneidas Dodge Potentially Adverse Supreme Court Ruling In R/E Tax-Dodging Case; 11th Hour Waiver Of Lawsuit Immunity Moots High Court's Role In Case.

Fla. High Court Boots Lawyer From State Bar For "Preying Upon...Vulnerable Couple" Involving Conduct In Private Transaction Unrelated To Law Practice

In an August, 2010 ruling, the Florida Supreme Court gave what appears to be a well-deserved boot to now-former attorney Sherry Grant Hall from the legal profession in the state for her conduct in connection with a failed attempt to egregiously arm-twist an elderly married couple, Irving and Clara Godwin (Irving suffered from Alzheimer's disease), into selling property that they had been leasing to her.(1)

Her actions culminated by forging the Godwins' signatures on a phony real estate purchase contract and recording it in the public records, thereby creating a cloud on the Godwin's title and sabotaging their efforts to sell the property to other interested parties.

Some of the notable points in this case were:

• There was no formal attorney-client relationship between the parties. Hall was engaged in a personal transaction with the Godwins that was unrelated to her legal practice in which no professional services were offered and no legal fees were involved. Thus, the misconduct was in her personal capacity, not in her professional capacity;

• Hall had been a member of The Florida Bar since 1986 and had no prior disciplinary history,

• The court rejected the recommendation of the referee to dish out only a 90-day suspension, finding that disbarment was the only appropriate sanction.

Some of the facts of the case:

• Hall began misrepresenting to Mrs. Godwin that their original lease agreement, which contained an agreement to negotiate a possible sale was actually an agreement to sell the property to Hall;

• Shortly thereafter, the Godwins felt compelled to retain an attorney to fend off Hall's continued misrepresentations;

• Despite being told that, according to the advice of her newly-retained attorney that she was not required to sell Hall the property under the Lease Agreement, Hall continued to harass Mrs. Godwin about selling her property;

• The Godwin's daughter testified that Hall threatened to sue the Godwins and tie them up in court, insinuating that they could lose their property from protracted litigation, and insisting that the Godwins had to sell the property to her;

• After Mrs. Godwin decided to list her property for sale with a real estate agent, Hall continued her misconduct—by seeking to drive away any possible contenders for the property. She wrote a letter to the real estate agent misrepresenting to him that she had a contract with the Godwins to purchase their property. The real estate agent testified that Hall threatened to report him to the real estate commission and have his license revoked if he sold the Godwins’ property;

• Finally, Hall forged the Godwins' signature on a phony real estate purchase contract and recorded it in the public records, and sent it to the Godwins' attorney, stating that the Godwins were obligated to sell the property to her.

In reaching its ruling to boot Hall from the legal profession in the state, the Florida high court made the following observations about her conduct (bold text is my emphasis, not in the original text):

• Respondent’s brazen misrepresentations and continual harassment distinguish this case from other forgery cases. Although the referee found only one rule violation, Respondent’s misconduct is egregious.
  
  Her misrepresentations caused the Godwins to lose two buyers for their property. Respondent’s threats to the Godwin’s realtor caused him to withdraw the Godwins real estate listing.
  
  Due to Respondent’s continued harassment, the Godwins were forced to hire an attorney to defend themselves.
  
  Even though Respondent was not acting in a formal attorney-client relationship, she was still a member of The Florida Bar and bound by its ethical rules.
  
  Respondent misused her status as an attorney to harm the Godwins: (1) by recording the fraudulent document in the clerk’s office, in order to tie up the Godwins’ property; (2) by asserting that the Godwins and their realtor would suffer for not complying with her legal claims; and (3) by forcing the Godwins to hire counsel to resolve the legal problems that Respondent created.
  
  Even after being informed that the Godwins had hired counsel, Respondent continued to directly harass them. This Court does not look favorably on those who use their standing as an officer of the court to deliberately harm others—especially when they intentionally hurt members of the public for their own personal gain.
  
  Further, in the instant case, Mr. and Mrs. Godwin were seniors, and Mr. Godwin was suffering from Alzheimer’s disease. Respondent was preying upon this vulnerable couple.
  
  Respondent put pressure on the Godwins by sending letters, making phone calls, and visiting them, in an effort to achieve her goal of purchasing the property. Further, Respondent continuously misrepresented to third parties that she had a contract for sale, when she knew, or should have known as an attorney, that she had no contractual right to purchase the Godwins’ property. Based on this evidence, the referee orally pronounced from the bench that Respondent "violated the rules of the Bar by harassing lots of people."
  
  Further, Respondent deliberately and intentionally engaged in felonious conduct by recording the fraudulent Lease Agreement and Agreement for Sale in the county clerk’s office. As a lawyer, Respondent knew or should have known that the recording of this instrument in the clerk’s office was a felony (uttering a forged document).(2) By the terms of the original agreed-upon paragraph, Respondent should have known that she did not have an agreement to purchase the land.
  
  Nevertheless, Respondent recorded the fraudulent document in the clerk’s office to misrepresent to the public at large that she had a right to purchase the Godwins’ property. By recording the fraudulent document, Respondent placed a cloud on the title of the property she desired, which impeded the Godwins from selling or transferring the property to anyone else. It is apparent that Respondent committed these misdeeds for her own benefit, in an effort to secure the property.

For the ruling, see The Florida Bar v. Hall, No. SC07-863, 2010 Fla. LEXIS 1406; 35 Fla. L. Weekly S 458 (August 26, 2010).

(1) The court described Hall's conduct as a "lengthy process of harassment and abuse of the legal system" and said that she "purposefully used her knowledge of the law to harm others, for her own personal benefit."

(2) For those wondering if there were any criminal charges brought against Hall for manufacturing the bogus real estate purchase contract, forging the Godwins' signatures thereto, and recording the dubious document in the public records, the ruling notes Hall's successful effort to buy her way out of a criminal conviction in this excerpt:

• The State Attorney’s Office charged Respondent with two felonies—grand theft and uttering a forged instrument (the fraudulent recording of the Lease Agreement and Agreement for Sale).
  
  In August 2006, Respondent entered into a Deferred Prosecution Agreement (DPA) in which she agreed, among other things, to (1) quitclaim any interest in the Godwins’ property to give them clear title to the property within forty-eight hours of signing the agreement; (2) pay the Godwins $15,000 in restitution; (3) acknowledge in writing that the existing lease between Respondent and the Godwins was null and void; (4) vacate the pasture land and relinquish any rights she might have had under the lease; (5) execute any documents necessary to eliminate any cloud on the title of the Godwins’ property resulting from the lease; and (6) ensure that all sub-tenants or other persons occupying the pasture under Respondent’s lease would vacate the property.
  
  In September 2006, the criminal charges were dismissed because Respondent had complied with the requirements of the DPA.

Vacant Foreclosed Home Faces $250K Repair Job After Vandals Give Premises A 'Professional' Trashing

In Huntington Beach, California, KABC-TV Channel 7 reports:

• A foreclosed home in Huntington Beach is undergoing $250,000 in repairs after vandals trashed the place. The real estate agent said it is the worst case he's seen in Orange County. The 3,000-square-foot house in a gated community on Radcliff Circle has extensive damage.

• Chemicals and cement were poured down drains, walls were covered in mold and piles of wet clothes caused part of the floor to cave in.

• "This is the worst malicious damage I've seen," said realtor Tom Moon. "They took a hose and weighted the clothes down so it might have been 1,000 pounds just to collapse the ceiling." Outside, the pool and Jacuzzi are greener than the grass. Most of the appliances and fixtures were taken, including the kitchen sink.

• The realtor says he and the bank cannot prove who did it and it could be weeks to complete repairs. [...] At a foreclosure auction last August, the home listed at more than $1.7 million, but with no bids, it went back to the bank.

Source: Foreclosed Huntington Beach home vandalized.

Ohio Man Found Guilty Of Torching Home After Cashing Out By Refinancing Mortgage Four Times In Three Years

In Akron, Ohio, WKYC-TV Channel 3 reports:

• The Summit County Prosecutor said Raymond Stewart, 38, of Sagamore Hills, was found guilty in a bench trial before Judge Thomas Parker of aggravated arson and insurance fraud.

• On March 30, 2009, Stewart set his own home on fire. He lived in the house with his two children, six and eight years old. He bought the home in 2006 but had been in foreclosure once and had refinanced the mortgage four times. Each time he refinanced, he increased the amount he owed on the principal.

• On the day of the fire, Stewart left with the kids and set it on fire, returning several times to check on its progress, the prosecutor said. The fire was called in by a neighbor at 11:05 pm. Sentencing is set for 1 p.m. Feb. 15. Stewart could receive up to 15 years in prison.

Source: Sagamore Hills man guilty of burning down his own house.

Nevada Regulator Orders Unlicensed Loan Modification Outfit To Cease & Desist; Says Company Clipped Six Homeowners Out Of $7,550

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

• After getting six complaints, the state has issued a stop order against an unlicensed Las Vegas company that has been billing itself as loan and foreclosure consultants. The state Division of Mortgage Lending has filed an administrative complaint against American Home Services and its operators, Erika and Miriam Fimbres.

• The state also seeks a $20,000 fine and is ordering the company to immediately return the fees it collected.

***

• From November 2009 through September 2010, the division said American Home and the Fimbreses collected fees totaling $7,550 from six homeowners to obtain mortgage loan modifications or services to stop foreclosures. The complaint says the company and the Fimbreses never applied for a state license.

For the story, see State issues stop order against Las Vegas loan modification company.