Cops Pinch NYC Mailman Facing Foreclosure For Illegally Clipping Coupons, Unloading Them On eBay For Quick Cash

In New York City, the New York Post reports:

• Citing pressure from an impending foreclosure, a Queens postal worker stole thousands of retail-store coupons before they were mailed out -- and sold them at a discount on eBay, cops said yesterday.

• Thomas Tang, 38, of Baldwin, Long Island, allegedly pilfered more than 7,000 coupons from JCPenney, Kohl's and Lowe's and sold them in batches on the Internet auction site. Working out of the Corona branch, Tang told investigators that he netted roughly $35,000 from the sale of JCPenney coupons between October 2009 and January of this year.

***

• "I have two small children, and my wife is pregnant," he told cops, according to court documents. "I also have a mortgage, and I have to pay cash for my chil dren's baby sitter. I did not want this to happen, but it was the only way I could avoid having my house fore closed on." With his tearful wife looking on, the 13-year veteran of the postal service pleaded not guilty yesterday to felony grand larceny and was held on $10,000 bail.

For the story, see Mailman 'clipped' coupons (Stole & sold 'em: cops).

Montana Airlift Dumps Tons Of Hay With More To Come In Rescue Effort To Save Hundreds Of Hungry Horses Abandoned At Recently Foreclosed Ranch

In Billings, Montana, ABC News reports:

• A helicopter airlifted 20 tons of hay, and deputies hauled even more to a sprawling southeastern Montana ranch where hundreds of horses are starving. The horses belong to James H. Leachman, who pleaded not guilty Friday to 10 misdemeanor counts of animal cruelty in an initial court appearance in Billings. Leachman was supposed to remove the animals last July when his business, Leachman Cattle Co., lost the ranch at a federal foreclosure sale.

• Leachman said little during the hearing. But in an interview with The Associated Press, he blamed the horses' problems on the family that bought his ranch. He said the horses had survived Montana's harsh winters for years on natural forage, but this year were confined by the new landowners to areas that already were overgrazed. "There's only been one side told," Leachman said. "They put them in a pasture that had no grass."

• Justice Court Judge Larry Herman told Leachman not to enter the property to provide care for the horses without first making arrangements with authorities. Each animal cruelty count is punishable by up to one year in jail and a $1,000 fine.

• Leachman, 68, ran a horse breeding business called Hairpin Cavvy. Five of his horses have died in recent weeks, and a Montana veterinarian warned that others would start dying if they did not receive food.

***

• Yellowstone County Sheriff's Office officials hauled more hay with a tractor and a flatbed to about 75 horses stuck in an isolated pasture.

For more, see Hay Dropped to Starving Horses at Montana Ranch (20 tons of hay airlifted to hundreds of horses starving at Montana ranch).

See also, The Billings Gazette: First hay drop for starving horses a success:

• An estimated 500 to 700 horses belonging to James Leachman are spread over 20 miles across a handful of ranches and Crow Reservation leases. [...] So far, 250 tons of hay have been donated for the rescue effort, dubbed Operation Home Place.

C. Florida Judge Rescinds $49K Contempt Fine On Foreclosure Mill; Says Firm's Purged Itself Of Citation With Substantial Compliance w/ Court Order

In Manatee, Florida, the Bradenton Herald reports:

• A local judge has rescinded a widely publicized $49,000 fine against a foreclosure law firm for missing court hearings, court records show. Smith, Hiatt & Diaz P.A.” has substantially complied” with court requirements and “is not subject to any fine for failure to comply,” Manatee County Circuit Judge Janette Dunnigan said in lifting her contempt finding.

***

• Dunnigan made national news in early September, when she fined the firm for “deliberate, willful and flagrant” civil contempt of court in a foreclosure case. She was upset with the firm, which represented the bank in the case, for setting court hearings and either missing them or not properly canceling them in a timely manner.

• The firm, which blamed the missed hearings on a glitch in its internal case-management system while it was being updated, called the contempt finding and fine excessive and improper. But critics of so-called “foreclosure mills,” or law firms that handle large numbers of such cases, hailed Dunnigan’s reprimand as a blow against those firms’ practices.

• Dunnigan later amended her order to give Smith, Hiatt & Diaz the chance to purge the contempt and fine if it met certain conditions. The firm did, but is appealing the original contempt order to the Second District Court of Appeals in Lakeland. The firm contends Dunnigan improperly referred to unrelated cases in holding it in contempt.

For the story, see Foreclosure firm’s fine lifted.

Mortgage Servicer Screw-Up While Processing Loan Modification Request Leads To Foreclosure, Says Boot-Facing Homeowner

In Maricopa County, Arizona, KPHO-TV Channel 5 reports:

• A Valley homeowner said a mistake by Chase bank has cost her home. "I hope they can sleep at night," said Kat Grover about the bank's employees. Freddie Mac foreclosed on Grover's Maricopa home on Jan. 11.

• Grover said Chase Bank representatives failed to inform Freddie Mac officials she was still working on a modification plan for her mortgage payment. Grover said the mortgage company's representatives told her they would not have gone through with the foreclosure if they had known she was still working on a loan modification with Chase Bank.

• "The bottom line is, between Dec. 15 and Jan. 11, somebody didn't do their job and I lost my house over it," said Grover. She has to vacate her home by Feb. 18.

For the story, see Valley Homeowner Says Chase Mistake Triggered Foreclosure.

Fear Of Footing Bill For Tear-Down, Potential Environmental Cleanup Costs Causes County To Can 'Back Tax' Foreclosure Sale, Cancel Lien

In Genesee County, New York, The Batavian reports:

• The owner of the former Wiss Hotel at 80 Main St., Le Roy, will get to keep the property, despite owing thousands of dollars in back taxes. The property was headed for the county's March foreclosure auction, but the Genesee County Legislature cast a unanimous vote Wednesday night saying essentially, "we don't want it."

• The building, owned by New Jersey resident Emily Pangrazio, is in such a state of disrepair, county officials said, the only thing to do with it is tear it down, which would cost more than $100,000. The county could not take title without take responsibility for the building's disrepair, even just to auction it off later.

• There's also concern that a former gas station next door could have leached contaminants onto the property, creating a potentially costly clean up requirement. If the county became part of the chain of title for even one day, county taxpayers could wind up footing the bill for any environmental impacts.

• By voting to cancel the tax lien, the property -- with numerous alleged code violations -- becomes an issue for the owner and the Village of Le Roy to deal with. Several people have noted that a couple of weeks ago, crews were inside the former hotel removing fixtures and other items, basically stripping the building of salvageable items, according to witnesses.

Source: County decides not to take on risk of foreclosing on a property in Le Roy.

City Gives Eight Rent-Paying Families The Boot After Power Shut Off To Bldg; Rent Skimming Landlord Said To Have Stiffed Bank, Ignored Electric Bill

In Lawrenceville, Georgia, Fox 5 Atlanta reports:

• Some Lawrenceville renters said that they didn't have power or a warm place to stay Tuesday night after being told their building was in foreclosure. Eight families were affected. The families live off of North Dale Road in Lawrenceville. The residents said they woke up at home Tuesday morning with no idea they would [have] nowhere to sleep.

• Lawrenceville resident Malika Beyah said she arrived home to discover she had no power, no heat and no home. "The apartment went [into] foreclosure. We found out today when the city of Lawrenceville came and turned off the power. The apartment manager told us we have to leave the premises," said Beyah.

• Residents said they were told the man they paid their rent to, the owner of the converted apartments hasn't been paying the mortgage or electricity.

For more, see Lawrenceville Apartment Building Goes Into Foreclosure (Eight families displaced).

Bank Accused Of Changing Locks On Foreclosed Child Care Center, Forcing Locked-Out Young Kids To Wait In Cold Until Fire Department Showed Up

In Elkins, Arkansas, KHBS-TV Channel 40/29 reports:

• Sheri, the owner of an Elkins childcare facility said Arvest Bank changed the locks on her foreclosed building without giving her notice, forcing children to wait outside in the cold. "We didn't know the date last week when it foreclosed," said England.

• England said the children had to stand outside in the cold for some time before the Elkins Fire Department let them wait at the station next door until a locksmith let her and the children back into the building.

***

• Parent Mecca Pennington said she was angry at Arvest Bank for locking the children out of the building. "I was furious. Just the fact that someone will do that knowingly, knowing that there's 20 plus children going there, and there was no where for them to go," Pennington said.

For more, see Parents Angry After Bank Locks Children Out Of Foreclosed Child Care Center.

NYC Getting Away With Eminent Domain Abuse In East Harlem Land Grab & There's Nothing We Can Do About It, Says State Appeals Court

In New York City, the New York Post reports:

• In a little-noticed ruling that could pack a punch for property owners, a judge has blasted the city for abusing eminent domain in its bid to seize buildings in East Harlem -- yet says there's nothing he can do about it.

• In a searing statement, Justice James Catterson of the state Appellate Division accused the city of falsely claiming "blight" as a ploy to transfer private property to developers.

• But New York's lower courts are powerless to stop it, said Catterson, thanks to prior rulings from the state Court of Appeals on eminent-domain cases related to Brooklyn's Atlantic Yards development and Columbia University's West Harlem expansion.

• "In my view, the record amply demonstrates that the [East Harlem] neighborhood in question is not blighted . . . and that the justification of under-utilization is nothing but a canard to aid in the transfer of private property to a developer," Catterson said of the city's argument that it can grab two blocks between 125th and 127th streets along Third Avenue because the area is economically depressed.(1)

• "Unfortunately for the rights of the citizens affected by the proposed condemnation, recent rulings . . . have made plain there is no longer any judicial oversight of eminent-domain proceedings," the justice wrote.

• Catterson and a panel of four other Appellate Division justices dismissed the matter of Uptown Holdings vs. New York City on Oct. 12, 2010, infuriating the half-dozen East Harlem merchants who had brought the lawsuit hoping it would save their livelihoods.

For more, see Wrong from blight (Judge rips land grab).

(1) Judge Catterson's entire remarks, contained in his concurring opinion, follow:

• In my view, the record amply demonstrates that the neighborhood in question is not blighted, that whatever blight exists is due to the actions of the City and/or is located far outside the project area, and that the justification of underutilization is nothing but a canard to aid in the transfer of private property to a developer. Unfortunately for the rights of the citizens affected by the proposed condemnation, the recent rulings of the Court of Appeals in Matter of Goldstein v New York State Urban Dev. Corp. (13 NY3d 511 [2009]) and Matter of Kaur v New York State Urban Dev. Corp. (15 NY3d 235 [2010]) have made plain that there is no longer any judicial oversight of eminent domain proceedings. Thus, I am compelled to concur with the majority.

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.