Friday, March 18, 2011

'Straw Buyer' Recruiter In Northern New Jersey Sale Leaseback, Equity Stripping Racket Gets 12 Months, 3 Years Probation, $275K Restitution Order

From the Office of the U.S. Attorney (Newark, New Jersey):
  • A Bloomfield, N.J., man was sentenced [] to a year and a day in prison for his role in a mortgage fraud scheme carried out by the owner and employees of Elite Financial Solutions, a company based in Scotch Plains, N.J., which claimed to be a home foreclosure rescue company, U.S. Attorney Paul J. Fishman announced.

  • Michael Martino, 47, who as an employee of Elite was responsible for recruiting straw buyers for properties in foreclosure, previously pleaded guilty before U.S. District Judge William J. Martini to one count of wire fraud conspiracy. Judge Martini also imposed the sentence [] in Newark federal court.

  • According to documents filed in this and related cases and statements made in court:

    Beginning in February 2005, Elite’s owner and operator Stephen French devised a scheme to fraudulently induce financial institutions to provide mortgage loans to unqualified borrowers, enabling French, Martino, and their co-conspirators to earn consulting fees from the sales of properties financed by the fraudulently induced loans.

    French, Martino, and others at Elite targeted New Jersey homeowners who couldn’t make mortgage payments and were facing foreclosure. They would promise the homeowners that Elite would help them keep their homes and repair their damaged credit. The homeowners would be instructed to permit title to their homes to be put in the names of straw buyers for one or two years. French promised to improve their credit ratings during that time, help them obtain more favorable mortgages, and ultimately return title to their homes.

    French, Martino, and others at Elite told the homeowners that equity withdrawn from their homes would be kept in escrow and used to pay the mortgages and expenses and to repair their credit. Instead, Elite took a “consulting fee” of $25,000 per property, and the remaining equity was deposited into bank accounts French controlled.

    Martino admitted that he recruited straw buyers for the scheme. French, Martino, and others at Elite paid the straw buyers $10,000 for use of their names and credit histories in the transactions, and submitted fraudulent loan applications to mortgage lenders in the straw buyers’ names in order to ensure the loans would be approved.

    In addition to the prison term, Judge Martini sentenced Martino to three years of supervised release and ordered him to pay $275,000 in restitution
    .(1)

For the U.S. Attorney press release, see Former Employee Of Phony Mortgage Rescue Company Sentenced To Prison For Role In Fraud Scheme.

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

(1) According to the press release, French, 53, of Scotch Plains, N.J., previously pleaded guilty before Judge Martini to one count of wire fraud conspiracy, admitting he caused more than $1 million in losses through the scheme. He is currently scheduled to be sentenced on April 21, 2011. Tameka Broadhurst, 27, of Plainfield, N.J., a secretary and loan processor at Elite, previously pleaded guilty before Judge Martini to one count of wire fraud conspiracy and was sentenced on November 4, 2010, to a day in prison followed by 18 months of supervised release. Martini also ordered Broadhurst to pay $355,000 in restitution. During her guilty plea, Broadhurst admitted that she recruited straw buyers for the scheme and submitted fraudulent loan applications to mortgage lenders in straw buyers’ names.

Citimortgage Tagged With NJ Suit As HAMP Class Action Parade Continues; Loan Servicer Allegedly Grabbed TARP Cash, Stiffed Loan Mod-Seeking Homeowners

From the Office of Berger & Montague, P.C.:
  • The law firm of Berger & Montague, P.C. has filed a class action complaint in the United States District Court for the District of New Jersey on behalf of all New Jersey homeowners whose mortgage loans have been serviced by CitiMortgage, Inc., and who, since April 13, 2009, (1) have entered into a Trial Period Plan (“TPP”) contract with CitiMortgage and made all payments required by their TPP contract, but (2) have been denied a permanent loan modification agreement that complied with the U.S. Department of the Treasury’s Home Affordable Modification Program (“HAMP”) rules.

***

  • The Complaint alleges that CitiMortgage accepted billions in government bailout money under the Troubled Asset Relief Program ("TARP") earmarked to help struggling homeowners avoid foreclosure. CitiMortgage, like other TARP-funded financial institutions, is contractually obligated to modify mortgage loans it services for homeowners who qualify under HAMP, a federal program designed to abate the foreclosure crisis by providing mortgage loan modifications to eligible homeowners.

  • According to the lawsuit, CitiMortgage systematically slows or thwarts homeowners' requests to modify mortgages, depriving borrowers of federal bailout funds that could save them from foreclosure. The bank ends up reaping the financial benefits provided by TARP-funds and also collects higher fees and interest rates associated with stressed home loans.

For the press release, see Berger & Montague, P.C. Files Class Action Lawsuit Against CitiMortgage, Inc.

For the lawsuit, see Silva v. Citimortgage, Inc.

Sloppy Lender, State Homestead Law Leave Iowa Couple w/ Voided Mortgage; Bank Left Holding The Bag After Failing To Get Wife's Signature On Loan Docs

In Ankeny, Iowa, the Des Moines Register reports:
  • Talk about sticking one to the bank. Matt and Jamie Danielson own their $278,000 Ankeny home outright, and paid almost nothing for it. A hasty home-loan approval and a 123-year-old law that requires mortgages be signed by both spouses helped the couple fight foreclosure all the way to the Iowa Court of Appeals. They won, and though they made only one payment to lender Citimortgage, the mortgage is now void and they get to keep the home.

  • "It's dumb luck that we're in this house," said Matt Danielson, 33. The banking lobby is chagrined. The Iowa Bankers Association is backing legislation that would change the law so this never happens again.

***

  • The law's original intent was to protect husbands and wives from liability if one spouse made a disastrous financial decision unbeknownst to the other or against her or his wishes. [...] The Iowa law invoked by [attorney Jerry] Wanek in the Danielson case dates to 1888, and has its roots in a law passed in 1851. It was intended to stop one spouse from ripping off the other. It invalidates sales of — or loans on — a home, unless both spouses sign. The idea is to prevent one spouse from refinancing a mortgage and taking off with the cash.(1)

***

  • Wanek, the Danielsons' lawyer, doesn't believe it's right to pass a law to protect banks from their own - or their mortgage brokers' - mistakes.

For more, see Iowa loophole voids mortgage, gives couple 'a free house'.

For the ruling of the Iowa Court Of Appeals, see Citimortgage, Inc. v. Danielson, 771 N.W.2d 653, 2009 Iowa App. LEXIS 1071 (Iowa Ct. App., 2009) (Go here for the Google Scholar version, containing embedded hyperlinks).

(1) Part of the commentary made by the state Court of Appeals on the application of the Iowa homestead law (Chapter 561, Iowa Statutes) in this case follows (bold text is my emphasis):

  • "Homestead rights are jealously guarded by the law." Michel, 683 N.W.2d at 101; see also Merchants Mut. Bonding Co. v. Underberg, 291 N.W.2d 19, 21 (Iowa 1980) ("Homestead laws are creatures of public policy, designed to promote the stability and welfare of the state by preserving a home where the family may be sheltered and live beyond the reach of economic misfortune.").

    One way in which the legislature has sought to protect homesteads is through Iowa Code section 561.13, which invalidates encumbrances of the homestead not signed by both spouses unless and until the spouse of the owner executes the same or a like instrument. See Thayer v. Sherman, 218 Iowa 451, 458, 255 N.W. 506, 509 (1934) (The provisions of this section are for the benefit of all who are interested in the homestead. It is designed as a protection to the wife, the children, and the husband himself.).

    If section 561.13 is not satisfied, the transaction is invalid as to both the husband and the wife. See Martin v. Martin, 720 N.W.2d 732, 736 (Iowa 2006) (finding deed attempting to convey a homestead invalid where it was not signed by the owner‟s spouse); Beal Bank v. Siems, 670 N.W.2d 119, 124 (Iowa 2003) (holding mortgage on homestead void because not signed by owner‟s spouse as required by section 561.13).

    Section 561.13 was not satisfied in this case because the mortgage encumbering the parties' homestead was signed only by Matthew, who was married to Jamie at the time of the encumbrance. The mortgage is therefore invalid and void as to both Matthew and Jamie. See Martin, 720 N.W.2d at 738 (emphasizing section 561.13 makes a conveyance or encumbrance of the homestead "invalid—that is, void—without the signature of both spouses, not merely voidable by the spouse who did not sign").

    Citimortgage attempts to avoid the harsh effect of section 561.13 in this case by asserting Matthew procured the mortgage by fraudulently misrepresenting his marital status, which it contends should result in the imposition of an equitable mortgage. The district court denied this claim, finding there was "not one piece of evidence to indicate Mr. Danielson knowingly or with any intent to defraud gave false information to anyone throughout this transaction." Citimortgage claims the district court erred in so concluding. We do not agree.

----------------------------

One somewhat interesting piece of trivia is that attorney Jerrold Wanek, who represented the Danielsons as reported in the Des Moines Register story, also successfully represented the homeowner who voided his mortgage in the above-referenced Beal Bank v. Siems case, which was decided by the Iowa Supreme Court in 2003.

For another relatively recent Iowa case where a sloppy lender was left holding the bag in a similar situation, see Wells Fargo Bank, N.A. v. Hudson, 2007 Iowa App. LEXIS 1867 (Iowa Ct. App. 2007) :

  • The district court dismissed on summary judgment Wells Fargo Bank's (Wells Fargo) petition for foreclosure of a real estate mortgage on property owned by defendant Troy D. Hudson. The court found the undisputed facts to be that (1) the property at the time the mortgage was given was the homestead of Troy and his wife, defendant Jodi Hudson, and (2) Jodi Hudson had not signed either the note or the mortgage. Under these facts in applying Iowa Code section 561.13 (2005), the district court found the mortgage was null and void. On appeal Wells Fargo contends (1) the district court erred in granting summary judgment, and (2) Wells Fargo should have been found to have an equitable mortgage or equitable lien on the property. We affirm.

Would-Be Buyers In Possession Under Unrecorded Purchase Agreements Say Their Land Was Mortgaged Out From Under Them By Seller

In Surry County, North Carolina, WXII-TV Channel 12 reports:
  • Some Surry County residents are being forced to move after they said they bought property from a landowner. But the bank who owns the deed to the land said the properties are in foreclosure and is holding an auction for the land.

  • The residents said they signed mortgage contracts with Nichols Land Company for lots in Dobson and Mount Airy. A notice of sale letter shows Nichols Land Company Holdings used the same lots as collateral on a $200,000 loan it took out in 2007. Nichols defaulted on the loan, so the bank that holds the loan now controls the land.

  • "We've been there eight months and I've just been through a liver transplant. How can I move? I'm on Social Security now. How can I move? All our savings are gone," one of the residents, Debi Flannelly, said.

  • Another resident, Denise Daniels, said she signed a contract with Nichols in 2001 for a 15-year loan that states she'll own the property outright in 2016. "Over the years, we've paid about $30,000 on our lot. As of yesterday, I owe $4,500," she said. A lawyer for Nichols said he hadn't investigated the legal issues and wasn't able to comment.(1) A lawyer who sent the notice of sale to the residents didn't return WXII's attempt to obtain a comment.

  • The residents said they feel they've been duped. "It's just a fraud. He sold these properties to us and he used these deeds as collateral," one resident said.

Source: Residents Say They've Been Forced From Land (Bank Says Property Actually In Foreclosure).

See also, The Mount Airy News: Land company gets extension on foreclosures:

  • A company accused of defaulting on a loan, which would potentially force several local residents from their homes, said Wednesday it has reached an agreement with its bank that will delay evictions.According to legal notices published in Wednesday’s edition of The Mount Airy News, 35 properties owned by Nichols Land Company would go up for public auction on March 30 at 3 p.m. at the Surry County Courthouse door.

  • Nichols Land has sold hundreds of pieces of property throughout the years as a middle man between the purchaser and lending institutions, and has relied on those purchaser’s payments to meet its debt servicers. [...] Most of these individual land installment contracts in question now were drawn up more than 10 years ago, Nichols said. Nichols did at that time, and has continued to, have a note against the land, he said. The bank that holds the notes for these properties knew that land installment contracts existed when the note was procured.(2)

(1) To the extent the residents acquired their rights to the land pursuant to an unregistered or unrecorded contract for deed (a/k/a land contract, agreement for deed, conditional sales contract, installment sale contract, etc.), where that contract pre-dates the granting of a subsequently made, but earlier recorded mortgage, the residents' property rights under the unrecorded contract for deed may be superior to the recorded rights of the morgage holder. This could be the case if, at the time the mortgage was made, the residents were in possession of the land, said possession was open, notorious and exclusive, and the mortgagee failed to inquire into any legal rights or equities by which the residents held possession. In such a case, the mortgagee arguably would not qualify as a bona fide purchaser (a/k/a innocent purchaser, good faith purchaser), and consequently, would leave its rights under its later-acquired mortgage subject and subordinate to the rights of the residents, notwithstanding its earlier recording in the public record (this means that the bank has no right to foreclose on the buyers under the contracts for deed).

For support on this point from the North Carolina Supreme Court, see (bold text is my emphasis):

Morehead v. Harris, 262 N.C. 330; 137 S.E.2d 174 (1964):

  • "A person is an 'innocent purchaser' when he purchases without notice, actual or constructive, of any infirmity, and pays valuable consideration and acts in good faith." Lockridge v. Smith, 206 N.C. 174, 173 S.E. 36.

***

  • The burden of proof of the "innocent purchaser" issue is upon those claiming the benefit of this principle -- in this case the defendants Price. Hughes v. Fields, 168 N.C. 520, 84 S.E. 804; Lumber Co. v. Trading Co., 163 N.C. 314, 79 S.E. 627; Cox v. Wall, 132 N.C. 730, 44 S.E. 635.

Perkins v. Langdon, 237 N.C. 159; 74 S.E.2d 634 (1953):

  • Actual possession is treated as the equivalent of notice to the purchaser and as a substitute for registration. Webber v. Taylor, 55 N.C. 9; Edwards v. Thompson, 71 N.C. 177; Tankard v. Tankard, 79 N.C. 54; Heyer v. Beatty, 83 N.C. 285; Bost v. Setzer, 87 N.C. 187; Johnson v. Hauser, 88 N.C. 388; Staton v. Davenport, 95 N.C. 11; Mayo v. Leggett, 96 N.C. 237, 1 S.E. 622. See also Allen v. Bolen, 114 N.C. 560, 18 S.E. 964; 51 C.J.S., Landlord and Tenant, Sec. 258; Raisin v. Shoemaker, supra; Eckman v. Beihl, 116 N.J. 308, 184 A. 430; Huddleston v. Ward (Ohio), 68 N.E. 2d 580; 39 Am. Jur., Notice and Notices, Sec. 18; Annotation, 74 A.L.R. 355.

Smith v. Fuller, 152 N.C. 7; 67 S.E. 48 (1910), in which the North Carolina high court [alteration added]:

  • Conced[es] the soundness of the principle established by the decided weight of authority, that possession by a person other than the vendor, when such possession is open, notorious and exclusive, puts a purchaser upon inquiry and is notice of every fact which he could have learned by proper inquiry (as held by this Court in Edwards v. Thompson, 71 N.C. 177; Staton v. Davenport, 95 N.C. 11; Tankard v. Tankard, 79 N.C. 54; ibid., 84 N.C. 286; Bost v. Setzer, 87 N.C. 187; Johnson v. Hauser, 88 N.C. 388; Mfg. Co. v. Hendricks, 106 N.C. 485, 11 S.E. 568; Patterson v. Mills, 121 N.C. 258, 28 S.E. 368), [...]

Tankard v. Tankard, 79 N.C. 54 (1878):

  • Open, notorious, and exclusive possession puts a purchaser upon inquiry, and is notice of every fact which he could have learned by inquiry.

For more on the bona fide purchaser doctrine in other states, see Bona Fide Purchaser Doctrine, Possession Of Property By Occupants Other Than The Vendor & The Duty To Inquire.

(2) Ibid.

Thursday, March 17, 2011

Goldman Says It's "Exploring Strategic Options For Litton Loan..." As It Begins Effort To Wash Hands Of Mortgage Servicing Unit

Bloomberg reports:
  • Goldman Sachs Group Inc., the fifth-biggest U.S. bank by assets, said it’s trying to sell Litton Loan Servicing LP, the Houston-based mortgage-servicing unit it acquired more than three years ago. “Goldman Sachs is exploring strategic options for Litton Loan Servicing, which include a possible sale,” Michael DuVally, a spokesman in New York, said in a telephone interview.

  • The company bought Litton in December 2007 as investors including billionaire Wilbur Ross and Centerbridge Capital Partners LLC purchased mortgage servicers to help them better understand the market and profit from buying discounted loans. Goldman Sachs is selling after failing to find enough opportunities to buy distressed mortgage loans, said a person familiar with the situation.

***

  • Since Goldman Sachs bought Litton, the value of the company’s mortgage-servicing rights has also evaporated. By the end of 2009, Goldman Sachs’s estimate for the fair value of the rights had dropped to $88 million from $283 million at the end of February 2008, according to regulatory filings.

For more, see Goldman Sachs Seeking to Sell Litton Mortgage-Servicing Unit.

See also, Business Insider: Why Goldman Sachs Wants To Get Rid Of Its Home Loan Servicing Unit ASAP:

Freddie Dumps Another Fort Lauderdale-Area Foreclosure Mill; Cases To Be Transferred To New Counsel

Housing Wire reports:
  • Freddie Mac pulled its cases from a Florida law firm that is under investigation by the Florida attorney general. Freddie Mac spokesman Brad German confirmed Tuesday that Freddie has pulled its cases from the Law Offices of Marshall C. Watson, which represents lenders in foreclosure cases, but said he could not discuss why.

***

***

  • Last fall, McCollum released several sworn statements from former employees at law firms under investigation, detailing alleged improprieties in the way foreclosure cases were being handled, including one from a former lawyer at the Watson firm.

  • Attorneys at the Watson firm allegedly signed affidavits without a notary present, according to a September 2010 sworn statement from Jessica Cabrera, a lawyer there from December 2007 to July 2010. Attorneys at the firm would allegedly sign the documents and send stacks to notaries afterward.

  • This process changed about eight months prior to the sworn statement, according Cabrera, when the firm realized there was a problem and employed roughly 50 notaries to work in-house.

***

For more, see Freddie Mac and Florida foreclosure law firm part ways.

Unwitting Investors Duped Into Buying Crappy Mortgage Paper Make Gains In Effort To Obtain Documents Proving Bankster Fraud & Enforce Buyback Demands

Reuters reports:
  • U.S. banks may be turning on one another in the legal battle over losses on mortgage-backed bonds. Big pension funds and other investors are demanding compensation from banks that sold them supposedly low-risk mortgage-backed bonds that disintegrated in the housing crisis, a fight that ultimately could cost Wall Street $100 billion or more.

  • One big legal obstacle for investors has been getting documents they say will prove those bonds were anything but low-risk. Demands for documents have to come from the trustees who administer the bonds, and until recently trustees have stayed out of the legal fray.

  • That may be changing. A recent Delaware lawsuit illustrates the increased aggressiveness of trustees in helping investors make their case. An attorney for one trustee, Wells Fargo & Co, spent a year pursuing documents from EMC Mortgage Corp, a unit of JPMorgan Chase & Co.

  • Court documents show EMC, which JPMorgan inherited as part of its shotgun acquisition of Bear Stearns in 2008, faces several other requests from trustees, including Citigroup Inc. The lawsuit is among the first of its kind by a trustee, partly because investors have only recently organized themselves in large enough numbers to force trustees to consider their demands.

For more, see Mortgage bondholders gain key ally in putback fight.

Wednesday, March 16, 2011

Homestead Protection From Forced Sale Gets Boost For Some Bay State Homeowners; Will Ease Pressure From Bill Collector Threats Against Home Equity

The Boston Globe reports:
  • Credit card debt got you down? Revisions to the state’s Homestead Act that take effect Wednesday offer greater protection to [Massachusetts homeowners] from losing their homes to debt collectors.

  • Though the law won’t protect someone who doesn’t pay a mortgage from losing a home to foreclosure, it could protect a homeowner from being evicted because of claims from an automobile accident or credit card debt, said Secretary of State William F. Galvin.

  • It’s an important protection for homeowners,’’ Galvin said. “Especially in an age where people have been really bedeviled by debt. This is not going to solve the mortgage problem. But it does solve the problem where people put their home at risk.’’

  • In the past, people were protected up to $500,000 if they filed a so-called homestead declaration on their primary residence. They will still have that protection after filing, but now, even if they have not filed a homestead declaration, homeowners will have automatic protection up to $125,000.

  • And couples who are over 62 or disabled will get double the protection — up to $1 million if both partners file a homestead declaration. “It starts with the concept that the home is something we want people to protect,’’ Galvin said. “The objective here is to protect the home so that people aren’t out on the street.’’

  • Homeowners who already have filed homestead declarations do not need to refile to be protected by the new law. And people who seek a homestead declaration will now be covered even for preexisting debt. Attorney groups had pushed for years for revisions to the state’s antiquated homestead law, which was originally enacted when women had limited rights to property.

  • The new law makes clear that children and both spouses are protected, even if the person who signed the homestead declaration dies. Under the revisions, both spouses who own the home must sign the homestead declaration, and if only one is considered the owner, he or she must declare marital status and whether a spouse is living there. If a single homeowner gets married after seeking the homestead declaration, the protection is automatically extended to the spouse. The new law covers manufactured homes and properties that are held in trust.

  • The law generally protects a home from claims against the homeowner. But not all claims. A divorced father who fails to pay child support and lives in a million-dollar home would not be covered, for example. Nor would someone who uses his home as collateral for another loan.

  • But, the law could lessen the chance a homeowner would be required to sell his home during a bankruptcy liquidation. And, the spouse of a compulsive gambler who runs up credit card debt would no longer be at risk of losing the family home, he said.

  • Anyone can file a homestead declaration on a primary residence for a cost of $35 at the county Registry of Deeds. More information is available there and on the [Massachusetts] secretary of state’s website, sec.state.ma.us/. (1)

Source: Beginning this week, Homestead Act strengthens protection.

See also, Secretary Galvin Announces Changes to the Homestead Protection Law:

  • "Homestead protections now extend to pre-existing debts and the proceeds of a sale or insurance coverage.(2) [...] If you are purchasing your new principal residence, your closing attorney must provide you, as a mortgagor, with notice of your right to declare a homestead protection. At that time, you will be asked to acknowledge receipt of this notice in writing."

(1) Given the proliferation of sleazy "zombie debt" buyers acquiring old, stale, delinquent credit card accounts for pennies on the dollar with the view of forcing collection through forced sales of real estate, wage garnishment, etc., there seems to be no reason for Massachusetts homeowners not to cough up the $35 and file the homestead declaration to get the benefit of the entire $500,000 of home equity protection from these bill collectors (who typically count on consumers being unaware of their legal rights in order to squeeze them out of cash that needn't be paid out).

Unlike some states (ie. Florida and Texas, to name two), Massachusetts requires the formal filing of a declaration to reap the full protections of the state's homestead law against forced sale. This recent change in Massachusetts law will at least now extend partial protection, to the extent of $125,000 of home equity, to those homeowners who have failed, unwittingly or otherwise, to file the formal declaration with the appropriate county office.

For the homestead declaration forms and additional information, see:

  • Declaration of Homestead for Homes Owned by Natural Persons,
  • Declaration of Homestead for Homes Owned by Trustee(s),
  • Questions and Answers, The Homestead Act (Massachusetts General Laws, Ch. 188, §1-10, William Francis Galvin, Secretary of the Commonwealth; updated 3/11/11) ("The declaration of homestead shall benefit each owner named on the homestead and each of the owner’s family members who occupy or intend to occupy the home as their primary residence. Each family member shall have the right to use, occupy and enjoy the home. The new law provides additional protections to spouses that are not listed as owners in their principal residences. For example, protection extends automatically to a new spouse where an unmarried person declared a homestead and later marries. Also, divorcing spouses are protected against the loss of homestead through termination or divorce. Neither divorce nor remarriage will affect the homestead of the spouse who still primarily resides in the home. [...] Additionally, if there are dependent minor children, under the age of 21, living with all elderly or disabled homeowners, you may wish to consult an attorney in order to adequately protect the children’s right to use, occupy and enjoy the home. Be sure to use the proper homestead form when you file.")

(2) See Questions and Answers, The Homestead Act (at page 4):

  • What if my home is sold or damaged? If the home is sold, the sale proceeds shall be protected by the homestead for one (1) year after the date of the sale or on the date when a new home is purchased with the proceeds, which ever is earlier. If the home is damaged by a fire, for example, the insurance proceeds are protected for two (2) years after the date of the fire or on the date when the home is reconstructed or a new home is purchased, which ever is earlier.

"Legitimacy Of Our Justice System" At Stake, Says NY Chief Judge As He Refuses To Back Down On Call For $25M Funding Boost For Civil Legal Services

From a recent editorial in The New York Times:
  • Acknowledging New York’s deep fiscal crisis, Judge Jonathan Lippman, the state’s chief judge, has reluctantly agreed to make cuts in his $2.7 billion budget request, including a reduction in the number of people working for the court system. But he is refusing to back down on his call for a $25 million increase, to $40 million, in support for civil legal service programs that help low-income New Yorkers faced with foreclosures, evictions, domestic violence and other serious legal problems.

***

  • Judge Lippman knows what he is up against politically but is undaunted. In a recent talk at Benjamin N. Cardozo School of Law in Manhattan, he described the shocking need for help out there — and the cost to justice and the judicial system if it continues to go unmet.

  • He told of state courtrooms that are “standing room only, filled with frightened, unrepresented litigants — many of them newly indigent — who are fighting to keep a roof over their heads, fighting to keep their children, fighting to keep their sources of income and health care.” And he cited the astonishing fact that in New York City 99 percent of tenants in eviction cases and 99 percent of borrowers in consumer credit cases have no lawyers.

  • What is at stake,” he said, “is nothing less than the legitimacy of our justice system,” adding that the rule of law “loses its meaning when the protection of our laws is available only to those who can afford it.”

For more, see Listen to Judge Lippman.

Thanks to Lisa E. of Foreclosure Hamlet for the heads-up on the editorial.

Attorney Who Advised Clients To Break Into Their Foreclosed Homes Targeted By State Bar For Immediate Removal From Active Practice

The ABA Journal reports:

  • The complaint against Michael T. Pines, filed in the State Bar Court, seeks to lift his law license. According to a press release the state bar issued, Pines in February was arrested for threatening the occupants of a house that used to belong to his clients, and the following day was cited for trespassing on the property. Four days later, according to the release, he was cited for violating a temporary restraining order at the site. According to the state bar, Pines told his clients that he may break into the property again. And in October, according to the release, Pines notified Newport Beach, Calif., police that he and a client were going to take possession of a house that the client lost in foreclosure.

  • To remove a lawyer from active practice on an interim basis before formal charges are filed is a drastic remedy,” James Towery, the state bar’s chief trial counsel, stated in today’s release. “That remedy is justified by the established misconduct of Michael T. Pines. He has shown complete disrespect for the law, the courts and especially the best interests of his clients. Removing Mr. Pines from active practice is an important step in our mission of public protection.”

For more, see Discipline Case Filed Against Lawyer Who Advised Clients to Break Into Their Foreclosed Homes.

For The State Bar of California press release, see State Bar Seeks To Stop Practice Of Carlsbad Foreclosure Attorney Michael T. Pines:

  • For five hours, Pines “kept approximately seven police officers and an assistant city attorney wrapped up in his media circus” until Pines and his client were arrested, [Deputy Trial Counsel Brooke] Schafer wrote in the petition.

Tuesday, March 15, 2011

Secured Lender's Negligent Screw-Up When Failing To Pay Off All Existing Real Estate Liens Gives Unpaid Lienholder Priority Over New Mortgage In Ohio

Lexology reports:
  • A recent Ohio appellate holding reinforces last year’s Ohio Supreme Court decision on the negligence exception to the doctrine of equitable subrogation. In Deutsche Bank National Trust Co. v. Boswell, 2011-Ohio-673, 2011 Ohio App. LEXIS 589 (Ohio App. 1st Dist. 2011), the plaintiff bank brought suit seeking foreclosure on defendants’ property. The bank argued that the doctrine of equitable subrogation gave its mortgage priority over a judgment lien recorded two weeks prior to the mortgage. Although not specified in the opinion, the defendants used part of the bank’s mortgage to satisfy other existing liens on the property. The judgment lien holder argued that the doctrine did not apply since the bank’s predecessor in interest (the mortgage company that originated the loan) failed to discover the judgment lien.

  • The doctrine of equitable subrogation operates as an exception to the general rule of “first in time, first in right.” Under the doctrine, a mortgagejumpsother liens in priority if part of its proceeds satisfy higher priority liens on the property.

  • Last year, the Ohio Supreme Court examined the doctrine in ABN Amro Mtge. Group v. Kangah, 126 Ohio St.3d 425, 2010-Ohio-3379, holding that equitable subrogation did not apply to a fact pattern similar to Boswell. The Court held that a mortgagee was not entitled to the benefits of equitable subrogation if it was negligent in failing to discover existing liens prior to executing a mortgage.

  • In Boswell, the First District Court of Appeals found that the plaintiff bank failed to explain why it had not discovered the judgment, a matter of public record, prior to executing and recording its mortgage. As a result, the court granted priority to the judgment lien over the bank’s mortgage.

Source: Recent Ohio decision reinforces negligence exception to doctrine of equitable estoppel (requires subscription; if no subscription, GO HERE, or TRY HERE - then click appropriate link for the story.).

No Boot For Pro Se Homeowner In Convoluted Foreclosure Eviction Case; Woman Claiming BofA Refused To Talk To Her About Payments Granted Jury Trial

In Centreville, Michigan, WOOD-TV Channel 8 reports:
  • The first jury trial in 30 years in an eviction case in St. Joseph County has left home owner Robin Roberts "thrilled." Trials are rare in eviction cases, which usually take a few minutes in front of a judge. But District Judge Jeffrey Middleton Friday agreed to grant her the jury trial as FannieMae tries to evict her from her foreclosed home in Three Rivers.

  • Roberts said the trouble started in 2006 when she put a friend who was living with her on the deed to her house and on a new refinance agreement. Something went wrong. "The paper work was done improperly," she said. It left her on the deed as the owner of the property but left her name off the mortgage note. The lender said the now long-gone roomate was the only person named on the mortgage note.

  • Roberts learned that only after she got behind on her payments and found that Bank of America -- which had taken over the loan from her first mortgage company, Countrywide -- refused to talk to her about saving her home because she was not on the note. "I was willing to pay," Roberts said, "but then they told me I was not an owner and they would have no discussion with me at all."

  • Her house has been foreclosed and sold, and FannieMae, the government-supported mortgage backer, is trying to evict her. She decided to fight in court and asked for a jury trial. In granting the jury trial, Judge Middleton expressed concern that Roberts will be "at a terrible disadvantage" against experienced lawyers. "You need legal representation," he told her, "but you aren't able to get it, through no fault of your own."

  • Roberts said she has tried a list of attorneys. Even Legal Aid refused to take her case, something which Judge Middleton found disappointing. "The reason no attorney will take your case," he said, is "this is a convoluted mess and you don't have any money."

For more, see Rare jury trial in foreclosure eviction (First trial of this nature in 30 years).

Cops: Father-Son Duo Suspected Of Using Forged Deeds To Take Title To Homes In Foreclosure, Then Renting Them Out To Unwitting Tenants

In Peoria, Arizona, KPHO-TV Channel 5 reports:
  • Peoria police arrested a father and son on suspicion of renting out homes that did not belong to them. Officers arrested 75-year-old Earl R. Koskella and booked him on fraud schemes and aggravated identification theft. His son, 38-year-old Keith E. Koskella, was arrested and booked for fraud schemes.

  • Peoria police say the pair rented out five homes, each in some stage of foreclosure, for well below market value. Property records show Earl Koskella as the owner of the homes. Police say the pair used quit claim deeds that were forged.

Source: PD: Father, Son Rented Homes They Didn't Own.

Monday, March 14, 2011

BofA's Force-Placed Insurance Unit Hid Foreclosure Information, Say E-Mails Released By Hacker Group

The New York Times reports:
  • A hacker organization known as Anonymous released a series of e-mails on Monday provided by a former Bank of America employee who claims they show how a division of the bank sought to hide information on foreclosures.

  • The bank unit, Balboa Insurance, was acquired by Bank of America when it bought the mortgage lender Countrywide Financial in 2008. Balboa deals in so-called force-placed insurance coverage on mortgages. The e-mail messages concern the removal of information linking loans to other documentation.

***

  • The e-mails dating from November 2010 concern correspondence among Balboa employees in which they discuss taking steps to alter the record about certain documents “that went out in error.” The documents were related to loans by GMAC, a Bank of America client, according to the e-mails.

***

  • A member of Anonymous told DealBook on Monday that the purpose of his Web site was to bring attention to the wrongdoing of banks. “The way the system is, it’s made to cheat the average person,” he said.

For more, see Bank of America Unit Tried to Hide Foreclosure Information, Hackers Say.

Go here for the Balboa e-mails.

See also Zerohedge.com: Hacker Collective Anonymous To Release Documents Proving Bank Of America Committed Fraud This Monday.

Thanks to Mike Dillon at GetDShirtz.com for the heads-up on the story.

According to Dillon, he attempted to bring the loan servicer racket revolving around force-placed insurance and kickbacks to the attention of 45+ Senators and Congresspeople almost two years ago through a GAO Review request of the FTC in connection with the USA v. Fairbanks litigation. No one was interested. Exhibit T (see page 2), Exhibit U, and Exhibit V may be of interest. They will show that HUD-OIG and, therefore, the FTC, US Attorney General's Office, etc. knew about force placed insurance, alleged kickbacks, etc. at least as far back as 2003. And have apparently done nothing about it. According to Dillon, HUD-OIG, the FTC and who knows who else knew about this as part of a USA/Curry v. Fairbanks criminal investigation that was killed per the civil settlement.

State AGs Playing Into The Hand Of The Banksters???

The New York Times reports:
  • ONE crucial reason the nation’s mortgage industry ran itself — and the entire nation — off the rails was its obsession with speed. Mortgages had to be approved chop-chop, loans pooled instantly. When it came to foreclosure, well, the quicker the better.

  • So it is disturbing that the same need for speed is at work in the bank settlement being devised by state attorneys general relating to improper loan-servicing and foreclosure practices. When Tom Miller, the Iowa attorney general who leads the talks, announced initial terms of a deal on Monday, he said, “We’re going to move as fast as we can.”

  • While some might argue that a rapid approach will help borrowers, it is apt to benefit the banks far more. Hurrying to strike a deal means less time to devote to understanding how pernicious the foreclosure practices were at the nation’s largest institutions. How can you determine appropriate penalties for troubling practices when you haven’t conducted a full-fledged investigation?

For more, see A Swift Deal May Not Be a Sound One.

Feds Start Probe Into Saxon For Possible SCRA Violations As Mortgage Servicer Settles With Screwed Over, Foreclosed Sevicemember During Damages Trial

The New York Times reports:
  • The Justice Department is investigating allegations that a mortgage subsidiary of Morgan Stanley foreclosed on almost two dozen military families from 2006 to 2008 in violation of a longstanding law aimed at preventing such action.

  • A department spokeswoman confirmed on Friday that the Morgan Stanley unit, Saxon Mortgage Services, is one of several mortgage and lending companies being investigated by its civil rights division. The inquiry is focused on possible violations of a federal law that bars lenders from foreclosing on active-duty service members without a court hearing.

  • Mark Lake, a Morgan Stanley spokesman, declined on Friday to comment on the investigation. However, in the fine print of a recent regulatory filing, Morgan Stanley disclosed that it was “responding to subpoenas and requests for information” from various government and regulatory agencies concerning, among other issues, its “compliance with the Servicemembers Civil Relief Act,” [SCRA] the law that governs the actions creditors can take against service members on active duty.

  • The investigation came to light in a document that Saxon’s lawyers filed on Tuesday in federal court in Grand Rapids, Mich., during a trial to assess damages against Saxon and two co-defendants after a federal judge ruled late last year that they had illegally seized and sold the home of Sgt. James B. Hurley, a Michigan National Guard member who lost his home while he was serving in Iraq in 2005. That case was ultimately settled on Thursday.

***

  • Sergeant Hurley was one of the service members affected by a violation of the act. He returned from duty as a power generator mechanic in Iraq in December 2005 to find that Saxon had foreclosed on his riverside home outside Hartford, Mich., and sold it to someone else. He sued Saxon and two co-defendants, Orlans Associates, the law firm in Troy, Mich., that handled the foreclosure paperwork, and Deutsche Bank Trust Company Americas, the trustee for the mortgage involved in the foreclosure.

  • The case dragged on until late last year, when Judge Gordon J. Quist of United States District Court ruled that the foreclosure and sale of the Hurley home had violated the civil relief act and ordered a jury trial to determine damages.

  • On Thursday, the fifth day of that trial, Sergeant Hurley settled with all the defendants in the case for an undisclosed sum, according to Col. John S. Odom, a retired Air Force lawyer who represented the Hurley family. The terms of the settlement are confidential, Colonel Odom said. “But the Hurleys are well pleased,” he added.

***

  • The settlement came two days after the brief courtroom drama on Tuesday that led to the disclosure of the Justice Department investigation. It began when Colonel Odom unexpectedly served a subpoena on Saxon’s general counsel, Gregory Smallwood, who was present in the courtroom.

For more, see U.S. Inquiry on Military Family Foreclosures.

For the lawsuit, as initially filed in Detroit Federal Court, see Hurley vs. Deutsche Bank National Trust, et al.

Media Report Triggers Calls From F'closed Ex-Homeowners About Surplus Money From Public Sales, Forcing County Officials To Begin Cutting Refund Checks

In Denver, Colorado, The Denver Post reports:
  • Dozens of former homeowners who lost their houses to foreclosure have been calling public trustee offices across Colorado to see whether they have any money coming to them. "We had no idea until we saw it in the newspaper," said Anthony Michaels of Denver, whose mother, 92-year-old Fayetta Curry, and his younger sister, Sharon Parker, were among a list of individuals due funds from a foreclosure auction.

  • The Denver Post on Tuesday highlighted how county public trustees and treasurers have hundreds of thousands of dollars in unclaimed funds that belong to homeowners whose houses were sold at auction. Michaels' family members were among those eligible to collect more than $635,000 in unclaimed money but never knew it.

  • Known as "overbid funds," the money comes from auction bids that exceeded the amount owed on the house at the time of the foreclosure. Counties are required by law to pay the homeowners after all eligible liens have been paid — but are not required to search for the homeowners, instead sending notices to their last known address, typically the foreclosed house they were forced to leave.

  • Other times, the homeowners have died, and county officials have no next of kin listed in foreclosure papers. Counties get to keep the money if it remains unclaimed for five years from the date of the foreclosure sale.

  • The Post published a shortened list of those owed at least $10,000, prompting a slew of telephone calls to trustee offices, according to interviews. "We have had numerous calls and e-mails about the overbid funds," Arapahoe County Public Trustee Ana Maria Peters-Ruddick said, noting the treasurer has issued checks as high as $50,000 as a result. Arapahoe Treasurer Sue Sandstrom's office has issued checks totaling more than $100,000 to three families due foreclosure funds as of Friday.

  • Denver County is expecting to issue checks totaling more than $85,000 to three families over the next week or so, and Adams County officials said they expect to issue more than $100,000 in checks to at least four families due funds.

  • Michaels' mother is a resident of a state veterans home near Denver, and his sister is convalescing at a medical-care facility. Neither knew they were entitled to the $33,212 held by the Denver County public trustee from the auction of the family's Park Hill home. That's probably because the city was mailing the notices to the wrong address — three blocks away, records show.

  • "We looked up one day, and the house was gone, foreclosed," said Michaels, 62. "My sister got behind on it and didn't say anything, and things just happened." The money will help settle some pressing family bills, Michaels said. Homeowners should check with the county public trustee who auctioned their house to see whether they are entitled to any funds.

Source: Foreclosed homeowners get unexpected windfalls.

Bronx Tenants Sue Lender To Cough Up Cash For Urgent Repairs To 8 Buildings Abandoned By Landlord As Bank Scrambles To Unload Unwanted Promissory Note

In The Bronx, New York, Crain's New York Business reports:
  • A group of Bronx tenants filed a lawsuit Thursday seeking to force New York Community Bank to hand over money to repair eight foreclosed buildings riddled with code violations.

  • The suit is similar to one filed last year by tenants in foreclosed buildings that had been bought by Los Angeles-based Milbank Real Estate. In that case, a Bronx judge ordered owner LNR Property Corp. to put up $2.5 million to cover repairs on the 10 rundown properties.

  • The Milbank tenants have established a new tool and now tenants no longer have to endure horrible conditions,” said Jonathan Levy, deputy director of the housing unit at Legal Services NYC-Bronx, which represents the tenants. “They have a way to go to court and seek relief.”

  • Meanwhile, a nonprofit housing group has made a bid of more than $8 million to buy the mortgage on the properties, which fell into foreclosure in October 2009. But New York Community Bank has rejected the offer by Mutual Housing Association of New York Management and is believed to be negotiating with a buyer willing to pay closer to the note's face value, which is more than $16 million.

***

  • The eight buildings were purchased in 2006 by New York Affordable Housing Association, a collection of some of the city's most notorious landlords and several private equity players, with a $14.7 million mortgage from New York Community Bank. In June of 2008, the group refinanced the portfolio, taking on an additional $4.5 million in debt.

  • If the group, which never responded to foreclosure notices, used the extra financing to make building repairs, it isn't evident, tenant advocates say. Mold, collapsed ceilings, missing tiles, outdated wiring and broken boilers abound, they say. The elevator in the one building hasn't worked for several years.

For more, see Bronx tenants sue bank for urgent repairs (Move by residents of eight buildings against NY Community Bank follows similar, precedent-setting suit won by tenants group in the borough last year, in which a judge ordered $2.5 million for repairs).

For story update, see The Wall Street Journal: Bank Sells Bronx Mortgage:

  • New York Community Bank has sold the mortgage on eight dilapidated buildings in the Bronx, bank officials said Thursday, disposing of its interests in properties that have attracted tenant protests. The purchaser bought the mortgage, which had a $16 million balance, at a discount. The bank declined to identify the buyer or to say how much the buyer paid. [...] Jonathan Levy, an attorney with Legal Services NYC-Bronx, which is representing the tenants, said he was "stunned" by the news of the sale.

Clueless Out-Of-Town Landlord Abandons Mismanaged Units After Overpaying For 19 Buildings; Leaves Living Hell For Poor, Displacement-Fearing Renters

In Cincinnati, Ohio, The Enquirer reports:
  • In Avondale, Tawana Riley battles daily with roaches, bed bugs and faulty electrical outlets. In Over-the-Rhine, residents at The Senate Apartments on 12th Street have been plagued by a rat infestation and broken plumbing that backs up sewage.

  • And in Walnut Hills, Alexander Bailey has struggled for three years to keep water from leaking into his apartment when it rains. "Something has to be done," says Bailey. "We're paying the rent every month and the government is paying, but nothing is getting done. Where is all the money going?"

  • Their homes are among nearly 700 units of low-income housing across Cincinnati left to crumble after their owners, Brooklyn-based NY Group, bought them three years ago and then fell into foreclosure in July 2010. Purchased at the peak of the housing market for $21.5 million, the 19-building portfolio of affordable rental housing spans nine Cincinnati neighborhoods and includes apartment communities in Evanston, Mount Auburn, Paddock Hills, East Price Hill and Sedamsville.

  • The case illustrates how the impact of nation's foreclosure crisis is spreading beyond over-leveraged homeowners and into the country's most fragile housing stock: low-income rental communities that were purchased at peak of the market by speculators and investors.

  • Residents say major problems began at their homes after NY Group took over in 2007. Since the foreclosure filing, repairs to the buildings have become the responsibility of lending giant Fannie Mae, the mortgage holder for the financially ailing properties. The lender says it has spent hundreds of thousands of dollars to address outstanding code violations and city work orders that went unattended to under the NY Group's watch. But residents and others say the buildings remain in unacceptably poor condition.

  • "The NY Group was not interested in making repairs and neither is Fannie Mae, it appears," said Marcheta Gillam, a lawyer at the Legal Aid Society of Greater Cincinnati. For Riley, Bailey and the 653 other Cincinnati families renting from the NY Group, foreclosure means an uncertain future; there's no guarantee they can stay in their homes once they are sold.

***

  • In Cincinnati, NY Group bought its 19 buildings in 2007 from downtown-based Downtown Property Management Inc. Soon after, work orders for roof repairs, leaky kitchen faucets and litter control began to pile up, said Ed Cunningham, manager of Cincinnati's property maintenance code enforcement division. Since the July foreclosure filing in Hamilton County Common Pleas Court, Cunningham's department has received calls for collapsed ceilings, electrical fires, and mold.

***

  • "These residents and buildings are being abandoned, and it's the communities that get stuck holding the bag," Gillam said. "We get stuck with the blight. We get stuck with the unhappy, desperate families that are left wondering if they're going to be displaced."

  • Gillam is representing the tenants who are fighting to be heard in the foreclosure case pending against their homes. Currently, the tenants are not considered a party in the foreclosure case.

For more, see Upkeep neglect bedevils tenants (Renters suffer in foreclosures).

Sunday, March 13, 2011

Manhattan Jury Slams Phony Rental Agent For Clipping $77K+ In Upfront Deposits From Desperate NYC Tenants Seeking 'Section 8' Housing Placement

From the Office of the New York County District Attorney:
  • Manhattan District Attorney Cyrus R. Vance, Jr., [] announced the conviction of JOSIE ALMONTE, 33, for perpetrating a large-scale real estate fraud scheme that targeted sixteen victims. On March 9, 2011, a jury in New York State Supreme Court found the defendant guilty of 28 counts of Grand Larceny, Scheme to Defraud, and Criminal Impersonation.

  • The defendant launched her scheme to defraud vulnerable, low-income families in the middle of a nationwide economic and housing crisis,” said District Attorney Vance. "JOSIE ALMONTE preyed upon individuals who obtained or were seeking federal housing assistance, gained their trust and then stole their money. I would like to commend the jury for recognizing the depth of her deception in pursuit of her personal financial gain.”

  • As proven at trial, ALMONTE falsely represented herself as a real estate agent to sixteen victims. In some cases, she handed out business cards that stated she was a real estate representative for “Empire Home Sales.” In 2008, ALMONTE briefly worked as a Spanish translator for an agent who worked with Empire Home Sales, but she was never issued a business card by that company.

  • ALMONTE also accepted cash deposits ranging from $2,000 to $10,000 from some of her victims, and promised them placement in the Section 8 federal housing program, which provides rent subsidies for eligible low-income families. Nearly all of these victims had Section 8 housing vouchers that were close to their expiration date, so they were in desperate need of housing. [...] ALMONTE’S victims were primarily from the Dominican community in Northern Manhattan.

For the Manhattan DA press release, see District Attorney Vance Announces Conviction In Real Estate Fraud Case (JOSIE ALMONTE Convicted of Scamming Victims Out of More Than $77,000).

Loan Servicers' Force-Placed Insurance Racket Targeted By State AG Settlement Offer

Insurance Networking News reports:
  • Few of the restrictions in the proposed attorneys generals' settlement of mortgage servicing practices are as absolute as the prohibition of profiting from force-placed insurance.

  • Under the settlement's terms, banks and other mortgage servicers are forbidden from placing policies with an affiliate or accepting "commissions," "referral fees," "kickbacks" or "anything of value" in relation to force-placed policies. Moreover, it would require servicers to attempt to maintain delinquent borrowers' existing policies, rather than replacing them with more expensive ones.

***

  • Though banks do not report how much they collect from such payments, a cursory review of force-placed insurers' financials suggests that the business brings servicers hundreds of millions of dollars every year. Combined with the servicing settlement's more general restrictions on marking up default- and foreclosure-related services, the proposal threatens a high-margin source of servicing income.

For more, see Attorneys General Draw a Bead on Banks' Force-Placed Insurance Practices (Last year, Assurant collected roughly $2.7 billion of premiums through its specialty insurance division, making force-placed insurance the company's most profitable segment).

Non Profit Law Firm Teams w/ Private Attorneys To Chase Long Island Outfit Allegedly Targeting Homeowners In Foreclosure w/ Loan Modification Ripoffs

In Nassau County, New York, The Wall Street Journal reports:
  • Lawyers working pro bono for borrowers facing foreclosures say loan-modification "specialists" are pretending they can convince banks to accept lower monthly mortgage payments in return for fees from the borrowers. Foreclosed homeowners, whose cases are entered into public records, have become a prime target for loan modification cons, they say.

***

  • The complaint names as defendants several companies it said operated out of the same cluster of offices in a building on Stewart Avenue in Garden City, N.Y. None of the companies could be reached to comment.

***

  • In New York, it is illegal under a 2008 statute for "distressed property consultants" to charge an up-front fee for help in getting a loan modification. Since February 2010, when the Lawyer's Committee began keeping track of modification fraud complaints, more than 10,000 homeowners nationwide have claimed they were victims of similar scams resulting in more than $27 million in losses. About 500 of those complaints are from New York, which the claimants said resulted in more than $2 million in losses.

  • The New York attorney general's office has been investigating loan modification scams since 2009. In March 2010, the office obtained an $8.8 million judgment against Infinity Mitigation Services, a loan consultant, and obtained a court order to shut down the company.

For more, see Suits Claim Loan Scams.

'Single Mom' Straw Buyer w/ Few Assets Who Bought Ten Homes That Ended In Foreclosure Cops Quick Plea, Blows Whistle On Alleged Mortgage Fraud Racket

In Tampa, Florida, the St. Petersburg Times reports:
  • Three Tampa Bay men have been indicted in a $1.84 million mortgage fraud involving 10 properties purchased without a penny down. The indictment unsealed Tuesday stems from a 2006 St. Petersburg Times story detailing a mysterious real estate spending spree by a single mother with few assets.(1)

  • But federal prosecutors say the single mother was a "straw buyer" and that William Ondra Joel II, 31, of Wesley Chapel was actually behind the purchases. Joel, president of Investor's Outlet Inc. in Tampa, is charged with mail fraud, conspiracy and making false statements to a financial institution.

  • Also indicted on identical charges are the company's vice president, Maurice Vernon, 32, of Tampa, and Elton Lassiter, 44, of Odessa, a loan processor for an unidentified lender. All could get 30 years in prison if convicted. Family members of the three men declined comment at the first appearance in court Tuesday.

  • The straw buyer, Jill Taylor, 35, of St. Petersburg, is cooperating with prosecutors. Known as Jill Jackson at the time she signed to buy the 10 properties, Taylor pleaded guilty in November 2009 to conspiracy to commit wire fraud and faces up to five years in prison.

***

  • By 2007, all 10 of the properties were in foreclosure. Taylor told the Times she had been foolish to fall for the get-rich-quick scheme pitched by Joel, a church acquaintance. Taylor also said she simply followed instructions to buy 10 Tampa properties she had never seen. She paid $700,000 more than the county property appraiser said they were worth. "They arranged everything," Taylor told the Times. "They picked out the properties. They selected the lenders. I was just told to go to closings, and that's what I did." But Taylor said, "I didn't know what I was doing. I don't have any background in real estate."

For more, see Feds indict men in mortgage fraud scheme.

(1) See Home buying spree snaps (A year after a woman bought 10 overpriced properties, she's not the only one hurting):

  • Jill Jackson, a single mom and apartment renter with an annual take-home pay of about $24,000, managed to go on an incredible real estate buying binge last year.

Federal Court Slams Landlord For Allowing Rental Agent To Sexually Harrass Female Tenants; Conduct To Cost Defendants $197K

From the U.S. Department of Justice:
  • A federal court in Detroit has ordered Ypsilanti, Mich., property owner and Washtenaw County Commissioner Ronnie Peterson, and his former manager Glen E. Johnson to pay a total of $82,500 in civil penalties in a sexual harassment case, the Justice Department announced []. The civil penalty is in addition to the $115,000 jury verdict obtained by the department on behalf of six victims of the sexual harassment in August 2010.

  • This decision makes clear that property owners can be held accountable for sexual harassment carried out by their rental agents,” said Thomas E. Perez, Assistant Attorney General for the Civil Rights Division “It is disturbing that some landlords will take advantage of vulnerable women and force them to choose between a roof over their heads or being sexually harassed. It is even more troubling when the harasser is enabled by a property owner who hands him the keys and looks the other way. Rental property owners must establish clear policies against sexual harassment, provide an avenue for tenants to make complaints directly to them, and take those complaints seriously.”

***

  • In its decision, the court noted that Johnson repeatedly sexually harassed six women tenants and that his behavior “was egregious and interfered with the women’s peaceful enjoyment of their homes, which should have been the one place where they could turn for refuge.” The court also noted that Peterson had not taken any corrective action after two of his tenants complained to him about Johnson’s contact. The court noted that Peterson’s conduct was “troubling inasmuch as he was willfully impervious to the complaints from two of his tenants. At the very least, their troubling comments should have put him on notice that he should have given closer attention to Johnson’s supervisory control over his tenants.”

For the DOJ press release, see Michigan Property Owner and Manager Ordered to Pay $82,500 in Civil Penalties in Sexual Harassment Case.

Cincinnati Landlord To Tussle With DOJ In Fair Housing Suit Over Charges Of Sexual Harrasment Of Female Tenants

From the U.S. Department of Justice:
  • The Justice Department [] filed a lawsuit against Cincinnati landlord Henry E. Bailey alleging that Bailey sexually harassed female tenants at residential properties he has owned and managed in the Cincinnati metropolitan area.

  • The complaint, filed in the U.S. District Court for the Southern District of Ohio, alleges that Bailey violated the Fair Housing Act by subjecting female tenants and prospective tenants to unwanted verbal sexual advances and unwanted sexual touching; entering the apartments of female tenants without permission and notice; granting and denying tangible housing benefits based on sex; and taking adverse actions against female tenants when they refused his sexual advances.

  • "Every individual has the right under federal law to rent housing without being subjected to sexual harassment," said Thomas E. Perez, Assistant Attorney General for the Civil Rights Division. "Landlords who abuse their power and authority in this way should be on notice that the Justice Department steadfastly enforces the Fair Housing Act throughout the United States."

  • "A person’s home should provide a place of comfort and safety," said U.S. Attorney for the Southern District of Ohio Carter M. Stewart. "We must safeguard those values by investigating and prosecuting any person or group that seeks to interfere with them." The suit seeks monetary damages for victims of the alleged harassment, civil penalties and a court order barring future discrimination and requiring additional preventive measures.

For the DOJ press release, see Justice Department Sues Cincinnati Landlord for Sexual Harassment.

City Officials Have Hands Tied In Effort To Stem Tide Of 'Sober' Homes In Pompano Beach Neighborhood, Leaving Local Residents Rankled

In Pompano Beach, Florida, the South Florida Sun Sentinel reports:
  • A new type of housing arrangement known as 'sober homes' are cropping up all over the Pompano Highlands neighborhood, according to members of the Pompano Highlands Civic Improvement Association. And there is little that can be done about it.

  • "It's a phenomenon happening all over the country. The problem is they're hard to [regulate] because they are not halfway houses," said Sandra King, a spokeswoman for the city of Pompano Beach.

  • Halfway homes are typically regulated by the state and are allowed in residential areas as long as they are inspected and operating within state laws, said Dennis Beach, the city manager. But the homes in the Highlands appear to be mostly what is known as 'sober homes,' where people coming out of halfway houses or rehabs live together to stay out of trouble. The only thing the homeowner needs to get from the city is a business tax receipt in order to operate legally, said King.

***

  • The Highlands has been targeted mostly because rents are cheap due to a foreclosure crisis that has hit the neighborhood particularly hard, said Walter Syrek, secretary of the civic improvement association. "I can say that my experience over the past four years of working with the association, I'm amazed how often it gets mentioned," Syrek said. "Everyone I've talked to seems to know where one is."

  • But the existence of these homes has caused a nuisance for some in the neighborhood. Syrek said he knows of one sober house on Northeast 43rd Court and 13th Avenue where on weeknights groups set up lawn chairs on the front lawn and hold AA meetings.

For more, see 'Sober homes' causing concern in Highlands neighborhood.

Saturday, March 12, 2011

Mississippi Mobile Home Park Owner To Cough Up $50K To Settle Race-Based Discrimination Fair Housing Lawsuit

From the U.S. Department of Justice:
  • The Justice Department [] announced that Mississippi property owner Indigo Investments LLC, has agreed to pay $50,000 in monetary damages and civil penalties to settle the government’s Fair Housing Act lawsuit. The government alleged that Indigo and its former employees, Barbara A. Hamilton and Edward L. Hamilton, discriminated against African-American residents and members of interracial households at Homestead Mobile Home Village in Gulfport, Miss., which Indigo formerly owned and the Hamiltons formerly managed.

  • The lawsuit originated as a result of a complaint filed with the Department of Housing and Urban Development (HUD) by an African-American couple who moved to the mobile home park after being displaced by Hurricane Katrina. After investigating the complaint, HUD issued a charge of discrimination, and the case was referred to the Justice Department, which filed the lawsuit in June 2009.

***

  • "Losing one’s home to any disaster is disruptive enough without facing housing discrimination when trying to find a new home to restart your life," said John Trasviña, Assistant Secretary for Fair Housing and Equal Opportunity. "HUD and the Department of Justice continue our joint enforcement actions to eliminate illegal housing discrimination in all forms."

  • Under the settlement, which was approved by the U.S. District Court for the Southern District of Mississippi, Indigo Investments LLC, will pay $45,000 to 12 individuals and $5,000 to the United States as a civil penalty.

For the DOJ press release, see Justice Department Settles Housing Discrimination Lawsuit Against Mississippi Mobile Home Park Owner and Managers.

Use Of "No Blacks" Selling Point To Cost Alabama Landlord, Two Employees $15K+ To Settle DOJ Fair Housing Discrimination Lawsuit

From the U.S. Department of Justice:
  • The Justice Department [] announced a settlement of its lawsuit alleging that Chandi Biswas, Kenneth R. Scott and Frankie L. Roberson violated the Fair Housing Act by making discriminatory statements against African-American renters at Rolling Oaks Apartments in Clanton, Ala. The settlement, in the form of a consent decree, was approved by a federal district judge in Montgomery, Ala.

  • The case originated based on evidence generated by the Civil Rights Division’s Fair Housing Testing Program, in which individuals pose as renters to gather information about possible discriminatory practices. The testing uncovered evidence that Scott and Roberson, employees at Rolling Oaks Apartments, told white testers that a selling point of the apartment complex was the lack of African-American tenants, and that Rolling Oaks Apartments had adopted rental policies intended to discourage African-American rental applicants. Biswas owns Rolling Oaks Apartments and employed Scott and Roberson.

  • "When housing providers make race a part of their sales pitch, they create an atmosphere of intolerance and they violate the law," said Thomas E. Perez, Assistant Attorney General for the Civil Rights Division. "This settlement will make clear that race is never an appropriate selling point for housing."

  • Under the settlement, the defendants must pay $15,500 to the government as a civil penalty.

For the DOJ press release, see Justice Department Resolves Lawsuit Alleging Discrimination on Basis of Race in Clanton, Alabama.

Tenant, Non-Profit To Split $30K For Settlement Of DOJ Fair Housing Racial Discrimination Suit; Feds Pocket $5K In Penalties

From the U.S. Department of Justice:
  • The Justice Department announced [] that Orland Park, Ill., property owner Terence Flanagan has agreed to pay $35,000 in monetary damages and civil penalties to settle consolidated Fair Housing Act lawsuits against him. The lawsuits alleged that Flanagan discriminated against a family that tried to rent a single-family home from him, and that Flanagan made repeated statements to fair housing testers expressing a preference not to rent the home to African-Americans.

  • [The] settlement, which has been approved by the U.S. District Court for the Northern District of Illinois in Chicago, resolves a lawsuit filed by the department and one filed by Kemal Majied and the South Suburban Housing Center, a private fair housing organization, against Flanagan in late 2009.

  • Mr. Majied, who is African-American, and his family unsuccessfully sought to rent a single-family home that Flanagan had advertised for rent and contacted the South Suburban Housing Center for assistance. Both the Housing Center and the department later sent fair housing testers to the property, where Flanagan stated he would rent the house to a white tester for $100 less than the advertised rate, and further stated “you’re not black, that’s the reason you’re getting that.”

For the DOJ press release, see Justice Department Obtains $35,000 Discrimination Settlement Against Chicago-area Landlord.

W. Pennsylvania Feds Score Guilty Plea From Teen In Cross-Burning Conspiracy; Conduct Constitutes An Illegal Interference w/ Housing Rights Of Another

From the U.S. Department of Justice:
  • Michael Francis Bealonis, of Robinson, Penn., pleaded guilty [to] a charge related to the burning of a cross in the yard of an African-American juvenile in November 2009, the Justice Department announced []. Bealonis, 19, pleaded guilty to conspiracy to interfere with the housing rights of another in federal court in Pittsburgh before Senior U.S. District Judge Maurice B. Cohill.

  • Information presented during the plea hearing established that a cross burning occurred on Nov. 14, 2009, at a residence in Robinson that was home to a family with three minor children, one of whom is African-American and an adopted son of the family.(1)

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  • "This teen used an unmistakable symbol of bigotry and hate to threaten a family with violence simply because the race of a child. These incidents have no place in our country, and they are a reminder of the civil rights challenges we still face today," said Thomas E. Perez, Assistant Attorney General for the Civil Rights Division. "We will continue to aggressively prosecute hate crimes of this kind."
For the DOJ press release, see Pennsylvania Teen Pleads Guilty for Cross Burning.

Go here for other posts on cross-burning prosecutions.

(1) According to the DOJ press release, the investigation determined that Bealonis and his co-conspirators agreed to burn a cross in the backyard of the home, and used boards to construct a 6-foot wooden cross with athletic socks attached that had been soaked in accelerant. Bealonis and one of his co-conspirators transported the cross to the garage of another co-conspirator, where they poured gasoline on the cross before Bealonis took it, jumped over a fence and carried it to the back yard of the victim’s house, where he pushed the cross into the ground and lit it. He also used racial slurs and expressed racial animus during the cross burning.

Three Guilty Pleas, One Conviction After Louisiana Federal Court Trial In Cross-Burning Conspiracy

From the U.S. Department of Justice:
  • The Justice Department announced that U.S. District Judge Donald E. Walter accepted the guilty plea of Jeremy Matthew Moro, 33, for conspiring to burn a cross near the home of an interracial couple in Athens, La., in October 2008. [In February], Judge Walter accepted the guilty plea of Joshua James Moro, 25, on the same charge.

  • Another defendant, Sonya Marie Hart, 31, pleaded guilty on Jan. 31, 2011, to misprision of a felony because she withheld information from the FBI regarding the defendants’ attempt to cover up the cross burning. The Moros’ cousin, Daniel Danforth, was previously convicted by a federal jury for organizing, carrying out and attempting to cover up the same cross burning.

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  • Cross burning, unfortunately, remains a terrible symbol of hatred and intolerance. Every citizen has a right to feel safe and secure in their homes and neighborhoods. Intimidation of citizens in this district will not be tolerated. This office will continue to prosecute individuals who participate or facilitate crimes which violate the civil rights laws,” said U.S. Attorney for the Western District of Louisiana Stephanie Finley.

For the DOJ press release, see Three Plead Guilty to Civil Rights Conspiracy in Connection with Cross Burning in Athens, Louisiana.

Go here for other posts on cross-burning prosecutions.

'Clean & Sober' Group Home Operator Scores $55K From Michigan Municipality In Settlement Of DOJ Fair Housing Lawsuit

From the U.S. Department of Justice:
  • The Justice Department announced [] that Dalton Township, Mich., will pay $62,500 to settle a lawsuit alleging that the township discriminated against a group home for persons recovering from drug and alcohol addiction, in violation of the federal Fair Housing Act and Title II of the Americans with Disabilities Act.(1)

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  • "The Fair Housing Act and the Americans with Disabilities Act ensure that persons with disabilities, including those recovering from addiction, can live in a community of their choosing free from discrimination," said Thomas E. Perez, Assistant Attorney General for the Civil Rights Division. "The Justice Department will continue its vigorous enforcement of federal laws to protect the civil rights of persons with disabilities across the country."

  • "Cities and towns have an obligation to make reasonable accommodations to their zoning policies when they are necessary to afford people with disabilities the same housing opportunities that others enjoy," said John Trasviña, Department of Housing and Urban Development (HUD) Assistant Secretary for Fair Housing and Equal Opportunity. "HUD will continue to work with the Justice Department to enforce the Fair Housing Act to ensure equal housing opportunities for people with disabilities."

For the DOJ press release, see Justice Department Settles Housing Discrimination Lawsuit Against Dalton Township, Michigan.

(1) According to the press release, Dalton Township will fork over $55,000 to the owner of the group home, and permit him to operate the group home for up to nine men recovering from alcohol and drug dependency at its current location; and cough up $7,500 to the United States as a civil penalty.