Tuesday, June 21, 2011

Florida High Court Battle Begins Over Use Of Voluntary Dismissal By F'closure Sweatshop After It Gets Bagged Submitting Allegedly Bogus Mortgage Docs

The initial brief in a case involving the use of a voluntary dismissal by a foreclosure mill in a foreclosure action to dodge court scrutiny of dubious documents that were submitted with the lower court was filed earlier this month with the Florida Supreme Court.

This issue was raised in Pino v. The Bank of New York Mellon, a Florida appeals court case, and involves conduct by the defunct foreclosure sweatshop headed by attorney David J. Stern.

For the brief, see Initial Brief - Pino v. The Bank of New York Mellon (go here for Appendix to initial brief).

Go here for links to other documents filed with the Florida Supreme Court.

Evidence Of Life Surfaces At Fla Bar; Lawyer Regulatory Body Finally Files Disciplinary Complaint Against Dethroned King Of F'closure Mill Sweatshops

The Palm Beach Post reports:
  • The Florida Bar is asking for disciplinary action against South Florida attorney David J. Stern for ignoring a 5th District Court of Appeal order in a foreclosure case where his firm represented SunTrust Bank.


  • A complaint filed Friday with the Florida Supreme Court charges Stern, whose Plantation-based company was once the largest foreclosure firm in the state, with violating rules of professional conduct and disobeying a court obligation.

For more, see Ex-foreclosure giant David J. Stern faces Bar trouble.

For the complaint, see The Florida Bar v. Stern, Case No. 11-1192 (June 17, 2011).

Go here for links to other relevant court documents.

Dubious Document Signed Years After Lender Tanked Surfaces In Ongoing South Carolina Foreclosure Action

Buried in a recent story in The Myrtle Beach Sun News on the foreclosure fraud scandal (story mentions Docx, Linda Green, LPS - the 'usual suspects') is the following excerpt on how one couple facing foreclosure was victimized by a dubious assignment of mortgage that was signed a couple of years after the mortgagee of record went out of business:
  • Bob and Christine Dorrie moved to Myrtle Beach from the Bronx in New York in 1998. Like many people during the economic boom, the Dorries used their credit cards to finance a lifestyle beyond their means. So, in September 2007, they decided to refinance their home in the Island Green East neighborhood to pay off some of their bills.

***

  • The Dorries' mortgage payment, which had been $987 a month, soared to $1,340 a month after the refinance. As the economy grew worse, the Dorries quickly fell behind on their house payment.


  • Wells Fargo Bank, the new owner of the Dorries' loan, filed a foreclosure lawsuit against the couple on Sept. 2, 2009. Bob Dorrie's emergency bankruptcy filing three days before the house was to be sold at auction has put everything in limbo. The Dorries now are questioning how Wells Fargo came to own their loan.


  • Ace Funding - the company that gave the Dorries their loan in 2007 - filed for bankruptcy protection and went out of business the following year, never officially assigning the Dorries' loan over to Wells Fargo.


  • Wells Fargo didn't file the assignment on behalf of the defunct Ace Funding until more than three weeks after the foreclosure lawsuit was filed. A lawyer representing Wells Fargo in the foreclosure lawsuit signed the document for Ace Funding, even though he "really has no authority to assign this mortgage," according to Terry Walden, an audit originator and attorney liaison for New South Financial.

For the story, see Mortgage papers raise Myrtle Beach real estate fraud claims (Signatures on documents used in foreclosure cases under review).

Attttorney Gets 8 Years For Clipping Clients' Trust Account Out Of $380K; Prosecutors: Lawyer Used Cash To Finance Costa Rican Casino Crapshoot

In Fort Lauderdale, Florida, the South Florida Sun Sentinel reports:
  • A former Fort Lauderdale lawyer who cheated his clients out of more than $380,000 was sentenced on Thursday to eight years in prison, the Broward State Attorney's Office said. Mitchell Olin, 50, made an open plea putting his legal fate in the hands of Broward Circuit Judge Andrew Siegel.


  • He imposed the sentence and ordered Olin to repay the seven families he represented in real estate transactions and insurance settlements starting in 2002.(1) He also sentenced Olin to 15 years probation. And, Olin promised to help three of the families in foreclosure proceedings, the State Attorney's Office said.


  • The money had been placed in trust, but Olin used it to finance a casino venture in Costa Rica, prosecutors said. Olin's bank caught the discrepancies in the trust account and alerted the Florida Bar.

Source: Former Broward lawyer sentenced in fraud case.

(1) The Florida Bar's Clients' Security Fund compensates people who have been victims of of misappropriation or embezzlement of cash or property by a Florida-licensed attorney. For those ripped off by dishonest attorneys in other states and Canada, see:

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

Monday, June 20, 2011

Failure To File Motion Within 90 Days Of Deed Delivery Consummating NY Foreclosure Sale Sinks Lender's Move To Score Deficiency Judgment

A recent ruling by a New York intermediate appellate court serves as a reminder that, in New York, where the proceeds of the foreclosure sale fail to cover the entire amount due on the loan, a foreclosing mortgage lender will be deemed to be legally "out of luck" in any attempt to obtain a deficiency judgment against those liable on the loan if it fails to file a motion for a deficiency judgment "within ninety days after the date of the consummation of the sale by the delivery of the proper deed of conveyance to the purchaser", as one recent lender sadly discovered.(1)

The lender's desperate attempt to salvage the situation with the argument that the '90-day meter' should not begin to run until the referee's (foreclosure) deed could, under state law, legally be recorded fell on unpersuaded judicial ears.(2)(3)

For the ruling, see Cicero v Aspen Hills II, LLC, 2011 NY Slip Op 05153 (NY Sup. Ct. App. Div. 3rd Dept. June 16, 2011).

(1) Contrast the 90-day time period in New York with the five year time period in Florida (with an additional 20 years to collect). See Time in which the plaintiff must apply for a deficiency judgment in a Florida foreclosure case. Check state law for the applicable time frame in your state.

(2) From the ruling:

  • Pursuant to the RPAPL, "the mortgagee in a mortgage foreclosure action [may] recover a deficiency judgment for the difference between the amount of indebtedness on the mortgage and either the auction price at the foreclosure sale or the fair market value of the property, whichever is higher" (BTC Mtge. Invs. Trust 1997-SI v Altamont Farms, 284 AD2d 849, 849-850 [2001]; see RPAPL 1371 [2]).

    The statute requires, however, that a motion for a deficiency judgment be made "within ninety days after the date of the consummation of the sale by the delivery of the proper deed of conveyance to the purchaser" (RPAPL 1371 [2]).

    The 90-day period is a provision in the nature of a statute of limitations, thus "[f]ailure by plaintiff to serve notice within the 90-day period is a complete bar to the entry of a deficiency judgment" (Amsterdam Sav. Bank v Amsterdam Pharm. Dev. Corp., 106 AD2d 797, 797 [1984]).

    Here, no dispute exists that the appointed referee delivered the deed to plaintiff on November 23, 2009, or that there was any deficiency in the deed itself. Plaintiff was required, therefore, to file the motion by February 21, 2010 — 90 days from delivery of the deed — and, accordingly, Supreme Court properly held that plaintiff's March 25, 2010 motion was untimely (see Citicorp Mtge. v Strong, 227 AD2d 818, 820-821 [1996]; National Bank of Sussex County v Betar, 207 AD2d 610, 612 [1994]).

    Plaintiff asserts, instead, that the 90-day period did not begin to run until the expert's appraisals of the mortgaged properties were delivered to plaintiff on January 13, 2010. Specifically, because the deed could not be recorded in New York State until two tax forms were completed — the TP-584 and the RP-5217 — which could not be executed until the fair market value was derived from the appraisals, plaintiff argues that consummation of the sale, and the commencement of the 90-day period, did not occur until the appraisals were delivered.

    We disagree. Both our statutory and common laws dictate that transfer of real property occurs at the delivery of a properly executed deed, rather than when the deed is recorded (see Real Property Law § 244; Manhattan Life Ins. Co. v Continental Ins. Cos., 33 NY2d 370, 372 [1974]; Janian v Barnes, 284 AD2d 717, 718 [2001]).

    Plaintiff's attempt to read the clear reference to "delivery of the proper deed of conveyance" in RPAPL 1371(2) to require something more than the delivery of the properly executed deed to commence the limitations period is not persuasive (see Citicorp Mtge. v Strong, 227 AD2d at 820-821; Savings Bank of Utica v 561-575 Delaware Ave., 201 AD2d 946, 946 [1994]; Crossland Sav. v Patton, 182 AD2d 496, 496 [1992], lv denied 80 NY2d 755 [1992]).
(3) This ruling should serve as a reminder to foreclosed homeowners in New York (and elsewhere) that the unpaid balance on a foreclosed loan cannot be collected (either by the lender, some zombie debt buyer who may have swooped in and bought the crappy paper for 'pennies on the dollar', or any other scavenger) unless and until:
  • a motion requesting a hearing for the granting of a deficiency judgment is filed with the court within the proper time period,
  • a judge holds the hearing (with all parties receiving proper notice thereof), and
  • a judge grants the deficiency judgment, determining exactly what the deficiency amount is (typically, and as set forth in Cicero v Aspen Hills II, LLC, it is "the difference between the amount of indebtedness on the mortgage and either the auction price at the foreclosure sale or the fair market value of the property, whichever is higher").
A word of caution to foreclosed homeowners: beware of zombie debt buyers and other vultures that gobble up these unpaid deficiency debts from foreclosing lenders (see e.g. Short Sellers, Foreclosed Borrowers May Be In For Big Surprise As Collection Firms Scramble To Buy Up Unpaid Loan Deficiencies), and who then attempt to collect on them without first having obtained a deficiency judgment. Keep in mind that, not only are they not allowed to do this, but if they do, they are giving you a good case for a lawsuit against them for violation the federal Fair Debt Collection Practices Act, as well as any applicable state law.

See Fla. Appeals Court Nabs Sneaky F'closing Lender In Attempt To Improperly Go After Foreclosed Property Owner's Personal Assets To Satisfy Unpaid Debt for an example of one foreclosing lender who almost got away with duping a snoozing trial judge into signing a court order allowing for the collection of an unpaid post-foreclosure sale debt where the lender did not first obtain a deficiency judgment in the court that granted the foreclosure.

Trafficking In Deficiency Judgments An Upcoming Cottage Industry Being Seen On The Horizon?

The following excerpt buried in a recent story in the Sarasota Herald Tribune serves as a caution to financially-strapped homeowners and 'strategic defaulters' thinking of walking away from their underwater homes and investment property:
  • Florida is gliding quietly into a new and potentially painful part of the boom-bust cycle, where stacked-up "deficiency judgments" for unpaid condo fees and unsatisfied mortgages could come back to haunt past owners. Many of them thought they had escaped further costs when they handed their home over to their lender.


  • When a lender sells a foreclosed home for less than the mortgage, the difference -- or "deficiency" -- is typically registered in the court proceedings as being owed by the original borrower, but it is seldom paid.


  • The same thing can happen with unpaid condo or homeowner fees. Either as part of the bank foreclosure or through a separate foreclosure action, the homeowner or condo association can ask the court for a deficiency judgment.


  • In either case, even if these debt instruments gather dust for years, they remain valid and are accruing interest at the rate of 6 percent to 18 percent per year.

***

  • [In Florida, t]here is a five-year period from the end of a case judgment to establish a deficiency judgment.(1) Then that judgment lasts for 10 years and it can be renewed for another 10 years. "You can even sue at the end and get more time, so there is all the time in the world to collect on these things,"(2) Soto said. "Yet there is this pervasive rumor that you can somehow walk away from your house and never have to worry about it again. And it is simply not true."(3)
For more, see Foreclosure fees haunt homeowner associations.

(1) See Time in which the plaintiff must apply for a deficiency judgment in a Florida foreclosure case.

(2) See Burshan v. Nat'l Union Fire Ins. Co., 805 So.2d 835 (Fla. 4th DCA 2001):
  • The "main purpose of an action on a judgment is to obtain a new judgment which will facilitate the ultimate goal of securing satisfaction of the original cause of action." Adams v. Adams, 691 So.2d 10, 11 (Fla. 4th DCA 1997).

    If a limitations period has almost run on a judgment, a judgment creditor "can start the limitation period anew by bringing an action on the judgment to obtain a new judgment." 47 AM.JUR.2D Judgments § 945 (1995); accord Adams
    , 691 So.2d at 11 (quoting Koerber v. Middlesex College, 136 Vt. 4, 383 A.2d 1054, 1057 (1978)). A party may not relitigate the merits of the original cause of action in an action on a judgment. See Klee v. Cola, 401 So.2d 871, 872 (Fla. 4th DCA 1981).

(3) There is also a pervasive belief (and seemingly persuasive argument) that a judgment creditor can just sit on its claim, without making any attempt to collect on the money owed, wait for the debtor to get financially back on his feet, and then go after him for the unpaid debt, all the while accumulating additional judgment interest on the amount owed.

Specifically in Florida (and elsewhere, I'm sure), a "foot-dragging" creditor intentionally twiddling its thumbs in such a case may be found to to have "slept on its rights" and, consequently, leave itself vulnerable to a laches defense, as some presumably flabbergasted creditors in Florida have mournfully discovered, even though the 20-year period had yet to expire. See:

  • Winter v. Allstate Mortg. Corp., 303 So. 2d 399 (Fla. App. 3d DCA. 1974):

    Of course, a party ordinarily has twenty years in which to enforce a judgment in Florida. However, when undue delays are exercised without sufficient reason, it has been held that equitable defenes may be raised which may cut off the right to satisfy a judgment. Orr v. Allen-Hanford, Inc., Fla.1946, 158 Fla. 34, 27 So.2d 823; Blackburn v. Venice Inlet Co., Fla.1949, 38 So.2d 43.

    In the instant case, no effort was undertaken by the original judgment creditor, Brown, to satisfy his judgment, and it was not until eight years later that the appellee brought this action which informed the appellants for the first time of the existence of the judgment.

    It is also apparent that appellee's motive in purchasing the judgment was to assist it in acquiring the appellants' property at a reduced price. To permit foreclosure on a relatively valuable piece of property to satisfy the comparatively meager sum due because of the judgment would be inequitable under the circumstances of this case.

    Therefore, for the reasons stated, the judgment appealed is reversed and the cause is remanded with directions to enter judgment in favor of the appellants.
  • Blackburn v. Venice Inlet Co., Fla.1949, 38 So.2d 43:

    In the case of Orr v. Allen-Hanford, Inc., 158 Fla. 34, 27 So.2d 823, we held that a creditor may satisfy his judgment within twenty years, but when undue delays are exercised without sufficient reasons shown therefor, equitable defenses become available that may cut off the right to satisfy the judgment.

See also, NH Couple Beats Back Debt Scavenger's Attempt To Collect On Zombie Debt From Old Foreclosed Mortgage:

  • The judge also agreed with Wright's argument, under a legal doctrine known as a "Laches" defense, that Cadle had waited to try to collect the debt so that interest and late fees would pile up. The original loan deficiency on the Lessards' note was about $14,000, but Cadle was trying to collect nearly $30,000 by the time the lawsuit was filed.

Zombie Debt That Came Back To Life & Bite 'Deed-In-Lieu-Conveying' Homeowner Leads To Suit Against Fannie, BoA, Foreclosure Mill Sweatshop

In Fort Myers, Florida, The News Press reports:
  • David Cruz Jr. got what he believed was a great offer in a foreclosure lawsuit filed against him by giant mortgage lender Fannie Mae. If Cruz deeded the modest Fort Myers investment house back to Fannie Mae, the government-backed company would release him from the loan's $123,750 note: the obligation underlying his mortgage.


  • He deeded the house back to Fannie Mae, but court records show he didn't get what he bargained for. Now, experts say, he and thousands of others in Florida who took the same deal from Fannie are at risk of being stalked by a so-called "zombie note:" debt that appears dead and gone but still can come back to life.


  • Cruz, of Fort Lauderdale, is suing Fannie in Lee circuit court along with its loan servicer Bank of America and their attorney, Fort Lauderdale-based Law Office of Marshall C. Watson, which handled the foreclosure and the deed-back deal.

***

  • Even if Fannie has the note, Cruz should take little comfort from the fact he's dealing with a federally backed entity, said Jack Williams, resident scholar at the American Bankruptcy Institute and a bankruptcy professor at Georgia State University. "That note is a legal obligation," he said, and even if Fannie Mae doesn't sue, it could sell the debt to someone who would.


  • "We saw something very similar to this in the debacle in the '80s, people buying notes from the government and suing," Williams said. "I won't rule out that could happen again. They sold the note to collection agencies and law firms and places like that."


  • In the real estate meltdown of the '80s, he said, it was the Resolution Trust Corp., set up by the federal government to liquidate mortgage loans and other real estate assets held by failed savings and loan associations.


  • "Let me tell you, people made millions of dollars suing homeowners back in the day," Williams said. Some of the debt was in the form of deficiency notes: court judgments saying a certain amount was owed even after the property was sold at public auction. But in other cases, Williams said, it was the note, straight up.

For more, see 'Zombie notes' live to haunt deed transfers (Thousands affected by Fannie Mae tactics) (if link expires, TRY HERE).

Failure To Record Earlier-Created Mortgage No Bar To Priority Over Later-Created, Recorded Mortgage, Says Brooklyn Trial Court

The following facts are taken from a recent ruling of a Brooklyn, New York trial court denying a defendant's motion for dismissal by one bankster in litigation against another bankster:
  1. On or about August 10, 2005, a property owner, one Hemant, and a co-owner obtained a $302,250 mortgage loan from Fremont Investment and Loan.


  2. Inexplicably, Fremont failed to record the mortgage (further, at the time of the litigation in this matter, Fremont admitted that it was not in possession of the mortgage documents).


  3. Thereafter on March 30, 2007, Hemant executed a deed purportedly conveying all of his right title and interest to the premises to defendants Seema and Sushma, his daughters.


  4. The deed was recorded on March 30, 2007. On March 30, 2007 Seema and Sushma executed a note and mortgage for $423,750 secured by the Premises, said note and mortgage ultimately winding up in the hands of HSBC.


  5. In the process of carrying out the March 30, 2007 transaction, Hemant delivered two affidavits at the closing in which he states that he has received zero consideration for the transfer of the premises, that the transfer was between family members and two transfer tax documents which state that the consideration for the transfer was $0.


  6. In contrast to those documents, the HUD-1 form states that Hemant received $296,000 in consideration for the transfer.


  7. Also, the checks issued at the closing were endorsed to parties other than Hemant and his daughters (an attorney's affirmation authenticating copies of checks issued in connection with this closing, which involved Delta Finding (now held by HSBC) and the parties was submitted to the court affirming that the checks were issued to persons and entities including Sushma Rambaran, HKR Construction, Varsha Construction, and 81-83-85 Blake Avenue LLC).
In this case, the court was asked to address, as between Fremont (holder of the earlier-created mortgage that recklessly went unrecorded) and HSBC (holder of the later-created, but earlier recorded mortgage), whose mortgage has priority on the property in question. Specifically, Defendant HSBC moved to be dismissed from what apparently was a foreclosure action brought by Fremont (actually, by MERS, as Fremont's nominee), HSBC claiming that its mortgage had priority over Fremont's mortgage.

Question: Which has priority over the other, Fremont's earlier-created, unrecorded mortgage or HSBC's later-created, earlier-recorded mortgage.

Answer: If you said HSBC's recorded mortgage has priority over Fremont's unrecorded mortgage, you may very well be wrong. Based on the foregoing facts (which have been assumed to be true in deciding a motion to dismiss), Kings County Supreme Court Justice Herbert Kramer denied HSBC's motion to dismiss, "hold[ing] that a genuine issue of material fact exists as to whether the mortgagee was a bona fide purchaser due to the discrepancies in the closing documents."(1)

For the ruling, see Mortgage Elec. Registration Sys., Inc. v Rambaran, 2011 NY Slip Op 50966(U) (NY Sup. Ct. Kings County, May 23, 2011).

Observations:
  1. Inasmuch as attorneys from The Law Division of Fidelity National Title Group., Inc., New York City, represented HSBC in this case, one can reasonably surmise that Fidelity was the insurance company that issued HSBC its mortgagee's title insurance policy (which means Fidelity, along with the agent who ostensibly butchered the closing of the March 30, 2007 transaction, may ultimately be the ones left holding the bag on this apparent screw-up).
  2. While apparently not central to Justice Kramer's ruling, Mortgage Electronic Registration Systems played a role in the origination/servicing of both mortgages involved in this controversy. Yet another fine mess MERS finds itself in the middle of.

(1) Justice Kramer begins his analysis by stating that New York follows the (seemingly) universally well-known general rule that, as a 'race-notice' state, an earlier-recorded instrument (ie. HSBC) has priority over a later-recorded or unrecorded instrument (ie. Fremont).

He then refers to what is seemingly a universally unknown (or, at least, not fully understood) exception to the general rule, in this excerpt:

  • However, there are several exceptions carved out of this general rule. For example, a prior recorded mortgage would lose priority to an unrecorded mortgage if the mortgagee had notice, actual or constructive of such a conveyance.

    If a purchaser has knowledge of any fact, sufficient to put him on inquiry as to the existence of some right or title in conflict with that he is about to purchase, he is presumed either to have made the inquiry, and ascertained the extent of such prior right, or to have been guilty if a degree of negligence equally fatal to his claim, to be considered a bona fide purchaser. Maiorano v. Garson, 886 N.Y.S.2d 190 [2d Dep't 2009] citing Williamson v. Brown, 15 NY 354, 362 (internal citations omitted).

In the following brief discussion, Justice Kramer sets forth his reasons for denying HSBC's motion to dismiss:

  • The defendant, HSBC moves for dismissal on the grounds that the defendant's purported lien was not recorded at the time that HSBC took a mortgage on the subject property. HSBC asserts that it had no knowledge, actual or constructive of the purported lien and therefore a bona fide good faith purchasers/encumbrancers and that the mortgage which they hold has priority.[2]

    Plaintiff, in opposition to the motion contends that HSBC is not a bona fide purchaser in good faith because, as discussed above, the closing documents associated with the transfer of the property between Hemant and his daughters conflict. Plaintiff further asserts that the contradiction between the documents raised HSBC's duty to inquire as to whether the transfer was a fraudulent transfer designed to evade Hemant's creditors.

    This Court holds that the discrepancies in the closing documents were sufficient to put HSBC on notice to further inquire as to the bona fides of the transaction. No evidence has submitted that HSBC engaged in any additional investigation in light of the discrepancies. Rather, it seems that HSBC simply pushed the documents through without the critical eye which is required in these transactions.

    Gone are the days in which closing documents are merely meant to be shuffled and stacked. A lending institution has an affirmative duty to inquire into the bona fides of the documents, prior to taking mortgage on a property. If they fail in that duty their status as a bona fide purchaser is threatened. See, Southwell v. Middleton, 17 Misc 3d 1129(A) [Sup. Kings. 2007].
    [3] [Where the court held that discrepancies between the closing checks gave rise to a duty to further investigate the transactions].

    Accordingly, the motion is denied.

Sunday, June 19, 2011

Failure To Name Scam-Financing Lender As Defendant In Suit To Undo Sale Leaseback Equity Stripping Ripoff Leads To Never-Ending Litigation Marathon

An Indiana sale leaseback ripoff transaction that dates back to 2002 has been the subject of multiple rounds of court proceedings over the last eight years, and was the subject of a recent ruling by the Indiana Court of Appeals. In a nutshell:
  1. One, Swafford (the home owner), who was unable to obtain conventional financing through a mortgage company, asked one, Seitzinger, the agent of the mortgage company, if she could help him save his home from foreclosure.


  2. Seitzinger contacted Hodges, her brother, who proposed a sale leaseback arrangement, whereby Swafford sold the home to Hodges, and where a land contract between Swafford and Hodges was contemporaneously entered into to effect the planned repurchase by Swafford.


  3. The total effective sale price paid by Hodges to Swafford was $39,514.17, and the contemporaneous buy back agreement (the land contract) required Swafford to repurchase his home for $59,000.00, with interest at the rate of 8.50 percent per annum.


  4. As part of consummating the transaction, Hodges obtained an institutional mortgage loan for $57,400, paying Swafford $39,514.17 (all but $4,000 going to pay off existing liens/debts), and pocketing the balance.


  5. In 2003, a year after the deal was done, and after some disagreements that arose, Swafford filed a lawsuit against Hodges & Seitzinger to rescind the deal, alleging violations of the federal Truth in Lending Act, the federal Home Ownership and Equity Protection Act, the federal Real Estate Settlement Procedures Act, the Indiana Deceptive Consumer Sales Act, among other claims.


  6. When filing the suit, however, Swafford failed to name, as an additional defendant, the holder of the mortgage loan that financed Hodges' purchase from Swafford.


  7. Swafford ultimately prevailed in Round 1 of this litigation, with the sale leaseback being voided by the trial court. Among other things, Swafford recovered title to his home, subject to the mortgage loan Hodges obtained to finance the sale leaseback, and Hodges was instructed to continue making payments on said loan.


  8. In Round Two, the ruling of the trial court was affirmed on appeal. See Hodges v. Swafford, 863 N.E.2d 881, amended on reh'g, 868 N.E.2d 1179 (Ind. Ct. App. 2007).


  9. At some point after losing Round 2, Hodges stopped making the payments he was ordered to make to the mortgage lender, and the lender began Round 3 of this battle by filing a foreclosure action against both Hodges, the sale leaseback peddler, and homeowner Swafford.


  10. In Round 3, the trial court concluded that because the transaction between Swafford (the homeowner) and Hodges (the sale leaseback peddler) had been rescinded, Hodges had no interest in the property when he obtained his loan, and as a result, the mortgage never attached to Swafford's home.


  11. The trial court therefore concluded that the Bank could not foreclose on the property; however, it was entitled to summary judgment against sale leaseback peddler Hodges for the remaining amount due and owing under the mortgage loan. Homeowner Swafford (now with a home free & clear of Hodges' mortgage) was dismissed from the foreclosure action.


  12. Unsatisfied with this result, the bank commenced Round 4 and filed this appeal.

After an analysis of the federal Truth in Lending Act, the Indiana Court of Appeals ruled that the mortgage loan made to Hodges by the lender was not void ab initio, but merely voidable. Accordingly, it reversed the trial court finding that the mortgage did not attach at the time the sale leaseback was consummated, seemingly resulting in a reinstatement of the mortgage as a lien on Swafford's home.

However, the appeals court then went further, and instructed the trial judge to begin Round 5 of this seemingly never-ending mess by holding off on proceeding with a foreclosure sale of Swafford's home until certain issues have been addressed, as explained in the following excerpt (bold text is my emphasis):

  • It does not necessarily follow, however, that the Bank is entitled to foreclose on the mortgage. We believe that substantial genuine issues of material fact remain regarding the equities of this case, and the interplay between those equities and the Bank's security interest in Swafford's property.

    Because Swafford has already paid off the amount he owed to the Hodgeses, it may be inequitable to allow the Bank to foreclose on the mortgage and thereby deprive Swafford of ownership of the property.

    On the other hand, it may be inequitable to cut off the Bank's right to foreclose on the mortgage based on the Hodgeses' wrongdoing, assuming the Bank was not in a position where it knew or should have known of that wrongdoing.

    We find it particularly troubling that the Bank was not joined as a necessary party to Swafford's action to enforce his right to rescind under the TILA. It seems evident on the face of the record that the Bank was a necessary party to any action seeking to transfer title to the property subject to the Bank's mortgage. See In re Paternity of C.M.R., 871 N.E.2d 346, 349 (Ind. Ct. App. 2007) (noting that a necessary party as one who must be joined in the action for a just adjudication).

    If the Bank had been made a party to the underlying litigation, the parties may have been able to reach a settlement or, if no settlement could be reached, the trial court could have fashioned a complete and appropriate, equitable remedy at a much earlier time.

    If Swafford was aware of the Bank's interest in the property during the course of his suit to enforce his right to rescind under TILA, but nevertheless chose not to join the Bank, he may be estopped from denying the Bank's interest. See Zoller v. Zoller, 858 N.E.2d 124, 127 (Ind. Ct. App. 2006) (noting that all forms of estoppel "are based upon the same underlying concept: a person who, by deed or conduct, has induced another to act in a particular manner will not be permitted to adopt an inconsistent position, attitude, or course of conduct that causes injury to the other.").

    Likewise, if the Bank was aware of the litigation and chose not to intervene, it may be estopped from asserting any right to enforce or reform the terms of the mortgage. See id..

    Swafford's level of sophistication ("a retired laborer, has a sixth grade education and is illiterate, except that he can read numbers and sign his name") and whether he was aware that the Hodgeses intended to finance their loan to Swafford by mortgaging the property, together with the extent to which the Bank's assignor knew or should have known of Swafford's interest in the property at or about the time the Hodgeses executed the promissory note and mortgage at issue will also be very relevant in balancing these equities.(1)

    For all of these reasons, we reverse and remand with instructions for the trial court to receive additional evidence on whether any legal or equitable remedy is available to the Bank, and if so, what the terms of that remedy should be

    Reversed and remanded with instructions.

For the Indiana appeals court ruling in Round 4 of this continuing litigation marathon, see Wells Fargo Bank, N.A. v. Hodges, No. 55A01-1007-MF-334 (Ind. Ct. App. June 10, 2011) (unpublished).

(1) In suggesting that a determination should be made of the extent, if any, to which the bank "knew or should have known of Swafford's interest in the property at or about the time the Hodgeses executed the promissory note and mortgage at issue ...", it may be that the appeals court is telegraphing to the parties that the bank, by reason of Swafford's retained and continued possession of the premises at the time the bank financed the sale leaseback and thereafter, may have been been on notice of Swafford's ownership interest in the premises at that time. In such case, and assuming the bank failed to conduct a physical inspection of the premises in ascertaining the rights of persons in possession, Swafford may be able to successfully void the bank's mortgage and eliminate the lien thereof from his home after all.

Indiana case law appears to support the proposition that a lender's failure to examine the premises prior to making a mortgage loan will leave it vulnerable to the unrecorded rights and equities of the occupants, and without the protection of the recording statutes as a bona fide purchaser / bona fide mortgagee, as one disappointed Indiana lender sadly learned last year. Thomas v. Thomas, 923 N.E.2d 465 (Ind. Ct. App. 2010):

  • "[T]o qualify as a bona fide purchaser,[[1]] one has to purchase in good faith, for a valuable consideration, and without notice of the outstanding rights of others." Kumar v. Bay Bridge, LLC, 903 N.E.2d 114, 116 (Ind.Ct.App.2009) (citation omitted). "The theory behind the bona fide purchaser defense is that every reasonable effort should be made to protect a purchaser of legal title for a valuable consideration without notice of a legal defect." Id. (citation omitted).

    There is no dispute that Benjamin failed to file a lis pendens notice when he filed his quiet title action against Richard on September 12, 2001. The trial court, however, concluded that Trustcorp did not qualify as a bona fide mortgagee because it did not act in good faith and had constructive notice of Benjamin's lawsuit. Trustcorp contends that these conclusions were erroneous. The record supports conclusions that Trustcorp did not act in good faith and can be imputed with notice of Richard's fraud and Benjamin's lawsuit.

    The Indiana Supreme Court has squarely held that "one who fails to examine land which he is about to purchase, and to inquire as to the rights of one in possession, is not acting in good faith and will not be treated as a bona fide purchaser."
    Mishawaka, St. Joseph Loan & Trust Co. v. Neu, 209 Ind. 433, 443, 196 N.E. 85, 90 (1935).

    Regarding notice of competing claims, the Court also held that "means of knowledge, with the duty of using them, are equal to knowledge itself." Id. The Indiana Supreme Court has also held that possession of land puts the world on notice that the possessor may have a claim of ownership and right to possession. See
    Olds v. Hitzemann, 220 Ind. 300, 308, 42 N.E.2d 35, 38 (1942) ("[Appellees] were still in possession of their land, and their possession was notice to the world of their claims to ownership and right to possession.").

    Quite simply, it is undisputed that Benjamin was in possession of the property in question and that Trustcorp nonetheless did nothing to ascertain his rights to it. It is apparent that even a cursory investigation would have quickly uncovered both Richard's fraud and Benjamin's claims on the home. Under the circumstances, Trustcorp cannot have been a bona fide mortgagee, and we therefore affirm the trial court's judgment in this regard.

(By the way, in footnote 1 of Thomas v. Thomas, the appeals court gives this reminder that, in Indiana, "[t]he law regarding bona fide purchasers applies with equal force to mortgagees. See, e.g., Weathersby v. JPMorgan Chase Bank, N.A., 906 N.E.2d 904, 910 (Ind. Ct. App. 2009).")

See also, Failure To Inspect Property & Inquire Into Rights Of Parties In Possession Prior To Making Loan Leaves Indiana Lender With Voided Mortgage.

See Bona Fide Purchaser Doctrine, Possession Of Property By Occupants Other Than The Vendor & The Duty To Inquire for case law in other states addressing the effect of possession and a real estate purchaser's or lender's duty to inquire into the rights of the occupants when seeking the protection of the recording statutes as a bona fide purchaser or bona fide mortgagee/lender/encumbrancer.

89-Year Old Stroke Victim Recovers Title To $800K Home After Judge Voids Deeds Used In Swindle By Her Purported Preacher

In Pomona County, California, The Downey Patriot reports:
  • A Pomona Superior Court judge last week granted a motion filed by the district attorney's office on behalf of an elderly victim whose home was swindled three years ago by a so-called church bishop who duped the Claremont woman into signing over the grant deed of her home.
  • Judge Steven Blades granted the motion to declare the two grant deeds in this case "null and void and of no legal effect," deputy district attorney James Daloisio said.
  • "The objective of this motion was to free up this 89-year-old stroke victim's property so that she could use her equity to execute a reverse mortgage as she has no substantial means of support and requires constant medical care," Daloisio said.
  • Leroy Dowd, a 74-year-old self-styled bishop who operated the now-defunct Triumph Church of God in south Los Angeles, allegedly met the victim through church in December 2006. Dowd told the victim that he could help her secure widow's benefits from Medicare and Social Security.
  • Under this guise, he tricked her into signing over the grant deed to her $800,000 home, which was paid in full, prosecutors said. Eight days later, Dowd sold the house to straw buyer Bessie Mae Moore, 63, who borrowed $800,000 from victim lender MortgageIt. At closing, Dowd walked away with more than $775,000, authorities said.
  • Dowd pleaded guilty in May 2010 to one count of grand theft of personal property and was immediately sentenced to three years in state prison. He was ordered to pay $800,000 in restitution.(1) Moore pleaded no contest in December 2008 to one misdemeanor count of obtaining money, labor or property by false pretenses. She was sentenced to 98 days in county jail.
  • The prosecutor gave credit to the Claremont Police Department, who investigated the case, for working quickly enough to avoid foreclosure. The district attorney's office worked closely with the Los Angeles County Tax Assessor's fraud investigation unit to reinstate the prior assessed value of the house.

For the story, see Elderly victim recovers home pilfered by phony bishop.

(1) The story is silent as to what happened to the mortgage lender and the $800K trust deed/mortgage it holds. If the trust deed was also voided, it probably required the consent and sign off by the lender (it would be difficult to believe that a judge in a criminal proceeding would have the necessary jurisdiction over the current trust deed holder (who itself was a victim, and not a party to the criminal proceeding) to unilaterally void its trust deed. Judgments and orders issued by a court lacking jurisdiction (either subject matter, or personal) are void ab initio). If the trust deed was also voided, the lender would be entitled to the $800K in restitution.

Had the trust deed not been voided, the judge's voiding of the scammer's grant deed would simply result in the homeowner's recovery of her home title subject to the loan that financed the scam, and it would be up to the victimized homeowner to file a civil lawsuit to quiet title to nullify the lender's lien on the home. See Unwinding An Abusive Or Fraudulent Real Estate Transaction? Determining If The Deed Is Void, Or Merely Voidable for some California case law on the issue of whether the trust deed in this case is absolutely void/void ab initio, or merely voidable.

If the trust deed that came into being as a result of this ripoff is found to be merely voidable (as opposed to absolutely void/void ab initio), it would then be up to the victimized homeowner to assert that the lender, at the time it originated the loan, had a duty to inspect the premises to ascertain the occupancy status of the premises, and by its failure to do so, her continued occupancy before, during, and after the scam was perpetrated was sufficient to place the lender on notice of any of her unrecorded rights or equities in the premises. See California Bona Fide Purchaser, Possession, Duty Of Inquiry.

Sale Leaseback Peddler Cops Plea For Role In 'Head' Nationwide Equity Stripping Foreclosure Rescue Scam

From the Office of the U.S. Attorney (Sacramento, California):
  • [L]eonard Bernot, 46, of Laguna Hills, pleaded guilty [] to conspiracy to commit mail fraud for his part in a wide-ranging "foreclosure rescue" scheme involving Head Financial Services Inc.
  • Originally indicted on February 28, 2008, Bernot and 10 other defendants were charged with conspiring to defraud financially distressed homeowners by promising them that their homes could be saved from foreclosure and their credit repaired if the names of straw buyers were added to, or replaced on, the homes' property titles.(1)
  • Bernot and others allegedly would obtain mortgage loans on each of the homes, thereby extracting substantial equity, a scheme sometimes referred to as "equity stripping."
  • Often, the homeowners were left paying "rent" to the conspirators. The rent would often be nearly as much as the prior mortgage payment the homeowner had been unable to pay. When the homeowners were unable to keep up with the payments, they were often evicted from their homes.
  • The cases of several co-defendants, including Charles Head, the founder of Head Financial Services Inc., are still pending. [...] Bernot will be sentenced [] on September 1, 2011.

For the U.S. Attorney press release, see U.S. Attorney Announces Results of Mortgage Fraud Prosecutions in 12 Months Since Operation Stolen Dreams.

Go here for other posts on the Head nationwide foreclosure rescue operation.

(1) For the criminal indictments, see:

Maryland Man Gets 13 Months For Violating State Anti-Foreclosure Rescue Law After $8,500 Ripoff Of Homeowner Needing House Payment Help

In Harford County, Maryland, The Baltimore Sun reports:
  • A Baltimore man was sentenced to spend 13 months in jail last week for defrauding a Harford County couple in a mortgage workout scam that a prosecutor says cost them thousands of dollars and may have contributed to the loss of their home.
  • Frank G. Debelius, 54, [...] pleaded guilty June 8 in Harford County Circuit Court to theft of more than $500 and violating the state's Protection of Homeowners in Foreclosure Act. "It's the first mortgage fraud case that has been prosecuted in Harford County," Bill Christoforo, a veteran assistant state's attorney who prosecuted the case, said.

***

  • Debelius told the couple he was with Bay One Mortgage, provided them with his professional card and offered to help them [with their unaffordable mortgage payments], according to the prosecutor. "The long and short of it was this guy said, 'I'm going to do a workout for you with your mortgage company,'" Christoforo said.
  • Debelius told the Rories that he went to their mortgage company and convinced that company to knock $100,000 off the principal of the loan and extend their payments, Christoforo explained. Debelius then told the Rories he needed $8,500 in order to complete the deal, and the Rories made the payment. "He was never in contact with the mortgage holder and never made it happen," Christoforo said.

***

  • The couple's foreclosure troubles ultimately came to the attention of Circuit Court Judge William Carr, who referred the case to the Harford State's Attorney's Office. "Unfortunately it was really too late," Christoforo said. "They lost their home." Christoforo speculated that the $8,500 may have helped the couple keep the home.
  • A nine-count grand jury indictment was handed down against Debelius in June 2010. Last week, Debelius pleaded guilty to two counts and was sentenced to three years in jail, by Circuit Court Judge Emory Plitt Jr., who then suspended one year and 11 months of that sentence. Debelius also received one day credit on his jail sentence. Debelius was ordered to serve four years supervised probation upon his release from jail and to pay restitution.
  • Christoforo said the Rories may not have been Debelius' only victims. He said another woman in Baltimore City has made similar claims against Debelius. "My feeling is there's other cases like this, probably that have gone on or are going on in the [Harford] county," Christoforo said.

For the story, see Harford couple duped in mortgage fraud.

Title Insurance Considerations For Lenders Foreclosing In California

Lexology reports:
  • With mortgage defaults on the rise, a growing number of lenders are being forced to foreclose on their collateral, either judicially or non-judicially, exercising the private power of sale.
  • Once a lender determines that it must take title to the property securing the loan, it is important that the lender understand what title coverage it has and needs during and after the foreclosure process.
  • What protection does a Trustee Sale Guaranty and/or Litigation Guaranty provide the lender? Does the lender’s current Lender’s Title Policy provide it with sufficient protection, or does the lender want to obtain a new Owner’s Title Policy?
  • The following is a description of the title protection that a Trustee Sale Guaranty and Litigation Guaranty provide a California lender and a brief discussion of the factors to consider when deciding whether to obtain an Owner’s Title Policy after a foreclosure sale.

For more, see Title insurance and foreclosure: What type of title coverage do lenders need in connection with a foreclosure in California? (paid subscription required; if no subscription, GO HERE).

Saturday, June 18, 2011

Foot-Dragging Lender Says Bronx Firetrap Tragedy Not Its Problem; Foreclosure Sale Never Took Place Despite Obtaining Court Judgment

In The Bronx, New York, the New York Daily News reports:
  • Nobody will admit to owning the illegal firetrap in the Bronx where a 12-year-old and his parents died in April.(1) The three-family home at 2321 Prospect Ave. in the Bronx had been chopped into 12 illegal single-room-occupancy units when a blaze broke out April 25.


  • City building inspectors filed 11 violations against two entities: Domingo Cedano, whose name appears on the building's deed, and the Bank of New York/Mellon, which has moved to seize the home in foreclosure.


  • Both parties denied ownership [] at a hearing before the city Environmental Control Board to answer some $44,000 in fines. Cedano appeared and then left before the hearing began, but his lawyer, Ingrid Wyllie, insisted he wasn't the owner because a judge had signed a judgment of foreclosure on the property in January.


  • Steven Pasternak, an expediter representing Bank of New York, said the foreclosure wasn't complete, so the building was still Cedano's problem. Administrative Law Judge Malcolm Spector pointed out that property records listed Cedano as owner on the day of the fire, but gave him until next week to produce his foreclosure paperwork.
For more, see Ownership of Bronx firetrap that killed 12-year-old and his parents in dispute. subdividedsubdivided
(1) For earlier posts on this story, see:

Ticket-Lacking 'Lawyer' Buys Delinquent Debts As Price Of Admission To Protracted Foreclosure, Bankruptcy Litigation

In Worcester, Massachusetts, the Worcester Telegram & Gazette reports on a story of a law school graduate who, despite the fact that he's failed the state bar exam five times and is not licensed to practice law, has nevertheless carved out a name for himself as a dogged litigator appearing regularly before the local state and federal courts representing one particularly litigious client, himself:
  • On most days, you can find Ara Eresian Jr. either poring over thick law books at the public law library on Main Street or tending to matters across the street at the state courthouse.
  • The 57-year-old Shrewsbury man has scores of cases on the dockets of state and federal courts, many that have been litigated and appealed for years. His painstakingly researched legal pleadings number in the tens of thousands of pages and counting.
  • But Mr. Eresian is not a lawyer. He is a kind of continual plaintiff who sues over real estate deals in which he claims a stake, usually representing himself. In some cases, Mr. Eresian buys the rights to debts or court judgments as a means of inserting himself into bankruptcy cases or foreclosure proceedings.
  • The would-be lawyer, who holds a law degree but has failed the bar exam five times, stands infamous among local attorneys more for his doggedness in the face of defeat than for his legal acumen. Undeterred by adverse rulings from judges, Mr. Eresian appeals nearly every loss, tying up the subjects of his lawsuits in court for years and leaving them with mounting legal bills.(1)

For more, see Legal fights never end (Who Is Ara Eresian; Why Does He Do It?).

(1) Reportedly, one case (In re Scheffer, Case No. 06-41218-MSH (Bankr. D. Mass. May 25, 2011)) involved a local homeowner/couple who had filed for bankruptcy. Eresian reportedly purchased an unpaid debt to a local heating oil company owed by them, thereby making him a creditor with the legal standing to challenge the couple's bankruptcy protection.

As the story goes, Mr. Eresian's parents, first generation Armenian-Americans originally from Somerville, once owned the home where the couple now live. Eresian apparently grew up in the three-bedroom ranch, which his parents lost to a foreclosure more than two decades ago. In rejecting Eresian's challenge, U.S. Bankruptcy Melvin S. Judge Hoffman characterized Mr. Eresian's case against the couple as a “misguided and obsessive crusade to avenge" that foreclosure, which the couple had nothing to do with. Reportedly, the couple's attorney said his clients were left bewildered by Eresian's legal onslaught that put their home at risk. A few of Judge Hoffman's comments from his ruling:

  • "I find that Mr. Eresian purchased the Peterson Oil claim in order to gain standing so he could more effectively continue his campaign of harassment against the debtors, the unlucky owners of his childhood home. [...] Mr. Eresian has exhibited a pattern of behavior that any reasonable person would find shocking. He has needlessly multiplied litigation in this Court and has saddled the debtors with the need to defend their discharges a year after they were granted."

Auctioneer Faces Administrative Charges Over Advertising 'Absoulte' Sale Of Property Subject To $2.3M Mortgage In Foreclosure

In Rapid City, South Dakota, the South Dakota Journal reports:
  • The South Dakota Real Estate Commission is accusing auctioneer Martin Jurisch of unprofessional conduct just a year after he settled to avoid an investigation in a similar case.
  • The commission plans a formal hearing to consider a complaint lodged in February in which the Rapid City auctioneer is accused of advertising an auction as absolutewhen the property was encumbered by $2.3 million in mortgages and was the subject of a pending foreclosure.
  • In an absolute auction, the property must sell to the high bidder no matter how low the price, which in this case put the seller at risk if the sale price wasn’t high enough to pay the mortgages, according to the complaint.
  • The commission’s formal complaint against Jurisch accuses him of six violations of state real estate laws. After the hearing, the commission could issue Jurisch a letter of reprimand, revoke or suspend his license, fine him up to $2,500 or order any combination of the penalties.

For more, see Real Estate Commission accuses auctioneer, former mayor of violations.

(1) Reportedly, Jurisch agreed last year to a settlement to resolve a complaint that he refused to sell 2,909 acres in Bennett County at what was advertised as an absolute auction. A prospective buyer complained Jurisch withdrew the land from sale when the high bid fell short of the amount needed to pay off the property owner’s mortgage.

Judge Dodges Judgment Of Eviction; Coughs Up Cash, Moves Out Of Rented Home After Being Accused Of Stiffing Landlord In Foreclosure Out Of $3,600

In Bridgeport, Connecticut, the Connecticut Post reports:
  • Probate Judge Paul Ganim averted an eviction hearing Wednesday and voluntarily agreed to vacate the Black Rock home he was renting. "We always talked about getting out in June and we are out," Ganim commented.
  • Gayle Gleckler, who owns the single-family house [...] that Ganim and a female companion have been renting since October 2009, claimed Ganim owes her $3,600 in back rent. She filed suit against him in housing court here seeking his eviction.
  • Gleckler's lawyer, Robert Russo, said he has withdrawn the lawsuit since Ganim moved out. He said Ganim is continuing to pay rent while he keeps a storage unit on the front lawn. "This lady was paid, she was under foreclosure and needs to sell the property and I certainly sympathize with her financial plight," said Ganim.

Source: Probate Judge Ganim averts eviction by leaving home.

Broward Judges Asked To Supply Compromising Info Regarding Possible Attempts To Score Post-Bench Employment With Local Foreclosure Mill

In Fort Lauderdale, Florida, Broward Palm Beach New Times reports:
  • Would you trust Broward judges to supply compromising information about themselves? That's what they're being asked to do now, essentially...A few weeks ago, we wrote about outgoing Broward County Chief Judge Victor Tobin leaving his post to join a foreclosure law firm that stands to benefit from policies he crafted.
  • Among Tobin's accomplishment as head honcho at the courthouse is the institution of the "rocket docket," which allows judges to move a foreclosure case forward in the blink of an overworked attorney's eye. (Matt Taibbi wrote a scathing account of the process in Rolling Stone.)
  • Now somebody -- we swear it wasn't us -- has initiated a vast public records request that could reveal whether Tobin or other judges were actively angling for employment based on their current positions.

***

  • As reported on JAABlog, the request filed under Florida's saving-grace public-records laws seeks a broad range of communications from the year preceding Tobin's announcement that he was leaving the bench:

    All records of the judicial branch relating to discussions of employment and career opportunities, salary offers, salary negotiations, benefits, other forms of compensation, employment starting dates, current employment exit strategy, hiring procedures, job applications, letters of recommendation, and/or incentives regarding the employment of judges of the Seventeenth Judicial Circuit to or from any employee or representative of the Law Office of Marshall Watson, including but not limited to emails, letters, meeting minutes, calendar pages.
  • Now that's certainly a hell of a lot of information for anyone to search for... which is why courthouse General Counsel Alexandra V. Rieman is outsourcing the duty of supplying the information to the judges themselves.
  • In an email, she forwarded the request to circuit judges and asked them to supply her with copies of documents matching the description. "If you have any questions," she wrote, "please contact me."
  • Yes, how quickly does the "empty trash" button work??

For the story, see Chief Judge Victor Tobin's Questionable Exit Prompts Massive Public-Records Search.

Judge Accused Of Fixing Foreclosure Case Found Guilty Of Corruption Charges; Co-Defendant Facing 22 Years Copped Earlier Plea & Testified Against Him

In Akron, Ohio, WEWS-TV Channel 5 reports:
  • The Cuyahoga County judge charged in the county corruption investigation for allegedly fixing a foreclosure case has been found guilty on three of the five charges he was facing. The federal jury returned the verdict against Judge Steven Terry shortly before 2 p.m. Monday in Akron. Terry, who was facing five charges, was found guilty of counts one, three and four – which were related to conspiracy to commit mail fraud and mail fraud.

***

  • During closing arguments Friday, the prosecutor said there are recorded phone conversations between Terry and former Cuyahoga County Auditor Frank Russo that proved Terry was corrupt. [...] Russo, who is facing 22 years in prison after pleading guilty to his role in the corruption scandal, testified earlier this week that he gave campaign contributions to Terry and expected to get benefits, like favorable rulings, in return.(1)

For the story, see Cuyahoga County Judge Steven Terry found guilty of mail fraud in corruption case.

(1) Given his admitted 'track record' of 'expecting benefits', Russo no doubt will be expecting benefits (in the form of a prison sentence 'buydown') for 'bellying up' and giving testimony to sink his robe-wearing confederate.

Cops Pinch Columbus Man Who May Have Used Forged HUD Work Orders To Access Vacant Homes In Central Ohio Burglary Spree

In Delaware County, Ohio, the Westerville News & Public Opinion reports:
  • The Delaware County Sheriff's Department has arrested a man suspected in 20 recent burglaries of vacant homes across Central Ohio, including 10 in Delaware County.Sheriff reports said Monte Shoemaker, 24, of Martinsburg Drive in Columbus, was arrested last Wednesday, June 1 after Cottage Realty, Inc. agent Dave Schulte saw two suspects entering one of his vacant properties on Dauer Court in Powell and called police.

***

  • When deputies found Shoemaker in the home, they retrieved keys to multiple homes along with out-of-state work orders for recently burglarized homes, according to reports. After further investigation, the [Housing] and Urban Development work orders that Shoemaker had been presenting to receive keys to homes were determined to be fake, according to reports.

***

  • On Monday, June 6, Sheriff Walter L. Davis III confirmed the department had found evidence to link Shoemaker to many recent burglaries of model homes in Delaware and Franklin counties.
  • "The suspect can be linked to at least 10 (burglaries) in Delaware and we believe we're going on 10 in Franklin County -- a total of 20 burglaries in Central Ohio," he said "We're currently going through facts, data and evidence." Shoemaker has not yet been charged with the multiple breaking and entering crimes aside from the June 1 incident, according to Delaware County Municipal Court records.

For more, see Suspect may have used fake work orders to enter houses (A Columbus man is a suspect in 20 burglaries of vacant homes across Franklin and Delaware counties).

San Diego Man Facing F'closure Cops Plea To Forging 'Court-Issued' Temporary Injunction In Attempt To Dupe Stiffed Lenders Into Stalling Sale Of Home

In San Diego, California, The San Diego Union Tribune reports:
  • A San Diego man has pleaded guilty to forging the signature of a federal judge and creating a fake order with the hopes of forestalling the foreclosure of his Mission Valley Home. Marc Uribe, 45, entered the plea Wednesday before U.S. Magistrate Judge Cathy Ann Bencivengo.
  • Uribe acknowledged in the plea that he created a falsified court order and forged the signature of a fictional federal judge named Ivan Gonzalez, Assistant U.S. Attorney Robert Huie said.
  • Uribe issued the fake order with a civil lawsuit against various lenders. The forged order instructed the lenders that they were temporarily prohibited from foreclosing on his home.

For the story, see Man pleads guilty to forging a judge's signature.

Chase Left Holding The Bag On Slimy, Snake-Infested Home As Creepy Creatures Force Unwitting Homebuyer, Family To Abandon Abhorrent Abode

In Rexburg, Idaho, The Seattle Times reports:
  • They slithered behind the walls at night and released foul-smelling musk into the drinking water. Ben Sessions once killed 42 in a single day. Shortly after buying their dream home, Sessions and his wife discovered it was infested with thousands of garter snakes. Their growing family lived as if in a horror movie for three months. They abandoned the property, but the home briefly went back on the market more than a year later, and they fear it could attract another unsuspecting buyer.

***

  • Now owned by JP Morgan Chase, it was listed at $114,900 in December, according to Zillow.com, a real-estate data firm. That price fell to $109,200 in January. The Animal Planet network then featured the couple's story in its "Infested" series. The listing was removed, and it has stayed off the market while Chase decided what to do with it.
  • Darcy Donahoe-Wilmot, a Chase spokeswoman in Seattle, said the bank has contracted to have the snakes trapped and released from the house. Once the infestation is gone, the house will be up for sale again and a report will be issued to potential buyers.
  • "We can't list the house until its been taken care of," Donahoe-Wilmot said. An estimate of how much it would cost to remove the snakes and how long the process would take was not available.

For all the gory details, see Idaho family abandons snake-infested house (Shortly after buying their dream home, Ben Sessions and his wife discovered it was infested with thousands of garter snakes. They abandoned the property, but the home briefly went back on the market more than a year later, and they fear it could attract another unsuspecting buyer).

Friday, June 17, 2011

Victimized Couple Gets Little Help From Title Insurer After Discovering Deed To Home May Have Been Forged; Suspect Currently Faces Criminal Trial

In Murrieta, California, KABC-TV Channel 7 reports:
  • A family is being told the house they thought they bought in Murrieta actually belongs to someone else. The family says they can't stop making their mortgage payments. "Even though you've made your payments in full every month, you could get a knock at the door saying get out," said would-be homeowner Charlie Zahari. "If you look at it, we're renters in a house we can't move out of."
  • That was hardly the feeling last summer where there was all the euphoria of buying their first home. They custom painted the girls' bedrooms and sodded the backyard. They stopped making improvements when they found out they're not the legal owners of the home.
  • "We actually got a call from the FBI who said we just wanted to inform you that your house has been part of a deed fraud scheme," Zahari said. Karen Tappert is the person the Zahari's say is responsible for stealing the home and selling it to them. She's facing federal charges,(1) but that does little to help the Zahari's with their situation. They must continue paying for the home or otherwise put their credit at risk. They can also be forced to vacate at any moment.
  • Officials said it started when the original owners of the property vacated the house because they thought the bank was going to foreclose on them. That never happened, and the alleged scam artists swooped in and fraudulently sold it to the Zaharis.
  • The family said neither the title company, First American Title Insurance, nor the bank have done much to help answer how the title company allowed the purchase of the home in the first place.
  • In a statement, First American said, "For privacy reasons we cannot comment on the specifics of Mr. & Mrs. Zahari's claim, however, generally the process of establishing title involves other necessary parties and is dependent on their cooperation. This process can be time consuming and complicated."
  • Bank of America also said they're a victim too and they're working with the title company for a resolution. Tappert's federal trial is under way in Nevada.

Source: FBI informs family they bought stolen house in Murrieta.

Thanks to Deontos for the heads-up on the story.

(1) For more on Karen Tappert's indictment, see Vegas Feds Say Woman Used Fraudulent Deeds In Foreclosure Rescue Ripoffs & Squatter Scams.

Michigan AG Urges All With Knowledge Of Illegal Robosigner Practices To Step Forward As DocX, LPS, Fidelity Get Slammed w/ Subpoenas In Criminal Probe

In Lansing, Michigan, The Grand Rapids Press reports:
  • Michigan Attorney General Bill Schuette issued criminal investigative subpoenas against DocX and three affiliated companies as part of his office's investigation into fraudulent signatures on mortgage documents filed in Michigan.
  • In addition to DocX, which provides mortgage support services, Schuette's office also served investigative subpoenas to Lender Processing Services Inc., Fidelity National Financial Inc. and CT Corporation System, according to an announcement today.
  • Schuette is requesting documents regarding the companies’ processing of foreclosure and/or bankruptcy documents. The subpoenas were approved by the 54B District Court in Ingham County on Monday. The companies have until June 30 to comply.
  • The subpoenas are part of an investigation launched in April after county officials across the state reported suspect documents. The reports were triggered by a 60 Minutesstory revealing that the name Linda Greenwas signed to thousands of mortgage-related documents nationwide, but with many different variations in handwriting.
  • Schuette is investigating whether certain mortgage processing companies permitted such “robosigning” of legal documents filed in connection with Michigan foreclosures. obosigning may also involve individuals signing affidavits to signify that mortgage documentation was properly prepared without ever conducting a proper review of the documents.
  • The attorney general is urging any current or former employees of mortgage servicers or processing companies with information about unlawful practices [to contact] the Corporate Oversight Division at (517) 373-1160.(1)

Source: Michigan AG issues subpoenas in investigation of foreclosure documents with fraudulent signatures.

For the Michigan AG press release, see Schuette Issues Subpoenas in Criminal Probe of Mortgage Processors.

(1) Those thinking about whether to come forward, spill their guts about their roles in the robosigning racket, and essentially, 'roll' on their current/former employers should factor in this admonition, made by a Federal judge, when deciding what to do:

  • When a conspiracy is exposed by an arrest or execution of search warrants, soon-to-be defendants know that the first one to "belly up" and tell what he knows receives the best deal. The pressure is to bargain and bargain early, even if an indictment has not been filed. United States v. Moody, 206 F.3d 609, 617 (6th Cir. 2000) (Wiseman, J., concurring).

One can reasonably believe that the Michigan AG is won't be investing his limited resources in this probe without the view of 'scoring a few high-level scalps.'

Final Defendant Goes Down In Scam Using Rent To Own Racket To Lure, Rip Off Investors, Would-Be Homebuyers On 100+ Homes That Ended Up In Foreclosure

From the Office of the U.S. Attorney (Portland, Oregon):
  • Jennifer Venable, 29, of Beaverton, Oregon, was sentenced by the Honorable Robert E. Jones of the United States District Court on June 8, 2011, to 5 years probation and ordered to pay $15,000 in restitution relative to her January 13, 2011 wire fraud conviction.

***

  • Ms. Venable’s sentencing brings to an end the prosecutions related to the conduct of Jeremy Richardson and his company, Richardson Equities LLC. Richardson’s company ran a “rent-to-own” scheme that promised high profits to investors who purchased homes on behalf of tenants who agreed to purchase the home from the investor at a price greater than the original purchase price when their credit improved.
  • To effect the scheme, the investor would apply for a residential mortgage using inflated asset and income information and lie about the true nature of the loan. Richardson and his associates purchased over 100 homes in the Portland area valued in excess of $35 million.
  • In every case, Richardson and his investors failed to maintain their financial obligations and the properties fell into foreclosure.(1)

For the U.S. Attorney press release, see Sentencing of Real Estate Agent Concludes Prosecution of Mortgage Fraud Scheme.

(1) According to the press release, on May 4, 2010, Jeremy Richardson was sentenced to 37 months in federal custody following his guilty plea to money laundering. In addition to Richardson and Venable, others involved in the rent-to own scheme involved:

  • Nicolas Cooper of Portland, Oregon, who was sentenced to a term of 5 years probation and ordered to pay $102,058 in restitution on May 23, 2011,
  • Andrew Paul Shute of Seattle Washington, who was sentenced to 5 years of probation and ordered to pay $61,332 in restitution following his plea of guilty to wire fraud related to his activities as a mortgage broker on behalf of Richardson; and
  • Tyler Jacob Marsten of Tulsa, Oklahoma, who was sentenced to 5 years probation and ordered to pay $39,549 in restitution following his conviction for bank fraud related to his activities as a mortgage broker on behalf of Richardson.

Would-Be Homebuyers Under Rent-To-Own Deal Get Clipped Out Of $12K Upfront, Monthly Payments As Rent-Skimming Owner Pockets Cash, Stiffs Bank

In St. Charles, Missouri, KTVI-TV Channel 2 reports:
  • If you don't qualify for a conventional home loan, you might want to proceed with caution if lease to own is your only option. We talked with a couple who now have to fight to keep a roof over their hea^ds while battling serious health concerns.
  • Brian and Teresa Wilson understand what it means to have terminal cancer. They didn't expect they'd be fighting health issues and a bad deal on a lease to own agreement for a house.
  • They signed a contract on this house in St. Charles County in February 2011. The family traveled a lot with Brian's job. And they just wanted to settle into their own home. But Brian says they've gotten the shock of their lives. "We've since come to find out that this home is not, is in foreclosure and has not had a current payment made in over seven months."
  • Brian signed a contract and lease agreement with a St. Louis area real estate investor who's come to the attention of the Better Business Bureau. The BBB recommends extreme caution when dealing with Jack l. Roddy, JMZ homes, JMZ Investment Group. Jim Judge of the BBB explains why they started investigating. "We're getting complaints from consumers that are getting into lease to own situations with this company."
  • Wilson says, "It was two months behind going into default in February when I gave him a check for twelve thousand dollars plus we made a thousand dollar rent payment every month on time since then." Four checks written by the Brian were cashed. Jack Roddy had no comment when we called him.

***

  • The Wilsons say they researched the company before signing the contract but saw no red flags. They believe the mortgage is still held by the original owners. Something they just discovered. Teresa was the first to hear the news.

For the story, see Contact 2: Lease to Own Scam.