Woman Who Witnessed Phony Docs Cops Plea, Gets Probation In Exchange For Deal To 'Sing' Against Co-Defendants In Alleged Home Hijacking Operation

In DeKalb County, Georgia, WSB-TV Channel 2 reports:

• A woman pleaded guilty Wednesday morning to participating in a housing scheme involving 11 other people. Channel 2’s Carol Sbarge attended an arraignment for a dozen racketeering suspects at the DeKalb County Courthouse on Wednesday morning. It was the latest stage in the case against a group of people accused of using fraudulent deeds to take over metro Atlanta homes in foreclosure.



• The suspects, or self-proclaimed sovereign citizens, were the subject of a Channel 2 investigation last year. Sovereign citizens claim they are immune from Georgia law and prosecution. Prosecutors said their beliefs don’t supersede the law. “They can believe in the spaghetti monster if they want to,” prosecutor John Melvin said in court.



• The suspects face a maximum 20-year sentence for each count against them, but Wylissa Lawrence was sentenced to five years of probation and community service because of her guilty plea. The prosecution said she witnessed documents used to falsely get homes.



• As part of her deal, she must testify against the others.(1) Melvin said the indictment against the group involves 18 properties.

Source: Woman Pleads Guilty In Housing Scheme.

(1) Another defendant in a multi-defendant prosecution wins the "race to the prosecutor's office," as she is the first to "belly up" to investigators and spill her guts to cut the best deal for herself.

BofA Tagged With Utah Suit For Allegedly "Conducting Thousands Of Unauthorized Foreclosures," Class Action Status Sought

In Salt Lake City, Utah, The Salt Lake Tribune reports:

• A Salt Lake City law firm has filed a proposed class-action suit against Bank of America and its subsidiary ReconTrust "for conducting thousands of unauthorized foreclosures in Utah."



• Mumford West & Snow filed the suit in 3rd District Court last week. The action comes in the wake of the Utah Legislature creating civil penalties against what state authorities consider illegal foreclosures. It also comes more than one month after the Utah Attorney General’s Office pledged that it would file suit against the banking giant if ReconTrust continued to file foreclosure proceedings in violation of state law.

***

• Lead counsel for the law firm, Marcus R. Mumford, said Wednesday he intends to seek a statewide restraining order and a preliminary injunction "prohibiting the named defendants from conducting any additional foreclosure sales within the state."

***

• Mumford said that Bank of America and ReconTrust "have demonstrated a long-standing pattern of illegal activity in taking thousands of homes from Utah homeowners in unauthorized foreclosures." He estimates there are tens of thousands homeowners who could be eligible to sign on to the lawsuit if it receives class-action status from the court.

For more, see Utah law firm sues to halt Bank of America foreclosures.

Minnesota Prosecutors Invoke Seldom-Used Law To Charge Office Building Owner In Foreclosure With Removing/Damaging Property Subject To Mortgage

In Anoka County, Minnesota, the Star Tribune reports:

• With his building under foreclosure, Donald Mordal decided to take some items that he says belonged to him.



• Now, he's facing criminal prosecution, only the second person charged in Anoka County in the past 25 years under a 1963 state law. The law makes it a felony to remove or damage property subject to a mortgage with intent to hurt the property's value. It is so rarely used that officials in the Hennepin and Ramsey county attorney's offices couldn't recall prosecuting anybody under it.

***

• Mordal, 44, was charged in March with "defeating security on realty." Prosecutors said he wasn't charged with a more common felony theft crime, which requires intent to take someone else's property and deprive them of it. Technically, he owned the property he is alleged to have taken illegally.



• Mordal, who has nothing more than a speeding ticket on his record, was stunned when he learned of the charge. Potential jail time is now piled atop the foreclosures of his business and house, along with unemployment and a divorce.

***

• According to the charges against Mordal, the bank contacted law enforcement in May 2010 when it learned he had removed items and allegedly damaged property just before the sheriff's foreclosure sale.(1) He says he had removed the items months earlier.



• Aleesha Kveton-Webb, vice president of special assets for Village Bank in Blaine, said the bank's four branches in Anoka County work hard to improve local communities and that they have to protect customer's assets. The bank could have "just left this at foreclosure" and not pursued criminal charges, but "we want to make a point that this shouldn't happen to other banks."

For the story, see Nowthen businessman faces rare charge in foreclosure (Under a seldom-used law, he is accused of illegally removing items from his office building).

(1) See State v. Zacher, 490 NW 2d 149 (Minn. App. 1992) for an example of one property owner who successfully scored a reversal of a conviction of this charge where the property was taken after the sheriff's foreclosure sale had taken place (owner removed the fixtures one day before the end of the statutory six-month redemption period).

Judge 'Green-Lights' Trial For Ex-Cop, Wife Accused Of Trashing Their Now-Foreclosed Home

In French Valley, California, The Press Enterprise reports:

• A judge ruled Friday that there is enough evidence for a former San Diego police officer and his wife to stand trial on felony charges in connection with the trashing of their foreclosed French Valley home.



• Robert Conrad Acosta, 39, and Monique Evette Acosta, 35 -- who has worked as a real estate agent -- are each charged with one count of carrying away or disposing of items from a mortgaged or foreclosed property. They have pleaded not guilty.



• The property suffered more than $100,000 in damage, including missing doors, light fixtures and air-conditioning units, stones smashed off the facade, dye poured on carpets, spray-painted graffiti, wiring pulled out of walls and cut, a gutted kitchen and chopped-down landscaping tossed in the backyard swimming pool, court records show.



• If convicted, the Acostas face up to four years in prison. "There is a public interest in seeing that this conduct is not encouraged," Judge Mark Mandio said at the conclusion of a preliminary hearing Friday at the Southwest Justice Center in French Valley.

For more, see Ex-officer, wife to stand trial in foreclosure trashing.

Judge Appoints Receiver To Take Control Over Mobile Home Park After Stiffed Lender Levels Rent Skimming Charges Against Landlord In Foreclosure

In Bloomington, Illinois, The Pantagraph reports:

• A court has appointed a Michigan company to oversee Southgate Estates while a foreclosure case is pending against the south Bloomington mobile home park.



• The foreclosure, filed last month in McLean County court, alleges that the property’s owner, Southgate Estates LLC, has failed to make payments on a $6.9 million loan since June 2010.



• The foreclosure alleges Southgate “misappropriated rents, security deposits and other income from the property” after it defaulted. Judge Paul G. Lawrence on June 10 granted the plaintiff, Wells Fargo Bank, its request that a receiver be appointed to oversee the property, [...] which has about 364 pads for mobile homes. Newbury Management Services LLC, based in Farmington Hills, Mich., was given control while the case is pending.



• “The property is in jeopardy and plaintiff will suffer severe and irreparable injury unless immediate steps are taken to secure the property,” Wells Fargo’s attorney wrote in the foreclosure filing.



• Lawrence’s ruling says residents who own or lease mobile homes on Southgate’s property should continue to make regular monthly lot rent payments to Newbury.

For the story, see Judge names receiver for B-N mobile home park.

FDNY: Candle Triggered Deadly Bronx Blaze In Illegally-Subdivided Firetrap In Foreclosure; Power To Premises Previously Shut Off

In New York City, The Wall Street Journal reports:

• Fire marshals have determined a candle started a fast-moving fire that killed a 12-year-old boy and his parents in an apartment building city officials say was illegally subdivided.



• The troubled three-story Bronx building was in foreclosure, and the utility Consolidated Edison had shut off the electricity because it had no record of tenants at that address. But the victims and others were living there in illegally subdivided apartments where access to fire escapes was blocked, city officials said after the April 25 blaze.



• The death of Christian Garcia and his parents, Christina Garcia, 43, and Juan Manuel Lopez, 36, prompted a city crackdown on illegal subdivisions, which are common in many neighborhoods where tenants struggle to make ends meet.

***

• The building's ownership status and who should have been responsible for it were the subjects of debate. The owner listed on city records said he lost it during a foreclosure proceeding, and it changed hands through several financial institutions. City officials have said the foreclosure had not been finalized.



• A state law that took effect last year makes lenders responsible for properties in foreclosure, but the dispute over the Bronx building is likely to end up in the courts. Because of the uncertainty, the Department of Buildings issued several violations on the day of the fire to the listed owner, Domingo Cedano, and the Bank of New York/Mellon, Buildings spokesman Tony Sclafani said.(1)

For more, see FDNY: Candle caused deadly Bronx fire. subdivided
In a related story, see New York Daily News: Bronx firetrap owner fined $25K for violations after devastating blaze killed 12-year-old, parents (Four violations against the bank were thrown out by Administrative Law Judge Malcolm Spector because it was not the titleholder at the time of the fire).
(1) For earlier posts on this story, see:

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



• Tragedy Involving Deadly Bronx Firetrap That Lingered For Years In Foreclosure Spurs Crackdown On Illegally Converted Rooming Houses Throughout City,



• Early Morning Bronx Fire In Illegally Converted Rooming House Leaves 3 Dead, 8 Injured; Firetrap Lingered In Foreclosure Since 2008.

Recently-Pinched Burglary Suspect Invokes Foreclosure 'Defense'

In Nevada City, California, The Union reports:

• A Nevada City man allegedly caught in the act of burglarizing a home [] had an explanation for Nevada County Sheriff's deputies. He believed the house was a vacant foreclosure, said Sheriff Keith Royal.

***

• The man, identified as Van Cade Marsh, 69, was ordered out of the residence at gunpoint, Royal said. He complied and was arrested without incident. [...] Marsh was booked into county jail on suspicion of burglary of an inhabited dwelling and was being held in lieu of $25,000 bail.

For the story, see NC man arrested after allegedly breaking into home.

Closing Attorney Cops Plea To $900K Escrow Funds Ripoff; Pocketed Loot Intended To Pay Off Sellers', Refinancing Homeowners' Existing Mortgage Loans

From the Office of the U.S. Attorney (Pella, Iowa):

• [F]ormer attorney, Franklin R.York, of Pella, Iowa pled guilty in federal court in Des Moines to one count of wire fraud, announced United States Attorney Nicholas A. Klinefeldt.



• According to the written plea agreement, York owned and operated Escrow and Closing Services of Marion County, LLC since 2005 and provided real estate closing and refinancing services. Funds from real estate purchases and refinancing were wired to the escrow account belonging to Escrow and Closing Services and were intended to be used to pay mortgage balances of real estate sellers or persons refinancing.



• Beginning in at least 2009, York took money from the escrow account for his own use. To hide this, York would delay paying a mortgage balance and would use funds from a later transaction to then pay for the mortgage.



• As of February 1, 2010, there were ten mortgages that York received funds to pay but did not pay. These unpaid mortgages involved nine individuals and totaled $907,600.00.(1)

For the U.S. Attorney press release, see Pella Attorney Pleads Guilty To Wire Fraud.

(1) The Iowa Judicial Branch's Client Security Commission manages a fund, generated from contributions from lawyers and judges, that reimburses clients of lawyers who have misappropriated or lost a client's money. The purpose of the fund is to prevent defalcations by members of the lowa bar and to provide for the indemnification by the profession for losses caused to the public by the dishonest conduct of members of the bar of this state.

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

• Directory Of Lawyers' Funds For Client Protection (now includes Canadian recovery funds, courtesy of the American Bar Association);


• Check the USA Client Protection Funds Map;


• Check the Canada Client Protection Funds Map.

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

Law Firm's Real Estate Closing Paralegal Gets 3 Years For Pilfering $260K From Company Escrow Account

From the Office of the U.S. Attorney (Atlanta, Georgia):

• OLA SUZANNE STOWERS, 34, of Dawsonville, Georgia, was sentenced to prison yesterday by United States District Judge Richard W. Story on charges of bank fraud and aggravated identity theft. STOWERS was sentenced to 3 years in prison, and ordered to pay $260,171.94 in restitution. STOWERS pleaded guilty to the charges on April 4, 2011.



• According to United States Attorney Yates, the charges and other information presented in court: From July 1999 through May 2010, STOWERS was a closing paralegal and database manager at a real estate law firm located in Atlanta, Georgia.



• In June 2008, STOWERS transferred $176,946.79 from a law firm escrow account into a Bank of America account that she had been directed to close, but instead kept open and changed the statement mailing address on the account to her residence. [...] In July 2008, STOWERS began writing checks from that Bank of America account for her own personal use, forging the signature of one of the firm’s partners.



• By March 2009, the Bank of America account had a balance of $959.93. In April 2010, STOWERS deposited $82,727.42 of checks made payable to the law firm into the Bank of America account, and again wrote checks from the account for her own personal use, again forging the signature of one of the firm’s partners.

For the U.S. Attorney press release, see Law Firm Paralegal Sentenced to Federal Prison for Stealing from Escrow Account (Defendant Wrote Over $260,000 in Checks From Firm’s Account for Her Own Personal Use).

Trio Get Multi-Year Sentences In MD-Based $78M "Dream Homes" Ponzi Scam; Home Refinancing Pitch Used To Generate Funds To Invest In Worthless Racket

From the Office of the U.S. Attorney (Greenbelt, Maryland):

• U.S. District Judge Roger W. Titus sentenced Isaac Jerome Smith, age 48, of Spotsylvania, Virginia; and Alvita Karen Gunn, age 33, of Hanover, Maryland today to 70 months and 60 months in prison, each followed by three years of supervised release, respectively, for a fraud conspiracy, wire fraud and conspiracy to commit money laundering in connection with their participation in a massive mortgage fraud scheme which promised to pay off homeowners’ mortgages on their “Dream Homes,” but left them to fend for themselves. Judge Titus also ordered that the defendants pay restitution in the full amount of the loss, with the exact amount to be determined at a later hearing.



• On February 18, 2011, a federal jury convicted Smith and Gunn, along with co-defendant Michael Anthony Hickson, age 48, of Commack, New York, after a six week trial. Hickson, chief financial officer of Metro Dream Homes (MDH), was also convicted of making a false statement in a federal court proceeding [...].(1)

***

• According to evidence presented at the trial, beginning in 2005, the defendants targeted homeowners and home purchasers to participate in a purported mortgage payment program called the “Dream Homes Program.” In exchange for a minimum $50,000 initial investment and an “administrative fee” of up to $5,000, the conspirators promised to make the homeowners’ future monthly mortgage payments, and pay off the homeowners’ mortgages within five to seven years.



• Dream Homes Program representatives told investors that the homeowners’ initial investments would be used to fund investments in automated teller machines (ATMs), flat screen televisions that would show paid business advertisements and electronic kiosks that sold goods and services. To give investors the impression that the Dream Homes Program was very successful, Metro Dream Homes spent hundreds of thousands of dollars making presentations at luxury hotels in Washington, D.C., New York, New York and Beverly Hills, California.(2)

***

• MDH encouraged homeowners to refinance existing mortgages on their homes in order to withdraw equity and generate the funds necessary to enroll their homes in the Dream Homes Program.

***

• Trial testimony established that at a hearing on Sept. 12, 2007, Hickson testified that the financial success of the Dream Homes Program did not rely upon new investor funds, when in fact Hickson knew that the sole source of meaningful revenue for MDH was new investor funds [ie. 'Ponzi' scheme].



• As a result of the scheme, more than 1,000 investors in the Dream Homes Program invested approximately $78 million. When the defendants stopped making the mortgage payments, the homeowners were left to attempt to make the mortgage payments MDH had promised to make in full.

For the U.S. Attorney press release, see Two Conspirators Sentenced To Prison In $78 Million "Dream Home" Mortgage Fraud Scheme (Defendants Spent Investor Funds to Employ Chauffeurs and Maintain a Fleet of Luxury Cars; on Luxury Travel; to Pay Off Prior Investors as Part of a Ponzi Scheme; and Fund a Failed Investment Venture and Undisclosed Third Party Businesses).

(1) In addition, Carole Nelson, age 52, of Washington, D.C., the chief financial officer of POS Dream Homes, previously pleaded guilty to money laundering, and Charlotte Melissa Josephine Hardmon, age 39, of Bowie, Maryland, pleaded guilty to conspiracy to commit wire fraud in connection with their participation in this scheme, and are awaiting sentencing, according to the press release.

Hickson has since received a ten-year prison sentence. See Leader In $78 Million "Dream Home" Mortgage Fraud Scheme Sentenced To 10 Years In Prison.

(2) The evidence also showed that in February 2007, the Dream Homes Program added a second program called “POS Dream Homes” offering similar promises of paying off investor mortgages in five to seven years in exchange for an up-front investment of $50,000 or more, the press release states. Collectively, these programs had offices in Maryland, the District of Columbia, Virginia, North Carolina, New York, Delaware, Florida, Georgia and California.

High-Risk, Illiquid Securities Peddler Targets Seniors, Others With Home Refinance Pitch To Fuel Sales Of Dubious Investments

In Victoria, British Columbia, the Times Colonist reports:

• Last week, I reported that David Michaels, principal of Michaels Wealth Management in Victoria, has been selling highrisk, illiquid securities to his clients, many of whom are quite elderly. He has been promoting these investments through hour-long infomercials on CFAX Radio, and through "lunch and-learn" seminars at his office.

***

• In some cases, Michaels arranged for investors - some of them seniors - to borrow against their homes to finance these investments. "My mother, a retired widow, went to see David Michaels after hearing his radio show on CFAX where he claims that he loves making seniors money," Heidi Dubas told me in an email.



• "She made it clear that she was on a fixed income and was not interested in any high-risk investments. Michaels convinced her that borrowing $100,000 against her mortgage would net her 12 per cent monthly interest on her investment, which would be low risk, as well as getting her involved with Focus Money Solutions Inc. To date, she is out over $150,000 as well as having to pay interest monthly on her loan."



• I spoke to several other investors who told me that, at Michaels' prompting, they also borrowed against their home. One was 70-year-old Robert Davey of Ladysmith, who borrowed $150,000 to invest in Focused Money Solutions, plus two other deals that Michaels was recommending.



• Another elderly woman - who wouldn't tell me her age, but I would guess to be in her 70s or 80s - told me that, on Michaels' recommendation, she borrowed $200,000 against her house and invested $75,000 in Focused Money Solutions and $100,000 in Bethel.



• That money is gone. The loan is not.



• To my surprise, most of these people didn't blame Michaels for these losses. In the case of Focused Money Solutions, they blamed promoter Victor DeLaet, or they blamed the Alberta Securities Commission for issuing the cease-trade order, or they blamed themselves for making such a risky investment.

***

• Last Saturday, Michaels was on CFAX Radio's Talk to the Experts infomercial program, promoting foreclosure properties in Arizona. CFAX general manager Jim Blundell has since advised that Michaels will no longer appear on the program, but that won't necessarily stop him.



• Meanwhile, more of Michaels' investment deals are turning sour. One client told me that in March 2010, she invested RRSP money - how much, she didn't say - in Treadwell Energy Inc., through Michaels.

For the story, see Investment deals devastate seniors (B.C. Securities Act exemption allows Victoria agent to sell high-risk, illiquid securities without a licence).

In related stories, see:

• Victoria woman, 90, is now out $550,000,
• B.C. Securities Commission says it will review rules for sale of exempt securities.

Brooklyn Judge Demands Court Appearances From Bankster Exec, Foreclosure Mill To Explain Document Filings "Replete With False Statements"

In Brooklyn, New York, the New York Daily News reports:

• A Brooklyn judge has ordered the head of one of the nation's biggest banks to appear in court and explain why it should not be penalized for submitting false documents in a foreclosure case.



• In a scathing decision issued Friday, Supreme Court Justice Arthur Schack dismissed HSBC's case against Bedford-Stuyvesant homeowner Ellen Tahrer as a "frivolous motion" and a "waste of judicial resources."



• The bank failed to prove it even owned the $475,000 mortgage on Tahrer's home, Schack ruled. Instead, its lawyers submitted documents from several notorious "robo-signers,"(1) all of which claimed the original loan had been transferred to HSBC from Delta Funding Corp., the original lender, which declared bankruptcy in 2007.



• Those documents were "replete with false statements," Schack ruled. He ordered the British bank's North American CEO, Irene Dorner, to appear July 15 to explain. Tahrer, 55, the delinquent homeowner, still lives in the two-story home and had no idea what had happened with her case.



• Laid off in 2009 as an office worker at American Express, Tahrer has been unable to make her $3,000 monthly mortgage payment. "I went to legal aid for help and tried to get a mortgage modification, but had no success," she said. "A few months ago, the bank called and offered me $20,000 to get out of the house. I told them, I had no place to go."



• Schack's decision freezes Tahrer's status for perhaps another year or two. With his tough stance on shoddy foreclosure filings, Schack has emerged as a folk hero among financially strapped homeowners. In HSBC, he is tackling the ninth-largest bank in the U.S., and he has concluded that what happened goes beyond shoddy paperwork.

For the story, see Supreme Court Justice Schack hits HSBC for 'frivolous motion' in foreclosure, asks boss to explain.

For the court ruling, see HSBC Bank USA, N.A. v Taher, 2011 NY Slip Op 51208(U) (N.Y. Sup. Ct. Kings Cty. July 1, 2011).

Thanks to William A. Roper, Jr. for the heads-up on the court ruling.

(1) Among the notorious, prolific, nationally-recognized, multiple corporate hat-wearing robosigners involved in this case:

• Robosigner Scott W. Anderson: In describing the history of his handiwork, Schack notes (among other things):
  
  While I have never personally met Mr. Anderson, his signatures have appeared in many foreclosure documents in this Court. His claims of wearing different corporate hats and the variations in the scrawls of initials used for his signature on mortgage documents has earned Mr. Anderson notoriety as a robosigner. [...]
  


• Robosigner Margery ("The Milliner's Delight") Rotundo: In describing the robosigning history of the "peripatetic" Ms. Rotundo, Schack includes a quote from an earlier ruling in another case:
  
  The late gossip columnist Hedda Hopper and the late United States Representative Bella Abzug were famous for wearing many colorful hats. With all the corporate hats Ms. Rotundo has recently worn, she might become the contemporary millinery rival to both Ms. Hopper and Ms. Abzug. [...]
  


• Robosigner Christina Carter: Regarding a foreclosure mill attorney's statement filed in court describing Carter as an employee of the plaintiff, HSBC, Schack responds:
  
  This is disingenuous. Ms. Carter is not employed by plaintiff, but by OCWEN. She executed documents as an officer of MERS and as an employee of OCWEN. Ms. Carter's signature on documents is suspect because of the variations of her signature used. This Court examined eight recent documents that exhibit three different variations of Christina Carter's signature. [...]

Foot-Dragging BofA Reluctant To F'close On Abandoned House Loses Lien Priority To HOA; Judge To Allow Home Sale, Apply Proceeds First To Junior Claim

In Nashville, Tennessee, The Tennessean reports:

• An outgoing Nashville bankruptcy judge has sided with a local flood victim over the nation’s largest mortgage lender in a decision that could serve as a blueprint for disaster victims who can’t escape mounting homeowners association fees even if they abandon their homes, enter foreclosure and declare bankruptcy.



• At a time when mortgage lenders are taking more than a year to complete foreclosures, Judge George C. Paine II has ruled that Bank of America has consented to the sale of a flood-damaged Bellevue condominium through its inaction and must wait in line behind a homeowners association to get paid.



• The Bellevue condo belongs to Sheryl Lynn Pigg, a filmmaker professionally known as Sherry Paige, who lost nearly everything in the Nashville flood of 2010. She ultimately found a new home, declared bankruptcy, discharged her debts and embarked on a fresh start.



• Or, so she thought. Pigg was surprised when she learned that Belle Management Corp. was still saddling her with homeowners association fees for a unit that she stripped to its studs and abandoned.

***

• Pigg sued her mortgage holder, Bank of America, to get the lender to finalize the foreclosure, accept a deed in lieu of foreclosure or allow a sale of the condo.



• Citing the wide latitude courts have to fashion whatever remedy is necessary to achieve justice, Paine said Pigg and others like her have unjustly been left in limbo. In a memorandum opinion, he has asked that Pigg’s bankruptcy be reopened so that a trustee can sell the condo.



• Proceeds from the sale will go first toward settling the homeowners association bill and then Bank of America. When Pigg declared bankruptcy in September, she owed $97,500 on a home that was worth only $55,000.



• “With the real estate collapse, lenders, who otherwise have the right to do so, are choosing not to foreclose on their collateral leaving homeowners in limbo,” Paine wrote. “Congress’ broadening of (the bankruptcy code) to protect HOAs deprives the debtor of a fresh start, and thwarts the goals of the entire Bankruptcy Code.”

For the story, see In rare move, court backs flood victim in foreclosure (Bankruptcy judge says bank unjustly left woman in limbo).

For the ruling, see Pigg v. BAC Home Loans Servicing LLC (In re Pigg), Case No. 10-10168 (Bankr. M.D. Tenn. June 24, 2011).

Go here for the Pigg-Amended Complaint, and here for Pigg - Trial Brief.

Bankruptcy Trustee's Attempt To Boot Homeowner In Underwater Home Fails; State 'Wildcard' Exemption Allows Debtor To Stay Put

The Florida Bankruptcy Law Blog reports:

• Some bankruptcy trustees have been trying to force debtors’ to turn over possession of real property even when the property appears to be under water. It seems that these bankruptcy trustees want to see if they can find a buyer and/or negotiate concessions or payment from the mortgage lender.



• A recently decided district court case in the Middle District of Florida considered a Chapter 7 bankruptcy case wherein a trustee wanted debtors to surrender and move out of their upside down homestead so that the trustee can market the property.



• The debtor’s objected on the grounds that the trustee cannot compel turnover of assets with no equity and no benefit to creditors. The trustee then argued that the debtors’ objection, itself, impeded the trustee’s administration of the estate and thereby disqualified the same debtors from the $4,000 wildcard exemption.



• The district court ruled that the trustee had no right to compel turnover of an asset with no value, and that the trustee should abandon such assets.



• The court indicated that a trustee could try to sell the debtor’s property but that the debtor should retain possession unless the trustee finds a buyer who will pay more than the mortgage debt. The debtor’s opposition to turnover did not forfeit his wildcard exemption.(1) 8:11-cv-193

Source: Chapter 7 Trustee Wants Debtors To Move Out And Turn Over Upside Down House.

For the ruling, see Iuliano v. Brook (In re Iuliano), Case No. 8:11-cv-193-T-JSM (M.D. Florida, Tampa Div. April 29, 2011).

In a related post, see Chapter 7 Trustees Attacking Debtors' Right To Stay Put In Their Upside Down Homestead Property.

(1) Among the cases cited by the District Court in reaching its conclusion:

• Osborne v. Dumoulin, 55 So. 3d 577 (2011),
• In Re: Feinstein Family Partnership, 247 B.R. 502 (Bankr. M.D. Fla. 2000),
• In Re: Bennett, 395 B.R. 781 (Bankr. M.D. Fla. 2008).

Title Lawyer Gets 29 Months, Loses 'Ticket' After $16.3M Escrow Swindle; Bar's 'Attorney Ripoff Reimbursement Fund' May Be Left Holding Heavy 'Bag'

The South Florida Sun Sentinel reports:

• A Boca Raton real estate title attorney has been disbarred for five years, the Florida Bar announced Thursday, two days after he was sentenced to 29 months in federal prison on bank fraud charges.



• Bar records show that Andrew Mark David, an agent with the Attorney's Title Insurance Fund, did not document $16.3 million in escrow disbursements for closings. The bar said Angel Puentes, a non-lawyer with several real estate investment companies who became affiliated with David's practice, took most of the money for himself.



• David pleaded guilty to both the bar complaint and federal charges, although he said he was unaware of Puentes actions and denied wrongdoing. He received a reduced sentence for cooperating with federal investigators, and agreed to be part of a $4.4 million restitution, court documents show. The case against Puentes is pending.



• "Mr. David is very remorseful for his conduct. He did not knowingly defraud anyone," said Allen Stewart Katz, David's attorney.

Source: Boca title attorney disbarred after sentencing on bank fraud charges.
See also: The Florida Bar v. David - Referee's Report for the results of The Florida Bar probe:
Among the referee's recommendations:

• Respondent will make reasonable efforts to reimburse The Florida Bar’s Clients' Security Fund if it issues any payments to compensate the victims of his misconduct.(1) Respondent must repay to the Clients’ Security Fund all monies paid out as a result of his misconduct, as a condition precedent to his eligibility to apply for readmission to The Florida Bar.

(1) The Florida Bar's Clients' Security Fund was established to reimburse clients who have suffered a loss due to misappropriation or embezzle­ment by a Florida-licensed attorney.

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

• Directory Of Lawyers' Funds For Client Protection (now includes Canadian recovery funds, courtesy of the American Bar Association);
• Check the USA Client Protection Funds Map;
• Check the Canada Client Protection Funds Map.

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

Foreclosing Lender's Failure To Serve Junior Lienholder Leaves Latter With Major Windfall

A recent ruling by the Indiana Supreme Court may be of some interest to title agents and examiners (who are already in the unenviable position of being expected to insure title to homes that have a foreclosure judgment and foreclosure deed in its chain of title), and to some real estate operators (those who profitably dabble in the "trafficking" of seemingly worthless junior liens on properties in foreclosure).

In a nutshell:

• A mortgage holder foreclosed its mortgage, took title to the subject property at a sheriff's sale, and then sold the property to a third party;



• The foreclosing mortgagee subsequently discovered it had inadvertently failed to name a junior lienholder in the foreclosure action.



• The foreclosing mortgagee then went back into court and got the judge to order the junior lienholder to either redeem its interest by paying off the foreclosing mortgagee or lose its lien foreever.



• The junior lienholder appealed, and the Indiana Court of Appeals reversed.(1)



• On review, the Indiana Supreme Court, while disagreeing with the legal reasoning employed by the Court of Appeals, reached the same end result.



• It essentially said that the foreclosing lender's failure to name the junior lienholder in the foreclosure action without a good reason to explain the omission allows the latter's lien on the property both to:
  
  a) survive, and
  b) move up in priority with respect to its claim on the foreclosed property.
  


• The state high court stated that, given the facts of the case, the equitable remedy of strict foreclosure / reforeclosure was unavailable to the foreclosing mortgagee, and the doctrine of merger was applicable.(2)
(which operated to obliterate any claim of priority that the senior (foreclosing) mortgagee may have had over the junior lienholder).


• Consequently, the foreclosing mortgagee was stuck with a property encumbered by the debt secured by the junior lien.(3)

For the ruling, see Citizens State Bank of New Castle v. Countrywide Home Loans, Inc., No. 76S03-1009-CV-515 (Ind. June 29, 2011).

(1) Citizens State Bank of New Castle v. Countrywide Home Loans, Inc., 922 N.E.2d 655 (Ind. Ct. App. 2010).

See also, Sloppy Service, Subsequent Title Transfer In Foreclosure Process Leaves Lender Holding The Bag On $111K+ Error.

(2) However, in the following excerpt from the ruling, the state high court added that had there been no screw-up on the part of the foreclosing mortgagee in naming the junior lienholder in the foreclosure action, the result in this case may have been different (bold text is my emphasis, not in the original text):

• We hasten to add that although the mortgagee's intent is the primary consideration in determining whether a merger has occurred, there may be circumstances under which the equitable remedy of strict foreclosure may nonetheless be appropriate.
  
  For example, this is not a case in which a junior lienholder was not joined in the foreclosure action because of an indexing error resulting in the lien not appearing in the court records. See U.S. Bank of Wash. v. Hursey, 806 P.2d 245, 247 (Wash. 1991) (declaring that a "reforeclosure" was appropriate where a junior lienholder was omitted from a foreclosure action because of indexing error by the court clerk's office).
  
  Were such facts before us, then the outcome of this case very well may have been different.
  
  Instead, the record is clear that Citizen Bank's lien on the property was properly recorded and indexed. Other than essentially declaring mistake or inadvertence Countrywide does not explain why the lien was overlooked. In sum, Countrywide has failed to demonstrate that it is entitled to the remedy of strict foreclosure.

(3) It is undeniable that there are plenty of junior lienholders that have ostensibly been foreclosed by the owner/holder of a superior 1st mortgage. If the junior lienholder was not served in the foreclosure action, this case appears to state that the junior lienholder will score a windfall.

Further, if there was "sloppy" service attempted on the junior lienholder that was so ineffectual so as to render it void (or at least voidable), this ruling may support the same proposition, although the court did not specifically address the issue of defective service of process.

One thing is clear, however:

• title examiners, agents, insurers (at least in Indiana, and possibly elsewhere) have one more issue to sweat about when underwriting a title insurance policy on a foreclosed property,


• buyers of homes that have a foreclosure sale in their chains of title have one more source of possible surprise and chagrin, and


• clever real estate operators who seek out and buy junior liens (usually at a steep discount) may have found one more potentially profit-pocketing opportunity available to them.

Foreclosure Mill Sweatshop Attorneys, Robosigner Notaries Dodge Grilling After 'Behind Closed Doors' Baltimore Court Hearing Yields Nine Dismissals

In Baltimore, Maryland, The Daily Record reports:

• Until last Monday, hearings on signature irregularities in foreclosure filings in Baltimore City Circuit Court have made for surprisingly good courtroom drama. Special Master Elizabeth A. Ritter, a former prosecutor, has asked tough questions about practices and processes at three local law firms, and the lawyers on the stand have either conceded mistakes or faced further grilling.



• Perhaps having read about their predecessors' experiences, the Baltimore firm of Wittstadt & Wittstadt P.A. took a different tack last week. The Wittstadt brothers and their lawyer, along with the firm's support staff and their lawyer, showed up in Judge W. Michel Pierson's third-floor courtroom in the morning and, after identifying themselves on the record, consented to moving the whole proceeding behind closed doors.



• According to a video recording of the proceeding, before he left the courtroom, Michael Pate turned to his clients, the notaries, and said, "Watch my stuff, please. If something happens we're all in trouble, OK? You guys more than me."



• But all that happened during the next few minutes, according to court records filed thereafter, was the firm agreed to dismiss nine of the 10 cases in question, and Judge Pierson agreed to dismiss the show cause order in the other.



• There would be no cross-examination of veteran attorneys this time, no notaries invoking their Fifth Amendment rights.



• The Wittstadt firm seemed to have fared better than firms like Shapiro & Burson LLC or Friedman & MacFadyen P.A., but they were in no mood to talk about it as they left the courthouse. The Wittstadts' attorney, Timothy M. Gunning, identified himself but would not say whom he represented. Gerard W. Wittstadt introduced himself as "Mickey Mouse."

Source: Baltimore firm dismisses nine foreclosure filings (requires subscription; if no subscription, GO HERE).

NJ Lawmakers Overwhelmingly Pass Bill Targeting Sale Leaseback Equity Stripping Peddlers, Other F'closure Rescue Operators; Awaits Governor's Sign-Off

The Star-Ledger reports:

• They call themselves "foreclosure rescue" companies, but in many cases they end up enriching themselves while destroying whatever credit-worthiness a distressed homeowner has.



• A bill to regulate the industry overwhelmingly passed both the state Senate and Assembly last week and housing and foreclosure experts said it will at least bring some relief to the already daunting task of helping people stay in their homes.



• "It’s some of the most egregious kind of predatory lending, the foreclosure rescues," said Peggy Jurow, who leads the Foreclosure Defense Initiative at Legal Services of New Jersey.(1) She said it can take years to help victims sort through the complicated mass of subsequent lawsuits and paperwork, even if the consultant has been jailed.

***

• Gov. Chris Christie has not taken a public position on the bill and has 45 days from June 29, when it passed, to review its contents before taking action, said spokesman Kevin Roberts.

For more, see N.J. Legislature bill would regulate foreclosure rescue fraud, offer relief to distressed homeowners.

(1) Legal Services of New Jersey coordinates the statewide Legal Services system, which provides free legal assistance to low-income New Jerseyans for their civil legal problems.

Arizona Feds Bag Suspected Vacant Foreclosed Home Hijacker On Unrelated Charges Of Filing False Bankruptcy Claims While Promising Foreclosure Rescue

In Tucson, Arizona, KVOA-TV Channel 4 reports:

• A former mayoral candidate and self-proclaimed "sovereign citizen" has been arrested for false claims in bankruptcy stemming from a website he operated claiming he could make the foreclosure process stop.



• According to a release from Dennis Burke, U.S. Attorney for the District of Arizona, Marshall E. Home, 81, is facing a criminal complaint charging him with two counts of false claims in bankruptcy.



• According to the complaint, Home operated the "Individual Rights Party; Mortgage Rescue Service," and would charge individuals in foreclosure proceedings $500 to make the process stop.(1) The complaint alleges that Home believes Congress does not have the authority to make laws binding to anyone outside the District of Columbia and federal territories, under the U.S. Constitution. The complaint also alleges that in March, Home falsely told the Bankruptcy Court that he had a $3 billion financial claim against the United States, then went on to file 173 more false claims relating to individuals participating in his "Mortgage Rescue Service."



• The complaint says these claims totaled over $2.5 trillion dollars - the two counts in the criminal complaint involve claims of $2.5 billion and $50 million. "The anti-government paranoia of so-called ‘sovereign citizens' becomes a self-fulfilling prophecy when they use their false claims and fraudulent practices to rip-off others," said U.S. Attorney Dennis K. Burke. "We will continue to work with our law enforcement partners to pursue and prosecute those who make false claims against the government to cover for their wrongdoing."

For the story, see Former mayoral candidate arrested for false bankruptcy claims.

(1) In addition to his alleged antics filing dubious documents in bankruptcy court, the 81-year old Home also appears to have a career as a self-employed vacant foreclosed home hijacker. See Fringe Tucson Mayoral Candidate Goes On 'Home' Hijacking Spree, Staking Claims To Vacant Fannie-Owned REOs Throughout Metro Phoenix.

Ongoing NY Civil Litigation Triggered By Now-Convicted Crook's $8M Home Equity Refinance Swindle May Leave Lenders Liable For 21 L.I. Families' Losses

In Nassau County, Long Island, The New York Times reports:

• HOLDING banks accountable for all those disastrous mortgages has been remarkably difficult. But last week, a big bank agreed to pay a price: Bank of America announced that it would part with $8.5 billion to settle claims that its Countrywide Financial unit had packaged garbage loans into investments that were said to be safe.



• That is good news for investors, as these things go. But another, lesser-known case now winding its way through the courts may help others recover losses from lenders who dealt in risky mortgages and claimed that they had no duty to their customers.



• The case involves 21 families on Long Island and a convicted swindler named Peter J. Dawson. Mr. Dawson, a self-described financial planner, stole roughly $8 million from his clients, among them elderly parishioners at his church in Uniondale, N.Y. He pleaded guilty in state court in December 2007 and is serving 5 to 15 years in prison.



• What does this have to do with mortgage lenders? Home loans were central to Mr. Dawson’s theft. He persuaded people who had paid off all or much of their mortgages to take out new home loans and entrust him with the proceeds. He promised to pay off their new loans with income from investments. Instead, he absconded with their money. Many of his victims lost their life savings and now cannot afford to pay off the mortgages.

For more, see The Swindler and the Home Loans.

See Hennessy v. Dawson, No. 19368/06 (NY Sup. Ct. Suffolk Cty., May 20, 2011) for a 21-page trial court ruling detailing the allegations and allowing the case against the banksters to continue.

More Mortgage Servicer Horror Stories; Screw-Ups Lead To Foreclosure Threats, Ruined Credit For Homeowners Who Never Missed Payments

In Lutherville, Maryland, The Baltimore Sun reports:

• Anca Safta never missed a payment on her loan to expand her Lutherville home. But that didn't stop Safta's mortgage servicer from citing her this year for failing to pay, reporting her to credit agencies and threatening to foreclose.



• "It was just a nightmare," said Safta, a physician at the University of Maryland Medical Center who got the loan to build an extension for her parents to live in. What happened?



• Her servicer had not credited the payments to her account. It might seem to be a simple problem. It's not. A growing number of lawsuits, investigations and studies indicate that servicer blunders and outright misconduct are common — and difficult for homeowners to resolve. Borrower advocates and regulators say the system is effectively broken.



• "This isn't just a few technical errors," said Anne Balcer Norton, the state's deputy commissioner of financial regulation. "The entire servicing model needs to be revised."

***

• Three years ago, Baltimore homeowner Brian J. Casey asked his servicer for a payoff statement so he could refinance. Litton Loan Servicing, which had taken over his account from a failing servicer, said Casey's balance due was higher than his own records indicated.



• Casey said Litton had not credited him for a payment made to the previous servicer, and had tacked on fees that he questioned. So he asked for the loan history.



• "They formally told me by electronic mail, 'We don't have it,'" said Casey, 55, who runs a Towson-based banking consultancy. "Literally, 'We don't have the records.'"



• Casey said he pressed for a resolution but didn't get anywhere. Litton, meanwhile, piled on more charges and started foreclosure proceedings. While Casey acknowledged that he had been late on payments, he said he was less than three months behind — the point at which foreclosure is allowed.



• Casey said he has spent more than $30,000 in legal fees trying to save his family's home, get his account questions answered and fix his ruined credit. "It was like an absolute runaway train," he said.



• Baltimore-based Civil Justice, a nonprofit that specializes in mortgage problems, has made Casey and his wife the lead plaintiffs in a federal class-action suit against Litton. The class-action allegations focus on foreclosure robo-signing, in which servicer representatives sign documents without checking for accuracy or allow their signatures to be faked by others.



• But Civil Justice says it's also common to see payment records mismanaged in the handover from a failing servicer to a new firm. "In this case, it could have been resolved very easily," said Phillip Robinson of Civil Justice. "It … escalated and snowballed because Litton just ignored him."

For more, see Problems rampant in mortgage servicing, advocates and regulators say (Errors, misbehavior point to need for reform).

See Misbehavior and Mistake in Bankruptcy Mortgage Claims for more on mortgage servicer screw-ups (in the context of bankruptcy cases).

Fla. Appeals Court To Trial Judge: Pending Affirmative Defenses, Counterclaim Preclude Execution Of Judgment; Score Another Win For Pro Se Homeowners

A Florida appeals court recently granted another request to reverse an erroneous order granting summary judgment of foreclosure in favor of a lender, finding that allowing a subsequent foreclosure sale to proceed was erroneous because affirmative defenses and a counterclaim for fraud were still pending.

Palm Beach County Circuit Court Judge Meenu T. Sasser was the guilty trial judge in this basic screw-up involving fundamental issues of law.

For the ruling, see Peterson v. Affordable Homes of Palm Beach, Inc., 4D09-5180 (Fla. App. 4th DCA, June 29, 2011).

(1) In granting the request of a self-represented homeowner, the three-judge appellate court panel gave trial court Judge Sasser this lesson on basic Florida law applicable here:

• "Courts have repeatedly held that, where summary judgment is granted for a plaintiff and a counterclaim remains pending, the trial court should stay the execution of the judgment pending the resolution of the counterclaim." Tooltrend, Inc. v. C.M.T. Utensili, S.r.l., 707 So.2d 1162, 1162 (Fla. 2d DCA 1998).
  
  "[T]he issue of fraud, raised by appellants as a defense and counterclaim, is usually considered a jury question and is not ordinarily appropriate for summary judgment proceedings." L & S Food Servs., Inc. v. Roberts Cafeteria, Inc., 422 So.2d 45, 45 (Fla. 2d DCA 1982). See also Millennium Group I, L.L.C. v. Attorneys Title Ins. Fund, Inc., 847 So.2d 1115, 1117 (Fla. 1st DCA 2003) (stating that when summary judgment is granted for one party and a counterclaim on an original claim remains pending, the trial court should stay the execution of the judgment pending the resolution of the remaining claim).
  
  Here, allowing the foreclosure action to proceed before deciding Peterson's counterclaim effectively denied Peterson the right to a jury trial, which she had demanded in her counterclaim. See Del Rio v. Brandon, 696 So.2d 1197, 1198 (Fla. 3d DCA 1997). "The purpose of the compulsory counterclaim is to promote judicial efficiency by requiring defendants to raise claims arising from the same `transaction or occurrence' as the plaintiff's claim."
  
  Id. In Londono v. Turkey Creek, Inc., 609 So.2d 14, 20 (Fla. 1992), our supreme court explained "transaction or occurrence," using the "logical relationship test" in order to determine whether a claim was compulsory:
  
  A claim has a logical relationship to the original claim if it arises out of the same aggregate of operative facts as the original claim in two senses: (1) that the same aggregate of operative facts serves as the basis of both claims; or (2) that the aggregate core of facts upon which the original claim rests activates additional legal rights in a party defendant that would otherwise remain dormant.
  
  Id.
  
  Here, Peterson's counterclaim alleged fraud on the part of Affordable Homes in connection with the purchase of the property. Her counterclaim was compulsory, as issues of fact which were "logically related" remained as to the liability of Affordable Homes. Thus final summary judgment of foreclosure should not have been ordered before the trial court considered it.
  
  We therefore reverse the order granting summary judgment and remand this cause for further proceedings.

Go here for links to some Florida case law on the staying of execution on a judgment while a counterclaim is pending.

While we're at it, a court's granting of summary judgment while discovery is pending is generally problematic for Florida appeals courts as well. See:

Payne v. Cudjoe Gardens Prop. Owners Ass'n, 837 So. 2d 458 (Fla. App. 3d DCA 2002):

• It is axiomatic that Summary Judgment may not be granted unless the moving party is able to show that no genuine issues of material fact exist. See Holl v. Talcott, 191 So. 2d 40, 43-44 (Fla. 1966); Kemper v. First Nat'l Bank of Dayton, Ohio, 277 So. 2d 804 (Fla. 3d DCA 1973).

• Where discovery is not complete, the facts are not sufficiently developed to enable the trial court to determine whether genuine issues of material facts exist. See Singer v. Star, 510 So. 2d 637, 639 (Fla. 4th DCA 1987).

• Thus, where discovery is still pending, the entry of Summary Judgment is premature. See Smith v. Smith, 734 So. 2d 1142, 1144 (Fla. 5th DCA 1999)("Parties to a lawsuit are entitled to discovery as provided in the Florida Rules of Civil Procedure including the taking of depositions, and it is reversible error to enter summary judgment when discovery is in progress and the deposition of a party is pending."); Henderson v. Reyes, 702 So. 2d 616, 616 (Fla. 3d DCA 1997)(reversing the entry of Summary Judgment where depositions had not been completed and a request for the production of documents was outstanding.); Collazo v. Hupert, 693 So. 2d 631, 631 (Fla. 3d DCA 1997) (holding that a trial court should not entertain a motion for summary judgment while discovery is still pending); Spradley v. Stick, 622 So. 2d 610, 613 (Fla. 1st DCA 1993); Singer v. Star, 510 So. 2d 637 (Fla. 4th DCA 1987).

Fleet Fin. & Mortg. v. Carey, 707 So. 2d 949 (Fla. App. 4th DCA 1998):

• This court has held on many occasions that "a court should not enter summary judgment when the opposing party has not completed discovery." Lubarsky v. Sweden House Properties of Boca Raton, Inc., 673 So. 2d 975, 977 (Fla. 4th DCA 1996) (quoting Brandauer v. Publix Super Markets, Inc., 657 So. 2d 932, 933 (1995)). See also Sica v. Sam Caliendo Design, Inc., 623 So. 2d 859 (Fla. 4th DCA 1993); Moore v. Freeman, 396 So. 2d 276 (Fla. 3d DCA 1981) (trial court's granting of summary judgment was premature where the opposing party, through no fault of his own, had not completed discovery). Further, it is reversible error to grant summary judgment where depositions are still pending. See Sica.

Trump Leaves BofA Holding The Bag On $22.8M Foreclosed Mansion; Buys Driveway, Front & Back Yard Out From Under Desperate 'Looking To Unload' Bankster

MSN Money reports:

• This is one foreclosure that won't go Bank of America's way. Donald Trump is putting a huge squeeze on the bank as it tries to foreclose on a 24,000-square-foot estate in Virginia. Bank of America owns the house and is trying to sell it for $16 million, The Wall Street Journal reports.



• Maybe the bank could sell a normal estate for that much, but not in this case. You see, Trump owns the backyard, the front yard and most of the driveway. He doesn't own the house itself, but he's willing to take it off the bank's hands for, oh, $3.6 million. Ah, you gotta love the Donald.(1)



• Here's how this nightmare for Bank of America came about: [...]

For more (the short version of the story), see Donald Trump squeezes Bank of America (The company is trying to sell a huge estate it foreclosed on. But the business magnate's cagey moves present a problem).

For the long version of the story, see The Wall Street Journal: The Fall of the House of Kluge Leads to the Rise of the Yard of Trump (The Donald Snaps Up Lawn, Driveway of Foreclosed Manse; Bank Is Not Amused):

• To make his point, he has erected signs on the front lawn of the mansion that read, "No Trespassing. This Land is Owned by Trump Virginia Acquisitions LLC," aimed at warding off possible buyers. He has also let the lawn go to seed.

(1) Commenting on BofA's attempt to unload the foreclosed mansion that once secured its $22.8 million mortgage:

• Trump could hardly contain his glee. "Maybe someone is stupid enough to buy the house," he said. "I wish them luck."

Feds Score Eight More Guilty Pleas In Northern California Foreclosure Auction Bid-Rigging Sweep; Sherman Act Violations Leave Investors In Hot Water

From the U.S. Department of Justice:

• Eight California real estate investors have agreed to plead guilty for their roles in two separate conspiracies to rig bids and commit mail fraud at public real estate foreclosure auctions in Northern California, the Department of Justice announced.(1)

***

• According to the felony charges, the real estate investors participated in a conspiracy to rig bids by agreeing to refrain from bidding against one another at public real estate foreclosure auctions in Contra Costa County and Alameda County, Calif.

***

• The department said that the primary purpose of the conspiracies was to suppress and restrain competition to obtain selected real estate offered at Alameda and Contra Costa County public foreclosure auctions at noncompetitive prices. When real estate properties are sold at these auctions, the proceeds are used to pay off the mortgage and other debt attached to the property, with remaining proceeds, if any, paid to the homeowner.(2)

***

• Each violation of the Sherman Act carries a maximum penalty of 10 years in prison and a $1 million fine for individuals. [...] The Antitrust Division and the FBI have identified a pattern of collusive schemes among real estate investors aimed at eliminating competition at real estate foreclosure auctions, and [the] charges are part of the department’s ongoing effort to combat this conduct and restore competition to public auctions.(3)

For the Department of Justice press release, see California Real Estate Investors Agree to Plead Guilty to Bid Rigging at Public Foreclosure Auctions (Investigation Yields Eight Plea Agreements).

(1) According to the press release, charges were filed in U.S. District Court for the Northern District of California in Oakland, Calif., against Thomas Franciose of San Francisco; William Freeborn of Alamo, Calif.; Robert Kramer of Oakland, Calif.; Thomas Legault of Clayton, Calif.; David Margen of Berkeley, Calif.; Brian McKinzie of Hayward, Calif.; Jaime Wong of Dublin, Calif.; and Jorge Wong of San Leandro, Calif.

(2) According to the Justice Department and/or court documents:

• after the conspirators’ designated bidder bought a property, the conspirators would hold a secret, private auction at which each participant would bid the amount above the public auction price he was willing to pay;


• secret, private auctions took place at or near the courthouse steps where the public auctions were held where the highest bidder at the private auction won the property;


• the difference between the public auction price and that at the second auction was the group’s illicit profit, and it was divided among the conspirators, often in cash.

(3) The investigation into fraud and bid rigging at certain real estate foreclosure auctions in Northern California is being conducted by the Antitrust Division’s San Francisco Office and the FBI’s San Francisco office. The Justice Department urges anyone with information concerning bid rigging or fraud related to public real estate foreclosure auctions should contact the Antitrust Division’s San Francisco Office at 415-436-6660, visit www.justice.gov/atr/contact/newcase.htm or call the FBI tip line at 415-553-7400.

Another Florida Homeowner Suffers Pre-Foreclosure House-Trashing; Cops To Victim: Don't Bother Us, It's A 'Civil Matter!'

In Brooksville, Florida, WTSP-TV Channel 10 reports:

• Imagine coming back to your home after being away a few weeks and finding the locks changed and the home trashed. That's what happened to Chris Boudreau of Brooksville. Boudreau showed us the home, which was stripped bare.



• Walking through the living room, he tells us "I used to have a couch, a sofa, a couple of end tables, a TV, DVD player, tapes and cabinet... but they are now gone."



• It happened after 21 Mortgage Corporation in Knoxville, which is Boudreau's lender, hired a local company to do the job. The mortgage company spokesperson refused to talk to us, but we talked to Boudreau's attorney, Tom Altman.



• According to Altman, the woman from the mortgage company told him Florida is a "self help state," and that's why they are allowed to do this. However, Altman explained he was holding the mortgage and Florida is not a self help state. He says he told the woman Florida has strict mortgage foreclosure laws and they were being violated by the company.



• But the Hernando Sheriff's Office apparently has no interest in enforcing those laws... or burglary, breaking and entering and trespassing, either. They say it is a civil matter, even though everything from the house was taken or thrown in the dumpster. The wedding dress belonging to Boudreau's wife was even cut to shreds.



• "When she saw what happened, she actually went into in the dumpster trying to go through the stuff," Boudreau says. "She was crying her eyes out."



• Boudreau's attorney says the Hernando Sheriff's Office is flat wrong. "Although Boudreau had fallen behind a bit in his mortgage, there were no foreclosure proceedings in effect," Altman says. "That means the people who trashed bordures home and took his possessions should be arrested and prosecuted like common criminals."



• Boudreau says he just wants to get his stuff back. However, that seems unlikely and it appears Boudreau will have to sue to be compensated for his losses.

Source: Man falls behind on payments, mortgage company has home trashed.

(1) For examples of filed lawsuits involving illegal bank break-in, "trash-out" & lockout cases, see:

• Bank admits mistake on Willcox home foreclosure (involving an Arizona homeowner) (for a copy of the resulting federal lawsuit, see Newman v. Bank of America, N.A. and go here for the attached Exhibits),


• Couple: Bank Foreclosed On Wrong House (New Bedford Couple Suing Bank Of America) (involving a Massachusetts resident with a home in Florida) (for a copy of the resulting federal lawsuit, see Cardoso v. Bank of America, et al.),


• Family's recently purchased home, gutted by property removal service (involving a Michigan homeowner) (for a copy of the resulting federal lawsuit and accompanying Exhibits , see Rought v Deutsche National Trust Company, Trustee, et al.),


• In a Sign of Foreclosure Flaws, Suits Claim Break-Ins by Banks (involving a California homeowner) (for a copy of the resulting federal lawsuit, see Ash v. Bank of America).

For those homeowners who've been screwed over by wrongful lockouts by foreclosing lenders (and their confederates) and seek some possible guidance on how much their cases might be worth if they seek to sue, see:

• Nevada High Court OKs $1M+ Damage Award To Homeowner Due To Mortgage Company Misidentification Of Home In Foreclosure (for the court ruling, see Countrywide Home Loans v. Thitchener, 192 P.3d 243; 2008 Nev. LEXIS 79; 124 Nev. Adv. Rep. 64 (Nev. 2008)),



• Long Island Judge Hammers Wells w/ $155K Tab For Oppressive, Heavy Handed, Egregious Conduct For Pre-Sale Lockout Of Homeowner In Foreclosure (for the court ruling, see Wells Fargo v. Tyson, 2010 NY Slip Op 20079 (Sup. Ct., Suffolk County, March 5, 2010)).

(2) This isn't the first time that cops have washed their hands when investigating these real estate-related crimes. See:

• Fed. Court Affirms 29+ Year Sentence For F'closure Rescue Operator In Rackets That Local Cops, DAs, Texas AGs Cluelessly Minimized As 'Civil Matters';


• Would-Be Buyers Screwed Over In Rent-To-Own Racket Involving Homes In F'closure Complain To Local Prosecutor; Ripoff Is Treated As A Civil Matter;


• Cops Accept "The Bank Sent Me!" Defense In Home Break-In Probe Targeting "Trash-Out" Agent; Say No Crime Was 'Intended' - "It's A Civil Matter!";


• Another F'closed Homeowner Illegally Driven From Home; Cops Decline To Pursue Criminal Charges; Call Premature, Unauthorized "Eviction" A Civil Matter;


• Suspected Home Hijacking Case Once Considered "Civil Matter" Will Now Be Treated As Criminal Trespass, Say Cops;


• Another Foreclosure Misidentification Screw-Up Results In Pair "Cleaning Out" Wrong Home; DA Declines Prosecution - Says It's A Civil Matter.

BofA At Center Of Another Servicer Screw-Up; Buyer Who Paid Cash Barely Dodges Foreclosure On Recently-Bought Home Once Owned By Delinquent Borrower

In Sacramento, California, The Sacramento Bee reports:

• Kamal Sharma almost lost his house in a foreclosure auction the other day. The funny thing is: He doesn't even owe any money on it. Sharma's story – an extreme case even in Sacramento's chaotic real estate market – shows that lenders continue to make foreclosure mistakes despite extensive publicity and promises to fix problems, which include sloppy paperwork and communication breakdowns.

***

• Sharma's troubles started last month when he arrived at his West Sacramento house one day to find a foreclosure notice from the servicing arm of Bank of America taped to the front door. Sharma, 34, had paid $85,000 in cash for the three-bedroom home in March, using money from a settlement he received from a workplace accident in which he lost half of his left foot. He planned to rent the house out for income.



• After the foreclosure notice arrived, other curious things happened. A potential buyer came snooping around the neighborhood, and then a property management firm refused to list the house as a rental due to the foreclosure notice.



• Unable to reach BofA for answers, Sharma headed to West Sacramento City Hall on June 22, the day his house was scheduled for auction. That's when the bank abruptly called off the sale just as buyers were lining up. Sharma still hasn't heard anything directly from BofA. But in response to a Bee inquiry, the bank apologized and attributed the problem to a "data entry error" that restarted an old foreclosure action against the home's previous owner.

For more, see Wrongful home foreclosures rare – but devastating.

Faulty Affidavit Failing To Establish That Prior Notice Of Default & Acceleration Was Given To Homeowner Derails Another Foreclosure Action

William A. Roper, Jr. writes in the Mortgage Servicing Fraud Forum:

• The Ohio Court of Appeals for the Ninth District [] reversed another Summary Jugment granted by a Summit County Trial Court in the case Central Mortgage Company v. Elia.



• The Court found that the conclusory averment within the plaintiff's affidavit that all conditions precedent had been satisfied was insufficient to prove compliance with Section 22 of the mortgage.(1) Does that sound familiar?

He goes on to state:

• After looking through a few Ohio cases I do think it is important to point out that the Plaintiff does seem to be getting an assignment done prior to commencement (about 30 days) but they constantly fail to plead an endorsed copy of the note, even in contested cases, they have failed to attach an endorsed copy of the note to a motion for [summary judgment].



• There are also many deficiencies in the affidavits submitted by the Plaintiffs, it's important to know the cases and rules on what makes an admissible affidavit. Failure to raise the deficiencies in these affidavits will result in a waiver of the argument.

For Bill Roper's entire post thread, see Ohio Appellate Court Reverses Another Summary Judgment on Failure To Prove Conditions Precedent: Central Mortgage Company v. Elia.

For the ruling, see Central Mortgage Company v. Elia, No. 25505, 2011 Ohio 3188 (Oh. App. 9th Dist. June 29, 2011).

(1) Section 22 refers to the written requirement contained in the mortgage that the borrowers be given written notice by the foreclosing lender prior to the start of the foreclosure process specifying the default, the action needed to cure the default, and the time period within which to do so.

O'Brien After Land Doc Registry Audit: "My Registry Is A Crime Scene...This Is Disgusting & This Is Criminal!" Calls For Halt To AG Settlement Talks

From the Office of the Southern Essex District Registry of Deeds (Massachusetts):

• Yesterday at the Annual Conference of The International Association of Clerks, Recorders, Election Officials and Treasurers (IACREOT), Register John O’Brien revealed the results of an independent audit of his registry.



• The audit, which is released as a legal affidavit was performed by McDonnell Property Analytics, examined assignments of mortgage recorded in the Essex Southern District Registry of Deeds issued to and from JPMorgan Chase Bank, Wells Fargo Bank, and Bank of America during 2010. In total, 565 assignments related to 473 unique mortgages were analyzed.

McDonnell’s Report includes the following key findings:

• Only 16% of assignments of mortgage are valid,


• 75% of assignments of mortgage are invalid,


• 9% of assignments of mortgage are questionable,


• 27% of the invalid assignments are fraudulent, 35% are “robo-signed” and 10% violate the Massachusetts Mortgage Fraud Statute,


• The identity of financial institutions that are current owners of the mortgages could only be determined for 287 out of 473 (60%),


• There are 683 missing assignments for the 287 traced mortgages, representing approximately $180,000 in lost recording fees per 1,000 mortgages whose current ownership can be traced.

***

• "My registry is a crime scene as evidenced by this forensic examination," stated John O’Brien. "This crime that has affected thousands of homeowners in Essex County who, through no fault of their own, have had their property rights trampled on and their chain of title compromised. This evidence has made it clear to me that the only way we can ever determine the total economic loss and the amount damage done to the taxpayers is by conducting a full forensic audit of all registry of deeds in Massachusetts. I suspect that at the end of the day we are going to find that the taxpayers have been bilked in this state alone of over 400 million dollars not including the accrued interest plus costs and penalties. The Audit makes the finding that this was not only a MERS problem, but a scheme also perpetuated by MERS shareholder banks such Bank of America, Wells Fargo, JP Morgan and others. I am stunned and appalled by the fact that America’s biggest banks have played fast and loose with people’s biggest asset – their homes. This is disgusting, and his is criminal," said O’Brien.



• O’Brien continued "Once again I am asking Attorney General Martha Coakley and the other state Attorney’s General to follow the lead of New York Attorney General Eric Schneiderman and stop any settlement talks with the banks. The results of this report are only for my registry, but I can assure you that this type of criminal fraud is rampant across the nation. This leaves me to question why anyone would consider settling with these banks until we know the full extent of the damage that they have caused to the homeowners chain of title across this country and the amount of money they have bilked he taxpayers for their failure to pay recording fees."(1)

For more, see Southern Essex Registry of Deeds Audit Reveals That 75% of Assignments of Mortgage Are Invalid; O'Brien Says Banks Responsible for an Epidemic of Fraud (Once again urges Attorney’s General to stop Bank settlement talks).

(1) At the risk of emphasizing what may be obvious to many, this 'crappy title' problem can affect both those properties that have gone through foreclosure, as well as those that haven't.

For more on the crappy title problem in connection with the filing of bogus land documents and improperly foreclosing on homes, see:

• Daily Finance: Why the Foreclosure Mess Settlement Proposal Can't Fix the Damage,


• Naked Capitalism: On the Clouded Title Mess and the Difficulties of Cleaning It Up.