Fla AG Slams Brakes On Meaningful Efforts In F'closure Fraud Probe; Political Arm-Twist Forces Pair Of Investigators Out Door; Duo Start Defense Firm

The Palm Beach Post reports:

• A lead foreclosure fraud investigator for the state said she and a colleague were forced to resign from the Florida attorney general's office, unexpectedly ending their nearly yearlong pursuit to hold law firms and banks accountable.



• Former Assistant Attorney General Theresa Edwards and colleague June Clarkson had been investigating the state's so-called "foreclosure mills," uncovering evidence of legal malpractice that also implicated banks and loan serv­icers.



• Despite positive performance evaluations, Edwards said the two were told during a meeting with their supervisor in late May to give up their jobs voluntarily or be let go. Edwards said no reason was given for the move.



• "It all happened very abruptly," said Edwards, who had worked in the attorney general's office for about three years. The foreclosure investigations were launched under former Attorney General Bill McCollum, but Edwards said she sensed changes were coming under Gov. Rick Scott and Attorney General Pam Bondi.



• "I think they wanted to put people in there that were more in line with their thinking," Edwards said.

***

• Edwards and Clarkson have opened their own foreclosure defense firm based in Hollywood and hope to help homeowners with the knowledge they gained in the attorney general's office.

For more, see Foreclosure fraud investigators forced out at attorney general's office.

Ohio AG Tags Foreclosure Rescue Operator With Lawsuit For Allegedly Running Illegal Upfront Fee Loan Modification Ripoff

From the Office of the Ohio Attorney General:

• Ohio Attorney General Mike DeWine [] announced a lawsuit against foreclosure rescue company Diversified Real Estate Consultants LLC (DREC), its affiliates, and its owner for multiple violations of Ohio consumer laws.

***

• According to Attorney General DeWine's lawsuit, filed in the Cuyahoga County Common Pleas Court, DREC is a Florida registered company operating from Ohio that offered mortgage assistance relief services to Ohio consumers, even though it never registered to do business in Ohio. DREC charged and accepted fees of $500 to $3,495 from homeowners, promising them reduced monthly mortgage payments or better interest rates, and represented a "100% money-back guarantee." Despite the company's claims, consumers received no help and no refunds.

For the Ohio AG press release, see Northeast Ohio Foreclosure Rescue Company Sued for Consumer Law Violations.

For the lawsuit, see State of Ohio v. Diversified Real Estate Consultants, LLC, et al.

(1) In addition to DREC, the Attorney General's lawsuit names defendants DREAM Management USA (DREAM) and Precision Processing Solutions International LLC (PPSI) – Ohio companies that provided DREC research, analysis, and documentation processing services, in direct connection with DREC's mortgage relief assistance services. The suit also names North Canton resident Daniel J. DePasquale, owner and operator of DREC, DREAM, and PPSI.

The lawsuit charges the defendants with violations of Ohio's Consumer Sales Practices Act, Debt Adjusters Act, and Telephone Solicitation Sales Act. It seeks a declaratory judgment, injunctive relief, civil penalties, and full restitution for consumers.

Homeowner Trips Over Procedural Rules, Sinking Proposed Class Action Alleging Servicer Overcharges Without Lawsuit's Merits Ever Being Addressed

The following facts come from a recent ruling from a U.S. Circuit Court of Appeals (3rd Circuit), applying the law of the State of New Jersey in a controversy centered on a foreclosure action (the take-away here, folks, is that regardless of the merits of a case, if a lawsuit is filed in the wrong court, the plaintiff could find itself dead in the water without the litigation ever really getting out of the starting gate. And, by the way, filing in the wrong court is no unusual occurrence; it happens quite frequently in the context of foreclosure actions when homeowners bring certain actions having some connection to the foreclosure in a Federal court long after a state court has already rendered judgment in the foreclosure action itself):

1. Homeowner goes into default on her home mortgage loan.


2. Chase filed a foreclosure action in the Chancery Division of the New Jersey Superior Court (ie. state court) and obtained a judgment of $90,401, plus fees.


3. Homeowner, however, did not pay the judgment, and a foreclosure sale was stalled for approximately three and a half years while she filed three bankruptcy proceedings.


4. After dismissal of the third bankruptcy proceeding, Chase sent Homeowner a quote for reinstating the mortgage in return for a payment of $18,658. Of that total, the letter stated that $900 was to be collected for foreclosure fees and $5,791 was to be collected for foreclosure costs.


5. Homeowner paid in full the amount quoted by Chase to reinstate her mortgage, and the Chancery Court entered a judgment of dismissal without prejudice in the foreclosure action.


6. Two years after paying the reinstatement balance, Homeowner commenced a class action suit in a U.S. (Federal) District Court against Chase alleging multiple claims, all stemming from the alleged overcharges of foreclosure costs and fees contained in the reinstatement quote.


7. Without considering the merits of the allegations, the District Court booted the lawsuit, saying Homeowner failed to state a claim upon which relief may be granted.


8. On appeal, the 3rd Circuit Court of Appeals affirmed the lower court ruling.

Agreeing with the lower court, the appeals court applied New Jersey's 'entire controversy doctrine' in finding, in a nutshell, that the homeowner brought her lawsuit in the wrong court.

It noted that her lawsuit should have been filed as a counterclaim in the original foreclosure action, which was filed in state court (ie. the Chancery Division of the New Jersey Superior Court) beacuse her suit was based on the same or similar underlying facts associated with the events related to the foreclosure action, said action being brought in the Chancery Court.(1) Accordingly, it was in the state court (as part of the original foreclosure action) where the Homeowner's lawsuit should have been brought.(2)(3)

For the ruling, see Coleman v. Chase Home Finance, LLC, No. 09-4727 (3rd Cir. July 12, 2011).

(1) The federal appeals court addresses the 'entire controversy doctrine' in the following excerpt (bold text is my emphasis):

• The entire controversy doctrine compels the parties, when possible, to bring all claims relevant to the underlying controversy in one legal action. When the court finds that a claim not joined under the original action falls within the scope of the doctrine, that claim is barred. N.J. Ct. R. 4:30A.
  
  The doctrine "seeks to further the judicial goals of fairness and efficiency by requiring, whenever possible, `that the adjudication of a legal controversy should occur in one litigation in only one court.'" Circle Chevrolet Co. v. Giordano, Halleran & Ciesla, 662 A.2d 509, 513 (N.J. 1995) (quoting Cogdell v. Hospital Ctr., 560 A.2d 1169, 1172 (N.J. 1989)). The doctrine is also applied to New Jersey claims in federal court. Bennun v. Rutgers State Univ., 941 F.2d 154, 163 (3d Cir. 1991).
  
  However, application of the entire controversy doctrine is "equitable in nature" and based substantially on "judicial fairness," meaning that the Court must balance considerations of judicial efficiency as well as fairness to the litigants. Cafferata v. Peyser, 597 A.2d 1101, 1103 (N.J. Super. Ct. App. Div. 1991)
  
  New Jersey courts have held that the primary consideration in determining if successive claims are part of the same controversy is whether the claims "arise from related facts or from the same transaction or series of transactions." DiTrolio v. Antiles, 662 A.2d 494, 502 (N.J. 1995). It is a "commonality of facts, rather than [a] commonality of issues, parties, or remedies that defines the scope of the controversy." Id. at 504.
  
  The limits of the entire controversy doctrine with regards to foreclosure actions are necessarily somewhat narrower, as N.J. Ct. R. 4:64-5 requires that only "germane" counterclaims may be joined in a foreclosure action. See N.J. Ct. R. 4:30A. Claims are considered to be germane to a foreclosure action if they arise out of the mortgage that is the basis of the foreclosure action. Leisure Technology-Northeast, Inc. v. Klingbeil Holding Co., 349 A.2d 96, 98 (N.J. Super. Ct. App. Div. 1975).
  
  Here, Coleman's claims arose directly out of a reinstatement quote that was provided to her as an alternative to a foreclosure sale, and the excessive fees allegedly charged by Chase would not have been charged but for the foreclosure action. Accordingly, Coleman's causes of action arose out of and were germane to the original foreclosure action.

(2) Homeowner's seemingly strong arguments against the application of the entire controversy doctrine in this case fell upon deaf judicial ears (bold text is my emphasis):

• However, Coleman makes three arguments why her federal claims should not fall within the doctrine despite the fact that they are otherwise "germane" to the foreclosure action.
  
  First, the doctrine is not a bar to successive claims where they have accrued after the pendency of the of the original action. McNally v. Providence Washington Ins. Co., 698 A.2d 543, 548 (N.J. Super. Ct. App. Div. 1997). Coleman argues that the foreclosure action was no longer pending once judgment was issued on August 1, 2002, and thus her claims are not barred by the entire controversy doctrine. We disagree.
  
  A court retains jurisdiction in a foreclosure action even after a final judgment, until delivery of the sheriff's deed under New Jersey Court Rule 4:65-5. Sovereign Bank, FSB v. Kuelzow, 687 A.2d 1039, 1043 (N.J. Super. Ct. App. Div. 1997). "The foreclosure action, although already the subject of a judgment, is not totally concluded until the defendants' equity of redemption is cut off by the delivery of the sheriff's deed." Id.
  
  Here, the fact that the foreclosure sale had been stalled due to the bankruptcy proceedings and the judgment had not been paid meant that the foreclosure action continued to be pending until Coleman paid the reinstatement quote and the judge vacated the judgment and dismissed the claims on January 20, 2006. Thus, the state court still had jurisdiction over the matter and Coleman could have brought her claims as a part of the original foreclosure action until January 20.
  
  Second, Coleman argues that the entire controversy doctrine does not apply to "related claims which were unknown, or had not arisen or accrued during the pendency of the original action." Riemer v. St. Clare's Riverside Med. Ctr., 691 A.2d 1384, 1388 (N.J. Super. Ct. App. Div. 1997). New Jersey's discovery rule states that a cause of action has not accrued unless the plaintiff knows or should have known that "(1) she has suffered damage and (2) that the damages were caused by the fault of another." Maertin v. Armstrong World Indus. Inc., 241 F.Supp.2d 434, 458 n.18 (D.N.J. 2002).
  
  Therefore, if Coleman was unaware of either of these facts at the time the foreclosure action became final on January 20, 2006, her successive causes of action would not yet have accrued and the doctrine would be inapplicable. Yet, when Coleman received the reinstatement quote from Chase on November 4, 2005, she should have been aware that the amount differed substantially from the fee determination in the original foreclosure action. Her counsel, who had represented her since the original foreclosure action, and whom we presume reviewed the reinstatement quote, also should have been aware of these facts. Thus, her cause of action accrued on November 4 while the original foreclosure action was still pending, and she is barred by the entire controversy doctrine.
  
  We also disagree with Coleman's argument that she did not have a "fair and reasonable opportunity to have fully litigated that claim in the original action." Cafferata, 597 A.2d at 1104. While it might not have been clear to Coleman that the fees charged by Chase in the reinstatement quote were allegedly in violation of state law, as explained above, it is undeniable that she was on notice, or should have been on notice, that the fees charged were substantially larger than those issued by the state court. This is especially true given that the same counsel represented Coleman from the time of the original foreclosure action up through the time that she paid the reinstatement quote.
  
  Ultimately, the entire controversy doctrine requires equitable considerations and is determinable on a case-by-case basis. Paramount Aviation Corp. v. Agusta, 178 F.3d 132, 137 (3d Cir. 1999). The "polestar for the application of the rule is judicial fairness." Reno Auto Sales, Inc. v. Prospect Park Sav. & Loan Ass'n, 581 A.2d 109, 113 (N.J. Sup. Ct. App. Div. 1990) (citing Cogdell, 560 A.2d at 1179) (internal quotation marks omitted).
  
  We must balance the plaintiff's right to bring a separate action against the defendant's right to avoid excessive litigation. Here, we are not persuaded that Coleman was deprived of a fair opportunity to litigate her claims.

(3) A point that begs highlighting here is that the allegedly screwed over homeowner in this case appears to be under a double onus to bring her claims not only within the applicable statute of limitations, but also within the boundaries set by the entire controversy doctrine. Said point was made in Circle Chevrolet Co. v. Giordano, Halleran & Ciesla, 142 N.J. 280, 662 A.2d 509 (N.J. 1995), in the context of a malpractice claim arising out of an attorney-client relationship where the errant attorney is continuing to represent a client on the underlying matter.

In this case, Chase sent Homeowner the quote for reinstating the mortgage on November 4, 2005. On January 17, 2006, Homeowner paid in full the amount quoted by Chase to reinstate her mortgage. Three days later, the Chancery Court entered a judgment of dismissal without prejudice in the foreclosure action. Unless the Chancery Court is requested to retain jurisdiction over the matter for possible claims arising from the foreclosure (or if, for whatever reason, the court is simply not asked to formally dismiss the case), it appears that Homeowner's window for bringing her claims for the alleged overcharges ran from November 4, 2005 (or possibly January 17, 2006, the date of actual payment of the alleged overcharges) through January 20, 2006 (the date of dismissal), notwithstanding what the applicable stautute of limitations might otherwise have been.

Because, according to the court, "the entire controversy doctrine requires equitable considerations and is determinable on a case-by-case basis," and Homeowner (who was operating under a foreclosure "Sword of Damocles" hanging over her head), only had, at best, 2 1/2 months to assess and bring her claims against Chase, it sure looks like she took a serious screwing over in this matter.

Pro Se Homeowner Fails In Foreclosure Defense Attempt, Despite Involvement Of Notorious Robosigners In Executing Lender's Mortgage Documents

A recent ruling by a Florida appeals court should serve as a reminder to self-represented, "pro se" homeowners defending against a home foreclosure that it isn't enough to merely go into court, and point out generally that there are defects with the lender's paperwork due to the involvement of three prolific, nationally-recognized robosigners in the execution of those documents and expect the court to give the case the boot.(1)

As in any case, all litigants have to adequately plead their case, raise and brief all the issues, and submit evidence to support the allegations that are in a form that is admissible in court (in compliance with the court's rules of procedure).

While it is true that a court is to hold pro se litigants to less stringent standards in construing their pleadings than formal pleadings drafted by lawyers,(2) they must still adequately raise and brief the issues, and acquaint themselves and follow the applicable rules of procedure.(3)

Failing that, no matter how hard they work familiarizing themselves with the stories of robosigning, document-manufacturing, forgeries, etc. that are floating around on the Internet, pro se homeowners like the one in this case (who, in fact, may have had strong defenses and counterclaims) will find themselves on the dead-end road of disappointment.(4)

For the ruling, see Harvey v. Deutsche Bank National Trust, No. 4D10-674 (Fla. App. 4th DCA, June 29, 2011).

(1) In this regard, the court noted, in footnote 2 of its ruling:

• As to this point, Harvey specifically argued that on April 16, 2009, an assignment of mortgage was executed by Korell Harp, vice president for MERS, as nominee for AHMAI, and Tywanna Thomas, assistant secretary for MERS. Harvey stated that on May 6, 2009, an assignment of mortgage in a different and unrelated foreclosure case was executed by Korell Harp; Harp was listed as vice president and assistant secretary for Argent Mortgage Company, LLC. Harvey further stated that in another unrelated foreclosure case, an assignment of mortgage was executed by Cheryl Thomas and Tywanna Thomas; Cheryl Thomas was listed to be vice president of Sand Canyon Corporation and Tywanna Thomas was listed as assistant vice president.
  
  Harvey stated that in yet another unrelated foreclosure case, an assignment of mortgage was executed by Korell Harp and Tywanna Thomas. Harvey argued that the signatures of Harp and Tywanna Thomas "appear to be different when compared with the other assignments signed by Ms. Harp and Ms. Thomas," and "[b]ecause there was a dispute concerning either the facts of the controversy or the inferences to be drawn from those facts, a summary judgment was improper."

(2) See e.g. Estelle v. Gamble, 429 U.S. 97 (1976), which supports the mandate that trial judges cut pro se homeowners slack when bringing their cases:

• As the Court unanimously held in Haines v. Kerner, 404 U. S. 519 (1972), a pro se complaint, "however inartfully pleaded," must be held to "less stringent standards than formal pleadings drafted by lawyers" and can only be dismissed for failure to state a claim if it appears " `beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief.' " Id., at 520-521, quoting Conley v. Gibson, 355 U. S. 41, 45-46 (1957).

(3) See e.g.:

Pliler v. Ford, 542 U.S. 225 (2004):

• District judges have no obligation to act as counsel or paralegal to pro se litigants. In McKaskle v. Wiggins, 465 U. S. 168, 183-184 (1984), the Court stated that "[a] defendant does not have a constitutional right to receive personal instruction from the trial judge on courtroom procedure" and that "the Constitution [does not] require judges to take over chores for a pro se defendant that would normally be attended to by trained counsel as a matter of course."

Faretta v. California, 422 U. S. 806 (1975):

• The right of self-representation is not a license to abuse the dignity of the courtroom. Neither is it a license not to comply with relevant rules of procedural and substantive law.

Rhodes v. Wathen, No. 10-10892 (5th Cir., March 2, 2011):

• Although pro se briefs are afforded liberal construction, Haines v. Kerner, 404 U.S. 519, 520 (1972), even pro se litigants must brief arguments in order to preserve them. Yohey v. Collins, 985 F.2d 222, 224-25 (5th Cir. 1993).

Timson v. Sampson, 518 F. 3d 870 (11th Cir., 2008):

• While we read briefs filed by pro se litigants liberally, Lorisme v. I.N.S., 129 F.3d 1441, 1444 n. 3 (11th Cir.1997), issues not briefed on appeal by a pro se litigant are deemed abandoned, Horsley v. Feldt, 304 F.3d 1125, 1131 n. 1 (11th Cir.2002). Moreover, we do not address arguments raised for the first time in a pro se litigant's reply brief. Lovett v. Ray, 327 F.3d 1181, 1183 (11th Cir.2003).

Childs v. Motor City Casino Hotel, Case No. 09-13108, No. 10-13458 (E.D. Mich., Southern Div. April 27, 2011):

• A pro se litigant's complaint is to be construed liberally, Erickson v. Pardus, 551 U.S. 89, 94 (2007), and is held to "less stringent standards" than a complaint drafted by counsel, Haines v. Kerner, 404 U.S. 519, 520 (1972). Nonetheless, "[t]he leniency granted to pro se [litigants] . . . is not boundless," Martin v. Overton, 391 F.3d 710, 714 (6th Cir. 2004), and such complaints still must plead facts sufficient to show a redressable legal wrong has been committed, Fed. R. Civ. P. 12(b); Dekoven v. Bell, 140 F. Supp. 2d 748, 755 (E.D. Mich. 2001).

Caidor v. Onondaga Cnty., 517 F.3d 601 (2d Cir. 2008):

• This Circuit makes certain allowances for pro se litigants. We recognize that the right to appear pro se "should not be impaired by harsh application of technical rules," and therefore we "make reasonable allowances to protect pro se litigants from inadvertent forfeiture of important rights because of their lack of legal training." Traguth v. Zuck, 710 F.2d 90, 95 (2d Cir. 1983).
  
  Nonetheless, "pro se litigants generally are required to inform themselves regarding procedural rules and to comply with them." Edwards v. INS, 59 F.3d 5, 8 (2d Cir.1995) (citation omitted);

Keeler v. Aramark, No. 10-3214 (10th Cir. April 7, 2011):

• [A]lthough courts afford a pro se litigant's filings some leniency, they have no obligation to advise such a litigant of the authentication requirement, for even pro se litigants are expected to "follow the same rules of procedure that govern other litigants." Kay v. Bemis, 500 F.3d 1214, 1218 (10th Cir. 2007) (quotation omitted).

Petty v. Krause, No. 1:10CV573 (M.D. N.C. April 27, 2011):

• Moreover, although the Supreme Court has reiterated the importance of affording pro se litigants the benefit of liberal construction, Erickson v. Pardus, 551 U.S. 89, 94 (2007), the United States Court of Appeals for the Fourth Circuit has "not read Erickson to undermine Twombly's requirement that a pleading contain more than labels and conclusions," Giarratano v. Johnson, 521 F.3d 298, 304 n.5 (4th Cir. 2008) (internal quotation marks omitted) (applying Twombly standard in dismissing pro se complaint). Accord Atherton v. District of Columbia Off. of Mayor, 567 F.3d 672, 681-82 (D.C. Cir. 2009) ("A pro se complaint . . . `must be held to less stringent standards than formal pleadings drafted by lawyers.' But even a pro se complainant must plead `factual matter' that permits the court to infer `more than the mere possibility of misconduct.'" (quoting Erickson, 551 U.S. at 94, and Iqbal, 129 S. Ct. at 1950, respectively)), cert. denied, 130 S. Ct. 2064 (2010).

Lomax v. Capital Rental Agency, Inc., (11th Cir. May 23, 2011):

• "Pro se pleadings are held to a less stringent standard than pleadings drafted by attorneys and will, therefore, be liberally construed." Tannenbaum v. United States, 148 F.3d 1262, 1263 (11th Cir. 1998).
  
  Although we show leniency to pro se litigants, we will not serve as de facto counsel or "rewrite an otherwise deficient pleading in order to sustain an action." GJR Invs., Inc. v. County of Escambia, Fla., 132 F.3d 1359, 1369 (11th Cir. 1998),

C.P. v. Shepherd, No. E2010-00726-COA-R3-CV (Tenn. App. March 24, 2011):

• The courts give pro se litigants who are untrained in the law a certain amount of leeway in drafting their pleadings and briefs. Whitaker v. Whirlpool Corp., 32 S.W.3d at 227; Paehler v. Union Planters Nat'l Bank, Inc., 971 S.W.2d at 397.

***

• Pro se litigants should not be permitted to shift the burden of the litigation to the courts or to their adversaries. They are, however, entitled to at least the same liberality of construction of their pleadings that Tenn. R. Civ. P. 7, 8.05, and 8.06 provide to other litigants. Irvin v. City of Clarksville, 767 S.W.2d at 652.
  
  Even though the courts cannot create claims or defenses for pro se litigants where none exist, Rampy v. ICI Acrylics, Inc., 898 S.W.2d 196, 198 (Tenn. Ct. App. 1994), they should give effect to the substance, rather than the form or terminology, of a pro se litigant's papers. Brown v. City of Manchester, 722 S.W.2d 394, 397 (Tenn. Ct. App. 1986); Usrey v. Lewis, 553 S.W.2d 612, 614 (Tenn. Ct. App. 1977).

(4) Homeowners expecting a court proceeding similar to those on "Judge Judy" (or other TV court shows) will be in for a big let down.

"Strategic Defaulters" - Savvy Homeowners Choosing To Cut Their Losses On Underwater Homes

The Arizona Republic reports:

• Many of the people who have been walking away from mortgages over the past few years don't fit the standard profile. Cash-strapped? Unemployed? Financially unsophisticated? Low-income?



• None of those descriptions seem to apply to most "strategic defaulters" - homeowners who have chosen to cut their losses on properties that dropped in value, just as they might sell an old car with mounting repair bills or dump stock in a company that just reported a loss.



• "Many are financially savvy people with higher credit scores and higher income," said Tracy Bremmer, director of decision analytics at credit-bureau Experian, which has studied the issue to help lenders identify people who might be default candidates. "They often own multiple properties, with larger original loan amounts."



• Strategic defaulters, in other words, seem to know what they're doing. In fact, they're often angling to buy the foreclosed home across the street at a bargain price before abandoning their own property, Bremmer said. "They'll open a new mortgage before defaulting on the existing loan," she said.

***

• Defaulting on a loan - that is, missing payments - will hurt your credit score. But many strategic defaulters apparently don't worry about this or consider it a lesser evil. [...] Still, strategic defaulters tend to keep current on other obligations such as credit cards and auto loans. In fact, this tendency to keep making other payments is how Experian sorts out strategic defaulters from more distressed borrowers. "They're skipping out on their mortgages but paying everything else," she said.(1)

For the story, see 'Strategic defaulters' tend to be affluent, savvy homeowners.

(1) See Underwater and Not Walking Away: Shame, Fear and the Social Management of the Housing Crisis for more on the phenomenon of strategic defaulting:

• This article suggests that most homeowners choose not to strategically default as a result of two emotional forces: 1) the desire to avoid the shame and guilt of foreclosure; and 2) exaggerated anxiety over foreclosure’s perceived consequences.



• Moreover, these emotional constraints are actively cultivated by the government and other social control agents in order to encourage homeowners to follow social and moral norms related to the honoring of financial obligations - and to ignore market and legal norms under which strategic default might be both viable and the wisest financial decision.



• Norms governing homeowner behavior stand in sharp contrast to norms governing lenders, who seek to maximize profits or minimize losses irrespective of concerns of morality or social responsibility.

Minnesota Appeals Court Slams Hammer On Foreclosure Redemption Scheme Involving Use Of Sham Note & Mortgage By Property Owner To Squeeze Co-Owner

The Minnesota Court of Appeals recently refused to allow a 'foreclosure redemption' scheme whereby one co-owner of real estate attempted to screw his co-owner out of the equity in the subject property that had gone through foreclosure proceedings through the use of:

• a sham mortgage, and
• an "improper side agreement" with the 'creditor' holding the sham mortgage to redeem the subject foreclosed real estate

with the intended effect of extinguishing his unwitting co-owner's interest in the property.

The point here is that, had the cunning co-owner redeemed the property directly, he would have (under the law) also been treated as having redeemed on behalf of his unwitting co-owner as his co-tenant. The adroit-thinking co-owner thought he could avoid his obligation to his co-owner by instead surreptiously redeeming through a third/straw party (the 'creditor' holding the sham mortgage).

The 'creditor's attempt to assert that there was no improper side agreement with the bad actor, claiming she was an innocent unwitting party, an "unwilling accomplice," fell on deaf ears as the Minnesota appeals court pointed out that "even if a creditor is an "innocent" third party, relief may be available as long as that creditor is participating in a sham scheme with a devious cotenant and an improper result is obtained."(1)

The case makes for interesting reading, but probably only if you are in the business of undoing real estate equity ripoffs in Minnesota, and possibly in other states where the owner of a partial interest in real estate tries to screw his/her co-owners out of their interests through the use of a redemption scam used after a foreclosure sale due to an unpaid mortgage loan, municipal real estate taxes, or mechanics' and judgment liens.(2)

For the ruling, see Blat v. Takita, No. A10-2217 (Minn. App. July 5, 2011) (unpublished).

(1) In support of this proposition, the appeals court cites Hall v. Hall, 173 Minn. 128, 131, 216 N.W. 798, 799 (1927), a case where the Minnesota Supreme Court concluded that a foreclosure redemption scheme among remaindermen was improper because it eliminated the ownership interest of the life tenant, not because of the state of mind of the redemptioner who was given the sham note and mortgage in order to redeem the property. (Editor's Note: The fact that the Hall case dates back to 1927 is a clear indicator that this particular type of racket is nothing new - it's been around a pretty long time. It just doesn't seem to get litgated all that much - maybe because the victims of this scam don't know what hit them, or how to undo them.)

(2) See generally, Nelson, Grant S., The Foreclosure Purchase by the Equity of Redemption Holder or Other Junior Interests: When Should Principles of Fairness and Morality Trump Normal Priority Rules?, 72 Mo. L. Rev. 1259 (2007) (contains heavily-cited discussion on foreclosure redemption schemes involving junior lien 'squeeze-outs' by the owner of the property in foreclosure).

Fla. Lawyer Gets 210 Months For Running Ponzi Scheme Preying On Elderly, Servicemembers w/ Investments In Phony Mortgages, Predatory & Usurious Loans

From the Office of the U.S. Attorney (Miami, Florida):

• [A] federal judge sentenced attorney and C.P.A. Lorn Leitman, 61, of Miami, Florida, to 210 months’ incarceration for his role in a 10-year Ponzi scheme. In an unusual decision, the court departed upward from a sentencing guideline range of 121-151 months, commenting, “this case is exceptional.”



• A federal grand jury charged the defendant with violating the mail fraud statute for defrauding elderly victims and retirees, among others, through the operation of a Ponzi scheme which sought investments in either phantom residential mortgages or a separate venture burdening U.S. military personnel with predatory and usurious loans.

***

• Several victims appeared in court to address the impact of the fraud. As one victim explained, losses from the Ponzi scheme forced the end of his retirement and his return to work. He commented, “my dreams are dead.”



• The court explained that the decision to sentence above the guidelines resulted from the defendant’s conduct preying upon his closest friends, fellow servicemen, the elderly and retirees, and noted that the defendant breached codes of conduct applicable to members of the Florida Bar and certified public accountants. In addition to the enhanced sentence, the court ordered the defendant to pay $3,308,435.03 in restitution to victims.

For the U.S. Attorney press release, see Ponzi Scheme Defendant Receives 17 1/2 Year Sentence.

San Bernardino Investigators Bust Six In Alleged Swindle That Stole Title To Vacant Land Out From Under Owners & Peddled It To Unwitting Buyers

From the Office of the San Bernardino, California District Attorney:

• A $2.1 million dollar fugitive arrest warrant has been issued by the San Bernardino County Superior Court for Salvador Anzo Sr. Between November 2007 and January 2009 Anzo Sr., 44, along with additional suspects Salvador Anzo Jr., 22, Marlen Medina, 26, Jennifer Costa, 37, Yvette Costa, 36, and Milton Figueroa, 23, allegedly conspired to sell vacant land they did not own in the Hesperia area of San Bernardino County. Anzo Sr. recruited the others to assist by using their personal bank accounts to receive the proceeds of the fraudulent land sales.(1)



• According to investigators from the San Bernardino County District Attorney’s Real Estate Fraud Unit, the suspects advertised the sale of vacant land in the "Pennysaver" which is how they met the unsuspecting buyers.



• The actual owners of the land were alerted to the sale of their property when their property tax payments were returned to them. In San Bernardino County, the suspects are alleged to have sold 22 separate pieces of property with the total loss to the victims estimated at approximately $980,000.00.

***

• "A lot of these victims who were taken advantage of were elders," said Senior Investigator Tina Greco of the San Bernardino County District Attorney’s Office. "I just hope that we are able to find him and take him into custody and then locate some of the stolen funds."

Source: Investigators Seek Public’s Help Locating Fugitive in Land Fraud Scheme.

(1) According to the press release:

• Medina was located and arrested in Utah, and was subsequently extradited to the West Valley Detention and is being held there with a bail of $940,924.00 for the San Bernardino County charges, and INS hold and other outstanding warrants from Orange County;



• Anzo Jr. was arrested in San Diego County and transferred to San Bernardino County where he is being held at the Adelanto Detention Center with a bail of $197,266.00;



• Jennifer Costa, Yvette Costa and Figueroa pleaded guilty in plea agreements with the court.

Investigators are seeking the public’s assistance in finding Salvador Anzo Sr. If anyone has information of his whereabouts they are asked to contact Sr. Investigator Tina Greco at 909-891-3348.

Robosigning Allegations Begin Hounding Prominent Michigan Foreclosure Mill Sweatshop

The Michigan Messenger reports:

• A Massachusetts county clerk says a forensic examination of documents filed by Troy-based Orlans Associates, one of the largest foreclosure firms in Michigan, shows that the company has engaged in illegal robo-signing.



• Robo-signing is when a bank, mortgage company or foreclosure company has multiple people sign documents with the name of the person who is supposed to sign those documents and then has them notarized as having been signed by that person. In the case of Orlans, the signer was supposed to be attorney Marshall Isaacs, but he has now been implicated in two states for having had others sign his name and notarize that he did so.

***

• Michigan Messenger has been carefully following the allegations against Isaacs since early May, following revelations [Ingham County Register of Deeds Curtis Hertel Jr.] had found robo-signed documents involving DocX, a Georgia company profiled on 60 Minutes. Hertel’s discovery led to investigations by both the Michigan Attorney General’s office and the FBI.

For more, see Michigan foreclosure firm implicated in robo-signing (Thousands of foreclosures may be invalidated).

For a follow-up story, see Orlans robo-signing allegations drawn concerns from lawmakers, activists (Most say independent investigation is required):

• Allegations that an attorney working for Troy-based Orlans Associates foreclosure giant is allegedly involved in robo-signing drew immediate concerns from lawmakers and activists.

Phony Land Document Epidemic Infects Charlotte-Area Courthouses; Recording Official: "My Records Are Literally Full Of This Stuff!"

In Weddington, North Carolina, The Associated Press reports:

• Officials at Charlotte-area courthouses say they are seeing epidemic of frivolous paperwork filed by people claiming the right to seize foreclosed property.



• The bogus deeds are being filed by people who claim to belong to the Moorish Science Temple of America, an obscure religious sect founded in the 1920s with beliefs loosely connected to Islam.



• In one incident, a real estate agent and a couple viewing a foreclosed $700,000 home in the Union County town of Weddington were confronted on June 1 by two men who produced a deed claiming the home in the name of the Moorish Science Temple, The Mecklenburg Times reported.(1)

***

• J. David Granberry, Mecklenburg County's register of deeds, said at least 200 deeds and other documents filed in his office in the name of the Moorish Science Temple are "outright fraud."



• Granberry said he's seen forgeries and notary fraud in the deeds claiming ownership of vacant, foreclosed properties. Many times, the documents appear official and legitimate, he said. "My records are literally full of this stuff," he said. "It's like an epidemic, as far as I can tell."



• In Union County, about 25 deeds have been filed this year in the name of the Moorish Science Temple, Register of Deeds Crystal Crump said.



• Granberry and other officials said as more homes have fallen into foreclosure and been vacated, the more opportunity there's been for others to move in. Real estate agents in Virginia and police in California warn of similar incidents there.



• "Today, all you have to do is go on to the Internet to find sites that purport to tell you how to beat your mortgage," said Tom Miller, legal counsel for the North Carolina Real Estate Commission.



• Registers of deeds say they are powerless in the face of fake deeds. As long as the deeds meet certain requirements, their offices must accept them, Crump said. "We don't check to make sure the title is good," Crump said. "That's why people have an attorney. Anybody can do this, and there is nothing we can do to stop it."

For more, see NC officials say fake property claims flooding in on real estate caught in foreclosure crisis.

(1) According to the story, the grand sheik of the Moorish Science Temple in Charlotte said his group is not affiliated with any effort to seize vacant properties. Christopher Bennett-Bey said he has heard of similar real estate scams around the country, which misrepresent a faith he has followed for more than two decades. He said he does not believe people using the group's name are members.

Judge 'Splits' Decision In HAMP Suit; Homeowners To Continue Pursuing Claims, BofA To Continue Foreclosures; Combines 26 Actions Filed In 19 States

The Huffington Post reports:

• Bank of America Corp lost its bid to dismiss a lawsuit accusing it of reneging on promises to help borrowers modify their mortgage loans under a much-criticized federal program. The bank, however, claimed a partial victory, citing District Judge Rya Zobel's decision to dismiss claims by borrowers who sought to participate in the two-year-old Home Affordable Modification Program, or HAMP.



• Zobel nonetheless ruled that homeowners who contend they did not get modifications for which they qualified under HAMP, to avoid foreclosures, could pursue claims against Bank of America.



• The complaint "meticulously" detailed each of these plaintiffs' compliance with loan modification conditions, but said the bank "willfully failed" to modify the loans, either in bad faith or for its own economic benefit, Zobel wrote. Such allegations are "sufficient" to let the lawsuit go forward, she added.



• Zobel rejected claims by borrowers who claimed they were "intended beneficiaries" of HAMP but never entered the program, saying they had no contractual right to relief. She also rejected a request to block Bank of America while the lawsuit is pending from foreclosing on 37 borrowers said to be in "imminent danger" of losing their homes.

***

• The lawsuit combines 26 cases that had been brought in 19 states, and sought class-action status for various plaintiffs.



• "The Court's conclusions will likely help hundreds of thousands of families to convert temporary mortgage modification plans into permanently lower monthly payments. Tens of thousands of foreclosures are likely to be prevented," said Gary Klein, a lawyer for the plaintiffs, adding that he expects the case to get class certification quickly.

For more, see Bank Of America Loses Bid To Dimiss Mortgage Modification Lawsuit.

Pair Of Alleged Long Island Loan Modification Rackets Get The 'Freeze' As Judges Limit Firms' Activities, Order Hold On Assets

In Nassau County, New York, Long Island Business News reports:

• The assets of two Long Island mortgage modification companies will remain frozen after separate rulings by Nassau County Supreme Court justices.



• On Tuesday, Justice Thomas Adams extended a temporary restraining order that limits the activities and freezes the assets of a group of companies in West Hempstead operating under the names Express Home Solutions and Home Preserve Law Group.



• Last week, Justice John Galasso extended a similar order, which enjoins a group of individuals operating a business called Homesafe America in Levittown, also known as United Legal Solutions.

***

• The cases were brought by the Lawyers’ Committee for Civil Rights Under Law(1) and its pro bono counsel Manhattan-based Davis Polk & Wardwell on behalf of more than 30 homeowners who allegedly lost money to the two companies. Plaintiffs are seeking a combined $3 million in punitive damages, as well as court orders permanently preventing their owners and employees from engaging in mortgage-related activities.

For more, see Judges freeze assets of LI mortgage mod firms.

(1) The Lawyers’ Committee for Civil Rights Under Law is a nonpartisan, nonprofit organization formed to involve the private bar in providing legal services to address racial discrimination. It implements its mission and objectives by marshaling the pro bono resources of the bar for litigation, public policy advocacy, and other forms of service by lawyers to the cause of civil rights. For more on this case, see:

• Full press release,
• Lawsuit: Osmanzai v. Save My Home,
• Lawsuit: Mook v. Homesafe,
• A detailed “anatomy” of the Homesafe scam, and
• key documents related to the case.

Defective Assignment, Failure To Produce Note Endorsement Sanctionable Under Nevada Mediation Rules; Halts F'closures; Another Lower Court Reversal

From a recent ruling by the Nevada Supreme Court:

• In this appeal, we consider issues arising out of Nevada's Foreclosure Mediation Program.
  
  First, we must determine whether a homeowner who is not the original mortgagor is a proper party to participate in the program. We conclude that the Foreclosure Mediation statute, NRS 107.086, and the Foreclosure Mediation Rules (FMRs) dictate that a homeowner, even if he or she is not the named mortgagor, is a proper party entitled to request mediation following a notice of default.
  
  Second, we must determine if a party is considered to have complied with the applicable statute and FMRs governing document production in a mediation proceeding by producing what the district court referred to as "essential documents." In this, we address whether substantial compliance satisfies the mandates of the statute and FMRs.
  
  Because we conclude that strict compliance is compelled by NRS 107.086(4) and (5), that the assignment offered was defective, and that no endorsement of the mortgage note was provided according to Article 3 of the Uniform Commercial Code, we conclude that Wells Fargo failed to produce the documents required under NRS 107.086(4).(1)
  
  Additionally, we recently concluded in Pasillas v. HSBC Bank USA, 127 Nev. ___, ___. P.3d ___ (Adv. Op. No. 39, July 7, 2011), that a party's failure to produce the enumerated documents required by NRS 107.086 and the FMRs prohibits the district court from directing the program administrator to certify the mediation so that the foreclosure process can proceed. Here, we again conclude that, due to the statute's and the FMRs' mandatory language regarding document production, a party is considered to have fully complied with the statute and rules only upon production of all documents required.
  
  Failure to do so is a sanctionable offense, and the district court is prohibited from allowing the foreclosure process to proceed.
  
  Therefore, we must reverse and remand this case to the district court for it to determine appropriate sanctions against respondents.

For the rest of the ruling, see Leyva v. National Default Servicing Corp., 127 Nev. Adv. Op. No. 40 (Nev. July 7, 2011).

For a discussion of this and a companion case issued by the Nevada Supreme Court on the same day, see Credit Slips: Nevada Supreme Court: You Gotta Prove Chain of Title.

(1) It may be that the foreclosing lender here may attempt to cure its problem by 'producing' an endorsement on a separate sheet of paper that magically appears at the 11th hour in this litigation in order to move forward and proceed to foreclosure. Such a separate sheet of paper, also known as an allonge, may be fatal to the foreclosing lender's status as a holder in due course when not attached to the actual note itself. Consequently, additional defenses to the foreclosure action may become available to the homeowner when the foreclosing lender lacks this special status.

For what may be, for some, helpful discussions on the importance of this separate sheet of paper being affixed to the note itself, see:

• Adams v. Madison Realty & Development, Inc., 853 F.2d 163 (3d Cir. 1988) (involves a purchaser of a group of promissory notes where the allonges were not appropriately attached to the instruments),
• New York Law Journal: Getting Attached: When do allonges meet the requirements of the New York UCC?
• Max Gardner: STAPLES OR GLUE? The Validity of Allonges and Its Impact on Standing to Foreclose,
• All American Finance Co. v. Pugh Shows, Inc., 30 Ohio St.3d 130, 507 N.E.2d 1134, 1136-37 n. 3 (1987) (collecting cases showing disagreement among courts on how firmly indorsements must be affixed - see footnote 3 of the ruling).

Nevada Supreme Court: Violation Of State Mediation Rules A Sanctionable Offense, Slams Brakes On Foreclosure; Lower Court Reversals Continue

In a recent ruling, the Nevada Supreme Court "consider[ed] issues arising out of Nevada's Foreclosure Mediation Program and address whether a lender commits sanctionable offenses when it does not produce documents and does not have someone present at the mediation with the authority to modify the loan, as set forth in the applicable statute, NRS 107.086, and the Foreclosure Mediation Rules (FMRs)."

The court sets forth its general legal analysis in the following nutshell:

• Because NRS 107.086 and the FMRs expressly require that certain documents be produced during foreclosure mediation and that someone with authority to modify the loan must be present or accessible during the mediation, we conclude that a party's failure to comply with these requirements is an offense subject to sanctions by the district court.
  
  In such an event, the district court shall not direct the program administrator to certify the mediation to allow the foreclosure process to proceed until the parties have fully complied with the statute and rules governing foreclosure mediation.
  
  Here, because respondents HSBC Bank USA, Power Default Services, and American Home Mortgage Servicing, Inc. (AHMSI), did not bring the required documents to the mediation and did not have access to someone authorized to modify the loan during the mediation, we conclude that the district court erred in denying appellants Emiliano and Yvette Pasillas's petition for judicial review. Therefore, we reverse the district court's order and remand this matter to the district court so that the court may determine sanctions.

For the entire ruling, see Pasillas v. HSBC Bank USA, 127 Nev. Adv. Op. No. 39 (Nev. July 7, 2011).

For a discussion of this and a companion case issued by the Nevada Supreme Court on the same day, see Credit Slips: Nevada Supreme Court: You Gotta Prove Chain of Title.

Wells To Cough Up $125M To Settle Charges It Knowingly Peddled Crappy Mortgage-Backed Securities To Public Pension Plans

Bloomberg reports:

• Wells Fargo & Co. agreed to pay $125 million to settle accusations by investors that the bank misled them about the risks of mortgage-backed securities it sold. The plaintiffs in the consolidated group case, or class action, include the General Retirement System of Detroit, New Orleans Employees’ Retirement System and other public pensions, according to the proposed settlement filed yesterday in federal court in San Jose, California.



• Wells Fargo, the largest U.S. home lender, and several investment banks that underwrote the securities were sued in 2009 over alleged violations of securities laws in connection with sales of $36 billion in mortgage pass-through certificates in 2005 and 2006. The securities were backed by pools of mortgage loans that Wells Fargo or its affiliates originated or purchased.



• In 28 offerings, the bank misrepresented the quality of the loans, failing to disclose that it hadn’t followed appropriate underwriting standards and loans were made based on inflated appraisals, investors said in a complaint. The bank and the underwriters deny wrongdoing, according to the proposed accord, which is subject to a judge’s approval.

***

• The bank still faces claims in state courts in California, Illinois and Indiana filed by individual investors and federal home loan banks seeking to rescind billions of dollars of mortgage-backed securities purchases.

For the story, see Wells Fargo to Pay $125 Million to Settle Mortgage-Backed Securities Case.

Proposed Class Actions Against SCRA-Violating Banksters Continue; Citigroup Latest To Be Tagged By Servicemember Demanding Damages, Return Of Home

In New York City, Bloomberg reports:

• A Citigroup Inc. unit was sued by an Iraq War veteran who claims the lender illegally foreclosed on his home while he was on active military duty. Jorge Rodriguez, a U.S. Army sergeant, claimed in a complaint filed [last week] in federal court in Manhattan that he was in training in preparation for deployment to Iraq in 2006 when CitiMortgage filed a foreclosure suit against his home in Del Valle, Texas.



• CitiMortgage lawyers falsely said in an affidavit that Rodriguez wasn’t on active service at the time, depriving him of protection under the Servicemembers Civil Relief Act, or SCRA, according to the complaint. Rodriguez is seeking to have the suit certified as a class action against CitiMortgage on behalf of other service members whose homes were foreclosed.



• “This was not an isolated incident,” Rodriguez said in the complaint. Beginning in December 2003, “CitiMortgage initiated thousands of foreclosure proceedings across the United States without adequate safeguards to ensure that service members on active duty were not targeted by CitiMortgage’s foreclosures.”



• The suit seeks unspecified damages and an order restoring to service members possession of properties foreclosed in violation of the SCRA. Sean Kevelighan, a Citigroup spokesman, said the bank is looking into the matter.



• SCRA protections for active-duty members of the military include a 6 percent cap on pre-service loans, limits on court proceedings and a ban on foreclosures without court approval.



• Bank of America Corp. and Morgan Stanley agreed in May to pay $22.4 million to resolve U.S. allegations that they improperly foreclosed on active-duty soldiers. JPMorgan Chase & Co. earlier agreed to a $56 million settlement of claims that it illegally overcharged military personnel on home loans.

Source: CitiMortgage Sued by Iraq War Veteran Over Home Foreclosure.

The case is Rodriguez v. CitiMortgage Inc., 11-cv-04718, U.S. District Court, Southern District of New York (Manhattan).

Bay State Bankruptcy Court: State Law Allows Mortgage Holder To Foreclose Despite Lack Of Ownership Interest In Underlying Note

Housing Wire reports:

• Mortgage Electronic Registration Systems, the real estate registry at the center of foreclosure litigation, says a U.S. Bankruptcy Court in Massachusetts validated a MERS title assignment this week despite the promissory note moving through a succession of owners.



• The case was decided by Bankruptcy Judge Melvin Hoffman who said "Massachusetts law allows a mortgagee with no interest in the underlying obligation to foreclose, the trustee's argument that MERS did not have a sufficient interest in the debtor's property to foreclose the mortgage fails."



• The judge added, "the fact the debtors' promissory note passed like a hot potato down a line of owners, including some in bankruptcy and liquidation, with no accompanying assignment of the note holders beneficial interest in the mortgage, changes nothing."

For more, see Massachusetts bankruptcy judge, other courts validate MERS assignments.

For the court ruling, see In re Marron, Case No. 10-45395-MSH (Bankr. D. Mass. Central Div. June 29, 2011).

Another Faulty Affidavit Sinks One More Foreclosure Sale; Add One More Lower Court Ruling To List Of Those Negated On Appeal

In another case highlighting the use faulty affidavits by banksters in foreclosure actions, the Maine Supreme Court recently vacated a foreclosure judgment, finding the affidavit was inadequate to establish the admissibility of the purported business records being introduced into evidence in connection with a motion for summary judgment.(1)

For the ruling, see Beneficial Maine Inc. v. Carter, 2011 ME 77 (Me. July 7, 2011).

(1) From the ruling ("Richmond" is the individual who signed the faulty affidavit) (bold text is my emphasis):

• [¶ 15] In the matter before us, Richmond was not an employee of Beneficial itself but of Beneficial's "servicer," HSBC. Although Richmond's affidavit states that the records were kept by Beneficial in the ordinary course of business from information supplied at or near the time of the recorded events by a person with knowledge of those events, it does not provide any basis for Richmond's personal knowledge of Beneficial's practices.
  
  Richmond does not purport to be the custodian of the records, nor does she explain the source of her understanding of Beneficial's "daily operation" or show the "firsthand nature of [her] knowledge." Murphy, 2011 ME 59, ¶ 10, 19 A.3d at ___ (quotation marks omitted). Her affidavit indicates only that she has personal knowledge of "this account and of the records of this account" and that she has "access to the records." The affidavit provides no elaboration on the nature of HSBC's role as Beneficial's "servicer," or of HSBC's responsibilities and activities with regard to Beneficial's accounts.
  
  [¶ 16] Although it is possible that an employee of HSBC—perhaps even Richmond herself—may have personal knowledge of both entities' practices for creating, maintaining, and transmitting the records, the affidavit does not report the basis for Richmond's knowledge of (1) Beneficial's practices for creating, maintaining, and transmitting the records at issue; (2) HSBC's practices in obtaining and maintaining the bank's records for HSBC's own use; or (3) HSBC's integration of the bank's records into HSBC's own records. See Murphy, 2011 ME 59, ¶ 10, 19 A.3d at ___; Barr, 2010 ME 124, ¶¶ 18-19, 9 A.3d at 820-21; Soley, 481 A.2d at 1127; M.R. Civ. P. 56(e). Richmond did not, therefore, establish that she was a "custodian or other qualified witness" who could provide trustworthy and reliable information about the regularity of the creation, transmission, and retention of the records offered. M.R. Evid. 803(6). Because Richmond's affidavit could not establish the foundation for the records' admissibility, the court could not properly consider those records on summary judgment. See M.R. Civ. P. 56(e).
  
  [¶ 17] Beneficial presented no other evidence regarding the mortgage, the default, or the other elements set forth in Chase Home Finance LLC v. Higgins, 2009 ME 136, ¶ 11, 985 A.2d 508, 510-11, to support its motion for summary judgment. Because of the deficiencies in the affidavit, Beneficial has failed to demonstrate on summary judgment that the Carters were obligated by, and defaulted on, the mortgage note, and that Beneficial is entitled to judgment as a matter of law. See M.R. Civ. P. 56(c), (e); Murphy, 2011 ME 59, ¶ 17, 19 A.3d at ___. Accordingly, we vacate the summary judgment entered in favor of Beneficial.

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

Editor's Note: The court's mention of 'Murphy' in the above excerpt is a reference to HSBC Mortgage Services, Inc. v. Murphy, 2011 ME 59 (Me. 2011), a recent case where the Supreme Judicial Court of Maine, in vacating a foreclosure judgment, slammed HSBC in determining that the affidavits they submitted were inherently untrustworthy and, therefore, did not establish the foundation for admission of the attached documents as business records necessary to properly support a grant of summary judgment.

Insurance Underwriting Giants Slam Brakes On Issuing Title Policies On Foreclosed D.C. Homes; Say New Local Law Makes Risk Too Crappy To Take

In Washington, D.C., The Washington Post reports:

• A District effort to help distressed homeowners threatens to bring a halt to the sale of foreclosed properties in the city, depress home prices and cast new uncertainty on the local housing market.



• The District implemented regulations in May requiring lenders to enter into mediation with a homeowner before foreclosing on a home. But now, two large title insurers, which have about 80 percent of the D.C. market share, have stopped insuring the sale of foreclosed properties, saying the law makes it too risky.



• Without title insurance, obtaining a home loan is extremely difficult. The policy protects mortgage lenders from challenges to the title of a property. The problems could move beyond the foreclosure market to all home sales if lenders decide that any District home that could potentially fall into delinquency would face a similar problem down the road, according to industry officials and local lawyers. If these foreclosed properties linger on the market, unable to be sold, they could bring down neighborhood prices, they said.

***

• At issue is one sentence in the council’s legislation: “Each foreclosure sale in violation of this act shall be void.” [...] First American Title Insurance and Fidelity National Title Group argue that the new regulations make it more likely that someone could challenge the validity of a foreclosure sale, forcing them to pay or defend claims in court. First American and Fidelity have 50  percent and 28 percent of the D.C. market respectively, according to data from American Land Title Association.

***

• First American declined to comment but said in a letter to its agents that the regulations make it “virtually impossible” to write insurance. A borrower would have to sign a long affidavit certifying that the foreclosure had been carried out properly, according to the letter obtained by The Washington Post.

For the story, see District effort to help distressed homeowners could halt foreclosure sales.

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

Escrow Agency Operator Gets 24 Months For Ripping Off $5.3M+ In Title Insurance Premiums, Closing Costs From Thousands Of Real Estate Closings

From the Office of the U.S. Attorney (Minneapolis, Minnesota):

• [A] 42-year-old Golden Valley man was sentenced for stealing money in a mortgage fraud scheme. United States District Court Judge Ann D. Montgomery sentenced Trent Christopher Jonas to 24 months in prison on one count of wire fraud and one count of money laundering. In addition, Jonas was ordered to pay more than $5.3 million in restitution. Jonas was charged on November 22, 2010, and pleaded guilty on December 30, 2010.



• In his plea agreement, Jonas admitted that from June of 2005 through August of 2007, he misappropriated more than $5.3 million that was intended to pay for title insurance premiums, title search costs and recording fees in connection with thousands of residential real estate mortgage financing transactions.

***

• Jonas owned and operated Title Source, Ltd. and Zen Title, two title insurance agencies. Both agencies acted as an insurance agent for Ticor Title Insurance Co., a title insurance underwriting company located in Florida, which is a subsidiary of Fidelity National Financial and United General Title Insurance Co.

***

• Ticor Title has now issued title insurance policies for all homeowners whose premiums went unpaid because of defendant's fraud. Ticor Title has also paid all of the recording fees that went unpaid because of defendant's fraud, which total more approximately $2.3 million. In addition, Ticor has paid more than $1.8 million in expenses and losses on claims related to Title Source’s and Zen Title’s failure to issue policies and record documents.

For the U.S. Attorney press release, see Golden Valley man sentenced for stealing mortgage title insurance proceeds.

(1) Those who have been screwed out of money due to the fraudulent, deceptive or dishonest practices, or conversion of trust funds by a Minnesota closing agent, or licensed real estate broker or salesperson can apply to the Minnesota Department of Commerce's Real Estate Education, Research and Recovery Fund to try and recover some or all of their losses.

According to their website:

• The improper action that was committed must be an activity that required a license,


• Applicants may be awarded any amount from $0 to $150,000, depending on a number of factors. According to the Fund's website, there is no guarantee that a claim will be paid. Whether an applicant will receive payment from the fund depends on the specific facts of the case.

See also, State Recovery Fund To Cough Up $116K+ To Compensate Elderly Victim Of Bogus Sale Leaseback Equity Stripping Scam Involving Licensed Real Estate Agent for a story on how this fund ponied up what was reported as the largest compensation payout from the Minnesota real estate recovery fund in 13 years to an 87-year old woman who was victimized by a licensed real estate agent in a real estate equity ripoff that stripped an elderly womans's title to her home of fifty years.

Florida Appeals Court Upholds Temporary Injunction Ordering Removal Of Videotaped Robosigner Depositions

In Sarasota, Florida, the Sarasota Herald Tribune reports:

• A foreclosure defense attorney who uncovered what he called "astounding" revelations of bank misbehavior does not have a right to post videos of bank employees on the Internet, an appeals court has ruled.



• The videos are anything but a YouTube sensation, but they touched off a legal battle over First Amendment rights in December when a Sarasota County judge ordered them taken off the Internet video sharing site.



• The ACLU of Florida appealed on behalf of Sarasota lawyer Christopher Forrest and his law firm, saying Circuit Judge Rick De Furia's temporary injunction violated Forrest's free-speech rights.

***

• But the 2nd DCA ruling last week stated that De Furia made the right call because depositions and other pre-trial information are not court records that are generally open to the public and because they frequently contain matters that are irrelevant, defamatory or prejudicial.

For more, see Bank employee videos to be kept off YouTube.

For the court ruling, see Forrest v. Citi Residential Lending, Inc., 2D10-5667 (Fla. App. 2d DCA June 29, 2011).

Miami Feds Pinch Four In Alleged Refinance Ripoff; Reverse Mtg Proceeds Illegally Diverted, Existing Liens Remain Unpaid; Some Seniors Face F'closure

In Miami, Florida, The Miami Herald reports:

• Three South Florida mortgage professionals conspired with a Pittsburgh title agent to defraud senior citizens through a reverse mortgage scam, according to allegations unveiled Wednesday by U.S. Attorney Wifredo Ferrer.



• Through 1st Continental Mortgage Company, which has offices in Fort Lauderdale and Boca Raton, the group processed 14 reverse mortgages across the country and did not use the mortgage money to pay off the existing loans, the U.S. attorney charges.



• Louis Gendason, John Incadela, Marcos Echevarria of 1st Continental, and Kimberly Mackey, a title agent in Pittsburgh, obtained $2.5 million in reverse mortgage loans from Genworth Financial between 2009 and 2010.



• They are charged with pocketing nearly $1 million in illegal loan proceeds, and each faces one count of conspiracy to commit wire fraud. The reverse mortgage loans are insured by the Federal Housing Administration.



• “There are multiple levels of fraud in this one case,” said Ferrer. “Because of this fraud, some of these [victims] are having to fight off foreclosure.”

***

• “These are seniors who are on Medicare, limited incomes, desperate for help,” said Tony West, U.S. assistant attorney general for the Civil Division. “Money that should’ve gone to help seniors with modest incomes instead went to line the pockets of fraudsters.”

For more, see Reverse mortgage scam targeted seniors (A South Florida company engaged in a $2.5 million reverse mortgage fraud scheme, according to charges revealed Wednesday by the U.S. Attorney’s Office).

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

The South Florida Sun Sentinel adds:

• In a separate action, the Federal Trade Commission filed a lawsuit in March that named Incandela and Lower My Debts.com, a loan modification operation based at 1st Continental's Boca address, in a crackdown on foreclosure rescue and mortgage modification businesses. The FTC said the company falsely promised consumers they would get their mortgage payments reduced or their money would be refunded.(1)

For more, see South Florida seniors targeted in mortgage fraud, officials say.

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

From the Office of the U.S. Attorney (Miami, Florida):

• Press Release:Three Loan Officers And A Title Agent Charged In A $2.5 Million Reverse Mortgage And Loan Modification Scheme,


• Criminal Information: U.S. v. Gendason, et al.

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

(1) See FTC Charges Mortgage Relief Operation with Deceiving Distressed Homeowners.

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.