Tucson Feds Score Indictments Accusing Pair Of Abusing Bankruptcy Court In Peddling Foreclosure Rescue Services, Hijacking Vacant Freddie, Fannie REOs

From the Office of the U.S. Attorney (Tucson, Arizona):

• A federal grand jury in Tucson returned a 10-count superseding indictment this week against Marshall E. Home and Margaret Elizabeth Broderick of Tucson for bankruptcy fraud, mail fraud, and wire fraud.



• The indictment alleges that Home and Broderick operated "The Individual Right Party; Mortgage Rescue Service" which offered, for a $500 fee, relief for people facing mortgage foreclosure. Rather than providing relief, the pair filed false documents in U.S. Bankruptcy Court, making false claims against the United States. The false claims totaled over $250 billion.(1)



• In addition, the indictment alleges that the defendants essentially tried to assume the identities of the Federal National Mortgage Association (better known as "Fannie Mae") and the Federal Home Loan Mortgage Corporation (better known as "Freddie Mac.")



• The defendants then filed deeds purporting to transfer title to real estate owned by Fannie Mae and Freddie Mac to an entity controlled by the defendants. The defendants attempted to steal at least 28 properties from Fannie Mae and Freddie Mac in this manner.

For the U.S. Attorney press release, see Pair Charged In Fraud Scheme In Tucson.

(1) For more on the various foreclosure rescue rackets that employ fraudulent filings and other abuses of the bankruptcy court process, see Final Report Of The Bankruptcy Foreclosure Scam Task Force.

Banksters' Bad Faith Bargaining In Loan Modification Talks During Foreclosure Proceedings Draws Ire From Some Judges

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

• Dental hygienist Charmaine Davis' ordeal with Deutsche Bank began soon after she found herself facing foreclosure while helping her mother deal with cancer. After 17 negotiation conferences, her effort to modify her loan had gone nowhere - until a Brooklyn judge stepped in and punished the bank for "bad faith" bargaining.



• Davis' case is hardly unique. Banks have come under increasing fire for mishandling the growing number of foreclosed properties on their books.

***

• In 2009 a New York law began requiring banks to make a "good faith effort" to negotiate with homeowners and try to work something out. In recent months judges have begun cracking down on banks that don't make that "good faith" effort.



• From November 2009 through last month, New York judges have slammed banks for their lack of good faith in at least seven cases. In one case a judge ordered the mortgage debt wiped out. In the others substantial sanctions were imposed or threatened.

For more, see Judges crack down on banks for 'bad faith' as homeowners face threat of foreclosure.

Bankster-Created Housing Market Mess Leads To Improper Home Loss For Many, Pension Hit For Others While Some Get Belted On Both Ends

The New York Post reports:

• It’s the flip side of foreclosure fraud: Not only is the city fireman in danger of losing his home, he also might wind up with smaller retirement checks because his pension invested in home-mortgage-backed bonds that were bundled and sold off by banks during the real-estate bubble.



• Pension funds, insurance companies, university endowments, charities, community banks and other investors are believed to be out hundreds of billions of dollars because of the mess big banks made of the housing market.



• Although lawsuits against banks are mounting, the disputes over the almost $1 trillion in mortgage securities may take years to resolve -- and most investors are likely to wind up with only cents on the dollar.



• “It comes out of our pockets,” says Peter Henning, a Wayne State University law professor and securities-law expert. “No one reached into your wallet and took out cash, but it impacts all of us. If you’re a mutual-fund holder with a bond fund, you’ve probably taken a hit. Insurance companies have losses, and that cost has to get passed on.”

***

• “Every layer of this onion you peel is rotten,” says Talcott Franklin, a Dallas lawyer who is representing the 129-year-old Catholic charitable organization, Knights of Columbus,(1) and other investors in lawsuits against banks. “It’s hard not to feel wronged.”

For more, see $1T in sour notes (Banks being squeezed by mortgage investors).

(1) For more on the Knights of Columbus case, see Investor Files Amended 'Securitization Screw-Up' Suit; Believes Bankster's Knowing Bungle In Mortgage File Exchange Led To Purchase Of 'Unbacked' MBS.

Nevada AG Bags Suspect For Allegedly Refinancing Equity Out From Under Unwitting Homeowner

From the Office of the Nevada Attorney General:

• The Office of the Nevada Attorney General announced an indictment [] against Shafik Hirji, 53, who unlawfully obtained financing on the home of one of his acquaintances. Hirji, of Las Vegas, was indicted on three counts of forgery and one count of theft for obtaining a loan on the victim’s home and embezzling the proceeds.



• The indictment alleges that Hirji completed loan documents in the homeowner’s name and used them to effectuate the loan transaction. In the process, Hirji induced a notary public to certify that the signatures contained on the documents were true and then presented these documents to the lender. The indictment further alleges that Hirji retained the proceeds of the loan, directing that they be deposited into a bank account under his control.



• "The facts surrounding this particular crime are especially troubling," said Attorney General Catherine Cortez Masto. "The fact that the owner was unaware his home had been refinanced indicates the crime was committed by someone the victim trusted. My office continues to place a high priority on prosecuting fraud in Nevada."

For the Nevada AG press release, see Attorney General Announces Indictments In Mortgage Refinancing Scam.

Suspect Learns Upfront Fee Foreclosure Rescue Ripoffs Not A 'Civil Matter;' Slammed w/ $100K Bail Hold After Getting Pinched For Burglary, Grand Theft

In Ventura County, California, the Ventura County Star reports:

• A Fontana man was arrested Thursday on suspicion of stealing thousands of dollars from an Oxnard woman as part of a foreclosure-rescue operation, prosecutors said.



• Juan Alvarado Cervantes, 49, was arrested by Fontana police, then booked into Ventura County jail on suspicion of residential burglary and grand theft, the Ventura County District Attorney's Office said.



• Prosecutors said Cervantes went to the home of an Oxnard woman struggling to make her mortgage payment, collected thousands of dollars in upfront fees, promised to save her home from foreclosure but provided no services. The woman eventually lost her home, officials said.



• The charges against Cervantes stem from a long-term investigation by the District Attorney's Real Estate Fraud Unit into foreclosure-rescue operations in Ventura County, prosecutors said.



• Cervantes was being held in county jail Thursday in lieu of $100,000 bail. If convicted, he faces a maximum of six years and eight months in prison, prosecutors said.

Source: Fontana man accused in Ventura County foreclosure case.

Go here for the Ventura County DA press release.

Kentucky Attorney Cops Plea To Ripping Off Clients, Forging Deed In Effort To Score 66 Acres At Deep Discount

In Covington, Kentucky, the Cincinnati Enquirer reports:

• Covington lawyer pleaded guilty Wednesday to stealing thousands of dollars from his clients and forging a state senator’s name.



• Patrick Moeves, 42, admitted in Kenton Circuit Court that he took fees for legal work he did not do and forged state Sen. Jack Westwood’s name on a land deed – allowing the land to be sold to Moeves’ cousin.



• Moeves, who has been held in the Kenton County jail for more than eight months, faces up to eight years in prison when Judge Martin Sheehan sentences him next month.

***

• Commonwealth’s Attorney Rob Sanders said he agreed to accept the guilty plea because Moeves will likely serve more than five years in prison. Sanders is seeking a total of eight years in prison – one four-year sentence and two, two-year sentences consecutively.



• “I think the court, as does the Commonwealth, understands that we have to be able to trust attorneys,” Sanders said. “Contrary to what many people think, a license to practice law is not a license to steal. To maintain the public’s trust in the system it’s important that anyone with a law license that violates that trust goes to prison.”

***

• In December, Moeves was removed as co-executor of the estate a Park Hills woman after the other co-executor, state Sen. Jack Westwood, said his name was forged on a deed.



• The forgery allowed 66 acres in Harrison County to be sold to Moeves’ cousin for less than half its taxable value of $289,000. Sanders said Wednesday that because Moeves admitted to the forgery in court, the land sale should soon be voided.

For the story, see Covington lawyer guilty of theft, forgery.

Real Estate Agents Cautioned Against 'Reverse Staging' Short Sale Fraud

Robert Freedman, Senior Editor at REALTOR® Magazine writes:

• If you’re thinking about working with a financially distressed seller and the house he wants to sell is trashed, take the extra time to be sure he didn’t trash it himself.



• One of the types of short sale fraud that Fannie Mae is seeing these days is “reverse staged” houses. In these cases, owners trash their house to knock down the property value.



• A buyer with whom the owner is colluding then comes in with a low-ball offer, buys it and fixes it back up, then flips it for its real market value. That seems like a brazen scheme, but mortgage fraud by its nature is a brazen activity.(1)

For more, see Fraud: Are Your Clients Using Reverse Staging?

(1) According to Kim Ellison, Fannie Mae senior industry relations manager for the mortgage fraud program, Fannie conducts post-closing reviews and do proactive database searches looking for patterns and trends by pulling in MLS data and public records and looking at listing information compared to what they've been told, but that the majority of the information comes from tips, the story reports. Fannie's tip line is 800/7-fannie, and e-mail, mortgagefraud_tips@fanniemae.com.

Unaccountable To Executive Branch, Federal Agency May Be The Needed 'Loose Cannon' To Hold Banksters Personally Responsible For Roles In Fin'l Crisis

Reuters reports:

• By suing 131 individuals in its effort to recover losses on $200 billion of mortgage debt that went sour, the federal agency overseeing mortgage giants Fannie Mae and Freddie Mac is doing one thing that the U.S. government has largely left alone.



• It is trying to hold actual people, not just companies, responsible for their roles in the global financial crisis. The 18 lawsuits(1) by the Federal Housing Finance Agency, including 17 filed last week and one in July, signal a change from prior federal efforts to punish banks and bankers for their roles in the financial crisis.



• That difference may stem in part from the FHFA's belief that it has enough evidence to pursue civil claims against banking executives. Its lawsuits draw on information generated by 64 subpoenas issued last year for details on pools of mortgage securities that Fannie Mae and Freddie Mac bought. They also draw on probes by a U.S. Senate investigation subcommittee and the Financial Crisis Inquiry Commission, among other sources.



• Most of the higher-profile financial crisis cases brought by the Department of Justice, such as its civil fraud against Deutsche Bank AG, or the Securities and Exchange Commission have named few or no individual defendants. So far, no top executives at major banks have been criminally charged.



• "Each agency has its own statutory authority, and its own particular evidence," said Peter Swire, a law professor at Ohio State University and former special assistant to the president for economic policy in the Obama administration.



• "The FHFA is not part of the executive branch," Swire added. "It does not report to the president. If the FHFA finds the right evidence, it decides on its own to move forward."

For more, see Analysis: Mortgage cases target people, not just banks.

See also:

• The Seattle Times: 23 ex-WaMu employees named in federal suit (Twenty-three former Washington Mutual employees and several of the defunct thrift's subsidiaries have been sued by the federal government as part of its mortgage-securities lawsuit against JPMorgan Chase),
• The New York Times: U.S. Takes Hard Line in Suits Over Bad Mortgages.

(1) For a link to the 18 lawsuits, please click here.

'Stunning' Decision On 'Unremarkable' Issue Of Law In Recent Florida Foreclosure Case

From a recent post in Reality Check:

• [T]he District Court of Appeal for the 4th District in Florida issued a wholly unremarkable ruling in Glarum v. LaSalle that nonetheless could massively complicate banks’ efforts to foreclose in Florida.(1) When foreclosing, the court said, a bank has to use evidence, not hearsay. In this case, the hearsay was LaSalle’s claim about how much the homeowner owed it–the bank’s “affidavit of indebtedness.”



• What is hearsay? Split the word in two and it’s obvious: the witness hears something, and then says it to the court. Hearsay’s prohibited for a basic reason: you can’t trust it to be true, as anyone who has played “telephone” knows. The hearsay rule has a 500+ year pedigree, so it’s not possible that any lawyer or judge in Florida thought it was okay to use hearsay to win a case.

***

• Ruling that LaSalle’s affidavit of indebtedness was inadmissible hearsay was unremarkable as a matter of law. But in a state where some judges have displayed pro-bank bias so powerful they don’t require the banks to follow the rules, the decision is stunning. In fact, banks are likely to be far more than stunned by it; they may be stopped in their tracks for a long time.



• That’s because the affidavit represented normal business practice: have an employee look at a piece of paper, look at a computer screen, and sign. By rejecting Orsini’s affidavit, the court is forcing the banks to overhaul their basic foreclosure processes. Don’t be too sympathetic to those poor banks, however. The hearsay nature of these affidavits is obvious, and the only way banks could think it would be alright to use them would be to think they are above the law.



• That is, a business with a healthy respect for the rule of law would have said to itself at the very beginning: ‘hmm, we need to submit evidence, not hearsay, so let’s set up our business to allow us to do that. Let’s verify the data we get from previous servicers; let’s have quality control procedures that insure the data we enter is accurate and not altered later; let’s make sure that we have employees who really understand how we do all this make the affidavits we give courts. Instead, the banks said, ‘here’s how we do business. Courts better accept it.”

For more, see Florida Appeals Court Rules Banks Must Follow.

(1) See also, Florida Trial Judge Fumbles Another F'closure Ruling; Sworn Affidavit By One Without Personal Knowledge Of Facts = Inadmissible Heresay: Appeals Court on the latest misadventure in a foreclosure ruling for the Palm Beach County trial judge whose ruling in Glarum v. LaSalle was overturned on appeal, Judge Meenu Sasser.

Brakes Temporarily Slammed On Attorneys Allegedly Peddling Participations In Mass Joinder Foreclosure Relief Suits; One Target Of AG Probe Responds

In Los Angeles, California, The Associated Press reports:

• A Los Angeles judge has issued an injunction prohibiting several lawyers, direct marketers and call center operators from continuing with an alleged nationwide scheme to dupe desperate homeowners into paying thousands of dollars to join dubious lawsuits against big banks.



• Superior Court Judge Louis Meisinger also ruled Tuesday that the assets of foreclosure attorney Philip Kramer, the direct marketing firm Pate, Marier and Associates and other defendants would remain frozen while a receiver retains stewardship over their businesses.



• Orders against another lawyer accused in the civil suit filed in August, Mitchell Stein, are being considered in a separate hearing later this month. Stein filed a series of lawsuits this week in California, Florida and New York(1) accusing California Attorney General Kamala Harris of filing the complaint against him at Bank of America’s behest.



• Prosecutors accuse Kramer, Stein, Pate, Marier and Associates and more than a dozen other individuals and businesses of ensnaring borrowers in a scheme that falsely promised a cut of future legal settlements in lawsuits alleging malfeasance by their banks.



• The lawyers and their associates sent mailers that looked like official class-action lawsuit notifications and stated that their recipients could cut their mortgage to as little as 70 percent of their value, prevent foreclosure and get $75,000 in damages, according to the lawsuit.

For more, see Judge’s ruling keeps Calif. lawyers’, marketers’ assets frozen after bank suit complaint.

(1) See:

• ABA Journal: Accused by Cal. AG of Misleading Clients, Lawyer Fires Back with Federal Civil Rights Suit,
• Press Release: California Attorney General Kamala Harris "Acted as the Pawn of America's Most Powerful Banks" While Violating Homeowners' Civil Rights, Lawsuits Allege.

Foreclosure Case Pending Before Ohio Supreme Court Now A Moot Issue?

An earlier story posted here(1) referenced the mortgage loan at issue in the foreclosure action currently pending before the Ohio Supreme Court.

Specifically, the mortgage loan in foreclosure, initially reported as mysteriously 'disappearing' has apparently been somehow satisfied, arguably making the issue moot (However, details as to exactly how the loan was satisfied - ie. payment, cancellation, etc. are apparently still a mystery).

How this affects the Ohio Supreme Court in deciding whether to simply dismiss the suit, or go forward and address the issue anyway remains to be seen.

For more, see:

• Notice of suggestion of mootness filed by homeowner/defendants Antoine Duvall & Madinah Samad.



• Court Order that appellant may file a response to the notice of suggestion of mootness.



• Memorandum regarding notice of suggestion of mootness per the Court's 8/8/11 order filed by U.S. Bank, N.A.



• Ohio Public Radio: Who owns the deed? (The Ohio Supreme Court is taking up the question of what a bank needs to prove to force someone from his home):
  
  "The Duvall case seemed like a good one for the state Supreme Court to rule on to settle the issue but it has taken an unusual twist. You might even call it another bank snafu.
  
  The homeowner, Duvall, now owes nothing on his mortgage because - in an action unrelated to the Supreme Court case - the loan servicer cleared his debt completely in June.
  
  Duvall doesn’t know why it happened and neither his loan servicer nor US Bank’s attorneys are commenting. It’s not clear what the state Supreme Court will do, but attorneys for both sides say the legal question is not going away. The court could still take up the Duvall case or it could address several other cases on the same issue, waiting in the wings."

Go here for links to all the briefs filed with the Ohio Supreme Court in this case.

(1) See 'Biggest Case In Ohio F'closure Law In A Century' Takes Unusual Turn; Homeowner's Mtg. Debt Mysteriously Disappears; Banksters, Lawyers: 'No Comment!'

“I Want To Choke His Little Irish Neck!” Says Legally Blind Predatory Loan Victim About Contractor Who Played Role In Alleged Home Improvement Scam

In Astoria, Queens, iWatch News reports:

• Margaret Mosunic is 63 and a devout Christian, but if she ever encounters her building contractor again, she has a specific, violent plan of action. “I want to choke his little Irish neck,” she said in a recent interview in her home of more than 40 years in Queens, New York. As for the mortgage broker who recommended the contractor? “[He is] a devil in the disguise of a man,” she said.



• On Jan. 9, 2008, Thomas Delaney, a broker at Home Consultants, Inc., drove Mosunic to a law office to close what she thought was a $40,000 bank loan, according to a lawsuit filed by Mosunic in Queens County court. She planned to use the money to pay back taxes and make repairs to a downstairs rental apartment, she said.



• But that wasn’t the loan that the broker had asked the lender, Emigrant Mortgage Co. of New York to approve, Mosunic’s lawsuit alleges. An hour later, Mosunic claims, she stood on a street corner with a $20 bill that Delaney had pressed into her hand for cab fare, confused and upset.



• She had just signed her name to a $300,000 mortgage with terms she alleges she couldn’t possibly meet. Mosunic’s loan required a monthly payment of $2,227. At the time, her only income was a $738 monthly disability check. “I was flabbergasted and I was so upset,” Mosunic said when she got her first bill.

For more, see Borrower Nightmares: Disabled homeowner alleges broker, bank sold her mortgage she couldn’t afford.

Foot-Dragging Banksters, Bogus Paperwork, Foreclosure Mill Screw-Ups All Helping To Stabilize Real Estate Market?

In Central Florida, the St. Petersburg Times reports:

• With foreclosures, final doesn't always mean final. Some Tampa Bay residents are still living in their homes long after the final judgment of foreclosure because banks have canceled the public auction two, three, even five times. Others have had their houses sold at auction, only to have the sale reversed later.



• Either way, here's a surprising result: Banks' slowness to take title to thousands of homes and condos might actually be helping to stabilize Florida's beleaguered real estate market. "It's helped keep the values up a little bit in that we have a pent-up demand'' for foreclosed houses, says Scott Samuels, a liquidation specialist for Keller Williams.



• In some cases, banks delay taking ownership to avoid maintenance bills or homeowners association fees. In other cases, houses and condos have yet to get beyond the final judgment stage because of problems with foreclosure documents and errors by lawyers representing the banks.

For more, see Balky banks gum up foreclosure courts, benefiting some owners.

Settlement Of Class Action Suit Alleging Landlord Harassment Drove Below-Market-Paying Renters From Homes Leaves Lawyers Happy; Tenants - Not So Much

In New York City, The New York Times reports:

• A settlement deal has been reached between lawyers for a large New York City landlord and its rent-regulated tenants, who claimed in a class-action lawsuit that they had been subjected to harassment, unlawful rent increases and aggressive eviction attempts during the real estate boom.



• Under the terms of the deal, the landlord, the Pinnacle Group, will pay $2.5 million to legal and tenant-rights groups to help current and former tenants make legal claims for damages. The $2.5 million is separate from any damage awards. A court-appointed claims administrator will hear the complaints and decide whether to award compensation.



• The Pinnacle Group, which owns about 15,000 apartment units citywide, must also set up a help line and follow new protocols like carefully notifying tenants of plans to increase rents or start evictions.



• Tenant advocates and housing experts hailed the settlement deal, which was reached in early August and announced last week, for strengthening tenants’ legal rights in cases claiming harassment and unlawful evictions.

***

• Advocates for residents’ and tenants’ rights have long claimed that people in rent-regulated apartments owned by the Pinnacle Group were widely intimidated as part of the owner’s efforts to empty its buildings to make way for higher-paying tenants.

***

• News of the deal, which is expected to be completed at a fairness hearing in October, drew mixed reactions from tenants. Bobby Jones, president of the tenant association at Dunbar, a large complex in Harlem that Pinnacle recently lost to foreclosure, said that the deal was “better than nothing,” but that Pinnacle had wrought lasting damage on the place. About 45 percent of Dunbar’s tenants left their homes or were forced out during Pinnacle’s five-year ownership, he said.

***

• Kim Powell, a tenant leader at an existing Pinnacle building, said she and other named plaintiffs were “totally disappointed” with the deal. Among the issues it left unclear, she said, was who would be eligible for compensation. “The two attorneys may be happy with it, but we’re not,” Ms. Powell said.

For the story, see Deal Would Settle Tenants’ Harassment Suit.

Cops Caught In Middle Of Dispute In Alleged Home Hijacking Scam; Owner In Foreclosure Has The Deed, Unknown Occupants Have Lease, Rental Receipts

In Bakersfield, California, KERO-TV Channel 23 reports:

• Kern County deputies were called to a home where squatters may have taken over, but the people in the home will get to stay there for now.



• The home near Morning Drive and Niles Street went into foreclosure. When the owner couldn't keep up the house payments he moved out and tried to give it back to the bank. He says the bank wouldn't take it so he remained the legal owner of the home even though he wasn't living there or making house payments. Then he discovered people living inside the house.

***

• When Kern County deputies showed up Tuesday, the owner showed them his deed. Deputies said they also verified with the bank that the man is the legal owner of the house. But the people living there said they have a lease.



• "They produced rental receipts, a rental agreement and receipts that they have paid since December of last year,” said Kern County Sheriff’s Office Senior Deputy Paul Leonard.



• Deputies said that since the mortgage crisis began, cases of squatting have become more common. They said because they can’t prove who is right and who is wrong, the people living at the home can stay until the courts can figure it out. "Based upon what they have told us and he has told us and the documents that has been provided, it appears that it is a civil dispute," Leonard said.

For more, see Man Says Squatters Took Over His Empty House (Alleged Squatters Moved In During Foreclosure Process).

For follow-up story, see Alleged Squatters Say They Are Victims (Renters Say Fake Landlord Scammed Them):

• [Purported tenant Jessika] Vapnar and her roommates say they moved in after driving through the neighborhood looking for a house to rent. They say they found a woman in the front yard of the house who said she was the owner and the house was for rent. The renters say she had keys to the house so they thought everything was legitimate.

***

• She says they only have contact with the woman they pay rent to when she comes to get the rent once a month. The receipts they have for the $900 they pay every month are signed with only the first name Gloria. [...] Vapnar and her roommates say the do have a signed rental agreement with the mysterious woman. Deputies took it as part of their investigation. They say they are continuing to investigate the case.

Bankster Takes Homeowner For Ride On 'Stagecoach To Hell' With F'closure Threat Despite Automatically Deducting House Payments From Customer's Account

In Seattle, Washington, KING-TV Channel 5 reports:

• A University of Washington professor is told her home is in pre-foreclosure. The only problem? She's not behind on her payments.

For more, see Homeowner facing pre-foreclosure can't get answers in writing.

Evicted, Desperate & Facing Possible Death, Homeless 1-Year Old Finds New Home; Adopted By Fla. Family, Youngster Must First Face Sensitive Surgery

In Oakland Park, Florida, the South Florida Sun Sentinel reports:

• Porkey, the year-old potbelly pig evicted from Pompano Beach last week because he's a swine, has found a new home. Officials with the Humane Society of Broward said Friday that dozens of people called their shelter offering the portly pet a place to live after reading about his plight in the Sun Sentinel.



• Porkey will be going to a home in Oakland Park with a family that already owns two pigs, said shelter spokeswoman Andrea Silverberg. Unlike Pompano Beach, where pigs are prohibited, ordinances in Oakland Park allow "animals capable of being kept as pets within a home such as those species of animals that generally are kept as pets and live in or about the habitation of humans."



• Porkey is no longer at risk of being euthanized, but it's not all good news for him. "He has to be neutered before he goes home," said Silverberg.

Source: Homeless Pompano Beach pig finds new digs in Oakland Park.

See also, Piggy in a pickle: Evicted Broward pet needs a new home.

Go here to see the recently-reprieved Porkey celebrating his new-found freedom. He apparently had no comment on the code enforcement officials and their actions that led to his getting the boot from the swine-sour city of Pompano Beach.

By Day: A Publicly-Funded Kids Charter School In F'closure; By Night: An After-Hours Nightclub Hosting R-Rated Bashes Headlining Bikinis, Boobs, Booze

In South Dade, Florida, The Miami Herald reports:

• The "Push It To Da Limit: The Flossin Edition" late-night party is still scheduled to go off Saturday night -- but it won't be at a South Miami-Dade charter school, as previously advertised.



• Miami-Dade School District officials on Friday were still trying to determine whether the Balere Language Academy -- a charter school already facing financial free-fall and increased school district scrutiny -- has also been doubling as an after-hours nightclub.



• This week district officials learned of R-rated party fliers, featuring bikini-clad women and bottles of booze, promoting a bash at 10875 Quail Roost Dr. -- the address of the South Miami Heights charter school. Older ads, Twitter posts, Facebook photos and a string of parent complaints about smoky smells and empty beer bottles on campus also indicated past parties were held at the school.

***

• The controversy comes as Balere struggles to stay afloat amid a barrage of problems. Among them: A lender filed a foreclosure lawsuit against the school in June for failing to make payments on a $1.5 million mortgage -- one of four mortgages on the school's six-acre property, records show.

***

• The school's revenue, which comes from public tax dollars directly tied to the number of students, has shrunk from more than $2 million in 2010 to just over $1 million today. As of February, the school owed more than $100,000 to the Internal Revenue Service for unpaid payroll taxes.

For more, see Charter school in adult-club scandal has money woes (Party promoter has ties to the school's principal, records show).

Florida Trial Judge Fumbles Another F'closure Ruling; Sworn Affidavit By One Without Personal Knowledge Of Facts = Inadmissible Heresay: Appeals Court

In West Palm Beach, Florida, The Palm Beach Post reports on the latest, incorrect homeowner-unfavorable ruling by Palm Beach County Circuit Judge Meenu Sasser that has subsequently been reversed on appeal: (1)

• In a decision that could have staggering implications on foreclosure proceedings statewide, an appeals court ruled Wednesday in favor of the owners of a Wellington home whose bank filed documents sworn to by employees with no personal knowledge of the case.(2)



• The ruling from the 4th District Court of Appeal reversed in part a 2010 Palm Beach County Circuit Court summary judgment that said homeowners Gary and Anita Glarum owed LaSalle Bank $422,677.



• That amount was based on an affidavit of indebtedness signed by loan servicer employee Ralph Orsini, who pulled the information from a company computer ­-- a move that appeals court judges said amounts to hearsay.



• "Orsini did not know who, how, or when the data entries were made into Home Loan Services' computer system," the decision states. "Orsini could state that the data was accurate only insofar as it replicated the numbers derived from the company's computer system."



• The ruling means the home on Amesbury Court, which has been in foreclosure since September 2008, can't go to a foreclosure sale until the bank either gets another summary judgment or goes to trial. The Glarums still live in the home.



• Tom Ice, whose firm Ice Legal represents the homeowner, said Wednesday's decision hits at the essence of the nation's foreclosure robo-signing scandal in which tens of thousands of foreclosure court documents were signed by people swearing that they had personal knowledge of cases when they did not.



• While some lenders called the document problem a technicality, foreclosure defense attorneys called it perjury and fraud.

***

• The appeals court ruling was called "rock solid" by Sarasota-based attorney Henry Trawick, an expert on Florida's judicial rules and author of Trawick's Florida Practice and Procedure.



• He said a valid affidavit of indebtedness would have to be sworn to by the person who actually entered the information into the computer system. He expects the decision to further snarl Florida's courts.



• I think a whole lot of summary judgments on these foreclosures are not valid because of this," said Trawick, who is also concerned about how allegedly bogus affidavits will affect getting clear title to homes. "The real problem ahead of us is years to come when all these properties are being sold."

For more, see Ruling in Wellington case could further complicate Florida foreclosures.

See also, Reality Check: Florida Appeals Court Rules Banks Must Follow The Rules:

• Ruling that LaSalle’s affidavit of indebtedness was inadmissible hearsay was unremarkable as a matter of law. But in a state where some judges have displayed pro-bank bias so powerful they don’t require the banks to follow the rules, the decision is stunning.

For the ruling, see Glarum v. Lasalle Bank, No. 4D10-1372 (Fla. App. 4th DCA September 7, 2011).

(1) This is not the first foreclosure screw-up by Judge Sasser that Florida's 4th District Court of Appeal has been compelled to clean up (maybe she's just trying to 'pad her resume' when she quits the bench and goes into private practice working for a foreclosure mill sweatshop? Possibly following in the footsteps of her Broward County, Florida judicial colleague, Victor Tobin? See "See No Evil, Hear No Evil" Broward County Chief Judge Knew Exactly What He Was Doing After All! ).

For examples of Judge Sasser's other reversed foreclosure 'handiwork', see:

• Peterson v. Affordable Homes of Palm Beach, Inc., 4D09-5180 (Fla. App. 4th DCA, June 29, 2011),
• Kwong v. Countrywide Home Loans Servicing, L.P., No. 4D10-1129 (Fla. App. 4th DCA, December 15, 2010) (coincidentally, a case where the homeowner was also represented by the law firm Ice Legal).

(2) Unmentioned by The Palm Beach Post story, but deserving of attention, is that the appeals court also reversed another screw-up by the trial judge in this matter, Palm Beach County Circuit Judge Meenu Sasser, in which she improperly sanctioned homeowner's attorney Ice Legal, P.A. for allegedly filing frivolous pleadings, pursuant to section 57.105, Florida Statutes. (Go here for more on Section 57.105).

From the court ruling:

• The trial court also entered sanctions against appellants’ counsel for filing a “form affidavit” from an expert, Rita Lord, who opined on the ability of lay persons to distinguish between original and high-quality copies of promissory notes.
  
  Lord did not represent in the affidavit that she reviewed the papers at issue in this case. Nevertheless, the trial court was distressed by appellants’ counsel’s habit of filing “the same affidavit in ten different cases, when [Lord] hasn’t seen the documents in this case.”
  
  The court awarded LaSalle its reasonable attorney’s fees for having to file a motion to strike Lord’s affidavit.
  
  We note that LaSalle moved for sanctions under section 57.105, Florida Statutes. That statute permits a trial court to award a “reasonable attorney’s fee” to the “prevailing party” where the plaintiff’s claim was frivolous or to a party to compensate for the opposing party’s dilatory conduct. § 57.105(1)-(2), Fla. Stat.
  
  The trial court did not find that appellants’ claims were frivolous, and the trial court did not conclude that Lord’s affidavit was filed to cause unreasonable delay. Thus, section 57.105 could not serve as a basis for the award of attorney’s fees to LaSalle.
  
  To the extent that the trial court may have been exercising its inherent authority to sanction parties or their attorneys, we also find error. “[A] trial court possesses the inherent authority to impose attorneys’ fees against an attorney for bad faith conduct.” Moakley v. Smallwood, 826 So. 2d 221, 226 (Fla. 2002).
  
  To impose attorney’s fees as a sanction under its inherent authority, the trial court must make an “express finding of bad faith conduct” that is “supported by detailed factual findings describing the specific acts of bad faith conduct that resulted in the unnecessary incurrence of attorneys’ fees.” Id. at 227.
  
  The trial court did not make any specific findings of bad faith on the record, and the sanctions order must be reversed without prejudice. See Finol v. Finol, 912 So. 2d 627, 629 (Fla. 4th DCA 2005). “Upon remand, should the court be asked to reconsider the issue, any future hearing and order must comply with the requirements of Moakley.” Id.

See also, Daily Business Review: 4th DCA bars affidavit over failure to verify:

• The 4th DCA also tossed out a disciplinary action against Ice and his firm, Legal Ice in Royal Palm Beach.
  
  Ice had presented an affidavit from a document review expert that didn't sit well with Sasser. The expert testified that it was hard to prove if the note presented by the lender at the hearing was the original document, as required by law. Ice asked the judge for more time to make a technical analysis of the note to determine that it wasn't a "mere" copy of the original document, he said.
  
  "Judges across the state have a tendency to believe that when they see blue ink on a signature, that is the original note" and make a decision based on a document that could be a copy, he said.
  
  Sasser rejected Ice's argument and entered sanctions against Ice Legal at the request of LaSalle, which called the action a frivolous claim.
  
  The judge ordered Ice Legal to pay the lender's attorney fees. The 4th DCA reversed the sanctions against the Ice firm.

Federal Appeals Court: Proposed Arizona Class Action Plaintiffs Failed To Allege Facts, Cite Law Proving MERS To Be Fraudulent Conspiracy

Reuters reports:

• A lawsuit accusing several mortgage lenders of fraud over home loans maintained within the industry's private electronic database cannot proceed, according to a U.S. appeals court ruling.



• The lawsuit targeted lenders, including Bank of America Corp, JPMorgan Chase & Co and Wells Fargo, over their use of the Mortgage Electronic Registration System. MERS, a unit of Merscorp Inc of Reston, Virginia, owns the computerized registry which tracks the transfer of the beneficial interest in home loans, as well as any changes in loan servicers. It was also a defendant.



• Mortgage loan giants Fannie Mae and Freddie Mac and several of the largest U.S. banks established MERS in 1995 to circumvent the costly and cumbersome process of transferring ownership of mortgages and recording the changes with county clerks.



• However, MERS's role in foreclosure cases has made it a lightning rod in recent months in other court decisions which have held that loan servicers' use of the registry violates basic real estate and mortgage laws.

***

• A proposed class action in an Arizona federal court alleged a conspiracy among MERS members to commit fraud and facilitate predatory lending practices. [...] A lower court judge dismissed the lawsuit, and on Wednesday the 9th Circuit upheld that decision.



• "Although the plaintiffs allege that aspects of the MERS system are fraudulent, they cannot establish that they were misinformed about the MERS system,"(1) wrote Judge Consuelo Callahan for the unanimous three judge 9th Circuit panel.

For the story, see Appeals court rejects mortgage database suit.

For the ruling, see Cervantes v. Countrywide Home Loans, Inc., No. 09-17364 (9th Cir. September 7, 2011).

(1) For sake of completeness, Judge Callahan's full quote follows:

• Although the plaintiffs allege that aspects of the MERS system are fraudulent, they cannot establish that they were misinformed about the MERS system, relied on any misinformation in entering into their home loans, or were injured as a result of the misinformation.



• If anything, the allegations suggest that the plaintiffs were informed of the exact aspects of the MERS system that they now complain about when they agreed to enter into their home loans.



• Further, although the plaintiffs contend that they can state a claim for wrongful foreclosure, Arizona state law does not currently recognize this cause of action, and their claim is, in any case, without a basis. The plaintiffs’ claim depends upon the conclusion that any home loan within the MERS system is unenforceable through a foreclosure sale, but that conclusion is unsupported by the facts and law on which they rely.



• Because the plaintiffs fail to establish a plausible basis for relief on these and their other claims raised on appeal, we affirm the district court’s dismissal of the complaint without leave to amend.

Editor's Note: A careful reading of this case should lead any objective observer to conclude that MERS did not win a carte blanche approval for all of its 'handiwork' in foreclosure actions nationwide. The ruling simply states that, given the specific facts as alleged, and given the specific laws plaintiffs relied on to establish their case, plaintiffs failed to allege viable causes of action. Contrary to what banksters and their apologists may claim to the contrary, there are no national implications to come from this ruling.

Accused Upfront Fee Loan Modification Scammer Gets 90 Days After Copping Plea; Cases Against Two Others Remain Pending: Sacramento DA

In Sacramento, California, Fair Oaks Patch reports:

• One of the men said to have preyed on local homeowners threatened with foreclosure was sentenced Tuesday to 90 days in county jail as part of a plea agreement reached with the Sacramento County District Attorney’s Office, the office announced.



• Ashik Ahmed Azeez, 50, of Sacramento pled no contest to three misdemeanor counts of mortgage fraud. According to Sacramento Superior Court records, he was facing 23 counts for his involvement in a loan modification business that illegally siphoned advance service fees from seven victims, including individuals with properties in Fair Oaks and Carmichael.



• An arrest warrant filed in March said a Fair Oaks couple that solicited the help of Azeez’s business, Turbo Mortgage Modification, ended up losing their home when Azeez didn’t follow up on his promise to deliver a loan modification.



• The couple first entered Azeez’s Arden Way office suite in September 2010. According to the warrant filing by prosecutor Michael Blazina, Azeez gave the couple the impression that their “loan modification was guaranteed” and had them pay him $2,500 in cash the following day.

***

• Even with the cash, the Fair Oaks couple’s loan modification never materialized, with Azeez telling them three months later they hadn’t gotten him additional information in a timely manner, the warrant filing asserted.The couple lost their home to foreclosure last December.

***

• Azeez ran the company, later named Turbo Solutions, with Frank Joseph Ferris, 69, and Vicente Jose Perez, 49, both of Sacramento. DA spokeswoman Shelly Orio said the cases against those two individuals remain ongoing and declined to comment further.



• Online court data, however, shows that Perez was scheduled for a plea hearing Tuesday morning, just as Azeez was. He faces 11 misdemeanor charges. Ferris is not yet facing active prosecution, at least according to online court records.

For more, see Man Sentenced After Defrauding Homeowners (Fair Oaks couple lost home to mortgage scheme).

Lawsuit: 'Set Aside' Of Dubious F'closure Leaves REO-Buying Couple Without Legal Title To Property After Sinking $230K Into Home Bought From Bankster

In Cape Coral, Florida, The News Press reports:

• Brian and Holly Barnhart of Cape Coral - who were sold a house by Wells Fargo Bank even though the bank didn't own the property - have filed a lawsuit alleging fraud and negligence.



• The Barnharts, who emptied their life savings to buy the house for $153,000 cash and renovate it for another $80,000, bought the house in November.



• But it turned out Wells Fargo had given the house back to its original owner, Richard Riccobono, for a mortgage he had on the house. The bank won a foreclosure suit and took back possession of the house, but moved July 30, 2009, to set aside its ownership. As a result, Wells Fargo sold the house to Barnhart even though by then it belonged to Riccobono.

For more, see Cape Coral couple sue Wells Fargo (Bank sold them home it didn't own).

Suit: Allstate's Paperwork Boot Leads To Force-Placed Insurance On Ike-Hammered Home, Driving Owner Into F'closure While Away Working In Saudi Arabia

In Galveston, Texas, The Southeast Texas Record reports:

• Alleging Allstate Insurance Co. and agent Steve Wolverton's actions after Hurricane Ike caused him legal troubles, League City resident Bradley J. Gana has filed a lawsuit. Recent court documents filed Aug. 26 in Galveston County District Court claim the defendants neglected to deliver a certificate of destruction to Gana's lenders after the Category 2 storm destroyed his house on Sept. 13, 2008.



• Gana, who was working in Saudi Arabia at the time, says the apparent failure prompted the lenders to force their captive insurance upon him and cause a negative amortization to occur to his loans.



• "The plaintiff's home was placed in foreclosure as a result of this omission," the suit states. The original petition says that Gana incurred numerous attorneys' fees to keep his home out of foreclosure and ultimately resorted to obtaining a temporary restraining order.



• His case was elevated to federal court where a settlement and payment of certain insurance proceeds were reportedly paid to the lenders. Gana finally received the certificate earlier this year along with an admission against the defendants' interest that they had forgotten to send it before.



• The suit summarily faults the respondents for negligence, gross negligence, breach of contract and vicarious liability and agency. Consequently, Gana seeks unspecified monetary damages and a jury trial.

Source: League City man says insurer cost him numerous legal fees after Hurricane Ike.

Procedures vs. Outcomes: Which Matters More In Foreclosure Process?

From a recent article in American Banker:

• Is it "just" a technicality if a mortgage servicer, foreclosing on a borrower who in all likelihood has defaulted, creates documents to prove the servicer’s client acquired the loan years ago?



• Consider this (admittedly imperfect) analogy: is it just a technicality if a criminal wasn’t read his rights before being arrested? If we know such a person is guilty, it fair to say that such a person was "not harmed" by the police officer’s procedural misstep? Is it worse to violate his constitutional rights or let him back out on the street?



• You can hear echoes of that age-old friction between due process and the messy, often infuriating results of honoring it, in reader reactions to American Banker’s recent story about servicers backdating paperwork to support foreclosures.

***

• The story won kudos throughout the blogosphere. Reuters’ Felix Salmon called it "a fantastic piece of reporting" and Columbia Journalism Review’s Ryan Chittum lauded the writing as "straightforward and tough."

For more, see 'Procedures Matter' in Foreclosure; Do Outcomes Matter More?

NY Bankruptcy Judge To Foreclosure-Desirous Bankster: 'Hit The Road!' Lift Stay Motion Denied Despite Lack Of Objection By Debtor, Chapter 7 Trustee

From a recent ruling by a U.S. Bankruptcy Court (Southern District, NY):

• [T]he issues discussed in this Opinion are neither novel nor complex, but highlight a well-publicized and persistent problem with inadequate mortgage foreclosure documentation.



• The failure to properly document the transfer of the note and mortgage raises the question whether the movant has standing to seek relief—here, an order vacating the automatic stay, but, if successful here, then a judgment of foreclosure in state court.



• Neither the Debtor's counsel nor the Chapter 7 trustee filed an objection to the Motion.



• But the lack of objection does not relieve U.S. Bank from the burden of establishing its right to relief. The Court denies the Motion because U.S. Bank has not established its standing for stay relief.

For the entire ruling, and the court's analysis and reasoning, see In re Lippold, Case No. 11-12300 (MG) (Bankr. S.D. N.Y. September 6, 2011).

Loophole Allows Some Detroit Property Owners To Stiff City On R/E Taxes & Water Bills, Then Buy Back Subsequently F'closed Homes For Pennies On The $1

In Detroit, Michigan, The Detroit News reports:

• Landlord Jeffrey Cusimano didn't pay property taxes on seven of his east-side rentals for three years, owing the city of Detroit more than $131,800. Typically, that would mean losing the properties. But Cusimano not only got to keep them — his debt, including interest, fees and unpaid water bills, was virtually wiped free.



• Cusimano and a growing number of Detroit property owners are using a little-known loophole to erase tax debt by letting their properties go into foreclosure and then buying them back a month later at the Wayne County Treasurer's auction for pennies on the dollar.



• It's legal. But that doesn't mean it's fair, said homeowner Marilynn Alexander, who lives on Fairmount next door to one of Cusimano's rentals. The landlord owed $26,200 in taxes and other fees on the bungalow, but bought it back in October for $1,051.



• "He shouldn't be able to get away with that," said Alexander, a 57-year-old laundry worker who said she scrapes together every year her $1,500 in property taxes at the house where she's lived for 20 years. "That's not a fair break to anybody else out here."



• Critics described it as a growing problem as the foreclosure crisis deepens. A record number of properties — nearly 14,300 — are expected to be auctioned this fall, and officials predict more owners will try to buy back their properties.



• The News identified about 200 of nearly 3,700 Detroit properties sold at auction last year that appeared to be bought back by owners, some under the names of relatives or different companies and many for $500. The total in taxes and other debts wiped away was about $1.8 million.



• "I don't think it's OK; it's just how things are," said Cusimano, who argues Detroit taxes are so unfairly high he was forced to buy back the foreclosed properties. At the September auction, the properties' prices are the debt that's owed. But in October, the county treasurer sells off whatever is left at a $500 opening bid. That's where most of the sales happen, including owners buying back their properties.(1)

For more, see Owners escape tax debt by rebuying foreclosed homes.

(1) Use of this and other so-called 'foreclosure redemption schemes' is not unheard of. For more on foreclosure redemption schemes used by clever property owners and real estate operators in attempts to 'squeeze out' lien-holding creditors, see:

• 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 various foreclosure redemption schemes involving lienholder 'squeeze-outs' by the owner of the property in foreclosure);



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

Ohio Non-Profit Legal Advocates Weigh In With Amicus Brief In Effort To Hold Banksters Accountable For Inability To Prove Foreclosure Rights

In Athens, Ohio, The Athens NEWS reports:

• An attorney with a local legal aid agency has signed onto a "friend of the court" brief filed with the Ohio Supreme Court in a case that could have a big impact on home foreclosures in the state.



• The brief, in U.S. Bank National Association v. Antoine Duvall, was submitted Aug. 16 by Peggy P. Lee of Southeastern Ohio Legal Services, along with representatives of many other legal aid agencies and activist groups around Ohio.(1)



• SEOLS and others who signed onto the amicus curiae brief have been involved in the Save the Dream Ohio project, a statewide foreclosure intervention initiative, and they report that since 2008, they collectively have represented more than 12,000 homeowners in various foreclosure-related actions.



• The Duvall case is complex, but essentially addresses a growing legal issue that could seriously impact home foreclosures in Ohio: the issue of whether a foreclosing bank can actually prove that it owns the mortgage.

***

• Lee of SEOLS said in foreclosure cases, the strategy of demanding that the foreclosing party produce the actual mortgage documents has been catching on among homeowners, which has led to a number of cases around Ohio in which appellate courts have come to different conclusions on whether you have to have the mortgage documents in hand to take a foreclosure to court.



• "There's been a lot of different opinions from a lot of different appellate districts," she said, which is why the state Supreme Court has been asked to review the question.

For more, see SEO Legal Services weighs in on big anti-foreclosure lawsuit.

For the Ohio appeals court ruling at the center of this litigation, see U.S. Bank Nat'l. Assn. v. Duvall, 2010 Ohio 6478 (Ohio App. 8th Dist. Cuyahoga County, December 30, 2010).

(1) Go here for the amicus brief filed jointly by the following nine non-profit law firms throughout Ohio in this case:

• Advocates for Basic Legal Equality, Inc.,
• Community Legal Aid Services, Inc.,
• Legal Aid of Western Ohio,
• Legal Aid Society of Cleveland,
• Legal Aid Society of Columbus,
• Legal Aid Society of Southwest Ohio, LLC,
• Ohio Poverty Law Center, LLC,
• Pro Seniors,
• Southeastern Ohio Legal Services.

Go here for links to all the briefs filed with the Ohio Supreme Court in this case.

Another Utah State Court Foreclosure Case Gets Booted Over To Federal Court

In St. George, Utah, KCSG-TV reports:

• ReconTrust Company, the foreclosure arm of Bank of America [], accused of illegal foreclosures against Utah homeowners, moved a state court eviction case to federal court Friday claiming exemption to State law. (Case 11-00801)



• Utah homeowner, Alexis K. De Azevedo II, represented by St. George attorney John Christian Barlow, said in the counter claim and complaint that the Bank of America through ReconTrust Company knowingly conducted a non-judicial foreclosure sale of the property in Washington, Utah, and recorded a Trust Deed in favor of the Federal National Mortgage Association (Fannie Mae) adverse to De Azevedo.



• The complaint asserts that ReconTrust knew the Trustee's Sale was fraudulent since it's neither a member of the Utah Bar Association or a title insurance company required by Utah law.



• Fannie Mae is attempting to evict De Azevedo from a home in which they have no interest because of the bogus Trustee Sale conducted by ReconTrust, according to the counter claim.



• The defendant (De Azevedo) seeks injunctive relief enjoining Fannie Mae from eviction pending a resolution of ownership issue. The counter claim asks for actual, special and statutory damages to be determined by trial.

***

• Meanwhile, the Utah Attorney is said to be negotiating a settlement with the Bank of America for its illegal foreclosure activity against Utah homeowners as a result of a May 19, 2011 letter from the Attorney General) in which the bank is accused of using ReconTrust Company, in violation of Utah law as set forth in Utah Code Sections 57-1-21 and 57-1-23, which outlines the requirements for lawful non-judicial foreclosures.



• The attorney general cited legal precedent for the position in a recent 10th Circuit case, Shurtleff v. Kleinsmith in which Utah Code Sections 51-1-21 and 57-1-12 were found to be constitutional.(1)



• Shurtleff said, that ReconTrust is in violation of the National Bank Act, which does not allow national banks to operate in contravention of State and local law. Shurtleff said that ReconTrust's exercise of fiduciary powers in the State of Utah is not only a violation of State law, but also applicable federal law.

For more, see St. George Homeowner Eviction Case Moved to Federal Court.

(1) Kleinsmith v. Shurtleff, 571 F. 3d 1033 (10th. Cir. 2009).

Lien Stripping In Chapter 13 Bankruptcy - Primary vs. Non-Primary Residence

The following excerpt in a recent article on the lien stripping process in a Chapter 13 bankruptcy proceeding highlights the unique rules applicable to a primary residence and the distinction between how the rules apply to a primary residence vs. a non-primary residence:

• Lien Stripping in Chapter 13 Bankruptcy
  
  In a process called lien stripping, a secured debt like a second mortgage or car loan may be reduced to the value of the collateral backing the loan and divided into portions of secured and unsecured debt.
  
  Under sections 506(a) and 506(d) of the U.S. Bankruptcy Code, through Chapter 13 lien stripping, a loan is secured up to the amount of the fair market value of the collateral, and the remaining balance of the loan is classified as unsecured debt. For example, if a car loan was for $10,000 but the current fair market value of the vehicle is only $7,000, through lien stripping the car loan will remain as secured debt for only $7,000 and the remaining $3,000 of debt will be converted into unsecured debt.
  
  Unique Rules for Primary Residences
  
  Importantly, different rules apply for loans secured by primary residences. A second mortgage on a home can be stripped only if the current fair market value of the home does not exceed the value of the first mortgage.
  
  For example, assume the current value of a primary residence is $400,000, the first mortgage was for $500,000 and a second mortgage was taken for $150,000. Because there is no equity remaining in the home after accounting for the first mortgage, the second mortgage can be converted to an unsecured loan and stripped.
  
  However, if the current value of the primary residence is $600,000, the second mortgage cannot be stripped. This is because, after $500,000 is secured for the first mortgage, $100,000 in equity is available to secure the second mortgage. If the second loan was not secured by a primary residence, $100,000 would be secured debt and the remaining $50,000 would be converted to unsecured debt through lien stripping.
  
  But, the unique rules for loans on primary residences say that, as long as there is equity remaining for the second mortgage on a primary residence, the second mortgage cannot be divided into secured and unsecured debt and stripped. In the second example, then, the entire $150,000 second mortgage would remain secured debt because it was secured by a primary residence.(1)

Source: Lien Stripping in Chapter 13 Bankruptcy (Individuals with second mortgages and underwater mortgages may benefit from changing the character of their second-mortgage debt from secured to unsecured debt through Chapter 13 lien stripping).

(1) In this situation, I wonder if it would be viable if the homeowner, shortly before filing the Chapter 13 petition, converted the home from a primary to a non-primary residence by moving out and renting out the premises to a tenant, in an attempt to position himself for a subsequent lien-strip of the undersecured portion of the 2nd mortgage when the bankruptcy petition is eventually filed?