NYC Landlord Lender Unloads Mtgs Backed By Crappy Collateral To Non-Profit Developer; Tenant Groups Hope For Similar Deals To Save Affordable Rentals

In New York City, Crain's New York Business reports:

• New York Community Bank, which has been targeted by housing advocates and city officials for selling off distressed mortgages to the highest bidders, has for the first time agreed to a discounted sale of notes to a nonprofit housing developer.



• The bank has sold the debt on a portfolio of four foreclosed residential buildings in Bedford-Stuyvesant to the Mutual Housing Association of New York Management, Inc., a Brooklyn nonprofit that is funding the purchase by tapping a new city loan fund designed to preserve affordable housing.



• The housing group got the $2.4 million worth of mortgages on the dilapidated buildings at a nearly 50% discount. The size of that price cut signals a big potential thawing in a protracted battle between housing advocates and the bank over how the institution is disposing of mortgages on properties in both physical and financial distress.

***

• New York Community Bank is by far the biggest lender to landlords in the city. In all, the bank provides financing for more than 3,000 buildings housing 85,000 apartments, twice as many as anyone else in town. A study by a housing group last year found that New York Community Bank finances the owners of nearly 9,000 distressed apartments, more than the next three banks combined.



• The lender has come under fire from activists and city officials for selling distressed mortgages on rundown properties at prices that would make it tough for new owners to repair the buildings. Last year, the city backed an $8 million bid by Mutual Housing for a portfolio of eight dilapidated buildings in the Bronx, but New York Community Bank sold the mortgage to investors for only a slight discount on the mortgage's $16 million face value.

***

• After battling each other on the streets and in court, the bank and advocates have finally reached a détente in which nonprofit developers will be given a first look at any distressed mortgages the bank is looking to sell. [...] Tenant advocates applauded the Mutual Housing deal and hoped it could serve as a model for the growing number of buildings in financial and physical distress across the city.(1)

For more, see NYC's biggest landlord lender cuts mortgage deal (New York Community Bank's sale of distressed mortgages on four residential properties in Brooklyn at a 50% discount will leave the buyer with enough cash for much-needed rehabs).

(1) In this story, the following excerpt provides some insight as to why New York Community Bancorp head Joseph Ficalora decided it best to reach a deal with his critics:

• He wouldn't say what moved him to lay down arms, but the FDIC's decision to cut his bank's community-lending rating may well have been a factor. Starting two years ago, Mr. Ficalora has been expanding nationally, snapping up failed banks in Ohio, Florida and Arizona.
  
  The seller? None other than the FDIC. If he wants more busted banks sent his way, he needs good relations with his regulator.
  
  As Mr. Ficalora sees it, his decision to forge a deal with his critics was just a matter of simple logic. “When a baby is howling, you eventually figure out that you have to change the diaper,” he said.

Oil & Gas Exploration Outfits Scrambling For Landowners' Mineral Rights A Modern Day 'Gold Rush' As 100s Flood Land Recorders' Offices

In Guernsey County, Ohio, the Zanesville Times Recorder reports:

• It's standing-room only in the Guernsey County Recorder's Office. Hundreds of people have flooded the office for several months, researching land deeds and leases all the way back to 1803 to make sure mineral rights are clear for Utica shale leasing,(1) said Guernsey County Recorder Colleen Wheatley.



• The rush got so bad that as of Nov. 1, the recorder's office expanded its hours. Normally open weekdays from 8 a.m. to 4 p.m., the office is open until midnight Monday, Tuesday and Thursday and from 9 a.m. to 2 p.m. Saturday.



• "There's just so many people, the demand for the space and the records, you have to see it to believe it," Wheatley said. "It's just a different feel, almost like the gold rush."



• In the past, the recorder's office would see maybe a dozen people per day, usually looking up foreclosure or bankruptcy information, Wheatley said. Now, the office sees about 150 title researchers each day, she said.



• Muskingum County Recorder Karen Vincent visited Guernsey County this week to check out the buzz. Her office sees a few local landowners doing title research each day, but the office keeps all of its deed and lease information online, Vincent said. She thinks the Muskingum recorder's office will see some increase in the coming months, but she doesn't know whether it will hit the level Guernsey has, she said.



• Title researcher Lori Ross, from Pennsylvania, spent Tuesday afternoon -- and Tuesday morning and most likely Tuesday evening -- in the Guernsey recorder's office, poring over records. Ross is a crew leader for Brighton Resources, based in Pittsburgh.



• Ross and her crew essentially are subcontractors for oil and gas companies, she said. When a company wants to lease the rights to a plot of land, it's her job to go back through the title to make sure the mineral rights aren't already leased to someone else.



• Ross got to Guernsey about a month ago, she said. She could be there another six months or a year, or she could get a call tomorrow, telling her she's moving to a different project, she said.



• It's the same for Hugh Carroll, a crew leader from Virginia. Carroll has been in Guernsey County about a month and a half, he said, but he's been doing the same type of research work for five years, in 60 different counties in five different states: Virginia, West Virginia, Pennsylvania, Ohio and Kentucky.



• Carroll and his crew start work about 8 a.m., he said, and work until 8 p.m. or later. A separate group works at night, he said. Overnight, Carroll tries to stay at the Hampton Inn in Cambridge, he said, although sometimes it's full of other title researches.



• Ross, Carroll and their crews are working long hours, but both said the recorder's office and the entire Guernsey community have been accommodating. It's not always that way, they said, but it makes it a lot easier to get their job done.



• Karie McCauley, a part-time employee in the recorder's office, grew up in Guernsey County, and she never has seen the community as excited as it is about the coming gas boom, she said. McCauley is excited because she just got her first bonus check: On Oct. 24 and 25th, McCauley signed over the mineral rights to about 10 acres in Cumberland, she said. She signed as part of a landowner group, nabbing a $5,000 per acre bonus plus 18 percent royalty payments.



• It isn't just landowners who are excited about Utica, McCauley said -- everyone, including owners of stores, restaurants and other businesses, wants in. "The energy is just so exciting," she said. "There's never a dull moment. I always have something to do."

Source: Mineral rights title researchers flock to recorder's office.

(1) The Utica Shale is a rock unit that is believed to be developing into another incredible source of natural gas. It underlies portions of Kentucky, Maryland, New York, Ohio, Pennsylvania, Tennessee, West Virginia and Virginia. It is also present beneath parts of Lake Ontario, Lake Erie and part of Ontario, Canada, and is located a few thousand feet below the Marcellus Shale.

For more on the Utica Shale, see Utica Shale - The Natural Gas Giant Below the Marcellus? (Stacked plays in the Appalachian Basin produce multiple natural gas pay zones).

See, generally, Bloomberg News: U.S. Shale Bubble Inflates After Near-Record Prices for Untested Fields:

• Chinese, French and Japanese energy explorers committed more than $8 billion in the past two weeks to shale-rock formations from Pennsylvania to Texas after 2011 set records for international average crude prices and U.S. gas demand. As competition among buyers intensifies, overseas investors are paying top dollar for fields where too few wells have been drilled to assess potential production, said Sven Del Pozzo, a senior equity analyst at IHS Inc.

For ways how landowners can get screwed over by entering into these leases with drilling outfits, see:

• The New York Times: Learning Too Late of the Perils in Gas Well Leases (go here for links to the "Drilling Down" articles, a series of other New York Times articles examining the risks of natural-gas drilling and efforts to regulate this rapidly growing industry),
• NY AG Warns Consumers On Entering Natural Gas Exploration Leases,
• Lawsuits: National Natural Gas Company Behind Effort That Bilked 92-Year Old Widow & Many Other Northern Michigan Landowners On Drilling Leases.

Upstate NY Trial Judge: OK For Municipality To Ban 'Fracking' For Natural Gas; Stripped Of Mineral Rights, Landowners Plan Appeal

In Otsego County, New York, The Ithacan reports:

• The Town of Middlefield in nearby Otsego County has the right to prohibit natural gas drilling within its limits, according to a recent New York state court ruling.



• Otsego County Acting Supreme Court judge Donald F. Cerio Jr. ruled the Town of Middlefield, located almost 115 miles northeast of Ithaca, can ban hydraulic fracturing within its jurisdiction. The Feb. 24 ruling came after Cerio decided local officials have the right to regulate drilling methods and manners within the town.



• The Middlefield ruling closely followed a Feb. 21 court decision in the Town of Dryden to permit local authorities to decide whether to allow fracking within their town borders. According to the Dryden ruling, the judge has determined New York state law should not impede a town from changing its zoning laws.



• Cerio denied the claim made by Jennifer Huntington, president of the Cooperstown Holstein Corporation, a local dairy farm. Huntington argued the town does not have the power to regulate natural gas more than how it affects road use and taxation.



• Huntington is a dairy farmer who leased her 377 acres worth of mineral rights to gas drilling companies. She and her company filed against the Town of Middlefield on Oct. 28. In June, town officials had adopted legislation to prohibit constituents from leasing their land to gas drilling companies.



• Deborah Goldberg, an attorney for the town, said she believes the Dryden and Middlefield cases will set a precedent to empower town law but not to prevent fracking throughout the state of New York. “What it very well may do is give communities who were on the fence the courage to go ahead and do what they need to do to help protect themselves,” Goldberg said.



• Thomas S. West, an attorney for Cooperstown Holstein Corp., said proponents of the court’s decision failed to consider the repercussions the leasing ban will have on landowners who depend on the gas companies financially. “This is really a stake in the heart of landowners in New York who were hoping to get some value for their mineral rights and avoid foreclosure or bankruptcy,” West said.



• Though Goldberg admits landowners should not expect money through leasing of their property, she said they should consider the potential negative long-term effects of fracking. "Anyone would hope that they are taking into account the needs of their own community members and not just their own pocketbook,” Goldberg said.



• West said the company plans to appeal the ruling. If the appeal is approved and the Middlefield ruling reversed, landowners will be able to continue leasing their mineral rights to gas companies for drilling.



• Cheryl Roberts, another attorney for the Town of Middlefield, said she is confident the appeal won’t be passed at the appellate court level. “I suspect there will be many communities in New York that will not allow fracking in their communities,” Roberts said. “Gas companies will obviously not be able to exploit the resources there and will be limited in their ability for gas.”



• Goldberg said that the farmers who elected to lease their land to fracking companies understood the risk prior to allowing those companies to purchase their mineral rights. But, in the long run, she said, the environment of the towns will be better off. “We think it was a very thorough, well received opinion, and we’re hopeful that it will hold up on appeal,” Goldberg said.

Source: Another NY fracking ban upheld (Middlefield follows Dryden's lead).

See also, Dryden fracking ban upheld by zoning lawsuit decision:

• A state judge ruled [] that the Town of Dryden was within its rights to ban hydraulic fracturing, a decision that stopped a lawsuit filed by a Denver-based oil and natural gas company against the town’s ban.

For the court ruling, see Cooperstown Holstein Corporation v. Town of Middlefield.

Texas Supreme Court: Land Ownership Includes Right To Pump Groundwater; 'Taking' By Gov't Without Coughing Up Adequate Cash Nixed

In Austin, Texas, The Southeast Texas Record reports:

• Texas landowners received a huge boost from the state's Supreme Court [...], when justices ruled land ownership includes an interest in groundwater that cannot be taken for public use without adequate compensation.



• In 1994, R. Burrell Day and Joel McDaniel bought 381.40 acres to grow oats and peanuts and graze cattle. The land overlies the Edwards Aquifer, an underground layer of porous, water-bearing rock, 300-700 feet thick, and five to 40 miles wide at the surface, that stretches in an arced curve from Brackettville, 120 miles west of San Antonio, to Austin, court records show.



• In 1996, Day, who is now deceased, and McDaniel sought a permit to pump from the Edwards Aquifer. However, they were unable to establish "historical use" -- the method the authority uses to allocate water -- and were granted a permit for only 14 acre-feet, court papers say.



• Demanding compensation for the loss of the right to pump water on their own land, the two men filed suit against the Edwards Aquifer Authority, arguing that the entity's limiting of water use violated their constitutional rights.



• The authority maintained that it should not have to pay for reasonable restrictions on how much a landowner can pump from the aquifer. Following several years of litigation, on Feb. 24 the Supreme Court affirmed the judgment of the Fourth District of Appeals and remanded the case to the district court for further proceedings.



• The justices found that the taking of water below a property owner's land without compensation, even for public use, was a violation of the Texas Constitution.



• "Whether groundwater can be owned in place is an issue we have never decided," states the court's opinion. "But we held long ago that oil and gas are owned in place, and we find no reason to treat groundwater differently."



• While Texas property owners might consider the ruling a victory, some environmental groups have publicly stated that without proper water regulation, the surrounding environment and wildlife will suffer.

Source: Landowners have constitutional right to be compensated for water, Supreme Court opines.

For the court ruling, see Edwards Aquifer Authority v. Day, No. 08-0964 (Tex. February 24, 2012).

Fort Lauderdale Couple Victimized By City Wrecking Ball Scores $182K Jury Award; Say It's Not Enough, File Request For New Trial

In Fort Lauderdale, Florida, the South Florida Sun Sentinel reports:

• The city demolished a family's house in a deal to build them a new one — but then walked away. Now, a jury says the city owes $182,000 for breaking its promise.



• But the lawyer for Andrea and Henry Bonner says that's not enough, given the pain and hardship the Bonners endured. "I'm extremely disappointed," said attorney Scott Leeds of Miami. The Bonners, who now make their home in the Oakland Park warehouse where Henry Bonner runs a business, declined to discuss the case. The city's lawyers also declined comment.

***

• After a five-day trial and nearly three hours of deliberation, a jury on Feb. 13 determined the city breached its contract with the Bonners and awarded them $192,000 to buy a new house. The jury then subtracted $10,000 from its award because the Bonners "knowingly made a false statement" about their interest in [a] second property.



• No damages for pain and suffering were awarded by the jury, and Leeds has filed requests for a new trial, damages, court costs and the living expenses the Bonners incurred.

For the details, see Fort Lauderdale wrongly demolished home, owes family $182,000, jury says.

Beaumont Residents Sue City To Save Subpar Homes From Wrecking Ball

In Jefferson County, Texas, The Southeast Texas Record reports:

• A Beaumont man claims he faces the prospect of losing his home because it is scheduled for demolition. He is pinning his restoration hopes on a requested court order.



• Frank Flores filed a lawsuit Feb. 23 in Jefferson County District Court against the city of Beaumont. In his complaint, Flores alleges he purchased property at 2694 Houston St. in Beaumont on Feb. 8 with the intention of remodeling it. However, when Flores went to Beaumont's building permit department in an attempt to secure the necessary permits for his planned work, he learned of the city's intent to demolish the house, according to the complaint.



• "The city permit officials do not have the discretion or authority to override the city's prior decision to demolish the house," the suit states. The only way Flores will be able to perform his sought-after repairs is if the court prohibits the city from demolishing his property, the complaint says.



• In his complaint, Flores seeks a temporary restraining order that would prevent the city from demolishing his property, plus costs and other relief the court deems just.

Source: Beaumont man seeks TRO to stop demolition of house.

In an unrelated case, The Southeast Texas Record reports:

• Nancy Robbins has filed an application for injunction, seeking to stop the city of Beaumont from demolishing her condemned home.



• The injunction and restraining order petition was filed Feb. 21 in Jefferson County District Court.According to the petition, Robbins owns a home located at 4630 Hartel St. in Beaumont, which has been declared to be a dilapidated structure and is scheduled to be demolished by the city.



• Robbins maintains she purchased the home in order to save it from demolition and to remodel and renovate the home. She maintains she will suffer immediate and irreparable injury, loss or damage unless the city is enjoined.

Source: Beaumont woman seeks TRO to stop city from demolishing home.

Brooklyn Judge Voids Home Transfer Where Son Duped Elderly, Blind, Wheelchair-Bound Mom To Sign POA Used To Deed Property For Pennies On The Dollar

In Brooklyn, New York, the New York Post reports:

• A shady Brooklyn real-estate deal that stripped a blind, elderly woman of the deed to her home has been undone by a judge who said the transaction “reeked of fraud.”



• A lawyer for wheelchair-bound Evelyn Popalardo, 84, filed suit in 2010 after discovering that her two-story home — which a bank appraiser valued at about $600,000 in 2007 — had been sold out from under her for a mere $6,000 by her own son.



• Brooklyn Supreme Court Justice Martin Solomon voided the deal after a civil trial in which the elderly widow testified that she couldn’t even read the document in which she signed over power of attorney to her son, Andrew, The Post has learned.



• “So the entire foundation of this transaction failed,” Solomon said, according to a transcript of his verdict. “It is as if you are building a house on a river.”



• Popalardo’s suit charged that her son, 53-year-old Andrew — an unemployed Army vet who shared the Sunset Park home with her — persuaded her to sign over power of attorney so he could deed the property for one one-hundredth of its value to Queens real-estate investor Yuval Golan, the owner of Bapaz Adaret Properties Corp. But Andrew Popalardo insists he was as much a victim as his mom. Andrew claims that a Bapaz Adaret representative convinced him the family could lose the house if his mother ended up in a nursing home.

Source: ‘Sold out’ his blind mother (Took 6G for home).

For earlier story, see Mom gets '$onburn'.

Scrutiny Increases On Suspected Foreclosure Rescue Racket Allegedly Duping Financially Stressed, Confused Homeowners Into Signing Over Deeds To Homes

In West Palm Beach, Florida, The Palm Beach Post reports:

• Complaints are mounting against a Palm Beach County foreclosure­ rescue company accused in lawsuits and letters to state officials of defrauding desperate homeowners. The 3-year-old Nationwide Investment Firm promises to conduct short sales, obtain loan modifications or "negotiate with lenders to stall foreclosure," according to a contract attached to a Feb. 15 lawsuit filed in Palm Beach County.



• But clients allege in complaints to the Florida Attorney General's Office and court actions in Broward and Palm Beach counties that instead of getting the help they sought, they unwittingly signed over the deeds to their homes. Some claim they were then threatened with eviction and left with mortgage debt on properties to which they no longer have title.



• The Palm Beach Post first reported on Nationwide Investment Firm in November when five lawsuits within a year's time accused the company of fraud. Since then, at least two more lawsuits have been filed against it, two Broward residents are fighting eviction from the homes they deeded to the company, and a Port St. Lucie couple say they sought a refinance from Nationwide but ended up giving away their home in a flurry of paperwork they didn't understand.



• Property records show Nationwide has title to 65 homes in Palm Beach, Broward, Miami­-Dade, St. Lucie and Lee counties. "Imagine - we keep paying on the house and the house is not even ours," said Antoine Jean Francois of Port St. Lucie, who said he learned about the company from a commercial on a Haitian radio station.



• Nationwide's attorney, Kevin Fabrikant, said the clients knew what they were doing. "I believe they are lying," he said, adding that Nationwide has voluminous short-sale files on homes that prove it is working with banks to erase home­owner debt. "They knew they were signing away title to their property."



• Attached to two of the complaints sent to the attorney general are contracts, written in both English and Creole, that the homeowners signed saying that no one had induced them to sign a quit claim deed or sell the property.



• But West Palm Beach attorney Pierre St. Jean, who is representing a homeowner who filed suit last month, said people don't understand the consequences and are given nothing of value in return for their deed. "They (Nationwide) are looking for people who are inexperienced, confused, and in a frightened state of mind," he said.



• The Florida Office of Financial Regulation confirmed last week it was investigating the company's practices, but wouldn't comment further. Still, the firm continues to collect deeds. Two Palm Beach County homeowners signed over their properties in the first two months of 2012, according to records.



• Claims in the two most recent lawsuits filed in Palm Beach and Broward counties include fraud, unjust enrichment and violation of Florida loan modification regulations.



• In one attorney general complaint, a Margate woman said she was asked to pay Nationwide $1,400 per month after she sought short-sale help and signed over her deed. She moved, fearing eviction. Nationwide has since sold the home, which is in foreclosure, in a lease-to-own deal to another couple who gave the company $13,000 down on a $65,000 purchase price with an interest rate of 9.6 percent, according to a contract for deed filed with the Broward County clerk of court.



• Francois, the Port St. Lucie homeowner, wrote a letter in late November to the attorney general that he and his wife were told Nationwide has investors who would buy their home in a short sale and sell it back to them for its current value.



• It's a similar situation described in other complaints, including from one woman who filed a Boca Raton Police Department incident report in October. In that case, the homeowner said she remained in the house after deeding it to Nationwide and gave the firm $27,000 to buy the home back after a short sale. She said she made monthly payments to the company of between $1,170 and $1,300. That was two years ago, she said in the police report, and the homeowner believes a short sale was never initiated.

For more, see Complaints mount against Palm Beach County foreclosure rescue company accused of defrauding desperate homeowners.

Chase's Credit Card Litigation Operation: Shoddy Back-Office Procedures, Flawed Legal Work Extends Well Beyond Mortgage Servicing

From a recent story from American Banker:

• JPMorgan Chase & Co. took procedural shortcuts and used faulty account records in suing tens of thousands of delinquent credit card borrowers for at least two years, current and former employees say.



• The process flaws sparked a regulatory probe by the Office of the Comptroller of the Currency and forced the bank to stop suing delinquent borrowers altogether last year.



• The bank's errors could call into question the legitimacy of billions of dollars in outstanding claims against debtors and of legal judgments Chase has already won, current and former Chase employees say.



• For the banking industry at large, the situation at Chase highlights the risk that shoddy back-office procedures and flawed legal work extends well beyond mortgage servicing.



• "We did not verify a single one" of the affidavits attesting to the amounts Chase was seeking to collect, says Howard Hardin, who oversaw a team handling tens of thousands of Chase debt files in San Antonio. "We were told [by superiors] 'We're in a hurry. Go ahead and sign them.'" Hardin left the bank in 2010 to work in a different industry. Chase declined repeated requests to discuss details of its consumer debt collection activities.



• Company documents, court filings, and interviews with seven current and former employees reveal that Chase's credit card litigation operation was allegedly plagued by unreliable external attorneys, management's disregard for accuracy, and patchy technology. The bank's computer systems frequently disagreed about how much debtors actually owed, several of the Chase sources say.



• The employees' stories corroborate allegations made by Linda Almonte, a former mid-level business process executive in Chase's San Antonio-based Credit Card Litigation Support Group. Dismissed in November 2009 after six months on the job, Almonte filed whistleblower complaints and a wrongful termination suit claiming that she was fired for objecting to the sale of credit card debts with erroneous balances.



• Almonte's complaints drew the attention of the OCC, former Chase employees say, and led to the April 2011 shutdown of a formidable collections operation that generated several billion dollars of legal judgments every year.



• Few details of the OCC's investigation are available, but current and former Chase employees confirm that staffers from the agency's enforcement division spent two months gathering information in the San Antonio facility late last year. A person familiar with the OCC's review says that the regulator is taking the situation very seriously.



• This is the first article in a series that will look at what allegedly went wrong in Chase's credit card litigation operation — and how those missteps could roil the banking and debt collection industries.

For more, see OCC Probing JPMorgan Chase Credit Card Collections.

WV AG: Zombie Debt Buyer Used Crappy Paperwork To Score Court Judgments In Groundless Lawsuits Seeking To Collect Stale, Bogus Debts From Consumers

In Charleston, West Virginia, The West Virginia Record reports:

• West Virginia Attorney General Darrell McGraw said Thursday his office is suing Midland Funding LLC, one of the country's largest debt buyers. McGraw said he is going after Midland Funding, a Delaware corporation, and its sister corporation, Midland Credit Management, a Kansas corporation, for using false affidavits to obtain default judgments against state consumers.



• In addition, the attorney general said he is suing the two corporations for failing to include information required by law when suing a consumer in magistrate or circuit court for an alleged debt.



• Midland is considered one of the nation's largest "debt buyers," having bought about $54.7 billion in old consumer debt in recent years.The company typically buys debt that has been charged-off by the original creditor -- usually old credit card debt -- for about three cents on the dollar.



• In other words, Midland pays about $3 for every $100 of debt it buys, McGraw's office explained. The attorney general said because debt buyers like Midland usually only acquire an electronic file about the debt and not actual copies of the underlying charge slips, account statements, etc., consumers are hounded regularly by the companies for payments of bills they do not owe.



• In fact, in some cases, debt buyers sue people solely because they have the same or similar name or address as the real debtor. In other cases, they pursue people for bills repaid years ago, McGraw said.



• According to the Attorney General's Office, Midland frequently uses "false" and "unreliable" mass-produced affidavits as supposed "proof" of consumer debts in lawsuits against individual citizens. The company does this in order to obtain judgments against or extract payments from mostly unrepresented consumers, some of whom had no knowledge of any alleged debt, McGraw's office alleges.



• The National Consumer Law Center has estimated that one out of 10 lawsuits filed by debt buyers are premised on bad or incorrect information. "Unfortunately, many consumers are frightened or unaware of their rights when they are sued and fail to respond to these groundless lawsuits, leaving them subject to judgments on debts that cannot be proved. Companies such as Midland rely upon this fear and typically drop their lawsuits if consumers know their rights," McGraw said Thursday.



• The Attorney General's Office began its investigation into Midland's business practices after receiving complaints from consumers that they had received repeated telephone calls from the company, trying to collect debts they did not owe. Some consumers also complained they had been sued for debts they did not owe on credit cards they never had.

Source: McGraw suing debt-buying company.

Guilford County Register Of Deeds Files Robosigner Suit; Seeks To Clean Up Bankster-Created Mess In Land Records Registry

From the Office of the Guilford County, North Carolina Register of Deeds:

• Guilford County, ex rel. Jeff L. Thigpen, Guilford County Register of Deeds, filed suit today against LPS/DocX, MERSCORP, MERS, Inc., and numerous banks, loan servicers, and foreclosure specialists seeking to clean up the “mess” Defendants created in the County’s property records registry.



• “Our office uncovered an abundance of falsified, forged, and fraudulently executed mortgage documents,” said Thigpen. “But our investigation only found the tip of the iceberg. We need the banks to clean up their mess.”



• The suit cites as evidence Thigpen’s identification of over 4,519 mortgage documents that were filed by DocX with the Register of Deeds and signed in the names of known robo-signer aliases: “Linda Green,” “Christie Baldwin,” “Pat Kingston,” “Korell Harp,” “Jessica Ohde,” “Rita Knowles,” “Linda Thoresen,” and “Brent Bagley.”



• “How can we maintain accurate records of title with fraudulent documents? The banks are also maintaining their own private registry called ‘MERS’ that prevents the public from discovering who owns what loans. Because there is no accountability for MERS, its records are also a mess,” said Thigpen.



• “The system is broken and it needs to be fixed. We’re telling MERS and the banks: you broke it, you fix it.” In an April 6, 2011 letter, Thigpen and Southern Essex (MA) District Registry of Deeds John O’Brien urged Iowa Attorney General Tom Miller to investigate MERS and its impact on Registers of Deeds as part of the national attorneys general robo-signing investigation.



• The suit cites numerous reasons why MERS fails to keep reliable chains of title, and notes that the recent attorneys general settlement did not address MERS’s and robo-signing’s impact on Registers of Deeds. “When you combine the fraudulent documents with MERS, it is difficult if not impossible to trace title for property. Potential title defects hurt Guilford County homeowners and businesses by impacting property values,” said Thigpen.



• “We need to clean up chains of title to ensure certainty in the land records system.”

For the Guilford County Register of Deeds press release, see Guilford County Sues To Clean Up Banks’ “Mess” at the Register of Deeds.

Emerging Details Of Foreclosure Fraud Settlement Point To A Lousy Deal

CNNMoney reports:

• As more details emerge about the massive $26 billion foreclosure settlement between the five biggest mortgage lenders and the states' attorneys general, a growing number of borrowers are realizing that the deal will do little, if anything, to help them out.



• Proponents of the settlement deal tout that roughly 1 million homeowners who owe more on their homes than their homes are worth are expected to have their mortgage balances lowered through principal reductions and another 750,000 would be able to refinance into loans with lower interest rates.



• However, that's only a fraction of the 11 million homeowners who are currently underwater on their homes, according CoreLogic. And it's also a mere sliver of the 3.5 million people who lost their homes to foreclosure over the past four years.



• "The impact [of this settlement] will be small," said Mark Zandi, chief economist for Moody's Analytics. "It's not a home run; it's a single."

For more, see Rage grows over mortgage deal.

Banksters' Foreclosure Attorney Comes Clean; Says 1000s Of Colorado Foreclosures Were Probably Bogus

In Denver, Colorado, The Denver Post reports:

• Thousands of Colorado homes were taken in foreclosure in recent years by banks that probably never had the right to do so because no one bothered to challenge the process, said a lawyer who worked for the state's biggest foreclosure law firm.



• Lawyers often blindly sign a document attesting that the bank they represent has the right to foreclose — allowable under Colorado law — without ever actually seeing the original loan documents, attorney Keith Gantenbein said. He worked at Castle Stawiarski, where more foreclosure cases originate than any other law firm statewide.



• Gantenbein said he and other lawyers signed "tens of thousands" of documents known as statements of qualified holder. The papers certify lenders' right to foreclose, generally with little more than an e-mail from a bank or loan servicer telling the lawyers to file the case.



• "The discomfort was you had no way to verify the information they provided, and we found many bank errors, and you're not 100 percent sure you had the right to foreclose," Gantenbein said Monday. "It happened so frequently that there has to be a large percentage of homeowners who lost their homes to the wrong people."



• Gantenbein, 31, is expected to appear today before a state House committee taking testimony on a bill designed to end the practice and require banks to provide original loan papers before they can foreclose.

For more, see Honor system for foreclosure paperwork has led to illegal Colorado seizures, lawyer surmises.

Title Agent Gets 6 Years For Illegally Pocketing $4.9M+ In Real Estate Closing Cash Meant For Existing Lienholder Payoffs On Home Sales, Refinancings

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

• U.S. District Judge Catherine C. Blake sentenced Gary Pierce, age 44, of Edgewater, Maryland, [] to six years in prison, followed by three years of supervised release, for conspiracy to commit wire fraud in connection with a five year scheme to divert or hold mortgage payoff funds from clients’ closings on 17 Maryland properties. Judge Blake also ordered Pierce to pay restitution of $4,174,044.41. Co-defendant Todd R. Bettin, age 42, of Crofton, Maryland, pleaded [] today to wire fraud in connection with the same scheme.

***

• Beginning in 2007, Pierce and Bettin diverted or held mortgage payoff funds from clients’ closings for a matter of days, weeks and sometimes years. Pierce falsely represented on HUD-1 forms sent to the borrower’s lender that the payoff was made, when in fact Pierce intended to divert the funds.



• Pierce and Bettin fabricated wire confirmation reports, which purported to be a bank record of the transfer, to include in loan files. These were created in advance of audits in order to deceive the title insurers.



• Additionally, to forestall discovery by the lenders, Pierce and Bettin contacted the mortgage lender who should have been paid off and posed as the borrower/homeowner. Bettin would either create an on-line profile for the borrower and stop any mail from being sent to the borrower, or he would tell the lender that his, the borrower’s, address had changed and he would re-direct the lender to send all correspondence to a post office box owned by Pierce. Bettin would then make monthly mortgage payments to the existing lender.



• Believing that the bank had been paid off as a result of the settlement, the borrower stopped making monthly payments on that mortgage. And since that lender was receiving monthly payments, it had no reason to notify the borrower of any delinquency. With no delinquency in the account, the scheme went undetected.



• Because the existing mortgages were not paid off, the liens against the property were not removed and clear title could not be passed to the new lender and borrower. The total amount of diverted or otherwise improperly obtained funds totals $4,971,380.

For the U.S. Attorney press release, see Owner of Gambrills Title Agency Sentenced to 6 Years in Prison in $4.9 Million Mortgage Fraud Scheme (Employee Pleads Guilty To The Same Scheme).

Minnesota Appeals Court: Foreclosure By Advertisement Is Void Unless Strict Statutory Compliance Is Met

In a recent ruling by the Minnesota Court of Appeals, the court issued a reminder that, for a foreclosure by advertisement to be valid in Minnesota, strict compliance with statutory requirements is met. Accordingly, it reversed a lower court ruling adverse to a foreclosed homeowner.(1)

For the court ruling, see Ruiz v. 1st Fidelity Loan Servicing, LLC, No. A11-1081 (Mn. Ct. of App., March 12, 2012) (unpublished).

(1) From the appeals court ruling (bold text is my emphasis, not in the original text):

• In 1910, the Minnesota Supreme Court adopted a strict-compliance standard in foreclosure-by-advertisement proceedings, stating:
  
  Foreclosure by advertisement is purely a statutory creation. One who avails himself of its provisions must show an exact and literal compliance with its terms; otherwise he is bound to profess without authority of law. If what he does failed to comply with the requirements of the statute, it is void.
  
  Moore v. Carlson, 112 Minn. 433, 434, 128 N.W. 578, 579 (1910). The supreme court has recently reiterated this strict-compliance requirement, citing Moore for the principle that "[u]nder Minnesota law, a foreclosure by advertisement—non-judicial mortgage foreclosure—is only valid if the party seeking to foreclose the mortgage meets certain statutory requirements." Jackson v. Mortg. Elec. Registration Sys., Inc., 770 N.W.2d 487, 492 (Minn. 2009).
  
  The legal question in Jackson was "what constitutes an assignment of a mortgage within the meaning of Minnesota's foreclosure by advertisement statutory scheme." Id. at 489. In resolving this question, the supreme court reviewed the history of Minnesota's foreclosure-by-advertisement statutes and explained that:
  
  Foreclosure by advertisement was developed as a non-judicial form of foreclosure designed to avoid the delay and expense of judicial proceedings. Because foreclosure by advertisement is a purely statutory creation, the statutes are strictly construed. We require a foreclosing party to show exact compliance with the terms of the statutes. If the foreclosing party fails to strictly comply with the statutory requirements, the foreclosure proceeding is void.
  
  Id. at 494 (emphasis added) (quotations and citations omitted).
  
  Jackson concluded with a statement that "[a]s a court that reviews and interprets the laws of this state, we must apply the foreclosure by advertisement statutes as they have been written by the legislature and as they have been applied and interpreted in the past." Id. at 502-03.
  
  The supreme court's statements regarding the strict-compliance standard, although dicta, are entitled to "great weight." In re Wylde, 454 N.W.2d 423, 425 (Minn. 1990); see Simons v. Shiltz, 741 N.W.2d 907, 910 (Minn. App. 2007) (relying on dicta in a supreme court opinion), review denied (Minn. Feb. 19, 2008). Moreover, the statements provide no indication that the court is willing to depart from the standard that it adopted in 1910.
  
  Despite the supreme court's recent reiteration of the strict-compliance requirement, the district court accepted respondent's arguments that substantial compliance with foreclosure-by-advertisement statutory requirements is nonetheless sufficient. The district court reasoned: "Although [appellant]'s reading of Jackson is technically correct, [appellant] does not take into account the entire context of decisions concerning foreclosure and real property, and that minor errors should not and do not invalidate a foreclosure."
  
  In concluding that substantial compliance is sufficient, the district court relied on Hudson v. Upper Mich. Land Co., 165 Minn. 172, 206 N.W. 44 (1925), Sieve v. Rosar, 613 N.W.2d 789 (Minn. App. 2000), and State by Spannaus v. Dangers, 368 N.W.2d 384 (Minn. App. 1985), review denied (Minn. Aug. 20, 1985). This reliance was misplaced.
  
  Although language in Hudson is inconsistent with the strict-compliance standard, see Hudson, 165 Minn. at 174, 206 N.W. at 45 ("Whether a sale on the foreclosure of a mortgage pursuant to a power of sale is void or voidable by reason of an irregularity in the proceedings depends upon the nature of the irregularity."), Hudson does not provide a basis to reject the supreme court's much more recent reiteration of the strict-compliance standard in Jackson.
  
  And Rosar and Dangers are factually distinguishable and therefore not on point. See Rosar, 613 N.W.2d at 793 (requiring only substantial compliance to effect a valid redemption after a foreclosure sale); Dangers, 368 N.W.2d at 386 (requiring only substantial compliance in condemnation proceedings).
  
  The district court also reasoned that "[i]n the foreclosure and real property context, [appellant]'s reliance on Jackson and the standard of strict compliance is inflexible and does not correspond to the reality of the foreclosure process."
  
  But the supreme court clearly requires strict compliance with the foreclosure-by-advertisement statutes, and "[t]he district court, like this court, is bound by supreme court precedent." State v. M.L.A., 785 N.W.2d 763, 767 (Minn. App. 2010), review denied (Minn. Sept. 21, 2010).

Michigan AG Issues 2nd Subpoena In Criminal Probe Involving Now-Defunct Suspected Racket That Allegedly Manufactured Bogus Foreclosure Documents

From the Office of the Michigan Attorney General:

• Michigan Attorney General Bill Schuette today announced that he has issued a second criminal investigative subpoena against national mortgage servicing support provider DocX as his office continues to investigate questionable mortgage documentation filed with Michigan's Register of Deeds offices during the current foreclosure crisis.



• "We are moving forward with our investigative efforts to find answers on behalf of Michigan homeowners," said Schuette.



• The Attorney General is empowered to pursue criminal investigative subpoenas under the Code of Criminal Procedure (MCL 767A.2(2)). Schuette's office has requested documents and information regarding DocX operations in relation to foreclosure and/or bankruptcy-related document processing. The subpoena was approved by the 54B District Court in Ingham County, and the information must be provided to the Attorney General's Office on or before April 4, 2012.



• This is the second criminal subpoena filed during the course of Schuette's investigation. Schuette previously filed a criminal subpoena against DocX on June 12, 2011.

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

HUD IG Reports: Bankster Managers Knew Of Problems, Did Nothing To Correct Them; Directed Shortcuts In Some Cases

The New York Times reports:

• Managers at major banks ignored widespread errors in the foreclosure process, in some cases instructing employees to adopt make-believe titles and speed documents through the system despite internal objections, according to a wide-ranging review by federal investigators.(1)



• The banks have largely focused the blame for mistakes on low-level employees, attributing many of the problems to the surge in the volume of foreclosures after the housing market collapsed and the economy weakened in 2008.



• But the report concludes that managers were aware of the problems and did nothing to correct them. The shortcuts were directed by managers in some cases, according to the report, which is by the inspector general of the Department of Housing and Urban Development.



• The examination is among the most extensive to date of the banks’ foreclosure practices, which caused a national uproar and prompted a $25 billion settlement between the banks and the government that was filed in federal court Monday.

For more, see Bank Officials Cited in Churn of Foreclosures.

(1) For the HUD IG reports, see:

• CitiMortgage, Inc. Foreclosure and Claims Process Review;
• Ally Financial, Incorporated Foreclosure and Claims Process Review;
• JPMorgan Chase Bank N.A. Foreclosure and Claims Process;
• Bank of America Corporation Foreclosure and Claims Process Review;
• Wells Fargo Bank Foreclosure and Claims Process Review.

$25B Nationwide Foreclosure Fraud Settlement Filed

Bloomberg reports:

• The $25 billion agreement with five banks to end federal and state probes into abusive foreclosure practices was filed in U.S. court in Washington, capping negotiations over claims of misconduct after the housing bust.



• The agreement subjects the lenders to monitoring by officials plus penalties of as much as $1 million for each violation, the U.S. Justice Department said. The consent judgments will be in effect for 3 1/2 years, according to the settlement terms.



• The Justice Department today filed in federal court the proposed settlements along with a civil complaint against Bank of America Corp. (BAC), JPMorgan Chase & Co. (JPM) and three other banks. The agreement needs approval from a federal judge.

For more, see Foreclosure Settlement With Banks Filed in Federal Court.

See also, Firedoglake: HUD IG Report Released With Settlement Details Servicer Abuse Directed From the Top.

Whistleblower Lawsuits Recently Made Public Shed New Light On Bankster Industry Abuses

The Center for Public Integrity's iWatch News reports:

• Whistleblower lawsuits made public in recent weeks shed new light on abuses in the mortgage industry that led to — and continued well after — the housing crash in 2007.



• The cases suggest that fraud inside the banking industry continued years after the meltdown, some as late as 2011. They have been made public as federal officials put the finishing touches on the $25 billion mortgage fraud settlement with five major lenders.

***

• These cases highlight issues that have been explored by recent Center for Public Integrity investigations. One piece documented evidence that Countrywide worked to silence whistleblowers who tried to report forged documents, inflated income documentation and other misconduct. One of the highest-level employees to complain about fraud inside Countrywide was Mark Zachary, a former vice president who alleged appraisal problems similar to those described in Lagow’s lawsuit. Zachary and Bank of America reached a confidential settlement in 2009.



• Another Center story looked at how homeowners are still struggling to deal with a faulty mortgage modification process.



• The $25 billion mortgage fraud settlement by 49 state attorneys general and several federal agencies included Bank of America and Citibank, as well as JP Morgan Chase, Wells Fargo, and Ally Financial Inc. Although the formal papers have yet to be filed in court, the U.S. Department of Justice announced that under settlement, the majority of the funds would go to principal reductions and loan modifications to borrowers under water. And roughly 750,000 borrowers who lost their homes to foreclosure will receive $2,000.

For more, see New whistleblower cases allege continued bank fraud (Mortgage modifications and appraisal processes in question).

Co-Owner Of Racket That Ran 'Contract For Deed' Scam Cops Guilty Pleas To Multiple Charges Of Securities Fraud, Unlawful Merchandising Practices

In Sprinfield, Missouri, the Springfield News Leader reports:

• A former part owner of Greenleaf Companies has pleaded guilty to 10 counts of securities fraud and nine counts of unlawful merchandising practices.(1) Eric Christian Gagnepain, 39, of Springfield pleaded guilty Feb. 29 in Greene County Circuit Court to the charges for his role in running the Greenleaf Companies and The Real Estate Company in Springfield, said Attorney General Chris Koster. Gagnepain was indicted in February 2011.



• Gagnepain is the second officer of the company to plead guilty. Lane Sanders, former president of Greenleaf Companies, pleaded guilty to securities fraud and unlawful merchandising fraud charges in February 2011. Sanders’ sentence is pending. Gagnepain faces between seven and 10 years in prison, Koster said. His sentencing is set for Aug. 3.(1)

***

• Gagnepain solicited investors to enter into investment contracts under which investors would buy one or more new homes designated by Greenleaf, Koster said. Greenleaf Companies was responsible for the down payment, the closing costs and reselling the homes.



• Under the terms of the investment contracts, Greenleaf would pay the investor $10,000. Prosecutors say Gagnepain failed to advise investors of Greenleaf’s weak financial condition and failed to advise them that financial institutions were being misled about the true source of down payments.



• When Greenleaf and The Real Estate Company resold the homes, Gagnepain failed to advise the purchasers that the title to the homes were held by the investors and failed to advise the consumers when the homes were in danger of foreclosure, according to Koster

For more, see Greenleaf investigation leads to a second guilty plea (Eric Gagnepain is the second officer of real estate company to admit role in securities fraud, unlawful merchandising).

(1) For earlier posts on this contract for deed, home-flipping racket which describe the nature of the scam, see:

• Missouri AG Obtains $338K+ Judgment In Suit Against Alleged Contract For Deed, Payment Skimming Racket That Left Would-Be Homebuyers In Foreclosure,
• Straw Buyer Scheme Coupled With Subsequent Sale Using Contract For Deed Constitutes Sale Of Unregistered Security, Says Arkansas Securities Regulator,
• 21 Missouri Homebuyers File Suit Against Springfield Firm In Failed Contract For Deed Home-Buying Program,
• Missouri "Contract For Deed" Operator Hit With C&D Order By Securities Regulator, Preliminary Injunction By State AG,
• Missouri Feds, State AG, Local Cops Raid "Contract For Deed" Operator; Firm Subject To Numerous Complaints; Company Issues Public Statement,
• More Trouble For Missouri "Contract For Deed" Operator As Homeowners File Federal Suit Seeking $60M In Damages,
• Missouri Couple Sues "Contract For Deed" Operator For Allowing Home To Fall Into Foreclosure.

(2) According to the story, the cases for four other individuals indicted along with Gagnepain last February are pending. Those individuals are:

• Scott Allen Dasal, former president of The Real Estate Company;
• Misty May Perkins, former director of investor relations for Greenleaf;
• William David Strong, former director of finance for Greenleaf; and
• Robert Lee Batchman, former real estate broker for The Real Estate Company.

Shift In Loan Servicers, Mortgage Payment Confusion Leads To Foreclosure, Pending Eviction For South Florida Man

In Pompano Beach, Florida, WSVN-TV Channel 7 reports:

• A South Florida man is facing foreclosure after having life-saving heart surgery. Paul Crowley loves the view from his Pompano Beach condo, but how much longer he will be able to enjoy that view now hangs in jeopardy.



• Crowley now faces eviction. His problems began when he tried to remodify his nearly $750 a month loan to be able to pay for mounting medical costs. "A couple years ago, I had some very serious medical problems, including a quintuple bypass operation," said Crowley.



• Crowley said, when his mortgage got shifted to a different servicer he was told to stop paying to the original bank but never told who to write the checks out to next. "They told me they were going to tell me where they were going to send the new payments," said Crowley, "who the mortgage server was. They never did. It was to a collection agency, not a mortgage server."



• Crowley's foreclosure attorney calls this case extreme and is now fighting to save the condo. "Never communicated with Mr. Crowley regarding making new payments, and they moved immediately into foreclosure," said Johnny Gaspard.



• After years of arguing back and forth with several different entities, the bank officially foreclosed the unit [...]. "At this point, our next step is to file an objection to the foreclosure sale based upon the circumstances, based upon Mr. Crowley's case," said Gaspard. "We believe we'll be successful with it."



• Crowley is not sure what step he will take next if his home is foreclosed. "I don't know where I would go. I have no place to go, really. I just don't know what I would do," he said. Crowley and his attorney hopes to have a hearing. For now, Crowley lives in his condo, just like he has for the past 11 years.

Source: Man's home foreclosed after heart surgery.

Recent Federal Appeals Court Ruling Opens Major Can Of Worms For Banksters Violating HAMP Rules When Jerking Around Homeowners On Loan Modifications

From a press release Issued by the Chicago, Illinois law firm Edelson McGuire announcing their recent big win in Wigod v. Wells Fargo Bank, N.A., in which the U.S. Court of Appeals for the 7th Circuit ruled that, while no Federal cause of action arises when a loan servicer violates the Federal HAMP statute when it fails to modify a home loan, there is nothing in the Federal statute that prevents a homeowner from bringing a state cause of action against a servicer when a violation of HAMP occurs where said violation may constitute a violation of an existing state law, including a state consumer protection law(1) (the consumer protection law at issue in Wigod was the Illinois Consumer Fraud and Deceptive Business Practices Act - "ICFA"), or otherwise gives rise to a state law claim.(2)

• In a landmark decision that promises hope for millions of distressed homeowners across the Country, the United States Court of Appeals for the Seventh Circuit has held that borrowers have enforceable rights under their Home Affordable Modification Program ("HAMP") Trial Plan Agreements. Wigod v. Wells Fargo Bank, N.A., Appeal No. 11-1423 (7th Cir. Mar. 7, 2012).



• Reversing the dismissal of a putative class action complaint challenging Wells Fargo's HAMP modifications, the Court found that Plaintiff Lori Wigod – a Chicago homeowner who had alleged that Wells Fargo breached her HAMP Trial Plan despite her full compliance with its terms – could proceed on her claims for breach of contract and promissory estoppel.



• In the words of the Court, "In short, Wells Fargo's interpretation of the [Trial Plan] turns an otherwise straightforward offer into an illusion." The Court further upheld Wigod's claims for statutory and common law fraud against the bank, stating "Wigod alleges that Wells Fargo made and broke promises of permanent modifications to her and to thousands of other potential class members as well. If true, such a widespread pattern of deception could reasonably be considered a scheme under Illinois law and thus actionable as promissory fraud."



• Although over 80 lawsuits had been filed nationwide challenging the HAMP modification practices of several major banks, relatively few had made it beyond the pleadings, with District Courts dismissing cases in light of the HAMP's lack of a private right of action. The Wigod panel rejected such arguments, finding that no "end run" theory prohibited the claims and that Wigod's claims were not preempted.



• "This is an incredibly important decision for homeowners who have been subjected to Wells Fargo's home loan modification abuses," said attorney Steven L. Woodrow of Edelson McGuire LLC, who represents the Plaintiff/Appellant, Lori Wigod. "For tens of thousands of homeowners like Ms. Wigod it's been nothing but a nightmare of lost paperwork, endless hours on the phone with the bank, inconsistent explanations, and, ultimately, unjustified denials followed by threats of foreclosure," he said. "The Court should be commended for standing up for the rights of borrowers." Woodrow is the Chair of Edelson McGuire's Banking and Financial Services Practice Group.



• The Court itself acknowledged the far-ranging impact of its decision. As expressed in the concurring opinion of Senior Circuit Judge Kenneth Ripple, "Prompt resolution of this matter is necessary not only for the good of the litigants but for the good of the Country."(3)

For the press release, see SEVENTH CIRCUIT: Homeowners May Enforce Rights Under Home Affordable Modification Program ("HAMP") Trial Plan Agreements.

(1) See National Consumer Law Center: CONSUMER PROTECTION IN THE STATES: A 50-State Report on Unfair and Deceptive Acts and Practices Statutes for an overview of state consumer fraud, unfair/deceptive trade practices statutes throughout the states.

(2) The three-judge appellate panel found that the "allegations support garden-variety claims for breach of contract or promissory estoppel" and that the homeowner "also plausibly alleged that Wells Fargo committed fraud under Illinois common law and engaged in unfair or deceptive business practices in violation of the ICFA."

(3) The binding effect of this court ruling by the 7th Circuit Court of Appeals is limited to all lower Federal courts in the states of Illinois, Indiana, and Wisconsin, but may be considered for its persuasive effect by other courts. To find out which Federal appeals court has jurisdiction over appeals from the lower Federal courts in your state, you can check the U.S. Circuit Court of Appeals Map.

Philly Feds Pinch "Slumlord Millionaire" In Connection w/ Allegedly Peddling Shabby Homes In Rent To Own Scam Leaving Wanna Be Homebuyers In F'closure

In Philadelphia, Pennsylvania, the Philadelphia Daily News reports:

• FOR THE alleged victims of Philadelphia's homegrown "Slumlord Millionaire," federal prison for him would be too comfy.



• Robert Coyle Sr. - the real-estate mogul who was widely known for peddling shabby homes to the city's poorest and robbing them of their dream of home ownership - was indicted last week on charges of defrauding banks out of $10 million. If convicted, Coyle could face up to 120 years in prison and $4 million in fines.



• "I'm liking that he might have to pay $4 million in fines - he'll feel that," Inez Ramos, an alleged Coyle victim, said last night. "But if he goes to prison, he'll still have a roof over his head. He is not going to get cold or worry that he's not going to have enough money for food. He'll have a place to sleep and he'll get three meals a day, and taxpayers like us, we'll have to pay for it."



• Ramos is one of dozens of cash-strapped tenants, mostly in Kensington and Port Richmond, who claim that Coyle promised that they could rent-to-own their homes. The hopeful homeowners used what little money they had to make Coyle's rickety homes livable. They spent their life savings to install sinks, toilets, windows, walls, roofs, kitchens and front doors.



• After all that, instead of getting deeds, they got slapped with foreclosure notices and faced eviction.



• In an October 2009 article, the Daily News detailed how Coyle, who ran Landvest and at least 11 other companies, obtained more than $15 million in bank loans on some 300 homes that he owned or rented out, then stopped making bank payments and padlocked his Port Richmond real-estate office.(1)

For the story, see They want 'slumlord' to feel their pain.

From the Office of the U.S. Attorney (Philadelphia, Pennsylvania):

• Indictment: U.S. v. Robert Coyle, Sr.;


• Press Release: New Jersey Man Charged With Loan Fraud.

(1) For earlier posts on ths story, see:

• Philly DA, Feds Probe "Dream Killer" In Suspected Rent To Own Scam Peddling Shabby Homes To City's Poorest; Victims Paid Thousand$, Now Face The Boot;



• Probe Continues Into Suspected Philly Rent-To-Own Racket; Unsophisticated Would-Be Buyers Duped Into Fixing Up Decrepit Homes & Ended In Foreclosure.

Buyers Allege Sellers In Possible Contract For Deed Scam Pocketed Monthly Payments Intended To Satisfy Existing Mortgage, Leading To F'closure Threat

In Jefferson County, Texas, The Southeast Texas Record reports:

• Two Jefferson County men have filed suit against the people who sold them their property for defaulting on the lien.



• Mario Espinola and Tomas Espinola claim they purchased property [...] in Port Arthur from the defendants for $125,000 on April 1, 2011. They say they put down $62,500 at the time of the purchase and have been making monthly payments of $5,494.74.



• Despite the Espinolas' payments, defendants Lloyd P. Broussard and Envirotech Services defaulted on the lien on the property, according to the complaint filed Feb. 21 in Jefferson County District Court. In turn, the lien holder, Great Central Mortgage Acceptance Mortgage Co., threatened to sell the property, the suit states."Plaintiffs had to pay four months of note payments, as well as attorneys' fees and late fees, to cure the default and prevent the property from being sold," the complaint says.



• "Additionally, Plaintiffs have continued to pay the monthly note owed to Great Central Mortgage Acceptance Company by defendants so they will not lose the property in which they have invested a large sum of money."



• In their complaint, the Espinolas allege breach of contract and fraud against the defendants.

Source: Homebuyers forced to make additional payments, suit claims.

State Consumer Affairs Advocate Targets Three Unlicensed Loan Modification Outfits For Allegedly Ripping Off 270 New Jersey Homeowners Out Of $400K

In Trenton, New Jersey, newjerseynewsroom.com reports:

• The state Division of Consumer Affairs has issued violation notices to three companies and their operators who took money from consumers for mortgage modification services without being licensed by the state as legally required.(1)



• None of the 270 consumers who have filed complaints were able to get their mortgages modified, Consumer Affairs officials said Friday. The consumers collectively paid $398,059 to the companies.

***

• The notices state that each of the companies and operators violated the state’s Consumer Fraud Act by committing “unconscionable” business practices through not being licensed as debt adjusters by the state.



• “The law is clear – debt adjusters must be licensed by the state Department of Banking and Insurance,” Attorney General Jeffrey S. Chiesa said. “We allege that these parties broke the law. We’ve taken action to hold each accountable and to get money returned to the consumers who were deceived.”



• In addition to restitution, each of the three companies must pay a $5,000 civil penalty to the state and stop advertising, offering to sell, and selling debt adjustment services. Each has the option to accept the settlement terms or contest the notice at an administrative hearing with the Division of Consumer Affairs.

***

• In February, Consumer Affairs won a $469,500 trial decision against two corporate defendants and two individuals accused in a lawsuit of defrauding financially struggling homeowners through a variety of deceptive mortgage foreclosure “rescue” practices.

For the story, see 3 unlicensed mortgage modifiers accused of taking $400K from New Jerseyans (270 people complain they never received help).

(1) Consumer Affairs issued the violation notices to the following to:

• Secure Property Solutions and Joseph A. Gembala, III and Associates, formerly located in Barrington; 250 complaints; $364,147;
• Fresh Start Home Modifications and Thomas R. Mansell, Jr., formerly located in Woodbury Heights; 19 complaints; $32,811;
• Financial Investigators of America and Michael Quellman, formerly located in Red Bank; 1 complaint; $1,100 .

California AG Pinches Trio Of Attorneys For Allegedly Pocketing Illegal Upfront Fees, Peddling Bogus Loan Modification, Forensic Loan Audit Services

From the Office of the California Attorney General:

• Attorney General Kamala D. Harris [] announced the arrests of the owners and managing attorney of a law firm that took thousands of dollars in up-front loan modification fees for services that were never performed for homeowners, many of whom ended up losing their homes.



• Gregory Flahive of El Dorado Hills, 39, Cynthia Flahive of Folsom, 41, and Mike Johnson of Elk Grove, 42, were arrested [] on 19 felony counts, including grand theft by false pretense, conspiracy and false advertising. They were booked at the Sacramento County Jail with bail set at $50,000 bail each.



• "Homeowners facing foreclosure are being targeted by predators, including those who use their law license to gain credibility and scam innocent Californians," Attorney General Harris said. "My office's Mortgage Fraud Strike Force is dedicated full-time to cracking down on these deceptive practices and protecting homeowners from fraud like this."



• Gregory and Cynthia Flahive, ex-spouses and owners of Flahive Law Corporation, and Johnson, the firm's managing attorney, took up-front fees of up to $2,500 from homeowners in Placer, Sacramento, Butte and Yuba counties for loan modification services that were never performed.



• In California, it is illegal for foreclosure consultants to collect money for services before they are performed. The Folsom-based law firm advertised their services on flyers, radio and televised infomercials, offering to provide loan modification services and help clients with bankruptcy, IRS tax relief and credit card modification.



• In a 2010 infomercial, the Flahives said that, as a law firm, they had "extra leverage" with the banks. They described one of their unique services as a "mortgage violation audit" in which they reviewed a client's loan documents to find bank violations that could be used as leverage to modify a client's home loan.



• In fact, the investigation revealed that, in some instances, the client's lender had no record of contact with the Flahive Law Corporation.

For the California AG press release, see Attorney General Kamala D. Harris Announces Arrests of Three Attorneys in Sacramento-area Loan Modification Scam.

Sale Leaseback Peddlers Continue Feeling Heat As Queens DA Indicts Duo For Grand Larceny, Criminal Possession-Stolen Property, Records Falsification

In New York City, Reuters reports:

• A disbarred lawyer was charged [] with taking part in a real estate scam that allegedly bilked a Queens couple out of more than $65,000, the Queens district attorney's office announced Friday.



• Thomas Zacharia, 38, a former lawyer from Staten Island, and investor Jose Toral, 28, were arraigned [] before Acting Supreme Court Justice Fernando Camacho on a seven-count indictment charging them with larceny, criminal possession of stolen property and falsifying business records.



• Zacharia was also charged with criminal facilitation, according to the DA's office. He has pleaded not guilty, according to his lawyer, Stuart Tarshis of Tarshis & Hammerman, who said the charges against his client are without merit.



• According to the DA, a Queens couple agreed in May 2007 to sell their residence to Toral with the understanding that they could continue living in their home while making mortgage payments to the investor. After a year, they would be able to re-purchase their property, while proceeds from the sale were used to pay down their debt, the DA's office said.



• Zacharia allegedly helped Toral arrange for the sale of the property and handled funds given by the couple to Toral, according to the DA's office.



• After the sale of the residence was completed, the couple made monthly cash payments to Toral, prosecutors said. But in 2008, Toral allegedly stopped making monthly payments on the mortgage, and the property went into foreclosure.



• In all, Toral and Zacharia kept $65,000 from the sale of the couple's home,(1) the DA's office said. "[T]he defendants arranged for only a portion of the homeowners' debts to be paid off while retaining a major portion of the mortgage proceeds for themselves," Queens District Attorney Richard Brown said in a statement.



• Zacharia was disbarred in 2008 by the Appellate Division, Second Department. According to the Second Department's decision, Zacharia was under investigation by the local grievance committee for two complaints of professional misconduct alleging that checks from his attorney trust account had bounced due to insufficient funds.



• An attorney for Toral could not immediately be reached for comment [...]. If convicted on all charges, both men face up to 15 years in prison, according to the DA's office.(2)

Source: Lawyer charged in Queens real-estate scam

For the Queens County DA press release, see DA Brown: Real Estate Investor And Attorney Indicted In Alleged Mortgage Fraud Scheme Involving Queens Village Couple (Face Up To 15 Years In Prison).

(1) According to the Queesn DA press release, authorities allege that the victims were represented at the transaction closing by Zacharia. To the extent the now-disbarred attorney Zacharia is found guilty of playing a role in this alleged ripoff and fails to cough up restitution, and inasmuch as Zacharia was a licensed practicing attorney at the time of the alleged ripoff, it may be that the victims in this case could turn to The Lawyers’ Fund For Client Protection Of the State of New York and request that it step up and cover at least some of the losses they suffered. The Fund exists to protect legal consumers from dishonest conduct in the practice of law in the state, to preserve the integrity of the bar, to safeguard the good name of lawyers for their honesty in handling client money, and to promote public confidence in the administration of justice in the Empire State. It attempts to secure these goals by, among other things, reimbursing client money that is misused in the practice of law.

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

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

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

(2) For more on this type of foreclosure rescue ripoff, see:

• Criminal Prosecutions Of Sale Leaseback Peddlers In Equity Stripping Foreclosure Rescue Deals;
• Dreams Foreclosed: The Rampant Theft of Americans' Homes Through Equity-stripping Foreclosure 'Rescue' Scams (June 2005).

Scammer Gets 41 Month Stay In Federal Facility For Peddling Predatory Sale Leaseback Deals To High Equity Maryland Homeowners Facing Foreclosure

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

• U.S. District Judge William D. Quarles, Jr. sentenced Charles Donaldson, age 58, of Bowie, Maryland, [] to 41 months in prison followed by three years of supervised release for conspiracy to commit wire fraud in connection with a mortgage fraud scheme which caused the issuance of over $4.7 million in fraudulent mortgage loans and homeowners to lose over $1.2 million in equity in their homes.

***

• “Charles Donaldson promised to rescue homeowners who were behind in their mortgage payments, but instead he stole the equity from their homes and used it to buy his own house, “ stated U.S. Attorney Rod J. Rosenstein.

***

• According to Donaldson’s plea agreement and court documents, co-conspirator Mary Dean was a loan originator and operated Sunset Mortgage Company from her home. Donaldson, who was also a loan originator, steered clients to Dean’s mortgage brokerage franchise.



• Beginning in 2005, Donaldson identified homeowners who were in financial distress because they were unable to make the mortgage loan payments on their homes and enticed the homeowners to participate in a foreclosure “rescue” plan.



• Donaldson told the homeowners that he would locate “investors” to purchase their homes and thereafter, the homeowners would pay rent to the “investors,” who would pay the mortgage and receive a small percentage of the homeowners’ equity; that the remainder of the homeowners’ equity would be transferred to Donaldson, who would hold it in escrow; and that the homeowners would buy back their properties after 12 to 18 months, giving them time to “repair” their finances and credit while they continued to live in their homes.(1)

For the U.S. Attorney press release, see Loan Officer Sentenced in Fraudulent Mortgage “Rescue” Scheme Resulting in Losses of over $1.2 Million To Homeowners in Financial Distress (Conspirators Obtained Over $4.7 Million in Fraudulent Mortgage LoansLoan Officer Used Money Taken From Distressed Homeowners to Buy His Own Home).

(1) For more on this type of foreclosure rescue ripoff, see:

• Criminal Prosecutions Of Sale Leaseback Peddlers In Equity Stripping Foreclosure Rescue Deals;
• Dreams Foreclosed: The Rampant Theft of Americans' Homes Through Equity-stripping Foreclosure 'Rescue' Scams (June 2005).

Sale Leaseback Peddler Hit With Allegations Of Fair Housing Act Violations In Civil Suit Brought By Screwed-Over Virginia Couple

The Lawyers’ Committee for Civil Rights Under Law(1) announces:

• On March 6, 2012, K&L Gates, LLP, the national Lawyers’ Committee for Civil Rights Under Law (Lawyers’ Committee), and the Washington Lawyers’ Committee for Civil Rights and Urban Affairs (Washington Lawyers’ Committee) filed a lawsuit on behalf of a Woodbridge, Virginia couple who have been victimized by mortgage rescue scammers that allegedly prey on vulnerable homeowners by targeting Hispanics in Northern Virginia. As a result of the alleged scam, the couple has lost title to their home and thousands of dollars.



• The complaint, filed in the United States District Court for the Eastern District of Virginia, alleges that the mortgage rescue scam in this case is operated by Bella Homes LLC (Bella), a Georgia-based company. As alleged in the complaint, local representatives of Bella specifically targeted the scam to Hispanic people in Northern Virginia, like the Virginia couple, who are Hispanic and for whom English is a second language.



• Bella, it is alleged, induced the Virginia couple, who have limited understanding of financial matters, to give the company title to their home for no money; they then entered into a “lease agreement” with Bella whereby the couple paid thousands of dollars to “rent” their home while Bella allegedly worked to purchase their mortgage.



• The complaint further alleges Bella did nothing to help the couple avoid foreclosure, and the representations made by Bella to induce the couple into this scheme, including advice that they need not continue making their mortgage payments, were false. As a result of the scam, the couple has defaulted on their primary mortgage, subjecting them to a risk of foreclosure and of damage to their credit.



• The targeting of this scam on Hispanics is alleged to violate the anti-discrimination provisions of the Fair Housing Act. This is one of first cases filed in federal court that alleges a violation of the Fair Housing Act based on a mortgage rescue scam.



• In addition, the scam allegations in this case contain many hallmarks identified by federal enforcement agencies as typical of predatory mortgage modification and foreclosure rescue scams.



• In fact, the United States Attorney and the state Attorney General in Colorado recently initiated an enforcement action against Bella for similar scamming operations throughout the country. In the Colorado case, Bella agreed to a preliminary injunction ceasing further operations and transferring approximately $500,000 to the government, pending final resolution of the case or further orders from the court (go here for lawsuit: U.S. v Bella Homes LLC, et al.).(2)

For more, see Lawyers' Committee & Partners File Suit Against Bella Homes LLC for Mortgage Rescue Scam Targeted at Hispanics.

For the lawsuit, see Viera v. Bella Homes, LLC, et al.

(1) The Lawyers’ Committee for Civil Rights Under Law is a nonpartisan, nonprofit organization formed in 1963 to involve the private bar in providing legal services to address racial discrimination.

(2) For more on this type of foreclosure rescue ripoff, see:

• Criminal Prosecutions Of Sale Leaseback Peddlers In Equity Stripping Foreclosure Rescue Deals;
• Dreams Foreclosed: The Rampant Theft of Americans' Homes Through Equity-stripping Foreclosure 'Rescue' Scams (June 2005).