NYC Renters In Multi-Unit Buildings, Tenant Advocates Left Dealing With Mess Created By Overleveraged, Absentee Landlords Who Cluelessly Jumped Into Real Estate Speculation At Height Of Housing Bubble

In The Bronx, New York, The Atlantic Cities reports:

• Foreclosure came to 553 East 169th Street in the Bronx in November of 2010. No doubt hundreds of other dwellings nationwide were foreclosed on that month, contributing to the raft of vacant, unkempt single-family homes with which so many cities are now stuck. But 553 East 169th Street isn't empty. Eighteen families still live there. As renters, New York law allows them to stay put, since they weren't the ones who had a problem with the bank. Their landlord did.
• These people – the renting tenants of foreclosed apartment buildings – are among the least-recognized casualties of the housing crisis. “These are individuals who have never once taken out a loan,” says Celia Weaver, an organizing and policy advocate with the Urban Homesteading Assistance Board in New York.
• New York City has the highest renter rate in the country, with 69 percent of all households renting, and so the mess of foreclosed multi-unit residences is particularly ugly here. Between January of 2010 and December of 2011, Weaver says more than 400 multi-family buildings fell into foreclosure in the city, mostly in central Brooklyn and the Bronx, affecting about 6,600 apartments. Some of these buildings are as small as six units, others as large as a hundred.
• So what eventually happens to properties that still have tenants but no permanent owners? For starters, the rats move in.

***

• Buildings that have gone into foreclosure are transferred to court-appointed receivers (read: “politically connected lawyers,” Weaver says). They’re charged with collecting rent and making repairs. But the reality is that most of these apartments, built in the 1920s and '30s, began falling apart long before a receiver showed up.
• Landlords in fear of foreclosure, after all, are more likely to funnel rent checks at mortgage payments than leaky roofs. And a temporary receiver isn’t motivated to make long-term investments in a property, like say a new boiler or broken ductwork. “They’re not good at maintaining these buildings,” Weaver says. “That’s not really their goal. They don’t own the property. So there’s basically no accountability.”

***

• Weaver’s organization has been working with the tenants here and in other buildings in the city to find responsible new owners (perhaps the tenants themselves?) and to push banks into taking financial responsibility for maintaining these places in the meantime.
• A lot of these buildings originally went into foreclosure, even though they house rent-paying tenants, because they were overleveraged at the height of the housing boom by speculators who hoped to drive out rent-regulated existing tenants in favor of newer ones who could be charged much more.
• “So much of the news around this foreclosure crisis has been focused on getting low-income homeowners the opportunity to get back into their homes,” Weaver says. “This is not exactly what we’re fighting here. We don’t want to get the building back to the slum lord who speculated it.”

For the story, see What Happens to a Foreclosed New York Apartment Building?

Tenants Commandeer Control Of 9-Unit Building After Clueless Absentee Landlord Gets In Over His Head & Abandons Premises, Leaving Mortgage, Utility Bills Unpaid; Residents Look To Form Co-Op, Acquire Title

In The Bronx, New York, the New York Daily News reports:

• Some tenants in slum buildings with rats and leaks stop paying rent. Others move out, complain or ask for handouts. But when their Bronx tenement crumbled due to landlord neglect, the tenants at 943 E. 179th St. banded together to collect rent and make repairs.
• Now they boast new kitchen cabinets, refrigerators, stoves, walls and floors, and they could become homeowners soon. With help from the Urban Homesteading Assistance Board, the tenants hope to buy their beloved West Farms building outright and form a co-op.
• Department of Housing Preservation and Development officials harbor concerns about tenants performing renovations without permission rather than letting the city force landlords to make repairs. But Jacqueline Rodriguez and her neighbors were tired of waiting. "Most of the people here have been here a long time," said Rodriguez, tenant association president. "They don't want another landlord. No one is going to take care of the building better than the people who live here."
• Tucked between E. Tremont Ave. and the Bronx Zoo, 943 E. 179th St. began to deteriorate in 2007, after a Hamptons-based landlord purchased the four-story walkup, said Rodriguez, 32, a recreational therapist who grew up in the building.
• Broken pipes and windows went unmended and cockroaches swarmed to the slum. The 9-unit building still has 248 open housing code violations. It entered foreclosure in 2008, with Lehman Brothers holding the mortgage: a nightmare scenario, said Kerri White, UHAB organizer.
• "There were no repairs at all," said Rodriguez, 32, a mother of twin infants. "We suffered without hot water for six months and without heat for months…You pay your rent and you don't know where the money is going."
• The tenants found out about the foreclosure in 2010, when they were instructed to pay their rent to Con Edison via city marshals. Their landlord owed the utility $38,000, Rodriguez said. The revelation spurred Rodriguez and her neighbors to form a tenants association and corporation. They opened a bank account to hold their rent in escrow.
• In five months under the new system, the tenants have used their rent money to remodel several kitchens, buy new appliances and hire an exterminator. "When I got here there were roaches and rats all over, in every crevice," said exterminator Major Meyers of Complete Enterprize. "Now there are minimal issues."
• Several tenants who boast carpentry skills have donated their time and Rodriguez has taught some English to neighbors who speak only Spanish. The building "feels like a family" now, she said. Meanwhile, HPD has completed $80,714 in emergency repairs, and helped with boiler oil. The building --controlled by Lehman-affiliated mortgage holder 745 Special Assets LLC , and Aurora Bank -- could head to foreclosure auction soon.

For the story, see Determined West Farms tenants band together to fix up neglected Bronx slum building, work to form co-op.

Tenants Resort To Rent Strike To Get Necessary Services At Foreclosed 32-Unit Building That Lingers In Receivership Limbo Since 2008

In Chicago, Illinois, CBS-TV Channel 2 reports:

• Tenants staging a rent strike at a foreclosed, 32-unit apartment building in the Austin neighborhood have a new receiver – and they are finally beginning to see some repairs. But the leader of the strike said Thursday that it may be “months” before the tenants agree to pay rent again.
• "Before, people have started working, but they’ve stopped,” said Pamela Johnson, who lives in a second-floor apartment at 5159 W. West End Av.  “So until everything is done in this building, we can’t afford to pay rent.”
• The tenants say they consider the building, at 5141-59 W. West End Ave., a microcosm of what can go wrong when a bank forecloses on an apartment building. The building has been in receivership since 2008.

For more, see Rent-Striking Tenants In Troubled Building See Improvements Made.

Yankee Stadium Parking Garage Nears Foreclosure As Fans Opt For Cheaper Sites, Subway Schlep; Bondholders Backing Project May Be Left Holding The Bag

In The Bronx, New York, WNBC-TV Channel 4 reports:

• On the day of the Yankees home opener last week, the stadium was packed with more than 49,000 fans, but inside a nearby parking garage on 153rd Street, three of the four floors were empty. Parking cashier Janee Addison estimated about 20 percent of the 2,300 spots were actually being used, and that was during the third inning, when even the latecomers had scanned their ticket.
• The garage, along with about a dozen other lots and garages, was built with millions of dollars in tax-free bonds by a firm called Bronx Parking Development Company, to accompany the new stadium. Last year, the Bronx Parking Development Company's average game-day lot was 43 percent full. This year, on the day of the Yankees' home opener, the garages increased the price of a parking space by $12 to $35, amid the sluggish demand.
• On March 23, the company filed paperwork with the Securities and Exchange Commission notifying them that it will likely default on its tax-free bonds within 60 days.
• Joyce Hogi, a South Bronx resident who lives near the stadium, is not surprised. According to Hogi, many Yankees fans began opting last year to park in a garage attached to a nearby shopping center. It is cheaper, she said, and nearly as close to the stadium. And unlike the garages owned by Bronx Parking, the shopping center garages don't kick out fans two hours after games end.

***

• The company was able to strike a deal last year with private bondholders to delay foreclosure on the garages. It is unclear if the bondholders will grant another waiver this year.

For the story, see Bronx Garage Near Yankee Stadium Nearly Empty on Home Opener (Neighbors say the garage, built with millions of dollars in tax-free bonds, was a wasteful project; On the day of the Yankees home opener, more than 49,000 fans packed the stadium. The skies were clear. The No. 4 subway was crowded. But the garage was nearly empty).

Frustrated, Embarrassed Town Votes To Unload Title To Empty Jail Onto Stiffed Bondholders After Nationwide Search For Prisoner/Occupants Yields Squat; Desperate Request To House Guantanamo Terror Suspects Nixed

In Hardin, Montana, the Great Falls Tribune reports:

• Economic development officials in Hardin voted Tuesday to relinquish control of a $27 million jail that was built with the promise of economic development, but brought only frustration and embarrassment to the southeastern Montana town in the five years since it was built. The board of Hardin's Two Rivers Authority voted unanimously to transfer the title to the 464-bed jail to the bondholders who financed the project. The bondholders still must approve the transfer.
• Two Rivers chairman Bill Joseph said the board made the decision in an effort to get the jail open. "If we can give them back the title and someone can come in here and buy it, and this will help get it open faster, then we are all for it," Joseph said. Two Rivers is hoping the transfer will take a month or less, said executive director Jeffrey McDowell.
• McDowell said bondholders "ran out of patience" with the city's efforts to put the jail to use and wanted to assume control over the 92,000-square-foot jail on 40 acres rather than go through the foreclosure process. The jail was built at a time when state and local governments didn't need additional jail space.
• After looking for prisoners from Vermont to Alaska, local officials became so desperate to put the jail to use they nearly turned it over to a convicted con artist who promised to turn it into a military training camp. They also sought unsuccessfully to house terrorism suspects being held by the military at Guantanamo Bay.
• The privately operated facility defaulted on its bond in 2008, forcing authorities to dip into the jail's construction loan to meet its debt payments. The last of those payments was made in late 2008, McDowell said.

Source: Developers turn over empty Hardin jail to bondholders.

Foreclosure Led To Problems With Unburied Bodies, License Revocation: Funeral Home Operator

In Wadesboro, North Carolina, The Associated Press reports:

• An Anson County funeral home operator has lost her operating license after regulators say she left unburied bodies lingering for up to five months. The North Carolina Board of Funeral Services revoked the operating permit for F&M McLendon Funeral Home in Wadesboro and the license of its operator, Mary McLendon. Funeral home operators face criminal citations if they try to provide services without permits.
• McLendon denies the claims and says the problem with unburied bodies happened when her funeral home was in foreclosure. Police evicted McLendon after finding three bodies there in 2010. The state funeral services board says the deceased had been dead between one month and five months. The bodies were sent to another funeral home for cremation and funerals.

Source: NC funeral home loses license for old bodies.

Civil Rights Feds Settle Race Discrimination Suit Saying City Responded To Public Opposition By Nixing Affordable Housing Project It Earlier Approved

From the Office of the U.S. Department of Justice:

• The Department of Justice announced [Wednesday, April 11, 2012] that it has settled its lawsuit against the city of New Berlin, Wis., for race discrimination in violation of the Fair Housing Act.
• Filed in June 2011, the lawsuit alleged that the city of New Berlin blocked a 180-unit affordable housing project that a developer, MSP Real Estate Inc., had proposed for the city center area of New Berlin.
• The city’s planning commission initially approved the project, but reversed course and denied it weeks later, after hundreds of residents objected to it. The suit alleged that opposition was based partly on racial stereotypes and fear that the project’s tenants would be African-American.
• The lawsuit also charged that the city, in response to public opposition, changed its zoning and land use requirements to bar affordable housing in the city center in the future.
• Shortly after the United States filed a motion for preliminary injunction requesting that the court order the city to allow MSP’s affordable housing project, the city agreed to issue the necessary permits to allow MSP’s affordable housing development to be built.
• The settlement, filed [] as a proposed consent decree in the U.S. District Court for the Eastern District of Wisconsin, requires that the city not take any further action to obstruct or delay the affordable housing project. It also requires that the city take affirmative steps to provide for future affordable housing, communicate its commitment to fair housing and establish a mechanism to ensure open and fair housing in New Berlin.(1)

For the Justice Department press release, see Justice Department Settles Lawsuit Against City of New Berlin, Wisconsin, for Blocking Affordable Housing.

(1) As part of the settlement, the city agreed to modify changes it made to its zoning and land use requirements following public opposition to allow for future additional affordable housing in the city center. The settlement requires the city to provide a minimum of $75,000 to establish a Housing Trust Fund, which will finance projects that promote affordable housing, residential integration and equal housing opportunity. In addition, city officials must develop a Fair Housing Outreach Plan to encourage tenants and developers of affordable housing to come to New Berlin, appoint a fair housing compliance officer, and undergo fair housing training. It also provides for a $5,000 civil penalty to be paid to the United States.

Civil Rights Feds Pinch Pennsylvania Man For Interference With Another's Housing Rights In Connection With Cross Burning Incident

From the U.S. Department of Justice:

• Ryan M. Held, aka Ryan M. Foley, 20, of Philipsburg, Penn., was indicted on March 27, 2012, by a federal grand jury on charges stemming from a cross burning he committed in August 2010. The indictment was unsealed [Tuesday, April 10, 2012].



• According to the indictment, on or about Aug. 20, 2010, Held burned the cross because a woman was associating with an African-American male within the residence.



• The two-count indictment charges Held with violating the housing rights of the two victims by burning the cross for the purpose of threatening and intimidating the victims in order to interfere with their rights to occupy a dwelling free from racial discrimination.

For the Justice Department press release, see Pennsylvania Man Indicted for Cross Burning.

Go here for links to other cross burning incidents from the U.S. Justice Department.

Ohio Man Cops Guilty Plea For Role In Cross Burning Conspiracy

From the U.S. Department of Justice:

• Brandon Rhodes, 20, of Marengo, Ohio, pleaded guilty yesterday to a charge related to the burning of a cross in the yard of an African-American juvenile in March 2011, the Justice Department announced [Friday, March 2, 2012].



• Rhodes pleaded guilty to conspiracy to interfere with the housing rights of another in federal court in Columbus, Ohio, before U.S. District Judge Gregory L. Frost.



• Information presented during the plea hearing established that a cross burning occurred on March 2, 2011, at a residence in Bennington Township, Ohio, that was home to an African-American family with three high school children.(1)

For the Justice Department press release, see Ohio Man Pleads Guilty for Cross Burning.

Go here for links to other cross burning incidents from the U.S. Justice Department.

(1) According to the press release, the investigation revealed that Rhodes and his co-conspirator agreed to burn a cross in the backyard of the home of one of the children who resided there. After the six-foot wooden cross was constructed, Rhodes and his co-conspirator transported the cross to the back yard of the African-American family. Rhodes and his co-conspirator wrote “KKK will make you pay” and another racial derogatory term on the cross. Rhodes and his co-conspirator poured gasoline on the cross and, using a cigarette lighter, ignited the cross around midnight.

“A burning cross is a symbol of bigotry and hate and, in this case, it was used to threaten a family. These incidents have no place in our country, and they are a reminder of the civil rights challenges we still face today,” said Thomas E. Perez, Assistant Attorney General for the Civil Rights Division. “We will continue to aggressively prosecute hate crimes of this kind.”

Fair Housing Advocate Tags Another Bankster With Race Discrimination Charges In Connection With Post-Foreclosure Handling Of Repossessed Homes

The National Fair Housing Alliance recently announced:

• [T]he National Fair Housing Alliance (NFHA) and four of its member organizations announced a federal housing discrimination complaint against U.S. Bancorp and U.S. Bank National Bank Association.(1)



• This complaint, which was filed with the U.S. Department of Housing and Urban Development, is the result of an undercover investigation of U.S. Bank's properties that found that its foreclosed properties in White areas are much better maintained and marketed than its properties in African-American and Latino neighborhoods. U.S. Bank is the fifth largest commercial bank in the United States.



• The investigation of 177 foreclosed properties owned by U.S. Bank demonstrates that the financial giant has engaged in a systemic practice of maintaining and marketing its foreclosed, bank-owned properties (also known as Real Estate-Owned or REO properties) in a state of disrepair in communities of color while maintaining and marketing REO properties in predominantly White communities in a far superior manner.



• The U.S. Bank investigation evaluated REO properties in the seven metropolitan areas of Atlanta, GA; Chicago, IL; Baltimore, MD; Dayton, OH; Miami/Fort Lauderdale, FL; Oakland/Richmond/Concord, CA; and Washington, DC.

For more, see National Fair Housing Alliance Alleges Discrimination in Marketing and Maintenance of Foreclosed Properties.

(1) The NFHA recently tagged Wells Fargo with similar accusations.

Antitrust Feds Pre-Charging Negotiations Lead To Suspect Take-Down In NJ Tax Lien Bid Rigging Probe; Plea Deal Filed Simultaneously w/ Charging Docs

From the U.S. Department of Justice:

• A former executive of a New York-based tax liens company who supervised the purchasing of municipal tax liens at auctions in New Jersey pleaded guilty today [April 17, 2012] for his role in a conspiracy to rig bids for the sale of tax liens auctioned by municipalities throughout the state, the Department of Justice announced.



• A felony charge was filed today [April 17, 2012] in the U.S. District Court for the District of New Jersey in Newark, N.J., against former Vice President Stephen E. Hruby, of Hainesport, N.J. Under the plea agreement, which is subject to court approval, Hruby has agreed to cooperate with the department’s ongoing investigation.



• According to the felony charge, from at least as early as December 2002 until approximately February 2009, Hruby participated in a conspiracy to rig bids at auctions for the sale of municipal tax liens in New Jersey by agreeing to, and directing others to, allocate among certain bidders which liens each would bid on. Hruby, and those under his supervision, proceeded to submit bids in accordance with their agreements and purchased tax liens at collusive and non-competitive interest rates.

***

• According to the court documents, Hruby conspired with others not to bid against one another at municipal tax lien auctions in New Jersey. Because the conspiracy permitted the conspirators to purchase tax liens with limited competition, each conspirator was able to obtain liens which earned a higher interest rate. Property owners were therefore made to pay higher interest on their tax debts than they would have paid had their liens been purchased in open and honest competition.

For the Justice Department press release, see Former Executive of New York-Based Tax Liens Company Pleads Guilty to Bid Rigging at Municipal Tax Lien Auctions in New Jersey.

(1) According to the press release, a violation of the Sherman Act carries a maximum penalty of 10 years in prison and a $1 million fine for individuals. The maximum fine for a Sherman Act violation may be increased to twice the gain derived from the crime or twice the loss suffered by the victim if either amount is greater than the statutory maximum.

Hruby’s plea is the seventh guilty plea resulting from an ongoing investigation into bid rigging or fraud related to municipal tax lien auctions, the press release states. Others include Isadore H. May, Richard J. Pisciotta Jr. and William A. Collins, each pleading guilty to one count of bid rigging in connection with their participation in a conspiracy to allocate liens at New Jersey auctions on Aug. 24, 2011. Going down next were Robert W. Stein and David M. Farber, who each pleaded guilty to one count of bid rigging on Feb. 23, 2012. On March 27, 2012, Robert E. Rothman pleaded guilty to one count of bid rigging in connection with his participation in this conspiracy.

Forum Shopping By Zombie Debt Buyers - Why Are They Dodging Small Claims Courts & Filing Actions In More Expensive Forums?

Notre Dame Law School Associate Clinical Professor of Law Judith L. Fox writes (footnotes omitted):

• Carol Jones called the Notre Dame Legal Aid Clinic for assistance. She had received a summons and complaint regarding a credit card she was unable to pay. My student intern and I met with Carol and reviewed her paperwork. Carol agreed that the complaint referenced her credit card and the balance was correct. During the conversation she mentioned “that other complaint” that she had not brought along because it “was not her debt.”



• In the case of both complaints, for the debt she owed and could not pay and for the debt she did not recognize, Carol saw no reason to appear in court. Carol was judgment proof and too poor for bankruptcy court.



• Both complaints were collection actions attempting to collect debt far below the $6,000 jurisdictional limit for small claims actions in Indiana, and yet one collector filed in small claims court, a division of the Superior Court, and the other filed in the Circuit Court.



• Nothing about the nature of the claims accounted for the decisions to file in different courts; the only difference between the claims was the nature of the plaintiff. The plaintiff filing in small claims court was collecting its own debt, the other was a national collection agency.



• Why would the collection agency spend more money to file an action in a Circuit Court, a court of general jurisdiction, when it could file so much more cheaply in small claims court?

***

• Looking back over the statistics, I noticed many other cases filed in Superior and Circuit Courts that were below the jurisdictional limits of small claims court. 64% of the cases in the study group were for claims below $6000. This is significant because much of the conversation around collection activity and abuses has focused on the problems in small claims courts.



• National collection firms are forum shopping in Indiana. They are increasingly avoiding small claims courts.

For more, including why collection agencies are not filing claims in small claims court and how that decision may impact the debate over reform of the collection industry, see Do We Have A Debt Collection Crisis? Some Cautionary Tales Of Debt Collection In Indiana, 24 LOY. CONSUMER L. REV. 355 (2102).

Thamks to Deontos for the heads up on the article.

Notary Trade Group: Foreclosure Fraud Crisis Highlights Need For Legal, Trusted, Ethical Notarizations

The National Notary Association recently announced:

• With the foreclosure 'robo-signing' crisis and the National Mortgage Settlement sending shockwaves through America's mortgage industry, three nationally prominent Secretaries of State will convene a special Keynote Panel at the National Notary Association's 34th Annual Conference this June to discuss the growing demand for trusted, legal notarizations, and what Notaries need to do to increase public protections and reduce liability risks.



• Secretaries of State Elaine Marshall of North Carolina, Beth Chapman of Alabama, and Ken Bennett of Arizona are at the forefront of developments transforming the role of Notaries Public. Their insights will be a highlight of Conference 2012 -- especially in light of mounting nationwide concerns over notarial compliance and risk management.



• "We are pleased that these three influential Secretaries -- all of whom are among the top minds in notarial issues -- will join us to address the nation's Notaries and their employers during this critical time," said NNA President and Chief Executive Officer Thomas A. Heymann.



• "The foreclosure crisis put the spotlight squarely on the high value of legal and ethical notarizations. These Secretaries will provide their perspectives on what needs to be done to strengthen the notarial process and avoid these types of financial crises."

For more, see Secretaries of State to Address Notary Compliance, Liability, Consumer Protection Following National Mortgage Settlement (Distinguished State Leaders Will Convene Keynote Panel at the National Notary Association's 2012 Conference in San Diego).

Chase Accused Of Strong-Arming Appraisers For Restricted Info, Blacklisting Those Refusing To Cooperate

In Phoenix, Arizona, KPHO-TV Channel 5 reports:

• Clay Gregory is a Valley home appraiser who is spending a lot of time at home these day, but it's not by choice. "I was put in a position where they pretty much demanded information from me or they were threatening me not to use me anymore," Gregory said.



• Gregory claims he's been blacklisted by Chase Bank, making it extremely difficult to find work. The appraiser told CBS 5 News that Chase sent him a letter a couple months ago demanding data on an old appraisal and citing possible violations. Chase apparently needed information on the home which they were buying back from a foreclosure.



• The only problem was Gregory would be breaking state and federal law by sharing info with Chase because the bank was not the one that hired him. A number of new laws were put in place in 2009 to prevent conflicts of interest between lenders and appraisers to help avoid another housing crisis.



• "It doesn't matter at Chase," Gregory said. "They want what they want and if they don't get their way they put you on an ineligible list." Gregory opted to follow the law and now, instead of appraising eight to ten homes a week, he'll visit maybe two.



• Another Valley appraiser John Dingeman is facing a similar situation. His letter from Chase arrived a couple weeks ago, stating that Dingeman had 21 days to respond to questions about an old appraisal or he would find himself on the ineligible list.



• "Appraisers are losing revenue, losing livelihood," Dingeman said. "It's defamation of business character. If they did a bad appraisal, that's one thing, but for someone like me that follows the letter of the law, to place me on ineligible list so I can't work - that's just wrong."

***

• CBS 5 News plans to turn its investigation over to the state attorney general's office this week to see if there is anything officials can do to hold these banks accountable for their actions.

For more, see Home appraiser blacklists probed.

Bay State Lender Accused Again Of Strong-Arming Borrowers In Effort To Wrestle Away Ownership Of Homes, Income Properties Used As Loan Collateral

In Worcester, Massachusetts, the Worcester Telegram & Gazette reports:

• Trustees in U.S. Bankruptcy Court have filed an adversary proceeding on behalf of a local couple alleging that two area businessmen engaged in racketeering and conspiracy. Meantime, lawyers for the businessmen have denied the charges, calling them recycled.



• Trustees representing the interests of creditors of the bankruptcy estate of husband and wife, Nicholas J. Fiorillo and Tracey L. Krowel, are suing David G. “Duddie” Massad and Marcello Mallegni. The case was filed Jan. 18; however, lawyers for the defendants this month filed a motion asking that the case be transferred to U.S. District Court. The trustees are Jonathan R. Goldsmith, a Springfield lawyer appointed in Mr. Fiorillo's bankruptcy, and Joseph H. Baldiga, a Westboro lawyer, appointed in Ms. Krowel's case.



• Their adversary proceeding alleges extortion and loan-sharking, usurious interest rates, falsifying debt figures and bait-and-switch tactics to try to wrest income properties from the couple and their trusts and real estate company, and their personal residences.



• Mr. Massad is chairman and majority stockholder in Commerce Bank and Trust Co. and Mr. Mallegni is manager and an owner of LBM Financial LLC in Marlboro. Also named as defendants in the suit are Commerce Bank and LBM which, along with Mr. Massad and Mr. Mallegni, are alleged to have committed breach of contract and breach of covenant of good faith and of fair dealing.

***

• The trustees allege that the businessmen used threats of violence and loan sharking on loans at up to 75 percent interest in a scheme over the past 13 years to take over properties. The trustees are asking a jury to award $6 million.(1)

For more, see Charges against Massad, Mallegni similar to '07 ones (Bankruptcy trustees allege racketeering, conspiracy).

See also Bankruptcy Judge Hammers Mass. Money Lender Accused Of Predatory Practices In Piling Up Loan Charges, Wrestling Property Ownership Away From Borrowers for a July, 2009 story containing similar allegations against this outfit by other borrowers.

(1) Keep in mind that, in Massachusetts, it is evidently legal to rip off borrowers by charging usurious interest rates, provided that the lender notifies the state attorney general in writing ahead of time about it (see M.G.L. Chapter 271: Section 49(d). Criminal usury). It is interesting to note that the lender need not actually obtain approval from the state attorney general to make these loans (or any other government authority, for that matter); you merely have to let the AG's office know ahead of time, in writing, that you're going to engage in the ripoff.

Go here for an earlier-reported example of an LBM Financial letter, sent by Marcello Mallegni, informing the Massachusetts AG it will be charging usurious rates that, but for this notification, would otherwise be criminal pursuant to Chapter 271: Section 49(d), of the Massacusetts state statutes.

Maryland Legislation Targets Foreclosing Banks, Other Real Estate Tax Cheats Benefitting From Improper Homestead Tax Credit Claims

In Baltimore, Maryland, The Baltimore Sun reports:

• A grab bag of housing-related legislation passed in the Maryland General Assembly's recently completed session. Here are the highlights:
  
  Homestead credit penalties (HB 1081): Authorizes local governments to hit people with bigger penalties if they are found to be receiving a Homestead Property Tax Credit (or credits) they don't qualify for and "willfully misrepresented facts" to get the break. The homestead credit caps big tax increases as a result of property appreciation, but it is only for primary residences.
  
  No homesteads for banks (SB 123): Requires that banks -- or whoever purchases a home at foreclosure auction -- send a copy of the court ratification notice to the state Department of Assessments and Taxation so the new owners don't reap the benefit of homestead tax credits intended for the previous owners. Previously, the assessments agency said it had to wait until the new owner recorded the deed to transfer title, which frequently took months -- even years.

Source: New Md. laws affecting property tax credits, foreclosures, ground rent (and possibly you).

Pennsylvania Trial Judge's Undoing Of Sheriff's Sale Where Property Sold At Less Than 50% Of Value Nixed By State Appeals Court

In Pittsburgh, Pennsylvania, the Pittsburgh Post Gazette reports:

• The state Superior Court has ruled that a sheriff's sale of real estate in Middlesex, Butler County, cannot be set aside simply because a buyer came forward after the fact and made a substantially higher offer.



• A split three-judge panel said Butler County Common Pleas Judge S. Michael Yeager abused his discretion when he set aside the sheriff's sale of a home after the estate of the homeowner found a buyer willing to pay more than double what it sold for.



• Judge Christine L. Donohue said appellants Gregory Simakas and Michael Newman, the winning bidders, had lawfully purchased the property at issue. "If the property can be resold at a profit, appellants are entitled to reap the reward of the risk they took in purchasing the property at the sheriff's sale," Judge Donohue said. She was joined by Judge John L. Musmanno.

***

• [M]r. Simakas and Mr. Newman purchased the house at the sheriff's sale with the winning bid of $255,800. [T]he [homeowner's] estate filed a petition to set aside the [sheriff's] sale, and Judge Yeager conducted a hearing on Jan. 26, 2011. At that hearing, the estate, pointing to comparative market analyses, argued that the property was actually worth $562,000 and that a new buyer, Alexander K. Wing, was prepared to offer $580,000 for it, Judge Donohue said.



• Judge Yeager ruled that the price Mr. Simakas and Mr. Newman had paid was grossly inadequate and ordered Mr. Wing and the estate to enter a binding purchase agreement on Jan. 31, 2011, and to close the sale by Feb. 28. On Feb. 18, however, Mr. Simakas and Mr. Newman filed a petition to intervene, asking the court to rescind the order, according to Judge Donohue.



• On Feb. 24, 2011, Judge Yeager allowed Mr. Simakas and Mr. Newman to intervene but refused to rescind the order. They appealed to the Superior Court the following day.



• Judge Donohue said that, under the Superior Court's 2002 ruling in Blue Ball National Bank v. Balmer, a decision regarding whether a sale is adequate is one that must be made on a case-by-case basis.

***

• In addition, Judge Donohue said the sheriff's sale was duly advertised and lawfully conducted, noting that Mr. Wing offered no explanation as to why he wasn't present to make his bid at the sale. (Mr. Wing owns land adjoining the property, and wanted to buy the Hood property as a "buffer" for his land.)

For more, see Sale can't be set aside for late bidder.

For the court ruling, see Bank of America, NA v. Hood, 2012 PA Super 70 (Pa. Super. March 22, 2012).

State High Court: Georgia Lenders Have Right To Undo Foreclosure Sale After A Properly Conducted Public Auction Has Already Taken Place

Lexology reports:

• [A] lender can rescind a [Georgia] foreclosure, for among other reasons, the fact that it had entered into an agreement when the default was cured prior to the sale or the borrower had entered into an agreement to cure the default. (See OCGA 9-13-172.1.)



• What happens though if a lender actually conducts a foreclosure sale and then simply decides that it would rather sue on the note. Can it unwind the foreclosure even if its reasons for doing so do not fall with the statutory guidelines?



• The Georgia Supreme Court has decided that a lender may in fact rescind a properly conducted foreclosure sale for its own internal business reasons.(See Tampa Investment Group, Inc. v. BB&T, 2012 WL 933110 (Ga.).)

***

• On March 19, 2012, the Georgia Supreme Court found that a “sale under power of real estate at public outcry does not become binding as between the mortgagee and the purchaser unless a memorandum is made as prescribed by the Statute of Frauds.” The court went on to note that until a deed under power is transferred and consideration is passed, the sale itself has not occurred; there is only a contract to buy and sell. Under the circumstances the borrowers have not been harmed. They still hold the same rights as they held prior to the attempted sale.

For more, see Rescission of foreclosure sales in Georgia (may require subscription; if no subscription, GO HERE; or TRY HERE - then click the appropriate link).

BofA's Plan To Work Around Florida Foreclosure Process Results In 'Walking Money" Averaging $12K In Delinquent Borrowers' Pockets

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

• Bank of America's payoff to Florida homeowners who do a short sale instead of dragging out a foreclosure has averaged $12,000 per deal and helped close 678 contracts statewide since it debuted in October.



• The Florida-only plan originally targeted 20,000 homeowners with incentives of between $5,000 and $20,000 to forgo the more than two-year foreclosure process and leave their home in "broom swept" condition for a new owner.



• Bank of America spokesman Rick Simon said the Charlotte, N.C.-based company remains "enthused" about the pilot program, which generated 3,900 purchase offers and 11,000 verbal agreements from customers who said they were interested in participating.



• "We've quietly done a little experimentation with a similar plan in one of the non-judicial states, but we are not to the point of announcing a major expansion," said Simon, adding that monthly short sale volume has more than doubled this year. "Of particular note is the response from 'hand-raisers' who heard about the program and asked to be included without us reaching out to them."

***

• To participate, purchase offers had to be submitted by mid-December. Sales must close by Aug. 31. [...] Florida was a testing ground for Bank of America because of the state's high foreclosure rates. Wells Fargo and JPMorgan Chase have similar plans.

For more, see Bank of America's payoff to Florida homeowners draws 678 short sales (Thousands more homeowners pursue incentives of up to $20,000).

New State Law Slams Shut Loophole That Allowed Colorado Counties To 'Snatch' Unclaimed Proceeds From Public Auctions Belonging To F'closed Homeowners

In Denver, Colorado, The Denver Post reports:

• Homeowners who are legally entitled to excess funds from the public auction of their foreclosed properties can now claim the money years after they learn of it, according to a new law signed by Gov. John Hickenlooper [].



• Until now, counties were allowed to keep — and often did — excess funds known as "overbid proceeds" if no one claimed them within five years of the foreclosure auction.



• The law, the result of SB-30 by Sen. Cheri Jahn, D-Wheat Ridge, requires county public trustees who oversee the foreclosure process to give the unclaimed funds to the state treasurer. The treasurer's fund, known as the Great Colorado Payback, is held in perpetuity for its rightful owner or heir to claim at any time.



• The legislation comes as a result of Denver Post reporting that last year exposed how many counties did little or nothing to track homeowners who were due money after their houses were foreclosed and liens paid.(1)



• In some cases, county treasuries pocketed hundreds of thousands of dollars in large part because homeowners due the money weren't notified or didn't know they had money coming to them.



• "This is really a great thing you've done," Barry Gragert said to Jahn as he watched Hickenlooper sign the bill. "So many people who weren't as lucky as me will be helped so much."



• Gragert had more than $50,000 coming to him but never knew it until The Post located him as part of its story. The retired veteran had lived in his car and was recovering from cataract surgery after his house was foreclosed.



• The Denver resident was only a few months from never seeing the money. At the time, counties only had to advertise the availability of the funds once a week for five weeks, often in weekly newspapers that were in communities far from where the foreclosed property was located. In addition, counties were only required to mail a single notice to the homeowner at their last known address — usually the foreclosed home that they'd already left behind.



• Under the new law, counties are required to make an effort to locate homeowners and notify them. If not located, the money is then turned over to the state treasurer for safe-keeping. The state payback fund advertises the names of people due money once a year.



• It also requires counties to notify homeowners during the foreclosure process that they could be due money — which occurs when a home is auctioned for more money than is owed on it. Once all liens are paid, any money left over is due the homeowner.



• Others read The Post and contacted county officials about the funds, many of whom were able to collect a piece of the more than $635,000 that remained uncollected.(2) The Post also found that public trustees in some counties skirted the law and never tried to contact homeowners or publish the existence of the money.(3) Provisions of the law kick-in Sept. 1.

Source: New law makes it easier for homeowners to collect foreclosure auction money due them.

(1) See Money owed to victims of foreclosure rarely gets to them.
(2) See Foreclosed homeowners get unexpected windfalls.
(3) See People foreclosed on in Arapahoe County might be owed money and not know it.

Junior Creditor Allowed To Snatch Surplus Sale Proceeds As Court Says Foreclosed Owner Not Entitled To Homestead Protection While Away In Jail

The following facts are taken from a recent ruling from a division of the Washington State Court of Appeals:

1. Homeowner Susan cops guilty plea for embezzling $300K+ from employer and is incarcerated for 24 months;



2. While incarcerated, Susan's home falls into foreclosure, is sold in a public sale, and yielded $57,381.30 in excess of what was necessary to satisfy the obligation owed to the primary lien holder;



3. After a proper distribution of approximately $25,000 owed to a 2nd mortgage holder, the trial court awarded 50% of the remaining balance of the excess sale proceeds (ie. the 'overbid') to homeowner's ex-husband (a co-owner of the property who was not implicated in Susan's embezzlement), and the remaining 50% to Susan's (presumably now-former) employer, the victim of her embezzlement (presumably, the victimized employer was treated as a judgment creditor on account of a restitution lien that attached to her 50% share of the home after her conviction).



4. Susan objected and appealed the trial court ruling, claiming that she was entitled to her 50% share of the proceeds by reason of the homestead protection against claims by lienholders holding non-consensual judgments, and unsecured creditors.(1)

In an unpublished ruling,(2) the state appeals court affirmed the ruling of the trial court, saying that because Susan:

• had not filed a declaration of homestead, and



• had not lived on the premises for more than six months before the foreclosure sale

RCW 6.13.050 of the Washington State statute established her abandonment of the homestead. Accordingly, the remaining proceeds from the sale of her home was not entitled to the homestead protection provided under state law.

For the ruling, see In re Trustee's Sale of the Real Prop. of Arrington, No. 66103-5-I (Wn. App. 1st Div. March 26, 2012).

(1) The appeals court points out that homestead protection extends to the surplus proceeds generated in a foreclosure sale:

• RCW 61.24.080(3) provides, in relevant part: "Interests in, or liens or claims of liens against the property eliminated by sale under this section shall attach to the surplus in the order of priority that it had attached to the property."
  
  But, as this court held in Sweet, a home owner's interest attaches to the surplus proceeds from a nonjudicial foreclosure sale under a deed of trust such that a judgment creditor's claim is limited to funds in excess of the homestead, if any. In re Trustee's Sale of the Real Prop. of Sweet, 88 Wn. App. 199, 200, 944 P.2d 414 (1997); see also In re Trustee's Sale of the Real Prop. of Upton, 102 Wn. App. 220, 223, 6 P.3d 1231 (2000) ("Generally, a property owner's homestead interest in property takes priority over the interests of other creditors.").

(2) When an appeals court issues a ruling that it characterizes as unpublished, it typically does so because it has determined that the ruling is a narrow one, limited to the particular facts of the case, and consequently, is of no value as precedent and should therefore not be cited as such in future cases.

It may be that the court felt that had the facts been slightly different in this case, it would have reached a different outcome.

Alternatively, the court may have felt that one or more issues relating to this particular fact pattern either went unraised or were inadequately briefed by the parties which, had they been properly raised or more adequately briefed, the court would have been compelled to reach a different outcome, one more favorable to the homeowner. If such was the case, the court may not want this ruling to be viewed as binding precedent to be applied in all cases involving an incarcerated homeowner claiming the homestead protection afforded him/her under state law.

Note that it is not uncommon for the homestead laws of other states to treat a homeowner who has been incarcerated as not having abandoned his/her homestead rights, regardless of how long the homeowner is incarcerated for. See, for example:

• Holden v. Cribb, 349 S.C. 132, 561 SE 2d 634 (S.C. App. 2002) (applying South Carolina law):
  
  Holden also argues Singleton is not entitled to the homestead exemption because he is currently in jail. We disagree. [...] We hold that Singleton, though incarcerated, is entitled to the protection of the homestead exemption.
  
  "The act and intent as to domicil, and not the duration of residence, are the determining factors." Miller at 129, 149 S.E.2d at 339. Clearly, Singleton had no intent to transfer his residence to the detention center and, in fact, was being involuntarily detained.
  
  "`To effect a change of residence or domicile, there must be an actual abandonment of the first domicile, coupled with an intention not to return to it, and there must be a new domicile acquired by actual residence in another place or jurisdiction, with the intention of making the last acquired residence a [permanent] home.'" Reynolds v. Lloyd Cotton Mills, 177 N.C. 412, 99 S.E. 240, 242 (1919) quoted with approval by and followed in Ferguson v. Employers Mut. Cas. Co., 254 S.C. 235, 239, 174 S.E.2d 768, 769 (1970) (alteration in original).
  
  We daresay Singleton has no intent to make the detention center his permanent residence. To hold otherwise would thwart the underlying policy of the homestead exemption.
  



• Roberts v. Grisham, 493 So. 2d 940 (Ms. 1986) (applying Mississippi law):
  
  The question before us is whether the appellee, Wesley Grisham, was divested of his rights to claim homestead exemption by virtue of his conviction for murder and sentence of life imprisonment. The Circuit Court of Clay County held that such conviction and imprisonment did not deprive appellee of his right of homestead exemption. We affirm. [...] Under the law as it presently stands, absence occasioned by imprisonment — even a life sentence — does not defeat the claim of homestead. This Court therefore has no alternative but to affirm the holding of the trial court on all issues.



• In re Gerholdt, No. 11-01321 (Bankr. N.D. Iowa. 2011) (applying Iowa law and collecting cases from other states):
  
  A removal from a homestead is an abandonment of the exemption, unless the move was intended to be temporary. Kimball v. Wilson, 13 N.W. 748, 748 (Iowa 1882). The homestead right "will continue during a temporary absence while the owner has a fixed and definite intention of returning." In re Powers, 286 B.R. 726, 728 (Bankr. N.D. Iowa 2002), citing In re McClain's Estate, 262 N.W. 666, 669 (Iowa 1935). When an absence from the homestead is prolonged, the intention to return to the premises as a home should be clear and unmistakable. Fyffe v. Beers, 18 Iowa 4, 1864 WL 266, at *4 (Iowa 1864). The owner may meet this burden by showing a continued and fixed purpose to return with the question resting primarily on the owner's actual intent. In re Roberts, 450 B.R. 159, 169 (N.D. Iowa 2011). The party objecting to a homestead exemption has the burden to prove the exemption is not properly claimed. Fed. R. Bankr. P. 4004; In re Stenzel, 301 F.3d 945, 947 (8th Cir. 2002); In re White, 293 B.R. 1, 4 (Bankr. N.D. Iowa 2003).
  
  The Iowa Supreme Court has found that the incarceration of a wife in an insane asylum after her husband's death does not affect her homestead rights. Floyd County v. Wolfe, 117 N.W. 32, 34 (Iowa 1908).
  
  Minnesota courts have found exception to the physical occupancy requirement for homesteads under Minnesota law in cases involving imprisonment or mental incapacity. In re Mueller, 215 B.R. 1018, 1025 (B.A.P. 8th Cir. 1998).
  
  Texas courts have held a homestead is not abandoned merely because a person does not occupy the home during a prison sentence. Driver v. Conley, 320 S.W.3d 516, 519 (Tex. App. 2010).
  
  Likewise, Kansas courts have concluded that the fact the owner was incarcerated did not result in voluntary abandonment of the homestead. See In re Hall, 395 B.R. 722, 734 (Bankr. D. Kan. 2008); see also In re Crabb, 2007 WL 7209436, at *3-4 (Bankr. S.D. Cal. Jun. 21, 2007) (finding incarcerated debtor was entitled to California homestead exemption).
  
  ANALYSIS
  
  Based on the foregoing, and in light of the mandate that Iowa's exemption statutes be liberally construed, the Court concludes that Debtor is entitled to claim his real estate exempt as his homestead even though he is currently incarcerated. Testimony at trial establishes that Debtor lived at the homestead real estate prior to the time he was incarcerated and he intends to return after completing his sentence. AgVantage has the burden to prove Debtor's homestead is not properly claimed exempt. The only proof it has put forward is the fact that Debtor is incarcerated. This is insufficient to defeat Debtor's homestead exemption.

See also:

• Texas: Sexual Assault Victim's Attempt To Satisfy Money Judgment By Snatching Now-Vacated, Jailed Perpetrator's Texas House Squelched By Homestead Claim,


• Florida: 9 To 33 Year Sentence No Bar To O.J.'s Florida Homestead Exemption; Ex-Football Star To Keep Benefit Despite 'Scoring' Extended Stay In Nevada Prison.

NY Courts Move To Address 'Shadow' Docket Of Foreclosure Cases Created By System-Gaming Lenders That Fail To File Required Paperwork

Reuters reports:

• New York is launching a pilot program aimed at clearing the backlog of inactive residential foreclosure cases that have been stranded in legal limbo on state courts' so-called "shadow" docket.



• On March 28, the Unified Court System proposed the creation of a special calendar to identify inactive residential mortgage foreclosure actions that have been filed with county clerks, but never officially activated on the court docket. The proposal gives judges the power to schedule a settlement conference or take other action to move the cases forward.



• Under 22 NYCRR 202.12-a, lenders must file proof of service of the summons and complaint in a residential mortgage foreclosure action within 120 days of bringing the action. When they file proof of summons, they also must file a request for judicial intervention ["RJI"] and a lawyer's affirmation vouching for the accuracy of the documents. Once the paperwork is complete, courts can schedule a settlement conference.



• But lenders increasingly are filing foreclosure actions without the accompanying proof of service, attorney affirmation, or RJI, according to a letter from the court announcing the proposal. Those cases wind up on the "shadow inventory," meaning they are not on the court's formal docket and judges can't take steps to resolve the case.

For more, see New York tests solution for 'shadow' foreclosure docket.

See also, New York Post: Judge bites banks (Prods lenders, attys to unclog foreclosure cases).

Mortgage Assignment That Fails To Transfer Promissory Note, Failure To Establish Its Physical Delivery Sink F'closing Lender; Trial Court Wrong Again

A New York intermediate appeals court recently found itself compelled to give the boot to another trial judge screw-up in a foreclosure case. The problem in this case (as is becoming quite common among sister appeals courts throughout the country): the bankster failed to establish that, at the time the action was filed, it had standing to initiate the foreclosure case.

In this case, the lender failed to establish either that it had possession of the promissory note at the time the case was filed, or that it had otherwise acquired said note by a proper assignment prior to filing the action.(1) (Based on the facts of the case and reasons set forth in the ruling, the lender's attempt to use a post-filing corrective assignment of mortgage (the foreclosing bankster claimed that an original assignment, purportedly dated two weeks before the filing of the suit, was sent to the appropriate county office for recording, but was somehow (mysteriously?) lost prior to recording) to establish that it had standing to initiate the action at the time it was commenced fell flat on its face).(2)

For the ruling, see U.S. Bank Natl. Assn. v Dellarmo, 2012 NY Slip Op 02481 (App. Div. 2nd Dept. April 3, 2012).

Representing the homeowner in this case was Schloss & Schloss, Airmont, N.Y. (Jonathan B. Schloss of counsel).

(1) The appellate court gives the following summary of the New York case law that applied in this case:

• "In a mortgage foreclosure action, a plaintiff has standing where it is both the holder or assignee of the subject mortgage and the holder or assignee of the underlying note at the time the action is commenced" (Bank of N.Y. v Silverberg, 86 AD3d 274, 279; see Countrywide Home Loans, Inc. v Gress, 68 AD3d 709).
  
  Where a defendant raises the issue of standing, the plaintiff must prove its standing to be entitled to relief (see CitiMortgage, Inc. v Rosenthal, 88 AD3d 759; U.S. Bank, N.A. v Collymore, 68 AD3d 752, 753).
  
  Moreover, while assignment of a promissory note also effectuates assignment of the mortgage (see Bank of N.Y. Silverberg, 86 AD3d at 280; U.S. Bank, N.A. v Collymore, 68 AD3d at 753-754; Mortgage Elec. Registration Sys., Inc. v Coakley, 41 AD3d 674), the converse is not true: since a mortgage is merely security for a debt, it cannot exist independently of the debt, and thus, a transfer or assignment of only the mortgage without the debt is a nullity and no interest is acquired by it (see Deutsche Bank Natl. Trust Co. v Barnett, 88 AD3d 636; Bank of N.Y. v Silverberg, 86 AD3d at 280).
  
  The failure to record an assignment prior to the commencement of the action is not necessarily fatal since "an assignment of a note and mortgage need not be in writing and can be effectuated by physical delivery" (Bank of N.Y. v Silverberg, 86 AD3d at 280; see Deutsche Bank Natl. Trust Co. v Barnett, 88 AD3d 636; U.S. Bank, N.A. v Collymore, 68 AD3d at 754; LaSalle Bank Natl. Assn. v Ahearn, 59 AD3d 911, 912).

(2) The basis for the appellate court's ruling follows:

• Here, as the plaintiff concedes, the complaint incorrectly asserts that the April 11, 2006, assignment of the mortgage to the plaintiff had been duly recorded.
  
  Further, there is no allegation that the note or mortgage was physically delivered to the plaintiff prior to commencement of the action (compare Mortgage Elec. Registration Sys., Inc. v Coakley, 41 AD3d 674).
  
  The record also suggests that in the order dated January 4, 2010, in which the Supreme Court held that the plaintiff had standing pursuant to the April 11, 2006, assignment, the court relied upon the incorrect assertion in the complaint that the April 11, 2006, assignment had been recorded. The Supreme Court referred only to the April 11, 2006, assignment and made no reference to the corrective assignment's purported replacement of the April 11, 2006, assignment.
  
  The plaintiff now relies on the corrective assignment, which was recorded with the Clerk of Rockland County on October 30, 2009, to demonstrate that it was a holder of the mortgage as of the April 25, 2006, commencement of this action. The corrective assignment recites, in pertinent part, that it "is meant to correct and replace the April 11, 2006 assignment by and between the parties herein which was sent for recording but was lost prior to being recorded" in Rockland County.
  
  However, inasmuch as the complaint does not allege that the note was physically delivered to the plaintiff, and nothing in the plaintiff's submission in opposition to Dellarmo's motion could support a finding that such physical delivery occurred, the corrective assignment cannot be given retroactive effect (see Countrywide Home Loans, Inc. v Gress, 68 AD3d at 710; Wells Fargo Bank, N.A. v Marchione, 69 AD3d 204, 210; LaSalle Bank Natl. Assn. v Ahearn, 59 AD3d at 912-913).
  
  Moreover, both the unrecorded April 11, 2006, assignment and the recorded corrective assignment indicate only that the mortgage was assigned to the plaintiff. Since an assignment of a mortgage without the underlying debt is a nullity (see Deutsche Bank Natl. Trust Co. v Barnett, 88 AD3d 636; Bank of N.Y. v Silverberg, 86 AD3d at 280), the plaintiff has failed to demonstrate that it had standing to commence this action (see Bank of N.Y. v Silverberg, 86 AD3d at 280; U.S. Bank, N.A. v Collymore, 68 AD3d at 754).

Fundamentals-Lacking Trial Judge's Grant Of Default Judgment To Standing-Lacking Lender In Oklahoma Foreclosure Action Lacked Rational Basis

The Oklahoma Supreme Court recently added to its growing list of lower court reversals in foreclosure cases(1) in another ruling finding that the foreclosing bankster lacked standing to foreclose. The court said that the bankster failed to establish that, at the time of the filing of the foreclosure action, it was in possession of the promissory note it was attempting to enforce, and was not otherwise able to establish that it was the proper entity entitled to enforce the note. Attempts by the bankster to cure its screw-up subsequent to the filing of the action were unavailing.

Among other things, the Oklahoma high court made the following observation regarding the apparently snoozing trial judge's granting of a default judgment in favor of the bankster:

• The trial court's granting of a default judgment in favor of Appellee could not have been rationally based upon the evidence or Oklahoma law. Therefore, we find that the trial court abused its discretion by dismissing the Appellants Petition to Vacate the default judgment.

In concluding its opinion, the court makes the following statement summarizing, in a nutshell, what is expected from parties initiating foreclosure actions (and adds an admonition to homeowners reminding them that if they think they just won a free house because of a lender's procedural screw-up, they should think again!):

• It is a fundamental precept of the law to expect a foreclosing party to actually be in possession of its claimed interest in the Note, and to have the proper supporting documentation in hand when filing suit, showing the history of the Note, so that the defendant is duly apprised of the rights of the plaintiff.
  
  This is accomplished by showing the party is a holder of the instrument or a nonholder in possession of the instrument who has the rights of a holder, or a person not in possession of the instrument who is entitled to enforce the instrument pursuant to 12A O.S. 2001, § 3-309 or 12A O.S. 2001, § 3-418.
  
  Likewise, for the homeowners, absent adjudication on the underlying indebtedness, today's decision to reverse the dismissal of the petition and motion to vacate cannot cancel their obligation arising from an authenticated Note, or insulate them from foreclosure proceedings based on proven delinquency. This Court's decision in no way releases or exonerates the debt owed by the defendants on this home. See, U.S. Bank National Association v. Kimball, 27 A.3d 1087, 75 UCC Rep.Serv.2d 100, 2011 VT 81 (VT 2011); and Indymac Bank, F.S.B. v. Yano-Horoski, 78 A.D.3d 895, 912 N.Y.S.2d 239 (2010).

For the ruling, see U.S. Bank v. Moore, 2012 OK 32, __ P.3d __ (Ok. April 10, 2012).

(1) See Oklahoma High Court Means Business In Booting Back Foreclosure Judgments Based On Unindorsed Notes, Dubious Assignments, Lack Of Standing.

Virginia Feds Score Guilty Plea From Owner/Operator Of Loan Mod Racket That Ripped Off Hundreds Of Homeowners Out Of Thousand$ In Upfront Fees

From the Office of the U.S. Attorney (Alexandria, Virginia):

• Howard R. Shmuckler, 68, of Virginia Beach, Va., [] pled guilty to running a fraudulent mortgage-rescue business that received substantial fees but actually modified clients’ mortgages in only a few cases. [...] Shmuckler pled guilty [] to six counts of wire fraud, which each carry a maximum penalty of 20 years in prison. Sentencing has been scheduled for June 22, 2012.



• According to the statement of facts filed in court, Shmuckler owned and operated a Vienna, Va. mortgage-rescue business known as The Shmuckler Group (TSG). According to TGS’s website, TSG had approximately 1,100 clients. Shmuckler misrepresented that TSG had a success rate of 97 percent and falsely portrayed himself as an attorney licensed in Virginia.



• Based on these representations made by Shmuckler or client recruiters to induce potential clients to sign up for TSG services, TSG’s clients provided the company with fees ranging from $2,500 to $25,000 to help modify the terms of their mortgages.



• Court records indicate that Shmuckler instructed clients to terminate contact with their mortgage companies and to stop making payments to their lenders. TSG never facilitated a modification of the mortgages referenced in the statement of facts.

For the U.S. Attorney press release, see Mortgage Rescue Business Owner Pleads Guilty to Fraud.

'Gimme Back My Money!' Demands Building Buyer After Discovering Seller Didn't Own Land Underneath Purchased Premises

In Beaumont, Texas, The Southeast Texas Record reports:

• A Travis County woman claims she bought a building and the land on which it was situated in Beaumont, but later discovered she only purchased the portable building. Andrea Williams and A Personal Touch filed a lawsuit March 21 in Jefferson County District Court against Charlton Pollard Neighborhood Association.



• Williams claims she paid $21,500 to the Charlton Pollard Neighborhood Association in an attempt to purchase the property at 710 Lincoln St. in Beaumont. "Only after paying the $21,500 purchase price and after the execution of the warranty deed did Plaintiffs learn that Defendants did not, in fact, own the real property located at 710 Lincoln Street," the suit states.



• "In actuality, Defendants only owned the portable building situated on the property. Title to the real property is in fact held by the City of Beaumont." Although Williams has demanded a refund of her money, Charlton Pollard Neighborhood Association has refused to repay her, the complaint says.



• In her complaint, Williams alleges breach of contract, common law fraud, fraud in a real estate transaction and negligent misrepresentation against the association. Williams seeks economic and actual damages within the jurisdictional limits of Jefferson County District Court, plus treble damages, attorneys' fees, costs, pre-judgment interest at the maximum rate allowed by law, post-judgment interest at the legal rate, costs and other relief the court deems just.

Source: Woman says neighborhood association misled her about property purchase.