Sunday, April 29, 2012

Victimized Consumer Battles Deadbeat Zombie Debt Buyer In Effort To Collect $10.8M Judgment Over Harassing Phone Calls, Illegal Collection Practices

In Wheeling, West Virginia, ABC News Nightline reports:
  • [T]wo years ago, a debt collector with a company called Reliant Financial Associates, or RFA, left a message [for Diana Mey] implying that her house was in jeopardy if she didn't pay a debt. The message stated:

  • "I'm calling in regards to a preliminary asset liability investigation. They are in the process of serving some court documents in regards to case 29369... They have some information now pending questions at the property,... Springdale Avenue, in Wheeling, West Virginia. It is in your best interests to contact the department. You are required to contact 866-764-9779."

  • It is illegal for debt collectors to make empty threats about serving people with a lawsuit or seizing their home. And it was especially galling to Mey, who says she is debt-free. "They threatened to take legal action against our property and it wasn't even our debt," Mey said.

  • Millions of Americans are victims of this kind of mistaken debtor identity, partly because of a new breed of collectors called "debt buyers." They purchase old debts for pennies that the original creditors have given up on and then try to collect them for a big profit. Critics say debt buyers sometimes use outrageous tactics to get the money where others have failed. RFA is a debt buyer.

  • Mey wrote RFA a cease and desist letter, telling the company not to contact her anymore, and sent it certified mail. Postal records show exactly when RFA signed for it. Precisely 23 minutes later, Mey started getting mysterious hang-up calls that showed up on her caller ID as coming from her local county government.

  • "So I called the number back and it was the sheriff's department. And I asked if someone there was trying to reach me. And they said, no - nobody there was trying to reach me," Mey said. After two days of hang-up calls from that sheriff's department number, Mey picked up another one with that same caller ID. The man on the line repeatedly called her a vulgar name for the female anatomy. He described violent sexual acts he would like to subject her to and asked if she liked to be "gang banged."

  • "I was so frightened. I felt violated, but then I realized, you know, I'm taping this call,." Mey said. "I pulled myself together and I thought, I can get through this. Just keep on talking buddy because we're gonna get plenty of your voice on tape." The verbal assault went on for nearly two minutes before the man hung up.

  • Mey said she immediately called 911 to report that someone had threatened to sexually assault her. She says she was terrified because she believed the call was from a local number. Mey said she then bolted the door and got her husband's gun out of the dresser and hung it on the bedpost in her bedroom.

  • At the time, Mey said she didn't make a connection between that call and the collectors. But then she learned the call hadn't come from the local sheriff's office after all. The caller ID had been manipulated to look like it did, a practice called spoofing. That's when she went online and discovered complaints about RFA debt collectors pretending to call from sheriff's offices, including a male collector who called women vulgar names. "He picked the wrong person," Mey said.
***
  • Last May, Mey sued RFA for harassment and illegal collection practices. In August, RFA's lawyer failed to show up in court, so Mey testified unopposed. The judge called RFA's actions "malicious" and ruled that all of the allegations were true. And then he awarded that record judgment of $10,860,000.

  • When "Nightline" went to RFA's Orange County, Calif., office to ask about the case, it was abandoned. RFA is actually a fictitious business name for a company called Global AG, LLC. Records show it is just one of several collection companies run by the same people that often change names and move. "Nightline" also visited other offices registered to people named in Mey's suit, but employees refused to talk and asked us to leave.
See Repairing A Broken System: Protecting Consumers in Debt Collection Litigation and Arbitration for an FTC report on dealing with bill collectors and zombie debt buyers.

'Debtors' Prisons' Flourishing? Despite 2+ Decades-Old Supreme Court Ruling To The Contrary, More Find Themselves Canned For Failure To Pay Bills

CBS MoneyWatch reports:
  • How did breast cancer survivor Lisa Lindsay end up behind bars? She didn't pay a medical bill -- one the Herrin, Ill., teaching assistant was told she didn't owe. "She got a $280 medical bill in error and was told she didn't have to pay it," The Associated Press reports. "But the bill was turned over to a collection agency, and eventually state troopers showed up at her home and took her to jail in handcuffs."

  • Although the U.S. abolished debtors' prisons in the 1830s, more than a third of U.S. states allow the police to haul people in who don't pay all manner of debts, from bills for health care services to credit card and auto loans. In parts of Illinois, debt collectors commonly use publicly funded courts, sheriff's deputies, and country jails to pressure people who owe even small amounts to pay up, according to the AP.

  • Under the law, debtors aren't arrested for nonpayment, but rather for failing to respond to court hearings, pay legal fines, or otherwise showing "contempt of court" in connection with a creditor lawsuit.

  • That loophole has lawmakers in the Illinois House of Representatives concerned enough to pass a bill in March that would make it illegal to send residents of the state to jail if they can't pay a debt. The measure awaits action in the senate.
***

  • Yet Illinois isn't the only state where residents get locked up for owing money. A 2010 report by the American Civil Liberties Union that focused on only five states -- Georgia, Louisiana, Michigan, Ohio, and Washington -- found that people were being jailed at "increasingly alarming rates" over legal debts.

  • Cases ranged from a woman who was arrested four separate times for failing to pay $251 in fines and court costs related to a fourth-degree misdemeanor conviction, to a mentally ill juvenile jailed by a judge over a previous conviction for stealing school supplies.

  • According to the ACLU: "The sad truth is that debtors' prisons are flourishing today, more than two decades after the Supreme Court prohibited imprisoning those who are too poor to pay their legal debts. In this era of shrinking budgets, state and local governments have turned aggressively to using the threat and reality of imprisonment to squeeze revenue out of the poorest defendants who appear in their courts."
For the American Civil Liberties Union report, see In For A Penny (The Rise of America’s New Debtors’ Prisons).
In related stories, see:

West Virginia Tags Seven Alleged Debt Collection Rackets With Suits In Connection With Potentially Illegal Dunning Practices

In Charleston, West Virginia, The West Virginia Record reports:
  • West Virginia Attorney General Darrell McGraw is suing seven unlicensed collection agencies, and their owners, to enforce investigative subpoenas and stop them from engaging in unlawful practices in the state. On Tuesday, McGraw's office said it began investigating the companies after receiving complaints alleging they engaged in "abusive" and "unlawful" debt collection practices.

  • The attorney general said the practices included repeated harassing phone calls, impersonating law enforcement and judicial officers, making false threats that non-payment will result in arrest or criminal prosecution, and collecting non-existent debts or debts that have already been paid.

  • Spokesman Norman Googel said McGraw's office received at least one complaint, if not a few, for each company. "When we receive even one complaint, we investigate," he explained. "From that one complaint, we can tell if they are a licensed company or if they are violating the law." Googel said unlicensed debt collection agencies tend to operate in a similar, systematic way. "If a certain type of threat was made to one person, we find that that's what they do to everybody."
The companies and individuals sued by McGraw's office include:
  1. County Filing Services Inc. and owner Todd Loop;
  2. Portfolio Investment Financial and owner Todd Loop;
  3. Investment Management and Recoveries Inc. and Randall Ray Goins;
  4. Rosenthal, Stein and Associates LLC and Sharisse Williams;
  5. Vision Credit Solutions LLC and James P. Belstadt;
  6. National Capital Management Inc., and Ryan Daniel Todora and Natalie Lynn Rowe; and
  7. Dorsey Thornton and Associates LLC, and Wyteria Dorsey and Michael Thornton.
All seven of the companies are from out of state, Googel noted.

Mass. AG's New Regs Puts Tighter Squeeze On Anyone Engaging In Dubious Practices When Collecting Debts From Consumers Residing In Bay State

Lexology reports:
  • On March 2, 2012, the Massachusetts Attorney General published onerous new consumer debt collection practice regulations, deeming their violation to be an unfair trade practice.

  • These regulations, which became effective upon publication, purport to govern every business and person nationwide who engages in collecting a consumer debt (defined as any debt resulting from a purchase, lease or loan of goods, services or real or personal property or for a loan of money obtained for personal, family or household purposes, whether or not reduced to a judgment) from a person located within Massachusetts.

  • A copy of the regulations is available here. They are extraordinary in that, among other things, they impose validation and verification requirements on creditors collecting their own debts, rather than just on third party debt collectors or purchasers of defaulted debt as under the federal Fair Debt Collection Practices Act.
For more, see Massachusetts first state to require creditors to validate consumer debt (requires subscription; if no subscription, TRY HERE).

Thanks to Deontos for the heads-up on the story.

Saturday, April 28, 2012

Banksters Prohibited By Local Law From Evictions Apply Pressure Anyway In Effort To Drive Tenants From Foreclosed Homes: Bay Area Renter Advocates

In San Francisco, California, the San Francisco Bay Guardian reports:

  • Alma Sierra has been living in her home at 490 Athens for three years. Sierra, her nine year old son, and two other mothers with their children share a rental unit. They have diligently paid their rent, and her son goes to school across the street. But last year, US Bank foreclosed on the small-time landlords that owned the property- now, the tenants face eviction.

  • We’re three single mothers with children. We don’t have the means to just up and leave,” Sierra, a part-time domestic worker, told me through a translator from Causa Justa, an organization that works for tenants’ rights. Their worked helped pass the Just Cause eviction policy for which the organization is named last year.

  • Under city law, a landlord needs one of 14 reasons to justly evict a tenant. The reasons include failure to pay rent and trashing the property, as well as owner move-in and Ellis Act evictions. But the foreclosure crisis has brought on a wave of bank-owned properties. These are tricky situations legally; banks generally want to sell the property, a task made more difficult if there are pesky tenants living there.

  • The banks want to get rid of the tenants. The realtors for the banks always tell them they can get more money if there aren’t any tenants in it. Because that way they would have to do an owner move-in eviction,” said Tommi Mecca, a long-time tenants’ rights advocate in the city.

  • According to Mecca, US Bank has been pressuring the three families to leave the building, although no eviction papers have been filed yet. The Guardian is awaiting calls back from US Bank representatives.
***

  • It can take many months, in some cases longer, to actually sell property,” said Sarah Shortt, an organizer with the SFHRC. So in the meantime the bank is the landlord and they haven’t been responsible in lending or as landlords. They tend to disregard tenants’ rights and trample over the needs and concerns of renters.”

  • Even when tenants are made aware that the property they live in has been sold back to bank, it can often be difficult to determine who to turn to for repairs, complaints, or even the right address for rent checks. One of the things we see a lot of is, the bank acquires the property and then they’re just MIA. Tenants come to us and say, we don’t know who owns our building, where to pay rent, who to ask to fix leaky ceiling. We help them research to find who owner is,” said Shortt.

  • These situations often end with buy-outs, in which the bank pays the tenants to leave the property. The amount ranges, but according to Mecca, it can often be insubstantial. They start at $1,000, $3,000, something really insulting. And it’s only if tenants walk in somewhere like [the SFHRC] that we tell them, wait a minute, your tenancy is worth so much more than that.

  • A U.S. Bank branch in the Mission District was the site of a different kind of anti-foreclosure protest April 26, as three families who are tenants in a foreclosed building, accompanied by some 100 supporters, demanded the bank collect their rent and let them stay in their homes.

Son: 'BofA's Breaking Law By Giving My Elderly Mom The Boot From F'closed Home!' Bankster Accused Of Ceasing Rent Collection, Sending Eviction Notice

In Porterville, California KSEE-TV Channel 24 reports:

  • On a typical morning, you can find Eve Ball outside her Porterville home, sitting on the porch, sipping coffee, listening to wind chimes. Eve Ball said, "It's been my home ever since my husband past away."

  • That was 11 years ago. Her son Barry bought the home for her. Three years later he sold it and negotiated a 10 year lease for his mom with the new owner.

  • In October, the owner foreclosed. Bank of America took over, stopped accepting rent and sent Eve an eviction notice. Barry Ball said, "It's somewhat ironic that we as taxpayers bailed Bank of America out in the first place and now they're not keeping up to their end of the bargain as promised."

  • Eve took the fight. Her attorney, Alex Reed-Krase claims the bank is breaking federal law. The Protecting Tenants at Foreclosure Act of 2009 to be exact. "Tenants have a senior interest and banks can't just kick them out...they have to live out their lease," he said.

  • In court, bank attorneys said the law shouldn't apply in this case. The judge heard both sides and said he'll make a decision soon. Until that happens, Eve says she's not going anywhere, "I think this may help someone else going through this I hope."

San Bernardino DA: Scammer Used Forged Signatures To Record 'Dirty' Deeds On Homes In F'closure, Then Renting To Tenants, Borrowing From Duped Lenders

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

  • An Upland man who was arrested [...] by investigators with the San Bernardino County District Attorney’s Office has been charged with real estate fraud, identity theft, forgery, and preparing fraudulent credit applications. Thirty-eight-year-old Eric Lamonte Smith was arraigned [] in San Bernardino Superior Court. He pleaded not guilty to all counts.

  • The investigation began after investigators received a fraud complaint from a Notary Public who alleged that her signature and seal had been forged on a Grant Deed. As a result, investigators opened a criminal investigation which eventually revealed that Smith had been part of a suspected real estate fraud ring operating in San Bernardino, San Diego and Los Angeles counties since 2006.

  • The suspects allegedly filed fraudulent Grant Deeds on properties that were in the process of being foreclosed, causing the process to be delayed. The suspects would then rent the property to unsuspecting renters.

  • The suspects would also fraudulently obtain Home Equity Lines of credit on the properties, as well as use false information on credit applications to purchase luxury automobiles.
For the San Bernardino County DA press release, see DA Charges Upland Man With Real Estate Fraud.

Cops Pinch Suspect In Foreclosed Home Rent Ripoff That Left Single Mom, Three Kids Homeless, Out $3K

In Naples, Florida, the Naples Daily News reports:

  • Earlier this month, Emanoel Thermitus packed up her family's things, paid her new landlord and moved into a rental house in Golden Gate Estates. With three young sons, Thermitus was looking to get out of a town house community where she said children as young as 12 and 13 often were arrested for drugs. "I got scared," she said. "I didn't want my kids to go through that, you know? Let me do whatever I can to get them out of there."

  • But about a week after the family of four moved into the three-bedroom house on Third Avenue Northwest, a Collier County sheriff's deputy called and told her she'd have to move out. Her landlord, 21-year-old Yoandry Leiva, didn't actually own the house and had no authority to rent it out, he said.

  • Deputies arrested Leiva, of the 8600 block of Wheat Lane, East Naples, on Thursday, charging him with three counts of burglary, one count of grand theft and one count of manufacturing marijuana. He also is a suspect in the fraudulent rental of a house at 5921 Green Blvd., where a marijuana plant and a stolen Yamaha motorcycle were found in the backyard.
***

  • Lt. Chad Parker, who works financial crimes at the Sheriff's Office, said the agency had only recently begun to see [this type of scam]. In those cases, renters must leave the property even if they've paid rent to someone because they are legally considered to be trespassing. "It's unfortunate because they have to get kicked out of a house," Parker said. "They're being victimized twice."

  • Out $3,000 and with no leftover savings, Thermitus said she and her sons now stay at a public park until 10 o'clock every night, when they have to look somewhere else for a place to sleep.

  • "I spent all the money I had," she said. "I don't know how, but I know if I pray, God will listen and I will be safe, but I don't feel safe alone with the kids."
For the story, see Man accused of renting house he didn't own; family left homeless.

For story update, see Good Samaritan offers home to single mother evicted from fraudulently-rented house (North Naples resident Paul Conti read about the family in the Daily News and thought about a home of his own. The property he'd bought in a foreclosure sale years earlier would be perfect for them, he thought, and so on Monday, Conti handed a key to a stranger and let her move into his empty house).

Calif Rent Scam Suspect Bagged In Nevada; Used Craigslist To Rip Off Off Tenants By Renting Out Parents' Now-Foreclosed Home: Cops; Awaits Extradition

In Porterville, California, KMPH-TV Channel 26 reports:

  • It's a scam happening across the nation and right here in the Valley. Crooks rent out foreclosed homes and get away with thousands of dollars. The latest report popped up in Porterville.

  • Currently, Porterville police are looking for 39-year-old Scott Crowder. Police say Crowder has scammed several families out of thousands of dollars. Detectives say he's trying to rent a home that once belonged to his parents, but is currently in foreclosure. Detectives say he takes people's security deposit, gives them fake keys, and then splits.

  • Keri Dunning paid him one–thousand dollars. She says, "He walked us through the place, and made it sound pretty legit. He said we could do whatever we wanted with the place, we could fix it up and paint it. He then took our money and left." Crowder is not returning their phone calls, and they aren't the only the ones.

  • Stephanie Leyva says, "I gave him $2,850; that was first month's rent, last month's rent, and a security deposit of $950."

  • The families saw the house advertised on Craigslist. The ad states the house in a good neighborhood, close to schools and shopping. Stephanie says while trying to find Crowder, she stopped another woman from giving a security deposit for the same house.

  • Investigators with the Porterville Police Department are asking anyone with information on his whereabouts to give them a call.
For a story update, see Rental Scam In Porterville; Man Arrested (Porterville Police say a man suspected of scamming several families out of thousands of dollars is behind bars. 39-year-old Scott Crowder was arrested in Las Vegas, Nevada. Crowder remains in custody in Nevada pending extradition to California).

Rent Scams Promoted On Craigslist Continue To Reel In Unwitting, Would-Be Renters

In Jacksonville, Florida, Action News reports:
  • People do it every day. But this time when a couple found a Westside home on Craigslist for rent, appearances were deceiving. According to the police report, the couple met the so-called landlord at a public place. He gave them keys. They signed a lease agreement agreeing to buy a refrigerator, pay $1,000 a month for rent, and another $800 for a security deposit. They had no idea the house they were renting for the last couple of weeks was actually in foreclosure.

  • "It's very frustrating because law enforcement doesn't want to have to intervene in cases like that, but when they cross a line and it becomes criminal, then we will intervene,” said State Attorney Angela Corey.

  • The homeowner notified police when she realized people were living in her foreclosed home. [...] So far no arrests have been made. This case is still under investigation.

Foreclosed Couple Cop Guilty Pleas On Charges Of Removing, Vandalizing $20K+ In Fixtures From Former Home

In Stockton, California, The Record reports:

  • A Stockton couple pleaded guilty to stealing and vandalizing more than $20,000 worth of fixtures from the home they lost in foreclosure. Greg Alan Wright, 41, and his wife, Sandy Wright, 48, were in default on their two mortgages for nearly two years and were unable to sell their home in a short sale, selling the home for less than the loan amount.

  • Greg Wright was sentenced to five years' felony probation and 270 hours of community service after pleading no contest to removal of attachments or fixtures from mortgaged or encumbered real property, a felony that carries a maximum prison term of three years. He also pleaded guilty to a vandalism misdemeanor.

  • Sandy Wright was sentenced to three years' probation and 270 hours of community service after pleading no contest to a vandalism misdemeanor.

  • Real estate fraud prosecutor James Lewis said homeowners risk criminal prosecution if they vandalize the home or take the fixtures once it is no longer theirs.

Friday, April 27, 2012

Sacramento Feds Score 3 Convictions Centering On Equity Stripping Racket That Peddled Sale Leaseback Ripoffs To High-Equity Homeowners In Foreclosure

In Sacramento, California, The Record Searchlight reports:

  • Two Redding residents indicted by a federal grand jury in 2010 for their roles in what prosecutors have described as a fraudulent foreclosure recovery scheme pleaded guilty [] in U.S. District Court, a spokeswoman with the U.S. attorney's office said. A Redding woman also indicted in the same case has rejected a plea bargain offer and is scheduled to stand trial next month.

  • Lauren Horwood, a spokeswoman for the U.S. attorney's office, said Darrin Arthur Johnston, 47, and Todd Allen Smith, 49, both of Redding, as well as Jeremiah Allen Martin, 34, of San Antonio, pleaded guilty Tuesday and are scheduled to be sentenced on Sept. 25. But she said the terms of the plea bargains, as well as the specific counts to which the trio admitted guilt, won't be released until then.
***

  • Prosecutors have said the alleged fraud scheme resulted in financially distressed homeowners signing over the deeds to their homes with the understanding that they could lease them and buy them back in two years. But, prosecutors have said, Johnston, Smith and Martin allegedly pocketed the lease-rental payments instead of paying off the loans.

  • Peterson, who was an escrow officer, used her notary status to give the appearance of legitimacy to the scheme, the federal indictment claims. Many homeowners lost their homes in the course of the alleged fraud, and lenders suffered losses in excess of $1 million, prosecutors have said.
***
  • According to the federal jury's indictment, the so-called foreclosure recovery program was based on their false representations that the homeowners could lease back their homes for a low rent and that they would help them repair their credit.

  • After obtaining titles to the homes, however, prosecutors said, Martin, Johnston and Smith allegedly extracted equity from them by inflating their values and obtaining additional loans, keeping the rent payments rather than making payments to lenders, and then allowed the homes to be lost in foreclosure.(1)
For the story, see Three plead guilty to federal charges in Redding foreclosure recovery scheme (Fourth person will stand trial next month).

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

Nevada Foreclosure Investors File Massive Federal False Claims Act Suit Targeting HOAs That Allegedly Squeezed Them For Improper Charges

In Las Vegas, Nevada, Vegas, Inc. reports:
  • Attorneys for investors in Nevada foreclosed homes have filed yet another massive lawsuit challenging homeowner association assessments and collection costs. The latest suit was filed secretly in April 2011 in federal court in Las Vegas and it was unsealed on Wednesday.

  • In the suit, investors’ attorneys Puoy Premsrirut and James Adams represent the United States government with their suit filed under the False Claims Act. It was initially filed secretly so the government could review it to see if it wanted to participate in the action.

  • Under the False Claims Act, citizens can sue on behalf of the government when they become aware of alleged wrongdoing causing harm to the government. They can then share any damages collected with the government.In this case, the U.S. Justice Department specifically chose not to intervene in the suit and it chose not to seek dismissal of the suit.

Closing Agent Cops Guilty Plea For Illegally Diverting Escrow Funds From Real Estate Closings

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

  • [D]efendant Linda Irene Rovetto, 69, of Lake County, pled guilty [] in connection with her participation in a bank fraud conspiracy scheme. More specifically, Rovetto pled guilty to converting and misdirecting more than $3.5 million of real estate escrow funds, in violation of Title 18, United States Code, Sections 1344 and 1349.
***
  • On December 9, 2010, defendant Rovetto and three others were indicted on bank fraud, conspiracy, and related mortgage fraud charges. According to the charges, Rovetto, through her company Florida Lakes Title & Closing, LLC, along with various co-defendants, were diverting escrowed mortgaged funds from real estate closings.

  • In this way, the defendants diverted more than $3.5 million in mortgage loans to Raviworld New Homes, Inc., a company managed by codefendant Bhaardwaj Seecharan. Bhaardwaj Seecharan pled guilty on April 2, 2012 to the same charges as Rovetto.
For the U.S. Attorney press release, see Lake County Woman Pleads Guilty to Bank Fraud Conspiracy Charges.

Real Estate Agent Pinched For Allegedly Using Client's Personal Information To Score $412K Mortgage

In East Orange, New Jersey, The Star Ledger reports:
  • Authorities have charged a real estate agent with fraud for illegally using a client’s personal information to secure a mortgage on a property, then operate her business and collect rent from the same location.

  • Sylvia Sexius, 46, was arrested [], charged with theft by deception, forgery and theft by unlawful taking, the Essex County Prosecutor’s Office announced. Authorities were alerted to the alleged crime in October, when a Newark woman reported she had been receiving foreclosure notices for an East Orange property she did not own.

  • The prosecutor’s office financial crimes unit investigated and discovered that Sexius, an East Orange-based real estate agent, had completed a fraudulent mortgage on the property for $412,000 using the Newark woman’s personal information, authorities said. Sexius, of Orange, had allegedly obtained the information after having earlier refinanced the woman’s home.

  • Sexius took possession of the property at 520-524 Prospect St., then began operating her real estate business there while also collecting rental income from commercial and residential units in the same building, the prosecutor’s office said.

Thursday, April 26, 2012

MERS, Others File Responses To NY AG Charges Relating To Banksters' Dubious Foreclosure Filings

In Brooklyn, New York, the New York Law Journal reports:
  • MERS and several banks who were sued by New York's attorney general for allegedly initiating faulty foreclosure actions have struck back in the high-profile litigation by strongly defending their practices and discounting the office's assertions as factually and legally deficient.

  • In February, Attorney General Eric Schneiderman sued MERS—Mortgage Electronic Registration Systems—and several major banks and mortgage servicers, including JPMorgan Chase, Bank of America and Wells Fargo.

  • The action contended the defendants' use of the MERS system resulted "in the filing of improper New York foreclosure proceedings, undermined the integrity of the judicial process, created confusion and uncertainty concerning property ownership interests, and potentially created clouds of title on properties" across the state (NYLJ, Feb. 6).

  • Defendants fired back on April 20, seeking dismissal of the suit and claiming that their practices—such as having MERS commence a foreclosure or using a private registry to track loan ownership rights—were not deceptive and stressed that the attorney general never pointed to a single case where an action was initiated against a homeowner who was not in default.
***
  • The case has been assigned to Brooklyn Supreme Court Justice David Schmidt and the attorney general's response is due June 22.

Go here for the New York Attorney General lawsuit filed Feb. 3 describing MERS Inc. of Virginia, a digital mortgage tracking service, as "a shell company" established as a stealth mortgagee for banks, particularly JPMorgan Chase, the Bank of America and Wells Fargo Bank.

Criminal Prosecutions Related To New Jersey Municipal Tax Lien Bid Rigging Probe Lead To Property Owner's Civil Suit Making Similar Charges

In Trenton, New Jersey, Courthouse News Service reports:
  • A federal class action claims that 26 people, banks and corporations, "who are among the largest purchasers of tax sale certificates in the State of New Jersey," rigged bids at municipal tax lien auctions to assure that interest rates on property tax obligations would stay at the maximum 18 percent. The named plaintiff is MSC, LLC, of Cherry Hill.


  • "A Tax Sale Certificate was issued with respect to plaintiff's property, and such Tax Sale Certificate was purchased by one of the defendants pursuant to the conspiracy alleged herein," the complaint states.


  • "As a result of the defendants' conduct alleged herein, the interest rate associated with plaintiff's delinquent tax obligation was artificially inflated and plaintiff was damaged thereby. Plaintiff is currently facing the prospect of foreclosure on its property by one of the defendants due to the TSC associated with its property."
For the lawsuit, see MSC LLC v. Collins et al.

Michigan Appeals Court To Stiffed Lenders: 'One Action' Rule Means What It Says - Only One Action At A Time In Cases Involving Foreclosure

Lexology reports:
  • [T]he Michigan Court of Appeals, Michigan’s intermediate appellate court, issued its opinion in Greenville Lafayette, LLC v. Elgin State Bank (Case No. 308450), which reversed a decision of the Montcalm County Circuit Court on the scope of Michigan’s “one action” rule applicable to mortgage foreclosure by advertisement proceedings, MCL 600.3204(1)(b).


  • This statutory provision prohibits the commencement and continuation of foreclosure by advertisement proceedings when “an action or proceedings, at law” have been instituted “to recover the debt secured by the mortgage or any part of the mortgage.”


  • If such an action or proceeding has been commenced and is pending, it must be discontinued before the foreclosure proceeding can be begun. Alternatively, if such an action has resulted in the entry of a money judgment on the mortgage debt, then the foreclosure proceeding may only be commenced if an execution on that judgmenthas been returned unsatisfied, in whole or in part.” Id.


  • The rationale for this rule is to prohibit harassment of the mortgagor by requiring it to defend two proceedings at once and to forbid a double recovery on the debt. See, e.g., Lee v. Clary, 38 Mich. 223, 227 (1878); Larzelere v. Starkweather, 38 Mich. 96 (1878).

Wednesday, April 25, 2012

Antitrust Feds Pinch Another In Ongoing Probe Into Bid Rigging At New Jersey Tax Lien Auctions

From the U.S. Department of Justice::::;:;
  • A financial investor who purchased municipal tax liens at auctions in New Jersey, as well as a company in which he was a partner, pleaded guilty [] for their roles 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 [] in the U.S. District Court for the District of New Jersey in Newark, N.J., against David Butler of Cherry Hill, N.J. A charge was also filed against DSBD LLC, a New Jersey company responsible for managing tax lien investments in which Butler had a partnership interest. Under the plea agreements, which are subject to court approval, Butler and DSBD have each agreed to cooperate with the department’s ongoing investigation.


  • According to the felony charges, from at least as early as the beginning of 2005 until approximately February 2009, Butler and his company participated in a conspiracy to rig bids at auctions for the sale of municipal tax liens in New Jersey by agreeing to allocate among certain bidders on which liens to bid.
  • The department said that both Butler and DSBD proceeded to submit bids in accordance with their agreements and purchased tax liens at collusive and non-competitive interest rates.

Title Underwriter: Property Acquired Through 'Mortgage Terminator' Lawsuits Are Uninsurable

From the Florida Condo & HOA Blog:
  • The largest title insurance company in Florida (Attorneys’ Title Fund Services, LLC, also known as “The Fund”) recently published an opinion by its underwriting counsel cautioning attorneys and title insurance companies against closing and insuring any transaction where the association’s title was obtained through a “mortgage terminator” lawsuit.


  • What is a “mortgage terminator” lawsuit? It is a marketing term used to describe a lawsuit filed by a condominium or homeowners’ association, after the association has taken title to a unit (typically through foreclosure of the association’s lien). After acquiring title to the property, the association files suit against the lender (the owner of the mortgage) to “terminate” the mortgage. When the lender fails to appear, a default judgment is entered granting the relief sought which includes cancellation of the mortgage of record.


  • Proponents of the “mortgage terminator” lawsuit have tried to convince associations that these lawsuits are a good idea. Some are actively encouraging associations to move forward with this type of action. We are seeing more and more evidence that these tactics ultimately put associations at risk. Associations may have sold such units to third-parties, claiming that the mortgage on the unit has been “wiped-out” by the mortgage terminator lawsuit.


  • In reality, the lender may still have the right to enforce the mortgage. Therefore, an association could be sued by the person who bought the unit from the association and who thought that he or she had clear title to the unit. And instead of clear title to the unit, the new owners could be forced to move out of the unit when the bank took title or would have to pay rent to the bank on a unit that they thought they owned.


  • So associations should proceed with caution and understand that any potential benefit from these types of lawsuits are outweighed by the risks to the association and the innocent third party that buys such a unit from the association.

Homeowner Gets Temporary Stall From Foreclosure Eviction; Judge Orders Discovery To Establish Legitimacy Of Dubious 'Linda Green' Mortgage Assignment

In Detroit, Michigan, The Michigan Citizen reports:
  • A metro Detroit homeowner received a temporary victory in court April 16 against a possible illegal eviction. Attorney Vanessa Fluker argued in Wayne County Circuit Court that Deutsche Bank is using forged documents to claim ownership of her client’s home. Fluker’s client, who asked that her name not be released to the press, is facing eviction despite seeking loan modifications and attempting to buy her home after a sheriff’s sale.


  • Deutshe Bank is one of several large financial institutions foreclosing on homeowners without knowing who legally possesses the title, Fluker argued before Judge John MacDonald. Fluker was in court to defend her client from Deutsche Bank.


  • Fluker says her client is a victim of an epidemic of robo-signings — the practice of banks signing thousands of documents and affidavits without verifying the information. “The whole issue is that the homeowner was at the eviction stage and they actually challenged the legitimacy of the ownership/interest of the plaintiff, which is Deutsche Bank,” Fluker told the Michigan Citizen. “One of the reasons and rationale for this is that there were numerous assignments, one of which was done by a ‘Linda Green,’ a nationally known robo-signer.”


  • Fluker argued the assignments were improper and therefore would affect the bank’s standing to initiate a legitimate foreclosure and subsequent eviction.


  • Judge MacDonald ruled in favor of Fluker’s client, saying a period of discovery was required before he could establish theassignment of mortgage” and the case could move forward.

Tuesday, April 24, 2012

Minnesota Suit Alleges Servicemember Lost Home To Foreclosure While Away On Active Duty; Class Action Status Sought

In St. Paul, Minnesota, the Star Tribune reports:

  • Army Staff Sgt. Phillip Harry learned his house had been foreclosed upon and sold in a letter forwarded to him while he was serving in Iraq. Harry, a member of the Minnesota National Guard, filed suit on Friday against his mortgage company, alleging the company violated a federal law protecting service members from losing their homes while they are deployed.


  • Reflecting a convergence of two major social issues: the home foreclosure crisis and the return of thousands of members of the military from Iraq and Afghanistan, attorneys for Harry are seeking to have the suit certified as a class action, saying hundreds of service members are likely to have faced the same situation.
***
  • The suit filed in U.S. District Court in Minnesota accuses Illinois-based HSBC Mortgage Services of violations of the Servicemembers Civil Relief Act, signed into law in 2003 as a way of easing the economic and legal burdens on military personnel called to service.


  • The suit alleges that the company has foreclosed on service members' mortgages while they were on active duty and evicted them and their families without giving them a chance to challenge the foreclosures in court. It also alleges that HSBC recklessly filed papers that said Harry was not a member of the military at the time of the sale, when a simple check of public records would have shown he was serving overseas.

Lawsuit: Property Seller Under Contract For Deed Pocketed $51K In Payments, Then Stiffed Buyer On Title Transfer

In Jefferson County, Texas, The Southeast Texas Record reports:
  • A Jefferson County woman claims the seller of property she purchased refuses to convey the property's deed to her. Doris Marie Living filed a lawsuit April 5 in Jefferson County District Court against Calvin Spikes.


  • In her complaint, Living claims she entered into a contract for deed and made $51,000 in payments. Despite Living's payments, however, Spikes refuses to transfer the deed to her, breaching his contract with her, according to the complaint.


  • Spikes also violated the Texas Property Code by refusing to transfer the property title to Living, the suit states. Not only did Spikes refuse to give Living the deed to the property she purchased, but he also overcharged her by $4,000, the complaint says.


  • In her complaint, Living seeks a declaratory judgment that she legally owns the title to the property.


  • She also seeks actual damages, a refund of overpayments, liquidated damages in the maximum amount allowed by law, attorneys' fees, costs, pre- and post-judgment interest and other relief the court deems just.

Missouri High Court: F'closure Deficiency Damages Calculation To Be Based On Deflated Auction Sale Price, Despite Property's Higher Fair Market Value

Lexology reports:
  • On Tuesday, April 17, 2012, the Missouri Supreme Court handed down its decision in First Bank v. Fischer & Frichtel, Inc. (Case No. SC91951), a case which we originally discussed in early-October.  The Court’s 6-1 decision (with Justice Draper and Justice Price not participating and Justice Teitelman dissenting in a separate opinion) upheld Missouri’s common law approach to calculating the amount of a deficiency judgment resulting from a foreclosure.


  • Missouri courts have long held that the measure of a deficiency is the difference between the debt owed and the price paid at a foreclosure sale. The Court stated that any change to that law should be made by statute.
***

  • The Borrower asked the Missouri Supreme Court to overrule Missouri’s common law approach to measuring deficiency judgments by adopting the Restatement (Third) of Property fair value approach.  This approach limits a lender’s deficiency damages to the difference between the fair market value of the property on the date of the sale and the amount due on the note.


  • During oral argument, counsel for the Borrower stated that 35 states have incorporated a fair market value approach. However, the Court’s opinion notes that all of the states that follow the fair market value approach have either always done so or have done so in accordance with state statute.
For more, see Missouri Supreme Court reaffirms deficiency judgment measure in First Bank v. Fischer & Frichtel, Inc. (may require subscription; if no subscription, GO HERE; or TRY HERE - then click the appropriate link).
In a related story, see St. Louis Post Dispatch: Missouri Supreme Court decision could hit Matheny in the wallet (New Cardinals manager Mike Matheny is off to a sizzling start in the dugout, but a ruling by the state's highest court could deal a blow to his finances).

Monday, April 23, 2012

Atlanta Cops Pinch 'Sovereign' Pair On Theft By Deception, Racketeering Charges; Duo Accused Of Hijacking Vacant Foreclosed Homes Using Adverse Possession Claims

In Atlanta, Georgia, the Atlanta Journal Constitution reports:
  • A husband and wife associated with the so-called sovereign citizens movement were arrested Thursday for allegedly trying to sell stolen vacant Atlanta homes. Edgar Lee Rodgers and Diane Rowe are accused of filing false adverse possession documents – essentially claiming squatters’ rights – to homes that were vacant, likely due to foreclosure. Rodgers and Rowe are being held in the Fulton County jail awaiting bond hearings on racketeering and multiple theft-by-deception charges.
  • Police say the couple ascribe to the sovereign citizen philosophy that they are subject to the rule of common law – that is, legal precedent established by judges – and are immune to federal, state and local laws.
  • "The irony of it is that while they were out convincing people to buy homes using adverse possession, they both paid a regular mortgage," said Sgt. Paul Cooper, head of the Atlanta Police Department fraud unit.
  • Rodgers called himself Immanuel Hood and went around recruiting people to take over homes using adverse possession, police said. He was charging upwards of nearly $9,000 to walk people through his process for adverse possession, promising them they could own homes in as little as two weeks for sums as low as $2,000. "He was literally hosting tours of homes," Cooper said. At least 19 homes across Atlanta were targeted.
  • Georgia's adverse possession laws allow for a person living in a home for 20 years or more -- with the owner's knowledge and express permission -- to take possession of the home. Rodgers' method fell far short of the state's requirements, authorities said.
For more, see Police: Man gave tours of stolen homes.

Minnesota Lawmakers Make Move To Close Loophole Allowing Loan Modification Rackets To Flourish

In Minneapolis, Minnesota, the Star Tribune reports:
  • The homeowners met at such places as Perkins or McDonald's, desperately handing over hundreds of dollars to Kevin Sistrunk in hopes he could help save their home from foreclosure. He never did. Instead, the more than $6,000 they gave him was deposited into his personal bank account.
  • The 2011 case that resulted in felony convictions against Sistrunk of North Branch for check forgery and theft is part of a growing number of loan modification scams targeted at homeowners looking to refinance their homes or save them from foreclosure.
  • In response, Minnesota legislators are moving to ramp up regulations for loan originators like Sistrunk, who have been exempt from nearly all state regulations for the loan modification industry. Legislation that unanimously passed in the Senate and is now awaiting a vote in the House would close that loophole.
  • Advocates and lawmakers say tightening state law will better protect homeowners by requiring loan originators to give specific warnings or provide copies of paperwork, among other provisions. It also will make it easier for lawyers to pursue charges when fraud occurs.
  • "What has arisen here is people getting these licenses as a way to avoid complying with the law," said Ron Elwood, supervising attorney for Legal Services Advocacy Project who lobbied for the change. "It's a growing problem and the potential [for damage] is tremendous as soon as folks figure out that, to get a mortgage broker license, they get a 'get out of jail' free card ... It has become an epidemic."
  • Current state law says financial consultants licensed as loan originators only have to abide by one state rule: Don't charge compensation until after completing what they tell a consumer they'll do. But even that, Elwood says, is loosely defined, giving them ways around it to charge upfront fees. Other provisions such as providing paperwork copies or allowing a homeowner to sue for damages are exempt for loan originators.
  • "Nobody contemplated that loan modifiers ... would actually use the license as a shield to get away with it," Elwood said.
  • In cases that aren't as well-documented as that against Sistrunk, the added provisions would make it easier to build a case in civil court and would put more liability on the company that employs the loan originator. In the case of Sistrunk, prosecutors in Washington County had a clear paper trail.
  • Sistrunk, who worked for Trinity Mortgage, promised to help seven families refinance or modify home loans in 2008 and 2009. They met him at their homes or at fast-food restaurants to drop off checks of about $750 each, according to court documents. In all, they gave Sistrunk $6,375.
  • No copies of the paperwork they signed were given to them. No homes were refinanced and no loans were modified, causing some of the homes to end up in foreclosure. And every check they wrote was deposited in Sistrunk's personal account even though they were written to Trinity Mortgage. After an investigation by the state Department of Commerce, Sistrunk pleaded guilty and was convicted of check forgery and theft, both felonies. Not all of the restitution has been paid yet, County Attorney Pete Orput said, which "just compounds the pain for these victims."
  • In recent years, he said his office have seen more mortgage fraud cases like Sistrunk's, and often "they can hide behind a good faith effort ... a lot of finger-pointing," he said.
For more, see Whistleblower: Loan modification scams 'a growing problem' (A bill moving through the Legislature aims to better protect homeowners from unscrupulous originators).

Ohio AG Files Civil Suit Charging Alleged Loan Modification Racket Of Pocketing Upfront Cash, Then Failing To Deliver Promised Services

From the Office of the Ohio Attorney General:
  • Ohio Attorney General Mike DeWine [] announced a lawsuit against Christopher Rojas of Irvine, Calif., for running a foreclosure rescue operation that used multiple business names and failed to deliver on its promises to lower consumers' mortgage payments. The lawsuit charges Rojas with multiple violations of Ohio's consumer laws.
***
  •  Christopher Rojas, working out of California, promises consumers that he will reduce their mortgage payments in exchange for fees of approximately $3,000 per consumer. Despite accepting substantial down payments, Rojas fails to provide beneficial services to consumers and fails to refund their money.
  • According to the Attorney General, Rojas also routinely changes his business names when consumer complaints begin to surface. Rojas has done business as National Juris Solutions, US National Legal Solutions, Weston & Wyatt, Merrill & Warren, and Legacy Holdings Group.
For the Ohio AG lawsuit, see State of Ohio v. Rojas.

Homeowner Victimized By Loan Mod Runaround Scores Foreclosure Dismissal; Judge: Failure To Date Loan Mod Agreement Not Fatal To Valid Contract

In Prescott, Wisconsin, the Pierce County Herald reports:
  • Judge Joseph Boles dismissed a foreclosure action brought by JP Morgan Chase Bank against Steven J. and Sharolynne Atkins, N4893 1100th St., Prescott.
  • According to background in the decision, the Atkinses fell behind on their mortgage in 2009. They negotiated with the finance company to modify the terms of the mortgage and were approved for modification in December 2009. They signed the agreement in January 2010.
  • According to the judge’s decision, the couple made all the payments required by the modification agreement since June 2009. But in August 2010, the bank began rejecting the $719 monthly payments, returned the check and began foreclosure proceedings. JP Morgan claimed the modification agreement was not valid because Sharolynne Atkins’ signature was not dated.
  • Boles found the loan modification agreement was a valid contract, the signatures had been notarized and Atkins’s failure to print a date by her signature did not invalidate the agreement.
Source: Judge dismisses foreclosure action against Prescott couple.

Accusations Continue That BofA Gives Homeowners Loan Mod Runaround, Pocketing Reduced Workout Payments, Then Threatening Foreclosure Anyway

In Port St. John, Florida, WFTV-TV Channel 9 reports:
  • A Port Saint John family thought they had avoided disaster after a loan modification was approved. But  a year later, they claim, Bank of America is foreclosing on their home even though they haven't missed a mortgage payment since the modification.
***
  • Billie Whaley posted three signs  at her  home, all attacking Bank of America. One reads: "Please help us. Bank of America is trying to steal our home." Whaley claims the lender double-crossed her family by approving  a loan modification, taking payments for nearly a year, and now threatening foreclosure. "I can't think about it and not cry. We put everything into this home," Whaley said.
  • According to Waley, the bank approved a modified loan with a congratulations letter last March and dropped their payment by $200 a month. Months later, the bank said it had not signed the final papers, but Waley claims she was told to keep paying and the bank told her, "We apologize, it's on our end, it's our problem, everything's going to be fixed."
  • But now, Bank of America told the Whaleys they are $14,000 behind, and it has start the foreclosure process. They're not alone. WFTV has received a dozen complaints from Bank of America customers just this year. Many claim they can't get a straight answer about their loan modification.
  • What angered the Whaleys was that the bank kept cashing their mortgage checks, but did not apply anything toward their loan. [...] Bank of America told WFTV, the couple's case is now under review and they have contacted them. But the Whaleys are considering legal action against the bank to enforce what they consider a final modification.