Fla. Appeals Court: F'closing Lender Must Prove Note Ownership As Of Filing Date; Nixes Retroactive Mortgage Assignments; Says One Year TILA Limitations Statute Inapplicable When Recoupment, Setoff Raised As Defense

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

• A foreclosure sale isn’t necessarily the end for some homeowners, as one South Florida couple has found.
  
  An appeals court last week sided with Cesar and Ruth Vidal, who appealed a Broward County Circuit Court ruling granting a lender’s right to repossess their North Lauderdale home.
  
  The home was sold to a third party at a foreclosure auction in April 2011, but the Fourth District Court of Appeal ruling means that the foreclosure must be overturned, said John H. Ruiz, the couple’s Miami lawyer.
  
  The appeals court also ruled that the Vidals could continue to seek damages and try to have the mortgage canceled on the grounds that the lender, Liquidation Properties Inc., allegedly violated the federal Truth in Lending Act, Ruiz said.(1)
  
  He said both rulings could be precedent-setting and have the potential to affect thousands of other foreclosures in Florida. “This is a victory for homeowners in a huge way,” he said.

***

• In late 2010, several big lenders temporarily stopped filing thousands of foreclosures nationwide while they investigated possible paperwork errors. Bank employees admitted to signing foreclosure affidavits without reviewing them.
  
  In the furor that followed, homeowners and their lawyers accused lenders and judges of rubber-stamping foreclosures and compromising defendants’ rights to due process.
  
  Some homeowners say banks lost the mortgages and improperly submitted back-dated paperwork in an effort to show ownership.
  
  In the Vidal case, the Broward court ruled that Liquidation Services proved its right to foreclose. But the Fourth District Court of Appeal disagreed, saying the lender didn’t produce an affidavit showing it owned the mortgage prior to filing the foreclosure, as required by law.(2) Lawyers for Liquidation Services could not be reached for comment.
  
  “In filing a mortgage foreclosure suit ... it is incumbent on the plaintiff to be in a position to prove he, she, or it owns and holds the note as of the date suit is filed,” the appeals court wrote.
  

For the story, see Broward couple wins appeal after house is foreclosed.

For the ruling, see Vidal v. Liquidation Properties, Inc., No. 4D10-3358 (Fla. App. 4th DCA October 31, 2012).

(1) In connection with the alleged violations of the federal Truth in Lending Act, the central point was whether the statute's one year statute of limitations applied when the issue of recoupment was raised by the homeowner. According to the Florida appeals court:

• The trial court held the affirmative defense of violations of the Truth in Lending Act was legally insufficient because the statute of limitations under that Act had run.
  
  Federal law imposes a three-year statute of limitations from the consummation of the transaction on any action for rescission under the Truth in Lending Act. 15 U.S.C. § 1635(f) (2006); Dove v. McCormick, 698 So. 2d 585, 587 (Fla. 5th DCA 1997).
  
  A one-year statute of limitation from the date of violation of the Act applies to actions for recoupment. 15 U.S.C. § 1640(e). However, when recoupment and setoff are raised as a defense, the one-year statute of limitations does not apply. Title 15 U.S.C. 1640(e) states:
  
  'This subsection does not bar a person from asserting a violation of this subchapter in an action to collect the debt which was brought more than one year from the date of the occurrence of the violation as a matter of defense by recoupment or set-off in such action, except as otherwise provided by State law."
  
  The Vidals' affirmative defense seeking recoupment damages and set-off for Truth in Lending violations was not barred an the statute of limitations set forth in the Truth in Lending Act. Liquidation filed no sworn statements showing the defense was not valid. The failure to rebut a properly raised affirmative defense precludes the entry of summary judgment in favor of Liquidation. Servedio v. US Bank Nat'l Ass'n, 46 So. 3d 1105, 1107 (Fla. 4th DCA 2010).

(2) The court addressed this point in the following excerpt:

• While Liquidation filed the original note and an allonge to the note endorsed in blank, the allonge is not dated, and Liquidation did not file an affidavit demonstrating that the note was transferred prior to the filing of the complaint.
  
  The assignment of mortgage reflects transfer of only the mortgage, not the note. Although the Assignment of Mortgage was sworn to on February 6, 2009, and states "ASSIGNMENT EFFECTIVE AS OF 01/15/2009," two inferences can be drawn from the effective date language. One could infer that ownership of the note and mortgage were equitably transferred to Liquidation on January 15, 2009, but one could also infer that the parties to the transfer were attempting to backdate an event to their benefit.
  
  Because the language yields two possible inferences, proof is needed as to the meaning of the language, and a disputed fact exists. Soncoast Cmty. Church of Boca Raton, Inc. v. Travis Boating Ctr. of Fla., Inc., 981 So. 2d 654, 655 (Fla. 4th DCA 2008).

In a footnote, the court briefly addressed the possible use of backdated assignments by foreclosing lenders to cover up their screwups:

• Allowing assignments to be retroactively effective would be inimical to the requirements of pre-suit ownership for standing in foreclosure cases.

Closing Agent Gets Two Years After Admitting To $680K+ Escrow Account Ripoff Of Cash Intended To Pay Off Existing Mortgage Liens

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

• U.S. District Judge Ellen L. Hollander sentenced Sandy P. Kim, age 43, of Ellicott City, Maryland, [] to two years in prison followed by three years of supervised release for wire fraud. Judge Hollander also entered an order that Kim forfeit $684,283, the amount Kim stole from mortgage escrow accounts.

***

• According to her plea, from 2005 to 2008, Kim was an agent for a title insurance company, and was the owner and chief operating officer of EK Settlements. Kim was required to maintain an escrow account for EK Settlements in order to receive real estate settlement funds from buyers and pay off mortgage lenders.
  
  Starting in 2006, Kim stole money from the escrow accounts to pay her personal bills, including taxes and private school tuition for her children. She also used the stolen funds to pay prior loans she had failed to pay off, in order to forestall discovery of her theft.
  
  On August 20, 2007 Kim performed a closing for a client and caused $175,136 to be wired to an account she controlled. Instead of paying off the client’s prior mortgage, Kim used the money for her own purposes. To conceal the theft, she made several monthly mortgage payments to the prior mortgage lender.
  
  In 2008 when the title insurance company began to suspect problems and sought to audit her accounts, Kim submitted fraudulently altered bank records. When subsequently interviewed by law enforcement, she admitted to the scheme.
  
  Kim stole a total of $684,283 from the escrow accounts which were intended to pay off mortgage lenders.

For the U.S. Attorney press release, see Ellicott City Title Agent Sentenced to 2 Years in Prison for Stealing over $684,283 from Mortgage Escrows.

Ohio AG Targets Outfit In Lawsuit Alleging Loan Modification Ripoffs In Response To Complaints Received From Approx. 150 Consumers Nationwide

From the Office of the Ohio Attorney General:

• Ohio Attorney General Mike DeWine [] announced a lawsuit against Ryan Zimmerman, Consumer Advocates Group Experts, LLC, and Advocates for Consumer Affairs Experts, LLC for violations of Ohio's consumer laws, including failure to deliver and failure to provide refunds for home loan modification assistance. DeWine seeks consumer restitution, injunctive relief, and civil penalties.

***

• Ryan Zimmerman, previously of Culver City, Calif., operates Consumer Advocates Group Experts and Advocates for Consumer Affairs Experts. Through online advertising and telephone and mail solicitations, the businesses offered to help consumers avoid foreclosure by working with the consumers' lenders to negotiate a loan modification or otherwise adjust their debt. After accepting the payments, the businesses did little or no work to help consumers. The businesses also failed to provide refunds.
  
  The Ohio Attorney General's Office, the Better Business Bureau, and Consumer Sentinel have received approximately 150 consumer complaints nationwide against the businesses. In their complaints, consumers state they paid up-front fees for the loan modifications ranging from $1,875 to $2,700.
  
  The Ohio Attorney General's lawsuit charges the defendants with multiple violations of the Consumer Sales Practices Act, including failure to deliver and failure to provide refunds. Additionally, it charges the defendants with violating the Debt Adjusters Act and the Telephone Solicitation Sales Act.

For the Ohio AG press release, see Attorney General DeWine Seeks Consumer Restitution from Out-of-State Foreclosure Rescue Operation.

Closing Attorney Gets 51 Months For Ripping Off $3M+ From Trust Account; Loot Intended For Loan Payoffs, Lien Satisfactions

From the Office of the U.S. Attorney (Boston, Massachusetts):

• A Falmouth man who practiced law in Taunton was sentenced [] for bank fraud in connection with mortgage closings.
  
  Craig J. Martin, 54, was sentenced by U.S. District Judge Patti B. Saris to 51 months in prison, to be followed by two years of supervised release and $2.9 million in restitution. On Feb. 3, 2012, Martin pleaded guilty to two counts of wire fraud.
  
  Martin, in his role as a closing attorney for real estate transactions, received mortgage loan funds from lenders, which were to be held in his attorney trust account and used for the closings. As closing attorney, Martin was responsible for using the loan proceeds to pay off the existing mortgages on the properties.
  
  But instead, Martin diverted more than $3 million in mortgage funds to other purposes and falsified the loan closing documents to conceal his misappropriation of the funds.

For the U.S. Attorney press release, see Former Falmouth Attorney Sentenced for Bank Fraud.

Threats From Foreclosed Former Owner Keep Recent Home Buyer, Family From Moving Into Recently-Purchased REO

In Columbus, Ohio, The Columbus Dispatch reports:

• Xavier Salek worked a decade to save enough money to buy his first house. Now he and his family are too terrified to move in.
  
  Salek’s story should be one of triumph. Instead, it illustrates an ugly aftermath of the housing collapse.
  
  Salek moved to Columbus a decade ago, a 28-year-old refugee from violence-torn Mauritania in western Africa. During the next several years, he delivered packages, slowly putting money away to buy a home for his family.
  
  After saving $15,000, he found a house in foreclosure on the Northeast Side with the help of real-estate agent Lyuda Dehlendorf. He borrowed $3,000 from friends and, in late September, paid $18,000 cash for the 1,000-square-foot, three-bedroom ranch. Although the house needs work, he was excited by the idea of having something of his own in America. He liked to think of his two young children playing in the spacious backyard.
  
  Salek hired friend and fellow Mauritanian Ali Kane, a construction worker, to help renovate the house. Shortly after Kane arrived at the home to start the work, Kane said, a man pulled up in a black pickup truck, hopped out and told him that he was the rightful homeowner and that Salek’s purchase was a “fraud.”
  
  “He said he used to live here,” Kane recalled. “He started talking about how people get shot for moving into other people’s homes.” Kane passed along the exchange, which he took as a thinly veiled threat, to Salek and his wife.
  
  The family was so alarmed that they refused to move in. (In talking to me for this column, Salek asked that the address and his real name not be used, because he fears what the man might do.)
  
  Salek called Dehlendorf to see whether he could get his money back. She said no and urged him to call the police. Columbus Police Sgt. David Pelphrey confirmed that Salek should file a report. The next step, if the harassment continues, might be to seek a restraining order.
  
  Dehlendorf assured Salek that he and his wife are the rightful owners of the home. A title search had revealed nothing unusual, no competing claims.
  
  According to a neighbor, the description of the man in the pickup matches that of the former owner, who, along with his wife, lost the home earlier this year after failing to make payments on the mortgage.
  
  The former owner’s anger reflects the lingering bitterness — taken to the extreme — among homeowners who’ve lost homes to foreclosure.

For more, see Anger over foreclosure threatens new owner.

Nebraska Supremes Nix Forced Sale Of Deceased Owner's Multiple Tracts Of Land Where In-Kind Distribution To Heirs Was Feasible; Cash Equalization Ordered To Reflect Varying Values

From a summary of a recent court decision by the Nebraska Supreme Court: appearing in Justia US Law:

• This was an action for partition of the real property in the estate of Ronald McKillip. At the time of his death, McKillip owned four tracts of land.(1) McKillip's will left the property to his three daughters,(2) "share and share alike."
  
  The probate court confirmed ownership of the real estate to the daughters in equal shares. One daughter brought an action to partition the real estate. A referee appointed by the county court determined that a partition in kind of the real estate was not possible and recommended a public sale.
  
  The court approved the report and concluded that the real estate could not be partitioned in kind "without great prejudice to the owners." The court ordered the referee to sell the real estate, and the personal representative appealed.
  
  The Supreme Court reversed, holding that the real estate should be partitioned in kind.(3) Remanded with directions.

Source: Opinion Summary: In re Estate of McKillip.

For the ruling, see In Re Estate of McKillip (aka Shields v. McConnville), 284 Neb. 367 (Neb. September 21, 2012).

(1) The four tracts of unequal values are described in the ruling as follows:

• Tract 1 is a 5-acre rural residential property with a house on it. The property is close to McCook, Nebraska, and shares a water well with tract 2. Tract 1 was valued at $190,000 by the court. The amended inventory valued the property at $196,000, as adjusted for roof repairs.
  
  Tract 2 consists of pastureland (62.74 acres) and cropland (19.49 acres). It was valued at $102,000. Tract 2 could be developed as a subdivision or rural lots. Tracts 1 and 2 are adjoining, and a well on tract 1 is used to water livestock on tract 2.
  
  Tract 3 is about 6 miles from the Kansas state line. It contains mostly cropland, but also some marginal pastureland. Water for livestock is available from a neighboring property. Tract 3, which consists of approximately 161 acres, was valued at $124,000.
  
  Tract 4 is 2 miles north of the Kansas state line and a few miles southwest of tract 3. Tract 4, which totals approximately 240 acres, consists of dryland fields and pastureland. A windmill and two dams provide water for livestock. It was valued at $143,000.

(2) From the ruling:

• At the time of his death, McKillip was survived by three daughters: Sandra K. McConville, Cinthia S. Shields, and Laura Klaus. McKillip's will left his estate to his daughters "share and share alike." The estate included four tracts of real estate valued at $565,000 in the amended inventory, as well as cash and certificates of deposit in excess of $720,380. McConville was named personal representative of the estate.

(3) The Nebraska high court ruled as follows:

• [14,15] It is generally held that until the contrary is made to appear, the presumption prevails that partition in kind is feasible and should be made, and that the burden is on those who seek a sale of the property in lieu of partition in kind to show the existence of a statutory ground for such sale. See Trowbridge v. Donner, supra. A sale in partition cannot be decreed merely to advance the interests of one of the owners, but before ordering a sale, the court must judicially ascertain that the interests of all will be promoted. See id.
  
  In this case, there was no dispute as to what property constituted the assets in the estate. There was no dispute as to the value of the real estate, and there was no claim that the value of the real estate as one parcel was greater than the value of the sum of the individual tracts. There was evidence that two of the devisees, McConville and Klaus, wanted to retain the real estate for personal and sentimental reasons. Shields requested a partition and testified that she wanted the distribution of the real estate to be fair.
  
  [16] The statutory ground for a sale is a showing that partition cannot be made without great prejudice to the parties. See Neb. Rev. Stat. §§ 25-2181 and 25-2183 (Reissue 2008). The generally accepted test of whether a partition in kind would result in great prejudice to the owners is whether the value of the share of each in case of a partition would be materially less than the share of the money equivalent that could probably be obtained for the whole. Trowbridge v. Donner, 152 Neb. 206, 40 N.W.2d 655 (1950) (citing 40 Am. Jur. Partition § 83 (1942)).
  
  Whether partition in kind will result in great prejudice to the parties requires comparing two amounts. The first is the amount an owner would receive if the property were divided in kind and the owner then sold his portion of the property. The second is the amount each owner would receive if the entire property were sold and the proceeds were divided among the owners. If the first amount is materially less than the second amount, great prejudice has been shown. See id.

The court directed that the four tracts real estate (of unequal values) contained in the estate of the sisters' deceased father to be split up in kind, rather than sold by public sale, stating the following:

• The facts necessary for a partition in kind are not in dispute. The appraiser's valuation of the property is not contested, nor is his testimony that sale of the tracts as a whole would not bring a greater amount than sale of the tracts individually. All the property, both real and personal, is to be divided equally among the sisters.
  
  We reject McConville's proposed distribution in kind for the following reasons: Tracts 1 and 2 should not be separated. Separating 19.49 acres is not practical and would create more problems than it would solve. A well on tract 1 provides water to tract 2, and separating tracts 1 and 2 would require arrangements for tract 2 to continue to utilize the well on tract 1 or would necessitate the expense of drilling a new well on tract 2, which may not be feasible.
  
  Accordingly, tracts 1 and 2 should be awarded to one of the devisees. Tract 3 should be awarded to another devisee along with cash from the estate. Tract 4 should be awarded to the remaining devisee along with cash from the estate. The amended inventory of the estate shows that tracts 1 and 2 are valued at a total of $298,000 ($196,000 and $102,000 respectively). (We employ the figures from the amended inventory to account for $6,000 in roof repair to the house on tract 1 not covered by the appraisal.) Tract 3 is valued at $124,000, and tract 4 is valued at $143,000.
  
  The estate contains cash assets in the amount of $720,380.42, and the will directs that the personal property be divided among the devisees. For purposes of this partition, each sister should receive $298,000 in real estate or a combination of real estate and cash from the estate to equalize the distribution. This is accomplished by awarding one sister tracts 1 and 2, one sister tract 3 and $174,000 in cash assets, and the third sister tract 4 and $155,000 in cash assets. Following these distributions, each sister will have received $298,000 from the estate, either in real estate or real estate and cash. Cash assets of $391,380.42 will remain in the estate for later distribution along with other assets of the estate.
  
  Because the county court did not partition the property in kind, it did not consider which sister should receive which tract. Accordingly, the cause must be remanded to the county court with directions to distribute tract 1 and 2 to one sister, tract 3 and $174,000 to one sister, and tract 4 and $155,000 to one sister in order to equalize the distributions of the real estate using cash from the estate.
  
  If the parties cannot agree as to which distribution should be made to each devisee, the court is directed to have the clerk of the court number the shares and then draw the names of the future owners by lot. See Neb. Rev. Stat. §§ 25-2182 and 25-21,102 (Reissue 2008). Section 25-2182 gives a trial court the power to allot particular portions of the land to particular individuals, and unless so allotted, the shares may be drawn by lot, as provided by § 25-21,102. See Trowbridge v. Donner, 152 Neb. 206, 40 N.W.2d 655 (1950).

Foreclosure Review Consultants Scoring Big From National Bankster Mortgage Settlement; Screwed Over Homeowners: Not So Much

American Banker reports:

• In the wake of the financial crisis, banks mishandled foreclosures on such a scale that regulators stepped in. Led by the Office of the Comptroller of the Currency, they ordered banks to hire independent outsiders to identify homeowners who were wrongly foreclosed on and to provide compensation.
  
  Instead of righting a large-scale wrong, however, the "lookback" reviews have become nearly as controversial as the original servicing blunders. Consumer advocates have blasted the reviews as lacking in independence. They allege that regulators have allowed banks to subvert the program by choosing their reviewers, weighing in on whether borrowers were harmed and even appealing consultants' decisions.
  
  Obscured in the feuding is an issue potentially even more troubling than the questions about the consultants' independence: the cost of running the reviews has spiraled out of all proportion to their potential benefits.
  
  Designed to compensate wronged homeowners, the review programs are almost certain to deliver several times more cash to the consultants overseeing them. Bankruptcy filings by ResCap, the former GMAC mortgage servicer slated to be acquired by Ocwen, state that the company will pay consultant PricewaterhouseCoopers $12,500 to review each of 20,000 loans for a total cost of a quarter-billion dollars. Yet ResCap expects to pay only $35 million to $60 million to harmed homeowners.
  
  PwC employees working on the review are billing between $235 and $630 an hour, depending on seniority. The auditing firm declined to respond to emailed questions on the cost and its procedures.
  
  Other servicers appear to be paying foreclosure reviewers similar fees per file, and the OCC has offered no reason not to use ResCap's filings as a proxy for the costs of its peers. The massive bills being incurred indicate that the banks aren't calling the shots, industry sources argue — the institutions are simply following orders and footing the tab for a program that has gone off the rails
  
  "This is Kafkaesque," says an industry source who requested anonymity to avoid angering the OCC and independent reviewers. "The reviews don't provide any closure [to borrowers], and their cost is going to be orders of magnitude beyond what banks pay out."

For more, see Foreclosure Reviews: Exorbitant for Banks, Gold Mines for Consultants.

In a related story, see: Foreclosure Review Pays Consultant $4 for Each $1 to Homeowners.

Use Of 'Contracts For Deed' As Way To Skirt Regulations Raises Concerns For Minneapolis Housing Officials

In Minneapolis, Minnesota, Minnesota Public Radio reports:

• Minneapolis officials and housing advocates are concerned about a trend in the housing market. They say more property owners are striking up informal "contract for deed" deals as a way to sell homes to people who don't qualify for loans.
  
  Some of these sellers are landlords the city says are using the arrangement to skirt safety and housing laws.(1)

***

• The problem is that many buyers don't understand what they're getting into, according to Legal Aid attorney Luke Grundman. As credit continues to be tight, he said unregulated contracts for deed are fueling housing fraud in areas like north Minneapolis, where foreclosed homes come cheap.

***

• As the number of contracts for deed rise, Acting Director of Regulatory Services Henry Reimer is concerned that landlords are using these deals to avoid regulations and rent without a license.
  
  "Then that means that we have people that are living in properties that might not be safe and folks that truly don't have the ability to control their environment not being provided with protections for which we require rental licenses," Reimer said.
  
  "They're not deals, they are steals," said north Minneapolis resident Nekia Tetter.
  
  Tetter and her fiance recently turned down their landlord's offer of a contract for deed. Tetter, 38, said her landlord lost his rental license and the house was in terrible condition. The city posted a red sticker warning of unpaid assessments on the property. Tetter worries that her neighbor, who accepted a contract for deed with the landlord, got a bad deal.
  
  "If you're poor and you feel like your landlord is saying 'oh my god I'm giving you a good deal and this is your home, now you own this, this is not mine anymore.' And a lot of people take this small garbage that they say instead of looking at the big picture," she said.
  
  To prevent more people from entering into contracts they don't understand, Minneapolis officials are surveying neighborhoods to find out how many contracts for deed are out there. Meanwhile, housing advocates are crafting legislation for next session they say would give more protection to contract for deed buyers.

For the story, see Beware of 'contract for deed' housing schemes, Mpls. officials warn.

(1) Contracts for deed can also provide a handy way for unscrupulous real estate investors to unload, onto unwitting novice home buyers, the burdens of owning crappy property that cannot be sold through conventional means due to a variety of problems (structural defects, title defects, environmental hazards (mold, methamphetamine contamination, lead-based paint, etc.)). The victims of these home-buys typically are too unsophisticated to appreciate the need for:

• having a professional home inspection (structural & termite) conducted,
• having a professional title search and property survey conducted, and
• obtaining title insurance.

N. California Couple Wins 'Dual Tracking' Wrongful Foreclosure Suit, But Gets Hammered Anyway; Damages Limited To 'Lost Equity', Leaving Underwater Homeowners Empty-Handed

In Brisbane, California, the San Francisco Chronicle reports:

• While Mark and Jenny Gin were making dozens of calls and submitting reams of paperwork to get a loan modification from OneWest Bank, another department of the bank proceeded to foreclose on their Brisbane home.
  
  That's not unusual. Thousands of homeowners have complained about such "dual tracking" - so many, in fact, that California will ban the practice starting Jan. 1, when the state Homeowners Bill of Rights takes effect.
  
  What distinguishes the Gin family is that they sued - and won. A San Mateo Superior Court jury last month found that OneWest acted fraudulently. Legal experts said it may be the first instance of a California jury finding that a bank committed wrongful foreclosure by dual tracking.
  
  However, the jury awarded the Gins just $13,500, which didn't even cover their legal expenses. To get the house back, they'd have to pony up the full amount they owe on the mortgage, which they can't do.
  
  A cautionary tale
  
  Their story is a cautionary tale that illuminates California's legal landscape for the many homeowners who feel they were wrongfully foreclosed upon. Even in the rare instances where borrowers prevail against banks in court, the rewards may not be worth their trouble.

***

• His attorney, Steven Finley of San Francisco's Hennefer, Finley & Wood, explained the reasoning. The jury "found that the foreclosure was wrongful and fraudulent, but because the property was underwater, (the Gins) received no damages," he said. "Under wrongful foreclosure actions, you only get lost equity."
  
  California offers just two remedies for wrongful foreclosure, Finley said. One is damages, but they are limited to lost equity. The other is to get the house back, but that requires tendering all the money owed on the mortgage.
  
  "California really screws the borrower. If your house was wrongfully foreclosed and you want it back, you have to offer the whole amount," Finley said.
  
  The jury declined to award punitive damages. "Jurors said, 'We feel your client has been defrauded but it wasn't directed maliciously against him,' " Finley said.
  
  The $13,500 awarded to the Gins was to pay them back for a remodeling project they had started. With their first child on the way, they borrowed money from relatives to make the house more child-friendly after being assured by OneWest that they would receive a loan modification, Gin said.

For more, see Legal win means little after foreclosure.

Federal Judge: Pennsylvania Law Requires, Not Merely Permits, Recording Of All Mortgage Assignments; Refuses To Dismiss County Suit Tagging MERS For Failing To Cough Up Associated Recording Fees

From a client alert from the law firm Ballard Spahr:

• A Pennsylvania federal court recently refused to dismiss a putative class action filed against Mortgage Electronic Registration Systems (MERS) by a county recorder of deeds seeking to compel MERS to record past, present, and future mortgage assignments and pay the associated recording fees.
  
  In Montgomery County, Pennsylvania, Recorder of Deeds v. MERSCORP, Inc., and Mortgage Electronic Registration Systems, Inc., the court interpreted Pennsylvania's recording statute to require, rather than merely permit, the recording of all conveyances.
  
  Although a mortgage is recorded naming MERS the mortgagee as nominee for the lender and its assigns, no assignment is recorded when the note secured by the mortgage is transferred to a new owner who is a MERS system member. Instead, the change in beneficial ownership is registered in the MERS electronic database.

For more, see Pennsylvania County Recorder Can Sue MERS for Failure to Record Mortgage Assignments, Federal Court Rules.

Jury-Convicted South Florida Pair Who Ran Sale Leaseback, Equity Stripping Foreclosure Rescue Racket Get Multi-Year Prison Sentences

From the U.S. Department of Justice (Washington, D.C.):

• Lisa Wright, 46, and Cathy Saffer, 52, of Pompano Beach, Fla., were sentenced [] to serve 66 and 60 months respectively for defrauding homeowners and mortgage lenders as part of a foreclosure rescue scheme, the Justice Department announced. The two women were sentenced by U.S. District Judge Kenneth A. Marra in the Southern District of Florida.
  
  Wright pleaded guilty on March 27, 2012, to one count of conspiracy to commit mail and wire fraud, one count of mail fraud and one count of wire fraud. Saffer was convicted of one count of conspiracy to commit mail and wire fraud, three counts of mail fraud and two counts of wire fraud, following a two week jury trial in July.
  
  According to the indictment and evidence presented at trial, Wright and Saffer operated Foreclosure Solution Specialists (FSS) from 2006 to 2009. Through FSS, Wright and Saffer targeted homeowners facing foreclosure, advertising that FSS could assist those homeowners in remaining in their homes.
  
  When contacted by distressed homeowners seeking assistance, Wright and Saffer misrepresented to those homeowners that their homes would be sold to investors. They also claimed that customers could remain in their homes after the sales and promised them an opportunity to repurchase the homes at a later date. Rather than selling the homes to legitimate investors, Wright and Saffer designed sham sales to straw purchasers whom they paid to participate in the scheme.
  
  According to the indictment and evidence presented at trial, Wright and Saffer paid Florida Certified Public Accountant Barrington Coombs to write a fraudulent letter which falsely vouched for the fraudulent information on various loan applications. Coombs, who was also convicted by the jury, is scheduled to be sentenced Dec. 7, 2012.
  
  Mortgage transactions completed by FSS drew equity out of the homes, which Wright and Saffer pocketed for their own purposes. After doing so, Wright and Saffer allowed the loans to go into foreclosure. Homeowners ultimately lost all of the equity in their homes, and most of the victims were forced to move out of their homes.(1)

For the Justice Department press release, see Two Florida Residents Sentenced for Roles in Foreclosure Rescue Scheme (As Part of Scheme Lied to Homeowners Facing Foreclosure They Could Stay in Their Homes).

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

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

Sacramento, Antitrust Feds Score 26th Guilty Plea In Ongoing N. California Foreclosure Sale Bid-Rigging Probe

In San Francisco, California, the San Jose Mercury News reports:

• A Concord man has agreed to plead guilty to a conspiracy to rig bidding at public real estate auctions in the Bay Area, authorities said.
  
  Norman Montalvo, a real estate investor, was charged with four felonies Thursday in the U.S. District Court for the Northern District of California, according to an FBI news release. Montalvo is the 26th person who has admitted to a role in the conspiracy to rig bidding and fraud at the foreclosure auctions.
  
  Montalvo was also charged with using the mail to fraudulently acquire title to properties sold at auctions, to send and receive payoffs, and to send money to co-conspirators. Montalvo's role in the scheme began as early as June 2008 and lasted until about September 2010, according the FBI.
  
  By conspiring to purchase properties at non-competitive prices, Montalvo and others were preventing mortgage holders from getting fair prices for their properties, and in some, cases, keeping money out of the hands of defaulting homeowners, according to the FBI.
  
  Montalvo is charged with bid rigging and fraud at auctions in San Francisco and San Mateo counties, but the Department of Justice's antitrust investigation also covers auctions in Contra Costa and Alameda counties.

Source: Concord investor will plead guilty to foreclosure fraud, authorities say.

For the U.S. Department of Justice press release, see Northern California Real Estate Investor Agrees to Plead Guilty to Bid Rigging at Public Foreclosure Auctions (Investigation Has Yielded 26 Plea Agreements to Date).

Denver-Area Foreclosed Home-Snatching Suspect's Spouse Faces Felonies In Foreclosure Scheme; Hubby Faces Similar Allegations

In Denver, Colorado, The Denver Post reports:

• The wife of a man already indicted by a Denver grand jury for violating Colorado's racketeering law now faces similar charges for her role in a scheme where the couple falsely bought and sold homes that didn't belong to them.
  
  Maria Carrillo, 50, is now charged with violating the Colorado Organized Crime Control Act and faces other felony counts of forgery, conspiracy to commit forgery and attempt to influence a public servant.
  
  Her husband Alfonso Carrillo, 50, now faces seven new counts for a total of 25 counts of theft, burglary and criminal trespass among others, according to the District Attorney's Office.(1)
  
  The indictment alleges that Alfonso Carrillo found homeowners facing foreclosure and convinced them to relinquish their property for a fee, misrepresenting it as a way to avoid foreclosure.
  
  Then he and Rudy Breda, 54, would falsify a sale of the properties to others, taking their money for the "purchase" even though later those "buyers" were forced to vacate the properties when mortgage lenders or actual property owners found them living in the homes.
  
  The scheme was targeting Spanish-speaking home buyers, often undocumented and reluctant to work aith investigators out of fear.
  
  Jose Caraveo and Veronica Fernandez-Beleta were originally named as co-defendants in the indictment, but charges have been dropped and they are now listed as victims of theft. Breda remains at large.

Source: Wife of man accused in real estate scam is indicted as well.

(1) See Indictments Filed Against Pair Accused Of Duping Homeowners Into Giving Up Control Of Homes To Avoid F'closure, Illegally Snatching Vacant Homes.

WV AG Tags Out-Of-State Law Firm For Allegedly Duping Consumers Into Thinking They Must Pay Fees To Collect Benefits From Nat'l Mortgage Settlement

In Charles Town, West Virginia, The Associated Press reports:

• West Virginia Attorney General Darrell McGraw is suing a Texas company for allegedly charging fees to receive benefits from a national mortgage settlement.
  
  Claim forms already were sent to more than 5,000 West Virginians who lost their homes to foreclosure eligible for payments under the settlement between lenders and states.
  
  But McGraw said Thursday that some companies have sought to profit from the settlement by misleading consumers into thinking they must pay a fee to obtain their checks.
  
  The attorney general's office sued Murray LLP and four individuals in Jefferson County Circuit Court. The suit asks the court to block Murray from taking 20 percent of consumers' money as a fee for completing the claim form.
  
  The company's phone number does not allow callers to leave a message.

Source: W.Va. AG sues law firm for exploiting consumers.

For the West Virginia Attorney General press release, see Attorney General McGraw Sues Texas Firm, Murray LLP, to Halt Exploration of Consumers Who Lost Homes Through Foreclosure (Suit Seeks To Block Murray From Charging Fees For Benefits From National Mortgage Settlement Intended To Be Free).

C. Florida Real Estate Operator Bagged Again For More Dubious Dealings With Homeowners; 3rd Arrest Since June, Now Held Without Bail

In Brooksville, Florida, the Tampa Bay Times reports:

• A Brooksville man accused of trying to sell foreclosed properties he never legally owned to unsuspecting buyers(1) is in jail again, this time on a charge of selling real estate without a license, authorities said.
  
  Gaetano Antonelli, 62, was arrested Thursday after a detective, following up on a tip, witnessed Antonelli showing a home on Fairlawn Street in Spring Hill, the Hernando Sheriff's Office said in media release. During a traffic stop immediately afterward, Antonelli admitted he was there to show the property.
  
  His real estate sales license expired in 1999, investigators said.
  
  The woman who owned the home said she contacted Antonelli after seeing his "we buy homes" ad in a coupon booklet. She signed a contract with Antonelli to work for a profit, the Sheriff's Office said.
  
  This is Antonelli's third arrest since June. He already faces six counts of organized fraud and was out on bail at the time of his arrest Thursday.
  
  Investigators say Antonelli targeted homeowners facing foreclosure, telling them he could relieve them of their mortgages by suing their mortgage company. Antonelli told them they could walk away and maybe even get money back if they signed their deeds over to him by a power of attorney agreement, detectives say. Then he would list the houses for sale on Craigslist without the knowledge of the homeowners.
  
  But Antonelli's scheme was based on a false premise, detectives say: Once the foreclosure process begins, as it had in these cases, the owner has no legal right to sign over the deed to him.
  
  He remained in the Hernando County jail without bail Thursday. His vehicle and cash are being seized by the Sheriff's Office.
  

Source: Brooksville man accused of selling real estate without a license.

Go here for the Hernando County, Florida Sheriff's Office press release, see Gaetano Antonelli Back In Jail.

(1) See Cops Bag R/E Operator Accused Of Duping Strapped Homeowners Into Signing Away Deeds To Avoid Foreclosure, Then Looked To Flip Them On Craigslist.

California Homestead Exemption: Automatic vs. Declared

California attorney Marlene S. Cooper writes in The Pasadena/San Gabriel Valley News Journal:

• In these days of rampant debt faced by many of us, protecting the family home through a declaration of homestead could take on new significance.
  
  When financial obligations go unpaid, a person's creditor can go to court to seek payment of the debt. If a judgment is obtained against the debtor, the creditor can then file a judgment lien against the person's real estate, including the debtor's personal residence.
  
  Many times unsecured creditors simply wait for the house to be voluntarily transferred (or re-financed) and collect on the debt from the escrow proceeds; however, sometimes the house is sold involuntarily in foreclosure by the holder of a trust deed on the property or a sale is forced in execution of a money judgment.
  
  Homestead laws are designed to protect the sanctity of the family home against a loss caused by a forced sale of the home by creditors. It can ensure that insolvent debtors and their families are not rendered homeless by virtue of an involuntary sale of the residential property they occupy.
  
  The [California] homestead exemption can be obtained in two ways: (1) the automatic homestead exemption granted as a matter of law to every homeowner, and (2) an express declaration of homestead by the homeowner which is notarized and recorded with the county recorder.
  
  The amount of the exemption may be $50,000, $75,000 or $150,000 according to which statutorily-defined class of persons the homeowner falls into. The amount of equity protected is the same for each type of homestead exemption; however, they operate quite differently in terms of the protection afforded.
  
  The declared homestead provides much greater protection for the property owner than the automatic homestead.
  
  With the automatic homestead, the homeowner['s equity] is protected in the event of a forced foreclosure sale but not a voluntary sale. With the declared homestead, however, the exempt proceeds from a voluntary sale may be reinvested within six months, thus allowing the debtor to invest in another residence.
  
  With the automatic homestead, judgment liens attach to all interests in the property that are subject to the enforcement of money judgments. For the declared homestead, however, a judgment lien filed after the declaration of homestead can only attach to equity in an amount greater than the homestead exemption and any preexisting liens on the property.
  
  Another important distinction is that the declared homestead survives the death of the homestead owner whereas the automatic homestead does not.
  
  A Declaration of Homestead form can be purchased at office supply or legal stationery stores. For those who are internet savvy, the form can also be downloaded from the Registrar-Recorder's website in the real estate section (www.lavote.net). The fee to have the Declaration notarized and recorded is approximately $25.00. There is certainly nothing to lose but much to gain by taking the simple step of filling out and recording the declaration.

Source: The Homestead Exemption.

Use Of 'Cash Register Justice' By Financially-Strapped Municipality Leads To Arrest Over Unpaid Administrative Fee For Ex-Offender Long After Probation Term Ended

In Augusta, Georgia, NBC News reports:

• Kathleen Hucks was walking her dogs down the dirt road that leads out of Mim’s Rentals, a small trailer park in rural Augusta, Ga., when a police officer in a cruiser stopped her on Labor Day weekend.
  
  The officer asked the slight 57-year-old for identification and ran her name through the system. Nothing came up for Richmond County, where she lives. Then the officer ran one more search.
  “He says, ‘Ma'am I have to place you under arrest -- Columbia County’s got a hold on you for violation of probation,’” Hucks remembered.
  
  When her husband, 64-year-old James Hucks, saw his wife getting arrested even though she was no longer on probation, he thought there had been an error. “I said, ‘Look here, don’t y’all realize this case is dead?’”
  
  It was no mistake. A warrant for Hucks’ arrest had been issued in 2010, long after she completed a 24-month probation term arising from a 2006 conviction for drunken driving, possession of marijuana and driving with a suspended license. The reason: She hadn’t paid all the fees she owed to the for-profit company that supervised her probation.
  
  Even though the company’s ability to collect the debt had expired when her probation did, she was arrested. Hucks spent 20 days in jail before a judge freed her.
  
  Last week, Hucks filed suit against Sentinel Offender Services alleging that the Irvine, Calif.,-based company violated her civil rights. The outcome has implications beyond the case of one woman in Augusta because it claims that the Georgia law that allows for a for-profit company to act in a judicial capacity violates the due process clause of the state Constitution.
  
  Hucks’ case is the latest of several lawsuits filed in Georgia and elsewhere challenging private probation companies, which operate in about 20 states.

For more, see 'Cash register justice': Private probation services face legal counterattack.

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

Big Banksters In Need Of More Profit Begin Easing Into Offering High Cost, Short Term Loans To Cash/Credit Challenged Clients; Create Competition With Storefront, Online Payday Loan Peddlers

Bloomberg reports:

• Banks facing lower revenue from debit-card and overdraft fees are ramping up marketing of small short-term loans, prompting regulators to question if they carry the same risks to borrowers as other forms of payday lending.
  
  The high-cost loans offered by firms including Wells Fargo & Co. (WFC) and U.S. Bancorp (USB) are meant for people who can’t access other forms of bank credit, similar to the clients of storefront or online payday lenders.
  
  Scrutiny of the loans increased on Sept. 21, when North Carolina Attorney General Roy Cooper asked Regions Financial Corp. (RF) to provide data showing its loans don’t violate the state’s interest-rate cap. That followed a decision in May by the Federal Deposit Insurance Corp. to investigate payday-like products offered by banks, joining an inquiry by the Consumer Financial Protection Bureau.
  
  “They lend money at a high interest rate and get it paid back at the next paycheck,” Cooper said in an interview. “We want to come at this from all angles to prevent these kinds of loans in North Carolina.”
  
  The matter also has found its way into the judicial system. In August, a private lawsuit was filed in U.S. District Court in Ohio, claiming that Fifth Third Bancorp (FITB) deceived customers about the true costs of its short-term loans.
  
  Traditional storefront payday loans are secured by a check, post-dated to a borrower’s next payday. Online versions require clients to have payments directly debited from their bank account. Consumer groups have charged that the loans prey on low-income people by concealing costs and ensnaring them in an expensive debt cycle.

For more, see Banks Pushing Into Small Loans Compete With Payday Shops.

'Phantom' Online Lead Generators Using Sneaky Ways To Peddle Payday Loans

The Los Angeles Times reports:

• The envelope looked official enough. "Confidential materials enclosed," it said on the outside. "Unauthorized use strictly prohibited."
  
  Evelyn Potter, 81, could feel something the size of a credit card within. Opening the envelope, she found a plastic card with her name and a "reservation number" printed on it. The card invited her to "get up to $500 in your checking account by tomorrow."
  
  Unsure what to make of the offer, the Valley Village resident handed an accompanying letter to her husband, Brent, who'd been a banker for about 30 years. "Did you know you can use this cash any way you like?" the letter said. "You can. It's your money."
  
  Not really.
  
  What we're actually talking about is a sneaky way of pitching payday loans that can come with annual percentage rates as high as 700%. We're also talking about a cunning ploy to get people to disclose sensitive information that can end up in the hands of marketers.
  
  "I've never seen anything like this before," Brent Potter told me. "They're not even disclosing an interest rate. Someone who needed money could very easily get into a terrible situation."
  
  In the Potters' case, the pitch was from a website called NeedRapidCash.com, which makes clear in its fine print that it doesn't actually give loans. What it does is "submit the information you provide to a lender."
  
  Or to whomever is willing to pony up the most money for your Social Security number, bank account number and other personal info.
  
  "They're auctioning off completed loan applications to the highest bidder," said Jean Ann Fox, director of financial services for the Consumer Federation of America. "Some might be real lenders, some might not. It's very dangerous."
  
  NeedRapidCash.com and similar sites serve as so-called lead generators for payday lenders, which pay about $100 for people's loan applications, regardless of whether they end up making the loan.
  
  Fox said online payday lenders are proliferating as their storefront counterparts shrink in number amid more aggressive regulation by state and federal regulators. Frequently, it's unclear what state online payday lenders are operating in — or even whether they're in the country.
  
  The NeedRapidCash.com website offers no clues about its whereabouts. Nor does it provide any way to contact the company other than an email address buried deep in its privacy policy. My email to the address went unanswered.
  
  The site's Internet Protocol address, which marks its real estate in cyberspace, leads to a data center in Las Vegas, where employees told me they'd never heard of NeedRapidCash.com. They figured the site must be based on one of the various Internet services using the data center's equipment.

For more, see Don't be tricked into applying for an online payday loan (So-called lead generators have sneaky ways of pitching payday loans with annual interest rates as high as 700%).

Empty Nesters: The Latest Group Finding Themselves Feeling The Squeeze By Delinquent Student Debt

The Wall Street Journal reports:

• After years of facing all sorts of financial pressures they never expected, from adult kids moving back home to their own parents needing help to retire, empty nest parents are struggling with a new headache.
  
  Thinking it was only natural to want to help children and grandchildren, many co-signed student loans. Now, they're becoming the latest victims of the nation's mounting problem with student-loan debt, which surpassed the $1 trillion mark last year.
  
  At a growing rate, young graduates who are either out of work or who didn't land high-paying jobs find themselves unable to pay their loans. When primary borrowers stop paying, co-signers are expected to pick up the tab—and soon find themselves fending off debt collectors.
  
  "People are confused about what it means to co-sign, and their ongoing obligation," says Deanne Loonin, director of the Student Loan Borrower Assistance Project at the National Consumer Law Center, a consumer-advocacy group in Boston. "When they come to understand that they are equally liable, the regrets set in."

***

• It is almost impossible for someone who co-signed a private student loan to escape the debt. A bankruptcy-code change in 2005 made it much tougher for borrowers or co-signers to discharge private student loans in bankruptcy. The main avenue for ending the payments is to prove "undue hardship," and the hurdles are high, says William Brewer Jr., president of the National Association of Consumer Bankruptcy Attorneys, a trade group in Washington, D.C. "The court can take the position that all you need to do is sell your house," he says.

For more, see New Peril for Parents: Their Kids' Student Loans (May require paid subscription; if no subscripton, GO HERE, then click appropriate link for story).

Early-Arriving Craigslist Crowd Breaks Into & Ransacks Temporarily-Unattended Home In Response To Foreclosed Couple's 'Free Yard Sale' Ad

In Woodstock, Georgia, WXIA-TV Channel 11 reports:

• A family in Woodstock, who just lost their home of 20 years to foreclosure and are preparing to move out, lost even more [...]. And it was all because they inadvertently triggered what they now call "mayhem" when they posted a craigslist ad [...].
  
  Their online post was just a well-meaning ad for a giveaway of furniture and other household items in their driveway outside the small house, a giveaway scheduled to begin at 10 a.m. Wednesday.
  
  But big crowds showed up early, while the family was out, breaking into the house and taking practically everything inside, in part because the way that the craigslist ad was written gave them the idea that everything on the property was up for grabs.
  
  Wednesday night, Michael Vercher walked 11Alive's Jon Shirek through his family's almost empty soon-to-be former home.
  
  "Well, when we got to the house, I mean, pretty much -- this," he said as he stepped from the foyer into the living room. Their home -- ransacked, ravaged, raked over. Almost everything inside -- gone. "They came in and just tore the place up," he said.
  
  People who responded to the family's craigslist ad showed up at the house earlier than 10 a.m., before Vercher arrived there from work to supervise the giveaway. And when he drove up to the house, he said, they had already broken into it, helping themselves to almost everything inside.
  
  And as the family was calling 911, he could not stop them. "Everyone was inside the house; they were taking out items," he said. "There were cars around the block. It was like ants in and out of the house."
  
  He spoke of how they took, from inside the house, the only items that the family wanted to take with them as they moved out -- family keepsakes, and all their clothes -- everything but a few of their books, which were left scattered across the carpet.

For more, see Foreclosed family watches helplessly as craigslist crowds strip house bare.

Gun-Wielding Cops Disregard Court Order, Storm S. California Home To Carry Out Eviction Of Wheelchair-Bound Cancer Victim

In Orange County, California, OC Weekly reports:

• On the morning of October 10, Niko Black was alone and ill when deputies from the Orange County Sheriff's Department arrived to evict her from her Garden Grove home on Shannon Avenue. "I'm in my bed and I see them storming my property," she tells the Weekly. "I crawl to my wheelchair."
  
  The 37-year-old Mescalero Apache woman, who suffers from a rare, malignant and metastatic form of cancer, refused to open the door, saying that they had no legal right to be there. On the other side was a taped copy of a court order obtained from Federal Bankruptcy Judge Theodore C. Albert in late August that she firmly believes should have prevented the OCSD from carrying out the eviction. The deputies acted anyway.
  
  "They break down my door," Black recounts. "I'm sitting there in my wheel chair. I'm about 100 pounds of shriveled-up cancer and a threat to no one."
  
  What came next, she says, was much more harrowing. "Sergeant Bob Sima puts a gun to my face, finger on the trigger, no safety and walks around me," Black states, pausing to emotionally gather herself. "There's no reason, except for to threaten my life, for an intimidation factor, to put a gun to my head."
  
  With neighbors lining up outside watching, Black's health began to worsen. "I needed my medication, I couldn't breathe and I was having a seizure," she said, claiming that deputies were unresponsive to concerns about her condition; one officer even remarked that she 'looked good' to him. An ambulance finally arrived at her friend's behest and she was forcibly removed from her home and hospitalized.
  
  Sheriff's officials claim they originally arrived to Black's home on September 19 and that she served them legal documents at the time. County counsel allegedly instructed the deputies to carry out the eviction. Following the events of October 10, though, Judge Albert has ordered Wells Fargo and county officials to appear in court on November 13 to explain why they should not be held in contempt for violating the stay and be made to pay punitive damages.
  
  "Wells Fargo filed a motion about an inch thick all the reasons why they should be allowed to evict me," Black said about the court order. "The federal judge denied them and stated very clearly they are not to. The bank illegally acquired an unlawful detainer, an eviction, without due process. They did it with fraudulent paperwork."

For more, see Sheriff's Deputies Barge Into Cancer-Stricken Disabled Woman's House with Guns Drawn to Evict Her.

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

Ohio Supremes: Standing-Lacking Lender Has No Authority To Foreclose; Status Cannot Be Remedied Post-Filing; Suit Requires Dismissal, But Not A Judgment On The Merits

In Columbus, Ohio, Court News Ohio reports:

• The Supreme Court of Ohio ruled [Wednesday] that a party’s standing to initiate a mortgage foreclosure lawsuit is determined on the date the complaint is filed in court, and a party that lacked standing at the time a suit was filed cannot remedy that defect by receiving assignment of a mortgage and promissory note after the filing of the foreclosure action but prior to the entry of judgment.
  
  Applying that analysis to a Greene County case, the court dismissed a decree of foreclosure granted to the Federal Home Loan Mortgage Corporation (FHLMA) against the home of Duane and Julie Schwartzwald of Xenia because FHLMA did not have standing as an actual party in interest at the time it filed the foreclosure action.
  
  The court’s 7-0 decision, authored by Justice Terrence O’Donnell, reversed a decision of the Second District Court of Appeals.

***

• Writing for a unanimous court in [Wednesday]’s decision, Justice O’Donnell explained that in order to invoke the jurisdiction of a trial court, a party initiating a lawsuit must have “in an individual or representative capacity, some real interest in the subject matter of the action.”
  
  Justice O’Donnell wrote: “We recognized that standing is a ‘jurisdictional requirement’ in State ex rel. Dallman v. Franklin Cty. Court of Common Pleas, (1973), and we stated: ‘It is an elementary concept of law that a party lacks standing to invoke the jurisdiction of the court unless he has, in an individual or representative capacity, some real interest in the subject matter of the action.’ ... And recently, in Kincaid v. Erie Ins. Co., (2010), we affirmed the dismissal of a complaint for lack of standing when it had been filed before the claimant had suffered any injury.”
  
  Citing the U.S. Supreme Court’s 1992 holding in Lujan v. Defenders of Wildlife that “standing is to be determined as of the commencement of suit,” and state court decisions supporting that same conclusion from Oklahoma, Vermont, Maine, Connecticut, Florida, Mississippi, and Nebraska,(1) Justice O’Donnell pointed out that in this case “Federal Home Loan concedes that there is no evidence that it had suffered any injury at the time it commenced this foreclosure action. Thus, because it failed to establish an interest in the note or mortgage at the time it filed suit, it had no standing to invoke the jurisdiction of the common pleas court.”
  
  The justices rejected the Second District’s finding that FHLMA’s lack of initial standing to sue had been remedied by the assignment of the Schwartzwald’s mortgage and promissory note from Wells Fargo to FHLMA after the foreclosure action had been filed.
  
  Justice O’Donnell wrote that Ohio Civil Rule 17(A) allows an authorized representative of a real party in interest, such as the executor or administrator of an estate, the trustee of a trust, or a party with a shared contractual interest in disputed property to initiate a lawsuit on behalf of the real party in interest, but does not “allow a party with no personal stake in a controversy to file a claim on behalf of a third party, obtain the cause of action by assignment, and then have the assignment relate back to commencement of the action.”
  
  Noting that its dismissal of FHLMA’s April 2009 complaint based on lack of standing was not a judgment on the merits of the case, and did not preclude the pursuit of a future foreclosure action, the court concluded: “It is fundamental that a party commencing litigation must have standing to sue in order to present a justiciable controversy and invoke the jurisdiction of the common pleas court. Civ.R. 17(A) does not change this principle, and a lack of standing at the outset of litigation cannot be cured by receipt of an assignment of the claim or by substitution of the real party in interest.”
  
  “Here, it is undisputed that Federal Home Loan did not have standing at the time it commenced this foreclosure action, and therefore it failed to invoke the jurisdiction of the court of common pleas. Accordingly, the judgment of the court of appeals is reversed and the cause is dismissed.”

For the story, see Supreme Court Holds Foreclosure Action Void If Party Filing Suit Did So Before Becoming Actual Party in Interest (Assignment of Note After Suit Filed Does Not Cure Lack of Standing).

For the ruling, see Fed. Home Loan Mtge. Corp. v. Schwartzwald, Slip Opinion No. 2012-Ohio-5017 (Ohio October 31, 2012).

See also, The Columbus Dispatch: High court limits foreclosure filings (Ohio justices rule lender must have paperwork in order, in its possession before taking a home).

(1) For the cases:

• Oklahoma: Deutsche Bank Natl. Trust v. Brumbaugh, 2012 OK 3, 270 P.3d 151 (Ok. 2012);
• Vermont: U.S.Bank Natl. Assn. v. Kimball, 190 Vt. 210, 2011 VT 81, 27 A.3d 1087 (Vt. 2011);
• Maine: Mtge. Electronic Registration Sys., Inc. v. Saunders, 2010 ME 79, 2 A.3d 287 (Me. 2010);
• Connecticut: RMS Residential Properties, L.L.C. v. Miller, 303 Conn. 224, 229, 232, 32 A.3d 309 (Conn. 2011);
• Florida: McLean v. JP Morgan Chase Bank Natl. Assn., 79 So.3d 170 (Fla.App. 4th DCA, 2012);
• Mississippi: Burley v. Douglas, 26 So.3d 1013 (Miss.2009); and
• Nebraska: In re 2007 Administration of Appropriations of Water of the Niobrara, 278 Neb. 137, 768 N.W.2d 420 (Neb. 2009).

Homeowner Could Face 'Force-Placed' Foreclosure Squeeze By Filing Casualty Claim On Home Insurance Policy; "A Real Life Halloween Trick" That Screws Consumers: Florida Consumer Advocate

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

• Florida's insurance watchdog Tuesday called for an investigation into companies that she says deny claims by alleging that customers misrepresented their finances when applying for policies.
  
  Insurance Consumer Advocate Robin Westcott cited repeated complaints against Fort Lauderdale-based Universal Property & Casualty in asking Florida regulators for the probe.
  
  Westcott said insurers should verify applicant's financial information within 90 days of coverage — not take premiums for years before checking credit reports and then later cancel policies and deny claims.
  
  "This tactic threatens homeowners' financial well-being as well as the state's economy and must be addressed swiftly and appropriately," Westcott said in a news release.
  
  "This is a real-life Halloween trick that does not treat consumers fairly. We must give consumers relief from this game of 'gotcha.'''
  
  Universal executives did not return phone calls or emails late Tuesday.
  
  Westcott said insurers appear to be using bankruptcy, liens, judgments and "perhaps" foreclosures as a reason to find Floridians ineligible for certain homeowners policies.
  
  When those policies are canceled, homeowners may be bound by terms of their mortgage to retroactively buy coverage under a lender-placed program [ie. force-placed insurance]. If they can't afford that program, they could lose their homes.
  
  In addition, cancellations will drive more to the state-backed insurer of last resort, Citizens Property Insurance Corp., which is trying to trim the number of its policyholders, she said.
  
  Westcott asked regulators to work with insurers on "reasonable standards" for underwriting that recognize
  
  "Florida's unique circumstance with regard to the foreclosure crisis." Almost half of the mortgages in Florida are "upside down," with more owed than homes are worth, and Florida is among the hardest hit nationwide in foreclosures and bankruptcies, she said..

Source: Insurers under fire once again (Watchdog says Universal cancels policies improperly).

For the Florida Insurance Consumer Advocate's press release, see Florida Insurance Consumer Advocate Westcott Calls for OIR Investigation into Insurance Company Post-Claim Underwriting Tactics.

Go here for the Florida Insurance Consumer Advocate's letter to the state Insurance Commisioner requesting the probe.

Lenders' Role In Deal Beyond That Of Traditional Creditor May Land It In 'Fiduciary' Hot Water With Borrowers Seeking To Stiff Them

From a client alert from the North Carolina law firm Poyner Spruill LLP:

• In the wake of the collapse of the real estate market, banks across the country have seen a significant increase in cases brought by developers and individual buyers alike seeking to avoid their loan obligations on their failed real estate investments.
  
  Many of these claims rely on the argument that the appraisal on which the loan was approved over-valued the property, and that the lender knew or should have known the appraisal was inflated and breached a duty to advise the borrower of that fact.
  
  North Carolina’s courts routinely have rejected these claims, relying on long standing authority that the mere existence of a debtor-creditor relationship does not make the lender the borrower’s fiduciary and that, absent a fiduciary relationship, a lender is only obligated to perform those duties expressly provided for in the loan documents, which generally contain no obligation to advise the borrower about the appraisal.
  
  A recent decision from the North Carolina Business Court illustrates the risks a lender faces when it assumes a role in a transaction beyond that of a traditional creditor.
  
  In WNC Holdings, LLC et al. v. Alliance Bank & Trust, et al., the Business Court denied a lender’s motion to dismiss a developer’s breach of fiduciary duty claim because the lender allegedly acted as a “financial and development advisor” to the developer by completing “financial feasibility pro forma statements” on behalf of the developer; reviewing property development agreements and making suggested changes; and performing inspections of the property and development.
  
  After concluding a breach of fiduciary duty claim was sufficiently supported by the allegations, the Business Court also allowed to stand the developer’s claims of negligence, fraud by misrepresentation, fraud by concealment, constructive fraud, breach of the covenant of good faith and fair dealing, unfair and deceptive trade practices, and punitive damages.
  
  Those claims were based on allegations that the lender, as a fiduciary of the borrower, had an obligation to but failed to tell the developer that the initial appraisal of the property was defective, and allegations that the lender misled the borrower into believing the property needed to be reappraised because of the economic downturn rather than because of defects in the first appraisal.

For more, see Lenders Beware: The Risks of Creating a Fiduciary Relationship With Your Borrower.

For the ruling, see WNC Holdings, LLC v. Alliance Bank & Trust Co., 2012 NCBC 50 (October 2, 2012).