After Saving Home From Bank Foreclosure, Homeowner Blows Off HOA Over Two Years Of Unpaid Fees, Loses Home At Court-Ordered Auction Anyway

In Jacksonville, Florida, First Coast News reports:

• Ken Baxley lived in his East Arlington house four years, but in 24 hours, it was no longer his home. "I called the police and said 'Is this for real?' and they said 'Yes,'" he said.
  
  It was real, but Baxley says still hard to believe. Checking the court files only added to his nightmare. "The court records said my house is no longer in our name but it is in the name of some Duval trust group," said Baxley.
  
  Baxley lives in a deed restricted community. Like all the other homeowners he has to pay Homeowners Association fees. For two years, he didn't.
  
  "I didn't think they were that threatening," said Baxley. "I basically blew them off. That was my mistake. I blew off the homeowners association."
  
  Baxley saved his home from a mortgage foreclosure in 2009, but ignored the HOA notices. A few days before Christmas, the HOA evicted Baxley from his home. The HOA and filed and won a foreclosure lawsuit against him.
  
  "I had no clue in my mind that for $532, they would take my house from under me and make me move," said Baxley.
  
  Baxley is now leasing an apartment, but attorney Fred Elefant said the chances of Baxley getting his home back are remote.

***

• The court record reveals Baxley can recover the difference between what he owed the HOA and how much the home was sold for, but he has to file with the Clerk of Courts.
  
  Elefant said it is not over for Baxley. If the buyer fails to pay the mortgage, Elefant said the bank will file a mortgage foreclosure lawsuit against Baxley even though he no longer owns the house.

For the story, see Homeowner evicted due to past due homeowners association fees.

Disbarred Lawyer Recently Released After Doing 3 Years For $4M Client Trust Account Ripoff Pinched Again On New Charges In Unrelated Straw Buyer Scam; Latest Case Spurred By Two Alleged Co-Conspirators Turned Stool Pigeons

In Lyndhurst, New Jersey, The Record reports:

• A disbarred attorney from Lyndhurst was arrested [], four months after he was charged in connection with a long-running mortgage-fraud scheme that caused losses of more than $30 million, authorities said.
  
  Michael Rumore, 54, was charged in September with conspiracy to commit bank fraud and money laundering, U.S. Attorney Paul J. Fishman said in a statement.

***

• Rumore handled real estate closings, falsely indicating that the buyers were making substantial down payments when they never did, and diverted funds to the co-conspirators, authorities said.
  
  The scheme was aided by a tax preparer and document creator who became one of two cooperating witnesses in the case, authorities said.
  
  The unidentified cooperator also operated several shell companies that were used to create between 75 and 150 bogus tax documents and employment verification forms for the straw buyers, authorities said.
  
  The second cooperator specialized in making phony bank statements, driver’s licenses, permanent resident cards and Social Security cards.
  
  Loan companies funded more than 60 fraudulent mortgages worth more than $30 million, authorities said.
  
  Rumore was initially charged in September along with seven alleged co-conspirators. Another Lyndhurst resident, Klary “Patty” Arcentales, 44, a loan officer at Premier Mortgage Services, was among co-conspirators arrested in September.
  
  Rumore was released in September from South Woods State Prison in Bridgeton, where he served three years after pleading guilty to state charges in an unrelated scheme to steal more than $4 million entrusted to him for real estate closings. Rumore transferred the $4 million to his personal and business accounts and used the money to gamble at casinos in Atlantic City, state officials said.

For the story, see Lyndhurst attorney is arrested in mortgage-fraud scheme.

Driver For Corrupt Mayor Cops Guilty Plea For Role In Rigging Public Housing Lottery That Landed Him 2-Family Home

From the Office of the New Jersey Attorney General:

• Attorney General Jeffrey S. Chiesa announced that a man who served as personal driver to former Perth Amboy Mayor Joseph Vas was sentenced [] in connection with a scheme involving Vas to rig a public housing lottery.
  
  Anthony S. Jones, 51, of Perth Amboy, was sentenced to five years of probation by Superior Court Judge Anthony J. Mellaci Jr. in Monmouth County. Jones pleaded guilty on Aug. 18, 2011 to a criminal accusation charging him with third-degree falsifying or tampering with records.
  
  In pleading guilty, he admitted that he falsified personal financial information that he submitted in order to qualify to buy an affordable two-family home on Market Street in Perth Amboy through the Perth Amboy Home Program. Previously, Vas admitted that he rigged the public lottery for the home so that Jones won the opportunity to buy it. Jones forfeited his job with the city and is permanently barred from public employment in New Jersey.
  
  Jones was ordered, as a condition of probation, to refrain from entering the property, which he has vacated, to perform 100 hours of community service, and to pay various amounts as restitution related to his illegal acquisition of the property. The home is currently in foreclosure.
  
  Jones was ordered to pay $147,600, representing principal and interest on a second mortgage which secures HUD grant funds that were provided to make the property affordable housing. He must pay $2,000 to reimburse the City of Perth Amboy for closing costs it paid when Jones took title to the property. He must pay the state $127,123, representing rent he collected by leasing the second unit of the property. Finally, he must pay $6,020 in rent for his occupancy of one unit of the property for four months after he was supposed to have vacated the property. Jones entered a consent judgment to pay all of those amounts.

For the New Jersey AG press release, see Driver for Former Perth Amboy Mayor Joseph Vas Sentenced in Connection with Scheme to Rig Public Housing Lottery.

JPM Chase Abandons Home In Foreclosure Limbo; Bankster's Handiwork Leaves Homeowner With 'Zombie Title', Dying & Ineligible To Get Social Security Disability Benefits Needed In Effort To Dodge Early Grave

Reuters reports:

• Joseph Keller doesn't expect he'll live to see the end of 2013. He blames the house at 190 Avondale Avenue.
  
  Five years ago, Keller, 10 months behind on his mortgage payments, received notice of a foreclosure judgment from JP Morgan Chase. In a few weeks, the bank said, his three-story house with gray vinyl siding in Columbus, Ohio, would be put up for auction at a sheriff's sale.
  
  The 58-year-old former social worker and his wife, Jennifer, packed up their home of 13 years and moved in with their daughter. Joseph thought he would never have anything to do with the house again. And for about a year, he didn't.
  
  Then it started to stalk him.
  
  First, in 2010, the county sued Keller because the house, already picked clean by scavengers, was in a shambles, its hanging gutters and collapsed garage in violation of local housing code. Then the tax collector started sending Keller notices about mounting back taxes, sewer fees and bills for weed and waste removal. And last year, Chase's debt collector began pressing Keller to pay his mortgage, which had swollen, with penalties and fees, from $62,100.27 to $84,194.69.
  
  The worst news came last January, when the Social Security Administration rejected Keller's application for disability benefits; the "asset" on Avondale Avenue rendered him ineligible. Keller's medical problems include advanced liver disease, hepatitis C and inactive tuberculosis. Without disability coverage, he can't get the liver transplant he needs to stay alive.
  
  "I can't make it end," says Keller. "This house, I can't get out."
  
  Keller continues to bear responsibility for the house because on December 23, 2008 - about two months after he received Chase's notice of sale - the bank filed to dismiss the foreclosure judgment and the order of sale. Chase said it sent Keller a copy of its court filing on December 9, 2008. Keller says he never received any notification. Either way, his name remained on the property title.
  
  WITH IMPUNITY
  
  The Kellers are caught up in a little-known horror of the U.S. housing bust: the zombie title. Six years in, thousands of homeowners are finding themselves legally liable for houses they didn't know they still owned after banks decided it wasn't worth their while to complete foreclosures on them. With impunity, banks have been walking away from foreclosures much the way some homeowners walked away from their mortgages when the housing market first crashed.
  
  "The banks are just deciding not to foreclose, even though the homeowners never caught up with their payments," says Daren Blomquist, vice president at RealtyTrac, a real-estate information company in Irvine, California.
  
  Since 2006, 10 million homes have fallen into foreclosure, according to RealtyTrac, a number that in earlier, more stable times would have taken nearly two decades to reach. Of those foreclosures, more than 2 million have never come out. Some may be occupied by owners who have been living gratis. Others have been caught up in what is now known as the robo-signing scandal, when banks spun out reams of fraudulent documents to foreclose quickly on as many homeowners as they could.
  
  And then there are cases like the Kellers, in which homeowners moved out after receiving notice of a foreclosure sale, thinking they were leaving the house in bank hands. No national databases track zombie titles. But dozens of housing court judges, code enforcement officials, lawyers and other professionals involved in foreclosures across the country tell Reuters that these titles number in the many thousands, and that the problem is worsening.
  
  "There are thousands of foreclosures in limbo, just hanging out there, just sitting, with nothing being done," says Cleveland Housing Court Judge Raymond Pianka, whose pending court cases tied to derelict properties have doubled in the past two years, to 1,000. He says the surge is due largely to homes vacated by people who fled before an imminent foreclosure sale, only to learn later that they remain legally responsible for their house.
  
  When people move out after receiving a notice of a planned foreclosure sale and the bank then cancels, municipalities are left to deal with the mess. Some spend public funds on securing, cleaning and stabilizing houses that generate no tax revenue. Others let the houses rot. In at least three states in recent months, houses abandoned by owners and banks alike have exploded because the gas was never shut off.
  
  THREAT OF JAIL
  
  Unsuspecting homeowners have had their wages garnished, their credit destroyed and their tax refunds seized. They've opened their mail to find bills for back taxes, graffiti-scrubbing services, demolition crews, trash removal, gutter repair, exterior cleaning and lawn clipping. At their front doors they've encountered bailiffs brandishing summonses to appear in court.
  
  In some cities, people with zombie titles can be sentenced to probation - with the threat of jail if they don't bring their houses into compliance.
  
  "These people have become like indentured serfs, with all of the responsibilities for the properties but none of the rights," says retired Cleveland-Marshall College of Law Professor Kermit Lind.

***

• Cases against zombie-title holders are rising due to everything from sewer bills to tilting chimneys, and they are clogging the courts. In Milwaukee, Wisconsin, about 900 cases in the foreclosure process involve zombie titles. In South Bend, Indiana, the number is 1,275, up from 600 in 2006. In Memphis, Tennessee, cases have doubled in the past two years to 1,500.
  
  In Cleveland, 15 percent of foreclosures between 2005 and 2009 stalled out in foreclosure limbo, more than a third of them involving homeowners who had fled foreclosure notices, according to the Case Western Reserve study.

***

• Once a bank walks away from a foreclosure, the real rot begins. Living rooms turn into meth labs. Falling shingles menace passers-by. Squatters' cooking fires turn into infernos. The latest iteration of the trend: gas explosions.
  
  Electric companies usually shut off the juice when homeowners tell the utility they are moving. But natural-gas companies usually don't. In recent months, abandoned homes have exploded in Chicago, Cleveland and Bridgeport, Connecticut. In all cases, foreclosed homeowners had moved out. With no one home to smell the gas, it went undetected - until the houses blew.
  
  "We are seeing more and more close calls," says Mark McDonald, a former natural gas public safety worker who now runs the New England Gas Workers Association. "These houses are a formula for disaster."

***

• In Columbus, Ohio, Joseph Keller recently paid a visit to the empty house on Avondale Avenue. In the living room, the floor was littered with dirty diapers, pill bottles, condoms, sooty mattresses and soda cans. In the kitchen, squatters had hung pink curtains.
  
  "They tore it to hell and back," Keller said, kicking at a dirty mattress. "We never would have left the home if we weren't told to get out."
  
  The Kellers live in their daughter's dining room, where their queen-size bed leaves little room to maneuver. Joseph can't sit, stand or sleep for more than 15 minutes at a time. He can't take pain medication because of his diseased liver. Every few months, he makes a trip to the emergency room, where doctors drain his abdomen of excess fluid.

***

• At a hearing in early December, a Social Security administrative judge told the Kellers that he would review their appeal of the original denial of benefits, a process that he said could take two months. Joseph Keller responded that he might not be around that long. Earlier this month, the judge sent the case back to the local office after it determined that the house was virtually worthless. Keller still has no benefits.
  
  A Social Security Administration spokesperson declined to comment on the case.
  
  "He's dying," says Keller's daughter, Barbara. "He needs his name off this house."

For the story, see Special Report: The latest foreclosure horror: the zombie title.

Wisconsin Feds Convict Scammer Accused Of Using 'Sewer Service' Racket To File Small Claims Lawsuits, Score Default Judgments, Then File Wage Garnishments Against Multiple Unwitting Victims

In Madison, Wisconsin, The Chippewa Herald reports:

• A scheme involving small claims courts has resulted in an Eau Claire man being found guilty of 50 counts of mail fraud in federal court, including cases from Chippewa County.
  
  Bernard C. Seidling, 61, was convicted by Judge Barbara B. Crabb on Dec. 26 for the scheme that ran from 2003 through 2009. He will be sentenced at 1 p.m. March 21. Seidling could face a maximum sentence of 20 years in prison on each of the 50 charges.
  
  According to the U.S. Department of Justice, Seidling filed suits in small claims courts where he lied about the defendants addresses and his attempts to serve them with court papers.
  
  Prosecutors said Seidling knew the attempt to serve papers either had not been made or could not be made, because the defendants didn’t live at the address Seidling gave.
  
  Seidling claimed $5,000, the maximum allowed, in each of the lawsuits and obtained default judgments. He would then use the judgments to file wage garnishments against the victims and their property.
  
  The victims included a couple who were renting a farm in Chippewa County in 2002 until moving in 2003. Seidling filed a lawsuit in Iron County and a transcript was sent to the Chippewa County Sheriff’s Department. Seidling eventually asked for an earnings garnishment of $5,141.79.
  
  Another victim was a man who owned an engineering firm that contracted with another company for surveying and subdivision design in Chippewa County in 2002. Six years later, a company run by Seidling filed a lawsuit against the engineering firm, claiming its address was now in Hayward. That wasn’t the case.
  
  Another Seidling company in 2009 sued Footsmart, a shoe retailer in Norcross, Ga. However, Seidling listed Footsmart’s address as Main Street in Chippewa Falls, and claimed a representative tried to serve papers to Footsmart there. The address he used for Footsmart in Chippewa Falls was instead a property in foreclosure.
  
  A nurse for the Barron County Public Health Department was sued in 2009 by Seidling, but listed the nurse’s address as East Columbia Street in Chippewa Falls. The nurse never lived in Chippewa Falls.
  
  Another victim was a lawyer working for the Legal Aid Society of Milwaukee. She and her son lived in a rental house.
  
  One of Seidling’s companies filed a lawsuit and listed the woman and her son’s address as Second Avenue in Chippewa Falls. Neither the woman or the son ever lived in Chippewa Falls. The property Seidling listed was in foreclosure at the time of the lawsuit.
  
  He filed notices of lawsuits with various publications, including some with Chippewa Valley Newspaper publications.

Source: Eau Claire man found guilty of 50 cases of mail fraud.

Michigan High Court Justice Suspected Of Illegal 'Short Sale Shuffle' Announces Retirement From Bench

In Lansing, Michigan, WXYZ-TV Channel 7 reports:

• Amid an accusation of fraud and a move by the state's Judicial Tenure Commission to suspend her, it has been revealed that Michigan Supreme Court Justice Diane Hathaway will retire January 21.
  
  Her attorney Steve Fishman confirmed the development to 7 Action News. He says Hathaway began the process of retiring back in December.
  
  The Michigan Supreme Court released the following statement about Hathaway's retirement:
  
  "This afternoon, through her counsel, Justice Hathaway advised the court that she is retiring effective January 21. In the meantime, she has agreed not to participate in any matters before the court."

***

• The revelation of Hathaway's retirement comes not long after she was hit with the formal complaint by the state's Judicial Tenure Commission, which asked that she be suspended from the bench.
  
  The JTC complaint accuses Hathaway of fraud and money laundering and comes on the heels of a November civil complaint filed by the U.S. Attorney, which also accused Hathaway of fraud.
  
  The feds began forfeiture proceedings to go after Hathaway's $750,000 Florida home, which they alleged she hid in a stepdaughter's name in order to have a short sale approved on her Grosse Pointe Park home. Last month, they put a stay on those forfeiture proceedings.
  
  The JTC has asked that Hathaway be suspended pending the resolution of their formal proceedings. Hathaway has 14 days to respond to the JTC's complaint.
  
  A short sale allows a homeowner to sell his or her property at a loss rather than go into a foreclosure. It can save the owner hundreds of thousands of dollars in mortgage payments, but he or she needs to prove a hardship to their bank, like a loss in income.
  
  But prior to Hathaway’s short sale, she shuffled two homes out of her name: a Florida home valued at almost three-quarters of a million dollars went to her stepdaughter, and one in Grosse Pointe Park went to her stepson.
  
   After the bank agreed to the short sale on Hathaway’s Lake St. Clair home, that Florida house went back into Hathaway’s name.
  
  The home where the Justice currently lives was recently put into her name, but its first owner was Hathaway’s stepdaughter. According to records, she bought it for $195,000 cash around the same time Hathaway’s bank was mulling over the short sale that they ultimately approved. Hathaway won’t say whose cash was used to buy that home.

For the story, see MI Supreme Court Justice Hathaway to retire after fraud accusation, commission's move to suspend her.

MERS' Role In Non-Judicial Oregon Foreclosures Now In Hands Of State Supremes

In Salem, Oregon, the Statesman Journal reports:

• The Oregon Supreme Court heard arguments Tuesday about whether a mortgage-industry database can stand in for lenders on real estate deeds under Oregon law — and in effect trigger out-of-court foreclosures.
  
  The court’s responses in a pair of actions will be awaited by lenders and homeowners facing foreclosures.
  
  The central question in both actions is whether Mortgage Electronic Registration Systems can be considered a “beneficiary” under a 1959 law governing real estate deeds in Oregon. The national database was launched in 1997 to track home mortgage loans — about two-thirds of the nation’s loans are covered by it — but it does not lend or collect money itself.
  
  The Oregon Court of Appeals decided July 18 that individual lenders — not the national system — must file deed assignments with counties before they can begin out-of-court foreclosures. The decision would compel lenders to file each change of ownership of a loan.
  
  Coupled with new state legislation during the 2012 session, it put a halt to most out-of-court foreclosures.
  
  Based on how the 1959 Oregon Trust Deed Act defines “beneficiary,” the database “cannot be a beneficiary under any circumstances,” said Jeff Barnes, a California lawyer representing Rebecca Niday, who is challenging a foreclosure action brought by GMAC Mortgage.
  
  Only the lender or a successor can be a “beneficiary” under the law, Barnes said. “What MERS does is provide a service,” he said, but it has limited legal powers.

***

• The justices are considering similar questions put to them by the U.S. District Court in Portland, which has four other foreclosure cases before it. The federal court is seeking how the Oregon Supreme Court interprets the 1959 state law.
  
  A month after the Oregon Court of Appeals decision, which reversed a judgment against Niday in Clackamas County Circuit Court, the Washington Supreme Court decided a case against the national database.
  
  But the Oregon Supreme Court will have to decide based on Oregon law, and justices had plenty of questions for the lawyers Tuesday.
  
  “Our goal is not to figure everything out today, but to get information from you so that we can figure everything out later,” Chief Justice Thomas Balmer said.

For the story, see Oregon justices aim to clarify foreclosure process.

Recent Court Ruling May Signal Go-Ahead For Thousands Of New Jersey Foreclosures

In Paterson, New Jersey, The Record reports:

• Thousands of New Jersey foreclosures that were held up by faulty paperwork are expected to move forward this year, after a recent decision in Superior Court in Paterson.
  
  The case involved Wells Fargo, which has been cleared to resume foreclosures on about 3,300 New Jersey homeowners under an order signed by Superior Court Judge Margaret M. McVeigh in Paterson.
  
  The impact may be felt beyond those 3,300 homeowners because the Wells Fargo case "provided an example for other big lenders to follow procedurally," according to Kristi Jasberg Robinson, a lawyer with the state judiciary. Foreclosure activity could begin this year on 15,000 or more homeowners affected by the same faulty paperwork that was at issue in the Wells Fargo case, she said.

***

• The Wells Fargo case hinges on the "notice of intent to foreclose" that mortgage companies send to delinquent borrowers. Many of these notices named the mortgage servicing company — the company that collects the monthly payments — not the actual owner of the mortgage. Since many mortgages were packaged and sold as investments, the servicing company often is not the owner of the loan.
  
  In a decision last February, the state Supreme Court ruled that the state's Fair Foreclosure Act requires that the notice to delinquent homeowners must name the owner of the loan, not the mortgage servicing company. The ruling came in a case involving Maryse and Emilio Guillaume of East Orange, who defaulted on a $210,000 mortgage but challenged their foreclosure because the paperwork named the mortgage servicing company, a subsidiary of Wells Fargo.
  
  After the Guillaume case was decided, state Chief Justice Stuart Rabner set guidelines under which mortgage companies could send out corrected notices, so they could move forward with foreclosures. McVeigh and a Trenton judge were appointed to hear arguments as to why the mortgage companies should not be allowed to re-send the corrected paperwork and foreclose in these cases. McVeigh reviewed those arguments with respect to Wells Fargo, and rejected them, writing in her order, "Wells Fargo may resume any foreclosure where the foreclosure defendant has not reinstated the loan."

For more, see Foreclosure pace likely to pick up in NJ after ruling.

Feds Admit Fumbling Ball When Establishing Independent Foreclosure Review; New $8.5B 'Replacement' Settlement With Banksters Includes $5.2B In 'Phantom' Homeowner Relief

Investigative reporter Paul Kiel of ProPublica writes:

• The Independent Foreclosure Review was supposed to be a full and fair investigation of the big banks' foreclosure abuses, and it was trumpeted as the government's largest effort to compensate victimized homeowners. Federal regulators, who designed the review, forced banks to spend billions to carry it out. Millions of homeowners were eligible and hundreds of thousands submitted claims. But Monday morning, the very regulators who launched the program 18 months ago announced that it had all been a massive mistake and shut it down.
  
  Instead, 10 banks have agreed to pay a total of $3.3 billion in cash to the 3.8 million borrowers who had been eligible for the review. That's an average of around $870 per borrower. But typical of a process that's been characterized by confusion, delays and secrecy, regulators said the details of how the money will be doled out were not yet available.
  
  The headline number for the settlement is $8.5 billion, but that includes $5.2 billion in "credits" the banks will receive for actions they take to avoid foreclosures, such as providing loan modifications. That's very similar to the separate $25 billion settlement reached last year between five banks, 49 states and the federal government. That settlement has been criticized for awarding credit to banks for things they were already doing.

For more, see Feds Replace Flawed Foreclosure Review With Vague $8.5 Billion Settlement.

Banksters Score Another Major Win In Effort To Buy Their Way Out Of Foreclosure Fraud Hot Water; 10 Outfits Agree To Fork Over A Mere $3.3B To Screwed Over Borrowers, Another $5.2B For Purported Deficiency Waiver 'Credits' For Future Short-Selling Underwater Homeowners

The Los Angeles Times reports:

• A mortgage is a contract. You agree to pay a certain amount of money to the bank each month, and the bank, in turn, agrees to finance your purchase, play fair and not jeopardize your ability to keep a roof over your head.
  
  Ten big banks said Monday that they'll shell out $8.5 billion to settle federal complaints that they wrongfully foreclosed on hundreds of thousands of homeowners who should have been allowed to stay in their homes.
  
  They got off cheap. The average compensation for each homeowner who faced foreclosure in 2009 and 2010 will run about $2,000.
  
  That's a couple thousand bucks for having been deceived and pushed around — and possibly thrown out onto the street — by a bank that was knowingly breaking regulatory procedures in handling distressed properties.
  
  That's a couple thousand bucks for having your life turned upside-down and dealing with a take-no-prisoners financial system that refused to acknowledge, at least at first, that it was behaving duplicitously.
  
  Alys Cohen, a staff attorney for the National Consumer Law Center, called Monday's settlement "wholly inadequate in light of the scale of the harm."
  
  By ponying up a few billion dollars, Chase, Bank of America, Wells Fargo, Citibank and a half-dozen smaller banks will close the books on a federal investigation into accusations that they mishandled people's paperwork and skipped required steps in the foreclosure process.
  
  Among the banks' abuses: They routinely assigned employees to approve foreclosures without giving homeowners' documents a thorough going-over. In some cases, according to investigators, they signed foreclosure papers without even reading them.
  
  Some bank workers admitted signing more than 10,000 foreclosure affidavits a month. That's about four per minute for any bank staffer working a 40-hour week.
  
  Think of that: As millions of families were grappling with job losses and the worst economic downturn since the Great Depression, banks were devoting all of 15 seconds to deciding the fate of people's homes.
  
  And this followed months of requiring homeowners to file reams of documents to make their case for why they should be given just a little leeway on their obligations.

***

• Before Monday's settlement, the banks had paid about $1.5 billion to private consultants to help them deal with the mess, officials found, while making little effort to assist mortgage holders.
  
  The latest settlement requires the banks to spend $3.3 billion to compensate borrowers whose homes were unfairly foreclosed upon, plus $5.2 billion in mortgage assistance to others.
  
  Citi, for its part, said the bank is "pleased to have the matter resolved." Chase said it was "pleased to have it now behind us," as if everyone can now live happily ever after.
  
  The banks certainly will. In 2011, the year after the period covered by Monday's settlement, Citigroup pocketed $11.3 billion in profit. JPMorgan Chase saw record profit of $19 billion. Wells Fargo posted almost $16 billion in profit.
  
  BofA was the poor relation of the family. It earned only $1.4 billion in profit in 2011 as the bank continued dealing with its acquisition of troubled Countrywide Financial.
  
  These four banks alone accounted for almost $48 billion in annual profit on the heels of subjecting borrowers to some of the most despicable behavior imaginable.
  
  Now they'll join other banks in collectively paying just $3.3 billion to homeowners they abused, plus an additional $5.2 billion to do what they should have done all along — help customers deal with extraordinary circumstances.
  
  Separately, BofA agreed to pay more than $10 billion in cash and loan buybacks to mortgage financing giant Fannie Mae to settle Countrywide-related claims.

For the story, see Banks shortchanging consumers in mortgage settlement (Ten big banks say they'll shell out $8.5 billion to settle federal complaints that they wrongfully foreclosed on hundreds of thousands of homeowners).

See also, The Associated Press: US banks try to clean up remaining mortgage mess:

• [C]onsumer advocates complained that regulators settled for too low a price by letting banks avoid full responsibility for foreclosures that victimized families and fueled an exodus from neighborhoods across the country.
  
  The settlement ends an independent review of loan files required under a 2011 action by regulators. Bruce Marks, CEO of the advocacy group Neighborhood Assistance Corp. of America, noted that ending the review will cut short investigations into the banks' practices.
  
  "The question of who's to blame — the homeowners or the lenders — if you stop this investigation now, that will always be an open-ended question," Marks said.
  
  The banks, which include JPMorgan Chase, Bank of America and Wells Fargo, will pay about $3.3 billion to homeowners to end the review of foreclosures.
  
  The rest of the money — $5.2 billion — will be used to reduce mortgage bills and forgive outstanding principal on home sales that generated less than borrowers owed on their mortgages.

***

• The companies involved in the settlement announced Monday also include Citigroup, MetLife Bank, PNC Financial Services, Sovereign, SunTrust, U.S. Bank and Aurora. The 2011 action also included GMAC Mortgage, HSBC Finance Corp. and EMC Mortgage Corp.

BofA To Cough Up $4.9B, Buy Back $6.75B In Crappy Loans It Unloaded On Fannie To Settle Claims Related To Its Mortgage-Backed Investment Peddling Activities

The Associated Press reports:

• Bank of America reached an $11.6 billion settlement with government mortgage agency Fannie Mae to settle claims resulting from mortgage-backed investments that soured during the housing crash, bringing it a step closer to clearing up its legacy of bad home loans.
  
  Under the deal announced Monday, Bank of America will pay $3.6 billion in cash to Fannie Mae and buy back $6.75 billion in loans that the bank and its Countrywide Financial unit sold to the agency from Jan. 1, 2000 through Dec. 31, 2008. That includes about 30,000 loans. The bank is also paying $1.3 billion to the agency for failing to deal with foreclosures fast enough.
  
  Also Monday, a separate settlement was announced between federal regulators and ten major banks and mortgage companies, including Bank of America, over wrongful foreclosure practices. That $8.5 billion settlement covers up to 3.8 million people who were in foreclosure in 2009 and 2010. Of those, about 400,000 may be entitled to payments, advocates estimate.
  
  For Bank of America, its own settlement with Fannie Mae over the mortgage investments represents a “a significant step” in resolving the bank’s remaining mortgage problems, Bank of America CEO Brian Moynihan said in a statement. Moynihan’s predecessor, Ken Lewis, bought Countrywide, a troubled mortgage-lending giant, in July 2008 just as the financial crisis was taking hold.
  
  The settlement represents “another step closer to normal,” for Bank of America, Wells Fargo analyst Matt Burnell wrote in a note to clients. Burnell said the deal was good for the bank because it resolved a dispute with a government agency and will likely reduce the provisions it has to set aside to cover claims from investors over faulty mortgages that were sold with incorrect data on home values or income.
  
  Bank of America’s acquisition of Countrywide was initially praised by lawmakers because the lender was seen as stepping in to support the mortgage industry. However, instead of boosting Bank of America’s mortgage business, the purchase has drawn a drumbeat of regulatory fines, lawsuits and losses.

For more, see Bank of America reaches $11.6 billion settlement with Fannie Mae over soured mortgages.

Florida Bar Finally Disciplines An Attorney For Foreclosure Mill Irregularities; Gets Firm Head To Accept 91-Day Suspension For Allegedly Paying Another Lawyer $1 Each For Robosigning 150,000 Fee Affidavits, Among Other Things

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

• The owner of the Fort Lauderdale-based Law Offices of Marshall C. Watson has agreed to plead guilty to offenses found during a Florida Bar investigation in what is believed to be the first disciplinary action taken by the regulatory group against a so-called foreclosure mill.
  
  The consent judgment, which still requires approval by the Florida Supreme Court, would suspend attorney Marshall C. Watson for 91 days _ a move that means the closure of his firm _ and require him to pay $30,000 for a record-keeping analysis, plus $5,931 for the Bar investigation.
  
  All suspensions of 91 days or greater require proof of rehabilitation and approval of the Florida Supreme Court before a lawyer may be reinstated to the practice of law.
  
  Signed in December, the agreement accuses Watson of failing to develop foreclosure policies for firm employees and includes charges that the firm routinely filed court documents alleging a mortgage note was lost without confirming that its clients had in fact lost the note.
  
  Filing a “lost note count” was a time-saving tactic for lender firms. The note was typically found before final judgment.
  
  Foreclosure defense attorneys concerned that no one would be held accountable for shoddy and fraudulent foreclosure practices in Florida lauded the Bar’s action. Florida Attorney General Pam Bondi’s investigation into several of the companies was shut down last year after a state Supreme Court decision upheld a ban on her ability to subpoena the firms.
  
  “What is groundbreaking about the plea agreement is that it holds Mr. Watson accountable, not for doing these things himself, but for failing to supervise and train his associates and control firm policies so that others didn’t do these things,” said Royal Palm Beach-based foreclosure defense attorney Tom Ice. “It acknowledges that many of the practices we have been complaining about were actually taking place.”
  
  A message left at the Law Offices of Marshall C. Watson was not returned Monday. The Florida Department of State website shows the firm officially changed its name to Choice Legal Group late last month.
  
  Watson’s firm was the only one of those investigated by Bondi’s office that settled its case with the attorney general. In March 2011, the firm signed a $2 million consent agreement while admitting no wrongdoing.
  
  Charges against Watson in the Bar’s 12-page “conditional guilty plea for consent judgment” include that an attorney contracted by the firm was paid $1 each for signing approximately 150,000 fee affidavits. Of those, an unknown number of which were fraudulently notarized.
  
  In “numerous instances” only the last sheet of the fee affidavit was given to the attorney to sign despite the fact that he was swearing to the truth and accuracy of the entire document, according to the judgment.

For the story, see Foreclosure mill head faces Florida Bar discipline.

Wanna-Be Real Estate 'Moguls' Continue Getting Their Heads Handed To Them When Trying To Buy 'Profitable' Foreclosure Steals & Deals Online

In Miami Shores, Florida, The Miami Herald reports:

• Billy Makedonsky thought he’d found the perfect retirement home for his 75-year-old mother. Better yet, buying it required just a few mouse clicks.
  
  His only concern about the bank-owned house with the terracotta driveway and barrel-tiled roof — other than the fact he’d never bought a home online before — was this caveat on GoHoming, the site auctioning off the property as is: “Please DO NOT DISTURB the occupant.”
  
  Turns out he had good reason to be worried.
  
  For $159,000, what Makedonsky got was a house wrapped up in multiple bankruptcies, foreclosed in protested proceedings, and shrouded by allegations of fraud. The home is also the residence of El Portal’s former mayor, Joyce A. Davis, who said she wasn’t about to leave it in the middle of her comeback campaign.
  
  “There were signs up all over El Portal: ‘Elect Joyce Davis for Mayor,’ and she was squatting in my home,” marveled Makedonsky, a 41-year-old flight attendant.
  
  Makedonsky’s tale is just one buyer-beware among many in the digital age, when reams of distressed and bank-owned properties are added daily to online auction sites, making the business of vulturing real estate cheaper and more accessible.
  
  The flipside: Establishing clear title and control of the home, which some cash buyers have never set foot in, can mean sorting through a thicket of foreclosure filings, fraud allegations, bankruptcies, other mortgages, association liens, creditors and combative tenants.
  
  “People don’t realize there’s a lot more to it than ponying up some money,” said Dennis Donet, a Miami foreclosure defense attorney.

***

• While Makedonsky bought his home on a private auction, attorneys say more horror stories come from the clerk’s foreclosure auction in Miami-Dade, a county where there is a backlog of 53,000 foreclosure cases.
  
  Nearly 100,000 properties have been listed on the clerk’s online auction since it opened three years ago. Last year, an average of 100 properties were sent to auction each day.
  
  Properties can be pulled off of auction or purchased at the last minute by the distressed home’s owner, so not every property listed was auctioned. But Donet, the foreclosure attorney, said the vast new real estate frontier is attracting a new clientele, many of whom haven’t done the proper research on the properties they’re trying to buy.
  
  “There are riches for sure,” he said. “But you may be opening up a can of worms that’s very expensive to get out of.”
  
  Attorney Ferrer Shane said the most common mistake buyers make is not understanding what it is they’re buying. Many clients drop thousands on a home thinking they’re buying a foreclosed mortgage when they’re actually buying an association lien that will be trumped by the lender when the bank finally forecloses.
  
  That’s what happened to Maria Alonso, who spent $9,100 in May on a 2,600-square-foot home in The Hammocks. The home was at auction because of a $7,482 judgment held by the Panache Homeowners Association over unpaid assessments by the previous owner.
  
  Alonso, however, thought she’d bought the home outright and after fighting for three months to evict the previous tenants, she leased the home out, according to daughter-in-law Dayana De Latorre. And then they got a notice that their new property was to be auctioned again on Dec. 13, this time due to a judgment held by Wells Fargo.
  
  De Latorre said her in-laws, who bought the house with settlement money from a personal injury claim, have challenged the sale and have a court date set for Wednesday. But they’re not sure what will happen next.
  
  “It’s been very confusing. There’s not a lot of help out there,” she said.

For more, see The perils of buying a foreclosed home online (It could go fine. Or the ex-mayor could live in the property and refuse to vacate, as happened to Billy Makedonsky).

Slick Real Estate Operators Peddling Crappy Houses Using 'Contract For Deed' Conveyances Lead To Continuing Horror Stories For Unwitting Homebuyers

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

• A year after moving into her white brick house in suburban Robbinsdale, Jennifer Gaines got a letter that turned her life upside down.
  
  She was facing foreclosure -- even though she was current on her monthly payments. She was also about to lose the $25,000 she paid on the home because the seller, who was responsible for paying the mortgage, had gone bankrupt.
  
  Gaines bought the property through an unusual, but increasingly common, option known as "contract for deed." Unlike a traditional home sale, the transactions typically take place with no bank, no Realtor, no appraisal -- and little government oversight.
  
  Instead, the seller finances the sale and then collects monthly payments, much like a landlord.
  
  Across the Twin Cities, many homes sold through contract for deed have been beset by inflated prices, high interest rates and other terms that almost guarantee the buyer will default, according to a Star Tribune investigation of 1,330 such deals dating back to 2007.
  
  In hundreds of cases, records show, sellers failed to provide mandated home inspections that would have revealed code violations and safety hazards. Some buyers said they were misled about outstanding debts attached to the properties. Others thought they were signing a lease.(1)
  
  "This is the first place that ever felt like home to me, and now I have to move," Gaines said. "I was so naive."
  
  In the aftermath of the housing market crash, contract-for-deed sales in the metro area have soared more than 50 percent in the past five years, as families with low income or bad credit are lured by the promise of homeownership.
  
  "There is a lot of abuse out there," said Connie Sandberg, who oversees St. Paul's housing sale inspections. "People are being victimized."
  
  Regulators in several cities said they are alarmed by the Star Tribune's findings and frustrated by their inability to do more to protect buyers. Local officials are vowing to push state legislators this year to require greater disclosure from sellers.
  
  "They are clearly taking advantage of a certain segment of the population that needs housing," said Kellie Jones, manager of Minneapolis' problem properties unit.
  
  The purchase price can be twice what the property is worth, records show. On average, contract-for-deed sales were about 10 percent above the estimated market value as set by county assessors.
  
  To get a handle on the growing business, Minneapolis officials recently began their own examination of contract sales. They believe many rental property owners are using contracts for deed as a way to avoid maintenance rules, shifting the cost of expensive repairs onto their buyers. Indeed, hundreds of contract sales in the Twin Cities involve former rental properties, many with a history of problems.
  
  "People are signing a contract for deed and thinking it is a synonym for a lease, and they don't recognize the seriousness of what they are agreeing to," said Henry Reimer, assistant director of regulatory services for Minneapolis.
  
  Many properties were sold again after buyers defaulted, allowing sellers to pocket down payments ranging from $1,000 to $25,000, plus any monthly payments already collected.

***

• For rent or for sale?
  
  In the past five years, nobody sold more former rental properties on contracts for deed in the Twin Cities than Brooklyn Park homebuilder Leslie Reynolds.
  
  But Reynolds' online advertisements continue to promote the properties as rentals, not homes for sale. Reynolds acknowledged the bait-and-switch tactic during a recent interview.
  
  "We put them in 'houses for sale' and we never got a call," Reynolds said.
  
  Several people who responded to the ads said they didn't find out Reynolds wanted to sell them a home until they walked into his office to sign what they thought was a lease. By then, the buyers said, they had already toured the properties and agreed on the size of the monthly payment, not realizing other financial obligations would follow.
  
  Natasha Osborn said she didn't know how much she agreed to pay for her property until she moved in and the contract arrived in the mail. She thought she was renting a house for $900 a month with an option to buy. Instead, she must pay $145,000 by 2014.
  
  "I kind of lost my mind," Osborne said. "My house is not worth $145,000."

***

• So far, not one of Reynolds' 160 buyers has been able to refinance their deals, which typically require six-figure balloon payments in three years. Many walked away, allowing Reynolds to retain ownership. In the past three years, 40 of Reynolds' former rental properties have sold more than once through contract for deed.

***

• Many of Reynolds' buyers went to Brooklyn Park officials for help, said Curt Raymond, who handles enforcement for the city's building department. City officials believed Reynolds may have violated laws against deceptive marketing, so they contacted state, local and federal prosecutors, Raymond said.
  
  "We've run this past everybody we can -- including the FBI -- to see if there is something predatory here, but we couldn't find anything criminal to go after him on," Raymond said. "There is nothing much we can do."(2)

For more, see Contract for deed can be house of horror for buyers (High-risk housing often is sold on such contracts, with little or no oversight).

(1) See Detroit Feds Pinch Notorious Area R/E Operator Suspected Of Screwing Over Naive Homebuyers With Land Contracts On Homes In Some Stage Of Foreclosure for a post on a Detroit-area real estate operator who got bagged in June, 2012 on federal wire fraud charges for allegedly engaging in a similar pattern of unloading crappy houses to naive homebuyers using 'land contracts', a form of deferred title transfer used in Michigan that is essentially the same as the 'contract for deed' form of deferred title transfer used in Minnesota (and not unlike two other forms of transfer often favored by ripoff artists, the 'rent-to-own racket' and the 'lease/option' deal).

See also Co-Owner Of Racket That Ran 'Contract For Deed' Scam Cops Guilty Pleas To Multiple Charges Of Securities Fraud, Unlawful Merchandising Practices for a post on a Missouri case where the ripoff artists failed to advise their gullible homebuyers when their homes were in danger of foreclosure.

Go here for other posts on:

• contract for deed ripoffs,
• land contract scams, and
• rent-to-own/lease option rackets.

(2) Make no mistake - if prosecutors (either the feds, or state prosecutors) were motivated enough to bring criminal charges against these real estate operators, they can find something to slam them with, even if they bring charges for something basic, like theft by deception/ false pretenses, obtaining property by deception/false pretenses, securing writings/execution of documents by deception, engaging in a pattern of corrupt activity, organized scheme to defraud, theft/exploitation of the elderly/vulnerable adults, unlawful merchandising, etc., etc. depending on the specific facts of each scam and the laws of the jurisdiction in which the ripoffs are taking place (to the extent the scammers use the U.S. mail, UPS, Federal Express, etc. or telephone when pulling off any of these scams, federal jurisdiction may be triggered through the mail fraud & wire fraud statutes).

As a reminder to those who mistakenly assume that these apparent ripoff deals are nothing more than civil cases, it is clear that all the sophisticated paperwork in the world (ie. business/purchase contracts, leases, closing statements, etc.) isn't enough to permit scammers to insulate themselves from criminal prosecution when they target their victims with legitimate-looking business propositions when screwing their victims over. Criminal prosecutors have the authority to "pierce through" such attempts to disguise a blatant criminal real estate ripoff as a common, legitimate business deal.

Clear precedent exists for such a "pierce through" approach to overcome any objections that will certainly arise when the scammers make the argument that the arrangement was just a civil transaction that, if challenged, should be done with a civil lawsuit, not a criminal prosecution. See, for example:

• People v. Frankfort, (1952) 114 Cal.App.2d 680, 700; 251 P.2d 401:
  
  The simple answer to this argument is that "The People prosecuting for a crime committed in relation to a contract are not parties to the contract and are not bound by it. They are at liberty in such a prosecution to show the true nature of the transaction." (People v. Chait, 69 Cal.App.2d 503, 519 [159 P.2d 445]; People v. McEntyre, 32 Cal.App.2d Supp. 752, 760 [84 P.2d 560]; People v. Jones, 61 Cal.App.2d 608, 620 [143 P.2d 726]; People v. Pierce, supra, p. 605.)


• People v. Jones, (1943) 61 Cal.App.2d 608, 620 [143 P.2d 726]:
  
  Defendant argues that the deal with each "seller" was a civil transaction; [...] Cloaked in the draperies of his corporation and pretending to act in its behalf, he boldly approached his unsuspecting victims.
  
  [***]
  
  Although each deal in its incipiency bore the color and trappings of a normal, civil contract, yet when subjected to a postmortem it exhaled the stench and disclosed the carcass of a fraud. (People v. Epstein, 118 Cal.App. 7, 10 [4 P.2d 555].) There appears no sign of good faith at any turn. Each taking and appropriation was a grand theft.
  
  The use of the corporate name and the promises made in accomplishing his purpose were a camouflage of such common variety that no excess of genius was required to discern the fraud. Parol evidence of all that occurred was admissible to show the intention of defendant. (People v. Robinson, 107 Cal.App. 211, 221 [290 P. 470].)

Video: Mortgage Crisis In A Nutshell

From the video Mortgage Crisis In A Nutshell:

• In this one-hour video, Attorney John E. Campbell explains the main aspects of the mortgage crisis that has devastated the U.S. housing market and the economy.
  
  This video was produced by John Campbell and Erich Vieth, who are both attorneys with the Simon Law Firm in St. Louis, Missouri. A substantial part of their law practice concerns issues pertaining to mortgage fraud and unlawful foreclosures. They have filed numerous individual and class action lawsuits on behalf of behalf of homeowners.

For the video, see Mortgage Crisis in a Nutshell.

Widows/Widowers Who Are Not Named In Now-Deceased Spouse's Reverse Mortgage Score Big Appeals Court Win In Effort To Dodge Foreclosure Boot; HUD Regs That Seem Contrary To Statute Leave 3-Judge Panel "Somewhat Puzzled"

In Washington, D.C., Bloomberg reports:

• A federal appeals court revived a lawsuit accusing the U.S. Department of Housing and Urban Development of setting up its reverse-mortgage program in a way that makes it more likely a surviving spouse will end up in foreclosure.
  
  A three-judge panel of the U.S. Court of Appeals in Washington [] ruled that a case brought by two widowers challenging HUD regulations on reverse-mortgage loans may proceed. The widowers claim that HUD rules on when loans become due and payable conflict with language in the law aimed at protecting surviving spouses from foreclosure.(1)
  
  “We admit to being somewhat puzzled as to how HUD can justify a regulation that seems contrary to the governing statute,” U.S. Circuit Judge Laurence Silberman wrote in the 13-page opinion.
  
  Lemar Wooley, a spokesman for HUD, declined to comment on the decision. Reverse-mortgage loans pay out a home’s equity to the homeowner, often in installments, and are usually repaid when the borrower dies or moves out of the house. Borrowers are considered in arrears if they don’t keep current on their property taxes and insurance.
  
  The loans are available only to borrowers who are at least 62 and who have significant equity in their homes.
  
  ‘Surviving Mortgagor’
  
  The lawsuit involves changes to the program that were mandated by Congress in 1987 in authorizing HUD to administer a mortgage-insurance program. Congress, in the law, said the loan obligation was deferred until the homeowner’s death, specifically stating that the term “homeowner” includes the spouse of the homeowner.
  
  The language HUD crafted when implementing the law states that the balance of the loan is due and payable in full “if a mortgagor dies and the property is not the principal residence of at least one surviving mortgagor.”
  
  HUD said in its response to the lawsuit that it was concerned a homeowner, after taking out a reverse mortgage, might marry a young spouse, which would increase a lender’s risk.
  
  The lawsuit had been dismissed by a lower court judge who found that because the widowers weren’t borrowers on the loans at issue, winning the lawsuit wouldn’t save their homes because it was the lender’s decision on to whether to foreclose.
  
  HUD Remedy
  
  In establishing that the widowers have the authority to sue, the appeals court said today that HUD could come up with a remedy that would allow them to keep their homes. “HUD could accept assignment of the mortgage, pay off the balance of the loans to the lenders, and then decline to foreclose,” Silberman said.
  
  Craig Briskin, one of the lawyers for the plaintiffs, said he’s “thrilled with the decision.”
  
  “The ball is really in HUD’s court right now,” Briskin, of Mehri & Skalet PLLC in Washington, said in an interview. “The D.C. Circuit clearly told HUD it made a mistake.”

Source: Reverse-Mortgage Suit Against HUD Revived on Appeal.

For the ruling, see Bennett v. Donovan, 11-5288 (D.C. Cir. January 4, 2013) .

(1) According to the facts of the case:

• Robert Bennett and Leila Joseph are the surviving spouses of reverse-mortgage borrowers whose mortgage contracts were executed pursuant to HUD’s insurance program. Only their spouses, not the appellants themselves, were legal borrowers under the mortgage contract. Appellants allege that they were assured by their brokers that they would be protected from displacement after their spouses died, and that in reliance on this protection, they quitclaimed interest in the homes they had owned jointly with their spouses when their mortgages were originated.

In a footnote, the court added some context as to the possible reason why the surviving spouses had been talked into signing away their respective ownership interests in their homes by the brokers peddling the reverse mortgages:

• Both Bennett and Joseph were younger than their respective spouses, and because loan limits depend on the age of the youngest borrower, quitclaiming interest in their homes likely allowed the banks to provide appellants more favorable loan terms than if they had been parties to the contract as well. Pricing of reverse mortgages is like the inverse of life-insurance policies — older borrowers are expected to live for a shorter period of time, and thus draw fewer payments over the life of the mortgage, so the magnitude of those payments can be greater for a given amount of equity.

Michigan Trial Court OKs Homeowner Challenge To Validity Of Mortgage Assignment Where Assignee's Lack Of Title Is Raised As A Defense

From the National Consumer Rights Bankruptcy Center:

• A Michigan state court found that a debtor may oppose foreclosure on the basis that the assignment of the mortgage to the foreclosing party was in violation of the Pooling and Service Agreement and, therefore, ineffective. HSBC Bank, USA v. Young, No. 11-693 (Cir. Ct. Mich. Oct. 16, 2012).
  
  HSBC conducted a foreclosure by advertisement and bought the property at the foreclosure sale. When it moved the court for possession of the property the debtor challenged the legitimacy of the foreclosure on the basis that the assignment of the note and mortgage from Wells Fargo to HSBC took place after the note was in default in violation of the terms of the PSA.
  
  The court began by finding that the debtor challenged HSBC’s ownership of both the note and the mortgage and Michigan law does not allow foreclosure by a party who owns neither the note nor the mortgage. Residential Funding Co. v. Saurman, 490 Mich 909, 805 NW2d 183 (2011).
  
  The court then turned to the question of whether the debtor had standing to challenge the assignment of the mortgage and note on the basis that it did not conform to the requirements of the PSA. The court found that she did.
  
  Citing Livonia Property Hldgs v. 12840-12976 Farmington Rd. Hldgs, 717 F.Supp. 2 724, 746 (E.D. Mich 2010), the court recognized an exception under Michigan law, to the rule that only a party or third party beneficiary to a contract may enforce its terms.
  
  Under that case, a debtor may protect herself from the threat of having to pay the same debt twice by raising as a defense the assignee’s lack of title.
  
  The court distinguished the holdings of others courts that found that mortgagors lack standing to enforce the terms of the PSA on the basis that those cases relied on state law that did not permit a debtor to challenge an assignment. Michigan, by contrast, does not preclude that challenge and because the debtor suffered an injury from the allegedly invalid assignment, she had standing under state law to raise failure to comply with the PSA as a defense to the foreclosure.
  
  While the court framed the issue as one involving the borrower’s right to challenge compliance with the PSA, in fact the debtor is not, in most cases, attempting to enforce the PSA.
  
  Instead the PSA provides the road map that tells the world who is supposed to own the loan and how the transfer of ownership was supposed to be accomplished. Failure to comply with the terms of the PSA potentially means that the party claiming ownership of a loan may not in fact have obtained those rights.
  
  Certainly, borrowers have standing to challenge the legitimacy of a party seeking to foreclose on their home. The PSA is an important piece of evidence that describes the conditions under which one party or another owns the loan.

Source: Debtor Has Standing to Argue Failure to Comply with Terms of PSA.

For the ruling, see HSBC Bank, USA v. Young, No. 11-693 (Cir. Ct. Mich. Oct. 16, 2012). (Representing the successful homeowner was the non-profit law firm Legal Services of South Central Michigan).(1)

See Homeowners Have Standing To Challenge Faulty Mortgage Assignments From One Bankster To Another, But Only Where Defects Render Conveyance Absolutely Void, Not Merely Voidable for a post involving a recent Texas case that allowed for a homeowner challenge to a faulty mortgage assignment in certain limited circumstances.

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

(1) Legal Services of South Central Michigan (LSSCM) provides free legal advice and representation in certain civil cases to approximately 10,000 low income persons and senior citizens (regardless of income) each year in over a dozen counties in the state.

Void vs. Voidable: The Difference Is Subtle, But Significant

From a recent client alert from the law firm Miller Canfield:

• Shortly before the end of 2012, the Michigan Supreme Court issued its first opinion in a calendar case on Michigan's foreclosure statute in nearly 20 years. In Kim v JPMorgan Chase Bank, N.A., --- Mich ----; --- NW2d ---- (Mich Dec 21, 2012) (No 144690), the Court was unanimous in upholding long-standing Michigan case law stating that deficiencies in the foreclosure process make a foreclosure sale voidable, not void ab initio.
  
  The difference is subtle, but significant.
  
  Voidable sales may be set aside, but only if the mortgagor can show it was prejudiced by any alleged deficiencies.
  
  Sales that are void ab initio are simply invalid, whether the mortgagor was harmed or not – and even if the foreclosed property has since been sold to one or more innocent purchasers.
  
  The Kim decision comes in response to a growing number of Michigan Court of Appeals decisions following the Court of Appeals’ 2007 ruling in Davenport v HSBC Bank USA, which held that at least certain types of deficiencies made a foreclosure sale void ab initio. 275 Mich App 344; 739 NW2d 383 (2007). By rejecting Davenport and its progeny, Kim gives a great deal more certainty to foreclosing mortgagees, purchasers of foreclosed property and the title companies insuring those sales alike.
  
  Despite the full Michigan Supreme Court agreeing on this point, the Court split 4-3 on the actual merits of the Kim case. At issue was whether a transfer by the FDIC of a closed bank’s assets was a transfer by operation of law, or a more typical asset sale.
  
  Justice Marilyn Kelly, writing for the majority, explained that this transfer was a sale of assets and not a transfer by operation of law. Because it was not a transfer by operation of law, the majority held that the mortgagee of the Kim’s property was unquestionably required to record an assignment before the sheriff’s sale under MCL 600.3204(3). Since the mortgagee failed to do so, the sheriff’s sale is voidable. The Court remanded for determination of whether the mortgagor was prejudiced.
  

Source: Michigan Supreme Court Issues Opinion on State’s Foreclosure Statute.

Texas Homeowner Seeks To Invoke State Homestead Law To Invalidate Mortgage Obtained When Refinancing Family Home On 11+ Acres Of Land

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

• A man claims a mortgage company is attempting to wrongfully foreclose on his home, despite its failure to provide him with notice of its intent.
  
  Todd David Bryson filed a lawsuit Dec. 28 in Jefferson County District Court against Wells Fargo Bank.
  
  In his complaint, Bryson alleges he stumbled upon a foreclosure notice for his home, which sits on 11.37 acres of land.
  
  Bryson had previously granted a lien to Wells Fargo in an attempt to guarantee a $700,000 promissory. The interest in the lien was Bryson’s home, according to the complaint.
  
  If Bryson was to become delinquent on his loan, Wells Fargo agreed to provide him with a 21-day advanced notice of its posting of the foreclosure of his home, the suit states. However, Bryson claims he was never given the required notice and only recently discovered Wells Fargo’s intent to foreclose on it on Jan. 1, the complaint says.
  
  In fact, Bryson is now questioning whether the lien on his home is even valid.
  
  “This property was known by all parties to constitute the plaintiff’s homestead and as such, any acquisition of the lien upon said property would have to comply, clearly and completely, with the provisions not only of the Texas Property Code, but also the Texas Constitution,” the suit states.
  
  “Notwithstanding the foregoing, Wells’s predecessor in interest, Wachovia Bank, induced plaintiff to execute loan documentation related to acquisition of financing from said bank even though loan officers of Wachovia Bank were aware of the fact that (i) the property constituted plaintiff’s homestead and (ii) plaintiff had already completed construction of the improvements constituting his homestead before the bank presented documentation to plaintiff purporting to create the lien upon the property.”
  
  In a telephone conversation with the Record, Alfredo Padilla, a spokesman for Wells Fargo Mortgage, said the company is “looking into the matter.”
  
  If Wells Fargo forecloses on Bryson’s home, he claims he will lose out on $200,000 worth of equity in the property.
  
  Bryson seeks an order that would determine the lien as invalid, plus unspecified damages, attorney’s fees, court costs and other relief the court deems just.
  
  James Wimberley of McPherson, Hughes, Bradley, Wimberley, Steele and Chatelain in Port Arthur will be representing him.

Source: Man fears losing $200,000 worth of equity in home.

Texas Residents' Lawsuit: Oil Company Is Screwing Us Out Of Million$ In Royalties For Our Mineral Interests In Land

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

• Texas residents allege a major gas company is denying them the rights to substantial amounts of money they should be making from the production of oil.
  
  Donna L. Davis as trustee of the Rhonda Lee Davis Irrevocable Trust, Glenna Lee Satterfield, Leah McCurry, Robert A. Garbrecht co-trustee of the Faustine M. Garbrecht Revocable Trust, Glenn H. McCarthy Jr. and Legacy Royalties filed a lawsuit Dec. 19 in Jefferson County District Court against BP America Production Co. and Cimarex Energy.
  
  In their complaint, the plaintiffs claim they are entitled to 1/16 of the more than $100 million worth of oil drilled on a tract of Jefferson County land.
  
  According to the complaint, the plaintiffs’ predecessors owned a mineral interest in land where BP and Cimarex are currently drilling wells.
  
  Under the deeds signed in 1933, the plaintiffs’ predecessors were entitled to a non-participating royalty interest, the suit states. This meant that they would receive 1/16 of the value of any oil produced on the land, the complaint says. The deeds are still in effect and are now owned by the plaintiffs, they claim.
  
  “Cimarex Energy has now drilled several producing wells in the units that include the BP/Cimarex Leases and the plaintiff’s NPRI (non-participating royalty interest),” the suit states.
  
  “Although BP and Cimarex have collectively realized payments for the production from the wells that exceed $100 million, much of which results from the sale of oil, they have refused to pay plaintiffs their just and due royalty interest and deny that plaintiffs are entitled to payment of any future royalty.”
  
  In their complaint, the plaintiffs want the court to declare that they, and not BP, are entitled to the royalty payments.
  
  The plaintiffs allege breach of contract against the defendants.
  
  They are asking the court to quiet their title and are seeking declaratory relief, damages within the jurisdictional limits of Jefferson County District Court, attorney’s fees, pre- and post-judgment interest, costs and other relief the court deems just.

Source: Texas residents sue for millions of allegedly unpaid oil revenues.

Texas Bar Moves To Pull Attorney's Ticket To Practice Law Over Alleged $1M+ Trust Account Ripoff

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

• The Commission for Lawyer Discipline, an arm of the State Bar of Texas, has filed a second petition to suspend the practice of Beaumont attorney Kip Lamb.
  
  The first petition was filed July 10 in Jefferson County District Court. The second was filed Dec. 17.
  
  According to the petitions, on April 14, 2008, Lamb received $1,094,611.02 into his trust account as his client’s (New Life Tabernacle Church) portion of a settlement.
  
  Lamb later transferred the funds to other bank accounts for his own personal use and his law firm’s use, the petition states.
  
  The Bar is asking that the court suspend or disbar Lamb.

Source: State Bar files second suit against Beaumont attorney Kip Lamb.