Bankruptcy Debtor Fails In Homestead Claim To Shield Home Equity From Creditors' Claws Where He Left Premises 15 Years Earlier, Rented It Out, Testifying To A Lack Of Intent To Return

From an Opinion Summary from Justia US Law.com:

• Debtor appealed from the bankruptcy court's order granting summary judgment in favor of the Chapter 7 Trustee on his objection to debtor's claimed homestead exemption
  
   The Bankruptcy Appellate Panel affirmed the bankruptcy court's conclusion that debtor had abandoned the property at issue as his homestead by removing himself from the property with no fixed or actual intent to return, and was not, therefore, permitted to claim a homestead exemption.(1)

Source: Opinion Summary - Paul v. Allred.

For the ruling, see Paul v. Allred, No.12-6068 (Bankr. App. 8th Cir. February 28, 2013).

(1) From the court ruling:

• [The Chapter 7 Trustee] stated that the Debtor testified at the § 341 meeting that he has owned the Spark Street property since 1997 or 1998; that he did not live in the property on the date of filing; that he has not lived in the property for 14 or 15 years; and that he had no intent to live in the property.
  
  Further, the Debtor testified that the subject property was rented out, generating $550 per month of gross rental income, which, we note, was consistent with what was reported on Schedule I. The Debtor also testified he owns no other interests in real property.
  
  The Trustee asserted that entitlement to exemptions is determined on the date of filing and that, under South Dakota law, real property not actually occupied by the debtor on the date of filing can be claimed as an exempt homestead only if the debtor has, on the date of filing, an intention to occupy the property.
  
  Because the Debtor testified that he had no intent to occupy the property, the Trustee asserted that he was not entitled to the homestead exemption claimed in it.

***

• While the Spark Street property may have once been the Debtor's homestead, the Trustee asserts that it no longer continues to possess the character of a homestead because he left the property and has no intent to return. In Yellowhair v. Pratt, the South Dakota Supreme Court stated the following standard regarding abandonment of a homestead:
  
  The main question in all cases of this nature is the intent of the party who has ceased to occupy the homestead.
  
  No general rule can be laid down as a guide for a court in determining intent, but each case must stand upon its own facts. Actual removal without intention to return is a forfeiture of the homestead right.
  
  If one removes from homestead property without any present intention of returning, but with a mere possible, or at most probable, future purpose to do so, contingent upon the happening or not happening of a particular event, the homestead is abandoned.
  
  Long absence, while not conclusive proof of intent to abandon, is a circumstance which may indicate such an intent in absence of a showing of intent to return.
  
  The real question is: Did the party have a fixed and actual purpose or intent to return and reside on the property, and did that purpose or intent continue to exist to the time in question?[16]

***

• And, in Hewitt v. Carlson, the South Dakota Supreme Court said:
  
  While a party leaving a homestead must, in good faith, intend to return to it at some future date, such date need not be "fixed or definite" as to time; neither need such intent be an intent to return regardless of all possible contingencies; but, if there is an honest belief that at some time in the future the party will reoccupy the property as a home, and such party does no act inconsistent with such belief and intent, the homestead right is not forfeited.[17]

***

Editor's Note: It appears that the court didn't really seem concerned that the homeowner was gone from the home for 15 years, nor did it really seem concerned  that the premises was rented out.

The crucial issue here, as far as the court was concerned, was simply whether or not the Debtor had "an honest belief that at some time in the future the party will reoccupy the property as a home, and such party does no act inconsistent with such belief and intent, ...".

According to the Debtor's own testimony, the answer was no. So the court's ruling was quite predictable.

1st Mortgage Foreclosure Sale: IRS Succeeds In Squeezing 2nd Mortgage Holder For $100K To Release Its Right Of Redemption On Federal Tax Liens, Despite Its Subordinate Lien Priority

From the blog Bankruptcy-RealEstate-Insights.com:

• A secured junior lender who purchased property at a senior lender’s foreclosure sale paid $100,000 to the Internal Revenue Service to induce it to release a right of redemption in connection with its tax liens on the property.
  
  After a bankruptcy court held that the junior lender had priority over the IRS but would not address the settlement payment, the junior lender sued the IRS in the U.S. Court of Federal Claims. It sought return of its $100,000 settlement payment, ... asserting that the settlement agreement was void for lack of consideration based on an argument that the right of redemption was illusory because it was later held to be invalid.
  
  After losing in the Court of Federal Claims, [the junior lender] appealed to the Federal Circuit Court.

For more, see Trying To Undo A Settlement: Bad Liens Don’t Make Bad Settlement Payments.

For the Federal appeals court ruling, see Road & Highway Builders, LLC v. United States, 702 F.3d 1365 (Fed. Cir. 2012).

80-Year Old Widow Scores Court Win Over Notorious Bankster In 3-Year Struggle To Save Home Of 46 Years From Foreclosure; Purported Missed Mortgage Payments Were Actually Sloppy Servicer's Bookkeeping Screw-Ups; Victim's Lawyer Vows More Litigation

In Tualatin, Oregon, ABC News reports:

• A woman in Tualatin, Ore., is breathing a sigh of relief after a three-year battle to prove Wells Fargo had wrongfully moved to foreclose on her home, saying she had missed mortgage payments.
  
  A judge ruled Wednesday that Wells Fargo failed to prove she was actually behind in her payments, which Delores Dingman, 80, attributes to the bank's simple "accounting errors." "I just praise God for it all because I kept praying so many times about this, because I knew I had made the payments, but their accounting errors made it hard," she said.
  
  The judge heard six hours of testimony and then ruled to cancel the judicial foreclosure.
  
  Dingman and her late husband moved into their four-bedroom home in 1967, 46 years ago. After her husband, Leland, died in March 2008, Dingman took out a new mortgage with Wachovia while she paid off his medical bills, never missing a payment. Court records show she promised to pay $308,000 plus interest June 16, 2008.
  
  The next year, after Wells Fargo's acquisition of Wachovia was completed in Jan. 2009, Dingman began receiving foreclosure notices. She believes the bank did not correctly process her payment since around October 2009.
  
  But her bank records show her mortgage payments have been deposited by Wells Fargo. Despite efforts to clear up the mistake and paying more than $12,000 in attorney fees, her home went into judicial foreclosure.
  
  She had been employed by the local Kmart since it opened 40 years ago but stopped working when the store closed last year. She continued to pay her monthly mortgage amount of more than $2,300 while paying her attorney, Terry McLaughlin, to help her clear up the mistake.
  
  "There is going to be more litigation," McLaughlin said, declining to comment further.

For more, see Oregon Woman Wins 3-Year Fight Against Wells Fargo Foreclosure.

Attorney Gets 15 Years For Swindling $1.29M From Clients

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

• Beaumont attorney Kip Lamb, 57, was sentenced to 15 years for swindling more than a million dollars from two separate clients.
  
  Court records show that on April 14, 2008, Lamb received $1,094,611 into a trust account as his client’s (New Life Tabernacle Church) portion of a hurricane insurance settlement.
  
  Lamb later transferred the funds to other bank accounts for his own personal use and his law firm’s use, according to court documents.
  
  Last year, Lamb was charged with two counts of misapplication of fiduciary property. He pleaded guilty in February.
  
  The second charge accused Lamb of taking a female client’s trust of more than $200,000.
  
  Criminal District Judge John Stevens also ordered Lamb to pay restitution for the theft, according to a Channel 6 news report.
  
  The judge sentenced Lamb to 15 years for stealing the church’s funds and 10 years for stealing the woman’s money. The judge suspended Lamb’s sentence for taking the woman’s money, meaning his final sentence is 15 years in prison.
  
  Following the May 2012 indictment, Judge Stevens issued a warrant for Lamb’s arrest; however, the attorney fled. Authorities found Lamb in Arkansas on May 8, 2012.
  
  As previously reported, in September the Commission for Lawyer Discipline, an arm of the State Bar of Texas, filed a letter notifying Jefferson County district judges of Lamb’s suspension.

For the story, see Beaumont attorney sentenced to 15 years for swindling $1M from clients.

Attorney Disbarred For Ripping Off Clients' Insurance Settlement Proceeds Finally Gets Pinched; Held On $420K Bond On 22 Theft, Fraud-Related Charges

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

• A disbarred Pembroke Pines lawyer is behind bars after authorities say he stole more than $800,000 from people and companies he was representing.
  
  Wearing jail garb instead of a lawyer's suit, Mark Foster Dickson, 64, appeared in a brief bond court hearing on Thursday, where he was issued a $420,000 bond on 22 charges related to theft and fraud.
  
  Most of the victims listed in the case are insurance companies he did work for, according to an arrest affidavit. In most of the cases he negotiated settlements on behalf of the companies, but he kept the funds without telling clients about the payouts, according to an affidavit.
  
  "He used his bar license to conduct these thefts," said Assistant State Attorney Catherine Maus.
  
  Authorities said Dickson deposited the stolen funds into his practice's operating account and then drew the funds for personal use. The claims ranged from as little as $8,000 to a $165,000 settlement check he allegedly stole from Florida Intercoastal Underwriters.
  
  On several instances, he advised his clients that a settlement on a claim would be difficult and recommended closing the file. However, Dickson still allegedly negotiated and settled claims, keeping the funds for himself.
  
  In one case, Dickson was representing ACE American Insurance Company on a claim related to an engine failure on a man's yacht caused by contaminated gas. Dickson told company officials to close the file because experts determined the gas was not contaminated.
  
  Dickson reportedly settled the matter anyway for $20,000 and deposited the funds in his firm's operating account. He then made multiple withdrawals from the account from several locations in Broward, according to the affidavit.
  
  At the bond court hearing, the prosecutor told Broward Court Judge John "Jay" Hurley that it was unclear where all of the allegedly stolen funds are. Defense attorney Mitchell B. Polay asked Hurley to consider Dickson's lack of criminal history and his long tenure as a lawyer when setting a bond.
  
  "He's been a member of the Florida Bar for a number of years, your honor, no problems with the Bar. Obviously something has come about," Polay said. "Mr. Dickson has never had any problems with the law. This is an anomaly."
  
  Hurley declined to lower the bond amount, saying the funds allegedly stolen are large enough to put Dickson at risk of fleeing the country. Dickson now will be required to prove that the funds used to post his bond come from a legitimate source.
  
  Polay declined to comment after Thursday's hearing.
  
  A 1974 graduate of St. John's University School of Law, Dickson was admitted to the Florida Bar in 1975, records show. Dickson's law license was suspended in February 2012. The Florida Supreme Court disbarred Dickson last month.

Source: Disbarred lawyer accused of stealing thousands from clients.

South Florida Attorney Reported Missing ... Along With At Least $6M Cash From Law Firm's Firm's Trust & Title Company Accounts

In Boca Raton, Florida, the South Florida Sun Sentinel reports:

• Police are investigating the mysterious disappearance of a Palm Beach County real estate attorney who was last seen 11 days ago.
  
  Also missing, according to the attorney's partner: at least $6 million from the firm's trust accounts.
  
  Timothy P. McCabe, 55, of Boca Raton, was last seen on April 2, according to a missing person's report made to Boca Raton police on April 5 by McCabe's wife Donna.
  
  His friends and family say they don't know what to think about his disappearance, or if it is related to the Lake Worth firm's missing money.
  
  Boca Raton police spokesman Mark Economou said McCabe's wife told police she grew concerned after she heard from a friend of McCabe's on April 5. The friend said he had heard from McCabe by phone, who said it would be the last time they talk.
  
  According to reports from the Palm Beach County Sheriff's Office, McCabe told the friend, "this is the last time we talk."
  
  McCabe's wife filed the missing person report that same day.
  
  Up until she received that phone call, Economou said, McCabe's wife assumed her husband had been away on a business-related trip to Tampa and Orlando. Boca Raton police investigated McCabe's cellphone records and discovered that when he had called the friend on April 5, he was in South Carolina.
  
  Still, police had no obvious reason to believe that McCabe was anything other than an adult who had gone somewhere on his own accord.
  
  "It was determined at that point that he wasn't in any harm," Economou said, adding the case is still open. "Until any more information comes in, he's basically an adult that left."
  
  McCabe's law firm partner at McCabe and Samiljan LLC, Steve Samiljan, said Friday that he estimates that "at least" $6 million is missing from the firm's trust and title company accounts. But he also added he is concerned about McCabe's well-being.
  
  "We're concerned about him," Samiljan said Friday. "He's a son, he's a husband and he's a father and I've known him for 17 years."
  
  Samiljan said that since April 5, he has spent most of his days talking to clients who have come by the office asking questions about the missing money. He said he contacted the sheriff's office, the Florida Bar, and has been working with title insurance underwriters to "figure out the extent and damage."
  
  "I can tell you that a lot of money is missing and that a lot of clients are hurt," Samiljan said. "It's been devastating for the clients, for my employees and for myself."(1)

For more, see Palm Beach County attorney missing, as is at least $6M from firm.

(1) The Florida Bar's Clients' Security Fund was established to reimburse clients who have suffered a loss due to misappropriation or embezzle­ment by a Florida-licensed attorney.

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

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

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

Homeowner Facing Foreclosure Gets 3 Months For Lying To Score Loan Modification; Small-Fish Suspect Snagged By Broad Investigatory Fishing Net Targeting Sibling-Pol's Campaign Activities

From the Office of the U.S. Attorney (Washington, D.C.):

• Che M. Brown, 45, of Washington, D.C., was sentenced [] to three months of incarceration on a federal charge of bank fraud stemming from a scheme in which he submitted false documents to a mortgage lending service to win approval of a modification on a mortgage for his residence. [...] Upon completion of his prison term, Brown will be placed on five years of supervised release. During that time, the judge ordered that Brown perform 200 hours of community service.
  
  According to a statement of offense signed by the government as well as the defendant, Brown fell several months behind on his monthly mortgage in 2009. GMAC Mortgage LLC, a mortgage lending and servicing business, informed him that the mortgage was in default. GMAC also sent a letter to Brown in June 2009 that advised him that he should consider whether he was eligible for a loan modification that would make his monthly mortgage payment more affordable.
  
  From September 2009 through September 2010, Brown schemed to defraud GMAC by submitting documents that made it appear that he had received $35,000 in income that he, in fact, had never received. Based on those and other representations, Brown was deemed qualified for the mortgage modification, which ultimately reduced his payments by $717.44 a month, to $1,499.
  
  This marked the second time that Brown has been convicted of bank fraud. In 1995, he was convicted in the U.S. District Court for the District of Columbia of conspiracy to commit bank fraud in a scheme involving credit cards that resulted in $58,500 in losses.
  
  The current prosecution arose from a broader investigation into the campaign activities of Brown’s brother, Kwame R. Brown, the former chairman of the Council of the District of Columbia.(1) That investigation also led to the conviction of Kwame Brown in another bank fraud matter.
  
  Kwame Brown pled guilty in June 2012 to a federal charge of bank fraud stemming from false documents that he used to secure a $166,000 home equity loan, as well as a $55,335 loan that he used to purchase a boat.

For the U.S. Attorney press release, see Che Brown Sentenced to Three Months in Prison for Bank Fraud, Used False Documents to Modify His Mortgage (Claimed Income That He Didn’t Actually Receive).

(1) This incident serves as a reminder to take caution with who you hang around with (especially if you're up to no good and, in this case, have a criminal history of no good), lest you end up getting snagged in law enforcement's 'investigatory fishing net' intended for someone else. The cops may not have set out to look for you, but once they bag you (even for something unrelated to that which triggered the probe), they're not about to throw you back into the water.

Homeowner Facing Foreclosure Faces Felony Charges For Allegedly Forging Ex-Hubby's Signature On Loan Modification Paperwork

In Westland, Michigan, the Observer & Eccentric reports:

• A Westland woman has been ordered bound over for trial on felony charges that she forged her former husband's name on mortgage modification paperwork.
  
  Tonya Cramier-Oncza, 45, waived her preliminary examination in Westland 18th District Court Thursday. She is charged with forgery, uttering and publishing and being a fourth-degree habitual offender. A not guilty plea had been entered and she is free on a $200,000 cash/surety bond.
  
  Divorced six years, Cramier-Oncza is charged with signing her ex-husband's name on documents to modify a home loan. Cramier-Oncza's former husband doesn't live at the former marital home on Merritt and currently resides in Garden City.
  
  The former husband thought Cramier-Oncza was going to lose the home to foreclosure, police said, then became curious when she continued to live there. When he checked into the situation, the former husband found loan documents were signed with his name but not his signature and contacted police.
  
  Cramier-Oncza is scheduled for Wayne County Circuit Court arraignment on April 25.
  
  The habitual offender charge is the result of prior charges for forgery against Cramier-Oncza which resulted in probation.
  
  In 2007, Cramier-Oncza was charged with forging a signature and cashing a check belonging to a client she was assisting through the federal Family Self-Sufficiency Program at Westland's Dorsey Center. The client complained that Cramier-Oncza, who worked for an outside agency, had kept part of the money from the check.
  
  While on probation for that case in 2008, Cramier-Oncza and one of her sons were charged with forging checks belonging to a neighbor.

For the story, see Westland woman faces trial for forgery.

Municipal Foreclosure Sale Triggered By Unpaid $600 Garbage Bill Raises Questions Over Crappy Legal Notice Given To Delinquent Homeowners

In Buffalo, New York, The Buffalo News reports:

• The Cottones’ first indication that something was amiss came in a panicked call from one of their tenants, who had just opened an envelope from the City of Buffalo. Their house in Parkside had been sold.
  
  “You can’t imagine the stress of thinking the unthinkable, that something has happened and your house is gone,” Jerry Cottone said.
  
  An unpaid garbage fee of about $600 had landed their house on the city’s auction list.
  
  The Cottones eventually won their house back in court. But in the meantime, they had to hire a lawyer, get a judge’s order, miss work and spend countless hours worrying that they had lost their investment property.
  
  Their situation raises the question of what lengths the city or any municipality must pursue when notifying homeowners of delinquent fees and taxes, and the consequences of foreclosing on properties that owe small amounts.
  
  Jerry and his wife, Catherine Cook-Cottone, acknowledge they forgot about the garbage fee when they moved to Amherst in 2010 and didn’t join the city’s rental registry, which allows the city to find property owners who live elsewhere. But they said they received no notice that their house was in danger of being foreclosed. They did receive other city bills at their Amherst home and paid them, so they thought the city knew where they were.
  
  “At 6 o’clock at night, your tenant calls you and says the letter says the house has been sold, and you have no idea what the heck could be going on,” said Jerry Cottone. He got the call in early December, five weeks after the house was sold.
  
  The Cottones lived in the Woodward Avenue house for 10 years and kept it as an investment property when they moved. They said they never saw the garbage fee bills sent to Woodward.
  
  After two years, the unpaid fees amounted to about $600, so the city sold their two-family house, assessed at $147,000, for $110,000 in the city auction.
  
  The city sends out some 14 notices to a property owner that their home is on the city’s auction list, warning them to pay up or lose the house, but the Cottones said they never received any.
  
  But when the city sent a notice to Woodward that the house had been sold, their tenants opened it and immediately called them.
  
  The tenants also routinely gave them junk mail, such as advertisements for sweepstakes, the Cottones said, so they doubt foreclosure notices from the city were being discarded. The tenants submitted statements to the court saying they never received the city’s notices.
  
  The city’s top attorney, Corporation Counsel Timothy A. Ball, insisted that the city did indeed send notices to the Woodward Avenue house, as it does for every property whose owners have fallen behind in their bills. “The city complied with all laws, rules and regulations,” Ball said.
  
  First-class letters to the Woodward Avenue property from the city were not returned to the city as undeliverable, though a certified letter was, according to the city’s submission to the court.
  
  Property owners who have lost their house at the auction but were not notified is something attorney Paul B. Curtin hears often enough for him to think it’s a problem.
  
  “People come to me in huge, major crisis,” said Curtin, who works for Legal Aid Bureau of Buffalo and represents low-income defendants who are in danger of losing their homes. “Why would so many people on such a regular basis try to game me with that excuse?”

For more, see Amherst couple’s foreclosure nightmare is a real-life cautionary tale (Amherst couple’s first sign their Buffalo property was in arrears was a notice that it had been sold at auction).

Federal Reserve, OCC Invoke Their Purported "Trade Secrets" Obligation To Banksters To Stiff Congress On Document Request Centering On Types Of Foreclosure Fraud Abuses Committed By Each Mortgage Servicer

Reuters reports:

• Two Democratic lawmakers lambasted federal regulators whom they accuse of using an obligation to protect bank "trade secrets" as an excuse not to hand over details of a botched review of home foreclosures.
  
  "Breaking the law is not a corporate trade secret," Senator Elizabeth Warren of Massachusetts and Representative Elijah Cummings of Maryland told the Federal Reserve and the Office of the Comptroller of the Currency in a letter on Wednesday.
  
  The regulators reached settlements worth about $9.3 billion with 13 banks earlier this year to end case-by-case reviews of whether they had wrongly seized homes or begun the foreclosure process.

***

• Regulators had already turned over some information about the reviews, but the lawmakers wanted to look at documents concerning the types of abuses committed by each mortgage servicer.
  
  But regulators resisted turning over such information and said documents involved are trade secrets, or subject to confidentiality agreements, according to the lawmakers.

For more, see Lawmakers lambast Fed, others for hiding behind "trade secrets".

Quartet Cop Guilty Pleas In Iowa 'Free House' Case; Hubby Conned Lender To Grant Home Loan Without Wife's Signature, Making Mortgage Void Under State Homestead Law

In Des Moines, Iowa, the Des Moines Register reports:

• Four people, including a Des Moines police lieutenant, pleaded guilty Friday to charges related to a mortgage fraud scheme, federal prosecutors announced.
  
  The two couples were accused of falsifying loan information and taking part in a plan to exploit a mortgage law loophole to obtain a free house in Ankeny.
  
  Jamie Bowers-Danielson, 35, and Matthew Danielson, 35, of Ankeny both pleaded guilty of bank fraud. Bowers-Danielson also pleaded guilty of conspiracy to commit bank fraud.
  
  Bobbi Jo Wojewoda, 43, of Grimes, pleaded guilty of conspiracy to commit bank fraud. Her husband, Des Moines police Lt. Wade Charles Wojewoda, 45, of Grimes, pleaded guilty of receipt of proceeds obtained under false pretenses, related to the 2003 purchase of the couple’s home.
  
  In his written plea agreement, Danielson admitted to listing himself as single to deceive a lender into giving him a mortgage without obtaining his wife’s signature, thus making the mortgage void, according to a news release from U.S. Attorney Nicholas A Klinefeldt.
  
  The Danielsons’ case gained notoriety in 2011, when the couple persuaded an Iowa appellate court to void a foreclosure proceeding based on an an 1888 law that requires both spouses to sign a mortgage.(1)
  
  Bowers-Danielson, who worked as a loan originator for two different companies between 2003 and 2007, used her position to fake information on loan applications for herself and others who otherwise would not have qualified for the loans, according the news release.
  
  Bobbi Jo Wojewoda, meanwhile, used her position as an apprentice appraiser to inflate the values of homes, including her own, to help herself and others qualify for mortgage loans, according to the news release.
  
  According to an indictment unsealed in 2012, Wade Wojewoda signed documents with false information.
  
  Wojewoda remains employed by the Des Moines Police Department in an administrative position where he is not allowed to supervise other employees, said Sgt. Jason Halifax, a Des Moines police spokesman.
  
  Des Moines police officials will determine the future of Wojewoda’s employment following an internal investigation that will begin now that the criminal case has concluded, Halifax said. Wojewoda was re-assigned and stripped of his patrol supervision responsibilities following the indictment.
  
  The Danielsons will be sentenced July 26. The Wojewodas will be sentenced July 31. All four remain released from jail pending their sentencing.
  
  Bank fraud and conspiracy to commit bank fraud are punishable by up to 30 years in prison and a fine of $1 million. Receipt of proceeds under false pretenses is punishable by up to one year in prison and a fine of $100,000.

For the story, see In 'free house' fraud case, 4 plead guilty, including police officer.

For an earlier story, see Iowa Couple's Legitimate Move To Score 'Free House' Through Homestead Exemption Claim May Be Sunk After Feds Bring Charges For Alleged Mortgage Fraud.

(1) See Sloppy Lender, State Homestead Law Leave Iowa Couple w/ Voided Mortgage; Bank Left Holding The Bag After Failing To Get Wife's Signature On Loan Docs.

Go here for earlier posts on this story.

Virginia AG Tags Loan Modification Operator For Allegedly Clipping Homeowners For Upfront Fees For Foreclosure Rescue Services

From the Office of the Virginia Attorney General:

• Attorney General Ken Cuccinelli announced [] that he has filed a lawsuit against Alexandria resident Joel Steinberg and his two Alexandria-based mortgage loan modification companies, MidAtlantic Loan Solutions, Inc. (MLS), and MidAtlantic Financial Solutions, LLC (MFS), for allegedly charging illegal advance fees of up to $1,500 before performing "foreclosure rescue" services for their customers.
  
  The attorney general alleges that Steinberg, MLS, and MFS violated the Virginia Foreclosure Rescue law by charging advance fees in connection with services to avoid or prevent foreclosure. The foreclosure rescue law prohibits a supplier of foreclosure avoidance or prevention services from "charging or receiving a fee prior to the full and complete performance of the services it has agreed to perform, if the transaction does not involve the sale or transfer of residential real property."

For the Virginia AG press release, see Attorney General Cuccinelli announces suit against Alexandria-based mortgage modification companies and owner (MidAtlantic Loan Solutions, MidAtlantic Financial Solutions allegedly charged illegal advance fees for "foreclosure rescue" services).

Couple Who Allegedly Filed $114B In 'Retaliation' Liens Against Public Officials Withdraw Guilty Pleas, Decide To Move Forward In Defending Against Prosecution

In Ramsey County, Minnesota, the Pioneer Press reports:

• An Itasca County couple charged in a $114 billion harassment scheme involving bogus liens now say they want to withdraw their guilty pleas.
  
  Thomas and Lisa Eilertson, formerly of Brooklyn Park and Minneapolis, pleaded guilty April 4 to 12 felony counts each. They had refused earlier that day to enter guilty or not-guilty pleas.
  
  On Tuesday, April 9, they filed a 140-page document that included, among other things, copies of the plea agreements with lines through them and, in large handwritten letters, "RESCISSION."
  
  In the cover letter, the Eilertsons wrote that their pleas were "withdrawn and refused without dishonor, without recourse, as slander of title, rights prejudiced, deceptive trade practices, deceit dishonor defamation by: (Ramsey County Attorney) John J. Choi, with article in PIONEER PRESS and MEDIA slander." Choi was quoted in a Pioneer Press story about the guilty pleas.
  
  "Defendants wish to move forward and not be used as pawns for John Choi's political slander," the Eilertsons wrote in an affidavit included with the Tuesday filing. They wanted to resolve the matter in "good faith," they wrote, but were thwarted by "the malicious intent to prosecute."
  
  Dennis Gerhardstein, a spokesman for the county attorney's office, said Thursday that the office had no comment.
  
  In a news release last week, Choi called what the Eilertsons did "financial and economic terrorism."
  
  Thomas Eilertson, 45, and Lisa Eilertson, 49, represented themselves in court. Sentencing is scheduled before Ramsey County District Judge Lezlie Marek on June 7.
  
  As part of the guilty pleas, the Eilertsons had agreed to remove all liens filed against public officials, who include Hennepin County Attorney Mike Freeman and Hennepin County Sheriff Richard Stanek. They also agreed not to file bogus liens in the future.
  
  The deal also stipulated that in exchange, the maximum jail time they would face was 120 days, providing they had no felony convictions on their records. They also would pay restitution for their crimes. The charges were to be reduced to misdemeanors if they followed the terms of their five-year probation, the agreement stated.
  
  The Eilertsons filed false liens against 12 victims, using the name "Blessings of Liberty," according to criminal complaints filed in Ramsey County District Court.
  
  The Hennepin County sheriff's office referred the case to St. Paul police for investigation because several of the victims are Hennepin County officials.
  
  The Eilertsons' activities stemmed from 2009, when their home at 4448 Cedar Ave. S. in Minneapolis went into foreclosure.
  
  An online contact, identified in the complaints by the initials P.K., gave them instructions on how to file Uniform Commercial Code liens against people in retaliation for their economic problems. They were told that filing under the name "Blessings of Liberty" shielded them from civil and criminal liability.
  
  P.K. said the liens, which are claims against an asset, would allow the Eilertsons to "do death by a thousand paper cuts."
  
  The liens were filed in 2009 and 2010 with the secretary of state's office in St. Paul and totaled $114 billion.

For the story, see Itasca County couple moves to withdraw pleas in lien harassment case.

Calculating Bankster-Paid Legal Fees For Non-Profit Law Firm Taking "Undesirable" Consumer Law Case Alleging Unconscionable Conduct When Originating, Servicing Home Loan; Judge Grants Add'l 20% Contingency Fee Bonus

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

• Mountain State Justice, the nonprofit law firm that helps low-income individuals, will recover only 69 percent of what it was requesting for helping a Beckley woman sue Wells Fargo.
  
  U.S. District Judge Thomas Johnston ruled March 29 that Mountain State Justice is entitled to $24,784.32 in attorneys fees and $3,349.60 in costs and expenses incurred during Ann Koontz’s lawsuit against Wells Fargo. He cited hourly rates that were too high and vague timesheets.
  
  Koontz accused Wells Fargo of engaging in unconscionable conduct concerning the origination and servicing of her home mortgage loan.(1)
  
  Using a lodestar analysis, Johnston determined Mountain State Justice was entitled to $20,653.60 for its work, but he increased the amount by 20 percent.(2) Wells Fargo did not disagree.
  
  “In light of (a March decision by the state Supreme Court),(3) the particular facts of this case and the absence of any opposition by Defendant, the court is inclined to agree that the lodestar analysis in this case does not adequately measure the true market value of Plaintiff’s uniquely situated counsel,” Johnston wrote.
  
  In the March decision by the Supreme Court, a Harrison County woman was awarded $32,000 after being foreclosed on. A $30,000 award of attorneys fees to Mountain State Justice was affirmed in the decision.(4)
  
  Harrison County Circuit Court Judge Thomas A. Bedell had ruled that Mountain State Justice survives on fees collected in “undesirable” cases.
  
  In Koontz’s case, she alleged Wells Fargo told her that her mortgage payment would be $614, but her closing was rushed and hurried without a sufficient explanation of the loan documents and loan terms. At closing, she says she was told her payment would be more than $700 per month.
  
  “Ms. Koontz continued with the loan closing because it was too late to back out,” the complaint says. By 2008, the payment had increased to $980, she says.
  
  On Feb. 28, 2012, the case was dismissed after Koontz and Wells Fargo reached a settlement. However, three months later, Koontz filed a motion to re-open the case.
  
  The two sides had reached an agreement on everything except the amount of attorneys fees. Mountain State Justice sought $40,484.60 as compensation for the work of attorneys Jennifer Wagner, Sara Bird and Dan Hedges.
  
  That figure represented hourly rates of $275 for Wagner and Bird, $425 for Hedges and $100 for paralegal work.
  
  Wells Fargo argued the hourly rates were unreasonable and unsupported by evidence of area market rates and that billing records offered little detail of the work provided.
  
  In support of their requests, the three Mountain State Justice attorneys filed affidavits, but none of them include the names of the attorneys with whom they spoke about the going hourly rate for the services they provided.
  
  When Wells Fargo challenged their requests, they filed affidavits from peer attorneys John Poffenbarger, Benjamin Bailey, Anthony Majestro and David Grubb.
  
  Johnston said only Grubb specializes in consumer law and the other three affidavits were too brief. He also noted an identical statement – “I believe these rates are reasonable, and within the range of hourly rates charged for attorneys of their experience and background in this community” – within each of the four affidavits.
  
  Johnston said the affidavits were deficient for the following reasons:
  
  -Poffenbarger’s and Majestro’s affidavits contain no representations that they know the reputations, skills and training of the three attorneys;
  
  -Bailey’s affidavit “fails to characterize Mr. Hedges’ work one way or another”;
  
  -Grubb’s affidavit has statements attesting to the reputation and skill of only Hedges and not the other two; and
  
  -The affidavits do not provide evidence of “the prevailing market rates in the relevant community for the type of work” for which Plaintiff seeks an award.
  
  Wagner performed most of the work on the case, charging $30,085 for 109.4 hours. Hedges charged $5,100 for 12 hours.
  
  Johnston found that a reasonable hourly rate for Wagner is $160, noting her federal clerkship term, lectures on consumer law issues and some appellate experience. He added that she was a “very inexperienced” attorney at the time the case was filed.
  
  “In selecting this rate the Court also considered the fact that Plaintiff tendered an affidavit by Ms. Wagner, lead counsel in the case, that inexplicably fails to set forth fundamental, simple and essential facts: when she graduated from law school, the length of her clerkship term, and the type of legal practice prior to joining Mountain State Justice,” Johnston wrote.
  
  Hedges’ appropriate hourly rate, Johnston wrote, is $375. He called him a “preeminent consumer law attorney who has devoted his lengthy career to this highly specialized area of public interest law.”
  
  Johnston then wrote about deficiencies in Wagner’s timesheets. They failed to describe with any specificity the tasks she was performing, he said. Some of her entries simply said “legal research,” “revise,” “draft,” “discovery,” “email,” and “preparation.”
  
  “Ms. Wagner’s time entries became somewhat more detailed as the case went on, presumably because she gained more experience as a lawyer,” he wrote.
  
  A 10 percent reduction of the hours billed remedied the vague entries, leaving Wagner’s amount of hours she could charge for at 98.46.

Source: Judge slashes Mountain State Justice’s fees request.

For the ruling, see Koontz v. Wells Fargo, N.A., Civil Action No. 2:10-cv-00864 (S.D. W.V. March, 29, 2013).

(1) Quoting from the Federal court ruling:

• This case, originally filed in state court and later removed to this Court, centered on allegations that Defendant Wells Fargo N.A. engaged in unconscionable conduct concerning the origination and servicing of Plaintiff Ann L. Koontz's home mortgage loan in violation of the West Virginia Consumer Credit Protection Act ("WVCCPA"), West Virginia Code §§ 46A-1-101, et seq. (1996) and common law.

(2) The 20 percent mark-up on top of the basic fee calculation awarded by U.S. District Judge Johnson was to account for a contingency fee multiplier or bonus to reflect, among other things, the "undesirability" of the case taken by the attorney (often, a non-profit, public interest law firm) in the context of fee-shifting statutes.

In awarding the fee enhancement, Judge Johnston indicates that said award is generally not the common practice in a federal court proceeding, but was influenced, in part, by West Virginia state court precedent to do so here.

Quoting from the ruling:

• Under West Virginia law, a "contingency enhancement" (sometimes referred to as a multiplier), may be "used to enhance the `normal' hourly fee to compensate for the risk of loss." Comm. on Legal Ethics v. Triplett, 378 S.E.2d 82, 93 (W. Va. 1988).
  
  The West Virginia Supreme Court has recognized, however, that "[t]he great weight of authority is that the lodestar calculation is the general rule in awarding attorneys' fees with occasional contingency enhancement." Bishop Coal, 380 S.E.2d at 249 n.10; see also Heldreth, 637 S.E.2d at 366 n.11 (noting that in federal courts the use of a fee enhancement mechanism in conjunction with fee-shifting statutes has been expressly rejected citing City of Burlington v. Dague, 505 U.S. 557, 565-66 (1992)).

***

• Importantly, the West Virginia Supreme Court of Appeals, as noted supra, recently approved of the trial court's consideration of the fact that the plaintiff was represented by Mountain State Justice and that Mountain State Justice was a "unique organization" that "survives based upon fees collected in `undesirable' cases such as [plaintiff's]." Vanderbilt, 2013 WL 870442, slip op. at *24. The West Virginia Supreme Court stated that this was a proper consideration under Aetna's "undesirability" factor. Id.
  
  In light of Vanderbilt, the particular facts of this case, and the absence of any opposition by Defendant, the Court in inclined to agree that the lodestar analysis in this case does not adequately measure the true market value of Plaintiff's uniquely situated counsel.
  
  Accordingly, the Court FINDS that a twenty percent enhancement to the lodestar figure of $20,653.60 is appropriate in this case and, thus, AWARDS $24,784.32 in attorneys' fees and $3,349.60 expenses to Plaintiff for a total award of $28,133.92.
  
  In making this determination, this Court was mindful of its duty to apply West Virginia law in its attorneys' fees reasonableness analysis to the extent that federal law conflicts with West Virginia law.
  
  In the face of the "strong presumption" under federal law that the lodestar figure represents a reasonable fee, an enhancement based on the fact that Mountain State Justice's lawyers served as counsel may not have been applied but for consideration of West Virginia precedent and Defendant's failure to respond to this factor.
  
  Importantly, the Court's decision to apply this enhancement in this case should not signal that it will apply an enhancement in every case where Mountain State Justice's lawyers serve as counsel. Rather, the Court's decision to apply the enhancement was purely an exercise of its discretion under the particular facts of this case.

For more on the contingency fee bonus when calculating prevailing party legal fees, whether in pro bono cases or otherwise, see:

• The Yale Law Jounal: The Contingency Factor In Attorney Fee Awards,
• Defending A Foreclosure Defense Case Pro Bono? Don't Forget The Contingency Risk Factor When Sticking Losing Lender With Tab.

(3) Vanderbilt v. Cole, Nos. 11-1288, 11-1604, 2013 WL 870442, slip op. (W. Va. March 8, 2013).

(4) Ibid.

See also, Despite Jury's Actual Damage Award Of $0, Booted WV Homeowner Walks Away With $32K In Inflation-Adjusted Civil Penalties, $30K In Attorney Fees Anyway In Connection With Foreclosing Lender's Unlawful Debt Collection Practices.

Connecticut Feds: Fairfield Housing Authority Executive Director Pilfered $30K From Agency Tasked With Helping Provide Affordable Housing For Eligible Low-Income Families, Elderly

From the Office of the U.S. Attorney (Hartford, Connecticut):

• David B. Fein, United States Attorney for the District of Connecticut, [] announced that a federal grand jury [...] has returned an indictment charging ELIZABETH JO GUTIERREZ, 47, of Ridgefield, with one count of theft concerning programs receiving federal funds. The indictment alleges that GUTIERREZ embezzled $30,000 from the Fairfield Housing Authority.

***

• The Fairfield Housing Authority administers federal housing programs for the U.S. Department of Housing and Urban Development with the mission of providing affordable housing for eligible low-income families and the elderly.
  
  According to the indictment, GUTIERREZ served as the Executive Director of the Fairfield Housing Authority from approximately July 2010 to December 2011. In the summer of 2011, GUTIERREZ issued two checks, each in the amount of $15,000, from the Fairfield Housing Authority’s checking account and subsequently deposited them into her own checking account.

For the U.S. Attorney press release, see Ridgefield Woman Charged with Embezzling from Fairfield Housing Authority.

Proposed Laws Regulating Condo Development Aim To Curb Horror Stories Caused By Builders, Converters That Peddle Problem Units To Unwitting Homebuyers

In Edmonton, Alberta, The Calgary Herald reports:

• Changes to the Condominium Property Act won't come fast enough for Trish Millard, who worries she'll have to walk away from her Rutherford-area condo.
  
  She bought it new for $280,000 five years ago. Problems followed.
  
  First the residents discovered the attic was built without fire separations after a small fire on the third floor. The condo corporation filed a lawsuit against the developer, builder and architect.
  
  Last fall, a city safety inspector found their balconies did not meet the building code.
  
  They've added that to the $2-million lawsuit and have already spent about $70,000 in legal fees trying to recoup the cost of repairs. Millard doubts they'll see a penny. If they don't, she figures each owner will be asked to pay $40,000 to $50,000 to cover all the repairs. "I've had two financial advisers tell me to just walk away from it," she said.
  
  Changes to the Condominium Property Act that could protect people like Millard were in a discussion paper released in February by Service Alberta. Condo owners and others in the industry have until May 2 to give their opinions. The survey can be found online at servicealberta.ca.
  
  Changes would affect hundreds of thousands of people living in the nearly 8,000 condo buildings in Alberta. "From top to bottom, I believe this act needs a look," said Manmeet Bhul-lar, Minister of Service Alberta. "I'm hoping for changes as soon as possible. Tell us what you think the act needs to have."

***

• It's easy to find horror stories regarding structural problems in relatively new buildings. Condo residents across Edmonton have been struggling with leaky stucco applications.
  
  In Leduc, a long list of safety problems resulted in temporary evictions for Bellavera Green residents.
  
  Structural issues forced Fort McMurray's Penhorwood Condominium residents out one day at midnight.
  
  The problems might reflect a different system of enforcement. City safety code officers inspect single-family homes an average of 12 times at many points during construction, but for condo buildings or anything taller than three storeys, professional architects and engineers are involved, says city staff.
  
  Inspectors generally visit the site only for complaints or at the request of the builder, visiting a minimum of twice for inspections.

For more, see Revisions to condo act aim to stop the horror stories.

See also: Condo laws are in desperate need of reform.

NYC Landlord Tags High-Powered Local Real Estate Broker In Lawsuit For Intentionally Concealing Income Level To Score Deep Discount On Rented Residence

In New York City, bigtime real estate operator Harry Macklowe recently filed suit against one of his tenants, well-known, high-powered local real estate broker Carol Cohen, for allegedly intentionally concealing her income level to avoid high-income rent deregulation of the rented premises she currently resides in.

Cohen is accused of availing herself of the protection of the local rent control/rent stabilization law to keep her monthly rent artificially low and way below fair market value when, according to the landlord's suit, her high income level disqualifies her from such statutory protection.

Reportedly, she pays $3,000 per month, while a similar apartment two floors up goes for three times as much, according to a recent story in the New York Post.

For the lawsuit, see 737 Park Ave. Acquisition LLC v. Cohen, et al.

See also, The Real Deal: Macklowe sets sights on Carol Cohen’s rent-stabilized unit at 737 Park Avenue (Litigious landlord wants state regulators to inspect broker’s tax returns).

Lawsuit: Niece Used 4-Year Charade To Dupe HOA, Landlord Into Thinking Dead Aunt Was Still Alive To Keep Deceased's $287/Month Rent Stabilized Brooklyn Apartment

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

• A Brooklyn scammer spent four years fooling her dead aunt’s co-op board into thinking the woman was still alive, to keep living in the rent-stabilized apartment for $287 a month, a lawsuit charges.(1)
  
  Brenda Williams, 55, gave neighbors regular health updates on Debbie Vaughan long after the woman died at age 93 in 2007 — and pulled out all the stops to keep board members at the Prospect Park building from trying to contact the woman, the lawsuit says.
  
  Williams claimed “her aunt was paranoid and senile and if we knocked on the door, she would have a heart attack,” said the co-op board’s president, Diana Hansen-Young. The suit was filed Phillip Cramer, the apartment's owner.
  
  The alleged scam was uncovered in 2010, when Hansen-Young and a plumber went into the apartment on Vanderbilt Avenue to fix a leak. [...] When Cramer checked death records, he found that Vaughan had died almost four years earlier.
  
  Cramer is now trying to evict Williams from the 550-square-foot apartment, which has hardwood floors, exposed brick and high ceilings — and should rent for about $2,200 a month. Cramer had kept Vaughan’s rent low — even as the neighborhood gentrified — because of her advanced age, poor health and poverty, the suit says.
  
  Before Vaughan’s death, Williams told Cramer she lived with her aunt and helped out by “cooking for her, bathing her, and taking her to doctors, supermarkets, church and senior-citizen centers,” the suit charges.
  
  But Williams really lived down the block with a boyfriend, said attorney Peter Sanders, who filed the $405,000 suit in Brooklyn Supreme Court on March 20.
  
  “She moved into the apartment after her aunt died,” Sanders said. “She would pay the rent by money order with her aunt’s name years after her aunt died.”

For more, see B'klyn woman covered up aunt's death to live in rent-stabilized apartment: lawsuit.

In a follow-up story, see Woman accused of hiding aunt's death to keep her apartment will fight to remain in building.

(1) See Rent control in New York for more on the state rent regulation statutes.

Foreclosure Fraud Settlement Checks To Begin Going Out; Most To Get Paltry Payments

Bloomberg reports:

• Rust Consulting Inc. will begin sending $125,000 checks to 1,135 borrowers deemed most harmed by botched foreclosures in 2009 and 2010 that led to a $9.3 billion settlement between regulators and U.S. mortgage servicers.
  
  The consulting firm is distributing $3.6 billion that servicers including JPMorgan Chase & Co. (JPM) and Bank of America Corp. agreed to pay to settle claims they improperly seized homes in the wake of the subprime mortgage crisis, according to a statement from the Office of the Comptroller of the Currency and Federal Reserve.
  
  Payments will begin to go out April 12, with as many as 90 percent of more than 4 million affected borrowers expected to receive their checks this month, according to the regulators. The agencies expect the process to extend into mid-July, and they are still working on payments to borrowers from servicers that had been affiliated with Goldman Sachs Group Inc. (GS) and Morgan Stanley. (MS)
  
  Those at the top of the scale for potential harm will receive $125,000, and the 2.6 million categorized at the lowest of 11 rungs of potential harm will get $300, the regulators said. The remainder of the settlement money from the 13 servicers who signed on is meant to be used to prevent future foreclosures.
  
  After a rash of botched foreclosures during the previous decade’s housing-market collapse, an earlier 2011 settlement called for the servicers to hire outside consultants to review the cases one-by-one and compensate borrowers based on actual harm. After the process was beset by delays, those reviews were mostly scrapped in the current settlement, which is meant to give some level of payment to every borrower who went through foreclosure during the two-year period.
  
  The Government Accountability Office said in a report released last week that insufficient guidance from the OCC and Federal Reserve slowed down the earlier review process. A Senate subcommittee will examine the relationship between regulators and outside consultants in an April 11 hearing.

For the story, see Mortgage Servicers’ Robosigning Payments Being Sent to Borrowers.

State Regulator Commences Enforcement Action Against 32 Outfits Peddling Loan Modification Services To Financially Strapped Washington Homeowners

From the Washington State Department of Financial Institutions:

• The Consumer Services Division of the Washington State Department of Financial Institutions (DFI) announced today that it filed 32 Statements of Charges against businesses preying on Washington homeowners facing foreclosure. This action follows another multi-company sweep DFI conducted in September 2012 when it issued 40 Statements of Charges against unlicensed businesses offering loan modification services to Washington residents.
  
  Of the 32 Statements of Charges in this latest round of enforcement actions, 31 are against businesses located outside of Washington, about half of which are attorneys or affiliated with attorneys.

For the DFI press release, see DFI Charges 32 Companies In Continuing Effort To Combat Unlicensed Loan Modification Activity (DFI seeks full restitution, prohibition from operating in Washington, $426,000 in fines).

Go here for the list of 32 alleged rackets cited by DFI.

WV Supremes: State Consumer Protection Statute Provides No Relief For Allegedly Screwed Over Couple Where Mortgage Constituted A "Commercial" Loan (As Opposed To A Consumer Or Agricultural Loan)

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

• The state Supreme Court has ruled against a Preston County couple who sought to have a bank loan characterized as a “consumer loan” rather than a “commercial loan.”
  
  Doing so might have found them relief under the West Virginia Consumer Credit and Protection Act. The court issued the unanimous memorandum opinion affirming the Circuit Court of Preston County’s Order Granting Summary Judgment to the bank on March 29.
  
  Wayne and Dorothy Miller took out three loans through Clear Mountain Bank in 2008-2010. After the bank foreclosed on certain collateral, the Millers asserted that the bank violated the West Virginia Consumer Credit and Protection Act.
  
  The circuit court entered summary judgment for the bank, finding as a matter of law that the WVCCPA did not apply because the loans were commercial loans and the WVCCPA only applies to consumer transactions.

For more, see Preston couple can’t bring loan claim under consumer protection statute.

For the West Virginia high court ruling, see Miller v. Clear Mountain Bank, Inc., No. 11-1430 (W.V. March 29, 2013)