Saturday, August 08, 2015

Lawsuit: Landlord Refused To Let Tenants Out Of Their Leases, Despite Its Careless Sandblasting Activities That Resulted In Toxic Lead Dust Pouring Into Their Apartments Through Windows, Cracks In Floors

In Manchester, New Hampshire, New Hampshire Public Radio reports:
  • One of New Hampshire’s largest landlords, Brady Sullivan Properties, is under scrutiny from city, state and federal regulators for lead contamination in one of its buildings in Manchester.

    Tenants contend their landlord and a contractor hired by Brady Sullivan are responsible for the lead dust that permeated their apartments, and 22 have filed a lawsuit.(1)

    It will be up to the courts to determine who’s at fault, but one thing is clear: Brady Sullivan has downplayed the health risk to its tenants in the weeks since the contamination happened.

    Brady Sullivan has made a name for itself converting old mills around New England into commercial and residential space. But since many of those mills spent decades as industrial sites, they often come with a host of environmental risks, requiring complex renovations.

    "So a contractor will come in," says Beverly Drouin, a lead expert with the Department of Health and Human Services, "they’ll remove the lead, the asbestos, the pigeon guano, the PCBs, the mercury, whatever’s in that building – but that building is empty. Never in my professional career have I ever seen sandblasting activities in an occupied building."

    That is, she had never seen sandblasting in an occupied building until May 12, when regulators shut down a construction site just below 98 Brady Sullivan apartments in a Manchester building called Mill West. Brady Sullivan markets Mill West as a luxury development, and rents range from $1,200 to $2,550 a month.

    Within one day of regulators stepping in, here’s what was clear: Brady Sullivan’s contractor did not have the proper permits or training; toxic lead dust had piled up in at least one apartment; and tenants had complained clouds of dust poured through their windows and cracks in their floors.

    Yet two days later, Brady Sullivan sent an email to tenants stating the dust had been fully contained, and there was no evidence of a “risk of any health hazard.” Since then Brady Sullivan’s efforts to address the problem prompted regulators to crack down on the landlord, pushed a contractor to quit, and left many tenants angry, scared and confused.
For more, see Brady Sullivan Downplayed Health Risk Of Lead Dust To Tenants.
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(1) See Mill West tenants file suit over lead:
  • Several Mill West tenants complained [] that the company is not releasing them from their leases. [...] “Brady Sullivan has refused to terminate our lease; they’ve said they’re not responsible. The terms of lease require 60-day notice and 90 days rent, which would be $4,000,” said Danielle Mattiello. “I don’t want anything more from Brady Sullivan than to get out of my lease.”

    [Tenants' attorney Francis] Murphy said his clients have been told they cannot terminate their leases. The lawsuit also says Brady Sullivan should not have claimed the property was “lead safe.”

Remaining 80 Homeowners In Shuttering 240-Lot Mobile Home Park Get The Boot, Scramble For New Living Arrangements As Land Use Change Is Expected With Pending Sale Of Premises To New Landowner

In Davenport, Iowa, the Quad City Times reports:
  • Phil DeToye helped neighbors move out of the Lake Canyada Mobile Home Park in Scott County on a rainy Tuesday afternoon before fixing his eyes on his own, light blue 1973 trailer.

    He said he will be homeless by the weekend. “I have nowhere to go,” DeToye said, leaning against the hood of a neighbor’s truck as storm clouds rumbled overhead.

    Tuesday was moving day for the Cole family, DeToye’s neighbors of eight years. And DeToye, a 53-year-old former casino cage cashier who’s on disability from a leg injury, was eager to help in any way he could even as his own prospects looked bleak.

    “Things are getting worse instead of better,” he said.

    DeToye and all other residents were given eviction notices by Lake Canyada’s management company, Atlanta, Ga.-based CFLane, stating they have to move out by 11:59 p.m. Friday.

    “I still got three days left,” resident Linda Hicks, who also has not found another home, said. “Miracles happen.”

    Lake Canyada’s previous owner, I&R Properties, went bankrupt, and the property, which contains 240 lots, went into foreclosure in 2012.

    After years of rumors, about 80 residents were told at a meeting in April the park would close July 1. The date was later pushed back to July 31, when Scott County officials say they are shutting off sewer access.

    Victor Roth, who represents Lake Canyada for CFLane, has declined repeated requests for an interview.

    Whatever is in store for the 56 acres off U.S. 61, a mobile home park is not part of future plans, Scott County Administrator Dee Bruemmer said.

    The park's owner Lake Canyada LLC is planning to sell the property to First City LLC, Bruemmer said, though she is not sure at this point what the prospective buyer has in store. First City has hired Verbeke-Meyer Consulting Engineers PC of Davenport to determine "the highest and best use," she said.

    Several residents was still living there Tuesday.

    Josh Cole called the place a “ghost town” as he pointed out empty trailer after empty trailer, each with a story of its own.

    “That guy didn’t know what he was going to do, and now he’s out,” Cole, 36, said of one of the vacated trailers. “He found a place. Many were having trouble and now almost everyone’s out of here. “It’s really dead around here.”

    The Coles got out just in time. Those threatening storm clouds let loose a deluge just as they were pulling out in two pickup trucks hauling their belongings.

    Josh Cole said his family is staying with relatives until he can get the frame of his double-wide fixed to move it to the nearby Rustic Ridge Mobile Home Park, Davenport.

    For some residents, searching for a new home was touch and go down to the last minute. Meghan Dipple signed the paperwork on a “fixer-upper” mobile home in Coal Valley on Thursday.

    “We were totally panicking,” the stay-at-home mother of two said on Tuesday as they were preparing to move. “We hadn’t found anywhere we could afford, knowing we were getting closer to homelessness.”

    The new mobile home will need a lot of fixing up, Dipple said, but it’s larger than the old one she has called home for three years.

    “It beats sleeping in a van,” Dipple said.

    And there's another advantage, Dipple’s 11-year-old daughter, Lily, said. “The playground is right across from this stream thing,” Lily said of her new Coal Valley home.

    Angi Benham, a convenience store clerk who lived across the street from Dipple at Lake Canyada, also has found a home elsewhere in the Quad-Cities. “We got a house and we’re all moved in,” Benham said. “We’re still trying to get situated.”

    Benham said she knew of five residents who still had not found another place, adding that she’s worried about them.

    Shortly after the meeting in April, Hicks said she had been praying that all her neighbors find another place to live. Her charitable demeanor was still the same Tuesday — she even asked about DeToye, who lives a few doors down.

    The 25-year resident of Lake Canyada, who lives with her husband and two dogs, said she now needs some of those prayers to come her way. “I’ve just been praying the Lord opens a door,” Hicks said. “We’ve been looking and searching and just haven’t found something yet.”

    She’s working with a real estate agent, but every house and apartment for rent is too expensive or too far from family and her church, she said. “Prices are high,” she said.

    Hicks said her sister has offered to let her and her husband stay with her as needed.

    For months, DeToye said he called around to other mobile home parks, and no one is willing to relocate his old trailer, which he bought for $2,500. After he’s evicted, he’ll have to sign the title over to Lake Canyada’s managers, he said.

    “My trailer is too old, that’s what most people told me,” DeToye said. “But I can’t give up.”

Ex-Non-Profit Exec Gets 18 Months For Stealing $150K+ In Program Funds Intended To Help Homeless

From the Office of the U.S. Attorney (Philadelphia, Pennsylvania):
  • Nathaniel E. Robinson, 62, of Philadelphia, was sentenced [] to 18 months in prison for stealing funds from SELF, Inc., a non-profit that helps the homeless. Robinson was the Chief Program Officer at SELF, Inc. He pleaded guilty on March 12, 2015 to theft from a program receiving federal funds.

    Between 2006 and 2010, Robinson used his corporate American Express credit card at SELF to charge personal expenses in the amount of approximately $154,050. He reimbursed a total of $2,594.30 before his employment was terminated. Robinson used the corporate American Express card to pay for trips to Alabama, including airfare, lodging, and restaurants; lodging in Orlando, Florida, and the Philadelphia area; car rentals; car repairs; admission tickets to Six Flags Great Adventure and Clementon Amusement Park; Amtrak tickets; purchases at Walmart and Filene’s Basement; and restaurant charges in Washington, D.C. and Baltimore, MD.

    In addition to the prison term, U.S. District Court Judge Berle M. Schiller ordered restitution in the amount of $151,455, three years of supervised release, and a $100 special assessment.

Friday, August 07, 2015

Florida Appeals Court: Vacating A Foreclosure Sale Without First Giving Winning Bidder Notice & Opportunity To Be Heard Violates His Due Process Rights

A Florida appeals court recently ruled that a trial judge violated the due process rights of a winning bidder at a foreclosure sale when it improperly set aside the sale without first providing the winning bidder with notice and an opportunity to be heard. The court found that the winning bidder has a protectable legal interest in the property purchased at a foreclosure sale, even though the certificate of title (ie. the instrument conveying title to property in a foreclosure sale in Florida) had not yet been issued.(1)

For the ruling, see Residential Mortgage Servicing Corp. v. Winterlakes Property Owners Association, Inc., Case No. 4D14-1109 (Fla. 4th DCA July 8, 2015).
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(1) The court sets forth the basis for its ruling in this excerpt:
  • "[A] third-party purchaser has a protectable legal interest in a parcel purchased at a foreclosure sale. This status bestows on the purchaser due process rights, and when a sale is vacated without notice to and an opportunity to be heard by the purchaser, due process is violated." Skelton, 157 So. 3d at 472 (internal citation omitted); see also Avi-Isaac v. Wells Fargo Bank, N.A., 59 So. 3d 174, 177 (Fla. 2d DCA 2011) ("A purchaser at a foreclosure sale is entitled to notice and an opportunity to be heard on a motion to vacate the sale.").

Defaulting Winning Bidder At Foreclosure Sale Scores Full Refund Of Initial Deposit Where Subsequent Auction Sale Price Exceeds Defaulting Bid Plus Resale Costs

A recent excerpt from a client alert from the North Carolina law firm PoynerSpruill LLP:
  • I. Defaulting Foreclosure Bidder Gets Full Refund

    Glass v. Zaftrin, LLC: At issue in this foreclosure was a defaulting bidder’s claim for refund of its bid deposit where there was a subsequent resale of the property at a price greater than the original bid.

    The facts were simple. Zaftrin was the high bidder at a foreclosure sale and paid its bid deposit to the Clerk. Zaftrin thereafter notified the trustee it was unable to complete the purchase, and the property was resold at a higher price. The trustee moved for an order to disburse the bid deposit back to Zaftrin, but sought to deduct the costs of resale. The trial court granted the trustee’s motion over Zaftrin’s objection.

    On appeal, the Court of Appeals reversed and awarded Zaftrin its full deposit. The court found that a “bidder in default is liable only to the extent that the final sale price is less than his bid plus the costs of sale.” In this case, the final sale price ($350,000.00) was greater than the defaulting bid ($315,000.00) plus the costs of resale ($1,469.80).
Source: NC Court of Appeals Weighs in on Multiple Creditor’s Rights Issues.

For the court ruling, see Glass v. Zaftrin, LLC, 768 S.E.2d 612 (N.C. App. 2015)

Bidders Gaming Online Foreclosure Sale Auctions Pose Problem For Central Florida HOA Saddled w/ Slew Of Maintenance Fee-Delinquent Unit Owners

In Hillsborough County, Florida, Business Observer reports:
  • It’s bad enough that a Riverview condominium association is still working through foreclosures on its property, but now it has a new problem: auction hijackers.

    Jonathan Ellis, an attorney with Shumaker Loop & Kendrick, says the Eagle Palms association he represents can’t clear its books on foreclosures because fake bidders are botching court-ordered sales.

    Bidders, he says in a release, are paying an initial fee to participate in a foreclosure auction, but then never follow through with the property purchase. Eagle Palms had put several properties up for auction online, finding successful bidders who quickly paid quitclaim deed fees and a 5% deposit on the purchase price.

    Those bidders then put renters in the unit, collecting first month’s rent and a security deposit, Ellis says. But when it comes time to pay the rest of the condo’s purchase price, those bidders back out.

    The renters, Ellis adds, often don’t even know they’re living in a foreclosed unit. “They think they were just subletting the property from a legitimate company,” he says.

    Ellis has tried to track down the fake bidders, but he instead finds fake names and addresses that are either outright wrong, or lead to mailbox centers with no record of an owner.

    What’s the best way to avoid this new practice? Ellis suggests a live auction, not an online one. Bidders are then required to show up and make payments.

Thursday, August 06, 2015

Battle Between L.A. Archibishop, Two Aging Nuns Over $14.5 Million Convent Continues; Judge Voids Latter's Sale To Developer; Says Title Rests With Archdiocese, But Control To Be Held In Temporary Limbo While Suit Remains Pending

In Los Angeles, California, the Los Angeles Times reports:
  • Los Angeles County Superior Court James Chalfant ruled July 30 that the contested sale of the former convent of the Immaculate Heart of Mary sisters to restaurateur and urban developer Dana Hollister is invalid.

    The judge also confirmed that the eight-acre, villa-style hilltop property located in the Los Feliz section of Los Angeles is Church property under the oversight Archbishop José H. Gomez.

    “I would like to reiterate my continued commitment to all of the Immaculate Heart sisters that the archdiocese will take care of them and ensure their well-being now and in the future,” the archbishop said in a recent statement.

    The archdiocese initiated legal action June 19 to protect the sisters by seeking to nullify the “unauthorized” transaction with Hollister. In a recent deposition, Hollister confirmed that she took possession of the Waverly Drive property for $100,000 (of which the sisters received only $44,000), and the balance of $9.9 million in a non-recourse promissory note, with no payments for three years.

    The archdiocese contended that the sale violates the California law protecting the elderly from transactions that are not in their best interest — the five surviving Immaculate Heart of Mary sisters are between 77 and 88 years of age.

    Because the loan is non-recourse, it does not require payment after the three years, the archdiocese explained in a recent statement. As such, if Hollister were unable to pay the remaining $9.9 million, the only remedy to get the property back would be foreclosure and the sisters would have to pay the related legal costs.

    Other points of contention include the archdiocese’s lease of the buildings on the property for the priests’ house of prayer, which has a remaining term of 77 years, and Hollister’s reported plan to convert the villa property into a boutique hotel.

    Judge Chalfant set another hearing for Sept. 15 and ordered the lawyers to prepare proposals detailing possible remedies that would most benefit the five sisters. He said that Hollister may remain in possession of the property pending the hearing, but ordered her to pay $25,000 a month rent and stipulated that she cannot sell, lease or modify the property in the interim.

    “The care and well-being of all five sisters has always been our primary concern,” said the archdiocese in a statement released shortly after the July 30 court ruling. “We were forced to take legal action to protect the sisters from the Dana Hollister transaction, which allowed Hollister to take possession of their property away from them. We are grateful that the judge found the sale to Hollister to be invalid, and that he agreed that this was a ‘bad deal’ for the sisters.”
For more, see Judge rules LA convent sale invalid.

See also, Bloomberg Business: What's Next in Katy Perry's $15 Million War With Two Nuns (Nobody gets this property during the pendency of this lawsuit,” California Superior Court Judge James C. Chalfant told the lawyers.).

Philadelphia-Area Lawmaker Describes Experience Of Being Roped Into Role As Straw Buyer In Sale Leaseback, Equity Stripping Foreclosure Rescue Scam

In Philadelphia, Pennsylvania philly.com reports:
  • WITH THE MAYORAL primary behind him, former candidate Anthony Hardy Williams has eased back into his day job as a state senator. Last week, he clasped hands with the other losing Democrats and winner Jim Kenney in a show of unity. Williams had moved on.

    He was also ready, finally, to talk about a revelation about his past. His campaign staffers had dodged questions about it - a disastrous New Jersey real estate deal at the height of the subprime lending crisis that ended with Williams' credit in shambles, an investment property at sheriff's sale and a tenant accusing him of impropriety, according to court documents.

    In a recent interview, Williams confessed that he'd been the victim of a sophisticated mortgage scammer. He laid out a series of events that he said showed how even powerful people can be taken advantage of.

    In 2005, Williams said, he purchased a house in Atco, Camden County, after a friend in real estate told him he could help a woman on the verge of foreclosure named Darlene Johnson.

    "A friend of mine approached me about using my credit to help people who were losing their homes," Williams said. "If you're born into a life of service, this is the kind of stuff that you do."

    The friend, who Williams could only identify as a man named "Achmed" from West Philly, told him that he could help by getting into a "leaseback" or "lease buyback," a transaction that would become emblematic of the mortgage bubble of the 2000s.

    The idea was for Williams to get a mortgage to buy the soon-to-be foreclosed property, while Johnson remained in her home and paid rent to Williams to cover his costs. When Johnson's finances improved to the point where she could qualify for her own mortgage, she would buy the property back from Williams.

    The senator, who said he never saw or visited the property, was told he would get a "fee" for his trouble.

    At least, that's how it was supposed to work.

    Altruism to nightmare

    After months of requests by Philly.com to speak with Williams about the transaction, the lawmaker agreed to discuss it at the law offices of Center City criminal defense attorney George Bochetto.

    Williams said he saw the real estate deal as a chance at altruism. What it became, he said, was "a nightmare that won't go away."

Wednesday, August 05, 2015

Spotlight Of Suspicion Focuses On NE Pennsylvania R/E Agent Suspected Of Pocketing Cash On Sales Of Foreclosure Homes He Didn't Own; Cops Serve Search Warrant On Title Agency For Bogus Paperwork; Local Realtor Group Flooded With Complaints

In Luzerne County, Pennsylvania, The Standard Speaker reports:
  • Pennsylvania State Police have named Ignacio “Iggy” Beato, 45, of Hazleton as a person of interest in a multi-agency investigation of real estate fraud.

    Beato has yet to be charged with any crime.

    Beato is suspected of conducting fraudulent real estate transactions among numerous victims in Luzerne County, where he personally accepted deposits, fees and, in some cases, the full purchase price for numerous properties — and then kept the monies for his own personal use, according to troopers.

    State police are investigating claims against Beato dating back to February 2014, according to their most recent report.

    Felix Cabrera of Seybert Street is just one of many who have complained that he thought he purchased a home from Beato, only to find out that Beato did not have the right to sell him the home in the first place.

    The homes that Beato sold during this time period were strictly cash transactions.

    The homes in question were either in foreclosure or owned by HUD and therefore subject to irregular monitoring.

    On July 14, state police acted on a search warrant of Covenant Abstract Inc., a title company in West Hazleton, for documents that Beato shared with the agency.

    Don Elko of Covenant Abstract told the Standard-Speaker that he refused to close deals for the sale of houses that Beato brought him due to irregularities that included two critical documents that did not have the signatures of sellers.

    Jerry T. McGuire, president of the Greater Hazleton Association of Realtors, reported that his office has been flooded with reports of unscrupulous deals in which Beato has been named as an actor.

    McGuire has continued to refer those who have complaints to state police and expressed a concern that the public may generalize Beato’s alleged actions and see realtors in a negative light because of this rare case.

    McGuire also said that he had never seen anything like this in his many decades as a realtor. “Realtors adhere to a high code of ethics,” McGuire said, continuing his explanation that Beato had “gone rogue.”

    Beato was most recently employed by Poggi and Jones LLC of Forty Fort. “After two months,” Ted Poggi of the real estate group said, “I escrowed his license.” Beato was fired and his ability to sell real estate was taken away from him through Poggi’s action.

    However, Poggi refused to discuss the exact circumstances behind the escrow and dismissal for “legal reasons.”

Woman Gets 32 Months For Recording Bogus POA Against Unwitting Victim's Home, Then Pledging Property To Secure Bail Bond For Another; Bondsman Then Sought To Foreclose After Criminal Defendant Subsequently Fled Country

In Oxnard, California, the Ventura Counta Star reports:
  • A Kern County woman was sentenced to two years and eight months in state prison for recording a false document in connection with an Oxnard bail fraud case, the Ventura County District Attorney's Office said Wednesday.

    Gina Marie Hernandez, 37, fraudulently used an Oxnard homeowner's residence as collateral for a friend's bail in a Kern County case, the District Attorney's Office said. Hernandez's friend, Hayser Scarlett Lopez, 46, also of Kern County, fled the country as soon as her bail was secured but later returned, prosecutors said.

    The victim's home was almost lost in foreclosure proceedings when the bondsman who posted the bail sought to foreclose it, the District Attorney's Office said.

    Hernandez recruited fellow Kern County resident Peggy Ann Soto, 55, to execute a fraudulent power of attorney and impersonate the Oxnard homeowner while testifying at Lopez's bail hearing in Kern County Superior Court, the District Attorney's Office said.

    Hernandez pleaded guilty in April to her part in the scheme, prosecutors said.

    Lopez pleaded guilty in January to felony charges of perjury and recording a false document and was sentenced the next month to two years in state prison, the District Attorney's Office said. Soto pleaded guilty to the same felony charges and was sentenced on July 15 to two years in state prison, prosecutors said.

    All three were arrested in October 2014 following an investigation by the District Attorney's Real Estate Fraud Unit, prosecutors said.

Lawsuit: Homeowner's Precious Artifacts Survived Nazis, Holocaust In 1940's Europe, But Succumb To Bankster, Trash-Out Contractor Henchman In 21st Century New Jersey; Cops Give Standard Response To Victims' Complaint - 'It's A Civil Matter!'

In Morristown, New Jersey, NJ.com reports:
  • When Nazis seized Henri Adier's home in France during World War II, he managed to grab many of his most precious belongings when he fled, according to his son and daughter.

    But after Adier died in 2012 and his home in Morris Township was declared in default on its mortgage, many of those possessions were either destroyed or removed by agents working on behalf of a major American bank, his son and daughter contend.

    Those allegations are contained in a lawsuit filed in Superior Court in Morristown this week by siblings David Adier and Anne Adier-Vivino against Wells Fargo Home Mortgage and eight individuals and companies allegedly working on its behalf.

    Among the items that went missing after the locks were changed on the house and the building was "ransacked," said David Adier, were a silver Passover Seder plate and a silver kiddish cup, both important pieces from Jewish religious rites.

    Also gone were various pieces of gold and silver jewelry along with such irreplaceable items as an antique telephone and the only existing wedding photos of his grandparents, Adier said.

    Adier says he had no photos of the items that made it through the Holocaust, so he was left with only his memories.

    "I feel violated, I feel traumatized," Adier said in an interview. "I feel angry that they have taken away these things — artifacts that my father was able to rescue from the Nazis. I have very little hope of ever getting them back."

    The lawsuit seeks compensatlon for trespassing; conversion of property; negligence and consumer fraud violations.

    Although he and his sister contacted Morris Township police about the problems, they accepted the bank's version that there was a "work order" from Wells Fargo, according to the lawsuit filed by attorney Joshua Denbeaux.

Tuesday, August 04, 2015

Failure To Allege: Void (As Opposed To Merely Voidable) Transfer, Risk Of Double Payment Or Other Prejudice Is Fatal To Borrowers' Foreclosure Defense As Nebraska High Court Says Homeowners Lacked Standing To Challenge Allegedly Faulty Mortgage Assignment From One Bankster To Another

As has been been observed by at least one lender-favoring commentator:(1)
  • Attacking sufficiency, accuracy, or validity of assignments of mortgages and deeds of trust has been among the most common strategies employed by borrowers to challenge foreclosures. Allegations regarding the status of MERS, the legal authority of the individual executing the assignment, and the timing of the assignment’s recording have all been raised and litigated in courts throughout the United States.

    Recently, however, the Nebraska Supreme Court joined a growing number of state courts that have rejected such arguments, citing fundamental questions about borrowers’ standing to challenge contracts in which they have no legally cognizable interest.
However, the point the commentator and others fail to emphasize, and what some courts throughout the country are either missing, or less-than-effective foreclosure defense attorneys are failing to raise, is the fact that, in order to have standing to challenge said assignments, an allegation that the assignment is absolutely void, and an allegation that some injury or prejudice (or risk thereof) due to the faulty assignment is present and must be sufficiently plead, briefed, and ultimately proven by the homeowners.

This appears to be the case in the recent ruling by the Nebraska Supreme Court referenced above.

Buried on the 16th page of the 18-page ruling, and on the basis of what it pointed out earlier in its ruling, the Nebraska high court made this observation:
  • We need not decide in this case whether a borrower who is at risk of paying the same debt twice, or otherwise at risk of prejudice from an improper assignment, would have standing to challenge that assignment of its mortgage.

    Had the Marcuzzos established an injury that directly related back to the assignment of their mortgage, our holding may have been different.

    But no such injury caused by the assignment is alleged or found. Strictly applying Nebraska law, the Marcuzzos were not a party to the assignment. Nor was the assignment made for their benefit. Thus, the Marcuzzos cannot challenge the assignment contract's validity.
Clearly, the court here is telegraphing to anyone who's bothering to pay attention (ie. hopefully, homeowners in foreclosure, foreclosure defense attorneys, etc.) that challenging said assignment requires an allegation (which must be plead and proven) that the assignment is absolutely void (ie. void ab initio, invalid, ineffective, etc.) and not merely voidable, and an allegation that the homeowners face some harm or risk of harm due to the faulty assignment. In this case, the homeowner, according to the court, didn't bother to even allege a void assignment, harm, or risk of harm, much less prove it.

In laying its groundwork for this observation (which it acknowledges is an exception to the general rule that one cannot challenge the validity of a contract to which it is neither a party nor a third-party beneficiary), the court made reference to a recent federal appeals court case in which the homeowner succeeded in challenging a mortgage assignment to which it was not a party:
  • Some courts while accepting this general rule have recognized an exception if the borrower can show actual prejudice by the improper assignment of the loan.[22]

    For example, if the borrower was at risk of paying the same debt twice, then the borrower could establish a concrete injury arising from the improper assignment of the mortgage.[23]

    If the borrower can show any injury that is directly traceable to the assignment of the mortgage, then, under this exception, the borrower would have standing to challenge that assignment.

    Only one circuit court has held that the borrower does not need to demonstrate injury in order to have standing to challenge the validity of an assignment that the borrower was not a party to.[24] But, the court strictly circumscribed the type of challenge for which a borrower may have standing.[25]

    In Culhane v. Aurora Loan Services of Nebraska,[26] the First Circuit Court of Appeals held that a borrower can have standing to challenge the assignment of his or her mortgage where the borrower is arguing the mortgage is invalid, ineffective, or void. Examples of void assignments include where the right attempted to be assigned is not assignable, or a prior revocation of the assignment.[27]

    However, the Culhane court held that a borrower does not have standing to challenge shortcomings in an assignment that render it merely voidable at the election of one party, but otherwise effective to pass legal title.[28]

    The plaintiff in Culhane argued that the assignor of the mortgage never had valid title to the mortgage, and therefore never had the right to assign the mortgage.[29] If true, the mortgage assignment would be void ab initio.

    The First Circuit Court of Appeals found that the harm to the plaintiff in such circumstances would be the foreclosure, which could be traced directly to the creditor's "exercise of the authority purportedly delegated by the assignment."[30] The court also found two key facts in favor of standing in light of the allegations presented: (1) that, in Massachusetts, debtors have a statutory right under state law to ensure that any attempted foreclosure on his or her home is conducted lawfully and (2) that the mortgage contained a power of sale without prior judicial authorization.[31] The court was careful to caution that its holding was narrow, specific to Massachusetts law, and applied only when the borrower challenged the mortgage assignment as invalid, ineffective, or void.[32]

    We find Culhane to be distinguishable from the case at bar. The Marcuzzos did not allege a void assignment. They did not allege that MERS, or Bank of the West, had no legally cognizable right to assign under the mortgage documents.

    Instead, the Marcuzzos' argument is that the assignment paperwork between the assignor and Bank of the West did not follow the proper procedural framework. Even if this were true, the assignment would not be defective.[33]
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Based on the forgoing, it appears clear that to have any chance at successfully challenging a faulty mortgage assignment, the homeowner must sufficiently plead, brief and prove that:
  • the defective aspects of the assignment render it void ab initio (ie. ineffective, invalid, a nullity) and not merely voidable, and
  • the homeowner faces some prejudice (ie. injury or risk of injury - risk of paying debt twice (ie. "double collection" on the part of note holder(s)), lack of assignor's right to assign, assignee's lack of title) which, as the court put it, "could be traced directly to the creditor's exercise of the authority purportedly delegated by the assignment."
For the Nebraska Supreme Court ruling, see Marcuzzo v. Bank of the West, 290 Neb. 809 (Neb. May 1, 2015).
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(1) See Borrowers Cannot Challenge Mortgage Assignments, Says Nebraska Joining Other States.

(2) For earlier posts providing examples of homeowners who have successfully challenged mortgage assignments, despite the fact that they were not parties to the assignment, see:

Bankster's Failure To Give Proper Notice Of Intent To Accelerate Debt & Allow Opportunity To Cure Default On Loan Secured By High-Equity Property Leads To $1 Million+ Victory In Wrongful Foreclosure Cases For Austin Business Owner

In Austin, Texas, the Austin Business Journal reports:
  • An Austin small business owner who claimed his commercial property was wrongfully foreclosed on has won judgments totaling more than $1 million from a mortgage lender.

    A state court and a federal court both ordered DCR Mortgage III Sub 1 LLC to pay the judgments to Larry Mathis, owner of SmartMail of Austin Inc. — a direct mail and printing company.

    Both cases were initiated by Mathis — one in 2009 to try and stop a foreclosure sale after he fell behind in payments and a second case alleging wrongful foreclosure actions after the property was taken back by the lender.

    The case is complicated, but Mathis' attorney Steve Skarnulis of Cain & Skarnulis PLLC, an Austin boutique litigation firm, said he hopes lenders take notice of the judgments and carefully consider the merits of aggressive foreclosure actions. He called the case "a rare plaintiff victory" in a wrongful foreclosure case.(1)

    ***

    Mathis filed suit on April 29[, 2009] to prevent the sale — a measure that staved off foreclosure for nearly two year until February 2011.

    But by then the court had ruled in favor of DCR, determining that the lender had every right to foreclose. The temporary injunction was lifted and DCR foreclosed, selling it for a $500,000 credit bid. Mathis claimed he never received any formal notice of the acceleration clause and the foreclosure action.

    He also accused claimed that the amount was far below market value.

    Mathis appealed that court's ruling in favor of DCR and eventually won.(2) He was awarded about $230,000 in 2014 in association with that appeal.

    In the meantime, Mathis filed a wrongful foreclosure action, which was heard before a jury this April. The jury found in favor of Mathis' claim of wrongful foreclosure in that case, as well.

    U.S. District Court Judge Sam Sparks distilled the complexities down to one basic issue — the lender failed to provide formal notice that it was accelerating the term of the note.

    In order signed June 25, Sparks wrote, "All of this evidence, taken together, raises the plausible inference that DCR failed to give Mathis the required notice and opportunity to cure before foreclosing in order to turn a healthy profit on the Tillery Property."

    Sparks order DCR to pay Mathis more than $803,000.
For the story, see Austin business owner wins $1 million+ in wrongful foreclosure case.
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(1) See Cain & Skarnulis' press release - Rare Plaintiff Victory in Wrongful Foreclosure Case ("We are grateful that the jury recognized the unfairness of the foreclosure, and we are glad to recover some of Mr. Mathis’ equity in his property”).

(2) See Mathis v. DCR Mortgage III Sub I, LLC, 389 SW3d 494 (Tex. App. 2012).

Monday, August 03, 2015

Banksters Dodge 'Ticking Time Bomb' Of Crappy Massachusetts Real Estate Titles; State High Court Says Lenders Failing To Strictly Comply w/ Conditions Precedent To Exercise Of Power Of Sale Will Result In Void (As Opposed To Voidable) Foreclosure Sales, But Refuses To Apply Ruling To Past Sales

From a comment on the website of Massachusetts law firm Johnson & Borenstein, LLC:
  • Mortgagees beware – the Supreme Judicial Court has ruled that a foreclosing entity must strictly comply with the provisions of the mortgage which delineate the notice of default to homeowners. This case extends the rule, set out in United States Bank Nat'l Ass'n v. Ibanez, 458 Mass. 637 (2011), that strict compliance with the power of sale provisions and the statutory notice requirements is necessary to result in a valid foreclosure.

    ***

    A majority of the Court interpreted a long line of mortgage foreclosure cases to stand for the proposition that a mortgagee “must strictly comply not only with the terms of the actual power of sale in the mortgage, but also with any conditions precedent to the exercise of the power that the mortgage might contain.”

    ***

    The Court distinguished its decision in U.S. Bank Nat'l Ass'n v. Schumacher, 467 Mass. 421 (2014), on the grounds that G.L. c. 244, § 35A, the statute at issue in Schumacher, is not related to the exercise of the power of sale, but concerns the provision of a sufficient period of time to permit a homeowner to cure a default. Therefore, the Court decided, the defective notice sent to Phillips and Pinti rendered the foreclosure sale void.

    Lest mortgagees become unduly concerned about pending or past foreclosures being invalidated on the grounds of a notice failure, the SJC stated that this decision is prospective only.(1)
For more, see New Requirements For Foreclosing Mortgagees Courtesy Of The Supreme Judicial Court.

For the court ruling, see Pinti v. Emigrant Mortgage Co., No. SJC-11742 (Mass. July 17, 2015).

Thanks to Deontos for the heads-up on the court ruling.
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(1) Prospective vs. Retroactive effect

On this very significant point, the Massachusetts high court's desire here was to dodge, at all costs, the disaster with real estate titles that would have arisen throughout the state (the "ticking time bombs" of void - as opposed to voidable - titles) had the court applied this ruling retroactively. Some may remember that the court took this same dodge several years ago in Eaton v. Federal Nat'l Mtge. Ass'n, 462 Mass. 569 (2012).

In this regard, this case represents a significant win for the banksters in that the court decided to give this ruling prospective (ie. "going forward") effect only (although it does apply the ruling to the parties to this litigation as well), thereby rendering the ruling inapplicable to any past foreclosures (and, thus, mooting any "ticking time bomb" problem that would have occurred with the flood of past foreclosure sales that would have been voided had the court decided to give this ruling retroactive effect).

The court addressed this point at the end of its majority opinion:
  • We turn to the question whether our decision in this case should be given prospective effect only, because the failure of a mortgagee to provide the mortgagor with the notice of default required by the mortgage is not a matter of record and, therefore, where there is a foreclosure sale in a title chain, ascertaining whether clear record title exists may not be possible.

    We confronted the same issue in Eaton, 462 Mass. at 586-587. As Eaton also indicates, in the property law context, we have been more willing to apply our decisions prospectively than in other contexts. See id. at 588.

    We conclude that in this case, because of the possible [me here - "disasterous"] impact that our decision may have on the validity of titles, it is appropriate to give our decision prospective effect only: it will apply to mortgage foreclosure sales of properties that are the subject of a mortgage containing paragraph 22 or its equivalent and for which the notice of default required by paragraph 22 is sent after the date of this opinion.

    As in Eaton, however, and for the reasons stated there, we will apply our ruling to the parties in the present case. See id. at 589, and cases cited.[25]
The court also noted, in footnote 25 of the majority opinion, that it expressly declined to decide whether it will apply its ruling to cases currently pending on appeal, leaving that argument for other litigants to make in a future case:
By giving this ruling prospective, as opposed to retroactive, effect only, the court appears to reaffirm the notion held by some that, no matter how badly the banksters screw up, they can usually count on the government (ie. the court system is part of the judicial branch of government) to somehow pull their collective asses out of the fire.

And The Beat Goes On! Florida Appeals Courts Continue The Clean-Up Of Trial Judge Screw-Ups That Unfairly Hurt Already-Hurting Homeowners In Foreclosure Cases

The Florida appeals courts were at it again lately, reversing trial court errors in foreclosure cases that, unsurprisingly, were unfavorable to homeowners (For an earlier post, see Florida Appeals Courts Continue Reversing Lower Court Screw-Ups In Foreclosure Cases, Highlighting Importance Of Hiring Competent Counsel When Fighting Off Sloppy Banksters (& Snoozing Trial Judges)).

The following newer cases once again highlight the importance of homeowners having competent counsel able to secure these reversals and avoid being screwed over by sloppy banksters & seemingly one-sided trial judges in foreclosure cases.

1- Foreclosure/Standing:
  • Original note was insufficient to prove plaintiff’s standing at the inception of the case because there was no evidence indicating when the blank endorsement was placed onto the note and the assignment, despite containing a purported effective date before the complaint was filed, it was executed after the complaint was filed and the witness could not verify when the assignment took place. – George Kenney v. HSBC Bank USA, National Association, as Trustee for the Holders of Deutsche Alt-A Securities, Inc., Mortgage Loan Trust, Series 2005-6, et al. No. 4D13-4165 (Fla. 4th DCA July 22, 2015) (reversed)
2- Foreclosure/Standing:
  • Plaintiff’s trial testimony did not establish that the promissory note was endorsed at the time the complaint was filed, and thus, Plaintiff had not established its standingKelly v. Bank of New York Mellon, Case No. 1D13-2778 (Fla. 1st DCA July 14, 2015) (reversing final judgment of foreclosure)
3- Foreclosure/Standing:
  • Bank failed to establish it had standing because it did not show that it received the instrument from a holder with enforcement rights – St. Clair v. U.S. Bank Nat’l Ass’n, as Trustee, Case No. 2D14-2111 (Fla. 2d DCA July 17, 2015) (reversed and remanded)
4- Foreclosure/Reverse Mortgage:
  • Entry of final judgment of foreclosure was improper because defendant was a co-borrower, as contemplated under the mortgage, and because she had not died, a condition precedent to plaintiff’s right to foreclose had not occurred– Smith v. Reverse Mortg. Solutions, Inc., Case No. 3D13-2261 (Fla. 3d DCA July 15, 2015) (reversed and remanded with instructions to determine whether property was co-borrower’s principal residence)
5- Foreclosure/Damages:
  • Affirming trial court’s finding that plaintiff had standing to foreclose, and admission of payment history into evidence under business records exception to hearsay, but concluding that plaintiff did not properly establish the amount owedPeuguero v. Bank of Am., N.A., Case No. 4D13-3210 (Fla. 4th DCA July 15, 2015) (reversed and remanded for determination of the amounts owed)

    Editor's Note: For more on this case, see Daily Business Review: Oops! How a Mistake Cost Bank of America in Foreclosure Case, in which it appears the appeals court may have had shaky reasoning in (1) finding that the plaintiff lender had standing to foreclose, and (2) further finding that the payment history was admissible into evidence under the business exception to hearsay, given the specific facts of this case.
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P.S.: There's been at least one recent case where the trial judge actually got it right - ruling in favor of the homowner in foreclosure - a ruling subsequently affirmed by a Florida appeals court:
  • Foreclosure/Lost Note:

    Plaintiff failed to prove who lost the note, when it was lost, who had the right to enforce the note when it was lost and failed to produce any evidence of ownership at the time of loss. – Wells Fargo Bank, N.A. v. Robinson et al., No. 5D14-2819 (Fla. 5th DCA July 24, 2015) (affirmed)

Sunday, August 02, 2015

NYC Civil Rights Group Shakes $150K In Damages, Attorney Fees Out Of Local Landlord In Resolution Of Race Discrimination Allegations Made By Black Renter, Two Fair Housing Testers; Victim To Share In Cash Settlement & Scores Apartment w/ Two Years Free Rent

In New York City, the Fair Housing Justice Center recently announced:
  • On July 16, 2015, U.S. District Court Judge Cathy Seibel signed an agreement resolving a housing discrimination lawsuit involving rental housing in New Rochelle, New York in Westchester County. The complaint, filed in December 2014, by the Fair Housing Justice Center (FHJC), two African American testers, and an African American renter alleged that the owners and managers of the 216-unit Pelham East Apartments engaged in racially discriminatory rental practices. The lawsuit named, as defendants, Fraken Builders, Inc., La Sala Mason Corp., Rochambeau Realty & Development Corp., Andrew LaSala, and Andrea La Sala Suter.

    The lawsuit resulted from a complaint filed with the FHJC by Ms. P., an African American woman who alleged that she tried, without success, for over a year to obtain an apartment at this rental complex. FHJC conducted a testing investigation which corroborated the allegation and yielded evidence that agents were misrepresenting to African American testers that no apartments were available, while providing information about available apartments and showing apartments to comparably qualified white testers.

    The testing was funded through a Fair Housing Initiatives Program grant from the United State Department of Housing and Urban Development (HUD).

    As part of the injunctive relief in this case, the defendants agreed to adopt, post, and distribute a fair housing policy, require employees and agents to participate in fair housing training, ensure that available rental units are publicly advertised, and require uniform standards and procedures for showing available apartments and dispensing information about them. In addition, the individual plaintiff, Ms. P., will be able to lease an apartment with two years free rent.

    The order provides that the defendants will maintain rental records and the FHJC will be able to monitor compliance with the agreement for a period of four years. Finally, the defendants agreed to pay the plaintiffs a total of $150,000 for damages and attorney’s fees. The plaintiffs are represented by Mariann Meier Wang and Alice G. Reiter with the law firm of Cuti Hecker Wang LLP.

    FHJC Executive Director Fred Freiberg(1) commented, “The grim reality for many New Yorkers is that their ability to obtain housing continues to turn on illegal considerations such as race or color. The outcome in this case demonstrates what can happen when individuals exercise their fair housing rights with assistance from private fair housing organizations like the FHJC.” Freiberg added, “It is painfully ironic that we, once again, demonstrate the effectiveness of testing as an investigative tool at a time when Congress has been debating measures that, if enacted, would have eliminated federal funding for fair housing testing. This is a time in our nation’s history when government at all levels should be devoting greater resources to fighting all forms of racial discrimination in housing.”
Source: Westchester Landlord Alters Rental Practices and Pays $150,000 (African American Woman To Obtain Apartment, Damages, And Free Rent For 2 Years).
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(1) A December, 2012 ProPublica investigative report (No Sting: Feds Won’t Go Undercover to Prove Housing Discrimination) describes Fred Freiberg's approach to the use of professional actors as fair housing testers and recording devices when conducting undercover housing discrimination investigations, and sophisticated mapping software to identify enclaves in New York City where the racial patterns of housing conflict with area demographics and income.

Landlord Pinched For Allegedly Pocketing $35K+ In Section 8 Rent Subsidies In Connection w/ Prohibited Lease To Two Relatives

From the Office of the U.S. Attorney (Cleveland, Ohio):
  • A Cleveland woman faces criminal charges related to collecting Section 8 payments for renting a property to a relative, said Steven M. Dettelbach, U.S. Attorney for the Northern District of Ohio.

    Jasmine Ganaway, 36, was charged via criminal information with one count of theft of public money and one count of concealment of assets in bankruptcy.

    Ganaway formerd LRG Development in 2006. She purchased residence on East 146th Street in Cleveland then transferred ownership to LRG. That residence in 2008 was certified for the Housing Choice Voucher Program, or Section 8, In November 2008, two of Ganaway’s relatives executed a lease agreement for part of the property on East 146th Street, despite a prohibition against leasing to relatives, according to the information.

    Between 2009 and 2015, the Cuyahoga Metropolitan Housing Authority ["CMHA"] made deposits under the Section 8 program into Ganaway’s checking account totaling approximately $35,611, according to the information.

    In October 2013, Gananway also fraudulently concealed her ownership interest in LRG and rental income as part of her bankruptcy proceedings, according to the information.

    This case is being prosecuted by Assistant U.S. Attorney Robert J. Patton following an investigation by the U.S. Department of Housing and Urban Development-Office of Inspector General and the CMHA police.